Q3 2025 ChargePoint Holdings Inc Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until that time, your lines will again be placed on music hold. We thank you for your patience.
Speaker Change: Please wait. The conference will begin shortly. Please wait. The conference will begin shortly.
Music Music Music Music Music Music Music Music Music Music
Abby: 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 ChargePoint third quarter fiscal 2025 earnings conference call and webcast.
Abby: All participants' lines have been placed in a listen-only mode to prevent any background noise.
Speaker Change: After the speaker's remarks there will be a question and answer session and I would now like to turn the call over to Nandan Amlodi, ChargePoint's Vice President of Finance and Investor Relations. Nandan, please go ahead.
Nandan Amlodi: Good afternoon and thank you for joining us on today's conference call to discuss ChargePoint's third quarter fiscal 2025 earnings results.
Nandan Amlodi: With me on today's call are Rick Wilmer, our Chief Executive Officer, and Mansi Khetani, our Chief Financial Officer. This afternoon, we issued our press release announcing results for the quarter, ended October 31st, 2024, which can be found on our website.
Nandan Amlodi: We'd like to remind you that during the conference call management will be making forward-looking statements.
Nandan Amlodi: including our outlook for our fourth quarter of fiscal 2025. 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.
Nandan Amlodi: These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call.
Nandan Amlodi: For a more detailed description of certain factors that could cause actual results to differ, please refer to our Form 10-Q filed with the SEC on September 9, 2024, and our earnings release posted today on our website and filed with the SEC on Form 8-K.
Nandan Amlodi: 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 certain historical periods in the investor presentation posted on the investor section of our website.
Speaker Change: And finally, we'll be posting a transcript of this call to our Investor Relations website under the quarterly results section. And with that, I'll turn the call over to Rick.
Speaker Change: Good afternoon and welcome to ChargePoint's third quarter fiscal 2025 earnings call. Today, I will walk through key financial results for the quarter, implications of the recent U.S. elections,
Rick Wilmer: and a review of progress made on our strategic plan. Let's start with the third quarter. Our relentless pursuit of operational excellence is translating into positive results as we align our business for growth and manage our operating expenses.
Rick Wilmer: We finished the quarter with revenue of $100 million exceeding our guidance range of $85 to $95 million.
Rick Wilmer: Non-GAAP gross margins remained steady at 26% and inventory was slightly lower than it was in the second quarter.
Rick Wilmer: Operating expenses were also down at $59 million compared to $66 million in the second quarter. In the quarter we reduced our cash consumption to $24 million which is down 64% from Q1 of this year.
We continue to manage our cash with extreme rigor.
Rick Wilmer: The third quarter was notable for the expansion of our work with automotive manufacturers and partners.
Rick Wilmer: We completed a project for General Motors, deploying our software for a new use case with a major fast charging network in the USA.
We expanded our footprint at U.S. ports.
Rick Wilmer: doing a sizable deal with the Port of Stockton in California.
Rick Wilmer: We recently joined forces with SixthUSA, a leading provider of premium mobility services.
Speaker Change: Sixt and ChargePoint will be working together to test ChargePoint solutions at select Sixt car rental locations in U.S. markets with high EV adoption rates.
Speaker Change: With our partner Energy Efficiency Pros, we did a large installation for Red Bull's delivery fleet.
Speaker Change: More installations at IKEA locations went live, and we co-hosted a fleet webinar with them to share the case study.
Speaker Change: The recent U.S. election is likely on many of your minds, but Chargepoint currently does not see any dramatic changes on the horizon that we expect will materially impact our business.
Speaker Change: We have established our market leadership over 17 years amidst changing political environments.
Speaker Change: and we will continue to drive the secular shift towards clean transportation.
Speaker Change: Significant investments have been made across sectors to prepare for this shift. We believe electric vehicles are far superior to their internal combustion counterparts and we do not predict any reversals on the road to electrification.
Speaker Change: Last quarter, I mentioned green shoots in demand, and we continue to see encouraging signs in the market.
Speaker Change: Charging network operators have been reporting an upswing in charger utilization, a trend we are also seeing at ChargePoint.
Speaker Change: This is good for the industry as a whole and good for Chargepoint as a supplier of software and hardware to the aforementioned networks.
