This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk05: Greetings and welcome to the EVGO second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ted Brooks of Investor Relations. Thank you. You may begin. Hi, everyone. and welcome to EVgo's second quarter 2021 earnings call. My name is Ted Brooks, and I head up investor relations at the company. Today's call is being webcast and can be accessed from the investor section of our website at investors.evgo.com. The call will be archived and available there, and the company's results, investor presentation, and a transcript of today's proceedings will be available at the events and presentation section of the investors page after the conclusion of today's call. Joining me on today's call are Cathy Zoy, EVgo's CEO, Olga Shevchenkova, the company's chief financial officer, and other members of EVgo's senior management. Today, we will be discussing EVgo's latest financial results for the second quarter of 2021, followed by a Q&A session. During the call, management will be making forward-looking statements regarding the 2021 fiscal year and our outlook for expected growth and investment initiatives. These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations, including, among other risks and uncertainties, the severity and duration of the effects of the COVID-19 pandemic. These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. For a more detailed description of factors that could cause actual results to differ, please refer to our form 8K filed with the SEC today and posted to the investor section of our website. Also, please note that certain financial measures we use on this call are of a non-GAAP basis. And for historical periods, we provide the reconciliations of these non-GAAP financial measures to GAAP financial measures. With that, I will turn the call over to Cathy Zoey, EV Bureau CEO. Cathy?
spk08: Thanks, Ted. I'd like to welcome everyone to today's second quarter of 2021 results call. Whether you're a current shareholder or just interested in learning more about EVgo's business and our role in the growing electrified transportation sector, we've got a lot to share with you today. This is the first time EVgo is reporting results and sharing our outlook since we commenced trading at EVgo on NASDAQ on July 2nd. After completing our business combination with Climate Change Real Impact Solutions, or CRISP, I know I speak for the entire team at EVgo when I say how pleased we are to be here and how excited we are to be able to discuss the growth and new developments at EVgo. During the second quarter of 2021, we achieved growth across all of EVgo's segments. We deepened relationships with our core partners and we cultivated business with new ones. The backdrop for EVgo success and exciting growth trajectory is a rapidly transforming transportation sector. as the electric vehicle industry continues to experience unprecedented growth and a supportive policy backdrop, both in Washington and at the state level in the U.S., and indeed around the globe. EV sales were brisk in the first half of the year, with over 200,000 EVs sold in the U.S. through June, about one-third, or 70,000 of which we estimate were non-Tesla vehicles, reflecting increasing adoption and additional vehicle options available to drivers. EV sales in the U.S. for the full year are expected to continue to accelerate, driven by long-term industry growth fundamentals. First, OEM commitment. Globally, the auto industry has reached a crucial tipping point in its support for the electrification of the transportation sector. This is translating to meaningful financial support, with an estimated $330 billion of investment in bringing EVs to market over the next five years. The second significant tailwind is favorable regulatory dynamics. President Biden has announced an executive order aimed at making half of all new vehicles sold in 2030 zero-emission vehicles. Additionally, policymakers are working hard in Washington on proposals that will provide billions of dollars to support charging infrastructure and consumer purchases of EVs. And third, shifting consumer preferences. According to a Harris poll conducted in July, 48% of Americans said they would consider purchasing an electric vehicle today, and that figures up from 37% in just April of this year and up from around 20% in 2017. Related to this strength of the EV market, EVgo added approximately 35,000 new customer accounts during the second quarter and more than 53,000 new customer accounts year-to-date. EVgo's customer account number now exceeds 275,000. Further, driven by the factors of a reopening economy, the March of EV adoption in both the retail and fleet segments, and new take-or-pay arrangements with some of our fleet customers, EVgo realized kilowatt-hour network throughput growth of 48% sequentially and 125% versus the prior year quarter. During the second quarter of 2021, EVGO commissioned 104 new charging stalls, representing an approximate doubling of our first quarter of 2021. Operating in 68 metro areas and in 35 states, EVGO's total fast charging stall count at the end of the second quarter was 1,548. EVGO continues to execute on its robust stall build-out plan, identifying locations that will deliver our targeted financial returns. Today, we have more than 2,000 charging stalls in what we refer to as the Active Engineering and Construction, or Active E&C, pipeline, representing strong visibility into further stall growth. Roughly 85% of the Active E&C pipeline stalls are located within the top 20 U.S. metropolitan markets, and the majority are part of the GM EasyGo partnership to deploy 2,750 fast-charging stalls by 2025. By definition, stalls are added to our active E&C pipeline only after undergoing a rigorous evaluation process, at which point we have a high confidence in station completion and EVgo begins investing capital into those projects. Upstream of active E&C is a pipeline of literally tens of thousands of prospective station locations that EVgo has identified across the U.S. to meet the needs of the rapidly expanding EV markets. we're working closely with others in the charging ecosystem, retail and municipal flight hosts, electric utilities, local government permitting authorities, and OEM and state government funding partners to create a charger deployment flywheel that positions the industry to rapidly advance from station concept to energization. While it takes EVGO just four to eight weeks to actually construct a fast charging station, The typical all-in timeline of end-to-end station deployment can take from 9 to 24 months, allowing for interactions and sign-offs by hosts, utilities, and government permits. To help compress project development timelines, EVGO kicked off an initiative in April called Connect the Watch, in which we're providing a forum for stakeholders like site hosts and utilities to share best practices on charger deployment across their jurisdictions. Collectively, we're aiming to achieve ideas to energization timelines that are more efficient and hence meaningfully shorter, possibly removing months or even quarters from the timeline once that flywheel is really spinning. EVgo's market leadership and public fast charting for the retail market has given rise to expanded work with both existing and new partners as the base of EV applications extends across new segments of the transportation sector. A recent development I'd like to highlight here is the mid-July announcement that EVgo was chosen by GM to serve as a preferred charging provider for its Ultium Charge 360 fleet service. GM is, in its own words, expanding its Ultium Charge 360 solution to fleet customers in an effort to make it easier for fleets to switch from internal combustion to all-electric offerings. Well, like GM, we