Q2 2022 EVgo Inc Earnings Call
Greetings and welcome to E V go second quarter 2022 earnings calls.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It's now my pleasure to introduce your host Ted Brooks Investor Relations for E. V. Go. Thank you you may begin welcome to <unk> second quarter 2022 earnings call. My name is Ted Brooks and I head Investor Relations at the company.
Today's call is being webcast and can be accessed from the investors section of our website at investors <unk> E V go Dot com.
The call will be archived and available there and the company's result, investor presentation, and a transcript of today's proceedings will be available at the events and presentations section of the investors page after the conclusion of today's call.
Joining me on today's call are could easily easy go CEO and oldest chevron cobalt the company's chief financial Officer.
Today, we will be discussing he if he goes latest financial results for the second quarter of 2022, followed by a Q&A session.
During the call management will be making forward looking statements regarding the 2022 fiscal year and our outlook for expected growth and investment initiatives.
These forward looking statements involve risks and uncertainties many of which are beyond our control and could cause actual results to differ materially from our expectations, including among other risks and uncertainties.
The severity and duration of the effects of the COVID-19 pandemic. These forward looking statements apply as of today and we undertake no obligation to update these statements after the call.
For a more detailed description of factors that could cause actual results to differ please refer to our Form 10-Q filed soon with the SEC and posted to the investors section of our website.
Also please note certain financial measures we use on this call on a non-GAAP basis for historical periods. We provide reconciliations of these non-GAAP measures to GAAP financial measures. The investor presentation can be found on the investors section of our website.
With that I'll turn the call over to Kathy Zoe E V go CEO kathi.
We're excited to be with you following another quarter of progress for E. D go.
Our results for the second quarter together with the milestone partnership we recently announced with pilot and General Motors reinforced our leadership position in ultrafast EV charging.
I wanted to touch on a few important themes. This morning, one E. V. Go has continued operational success too.
Two our commercial progress having signed a number of important partnerships.
Three the work E. V go has been doing on the regulatory front to prepare for the massive investment that the U S is making under the infrastructure investment and jobs Act I soon to become law inflation reduction that.
Four and finally, the importance of technology enabled innovation and why it's critical to all of the work E V go does including maintaining industry, leading reliability and uptime standard.
Let's start on the operational side.
E V go placed 170 stores into operation across 17 states during Q2, bringing our total stalls in operation or under construction to 2000 and 397.
Through the first six months of this year, we have already eclipsed the number of cells, we placed into operation in all of 2021.
The same is true for mobile lifestyles, which for the first half of the year are already 15% above where they were for the entirety of 2021.
At the same time, we continue to increase our active engineering and construction development pipeline, which is now over 3600, notably these numbers do not reflect the additional solves for the pilot G. M partnership announced a few weeks ago.
Throughput with pinpoint one gigawatt hours, an increase of 66% over the second quarter of 2021.
Retail volumes were also encouraging and the revival of volumes among Uber and Lyft drivers what combined throughput was up 123% versus the second quarter of 2021 pointed the ongoing normalization of the post COVID-19 period, and the continued easy adoption trends everywhere.
Although we'll share more about some of this in our financial results later.
In June we activated plug in charge for all G. Any of these on the E. V go network plug in charge, which we would need to go called auto charge plus enabled E. D. Do customers just started fast charging session and second by simply plugging in the car in no need to swipe, a credit card or even opened a mobile app.
He goes auto charge plus is another example of homegrown innovation enhancing the driver experience through a collaboration with a variety of automakers.
The auto charge plus rollout also shows how easy to open apply our technology in a number of different ways to meet the diverse needs of our customers and partners.
We can incorporate auto charge plus into proprietary offering like G. M. O P. M charged III 60 ecosystem in fleet offering in conjunction with our Optima software products and more broadly to our retail drivers across E. V goes best charging network.
On fleet offering E V go as normal part of our managed charging pilot program with a major Midwestern investor owned utility if they work overtime to electrify their fleet of vehicles.
As part of this easy go will assist with installation testing and data reporting services, which will be powered by the E. V go often enough to meet charging optimization software and the EV gold charging service and maintenance program.
We also recently announced a charging partnership with the city of Philadelphia, and which the city will use E V goes public charging network as they electrify their fleet of over 6000 municipal vehicles.
Both are very exciting and emblematic of the fleet electrification that it's taking hold across the U S.
On the partnership side in May we announced a commercial agreement with Cadillac offered drivers of the new 'twenty 'twenty three in theory, the option of two years aren't limited public fast charging on the easy go network.
Cadillac selected E V go to develop this fast charging off it can make purchasing the new lyric E b, even more enticing.
Last month in collaboration with G M and pilot company, we announced an easy go external for that.
The pull up to 2000 charging sells and up to 500 pilot flying J locations across the United States.
With 78% of the entire Continental U S. Interstate system within 10 miles of a pilot flying J location. This collaboration represents a giant expansion of EV goes beach and is poised to greatly enhance the experience of driving an EV on Americas Interstates and highway corridors.
This G M pilot partnership represents the first major announcement of the E. V go extend offering we highlighted earlier this year as.
As we have discussed the growth in demand for Evs and the passage of the infrastructure investment and jobs Act in 2021.
Increased interest in charging infrastructure and community as far and wide.
Our history and track record in operating complex public fast charging networks with higher liability positions E V go as the ideal partner.
As part of the G. M pilot agreement E. V go will procure construct operate and maintain these charging self providing us with both an increase in near term revenue and longer term contracted revenues.
In addition to the procurement.
Okay associated with this contract recall the E. V. Go will also be servicing these assets after installation, providing operational and maintenance support technology assistance on the hardware and software side and running the charging networks.
Since we've been a public company, we've always discussed with investors our laser focus on profitability in the business and making investments only where they clear our internal rate of return or margin hurdles and disagreement exceeds those hurdles.
