EVgo Inc. Q3 FY2025 Earnings Call

Thank you for your patience. I would like to welcome everyone to the EVgo Third Quarter 2025 Earnings Call. I will now hand the call over to Heather Davis.

Good morning, and welcome to EVgo's Third Quarter 2025 Earnings Call. My name is Heather Davis, and I am the Vice President of Investor Relations at EVgo. Joining me on today's call are Badar Khan, EVgo's Chief Executive Officer; and Paul Dobson, EVgo's Chief Financial Officer. Today, we will be discussing EVgo's third quarter 2025 financial results, followed by a Q&A session. Today's call is being webcast and can be accessed on the Investors section of our website at investors.evgo.com. The call will be archived and available 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. Factors that could cause actual results to differ materially from our expectations are detailed in our SEC filings, including in the Risk Factors section of our most recent annual report on Form 10-K and quarterly reports 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 measures can be found in the earnings materials available on the Investors section of our website. With that, I'll turn the call over to Badar Khan, EVgo's CEO.

Thank you, Heather. EVgo delivered another solid quarter of results, furthering our position as an industry leader built for long-term success. We delivered total revenue of $92 million and record charging network revenues. We ended the quarter with almost 4,600 stalls in operation and expect to see a very large fourth quarter for stall deployment. And we continue to see improvement in adjusted EBITDA. From a liquidity standpoint, we are in a very strong position with a higher cash balance at the end of the quarter than last quarter. In October, we received the latest advance for $41 million from the DOE Loan, which is being used to accelerate the nationwide build-out of EV charging infrastructure, offering American drivers more choices on where they charge. As you recall from the last call, we closed on a first-of-its-kind transformational commercial financing facility in July for $225 million with potential to expand up to $300 million, which we believe reflects the confidence these banks have in the resilience of the cash flows generated by our ultrafast charging infrastructure. We have now received 2 draws from this facility for a total of $59 million. We've expanded our pilot for J3400 connectors, more commonly known as NACS, and now have roughly 100 NACS cables installed. We're encouraged to see an increase in Tesla's charging at EVgo. And we continue to improve returns on capital deployed by lowering net CapEx per stall with 2025 vintage net CapEx per stall now expected to be lower than our initial plan by 27%. Unlike other companies in the EV charging space, EVgo's revenue has grown consistently and predictably faster than the growth in EV vehicles in operation, growing at double the CAGR of VIO growth over the past 4 years. This is due to both market factors and company-specific factors, and we believe this outperformance of revenue growth over VIO growth is set to continue for the foreseeable future. Today's market-wide tailwinds include higher usage fueled by rideshare electrification, expansion of affordable vehicles, bringing more drivers to public charging, faster vehicle charge rates with a shift towards larger, less efficient cars. And historically, EV vehicle miles traveled has steadily closed the gap to their ICE counterparts. Company-specific factors that are driving EVgo's outsized growth include our network planning, which looks for better locations with high utilization compared to the rest of the industry, building better charging stations and our expanding network effect of more than 1.6 million customer accounts. The third quarter saw a historic number of EV sales in the U.S. ahead of the federal tax credits expiring. While we won't speculate on the level of EV sales in Q4 and 2026, it will result in an ever-increasing number of EVs on the road. Although EV projections today are lower than in the past, the latest forecast for EV VIO growth remains strong, albeit with a slower rate of growth. Our charging revenue forecast based on our updated unit economics and forecasted store growth we discussed last quarter also conservatively assumes a lower rate of growth than we delivered historically and yet still represents 3 to 4x annualized growth from today. As we noted earlier, we are nearing a critical milestone, delivering breakeven adjusted EBITDA, which we expect to achieve in the fourth quarter. Over the past 4 years, quarterly revenue and gross profit have accelerated 15 to 19-fold, whereas quarterly adjusted G&A has only grown modestly because most of our G&A is actually fixed. As a result, we are predictably reaching adjusted EBITDA inflection to positive in the fourth quarter. But after this inflection, EVgo has 2 sources of operating leverage that will position us for accelerated adjusted EBITDA growth in the future. First, and something we have been benefiting from over the past 4 years is that we have leverage within our charging network cost of sales. Approximately 28% of our cost of sales is fixed on a per store basis. So as throughput per store grows, so does the charging network gross margin. These fixed costs on a per store basis include rent and property taxes. Secondly, once store-based cash flow or charging network gross profit less sustaining G&A exceeds the total of growth and corporate G&A, which are largely fixed, all profits from the charging network fall straight to the bottom line, accelerating adjusted EBITDA growth. With approximately 2/3 of our G&A cost base largely fixed today, this represents very strong operating leverage. In fact, excluding growth G&A, EVgo is already adjusted EBITDA positive, but we are choosing to incur growth expenses given the strong returns associated with deploying new stores. Making this even more attractive for investors is that we have the financing in place through 2029 to deploy all these new stores without the need for any additional equity capital. The expected result is a very attractive business by 2029 with $0.5 billion in adjusted EBITDA at mid-30s adjusted EBITDA margins. For almost 2 years, EVgo has been delivering one of the highest levels of network usage across the industry. Again, this is driven by both market and company-specific factors. Average daily throughput per stall is an important KPI to view network performance, and it is growing, driven by both time-based utilization as well as charge rates, both of which