What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-10 compared with 2022-05-13 · 222 added, 106 removed, 327 unchanged (50% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with EVgo’s unaudited condensed consolidated financial statements and related notes thereto as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021, included elsewhere in this Quarterly Report on Form 10-Q.

The following discussion and analysis should be read in conjunction with EVgo’s unaudited condensed consolidated financial statements and related notes thereto as of June 30, 2022 and December 31, 2021 and for the three and six months ended June 30, 2022 and 2021, included elsewhere in this Quarterly Report.

In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause EVgo’s actual results to differ materially from management’s expectations due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” in this Quarterly Report.

Factors which could cause such differences are discussed therein.

EVgo owns and operates the U.S.’ largest public DC fast charging network and the first to be powered by 100% renewable electricity.

EVgo owns and operates the U.S.’ largest public DC fast charging network and the first to be powered by 100% renewable electricity through the purchase of renewable energy credits.

Founded in 2010 and a key leader in fast charging, EVgo’s network of charging stations provides EV charging infrastructure to consumers and businesses.

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EVgo sells electricity directly to drivers who access EVgo’s publicly available networked chargers.

Various pricing plans exist for customers, and drivers have the choice to charge as members (with monthly fees and reduced per minute or kWh pricing), through a subscription service or as non-members.

Various pricing plans exist for customers, and drivers have the choice to charge as members (with monthly fees and reduced per minute or Kilowatt-hour (“kWh”) pricing), through a subscription service or as non-members.

Drivers locate the chargers through EVgo’s mobile application, their vehicle’s in-dash navigation system or third-party databases that license charger-location information from EVgo.

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Recent Developments

COVID-19 Outbreak

The global outbreak of COVID-19 has resulted in significant volatility in the global and domestic economies, changes in consumer and business behavior, market downturns and restrictions on business and individual activities, which has led to overall reduced economic activity.

Geopolitical and Macroeconomic Environment

During the last several years, the global economy has experienced disruption and sustained volatility from a number of factors.

In particular, the global outbreak of COVID-19 resulted in significant volatility in the global and domestic economies, changes in consumer and business behavior, market downturns and restrictions on business and individual activities, which led to overall reduced economic activity.

The COVID-19 pandemic impacted EVgo’s operations through reduced network throughput, construction delays and supply chain and shipping constraints.

EVgo also experienced delays in its Site Host negotiations as they devoted more time to day-to-day operations and employee health and safety.

Finally, for some contractual commitments, EVgo is

required to adhere to a construction schedule over specific timeframes.

Finally, for some contractual commitments, EVgo is required to adhere to a construction schedule over specific timeframes.

Those timelines were impacted due to delays associated with COVID-19, and it is possible that the ongoing pandemic could continue to impact these timelines in the future.

How COVID-19 will affect EVgo’s future business results is unclear.

While the disruption is expected to be temporary, there is considerable uncertainty around the duration and magnitude of this disruption.

Development and commissioning lead times may be extended as a result of the measures taken by the state and local governments to mitigate the spread of COVID-19.

The further extent of the financial impact and duration cannot be reasonably estimated at this time.

More recently, Russia’s military invasion of Ukraine and the subsequent sanctions imposed on Russia, Belarus, the so called Donetsk People’s Republic and the so called Luhansk People’s Republic have led to, and will likely continue to lead to, geopolitical instability, market uncertainty and supply disruptions.

Finally, rising inflation has increased operating costs for many businesses and, together with slowing economic growth and fear of a recession, has led governments to change monetary policy in response.

The current economic environment remains uncertain and the extent to which our operating and financial results for future periods will be impacted by the COVID-19 pandemic, the ongoing conflict in Ukraine, increasing inflation, government efforts to reduce inflation and any recession will largely depend on future developments, which are highly uncertain and cannot be reasonably estimated at this time.

Government EV Initiatives

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In November 2021, Congress passed and the President signed the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law.

Among other provisions, this legislation included up to $7.5 billion in funding for electric vehicle charging infrastructure through the Department of Transportation.

Among other provisions, this legislation included up to $7.5 billion in funding for EV charging infrastructure through the Department of Transportation.

federal government offers a tax credit for qualified plug-in EVs;

the minimum credit is $2,500, and the maximum credit is $7,500, depending on vehicle weight and battery capacity.

(“Tesla”), but legislation under consideration in Congress, if enacted as currently proposed, would alleviate the manufacturer cap and expand the credit both for used and new electric vehicles.

(“Tesla”), but legislation under consideration in Congress, if enacted as currently proposed, would alleviate the manufacturer cap and expand the credit both for used and new EVs.

However, it is uncertain whether such legislation will be enacted, and, if enacted, whether such legislation will be enacted as proposed.

In July 2022, the Department of Energy announced funding of $96 million to support the decarbonization of the domestic transportation system, to include the expansion of EV charging accessibility and the development of electric drive components and materials to aid both EV efficiency and affordability.

States including California, Colorado, Delaware, Massachusetts, New Jersey and New York also offer various rebates, grants and tax credits to incentivize both EV and EVSE purchases.

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Operating margin is operating loss as a percentage of revenue.

Interest Expense

Interest expense consists of amounts paid upon the purchase of debt securities.

