Good afternoon, and welcome to the Nuvve Holding Corp.'s first quarter 2023 earnings call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Eduardo Royes. Thank you. You may begin the call.
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 first quarter 2023 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 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. Good day to you all listening in. We thank you for joining our first quarter 2023 results call. We are extremely encouraged by the improvement in the fundamentals of our business in Q1. 2023 is so far delivering the green shoots we have always felt were inevitable. It has just been a question of when, not if. This was evidenced by both record orders and deliveries for our DC chargers during the period. At the same time, we progressed on additional lumpy orders, which is helping sustain momentum in order flow and sales of our DC chargers in the near term, and evolve our plans to boost megawatts under management and grid services revenue streams more quickly via avenues that are not dependent on large-scale hardware rollouts.
To briefly summarize our key accomplishments in the quarter, while we do not get into specifics on orders and deliveries, we'll note the following. On the order front, we saw a four-fold increase in orders for DC chargers versus the fourth quarter 2022, and saw an order increase for more than 3.5x on a year-over-year basis. In terms of deliveries, we more than doubled our fourth quarter DC charger shipments sequentially and more than tripled shipments related to Q1 2022. One big driver of the increase in both orders and shipments in the first quarter was the previously discussed record size order for 24 units from the Los Angeles Unified School District.
Only a small portion of orders we recognize in Q1 were affiliated with rebates to customers that we directly supported in the 2022 inaugural funding round of the five-year EPA Clean School Bus program. We're also thrilled to report that our strategic initiatives aimed at quickly growing and scaling up our megawatt under management by integrating into established third-party hardware networks led to the partnership we announced with Circle K in February. In summary, our agreement with Circle K is initially expected to yield an additional 40 megawatts under management from EV fast chargers at 50 Circle K service stations and three to five stationary storage sites in Norway and Denmark. Importantly, Circle K has more than 560 locations combined across these two countries.
We believe that a strong demonstration in this initial program should bode well for expansion in the region. For perspective, if all 560 locations were hooked up, this would represent nearly 500 megawatts under management in the Nordics alone. If you look even further out, we know that Circle K has an estimated 17,000 locations worldwide. We have been working closely with our colleagues at Circle K on integration. As of today, we are integrated and ready to demonstrate our grid service capabilities on the stationary batteries, and we are progressing on integration activities with the charging stations. We expect to begin generating grid services revenue from this partnership in the back half of the year. Turning to recent developments since our last call that underpin our optimism about 2023 showing a marked improvement in results for Nuvve over 2022.
We are pleased to disclose today that in April, we secured a new record order from a large fleet operator with 25 DC chargers. We understand this order to be for a school district that has been awarded funds via the EPA Clean School Bus Program. Importantly, it is not one of which we were involved with in leading or supporting role during the application process, so it is incremental. Looking ahead, we expect to receive the majority of the purchase orders for hardware associated with the EPA rebates during the second quarter. As we discussed on our March call, we have been working closely with our school district partners to help them strategically evaluate the optimal use of the government dollars, which include their hardware selection.
At a high level, our orders should translate to approximately $1.1 million in Nuvve hardware sales affiliated with the 10 school district customers that we formally represented in the grant writing and submission process. In addition, we are receiving orders for other customers we have facilitated in the process. Further, we're pleased to see that in late April, the EPA opened up the second round of funding for the Clean School Bus Program. At least initially, they will be awarding $400 million as part of the 2023 round. Applications are due this August, with awards expected between November 2023 and January 2024. This is an elongated timeline for approval and reflects a change in the structure of the program related to the 2022 round. Round one last year award nearly $1 billion in rebates through a lottery system.
With awards spreading out over nearly 400 school districts, the average number of buses per recipient was in the order of a single digit. Round two, however, will be a competitive grant-based program, and awards will be for larger scale programs. Grants will allow a minimum of 15 and up to 50 buses per applicant school districts. Unlike last year, third-party applicants such as transportation companies will be allowed to participate as well. They will be allowed a minimum of 50 and up to 100 school buses serving at least four school districts. The EPA ultimately plans to make only 25 to 50 awards in total in this phase. We believe this new format should play to our strength.
Nuvve differentiates itself not only through its tech, but also via its ability to offer a turnkey solution and act as a trusted advisor for fleets as they electrify. We believe that applicants who have not only the desire but who can demonstrate a plan for how to implement and scale up the electrification program efficiently will be the best position to win EPA dollars in this next round. With Nuvve's assistance, we can lead not only the grant writing initiatives, but also advise on design, implementation strategy, financing, and project management as we interface with a variety of stakeholders involved in the process. We look forward to partnering with our applicants in the month ahead to build a pipeline for these award wins late this year and going into next year.
