Ladies and gentlemen, good afternoon. My name is Foe and I’ll be your conference operator for today’s call. At time this, I would like to welcome everyone to the ChargePoint Third Quarter Fiscal 2023 Earnings Conference Call and Webcast. [Operator Instructions] 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 third quarter fiscal 2023 results. The 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 Pasquale Romano, our Chief Executive Officer and Rex Jackson, our Chief Financial Officer. This afternoon, we issued our press release announcing results for the quarter, which can also be found on the website. We would like to remind you that during the conference call management will be making forward-looking statements, including our fiscal fourth quarter and full fiscal year 2023 outlook. 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 September 8, 2022 and our earnings release posted today on our website and filed with the SEC on Form 8-K. Also, please note that we use certain non-GAAP financial measures on this call, which we reconcile to GAAP in our earnings release and for historical periods and the investor presentation posted on the Investors section of our website. And finally, we will be posting the transcript of this call to our Investor Relations website under the Quarterly Results section. And with that, I’ll turn it over to Pasquale.

Thank you, Patrick and thank you everyone for joining our eighth earnings call as a public company. We had another record quarter with strong growth yielding $125 million in revenue, at the low end of our guidance range, up 93% year-over-year and 16% sequentially. The difference between $125 million in revenue and our guidance midpoint was largely made up of production constraints on our most mature AC product as a result of supply-driven redesign. The delay in shipping this high-margin product held our margin improvement for the quarter to 1 point and we have now shipped the shortfall and more in November. Demand again exceeded supply for the quarter, resulting in additional growth in backlog. We are on track to [retrieve] (ph) our revenue target for the year and Rex will provide more color on revenue and particularly on gross margin in his comments. As we manage the revenue and gross margin challenges presented by supply chain constraints, logistics disruptions and new product introductions, I’d like to comment on operating expenses. As our OpEx this year shows, we have significantly slowed our operating expense trajectory. We are managing OpEx as a key driver of turning cash flow positive in the fourth quarter of calendar 2024 and think we have made and are making the right choices and investing to achieve our market position. As we have commented previously, we have invested ahead of the market for many years and our revenue growth has been and continues to be correlated with the availability of electric vehicles. With the continuing announcements by manufacturers of new EVs for consumers and fleets, we believe the global vehicle industry has passed the point of no return. Spending ahead of revenue has enabled us to engage across our key verticals in North America and increasingly in…

Thanks, Pasquale and good afternoon everyone. A quick reminder, as in previous calls, my comments are non-GAAP, where we principally exclude stock-based compensation, amortization of intangible assets and non-recurring costs related to restructuring and acquisitions. Please see our earnings release for our non-GAAP to GAAP reconciliations. For Q3, revenue was $125 million, up 93% year-on-year and 16% sequentially at the low end of our guidance range of $125 million to $135 million. As Pat mentioned, the difference between our results and the midpoint of our guidance was largely due to shipments of AC units delayed beyond quarter close, all of which shipped in November. As we have for multiple quarters running, we fundamentally ship what we could build and book more than we could ship. So we worked down a meaningful percentage of our existing backlog during the quarter, a good thing since much of our backlog was at older and thus lower pricing, our ending backlog increased. Network Charging Systems revenue at $98 million was 78% of Q3 revenue, up 105% year-on-year and 16% sequentially. Subscription revenue at $22 million was 17% of total revenue, up 62% year-on-year and 7% sequentially. Other revenue of $6 million and 5% of total revenue increased 47% year-on-year and 56% sequentially. Our deferred revenue, which is future recurring subscription revenue, principally from existing customer commitments and payments for our cloud software and Assure warranty coverages, continues to grow, finishing the quarter at $175 million, up from $168 million at the end of Q2. Turning to verticals, as you know, we report them from a billings perspective, which approximate the revenue split. Q3 billings percentages were commercial 69%, fleet 18%, residential 12% and other 1%, representing a slight shift in favor of fleet. Residential contribution was strong, but on a percentage basis was impacted…

Thank you very much. [Operator Instructions] And we will take our first question this afternoon from James West of Evercore ISI.

