NHOA S.A. (NHOA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to NHOA Group Investor Call on the Group's Q1 2023 Trading and Operational Update and the upcoming EUR 250 million fundraising. The investor call will be opened by Carlalberto Guglielminotti, CEO of NHOA Group; and with him to explain all details about Q1 2023 trading and operational update and the upcoming fundraising will be Giuseppe Artizzu, CEO of NHOA Energy; Stefano Terranova, CEO of Atlante; Gabriele Tuccillo, Chief Integration and Strategy Officer of NHOA Group; and Alessio Caruso, CFO of NHOA Group. Guglielminotti will open the call with the main Q1 2023 results, and then we'll go deeper in the results of the global business line with Artizzu and Terranova, followed by a more in-depth analysis of the upcoming fundraising. At the end of the presentation, the management team will be available to answer any questions you may have. Please note that this investor call will be recorded. If you could not attend the whole call, the webcast and the presentation will be -- are available on the corporate website on the dedicated page. [Operator Instructions] Before we begin, I just want to point out that any forward-looking statements made during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement, which is included on Page 3 of today's presentation. This also includes the risk that the transactions discussed during today's call remains subject to standard conditions for these type of transactions as well as any other risks and uncertainties associated with the execution of transactions of this type. And as customary, the call will be governed by that language. So with that, I will now leave the floor to Carlalberto.

Thank you, Chiara, and good morning, everyone. It's a real pleasure to be here today. We talk about the results of the first quarter and how we'll address our unparalleled growth in the future, as I say, with the launch of the EUR 250 million green convertible bond, but let me get back on that in a second. So first of all, NHOA Group started 2023 with an accelerated growth and the results achieved in the first quarter were excellent, with growth in all our business lines from double to triple digits with revenues at the Group level up 110% and confirming the value of our integrated technology model in both energy storage and EV fastcharging infrastructure. NHOA Energy has today 1.4 gigawatt hours under construction, a pipeline of EUR 1.2 billion in 4 continents, still going strong and the revenues year-on-year stand at plus 115%, with a backlog up 30% and pipeline up 60% compared to the same time last year. Same goes for Atlante, our EV fastcharging network in Southern Europe, which now has 1,000 points of charge online in Italy, France, Spain and Portugal, with another 1,600 currently under construction, totally over 2,600 points of charge online and under construction. This is from the industrial perspective, while from the financial communication perspective in this quarterly update, we decided to do a careful review with the performance indicators. And this is because we want to give you always the most precise picture of what's going on and our commitment to our people, and I mean, the results speak for themselves. During the year, the network of fast chargers online in Italy today is at around [Technical Difficulty] points of charge online and under construction, 43% of them are in Italy. So we have approximately 30% of the Italian market share, which is 2x the Masterplan targets, as you know. So you will see a description of the new performance indicator in the notes to the trading update. The other major news we announced today is obviously the fundraising. And let me say that this high unprecedented pressure in the capital markets that the whole sector has been feeling, we can now reaffirm very straightforward beyond the performance [Technical Difficulty] beyond the performance and target in the last 8 years with the exception of the COVID year obviously. But then let me reaffirm that NHOA Group financial capacity to fully fund our own growth at this accelerated pace. Thanks, obviously, to the support of TCC and thanks to our operational performance, we can say today that in the first quarter, we have consolidated cash and credit line position that exceeds EUR 100 million, which is a plus 44% compared to the year-end. And at the same time, we are launching a fundraising centered on a 5-year EUR 250 million convertible bond -- green convertible bond at the conversion price that is the double of the current spot price, meaning that or if you want an increase compared to the last closing price of 115%. And the book of which is today 90% fully covered well before the start of the book building process. So given our financial backing, I'd like to reiterate today more than ever that NHOA Group is strong and financially backed and will continue on this path accelerating towards the outperformance of all Masterplan10x 2025 targets. And this is possible once again, thanks to the support of TCC, our majority shareholder, which, along with us, continue to believe that NHOA is its mission. So we want to shape a better world for next generation period, and we really believe it. Our goals are on the long run, and this is not a sprint, even if in the sprint phase, we are outperforming and we are accelerating, and this is a factual matter of fact despite the market skepticism. And this is first and foremost, thanks to our extraordinary people, our unique team of more than 450 extraordinary people at year-end, over 500 today that believe in our mission and the hard work to make it happen. By the way, people of 36 nationalities, 50% engineers, 50% women in management team, I mean that's an amazing team. And the people that after the launch of this transaction, namely the EUR 250 million convertible bond, I want personally to be more focused on. And this is the reason why we are structuring literally now an innovative and iconic program that we will call NHOA [ Elite ] program that we provide to our people a world-class training and coaching that means duration of experience that has no parallel nor comparison in the market and that just NHOA's employees and also, obviously, sports association with sponsor will benefit from. And again, this is the reason why we cultivate a culture of excellence, innovation and hard work that is the growth engine behind our outperforming results. So in a nutshell, thank you again to our people, all of our teams at the Group level for the outperforming results. And let me thank particularly Ludovica Solera in her new role as Global Chief People Officer, but particularly thanks to you, Giuseppe, first and foremost, for the outstanding results at NHOA Energy, the energy storage business line and the growth engine of the Group. So floor is yours, Giuseppe.

