Q2 2026 ChargePoint Holdings Inc Earnings Call

Speaker #4: Good afternoon, and thank you for standing by. Welcome to ChargePoint's second quarter, fiscal year 2026, financial results conference call. Please be advised that today's conference is being recorded, and a replay will be available on ChargePoint's investor relations website.

AJ Gosselin: Good afternoon and thank you for standing by and welcome to ChargePoint's second quarter fiscal year 2026 financial results conference call. Please be advised today's conference is being recorded, and a replay will be available on ChargePoint's investor relations website. I would now like to hand the conference over to AJ Gosselin, Director of Corporate Communications.

Speaker #4: I would now like to hand the conference over to A.J. Goslin, Director of Corporate Communications.

Speaker #5: Good afternoon, and thank you for joining us on today's conference call to discuss ChargePoint's second quarter fiscal 2026 earnings results. This call is being webcast and can be accessed on the investor section of our website at investors.chargepoint.com.

Speaker 5: Good afternoon and thank you for joining us on today's conference call to discuss ChargePoint's second quarter fiscal 2026 earnings results. This call is being webcast and can be accessed on the investors section of our website at investors.chargepoint.com. 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 July 31, 2025, which can be found on our website. We'd like to remind you that during the conference call, management will be making forward-looking statements, including our outlook for the third quarter of fiscal 2026. 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.

Speaker #5: With me on today's call are Rick Wilmer, our Chief Executive Officer, and Manti Khetani, our Chief Financial Officer. This afternoon, we issued our press release announcing results for the quarter ended July 31st, 2025, which can be found on our website.

Speaker #5: We'd like to remind you that during the conference call, management will be making forward-looking statements including our outlook for the third quarter of fiscal 2026.

Speaker #5: 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.

Speaker #5: These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. For a more detailed description of certain factors that could cause actual results to differ, please refer to our Form 10-Q filed with the SEC on June 6, 2025, and our earnings release posted today on our website and filed with the SEC on Form 8-K.

Speaker 5: These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. For a more detailed description of certain factors that could cause actual results to differ, please refer to our Form 10-Q filed with the SEC on June 6, 2025, and our earnings release posted today on our website and filed with the SEC on Form 8-K. Also, please note that we use certain non-GAAP financial measures on this call, which we reconcile to GAAP in our earnings release and for certain historical periods in the investor presentation posted on the investor section of our website. Finally, we'll be posting a transcript of this call to our investor relations website under the quarterly results section. Thank you. I will now turn the call over to our CEO, Rick Wilmer.

Speaker #5: Also, please note that we use certain non-GAAP financial measures on this call, which we reconciled to GAAP in our earnings release and for certain historical periods in the investor presentation posted on the investor section of our website.

Speaker #5: And finally, we'll be posting a transcript of this call to our investor relations website under the quarterly results section. Thank you. I will now turn the call over to our CEO, Rick Wilmer.

Speaker #6: Good afternoon, and thank you for joining us for ChargePoint's second quarter, fiscal 2026 earnings call. We are pleased to report solid results for the quarter.

Rick Wilmer: Good afternoon and thank you for joining us to ChargePoint's second quarter fiscal 2026 earnings call. We are pleased to report solid results for the quarter. Second quarter revenue was $99 million, landing at the top of our guidance range. Non-GAAP gross margin improved sequentially with Q2 results coming in at 33%. This figure is notable as the highest gross margin we've reported since becoming a public company, and we successfully mitigated tariffs to achieve it. Cash management was exceptional, with our ending balance at $195 million, only $2 million below Q1's close, largely driven by structural OPEX changes we've been making over the last year. Our collaboration with General Motors is also progressing, with nearly a dozen sites and more than 50 new fast charging ports and many more scheduled to launch this year.

Speaker #6: Second quarter revenue was $99 million, landing at the top of our guidance range. Non-GAAP gross margin improved sequentially, with Q2 results coming in at 33%.

Speaker #6: This figure is notable as the highest gross margin we've reported since becoming a public company, and we successfully mitigated tariffs to achieve it. Cash management was exceptional, with our ending balance at $195 million, only $2 million below Q1's close.

Speaker #6: Largely driven by structural opex changes we've been making over the last year. Our collaboration with GM is also progressing, with nearly a dozen sites and more than 50 new fast-charging ports, and many more scheduled to launch this year.

Speaker #6: Overall, ChargePoint now manages over 363,000 ports, including more than 37,000 DC fast chargers and 123,000 located in Europe. Globally, ChargePoint drivers can access nearly 1.3 million charging ports.

Rick Wilmer: Overall, ChargePoint now manages over 363,000 ports, including more than 37,000 DC fast chargers and 123,000 located in Europe. Globally, ChargePoint drivers can access nearly 1.3 million charging ports. We achieved this performance despite the uncertainty, particularly in North America. Within the U.S., passenger EV sales growth slowed to a 3% year-over-year increase. The forthcoming expiration of the consumer 30D EV tax and 30C alternative fuel vehicle refueling credit are also sources of concern for future EV adoption, along with the evolving tariff landscape. This has translated into delays for major projects we have won and extended expansion buildouts, but no project cancellations. While we are making solid progress on our path to non-GAAP adjusted EBITDA breakeven, as we saw over the past year, considering these delays and their impact on revenue, we've determined we will be best positioned if we push out our EBITDA breakeven beyond this year.

Speaker #6: We achieved this performance despite the uncertainty, particularly in North America. Within the U.S., passenger EV sales growth slowed to a 3% year-over-year increase. The forthcoming expiration of the consumer 30(d) EV tax and 30(c) alternative fuel vehicle refueling credit are also sources of concern for future EV adoption.

Speaker #6: Along with the evolving tariff landscape, this has translated into delays for major projects we have won and extended expansion buildouts, but no project cancellations.

Speaker #6: So, while we are making solid progress on our path to non-GAAP-adjusted EBITDA break-even, as we saw over the past year, considering these delays and their impact on revenue, we've determined we will be best positioned if we push out our EBITDA break-even beyond this year.

Speaker #6: This is to ensure we can fund product innovation and commercialization efforts which we expect to drive durable revenue growth. Uncertainty aside, we believe our go-to-market strategy and innovation put us on a firm footing to drive growth when market share and hit EBITDA positive in the coming quarters.

Rick Wilmer: This is to ensure we can fund product innovation and commercialization efforts, which we expect to drive durable revenue growth. Uncertainty aside, we believe our go-to-market strategy and innovation put us on a firm footing to drive growth, win market share, and hit EBITDA positive in the coming quarters. Regarding our go-to-market strategy, we are rapidly operationalizing our partnership with Eaton, and that work will be largely completed this quarter. Since this partnership was announced in May, we continue to build confidence that together we will accelerate the deployment of electric vehicle charging infrastructure across North America and Europe. We have already introduced our co-branded product, expanded our channel reach, accessed new strategic accounts, and started generating new streams of revenue together. We are delivering innovation, which has been accelerated and expanded because of our partnership with Eaton.

