Q3 2023 EVgo Inc Earnings Call
Thank you for standing by my name is Ian and I will be your conference operator today.
At this time I would like to welcome everyone to the E. V Go Inc. Q3, 'twenty two 'twenty three earnings call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again, a press star.
Thank you.
Yeah.
I would now like to turn the call over to Heather Davis, Vice President of Investor Relations you May begin your conference.
Yeah.
Good morning, and welcome to <unk> third quarter 2023 earnings call. My name is David and I am the Vice President of Investor Relations at <unk> Gov.
Joining me on today's call are copies boy illegal Chief Executive officer, along with our incoming CEO Badar Khan.
Southern copper <unk> Chief Financial Officer.
Today, we will be discussing EBITDA third quarter 2023 financial results.
For the remainder of 2023, followed by Q&A session.
Today's call is being webcast and can be accessed on the investors section of our website at investors <unk> E V go Dot com.
It will be archived and available there along with the company's earnings release and Investor presentation. After the conclusion of this call.
During the call management will be making forward looking statements that are subject to risks and uncertainties, including expectations about future performance.
Actors that could cause actual results to differ materially from our expectations are detailed in our SEC filings, including the risk factors section of our most recent annual report on Form 10-K, and quarterly report on Form 10-Q.
The company's SEC filings are available on the investors section of our website.
These forward looking statements apply as of today and we undertake no obligation to update these statements after the call.
Also please note that we will be referring to certain non-GAAP financial measures on this call.
Information about these non-GAAP measures, including a reconciliation to the corresponding GAAP measure can be found in the earnings material available on the investors section of the website.
With that I'll turn the call over to Kathy Zoe E V go C E O.
Good morning, everyone and thank you for joining today I'm excited to share our phenomenal results for the quarter and introduce you to barter Con EV goes incoming CEO.
The E V go growth engine is indeed hunting revenues throughput and utilization are trending superbly, it's clear that being a leading owner and operator of well located charging infrastructure to service and increasingly hungry fleet of electric vehicles is a winning strategy.
As has been the case quarter over quarter E. V. Go continues to deliver on our commitments to our customers partners and shareholders and we were pleased with our operational execution and the ability to raise our full year revenue guidance.
The electricity dispensed on EV goes network rapidly accelerated in the third quarter to 37 gigawatt hours growing over 200% versus last year and nearly 50% sequentially.
In addition to the throughput growth our retail network and extend business helped drive revenues to over 35 million in the quarter growing over 200% versus last year's third quarter.
Our adjusted EBITDA loss of 14 million narrowed significantly from the prior year as we were achieving operational leverage and remain focused on cost efficiencies.
2023 station development remains strong and on course, we've added over 240 stores to the network in the third quarter, including 40 extend stores, bringing us to over 3400 stores in operation or under construction.
This includes the exciting milestone of operationalized. The first E V go extend sites at pilot flying J locations.
With roughly 2700 operational stalls and over 35 States and 65 Metropolitan markets E. V. Go was one of the largest fast charging providers in the United States.
Our station development continues across the country with some of the fastest growing markets in Texas.
More of the Michigan and Arizona about.
About half of the energy delivered this quarter was outside of California.
If he goes exceptional throughput this quarter is translated over 15% utilization across the entire network in September 2023 in fact, 45% or nearly half of our stores were over 15% utilization up from just 30% in June.
And in September a full 30% of installed or over 20% utilization a threshold that truly makes my spirit store.
These strong utilization trends validate E V goes business thesis leveraged the EV adoption.
Our rigorous underwriting designed to achieve double digit returns and our sophisticated site selection and network planning algorithms.
With current utilization at our top styles already exceeding base case utilization assumptions and our financial modeling. We believe the go forward picture on network profitability is stronger than ever.
Well I'm not surprised to be able to report such strong results to you. During my last quarterly earnings call as CEO of V. Go I'm certainly thrilled it's.
<unk> been a great honor and privilege to lead the team in building the foundational business at igo and adding elements of that foundation to create a flywheel and to now witness that flywheel start to spin.
We've created a robust business model leveraged to EV adoption with 3 million Evs on the road today and an expected five to 6 million by the end of 'twenty 'twenty four and further projections of 35 to 38 million electric vehicles in operation in the U S by 2030.
If you go to the Blue ribbon partnerships across the EV ecosystem strengthen our financial performance, while our neighboring others in the ecosystem Oems site host utilities and government agencies to meet their goals.
G M Honda Toyota whole foods, Safeway target Lowe's, Uber Lyft, Amazon dozens of utilities and government agencies to name just a few of our partners.
He began his focus on unit economics, and financial discipline, and our network planning is demonstrating proven financial returns and our white label charging business E. V. Go extend has created shareholder value in an optimize risk return matter broadening network reach and bolstering revenues and margins without E V go needing to.
Invest capex in lower utilization settings.
<unk> technology leadership in this new and rapidly growing sector, deepen and widen our competitive moat with a litany of industry first and the public fast charging sphere, including power sharing auto charge plus E V go reservations integrated Tesla connectors.
Terry software products like E V go Optima and need to go inside and of course the E V go innovation lab.
We believe E V goes engineering team is not only a step ahead of other public charging networks. We're working collaboratively with automakers are equipment manufacturers and policymakers to crash. The holistic infrastructure architecture designed to scale to meet the needs of hundreds of diverse models of evs coming to market over the next few years.
