Item 2. Management’s Discussion and Analysis
Item 2. 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 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.
Overview
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. With a rapid rise in electrification expected over the next two decades, EVgo offers the essential infrastructure technology and services required to help the world transition to a cleaner, more sustainable future.
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EVgo has a flexible business model that derives value through multiple revenue streams. The foundation of the Company’s business is the development and operation of EV charging sites through which it dispenses electricity to EVs driven by individuals, commercial drivers, and fleet operators. EVgo’s principal revenue stream is from the provision of charging services for EVs of all types on EVgo’s network. In addition, a variety of business-to-business commercial relationships provide EVgo with revenue or cash payments based on commitments to build new infrastructure, provide guaranteed access to charging, and offer marketing, data and software-driven services. EVgo also earns revenue from the sale of regulatory credits generated through sales of electricity and its operation and ownership of its DCFC network. This combination of revenue streams can drive long-term margin expansion and customer retention.
Specifically, revenue is earned through the following streams:
● Charging Revenue, Retail: 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 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. EVgo installs its chargers in parking spaces owned or leased by commercial or public-entity Site Hosts that desire to provide EV charging services at their respective locations. Commercial Site Hosts include retail and grocery stores, hotels, offices, medical complexes, airports and convenience stores. EVgo believes its offerings are well aligned with the goals of Site Hosts, as many commercial businesses increasingly view EV charging capabilities as essential to attract tenants, employees, customers and visitors, and achieve sustainability goals. Site Hosts are generally able to obtain these benefits at no cost when partnering with EVgo through EVgo’s owner and/or operator model, as EVgo is responsible for the installation and operation of chargers located on Site Hosts’ properties. In many cases, Site Hosts will earn additional revenue from license payments made by the Company in exchange for use of the site. EVgo also incorporates flexible ownership models through EVgo eXtend TM , which helps Site Hosts invest in and build EV charging stations for their customers.
● Charging Revenue, OEM: EVgo is a key leader in OEM charging programs with revenue models to meet a wide variety of OEM objectives related to the availability of charging infrastructure and the provision of charging services for EV drivers. EVgo contracts directly with OEMs to provide charging services to drivers who have purchased or leased such OEMs’ EVs and who access EVgo’s public charger network, to expand EVgo’s network of owned DCFCs and to provide other related services. Other related services currently provided to OEMs by EVgo include co-marketing, data services and digital application services. EVgo views its OEM relationships as a core customer acquisition channel.
● Charging Revenue, Commercial : High volume fleet customers, such as transportation network companies (“TNCs”) or delivery services, can access EVgo’s charging infrastructure through EVgo’s public network. Pricing for charging services is most often negotiated directly between EVgo and the fleet owner based on the business needs and usage patterns of the fleet. In these arrangements EVgo contracts with, and bills, either the fleet owner directly or an individual fleet driver utilizing EVgo’s chargers. Access to EVgo’s public network allows fleet and rideshare operators to support mass adoption of transportation electrification and achieve sustainability goals without needing to directly invest capital in charging infrastructure or incur operating costs associated with charging equipment.
In addition to offering access to its public network, EVgo offers dedicated charging solutions to fleets. As part of this offering, EVgo typically builds, owns, and operates charging infrastructure for the exclusive use of a dedicated customer and is currently offering flexible ownership models, such as its charging as a service (“ChaaS”) offering. EVgo’s dedicated and ChaaS offerings provide a value proposition for fleets who might otherwise feel compelled to procure, install and manage their own electric vehicle supply equipment (“EVSE”). EVgo offers a variety of pricing models for its dedicated charging solutions, including a mix of volumetric commitments and variable and fixed payments to EVgo for provision of its services. ChaaS and dedicated charging allow for tailored fleet charging solutions without requiring fleets to directly incur capital expenditures or operating and management costs related to charging EVs. Together, EVgo’s dedicated charging solutions and public fleet charging services provide fleets with a more robust and flexible charging solution.
