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 Fourth Quarter Fiscal 2022 Earnings Conference Call and Webcast. All participants’ lines have been placed in listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. And I would now like to turn the call over to Patrick Hamer, ChargePoint's Vice President of Capital Markets and Investor Relations. Patrick, please go ahead.

Good afternoon and thank you for joining us on today's conference call to discuss ChargePoint's fourth quarter and full fiscal year 2022. This call is being broadcast over the web and can be accessed on the Investors section of our website at investors.chargepoint.com. With me on today's call are Pasquale Romano, our Chief Executive Officer; and Rex Jackson, our Chief Financial Officer. This afternoon, we issued our press release announcing results from fourth quarter and full fiscal 2022 ended January 31, 2022, 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 fiscal first quarter and full fiscal year 2023 outlook and our expected investments in growth initiatives. These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations. These forward-looking 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 December 15, 2021, and our earnings release posted today on our website and filed with the SEC on Form 8-K. Also, please note that we use certain non-GAAP financial measures on this call, which we reconcile to GAAP in our earnings release and for historical periods in the investor presentation posted on the Investors website -- Investors section of our website. And finally, we'll be posting the transcript of our call to our Investor Relations website under the Quarterly Results section. And with that, I'll turn it over to Pasquale.

Thank you, Pas, and thank you all for joining us today. In my remarks, I'll provide an overview of our execution against our Q4 plan and some highlights from the full year that just closed, an update on our technology and business infrastructure and some commentary on how we see this year unfolding. And after that, I'll turn it over to Rex Jackson, our CFO, for a more detailed review of the quarter and the year that just closed and guidance for Q1 and the full year ahead. The mission of ChargePoint has never been more important, and our opportunity has never been greater. And this marks our first full year operating as a public company, and it was a remarkable year on many fronts. The investments we made over nearly 15 years set us up to capture the demand we are seeing today across commercial fleet and residential verticals in both North America and Europe. And these results further cement ChargePoint as the equivalent of an index for the electrification mobility. Our strong performance and record revenue throughout the year was fueled by growth in charging demand from accelerated EV adoption. EV volumes in North America and Europe were up over 70% in 2021 conservatively. In fact, all our verticals, commercial fleet and residential, were strong. We began the year with revenue guidance of $195 million to $205 million and repeatedly raised guidance, ending the year with over $242 million in revenue, a number that could have been higher if it weren't for supply chain constraints. In the challenging supply chain environment in 2021, we chose to optimize for customer acquisition, leading us to prioritize assurance of supply rather than short-term gross margin preservation. And this had an impact of 3 percentage points of gross margin for the year…

Thanks, Pasquale, and good afternoon, everyone. First, my comments are non-GAAP, where we principally exclude nonstock-based compensation, amortization of intangible assets, nonrecurring costs related to restructuring and acquisitions and the effect of the valuation of our stock warrants. Please see our earnings release for a reconciliation of these non-GAAP results to GAAP. Second, after covering our Q4 full year results, I will guide on Q1 revenue. And for reasons I'll explain later, I'll guide on revenue, non-GAAP gross margin and non-GAAP operating expenses for the full year. Third, consistent with prior calls, we continue to report revenue along 3 lines: network charging systems, subscriptions and other. Network charging systems represents our connected hardware. Subscriptions include our cloud services; connecting that hardware; our Assure warranties; our ChargePoint-as-a-Service offerings, where we bundle our solutions into recurring subscriptions; and software revenue from our ViriCiti and has·to·be acquisitions. Other consists of energy credits, professional services and certain nonmaterial revenue items. Moving to results. Q4 revenue was $81 million, up 90% year-on-year, above our previously announced guidance range of $73 million to $78 million and up 24% sequentially. We are particularly pleased with this performance given continuing supply chain challenges. We managed as well relative to our guidance commitments, but with demand significantly exceeding supply, our exiting Q4 backlog was significantly higher than any prior quarter in the company's history. Network charging systems at $59 million was 73% of Q4 revenue, consistent with Q3 and up 109% year-on-year and 25% sequentially. Subscription revenue at $17 million was 21% of total revenue and up 57% year-on-year and 28% sequentially. The sequential increase in subscription revenues reflects software activations of recent hardware shift as well as stronger take-up rates in Assure, our warranty product, as well as contributions from our acquisitions. Our deferred revenue from subscriptions representing…

[Operator Instructions]. And we will take our first question from Shreyas Patil with Wolfe Research.

