# EVgo Inc. (EVGO) FY 2022 MD&A Verbatim Item 7 Management's Discussion and Analysis from EVgo Inc.'s 10-K for fiscal year 2022. SEC filing source: https://www.sec.gov/Archives/edgar/data/1821159/000155837023005121/evgo-20221231x10k.htm Accession: 0001558370-23-005121 Filing date: 2023-03-30 Report date: 2022-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/EVGO/ All MD&A years: /company/EVGO/mda/ Previous year: /company/EVGO/mda/fy2021/ (FY 2021) Next year: /company/EVGO/mda/fy2023/ (FY 2023) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of EVgo’s consolidated results of operations and financial condition. The discussion should be read in conjunction with EVgo’s consolidated financial statements and related notes thereto as of and for the years ended December 31, 2022 and 2021, included elsewhere in this Annual Report. In addition to historical information, this discussion contains forward-looking statements that involve numerous risks, uncertainties and assumptions that could cause EVgo’s actual results to differ materially from management’s expectations due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” in this Annual Report. ​ Overview EVgo is a key leader in charging solutions, building and operating the infrastructure and tools to expedite the mass adoption of EVs for individual drivers, rideshare and commercial fleets and businesses. Since its founding in 2010, EVgo has led the way to a cleaner transportation future and its network has been powered by 100% renewable energy since 2019 through the purchase of RECs. EVgo has a flexible business model that derives value through multiple revenue streams. The foundation of the Company’s business is the development and operation of EV charging sites through which it dispenses electricity to EVs driven by individuals, commercial drivers and fleet operators. EVgo’s principal revenue stream is from the provision of charging services for EVs of all types on EVgo’s network. In addition, a variety of business-to-business commercial relationships provide EVgo with revenue or cash payments based on commitments to build new infrastructure, provide guaranteed access to charging and offer marketing, data and software-driven services. EVgo also earns revenue from the sale of regulatory credits generated through sales of electricity and its operation and ownership of its DCFC network. EVgo believes this combination of revenue streams can drive long-term margin expansion and customer retention. Specifically, revenue is earned through the following streams: [[GREPCENT_TABLE]] [["","\u25cf","Charging Revenue, Retail: EVgo sells electricity directly to drivers who access EVgo\u2019s publicly available networked chargers. Various pricing plans exist for customers and drivers have the choice to charge as members (with monthly fees and reduced per-minute or kWh pricing) through a subscription service or as non-members. Drivers can locate the chargers through EVgo\u2019s mobile application, their vehicle\u2019s in-dash navigation system or third-party databases that license charger-location information from EVgo. EVgo generally installs its chargers in parking spaces owned or leased by commercial or public-entity Site Hosts that desire to provide EV charging services at their respective locations. Commercial Site Hosts include retail and grocery stores, hotels, offices, medical complexes, airports and convenience stores. EVgo believes its offerings are well aligned with the goals of Site Hosts, as many commercial businesses increasingly view EV charging capabilities as essential to attract tenants, employees, customers and visitors and achieve sustainability goals. Site Hosts are generally able to obtain these benefits at no cost when partnering with EVgo through EVgo\u2019s owner and/or operator model, as EVgo is responsible for the installation and operation of chargers located on Site Hosts\u2019 properties. In many cases, Site Hosts will earn additional revenue from license payments made by the Company in exchange for use of the site. EVgo also incorporates flexible ownership models through EVgo eXtend, through which certain Site Hosts can invest in and build EV charging stations that the Site Host owns and EVgo operates."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Charging Revenue, Commercial: High volume fleet customers, such as TNCs or delivery services, can access EVgo\u2019s charging infrastructure through EVgo\u2019s public network. Pricing for charging services is most often negotiated directly between EVgo and the fleet owner based on the business needs and usage patterns of the fleet. In these arrangements EVgo contracts with and bills, either the fleet owner directly or an individual fleet driver utilizing EVgo\u2019s chargers. Access to EVgo\u2019s public network allows fleet and rideshare operators to support mass adoption of transportation electrification and achieve sustainability goals without needing to directly invest capital in charging infrastructure or incur operating costs associated with charging equipment."]] [[/GREPCENT_TABLE]] 62 Table of Contents [[GREPCENT_TABLE]] [["","\u25cf","Charging Revenue, OEM: EVgo is a key leader in OEM charging programs with revenue models to meet a wide variety of OEM objectives related to the availability of charging infrastructure and the provision of charging services for EV drivers. EVgo contracts directly with OEMs to provide charging services to drivers who have purchased or leased such OEMs\u2019 EVs and who access EVgo\u2019s public charger network, to expand EVgo\u2019s network of owned DCFCs and to provide other related services. Other related services currently provided to OEMs by EVgo include co-marketing, data services and digital application services. EVgo views its OEM relationships as a core customer acquisition channel."]] [[/GREPCENT_TABLE]] In addition to offering access to its public network, EVgo offers dedicated charging solutions to fleets. As part of this offering, EVgo typically builds, owns and operates charging infrastructure for the exclusive use of a dedicated customer and is currently offering flexible ownership models, such as its ChaaS offering. EVgo’s dedicated and ChaaS offerings provide a value proposition for fleets who might otherwise feel compelled to procure, install and manage their own EVSE. EVgo offers a variety of pricing models for its dedicated charging solutions, including a mix of volumetric commitments and variable and fixed payments to EVgo for provision of its services. ChaaS and dedicated charging allow for tailored fleet charging solutions without requiring fleets to directly incur capital expenditures or operating and management costs related to charging EVs. Together, EVgo’s dedicated charging solutions and public fleet charging services provide fleets with a more robust and flexible charging solution. ​ [[GREPCENT_TABLE]] [["","\u25cf","Regulatory Credit Sales: As a charging station owner and operator, EVgo earns regulatory credits, such as LCFS credits and other regulatory credits, in states where such programs are enacted currently, including the FCI program in California. These credits are generated through charging station operations based on the volume of kWh sold. EVgo earns additional revenue through the sale of these credits to buyers obligated to purchase the credits to comply with the program mandates."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Network Revenue, OEM: This revenue stream represents revenue related to contracts that have significant charger infrastructure build programs, which represent set-up costs under Financial Accounting Standards Board Accounting Standards Codification (\u201cASC\u201d) Topic 606, Revenue from Contracts with Customers (\u201cASC 606\u201d). Proceeds from these contracts are allocated to performance obligations including marketing activities, memberships, reservations and the expiration of unused charging credits. Marketing activities are recognized at a point in time as the services are performed and measurement is based on amounts spent. For memberships and reservations, revenue is recognized over time and measured based on the charging activity of subscriber members at each measurement period. Any unused charging credits are recognized as breakage using the proportional method or, for programs where there is not enough information to determine the pattern of rights exercised by the customer, the remote method."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","eXtend Revenue: Through EVgo eXtend, EVgo provides hardware, design, and construction services for charging sites, as well as ongoing operations, maintenance and networking and software integration solutions, while EVgo\u2019s customers purchase and retain ownership of the charging assets. For some eXtend customers, EVgo also provides grant application support and related services. In 2022, EVgo announced an eXtend deal with the Pilot Company to deploy up to 2,000 fast charging stalls that the Pilot Company will own and EVgo will build, network, operate and maintain."