EVgo Inc.

Greetings and welcome to the EVGO third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Just as a reminder, we have allotted one hour for this call. 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. I would now like to turn the call over to Ted Brooks, Vice President of Investor Relations. Thank you. You may begin.

Hi, everyone. Welcome to EVGO's third quarter earnings call. My name is Ted Brooks, and I head up investor relations at the company. Today's call is being webcast, and the call and supporting materials 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 investor's page after the conclusion of today's call. Joining me on today's call are Cathy Zoe, eVigo's CEO, and Olga Shevrenkova, the company's chief financial officer. Today, we will be discussing eVigo's latest financial results for the third 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. 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 10-Q filed soon with the SEC 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. For historical periods, we provide reconciliations of these non-GAAP financial measures to GAAP financial measures, and the investor presentation can be found on the investor section of our website. With that, I will turn the call over to Kathy Zoe, EVgo's CEO. Kathy?

Thanks, Ted, and good morning, everyone. EVgo continued to make great progress during the third quarter, which marked our first full quarter operating as a public company. With 130,000 EV sales in Q3 and now over 1.3 million EVs on U.S. roads, EVgo's operations in the third quarter demonstrated further progress toward an electrified transportation future. We celebrated the continuing growth of our customer base with customer accounts ending the quarter at over 310,000, an 11% increase from just the last quarter. We generated our highest network throughput ever at eight gigawatt hours, a 31% increase in network throughput quarter over quarter with retail and fleets both showing significant upticks. And this in turn resulted in a 29% quarter over quarter revenue increase. EVgo's network performed well, delivering hundreds of thousands of charging sessions across 35 states and 68 metropolitan areas, with plenty of capacity on our current network footprint to accommodate expected traffic from 2022 EV sales. Said another way, EVgo's existing charger base can handily absorb the throughput arising from expected near-term growth in EV sales, and we're expecting charging revenue to increase accordingly. And given that we're in the business of skating to where the puck is going to be, we're continuing to build charging stations in advance of the dozens of EV models hitting the market in 2023, 24, and beyond. This means that during the third quarter, we ensured that every part of EVgo's station development pipeline expanded. Agreements with new national and regional site hosts eager to participate in transportation electrification. dozens of local government authorities reviewing applications for fast charging stations within their localities, some faster than others, working with major utilities and utility commissions toward new EV-friendly electricity tariffs, and engaging with the government agencies launching new programs to provide financial support for charging infrastructure. Taken together, EVgo's active engineering and construction pipeline grew to nearly 2,500 DCFC charging stalls, 400 more than when we last spoke with you just three months ago. With EVgo placing 47 new stalls into service in nine metro markets in Q3, bringing total stalls in operation to 1,595 by the end of last quarter. In particular, the market appetite for hosting fast chargers is accelerating and an increasing clip. EVgo now has multi-year programs underway with national retailers like Target, Kroger, Whole Foods, Albertsons, and retail real estate leaders like Regency Centers, Kimco, and Brixmore. These are complemented by a plethora of site host agreements with more regional and local retail brands. all of whom have joined and accelerated the transition to electrification as EVgo retains our commitment to build stations and locations convenient to drivers in their everyday lives. And based on the increased appetite for EVgo charging stations across the board and General Motors' sustained commitment to electrification and planned delivery of 30 EV models to the market by 2025, I'm pleased to report that EVgo and GM have expanded our partnerships. Together, we will be building an additional 500 high-powered fast-charging stalls by 2025, taking the total in this program to 3,250. Geographically, the work with GM and others means that we expect EVgo's public charging network to span over 75 metro markets in at least 40 states by 2025. During the third quarter, we also focused on deepening our relationships with EV drivers themselves, launching new customer loyalty and pricing programs, as well as per-transaction billing. Coupled with EVgo's existing reservations, coupons, and seamless parking garage access, these efforts are aimed at increasing flexibility, incentivizing charging at different times during the day, and enhancing a world-class customer experience. Also during this quarter, EVgo's reach into the growing electrified fleet segment expanded, Tailoring our offerings to the particular needs of businesses that own and operate fleets, we introduced the EVgo Optima software product suite. Optima's fleet management platform delivers highly efficient charging performance, co-optimizing costs, energy demand, and grid conditions in a manner that integrates fully with the charging needs of our fleet customers. To that end, EVgo's fleet business is growing, with new agreements announced with General Motors, Merchant Fleet, and Electric Last Mile Solutions. EVgo also signed a new agreement with Uber to extend and expand our relationship in helping drivers on the Uber platform go electric. And building on our pilot work with Penske on the DCFC side, EVgo and Penske have a new order for high-powered Level 2 chargers at Penske locations that are starting this quarter. EVGO has achieved these milestones despite some headwinds that continue to affect not just our nascent industry, but the whole global economy as workers everywhere face continued COVID restrictions and the raft of uncertainties that come with it. So far in 2021, EVGO has seen that while the time it takes us to construct a station is four to eight weeks, the average timetable for getting high-powered charging stations from concept to utility energization in dense retail parking lots can be 18 months or more. And so during Q3, we worked with our partners, including GM, to adjust charger build programs accordingly, including updating partnership agreements where that was required to reflect current market reality. We, of course, continue to engage with other members of the charging ecosystem, utilities, local permitting authorities, state funding agencies, and site hosts themselves through our Connect the Watts program to create a more streamlined process for bringing chargers to life, You've heard me call it a flywheel, and we see evidence that it's starting to spin. EVGO witnessed a 50% increase in the number of permits granted in Q3 versus Q2. We logged a third consecutive quarter of exceeding quarterly targets for executed sites. A company record in Q3 of beating our targets by 37%, and we met our full-year target one quarter early. and we more than doubled the number of executed utility easements in Q3 versus the prior quarter. There is, of course, much more to be done, as local permitting and utility easements remain bottlenecks in the fast charger build process. Overall momentum for electric vehicles and the decarbonization of transportation is undeniable, though. Whether it is the new EV purchases I referenced above, the greater than 50% increase in 2027 EV penetration forecasts made by leading market analysts in the last year, OEM commitments ranging from Ford's plans to invest $11 billion in new EV and battery manufacturing facilities in the U.S., Toyota's announcement to have a full battery electric vehicle on the market by next spring, GM's October Analyst Day that focused on the centrality of the EV universe for its plans, or the continued support at a policy level that is playing out in the U.S. and elsewhere. On that last point, a quick update and perhaps sense of scale for the programs included in the infrastructure and reconciliation bills in Congress. The infrastructure bill, which was passed late last week, includes provisions that allow for up to $7.5 billion of grant funding for electric vehicle charging infrastructure and additional potential opportunities on top of that, This new support represents a considerable increase in the financial commitment on the part of policymakers for the EV and EV charging industry, and the funds will likely flow through the state starting in late 2022 and on into 2023. Additionally, as big as the infrastructure bill is, there's likely more to come. The Build Back Better Act reconciliation legislation includes an extension and expansion of the Section 30C tax credits, supporting the build-out of EV infrastructure, as well as consumer tax credits for EV purchases, both new and used, delivering benefits to more U.S. drivers. EVgo strongly supports complementing infrastructure funding with consumer-side incentives for purchasing EVs. And we'll be watching closely in the coming weeks as the final terms of Build Back Better are hopefully agreed and this package of additional EV incentives is passed by the Congress and heads to President Biden's desk. One final note on these pieces of legislation, though. While we are enthusiastic about the additional tailwind Build Back Better could provide to transportation electrification, EVGO's build program is and has been grounded in investing in charging assets that will deliver returns to our shareholders based on the market settings in place at the time we decide to make an investment in that charging station. Our multi-year forecasts and plans were developed without reliance on pending or potential legislation. With the infrastructure bill now a reality, we will be working with policymakers on how the funding will get distributed over the coming months and will update EVGO's own business plans accordingly. We expect that this funding will allow for more rapid expansion and increased upside for EVGO's growth, and I look forward to discussing this with you on future calls. With that, I'll turn the call over to Olga to provide our financial and operational updates, as well as our updated 2021 guidance.

