Ladies and gentlemen, good afternoon. My name is Lisa, 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 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 fourth quarter and full fiscal 2023 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 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 and full year ended January 31, 2023, which can also 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 first quarter fiscal 2024. These forward-looking statements involve risks and uncertainties and 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 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 for certain historical periods in the investor presentation posted on the Investors section of our website. And finally, we'll be posting the transcript of this call to our Investor Relations website under the Quarterly Results section. And with that, I'll turn the call over to Pasquale.

Thank you, Patrick, and thanks to everyone for joining us today. Yesterday marked our second anniversary of being a public company, and I'd like to start by recognizing the team here at ChargePoint that has worked tirelessly to continue to evolve the company to fulfill the enormous role we play in the energy transition. Before I get into a bit of retrospective on the full year and what the road ahead holds for us, I'll review the fourth quarter results for fiscal 2023. Our fourth quarter grew 93% year-on-year and 22% sequentially, making another record quarterly revenue level for the company, while improving non-GAAP margins by 3 points to 23%, delivering on our expectations set on our last call that we would sequentially improve gross margin. However, on that same call, we effectively raised the midpoint of our full year guidance by $5 million. The revenue results for the full year were slightly below the original guidance midpoint and 2.5% below the revised guidance midpoint. Fourth quarter revenue results were below the guidance range and 7% short of the midpoint. This was due to a combination of special circumstances. The first is a decrease in North American commercial demand during the month of December; the second, while overall supply chain limitations have eased, they persist for certain hardware products; and lastly, we just missed shipment cutoffs for some customers that caused a larger gap between billings and revenue than historical norms. To put that in perspective, the full year revenue was $468 million. Our business grew 94% this year versus last and over 90% year-on-year each quarter. We managed operating expenses through the year to achieve the improving operating leverage you see. And this is foundational to becoming cash flow positive in calendar 2024. We are exceptionally proud of crossing…

Thanks, Pasquale. As a reminder, please see our earnings release where we reconcile our non-GAAP results to GAAP, our principal exclusions or stock-based compensation, amortization of intangible assets and certain costs related to restructuring and to acquisitions. Also, we continue to report revenue of along three 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 and our ChargePoint is the service offerings where we bundle our solutions into recurring subscriptions. Other consists of energy credits, professional services and certain nonmaterial revenue items. Moving to results. Fourth quarter revenue was strong at $153 million, up 93% year-on-year and 22% sequentially, but below our previously announced guidance range of $160 million to $170 million, as Pasquale noted. Again, the shortfall was principally due to supply issues with our DC product lines as availability was better, but still not sufficient to hit the significant ramp from the third quarter to the fourth quarter. A lack of linearity to force shipments too late in the quarter to meet our revenue cutoff criteria and softer North American commercial demand than expected also contributed. Network charging systems at $122 million was 80% of fourth quarter revenue, up 109% year-on-year and 25% sequentially. Subscription revenue at $26 million was 17% of total revenue, in line with its third quarter percentage contribution, up 50% year-on-year and 19% sequentially. Importantly, as Pas mentioned, this quarter, we hit a significant milestone of $100 million in annual run rate for this revenue line. Further, our deferred revenue from subscriptions representing future recurring revenue from existing customer commitments and payments continued to grow nicely, finishing the quarter at $199 million, up from $175 million at the end of the third quarter. Other revenue was $5 million…

[Operator Instructions] We'll go first to Colin Rusch, Oppenheimer.

I wanted to dig into the seasonality piece of this because we see this in a variety of industries. And what it looks like it's happened in the first quarter of your fiscal year as you end up pens out about 18% to 20% of the annual revenue and you're guiding to something a little bit north of 50% here. I guess what can you say about the backlog and your visibility into the balance of the year? And how you're thinking about the seasonal trajectory of revenue throughout the balance of the fiscal year.

