EVgo Inc.

Thank you for standing by and welcome to the EVGO second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's 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. I'd now like to turn the call over to Heather Davis, Vice President of Investor Relations. You may begin.

Good morning, and welcome to EVgo's second quarter 2024 earnings call. My name is Heather Davis, and I am the Vice President of Investor Relations at EVgo. Joining me on today's call are Badar Khan, EVgo's Chief Executive Officer, and Stephanie Lee, EVgo's Interim Chief Financial Officer. Today, we will be discussing EVgo's second quarter financial results and our outlook for 2024, followed by a Q&A session. Today's call is being webcast and can be accessed on the investor 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 filings, 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 delivered yet another excellent quarter. We achieved record revenues, over $66 million, and charging network revenues grew 2.4 times compared to last year, becoming the seventh sequential quarter of double-digit growth in charging revenues. and the sixth consecutive quarter of triple-digit year-over-year growth in network throughput. With the level of utilization and throughput we have in the network today, the annualized per-store unit economics have improved over 300% in just a short six months. Providing yet more confidence, we will complete our path to profitability and deliver adjusted EBITDA breakeven in 2025. With the operating leverage we have in the business, Once fixed costs are covered in 2025, all per store cash flows fall straight to the bottom line, conservatively resulting in over $200 million in adjusted EBITDA in three to five years' time if we're only growing at the rate we are this year. A higher rate of store growth would result in even stronger EBITDA. Let's look at some key highlights from this past quarter. Our second quarter was yet another great quarter. charging network revenue more than doubled, driving an increase in total revenues. We grew our operational stalls by 37% compared to last year, and are on track to add 800 to 900 new owned and operated stalls this year. Customer accounts continued to grow faster than VIO growth in the second quarter, and Ethigo recently surpassed 1 million customer accounts, an exciting milestone. We continue to see clear evidence of the operating leverage that we've talked about on our last few calls, with both expanding adjusted gross margins, especially in our owned and operated business, and adjusted G&A improvement translating into strong bottom line improvement year over year. Given our strong results and the consistent operational improvements in the business year to date, we have raised the midpoint of revenue and narrowed our adjusted EBITDA guidance for the full year, which Stephanie will provide more color on later. In Q2, EV sales in the U.S. reached over 300,000, including a record quarter for non-Tesla EV sales in the U.S. Non-Tesla sales in the second quarter grew 35% compared to last year and accounted for more than 50% of EV sales for the first time. Non-Tesla EVs make up the majority of throughput on the EVO network today. We expect this trend to continue, which supports the future growth opportunity at EVO. EV market in the United States is at a tipping point, moving from early adopters of EVs to mass adoption. Today, 8% of new vehicles sold are electric, up from just 2% a few years ago. A key driver of mass adoption is more affordable vehicles. There are over 70 EV models available in the US today, and many more coming. J.D. Power's future vehicle calendar counts 38 New affordable models for those with an expected MSRP of $35,000 or less coming to market in the next 18 months. That's incredible. EV buyers will have more choice, including exciting models such as the Chevy Equinox, next generation Chevy Bolt, Hyundai Ioniq 3, and Kia EV3, just to name a few. And this is expected to accelerate adoption. Looking at the total market, Bloomberg New Energy Finance forecasts that EVs are expected to sell at a lower price point than ICE vehicles in 2026. Significantly, it's important to note that BNF estimates that the total cost of ownership for EVs is already lower than ICE vehicles today. On top of VIO growth, EVgo benefits from multiple additional short and long-term tailwinds. that are drivers of why throughput and charging revenue are growing and are expected to continue to grow faster than VIO growth. Ride share is increasingly electrifying, and they will tend to charge at DCFC, not L2 locations. Faster charge rates also not only lead to higher overall EV adoption, but being able to charge faster will decrease customers' reliance on home charging, thus increasing the share of public charging. More affordable vehicles are not only key to overall EV adoption, but will tend to attract more customers without access to home charging who will be reliant on public charging. Autonomous vehicles are a major long-term driver, as these cars will be electric and will charge at either public or dedicated DCFC locations. Finally, as the MAX cable is introduced, we expect EVgo to benefit more than other DCFC owner-operators because we expect to be able to attract more Tesla drivers who represent roughly 60% of current VIO as our stations are located closer to where drivers live and work versus highway-focused charging companies. DCFC hardware companies and those that operate but do not own DCFC networks and instead sell equipment to site hosts and other customers will benefit to a lesser extent from many of these drivers. because they generate one-time equipment sales versus recurring