Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the EVgo's Fourth Quarter and Full-Year 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Heather Davis, Vice President of Investor Relations at EVgo, you may begin your conference.

Good morning, and welcome to EVgo's fourth quarter and full-year 2023 earnings call. My name is Heather Davis, and I'm the Vice President of Investor Relations at EVgo. Joining me on today's call are Badar Khan, EVgo's Chief Executive Officer and Olga Shevorenkova, EVgo's Chief Financial Officer. Today, we will be discussing EVgo's fourth quarter 2023 financial results and outlook for 2024, followed by a Q&A session. Today's call is being webcast and can be accessed on the Investors section of our website at investors.evgo.com. The call will be archived and available there along with the company's earnings release and investor presentation after the conclusion of this call. During the call, management will be making forward-looking statements that are subject to risks and uncertainties, including expectations about future performance. Factors that could cause actual results to differ materially from our expectations are detailed in our SEC 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 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 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 Badar Khan, EVgo's CEO.

Good morning, everyone, and thank you for joining us today. EVgo posted yet another great quarter and set of results in the full year. But before we dive into those details, since this is my first call as EVgo's CEO, I thought it worth taking a moment to remind everyone of the incredible and important journey we are on. Emissions from transportation represent the largest source of emissions in the United States, and that is why the work we do is so important. At EVgo, our mission is to accelerate the mass adoption of electric vehicles by creating a convenient, reliable and affordable EV charging network that delivers fast charging for everyone. I believe EVgo represents a compelling value proposition for investors, not just because of where the company is currently trading. An investment in EVgo is clearly an investment in sustainability, but it is also an investment in a market that has a multi decade growth trajectory without the need to pick one EV manufacturer over another. Our business model is also focused on the highest growth segment of the charging market, DC fast charging, a fact seen from the data today. We like our core business of owning and operating the charging network. We generate revenue every time a customer charges on our network, unlike a one-time equipment sale. And as we continue to see, our revenue is growing faster than the growth of EVs. From customer capture, through design development and construction, to products and services that build customer loyalty, we have a growth engine that leverages key partner and OEM relationships across this entire cycle and is hard to replicate. Financial discipline is key throughout our business from the proprietary network-planning model to determine where to locate our charging stations to the disciplined investment decision-making processes…

Thank you, Badar. EVgo ended 2023 with yet another strong quarter, mostly driven by the continued growth of our owned and operated charging network. Revenue in the fourth quarter was $50 million, which represents an 83% year-over-year increase. This growth was primarily driven by increased charging revenues. Retail charging revenue grew from $5.8 million in the fourth quarter of 2022 to $16.7 million in the fourth quarter of 2023, exhibiting a 186% year-over-year increase. Commercial charging revenue grew from $1.3 million in the fourth quarter of 2022 to $6.3 million in the fourth quarter of 2023, exhibiting a 378% year-over-year increase. And eXtend revenue grew from $16.7 million in the fourth quarter of 2022 to $18.3 million in the fourth quarter of 2023, exhibiting a 10% year-over-year increase. We added over 930 new operational stalls to our own and operated network during 2023, accelerating off the 670 new stalls we added in 2022. Sold and operational under construction inclusive of $196 sold was 3,550 as of December 31, 2023. During 2023, EVgo added over 866,000 new customer accounts, which represents the majority of all non-Tesa EV sales in 2023. EVgo ended 2023 with more than 884,000 customer accounts, a 60% increase over year-end 2022. EVgo's network throughput continues to accelerate in the fourth quarter, growing faster than EV VIO growth over the same time period. As Badar discussed earlier, EVgo is focused on the fastest growing segment of the charging market, DCFC, and it can clearly be seen in our numbers. This accelerated growth is driven by a number of factors. EV buyers moving from early to mass adopters with a higher portion of multi union dwellers and the rapid growth in rideshare, as well as EV vehicle miles traveled finally catching up to those of ICE, increasing EV charge…

[Operator Instructions] Your first question today comes from the line of Gabe Daoud from TD Cowen.