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● Network Revenue, OEM: Revenue related to contracts that have significant charger infrastructure build programs, which represent set-up costs under ASC 606. Proceeds from these contracts are allocated to performance obligations including marketing activities, memberships, reservations and the expiration of unused charging credits. Marketing activities are recognized at a point in time as the services are performed and measurement is based on amounts spent. For memberships and reservations, revenue is recognized over time and measured based on the charging activity of subscriber members at each measurement period. Any unused charging credits are recognized as breakage using the proportional method or, for programs where there is not enough information to determine the pattern of rights exercised by the customer, the remote method.
● Ancillary Revenue : In addition to charging services, EVgo offers a variety of software-driven digital, development and operations services to its customers. These offerings currently include customization of digital applications and charging data integration. EVgo currently pilots micro-targeted advertising services, smart charging reservations, loyalty programs and access to chargers behind parking lot pay gates. EVgo also offers maintenance services and development and project management services, including EVSE installation, networking and operations. EVgo also continues to evaluate and engage on potential market opportunities beyond these business models.
● Regulatory Credit Sales : As a charging station owner and operator, EVgo earns regulatory credits, such as LCFS and other regulatory credits, in states where such programs are enacted currently, Fast Charging Infrastructure in California and Clean Fuel Standards in Oregon. These credits are generated through charging station operations based on the amount of kWh sold. EVgo earns additional revenue through the sale of these credits to buyers obligated to purchase the credits to comply with the program mandates.
Recent Developments
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. 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.
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.
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Government EV Initiatives
In order to encourage the use of EVs, the U.S. federal government as well as state and local governments offer a variety of incentives and rebates. 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 EV charging infrastructure through the Department of Transportation. The U.S. 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 (with several manufacturers, such as Toyota, hitting such production levels this year or in the future), and such credit has already been completely phased out for EVs manufactured by GM and Tesla, Inc. (“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. EVs are also gaining momentum in the Midwest, and soon states like Illinois will also begin to offer vehicle and EVSE incentives.
Demand for EVs has also been encouraged by regulatory developments and changes in consumer habits. Several states — including California, Oregon, New Jersey, New York, Maryland and Massachusetts — have adopted or proposed mandates for EVs with the goal of more than 8.0 million EVs on the road by 2030. In September 2020, California Governor Gavin Newsom issued an executive order, announcing a target for all in-state sales of new passenger cars and trucks to be zero-emission by 2035. And, in January 2022, Governor Newsom introduced a $10 billion zero-emission vehicle package to accelerate this transition. Additionally, California has enacted its Clean Miles Standard aiming to reduce greenhouse gas emissions from TNCs, such as rideshare vehicles, through electrification and other means. In 2021, California also approved the Advanced Clean Truck Rule (“ACT rule”), a regulation that requires an increasing percentage of medium- and heavy-duty trucks sold in the state to be zero emissions. Washington, New York, New Jersey, Massachusetts and Oregon have also adopted the ACT rule.
EVgo believes these regulations, combined with a shift toward car-sharing and mobility as a service offering as well as broader fleet sustainability trends, will rapidly accelerate EV adoption by fleets in the coming years.
Key Components of Results of Operations
Revenue
EVgo’s revenues are generated across various business lines. The majority of EVgo’s revenue is generated from the sale of charging services, which are comprised of retail, OEM and fleet business lines. In addition, EVgo generates ancillary revenues through the sale of data services, consumer retail services and the development and project management of third-party owned charging sites. EVgo also offers network services to OEM customers, including memberships and marketing. Finally, as a result of owning and operating the EV charging stations, EVgo earns regulatory credits such as California LCFS credits which are sold to generate additional revenue.
Revenue From Related Party
EVgo entered into various agreements with an affiliate of LS Power for the purchase and sale of California LCFS credits at prevailing market prices.
