EVgo, Inc. (NASDAQ:EVGO) Q3 2022 Earnings Conference Call November 2, 2022 5:00 PM ET
Company Participants
Heather Davis – Vice President of Investor Relations
Cathy Zoi – Chief Executive Officer
Olga Shevorenkova – Chief Financial Officer
Conference Call Participants
Gabriel Daoud – Cowen
Gavin Kennedy – Jefferies
Jon Lopez – Vertical Group
Stan Shpetner – Pickering Energy Partners
Operator
Good day and welcome to EVgo’s Third Quarter Earnings Results Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. Instructions will be given at that time. I would now like to turn the call over to Heather Davis, Vice President of Investor Relations.
Heather Davis
Hello, everyone, and welcome to EVgo’s Third Quarter 2022 Earnings Call. My name is Heather Davis and I am the new head of Investor Relations at EVgo. Joining me on today’s call are Cathy Zoi, EVgo’s CEO, and Olga Shevorenkova, the Company’s Chief Financial Officer.
Today, we will be discussing EVgo’s financial results for the third quarter of 2022, followed by a Q&A session. Today’s call is being webcast and the call and supporting materials can be accessed from the Investors section of our website at investors.evgo.com. The call will be archived and available there along with the Company’s earnings release and investor presentation after the conclusion of the 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 the risk factors of our most recent annual report on Form 10-K and in the quarterly report on Form 10-Q that we will be filing soon and which will be 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 financial 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 Cathy Zoi, EVgo’s CEO. Cathy?
Cathy Zoi
Good afternoon, everyone, and thank you for joining today. Before I begin with an update on the quarter, I’d like to take a moment to recognize of two new additions to our team at EVgo. First, I am pleased to welcome Heather Davis, our new Head of IR who kicked off our call today. Heather brings more than 20 years of investor relations and corporate finance experience. I know you all will enjoy getting to her quicker.
Second, we recently hired a new Chief Revenue Officer, Tanvi Chaturvedi, who joins us from Google. Tanvi will focus on turbo charging our retail revenue growth by transforming the fast-charging user experience. As CRO, Tanvi will lead our go to market functions including all consumer revenue growth initiatives, marketing, advertising and expansion and use of the PlugShare App.
Prior to joining EVgo, Tanvi held numerous leadership positions at Google, most recently responsible for delivering growth and monetization of the Google Nest smart home product portfolio and services business. Previously she also held leadership positions at Procter & Gamble Consumer businesses and served as a technology investment banker at J.P. Morgan.
Now, turning to the quarter. EVgo experienced a solid quarter as we continue to harness our technology-driven approach to lead the ultrafast EV charging marketplace. On today’s call, I’ll focus on a few themes from the quarter that we see as key drivers of growth.
One, the strength of our operational foundation. Two, our strong commercial progress, as we make headway with existing and new partners. Three, our commitment to technology as a source of advancement and innovation. And lastly, some important updates across the regulatory front, which we expect will drive substantial investment in EV charging space in 2023 and beyond.
Today, nearly 140 million Americans live within 10 mile of an EVgo charger, which is a testament to the foundation of operational excellence we established in order to now accelerate our growth. Our footprint continues to grow across the country and we are excited to see accelerating momentum as more and more Americans adopt EV.
In fact, we recently announced that we have surpassed 500,000 customer accounts on our platform. The third quarter of 2022 saw a record number of EVs sold in the U.S. with more than 210,000 new fully electric vehicles purchased during the three months according to EV volume. The market share for EV continues to increase every quarter and we expect these trends to only accelerate as we head into 2023.
Reuters recently calculated that the world’s top automakers are planning to spend nearly $1.2 trillion through 2030 to develop and produce EV. This is a 2x increase over the estimates that they have projected just a year earlier. The market is coming and EVgo is at the forefront. A major component of this effort is the work we are doing on the commercial side of the business as we continue to build out our partnership across all assets of the ecosystem.
On the fleet side, we signed a new behind the fence deal with MHX Solutions, which is a full-service logistics operation based in California and our first EVgo Optima deployment for our Class 8 truck fleet. This comes on the heels of the agreement we signed with a major investor and utility last quarter.