have been growing for the past 4 years. Rising charge rates are a significant tailwind we benefit from as higher charge rates deliver more kilowatt hours at the same utilization level and tend to result in higher levels of EV adoption, in turn, increasing demand for our fast chargers. Higher charge rates also improve returns on capital deployed because they allow us to dispense more kilowatt hours from the existing assets without the need to deploy more capital. Higher charge rates come from improved battery technology and EVs, as well as EVgo deploying more 350-kilowatt ultrafast high-powered infrastructure. Average daily throughput per stall has grown more than sixfold from less than 50 kilowatt hours in Q1 2022 to 295 this quarter, and we conservatively assume only slightly higher utilization by 2029, but with rising charge rates, we expect to see 450 to 500 average daily throughput by 2029. This higher throughput per stall, combined with many more stalls deployed is what has been and will continue to drive growth in revenues. Not only have we been delivering some of the best performing usage across the industry, we're focused on ensuring our chargers perform to their maximum potential and can maintain increasing utilization rates. Today, nearly all stores deployed are 350-kilowatt chargers, which delivered almost 60% of our throughput in the quarter. These chargers are the most representative of our expected future network since we estimate well over 90% of our throughput in 2029 will come from these chargers. Utilization on the EVgo network has surpassed others in the industry, our expectations and the expectations of the equipment providers. This high usage placed stress on our Signet chargers, which were the first 350-kilowatt chargers we deployed. After performing root cause analysis in conjunction with Signet in 2024, we embarked on a number of tech enhancements and a year later, Signet chargers are performing very strongly with usage already close to our long-term target in 2029. We are now at a similar junction with our Delta chargers, which have comprised almost all new builds since 2024. EVgo is embarking on the same kind of tech enhancements we did with Signet, and we're confident we will see the same strong performance step-up as we've seen with the Signets. As an industry leader, we are focused on ensuring we have the best quality hardware through ongoing maintenance, periodic enhancement of specific components and our next-generation charging stations, which we are actively developing at our innovation lab in El Segundo. Our new generation of charging architecture is being designed not only for a better experience and lower cost, but also being developed and qualified for these higher levels of utilization from the start. This project is being led by the EVgo team and features a robust design for reliability methodology, including best-in-class hardware design and software, taking into account our learnings from our 15 years of experience in EV charging and over 1.6 million customer accounts, all of which sets us apart from the rest of the industry. The next generation of charging architecture is expected to lower our gross CapEx per stall by over 25% in 2029 versus 2023, delivering even stronger returns on capital deployed. In the meantime, we've been driving down both gross and net CapEx per stall over the last 3 years. In 2025, vintage gross CapEx per stall is expected to be 17% lower than 2023, driven by savings from lower contractor pricing, material sourcing and increased use of prefabricated skids. When you include capital offsets, our CapEx per stall is expected to be reduced by 40%, resulting in vintage net CapEx per stall of $75,000. As a reminder, capital offsets come from 3 sources: state and utility incentives, OEM infrastructure payments and federal incentives like 30C. Our forecasted performance this year is a reminder that despite the fact that federal incentives for EV charging will sunset in the summer of 2026, state grants and utility incentives are alive and well. As we said last quarter, in order to capture some of these state grants, a certain number of stores that were due to be operationalized in the second half of the year have shifted out by a few weeks, lowering the total number of stores that we expect to deploy in calendar 2025. Our long-term expectation is to continue lowering gross CapEx per stall as a result of our next-generation architecture, but we conservatively assume we do not have a same level of offsets as we've seen in the past couple of years. Let's now briefly turn to progress on our 4 key priorities: delivering a best-in-class customer experience, operating in CapEx efficiencies, capturing and retaining high-value customers and securing additional complementary nondilutive financing to accelerate growth. As we discussed earlier, our next-generation charging architecture will take our customer experience to the next level. We've completed the enhancement of a number of components in our Signet 350-kilowatt chargers and are now embarking on a similar campaign for our Delta 350-kilowatt chargers. In terms of efficiencies, while the next-generation charging architecture is expected to deliver CapEx efficiencies by 2027, we're making great progress in the near term, too, lowering 2025 vintage net CapEx by 27% versus our plan for the year, and we continue to see a reduction in G&A as a percent of revenue for 2025 versus prior years. The EVgo app has now reached an overall rating of 4.5 on the Apple App Store, which is a key threshold above which we would expect to see accelerated organic customer acquisition, and we're thrilled with reaching this milestone. Our NACS pilot has continued to expand from 2 sites last quarter to almost 100 stores as of the end of October. In this pilot, we continue to test our ability to attract native NAC vehicles to our network and we remain encouraged by the higher number of Tesla drivers at these stores than they had prior to installing the NACS cables. This is a key part of our iterative learning process before a much wider scale rollout plan for 2026. And on financing, we've made excellent progress this year between continued advances under the DOE Loan, closing the sale of our 2024 Vintage 30C portfolio and of course, the transformational first-of-its-kind commercial financing facility. As we noted earlier, we expect 40% capital offsets for the 2025 vintage CapEx. We have the financing in place to increase our annual store build to up to 5,000 stores a year by 2029 without the need for any new equity capital.

