Ladies and gentlemen, good afternoon. My name is Krista and I'll be your conference operator for today's call. At this time, I would like to welcome everyone to the ChargePoint First Quarter Fiscal 2025 Earnings Conference Call and Webcast. All participants' lines have been placed in a listen-only mode to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. 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 first quarter fiscal 2025 earnings results. This call is being webcast and can be accessed on the Investors section of our website at investors.chargepoint.com. With me on today's call are Rick Wilmer, our Chief Executive Officer, and Mansi Khetani, our Interim Chief Financial Officer. This afternoon, we issued our press release announcing results for the quarter ended April 30, 2024, 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 our second quarter of fiscal 2025. These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations. 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-K filed with the SEC on April 1, 2024 and our earnings release posted today on our website and filed with the SEC on Form 8-K. Also, please note that we use certain non-GAAP financial measures on this call, which we reconcile to GAAP in our earnings release and for certain historical periods in the investor presentation posted on the 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 it over to Rick.

Good afternoon, everyone, and thank you for taking the time to learn more about ChargePoint's first quarter fiscal 2025 results. Today, we are going to recap the first quarter's financials, some recent highlights, and discuss the state of the market. We will update you on our four areas of strategic focus, key accomplishments, and new partnerships we have formed. Our interim CFO, Mansi Khetani, will give Q2 guidance in her portion of the call. I want to start by emphasizing that when we say we will do something, we fully intend to do it. My approach as CEO is to lead by example through clarity and accountability, provide regular updates and drive the organization to deliver on our commitments, not our intentions. That said, here are the top line financial results for the first quarter. In Q1, we delivered what we targeted in our last earnings call. ChargePoint's revenue for the first quarter was $107 million, which is above the midpoint of our guidance range. Non-GAAP gross margin was up to 24%, and I am pleased that our non-GAAP operating expenses came in at $66 million, which is down $8.4 million from last quarter and a proof point of the financial prudence I discussed in the last earnings call. Our cash management is a priority and for the second quarter in a row, we used significantly less cash than forecasted. Our non-GAAP adjusted EBITDA loss for the quarter was down to $36 million, which is ahead of plan. While these results were positive, they could have been better. There were two areas where we saw opportunity. First, we had eight figures worth of deals postponed to later quarters, primarily because of construction and infrastructure delays. Second, our inventory was up 13% as we stand behind our valuable manufacturing partners and…

Thanks, Rick. As a reminder, please see our earnings release where we reconcile our non-GAAP results to GAAP. Our principal exclusions are stock-based compensation, amortization of intangible assets, and certain costs related to restructuring and litigation. We continue to report revenue along three lines, network charging systems, subscriptions, and others. Network charging systems represent our connected hardware. Subscriptions include our cloud services connecting that hardware, our Assure warranties, and our ChargePoint as a Service offering, where we bundle our full stack solutions into recurring subscriptions. Other consists of professional services and certain non-material revenue streams. Moving on to the results for the quarter, revenue was $107 million above the midpoint of our guidance range of $100 million to $110 million. This was 8% lower than the fourth quarter, reflecting the expected seasonal slowdown, and 18% lower year-on-year due to lower hardware revenue. Network charging systems at $65 million accounted for 61% of first quarter revenue. This was down 12% sequentially due to the impact of seasonality and down 34% year-on-year, in line with our expectations. Subscription revenue at $33 million was 31% of total revenue, essentially flat sequentially and up 27% year-on-year. Other revenue at $8 million was 8% of total revenue, flat sequentially and up 54% year-on-year. Turning to verticals, we report verticals from a billing perspective which approximates the revenue split. First quarter billing percentages were commercial 63%, fleet 20%, residential 15%, and other 3%, generally consistent with last quarter. As Rick mentioned, we continue to see projects pushed out in both commercial and fleet verticals as customers await site readiness and vehicle delivery. Our home products continue to sell very well, and in the first quarter, a significant portion of our home units shipped were equipped with a NACS connector. From a geographic perspective, North America made…

Thank you. [Operator Instructions] Your first question comes from the line of James West with Evercore ISI. Please go ahead.

