Thank you for standing by, and welcome to the EVgo First Quarter 2024 Earnings Conference Call. [Operator Instructions] I'd now turn the call over to Heather Davis, Vice President of Investor Relations. You may begin.

Good morning, and welcome to EVgo's first quarter 2024 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 first quarter financial results and our outlook for 2024, followed by a Q&A session. Today's call is being webcast and can be accessed on the 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. 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. Before I begin the call, I'd like to take a moment to congratulate and thank Olga. In addition to our first quarter financial results, today, we also announce that Olga will be departing the company at the end of the month to pursue a different opportunity with a private company. Olga has been a trusted and valued partner to me since I joined EVgo and has been critical in driving the success of the company since she joined EVgo as a private company 6 years ago. On behalf of the entire EVgo family, we wish her well in her future endeavors. Many of you know Stephanie Lee, our EVP of Accounting and Finance, who will serve as Interim CFO from the time of Olga's departure until a permanent successor is on board. We are well underway with the search process and look forward to updating you when we have news to share. I will now turn to our results for the quarter. EVgo posted yet another excellent quarter, more than doubling revenue and nearly tripling throughput year-on-year. Non-Tesla electric vehicle sales grew 29% year-over-year, demonstrating continued demand for EVs. With the level of utilization we continue to see in our network, we not only have a clear path to EBITDA breakeven in 2025, but with the operating leverage in the business, we expect we could have annual adjusted EBITDA of $200 million in 3 to 5 years' time, representing a very compelling investment. I'm excited to share our results from Q1 with you today as well as talk about our key priorities over the next year or so. Let me also take a moment to address the change in our competitive landscape. Tesla's decision to halt further growth of charging…

Thank you, Badar. Before I dive into EVgo's first quarter 2024 financial results, I wanted to express gratitude for having had an opportunity to serve as EVgo's Chief Financial Officer. Being part of the team, focused on growing EVgo over the past 6 years and working closely with our investors and analysts has been a pleasure and a remarkable journey. I am proud of all we have accomplished and excited about the path forward. We have a well-planned transition in place, as Badar mentioned, and the deep [ bunch ] of talent in the finance organization that will ensure a smooth handoff. With that said, I will now discuss our first quarter results. EVgo started 2024 delivering another strong quarter of growth and execution. Revenue in the first quarter was $55.2 million, which represents 118% year-over-year increase. This growth was primarily driven by increased charging revenues. Retail charging revenues of $18.3 million grew from $6.6 million in the first quarter of 2023, exhibiting a 177% year-over-year increase. Commercial charging revenues, which primarily includes revenue from our rideshare partnerships of $5.8 million increased from $1.7 million in the first quarter of 2023, exhibiting a 240% year-over-year increase. And eXtend revenue of $19.2 million grew from $10.3 million in the first quarter of 2023, increasing 86% year-over-year. We added 250 new operational stores in Q1, including eXtend. Total stores in operation were approximately 3,240 at the end of March 2024, including 130 EVgo eXtend stores, increasing 38% from the end of March 2023. During the first quarter of 2024, EVgo added 109,000 new customer accounts, which shows 63% increase versus 67,000 customer accounts added in Q1 2023. EVgo ended the quarter with more than 981,000 customer accounts, a 60% increase over the end of Q1 2023. EVgo's network throughput continues to grow,…

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

Congrats on the new opportunity. But I was hoping we could just maybe get some general thoughts on the piece of news that hit recently around Tesla and playing off the Supercharger team and that may be impacting the pace at which they grow the Supercharger network? Can you maybe just give a little bit of context or thoughts around how this could impact EVgo in both maybe the near and long-term from a market share perspective?

Yes. Thanks, Gab. Look, this is a fairly significant change in the competitive dynamic in the charging space. And I think it's positive for the sector and for EVgo. It's positive in my mind because it allows Tesla to focus on cars, and more affordable cars, as they've been talking about recently with the Model [ 2 ]. I think that's great for EV adoption. I think we all see that affordability is a key driver of shifting from early adopters to mass adoption. We see that from almost all the other OEMs on their earnings calls in terms of building out more affordable vehicles. So I think that's a positive. I think it's very positive for EVgo. I think that we have talked about very strong economics here on this call and I expect to see that to continue for, frankly, or improve in the foreseeable future. I expect to see that demand exceeds supply of charging stations for some time. Companies like EVgo just really didn't exist 12 years ago when Tesla began its Supercharger business, but they exist today. We added over 900 stores, as we said last year, which are state-of-the-art ultra-fast 350-kilowatt chargers. I expect that Capital will be more interested in participating in this space, in this new competitive dynamics, allowing companies like ourselves and others to pick up some of the slack in terms of charging station growth that Tesla may be leaving behind.

