Q3 2021 ChargePoint Holdings Inc Earnings Call
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Ladies and gentlemen, good afternoon. My name is Hannah and I will be your coordinator conference operator for today's call at this time I would like to welcome everyone to the charge 0.3rd quarter fiscal 2022 earnings conference call and webcast. All participants lines have been placed in a listen only mode.
To prevent any background noise.
After the Speakers' remarks, there will be a question and answer session I would like to turn the call over to Patrick humor charge point, Vice President of capital markets and Investor Relations. Patrick. Please go ahead.
Good afternoon, and thank you for joining us on today's call all the discuss charge points third quarter of fiscal 2022. This call is being broadcast over the web and can be accessed on the investors section of our website at investors <unk> charge point Dot Com with me on today's call Paul Romano, Our Chief Executive Officer, and Rex Jackson, Our Chief Financial Officer.
This afternoon, we issued our press release announcing results for the third quarter of fiscal 2022 ended October 31, 2021, which can also be found on our website.
We would like to remind you that during this conference call management will be making forward looking statements, including our fiscal fourth quarter and full year 2022 outlook and our expected investment in growth initiatives.
These forward looking statements involve risks and uncertainties many of which are beyond our control and could cause actual results to differ materially from our expectations.
These forward looking statements supply as of today and we undertake no obligation to update these statements. After the call for a more detailed description of certain factors that could cause actual results to differ please refer to our Form 10-Q filed with the SEC on September 10th 2021, and our earnings release posted today on our website.
Filled with the SEC on form 8-K.
Also please note that we use certain non-GAAP financial measures on this call, which we reconcile to GAAP financial measures for the current quarter in our earnings release and for historical periods and the Investor presentation posted on the investors section of our website.
Finally, we will be posting the transcript of our call to our Investor Relations website under the quarterly results section and with that I'll turn it over to Pascal.
Thank you Pat and thank you all for joining us today.
I will provide a business update including details of our strong Q3 execution against plan before turning it over to Rex for financials.
I have stated previously our success is tied to the arrival of electric vehicles and this quarter. We saw continued momentum in EV sales in both the passenger and freight categories.
According to Bloomberg.
Many as $2 9 million electric vehicles are expected to be sold across North America and Europe. This year, an increase of approximately 67% from 2020 and accordingly, we are seeing strong demand from auto dealers for charging infrastructure and indicators that they're correcting for high volume detail.
Our strong financial performance throughout this year is the result of investments in our product and go to market strategy. We have made over many years to be able to capture associated demand across commercial and.
In residential verticals in both North America and Europe.
Historically, our revenue has only been limited by execution breadth and quantity of vehicle options available to consumers and fleets.
And this further reinforces the charge point is the equivalent of an index for the electrification of mobility.
Our Q3 revenue of $65 million was at the high end of the guidance range. We provided on September one.
This positions us to raise our expectations for the fourth quarter and full year. Despite what continues to be a dynamic supply chain environment.
I'd like to call your attention to a number of indicators of the scale we are delivering.
First we added more commercial and fleet customers in Q3 than any other quarter in the company's history. It is clear that our customers are preparing for the future as evidenced by 89% year on year growth in our commercial business.
We finished the quarter with approximately 163000 network ports under management inclusive of both acquisitions within that the European Port Count was approximately 45000 and globally. The DC fast charge Port count was approximately 11000.
We continue to work with the industry to enable drivers to roam across networks in North America and Europe. This quarter, we crossed through over 290000 roaming ports acceptable to drivers using their charge point account. In addition to the ports directly on our network.
Please billings in the quarter increased over 69% sequentially and over 198% year on year.
I'll remind you we acquired <unk>, a leading E bus and commercial vehicle management provider and we also announced the expansion of our partnership with wax a leading fleet payment solutions company.
Partnership will provide suite customers ready access to the largest EV charging network for on route charging needs and enable depot and at home charging along with easy employee reimbursement.
Demand for our residential solutions continues to be robust residential billings for the third quarter were up 62% year on year and 50% from the last quarter in Europe, we saw revenues of over 190% year over year. As a reminder, we closed the acquisition of has to be on E mobility providers.
<unk> with a leading charging software platform in the European market at the end of Q3.
Our established and growing channel, which provides unique leverage and efficiency growing proportionately with the balance of our business as well and overall the scale of our network is generating positive environmental impact with over $3 3 billion electric miles driven to date.
By our estimates drivers we've avoided over 132 million gallons of gasoline and over 529000 metric tons of greenhouse gas emissions.
Our mission requires world class talent and I'm pleased the charge point continues to be a destination for top professionals. We ended the quarter with more than 1300 employees, including the charge pointers that joined us through the two recent acquisitions.
And on the policy front.
Testing of the infrastructure investment and jobs Act includes up to $7 5 billion.
To accelerate the build out of charging along highways and in our communities.
As evidenced that U S policy leaders are committed to an electric future.
We are working with policymakers at the federal and state level to shape. This.
While other state and utility programs are in place now this new stimulus will likely manifest significant beginning in 2023.
Lastly, I would like to welcome former U S Secretary of transportation and Labor Elaine Chao to our board of directors.
Appointment brings depth from both public and private sectors and further strengthen the board composition, which already includes leaders from technology automotive and Investor community.
Now I'll turn this over to Rex to discuss financials before we move to Q&A over to you.
Thanks, as well and good afternoon, everyone first my comments or non-GAAP, where we principally exclude stock based compensation amortization of intangible assets.
And the effects of the valuation of our stock awards. This quarter. We also excluded professional service fees related to acquisitions.
For a reconciliation of these non-GAAP.
Results to GAAP, please see our earnings release.
