Q4 2022 ChargePoint Holdings Inc Earnings Call
[music].
Ladies and gentlemen, good afternoon. My name is Abby and I'll be your conference operator for today's call.
At this time I would like to welcome everyone to the charge 0.4th quarter fiscal 2022 earnings conference call and webcast. All participants lines have been placed in listen only mode to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
And I would now like to turn the call over to Patrick Hamer charge points, Vice President of capital markets and Investor Relations. Patrick. Please go ahead.
Okay.
Good afternoon, and thank you for joining us on today's conference call to discuss charge fourth quarter and full fiscal year 2022. This call is being broadcast over the web and can be accessed on the investors section of our website at investors <unk> Dot chart Dot com.
With me on today's call, thus far Romano, our Chief Executive Officer, and Rex Jackson, Our Chief Financial Officer. This afternoon, we issued a press release announcing results from the fourth quarter and full fiscal 2022 ended January 31, 2022, which can be found on our website wed like to remind you that during the conference call.
Management will be making forward looking statements, including our fiscal first quarter and full fiscal year 2023 outlook and our expected investments 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.
<unk> 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 December 15, 2021, and our earnings release posted today on our website and filed 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 in our earnings release and for historical periods and the Investor presentation posted on the investors website investors section of our website and finally, we'll be posting the transcript of our call to our Investor Relations.
<unk> web site 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.
My remarks, I will provide an overview of our execution against our Q4 plan and some highlights from the full year that just closed and update on our technology and business infrastructure and some commentary on how we see this year unfolding.
And after that I will turn it over to Rex Jackson, our CFO for a more detailed review of the quarter and the year that just closed in guidance for Q1 and the full year ahead.
The Michigan and charge point has never been more important and our opportunity has never been greater and this marks our <unk>.
First full year operating as a public company and it was a remarkable year on many fronts.
The investments we made over nearly 15 years set.
Set us up to capture the demand we are seeing today across commercial fleet and residential vertical through both North America and Europe and these results further cement charge point is the equivalent of an index to the electrification of mobility.
Our strong performance and record revenue throughout the year was fueled by growth in charging demand from accelerated EV adoption EV volumes in North America, and Europe were up over 70% in 2021 Conservative away in fact, all our verticals commercial fleet and residential were strong.
We began the year with revenue guidance of $195 million to $205 million.
And repeatedly raised guidance ending the year with over $242 million in revenue a number that could have been higher.
Arent for supply chain constraints.
In the challenging supply chain environment in 2021, we chose to optimize for customer acquisition, leading us to prioritize the assurance of supply rather than short term gross margin preservation and this had an impact of three percentage points of gross margin for the year and four percentage points for the quarter.
Given that every commercial and sleep port we sell has attached recurrent recurring software subscription revenue of nearly every customer account represents a significant land and expand opportunity. This decision should have long term positive implications for our revenue and our gross margin now, let's talk about the product portfolio.
And infrastructure required to scale.
We continue to invest heavily in our cloud based software solution and our software is designated designed to support the use cases wherever driver need to charge and that includes residential commercial and fleet settings.
Our software also covers linkages between those settings I will give you an example.
Let's say a customer has primarily depot based charging that occasionally also uses charge point on route that customer and can manage the scenarios on a consolidated basis.
To give you some examples of the broad use case coverage our software facilitates we support payment integration in a multitude of ways energy management charger deadline scheduling and many other features we continue to develop and improve for our fleet and site host customers and charge point drivers.
Additionally, strengthened our broad software offering through two acquisitions last year.
We made a portfolio announcement last year as well and we are in deployment now with customers and are ramping production throughout this year.
And I'll remind you that our architecture is highly modularized. So configurations of the exact same hardware leveraged across commercial fleet and residential verticals.
The entire hardware portfolio has been designed in conjunction with our cloud based charter control system, enabling charge point to address a very broad set of customer requirements with the minimum number of platforms and the law.
A large number of integrations, we continue to make with the tech and automotive ecosystems are becoming increasingly important as charging moves into the mainstream.
Last year, we added to the list of in vehicle and in App integrations with partners Android Auto Mercedes Pollstar and Volvo.
The investments, we made long ago, and establishing a strong distribution channel are paying dividends.
Now some highlights from the quarter and the full year that indicate this scale we are delivering.
Our Q4 revenue of $81 million marks a record quarter and above the high end of the guidance range. We provided on December 7th.
We finished the quarter with over 174000 network ports under management, an increase of 64% year over year within that the European Port Count was approximately 51000 and the global DC fast charge for count was approximately 11500.
And we're also approaching 300000 roaming towards accessible to drivers using their charge point account. So if you combine that with the 174000 ports that are directly on our network. Our drivers have access to almost 475000 ports globally.
The momentum in our commercial business, which includes everything from retail parking fuelling and convenience et cetera indicates that businesses of all types are preparing for the electric future charge point is proud to.
To have over 50% of the fortune 500 as its customers.
And last year, we achieved over 89% year on year growth in our commercial business on a billings basis.
In 2021 charge point continued to lead across Europe , with strategic acquisitions commercial partnerships significant roaming progress and expanded talent base and industry recognition.
We made meaningful advances in Europe , and our market share accelerated with the successful acquisition of <unk>.
It was also a banner year on the fleet front fleets are electrifying turning to charge point for charging solutions as evidenced by the year on year billings increase of 132%.
