Q4 2024 ChargePoint Holdings Inc Earnings Call

Unknown Executive: which we reconciled to GAAP in our earnings release and for certain financial periods in the investor presentation post on the investor section of our website. And finally, we will be posting the transcript of this call on our Investor Relations website within the quarterly results section. With that, it's my pleasure to introduce our President and CEO, Rick Wilmer. Thank you all for joining us.

In our earnings release and for a certain financial periods and the Investor presentation posted on the investors section of our website.

And finally, we will be posting the transcript of this call to our Investor Relations website within the quarterly results section with that it's my pleasure to introduce our president and CEO Rick Wilmar.

You all for joining us in today's call. We will review our financial results for Q4 of fiscal 2024, and the corresponding annual results after giving an overview of Q4, we will outline charge point strategy moving forward as promised during the Q3 earnings call.

Richard Wilmer: In today's call, we will review our financial results for Q4 of fiscal 2024 and the corresponding annual results. After giving an overview of Q4, we will outline ChargePoint's strategy moving forward, as promised during the Q3 earnings call. Later in the call, our interim CFO, Mansi Khetani, will outline how we plan to achieve our commitment to being adjusted EBITDA positive in the fourth quarter of this year, and she will also provide top line guidance for Q1 of fiscal 2025. I will begin by reviewing the results for Q4 of fiscal 2024, as well as a few highlights of the quarter.

Later in the call our interim CFO monthly Tony will outline how we plan to achieve our commitment to being adjusted EBITDA positive in the fourth quarter of this year and she will also provide top line guidance for Q1 of fiscal 2025.

Tony: I will begin by reviewing the results for Q4 fiscal 2024 as well as a few highlights of the quarter critically our inputs to the business are beginning to make a difference as evidenced by the operational efficiencies and cash management improvements I will outline shortly or.

Richard Wilmer: Critically, our inputs to the business are beginning to make a difference. As evidenced by the operational efficiencies and cash management improvements I will outline shortly. Our revenue for the quarter increased sequentially to $116 million in Q4.

Tony: Our revenue for the quarter increased sequentially to $116 million in Q4.

Richard Wilmer: The quarter also saw improvements to the underpinnings of the business. These included our non-gap gross margin increasing to 22%, a decrease in operating expenses to $75 million, or 65% of our revenue, and a significant reduction in our cash use. Also of note was our subscription revenue, which was up 30% year over year. This is particularly exciting because it represents our highest margin revenue. For the full fiscal year 2024, revenue was $507 million. Our CFO, Mansi Khetani, will give an annual review in her portion of the call.

Tony: The quarter also saw improvements to the underpinnings of the business.

Tony: These include our non-GAAP gross margin increasing to 22% a decrease in operating expenses to $75 million or 65% of our revenue.

Tony: And a significant reduction in our cash usage.

Also of note was our subscription revenue, which was up 30% year over year. This is particularly exciting because it represents our highest margin revenue stream.

Tony: For the full fiscal year 2024 revenue was $507 million. Our CFO months, you can Tony will give an annual review in her portion of the call.

Richard Wilmer: In Q4, we had quite a few highlights. As the industry moves towards the next connector in North America, ChargePoint lived up to our promise of being first to market and ready for the transition. In Q4, NAAQS connectors rolled out across both our residential and commercial product lines, and the first NAAQS cable installations at DC public fast chargers went into operation. This represents the first time Tesla vehicles have been able to fast charge outside of their own ecosystem without a costly adapter. With additional NOx cables being installed regularly, we are well ahead of the transition. We kicked off the quarter with the launch of the Mercedes-Benz HPC charging network in North America. The network represents the pinnacle of our full-stack offering. Mercedes drivers can reserve a charging session, seamlessly authenticate, charge, and pay with plug and charge convenience on a new network. These features are enabled by ChargePoint for the Mercedes me in-dash experience and mobile app.

Tony: In Q4, we had quite a few highlights.

Tony: As the industry moves towards the <unk> connector in North America charge point lived up to our promise of being first to market and ready for the transition.

Tony: In Q4, <unk> connectors rolled out across both our residential and commercial product lines and the first Max cable installations at DC public fast charges went into operation.

Tony: This represents the first time Tesla vehicles have enabled to SaaS charge outside of their own ecosystem without a cost of the adapter.

Tony: With additional Nox cables being installed regularly we are well ahead of the transition.

Tony: We kicked off the quarter with the launch of the Mercedes Benz HP C charging network in North America the.

Tony: The net represents the pinnacle of our full stack offerings Mercedes drivers can reserve charging session seamlessly authenticate charge and pay with plug in charge convenience on our new network. These features are enabled by charge point for the Mercedes meat in dash experience and mobile App.

Richard Wilmer: At the end of the year, we expanded our relationship with Verizon Communications. ChargePoint will now begin deploying fleet charging solutions at Verizon service areas. These locations will support the Verizon fleet operations. In January, we received our FedRAMP authority to operate, whereby ChargePoint became the only end-to-end EV charging provider to receive this authorization from the United States federal government. So what exactly does this mean?

Tony: At the end of the year, we expanded our relationship with Verizon Communications charge, we will now begin deploying fleet charging solutions at Verizon and service areas. These locations will support the horizon fleet operations.

Tony: In January we received our fed ramp authority to operate whereby charge point became the only end to end EV charging provider to receive this authorization from the United States Federal government.

Tony: So what exactly does this mean charge point is now able to pursue tens of millions of dollars in available government contracts.

Richard Wilmer: ChargePoint is now able to pursue tens of millions of dollars in available government contracts, and all our cloud software products are live for selection on the FedRAMP Market. Also in Q4, we expanded upon our existing relationship with WEX, a leading payments and software provider to businesses representing more than 19 million commercial vehicles serviced globally. Wex's U.S. customers and their drivers are now able to use Wex's mobile app, DriverDash, to find, use, and pay for charging within the ChargePoint network.

Tony: And all our cloud software products are live or selection on the fed ramp marketplace.

Tony: Also in Q4, we expanded upon our existing relationship with works, a leading payments and software provider to businesses, representing more than 19 million commercial vehicles serviced globally.

Tony: <unk> U S customers and their drivers are now able to use <unk> as mobile app driver dash to find use and pay for charging within the charge point network.

Richard Wilmer: DriverDash enables fleet operators to gain enhanced insight and metrics into driver performance, including preferred pricing, proactive monitoring, and reporting through a single integrated payment platform. For our business, this solution represents an exciting new application of an existing product and an additional revenue stream to pursue in the realm of fleet. We are actively working with WEX on additional applications for our existing products. Sales volume of our home charging station, the ChargePoint HomeFlex, was up 37% year-over-year and set another annual sales record. This was highlighted by record home charger sales in Q3 and in Q4. Our NAX offerings for HomeFlex have become approximately 10 percent of the total orders on the ChargePoint e-commerce store, showing that Tesla drivers are also choosing ChargePoint for their home charging needs. HomeFlex installations are a critical entry point into the ChargePoint ecosystem, so we are encouraged by the excellent sales volume the product has seen lately. We expect these sales to reign strong in fiscal year twenty five.

Tony: Ivor Dash enables fleet operators to gain enhanced insight and metrics into driver performance, including preferred pricing proactive monitoring and reporting through a single integrated payment platform.

Tony: For our business the solution represents an exciting new application of an existing product and an additional revenue stream to pursue in the realm of fleet. We are actively working with wax on additional applications for our existing products.

Tony: Sales volume of our home charging station that charge point on flex was up 37% year over year and set another annual sales record.

Tony: This was highlighted by record home charter sales in Q3 and in Q4, our <unk> offerings for home flex have become approximately 10% of the total orders on the charge point E Commerce store showing the Tesla drivers are also choosing our charge point for their home charging needs.

Tony: <unk> flex installations are a critical entry point into the charge <unk> ecosystem. So we are encouraged by the excellent sales volume the product has seen lately. We expect these sales to remain strong in fiscal year 'twenty five.

Tony: As I mentioned in our last earnings call network reliability is critical.

Richard Wilmer: As I mentioned in our last earnings call, network reliability is critical. It's a barrier to EV adoption, and we have dedicated considerable resources to improving charger uptime. When we launched the Network Operations Center in August of last year, the ChargePoint network was measured at 96% uptime. Since then, we have made improvements to the functionality of the operations center itself, as well as remedied many of the issues it identified. I am pleased to report that as of January 31st, we are at 99.6% uptime based on what we currently measure. As a reminder, ChargePoint defines uptime as the percentage of ports capable of dispensing energy at any given moment. But uptime metrics mean nothing if any driver pulls up to a ChargePoint station and walks away without a successful charging session. So we are stopping there.

Tony: Barrier to EV adoption, and we are dedicating considerable resources to improving charger uptime.

Tony: When we launched the network Operation Center in August of last year.

Tony: <unk> network was measured at 96% uptime. Since then we've made improvements to the functionality of the operation Center itself.

Tony: As well as remedied many of the issues that is identified I am pleased to report that as of January 31, we were at 99, 6% of time based on what we currently measure as a reminder, charge point defines uptime as the percentage of ports capable of dispensing energy at any given moment, but.

