Q3 2022 EVgo Inc Earnings Call
Under construction increased to 2000 and 625.
We added a record $188 during this quarter and year to date, we have energized 487, new stores on our network to four times more than the same period last year.
Additionally, our active engineering and construction development pipeline reached its largest point ever at 4534 song.
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 cleared our internal rate of return or margin hurdle.
The biggest issue we're facing on the installation front right now is timing on the utility side.
At the end of the quarter illegal had installed over 130 stall that we're still awaiting utility power with more than 100 of those being delayed more than six weeks.
Unfortunately, persistent utility labor shortages and transform our supply chain constraints exacerbate utility work backlogs at the front and back end of the charter development process.
We expect utility related delays will continue to be an issue is power companies gear up for transportation electrification and work to make power systems are resilient to the effects of climate change.
Joe will continue to work cooperatively with our utility partners and local governments to address these issues. We believe these challenges can be addressed working side by side.
Throughput this quarter was $12 one 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.
For us it's altera following their recall, we expect to see greater contributions from our preferred partners moving forward and we continue to see growth in Kessler drivers charging on the easy go in network.
Which brings me to the topic of technology.
Simply put he would go with a technology powerhouse. This is our key differentiator and sets us apart our investments to create a seamless integration between E. V. Go is 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 <unk> partners that E. V. Go has pioneered functionality that no one else is crap.
One example of this is auto charge plus.
In September across the country, all the charges plus sets a new bar for a streamlined EV charging experience by simplifying the process between a charge and a payment session.
One's easy driver self register through the E. V go App. They can start charging session and even go station without a credit card RFID or even swiping the app on their phone.
In the few weeks since we've launched we've seen enrollment skyrocket and positive feedback from both new and existing driver taking advantage of this faster and more convenient program.
Notably and OTO charge plus is also available for Tesla.
V go was looking forward to welcoming even more peso drivers to our network.
On the fleet side as I mentioned earlier, our technology here is truly a game changer.
Even though optima is our homegrown proprietary cloud based software platform that helps ensure we evs are charged in a manner that optimizes logistics 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 even though optima has been built from the ground up as a leak centric applications.
Other than a repurposed adaptation of software meant for retail drivers like that being offered by some of our competitors.
On the OEM front, we continue to work with our partners to leverage EV go inside API, which are designed to seamlessly integrate into an automaker's branded at.
This provides an automaker with the ability to offer its customers a fully integrated E V go charging experience without switching between apps.
We believe were truly ahead of the market here.
And finally, we're really proud of our efforts to lead the EV charging industry forward in terms of global standards and interoperability testing.
E V go was on the board of charge on the.
The leading global association promoting global charging standards with Ccs MTS and 15 11, eight emerging as the de facto fast charging standards.
And I'll, even go innovation lab is a go to for Oems developing new EV and for manufacturers developing new equipments are charged <unk>.
In fact in addition to our principal U V go lab location in El Segundo, California. We also have three remote testing location set up OEM facilities.
This distributed approach enables automakers to test vehicles much earlier in the process, sometimes even before a prototype has been officially released.
Go retain access to the testing software and remotely manage the process in support of the Oems design and commercialization process.
Turning to slide eight you'll find a brief update on the national electric vehicle infrastructure program or <unk> and.
In late September the U S government approved all 50 state plans, plus Washington D. C in Puerto Rico, meaning that states are now eligible to start the process to reward their fiscal year 2022, and fiscal year 2023 allocated funding.
The first round of investment in fiscal year, 2022, which totaled $615 million will help to build EV Chargers covering approximately 75000 miles of highway.
We anticipate the first solicitations from the states. It this quarter or in Q1 2023 with initial funds deployed 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 credit and the inflation reduction act or IRI and in particular, the changes to U S code 30 C represents tailwind for our industry and our business.
We are pleased with these developments and believe they will serve to reduce carbon emissions as the world continues to embrace electric vehicles.
That said, we expect to take some time for the benefits to be recognized in our financial performance as the Treasury Department is conducting request for information prior to issuing guidance on the specifics of how the <unk> tax credit will be applied.