That's helpful. That's great color. And then I guess just as a follow-up, maybe switching gears to financing. You noted in your prepared remarks 30C maybe start to kick off over the next couple of months. Is there any additional color you can provide on just expectations and maybe remind us of the 800 to 900 new stalls this year fully qualified for that 30% reimbursement? And then the second part of that question is just the DOE loan process, if you can maybe just dial in a bit more detail on that? And maybe specifically just timing around when you think we can get an answer?

Sure. So maybe I'll ask Olga just to comment on the 30C transaction over the course of this year. But if I start with the DOE loan, look, we think we have a very high-quality application in front of the DOE loan program office, which -- and we've been under -- in dialogue with them for quite some time at this point. We're pleased with our progress. We know it's a very important part of President Biden's agenda. And given, again, I think the unit economics that we've shared with you on this call and previous calls, I think would suggest that -- I think anyone would look at this and think this is a pretty good investment. In terms of timing, this is not a 2025 thing. We are expecting us to be -- if we're successful, to be over the course of this year. We have not shared a quantum, but what I can share with you is that we'd expect the quantum here to accelerate our rate of growth from the 800 to 900 stores that we're doing this year, the 900 plus that we did last year and at the same time, accelerate our journey to free cash flow breakeven at a higher rate of store growth. That's what we're looking at for the DOE loan. Of course, it's not our only source of non-dilutive financing. Again, as I said before, I think that the economics here are very attractive and will attract capital to this business, and I think that will increase with the [ speed ] landscape that we've just talked about last week. And we are engaged in conversations with counterparties around similar sorts of financing, nonrecourse project financing. And so those are things that can be done in combination with the DOE loan program office. And then, Olga, do you want to just provide a little insight on the 30C?

Yes, and maybe like a little add-on about the DOE loans we're applying and the Title 17, that LPO program, and gave you free to -- just do research and see what kind of other companies did that and what quantum they obtained. I think it will give you a good feel for what we're looking for as well. And on 30C, roughly 35% to 40% of our portfolio last year and this year qualifies. We're working on effectuating the first transaction and sell our 2023 portfolio. It will be the first -- one of the first transactions done of this nature in the industry and certainly will be the first one for EVgo. So it takes a little bit of time to put the transaction documents in place. But we see a very strong interest for these types of portfolios. And it is clear to us that the very robust market is emerging to be able to trade this credit in the future on a regular basis.

Your next question comes from the line of Chris Dendrinos from RBC Capital Markets.

I guess I wanted to kind of dial in a little bit into the operations side of things and maybe to start here. On the throughput, it looks like maybe December I want to say it was around [ 201 ]. And so the implied on the quarter was a bit lower on the kilowatt hours per day. Can you just kind of talk about the dynamics there? Is there any sort of seasonality going on? Or how should we kind of think about, I guess, throughput growth going forward?

Yes, Chris, that's exactly it. It's seasonality where we've been growing so fast over the last couple of years. We haven't even seen it in our numbers, but we're finally seeing it. That's really it. April's throughput per -- store per day is well over 210 kilowatt hours per store per day. So that's in line with what we were expecting.

And then I guess, I think you mentioned some software updates that might have been going out later this year. Can you kind of just update us on sort of what's going on there and the expectations for that?

Yes. Look, we, as a company, Chris, we have been so focused on building a growth engine that can add very carefully selected stores that generate -- that we expect to generate very strong returns. That's the proprietary network plan and site selection process. We've really refined that to a point where it's -- I think it's just humming super nicely. We shared, I think, on the Q4 call that we're actually exceeding our throughput expectations versus the modeling that we've done. So we think that we're -- it's a great process, but it's also one that's conservative. But really, we're really shifting our focus from not just building the growth engine, but to making it more efficient. That is something that we can do today as a result of the scale of the business. And we see that showing up in multiple areas, one of which is the inefficiencies in the operating cost of the business. There are multiple software and process improvements, none of which are frankly -- they are not things that are -- things that haven't been seen elsewhere in much -- every other industry in the world. We're just deploying the technology today. And those are things that allow us to have a better sense of sort of predictive maintenance, diagnostics around our equipment where they're not performing as we'd expect. It will be software in terms of handling customer calls in a way that allows us to expedite resolution faster. Again, these are not game-changing technology improvements. We're just bringing what exists in other sectors to our own sector. And in terms of expectations, we shared with you our sustaining G&A cost per store in our -- on the webinar. And in fact, I showed that in one of the slides here, a fairly significant reduction over the next 3 to 5 years. We're expecting the software updates just for this year to lower sustaining G&A by around 20% run rate, so Q4 versus Q4 last year.

