ChargePoint Holdings Inc - Ordinary Shares - Class A Aktie

Hello, everyone. Thank you for joining us and welcome to the ChargePoint second quarter fiscal 2027 earnings call. After today's prepared remarks, we will host a question-and-answer session. [Operator Instructions] I will now hand the conference over to [ Audrey Dion ], Head of Investor Relations. [ Audrey Dion ], please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ChargePoint's second quarter fiscal year 2027 earnings results. This call is being webcast and can be accessed on the Investor section of our website at investors.chargepoint.com. With me on today's call are Richard Wilmer, our Chief Executive Officer, and Mansi Khattri, our Chief Financial Officer.

This afternoon, we issued a press release announcing results for the quarter ended July 31, 2026, which can be found on our website. We'd like to remind you that during the conference call, management will make forward-looking statements, including our outlook for the third quarter of fiscal year 2027. These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations.

These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. For a more detailed description of certain factors that could cause actual results to differ, please refer to our Form 10-Q filed with the SEC on June 8, 2026, 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 Investor section of our website. And finally, we'll post a transcript of this call on our Investor Relations website under the quarterly results section. Thank you. I will now turn the call over to our CEO, Richard Wilmer.

Good afternoon, and thank you for joining us. Q2 was an exceptional quarter for ChargePoint that demonstrates why we believe we are the definitive leader in intelligent electrification and e-mobility. We meaningfully exceeded the top of our guidance range, delivered record gross margins, and achieved essentially 0 cash burn. We also began shipping early access units of Express Solo, which is the first product based on what we considered to be the fastest, most advanced DC charging architecture ever developed. In partnership with Eaton, we are building the intelligent energy infrastructure of the future that will supercharge the energy transition, including autonomous vehicles and electric fleets. We are building for what is coming, not just what is here today.

We delivered revenue of $116 million in Q2, a decisive beat above the top end of our guidance range and our strongest quarter in recent history. This result represents 18% year-over-year growth and also marks our fourth consecutive quarter of year-over-year growth. More than 80% of the Fortune 50 are ChargePoint customers, and many of the leading fleet electrification companies in the world run on our platform. This is the result of disciplined execution against our 3-year strategic plan, operational excellence, and our steadfast commitment to innovation.

Our gross margins hit an all-time record as a public company this quarter. Part of this included non-recurring tariff refunds, but even excluding that benefit, the normalized gross margin still set a new record. That is the business model working exactly as designed, sustained pricing discipline, relentless focus on cost, operational excellence, and the compounding power of our higher-margin software and subscription revenues. As Express Solo and our compelling new single-port AC product enter the market, we expect this trajectory to accelerate. Our industry-leading full-stack intelligent electrification platform is being validated as a driver for both growth and strong margins.

We also achieved effectively 0 cash burn in Q2. Our capital-light model is a structural competitive advantage. We grow revenue, expand margins, and do not consume significant cash on capital assets to do so. We are on a clear trajectory towards adjusted EBITDA-positive. Our operating expenses this quarter reduced further compared to the prior quarter, and we expect another reduction in the third quarter. This has been accomplished without compromises to execution or the scope of what we do. Guided by our excellent leadership team, AI is fundamentally changing how we operate.

Our AI initiatives are compressing software development cycles, automating business processes, and enabling us to accomplish more with less. We are continuously adapting our organizational structure as a result, which means we are flatter with broader spans of control. This new operating model leads to an organization that is simultaneously accelerating growth, delivering faster, and becoming more efficient. That combination will drive sustainable operating leverage that compounds over time. A core pillar of this third year of our 3-year strategic plan is driving growth. We are executing with our fourth quarter of sequential year-over-year growth, and now we aim to accelerate further. Accordingly, we are focused on revenue enablement.

We are building a world-class sales and marketing engine with a significant emphasis on Europe, and we're putting elite leadership in place to run it. A critical recent addition to our team is John Saffrett, who has joined ChargePoint as Executive Vice President and Managing Director of Europe. John is a proven enterprise operator with deep regional expertise and a track record of building and scaling organizations across European markets. Our pipeline is expanding, and customer confidence in our platform has never been higher. Express Solo, the first product based on what we consider to be the most advanced DC charging architecture on the planet, will be a key driver for accelerating growth.

We co-engineered Express with Eaton with an uncompromising focus on performance, scalability, energy density, and economics that we believe is unmatched. Early access units have begun shipping, and the demand signal from customers has been exceptional. Early access units are substantially committed, backlog is building, and the market is telling us exactly what we expected. Express is the product the industry has been waiting for. In terms of performance of Express, let me put a number on it. We recently demonstrated a 600-plus kilowatt charge on a passenger vehicle at our headquarters. We charged the car from 10% to 80% state of charge in just 11 minutes.

