EVgo Inc.

Good morning, my name is rob and I will be your conference operator today at this time, I would like to welcome everyone to the EV goes fourth quarter and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise after the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time simply press star, followed by the number one on your telephone keypad if you would like to withdraw your question again press the star one. Thank you. Heather Davis, Vice President of Investor Relations at EVGO. You may begin your conference.

Good morning, and welcome to EVGO's fourth quarter and full year 2023 earnings call. My name is Heather Davis, and I'm the Vice President of Investor Relations at EVGO. Joining me on today's call are Badar Khan, EVGO's Chief Executive Officer, and Olga Shevrenkova, EVGO's Chief Financial Officer. Today, we will be discussing EVgo's fourth quarter 2023 financial results and outlook for 2024, followed by a Q&A session. Today's call is being webcast and can be accessed on the Investors section of our website at investors.evgo.com. The call will be archived and available there along with the company's earnings release and investor presentation after the conclusion of this call. During the call, management will be making forward-looking statements that are subject to risks and uncertainties, including expectations about future performance. Factors that could cause actual results to differ materially from our expectations are detailed in our SEC filing, including in the risk factors section of our most recent annual report on Form 10-K and quarterly report on Form 10-Q. The company's SEC filings are available on the investor section of our website. These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. Also, please note that we will be referring to certain non-GAAP financial measures on this call. Information about these non-GAAP measures, including a reconciliation to the corresponding GAAP measures, can be found in the earnings materials available on the investor section of our website. With that, I'll turn the call over to Badar Khan, EVGO's CEO.

Good morning, everyone, and thank you for joining us today. EVGO posted yet another great quarter and set of results in the full year. But before we dive into those details, since this is my first call as EVGO's CEO, I thought it worth taking a moment to remind everyone of the incredible and important journey we are on. Emissions from transportation represent the largest source of emissions in the United States. And that is why the work we do is so important. At EVGO, our mission is to accelerate the mass adoption of electric vehicles by creating a convenient, reliable and affordable EV charging network that delivers fast charging for everyone. I believe EVgo represents a compelling value proposition for investors, not just because of where the company is currently trading. An investment in EVgo is clearly an investment in sustainability, but it is also an investment in a market that has a multi-decade growth trajectory without the need to pick one EV manufacturer over another. Our business model is also focused on the highest growth segment of the charging market, DC fast charging, a fact seen from the data today. We like our core business of owning and operating the charging network. We generate revenue every time a customer charges on our network, unlike a one-time equipment sale. And as we continue to see, our revenue is growing faster than the growth of EVs. From customer capture through to site development and construction to products and services that build customer loyalty, we have a growth engine that leverages key partner and OEM relationships across this entire cycle and is hard to replicate. Financial discipline is key throughout our business. From the proprietary network planning model to determine where to locate our charging stations to the disciplined investment decision-making processes designed to ensure we generate double digit returns and minimize reliance on shareholder capital. For over a decade, EVGO has built a growth engine that is benefiting from this mega trend towards electric vehicles and has delivered a near traveling of throughput and revenue for each of the past two years and is adding NPV at scale annually. And as you'll hear today, has a clear path to adjusted EBITDA breakeven in 2025. And we passed an important inflection point in 2023 as a result of utilization and throughput levels we're now seeing across our network. The installed base is now profitable on a standalone basis. It's truly an exciting time at EVGO to be leading the company in the next phase of profitable growth. We had a great fourth quarter in 2023, and for the full year, we delivered record levels of throughput and revenue, near-trebling year over year. On our Q3 call, we raised revenue guidance, and I'm very pleased to say we came in above the top end of that raised guidance at $161 million in revenue. Operationally, we had another strong year of customer account growth and growth in our network in both stores and throughput. EVgo's path to profitability comes from strong, top-line revenue growth, but also from operating leverage driving gross margin expansion. On our Q3 call, we also provided improved adjusted EBITDA guidance for the full year. And so I'm also very pleased to say that we came in above the top end of that raised guidance at negative $58.8 million. As a reminder, EVGO currently has three main sources of revenue, revenues associated with owning and operating our growing network of DC fast chargers, revenues from our capital light extend business that complements our core business but with chargers owned by site host customers, and ancillary and tech-enabled services like our plug share business and fleet-focused business models. As we said in our preliminary results in mid-January, we plan to focus our growth efforts in the near term on our core owned and operated business, given that this business is most leveraged to EV adoption, is experiencing strong revenue and throughput growth, and is expected to generate the