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Ancillary Revenue: EVgo offers a variety of software-driven digital, development and operations services to its customers. EVgo has offerings that currently include customization of digital applications, charging data integration, micro-targeted advertising services, smart charging reservations, loyalty programs, access to chargers behind parking lot pay gates, and equipment procurement and operations services for customers operating dedicated networks. EVgo also continues to evaluate and engage on potential market opportunities beyond these business models."]] [[/GREPCENT_TABLE]] 63 Table of Contents Recent Developments Geopolitical and Macroeconomic Environment During the last several years, the global economy has experienced disruption and sustained volatility due to a number of factors. In particular, the global outbreak of COVID-19 resulted in significant volatility in the global and domestic economies, changes in consumer and business behavior, market downturns and restrictions on business and individual activities, resulting in overall reduced economic activity. The COVID-19 pandemic impacted EVgo’s operations through reduced network throughput, construction delays and supply chain and shipping constraints. EVgo also experienced delays in its Site Host negotiations as Site Hosts devoted more time to day-to-day operations and employee health and safety. Finally, for some contractual commitments, EVgo is required to adhere to a construction schedule over specified timeframes. Those timelines were impacted due to delays associated with COVID-19 and broader supply chain disruptions and it is possible that the pandemic and its ongoing effects could continue to impact these timelines in the future. More recently, Russia’s military invasion of Ukraine and the subsequent sanctions imposed on Russia, Belarus, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic have led to and will likely continue to lead to, geopolitical instability, market uncertainty and supply disruptions. Additionally, rising inflation has increased operating costs for many businesses and, together with slowing economic growth and fear of a recession, has led governments to change monetary policy in response. Finally, recent concerns regarding the stability of the U.S. and international financial systems has raised concerns regarding the ability of companies to access deposits; potential losses of uninsured deposits and other financial assets; the potential loss of access to working capital sources and access to favorable commercial financing terms (including terms related to interest rates and restrictive financial or operating covenants); and systemic limitations on access to credit and liquidity sources. The current economic environment remains uncertain and the extent to which EVgo’s operating and financial results for future periods will be impacted by the ongoing impacts of the COVID-19 pandemic, the ongoing conflict in Ukraine, increasing inflation, instability in the financial services sector, supply-chain disruptions, government efforts to reduce inflation and any recession will largely depend on future developments, which are highly uncertain and cannot be reasonably estimated at this time. Government EV Initiatives In order to encourage the use of EVs, the U.S. federal government and some state and local governments provide incentives to end users and purchasers of EVs and EV charging stations in the form of rebates, tax credits and other financial incentives that promote EV adoption and related EV charging infrastructure. EVgo believes the increase in promotion of EVs and the installation of related EV charging infrastructure will continue in part due to the ongoing implementation of the Infrastructure Investment and Jobs Act (the “Bipartisan Infrastructure Law”) and the recently enacted Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), which included extensions, expansions and revisions of various tax credits relating to EVs and EV charging infrastructure and may provide more flexibility and options in monetizing such credits. In particular, the Inflation Reduction Act (i) expanded and extended tax credits for EV charging infrastructure and new EVs while also imposing new limitations and requirements for such credits, (ii) introduced tax credits for used EVs and commercial EVs and (iii) introduced the concept of transferability for certain tax credits, providing an additional option to monetize such credits. However, the impact of the Inflation Reduction Act cannot be known with any certainty, and EVgo may not reap any or all of the expected benefits of the Inflation Reduction Act. States including (but not limited to) California, Colorado, Delaware, Massachusetts, New Jersey and New York also offer various rebates, grants and tax credits to incentivize both EV and EVSE purchases. Issuance of Common Stock On November 10, 2022, EVgo entered into a Distribution Agreement with J.P. Morgan Securities LLC, Evercore Group L.L.C. and Goldman Sachs & Co. LLC as sales agents, pursuant to which the Company may sell up to $200 million of shares of Class A common stock in “at the market” transactions at prevailing market prices (the “ATM Program”). 64 Table of Contents During the fourth quarter of 2022, EVgo sold 1,588,340 shares of Class A common stock pursuant to the ATM Program, with aggregate gross proceeds of $10.7 million. After deducting commissions of $0.3 million, the Company received net proceeds of approximately $10.4 million. Granting of EVgo’s 205 Petition On February 3, 2023, EVgo filed a petition in the Court of Chancery under Section 205 of the Delaware General Corporation Law seeking (i) the validation of the stockholder vote approving CRIS’s certificate of incorporation in connection with the CRIS Business Combination and (ii) the validation and declaration of effectiveness of (a) EVgo’s Charter (including its filing and effectiveness, in each case as of July 1, 2021) and (b) the securities issued or to be issued in reliance on such approval and/or the validity of EVgo’s Charter, as of the respective dates of their issuance (including the 5,750,000 shares of Class A common stock into which the shares of Class B common stock converted upon the consummation of the CRIS Business Combination). EVgo filed the petition due in part to a recent ruling of the Court of Chancery that created uncertainty as to the validity and effectiveness of these corporate acts and, consequently, as to its capital structure. Such purported uncertainty was eliminated on February 21, 2023, when, following a hearing EVgo’s petition, the Court of Chancery issued an order validating each of the corporate acts described above, effective as of the time each such act was originally taken, notwithstanding any failures of authorization or potential failures of authorization described in, or resulting from the matters described in, the petition. Key Components of Results of Operations Revenue EVgo’s revenue is generated across various business lines. The majority of EVgo’s revenue is generated from the sale of charging services, which are comprised of retail, OEM and commercial business lines, and its eXtend offering. In addition, EVgo generates ancillary revenue through the sale of data services and consumer retail services. EVgo also offers network services to OEM customers, including memberships and marketing. Finally, as a result of owning and operating the EV charging stations, EVgo earns regulatory credits such as LCFS credits, which are sold to generate additional revenue. Revenue From Related Party Revenue from related party is for data reporting services provided to an entity related to a former Board member and to various agreements with an affiliate of LS Power for the purchase and sale of LCFS credits at prevailing market prices. Cost of Sales Cost of Revenue. Cost of revenue consists primarily of energy usage fees, site operating and maintenance expenses, warranty and repair services and site lease and rent expense associated with charging equipment. EVgo is facing a challenging utility pricing environment where energy usage fees are increasing particularly in the summer months. It is anticipated that this may lead to a margin decrease, as the Company may not be able to fully pass on these energy cost increases to its customers through increases to charging session pricing. Depreciation, Net of Capital-Build Amortization. Depreciation, net of capital-build amortization, consists of depreciation related to EVgo’s property and equipment associated with charging equipment and installation and is partially offset by the amortization of EVgo’s capital-build liabilities associated with third-party funding received for charging stations and other programs. Gross Profit (Loss) and Gross Margin Gross profit (loss) consists of EVgo’s revenue less its cost of revenue and depreciation, net of capital-build amortization. Gross margin is gross profit (loss) as a percentage of revenue. 