Thank you, Badar. Operational stall growth is one of the key components of growing EVgo's revenue. We ended Q3 with 4,590 stalls in operation, a 2.7x increase compared to the end of 2021. Our customer base has grown almost fivefold over that same period, which contributes to the network effect driving increased usage on our network. We've grown the total energy dispensed on EVgo's network to 350 gigawatt hours over the trailing 12 months, a 13-fold increase over that same period. Revenues of $333 million over the last 12 months have increased over 15x since 2021. Charging network gross margin has grown from the mid-teens to the mid to high 30s, reflecting the leverage of fixed cost of sales on a per stall basis as throughput per stall rises. And importantly, we continue to deliver improving profitability and adjusted EBITDA margin has made significant improvements driven by increasing revenues, leverage of fixed costs and disciplined cost management. Total throughput on the public network during the third quarter was 95 gigawatt hours, a 25% increase compared to last year. Revenue for Q3 was $92 million, which represents a 37% year-over-year increase with growth in all 3 revenue categories. Total charging network revenues were $56 million, exhibiting a 33% increase. eXtend revenues were $32 million, delivering growth of 46%. Ancillary revenues of roughly $5 million were up 27%. Charging network gross margin in the third quarter was 35%, up 1 percentage point. Third quarter adjusted gross profit of $27 million was up 48% versus the prior year. Adjusted gross margin was 29% in Q3, an increase of 230 basis points. Adjusted G&A as a percentage of revenue also improved from 40% in the third quarter of 2024 to 34% in Q3 of this year, demonstrating the operating leverage effect. Adjusted EBITDA was negative $5 million in the third quarter of 2025, a $4 million improvement versus the third quarter of 2024. Now turning to our 2025 guidance. We anticipate some of the public and dedicated stalls we forecasted to be operationalized in December will now be open in January 2026. As such, our EVgo public and dedicated stall expectation for the year is 700 to 750. This shift in deployments to January will be reflected in our 2026 guidance, which we expect to issue with our Q4 results in early 2026. However, we are increasing our expectation of the number of eXtend stalls operationalized this year to 550 to 575 due to the great progress we've been seeing all year with our partner, Pilot Flying J. As a result, Q4 is expected to represent a very big quarter for newly operationalized stalls. Overall, we will deploy slightly fewer total stalls in 2025 compared to our guidance in Q2. However, the mix has changed with fewer public and dedicated stalls and more eXtend stalls. We have not only been focused on capital efficiency, but also reducing the length of time it takes for us to develop and build stalls. As a result, we now expect fiscal net CapEx for 2025 in the range of $100 million to $110 million driven primarily by less spend this year on 2026 stalls. We are now forecasting a wide range of outcomes for the fourth quarter and full year than we normally would, substantially due to a potential contract closeout payment to EVgo in relation to dedicated stalls we were building for one of our autonomous vehicle partners that has decided to exit the robotaxi business. There is currently uncertainty on both the quantum and timing of these payments. And because this amount could be very significant, we are issuing a baseline guidance that does not include this item and an upside guidance that includes it. Our prior revenue and adjusted EBITDA guidance did assume a smaller range from this matter in 2025. As the matter has progressed, we now believe the range of outcomes could be much wider. In addition, the matter may not be concluded this year and may slip into the new year. For the full year 2025, we expect total baseline revenues will be in the $350 million to $365 million range with baseline adjusted EBITDA in the negative $15 million to negative $8 million range. Our baseline revenue and adjusted EBITDA guidance are relatively in line with our prior view, excluding our prior estimate for the ancillary upside. Including the ancillary revenue upside of up to $40 million, 2025 revenues are expected in the range of $350 million to $405 million, with adjusted EBITDA in a negative $15 million to positive $23 million range. There are a few moving parts for the implied Q4, so let's unpack those a bit. Charging network revenues are estimated to be near 60% of total revenues for the full year, in line with prior guidance. We're anticipating continued sequential improvement in the fourth quarter. We expect the 2025 charging network margin profile to be consistent with 2024. Fourth quarter charging network margin should improve compared to Q3 '25. Our eXtend business with a pilot company continues to perform better than expectations. Full year eXtend revenues are anticipated to be approximately 30% higher than prior year eXtend revenues, slightly higher than prior guidance. We'll be more than halfway through the build program with pilot by the end of this year and thus expect 2026 eXtend revenues to be similar to 2025. Ancillary revenues are expected to grow significantly in 2025, driven by our dedicated hubs business serving other autonomous vehicle partners. Baseline ancillary revenues are expected to show at least 50% growth before any potential upside. Adjusted G&A for 2025 is expected to be approximately $125 million to $127 million for the full year. In 2026, we're continuing to invest in growth, therefore, anticipate G&A increasing by approximately 20%. We expect to achieve adjusted EBITDA breakeven in the fourth quarter at the midpoint of our baseline guidance. This is a significant milestone for the company.