Hey, good afternoon guys.

Hey, James.

Hey, James.

Pat, on the fleet side of the business, which obviously is a huge opportunity, I know we are still a bit vehicle constrained, but every kind of quarter we get closer to that constraint coming down. Are you starting to see urgency building within your customer base as we get closer to this kind of unleashing of vehicles in the market?

Yes. I mean the urgency has been there. So, I don’t see a change in urgency, because the – I mean, I think there has been a lot of pent-up demand for vehicles, because they just pencil. What you are seeing, I’ll just draw your attention to a couple of comments that I made, large growth rates year-on-year in both the kind of midsized logistics, short-haul vehicles, because you are starting to see more supply come online. And then you are also seeing which is a disproportionately mature transit industry, so effectively buses, where because there are plenty of manufacturers that have maturing products, products that have actually seen more than one generation, you are seeing that growth rate as well. We expect this to – that trend to manifest the minute vehicle availability kind of percolates to all the other sub-verticals.

Okay, okay. That’s helpful. And then on the production constraints or logistics and supply chain constraints that you guys are still experiencing, are those easing at this point or are they similar to maybe last quarter?

So, I made – I had some specific comments in my remarks on that. The components that are continuing to be on the problem list are narrowing. So the list is narrowing. And I made a similar comment in answer to a question, I believe, last earnings Q&A. And so that’s continuing. The freight and logistics, we got headlights into that, starting to normalize. And so that’s moving in the right direction for sure. And just to kind of a little bit more color on kind of what held us up a bit this quarter on the revenue side, we made a supply-driven design update effectively of one of our AC platforms that was planned. And as a result of components coming in a bit late and a very complicated transition in what is a kind of mature product in the factory, just didn’t get it all built in time. So as Rex pointed out in his comments, I think I made it in mine as well we cleared all that and shipped it. We just shipped it on the wrong side of the quarter boundary. So that’s all the stuff is all out and we are continuing to build down the factory on that front.

Perfect. Thanks, Pat.

Thank you. [Operator Instructions] We will go next now to Matt Summerville of D.A. Davidson.

Thanks. Couple of questions. I want to put just a finer point on the supply chain side of things. In an unconstrained supply chain environment, what would revenue have looked like in Q3 and what could it look like in Q4?

That’s a good question, one I can’t directly answer, but we have been building backlog, as we have said, at a rapid rate this year. I think the only thing to say is it would be substantially higher, but I just can’t give that out. But anyway, the other thing I was thinking is and listening to the question from James West and how we are handling things, we have supply chain constraints, but our growth rate is fairly astounding. So I think we are banging through this pretty well. And then I would expect from a backlog burn off perspective next year for that to be a nice boost to – or maybe a boost or a sustainer of growth rates, right. It will help us get – keep the engine running. I don’t know how fast we will burn out, but I don’t see it as being blood-ish.

And then to your point, Rex, in your prepared remarks, you called out $7 million in purchase price variance, $3 million in product transition costs. How much of that goes away – outright goes away in Q4? How much lingers into Q4? And when will you be 100% – when will you be receiving 100% of the benefit from the pricing actions you’ve taken? Will that be in Q4? Will that not be until Q1 of next year? Thank you.

