Brett Castelli

Brett Castelli from Morningstar Research Services LLC asked if the recent contract closeout would impact EVgo's medium-to-long-term stall and build-out expectations for its dedicated network. He also sought clarification on the drivers behind the muted charging network gross margin expansion in 2025 and the outlook for margin expansion in 2026.

Answer

CEO Badar Khan confirmed that the contract closeout does not impact the previously provided range for public and dedicated build targets for 2026, emphasizing the continued excitement for AV partnerships with other players. Regarding charging network gross margin, Khan explained that Q3 is seasonally the lowest due to higher summer tariffs, but year-over-year margins are expanding. CFO Paul Dobson added that excluding a large breakage revenue in Q1 2024, margins show a steady increase, with Q4 2025 expected to be 6-7 percentage points higher than Q3, a pattern expected to continue into 2026 due to operating leverage.

Brett Castelli asked if the contract closeout payment for an autonomous vehicle partner would impact EVgo's prior expectations for dedicated stalls and the overall AV network build-out. He then inquired about the drivers behind the muted charging network gross margin expansion in 2025 and expectations for 2026.

Answer

CEO Badar Khan confirmed that the contract closeout does not impact the 2026 public and dedicated build targets, reiterating that autonomous vehicles remain an exciting growth area with a focus on attractive economics. Regarding charging network gross margin, Mr. Khan explained that while there is year-over-year expansion, Q3 is seasonally the lowest due to higher summer tariffs, and operating leverage from fixed cost of sales is expected to continue. CFO Paul Dobson added that Q1 2024 included a large amount of breakage revenue, which impacted comparisons, but underlying trends show steady improvement.

Brett Castelli asked for a bigger-picture update on the ABL segment, specifically inquiring about the traction and contribution from new verticals the company has entered in recent years.

Answer

Neil Ashe, Chairman, President & CEO, highlighted three key verticals. He noted a 'really good start' in the refuel market, performance that has 'exceeded our expectations' in healthcare following the Nightingale brand launch, and future opportunities in sports lighting and infrastructure from the recent M3 acquisition. He contrasted this with the horticulture market, which has been slower than expected, illustrating a portfolio approach to growth.

Brett Castelli from Morningstar inquired about customer traction with the Design Select product portfolio and asked about capital allocation priorities for the remainder of the year, particularly regarding debt paydown.

Answer

Neil Ashe, Chairman, President and CEO, reported that traction for the Design Select portfolio is strong and ahead of expectations, though it remains in the early stages of a multi-year rollout. Karen Holcom, SVP and CFO, reiterated the company's capital priorities, confirming that strong cash flow allows for the paydown of acquisition-related debt over the next 12-18 months while also continuing the share repurchase program.

Brett Castelli of Morningstar inquired how potential supply chain shifts from tariffs could impact lab utilization and margins, and asked for expectations on the full-year trend for free cash flow.

Answer

CFO Ryan Robinson explained that the business model is adaptable, with human-based services being mobile and lab capacity being adjusted over time to match trade patterns. He noted that strong Q1 free cash flow was driven by profitability and working capital improvements, with full-year capex expected to remain consistent.

Brett Castelli of Morningstar asked a broader question about Bloom's cost reduction roadmap, specifically the timeline for future product generations and their expected impact.

Answer

CEO K.R. Sridhar emphasized that cost reduction is in the company's DNA, targeting double-digit reductions annually. He explained the focus is now on adding value-added features like "load following" for islanded microgrids while still driving down costs. CFO Dan Berenbaum added that the teams are "maniacal" about this operational discipline.