In addition to introducing industry's most comprehensive global electric fleet charging portfolio.
We rounded out the portfolio with the successful acquisition of <unk> landed signature account wins and last mile delivery in transit we expanded our partnership portfolio to include element.
Lease plan USA works and wheels Domino.
These partnerships spanned fleet management financial technology services, and leasing providers and represent an opportunity to provide charging solutions for well over 15 million vehicles as they electrify.
Now turning to residential billings were up 40%, 44% year on year.
Years ago, we calculated that being in all verticals are charging would be a strategic advantage and our strategy has long included enabled charging where people spend time.
Our three verticals came together in residential in a significant way in 2021, having a residential solution that can be integrated with our commercial and fleet verticals continues to be an advantage and here are some examples first businesses that operate take home fleets and companies, who offer vehicles and fueling as an employee benefit.
Are increasingly turning to charge point to handle charging and the associated reimbursements.
And as many continue to work from home be that an apartment condo single family home et cetera, we saw corresponding demand from property owners and homeowners.
Third we continue to partner with a growing number of residential charging programs with utilities throughout North America as they seek expert help to plan for residential fueling demand today in three years to come.
We're also being recognized for our innovation with strong consumer ratings and continued recognition from leading publications.
The scale of our network is generating positive environmental impacts with over $3 6 billion electric miles driven today by our estimates drivers have avoided over 145 million gallons of gasoline and over 608 metric tons of greenhouse gas emissions.
Now turning to fiscal 2023.
We see a steeper revenue trajectory than previously forecast that we expect will continue for the foreseeable future and I'll remind you that the transition from fossil fuels to electric drive will span multiple decades recharge point, we are forecasting a growth rate acceleration from 65% last.
Year to 96% this year.
As I mentioned consistently and we continue to optimize for insurance of supply in this land and expand model that has recurring revenue attached to every hardware port solved so any resulting margin impact last year or this year is not indicative of the long term margin profile of the company.
We expect increasing operating leverage this year and in the future and continue to expect that we will cross through cash flow breakeven, even in count cash flow breakeven in calendar 2024.
I would like to thank our customers partners and employees for an exceptional year and their commitment to electric mobility. Our mission requires world class talent and I'm pleased the charge point continues to be a destination for top professionals, we doubled our talent pool in the year, we ended the quarter with over 650 employees.
He is dedicated to R&D and technology related functions. Our board additions included Susan hasty former Verizon Telematics leader and Elaine Chao former Secretary of transportation needs adds further round out the board, which includes leaders from technology energy auto and the investment community.
In the U S. The infrastructure investment and jobs Act represents a tremendous opportunity for up to $7 5 billion.
To accelerate the build out of charging along highways and in our communities as.
As we expected and have commented on previously this new stimulus should substantively manifest in calendar year 2023 Rolling for five years. In addition, there are other state and utility programs being formed and in place today, all of which indicate broad commitment to the electric future.
In closing our ability to achieve 65% revenue growth in fiscal 2022 illustrates the power of our strategy business model and operating capability.
Capabilities give me tremendous confidence that we will continue to scale the business.
Even market growth forecasted to continue for the decades to come.
We are delivering on our plan exceeding revenue goals and executing across all our verticals in North America and Europe .
Now I'll turn this over to our CFO Rex Jackson to discuss financials before we move to Q&A Rex over to you.
Thanks, <unk> and good afternoon, everyone.
First my comments or non-GAAP , where we principally exclude stock based compensation amortization of intangible assets.
Nonrecurring costs related to restructuring and acquisitions and the effect of the valuation of our stock loads.
Please see our earnings release for a reconciliation of these non-GAAP results to GAAP.
Second after covering our Q4 and full year results. Our guide on Q1 revenue and for reasons I'll explain later guide on revenue non-GAAP gross margin non-GAAP operating expenses for the full year.
Excuse me.
Third consistent with prior calls we continue to report revenue along three lines network charging systems subscriptions and other network charging systems represents our connected hardware subscriptions include our cloud services connecting that hardware or assure warranties are charge point as a service offerings, where we bundle our solutions into recurring.
Subscriptions.
In software revenue from our <unk> and has to be acquisitions.
Other consists of energy credits professional services and certain non material revenue items.
Moving to results Q4 revenue was $81 million up 90% year on year above our previously announced guidance range of <unk> $73 million to $78 million and up 24% sequentially.
We were particularly pleased with this performance given continuing supply chain challenges.
Men's as well relative to our guidance commitments, but with demand significantly exceeding supply our exiting Q4 backlog was significantly higher than any prior quarter in the company's history.
Network charging systems at $59 million or 73% of people revenue consistent with Q3 and up.
109% year on year, and 25% sequentially subscription revenue at $17 million was 21% of total revenue and up 57% year on year and 28% sequentially to.
The sequential increase in subscription revenues.
Next software Activations of recent hardware shifts as well as stronger take up rates and assure our warranty products as well as contributions from our acquisitions.
Our deferred revenue from subscriptions, representing future recurring revenue from existing customer commitments and payments continues to grow nicely, finishing the quarter at $147 million up from $121 million at the end of Q3.
Other revenue of $4 million and 5% of total revenue increased 38% year on year and was flat sequentially.
Turning to verticals as you know, we look at them from a billings perspective, which approximates the revenue split.
Q4, billings percentages, where commercial 74% fleet, 14% residential 10% and other 2%.
