Release Date: September 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ChargePoint Holdings Inc (CHPT, Financial) achieved Q2 revenue of $109 million, within their guidance range.
- Non-GAAP gross margins improved for the third consecutive quarter, reaching 26%, the highest in nearly three years.
- The company reduced non-GAAP operating expenses by an estimated $38 million annually, including a 15% headcount reduction.
- ChargePoint Holdings Inc (CHPT) continues to expand its partnerships, including new collaborations with Porsche and Hyundai Motor Company.
- The company reported significant growth in managed port count, DC port growth, and active users, indicating strong market adoption.
Negative Points
- Q2 revenue was 28% lower year-on-year due to decreased hardware revenue.
- Fleet revenue was impacted by external factors such as delayed permitting and construction, pushing large deals to future quarters.
- The company provided a cautious Q3 revenue guidance of $85 million to $95 million, reflecting ongoing market uncertainties.
- Inventory levels are expected to remain high for the rest of the year, impacting working capital.
- Despite improvements, ChargePoint Holdings Inc (CHPT) continues to face competitive pressures and market headwinds, affecting near-term growth.
Q & A Highlights
Q: Could you talk a little bit about the target revenue level to reach that EBITDA breakeven and how you see the existing inventory working off and your ability to reduce working capital along the way towards that breakeven level?
A: (Mansi Khetani, CFO) We expect inventory levels to stay high for the rest of the year but should decrease around Q1 or Q2 of next year as we sell through the inventory on hand. For EBITDA breakeven, we need moderate revenue growth next year, which we think is possible due to deals pushing out from this year, increased fleet opportunities, and gradual improvement in the macro environment.
Q: Can you talk a little bit about key areas of investment around the development, particularly in technology?
A: (Richard Wilmer, CEO) We have two major areas of focus: software and hardware. We recently hired a new Chief Development Officer for software, and we expect a lot of exciting innovation in that area. On the hardware side, we are working with co-development partners WNC and AcBel on new products that will be launched in the future.
Q: When do you think we start to see kind of a revenue inflection point based on some of the positives you're seeing in the market right now?
A: (Richard Wilmer, CEO) It's hard to predict, but we are seeing positive signs such as current customers expanding their deployment plans, a significant increase in fleet opportunities, and deals coming back to us after competitors failed to execute. Additionally, workplace EV adoption is growing faster than charger adoption, indicating potential future demand.
Q: How should we think about the impact of Asia manufacturing on gross margins for both Level 2 and DC fast chargers?
A: (Mansi Khetani, CFO) Asia manufacturing will significantly benefit hardware margins, but the exact impact will vary as we sell through existing inventory. We expect gradual improvement in gross margins through each quarter next year. Subscription margins have improved due to cost optimizations and economies of scale.
Q: Can you provide some additional context on the quarter-on-quarter decline in third-quarter guidance?
A: (Richard Wilmer, CEO) We made significant changes to our sales and marketing organization, which has caused some disruption. Additionally, we saw a higher magnitude of deals getting pushed out due to macroeconomic uncertainty, delayed permitting, and extended construction timelines.
Q: How big can the fleet business get over the next couple of years?
A: (Mansi Khetani, CFO) We expect fleet to become a significant portion of our overall revenue, potentially about a third over time. We are already seeing twice the number of opportunities compared to last year, although these deals take longer to close.
Q: Can you provide an update on customers looking to source charging hardware from multiple providers in North America?
A: (Richard Wilmer, CEO) While there is intent to multisource hardware, our investments in support and network uptime have created differentiation, leading some customers to still prefer our solutions. In Europe, we see more brownfield opportunities driving software sales without hardware.
Q: Where do utilization rates stand, and is there any specific level that would trigger additional charging investments from customers?
A: (Richard Wilmer, CEO) Utilization rates are continuing to increase, and we are starting to see this pull through demand for expansion opportunities, especially with existing workplace customers. In hospitality, larger brands are starting to get serious about a brand standard for their entire chain.
Q: Can you expand on the competitive landscape right now?
A: (Richard Wilmer, CEO) The level of competition remains fairly consistent, although some names are changing. We have seen deals come back to us after competitors failed to deliver, and this is happening across home, workplace, and fleet verticals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
