Earnings Call Transcript
EVgo Inc. (EVGO)
Earnings Call Transcript - EVGO Q2 2021
Operator, Operator
Greetings and welcome to EVgo’s Second Quarter, 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ted Brooks of Investor Relations. Thank you. You may begin.
Ted Brooks, Investor Relations
Hi everyone. And welcome to EVgo’s second quarter 2021 earnings call. My name is Ted Brooks and I head up Investor Relations at the company. Today's call is being webcast and can be accessed from the Investor section of our website at investors.evgo.com. The call will be archived and available there. And the company's results, investor presentation, and a transcript of today's proceedings will be available at the Events and Presentation section of the investors page after the conclusion of today's call. Joining me on today's call are Cathy Zoi, EVgo’s CEO; Olga Shevorenkova, the Company’s Chief Financial Officer; and all the members of the EVgo’s senior management. Today we will be discussing EVgo’s latest financial results for the second quarter of 2021, followed by a Q&A Session. During the call, management will be making forward-looking statements regarding the 2021 fiscal year and our outlook for expected growth and investment initiatives. These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations, including among other risks and uncertainties, the severity and duration of the effects of the COVID-19 pandemic. These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. For a more detailed description of factors that could cause actual results to differ, please refer to our Form 8-K filed with the SEC today and posted to the Investor section of our website. Also, please note that certain financial measures we use on this call are on a non-GAAP basis; for historical periods, we provide the reconciliations of these non-GAAP financial measures to GAAP financial measures. With that, I will turn the call over to Cathy Zoi, EVgo’s CEO. Cathy?
Cathy Zoi, CEO
Thanks, Ted. I'd like to welcome everyone to today's second quarter of 2021 results call. Whether you're a current shareholder or just interested in learning more about EVgo’s business and our role in the growing electrified transportation sector, we've got a lot to share with you today. This is the first time EVgo is reporting results and sharing our outlook since we commenced trading at EVgo on NASDAQ on July 2 after completing our business combination, the Climate Change Real Impact Solutions or CRIS. I know I speak for the entire team at EVgo when I say how pleased we are to be here and how excited we are to be able to discuss the growth and new developments at EVgo. During the second quarter of 2021, we achieved growth across all EVgo segments. We deepened relationships with our core partners and cultivated business with new ones. The backdrop for EVgo’s success and exciting growth trajectory is a rapidly transforming transportation sector. As the electric vehicle industry continues to experience unprecedented growth and a supportive policy backdrop, both in Washington and at the state level in the U.S. and indeed around the globe. EV sales were brisk in the first half of the year with over 200,000 EVs sold in the U.S. through June. About one-third of the 70,000 of which we estimate were non-Tesla vehicles reflecting increasing adoption and additional vehicle options available to drivers. EV sales in the U.S. for the full year are expected to continue to accelerate driven by long-term industry growth fundamentals. First, OEM commitment. Globally, the auto industry has reached a crucial tipping point in its support for the electrification of the transportation sector. This is translating to meaningful financial support with an estimated $330 billion of investment in bringing EVs to market over the next five years. The second significant tailwind is favorable regulatory dynamics. President Biden has announced an executive order aimed at making half of all new vehicles sold in 2030 zero emissions vehicles. Additionally, policymakers are working hard in Washington on proposals that will provide billions of dollars to support charging infrastructure and consumer purchases of EVs. And third, shifting consumer preferences: according to a Harris poll conducted in July, 48% of Americans said they would consider purchasing an electric vehicle today. That figure is up from 37% in just April of this year and up from around 20% in 2017. Related to this strength of the EV market, EVgo added approximately 35,000 new customer accounts during the second quarter and more than 53,000 new customer accounts year-to-date. EVgo’s customer account number now exceeds 275,000, further driven by the factors of a reopening economy, the march of EV adoption in both the retail and fleet segments, and new take-or-pay arrangements with some of our fleet customers. EVgo realized kilowatt-hour network throughput growth of 48% sequentially and 125% versus the prior year quarter. During the second quarter of 2021, EVgo commissioned 104 new charging cells, representing an approximate doubling of our first quarter of 2021. Operating in 68 metro areas and in 35 states, EVgo’s total fast charging stall count at the end of the second quarter was 1,548. EVgo continues to execute on its robust stall build-out plan, identifying locations that will deliver our targeted financial returns. Today we have more than 2,000 charging stalls in what we refer to as the active engineering and construction or active ENC pipeline, representing strong visibility into further stall growth. Roughly 85% of the active ENC pipeline stalls are located within the top 20 U.S. metropolitan markets, and the majority are part of the GM-EVgo partnership to deploy 2,750 fast charging stalls by 2025. By definition, stalls were added to our active ENC pipeline only after undergoing a rigorous evaluation process, at which point we have high confidence in station completion and EVgo begins investing capital into those projects. Upstream of Active E&C is a pipeline of literally tens of thousands of prospective station locations that EVgo has identified across the U.S. and meet the needs of the rapidly expanding EV market. We're working closely with others in the charging ecosystem, including retail and municipal site hosts, electric