Speaker Change: This all demonstrates a need for more infrastructure with our utilization outpacing our port growth yet again in the third quarter. This pressure has prompted customer inquiries about incremental chargers.
Speaker Change: The utilization pressure is the result of more EVs on the road. The U.S. saw record EV sales in the third quarter, up 11% year-over-year, according to Cox Automotive.
Speaker Change: It was also a record quarter for the EV market share in the U.S., continuing the stable and sustainable growth pattern I mentioned in our last earnings call.
Speaker Change: In terms of our own growth, our managed port count now exceeds 329,000.
Speaker Change: representing 20% more active ports in the field year over year.
Speaker Change: We count 80% of the Fortune 50 companies as customers and we estimate we have avoided the consumption of nearly 500 million gallons of gasoline.
In our last call, I introduced ChargePoint's three-year strategic plan.
Speaker Change: This plan remains anchored upon our four cornerstones of a class-leading software platform, hardware innovation, delivering a world-class driver experience and operational excellence.
Speaker Change: Year one goals included finalizing our leadership team, revising our product roadmap, right sizing, and ensuring operational excellence.
Speaker Change: Three quarters into this fiscal year, we have accomplished all of this, with the hiring of our new CRO, David Weiss, being a recent highlight.
Speaker Change: David joined us in September and he is aligning the sales organization to drive growth.
Speaker Change: Priority for year two of the strategic plan is the rollout of our next-generation software and hardware products.
Speaker Change: Our next generation software aggregates our greatest features and capabilities into one formidable platform.
Speaker Change: Within this platform, a customer will be able to manage anything from a network of chargers to a corporate fleet of cars, trucks, or buses.
Speaker Change: When we roll out these integrated capabilities, we expect to delight our CPO, commercial, and fleet customers with the first major proof points of this software-first initiative.
Speaker Change: The new hardware solutions will be proof points of our enhanced product design and manufacturing strategy.
Speaker Change: which leverages partners to bring our products to market faster, at a lower cost, and at improved margins.
Speaker Change: Year three of the plan is when we expect to reap the full benefits of a top-performing organization, a next-gen portfolio of innovative software and hardware products, and operational excellence.
Speaker Change: To ensure a world-class driver experience, we are continuously improving network reliability.
Speaker Change: Last quarter, we deployed an AI solution to make it easy for drivers to report problem stations with detailed and actionable information.
Speaker Change: We knew it would resonate with our drivers, but the results have far exceeded our expectations.
Speaker Change: Within the first 10 weeks, we received actionable reports that enabled us to resolve nearly half of all reported issues across thousands of stations more efficiently.
Speaker Change: This tool is materially helping us improve station uptime and increase customer satisfaction.
We continue to focus on operational excellence.
Speaker Change: Proof of this comes in the form of our third quarter results.
Speaker Change: September sales and marketing focused RE-ORG has opened the door for new ideas and approaches and our CRO has been aligning the team for revenue growth and scalable processes.
Speaker Change: The financial benefits of September's right-sizing became evident at the end of the quarter, and the additional benefits will materialize in the fourth quarter and beyond.
Speaker Change: We are focused on driving revenue growth while carefully managing our operating expenses.
Speaker Change: Excellence is also defined by outstanding customer support and our support capabilities are now winning us deals over the competition.
Speaker Change: In conclusion, we have accomplished the first year goals of our strategic plan and done so ahead of schedule.
Our Q3 revenue and improved OPEX are proof of this.
Speaker Change: We are encouraged by the record EV sales in the industry, and we continue to see network utilization demonstrate the need for more charging infrastructure.
Speaker Change: We are now concentrating on returning to growth and streamlining operations to continue on our path to positive non-GAAP-adjusted EBITDA, which is targeted for a quarter in fiscal year 2026.
Speaker Change: I will now hand the call over to our CFO Mansi.
Thanks Rick
Mansi Khetani: Revenue for the third quarter was $100 million above our guidance range of $85 million to $95 million.
Mansi Khetani: Network charging systems at 53 million accounted for 53% of third quarter revenue.
This was down 18% sequentially and down 29% year-on-year.
Mansi Khetani: Subscription revenue at $36 million was 37% of total revenue, up 1% sequentially, and up 19% year-on-year. Subscriptions continue to demonstrate healthy growth.