charging revenue that owner operators receive. Only some of these drivers benefit L2 companies. And again, those benefits are limited to one-time equipment sales versus recurring charging revenue. And it's consistent with expectations of public DCFC gaining share of total energy delivered over time due to all the drivers listed here. In the U.S., There is only one company that is exclusively focused on the owned and operated DCFC space that public equity investors can invest in, and that is EVO. As we've discussed in our prior call this year, we have very compelling unit economics. This is due to our proprietary network planning resulting in carefully selected site locations and conservative underwriting, and they have grown considerably in the last six months. We reached a level of scale in kilowatt hours per store that enabled us to generate positive annual cash flow on a per store basis by the end of last year. And at that time, the top 15% of our stores were generating over $30,000 per store on an annual basis. In Q2 this year, our entire network is now generating over $7,000 annualized per store, and the top 15% is now over $40,000. This is driven by relatively minor increases in utilization and charge rate. As a reminder, daily throughput per stall is the product of charge rate and utilization multiplied by 24 hours. If we continue to see the absolute increase in annual cash flow per stall over the next three six-month periods, and we continue to grow stall count at the rate we are this year, then the simple math results in total network cash flow exceeding fixed costs. and thus adjusted EBITDA break even in 2025. In three to five years time, we expect to have around 7,000 stalls. If we're only adding stalls at the rate we are today, at that point, we would expect cashflow per stall across the whole network to be just under $40,000 per stall annually, given mostly by increased charge rates, and it's one of the many tailwinds due to the increasing mix of higher charge rate vehicles, and a very conservative utilization assumption far lower than the top 15% of our stores today, resulting in a level of throughput also lower than the top 15% of our stores today. If we had the same utilization in three to five years time as the top 15% of our stores today with 80 kilowatt charge rates, we would double the cash flow per store to over $85,000 annually. These unit economics not only provide very compelling adjusted EBITDA growth, but they also deliver very compelling project ROI. With the decline in gross capex per store we are targeting from our next generation chargers, and even with much lower capital offset than we are seeing today, we would expect to see net capex per store in the $80,000 range. In other words, a one-time investment of $80,000 conservatively returning almost 40,000 annually. That is an excellent return on investment. Once fixed costs are covered next year, given the very strong operating leverage, All store-based cash flows fall straight to the bottom line, resulting in very strong EBITDA growth potential. As I've said, we're assuming here that we continue store growth at only 800 to 900 new stores per year, which is our current growth rate. Of course, if we are successful in securing new financing, we would expect to materially increase that rate of growth. Therefore, our annual adjusted EBITDA in three to five years is simply 7,000 stalls times cash flow per stall in the prior slide minus fixed costs with very significant continued growth beyond that. In fact, every 1,000 new stalls adds almost $40 million in adjusted EBITDA annually because we've already covered fixed costs based on our expected unit economics in three to five years' time. That is very compelling adjusted EBITDA growth potential. I sometimes get asked whether all the best sites have been developed. And the answer is most definitely not. First, we have over 10,000 stalls that currently pencil and meet our return expectations. And as EV adoption grows, more sites pencil. And secondly, our site selection algorithms and quality of stalls are just getting better and better. This chart shows daily throughput per stall for stalls in our network in Q2, depending on when they went online. With 2023 stalls, some of which would have been just over three months old, faring better than all prior years. Let's now turn to progress on our four key priorities that I described in our last call, improving the customer experience, operating in CapEx efficiencies, capturing and retaining high-value customers, and securing financing to get to free cash flow break-even. Improving the customer experience remains our first priority, and we continue to make progress on all the key metrics we have discussed on prior calls. Increasing the number of sites per sole so customers don't have to wait for a charge, installing higher power chargers so they can fuel up quickly, having a reliable solution that works right on the first try, and growing the number of sessions that have a hassle-free payment process where customers just plug the connector in and the payment is processed automatically. This last feature gets particularly rave reviews. And in Q2, we release an auto-enrollment capability for some EV models and expect to expand that to many more EV models in the second half of the year, driving up the penetration of Auto Charge Plus. We believe we were able to execute these improvements because of the scale advantage we have over the 40 much smaller DCSD operators in the US and will ultimately result in customers gaining further confidence in public charging driving up utilization and throughput on our network. We've made excellent progress this quarter