Interest Expense, Related Party

Interest expense, related party consists primarily of interest due under the Secured Grid Demand Promissory Note, dated January 16, 2020, by and between EVgo Holdco and EVgo Holdings (the “LS Power Note”).

Interest expense, related party consists primarily of interest due under the Secured Grid Demand Promissory Note, dated January 16, 2020, by and between EVgo Services and EVgo Holdings (the “LS Power Note”).

Pursuant to the terms of the Business Combination Agreement, the LS Power Note was cancelled immediately prior to the CRIS Close Date and deemed to be an equity contribution to the Company, immediately followed by a contribution of such equity interest by EVgo Holdings to EVgo Holdco.

Other Income, Net

Other income, net, consists primarily of unrealized gains and losses on marketable securities.

Interest Income

Interest income consists primarily of the interest earned on cash, cash equivalents and debt securities.

Other (Expense) Income, Net

Other (expense) income, net, consists primarily of unrealized gains and losses on marketable securities.

Change in Fair Values of Warrant and Earnout Liabilities

The change in the fair values of the warrant and earnout liabilities represents the gain (loss) on the adjustments to mark the warrant and earnout liabilities to fair value for each reporting period.

The change in the fair values of the warrant and earnout liabilities represents the gain (loss) resulting from adjusting warrant and earnout liabilities to fair value for each reporting period.

EVgo’s provision for income taxes consists primarily of income taxes related to federal and state jurisdictions where business is conducted related to the Company’s ownership in EVgo OpCo.

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Network Throughput

Network throughput represents the total amount of GWh that was consumed by EVs using chargers and charging stations on EVgo’s network.

Network throughput represents the total amount of Gigawatt hours (“GWh”) that was consumed by EVs using chargers and charging stations on EVgo’s network.

EVgo typically monitors GWh sales by business line, customer, and customer class.

EVgo believes monitoring of component trends and contributions is the appropriate way to monitor and measure business-related health.

Number of DC Stalls on EVgo’s Network

Number of DC Stalls on EVgo’s Network and Customer Accounts

Number of DC stalls represents the total number of DC stalls that EVgo has operational on its network.

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all chargers at such a site are counted as two stalls per one charger.

The following table represented network throughput and number of DC stalls on EVgo’s network:

The following table represented network throughput and the number of DC stalls on EVgo’s network:

Network throughput (GWh) for the three months ended

Network throughput (GWh) for the six months ended

Number of DC stalls on EVgo network as of

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Additionally, as demand increases, the supply must keep pace for adoption to continue to accelerate at a rapid pace.

services for EVs; consumers’ perception about the convenience, speed and cost of EV charging; volatility in the price of gasoline and diesel;

Factors impacting the adoption of EVs include perceptions about EV features, quality, safety, performance and cost; perceptions about the limited range over which EVs may be driven on a single battery charge; availability of services for EVs; consumers’ perception about the convenience, speed and cost of EV charging; volatility in the price of gasoline and diesel;

EV supply chain disruptions including but not limited to availability of certain components (e.g.

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availability of batteries, and battery materials;

availability, cost and desirability of other alternative fuel vehicles, plug-in hybrid electric vehicles and high fuel-economy gasoline and diesel-powered vehicles;

availability, cost and desirability of other alternative fuel vehicles, plug-in hybrid EVs and high fuel-economy gasoline and diesel-powered vehicles;

and increases in fuel efficiency.

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The credits under Section 30C of the Code expired on December 31, 2021, and thus, are not available going forward for EV charging stations placed in service after such date unless such credits are extended retroactively.

Current legislation proposals include an extension of the credits under Section 30C of the Code as of and after December 31, 2021.

In addition, in November 2021, Congress passed and the President signed the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law, which included up to $7.5 billion in funding for electric vehicle charging infrastructure through the Department of Transportation.

Current legislation under consideration in Congress includes an extension of the credits under Section 30C of the Code as of and after December 31, 2021 as well as an expansion of the credit starting in 2023 going forward to 2032.

In addition, in November 2021, Congress passed and the President signed the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law, which included up to $7.5 billion in funding for EV charging infrastructure through the Department of Transportation.

federal government offers a tax credit for qualified plug-in EVs;

the minimum credit is $2,500 and the maximum credit is $7,500, depending on vehicle weight and battery capacity.

These credits will begin to phase out when the vehicle manufacturer reaches certain production levels, and such credit has already been completely phased out for EVs manufactured by GM and Tesla, but legislation under consideration in Congress, if enacted as currently proposed, would alleviate the manufacturer cap and expand the credit both for used and new electric vehicles.

Various states also offer various rebates, grants and tax credits to incentivize both EV and EVSE purchases and have adopted or proposed mandates for EVs as well

as mandates that aim to reduce greenhouse gas emissions through electrification such as California’s Clean Miles Standard and the ACT rule.

These credits will begin to phase out when the vehicle manufacturer reaches certain production levels (with several manufacturers, such as Toyota, hitting such production levels this year or in the near future), and such credit has already been completely phased out for EVs manufactured by GM and Tesla, but legislation under consideration in Congress, if enacted as currently proposed, would alleviate the manufacturer cap and expand the credit both for used and new EVs.

However, it is uncertain whether such legislation will be enacted, and if enacted, whether such legislation will be enacted as proposed.