65 Table of Contents Operating Expenses General and Administrative Expenses. General and administrative expenses primarily consist of payroll and related personnel expenses, IT and office services, customer service and network charges, office rent expense and professional services. EVgo expects its general and administrative expenses to increase in absolute dollars as it continues to grow its business. EVgo also expects to continue to incur additional expenses related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, general insurance and directors’ and officers’ insurance, investor relations and other professional services. Depreciation, Amortization and Accretion. Depreciation, amortization and accretion consists of depreciation related to EVgo’s property, equipment and software not associated with charging equipment and, therefore, not included in the depreciation, net of capital-build amortization expenses recorded in cost of sales. This also includes amortization of EVgo’s intangible assets and accretion related to EVgo’s asset retirement obligations. Operating Profit (Loss) and Operating Margin Operating profit (loss) consists of EVgo’s gross profit or loss less general and administrative expenses and depreciation, amortization and accretion in operating expenses. Operating margin is operating profit (loss) as a percentage of revenue. Interest Expense, Related Party Interest expense, related party consists primarily of interest due under the Secured Demand Grid Promissory Note, dated January 16, 2020, by and between EVgo Services and EVgo Holdings (the “LS Power Note”). Pursuant to the terms of the Business Combination Agreement, the LS Power Note was cancelled immediately prior to the CRIS Close Date and converted into equity of EVgo Services, immediately followed by a contribution of such equity interest by EVgo Holdings to EVgo Holdco. Interest Income Interest income consists primarily of interest earned on cash, cash equivalents and debt securities. Other (Expense) Income, Net Other (expense) income, net, consists primarily of unrealized gains and losses on marketable securities. Change in Fair Values of Warrant and Earnout Liabilities The change in the fair values of the warrant and earnout liabilities reflects the mark-to-market adjustments associated with warrants to purchase shares of the Company’s common stock and earnout liabilities for each reporting period. Income Taxes EVgo’s provision for income taxes consists primarily of income taxes related to federal and state jurisdictions where business is conducted related to the Company’s ownership in EVgo OpCo. For the years ended December 31, 2022 and 2021, EVgo’s provision for income taxes and effective tax rates were deemed to be de minimis. As of December 31, 2022 and 2021, EVgo maintained a full valuation allowance on EVgo’s net deferred tax assets. There were no unrecognized tax benefits for uncertain tax positions, nor any significant amounts accrued for interest and penalties as of December 31, 2022 and 2021. 66 Table of Contents Net Earnings (Loss) Attributable to Redeemable Noncontrolling Interest Net earnings (loss) attributable to redeemable noncontrolling interest represents the share of net earnings or loss that is attributable to the holder of EVgo’s Class B common stock. Key Performance Indicators EVgo management uses several performance metrics to manage the business and evaluate financial and operating performance. EVgo considers the following indicators to be of critical importance: Network Throughput Network throughput represents the total amount of GWh that was consumed by EVs using chargers and charging stations on EVgo’s network. EVgo typically monitors GWh sales by three components: business line, customer and customer class. EVgo believes monitoring of component trends and contributions is the appropriate way to monitor and measure business-related health. Number of DC Stalls on EVgo’s Network Number of DC stalls represents the total number of DC stalls that EVgo has operational on its network (energized, inspected and commissioned). One stall can charge one vehicle at a time. There are certain configurations of EVgo sites where one DC charger is capable of charging only one vehicle at a time; all chargers at such a site are counted as one stall per one charger. There are certain configurations of EVgo sites where one DC charger is capable of charging two vehicles simultaneously; all chargers at such a site are counted as two stalls per one charger. Receipts EVgo defines Receipts as total revenue plus change in deferred revenue over the same period. Pursuant to the term of certain OEM contracts, EVgo is paid well in advance of when revenue can be recognized according to ASC Topic 606; usually, the payment is tied to the number of stalls that commence operations under the applicable contract arrangement. EVgo believes that its Receipts metric provide investors valuable insight into cash that has been generated from EVgo’s customers and EVgo’s periodic performance. EVgo uses Receipts to monitor and measure EVgo’s commercial performance, liquidity and growth as EVgo’s OEM customers pay EVgo in advance for placing stalls in operation and then EVgo recognizes a portion of the related revenue over time. The following table represents network throughput and the number of DC stalls on EVgo’s network: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b","December 31,"],["\u200b","\u200b","2022","","2021"],["Network throughput (GWh) for the year ended","","44.6","","26.4"],["Number of DC stalls on EVgo network as of","","2,184","\u200b","1,676"]] [[/GREPCENT_TABLE]] The following table presents the calculation of Receipts for the years ended December 31, 2022 and 2021: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","Years Ended"],["\u200b","December 31,"],["(in thousands)","2022","","2021"],["GAAP revenue1","$","54,588","\u200b","$","22,214"],["GAAP changes in deferred revenue2","","13,070","\u200b","","21,925"],["Total Receipts","$","67,658","\u200b","$","44,139"],["Year-over-year percentage change in total Receipts","","53%","\u200b","","\u200b"]] [[/GREPCENT_TABLE]] 1 As presented in the consolidated statements of operations. 2 As presented in the consolidated statements of cash flows. Change in deferred revenue for the year ended December 31, 2021 includes the first payment received in March 2021 of $20.0 million under one of EVgo’s OEM agreements. 67 Table of Contents Factors Affecting EVgo’s Operating Results EVgo believes its performance and future success depend on a number of factors, including those discussed below and in “Part I, Item 1A., Risk Factors.” EV Sales EVgo’s revenue growth is directly tied to the adoption and continued acceptance and usage of passenger and commercial EVs, which it believes drives the demand for electricity, charging infrastructure and charging services. The market for EVs is still rapidly evolving and, although demand for EVs has grown in recent years, there is no guarantee of such future demand. Additionally, as demand increases, the supply must keep pace for adoption to continue to accelerate at a rapid pace. Factors impacting the adoption of EVs include perceptions about EV features, quality, safety, performance and cost; perceptions about the limited range over which EVs may be driven on a single battery charge; availability of services for EVs; consumers’ perception about the convenience, speed, reliability and cost of EV charging; volatility in the price of gasoline and diesel; EV supply chain shortages and disruptions including, but not limited to, availability of certain components (e.g., semiconductors and critical raw materials necessary for the production of EVs and EV batteries), the ability of EV OEMs to ramp-up EV production and/or allocate sufficient quantities of EV models to the U.S. market; domestic content requirements or other policy constraints; availability of batteries and battery materials; availability, cost and desirability of other alternative fuel vehicles, including plug-in hybrid EVs and high fuel-economy gasoline and diesel-powered vehicles; and increases in fuel efficiency. In addition, macroeconomic factors could impact demand for EVs, particularly since the sales price of EVs can be more expensive than traditional gasoline-powered vehicles. If the market for EVs does not develop as expected or if there is any slowdown or delay in overall adoption of EVs, EVgo’s operating results may be adversely affected. Electrification of Fleets EVgo faces competition in the emerging fleet electrification segment, including from certain fleet customers who may opt to install and own charging equipment on their property; however, EVgo believes its unique set of offerings to fleets and its existing charging network position EVgo advantageously to win business from fleets. Fleet owners are generally more sensitive to the total cost of ownership of a vehicle than private-vehicle owners. As such, electrification of vehicle fleets may occur more slowly or more rapidly than management forecasts based on the cost to purchase, operate and maintain EVs and the general availability of such vehicles relative to those of ICE vehicles. The ability of EVgo and its competitors’ to offer competitive charging services and value-added ancillary services may impact the pace at which fleets electrify and may impact EVgo’s ability to capture market share in fleets. Additionally, federal, state and local government support and regulations directed at fleets (or lack thereof) may accelerate or delay fleet electrification and increase or reduce EVgo’s business opportunity. EVgo’s management is currently monitoring several key rules that may encourage fleet electrification, including California’s ACT rule and similar programs recently adopted by Massachusetts, New Jersey, New York, Oregon and Washington and the implementation of California’s Clean Miles Standard, as well as similar proposals in other zero emission vehicle states and potential action at the federal level. Competition The EV charging industry is increasingly competitive. The principal competitive factors in the industry include charger count, locations, accessibility and reliability; charger connectivity to EVs and ability to charge all standards; speed of charging relative to expected vehicle dwell times at the location; DCFC network reliability, scale and local density; software-enabled service offerings and overall customer experience; operator brand, track record and reputation; and access to equipment vendors and service providers; policy incentives; and pricing. Existing competitors may expand their product offerings and sales strategies, new competitors may enter the market and certain fleet customers may choose to install and operate their own charging infrastructure. If EVgo’s market share decreases due to increased competition, its revenue and ability to generate profits in the future may be impacted. 