Tony: If time metrics mean nothing.

If any driver pulls up to recharge points station and walks away without a successful charging session. So we aren't stopping there we are continuing to expand the remote diagnosis and predictive analytics capabilities of our network operations Center and incremental measurements will be added this year.

Richard Wilmer: We are continuing to expand the remote diagnosis and predictive analytics capabilities of our Network Operations Center, and incremental measurements will be added this year. To be transparent about where we fell short of our expectations in Q4, we had a sluggish quarter in the EU. This was a result of lower hardware sales to commercial customers, but the European software business remained steady. In North America, sales to U.S. automotive dealerships remained at a somewhat slow pace in Q3.

Tony: To be transparent about where we fell short of our expectations in Q4, we had a sluggish quarter in the EU.

Tony: This was a result of lower hardware sales to commercial customers, but the European software business remained steady and.

Tony: In North America sales to U S. Automotive dealerships remained at a somewhat slow pace of Q3 <unk>.

Richard Wilmer: Here are the latest non-financial statistics of note. We count 74% of the Fortune 50 and 60% of the Fortune 500 as customers. We finished the quarter with more than 286,000 global active ports under management on the ChargePoint network, of which approximately 24,000 are DC fast chargers. We provided drivers with access to more than 631,000 roaming ports worldwide for a total of more than 917,000 places to charge.

Tony: Here are the latest non financial statistics of note, we count 74% of the Fortune 50, and 60% of the fortune 500 as customers.

Tony: We finished the quarter with more than 286000 global active courts under management on the charge point networks of which approximately 24000 are DC fast Chargers.

Tony: We provided drivers with access to more than 631000 roaming ports worldwide for a total of more than 917000 places discharge of particular note in Q4, we hit a milestone of 100000 active sports under management in Europe, which is another nod to our growth in subscription.

Richard Wilmer: In particular, in Q4, we hit a milestone of 100,000 active ports under management in Europe, which is another nod to our growth in subscription revenue. Q4 also saw considerable growth in the e-mobility metrics ChargePoint tracks. We estimate we now have enabled more than 9 billion electric miles driven. That would mean over 1.9 million metric tons of greenhouse gas emissions have been inverted by EVs on our network.

Tony: Revenue.

Tony: Q4 also saw considerable growth in E mobility metrics charge point tracks. We estimate we now have enabled more than $9 billion electric miles driven that would mean over one 9 million metric tons of greenhouse gas emissions have been inverted by Evs on our network.

Tony: In summary charge point made incremental progress in the fourth quarter, we have a revised strategy for the road ahead, and we remain committed to the goal of becoming profitable on an adjusted EBITDA basis in the fourth quarter of this year.

Richard Wilmer: In summary, ChargePoint made incremental progress in the fourth quarter. We have a revised strategy for the road ahead, and we remain committed to the goal of becoming profitable on an adjusted EBITDA basis in the fourth quarter of this year. To give market context for the strategy we will be outlining shortly, I'd like to report what we see in terms of ED adoption. Based on the latest sales reports, EV growth continues at a double-digit pace, but not at the aggressive rate OEMs had expected. Looking at the year ahead, Bloomberg NEF estimates passenger EV sales will grow at 32% year-over-year in North America and 10% year-over-year in Europe. However, it is expected that dependable charger access will be available for these vehicles, and ChargePoint remains a leading infrastructure solution.

Tony: To give market context for the strategy, we will be outlining shortly I'd like to report what we see in terms of adoption.

Just on the latest sales reports EV growth continues at a double digit pace, but not at the aggressive rate Oems had expected.

Tony: Looking at the year ahead, Bloomberg estimates passenger EV sales will grow at 32% year over year in North America, and 10% year over year in Europe.

Tony: However, as expected dependable charger access for these vehicles and charge point remains a leading infrastructure solution.

Tony: We outlined vehicle data because EV sales are a leading indicator for us.

Richard Wilmer: We outline vehicle data because EV sales are a leading indicator for us. To directly address the e-deterging industry, we are seeing a few trends. First, we are seeing disaggregation between hardware and software purchases, particularly amongst larger customers that prefer a multiple sourcing model. This represents an opportunity for us with software, which I will discuss later in the call. The second trend is the commercial hesitation brought on by the noise surrounding the EV segment lately. Institutions want and need EV charging but are hesitant to commit at a time when the news is questioning EV adoption. They are still buying, but not as freely or quickly as they were last year. The third trend is in the consumer market, where patterns contradict that of commercial.

Tony: To directly address the EV charging industry. We are seeing a few trends first we are seeing disaggregation between hardware and software purchases, particularly amongst larger customers that prefer a multiple sourcing model.

Tony: This represents an opportunity for us for software, which I will discuss later in the call.

The second trend is the commercial hesitation brought on by the noise surrounding the EV segment.

Tony: Institutions want and need EV charging but are hesitant to commit at a time when the news is questioning EV adoption.

Tony: They are still buying but not as freely or quickly as they were last year.

Tony: Third trend is in the consumer market, where patterns contradict that of commercial home charger sales are up considerably a knock on effect of new EV sales. This tells us that despite the noise EV adoption is continuing charge point utilization data backs this up.

Richard Wilmer: Home charger sales are up considerably, a knock-on effect of new EV sales. This tells us that, despite the noise, EV adoption is continuing. ChargePoint utilization data backs this up. Regardless of sector, one thing is clear, based on our network utilization data: pressure for more charging infrastructure continues to build. Last year, the ChargePoint network dispensed over 1 terawatt of energy, which is an increase of more than 70% year over year, while the active port count continued to grow. However, utilization drastically outpaced it, with charging sessions increasing 53% for the year.

Tony: Regardless this sector. One thing is clear based on our network utilization data pressure for more charging infrastructure continues to build.

Tony: Last year, the charge point network defense over one terawatt of energy, which is an increase of more than 70% year over year, while active port count continued to grow utilization drastically outpaced it with charging sessions, increasing 53% for the year.

Richard Wilmer: This data makes it clear that charging infrastructure must scale up faster to keep up with demand, and soon. As a result of these trends, we are evolving our strategy to meet the current needs of the market. Here are the four cornerstones of our strategy moving forward. Our first cornerstone is operational excellence. In our Q3 earnings call, we emphasize the importance of operational rigor but a laser focus on execution. The better we execute, the better our results. Steel, efficiency, speed, and managing casts all represent a priority.

Tony: This data makes it clear that charging infrastructure must scale up faster to keep up with demand and soon.

As a result of these trends we are evolving our strategy to meet the current needs of the market.

Tony: Here are the four cornerstones of our strategy moving forward.

Tony: Our first cornerstone is operational excellence.

Tony: In our Q3 earnings call, we emphasized the importance of operational rigor with laser focus on execution.

Tony: The better we execute the better our results scale efficiency speed and managing cash all represent priorities.

Richard Wilmer: While we are confident in our strategy, it is nothing without a continual focus on operational excellence and execution. This will remain a core focus. We are making progress, but not yet where we want to be to demonstrate measurable progress. Here are two recent actions that have had a major operational impact on our business. In January, we took the tough decision to reduce our global workforce by approximately 12%.

Tony: While we are confident in our strategy that is nothing without our continual focus on operational excellence and execution.

Tony: This will remain a core focus we are making progress, but not yet where we want to be to demonstrate measurable progress here are two recent actions that had a major operational impact on our business.

Tony: In January we took the tough decisions to reduce our global workforce by approximately 12%.

Richard Wilmer: This represented a reduction of approximately $33 million in annual non-GAAP operating expenses and was concentrated in hardware engineering for reasons beyond simply cutting our op-eds. To explain why the reductions were focused on hardware, in February, we announced a new approach to hardware development. We now have an agreement with a leading power supply manufacturer, Actel, to jointly develop future hardware.

Tony: This represented a reduction of approximately $33 million in annual non-GAAP operating expenses and was concentrated in hardware engineering for reasons beyond simply cutting our opex.

Tony: To explain why the reductions were focused on hardware in February we announced a new approach to hardware development.

Tony: We now have an agreement with a leading power supply manufacturer Asheville to jointly develop future hardware under.

Richard Wilmer: Under the agreement, ACCO and ChargePoint will co-design hardware for our portfolio, and ACCO will then manufacture that hardware for ChargePoint. This represents an extension of our existing agreement, and the arrangement enables us to bring new hardware to market faster because the development of the hardware is integrated with the manufacturing. We will also have more engineers than ever working on ChargePoint hardware. We expect to do this at a lower cost, all while improving our benchmark quality standards.

Tony: Under the agreement <unk> charge point will code designed for our portfolio and <unk> will then manufacture that hardware for charge points.

Tony: This represents an extension of our existing agreement and the arrangement enables us to bring new hardware to market faster because the development of the hardware is integrated with manufacturing.

Tony: We'll also have more engineers than ever working on charge point hardware, we expect to do this at lower costs, all while improving our benchmark quality standards.