Colin, thanks for the question. So if you look at our Q1 outlook, as I said in the prepared remarks, it's a -- we're a growth company, right? So you end up with a lower percentage in Q1 relative to the percentage just for Qs two through four. So you can extrapolate, I think, successfully from there. Looking at your models and our historical performance, I think that's something that you guys can do. From a backlog perspective, we actually did a nice job in Q4 of burning off some of the historical backlog. As we've said in prior quarters, we don't actually think that backlog is necessarily a virtue. We're not a backlog business, particularly maybe that changes as fleet continues to become a broader part of the company's business, but we're a land and expand business, and we want product out the door and then people's hands it in the ground. So we're going to burn that down. And it was a nice backstop for Q4. It's a decent backstop for Q1, but we're going to work that off as we go through next year.

Okay. And then just in terms of the texture of the client engagement right now, can you talk a little bit about what trends you're seeing in terms of incremental customers that you're adding into that land part of the land and expand strategy and the velocity of sales in terms of whether it's accelerating or decelerating with the existing customers as you get into the first part of this year?

So Colin, I think the easiest way to answer that is to point you at a statistic in our prepared remarks. The rebuy rate as a percentage of our revenue in the quarter was very consistent with historical norms, which indicates that the customer ad rate is holding. So there's no further color to add.

Next, we'll hear from James West, Evercore ISI.

So Rex, a question -- so a question for you, Rex, just to clarify the revenue shortfall versus your guidance for the quarter. if you had -- if those shipments have gone out in time, would you still have been within or even above your guidance range because it's not really revenue, you're not going to get it because it comes just at a different time?

Yes. I mean that's a good question, right? So first thing I would say is we put a lot of pressure on ourselves be from Q3 to Q4, a big uptick, and we accomplished most of it. But I don't actually know the number, but I think the -- at the end of the quarter, the semi-trucks were sort of blended up around the block. So we fundamentally just had a back-end linearity issue of getting products either built from a DC standpoint because you ran out of gas on that from a supply chain standpoint and then on the trucks in time at the end of the quarter. So would we have made it -- the short answer is yes.

Okay. Okay. Got it. That's very helpful. And then another question maybe for Pas is with your customer and the customer engagement right now, do you have a sense for how much of your business is new customers, putting up charging stations versus existing customers adding to their charging networks?

Yes. I mean I think that's just a different way of asking the same question that Colin asked previously. About 30% of the quarter was new customers, and there was no deal size anomaly in that. So if the revenue split percentage is very consistent with historical norms, the new customer add rate is consistent with that.

Our next question is Gabe Daoud, Cowen.

Maybe just starting on the margin side. You obviously showed sequential improvement on a non-GAAP basis. Could you, Rex, maybe just give us a little bit of color on the trajectory there and maybe what some of the puts and takes are with respect to margin. Is it fair to assume maybe you continue to turn out like 100 basis point improvement sequentially throughout the rest of the year?

Yes. So if you look at the year we were at 17, 19, 20 and 23 non-GAAP, of course, through the year, and we're hard at work in terms of driving that forward. The supply chain thing has been as high as 6 or 7. Now it's more like 4 that helps. We bank through the fact that mix shifted this year meaningfully in favor of DC, which is one good from a resilience standpoint, but it's not the highest margin product that we do. So we manage to bank through that and those margins have come up nicely here upstream delivering meaningful cost downs and then the price increases that we did last year. So mix makes it hard for all these other factors are contributing to being able to add to the number. As you look to next year, you will note in my prepared remarks, I gave [IG], we had lower revenue in Q1. Therefore, the operating expense leverage is going to go the wrong way for Q1, but the next go back the right way in Qs two, three and four. But I did say sequential improvement in gross margins throughout the year next year. So I wouldn't put a number on it, like is it 1 or is it 2, don't know or can't guide, but I do think there's going to be a steady progression next year.

Okay. Okay. That's helpful. And then maybe, Pasquale, just going to your comment around seeing a little bit less demand in December. I mean is that just seasonality? Obviously, been setting up a seasonally weak 1Q? Or are you concerned at all with like a lot of your maybe tech giant customers in California kind of tightening the strings a bit on spending. Is that creeping into demand issues as well? Could you maybe help us think about that?