Thank you, Kathy. I would like to start with a review of our operational and financial results for the quarter. Network throughput in the third quarter was 8.0 gigawatt hours, an increase of 31% from 6.1 gigawatt hours in the second quarter. This sequential increase in throughput was driven by new retail customers added on the EVgo network, as well as a ramp-up of activity on autonomous vehicle sites. I would like to add that EVgo's network throughput outpaced the growth in electrical vehicles in operation over this period by about 20 percentage points. More than 36,000 new customer accounts were added during the quarter, bringing total customer accounts to over 310,000 as a growing base of drivers continued to choose EVgo as their key EV charging provider. Tesla drivers represented roughly 15% of all new EVgo customers in the third quarter. Today, we estimate Tesla drivers account for approximately 5% of total EVgo retail throughput. We observed a 29% quarter-over-quarter revenue increase in the third quarter. This increase reflects ongoing EV adoption trends and continued improvement in economic activity. Retail charging revenue increased 28% in the quarter, while fleet charging revenue increased 26% due to ramps in activity on our dedicated autonomous vehicle fleet sites, as well as the growth of public fleet traffic from continued recovery after many COVID-19 disruptions. Retail and fleet revenues were up 101% and 64% year-over-year, respectively. Ancillary revenues increased 73% versus the prior quarter, predominantly driven by the inclusion of recargo revenues following the close of our acquisition on July 9th. This quarter, we have changed the presentation of certain costs by reclassifying some of the items in cost of goods sold accounts to general administrative expenses. This reclassification to G&A is being done to more accurately reflect the cost of goods sold associated with providing charging and other services to our customers, and therefore give investors a more proper view of the profitability. Costs previously included in cost of goods sold, but now in general administrative expenses, include network platform service fees, certain storage and freight costs, free operational rent and license fees, call center expenses, and certain costs related to field and customer operations. Cost of goods sold include charge aside depreciation and amortization expense, direct energy expenses, maintenance, rent, property taxes, payment processing fees, and other non-charging network costs related to activities that support ancillary revenue. Our adjusted gross profit for the third quarter was $1.4 million, representing a 22.2% adjusted gross margin. up from $1 million and 21.4% respectively in the second quarter. The margin increase was mostly driven by the inclusion of higher margin recargo revenues following our acquisition completed in early July. Adjusted cost of goods sold totaled $4.8 million for the third quarter, up from $3.8 million for the second quarter, driven by higher overall energy costs due to higher network throughput and higher non-energy costs due to expanding the number of charges installed. As part of our ongoing process to help our investors understand the drivers for EVGo financial results, I wanted to take a moment to describe the components of our revenue. Revenue breaks down into four subcategories, charging, regulatory credits, ancillary, and network. Charging revenue comprises roughly 65% of our total revenue as of today, and we further break down charging revenue into three categories, retail, fleet, and OEM. Retail charging revenue, which as I noted, rose by 28% in the quarter, is driven by retail customers charging at public stations on EVgo's network and is comprised of membership or subscription payments as well as volumetric base payments. This revenue stream is driven by EV adoption by regular commuters who choose EVgo as their charging provider. Fleet charging, which rose 26% quarter over quarter, is comprised of both public and dedicated fleet charging activities. Everything from rideshare drivers charging at lunchtime to autonomous vehicles charging in depots and could be revenue-linked to volumes as well as take-or-pay type of payments if you go receive for stores at dedicated fleet depots. OEM charging revenue is associated with prepaid charging credits that EVgo's OEM partners, such as General Motors or Nissan, award to their respective customers. OEMs prepay EVgo for such credits, and EVgo recognizes their revenue when OEM customers show up to charge. This revenue line is driven by some of our OEM agreements and the number of vehicles this OEM sells into the market, which is expected to increase with the V-adoption. Regulatory credit revenue is the next important component in our revenue stream and comprises approximately 10% of our total revenues. This largely reflects the monetization of credits EVGO sells under the low carbon fuel standard. The LCFS program, which is the most mature and advanced in California, requires companies to adhere to carbon emission targets, with those exceeding the limits obligated to purchase credits to be in compliance. The nature of EVGO's business, combined with the fact that our network is 100% powered by renewable electricity, means that we generate LCFS credits that we then sell on the market. Since pricing is determined by the market, we expect to experience volatility in realized prices and have averaged 20 to 24 cents per kilowatt hour over the