Good day, and welcome to EVgo's Third Quarter Earnings Results Call. [Operator Instructions] I would now like to turn the call over to Heather Davis, Vice President of Investor Relations.

Hello, everyone, and welcome to EVgo's Third Quarter 2022 Earnings Call. My name is Heather Davis, and I am the new Head of Investor Relations at EVgo. 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 financial results for the third quarter of 2022, followed by a Q&A session. Today's call is being webcast and can be accessed from 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 filings, including the Risk Factors section of our most recent Annual Report on Form 10-K and in the quarterly report on Form 10-Q that we will be filing soon and which will be available on the Investors 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 financial measures, including a reconciliation to the corresponding GAAP measures can be found in the earnings materials available on the Investors section of our website. With that, I'll turn the call over to Cathy Zoi, EVgo's CEO. Cathy?

Good afternoon, everyone, and thank you for joining today. Before I begin with an update on the quarter, I'd like to take a moment to recognize a few new additions to our team at EVgo. First, I'm pleased to welcome Heather Davis, our new Head of IR, who kicked off our call today. Heather brings more than 20 years of Investor Relations and corporate finance experience. I know you all will enjoy getting to work with her. Second, we recently hired a new Chief Revenue Officer, Tanvi Chaturvedi, who joins us from Google. Tanvi will focus on turbocharging our retail revenue growth by transforming the fast-charging user experience. As CRO, Tanvi will lead our go-to-market functions, including all consumer revenue growth initiatives, marketing, advertising and expansion and use of the PlugShare app. Prior to joining EVgo, Tanvi held numerous leadership positions at Google, most recently responsible for delivering growth and monetization of the Google Nest Smart Home Product Portfolio and Services business. Previously, she also held leadership positions at Procter & Gamble's Consumer businesses and served as a technology investment banker at J.P. Morgan. Now, turning to the quarter; EVgo experienced a solid quarter as we continued to harness our technology-driven approach to lead the ultrafast EV charging marketplace. On today's call, I'll focus on a few themes from the quarter that we see as key drivers of growth. One, the strength of our operational foundation; two, our strong commercial progress as we make headway with existing and new partners; three, our commitment to technology as a source of advancement and innovation; and lastly, some important update across the regulatory front, which we expect will drive substantial investment in the EV charging space in 2023 and beyond. Today, nearly 140 million Americans live within 10 miles of an EVgo charger,…

Thank you. As Cathy mentioned, we experienced a solid quarter with strong momentum on the execution side as we rapidly build out our network. EVgo increased our active engineering and construction store development pipeline by 82% year-over-year, reaching a record 4,534 stores at quarter end. The noticeable increase includes the addition of the stores from the Pilot Flying J deal we announced last quarter. We added 188 new stores to our network during the quarter, and stalls in operation or under construction totaled 2,625 at quarter end. Customer accounts increased by 60% year-over-year and year-over-year throughput growth of 51% continued to exceed year-over-year operational stall growth of 33%. We delivered $10.5 million of revenue in the third quarter, representing an increase of 70% year-over-year. Growth was driven by increases in retail charging revenue, up 62% year-over-year and increased ancillary revenues, started pre-engineering work on PFJ contract and growth in PlugShare and regulatory credit sales. As expected, we experienced a sequential decline in regulatory credit sales following the accelerated monetization efforts in the first half of the year. Regulatory credit sales totaled $1.2 million, a year-over-year increase of 72%, but a substantial sequential quarter-over-quarter decline. This, combined with the seasonal impact of summer rate electricity tariffs and lower LCFS credit prices contributed to an anticipated decline in adjusted gross margin. Decline of adjusted gross margin from 22.2% in Q3 2021 to 19% in Q3 2022 is caused primarily by lower LCFS prices this year. While EVgo experienced high energy costs in 2022, this was largely offset by improved leverage of network fixed operating costs. As a reminder, our business model has significant built-in leverage that is realized with increased charging volumes. We reported adjusted EBITDA of negative $22.2 million versus negative $14.3 million in Q3 2021, which reflects our investment in…

[Operator Instructions] We'll take our first question from Gabriel Daoud with Cowen.

Hey, everybody. Good afternoon. Thanks for all the prepared remarks. Olga I was maybe hoping to just dig into just the guide a bit more, I understand that there's maybe a decent contribution from Flying J and that's kind of what helps you get to full year. But is there any way to maybe just quantify what the Flying J impact would be this year at all?