Yes. So I think the easiest way to put -- get some overarching color on that is the revenue diversity has increased meaningfully over time in the company. I made some comments in my prepared remarks about the increased percentage on fleet and Europe overall as a percentage of revenue. And I'll remind you that it had to outpace what was already a blistering year-over-year growth rate for the company. So it's just fundamentally very hard for sub-segments like that to overcome a growth rate in the core business, which is very mature in North America, and we managed to do that. And so what that's leading to is we do see some softness in effectively businesses that have more of a discretionary stance with respect to when they -- the timing around when they put in charging, and I want to emphasize this, eventually, the attach rates prevail. And so in a set of verticals more so in North America than in Europe, you are seeing some delays or delays of ordering, but we don't see it as a fundamental shift at all. We see it as effectively aligned with the macro and with the increased resilience in the business with respect to just the spread, there's no hotspots. If you look at the residential business, commercial, fleet, when you look at the geographies, you've seen us make meaningful progress in all those fronts. So while there's definitely an economic overhang in a couple of verticals, I'm really very pleased that the business doesn't have any significant overweight because if that were the case, I would comment otherwise.

Our next question comes from Bill Peterson, JPMorgan.

I apologize for the background noise. I wanted to ask what your thoughts were around cash flow and outlook. I would think that it wouldn't have a lot of impact on -- you talked about the verticals, you just said that home feed work areas like Level 2 for front of a store or a restaurant. I wouldn't think there would be really any impact, but maybe large retail locations and maybe some DC fast. Just trying to understand the threat of Pasquale maybe other car companies that have it on networks, of course, Europe exciting subset yourselves. But in terms of the competitive environment, how could that play out?

Yes. So no, I get the question often. And in fact, I think I got it on several previous earnings calls. So the overarching response to that is -- the fast charge market in the passenger car sector serves a very narrow use case. It's for when you're driving beyond your battery range. So it is not the significant driver for our revenue. Now let's not be making any excuses or saying that you're right on Tesla opening up their network either. We're also seeing now a tremendous sudden attention from what we refer to as players in the 30-minute retail economy that traditionally serve people on road trips they now want to embrace because the broader EV market has shown up. It's not one OEM now. It's a multiplicity of OEMs. They're all moving in the right direction with electrifying their offerings in fact, completely disinvesting in their ICE cars, that's given the players in the 30-minute retail economy, a lot of confidence that they can start to move the ball down the field with respect to investments at their own properties. So we see this as a massive opportunity with respect to placing fast chargers along with partners. And if you see how Mercedes-Benz and Volvo, two announcements we made this year, have worked into a 30-minute retail economy sort of aligned network announcement, we think that's going to continue.

Yes. You like in the fleet opportunity to a coiled spring and lack of vehicles. And we've talked about this, but are you seeing any signs that this should accelerate through the year? I guess, I know it's already a meaningful part of your business, but how should we think about your fleet opportunity as this stream uncoils?

So how you should think about fleet is that it's more land than expand right now. I mean, honestly, it doesn't have the expansion rate within customers that we've won that the more granular commercial business has because passenger cars are increasing in diversity and availability from a lot of OEMs, while on the fleet side, we are severely vehicle limited maybe with the exception of transit buses, but transit buses represent a very small on a vehicle count basis, percentage of fleets globally. So hence the coiled spring analogy, if you're landing more than you're expanding, but the expanding has to follow, we're in good position when our customer base decides to actually get -- well, when they can actually get vehicles and can expand. And if you look at the announcement we just made with USPS, for example, you're starting to see the cloud break, so to speak, with respect to a very large fleet that's positioned across the United States start to get commitments from vehicle manufacturers that they're going to see those vehicles come in earnest. So as that -- as things like that start to happen, I think you're going to see a much more balanced expand versus land mix, and it should result in an acceleration of revenue even within our customer base. .

Next will hear from Kashy Harrison, Piper Sandler.

So just the first one for me. So the liquidity position improved a few million of $400 million in cash and short-term investments, $400 million. You mentioned the $50 million ATM offering. Could you speak to the driver behind the utilization of the ATM in December, just given that you already had a pretty strong liquidity position before that? And then maybe just talk about how we should be thinking about like strategically the strategy behind the ATM in the future?

