ChargePoint Holdings Inc (CHPT) 2025 Q1 法說會逐字稿

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.

(Operator Instructions)

I would now like to turn the call over to Patrick Hamer, ChargePoint 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 ChargePoints 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, the top line financial results for the first quarter.

In Q1, we delivered what we targeted in our last earnings call.

ChargePoint 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 use significantly less cash than forecasted.

Our non-GAAP adjusted EBITDA loss for the quarter was down to $36 million, which is ahead of plan.

And while these results were positive, they could have been better.

There were two areas where we saw opportunity.

First, we had eight years 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 continued to support our commitments.

We chose to take the inventory and be a reliable partner over working down the inventory balance.

Our inventory continues to gradually normalize, which we expect will take the rest of the year.

Regarding our goal of becoming adjusted EBITDA positive in Q4.

As I said at the beginning of this call, we will drive the organization to deliver on this and our other goals.

We have a clear plan to get there, and we exceeded our internal goal for Q1 EBITDA.

Some key drivers are as follows, large deals that have been booked and will ship later this year.

The deals will be announced by our customers at the time they find best for their respective businesses.

There are multiple initiatives underway that will have a positive impact on COGS, OpEx and margin rich top line contribution.

These initiatives are specific and actionable and are embedded in our quarterly objectives.

I will touch upon some of them in this call.

As demonstrated in Q1, we will continue to reduce OpEx through operational rigor.

We know you rely heavily on our past performance is an indicator of our future results, but I must remind you that we are a new leadership team with a new strategy and a serious commitment to operational excellence.

As our Q1 results demonstrate, we are implementing positive changes that could not have been extrapolated based on our past results.

Moving to the state of the market, it may feel like there's a lot to discuss this quarter and there has been a lot of media coverage in this sector, but the story remains the same.

EV's are selling and people need the infrastructure to charge them.

Various factors cause micro movements within this macro trend line but the trend line continues upward.

According to Bloomberg non tests the EV sales were up 13% compared to the first quarter of last year.

In fact, EV sales at 6 of the 10 best selling OEMs increased 50% or more in Q1.

As a reminder, also, OEMs are reducing projections for EV sales volumes, R&D continues at major global OEMs, including [Honda's] recent announcement to spend $65 billion electrifying their lineup over the next 10 years. [Per our] report from the International Energy Agency titled global EV outlook 2024, from 2022 to 2023 investment announcements in EV and battery manufacturing totaled almost $500 billion, of which 40% has been committed.

Finally, to give commentary about plug-in hybrid scaling faster than pure EVs, we view this as beneficial for ChargePoint.

A plug-in hybrid as a natural stepping stone towards full EV and plug-in hybrids require charging.

Plug-in hybrid buyers are perspective home charger buyers and their adoption is putting utilization pressure on commercial and public chargers.

We delivered nearly [4 million PHEV] charging sessions at workplaces in 2023.

If it has a plug it is supporting our business.

The bulk of our customers and investors are reading summarizes the demand curve for electric vehicles, not demand for chargers against Q1 micro movements on the macro trend line, utilization pressure on the ChargePoint network, which we believe is a key indicator of charger demand and not vehicle demand has never been higher.

In Q1, we saw commercial utilization outpace new charger installation by more than 20%.

This has been building several quarters in a row, which indicates the need for incremental infrastructure to follow.

To communicate this pressure in terms of vehicle adoption.

In 2016, there were seven electric cars for each public charging point there are more than 20 EVs per public charging points.

A new trend we are keeping an eye on is quite intriguing growing cyto sentiment that EV adoption has reached critical mass and they are putting in charging regardless of current or future EV sales phase.

In other words, we believe the correlation between passenger EV sales and charger demand is disconnecting.

We will continue to monitor this with interest.

What has moved from a trend to the norm as hardware and software disaggregation among our largest existing and prospective customers is becoming clear that the industry leaders will supply world-class software to support an entire hardware plus software solution, regardless of who's supplies the hardware.

In North America and Europe, we see continued government support for infrastructure buildout, starting with the US national electric vehicle infrastructure program, results are going well for ChargePoint as of today and inclusive of the proposed award and California announced earlier this week, ChargePoint customers have been successful in winning more than 120 individual NEVI site awards totaling roughly [71 million] in grant opportunities.