utilities, local government permitting authorities, and OEM and state government funding partners to create a charter deployment flywheel that positions the industry to rapidly advance from station concept to energization. While it takes EVgo just four to eight weeks to actually construct a fast-charging station, the typical end-to-end timeline for station deployment can take from nine to 24 months, allowing for interactions and sign-off by hosts, utilities, and government permits. To help compress project development timelines, EVgo kicked off an initiative in April called 'Connect the Watts,' in which we are providing a forum for stakeholders like site hosts and utilities to share best practices on charge deployment across their jurisdictions. Collectively, we're aiming to achieve ideas to energization timelines that are more efficient and hence meaningfully shorter, possibly removing months or even quarters from the timeline, once that flywheel is really spinning. EVgo’s market leadership in public fast charging for the retail market has given rise to expanded work with both existing and new partners as the base of EV applications extends across new segments of the transportation sector. Our recent development I'd like to highlight is the mid-July announcement that EVgo was chosen by GM to serve as a preferred charging provider for its Ultium Charge 360 fleet service. GM is, in its words, expanding its Ultium Charge 360 solution to fleet customers in an effort to make it easier for fleets to switch from internal combustion to all-electric offerings. Like GM, we believe that fleet adoption of electric vehicles is crucial for reducing transportation carbon emissions. Therefore, EVgo is offering a suite of solutions for the emerging fleet segments that are tailored to meet individual fleet customer needs. EVgo is proud to be partnered with GM on fleet and proud to deepen and broaden our GM relationship beyond the expansion of the public retail network I just described. The strength of the GM-EVgo partnership is founded on a shared philosophical and commercial commitment to the electrification of transportation and zero emissions vehicles. As another example of market expansion into fleet, EVgo has now contracted with two leading autonomous vehicle companies to provide each with dedicated, fast charging sites away from their home base of operations. This is important for various key reasons. First, dedicated charging depots will allow those autonomous vehicle companies to promptly charge and recirculate vehicles in the cities where they're commencing operations. Similar to the usage profiles of the rideshare vehicles that EVgo has served for years, self-driving vehicles are utilized in very high mileage situations, often more than seven times the vehicle miles traveled annually than a privately-owned car. Second, EVgo’s momentum in serving autonomous vehicle companies illustrates the value we see in being a first mover and trusted partner to those companies who, like us, are unlocking new norms of operating for 21st-century electrified transportation. In addition to the dynamic that benefited the EVgo network with the addition of rideshare, we expect autonomous vehicle activity to turbocharge throughput growth on EVgo’s network, given AV’s higher mileage patterns compared to everyday drivers. The third reason that the business with these autonomous vehicle companies is important is that the contract structure includes take-or-pay arrangements that provide a revenue minimum to EVgo in exchange for a guarantee of exclusive charging assets, increasing those certainties and reducing risks for both parties as the self-driving market continues to expand—a true win-win. Finally, I'd note that this sector is just getting moving. Autonomous vehicle fleets are starting off in dense urban areas with supportive regulatory backdrops. The industry's high rate of growth is forecasted to continue once certain critical technological and consumer thresholds are reached. In July, EVgo also announced a deal to acquire e-mobility software company, Recargo, for $25 million. I would like to highlight several key aspects of this acquisition that we're most excited about. First, the purchase reflects a highly strategic and logical extension of the efforts already well underway at EVgo to create value-added software and data-driven ancillary services. Recargo’s robust software offering, unmatched customer reach, and product development pipeline are well aligned with EVgo’s vision and growth. Second, Recargo was a well-established platform that serves as the go-to for many drivers in the industry. Recargo was founded in 2009 and is known to many through its PlugShare offering. Globally, PlugShare has 1.6 million users and 3.3 million app downloads with coverage of more than 61,000 Level 2 and fast-charging stations in North America alone. Users share crowd-sourced reviews, photos, and data, helping the whole EV community facilitate communication as well as understand and address drivers’ needs. Its emergence and growth over the last several years provides a clearinghouse for communal insights that help drivers optimize their experience and charging network operators to improve their services. The third aspect we find exciting about Recargo is 'Pay with PlugShare.' This proprietary application developed by Recargo allows for seamless payments across multiple charging networks to expedite and improve the charging experience for EV drivers. EVgo will be moving quickly to adopt 'Pay with PlugShare' on our network and we'll encourage other charging networks to do the same. We’re keenly aware of the important role that the PlugShare platform plays within the EV ecosystem, and we're committed to maintaining the integrity and independence of the platform for drivers, charging network operators, and automakers. EVgo will ensure that driver and operational data remains unbiased and secure. We will also be enhancing platform features and improving transparency for all parties, including, for example, publishing the PlugShare algorithms to charging network companies. EVgo is steadfastly committed to enabling the rapid development of the EV sector, and the integrity of a platform such as PlugShare is essential to those efforts. The final