Now, let's talk about E. V. Go is focused on enhancing the customer experience and the demonstrable progress we've made in our own Chargers in working with Oems and an improving driver education.
First on Chargers, we've continued to run to ground and remedy issues associated with charging equipment supporting our suppliers to exacting standards on both hardware and software.
We collaborate closely with Oems to ensure their EV can work seamlessly with EV Chargers.
And we're continuing to invest and drive array of indications as the number of Evs on the road skyrockets and use of fast Chargers grows with it.
Our charge talk and renew video series and related blog posts are helping new and experienced E V drivers adapt to the ever changing fast charging ecosystem.
One of the E. V. Go success benchmarks is what we referred to as one and done charging.
This is a metric we track showing the percentage of time customers get what they came for a successful charge an easy go on their first attempt.
We started 2023 with one and done at 85% and has now reached 91% with the aim of achieving 95% at year end.
And we will continue driving towards a one and done right a 100%.
Our investments in customer experience are paying off with rising plug scores in J D power results.
In the Q3 2023, J D power overall satisfaction Index E. V go improved four percentage points from Q1 and saw strong gains on key customer experience metrics, such as speed of charging up 12% and ease of charging up 6%.
Turning to E V go supply chain.
Along with most of the U S. E V industry players E. V. Go has committed to support next connectors.
We have qualified a couple of potential suppliers for next charging cables, including liquid cool cables, which are required for the high powered 350 kilowatt charges that are easy to go standard deployment.
E V go anticipates rolling out next connector cables in 2024 at a cost comparable to a C. C. S cable today and with the minimal cost of retrofit to existing stations.
We expect to be ready with nice tables for our charges well before the automakers that are transitioning to <unk> have their nox evs on the road.
With respect to Capex trends for fast Chargers, we've been able to negotiate lower equipment pricing.
However, there are several factors currently contributing to capex being at the top end of our previously mentioned range.
First build America by America or Bubba.
In order to be eligible for Navy funding the IRI stipulates that charges must meet Barbour standards.
Well if you go fully supports building domestic manufacturing capabilities for the EV charging industry. The Baba compliant charges cost more at present.
Second prevailing wage requirements for grant funded projects under nervy or 30 C at about 30% to the labor portion of Capex.
And finally utilities are needing to upgrade local power distribution networks to accommodate more and more fast Chargers and they are passing on many of these costs to charging company such a D V go.
To help counter the current cost headwinds in our industry EV Gogo is pursuing innovation on many fronts to reduce the capex required to build a station for example, we recently announced a prefabricated charging deployment model on the skid that is expected to reduce installation timelines by 50% and reduced capital equipment costs by.
15% eligible sites.
This scalable design is being deployed at several locations in the next few months it will be honed for more widespread application and station designed and mobilized later in 2024.
On partnerships I'm pleased to report that the first E V go extend sites with the pilot company and G. M are now operational.
Customer feedback has been terrific with plug scores for these new highway corridor stations rivaling the best in the business.
The P. S. J station deployment program is on track with agility and innovation being key ingredients in our success so far.
Emblematic of this we announced last quarter that E. V. Go received the first 350 kilowatt Barbour compliant Chargers in the country.
Last quarter <unk> added another blue ribbon OEM partner with the signing of an agreement with Honda.
Future Honda and accurate EV models will be eligible for up to a $750 charging credit on EV goes public network.
Honda will embed E V go inside our proprietary software into their navigation system to help enable their drivers to locate EV charging stations nearest to them.
We also signed a deal with automakers its Atlantis, who will leverage E V go inside as their API to integrate into their app to aid their drivers to find the fast charger you availability and started charge.
<unk> extended our agreement with Toyota, providing Toyota E V drivers a year of free charging at igo for model year 'twenty 'twenty four.
If he goes rideshare partners led by Uber and Lyft delivered significant growth this quarter as they move aggressively towards their goals of electrifying their fleets.
Throughput from fleets on EV goes network is five times higher in the third quarter compared to last year's third quarter.
You do expect to open our second depot site for an autonomous vehicle company in January 2020 for these two sites have stalled counts between 26% and 30 more than double our typical public site size.
Also in our fleet business, our national food and beverage company site is operational and they are using E. V go Optima, our proprietary fleet management software.
I need to go and hurts signed to be to be fleet charging agreement to allow hurts vehicles to be charged on the easy go public network between rentals.
And plug sure the Yelp of the charging World continues to grow <unk> share remained the largest community of EDI drivers in the world with 7.4 million checking since its inception, and reaching more than $4 1 million registered users in the third quarter.
Harnessing this reach to make charging easier across all networks in October E. V go launched pay with bloodshed across California, allowing users to pay for a charge within their plug their app.
Now turning to deployment of capital, let me reemphasize the point I made to you many times <unk>.
If he goes ability to adjust the speed of our growth engine and invest capital to match the market circumstances as a great strength of our business model and our management team.
I've often compare D V go to hockey legend, Wayne Gretzky, who famously noted that to be successful he didn't skate to where the puck was but to where it was going to be.
E V. Go Similarly skates, just ahead of the puck incorporating lead times to site and build our infrastructure, while anticipating growth in demand and integrating the timing of grants as we pace our build out.
The agility of EDI goes high performance engine allows us to torque our deployment schedule to optimize shareholder returns, while keeping the availability and timing of new capital front of mind.
And now regarding new capital.
Lesser of non dilutive government sources of capital are in the mix.