As the enabler of EV charging for entities who deploy NEVI funding.

We support NEVI grid applications, but not necessarily named as the awardee by the state agency.

Today, about 30 state DOTs have issued competitive NEVI RFPs and around 20 states have announced for awards, but we continue to support our customers in pursuit of NEVI grants that haven't opened their programs yet as well as those that are on their second or third round of funding.

In the EU of fear the government's alternative fuel infrastructure regulation went into effect on April 13, while not an incentive program a fear sets targets for EV charging deployment and will encourage wider EV adoption.

They will do so by setting standard requirements for charger, hardware and software functions across the entire European Union.

Not only was ChargePoint prepared to ensure our charters are appear compliant.

We helped establish some of the parameters directly with the European Union.

Next step, I'd like to give you an update on our strategic priorities.

As a reminder, last quarter, I introduced our new corporate strategy to you, which is summarized by the four cornerstones of prioritizing our open modular software platform, revamping our approach to hardware development, delivering world-class driver experience and operational excellence.

For each cornerstone I will now relay the demonstrable progress I promised last quarter. in terms of software it has been a busy quarter.

We announced the latest enhancements to our fleet software platform, which include home charging reimbursement for company car drivers, commonly referred to as take-home fleets, transit vehicle preconditioning and a substantially enhanced DY that is currently in its pilot phase.

Most importantly, we made great progress opening our software up to third party hardware in the USA.

We had a good head start on this, thanks to our existing work in Europe.

ChargePoint be energized software, which we sell in Europe to manage entire charging networks has provided industry leading experience managing mixed hardware.

Look for our first hardware OEM announcement in the coming weeks.

In Q4 of fiscal 2024, we received FedRAMP certification of our software, which as mentioned in our last earnings call enable us to sell to the US federal government.

I am pleased to say that this certification is paying off.

We booked seven figures of FedRAMP required revenue in our very first quarter, including a sizable deal with the US NEVI.

Our new approach to the design and manufacturing hardware is also making a difference.

Last quarter we announced our partnership with AcBel Polytech, Incorporated for future hardware.

And in the first quarter, we began actively working on our first project together.

As a reminder, this relationship will bring our products to market faster and at higher margins.

We continue to develop this strategy.

And today I am delighted to announce a second hardware co-development partnership.

We have signed an agreement with strong new win, commonly known as WNC to work on a set of future hardware projects.

And we look forward to a great working relationship with them.

To recap our latest hardware news, we showed our upcoming megawatt charging system at the recent ACT fleet exposition designed for trucking, marine and aviation applications.

This is the most powerful charger we will offer.

Capable of 1.2 megawatts at launch and multi-megawatt charging in the medium term future.

To give an idea of how incredibly powerful this system is our launch spec system, we can power more than 1,000 residential homes through a single connector.

This upcoming connector protocol eliminates a key barrier to the electrification of large-scale trucking, which in turn has the potential to reduce or eliminate the [400 plus million] metric tons of greenhouse gases emitted by that segment.

As we have said before, what is good for our business is also good for the environment.

Our strategic decision to focus on a world-class driver experiences delivered a wonderful solution for our newest partnership.

We have established a relationship with Airbnb to increase the availability of EV charging Airbnb listings across the USA.

To accomplish this, we created a novel solution for Airbnb hosts encompassing the ChargePoint home flex residential charger installation software and support services.

For drivers this will guarantee a charge where they are staying a critical need for EV drivers on a road trip and one not always accomplished at a hotel better yet world-class experience extends to the Airbnb host.

We make their adoption of charging as an amenity near seamless.

Once they answer three simple questions on our website, they have a quote, including installation costs and we can implement charging and as little as two weeks as a turnkey solution.

We are now exploring compelling use cases for this offering outside of the vacation rental industry, which is important for me to call out as one of those actionable margin-rich initiatives currently underway.

Operational excellence is our fourth cornerstone and the area in which our results have surpassed our internal expectations.

We had a good quarter ahead of our plans for cash, gross margin, OpEx and adjusted EBITDA as a result.

We remain discipline, factoring OpEx and margin impact into every decision we make.

This requires a lot of restraint, but has enabled focus and delivered results.

The proof points above outline progress and deliverables under these four cornerstones of our strategy, which we will continue to do as the year progresses.

