EVgo, Inc. (NASDAQ:EVGO) Q1 2024 Earnings Call Transcript May 7, 2024
EVgo, Inc. misses on earnings expectations. Reported EPS is $-0.26909 EPS, expectations were $-0.11. EVgo, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by and welcome to the EVgo First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question. [Operator Instructions] Thank you. I’d now to call over to Heather Davis, Vice President and the Investor Relations. You may begin.
Heather Davis: 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 investor 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 factor section of our most recent annual report on Form 10-K. The company’s SEC filings are available on the investor 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 investor section of our website. With that, I’ll turn the call over to Badar Khan, EVgo’s CEO.
Badar Khan: 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 announced 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 six 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 August 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 break even in 2025, but with the operating leverage in the business we expect we could have annual adjusted EBITDA of $200 million in three to five 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. If Tesla’s decision to halt further growth of charging stations was designed to allow them to focus on their automotive business and particularly more affordable vehicles then this will be a positive for EV adoption. We know from experience both here in the U.S. as well as in other countries that affordability is a key driver of mass adoption. Companies like EVgo are now adding public charging stations at a pace that didn’t exist when Tesla began their supercharger business. In fact, I expect capital will be more interested in participating in the space in this new competitive context allowing companies like EVgo to plug the gap left behind and accelerate their charging station growth.
We added over 900 stalls last year most of which were state-of-the-art ultra-fast 350 kilowatt stations faster than Tesla’s 250 kilowatt supercharger network. We’re excited to be able to add next connectors to our chargers later this year and welcome more Tesla drivers to our network as well as help site hosts that have been far along the process of adding new DC fast charging stations and of course offer employment to as many talented employees as we can. As we’ve discussed in our last two calls, we see very strong unit economics in our business and expect to see that continue for the foreseeable future as EV demand exceeds supply of charging stations. Now turning back to our earnings this past quarter. We had a great first quarter in 2024 with throughput near a tripling year-over-year and while revenues grew just over two-fold revenues from the owned and operated charging network grew faster.
We grew our operational stalls by 38% and are on track to add 800 to 900 new owned and operated stalls this year. Customer accounts continue to grow faster than VIO growth in the first quarter and we were just under one million at the end of the quarter. We continue to see clear evidence of operating leverage that we’ve talked about in detail in our last two calls with both expanding adjusted gross margins especially in our owned and operated business and in adjusted G&A translating into strong bottom line improvement year-over-year. EVgo’s model is unique in that we own and operate DC fast charging stations where customers are going about their lives. Our growing network of over 1,000 locations is within a 10-mile drive for over 145 million Americans, and we have a network plan and strategic site hosts that allow EVgo to continue our rapid expansion serving more EV drivers.
Demand for EVs especially amongst non-Tesla brands remained strong this quarter with new BEV sales up almost 30% year-over-year. This past quarter we saw especially strong sales growth from Ford, Rivian, Hyundai and Kia. More affordable EV models are coming supporting the growth of DC fast charging as these models tend to attract a higher share of customers without access to home charging. It’s also worth remembering that the number of BEVs sold this quarter is roughly equal to what was sold in all of 2020. Although non-Tesla vehicles account for the vast majority of our network throughput today, we expect to start adding max connectors to our chargers later this year and given our locations tend to be closer to where EV drivers live and go about their daily lives and our network is increasing the ultra-fast 350 kilowatt chargers versus Tesla’s 250 kilowatt superchargers and we offer convenient customer features like auto charge plus.
We look forward to welcoming more Tesla vehicles onto our network. As we discussed in our financial webinar a few weeks ago, because of our proprietary network planning resulting in carefully selected site locations and the conservative underwriting process we have very compelling unit economics. We reached a level of scale in kilowatt hours per stall that enabled us to generate positive annual cash flows on a per stall basis by the end of last year and in Q4, 2023 the top 15% of our stalls were generating over $30,000 per stall on an annual basis. As a reminder throughput is the product of charge rate and utilization multiplied by 24 hours. Charge rate is a speed with which EVs take energy into the car and utilization is the percentage of time an individual stall has been utilized.