Speaker #6: Regarding our go-to-market strategy, we are rapidly operationalizing our partnership with Eaton, and that work will be largely completed this quarter. Since this partnership was announced in May, we continue to build confidence that together we will accelerate the deployment of electric vehicle charging infrastructure across North America and Europe.

Speaker #6: We have already introduced our co-branded product, expanded our channel reach, accessed new strategic accounts, and started generating new streams of revenue together. We are delivering innovation that has been accelerated and expanded because of our partnership with Eaton.

Speaker #6: The express line of DC charging solutions powered by Eaton and announced last week combines the strengths of both companies to deliver more power, in less space, with massive scalability, along with the easiest and fastest installation.

Rick Wilmer: The express line of DC charging solutions powered by Eaton and announced last week combines the strengths of both companies to deliver more power in less space with massive scalability, along with the easiest and fastest installation. It features Eaton hardware for grid connectivity plus V2G capabilities. The net result will be substantially lower CAPEX and operating costs and faster deployment timelines. It will change the game in terms of the economics of DC fast charging for our customers. We are also co-developing bidirectional home charging solution with advanced energy management. The integration of ChargePoint's FlexPlus chargers with Eaton's ABLE Edge smart panels and breakers enables vehicles to supply backup power to homes and also automatically adjust EV charging based on the home energy usage to allow homeowners to install EV charging. The behind-the-meter insights will help utilities manage grid stress and transformer loads.

Speaker #6: It features Eaton hardware for grid connectivity plus V2G capabilities. The net result will be substantially lower CAPEX and operating costs and faster deployment timelines.

Speaker #6: It will change the game in terms of the economics of DC fast charging for our customers. We are also co-developing bi-directional home charging solution with advanced energy management.

Speaker #6: The integration of ChargePoint's FlexPlus chargers with Eaton's Able Edge smart panels and breakers enables vehicles to supply backup power to homes and also automatically adjusts EV charging based on home energy usage, allowing homeowners to install EV charging.

Speaker #6: The behind-the-meter insights will help utilities manage grid stress and transformer loads. We expect this synergistic type of innovation will deliver real value to homeowners, utilities, and auto OEMs while at the same time driving market share gains.

Rick Wilmer: We expect this synergistic type of innovation will deliver real value to homeowners, utilities, and auto OEMs, while at the same time driving market share gains. Both the new express line of DC solutions and Flex product line were designed to not only deliver market differentiation but also cost effectiveness. We expect both product lines to have a positive impact on our hardware gross margins. Moving to markets, Europe seems promising going forward. Road Motion reports a 26% year-over-year increase in European EV sales during the first half of the year, which is a strong indicator of future charging demand in Europe. We believe the current infrastructure cannot support such growth. With the innovation and new products we are delivering, we will be well situated to capture much of this demand. In summary, despite an uncertain environment causing delays, we delivered strong results.

Speaker #6: Both the new express line of DC solutions and Flex product line were designed to not only deliver market differentiation but also cost-effectiveness, we expect both product lines to have a positive impact on our hardware gross margins.

Speaker #6: Moving to markets, Europe seems promising going forward. Row motion reports a 26% year-over-year increase in European EV sales during the first half of the year.

Speaker #6: Which is a strong indicator of future charging demand in Europe. We believe the current infrastructure cannot support such growth. With the innovation and new products we are delivering, we will be well situated to capture much of this demand.

Speaker #6: In summary, despite an uncertain environment causing delays, we delivered strong results. We are operationalizing our strategic Eaton partnership, which accelerates innovation and expands our reach.

Rick Wilmer: We are operationalizing our strategic Eaton partnership, which accelerates innovation and expands our reach. We are delivering game-changing products poised to strengthen our market share and profitability. Internally, our team continues to execute with excellence. Our long-term thesis remains intact, validated by the strength of our pipeline, the positive reaction to our new products, and the new partners and customers we're actively citing. I will now turn the call over to our Chief Financial Officer, Mansi Khetani.

Speaker #6: We are delivering game-changing products poised to strengthen our market share and profitability. Internally, our team continues to execute with excellence. Our long-term thesis remains intact.

Speaker #6: Validated by the strength of our pipeline, the positive reaction to our new products, and the new partners and customers we're actively signing. I will now turn the call over to our Chief Financial Officer, Mansi Khetani.

Speaker #4: Thanks, Rick. 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, settlements, and non-recurring legal expenses.

Mansi Khetani: Thanks, Rick. 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, settlements, and non-recurring legal expenses. Revenue for the second quarter was $99 million at the high end of our guidance range, sequentially higher than the prior quarter and down 9% year-on-year. Network charging systems at $50 million accounted for 51% of second quarter revenue. Subscription revenue at $40 million was 40% of total revenue, 5% higher sequentially, and up 10% year-on-year as our total installed space continued to increase. Other revenue at $8 million was 8% of total revenue. Turning to verticals, which we report from a billings perspective, second quarter billings percentages were commercial 75%, fleet 11%, residential 10%, and other 4%.

Speaker #4: Revenue for the second quarter was $99 million, at the high end of our guidance range. Sequentially higher than the prior quarter and down 9% year-on-year.

Speaker #4: Network charging systems at $50 million accounted for 51% of second quarter revenue. Subscription revenue at $40 million was 40% of total revenue, 5% higher sequentially and up 10% year-on-year as our total installed base continued to increase.

Speaker #4: Other revenue at 8 million was 8% of total revenue. Turning to verticals, which we report from a billings perspective, second quarter billings percentages were commercial 75%, fleet 11%, residential 10%, and other 4%.

Speaker #4: From a geographic perspective, North America made up 84% of revenue, and Europe was 16%. This was relatively consistent with Q1. Non-GAAP gross margin was 33%, growing by 3 percentage points sequentially and 8 percentage points year-on-year.

Mansi Khetani: From a geographic perspective, North America made up 84% of revenue and Europe was 16%. This was relatively consistent with the first quarter. Non-GAAP gross margin was 33%, growing by 3 percentage points sequentially and 8 percentage points year-on-year. This is attributable to higher hardware margins, higher subscription margins, as well as subscription revenue growing as a percentage of total revenue. I'd like to point out that this was our seventh straight quarter of sequential non-GAAP gross margin improvement. Hardware gross margin increased 1% sequentially despite the impact of higher tariffs. Subscription margin continued to grow, reaching another record high of 61% on a GAAP basis and was even higher on a non-GAAP basis, reflecting economies of scale and continued optimization of support costs. Non-GAAP operating expenses were $59 million, up 3% sequentially and down 12% year-on-year.

