Share-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Compensation

Share-Based Compensation

Note 15 – Share-Based Compensation

On July 1, 2021, concurrent with the closing of the CRIS Business Combination, the stockholders also approved the Board of Directors-approved EVgo Inc. 2021 Long Term Incentive Plan (the “2021 Incentive Plan”), effective March 26, 2021 (the “Effective Date”). The 2021 Incentive Plan reserves 33,918,000 shares of Class A common stock for issuance to employees, non-employee directors and other service providers. As of September 30, 2022, there were 29,435,928 shares of Class A common stock available for grant.

The 2021 Incentive Plan provides for potential grants of: (i) incentive stock options qualified as such under U.S. Federal income tax laws; (ii) stock options that do not qualify as incentive stock options; (iii) stock appreciation rights; (iv) restricted stock awards; (v) RSUs; (vi) vested stock awards; (vii) dividend equivalents; (viii) other share- or cash-based awards; (ix) cash awards; and (x) substitute awards. Unless earlier terminated by action of the Company’s Board of Directors, the 2021 Incentive Plan will terminate on the tenth anniversary of the Effective Date.

The following table sets forth the Company’s total share-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	$	28	$	12	$	65	$	18
General and administrative		6,865		4,270		17,376		5,275
Total share-based compensation expense	$	6,893	$	4,282	$	17,441	$	5,293

Stock Options

On April 1, 2022, the Company granted stock options covering 375,428 underlying shares of Class A common stock to employees. Compensation expense related to share-based awards is measured and recognized in the financial statements based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model and recognized on a straight-line basis over the requisite service period. The options vest annually over a three-year period and have a term of 10 years.

The following table summarizes stock option activity for the nine months ended September 30, 2022:

					Weighted Average
	Shares Underlying		Weighted Average		Remaining		Aggregate
(shares in thousands)	Options		Exercise Price		Contractual Life		Intrinsic Value
Outstanding as of December 31, 2021		—
Granted		375	$	12.86			$	—
Outstanding as of September 30, 2022		375	$	12.86		9.5 years	$	—

As of September 30, 2022, the Company’s unrecognized share-based compensation expense related to stock options was approximately $2.2 million, which is expected to be recognized over a period of 1.6 years. The weighted average grant date fair value per share of options granted during the nine months ended September 30, 2022 was $8.79. No stock options were granted during the three months ended September 30, 2022 and there were no stock options vested or exercisable as of September 30, 2022.

The fair value of the stock options granted on April 1, 2022 was computed using Black-Scholes option-pricing model using the following key assumptions:

Risk-free interest rate	2.5	%
Dividend yield	—	%
Expected volatility	81.4	%
Expected life (in years)	5.67

Risk-free interest rate. The risk-free interest rate was based on the implied yield currently available in U.S. Treasury securities at maturity with an equivalent term.

Dividend yield. The Company has not declared or paid any dividends through September 30, 2022 and does not currently expect to do so in the future.

Expected volatility. The Company based its estimate of expected volatility on the historical and implied volatility of comparable companies from a representative peer group selected based on industry and market capitalization data. The Company uses the average expected volatility rates reported by the comparable group for an expected term that approximated the expected term estimated by the Company.

Expected life. The Company did not have sufficient exercise history to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. The expected term for stock options, calculated using the simplified method due to limited exercise data, was the midpoint of the stock option vesting term and the expiration date of the stock option.

Restricted Stock Units

RSUs granted by EVgo typically vest annually over a period of three years from the date of grant. The fair value of RSUs is based on the closing price of the Company’s Class A common stock on the grant date. The table below represents the Company’s RSU activity under the 2021 Incentive Plan during the nine months ended September 30, 2022:

		Weighted
		Average
	Number of	Grant Date
(shares in thousands)	Shares	Fair Value
Outstanding as of December 31, 2021	1,955	$	11.40
Granted	2,548	$	11.51
Vested	(645)	$	11.39
Forfeited	(396)	$	11.92
Outstanding as of September 30, 2022	3,462	$	11.42

As of September 30, 2022, the Company’s unrecognized share-based compensation expense related to unvested RSUs was approximately $23.1 million, which is expected to be recognized over a period of 1.5 years.

Incentive Units

Certain employees of EVgo Services have received share-based compensation in the form of units in EVgo Management that track incentive units issued by EVgo Holdings to EVgo Management (“Incentive Units”). The Incentive Units typically vest annually over a period of four years from the date of grant. Presented below is a summary of the activity of the Company’s Incentive Units during the nine months ended September 30, 2022:

			Weighted
			Average
			Grant Date
(units in thousands)	Units		Fair Value
Outstanding and expected to vest as of December 31, 2021		659	$	18.19
Vested		(123)	$	17.08
Forfeited		(63)	$	17.00
Outstanding and expected to vest as of September 30, 2022		473	$	18.64

As of September 30, 2022, there was $7.5 million of unrecognized share-based compensation expense related to unvested Incentive Units, which is expected to be recognized over a period of 1.9 years.