Volta: The Other Shoe Just Dropped
Summary
- Volta warned of massive revenue misses only days after announcing executive departures.
- The EV charging station company has limited flexibility to turn around the business with large losses and a small revenue base.
- The stock valuation isn't appealing until Volta has an updated business plan and hits updated targets.
- Looking for a portfolio of ideas like this one? Members of Out Fox The Street get exclusive access to our model portfolio. Learn More »
Evgenia Parajanian/iStock Editorial via Getty Images
Despite several warnings regarding the EV charging station space, Volta (NYSE:VLTA) appeared the most promising business model in the sector. The company recently announced surprising executive leadership changes and the other shoe dropped at month end with a major warning. My investment thesis remains Neutral on the stock now waiting for a corporate update to better analyze any future move.
Tough Model Gets Harder
Even liking the business concept of Volta, the company had a tough business model. What the EV charging business couldn't afford was a major setback.
Last week, the company announced a surprise executive transition with founder and CEO Scott Mercer stepping down and resigning from the board. In addition, co-founder and President Chris Wendel resigned from the company and board leaving a major vacuum in executive leaders.
The stock was below $5 and down 50% from the SPAC transaction price, but the company was generally on plan set out for the business. Revenues did miss estimates, but a lot of the issues appeared more related to installation delays of new charging stations.
The surprise news of the founders leaving the company wasn't a good indication that the business was doing well. This week, Volta dropped the other shoe with the delay of the quarterly report filing for Q4'21 and a huge cut to Q1'22 and 2022 revenue targets.
The company suggests revenues will only reach up to $8.5 million in Q1'22 versus analyst estimates up at $16.1 million. The updated 2022 revenue target is ~$75.0 million while the consensus estimates were up at $88.4 million.
In essence, Volta is now forecasting to miss Q1'22 targets by ~$8 million while the full-year number will only miss targets by $13 million. The numbers just don't add up with a general prediction the EV charging station company reports substantial growth during the year with Q4'22 revenues approaching current targets of nearly $29 million. Besides, the lack of a revenue warning when announcing the executive leadership changes just 3 days prior isn't going to provide much confidence to the market.
Volta forecasts adding an incremental 1,700 to 2,000 connected charging stalls in 2022, but the company didn't provide any details on why revenues are declining sequentially and missing targets. The company only has ~2,300 stalls in service now and Volta vaguely blames growing scale and seasonal media revenue patterns impacting the business.
One of the biggest concerns with the business model was the ability to scale the media network. My previous research hammered away at the risk to the business of reporting over $38 million in quarterly EBITDA losses when just reporting revenues of $8.5 million. The numbers provided no flexibility for Volta to miss financial targets.
For Q3'21, Volta had quarterly operating expenses of $29 million. The company has to now convince the market revenues will rebound in the 2H'22 in order to cover these expenses. In the meantime, the EV charging station specialist is eating millions in quarterly losses with a precarious cash position of $331 million as of last September 30 and definitely much lower now in April.
In addition, the executive leaders needed to turn around the business aren't even hired yet. A move to restructure the business by new executives could set back the sales cycle. A lot of such turnaround attempts in aggressive growth companies just upset the apple cart and lead to lower sales while cutting costs.
Can't Touch
Despite the dip to $3 now, Volta isn't a stock investors should buy. The market cap is down to $520 million, but the company is burning a ton of money and has consistently missed financial targets.
As a SPAC deal, Volta still has a lot of warrants and stock options in play here. The company and market didn't expect to see a lot of these stocks trading this far below $10 after months of being public.
A general assumption was that the warrants would be exercised to provide additional liquidity and the share count would naturally end up at the higher level. After the end of Q3'21, Volta had a total of 24 million warrants still outstanding with the public and private warrants having an exercise price of $11.5 while the common stock warrants are down at $1.31. The company has nearly 15 million stock options with a weighted-average exercise price of $3.14 plus RSUs at a much higher price.
Source: Volta Q4'21 10Q
Without the warrants exercising at $11.50 (once seen as a SPAC weakness) to raise ~$165 million, Volta could now need to raise additional funds at these depressed levels.
Takeaway
The key investor takeaway is that investors interested in the EV charging station sector should watch Volta from the sidelines. The company needs to better explain the executive departures and corresponding revenue shortfalls before the story becomes interesting again, even with the stock down at $3.
If you'd like to learn more about how to best position yourself in under valued stocks mispriced by the market early 2022, consider joining Out Fox The Street.
The service offers model portfolios, daily updates, trade alerts and real-time chat. Sign up now for a risk-free, 2-week trial to start finding the next stock with the potential to generate excessive returns in the next few years without taking on the out sized risk of high flying stocks.
This article was written by
Stone Fox Capital (aka Mark Holder) is a CPA with degrees in Accounting and Finance. He is also Series 65 licensed and has 30 years of investing experience, including 10 years as a portfolio manager.
Mark leads the investing group Out Fox The Street where he shares stock picks and deep research to help readers uncover potential multibaggers while managing portfolio risk via diversification. Features include various model portfolios, stock picks with identifiable catalysts, daily updates, real-time alerts, and access to community chat and direct chat with Mark for questions. Learn more.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock, you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Recommended For You
Comments (41)
Do you really think it was a scheme? My view is just incompetence, but who knows.
Definitely an interesting take. Think they converted the Class B shares to Class A changing the voting control from 60% to 16%. The stock has been $3 or below since this move on March 28. At least, they weren't able to sell above $10.
-The board appointed Vincent Cubbage as Interim CEO and hired Stephen Pilatzke as Chief Accounting Officer.
-The board's CEO Search Committee is formed and is actively engaged in a process to identify a permanent CEO.
-Current revenue chief and interim CEO Brandt Hastings has now been promoted to Chief Commercial Officer to capitalize on Volta's growing revenue momentum and market opportunity.
-The board will commence a search for a successor to Volta's current CFO, Francois Chadwick, in the coming weeks; he will be leaving the company on Aug.22, 2022 for pursuing another professional opportunity.
That exodus kind of spells corporate doom to me, but perhaps if there are any Board members left they will try to save the company.
I wonder if there is anyone left to answer the phone?
Corporate doom is very possible. Definitely keep watching from the sidelines.
-Revenue of $12.1M (+44.0% Y/Y) misses by $0.22M.
-Adjusted EBITDA was $30.7M loss, compared to $12.9M loss in the prior-year period.
-Cash and marketable securities were $262.3M as of December 31, 2021.
-First quarter 2022: Revenue in the range of $8 million to $8.5 million vs. consensus of $9.82M.
-Full year 2022: Revenue in the range of $70 million to $80 million vs. consensus of $74.27M.
The business model is hard to make it profitable.
As someone interested in buy the stock now why does it matter? If an IPO bombs, do you ask how much GS made off the public offering?
The information should be in the business combination filing so please let us know.
How are the founders getting rich with the stock at $3?
Where did they dump shares at $12?
Where did the execs cash out?
Some did, some failed to meet targets, but a lot have hit targets.