Maybe wanted to start with Olga, what you wrapped up with the 2024 capital offsets. So I'm just looking at rough math, 900 stalls at $160,000 per stall, call it, over $140 million of capital. So I guess the offset would be what around $30 million to $50 million or so. Could you maybe give a bit more detail on where all of that is coming from?

So let me kind of like remind the time and component of all of this, and then I'll answer your question. So when we talk about CapEx spend in a particular year, it's not necessarily spend on the chargers, which go operational that particular year, because we already probably spend good 30%, 40% of what's required to be spent to put at 2024 assets in operation in 2024 as of now, because you construct over, like, 12 to 18 months with various stages of development. And, that's said, within 2024, fiscal CapEx or cash CapEx we're going to spend, some of it will be spent on ‘24 assets. Some of it will be spent already on ‘25 assets. Some of it will be an early development cost for ‘26 and maybe even ‘27 assets for some early scope and exercises. So just to kind of make it clear, 160K by 800 to 900 won't get you to that precise numbers, so you won't be able to match it one-to-one. And the same dynamics plays out with offsets. With offsets, as we spoke at length many times, one of the main components of offsets is grant funding. And when the grants funding, you start invoicing them after the asset goes operational. It takes you up to several months to collect that cashback. So there is a clear mismatch on when you had spent the CapEx for this particular asset versus when you collected the offset. The cycle is a little shorter with OEM payments because they just pay quicker to commercial organization. And on 30C offsets, there will be a delay. It's unclear yet if we're going to be trading once a year, those credits twice a year or maybe once transaction costs come down and, industry, the overall, so to see trades and tax industry matures, we maybe will be trading every quarter, but there will still be a delay. So when you are, looking at, kind of cash number within the year, the capital offsets versus CapEx, they don't relate into the same assets. That's why we introduced the concept of vintage CapEx or the concept of vintage offsets. And I talked about it in my prepared remarks, and the chart is included in the materials we provided. When we compare the CapEx, refer to specifically assets which go in operational '24 and capital offsets also related to those particular assets. We expect to offset roughly 40%. So 60%, comments. It's net comes from EVgo, and 40% comes from other sources. Within the particular year, that number could fluctuate one way or the other depending on a timing of each of those components.

And maybe just sticking to that. So I guess '24, is that this will be the first year you'll attempt to monetize 30C credits? Just kind of curious how that looks in the secondary market from a value standpoint? Is it like $0.90 on $1? Just how should we think about 30C value?

Yes. That's going to be the first time, and it's going to be the first time for a lot of actors in the market. Both buyers and sellers are trying to understand what will work for each party to transact. We have a lot of interest for our first portfolio, for our effect to a 2023 assets portfolio. I probably will not comment on the price just yet because we just started exploring it. Maybe when we speak next time in a couple months, I'll give you a better indication of what that is if we're sufficiently more along with one of the parties.

And then just a follow-up for me would be talking about some of the attractive economics here. Just curious if you could refresh maybe thoughts on you get to 2030, I know it's a long time from now and you do see $30 million to $40 million in VIO at 20% utilization. How does that translate to like financials and what the business actually looks like in terms of maybe EBITDA or free cash flow? Any kind of thoughts around that would be helpful. I know, again, longer dated, but just curious.

So, we obviously are looking at all of those numbers internally, Gabe. But we think that the more appropriate time and space to share something like that will be a separate occasion. We are thinking about conducting, kind of webinars, event of some sorts, where we will go in a greater in-depth detail in our project unit economics and our more mid-term to long-term planning. In the meantime, we think with this call we gave quite a bit of information on the separation of fixed and variable costs within our cost base, how we're thinking about the charge rate and whatnot. Honestly, our business is types to EV adoption, right? That's as a driver, and we've been saying it over and over again. The EV VIO grows, our business grows. Now I think you have enough information to try to even model it yourself and see. It's going to be big if we continue to deploy in Africa and continue to grow alongside the adoption. How exactly it's going to look like from our perspective? I think a separate occasion is probably a better chance for us to share that information and talk about it at lengths.