believe that fleet adoption of electric vehicles is crucial for reducing transportation carbon emissions. And hence, EVgo is offering a suite of solutions for the emerging fleet segments that are tailored to meet individual fleet customer needs. EVgo is proud to be partnered with GM on fleets and proud to deepen and broaden our GM relationship beyond expansion of the public retail network I just described. the strength of the GM-EVGO partnership is founded on a shared philosophical and commercial commitment to electrification of transportation and zero emissions vehicles. As another example of market expansion into fleets, EVGO is now contracted with two leading autonomous vehicle companies to provide each with dedicated fast charging sites away from their home base of operations. This is important for several key reasons. First, Dedicated charging depots will allow those autonomous vehicle companies to quickly charge and recirculate vehicles in the cities where they are commencing operations. Similar to the use profiles of the rideshare vehicles that EVgo has served for years, self-driving vehicles are utilized in very high mileage situations. Often more than seven times the vehicle miles traveled per annum than a privately owned car. EVgo's momentum in serving autonomous vehicle companies illustrates the value we see in being a first mover and trusted partner to those companies who, like us, are unlocking new norms of operating for 21st century electrified transportation. Similar to the dynamic that benefited the EVgo network with the addition of rideshare, we expect autonomous vehicle activity to turbocharge throughput growth on EVgo's network, given AV's higher mileage patterns compared to everyday drivers. The third reason that the business with these autonomous vehicle companies is important is that the contract structure includes taker pay arrangements that provide for revenue minimums to EVgo in exchange for a guarantee of exclusive charging access, increasing both the certainty and reducing risk for both parties as the self-driving market continues to expand, a true win-win. And finally, I'd note that the sector is just getting moving. Autonomous vehicle fleets are starting off in dense urban areas with supportive regulatory backdrops. The industry's high rate of growth is forecasted to continue more broadly once certain critical technological and consumer thresholds are reached. In July, EVgo also announced a deal to acquire e-mobility software company Recargo for $25 million. I would like to highlight several key aspects of this acquisition that we're most excited about. First, the purchase reflects a highly strategic and logical extension of the efforts already well underway at EVgo to create value-added software and data-driven ancillary services. Recargo's robust software offering, unmatched customer reach, and product development pipeline are well aligned with EVgo's vision and growth. Recargo is a well-established platform that serves as the go-to for so many drivers in the industry. Recargo was founded in 2009 and will be known to most of you through its PlugShare offering. Globally, PlugShare has 1.6 million users and 3.3 million app downloads, with coverage of more than 61,000 level 2 and fast charging stations in North America alone. Users share crowdsource reviews, photos, and data, helping the whole EV community to facilitate communication and understand and address drivers' needs. Its emergence and growth over the last several years provides a clearinghouse for communal insight that helps drivers optimize their experience and charging network operators to improve their services. The third thing we're really excited about with Vicargo is pay with PlugShare. This proprietary application developed by Ricardo allows for seamless payments across multiple charging networks to expedite and improve the charging experience for EV drivers. EVgo will be moving quickly to adopt pay with PlugShare on our network and will encourage other charging networks to do the same. We are keenly aware of the important role the PlugShare platform plays within the EV ecosystem and are committed to maintaining the integrity and independence of the platform for drivers, charging network operators, and automakers. EVgo will ensure that driver and operational data remains unbiased and secure. We will also be enhancing platform features and improving transparency for all parties, including, for example, publishing the plug score algorithm to charging network companies. EVgo is steadfastly committed to enabling the rapid development of the EV sector and the integrity of a platform such as PlugShare is essential to those efforts. The final development I'd like to share relates to EVgo's technical leadership. We built the EVgo Innovation Lab, an advanced technical laboratory, to test, validate, and certify charging equipment for safety, performance, and user experience. Doing this successfully requires rigorous testing of both hardware and software components of the chargers. We design, prototype, and test all applicable national and international automotive standards for safety, efficiency, performance, and user interfaces and interactions. We test for and then ensure seamless interoperability between chargers and the EVs themselves, including models in operation now and those in pre-production. The EVgo Innovation Lab enables the entire industry to anticipate and remediate technical challenges inherent to young, fast-moving sectors. And it positions EVgo to lead the industry in specifications for the next generation of charging equipment and software. We provide this valuable information to EV, OEMs, and charger manufacturers for free, and then we work together with all parties to address these issues before they impact customers. In summary, EVgo's mission to speed the adoption of electric vehicles through the investment and charging infrastructure is progressing at an accelerating pace. EVgo's build, own, operate business model has equipped us with the experience and insight to be a market leader and to be a provider of first resort to the rapidly expanding EV market. While retaining a relentless focus on financial discipline as we invest capital, we're able to offer new and emerging EV segments charging solutions that meet their particular needs. These include DCFC or Level 2 or a combination of charger types. They include use of the EVgo public network, dedicated depots, or both. They include EVgo owned assets, charging as a service, or white label services. We've also cracked the code on keeping the most expansive fast charging network in the U.S. operating at 98% uptime, a key element of the customer experience and retention. We've built the EVgo Innovation Lab, which has become a trusted go-to resource for automakers to test their new EV model on different types of chargers. We've pioneered a best-in-class power sharing and power routing configuration for our fast chargers. We've integrated proprietary software functionality that can drive margin expansion and delight EV drivers via reservations, driver coupons, loyalty rewards, and behind parking garage pay dates. We've been a reliable partner for state and local funding agencies, delivering on our commitment to deploy chargers and offer electric for all. And thus, we've earned the trust of industry participants across the board. I'm proud to be at the helm of such a company and working alongside a truly world-class leadership team. EVgo will continue to offer the growing base of EV drivers and sellers convenient and reliable charging infrastructure where they want it and when they want it, all while making an outsized contribution to addressing climate change. With that, I'll turn it over to Olga to go through some of the particulars in the quarter and our outlook.