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Cost of Sales
Cost of Revenue
Cost of revenue consists primarily of energy usage fees, site operating and maintenance expenses, warranty and repair services, and site lease and rent expense associated with charging equipment.
Depreciation and Amortization
Depreciation and amortization consists of depreciation related to EVgo’s property and equipment associated with charging equipment and installation and includes the amortization of EVgo’s capital build liabilities.
Gross Profit (Loss) and Gross Margin
Gross profit (loss) consists of EVgo’s revenue less its cost of revenues and depreciation and amortization. Gross margin is gross profit (loss) as a percentage of revenue.
Operating Expenses
General and Administrative Expenses
General and administrative expenses primarily consist of payroll and related personnel expenses, IT and office services, customer service and network charges, office rent expense and professional services. EVgo expects its general and administrative expenses to increase in absolute dollars as it continues to grow its business but to decrease over time as a percentage of revenue. EVgo also expects to incur additional expenses as a result of operating as a public company, including expenses necessary to comply with the rules and regulations applicable to companies listed on a national securities exchange and related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, as well as higher expenses for general and director and officer insurance, investor relations and other professional services.
Depreciation, Amortization and Accretion
Depreciation, amortization and accretion consists of depreciation related to EVgo’s property, equipment and software not associated with charging equipment, and, therefore, not included in the depreciation and amortization expenses recorded in cost of sales. This also includes amortization of EVgo’s intangible assets and accretion related to EVgo’s asset retirement obligations.
Operating Profit (Loss) and Operating Margin
Operating profit (loss) consists of EVgo’s gross profit or loss less general and administrative expenses, transaction bonus expense, and depreciation, amortization, and accretion in operating expenses. 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 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.
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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) resulting from adjusting warrant and earnout liabilities to fair value for each reporting period.
Income Taxes
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.
Net Earnings (Loss) Attributable to Redeemable Noncontrolling Interest
Net earnings (loss) attributable to redeemable noncontrolling interest represents the share of net earnings or loss that is attributable to the holder of EVgo’s Class B common stock.
Key Performance Indicators
EVgo management uses several performance metrics to manage the business and evaluate financial and operating performance. EVgo considers the following indicators to be of critical importance:
Network Throughput
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 and Customer Accounts
Number of DC stalls represents the total number of DC stalls that EVgo has operational on its network. One stall can charge one vehicle at a time. There are certain configurations of EVgo sites where one DC charger is capable of charging only one vehicle at a time; all chargers at such a site are counted as one stall per one charger. There are certain configurations of EVgo sites where one DC charger is capable of charging two vehicles simultaneously; all chargers at such a site are counted as two stalls per one charger. The following table represented network throughput and the number of DC stalls on EVgo’s network:
June 30,
June 30,
2022
2021
Network throughput (GWh) for the three months ended
10.1
6.1
Network throughput (GWh) for the six months ended
18.1
10.2
Number of DC stalls on EVgo network as of
1,937
1,548
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Factors Affecting EVgo’s Operating Results
EVgo believes its performance and future success depend on several factors, including those discussed below and in “Part II, Item 1A., Risk Factors.”
EV Sales
EVgo’s revenue growth is directly tied to the adoption and continued acceptance and usage of passenger and commercial EVs sold, which it believes drives the demand for electricity, charging infrastructure and charging services. The market for EVs is still rapidly evolving and although demand for EVs has grown in recent years, there is no guarantee of such future demand. Additionally, as demand increases, the supply must keep pace for adoption to continue to accelerate at a rapid pace. 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. semiconductors), ability of EV OEMs to ramp-up EV production and/or allocate sufficient quantities of EV models to the U.S. market; availability of batteries, and battery materials; 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. In addition, macroeconomic factors could impact demand for EVs, particularly since EVs can be more expensive than traditional gasoline-powered vehicles. If the market for EVs does not develop as expected or if there is any slowdown or delay in overall adoption of EVs, EVgo’s operating results may be adversely affected.
