Q4 2023 EVgo Inc Earnings Call

Participants

Heather Davis; VP of IR; EVgo Inc

Badar Khan; CEO & Director; EVgo Inc

Olga Shevorenkova; CFO; EVgo Inc

Gabe Daoud; Analyst; TD Cowen

Andres Sheppard; Analyst; Cantor Fitzgerald & Co

Bill Peterson; Analyst; JPMorgan Chase & Co

Stephen Gengaro; Analyst; Stifel

Craig Irwin; Analyst; ROTH MKM Partners, LLC

Presentation

Operator

(audio in progress) later today. At this time, I would like to welcome everyone to the EVgo's Fourth Quarter and Full Year 2023 earnings conference call. (Operator Instructions) Thank you. Heather Davis, Vice President of Investor Relations at EVgo you may begin your conference.

Heather Davis

Good morning and welcome to EVgo's Fourth Quarter and Full Year 2023 earnings call. My name is Heather Davis, and I'm the Vice President of Investor Relations at EVgo. Joining me on today's call are Badar Khan, EVgo's Chief Executive Officer; and Olga Shevorenkova, EVgo's Chief Financial Officer. Today, we will be discussing EVgo's Fourth Quarter 2023 financial results, an outlook for 2024, followed by a Q&A session.
Today's call is being webcast and can be accessed on the Investors section of our website, 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 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 for detailed in our SEC filings, including the Risk Factors section of our most recent annual report on Form 10-K and quarterly report on Form 10-Q 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.

