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Item 2. Management’s Discussion and Analysis

2022-11-04 compared with 2022-08-10 · 211 added, 223 removed, 326 unchanged (57% 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 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.

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of EVgo’s consolidated results of operations and financial condition.

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

In addition to historical information, this discussion contains forward-looking statements that involve numerous 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 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.

EVgo is a key leader in charging solutions, building and operating the infrastructure and tools to expedite the mass adoption of electric vehicles for individual drivers, rideshare and commercial fleets, and businesses.

Since its founding in 2010, EVgo has led the way to a cleaner transportation future, and its network has been powered by 100% renewable energy since 2019 through renewable energy certificates.

EVgo has a flexible business model that derives value through multiple revenue streams.

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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.

EVgo believes this combination of revenue streams can drive long-term margin expansion and customer retention.

Specifically, revenue is earned through the following streams:

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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.

Drivers can 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 generally 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.

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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.

EVgo also incorporates flexible ownership models through EVgo eXtend ™ , through which certain Site Hosts can invest in and build EV charging stations that the Site Host owns and EVgo operates.

● Charging Revenue, OEM:

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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.

This revenue stream represents 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.

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● 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.

In addition to charging services on its owned network, EVgo offers a variety of software-driven digital, development and operations services to its customers, including through its PlugShare subsidiary and its eXtend offering.

EVgo has a number of offerings that 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.

In 2022, EVgo announced a major eXtend deal with the Pilot Company to deploy up to 2,000 fast charging stalls that the Pilot Company will own and EVgo will build, network, operate, and maintain.

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.

As a charging station owner and operator, EVgo earns regulatory credits, such as Low Carbon Fuel Standard (“LCFS”) credits and other regulatory credits, in states where such programs are enacted currently, including the Fast Charging Infrastructure program in California.

These credits are generated through charging station operations based on the volume 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.

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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.

EVgo also experienced delays in its Site Host negotiations as Site Hosts 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 specified timeframes.

Those timelines were impacted due to delays associated with COVID-19 and broader supply chain disruptions, and it is possible that the pandemic and its ongoing effects 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.

The current economic environment remains uncertain, and the extent to which EVgo’s operating and financial results for future periods will be impacted by the COVID-19 pandemic, the ongoing conflict in Ukraine, increasing inflation, supply-chain disruptions, 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

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.

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 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.

federal government and some state and local governments provide incentives to end users and purchasers of EVs and EV charging stations in the form of rebates, tax credits, and other financial incentives that promote EV adoption and related EV charging infrastructure.

EVgo believes the increase in promotion of EVs and the installation of related EV charging infrastructure will continue in part due to the ongoing implementation of the Infrastructure Investment and Jobs Act (the “Bipartisan Infrastructure Law”) and the recently enacted Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), which included extensions, expansions and revisions of various tax credits relating to EVs and EV charging infrastructure and may provide more flexibility and options in monetizing such credits.

In particular, the Inflation Reduction Act (i) expanded and extended tax credits for EV charging infrastructure and new EVs while also imposing new limitations and requirements for such credits, (ii) introduced tax credits for used EVs and commercial EVs and (iii) introduced the concept of transferability for certain tax credits, providing an additional option to monetize such credits.

However, the impact of the Inflation Reduction Act cannot be known with any certainty and EVgo may not achieve any or all of the expected benefits of the Inflation Reduction Act.

States including (but not limited to) California, Colorado, Delaware, Massachusetts, New Jersey and New York also offer various rebates, grants and tax credits to incentivize both EV and EVSE purchases.

Pilot Infrastructure Agreement

On July 5, 2022, EVgo entered into a charging infrastructure agreement (the “Pilot Infrastructure Agreement”) and an operations and maintenance agreement (the “Pilot O&M”) with Pilot Travel Centers LLC (“Pilot Company”) and General Motors LLC (“GM”) to build, operate, and maintain up to 2,000 stalls served by DC chargers that Pilot Company will own.

The stalls will be located at approximately 500 Pilot Company sites across more than 40 states.

Under the Pilot O&M, EVgo is required to perform operations, maintenance and networking services on stalls built and commissioned under the Pilot Infrastructure Agreement in exchange for payment of a monthly fee by Pilot to EVgo.

Delta Charger Supply Agreement and Purchase Order

On July 12, 2022, EVgo entered into a General Terms and Conditions for Sale of EV Charger Products (the “Delta Charger Supply Agreement”) with Delta Electronics, Inc.