Yes. So if you are focused on the price increase, as we said, we’ve got about half of it in Q3, I would expect to get most of it – most of the rest in Q4. It’s really dependent on how fast we burn the backlog off and there are different components to backlog and some stuff will ship and some stuff won’t. But I would expect us to be – hit 100% by Q1. I’d be surprised if that didn’t happen. And then in terms of the variances and whatnot, as Pat mentioned just a moment ago, the logistics side of the house is turning around pretty well. And I think logistics have pretty well normalized and look a lot like they should going forward. So I would expect a benefit there. As far as the PPV, it’s more isolated. It used to be pretty much across everything, and now it’s more isolated components, and then I would see that coming down nicely over the next couple of quarters. Can’t forecast when it goes away entirely, but I do think it would be on a downward trajectory, maybe not in Q4 because a lot of things are baked in, but certainly as we go into next year. And then one thing you should know – in terms of getting to 100% of price increases, make sure you understand where they apply, they apply mostly to North America – hardware in North America. We did a price increase on software earlier last year. And it will – if you’re doing a model, it will apply – when we get to 100%, it won’t be 100% because we have contracts with major customers that won’t let us do that everywhere. But the impact is certainly a meaningful and positive as we saw in Q3, and we expect to see in Q4.

Got it.

Thank you. We go next now to Bill Peterson of JPMorgan.

Yes. Hi, thanks for taking my questions. I guess as we look into next year – thanks for the color on how you are prioritizing OpEx. But I guess, what opportunities are you expecting to show the most growth and, thus, where are you trying to prioritize your OpEx? I mean, if you could stack right between things like fleet or commercial work, some of the applications, where are you really focusing the resources as we look into next year?

It’s – I mean, we’re continuing to focus in a balanced way across all the verticals, and we will continue to do so. We’re not going to overweight one. We will make the necessary operating expansion on the sales and marketing side as kind of demand dictates essentially by sub-vertical. So it’s just how historically we’ve performed. We haven’t steered it unnaturally in any one given direction. I want to just make sure that we reinforce a point in – that I was making in my prepared remarks, in that when we decided to really escalate our spend rate relative to where the market was even before we went public, that was essentially to intersect with the growth models that we have put together for EV installed base effectively. Where – the reason that things have leveled off quite a bit with respect to OpEx expansion, and as Rex mentioned, it doesn’t mean it’s going to go down, it’s just we’re controlling that trajectory now, is because we’ve built out most of the functions substantively necessary to support the verticals and the geographies. There will be continued investments as we flesh things out and as certain verticals unwind from vehicle shortages, but I don’t expect us to unnaturally overweight anything and leave another vertical uncovered. It’s just not how we’ve operated historically.

Okay. Thanks for that color. For my second question, I’d like to ask where service attach rates are trending, like where is it today? What has been the trend? Has it sustained as a percentage of installed base? Has it gone up? Obviously, there is a lot of new EV drivers out there and that could also kind of create friction and service networks don’t work properly, but what is your team doing to, I guess, to try to drive that higher as we look ahead?

I just want to clarify that when you are referring to – you mean our Assure programs, our...

Assure programs, yes.

Maybe it’s Assure programs, okay. Rex – why don’t you take that, Rex?

Yes. So just to make sure I am referring to the right thing certainly from a software perspective, which is one of the things we supply that with call service. Attach rates are always 100% out of the gate. And our renewal rates have been very solid and we’ve said on multiple calls that our loss rate there is extremely low. As far as our Assure Warranty program, we put a lot of energy into increasing the attach rates on that over the last couple of years. So they are healthy. They are not 100%, but they are very healthy and they are not trending down, they are trending slightly up, and we would expect that to continue. Big swing on that is, there are some customers who can’t buy it because they want to self-serve and then obviously, we have to work successfully with our extensive channel network to drive short through that, and we’re working on that steadily, but – yes, Assure is in a great place. And we haven’t seen any downward trends on either.

Okay, thanks for that.

Thank you. We go next to now to Gabe Daoud at Cowen.

Thanks. Good afternoon, everybody. Thanks for all the prepared remarks. Pasquale, you talked about demand trends and – you talked about fleet, particularly in Europe, but I’m just curious if you can maybe talk a little bit about commercial and within commercial, what’s maybe – what you’re seeing there? What’s the largest source of demand, I guess, at this point within that channel? And then also just mix it, so I just mix it on a product basis? Like is the – should we expect over time that DC will continue to grow, particularly as the NEVI program kicks off? So I know there is a lot in there, but...