Badar Khan

Good morning, everyone, and thank you for joining us today. EVgo posted yet another great quarter and set of results the full year before we dive into those details, since this is my first call as the EVgo's CEO, I thought it worth taking a moment to remind everyone of the incredible and important journey we are on emissions from transportation represents the largest source of emissions in the United States, and that is why the work we do is so important at EVgo, our mission is to accelerate the mass adoption of electric vehicles by creating a convenient, reliable and affordable EV charging network that delivers fast charging for everyone.
I believe EVgo represents a compelling value proposition for investors, not just because of where the company is currently trading and investment you need to go is clearly an investment in sustainability, but it is also an investment in a market that has a multi-decade growth trajectory without the need to pick one easy manufacturer over another.
Our business model is also focused on the highest growth segment of the charging market DC fast charging effect seen from the data today. We like our core business of owning and operating the charging network. We generate revenue every time a customer charges on our network, unlike a one-time equipment sale. And as we continue to see, our revenue is growing faster than the growth of EVgos, customer capture to site development and construction to products and services that build customer loyalty.
We have a growth engine that leverages key partner and OEM relationships across this entire cycle and it's hard to replicate. Financial discipline is key throughout our business from the proprietary network planning model, determine where to locate our charging stations to the disciplined investment decision making processes designed to ensure we generate double digit returns and minimize reliance on shareholder capital for over a decade.
Even though he's built a growth engine that is benefiting from this mega trend towards electric vehicles. It has delivered a near trebling of throughput and revenue for each of the past two years and is adding NPV at scale annually. And as you'll hear today has a clear path to adjusted EBITDA breakeven in 2025, and we passed an important inflection point in 2023 as a result of utilization and throughput levels we're now seeing across our network.
We installed base is now profitable on a stand-alone basis. It's truly an exciting time at EVgo to be leading the company in the next phase of profitable growth. We had a great fourth quarter in 2023. And for the full year, we delivered record levels of throughput and revenue near trebling year over year on our Q3 call, we raised revenue guidance and I'm very pleased to say we came in above the top end of that raised guidance at $161 million in revenue.
Operationally, we had another strong year of customer account growth and growth in our network in both stores and throughput. EVgo's path to profitability comes from strong top line revenue growth but also from operating leverage driving gross margin expansion on our Q3 call. We also provided improved adjusted EBITDA guidance for the full year.
And so I'm also very pleased to say that we came in above the top end of that raised guidance at negative $58.8 million. As a reminder, EVgo currently has three main sources of revenue. Revenues associated with owning and operating our growing network of DC fast chargers, revenues from our capital-light extend business that complements our core business, but with chargers owned by site hosts, customers and ancillary and tech-enabled services like our plug share business and fleet focused business model.
As we said in our preliminary results in late January, we plan to focus our growth efforts in the near term on our core owned and operated business. Given that this business is most leveraged to EV adoption is experiencing strong revenue and throughput growth and is expected to generate the highest returns. As a result, we're targeting this to become the majority of our business.
As you know, he goes almost 3,000 operational stores spanned most of the country stores and over 35 states across over 50 national and regional strategic site hosts. And today over 145 million Americans live within 10 miles of an EVgo charger across our site host partners. We've identified over 100,000 potential stores for easy go to build, which shows how far we can go, but also that we have plenty of opportunity to select some of the best sites.
Two years ago, around one-third of our network throughput was outside California, whereas by the end of 2023 has grown to around half in fact, Texas and Florida are two of our fastest growing states in terms of throughput, proving that the growth of electric vehicles is occurring in both red states and Blue in 2021, consumers had approximately 31 EV models to choose from today. There are now more than 70 models with many more on the way from the OEMs.
These models are not only becoming more affordable, but they are increasingly addressing all vehicle segments and their technology is improving from egos inception. We've made it a priority to serve all these deals enabled by our innovation lab in LA, where we work collaboratively with OEMs to ensure interoperability between all EV models and our chargers.
EVgo's commitment to serve all EVs includes adding max connectors to our network over a decade, EVgo team has built and refined the growth engine that is now humming and the proprietary process of determining whether and where to build to construction to grant capture to customer acquisition, the ongoing maintenance, we are adding net present value every year, foundational to this growth engine or the many years' experience we have in securing our supply chain, marquee site host relationships, excellent relationships and advocacy efforts with governments and utilities, an innovative tech platform and our sizable OEM partnerships. When put together, this is difficult to replicate at this scale and with the customer experience, we now offer and reinforces our competitive advantage.
There are several drivers underpinning the growth of transport electrification, although I recognize there may be speed bumps along the way, despite some OEMs pulling back from their extraordinary ambitions over the past couple of years, commitments from OEMs towards investing in electric vehicles still represents over 400 billion in 14 states, representing over a third of the US population have adopted advanced clean cars to the regulation from the California Air Resources Board that phases out the sale of new ICE vehicles in favor of a 100% zero emission future for new zero emission vehicle sales.
Rideshare companies have committed to an all-electric future with bluebird are setting the goal of having 100% of the rights of EVs in the US by 2030. This is parallel to efforts of cities such as New York City With me are Eric Adams signed the green lines rule for all rideshare vehicles that operate in the city must be electric by 2030.
And across the US, we see strong consumer preferences for EVs today, which we expect to gain momentum as the average price of battery electric vehicles becomes closer and eventually becomes cheaper than ICE vehicles with more new models being brought out every few months. Two years ago, the average TV was around a third more expensive than the average ICE vehicle. And today it is almost at parity without incentives.
According to Cox Automotive Battery electric vehicle sales continue to grow year over year and sales of non Tesla vehicles, which are the majority of vehicles charge. Even EVgo network grew by 66% year over year and now represent approximately half of all 2023 battery electric vehicle sales up from about a third in 2022. While there may be some uncertainty over the growth of EVs in the near term. Estimates for 2013 remain very significant, implying EVgo's of 37% to 42% through 2030.