Sure. Sure, Gabe. So we – the reason why we give – still give the same guidance in the range of $7 million is that the exact contribution from Pilot Flying J will depend on the timing of hardware units delivered to our warehouse and we right now scheduled to take that delivery over the month of December, which has holidays in it. And we - the short answer is that, that's going to depend and that's going to drive the difference between the 48 and $55 million. On an exact Pilot Flying J contribution this year, I would restrain from giving the exact number because that's not the number we report separately. But, what I would say, what I think would help you is that vast majority of PFJ revenues will come in Q4. And in Q3, it was still – we recognized some of it. It was still small. And I think that by doing a simple math, that would probably lead you to the answer, but we will not disclose that exact number.

Okay, okay. That's helpful. And then just overall, curious to hear trends on the fleet side, Cathy, you obviously hit on this in your prepared remarks quite a bit. But can you just talk about maybe the partnership with MHX? And like what revenue model did they go with? Was it the charging or the service or customer owned? And since it's Class 8, I'm assuming they went with 350. Is there even an interest in a megawatt charger? So just kind of curious how that partnership -- I guess if you could share details there. And then generally what you're seeing on the fleet side.

What we're generally seeing is, first of all, it's still really early innings and the fleet being able to access the vehicles, right? So there's lots and lots of interest in every fleet we know. The last mile delivery, the middle mile and now the they're all thinking about how they're going to do this. So this is like the sort of the first truck off the rank rather than the first cab off the rank for MHX. Again, the business models vary. And as we've said to you many times, we are happy to own the assets or we're happy to have the customer, in this case, own the assets. So we will -- we're signing generally speaking, that the fleets are at this point, wanting to own the chargers and it is charging the service model that we provide, where we actually build and operate the chargers for them and guarantee upfront.

Alright. Got it. That’s helpful. Alright. I’ll keep in touch. I’ll hop back in. Thanks.

Thanks, Gab.

We'll take our next question from Bill Peterson with J.P. Morgan.

This is Mahima Kakani on for Bill Peterson. To start, can you elaborate on EVgo's current timeline for the replacement or upgrade of older chargers? Approximately like how many chargers would that be and at what pace will they be replaced at? And then, maybe a follow-up, will that impact the rate of new charging installations overall? Thank you.

Hi. Thanks so much for this question. So, we are currently evaluating how many stalls we will be upgrading or replacing or maybe even retiring next year. We are not ready to give the exact number, but it's going to be in hundreds and we will update the market as that program is coming along. That program will be focused on our older chargers, our older 50 kilowatt chargers. We want to just also make a remark that not all of our old 50 kilowatt chargers are underperforming, a lot of them are functioning greatly and have no issues, but there is a cohort of really old ones, which are near to their – they're nearing their end of their life. And those are the ones which have given us problems. And those are the ones which we are mostly focusing on. But what we also want to say is that our ReNew program and our kind of customer experience or customer enhancement improvement program doesn't just focus on replacement, the retiring of chargers or upgrading the chargers, which it is, but it also is being focused on improving overall end-to-end customer experience, including a convenience of an app, convenience of notifications and a variety of different things our cross-functional teams are focusing on. And we would also like to remind a challenge we're experiencing as an industry on its own that we have various equipment on our network, which is charging various car models. So the match and sometimes the problem is not the hardware sometimes the problem is not the software, but sometimes the problem is a compatibility between innovative first-time new cars on the market, the innovate first time new chargers on our network and our competitors' network and what really sets EVgo apart is that we have our lab where we're able to test various equipment in combination with various EVs. And that already has given us quite a lead way and we'll continue to do it and even reinforce next year the importance of overall customer experience, which is being helped, again, by a variety of things, new hardware, upgraded hardware, it's operational maintenance practices, it's software convenience and overall customer experience convenience and its lab test and allowing for the compatibility to be high class.

Thanks so much for that color. Maybe if I can sneak in another one. Are you still experiencing inflation on the supply and labor side?

We are still experiencing some of it. We would like to probably say that it has abated in H2 versus H1. We're still seeing some of the labor costs experiencing inflationary pressure, but it's not to the level we observed in the first half of this year. So we're remaining hopeful for next year.

We'll take our next question from David Kelley with Jefferies.

Hi, this is Gavin Kennedy on for David Kelly. Thanks for taking my question. Can you just provide more info on the installation issue that you mentioned in the prepared remarks? How many stalls were affected this quarter? And can you quantify at all the expected increase going forward of stalls affected? And how should we think about labor and transformer constraints generally into 2023?