development I'd like to share relates to EVgo’s technical leadership. We built the EVgo Innovation Lab, an advanced technical laboratory to test, validate, and certify charging equipment for safety, performance, and user experience. Successfully doing this requires rigorous testing of both hardware and software components of the chargers. We design, prototype, and test all applicable national and international automotive standards for safety, efficiency, performance, and user interfaces. We test for and then ensure seamless interoperability between chargers and the EVs themselves, including models that are in operation now and those in pre-production. The EVgo Innovation Lab enables the entire industry to anticipate and remediate technical challenges inherent in fast-moving sectors, positioning EVgo to lead the industry in specifications for the next generation of charging equipment and software. We provide this valuable information to EV OEMs and charger manufacturers for free, and then we work together with all parties to address these issues before they impact customers. In summary, EVgo’s mission to speed the adoption of electric vehicles through the investment in charging infrastructure is progressing at an accelerating pace. EVgo’s build, own, operate business model has equipped us with the experience and insight to be a market leader. We aim to be the provider of first resort to the rapidly expanding EV market. While retaining a relentless focus on financial discipline as we invest capital, we're able to offer new and emerging EV segments charging solutions that meet their particular needs. These include DC fast charging or Level 2 charging or a combination. They include the use of the EVgo public network, dedicated depots, or both. They include EVgo owned assets, charging as a service, or white-label services. We've also cracked the code on keeping the most expansive fast-charging network in the U.S. operating at 98% uptime, a key element of customer experience and retention. We’ve built the EVgo Innovation Lab, which has become a trusted resource for automakers to test their new EV models on different types of chargers. We've pioneered a best-in-class power-sharing and power-routing configuration for our fast chargers. We’ve integrated proprietary software functionality that can drive margin expansion and delight EV drivers via reservations, driver coupons, loyalty rewards, and behind parking garage payment methods. We've been a reliable partner for state and local funding agencies to deliver on our commitments to install chargers for all, and thus we've earned the trust of industry participants across the board. I'm proud to be at the helm of such a company and working alongside a truly world-class leadership team. EVgo will continue to offer the growing base of EV drivers and sellers convenient and reliable charging infrastructure where they want it and when they want it, all while making an outsized contribution to addressing climate change. With that, I'll turn it over to Olga to go through some of the particulars in the quarter and our outlook.
Olga Shevorenkova, CFO
Thanks, Cathy. First and foremost, I would like to highlight that upon the completion of the business combination with CRIS on July 1, EVgo received net cash of $573 million, which will enable us to fund our strategic plan going forward. As Cathy noted earlier, we're pleased to report solid results for the second quarter of 2021, including strong growth in customer accounts, network throughput, and revenue. Please let me take you through some of those numbers and discuss how they support our outlook for 2021. As Cathy mentioned, we saw 48% quarter-over-quarter growth in kilowatt-hour network throughput during the second quarter of 2021, and 126% growth year-over-year. Retail and fleet both benefited from a continued reopening of the economy and strong EV sales. Network throughput was ahead of our forecast for the second quarter and the first half of the year. We remain on track to achieve our full-year 2021 network throughput target of 24 gigawatt hours. Revenue exhibited similar growth trends. Partially, we saw a 16% increase in revenues. With this quarter, we remain on track to achieve our $20 million revenue target for full-year 2021. Adjusted gross loss, which not only includes energy usage fees but also fixed costs such as the operational and maintenance expenses, call center, and site leases, was negative $61,000 for the quarter, equating to a margin of negative 1.3% for the quarter, up 260 basis points from negative 3.9% in the first quarter of the year, driven by improved energy costs per kilowatt-hour due to reducing demand charges. EVgo dedicates considerable resources internally to making our operations more efficient while continually striving to reduce costs. One of the bigger components of our cost base is energy-related expenses. By working with our utility partners to improve rate design and better match the EV charging use case, we can limit or eliminate demand charges, which helps in improving our energy costs. EVgo has been able to shift our California stations away from tariffs with demand charges across three major corresponding utility territories, two of them in the last 18 months. General and administrative expenses increased to $12.2 million in the second quarter of 2021, compared to $11 million in the first quarter of 2021 and $6.8 million in the second quarter of 2020. The increase is in line with EVgo’s expectations and is primarily driven by the company’s ongoing growth investments. Adjusted EBITDA for the second quarter of 2021 was negative $11 million, compared to negative $9.8 million in the first quarter of 2021. Cash flow from operations for the first half of 2021 was negative $1.4 million, which is $14.4 million higher than during the comparative period in 2020, driven mostly by OEM partner prepayment of $20 million in the first quarter of 2021. CapEx was $23.3 million in the first half of 2021 as compared to $7.7 million in the same period last year. As we continue to accelerate and execute on our stall build plan. Let me take a moment to emphasize the flexibility of our business model from a financial perspective. Out of the $573 million we have raised, the vast majority, over $400 million will