Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EVgo Inc (EVGO, Financial) achieved record revenues of over $66 million, with charging network revenues growing 2.4 times compared to last year.
- The company has seen seven consecutive quarters of double-digit growth in charging revenue and six consecutive quarters of triple-digit year-over-year growth in network throughput.
- EVgo Inc (EVGO) surpassed 1 million customer accounts, reflecting strong customer acquisition and growth.
- The company has raised the midpoint of its revenue guidance for the full year and narrowed its adjusted EBITDA guidance, indicating confidence in its financial outlook.
- EVgo Inc (EVGO) is on track to add 800 to 900 new owned and operated stores this year, expanding its network significantly.
Negative Points
- Despite strong revenue growth, EVgo Inc (EVGO) reported an adjusted EBITDA of negative $8 million for the second quarter of 2024.
- The company faces seasonality in its charging network margin, with higher electricity tariffs in the summer impacting profitability.
- EVgo Inc (EVGO) expects to incur additional costs in the second half of the year for the development of next-generation architecture and financial systems to support project financing.
- The company is still awaiting finalized 30C guidance from the treasury, which could impact its financing plans.
- There is uncertainty regarding the impact of potential changes in government policy on EVgo Inc (EVGO)'s business, particularly related to the DOE loan program.
Q & A Highlights
Q: Can you share what portion of the revenue today is a result of charging Tesla vehicles and how you are thinking about the uptake from the access to being able to charge more Tesla vehicles with the max cable?
A: (Badar Khan, CEO) Tesla drivers currently represent a minimal share on our network. The introduction of max cables, which we expect to start deploying towards the end of this year, will allow us to attract more Tesla drivers, representing a significant upside given that Tesla vehicles make up roughly 60% of the current VIO.
Q: Can you provide more details on the next-generation charging infrastructure you are working on and the expected improvements?
A: (Badar Khan, CEO) We are leveraging our scale and customer insights to design a new site configuration and equipment architecture, including a distributed bus architecture and improved dispenser design. This effort, supported by new talent from Tesla, aims to lower gross CapEx per store by 30% and enhance the customer experience. We expect to have prototypes by the second half of 2026.
Q: Can you unpack your expectations around pricing, power prices, and other factors driving the adjusted gross margin target?
A: (Badar Khan, CEO) We assume current unit prices and costs will remain stable over the next three to five years. The demand for charging infrastructure exceeds supply, and we are introducing sophisticated pricing strategies, including dynamic demand-based pricing. The main drivers for margin improvement are increasing charge rates and utilization.
Q: How much timing risk is there for securing DOE loan program funding before the election, and what is your current thinking on policy support?
A: (Badar Khan, CEO) We believe our business will thrive under any administration, as EV adoption is strong across both red and blue states. We are confident in securing a conditional commitment from the DOE loan program this year, which will support our growth regardless of the election outcome.
Q: Can you explain the impact of higher electricity rates on your charging network gross margins and how you manage to pass through these costs?
A: (Badar Khan, CEO) We have not increased prices; the expanding charging margin is due to operating leverage. As utilization increases, fixed costs are spread over more usage, improving margins. We also benefit from strong underlying demand for fast charging infrastructure.
Q: How does the 20% average utilization rate for EVgo compare to the industry average, and what drives this utilization?
A: (Badar Khan, CEO) While exact industry comparisons are difficult, we believe our utilization rates are higher due to sophisticated site selection, marketing efforts, and pricing strategies. Our urban and suburban locations also contribute to higher utilization compared to highway locations.
Q: What are the key factors driving the higher capital offsets for the 2024 vintage stalls compared to 2023?
A: (Stephanie Lee, Interim CFO) The higher offsets are due to a greater mix of GM-funded stalls and successful grant funding efforts. We have focused on maximizing grant funding and selecting sites with better cash flow profiles, resulting in higher capital offsets for the 2024 vintage.
Q: How do you plan to manage the seasonality in charging network gross margins, and what are the expected trends for the rest of the year?
A: (Stephanie Lee, Interim CFO) Q3 typically has the highest electricity tariffs, leading to lower margins. We expect margins to improve in Q4. We also had some one-time adjustments in Q1 and Q2, which impacted margins. Going forward, we will focus on managing seasonal impacts and improving operational efficiencies.
Q: How are conversations with GM and other OEMs progressing regarding partnerships and infrastructure development?
A: (Badar Khan, CEO) Our partnership with GM is strong, and we have seen positive results from GM-funded stalls. We are also in discussions with nearly a dozen other OEMs for various partnerships, including infrastructure development, charging credits, and data integration.
Q: What is your strategy for increasing the pace of stall growth, and how do you view competition for site selection?
A: (Badar Khan, CEO) We have strong relationships with site hosts and sophisticated site selection algorithms. We aim to accelerate stall growth through financing efforts, potentially doubling our current growth rate. Our goal is to continue deploying high-return stores while managing competition effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