Second after a quick review of our results I will provide revenue estimates for Q4 and the full year.
Consistent with our prior calls and as you can see in our earnings release, We report revenue along three lines network charging systems subscriptions and other network charging systems represents our hardware also with our cloud services solutions subscriptions include those cloud services or assure warranties.
Charge for the service offerings, where we bundle our solutions.
Hey, Joanne referred subscription software revenue from our entity it has to be acquisitions.
<unk> consists of energy credits professional services and certain non.
<unk> revenue streams.
Q3 revenue was $65 million up 79% year over year at the high end of our previously announced guidance range of 60 to 65 billion.
At six 4% sequentially.
We are very pleased with this performance despite a number of supply chain challenges and demand in the quarter, we could not meet its given us a good start on Q4.
That we're charging systems at $48 million at 73% of total revenue for the quarter consistent with Q2 and grew 111% year over year and 16% sequentially.
Subscription revenue was $13 billion to 21% of total revenue is up 24% year on year and 11% sequentially.
As I mentioned last quarter, the delta in growth rates between network charging systems and subscription revenue as a function in Q3 again favors DC network charging systems, and hull, which have a less lower ratio of subscription to network hardware revenue.
Second for most of our solutions, we began revenue for subscriptions at a fixed time after the associated hardware shipment.
Accommodate installations, you will be a time lag of at least a quarter.
Revenue from subscriptions, representing recurring revenue or at least listing customer commitments payments grew nicely, finishing the quarter at over $120 million.
Other revenue.
At $4 million in 6% of total revenue increased 37% year on year and 30% sequentially.
As driver activity and associated credits.
For commercial 69%.
Please 16% resident.
Percent.
Reflecting outperformance in both fleet and residential.
We are very pleased to see strong growth.
It'll billings up 96% year on year and 25% sequentially.
<unk> commercial up 89% year on year, and a COVID-19 impacted community environment.
From a geographic perspective Q3 revenue from North America was 89% in Europe was 11% representing a slight percentage gain in European contribution.
Even by both organic growth and acquisition contribution.
The third quarter, our European business did over $7 billion in total revenue almost tripled from last year's third quarter and up 41% sequentially.
Turning to gross margin non-GAAP gross margin for Q3 was 27% a four point improvement over Q2.
Reflecting continued improvements in our cost of goods sold did positive margin contribution from our European acquisitions, we estimate elevated logistical costs and supply chain constraints cost us approximately 2% of additional network charging system margin.
Non-GAAP operating expenses for Q3 were $63 million a year over year increase of 61%.
Sequential increase of 18%.
Included in the quarter was an additional $2 million in operating expenses attributable to our two acquisitions.
As we have said we can take.
Continue to invest heavily on product development customer acquisitions operations scaling and other areas to drive our leadership position.
In this rapidly evolving and growing market.
Stock based compensation in Q3 was at a normalized level of $16 million down from $28 million in Q2.
The $28 million of stock based compensation in the second quarter approximately $14 million was attributable to services performed prior to the second quarter included grants to employees.
Joined the company during the preceding 12 months as well as incentive awards to key personnel in those cases delayed while the company executed in stack transaction Q3 did not have any such adjustments.
With respect to contributions from our two European acquisitions I mentioned in our September earnings call that we expect that Q4 revenue contribution of approximately $4 million in Q4 operating expenses of approximately $8 million to $10 million.
Changes to be true in.
In Q3, the revenue contribution from the acquisitions was approximately 2 million comprise.
Hardware and other.
The fact that we own these assets for only a portion of Q3.
Looking at cash we finished the quarter with approximately $366 million down from $618 million at the end of Q2.
Reflecting cash on operations and $210 million paid for acquisitions in the quarter.
After giving effect to the acquisition of has to be an ongoing employee issuances during the quarter, we have approximately 331 million shares outstanding.
Turning now to guidance demand for our solutions in Q3 continued to outstrip, our expectations and production ramp COVID-19 keeps the market's guessing and employers continually have to adjust return to work plans.
The strong third quarter healthy backlog to start the fourth quarter and continuing broad pipeline build across all verticals. We are moving our Q4 and full year guidance up for.
For fiscal Q4, we expect total revenue of 73 to 78 million at the midpoint, an increase of 78% versus Q4 of last year and a sequential increase of over 16%.
For the fiscal year were taking our revenue guidance up from 225 million to 235 million.
The 235 million to $240 million at the new midpoint, representing a 62% increase year on year.
And with that it concludes our prepared remarks, and we'll turn it over to Q&A.
Certainly I think I would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to turn that question. Please press star followed by team again to ask a question press Star one.
We ask that you limit yourself to two questions today.
Minder, if youre using a speakerphone please pick up your handset before asking your question no pause here briefly as questions are registered.
The first question is from the line of hotel with Wolfe Research you May proceed.
Hey, thanks, so much.
Just the first one.
Pat I think you had mentioned that you expect to see the federal stimulus.
Good morning, uniquely manifest in 2023.
Is there a way to maybe frame.
What kind of funding.
The number of these.
Additionally, these additional dollars could support in terms of new Chargers.
Added.
And maybe also if you can remind us what youre seeing at the moment in terms of funding from utilities in certain states.
Towards charging.
Thanks, Thanks, Chris good to hear your voice.
And.
So it's a complicated question the federal infrastructure Bill is.
Much of the money not all but most of the money is going to flow through states and the states have to design. Their program. So that's why we are estimating that we won't see much of that.
In 2022, we may see some of the back half of the year, but it's hard to predict.
And in terms of how much money is.
Going to flow actually in that year versus in subsequent years.
Right now, it's too hard to call Im not trying to be evasive.