Richard Wilmer: To summarize my comments on this operational cornerstone, in the last six months, we have taken nearly $70 million in annual non-GAAP OPEX out of the business when compared to our OPEX high point in Q2 of last year. In the process, through partnerships, we have increased our hardware engineering bandwidth, and we are improving our speed to market. There are many further initiatives planned, but we wanted to relay the demonstrable progress to our shareholders today. We are confident we are on the right track.

Tony: To summarize my comments on this operational cornerstone in the last six months, we have taken nearly $70 million in annual non-GAAP opex out of the business when compared to our Opex high point in Q2 of last year.

Tony: In the processed through partnerships, we have increased our hardware engineering bandwidth.

Tony: And we are improving our speed to market.

There are many further initiatives planned, but we wanted to relate that demonstrable progress to our shareholders. Today. We are confident we are on the right track. The second cornerstone is delivering world class driver experiences.

Richard Wilmer: The second cornerstone is delivering a world-class driver experience. We now serve more than a million quarterly active DV drivers, representing one of the largest charging platforms in the world. To attract and scale this driver base, we need to deliver outstanding experiences at every step of the driver journey for any type of EV in North America or Europe. At home or on the road, while the driver eats, sleeps, works, or plays, ChargePoint is committed to providing a driver experience that is intuitive and reliable.

Tony: We now serve more than 1 million quarterly active BV drivers, representing one of the largest charging platforms in the world.

Tony: To attract and scale. This driver base, we need to deliver outstanding experiences every step of the driver attorney for any type of EV in North America, or Europe at home or on the road, while the driver each sleeps works replace <unk> point is committed to providing a driver experience that is intuitive and <unk>.

Tony: <unk> or.

Richard Wilmer: Our drivers are key to our success, and whether they plug into one of the 286,000 active ports on the ChargePoint network or tap into the over 631,000 more ports with one of our roaming partners, we must make it easy to charge. We not only need to deliver a great experience but also surprise and delight our drivers with new, even more useful features. We will continue to execute a roadmap for this, and we will report progress as we go. The third cornerstone of our strategy is to double down on the development of our software platform. Historically, we have focused on selling full-stack hardware and software solutions. Our future will include a significant focus on software solutions for all EV charging use cases.

Our drivers are key to our success and whether they plug into one of the 286000 active ports on the <unk> network or tap into the over 631000 more ports with one of our roaming partners, we must make it easy to charge.

Tony: We don't only needs to deliver a great experience, but also surprise and delight our drivers with new even more useful features we will continue to execute our roadmap for this and we will report progress as we go.

Tony: The third cornerstone of our strategy is to double down on the development of our software platform Mister.

Tony: Historically, we have focused on selling full stack hardware and software solutions. Our future will include a significant focus on software solutions for all EV charging use cases.

Richard Wilmer: Our software margins are considerably better than they are for hardware, and the revenues are recurring. This pivot comes at a good time as we're seeing the disaggregation trend I mentioned earlier. For those needing a comprehensive charging solution, we remain a formidable one-stop-shop with class-leading hardware, but we will not exclude those who already have hardware and seek a leading software platform to manage it. We will also continue to build out our in-dash integrations for auto OEMs and payment providers, which improves both the driver experience and our own margin. ChargePoint is reinforcing our software platform to empower our customers. We will continue to share more details about our software offerings. Demonstrating their value to the business and our market.

Tony: Our software margins are considerably better.

Tony: When they are for hardware and the revenues are recurring.

Tony: This pivot comes at a good time as we're seeing the disaggregation trend I mentioned earlier for.

Tony: For those needing a comprehensive charging solution, we remain a formidable one stop shop with class leading hardware, but we will not exclude those who already have hardware and seek a leading software platform to manage it.

Tony: We'll also continue to build out our in dash integrations for auto Oems and payment providers, which improves both the driver experience and our own margins charge point is reinforcing our software platform to empower our customers. We will continue to share more details about our software offerings.

Tony: Demonstrating their value to the business and our margins.

Richard Wilmer: For now, we would like to give an overview of what our platform can do. It already enables charging station owners to manage costs, optimize fleet operations, integrate loyalty programs, manage payments, and more. It powers our seamless integrations with customer workflows, EV and EVSE manufacturers, fuel and fleet cards, payment processors, utilities, and other energy services. The software platform powers ChargePoint's network charging stations.

For now we would like to give an overview of what our platform can do.

Tony: It already enables charging station owners to manage costs optimize fleet operations and a great loyalty programs managed payments and more.

Tony: Powers, our seamless integrations with customer workflows, EV and EV manufacturers fuel and fleet cards payment processors utilities and other energy services.

Tony: Software platform powers charged points networks charging stations thoughtfully designed for usability and uptime third party charging stations in E. Mobility service providers can also run on charge points platform uniquely enabling need service providers to deliver their own charging solutions to the market faster.

Richard Wilmer: Thoughtfully designed for usability and uptime, third-party charging stations and e-mobility service providers can also run on ChargePoint's platform, uniquely enabling these service providers to deliver their own charging solutions to the market faster. ChargePoint empowers our customers and ecosystem partners to connect with EV drivers when they want to charge. Providing a valuable benefit, increasing brand loyalty and engagement, and unlocking powerful tools to generate revenue or optimize fleet operations. Now and in the future, we aim for this platform to be the enabler of any institution's EV charging needs, fostering the realization of their own goals. The final cornerstone is our hardware strategy. As evidenced by the aforementioned ACT-BEL partnership, we have big plans for hardware. Although our software has a strong focus under this plan, we will continue to compete in the hardware space. We will develop new hardware for as long as the industry requires innovation because better software runs better on better hardware. Across the board, EV chargers are still too expensive and have room for improvement in areas such as reliability and durability.

Tony: Charge point empowers, our customers and ecosystem partners.

Tony: <unk> with EBIT drivers when they want to charge.

Tony: Providing a valuable benefit increasing brand loyalty and engagement.

Tony: Unlocking powerful tools to generate revenue or optimize fleet operations now and in the future. We aim for this platform to be the enabler of any institutions EV charging needs fostering the realization of their own goals.

The final cornerstone is our hardware strategy.

Tony: As evidenced by the aforementioned at Bell partnership we have big plans for hardware.

Tony: Our software has a strong focus under this plan, we will continue to compete in the hardware space.

Tony: We will develop new hardware for as long as the industry requires innovation because better software runs better on better hardware.

Tony: Across the board EV Chargers are still too expensive and have room for improvement in areas, such as reliability and durability.

Richard Wilmer: Support for the future of green energy, meaning compatibility with vehicle-to-home, grid, and other connected energy points, is the future of charging hardware. The ECHO partnership enables us to bring these technologies to market faster and in more configurations. We will also continue to focus on developing innovative hardware for home charging, fulfilling our commitment to those great driver experiences, which are critical to our success. In conclusion, we are making ChargePoint fast, lean, and efficient. All with the goal of returning higher marks.

Tony: Support for the future of Green energy meeting compatibility with vehicle to home grid and other connected energy points is the future of charging hardware.

Tony: <unk> partnership enables us to bring these technologies to market faster and more configurations.

Tony: We will also continue to focus on developing innovative hardware for home charging for.

Tony: Fulfilling our commitment to those great driver experiences, which are critical to our success.

Tony: In conclusion, we are making charge point fast lean and efficient.

Tony: All with the goal of returning higher margins.

Mansi Khetani: Moving forward, our strategy of enhancing the experience for our drivers will ultimately maximize the results for our shareholders. We intend for ChargePoint to be the enabler of the transition to e-mobility. Thank you for listening. And I will now hand the call over to our CFO, Mansi Khetani, to review the finances. Thank you, Rick.

Tony: Moving forward our strategy of enhancing the experience for our drivers will ultimately maximize the results for our shareholders.

We intend for charge point to be the enabler of the transition to E. Mobility. Thank you for listening and I will now hand, the call over to our CFO Muncie could Tony to review the financials. Thank you Nick.

Mansi Khetani: As a reminder, please see our earnings press release where we reconcile our non-GAAP results to GAAP. Our principal exclusions are stock-based compensation, amortization of intangible assets, and certain costs related to restructuring and acquisition. We continue to report revenue along three lines: Network Charging Systems, Subscriptions, and others. Network charging represents our connected hardware.

CFO Muncie: As a reminder, please see our earnings press release, when we reconcile our non-GAAP results to GAAP.

Muncie: I think that the exclusion I stock based compensation amortization of intangible assets and certain costs related to restructuring and acquisition.

Muncie: We continue to report revenue along three lines.

Muncie: Charging system subscription and other.

Muncie: Nicholas driving system represents a connected hardware.

Mansi Khetani: Subscriptions include our cloud services connecting that hardware, our Assure warranties, and our ChargePoint as a service offering, where we bundle our full stack solution into a recurring subscription. Other revenue consists of professional services and certain non-material revenue. Moving to our results for the fourth quarter, revenue was $116 million, an improvement of 5% sequentially and a decrease of 24% year-on-year. The network charging system, at $74 million, accounted for 64% of fourth quarter revenue.

Muncie: Participants include our cloud services connecting that hardware.

Speaker Change: Good morning, Keith and Josh point, as a service offering when we bundle our full stack solution into a recurring subscription.

