Tritium DCFC: Fast Charging Into Uncertainty

Tritium DCFC (NASDAQ:DCFC) is down 86.5% over the last year to trade at about $0.19 above the minimum threshold to remain listed on the Nasdaq. The Murarrie, Australia-based EV charging company joined a crowded field for EV chargers when it went public via a blank check company in the winter of 2021. Stock market sentiment since then has been in a full risk-off mode as the Fed funds rate was hiked to its highest level since 2008 and the broader global economy gyrates between a recession and anemic economic growth. The company currently trades on a $182 million market cap against revenue of $57 million for the first four months of 2023, around $171 million annualized. This infers a 1.06x forward price-to-sales multiple even as the company realizes triple-digit growth rates on the back of an order book set alight by the fast-ramping global adoption of EVs.

Tritium chargers are present in 41 countries, providing the company with exposure to the global growth of EVs. In the US, 750,000 fully electric cars were registered in 2022, a 57% growth over 2021 even against the marked increase in financing costs. This was around 5.6% of the total US automobile market and came as the 2022 Inflation Reduction Act is set to supercharge EV adoption through its provision of a $7,500 EV tax credit. Tritium's current market cap has to be contextualized against this growth. Blink Charging (BLNK) is currently trading on a forward price-to-sales multiple of 3.90x, and market leader ChargePoint (CHPT) is swapping hands for 4.70x. Near bankrupt Volta was acquired by Shell (SHEL) for $169 million against $54.6 million in revenue for the trailing 12 months before its acquisition.

EV Sales Go Through A Generational Ramp

What's with the Tritium discount? The company's unorthodox financial calendar stems from its foreign issuer status. This has reduced its comparability against its peers, with no earnings for the first three months of 2023 being made available outside of a Form 6-K filing on May 11 that provided brief highlights on its financials. Bears, who form the 18.35% short interest in the commons, have in view a Volta-style collapse as Tritium also faces the same issues with profitability and cash that plagued Volta.

Tritium is serving the rapidly growing fast-charging market for EVs and forms a pick-and-shovel play on the growth of this zero-carbon transport as both have a symbiotic relationship. The company expects to realize revenue of $57 million between the first of January 1 and the end of April 2023, a growth rate of 237% over revenue of $17 million generated in the year-ago comp. This came on the back of the production of 3,200 charging units against an order backlog that exited April at $153 million, up $33 million from the year-ago period. Operational wins during the period included a partnership with BP (BP) to supply its 50kW RTM and 150kW PKM chargers for fleets and general public use in the US, UK, Europe, and Australia. UK charging network evyve has also ordered 350 Tritium fast chargers through the period.

Charging infrastructure forms a core component of the EV revolution as it solves range anxiety and forms a positive feedback loop where new car buyers are more likely to go with an EV because they have sight of charging stations, which in turn drives more locations to more readily expand any such charging network. The fundamentals of the EV industry are strong as several government investment schemes are set to blossom around the world and consumer sentiment towards EVs experiences its nirvana. However, my concern with Tritium isn't growth but profitability.

How Positive Sentiment Returns

The company has not provided any guidance for profitability against what were negative gross profits of $10.9 million for the trailing 12 months from its last reported half-year from the end of December 2022. Previous EV charging valuations were built on buoyant narratives of the green energy future and the significant role EV charging companies would play in this. It was easy to buy into this dream when interest rates were near-zero and market sentiment towards EV companies drove valuations to stratospheric highs.

Tritium realized operating expenses of $89.5 million and net losses of $115.7 million for the trailing 12 months from its last reported half-year. This drove a cash burn from its operations of $141.6 million. Such losses are unsustainable, even against attempts by the company to raise funds. Tritium entered into agreements in early May with two lenders to take on an aggregate of $40 million in loans at an interest rate of 12% per year. The company also filed for a mixed security offering in March to be able to sell up to $500 million worth of new shares. This would amount to 275% of their current market cap and highlights the dash for liquidity that currently plagues the industry. Critically, positive sentiment will not return as long as this funding uncertainty exists on the back of continued net losses.