In July we also entered into a charge your supply agreement with Delta electronics under.
Under the terms and disagreement easy go will purchase more than 1000 charges, which equates to 2000 EV charging stall.
This collaboration with a major international partner with strength in power electronics helps position even go to maintain the supply of charges at a critical time in our company and our country's and ramping demand for charging infrastructure.
Overall E V go extend partnerships provide for increased growth opportunities for E. V go while minimizing our exposure to near term utilization risk and very nascent market and.
And importantly, we were able to significantly extend E V goes reach on a capital light basis.
On the regulatory development front, we announced in late May that E V go and OFC Redco, a leading global provider of comprehensive fully integrated solutions to the U S. Federal government had been awarded participation in a new five year blanket purchase agreement with the U S General services administration.
We refer to as the GSA to furnish E b supply equipment and ancillary services to federal government agencies.
This blanket purchase agreement or BPA awarded to just 16 contracting team allows easy go to offer a variety of fast charging and level two charging solutions to federal fleet vehicles across agencies, the U S military and more.
With this BPA in place federal agencies and approved government buyers can work with E. V go to plan build and install charging solutions and stations for their sleep without entering into a lengthy procurement process.
Biden Harris administration is working to transition its entire federal fleets at zero emission vehicles, and it's F. Y 93 proposed budget includes $300 million for the G S a and $457 million for other agencies to help facilitate this goal.
Supporting an entire electric federal fleet to require more than 100000, new charging stations. According to the government Accountability office.
E V go with Susie ethically welcome to the U S government leadership in electrification and looks forward to helping agencies across the federal government meet their EV charging goals.
Specific bids and projects will be announced by individual agencies as they formulate their own fleet electrification plan.
These efforts also complement the 7.5 billion dollar investments from the bipartisan infrastructure law, which will help to build a national network of convenient reliable and affordable EV Chargers.
National Electric vehicle infrastructure or Nervy program will provide $5 billion in formula funding to states to build out core they're charging.
Each state has to submit a plan for using their mobile phones by August 1st once approved dates will be eligible to begin spending their allocated nervy fun.
The E V. Go team has met my 36 departments of transportation and provided formal comments to 18 states in furtherance of the development of these plants.
And we are expecting to see first solicitations from the states as early as the fourth quarter of 2022 or the first quarter of 2023.
The early plans and drafts from states include a strong preference for competitive solicitations for grant recipients over first come first served approached it.
E. V. Go has strongly encourages approach as competitive solicitations tend to explicitly recognize the importance of established track record in delivering charging services and has to be more effective than putting taxpayer dollars to good use in maximizing driver utility.
You didn't go has been busy preparing for this increased commercial activity and believe we are well positioned thanks in part to the work we've been doing as part of our connected watch initiatives.
We started connected watch to bring together all of the spokes in the electrification flywheel, including utilities and public funding agencies to share best practice and help accelerate the deployment of EV Chargers.
Through this effort E. V. Go has developed strong relationships at both the local and state level and in many cases has become a trusted resource for officials looking to implement EV charging solutions.
As a reminder earlier this year E V go published best practices for State D O genes for administering the Navy program.
We have a history of working collaboratively to create mutually beneficial public private partnerships and believe our expertise has been helpful to states and preparing for an IV.
Yeah.
Turning to utility level rate changes that will impact. The these new programs had been approved by regulators in California, including at Smart in Sacramento and the S. D. G any in San Diego as well as pending E rate changes in Colorado, where a recommended decision by the regulator would be positive for EV drivers and public service company.
Colorado's territory.
In all E. V go was participating in rate proceedings in 18 different utility service territory in 12 States and we'll be reporting back on the outcome of those cases overtime.
And lastly on the regulatory front, we announced in late June that E. V. Go has been selected by the California Energy Commission to receive a $3 6 million dollar grant to build fast charging infrastructure for multifamily housing residents with more than 6 million residents of California living an apartment building accessible.
Fast charging maybe key to facilitating adoption for these consumers we're thrilled to work with California on this innovative program to keep making it easier for more drivers to go electric.
Altogether E V go has applied for public funding and more than 30 different grant programs year to date, and we expect to be very busy in the second half of the year.
I'd like to close by talking about our commitment to technology enabled innovation, which we believe is one of <unk> biggest competitive advantages.
EV goes technology offerings frequently come up in discussions with potential commercial partners, who appreciate E. D goes track record and capability across the hardware and software landscape and our commitment to making the EV charging landscape seamless for drivers of all types.
Technology as part of E V goes DNA and value proposition in a prior quarter, we shared how we leverage drone to speed up the site selection and development process.
Aldo charge, plus which I referenced earlier is a great example of our push to add functionality to simplify and enhance the charging process and experience.
At truck share, which has now been part of the E. V go family for a year, we exceeded $2 5 million registered subscribers as the platform continues to grow.
In addition, we launched plus share premium during the second quarter, which for a small monthly fee enhances drivers and allows them to opt for an AD free experience.
The E V go innovation lab continues to provide value across the sector and to augment our operations in El Segundo now operates three remote locations at OEM development and testing facilities.
Since the lab was opened we've tested passenger evs from 13 different Oems and Sweeny Vf's from 12 different Oems, we test vehicles against the full complement of Chargers deployed publicly and privately as well as with new charges undergoing E V goes rigorous certification process.
I'd also like to share more about how E. V go maintained industry, leading reliability and uptime standards on our network. This involves testing preventative and corrective maintenance a 24, seven 365 call center and consumer research.
Emblematic of our enduring commitment E. V go conducted a study in February and March this year to assess the operation of over 250 Chargers in Northern California.
This is one of the highest usage region on our network, we reviewed charter logs and investigated payment processing system charge of initiation functionality and overall vehicular interactions across seven different vehicle types.
We also conducted a follow up health checks on these same charges in May what we have found is that 95 per cent classes of charters, we're functioning as expected.