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

I think two for me. The first, you had a good first quarter and you kind of reaffirmed your guidance for the year. When we think about your 2025, you talked about EBITDA breakeven. And it feels almost a little conservative versus kind of where -- the path you're on right now. So I was just kind of curious if you could comment on those expectations and what drives you there?

So we're very pleased with that quarter this year. We have 3 more quarters to go. And so we just came out with our guidance for this year and also for EBITDA breakeven just sort of 7 or 8 weeks ago. So we thought it was too early to make any changes to that. I can tell you that with the change of the competitive dynamic that we've just been talking about. We're in a -- as a -- for instance, we're in a conversation with many site hosts across the United States that were well along the path towards putting in DC fast charging stations in their locations for the first time, that are stuck. And we're, of course, happy to be able to pick up potentially some of those locations if they meet our return expectations. That would allow us to accelerate our store growth potentially faster and cheaper. As I've talked about before, we've got a significant set of tailwinds in terms of charge rates. Charge rates improving allows customers to be more confident in on-the-go DC fast charging. Charge rates actually improved EV adoption. We hire all the OEMs talking about more affordable vehicles later this year and into next year. So there's a set of factors here that actually would suggest we could be doing a lot better. It's too early for us to talk about 2025 on this call, but perhaps we'll talk about 2025 on Q2 and Q3 calls.

And the other question I had, and you sort of just answered it. But when you were talking about the different financing options and you mentioned the ability to potentially accelerate growth beyond the 800 to 900 stores per year, that suggests to me that if you could do that, there is plenty of room for -- and sites that you've identified, that would be profitable and meet your IRR hurdles even if you grew the store count at a much -- at a higher rate. Is that fair?

That's exactly right, Stephen. We find that there's about -- well, first of all, we've got about 50 -- over 50 strategic relationships with site hosts across the country. And there are -- well, there's over 100,000 sites actually we've identified that we could potentially get after. But in that, it's a subset of over 10,000 that actually meet our return expectations. And again, I think with the competitive dynamic shift from last week, those are likely to be very attractive locations for us to get after. And so yes, we -- I think when it comes to capital allocation, we will -- once we cover our costs and -- which we will do next year and we're generating EBITDA or positive EBITDA, the question for us is, do we return capital to shareholders or do we keep deploying capital to build out locations. The unit economics would clearly suggest it's in everyone's interest to -- for the company to grow our store base faster than the 800 to 900 just given the returns that we're expecting. And so that's what we'll be looking to do.

Your next question comes from the line of Chris Pierce from Needham.

Can you just talk about what you're seeing broadly over the past year or so? Are there -- I know you guys identified type -- and you want to drop your Level 3 equipment in that site. But are you seeing an industry shift at all where people that had maybe considered Level 2 sites or Level 2 charging equipment are now moving towards Level 3 because of customers demanding higher speeds? I'm just trying to get a sense of if you look at how people have thought about this industry is growing through 2030, Level 2 were sort of dominating the conversation. But it seems like over the past year or so, Level 3 is started to dominate the conversation. So I just wanted to kind of get your thoughts around that?

Yes, it's a good question, Chris. I think that -- look, I think the sort of landscape is kind of waking up to the potential for Level 3 in a way that maybe didn't exist a few years ago. And again, I talked about charge rates in my script that kind of went on a little longer, maybe. But I did that because there's a tremendous tailwind here that benefits DC to public DC fast charging. If charge rates improve and you can charge your vehicle at significantly faster time, maybe half the time, I think you're going to be more comfortable with public charging, less reliant on charging at home and for site hosts to be able to have and offer that feature for their customers, which we know is something that customers' value. I think it's only one direction of travel. And the question is how much share does DC fast charging takes of overall charging over the course of the next several years. We believe it's going to continue to grow, not just because of charge rates but also because as these vehicles become more affordable, customers without access to private driveways are more likely to be buying more affordable vehicles and therefore, more reliant on charging and likely will be -- will prefer faster charging.

Okay. And you talked about demand base pricing is something you guys might experiment with down the road.

Yes.

Can you talk about pricing in general? Is that something where -- is there really no price pressure that you're seeing now given the rate of growth of EVs and the lower rate of growth and charging [ equipment ] out there? Or is there other certain times of the day where there is pricing pressure on your network? Or is this not something that you're seeing right now?