Other key provisions in the IRI, including the revisions to the consumer EV tax credits 30 D. First ever use your tax credit 25 E and commercial vehicle tax credit 45 W. Should also support acceleration of EV adoption with some key implementation questions also pending IRS.
Items.
We believe 30 C and the other tax credits in the IR a will benefit D. V go, but we're not expecting to realize those benefits financially in the very near term.
That's one of the longest running largest and most reliable public fast charging operators in the U S.
<unk> mission is to expedite mass adoption of electric vehicles for everyone.
This quarter and service to that mission easy go launch that connects to what 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 easy go hopes to bring awareness inspiration 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.
Thank you I guess, you mentioned, we experienced a solid quarter with strong momentum on the execution side as we rapidly build out our network.
If you go increased our active engineering and construction stone development pipeline by 82% year over year.
Reaching a record 4534 skulls at quarter end.
Noticeable increase includes the addition of the stores from the pilot flying J deals, we announced last quarter.
We added 188, new stores to our network during the quarter and stores in operation under construction totaled 2625 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 growth of showed a supercenter.
We delivered $10 5 million of revenue in the third quarter.
Presenting an increase of seven 2% year over year.
Growth was driven by increases in retail charging revenue up 62% year over year and.
And increased ancillary revenues startup engineers work on PSA construct and gross implant share.
And regulatory credit sales.
As expected we experienced a sequential decline in regulatory credit sales following the accelerated monetization efforts in the first half of the year.
Regulatory credit sales totaled one 2 million a year over year increase of 72%, but a substantial sequential quarter over quarter decline.
This combined with the seasonal impacts of summer rates electricity tariffs in la where you'll see a post graduate prices contributed to an anticipated decline in adjusted gross margin.
Decline of adjusted gross margin from 22.2% in Q3, 'twenty 'twenty, 1% to 19% in Q3 2022.
It's caused primarily by lower oil prices this year.
While illegal experienced high energy cost in 2022. This was largely offset by improved leverage of network fixed operating cost.
As a reminder, our business model has significant built in leverage that is realized was increased charging volumes.
We reported adjusted EBITDA of negative $22 2 million versus negative 14, one 3 million in Q3 2021.
Which reflect our investments in the people and infrastructure required to capture the growth in front of us and expand our moat.
Capex was 621 6 million this quarter as we accelerated charter deployment and exit skewed against all our long term strategic plan.
As a reminder.
All of our charge of infrastructure deployment goes through rigorous underwriting process and pencil to low double digits pretax unlevered IRR at the project level.
Even though 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 demands an ego to ensure we're meeting and exceeding our customer expectations to appropriate level of investments in maintenance and network upgrades.
If you go is actively expanding its current network maintenance and reliability program, which recall easygoing Ya.
The goal of this program is to both improve charge of off time.
To enhance the customer experience in our continued pursuit of EV fast charging believes a ship.
We have upgraded 125 stores year to date and are working with sidecar kibali eight additional stores influences when history.
We're largely focused on our legacy 50 kilowatt charges.
Some of which are reaching the expected end of life.
We apply a rigorous and analytical approach to this program with a focus on upgrading.
And or extending sites in high demand and future growth locations.
In some cases, we will seek to upgrade the charges with high power model or even expand the site.
My also opt to retire particular charger, removing an underperforming sites from out of network.
Before we open up the call for Q&A.
I would like to share our updated full year, two and just wanted to operational and financial guidance.
<unk>.
We are reconfirming full year, two and just wanted to revenue guidance of 48 to 55 million.
This range is driven by the timing of pilot flying J equipment deliveries.
We're narrowing our full year two inches wants us to adjusted EBITDA guidance to negative 85 to negative 80 nealon as it.
Would be actualizing, the hiring pace throughout the year.
We are revising our networks throughput guidance for the full year of two inches went to 242 to 45 gigawatt hours.
The revision is associated with permitting delays.
On a couple of dedicated stations in the San Francisco Bay area.