be invested in building charging stalls. We have full discretion over the pace of that capital deployment. We can accelerate charging deployment if the market ramps more quickly. We can also slow capital deployment if market development is delayed. Remember, each station investment is discrete; most are under $1 million CapEx and have lead times of months, not years. Also, as Cathy mentioned previously, we apply rigorous underwriting criteria to every opportunity. This combination of factors affords EVgo enormous flexibility to navigate market dynamics and deliver shareholder value. In order to help the investment community fully appreciate our business model and the robustness of EVgo’s project approval process, I would like to walk everyone through the unit economics of a typical charging station. As I just mentioned, every single project developed by EVgo undergoes a rigorous underwriting process and is evaluated against preset financial criteria. The model for every project includes three key elements: CapEx, operating costs, and revenue. The first element, CapEx, includes the cost of constructing the site as well as any investment offsets such as CapEx contributions from partner contributions, public agencies, and utilities. The second element is operating costs, which primarily includes the cost of energy at the location but also encompasses non-energy costs such as ramp-up and maintenance for the site, which, as a reminder, all fit in the cost of goods sold on our income statement. Finally, the revenue element comprises site-specific revenue forecasts based on a detailed utilization model. On average, a charging station is comprised of four to six stalls, meaning it can charge four to six vehicles simultaneously. CapEx per stall is roughly $110,000, which includes both the equipment and third-party labor, bringing all-in installed costs to somewhere between $400,000 and $700,000. These figures are obviously affected by site layout and equipment. Regarding investment offsets, if we build a stall in partnership with an OEM, for instance, General Motors, our capital outlay may be reduced by up to one-third. In addition, state, local, or utility incentives might reduce the initial CapEx by anywhere from 5% to 10% to over 50%. All these parameters are known and included in our model when deciding whether to proceed with a project. Our stalls are subject to commercial and industrial utility tariffs, which vary greatly across geographies and can sometimes include demand charges in addition to the volumetric cost per kilowatt-hour of energy per stall. Currently, our energy costs range from as little as $0.10 per kilowatt-hour to as much as $0.60 and even higher in certain cases. We actively work with utilities and regulators to continue reducing these costs. Non-energy costs are more stable and generally center around $6,000 to $7,000 per install per year. These costs encompass rent, property taxes, maintenance, warranties, third-party software, call center, and other network-related costs. Turning to the revenue side, to forecast station throughput or utilization, we employ proprietary analytics tools developed in-house. We also utilize these tools to help identify the best site locations and geographies. We do this in two steps. First, we determine starting utilization for year one using our proprietary machine learning model, which enables EVgo to forecast utilization at an average census block group in the United States with high accuracy. Second, we develop a lifetime station throughput curve using a proprietary market build-out trajectory that relies on EVgo's experience and market data on EV sales, average vehicle miles traveled, vehicle efficiency, and other factors. Charge rate is a factor in projecting a station’s kilowatt-hour throughput. An individual EV's charge rate is driven by its battery characteristics. On our network, we see average charge rates close to the mid-30 kilowatt-hours per hour range; new vehicle models introduced over the next several years will have higher charge rates expected to more than double to roughly 80 kilowatt-hours per hour. These improved batteries mean that EVgo should be able to dispense more kilowatt-hours over an equivalent time period. Current public policy initiatives also enhance our operating revenue forecast, as carbon reduction standards, federal-level benefits, and state programs also improve revenues. The low carbon fuel standard in California, for instance, has contributed approximately $0.20 to $0.24 of additional revenue per kilowatt-hour dispensed in recent periods. Similar programs are being contemplated in other states. Our forecast only includes currently active policies. Any new programs enacted will provide upside to our forecast. We hope this helps you understand EVgo’s unit-level economics. Finally, I would like to turn quickly to our 2021 full-year guidance. We reiterate our financial and operational forecasts communicated earlier this year, including total revenue of $20 million, network throughput of approximately 24 gigawatt-hours, and adjusted EBITDA of negative $58 million. Regarding operational guidance, we expect to provide our year-end stall count expectations at the third quarter call in November. As Cathy noted earlier, while many EVgo projects have reached the active engineering and construction pipeline stage, where we have high confidence in project completion, there is still a fair amount of volatility in these timelines, especially around permitting and inspection. We expect to have clearer visibility on this in a few months; however, our mid-term and long-term deployment goals remain unchanged. We are closely monitoring recent COVID-19 developments and outbreaks linked to the Delta variant and any potential impact on customer activity, supply chain, raw material costs, and the overall macroeconomic situation. Generally, we’re pleased with our second quarter of 2021 results and how our to-date performance positions EVgo for the future in this high-growth marketplace. We’ve seen growth in existing and new relationships, we are expanding our product depth, and the depth of talent on the EVgo team. We are executing our operational and financial plans. With that, I would like to stop there and open up the lines for questions.