No. This -- we have very different customer segments that are charging on our network. We have rideshare, segments of high-frequency, high-usage customers. And that's -- and when you put them -- put all the sort of higher usage customers together, it's over half of our kilowatt hours, which I consider to be quite sticky and more predictable and reliable and love to have more and we're expecting to target and have more. But as we think about pricing, there's different times of the day and/or pricing will appeal to different customers. So we are shifting some of our higher usage customers to times of the day where it's -- where there's less utilization in our network. Earlier times, we call them early bird or off-peak rates, they tend to be lower rates. That frees up the locations for customers that are less frequent users and potentially less sensitive towards price. So that's the kind of work we're doing. It's time-based pricing, location-based pricing. Dynamic pricing, it's not a dynamic -- demand-based pricing. It's not a new concept. And it's not something that we're considering. We are now deploying it. So less -- around 5% of our network today has dynamic demand-based pricing and we expect to roll that out over the course of this year. And I expect that will deliver some fairly solid improvements to actually our margins, which have already improved over the course of the last year, as you see in our results. Margins from our charging business have gone -- have doubled over the course of the last year. And that's partly or significantly driven through the leverage that exists in our cost of sales.

Okay. And if I could just ask one last question for Olga. On ancillary revenue, we've seen that grow pretty dramatically. I know we're talking about smaller numbers. But what is the margin profile of this business? And is that -- since the 10-K talks about again software digital revenues, are we talking 75%, 80% gross margin for that type of business? And that is providing a gross margin uplift as well? Or am I not thinking about that the right way?

Olga, do you want to take that question?

Yes. Sorry, I muted myself. So yes, most of that revenue is coming from PlugShare. It's the [indiscernible] charging company which we bought roughly 3 years ago. But it also has our behind defense fleet contracts, which is a couple of them, which we talked about on prior earnings calls. So the margin profile is a mix of the 2. And of course, any software-driven revenue, including PlugShare will be very high margin. So you look at any SaaS type of a company and you'll get an idea what kind of gross margins we're talking about. The other business which gets mixed in here, which is behind the fence, has a more eXtend-like margin profile, which will be on a low double-digit territory. So there is a bit of a game of a revenue mix happening here. But considering that it's a very small -- it's still a relatively small revenue contribution. Most margin trends have been played by interplay of eXtend in the core charging business rather than ancillary.

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

Congratulations on the quarter. I just wanted to maybe come back to the utilization rate. That seems to be growing, again, at a very rapid pace, which is great. I'm just wondering -- I realized you don't guide this. But just maybe some direction here would be helpful. How should we think about that network throughput throughout the year? I know you touched on seasonality a little bit. But at this rate, should we be thinking of that gigawatt hour to be north of 200 or 215 for the year? In other words, how should we think about the network throughput throughout the rest of this year?

Yes. I mean, look, let me just -- I'll ask Olga just to give you some thoughts about 2024 specifically. But as you can see in the compelling unit economics slide and we talked about in our webinar a few weeks ago, the utilization of the top 15% of our network is already at 41%. Now we're not expecting 41% utilization across our entire network. In fact, we have said that we expect to see utilization in 3 to 5 years in the low 20s. We don't expect anything more than that to get to double-digit returns. And so that's -- maybe that's a way of thinking about utilization in the medium term. It's obviously a combination of utilization and charge rate that delivers throughput per store, which is the [indiscernible] [ Q ] revenue formula. But maybe, Olga, you want to just provide some thoughts from 2024, specifically?

Yes. So as you correctly mentioned, we do not guide to gigawatt hours, but maybe I can give you a little bit of a path to get to there yourself. So we gave color during our last call that we expect eXtend revenue to be roughly 35% of our revenue this year at the midpoint of the range and the range is to $220 million to $270 million. So if you subtract that, right, then the rest of the variability comes from still a prevailing uncertainty of EV sales this year. So as always, it comes from uncertainty on the final number or the throughput number. So if you take our average pricing, which you can derive from our financial statement, you can very easily get a range of gigawatt hours, which we are thinking about for this year.

Okay. I guess that's helpful. So it's then safe to assume maybe a higher -- some more seasonality in Q4 since that's usually the strongest EV quarter? I'm just trying to figure out like, should it be a smooth, gradual number quarter-over-quarter? Or should we account for some seasonality throughout the year?

Yes. So we do expect smooth. However, again, EV sales is something we don't have control on and have -- do not kind of understand exactly how it will play out for the rest of the year. We have an expectation that it will be smooth. But if you think about specific seasonality and driven patterns, then, Bureau of Transportation statistics actually publishes that publicly available data. And you could see how the driving patterns play out between the quarters by using that information. I think it will be actually quite helpful.

We'll take a look at that.

