EVgo Inc.

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?

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.

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.