Over the past two years we have seen very strong increases in both utilization and charge rate resulting in near quadrupling in daily throughput per stall. In three to five years time we expect to have around 7,000 stalls and at that point we would expect cash flow per stall across the whole network to be around $37,500 per stall annually driven mostly by increased charge rates and a conservative utilization assumption and a level of throughput per stall already achieved by the leading edge of our network today. This level of annual cash flow provides a very strong return when considering we’re expecting around $96,000 net CapEx per stall for 2024 vintage stalls and that’s before any CapEx reductions we would expect to see over time some of which I will talk about later on this call.
As we’ve described in our prior two calls EVgo has significant operating leverage where around 40% of our cost of sales in charging network gross margin is fixed per stall and around 70% of adjusted GN&A is fixed. Across our existing site host partners we’ve identified approximately 10,000 stalls that currently pencil to our double digit return expectations, but we’ve assumed here that we will continue stall growth at the 800 to 900 new stalls per year that we’re currently growing at. We’re making good progress in securing financing that allows us to grow at least at that rate which I’ll cover later. Taking the estimates from the prior slide and assuming 7,000 stalls, our own developer network would generate significant contribution dollars that falls straight to the bottom line once fixed GN&A costs have been covered.
And taking those same estimates we expect the roughly $70 million of fixed costs to be covered by full year 2025. And therefore a scale of 7,000 stalls in three to five years time the company would be generating around $200 million in adjusted EBITDA annually with very significant continued growth beyond that. Of course this is prior to the contribution of any extend or ancillary and tech-enabled services. Not only does our business benefit from such strong operating leverage, but we also benefit from a significant tailwind in the form of rising charge rates. As we have said before, the charge rate on our network is a function of the speed that batteries can be charged and the average power rating of EVgo chargers on our network both are rising.
Vehicles sold today have significantly higher charge rates than the average charge rates of all BEVs on the roads, which will include many older vehicles with lower charge rates. In fact over 8% of all BEVs sold today have charge rates over 50 kilowatts and over 50% are over 90 kilowatts. We conservatively assume battery electric vehicles are sold using the 2023 sales mix with no improvements to either vehicle mix or battery technology and that represents roughly 70% of the assumed increase in charge rate from 43 to 80 kilowatts across our network in three to five years time. EVgo continues to add mostly 350 kilowatt chargers to our network and today nearly 40% of our network is 350 kilowatts versus 22% a year ago. Therefore the average mix of our charger network also increases over time and contributes the other 30% of the assumed growth in network charge rate.
The combination of the two means charge rates are expected to improve significantly benefiting the company. Higher charge rates means the same kilowatt hours can be dispensed over much less time, meaning we realize the same return with lower utilization. Higher charge rates drive three sources of upside that we are not assuming. First higher charge rates could drive up EV adoption because customers favor faster charging times, higher EV adoption drives up utilization. Second higher charge rates could actually drive up the share of DC fast charging, because customers are able to charge their cars for the same number of miles much faster leading customers to become more confident in on the go public charging and less concerned with charging at home.
Therefore higher charge rates could lead to higher utilization and thus even higher returns per store. If we had the same utilization in three to five years time as the top 15% of our stores today with 80 kilowatt charge rates, we would double the cash flow per store to over $75,000 annually. And third higher charge rates translate into much improved CapEx efficiency because it allows a smaller number of chargers for the same kilowatt hours dispensed. Again, we have not assumed any of these upsides nor any improvements in battery technology nor improvements to the mix of new vehicle sales in our expected economics in three to five years time. Let’s now turn to our four key priorities over the next year or so. First and as you’ve heard a lot on prior earnings calls, we remain focused on improving the customer experience.
Second an area we will discuss further in future calls are the steps we are taking to improve efficiency in the business above and beyond the operating leverage we’ve talked about on the past two calls. Third, another area we will discuss more in future calls are the initiatives we are now putting in place to ensure we are attracting and retaining a greater number of higher value customers on our network. And finally, we will provide a little more detail on progress on securing financing to get to free cash flow break even. A customer experience we know that there are four things that customers value the most. First, having lots of stalls at a site so they never have to wait for a charge, second, having high power chargers available so they can fuel up quickly.
Third, having a reliable solution that works right on the first try, and fourth, a hassle free payment process where customers just plug the connector in and the payment is processed automatically. Over the past quarter we made progress on each of these key metrics. We continue to deploy mostly six stalls per site and so the percentage of sites with six stalls or more continues to rise, and we’re aiming for around 20% by the end of this year. We’re mostly also only deploying 350 kilowatt chargers now and so the percentage of stalls with 350 kilowatt chargers have nearly doubled year-over-year and we expect that to be close to 50% by the end of this year. One and Done also continues to rise and we expect another step up in performance in Q4 when we release a key software update.
