EVGO - EVGO: PAVING A FASTER ROAD TO EV ADOPTION
EVGO: PAVING A FASTER ROAD TO EV ADOPTION
EVgo Inc. (NASDAQ: EVGO) is a leader in charging solutions, building and operating the infrastructure and tools needed to expedite the mass adoption of electric vehicles for individual drivers, rideshare and commercial fleets, and businesses.
The Company and its Products
EVgas was founded in 2010, and since 2019, it has been powered by 100% renewable energy by purchasing renewable energy certificates. The Company owns and operates a charging network of approximately 900 fast-charging locations, serving over 60 metropolitan areas and 30 states.
Market Cap: $1.10B; Current Share Price: $3.68
Data by YCharts
EVgo continues to add more DC fast charging locations through EVgo eXtend, its white-label service offering. EVgo is accelerating transportation electrification through partnerships with automakers, fleet and rideshare operators, retail hosts such as grocery stores, shopping centers, gas stations, policy leaders, and other organizations. With a rapidly growing network, robust software products, and unique service offerings for drivers and partners, including EVgo Optima, EVgo Inside, EVgo Rewards, and Autocharge, EVgo enables a charging experience where drivers live, work, travel, and play.
EVgo also owns PlugShare, the leading global platform for EV drivers to locate and provide information about charging stations and feedback on their charging experiences while leveraging tools like Pay with PlugShare and EV Trip Planner.
We’ll discuss key elements that make the Company worth tracking.
- Rapid Growth in EV Adoption Signaling Increasing Need for DC Fast Charging
The EV charging market is inextricably linked to the general market for EVs, which has experienced significant recent growth. For the year ended December 31, 2022, new battery EV sales in the United States were approximately 812,000, an increase of 65% compared to 2021.
In response to the growing electrification trend, nearly all major automobile manufacturers have committed to producing EV models, with over 60 EV models anticipated to be available in 2023 from over 30 manufacturers and nearly a dozen more models coming onto the market soon. According to forecasts from the United States Department of Transportation and Bloomberg New Energy Finance (BNEF), approximately eight million EVs are expected to be on American roads by 2025, nearly 34 million EVs by 2030, and over 125 million by 2040, which would represent approximately 50% of all motor vehicles in the US.
Additionally, federal, state, and local governments are offering incentives and rebates to encourage the adoption of EVs. In November 2021, Congress passed, and the President signed the Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law. Among other provisions, this legislation included up to $7.5 billion in funding for EV charging infrastructure through the Department of Transportation.
Several states — including California, Oregon, New Jersey, New York, Maryland, and Massachusetts — have adopted or proposed mandates for EVs. California alone has set an aggregate goal of more than seven million EVs on the road by 2030, which, by California Energy Commission estimates, will require 1.2 million private and shared public chargers.
Nevertheless, broadening demographics of EV owners, larger battery sizes, larger EVs with higher kWh usage per mile, increased EV penetration in medium- and heavy-duty vehicle applications, increasing adoption of rideshare and last-mile delivery services, and the proliferation of autonomous vehicle fleets are expected to increase demand for DCFC faster than demand for overall EV charging. According to forecasts from BNEF, fast charging is expected to constitute more than 25% of all public EV charging demand by 2030, compared to less than 15% in 2021.
Overall, more than $1.2 trillion is expected in planned investment for developing and deploying EVs through 2030, and EVgo is well prepared to benefit from this phenomenon.
To start with, the EVgo business model is such that it benefits from increasing EV VIO (Vehicles in Operation) as this drives utilization. Top stalls on the EVgo network are already in line with long-term revenue targets, and the Company expects to realize an increasing charge rate as EV batteries improve and EVgo deployment of ultra-fast chargers accelerates. Over the long term, the public network may account for 75%-80% of EVgo revenue (remainder eXtend, hubs, behind-the-fence, tech-driven services).
Secondly, EVgo may realize robust double-digit pre-tax unleveraged IRR on a portfolio basis. The Company may reap attractive long-term returns underpinned by EVgo’s first-mover, analytics, and platform advantages. Current gross capex per stall is approximately $130,000 to $150,000, and EVgo can benefit from OEM/grant funding/tax policy available to offset capex spending.
Thus, it can be safely assumed that the Company will profit immensely from the upcoming expansion in the EV and DC Fast Charging sectors.
- Market Leader Across the EV Fast Charging Landscape
EVgo is a leader in charging solutions – it has a flexible business model that derives value through multiple revenue streams. It is prioritizing the build-out of ultra-fast chargers, a key market segment expected to grow faster than the overall EV charging market.
To take advantage of the expected rapid growth in the number of EVs on the road in the United States, the Company is rapidly expanding its charging station network, focusing on developing locations with favorable traffic, utilization, and financial return characteristics.
The Company’s proprietary technology, analytical tools, and extensive commercial partnerships with OEMs, fleets, and governments provide a strong competitive edge as it selects, designs, and develops new charging stations.
EVgo’s partnerships and collaboration with a wide range of automotive OEMs, rideshare operators, and other channel partners are designed to incentivize and accelerate EV adoption across the US Through these partnerships, EVgo’s network has powered more than 400 million electric miles as of December 31, 2022.
The Company has made significant investments in its network, making it one of the market leaders in its segment today.
As seen from the above graph, specifically for Q1 2023, EVgo displayed throughput growth of 124% compared to VIO growth of 53% YoY. At the same time, operational stall growth was +33% – this indicates that kWh dispensed is increasing faster than stall growth. Growth in kWh per stall creates meaningful operating leverage in the EVgo model, allowing it to cement its position in the industry.
Additionally, leading EVgo stalls demonstrate the long-term potential of growth runway for a broader network.
- Top 10% of stalls: 26% utilization
- Top 20% of stalls: >20% utilization
- California network >12% utilization; top metropolitan statistical areas (MSA) >13%
- Certain MSAs in Texas, Florida, Nevada, and Connecticut > 10%
In other words, EVgo performs incredibly well and has the resources to perform even better.
- Financial Highlights
EVgo reported excellent results for Q1 FY23 – revenue grew to $25.3 million, representing an increase of 229% YoY. Network throughput reached 17.9 gigawatt-hours, an increase of 124% YoY.
The Company ended Q1 FY23 with approximately 3,100 stalls in operation or under construction, with nearly 220 new stalls added to the EVgo network during the quarter. It also added more than 67,000 new customer accounts in the first quarter, reaching approximately 614,000 overall at the end of the quarter.
For FY22, EVgo reported revenue of $54.6 million, an increase of 146% over FY21. At the same time, network throughput of 44.6 GWh grew 69% over FY21. The Company ended FY22 with over 2,800 stalls in operation or under construction, with approximately 670 added during FY22. EVgo added approximately 224,000 during 2022, reaching approximately 553,000 overall at the end of the year.
For FY23, the Company provided the following guidance.
- Total revenue of $105 – $150 million
Additionally, at year-end 2023, EVgo expects 3,400 – 4,000 DC fast charging stalls in operation or under construction.
This indicates that EVgo’s exponential revenue growth is expected to continue. As already discussed, the Company operates in a fast-growing industry and has all the tools and resources to derive maximum advantage from the sector expansion. This makes EVgo worth watching out for.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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Reference:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1821159/000155837023008869/evgo-20230331x10q.htm
https://www.sec.gov/ix?doc=/Archives/edgar/data/1821159/000155837023005121/evgo-20221231x10k.htm