Operator, Operator
Thank you. We will now be conducting a question-and-answer session. Our first question comes from the line of James West with Evercore. Please proceed with your questions.
James West, Analyst
Hey, good morning, Cathy, Olga.
Cathy Zoi, CEO
Hey, James.
Olga Shevorenkova, CFO
Good morning.
James West, Analyst
Hey, so the first question for me is around kind of behavior of EV drivers. Now that you’ve made this acquisition, you’ve got even more data than you already had. I know you guys had an impressive amount of data already. But I think the biggest key to success for especially your business model is this change in behavior to where I, as an EV owner, I’m topping off or charging at places where I go, not charging to go somewhere. I guess, if that makes sense to you guys. Are you seeing evidence or have you seen evidence of this behavioral change that we expect to start to happen, or are we still maybe too early days with penetration.
Cathy Zoi, CEO
James, actually we are - what we see on our network is that on average, during a charging session, people are spending about $8.20. So what that tells us is that they’re not just going all the way down to zero on their battery and waiting and then filling up at the end; they are convenience charging. One of the reasons for this convenience charging at EVgo is that we’re located in places where they’re going to be anyway. So one of the reasons that you see our strategy is targeting retail centers is because we don’t feel like charging needs to be a separate special destination. You should be able to charge while you shop or charge while you visit the gym or charge while you’re watching your son play softball. That’s very much a part of our business strategy. I also remind you that 30% of Americans don’t have access to home charging; EVgo’s main business model does not assume that we’re going to take any market share from people who do have access to home charging. If you have a Level 2 charger in your garage and it’s available, you’re going to charge most of the time at home, and that’s fine. But what we see is, as the broadening choice of options for purchasing EVs improves and the price points for many different types of buyers or lessors of EVs become more favorable, many of the demographics are changing. So those individuals who don’t possess access to home charging also need convenient charging away from home. We’re already seeing that, and we’re pretty confident that we’re on the right path here. As I mentioned in the opening remarks, in our Active Engineering and Construction pipeline, we’re in the top metro areas in the U.S., so we’re going to be where people want to charge.
James West, Analyst
Right. Got it. Okay. That’s good to hear. And then perhaps, Cathy, on the policy side, we have an infrastructure bill that’s now passed, and we’ve got a reconciliation package that we’re seeing some information from. Understand that no one’s going to get preferential treatment here on EV charging. But maybe you have some context to share about how you think this will play out with the Biden administration, clearly understanding the chicken-and-the-egg problem and wanting to drive EV adoption via charging networks and how EVgo could fit into that.
Cathy Zoi, CEO
Yes. We’re pretty excited about this. I mean, the federal policies that we’re seeing emerging from Washington right now are a big accelerant and are incredibly important. The UN climate change report of a couple of days ago was a wake-up call for everybody who hadn’t already woken up. We now need to move very, very quickly to actually accelerate solutions to address climate change across all sectors. Transportation is a significant area in this regard. The conversations we've had both with the administration and on Capitol Hill suggest that the support for EVs will be provided through the infrastructure bill focused on the charging component. Through reconciliation, we’re going to see more incentives for drivers to purchase EVs and for tax credits related to charging infrastructure. So, there is a variety of incentives to accelerate this. On the charging side, there will likely be support for both fast charging and Level 2 charging, along with a combination of support for urban and distributed charging. There will be an emphasis on ensuring that some of that infrastructure money reaches disadvantaged communities. EVgo has experience in all of that, and we’re really looking forward to participating. As someone who administered over $30 billion of infrastructure money during the Obama administration, I can tell you that grants will be competitively secured. Much of the funding will flow to the states, and the indications suggest they will flow through State Departments of Transportation. EVgo has had positive experience accessing state funding that has arisen from the Volkswagen Dieselgate settlement, and we believe we will be well positioned to compete for and secure such funding.