Electrification of Fleets
EVgo faces competition in the emerging fleet electrification segment, including from certain fleet customers who may opt to install and own the charging equipment on their property, but believes its unique set of offerings to fleets and existing charging network position EVgo advantageously to win business from fleets. Fleet owners are generally more sensitive to the total cost of ownership of a vehicle than private-vehicle owners. As such, electrification of vehicle fleets may occur more slowly or more rapidly than management forecasts based on the cost to purchase, operate and maintain EVs and the general availability of such vehicles relative to those of legacy internal combustion engine vehicles. EVgo’s, and other competitors’, ability to offer competitive charging services and value-added ancillary services may impact the cadence at which fleets electrify and may impact EVgo’s ability to capture market share in fleets. Additionally, federal, state and local government support and regulations directed at fleets (or lack thereof) may accelerate or delay fleet electrification and increase or reduce EVgo’s business opportunity. EVgo’s management is currently monitoring several key rules that may encourage fleet electrification, including California’s ACT rule and the implementation of California’s Clean Miles Standard, as well as similar proposals in other zero emission vehicle states and potential action at the federal level.
Competition
The EV charging industry is increasingly competitive. The principal competitive factors in the industry include charger count, locations and accessibility; charger connectivity to EVs and ability to charge all standards; speed of charging relative to expected vehicle dwell times at the location; DCFC network reliability, scale and local density; software-enabled services offering and overall customer experience; operator brand, track record and reputation; and access to equipment vendors, service providers, policy incentives and pricing. Existing competitors may expand their product offerings and sales strategies, new competitors may enter the market and certain fleet customers may choose to install and operate their own charging infrastructure. If EVgo’s market share decreases due to increased competition, its revenue and ability to generate profits in the future may be impacted.
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Government Mandates, Incentives and Programs
The U.S. federal government, some state and local governments, and certain utilities provide incentives to end-users and purchasers of EVs and EV charging stations in the form of rebates, tax credits, grants and other financial incentives. The EV market relies on these governmental rebates, tax credits, and other financial incentives to significantly lower the effective price of EVs and EV charging stations. For example, EVgo has historically benefitted from the availability of federal tax credits under Section 30C of the Code. 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 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. The U.S. 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 (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. Any reduction in rebates, tax credits, grants or other financial incentives could negatively affect the EV market and adversely impact EVgo’s business operations and expansion potential. In addition, there is no assurance EVgo will have the necessary tax attributes to utilize any such credits and may not be able to monetize them given the nascent state of the market for such credits or be able to monetize such credits on favorable terms. New tariffs and policies that could incentivize overbuilding of infrastructure may also have a negative impact on the economics of EVgo’s stations. Furthermore, future tariffs and policy incentives may favor equipment manufactured or assembled at American factories, which may or may not put EVgo’s fast charging equipment vendors at a competitive disadvantage, including by increasing the cost or delaying the availability of charging equipment, by challenging or eliminating EVgo’s ability to apply or qualify for grants and other government incentives, or by disqualifying EVgo from the ability to compete for certain charging infrastructure buildout solicitations and programs, including those initiated by federal government agencies.
Technology Risks
EVgo relies on numerous internally developed and externally sourced hardware and software technologies to operate its network and generate earnings. EVgo engages a variety of third-party vendors for non-proprietary hardware and software components. The ability of EVgo to continue to integrate its technology stack with technological advances in the wider EV ecosystem including EV model characteristics, charging standards, charging hardware, software and battery chemistries will determine EVgo’s sustained competitiveness in offering charging services. There is a risk that some or all of the components of the EV technology ecosystem become obsolete and EVgo will be required to make significant investment to continue to effectively operate its business. EVgo’s management believes EVgo’s business model is well-positioned to enable EVgo to remain technology-, vendor- and OEM-agnostic over time and allow the business to remain competitive regardless of long-term technological shifts in EVs, batteries or modes of charging.