Hey, good afternoon, Rick and Mansi.

Hi, James.

Hello.

Rick, maybe first question for me on the significant number of NEVI wins that you've had so far, which should turn into new grants and sales here, what's the expected timeline for recognizing those sales? I know there's been some delays in kind of getting the NEVI program underway, which I recognize we kind of all expected in the beginning as it’s a government program and it had to go to the states, but how are you thinking about the rollout and the sales hitting your revenue?

We'll see some this year for sure, but we expect the bulk of it to be next year.

Okay, okay, got it. And then you announced the new, or at least a new agreement, a joint development agreement with WNC. In your prepared remarks, I know we had the Kinpo polytech announcement recently as well. Could you maybe unpack kind of the what you're doing there, what the strategy is, how you're realigning your hardware development?

We have a very robust hardware roadmap and a variety of new products that we're very excited to bring to market and adding more hardware development bandwidth to the overall effort is clearly beneficial to what we're trying to accomplish. So we've added WNC as a second partner, in addition to AcBel Polytech, to increase that bandwidth. And we have them each focused on certain areas of specialization that will allow us to bring some really exciting and compelling market -- products to market as we move into the future.

Got it. Thanks, Rick.

Your next question comes from the line of Colin Rusch with Oppenheimer. Please go ahead.

Thanks so much, guys. If you look at some of the utilization rates moving higher and the pressure that's building around the overall network, can you talk about what you're seeing as precursors to incremental orders or incremental capacity build out with your customers in particular geographies?

Yeah, hi, Colin. I think in addition to the increasing utilization pressure, as I mentioned in the prepared remarks, we're also seeing this dislocation, especially in commercial charging, between the sale of EVs and the demand for chargers. I think in areas where there's reasonable EV penetration, you're seeing institutions that want people to come to their building, putting in chargers now because they know there's a critical mass of EV drivers out there that they need to attract to their business or their institution. So you've got the utilization pressure going up. You've got this recognition that if I don't have EV chargers in my parking lot, some people I care about aren't going to come to my business. Combined is what's starting to show some demand in the commercial market for chargers that may not directly correlate with EV sales.

That's super helpful. And then thinking about inventory levels and what you've just added to the inventory, how should we be thinking about overall run rate on what you're going to be carrying and what this incremental inventory build, what is constituted in there? Is it finished goods? How much is components? How flexible is that inventory? And actually, we see that trend through the balance of the year.

Yeah. Hi, Colin. So it's mostly finished goods in the inventory right now. There's a little bit of raw material. There's some material in transit, but majority is finished goods. And it is made up of products that we're actively selling, all next-gen products. We review inventory very very religiously every quarter and it's all live inventory actively selling products in there right now.

Okay. I'll follow up on that offline. Thanks so much, guys.

Your next question comes from the line of Bill Peterson with JPMorgan. Please go ahead.

Yeah, hi. Good afternoon. Thanks for taking the questions. I'm wondering if you've received any incremental in-bounds or demands from customers. Interesting to have in your fast product charger. [Technical Difficulty] So Tesla superchargers business, I've heard the big chunk of their team has let go. Have you seen the increased demand to say, NEVI or commercial programs in particular?

Yeah, again, the Tesla changes, exactly what happened there, some of it has been reported on extensively, but I'm not sure how accurate it all is. So some of it's speculation, but from our perspective, there's been some clear benefit as a result of those changes. We've had access to some good talent that has become available, which is good for us. And we've also seen some changes in the market and demand in certain areas, apparently, as a result of the Tesla changes and we're absolutely capitalizing on those when they come up.

Great. Thanks for that. Obviously you're expanding your hardware agreements across the board. I'm wondering if you're -- how to characterize any sort of obsolescence risk with your existing inventory? I mean, are you seeing any signs that customers would prefer to wait for any newer hardware in their partner's measure? Or are you offering attractive pricing? How are you planning to get rid of the high cost inventory in your existing sort of product lines ahead of the newer products?