Selecting strong performance across all verticals despite supply chain challenges total billings for the quarter were up 95% year on year and 20% sequentially.
From a geographic perspective, Q4 revenue from North America was 88%.
And Europe was 12% representing a slight shift to Europe , driven by both organic growth and acquisition contributions.
In the fourth quarter, and Europe delivered $10 million in revenue growing 184% year on year and 35% sequentially.
Turning to gross margin non-GAAP gross margin for Q4 was 24%.
<unk> mentioned, we are focused on assurance of supply land, new customers and to expand with existing ones.
While this places pressure on our gross margin. We believe this is the right and necessary strategy.
Once we land a customer they tend to grow with us over time.
And then also provide ongoing subscription revenue. So it is very important to keep our focus on delivering product and locking customers and.
We estimate higher purchase price variances and logistics costs.
Represented approximately four margin points net of our efforts to pass through costs, where we can through higher prices and logistics fees.
The key point to note our prices are holding well so the key margin challenges our supply chain and mix.
non-GAAP operating expenses for Q4 were $77 million a year.
Year on year increase of 83% and.
And a sequential increase of 23%.
Based compensation in Q4 was $15 million.
Looking at cash we finished the quarter with $316 million down from $366 million at the end of Q3.
We have approximately 335 million shares outstanding.
Turning to the year annual revenue was $242 million up 65% year on year above our increased December guidance of 235 million to $240 million.
Network charging systems at $174 million was 72% of total revenue for the year and an increase of 90% year on year.
Ascription revenue was $54 million was 22% of total revenue and up 32% year on year.
We've mentioned previously subscription revenue is delayed a quarter or more due to activations and heavily influenced by mix. This year mix trended materially towards residential and best charge solutions, which on a percentage basis have lower sulfur content.
Quickly covering verticals for the year.
Billings by vertical where commercial is 73%, 14% residential 11% and other 2% as Pat mentioned <unk> billings increased 132% year on year as that market continues to accelerate and we display leadership.
Total billings were up 81% year on year.
From a geographic perspective full year revenue from North America was 90% in.
In Europe was 10% in fiscal 'twenty to 2022, our European business delivered $25 million in revenue.
131% year on year.
As we've said before Europe is a key growth driver for us and were investing accordingly.
Turning to gross margins non-GAAP gross margin for the year between 4% for the reasons I mentioned earlier and up one point from the prior year.
Total supply chain and logistics impact for the year was approximately three points.
non-GAAP operating expenses for the year were $240 million a year on year increase of 62%.
As you heard them disclose remarks, and I will again to it in our guidance. We believe continued heavy investments in the right answer to pursue.
Our product and sales goals.
Turning to guidance.
As many of you know now that we're through our first year as a public company I plan to move to only quarterly revenue guidance. However, given the strength in demand movements in mix continuing to supply chain challenges and our conviction around opex investments we.
It is better to recenter, everyone on what we see this year, but giving annual guidance on multiple measures.
Starting with the first quarter of fiscal 'twenty, three we expect revenue to be $72 million to $77 million, an increase year on year of 84% at the midpoint and seasonally slightly down after a strong fourth quarter for.
For the full year 2023 fiscal.
Fiscal 2023, we expect revenue to be $50 to $500 million, an increase year over year of 96% at the midpoint. This guidance reflects a number of factors benefiting charge point <unk>.
Including first new customer yields from significant investments in our sales and marketing capacity in North America, and Europe in calendar 2021, and going forward this year.
A healthy customer rebuy rate, which has continued to 60% or better of our business.
Second significant product releases. This year's this year as our investments in R&D product and operations continue to move our industry leading portfolio forward.
Third more OEM mandated and investment in charging infrastructure at auto dealerships and area, where our broad connected and flexible solutions portfolio and surface served as well.
The fleet, we have seen triple the pipeline growth in medium and heavy trucks year on year.
In our RFP activity continues to be robust.
Fifth in residential we expect more than 100% category growth with increasing sales to new drivers with new utility auto and take home fleet programs and as we expand in multifamily obligations.
And finally, the continued growth in Europe , and a full year of contributions from our recent acquisitions.
Looking at gross margin for the year the planning for the challenges associated with mix, which is weighted towards lower margin products last year and supply chain to continue slowing margin expansion with those assumptions, we expect non-GAAP gross margin to be 22% to 26% for the full year.
Keep in mind this expectation reflects roughly six points of expected supply chain impact.
Turning to Opex as Pat and I have said, we are investing heavily across all functions to drive our market position and take advantage of the enormous opportunities ahead.
We expect non-GAAP opex to be between $3 50, and three $370 million for the year and show leverage on a percentage of revenue basis.
Lastly, we remain committed to being cash flow positive in calendar 2024.
With that I will turn the call back to the operator to facilitate questions. Thank you.
Thank you and at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Do ask that you please limit yourself to one question.
And we'll pause for a moment just to compiler Q&A roster.
And we will take our first question from Schranz Patel with Wolfe research.
Hey, this is <unk>. Thanks, a lot for taking my question.
Yes, so maybe just picking up on the last point about.
Thank you as we think about the improvement in gross margin or are we thinking about the gross margin guide from from fiscal 'twenty two to 'twenty three you mentioned.
You are baking in about six points of <unk>.
Supply chain.
Headwind number one is that is there.
That sort of based on what Youre seeing right now.
Are you seeing a tighter.
Supply chain at the moment.
