EVgo, Inc. (EVGO) Q3 2021 Earnings Report, Transcript and Summary

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. [Operator Instructions] 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 of the Company. Today's call is being webcast and the call and supporting materials can be accessed from the Investors section of our website at investors.evgo.com. The call will be archived and available there and the Company's results, investor presentation, and a transcript of today's proceedings will be available at the events and presentation section of the Investors page, after the conclusion of today's call. Joining me on today's call are Cathy Zoi, EVgo's CEO, and Olga Shevorenkova, the Company's Chief Financial Officer. Today, we will be discussing EVgo's latest financial results 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 in 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-K filed soon with the SEC and posted to the investors 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 Investors section of our website. With that, I will turn the call over to Cathy Zoi, EVgo's CEO. Cathy.

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 towards 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 8 gigawatt hours, a 31% increase in network throughput, quarter-over-quarter, with retail and fleet both showing significant upticks, and this, in turn resulted in a 29% quarter-over-quarter revenue increase. EVgo 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. Set another way, EVgo existing charger base can handle the absorb the throughput arising from expected near-term growth and EV sales, and we're expecting charging revenue to increase accordingly, and given that we're in the business of skating to where the pack 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 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 tariff, and engaging with the government agencies, launching new programs to provide financial support for charging infrastructure. Taken together, EVgo's acid 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 in the service, in 9 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 multiyear programs underway with national retailers like Target, Kroger, Whole Foods, Albertsons, and retail real estate leaders like Regency Centers, Kimco, and Brixmor. 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 partnership. 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 program, as well as per transaction billing. Coupled with EVgo's existing reservations, coupon, 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, EV goes reach into the growing electrified fleet segment extended. Tailoring our offerings to the particular needs of businesses that own and operate fleets, we introduced the EVgo optima software products suite. Optimus fleet management platform delivers highly efficient charging performance. Co-optimizing costs, energy demand, and grid coditions in a manner that integrates fully with the charging needs of our fleet customers. To that end, EVgo's fleet businesses growing with new agreements announced with General Motors, merchants leap, 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 charges at Penske locations that is starting this quarter. EVgo has achieved these milestones despite some headwinds that continue to effect not just our nascent industry, but the whole global economy as workers everywhere face continued COVID, restrictions and the wrath 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 4 to 8 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 charges 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 of 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 remained bottlenecks in the fast charger build process. Overall momentum for electric vehicles and the de - carbonization of transportation is undeniable though. Whether it is a new EV purchases I referenced above, the greater than 50% increase in 2027 EV penetration forecast made by leading market analyst 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. with 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 since the scale for the programs included in the infrastructure and Reconciliation Building Congress. the infrastructure bill which was passed late last week include provisions that allow for up to $7.5 billion of rent 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 passage of additional EV incentives is passed by the Congress and has the President Biden's desk. One final note on these pieces of legislation though, while we are enthusiastic about the additional tailwinds build back better could provide the 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 setting in place at the time we decide to make an investment in that charging stations. Our multiyear forecast and plans were developed without reliance on pending or potential legislation. With the infrastructure bill malware reality, we will be working with policy makers on how the funding will get distributed over the coming months, and we'll update EVgo's owned 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, Cathy. I would like to start with a review of our acceleration on financial results for the quarter. Network throughput in the third quarter was 8.0 gigawatt hours, and 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 the ramp up of activity on autonomous vehicles sites. I would like to add that EVgo's network throughput outpaced the growth in electrical vehicles and of duration over this period by about 20% 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 continue to choose EVgo as a key EV charging provider. Tesla drivers represented roughly 16% of all new EVgo customers in the third quarter. Today, we estimate Tesla drivers account for approximately 5% of total EVgo goal retails throughput. We observe the 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 a ramp 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. The tailwind 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 re-classifying some of the items and 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 some more proper view of the profitability. Cost previously included in the cost