So I didn't catch the entire question clearly, Bill, but I'll do my best based on what I understood. So the level of inventory we have is something we will continue to work down as we move through the course of the year. We've got a lot of focus, as we've mentioned multiple times, not only in this call, but in prior calls around operational excellence. And one area of focus really is around managing inventory, as Mansi mentioned. So we've got, again, I think a very strong process in place now, such that we don't drive excess inventory. What we're working through is inventory that we have on hand, plus inventory we've committed to take from our valuable manufacturing partners. And we expect it to take the rest of the year to work through that and get down to what we would consider a normalized inventory in both our -- on our balance sheet as well as with our manufacturing partners.

Okay, thanks. So, I'll take the rest offline. Thank you.

Your next question comes from a line of Matt Summerville with D.A. Davidson. Please go ahead.

Thanks. To that last point, the fact that this inventory normalization you're looking at is going to take the better part of this fiscal year, I would imagine there's some sort of margin penalty associated with that. So as I think about next year, under “a more normalized” operational situation in that regard, how much of an uplift should you get from not having to kind of deal with these issues? And similarly, I'd like to get just maybe a little more color on how some of these new Asian manufacturing and development relationships are sort of bearing fruit for you guys and when maybe we really start to see more concrete gross profit improvement.

Yeah, your first question was very insightful, Matt. Thanks for that. And there's, I don't know if I would call it a penalty on gross margin, but it's just that definitely we're deferring optimal gross margin or optimal product costs. We're working through inventory on some product lines that was built at higher cost basis than we would enjoy if we were building that inventory new today out of one of our Asian factories or even one of our existing factories because we continue to drive costs down on the materials that go into our products in addition to the overall cost of manufacturing them. So we expect again that inventory to be worked through by the end of the year. And at that point, we'll realize all the benefits of the cost down efforts we've taken, both on the materials that go into our products, as well as the cost related to manufacturing of those products. Specifically on our Asian manufacturing partners, both now AcBel Polytech as well as WNC, are in production for us. And the benefit not only is the cost structure of Southeast Asia where they're both located in manufacturing for us, but almost more importantly is the localized supply chain we can now access in that part of the world. Southeast Asia has been building high technology products for almost 50 years now, and the local suppliers there are very capable of building high quality, highly reliable parts at very cost effective prices. If you look at some of our manufacturing we've done up to now outside of Asia, many of the parts that go to those factories come from Asia. So not only do we have a richer way to access the Southeast Asian supply chain capabilities, but we're also going to reduce lead time and minimize logistics costs because the parts are going to be much closer to the factories.

And then -- thank you for that. And then, just as a follow-up, I think you had mentioned in your prepared remarks, you had $10 million or more in revenue that basically pushed to the right due to resource constraints, I'll call that. And I guess I'm wondering if that constraint issue is that something that is more acute in nature or more chronic? Is that something that's going to get worse before it gets better? If you can maybe just talk through that a little bit.

So it isn't resource constraints on behalf of ChargePoint, Matt. It's resource, I don't know if you'd characterize it as frequent source constraints, but it's construction delays and the delivery of other infrastructure equipment like transformers and switch gears to sites that are under construction. That's largely what we see causing deals to move out from quarter to quarter are delays with site readiness and site construction.

Got it, thanks.

Your next question comes from the line of Chris Pierce with Needham & Company. Please go ahead.

Hey, good afternoon. What's the right way to think about subscription revenue being flat quarter-over-quarter after the step-up we saw in the fourth quarter?

Yes, the reason for that was, in Q4, we had a small adjustment in shore revenue, typical year-end adjustment which did not reoccur in Q1. So if you normalize for that, you would have seen a gradual improvement in line with normal trends.

Okay, perfect. Thank you for that. And then just following up on the last question, the eight figures of deals, is the right assumption that they would have hit this quarter and you still hit the midpoint above the midpoint of your top line guidance, or is that just a general comment and that they've slipped in, they weren't necessarily in this quarter?

If they had hit this quarter, we would have been above range. But now they've moved into...

Were they in the range? Were they in the original guidance, though, or that's getting too deep in the weeds?

Yeah, so we basically see some kind of deal slippage every quarter, right? So we have a guidance methodology that takes into consideration all of that. So we kind of ensure that we hit the range. So we did build in some kind of padding for that.