Speaker Change: Hi, there.

Speaker Change: Professional services and certain non material revenue stream.

Speaker Change: Moving to our results for the fourth quarter.

Speaker Change: Revenue was 116 million, an improvement of 5% sequentially and a decrease of 24% yet on yet.

Speaker Change: And that's what's driving system at $74 million accounted for 64% of fourth quarter revenue.

Mansi Khetani: This was flat sequentially and a decrease of 39% year-on-year due to deteriorated macro conditions that impacted commercial billing. Subscription revenue, at $34 million, was 29% of total revenue, up 10% sequentially, and up 30% year-on-year. Other revenue, at $8 million, was 7% of total revenue, up 42% sequentially, and up 74% year-on-year. Turning to verticals, we report verticals from a building's perspective, which approximates the revenue split.

Speaker Change: This was flat sequentially and a decrease of 39% year on year.

Speaker Change: Macro conditions impacted commercial Danny.

Speaker Change: It's fiction revenue at 34 million with 29% of total revenue.

Speaker Change: 10% sequentially and up.

Speaker Change: 30% on yet.

Speaker Change: Although revenue at 8 million or 7% of total revenue up 42% sequentially and up 74% year on year.

Speaker Change: Turning to <unk>, we had appointed vertical from a business perspective, which approximates the revenue mix today.

Mansi Khetani: Both quarter billing percentages were commercial 64%, fleet 18%, residential 15%, and others 3%. The commercial vertical continues to see softness due to slower auto dealership demand in North America and lower channel rebuy rates in Europe. Please improve the 11% sequentially. Residential, again, had the largest quarter ever in terms of home units sold, with buildings growing 13% sequentially.

Speaker Change: Fourth quarter billings percentages.

Speaker Change: Promotion of 64%.

Speaker Change: 10%.

Speaker Change: 15% and other 3%.

Speaker Change: The commercial vertical continues to see softness due to slower auto dealership demand North America and lower channels in.

Speaker Change: Okay.

Speaker Change: Until 11% sequentially.

Speaker Change: Residential again had the largest quarter ever in terms of holding units.

Speaker Change: With billings growing 13% sequentially.

Speaker Change: Okay.

Mansi Khetani: From a geographic perspective, North America made up 82% of fourth-quarter revenue, and Europe was at 18%. European revenue declined 6% sequentially due to lower restocking orders by channel partners as sell-through rates slowed for capital-intensive DC projects. Turning to gross margin, non-GAAP gross margin for the fourth quarter was 22%, up from negative 18% in Q3. This is up two percentage points from a normalized Q3 growth margin of 20%, which excludes the inventory impairment charge we took in the third quarter. Gross Margin was down 1 percentage point year on year. Non-GAAP operating expenses for the fourth quarter were $75 million, a sequential decrease of 8% and a year-on-year decrease of 7%. This reflects the four-quarter impact of our September restructuring but only a partial portion of the restructuring announced in January. Stock base compensation in the fourth quarter was $25 million.

Speaker Change: From a geographic perspective, North America made up 82% of fourth quarter revenue in Europe was that 18%.

Europe revenue declined 6% sequentially due to lower restocking order by China's bottleneck.

Speaker Change: Facility slowed capital intensive DC project.

Turning to gross margin non-GAAP gross margin for the fourth quarter with 22% up from negative 18% in Q3.

Speaker Change: This is up two percentage points from the normalized Q3 gross margin of 20%, which excludes the inventory impairment charge, we took in the third quarter.

Speaker Change: Gross margin was down one percentage point.

Speaker Change: On yet.

Speaker Change: non-GAAP operating expenses for the fourth quarter was $75 million.

Speaker Change: A sequential decrease of 8%.

Year on year decrease of 7%.

Speaker Change: This reflects the full quarter impact of our September restructuring.

Speaker Change: But only a partial portion of the restructuring announced in January.

Speaker Change: Stock based compensation in the fourth quarter was $25 million.

Speaker Change: Looking at cash and cash equivalent.

Mansi Khetani: Looking at cash and cash equivalents, we finished the quarter with 358 million. Cash consumption significantly reduced from Q3.

Speaker Change: We finished the quarter with $358 million.

Speaker Change: Cash consumption significantly.

Speaker Change: From Q3.

Mansi Khetani: This is primarily attributed to improved working capital management. Specifically, our inventory remained flat, and we improved collection of accounts receivable. While inventory was flat for the quarter, we will continue to focus on managing it down to a more desirable level in the second half of this year as we sell through the finished goods on hand. Meanwhile, our deferred revenue from subscriptions continues to grow. This represents payments for future revenue commitments from existing customers and finishes the quarter at $231 million, up from $227 million at the end of the third quarter. Our $150 million revolving credit facility remains undrawn, and we have no debt maturities until 2028. We also did not issue any shares via the ADM during the quarter.

Speaker Change: This is primarily attributed to improved working capital management.

Speaker Change: Quickly on inventory remained flat.

Speaker Change: It fills collection of accounts receivable.

Speaker Change: While inventory was flat for the quarter, we will continue to focus on managing it down to a more desirable level in the second half of the Ti as we said over the finished goods on hand.

Deferred revenue from subscriptions continue to grow.

Speaker Change: This represents payments of future revenue commitments from existing customers and finished the quarter at $231 million up from $227 million at the end of the third quarter.

Speaker Change: $150 million revolving credit facility remains undrawn and we have no debt maturities until 2028.

Speaker Change: We also did not issue any shares via the ATM during the quarter.

Mansi Khetani: At the end of the fourth quarter, we had approximately 421 million shares outstanding. Turning to full fiscal year 2024 results, annual revenue was $507 million, up 8% year-on-year. Network Charging Systems revenue at $361 million was 71% of total revenue for the year and was flat year-on-year.

Speaker Change: At the end of the fourth quarter, we had approximately 421 million shares outstanding.

Speaker Change: Yeah.

Speaker Change: Turning to full fiscal year 2024 results.

Speaker Change: Annual revenue was $507 million.

Speaker Change: Up 8% year on year.

Speaker Change: Nevertheless, charging systems revenue at $361 million with 71% of total revenue for the year and was flat year on year.

Mansi Khetani: Subscription revenue, at $120 million, was 24% of total revenue and up 41% year-on-year. In the software hardware market of the past year, the benefits of recurring subscription revenue really stand out. As Rick mentioned, more than half of our subscription revenue comes from software offers. Other revenue came to $25 million, with 5% of total revenue of 32% year-on-year. Quickly covering verticals, Billing Percentages by verticals for the full year work: Commercial 69%, Fleet 18%, Residential 11%, and Other 2%. From a geographic perspective, North America was 80% of full-year revenue, and Europe was 20%. The European business surpassed $100 million in annual revenue for the first time in fiscal 2024.

Speaker Change: Subscription revenue at $120 million with 24% of total revenue and up 41% year on yet.

In the Susquehanna hardware market of the past year and benefits of a recurring subscription revenue really stand out.

Speaker Change: And Jay mentioned more than half of our subscription revenue comes from software offering.

Speaker Change: Other revenue at $25 million with 5% of total revenue up 32% year on year.

Speaker Change: Quickly covering vertical.

Speaker Change: These percentages by vertical for the full year.

Speaker Change: Commercial 69% fleet, 18% residential 11% and 2%.

Speaker Change: From a geographic perspective, North America was 80% of full year revenue and Europe was 20%.

Speaker Change: Our European business surpassed $100 million in annual revenue for the first time in fiscal 2024.

Speaker Change: In regards to gross margin non-GAAP gross margin was 8%, which reflects two quarter with inventory impairment charges and a year on year, a decrease of 12 percentage points.

Mansi Khetani: In regards to gross margin, non-GAAP gross margin for the year was 8%, which reflects two quarters with inventory impairment charges and a year-on-year decrease of 12 percentage points. Excluding the impairment charges taken in Q2 and Q3, gross margin would have been 22%. Non-GAAP operating expenses for the year were $330 million, a year-on-year increase of 2%.

Speaker Change: Excluding the impairment charges taken in Q2, and Q3 gross margin would've been 22%.

Speaker Change: non-GAAP operating expenses for the year with 330 million a year on year increase of 2%.

Mansi Khetani: Turning to Guidance. For the first quarter of fiscal 2025, we expect revenue to be $100 to $110 million. This reflects the typical seasonal drop due to construction slowdowns in the winter months. In addition to seasonality,

Speaker Change: Turning to guidance.

Speaker Change: The first quarter of fiscal 2025.

Speaker Change: <unk> revenue can be $100 million to $110 million.

This reflects the typical seasonal drop due to construction slowdown in the winter months.

Speaker Change: In addition to seasonality.