Similar review processes and health checks are occurring across the country with upgrades and replacement of old equipment plans for $75 in the third quarter alone.
This work is something E V go budgets for and expect to do in order to maintain industry, leading performance, which we recognize is critical in maintaining driver confidence.
And it's easy to go derived our revenues from operating charges, we remain fully aligned with our customers and shareholders and maximizing uptime.
In closing, we believe that not only its E V go entering the rollout or the federal government's Levy program with strong momentum and substantial progress. This weekend Senate passage of the inflation reduction Act provides the EV sector with even stronger tailwind.
Slated for a vote. This Friday in the house the new Bill includes provisions that extend and advance section 36, and 30 day tax credits for EV charging infrastructure and EDI purchases respectively.
We are still working our way through the particulars of the Bill. It is clear these developments represent enhanced financial support for the industry and E. V. Go expect accelerated growth to arise from both greater E V sale and expanded funding for charging infrastructure.
We're looking forward to providing more on this as program details are finalized in the coming days and weeks.
That's one of the longest running largest and most reliable public fast charging operators in the U S. We could not be more excited about the possibility of accelerating our growth expanding our partnerships and helping to encourage the wider faster adoption of Evs across America, and with that I turn it over to Olga.
Thanks Kathy.
I will start with a review of the key operational highlights before turning to our financial results followed by some additional details on the financial impact of the pilot flying J M. G. M partnerships, we have recently announced.
During the second quarter, we placed 107, just falls into operation in 17 different states.
Number of cells and the duration or under construction with 2397 at the end of the second quarter was it taught a law 1900 showed a seven stall being in operation and 460 under construction.
Our actual engineering and construction development pipeline remains strong and increased from 3344 stores at the end of the first quarter.
3669.
The end of the second.
Operational stole grows it's picked up pace year to date those shop challenges remain them do you choose your side, where it was still experiencing in their gestation delays.
Could you affirm our total store than the duration on the construction guidance of 3000 to 3300 by the end of 'twenty to 'twenty two.
In July .
We entered into a long term supply agreement with Delta electronics for the procurement of 350 kilowatts charges.
This agreement will provide charges supplies through 'twenty, one to six and covers a substantial portion of our obligations under the new extend deal with pilot N G M.
Network throughput was 10.1 gigawatt hours for the second quarter of two months as one to two and increase of six 6% over the second quarter of two months as long as you want.
We benefited from seasonality as more consumers took to the road during the spring and summer periods continuous growth in EV sales as a rebound in rideshare.
We expect the positive input gestures analogy to continue through the summer.
Our customer count increased by 18% versus the first quarter this year.
And is now 444000.
Turning to financial results.
We reported 941 million of revenue in the second quarter of two once a bunch it too.
Which is an increase of 92% over the second quarter of 201 to one.
Charging revenue was five 3 million up six 6% over the second quarter of last year.
Sanctioned retail charging which was up seven 6% year over year.
Helped drive over half of the increase in overall revenue.
Regulatory credit sales were $2 1 million.
As a reminder, we expect as I go through the credit sales growth to modulate in this third quarter as it was sold off our existing bank of credits and vote alerts to business as usual.
Adjusted gross margin was.
So it is seven 2% for the second quarter, reflecting the increased benefits of amortizing our fixed cost base over a larger network support.
And acceleration of L C and faster revenue recognition.
Overall year over year.
Adjusted gross margin increase was approximately 15 percentage points.
Was it roughly nine percentage points of those added by LCL fast acceleration.
We expect that to normalize and modulate started in the third quarter.
Opex increased substantially to 44 million this quarter as we continue to accelerate the charges deployment.
General and administrative expense was consistent with ramping up personnel as needed to accommodate the girls.
We reported adjusted EBITDA of negative 19, 8 million versus negative 11 million in Q2 of 2021 which was also consistent with the ramp in personnel growth and expenses associated with being a public company.
We ended the quarter with $307 2 million in cash and short term investments and remain well capitalized at this time.
Turning to our new easy go extend partnership with pilot company and General Motors.
The agreement calls for the construction of up to approximately 2000 fast charge installed primarily over the next few years and up to 500 pilots and flying J locations across the United States.
We have not disclosed the terms of this deal, but I would like to draw your attention to the cash flow profile.
All core develop own operate model.
And you extend model.
And the annual cash flow examples you see here and this is for two months at one to three vintage projects in both cases.
Yes zero cash flows are negative in the core develop own operate model as you would expect you to the incurrence of capital expenditures and then turn positive in year, one as the project goes a duration all.
Those cash flows that are occurring in nature and grow over the life of the project as well he said on the road.
Throughput increases and its been raising leverage is being realized.
They extend model either go sees positive cashflow in need of it.
This is because our customer and curse the upfront capital expenditures well either go generates margin as the developer and builder of the project as well as going forward as well.
Our own ongoing revenues from providing operations maintenance and networking and software integration services under the contract.
Introduction of extend helps optimize near term utilization rates in corridor side, we expect the sides will ramp in terms of utilization more slowly than our traditional urban sites.
At the same time.
Does that important locations to build even those presence as we improve national coverage.
We believe that these external partnerships create long term value. So easy go as they provide opportunity for long term service cash flows side expansion into Florida, Michigan and customer acquisition and retention.
Lastly, I would note that.
We are affirming our trans Atlantic to operational and financial guidance and look forward to sharing more updates as the year progresses.
A final note if it goes now form S three eligible.
In accordance with customer and market practice and was even goes obligations under our registration rights agreement subscription agreements and the warrant agreement, we intend to file an S. Three shelf registration statement following the filing of our second quarter. Thank you.
The form S. Three will register their shows only buy a controlling shareholder.
The shares entitled to registration rights and provides us greater flexibility for potential primary issuances over time.
With this I will conclude and turn the call over to the operator for questions.
Thank you.