Okay, perfect. And then just one to follow up on one other question, one last question. So the right way to think about it is, AcBel and Wistron aren't building next generation products right now, they're helping you build existing products at lower cost and that's why the inventory that you have is the inventory that you're able to sell through this year in theory without taking any sort of charges against it. That's the right way to think about it?

Yeah, generally speaking, they're building current generation products as we speak. They're also, we're also co-developing next-gen products with them and in some cases there's prototype builds underway now for those next-gen products with both partners.

Okay, thank you.

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

Yes, good afternoon. Thanks for taking the questions. You mentioned you have some bigger programs you expect to ship for in the second half of this year. Can you give us a sense of how much revenue you expect these larger programs to amount to in terms of the pickup in revenue?

Generally, as I mentioned in my preferred remarks, this year we're going to see a much more normal seasonality like we've seen in prior normal years with a majority of our revenue coming in in the second half. And even as we kind of start emerging from this macro end use slowdown in the first half, we believe that the second half will be even seasonally stronger than past years. We have factored in -- we're confident of the seasonality coming in because of these large deals that we're seeing in our pipeline, all the verticals that we have. On the fleet side, we're seeing large FedRAMP deals, deals pushed out from the first half into the second half. E-bus continues to be strong. USPS deals are in there. On the commercial, we're seeing some NEVI funded deals coming into the second half, and workplaces picking up. On the residential side, our residential product is doing well. We just announced the Airbnb deal. That will give us some push. So all of this is kind of in the pipeline for the second half. In addition, we have new products like the pantograph that we've announced that's launching in the second half. So we're seeing good amount of pipeline built up for that as well.

Very helpful, color. Thanks for that, Mansi. And then another question was on OpEx, came down to $66 million on a non-GAAP basis this quarter. I think you said it could fall further, I believe on a dollar basis in the second half of the year. So I was hoping to better understand where OpEx dollars could go to on an absolute basis in 2H? Thanks.

Yeah, we're not specifically guiding to OpEx in the second half, but I do expect that OpEx will come down. So from the Q1 levels of $66 million, I think Q2 will kind of stay flattish as we have some mandatory raises in some regions, et cetera. So that will kind of wash out the cost avoidance initiatives that we will have. But then in the second half, we have specific plans in mind, one being reduction in NRE costs, non-recurring engineering costs, as we transition more and more engineering over to our Asia partners. And in addition to that, we have a lot of different ways planned. Generally what we saw in Q1 was, we're seeing fiscal discipline across the entire company and this is showing amazing results. So we've -- we overachieved our plan in Q1 and so we're really confident that we'll achieve what we have planned for the second half.

Thank you.

Your next question comes from the line of Steven Fox with Fox Advisors LLC. Please go ahead.

Hi. Good afternoon. Rick, I was wondering if you can go back over the rationale behind the deals being postponed. I think the question we're trying to get at is whether this is something that we should think of as an ongoing situation, even as your sales grow because of where we are in sort of supply chains, worker availability, infrastructure, or whether you think it eases or gets worse. Any kind of color on how you approach sort of the construction backdrop in relative to your backlog? And then I have a follow up.

Yeah, good question, Steven. I think as Mansi alluded to, we've got a buffer in place where we account for this every quarter and we're not planning for it to go down. We are not aware of any reasons that would allow construction to accelerate or other infrastructure gear that these sites rely on to come down dramatically on with their lead time. So we're holding our assumptions regarding deals that roll over from one quarter to the next fairly constant as we move through the year.

That's helpful commentary. And then just on the beat in the quarter, I mean, outside of the inventories that was already asked about, it seemed like you consistently outperformed across the metrics. I don't know what you -- is there some overarching theme you would attribute that to when you -- given all the changes you made organizationally, et cetera, or is it just little singles and doubles here and there? Thanks.

Easy to summarize it up under this big headline, kind of operational excellence, which is very easy to say, but it's a lot of work to do that. And we've got nine different areas that we focus on specifically. And essentially what another way to talk about this is we have the right people talking about those nine different topics at the right frequency, making sure that we're making all the right decisions and managing our resources extremely efficiently. And again, we're really impressed with the results that our team produced in the first quarter. And we know there's more opportunity left to be had. As Mansi alluded to, we expect to see that show up in the OpEx numbers we move through into the second half of the year.