There are few industries in the world with this kind of growth rate, underpinning the investment case, EV-DO focuses on DC fast charging versus L2 charging for DC fast charging, depending on the vehicle. It's possible to charge 100 miles and less than 10 minutes. These stores are in pretty convenient locations where people are going about their lives.
Our core business generates revenue from a set of electricity through these well located stores. In other words, we will continue to generate revenue even if there were no more new EVs sold because of decreasing vehicle efficiency due to larger EVs, we expect to see a higher growth rate of electricity consumption to power those vehicles.
Therefore, we estimate the total addressable market or TAM is growing at a kegger of up to 46% to 2030. And finally, DC, fast charging share of that electricity consumption is expected to grow considerably over the next several years with an even higher stagger up to 60%, resulting in a $12 million to $15 billion annual serviceable addressable market or SAM by 2030.
That assume that EV penetration of only up to 15%, implying decades of further growth. The growth of DC fast charging is not some hypothesis for future yet to emerge. We believe that early adopters have easy access to at-home charging as the market moves towards mass adoption, more easy buyers live in multifamily housing. And we know from a study from UCLA that multifamily residents are more likely to rely on public fast charging for their needs.
In just two years, the percentage of multifamily dwellers buying EVs has risen to 31%, up 10 points, the percentage of DC fast charging is growing as this transition unfolds in California over the last 2.5 years, we estimate that fast charging already accounts for over a quarter of all charging needs for EV drivers up from an estimated 5% to 10% in 2021 and expect this growth will continue over time.
Second driver for the growth of DC fast charging is a growing number of rideshare drivers that drive EV.s. The average rideshare driver drives three to four times more than the average commuter is more likely to live in multifamily housing for this more likely to not want to use valuable time during the day to charge their vehicle and is therefore very reliant on DC.
Fast charging segment of drivers is growing very fast evaluating our usage on the go network rideshare drivers on average charge five times more than our average retail customer as more rideshare drivers make the shift to electric demand of electricity dispense to this group of customers has increased 25% in the fourth quarter of this year, up from 11% in Q1 '21.
What are the EVgo sources of competitive advantage honed from over a decade of doing this is a proprietary, sophisticated network planning process that informs where we locate our charters. We ingest an enormous amount of data from easy adoption rates, forecast, sales, density of multifamily housing to rideshare volumes, electricity costs, demand charges and availability of grants all at a census block level, which then tells us where to place chargers, how many and at what pace within specific geographic bubbles that are projected to generate double digit returns.
We then turn to our extensive site partners to determine which of our partner sites are best placed to build a site. And the model is iterated continuously comparing actuals and forecasts to improve the network planning process.
The chart on slide 17 shows our actual forecasted throughput versus what we had originally forecasted for all owned sites I showed shows not only how accurate our network planning models, but also the level of robustness of our underwriting process. You can see this financial discipline in the way we deploy capital, where we seek to minimize the amount of capital we deploy with offsets coming from a range of sources, including OEM payments and grants and incentives.
And as we've discussed before, we receive approximately $33,000 per store per store built under our partnership with GM, which is typically received within a couple of months of stores going operational, we have over a decade of experience in successfully identifying applying for unsecured grants at the federal state and local level. Federal Government has two primary programs to incentivize charging infrastructure, the expansion and extension of 30 c, the alternative refueling property tax credit from the inflation.
Reduction Act and the Navy program up to 7.5 billion of formula funding from the bipartisan infrastructure law in January this year, the IRS clarified rules about 30 C eligibility essentially resulted in more sites being eligible for funding than we had previously expected. As a result, we now expect around 50% of our network plan to be eligible to receive 30 C funding. Finally, EVgo and our partners through our extend business continued to win many funding for highway sites.
However, given our strategy is focused on higher density urban locations, our network plan is not dependent on Navy funding as these sites are immaterial to our plan over the next couple of years. As a reminder, these diverse sources of funding can typically be stacked and in some cases, the funding stack may cover the vast majority of CapEx at a particular site for sites that are expected to go operational in 2024.
These offsets are expected to represent around 40% of the capital required for our owned and operated sites as it goes, digital first approach offers customers and partners alike, a variety of offerings driving value. We've worked tirelessly to improve the customer experience. And a lot of that is driven through software. For example, the Charge plus a seamless plug-in charge experience, get rave reviews from EV drivers as do reservations.
If you go offers flexible pricing models with location-based time-of-use subscription, rideshare and pay-as-you-go models available for drivers to choose what serves their needs best while optimizing profitability for EPS and our partners value with digital first approach from extended rideshare partners to OEMs to site hosts. Each of our partners have benefited from technology offerings that improve our relationship with them.
One of EVgo's core priorities is to offer a best-in-class customer experience. We know that there are four things that customers value the most first having lots of stores that aside. So they never have to wait for a charge. Second, having high-powered chargers available so they can fuel up quickly. Third, having a reliable solution that works right on the first trial, and fourth, a hassle free payment process on each of these dimensions.
EVgo has made great progress over the course of 2023 across our over 950 locations, we nearly doubled the number of sites that have at least six stores, and we're now targeting a minimum station size of six stores per site and aim for 8 to 10. If the site host has space across our nearly 3,000 store network, we have more than doubled the number of stores served by a three 50 kilowatt charger rather than an asset-based reliability measure.
We track what we call one and done an internal but more customer oriented metric that measures the percentage of time a customer has a successful charging experience within a reasonable time window on their first trial. During 2023, our One & Done rate increased over 600 basis points to 91%. Finally, we know that a key frustration for customers during the charging process is payments.
As a result, we developed our auto Charge plus feature, which allows drivers to just plug in and charge automatically without having to perform any additional steps, it makes charging easier and faster. During 2023, we nearly doubled the percentage of sessions using auto Charge plus, which now has over 50 vehicle models eligible for it.
This customer-centric model, combined with our disciplined investment in building a world-class fast charging network is why I am so excited about our electric future. I'll now turn the call over to Olga, who will go through our financial performance for the fourth quarter and full year 2023, as well as our initial outlook on 2024.