of goods sold but now in general administrative expenses include network platform service fees, certain storage and freight costs, pre-operational costs and license fees, call center expenses, and certain costs related to field and customer operations. Cost of goods sold include charges aside depreciation, and amortization expense. The direct energy expenses, maintenance, rent, property taxes, payments 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 high-end non-energy costs due to expanding the number of charging stalls. As part of our ongoing process to help our investors understand the drivers for EVgo's financial results, I wanted to take a moment to describe the components of our revenue. Revenue breaks down into 4 sub-categories; charging, regulatory credits, ancillary, and network. Charging revenue comprises roughly 65% of our total revenue as of today, and we further breakdown charging revenue into three categories; retail, suite, 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 based payments. This revenue stream, is driven by the adoption by regular commuters who choose EVgo as their charging provider. Fully charging, which rose 26% quarter-over-quarter, is comprised of both public and dedicated fleet charging activities. Everything from Rideshare drivers charging at lunch time, the autonomous vehicles charging in depots, and could be revenue linked to volumes, as well as take-or-pay type of payments, EVgo received for stall the dedicated fleet depots. OEM charging revenue, is associated with prepaid charging credits that, EVgo's OEM partners, such as General Motors or Nissan, awards to their respective customers. OEM prepay EVgo for such credits, and EVgo recognizes the 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 sell into the market. Which is expected to increase with the adoption. Regulatory credit revenue is the next important component in our revenue stream and comprises approximately 10% of our total revenue. This largely reflects the monetization of credit EVgo sells under the low carbon fuel standards. The LCFS program, which is the most mature and advanced and California, requires companies to adhere to carbon emission targets. Was those exceeding the limits obligated to purchase credits to being compliant. The major with it goes business combined with the fact that our network is a 100% powered by renewable electricity, means that we generate LCFS credits that we then sell in the market. Since pricing is determined by the market, we expect to experience volatility in realized prices and have averaged $0.20 to $0.24 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 forecast. To date, the vast majority of regulatory revenue at EVgo, has been derived from California 's LCFS program. Next is ancillary revenue, comprising 15% to 20% of our total revenue, which includes everything from maintenance services, development on project management revenue, data and technology driven services, consumer retail revenues such as reservations and coupons and advertising r evenues. 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 as 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 this part of this effort, we are working with our utility partners to reduce energy costs. In Arizona, Connecticut, Illinois, and California for the territory served by Tucson Electric, Connecticut Light and Power, United Illuminating, Connecticut Light and Power, United Illuminating and 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 appending in Arizona, Ohio, and Massachusetts, providing the potential for meaningful future rates relief. While our current footprint in some of these locations has been small, improving cost structures will support growth and EVgo's, capital commitments in those areas. Before moving to 2021 guidance update. I would like to elaborate on the relationship between EVs on the road, EVgo network throughput and associated revenues, and the number of stores in operation 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 charge the EVgo location. 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% to 10%. Our analysis suggests that we could see or radically 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 impact from availability occurring. At present, we see a very similar picture in all of our other key markets. Network throughput gross is, just to reinforce a function of more drivers adopting to these, and the prudent charger location selection that accommodate and encourage that adoption. The new stores that are in development as part of EVgo's build programs that Cathy described earlier will satisfy due to demand arising from vehicle sales in 2023 and beyond. A key takeaway, is that whether brand new charging station is energized this quarter or 2 or 3 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, offer $20 million to $22 million of revenue, 24 gigawatt to 26 gigawatt hours of network throughput, and -$54 million 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're issuing our first formula durational stall target guidance of 280 to 320 newly operational stalls for the full year of 2021. It turns to take 80 to 90 days for stall to go operational ones we begin construction. This consist of our construction timing plus utility energization. While variability of these external factors may contribute to short-term shifts in the operational status. We think that is helpful to provide color on the number of stores expected to be under construction as of year-end. In addition to stalls in operation as of year-end, EVgo expects the 220 to 260 stalls will be under construction at the end of 2021, resulting in a forecasted total of between 1,890 and 1,970 operational or 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. [Operator Instructions] 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. Cathy, 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, how it started. Right? How the conversation with 10 million loaders say, let's do more, let's do it faster, and what does this mean really for the outcome or what we should be looking at as far as the partnership between General Motors and EVgo over the next couple of years?