Yes, there is a lot to unpack here, Gabe, but we will – let’s see if we can take them in order. So the first one regarding hot or cold spots in commercial, I’ll shorthand your question that way. We’re not – we’ve been serving literally every type of parking lot and every type of business since – for the foreseeable history of the company. And so there is no major hot or cold spots in that. As Rex has mentioned, I think on a few earnings calls, the workplace component, while it’s there and continues to be vibrant is muted a little bit relative to what it would be if people were in the office 5 days a week, 100% of the previous workforce that was in office have returned to office. That’s largely offset by the growth rate of EVs in the installed base of cars. So we just kind of view that as a delay in workplace. And even relative to the previous answer that I gave to one of the questions today, it stresses why you have to be everywhere drivers go. You lose your network effect if you’re not everywhere and in every parking lot that they may encounter a charger. So we lose our network effect advantage to businesses if we were to see a focus on one sub-vertical versus another, that’s why we don’t do it. But most importantly, when we see unforeseen macro trends that will change traffic patterns and driving patterns, if you’re in every vertical, you’ve been insulated from that. And that’s – you’ve seen us despite a lot of supply chain constraints, etcetera, effectively doubling the business. And that is largely due to the fact that we’re a bit insulated from mix shifts due to grant programs, things like…

Yes, got it. Got it. Okay. That’s really helpful. Thanks, Pasquale. Sorry, again, for all the multiple questions and then one. But I’ll just quickly follow-up with one last one on the supply chain front. Could you just talk about the – what some of the component shortages are at this point? I know last year it was maybe more of a whack a mole. Maybe this year, it’s just more of a chip issue. And so just any color on that? And then if you look into your crystal ball, like when do you think this all kind of eases? Thanks, guys.

Well, one of the – like, Gabe, one of the things I’ve learned over my career is using a crystal ball is probably not a great way to run a business when something is driving the financials as hard as supply chain is. So I can’t – life has more imagination than we do. So I don’t know what the hell is going to happen in the macro that could potentially stop the recovery that’s happening in the – on the supply chain side, but something could happen that’s unforeseen. So it’s just too difficult to call. We are seeing, as we’ve reported now for several quarters, the concentration on the material side that is concentrated largely in ICs. In the long-term, if, and it’s a big if, the macro starts to significantly pull back demand for consumer electronics that use common ICs that would be prevalent in chargers, we would see that segment of the IC shortages clear up substantially. We do see some of that now, hard to call how long it’s going to take to fully kind of fully relieve itself there. And then in the long-term, we expect that power semiconductors will likely continue to be in demand because they are used across the energy transition. So we’re going to have to be very strategic with respect to power semis and how we manage that in our supply chain. And obviously, because I just said that, you know that that’s something that our supply chain team is working on continuously. That’s nothing new. That’s known in the industry for quite a long time. So that’s sort of how it naturally funnels down. But again, anything can happen in the macro as we all know. So we are trying to be exceedingly careful. I think we’ve done a good job really building a lot of products and supporting the growth of the company and what is the situation I’ve never seen before in my entire 30-some-odd year career of building products. So we’re welcoming a relaxation of these trends.

Thanks, Pasquale. Great color. Thank you.

Thank you. We go next now to Colin Rusch of Oppenheimer.

Thanks so much. Given the diversity requirements across geographies, could you talk a little bit about what you’re seeing on the standard development side and the potential to move increasingly towards standard hardware with dynamically contributable software from a single SKU potentially?