spk07: Thanks, Cathy. First and foremost, I would like to highlight that upon the completion of the business combination with Chris on July 1st, EVGO received net cash of $573 million, which will enable us to fund our strategic plan going forward. As Cathy noted earlier, we're pleased to report solid results for the second quarter of 2021, including strong growth in customer accounts, network throughput, and revenue. Please let me take you through some of these numbers and discuss how they support our outlook for 2021. As Cathy mentioned, we saw 48% quarter-over-quarter growth in kilowatt hour network throughput during the second quarter of 2021. 126% growth year over year. Retail and fleet both benefited from a continued reopening of the economy and strong EV sales. Network throughput was ahead of our forecast for the second quarter and the first half of the year. And we remain on track to achieve our full year 2021 network throughput target of 24 gigawatt hours. Revenue exhibited similar growth trends. Punctually, we saw a 16% increase in revenues With this too, we remain on track to achieve our $20 million revenue target for full year 2021. Adjusted gross loss, which does not only include energy usage fees, but also fixed costs such as operational and maintenance expenses, call center, or site leases, was negative $61,000 for the quarter. equating to a margin of negative 1.3% for the quarter, up 260 basis points from negative 3.9% in the first quarter of the year, driven by improved energy costs per kilowatt hour due to better leveraging of demand charges. EVGO dedicates considerable resources internally to making our operations more efficient while continually striving to reduce costs. One of the bigger components of our cost base is energy-related expenses. By working with our utility partners to improve rate design to better match the EV charging use case, for instance, by limiting or eliminating demand charges were able to improve our energy costs. EVGO was able to shift our California stations away from tariffs with demand charges across three major California utility territories, two of them in the last 18 months. General and administrative expenses increased to $12.2 million in the second quarter of 2021, compared to $11 million in the first quarter of 2021 and $6.8 million in the second quarter of 2020. The increase is in line with EasyGo's expectations and primarily driven by the company's ongoing growth investments. Adjusted EBITDA for the second quarter of 2021 was negative $11 million compared to negative $9.8 million in the first quarter of 2021. Cash flow from operations for the first half of 2021 was negative $1.4 million, which is $14.4 million higher than during the comparative period in 2020, driven mostly by OEM partner contract prepayment of $20 million in the first quarter of 2021. APEX was $23.3 million in the first half of 2021 as compared to $7.7 million in the same period last year. as we continue to accelerate and execute on our stall build plan. Let me take a moment here to emphasize the flexibility of our business model from a financial perspective. Out of the $573 million we have raised, the vast majority, or north of $400 million, will be invested in building charge stalls. and we have a full discretion over the pace of that capital deployment. We can accelerate charges deployments if the market ramps more quickly. We can also conserve capital if market development is, for some reason, delayed. Remember, each station investment is discrete. Most are under $1 million in capex and have lead times of months, not years. Also, as Kathy mentioned previously, we apply rigorous underwriting criteria to every opportunity. This combination of factors affords EVGO with enormous flexibility to navigate market dynamics and deliver shareholder value. In order to help the investment community fully appreciate our business model and the robustness of EVgo's process for green lighting projects, I would like to walk everyone through the unit economics of a typical charging station. As I just mentioned, every single project developed by EVgo undergoes a rigorous underwriting process and is evaluated against pre-set financial criteria. The model for every single project includes three key elements. First, capex. This includes the cost of constructing a site, as well as any investment offsets, such as capex incentives from partner contributions, public agencies, and utilities. Second, operating costs. This primarily includes the cost of energy at the location, but also encompasses non-energy costs, such as rent and maintenance for the site, which, as a reminder, all fit in cost of goods sold on our income statement. And third, revenue. This includes site-specific revenue forecasts based on a detailed utilization model. So let us dig more into each of those elements. First on CapEx. On average, a charging station is comprised of 46 stalls, which means it can charge 46 vehicles simultaneously. CapEx per stall is roughly $110,000, which includes both equipment and third-party labor. bringing all-in installed costs to somewhere between $400,000 and $700,000. These figures are obviously affected by site layouts and equipment. As for investment offsets, if we build a stall in partnership with an OEM, for instance, General Motors, our capital outlay may be reduced by up to 1 third. In addition, if there are state, local, or utility incentives, the initial capex may be offset by anywhere from 5% to 10% to over 50%. To make this point again, all of these inputs are known and included in our model when we decide whether to go ahead with the project. On the operating cost side, our stalls are subject to commercial and industrial utility tariffs, which vary greatly across geographies and sometimes are subject to demand charges in addition to the volumetric cost per kilowatt hour of energy sold. As it stands today, our energy costs range from as little as 10 cents per kilowatt hour to as much as 50 cents and even higher in certain cases. We work actively and we think effectively with utilities and their regulators to continue reducing these costs. Non-energy costs are more stable and tend to center around $6,000 to $7,000 per stall per year. These costs include rent, property taxes, maintenance, warranties, third-party software, call center, and other network-related costs. And again, as a reminder, all fit inside cost of goods sold on our income statement. Turning to the revenue side. In order to forecast station throughput or utilization, We employ proprietary analytics tools developed in-house. We