68 Table of Contents Government Mandates, Incentives and Programs The U.S. federal government and some state and local governments provide incentives to end-users and purchasers of EVs and EV charging stations in the form of rebates, tax credits and other financial incentives, such as payments for regulatory credits. The EV market relies on these governmental rebates, tax credits and other financial incentives to significantly lower the effective price of EVs and EV charging stations. However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or may be reduced or terminated as a matter of regulatory or legislative policy. In particular, EVgo has historically benefitted from the availability of federal tax credits under Section 30C of the Code, which effectively subsidizes the cost of placing in service EVgo’s charging stations. The Inflation Reduction Act revised the credit under Section 30C to extend the credit until December 31, 2032, introduce the concept of transferability of such tax credits, expand the credit such that it is capped at $100,000 per item and increase eligibility requirements to require installation of EV charging stations in certain census tracts along with meeting prevailing wage and apprenticeship requirements, among other changes. See Part I, Item 1A, “Risk Factors —The EV market currently benefits from the availability of rebates, tax credits and other financial incentives from governments, utilities and others to offset the purchase or operating cost of EVs and EV charging stations. The reduction, modification or elimination of such benefits could adversely affect EVgo’s financial results.” for further discussion. There can be no assurance that the EV charging stations placed in service by EVgo will meet the revised requirements for the Section 30C credits, and compliance with such requirements could increase EVgo’s labor and other costs. Any reduction in rebates, tax credits or other financial incentives available to buyers or owners of EVs or EV charging stations could negatively affect the EV market and adversely impact EVgo’s business operations and expansion potential. In addition, there can be no assurance that EVgo will have the necessary tax attributes to utilize any such credits that are available and may not be able to monetize such credits on favorable terms. Further, certain features of EVgo OpCo’s ownership may limit the available tax credit that can be monetized or utilized. New tariffs and policies that could incentivize overbuilding of infrastructure may also have a negative impact on the economics of EVgo’s stations. Furthermore, new tariffs and policy incentives could be put in place that favor equipment manufactured by or assembled at American factories, which may put EVgo’s fast charging equipment vendors at a competitive disadvantage, including by increasing the cost or delaying the availability of charging equipment, by challenging or eliminating EVgo’s ability to apply or qualify for grants and other government incentives, or by disqualifying the Company from the ability to compete for certain charging infrastructure build-out solicitations and programs, including those initiated by federal government agencies. Moreover, a variety of incentives and rebates offered by the U.S. federal government as well as state and local governments in order to encourage the use of EVs may be limited or reduced. In particular, the U.S. federal government offers a tax credit, the maximum amount of which is $7,500, for qualified new plug-in EVs. The Inflation Reduction Act modified the tax credit for new plug-in EVs and added new tax credits for used and commercial EVs. The Inflation Reduction Act removed the phase-out of tax credits for new plug-in EVs with respect to vehicle manufacturers that reached certain production levels beginning in 2023. However, the tax credit is subject to additional requirements and limitations, such as certain adjusted gross income limits for consumers claiming the credit, domestic content requirements for critical minerals and batteries and a requirement for final assembly to occur in North America. Such additional requirements and limitations for such tax credits may reduce incentives available to encourage the adoption of EVs, which could negatively affect the EV market and adversely impact EVgo’s business operations and expansion potential. Technology Risks EVgo relies on numerous internally developed and externally sourced hardware and software technologies to operate its network and generate earnings. EVgo engages a variety of third-party vendors for non-proprietary hardware and software components. The ability of EVgo to continue to integrate its technology stack with technological advances in the wider EV ecosystem including EV model characteristics, charging standards, charging hardware, software and battery chemistries and value-added customer services will determine EVgo’s sustained competitiveness in offering charging services. There is a risk that some or all of the components of the EV technology ecosystem become obsolete and that EVgo will be required to make significant investments to continue to effectively operate its business. EVgo’s management believes EVgo’s business model is well-positioned to enable EVgo to remain technology-, vendor- and OEM-agnostic 69 Table of Contents over time and allow the business to remain competitive regardless of long-term technological shifts in EVs, batteries or modes of charging. Sales of Regulatory Credits EVgo derives revenue from selling regulatory credits earned for participating in LCFS programs, or other similar carbon or emissions trading schemes, in various jurisdictions in the U.S. EVgo currently sells these credits at market prices. These credits are exposed to various market and supply and demand dynamics which can drive price volatility and which are difficult to predict. Price fluctuations in credits may have a material effect on future results of operations. The availability of such credits depends on continued governmental support for these programs. If these programs are modified, reduced or eliminated, EVgo’s ability to generate this revenue in the future would be adversely impacted. In addition to current programs, EVgo’s management is currently monitoring the implementation of Washington’s program and additional proposals in varying stages of discussions including in New York, along with potential changes to the Renewable Fuels Standard. Results of Operations Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 The table below presents EVgo’s results of operations for the years ended December 31, 2022 and 2021: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Years Ended December 31,","","\u200b","Change"],["(dollars in thousands)","","2022","","2021","","\u200b","$","","%"],["Revenue","","$","54,513","","$","21,652","\u200b","\u200b","$","32,861","\u200b","152","%"],["Revenue from related party","","\u200b","75","","\u200b","562","\u200b","\u200b","\u200b","(487)","\u200b","(87)","%"],["Total revenue","","\u200b","54,588","","\u200b","22,214","","","\u200b","32,374","","146","%"],["Cost of revenue","\u200b","\u200b","41,460","\u200b","\u200b","17,058","\u200b","\u200b","\u200b","24,402","\u200b","143","%"],["Depreciation, net of capital-build amortization","","\u200b","18,779","","\u200b","11,986","\u200b","\u200b","\u200b","6,793","\u200b","57","%"],["Gross loss","","\u200b","(5,651)","","\u200b","(6,830)","\u200b","\u200b","\u200b","1,179","\u200b","17","%"],["General and administrative expenses","\u200b","\u200b","126,713","","\u200b","71,086","\u200b","\u200b","\u200b","55,627","\u200b","78","%"],["Depreciation, amortization and accretion","","\u200b","17,139","","\u200b","11,915","\u200b","\u200b","\u200b","5,224","\u200b","44","%"],["Operating loss","","\u200b","(149,503)","","\u200b","(89,831)","\u200b","\u200b","\u200b","(59,672)","\u200b","(66)","%"],["Interest expense","\u200b","\u200b","(21)","\u200b","\u200b","\u2014","\u200b","\u200b","\u200b","(21)","\u200b","*","\u200b"],["Interest expense, related party","\u200b","\u200b","\u2014","","\u200b","(1,926)","\u200b","\u200b","\u200b","1,926","\u200b","100","%"],["Interest income","\u200b","\u200b","4,479","","\u200b","69","\u200b","\u200b","\u200b","4,410","\u200b","*","\u200b"],["Other (expense) income, net","","\u200b","(815)","","\u200b","607","\u200b","\u200b","\u200b","(1,422)","\u200b","(234)","%"],["Change in fair value of earnout liability","\u200b","\u200b","3,481","\u200b","\u200b","2,214","\u200b","\u200b","\u200b","1,267","\u200b","57","%"],["Change in fair value of warrant liability","\u200b","\u200b","36,157","\u200b","\u200b","31,105","\u200b","\u200b","\u200b","5,052","\u200b","16","%"],["Loss before income tax expense","\u200b","\u200b","(106,222)","\u200b","\u200b","(57,762)","\u200b","\u200b","\u200b","(48,460)","\u200b","(84)","%"],["Income tax expense","\u200b","\u200b","(18)","\u200b","\u200b","\u2014","\u200b","\u200b","\u200b","(18)","\u200b","*","\u200b"],["Net loss","\u200b","\u200b","(106,240)","\u200b","\u200b","(57,762)","\u200b","\u200b","\u200b","(48,478)","\u200b","(84)","%"],["Less: net loss attributable to redeemable noncontrolling interest","\u200b","\u200b","(78,665)","\u200b","\u200b","(51,856)","\u200b","\u200b","\u200b","(26,809)","\u200b","(52)","%"],["Net loss attributable to Class A common stockholders","","$","(27,575)","","$","(5,906)","\u200b","\u200b","$","(21,669)","\u200b","(367)","%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Gross