Hey, thanks, Craig. Look at the expanded relationship between GM and EVgo that, we just announced as a home run for both companies. There's a larger updated program to the 32.50 cell, 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 build in 2021 and that require actually more GM subsidy to pencil. For charger build 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 we're delighted because we get to go into new markets and build charging if structure 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. Great win-win. I mean, our relationship just continues to strengthen.

Perfect, perfect. So then I wanted to ask a little bit about the E&C pipeline, 2500 units up about 400, I think since last quarter. That's fairly substantial growth. Can you talk about 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 that it used to be. We had to explain to a site hosts. Not only what an EV rechargeable was, and what an EV was, what we're now seeing from site hosts and I mentioned a bunch of national brands, but itself local regional brands that are out there in a retail setting, they're really excited about getting EV charging bill, 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 8 gigawatts in the quarter, right? 31% growth sequentially, that's a pretty chunky results. Obviously, it's been sort of view on the top-line and I would say the bottom line this quarter. 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? I know you optimized for utilization different locations and calibrate 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 in, and with the expectation of the EV penetrations that are going to come from the various new model s 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 a 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 results here. I'll hop back in the queue.

Thanks.

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

Thanks. Good morning, everyone. Thanks for the prepared remarks. Super-helpful. Cathy, 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 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?

Gabe, I'm going turn over to Olga.

Sure. Thanks, Cathy. 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 t end to drive much over those holidays. They stay back home and enjoy their family time and dinners, and that I think is what influenced our general, conservatively. We'll see how people behave this year, is 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, Cathy, how you balance this with, I think in the past, you maybe mentioned EVgo not really being a Highway Corridor Company, and I think BIF funding will first be allocated towards a Highway Corridor. So could you maybe just talk about how you balance those 2 and 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, and in the past quarters didn't pencil, so we didn't see us going deep into quarters with the widespread support and the magnitude of that support for quarters, we'll be taking a look at that, and we'll be working with policy next to see how that flows. In addition, I'm sure you've also read that in certain places where the quarters are covered the States are going to be able to say, okay, now we're also going to do metropolitan areas. So would look where we clearly 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.

So thanks guys, that's helpful, and then one just last one for me, just on rate reform in several states on the utility side and further proceedings pending in some safe could you talk a little bit more about this? Like how long is the relief or demand charge holiday in place for? 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. Let me talk about generally and then talk to you about some of the specifics. But the general answer to your question, Gabe, is either very, very jurisdiction specific. So, at 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 what we want, 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. There's lots of things that are pending and it takes some time to go to the deregulatory processes. Olga, on the commodity stuff.

Sure. So on energy prices, we are not subject to short-term volatility or inflation or pressures on those. We're utility CNI customers, so our tariffs are regulated and they are fixed, over longer term if utility is still at the environment has changed and revised those tariffs and will become a party. Yes. The party but not in a short term. So what's happening right now, will not have affect us in the coming probably year, I would say.

Great, really helpful. Thanks, everyone.

Thanks, Gabe.

Thank you. Our next questions comes from the line of James West with Evercore ISI. Please proceed with your questions.

Hey, good morning, everyone.

Hey, James.

Cathy, curious, you mentioned a little bit about quarters earlier, but the highway strategy here is you guys are seeing as 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 I know I can find an EVgo charger 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 returns focused 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 and into the highway system? Is that something that maybe you would work on with the GM relationship? I guess your overall strategy there would be great to hear about.