Thank you, Carlalberto. Apologies, everybody, for not switching on my camera, I'm in a complex logistics situation due to a major road accident. In 2 words, the update on NHOA Energy is on track. We have converted over EUR 30 million of backlog into revenues, which is quite as much as last year. We have 6 or 7 projects in commissioning and the rest of the portfolio is progressing healthily. The backlog is up on a year-on-year basis. This is due to the major commercial successes that we had at the end of last year, but we also have a very healthy pipeline in actual advanced origination situation, 5 projects that we define in a short list, but in reality, we are in a bilateral negotiation on several opportunities. So we are very happy about where we stand from an origination perspective as well. The market is healthy and is benefited from a substantial reduction in battery cost due to a very steep fall in lithium and other commodity prices over the last quarter. Just a technical note that is related indeed on the impact of commodity evolution on our numbers. You will see that the backlog reduction on a quarter-on-quarter basis is higher than the revenue conversion. This is exactly the effect of battery indexation cost, so a reduction in battery cost reduces cost in the same amount. So no impact on margin, but we have some backlog volatility that is driven by the fact that since last year have been including indexation process for risk management purposes in our portfolio. So, so far so good, on track with what we have promised the market over the last [Technical Difficulty] a healthier situation. Thank you.

Thank you, Giuseppe. Let me move very quickly on Free2move eSolutions. I mean, as we had [Technical Difficulty] of our figures, we have a double-digit growth compared to the last quarter -- year-on-year, sorry. So compared to the [Technical Difficulty], obviously, that's [Technical Difficulty] double-digit, but we do expect the first signals of substantial restart starting from the second quarter. As we announced in October last year, the [Technical Difficulty], Chief Executive Officer of Free2move. So, so far so good, very focused on relaunching [Technical Difficulty] centered on the Stellantis customers and leveraging on backlog of orders [Technical Difficulty] [ 2023 ] results. So that's the situation on the Free2move side. I will now leave the floor to Stefano to talk about the amazing results that Atlante is achieving. So Stefano, the floor is yours.

Thank you, [ Guglielminotti ]. As you can see from the [Technical Difficulty] very good, very strong. We are focusing on delivering the network rollout. And the very important message is that the acceleration continues. So we have closed 2022 with important news on accelerating or basically achieving faster rollout than original plan and that the trend is continuing in Q1 of 2023. We are representing slightly more detail than before on our pipeline. As you can see for the first time, for example, we decided to provide [Technical Difficulty] that obviously, the difference in the 4 countries and the different speed at which we are moving in the 4 countries. Now importantly, we crossed a very important, let's say, a very important deadline. We have crossed the 1,000 points of charge online. As you can see, [ 1,600 ], to be precise as of end of March. Of course, the figure continues to grow month-by-month. And on top of that, we had an additional 1,600 points of charge under construction, bringing the grant total, as you can see, 2,600. That's important [Technical Difficulty] because there is more than half of what we were supposed to deliver by the end of 2025. So you can draw some conclusion we might get to the 5,000 target faster than foreseen. Importantly, we also have 3,000 sites under assessment that's on top of the above. So on top of the 2,600 points of charge online and under construction, we have an additional 3,000 sites which are under assessment. Other important figures to mention here in this table, you would see that the Q1 sales are double the total -- the grant total 2022. 2022, we said it was not a year where we were expecting any figures at all in terms of sales. It was a setup year. But, of course, we had delivered a little bit of sales. And now you will see that quarter-by-quarter, those figures will become very important. Now the -- what is underlying these figures and these results, what you cannot see is what we built in 2022. In 2022, we built a company from scratch. We built a very strong platform based on a strong headquarter located mainly in Italy and 4 country structures between Italy, France, Spain and Portugal, which is why we can deliver these results at the speed we have been doing, and we will continue to deliver stations at the same speed or even faster if needed. But behind that, there has been the building up of a structure or corporate structure and a platform, especially in terms of, of course, managing the supply chain, managing the pipeline of sites, which is in my opinion, extremely professional and adequate to deliver the important challenge that we have set for ourselves. And then the last thing I wanted to show you very quickly is just on the next slide. This is just an image of things to come. We have launched a few -- a couple of weeks ago, the new design of the Atlante iconic stations, which was developed together with Bertone Design, one of the most famous [Technical Difficulty]. This is the result of almost 1 year of hard work focused importantly on the aspect of staffing, which is useful, recognizable, but obviously also 100% sustainable from start to finish. And this type of architecture will start showing up as of the second half of 2023, together with the rollout of the stations with the storage, which is in a pilot scheme right now up and running, not open to the public yet, but we are working on stations, which will be open to the public in the second half of 2023 as planned. So that's it. We -- as I said, we -- the pace of acceleration has continued and therefore, we are delivering faster than initial plans, but that's good news for ourselves, it's good news for our majority shareholder, who strongly support that acceleration. Thank you very much. Back to [ Carlalberto ]?