We can now open the call for Q&A.

I guess maybe to start out here, and you mentioned some commentary around the EV demand outlook, and I know you wouldn't comment on it. But maybe could you kind of walk through how you're thinking about EV demand in relation to your longer-term outlook? And what are the puts and takes that would maybe make you slow development down or speed development up?

Yes, Chris, I think the number of electric vehicles on the road has increased three to four times in the past four years. Currently, there are around 100 battery electric vehicle models available, up from about 30 four years ago. These vehicles are becoming more affordable and are enjoyable to drive. At times, EV sales forecasts seem to fluctuate significantly. A few years back, expectations may have been too high, and now they could be too low, partly due to the expiration of certain incentives. I anticipate that we will see higher sales than what the current forecasts predict because these cars are enjoyable and improving in quality. It’s just a matter of time before they become more affordable. In terms of our business, we evaluate our charging stations based on whether they can achieve the strong returns on investment that we are currently realizing. It’s evident that we are seeing a 2 to 3-year payback period. As we look at the market, the ratio of vehicles to fast chargers nationwide has been increasing, which indicates greater potential for usage at each station. In fact, we have observed our usage per station increase sixfold. We do not expect this trend to decline. If conditions improve, that will be even more favorable for us. If they remain consistent with the current situation, we expect to continue deploying charging stations that yield the same returns we are experiencing now. This is our approach to capital investment in the business.