Yeah, when every car in America is an EV, then the quarters will pump just like metropolitan areas, probably, right? But we're now, we're in an interim period. I think the policy support that's coming for quarters is going to change that equation and expand the aperture over which EVgo go can make money for its shareholders. So I think what we're doing is we're excited about those possibilities, yes, and GM is excited about those possibilities. So I think we just continue to watch this space James, we'll keep you posted on our business opportunities. Again, but we're not going to deviate from our financial discipline. But there are lot of opportunities to have others come to the party to create those circumstances, where we can invest in new places and new ways, whether it's quarters or more rural areas or new states to get to deliver those returns.

Okay. That makes sense, and then again, but I do like to return to focus. Trust me, I get that. 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 are becoming more comfortable? Is it some standardization of the permitting process? What do you think is driving that whole improvement in Rimrock and recognizing that it's still an impediment too.

Yeah. If I look first and foremost, I think it's experienced like there are literally thousands a local governments that are now being asked many for the first time. Can you approve the first charging station? They say what? We've got one example in Ohio that the the local council has considered at 3 times is like what is this? Do we need to ask the landscape guy about how good does the plants look okay around this thing? I mean, that's quite of an extreme example, but I kind of like in 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 will be a couple of weeks and we had some examples of that are really fast now. Others that are just going to take a 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 is going to move to that electronic yes, of you go. They're all going to be individual. So the flywheel's spinning, the processing is happening, and our connector watts initiative is just growing and growing, like we had these quarterly salons and people from all across the country come on and may share best practice. So for example, on the last one, state of New Jersey has passed an ordinance to streamline local permitting. That representative of the lead from their journey came onto our connector watts call and shared that experience with others and they've got all that's interesting. So that's just one of the things that we're doing it even go to encourage the streamlining of the process.

Very helpful. Thanks, Cathy.

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.

Hey, Ryan.

Good morning. In terms of the increase to the revenue expectations and the widening to the top end to $22 million, I know in the initial projections that you guys have 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 Recargo.

Sure. So we do not include additional contributions from OEM revenues in here. OEM revenues, they sit in our balance sheet as deferred revenue and will be amortized in 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 them.

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 2 quarters after regenerate kilowatt-hours associated with that revenue. So pretty much, the Q3 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, sale exist in COVID, quite severe COVID restrictions, so that's what you see in Q2 to Q3 dynamics. On the bright end, we traded our Q3 volumes at 180 per credit. Right now we're a bit of an app price compression environment. So would most probably we'll see our Q4 volumes traded at lower than that. We don't know that yet, and on FCI Credits are actually exact same credit LCFS, so they get bundled together and traded in the same way, so they're subject to all the same pricing 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 1,700 versus the 2,200 plus that you guys laid out there in your initial projections. Appreciate the fact that you expect another 200 and change to be under construction there, but could 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 puts and takes here, but specifically around the delay in deployments relative to what you previously outlined?

Yeah. I just think what we talked about the fly, where we talk about the pain points that are taking a long time. So the permitting we've discussed per James's question, the utility easement process, is turning out to take a bit longer. So when our standards that, we're going to market with typically, Ryan, is a 350 kilowatt charging configuration. That almost always requires a service upgrades from the utility, and if it requires a service upgrade, 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 land owner, and the utility itself. That just adds more time to the process. So that's 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, anything again to kind consider there?

I think what we've tried to explain is that what we're building right now, is for the way aggressive thing is for future, for future EV sales 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, handling all of the EV sales that are coming. So whether we turn on a 100 new chargers, this quarter, next quarter, or even midway through 2022 is not going to impact revenues in anyway.

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

Thank you. Our next questions come from the line of Maheep Mandloi with Credit Suisse. Please proceed with your question.

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?

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

I was about to say exact same what you have just answered.

Okay.

I agree [Indiscernible] most of it is on the new sites.

Got you, and just follow up on that, I think Olga you mentioned the new chargers necessary not covering much of the 2022 revenues. So if I could just probably remind us why is that? Why are you seeing a slower ramp here on new locations, and if the overall news flow around EVs and EV chargers 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 for example, like at the end of our end-of-quarter call with GM and in Q3, we had built a whole bunch of stalls on dozens of them were like finished, beautiful pictures. They were sitting there on the parking lot, but the utility hadn't come to do the final inspection and energization. I mean, literally dozens of them. So that's a common practice that's outside of our control. So Olga, over to you.