Sale of Regulatory Credits
EVgo derives revenue from selling regulatory credits earned for participating in low carbon fuel standard programs, or other similar carbon or emissions trading schemes, in various states and jurisdictions in the U.S. EVgo currently sells these credits at market prices. These credits are exposed to various market and supply and demand dynamics which can drive price volatility and are difficult to predict. Price fluctuations in credits may have a material effect on future earnings.
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The availability of such credits depends on continued governmental support for these programs. If these programs are modified, reduced or eliminated, EVgo’s ability to generate this revenue in the future would be adversely impacted. In addition to current programs, EVgo’s management is currently monitoring proposed programs in Colorado, New York, Massachusetts, Washington, New Mexico and several other states, along with a potential federal program, as potential future revenue streams.
Results of Operations
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,
Change
(dollars in thousands)
2022
2021
$
%
Revenue
$
9,076
$
4,783
$
4,293
90
%
Revenue from related party
—
—
—
—
Total revenue
9,076
4,783
4,293
90
%
Cost of revenue
(5,719)
(3,752)
(1,967)
52
%
Depreciation and amortization
(4,101)
(2,705)
(1,396)
52
%
Gross loss
(744)
(1,674)
930
56
%
General and administrative
32,178
13,338
18,840
141
%
Depreciation, amortization and accretion
4,132
2,545
1,587
62
%
Operating loss
(37,054)
(17,557)
(19,497)
(111)
%
Interest expense
(13)
—
(13)
Interest expense, related party
—
(1,039)
1,039
100
%
Interest income
636
1
635
999+
%
Other (expense) income, net
(158)
174
(332)
(191)
%
Change in fair value of earnout liability
4,891
—
4,891
Change in fair value of warrant liability
48,712
—
48,712
Income (loss) before income tax expense
17,014
(18,421)
35,435
192
%
Income tax expense
(17)
—
(17)
Net income (loss)
16,997
(18,421)
35,418
192
%
Less: net income (loss) attributable to redeemable noncontrolling interest
12,518
(18,421)
30,939
168
%
Net income attributable to Class A common stockholders
$
4,479
$
—
$
4,479
Gross margin
(8.2)
%
(35.0)
%
Operating margin
(408.3)
%
(367.1)
%
Network throughput (GWh)
10.1
6.1
Number of DC stalls
1,937
1,548
The table below presents EVgo’s revenue for the three months ended June 30, 2022 and 2021:
Three Months Ended June 30,
Change
(dollars in thousands)
2022
2021
$
%
Revenue
Charging revenue, retail
$
4,389
$
2,498
$
1,891
76
%
Charging revenue, OEM
189
150
39
26
%
Charging revenue, commercial
654
546
108
20
%
Network revenue, OEM
887
275
612
223
%
Ancillary revenue
829
639
190
30
%
Regulatory credit sales
2,128
675
1,453
215
%
Total revenue
$
9,076
$
4,783
$
4,293
90
%
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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.
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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.
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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.
Income Taxes
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.