Additionally, EVgo signed a new agreement for a dedicated fast-charging hub with an existing autonomous vehicle fleet partner, as well as an agreement with a different AV fleet partner to repurpose a former dedicated site to meet its ongoing needs. We are really excited about the progress in our fleet business, which we believe is driven in large part by our technology advantage and more on that in a few moments.
Building on the momentum created in July, with the announcement of the EVgo eXtend deal with the Pilot Company, we are pleased to report that pre-engineering work has already begun at certain Pilot Flying J sites. We also received our first eXtend workplace purchase orders to deploy and manage L2 and some DC fast charging stalls for General Motors employees at four different company facilities.
This highlights EVgo’s ability to partner with large commercial organizations for workplace solutions. As we shared previously, we are open to both owning sites or managing them on behalf of others and in many cases, it’s better for us and our partners for them to own the chargers. In this case, GM is able to provide a unique benefit for its employees relying on EVgo to install and operate the chargers.
Continue to winning the – charging infrastructure is site control as we secured multiple new agreements with national brand names which will provide EVgo with access to high quality properties in prime locations across the U.S. Among these is our agreement with home improvement power house to Lowes.
Additionally, we expanded our existing site footprint at several large grocery chains including Kroger, Safeway and WinCo. We also energized the first of many sites in development at Target which are now available on the EVgo App and PlugShare. The addition of new national retail site host partners in the home improvement, grocery and restaurant sector, complemented by deepening engagement with a number of our existing portfolio partners to significantly increase EVgo’s pipeline for stations locations every corner of the U.S.
In fact, when we overlaid specific store locations at these well-known brands with EVgo’s own proprietary network planning tool that accounts for the numerous factors that makes charging infrastructure pencil, we’ve added nearly 10,000 potential charging stalls that pass our internal investment as of today and could be added to EVgo’s development pipeline.
This rapidly expanding pipeline of premium station locations with strong unit economics combined with the cost sharing potential will drive income forthcoming federal hub provides EVgo with the opportunity to widely invest capital to expand our footprints to new places, which is in line after we file our third quarter 10-Q, EVgo is planning to file as a supplement where recently filed S-3 in order to facilitate aftermarket sales of up to $200 million of our common stock.
We plan to use the proceeds of this ATM program to opportunistically raise additional capital in order to take advantage of this robust and accelerating EV infrastructure sector.
Turning to our performance, once again, the theme of that growth and execution. During the quarter sales and operation or under construction increased to 2,625. We added a record 188 stalls during this quarter and year-to-date, we have energized 487 new stalls on our network, 2.4 times more than the same period last year.
Additionally, our asset engineering and construction development pipeline reached its largest point ever at 4,534 stalls. As a reminder, while we want to invest in growing our network, we also remain laser focused on overall profitability in the business and building sites that clear our internal rate of return or margin hurdles.
The biggest issue we are facing on the installation side right now is timing on the utility side. At the end of the quarter, EVgo had installed over 130 stalls that were still awaiting utility power with more than 100 of those being delayed more than six weeks. Unfortunately, specific utility labor shortages and transformer supply chain constraints exacerbate utility work backlogs at the front and back end of the charger development process.
We expect these utility-related delays will continue to be an issue as power companies gear up for transportation electrification and work to make power resilient to the effects of climate change. EVgo will continue to work cooperatively with our utility partners and local governments to address these issues. We believe these challenges could be addressed working side-by-side.
Throughput this quarter was 12.1 gigawatt hours, an increase of 51% over the third quarter of 2021, driven by ongoing EV adoption across the U.S. and increasing rideshare electrification. While the rebound in rideshare electrification was a bit slower than anticipated during the first part of 2022, due to the – of EVs available to rideshare drivers both Uber and Lyft have indicated that their electrification plans will be accelerating going forward.
Uber recently stated that the company is focused the doubling the number of EVs on the road over the next year from 25,000 to 50,000 as it tries to be fully electric by 2030. Remember, EVgo sees an outsized impact as rideshare drivers convert the EDs given that they drive about three times more than average.