Yes. So maybe just picking up on the last point about -- as we think about the improvement in gross margin -- or are we thinking about the gross margin guide from fiscal '22 to '23, you mentioned you are baking in about 6 points of supply chain headwinds. Number one, is that sort of based on what you're seeing right now? Are you seeing a tighter supply chain at the moment? Or is that something that you sort of -- you just want to put in some cushion on? And then number two, you mentioned unfavorable mix. So maybe if you could just speak a little bit more to that and how that's maybe having an impact.

Happy to. Hi, Shreyas. So in answer to the first part of your question, if you look at our gross margin assumption, you're right, yes, there's a 6-point headwind that we're flagging. That's a function of, one, what we're seeing today; two, the fact that -- you heard the revenue guide, right? So it's one thing to meet your numbers. It's another thing to go to your suppliers and go. I appreciate you're struggling to get this tone now need twice as much. So we -- it's very clear to us that it's going to be tough to get supply, and we're making that as the primary goal of the company to obviously land and expand with customers. So we're going to run that hard. So I think that is the main determinant. And then your second question was around mix. And I think we've been consistent in several calls now. If you look at our gross margins across verticals and solutions, that tend to be highest in the commercial area, followed by home and then followed by DC fast. And then when those things are bundled into fleet applications and combine software, the whole game changes, and that's coming up as a very strong part of the business. So that's a little hard to predict. But the basic mix shift is if you go away from commercial and towards residential and corridor and urban fast-charge applications, it's going to keep the margin down a little bit.

And we will take our next question from Colin Rusch with Oppenheimer.

Could you talk about where the incremental OpEx investments are going and where you think the second really is on return on those things? Is a lot of that incremental investment going into R&D? Or is it more on the sales side?

Yes. So Colin, it's -- so we exit the year at a pretty nice clip, and I think we've been very, very consistent. If you look at sales and marketing, we are increasing our sales and marketing spend algorithmically from a capacity planning standpoint. And also, there's a big push this year in particular to get a broader coverage on the ground both here and in Europe. So we've got pretty good coverage in Europe, and we're adding countries, and then pretty good coverage here. But as the vehicles fill in, in the United States, you're going to want to be everywhere because a lot of people are going, "Hey, I need to get on the bandwagon." and start making these investments. So meaningful investments in sales and marketing, consistent with the growth in the business with some leverage being shown. R&D is, as we said, moving up, I do think as a percentage of revenue perspective, it's going to significantly taper off. But again, this year is a big year for new product introductions. As Pat alluded to, so we need to get that out. And then G&A grows at a much special rate because we've sort of taken the bullet when it comes to being a public company. So you shouldn't see a lot of expansion there. Also one other thing that's in there, Colin, that most people wouldn't think of because, I'd be honest with you, I don't think of it every day, but it's really in there is there's a lot in R&D when you do new products. There's a lot of spend in terms of new product introduction, testing, destructive testing, et cetera. So we're burning through some product now to get these big releases done this year, but you expect that to taper off next year.

We will take our next question from James West with Evercore ISI.

Well done.

Thank you. Thanks, James.

First question from me, maybe more philosophical somewhat, Pat, but your business -- I mean the acceleration here is pretty impressive, but it's also -- you're accelerating at scale, too, which comes with different challenges. And so how are you thinking about the operation? I know Rex just mentioned some of the moves on products and sales and marketing and things like that. But how are you thinking about, operationally, how the business needs to be run now that you're achieving the scale and achieving this massive acceleration in revenue at the same time?

So James, there's -- it's almost a follow-on answer to the question that was just answered in that if you look at where we're deploying some of the OpEx increase, a big chunk of it is going to improving our internal business systems. We're relooking at our customer onboarding, methodology, our station activation methodology. You're looking at a port activation rate in the ground, a channel support rate for our sales channel. I'll maintain that if you look at the numbers, still a very large percentage of our business goes through channel as designed because we feel that that's a big component of getting the coverage we need at a scale market. You see a very high transaction rate. So the long -- very long answer to your question is we're investing everywhere. Operationally, we need to be invested. I'll also point out that from a manufacturing operations perspective, we have a deep bench here. We're continuing to invest and that supply chain situations keep us on our toes. So we're applying the appropriate resource level there. And as you've seen, we've been able to -- last year's growth relative to previous year was not insignificant, right? So even though this year's growth is nearly a double. Last year's growth was 65%. So you're still looking at a good execution rate against a lot of headwinds, and that was the result of a massive investment in our operations team. Behind that operations team are multiple major contract manufacturers. So part of the scale that's been built into the strategy is to work deeply with our contract manufacturers, our supply chain partners, et cetera, to make sure that we've got appropriate infrastructure in place to deal with the scale. So it's -- you just we're investing across the board, and it shows up in the OpEx.