And gentlemen at this time, we'll be conducting a question and answer session.
If you'd like to ask a question you May press star one on your telephone keypad.
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Our first question.
A reminder, if you could please ask one question and one follow up so we may get to everyone's questions in queue.
Our first question comes from the line of Gabe Daoud with Cowen. Please proceed with your question.
Thanks, Good morning, everybody. Thanks for all the prepared remarks Cathy.
Yes.
Maybe just starting where revenue for this year I know it's a.
Really inconsequential just given how early days, we are here, but can you give us a little color or confidence.
And the ability to deliver on the on the steep ramp that's implied for the rest of this year.
Yeah sure I mean, Gabe I would just sort of say, where we're tracking to our forecast.
You know what we have taken account of is is the obviously the growth in evs over time, the number of movies that are coming to market. The seasonality factors and again, we did bake in a little bit of all of the P. S. J deal because you know we had we had been negotiated late last year. So we knew.
That that was going to be part of the scheme older anything you want to add to that.
Yeah, I would I would concur that some of the Doj revenues and some of the fleet's contractual rather than just the scheduled took again kick in closer to if Q4 second half on a year and that explains our.
Heavy alone on second half of the year versus what you've seen in the first year, but as we sat with them in our forecast our guidance at this time and we are tracking towards that.
Okay, Great that's helpful and maybe as a follow up thinking about.
All of the moving pieces on the policy front and extend obviously the pilot deal it pretty nicely.
Yeah.
The network, but just curious I guess, how big of a contributor do you think it's then become particularly as.
Levy and some plaza you mentioned before might not make the most sense to own and operate so just trying to get a sense of how big extent can really be over the next call. It two to three years.
Yeah, well gave like people like you've identified the key thing I mean, the the policy objective of Navy first and foremost a they get national coverage with a focus on quarters of rural areas and again I think your forecast as well as our as the expectation is that that's going to be kind of a probably a slow burn for a while so you know having seen this coming week we lead.
We developed E D I'll extend and and negotiated the pilot flying J D O which is substantial.
It's just it's it's a it's a great addition to our overall like our overall product mix revenue mix our earnings all of that so that's great more probably used to call them. Because you know pilot flying J is not the only entity that has quarters and rural rural rural presence with and many of those rural.
<unk> gas station operators and those those folks remain interested in participating in the electrification Revolution and given EDI goes track record over 10 years of operating and network really really well, we're very well placed to have that be a part of our business going forward. So as soon as we can tell you about specifics we will we look forward to talking about this these good business development.
Things when they get inked.
Well listen thanks, everyone.
Thank you.
Our next question comes from the line of Andre Shepherd with Cantor Fitzgerald. Please proceed with your question.
Hi, good morning, and congrats on the quarter and thanks for taking my question maybe to follow up a little bit for my first question.
So in order to meet the guidance.
The revenue guidance for later this year can you talk about do you anticipate.
Some seasonality in Q3 and Q4.
Quarter should that be kind of heavier concentrated any insight there would be helpful. Thank you.
Sure. So just to reiterate we are our business core business how are retail revenues from the drivers who drive around the E. V is it depends on seasonality, but it also depends on evs get themselves. So we do expect some of that seasonality actually.
In the winter does a detriment, but fall with neutral. So there was that much of the knowledge the plane, but mostly we expect to continue to ramp up to have more customers, who now not because you have seen we just signed up roughly six to 7000 of new customers This quarter and now and that's what we expect that to continue to ramp up and then driving more revenue through.
At the end of the year, but most important to know what what why.
Our forecast is more heavily loaded towards the second half of the year is the kicking off certain contractual revenues by the end of Q3, beginning of Q4, namely from the new P. J concept in some of the fleet's contractual deal. So there are two things happening at the same time.
Got it that's very helpful. Thanks, Holger, maybe one last fall.
So in regards to the Navy program I know this was just touched on but.
So just to get it right so you've hum.
You've already conducted sessions.
Sessions looks like here with 36 states.
<unk> submitted for more common between states.
The planes, which looks to be confirmed in later in September as well I'm. Just wondering is there any can you give us any sense of you know.
What we can expect from from the your contact with the states I know youre not guiding any numbers, but maybe a little bit color I know, you've said Q4 'twenty to Q1 'twenty three I'm just trying to see if we can maybe quantify that a little bit.
Yeah, Andreas I'd like to provide quantities as well.
We can't do it what we know is that the big giant amount of money that is absolutely going to start to flow with the earliest Q4. This.
This year, but probably well and truly get moving huge.
Q1, 2023, the conversation what we're really excited about is that our experience and our best practices documents and our conversation we become kind of a thought leader for state Dot's that are designing the program and you know that that where we're seen as not really experience, but willing to collaborate and cooperate the faster.
Many of these programs that I'm, saying, we're going to do competitive solicitations based on track record is really really that puts E. V. Go in in a in a kind of a pole position to to to get get our share of that business, where we where we want to go. So it's you know it's $5 billion over the next few years. It's you know theyre going to be looking for companies that can actually.
Deliver on what they say, they're going to do that so that is very much U V. Go well, we will be we will be very very active in in and bidding for that business. I mean, you don't have to go ahead and bid for it because these are competitive solicitations, but we really well placed and if you look at the you know our history of being able to access friends from say the volkswagens Appendix B do you debate sediment again.
That should give you some confidence that that's going to just give us more forward momentum going into the implementation of the nervy program.
Got it fair enough, thanks, Cathy and congrats again on the quarter I'll pass it on thank you. Thanks Andres.
Our next question comes from the line of James West with Evercore. Please proceed with your question.
Hey, good morning, Kathy Olga.
Okay.
So Kathy.
Big Picture question for me, so we've seen a we've seen the move in interest rates and equity prices.
And clearly there's been a change in cost of capital for the industry you have a good number of our.
