EVgo Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. EVgo owns and operates a U.S. public DC fast-charging network. Financial amounts below are in U.S. dollars; “m” means millions.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $9.1m | $4.8m | $16.8m | $8.9m |
| Gross loss (margin) | $(0.7)m (-8.2%) | $(1.7)m (-35.0%) | $(1.3)m (-8.0%) | $(3.4)m (-37.6%) |
| Operating loss | $(37.1)m | $(17.6)m | $(67.0)m | $(33.8)m |
| Net income (loss) | $17.0m | $(18.4)m | $(38.3)m | $(35.0)m |
| Adjusted EBITDA, non-GAAP | $(19.8)m | $(11.0)m | $(38.0)m | $(20.8)m |
Q2 net income included a $53.6m gain from lower fair values of warrant and earnout liabilities; it does not indicate operating profitability. Class A stockholders’ Q2 net income was $4.5m; their six-month loss was $9.9m. Revenue grew 90% in Q2 and 88% for the half year. Network throughput rose to 10.1 GWh in Q2 from 6.1 GWh and to 18.1 GWh for the half year from 10.2 GWh; network stalls increased to 1,937 from 1,548.
Retail charging was the largest revenue stream and rose 76% in Q2. Regulatory-credit sales increased 215% to $2.1m, partly reflecting a new buyer and sales of prior-year credits. Six-month OEM charging revenue declined 29%, principally following expiration of an OEM program. Adjusted gross margin, a non-GAAP measure, was 37.2% in Q2 versus 21.4% and 37.1% for the half year versus 20.1%.
At June 30, cash, restricted cash and cash equivalents were $345.0m; short- and long-term investments totaled $34.6m. Working capital was $326.5m, down from $459.5m at year-end 2021. Six-month operating cash outflow was $38.4m; investing outflow was $106.8m, including $72.3m for property, equipment and software and $34.7m for investments. Financing provided $5.0m, mainly from capital-build funding. Cash, restricted cash and cash equivalents fell $140.2m over the period. The balance sheet reported $32.8m of operating lease liabilities; no material conventional borrowing balance is reported, and interest expense was minimal.
Material changes and unusual items
- General and administrative expense rose 141% in Q2 to $32.2m, and 127% for the half year to $57.6m. Management attributed the increases mainly to payroll and share-based compensation, higher headcount, insurance, professional services and software.
- Gross loss narrowed as revenue growth and higher regulatory-credit sales improved cost absorption, but operating loss widened because overhead and depreciation, amortization and accretion increased.
- PlugShare, acquired in 2021, contributed to ancillary revenue growth and higher amortization. The company also adopted the lease accounting standard ASC 842 on January 1, 2022, recognizing operating lease assets and liabilities.
- In July 2022, EVgo sold all its debt securities. The filing does not state the resulting sale proceeds.
- Financial statement presentation was reclassified for certain costs between cost of sales and general and administrative expense; management said the change did not affect operating loss or net income.
Outlook, commitments and risks
Management said June 30 cash on hand was sufficient for current working-capital and capital-expenditure needs for at least 12 months from the filing date. No specific revenue or earnings guidance is provided. Management expects G&A to rise in dollars as the business grows, while declining over time as a percentage of revenue.
- EVgo’s July Pilot agreements with Pilot Travel Centers and GM cover development, operation and maintenance of up to 2,000 charging stalls at about 500 sites in more than 40 states. Missed construction milestones can lead to liquidated damages or termination.
- Under a July Delta purchase order, EVgo must buy at least 1,000 chargers, with an option for 1,100. The chargers are intended partly for the Pilot program. The take-or-pay commitment, supplier concentration, and potential mismatch between charger payments and customer receipts may pressure cash flow.
- The separate GM agreement requires 3,250 chargers by year-end 2025, with 72% due by year-end 2023, and at least 93% network availability. As of June 30, EVgo said 221 stalls remained to meet a milestone and 428 more stalls were to open by September 30, 2022; missed milestones can trigger a cure process, termination and damages up to $15m.
- The Nissan 2.0 agreement requires 58 chargers by November 30, 2022 and 210 by February 29, 2024. Delays may result in penalties of up to $70,000 per delayed site, subject to the agreement’s terms.
- Management cited COVID-related construction and supply-chain delays, inflation and higher interest rates, geopolitical uncertainty, EV adoption and competition, reliance on government incentives and volatile regulatory-credit prices as risks.
- Disclosure controls were not effective at June 30 because of material weaknesses in internal controls, including newly identified deficiencies in retail charging revenue completeness and accuracy. Management said the financial statements were fairly stated and described remediation efforts, which may continue beyond 2022 and increase costs.
- EVgo reported no material pending or threatened litigation. The tax receivable agreement may require substantial future payments if tax benefits are realized; no liability had been recorded at June 30.
Investor verification priorities
- Separate recurring operating performance from the Q2 noncash warrant and earnout fair-value gain; review Adjusted EBITDA and its reconciliation to GAAP results.
- Track cash burn, capital spending, investment-sale proceeds and liquidity against the company’s 12-month sufficiency statement.
- Verify progress on Pilot, GM and Nissan construction milestones, charger deliveries, payment timing and any potential penalties or termination rights.
- Monitor remediation of retail charging revenue controls and any subsequent changes to reported results or control effectiveness.
- Assess whether revenue growth and improved gross margin can continue without relying disproportionately on regulatory-credit sales, and confirm the effects of the expired OEM program.