Other revenue at $11 million was 10% of total revenue.
Mansi Khetani: This was up 28% sequentially and up 81% year-on-year due to growth in net transaction fees for processing payments and one-time project revenue.
Turning to verticals, which we report from a building's perspective.
Mansi Khetani: Third Quarter Billings Percentages were Commercial 61%, Fleet 15%, Residential 18%, and Other 6%.
Mansi Khetani: The commercial segment has normalized as a percentage of total billings after several large Express Plus DC shipments in the second quarter.
Mansi Khetani: Fleet remains stable, but the pushouts we outlined last quarter due to permitting and construction delays persist.
Mansi Khetani: Note that this is business that we expect to capture in future quarters. Our highly rated home charger, the HomeFlex, continued to be a bestseller and contributed a strong share of billings in the third quarter.
Mansi Khetani: From a geographic perspective, North America made up 83% of third quarter revenue and Europe was at 17%.
Mansi Khetani: Europe remains challenging for the entire EV sector amidst policy and incentive uncertainties.
Mansi Khetani: Non-gap growth margin for the third quarter was 26%, consistent with the second quarter.
Mansi Khetani: Growth margin improved by 44 percentage points as compared to the third quarter last year, a quarter that was impacted by an inventory impairment charge.
Mansi Khetani: Non-GAAP operating expenses for the third quarter were $59 million, down 12% sequentially, and down 28% from $81 million in the third quarter last year.
Mansi Khetani: In September, we reduced our non-GAAP operating expenses by an estimated $38 million on an annualized basis.
Mansi Khetani: In the third quarter, we saw a partial impact of the September restructuring.
Mansi Khetani: The full impact on our run rate operating expense profile will be evident in the fourth quarter.
Mansi Khetani: Non-Gap Adjusted EBITDA loss for the third quarter was $29 million, a fourth consecutive quarter of improvement.
Mansi Khetani: This compares to a loss of $34 million in the second quarter and a loss of $97 million in Q3 of last year.
Mansi Khetani: Stock-based compensation in the third quarter was $21 million, up from $19 million in the second quarter and down from $33 million year-on-year.
Mansi Khetani: Our inventory balance decreased by $7 million in the third quarter from an all-time high in the second quarter.
Mansi Khetani: As we continue to sell through finished goods on hand, this should release a significant amount of working capital and we expect to free up cash next year.
We ended the quarter with $220 million cash on hand.
Mansi Khetani: We reduced net cash consumption to $24 million for the third quarter, which is down 64% from Q1 of this year and is lower than our adjusted EBITDA loss for the third quarter.
Mansi Khetani: While we continue to rigorously focus on cash management, we have access to a $150 million revolving credit facility which remains undrawn.
Mansi Khetani: We have no dead maturities till 2028, and we have existing capacity on our ATM.
Turning to guidance for the fourth quarter of fiscal 2025.
We expect revenue to be $95 million to $105 million.
The
Mansi Khetani: While we are pleased with beating our guidance in the third quarter, we continue to be prudent in our forward guidance as a result of our recent improvements to the sales and marketing organization.
Mansi Khetani: In conclusion, our Q3 was solid, with revenue beating our expectations.
Speaker Change: As Rick outlined in his remarks, we have taken meaningful steps throughout this year to improve operations and have achieved a more efficient cost structure.
Speaker Change: This has improved our adjusted EBITDA each quarter this year and reduced our cash usage, a trend that we expect to continue as we progress towards profitability.
Speaker Change: We believe the trough is behind us. We are improving on all metrics within our control and with the recent reorganization of our sales structure we are now well positioned to capitalize on the opportunity ahead of us.
Speaker Change: With that, I will turn the call back to the operator for questions.
Speaker Change: Thank you. And we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to withdraw your question, simply press star 1 a second time.
Speaker Change: If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: To be able to take as many questions as possible, we do ask that you please limit yourself to one question and one follow-up.
Speaker Change: Again, press star 1 if you would like to join the queue.
Speaker Change: And your first question comes from the line of Colin Rush with Oppenheimer. Your line is open.