last several quarters. In addition to California, Oregon has introduced its own regulated carbon reduction program, whose prices have been lower at approximately $0.08 per kilowatt hour. The state of Washington has recently created a program as well, and that program should be up and running by 2023. If EVGO were to see adoption of LCFS-style programs in other states, such as New York, where it has been proposed, it would represent upside to our base case forecasts. To date, the vast majority of regulatory revenue at EVGO has been derived from California's LCFS Next is ancillary revenue, comprising 15 to 20% of our total revenue, which includes everything from maintenance services, development and project management revenue, data and technology-driven services, consumer retail revenues, such as reservations and coupons, and advertising revenues. As mentioned, EVGO's ancillary revenues also include recently acquired recargo. And finally, network revenue comprises 5% to 10% of total revenue. It is recognized in association with the services we provide to OEM partners tied to significant charger infrastructure build programs. Also, let us take a minute to walk through the main components of our adjusted cost of goods sold. Energy remains the biggest piece at roughly 45% to 50%. while site rent, property taxes, maintenance, and payment processing fees collectively comprise another 45 to 50%. The remaining 5% reflects other non-charging network related items, such as engineering and development costs and hosting fees. At EVGO, we have an ongoing focus on optimizing our cost structure. And as part of this effort, we are working with our utility partners to reduce energy costs. In Arizona, Connecticut, Illinois, and California, for the territories served by Tucson Electric, Connecticut Light and Power, United Illuminating, Connecticut Light and Power, United Illuminating, Emerson, Illinois, and the Los Angeles Department of Water and Power, We have seen electricity rate changes equating to an approximate 20% reduction in future EV charging rates in those locations. In addition, further rate proceedings are pending in Arizona, Ohio, and Massachusetts, providing the potential for meaningful future rate relief. While our current footprint in some of these locations has been small, improving cost structures will support growth in EVGO's capital commitments in those areas. Before moving into 2021 guidance update, I would like to elaborate on the relationship between EVs on the road, EVGO's network throughput and associated revenues, and the number of stalls and operations on our network. As mentioned earlier, we observed 31% growth in network throughput in the third quarter, which was driven by the rising number of EVs on the road and corresponding customers who charged at EVgo locations. EVgo has consistently focused on geographies with the highest EV adoption. For example, in Los Angeles, our home market, Approximately 90% of EV owners live within 10 miles of an EVgo charger, and current utilization in Los Angeles is 9-10%. Our analysis suggests that we could theoretically pause the development of new stalls for the next 15 months, and still see growth in both throughput and revenues in line with prior periods before expecting to see any negative impacts from availability occurring. At present, we see a very similar picture in all of our other key markets. Network throughput growth is just to reinforce a function of more drivers adopting EVs and the prudent charger location selection that accommodate and encourage that adoption. The new stalls that are in development as part of EVgo's build programs that Cathy described earlier will satisfy future demand arising from vehicle sales in 2023 and beyond. A key takeaway. is that whether a brand new charging station is energized this quarter or two or three quarters from now will not have a material effect on EVGO's overall network throughput or revenues in the near term. We are increasing our expectations for revenue, network throughput, and adjusted EBITDA for the full year of 2021. Our updated expectations are for $20 to $22 million of revenue, 24 to 26 gigawatt hours of network throughput, and negative $54 to $58 million of adjusted EBITDA. The increases in our forecast for revenue and adjusted EBITDA are driven by higher than estimated throughput on our network. As for stall guidance for 2021, We are issuing our first formal operational stall target guidance of 280 to 320 newly operational stalls for the full year of 2021. It tends to take 80 to 90 days for a stall to go operational once we begin construction. This consists of our construction timing plus utility energization. While variability of these external factors may contribute to short-term shifts in operational status, we think that it is helpful to provide color on the number of stalls expected to be under construction as of year-end. In addition to stalls in operation as of year-end, EVGO expects that 220 260 stalls will be under construction at the end of 2021 resulting in a forecasted total of between 1890 and 1970 operational under construction stalls as of december 31st a final point of note on the timing and content of future results We expect to be reporting fourth quarter and full year 2021 results in mid to late March. At that time, we will initiate operational and financial guidance for 2022. With that, we will conclude our prepared remarks and turn the call over to the operator to take your questions. Thank you.