Olga Shevorenkova

Thank you. Badar. EBITDA ended 2023 was yet another strong quarter, mostly driven by the continued growth of our owned and operated charge in networks. Revenue in the fourth quarter was $50 million, which represents an 83% year-over-year increase.
This growth was primarily driven by increased charging revenue. Retail targeting revenue grew from $5.8 million in the fourth quarter of $20 million to $16.7 million in the fourth quarter of 2023, exhibiting a 186% year-over-year increase. Commercial charging revenue grew from $1.3 million in the fourth quarter of 2022, to $6.3 million in the fourth quarter of 2023, exhibiting a 378% year over year increase and external revenue grew from $16.7 million in the fourth quarter of 2022 to $18.3 million in the fourth quarter of 2023, exhibiting a 10% year over year increase.
We added over 900 selling new operational stalls to our owned and operated network during 2023, accelerating off the 670 new stores we added in 2022 sold and a duration of under construction inclusive of 196 tons sold was 3,500 systems as of December 31, 2023.
During 2023, EVgo added over 366,000 new customer accounts, which represents a majority of all non Tesla EV sales in 2022 years ago, ended 2020 with more than 884,000 customer accounts and 60% increase over year end 2022. In those network, throughput continues to accelerate in the fourth quarter, growing faster than EBITDA growth over the same time period.
As Badar discussed earlier, EVgo focused on the fastest growing segment of the charging market UCFC, and it can clearly be seen in our numbers. This accelerated growth is driven by a number of factors, EV buyers moving from early to mass adopters with a higher portion of multi union dwellers and the rapid growth in rideshare as well as vehicle miles traveled.
Finally, catching up to those of I see increasingly easy charge rate for how much electricity is delivered over the time period to vehicle and heavier less deficient in remodel utilization was over 19% across the network in the month of December, over 55% of our installs had utilizations greater than 16% in December 2023, and over 40% of our stores had utilization greater than 20% in December 2023.
Another way to look at store level performance is to look at daily throughput per stall. There are two factors that drive this metric starting base utilization and charter rates. As a reminder, charge rate depends on the car battery, but can be limited by some legacy fast chargers with max capacity is lower than the specific car charger.
We expect average chargers on our network to increase over time, driven by newer cars with bigger batteries and a higher mix of ultrafast VCC charges on our network average daily throughput at Stall was 200 kilowatt hour in December 2023, up from 51 kilowatt hour in December 2021, representing a four times increase. Utilization grew around three times over the same time period, demonstrating the impact of increasing charge rate on throughput per install.
Looking back two years ago, phone only 2% of our stores were delivering 200 kilowatt hours or more per day. As of Q4 2023, that number has increased to 42%. And on the low end, three years ago, 60% of So we're delivering less than 60 kilowatt hour a day today. That number has shrunk to 16%, EVgo continues to realize operating leverage on its path to profitability in the fourth quarter of 2023, we doubled our revenue while tripling our adjusted gross profit versus the fourth quarter of 2022.
Adjusted G&A as percentage of revenue decreased from 92% to 54% over the same time period. This improvement and driven by first leverage within cost of goods sold and second, leverage within SG&A flat as the impact volume for every store we deploy there is an amount of six postal dependent costs associated with it, including property taxes, ran base maintenance and demand charges for every additional kilowatt hour throughput risk costs remain fixed.
First, all therefore flowing so dependent costs as a percentage of revenue driving the adjusted gross margin to help you model operating leverage in our core business, we have broken our adjusted cost of sales into two categories, charging network, cost of sales and other cost of sales charge and network cost of sales includes all costs associated with Ron and our core owned and operated charge in networks, whereas other cost of sales include cost of goods sold associated with our expand and ancillary business lines within charging network cost of sales, approximately 40% of cost, a sole dependence.
In other words, fixed or stalled, the other 60% of charge in network cost of sales, throughput dependent and includes Willow metric, energy costs and credit card processing fees. The increase in daily throughput per store you saw on the prior slide was primarily behind the adjusted gross margin expansion from 18.3% of Q4 last year to 26.5% in the fourth quarter of this year. We also have operating leverage in G&A, adjusted general and administrative expenses that at EVgo can be broken down into three categories.
First, the cost to sustain the existing charging network and other existing businesses such as call center third party, a key account management marketing, staying in software and hardware expenses. These costs represent roughly 30% of total adjusted G&A.
Second, the costs to support growth of the charging network and other business lines, our so-called growth engine, but has spoken at length about this. Cost represent another roughly 30% of adjusted G&A. And finally, corporate overhead costs that represent roughly 40% of total adjusted G&A growth costs are tied to the size of the growth engine and corporate costs are fairly fixed at this point.
And as a result, adjusted G&A has increased only 9% year over year, while as mentioned earlier, revenue tripled fully demonstrating the operating leverage within G&A. Both of those effects, coupled with increased scale of the charging network and other business lines put us on a clear path to reach adjusted EBITDA breakeven. And importantly, we have passed an important inflection point in 2023 in that as a result of the utilization and throughput levels we're now seeing across our network.
The installed base is now profitable on a stand-alone basis, adjusted gross profit was $13.3 million in the fourth quarter of 2023, up from $5 million in the fourth quarter of 2022. Adjusted EBITDA was negative $14 million in the fourth quarter of 2023, an improvement versus negative $20.1 million in the fourth quarter of 2022. Cash used in operations was $7.3 million in the fourth quarter, we added over 200 new stores to our owned and operated network during the fourth quarter.
Capital expenditures were $34.8 million in the fourth quarter. This includes expansion CapEx for the new capacity as well as capitalized engineering and construction and tech development costs. We are now reporting capital expenditures, net of capital offset were capital offset represents cash collected from various funding sources in a particular period.
Specifically in the fourth quarter of 2023, we collected $5.7 million and OEM infrastructure payments, all payments under the GM contracts and $7.4 million of proceeds from capital build funding all cash collected as part of the grant and incentive programs secured over the prior period, thus bringing capital expenditure net of capital offsets to $21.8 million for the quarter.
For the full year 2023, total revenue was $161 million, nearly tripling compared to 2022 revenue growth was primarily driven by charges, revenue and EVgo expense detail. Charging revenue was $45.7 million, an increase of 142% compared to 2022. Commercial charging revenue was $14.5 million, an increase of 331% compared to 2022.
And extend revenue was $72.4 million an increase of 292% compared to 2020. Adjusted gross profit was $41.8 million in 2023, up from $13.3 million in 2022. Adjusted gross margin was 26% for the full year 2023, up from 24.3% in 2022. This increase was driven by the operating leverage as discussed earlier and greater leverage effects observable when comparing adjusted gross margin in the fourth quarter of 23. So the fourth quarter of 22 versus comparing full year results.
This is driven by accelerated LCFS revenue recognition in the first half of 2022, which drove margins higher in that time period. Adjusted G&A as a percentage of revenue improved significantly from 171.2% in '22, 62.5% in '23, demonstrating the same levers. In fact, when looking at fourth quarter to fourth quarter numbers, adjusted EBITDA loss improved by $21 million in 2023 to a loss of $58.8 million versus a loss of $80.2 million in 2022.
Cash, cash equivalents and restricted cash was $209 million as of December 31st, 2023. Cash used in operations was $37.1 million for the year compared to $58.8 million in 2022. Clearly demonstrating our focus on reducing the operational cash burn and setting it a goal on a clear path to profitability. In 2023, total CapEx was 158.9 million and capital expenditures, net of capital offsets were $122.8 million.
The vast majority of the $159 million in CapEx was spent to grow our owned and operated network now and then just 2024 guidance, even though we currently expect full year 2024 revenue to be in the range of $220 million to $270 million and adjusted EBITDA to be in the range of negative $48 million to negative $30 million.
Our guidance is informed by several scenarios, which account for a range of release sales in 2024 utilization trends and the pace of execution under our contract with the pilot company, we expect the FDA revenue to be roughly 35% of total revenue in 2024. When looking at the midpoint of guidance range, we also expect the SG&A revenue to be more or less equally distributed through the Q4 with Q4 being slightly heavier than others. Jordan, the network revenue is expected to grow sequentially throughout the year, driven by increasing the IO consistent with prior years.
We also would like to add some color on our capital expenditures. Our current deployment plan for 800 to 900 new Asiago owned stores, expect system is put in operation in 2024 with an average CapEx per store of $160,000 before offsets, we expect capital expenditures net of capital offsets to be in the $95 million to $110 million range.
As we have discussed at length, if you go is on a clear path to an important inflection point of our business, hitting adjusted EBITDA breakeven, even though we expect to be adjusted EBITDA breakeven for the full year 2025. This is based on the expectation that EBITDA will continue to grow and that EVgo will continue to expand its network and realize operational efficiencies.
EVgo and the '23 was $209 million in cash, cash equivalents and restricted cash. Our current operational and network expansion plans give us runway through a good portion of 2025. Indigo is actively evaluating a number of non-dilutive sources of financing to fund the business. Beyond that point, both from private and public sources, including the DOE Loan Programs Office from the latter, either put together a high-quality DOE loan application that addresses the need for more public charging infrastructure to be judiciously, build out at scale across the year.
EVgo is a credible and sophisticated operator with over a decade plus track record focused on reliability and customer experience. And so far, we are rapidly moving through the process. We look forward to sharing our progress in 2024 with you throughout the year. Operator, we can turn the call over to question.

