By M. Marin
NASDAQ:EZFL
Balance sheet measures reduce debt & potentially interest expense; Shares expected to regain Nasdaq compliance…
EzFill Holdings, Inc. (NASDAQ:EZFL) and NextNRG Holding Corp. (NextNRG) have entered into an agreement to merge their two companies, with NextNRG to become a wholly owned subsidiary of EzFill Holdings once the merger is consummated. Michael Farkas, NextNRG’s founder and CEO, will assume the role of CEO of the combined company and be its largest shareholder.
This week, EzFill executed a series of debt-for-equity transactions, including with NextNRG, that converted an aggregate $13.5 million of debt into equity. This initiative eliminated the majority of the company’s outstanding debt and simplifies its balance sheet. The company expects the debt-to-equity conversions to reduce annual interest expense by an estimated $1.2 million. In addition, EzFill also raised about $1.4 million through the issuance of convertible preferred stock to NextNRG. Overall, the company expects these balance sheet measures to also address the deficiency of the Nasdaq minimum stockholders’ equity requirement.
EzFill Holdings provides a mobile fuel delivery service that offers convenience to owners of traditional ICE vehicles. Its target market ranges from individual automobile owners to business fleets. The company brings refueling to the vehicles at their primary location, thereby eliminating the need for owners to drive their vehicles to a gas station. Once a delivery order has been placed through the EzFill app, EZFL brings the gas to the vehicle. EZFL’s tagline is that it provides the “gas station that comes to you … at the click of an app.”
NextNRG deals with emerging greener energy solutions, including supplying energy to and maximizing the benefits of microgrids through artificial intelligence and machine learning. Microgrids are small-scale power grids that can operate independently or together with other small power grids, battery storage and charging electric vehicles (EVs) wirelessly, among other initiatives.
AI/ML Smart Microgrid technology
NextNRG intends to use AI (artificial intelligence) and ML (machine learning) to maximize efficiencies in energy supply, storage and delivery, with plans to develop, deploy and own AI/ML powered smart microgrid solar energy, and battery storage solutions.
NextNRG has developed or acquired the IP (intellectual property) to support its deployment strategy. Towards this goal, NextNRG purchased SEI in November 2023. SEI is a development stage company that controls certain licenses from the Florida International University to develop certain smart microgrid and wireless charging technologies. The company has a patented AI/ML microgrid solution and expects to build and manage renewable energy projects to provide localized energy solutions that utilize solar power and smart microgrids in order to maximize grid independence and efficiency and reduce dependence on fossil fuels.
The company’s smart microgrid AI/ML technology tailors the delivery of energy in order to optimize renewable energy use for each customer. Management expects to help ease energy problems by stabilizing energy levels over peak and off-peak consumption periods using its AI/ML solutions. Microgrids can operate independently or connect to larger grids, as needed, leveraging the company’s patented Smart Microgrid Controller to ensure that the customer uses the most efficient and reliable source of energy.
Increasing demand for energy challenges supply, often resulting in limited energy access on tribal lands …
Overall demand for energy has increased dramatically in the U.S., as illustrated below, placing growing demand on an aging grid infrastructure and resulting in tribal and lower income communities often having little or no access to energy.
The company’s initial deployments will be on domestic tribal land where there is a severe need for improved access to energy. According to a 2022 report by the U.S. Energy Department’s Office of Indian Energy, some 17,000 tribal homes were without electricity in 2022, the majority of those homes located in southwestern states and in Alaska. The Assistant Secretary for Indian Affairs has testified before congress that about 21% of homes on the Navajo Nation and 35% on the Hopi reservation are without electricity.
IRA, Federal initiatives designed to drive better energy solutions on tribal lands, lower income communities…
In the U.S., the federal government has incentivized the deployment of more efficient greener energy solutions on tribal lands. For example, the U.S. Inflation Reduction Act (IRA) and other government initiatives include funding specifically earmarked for Tribal Nations and Native communities. This includes $32 billion in the American Rescue Plan, $13 billion in the Bipartisan Infrastructure Law and more than $720 million in the IRA. In addition, the U.S. Department of Energy’s Clean Energy for Low Income Communities Accelerator partnered with state and local leaders, with an aggregate $335 million committed to help some 155,000 low-income households access renewable energy and efficiency and lower their energy bills.