Got it. And then as a follow-up, you mentioned you're seeing an uptick in Tesla's charging on your network with the rollout of that NACS cable. Can you maybe kind of quantify here what you're seeing early days?

I believe it's still a bit too early to provide a precise quantification. We have progressed from a few sites discussed last quarter to nearly 100 cables by the end of October. The team and I are excited about the trends we are observing. The usage of Tesla drivers at these sites is higher than it was before the installation. All these are retrofit cables. I anticipate that we will approach this similar to how we handle everything else in the business, using a data-driven analysis of the situation. If we maintain the confidence we have today in placing these retrofit cables at targeted sites where we think Tesla drivers live and work, and we continue to see an increase in Tesla usage, we will aim to scale the rollout in 2026. For now, I think we will keep the number at around 100 for another quarter to ensure we remain confident in the results before expanding next year.

I realize you're going to provide more granularity on stall guidance for next year. You gave some framework for eXtend. But if you look at the guidance, assuming some of the pushouts into next year, your prior guidance from the middle of the year was around, I don't know, 1,400 or so, 1,350 to 1,500 at the midpoint. I guess, conceptually, should we think of that coming in lower, maybe perhaps towards where you had provided guidance at the start of 2025, which was more in the 1,000 to 1,200 range. I'm just trying to get a sense of how we should think about that as well as really the build plan over the next 5 years. Should that be tracking more like what we saw at the start of the year? Just trying to get a sense given the realities that we may be probably see a negative year-on-year growth for EV demand maybe for the next several quarters.

Yes, we haven't provided guidance for 2026 yet, but looking back at what we mentioned last quarter is a good starting point. Last quarter, we indicated that we expect to see 1,350 to 1,500 stores for 2026, which includes our owned and operated stores, our public network, and dedicated stores. This reflects about double the current growth rate. For 2025, the number you mentioned includes our eXtend stores. We had around 800 public and dedicated plus eXtend for 2025, and now we see that figure slightly lower, leaning more towards eXtend and less towards public and dedicated. Nevertheless, for the public and dedicated segment, we are looking at doubling our current figures for 2026, which is exciting for us. We are achieving the returns we've been expecting, and as long as we continue to produce those returns, we believe our shareholders will want us to reinvest that capital.

I'd like to understand this additional opportunity a bit more and just to be clear, this was not included in your previous guidance, correct? If that is the case, I would like to know what the closeout could mean for future revenue impact. In other words, was there an expectation that this dedicated fleet customer would continue beyond 2025? Any further details would be appreciated.

Yes. We previously estimated that the contract closeout in 2025 would bring in between $10 million and $15 million. Looking at our current guidance, we are essentially in the same position as we were last quarter. If you take our current baseline guidance, exclude the updated view, and then add back the $10 million to $15 million from our earlier projection, you'll find we are approximately in the same range. The updated figures indicate a higher potential. However, there is a possibility that the timing may shift into next year. We do not expect this to be a recurring event, so we treat it as a one-time occurrence, which is why we are distinguishing it. This highlights the robust growth of our underlying baseline business.

Two things for me. I guess the first is you talked about fourth quarter and maybe getting to EBITDA breakeven at the midpoint of your guidance. Can you just remind us as we sort of think about seasonal patterns as you get into '26 without specific numbers, should we be thinking about this as when you get there, you should stay there and then progress from there? Or are there some seasonal noise we should be contemplating in our models just to make sure we're in line with how you're thinking about things?