Sure. So as I mentioned, yes, we definitely capped the ATM in December for $50 million. One of the things that is paramount for this company is we have a strong balance sheet, and we want to keep it that way. And when you map that to what it's been, and we hope continues to be a very strong growth rate. We need to be able to support the business. The thing that I would focus you on as we've talked about or path to profitability, the burn that you see, call it, adjusted EBITDA, call it, whatever you want to call it, that's going to decline meaningfully over time over the next year or two because getting to zero across the over something that's super important. So I think that the need to address that will decline over time as those metrics get better -- but the bottom line is we just need to maintain a strong balance sheet and relative -- I think we have the best in the industry, and we need to stay there. And then bottom line from a -- would we use it, again, it's opportunistic. It's based on price and circumstances and timing and everything else. So we're just going to keep an eye on it.

Okay. Fair enough. And then just my follow-up question. As you pointed out, I think both of you pointed out in the prepared remarks, you effectively held the non-GAAP OpEx flat all year roughly $80 million and the -- as a percentage of sales, down to 50% from 100% earlier in the year. Can you talk about your operating expense strategy for 2020 -- calendar '23 as well? Should we expect flattish OpEx again? Or should we expect a little bit of an uplift as the business is growing and there's also wage inflation. So just some thoughts on OpEx would be great.

Yes. You sort of answered your own question. So yes, there will be an uptick in Q1. The combination of an uptick in Q1 relative to Q4. The fact is that we're seasonally lower on revenue, it's going to make our operating expense leverage them were in the wrong way for the first time in three or four quarters. But the drivers are exactly what you just said. It's -- we've got -- our annual rate cycle is now and then we'll have the full impact in Q1 of new hires in Q4. So those are the main components that will drive it up a bit. But then what you'll see there's sort of this uptick in and it doesn't keep doing that Q2, Q3, Q4 is a very -- our view currently is a very, very modest series of increases throughout the year. So take an uptick in Q1 and slowly higher for the rest of the year.

We will now hear from David Kelley, Jefferies.

I was hoping maybe to start -- if you could update us on momentum in Europe. You delivered really meaningful growth in fiscal 2023 and the markets coming off of a really robust EV penetration ramp last year. So how are you thinking about the regional opportunity across the pond in 2024?

We think about it the same way we think about the opportunity in North America, frankly, and it's driven by, as you said, the differential is driven a little bit by a differential in car penetration from a new car sales perspective. But our strategy is virtually identical in Europe as it is in North America with respect to product in offering, business model, et cetera. And I'll just remind you that we've said on many earnings calls that at the root of our forecasting and modeling, it's all factored off of new car projections, net new vehicles in the installed base in the markets we serve. You had a kind of sub question in there about the sub-regions. We are serving predominant markets in Europe. We're not in every country, but the ones we're not in are small. And so we are we're just assuming that across the entire Continent of Europe, we should be able to continue to be successful with the product line that we've been successful with on the previous year. There was no real difference.

Okay. Got it. That's helpful. And then one quick follow-up on the supply chain situation. I guess are you seeing improvement Q1 to date relative to the fourth quarter? And how should we think about that 4-point margin headwind, I think you referenced, does that continue to lessen here into 2024?

Well, no -- I mean, as we've said many times, no one has a perfect crystal ball on that one. So taking -- maintaining a vigilant stance with respect to supply chain is what we're doing. What we have said before and what I can repeat now based on our experience in Q4 is that the supply chain hotspots have narrowed considerably from the peak of the crisis. So we have all our management bandwidth looking at a much smaller set of problems. The problems you couldn't you may still have issues with availability of supply of a fewer number of components that still limits your build, but it's certainly a lot easier to put in mitigation strategies around right now. And we hope that over the year, supply comes into alignment with demand. And it's too hard to call exactly what quarter we can say that all of it's gone.

Stephen Gengaro from Stifel is up next.

Two for me. The first, Rex, you mentioned how full -- consensus numbers for the year seem relatively tight, but you're not giving full year guidance. But it sort of suggests to me that you think the consensus is reasonable by making that comment. Am I thinking about that correctly?