NextNRG has filed an application for a grant with the DOE for a deployment on tribal land in Louisiana. The company’s subsequent planned deployments are in underserved communities in Newton, Texas and Havana, Florida. In addition, NextNRG has filed applications with the DOE for $49.5 million in grant funding for those deployments.
In the aggregate, NextNRG has almost $750 million in smart microgrid deployments planned, according to management, which are in various phases of development. For example, NextNRG is in early discussions with seven Native American Tribes to deploy five mWh Smart Microgrids. The company’s planned projects range from deployments on municipal property, tribal land, commercial facilities, office space, multifamily residential properties, and other properties.
Smart grids expected to deliver strong revenue growth, on top of EzFill’s recent growth.…
Management expects that deploying, owning and operating smart grids will be the company’s growth engine in the next several years, although EzFill already has a solid and growing revenue base, as well. EzFill revenue increased from $7.2 million in 2021 to $27.2 million in 2023, representing a 94% CAGR at this early stage in the company’s development, as the company has delivered nearly three times the number of annual gallons over the period (6.5 million in 2023, up from 2.3 million in 2021). EzFill 1H24 sales advanced 23% year-over-year to about $14 million.
Management believes the merger will facilitate NextNRG’s ability to fulfill a leading role in the expected fleet electrification process, as it can leverage EzFill’s customer base and fuel supply expertise throughout the expected transition of its customers to EV fleets.
Expected synergies post-merger, as focus on green energy solutions grows
The companies expect that the aggregate technologies and expertise of EzFill and NextNRG position the combined company to offer a range of sustainable energy solutions to a growing customer base. Solutions include smart microgrids, as noted, solar integration, fleet servicing and analytics, wireless EV charging and delivery of traditional fuel, as well as battery storage. Management’s strategy once the merger has been completed is to license and sell innovative energy and charging solutions to property owners, parking facilities, municipalities, and government agencies, as well as charge point operators (CPOs) to support the ongoing development of more sustainable energy and fueling / charging infrastructure.
Positive tailwind in the EV space, as the EV base expands…
While the near-term focus likely will be on deploying energy solutions on tribal and other lands, once wireless EV charging is offered, the company believes NextNRG has a competitive advantage compared to other wireless charging companies. For example, the company it can offer integrated bidirectional-capable chargers so that available energy and power capacity stored in the batteries of aggregated EV fleets can be resold back to the local electric grid when the fleets are not being used. In addition to convenience, the advantages of the technology include lowering stress on the energy grid. Plus, wireless EV charging eliminates the need for plug-in cables, which can be difficult to connect and are often vulnerable to theft at public charging stations.
NextNRG emphasizes that its planned system will automatically connect the vehicle and account to the charger, which the company expects will streamline the charging process and make it easier to use. Moreover, management believes this service will also be “greener” than existing EV charging by making it easier to charge EVs it will thereby facilitate EV adoption. Management expects to obtain synergies between the two companies as it pursues its growth strategy, including helping to transition ICE fleets to EV over time.
NextNRG has a positive tailwind of transitions within the automotive space, in our view, as EV sales grow, albeit at a slower pace than initially expected. For example, through the end of July 2024, Ford Motor Company had sold 52,422 EVs, up nearly 64% year-over-year compared to the same period of 2023. Sales of hybrid vehicles reached 109,068 units compared to 73,100 in the same period of 2023. That represents a 49.2% increase. EV sales are still relatively small as a percentage of Ford’s (and the industry’s) total sales, but based on the 2024 data are gaining share versus traditional ICE (internal combustion engine) vehicles, according to Ford and industry data.
This trend is occurring not only in the U.S., but it appears that the transition to green energy is accelerating worldwide, driven by increasing concerns about climate change and the need for sustainable solutions. This shift presents an opportunity for NextNRG to capitalize on the growing demand for greener charging stations.