Thanks a lot, Stefano. [Technical Difficulty] mainly in the form of the EUR 250 million green convertible bonds. First of all, why are green bonds, okay, because we'll be 100% centered on NHOA Group's [Technical Difficulty] strategy, obviously, but definitely it's like that. I mean, NHOA is a sustainment development goal-driven company, okay, focused on green energy transition and we strive to ensure access to affordable, reliable, sustainable and other energy for all sustainable numbers. And as you may know, NHOA contributes the most to SDG7, and this is a source of pride for all of us. Our strategic pillars mainly, as we can see in the slide, innovation and people leverage ESG fundamentals to enable us to make our sustainability. So in the context of our strategy, the E in environment represents the value chain and circularity in a business model that is per se sustainable, as we are playing in storage of renewable energy and electric mobility, right? While the S in social represents health and safety, product safety and stakeholders' engagements, while the G in governance stands for ethics and risk management. I mean, these pillars together with ESG fundamentals, I'm sure that our business follows a long-term sustainable growth trajectory that contributes to these SDGs. I mean, we understand that our industry play -- plays a critical role in driving sustainable development. And this is why we have set challenging ESG targets monitored by specific KPIs that we will tell you more about it in the 2022 Sustainability Report and Annual General Meeting, obviously, together with major ESG ratings and most importantly, the big impact assessment along with the commitment to reach the big corporation status by achieving all necessary eligibility criteria by 2025. I mean by becoming a certified big corporation, NHOA intends to be a leader in the global movement for an inclusive, equitable and regenerative economy. And this is an obvious target for NHOA. Again, you see here in the figures of our teams, I mean, 34 years old on average, 36 nationalities, 50% engineers, 10% PhD, 50% women in management. In conclusion, let me reiterate that our sustainability and ESG strategy is deeply embedded in everything we do at NHOA. And in other terms, we are not launching a green bond because we found some great assets to be financed in that way. We are rather financing the acceleration of our 100% sustainable business model was set over a decade ago when green financing did not even exist. Then going back to our bond, NHOA estimates the total financing need necessary to continue to fund these unparalleled growth in the energy storage business, global business line and the acceleration of the EV fastcharging infrastructure business line for following 2 years to be around EUR 250 million. And at NHOA Energy, we used, as you can see, very carefully the money raised in 2021 by delivering essentially EUR 450 million of order intake, EUR 150 million of which have been converted in 2022 revenues, EBITDA positive with over EUR 300 million of backlog of orders. So now EUR 50 million to EUR 100 million is the financing need we are looking for to be used by NHOA Energy to support the continued expansion of the business, which is beyond the 2021 expectations and the Masterplan targets across 4 continents. To fund first, working capital needs arising obviously from the over EUR 250 million backlog of orders. So it doesn't come out as a surprise and then strengthening the balance sheet, enabling further growth while leveraging on the global competitive positioning we already achieved with over EUR 1.2 billion of projects in pipeline. And then last but not least, selectively retain equity interest in strategic projects characterized by highly innovative and deeply vertically integrated technology solutions alongside our customers. Then at the Atlante level, again, it doesn't come as a surprise that we accelerated well beyond the 2025 Masterplan targets by 2.5x in terms of points of charge and by 2x in terms of market share. I mean now the financing need is between EUR 150 million and EUR 200 million, and this will be used to fund the accelerated rollout of Atlante and the rollout of charging stations across Italy, France, Spain and Portugal, in order to maintain the current accelerated development speed, that has seen already over 50% of the 2025 targets already secured and over 1,000 further sites currently under development literally now. Again, it doesn't come as a surprise the fact that to support this accelerated ramp-up, NHOA is carefully exploring further financing options for Atlante on top of this convertible bond, but these further options would represent in any event an additional catalyst to the current development path, which is, as I said, fully funded with our own resources. Then moving to the next slide. We have here a summary of our dual track strategy to provide a minority-friendly financing solutions. Let me just highlight the most important keywords in this slide. So first and foremost, minority-friendly and dual track, dual track. So in principle, the financing strategy is centered on the EUR 250 million 5-year convertible bonds, while we are extremely careful in respecting our minority shareholders. That's the reason why we will leave to the decision at the extra upcoming Annual and Extraordinary General Meeting via whitewash vote. And therefore, we have a dual track, Option A, Option B. Option A is the EUR 250 million convertible bonds, which is structured as a bridge to equity, meaning that the instrument can be refinanced at 10x via a Rights Issue should be completed by 2028. And then obviously, we have also Option B, which is the way we leave to minority shareholders in case of Option A is not approved, obviously, to ensure that the EUR 250 million will be raised in any event by June 2023. Then Chiara, we can move to the next slide. We see here the main terms. We see the maturity, which is 5 years. The coupon that obviously will be defined after the investor roadshow in any event, we do have the TCC backstop at 5% in terms of coupon. The conversion price is 40% above the reference share price. Reference share price that's on its turn is 40 -- last 40 days VWAP, meaning that the conversion price is equivalent to EUR 8.26. EUR 8.26 stands for essentially the double of our stock -- of our last closing share price on Friday, and you can see that also has a 100% -- 115% increase compared to the last closing price. Obviously, the reference irrespective of the financial communication, the reference is EUR 8.26, and EUR 8.26 has been structured as a 40 days