Further, we believe our holistic solution will continue to position us to win new business outside EPA, and we are optimistic that we will have more to say on this in the months ahead. Putting together a solid improvement in Q1 with the continued momentum we are seeing so far in Q2 supports our confidence that 2023 can be an inflection year for our business, both in terms of a ramp in hardware sales and via non-hardware related partnerships such as the one with Circle K. We continue to pursue large scale program where we can lean into our differentiated ability to offer a holistic solution while simultaneously pursuing other agreements with Charge Point Operators that are reliant only on our ability to integrate and manage third-party hardware. All the while, we'll continue to be a leading voice for V2G and its benefits.
On the March call, I discussed California Senate Bill 233, which aims to make bidirectional charging for electric vehicles the norm, and which, if passed, could facilitate widespread V2G adoption in the years ahead. In April, I testified before the California Senate Energy, Utilities and Communications Committee in support of this proposed legislation. The cost of a bidirectional capability is close to zero as the hardware capability exists today in widespread fashion. As this bill goes for appropriation and through the Senate, we hope the politician that will recognize the transformative impact that V2G can have on grid resilience and EV total cost of ownership. With that, I will now turn the call over to David to discuss our financial results.
Thanks, Gregory. I will start with a recap of first quarter 2023 results. In the first quarter, we generated total revenues of $1.9 million compared to $2.4 million in the first quarter of 2022. Recall that last year's Q1 results were impacted by a unique strategic decision to directly sell five electric school buses that has not been repeated since. On a more apples-to-apples basis that excludes the bus sales, our product and service revenues increased by approximately 240% year-over-year, given the record high number of charger shipments that Gregory alluded to. Margins on product and service revenues were 18% for the first quarter 2023, compared to 5% for the first quarter 2022. Margins in the year ago period were depressed due to the just-mentioned bus sale.
As a reminder, margins can be lumpy from quarter to quarter, depending on mix. DC charger gross margins at standard pricing generally range from 15%-25%, while AC charger gross margins are approximately 50%. In dollar terms, are a small fraction of the revenue of a DC charger. Grid services revenue margins are generally 30%. Operating costs, excluding cost of sales, was $8.3 million for the first quarter of 2023, compared to $9.8 million in the first quarter of 2022. This decrease was primarily attributable to lower public company fees, payroll, and consulting costs. Cash operating expense, excluding cost of sales, stock compensation, and depreciation and amortization, was $7.2 million in the first quarter of 2023, declining from $8.2 million in the first quarter of 2022.
The reduction in costs evidences our previously discussed initiatives to optimize our cost structure, and we believe we can continue to run expenses at approximately $7 million or lower per quarter in the near term. Other income was $0.2 million in the first quarter of 2023 versus income of $4.8 million in the year ago quarter. The decline primarily reflects a $4.8 million non-cash gain from the change in the fair value of warrants in the year ago quarter. Net loss attributable to Nuvve common stockholders increased in the first quarter of 2023 to $7.9 million from a net loss of $4.9 million in Q1 of 2022.
The increase-In net loss was also primarily a result of the just-mentioned non-cash gain in the year ago quarter, offset by a 17% improvement in operating losses of $1.7 million. Turning to our balance sheet. We had approximately $11.8 million in cash as of March 31, 2023, excluding half a million in restricted cash. On our last call, we provided an update on our capital raising initiatives, I'll briefly summarize. In February, we raised $637,000 through a combination of proceeds from our ATM and a registered direct offering of common stock. Further, during Q1, we were presented with an attractive opportunity to monetize our investment in Switch, a leader in charging infrastructure, operation and maintenance software. This resulted in $1.3 million in new cash proceeds received near the end of the first quarter.
We generated a 30% return on this investment in less than 12 months span, yet we were able to retain the same important commercial and technology benefits of the partnership that we had prior to our divestment. Subsequent to the quarter end, as previously disclosed, we raised an additional $1 million through a registered direct offering of common stock in April. We continue to remain focused on securing capital in the maximum ways amidst turbulent market conditions. This includes using our ATM facility and other potential equity offerings.
Total cash decreased by $3.9 million during the first quarter, primarily attributed to net cash used in operating activities, X working capital of $6.5 million, offset by the sale of our investment in Switch of $1.3 million, $0.6 million raised through the sale of equity, and the balance from positive working capital. As we have previously discussed, we expect to continue to generate positive working capital in future quarters as we bring down our net investment in inventory. Inventory decreased by $1.5 million during the quarter to $10 million, compared to $11.6 million at the end of 2022. This is consistent with expectations and our prior commentary regarding anticipated declines in inventory as charger shipments pick up.