Various states also offer various rebates, grants and tax credits to incentivize both EV and EVSE purchases and have adopted or proposed mandates for EVs as well as mandates that aim to reduce greenhouse gas emissions through electrification such as California’s Clean Miles Standard and the ACT rule.

There can be no assurance that any of these programs will have sufficient availability or be extended, or if extended, that such extension will be effective retroactively or that these programs will not be otherwise reduced.

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Results of Operations

Three Months Ended March 31, 2022 and 2021

The table below presents EVgo’s results of operations for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Three Months Ended June 30, 2022 and 2021

The table below presents EVgo’s results of operations for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

(dollars in thousands)

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Operating loss

Interest expense

Interest expense, related party

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Change in fair value of warrant liability

Income (loss) before income tax expense

Income tax expense

Net income (loss)

net income (loss) attributable to redeemable noncontrolling interest

Net income attributable to Class A common stockholders

Operating margin

Network throughput (GWh)

Number of DC stalls

The table below presents EVgo’s revenue for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

(dollars in thousands)

Charging revenue, retail

Charging revenue, OEM

Charging revenue, commercial

Network revenue, OEM

Ancillary revenue

Regulatory credit sales

Total revenue

Total revenue for the three months ended June 30, 2022 increased $4.3 million, or 90%, to $9.1 million compared to $4.8 million for the three months ended June 30, 2021.

As further discussed below, the increase in revenue during the three months ended June 30, 2022 was primarily due to a 76% increase in retail charging revenue as a result of the increased throughput, as well as a 215% increase in regulatory credit sales.

Charging Revenue, Retail

Charging revenue, retail, for the three months ended June 30, 2022 increased $1.9 million, or 76%, to $4.4 million compared to $2.5 million for the three months ended June 30, 2021.

Period-over-period growth was due to an overall increase in usage and subscription fees driven primarily by a growing number of customers and increased charging volume as well as the ongoing recovery from COVID-19.

Charging Revenue, OEM

Charging revenue, OEM, for the three months ended June 30, 2022 stayed flat at $0.2 million compared to the three months ended June 30, 2021 as there was no material change to agreements and limited pick up of driver activity.

Charging Revenue, Commercial

Charging revenue, commercial, for the three months ended June 30, 2022 increased $0.1 million, or 20%, to $0.7 million compared to $0.5 million for the three months ended June 30, 2021.

The increase was attributable to new fleet contracts that became effective towards the end of the three months ended June 30, 2021, increased charging volume by EVgo’s public fleet customers as well as the ongoing recovery from COVID-19.

Network Revenue, OEM

Network revenue, OEM, for the three months ended June 30, 2022 increased $0.6 million, or 223%, to $0.9 million compared to $0.3 million for the three months ended June 30, 2021 primarily due to increased membership fees, and breakage of prepaid charging credits as a result of increased membership activity and increased joint marketing activity under the OEM agreements.

Ancillary Revenue

Ancillary revenue for the three months ended June 30, 2022 increased $0.2 million, or 30%, to $0.8 million compared to $0.6 million for the three months ended June 30, 2021.

The increase was primarily due to the acquisition of PlugShare and subsequent inclusion of PlugShare’s revenues in ancillary revenue partially offset by reduced equipment sales revenue.

Regulatory Credit Sales

Regulatory credit sales for the three months ended June 30, 2022 increased $1.5 million, or 215%, to $2.1 million compared to $0.7 million for the three months ended June 30, 2021.

The period-over-period increase was primarily due to a new contract with a buyer who will purchase all of EVgo’s regulatory credits on an ongoing basis as well as the sales of credits generated in prior fiscal year, partially offset by the decrease in price per credit.

Cost of Sales

Cost of Revenue (Exclusive of Depreciation and Amortization Shown Separately Below)

Cost of revenue for the three months ended June 30, 2022 increased $2.0 million, or 52%, to $5.7 million compared to $3.8 million for the three months ended June 30, 2021.

The increase in cost of revenues was due to an increase of $1.3 million in non-energy costs due to an increased stall count and $0.8 million in increased energy and other variable costs due to increased throughput, partially offset by lower cost of equipment sales.

Depreciation and Amortization

Depreciation and amortization for the three months ended June 30, 2022 increased $1.4 million, or 52%, to $4.1 million compared to $2.7 million for the three months ended June 30, 2021 due to growth in EVgo’s asset base.

Gross Loss and Gross Margin

Gross loss for the three months ended June 30, 2022 improved $0.9 million, or 56%, to $0.7 million compared to $1.7 million for the three months ended June 30, 2021.

Gross margin for the three months ended June 30, 2022 improved 26.8% to negative 8.2% compared to negative 35.0% for the three months ended June 30, 2021 due to the improved leveraging of both energy and non-energy related costs due to higher revenue, as well as improved ancillary margin and higher regulatory credit sales.

Operating Expenses

General and Administrative

General and administrative costs for the three months ended June 30, 2022 increased $18.8 million, or 141%, to $32.2 million compared to $13.3 million for the three months ended June 30, 2021.

The difference was driven by an $11.7 million increase in payroll expenses due to higher headcount and higher share-based compensation, a $1.8 million increase in loss on fixed asset disposals, a $1.6 million increase in insurance expenses, a $2.1 million increase in legal service and professional service expenses, as well as a $1.4 million increase in software expenses.