Or is that something that youre sort of you just want to put in some some cushion on and then number and then number two.
You mentioned unfavorable mix, maybe if you could just.
Speak a little bit more to that.
And how that's maybe having an impact.
Okay.
Hi, Travis.
So in answer to the first part of your question. If you look at our gross margin assumptions Youre right. Yes. There is a six point headwind that we were flagging that as a function of.
One what we're seeing today to the fact that you heard the revenue guide right. So.
It's one thing to meet your numbers is another thing to go to your suppliers and go I appreciate you're struggling to get this didn't even need twice as much.
So we.
It's very clear to us that it's going to be.
Is going to be tough to get supply and we're making that the primary the primary goal of the company, obviously land and expand with us for so we will run that hard.
So I think.
<unk> is the main determinant of your second question was around.
Mix.
And I think I think we will.
Consistent in several calls now if you look at our gross margins across verticals and solutions they tend to be highest in the commercial area.
Followed by.
Home and then followed by <unk>.
G fast and then when those things are bundled into fleet applications into buying our software as a whole game changes that's coming up is a very strong part of the business. So that's a little hard to predict that the basic mix shift as you go away from commercial and towards residential and.
Quarter in urban fast charge applications, it's going to keep Tcf.
Tcf keep the margins out of it.
And we will take our next question from Colin Rusch with Oppenheimer.
Thanks, so much guys could.
Could you just talk about where the incremental opex investments are going and what you think.
The second really is on return on those things, but there's a lot of that incremental investment funding R&D or is it more on the sell side.
Yes.
Yes, so covenants so.
So we exit the year at a pretty nice clip I think we've been very very consistent if you look at sales and marketing we are increasing our sales and marketing spend.
Alvarez Algorithmically from.
From a capacity planning standpoint, and also there's a big push this year in particular to get.
Broader coverage on the ground both here and in Europe . So we've got.
Pretty good coverage in Europe , where we're adding countries and I'm pretty good coverage here, but.
As the vehicles fill in in the United States, you're going to want to be everywhere. There's a lot of people to go in and need to get on the bandwagon.
We're making these investments.
Meaningful investments in sales and marketing.
<unk> with the growth of the business with some leverage being shown R&D.
As we said moving up.
I do think of it as a percentage of revenue perspective, it's been a significantly taper off but again this is a big year for new product introductions.
As Pat alluded to so we need to get that out and then G&A.
My special array because.
We sort of taken the bullet when it comes to being a public company.
So you Shouldnt see a lot of extension there.
Also one other thing Thats in there Alan that most people didn't think of us as we answered <unk> I don't think of it every day, but it's really in there there's a lot in R&D when we do new products. There's a lot of stand in terms of new product introduction testing destructive testing et cetera. So we're burning through some product now to get to get these big.
<unk> done this year, but you would expect that to taper off next year.
And we will take our next question from James West with Evercore ISI.
Hey, good afternoon, guys and well done.
Thank you. Thanks, James Thanks, So first question from from me.
Philosophical somewhat pet, but your your business I mean, the acceleration here is pretty pretty impressive, but it's also you are accelerating at scale to which which comes with different challenges and so how are you thinking about the operation at.
<unk> mentioned some of the moves on the products and sales and marketing things like that but how are you thinking about operationally how the business needs to be run now that youre, achieving the scale and achieving this massive acceleration in revenue at the same time.
So James there is.
<unk>.
Almost a follow on answer to the question.
That was just answered.
In that if you look at where we are deploying some of the Opex increase.
A big chunk of it is going to improving our internal business systems. We are re looking at our.
Customer onboarding.
Methodology, our station activation methodology youre looking at a port activation rate in the ground.
Panel support right.
For our sales channel.
Well maintain that.
If you if you look at the numbers.
Still a very large percentage of our business goes through channel as designed because we feel that thats a big component of getting the coverage we needed a scale market you see very high transaction rate. So the long very long answer to your question is we're investing everywhere operationally, we need to be invested I'll also point out.
But from a manufacturing operations perspective, we have a deep bench here, we're continuing to invest in that supply.
Supply chain situations keep us on our toes.
We're applying the appropriate resource level, there and as you've seen we've been able to.
Last year's growth relative to the previous year was was not insignificant right. So so even though this year's growth is nearly a double last year's growth was 65%. So youre still looking at.
Good execution rate against a lot of headwinds and that was the result of a massive.
Investment in our operations team behind that operations team are.
Multiple major contract manufacturers, so part of the scale.
Thats been built into the strategy is to work deeply with our contract manufacturers, our supply chain partners et cetera to make sure that we've got appropriate.
Got appropriate infrastructure in place to deal with the scale. So.
It's just we're investing across the board and it shows up in the Opex.
And we will take our next question from Bill Peterson with Jpmorgan.
Yes.
Yeah.
Yes. Thanks for taking my question nice job on the quarterly expectation I wanted to talk about for fleet vehicles.
The operator, obviously opportunities that for the year.
I guess as you look.
At your offerings.
We still make sure you are key differentiators.
I'll be in software on your ability to apply better cost of ownership and I guess, how should we think about our business opportunities and growth outlook. I guess you were up compared to you guys like you started with leading the way.
How should we think about that opportunity growth for this year, particularly next year.
So I just want to make sure I heard the question correctly, there was a little bit of background noise you were referring to.
The value prop around fleet as the first part of your question, Yes really focused.
Focus on value.
Pardon the background noise.