And we will take our next question from Bill Peterson with JPMorgan.

Nice job on the sort of the execution. I wanted to talk about the fleet business and how they operate the opportunities are for the year. I guess, as you look at your offering, what do you see as your key differentiators? Or would it be in software or your billing to apply better cost of ownership? And I guess, how should we think about the business opportunities and your growth outlook, I guess, or compared to the U.S.? Like you started easening the way, and how should we think about that opportunity for this year, in particular next year?

So I just want to make sure I heard the question correctly, there was a little bit of background noise. You were referring to just the value prop around fleet is the first part of your question?

Yes. Really the focus on fleet and the value prop on. Pardon for the background noise.

No. It's fine. So the easiest way to think about it is customers in general, especially fleet customers, don't want to be the integrator. They want their suppliers to be the integrator. And the -- I think one of the many reasons we're doing exceedingly well in that vertical is that we can help them design and lay out their depot. We can provide a very broad set of software functionality that they can integrate with their business systems seamlessly. And then we have a hardware portfolio that you saw us announce last year that is rolling out now to customers, and we'll be ramping that throughout the year. It really has been designed in conjunction with that software to work seamlessly. And the entire -- as you -- I think part of your question was that on the TCO side. If you look at what we're providing in support services, the modularity that lends itself towards very easy spares maintenance on site for fleet, et cetera. It's just really the whole package, and we take care of it all for our fleet customers. So I'll stop there but -- because there's a lot more we could say, but I think you get the picture. If you could remind me of the second part of your question, I couldn't hear that.

Yes. Growth -- as I think about growth between Europe, is it going to be led by Europe or led by the U.S.? Or is there any even how to think about the growth opportunity relative to your full year guidance?

I think we're -- as Rex mentioned in his remarks and I mentioned in mine, Europe is a big part of our future. And we believe that the first company to be able to achieve a major market share in both North America and Europe will have a significant scale advantage. And if you think about many, many customers, especially on the fleet side but even on the commercial side, they're multinational. And when they integrate with their business systems, they want one partner for that. So it's not only existential from, I think, being able to drive cost structure that's competitive, in fact, better than competitive. It will be best-in-class long term. If we can get to be a scale leader in both North America and the U.S. or North -- and Europe and then also, again, make sure that we can just cover a customer wherever they go. And also, if you just remember from my remarks, the bleed-over from the other segments is significant. So fleet reinforces residential, residential reinforces fleet, commercial gets reinforced by both and vice versa. It really is working. This being in all the verticals really does provide us a big competitive differentiation. So again, on the growth side, we see it coming from everywhere.

And we will take our next question from Mark Delaney with Goldman Sachs.

I was hoping to speak more on the subscription line. Even though the press release talks about that segment more slowly last year overall, the sequential pickup there was very good and the sequential growth rate was higher than, I think, total revenue overall. So maybe first, if you could comment on what led to that increase? I mean, I think you alluded to activation timing. So was that the driver of the pickup in subscription? And then as you're thinking about the guidance for this year, how should we think about subscription? And is it going to see any timing issues? Or should we expect to have stronger growth there this year?

Yes. So the baseline observations that we've given before in terms of timing because, obviously, software, when it gets turned on, when the station gets turned on, in essence, and we have a time lag on that. So it's usually a quarter plus. And so I alluded to that on several occasions. And so that's a factor in terms of lag. The pickup that you saw recently, certainly, our acquisitions didn't hurt substantially, not all, but almost substantially all of the revenue related to acquisitions flow into that line. And as you may recall, we closed one acquisition in -- let's see, Q2, I think it was and then the other one late in Q3. So Q4 is the first quarter where we had both of them contributing at full volume. So that's a big help as well. We also had a big push recently in terms of expanding our Assure warranty program to more and more customers because it's important for everything that be up and running all the time and look great, which is part of our value proposition. So we've been pushing that pretty hard. So I think those are the main contributors to how that line builds around.