On the retail side, we are encouraged by recent developments on the OEM side. Despite the challenges some of our OEM partners have had supplying parts to the market earlier this year, the future is bright. Cadillac has begun shipping its new Lyriq model, Chevy Bolt and Bolt EUV sales have recovered following resolution of the battery recall.
And Toyota and Subaru reopened sales for BZ4X and Solterra following their recall. We expect to see greater contributions from our preferred partners moving forward and we continue to see growth in Tesla drivers charging on the EVgo network, which brings me to the topic of technology.
Simply put, EVgo is a technology powerhouse. This is our key differentiator and sets us apart. Our investments to create a seamless integration between EVgo’s hardware and software aimed to create a differentiated experience for our customers, as well as high value margins for our investors and other stakeholders.
We often hear from our B2B partners that EVgo has pioneered functionality that no one else has. One example of this is Autocharge+ launched in September across the country, Autocharge+ sets a new bar to a streamlined EV charging experience by simplifying the process between a charge and a payment session.
Once EV drivers self register through the EVgo App they can start a charging session at an EVgo station without a credit card, RFID or even swiping the App on their phone. In a few weeks since we launched, we’ve seen enormous skyrockets and positive feedbacks from both new and existing drivers taking advantage of this faster and more convenient program.
Notably, as Autocharge+ is also available to Teslas EVgo is looking forward to welcoming even more Tesla drivers to our network. On the fleet side, as I mentioned earlier, our technology here is truly a game changer. EVgo Optima is our homegrown proprietary cloud-based software platform that helps ensure fleet EVs are charged in a manner that optimizes fleet logistic needs and operating costs.
The user-friendly interface provides fleet managers with easy access to the most important data while integrated customer service provides seamless communication helping to ensure fleet uptime and service level agreements on that. The early feedback from fleet managers has been extremely positive as EVgo Optima has been built from the ground up as a flee-centric application rather than repurposed adaptation of software meant for drivers like that same offered by some of our competitors.
On the OEM front, we continue to work with our partners to leverage EVgo inside API which are designed to seamless integrate into an automaker branded App. This provides an automaker with the ability to offer its customers a full integrated EVgo charging experience without switching between Apps. We believe we are truly ahead of the market here.
And finally, we are really proud of our efforts to lead the EV charging industry forward in terms of global standards and interoperability testing. EVgo is on the board of CharlN, the leading global association promoting global charging standards with CCS, MCS and 15118 emerging as the de facto fast-charging standard.
And our EVgo innovation lab is a go to for OEMs developing new EVs and for manufacturers developing new equipment that charge new EVs. In fact, in addition to a principle EVgo lab location in El Segundo, California, we also had three remote testing locations at OEM facilities. This distributed approach enables automakers to test vehicles much earlier in the complex, sometimes even before a prototype and then efficiently released.
EVgo retained access to the testing software and remotely manages the process to support of the OEM design and commercialization process.
Turning to Slide 8, you’ll find a brief update on the National Electric Vehicle Infrastructure Program or NEVI. In late September, the U.S. government approved all 50 states planned plus Washington D.C. and Puerto Rico, meaning that states are now eligible to start the process to fiscal year 2022 and fiscal year 2023 allocated funds.
The first founded investment in fiscal year 2022, which totaled $615 million will help to build EV chargers covering approximately 75,000 miles of highway. We anticipate that first solicitations from the states is this quarter or in Q1 2023 with initial funds to improve during the course of the year in 2023, which will be based on state procurement, RFP processes and finalization of federal minimum standards.
Additionally, the tax credits in the inflation reduction after IRA and in particular the changes to U.S. Code 30-C represent tailwinds for our industry and our business. We are pleased with these developments and believe they will serve to reduce carbon emission as the world continues to embrace electric vehicles. That said, we expected to take some time for the benefits to be recognized in our financial performance as the treasury department is conducting the cluster information prior to issuing guidance on the specifics of how the 30-C tax credit will be applied.
Other key provisions in the IRA including the revisions to the consumer EV tax credit 30-B, first ever use tax credit 25-E and commercial vehicle tax credit 45-W should also support acceleration of EV adoption with some fee implementation practice also pending IRS guidance. We believe 30-C and the other tax credits in the IRA will benefit EVgo. But we are expecting to realize those benefits financially in the very near term.