Gabe, let me just quickly just add to that. We've shared with you already in this call and our materials that this is the operational business, so the stalls that we have in the ground, are covering their costs. So if you exclude the cost of the growth engine and our corporate overhead fixed costs, the assets that we have in the ground at the 19% utilization rate are actually covering their costs today. And so as this business continues to scale, we should expect to see margins coming from those operational stalls well in excess of the fixed costs certainly by 2030. And I think anyone that will model this business will find it to be a pretty attractive business at that point.

Your next question comes from the line of Andres Sheppard from Cantor Fitzgerald.

I wanted to maybe touch on how should we be thinking about cost of energy, ASPs and the utilization rate for 2024, particularly given the guidance that you issued? What kind of, in terms of for modeling purposes, what will be a good way to think about the ASPs and the utilization rate, 19% as of year-end, which is great? Curious, what you're targeting or what you might expect for 2024?

So we don't disclose either, but I'll describe the dynamics here. On an energy cost front, we probably will see a slight reduction in 2024 because we're still observing the effect of amortization of demand charges, coupled with us moving to very favorable EV rates in a number of geographies. So you should see a slight improvement on that front. On our pricing side, we probably will see a slight improvement as we've just made some changes to algorithm and pricing strategy or like a month ago or so. So it should take an effect to probably gain a couple cents there. And if we're talking about the difference between the two, we definitely should assume some improvement on the energy margin.

So if I'm understanding correctly, then probably a reduction in ASPs for '24 and then maybe a gradual improvement in the utilization rate of the chargers for this year?

So the reduction in average sales cost, so reduction in energy cost, but improvement in ASP, average sales price, right? So the difference between the two is the margin that should expand a little bit in '24.

And Andres, just again, just to reemphasize, you can see the operating leverage that exists in gross margin. We've shared with you how much of our charging COGS is fixed versus variable at a stall level. And so if we see growing utilization, growing throughput per stall, which you've seen a very significant increase over the last year, I'd expect us to see that operating leverage show through in expanding gross margin.

And so just to just to maybe clarify, Andreas, adjusted gross margin is not just energy cost. There is a lot of different costs and then it's fully loaded. It's quite a loaded number. There's maintenance, there's property taxes. There is some AT&T and Verizon charges. There is rent. So when you're looking at adjusted gross margin, it doesn't just talk to the dynamics of the difference between the price and then energy cost. Energy cost is another part of it. It’s 60/40 split, to be precise.

And then maybe switching gears, on NEVI funding, obviously, understanding that you're not dependent on it, but just can you maybe remind us what is the total amount that you have been awarded so far from NEVI? I think it was about $180 million in last quarter. So just seeing if there's an update there. And how should we be thinking about in terms of awards for this year? Is there a target that you guys are expecting for? Or just trying to, again, incorporate that into the model as well?

Yes. I mean, Andreas, the NEVI, as you said, funding is not a particularly material part of our build plan. As we've said, we were focused on building infrastructure in kind of urban, suburban, locations as opposed to highway corridors. So it's not a huge part of what we do. We are excited about supporting our partners, so Pilot Flying J and GM with through our extended relationships. So we're excited about supporting them in deploying sites that may be eligible for NEVI funding, but it's just not really a particularly material part of our build plan today, at least in the near-term.

And maybe just to add to it, we view NEVI as one of many grant funds and sources we're applying for and we have a called a big program and a bunch of other programs across different states. For those other programs, the amount which awarded but we haven't collected yet, that's tens of millions of dollars, just to give you a magnitude. So maybe small, it doesn't necessarily mean our overall capital offset strategy is not working out. We are accessing it wherever we can, where we're being guided by the principle of maximizing NPV rather than maximizing the grant captures. Some of the locations even with grant captures, it doesn't work for us. Just to remind that that's our strategy.

Sorry, I'm not sure if I missed it, but do we know then what the total awards is to date from NEVI? Again, I think it was $180 million as of last quarter. Is that number unchanged or is there?

I don't know if we have it at my fingertips, Andres, but we can get back to you offline on that.