Yes. I mean, look, the fast charge product line that we’ve been kind of grooming and expanding, that is a product line – it shifts everywhere now. It may – because everything has been designed to be a fairly Lego-block whether we have a European standard cable or a U.S. standard cable attached, it doesn’t change the fundamental electronics of the core or the software. The software just wakes up and understands what it’s in and what country it’s in. And it just does the right stuff and then make sure that everything is set up in accordance with all the local guidelines and local standards. The hardware remains configurable and that mention, we launched the CP6000 that’s up and running and in manufacturing and shipping now. And that one there is a global AC platform, so it can do the entire power range as well as single or three-phase. It does all the metering required for the entire world that we can see from a meter standards perspective, and we’re systematically going through all the incremental certification processes to cover the globe there. We haven’t gotten through 100% of everything in every corner of the markets that we serve, but we’re making steady progress and that will wrap up in the not-too-distant future. So it is possible to build something. I’ll point to a specific example. It’s completely modular with respect to whether it’s socketed or cable attached. Some European countries require socketed in some scenarios where the driver brings their own cable you can dynamically change the unit from socketed to cable attached, and you can meet all of the shuttered not socket requirements all over Europe with the same platform. So again, from a manufacturing velocity standpoint and ability to deal with demand, instantaneous kind of mix issues, which always happen, like the long-term trends we can predict pretty well. But instantaneously within a quarter, especially as you get close to the end, you could get deals that come in that move things around locally really quickly. It’s nice having the ability to have a product that is built that way because you can satisfy demand from what is a manageable number of subassemblies and inventory. So that’s why we do it that way.

Perfect. That’s helpful. And then I guess the second question is really around the advantages of slowing some of the growth. You guys have done a very admirable job of growing the team. It is actively to have, but with some of that growth slowing and the ability to have a more cohesive team, can you talk about some of the efficiencies you’re expecting to get and what you’re seeing from a culture perspective as you start to see this group be a little bit closer and get some incremental leverage from an operating perspective?

I think there is two big things to highlight that may or may not come to mind immediately when people listen to your question. We had to go through two acquisitions and integrate them. And I couldn’t be happier with how the teams have come together in both those acquisitions, they are fully integrated. Many of the folks that came in from the acquisitions have senior positions within technical and other and sales leadership within ChargePoint. So it was a really great add from a talent perspective. And we’ve kind of culturally all – we’ve learned a lot from those folks, and they have, I think, learned a lot from us. And together, I think we’re better than we were before all three of those companies came together on the technical side and on the sales side. So we are really happy with that. I think the bigger impact is how many people we’ve added since COVID because that forced us into a remote environment like any other company for so many years. And if you look at how many – if you look at the historical headcount of the company, kind of pre-COVID then you – we were still private, right, and going public and now being public for nearly 2 years, 2 years in March, most of our workforce – not most, but a substantial percentage of our workforce that has been hired since COVID have not had the benefit of a great amount of personal interaction just because it’s been constrained. Now that’s coming back and we’re doing a lot of things to make sure we actively get people collaborating and being very careful by the way, to make sure that we embrace the flexibility that today’s workforce sort of demand. So we are trying to make…

[Operator Instructions] We will go next now to Craig Irwin at ROTH Capital.

Hi. Good evening and thank you for taking my questions. Pasquale, I share your preference for performance indicators over Fortune telling with a crystal ball and that being said, you have the largest business development team in the industry and have a very interesting way of managing that team making them compete for resources. Can you maybe update us – you were appropriately conservative on the funding from the Infrastructure Bill and said that this is really going to be a ‘23 benefit. Can you maybe update us on what you see as a potential timeline for different states to disperse that money in a meaningful way? And is there anything else in NEVI that you are more optimistic about in the short to medium-term that might have a bigger impact on the overall levels of market activity?