Mansi Khetani: Our first quarter historically contributes a significantly lower percentage of our annual revenue, with Q2 to Q4 increasing from the baseline of Q1. This year, we expect the same, with a large portion of the revenue to be generated in the second half. We expect gradual improvement in non-gap growth margin as the year progresses. This will be the result of continued cost downs for hardware products and an improvement in subscription margins resulting from the cost optimization of our support organization. In addition, as we sell through inventory on hand, we will begin to see the benefits of our new Asia-based hardware manufacturing strategy in the second half of fiscal year 2025, particularly in Q4. We expect non-GAP operating expenses to fall to the low 70s in Q1 and Q2, with the full quarter impact of the January restructuring, as well as other cost avoidance measures resulting from the new hardware engineering strategy Rick mentioned earlier in the call. Operating expenses are expected to fall further in the second half as we continue to focus on operational efficiency. I will now hand it over back to Rick for closing remarks. Thank you, Mansi.

Speaker Change: Our first quarter historically contribute a significantly lower percentage of our annual revenue with Q2 to Q4, increasing from the baseline of Q1.

Speaker Change: This year, we expect the same with a large portion of the revenue can be generated in the second half.

Speaker Change: We expect gradual improvement in non-GAAP gross margin as the year progressed.

Speaker Change: This will be the result of continued cost downs behind electronics, and an improvement in subscription margin, resulting from the cost optimization of our support organization.

Speaker Change: In addition, as we sell through inventory on hand.

Speaker Change: We begin to see the benefits of our new Asia based hardware manufacturing strategy in the second half of fiscal year 2025, particularly in Q4.

We expect non-GAAP operating expenses to fall to the low 70 in Q1, and Q2 with a full quarter impact of the January restructuring as well as other cost avoidance measures.

Speaker Change: <unk> from the new hardware engineering strategy.

Speaker Change: And earlier in the call.

Speaker Change: Operating expenses are expected to fall further in the second half as we continued to focus on operational efficiency.

Speaker Change: I will now hand, it over back to Nick for closing remarks.

Nick: Thank you Monte to conclude the measures taken over the past two quarters have strengthened our path to profitability on a non-GAAP adjusted EBITDA basis in Q4 of fiscal 2025.

Richard Wilmer: To conclude, the measures taken over the past two quarters have strengthened our path to profitability on a non-gap adjusted EBITDA basis in Q4 of fiscal 2025. The strategic priorities we have outlined intend to deliver the gains to achieve this target. But we won't stop there. Our goal is to develop a thriving, profitable business that will be renowned as the enabler of the transition to e-mobility. Thank you for joining us

Nick: The strategic priorities, we have outlined intend to deliver the gains to achieve this target.

But we won't stop there our goal is to develop a thriving profitable business that will be renowned as the enabler of the transition to E mobility.

Speaker Change: Thank you for joining us today, operator, we will now turn it over for questions.

Unknown Executive: Operator, we will now turn it over to questions. Thank you. At this time, I would like to remind everyone that in order to ask a question, press the star, then the number one on your telephone keypad.

Speaker Change: Thank you 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.

Unknown Executive: We ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask a question. We'll move to our first question from Colin Rusch at Oppenheim. Thanks so much, guys, and I appreciate all the detail here.

Speaker Change: We ask that you. Please limit yourself to one question and one follow up till now everyone an opportunity to ask a question.

Speaker Change: We'll move to our first question from Colin Rusch at Oppenheimer.

Colin William Rusch: Thanks, So much guys I appreciate all the detail here.

Richard Wilmer: You know, in the hardware development focus area, how should we think about the cadence of the cost reduction? I appreciate the detail on 4Q with the shift, but as you work through this inventory, you know, should we be thinking about some ongoing cost reduction? And then on the development cycle, you know, how should we think about the overall development cycle for some of these new products starting to come out? So Colin, thanks for the question.

Colin William Rusch: The hardware development.

Colin William Rusch: How should we think about the cadence of the cost reduction and appreciate the detail on <unk> with the shift but as you work through this inventory should we be thinking about some some ongoing cost reduction and then on the development cycle. How we should think about the overall development cycle for some of these new products starting to come out.

Collyn: So collyn.

Collyn: Thanks for the question.

Richard Wilmer: With the hardware cost reductions, those will continue to flow through the P&L, accelerating as we move toward the latter half of the year, and we work through the current inventory that was built at a higher cost base, and then we should be fully enjoying that next fiscal year. On the development cycles, those will accelerate. As I mentioned in the prepared remarks, we have more engineers working on new hardware platforms than we have in the past as a result of our new relationship with Actvel, and that will accelerate hardware product development, and you'll begin to see the benefits of that show up in new product releases in the beginning part of next year. Okay, and then on the software side, can you give us, you know, just two or three of the key focus areas that you see as meaningful opportunities And how do you think that functionality really gets out to customers as you start to bring it to market? Is it only through new sales of new chargers?

Collyn: With the hardware cost reductions those will continue to flow through the P&L.

Accelerating as we move towards the later half of the year and we work through the current inventory that was built at a higher cost base than we should be fully enjoying that next fiscal year.

On the development cycles.

Collyn: Those will accelerate as I've mentioned.

Collyn: <unk> prepared remarks, we have more engineers working on new hardware platforms than we have in the past as a result of our new relationship with backfill and that will accelerate hardware product development.

Collyn: You'll begin to see the benefits of that show up in new product releases.

Collyn: Beginning part of next year.

Okay, and then on the software side can you give us just two or three of the key focus areas that you see as meaningful opportunities for improvement and how that how you think that functionality.

Collyn: It gets out to customers as you start to bring to market is it only through new sales.

Richard Wilmer: Or are you going to be able to do over there updates and bring some of that functionality out to the existing installers? So there's a variety of areas of opportunity within the software, but I wouldn't necessarily call them improvements. New features and enhancements that will roll out to the market, and as I mentioned in my prepared remarks, it really all starts with a great driver experience. So whether that's in our mobile app, or when a driver is actually interacting with the station to get their vehicle charged and pay for charging, it really drives everything we do within the software world. Our core belief is that if we provide a great experience for drivers... people that provide charging infrastructure for drivers will want to work with our platform to drive their business.

Collyn: New charters or are you going to be able to do over the air updates and grimstone that functionality out to the existing.

Collyn: Installed base.

Collyn: So theres a variety of areas of opportunity within the software and I wouldnt necessarily call them improvements with new features and enhancements that will rollout to the market.

Collyn: As I mentioned in the prepared remarks, it really all starts with a great driver experience.

Collyn: So whether thats in our mobile app or when our drivers actually interacting with the station.

Collyn: To get their vehicle charges and pay for charging it really drives everything we do within the software world. Our core belief is that if we provide great experience for drivers.

Collyn: People that provide charging infrastructure for drivers want to work with our platform to drive their business goals.

Speaker Change: Thanks, so much guys.

Richard Wilmer: Thanks so much, guys, www.charlesboyk-law.com. We'll move next to Chris Pierce at Needham, www.charlesboyk-law.com Hey, on the show, you mentioned disaggregation a couple times and customers kind of wanting hardware from multiple sources. Is that a new trend in the industry? And then, you know, what are they doing right now if they have hardware from multiple providers? And like, who would you be displacing? Or is this kind of greenfield therapy?

Speaker Change: We'll move next to Chris Pearce at Needham <unk> Company.

Speaker Change: Okay.

Christopher Alan Pierce: Hey on the you mentioned disaggregation of couple of tenants of customers kind of wanting cadre from multiple sources is that a new trend in the industry and then what are they doing right now if they have hardware from multiple providers and Hoot Lake who would you be displacing or is this kind of greenfield territory.

Richard Wilmer: Thanks for the question, Chris. Disaggregation has become, from our perspective, a more common request in North America in the last three to six months. We're seeing again, as we mentioned in the prepared remarks, some of the larger customers interested in sourcing hardware from more than one provider. I think the reasons for that can be inferred. But this has been a common practice in Europe for quite a while.

Speaker Change: Thanks for the question, Chris Disaggregation has become.

Christopher Alan Pierce: From our perspective of more common ask in North America in the last three to six months, we're seeing again.

Christopher Alan Pierce: As we've mentioned in the prepared remarks, some of the larger customers interested sourcing hard work from more than one provider I think the reasons for that can be inferred.

Christopher Alan Pierce: This has been a common practice in Europe for quite a while in Europe.

Richard Wilmer: In Europe, we manage more third-party hardware than we do our own hardware, so this is not a new business model. It's something that, from my perspective, appears to be coming from Europe to North America.

Christopher Alan Pierce: It's more third party hardware, we do our own hardware. So this is not new business model.

Christopher Alan Pierce: From my perspective appears to be coming from Europe to North America.

Christopher Alan Pierce: Again.

Mansi Khetani: Again, bigger customers are embracing it first. Okay, and then on the inventory side, you know, if you back into kind of network charge revenue in the first quarter of 25, and you kind of talked about clearing through inventory over the year, you know, how do you know what's in inventory now that you can kind of frame, and how do you kind of how are you confident that, you know, there won't be further potential for write-downs of the inventory that you're carrying? Yeah, I can take that question, Chris.

Christopher Alan Pierce: Bigger customers embracing it first.

Christopher Alan Pierce: Okay, and then on the inventory side.

Christopher Alan Pierce: Back into kind of network revenue in the first quarter of 'twenty, five and you've kind of talked about clearing through inventory over the year.

How do you kind of what's in inventory now that you can kind of frame in how do you kind of how are you confident that.