Speaker Change: Thanks so much, guys. Now, could you talk a little bit about the margin trajectory that you're expecting on the gross margin side? Obviously, you guys have adjusted some of the manufacturing, the component supply has shifted a little bit, but I just want to get a sense of how that's trending for you and how we should think about that on a multi-quarter basis.
Speaker Change: Yeah, hi Colin. I can take that one. So from a gross margin perspective...
Speaker Change: We ended at 26% in Q3. I expect it to be slavish to maybe improve slightly in Q4, but the majority of improvement or meaningful margin improvement will be realized next year as we sell through our existing inventory and really start seeing the benefits of our Asia manufacturing.
Speaker Change: Okay, that's super helpful. And then just in terms of the sales process, can you talk a little bit about the efficiency per headcount that you're seeing with the sales team as well as the the win rate that you guys are seeing in terms of the bids and how that's flowing through the sales funnel?
Speaker Change: Yeah, thanks Colin for that question. I've really been pleased with with our new leader David Weiss and the impact he made.
Speaker Change: in, quite frankly, a quarter that was disrupted through the restructuring that we executed during the quarter.
Speaker Change: but the progress we've made across a variety of initiatives in the sales and marketing area yielded results in Q3 and I'm optimistic about that.
Speaker Change: continued impact those changes will have going forward. They include things like, you know, areas of focus on certain segments by geography, clarifying roles and responsibilities within the sales and marketing organization, uploading, upleveling sales skills.
standardizing processes for moving deals through the deal stages.
as we take those through to win an execution.
Speaker Change: a focus on our partner program, our channel partner program, improving that along with the way we generate interest in the company's products from a marketing perspective and process that through into the sales organization for execution.
Appreciate it, guys. Thanks so much.
Speaker Change: And your next question comes from the line of Bill Peterson with J.P. Morgan. Your line is open.
Thank you for watching!
Hi. Good afternoon. Thanks for taking my questions.
Speaker Change: I wanted to come back to your comments that you're not expecting any material, you know, changes, I guess, with the incoming administration. I think it's pretty well known that there's expectations around tariffs and...
Speaker Change: potentially 30D tax credits going away, but maybe, I guess, on the tariff side and your cost structure, I know you're working with partners in Asia. If there were to be a tariff implemented, how should we think about...
Speaker Change: the impacts to your, I guess, margin expectations? Would you reflect any capacity back to North America? How should we think of, you know, does this give you caution on how to think about the margin expansion in the next term and beyond?
Speaker Change: You know, it's speculative exactly what's going to happen, you know, based on what we know so far, Bill, but we don't manufacture in China. For one thing, we also have manufacturing operations up and running in the United States and we've had those for a long time.
Speaker Change: You know, so if it became cost-effective to shift more production to the U.S., that's clearly an option that we have available to us right now today if we need to do that.
Speaker Change: Okay, thanks for that. You know, you commented earlier that, you know, Europe has been challenged. We saw a lot of negative year-on-year growth trends for many of the countries. France is pulling back in subsidies.
Speaker Change: I guess I'm trying to get a sense of how you feel about the strategic rationale of Europe at this stage. Would you consider divestment to shore up the balance sheet as your program unfolds? Or I guess maybe start asking another way, how synergistic are the businesses at this stage?
Speaker Change: We're committed to Europe and we remain committed to Europe, you know, despite the short-term uneasiness there, I think the long-term prospects look strong. Furthermore, we've got multinational customers that
Speaker Change: by being present both in Europe and North America give us a competitive advantage to serve them across both continents and those are some very important customers to us so we will continue to focus on Europe. The other thing I'll tell you is that the
Speaker Change: The focus on sales and marketing that we executed in Q3 was very North America centric and we're now going to turn a lot of that focus to Europe and have no reason to expect similar improvements like those we saw in North America.
Oh, that's helpful comments. Thank you.
Speaker Change: And your next question comes from the line of Mark Delaney with Goldman Sachs. Your line is open.
Speaker Change: Good afternoon. Thank you very much for taking the questions. Rick and Mansi, you both alluded to your view that the business has troughed and you see some signs to be optimistic heading forward. In light of everything you're seeing in the broader markets, you spoke a bit on Europe. We've already spoken a bit on public policy. Maybe you can just double click a little bit more on what gives you that confidence around the business momentum heading into this coming fiscal year.