Competitors and I'm using air quotes there, but good number of competitors that are not well capitalized and you guys or and so as you talk to customers potential customers today, and you think about when they think.
About how they want to build out or work with a partner with a charging providers has that economic reality started to sit in yet are they understanding that.
There's going to be a shake out here and there's there's winners or losers the well capitalized guys or are the winners at this point given the change in the overall capital markets. It goes together.
Yeah. It's a great question, John I think it's probably there in the background as part of our suite of all of our B to B business development conversations I mean, the most important thing that we're finding is that that we've got a track record of delivery right like so we've got blue ribbon partnerships that keep coming back for more.
Our partnership with GM, just keeps going from strength to strength to strength and.
Toyota coming across I mean, all of those those and those were sort of well in hand, and we were delivering charters that we needed to deliver and delivering you know the customer benefits and everything else well before well before all of this sort of the capital markets was completely just louie, but I would say probably I mean, if you're going to be doing business.
The electrification of transportation is a it is there's lots of near term work, but its a medium term game. So if you're going to want to be right and you're going to want to partner with somebody that the charges are going to be in the ground for 10 years or so you're going to want to be partnering with somebody that's going to be able to manage those assets really really well I know weather weather, whether we own them or whether you whether the counterparty on them and so I think again.
Well, that's why pilot got excited about partnering with us because of that track record and you know that the access to capital markets. If the markets continue to grow that well capitalized companies will have compared to others sure. That's probably part of it but that's probably more your world than they are operational but frankly, you know it's just it's hard it's part of the whole.
You know that you want to be doing business with other blue chip providers and clearly need to go as you did that.
Right. Okay. Okay that makes sense got it thanks for that and then maybe one for Olga.
As you were talking through the utilization of that sort of cash flow exam.
Examples I'm, just curious and I think youre now.
Fairly cash flow positive at certain locations or certain areas in California, maybe Brooklyn, but what what do you need what is the utilization number or how should we think about the the the amount of evs or however, you think about it that we need to be cash flow positive on a per location standpoint.
<unk> does or the weekend, so we can understand kind of.
How to how to model out each each location when we go cash flow positive and then in our minds.
The sign of a obviously a value to those stores.
Yeah No. That's that's that's a good question and the answer will be [laughter] it depends because the price.
They've got they've got the positivity of the cash flow in each location or in age geography. It depends on multiple factors. One is how many he says theyre right. How many he these he was an even go as its network what does that mean you need them to do so how many people are using public charging versus charging at home.
Why do we have also had some dislocation or not so California versus non California, what is the energy cost environment and energy costs. They range from as low as seven Samsung Seattle to 40, 50 sounds in the north and the east coast of the country.
So you have a variety of different doctors and so it is very difficult to pinpoint a specific concentration number but I'd say when.
You're probably looking at them.
Asian says low single digit where you could start seeing cash flow positivity in some of the better markets was I'll say, a fast presents them with lower energy costs, and then you probably need low double digits kind of major markets and then it goes up from there. If you are really in the in the markets with high energy costs and no.
Is it incentives. So so again very hard to pinpoint to some average is just because of the because of the diverse diverse nature of those other factors, but you're absolutely right. Some of the locations in California, such as San Francisco, Los Angeles, Santa Barbara and some of the locations in high easy adoption area such as ours.
Phoenix is one of our Hyatt how utilized markets right now we also see some of the east coast locations really kicking in Connecticut has been quite an interesting market, it's been really growing quite a bit in the last six months. So we'd see a pocket so that but and we will update the market when it was how that progresses, but again.
Hard to pinpoint a specific number.
Within the country, Okay. Okay fair enough. Thanks, Okay. Thanks, Kevin.
Pleasure.
Our next question comes from one of Ryan Greenwald with Bank of America. Please proceed with your question.
But it would seem that it's Alex variable on for Ryan. Unfortunately, he he's tied up on something else I'm, just two quick ones that I wanted to ask an extend specifically.
I mean, how would you think I mean, I know you gave us some guidance on the cash flow profile. How would you characterize the margin profile that was sort of a bifurcated between the initial site development installation and then you know sort of the recurring fee element. If you if you can opine on that.
Sure so so.
Let us first to come out in our core business model. So we underwrite to.
A minimum of a double digit double digit unlevered pretax IRR over the life of the asset because we've put capex in and then we get the investments back. So I arrived the concept we used to underwrite those.
Oh and expand them. So on a specific day deal, which we announced recently when I'll just close and the terms of that deal, but conceptually when we assess expand deals as deals we are working on for Phil even though we're looking at it.
Minimum of a double digit cash flow margin so that over time over the contract we are targeting to get a minimum amount of that so that's a bit of a different concept. Because you don't have in on you you don't underwrite the cutbacks we don't underwrite the investment you underwrite the overall cash flow generation to the company. So he has a bit of a different.
Concept in here, but we keep the same quantum of what cash flow margin would like to get back.
Got it very helpful. And then just one more on the policy some sort of landscape. If you will I mean, how do you see the practicality of the I guess sort of revitalize section 36 tax credits given location provision no direct pay I mean, how do you guys see your capacity to sort of extract value from that going forward.
Sounded positive, but curious if you can sort of parse that a little more for us.
Yeah look I actually think it is positive so so while there's no direct pay. It's also it's also transferable right. So that the transferability of attacks product is actually you know if you look at other stuff is just like it's not not a real heavy lift so I think that that that's that has real value for all the locations.
There are places, where we really definitely want to take advantage of that value. Because it is those are places that were it not for the texture that we might not be terribly interested in building. So it wouldn't I think that the provisions of 30 feet provisions that are part of the inflation reduction act or are likely to be material for us, enabling you to go to extend our footprint and our reach.
You know over the next few years.
Got it thanks, Tim So I'll leave it there.
Thank you.
Yeah.
Our next question comes from the line of David Kelley with Jefferies. Please proceed with your question.
