EVgo Inc. Q2 FY2024 earnings call

• EVgo delivered record revenues exceeding $66 million, with charging network revenues growing 2.4x year-over-year and achieving the seventh consecutive quarter of double-digit growth in charging revenue, along with the sixth consecutive quarter of triple-digit year-over-year growth in network throughput.
• Reached over 1 million customer accounts, a notable milestone. Annualized per store unit economics improved by over 300% in just six months.
• Key priorities: enhancing customer experience (increasing sites per source, installing higher power chargers, ensuring reliable solutions, and hassle-free payments), optimizing operating and CapEx efficiencies (completing offshoring of core volumes, reducing sustaining G&A costs, and improving CapEx per store), capturing and retaining high-value customers (strong base load demand, extending the charging credit program with Subaru, and launching a new customer data and engagement platform), and securing financing (expecting capital offsets for 2024 vintage stalls at ~50%, making progress with the DOE Loan Program Office application, and attracting interest from the commercial-backed market for non-dilutive financing).
• Hired a new EVP of Engineering with experience in Tesla Supercharger development and is making progress on the joint development of next-generation architecture to reduce gross CapEx per store by 30%.

EVgo achieved record revenues exceeding $66 million in Q2 2024. Charging network revenues saw a 2.4x year-over-year growth, marking the seventh consecutive quarter of double-digit growth in charging revenue. Retail charging revenue stood at $22.3 million, a significant jump from $9.1 million in Q2 2023 (a 146% year-over-year increase). Commercial charging revenue reached $7.1 million, up from $2.4 million in Q2 2023 (a 193% year-over-year increase). eXtend revenue was $27.7 million, which declined as expected compared to Q2 2023 due to lower one-time equipment sales. By the end of June 2024, the total number of operational stalls was approximately 3,440, representing a 37% increase from June 2023. Customer accounts grew by over 131,000 in Q2 2024, culminating in over 1 million customer accounts by quarter-end. Network throughput surged 2.6x year-over-year to 66 gigawatt hours. The charging network margin in Q2 2024 was 34.2%, an improvement from 19.1% in Q2 2023. Adjusted gross profit in Q2 2024 was $17.7 million, up from $12.9 million in Q2 2023. The adjusted gross margin in Q2 2024 was 26.5%, a 110 basis point increase from Q2 2023. The adjusted G&A as a percentage of revenue improved from 46.3% in Q2 2023 to 38.5% in Q2 2024. Adjusted EBITDA in Q2 2024 was negative $8 million, a $2.6 million improvement compared to the negative $10.6 million in Q2 2023.

• Raised the midpoint of the 2024 revenue guidance to a range of $240 million to $270 million, anticipating quarterly sequential growth in charging network revenue. eXtend revenue is expected to remain relatively stable in the second half of 2024 with lower margins compared to equipment sales.
• Maintained the midpoint of the 2024 adjusted EBITDA guidance but narrowed the range to between negative $44 million and $34 million. There are expected increased investments in next-generation architecture and financial systems to support project financing in the second half of 2024, which are expected to be offset by revenue growth.
• Anticipates capital expenditures, net of capital offsets, to fall in the range of $90 million to $105 million, with the main use being to add 800 to 900 new EVgo-owned stalls this year. Additionally, expects to remove or replace 150 to 200 EVgo-owned stalls in 2024 to enhance charger reliability and the customer experience.
• Confident in achieving adjusted EBITDA breakeven for the full year of 2025 based on EV vehicle miles traveled (VIO) growth, network expansion, and operational efficiencies.

• Factors that could significantly deviate actual results from expectations are detailed in SEC filings, including risk factors in the most recent annual report on Form 10-K and quarterly report on Form 10-Q. These include uncertainties related to future performance, competition, fluctuations in electricity prices, and changes in government policies or support for electric vehicle infrastructure.

Q: Can you share the portion of revenue today from charging Tesla vehicles and the expected uptake from max cables?

A: Currently, Tesla drivers represent a very small share on EVgo's network. EVgo expects to start deploying max cables towards the end of 2024 and roll them out across its network over time. With locations in urban and suburban areas closer to where people live and work, EVgo anticipates attracting a growing portion of Tesla drivers.

Q: What changes are in the next-generation charging infrastructure and how it improves the customer experience?

A: EVgo is working on a different site configuration, distributed bus architecture, and equipment design for the dispenser. This is based on customer interactions and feedback, aiming for a 30% reduction in gross CapEx per store and an improved customer experience with enhanced firmware. Prototypes are expected earlier than 2026, with something in the market by the second half of 2026.

Q: How much timing risk is associated with the DOE loans program before the election and thoughts on policy support changes?

A: EVgo believes its business is successful and will thrive under any administration. The DOE LPO team is actively working to process applications, and EVgo is confident in obtaining a conditional commitment in 2024. The business is well-positioned regardless of election outcomes, with strong underlying demand across the US.

Q: Explain the incremental funding for 2024 vintage stalls and its relation to the cost structure?

A: 2024 vintage stalls have higher capital offsets (~50%) due to a higher mix of GM and grant-funded sites and successful grant funding maximization. The 2023 vintage stalls lacked these elements. The team has built stalls with higher offsets by selecting cheaper sites, demonstrating flexibility in the development pipeline. The architecture targeted in 3-5 years will lead to more cost structure improvements even with lower capital offsets.

Q: How does EVgo pass through higher electricity costs and protect margins?

A: EVgo benefits from operating leverage in cost of sales where ~40% of cost of sales was fixed at the end of last year. As utilization expands, charging margin increases without price hikes. Strong underlying demand for fast charging infrastructure, including tailwinds like EV growth, rideshare electrification, affordable vehicles, and autonomous vehicles, supports robust unit margins. LCFS pricing, though impacting margin, is less than 5% of total revenue and expected to hold current levels through the rest of the year.

Q: Talk about seasonality in charging network gross margins and past and present performance?

A: Q3 typically has the lowest charging network margins due to the highest electricity tariffs. Q1 had one-time breakage revenue driving favorability. Q2 starts experiencing summer tariff impacts. In Q2 2024, there were smaller one-time adjustments. Breakage in Q1 came from the Nissan contract, and Q2 had smaller adjustments. LCFS also impacts margin with its 100% margin and potential volatility. Charging margin this quarter is similar when excluding Q1 breakage, with a slight improvement in utilization and a bit of impact from lower LCFS price.

Q: How does the implementation of dynamic pricing help with charging margin stability?

A: Dynamic pricing allows EVgo to influence when customers charge, shift demand to maximize margin capture, and utilize sophisticated pricing, subscription programs, and customer outreach. The new customer data and engagement platform enables achieving these objectives, setting EVgo apart from smaller operators and providing a competitive edge.

Q: Elaborate on the 20% average utilization rate compared to the industry average and its attributes?

A: EVgo's 20% average utilization rate is due to strong underlying demand from growth in battery electric vehicle sales (non-Tesla sales grew 35% year-over-year in Q2 2024), tailwinds like rideshare electrification, affordable vehicles attracting people without home charging, autonomous vehicles, and faster charge rates. Locations in urban and suburban areas, sophisticated site selection algorithms, and programs to get customers to charge throughout the day contribute to a higher utilization rate than the industry average.