And finally, the percentage of sessions initiated with Autocharge+ has also increased significantly and now that more than 50 models are part of this program we expect to see continued growth in this metric during 2024. We believe the benefit of these improvements will ultimately result in customers gaining further confidence in public charging driving up utilization and throughput on our network. As EVgo continues to scale rapidly we’ve begun to turn our attention to identifying and delivering efficiencies not just in operating costs but also in the capital costs of the chargers. In November last year we began prefabrication of stations which is expected to result in an average of 15% off the construction costs of a station at eligible sites and also to reduce station installation timelines by as much as 50%.
We expect over a third of stalls operationalized in 2025 to benefit from this approach and we continue to grow this over time. Our core owned and operated business has very compelling unit economics and enormous growth potential. In January of this year we streamlined and refocused certain teams to support near-term growth efforts in this core area. This strategy is already beginning to show in our financial results. In addition over the course of this year we began implementing multiple upgrades to our charge point management system including releases that allow for predictive maintenance and automated diagnostics capabilities that will directly lead to fewer truck rolls, fewer customer calls and faster customer issue resolution. Call center costs are a sizable portion of our sustaining G&A and are expected to decline this year as we complete the offshoring of around 90% of our core volume which is anticipated in Q3 this year.
The combination of all these efforts is expected to lower our sustaining G&A per stall run rate by around 15% by the end of this year. On the CapEx side in addition to the prefab aluminum skids for station construction we began last year, we’re implementing a series of incremental improvements including a transition from copper to aluminum conductors, multi-sourcing switch gear and various other EPC improvements that collectively aim to deliver around a 10% reduction in operationalized charge or cost per stall for 2025 vintage stalls. We’re also engaged in exploring a joint development of next generation charging architecture with an industry leading partner that aims to lower CapEx per stall by as much as 30% and a step change in customer experience due to a customer focused design and improved firmware with first deployments expected in the second half of 2026.
This level of improvement in CapEx per stall could improve our IRRs by at least seven percentage points. EVgo have had success in growing our recurring customer base through B2B relationships like our OEM charging credit programs as well as our rideshare programs and together with our subscription plans these programs account for over half of our throughput today. In other words, over half of our throughput comes from higher usage relatively predictable customer segments that represent stickier kilowatt hours. We reached almost a million customer accounts at the end of the quarter, a significant milestone of EVgo, underscoring the quality of the EVgo network. We believe our scale and position among customers is a competitive advantage that allows us to target and attract more higher value retail customers as well as increase the value of existing customer relationships.
To that end we had a new EVP of growth Scott Levitan earlier this year who brings a wealth of experience and track record in exactly these activities from companies like Google, McCurry and Phillips Electronics. We started executing segment specific marketing campaigns using low cost methods to identify, attract and retain customers who are most likely to be attracted by our convenient charging network close to where they live, work and go about their lives. We’ve also begun piloting new automated demand-based dynamic pricing that is now live across the portion of the network with a phased expansion planned during the course of this year. And in Q2 this year these efforts will be significantly enhanced when we expect to go live with a modernized customer data platform.
All of these efforts are expected to not just ensure we continue to grow our customer base at a faster pace than VIO growth, but also increase the throughput and average unit margins per customer. Our remaining key priority in the near term is to secure additional funding that allows us to reach a level of scale where we are self-financing but also accelerates the rate of new stalls operationalized per year from the 800 to 900 we are expecting to add this year. We plan to build on the track record already established with successful grant collections in prior years, a successful partnership with GM and the follow-on offering we completed in May last year. We continue to have substantial additional capacity under the ATM program we launched in November 2022 and we believe we’re also making progress in pursuing non-dilutive financing options.
As we’ve discussed, we expect around 40% of 2024 vintage CapEx to be offset from grants, OEM payments and incentives including executing on our first 30c transaction over the next few months. That provides us with sufficient capital to continue our CapEx plans well into 2025. We continue to be pleased with the dialogue we’re engaged in with the DOE loan program office for a loan under the Title 17 clean energy financing program. We believe we have a high quality loan application that addresses the need for more public charging infrastructure built out of scale across the U.S. While we have not disclosed the quantum of loan we are seeking, I can advise that if we are successful we believe it will be sufficient to not only expedite our journey to self-financing but also meaningfully accelerate the annual rate of store growth.