Speaker #4: This is attributable to higher hardware margins, higher subscription margins, as well as subscription revenue growing as a percentage of total revenue. I'd like to point out that this was our seventh straight quarter of sequential non-GAAP gross margin improvement.

Speaker #4: Hardware gross margin increased 1% sequentially, despite the impact of higher tariffs. Subscription margin continued to grow, reaching another record high of 61% on a GAAP basis and was even higher on a non-GAAP basis, reflecting economies of scale and continued optimization of support costs.

Speaker #4: Non-GAAP operating expenses were $59 million, up 3% sequentially and down 12% year-on-year. The small sequential increase this quarter was mainly due to a temporary increase in R&D spend as a result of higher NRE and contractor spend related to the development of our recently announced new ACNDC charging product architecture.

Mansi Khetani: The small sequential increase this quarter was mainly due to a temporary increase in R&D spend as a result of higher NRE and contractor spend related to the development of our recently announced new AC and DC charging product architecture. This increase will persist in the third quarter, but we should see the spend gradually coming down in Q4 and then further reducing next year. We are continuing to closely manage operating expenses, balancing investments that we believe will lead to significant future growth and margin expansion, while also being mindful of current constraints. Non-GAAP adjusted EBITDA loss was $22 million. This compares with a loss of $23 million in the prior quarter and a loss of $34 million in the second quarter of last year. Stock-based compensation was $18 million, flat to last quarter and down from $19 million in the second quarter of last year.

Speaker #4: This increase will persist in the third quarter, but we should see the spend gradually come down in Q4 and then further reduce next year.

Speaker #4: We are continuing to closely manage operating expenses, balancing investments that we believe will lead to significant future growth and margin expansion while also being mindful of current constraints.

Speaker #4: Non-GAAP adjusted EBITDA loss was $22 million. This compares with a loss of $23 million in the prior quarter and a loss of $34 million in the second quarter of last year.

Speaker #4: Stock-based compensation was $18 million, flat to last quarter and down from $19 million in the second quarter of last year. Our inventory balance remained virtually flat to the prior quarter at $212 million.

Mansi Khetani: Our inventory balance remained virtually flat to the prior quarter at $212 million. While this balance didn't decrease due to existing commitments with contract manufacturers, we continue to drive towards a gradual reduction in inventory over the next few quarters, which will free up cash. Speaking of cash, we ended the quarter with $195 million of cash in hand versus $196 million in the prior quarter, resulting in cash usage of less than $2 million. This compares with $49 million of cash usage in Q2 of last year and $29 million in Q1 this year. We have been able to significantly reduce cash burn over the past few quarters, mainly due to spend reductions and working capital management. Our $150 million revolving credit facility remains undrawn, and we have no debt maturities until 2028.

Speaker #4: While this balance didn't decrease due to existing commitments with contract manufacturers, we continue to drive towards a gradual reduction in inventory over the next few quarters, which will free up cash.

Speaker #4: Speaking of cash, we ended the quarter with $195 million of cash on hand versus $196 million in the prior quarter resulting in cash usage of less than 2 million.

Speaker #4: This compares with 49 million in cash usage in Q2 of last year and 29 million in Q1 this year. We have been able to significantly reduce cash burn over the past few quarters, mainly due to spend reductions and working capital management.

Speaker #4: Our $150 million revolving credit facility remains on run and we have no debt maturities until 2028. Turning to guidance, for the third quarter of fiscal 2026, we expect revenue to be between 90 million to 100 million.

Mansi Khetani: Turning to guidance, for the third quarter of fiscal 2026, we expect revenue to be between $90 million to $100 million. While we continue to guide cautiously given the challenging and constantly changing macro backdrop, delivering revenue growth and ultimately reaching non-GAAP adjusted EBITDA breakeven and generating positive cash flow remain our primary focus areas. As Rick mentioned, given the macroeconomic headwinds, the trajectory of revenue growth required to get to non-GAAP adjusted EBITDA breakeven in a quarter will take longer to materialize than this year, but we expect to continue to make progress towards profitability and reducing cash burn, which we have managed to do well over the past year. We will now open the call for questions.

Speaker #4: While we continue to guide cautiously given the challenging and constantly changing macro backdrop, delivering revenue growth and ultimately reaching non-GAAP adjusted EBITDA break-even and generating positive cash flow remain our primary focus areas.

Speaker #4: As Rick mentioned, given the macroeconomic headwinds, the trajectory of revenue growth required to get to non-GAAP-adjusted EBITDA break-even in a quarter will take longer to materialize than this year, but we expect to continue to make progress towards profitability, and reducing cash burn, which we have managed to do well over the past year.

Speaker #4: We will now open the call for questions. Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Speaker 7: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, again, press star one. We also ask that you limit yourself to one question and one follow-up. Your first question comes from the line of Colin Rusch with Oppenheimer. Please go ahead.

Speaker #4: And if you'd like to withdraw your question, again press *1. We also ask that you limit yourself to one question and one follow-up.

Speaker #4: Your first question comes from the line of Colin Rush with Oppenheimer. Please go ahead.

Speaker #7: Thanks so much, guys. You know, can you just talk a little bit about what's, what the trajectory is on opex? Obviously, R&D is, is remaining at some elevated levels along with the GNA.

Speaker 8: Thanks so much, guys. Can you just talk a little bit about what the trajectory is on OpEx? Obviously, R&D is remaining at some elevated levels along with the G&A. Just want to get a sense of how that should trend over the balance of this fiscal year.

Speaker #7: Just want to get a sense of how that should trend over the balance of this fiscal year.

Speaker #4: Yeah, hi, Colin. I'll take that one. Yes, as I mentioned in my prepared remarks, opex was slightly higher than Q1 because of some investment we did on the R&D front. We have spent on prototyping as we're releasing these new products and the new ACNDC architecture.

Mansi Khetani: Yeah, hi, Colin. I'll take that one. Yes, as I mentioned in my prepared remarks, OpEx was slightly higher than Q1 because of some investment we did on the R&D front. We have spent on prototyping as we're releasing these new products and releasing the new AC and DC architecture. Those are temporary, one-time, if you will, NRE costs. We also had elevated expenses on the contractor side this quarter. We expect this to persist in the next quarter because we're really in the middle of releasing all of these products. There's a lot of activity going on around that. I think it should come down gradually in Q4, and then we'll manage it better next year.

Speaker #4: those are, those are temporary one-time, if you will, NRE costs. and then we also had elevated expenses on the, contractor side. this quarter, now we expect this to, to persist in the next quarter because we're, we're really in the middle of, of releasing all of the, all of, these products.

Speaker #4: There's a lot of activity going on around that, but I think it should come down gradually in Q4. Then we'll manage it better next year.