We will take our next question from Matt Summerville with D.A. Davidson.

Couple of things. First, I want to think back to the time you issued your sort of SPAC projections. And I think for fiscal '23, you were talking about a number of sub-$350 million in revenue. So here today, talking about $450 million to $500 million, I mean, while that's a pretty big step-function improvement. And I guess I just want to put a finer point on what is really driving that upside versus the view you would have been expressing not all that long ago, really when you think about it. And I imagine there's a component of new customer funnel, rebuy rates, the ramp in subscriptions, all those good new products, all those things. But maybe just rank order of magnitude what's driving that. And then, Rex, if you wouldn't mind, what was the acquisition contribution to revenue in the quarter?

So I'll start. First of all, in no particular order, rebuy rates are about the same, virtually identical. That moves around a little bit, but it's always north of about 60%, somewhere between 60% and 70%, depending on the quarter. And that's just timing. So we're seeing strength from existing customers because it is an expand model with cars. But the overarching answer to your question is vehicles. The more vehicles that are available to consumers -- and you've seen in my remarks, Bloomberg New Energy Finance has increased their prognosis for auto sales in both North America and Europe. As those things flow in at higher rates, we naturally see higher revenue as a result. So the comment that I make consistently is we're broadly exposed to the EV industry. So we're sort of an index in that respect in that as more and more vehicles come into the commercial space, it drives our commercial customers to purchase more. It drives new commercial customers. You saw my stat on the Fortune 500 and our deep penetration into the Fortune 500 in North America. It works the same way in fleet. And frankly, fleet is just getting started. It's just getting out of the gate. The vehicle demands are certainly there. The vehicle OEMs are just starting to roll vehicles, and you don't have a full complement of vehicle there to cover everything. So watch that one over time because that's going to be a very exciting space for ChargePoint. And then residentially, people just need access to charging where they live. And so you're seeing very strong demand there as evidenced by all the numbers that Rex laid out for you. Rex, I think there was a comment...

The follow-up question was, what was the contribution from the European acquisitions? As we had forecasted, it's approximately $4 million in revenue. And then separately from an OpEx perspective, it's about $5 million, but we won't be breaking those out going forward. But I think that gives you a sense of scale.

I do want to point out one thing on that. Those are software acquisitions. So that revenue is flowing into the software subscription line. And as we've said many times, the growth rate, which is so fantastically high in new port adds, that hardware revenue associated with that is recognized in the period. So there's a difference in the rev rec, and so that drives the disparity there in the kind of cursory apparent contribution to revenue between the subscription line and the hardware line, but they're inextricably linked.

And we will take our next question from Ryan Greenwald with Bank of America.

Maybe just going back to the margins and operating expenses. I appreciate the additional color on how you're thinking about fiscal '23 here. Can you just talk a bit about how you're thinking about the operating leverage into the outer-years as you think about cash flow breakeven in calendar '24?

Yes. So I think, Ryan, what you have to do is first calculation is what's the OpEx as a percent of revenue for this year versus last. So last year, it was pretty much 100%. We're going to get 20-some points of benefit. I think it's just 76%, if I'm not mistaken. So go from 99% to 76%, that's a big move in 1 year. And as I mentioned earlier, I think the R&D should taper off at a little bit faster rate than some -- and then sales and marketing, for example. Then G&A should be fairly stable. So if you think about our growth rate next year, and obviously, I'm not going to guide to out-years, but we're on the front end of this thing. One would think we're going to have a meaningful growth rate in ensuing years as well, but there's no way that OpEx is going to keep pace for that because it doesn't mean to. That's where all the leverage kicks in. So we take that 23 points this time. I'd like to do that 2 or 3 more -- we do better than that next year and better than that the year after and continue to drive that down and cross over in '24, which is what we've suggested.

And we will take our next question from Craig Irwin with ROTH Capital Partners.

I should, too, add my congratulations to your execution and how you've set up the company for some impressive growth this year.

Thank you.