highest returns. As a result, we're targeting this to become the majority of our business. As you know, EVGO's almost 3,000 operational stalls span most of the country, with stalls in over 35 states, across over 50 national and regional strategic site hosts, and today over 145 million Americans live within 10 miles of an EVGO charger. Across our site host partners, we've identified over 100,000 potential stalls for EVGO to build. which shows how far we can go, but also that we have plenty of opportunity to select some of the best sites. Two years ago, around one-third of our network throughput was outside California, whereas by the end of 2023, that's grown to around half. In fact, Texas and Florida are two of our fastest-growing states in terms of throughput, proving that the growth of electric vehicles is occurring in both red states and blue. In 2021, consumers had approximately 31 EV models to choose from. Today, there are now more than 70 models, with many more on the way from the OEMs. These models are not only becoming more affordable, but they are increasingly addressing all vehicle segments and their technology is improving. From EVgo's inception, we've made it a priority to serve all EVs, enabled by our innovation lab in LA, where we work collaboratively with OEMs to ensure interoperability between all EV models and our chargers. EVgo's commitment to serve all EVs includes adding max connectors to our network. For over a decade, the EVgo team has built and refined a growth engine that is now humming. From a proprietary process of determining whether and where to build, to construction, to grant capture, to customer acquisition, to ongoing maintenance, we are adding net present value every year. Foundational to this growth engine are the many years experience we have in securing our supply chain, marquee site host relationships, excellent relationships and advocacy efforts with governments and utilities, an innovative tech platform, and our sizable OEM partnerships. When put together, this is difficult to replicate at this scale and with the customer experience we now offer and reinforces our competitive advantage. There are several drivers underpinning the growth of transport electrification, although I recognize there may be speed bumps along the way. Despite some OEMs pulling back from their extraordinary ambitions over the past couple of years, Commitments from OEMs towards investing in electric vehicles still represents over $400 billion. Fourteen states, representing over a third of the U.S. population, have adopted Advanced Clean Cars 2, the regulation from the California Air Resources Board that phases out the sale of new ICE vehicles in favor of a 100% zero-emission future for new zero-emission vehicle sales. Rideshare companies have committed to an all-electric future, with Uber setting the goal of having 100% of their rides in EVs in the U.S. by 2030. This is parallel to efforts of cities such as New York City, where Mayor Eric Adams signed the Green Rides Rule, where all rideshare vehicles operating in the city must be electric by 2030. And across the U.S., we see strong consumer preferences for EVs today, which we expect to gain momentum as the average price of battery electric vehicles becomes closer and eventually becomes cheaper than ICE vehicles with more new models being brought out every few months. Two years ago, the average BEV was around a third more expensive than the average ICE vehicle. And today, it is almost at parity without incentives, according to Cox Automotive. Battery electric vehicle sales continue to grow year over year, and sales of non-Tesla vehicles, which are the majority of vehicles charging on EVgo's network, grew by 66% year over year, and now represent approximately half of all 2023 battery electric vehicle sales, up from about a third in 2022. While there may be some uncertainty over the growth of EVs in the near term, estimates for 2030 remain very significant, implying CAGRs of 37% to 42% through 2030. There are few industries in the world with this kind of growth rate underpinning the investment case. EVgo focuses on DC fast charging versus L2 charging. With DC fast charging, depending on the vehicle, it's possible to charge 100 miles in less than 10 minutes. These stalls are in premium, convenient locations where people are going about their lives. Our core business generates revenue from the set of electricity through these well-located stalls. In other words, we would continue to generate revenue even if there were no more new EVs sold. Because of decreasing vehicle efficiency due to larger EVs, we expect to see a higher growth rate of electricity consumption to power those vehicles. Therefore, we estimate the total addressable market or TAM is growing at a CAGR of up to 46% to 2030. And finally, DC fast charging share of that electricity consumption is expected to grow considerably over the next several years with an even higher CAGR up to 60%, resulting in a $12 to $15 billion annual serviceable addressable market or SAM by 2030. That assumes EV penetration is only up to 15%, implying decades of further growth. The growth of DC fast charging is not some hypothesis for a future yet to emerge. We believe that early adopters of EVs had access to at-home charging, As the market moves towards mass adoption, more EV buyers live in multifamily housing. And we know from a study from UCLA that multifamily residents are more likely to rely on public fast charging for their needs. In just two years, the percentage of multifamily dwellers buying EVs has risen to 31%, up 10 points. The percentage of DC fast charging is growing as this transition unfolds. In California, over the last two and a half years, we estimate that fast charging already accounts for over a quarter of all charging needs for EV drivers, from an estimated 5 to 10% in 2021, and expect this growth will continue over time. The second driver for the growth of DC fast charging is the growing number of rideshare drivers that drive EVs. The average rideshare driver drives three to four times more