Hey, good morning, Thanks for taking my question, maybe a question on the step up in Capex, just given your growth targets should what do you assume a $44 million is the new baseline for future expansion.
Or were there any kind of one time impacts in the quarter.
No. There are no one time impact on the quarter as a continuation of our efforts to build our network. We've guided the market to 3000 to 3300 stores under construction or operational buys a year and and when we come out with.
The guidance for two months, it's unsustainable will who will give you that guidance again the thing. So I think Dod was more master drives they cut backs expansion is how many installs we're about to build them.
What what happened this quarter is it probably emblematic of kind of this year ramp up going forward, we'll update the market with more precise stole guidance and that will help you understand how to how to model that top packs, but I wouldn't necessarily assume that 44 mayland break waterfront next five years is the right assumption just because it.
It will be driven by our decision on the pace at which we will expand the network.
Okay, great. Thank you and then maybe a question on plugs your premium and recognizing it's still very early days, but can you talk about the reception to the subscription.
And maybe how youre thinking about potential longer term penetration within that growing $2 5 million registered subscriber base.
Yeah, we will.
But all of them.
Well I'll start with I'll start with the macro but look we're really excited about the about the club's your platform and as you kind of noted all of the eyeballs that are on that we spent we spent a fair amount of time over the last 12 months investing in the build out of the platform and its and its capability to increase advertising reach.
Right. So we've we've now got the we've actually increase and again you need you need software infrastructure to be able to do that and we've we've <unk> our investment in that software capability is increase the ability to AD impressions by six X. So would you which is which is really great at the sign at the same time, it's a customer curated community and we.
We're mindful of the some of the people some of the two and a half million eyeballs may not want advertising and so that's what the invention of pumps you have premium was all about the provision of the AD free environment for plugs. Your users again, you're right. It's very very early days that was sort of at that he has to go take a look we love culture, but we.
Actually don't want US, yes, and we'll pay for that so we will report back on the growth of that but again the early reception from that subset of the two and a half million you know I bought pairs of eyeballs that are using clubs here has been very positive.
Yeah, and I would add it would definitely saw an immediate ramp up measured in hundreds of people who had interest in and trying that out.
What what we also kind of conceptually or philosophically, what we would like to do with flagship premium is to add different features and maybe increase the price or was that a subscription is over time, but we will update the market when and how that will happen. It's a first step into the right direction here and we already see positive response millions of people.
I would like to use premium product and pay for it how the premium product is going to be evolving over time, we will continue to provide updates on our we are personally quite excited about that.
Okay, great, Thanks, Cathy and older.
Our next question comes from the line of Bill Peterson with Jpmorgan. Please proceed with your question.
Yeah, Hi, thanks for taking my questions.
Understanding maybe what capex are absolute absolute capex.
Trends are not fixed but how are you thinking about capex per stall trends I believe you've been experiencing inflationary by record I think it's.
It's up quite a bit thus far this year, but.
As you look out and you have it.
Programming and all those things you're doing for Jim are you seeing any light at the end of the tunnel that some of these costs your cost per.
Sites should cost are coming down.
We went over that you wanted to.
I'll take them. So we definitely see are the first signs of easement. So we are now looking at a roughly 140 Hum hundred $45000 per store in the and and in the second half of the year in Washington, as the increases associated with it.
Inflation on the labor part, but we have started a wide range of different initiatives to abate that and find savings elsewhere or is it on the labor component. It's difficult labor is not getting any cheaper, but what can be smarter than that and some of the things. We're doing we will get them by the practice and equipped.
We can say as much and we spoke about the new concept was the Delta I'm an hour and all earnings script I'm. So so that is that is quite positive and we continue to see positive effect was the rising competition in the just a rise in volume in the industry. So we are beneficiaries of our equipment.
Price has been under pressure here, but we are also how we organize and how we're thinking about which sites to build we're prioritizing sizable shot that you deal with Iran, and we're working on a couple of other efficiency innovation so for some of them.
Copper access way of looking at them closer to midyear next year, well did you see quite a bit of improvement in copper ox, but we will update the market once were or once were close to that so so definitely see some signs of improvement here, but yeah, that's what I would like to highlight that inflation.
And for the high inflation environment continues to persist as everybody knows so we will work hard to get savings in a couple of places I imagine, but at the same time were under pressure for those pieces, which such as labor for example, and some other.
Equipment thousands in actual charge offs, where are we where are we will continue to experience.
Pressure from rising pricing pricing environment.
Okay. Thanks for that.
Embedded in your full year guidance, I'm curious, where where do you expect these credits to trend I guess in the second half of the year what is good I guess expectation.
Yeah, we're expecting them staying flat at what would trade it the the last time, we traded would trade at.
Roughly $95 per credit and so we expect that to stay flat through here and well that's to be seen if that works out we are.
Well, we are exposed to volatility and also have aspiration.
Okay. Thank you.
Our next question comes from the line of Noel Parks, where TUI. Please proceed with your question.
Hi, good morning.
Good morning.
The upside of coal doesn't want to basketball you were talking earlier about sort of your extensive testing program. Thank you.
You mentioned 250 <unk>.
Or is that you had tested and I was just wondering for the expanding set of equipment vendors out there.
Wondering from your perspective, our product capabilities.
Lining pretty well with I guess sort of what what's most important to you guys on the demand side and also as far as pricing.
Or I was just interested in how you see kind of the current and coming crops.
Devices out there.
Yeah I Love. This question. So you know one of the reasons.
We eat it goes innovation lab is just so so important to success and we make that available not only to all the Oems the car companies, but also to all the charging companies. So it ends up being as a central repository, where we test all the charges that are coming to the market and we test them with all the cars that are that are either on the market or coming to the market.