Speaker Change: Yeah, I think the other thing that gives us confidence is the continued diversity of EV selection that rolls into the market from the auto OEFs.
I think that
Speaker Change: We are firmly convinced and probably biased that EVs are far superior to internal combustion engine cars as a product in general.
Speaker Change: and knowing that we now have a broader selection of vehicles coming, both in terms of price point
Speaker Change: size, shape, form, class. I think that's going to continue to drive EV adoption so I'm very optimistic that, you know, a broader selection of cars is going to help move things forward.
Speaker Change: And specifically, Mark, in terms of where we see revenue growth coming from, there are, you know, a number of green shoots.
Speaker Change: One is closing deals that have already been pushed out from this year. In many cases, we're getting indications of potential expansions as well.
Speaker Change: On the fleet side, there are large deals that we've already won, specifically in the e-bus space that are expected to ship next year.
Speaker Change: On the commercial side, there are government and Navy-related wins that we've already booked.
Speaker Change: that are expected to ship next year, as well as auto dealership deals we've won. Residential has been a strong sector for us as well, and we have forecasts of growth in volumes from our channel partners. And then, of course, there is a continued increase in subscriptions revenue. So all of this will contribute to a growth in revenue for us specifically next year.
Speaker Change: That's helpful. My follow-up question, I think more for you, Mansi. You spoke about some additional cost reductions you expect to flow through this coming quarter. Can you be a bit more specific around what to expect around OPEX or OPEX savings and how sustainable that lower run rate may be in the coming year? I guess just to conceptualize what that might mean, to the extent there is downside to the business from the top-line perspective, and I understand that's not your expectation, but if there were, because of macroeconomic or policy changes, do you think the charge might take more cost out, or would that be hard to do given how much you've already done on that front? Thank you.
Speaker Change: Yeah, so overall on the OPEC side, so as I mentioned in my prepared remarks, we took out $38 million of an annualized OPEC on an on-gap basis.
is towards September restructuring.
Speaker Change: So we saw, you know, that averages to about nine-ish million a quarter, and we saw two-thirds of that impact.
Speaker Change: coming through in Q3, and in Q4, we'll see the full quarter impact. So, we're not expecting anything additional in addition to the restructuring that we did in September for the Q4 operating expenses run rate.
Speaker Change: This fund will continue through next year, obviously there will be some investments that we will make in certain areas of the business where we see it prudent to do so and where we get direct revenue benefits.
Speaker Change: But other than that, I think this is a pretty good run rate going into next year.
Speaker Change: and then do the second part of your question in terms of overall.
Speaker Change: We are always looking at OPEX to find efficiencies. There are so many areas like T&E, there are facilities spend, there are software spend, external consulting services, etc, that we can and will continuously look at to see where we can get more synergies from.
Thank you.
Go to Beadaholique.com for all of your beading supplies needs!
Speaker Change: And your next question comes from the line of Stephen Fox with Fox Advisors. Your line is open.
Speaker Change: Hi, good afternoon. First question, just to round out the question on the backdrop, is it safe to say you're also not seeing any buyer hesitancy related to the new politics from any network customers or anything like that? Can you just give us a sense that there's been a reaction there? And then I had a follow-up. Yeah, hi Steve, thanks for the question. No, we've seen literally zero change in terms of buying behavior from our customer base.
Speaker Change: Okay, fair enough. And then if we could do just maybe a little bit deeper dive on the growth margins, looking at it software versus hardware. Are we thinking that the improvement, you know, for at least a couple more quarters is just more of a mix of software, or do we start to see the hardware margins start to improve based on everything that you talked about so far? Thanks.
Speaker Change: Yeah, so hardware margins will improve as well. As you saw, you know, in this quarter hardware margins
Speaker Change: were lower than last quarter. It was mostly due to some incremental freight charges for some raw materials that were moved from our US-based CMs to Asia. You know, more and more like a one-time impact. So hardware margins should continue to go up steadily. Hardware margins also kind of are influenced by final mix.
Speaker Change: of product. So depending on where the mix lands, you know, that will cause some fluctuations. But overall, like I said before, the more meaningful improvements in hardware margin will come around middle of next year when we actually start seeing benefit of our Asia manufacturing.