Our daily loan application is progressing well with the potential for a significant amount of low cost debt, becoming available to either go sometime in the latter half of next year.
The likelihood and exact timing of this is difficult to predict with precision.
Second tradable tax credits for charging infrastructure through 30 fee will be available at the start of 'twenty 'twenty four and we believe are likely to cover up to 30% of Capex for a significant portion of it. He goes projects for the first time, the 30 C credit will be eligible to be transferred so the companies like E. D go may monetize the full credit.
Value add.
As a result E V go was forecasting millions of dollars in benefits annually over the coming years.
In the past quarter, <unk> finance and tax teams have worked to prepare E. V go to monetize the credits we're expecting final rules from the U S Department of Treasury in the coming months to provide the certainty needed to finalize our plans for implementation.
And third public funding awards through Navy and other state programs continue to come easy goes way, albeit roughly six to nine months later than expected and that the market might have hoped due to delays arising from bureaucratic government processes, while delays may be a bit frustrating theres no doubt that the appropriated funds will end.
<unk> be dispersed and as mentioned above E. V go can adjust the pace of our Buildout to account for those delays recall that Navy has the potential to fund up to 80% of project Capex.
And to date E. V go was at the top of the leader Board amongst nervy grantees, winning over an estimated 20% of the funds announced recall that we only apply for grants where projects would meet our financial hurdles. Some jurisdictions are state program designs don't meet our criteria.
I'm on Navy remains a focal point, it's not the only source of public funding available to accelerate E. V goes network expansion for over a decade E. V. Go has partnered with public agencies of the state and local level through funding programs that have propelled our growth and we continued to build upon this experience for not only nervy, but other grant programs as well.
As a reminder of the financial significance of the external funding the complements E V go direct investments.
These diverse funding sources can typically be stacked for example, a solve it as part of EDI goes GM program received a 33000 dollar Capex payments. In addition, some locations may also be awarded nervy, our other state or municipal grants as well it would be eligible for a 30 C tax credits.
In some cases the funding stack may cover the vast majority of Capex for our station.
Availability of multiple funding sources extends the geographic footprint of stations that past E. V goes investment hurdles and makes those locations more profitable a genuine accelerant to EV goes business.
The upshot for our financial picture isn't this the diverse sources of non dilutive funding that include OEM funding grants and 30 <unk> in combination with E. V goes current balance sheets are ample to fuel our growth engine well into 2025 consistent with what we've reported previously.
And with that I'd like to introduce you to EV goes next Chief Executive Officer Barter Com.
Thank you Kathy.
Let me first congratulate you on a very successful tenure, leading you to go over the past six years.
The company has come a long way under your leadership from a 50 person private company to a public company leader in EV fast charging and over 35 states serving over 785000 customers.
Under your leadership E V go can play a number of firsts from being the first to deploy a 350 kilowatts charger in 2018 to being the first charging company to be 100% match with renewable energy since 2019.
So having the first integrated Tesla connector since 2019.
I also want to commend you and the team for delivering what you said.
So if we grow whats been public it has met or exceeded initial revenue and EBITDA guidance and the company is raising revenue and adjusted EBITDA. This year.
I'm excited to take on the CEO role at <unk> and I'm very excited for the future.
If it goes mission of mitigating the impact of climate change by accelerating the adoption of electric vehicles and building and growing our fast charging network is a mission that is very motivating.
In just the past year, we have seen a 50% increase in evs on the roads in the U S.
All growth rates may be slower or faster in the short term. There is no denying that the market will continue to see exponential growth in the long term with 300000, DC fast Chargers needed by 2030 up from over 30000 today.
I've also been impressed by the focus on discipline that I've observed as a board member for the past one and a half years, most clearly evidenced by the rigorous underwriting criteria employed by the company of only building assets that are projected to achieve a double digit return.
It is therefore, particularly exciting to take over at this time as we see some key underlying metrics accelerate in recent months like network throughput growing four times faster than <unk> growth over the past year and overall network utilization over 15% across the entire network during September.
Notably for the past two quarters growing faster in states outside of California.
Over the past decade E. V. Go has built and continues to refine a very compelling growth engine that we believe has the capacity to site permit when grants build and operate well located chargers that have a lifetime value far in excess of the annual cost of the growth engine.
At returns that are greater than the cost of the capital required for those fast Chargers.
That utilization at our top stools is already exceeding the utilization assumed that our underwriting further increases the value of our rules engine.
I'm also delighted to see the improvements in customer experience that has been a particular focus over the past year as reflected in the most recent J D power satisfaction scores, improving four percentage points overall and across all the metrics correct.
Four to meeting our customers partners vendors and shareholders in the coming months I also look forward to sharing more of my thoughts in the future be be go on the next earnings call in early 2024.
I'll now turn the call over to Olga to share more details on the quarterly performance as well as an update to <unk> 'twenty two 'twenty three full year guidance.
Yeah.
Thank you Barbara.
<unk> delivered another strong quarter driven by growth in all quality tailed charges business Alex Pham.
Revenue in the third quarter was $75 1 million, which was at 234% year over year increase.
Revenue growth was primarily driven by these charges Avenue and extends evidence.
Retail charges Avenue.
<unk> five point to me alone in the third quarter last year.
13 point for Neil N in the third quarter of this year exhibit in that 158% year over year increase.
Commercial charging revenue grew from Europe on seven Neil N in the third quarter last year to formula in the third quarter of this year at 496% year over year increase.