Moving on to our latest non-financial metrics of note, this is another area of the business, which continually demonstrate scale in the quarter, we reached two amazing milestones.

Most significantly, ChargePoint now offers drivers access to more than 8 million places to charge worldwide across public, private and roaming ports.

For us this is a celebratory milestone, and equally impressive was the fact that this statistic grew approximately 10% in a single quarter.

The other milestone reached in Q1 is that we now have now enabled more than [10 billion] electric miles for our drivers, which is approximately [3.5 million] cross-country trips from San Francisco to New York, our managed port count has grown to more than

[306,000].

Of note, the number of DC fast charger ports under management grew more than 14% in Q1 alone for total or surpassing 27,000 fast chargers under management at the end of Q1.

These statistics should leave you with this key takeaway.

EV adoption is continuing at an incremental phase and our network is scaling along with it as our network grows.

So do our subscription revenues.

I'd like to thank you again for joining us today.

To summarize Q1 the results were positive and we will gain momentum as the year moves on.

If you look at our news and announcements so far in Q2, you will see that momentum is clearly building.

Before turning the call over to our CFO, Mansi, for the financial review, I would like to once again remind you that when we say we will do something we fully intend to do it.

Hopefully, you agree that Q1 was an early proof point of this.

Thank you for your time and ongoing support.

Thanks, Rick.

As a reminder, please see our earnings release where we reconcile our non-GAAP results to GAAP.

Our principal exclusion 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 other.

Network charging systems represents 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 solution into recurring subscriptions.

Other consist of professional services and certain nonmaterial 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 had important verticals from a billings perspective, which approximate the revenue split.

First quarter billings percentages were commercial 63%, fleet 20%, residential 15% and other 3% generally consistent with last quarter.

And Rick mentioned, we continue to see projects pushed out in both commercial and fleet verticals as customers await site readiness and vehicle delivery.

Our whole product continued to sell very well.

And in the first quarter, a significant portion of our home units shipped when equipped with a next connector.

From a geographic perspective, North America made up 81% of first-quarter revenue and Europe was at 19%.

In the US we generated our first sales from the NEVI program.

Turning to gross margin.

Non-GAAP gross margin for the first quarter was 24%, up sequentially from 22% in Q4.

Gross margin was down 1 percentage point year-on-year.

The sequential improvement was largely due to improved subscription margins as well as a larger mix of subscription revenue within overall revenue, which is typical in a seasonally low Q1 with lower hardware sales.

Non-GAAP operating expenses for Q1 were $66 million, a decrease of 22% from $85 million in Q1 last year and a decrease of 11% from $75 million in Q4, reflecting the full quarter impact of the January restructuring and our continued focus on cost management.

Non-GAAP adjusted EBITDA loss for the first quarter was $36 million a significant improvement as compared to a loss of $45 million in the fourth quarter and a loss of $49 million in the first quarter of last year.

This improvement was achieved even with a lower revenue base due to gross margin improvement and reduction in operating expenses.

Stock-based compensation in the first quarter was $22 million, down from $25 million in the fourth quarter and down $2 million year on year due to recent restructuring events.

Looking at cash and cash equivalents, we ended the quarter with $292 million, down from $358 million (sic - see press release, "$314 million") last quarter.

In addition to cash usage to cover adjusted EBITDA loss, cash consumption included a semi-annual interest payment on our convertible bond as well as severance charges associated with our January restructuring.

I am pleased to relay as the $30 million of restricted cash as of April 30, 2024 is now unrestricted.

This leaves only $400,000 restricted of our $292 million cash balance.

As Rick mentioned, inventory balance increased in the quarter as we started to bring up our Southeast Asia based partners.

However, our inventory is primarily made up of finished goods and products that we are actively selling.

We expect to bring this down in the second half of the year as we sell through the finished goods on hand.

Our deferred revenue continues to grow.

This represents payments for future revenue commitments from existing customers and finished the quarter at $235 million, up from $231 million at the end of Q4.

Our $150 million revolving credit facility remains undrawn, and we have no debt maturities until 2028.

We did not issue any shares via the ATM during the quarter.

At the end of the first quarter, we had approximately 425 million shares outstanding.

Turning to guidance for the second quarter of fiscal 2025, we expect revenue to be between $108 million to $118 million, down 25% year on year at the midpoint.