Yes. Hey Gavin, Cathy here. I think the – when we went – when we reached the end of the quarter, we had 130 – just to go back, it takes us – EVgo about 4 to 8 weeks to actually do the construction of a charging station. And as I've said to you guys many times before, at the moment, it's kind of an 18-month all-in end-to-end cycle time from an idea of building a charging station to getting it energized by the utility. We started to see that decline a bit, getting it closer to down to 12 months, but now the long hold [indiscernible] is utilities. So the utility work backlog associated with transformer shortages, like when we're building the configurations that we're building now, which is ultrafast 50 kilowatt chargers more stalls that always requires a transformer upgrade. So we are at the behest of the utilities having those and we have a couple of utility folks on our Board and in our Board meeting last week, there is a gush. It is just – it's taking very long lead times to get those transformers these days. So in a nutshell, I mean, in summary, I guess, I would say we're thinking that, that may continue to be an issue. What we are doing to help out with that is we are proactively providing our utility partners where we want to build with our own 18-month, 24-month forward-looking plans overlaid with their grid. So we can say, okay, which ones are going to be easy, which ones are going to be harder? Can you guys go ahead and place orders for the transformer now because this is the configuration? And that's been very, very well received, where we've been doing that. So we're hopeful that by working side by side, as I said in my remarks, we'll be able to get all of this stuff moving and helping utilities do what they need to do to make sure that they can accommodate all of the growth on the grids.

Got it. Thank you. And then as a follow-up, since announcing your first major partnership with Pilot GM, can you talk about any additional traction your company is seeing with your EVgo eXtend offering specifically? Are you or your customers showing more interest in pivoting towards this asset-light model?

You bet. Look, so we're excited to be able to accelerate EV electrification transportation how we can and where we can deliver double-digit returns. And hence, the provision -- or the creation of the EVgo eXtend business and the launching of our big pilot project was -- we're very pleased about that last quarter. We have a number of very active live interested significant conversations happening to do more of that across the board. And as soon as we get those deals inked, we will be so excited to share them with you.

Alright. I’ll leave it there. Thank you.

We'll take our next question from Alex Vrabel with Bank of America.

Hey guys. Thanks for having me on the call. Just curious, I mean when you guys think about some of these software issues or initiatives that you're putting through here, I'm thinking specifically on Autocharge+. Can you quantify – I mean, I guess, any sort of financial uplift you see on a customer basis where that customers are coming more often on a more recurring basis? I mean, how do you quantify some of these initiatives into profitability, if that makes sense?

Well, Alex, what I would say about Autocharge+ is that this is primarily about creating a seamless customer experience in charging. Let's make it easy. Let's grow the market more quickly by making it just the life experience of charge. And our – we've been out there for a few weeks with this and the response we've had so far has been pretty fantastic that people that are both new EV drivers and then existing EV drivers are getting to take advantage of it or saying, oh my gosh, this is fantastic. I just drive up and I plug in because like EVgo has my - of my car, and it's just simple. Like – so for us, it's about making sure that the drivers have a great experience, and that will, in turn, create more interest in drivers to use the EVgo network. So we haven't quantified it specifically, but we feel like we've got a responsibility to provide a great customer experience and that will deliver great financial results for us, for our company.

Got it. Now that makes sense. And then I guess just kind of looking forward, I guess, a little bit higher level here. When you think about some of the policy tailwinds that you'll see here, whether 4Q or 1Q when we see some of the solicitations as well as IRA, I mean how do you think about repositioning your footprint, whether that's your counterparties or customers you're aligned with or geographically to best capture those possible credits or funding that are in the pipeline here?

Yeah. So we have – like we have a really cool network planning tool that is ours. And what drives it is where can we deliver – where can we pass our own internal [indiscernible] for making investments? And what the big giant cost of money coming to the federal government, whether it's grant money through NEVI or whether it's 30C tax credits are going to enable us to have more locations penciled profitably for us and for our shareholders. And so we are literally like taking a look at the different grant programs that have been now approved, all 50 of them by the federal government, where do we want to be, where are good EV market, where -- what are the structures of those programs, and we put that into our own planning tools, and then we send say to our site host team, okay, let's still find some great sites there. So it actually reduces the economics and it allows us to extend our footprint profitably more quickly.

We'll take our next question from Andres Sheppard with Cantor Fitzgerald.