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 Craig Irwin with Roth Capital. Please proceed with your questions. Craig, could you please check if you're on mute?

Hi, thank you. Good morning and thanks for taking my questions. Kathy, I wanted to start off by asking about the expanded relationship with General Motors. You added 500 sites, a dozen new geographic markets. Can you maybe give us a little color on how this expansion to what was already a pretty substantial agreement started to, how it started, right? How the conversation with General Motors say, let's do more, let's do it faster. And what does this mean really for the outcome or, you know, what we should be looking at as far as the partnership between General Motors and UVGO over the next couple of years?

Yeah, hey, thanks, Craig. Look, the expanded relationship between GM and EVgo that we just announced is a home run for both companies. The larger updated program for the 3250 stalls is delivering a higher NPV to EVgo than the original program, of course. and more geographic reach and DCFC presence for GM in markets where they plan to sell EVs. And it doesn't require more GM capital to get that done. So why is that so? How it's structured? What EVgo has done is we've traded early bills in 2021 that require actually more GM subsidy to pencil for larger, for charger bills in 2023 to 2025 that don't as a result of higher EV penetration in those later years. I guess to say it another way, if you build later, the same $90 million can buy an extra 500 charging stalls. And so, look, we're delighted because we get to go into new markets and build charging infrastructure where we have all the exposure on the revenue side once those are built. And GM gets to feel excited about going into those new markets where they want to sell EVs. It's a great win-win. I mean, our relationship just continues to strengthen.

Perfect. Perfect. So then I wanted to ask a little bit about the EMC pipeline, 2,500 units up about 400, I think, since last quarter. That's fairly substantial growth. You know, can you talk about, you know, how you're feeding the front end of the pipeline? Do we expect this kind of growth to potentially continue over the next number of quarters?

Craig, it's funny. In the old days, it used to be we had to explain to a site host not only what an EV charger was, but what an EV was. What we're now seeing from site hosts, and I mentioned a bunch of national brands, but it's also local regional brands that are out there in retail settings. they're really excited about getting EV charging built. Everybody across the country seems to feel that momentum. So our expectation is that pipeline is going to continue to grow. We are a great counterparty, so site hosts are excited about working with EVgo.