As one of the longest running, largest and most reliable public fast-charging operators in the U.S., EVgo’s mission is to expedite mass adoption of electric vehicles for everyone. This quarter, in service to that mission, EVgo launched the Connect the WattsTM National EV Charging Recognition Program. This program will celebrate leaders in the EV charging ecosystem for their achievements in driving the electrification of transportation.
By recognizing these leaders, EVgo hopes to bring awareness inspirations to the community working to electrify our transportation system.
And with that, I will turn the call over to Olga to talk more about our financial results.
Olga Shevorenkova
Thank you. As Cathy mentioned, we experienced a solid quarter with strong momentum on the execution side as we rapidly build out our network. EVgo increased our active engineering and construction stall development pipeline by 82% year-over-year reaching a record 4,534 stalls at quarter end, a noticeable increase in quarterly addition of the stalls from the Pilot Flying debut we announced last quarter.
We added 188 new stalls to our network during the quarter and stall and operation on the construction totaled 2,625 at quarter end. Customer accounts increased by 60% year-over-year and year-over-year throughput growth of 51% continued to exceed year-over-year operational stall growth of 33%.
Regionally we cancelled and signed million of revenue in the third quarter representing an increase of 70% year-over-year. Growth was driven by increases in the retail charging revenue, up 62% year-over-year and increased ancillary revenues startup for engineering work on PMJ contract and growth in PlugShare and regulatory credit sales.
As expected, we experienced a sequential decline in regulatory credit sales following the monetization efforts in the first half of the year. Regulatory credit sales totaled $1.2 million, a year-over-year increase of 72%, but a substantial sequential quarter-over-over decline. This, combined with the seasonal impacts of electricity tariffs and lower LCFS credit prices contributed to an anticipated decline in adjusted gross margin.
Decline of adjusted gross margin from 22.2% in Q3 2021 to 19% in Q3 2022 is caused primarily by lower LCFS prices this year. While EVgo experienced high energy costs in 2022, this was largely offset by improved leverage on network fixed to raising costs. As a reminder, our business model has significant built-in leverage that is realized within fleet charging volumes.
We reported adjusted EBITDA of negative $22.2 million versus negative $14.2 million in Q3 2021, which reflects our investments in the people and infrastructure required to capture the growth in front of us and expand our lots.
CapEx was $61.6 million this quarter as we accelerated charger deployments and execute against our long-term strategic plans. As a reminder, all of our charging infrastructure deployments goes through rigorous underwriting process and – to low double-digit pre-tax unlevered IRR at the project level.
EVgo has been put in public charging stations in operation since 2010 and while that created an unparalleled expertise and track record, it also places ongoing demand on EVgo to ensure we meet and exceeding our customer expectations through appropriate level of investments in maintenance and network upgrades.
EVgo is actually expanding its current network maintenance and dealership program which we call EVgo ReNew. The goal of this program is to both improve charger uptime and to enhance the customer experience in our continuous pursue of charging leadership. We have upgraded 125 stalls year-to-date and are working with site hosts to evaluate additional stalls in 2023. We are largely focused on our legacy safety chargers, channel voyage by reaching the expected end of life.
We apply a rigorous analytical approach to this program with a focus on upgrading and/or expanding sites in high demand and future growth locations. In some cases, we will seek to upgrade the chargers with high power models or even expand the site. We may also opt to retire a particular charger, removing that underperforming site from our network.
Before we open up the call for Q&A, I would like to share our updated full year 2022 operational and financial guidance. First, we are reconfirming full year 2022 revenue guidance of $48 million to $55 million. This range is driven by the timing of Pilot Flying J equipment deliveries. We are narrowing full year 2022 adjusted EBITDA guidance to negative $85 million to negative $80 million as we’ve been actualizing the hiring pace throughout the year.
We are revising our network throughput guidance for the full year of 2022 to 42 to 45 gigawatt hours. This revision is associated with making delays on a couple of dedicated stations in the San Francisco Bay Area. EV delivery delays by our OEM partners and the recovery of right shares starting later than expected in the year.