also use these tools to help identify the best site locations and geographies. We do this in two steps. Step number one, we determine starting or year one utilization using our proprietary machine learning model which enables EVgo to forecast utilization down to every census block group in the United States with a high degree of accuracy. Step number two, we develop a lifetime station throughput curve using a proprietary market build-out trajectory which relies on EVgo experience and market data on EV sales average vehicle miles traveled, vehicle efficiency, and other factors. Charge rate is an important element in projecting a station's kilowatt-hour throughput. An individual EV's charge rate is the rate at which its battery can take power from the charging network and is entirely driven by its particular battery characteristics. On our network, we see average charge rates close to the mid-30 kilowatt hours per hour range. New vehicle models being introduced over the next several years will have higher charge rates and expect to more than double to roughly 80 kilowatt hours per hour. These improved batteries mean that e-goals should be able to dispense more kilowatt hours over an equivalent time period. Current public policy initiatives also enhance our operating revenue forecast, as carbon reduction standards, federal-level benefits, and state programs offer ways to reduce costs and increase revenues. The low carbon fuel standard in California, for instance, has contributed approximately 20 to 24 cents of additional revenue per kilowatt hour dispensed in recent periods. And similar programs are being contemplated in other states as we speak. Our forecasts only include the policies which are currently in place. If any other programs get enacted, it will represent an upside to our forecasts. We hope this helps you understand EVGO's unit-level economics better. Finally, I would like to turn quickly to our 2021 full-year guidance. We reiterate our financial and operational forecasts communicated earlier this year, including total revenue of $20 million, network throughput of approximately 24 gigawatt hours, and adjusted EBITDA of negative $58 million. With respect to operational guidance, we expect to provide our year-end stall count expectations at the third quarter call in November. As Kathy noted earlier, while a large number of EVGO projects have reached the active engineering and construction pipeline stage, where we have high confidence in project completion, there is still a fair amount of volatility to these timelines, especially around permitting and inspection. We expect to have much clearer visibility on this in a few months. Our mid-term and long-term deployment goals remain unchanged. We are closely monitoring recent COVID-19 developments, outbreaks linked to the Delta variant, and any potential impact on customer activity, supply chain, raw material costs, and the overall macroeconomic situation. In general, we are pleased with our second quarter of 2021 results and how our to-date performance positions EVGO for the future within this high-growth marketplace. We are seeing growth in existing and new relationships, we are expanding our product depth and the depth of talent on the EVGO team, and we are executing on our operational and financial plans. With that, I would like to stop there and open up the lines for questions.
spk05: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of James West with Evercore. Please proceed with your questions.
spk02: Hey, good morning, Kathy. Hold on. Good morning. Hey, Dan. Hey, so the first question for me is around kind of behavior of EV drivers. Now that you've made this acquisition, you've got even more data than you already had. I know you guys have an impressive amount of data already, but, you know, I think the biggest key to success for, especially your business model, is this change in behavior to where I, as an EV owner, am topping off or charging at places where I go, not charging to go somewhere. I guess if that makes sense to you guys. Are you seeing evidence or have you seen evidence of this behavioral change that we expect can start to happen or are we still maybe too early days with penetrations?
spk08: you know james actually we are what we see on our network is that the the average um charging session people are spending about eight dollars and twenty cents so what's what that tells us is that they're not just going all the way down to zero on their battery and waiting and then filling up at the end they're they are convenience charging and one of the reasons and their convenience charging at EVgo because we're in places where they're going to be anyway. One of the reasons that you see our strategy is going to retail centers is because we don't feel like charging needs to be a separate special destination. You should be able to charge while you shop or charge while you go to the gym or charge while you're watching your son play softball. And that's very much a part of our business strategy. I'd also remind you that 30% of Americans don't have access to home charging. Now, EVGO's main business model does not assume that we're going to take any market share from people that do have access to home charging. If you've got a Level 2 charger in your garage and it's convenient, you're going to charge most of the time there at home, and that's fine. But what we see is with the broadening sort of choice of options for purchasing EVs and price points that are actually improving for many different sorts of either buyers or lessors of EVs, that many of the demographics are changing so that those folks who don't necessarily have access to home charging also need to charge conveniently away from home. So, look, we're already seeing that. We're pretty confident that we're on the right path here. And, you know, as I mentioned in the opening remarks, in our active engineering construction pipeline, we're in the top metro areas in the U.S., so we're going to be where people want to charge.
spk02: Right. Got it. Okay. That's good to hear. And then perhaps, Kathy, on the policy side, We have an infrastructure bill that's now passed. We've got a reconciliation package that we're seeing some of the information from, understanding that no one's going to get preferential treatment here on EV charging, but maybe you have some. context with which you could share how you think this will play out with the Biden administration clearly understanding the chicken and the egg problem and wanting to drive EV adoption via charging networks and how EVgo could fit into that.