Speaker #7: Great. And then just from the sales perspective, you know, we all know what's going on in North America and then, you know, kind of the, the digestion of the new policy.

Speaker 8: Great. Just from the sales perspective, we all know what's going on in North America and the digestion of the new policy. I'm curious, in Europe or other geographies where you're seeing any potential higher growth opportunities, particularly with this Eaton relationship and a global footprint there, are there other areas that you see the products ending up that could surprise us in some way around the growth trajectory?

Speaker #7: But I'm curious, you know, in Europe and other geographies, where you're seeing any potential higher growth opportunities, particularly with this Eaton relationship and a global footprint there. Are there other areas that you see, you know, the products ending up that could surprise us in some way?

Speaker #7: around the grocery trajectory.

Speaker #6: Yeah, I think, hey, Colin, I think the overall macro conditions in Europe are looking better right now than they are in North America.

Rick Wilmer: Yeah, I think, hey, Colin, I think the overall macro conditions in Europe are looking better right now than they are in North America. Hopefully, things will start to clarify in North America once we get through the tax credit expiration in September. In Europe, a lot of the products that are driving some of the incremental OPEX spend that Mansi alluded to are targeted at Europe, where we did not have solutions to serve those use cases in the past. The Flex product line that we've announced a month or so ago will launch in Europe here soon. In fact, we've now got inventory positioned in Europe to begin fulfilling early sales. The new DC Express architecture that we also announced will be targeted at Europe, where in the past we have not had a DC product that was developed by us available in Europe.

Speaker #6: Hopefully, things will start to clarify in North America once we, get through the, the tax credit expiration in September. but in Europe, a lot of the products that are driving some of the incremental opex spend that Manti alluded to are targeted, at Europe.

Speaker #6: Where we did not have solutions to serve those use cases in the past. So, the Flex product line that we've announced a month or so ago will launch in Europe here soon.

Speaker #6: In fact, we've now got inventory positioned in Europe to begin fulfilling early sales. The new DC Express architecture that we also announced will be targeted at Europe, where in the past we have not had a DC product developed by us available in Europe.

Speaker #6: So we are optimistic about Europe as we move forward into the new year, as a combination of a more positive macro environment and new products to serve that market that we believe are quite differentiated.

Rick Wilmer: We are optimistic about Europe as we move forward into the new year as a combination of a more positive macro environment and new products to serve that market that we believe are quite differentiated.

Speaker #7: Great. Thanks so much, guys. I'll hop back in, too.

Speaker 8: Great. Thanks so much, guys. I'll hop back in queue.

Speaker #4: You're next question comes from the line of Chris Dendrinos with RBC Capital Markets. Please go ahead.

Speaker 7: Your next question comes from the line of Chris Dendrinos with RBC Capital Markets. Please go ahead.

Speaker #8: Hi. Yeah, good evening, and thank you. I guess maybe to start here, I just wanted to follow up on that last question in regards to the AC architecture or the new AC launch in Europe.

Speaker 8: Hi, good evening and thank you. I guess maybe to start here, I just wanted to follow up on that last question in regards to the AC hardware architecture or the new AC launch in Europe. You know, can you maybe speak to the initial kind of interest levels there and mentioned inventory? I guess maybe what's the channel looking like and what has been the response from the dealerships, dealer channel there? Thanks.

Speaker #8: you know, can you maybe speak to the initial kind of interest levels there and mentioned inventory? I guess maybe what, what's the, what's the channel looking like and what has been the response from, from the dealerships dealer channel there?

Speaker #8: Thanks.

Speaker #6: Yeah, so it's very early, Chris. We've just moved the first bit of inventory into Europe. We've had successful early access customers, and we're beginning to build up our channel interest and target our end customer base in three major geographies in Europe: the UK, France, and Germany.

Rick Wilmer: Yeah, it's very early, Chris. We've just moved the first bit of inventory into Europe. We've had successful early access customers, and we're beginning to build up our channel interest and target our end customer base in three major geographies in Europe: the UK, France, and Germany. We've got all the approvals necessary to serve all the markets, all those different product configurations based on the requirements in each of those major European geos. We'll be really getting clarity on the overall demand that we expect early on with this new product as we move through this quarter, but early indications have been positive.

Speaker #6: we've got all the approvals necessary to serve all the markets, all those different, product configurations based on the requirements in each of those. Major European geos.

Speaker #6: So we'll be really getting clarity on the overall demand that we expect already on with this new product as we move through this quarter, but early indications have been positive.

Speaker #8: Got it. Okay. And then, you know, maybe as a follow-up here, you know, we're only a, I guess, a month or two removed from the passage of the OB-3, but just kind of thinking about the demand outlook and the sort of, call it lower for longer, outlook in, in the US.

Speaker 8: Got it. Okay. Maybe as a follow-up here, we're only, I guess, a month or two removed from the passage of the OB3, but just kind of thinking about the demand outlook and the sort of, call it, lower for longer outlook in the U.S. I guess how are you thinking about the company's positioning here just given the changes in that dynamic? Are you financially in the right place? Do you need to change personnel or strategy at all or slow down maybe some of the development going forward? Thanks.

Speaker #8: I guess how are you thinking about, you know, the company's positioning here? just given the, the changes in, in that dynamic, you know, are you financially in the, in, in the right place?

Speaker #8: Do you need to change personnel or strategy at all, or slow down maybe some of the development going forward? Thanks.

Speaker #6: No, I think just the opposite. I mean, within the constraints of our OPEX envelope, I really believe the path to success is to deliver innovation to the market, which we've clearly been doing as we've moved through the year with some of the more significant innovations just announced recently that we mentioned a minute ago.

Rick Wilmer: No, I think just the opposite. I mean, within the constraints of our OPEX envelope, I really believe the path to success is to deliver innovation to the market, which we've clearly been doing as we've moved through the year with some of the more significant innovations just announced recently that we mentioned a minute ago. The market, this whole industry went through a hype cycle. It collapsed in 2023. I think there's going to be ongoing demand for EVs. There are indications that that's happening. I think I've seen data from Cox that July will be a record sales for EVs in North America, largely as a result of the tax credit expiration coming up this month. What that tells us is that there is interest in EVs and demand for EVs if the price point is right.

Speaker #6: You know, the market, this whole industry went through a hype cycle. It collapsed in 2023. I think there's going to be ongoing demand for EVs.

Speaker #6: There are indications that that's happening. I think I've seen data from Cox that July will be a record sales month for EVs in North America.

Speaker #6: Largely as a result of the tax credit expiration coming up this month, what that tells us is that there is interest in EVs and demand for EVs if the price point is right.

Speaker #6: And I think we're seeing a lot of good innovation. On the vehicle side, you can look at Ford's new platform announcement. Slate Auto, they announced their new vehicle.

