EVgo Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. EVgo owns and operates a U.S. public DC fast-charging network and also provides charging infrastructure, operations and related services through its eXtend business.
Financial and operating performance
Amounts below are in millions of dollars except per-share data, percentages and operating metrics.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $50.6 | $9.1 | $75.9 | $16.8 |
| Gross profit (loss) | $5.5 | $(0.7) | $5.6 | $(1.3) |
| Gross margin | 10.9% | (8.2)% | 7.3% | (8.0)% |
| Operating loss | $(33.6) | $(37.1) | $(76.2) | $(67.0) |
| Net income (loss) | $(21.5) | $17.0 | $(70.6) | $(38.3) |
| Net income (loss) attributable to Class A stockholders | $(7.0) | $4.5 | $(20.1) | $(9.9) |
| Adjusted EBITDA (non-GAAP) | $(10.6) | $(19.8) | $(30.6) | $(38.0) |
- Q2 revenue grew 457%; first-half revenue grew 352%. The main driver was eXtend revenue, which rose to $33.3 million in Q2 and $43.6 million for the first half, primarily under the Pilot agreement. Retail charging revenue also increased 107% in Q2 and 99% year to date.
- Network throughput was 24.9 GWh in Q2 and 42.8 GWh for the first half, versus 10.1 GWh and 18.1 GWh, respectively, a year earlier. Operational DC stalls increased to 2,518 from 1,937.
- Gross margin improved year over year, which management attributed to better utilization of charging-station costs and eXtend revenue. However, adjusted gross margin fell to 25.4% from 37.3% in Q2 and to 25.4% from 37.2% for the first half. These are non-GAAP measures.
- Operating loss narrowed in Q2 but widened for the first half as general and administrative expenses increased 25% to $72.2 million. First-half net loss also increased, partly because gains from changes in warrant and earnout fair values were much smaller than in 2022. Q2 2022 net income included a substantial noncash gain from those fair-value changes.
- Q2 basic and diluted loss per Class A share was $0.08; first-half loss per share was $0.25. These figures reflect results attributable to Class A stockholders, not total consolidated net loss.
Cash, liquidity and capital
- Cash, cash equivalents and restricted cash totaled $257.4 million at June 30, 2023, versus $246.5 million at December 31, 2022. Working capital was $215.9 million, up from $188.1 million.
- First-half operating cash use was $22.5 million, investing cash use was $99.9 million, and financing cash inflow was $133.4 million. Capital expenditures for property, equipment and software were $100.1 million.
- Financing included $128.0 million gross proceeds from a May underwritten offering (30.1 million Class A shares; $123.4 million net proceeds) and $5.8 million gross proceeds from ATM sales. The offering increased the share count and diluted existing holders.
- The balance sheet reports no funded borrowings and the income statement reports no interest expense for the first half of 2023. Operating lease liabilities were $53.3 million; an additional estimated $45.5 million of lease commitments related to leases not yet commenced. Outstanding equipment purchase-order commitments were $56.1 million.
- Management said available cash was sufficient for current working-capital and capital-expenditure needs for at least 12 months from the filing date. This is management’s assessment, not a guarantee; the business has a history of operating losses and negative operating cash flows.
Outlook, risks and unusual items
- The filing provides no specific financial guidance or quantified forward outlook. Management expects general and administrative expenses to increase in absolute dollars as the business grows.
- Revenue concentration is significant: one customer represented 65.7% of Q2 revenue and 57.3% of first-half revenue. Two customers represented 39.9% of net accounts receivable at quarter-end. Two vendors supplied 84.7% of Q2 charging equipment.
- The Pilot eXtend build program materially boosted reported revenue; eXtend projects entail associated costs and revenue may vary with construction progress and contract timing. EVgo has obligations to purchase at least 1,000 Delta chargers, with take-or-pay exposure subject to contractual limits.
- GM contract obligations include installing 3,250 stalls by March 31, 2026, with 44% due by December 31, 2023, and maintaining at least 95% network availability. Failure to meet milestones or availability requirements could lead to termination and liquidated damages of up to $15 million. Nissan build schedules also carry potential penalties, subject to extensions and waivers described in the filing.
- Management cited risks from EV-adoption uncertainty, competition, supply-chain and permitting delays, inflation, regulatory-credit price volatility, government-incentive requirements and evolving charging standards. In particular, OEM announcements to adopt NACS could require network upgrades or create transition costs.
- Potentially unusual or nonrecurring items include $5.8 million of first-half impairment expense, $14.9 million of share-based compensation, and costs associated with a company reorganization and a Delaware Chancery Court petition. The filing says the latter costs are not expected to recur. No material legal proceedings were reported.
- Disclosure controls were deemed ineffective at June 30, 2023 because of existing material weaknesses in risk assessment, information and communication, process-level controls and IT controls. Management is implementing remediation; it said remediation may extend beyond 2023.
- The Tax Receivable Agreement generally entitles specified holders to 85% of certain realized or deemed tax savings. No liability had been recorded at quarter-end, but future payments could reduce available cash; early termination or a change of control could accelerate payments.
Most important facts for investors to verify
- Whether the rapid revenue growth, especially eXtend revenue, converts into durable margins and operating cash flow.
- Customer and equipment-vendor concentration, contract payment timing, and progress against Pilot, GM and Nissan construction and availability obligations.
- Cash burn and capital spending relative to the $257.4 million cash balance, lease obligations, charger purchase commitments and any future financing needs.
- The impact of the May equity issuance and any further share issuance on ownership dilution.
- Progress in remediating material weaknesses in internal control, and any subsequent changes to liquidity, commitments, customer concentration or contract performance.