James West, Analyst
Got it, got it. If I may ask, one more question, Cathy. This makes a lot of sense. I’m excited to see how this plays out. You had the GM relationship; they’ve obviously figured out they both need to work on their supply chains for batteries, as well as the end game of charging. As partners with you and others, are there other like-minded OEMs you’re talking to that you might announce similar types of relationships with in the coming quarters?
Cathy Zoi, CEO
Well, I can tell you that we have a great relationship with GM, and it continues to strengthen and broaden. We’re really excited to be partnering with them. We also have an existing relationship with Nissan that’s not dissimilar to GM, but it’s a bit smaller in scale. On the business development side, look, there’s not an OEM globally right now that’s not investing in EVs, and those conversations are very active. What we’re doing with General Motors to build 2,750 fast chargers by 2025 is significant and important, but it’s only a drop in the bucket. We’re looking to work with other OEMs to expand into more metropolitan areas and create comfort among the driving public that charging will be convenient and reliable wherever they go.
Unidentified Analyst, Analyst
Got it. Thanks, Cathy.
Cathy Zoi, CEO
Thank you, James.
Operator, Operator
Your next question comes from the line of Craig Irwin with Roth Capital Partners. Please proceed with your question.
Craig Irwin, Analyst
Good morning and thanks for taking my questions. Cathy, one thing that really jumped out to me in your results was the network throughput of 6.1 gigawatt-hours, showing 48% sequential growth. I was hoping we could tease this apart a little. When we look at the miles driven data that just came out for the whole country, there’s something like an 18% increase in miles driven from Q1 to Q2. Additionally, you onboarded a substantial number of new customers; since your SPAC IPO announcement, the number is about 55%, from roughly 19,000 to 34,600 from Q1 to Q2. Can you comment whether you’re seeing EV growth drive this increase in usage? Or are we perhaps observing customers charging at slightly better rates than the 5% of miles driven you were estimating previously? Are we seeing a potential acceleration of customers coming over to the EVgo network as we gain more visibility as a public company? Can you help tease those factors apart?
Cathy Zoi, CEO
Yes. I’m going to toss this to Olga now, and I’ll conclude if there’s anything to add. Go ahead, Olga.
Olga Shevorenkova, CFO
Sure. Thanks, Craig. What we’ve seen are three major factors driving that 48% increase in network throughput. One is the growth seasonality; this growth seasonality is influenced by two factors: people are coming back, and the miles driven are growing exactly as you’ve mentioned; so people are returning to work and driving more. Additionally, we’ve added many new customers to our network, contributing to increased traffic. You can see from our first half of 2021 results that we added approximately 35,000 new customers during this period. So these factors contribute to retail traffic. Regarding the 5% of miles driven we estimated, we don’t have any new data to suggest that this number has changed, and we’ve mentioned multiple times that we believe this number will grow over time. We don’t think that is a factor contributing to growth right now. The last factor contributing to growth is an increase in fleet traffic, driven by two key components: many fleet and rideshare drivers have more work to do as the economy opens up, leading to more deliveries and transporting people between locations. Plus, our partnerships with autonomous vehicles, which Cathy mentioned earlier, are also increasing traffic. So, overall, we’re seeing growth across all major segments in conjunction with the opened economy and new drivers joining our network.
Craig Irwin, Analyst
Thank you for that. Thank you for that. One area I find exciting is fleets, which is important for the longer run and drives your company model. Can you provide an update on your experience with public fleets? What operators are seeing? Is it logical to assume that these lower operating costs credibly support the rapid expansion of public fleets due to the relative opportunity for profitability versus internal combustion engine vehicles? Additionally, could you update us on medium to heavy-duty fleets? How is this shaping up for EVgo? Do you see an opportunity for multiple fleet announcements over the next year or two? Or is this something where we’re seeding the market now and medium to heavy-duty is something that will likely kick in later?