Well, I mean I don’t think we have a shortage of market activity. And I am not trying to be – and with respect to NEVI, I am not disappointed. As you mentioned, we have been very consistent. We didn’t expect anything to happen before 2023. And if you want to update, as you asked, I expect something to happen in the front half of the year, but not a lot. There will be some things that happen in the front half of the year for sure on NEVI. And it will grow. It won’t be a cliff, but it will grow through the year. And I think you will start to see quite a bit of activity in the back half of the year in 2023, and that if things continue on the current trend. I mean that’s our current visibility. I will also point out that we don’t engineer things like that into our models specifically as we are managing the company because we look to be conservative with respect to the dynamics that can happen as well in programs like that now. And maybe we are dealing with governments and it just moves at the pace of government. And so if you are in our position and you are betting on something on an optimistic side or you are betting on something at all until it materializes, it really undermines your ability to be predictable as a public company. It’s a bit reckless. So, when we start to see it ramp and we start to see what our win rate will be, we will be able to make further comments.

Thank you. We will go next now to Alex Vrabel at Bank of America.

Hey guys. Thanks for having me on. Just one other one for me and I am just curious if you can comment, I know it’s relatively fresh. But just on this e-RINs news that came out today, just curious if you can kind of clarify how you guys are positioned around that, what you expect. I know the details are very, very fresh. But just curious any color you can offer at this point?

So, I haven’t had a chance, given that we have been a bit pre-occupied with the goings on of this call today to really circle with our program people here to get a full impact statement. But what I can say is that the current LCFS program credit that we take advantage of or the proportions that we can take advantage of that we share with certain customers, that’s in the other line, on the revenue line. And where e-RINs will show up for us will be in that line if we can take advantage – in the scenarios where we can take advantage of it. I will remind you that we are not a station owner in general. There are occasions we are, but it’s not material or our business model. And so we have to analyze the scenarios and where that – where those credits go, whether – what percentage you are going to go to us, what that will look like in the long-term, and how much we will administer on behalf of our customers, but largely benefit our station on our customers, so too early to give you a full answer. But if you look at the other line, you will get a pretty good indicator of what LCFS has done.

Thank you. We will go next now to Steven Fox of Fox Advisors.

Hi, good afternoon. Just had a couple of quick questions on gross margins. One, you mentioned how your – some of your backlog is still on old pricing versus new pricing. What’s the difference in sort of the expected margin on the backlog that’s sort of more favorable versus less favorable? And then I just want to make sure I am clear on the gross margins going forward. With the full year guidance, are you implying that the gross margins for Q4 might be down from Q3 or just that you are going to be below the full year guidance? Thanks.

Yes. So, let me take the second one first. The – what we expect to have happen is continued sequential improvement. So, if you look at the years so far, we have gone ‘17, ‘19, ‘20. And so for Q4, we think we will improve on ‘20 given mix and the other things that we have to wrestle with on PPV and that sort of thing, it’s getting hard to put ranges on it. But we definitely see that going up in Q4. But we did want to let people know, being transparent, that the ‘22 to ‘26, which we thought we could get to is not mathematically likely, so we are taking that off the table. We do expect to get better Q3 to Q4. And then as far as the backlog is concerned, we burn off a significant amount of backlog every quarter, so it’s reloading. So, we did our price increases in June. And as you can imagine, that takes a while to work through the system in terms of you have got a bunch of quotes out there and now you have to go when you are doing new quotes and you put the new pricing in, so it takes a while for that to go through the system. It always related to hardware in North America, keep that in mind. And so we are rolling through the older commitments. And as I have said earlier, I think we will probably bang through the older pricing over the next couple of quarters, Q4, Q1, so that will be fully on the new pricing. In terms of how the margins improve there, we haven’t given out a figure on what the price increase level was, but it was significant, right. And so, it will have a very, very nice impact on margins when we roll that through increasingly through the next six months.

Thank you. We will go next now to Maheep Mandloi at Credit Suisse.

Hey. Thanks for taking the question. Just clarifying the previous comment, you talked about transitioning to new pricing over the next six months or the next two quarters by Q2 of next fiscal year. And second question, just on OpEx. How should we think about that you were able to reduce it a little bit for this year? Going forward, should we expect somewhat flattish at these levels or, obviously, slower growth than revenue growth, but how should we – just any clarifications or clarity on that would be appreciated? Thanks.