With respect to stalls, we expect to have a total of 2,800 to 3,100 DC fast charging stalls operational or under construction as of yearend. As Cathy mentioned, the resource challenges at municipalities and utilities across the U.S. are given rise to delays in a proven and energizing fast-charging stations. Hence, we are adjusting stall guidance to flag this persistent sector realities.
It is important to remember that such delays don’t have any material near-term financial impact on EVgo’s business. Our existing network has the capacity to accommodate the growing traffic.
With this, I will turn the call over to the operator for questions.
Question-And-Answer Session
Operator
Thank you. [Operator Instructions] We’ll take our first question from Gabriel Daoud with Cowen.
Gabriel Daoud
Hey, everybody. Good afternoon. And thanks for all the prepared remarks. Olga, I was maybe hoping to just dig into just to guide a bit more. I understand that there is maybe a decent contribution from Flying J and that’s kind of how she get for full year, but is there any way to maybe just quantify what the Flying J impact would be this year, at all?
Olga Shevorenkova
Sure. So, Gabe, the reason why we gave – to give the same guidance on the range of $7 million is that the exact contribution from Pilot Flying J will depend on the timing of hardware units delivered to our hub. And we right now scheduled to take that delivery over the month of December which has holidays in it.
And we – the short answer to that, that’s going to depend and that’s going to drive the difference between the 48 and 55. On an exact Pilot Flying J contribution, this year I would restrain from giving the exact number, because I don’t know the number we report separately.
But what I would say, what I think would help you is that the vast majority of PFJ revenues will come in Q4. In Q3 it was still – it was like some of it, it was still small and I think that by doing the simple math that would probably lead you to the answer, but we will not disclose that exact number.
Gabriel Daoud
Okay, okay. Thanks, Olga. That’s helpful. And then, just overall, curious to hear trends on the fleet side, Cathy, obviously hit on this in your prepared remarks quite a bit, but can you just talk about maybe the partnership with MHX and – like what revenue model that they go with, was it the charging of the service or customer own? And since it’s Class 8 I am assuming that 350 is that even an interest in a megawatt charges or just kind of curious how that partnership, I guess if you could share details there and then generally, what you are seeing on the fleet side? Thank you.
Cathy Zoi
Yeah, thanks, Dave. What we are generally seeing is, first of all it’s still really early innings and the fleet being able to access the vehicles. Right, so, there is lots and lots of interest in every fleet, the last mile delivery, the middle mile and now the Class 8, thinking about how they are going to do this, but this is like sort of the first tip of the rank, or first cap of the rank for MHX.
Again the business models vary and as we said to you many times, we are having to own the assets or we are happy to have the customer and if they own the assets. So, we will – it – signing generally speaking that the fleets are, at this point wanting to own the charter, at it is charging the service model that we provide where we actually build an upgrade for chargers for them against, yes.
Gabriel Daoud
Got it. Got it. Thanks, Cathy, that’s helpful. Alright. I’ll keep it. I’ll hop back again. Thanks.
Cathy Zoi
Thanks, Dave.
Operator
We’ll take our next question from Bill Peterson with JP Morgan.
Unidentified Analyst
Hi, this is [Indiscernible] on for Bill Peterson and thanks so much for taking our questions. Just can you elaborate on EVgo’s timelines where the replacements are upgrade of older chargers? Approximately, like how many chargers would that be and then what pace will they be replaced at? And then maybe a follow-up, will that impact the rate of new charging inspirations overall? Thank you.
Olga Shevorenkova
Hi, thanks so much for this question. So, we are currently evaluating how many stalls we will be upgrading or replacing or maybe even retiring next year, we I am not ready to give the exact number but it’s going to be in hundreds and we will update the market as that program is coming along. That program will be focused on our older chargers, our older 50 kilowatt chargers.
We want to just also make a remark that not all of our old 50 kilowatt chargers are underperforming. A lot of them are functioning greatly and have no issues, but there is a cohort of really old ones which are near to their – nearing their end of their life. And those are the ones which have given us problems and those are the ones which we are mostly focusing on.