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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,
Change
(dollars in thousands)
2022
2021
$
%
Revenue
$
16,776
$
8,352
$
8,424
101
%
Revenue from related party
—
562
(562)
(100)
%
Total revenue
16,776
8,914
7,862
88
%
Cost of revenue
(10,565)
(7,113)
(3,452)
49
%
Depreciation and amortization
(7,555)
(5,152)
(2,403)
47
%
Gross loss
(1,344)
(3,351)
2,007
60
%
General and administrative
57,606
25,344
32,262
127
%
Depreciation, amortization and accretion
8,019
5,055
2,964
59
%
Operating loss
(66,969)
(33,750)
(33,219)
(98)
%
Interest expense
(13)
—
(13)
Interest expense, related party
—
(1,915)
1,915
100
%
Interest income
691
1
690
999+
%
Other (expense) income, net
(422)
632
(1,054)
(167)
%
Change in fair value of earnout liability
2,627
—
2,627
Change in fair value of warrant liability
25,839
—
25,839
Loss before income tax expense
(38,247)
(35,032)
(3,215)
(9)
%
Income tax expense
(22)
—
(22)
Net loss
(38,269)
(35,032)
(3,237)
(9)
%
Less: net loss attributable to redeemable noncontrolling interest
(28,349)
(35,032)
6,683
19
%
Net loss attributable to Class A common stockholders
$
(9,920)
$
—
$
(9,920)
Gross margin
(8.0)
%
(37.6)
%
Operating margin
(399.2)
%
(378.6)
%
Network throughput (GWh)
18.1
10.2
Number of DC stalls
1,937
1,548
The table below presents EVgo’s revenue for the six months ended June 30, 2022 and 2021:
Six Months Ended June 30,
Change
(dollars in thousands)
2022
2021
$
%
Revenue
Charging revenue, retail
$
7,891
$
4,302
$
3,589
83
%
Charging revenue, OEM
340
482
(142)
(29)
%
Charging revenue, commercial
1,363
1,037
326
31
%
Network revenue, OEM
1,377
807
570
71
%
Ancillary revenue
2,299
1,043
1,256
120
%
Regulatory credit sales
3,506
1,243
2,263
182
%
Total revenue
$
16,776
$
8,914
$
7,862
88
%
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.
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Charging Revenue, Retail
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. 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 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 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 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 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 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. 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 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 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.
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Gross Loss and Gross Margin
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 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 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 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.
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
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 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.
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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 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.
Income Taxes
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
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, partially offset by improved gross loss and change in fair value of warrant and earnout liabilities.
Non-GAAP Financial Measures
This Quarterly Report includes the non-GAAP financial measures: “Adjusted Cost of Sales,” “Adjusted Gross Profit (Loss),” “Adjusted Gross Margin,” “EBITDA,” “Adjusted EBITDA” and “Receipts.” EVgo believes these measures are useful to investors in evaluating EVgo’s financial performance. In addition, EVgo uses these measures internally to establish forecasts, budgets, and operational goals to manage and monitor its business. Further, due to the nature of certain OEM contracts, there is a significant timing difference between cash receipt and revenue recognition, therefore, EVgo believes Receipts (defined below) provides valuable insight to the ongoing performance and liquidity of the business. EVgo believes that these non-GAAP financial measures help to depict a more realistic representation of the performance of the underlying business, enabling EVgo to evaluate and plan more effectively for the future. EVgo believes that investors should have access to the same set of tools that its management uses in analyzing operating results.
Adjusted Cost of Sales (defined below), Adjusted Gross Profit (Loss) (defined below), Adjusted Gross Margin (defined below), EBITDA, Adjusted EBITDA (defined below) and Receipts are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. These measures should not be considered as measures of financial performance under GAAP, and the items excluded from or included in these metrics are significant components in understanding and assessing EVgo’s financial performance. These metrics should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP.
Adjusted Cost of Sales, Adjusted Gross Profit (Loss), Adjusted Gross Margin, EBITDA and Adjusted EBITDA. EVgo defines Adjusted Cost of Sales as cost of sales before: (i) depreciation and amortization, (ii) share-based compensation, and (iii) OEM reimbursement. Adjusted Gross Profit (Loss) is defined as revenues less Adjusted Cost of Sales. Adjusted Gross Margin is defined as Adjusted Gross Profit (Loss) as a percentage of revenues. EVgo defines EBITDA as net income (loss) before (i) interest expense, (ii) income taxes and (iii) depreciation and amortization. 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.