And expand revenue.
Wanted to have me alone in the third quarter last year.
The Hot mill in the third quarter this year.
Vivid and yet five times at 17, 9% year over year.
Adjusted gross margin was 26, 4% in the third quarter and subsequent history.
When compared to 19, 1% in the third quarter of sympathetic to the year over year change was attributable to improved operating leverage resulting from high utilization.
Our folks have with hasn't paced by 208% year over year, while iterations. So.
It hasn't quite benign over the same time yet.
Hello, you can go to amortize that fixed cost over a larger revenue base.
Adjusted G&A as a percentage of revenue improved from 230% in Q.
Two to 6% to 7% Q3 trenches C L.
Illustrating the leverage you can go continuous serialized permits, suggesting that book and ongoing investments in infrastructure people and processes on its way to profitability.
Reflecting the revenue growth and operating leverage adjusted EBITDA was negative $14 2 million and he was sitting at 23 versus negative pledge. It took until nila <unk> to 'twenty two.
Cash cash equivalents and restricted cash was to have this once and nine Neil N as of September 30th.
We added over 240, new stores to our network during the first quarter.
Mitch I extend to all of our pilot program.
Installed in operation or under construction with over 7400 as of September 30th.
Operational so at quarter end were approximately 700 and include the first 40 operational though 10 locations.
I'll extend the program with pilot flying J M J M.
Cash used in operations was seven points in email and in this quarter also reflects an ongoing rationalization of operating leverage.
Q3, total cutbacks less fancy formulas, including around 21 million in gross Capex as we continue to execute our build plan.
To date, we have spent 174 wildly aligned on total cut backs in clothing, they're all 114 nila and grows our backs.
If I go back to that cover approximately 45% of its twice it was disturbing to shop at home.
So it is 3000 per store accounts for approximately half of that and the remainder covered so a combination of federal state and local grandson and sorry to see credits.
But 122 and 23 project manager ever go hadn't been awarded.
Some of these 29 grams.
Brands of which we have collected roughly 10 Neal it than.
The remainder is expected to be collected in Q4. It was it went to C. F 'twenty plentiful.
Even go cross cutbacks that stall is approximately 104000.
Driven by horizon utility interconnection costs and the requirement to pay prevailing wages, how labor associated with product, that's selling grandfathered as scaffold discussed earlier.
As part of our fleet business, we entered into an arrangement, allowing us to get access prime locations in key urban areas in the U S.
Selling and leasing back such properties.
In the beginning of the fourth quarter, even though sell them leads back to real estate location without them in 16, and a half Miller of gross proceeds.
As highlighted.
If it goes toggles throughput this quarter was three times more compared to last year.
We believe that.
Those factors are compelled to create this significant object.
Pharma is CIO gross billing growth of non tax levy.
At the end of third quarter is estimated at three am male M. Atvs in the U S.
Showing 50% compared to last year.
Second is an increase in the size of the addressable market.
Vehicle miles travel or the M T.
Growing nearing parity with internal combustion engine vehicle. According to recent industry data, that's waxing, a growing consumer confidence in charging availability wherever they go.
More miles traveled equals more challenging you need it.
We also believe that D. C. S E charging as a percentage of total charging ease in painting and E. D have become more affordable to drivers without access to home charging.
And with fast charging becoming easily available and accessible.
Our top up or convenience charging that's taken place.
Third is market Chad fashion arising from superior either go locations and enhance customer experience at all of that.
Sure.
The electrification of rideshare fleets.
And you the chunk that you can go in that market or at least try. This the average ride share driver travel three to five times more mild than an average computer and as much water lives on fast charging infrastructure.
Hey.
My charge rates of Uavs enable more throughput in the same at all at this time.
And finally, youre, he's hitting the markets are bigger and.
We have a law where efficiency battle they acquire walk YOD hours to go the same distance that's smaller late eighties.
Even go categorized that topic on a public napa into three categories.
<unk>, which is comprised of individual not commercially the drivers.
Commercial off lease, which includes rideshare drivers and autonomous vehicles, and Oems charging revenue, which is derived from charging credit programs from the automakers.
Retail through.
The first of those three categories was two and a half times greater than the third quarter of trying to advance it to them.
This increase is driven by both more customers on the easy go NASA and high usage per customer that's lasting that Charles discussed earlier.
We added over 106000, new customer accounts this quarter.
The total to over 785000.
Average monthly kilowatt hours or after.
Customer is up 66% in January sample testing.
Even though a membership program.
And the value to our frequent customers over 20% of all of the detailed charging revenue is now from eating drivers on the membership subscription plan.
Does it go now has all of those 30 markets that deliver double digit utilization in the third quarter. It is truly a coast to coast phenomenon, where the metro markets, such as Dallas, Houston, Miami Detroit Atlanta.
Ali Chicago, and Philadelphia, Joni historically strong, California markets of L, a San Diego and San Francisco.
Even though we topic, which accounts for over 20% of our throughput.
Genius to gain momentum this quarter growing five fold year over year.
Colbert and leased our largest rideshare partners with Oba alone.
Housing one two gigawatt hours in October with a bunch of things.
We estimate that either Gulf Power's up to 50% of all rideshare drivers charging needs well.
Oh I see the adoption on the right.
His leadership in the attractiveness of allocations and the relentless focus on the customer experience. We expect you can go to continue this quarter on quarter growth suggested in the foreseeable future buildings to a financially sustainable business model and superior profitability.