margin","","\u200b","(10.4)","%","\u200b","(30.7)","%","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating margin","","\u200b","(273.9)","%","\u200b","(404.4)","%","\u200b","\u200b","\u200b","","","\u200b"],["Network throughput (GWh)","","\u200b","44.6","\u200b","\u200b","26.4","\u200b","\u200b","\u200b","","","","\u200b"],["Number of DC stalls","","\u200b","2,184","\u200b","\u200b","1,676","\u200b","\u200b","\u200b","","","","\u200b"]] [[/GREPCENT_TABLE]] *Percentage greater than 999% or not meaningful 70 Table of Contents The table below presents EVgo’s revenue for the years ended December 31, 2022 and 2021: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended December 31,","","Change"],["(dollars in thousands)","\u200b","2022","","2021","","$","%"],["Charging revenue, retail","\u200b","$","18,895","\u200b","$","11,041","\u200b","$","7,854","71","%"],["Charging revenue, commercial","\u200b","\u200b","3,363","\u200b","\u200b","2,420","\u200b","\u200b","943","39","%"],["Charging revenue, OEM","\u200b","\u200b","941","\u200b","\u200b","812","\u200b","\u200b","129","16","%"],["Regulatory credit sales1","\u200b","","5,652","\u200b","\u200b","3,023","\u200b","\u200b","2,629","87","%"],["Network revenue, OEM","\u200b","","2,451","\u200b","\u200b","1,510","\u200b","\u200b","941","62","%"],["eXtend revenue","\u200b","","18,443","\u200b","\u200b","789","\u200b","\u200b","17,654","*","\u200b"],["Ancillary revenue2","\u200b","","4,843","\u200b","\u200b","2,619","\u200b","\u200b","2,224","85","%"],["Total revenue","\u200b","$","54,588","\u200b","$","22,214","\u200b","$","32,374","146","%"]] [[/GREPCENT_TABLE]] *Percentage greater than 999% or not meaningful 1 There were no amounts earned from related parties for the year ended December 31, 2022. The amount for the year ended December 31, 2021 includes $0.6 million of revenue earned from related parties. 2 Amount for the year ended December 31, 2022 includes $0.1 million of revenue earned from a related party and there was no related party revenue for the year ended December 31, 2021. Total revenue for the year ended December 31, 2022 increased $32.4 million, or 146%, to $54.6 million compared to $22.2 million for the year ended December 31, 2021. As further discussed below, the increase in revenue during 2022 was primarily due to a $17.7 million increase in eXtend revenue, a $7.9 million increase in retail charging revenue, a $2.6 million increase in regulatory credit sales, and a $2.2 million increase in ancillary revenue. Charging Revenue Retail. Charging revenue, retail, for the year ended December 31, 2022 increased $7.9 million, or 71%, to $18.9 million compared to $11.0 million for the year ended December 31, 2021. Year-over-year growth was due to an overall increase in charging volume and subscription fees driven primarily by a growing number of customers and higher utilization, as well as the recovery from COVID-19. Charging Revenue, Commercial. Charging revenue, commercial, increased $0.9 million, or 39%, to $3.4 million for the year ended December 31, 2022. The increase was attributable to new public commercial contracts that became effective during 2021 and increased charging volume by EVgo’s public commercial customers partially offset by a decrease due to the expiration of a dedicated commercial contract. Charging Revenue, OEM. Charging revenue, OEM, for the year ended December 31, 2022 increased $0.1 million, or 16%, to $0.9 million compared to $0.8 million for the year ended December 31, 2021. The increase was primarily due to increased usage from OEM customers as well as implementation of new charging programs. Regulatory Credit Sales. Regulatory credit sales for the year ended December 31, 2022 increased $2.6 million, or 87%, to $5.7 million compared to $3.0 million for the year ended December 31, 2021. The increase was primarily due to increased throughput resulting in additional credit generation and sales and a shift in the timing of when credits were sold during the first half of 2022, which was partially offset by decreases in credit rates from 2021 to 2022. Network Revenue, OEM. Network revenue, OEM, for the year ended December 31, 2022 increased $0.9 million, or 62%, to $2.5 million compared to $1.5 million for the year ended December 31, 2021 primarily due to increased revenue under an OEM agreement related to marketing activities, membership fees and the breakage of prepaid charging credits that expired unused. eXtend Revenue. eXtend revenue for the year ended December 31, 2022 increased $17.7 million to $18.4 million compared to $0.8 million for the year ended December 31, 2021 primarily as a result of the new agreement that was executed in 2022 with the Pilot Company. Ancillary Revenue. Ancillary revenue for the year ended December 31, 2022 increased by $2.2 million, or 85%, to $4.8 million compared to $2.6 million for the year ended December 31, 2021. The increase was primarily due to a $2.1 million increase in PlugShare revenue. 71 Table of Contents Cost of Sales Cost of Revenue. Cost of revenue for the year ended December 31, 2022 increased $24.4 million, or 143%, to $41.5 million compared to $17.1 million for the year ended December 31, 2021. The increase in cost of revenue was due to an increase of $10.4 million in equipment costs related to equipment sold to eXtend and fleet clients, an increase of $5.4 million in non-energy costs related to increased stall count, a $5.1 million increase in energy and other variable costs due to increased throughput, and a $2.8 million increase in engineering and construction costs incurred for eXtend. Depreciation, Net of Capital-Build Amortization. Depreciation, net of capital-build amortization, for the year ended December 31, 2022 increased $6.8 million, or 57%, to $18.8 million compared to $12.0 million for the year ended December 31, 2021 due to the increase in stall count. Gross Loss and Gross Margin Gross loss for the year ended December 31, 2022 improved $1.2 million, or 17%, to $5.7 million compared to $6.8 million for the year ended December 31, 2021. Gross margin for the year ended December 31, 2022 improved to negative 10.4% compared to negative 30.7% for the year ended December 31, 2021 due to higher margins on equipment revenue and improved leverage of fixed network operating costs. Operating Expenses General and Administrative Expenses. General and administrative expenses for the year ended December 31, 2022 increased $55.6 million, or 78%, to $126.7 million compared to $71.1 million for the year ended December 31, 2021. The increase was primarily due to a $35.1 million increase in payroll expenses driven by higher headcount and higher share-based compensation, a $5.9 million increase in loss on abandoned projects, a $5.1 million increase in professional services and legal fees, a $4.8 million increase in software expenses and a $2.2 million increase in insurance expenses. Depreciation, Amortization and Accretion. Depreciation, amortization and accretion expenses for the year ended December 31, 2022 increased $5.2 million, or 44%, to $17.1 million compared to $11.9 million for the year ended December 31, 2021. The increase was primarily due to $3.1 million in increased amortization of developed software, $1.6 million in increased amortization of intangibles from EVgo’s acquisition of PlugShare in 2021, and $0.3 million in increased accretion expense primarily due to additional stalls that went operational during 2022. Operating Loss and Operating Margin During the year ended December 31, 2022, EVgo generated an operating loss of $149.5 million, an increase of $59.7 million, or 66%, compared to $89.8 million for the year ended December 31, 2021. Operating margin for the year ended December 31, 2022 improved to negative 273.9% compared to negative 404.4% for the year ended December 31, 2021. Interest Expense For year ended December 31, 2022, interest expense was de minimis. There was no interest expense for the year ended December 31, 2021. Interest Expense, Related Party There was no interest expense, related party, for the year ended December 31, 2022, compared to $1.9 million for the year ended December 31, 2021. The 2021 related party interest expense was related to the LS Power Note, which was cancelled immediately prior to the CRIS Close Date. ​ 72 Table of Contents Interest Income Interest income for the year ended December 31, 2022 was $4.5 million. Interest income for the year ended December 31, 2021 was de minimis. The increase was a result of the interest earned on cash and cash equivalents and debt securities held by the Company during the year ended December 31, 2022. Other (Expense) Income, Net Other expense, net, for the year ended December 31, 2022 was $0.8 million compared to other income, net, of $0.6 million for the year ended December 31, 2021. The change was primarily due to realized and unrealized losses on investments and marketable securities. Changes in Fair Values of Earnout and Warrant Liabilities The changes in fair values of earnout and warrant liabilities for the year ended December 31, 2022 were gains of $3.5 million and $36.2 million, respectively, compared to gains of $2.2 million and $31.1 million, respectively, for the year ended December 31, 2021. The increase in gain from the change in fair values of earnout and warrant liabilities of $1.3 million and $5.1 million, respectively, was due to a larger decrease in the liabilities from the prior year. See “Part II, Item 8. Consolidated Financial Statements and Supplementary Data – Note 15 – Fair Value Measurements” for more information. Net Loss Net loss for the year ended December 31, 2022 was $106.2 million compared to $57.8 million for the year ended