Depreciation, Amortization and Accretion

Depreciation, amortization and accretion expenses increased by $1.6 million, or 62%, and was $4.1 million and $2.5 million for the three months ended June 30, 2022 and 2021.

The increase was primarily due to higher intangible asset amortization related to the PlugShare acquisition and software amortization.

Operating Loss and Operating Margin

During the three months ended June 30, 2022, EVgo had an operating loss of $37.1 million, an increase of $19.5 million, or 111%, compared to $17.6 million for the three months ended June 30, 2021.

Operating margin for the three months ended June 30, 2022 decreased to negative 408.3% compared to negative 367.1% for the three months ended June 30, 2021.

The increase in operating loss period-over-period was primarily due to an increase in general and administrative expenses, partially offset by the improvement in gross margin.

Interest Expense

For the three months ended June 30, 2022, interest expense was de minimis.

There was no interest expense for the three months ended June 30, 2021.

Interest Expense, Related Party

There was no interest expense for the three months ended June 30, 2022.

Interest expense for the three months ended June 30, 2021 was $1.0 million.

The decrease was related to conversion of the borrowings under the LS Power Note to equity on the CRIS Close Date.

Interest Income

Interest income for the three months ended June 30, 2022 was $0.6 million.

Interest income for the three months ended June 30, 2021 was de minimis.

The increase was a result of the interest earned on debt securities during the three months ended June 30, 2022.

Other (Expense) Income, Net

Other (expense) income, net, for the three months ended June 30, 2022 decreased by $0.3 million, or 191%, to $0.2 million of other expense, net, compared to $0.2 million of other income, net, for the three months ended June 30, 2021.

The decrease was primarily due to unrealized losses on marketable equity securities.

Changes in Fair Values of Warrant and Earnout Liabilities

The change in the fair values of the warrant and earnout liabilities relates to the liabilities that were assumed in connection with the CRIS Business Combination.

For the three months ended June 30, 2022, there was a $53.6 million gain primarily due to a reduction in the fair values of the liabilities during the second quarter of 2022.

See “Part I, Item 1.

Financial Statements – Note 11 – Fair Value Measurements” for more information.

For the three months ended June 30, 2022 and 2021, EVgo’s provision for income taxes and effective tax rates were de minimis as the current income tax benefit was offset by the change in the valuation allowance.

Net Income (Loss)

Net income for the three months ended June 30, 2022 was $17.0 million, a $35.4 million, or 192%, improvement compared to a net loss of $18.4 million for the three months ended June 30, 2021.

The change to net income was primarily driven by a $53.6 million decrease in the fair value of the warrant and earnout liabilities during the three months ended June 30, 2022, as well as improved gross loss, partially offset by increased general and administrative expenses incurred to support growth, increased depreciation, amortization and accretion expenses incurred due to the PlugShare acquisition and an increased number of chargers in EVgo’s network.

Six Months Ended June 30, 2022 and 2021

The table below presents EVgo’s results of operations for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

(dollars in thousands)

Revenue from related party

Total revenue

Cost of revenue

Depreciation and amortization

General and administrative

Depreciation, amortization and accretion

Operating loss

Interest expense

Interest expense, related party

Interest income

Other (expense) income, net

Change in fair value of earnout liability

Change in fair value of warrant liability

Loss before income tax expense

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Number of DC stalls

The table below presents EVgo’s revenue for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The table below presents EVgo’s revenue for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

(dollars in thousands)

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Total revenue

Total revenue for the three months ended March 31, 2022 increased $3.6 million, or 86%, to $7.7 million compared to $4.1 million for the year ended March 31, 2021.

As further discussed below, the increase in revenue during the three months ended March 31, 2022 was primarily due to a 94% increase in retail charging revenue as well as a 265% increase in ancillary revenue.

Total revenue for the six months ended June 30, 2022 increased $7.9 million, or 88%, to $16.8 million compared to $8.9 million for the six months ended June 30, 2021.

As further discussed below, the increase in revenue during the six months ended June 30, 2022 was primarily due to an 83% increase in retail charging revenue, a 182% increase in regulatory credit sales, as well as a 120% increase in ancillary revenue.

Charging Revenue, Retail

Charging revenue, retail, for the three months ended March 31, 2022 increased $1.7 million, or 94%, to $3.5 million compared to $1.8 million for the three months ended March 31, 2021.

Charging revenue, retail, for the six months ended June 30, 2022 increased $3.6 million, or 83%, to $7.9 million compared to $4.3 million for the six months ended June 30, 2021.

Charging Revenue, OEM

Charging revenue, OEM, for the three months ended March 31, 2022 decreased $0.2 million, or 55%, to $0.2 million compared to $0.3 million for the three months ended March 31, 2021.

The decrease was primarily due to the expiration of the first Nissan Agreement, in which EVgo partnered with Nissan to provide charging services for Nissan EVs.

Charging revenue, OEM, for the six months ended June 30, 2022 decreased $0.1 million, or 29%, to $0.3 million compared to $0.5 million for the six months ended June 30, 2021.

The decrease was primarily driven by the expiration of one of EVgo’s OEM programs.