These delivery delays by our OEM partners and the recovery of Rideshare, starting later than expected in the year.
With respect to store weeks ask to have a total of 2800 to 3100 G fast charging stolz operational or under construction as of year end.
As Kathy mentioned, the resource challenges with municipalities and utilities across the U S.
Given rise to delays in the proven and energize them fast charging stations.
Hence we are adjusting sold items to flag that the system sector a reality.
It is important to remember the charge delays don't have any material near term financial impact on EBIT goes 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.
Thank you if he would like to ask a question on the phone lines. Today. Please press star one on your telephone keypad. If you would like to withdraw your question you can press star one again.
As a reminder, please limit yourself to one question and one follow up if you have additional questions. Please feel free to reenter the queue.
We'll take our first question from Gabriel Daoud with Cowen.
Hey, everybody good afternoon, and thanks for all the prepared remarks.
Over with maybe hoping to just dig into just the guide a bit more I understand that.
Theres, maybe a decent contribution from foreign journey, that's kind of what helps you get that for full year, but anyway to maybe just quantify what portfolio impact.
The impact would be this year.
Sure.
Yeah.
Sure sure Gabe So we that's the reason why would you still give the same guidance in 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 warehouse.
And we're right now scheduled to take delivery over the months of December which has holidays in it.
And we these because the short answer that that's gonna 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 refrain from giving the exact number because that's not the number we report shoppers them.
But I, what I would say what I think would help you is that.
Vast majority of the revenues will come in Q4.
And in Q3 was still weak because some of 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.
Okay. Okay. Thanks, a lot good that's helpful and then just.
Just overall curious to hear turns on the fleet side Cathie you obviously hit on this.
In your prepared remarks quite a bit but can you just talk about maybe the partnership with Jackson.
Like what what revenue model today, they go with the charging about the servicer for customer one and does its class a.
Zooming, then went with $3 50 is there even an interest in megawatt Chargers. So just kind of curious how that partnership.
Yes, if you could share details there and then generally what youre seeing on the fleet side.
Yeah. Thanks, Gabe what we're generally seeing is first of all it's still really early innings in the fleet being able to access the vehicles right. So there's lots and lots of interest in everything we know.
The last mile delivery, the middle mile and all of the class eight they're all thinking about how they're gonna do get so this is like you know sort of a firm.
First check off the rack, rather the first cab off the rank for NHS.
Again, the business model very and as we've said many times, we are happy to own the assets or we're happy to have the the customer in this case only assets. So we will.
We're finding generally speaking that the fleets are at this point wanting to own the charters as either the charging as a service model that we provided where we actually build and operate the charges for them and guarantee.
Got it got it. Thanks Kathie that's helpful. All right I'll keep it to two and hop back in thanks.
Okay.
We'll take our next question from Bill Peterson with Jpmorgan.
Hi. This is me he must be counting on for Bill Peterson and thanks, So much for taking my questions.
To start can you elaborate on E. B goes current timelines for the replacement or upgrade of older charters and approximately like how many charges would that be and at what pace will they be replaced Scott.
And then maybe a follow up will not impact the rate of new charging installations.
Overall, thank you.
Hi, Thanks, so much for this question. So we're currently evaluating how many stores, we will be upgrading or replacing or maybe even the retiring next year. We are not related to give the exact number but it's going to be in the hundreds and we will update the market as that program.
It's coming along.
That program will be focused on our older charges. Our older 50 kilowatt charges, we want to just.
Also make a remark is that not all of our old physical overcharges to underperform in a lot of them are function and greatly and have no issues, but there is a cohort of really old one which are near to their.
They are nearing their end.
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 renewal program in our kind of our customer experience or customer enhancements improvement program. It doesn't just focused on the placement the retiring of charges or upgrade in the charges, which it is.
But it also is being focused on improving overall end to end customer experience, including a convenience of in App, a computer convenience of notifications and a variety of different things all cross functional teams are focusing on and we would also like to remind challenge.
Experiencing as as an industry on its own but we have various equipment on our network, which is charged in various car models.