No that's fine.
So the easiest way to think about it is customers in general, especially fleet customers don't want to be the integrator they want their suppliers to be the integrator.
And I think one of the many reasons, we're doing exceedingly well in that in that vertical is that.
We can help them design and layout their depot, we can.
Provide a very broad set of software functionality that they can integrate with their business systems seamlessly and then we have.
Hardware portfolio that you saw us announce last year that is rolling out now to customers and we'll be ramping that throughout the year. It really has been designed in conjunction with that software to work seamlessly and the.
Higher as you I think part of your question was on the <unk> side.
If you look at what we're providing in support services.
The modularity that lends itself towards very easy spares maintenance on site per fleet et cetera, It's just really the whole package and we just take care of it all.
For our fleet customers so.
I'll stop there, but because there's a lot more we can say, but I think I think you get the picture. If you could remind me the second part of your question I could grow that.
Growth.
How should we think about growth in Europe as it can be led by Europe and led by the U S.
So how to think about the growth opportunity relative to your full year guidance.
Yes, I think.
As Rex mentioned in his remarks, and I mentioned in mine.
A big part of our future and we believe that the.
The first company to be able to achieve major market share in both North America and Europe .
We'll have a significant scale advantage.
And if you think about many many customers, especially on the fleet side, but even on the commercial side Theyre multinational.
And when they integrate with their business systems, they want one partner.
For that so it's not only ex substantial from I think being able to drive.
Our cost structure.
It is competitive in fact.
Better than competitive it will be best in class long term, if we can get to.
B is scale leader in both North America, and the U S and Europe and then also again.
Make sure that we can just cover our customer wherever they go and also a few.
Just remember from my remarks.
The bleed over from the other segments is significant.
So fleet reinforces residential residential reinforces fleet commercial gets reinforced by both and vice versa.
<unk> is <unk>.
Working this being in all the verticals really really does provide us a big competitive differentiation. So again on the growth side, we see it coming from everywhere.
Yeah.
And we will take our next question from Mark Delaney with Goldman Sachs.
Yes. Good afternoon. Thank you very much for taking the question I was hoping to speak more on the subscription line, even though the press release talks about that segment growing more slowly last year overall, the sequential pickup there was very good in the sequential growth rate was higher than I think total revenue overall so maybe.
Firstly, if you could comment on what led to that that increase I mean, I think you alluded to activation timing so is that the.
The driver of the pickup in subscription and then as Youre thinking about.
The guidance for this year, how should we think about subscription and it's going to.
See any timing issues or should we expect to have a stronger growth. There this year. Thanks.
Yes so.
The baseline observations that we've given before in terms of timing because obviously software.
While it gets turned on when the station gets turned on in essence, and we have a time lag on that so it's usually a quarter plus.
Alluded to that on several occasions.
And so that's a factor in terms of lag the pickup that you saw recently certainly our acquisitions didn't hurt since substantially but all but almost substantially all of their revenue.
Most of the acquisitions flow into that line and as you may recall, we closed one acquisition in Q, Let's say Q2, I think it was and then the other one late in Q3. So Q4 is the first quarter, where we had both of them contributing in full volumes.
That's a big help as well.
Also had a big push recently in terms of.
Extending our assure warranty program to more and more customers.
Because that's important for everything.
All the time and look great, which is part of our value proposition. So we've been pushing that pretty hard so.
So I think those are the main contributors to how that that line moves around.
Yeah.
We will take our next question from Matt Summerville with D. A Davidson.
Thanks.
All of things first.
I want to think back to the time you issued your sort of spec projections and I think for fiscal 'twenty. Three you were talking about a number of sub $3 50 in revenue. So here today talking about 450 to 500, I mean wow.
Pretty pretty big step function improvement and I guess I just want to put a finer point on what is really driving that upside versus the view you would been expressing.
Not all that long ago really when you think about it but I imagine there is a component of new customer funnel rebuy rates the ramp in subscriptions all those good new products all of those things, but maybe just rank order of magnitude, what's driving that and then Rex if he.
Wouldn't mind, what it was the acquisition contribution to revenue in the quarter. Thank you guys.
So I'll start.
Jim.
So first of all in no particular order.
<unk> rates are about the same virtually identical.
That moves around a little bit, but its always north of about 60% somewhere between 60 and 70, depending on the quarter and.
And Thats just timing.
We're seeing strength from existing customers because it is an expand model with cars.
Overarching answer to your question is vehicles.
The more vehicles that.
Our available to consumers and you've seen.
In my remarks, Bloomberg New energy finance.
As increased there.
They are.
Prognosis for.
For auto sales in both North America, and Europe , as those things flow in at higher rates.
Naturally see.
Higher revenue as a result, so the comment that I make consistently is were broadly exposed to the EV to the EV industry. So we're sort of an index in that respect and that as more and more vehicles.
Come into the commercial.
Commercial space.
Drives it drives our commercial customers to purchase more it drives new commercial customers you saw my stat on the Fortune 500, and our deep penetration into the Fortune 500.
In North America. It works the same way in fleet.
And frankly fleet is just getting started it's just getting out of the gate the vehicle demands or the vehicle demands are certainly there.
The vehicle Oems are just starting to roll vehicles, and you don't have a full complement of vehicles there to cover everything so watch that one over time, because thats going to be a very exciting space for charge points and then residential.