Accounts receivables increased by $1.4 million during the quarter to $2.6 million, compared to $1.1 million at the end of 2022. The increase is attributable to higher sales activities laid in the first quarter of 2023 compared to last quarter. Now, turning to our megawatts under management and estimated future grid services revenues. As a reminder, megawatts under management is a metric we use to quantify the aggregated amount of electrical capacity from the deployment of our V1G and V2G chargers, which are primarily deployed in the electric school bus market in the U.S. and in light-duty fleet deployments in Europe, in addition to stationary batteries. Currently, these chargers and batteries are located throughout the United States, Europe, and Japan.
Megawatts under management increased by 5.7% over the fourth quarter of 2022, up 0.9 to 18.3 at the end of the first quarter 2023 from 17.4. In terms of its composition, 8.2 megawatts were from stationary batteries and 10.1 megawatts were from EV chargers. On a year-over-year basis, megawatts under management increased by 24.8%. While the sequential increase in megawatts under management from Q4 '22 levels may seem low relative to the aforementioned improvement in charger deployments, this simply reflects a timing issue, as many chargers shipped late in the first quarter have yet to be commissioned.
As such, we would expect to report an acceleration in growth in megawatts under management with our second quarter 2023 results and in the back of half of the year, driven by the Circle K ramp. As we noted in March, we expect grid services revenue growth to outpace our strong hardware revenue growth in 2023, resulting in grid services revenues making up a larger share of total 2023 revenues relative to its share of 2022 revenues. Depending on the geographic regions of our deployments, our grid services revenue opportunities will vary. We are currently seeing grid services revenue opportunities for vehicle-to-grid services ranging between $85 per kilowatt year up to $300 per kilowatt year in certain key markets we are focusing on.
With our planned expansion of V1G charging management services in Europe, we are seeing further grid services revenue opportunities. These revenues include a combination of contracted services and merchant exposed services. Given the long-term nature of our customer deployments, these revenues are generally recurring up to periods as long as 10-12 years. Turning to backlog. On March 31st, our hardware and services backlog was $4.2 million, up from $4.1 million. The modest growth reflects the fact that while orders were high, we also shipped a record number of units. Subsequent to Q1, we saw a strong increase in our backlog, increasing to $5.7 million by the end of April.
Before turning the call back to Gregory, I would like to reiterate that we believe Nuvve is on track to deliver strong growth in its key operating metrics in 2023 compared to 2022, including acceleration of megawatts under management increased charging station revenues and higher grid services revenues, while lowering our operating expense structure. We saw this play out in Q1, while it is still early days in Q2, our key operating metrics are improving, as evidenced by the win of our largest single order in Nuvve's history, recognized in April, and a 27% increase in hardware and services backlog through April compared to the end of Q1.
While our charging station deployments and megawatts under management continue to increase, at the same time, our operating costs have come down as we materially scale up the business and demonstrate our ability to generate valuable grid service revenues through opportunities with charge point operators such as Circle K. With that, Gregory, back to you to conclude our prepared remarks.
Thanks, David. To wrap up, we had a record orders and deliveries for our DC chargers in Q1. Q2 is poised to be another strong quarter given the larger award we've already won, others we are working on, and the EPA-funded 2022 awards coming in. We are making good progress getting our Circle K partnership up and running. We look forward to revenue generation later this year and to more materially showcase the benefits of this partnership to Circle K, their customers, and ultimately others who we think stand to benefit from such agreements over the balance of the year. At the same time, we continue to work on other similar opportunities with charge point operators that we hope to announce in the coming quarters. We thank you for your participation and look forward for speaking with you in August.
With that said, I would like to now turn the call back to the operator to begin our Q&A. Operator?
Thank you. We will now begin our question-and-answer session. To ask a question, you may press Star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then two. At this time, we will pause momentarily to assemble our roster. The first question will be from Eric Stine from Craig-Hallum. Please go ahead.
Hi, everyone. Thanks for taking the questions.
Hey, Eric.
Hey. Yeah, I've been jumping between calls this afternoon, so I apologize if I ask anything that you discussed at the beginning of the call. You know, maybe I'll start just taking a step back. You know, it's a question I think I've asked you over time. There's always a lot of noise about vehicle-to-grid, you know, I guess not all vehicle-to-grid is created equally. I know it's still early, as the market develops, you know, the EPA program starts rolling out and things move forward, do you sense that customers are starting to get a better sense of Nuvve's capabilities, your V2G solution, versus others who may call it that, but where, you know, just doesn't have the same functionality?