December 31, 2021. The increased loss was primarily due to increased general and administrative expenses incurred to support growth and increased depreciation, amortization and accretion expenses from the expansion of our charging network, which were partially offset by the higher gain from the changes in fair values of the earnout and warrant liabilities and increased interest income earned during the year. ​ 73 Table of Contents Non-GAAP Financial Measures This Annual Report includes the following non-GAAP financial measures, in each case as defined below: “Adjusted Cost of Sales,” “Adjusted Cost of Sales as a Percentage of Revenue,” “Adjusted Gross Profit (Loss),” “Adjusted Gross Margin,” “Adjusted General and Administrative Expenses,” “Adjusted General and Administrative Expenses as a Percentage of Revenue,” “EBITDA,” “EBITDA Margin,” “Adjusted EBITDA” and “Adjusted EBITDA Margin.” EVgo believes these measures are useful to investors in evaluating EVgo’s performance. In addition, EVgo management uses these measures internally to establish forecasts, budgets and operational goals to manage and monitor its business. EVgo believes that these measures help to depict a more meaningful representation of the performance of the underlying business, enabling EVgo to evaluate and plan more effectively for the future. Adjusted Cost of Sales, Adjusted Cost of Sales as a Percentage of Revenue, Adjusted Gross Profit (Loss), Adjusted Gross Margin, Adjusted General and Administrative Expenses, Adjusted General and Administrative Expenses as a Percentage of Revenue, EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. These measures should not be considered as measures of financial performance under GAAP and the items excluded from or included in these metrics are significant components in understanding and assessing EVgo’s financial performance. These metrics should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP. EVgo defines Adjusted Cost of Sales as cost of sales before (i) depreciation, net of capital-build amortization, and (ii) share-based compensation. EVgo defines Adjusted Cost of Sales as a Percentage of Revenue as Adjusted Cost of Sales as a percentage of revenue. EVgo defines Adjusted Gross Profit (Loss) as revenue less Adjusted Cost of Sales. EVgo defines Adjusted Gross Margin as Adjusted Gross Profit (Loss) as a percentage of revenue. EVgo defines Adjusted General and Administrative Expenses as general and administrative expenses before (i) share-based compensation, (ii) loss on disposal of property and equipment, net of recoveries, and impairment expense, (iii) bad debt (recovery) expense, and (iv) certain other items that management believes are not indicative of EVgo’s ongoing performance. EVgo defines Adjusted General and Administrative Expenses as a Percentage of Revenue as Adjusted General and Administrative Expenses as a percentage of revenue. EVgo defines EBITDA as net income (loss) before (i) depreciation, net of capital-build amortization, (ii) amortization, (iii) accretion, (iv) interest income, (v) interest expense, (vi) interest expense, related party, and (vii) income taxes. EVgo defines EBITDA Margin as EBITDA as a percentage of revenue. EVgo defines Adjusted EBITDA as EBITDA plus (i) share-based compensation, (ii) loss on disposal of property and equipment, net of recoveries, and impairment expense, (iii) loss (gain) on investments, (iv) bad debt (recovery) expense, (v) change in fair value of earnout liability, (vi) change in fair value of warrant liability, and (vii) certain other items that management believes are not indicative of EVgo’s ongoing performance. EVgo defines Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of revenue. 74 Table of Contents The following unaudited table presents a reconciliation of Adjusted Cost of Sales, Adjusted Cost of Sales as a Percentage of Revenue, Adjusted Gross Profit (Loss) and Adjusted Gross Margin to the most directly comparable GAAP measures, in each case, for the years ended December 31, 2022 and 2021: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","Years Ended"],["\u200b","December 31,"],["(dollars in thousands)","2022","","2021"],["GAAP revenue","$","54,588","\u200b","$","22,214"],["GAAP cost of sales","\u200b","60,239","\u200b","\u200b","29,044"],["GAAP gross loss","$","(5,651)","\u200b","$","(6,830)"],["GAAP cost of sales as a percentage of revenue","\u200b","110.4%","\u200b","\u200b","130.7%"],["GAAP gross margin","\u200b","(10.4%)","\u200b","\u200b","(30.7%)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["GAAP cost of sales adjustments:","\u200b","\u200b","\u200b","\u200b","\u200b"],["Depreciation, net of capital-build amortization","$","18,779","\u200b","$","11,986"],["Share-based compensation","\u200b","118","\u200b","\u200b","33"],["\u200b","\u200b","18,897","\u200b","\u200b","12,019"],["Adjusted Cost of Sales1","$","41,342","\u200b","$","17,025"],["Adjusted Cost of Sales as a Percentage of Revenue1","\u200b","75.7%","\u200b","\u200b","76.6%"],["Adjusted Gross Profit1","$","13,246","\u200b","$","5,189"],["Adjusted Gross Margin1","\u200b","24.3%","\u200b","\u200b","23.4%"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["1","In the first quarter of 2023, the Company updated its definition and presentation of Adjusted Cost of Sales to provide further clarity regarding the differences between GAAP Cost of Sales and Adjusted Cost of Sales, and to remove OEM reimbursement as an adjustment in the definition. The Company believes that omitting OEM reimbursement from the calculation of Adjusted Cost of Sales is appropriate due to the immateriality of this adjustment in recent periods. Prior period figures have been revised to conform to the updated definition and presentation."]] [[/GREPCENT_TABLE]] The following unaudited table presents a reconciliation of Adjusted General and Administrative Expenses and Adjusted General and Administrative Expenses as a Percentage of Revenue to the most directly comparable GAAP measures for the years ended December 31, 2022 and 2021: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","Years Ended"],["\u200b","December 31,"],["(dollars in thousands)","2022","","2021"],["GAAP revenue","$","54,588","\u200b","$","22,214"],["GAAP general and administrative expenses","$","126,713","\u200b","$","71,086"],["GAAP general and administrative expenses as a percentage of revenue","\u200b","232.1%","\u200b","\u200b","320.0%"],["GAAP general and administrative expenses adjustments:","\u200b","\u200b","\u200b","\u200b","\u200b"],["Share-based compensation","$","24,929","\u200b","$","10,909"],["Loss on disposal of property and equipment, net of recoveries, and impairment expense","\u200b","8,278","\u200b","\u200b","1,311"],["Bad debt (recovery) expense","\u200b","(18)","\u200b","\u200b","405"],["Other","\u200b","63","\u200b","\u200b","1,849"],["\u200b","\u200b","33,252","\u200b","\u200b","14,474"],["Adjusted General and Administrative Expenses","$","93,461","\u200b","$","56,612"],["Adjusted General and Administrative Expenses as a Percentage of Revenue","\u200b","171.2%","\u200b","\u200b","254.8%"]] [[/GREPCENT_TABLE]] 75 Table of Contents The following unaudited table presents a reconciliation of EBITDA, EBITDA Margin, Adjusted EBITDA, and Adjusted EBITDA Margin to the most directly comparable GAAP measure, in each case, for the years ended December 31, 2022 and 2021: [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","Years Ended"],["\u200b","December 31,"],["(dollars in thousands)","2022","","2021"],["GAAP revenue","$","54,588","\u200b","$","22,214"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["GAAP net loss","$","(106,240)","\u200b","$","(57,762)"],["GAAP net loss margin","\u200b","(194.6%)","\u200b","\u200b","(260.0%)"],["Adjustments:","","","\u200b","","\u200b"],["Depreciation, net of capital-build amortization","","19,103","\u200b","","12,122"],["Amortization","","14,900","\u200b","","10,177"],["Accretion","","1,915","\u200b","","1,602"],["Interest income","","(4,479)","\u200b","","(69)"],["Interest expense","\u200b","21","\u200b","","\u2014"],["Interest expense, related party","\u200b","\u2014","\u200b","\u200b","1,926"],["Income tax expense","","18","\u200b","","\u2014"],["EBITDA","\u200b","(74,762)","\u200b","\u200b","(32,004)"],["EBITDA Margin","\u200b","(137.0%)","\u200b","\u200b","(144.1%)"],["Adjustments:","\u200b","\u200b","\u200b","\u200b","\u200b"],["Share-based compensation","","25,048","\u200b","","10,942"],["Loss on disposal of property and equipment, net of recoveries, and impairment expense","","8,278","\u200b","","1,311"],["Loss (gain) on investments","","783","\u200b","","(554)"],["Bad debt (recovery) expense","","(18)","\u200b","","405"],["Change in fair value of earnout liability","\u200b","(3,481)","\u200b","\u200b","(2,214)"],["Change in fair value of warrant liability","\u200b","(36,157)","\u200b","\u200b","(31,105)"],["Other1","","63","\u200b","","1,849"],["Adjusted EBITDA","$","(80,246)","\u200b","$","(51,370)"],["Adjusted EBITDA Margin","\u200b","(147.0%)","\u200b","\u200b","(231.3%)"]] [[/GREPCENT_TABLE]] 1 Comprised primarily of $1.8 million in transaction costs related to the CRIS Business Combination and the PlugShare acquisition for the year ended December 31, 2021. See “Part II, Item 8. Consolidated Financial Statements and Supplementary Data – Note 3 – Business Combinations” for more information. Liquidity and Capital Resources EVgo has a history of operating losses and negative operating cash flows. As of December 31, 2022, EVgo had $246.5 million of cash, cash equivalents, and restricted cash and working capital of $188.1 million. As of December 31, 2021, EVgo had $485.2 million of cash, cash equivalents and restricted cash and a working capital deficit of $459.5 million. The Company’s net cash outflow for the year ended December 31, 2022 was $238.7 million. EVgo believes its cash and cash equivalents on hand as of December 31, 2022 is sufficient to meet EVgo’s current working capital and capital expenditure requirements for a period of at least twelve months from the filing date of this Annual Report. To date, EVgo’s primary sources of liquidity have been cash flows from the CRIS Business Combination, revenues from its various revenue streams, government grants, proceeds from sales of EVgo’s Class A common stock loans and equity contributions from its previous owners and proceeds from sales of EVgo’s Class A common stock under the ATM Program. EVgo’s primary cash requirements include operating expenses, satisfaction of commitments to various counterparties and suppliers and capital expenditures (including property and equipment). EVgo’s principal uses of cash in recent periods have been funding its operations and investing in capital expenditures, including the purchase of EV chargers for installation. 