I'm chuckling just because I did not say consensus. What I said was, and this is an important distinction, analysts develop their models and then they make judgments based on why I believe this. I think this is going to be better. This is going to be worse and they come to a conclusion, and we use the word dispersion. Last year through no fault of their own because we're a newly public company and who could have modeled us from the outside last year, I wouldn't expect you guys to be able to do that. So the numbers are all over the place. So I felt like we needed to help get it centered. But I think the dialogue we've had with analysts over the last year and people's understanding of the business and their ability to form their own conclusions about what the outlook should be is vastly improved versus last year. And so I just think -- I just -- I think having you be 100% the author of where you are is the right answer.

Okay. No, that's it. The other question I was curious if you could add some color to is any thoughts on the NEVI program and your strategy and how you benefit from that over the next couple of years and how you're positioned there?

So as we look at the NEVI program, not unlike how we approached many other programs that are similar in color. It's a very corridor-oriented program. It's implemented by each state. So each state has its own take on the federal guidelines and we're quite used to that. Our policy team has been instrumental in commenting and helping to shape the program. So it offers what we think is a good platform for a broad range of our customers to be able to take advantage of it, and that's the key there is the broad range of our customers. So how do we approach it? Because we don't own and operate stations ourselves and how we have approached similar programs in the past. So this is not a departure and approach it all is we look into our current customer base and our potential future customer base -- we do deep analysis. We have this capability internally, deep analysis on the state's requirements of where exactly they want chargers -- we look at the correlation between available utility capacity, availability of partners that we have that are in good locations, spacing, et cetera, construction ease or lack thereof of construction. And we put together a set of partners and jointly bid into the programs. And in many cases, there are multiple bidders that are based on our technology. We've already seen that in Ohio in -- because that -- those bids we already do, and we expect to see that on a go-forward basis. And that's not unlike how we've accessed previous programs that, again, have had similar structure in the past. So we're sort of kind of the bones behind the organization of the collection of players sites, technologies, et cetera, that can go into a bid. So that's how we approach it. We think the formula works for us. We think most importantly, formula works for drivers. What we've advised states on and the federal government is that these things need to be in good locations. There has to be good alignment, not 100% across the board because you could have some or locations where this statement isn't appropriate, but it needs to be well aligned with quick-serve brands, both food services and retail, et cetera. So we create a vibrant and enjoyable experience for EV drivers because that enables more and more EV adoption to accelerate, which enables the balance of our business. So we care about it deeply.

We'll take our next question from Matt Summerville, D.A. Davidson.

Just a kind of follow-up on the Q4 to Q1 kind of seasonality and realizing we don't have a huge amount of historical data to kind of work with here. But Q4 to Q1 last year was actually higher. I know a little bit of that would have been acquisitive related prior year, down slightly, maybe acquisitive nuance there, too, maybe helping. But moving from the 153 or whatever it was in Q4 down to 127 at the midpoint, I guess I'm just having a hard time really understanding why there's roughly a $25 million sequential reduction there? Maybe a little more help.

That's a fair question. The thing I would represent to you is if you go back in history with the company in like private lands. We've been very consistent. Two things have been consistent. One, as low Q4. Last year was unusual as the first time. I think for 5 years for sorting that's happened. So Q1 is always lighter. It varies in terms of percentage. I don't think this year's dip from Q4 to Q1 is extraordinary or surprising. It's just kind of what we're used to. And we know the reasons for which we explained. And then, as you know, we think of ourselves as a growth company. So when you take Q1 and you look at that and go, okay, that's a baseline for the year and how does it grow from there. There's pretty decent information in our history that would allow you to extrapolate. So I guess, the net of it is, I'm not concerned by Q1.

You kind of think about the portfolio position of the balance sheet, how should we be thinking about M&A over the course of your fiscal '24 and maybe what sort of technological or otherwise innovation, intellectual property you may be looking to add to the portfolio? Do you have things that are actionable in your pipeline? How should we be thinking about M&A over the next 12 months or so?

M&A, are you to referring mergers and acquisitions?

Yes.

Yes, I'm sorry to discern that.

We heard we have a partner called MN8. So I heard it that way. Please go ahead, Pas.