The the matching sometimes the problem is not the hardware sometimes the problems on the software, but sometimes the problem is the comparability between innovative first time new cars on the market that it was the first time new charges.
On an island network and our competitor does not work and what really sets either go apart is that we have our lab, where we're able to past.
Various equipment in combination with various evs and that already has given us quite a lead the way and we'll continue to do it and even reinforce next year the importance of of overall customer experience, which is being helped again by.
By a variety of things.
New hardware upgraded hardware its operations and maintenance practices, it's software convenience and overall customer experience convenience and its lab testing, allowing for the completed deal with it could be high class.
Thank you so much for that color.
Maybe if I can sneak in another one are you still experiencing inflation on the supply and labor side.
We are still experiencing some of it we would like to probably say that it has abated in H two versus H, one we're still seeing some.
Some of the labor cost experience in our placement of pressure, but it's not to the level observed in the first half of this year.
We remain hopeful.
Oh next year. Thank you.
Yeah.
We'll take our next question from David Kelley with Jefferies.
Hi, This is Gavin Kennedy on for David Kelly.
Thanks for taking my question.
To provide more info on the installation issue that you mentioned in the prepared remarks, how many stores 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.
Yeah, Hey, Kevin a half a year.
I think that what.
When we win when we reached the end of the quarter. We had 30 just to go back. It takes the easy go about four to eight weeks to actually do the construction of a charging station and as I've said to you guys. Many times before at the moment is kind of an 18 months all in end to end cycle time from an idea of building a charges they shouldn't be getting it.
Energized by the utility we started to see that decline a bit getting a closer down to 12 months, but now the long holding the Kansas utilities. So the utility utility work backlog associated with transformer shortages like what Brett when we're building with the configurations that were building now with its ultra fast 350 kilowatt charging more.
So that almost always requires a transformer upgrade.
We're at the behest of the utilities, having those and you know we have a couple of the utility folks on our board and our board meeting last week. They said gosh. It is just you know it was taking.
Very long lead times to get those to transform these days so it.
In a nutshell I mean in summary, I guess I would say, we're thinking that that may continue to be an issue what we are doing.
Help out with that is we are proactively providing our utility partners, where we want to build with our own 18 20 more 18 months 24 months forward looking plans overlaid with their grid. So we can say, we can say, okay, which ones are going to be easy, which ones are going to be harder can you guys go ahead and place orders for the Transformers now because this is like a.
Figuration and that's been very well received where we've been where we've been doing that so we're hopeful that by working side by side as I said in my remarks, we'll be able to.
Yes, it's all get all of the stuff moving and and helping utilities do what they need to do is to make sure that the big they can accommodate all of the growth on the grid.
Yeah.
Got it. Thank you and then as a follow up since announcing our first major partnership with pilot Jim can you talk about any additional traction your company is seeing with your EV go extend offerings. Specifically are you and your customers are you or your customers showing more interest in pivoting toward this asset light model. Thank you.
You bet. So we aren't we're excited to be able to accelerate.
The electrification of transportation and how we can and where we can deliver double digit return and you know that has the provision or the creation of the <unk> to go extend business and the launching of our Big pilot project, we're very pleased about that last quarter that.
We have a number of very active lives indicate significant conversations happening to do more of that across the board and as soon as we get those deals inked we won't be so excited to share that with you.
All right I'll leave it there thank you.
Yeah.
We'll take our next question from Alex <unk> with Bank of America.
Hey, guys. Thanks, Thanks for having me on the call.
Curious I mean, when you guys think about some of these software issues or initiatives that you're putting through here I'm speaker thinking specifically on auto charge plus.
Can you quantify I mean, I guess any sort of financial uplift you see.
Customer basis, where that customers are coming more often or.
On a more recurring basis I mean, how do you quantify some of these initiatives into profitability if that makes sense.
Well, Alex what I can say about auto charge plus is that this is this is primarily about creating a seamless customer experience and charging let's make it easy let's grow the market more quickly by by making it a good.