Amazing. Amazing. And then the eight gigawatts in the quarter, right, 31% growth sequentially, that's a pretty chunky result you know obviously it benefited you on on the top line and i would say the bottom line this quarter you know as as we look forward over the next few quarters if we see this above trend growth is there an opportunity to maybe build the network faster um you know i know you optimize for utilization different locations and and kind of uh you know calibrate you know what the different geographic markets can bear i mean Is this something we should read through as an indicator that there is room to go faster?

Look, you rightly point out that we do calibrate. And we've got, as Olga and I both mentioned in our remarks, we've got headroom on the network to absorb much more throughput that's coming. And with the expectation of the EV penetrations that are going to come from the various new models that are going to show up in 2022, But overall, the business model, as I've said many times, can accordion up or down, but it can accordion up very quickly. So if we see, for example, EV incentives from the federal government and the EV sales go faster than what the market analysts have said, EVgo can get out there and build in more places. For us, it's still that financial discipline. Where is EV charging infrastructure going to pencil well and deliver the returns that our shareholders expect? And we can move up or down as we need to.

Great. Congratulations on a solid result here. I'll hop back in the queue. Thanks.

Thank you. Our next questions come from the line of Gabe Daoud with Cowan. Please proceed with your questions.

Hey, thanks. Good morning, everyone. Thanks for the prepared remarks. Super helpful. Kathy, maybe could we just talk a little bit about just the revised guidance for the remainder of the year? If I look at the new throughput estimate, it kind of implies maybe a sequential decrease in throughput in 4Q. Is that just general conservatism? Is there anything else I should be thinking about related to throughput for the rest of the year?

I'm going to pass this over to Olga.

Sure. Thanks, Kathy. So, Gabe, it is both. It is a bit of a general conservatism, but also Q4 is traditionally affected by Thanksgiving and Christmas. People actually don't tend to drive much over those holidays. They stay back home and enjoy their family time and dinners. And that's, I think, kind of what influenced our general conservatism. We'll see how people behave this year. It's just based on our observations from past years over the Q4.

Got it. Thanks, Olga. That's helpful. Maybe just following up on the policy side, you mentioned BIF and funds potentially flowing through late 22, early 23. Curious, Kathy, how you kind of balance this with, I think in the past you maybe mentioned EVGO not really being a highway corridor company. And, you know, I think BIF funding will first be allocated towards highway corridors. So could you maybe just talk about how you balance those two and, you know, does build out accelerate as a result of BIS to capture these awards?

Yeah, well, so first principle for EVgo, we'll invest in charging infrastructure that pencils for our shareholders, right? And in the past, corridors didn't pencil. So you didn't see us going deep into corridors. With the widespread support and the magnitude of that support for corridors, we'll be taking a look at that, and we'll be working with policymakers to see how that flows. In addition, I'm sure you've also read that in certain places where the corridors are covered, the states are going to be able to say, okay, now we're also going to do metropolitan areas. So, look, we're working closely with policymakers on how these programs are going to unfold, and you can be sure that EVGO will be coming to the party wherever there's an opportunity for us to build charging infrastructure that delivers returns that our shareholders expect.

Understood. Thanks, Kathy. That's helpful. And then one just last one for me just on rate reform in several states on the utility side and for the proceedings pending in some states. Could you talk a little bit? more about this? Like how long is the relief or demand charge holiday in place for? And could you maybe also just talk on the cost side, potential impacts related to increasing commodity pricing and thus electricity pricing and what that means to your cost of energy?

Yes, Olga, let me talk about generally and then toss it to you about some of the specifics. But the general answer your question gave is these are very, very jurisdiction specific. Some places you might get a demand charge holiday. Some jurisdictions we're seeing specific EV rates that are going to be in place for a long time. So obviously what we are working on and what we've been successful in is garnering rates in the places that Olga mentioned in her comments that are favorable to us building more infrastructure in those places. So it's very, very jurisdiction-specific, and there's lots of things that are pending, and it takes some time to go through these regulatory processes. Olga, on the commodity stuff?

Sure. So on energy prices, we are not subject to short-term volatility or inflationary pressures on those. We are utility C&I customers, so our tariffs are regulated and they're fixed. Over longer term, if utilities feel that the environment has changed they might revise those tariffs and will become a party yes to that party but but but not in the short term so what's happening right now will not affect us in in the coming probably year i would say great really helpful thanks everyone thank you thank you our next questions come from the line of james west with evercore isi please proceed with your questions

Hey, good morning, everyone.

Hey, Dan.