As mentioned in the last call, we expect a larger portion of full year revenue to be generated in the second half.

This is due to the following, normal seasonality of transactional business visibility into large orders booked across both commercial and fee verticals for the second half as well as signs of overall charging demand recovery driven by factors Rick alluded to earlier.

We continue to expect gradual improvement in gross margin as the year progresses as a result of continued cost-down efforts for hardware products and improvements in subscription margins due to operating efficiency of the support organization, combined with automation initiatives underway.

We expect non-GAAP operating expenses to remain relatively flat in the second quarter, but fall further in the second half of the year and we continue to focus on operational efficiency and other cost avoidance measures.

We are committed to be adjusted EBITDA positive in the fourth quarter of this year and plan to achieve that through a combination of accelerated top line growth gross margin improvements as well as operating expense reductions as we progress through the year.

We are well capitalized to achieve this goal.

In summary, we are pleased with the improvement in our overall financial performance, especially the improvement in adjusted EBITDA loss, resulting from improved gross margin and reduced OpEx as well as overall cash management.

And we will continue to focus on these metrics as the year progresses.

With that, I will turn the call back to the operator for questions.

(Operator Instructions) James West, Evercore ISI.

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 was the expected time line for recognizing those sales I know there's been it's some delays and getting the NEVI program underway, which I recognize we all expected at the beginning as its government program and it had to go to the states, but how are you thinking about the rollout and the sales hit in your revenue?

We'll see some this year for sure.

But we expect the bulk of it to be next year.

Okay.

Got it.

And then you announced the new release, a new agreement, a joint development agreement with WNC in your prepared remarks.

I know we had the [AcBel] Polytech announcement recently as well.

Could you maybe unpack the what you're doing there, what the strategy is, how you're realigning your hardware development?

We have a very robust hardware growth road map 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 been 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.

Colin Rusch, Oppenheimer.

Thanks so much, guys.

If you look at some of these utilization rates moving higher and the pressure that you're building around the overall network, can you talk about what you're seeing as precursors to incremental?

Or is there incremental capacity build-out with your customers in particular geographies?

Yeah, Colin, I think in addition to the increasing utilization pressure, as I mentioned in the prepared remarks, we're also seeing this location, 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 to 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 it's complicated and there is it finished goods, how much is components?

How flexible is that inventory?

And naturally 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 is some material and transit, but majority is finished goods and it is made up of products that we are 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 have a follow-up on that offline.

Thanks so much, guys.

Bill Peterson, JPMorgan.

Yeah, hi, good afternoon.

Thanks for taking the questions.

I'm wondering if you've received any incremental inbounds or demand from customers interested in tapping your fast product to (inaudible) search, so tested supercharges business, I shouldn't be too large a chunk of it, it seems like go, have you see the Houston at least the maintenance or the NEVI commercial programs in particular.

Yeah.

Again, the Tesla changes that exactly what happened there so it has been reported on extensively, but I'm not sure if that how accurate it is always.

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 does become available, which is good for us.

And we've also seen some changes in the market in demand in certain areas apparently as a result of the test, the changes in were absolutely and we're capitalizing on those when they come up.

Great.

Thanks for that.

Obviously, you're saying your hardware agreements across the board.

I'm wondering what your how would you characterize any obsolescence risks with their existing inventory?

I mean, are you seeing any signs that customers would prefer to wait for any newer hardware from your partners measure?

Yeah, you offer attack the question is how are you planning to give her the high cost inventory in your existing product lines out 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 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 for taking us up and thank you.

Matt Summerville, D.A. Davidson.

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 margin penalty associated with that.

So as I think about next year under quote a more normalized, no operational situation in that regard how much of an uplift should you get from not having to deal with these issues?

And similarly, I like I've just maybe a little more color on how some of these new Asian manufacturing and development relationships are bearing fruit for you guys and when maybe we really start to see more concrete gross profit improvements.

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 a higher cost basis than we would enjoy if we were building that inventory new today out of one of our Asian factor 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 that.

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-out efforts we've taken both on the materials that go into our products as well as the costs related to manufacturing of those products.

Specifically on our Asian manufacturing partners are 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.

Then -- thank you for that.

And then just as a follow-up, I think you 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 issues 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 charge point that it's resource.