Moving on to our full year transit buses to the guidance.
Eva goal is raising its full year revenue guidance to a range of 148 million to 158 nail it.
And even though is raising its full year adjusted EBITDA guidance to a range of negative $6 6 million to negative 62 million.
We expect to have a total of 3400 to soda 700, you see fast charging stalled and aspirational under construction, including even go expand by the end of 2023.
And with that well turn it over to the operator for questions.
Yeah.
At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad to enter the question queue. Once again that is star followed by the number one.
We'll pause for just a moment to compile the Q&A roster.
Yeah.
Your first question comes from the line of Chris <unk> with RBC. Your line is opened.
Great Yeah. Thank you very much and congratulations on the fantastic quarter.
I guess maybe to start here.
Start here the throughput growth rate it is accelerating faster than <unk> as you noted.
Some some very impressive increases in utilization rates as well and noted a few reasons driving that.
Based on the guidance increase it looks like demand is perhaps even stronger than your internal expectations.
So can you comment on how youre thinking about demand growth going forward and how that is shaping developed plan and the thought process around that is there is there I guess desire to maybe accelerate installations in certain locations where utilization rates are particularly strong. Thanks.
Yeah, because we got we've got a pretty sophisticated network planning tool that that takes into account.
All of these trends down to the census block level. So yes, we're thrilled overall about about the kind of the compounding factors that are increasing utilization and will continue to be able to sort of accelerate.
In particular locations, where we see that demand growing more quickly and remember we still got tons of headroom on the existing networks. So what we're doing as we plan. The future build is there's a 12 to 18 months lead time for when those stations go lives. So we've got we've got lots of time as we're thinking about where those market trends are gonna take hold mode.
So it's again it.
It's the beauty of our model is that it's a disaggregated capital investments in particular locations that we can ramp up or down based on sophisticated tools, yeah, and maybe just to add on that since nugget plant sits within within my purview, It's an iterative too so.
Every moment every months of new data get gets fed back into the network plan and it it seeds into the future optimization. So this recent increases just like before when it didn't have such increases, but yet we still observed as they learn and elements of that they always go back to the network glad and I'm sure that network plan that's based on.
The most recent trends in most recent hum observable utilization and in other factoids, we see including they'd be sales et cetera. So there's nothing new here per se, our massive has always been as such.
Got it okay. Thank you and then I guess, maybe just following up on demand trend, but looking at it from a demand for Chargers the narrative around EV demand. It's been negative then and one of the reasons that driving us is the perceived lack of access to charging infrastructure.
One would think that this might be a signal to the Oems out there to accelerate EV infrastructure investment to address these concerns more quickly and I think this could probably be an opportunity for you all boats.
Extend.
Line of business as well as just partnerships in general So can you comment on any of the conversations that you're having with potential OEM partners.
Is there any change in their sense of urgency to accelerate installations, just any kind of updates there. Thank you.
Okay.
Yeah. So look we've got great relationships as you can see with the with all the leading Oems and they are continuing they they've made commitments to invest like the total accumulated over a trillion dollars in electrification of transportation. So they are bullish on this space.
Everybody has got this eye towards we're going to have over 30 million Evs on the road and in America by 2030, So where we where we're continuing to work closely with them.
Not just G M.
At this time with the Lantus and Honda, which are new partners of ours.
We're all very very excited about creating convenient reliable charging fast charging infrastructure for the <unk>.
And accelerating demand for fast charging in particular so it's.
It's all it it's sort of from our perspective, because it's all good.
Thank you.
Your next question comes from the line of James West with Evercore ISI. Your line is opened.
Okay.
And Kathy and congratulations on the solid quarter and ending your tenure with a with a very strong third quarter here, but all are welcome and look forward to working with you.
Thanks James.
So.
One of the things I wanted to just touch on.
As we've you know we've got the Navy program, which is increasing awareness. We've got a lot of states that are trying to kind of ramp up there adoption and put it into more charges or are you starting to see the the ability to accelerate your placement of charges I mean, I know you guys have it.
On the sites that they're already specced in are ready, we're ready to go but getting permits I'm working with utilities has always been kind of a delay.
You can see that the ease somewhat.
Yeah. It's a great question look I think it's a classic thing and you would have seen this in other work that you've done the sector is maturing well you know when I started six years ago, you know almost no local governments had ever received a permit to build a fast charging station and now almost all of them are seeing them or either have seen them in that have cited.
Or or are beginning to see them. So it because this is well and truly a national phenomenon. So the permitting is getting a bit easier the utilities are becoming quite familiar with this the longest pole in the 10 on the actual building process right now is still with the utilities not because of lack of awareness, but because there's still a bit is a bit of a <unk>.
Total neck on on Transformers for them on the service upgrades.
What we've done to compensate for that is we just have a bigger funnel. So you alluded to this in your question. We've got line of sight to 10000 perspective.
Occasionally that will provide positive NPV.
E V go and.
And for US it's a question of pacing those and matching that pace of deployment to win the Navy funds are going to drop when utility make ready programs are going to be available when the utilities can can accommodate that in their planning schemes and we've just all become much more sophisticated about working together on getting that done so.
It's you know, it's it's still not an overnight thing to build like a charter I guess I'd say one other thing about trends is that again when I started a D. V go six years ago, mostly it was single or maybe two charges at a location now our standard is $6 or above and we're actually also working with G. M right now on creating flagship station.