Great, that's helpful. Thank you.
Speaker Change: And your next question comes from the line of Joseph Osho with Guggenheim Partners. Your line is open.
Joseph Osho: Hi there. Thanks for taking my question. Mansi, you talked about continuing to free up working capital as you sell down inventory. I'm just wondering...
Joseph Osho: You know, is there any kind of, you know, obsolescence or price risk that you face is that, you know, as you, as the timeline to bring that inventory, you know, expands? And then I have one, one other question.
Speaker Change: Yeah, sorry, that's a much more eloquent way of putting it. Thank you. That's right. So, no, I mean, most, pretty much all the product that we have on our inventory right now is
is a product that we're actively selling.
Speaker Change: is of goods that we're currently selling and we expect to sell those through over a period of time. There is always, you know, some write-off each quarter. We have variances in terms of, you know, maybe changes in standard costs or, you know, maybe some really old E&O stuff, which is, which is small. It's kind of normal course of business that we will continue to do every quarter.
Speaker Change: Okay, thank you. And then my other question is just looking at the cash off XBURN, obviously you all have had a lot of luck bringing that down and continue to work on it. Can we, do you pretty much have that where you want it at this point, the idea being that future improvement comes from top-line growth? Can we think about it that way?
Speaker Change: Yeah, so and Cash, you know, we were really pleased with...
Speaker Change: With our cash usage for this quarter, as we mentioned, we brought it down to $24 million, which is significantly lower than the $66 million in Q1 and $50 million in Q2.
in Q2.
Speaker Change: The main reason was, well there were two reasons, one is we brought OPEX down so that directly impacts our cash usage and the second one was inventory. This quarter we actually managed to bring inventory down. Last couple of quarters we've been building inventory balance and so we've been investing and using up our cash.
Speaker Change: to bring that inventory on board. This quarter we saw reversal of that trend and we actually freed up cash and reduced our cash burden because of that. And that's what we've been saying. We should see that accelerate through next year as we bring down inventory in an even more meaningful way.
Speaker Change: Generally speaking, because of the business that we're in, we're capitalized, we don't have any CapEx or very, very little CapEx.
Our cash burn should mirror our EBITDA loss pretty closely.
Speaker Change: And that's basically my goal. That's what we want to get to. We did that this quarter. Actually, this quarter, our cash flow was even slightly lower than our EBITDA loss. We'll continue to see that trajectory going forward. And as we get closer to EBITDA break-even, we should get to cash flow break-even. Now, we could get to cash flow break-even a little bit earlier if we see more release of working capital because of reduced inventory.
Speaker Change: Thanks. Maybe I didn't state the question quite correctly. The cash OPEX, can we think about that as basically being flat, the non-GAAP OPEX going forward?
Okay, I'm sorry. Yeah, my bad, sorry.
Speaker Change: Q4 will see the full benefits of the September restructuring so it should be better than Q3.
Speaker Change: And then after that, we think it's more or less, you know, in a good place. We're not guiding as of now to next year's OPEX, but for Q4, you should see an improvement versus Q3.
Okay, thank you very much.
Speaker Change: And your next question comes from the line of Chris Dendrinos with RBC Capital Markets. Your line is open.
Chris Dendrinos: Yeah, thank you. Um, I just wanted to follow up on the on the longer term I'll look for for 26 and the positive EBIT comment Do you just maybe I guess walk us through some of the levers that you all have to achieve that? Is that really just a function of revenue growth or are there additional levers that you all have to I guess manage on your side? Outside of the kind of macro demand environment. Thanks
Speaker Change: Yeah, thanks Chris. So, you know, you saw this year, we've made significant progress.
Speaker Change: towards getting towards your CD Beta positive by managing our cost structure. So that helps on the OpEx side pretty significantly. The two levers that will get us there are revenue growth,
Speaker Change: and growth model improvement, right? So revenue growth, as I laid out, there are a number of green shoots that we're seeing that gives us confidence in that.
Speaker Change: in revenue growing next year, and then on the gross margin side, as we start seeing benefits of, you know, Asia manufacturing next year, we should see that trending up as well. So we'll see a combination of all of those three factors getting us there.
Got it. That was it for me. Thank you.