People, just need access to charging where they live and so you're seeing very strong demand there as evidenced by all the numbers that <unk> laid out for you.
Brexit Tinker with it.
Just a follow up question was what was the contribution from the European acquisitions.
As we had forecasted it's approximately $4 million in revenue.
And then separately from an Opex perspective, it's about 5%, but we won't be breaking those out going forward, but I think that gives you a sense of scale.
I do want to point out one thing.
That that those are those are software acquisitions.
So that that revenue is flowing into the software subscription line and as we've said many times the growth rate.
Which is so fantastically high in Newport ads.
<unk>.
Hardware revenue associated with that is recognized in the period.
So there is a difference in the Rev Rec and so that drives the disparity there.
And the.
Kind of cursory apparent contribution to revenue.
Between the subscription line and the hardware lines, but they are inextricably linked.
And we will take our next question from Ryan Greenwald with Bank of America.
Hey, good afternoon guys.
Maybe just going back to the margins and operating expenses I appreciate the additional color on how youre thinking about fiscal 'twenty. Three here can you just talk a bit about how youre thinking about the operating leverage into the outer years as you think about cash flow breakeven in calendar 'twenty four.
Okay.
Yes, so I think.
Brian would you have to do is first calculation as let's say opex as a percent of revenue for this year versus last so last year was pretty much 100%.
We're going to get 20, some points of benefit I think to 76% if I'm not mistaken. So go go from 99% to 76, that's a big move in one year.
And as I mentioned earlier I think.
The R&D should taper off a little bit faster rate than sales and marketing for example, the G&A should be fairly stable.
If you think about our growth rate next year, and obviously I'm not going to guide to out years, but.
So we're on the front end of this thing one would think we're going to have a meaningful growth rate in the ensuing years as well, but there is no way that opex is going to keep pace with that because there's a need to that's where all the leverage kicks in so we picked up 23 points. This time.
I'd like to do that two or three months.
Better than that next year and better than that of the year after and continue to drive that down and cross every 24, which is what we've suggested.
Okay.
And we will take our next question from Craig Irwin with Roth Capital Partners.
Thanks for taking my questions I should to add my.
Relations to your execution.
How you've set up the company for impressive growth.
Sure sure.
Thank you.
First question I wanted to ask is really it's a simple one right product portfolio you guys have invested a lot of money a lot of effort.
In being ready for some of these different opportunities I guess the topic minus maybe fleet.
But there is still quite a lot of innovation going on in the EV charging market.
Sort of.
Micro DC Chargers, there is sort of the battery in a box.
There is a few different.
Permutations that seem to be getting.
Good interest out there from potential customers, we've yet to see if these are going to sell in significant volumes.
But can you tell us sort of what you see as top priorities for charge point as far as product portfolio over the next year should we expect a similar tempo of introductions or is that tempo, even likely to increase from here.
We don't we're constantly rolling.
<unk>, especially on the software side and we usually don't.
<unk> formally announced that unless it's through a partnership so on the software side Youre seeing just a tremendous amount of continuous.
Evolution there your question centered more around the hardware side, so I'll flip to that.
With respect to.
The fleet announcement that you saw last year ever.
Every bit of that product line applies as much to consumer passenger car charging.
Yes.
In the Wild is it is it does fleet.
We build all our technology. So the platforms are applicable to a broad set of verticals as possible.
So with respect to different speeds and feeds of DC Chargers.
Evolution of the architecture et cetera, yes, that's it's either it's either part of stuff that we've already announced.
Or or we have a deep pipeline behind that and because we haven't announced that obviously I can't talk in more detail about that.
Same on the AC charging side.
So.
Our our coverage is really broad with your specific.
With your specific question around battery.
Our belief is that battery at the site makes sense.
And we tend to focus on site level energy storage when it makes sense to augment a site. We can we do not integrate battery directly into our Chargers, it's easy to accomplish the same.
Fundamental application benefit when that's applicable and only in those scenarios by using it at a site level and also makes it much easier to expand at the site level. So we don't integrate battery into our Chargers.
Okay.
Saying that we're looking at in the space.
Hopefully we have improved visibility on how and when exactly this is going to flow.
But.
There is some optimism that some of the money starts flowing later on this calendar year, which would mean almost certainly in your fiscal year.
How much of the.
The strong guidance that you issued today would you say is related to this.
Anticipated funding flow or is that potentially incremental support for what we see as a very strong market.
So we have a deep policy team thats.
Done.
<unk> worked over the nearly 15 year history of the company.
So we're very close to this and I'll remind you of comments that we've made.
Consistently over the last year.
We said programs, which are very ambitious.
Like like the infrastructure Bill.
Moneys that are dedicated to our space those ambitious programs take a while and our experience to operationalize, we have a pretty good feel for.
How long that takes.
And so our expectation is very conservative.
We don't really have an expectation of that hitting in our number this year.
We do.
We would expect it to hit in subsequent years.
We need to see how the state programs. The majority of that money is going to flow through to states and then states have to construct their programs.
And we have to see how they are constructed to be able to.
Really really evaluate.
How it is going to impact us on a go forward basis, but we've had very very very good.
Track record as a company historically on party large participation rates and programs like that and we would expect.
That if things are constructed is as as things have been in the past that we would we would be able to participate in them significantly. So again nothing built into this year to remind you it's the money.
As it's currently been.
Discussed by the administration rolls over five years with <unk>.
First year with a slightly smaller amount, but then it's roughly $1 billion a year over.