on driving efficiencies across both OpEx and CapEx. We completed offshoring of most of our call volumes, which, as I said on our prior call, are a sizable portion of our sustaining G&A costs. You may have noticed from the unit economics slide earlier, we have already made substantial progress on lowering sustaining G&A costs per store and continue to expect a reduction of around 15% on those costs in Q4 this year versus last year, which is well on the way to the 40% or so reduction we're targeting in three to five years' time. On the CAPEX side, we have already delivered a 5% improvement in gross CAPEX per store for FY24 vintage CAPEX than we previously guided for this year as a result of the work on the prefab skids, various incremental improvements to component sourcing, and EPC improvements. Given the strategic imperative of this effort, I'm excited to tell you we hired a new EVP of engineering, Martin Sukup, over the past 14 years held leadership roles in the development of multiple generations of Tesla superchargers. In fact, over a third of our new hires in the second quarter came from Tesla. We've also passed key internal milestones on the joint development of next generation architecture, with an industry-leading partner that aims to lower gross capex per store by 30% and would represent a step change in customer experience due to a customer-focused design with improved firmware. We do expect to incur additional costs in the second half of this year to drive this strategically important effort, but we are not adjusting the midpoint of our adjusted EBITDA guidance due to expected improvements elsewhere. This level of reduction in capex per store is what drives the even stronger returns I showed on the unit economic slide and will be a key source of competitive advantage over the dozens of other smaller fast charging operators in the United States. We also continue to make great progress on our growth priority. The share of what I consider base load demand on our network continues to be strong, with 56% of throughput in the quarter coming from higher usage, relatively predictable customer segments that represent stickier kilowatt hours. And we've added to that demand with the extension of a charging credit program with Subaru. We also continue to attract new customers at higher rates than the growth in VIO, up almost 60% year over year. Our goal is to attract customers across all hours with potential utilization, as well as ensure we are attracting the right customers at the right times to maximize margin capture. We went live with the new customer data and engagement platform that allows us to do just that, and are deploying segment-specific and low-cost campaigns to identify, attract, and retain customers to get the usage profile we are targeting. We also expect to continue rolling out dynamic, demand-based pricing across more of our network that I mentioned on the prior call. Unlike most of the more than 40 charging operators in the US today, E2Go has reached a level of scale that allows us to even contemplate these kinds of objectives and deliver on them, resulting in a key source of competitive advantage over most of the rest of the industry. On financing, we've also made solid progress this quarter. Capital offsets for our 2024 vintage stalls are now expected to be around 50% this year versus the 40% we previously indicated. This is driven by a higher share of GM and grant-funded sites than we originally planned, and our continued focus on maximizing the amount of grant funding from all available funding sources. We continue to await finalized 30C guidance from Treasury and expect to execute our first 30C transaction in the second half of this year for the 2023 vintage stalls. Our application to the DOE Loan Program Office for a loan under the Title 17 Clean energy financing program is continuing. We made significant progress this quarter, increasing our confidence of the conditional payment in 2024. We believe we have a high quality loan application that addresses the need for charging infrastructure to be built out at scale across the US and supports a core part of President Biden's agenda in terms of vehicle electrification. One of the many strengths and differentiating factors with our LPO application is that we do not expect to need to issue new equity to reach financial close. This benefits both our shareholders and expedites our ability to reach financial close. As I've said before, if we're successful, we believe it'll be sufficient to not only expedite our journey to self-financing, but also increase the annual rate of store growth by up to double or more. On top of our DOE loan application, EVGO is experiencing continued interest from the commercial bank market in relation to non-diluted financing structures for owner-operated DCFC charging stalls. EVGO is a proven developer and operator of DCFC, and DCFC as an asset class is showing strong correlation between revenue generation and VIO growth, as demonstrated by growth in EVGO's throughput. The positive outlook for long-term VIO growth creates the kind of cash flow certainty required to support debt financing. We also expect to incur additional costs in the second half of this year to prepare our financial systems to accommodate project financing. But again, we are not changing the midpoint of our adjusted EBITDA guidance because of upsides we are expecting elsewhere. We continue to have sufficient capital to continue our CAPEX plans well into 2025 without the benefit of any of these project financing efforts. I'll now hand over the call to Stephanie, who will run through our strong financial performance for the second quarter of this year.