If you look at how are we thinking painful to VW Appendix D program.
<unk> implemented analogous way it was money that flu.
Slowed from the federal government the federal portion of the settlement any way too.
All statements.
Quick.
To to define a program some.
Some are slower so that's why it's challenging.
For Us and then the color of the program.
In terms of the.
Exactly what the constraints are getting influenced the installation cost versus the equipment cost et cetera, So really hard to call.
Sum total of all the money like I said, we don't mean.
And expect to be the next year I also want to draw your attention to one other thing is that the budget reconciliation and other associated any conversations about.
Where the government is.
Is trying to generate stimulus and other areas for EV charging that could have faster effects.
Again, it's too hard to kind of too hard to pin that down right now in terms of your question with respect to new funding.
Funding.
Practically amounts Rex.
Want to comment on that.
If you have the current number.
I actually do not have a current number.
Apologies.
Yeah, So just to remind remind everyone.
That represents.
Approved utility programs and then those programs rollout over multiple years not all not all of the funds are relevant to our revenue even in those programs. So in previous quarters, we've reported similar.
Similar or analogous to a backlog number associated with kind of the sum total of approved utility programs that are running in the United States, it's not necessarily our backlog, but it's sort of analogous in that domain from the industries.
<unk> and <unk>.
We don't have an update for you right now.
So Pat I was hoping to make sure.
I've got a question in terms of what the programs are out there thats available because that's how I heard the question. The total of those two yes.
Yeah, because we have a billings number for utilities for us, but in terms of total progress is in the hundreds of millions of dollars.
But in terms of the exact figure out.
Hundreds of millions is it fair totaled.
Okay.
And then.
Just looking at.
And Opex.
Sorry.
Got it.
Was there something go ahead sorry.
Okay.
Looking at Opex, It was up modestly as a percent of revenue in Q3 versus Q2, but.
R&D was up more meaningfully so I'm wondering if you can just talk about some of the main priorities that are driving R&D spending and then just how should we think of especially as we think about.
Maybe the next few quarters or even into next year.
Sure. So first of all the Opex number is a broad based number.
Because we're investing heavily in sales marketing, obviously were a newly public company. So we do need to deal with those things but specific.
Our priorities are made.
Major product releases that we have coming out this year.
As you May have seen we had a big fleet announcement several months ago and Thats just a few that are going into that.
We've got some very interesting things that we have in mind for Europe.
Coming out shortly.
A huge amount of energy that goes into what we see as one of our greatest Differentiators, which is of course the software platform.
There's a big big push right now.
And obviously since we play in all verticals and in both North America, and Europe, and we see that the time is now from an industry perspective, we're really putting our shoulder to it so.
That agreement.
Great.
Yet but.
I think we should we should see some steady leverage next year.
I think you guys should be happy about.
The non-GAAP gross margin.
Arjun between network and.
In software and services I just wanted to I just wanted to confirm that thanks.
Uh huh.
Hmm.
That's tough.
Yeah.
On the subscription side.
As you probably know we do put our driver and help support into.
Our subscription line, so that line tends to be in the 50%.
These.
Other bounces around depending on what the components are.
So as you can do the math you can tell that the hardware.
You could back into the hardware number if I just look at that the overall bank.
Okay.
But you know when you talk to the other.
Thank you Mr Fitzgerald.
The next.
Great.
Hey, good afternoon, guys nice to be on the call and thanks for taking my questions.
Thank you.
I wanted to ask about your targets for market share in Europe, and the pathway for reaching those specifically.
Specifically the balance between organic versus really more fragmented market over there and just thinking through.
Cash flow profile <unk>.
We're tapping your own equity currency.
Yes, I'm, just wondering how youre thinking about the path of least or is it same thing.
While youre evaluating opportunities in Europe.
Great.
Very good question.
No.
First of all market share targets.
No.
Obviously as high as we can get them.
Okay, that's everyone's market share target.
And industry, we've done pretty well in non North American.
Recently over the last couple of years made enormous progress in Europe.
We're not we're not pretty to see hang on that we've done two acquisitions in very different industries, one is targeted at extending.
Consolidating customers as well as extending functionality in the fleet space that would convert to anyone.
And in <unk>.
With respect to inorganic versus.
Organic growth.
We'll be intelligent.
Obviously, we'll evaluate opportunities as they present.
But I don't think its necessary to have an all inorganic strategy to gain market share. It's early innings in the EV market in general.
Our early enough and we have strength.
Thanks.
Broad based with respect to our product portfolio and a position where.
And you were in every vertical.
We can think of.
And in.
On both continents, so theres, a tremendous amount of leverage there.
We have.
With that said if there is an opportunity that presents itself like that has to do with diversity in that have team check in and as customers that are aligned with our business model, we'd certainly look at it so we'd be very various two fires.
Perfect. Thanks, very helpful. And then for my next one more of a theoretical question around.
Site owners decisions between level, two and level III jogging.
Especially at places like shorter visit times like grocery stores malls parts et cetera.
Yeah.
Early conversations we're having I think theres some split opinions on what what the.
The preference maybe for future EV drivers.
You guys offer both solutions, obviously, but it has more of a presence in <unk>. So I'm just I'm curious.
What are your conversations been like with new site owners, deciding which route to go with.
And if any existing level customers are looking to expand but with our <unk> solution.
So a lot of misinformation on this too many folks are powder matching on gasoline so.
One of them.
By.
By way of facts, it's not an opinion.
And when you sneak the switch to.
Electric drive.
A depot is not your primary fuel anymore, meaning you don't want to have a little yellow lights on go drive somewhere show up.
That doesn't happen.