Yes. The way we think about acquisitions is we have a very full technology portfolio and lots of very good stuff in the pipeline. What I've commented on before is that we -- due to the fact that our portfolio is well built out with the exception of a few things that have not emerged yet that are deep in R&D -- we have the ability now to rebalance where we put the R&D resources to look at the scale technologies necessary to deal with streamlining customer onboarding, ongoing customer interaction and the like. And remember, we have a very, very, very deep channel business -- so we have to do -- we have to have core product services technologies that enable that all the way through the channel. And I made some references to that in my remarks. So as a result, we don't see a deep need from an M&A perspective at all on a technology basis. The way we look at M&A opportunity is customer acquisition capabilities. So if there's a good customer base with low liabilities on the installed base and it's a practical integration, we would certainly consider it. But that's really the lens that we're looking at from it is not a technology lens.

Next up from Credit Suisse is Maheep Mandloi.

Sorry if I may have missed this earlier -- there’s a squeeze on gross margins. I'm sorry if I missed this earlier. Can you just talk about how should we think about the gross margins in Q1 and through the year, specifically as you have this higher mix of DC, should we expect this continue your trend here?

Yes. So I think -- so first thing is, as I said earlier, DC mix historically last year was a challenge, but actually, we are improving things markedly on the DC front. So it's going to be less of a problem. And that's everything from cost reductions, volume our major new Express Plus platform is brand new and very small volumes. But there's a combination of things that are going to make that better. We also think that the supply chain side of the picture is going to continue to ease -- so I haven't put a number on it, but I have said I think it's just going to progress steadily throughout the year. I would be severely disappointed if it was flat or down in any given quarter. So -- but I think our outlook is quite positive that we can continue to drive the margins sequentially up this year given a lot of the operational initiatives that we have in the company.

Got you. And just one on the balance sheet. On Kashy's question, you talked about maintaining balance sheet at a healthy level as the prime driver here for the ATM. Just curious if you could characterize the -- like how should we think about that, is it like a minimum cash balance or some of the metric to think about that?

Honestly, I haven't fixed the number. I don't mind the $400 million number, but I haven't fixed a number in stone on that. As we grow the business, we may look at other financing opportunities. And then the nice thing is -- we expect our quarterly loss position to continue to decline nicely between now and cash flow positive next year. So there's a balance there. But if we continue to grow the company and it gets meaningfully bigger than it is today, you're going to want to have a decent balance sheet. And I kind of think that's where we are now. So how we maintain that and what we do to maintain, that's the question, but we're in a pretty good spot right now.

We will take the next question from Oliver Huang, TPH.

Just had one sort of a multipronged question, but I just wanted to try and get an update with more details around progression of your build cycle over the past quarter? Is it something that still remains fairly back end of the quarter weighted or think that started to really smooth itself out given how there is a backlog to kind of get through -- and when thinking about the ability to manufacture these charges at the factory, how close have you all progressed towards full utilization relative to what unconstrained capacity sits at today?

So I'll take the second part of that question first. We use external contract manufacturers as partners from a build perspective. So utilization of capacity is not a factor here. We use CMs that have substantially broad capacity capabilities. So access to capacity on the upside is not an issue because we'll see that need coming with adequate lead times. And the excess capacity is not a factor in our financials from a factory perspective. With respect to build linearity, we have much better build linearity now and our build linearity previously was largely driven not by factory issues, so to speak. It was driven mostly by supply chain and getting adequate parts, adequate fully populated kits to assembly lines in a smooth manner. And because the supply chain crisis has certainly smoothed out. But I think equally importantly, our investments in supply chain management, not only in our own staff, but process improvements with our CMs, that's dramatically improved the linearity of build. So that's much less of a factor now. With a few hotspots -- and the last comment I'll make is while Rex commented on continued limitations, the limitation ceiling keeps rising. It's just that the growth rate has continued to rise. So we maintain some limitations because we have to mitigate limitations on a few components that limit us, but we also have to exceed our growth rate. And that's -- I'll remind you, when you're doubling effectively, which is what we did year-over-year. And we had a very consistent growth rate quarter-over-quarter, if you look at a given quarter to the year prior. That's a huge issue. You have to overcome a growth rate and do better on top of that, which we think we're putting in all the mechanisms necessary to do it going into this year.

We'll go next to Steven Fox, Fox Advisors.