Rick Wilmer: I think we're seeing a lot of good innovation on the vehicle side. You can look at Ford's new platform announcement. Slate Auto, they announced their new vehicle. There's just a bunch of things happening out there that are going to bring the selection up and the price down on EVs, which we believe will drive overall demand for EVs and less charging going forward into the future. This down cycle is obviously putting pressure on everybody, and I think the industry is going to ultimately consolidate as a result of that. I believe we're in the best position to capitalize on that. We're the biggest company with the biggest balance sheet. We serve both North America and Europe. We've got a strong product portfolio spanning from home all the way up to DC fast charge, along with all the software to manage it for every use case.

Speaker #6: There's just a bunch of things happening out there that are going to bring the selection up and the price down on EVs, which we believe will drive overall demand for EVs and thus charging going forward into the future.

Speaker #6: This down cycle is obviously putting pressure on everybody, and I think the industry is going to ultimately consolidate as a result of that. I believe we're in the best position to capitalize on that.

Speaker #6: We're the biggest company with the biggest balance sheet. We serve both North America and Europe. We've got a strong product portfolio spanning from home all the way up to DC fast charge.

Speaker #6: Along with all the software to manage it for every use case, I think we're in a great position going forward.

Rick Wilmer: I think we're in a great position going forward.

Speaker #8: Got it. Thank you.

Speaker 8: Got it. Thank you.

Speaker #4: You're next question comes from the line of Mark Delaney with Goldman Sachs. Please go ahead.

Speaker 7: Your next question comes from the line of Mark Delaney with Goldman Sachs. Please go ahead.

Speaker #8: Yes, good afternoon. Thank you for taking my questions. I was hoping you could elaborate more on what you're hearing from customers with respect to their project plan, in particular for North America.

Speaker 8: Yes, good afternoon. Thank you for taking my questions. I was hoping first you could elaborate more on what you're hearing from customers with respect to their project plans, in particular for North America. Rick, I think you mentioned some projects are being delayed but not canceled. Can you share more on what you think it would take for customers to move forward with those delayed projects? Any context they're sharing about how they're thinking about project timing, especially with the 30C tax credits for charging stations set to go away?

Speaker #8: Rick, I think you mentioned some projects are being delayed, but not canceled. Can you share more on what you think it would take for customers to move forward with those delayed projects?

Speaker #8: And then any context they're sharing about how they're thinking about project timing, especially with the 30(c) tax credits for charging stations set to go away.

Speaker #6: Yeah, good question. And I think there's, you know, like we've got, you know, some—we're being cautious about our look forward. I think our customers are as well.

Rick Wilmer: Yeah, good question. I think we've got some, we're being cautious about our look forward. I think our customers are as well. They all, again, remain committed to their projects. We have literally not heard of one project cancellation. I think once the tax credits go away and we see what that means to EV sales, you'll see some more decisiveness in the market regarding moving forward and hopefully not canceling or pausing. We're waiting for that to happen to provide some clarity. Beyond that, it is the typical stuff that causes project delays. It's getting grid upgrades. It's construction timelines. It's all the things that we've historically seen in the past where customers that are doing big projects particularly often have kind of best-case timelines as if everything goes well.

Speaker #6: They all, again, remain committed to their projects. We have literally not heard of one project cancellation, but I think once the tax credits go away and we see what that means to EV sales, you'll see some more decisiveness in the market regarding moving forward and hopefully not, you know, canceling or pausing.

Speaker #6: But we're waiting for that to happen, you know, to provide some clarity. Beyond that, it is the typical stuff that causes project delays. It's getting grid upgrades.

Speaker #6: It's construction timelines; it's all the things that we've historically seen in the past where customers that are doing big projects, particularly, often have kind of best case timelines as if everything goes well.

Speaker #6: And then a permit gets delayed, the weather disrupts a construction project, and all of a sudden things are moving out. So that factor continues to persist, but it hasn't changed much.

Rick Wilmer: Then a permit gets delayed, the weather disrupts a construction project, and all of a sudden things are moving out. That factor continues to persist, but it hasn't changed much.

Speaker #8: Okay. Thank you for that detail, Rick. Another question is for you, Mansi, on the gross margin. Nice to see the improvement you reported this quarter.

Speaker 8: Okay, thank you for that detail, Rick. My other question was for you, Mansi, on the gross margin. Nice to see the improvement you reported this quarter. You've spoken in the past about the potential for the hardware gross margins to continue to improve as you work off inventory of older product and shift your mix toward the lower cost product that you're building with contract manufacturers. Maybe you can share more where you are in that process, and as you fully make the transition, how much do you think it could help the hardware gross margins? Thank you.

Speaker #8: You've spoken in the past about the potential for the hardware gross margins to continue to improve as you work off inventory of older products and shift your mix toward the lower-cost products that you're building with contract manufacturers.

Speaker #8: Maybe you can share more, where you are in that process and as you fully make the transition, how much do you think it could help the hardware gross margins?

Speaker #8: Thank you.

Speaker #4: Yeah, hi, Mark. so what we saw this quarter was, you know, hardware margins improved sequentially by a percentage point. by a percentage point, and this was because of we actually did see some products coming from Asia, lower cost.

Mansi Khetani: Yeah, hi Mark. What we saw this quarter was hardware margins improved sequentially by 1%, by 1%, and this was because we actually did see some products coming from Asia, lower cost. We also saw improvement in warranty costs, and we saw efficiencies in non-bom-related costs, which drove the margins up. Going forward, I think those factors will continue to benefit us, and depending on inventory and sell-through, we should start seeing the benefit of the Asia manufacturing as well.

Speaker #4: But we also saw improvement in warranty costs, and we saw efficiencies in non-bomb-related costs, which drove the margins up. Going forward, I think those factors will continue.

Speaker #4: to benefit us. And then, depending on inventory and sell-through, we should start seeing the benefit of the Asia manufacturing as well. Your next question comes from the line of Mickey Leg with the Benchmark Company.

Speaker 7: Your next question comes from the line of Mickey Legg with The Benchmark Company. Please go ahead.

Speaker #4: Please go ahead.

Speaker #8: Hey, guys. Thanks for taking my question. I want to dig in on the competitive landscape and how that's evolving a little bit. Could you talk about how you view your software and the moat you've built around that now that peers seem to be moving a bit harder into operation and software platforms?

Speaker 8: Hey guys, thanks for taking my question. I want to dig in on the competitive landscape and how that's evolving a little bit. Could you talk about how you view your software and the moat you've built around that now that peers seem to be moving a bit harder into operation and software platforms? Thanks.

Speaker #8: Thanks.