You know, I think in the segments where we are very present, such as, you know, school bus, for example, here in the U.S., it is clear. We see that because more and more people are coming and reaching out to us. Initially, we've been mostly working with school districts. We also see now fleet operators coming in and wanting to work with us. Yes, I think, I think there is a clear understanding in that space, that we are a clear leader.
Similarly, you know, I would say that the CPOs such as Circle K, the reason why they chose us is because they know that our platform is the most open platform in order to aggregate those charging stations that they have and to control them at a very fast pace, which is where there is the highest value in providing those grid services. The good news is the awareness is building up, right? This is why, for example, SB 233, the bill here in the Senate, in California is going through and would mean that by 2027 each and every vehicle, electric vehicle sold in California would have bidirectional capabilities. That will be seen very important for the growth of our business.
That shows that now it's not just us, the fleet managers in the school bus business, but also at the political level, the understanding of how critical V2G is building up rapidly.
Got it. That's helpful. You brought up Circle K. I mean, I know that in that industry, you know, people watch what others are doing. I mean, I guess I'd love to hear kinda next steps for Circle K. Beyond that, just thinking about, you know, do you, do you think that this is something you can replicate? Have others reached out upon seeing this announcement just to at least, you know, start to think about going that same route or how should we think about that?
First on, you know, where we are on Circle K, we know there is some integration work that needs to happen and rolling out certain potential hardware in some cases on some of the sites, you know, to create the communication link between our platform and the infrastructure that is already deployed today. We are right in the middle of this. On plan, you know, with our expectations in terms of this integration, and, you know, targeting 50 sites to integrate with them. Now, how is this replicable? I think, you know, first of all, Circle K, you know, is headquartered in Norway, and so they are very exposed to the EV rollout. That's why they understood it so well.
Also for us, it's an essential demonstration because once you demonstrate the value that we can bring to such an infrastructure rollout. It will become a no-brainer for the others to come and work with us. Yes, it's definitely replicable with other players in the space. You have different type of infrastructure, right? This is fast charger in gas station. You might have also some charging infrastructure, for example, for transit bus depots, where V2G might not be the most suitable, but the V1G can be very variable in charging those vehicles at the lowest cost and potentially reducing the total cost of ownership of the infrastructure that goes with them.
It's a question of use case, on the type of CPO implementation, but we are very confident that this is gonna be rolled out across a variety of CPOs over time.
Got it. Do you think that the demonstration project with Circle K needs to run for a bit before, you know, you really see interest coming your way? Is it something that you've already seen some inquiries, you know, just based on the announcement to start?
I mean, you know, we have not announced any of those things, so, you know, I can't disclose things. On the overall, you know, I think from my perspective, at least, what I really am looking forward is, and we're gonna see that very actively, is the value we can bring to such an infrastructure. Putting a number on that is gonna be a very important outcome of this rollout.
Okay. Thanks a lot.
Thanks, Eric.
Again, if you have a question, please press star then one. The next question is from Brian Dobson from Chardan. Please go ahead.
Hey, it's Greg Pendy in for Brian Dobson. Thanks for taking my questions. Can you just share with us any color on what you're seeing in the school bus market in terms of pricing? I think in 2022 prices were pretty elevated given a lot of the supply chain issues that were going on, and also buses were never even at places like Blue Bird spending any time on the lot, they were just leaving right away. Are prices normalizing at all in EV school buses?
I don't know. Normalizing, I don't know if this is the term I would use yet. I think, you know, the things are still pretty tight. I think the trend is gonna be to go back where you would think they would go, which is price going down over time. You know, I think what we see also is the battery size are increasing in those school buses. You know, initially we had a lot of them that were maybe in the order of 120 to 150 kilowatt hours. Now 200 or 300 kilowatt hours is becoming more of a norm. You know, maybe price are stabilizing, but the capabilities of those vehicles are increasing at the same time.
That's helpful. Then can you share any color that on what you're seeing, I guess, with your Wallbox relationship with the Quasar? Anything on that on the residential front?
Not anything that we can share at this point.
Okay. I understand. Thank you.
Thank you.
Thank you. Ladies and gentlemen, 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 very much, everybody, and we are looking forward to seeing you in 90 days for some very, hopefully very exciting news at the time. Thank you very much. Bye-bye.
Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.