<unk> that are gonna be 'twenty salt per location. There was an appetite now than the demand now that have bigger locations in shopping center parking lot grocery store parking lot and so that's what we're going to deliver so it's all really really exciting, but I think it's actually just classically the market is maturing the demand is getting higher and that's all happening together.
Right. Okay got it and then maybe just a quick follow up for me on the depot site you mentioned Youre building a second one how large is a depot site of for you at this point how many souls.
You don't get depends on the particular location.
Somewhere between 18 and 30 kind of typically is is what we're looking at for this deeper site, yes, Okay got it. Thanks.
Thank you.
Your next question comes from the line of Bill Peterson with Jpmorgan. Your line is opened.
Yeah, Hi, good morning, Thanks for taking the questions and similarly, Kevin Good luck in the next session border controllers to working with you.
First first question is on the initial disclosure so, Pennsylvania actually had some disclosure on that that'd be awards.
I mean, it's not comprehensive but some of the information would point to you to go and other project costs being materially higher than cash flows will take around double I'm not sure. This is apples to apples, but I guess can you break down some of the cost elements to how youre thinking about hardware construction installation I guess in order to be more competitive across the sort of levy reps into the new year.
Yeah, but I think you're right I think it it isn't necessarily apples to apples, but and Oh, but you may want to chime in with what we discussed about our breakdown of our capex like a bill of materials.
Yeah sure so our Capex right now is $150000.
On average some stall that is inclusive of everything.
All of the types of equipment all the labor older you to it to work so for some sites you'll have a lots of sometimes you will have a de minimis, but on average right.
There will be costs associated with that so roughly 40% of it is equipment, 60% of all of the labor we were.
Haps intestinal numbers, who believes they for example don't include utility in comp.
Components and it's hard for us to comment what portion of labor is included on that equipment to equipment, we were kind of looking at it and the that's probably a little bit more apple to Apple, but then overall capex, it's very hard for us to truly does start by just looking at absolute numbers reported in saying it is.
We can compare 200 assistant Cucuzza. This half we don't know what makes it wouldn't know Youtube does it makes them, but we don't know what else is missing to do a full comparison.
But look let's just pick them up for a second bill suffice it to say that everything that every smart businesses looking to decrease it is bill of materials and to innovate and so that's why we were particularly excited like we just announced this this prefab skids that we're doing that's going to that's going to decrease costs and save a lot of time. So that's both a labor our labor and equipment benefit.
And there's lots of other things in our Roadmaps that are going to be getting up there. So well and you will hear about those I think from a modern over next year, but we're very very excited about our innovation roadmap to to remain competitive.
That's helpful and I guess trying to think about the share first of all this great network throughput.
Growth here utilization trends are trending higher but if we think about the model working long term, it's going to be about installing more stalls and kind of letting this flywheel take effect. So I guess, if we think about next year and beyond how should we think about your share of ports being installed the ZB going to expand in 2024.
In 2025 faster than the market in order to drive this flywheel.
And I guess really ultimately how dependent on this growth plan into next year will be dependent on policy support for Joey loans or other funding.
Yeah. So maybe just start really at a high level, what do we think about our market share. We always think about our market share as a percentage of kilowatt hours, which gets dispense a D. C. F. C. So when we do our network plan B.
The short term or long term, we always optimize for that market share rather than the number of ports. So we are not our goal is not to put as many ports or somebody else or as many ports as average our goal is to put the ports in the highest utilization locations to maximize the profitability of every single port with best in it so for them.
That perspective.
Oh.
We were probably well it depends on how else how everybody else's deploy and that's just not the metric. We're looking at so I haven't had a hard time kind of like Oh come on so nothing is going to be faster or slower what we what you observed in our filings and what were they to Raytheon was this quarter, we are growing faster than via your.
Arms of the throughput. So we are gaining in our various extra police. It showed that in the last few quarters, we've been gaining market share we've been gaining market share with a disease. She segment. The overall safety segment has been gaining market share in terms of percentage of people charge and does he see the so two so those are the metrics, we're looking at because it directly attached to it.
Visibility the number of sports.
Without utilization is a simple sand cost and that's not how we look at our business.
Yeah.
Yeah.
Is that is that helpful.
Bill.
Yes, sorry, I was on mute.
Helpful.
I guess still nonetheless, I mean, you know you.
You need to have critical mass I would think even in these markets you talked about all these sort of new non California markets.
In terms of driving mindshare in driving people to the site. So I guess, how much we'll give that depend on on other funding opportunities versus your own balance sheet.
Oh, well from that perspective, yeah. So we we may.
If you go business as expected to be financed through a combination of so a combination of cash on balance at the funding sources, which isn't which include state and federal state and municipal programs, so to see and partner funds and so it was as I mentioned in my prepared remarks for example for 'twenty for 2023 are roughly 44.
5% of 2023 vintage cut back some of the Capex spend on 'twenty, one to three assets will be financed through the sources. We expect similar ratios going forward and that is already baked into the network plans I spoke a little bit early on this call about the network wants another plan takes into it takes it into the account we also.
That's the voter dimension before in the process of applying for a deal where you loan which is a very optimally priced source of capital to non dilutive sources of capital, which would allow us to.
Really underpin our network plan and.
20th century, Fox with with the six and beyond so we're constantly thinking about various funding sources and it always will be a combination of cash on balance sheet.
Non dilutive financing sources and betters grant programs.
Okay. Thanks, that's helpful I'll pass on.