Speaker #6: Yeah, hi, Mickey. Good question. I think we've got a, a state-of-the-art software platform. that continues to evolve and modernize. We've now got a hybrid cloud solution.

Rick Wilmer: Yeah, hi Mickey, good question. I think we've got a state-of-the-art software platform that continues to evolve and modernize. We've now got a hybrid cloud solution. The amount of AI that we're integrating into the product is very interesting and exciting. I think it's going to unleash some real value for our customers. I also believe and know, quite frankly, that we can unlock all kinds of value by having our software work with our hardware. While we're happy to have our software manage third-party hardware, which we do all the time, which is oftentimes a requirement for customers, we'll continue to do that. We remain committed to develop hardware as well because we know that our hardware plus our software can create more value and do things that can't be done with just standalone software.

Speaker #6: The amount of AI that we're integrating into the product is very interesting and exciting. I think it's going to unleash some real value for our customers.

Speaker #6: I also believe and know, quite frankly, that we can unlock all kinds of value by having our software work with our hardware. While we're happy to have our software manage third-party hardware, which we do all the time, that is oftentimes the requirement for customers. We will continue to do that.

Speaker #6: But we remain committed to developing hardware as well because we know that our hardware plus our software can create more value and do things that can't be done with just standalone software.

Speaker #8: Okay, great. That's all from me. Thanks.

Speaker 8: Okay, great. That's all for me. Thanks.

Speaker #4: You're next question comes from the line of Chris Pierce with Needham & Company. Please go ahead.

Speaker 7: Your next question comes from the line of Chris Pierce with Needham and Company. Please go ahead.

Speaker #8: Hey, good afternoon, Rick and Manti. I was just curious, at least out in California, we're seeing a lot of increased DC charging, you know, setups, money going into DC charging.

Speaker 8: Hey, good afternoon, Rick and Mansi. I was just curious, at least out in California, we're seeing a lot of increased DC charging setups, money going into DC charging. I was curious, do you think that's taking share from level two, where people thought level two might have higher share if we look back a couple of years to what people might see now, or what are you guys doing around that, or do you think the idea behind the question is wrong? I just kind of want to get a sense of level two demand, DC charging demand, how you're kind of fitting both those buckets and what you're seeing.

Speaker #8: You know, I was curious. Do you think that's taking share from level two, where people thought level two might have higher share? If we look back a couple of years to what people might see now?

Speaker #8: Or what are you guys doing around that? Or do you think the idea behind the question is wrong? I just kind of like a sense of level two demand, DC charging demand, how you're kind of fitting both those buckets and what you're seeing.

Speaker #6: We don't see, you know, DC cannibalizing AC demand. I mean, there are different use cases and, you know, as we've talked about more than once, the, you know, the vast majority of charging is done at home and at work, which is typically Level 2 charging.

Rick Wilmer: We don't see DC cannibalizing AC demand. There are different use cases. As we've talked about more than once, the vast majority of charging is done at home and at work, which is typically level two charging. On the financial side, we are seeing a lot of interest, or a reasonable amount of interest, I would say increased interest from financing partners behind DC fast charging for general public charging. We've had some good success with partners that we've found that want to work with us to deploy DC fast charging for general public.

Speaker #6: On the financial side, though, we are seeing a lot of interest or a reasonable amount of interest, I would say increased interest, from financing partners behind, you know, DC fast charging for general public charging.

Speaker #6: We've had some good success with partners that we've found who want to work with us to deploy DC fast charging for the general public.

Speaker #8: And then, if we go back to the inventory, Mansi, this one will sort of be for you. Is that something you have in the inventory now?

Speaker 8: If we go back to the inventory, Mansi, this one's sort of for you. Is that something you have in the inventory now? I guess with the inventory dollars staying where they are, but things are changing under the surface. I just wanted to kind of check in on any obsolescence risk or DC/AC new product versus old product, how you kind of frame all that.

Speaker #8: And I, I, I guess with the inventory dollars staying where they are, but things are changing under the surface, I just wanted to kind of check in on any obsolescence risk or DC/AC new product versus old product, how you kind of frame all that.

Speaker #4: Yeah, no, I mean, you know, our inventory balance has a variety of different products and different volumes of all the different products.

Mansi Khetani: Yeah, our inventory balance has a variety of different products and different volumes of all the different products. We're managing that based on the arrival of the new products. We're watching that closely. Again, the release dates of the new products and the general availability and increased volume is going to take some time. We're kind of watching each product level with their release date and inventory balance and managing that. In terms of if your question is about shortage or any kind of movement needed from one product to the other or the need to source more, we don't see any of that.

Speaker #4: and, and we're managing that, you know, based on the arrival of the new products. We're watching that closely. again, the, the release dates of the new products, and the, you know, the general availability and, you know, increased volume is going to take some time and we're, we're kind of watching each product level, with their release date, and inventory balance.

Speaker #4: And managing that. But in terms of if your question is about, you know, shortage or, you know, any kind of movement needed from one product to the other or the need to kind of source more, we don't see any of that.

Speaker #8: Okay, thank you for your time.

Speaker 8: Okay, thank you. Good time.

Speaker #4: You're next question comes from the line of Craig Irwin with Roth Capital. Please go ahead.

Speaker 7: Your next question comes from the line of Craig Irwin with Roth Capital. Please go ahead.

Speaker #9: Hi, good evening. Thanks for taking my questions. So, cash use this quarter was really tight, right? You guys have been squeezing a lot of cash out of, you know, receivables, inventories, and prepaid.

Speaker 8: Hi, good evening. Thanks for taking my questions. Cash use this quarter was really tight, right? You guys have been squeezing a lot of cash out of receivables, inventories, prepaid, payables, everything was a contribution this quarter. Can you talk about the ability to continue squeezing the balance sheet for cash, and the new products that are launching for the end of the year? Do they need a cash contribution for inventory for us to see the revenue start to ramp, or can that be offset by continued progress bringing down balances from other products?

Speaker #9: I mean, payables, everything was a contribution this quarter. can, can you talk about the ability to continue squeezing the balance sheet for cash, and, you know, the, the new products that are, that are launching, for the end of the year?

Speaker #9: Did they, did they need a, a cash contribution for inventory for us to, to, to see the revenue start to ramp or, you know, can that be offset by continued progress, bringing down balances from other products?

Speaker #4: Yeah, hi, Craig. and so I think, you know, there may be quarterly fluctuations in cash usage, obviously Q2 was, was fantastic in terms of cash usage.