(“Delta”), including an initial purchase order (the “Purchase Order”), pursuant to which EVgo will purchase and Delta will sell EV chargers manufactured by Delta in specified quantities at certain delivery dates.

EVgo expects to use a portion of the chargers purchased under the Purchase Order to meet the requirements of the Pilot Infrastructure Agreement.

EVgo is required to purchase a minimum of 1,000 chargers (which will enable the construction of 2,000 stalls) from Delta under the Purchase Order and may at EVgo’s election, increase the number of chargers it purchases from Delta to 1,100.

Key Components of Results of Operations

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.

The majority of EVgo’s revenue is generated from the sale of charging services, which are comprised of retail, OEM and commercial (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.

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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.

EVgo is a party to various agreements with an affiliate of LS Power for the purchase and sale of California LCFS credits at prevailing market prices.

Cost of Sales

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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.

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 directors’ and officers’ insurance, investor relations and other professional services.

Depreciation, Amortization and Accretion

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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.

Operating profit (loss) consists of EVgo’s gross profit or loss less general and administrative expenses, and depreciation, amortization, and accretion in operating expenses.

Operating margin is operating profit (loss) as a percentage of revenue.

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.

Interest expense, related party consists primarily of interest due under the Secured Demand Grid 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 converted into equity of EVgo Services, immediately followed by a contribution of such equity interest by EVgo Holdings to EVgo Holdco.

Interest Income

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

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

Other (Expense) Income, Net

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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.

The change in the fair values of the warrant and earnout liabilities reflects the mark-to-market adjustments associated with warrants to purchase shares of the Company’s common stock and earnout liabilities 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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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.

Number of DC Stalls on EVgo’s Network

Number of DC stalls represents the total number of DC stalls that EVgo has operational on its network (energized, inspected and commissioned).

One stall can charge one vehicle at a time.

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

September 30,

Network throughput (GWh) for the three months ended

Network throughput (GWh) for the six months ended

Network throughput (GWh) for the nine months ended

Number of DC stalls on EVgo network as of

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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.

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.

domestic content requirements or other policy constraints;

availability of batteries and battery materials;

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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.

EVgo faces competition in the emerging fleet electrification segment, including from certain fleet customers who may opt to install and own charging equipment on their property;

however, EVgo believes its unique set of offerings to fleets and its 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.

EVgo’s management is currently monitoring several key rules that may encourage fleet electrification, including California’s Advanced Clean Truck (ACT) rule and similar programs recently adopted by Massachusetts, New Jersey, New York, Oregon, and Washington, 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.

The EV charging industry is increasingly competitive.

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operator brand, track record and reputation;

and access to equipment vendors, service providers, policy incentives and pricing.

and access to equipment vendors and service providers;

policy incentives;

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.

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Government Mandates, Incentives and Programs

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.

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.

However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or be reduced or terminated as a matter of regulatory or legislative policy.

In particular, EVgo has historically benefitted from the availability of federal tax credits under Section 30C of the Code, which effectively subsidized the cost of placing in service EVgo’s charging stations.

The Inflation Reduction Act revised the credits under Section 30C of the Code to (i) retroactively extend the expiration of the credit as of December 31, 2021 (with such credit continuing to be capped at $30,000 per location for EV charging stations placed in service before January 1, 2023) until January 1, 2033, (ii) revised the credit structure, availability, and requirements for EV charging stations placed in service after December 31, 2022, and (iii) introduced the concept of transferability of such tax credits, providing an additional option to monetize such credits.

As part of the revised credit structure and requirements for EV charging stations placed in service after December 31, 2022, the available Section 30C credit was expanded such that it is capped at $100,000 per item;

however, in order to be eligible for such tax credit, EV charging stations must be installed in certain census tracts.

Additionally, in order to receive the full tax credit, labor for EV charging station construction and maintenance must meet prevailing wage and apprenticeship requirements unless an exception applies, with additional clarification possible pending Department of Treasury advice and comment proceedings.

There can be no assurance that the EV charging stations placed in service by EVgo will meet the revised requirements for the Section 30C credits and complying with such requirements could increase EVgo’s labor and other costs.

Any reduction in rebates, tax credits or other financial incentives available to EVs or EV charging stations, 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 that are available and may not be able to monetize such credits on favorable terms.

Further, certain of EVgo OpCo’s ownership may limit the available tax credit that can be monetized or utilized.

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.

Furthermore, new tariffs and policy incentives could be put in place by the Biden Administration that favor equipment manufactured by or assembled at American factories, which may 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 the Company from the ability to compete for certain charging infrastructure buildout solicitations and programs, including those initiated by federal government agencies.

Moreover, a variety of incentives and rebates offered by the U.S.

federal government as well as state and local governments in order to encourage the use of EVs may be limited or reduced.

In particular, the U.S.

federal government offers a tax credit, the maximum amount of which is $7,500, for qualified new plug-in EVs.

The Inflation Reduction Act modified the tax credit for new plug-in EVs and added new tax credits for used and commercial EVs.

The Inflation Reduction Act removed the phase-out of tax credits for new plug-in EVs with respect to vehicle manufacturers that reached certain production levels beginning in 2023.

However, the tax credit is subject to additional requirements and limitations, such as certain adjusted gross income limits for consumers claiming the credit, domestic content requirements for critical minerals and batteries, and a requirement for final assembly to occur in North America.

Such additional requirements and limitations for such tax credits may reduce incentives available to consumers to encourage the adoption of EVs, which could negatively affect the EV market and adversely impact EVgo’s business operations and expansion potential.

Technology Risks

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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.

There is a risk that some or all of the components of the EV technology ecosystem become obsolete and that 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.

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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.

In addition to current programs, EVgo’s management is currently monitoring the implementation of Washington’s program and additional proposals in varying states of discussions including in New York, along with potential changes to the Renewable Fuels Standard.

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,

Three Months Ended September 30, 2022 and 2021

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

The period-to-period comparison of results is not necessarily indicative of results for future periods.

Three Months Ended September 30,

(dollars in thousands)

Revenue from related party

Total revenue

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Interest income

Other (expense) income, net

Other expense, net

Change in fair value of earnout liability

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

Net (loss) income

net (loss) income attributable to redeemable noncontrolling interest

Net (loss) income attributable to Class A common stockholders

Operating margin

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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,

The table below presents a disaggregation of EVgo’s revenue for the three months ended September 30, 2022 and 2021:

Three Months Ended September 30,

(dollars in thousands)

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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.

Total revenue for the three months ended September 30, 2022 increased $4.3 million, or 70%, to $10.5 million compared to $6.2 million for the three months ended September 30, 2021.

As further discussed below, the increase in revenue during the three months ended September 30, 2022 was primarily due to a 62% increase in retail charging revenue as a result of increased throughput, as well as 152% increase in ancillary revenue and a 72% 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, retail, for the three months ended September 30, 2022 increased $2.0 million, or 62%, to $5.2 million compared to $3.2 million for the three months ended September 30, 2021.

Period-over-period growth was due to an overall increase in usage and subscription fees driven primarily by increased charging volume and a growing number of customers.

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, OEM, for the three months ended September 30, 2022 increased $0.1 million, or 67%, to $0.3 million compared to $0.2 million for the three months ended September 30, 2021.

Period-over-period growth was primarily due to the addition of a new OEM partner.

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.

Charging revenue, commercial, for the three months ended September 30, 2022 stayed flat at $0.7 million compared to the three months ended September 30, 2021 as an increase in revenue due to increased charging volumes by the Company’s public fleet customers was offset by the revenue impacts of the expiration of certain take-or-pay contracts in 2022.

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.

Network revenue, OEM, for the three months ended September 30, 2022 stayed flat at $0.4 million compared to the three months ended September 30, 2021 as there were no material changes to membership activity or 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.

Ancillary revenue for the three months ended September 30, 2022 increased $1.7 million, or 152%, to $2.8 million compared to $1.1 million for the three months ended September 30, 2021.

The increase was primarily due to engineering and construction revenue recognized in relation to a new EVgo eXtend ™ client, as well as higher PlugShare revenue and operating and maintenance 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.

Regulatory credit sales for the three months ended September 30, 2022 increased $0.5 million, or 72%, to $1.2 million compared to $0.7 million for the three months ended September 30, 2021.

The period-over-period increase was primarily due to increased network capacity and throughput, partially offset by a 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.

Cost of revenue for the three months ended September 30, 2022 increased $3.7 million, or 77%, to $8.5 million compared to $4.8 million for the three months ended September 30, 2021.

The increase in cost of revenue was due to an increase of $1.1 million in non-energy costs driven by increased stall count and $1.5 million in increased energy and other variable costs due to increased throughput, as well as a $1.1 million increase in ancillary cost of revenue driven by engineering and construction costs recognized in relation to a new EVgo eXtend ™ client, as well as operating and maintenance expenses and web hosting costs.

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.

Depreciation and amortization for the three months ended September 30, 2022 increased $2.2 million, or 72%, to $5.2 million compared to $3.0 million for the three months ended September 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.

Gross loss for the three months ended September 30, 2022 increased $1.6 million, or 94%, to $3.2 million compared to $1.7 million for the three months ended September 30, 2021.

Gross margin for the three months ended September 30, 2022 was negative 30.5% compared to negative 26.7% for the three months ended September 30, 2021 as growth in revenue was more than offset by higher cost of revenue and depreciation and amortization.

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.

General and administrative expenses for the three months ended September 30, 2022 increased $11.4 million, or 55%, to $32.3 million compared to $20.9 million for the three months ended September 30, 2021.

The difference was driven by an $7.5 million increase in payroll expenses due to higher headcount and higher share-based compensation, a $1.4 million increase in loss on fixed asset disposals, a $1.7 million increase in legal service and professional service expenses, as well as a $1.2 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.

Depreciation, amortization and accretion expenses for the three months ended September 30, 2022 increased $1.1 million, or 33%, to $4.5 million compared to $3.4 million for the three months ended September 30, 2021.

The increase was primarily due to higher intangible asset amortization related to 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.

During the three months ended September 30, 2022, EVgo had an operating loss of $40.0 million, an increase of $14.1 million, or 54%, compared to $25.9 million for the three months ended September 30, 2021 driven primarily by an increase in general and administrative expenses.

Operating margin for the three months ended September 30, 2022 was negative 381.1% compared to negative 419.5% for the three months ended September 30, 2021.

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.

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

There was no interest expense for the three months ended September 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.

There was no interest expense, related party for the three months ended September 30, 2022.

For the three months ended September 30, 2021, interest expense, related party was de minimis.

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.

Interest income for the three months ended September 30, 2022 was $1.6 million.

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

The increase was a result of the interest earned on cash and cash equivalents and debt securities held by the Company during the three months ended September 30, 2022.

Other Expense, Net

Other expense, net, for the three months ended September 30, 2022 increased by $0.2 million, or 143%, to $0.3 million compared to $0.1 million for the three months ended September 30, 2021.

The increase was primarily due to a $0.2 million increase in realized losses on investments.

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.

For the three months ended September 30, 2022, there was a $12.2 million loss on change in fair values of warrant and earnout liabilities compared to a $49.6 million gain for the three months ended September 30, 2021.

The change between periods was primarily due to an increase in the fair value of the warrant liability during the third quarter of 2022 and a decrease in the fair value of the warrant liability during the third quarter of 2021.

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.

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

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,

Net loss for the three months ended September 30, 2022 was $50.9 million, compared to net income of $23.6 million for the three months ended September 30, 2021.

The change was primarily driven by changes in fair values of the warrant and earnout liabilities and increased general and administrative expenses incurred to support growth.

Nine Months Ended September 30, 2022 and 2021

The table below presents EVgo’s results of operations for the nine months ended September 30, 2022 and 2021.

The period-to-period comparison of results is not necessarily indicative of results for future periods.

Nine Months Ended September 30,

(dollars in thousands)

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net loss attributable to redeemable noncontrolling interest

Net loss attributable to Class A common stockholders

Net (loss) income attributable to Class A common stockholders

Operating margin

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Number of DC stalls

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

Six Months Ended June 30,

The table below presents a disaggregation of EVgo’s revenue for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

(dollars in thousands)

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Total 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.

Total revenue for the nine months ended September 30, 2022 increased $12.2 million, or 81%, to $27.3 million compared to $15.1 million for the nine months ended September 30, 2021.

As further discussed below, the increase in revenue during the nine months ended September 30, 2022 was primarily due to a 74% increase in retail charging revenue, a 136% increase in ancillary revenue, as well as a 143% increase in regulatory credit sales.

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.

Charging revenue, retail, for the nine months ended September 30, 2022 increased $5.6 million, or 74%, to $13.1 million compared to $7.5 million for the nine months ended September 30, 2021.

Year-over-year growth was due to an overall increase in usage and subscription fees driven primarily by increased charging volume and a growing number of customers, 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, OEM, for the nine months ended September 30, 2022 stayed flat at $0.6 million compared to the nine months ended September 30, 2021 as the revenue lost from an OEM agreement that ended in 2021 was offset by revenue from an OEM agreement that became effective in 2021 and increased usage from existing agreements.

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.

Charging revenue, commercial, for the nine months ended September 30, 2022 increased $0.3 million, or 18%, to $2.0 million compared to $1.7 million for the nine months ended September 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, as well as the ongoing recovery from COVID-19, partially offset by the expiration of certain take-or-pay contracts in 2022.

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.

Network revenue, OEM, for the nine months ended September 30, 2022 increased $0.7 million, or 58%, to $1.8 million compared to $1.2 million for the nine months ended September 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 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.

Ancillary revenue for the nine months ended September 30, 2022 increased $2.9 million, or 136%, to $5.1 million compared to $2.1 million for the nine months ended September 30, 2021.

The increase was primarily due to the acquisition of PlugShare and subsequent inclusion of PlugShare’s revenues in ancillary revenue, as well as engineering and construction revenue recognized in relation to a new EVgo eXtend ™ client.

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.

Regulatory credits for the nine months ended September 30, 2022 increased $2.8 million, or 143%, to $4.7 million compared to $1.9 million for the nine months ended September 30, 2021.

The year-over-year increase was primarily due to increased network capacity and throughput, partially offset by a 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.

Cost of revenue for the nine months ended September 30, 2022 increased $7.2 million, or 60%, to $19.1 million compared to $11.9 million for the nine months ended September 30, 2021.

The increase in cost of revenue was due to an increase of $3.2 million in non-energy costs related to increased stall count, a $3.1 million increase in energy and other variable costs due to increased throughput, as well as a $1.2 million increase in ancillary cost of sales driven by engineering and construction costs recognized in relation to a new EVgo eXtend ™ client, higher operating and maintenance costs, and increased web hosting 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.

Depreciation and amortization for the nine months ended September 30, 2022 increased $4.6 million, or 56%, to $12.7 million compared to $8.2 million for the nine months ended September 30, 2021 due to higher stall count.

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.

Gross loss for the nine months ended September 30, 2022 decreased by $0.5 million, or 9%, to $4.6 million compared to $5.0 million for the nine months ended September 30, 2021.

Gross margin for the nine months ended September 30, 2022 was negative 16.7% compared to negative 33.2% for the nine months ended September 30, 2021.

The change in gross margin was primarily due to higher revenue, including increased retail charging revenue, partially offset by increased cost of revenue and depreciation and amortization.

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.

General and administrative expenses for the nine months ended September 30, 2022 increased $43.7 million, or 95%, to $89.9 million compared to $46.2 million for the nine months ended September 30, 2021.

The difference was driven by a $27.4 million increase in payroll expenses due to higher headcount and higher share-based compensation, a $4.7 million increase in legal service and professional service expenses, a $4.2 million increase in software expenses, a $4.0 million increase in loss on fixed asset disposals, and a $2.6 million increase in insurance expenses.

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.

Depreciation, amortization and accretion expenses for the nine months ended September 30, 2022 increased $4.1 million, or 48%, to $12.5 million compared to $8.4 million for the nine months ended September 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.

During the nine months ended September 30, 2022, EVgo had an operating loss of $107.0 million, an increase of $47.3 million, or 79%, compared to $59.7 million for the nine months ended September 30, 2021.

Operating margin for the nine months ended September 30, 2022 was negative 392.2%, compared to negative 395.4% for the nine months ended September 30, 2021 The increase in operating loss period-over-period was primarily due to an increase in general and administrative expenses and depreciation and amortization, 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.

For the nine months ended September 30, 2022, interest expense was de minimis.

There was no interest expense for the nine months ended September 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.

There was no interest expense, related party for the nine months ended September 30, 2022.

For the nine months ended September 30, 2021, interest expense, related party was $1.9 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 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.

Interest income for the nine months ended September 30, 2022 was $2.3 million.

Interest income for the nine months ended September 30, 2021 was de minimis.

The increase was a result of the interest earned on cash and cash equivalents and debt securities held by the Company during the nine months ended September 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.

Other (expense) income, net, for the nine months ended September 30, 2022 was $0.8 million of other expense, net, compared to $0.5 million of other income, net, for the nine months ended September 30, 2021.

The decrease was primarily due to unrealized and realized 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 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 .

For the nine months ended September 30, 2022, there was a $16.3 million gain on change in fair values of warrant and earnout liabilities, compared to a $49.6 million gain for the nine months ended September 30, 2021.

The change between periods was primarily due to a larger reduction in the fair value of the warrant liability during the first nine months of 2021 than in the first nine 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, partially offset by improved gross loss and change in fair value of warrant and earnout liabilities.

For the nine months ended September 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 a change in the valuation allowance on its deferred tax assets.

Net loss for the nine months ended September 30, 2022 was $89.2 million, compared to a net loss of $11.4 million for the nine months ended September 30, 2021.

The increased loss was primarily due to increased general and administrative expenses incurred to support growth and a smaller gain on the change in fair value of the warrant liability, partially offset by improved gross margin.

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.

This Quarterly Report includes the following non-GAAP financial measures:

“Adjusted Cost of Sales,” “Adjusted Gross Profit,” “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.

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(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 Profit 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.

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)

EVgo defines Adjusted EBITDA as EBITDA plus (i) share-based compensation expense, (ii) loss on disposal of property and equipment, (iii) loss (gain) on investments, (iv) bad debt expense, (v) change in fair value of earnout liability, (vi) change in fair value of warrant liability, and (vii) certain other items that we believe are not indicative of our ongoing performance.

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

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Total revenue

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Adjusted gross profit

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

Adjusted gross margin

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

(dollars in thousands)

Cost of sales, under previous method 1

Reclassification

Cost of sales, as reported

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:

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

Three Months Ended

Six Months Ended

(dollars in thousands)

Net income (loss)

Nine Months Ended

September 30,

(in thousands)

Net (loss) income

Depreciation, net of capital-build amortization

4 unchanged sentences

Loss on disposal of property and equipment

Unrealized loss (gain) on equity securities

Loss (gain) on investments

Bad debt expense

1 unchanged sentence

Change in fair value of warrant liability

Nonrecurring costs

Adjusted EBITDA

6 unchanged sentences

Three Months Ended

Six Months Ended

(dollars in thousands)

Nine Months Ended

September 30,

(in thousands)

Total revenues

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Year-over-year percentage change in total Receipts

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.

1 Change in deferred revenue for the nine months ended September 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.

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.

As of September 30, 2022, EVgo had a cash and restricted cash balance of $301.0 million and working capital of $248.5 million.

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

The Company’s net cash outflow for the nine months ended September 30, 2022 was $184.2 million.

EVgo believes its cash on hand as of September 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, revenues from its various revenue streams, including retail charging revenue and OEM charging and network revenue, government grants, 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).

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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.

Six Months Ended June 30,

(dollars in thousands)

Nine Months Ended September 30,

(in thousands)

Cash flows used in operating activities

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Cash flows provided by financing activities

Net decrease in cash, restricted cash and cash equivalents

Net (decrease) increase in cash and restricted cash

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.

Cash used in operating activities for the nine months ended September 30, 2022 was $57.3 million compared to $17.8 million for the nine months ended September 30, 2021.

The year-over-year change primarily reflected a $21.5 million cash loss from operations, a $17.4 million decrease in deferred revenue, and a $6.4 million decrease in customer deposits, partially offset by a $6.0 million decrease in prepaid expenses and other current and noncurrent assets and a $1.6 million decrease in 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.

Cash used in investing activities for the nine months ended September 30, 2022 was $133.3 million, primarily comprised of purchases of property, equipment and software, including costs incurred for construction in process and purchases of charging equipment.

During the nine months ended September 30, 2021, cash used in investing activities was $62.4 million, consisting of $39.7 million of purchases of property and equipment, largely comprised of purchases of charging equipment and costs incurred for construction in process, and $22.8 million paid, net of cash received, for the acquisition of Recargo, Inc.

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.

Cash provided by financing activities for the nine months ended September 30, 2022 was $6.5 million, primarily comprised of proceeds from capital-build funding.

Cash provided by financing activities for the nine months ended September 30, 2021 was $593.5 million, consisting principally of $601.6 million in proceeds received in connection with the CRIS Business Combination, partially offset by $28.1 million in transaction costs paid in connection with the CRIS Business Combination.

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.

EVgo’s working capital as of September 30, 2022 was $248.5 million, compared to $459.5 million as of December 31, 2021.

During the nine months ended September 30, 2022, EVgo’s cash balance decreased by $184.2 million, receivables from related party decreased $1.5 million, prepaid expenses decreased by $1.6 million and accrued liabilities increased by $19.0 million.

Critical Accounting Policies and Estimates

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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.

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

See “Part I, Item 1.

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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.

Accordingly, pursuant to Item 305(e) of Regulation S-K, the Company is not required to provide the information required by this Item.

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