And it is a big giant like ecosystem party to make sure that it's all going well I will tell you that every single brand new car that comes to market like the automotive engineers are so excited about it and they look really cool, but I was thinking you are seeking yelp, we asked them on this call, but what percentage of cases, because the car work with all the charges right.
It drives up to the lab, the very first time and that's damn near zero. So that lab enable is really really important to getting the ecosystem working at a nascent stage of this ecosystem of the car companies get it in the charging companies get it we have when we when we selected a new supplier for our charging equipment. It goes through a rigorous process. We first of all they have to meet our specifications.
Actions that we put out there in right and then they say yeah, yeah, Yeah, we need this in and it's all just obviously economics in that as well once they pass those hurdles then we begin the see the testing procedures at our lab, which are which are the hardware of the firm where the software and then testing it with lots of different vehicles that are available. So.
That's all to say, we're very excited about is the industry's capability to reach our exacting standards to be able to create great driver experiences, but that's a lot of hard work that our work is work that we're involved in and it's worked with or partnering with both the vendors and the OEM is on and it's going to stand us all and good.
Dead for the electrification of transportation in America, So that we can create happy drivers.
Right right, yeah, so so important for adoption and acceptance going going forward.
Or do you just.
Just want it.
Just want to turn for a moment to the the multifamily market you mentioned, the California Award and.
It does seem like one of the sleeping Giants out there as far as the ultra.
Although our potential.
Everyone has a garage.
And and I'm just curious on that.
Very special characteristics of the contracts are for that market for you your devising or is it pretty similar to sort of any commercial setting.
Yeah. No. This is it's what's unusual about this is that the look 30% of Americans don't have access to at home charging because they don't have a garage. They don't have a car port or something like that so so if you want the entire country to go electric as we do expect to happen over the next 10 15 20 years, then you're going to have to be able to have to provide access to the startup.
The apartment dwellers again.
The rebuttal presumption had been that you've got to put L. Two into these apartment buildings right because people are going to be their own life, but what's innovative about this approach in California's like well actually what if there were convenient fast charging and that people could just come and do 15 to 30 minutes at a shot maybe that's even more convenient and more cost effective.
Then then going in and trying to why our parking garages in apartment buildings and so that was very very exciting about this so we where we are we are hopeful that we're gonna be able to enable a new a new capacity for these apartment dwellers to conveniently charge near their homes.
And we think that will work. So that's what that's what that $3 6 million dollar Californian brand is about and I'm sure. The rest of the country is going to be watching for the results of that as they think too about how are we going to make it easy for apartment dwellers to charge close to home you know and we don't necessarily want to go into the basement of garages, where or part of it but if you don't even have garages right which is.
Which is another possibility right. So we're we're excited about this good good use of urban footprints to have fast charging rather than tying up whole parking lots for overnight charging.
Right Yeah. Thanks, that's a.
That's what I'm trying to just sort of game out exactly how all of these different sectors are going to evolve. So so thanks for that insight.
Pleasure.
Our next question comes from the line of Oliver Hung with Tudor Pickering Holt. Please proceed with your question.
Good morning, everyone and thanks for taking my questions. Just a quick follow up to the Capex question from earlier, besides the ramp up being a primary driver or are there any details with respect to how much of the increase is due to increasing our charter output capacity sars materially or any decreases the capital cost is kind of there.
So that's when you kind of compared to recent quarters.
So let me, let me just quantify that or no capital offset turns out 44 million dollar number its a pure capex.
So it's a gross carfax and all the capital offset as I said in a in a different spot now on the cashless statement. So every time, you'll see us reporting capex that will be actual cutbacks were put into the ground. So amount of equipment, then and labor and whatnot and so.
Most most of that ramp up is just acceleration of speed with which were constructed and of course, you know we were seeing a bit of a increase in the install cutbacks in the drive that a little bit, but if you really kind of dissect them, that's when the price and quantity here quantities and the overwhelming factor we are constructing.
And at a much much higher pace than we used to.
Okay, that's helpful and.
For my second question, just with respect our OEM network revenue understand that this should really start to kick up in the back half of the year and into next year from your earlier comments, but anything incremental to provide there to help us better understand the trajectory of that specific line item on a go forward basis, just kind of give them the imminent timing of various EV models coming to market that you all have agreements with them.
And with this inflow will be something that we should expect to be fairly lumpy.
So let me clarify some of the earlier comments they were related to be a a J contract, which will be a more ancillary revenue or extend revenue old, Florida, chaparral <unk> and some of the fleets construct which will fit in the fleets of Avenue. There, we do not expect much of a ramp up on the OEM.
Non charging revenue, that's our motivations of Nissan N G M contract prepayments and they are happening. So it's been a complicated accounting rules, but there was some modernizations are tied to how many cars of those particular.
Oems are on the road and over time, they will ramp up but we don't see much of a lumpiness. This year. So for near term you could just assume.
I'm kind of a continuation of the trends you see now.
Okay awesome, thanks for the color.
Uh huh.
Our next question comes from one of our heat mentally with credit Suisse. Please proceed with your question.
Hey, good afternoon, My Minder here from credit Suisse. Thanks for taking the questions here.
Maybe quickly just on the charging.
Volumes.
Good.
So steep ramp embedded in for Q3 Q4 here.
Could you talk about what's driving that visibility.
Hum you saw 30% jump in Q2 sequentially.
Sequentially is that something we should expect for Q4 that slow.
Does it include any and you'll see a P. F J a couple of times as well thanks.
And he said don't mind quantifying what what line item. So is your question about sorry, I missed that.
These are the two.
But the 50 to 60 gigawatt or so for the full year.
So it kind of implies almost 19 gigawatt does run rating jokes here in Q4.
Yeah. So so P. J a kilowatt hours won't be included in that we expect some ramp up on both retail and fleet tightens that would drive the increase.
Hum got you and then just as a revenue share they did somewhat flattish over here a cultural culture.
Anything special she comes out and like could we see a similar mix shift in second half or Oh.