But like we experienced a charge on or are you know we've been out there for a few weeks ago and the response, we've had so far has been pretty fantastic, but people that are both new EV drivers and then existing EV drivers are beginning to take advantage of it or saying Oh. My gosh. This is Beth I forgot just drive up when I plug in because like E. V. Go has by the end of my car.
It's just simple like so for us it's about making sure that the drivers have a great experience and that will in turn create more interest.
Drivers to easy to go network. So we haven't quantified it specifically, but we feel like we've got a responsibility to provide a great customer experience and that will delivered great financial results results for us for our company.
Got it no that makes sense and then I guess, just kind of looking forward I guess, a little bit higher level here you know when you think about.
Some of the policy tailwind that youll see here, whether whether it's <unk> or <unk>, when we see some green shoots or specifications as well as IRA I mean, how do you think about repositioning your footprint.
Whether thats your counterparties are the customers you're aligned with or geographically get best captured days, there's possible credits or funding that are in the pipeline here.
Yeah, Yeah. So we have like we have a really cool network planning tool that is ours and what drives it as where can we deliver what can we have our own internal ehrlich, we're making investments and what the big giant pots of money come into the federal government, whether it's grant money through Debbie or whether it's 32 tax credits.
Are going to enable us to have more locations penciled profitably for us and for our shareholders and so where we're literally like taking a look at the different grant programs that are that have been now approved all 50 of them by the federal government, where do we want to be where we're good EV market, where what are the structures of those programs and we put that into our own planning.
And then we sent stay to our site host team, Okay, let's you'll find some great sites. There. So it actually juices, the economics and it allows us to extend our footprint profitably more quickly.
Got it thanks, I'll take the rest offline.
We'll take our next question from Andres Sheppard with Cantor Fitzgerald.
Hey, guys congrats on the quarter and thanks for taking my question.
I'm trying to maybe just understand so you know revenue guidance is unchanged for the year.
So in order to let's say meet the bottom end of guidance you'd have to have a.
Over 20 million revenue in Q4.
So just help me understand like what the thinking around there is I know, usually Q4 is a little bit heavier weighted but.
Do you still remain confident in achieving that guidance, just given where things are currently.
Thanks for the question so just to clarify the big difference between Q4 and Q3 it will be there for the execution on P M to conduct full speed.
And that will add the revenue so our core business, we do not expect to double quarter over quarter, we do expect a healthy growth but it.
It will be in line with what you've observed with what with what you've seen in prior quarters, but the the key contributor to the expected Q4 over Q3 growth will be the execution of a pilot flying J J concept, namely the work that we're going to be taken a delivery of equipment pieces coming out of our supplier and that's the moment where.
Where they get transferred to our customer so.
So we would do and now we remain confident that we will get those pieces here in the United States. They are on the way the deliveries are scheduled over the month of December as I mentioned in my response to Gate Gate question and as of now we don't have any information, which would tell us that that won't happen, but that wasn't gives us confidence.
But we will be able to meet the guidance.
Got it. Thanks, all guys I really appreciate that and maybe just to follow up I just want to clarify in regards to <unk>. So it looks like you are targeting initial funds being deployed in 2023.
I'm wondering can you give us or are you able to quantify how many programs or projects you have applied for a grant funding so far.
Or just any color there that'd be helpful.
Yeah. Andreas this is just starting and I guess, we have learned by doing the appendix became over the past four years to do to try to pinpoint timing of state programs and procurement.
Procurement processes is a fool's errand. So so we we will be we will be applying for navy followed wherever I can.
It makes sense with our network planning model and where we can make money.
I don't say I just.
We cannot predict exactly when those funds when that those checks will get cut and in some cases, the money won't necessarily even be delivered until the stations are energized right. It depends on the structure of each of the program.
Well I hope, we will we will.
We will plan on it but again in terms of like the cash flows with it it's going to be very unclear for a while.
Understood. Okay. Thanks, Kathy Thanks, Olga Congrats again on the quarter I'll pass it on thank you.
Thank you.
We'll take our next question from Mohit <unk> with credit Suisse.
Hi, This is David Benjamin on for me. Thanks for taking my question.