Charging Revenue, Commercial

Charging revenue, commercial, for the three months ended March 31, 2022 increased $0.2 million, or 44%, to $0.7 million compared to $0.5 million for the three months ended March 31, 2021.

The increase was attributable to new fleet contracts that became effective following the three months ended March 31, 2021, increased charging volume by EVgo’s public fleet customers as well as the ongoing recovery from COVID-19.

Charging revenue, commercial, for the six months ended June 30, 2022 increased $0.3 million, or 31%, to $1.4 million compared to $1.0 million for the six months ended June 30, 2021.

The increase was attributable to new fleet contracts that became effective during 2021, increased charging volumes by the Company’s public fleet customers and also due to the ongoing recovery from COVID-19.

Network Revenue, OEM

Network revenue, OEM, for the three months ended March 31, 2022 stayed flat at $0.5 million compared to the three months ended March 31, 2021 as there were no material changes to agreements with OEMs related to marketing activities, memberships fees and the breakage of prepaid charging credits.

Network revenue, OEM, for the six months ended June 30, 2022 increased $0.6 million, or 71%, to $1.4 million compared to $0.8 million due to increased membership fees, and breakage of prepaid charging credits as a result of increased membership activity and increased joint marketing activity under the OEM agreements.

Ancillary Revenue

Ancillary revenue for the three months ended March 31, 2022 increased $1.1 million, or 265%, to $1.5 million compared to $0.4 million for the three months ended March 31, 2021 ended.

The increase was primarily due to the acquisition of PlugShare and subsequent inclusion of PlugShare’s revenues in ancillary revenue as well as an increase in other revenue including equipment sales.

Ancillary revenue for the six months ended June 30, 2022 increased $1.3 million, or 120%, to $2.3 million compared to $1.0 million for the six months ended June 30, 2021.

The increase was primarily due to the acquisition of PlugShare and subsequent inclusion of PlugShare’s revenues in ancillary revenue, partially offset by reduced equipment sales and engineering, procurement and construction revenue.

Regulatory Credit Sales

Regulatory credits for the three months ended March 31, 2022 increased $0.8 million, or 142%, to $1.4 million compared to $0.6 million for the three months ended March 31, 2021.

The period-over-period increase was primarily due to a new contract with a buyer who will purchase all of EVgo’s regulatory credits on an ongoing basis and, to a lesser degree, higher network throughput during the prior periods in which the regulatory credits were generated – July 2021 to September 2021 and July 2020 to September 2020, respectively, resulting in more regulatory credits that were available for sale.

Network throughput generated during the period from July 2020 to September 2020 was impacted by COVID-19 more compared to network throughput generated during the period from July 2021 to September 2021.

Regulatory credits for the six months ended June 30, 2022 increased $2.3 million, or 182%, to $3.5 million compared to $1.2 million for the six months ended June 30, 2021.

Cost of Sales

Cost of Revenue (Exclusive of Depreciation and Amortization Shown Separately Below)

Cost of revenue for the three months ended March 31, 2022 increased $1.5 million, or 44%, to $4.8 million compared to $3.4 million for the three months ended March 31, 2021.

The increase in cost of revenues was due to an increase of $0.8 million in non-energy costs due to an increased stall count and $0.7 million in increased energy and other variable costs due to increased throughput.

Cost of revenue for the six months ended June 30, 2022 increased $3.5 million, or 49%, to $10.6 million compared to $7.1 million for the six months ended June 30, 2021.

The increase in cost of sales during the six months ended June 30, 2022 was due to an increase of $2.1 million in non-energy costs from an increased stall count, $1.5 million in increased energy and other variable costs due to increased throughput, partially offset by a decrease of $0.3 million in equipment cost of sales and engineering and construction costs.

Depreciation and Amortization

Depreciation and amortization for the three months ended March 31, 2022 increased $1.0 million, or 41%, to $3.5 million compared to $2.4 million for the three months ended March 31, 2021 due to growth in EVgo’s asset base.

Depreciation and amortization for the six months ended June 30, 2022 increased $2.4 million, or 47%, to $7.6 million compared to $5.2 million for the six months ended June 30, 2021 due to a higher stall count.

Gross Loss and Gross Margin

Gross loss for the three months ended March 31, 2022 improved $1.1 million, or 64%, to $0.6 million compared to $1.7 million for the three months ended March 31, 2021.

Gross margin for the three months ended March 31, 2022 improved 33% to negative 7.8% compared to negative 40.6% for the three months ended March 31, 2021 due to the improved leveraging of both energy and non-energy related costs due to higher revenue, as well as improved ancillary margin and higher regulatory credit sales.

Gross loss for the six months ended June 30, 2022 improved by $2.0 million, or 60%, to $1.3 million compared to $3.4 million for the six months ended June 30, 2021.

Gross margin for the six months ended June 30, 2022 improved 29.6% to negative 8.0% compared to negative 37.6% for the six months ended June 30, 2021 due to the improved leveraging of energy and non-energy related costs, increased regulatory credit sales, as well as improved ancillary margin.

Operating Expenses

General and Administrative

General and administrative costs for the three months ended March 31, 2022 increased $13.4 million, or 112%, to $25.4 million compared to $12.0 million for the three months ended March 31, 2021.