76 Table of Contents In July 2022, EVgo entered into the Delta Charger Supply Agreement and the Purchase Order with Delta, pursuant to which EVgo will purchase and Delta will sell EV chargers manufactured by Delta from time to time in specified quantities at certain delivery dates over a period of four years. EVgo is obligated to purchase at least 1,000 chargers (which will enable the construction of 2,000 stalls) pursuant to the Delta Charger Supply Agreement and the Purchase Order with the option, at EVgo’s election, to increase the number of chargers purchased to 1,100. Under the terms of the Purchase Order, EVgo will receive delivery of 600 chargers in the 11 months following July 12, 2022 and is required to make full payment on such chargers within sixty (60) days of receipt. EVgo’s obligations under the Purchase Order are take-or-pay obligations; however, EVgo’s liability is capped at a maximum of the greater of $30.0 million or 50% of the value of any outstanding firm orders. EVgo entered into the Delta Charger Supply Agreement and Purchase Order in order to meet its obligations under the Pilot Infrastructure Agreement, other potential contractual commitments and its own needs and intends to fund the capital expenditure required under the Delta Charger Supply Agreement and Purchase Order with proceeds from the Pilot Infrastructure Agreement as well as cash and cash equivalents on hand. The term of the Tax Receivable Agreement commenced upon the completion of the CRIS Business Combination and will continue until all tax benefits that are subject to the Tax Receivable Agreement have been utilized or expired and all required payments are made, unless the Tax Receivable Agreement is terminated early (including upon a change of control). The actual timing and amount of any payments that may be made under the Tax Receivable Agreement are unknown at this time and will vary based on a number of factors. However, the Company Group expects that the payments that it will be required to make to TRA Holders in connection with the Tax Receivable Agreement will be substantial. Any payments made by the Company Group to TRA Holders under the Tax Receivable Agreement will generally reduce the amount of cash that might have otherwise been available to EVgo or EVgo OpCo. To the extent EVgo OpCo has available cash and subject to the terms of any current or future debt or other agreements, the EVgo OpCo A&R LLC Agreement will require EVgo OpCo to make pro rata cash distributions to holders of EVgo OpCo Units, including Thunder Sub, in an amount sufficient to allow the Company Group to pay its taxes and to make payments under the Tax Receivable Agreement. EVgo generally expects EVgo OpCo to fund such distributions out of available cash. However, except in cases where the Company Group elects to terminate the Tax Receivable Agreement early, the Tax Receivable Agreement is terminated early due to certain mergers or other changes of control, or the Company Group has available cash but fails to make payments when due, generally the Company Group may elect to defer payments due under the Tax Receivable Agreement if it does not have available cash to satisfy its payment obligations under the Tax Receivable Agreement or if its contractual obligations limit its ability to make these payments. Any such deferred payments under the Tax Receivable Agreement generally will accrue interest at the rate provided for in the Tax Receivable Agreement and such interest may significantly exceed the Company Group’s other costs of capital. In certain circumstances (including an early termination of the Tax Receivable Agreement due to a change of control or otherwise), payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, the Company Group realizes in respect of the tax attributes subject to the Tax Receivable Agreement. In the case of such an acceleration in connection with a change of control, where applicable, EVgo generally expects the accelerated payments due under the Tax Receivable Agreement to be funded out of the proceeds of the change of control transaction giving rise to such acceleration, which could have a significant impact on EVgo’s ability to consummate a change of control or the proceeds received by EVgo’s stockholders in connection with a change of control. However, the Company Group may be required to fund such payment from other sources and as a result, any early termination of the Tax Receivable Agreement could have a substantial negative impact on EVgo’s liquidity or financial condition. 77 Table of Contents Cash Flows The following table summarizes EVgo’s consolidated cash flows for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended December 31,"],["(in thousands)","\u200b","2022","","2021"],["Cash flows used in operating activities","\u200b","$","(58,794)","\u200b","$","(29,603)"],["Cash flows used in investing activities","\u200b","","(199,707)","\u200b","","(87,765)"],["Cash flows provided by financing activities","\u200b","","19,813","\u200b","","594,635"],["Net (decrease) increase in cash, cash equivalents and restricted cash","\u200b","$","(238,688)","\u200b","$","477,267"]] [[/GREPCENT_TABLE]] Operating Activities. Cash used in operating activities for the year ended December 31, 2022 was $58.8 million compared to cash used in operating activities of $29.6 million during the year ended December 31, 2021. This change was driven primarily by the timing of payments during 2022 compared to 2021. The year-over-year change primarily reflected a $23.6 million cash loss from operations, a $8.9 million decrease in cash flows from deferred revenue and an $8.3 million decrease in cash flows from accounts receivable, net, partially offset by a $3.3 million increase in cash flows from prepaid expenses and other current and noncurrent assets, a $2.9 million increase in cash flows from the receivable from a related party, a $2.7 million increase in cash flows from accounts payable and a $2.3 million increase in cash flows from customer deposits. Investing Activities. Cash used in investing activities for the year ended December 31, 2022 was $199.7 million, primarily comprised of purchases of property, equipment and software. During the year ended December 31, 2021, cash used in investing activities was $87.8 million, consisting of $65.0 million of purchases of property and equipment, and $22.8 million paid, net of cash received, for the acquisition of PlugShare. Financing Activities. Cash provided by financing activities for the year ended December 31, 2022 was $19.8 million, primarily comprised of net proceeds from sales of shares of Class A common stock in the fourth quarter of 2022 under the ATM Program and proceeds from capital-build funding received for charging stations. Cash provided by financing activities for the year ended December 31, 2021 was $594.6 million, consisting principally of $601.6 million in proceeds received in connection with the CRIS Business Combination and $24.0 million in proceeds from related party note payable, partially offset by $28.4 million in transaction costs paid in connection with the CRIS Business Combination. Working Capital. EVgo’s working capital as of December 31, 2022 was $188.1 million, compared to $459.5 million as of December 31, 2021. During the year ended December 31, 2022, EVgo’s cash, cash equivalents and restricted cash balance decreased by $238.7 million, accrued liabilities increased by $12.2 million, deferred revenue, current increased by $10.9 million, and accounts receivable, net, increased by $8.5 million. Contractual Obligations and Commitments. EVgo has material cash requirements for known contractual obligations and commitments in the form of operating leases, purchase commitments and certain other liabilities that are disclosed in “Part II, Item 8. Consolidated Financial Statements and Supplementary Data – Note 13 – Commitments and Contingencies” and discussed below. EVgo generally expects to fund these obligations through its existing cash and cash equivalents and future financing or cash flows from operations. Critical Accounting Policies and Estimates The discussion and analysis of EVgo’s financial condition and results of operations is based upon EVgo’s consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of EVgo’s financial statements requires the Company to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and related disclosures of contingent assets and liabilities. Management bases these estimates on its historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results experienced may vary materially and adversely from EVgo’s estimates. Revisions to estimates are recognized prospectively. for more information See “Part II, Item 8. Consolidated Financial Statements and Supplementary Data – 78 Table of Contents Note 2 – Summary of Significant Accounting Policies” for additional description of the significant accounting policies that have been followed in preparing EVgo’s consolidated financial statements. The accounting policies described below are those EVgo considers to be the most critical to an understanding of its financial condition and results of operations and that require the most complex and subjective management judgment. EVgo considers its critical accounting estimates to be those related to its revenue recognition, business combinations and warrant liability, which are described below. Revenue Recognition EVgo recognizes revenue in accordance with ASC 606. Recording revenue requires judgment, including determining whether an arrangement includes multiple performance obligations, whether any of those obligations are distinct and cannot be combined and allocation of the transaction price to each performance obligation based on the relative standalone selling prices (“SSP”). Revenue for performance obligations can be recognized over time or at a point in time depending on the nature of the performance obligation. Changes to the elements in an arrangement or, in EVgo’s determination, to the relative SSP for these elements, could materially affect the amount of earned and unearned revenue reflected in its consolidated financial statements. Understanding the complex terms of some of EVgo’s agreements and determining the appropriate time, amount and method under which the Company should recognize revenue for the related transactions requires significant judgment. The Company exercises judgment in determining which promises in a contract constitute performance obligations rather than set-up activities. The Company determines which activities under a contract transfer a good or service to a customer rather than activities that are required to fulfill a contract but do not transfer control of a good or service to the customer. Determining whether obligations in a contract are considered distinct performance obligations that should be accounted for separately or as a single performance obligation requires significant judgment. In reaching its conclusion, the Company assesses the nature of each individual service offering and how the services are provided in the context of the contract, including whether the services are significantly integrated which may require judgment based on the facts and circumstances of the contract. The Company does not disclose the transaction price allocated to remaining performance obligations for (i) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice and (ii) contracts with variable consideration allocated entirely to a single performance obligation. The Company’s remaining performance obligations under these contracts include providing charging services, branding services, and maintenance services which will generally be recognized over the contract term. The Company’s customer contracts may include variable consideration such as that due to the unknown number of users that will receive charging credits or an unknown number of sites that will receive maintenance services. For such variable consideration, the Company has determined it is not necessary to estimate variable consideration as the uncertainty resolves itself monthly in accordance with the contracts’ revenue recognition pattern. The timing and amount of revenue recognition in a period could vary if different judgments were made. The Company may also estimate variable consideration under the expected value method or the most likely amount method. Additionally, where there are multiple performance obligations, judgment is required to determine revenue for each distinct performance obligation. Determining the relative SSP for contracts that contain multiple performance obligations requires significant judgment to appropriately determine the suitable method for estimating the SSP. EVgo determines SSP using observable pricing when available, which takes into consideration market conditions and customer specific factors. At contract inception, EVgo determines whether EVgo satisfies the performance obligation over time or at a point in time. Revenues from charging – OEM are primarily recognized ratably over time or as fee-bearing usage occurs. Revenues from charging – retail, charging – commercial and LCFS are usage-based services and recognized over time or at a point in time upon the delivery of the charging products or services. eXtend and ancillary revenues are recognized over time based on a time-based or cost-based approach or at a point in time as performance obligations are satisfied. 79 Table of Contents Business Combinations Business combinations are accounted for using the acquisition method of accounting and accordingly, the assets and liabilities of the acquired business are recorded at their respective fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires knowledge of current market values and the values of assets in use and often requires the application of judgment regarding estimates and assumptions. While the ultimate responsibility resides with management, for certain acquisitions, EVgo retains the services of certified valuation specialists to assist with assigning estimated values to certain acquired assets and assumed liabilities, including intangible assets and tangible long-lived assets. Acquired intangible assets, excluding goodwill, are valued using various methodologies including discounted cash flows, relief from royalty, and multiperiod excess earnings, among others, depending on the type of intangible asset purchased. These methodologies incorporate various estimates and assumptions, such as projected revenue growth rates, profit margins and forecasted cash flows based on discount rates and terminal growth rates. Warrant Liability EVgo accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480 and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to EVgo’s common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of EVgo’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end-date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value at each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized in “changes in fair value of warrant liability” in the consolidated statements of operations. The fair value of the private placement warrants on the date of issuance and on each measurement date is estimated using a Monte Carlo simulation methodology, which includes inputs such as EVgo’s stock price, the risk-free interest rate, the expected term, the expected volatility, the dividend rate, the exercise price and the number of private placement warrants outstanding. Assumptions used in the model are subjective and require significant judgment. Recent Accounting Pronouncements For a discussion of EVgo’s new or recently adopted accounting pronouncements, see “Part II, Item 8. Consolidated Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies” as of and for the years ended December 31, 2022 and 2021. JOBS Act On April 5, 2012, the JOBS Act was signed into law. The JOBS Act includes provisions that, among other things, relax certain reporting requirements for qualifying public companies. Following the CRIS Business Combination, EVgo has qualified as an “emerging growth company” (“EGC”) under the JOBS Act and, as a result, is permitted to comply with new or revised accounting pronouncements based on the effective date for private (i.e., not publicly traded) companies. EVgo elected to delay the adoption of new or revised accounting standards and as a result, EVgo may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, EVgo’s financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. 80 Table of Contents As an EGC, EVgo is not required to, among other things, (a) provide an auditor’s attestation report on EVgo’s system of internal control over financial reporting, (b) provide all of the compensation disclosure that may be required of non-EGC public companies, (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (d) disclose comparisons of the chief executive officer’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of the Initial Public Offering or until EVgo otherwise no longer qualifies as an EGC. Additionally, following the CRIS Business Combination, EVgo has qualified as a “smaller reporting company” as defined under the Exchange Act. EVgo may continue to be a smaller reporting company so long as either (i) the market value of shares of its common stock held by non-affiliates is less than $250 million or (ii) its annual revenue was less than $100 million during the most recently completed fiscal year and the market value of shares of its common stock held by non-affiliates is less than $700 million. If EVgo is a smaller reporting company at the time it ceases to be an EGC, EVgo may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, EVgo may choose to present only the two most recent fiscal years of audited financial statements in its Annual Report on Form 10-K and has reduced disclosure obligations regarding executive compensation and, similar to EGCs, if EVgo is a smaller reporting company under the requirements of (ii) above, EVgo would not be required to obtain an attestation report on internal control over financial reporting issued by its independent registered public accounting firm. ​