I was wondering if you could talk about uptime and how that's tracking in light of recent criticisms on the industry lately, especially considering the high uptime requirements for incentives.
Yeah. So the uptime, we actually are still tracking to our high high 90, percents up time that we've really made commitments to one of the reasons that we are actually really excited about our E. V. Go renew program, though is that we can actually like we rigorously.
We are watching what's happening with our charges and when we start to have probably get out there and we will be replacing charges that are being particularly problematic on that so we're quite quite conscious of making sure that uptime is maximized and not simply because it's a reporting requirement, but we make money when we our charterers are operating we haven't.
Built in incentives to ensure that we have the highest uptime possible.
Okay. Thanks, so much.
We'll take our next question from Noel Parks with Tuohy brothers.
Hi, good afternoon.
Okay.
Hi.
Thanks for all the detail to really fascinating points.
Sure.
For example for one.
You were talking about you.
Planning with utilities, and giving them sort of like a 24 month forecast for installations, you can envision overlaying it was their grid and helping to identify your easy or difficult points of installation.
It sounds like it's sort of a classic help them help you situation I just wonder how do you how do you look at it.
As you get experience with different utilities as far as the ones that are pretty responsive is doing pretty well in the markets, where the utility in charge is pretty sluggish.
Wonder.
Do you wait it out into the balance of whether you're going to.
Try to avoid certain areas or try to get our foot in the door earlier, maybe in four areas. Just you know the sooner the better I'm just curious how you analyze that.
Yeah, well, it's funny I had a meeting earlier today on this very topic. So early is always better because utilities are larger organizations. When they have a lot of things that they have to worry about do you want to give them as much information as early as possible, but we do that everywhere. There are places however, where you might have two utility side by side and if we have discovered that one of them.
Utilities is actually pretty switched on and quite responsive and is a great partner and a mile away. There's a different utility that's much less responsive you bet that we will look to be building and working with the one that's more collaborative it's a practical reality because like frankly E. V drivers are not gonna care, what they want is reliability convenience right and if the.
The one mile difference if it you know.
It's getting more out there more quickly it is absolutely what we want to do I mean, there was a case example of this where Los Angeles Department of water and power.
Is it is basically the city of L, a and southern California Edison the Big Investor owned utilities. It is all around it and I think he is probably best in class in America in terms of EV charging infrastructure collaborations and I think our competitors would say the same thing, but they're very very good very switched on and they're there they're responsive and their lead.
Times are much quicker on their planning pretty sophisticated I've been there their fellow municipal colleague at a weighted do you think.
It started with just a reality.
Yeah.
Right got it.
Makes a lot of sense and I wanted to turn towards the you brought up your Youre testing your testing lab and.
I'm real interested in there.
The whole topic of Reputational issues, a reputation of a charger brand reputation of individual vehicles. So I guess, if you could maybe just talk a little bit more extensively about what's involved in and the charging effort. It sounds like already at this early stage.
Really a big task and also if you're getting any sense of whether.
EV by our sophistication is getting to the point that there they're looking critically at well you know what I'm hearing.
This vehicle is still your charges on E. M. S software is making me lean towards one vehicle or another or are we still just so early just getting your hands on a vehicle we're still of the name of the game.
[laughter] for your last question I think it's I think it's down your hands on vehicles I mean every what we hear from the Oems notwithstanding their own chip shortages and some of you know the recalls of whatever every he does get that gets made gets sold right like so that and that's kind of good news so that and we're delighted about that with respect to the evs.
The charging infrastructure. So right now there are 47 different EV models on American does E. V. Go charges all of them. There's also a bunch of different charger types, which E. V. Go is used and deployed in tests in our lab.
Every single one of those Evs has a different sort of battery signature a different base.
Baseline from where our software underneath it and our Chargers that we deploy has to be able to talk with every single one of them. So we invite the Oems and all of the vendors to like bring their kits to our lab and our lab.
And lab locations. So that we can actually test. It is not just about UL certification, it's about continuing to improve the user experience to be able to identify if theres a problem what sort of problem Where's that problem coming from and look it's a young sector, but we are all working on the RV goes to you is to work collaboratively with the vendor mess with it.