Yes. Let me address the seasonality aspect. You're correct that the company has strong operating leverage, with about two-thirds of our general and administrative expenses being relatively fixed. As the profits from the charging network grow and surpass these costs, all of that profit contributes directly to our bottom line, specifically from the charging network’s gross profit after sustaining G&A expenses. This is the stage where EBITDA accelerates significantly. Historically, this is how we transitioned from an $80 million loss to nearing breakeven. It's also how we expect to reach $0.5 billion in adjusted EBITDA within the next four to five years. Regarding the near term, in the third and fourth quarters of this year, we still have gross profit from our non-charging businesses assisting in covering fixed costs. However, by 2026, the profits from the charging network alone—after accounting for sustaining G&A—will be sufficient to cover those costs without any support from the non-charging business, and that's when we anticipate a significant acceleration. We expect this to occur in the latter half of next year. With respect to seasonality, we indeed experience it, particularly with vehicle miles traveled. There tends to be less travel and, consequently, lower throughput per store in the winter months compared to the summer. Additionally, charge rates are often lower during winter compared to the warmer months. We also notice seasonal variations in gross charging margin due to higher sales and energy costs as well as higher tariffs in the summer. These are the main seasonal influences we observe. As mentioned, once the gross profits from the charging network exceed the fixed costs, we will see a substantial acceleration in EBITDA growth, and we are approaching that point.

Great. My other question is about industry dynamics. You've outlined your plans through 2029 very clearly. How do you view the number of players in the industry and the consolidation in the U.S. market? How do you think this will evolve over the next couple of years?

We believe we possess several competitive advantages, particularly in site selection, by choosing locations where drivers are present, which allows us to achieve the returns we currently enjoy. This differs from much of the industry, where some are pursuing federal grants that may not lead to the most productive sites, or their focus is on promoting electric vehicle sales rather than maximizing charging returns. We understand that charging and range anxiety, along with the initial purchase price, are among the top reasons hindering faster electric vehicle adoption. Many companies are constructing charging stations primarily to sell cars. Our scale brings benefits in customer experience, remote monitoring and diagnostics, marketing, dynamic pricing, and supply chain relationships, which are not commonly seen among our competitors. Our rivals generally operate significantly fewer charging stations. Considering our advantages, next-generation architecture, and strong balance sheet, we anticipate fewer peers in the industry. I’m encouraged to see other companies building charging stations, as this will ultimately support EV adoption and improve throughput per location for our network due to our quicker charging stations and strategically chosen sites. This perspective helps frame our view of the current landscape.

So Badar, I was hoping we could dig in a little bit more on the experience you're seeing out there with the new NACS connectors, right? This is an exciting opportunity for you given the size of the Tesla fleet and that it's early days for the OEMs to cut over to the NACS connector where they're heading longer term. Can you maybe unpack for us what the actual utilizations are or early experiences on utilization around NACS? I mean, are you seeing the Tesla drivers come back repetitively to the same locations, use multiple locations? And how should we think about the build here and the tempo? And what would you use to guide your change out of additional locations in the future? Are there specific data points or other metrics you would use to guide the adoption of these cables?

We completely agree that the potential here is significant. As you've noted and we've discussed in previous calls, a large portion of the vehicle fleet consists of Tesla vehicles that generally do not use our charging stations. Accessing about half of all the input/output was a major advancement for us, and we're excited about that. We understand that replacing a CCS cable is quite beneficial. Our average is nearly 300 kilowatt hours per stall per day across the network, and we want to ensure that we don't take that for granted. We are being careful about replacing the CCS cables with NACS cables, as ramping up throughput per stall on our CCS cables requires time and familiarity for drivers with EVgo. We want to approach this transition thoughtfully while attracting Tesla vehicles. Earlier this year, our focus was on ensuring we had high-power cables that could endure the demands. We have implemented liquid-cooled cables and confirmed that we have the right technology. As of the end of October, we've reached 100 cables and will spend the next few months learning from everything you've inquired about, including the behavior of Tesla drivers in relation to our charging stations, whether they return to the same stations or visit multiple locations, and how they locate EVgo stations. We anticipate that by 2026, when we provide guidance, this will be a crucial aspect of our store rollout schedule. I expect that much of 2026 will involve retrofitting, and I foresee a significant rollout of the NACS cables next year, potentially attracting about half the market that currently isn't charging at our standard network. This could represent a substantial opportunity. Starting in 2026, the new charging stations we launch, likely around mid-year, will include NACS cables from the outset, not just retrofitted ones. However, you'll need to wait for our 2026 guidance for more details. As always, Craig, I think you'll see that we are approaching this in a thoughtful and analytical manner.