So the first question I wanted to ask is really it's a simple one, right? Product portfolio. You guys have invested a lot of money, a lot of effort in being ready for some of these different opportunities. I guess the top of mind is maybe fleet. But there is still quite a lot of innovation going on in the EV charging market. There's sort of micro DC chargers, there's sort of the battery in a box, there's a few different permutations that seem to be getting good interest out there from potential customers. We've yet to see if these are going to sell in significant volumes. But can you tell us sort of what you see as top priorities for ChargePoint as far as product portfolio over the next year? Should we expect a similar tempo of introductions? Or is that tempo even likely to increase from here?

We're -- we don't -- we're constantly rolling product, especially on the software side, and we usually don't formally announce that unless it's through a partnership. So on the software side, you're seeing just a tremendous amount of continuous evolution there. Your question is centered more around the hardware side, so I'll flip to that. With respect to the fleet announcement that you saw last year, every bit of that product line applies as much to consumer passenger car charging in the wild as it does fleet. We build all our technology. So the platforms are applicable to a broad set of verticals as possible. So with respect to different speeds and feeds of DC chargers, evolution of the architecture, et cetera, yes, that's -- it's either part of stuff that we've already announced or we have a deep pipeline behind that because we haven't announced that. Obviously, I can't talk in more detail about that. Same on the AC charging side. So our coverage is really broad. With your specific question around battery, our belief is that battery at the site makes sense. And we tend to focus on site-level energy storage. When it makes sense to augment a site, we can -- we do not integrate battery directly into our chargers. It's easy to accomplish the same fundamental application benefit when that's applicable and only in those scenarios by using it at a site level. It also makes it much easier to expand at the site level. So we don't integrate battery into our chargers.

[Technical difficulty] thing that we're all looking at in the space. Hopefully, we have improved visibility on how and when exactly this is going to flow. But there's some optimism that some of the money starts flowing later on this calendar year, which have been almost certainly in your fiscal year. How much of the strong guidance that you issued today would you say is related to this anticipated funding flow? Or is that potentially incremental support for what we see as a very strong market?

So we have a deep policy team that's done tremendous work over the nearly 15-year history of the company. So we're very close to this. And I'll remind you of comments that we've made consistently over the last year. We said programs which are very ambitious, like the infrastructure bill, monies that are dedicated to our space, those ambitious programs take a while in our experience to operationalize. We have a pretty good feel for how long that takes. And so our expectation is very conservative. We don't really have an expectation of that hitting in our number this year. We do -- we would expect it to hit in subsequent years. We need to see how the state programs -- the majority of that money is going to flow through the states and then states up to construct their programs. And we have to see how they're constructed to be able to really evaluate how it's going to impact us on a go-forward basis. But we've had very, very, very good track record as a company historically on large participation rates in programs like that. And we would expect that if things are constructed as things have been in the past that we would be able to participate in them significantly. So again, nothing built into this year. To remind you, it's -- the money, as it's currently been discussed by the administration, rolls over 5 years. The first year it's a slightly smaller amount, but then it's roughly $1 billion a year over that 5-year period, like it’s a little smaller in the first year.

We will take our next question from Stephen Gengaro with Stifel.

The -- just curious, and I am sort of trying to tie this a little bit into gross margin trajectory you need to get to that 2024 cash flow breakeven number or cash flow positive. When you talked about the mix Rex, and you’ve talked about this before, sort of the mix between commercial home and DC fast and the impact that has on margins, has there been anything in the macro as far as sort of the EV adoption rates and how that kind of affects where people charge? I'm just sort of thinking about this from the standpoint of as the EV adoption cycle accelerates, there's probably more people who can charge at home. So I'm just sort of thinking about how that folds into your mix and margin assumptions?

That's a great question. And we've been committed from the beginning as a company to make sure that we have solutions so drivers can charge wherever they need to charge. And one of the most important aspects to recognize with EV charging is you don't have to go somewhere to go somewhere. And that's a very interesting value proposition if you're a consumer. It's an enhancement to your life. So from our perspective, there may be some folks that purchase an EV that don't directly initially have available charging infrastructure where they live, but we're seeing very strong growth in our residential business. We're seeing that broad-based. We're seeing both single-family residents, we're seeing it in multifamily. If you look at our LeaseCo partnerships in Europe, that include a home reimbursement for fuel included with your car that's part of your compensation package, we're seeing tremendous growth there. In fact, we're making huge investments software-wise with our partners in Europe in that vertical, anticipating strong growth to continue there. So while some people may not have access at home, frankly, I think that will not be the dominant characteristic. I think most will at scale have some level of access, whether it be street side, multifamily or single-family residents.