Andres, just as a reminder, EV sales, obviously, is a driver of revenue. But our throughput grew 4 times faster than the growth of EV VIO quarter-over-quarter, which we've talked about for a couple of several quarters at this point. So it's new sales, but it's also share of DC fast charging. It's rideshare growth. It's more affordable vehicles, leading to customers who don't have private driveways charging on public infrastructure. So it's -- our revenue is a function of all of these things combined and we expect to see it grow sequentially over the year.

Yes. And I think it's also a result of the utilization rates of -- the average utilization rates per charger, which is continuing to increase, right, which you mentioned earlier.

Yes.

Okay. Maybe just one last question. And by the way, Olga, sorry, I wish you all the best in your future.

Thank you.

We'll certainly miss you. Maybe one last question for you, I guess, is just on the liquidity. Can you just remind us with the, let's call it, $176 million in liquidity as of Q1, excluding any maybe funding or any external funding, what is the expected run rate with that liquidity on hand? Is that still into -- well into 2025? Or what was the message there?

Correct. We're confirming that still a message. However, I'm not excluding any grants which we will be collecting. It's not necessarily anyways a big driver, but as we discussed at lengths at the previous call, we are -- have applied and have been awarded a variety of different grants across the country from a variety of different programs that are awarded to us. And the collection is just a question of execution and time. And so that is baked into all of our central planning and budgets and whatnot. So when we talk about cash, that is certainly included because that is part of the business model.

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

I wanted to ask about reliability and uptime. How are the trends, I guess, proceeding on your network? And are you a way to quantify the operational benefits from the renewed program that you've been -- started employing last year, but can you quantify what you've seen thus far?

Yes. We see great improvement. And again, Bill, it's -- as we think about the customer experience, uptime is a component of the experience and having led many asset-based businesses in my career. Uptime is a component of the customer experience, which continues to improve. But so does ensuring that the payment process is as fast and quick as possible, making sure that there's a charger available when a customer goes to a site, which is why we're targeting more chargers per site as well as lots -- enormous amount of feedback of customers, [ they ] were faster sites. So we're prioritizing a 350-kilowatt charter. But uptime is certainly improving. Some of the software updates that I talked about earlier in terms of predictive maintenance and sort of diagnostic support are all designed towards improving uptime even more over the course of this year, which leads to a reduction in truck rolls, customer calls and cost in the business. So we feel pretty good about it.

Okay. And then I want to try to talk about gross margin trajectory. I guess taking into account your expectations around utilization, network throughput, how should we think about the gross margin sector based off of what you talked about earlier, time of day, charging price increases? But I guess also potential, I guess, energy rate either increases or at least time-of-day charges? And then to remind us, is there any seasonality for that in terms of how that would flow through on the gross margin line?

Yes. So gross margin we reported over 30% for the Q1. However, in my prepared remarks, I mentioned that we had a $2.5 million of Nissan [ rate ], with recognition, which is typical for Q1, that inflates the margin. So like adjusted gross margin is in the high 20s. And the expectation for the rest of the year is mid to high 20s. So there is a seasonality to that number because we are seeing a [ customer ] of various utilities. And utilities tend to have summer and winter tariffs. And summer is defined in a variety of different ways across different utilities. But it tends to be around the real summer versus around the real winter. And summer tariffs are a little higher than winter. In some cases actually they're quite a bit higher than winter. So you should expect to see a little lower margin over the summer period, picking back up by Q4 to the winter time.

And maybe, Bill, if I could just make sure that we -- when we talk about gross margin, we are talking -- we're always talking about the entire business, both our charging business as well as our -- the non-charging revenue. We have provided disclosure for you to see for yourself margins in our charging business specifically, and they were 15% -- roughly 15% last year. And it's -- sorry, in 2022, up to about 28% in 2023. And this first quarter of 2024, they were in the mid to high 30s, the charging business itself.

Yes. And so let me maybe clarify my answer as well. Business when I quoted the absolute numbers, when I talked about the dynamics, it's related to charging business. When we talk about the dynamics in eXtend business, just to add to what Badar said that you probably see a stable gross margin profile throughout the year versus Q1 and Q4.

And this concludes our question-and-answer session. I will now turn the call back over to CEO, Badar Khan, for some final closing remarks.

Great. Well, look, thank you, everyone, for the call. We had a great -- another great and record quarter. As you heard, we have very compelling unit economics and operating leverage that drives very strong EBITDA in the near term and a growth engine that is generating strong returns for our investors. The change in the competitive landscape that we've talked about, presents even greater opportunities for EVgo to accelerate growth and deliver even stronger returns, taking advantage of the multiple sources of competitive advantage that we now have. And I look forward to providing updates on these competitive advantages in our priorities and progress on subsequent calls. Thanks very much, everyone.

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