Question and Answer Session

Operator

At this time. (Operator Instructions)
Gabe Daoud, TD Cowen.

Gabe Daoud

Thank you, and he bought our inaugural. Thanks for all the prepared remarks and detail. Very helpful. Maybe I wanted to start with arguably you wrapped up with the 2024 capital offset. So I'm just looking at rough math, I hundred stalls at 160,000 per store and call it over $140 million of capital. So I guess the offset would be would be what around $30 million to $50 million or so. Could you maybe give a bit more detail on where all of that is coming from.

Olga Shevorenkova

Yes. So again, so until it was new revenue, kind of like remind the timing component of all of this and then onto your costs. When we talk about CapEx spend in a particular year, it's not necessarily spend on the chargers which go operational in that particular year because we already probably some good 30$, 40% of what's required to be spent to put us '24 assets in operation in 2024 as of now, because you can start over like 12 to 18 months with various stages of development and all that should drive you within 2024 fiscal cup.
Actual cash CapEx, we're going to spend some of it will be spending 24 assets channel that will be spent already on 25 assets. Some of it will be in early development costs for 2016, maybe even 27 assets for some early scoping exercises.
So just to kind of make it clear, 100, 60 k. by 800 to 900 won't get you to that precise. Number two, you'll be able to match one to one. And the same dynamic plays out with offset was offset as we spoke at length many times many times, one of the main components of offset is grant funding. And when the grant funds and you start invoicing them after the asset goes operational, it takes you up to several months to collect that cash back.
So there is a clear mismatch. And when you had to spend the CapEx for this particular asset versus when you collected to offset the cycle is a little shorter was OEM. payments because they just pay quicker to commercialization. And on onto the key offsets, there will be a delay. It's unclear yet as we go into the trade and once a year, those credits twice a year or maybe once transaction costs come down and our industry, the overall 33 C trade and tax industry matures we made there will be trading that require, but there will still be a delay.
So when you're looking at kind of cash number was in the year, the capital offset versus CapEx, they're not related to the same assets. That's why we introduced the concept of vintage cutback for the concept of vintage offset. And I talked about in my prepared remarks and the charges included in the materials we provided when we compare the CapEx referred to specifically, assets will go into operation '24 and capital offsets also related to those particular assets, we expect offset roughly 40% to 60% comment it's math comes from EVgo and 40% comes from other sources within the particular year. That number could fluctuate one way or the other, depending on on a timing of each of those.

Gabe Daoud

Thanks. Thanks for that. That's that's really helpful. And maybe just dig into that. That's only '24 that this will be the 1st year you'll attempt to monetize 30 C credits. Just kind of curious how that looks in the secondary market from a value standpoint? Is it like $0.9 on the dollar? Just how should we think about 30 C value?