Also encouraging in terms of potential consumer adoption is continued improvements in EV performance and regulatory restrictions on automobile emissions. On average, the minimum performance on electric range increased to 150 kilometers (km) in 2018, from 100 km the prior year, according to McKinsey. McKinsey also notes that “governments and cities have introduced regulations and incentives to accelerate the shift to sustainable mobility. Regulators worldwide are defining more stringent emissions targets… In line with EV uptake, the buildup of charging infrastructure needs to accelerate to avoid becoming a potential bottleneck and limiting consumer-driven EV adoption.” Automotive OEMs such as GM and Tesla, among others, have also announced planned battery initiatives in North America.
Development of EV charging stations not keeping pace with growth of EV base …
Down the road, the company also aims to make traditional gas stations greener by introducing batteries, solar panels and wireless EV charging technology. Moreover, there are multiple advantages to EVs, in addition to satisfying the needs of environmentally conscious vehicle owners. EVs’ other advantages compared to gas-powered cars include 1) eliminating the cost of diesel and gasoline (electric bills associated with charging EVs are generally a fraction of what it costs for diesel and gasoline) and 2) reducing the costs of maintenance (due to factors such as no oil changes or engine maintenance).
Growing focus on green automotive options is leading to development of infrastructure to support the anticipated rising adoption of EVs. However, development of the infrastructure to support EV charging has not expanded as quickly as industry insiders would like, particularly given the rise in purchases of new EVs, although construction of charging infrastructure to support EV adoption has also been increasing. The Biden administration, U.S. Department of Transportation (DOT) and U.S. Department of Energy (DOE) recently announced their agreement to deploy about $5 billion over 5-years to support the development of a national EV charging network along what they refer to as “designated alternative fuel corridors, particularly along the interstate highway system.” They refer to this as “an important step towards making electric vehicle (EV) charging accessible to all Americans.”
Nevertheless, at this early point, the number of EV charging stations still represents only a small fraction compared to traditional gas stations. According to Department of Energy data, the U.S. currently has fewer than 46,000 public EV stations installed compared to more than 150,000 traditional gasoline fueling stations, although many existing gas stations are adding electric charging equipment in order to position themselves for the anticipated uptick in EVs.
According to the IEA, 2.7 million public charging points were in operation globally by year-end 2022, of which more than 900,000 had been deployed in 2022, representing a 55% year-over-year increase from 2021. The Biden administration has a stated target of constructing a national public charging network of 500,000 ports by 2030. The Biden administration, U.S. Department of Transportation (DOT) and U.S. Department of Energy (DOE) recently announced their agreement to deploy about $5 billion over 5-years to support the development of a national EV charging network along what they refer to as “designated alternative fuel corridors, particularly along the interstate highway system.” They refer to this as “an important step towards making electric vehicle (EV) charging accessible to all Americans.” According to the DOE, “EV charging continues to experience rapidly changing technology and growing infrastructure.”
Because expanding charging infrastructure is necessary to make EVs convenient and reduce range anxiety and, in turn, drive EV adoption, policy initiatives such as the National Electric Vehicle Infrastructure Formula Program (NEVI) are in place. The NEVI program received $885 million in funding for 2023 and aims to build chargers along 72,000 miles of highway, covering all US states, Washington DC, and Puerto Rico.
However, management believes that a substantial gap between the availability of public charging stations and demand for EV charging will persist for the foreseeable future. According to S&P Global Mobility forecasts, domestic installations of charging technology will need to quadruple over the 2022 -2025 period “and grow more than eight-fold by 2030,” in order to meet demand. Wireless charging technology can not only help accelerate the availability of EV charging, but also offer a more convenient option that eliminates the need for physical connectors or cords, according to management. By initially offering multiple fueling options, the company expects that in the future, it can help facilitate the transition of its ICE customers to EV fleets.
Management has history in green energy space
Management has extensive experience. Michael Farkas, NextNRG’s founder and CEO and the executive who will lead the combined company, has a successful track record as a principal investor across a variety of industries. He was also the founder and former Executive Chairman and CEO of Blink Charging inc., as well as the founder and managing director of privately-held investment group The Farkas Group. Another organization that Mr. Farkas founded and led, the Atlas Group, raised capital for numerous public and private clients.
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