Cathy Zoi, CEO
Yes. You correctly noted that the growth of the fleet segment is important to EVgo’s business model. The first area where we work closely with fleets is rideshare. We have arrangements with both Uber and Lyft, and as Olga noted, the rideshare segment is rebounding post-lockdown. Both Uber and Lyft made commitments to become zero-emission by 2030, and they’re increasingly electrifying, enabling their drivers to switch to EVs. This will benefit EVgo, since we’re expanding our offerings to more cities across America. The timing currently lies in the hands of Uber and Lyft, but we’ll keep you updated as we can. The second encouraging factor is the contracts with autonomous vehicle companies—those major players purchasing services from us include take-or-pay arrangements. If you run an autonomous vehicle business, it is essential that you know your AVs can return and recharge efficiently. This is exciting for us. In addition, light-duty delivery is an area where we’re active, and we look forward to sharing more details once deals finalize. As for medium to heavy-duty fleets, it’s important to note that there is still supply shortages regarding available vehicles. We’ve been partnering with a truck company for years and eagerly awaiting the next tranche of trucks. There’s still uncertainty in supply, but we continue our active conversations because the opportunity for total cost of ownership of electric trucks is becoming clearer. Charging solutions can be owned and operated by us or potentially financed through the customers, depending on what works best for their business model.
Craig Irwin, Analyst
Understood. That makes a lot of sense. Thank you. My last question is regarding the discretionary network build-out capability. You raised cash during the SPAC IPO, allowing you to choose the speed of station development. The pipeline of 2,000 chargers you’ve discussed—could you describe how many of these 2,000 stalls are already fully permitted or late in the permitting process? How many could you execute quickly if there were attractive subsidies available?
Cathy Zoi, CEO
So, yes, it certainly varies. The Active Engineering and Construction pipeline that we’re investing capital in has literally hundreds of stalls currently seeking approval from local government authorities right now, which allows us to respond very quickly once permits are issued. I was thinking about this and recalling that it reminds me of solar energy ten years ago. When I served as Assistant Secretary of Energy during the Obama administration, I invested billions to commercialize clean energy technology. The common refrain from solar grant recipients was that permitting was a choke point. The Department of Energy issued best practice guidelines to help accelerate the development of rooftop solar projects and the industry then gained experience, which compressed timelines. Similarly, in charging and electrifying transportation, we’re in the early stages, and the ecosystem is learning. EVgo’s initiative, 'Connect the Watts,' was created to share best practices with local governments, utilities, and retail shopping centers beginning to offer charging infrastructure. As more experience is gained, the timeframes will compress. We have agreements with national retailers offering access to literally tens of thousands of potential locations for fast chargers. Once the project flywheel starts to turn, we can ramp up quickly, provided the projects are financially viable.
Craig Irwin, Analyst
Thank you for that, and congratulations on the strong quarter.
Operator, Operator
Your next question comes from the line of Gabe Daoud with Cowen and Company. Please proceed with your question.
Gabe Daoud, Analyst
Hey, good morning, everyone, and congrats on the first print in the books. Thanks for all the details so far. Olga, you mentioned supply chain in your prepared remarks. I was hoping we could start there—obviously, bottlenecks and component inflation have been well-documented. I’m curious how inventory management is progressing and how your suppliers are guiding you for the rest of the year. Should we expect continued bottlenecks? What impact, if any, does this have on your business moving throughout 2021?
Olga Shevorenkova, CFO
Sure. We have been affected by supply chain bottlenecks yet. Currently, we are getting various signals from different suppliers and vendors about potential bottlenecks later in the year. To manage risks, we are preemptively placing orders much earlier to secure our supply. We’ve done this with chargers and various components, and we’re monitoring the situation closely. Additionally, we have identified some critical components—such as cables—and started diversifying our vendor base to ensure that we have a wide reach possible. From our perspective, we’ve taken precautions and pre-ordered equipment through Q1 of 2022. While we do not have any equipment in our warehouses yet, our supply has been secured, and we are remaining vigilant in monitoring and reacting to any new information. Fortunately, nothing serious has impacted our rest of the year supply chain as of now.
Gabe Daoud, Analyst
Okay, awesome. Thanks, Olga. That’s super helpful. Sticking to the financials for a second, I noticed that 2Q capital expenditures of about $15 million against the 104 installs implies approximately $144,000 per install. I recognize this could encompass various costs that aren’t strictly related to installations. Additionally, there may be timing differences between incurred costs and cash outflow. Is that a fair assessment, or are there concerns regarding cost inflation impacting that install number per port?