Olga Shevorenkova

Yeah, that's going to be the first time, and it's going to be the first time for a lot of activity in the market. Both buyers and sellers are trying to understand what will work for each party to transact. We have a lot of interest for our first portfolio for our factor was 2023 assets portfolio. I probably will on not comment on the price just yet because we just started exploring it. It may do when we speak next time in a couple of months, I'll give you I'll give you a better indication of what that is is where sufficiently more along was one of the parts.

Gabe Daoud

Okay. Okay. Yes, (inaudible) that's exciting. We'll look forward to that. And then just a follow-up for me would be on and talking about some of the attractive economics here. Just curious if you could refresh maybe thoughts on when you get to 2030 I know it's a long time from now and you do see 30 million to 40 million in VIO at a 20% utilization. What does how does that translate to like financials and what the business actually looks like in terms of maybe EBITDA or free cash flow? Any any kind of thoughts around that would be helpful. I know again, longer dated, but just curious, thank you.

Olga Shevorenkova

So we obviously are looking at all of those numbers internally gate, but we think that the more appropriate time and stage prefer something like that will be a separate occasion we are thinking about and that can kind of like webinars, event of some sort where we will go in a greater in-depth detail in our project unit economics and our more midterm to long-term planning. In the meantime, we think with this call, we gave quite a bit of information on the separation of fixed and variable cost within our cost base and how we're thinking about the charge rate and whatnot.
Honestly, our business is tied to EV adoption, right? That is a driver, and we've been changing scene and over and over again, the AV VIO grows, our business grows. Now I think you have enough information to kind of even model it yourself and she's going to make it expensive, be big if we continue to deploy network and continue to grow alongside yet of how that is going to look like from our perspective, I think a separate occasion is probably a better chance for us to share that information and talk about it at length.

Badar Khan

Yes, (multiple speakers) let me just show it dramatically, which could take us now that we've shared with you already in this call now materials that the operational business for the stores that we have in the ground are covering their costs.
So if you exclude the costs of the growth engine and our corporate overhead fixed costs, the assets that we have in the ground at a 90% utilization rate are actually covering their costs today. And so as this business continues to scale, we should expect to see margins coming from those operational stores well in excess of the fixed cost certainly by 2030. And I think anyone that model this business will find it to be a pretty attractive business at that point.

Gabe Daoud

(multiple speakers)Okay, we'll do. I'll begin to somebody else up offline. Thanks, everyone.

Operator

Andres Shepherd from Cantor Fitzgerald.

Andres Sheppard

Good morning, everyone. Congratulations on the quarter and thanks for taking our questions. And I wanted to maybe touch on, you know, how should we be thinking about cost of energy ASP.s and the utilization rate for 2024, particularly given the guidance that you issued, you know, what kind of in terms of you know, for modeling purposes, what would be a good way to think about the ASPs and the utilization rate of 19% as of year end, which is great. Curious what you're targeting or what you might expect for for 2024? Thank you.

Olga Shevorenkova

Yeah. So I would underscore this cause either, but I'll describe the dynamics here on an energy cost front, but probably we'll see a slight reduction in 2024 because we're still observing the fact of amortization of demand charges, coupled with as you move into very favorable, easy rates in a number of geographies. So you should see a slight improvement on that front.
On the operation side, we probably will see a slight improvement as we've just made some changes to our regulation and pricing strategy. I mentioned also to take in the fact that probably again, a couple of options there, um and um, if we're talking about the difference between the two we definitely should assume some improvement on the energy margin.

Andres Sheppard

Okay, thanks.I guess if I'm understanding correctly, then probably a reduction in ASPs for '24 and then maybe a gradual improvement in the utilization rate of the charges for this --

Olga Shevorenkova

So reduction in average sales, cost reduction and energy cost improvement. And Anish, the center itself, Brad speak to the difference between the two, the margin that should and a little bit in '24.

Badar Khan

(multiple speakers) just to reemphasize, you can see the operating leverage that exists in gross margin we've shared with you how much of our charge in COGS is fixed versus variable at the store level. And so if we see growing utilization and good throughput per store, which you've seen a very significant increase over the last year. I'd expect us to see that operating leverage show through in expanding gross margin.

Olga Shevorenkova

Right. And so just naturally require 500 adjusted gross margin is not just energy costs. There is a lot of different costs and then it's fully loaded. It's quite a loaded number is maintenance and property taxes. There is some from AT&T and Verizon charges, there is rent. So when you're looking at adjusted gross margin doesn't just talk because the dynamics of the difference between the pricing and an energy cost energy cost is on R-WIS.

Andres Sheppard

I see. (multiple speakers) Got it. Okay. And then maybe switching gears on Navy funding, obviously, understanding you're not dependent on it, but just can you maybe remind us what is the total amount that you have been awarded so far from Navy?
I think it was about 180 million and last quarter. So just seeing if there's an update there and how should we be thinking about in terms of awards for this year? Is there a target that you guys are expecting for or just trying to again incorporate that into the model as well?
Thank you.