spk08: Yeah, look, we're pretty excited about this. I mean, the federal policies that we're seeing emerging from Washington right now are a big accelerant, and they're incredibly important. I mean, the U.N. climate change report of a couple days ago was a wake-up call for everybody that hadn't already woken up. So we're now needing to move very, very quickly to actually accelerate, you know, climate solutions across all sectors, and obviously transportation is a big one. So, again, look, the conversations that we have both with the administration and on Capitol Hill, it suggests that, you know, this is going to – the support for EVs is going to be in the form of, you know, through the infrastructure bill, it's going to be on the charging part of it. And through reconciliation, we're going to see more incentives for drivers to purchase EVs. and for some other tax credits for the charging infrastructure pieces. So there is a potpourri, if you will, of incentives to accelerate this. On the charging side, they're probably going to be – is it going to be a combination of support for fast charging and Level 2? There's going to be a combination of support for urban and distributed, and there will be some emphasis on making sure that some of that infrastructure money goes into disadvantaged communities. And EVGO is, like, we've got experience in all of that, and we're really, really looking forward to participating in it. And, look, I can tell you, as somebody who administered over $30 billion of infrastructure money during the Obama administration, that there will be – probably this will be done via grants that are competitively secured. Much of the money will flow to states. And, again, the indications here are that they will flow through states. the State Departments of Transportation. And, you know, EVGO, in our experience to date in accessing much of the state funding that has come through the Volkswagen Dieselgate sediment, we're very well positioned to be able to compete for and secure and then deliver on those commitments.
spk02: Got it. If I could put one more in, Kathy. The And that makes a lot of sense. I'm excited to see how this plays out. You know, you had the GM relationship. They've obviously figured out they both need to work on their supply chains for batteries and the end game of charging and have partnered with you and others. Are there other like-minded OEMs, auto OEMs that you're talking to that you perhaps could have similar type relationships with and announce in the coming quarters?
spk08: Well, what I can tell you is that we have a great relationship with GM, and it just continues to strengthen and broaden, and we're really, really excited to be partnering with them. We also have an existing relationship with Nissan that's not dissimilar to GM, but it's a bit smaller in scale. And on the BD side with other OEMs, look, there's not an OEM globally now that's not investing in EVs. And so those conversations are really, really active. I mean, what we're doing with General Motors to build 2,750 fast chargers by 2025, it's big and it's important, but it's only a drop in the bucket. So we're looking forward all years for working with other OEMs to partner, to get out into more metropolitan areas, to create that comfort amongst the driving public that wherever they go, there's going to be convenient, reliable charging.
spk02: Got it. Thanks, Cathy.
spk08: Thank you, James.
spk03: Your next question comes from the line of Craig Irwin with Roth Capital Partners. Please proceed with your question.
spk05: Good morning, and thanks for taking my questions. Cathy, the one thing that really jumped out to me in your results was the network throughput, 6.1 gigawatt hours, 48% sequential growth. I was hoping maybe we could tease this apart a little bit. You know, when we look at the miles-driven data that just came out, actually, for the whole country, there's something like 18% miles-driven increase, 1Q to 2Q. And then you onboarded a very substantial number of new customers. You know, I think since your – Since your SPAC IPO announcement, the number's 55, I see you went roughly 19,000 to 34,600, 1Q to 2Q. Can you maybe comment a little bit whether or not you're seeing straight out EV growth, EV vehicle fleet growth drive this increase in usage? Or are we maybe seeing people charge at... you know, slightly better rates than the 5% of miles driven that you were thinking in the beginning? And, you know, are we seeing, you know, potential acceleration of people coming over the E2Go network as we, you know, get more visibility as a public company? I mean, just the presence in the media and the discussion of the financial opportunity, I think, draws a lot of attention, a lot of eyes. I mean, can you maybe help me tease those different things apart?
spk08: I'm going to toss this one to Olga, and then I'll round up if there's anything to add. Go ahead, Olga.
spk07: Sure. Thanks, Craig. So what we're seeing, there are three major factors driving that 48% in kilowatt hours throughput increase. One is the growth in our retail traffic. And the growth in our retail traffic is given by two factors on its own. People are coming back and vehicle miles traveled are growing exactly as you have mentioned. So people are coming out of lockdowns, coming back to work and driving more. But also we get all of those new customers who add pretty much new traffic to our network every single day. And the EV space in the first half of 2021 was very strong. And you can see in our results we added to 50,000 new customers, and they're driving and adding to their network. So both of those factors contribute to retail. The amount of insurgent, the 5% we were estimating, we don't have any new data which will demonstrate us at this very moment that that 5% has changed. And we have mentioned multiple times in various conversations and in various materials. We do think that 5% number will grow over time. We don't have any evidence suggesting the last six months that number has changed, so we don't think that is a factor contributing to the growth. The last factor contributing to your growth is an increase in our fleet traffic. And that is driven by two things here as well. One is a lot of fleet drivers, the rideshare drivers, they have more work to do now because the economy is back and people are just doing more things and moving deliveries and moving themselves between more locations. So we see the increase of a driving activity on our national, but also we have things partnerships with autonomous vehicles, which Cassie has spoken in her remarks earlier about. And that traffic, we see quite a bit of an increase on the take-or-pay contract, which contributes to that 48% growth as well. So it's pretty much growth across our major segments, and it's reopening an economy, and it is new drivers in our network, be it retail drivers or be it fleet drivers.