Given the year in economics we’ve disclosed we are now also concurrently engaged in multiple potential options for further commercial non-dilutive financing that could be contemplated alongside the DOE loan. Indeed spurring commercial bank financing for new asset classes is an intended goal of the DOE loan program office. I’ll now hand over the call to Olga who runs through our strong financial performance for the first quarter of this year.
Olga Shevorenkova: 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 six 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 past forward. We have a well planned transition in place, as Badar mentioned, and a deep bench 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 a 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 the 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 stalls in Q1, including the eXtend. Total stalls in operation were approximately 3,240 at the end of March 2024, including 130 EVgo eXtend stalls, increasing 38% from the end of March 2026.
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 continued to grow, reaching over 53 gigawatt hours and nearly tripled year-over-year. And again, grew over four times faster than the growth in VIO. I would like to reiterate what drives this growth. First and foremost, EV adoption continues, and as Badar has just mentioned, non-Tesla EV sales, which is the market EVgo primarily addresses today, increased 29% year-over-year in the first quarter. Second, EV buyers are shifting from early to mass adopters with a higher portion of multi-unit dwellers.
Third, EV vehicle miles traveled is increasing nearing parity with internal combustion engine vehicles. Fourth, rapid growth in rideshare, and finally, heavier, less efficient EV models. As a result, utilization averaged approximately 19% across the network in the first quarter of 2024. 53% of our stalls had utilization greater than 15%. Over 40% of our sales had utilization greater than 20%. And over 20% of our stalls had utilization greater than 30%. As I touched on earlier, revenue grew 118% in the first quarter of 2024 to $55.2 million. Adjusted growth profit was $17.3 million in the first quarter of 2024, up from $6.4 million in the first quarter of 2023. Adjusted growth margin was 31.3% in the first quarter of 2024. Q1 revenue usually includes breakage related to our Nissan contract.
In Q1 2024, breakage revenue was roughly $2.5 million. When removing it, adjusted growth margin was 28% in Q1, which is more in line with our expectations of mid to high 20s for the rest of 2024. When you compare this adjusted number to a similarly adjusted number from Q1 2023, we still see an increase of 11 percentage points from 16.8% in the first quarter of 2023, demonstrating the leverage effect of throughput and corresponding revenue growth on the stall dependent components of cost of sales. Adjusted G&A as a percentage of revenue improved significantly from 104.6% in the first quarter of 2023 to 44.4% in Q1 of this year, demonstrating the leverage effect from our G&A. Adjusted G&A went from $26.5 million in Q1 2023 to $24.5 million in Q1 2024, clearly illustrating our focus on lean operations and path to profitability.
Adjusted EBITDA was negative $7.2 million in the first quarter of 2024, a $12.9 million improvement versus negative $20.1 million in the first quarter of 2023. Cash, cash equivalents and restricted cash was $175.5 million as of March 31, 2024. Cash use in operations was $14.1 million in the first quarter narrowing from the first quarter of 2023. Capital expenditures were $21.1 million in the first quarter. Capital expenditures net of capital offsets was $13.6 million in Q1 of 2024. Now turning to reconfirming our 2024 guidance. EVgo continue to expect full year 2024 revenue to be in the range of $220 million to $270 million and adjusted EBITDA to be in the range of negative $48 million to negative $30 million. We continue to expect capital expenditures net of capital offsets to be in the $95 million to $110 million range, with the main use of CapEx to 800 to 900 new EVgo own stalls this year.
We’re as confident as ever that EVgo is on a clear path to an important inflection point in our business, hitting adjusted EBITDA breakeven. EVgo expects to be adjusted EBITDA breakeven for the full year of 2025. This is based on the expectation that electric vehicles and operations will continue to grow and that EVgo will continue to expand its network and realize operational efficiencies. We look forward to sharing our progress in 2024 with you throughout the year. Operator, we can turn the call over to questions.
Operator: Thank you. We will now begin the question and answer session. [Operator Instructions] Your first question comes from a line of Gabe Daoud from TD Cowen. Your line is open.
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