Over that five year period, like I said, a little smaller in the first year.
Yeah.
We will take our next question from Stephen <unk> with Stifel.
Thanks, Good afternoon everybody.
The just curious on.
Sort of trying to tie is a little bit into the gross margin trajectory you need to get to that 2020 for cash flow breakeven.
<unk> cash flow positive.
You talked about.
The mix racks, and you've talked about this before sort of the mix between commercial home in DC fast and the impact that has on margins.
Has there been anything in the macro as far as.
Sort of the EV adoption rates and how that kind of affects where people charge I'm just sort of thinking about this from <unk>.
Standpoint.
The EV adoption cycle accelerates there is probably more people who can't charge at home.
Just sort of thinking about how that folds into your mix of margin assumptions.
That's a great question and we we've been committed from the beginning of the company to make sure that we have solutions. So drivers can charge wherever they need to charge.
And one of the most important.
One of the most important aspects to recognize with EV charging is you don't have to go somewhere to go somewhere.
And that's a very interesting value proposition. If you are a consumer it's an enhancement to your life.
So from our perspective, there may be there may be.
Some folks that.
Purchased an EV that don't directly initially have available charging infrastructure.
Where they live but we're seeing very strong growth in our residential business, we're seeing that broad based we're seeing both single family residents.
We're seeing it in multifamily if you look at our lease co partnerships in Europe that include a home home reimbursement for fuel included with your car. That's part of your compensation package, we're seeing tremendous growth there in fact, we're making.
Huge investments software wise with our partners in Europe .
In that in that vertical anticipating strong growth to continue there. So while some people may not have access at home frankly.
Think that will not be the dominant that will not be the dominant characteristics. I think most will add scale have some level of access whether it be street side multifamily or single family residence.
And we will take our next question from Steven Fox with Fox Advisors.
Thanks.
It gives me good afternoon.
I was wondering if you could just double click a little bit more on the comment about the pipeline for fleet fleet tripling as part of that.
Sales targets for this year.
I was just curious how much of that is.
Customer expansion versus changes in buying plans or site plans that you are seeing an expanded psi size of.
<unk> infrastructure by certain fleets for to support different areas. How would you sort of describe why that pipeline is going up so much. Thank you.
Yes happy to so the main driver is as Pat said earlier.
People are starting to see vehicles coming to the passenger vehicles or other way and then there.
So just talk to us about yesterday was talking about getting delivery of.
A substantial number of electric delivery vans. So you go okay. So.
The vehicles are hitting the streets.
What it really is people, believing that this transition is coming the vehicles will come and they're getting ready for it because it is 100% and economic total cost of ownership game. When it comes to a fleet operator, because they get the business right. It's not a personal preference emotional kind of thing.
Our RFP volume, which we've talked about in several calls.
Enormous.
It's extremely vibrant and robust area for us our win rates are strong.
And as Pat said earlier, there is a combination of everything you can imagine some people say well what about software over here and hardware over there and this hardware over there in the service over there and they are willing to integrate themselves.
I think that's unfortunate.
Do that that's too hard to do.
But then there are a lot of people are figuring out what if I had to.
Single, a single point solution and integrator like a charge point that'd be the way to go. So I just think people are buying into exactly what Pat said, which is I don't want to be the integrator I believe that the total cost of ownership here is going to really drive that business, let's go and there are enough vehicles starting to hit the roads.
That side pickup trucks, all the way up to the age.
18, wheelers arent, there yet but.
Of the stack.
People know they've got to be ready so.
This is.
That part of the businesses that part of the customer.
Base has woken up.
Yeah.
And we will take our next question from David Kelley with Jefferies.
Hey, good afternoon, guys the auto dealer investment in charging infrastructure, that's being mandated.
Can you talk a bit more about that opportunity the mix of.
Chargers that that you expect to see there.
Sure.
That's a.
Sub vertical that we've been in for a lot of years.
And so we know it quite well.
Dealerships.
As a more and more of their inventory converts to electric they have the normal care and feeding for their pre delivery inspection and maintenance groups in the in the back of house so to speak.
Where they deploy a variety of charging infrastructure different speeds and feeds to suit the the.
Particular scenario they typically you'll have.
Some form of Charger and a service bay it'll tend to be either an AC charger or potentially a low end DC charger and the service Bay Youll see the PDI facilities typically have a fast charger because the pre delivery inspection does it take very long so youll see a medium capacity fast charger typically in those and then I'll front youll.
See a combination of AC Chargers in DC Chargers, we see both both for mostly mostly for customer parking, but occasionally for overflow.
At a dealership and so the way we look at the segment is going to populate relatively quickly over the next.
This year in the next several years.
They have to get ready to get the to be able to handle the inventory. So we expect it to be a robust segment.
For us.
And.
Eventually attach rates I think I think that's frankly years away right now there's a lot of infrastructure to changeover.
And we will take our next question from Vikram, <unk> with Needham and company.
Yes.
Good afternoon, everyone. Most of my questions have answered I had sort of a housekeeping question when I look at the food Activations in fourth quarter. It seems like most of the growth came from Europe .
Can you talk about what kind of growth, you're seeing which sub segment the growth coming from our strategy for 2023, if you plan to enter new regions and markets.
In Europe and outside.
And two.
Anything unusual white oak activation in the U S was not as strong outside of Europe doesn't want that strong. Thank you.