Hey guys. Congrats on the quarter. And thanks for taking my question. I am trying to maybe just understand. So revenue guidance is unchanged for the year. And so in order to, let's say, meet the bottom end of guidance, you'd have to have over $20 million revenue in Q4. So just help me understand like what the thinking around there is? I know usually Q4 is a little bit heavier weighted, but do you still remain confident in achieving that guidance just given where things are currently?

So just to clarify, the big difference between Q4 and Q3 will be the full – the execution on PFJ contract full speed. And that will add the revenue. So our core business, we do not expect to double quarter-over-quarter. We do expect a healthy growth, but it will be in line with what you've seen in prior quarters. But the key contributor to the expected Q4 over Q3 growth will be the execution of Pilot Flying J contract and namely, we're going to be taking the delivery of equipment pieces coming out of our supplier, and that's the moment where they get transferred to our customer. So we do as of now, we remain confident that we will get those pieces here in the United States. They are on the way. The deliveries are scheduled over the month of December, as I mentioned in my response to Gabe's question. And as of now, we don't have any information, which will tell us that, that won't happen. So that would give us confidence that we will be able to meet the guidance.

Got it. Thanks Olga. I really appreciate that. And maybe just as a follow-up, I just want to clarify, in regards to NEVI. So, it looks like you're targeting initial funds being deployed in 2023. I am wondering, can you give us – are you able to quantify how many programs or projects you have applied for grant funding so far, or just any more of color there would be helpful?

Yeah. Andres, it's just starting. And I guess we have learned by doing the appendix D over the past four years to try to pinpoint timing of state programs and procurement processes is a fool's errand. So we will be applying for NEVI wherever it makes sense with our network planning model and where we can make money. I just – we cannot predict exactly when those funds – when those checks will get cut. And in some cases, the money won't necessarily even be delivered until the stations are energized, right? It depends on the structure of each of the programs. So we will plan on it. But again, in terms of like the cash flows – it's going to be very unclear for a while.

Understood. Okay, thanks, Cathy. Thanks, Olga. Congrats again on the quarter. I’ll pass it on. Thank you.

Thank you.

We'll take our next question from Maheep Mandloi with Credit Suisse.

Hi, this is David Benjamin on for Maheep. Thanks for taking our question. I was wondering if you could talk about uptime and how that's tracking in light of recent criticisms on the industry lately, especially considering the high uptime requirements for incentives like NEVI?

Yes. So the uptime, we actually are still tracking to our high 90%s of time that we made commitments to. One of the reasons that we are actually really excited about our EVgo ReNew program, though, is that we can actually – like we rigorously are watching what's happening with our chargers. And when we start to have troubles we get out there, and we will be replacing chargers that are being particularly problematic on that. So we're quite, quite conscious of making sure that uptime is maximized and not simply because it's a reporting requirement, but we make money when we – our chargers are operating. So we have a built-in incentive to ensure that we have the highest uptime possible.

We'll take our next question from Noel Parks with Tuohy Brothers.

Hi, good afternoon.

Hi.

Thanks for all the detail, some really fascinating points. Just as an example for one, you were talking about your planning with utilities and giving them sort of like kind of 18 to 24 month forecast for installations. You can envision overlaying it with the grid and helping to identify easy and difficult points of installation. It sounds like it's sort of a classic help them, help you situation. I just wonder how do you look at it as you get experience of different utilities as far as the ones that are pretty responsive doing pretty well and the markets where the utility and charge is pretty sluggish. I just wonder do you weigh that into the balance of whether you're going to sort of try to avoid certain areas or try to get a foot in the door earlier maybe in full areas, just the sooner the better. Just curious how you analyze that.

Yes. Well, it's funny; I had a meeting earlier today on the very topic. I mean, so early is always better because utilities are large organizations, and they have a lot of things that they have to worry about, so you want to give them as much information as early as possible, so we do that everywhere. There are places, however, where you might have two utilities side by side. And if we have discovered that one of the utilities is actually pretty switched on and quite responsive and is a great partner and a mile away, there's a different utility that's much less responsive. You bet that we will look to be building and working with the one that's more collaborative. It's a practical reality because like, frankly, EV drivers are not going to care. What they want is reliability, convenience, right? And the one-mile difference, getting more out there more quickly is absolutely what we want to do. I mean, there is a case example of this where Los Angeles Department of Water and Power is basically the City of L.A. and the Southern California Edison, the big investor-owned utilities is all around it. And SCE is probably best in class in America in terms of EV charging infrastructure collaborations. And I think our competitors would say the same thing. I mean, they're very, very good and very switched-on and their response to their lead times are much quicker on their planning pre-sophisticated than their fellow municipal colleague at LAWP, it’s just a reality.