Your next question comes from the line of Chris Pierce with Needham <unk> Co. Your line is opened.
Hey, good morning, I was hoping we could drill down a bit on gross margins I know gross margins were down this quarter because of less equipment sales, but could you speak to where gross margins are as far as so in kilowatts, roughly where they are now and where they could go in the future and is it possible to kind of get a level of like if we exclude equipment equipment.
Like what level of network throughput would you be going need to be adjusted adjusted EBITDA positive.
Alright, So let me start with gross margin. So we are we're looking at so youre looking at GAAP gross margin.
The GAAP gross margin has a bunch of depreciation and amortization and so it's a lot of noncash expenses. When we are managing the business. We're looking at an adjusted gross margin. That's the number we're reporting and we clearly saw an expansion this quarter versus last quarter versus last quarter. This year. So we reported one to six 4% which is.
Is caused by.
Higher.
Utilization on our network, which allows us to fully exhibit deleverage effect.
And amortize some of them that fixed cost. So that's kind of a comment on that on our GAAP gross margins of why we're seeing a lower number than last than last quarter. So that that's you're absolutely right that the revenue mix, we had a higher portion of extend revenues last quarter extended having just kind of don't have attached the depreciation amortization.
That's why you see in that.
But again, our adjusted gross margin is probably a better number to look at to measure to measure the progress of the business. It's a consistent number you can you can we reported every single quarter.
Now when we're talking about adjusted EBITDA neutrality, we're clearly.
[noise] approach and Ed did you might see from a from the recent trends. We if you compare this quarter versus quarter this quarter last year.
Sure.
Our G&A as a percent of revenue has tremendously come down from 230%.
Revenue.
So 6% to 7% of revenue and so that that's a cool illustration that when the path to profitability when exactly it's going to happen that will happen in the next couple of years. The exact moment will be we will be talking to the market about this in the common months and update the market fully on that.
But that's probably as much as I can say right now.
Okay. Okay, just at a high level is that the right way to think about the business you've got these equipment partners right now and then.
Then as those kind of as that gets built out in the later years, it's gonna be be about margins on electricity sales to drivers in that sorry, just to confirm youre going to start something youre going to give more detail on maybe in the coming in the first half of next year, He said or at a later date.
Yeah, so or is that not the right with the overall business and they're sort of going to work for.
It's a combination of factors so electricity margins absolutely there the factor in there like just the margin is dependent on how pricing is dependent on a composition of network locations because the logistic costs are wildly different across the country is dependent on our efforts on getting ourselves on E D rates, which are usually more favorable.
But then there are other factors you have always allergy Crosby have non energy costs built into our cost of goods sold and overall network costs, such as maintenance AT&T and Verizon connectivity charges. Some software charges call center, and so on and so forth. So.
Those those items are semi fixed in nature and now our ability to cut costs on a per store basis is what driving the margins on maintaining the costs that would drive in driving that margin as well. So it's not all just about energy costs, it's not all about the price and you have some other costs. So the right way to think about it.
It is is.
Looking at the energy margins looking at pricing, but also making sure that we as a business that able to optimize for those semi fixed cost as well and that's something that would inform the margin. So the margin right now a 26, 4% and adjusted gross margin basis, we had 15% utilization this quarter, but utilization is expected.
To go opposite we all hope so that margin you said expect to see that number expands and with high utilization on the network.
Okay. Thank you.
Okay.
Your next question comes from the line of Andre Shepherd with Cantor Fitzgerald. Your line is opened.
Hey, good morning, everyone. Thanks for taking our questions and congrats on a strong quarter Kathy I Echo everyone's thoughts you will be missed I wish you all the best.
In your future endeavors, and we'll certainly Miss your EV.
Industry updates in our in the earnings call, but we're.
Looking forward to working with you as well.
Hmm.
Cathy maybe a question for you you know we've seen some of the large Oems out there Ford Mercedes.
First of all you've been to some degree talk about this potential slowdown in the demand for EV. So at least in the near term curious just maybe to get your thoughts on that and how that might translate into the charging industry and particularly into <unk>. Thank you.
Yeah, Thanks, Andreas and yeah.
I'll Miss talking to you on these quarterly calls as well so yeah.
What's fascinating is that the slowdown is relative to a giant I mean that is talked about as well is kind of a modulator slowdown from some some vertical growth. So we're still looking at I mean by all industry accounts, you know, 40% to 60% growth next year in a slower market than for any other.
Sector that would be viewed as like Oh, my goodness gracious. It so fast so we're going from 3 million Evs today to five to six it's by the end of 2024 and up to 35 by you know 35 million by 2030. So it is it is it remains a very fast growing sector. The the the modulate.
<unk> of that is again, we can actually lean in a little bit more to go a little bit more quickly on deploying stations more quickly if we need to and we can pull back just a little bit if it's going to slow down just a little bit I mean truly I actually do love the gretzky metaphor and so for US it's still like it it really is up into the right.
And whether 2024 is a little bit slower all of the Oems are building capacity to make hundreds of <unk>.
<unk> of model. The V. These there's no denying that so what happens in 2000 22020 for it because interest rates are high and in overall E V sort of sales are down I guess it just doesn't terribly worry on the macro trend is still really really strong and as evidenced by what we saw in the utilization trends right now right.
<unk> to be a leading provider of essential infrastructure for an increasingly hungary's set of people that need fast charging is a fantastic place to be.
