Share-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Compensation

Share-Based Compensation

Note 20 – Share-Based Compensation

The following table sets forth the Company’s total share-based compensation expense included in the Company’s consolidated statements of operations:

	Years Ended
	December 31,
(in thousands)	2022		2021
Cost of sales	$	119	$	33
General and administrative expenses		24,929		10,909
Total share-based compensation expense	$	25,048	$	10,942

2021 Long Term Incentive Plan

On July 1, 2021, concurrent with the closing of the CRIS Business Combination, stockholders approved the Board of Directors-approved 2021 Long Term Incentive Plan (the “2021 Incentive Plan”). 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 December 31, 2022, there were 28,968,027 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) restricted stock units (“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 2021 Incentive Plan’s effective date of March 26, 2021.

Stock Options

The Company commenced granting stock options to certain senior employees in 2022. 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 year ended December 31, 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 December 31, 2022		375	$	12.86		9.2 years	$	—

As of December 31, 2022, the Company’s unrecognized share-based compensation expense related to stock options was approximately $1.6 million, which is expected to be recognized over a period of 1.5 years. The weighted average grant date fair value per share of options granted during the year ended December 31, 2022 was $8.79. There were no stock

options vested or exercisable as of December 31, 2022. The fair value of the stock options granted during the year ended December 31, 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 December 31, 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 calculated 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 years ended December 31, 2022 and 2021:

		Weighted
		Average
	Number of	Grant Date
(shares in thousands)	Shares	Fair Value
Nonvested as of December 31, 2020	—	$	—
Granted	1,988	$	11.40
Forfeited	(33)	$	11.55
Nonvested as of December 31, 2021	1,955	$	11.40
Granted	3,059	$	10.76
Vested	(645)	$	11.39
Forfeited	(439)	$	11.84
Nonvested as of December 31, 2022	3,930	$	10.85

The total fair value of RSUs vested during the year ended December 31, 2022 was $7.1 million. No RSUs vested during the year ended December 31, 2021. As of December 31, 2022, the Company’s unrecognized share-based compensation expense related to unvested RSUs was approximately $19.7 million, which is expected to be recognized over a period of 1.5 years.

EVgo Management Holdings, LLC Incentive Units

Following the Holdco Merger and prior to the CRIS Business Combination, all employees of EVgo Services received share-based compensation in the form of units in EVgo Management Holdings, LLC (“EVgo Management”) that track incentive units issued by EVgo Holdings to EVgo Management (“Incentive Units”). The EVgo Holdings LLCA provides for the issuance of 1,000,000 Incentive Units. Each Incentive Unit grants a profits interest in EVgo Holdings, which can

generally be described as a participation interest whose right to receive distributions is determined by the cumulative amount of distributions (cash or in-kind) received by each outstanding Capital Unit in EVgo Holdings up to and including the date of a distribution. Distributions to the Incentive Unit holders are made solely from cash or property of EVgo Holdings. Incentive Unit holders have no claim as to the cashflow or assets of EVgo Holdco or EVgo Services.

The Incentive Units were awarded pursuant to the EVgo Holdings LLCA and consequently the limited liability agreement of EVgo Management and individual grant agreements. These agreements include limitations with respect to the distribution entitlements of such Incentive Units and limitations imposed in order to cause such Incentive Units to qualify as “profits interests” within the meaning of Internal Revenue Service Revenue Procedures 93-27 and 2001-43, Internal Revenue Service Notice 2005-43, or any future Internal Revenue Service guidance. Specifically, such limitations were established such that any holder of Incentive Units will participate only in the post-grant appreciation in value of EVgo Holdings. As a result, the Incentive Units essentially have no value on the date of grant.

Of each individual grant of Incentive Units, a portion was designated as time vesting (the “Time Vesting Incentive Units”) and the remaining portion was designated as sale vesting (the “Sale Vesting Incentive Units”). The Time Vesting Incentive Units vest annually and equally over a period of four years from the date of grant. Sale Vesting Incentive Units vest based upon the achievement of certain trigger events relating to the sale of EVgo Holdings.

The Company determined the Incentive Units and resulting profits interest are equity-classified requiring application of ASC 718. Under ASC 718, share-based payment awards are initially measured at the fair value of the equity instruments that the entity is required to issue when the employee becomes entitled to the instrument (i.e., when all service, performance, market and/or other conditions have been met). The estimate of fair value should be based on share price and other factors at the grant date and should incorporate the effect of any restrictions or conditions that continue in effect after the vesting date. For equity-classified awards, changes in the share price or other pertinent variable, such as volatility or the risk-free rate, subsequent to the grant date would not cause the fair value estimate to be remeasured.

The Company has elected to use the straight-line approach to recognize compensation cost for the Time Vesting Incentive Units awards. No compensation cost will be recognized for the Sale Vesting Incentive Units until such time that an event as described above occurs. The Company has elected to account for forfeitures as they occur.

The Company has recorded expense related to the Time Vesting Incentive Units over the vesting term based on a fair value calculated using the Monte Carlo simulation model in conjunction with the Finnerty Model. The assumptions underlying the simulation are noted in the following table for the year ended December 31, 2021:

Annual risk-free rate of return	0.32	%
Expected volatility	37.2	%
Expected term (in years)	4.0
Dividend yield	—	%

Presented below is a summary of the activity of the Company’s Incentive Units for the years ended December 31, 2022 and 2021:

		Weighted
		Average
		Grant Date
(shares in thousands)	Units	Fair Value
Outstanding at December 31, 2020	640	$	9.44
Granted	143	$	51.11
Vested	(104)	$	9.44
Forfeited	(20)	$	18.77
Outstanding at December 31, 2021	659	$	18.19
Vested	(123)	$	17.08
Forfeited	(65)	$	16.76
Outstanding at December 31, 2022	471	$	18.68

As of December 31, 2022, the Company’s unrecognized share-based compensation expense related to unvested Incentive Units was approximately $7.0 million, which is expected to be recognized over a period of 1.7 years.