spk05: Thank you for that. Thank you for that. So one of the things in there, fleets, right, is a very exciting area for the longer run, really drives the model for your company. Can you maybe update us on the experience with public fleets, what the operators are seeing? And, you know, is it logical for us to assume that these lower operating costs are credibly something that will support expanding public fleets, rapidly expanding public fleets, just because of the relative opportunity for profitability versus an ICE vehicle? And then, you know, can you update us on medium and heavy duty operations How is this taking shape for EBGO? You know, do you see the opportunity for multiple fleet announcements over the next year or two? Or is this something where we're seeding the market right now and, you know, medium and heavy duty is something that's going to kick in a little bit further out?
spk08: Yeah, so look, you rightly note that the growth of the fleet segment is important to EVGO's business plan and business model. The first area, of course, where we were working very closely with fleets was with rideshare, and so we've got arrangements with both Uber and Lyft. and as old and noted like post lockdown those the the the uber and lyft the rideshare segment is is coming back um and and as you know both uber lifts have made commitments to go zero emission by 2030. so they're going to increasingly being electrifying and enabling their drivers to drive evs and that's going to accrue to evigo's benefit you know because we've got you know and they're going to be expanding those offerings to more cities across america so you know again those The particular timing is in Uber and Lyft hands, but we'll keep you posted as we can on that. The second thing that we're already seeing that's really exciting is the AV announcement that I talked about, like the fact that we've got two contracts with autonomous vehicle companies. that are major players that come with take-or-pay arrangements because those guys, you know, if you're running an AV business, you need to know that when those autonomous vehicles are out on the road that they're going to be able to come back and they're going to be able to recharge fast. So that's super exciting. We have, and again, the light duty delivery, there's a whole bunch of activity that's underway, and we look forward to being able to share that with you when those deals become inked. The medium and heavy duty, as you've kind of alluded to, it's still a supply shortage in terms of the vehicles. Right. Like we're just like, you know, EVGO has been partnering with a truck company for a long time that they can get access to one truck. And so we've been working with them for a couple of years and they're planning for when they're going to get their next tranche of trucks. They're just as just, you know, and that should be coming. But you'll you guys will have to talk to the to the supply side, to the vehicle companies. to get more insight into exactly when. What I can tell you is that on EVgo's side is that we are in active conversations with all of those players because everybody's sort of anticipating and seeing that the total cost of ownership of electric trucks pencils as soon as you can get the trucks. And so those charging solutions, again, we're happy to either own the charging infrastructure for these folks and operate it for them, or if they want to put the charging infrastructure on their balance sheet, then we can operate it for them. That's fine with us as well. There's no lather, rinse, repeat model there yet for the fleet segment, but it's a very, very, I should say, very active conversation with that market as it develops.
spk05: Understood. That makes a lot of sense. Thank you. So my last question, I guess most of us already appreciate the opportunity of having sort of discretionary network build-out, right? You have the cash from the SPAC IPO, and you get to choose how quickly you're going to build the stations. The pipeline, the 2,000 charger stalls that you've discussed a couple times, can you maybe help us understand how many of these 2,000 stalls are already maybe fully permitted or late in the permitting process? How many of these could you move quickly on executing if there was a very attractive subsidy or something that made that the right decision here?
spk08: So, yeah, it varies wildly. I mean, the active ENC pipeline means that we're investing capital, and we've literally got hundreds of those stalls are in front of local government authorities right now. So, they can cut loose very, very fast. And so we can actually move really, really quickly once the permits come good. You know, it's funny, as I was thinking about this, about what we're seeing with either whether it's local government authorities or utilities providing permits and inspections and getting easements, It all reminds me, Craig, and I think you've been in this space a long time, too. It reminds me of solar 10 years ago. When I was Assistant Secretary of Energy during the Obama administration, I was literally investing billions of dollars to commercialize clean energy technology in the forms of grants or tax rebates. And the common refrain that we heard from the recipients of these grants or the solar businesses was, The choke point, the pain point, is permitting. Oh, my gosh. What the Department of Energy eventually did is issued this sort of best practice set of guidelines that was a checklist for the other players in the industry. Like, look, this isn't that hard. Here's what you just need to do to get these rooftop solar projects moving. And we'd like to think that that was quite helpful, and it probably was, but the thing that was equally helpful was that the industry as an ecosystem got experience with them, and as that experience took hold, the timeframes compressed. So I think if you translate that into where we are with charging, with EVs and electrification or transportation, we're in the early innings now. And all of these players in the ecosystem are just gaining experience. And this is why, you know, EVgo's invented this initiative, created this initiative called Connect the Watts. to help accelerate that and share best practices with local governments, with utilities, with site hosts, you know, retail shopping centers that have never had to set aside a part of their parking lot for charging infrastructure. They're just learning how to do that. So all of that, our expectation is that it's going to start to pick up pace I mean, interestingly, a couple of weeks ago, I did a ribbon cutting at Santa Monica, Santa Monica, California. You think of that as ground zero for all things environmental. The first fast charging station that was open in Santa Monica was an EVgo station, eight chargers, a couple of weeks ago. It took us at EVgo seven weeks to construct that. But it was in the planning stages for over 18 months prior to that. Now, we're doing another one in Santa Monica right now that's not going to take so long, right? Because there now, the city of Santa Monica now has experience. Everywhere we turn, we're seeing that. With more experience, the timeframes compress. So, look, we've got, just to get back to the macro sense of your question, We have agreements with major national retail chains that give us a line of sight to literally tens of thousands of possible locations for fast charging stations, like literally, literally that many. And so once this flywheel starts to spin, we're going to be able to ramp up really, really quickly, again, should the project pencil. And that is a fundamental thing for EVGo.