Yes. Sure, so on the ramp up, when we say that new stalls, we don't necessarily say they don't contribute, what we're saying is that they don't necessarily create additional traffic right away. So if we open overnight magically, 10,000 new stalls 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 like, oh, a new station. Okay. I'm going to be using this one instead of the one have been using before because it's new or 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. I really like to compare this to maybe a chain of a cost of shops, like is that 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. You won't see that revenue increase. We're luckily, in a very different business and coffee shops because our coffee drinkers, aka EVs drivers keep on increasing at a very high rate. So we're building slightly ahead of those EV drivers come in to the market. But that doesn't necessarily mean that, new stations don't have users. It's just, the users gets organically distributed, so people choose where they want to charge and open it's new locations. Sometimes, they prefer to stick with the old locations, because they were more convenient. I hope that answer your question.

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

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, and I apologize, 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?

So last year wasn't necessarily be a reference case because the increases could have been attributed to COVID restrictions easing in Q4 from my [Indiscernible] in California where does not forget 70 to 75% of every single just happening here is happening in California. From my memory, the vast majority of Q4 was so like an improvement and restaurants got open and people started getting out on the streets and what not, and then end of Q4 beginning in 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 for it, because they were heavily affected by what was happening with COVID.

Got you. Okay. That helps. Thanks, and the second one, I wanted to come back to the GM commentary, and so 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. Did I hear that right? Could you just tick through assuming I did tick through, like what changes in the cost profile and see is the dollar value of that engagement actually different or is the same dollar value, but just a higher number of chargers?

Yeah, Jon, 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 input, there are many inputs about what's makes it pencil, the CapEx, etc., the rent. But one of them is, what's the utilization on that station going to be? So when you are building stations, where in the earlier years, when there are fewer EVs on the road, it takes more money from some place else, if you're going to build them. So if you're building in 2021, the subsidy per station required by somebody out and in this case, GM, is higher. If you are building in 2023 after dozens more EVs, if it's the market and then 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 increased the overall NPV.

That really helps Cathy, but sorry, is the total dollar commitment between the 2 of you unchanged and the charger count higher?

Yes.

Okay. Got it. All right, thanks. Appreciate it.

Thank you. Our next questions come from the line of Stan Shpetner 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 2/3 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?

Olga, you want to take this one?

Sure. Not necessarily in the long run, in the 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 starts paying us Immediately for all the stores that are open, but it takes our partners time open to ramp up capacity. So you might see, again, if you look at a quarter-to-quarter developments in the next couple of years. So but the revenue grew but the throughput didn't or vice versa. In the following quarter, you will, for example, see revenue didn't grow that much, but the throughput ramped up because now they ramp up capacity. If they really a look at a long term, they should go hand-in-hand. We don't fore see much of the overlap 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 on a retail level and so that would have some impact on average pricing in a going forward basis?

[Indiscernible] If you look at the business, overall, yes, that will have that exactly. If you just take the overall kilowatt hour throughput versus overall revenue because per kilowatt hour price for fleet is lower, you'll notice that's a fact. If, however, [Indiscernible] you'll probably see a much even development between the revenue and throughput.

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 that's an interesting question because our fleet business has two distinct parts, public and dedicated. Public is when we can give access to our fleet partners and the cars come on our network and they drive, and we do give them volumetric discount, so on a per kilowatt hour basis we do make less of a margin, but the volumes definitely make up for it because they drive a lot. On a dedicated station though it's a very different business model, we don't take much of the risk on the throughput and we pretty much leave, if you want to call it, or a charge r dedicated price for every stall our partners are using, and those are very high margin businesses, and they also have very strong downside for taxing. So overall, I think the margin profiles of 2 businesses are similar when you look at the mix, if you just look at dedicated suite 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.

Thank you.

Thank you.