So, Kathy, curious, you mentioned a little bit about quarters earlier, but the highway strategy here, as you guys are seen as, and rightfully so, as the leader in fast charging, a lot of the range anxiety that people face, myself included, I guess, in that, is that, you know, I know I can find an EVgo charger you know, in Los Angeles at a Whole Foods or things like that. But I'm not convinced I can do that on the highway if I want to take a longer trip. And so I recognize there's a returns focus to the business, but there's also that chicken and the egg of the range anxiety. And so how are you guys thinking about building out into fast charging into the highway system? Is that something that maybe you would work on with, you know, the GM team

relationship you know i guess your overall strategy there would be would be great to hear about yeah look the the when every car in america is an ev then the quarters were penciled just like metropolitan areas probably right i mean you know i knew and but we're now we're in an inter we're interim period but as i think the policy the policy support that's coming for quarters is going to change that equation and and expand the aperture um over which evgo can can make money for its shareholders so i think what we're doing is we're we're excited about those possibilities yes and gm is excited about those possibilities so i think we just just continue to watch this space james we'll keep you we'll keep you posted on on our business opportunities, again, we're not going to deviate from our financial discipline. But there are lots of opportunities to have others come to the party to create those circumstances where we can invest in new places in new ways, whether it's corridors or more rural areas or new states, to get to, you know, to deliver those returns.

Okay. That makes sense. And, again, I do like the returns focus. So trust me, I get that. On the permitting side and the easement side, it sounds like there's some progress being made here to speed up some of the development of the network. Is that people becoming more comfortable? Is it some standardization of the permitting process? What do you think is driving that whole improvement and recognizing that it's still an impediment to it?

Yeah. Look, first and foremost, I think it's experience. Like, there are literally thousands of local governments that are now being asked, many for the first time, can you approve this fast charging station? And they say, what? I mean, we've got one example in Ohio that the local council has considered it three times. It's like, what is this? Do we need to ask the landscape guy about whether the plants look okay around this thing? I mean, that's quite an extreme example. But I kind of liken it to, like, The DMV, like, you know, when you go to the DMV, eventually they're going to renew your driver's license. You're just not sure how long it's going to take. This is what dealing with the local government authorities are like. Some of them are going to go. Some of them are going to learn and it's going to be like. Electronic rubber stamping, and it'll be a couple weeks. And we have some examples of that that are really fast now. Others, they're just going to take longer. What we're doing at EVGO is we're building that into our planning now. Because we would be dreaming if we thought everybody's going to move to that electronic, yes, off you go. They're all going to be individual. So look, but the fly was spinning, the processing is happening and our connect the loss initiative is just growing and growing. Like we have these quarterly salons and people from all across the country come on and they share best practice. So for example, in the last one, state of New Jersey has passed an ordinance to streamline local permitting that the representative, the lead from New Jersey, came onto our Connect the Watts call and shared that experience with others. And they thought, oh, well, that's interesting. So that's just one of the things that we're doing at EVGO to encourage the streamlining of the process.

Okay. Very helpful. Thanks, Kathy.

Pleasure.

Thank you. Our next questions come from the line of Ryan Greenwald with Bank of America. Please proceed with your questions.

Hey, good morning, everyone. Good morning. In terms of the increase to the revenue expectations and the widening to the top end of 22 million, I know in the initial projections that you guys had laid out, you were excluding any revenue associated with the OEM payments. Just wanted to clarify if this new range is inclusive of that contribution as you have a bit more visibility here and how much of the full year revenue increases attributed to these and any contribution from the cargo.

Sure. So we do not include additional contributions from OEM revenues in here. OEM revenues, they sit in a balance sheet as deferred revenue and will be amortized in the due course. So that increase definitely is not associated with that. It has some of the recargo revenue. We're not disclosing how much, but our ancillary revenue went up by 73%. this quarter versus last quarter, and it was mostly driven by inclusion of recargo, so you could probably infer from there.

Got it. That's helpful. And then in terms of the regulatory credit revenue, increase was pretty modest quarter over quarter despite the meaningful pickup and throughput. Any color you can provide just in terms of latest trends you're seeing in terms of LCFS pricing and any dynamics around the FCI credits?

sure so right now we are recognizing the revenue two quarters after regenerate kilowatt hours associated with that revenue so pretty much the q3 um lcfs volume is associated with q1 and q2 is associated with q4 2020. there was no meaningful pickup between q1 and q4 due to back then still existing coverage quite severe coverage restrictions so that's what you see in kind of q2 to q3 dynamic on the price end we traded um our q3 volumes at 180 per credit right now we're a bit of an up price um uh price compression environment so we most probably will see our q4 volumes traded at lower than that we don't know that yet and on fci credits fci credits are actually um exact same credits as lcfs so they get bundled together and traded in the same way so they're subject to all the same price and volatility increases or decreases got it thank you for that and then maybe just lastly looks like you guys are implying a year-end charger count closer to 1700 versus the 2200 plus that you guys laid out there in your initial projections

I appreciate the fact that you expect another 200 and change to be under construction here, but can you just provide a bit more color in terms of how you're thinking about the impact into 22? I know there's a bunch of kind of puts and takes here, but specifically around the delay in deployments relative to what you previously outlined.