The difference was driven by $1.6 million increase in insurance expenses, $1.6 million increase in software expenses, $0.7 million in legal service expenses, $0.3 million increase in professional services, $0.3 million increase in rent expense for non-operational sites, as well as $8.3 million due to increased payroll expenses driven by higher headcount and higher share-based compensation.

General and administrative costs for the six months ended June 30, 2022 increased $32.3 million, or 127%, to $57.6 million compared to $25.3 million for the six months ended June 30, 2021.

The difference was driven by a $19.9 million increase in payroll expenses due to higher headcount and higher share-based compensation, a $3.2 million increase in insurance expenses, a $3.0 million increase in software expenses, a $3.0 million increase in legal service and professional service expenses, as well as a $2.5 million increase in loss on fixed asset disposals.

Depreciation, Amortization and Accretion

Depreciation, amortization and accretion expenses increased by $1.4 million, or 55%, and was $3.9 million and $2.5 million for the three months ended March 31, 2022 and 2021.

The increase was primarily due to higher asset retirement obligation accretion and non-site related depreciation.

Depreciation, amortization and accretion expenses for the six months ended June 30, 2022 increased $3.0 million, or 59%, to $8.0 million compared to $5.1 million for the six months ended June 30, 2021.

The increase was primarily due to higher intangible asset amortization as a result of the PlugShare acquisition and software amortization.

Operating Loss and Operating Margin

During the three months ended March 31, 2022, EVgo had an operating loss of $29.9 million, an increase of $13.7 million, or 84.8%, compared to $16.2 million for the three months ended March 31, 2021.

Operating margin for the three months ended March 31, 2022 improved to negative 388.5% compared to negative 392.1% for the three months ended March 31, 2021.

During the six months ended June 30, 2022, EVgo had an operating loss of $67.0 million, an increase of $33.2 million, or 98%, compared to $33.8 million for the six months ended June 30, 2021.

Operating margin for the six months ended June 30, 2022 decreased to negative 399.2% compared to negative 378.6% for the six months ended June 30, 2021.

The increase in operating loss period-over-period was primarily due to an increase in general and administrative expenses, partially offset by the improvement in gross margin.

While operating loss increased, operating margin improved as a result of better leverage of costs.

Interest Expense

For the six months ended June 30, 2022, interest expense was de minimis.

There was no interest expense for the six months ended June 30, 2021.

Interest Expense, Related Party

Interest expense for the three months ended March 31, 2022 decreased $0.9 million, or 100%, to $0 compared to $0.9 million for the three months ended March 31, 2021.

The decrease was related to conversion of the borrowings under the LS Power Note to equity on the CRIS Close Date.

There was no interest expense for the six months ended June 30, 2022.

For the six months ended June 30, 2021, interest expense was $1.9 million.

The decrease was related to conversion of the borrowings under the LS Power Note that was converted to equity on the CRIS Close Date.

Interest Income

Interest income for the six months ended June 30, 2022 was $0.7 million.

Interest income for the six months ended June 30, 2021 was de minimis.

The increase was a result of the interest earned on investments made in the six months ended June 30, 2022.

Other (Expense) Income, Net

Other (expense) income, net, for the three months ended March 31, 2022 decreased $0.7 million, or 157%, to other expense, net, of $0.3 million compared to other income, net, of $0.5 million for the three months ended March 31, 2021.

The decrease was primarily due to the decrease in unrealized gain on marketable securities.

Other (expense) income, net, for the six months ended June 30, 2022 decreased $1.1 million, or 167%, to $0.4 million of other expense, net, compared to $0.6 million of other income, net, for the six months ended June 30, 2021.

The decrease was primarily due to unrealized losses on marketable equity securities.

Changes in Fair Values of Warrant and Earnout Liabilities

The change in the fair values of the warrant and earnout liabilities were due to the liabilities that were assumed in connection with the CRIS Business Combination.

For the three months ended March 31, 2022, there was a $25.1 million loss primarily due to a change in the fair values of the liabilities during the first quarter of 2022.

For the three months ended March 31, 2022 and 2021, EVgo’s provision for income taxes and effective tax rates were deemed to be de minimis as the current income tax benefit was offset by the change in the valuation allowance.

Net loss for the three months ended March 31, 2022 was $55.3 million, a $38.7 million, or 233%, increase compared to $16.6 million for the three months ended March 31, 2021.

For the six months ended June 30, 2022, there was a $28.5 million gain primarily due to a reduction in the fair values of the liabilities during the first six months of 2022 .

See “Part I, Item 1.

Financial Statements – Note 11 – Fair Value Measurements” for more information.

For the six months ended June 30, 2022 and 2021, EVgo’s provision for income taxes and effective tax rates were de minimis as the current income tax benefit was offset by the change in the valuation allowance.

Net loss for the six months ended June 30, 2022 was $38.3 million, a $3.2 million, or 9% increase compared to $35.0 million for the six months ended June 30, 2021.

The increased loss was primarily due to the increased general and administrative expenses incurred to support growth;

the depreciation, amortization and accretion expenses incurred due to an increased number of chargers in EVgo’s network and the PlugShare acquisition, as well as the reduction of other expense, net, driven by a $25.1 million change in the fair value of the warrant and earnout liabilities.

the depreciation, amortization and accretion expenses incurred due to an increased number of chargers in EVgo’s network and the PlugShare acquisition, partially offset by improved gross loss and change in fair value of warrant and earnout liabilities.