Yes. I don't remember on top of my head, the total either.

Your next question comes from the line of Bill Peterson from JPMorgan.

Hoping you can help just with the full year view. I know you dropped a lot of bread crumbs on how to think about your network operations. But if we think about the trajectory between that business, which you said should see growth throughout the year. What about eXtend and tech-enabled services? Trying to get a better understanding of how the cadence kind of goes through the year and maybe what's your underlying assumptions around BIO growth and so forth?

For the eXtent, we have a big contract with Pilot Flying J as we've talked at length. We are in a full speed executing on that contract. We just gave a guy, gave some color in my prepared remarks that it will be roughly 35% if you take a mid-point range of revenue. That will bring us, by the end of 2024, so roughly half of revenue collections to that contract. So another half will be left or to collect over ‘25 and ‘26, and execute on that as well. We do not have any other big contract right now committed to EVgo. We're focusing our efforts on our owned and operated network. If a big lucrative deal like that comes our way, appears in the market, we'll go for it, and then we'll give an update. That's another way we'll be executing on. But as of now, that is not the case. So eXtend as of now, will turn into the operational maintenance revenue for PFJ after we're done executing through and building out Phase 1 and Phase 2. On the ancillary services, that's mostly PlugShare at this point. We expect the revenue to grow, probably a little slower than VIO year-over-year, but you should see some growth in that business line year-over-year. That's kind of how we view it as of now. And what was the last question you asked after that, Bill, if you don't mind repeating it?

Well, I think you gave us, you do expect network to grow quarter-on-quarter, but I think what's missing and what's difficult for everybody is how to think about eXtend. Is it first half-weighted, second half-weighted? It tends to be lumpy, but, I mean I know you don't want to talk about one quarterly guidance versus hard to say on the bottom of that. We haven't seen sort of.

Sure. We gave some color in the remarks, but I'll reiterate it. We expect the eXtent to be roughly equally distributed among quarters this year with Q4 being a little heavier. So it will be a little bit of a different dynamics versus last year. Last year was lumpy because of large equipment deliveries. This year, we're mostly focusing on construction, which just tends to be steady quarter-over-quarter.

We've heard some prior commentary that, you've talked in the past that maybe 10,000 additional stalls that potentially pencil for the team. Trying to get a sense for how you're thinking about the growth in this business. I think you exited this year around 3,000 operational with around 560 under construction. You didn't guide this year, but how should we think about new stalls for this year? And then how many are you planning on completing this year?

We did, Bill, in August comments. We said that we expect 800 to 900 new stalls going operational this year. So that's just a little bit behind the 930 that we added for, well, that about that 930 includes the 100 eXtend stalls that we added in 2023. So we're quite, and so you're right that we've got a very large number of stalls that we think pencil. And so we are focused on ensuring that we are deploying the right number of stalls and minimizing capital from shareholder funds as we seek to execute on financing that extends the runway. And if that means we're a couple of stalls less than new than this 2024 we might otherwise have done. As you said, already there's 9,990 other stalls that pencil to our double-digit return framework.

Your next question comes from the line of Stephen Gengaro from Stifel.

So, two for me. One is a clarification. When you say that at the asset level, the charges are profitable. Do you mean, like, all in costs? Can you just give us color on what exactly you mean when you say the profitable at an asset level?

We do mean all in cost and when we say all in, it's all in and more. So it's obviously all the direct costs like energy, maintenance, property taxes, rent, third-party IT charges, asset management, customer operations, teams. It's call center. And then on top of it, we allocate a portion of other teams which are involved in sustaining and operating the network such as marketing, analytics, software and hardware, and a couple others. So it's a really, really full on number. So the only costs which are not included in that will be your true corporate costs and your, the gross engine cost, so cost required to deploy and grow the network. So it is a very encompassing number and a pretty robust number when we say that, it is positive.

From a bigger picture perspective, when we think about it and when you guys think about internally what Tesla has done opening up the network, I mean one of the things I think about and you mentioned this earlier, having access to fast charging without having to wait. And I would think that if I was a Tesla driver and showed up at a charging station and I had to wait for a Ford, I'd be upset. So I'm just trying to think about how do you think about their decision and whether that is a net positive or negative for you and how that kind of works in the overall fast charging world we're living in?