spk05: Thank you for that, and congratulations for the strong quarter out of the gates.
spk08: Yeah, we're really pleased. Thanks, Craig.
spk03: Your next question comes from the line of Gabe Dowd with Cowan and Company. Please proceed with your question.
spk01: Hey, good morning, everyone, and congrats on getting the first print in the books, and thanks for all the details so far. Olga, you mentioned supply chain in your prepared remarks. I was just hoping we can maybe start there. Obviously, bottlenecks and component inflation has been well documented. Just curious how inventory management is progressing at this point and how are your suppliers, I guess, guiding you for the rest of the year? Should we expect continued bottlenecks? And just, again, how does that impact your business moving throughout 2021?
spk07: Hi, Gabe. Sure. So we haven't been affected by supply chain bottlenecks yet. We are getting... various signals from various suppliers and vendors of ours that might come later. And what we have done, and we've been doing right from the beginning of the year, we are managing our risks and we're preemptively placing orders much earlier than we used to do in order to secure our supplies. So we have done it with charges. We have done it with various components, and we're constantly monitoring situation. What we have also done, we have identified a few critical components, for example, cables, and we started diversifying our vendor base and supply base to make sure that we have as far reach as possible. So we have, from our perspective, we have done all precautions possible. We have pre-ordered equipment through Q1 2022 pretty much. So we don't have it in our warehouses, but the supply has been secured and we continue very closely with very high degree of attention, monitor the situation and react quickly to information. Unfortunately, this is the world we live in where the situation changes day by day and we are pretty clear-eyed about it and ready to act quickly when we need to. But as of now, nothing serious has happened to our rest-of-the-year supply, and it hasn't affected us to a high degree yet. It might, but hasn't happened yet.
spk01: Okay, awesome. Thanks, Olga. That's super helpful. And then maybe just sticking to or just going back to financials just for a second, if I look at 2Q capital of about $15 million against 104 installs would imply, I guess, $144,000 per install. And I guess you could recognize there could be other numbers in that capital figure. There could also be timing differences between costs incurred and just kind of cash out the door. But curious, is that Is that fair? Is that the right way to look at it? Or again, just kind of maybe worried about cost inflation impacting that install number per port.
spk07: Yeah, that's a fair question. So first, we haven't noticed Yet, again, we're observing the same cost where we projected and quoted this number multiple times, including early in my remarks of average of $110,000 per stall. The math you're doing is a very natural math where your mind is going, but unfortunately, that's probably not the right way to look at it because time and effect is huge. As Kathy mentioned, answering the previous question, it might take up to 18 months to fully develop the station, and despite the fact that construction only takes seven weeks, you're prepaying the equipment, you're starting spending capacity much earlier than the station goes into operation. So in that 23.3 million number of capex in Q2, tons of that is not related to those 104 charges we put in operations. It's a lot of charges which are going to go into operations Q3, Q4, and even Q1. So the timing here is really not a friend when you're trying to do that estimate. But again, as we're seeing and monitoring our costs, We haven't seen inflation affected for anything which we spent to date. But if we see that effect, we will update you next time we speak in Q3.
spk01: Great. That's super helpful. It makes a ton of sense. And then just last one for me. This question comes up a lot amongst investors. And I'm just curious if you could share some thoughts around Tesla potentially opening up its supercharger network and how that could impact your business and potentially take some flow, if you will, on a kilowatt hour basis from EVgo. Is there any kind of level of risk embedded in your forecast from the SPAC materials that potentially accounts for this? Or just how should we be thinking about this potential moving forward?
spk08: Well, look, so, Gabe, the macro driver here is there's going to be a gigantic growth in EVs, right? I mean, you know, BNF updated its forecast in the spring. I mean, it's just significant. And what we need is, if you ask drivers, what we need is more chargers to satisfy that demand. So that's sort of the first point. The second point is that EVGO and Tesla have a really good relationship. And as you know, EVGO is the only network that Tesla has permitted to have a Tesla connector on our chargers so that we can charge any car. And what we're seeing, and we've now got, I think, 400 of those connectors out there, what we're seeing is about 10% of our new accounts are from Tesla drivers. So we've actually got the flow coming in our direction, which is fascinating. The practical implication we think of what if Tesla opens up its charging network to other non-Tesla vehicles is likely to happen in Europe first. because of the engineering issues associated with it. They use CCS cables on the Teslas in Europe. They don't do that here. And so we'll all be watching what the tweets say about what Tesla's going to do, but we're actually thinking that this is – overall macro is that the charging network needs to expand and grow. So we're full steam ahead on our build plan, and there's nothing particularly that this announcement does to affect our forecast for market share, growth of throughput, et cetera.
spk01: Got it. Got it. Very clear. Thanks, Kathy. Thanks again, Olga.
spk08: Sure.
spk05: Thank you. Our next questions come from the line of John Lopez with Vertical Group. Please proceed with your questions.
spk06: Hi, thanks very much. I appreciate you taking the questions. I had two quick ones. I guess they're probably mostly for Olga. The first one feels dumb, so I apologize for it in advance. If your gigawatt hours were up 49% sequentially, why was revenue up 16%? What was the offset?