Understood. That definitely makes sense. So, my next question is about dynamic pricing. In your past couple of calls, you'd shared some real points of success where that's actually driven much better utilization for the network and the overnight. Can you maybe share some more detail with us on where you stand with dynamic pricing, the peak-to-trough variance in rates, the geographic success? What should we be looking at to understand this business and what it could mean for EVgo over the next number of quarters?

It's very exciting, Craig. We've launched an initial version of dynamic pricing across our entire network, which we rolled out throughout 2024, specifically towards the end of that year. This system is implemented in all locations and charging stations. However, there are some limitations on the number of price combinations and how frequently they can change, which will improve in our next version of dynamic pricing. We initially expected this update to arrive in the fourth quarter of this year, but due to a significant expansion with approximately 350 to 400 new stores being deployed, we decided it would be better to focus on this rollout without overwhelming ourselves. Therefore, the next version of our dynamic pricing will be introduced at the end of the first quarter of next year. Regarding its impact, our revenue per kilowatt hour remains stable, and we are increasing throughput per store, which we are pleased about. We are observing double-digit utilization during overnight hours, which is remarkable, especially at 3:00 AM. Much of this success stems from our dynamic pricing strategy and how we engage with our customers to encourage charging during off-peak hours. All of these efforts contribute to enhanced throughput per store, improved utilization, reduced wait times, and giving customers access to charging rates that suit their needs.

If I could add a third point, the autonomous vehicle fleet is expanding. There are more cities where we're seeing adoption and vehicles being trained, with new vehicles in commercial operation and many cities involved in training. I suspect that some of the leading companies are utilizing the EVgo network or at least using proprietary stations built and managed by EVgo. How does revenue recognition work in these cases? When vehicles are in training, are they generating revenue on the EVgo network already? Are they considered customers? Or do we see site commissioning when they begin commercial operations? How do we relate fleet growth to demand growth for electric vehicles? Should we expect this to be a one-to-one correlation, or does it happen in steps? Any insight you can provide to help us understand how these businesses are connected would be appreciated.

Yes, both autonomous vehicles and the related point are significant growth opportunities for the company in the coming years. We agree that autonomous vehicles represent a potentially major and intriguing source of growth, and we anticipate rapid expansion in this sector. These vehicles are all electric and will require fast charging stations rather than slow ones. We are collaborating with leading players in the electric vehicle and autonomous vehicle industries to develop dedicated sites for these partners. Currently, our contracts involve a monthly rental fee based on operational stores, regardless of whether they are actively charging. This structure characterizes our current agreements. I believe we are still in the early stages of this industry, and it’s likely that the terms of these contracts will evolve over time. Revenue from these long-term contracts is recognized as a gain upon the store's launch or around that time. Is there anything else you want to clarify regarding revenue recognition?

No, that's good. That's pretty much how it works. They are long-term contracts with essentially a fixed monthly fee. That's the cash flow we receive. However, since some of them are long-term contracts under accounting principles, they are treated as a deemed sale, which falls under sale lease accounting. For the longer-term contracts, we recognize a gain on the sale of construction costs. There’s a markup based on what we consider fair market value for the site, and that gain is recognized when the site goes live, once the client takes over. After that, we mainly receive operating cash flows for maintaining the site. When we realize that gain on sale, we are bringing forward some of the economic value, which creates a receivable. As we receive the money, we gradually reduce that receivable over the life of the contract. It's a bit complex. We mentioned previously that we would conduct a webinar or teaching session on how it all works, and we will provide annual guidance on our overall expectations for these contracts.

Excellent. Well, you've confirmed for me that it's an exciting business, and I think that's what investors really mean. So, congratulations on the progress across the board.