VWAP plus conversion premium of 40%. If we move to the next slide, we can see some additional comment -- terms that you find in detail in the press release. So this instrument is reserved to institutional investors. TCC is committed to take up at least its pro rata share, even less in case of demand from institutional investors, but obviously, ready to go up to 90% in case of need. Conversion period will start from the first year. So after the first anniversary, it will be fully convertible at [ 10x ]. We do have a put option at year 3. And obviously, the AGM approval for the Rights Issue, which is the way in which we will refinance this instrument by 2028 will be taken at the Annual General Meeting. And obviously, this will be triggered as long as the conversion price in the next 5 years will be reached, meaning that we will not launch any Rights Issue at prices that might be extremely dilutive for our minority shareholders, and that's the reason why we structured this instrument as a bridge to add, gaining time in order to give time to our stock to recover and to launch a Rights Issue open to all our minority shareholders but at prices that are not dilutive as it will be. If we were launching a Rights Issue today, which is Option B, then moving to the next slide, we see the alternative that our minority shareholders have at the upcoming AGM, which is a Rights Issue today, EUR 250 million Rights Issue today, that will be the most obvious instrument, maybe the instrument of what the market was scared of if we look to the commentaries of brokers and the reaction of our stock price. But this is the instrument that we tried through the structuring of the green convertible bond to avoid because, as you can see from the dilution tables attached to the press release, this will be an instrument even if complying with the market standards, with the market standardized practices will be in any event extremely diluted. So we leave the decision, obviously, to our minority -- to our minority shareholders, but we are strongly convinced that the EUR 250 million green convertible bond, by the way, essentially fully covered as of today, but open for subscription to everybody, will be the perfect way to give to the company the money needed to continue the growth of this accelerated pace, so -- and at the same time, showing the commitment of our majority shareholder. Our commitment was already announced, anticipated by our Chairman, Nelson Chang, during the last investor call and that materialized in this announcement today with the evidence in front of your wary eyes that we have made and we will make whatever it takes to continue first, our growth at that pace. Second, with the ability to fully fund our own growth. And third, last but certainly not least, with an absolute minority-friendly approach, extremely respectful of the current situation in which with the Rights Issue today, our minorities will be extremely diluted. And this is what we believe in. We can move to the last couple of slides. And this one simply represents what's EUR 8.26, which is the conversion price stands for. If we look at the stock price evolution over the last essentially 15, 16 months, so from the last capital raise we made at the end of 2021, we see that our stock performance has been worse than the market, but not dramatically worse than the markets. I mean all our peers in Europe and U.S. in storage, in e-mobility and EV infrastructure lost approximately 63% of the market capitalization. In our case, it was 78%. So worse than the market. We do not believe to be worse than the market, not at all, certainly not in -- from the fundamentals and performance perspective at the energy storage level, where we are growing like our peers, if not at a higher pace in a very profitable way because we are the only company that is EBITDA positive. So we do not deserve a treatment by the market, which is worse than our peers, and we do consider we should be -- we should trade at a premium compared to them. Same reasoning for the e-mobility, certainly, for the potential we have with the Stellantis partnership. And lastly, Atlante, I mean we do have today, as we said in Italy, we have approximately 3,000 fast chargers and points of charge, fast points of charge. And today, Atlante, as mentioned by Stefano has approximately over 1,000 points of charge online and under construction just in Italy. I mean, we have 30% of the Italian market share, which is the double of our original targets of 15%. So we do not consider to deserve a treatment by the market, which is worse than our peers. We are well above, and that's the reason why the conversion price has been set with the support of TCC and with the full commitment of NHOA at a price, which is at EUR 8.26, which is above the market performance of all our peers. And that's the outcome. This was not the intention. I mean we analyzed that the stock performance after having defined obviously, the conversion premium, but we are absolutely in line with these results. And then last slide, Chiara, we can move to the guidance. Obviously, we reiterate all our guidances and all our outlook, essentially from EUR 220 million and EUR 280 million revenues this year, with EBITDA at the NHOA Energy level from EUR 5 million to EUR 10 million at the level of Free2move, we will see, but we are on track and looking forward to restart from the second quarter towards growth, margins and eventually, cash flow generation. Free2move is not even mentioned in the fundraising process, as you know, for the simple reason that we do expect to have them cash flow positive at the end of this year, and therefore, we do not expect major financing needs going forward. And then Atlante, I mean, we reconfirm all our targets looking forward to generate the first EUR 100 million revenues in 2025, while the combination of Atlante -- of Free2move and NHOA Energy will target the EUR 600 million revenues by 2025 with approximately 10% EBITDA margin, while reconfirming the long-term outlook of over EUR 1 billion revenues with a 15% EBITDA margin plus Atlante, which will be an equivalent amount of revenues with a 50% EBITDA margin, which is obviously in line with the infrastructure play of the company. So having said that, I think we can now move to our Q&A session. And together with Giuseppe, CEO of NHOA Energy, Stefano, CEO of Atlante, Gabriele in his new role of Chief Integration and Strategy Officer, along with Alessio, the newly appointed CFO of NHOA Group for all financial aspects, we are ready to take any questions you may have. So, Chiara, floor is yours to open the Q&A session.