Yes. It's a great question. I mean, I think we think this, the same as we have for quite some time, which is that, Tesla opening up their network, will contribute to lowering anxiety for customers in the purchase decision-making process for individual customers. And I think that's a good thing for EV adoption and, obviously, for our business. With respect to customers utilizing Tesla's network, and again, we're talking about model year 2026. That's when the vast majority of OEMs will have, max or expected to have max ports available on their cars to be able to use their network in a significant way. I think that if that results in congestion at Tesla sites, then clearly we would expect to benefit from that. So we're expecting to see range anxiety being addressed at the purchase decision point for customers and we're expecting if there's congestion at Tesla sites for us to be picking up the additional volume.

And that's helpful. And just a quick follow-up to that. When you think about your detailed analysis of site planning, is that starting to become a part of the algorithm?

We take into consideration, Stephen, a whole host of things as I talked about in our prepared remarks. So forecast sales, density of neighborhoods, multifamily housing, rideshare, but also, of course, location of other chargers. Right now, we're looking at -- we see that about a quarter of EVgo's sites are in ZIP codes where we expect Tesla will be able to actually charge other OEMs. And so very much we take into consideration all of these factors.

Your next question comes from the line of Craig Irwin from Roth MKM.

Most of my questions have been answered. Your acceleration that you saw in the OEM charging and commercial charging, is kind of counterintuitive with some of the things going on out there. There's rental companies reducing the size of their fleets and a bunch of announcements that sort of suggest that might have gone the other way. Can you connect for us sort of what's going right for EVgo there? Why we are seeing this acceleration and how sustainable it's likely to be this year?

Look, I think we all read the same things in the papers. We can clearly see that EV sales grew year-over-year, particularly for non-Tesla vehicles. Non-Tesla sales were up from 22% to 23%, up about 66% as we said in our materials. We are also seeing on our network, as again, we've said in our remarks here and we've said in the prior call, we're seeing a very significant increase in rideshare. So rideshare customers are taking advantage of our network, being able to charge different times of the day at off peak hours, and that rideshare volume is now 25% of our throughput. So that's obviously very attractive, and we think that's something that's likely to grow, especially since we've seen commitments from the likes of Uber for a 100% of their rideshare drivers to be driving electric vehicles by 2030. So there are some factors here that I think are quite compelling. I mean, I think that in terms of near-term, from the data that I've seen, we are still seeing year-over-year growth in electric vehicle sales. So January sales from what I've seen for battery electric vehicles continue to go higher year-over-year and I think that's also a positive for us.

And actually, I'm sure many of us on this call have heard anecdotal reports using rideshare services that people are switching and that they do it for economics. But can you maybe sketch out for us what the economic advantage might look like for a traditional rideshare driver? I mean, is that something you might be able to do for us at this time?

I don't think we can do it on this call, but I think that it's an interesting question. I think that, we expect that rideshare customers, as they look at their costs like, rideshare drivers, I'm sorry, I think is your question. As they look at their costs, they're finding that, driving a battery electric vehicle actually is an attractive thing to do for them versus a nice vehicle and we can perhaps dig into that at a future date.

And we have reached the end of our question-and-answer period. I will now turn the call back over to CEO, Bedar Khan, for some closing remarks.

Great. Well, thank you, everyone. As you heard, EVgo had a great fourth quarter and full year beating the top end of our guidance. Our strategy to focus on owning and operating DC fast charging, we think, is clearly working, and with a very strong throughput and utilization that is now far outpacing the growth in EVs and our own stall growth and we've passed a key inflection point where our installed base is now profitable on a standalone basis. Our focus on customer experience combined with disciplined investment, I'm very excited about where our growth engine will take us, and I look forward to providing you an update on progress on our next call next quarter. Thanks very much, everyone.

This concludes today's conference call. Thank you for your participation. You may now disconnect.