And we will take our next question from Steven Fox with Fox Advisors.

I was wondering if you could just double-click a little bit more on the comment about the pipeline for fleet tripling as part of the sales targets for this year. I was just curious, how much of that is customer expansion versus changes in buying plans or site plans that you're seeing, like an expanded size of charging infrastructure by certain fleets to support different areas? How would you sort of describe why that pipeline is going up so much?

Yes. Happy to. So the main driver is, as Pat said earlier, people are starting to see vehicles coming. So passenger vehicles are on the way. And then there -- just talking to us about yesterday, I was talking about getting delivery of a substantial number of electric delivery vans. So you go, okay, so the vehicles are hitting the streets. What it really is, is people believing that this transition is coming. The vehicles will come, and they're getting ready for it because it's 100% an economic total cost of ownership game when it comes to a fleet operator because they get a business, right? It's not a personal preference, emotional kind of thing. So our RFP volume, which we've talked about in several calls, is enormous. It's extremely vibrant and robust area for us. Our win rates are strong. And as Pat said earlier, there's a combination of everything you can imagine. Some people say, "Well, I want to buy software over here and hardware over there and this hardware over there and the service over there." And they're willing to integrate themselves. I think that's unfortunate side to do that because that's too hard to do. But then there are a lot of people who are figuring out, what if I had a single-point solution and an integrator like a ChargePoint. That would be the way to go. So I just think people are buying into exactly what Pat said, which is, "I don't want to be the integrator. I believe that the total cost of ownership here is going to really drive my business. Let's go." And sure enough, vehicles are starting to hit the roads on that side, pickup trucks all the way up to -- the 18-wheelers aren't here yet, but up the stack. People know they got to get ready. So I think this is -- that part of the business is -- that part of the customer base has [woken up].

And we will take our next question from David Kelley with Jefferies.

The auto dealer investment in charging infrastructure that's being mandated, can you talk a bit more about that opportunity, the mix of chargers that you expect to see there?

Sure. That's a sub-vertical that we've been in for a lot of years. And so we know it quite well. Dealerships, as they -- more and more of their inventory converts to electric, they have the normal care and feeding for their pre-delivery inspection and maintenance groups in the back of house, so to speak, where they deploy a variety of charging infrastructure, different speeds and feeds to suit the particular scenario. They typically will have some form of charger and a service pay. It will tend to be either an AC charger or potentially a low-end DC charger in a service pay. You'll see the PDI facilities typically have a fast charger because the redelivery inspection doesn't take very long. So you'll see a medium capacity fast charger typically in those. And then out front, you'll see a combination of AC chargers and DC chargers. We see both, both for -- mostly for customer parking but occasionally for overflow at a dealership. And so the way we look at the segment is it's going to populate relatively quickly over the next -- this year and the next several years. They have to get ready to get the -- to be able to handle the inventory. So we expect it to be a robust segment for us. And eventually, it saturates. I think that's, frankly, years away right now. There's a lot of infrastructure to change over.

And we will take our next question from Vikram Bagri with Needham and Company.

Most of my questions have answered. I had sort of a housekeeping question. When I look at the port activations in fourth quarter, it seems like most of the growth came from Europe. One, can you talk about what kind of growth you're saying? Which sub-segment is the growth coming from? Your strategy for 2023, if you plan to enter new regions and markets within Europe and outside? And two, was there anything unusual why the old activation growth in the U.S. was not as strong -- outside of Europe was not as strong?

Yes. So a couple of things. So to keep one huge thing in mind, which is in our port count, we don't have residential at all. So we have a very robust residential business that we're proud of, but we don't count those in the activated port count stats. The main reason why you would think it -- why you say it's moved a little more slowly is the mix shift in our business over the past 3 or 4 quarters has been a little less commercial workplace, retail hospitality on the AC side, a little bit more on the DC side, which is a variety of applications. A DC port is 10x-plus the cost of an AC port. So obviously, that's a great revenue perspective. But from a port count perspective, it's a slower-growth thing. And then keep in mind that activated ports supports under management. So as we add ports in Europe, for example, we just did that by virtue of an acquisition -- yes, through an acquisition. There are ports we add that are not the ones necessarily that we sold because we will sell software with that hardware but not hardware without software. So there is -- so that can skew things a little bit towards Europe. And then the question, of course, is activation, right? So we may have a bang-up quarter, which you just did, shipping a lot of product. But if you -- like most people have a fairly back-end-loaded quarter because we do -- things accelerate through the 3 months of a given quarter. Most of what we ship in Q4 doesn't get turned on that quarter because it's got to get there. They got to put in the ground. They got to turn it on. They got to go through the activation process, activate software and everything else. So that's why you'll see a 1-quarter delay on a big chunk of what we sell versus what we activate.