[Operator Instructions] We already have some questions coming. The first one will be by Mr. Alessandro Pozzi from Mediobanca.

[Technical Difficulty]

Sorry, Alessandro, I cannot hear you. So...

Just a second.

Probably, technology is very poor.

Can you hear me now?

Slightly better. That's fine.

[Technical Difficulty]. So the first question on the fundraising...

Sorry, Alessandro, I cannot even catch any single word of what you're saying. I'd also tell maybe Chiara to move to the next question while Alessandro tries to reconnect from a better line.

Yes, exactly. We have another question coming from Mr. Guillaume Muros from Societe Generale. I will ask him to open his microphone.

Yes. I have 4 for the moment. And the first one, Carlalberto, you answered it partially. But I would like to add a bit more detail on why haven't you gave any range for value in Atlante? Haven't you received any interesting offer as this is something that you were mentioning to be seeking for the last few months? And that's the first question. The second one is a bit more on communication. When you mentioned NHOA Energy, I understand that you mentioned the energy storage division as well as the e-mobility one. But looking at your presentations, you mentioned that you expect to be breakeven in 2023 at the NHOA Energy level, I guess it's on the -- at the energy storage. So please feel free just to correct me here because I think it doesn't encompass both divisions depending on the slides that you are referring to? And the third question on the fundraising. You mentioned EUR 50 million to EUR 100 million could be used to NHOA Energy, and you mentioned selectively retain equity interest in strategic projects. Could you elaborate a bit on that, please? And the fourth one for now will be on utilization rates. Now that you started generating quite a lot of revenue in Atlante, could you let us know if -- I mean, how are the customer adoption rates or utilization rates that you're seeing in some of your most iconic sites at Atlante?