than the average commuter, is more likely to live in multifamily housing, and is more likely to not want to use valuable time during the day to charge their vehicle, and is therefore very reliant on DC fast charging. This segment of drivers is growing very fast. Evaluating our usage on the EVgo network, rideshare drivers on average charge five times more than our average retail customer. As more rideshare drivers make the shift to electric, the amount of electricity dispensed to this group of customers has increased to 25% in the fourth quarter of this year, up from 11% in Q1 2021. One of EVGO's sources of competitive advantage, honed from over a decade of doing this, is a proprietary, sophisticated network planning process that informs where we locate our chargers. We ingest an enormous amount of data from EV adoption rates, forecast sales, to density of multifamily housing, to rideshare volumes, electricity costs, demand charges, and availability of grants, all at a census block level, which then tells us where to place chargers, how many, and at what pace within specific geographic bubbles that are projected to generate double digit returns. We then turn to our extensive site partners to determine which of our partners' sites are best placed to build a site. And the model is iterated continuously, comparing actuals with forecasts to improve the network planning process. The chart on slide 17 shows our actual forecasted throughput versus what we had originally forecasted for all owned sites. And shows not only how accurate our network planning model is, but also the level of robustness of our underwriting process. You can see this financial discipline in the way we deploy capital, where we seek to minimize the amount of capital we deploy with offsets coming from a range of sources, including OEM payments and grants and incentives. And as we've discussed before, we receive approximately $33,000 per store built under our partnership with GM. This is typically received within a couple of months of stores going operational. We have over a decade of experience in successfully identifying, applying for, and securing grants at the federal, state, and local levels. The federal government has two primary programs to incentivize charging infrastructure, the expansion and extension of 30C, the alternative refueling property tax credit from the Inflation Reduction Act, and the NEVI program, up to $7.5 billion in formula funding from the bipartisan infrastructure law. In January this year, the IRS clarified rules about 30C eligibility, essentially resulting in more sites being eligible for funding than we had previously expected. As a result, we now expect around 50% of our network plan to be eligible to receive 30C funding. Finally, EVGO and our partners through our extend business continue to win NEVI funding for highway sites. However, even our strategy is focused on higher density, urban locations, our network plan is not dependent on NEVI funding, as these sites are immaterial to our plan over the next couple of years. As a reminder, these diverse sources of funding can typically be stacked, and in some cases, the funding stack may cover the vast majority of CapEx at a particular site. For sites that are expected to go operational in 2024, these offsets are expected to represent around 40% of the capital required for our owned and operated site. EasyGo's digital-first approach offers customers and partners alike a variety of offerings driving value. We've worked tirelessly to improve the customer experience, and a lot of that is driven through software. For example, Auto Charge Plus, a seamless plug-and-charge experience, gets rave reviews from EV drivers as do reservations. EasyGo offers flexible pricing models with location-based, time of use, subscription, ride share, and pay-as-you-go models available for drivers to choose what serves their needs best while optimizing profitability for EasyGo. And our partners value a digital-first approach. From extend and ride share partners to OEMs to site hosts, each of our partners have benefited from technology offerings that improve our relationship with them. One of EVO's core priorities is to offer a best-in-class customer experience. We know that there are four things that customers value the most. First, having lots of stalls at a site so they never have to wait for a charge. Second, having high-powered chargers available so they can fuel up quickly. Third, having a reliable solution that works right on the first try. And fourth, a hassle-free payment process. On each of these dimensions, EVGO has made great progress over the course of 2023. Across our over 950 locations, we nearly doubled the number of sites that have at least six stalls, and we're now targeting a minimum station size of six stalls per site and aim for eight to 10 if the site host has space. Across our nearly 3000 stall network, we have more than double the number of stalls served by a 350 kilowatt charger. Rather than an asset-based reliability measure, we track what we call one and done, an internal but more customer-oriented metric that measures the percentage of time a customer has a successful charging experience within a reasonable time window on their first try. During 2023, our one and done rate increased over 600 basis points to 91%. Finally, we know that a key frustration for customers during the charging process is payment. As a result, we developed our Auto Charge Plus feature, which allows drivers to just plug in and charge automatically without having to perform any additional steps. It makes charging easier and faster. During 2023, we nearly doubled the percentage of sessions using Auto Charge Plus, which now has over 50 vehicle models eligible for it. This customer-centric model, combined with our disciplined investment in building a world-class, Fast charging network is why I am so excited about our electric future. I'll now turn the call over to Olga, who will go through our financial performance for the fourth quarter and full year 2023, as well as our initial outlook on 2024.