Great. That's helpful. Thank you.

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

Yeah, good evening and thank you. I guess maybe to kick off here, you highlighted some decent growth in the DC fast charger demand. I'm kind of curious, are you seeing any kind of pivot in what customers are demanding? Is there any changes in, I guess, Level 2 versus that DC fast charger product?

No, I don't think we're seeing any demand changes between the AC and DC. I think what we're seeing is new products like the pantograph that Mansi mentioned now in our portfolio, creating demand that wasn't there for us before on DC for the e-bus applications.

Got it. Okay. And then, I may hate to beat this one to death a little bit here, but just kind of going back to the revenue cadence and some of the delays. And I guess I think you mentioned delays in product availability, I guess EV availability for customers and then site prep being ready on time. I guess what kind of gives you confidence that it's going to be there later this year in 2H? Do you have any, I guess, kind of firm visibility to I guess these sites being ready or the vehicles being delivered?

So, again, on the commercial side we're starting to see this dislocation between vehicle delivery and the desire for our commercial customers to continue to expand or put chargers in their parking lot. And we don't see any reason for that trend to discontinue. Another way to put it is, if you go to a local business in an area where there's reasonable EV penetration and not another EV was ever sold in that area, they would still make sure they had enough chargers in their parking lot to attract the audience of people in that area they care about that they want to come to that building. So I think that's good news for us. On the other hand, I think you're saying some really exciting product offerings either announced or coming this year on the passenger vehicle side. I've seen some really cool vehicles in our parking lot recently that have just come onto the market. So I'm optimistic about that. On the fleet vehicle side, I personally don't have any statistics on forecasted delivery for fleet vehicles, but anecdotally for any of us that were at the ACT Expo in Las Vegas a couple of weeks ago, just the sheer breadth of selection and vehicles that are in production and available for fleets was very impressive. So it's based on that anecdotal observation, having personally been in ACT, I think it looks like that the fleet vehicles are coming.

Got it, thank you.

Your next question comes from the line of Craig Irwin with Roth MKM. Please go ahead.

Good evening, and thanks for taking my questions. So, Rick, several times on this call you've expressed confidence in the rebound in revenue, the rebound in outlook for the second half. I commend the focus on achieving positive EBITDA before the end of the year. When we look at your guidance for the July quarter, the second fiscal quarter, $108 million to $118 million, at the midpoint you're down 25% year-over-year, which is a deterioration from 18% contraction in the January quarter, or sorry, the April quarter. Can you maybe reconcile for us this modest deterioration as far as what you're giving us for an outlook versus what you expect to come together in the back end of the year? Is there is there a small piece that's maybe moving around on some of this political uncertainty or some of the customers recalibrating with Tesla exiting the market? Any color there would be helpful.

Yeah, I can take that Craig. So in terms of guidance for Q2, we have been prudent in our guidance because the macro overhang still exists. In Q2, while we're seeing signs of the environment improving in our pipeline build, the RFP volume and RFP success rate internally within the business, this gives us confidence for the second half, but in Q2 we're still seeing some of the overhang until we're doing that, I think, by being prudent in the guidance.

Okay, excellent. And then my follow-up question is regarding fleet specifically. So can you maybe give us color on whether or not utility work and site preparation is important and essential for you to recognize revenue if we see some of these very large fleet customers move forward with expanding installations towards the end of the year? A number of them have used ChargePoint in the past. Will this potentially be a gating factor for you?

I don't know if I'd consider it a gating factor. It is a factor that dictates the timing of deployment and therefore revenue. There's no question that fleet customers that are undergoing significant construction, try and time the delivery of the charging gear with the completion of the site construction work. So we are -- our revenue and our shipping is dictated by that to a certain extent. So that's the way it is in this industry and we work with that and we make our -- we build our forecasts on that factual information.

Thank you for that. Well, congratulations on the progress with the cost reductions.

Thanks, Craig.

That concludes our question-and-answer session. And with that, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.