Especially to you if you have access to charging or at home or work or both or street deck parking issues.
We've seen these driver patterns.
That kind of dominate how people behavior always corner cases.
Where people sit in certain percentages of the population don't conform, but they usually have.
Okay.
Our reasons for not conforming.
It is not net speed gets faster you put it in and in fact, it's actually matching the natural parking duration.
And how much energy is expected to be reloaded in that state.
If youre going into the grocery store and you hear in your house.
And Youre not trying to show you a tank battery.
Patterns youre not trying to do that.
Are you trying to avail yourself of some convenience miles you may pick up as an amenity higher grocery store now if you pulled off the highway.
And you're on your way to.
Holiday and.
And you happen to pick a grocery store to stop that.
Because it had a fast charger youre doing that because you want to make a sn.
Essentially a refueling stop.
So they're very different use cases, and they get conflated.
The average shopper doesn't want to use the fast charger.
They are in their local area Patrick correctly era.
Very expensive utilization mistake of the total construction costs and equipment costs versus the number of parking spaces and customers you can serve.
So it's not it's not an <unk>.
I got a real problem, because I really mean, a massive mistake.
Because you're going to if you plug in.
Around town.
And Youre just popping up.
You're a fast charger is such an expensive proposition for that use case and consume so much electrical capacity for that use case that you've made a mistake, but if youre well positioned to serve highway drivers as they are going out of there.
Beyond the battery range.
Having a mix on your grocery store site between <unk> for your local customers and fast for your long distance customers makes a whole lot of sense. So what we do is we consult with customers to try to help them understand how to allocate.
The right the right.
Strength.
For the likely use cases that are going to present in the parking lot because the number of parking spaces you can electrify.
Trickle capacity and the cost of one fast charger is pretty significant.
If you're primarily serving local clients house. So that's just some of the color.
So much different than putting gas stations up it she says no relationship to that to that legacy market at all.
Okay.
Okay I appreciate the color thanks, guys.
Thank you Mr. Watson Watson Koski.
The next question is from the line of Colin routes with Oppenheimer.
Please proceed.
Hey, this is Brendan on for Colin first one for me would you be able to give us a bit of color on early progress on acquisition integration in Europe, and maybe any insight on the initial returns for cross selling opportunities there.
Okay.
I mean typical specifics but.
In both acquisitions were newer to the has to be one frankly that diversity, one because it's earlier innings.
That closed a.
A couple months past when diversity one did.
But on both we're making good progress on the integration on the fleet side.
We are already co selling.
And where we have customers that.
As I said, we've done some customer consolidation that we had customers that have used variety for different functionality from <unk>.
And had our charging solution and a growth.
Vehicle solution and where that's the case, we're already moving the ball down the field to integrate the two solutions with that said it will take some time to get things integrated in an orderly way. We're in earlier innings with has to be what we've already got some.
Customer activity going on.
One plus one is already equaling three.
Where we can bring additional functionality either to their customer base or ours vice versa. So we're already making nice progress there.
Awesome and then just secondly on the supply chain and pricing are you seeing them into design products. Your particular sub systems in order to help the resiliency of the supply chain and how active have you guys been in terms of pass some additional cost to customers.
Yeah. So.
Chuckling as you said that.
Hi.
We're incredibly proud of what our engineering and supply chain teams have had to do.
As you've seen we turned in.
Upside results now.
For several quarters.
<unk>.
If you can.
When you can imagine how hard that is in the supply chain constraint environment, because obviously, we're laying forecast into our supply chain.
Yes.
On either even under normal circumstances with significant percentage of a year's worth of visibility because that's just what you need to do especially as you're scaling.
So they're then come up with upside when you get obviously surprise decommit, which is happening everywhere in the industry means that youre on mute.
Organization is responding.
Rapid qualification pumps substitute components and rapid adjustment in.
In software to enable that so it is definitely happening inside of our organization, they're doing a tremendous job.
Keeping keeping things we could have put those resources.
Okay.
Different places Rex ill, let you comment on the question on.
Pass through pricing.
Okay.
Yes, Brian good question so.
Without getting into it.
Thanks.
We definitely have a program in place.
For pass them through.
Some level of increased logistics days, which I referenced in my gross margin comments.
And there may be some price adjustments will not too distant future.
To take take account of what's going on in the supply chain. So.
We definitely have some movements ahead.
No nothing major reflection.
It's mostly perspective.
Okay, I'll circle, I'll remind you that I'll remind you two things for experts.
First of all I believe in your prepared remarks, you commented.
Correct me, if I'm wrong it was about two point.
Okay.
Supply chain issues resulted in about a two point penalty on gross margin relative to what kind of turned in.
Clarify that.
And so so collyn.
We had that.
Working against Us, but we still turned in strong improvement in gross margin quarter over quarter and.
Turned in results on the high side. So you can imagine internally what that took their two <unk>.
Great. Thank you.
Thank you Mr <unk>.
The next question is from the line of Gabe Daoud with Cowen You May proceed.
Thanks, and good afternoon, everyone.
Maybe.
Just kind of back to the supply chain can be around inventory.
Inventory of that.
I'll, let rich comment on inventory, but in terms of visibility its not so much visibility.
Visibility into supply chain that Cogs.
Yes.
Many other companies say the same thing Greece in the quarter, it's unplanned decommit.
Which happens.
And we respond to that now now there is there is there is a bit of.
Theres not a bit theres quite a bit of preplanning going on there where we're scrambling to.
Multiple sources.
Of a possible on parts that we forecast as possibly being problematic.
But.
R R.
Acacia to supply chain the firm orders that we're placing in the supply chain for product et cetera are well.
Sure well on it Tonight.