Yes, so couple of things to keep we'll keep one huge thing in mind, which is in our port count we don't have residential at all.
So we have a very robust residential business.
But we were.
We're proud of but we don't we don't count those in the activator per account space.
The main reason why you would think.
I used to say, it's moved a little more slowly as the mix shift in our business over the past three to four quarters has been.
A little less commercial workplace retail hospitality on the AC side, a little bit more on the DC side, which is a variety of applications.
A D C for US 10 X plus the cost of an AC court.
So obviously, that's a great great revenue perspective, but from a port count perspective.
It's a slower growth thing and then keep in mind that activate reports its courts under management.
So.
As we add ports in Europe . For example, we just did that by virtue of an acquisition.
Yes.
Through an acquisition.
There are the airports we add.
There are other ones necessarily that we've sold because we will sell well.
Software with hardware, but not hardware without software so.
So that can skew things a little bit towards Europe , and then the question of course is.
Activation right.
So we may have a bang up quarter, which we just did shipping a lot of product, but if you like most people have a fairly back end loaded quarter, because we do have.
Things accelerate through this through the three months of a given quarter most of what we ship in our Q4 doesn't get turned on that quarter, because you've got to get there is going to put in the ground I'm going to turn it on and they're going to go reactivation process activates offered everything else. So thats why youll see.
A one quarter delay on a big chunk of what we sell versus what we exited.
Yeah.
And we will take our next question from Kashi Harrison with Piper Sandler.
Good evening, all and thanks for taking the question congrats on the revenue and Opex leverage and guidance.
Thank you.
So I would like to dig into gross margins for a second if that's okay.
You indicated that margins gross margins were taken a little bit of a hit entering calendar 'twenty two just given the acceleration in growth land and expand strategy and securing supply.
Presumably your growth rate is going to be quite prolific entering calendar 'twenty three just given whats implied in the second half of your guidance here and so I was wondering if maybe you could walk us through some initiatives you're taking to drive gross margin expansion as you think about calendar 'twenty three 'twenty four.
And then in addition, if you could just maybe share some color on how to think about subscription gross margins how to think about that moving forward. Thank you.
Yeah.
Yes, So I think I think the question is.
What are the things that could go well as we look out into 'twenty, three and 'twenty four from a gross margin perspective.
Let's start off by saying that.
We've had three or four quarters of some of the hardest work I've seen anybody could do it ever.
How we managed to Eke out even a point of growth over the last year today is quite remarkable.
But again, we've been struggling with mix and then assurance of supply in the face of a very very high growth rate is really really hard.
And then it's also really hard when you're introducing new products, which we're definitely doing this year and.
We're going to see them and go look I not only need to even supply this but I don't I don't need very much of them in week, one anymore in week, two and more and we three and you start ramping up yet another.
Product that starts off not at scale.
That's a headwind that's very much a headwind having said that.
As the supply chain things is I do think they are.
Theres a whole documented internal set of cost reductions byproduct.
We will roll through as quickly as we can once once we get past the assurance of supply issue.
I think we've got some.
Well things happening in the subscription line from a.
Acquisition perspective from a growth in our core business perspective.
And then there is a lot of things we're doing from a from a cost perspective there.
Because.
As you know or as I hope you know.
Our support organization lives in that line, so theres a lot of leverage in automation and other improvements I think we can get there.
One other thing we used to have a very very healthy.
Gross margin in our other line because there was some components there that we're heavily dependent on overall utilization. So when people start revenue stopped driving to work.
That takes a bit of a bullet so we do get back to work.
Near term in that part of that.
That part of the P&L it turns back on as well.
I think youll see youll see a good performance there and then obviously if the weather clears and we can get that six points I referenced in my script back life is good so it's reassess, but keep in mind what I.
Hope I implied if not literally in the call. We haven't assumed in our planning that anything materially changes from a go back to work Covid et cetera standpoint, we've looked at the world as we know it today.
We don't know when that switches, but we're going to we're not going to pick a date and set up our forecast in our P&L based on a date.
So <unk>.
Improvement in the external environment can only help us.
And ladies and gentlemen that concludes our question and answer session I will now turn the call back to Pascal for closing remark.
Okay, well, just well, we'll wrap up this call which is.
Pretty much on our anniversary as a public company by thanking you all for.
You don't just said.
Tremendous amount of great earnings call questions over the last year.
Really happy.
Where we are and the progress that we've made it's Ben.
It's been quite exhilarating here as a company I want to thank all the charge pointers out there I know many of them are listening.
It's been a great journey for everyone on our first year as a public company again.
And on a go forward basis exciting times to come Youre really seeing asset.
Beginning of a very very very long multi decade growth cycle.
I can't emphasize that enough. This is.
Not <unk>.
Normal circumstances for most markets most markets don't have a growth curve nearly a steep nor do they have.
Nor do they have a period of growth that less as many years as this phone will likely have a more.
As I tell folks here all the time.
We're plus or minus at 1% penetration, depending on whether youre talking about North America or Europe into the into the fleet of vehicles out there less so for.
For fleets for consumer passenger cars, plus or minus a percent or so so.
A company like this can.
Turn in these results.
That level.
Four.
How early we are in penetration.
We have enormous.
Absolutely enormous expectations for what this looks like and just a very few years. So thank you very much and we will we will see you next time.
Ladies and gentlemen, this concludes today's conference call. We thank you for your participation you may now disconnect.
Goodbye.
Okay.
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