Yes. So, on the pricing front, again, if you think about – if you announce a price increase, you got to get it out to channel, you got to get it out to sales. It impacts only new deals that are not already quoted. Then you have to get those deals closed. As you know, we have been building backlog all year. So, then you got to cycle it through your backlog. So, it takes – you do a June price increase, it fully see that roll through, you are looking at nine months at a minimum, just the way it works, right. Good news is we are four months through. And so we are well underway, and we did see some nice impact from that in the third quarter. But I think we just have to be patient there as that works its way through the system over the next several months. And then as far as operating expense trajectory is concerned, I think if you look at our OpEx for Qs one, two and three on a non-GAAP basis, which I would encourage you to do, even though we all look out. You will get to see the actual trajectory of the company. And it’s been very steady this year, and that’s very purposeful. There is some – the nice thing as we look forward, our new product introduction expenses that hit OpEx will be many of which were in this past year will be substantially reduced. We are going to be intelligent on hiring. But as I have said in my prepared remarks, I do think OpEx will go up, but I think it’s going to go up in a very measured way in the near-term and a substantially reduced rate relative to our revenue increase. And then frankly, if you were to look back 2 years from now – 2 years ago, what was the OpEx rate of increase percentage-wise, nobody expects us to be below that. So, the rate of increase is going to go down.

Thank you. We will go next now to Shreyas Patil at Wolfe Research.

Great. Thanks so much for taking my question. I just wanted to maybe come back to the margin and just as we are thinking about the prior guide, I think it was indicating somewhere around 25% or 26% for the back half. It sounds like it’s going to be more like in the low-20s now. I understand some of that is related to some of the ongoing supply chain issues. But maybe can you help us reconcile the missing piece – the pieces there that’s kind of resulting in the margin softness?

Yes. So, the number – so, if you go through our last two calls and this one, what you will see is the PPV/logistics side of the house, when we had some effort charges this quarter. And then we had – twice we have had stuff not get out of the dock from an AC, which is a higher-margin product perspective. So, there have been 6 points to 8 points, even 9 points in each quarter that doesn’t have anything to do with our business model. It doesn’t have anything to do with the products. It doesn’t have anything to do – well, it may be a little bit with mix but not really. It’s sort of points lost on the shop floor. And so our thoughts on trying to recover to get to our annual guidance coming out of Q2 and guiding to the low end of that range was dependent upon some of that stuff cleared up. And as lot would have it, as we said, Q3 was another quarter where we just couldn’t get enough product out, especially from an AC perspective. So, when we look at that going forward, it’s a pretty simple question of when the external environment eases so that we get those points back, that’s a pretty easy fix. Then we have I think we have announced our new Head of Operations. We are attacking the op side of the house, both from a scaling perspective and a cost reduction perspective with the vengeance [ph]. So, I think there is cause to look forward with gross margin go, I see how this can improve. So, we know the recipe. We have just got to get it out of the kitchen.

Thank you. We will go next now to David Kelley of Jefferies.

Hi. This is Gavin Kennedy on for David Kelley. Thanks for taking my question. One of your competitors called out installation issues with DC fast chargers, which stemmed from both labor shortages and transformer supply chain constraints. Is that something that your team has seen and if so, any thoughts on the magnitude and timetable of that disruption?