But what we also want to say that, our new program and our kind of customer experience or customer enhancement improvement program doesn’t just focus on replacement or retiring of chargers. So upgrading the chargers which it is, but it also is being focused on improving overall end-to-end customer experience including a convenience of an App, convenience of notifications and a variety of different things our cross functional teams are focusing on.
And we would also like to remind achievements we experienced as an industry on its own as we have various equipment on our network which is charging various car models. So, they are managing sometimes, the problem is on the hardware sometimes the problem is on the software, but sometimes the problem is between innovative first time new cars on the market, innovative first time new chargers on our network and our competitors’ network.
And what really sets EVgo apart is that we have our lab where we are able to test various equipment in combination with various EVs and that already had given us quite a lead way and we will continue to do it and even import next year the importance of overall customer experience which is being helped again by a variety of things, the new hardware upgraded hardware, operational maintenance practices, its software convenience and overall customer experience convenience and its lab test and allowing for this which is to be high class.
Unidentified Analyst
Thanks very much for that color. And maybe if I can sneak in another one. And are you still experiencing inflation on the supply and labor side?
Olga Shevorenkova
We are still experiencing some of it. We would like to probably say that, it has abated in H2 versus H1. We are still seeing some of the labor cost experienced in inflationary pressure, but it’s not to the level we observed in the first half of this year. So we are remaining hopeful for next year.
Unidentified Analyst
Thank you.
Operator
We’ll take our next question from David Kelly with Jefferies.
Gavin Kennedy
Hi, this is Gavin Kennedy on for David Kelly. Thanks for taking my question. Can you just provide more info on the installation issue that you mentioned in the prepared remarks? How many stalls were affected this quarter? And can you quantify at all the expected increase going forward of stalls affected? And how should we think about labor and transformer constraints generally into 2023?
Cathy Zoi
Yes, hey, Gavin. Cathy here. The – I think when we reached the end of the quarter, we had 130 – just to go back, it takes EVgo about four to eight weeks to actually do the construction of a charging station.
Operator
Thank you. Our next questions come from the line of Jon Lopez with Vertical Group. Please proceed with your questions.
Jon Lopez
Hey, thanks so much. I had two, if I could. The first one, I just wanted to come back to the throughput question from a bit earlier, and I apologize, I think a year ago your throughput actually increased between calendar Q3 and calendar Q4. Why was that and what would make it different this year versus last?
Olga Shevorenkova
So last year wasn’t necessarily be a reference case because the increases could have been attributed to COVID restrictions easing in Q4 from my [Indiscernible] in California where does not forget 70 to 75% of every single just happening here is happening in California. From my memory, the vast majority of Q4 was so like an improvement and restaurants got open and people started getting out on the streets and what not.
And then end of Q4 beginning in Q1, they again introduced new restrictions because there was a new wave. So I wouldn’t necessarily look at the 2020 and infer any normal patterns for it, because they were heavily affected by what was happening with COVID.
Jon Lopez
Got you. Okay. That helps. Thanks, and the second one, I wanted to come back to the GM commentary, and so I apologize, I might not have caught all this, but I thought I heard you say that you’re effectively trading off some higher-cost near-term units for some lower-cost units, longer-term, like further out in time.
Did I hear that right? Could you just tick through assuming I did tick through, like what changes in the cost profile and see is the dollar value of that engagement actually different or is the same dollar value, but just a higher number of chargers?
Cathy Zoi
Yeah, Jon, no you didn’t quite hear right. Remember the EVgo’s principles are, we will invest in the charging station where it pencils, and one of the key input, there are many inputs about what’s makes it pencil, the CapEx, etc., the rent. But one of them is, what’s the utilization on that station going to be? So when you are building stations, where in the earlier years, when there are fewer EVs on the road, it takes more money from some place else, if you’re going to build them.
So if you’re building in 2021, the subsidy per station required by somebody out and in this case, GM, is higher. If you are building in 2023 after dozens more EVs, if it’s the market and then sold, then the required subsidy to make a charger pencil, is much, much less. So what we’ve been able to do, for the same $90 million of GM contribution, we’ve been able to build 500 extra charging stalls in the latter years of the build program and have it increased the overall NPV.