Non-GAAP Financial Measures

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EVgo defines Adjusted EBITDA as EBITDA plus (i) share-based compensation expense, (ii) loss on disposal of assets and (iii) other unusual or nonrecurring income (expenses) such as bad debt expense.

The following is a reconciliation of adjusted cost of sales and adjusted gross profit for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

The following is a reconciliation of adjusted cost of sales and adjusted gross profit for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Six Months Ended June 30,

(dollars in thousands)

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Cost of sales

Depreciation and amortization

Depreciation and amortization in cost of sales

Share-based compensation and other

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Adjusted gross profit

The following is a reconciliation of adjusted gross margin for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(dollars in thousands)

The following is a reconciliation of adjusted gross margin for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Six Months Ended June 30,

Depreciation and amortization in cost of sales

Share-based compensation and other in cost of sales

Share-based compensation and other

Adjusted gross margin

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Three Months Ended

Six Months Ended

(dollars in thousands)

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Cost of sales, as reported

The three months ended March 31, 2021 is presented as previously reported.

The following unaudited table presents the reconciliation of net loss, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the three months ended March 31, 2022 and 2021:

The three and six months ended June 30, 2021 are presented as previously reported.

The following unaudited table presents the reconciliation of net income (loss), the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

Six Months Ended

(dollars in thousands)

Net income (loss)

Depreciation, net of capital-build amortization

Interest income

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Share-based compensation

Loss on disposal of asset

Unrealized loss (gain) on investment

Loss on disposal of property and equipment

Unrealized loss (gain) on equity securities

Bad debt expense

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Three Months Ended

Six Months Ended

(dollars in thousands)

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Year-over-year percentage change in total Receipts

1 Change in deferred revenue for the three months ended March 31, 2021 includes the first payment received in March 2021 of $20.0 million under one of EVgo’s OEM agreements.

1 Change in deferred revenue for the six months ended June 30, 2021 includes the first payment received in March 2021 of $20.0 million under one of EVgo’s OEM agreements.

Liquidity and Capital Resources

EVgo has a history of operating losses and negative operating cash flows.

As of March 31, 2022, EVgo had a cash balance of $441.4 million and working capital of $401.5 million.

As of December 31, 2021, EVgo had a cash balance of $485.2 million and a working capital of $459.5 million.

The Company’s net cash outflow for the three months ended March 31, 2022 was $43.8 million.

EVgo believes its cash on hand as of March 31, 2022 is sufficient to meet EVgo’s current working capital and capital expenditure requirements for a period of at least twelve months from the filing date of this Quarterly Report.

As of June 30, 2022, EVgo had a cash, restricted cash and cash equivalents balance of $345.0 million and working capital of $326.5 million.

As of December 31, 2021, EVgo had a cash, restricted cash and cash equivalents balance of $485.2 million and working capital of $459.5 million.

The Company’s net cash outflow for the six months ended June 30, 2022 was $140.2 million.

EVgo believes its cash on hand as of June 30, 2022 is sufficient to meet EVgo’s current working capital and capital expenditure requirements for a period of at least twelve months from the filing date of this Quarterly Report.

To date, EVgo’s primary sources of liquidity have been cash flows from the CRIS Business Combination, government grants, strategic relationships with OEMs and loans and equity contributions from its previous owners.

EVgo’s primary cash requirements include operating expenses, satisfaction of commitments to various counterparties and suppliers, and capital expenditures (including property and equipment).

EVgo’s principal uses of cash in recent periods have been funding its operations and investing in capital expenditures.

EVgo’s principal uses of cash in recent periods have been funding its operations and investing in capital expenditures, including the purchase of EV chargers for installation.

In July 2022, EVgo entered into the Delta Charger Supply Agreement and the Purchase Order with Delta, pursuant to which EVgo will purchase and Delta will sell EV chargers manufactured by Delta from time to time in specified quantities at certain delivery dates over a period of four years.

EVgo is obligated to purchase at least 1,000 chargers (which will enable the construction of 2,000 stalls) pursuant to the Delta Charger Supply Agreement and the Purchase Order with the option, at EVgo’s election, to increase the number of chargers purchased to 1,100.

Under the terms of the Purchase Order, EVgo will receive delivery of 600 chargers in the 11 months following July 12, 2022 and is required to make full payment on such chargers within sixty (60) days of receipt.

EVgo’s obligations under the Purchase Order are take-or-pay obligations;

however, EVgo’s liability is capped at a maximum of the greater of $30.0 million or 50% of the value of any outstanding firm orders.

EVgo entered into the Delta Charger Supply Agreement and Purchase Order in order to meet its obligations under the Pilot Infrastructure Agreement, other potential contractual commitments and its own needs and intends to fund the capital expenditure required under the Delta Charger Supply Agreement and Purchase Order with proceeds from the Pilot Infrastructure Agreement as well as cash on hand.

Following the consummation of the CRIS Business Combination, the Company Group is obligated to make payments under the Tax Receivable Agreement.

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However, the Company Group may be required to fund such payment from other sources, and as a result, any early termination of the Tax Receivable Agreement could have a substantial negative impact on EVgo’s liquidity or financial condition.