Whatever you do in construction, especially when it involves electrical upgrades things take – you are into construction permitting and utility interconnect, so things take a while. But I will point you – the easiest way I can kind of help you understand it from our perspective anyway, is we added over 1,000 DC fast charger ports to our active ports under management count. Now, that means those products have been – that were sold through in the past, went through site design, construction, permitting, all the usual stuff, utility, interconnect, and were activated. But it gives you a flavor for the fact that if you have a pipeline, a proper pipeline, the delays essentially pipeline away, so – and the delays aren’t there everywhere. They are there for certain – literally certain physical locations where the electrical – the utility infrastructure at those particular locations may require an upgrade to deal with the power levels that are required for that use case at that site. So, we do see some hotspots. But again, the business is very broad here. And we have a continuous engagement pipeline that’s feeding the top of the funnel. So, in this quarter alone, you are seeing that 1,000 come out, which is a pretty big number. So, I just think as long as you are feeding the top of the funnel, a business like ours, and also because of our diversity of the verticals we are in and geographies, it’s a bit more muted for us.

Thank you. We will take our next question now from Itay Michaeli at Citi.

Great. Thanks. Good evening everyone. Just one quick question on the subscription gross margin, I think it kind of came in at below 40% in the quarter, kind of flat from last quarter. How should we think about that going forward? Is there any price increases being implemented there? Just kind of curious on the puts and takes in the quarter and the forward outlook.

So, I am so mired in non-GAAP. I have – I got surprised by the question. It’s a fair question from a GAAP perspective. But – so on a non-GAAP basis, our subscription margin actually moved up nicely in Q3 to the extent that it’s – if you go to GAAP, obviously, we are growing with the team. We are investing heavily, frankly, doing some pre-investing in that space, just because we see good customer support. It’s a huge differentiator for the company and the way you win. So, obviously, those people live in that line item and the costs are allocated accordingly. So, by the way, but net-net, our subscription gross margin went north and frankly, we are putting a lot of energy to make sure that continues.

Thank you. We will go next now to Mark Delaney at Goldman Sachs.

Yes. Good afternoon. Thanks very much for taking the question. When you think about the pricing and what that means for margins, do you think you need to do another round of price increases in order to reach your longer term margin targets, or do you feel with the pricing you have already done and potential for some of these other impacts to perhaps things like supply chain that you can – you get that continue done or are you going to be around? Thanks.

Sorry, I didn’t catch the tail end of the question due to the reception, but on the basic question of are we anticipating further price increases, I think the answer to that is TBD with a shading in the direction of not in the near-term because we just did – we did one early last calendar year and then we did another one that was larger, but North America hardware solution specific in June. And we are seeing the impact of that begin to roll through. We have seen about half of it in Q3. We would like to see the rest of it in Q4 and Q1. And so we think that will have a beneficial impact on our gross margins. And then beyond that, we have got a lot of operational improvements that we are doing is the PPV and the PPV and logistics situations ease. I think we can get where we need to be through more traditional means, right, just improving our costs and improving our expenses, etcetera, versus going for further price increases. We do like most software companies. We do have an automatic increase situation on software. So, there is a built an escalator there. But in terms of broad-based price increases, I don’t see one on the table in the near-term.

Thank you. And that concludes our question-and-answer session this afternoon. Mr. Romano, I will hand things back to you for any closing comments.

Well, I just wanted to say, first of all, thank you for everyone for the thoughtful questions. I appreciate it very much. I want to reiterate my usual thanks for our team here at ChargePoint. They had to work very, very hard to pull off the quarterly results. I know they are all very proud of their accomplishments and are looking forward to not only wrapping the year up in Q4, but to the road ahead in 2023 for us. I think it’s really, as I have said in my remarks, the number of makes and models across the board in both passenger cars and the fleet segment really – it’s a really stark difference than it has been even a year ago in terms of availability. And as those things reach some reasonable level of manufacturing maturity, I think you will – we will all be very pleasantly surprised with the pace of adoption and relative to the installed base in this market. So, we are very, very excited about the future. And again, thank you all. We will see you at our last earnings call of the year next time, and we will sign off for now.

Thank you, Mr. Romano. Ladies and gentlemen, that will conclude ChargePoint third quarter fiscal 2023 earnings conference call. We would like to thank you all so much for joining us and wish you all a great evening. Goodbye.