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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)
2022
2021
2022
2021
Total revenue
$
9,076
$
4,783
$
16,776
$
8,914
Cost of sales
9,820
6,457
18,120
12,265
Less: Depreciation and amortization in cost of sales
(4,101)
(2,705)
(7,555)
(5,152)
Less: Share-based compensation and other
(18)
6
(20)
12
Adjusted cost of sales
$
5,701
$
3,758
$
10,545
$
7,125
Adjusted gross profit
$
3,375
$
1,025
$
6,231
$
1,789
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,
2022
2021
2022
2021
Gross margin
(8.2)
%
(35.0)
%
(8.0)
%
(37.6)
%
Depreciation and amortization in cost of sales
45.4
56.4
45.1
57.7
Less: Share-based compensation and other
0.0
0.0
0.0
0.0
Adjusted gross margin
37.2
%
21.4
%
37.1
%
20.1
%
During the third quarter of 2021, the Company changed its presentation of certain costs that were included as a component of cost of sales in previous periods. The Company now presents these costs as a component of general and administrative expenses. The following is a reconciliation of the previous and current presentation of cost of sales:
Three Months Ended
Six Months Ended
June 30,
June 30,
(dollars in thousands)
2022
2021
2022
2021
Cost of sales, under previous method 1
$
11,582
$
7,548
$
21,617
$
14,288
Reclassification
(1,762)
(1,091)
(3,497)
(2,023)
Cost of sales, as reported
$
9,820
$
6,457
$
18,120
$
12,265
1
The three and six months ended June 30, 2021 are presented as previously reported.
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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
June 30,
June 30,
(dollars in thousands)
2022
2021
2022
2021
Net income (loss)
$
16,997
$
(18,421)
$
(38,269)
$
(35,032)
Adjustments:
Depreciation, net of capital-build amortization
4,170
2,749
7,687
5,230
Amortization
3,564
2,147
6,929
4,294
Accretion
499
354
958
683
Interest income
(636)
(1)
(691)
(1)
Interest expense
13
1,039
13
1,915
State income tax
17
—
22
—
EBITDA
24,624
(12,133)
(23,351)
(22,911)
Share-based compensation
7,042
531
10,548
1,010
Loss on disposal of property and equipment
1,879
116
2,889
347
Unrealized loss (gain) on equity securities
150
(175)
405
(577)
Bad debt expense
35
98
151
168
Change in fair value of earnout liability
(4,891)
—
(2,627)
—
Change in fair value of warrant liability
(48,712)
—
(25,839)
—
Nonrecurring costs
36
554
(189)
1,175
Adjusted EBITDA
$
(19,837)
$
(11,009)
$
(38,013)
$
(20,788)
Receipts . EVgo defines Receipts, a non-GAAP financial measure, as total revenue plus change in deferred revenue over the same period. Pursuant to the term of certain OEM contracts, EVgo is paid well in advance of when revenue can be recognized according to ASC 606; usually, the payment is tied to the number of stalls that commence operations under the applicable contract arrangement. EVgo believes that Receipts provide investors insight into cash generated from EVgo’s customers and EVgo’s periodic performance and liquidity. EVgo uses Receipts to monitor and measure EVgo’s commercial performance, liquidity and growth as EVgo’s OEM customers pay EVgo in advance for placing stalls in operation, and then EVgo recognizes a portion of the related revenue over time. The calculation of Receipts is set forth in the table below for the following periods:
Three Months Ended
Six Months Ended
June 30,
June 30,
(dollars in thousands)
2022
2021
2022
2021
Receipts
Total revenues
$
9,076
$
4,783
$
16,776
$
8,914
Change in deferred revenue 1
(11)
225
(572)
20,778
Total Receipts
$
9,065
$
5,008
$
16,204
$
29,692
Year-over-year percentage change in total Receipts
81%
(45)%
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 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.