Olga Shevorenkova, CFO
That’s a fair question. We haven’t noted significant increases as of yet. The estimates we've shared in previous discussions indicate about $110,000 per install on average. The math you outlined represents a reasonable thought process, but time and effect are significant factors here. As Cathy mentioned in a previous question, it may take up to 18 months to fully develop a station, and while constructions take about seven weeks, you often begin to spend on equipment much earlier in the process before the station becomes operational. So that $22.2 million in CapEx for Q2 isn’t solely tied to this quarter's 104 charger installations; it involves costs for chargers that are set to be operational in Q3, Q4, or even Q1 of next year. We have not observed inflation impacts for expenses incurred to date, but if we notice such effects, we will be sure to update you at our next discussion after Q3.
Gabe Daoud, Analyst
Great. That’s super helpful. Last question—this is a common inquiry among investors. What are your thoughts on Tesla potentially opening its supercharger network? How could that impact your business? Could this potentially divest some share from EVgo's throughput? Does any of this risk factor into your forecasts for the spec materials?
Cathy Zoi, CEO
The macro view is there’s going to be significant growth in EVs. The BNEF updated its forecast in the spring, suggesting significant market expansion. We need more chargers to satisfy that demand. That’s the first point. Second, EVgo and Tesla have a strong relationship; EVgo is the only network that Tesla has partnered with to offer Tesla connectors on our chargers. Currently, we have around 400 of those connectors out there. About 10% of our new accounts come from Tesla drivers. Therefore, we see positive flows coming in our direction. Regarding the practical implications if Tesla were to open its charging network to non-Tesla vehicles, I expect it would first occur in Europe due to engineering challenges around CCS cables. We will observe whatever Tesla decides to do, but the overall macro suggesting the need for an expanded charging network means we are fully pursuing our build plan. This announcement does not significantly impact our forecasts for market share, growth, or throughput.
Gabe Daoud, Analyst
Got it. Very clear. Thanks, Cathy. Thanks, Olga.
Cathy Zoi, CEO
Sure.
Operator, Operator
Thank you. Our next question comes from the line of Jon Lopez with the Vertical Group. Please proceed with your question.
Jon Lopez, Analyst
Hi, thanks very much. I appreciate you taking the questions. I have two quick ones, mostly for Olga. The first question, which may seem silly, is regarding your gigawatt hours. Given a 49% sequential increase, why was revenue only up 16%? What might be the offsets?
Olga Shevorenkova, CFO
Sure, that's not a silly question at all, Jon. The discrepancy here arises primarily from our take-or-pay contracts, which guarantee fixed revenue before we realize the throughput. Thus, while we are seeing a ramp-up of throughput, the contracts began paying out at the end of Q1, contributing to that difference. Additionally, we observed membership revenues on our retail side, where customers pay monthly fees and then utilize our services. As usage grows, we anticipate less breakage. In Q1, we had more breakage than in Q2, thus affecting revenue. Lastly, we ran certain promotional offerings in April and May to celebrate the reopening of the economy, which included providing customers $5 off their charges. This promotion contributed to lower revenue per kilowatt-hour realized in Q2, although we haven’t changed our pricing since 2019. That promotion was a significant factor.
Jon Lopez, Analyst
Gotcha. Thanks. That's really helpful, Olga. For my second question, could you clarify regarding your 2021 earnings commentary? The Recargo acquisition, which wasn't initially factored into your forecast—is there any expected contribution from Recargo in the second half of this calendar year?
Olga Shevorenkova, CFO
Recargo will have a very small contribution; it is a small company that hasn’t yet successfully commercialized their great technology, which is why we were able to acquire them at an attractive valuation. So for the remaining of 2021, we expect only a tiny contribution, which does not materially change our guidance.
Jon Lopez, Analyst
Gotcha. Just to clarify further on guidance—if you're not certain about your stall count, how can you be sure about the revenue?
Olga Shevorenkova, CFO
Great question. The revenue drivers are primarily twofold: the growth of new customers we acquire when they purchase EVs, and the capability of our network to accommodate increased traffic. Our current network has the capacity to handle all new traffic, and we do not foresee our capacity being impacted in the short term. Thus, we are well-prepared to handle new customer traffic, affirming our revenue potential.
Jon Lopez, Analyst
Gotcha. Really helpful. Lastly, I wanted to revisit the dynamics concerning Tesla and ElectriFI—both are now planning to double their spending beyond the initial $2 billion in their projections. If you think about the sites you've identified, do any calculations change considering potential new competition in supply?
Cathy Zoi, CEO
Certainly. The critical thing is every investment is factored through the angle of robust utilization over eight years. We evaluate each decision on a case-by-case basis, and our analytics tools assess nearby charging options. If a competitor were to build in a certain area, we could pivot and focus our capital elsewhere. Our flexibility allows us to determine the optimal value of our investments.
Operator, Operator
Thank you. There are no further questions at this time. With that, that does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Wish you a great day.