Yeah from an inventory standpoint.
Alright.
Okay.
First of all again.
Thank you for joining.
Correct, yes.
We extensively as CN, so not all inventory sits on our books, our inventory actually I think I said this last quarter I keep wanting it to go up because it was bought supply chain challenges, but.
Okay.
Actually slightly declined quarter over quarter here.
But I would just tell you if we can build inventory going forward, we will we just havent done that yet.
Got it got it that makes sense.
And again Thats not Gabe that's not that's not that's not weakness.
And Thats and Thats in our opinion it to happen.
That'd be problem I wish we didn't have the supply chain constraints, but but nonetheless.
<unk>.
It's on the good side of the problem balance sheet.
Yes Gabe.
Thanks.
Because it is kind of odd to have a CFO Jay payloads Leslie creates when you've got supply chain challenges that youre trying to made building inventory is that because that says it's a smart thing to do so that's what we're trying to do.
And this is also CAGR the modularity.
The modularity of the platform.
I know all of the platforms that we ship.
Really coming into play because we.
We have a lot we drive up.
We drive a very broad set of use cases on the hardware side of the product line with a very few skus, where very few internal parts that we have to make it may show up is different or ballpark numbers, but that's largely just configuration at the end. So it really has helped quite a bit of architecturally the product line.
It is not without its challenges in the supply chain constraint environment, but it's better than most.
Got it got it very helpful color. Thanks, guys.
And then maybe just as a follow up we kind of hit on the fleet side, just owing to the diversity of deal.
But obviously kind of competition there, particularly on the software side, just just given the energy management needs.
It's a more of a complex operation.
And you saw the competition with another announcement today VP, making the acquisitions, but could you maybe just.
Give us a little bit of color on conversations whether it's here in the U S and Europe and just generally how demand stemming from from the fleet channel and how you expect that to progress over the next couple of quarters.
Well Gabe fleets.
Not really.
Yes.
Interest just a tremendous I mean, it's.
Its coming at us from all sides.
In our opinion, we think we have.
The most fulsome.
Broad based software solution.
So, especially with the addition of adversity does not reflect the food chain on that.
On the vehicle side and remember well.
Yeah.
<unk> consultancy and project management.
Help with utility.
Infrastructure on the sides with respect to consultation there.
Yes.
We.
<unk> functionality across the board and then we're seeing a tremendous amount of cross vertical leverage I mentioned on our previous earnings call. It. One example of that is we're seeing a lot of fleets that have a take home component.
Two parking operations and refueling operations will not feeling in the traditional sense, but with electricity wanting.
Wanting to reimburse the contractor.
Yes.
He has taken the vehicle home with us.
Especially prevalent.
In fleets that are trying to lighten the capex load.
Real estate mode.
So because we are operating in those verticals naturally.
Especially in Europe with develop solutions for lease coast.
That are providing both company cars and leasing services too.
Commercial fleets and we really got a broad set of functionality. So.
So we're a one stop shop for much of that stuff and we're still kicking in.
As Rex mentioned on the R&D side, we're piling a tremendous amount of R&D into that on a continuous basis. So we're not stopping with the functionality that we have.
Great great.
Really helpful. Thanks, guys.
Thank you.
Okay.
Thank you Ms Turndown.
The next question is from the line of Ryan Greenwald with Bank of America. You May proceed.
Hey, good afternoon, everyone.
Appreciate the time.
So maybe first one just one more on the supply chain.
Can you guys talk about this too.
Impact from the elevated logistics costs I think you guys quoted 300 bps last quarter can you just give a bit more color on the evolution of the bottlenecks quarter over quarter and any way to help frame the amount of demand in the pipeline that you guys were unable to me.
Yes right.
The numbers correct. It was a three point swing last quarter two point swing this quarter.
The heaviest component of that is actually logistics will take expedite fees, putting it on a plane versus putting it on a boat.
And so David Thats.
The biggest driver there.
And I think that.
Obviously, we're going to continue to battle that a bit as you look forward into.
And so the second part of your question was.
Any way to help frame the amount of demand in the pipeline that you guys were unable to meet this quarter.
Okay.
So.
I would tell you that there was a positive spillover from Q3 to Q4.
It was it wasn't massive hesitate to give you a number but I would just tell you.
What's important is to understand that there was demand in the quarter.
It was big enough number that warranted mentioning it.
And it set us up for a nice start here in Q4, but.
It wasn't a massive number but it was a meaningful enough number that would have pushed us well above the high end of our range.
Got it I appreciate that and then in terms of the drivers of the revenue increase versus the plan that you guys laid out last quarter sounds like momentum across the board, but anything you can say in particular in terms of the contribution versus the prior forecast.
Is that a question are you, saying that our mix shift at all quarter on quarter.
So noticing in terms of the hurdle drivers than the revenue increase from last quarter.
So any kind of shaking out better than planned in the last quarter.
As we said earlier as Pat said earlier it is broad based.
Cross the three verticals.
The mix has been pretty consistent with Q2.
So.
Superb performance from home, even though that's not a big revenue number relatively speaking because its a fairly.
Inexpensive product relative to other products, we've seen really good performance from our.
<unk> hundred 50, which is our DC products.
And we've seen workplace.
Do you, okay relative to what we think it should be doing once we get out of Covid.
But if you were to look at it or the mix mix perspective. It was it was actually quite consistent.
As I said in my commentary.
Well Doug.
Our acquisitions in Europe. So it isn't like I wouldn't say, there's anything that's moving left or right. It was very consistent with Q2.
Just bigger.
I'll leave it there thanks guys.
New customer acquisition was super strong in the quarter and then the distribution of what they buy again consistent so it's just really good growth across the board.