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Table of Contents
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, 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. The actual timing and amount of any payments that may be made under the Tax Receivable Agreement are unknown at this time and will vary based on a number of factors. However, the Company Group expects that the payments that it will be required to make to TRA Holders in connection with the Tax Receivable Agreement will be substantial. Any payments made by the Company Group to TRA Holders under the Tax Receivable Agreement will generally reduce the amount of cash that might have otherwise been available to EVgo or EVgo OpCo. To the extent EVgo OpCo has available cash and subject to the terms of any current or future debt or other agreements, the EVgo OpCo A&R LLC Agreement will require EVgo OpCo to make pro rata cash distributions to holders of EVgo OpCo Units, including Thunder Sub, in an amount sufficient to allow the Company Group to pay its taxes and to make payments under the Tax Receivable Agreement. EVgo generally expects EVgo OpCo to fund such distributions out of available cash. However, except in cases where the Company Group elects to terminate the Tax Receivable Agreement early, the Tax Receivable Agreement is terminated early due to certain mergers or other changes of control or the Company Group has available cash but fails to make payments when due, generally the Company Group may elect to defer payments due under the Tax Receivable Agreement if it does not have available cash to satisfy its payment obligations under the Tax Receivable Agreement or if its contractual obligations limit its ability to make these payments. Any such deferred payments under the Tax Receivable Agreement generally will accrue interest at the rate provided for in the Tax Receivable Agreement, and such interest may significantly exceed the Company Group’s other costs of capital. In certain circumstances (including an early termination of the Tax Receivable Agreement due to a change of control or otherwise), payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, the Company Group realizes in respect of the tax attributes subject to the Tax Receivable Agreement. In the case of such an acceleration in connection with a change of control, where applicable, EVgo generally expects the accelerated payments due under the Tax Receivable Agreement to be funded out of the proceeds of the change of control transaction giving rise to such acceleration, which could have a significant impact on EVgo’s ability to consummate a change of control or the proceeds received by EVgo’s stockholders in connection with a change of control. 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.
Cash Flows
Six Months Ended June 30,
(dollars in thousands)
2022
2021
Cash flows used in operating activities
$
(38,370)
$
(1,357)
Cash flows used in investing activities
(106,836)
(23,341)
Cash flows provided by financing activities
5,032
18,185
Net decrease in cash, restricted cash and cash equivalents
$
(140,174)
$
(6,513)
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Operating Activities. 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 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 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 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
The discussion and analysis of EVgo’s financial condition and results of operations is based upon EVgo’s condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of EVgo’s financial statements requires the Company to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and related disclosures of contingent assets and liabilities. Managements bases these estimates on its historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results experienced may vary materially and adversely from EVgo’s estimates. 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.
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. Financial Statements – Note 5 – Lease Accounting” for further information on EVgo’s accounting policies related to the implementation of the comprehensive new lease standard.
Recent Accounting Pronouncements
For a discussion of EVgo’s new or recently adopted accounting pronouncements, see “Part I, Item 1. Financial Statements – Note 2 – Summary of Significant Accounting Policies.”
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Jumpstart Our Business Startups Act of 2012
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. Following the CRIS Business Combination, EVgo is an “emerging growth company” under the JOBS Act and is allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. 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. 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. These exemptions will apply for a period of five years following the completion of the Initial Public Offering or until EVgo otherwise no longer qualifies as an “emerging growth company.”
Following the CRIS Business Combination, EVgo was and currently is a “smaller reporting company” as defined under the Exchange Act. EVgo may continue to be a smaller reporting company so long as either (i) the market value of shares of its common stock held by non-affiliates is less than $250 million or (ii) its annual revenue was less than $100 million during the most recently completed fiscal year and the market value of shares of its common stock held by non-affiliates is less than $700 million. If EVgo is a smaller reporting company at the time it ceases to be an emerging growth company, EVgo may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, EVgo may choose to present only the two most recent fiscal years of audited financial statements in its Annual Report on Form 10-K and have reduced disclosure obligations regarding executive compensation, and, similar to emerging growth companies, if EVgo is a smaller reporting company under the requirements of (ii) above, EVgo would not be required to obtain an attestation report on internal control over financial reporting issued by its independent registered public accounting firm.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
EVgo is a smaller reporting company as defined in Rule 12b-2 under the Exchange Act. As a result, pursuant to Item 305(e) of Regulation S-K, the Company is not required to provide the information required by this Item.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.