Right. Thanks. That makes a lot of sense. And I want to turn towards, you brought up your testing, your testing lab and I am real interested in the whole topic of reputational issues, reputation of a charger brand, reputation of individual vehicles. So I guess if you could maybe just talk a little bit more extensively about what's involved in the charging effort. It sounds like already at its early stage, it's probably a really big task. And also if you're getting any sense of whether EV buyers sophistication is getting to the point that they are looking critically well, what I am hearing about this vehicle, it’s build to charge its own EMS software is making me lean towards one vehicle or another? Or are we still just so early just getting your hands on a vehicle is still name of the game?

For your last question, I think it's your hands on the vehicle. I mean every -- what we hear from the OEMs, notwithstanding their own chip shortages and some of the recalls or whatever, every EV that gets made get sold, right? Like so – and that's kind of good news. So we're delighted about that. With respect to the EVs and the charging infrastructure so right now, there are 47 different EV models on American roads. EVgo chargers all of them. There's also a bunch of different charger types, which EVgo is used and deployed and tests in our lab. Every single one of those EVs has a different bit of battery signature, a different baseline firmware and software underneath it. And our chargers that we deploy have to be able to talk successfully every single one of them. So we invite the OEMs and all of the vendors like bring their kit to our lab and our labs and as I mentioned, lab locations, so that we can actually test it and it's not just about UL certification. It's about continuing to improve user experience to be able to identify if there's a problem, what sort of problem, where is that problem coming from? And look, it's a young sector, but we are all working on our view, EVgo's view is to work collaboratively with the vendor -- with the charger manufacturers and with the OEMs, we are going to create that driver experience over the next couple of years that the drivers deserve, progress and we're completely and utterly committed to it.

We'll take our next question from Oliver Huang with TPH.

Good afternoon and thanks for taking my question. I just had one on the cost side of the equation. I think you all highlighted some higher energy costs that may have impacted adjusted gross margins for the quarter. Wondering if you all might be able to expand on the magnitude of impact in Q3, what sort of increases year-over-year, if any, you all are budgeting on this front when thinking about 2023? And if any of this is being passed off to customers and how you all are positioning yourself to mitigate such impact as we move into 2023 and throughput kind of scales from there?

Yes. Thank you for the question. So when we're comparing Q3 2022 to Q3 2021, there are two reasons why we're seeing slightly higher energy cost per kilowatt hours, and we're seeing like a few cents higher. One is that some of the California utilities did increase the energy portion of their tariffs earlier this year. And the second one, because we continue to open new stations in the rest of the U.S. and very often in new geographies where we haven't yet worked -- have been successful in working with local utilities to create EV rates and they still have demand chargers. As I remind the California, the major utilities in California have demand chargers. And partially, they don't because we were part of the group, which advocated for that not to be the case as it doesn't make sense for EV charging use case. But in the rest of the U.S., you still have geographies where they exist and they're quite high. And so as we are expanding into those geographies, that does affect our energy costs. On 2023, we're actually working right now with my team on a very detailed forecast and trying to understand and break in on the conservative side on how that's going to look next year. We will not share that with the market just yet. All the guidance will be issued during the next call, but that's something we're working on and paying attention to. And we haven't passed that on the consumer just yet this year, but conceptually, this is how we're thinking about it. But when we're thinking about passing it on to the consumer, we're not just thinking about the margin. We're thinking about it holistically, are we still generating the target return or not. And simultaneously, if we…

Awesome. Thanks for the color.

And that does conclude the question-and-answer session. I would like to turn the call back over to Cathy Zoi for any additional or closing remarks.

Thanks. Look, our commitment to technology-enabled innovation powers our customer relationship and whether it's Autocharge+ for drivers on the public networks, whether it's our APIs for automakers or fleet software for commercial customers, EVgo is positioned to deliver an exceptional and reliable fast-charging experience and expand our leadership across the market. We're excited about the growing momentum across the EV landscape. I think you could hear it Olga’s and my voice and we believe that EVgo is exceptionally well positioned to benefit from the electrification of travel. So, thanks to all of you for joining us. Great questions. Love that you love our sector like we do.

And that concludes today's presentation. Thank you for your participation and you may now disconnect.