Jon Lopez
That really helps Cathy, but sorry, is the total dollar commitment between the 2 of you unchanged and the charger count higher?
Cathy Zoi
Yes.
Jon Lopez
Okay. Got it. All right, thanks. Appreciate it.
Operator
Thank you. Our next questions come from the line of Stan Shpetner with Pickering Energy Partners. Please proceed with your questions.
Stan Shpetner
Hi, thanks for taking my question. On fleet sales, as you continue to pivot towards fleet over time. One, do you maintain your long term target to get fleet throughput to be about 2/3 of your total throughput, and as that trend continues, do you expect to see revenue growth sequentially to moderately lag the rate of your throughput growth?
Cathy Zoi
Olga, you want to take this one?
Olga Shevorenkova
Sure. Not necessarily in the long run, in the short run, you might see those fluctuations and they could go both ways. You might see revenue growing quicker than throughput when we open new dedicated locations, they starts paying us Immediately for all the stores that are open, but it takes our partners time open to ramp up capacity.
So you might see, again, if you look at a quarter-to-quarter developments in the next couple of years. So but the revenue grew but the throughput didn’t or vice versa. In the following quarter, you will, for example, see revenue didn’t grow that much, but the throughput ramped up because now they ramp up capacity. If they really a look at a long term, they should go hand-in-hand. We don’t fore see much of the overlap if you really take a step back and look at it in the multi-year line.
Stan Shpetner
So if you think about in pricing terms then, isn’t your fleet pricing somewhat of a discount to what you’re charging on a retail level and so that would have some impact on average pricing in a going forward basis?
Olga Shevorenkova
If you look at the business, overall, yes, that will have that exactly. If you just take the overall kilowatt hour throughput versus overall revenue because per kilowatt hour price for fleet is lower, you’ll notice that’s a fact. If, however, [Indiscernible] you’ll probably see a much even development between the revenue and throughput.
Stan Shpetner
Just one follow-on. As you think about being able to integrate additional services and related revenues with fleet customers on a medium to long term basis, how do you think about the margin profile of fleet revenues versus your retail business in comparison?
Olga Shevorenkova
We haven’t passed that on the consumer just this year, but conceptually, this is how we are thinking about it. But when we are thinking about passing it on to the consumer, we are not just thinking about the margins, we are thinking about it holistically. I was still doing a rate on the chargers returned on us and simultaneously if we have high utilization in certain places than we expected, we – in the future will be able to cut equipment cost and so on and so forth.
That might by itself solve the issue of rising energy cost and we don’t have to pass it on to the consumer. But it might not and that will be time when we will pass it on the consumer and just a reminder about our pricing, we were not marking up, we were not against and you have like a one price per gallon and that changes daily and it generally follows the overall cost of fuel prices.
This is how we are approaching that. We are approaching that a little bit from a consumer side and supply/demand side and there are various consumers with various price and securities and there are various consumers with various appetites for subscription or pay as you go types of tariffs which we are addressing and continue to innovate around it.
So, again, even if we say, we are passing on to the consumer, it doesn’t follow me as a marking up to at every single pump. Our pricing scheme is more sophisticated than that and it’s only going to get more sophisticated over time including their location and time of used pricing that we’ll do have certain levers to pull, let’s say we could make more expansive 6 PM charging and cheaper 8 AM charge.
That’s how we are approaching it just to really give some context about how the pricing that’s stack and what actually been surpassing the consumer. So it will be more sophisticated than what it might sound.
Stan Shpetner
Awesome. Thanks for the color.
Operator
And that does conclude the question and answer session. I would like to turn the call back over to Cathy Zoi for any additional or closing remarks.
Cathy Zoi
Thanks. Look, our committement to technology-enabled innovation powers our customer relationships and whether it’s Autocharge+ for drivers on our public networks, whether it’s our APIs for Automakers or free software for commercial customers, EVgo is positioned to deliver an exceptional and reliable fast-charging experience and expand our leadership across the market.
We are excited about the growing momentum across the EV landscape. I think you can hear it in Olga’s and my voice and I believe that EVgo is exceptionally well positioned to benefit from the electrification of travel. So, thanks to all of you for joining us. Great questions. Love to hear like we do.
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