I don't know if he characterizes frequent source constraints, but it's construction delays and delivery of other infrastructure equipment like transformers and switchgears 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.

Chris Pierce, Needham & Company.

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?

Yeah, the reason for that was in Q4, we had a small adjustment in a short 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 the normal trend.

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 of above the midpoint of your top line guidance?

Or is that just a general comment and they've slipped and they weren't necessarily in this quarter?

Our phase hit this quarter, we would have been above range.

But

--

(multiple speakers) in the range where they get in the original guidance or that's getting too deep.

Yeah, so we basically see some deal slippage every quarter.

So we have a guidance methodology that takes into consideration all of that.

So we don't have ensure that we hit the range.

So we did build in some batting for that.

Okay, perfect.

And then just one follow-up and one other question.

One last question.

The right way to think about it is ACT selling restaurants aren't building next-generation products right now.

They're helping you build existing product at lower cost.

And that's why the inventory that you have is the inventory that you sell through this year would in theory without taking any charges against that.

That's the right way to think about it.

Yeah.

Generally speaking, they're building current-generation products as we speak.

There 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 the -- with both partners.

Okay.

Thank you.

Mark Delaney, Goldman Sachs.

Yes.

Good afternoon.

Thanks for taking the questions.

But 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

In January, as we had mentioned in my prepared 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 the second half.

And even as we start emerging from this macro and you slowdown in the first half, we believe that the second half will be even seasonally stronger than past years.

We have factored in a year where confident of the seasonality coming in because of these large deals that we're seeing in our pipeline in all of our verticals that we have read.

On the flip side, we are seeing large federal deals serious pushed out from the first half into the second half.

EVs continues to be strong USPS deal done 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 audio and video that will give us some push.

So all of this is 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.

We're seeing good amount of pipeline buildup by that as well.

Very helpful color.

Thanks very much, Mansi.

And then my other 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 from the Q1 levels of $66 billion.

I think Q2 will stay flattish as we have some mandatory raises in some regions, et cetera.

So that will wash out the cost avoidance initiatives that we will have.

But then in the second half, we have specific plans in mind, one being a reduction in NRE costs or nonrecurring 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 where 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.

Steven Fox, Fox Advisors LLC.

Hi, good afternoon.

Rick, I was wondering if you can go back over the rationale behind the deals being postponed thing.

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 supply chains, worker availability, infrastructure or whether you think it eases or gets worse?

Any color on how how you approach that the construction backdrop in relative to your backlog, if 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 it with their lead times.

So we're holding our assumptions regarding deals that rollover 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 it was already asked about.

It seems like you consistently outperformed across the metrics I don't know what you, is there some overarching theme you had attributed that to when you've 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 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 expected to see that show up in the OpEx number as we move through into the second half of the year.

Great.

That's helpful.

Thank you.

Chris Dendrinos, RBC Capital Markets.

Yeah, good evening, and thank you.

I [asked him] to kick off here.

You highlighted some decent growth in the DC fast charger demand.

I'm curious, are you seeing any pivot and in what customers are demanding?

Is there any changes in, I guess, level 2 versus the DC fast charger product?

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

Got it.

Okay.

And then I mean, hate to beat this one to death a little bit here, but just going back to on the revenue cadence and some of the delays, and I guess, I think you mentioned the delays in product availability for -- I guess, EV availability for customers and then on site cropt on being ready on time.

I guess what gives you confidence that it's going to be there later this year in 2H?

Do you have any, I guess, firming visibility to, I guess, the site being ready or the vehicle 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 seeing 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, just been 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 is based on that anecdotal observation, having personally been an act, I think it looks like the fleet deals vehicles are coming.

Got it.

Thank you.

Craig Irwin, ROTH MKM.

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 and outlook for second half.

And I commend the focus on achieving positive EBITDA before the end of the year.

But 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 -- sorry, in 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've expected to come together in the back end of the year.

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 either in terms of guidance for Q2, well, we have been prudent in our guidance because the macro overhang still exist.

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 does give us confidence for the second half, but in Q2 versus seeing some of the overhang until we're doing the right thing 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 the expanding installations towards the end of the year, number of them have used ChargePoint in the past, will this potentially be a gating factor for you?

I [have] 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 training and time to delivery of the charging here 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.