Speaker Change: And your next question comes from the line of Chris Pierce with Needham. Your line is open.
Hey, good afternoon.
Speaker Change: Rick, I just want to make sure I followed something you said. Year two, which is next year, you're going to have next generation software and next generation hardware.
Speaker Change: Does the next generation software work on hardware in the field? And then, I just want to understand the timing of the inventory drawdown and the introduction of next generation hardware better.
Speaker Change: So let me take the first part of that, Chris. So all of our software is absolutely backward compatible with all of our prior products and will obviously support all the new products that we'll be introducing. Furthermore, we have talked
Speaker Change: many times about the fact that where our software platform is open so we manage a lot of third-party hardware with our software that's not even ours so we're fully compatible across the board with prior generation, next generation, and third-party hardware.
The
What was the second part again, Chris?
Speaker Change: I'm just curious about the timing you talked about next generation hardware coming next year but you've got this inventory build right now that you're looking to draw down I just
Speaker Change: It seems like they're both kind of landing at the same time, if I have that right, or I just want to understand the timing of the drawdown versus building inventory next-generation hardware.
Speaker Change: Yes, so we are very diligent about aligning supply with demand and we're confident that as we introduce new products, the products, if they do replace a prior product and are not something new, that we'll manage that transition effectively to avoid any significant, you know, obsolescence of an older product.
Speaker Change: And we've looked at that very carefully and are confident that we're in fine shape in that regard.
Speaker Change: Okay, perfect. And then can you just touch on the essential cloud plan that you released that you talked about at the end of October? Does this sort of put you on the path to being an owner-operator or quasi-owner-operator since you're taking revenue from the drivers now and this allows customers to have a lower monthly cost burden? I just want to understand the path that you're on or if this is just more of a
special project for multi-family dwelling type buyers.
Speaker Change: No, good question and thanks for asking that question. It definitely does not put us into the position of being an energy seller.
Speaker Change: that is not our business, that would put us in competition with our customers and we have no plans to do anything like that. So this is really an easy to buy or an easy to consume way.
to take care of your licensing requirements to ChargePoint.
Speaker Change: So rather than, you know, every year get a renewal notice for your software or your enhanced warranty services,
We just deduct that from your driver revenue until...
Speaker Change: The amount you owe us for those services are paid and then you could cover the rest so you forgo
Speaker Change: The hassle of getting renewal notices as a customer and having to, you know, get a quote from us and pay the invoice. It just happens automatically. It also improves our internal efficiency because we don't have to do all that renewal work on an annual or however long the term of the license is.
Okay, perfect. Thank you.
Speaker Change: And your next question comes from the line of Gabe Dowd with TD Cowan. Your line is open.
Gabe Dowd: Hey, afternoon, everyone. Thanks for taking my questions. Rick was curious if you could maybe give us a bit more color on this software you deployed for GM, a new use case with a major fast-charging network in the U.S. Just curious if you could maybe talk a little bit about that and if you outlined or identified additional use cases for this new software, I guess.
Speaker Change: Yeah, we won't go into too many details about that. It was a significant project and it also applies to things we can do with other Auto OEMs.
Speaker Change: Okay. Okay, fair enough. Thanks for that. And then just as a follow-up, you know, Mansi, you mentioned gross margin next year will ultimately also depend on mix.
Speaker Change: So it's curious if you can maybe level set a bit and give us an update or maybe rank within the portfolio like level twos
Speaker Change: CP6000 now, the more margin-rich product, versus CT4K or CPF50, the new one, like more margin-rich. And similarly, on the DC side, which express offering would be the most margin-rich at this point?
Speaker Change: Yeah, so we're selling both CT4K, which is our legacy AC product, as well as the CP6K, which is a more premium product, and both are margin-rich. All of our AC portfolios are margin-rich. And on the DC side, with the Asia manufacturing coming on board, that will help the DC margins more significantly.
Okay. Okay. Thanks, Moxie. Thanks, Rick.
Thank you.
Speaker Change: And your next question comes from the line of Patrick Ouellette with Stiefel. Your line is open.
Speaker Change: Hey, it's Pat O'Lennon for Steve and Jaguar. Thanks for taking the questions. You'd been optimistic about some green shoot potentials next year and seeing customers significantly expand their deployment plans. I'm curious if expectations have shifted one way or another and then any comments you could provide specifically on the fleet side.