What drove that a flattish charging revenues.
Well.
Charter revenues, when 20% sequential quarter over quarter.
Saturday define it as flattish.
Or or or maybe maybe I didnt misunderstand. Your question because we definitely we saw quite a bit of a gross you now charging revenue in Q2 versus Q1.
Got you know more about our property was making about five.
So just for the charging of visa.
That's right.
It's only like $5 2 million in Q2 versus full points Sri for Formula One in Q1, So we do see it close to 20% of our ramp up.
Gotcha.
And just last one for me on the regulatory credits.
On the timing of the inventory sale I saw in Q2.
Any reasons behind it and do you have any more left in conventional yeah.
Yeah. So we don't have any more last so the reason was and we spoke about it a couple of times, but it's a complicated matter some very gladly well if they do raise that so wished weights than the beginning of this year was switched to a third party handling our Lcs ice trading and that allowed us to.
You recognize the revenue from LG as fast as it occurs a theres a six months lag so what would that previously we would.
And could hour kilowatt hours gatto steadfast graduates and trade them six months after the advent of generations of kilowatt hours.
Okay. So we switched to immediate generation so for the first six months of this year. When it comes now to the revenue as it occurred so there will be a kilowatt hour generated on California network translate into how many credits and where it goes and that is driving young.
According to that plus we had six months worth of greatest of Lcs. That's graduates left from the old recognition massive and we're just sold them in Q1 and Q2 and so that's a one off event going forward.
You will only see L. T O fastener cognition, which is associated with kilowatt hour throughput in California that particular quarter.
Okay.
And just one last one for me just on the debt.
Our long term supply arrangement could you just provide some more.
D tens or hundreds or just help us understand what does it entail.
Hum.
Fixed pricing duration.
Any color would be appreciated thanks a lot.
Sure. It's mostly covers our P F J deal for the for the first phase of this relationship and the deal does assume a fixed price and covers up to a thousand charges achy, a 2000 installs because that was the powershares configurations and the deal is.
Up until 2026, we will be working on other supply agreements and we'll update the market once that's possible, but that's that's the first in a row.
Got you and that's what really appreciate the color and thanks for your questions.
Our next question coming from the line of Craig Irwin with Roth Capital Partners. Please proceed with your question.
Good afternoon, and thanks for taking my questions.
So Cathy I wanted to ask specifically about your mix of 50 kilowatt units on the network. So it's around two thirds of the 2400 units that you have out there.
Is there is there any commitment to installing 50 kilowatt units going forward and can you maybe talk about the the budget to retrofit. These to a higher capacity units are what sort of plans do you have what's the capability of retrofitting these units.
At the existing sites that you have out there and is there anything else we should consider when when when we look at these lower power units.
Yeah. Thanks, Craig look the as I think I mentioned in our last call that the what our standard configuration that was 350 right because the market is moving to three is moving towards refill season, we're skating out of the park. There. So we are we are putting in 300 fifty's everywhere, we have because we've been around for a dozen years and again when I got the easy there are nearly five.
Usually go 50 kilowatts, what's considered fast charging [laughter]. It is still fast compared to obviously feeling a lot of people use it but we are we are don't moving ahead, we will only be putting in much higher power ultrafast Chargers with respect to the replacement. It's interesting in those old days when you would put in once 50 kilowatts charger or.
250 kilowatt charter you could you could do it without any sort of utility upgrade any transformer upgrade you often were on the host meter because again, there was excess capacity at that site level.
So that that made those projects in some ways easier to do without getting in the utilities involved in a major way what we're doing now as we look we're looking across our entire network at <unk> in.
And in the cases, where we had 50 is it possible to upgrade them and up to upgrade them efficiently or is it actually more effective and more efficient to simply go and build more capacity in those areas and that's something that that our our CLO. Dennis is taking a good look at we've got our program, which is a replacement program for old charters, where it's possible to do it but it's.
If the replacement is going to involve lots and lots of utility upscaling and digging and everything else and it maybe it just makes more sense to build more in a in a location with proximity because there are there are a number of you know people people are still using them using the 50 kilowatt charters you know.
With great delight and getting getting what they need. So look it is we don't have a blanket sort of we have guiding principles, which are we're only selling higher power. We're upgrading we're building really quickly, but we don't have a plan to retire those fifties, because theres still providing great utility doing a lot of U E D drivers across the country.
Okay. I mean, just for the record you have 125 out of your fleet of just around 2400 125 of those 250 kilowatt units that compares to Electrify America.
Just under 750.
You know.
How long has this been a priority for you or is this a priority that was established in the last year or is this something that.
<unk> is a he's a building a building piece of momentum, but as far as the installed.
But.
Well I'm not sure what what what what are you asking specifically about whats been a priority.
Yeah. So so you'll have you'll have a much smaller proportion of your fleet and three fifties right than your primary competitor out there in your primary competitor has just under 750 50.
50 kilowatt fast Chargers out there you have 125.
Just wondering sort of when the priority moved for even go to being permitted to 350 kilowatt unit tried it's a very small piece of your fleet.
And you know what portion of the pipeline or the capital budget out there has committed to free system.
Everything was a 10 person they they are the types of the pipeline going forward is 350, the pipeline going forward of $3 50, we have we had since we've been in existence log or we do have a number of the US we have a $51 50 that are on that are in our network and we're building. We're building very quickly. So we are we are you know overtime.
We will have an increasing proportion of just doing the math of $3 50 is relative to the 50. The way we are skating to where the puck is going to be and we're completely committed to it.
Great. Thanks for taking my questions.
Yeah.
Sure.
No further questions in the queue I'd like to hand, the call back to management for closing remarks.
Thank you all for everyone for joining us today.
Got it.
No look we're going to start.
No look thanks for joining US guys and we're looking forward to keeping in touch and if we don't speak before the next quarter lots of progress ahead. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.