Yeah. I mean, I just think what we've, we talk about the flywheel, we talk about the sort of the pain points that are, that are taking a long time. So the permitting we've discussed, you know, per James, James's question, the utility easement process is turning out to take a bit longer. So when our standard that we're going to market with typically, Ryan, is a 350 kilowatt charging configuration, that almost always requires a service upgrade from the utility. And if it requires a service upgrade, the utility engineering is just a little bit, it takes a little bit more on the utility engineering side, plus If you have a service upgrade, it usually requires an easement or some sort of access agreement between the landlord, the landowner, and the utility itself. That just adds more time to the process. So that's sort of what we're witnessing in terms of the timing of the charger installed. So, again, it's not a question of... if it's more a question of the time it takes to get these things deployed. So we're not in any way concerned about it. We're just being pragmatic and realistic about what the time is going to take.

In terms of financial impact, though, anything to kind of consider there?

Well, no, what we've tried to explain is that what we're building right now is the Wayne Gretzky thing. It's for future EV sales that are going to probably be taking place in 23, 24. So we've got a bunch of headroom on our current network now to be able to absorb handily. all of the EV sales that are coming. So whether we turn on, you know, 100 new chargers this quarter, next quarter, or even midway through 2022, it's not going to impact revenues in any way.

Great. I'll leave it there. Thanks for the time.

Thank you. Our next questions come from the line of Maheep Mandoy with Credit Suites. Please proceed with your questions.

Greg, good morning. Thanks for taking my questions. Just a quick follow-up on the previous question. If you can quantify, like, how many of these stalls under construction are at existing sites versus new sites?

Oh, the vast majority of stalls under construction are at new sites. Go ahead. Sorry, Olga. Olga and I are not in the same location. Go ahead, Olga.

I was about to say the exact same what you have just said. I agree, strongly pile on. Most of it is on the new side.

Got you. And just to follow up on that, I think, Tolga, you mentioned the new charges are necessarily not contributing much to the 2022 revenues. So if we could just probably remind us, why is that? Why are you seeing a slower ramp here on new locations? And is the kind of the overall news flow around EVs or EV charges, is that changing any of that ramp up either for existing or for the new sites?

Yeah, let me start and then I'll toss it to Olga. Okay, Olga, do you want to go? No, no, please start. So I wouldn't call it a slower ramp. I would say it's a longer timetable to get things energized. Right. So so, for example, like, you know, at the end of the as our end of quarter call with GM and in Q3, we had we had built a whole bunch of stalls and dozens of them were like finished beautiful pictures. They were sitting there in a parking lot. But the utility hadn't come to do the final inspection and energization. I mean, literally dozens of them. So that's that's a common practice that's outside of our control. So anyway, I'll go over to you.

Yeah, sure. So on the ramp up, when we say that new stores, we don't necessarily say they don't contribute, but we're saying that they don't necessarily create additional traffic right away. So if we open overnight magically 10,000 new stores in Los Angeles, for example, that would be possible. We won't necessarily see the equivalent increase in the traffic overnight just because the number of cars in Los Angeles overnight has not increased. And what happens in such situations when we open new stations, we just see New customers and old customers, they kind of redistribute and people are like, oh, a new station. Okay, I'm going to be using this one instead of the one I've been using before because it's newer, it's in a more convenient location and whatnot. So the traffic kind of gets to redistribute itself in a short term. And then this capacity kind of gets filled up. with more cars coming to the specific market. So I really like to compare this to maybe a chain of a coffee shop. There are that many coffee drinkers in this town. So if you keep on opening coffee shops and a number of coffee drinkers don't increase in that particular town right you won't see that revenue increase we're luckily in a very different business than coffee shops because our coffee drinkers aka ev drivers keep on increasing at a very high rate so we're building slightly ahead of those ev drivers coming to the market but that doesn't necessarily mean that new stations don't have users it's just the users get organically redistributed because people choose where they want to charge, and often they choose new locations. Sometimes they prefer to stick with the old location because it was more convenient. I hope that answers your question.

Thank you. Our next questions come from the line of John Lopez with Vertical Group. Please proceed with your question.