Mansi Khetani: Yeah, hi Craig. I think there may be quarterly fluctuations in cash usage. Obviously, Q2 was fantastic in terms of cash usage. We used less than $2 million, but there may be slight quarterly fluctuations depending on the timing of receivables, payables, sale of inventory, etc. We do anticipate that the overall trend of declining annual cash usage will continue. It's entirely possible that because of our capital-led business model, we might get to the point where we generate cash in a quarter before we achieve EBITDA profitability. We anticipate that we will particularly benefit from this when we start to bring inventory balance down. In terms of the new products, I don't think it will impact inventory because I think the overall inventory reduction trajectory should still happen, and it should release cash because obviously the inventory number as it stands now is pretty high.

Speaker #4: We used less than $2 million. There may be slight quarterly fluctuations depending on the timing of receivables, payables, the sale of inventory, etc. However, we anticipate that the overall trend of declining annual cash usage will continue.

Speaker #4: And it's entirely possible that because of our capitalized business model, we might get to the point where we generate cash in a quarter before we achieve EBITDA or profitability.

Speaker #4: And we anticipate that we will particularly benefit from this when we start to bring inventory balance down. In terms of the new products, I don't think it will impact inventory because I think the overall inventory reduction trajectory should still happen and it should release cash. Obviously, the inventory number as it stands now is pretty high.

Speaker #6: The other comment I'll make, Craig, is that the supply chain, timelines, or lead time is pretty balanced with the sales cycles now in many cases.

Rick Wilmer: The other comment I'll make, Craig, is that the supply chain timelines or lead time is pretty balanced with the sales cycles now in many cases. Unlike the COVID days, for example, we don't need to build far in advance of demand such that we can adhere to customer lead time requirements. We can balance that pretty effectively now.

Speaker #6: So we, unlike the COVID days, for example, we don't need to build far in advance of demand, such that we can adhere to customer lead time requirements.

Speaker #6: We can balance that pretty effectively now.

Speaker #8: Understood. And if I could squeeze another one in on the gross margin side, can you maybe talk about the commonality of parts in the new products that you're launching?

Speaker 8: Understood. If I could squeeze another one in on the gross margin side, can you maybe talk about the commonality of parts in the new products that you're launching? I know a lot of your products introduced to date have had substantial commonality in the architecture and components to drive purchasing leverage. Is there maybe a change in architecture or an evolution here? How much do the new products benefit from the pre-existing buy? Would you expect these products to potentially be margin accretive heading into the end of the year?

Speaker #8: You know, I know a lot of your products introduced to date have had substantial commonality in the architecture and components to drive purchasing leverage.

Speaker #8: You know, is there maybe a change in architecture or an evolution here? How much do the new products benefit from the pre-existing buy? And, you know, would you expect these products to potentially be margin accretive heading into the end of the year?

Speaker #6: Yeah, so at a part level, there's probably not that much commonality between the old products and the new. There are some exceptions; for example, charging cables or charging cables.

Rick Wilmer: At a part level, there's probably not that much commonality between the old products and the new. There are some exceptions, for example, charging cables are charging cables. They don't change very much from product to product depending on level two, level three, for example. What is common is the vendor base, and the leverage we have with the supply base is really driven by the amount of business we concentrate into certain suppliers as opposed to specific individual parts that we buy from them that may change as we move on from product generation to product generation.

Speaker #6: They don't change very much from product to product depending on Level Two, Level Three, for example. What is common is the vendor base. And the leverage we have with the supply base is really driven by the amount of business we concentrate into certain suppliers as opposed to specific individual parts that we buy from them.

Speaker #6: That may change as we move on from product generation to product generation.

Speaker #8: Thank you for that. Can, congratulations again on the progress this quarter.

Speaker 8: Thank you for that. Congratulations again on the progress this quarter.

Speaker #6: Thanks, Craig.

Rick Wilmer: Thanks, Craig.

Speaker #4: You're next question comes from the line of Ryan Singh with B. Riley. Please go ahead.

Speaker 7: Your next question comes from the line of Ryan Sinks with B. Riley. Please go ahead.

Speaker #8: Hey, guys. Thanks for taking my questions. I'll, I'll just ask a couple of follow-ups on Europe. looks like it's almost 20% of revenue right now.

Speaker 8: Hey guys, thanks for taking my questions. I'll just ask a couple of follow-ups on Europe. Looks like it's almost 20% of revenue right now. I'm curious where you think Europe could go in terms of ChargePoint's overall revenue mix over the next few years. Could you remind us if there are any material differences in terms of your economics in Europe compared to in North America?

Speaker #8: I'm curious where you think Europe could go in terms of charge points overall revenue mix over the next few years and could you remind us if there are any material differences in terms of your economics in Europe compared to in North America?

Speaker #6: the economics aren't a lot different. the different European countries have different regulations and requirements. which makes a bit, it a bit more complex from an inventory standpoint to make sure you have the right product for the right country, for example.

Rick Wilmer: The economics aren't a lot different. The different European countries have different regulations and requirements, which makes it a bit more complex from an inventory standpoint to make sure you have the right product for the right country, for example. That's fairly minor relative to the overall dynamics of the business comparing North America to Europe. We're not guiding revenue beyond this quarter, but the fact that we've got hardware products going into Europe that are our products that we haven't been able to offer previously implies that Europe will definitely be growing for us.

Speaker #6: But that's fairly minor relative to the overall dynamics of the business comparing North America to Europe. We're not guiding revenue beyond this quarter.

Speaker #6: But the fact that we've got hardware products going into Europe that are our products that we haven't been able to offer previously implies that, you know, Europe will definitely be growing for us.

Speaker #8: Got it. Appreciate that, Colin, Rick.

Speaker 8: Got it. Appreciate that, Colin, Rick.

Speaker #4: Your next question comes from the line of Bill Peterson with JP Morgan. Please go ahead.

Speaker 7: Your next question comes from the line of Bill Peterson with JP Morgan. Please go ahead.

Speaker #9: Yeah, hi. good afternoon and thanks for taking my questions. I would like to follow up on, on gross margins as been asked a few different ways.

Speaker 8: Yeah, hi. Good afternoon and thanks for taking my questions. I would like to follow up on gross margins. It's been asked a few different ways, but just looking ahead, how should we think about steady state margins for hardware when you're really past any sort of existing inventory and you're on, I guess, an optimized platform? What should that look like over the long term, or I guess on a go-forward basis, as well as subscriptions? I think you've been doing some work there to optimize. That's part of the business as well. Just trying to get a sense for how we should think about steady state margins. You mentioned you're navigating tariffs, but could you quantify the impact so we can at least understand what level of impact there is? Should we get any relief or conversely if tariffs become, you know, more, I guess, impactful?

Speaker #9: But just looking ahead, how should we think about steady-state margins for hardware when you're really past any sort of existing inventory and you're on, I guess, an optimized platform?

Speaker #9: What should that look like over the long term or I guess on a go-forward basis? As well as subscriptions, I think you've been doing some work there to optimize.