Larger manufacturers and with the Oems, we are going to create that driver experience over the next couple of years that the drivers are there.
The progress and they are completely and utterly committed to it.
Great. Thanks, so much.
We'll take our next question from Oliver hung with T. P H.
Good afternoon, and thanks for taking my question.
Just had one on the cost side of the equation I think you all highlighted some higher energy costs that may have impacted adjusted gross margins for the quarter.
Wondering if you all might be able to expand on the magnitude of impact in Q3, what sort of increases year over year. If any of you. All are budgeting on this front when thinking about 2023 and if any of this is being passed off to customers on how you all are positioning yourself to mitigate such impacts as we move into 2023 and kind.
Kind of scales from there thanks.
Yeah. Thank you for the question. So the when we're comparing a Q3 'twenty constitutes Lukas just want to go into one there are two reasons for why we're seeing slightly higher energy cost per kilowatt hours and we've seen a few cents higher.
One is that some of the California utilities did increase the average a portion of their tariffs earlier this year and the second one because we.
Continue to open new stations in the rest of the U S.
Very often and you do all of this is where we haven't yet worked have been successful in working with local utilities to create E V rates and they still have demand charges. As a reminder, California, the major utilities in California, and do not have demand charges and partially they don't because we are a part of the group, which advocated for that not to be the case, if it doesn't make sense for EV charging.
Use case, but in the rest of the U S. You still have geographies, where they exist and they are quite high and so as we are expanding into those geographies that does affect our energy costs.
Oh in 'twenty to 'twenty three we're actually working right now with my team on a very detailed forecast and I'm trying to understand and baking and be on the conservative side on how that's going to look next year, we will not sure that was the market just oh the guidance says will be issued during the next call.
But that's something we're working on and paying attention to them.
And we haven't passed that on the consumer just beyond this year, but conceptually. This is how we're thinking about it but when we're thinking about passing it on to a consumer we're not just thinking about the margins, but I'm thinking about it holistically I was still done you're raising that target to return or not and simultaneously if we.
Have high utilization in certain places and we expect that we own in the future, we'll be able to call it equipment costs and so on and so forth that mine by itself solve the issue of her reasons are rising and there's a cost to them. We don't have the Boston consumer, but it's like not and that that will be the time when or what passes on the consumer and.
Just a reminder, about our pricing we're not marking up we went on a gas tank right, where you have like a one price per gallon and that changes daily and that generally follows. The overall fossil fuel prices. This is not how we're approaching that we're approaching it a little bit from a consumer side and supply demand side and there are various consume.
Was that a surprise since he was just under various consumers with various appetites.
For subscription or pay as you go.
Types of tariffs, which we're addressing them continues to innovate around it. So again, even if we say we're passing on a consumer it doesn't necessarily mean, there's a marking up two cents of every single pump our pricing scheme is more sophisticated than that and it's only going to get more sophisticated over time, including per location and time of year.
It was pricing, but we do have certain levers to pull lets say, we could make more expensive fixed cam charges, and what and cheaper 80 I'm sorry. So that's how we're approaching it just to really give some context about how is the pricing the sat and what actually what it means to Boston the consumer it's a little more sophisticated than what is my father.
Awesome, Thanks for the color.
And that does conclude the question and answer session I would like to turn the call back over to Kathy as always for any additional or closing remarks.
Okay.
Thanks.
Look our commitment to technology enabled innovation powers, our customer relationships and whether it's auto charge plus for driver on our public networks, whether it's our Apis for automakers or fleet software for commercial customers.
E V go is positioned to deliver an exceptional unreliable fast charging experience and expand our leadership across the market. We're excited about the growing momentum across the landscape I think you can hear it in older than my voice and we believe that <unk> is exceptionally well positioned to benefit from the electrification of travel. So thanks to all of you for joining US great question.
We love our sector like we do.
And that concludes today's presentation. Thank you for your participation and you may now disconnect.
[music].