Three Months Ended March 31,

Six Months Ended June 30,

(dollars in thousands)

Cash flows (used in) provided by operating activities

Cash flows used in operating activities

Cash flows used in investing activities

Cash flows provided by financing activities

Net (decrease) increase in cash and restricted cash

Net decrease in cash, restricted cash and cash equivalents

Operating Activities.

Cash used in operating activities for the three months ended March 31, 2022 was $19.8 million compared to cash provided by operating activities of $7.8 million during the three months ended March 31, 2021.

The year-over-year change was primarily due to $21.1 million in cash outflows from deferred revenue and net cash loss of $5.9 million.

Offsetting these decreases were $5.5 million of cash inflows related to prepaid expenses and other current and noncurrent assets.

Cash used in operating activities for the six months ended June 30, 2022 was $38.4 million compared to cash used by operating activities of $1.4 million during the six months ended June 30, 2021.

The year-over-year change was primarily due to a decrease of $21.4 million in cash inflows from deferred revenue and cash loss from operations of $15.8 million.

Offsetting these decreases were $3.5 million of increased cash inflows related to prepaid expenses and other current and noncurrent assets and $1.5 million of increased cash inflows from receivables from related parties.

Investing Activities.

Cash used in investing activities for the three months ended March 31, 2022 was $28.1 million, relating to purchases of property, equipment and software, which primarily comprised of purchases for construction in process and charging equipment.

During the three months ended March 31, 2021, purchases of property and equipment were $7.8 million, comprised of charging equipment and construction in process.

Cash used in investing activities for the six months ended June 30, 2022 was $106.8 million, relating to $34.7 million for purchases of investments in various debt securities and $72.3 million of property, equipment and software, which was primarily comprised of costs for construction in process and charging equipment.

During the six months ended June 30, 2021, cash used in investing activities was $23.3 million related to purchases of property and equipment, comprised of charging equipment and costs for construction in process.

Financing Activities .

Cash provided by financing activities for the three months ended March 31, 2022 was $4.1 million, primarily comprised of proceeds from capital-build funding.

Cash provided by financing activities for three months ended March 31, 2021 was $15.7 million, consisting of proceeds from the related party note payable.

Cash provided by financing activities for the six months ended June 30, 2022 was $5.0 million, primarily comprised of proceeds from capital-build funding.

Cash provided by financing activities for the six months ended June 30, 2021 was $18.2 million, consisting principally of proceeds from, and payments on, the related party note payable.

Working Capital .

EVgo’s working capital as of March 31, 2022 was $401.5 million, compared to a $459.5 million as of December 31, 2021.

During the three months ended March 31, 2022, EVgo’s cash balance decreased by $43.8 million, accounts receivable, capital build, decreased by $1.7 million, prepaid expenses decreased by $2.2 million and intangible assets, net decreased $2.9 million.

The decrease in assets was partially offset by the establishment of the right-of-use asset, net of $23.8 million and an increase in the property, equipment and software, net balance of $32.9 million.

EVgo’s working capital as of June 30, 2022 was $326.5 million, compared to a $459.5 million as of December 31, 2021.

During the six months ended June 30, 2022, EVgo’s cash balance decreased by $140.2 million, receivables from related party decreased $1.5 million, prepaid expenses decreased by $4.1 million and accrued liabilities increased by $16.3 million.

The decrease in assets was offset by purchase of short-term available-for-sale investments of $27.8 million.

Critical Accounting Policies and Estimates

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Revisions to estimates are recognized prospectively.

The Company’s significant accounting policies are discussed in Note 2 of the notes to the consolidated financial statements as of and for the fiscal years ended December 31, 2021 and 2020, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

There have been no significant changes to EVgo’s critical accounting policies other than the implementation of a comprehensive new lease standard during the three months ended March 31, 2022.

There have been no significant changes to EVgo’s critical accounting policies other than the implementation of a comprehensive new lease standard during the six months ended June 30, 2022.

See “Part I, Item 1.

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Financial Statements – Note 2 – Summary of Significant Accounting Policies.”

Internal Control Over Financial Reporting

In connection with the preparation of the audited consolidated financial statements of EVgo Holdco as of and for the year ended December 31, 2019, material weaknesses were identified in the Company’s internal control over financial reporting.

Certain of these material weaknesses continued during the three months ended March 31, 2022 and have not yet been fully remediated.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of EVgo’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

See the section titled “ Risk Factors—Financial, Tax and Accounting-Related Risks—EVgo has identified material weaknesses in its internal control over financial reporting.

If EVgo is unable to remediate these material weaknesses, or if EVgo identifies additional material weaknesses in the future or otherwise fails to maintain an effective system of internal control over financial reporting, this may result in material misstatements of EVgo’s consolidated financial statements or cause the Company to fail to meet EVgo’s periodic reporting obligations ” in the Company’s Annual Report.

Jumpstart Our Business Startups Act of 2012

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EVgo elected to delay the adoption of new or revised accounting standards, and as a result, EVgo may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

EVgo’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

As a result, EVgo’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

As an “emerging growth company,” EVgo is not required to, among other things, (a) provide an auditor’s attestation report on EVgo’s system of internal control over financial reporting, (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies, (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (d) disclose comparisons of the chief executive officer’s compensation to median employee compensation.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis