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 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.
Overview
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. 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. EVgo believes 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 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. 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 ™ , through which certain Site Hosts can invest in and build EV charging stations that the Site Host owns and EVgo operates.
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● 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.
● Network Revenue, OEM: 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. 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 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 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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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 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 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 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.
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 in the coming years.
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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
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 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. 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 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
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.
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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 directors’ and officers’ 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, 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 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 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 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.
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.
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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
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. 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:
September 30,
September 30,
2022
2021
Network throughput (GWh) for the three months ended
12.1
8.0
Network throughput (GWh) for the nine months ended
30.2
18.2
Number of DC stalls on EVgo network as of
2,115
1,595
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; domestic content requirements or other policy constraints; 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.
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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 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 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 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.
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 and 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.
Government Mandates, Incentives and Programs
The U.S. 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, such as payments for regulatory credits. 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. 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.
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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, 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
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 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.
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. 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 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.
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Results of Operations
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,
Change
(dollars in thousands)
2022
2021
$
%
Total revenue
$
10,509
$
6,181
$
4,328
70
%
Cost of revenue
(8,530)
(4,814)
(3,716)
77
%
Depreciation and amortization
(5,187)
(3,020)
(2,167)
72
%
Gross loss
(3,208)
(1,653)
(1,555)
(94)
%
General and administrative
32,322
20,882
11,440
55
%
Depreciation, amortization and accretion
4,516
3,394
1,122
33
%
Operating loss
(40,046)
(25,929)
(14,117)
(54)
%
Interest expense
(8)
—
(8)
Interest expense, related party
—
(11)
11
100
%
Interest income
1,636
33
1,603
999+
%
Other expense, net
(347)
(143)
(204)
(143)
%
Change in fair value of earnout liability
(1,299)
3,695
(4,994)
(135)
%
Change in fair value of warrant liability
(10,858)
45,946
(56,804)
(124)
%
Net (loss) income
(50,922)
23,591
(74,513)
(316)
%
Less: net (loss) income attributable to redeemable noncontrolling interest
(37,704)
17,461
(55,165)
(316)
%
Net (loss) income attributable to Class A common stockholders
$
(13,218)
$
6,130
$
(19,348)
(316)
%
Gross margin
(30.5)
%
(26.7)
%
Operating margin
(381.1)
%
(419.5)
%
Network throughput (GWh)
12.1
8.0
Number of DC stalls
2,115
1,595
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,
Change
(dollars in thousands)
2022
2021
$
%
Charging revenue, retail
$
5,176
$
3,203
$
1,973
62
%
Charging revenue, OEM
252
151
101
67
%
Charging revenue, commercial
678
688
(10)
(1)
%
Network revenue, OEM
448
351
97
28
%
Ancillary revenue
2,777
1,104
1,673
152
%
Regulatory credit sales
1,178
684
494
72
%
Total revenue
$
10,509
$
6,181
$
4,328
70
%
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.
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Charging Revenue, Retail
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 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 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 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 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 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 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 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.
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Gross Loss and Gross Margin
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 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 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 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 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, 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 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.
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Changes in Fair Values of Warrant and Earnout Liabilities
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.
Income Taxes
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 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.