And we will take our next question from Kashy Harrison with Piper Sandler.

Congrats on the revenue and OpEx leverage and guidance.

Thank you.

So I would like to dig into gross margins for a second, if that's okay. You indicated that margins -- gross margins are taking a little bit of a hit entering calendar '22 just given the acceleration in growth. Presumably, your growth rate is going to be quite prolific entering calendar '23 just given what's implied in the second half of your guidance here. And so I was wondering if maybe you could walk us through some of the initiatives you're taking to drive gross margin expansion as you think about calendar '23, '24. And then in addition, if you could just maybe share some color on how to think about subscription gross margins, how to think about that moving forward.

Yes. So I think the question is what are the things that could go well as we look out at the '23 and '24 from a gross margin perspective. I'd start off by saying that we've had 3 or 4 quarters of some of the hardest work I've seen anybody do it in ever. And how we've managed to eke out even a point improvement for last year to me is quite remarkable. But again, we've been struggling with mix. And then insurance and supply in the face of a very, very high growth rate is really, really hard. And then it's also really hard when you're introducing new products, which we're definitely doing this year. And going to [CN] and go, look, I not only need to know if you can supply this, but I don't need very much with them in week 1 and I need more in week 2 and more in week 3. And you start ramping up yet another product that starts off not at scale. It's -- that's a headwind. It's very much a headwind. Having said that, as the supply chain things ease, I do think there's a whole documented internal set of cost reductions by products that we will roll through as quickly as we can once we get past the assurance of supply issue. I think we've got some favorable things happening in the subscription line from an acquisition perspective from a growth in our core business perspective. And then there's a lot of things we're doing because from a cost perspective, there because, as you know or as I hope you know, our support organization lives in that line. So there's a lot of leverage and automation and other improvements, I think, we can get there. One other thing, we used to have a very, very healthy gross margin in our other line because there was some components there that were heavily dependent on overall utilization. So when people start driving -- stop driving to work, that took -- that takes a bit of a bullet. So we do get back to work in the near term, and that part of the P&L turns back on as well. I think you'll see a good performance there. And then honestly, if the weather clears and we can get that 6 points I referenced in my script back, life is good. So it's real so -- but keep in mind, what I hope I implied, if not said literally in the call, we haven't assumed in our planning that anything materially changes from a go back to work, COVID, et cetera, standpoint. We've looked at the world as we know it today. And like -- we don't know when that switches, but we're going to -- we're not going to pick a date and set up our forecast in our P&L based on a date. So improvement in the external environment can only help us.

And ladies and gentlemen, that concludes our question-and-answer session. I will now turn the call back to Pasquale for closing remarks.

Well, just -- we'll wrap up this call, which is pretty much on our anniversary as a public company by thanking you all for just a tremendous amount of great earnings call questions over the last year. We're really happy where we are and the progress that we've made. It's been quite exhilarating here as a company. I want to thank all the ChargePointers out there. I know many of them are listening. It's been a great journey for everyone on our first year as a public company again. And on a go-forward basis, exciting times to come. You're really seeing us at the beginning of a very, very, very long multi-decade growth cycle. I can't emphasize that enough. This is not normal circumstances for most markets. Most markets don't have a growth curve nearly as steep nor do they have a period of growth that lasts as many years as this home will likely have. And we're, as I tell folks here all the time, we're plus or minus at 1% penetration, depending on whether you're talking about North America or Europe into the fleet of vehicles out there, less so for fleets; for consumer passenger cars, plus or minus 1% or so. So a company like this can turn in these results at that level. For how early we are in penetration, we have enormous -- absolutely enormous expectations for what this looks like in just a very few years. So thank you very much, and we will see you next time.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.