Badar Khan

Yes, I mean, Andreas, the levy, as you said, funding is not a credit is not a particularly material part of our build plan. As we said, we're focused on building infrastructure in kind of urban suburban locations as opposed to highway corridors. So it's not a huge part of what we do. We are excited about supporting our partners, so Pilot Flying JN TN ways through our extend relationships. So we're excited about supporting them in in deploying sites that may be eligible for Medicaid funding. But it's just not really a particularly material part of our build plans. And even in the near term, and --

Olga Shevorenkova

maybe just to add to what you made is one of many brand transition charges were applying for and for if we have a holiday program and a bunch of other programs across different stage for those for those other programs, Landmark, which awarded, but hasn't we haven't collected yet. That's tens of millions of dollars.
Just to give you a magnitude, chose Navis smaller business. So I mean, our overall capital of that strategy is now working out. We are accession it wherever we can, but we're being guided by the principle of maximizing NPV rather than maximizing the brand catch some of the locations of our grand capture digital books for us. Just to remind that, that's our strategy.

Andres Sheppard

Got it. That's helpful. And sorry, I'm not sure if I missed it, but do we know than what the total awards is to date from maybe again, I think it was 180 as of last quarter, is that number unchanged or is there?

Badar Khan

You know, I don't know if we have it at my fingertips, Andreas, but we can get back to you offline (multiple speakers)

Andres Sheppard

Okay. No problem. Thank you so much and congrats again on the quarter. I'll pass it on. Thank you.

Operator

Bill Peterson from JPMorgan.

Bill Peterson

Yes, hi.Yes, good morning. Nice results and guide. I'm hoping you can help just for the point of view. I know you dropped a lot of breadcrumbs on how to think about network operations. But if we think about the trajectory between that business, which you said should see growth from here. What about extend and economical services? I'm trying to get a better understanding how the cadence kind of goes through the year and maybe what your underlying assumptions around the IO growth and so forth?

Olga Shevorenkova

Sure. Yeah. For the Extend, we have a big contract with Pilot Flying J And as we've talked at length, we are in full speed executing on that contract we just gave you guys gave some color in my prepared remarks that it will be roughly 45% if you take a minute for in the range of revenue that will bring us by the end of 2024 through roughly half of collection of revenue collections because our contract for another half will be left to collect over '25 and '26 and execute on that as well. We do not have any other big contract right now committed to EVgo. We're focusing our efforts on our owned-and-operated network.
It's a big lack of deal like that comes our way it appears in the market. We'll go for it and then we'll give an update that some of that's another whale we'll be executing on. But as of now that is that is not the case should expand as of now, I will turn into the operation and maintenance for PFJ after we're done execution to build analysis once at scale on other ancillary services, that's mostly blocks at this point on, we expect the revenue to grow from probably a little slower than the IPO year over year, but you should see some growth in that business line year over year. That's kind of how we view it as of now. And what was the last question you asked after that. Does you if you don't mind repeating it?

Bill Peterson

Well, I think you gave us so you expect network to grow quarter on quarter but I think what's missing and what's difficult for everybody is how to think about extenders are first half weighted second half weighted, it tends to be lumpy hard. I mean, Dan, so I know you don't want to talk about one quarterly guidance for (inaudible) --

Olga Shevorenkova

It's just hard to be a model that we really haven't yet sort of message that we gave some color in the remarks, and I'll reiterate it the extent to be roughly equally distributed among quarters this year with Q4 being a little heavier. So it will be a little bit of a different dynamics versus last year. Last year was lumpy because of large equipment deliveries this year were mostly focused on construction was this tends to be steady or quarter-over-quarter.

Bill Peterson

Okay. Thanks for that. Yes, we've heard some prior commentary that you talked in the past that maybe those maybe 10,000 additional stalls that potentially pencil for the for the team. I'm trying to get a sense for how you're thinking about the growth in this business. I think you exited this year around 3,000 operation with around [5, 60] under construction. You didn't guide this year, but how should we think about new new stores for this year? And then how many are you planning on completing this year?

Badar Khan

We did Bill in August comments, we said that we expect 8 to 900 new stores to an operational this year. So that's just a little bit behind the 930 that we added for all of us at nine 30 includes the 110 stores, but we added in 2023 assets that were required. And so you're right, that we've got a very large number of stores that we think pencil down.
And so we are we're focused on ensuring that we are deploying the right number of stores and minimizing capital from shareholder funds as we seek to execute on financing that extends the runway. And if that means where a couple of stores less than you can with this 2024 we might otherwise have done. As you said already, there's 9,990 other stores that pencil to our a double-digit return framework.

Bill Peterson

But yes, again, thanks for all your insights there.

Badar Khan

Yes.

Operator

Stephen Gengaro, Stifel.

Stephen Gengaro

(multiple speakers) Thank you. Hi. Good morning, everybody. So two for me. One is a clarification. When you say that at the asset level, the charges are profitable. You mean like all in costs. One, can you just give us some color on what exactly you say they're profitable at an asset level?