spk07: Sure, that's not a dumb question, John. That's the question I'll be asking as well. So the difference here comes mostly from our take-or-pay contracts. Take-or-pay contracts, by definition, they have a fixed revenue income, and the revenue comes before the throughput comes. So we see a wrap-up of the throughput, and we've seen it throughout the second quarter, and the contract started paying in the end of first quarter, and that contributes to that difference. Another reason is what we're seeing, we have those membership revenues on our retail site where people are prepaid for the month, $7.99, and then they're using it, and we have certain breakage in it. What we're seeing is that with the growth of usage, we see less and less breakage. So the Q1 had more breakage than Q2. on a relative basis, so that contributes to that as well. And the third factor contributing to it, we ran certain promotions in April and May to commemorate the end of pandemic as part of our marketing strategy, and we gave people $5 off, and that contributed a little bit to... um to kind of a lower kilowatt realized lower revenue per kilowatt hour in q2 but we haven't changed price in our engines since pretty much 2019 but that short-term promotion that was also a contributing factor here
spk06: Gotcha. Thanks. That's really helpful, Olga. My second questions are just, I guess, clarifications, if you will, about the 2021 commentary. Excuse me. So, the first one is, obviously, Recargo, I guess, was really not contemplated before. Is there any contribution that you expect from Recargo in the financials for the second half of this calendar year?
spk07: So, Recargo is – It's a very small contribution. It's a tiny company, and they haven't been successful in commercializing their great technology. That's why we're working with them at a very attractive valuation, and that's what we will be doing. So for the remaining of 2021, again, very small contribution, and that didn't materially change our guidance, so we decided not to update it.
spk06: Gotcha. And sorry, the other clarification there is I think I heard you say you guys are good with the station count target, excuse me, in a couple of months. But, like, if you're not sure on the station count, how can you be sure on the revenues?
spk07: That's a great question. Thanks, Alex. Let me explain what truly drives our revenues. There are two main factors which drive our revenues. One, it's the growth in DIO and the new customers we're getting when they purchase MEV. And two, an ability of our network to accommodate the traffic, the growing traffic. Right now, our network has capacity to accommodate all the new traffic which is coming in, and we do not see that ability to be impaired in the short term. So we are absolutely prepared to take all the new traffic with the charges we have, and that doesn't impact our revenue, doesn't impact our throughput. In the midterm and long term, we are committed to constructing more charges to accommodate that growing traffic. But in the short term, that doesn't really move the needle on us generating throughput and revenue because we do have capacity to take all the new customers on.
spk06: Gotcha. Really helpful. And sorry, if I could just sneak one last one in. Obviously, Olga, I'm happy to hear your thoughts on this. I'm wondering if Kathy could chime in as well. I want to come back to the Tesla dynamics a bit and maybe, Larynn, Electrify, because in both those cases, I mean, I think Electrify now is planning to double, and I think they said they're going to exceed that initial $2 billion they were planning to spend, and the Tesla dynamics are obviously new. So, I guess my question for you here, Cathy, is just, if you think about stations that you've specced out or sites that have historically maybe looked attractive to you, do any of those calculations change when you contemplate maybe a change in supply? Can you talk through those dynamics at all?
spk08: Yeah, well, so I think, John, as Olga outlined, we look at every single investment through the lens of, you know, kind of looking at it eight years, what's the utilization likely to be? And we take those decisions discreetly on an investment-by-investment basis. And that data is always quite up-to-date. Part of the algorithms, like, that's in our sort of proprietary utilization tools is how many other chargers are nearby. So if, for example, like... one of our competitors or a utility decided to build a whole lot in a particular area, we could immediately say, you know what, let's actually, a better use of that capital will be in this other place. So this is the beauty of our business model, is that we can kind of pivot on a dime and only build where the projects pencil. So I'm really, really, I've been in the clean energy space for a long time, and I've been in the energy sector since I graduated from college, What I love about this sort of place in the energy ecosystem is the flexibility, the granularity of the individual investments that give us so much agility in being able to deliver value.
spk05: Thank you. Our next questions come from the line of Stan Shepetner with Pickering Energy Partners. Please proceed with your questions.
spk04: Good morning. This is Philip James on for Stan Spettner. Thanks for making time for our question. With respect to the Investment America Act, could you comment on how grants potentially reducing your effective capex per DC fast charger could impact capital investment plans as well as return on capital and a path to positive free cash flow?
spk08: You bet. So the way this is likely to work is that there's going to be chunks of money that get distributed probably to the states at their local departments of transportation. And then the rules and the guardrails around how that money gets specifically allocated in those jurisdictions are probably going to be done at that level. And what we've seen, if If what we've seen through the Appendix D Volkswagen grants is any indicator of how the future might work, states are doing it differently. So some states, like, you know, we've got Virginia, which covered 75 percent of the capital of rolling out in Virginia. There are other jurisdictions where the states have decided to do 50 percent. There's others where they actually do a kind of a reverse auction possibility. So the answer is that there's no single answer, but that there will be some sort of, you know, anywhere, I'm guessing, from 20% to 80% CapEx coverage. What we then do is we put that into our model, and it makes, you know, it juices the returns in those particular locations. So we haven't modeled that for any of our forward, any of this prospective federal money. Everything that we're building now is based on real grants that are available now. So what this does is this will provide some upside and will allow us to get into markets that might not otherwise pencil without it. So, for example, rural locations or corridors that are not really in our schema now because there aren't enough EVs to make them pencil without the grants, they'll allow us to spread our footprint more quickly and profitably.
spk04: Great. I appreciate the color. Thank you.
spk08: Pleasure.
spk05: Thank you. There are no further questions at this time. With that, that does conclude today's teleconference. We do appreciate your participation. You may disconnect your lines at this time. Wishing you a great day.
Disclaimer