Speaker #9: That's part of the business as well. Just trying to get a sense for how we should think about steady-state margins. And, you know, I guess you mentioned you're navigating tariffs, but could you quantify the impact?

Speaker #9: Is it so we can at least understand what level of impact there is? It should we get any relief or conversely if tariffs become, you know, more, I guess, impactful?

Speaker #4: Yeah, hi, Bill. I'll, I'll take that one. So start with the subscription margins. I think subscription margins should continue to improve with, economies of scale and ongoing efficiencies in our support organization.

Mansi Khetani: Yeah, hi Bill. I'll take that one. I'll start with the subscription margins. I think subscription margins should continue to improve with the economies of scale and ongoing efficiencies in our support organization. Our revenue keeps growing, but we don't have to scale costs up. That improvement should continue. As you said, it's more than 61% on a non-GAAP basis this quarter. I think that trend continues. On the hardware side, as we see products coming in from Asia, margins should get better. We saw improvement in warranty costs, other efficiencies, and non-bom costs. All of that could help. However, on the hardware side, the overall margin really depends on the mix of products sold, which is difficult to predict. It's hard to call out an ideal state. There are a lot of moving parts there.

Speaker #4: Our, you know, revenue, keeps growing but we don't have to scale costs up. so that, improvement should continue, as you said with, you know, more than 61% on a non-GAAP basis this quarter.

Speaker #4: I think that, that trend continues. on the hardware side, again, as, as we see products coming in from Asia, i-it, you know, margins should, should get better.

Speaker #4: we, we saw improvement in warranty costs, other efficiencies, and non-bomb costs, all of that could help. However, on the hardware side, the overall margin really depends on the mix of products sold, which is difficult to predict.

Speaker #4: So it's hard to, to, to call out, an ideal state. There is, there is, there are a lot of moving parts there. And also overall, for margin, there is a fact of, subscription revenue as a percentage of overall revenue.

Mansi Khetani: Also, overall, for margin, there is a fact of subscription revenue as a percentage of overall revenue. If that improves, obviously margins go up, but as we start selling more hardware, that could impact overall margins.

Speaker #4: If, if that improves, obviously margins go up. But as we start selling more hardware, that could impact overall margins.

Speaker #6: The other comment I'll make, Bill, is that the new products we expect to have higher baseline margin profiles than any of our existing products.

Rick Wilmer: The other comment I'll make, Bill, is that the new products we expect to have higher baseline margin profiles than any of our existing products. We've been very focused on not only designing for features, functionality, broad applicability, but also for cost profiles.

Speaker #6: We've been very focused on not only designing for features, functionality, broad applicability, but also for, cost profiles.

Speaker #4: Yep. And then on, on, which we're kind of, leveraging to manage tariffs. it wasn't really meaningful, within this quarter and like I said, you know, we were able to mitigate or, you know, the tariffs that we had and whatever did we did incur, we, actually, you know, we had improvements that kind of overcame that.

Mansi Khetani: Yep. On the tariffs, we have a lot of tariff mitigation already in place. We have a spread-out manufacturing base across the globe, which we're kind of leveraging to manage tariffs. It wasn't really meaningful within this quarter. Like I said, we were able to mitigate the tariffs that we had and whatever we did incur, we actually had improvements that kind of overcame that. I don't think there is that much of an impact based on what we know today. Of course, if that tariff environment changes, then things could change.

Speaker #4: on the tariffs, so we have, a lot of tariff mitigation, already in place. We have, you know, a spread-out manufacturing base, across the globe.

Speaker #4: So, I don't think there is that much of an impact based on what we know today. Of course, if that tariff environment changes, then things could change.

Speaker #9: One of the.

Speaker 8: Okay, thanks for that. One of the.

Speaker #4: My apologies. Please repress star one. You're next question comes from John Winham with UBS. Please go ahead.

Speaker 7: My apologies. Please press star one. Your next question comes from John Winham with UBS. Please go ahead.

Speaker #9: Hi, this is John. Hopefully, you can hear me okay.

Speaker 8: Hi, this is John. Hopefully you can hear me okay.

Speaker #6: Yep.

Rick Wilmer: Yep.

Speaker #9: Yeah, perfect. you, you'd mentioned the potential for consolidation in the industry. I was wondering if you could talk through if there's been any early signs of that in Europe or US or anywhere?

Speaker 8: Yeah, perfect. You'd mentioned the potential for consolidation in the industry. I was wondering if you could talk through if there's been any early signs of that in Europe or U.S. or anywhere you can sort of point to. Appreciate it. Thanks.

Speaker #9: You can sort of point to. Appreciate it. Thanks.

Speaker #6: Yeah, John, I can't talk to anything specifically, but it seems like it's quite active. There's a lot of interesting conversations going on.

Rick Wilmer: Yeah, John, I can't talk to anything specifically, but it seems like it's quite active. There's a lot of interesting conversations going on.

Speaker #9: Maybe just ask the question a little bit differently. And without asking anything specific, in terms of where it would be, what would you see as the advantages?

Speaker 8: Maybe ask the question sort of a little bit differently. Without asking anything specific in terms of where it would be, what would you see the advantages? As an analyst, when we're looking at this, it's taking out OpEx as a % of revenue, greater network scale. If you could just talk through what you think the advantages of consolidation would be, I'd really appreciate it. Thank you so much.

Speaker #9: So as an analyst, when we're looking at this, it's taking out opex as a percentage of revenue, greater network scale, if you could just talk through what you think the advantages of consolidation would be.

Speaker #9: I'd really appreciate it. Thank you so much.

Speaker #6: Yeah, I think it's pretty typical after you go through a hype cycle, and you end up with, you know, a lot of companies getting started during that hype cycle with what looks like, you know, an exciting fast-growing market. Then you get overcrowding in terms of the competitive landscape.

Rick Wilmer: Yeah, I think it's pretty typical after you go through a hype cycle and you end up with a lot of companies getting started during that hype cycle with what looks like an exciting, fast-growing market. You get overcrowding in terms of the competitive landscape. You've got people that are trying to survive, and they tend to try and fight on price, and they race each other to the bottom. They end up in a situation where they just don't have an economic model that no longer makes sense.

Speaker #6: And you've got people that are trying to survive and they, they tend to try and fight on price and they race each other to the other to the bu they race each other to the bottom.

Speaker #6: And they end up in a situation where they just don't have an economic model that no longer makes sense.

Speaker #9: Perfect. Thank you.

Speaker 8: Perfect. Thank you.

Speaker #4: You're next question comes from the line of Ryan Singh with B. Riley. Please go ahead. And we have no further questions in our queue at this time.

Speaker 7: Your next question comes from the line of Ryan Sinks with B. Riley. Please go ahead. We have no further questions in our queue at this time. That does conclude today's conference call. Thank you for your participation, and you may now disconnect.