Christopher Alan Pierce: We'll be further potential for write downs on the inventory the accounting.

Speaker Change: Yes, I can take that.

Speaker Change: Chris.

Mansi Khetani: So, you know, we thought about the write-downs in a lot of detail, and we've taken all the charges that we thought were necessary. The inventory balance that we now have is all of the products that we're actively selling today, and we expect to sell through all of that through this year. On some products, we have a higher inventory balance that will take a little bit longer to sell through, but on others, we pretty much only have two or three months of inventory.

Christopher Alan Pierce: So we thought about it I don't have a lot of detail and we've taken all the charges that we talked about the city.

Speaker Change: Inventory bounce that we now have is all of products. They were actively selling today and we expect to sell through all of that through this year on some products, we have a higher inventory balances will take a little bit longer to sell through.

But on others, we pretty much have only two or three months of inventory. So the cost down Cedric mentioned, we'll start seeing those dropdowns on those products on which we have a lot of inventory balance. So we don't at this stage.

Mansi Khetani: So the cost downs that Rick mentioned, we'll start seeing those cost downs on those products on which we have a lower inventory balance. So in short, we don't – sitting here today, we don't see any additional major write-offs. Of course, there are small adjustments and variances that we take each quarter based on standard cost adjustments, et cetera. We'll continue to do that. That's the standard course of business, but there is nothing major that we can see as of now.

Speaker Change: Thanks sure today, we don't see any additional major drydock, let's call that a small adjustment and variances that we take each quarter based on standard cost adjustments et cetera will continue to do that that's a standard course of business, but there is nothing major that we see as of now.

Speaker Change: Okay. Thank you.

Unknown Executive: Okay, thank you. We'll take our next question from Bill Peterson at JP Morgan. Hi, good afternoon.

Speaker Change: Okay.

Speaker Change: We'll take our next question from Bill Peterson of J P. Morgan.

William Chapman Peterson: Yes, hi, good afternoon, thanks for taking the questions.

Richard Wilmer: Thanks for taking the questions. I asked last quarter about how you felt like the channel inventories were, and it sounded like you felt like a lot of the stocking had run its course. It sounds like there was still more de-stocking to go in Europe. But I guess, how do they do it if you look at the channels, both the US and Europe, and maybe for products such as, you know, AC or DC, and then maybe it's the channel that is focusing on the commercial fleet. Can you help us understand how you view the channel in these various segments and geographies today? Sure, Bill. It's different in Europe than it is in North America.

William Chapman Peterson: Asked last quarter about how you felt like that channel inventories worded. It sounds like you sound like a lot of Destocking had run its course it sounds like there is still more destocking to go in Europe, but I guess, how does that if you look at the channels both U S and in Europe, and maybe for products, such as AC or DC and then maybe it is.

The channel is focusing on our commercial fleet can you help us understand how you view the channel.

William Chapman Peterson: In these various segments and geos today.

Speaker Change: Sure Bill that's different in Europe than it is in North America, and North America. The channel is important for us largely as a demand generator.

Richard Wilmer: In North America, the channel is important for us, largely as a demand generator. They represent an important extension of our sales force. In terms of inventory levels in the channel in North America and Europe, they're normalized in both areas.

Speaker Change: <unk> represents an important extension of our sales force in terms of inventory levels.

The channel in North America, and Europe, they are normalized in both areas.

Richard Wilmer: In Europe, we do less of our business through the channel, but it's still an important part of our business in Europe, but not as significant as it is in North America. Um, you know, thanks for that. Interesting on the reliability side, and that's always been kind of a challenge, a headline challenge, when we think about EV adoption. I guess with this, with your new reliability data, are you seeing any benefits? Can you, you know, speak to any sort of wins or opportunities you've been able to unlock by demonstrating this reliability, whether it be in repeat business or with new opportunities? That's a good question.

Speaker Change: In Europe, we do less of our business through the channel, but there is still an important part of our business in Europe, but not as significant as it is in North America.

Speaker Change: Okay.

Speaker Change: Thanks for that interesting on reliability side, and that's always been kind of a challenge of headline challenged if we think about EV adoption I guess with this with your mill reliability data are you seeing any benefits can you speak to any sort of wins or opportunities you've been unlocked by demonstrating this reliability, whether it be repeat business or.

Speaker Change: Or with new opportunities.

Speaker Change: That's a good question I think what we're seeing is just fewer support cases and fewer complaints.

Richard Wilmer: I think what we're seeing is just fewer support cases and fewer complaints. But, as we mentioned in the remarks, we're still not where we want to be. There is still further room for improvement, and I expect, quite honestly, that 99% KPI that we measured, which is apples to apples with the prior quarter, to go down as we begin to ingest new data sources into our network operations center that will give us a more accurate picture of what stations are actually up and running for our definition of uptime in the market. And we want to be very transparent and honest about how our network is working. So we're quite honestly excited about this because this gives us more actionable data to improve the network. Okay, thanks a lot. Next, we'll move to Mark Delaney at Goldman Sachs. Yes, good afternoon.

Speaker Change: But as we mentioned on the in the remarks, we're still not where we want to be there is still further room for improvement and I expect quite honestly that 99%.

Speaker Change: Kpis that we measured which is apples to apples with the prior quarter to go down as we begin to as we begin to adjust to new data sources into our network operation Center that will give us a more accurate picture of what stations are actually up and running for our definition of uptime in the market and we want to be very.

Speaker Change: And honest about how our network is working so.

Quite honestly excited about this because it gives us more actionable data to improve the network.

Speaker Change: Okay. Thanks for that.

Speaker Change: Next we'll move to Mark Delaney of Goldman Sachs.

Mark Trevor Delaney: Yes. Good afternoon. Thanks, very much for taking my question the company reaffirmed its target to be adjusted EBITDA positive in fiscal <unk> can you speak a bit more on the path to get there and how much revenue maybe needed to reach our goal.

Mansi Khetani: Thanks very much for taking my question. The company reaffirmed its target to be adjusted EBITDA positive and fiscal 4Q. Can you speak a bit more on the path to get there and how much revenue may be needed to reach your goal? Yeah, I can take that.

Mark Trevor Delaney: Yes, I can take that Phil.

Mansi Khetani: On the revenue side, as I mentioned in my prepared remarks, we expect normal seasonality this year, like we have seen in the past, meaning we expect the second half of revenue to be significantly larger than the first half. Our revenue spread typically in the year is about 40% in the first half and 60% in the second half, with Q4 typically being the largest quarter. We expect this year to follow similar seasonality.

Speaker Change: On the revenue side as I mentioned in my prepared remarks, we expect normal seasonality. This year like we've seen in the past, meaning we expect the second half revenue could be significantly larger than the first half our.

Speaker Change: Our revenue growth typically in the yard is about 40% in the first half and 60% in the second half with Q4, typically being the largest quarter.

Speaker Change: Because if you had to follow similar seasonality and then on the gross margin side, we expect improvement through the year as well in Q4, we'll see the benefits of further cost reductions as we move to Asia manufacturing and then on the Opex side. When you look at easy to use are non-GAAP opex to the low 70, a quarter for the balance.

Mansi Khetani: And then on the gross margin side, we expect improvement through the year as well, and Q4 will see the benefits of further cost reductions as we move to Asia manufacturing. And then on the OPEC side, we have already reduced our non-GAAP OPEC prices to the low 70s a quarter. We will further balance this OPEC through the year with operational efficiencies and cost avoidance measures to get to that break-even EBITDA level in Q4. Follow-up question around gross margins.

Speaker Change: This opex through the year with operational efficiencies and cost avoidance measures to get to that.

Speaker Change: Breakeven EBITDA level in Q4.

Speaker Change: Understood. Thanks, and follow up question around gross margins, maybe you can help us think through some of the puts and takes around gross margins in the fiscal first quarter revenues sequentially as lower but you do have some of these efforts to improve margins, including the Asia based manufacturing and multi sourcing strategy sits just maybe help frame. If you could please a little bit more.

Mansi Khetani: Maybe you can help us think through some of the puts and takes around gross margins in the fiscal first quarter. Revenue sequentially is lower, but you do have some of these efforts to improve margins, including the agent-based manufacturing and multi-sourcing strategies. Maybe help frame, if you could please, a little bit more around gross margins sequentially for the upcoming quarter. Yeah, so we're not guiding to Q1 growth in margins, but what I can say is, I think we should see flat to sequential, slight sequential improvement in Q1. This is not going to come from the Asia manufacturing strategy yet because it's going to take some time for our inventory to sell through.

Around gross margin sequentially for the upcoming quarter.

Speaker Change: Yes, we're not guiding Q1 gross margins, but what I can say is I think we should see flat to sequential slight sequential improvement in Q1. This is not going to come from the Asia manufacturing strategy, because it's going to take some time for a lot of inventory to sell through.

Mansi Khetani: However, we are seeing improvement on the subscription margins because of economies of scale and because of our cost optimization efforts on the customer support side of things. And then as pricing stabilizes on the hardware side, that should kind of stabilize as well, quarter over quarter. Our next question comes from Matt Summerville at D.A. Davis.