And your next question comes from the line of Brett Castelli with Morningstar.

Just sticking with autonomy, I wanted to come back to this contract closeout here that you talked about and really understand more medium and long term. Does that at all impact sort of the prior range of expectations you gave us in terms of stalls and build-out for that particular part of the network?

No, it does not. The range we provided last quarter for public and dedicated build targets remains valid and unchanged. Next year, we are looking at 1,350 to 1,500 public and dedicated, with the majority being public. We have not yet specified how many are public versus dedicated. Dedicated refers to stores for our autonomous vehicle partners, and as mentioned earlier, this area holds significant potential for growth. We just need to ensure that if we are increasing the number of dedicated stores, they meet our return expectations. The economics for us are appealing, and we see very strong potential for our public network. Regarding the contract closeout, one company is exiting the robotaxi space significantly, but there are many others developing similar businesses, and we are collaborating with all of them.

Okay. And then I just wanted to ask on the charging network gross margin. We've seen more muted margin expansion within that line item here in 2025. Can you remind me for the drivers behind that? And then how we should think about margin expansion within that line item in 2026?

Yes. So, maybe I'll just start and then, Paul, I can ask you just to sort of provide further details. We are seeing charging network gross margin expand, Brett, year-over-year. There is seasonality. So Q3 is seasonally the lowest margin percent typically quarter over the course of the year because we got the higher summer tariffs. We saw that last year. You see that this year. This year is higher than last year year-over-year. And the operating leverage, we've got 2 sources of operating leverage, one in the G&A, which we talked about earlier and then operating leverage within the charging network cost of sales where about 30% of that is fixed. And so as usage per store grows, that margin just expands. And that certainly we fully expect to see continue over the next several years. But Paul, any other color or any other detail that might be helpful in the near term?

Certainly. In Q1 '24, we experienced significant breakage revenue with a 100% margin from customer credits that expire, contributing to our revenue and margin for that quarter. When excluding that factor, looking at '24 quarter-by-quarter compared to '25, we generally see a couple of percentage points increase each quarter. By Q3 '25, the increase stands at 35%, which is about a 1% rise from '24. The increase from Q3 to Q4 in '24 was 6 percentage points, while the previous year had about a 5 percentage point increase. We anticipate Q4 '25 to follow a similar trend with an increase of 6 to 7 percentage points over Q3 this year. This upward trend aligns with our demonstrated operating leverage and unit economics. When adjusting for these elements and considering seasonality, we do see an improvement.

Just one question for me. If I look at last quarter, if we calculate ASP per kilowatt, there was a mid-double-digit increase and then it's kind of a high single-digit increase kind of moving down sequentially in the third quarter. I just want to understand how to think about the pricing levers you guys are pulling and how bill to pull kind of going back to Craig's question on dynamic pricing? Or is it that OEM revenue sort of distorted things in the second quarter and made things look a little more robust than they actually were. I just kind of want to get a sense of pricing across the buckets there and how to think about ASP per watt.

Yes. Paul, do you want to take that?

Yes. So, when I look at the pricing charging revenue overall, I see Q2 versus Q3 to be broadly flat, and I see, of course, the costs energy costs, in particular, increasing in Q3 as we talked about because of summer tariffs, the seasonality there. So, we see a bit of a squeeze in the margin in Q3 as expected. But as I mentioned before, our pricing has been generally pretty steady, and our margins have been showing a general increase overall, which we expect to continue into Q4 and follow a similar pattern into '26 as well. There is some mix effect when we look at pricing, we have to think about where the volume of energy is coming from and being dispensed to. But it's been broadly flat across the portfolio in the quarter.

There are no further questions at this time. I will now turn the call back over to Badar Khan for closing remarks.

Great. Well, look, thank you, everybody. We had another solid quarter of great operational performance and hitting strategic milestones. We can clearly see that we're nearing the inflection to adjusted EBITDA breakeven. And with the operating leverage that we have, we can see accelerated EBITDA growth coming soon. And I look forward to sharing that progress with you on the next call. Thanks, everybody.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.