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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,
Change
(dollars in thousands)
2022
2021
$
%
Revenue
$
27,285
$
14,533
$
12,752
88
%
Revenue from related party
—
562
(562)
(100)
%
Total revenue
27,285
15,095
12,190
81
%
Cost of revenue
(19,095)
(11,927)
(7,168)
60
%
Depreciation and amortization
(12,742)
(8,172)
(4,570)
56
%
Gross loss
(4,552)
(5,004)
452
9
%
General and administrative
89,928
46,227
43,701
95
%
Depreciation, amortization and accretion
12,535
8,448
4,087
48
%
Operating loss
(107,015)
(59,679)
(47,336)
(79)
%
Interest expense
(21)
—
(21)
Interest expense, related party
—
(1,926)
1,926
100
%
Interest income
2,327
34
2,293
999+
%
Other (expense) income, net
(769)
489
(1,258)
(257)
%
Change in fair value of earnout liability
1,328
3,695
(2,367)
(64)
%
Change in fair value of warrant liability
14,981
45,946
(30,965)
(67)
%
Loss before income tax expense
(89,169)
(11,441)
(77,728)
(679)
%
Income tax expense
(22)
—
(22)
Net loss
(89,191)
(11,441)
(77,750)
(680)
%
Less: net loss attributable to redeemable noncontrolling interest
(66,053)
(17,571)
(48,482)
(276)
%
Net (loss) income attributable to Class A common stockholders
$
(23,138)
$
6,130
$
(29,268)
(477)
%
Gross margin
(16.7)
%
(33.2)
%
Operating margin
(392.2)
%
(395.4)
%
Network throughput (GWh)
30.2
18.2
Number of DC stalls
2,115
1,595
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,
Change
(dollars in thousands)
2022
2021
$
%
Charging revenue, retail
$
13,067
$
7,505
$
5,562
74
%
Charging revenue, OEM
592
633
(41)
(6)
%
Charging revenue, commercial
2,041
1,725
316
18
%
Network revenue, OEM
1,825
1,158
667
58
%
Ancillary revenue
5,076
2,147
2,929
136
%
Regulatory credit sales
4,684
1,927
2,757
143
%
Total revenue
$
27,285
$
15,095
$
12,190
81
%
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.
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Charging Revenue, Retail
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 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 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 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 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 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 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.
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Depreciation and Amortization
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 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 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 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 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 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, 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 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.
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Other (Expense) Income, Net
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
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.
Income Taxes
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
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 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. 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 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 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.
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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,
September 30,
(in thousands)
2022
2021
2022
2021
Total revenue
$
10,509
$
6,181
$
27,285
$
15,095
Cost of sales
13,717
7,834
31,837
20,099
Less: Depreciation and amortization in cost of sales
(5,187)
(3,020)
(12,742)
(8,172)
Less: Share-based compensation and other
(17)
(3)
(37)
9
Adjusted cost of sales
$
8,513
$
4,811
$
19,058
$
11,936
Adjusted gross profit
$
1,996
$
1,370
$
8,227
$
3,159
Adjusted gross margin
19.0
%
22.2
%
30.2
%
20.9
%
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
Nine Months Ended
September 30,
September 30,
(in thousands)
2022
2021
2022
2021
Net (loss) income
$
(50,922)
$
23,591
$
(89,191)
$
(11,441)
Adjustments:
Depreciation, net of capital-build amortization
5,275
3,079
12,963
8,308
Amortization
3,915
2,951
10,843
7,246
Accretion
513
384
1,471
1,066
Interest income
(1,636)
(33)
(2,327)
(34)
Interest expense
8
11
21
1,926
State income tax
—
—
22
—
EBITDA
(42,847)
29,983
(66,198)
7,071
Share-based compensation
6,893
4,282
17,441
5,293
Loss on disposal of property and equipment
1,729
292
4,618
639
Loss (gain) on investments
344
143
749
(436)
Bad debt expense
(84)
124
67
292
Change in fair value of earnout liability
1,299
(3,695)
(1,328)
(3,695)
Change in fair value of warrant liability
10,858
(45,946)
(14,981)
(45,946)
Other
(367)
545
(556)
1,722
Adjusted EBITDA
$
(22,175)
$
(14,272)
$
(60,188)
$
(35,060)
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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
Nine Months Ended
September 30,
September 30,
(in thousands)
2022
2021
2022
2021
Total revenues
$
10,509
$
6,181
$
27,285
$
15,095
Change in deferred revenue 1
4,116
165
3,544
20,943
Total Receipts
$
14,625
$
6,346
$
30,829
$
36,038
Year-over-year percentage change in total Receipts
130%
(14)%
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 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). 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.
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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
Nine Months Ended September 30,
(in thousands)
2022
2021
Cash flows used in operating activities
$
(57,337)
$
(17,797)
Cash flows used in investing activities
(133,322)
(62,441)
Cash flows provided by financing activities
6,458
593,452
Net (decrease) increase in cash and restricted cash
$
(184,201)
$
513,214
Operating Activities. 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 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 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 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.
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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 nine months ended September 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.”
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.
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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. Accordingly, 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.