Got it thank you.
Thank you Mr Green one.
The next question is from the line of James West with Evercore You May proceed.
Hey, Thanks afternoon guys.
Talked up fleet thorough amount in your prepared remarks, particularly on the commercial side I mean really massive year over year growth Theres, some very impressive or you mentioned.
Fleets coming at you from all directions, which is a good thing of course.
Is something changing with leaders or is there an uptick in just overall demand or a tipping point that we've hit or are you taking more share what do you. What do you think the evolution is fear for fleet.
Thank you.
It's pretty basic what I would love to do is.
Hey.
Okay.
There was.
Relative to a couple of years ago, no share gain because there were limited.
Vehicles.
And when there arent vehicles shipping in volume.
For manufacturers and Youre limited to pilot level.
Program sizes.
It just isn't that meaningful and if you.
Remember some of the comments I made in previous earning calls.
I pointed out that the revenue and fleet is not proportional to.
The opportunity that we've seized.
Because as we develop pilots and cement our relationship with our fleet customers, obviously based on earning that trust.
As they expand they will expand with us.
And you have to do all the work.
To get to a pilot or a lot of the work you have to integrate with a whole lot of their business system to have a lot of time all those things. So the challenge is it's an incredible.
From an opex perspective relative to money return.
Earned in the in the period.
It's certainly in the investment category not the.
Kind of run rate category, so to speak so that's what I think is most significant is we are still flag planting.
And we are doing a ton of work and if you look at the size of our business.
The opex that we're able to deploy because of the size of our business.
In our opinion.
A huge differentiation on a go forward basis, because we can afford frankly to do the work we can afford that mode. Because we are a commercial business to <unk>.
Right. Okay got it that makes a lot of sense thanks for that.
Another comment on auto dealers as well and seeing strong demand from them as they prepare for the future here. So they're obviously getting the signals from the Oems and we all we all know about the models that are that are coming out and it's about to hit the next 12 to 18 months.
What are they telling you will be the dealers or even the Oems about when they may start to retire or they're they're ice engines are older models, where oil and gas the oil models.
Because we'd be in violation of our our NDA.
Auto OEM partners, but if you just look at our <unk> announcement. If you just look at if you look at public announcements.
In terms of.
So flip over points, where the majority of automakers.
Manufacturers lines will be will be electric youre looking in Europe brand shooting for somewhere between depending on the brand in 2020.
Five I think thats, a good aggressive or the early 2000, <unk> youre seeing most commit to.
Being substantively.
Okay.
I think the dealers now to be able to get what is a production limited vehicle.
They need to put in the electrical and they need to put in the charging infrastructure and the training and support for selling those.
On mask give them the vehicles. So if you want to get the inventory you got to make the investment dealer.
And we're seeing the dealers or respond to those OEM programs.
Substantially and we think that especially.
Geographically broad based.
It is not in the usual hotspots for EV. It is geographically much more broad based are perfectly broadbased, but much more broad based that is a very good indicator that auto Oems are communicating to dealers that get ready.
Comment.
Right right, Okay got it thanks guys.
Thank you Mr. Li.
The next question is from the line of Bill Peterson with Jpmorgan you May proceed.
Yes, good afternoon, guys and nice job on the quarterly execution here.
Quick question you answered the prior question about the mix from the second to the third quarter I guess based off your backlog in midway through the quarter can you give us some directionality on how you see home versus commercial versus fleet.
Embedded in that is there any sort of seasonality, we should think about.
In that context.
It's hard to say, whether our growth is going to eclipse seasonality.
You know or not.
And shifts shifts some of the usual trends around it's just hard to say normally that we've seen seasonality in the business relative more to construction cycles in northern hemisphere.
We're we're only serving in northern hemisphere. So it normally is.
Deep winter construction cycle slowdown in some areas but.
You've got so much growth going on now.
It's hard to predict how much that's going to get offset.
So.
In terms of mix I'll caution you on something revenue mix and unit volume mix are very different.
Because of the wild price point differences.
It's between.
The residential business inclusive of multifamily.
And then the commercial and then the fleet business. The fleet business actually is split right down the middle of light commercial is.
Most of the ACM.
Yes.
And.
When you get to that.
Kind of mid tier vehicles, and heavy vehicles and now you've got a substantively RBC business and then Theyre dwell time.
I'm determines how shared that DC power conversion infrastructure could be so what that bodes for a very challenging segment in fleet.
To reconcile unit volume, even within this segment or vertical.
Very difficult to match unit volume to revenue, especially in early innings, where averages if not stable.
Periods.
Yeah. So that gives you an order of magnitude its not revenue its billings, but you could determine what the correlation is there.
That gives you an idea of order of magnitude of that one segment.
Just to say the unit volume in our commercial book.
Okay.
Yes, thanks for that color.
Regarding your question on to it as well.
Actually seeing.
Here in the last few weeks the California.
California Air Resources Board announced some pretty significant.
$1 over the next few years $1 4 billion and totaled $1 1 billion of new money of which a big chunk of that in the script for charging infrastructure can you give us a feel for if you're already seeing some activity and how you should.
These types of announcements, which are fairly near term frankly relative to the infrastructure Bill.
Your business.
So I mean, we've got a lot of experience with the CDC, we've done quarter build programs with the CDC for years.
Relatively quickly as you said relative to other credit terms because it's.
It's not if you look at the federal infrastructure Bill the bulk of the money has to flow to states and then stay type design program. So you get this inherent to tier two.
<unk> Cascade, where the CEO.
He doesn't have that two tier cascade into very large state. It already has a very large population that had been operating with significant.
EV programs for a lot of years so how.