Speaker Change: However, we are seeing improvement on the subscription margins because of economies of scale and because of our.

Speaker Change: Cost optimization efforts on our customer support side of things.

Speaker Change: And then as pricing stabilizes on the hardware side that should kind of stabilize as well quarter over quarter.

Speaker Change: Thank you.

Speaker Change: Okay.

Our next question comes from Matt Summerville of D. A Davidson.

Richard Wilmer: Jeff, thanks. I wanted to ask about utilization rates. You know, Rick, in your prepared remarks, you mentioned that they're effectively hitting a pressure point now that makes it necessary to build, to further build out from an infrastructure standpoint. What is that pressure point exactly?

Matt J. Summerville: Yes, Thanks, I wanted to ask about utilization rates Rick in your prepared remarks, you mentioned that they are effectively hitting a pressure point now that makes it necessary to build it.

Matt J. Summerville: To further build out from an infrastructure standpoint.

Is that pressure point, exactly where to utilization rates need to be and how has utilization been trending specifically on your network can you get just a little bit more granular on that.

Richard Wilmer: Where do utilization rates need to be, and how has utilization been trending specifically on your network? Can you get just a little bit more granular on that? So we published the utilization statistics in a press release a few weeks ago. I don't have the numbers memorized, but they're definitely going up. And exactly what threshold they need to hit before, you know, new port purchasing and installation hits the accelerator is hard to know. And it's hard to know whether it's going to be a big digital shift where it's going to turn on like a light switch or if it's going to be gradual. Well, what I do know is that customers need to provide charging to get the people they want to come to their place, whether that's workers to come to work there, or shoppers to shop there, or people to stay there overnight and sleep there, or park there while they're on a trip.

Speaker Change: So we published the utilization statistics in our press release, a few weeks back.

Speaker Change: I don't have the remember the numbers memorized, but theyre definitely going up.

Speaker Change: And exactly what threshold they need to hit before.

Speaker Change: Newport purchasing an installation.

Speaker Change: Hits, the accelerator is hard to know and it's hard to know whether it's going to be a big digital shift towards going to turn on like a light switch or if it's going to be gradual.

Speaker Change: What I do know is that.

Speaker Change: Customers need to provide charging to get the people they want to come to their place whether that's workers to come to.

Speaker Change: Work, there for shoppers to shop, there or people to stay there overnight sleep, there or park there while they are on a trip.

Richard Wilmer: We're seeing utilization go up in all those segments, and if those institutions want people to continue to come, they're going to need to add infrastructure. I think we're seeing some green shoots of that starting now, and I'm hopeful it will accelerate. And if we have the data that said exactly when it hits, you know, 49.7%, that's when it takes off. We'll continue to refine our analysis to try and determine that, but we don't know that today. Got it.

Speaker Change: We're seeing utilization go up in all those segments and if those institutions one people to continue to come they're going to need to add infrastructure I think we're seeing some green shoots of that starting now.

Speaker Change: Hopefully it will accelerate.

If we have the data that said exactly when it hits 49, 7% that's when it takes off.

Speaker Change: We'll continue to refine our analysis to try and determine that but we don't know that today.

Speaker Change: Got it and then just as we think about kind of market conditions now and the overall pricing environment in the business for both L. Two in D C fast.

Mansi Khetani: And then just as we think about market conditions now and the overall pricing environment in the business for both L2 and DC FAS, I guess I'm trying to understand how much of a price pressure you're seeing, which I'd like you to comment on. If that's the case, how much of the potential savings you're getting from the Asian-based development and manufacturing sort of gets offset by price erosion? Thank you.

I guess I'm trying to understand how much of it is youre seeing price pressure, which I'd like you to comment on.

Speaker Change: If thats the case, how much of the potential savings you're getting from the Asian base.

Speaker Change: Development and manufacturing sort of gets offset by price erosion. Thank you.

Mansi Khetani: Yes, in terms of ASPs, we, as you know, have brought prices down over the last few quarters. This was mainly, you know, bringing down price increases that we had done during the second part of last year due to all the supply chain hangover. We normalized that.

Speaker Change: Yes, so in terms of.

Steve: This is Steve.

Steve: As you know we have brought prices down over the last few quarters.

Steve: This was mainly.

Steve: Bringing down price increases that we had done.

Steve: During the second part of last year due to all the supply chain hangover.

Steve: We normalize that that was supposed to be temporary so we brought prices down.

Mansi Khetani: That was supposed to be temporary, so we brought prices down. Other than that, we haven't seen any other pricing pressure so far. That said, I do build in some price declines in the model just to be conservative, but the cost savings that we're seeing should overcome any of the price decreases. That's how we've planned our entire model.

Steve: Other than that we haven't seen any other pricing pressure so far.

Steve: I do build in some price declines in the model just to be conservative, but the the cost uptick we're seeing.

Steve: Should overcome any of the price decreases that's how we've planned on and kind of model and so even though prices may come down a little bit in the second half we have factored that in I think the cost down.

Richard Wilmer: And so even though prices, you know, may come down a little bit in the second half, we have factored that in. I think the cost savings will more than cover that, and that will give us the bump in our gross margin. Thanks a lot. We'll move next to Christopher Souther at B. Reilly.

Steve: With more than cover that and that will give us the bump in our gross margin.

Betsy: Got it thanks Betsy.

Betsy: We'll move next to Christopher Souther with B Riley.

Richard Wilmer: Hey, thanks for taking my questions here. Maybe just follow up a little bit on the gross margins. Can you give us, you know, a sense as to whether the target profile for the network charging system segment changes with this expanded contract manufacturing relationship, or maybe just kind of enables, you know, prior targets you've been thinking about internally? Give us a sense of what you think is achievable once we work through some of these inventory moves and towards new next-generation products. So, I'm not sure I got the entire question, sorry about that, but if With the age of manufacturing, we're going to take substantial costs out of the entire product portfolio.

Christopher Alan Pierce: Thanks for taking my questions here.

Christopher Alan Pierce: Maybe just a follow up a little bit on the gross margins.

Christopher Alan Pierce: Can you give us.

Christopher Alan Pierce: Our centers.

Christopher Alan Pierce: What is the target profile for the network charging system segment changes with this extended contract manufacturing relationship.

Christopher Alan Pierce: Can you just kind of enables.

Higher targets, you've been thinking about internally.

Speaker Change: So soon.

Speaker Change: You think is achievable once we work through inventory.

Speaker Change: Inventory moved in towards New next generation products.

Speaker Change: Okay.

So im not sure I got the entire question sorry about that but if I didn't provide a complete answer go ahead and ask a follow up.

Speaker Change: With the Asia manufacturing, we're going to take substantial costs out of the entire product portfolio.

Richard Wilmer: And equally important, the new products that we're going to develop in partnership with Actvel and potentially other partners, like Actvel, will lead to much lower-cost products when they initially go into production. So, this is something that's going to drive our hardware gross margin up. But as Mansi mentioned, as we continue to increase the software and recurring elements of our P&L, the revenue portion of our recurring business, that has a much higher gross margin than the hardware side. So, that's going to continue to enhance the gross margin outlook as well. Okay, no, that's really helpful.

Speaker Change: And equally important the new products that we're going to develop in partnership with OXXO and potentially other partners.

Like Arco will lead to much lower cost products when they initially go into production.

So this is something that's going to drive our hardware gross margin up.

But as Monty mentioned as we continue to increase the software.

Speaker Change: And recurring elements of our P&L the revenue portion of our recurring business that has much higher gross margin than than the hardware side. So thats going to continue to enhance the gross margin outlook as well.

Speaker Change: Got it Okay. That's really helpful and then maybe just.

Richard Wilmer: And then maybe just another one on, you know, you called out EV market adoption concerns from customers. I'm curious whether the shift to the MAX charging port is contributing to customer hesitation, maybe just uncertainty around which kinds of cars customers are going to be preferring two to three years out. Is that something that's also, you know, maybe causing customer headaches? If I got the question right, about NAAQS, I think the...

Speaker Change: Another one on <unk>.

Speaker Change: You've called out EV market adoption concerns from customers I'm curious whether the ship.

Speaker Change: The Max charging cord is contributing to customer hesitation, maybe just uncertainty around which tons of cars customers are going to be performing two to three years out is that something that also maybe causing customer headaches.

Speaker Change: Okay.

Speaker Change: If I got the question right.

Speaker Change: Around <unk>.

Speaker Change: I think the.

Speaker Change: The consternation about an axis diminishing now that they are becoming widely available.

Richard Wilmer: The consternation about NACs is diminishing now that they're becoming widely available. The position we've taken, which we believe is the right position to take, is that as we make the transition from CCS to NACs, you don't dedicate a parking spot to one connector type or another, and you keep the parking spots versatile. And we've got, you know, all the technology and solutions to do just that. So I view this as a connector at the end of the cord, and as long as you can pull into any parking spot and plug your vehicle in, regardless of whether it's CCS or NACs, this should be pretty seamless.

Speaker Change: The position, we've taken which we believe is the right position to take is that as we make the transition from Ccs to Max that you don't dedicated parking spots to one connector type to another and you keep the parking spots versatile.