Speaker Change: I think in general, across all segments, especially in North America, you know, we're seeing
Speaker Change: you know demand that is pleasing to us and again with the improvements we've made in terms of sales and marketing execution we're executing on that demand better.
So, thank you.
Speaker Change: It seems to be pretty evenly spread across all segments, at least in North America, you know, again with a bit slower...
Speaker Change: market growth in Europe at the moment and in fleet in particular I think we've got some exciting opportunities there and those tend to come in large steel chunks and we've got some pretty exciting things there that we're working on that I'm looking forward to next year.
All right, thanks for that. And then.
looking into next year with the Asian manufacturing coupled with
Speaker Change: potential increase in higher margin subscription revenue. Could you talk about any associated rampant margin? Understanding you still have to get through the inventory on hand, but just looking for insight on how margin progresses throughout the year. Then any thoughts on a more competitive market for product sales impacting margin?
Speaker Change: You are also correct both hardware and subscription margins should expand
hardware because of, you know, the Asia manufacturing.
Speaker Change: you know, coming on board and then subscription margins expanding because we will continue to see a larger size of subscription revenue in overall revenue as well as more efficiencies and economies of scale.
What was the second part, sorry, of your question?
Speaker Change: Thanks for that. Just like any thoughts on a more competitive market for product sales impacted margin.
Speaker Change: Yeah, the competitive landscape, it moves around, but in terms of the overall strength of the competition, it doesn't seem to change on an overall basis in an appreciable way. The one thing we have noticed is that
all the investments we've made in our support organization.
Speaker Change: you know the example of our AI picture to resolution feature that we rolled out last quarter, those are starting to make a real differentiating factor for us. We're winning deals on our ability to support our customers and make sure their networks stay up and stay reliable.
Subs by www.zeoranger.co.uk
Alright, thanks a bunch.
The
and the other one.
Speaker Change: and as a reminder it is star one if you would like to ask a question and your next question comes from the line of Craig Irwin with Roth Capital Partners your line is open
Speaker Change: Good evening and thanks for taking my question. I wanted to ask for a little bit more color around the sort of base assumptions in your forecast for growth and the return to positive EBITDA, or I should say the achievement of positive EBITDA, because it'll be a very important milestone. Can you maybe give us color on, you know, the relative contribution you expect from new products in verticals that you don't already serve versus, you know, new products in, you know, that are updates, as you've referred to them, you know, multiple times on the call, versus organic growth and a positive trajectory for products that you already have established channels and relationships and customers for?
Speaker Change: Good question Craig, nice to hear from you. I think next year
The new products
Speaker Change: that serve new use cases and categories will not contribute much. Those are really gonna be developed and launched as we move through the year and start to show significant financial benefit in the following year. So the majority of the revenue in the upcoming fiscal year, our fiscal 26, which starts on February 1st, will come from our existing portfolio.
Speaker Change: Excellent, thank you for that. And then just as a follow-up question, we're hearing a lot of interest about sort of an accelerated changeover to.
Speaker Change: and NACs on the part of many sort of third-party network operators.
Speaker Change: Can you maybe comment a little bit about the availability of the necessary hardware to make that change?
Speaker Change: you know, whether or not that's something that you could earn incremental service dollars on as these networks are looking to pursue growth with, you know, the Tesla fleet versus, you know, the non-Tesla fleet, which has been a big boon for many of them over the last few years.
The
Yeah, another good question.
Speaker Change: Thanks, Craig. We're in good shape there. We've got our Omniport solution that we've publicly announced. It's going to begin shipping here very soon.
Speaker Change: the connector on your car irrelevant you can come charge at a charge point station no matter what you have as long as you you've got the OmniPort solution installed and we do expect customers to spend money upgrading to that solution as we as we move through in the next year.
Speaker Change: Excellent, well congratulations on the progress bringing down cost. I'll hop back in the queue.
Thank you.
Patrick Hamer
Speaker Change: And ladies and gentlemen, that concludes our question and answer session and today's conference call. We thank you for your participation and you may now disconnect.
Speaker Change: Please wait. The conference will begin shortly. Please wait. The conference will begin shortly.