How should we say in the bullpen and California.
Yes.
And so.
It's hard to call how much of that is going to flow.
Again to us, it's always hard to call.
Not going to venture a guess.
And remember all of the subsidy programs that are announced.
Recently have not been contemplated in any of our previous commentary.
On a go forward it hasnt it was not in any of our models because we don't put something into a model until we can count on it and we understand that.
The policy has a license its own and so we don't count on stuff until we can actually count on stock.
So none of what Youre seeing Rex talk about these contemplating any of that.
Okay. Thanks again for the color.
Thank you Mr Peterson.
The next question is from the line of Tyler Bailey with Needham <unk> Company you May proceed.
Hey, guys just filling in for Vikram here.
One last quick one for you related to.
On the supply chain in the mix.
For that last question, but I guess do just on the supply chain initiatives.
Is there any potential.
Prioritize some of your high margin segment.
We can we.
We tend not to.
We don't we don't credential engineer our margin.
And the reason is.
And for a very long time because of the re by nature.
Yes.
So shaping dangerous.
We tried to take.
All the business we can service.
And obviously inventory inventory levels and lead times.
May impact our ability to serve.
When you deal in the future, who knows but so far so good and not having an impact things, but remember our customers initial buy is usually a fraction.
Their ongoing buys.
And you have a lot of time over the life of that customer too.
Mature and evolve the product they need by the day. So if the diet product today that Thunder say supply chain pressure.
Well, you want that customer anyway, because most of the product theyre going to bias can be well past one all of those clears.
Okay.
The books are.
I don't think Theres, a lot of data to SaaS born exactly.
We could or would want to engineer back with this or is it the fact that our mixes with fairly consistent.
Q2, Q3, and will probably be fairly consistent in Q4 just means.
<unk>.
And we have demand is more than what we can make sure.
We're meeting demand as best we can so just leave it there.
Okay.
That's helpful.
One last quick one.
In terms of you mentioned that.
Most of that residential.
Just on mix across the board.
Certainly some of it was residential.
And.
But it's fundamentally across the board.
Okay.
And by the way.
Okay.
Actual.
Anyway, the difference associated as well.
A very very strong demand level across.
For our business.
We're meeting it.
Although as we can so we don't have big open holes anywhere.
But.
So at some level, but thus far were made.
Our team for the great job.
Is that.
The question is from the vantage.
Is there one product that's suffering undue levels of supply chain and.
And the rest are clear to build now.
Yeah.
If that's where your question is coming from.
That's not the case.
Sure that's helpful.
Thank you I appreciate it.
The next question is from the line of Stephen <unk> with Stifel. You May proceed.
Thanks.
Yeah.
Hi.
Ill.
Sure.
So finished first.
When you look at your opportunity in Europe.
The growth rates in Europe.
Over the next couple of years versus the U S market.
Relative growth rates of the market itself for our grocery.
So your growth rates in your growth rates relative to the market for sure. But also you think the European business grows at about the same rate materially different based on.
So the maturity of the market.
Yes.
I don't think its the product lines aren't.
There are some differences.
In some areas, but theyre not substantively in the long term different we've got some startup conditions in our business.
But we havent worked ourselves out of yet, but that's in process. So.
I actually think tonnage.
Two years.
Just because of the.
The regulatory and policy environment.
Europe, you will youre likely to see higher percentages of electrification on new car sales than you will in the United States and now kind of normalize out over time.
I think well well before we hit <unk>.
<unk> percent penetration.
<unk>.
Into the into the installed base I'll remind you of an interesting stat that almost no one.
Everyone have a higher when I say a signal one realizes that upfront with a 100% of EV cars sold tomorrow or electric it takes you some cars.
Right.
In North America, and Europe, that's how big this market is.
And so.
The next couple of years.
Where does it.
It's certainly where a lot of other customers who want it certainly.
A lot of the market positions are made.
But the volume while the one on the volume continues to go on for a very very long time.
To serve that installed base. So we've seen the two markets is relatively similar relatively on the margin than any differences, but relatively similar.
By the time you get to.
Significantly to the into the installed base.
Some vehicles out there in terms of our business.
We should acquire market share faster in Europe than we're acquiring market share in the U S. Because of market shares already so high in the U S.
And so by definition, we should be acquiring market share in Europe I'll also point out something else. There is a higher percentage of Portland management in Europe.
By necessity, because we are acquiring customers that already have some hardware on the ground, but do not have our hardware.
On the other side of the software of our software.
Much higher percentage in the U S. It's not 100%, but its much higher in the U S.
And therefore.
The average when you look at the ports under management.
And you try to equate that to revenue, it's a little bit lower in the early days in Europe, because not 100% of the customers on our hardware.
Not an equivalent percentage or on our hardware.
It makes it a little harder in year chairs to do the analysis.
I understand.
I appreciate that comment.
And then just the other quick one for me.
You mentioned on the call.
That's sort of a one quarter lag.
On the subscriptions just based on the time from installation.
So.
That's been pretty steady right I mean, that's a pretty steady number that we should think about as kind of a guidepost going forward.
Yes, yes, that's definitely true there. So there is a one quarter lag and then the other factor when you look at hardware.
Sorry network solutions versus.
Our subscription revenue is you had a very different outcome on a percentage basis, depending on what you said.
So if you're selling or selling a home unit.
Lower percentage software content than a commercial unit.
On a percentage basis, and then and then.
In our D C line.
The equipment itself is sufficiently expensive debt.
But again relative to that number software is a smaller percentage of mix can really bang percentages subscriptions around.
Okay, Great I appreciate the color gentlemen, thank you.
Okay.
Yes.
Yes.
Thank you Mr <unk>.