Olga Shevorenkova

Yes, we're doing all in caution when we say all in all in and more. So it's obviously all the direct costs like energy maintenance, property taxes, ran and third party IP charges, asset management, customer operations, teams on it on call center. It's and then on top of it, we allocate a portion of other teams which are involved in sustaining operations and network services, marketing analytics, software and hardware, and a couple of others to really really full on numbers. So the only caution to not included, and that will be your true corporate costs and your the growth engine costs. So cost required to deploy and grow the network. So it is a very accomplished a number and a pretty robust number one would say that it is positive.

Stephen Gengaro

Great. That's helpful. Thanks. Thank you for clarifying. So from a bigger picture perspective, when we think about. And when you guys think about internally what Tesla has done opening up the network, I mean, one of the things I think about and you mentioned this earlier, having access to fast charging without having to wait. And I would think that it was a test driver I showed up at a charging station and I had to wait for a Ford, I'd be upset. So what so I'm just trying to think about how do you think about their decision and whether that is a net positive or negative for you and how that kind of works in the overall fast-charging world 11?

Badar Khan

Yes, it's a great question. I mean, I think we think this the same as we have for quite some time which is that Tesla opening up that network will contribute to lowering anxiety for customers in the purchase decision making process for individual customers. And I think that's a good thing for EV adoption and obviously, for our business with respect to customers utilizing a test this network and again, we're talking about model year 2026.
That's when the vast majority of OEMs will have that will are expected to have exports available on their cars to be able to use for their network nodes in a significant way. And I think that if that results in congestion at test flights, then clearly we would expect to benefit from that. So we were expecting to see a range anxiety being addressed assets plus the purchase decision points for customers. And we're expecting if the suggestion that Tesla side for us to be picking up the additional volume.

Stephen Gengaro

And that's helpful. And just a quick follow-up to that. When you think about your detailed analysis of site planning? Is that starting to become a part of the algorithm?

Badar Khan

We take into consideration, Stephen, a whole host of things, as I talked about and I've heard remarks, so forecast sales, density of neighborhoods, multi-family housing, rideshare, but also of course, location and other charges. And we right now we're looking at we see that about a quarter of EVgo sites are in the ZIP codes where we expect test that we'll be able to actually charge other OEMs. And so very much we take into consideration all of these factors.

Stephen Gengaro

Great. Excellent. Thank you for all the color.

Operator

Craig Irwin from Roth MKM.

Badar Khan

Hi Craig.

Craig Irwin

Thank you. Most of my questions have been answered, but this acceleration that you saw in the OEM charging commercial charging kind of counterintuitive with some of the things going on out there.
There's some rental companies are reducing the size of their fleets and a bunch of announcements that sort of suggest that might have gone the other way and can you can you connect for us sort of what's going right for EV, go there on why we are seeing this acceleration and how sustainable it's likely to be this year?

Badar Khan

Yes. We look, I think we all read the same things in the papers that we can clearly see that EV sales grew year over year, particularly for non test the vehicles, the non-cash, the sales were up from 22 to 23, up about 66% as we certain materials. We are also seeing on our network as again, we said in our remarks here, and we said in the prior call, we're seeing a very significant increase in rideshare.
So rideshare customers are taking advantage of our network, be able to charge at different times of the day at off-peak hours. And that rideshare volume is now 25% of our of our throughput. And that's that's obviously very attractive.
And we think that's something that's likely to flow, especially since sourcing commitments from the likes of Uber for 100% of their rideshare drivers to be driving electric vehicles by 2030. So there are some factors here that I think are quite compelling. I mean, I think that in terms of near term, we are seeing from the data that I've seen, we are still seeing year over year growth in electric vehicle sales. So January sales from what I've seen for battery electric vehicles continue to go higher year over year. And I think that's also a positive for us.

Craig Irwin

Okay. And actually, I'm sure many of us on this call have heard anecdotal reports using rideshare services that people are switching and that they do it for economics. Can you maybe sketch out for us what the economic advantage might look like come forward, traditional lamp rideshare driver? I mean, is that something you might be able to do for us at this time.

Stephen Gengaro

I don't think we can do it on this call, but I think that it's an interesting question. I think that we expect that rideshare customers as they look at their costs like rideshare drivers of choice in this your question, as they look at their costs, they they're finding that driving a battery electric vehicle actually is an attractive thing to do for them versus an ICE vehicle, and we can perhaps dig into that in a future date.

Craig Irwin

Great. Well, congrats. Congrats on the 50 megawatt hour throughput. It's a pretty pretty chunky number signaling.

Badar Khan

Thank you.

Operator

And we have reached the end of our question-and-answer period. I will now turn the call back over to CEO, Badar Khan for some closing remarks.

Badar Khan

Great. Well, thank you, everyone. As you heard, we go had a great fourth quarter and full year beating the top end of our guidance. Our strategy to focus on owning and operating DC fast charging we think is clearly working and with the very strong throughput and utilization that is now far outpacing the growth of EVs and arrows for growth.
We've passed the key inflection point where our installed base is now profitable on a stand-alone basis. Our focus on customer experience from blind, combined with disciplined investment I am very excited about where our growth engine will take us, and I look forward to providing you with an update on progress on our next call next quarter. Thanks very much, everyone.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.