Hey, thanks so much. I had two, if I could. The first one, I just wanted to come back to the throughput question from a bit earlier. I apologize, but I think a year ago, your throughput actually increased between calendar Q3 and calendar Q4. Why was that, and what would make it different this year versus last year?

So last year wouldn't necessarily be a reference case because the increases could have been attributed to COVID restrictions easing in Q4. From my memory in California, let us not forget 70 to 75% of everything which is happening here is happening in California. From my memory. The vast majority of Q4, we saw like an improvement and restaurants got open and people started getting out on the streets and whatnot. And then end of Q4, beginning of Q1, they again introduced new restrictions because there was a new wave. So I wouldn't necessarily look at the 2020 and infer any normal patterns from it because they were heavily affected by what was happening with COVID.

Gotcha. Okay. That helps. Thanks. The second one, I wanted to come back to the GM commentary. I apologize, I might not have caught all this, but I thought I heard you say that you're effectively trading off some higher-cost near-term units for some lower-cost units longer-term, like further out in time. So, A, did I hear that right? B, could you just tick through, assuming I did, tick through what changes in the cost profile? And C, is the dollar value of that engagement actually different, or is it the same dollar value, but just a higher number of chargers?

Yeah, John, no, you didn't quite hear right. Remember, the EVGO's principles are, we will invest in the charging station where it pencils. And one of the key One of the key inputs, there are many inputs about what makes a pencil, the capex, et cetera, et cetera, et cetera, the rent. But one of them is what's the utilization on that station going to be? So when you're building stations where in the earlier years when there were fewer EVs on the road, it takes more money from someplace else if you're going to build them. So if you're building in 2021, the subsidy per station required by somebody else, and in this case, GM, is higher. If you're building in 2023, after dozens more EVs have hit the market and been sold, then the required subsidy to make a charger pencil is much, much less. So what we've been able to do for the same $90 million of GM contribution, we've been able to build 500 extra charging stalls in the latter years of the build program. and have it increase the overall NPV to EVgo.

Okay. That really helps, Kathy. But, sorry, is the total commitment, dollar commitment, between the two of you unchanged and the charge account higher? Yes. Okay. Got it. All right. Thanks. Appreciate it.

No problem.

Thank you. Our next questions come from the line of Stan Spettner with Pickering Energy Partners. Please proceed with your questions.

Hi, thanks for taking my question. On fleet sales, as you continue to pivot towards fleet over time, one, do you maintain your long-term target to get fleet throughput to be about two-thirds of your total throughput? And as that trend continues, do you expect to see revenue growth sequentially to moderately lag the rate of your throughput growth?

Oh, you want to take this one? Sure. Not necessarily in the long run. In a short run, you might see those fluctuations, and they could go both ways. You might see revenue growing quicker than throughput. When we open new dedicated locations, they start paying us immediately for all the stalls that are open, but it takes our partners time. time often to ramp up capacity. So you might see, again, if you look at a quarter-to-quarter development in the next couple years, but, oh, the revenue grew, but the throughput didn't, or vice versa, right? The following quarter, you'll, for example, see revenue didn't grow that much, but the throughput ramped up because now they're on top capacity. If you really look at a long term, they should go hand-in-hand. We don't foresee much of a lag if you really take a step back and look at it in the multi-year line.

So if you think about in pricing terms, then, isn't your fleet pricing somewhat of a discount to what you're charging at a retail level, and so that would have some impact on average pricing on a going-forward basis?

Oh, that is your question. Apologies. I thought you were asking about fleet specifically. If you look at the business overall, yes, that will have that effect. If you just take the overall kilowatt-hour throughput versus overall revenue, because per kilowatt-hour price for fleet is lower, you'll notice this effect. If you, however, look at a fleet in isolation, you probably will see a much more even development between the revenue and throughput.

And then just one follow-on, as you think about being able to integrate additional services and related revenues with fleet customers, on a medium to long-term basis, how do you think about the margin profile of fleet revenues versus your retail business in comparison?

so so that that's an interesting question because our fleet business uh has two distinct parts public and dedicated public public is uh when we give access to our fleet partners and their cars come on our network and they drive and we do give them velometric discounts so on a per kilowatt hour basis we do make less of a margin but the volumes definitely make up for it because they they they drive a lot On a dedicated station, though it's a very different business model, we don't take much of a risk on the throughput, and we pretty much leave, if you want to call it, or charge a dedicated price for every stall our partners are using. And those are very high margin businesses, and they also have very strong downside protection. So overall, I think the margin profiles of two businesses are similar when you look at the mix. If you just look at dedicated fleet business, it's a very advantageous business from a margin perspective.

Great. Thanks very much.

Thank you. That is all the time we have for question and answer for today's call. We do appreciate your participation. This does conclude today's teleconference. You may disconnect your lines at this time. And have a great day.