Got it that's super helpful. I appreciate all that and maybe as a follow up I have a bit of a two part question. So.
And of course, then Debbie.
I think we would all probably agree that the deployment of the funds has been maybe slower than most of us would like so I'm. Just curious if you can just remind us of your run rate with your current liquidity on hand, I think in the past you had said that is sufficient to fund the business into 2025, So I just wanted to.
Confirm that and then if I just could also wanted to add.
With you know inflation and higher interest rates I'm curious to get your thoughts on how you see the energy Asp's are fluctuating you know next year.
Should there be a somewhat of a.
We will step up in cost or just curious to get your thoughts there. Thank you.
Yeah. So we're confirming with the current cash on the balance it was a combination of some of the fans. It finds and we talked on the call earlier like grandsons, and which we wanted to secure and just about to collapse. We are well financed well into two went to quantify if we don't need any extra capital until that moment.
On.
Okay.
Sorry, do you mind repeating the second question.
Yeah. The second part was just around the energy cost for the Ana there just yet.
It's kind of what you might expect.
Yeah.
So the interesting thing about energy costs, So Wednesday night customer of you too it is and we're very distributed across the country. So the the the good thing is that we're not tied to any wholesale a volatility and we're not tied to any particular utility due to distribution nature. So utilities do tends to pass on some of the costs to its customer.
But but because of the distributed nature of our network it doesn't happen.
And the whole network level at the same moment of time. So it happens in the pocket something that we're constantly monitoring that then would you have some sophisticated forecasting and probability weight it Assam since on which parts of the network to increase with which bought some in the network right now what we also want to remind everybody that we.
And we're absolutely free in the patent that those increases back to our customers. We're not the regulators in terms of how much we can charge our customers and we have a very sophisticated approach to our pricing, which I think we've discussed multiple times on these calls where we have a time of use pricing location based pricing subscription pricing. So there are little ways off.
Trying to charge a price insensitive customers more and allow access for price sensitive customers at some other maybe less popular times and whatnot. So even if we're seeing those increases that doesn't erode into our margin because were able to pass it all on them consumers pretty much right away as we see fit.
Got it Super helpful. Thanks, again, guys congrats on the quarter I'll pass it on.
Your next question comes from the line of Gabe Daoud with TD Cowen Your line is opened.
Thanks, Hey, good morning, everyone and congrats Kathy and bought our two bowls.
Was hoping we could maybe get a little more color on just capex trajectory from here.
Is it fair to assume that spend could actually decelerate in 24 just for.
Reserve cash and considering utilization rates are quite high in some of your across some of your portfolio would love to get a sense of the Capex trajectory and then how much.
Is the long lead times on Transformers really impacting you right now and when do you think it could become a bigger problem.
Yeah, well, what we're talking about a 274 various tens of other coal plants in our next call but.
I don't think deceleration is on the books, but we will obviously talk about all kinds of 'twenty 'twenty four metrics in a few months from now.
Yeah, and thanks a lot.
Let me just add on the sort of the transformer thing.
The transfer everything isn't slowing us down at all the transfer but the reality is we just take account of the fact that transformers, they're going to take a long time. So we planned for it right. So you know what.
Where we're being helpful to utilities, and we have a line of sight into which utilities have order transformers for the places because you know I think as I've mentioned before we go in and we meet with every single utility where were building and we give them our 12 to 18 months to 24 months.
Our game plan of where we're thinking we'll build so that they can actually make the orders for any service upgrades that are required and there are lots of lots of most places now do require a service upgrade as I think we've described.
Some of them are going to get their equipment faster than others, but we've got this machine that under the direction of dentists Kish. Our C. O O is extremely agile it's got to be the best in the business and so we are able to like we were able to ship are shipped our teams around to build where we can build when that when the utilities are ready to accept that when the.
Utilities are ready to install their parts of it as well. So we've got a very big funnel and are very in a very good line of sight to what we're building. So that's not it's not a gating item. It just may mean that we're not turning on as many as quickly you Youll remember a couple of years ago I thought Oh, let's get this all down to six months from start to energize Asian, well, it's not.
There yet and you know maybe maybe in a few years it will be but that's okay. Because we now plan for it.
Okay.
Okay. That's helpful.
And then I guess, just just as a follow up.
Could you maybe.
Talk a little bit about.
I'll start here.
Yeah.
Demand charge reform, that's where I was heading just is there is there an update there on maybe new jurisdictions and making some progress with demand charge reform in areas outside of California.
Leave it there thanks, everyone.
Yeah. So we've got we've got a great team that does does all of our utility regulatory advocacy and interventions and again I don't remember off the top of my head the sort of half dozen or does it between a half dozen or a dozen jurisdictions, where we're active.
But that demand charge reform extension of E V rates that are but conceivably sunsetting all of those things are on the boil and again, well well outside of California, and I, just I'm not remembering off hand, but gave happy to take that on notice.
And get back to you guys on on where those rate cases are underway.
Okay.
There are no further questions at this time I'd like to hand things back over to Kathy for closing remarks.
Thank you for attending everyone. This is our quarters financial and business update we all appreciate your interest in E. V go and while this is my final earnings call with you.
Be assured that I remain financially intellectually and emotionally invested an easy go success.
And I look forward to witnessing and celebrating the progress under Bob's leadership. Thank you so much.
This concludes today's conference call you may now disconnect.
Yeah.
Art, everyone we are clearer.
Thanks folks.
[music].
Uh huh.
[music].