Speaker Change: And we've got all of the technology and solutions to do just that so I view this as a connector at the end of the cord and as long as you can pull into any parking spot and plug your vehicle in regardless of whether it's ccs or <unk>. This should be pretty seamless and I think the market is starting to realize this and a lot of the consternation is fading.

Richard Wilmer: And I think the market's starting to realize this, and a lot of the consternation is fading. That's great to hear. Oh, thank you. Our next question comes from Mickey Lake, of the Benchmark Company. Hey guys, thanks for taking my questions. You mentioned a slowdown in hardware sales in the EU. Just curious if that was anywhere particularly slow or if there's any areas or signs of improvement that you're seeing. Thanks. Yeah, so in Europe, it was slightly different from North America.

That's great to hear okay.

Mickey Lag: Our next question comes from Mickey lag the benchmark company.

Okay.

Mickey Lag: Guys. Thanks for taking my questions you.

Mickey Lag: You mentioned a slowdown in hardware sales in the EU, just curious if that was anywhere, particularly slow or serious areas or signs of improvement that you're seeing thanks.

Mickey Lag: Yes, so in Europe.

Mickey Lag: I need to think of in North America as Rick mentioned, we saw a slower.

Mansi Khetani: As Rick mentioned, we saw a slower sell-through rate for our DC products because the channel there had an abundance of other DC products from our competitors and other companies that had been offloaded at lower prices. So the sell-through rates of our products slowed, and the rebuy rate slowed as well. Okay, great. And then one more.

Mickey Lag: Eight of our D C you've got it.

Mickey Lag: Does the channel there has an abundance of other D C products of our competitors and other companies that have been offloaded at lower prices. So that's absolute rates of our products slowed.

Mickey Lag: And maybe buy it in Florida.

Okay, Great and then one more could you just talk about some of the larger programs that you previously mentioned are those still on track for later this year and just curious where those discussions are at.

Richard Wilmer: Could you just talk about some of the larger fleet programs that you previously mentioned? Are those still on track for later this year? And just curious where those discussions are at. Thanks. Can you repeat that? Which program?

Mickey Lag: Yeah.

Mickey Lag: Okay.

Can you repeat that reach program sorry Mickey.

Unknown Executive: Sorry, Mickey. Yeah, you had mentioned on the last call just about the USPS contract and maybe some other sleep programs you were expecting to hit later this year. Just curious about the status of those. Thanks. Yeah, so what I can say about those larger programs is that this year, we expect USPS to ramp up in the second half, much like it did this past fiscal year. There are a lot of other transit deals that we're working on that are expected to ship in the second half as well. We expect some NEBI-related shipments to come in during the second half. This is a smaller portion of our overall building, though, but it is back-up loaded. Generally, we are being conservative on the commercial sub-segments like auto and workplace since recovery there will depend on the macro conditions and the interest rate environment. But we see some back-loaded commercial buildings, including in the auto space, as some of the programs have been pushed out from Q4 and the first half of this year to the second half.

Mickey Lag: Yeah, you had mentioned on the last call just about the USPS contract and maybe some other.

Mickey Lag: Programs you were expecting to hit later this year just curious on the status of those.

Speaker Change: Yeah, So what I can say about that as an artist programs in fifth gear.

Speaker Change: We expect USDA to ramp in the second half much like it did this past fiscal year. There are a lot of other kinds of deals that we're working on that are expected to ship in the second half as well.

Speaker Change: We expect some NIM it related shipment to come in in the second half. This is a smaller portion of about a little bit and so but it is a back half loaded.

Speaker Change: Candidly, we are being conservative on the promotional sub segments like auto and workplace.

Speaker Change: We're a company that will depend on the macro condition and the interest rate environment, but we see some backloaded commercial buildings, including in the auto space and some of the programs have been pushed out from Q4 and first half of this year to the second half.

Speaker Change: Okay, great. Thanks.

Mansi Khetani: Okay, great. Thanks. We'll go next to Steven Fox at Fox Advice. Hi, good afternoon.

Speaker Change: Okay.

Speaker Change: We'll go next to Steven Fox with Fox Advisors.

Steven Bryant Fox: Hi, Good afternoon, just one question from me on the network operating centers cost how do you how.

Richard Wilmer: Just one question for me. On the network operating centers cost, how do you, how much more of an investment period do you think you're going to have for those? How do you measure the return you're getting on it?

Steven Bryant Fox: Much more of an investment period do you think youre going to have to those how do you measure the return you're getting on it it seems like it's an important part of the strategy going forward.

Richard Wilmer: It seems like it's an important part of the strategy going forward, but just trying to understand, you know, the cost and return benefits there. Thanks. Yeah, thanks, Steven. This is one that's non negotiable in terms of the investment required. If we don't provide reliable networks that drivers can count on, we're not going to see this business grow at the rate we want it to grow. So we have to do this regardless.

Steven Bryant Fox: Just trying to understand.

Steven Bryant Fox: Cost and return benefits there. Thanks.

Speaker Change: Yes, Thanks Stephen.

Speaker Change: This is one that's non negotiable in terms of investment required.

Speaker Change: If we don't provide reliable networks to drivers can count on we're not going to see this business grow at the rate. We wanted to grow so we have to do this regardless.

Richard Wilmer: It is budgeted, and it is managed from a cost perspective, but functionality trumps that as long as it stays within reason. So this remains a priority commitment for the company. Is there any way to sort of give us a sense, like, is it a rising investment this year versus last year? How much of the costs, what percentage of costs is associated with it? Any other perspective on it you could provide? I wouldn't consider it a substantial cost and either cost to get sold or OpEx. A lot of it is done through automation and, you know, network tools that we use to aggregate data and turn it into actionable information.

Speaker Change: It is a budgeted and is managed from a cost perspective, but functionality trumps that as long as it stays within reason. So this remains a priority commitment for the company.

Speaker Change: Is there any way to sort of give us a sense for like is it a rising investment this year versus last year.

Speaker Change: Much of the costs what percentage of costs associated with any other perspective on it you can provide.

Speaker Change: I wouldn't consider it a substantial cost.

Speaker Change: In either cost of goods sold or Opex, a lot of it is done through automation.

Speaker Change: And.

Speaker Change: Network tools that we use to aggregate data and turn it into actionable information.

Great. That's helpful. Thank you.

Richard Wilmer: Great, that's helpful. Thank you. And next, we'll move to Chris Dendrinos at RBC Capital Markets.

Speaker Change: Okay.

Speaker Change: Yeah.

Christian Greenhouse: And next we'll move to Christian greenhouse at RBC capital markets.

Richard Wilmer: Yeah, thank you. I just wanted to follow up on the demand questions. If you could just expand a little bit more on, you know, what are the conversations that you're having with your customers right now? What is the feedback they're giving you? I think at one point last year, you had mentioned that there was a pullback in spending due to budget constraints, and then there was maybe a bit of a demand issue. What are the latest conversations that you're having? What are they saying about the need for chargers? Thanks. Again, I think we're seeing, you know, poor utilization continue to rise, which is leading to customers, you know, expressing an interest in increasing the size of their networks to keep, again, as I mentioned earlier, the people that they care about coming back to their institutions.

Christian Greenhouse: Yes. Thank you I just wanted to follow up a little bit on the demand questions.

Christian Greenhouse: If you could just expand a little bit more on it.

Christian Greenhouse: What are the conversations that youre, having with your customers right now what's the feedback they're giving you alright I think at one point last year you had mentioned.

Christian Greenhouse: That there was a pullback in spending due to budget constraints.

Christian Greenhouse: There was maybe a bit.

Christian Greenhouse: An issue.

Christian Greenhouse: The latest conversations that youre, having what are they saying about.

Christian Greenhouse: The needs for charges. Thanks.

Christian Greenhouse: Again, I think we're seeing that the poor utilization continue to rise, which is leading to customers.

Christian Greenhouse: Expressing interest in increasing the size of their networks to keep again as I mentioned earlier that people that they care about coming back to their to their institutions.

Richard Wilmer: But I think we're still in a bit of an overhang as a result of all the negative press around the decreasing rate of EV adoption. So I think we've got competing forces here that we're working with, with, you know, on the optimistic side, increasing port utilization, but the continued concerns about the slowing pace of BB adoption, you know, pushing things in the other direction.

Christian Greenhouse: But I think we're still in.

Christian Greenhouse: I don't know of an overhang.

Christian Greenhouse: As a result of all the negative press around the decreasing rate of EV adoption. So I think we've got competing forces here that we're working with.

Christian Greenhouse: With.

Christian Greenhouse: On the optimistic side increase importantly utilization, but the continued concerns about the slowing pace of <unk> adoption pushing things in the other direction.

Christian Greenhouse: Okay.

Unknown Executive: Thank you. And that concludes today's question and answer session and today's conference call. Thank you for your participation. You may now disconnect from today's conference call. Thank you for your participation.

Speaker Change: Thank you.

Speaker Change: And that concludes today's question and answer session and today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: Hmm.

Speaker Change: Today's conference call. Thank you for your participation you may now does.