The next question is from the line of David Kelley with Jefferies. You May proceed.
Good afternoon, guys. Thanks for taking my questions, maybe if you could talk a bit about the visibility to workplace ramp.
Your customers' propensity for revised at the moment just curious how that is trending recently given COVID-19 continues to factor into corporate planning here into 2022.
I'd actually really enjoy your insights into when we'll be returning to work for.
Okay.
If you want to.
Jeff There is around it's a difficult it's a difficult predicted environment for us in terms of return to work.
So what we're doing.
I'll point out is that the growth rate in the overall industry and just the sheer volume of cars that have entered the market.
While workplaces certainly not on a total.
On a proportional basis Hasnt returned to.
Its previous levels, because theres not as much utilization pressure at work.
And there are so many more cars, where we're still seeing relatively relatively.
Decent number actions or the country, where there are different types of workplaces that have different criticality, what their jobs are different policies internally with respect to housing.
Want to take off.
The more administrative larger administrative burden of having people in the office more often so youre seeing us hotspots everywhere. So it is not zero.
Zero when it gets to the new normal whatever that is.
Your guess is as good as mine Brexit you want to comment on the other.
Questions Yes.
So the only only.
The only thing I would add is if you look at our Q4 guide the assumption that's built into that as it workplace doesn't come back.
In Q4 in a big way because.
When you look at all of those things that are going on out there.
Got it updates today, it's really hard to think that people are going to be back to the office by the end of January.
Yes.
So the mix go to that as well. So we think our current mix will continue to it before it hits the numbers.
We think look great as far as guidance or concern.
We're really looking forward to workplace coming back.
In full force next year.
We're not forecasting because thats going to happen yet but.
That would be very very good impact on our business and we hope that happens, but we're short stay and of course now in terms of how we look at the near term future.
Gladys philosophically.
Philosophically.
Whenever there is doubt we take a conservative stance and how we think about it because that space.
And as Rick said, we'll build as much inventory as humanly possible because right now.
Possible to Overbill, it's just not especially with our limited scrap risk.
Since risks.
So we will build as much inventory as possible should.
Things come out on the positive side.
Either.
Sure.
Early onset of stimulus money early retreat of Covid, what have you if we get surprised to the upside awesome.
But we're not going to engineer our company around expectations.
Given variables, we don't control Rosie side of that equation.
Okay got it.
For the record my guess have returned to work is not very good so I won't get it but maybe as a quick follow up just on the utilization point in may.
This is a bit of an over simplification, but kind of viewing it as opening a pull model.
As it relates to workplace demand.
Are you seeing any shift to more of a push model in a sense that a lot of companies are certainly focused on ESG metrics sustainability.
Maybe there is some offsetting impact where they are they are the.
The demand is going up regardless of kind of what the utilization is at the moment.
So what that would.
I'm sure there's some of that frankly, because Paul.
All companies are turning their attention to making sure that they have.
The right posture with respect to supporting <unk> got as much fund transportation, which.
So it supports the clinical as well.
So there is certainly an element of that what I'll call. It all.
I'll point out, which I think is.
Significant is that early buys from our company just moving into electric vehicle charging tend to be small its their revised based on their run rate experience that tend to be large.
So customers trying to plant in ESG flag.
I doubt.
Are moving the needle significantly in our workplace business, but I bet you are in there I just can't quantify it.
<unk> do you have any better commentary.
Okay.
I think.
It's hard to call the build ahead because because.
So close to the waves will hit us anytime it hitting it now so I think.
I think people are recognizing this is an undeniable trend and they should get ready for it so.
I would call it preparation as opposed to early.
As Mark talked about.
And by the way.
Yes.
And what's yes, what's also happening I'll point. This out is is there is actually construction happening during COVID-19, because it's an opportune time to do construction and remodeling.
Hum.
Office space, because John occupied more lightly occupied.
So for that.
We're not seeing any slowdown at all in fact, we are seeing that being relatively strong on the construction side.
Yeah.
Okay got it.
That's helpful color. Thanks, guys.
Thank you.
Thank you Mr. Kelly.
That concludes the question and answer session I will now turn the call back over at any Pascal Armando for closing remarks.
So.
First of all I want to add.
Thanks, everyone for the questions.
I want to welcome.
<unk>.
New folks.
I've asked questions.
Having participated.
Participating in our earnings calls and are actively before.
The family really great to have you all wonderful questions.
Today and I wanted to just.
Some up again as I said in last quarter's remarks, I really want to thank.
The charge <unk> I think you've heard a lot of commentary around how much work it's been.
This team to manage to the upside.
In what has been a <unk>.
A dynamic environment with respect to supply chain.
And frankly, the market materializing to any upside which has been a wonderful thing for our employees. We also.
Have are well on our way now of integrating two stellar teams from two acquisitions.
Into the family of charge point or so I want to thank the charged <unk> I know a lot of them listening to these calls.
So thanks guys for.
Sure for doing Q1, all the good work that you do.
Okay.
Very very excited about what the what the future holds for for all of Us.
Collectively as an industry.
Company and our investors we think it's just.
Tremendously bright picture there.
Hi.
Really buoyed by the broad base the broad based support that.
That we've seen in our and we said that we are.
Sort of analogous to an index to the electrification of mobility, because as cars com, we've been so attached to cars light duty trucks et cetera, heavy heavy duty vehicles.
So as they continue to materialize.
We.
You see that really fueling some.
Great correct ahead. So thank you all again, we look forward to hosting you in a quarter. Thank you.
Sure.
Have a wonderful holiday.
That concludes today's conference call. Thank you for your participation you may now disconnect your lines.
Uh huh.
[music].