I just had one question. After listening to the prepared remarks, I mean, you made a lot of progress on the ecosystem in the past year. And so with a lot of major names, and I'm just curious why at this point, not more on the expand piece of land and expand as opposed to adding smaller customers that on a time line basis, maybe you do better with scaling established customers and also helping improve the margins, et cetera. I was just curious how you would react to that question.

So it doesn't improve the margins because cost of sales is not a component in margins. And with the expand piece is limited by, again, the attach rate to vehicles. So we're expanding effectively with the net new vehicles in the serving sphere of our customers within any geography. And you can't push them past the utilization boundary. They're not going to lean in -- they're not going to -- we can't push the lean in to an arbitrary degree. Also, if you look at the dividend that pays forward, the new customers, the dividend that pays forward. We have an incredibly low churn rate. On customers, and that's been a historical asset for the company. And since we do want to take a -- we don't want to stall our future growth. So we're not going to shift emphasis. We're going to maintain the emphasis on a balance between new customer add and expansion in the similar proportions that we've had before. I will tell you that our channel sophistication is improving continuously. It's something we've invested in since the beginning of the company. And that should, over time, remove a lot of the pressure on both sides of that equation, both the land and the expand. The USPS deal was a good one. That was done in conjunction with one of our distribution partners. And it really helps on an ongoing basis to have partners that are co-investing in big deals like that.

We will now hear from Alex Vrabel, Bank of America.

Just I guess to follow up one more time on this sort of coiled spring idea or the difference landing and expanding growth. I mean, I guess, doubling that back into this idea of operating leverage, when we think about the trajectory here kind of later into the year, early into '24 as you guys get closer to that cash inflection. Is there, I guess, an expand element that sort of helps you out on the OpEx line? I guess I'm just sort of thinking like lower S&M per unit or however you want to think about that, given sort of this dormant fleet story that's sort of waiting in the background, if you will. .

So the way we think about the -- as you referred to it, the effectively the untapped potential in fleet because our customers are vehicle limited in fleet for the most part. As I also mentioned before, but in a different context, we can afford the investment in fleet because it has a lot of commonality with respect to the investment from an OpEx perspective in the balance of the verticals that we go after in the balance of the geographies. Now there are some fleet-specific features that we have to invest in. But for us, it's incremental, very incremental, even the same hardware platforms, sometimes different configuration with same hardware platforms. So where am I going with this? Operating leverage over the year we just closed, we think is pretty phenomenal because it is showing that the trajectory of the OpEx, that's everything from R&D to sales and marketing, G&A, everything is it's on a very different trajectory as we add revenue. We weren't putting the company in peril this year. In fact, we're making some very strategic investments to improve what we think is our long-term ability to have a great customer experience at even larger scale this year. So we think that the continued things that you saw from a directional perspective, in the year we just closed, will continue through this year and Rex made one notable exception in that because the Q1 revenue is seasonally down for the company. You may see a small retreat in operating leverage only in that quarter, but it should return to normal increase in operating leverage or a similar one that you saw in the previous year.

Got it. Very clear. And then just on, I guess, sort of the growth outlook generally, like is there anything that you would sort of think about downstream beyond sort of the utilization rate or just sort of getting vehicles in people's hands, that's constraining you guys today. I'm thinking about utility interconnection, anything that's sort of hampering your abilities that's a little outside of your control that we should be aware of?

So the utility interconnect question is a very good one, and it's hard to model because the utility interconnect delays certainly are there. and they vary depending on the circumstances of the site, right, how much spare capacity is there? And what are you trying to do with that site. What -- the way I think you should think about it is the active ports under management, it normalizes out the pipeline delay from initial order and shipment to actual installation and activation, which we do see variance. We do see a big variance. But because we have a long pipeline with effectively no air gaps, what you see show up today is the result of utility interconnect deadlines that are coming to an end, right, on projects that we effectively sold maybe six months ago in some instances, but then we can't actually ship the product until they actually need it and it goes into the ground. So some amount of delay and if you look at the new port ad rate, you can kind of sort of see the shadows of it. That delay is built into our numbers already.

And everyone, at this time, there are no further questions. I'll hand the conference back to our speakers for any additional or closing remarks.

Thanks for your time today.

And ladies and gentlemen, that does conclude today's conference. Thank you all for your participation. You may now disconnect.