I want to be clear that is not a theoretical benchmark, that is not a laboratory result. It is a live demonstration on a production system based on the Express architecture that was developed internally by ChargePoint down to every single component. This is the future of refueling, and ChargePoint intends to lead it. ChargePoint Express is a platform that unlocks entirely new markets for ChargePoint: ultra-high-power highway corridors, autonomous vehicle fleet depots where 24/7 uptime is mission-critical, and premium CPO deployments where speed, reliability, and density are non-negotiable.

And looking further ahead and in partnership with Eaton, we think Express's architecture positions us for emerging opportunities in adjacent markets that will require exactly the kind of intelligent, high-density power delivery that Express was designed to provide. We are building for the next decade, not just the next quarter. We expect that Express will be a significant revenue driver as it scales as we enter into FY '28 and have started taking orders and building backlog. Globally, the long-term case for EV adoption continues to strengthen, and we are seeing meaningful real-time market dynamics that support continued growth for ChargePoint.

In North America, the economic argument for EV ownership has never been stronger. CNBC reported that average U.S. gas prices were approximately $4.10 per gallon as of late July, up roughly 31% from 1 year ago. That cost differential has a direct impact on consumer purchasing decisions with Cox Automotive reporting used EV sales reaching 42,923 units in May, up 5.5% month-over-month and 24.7% year-over-year. New EV models continue to enter the market across a widening range of price points, expanding the addressable population of EV buyers. And once consumers go electric, they stay.

According to J.D. Power's 2026 U.S. Electric Vehicle Experience (EVX) Ownership Study, 96% of EV owners would consider purchasing or leasing another EV even without the now-expired federal tax credit. In Europe, there are even stronger tailwinds. EV sales climbed 33% year-over-year in July, with year-to-date growth of 28%. France, Germany, and Britain posted EV sales growth of 81%, 46%, and 43% respectively in July alone. In the U.K., electrified vehicles filled every spot on Auto Trader's top 10 fastest-selling used car rankings in July, which is the first time no petrol or diesel models appeared on that list.

European subsidies continue to support demand. Regulatory tailwinds are durable, and ChargePoint's position in Europe, strengthened by John Saffrett's appointment and our growing install base, positions us well to benefit from this sustained growth. Let me frame the growth opportunity. We see 4 vectors that will define ChargePoint's trajectory, and we have a defensible position in every single 1. First, autonomous vehicles. Every major AV platform will need reliable, high-uptime, high-throughput charging infrastructure at scale. ChargePoint is already a charging partner for leading AV companies, and Express was purpose-built for this use case.

Second, truck electrification in Europe. The commercial vehicle transition is accelerating under regulatory mandate, and our product portfolio and established European presence give us a first-mover advantage. Third, Metro Transit. Our transit wins are proof points, and we see significant opportunity in this market. Fourth, CPOs demanding super-fast charging. Express fundamentally changes the economics for CPOs operating high-utilization sites. The 600-plus kilowatt capability is the best in the world, and it creates a value proposition that our competitors simply cannot match today. Our customer wins this quarter are strategic proof points.

We announced the continued expansion of our long-standing relationship with Mercedes-Benz, extending our work together to simplify fleet electrification for Mercedes commercial customers in the U.K. and Germany. When 1 of the most iconic automotive brands in the world chooses to go deeper with ChargePoint, that tells you everything you need to know about the quality and reliability of our intelligent electrification platform. This relationship continues to grow in scope because we deliver. We announced a deal with Optimus Energy Solutions, a leading CPO in the U.S., to grow its charging network by more than 200 DC ports across the Southeast.

Optimus chose ChargePoint because when you are scaling a high-utilization network, there is only 1 platform that delivers the full stack: hardware, software, network management, and a rich suite of services. That is ChargePoint. We announced a deal with Onvo, a Pennsylvania-based travel stop company, to deploy DC fast charging solutions at a dozen travel stops along major highways in the Northeast. Highway corridor charging is a strategically important and growing segment, and Onvo's deployment represents the kind of high-visibility, high-utilization infrastructure that benefits most from ChargePoint's platform capabilities.

We announced a significant deployment at Portland International Airport in Oregon that is redefining how airports approach rental car electrification. Airports are an underserved and rapidly evolving market for EV infrastructure, and this installation serves as a model for how ChargePoint can address that opportunity at scale. In Rhode Island, our partnership with the Office of Energy Resources, which dates back to 2014, continues to expand. More than 140 charging ports across approximately 95 sites are now active. We recently deployed a new DC fast charging site in Newport. And additional DC fast charging sites are expected to come online as the year progresses.

This long-tenured government partnership is a strong example of how ChargePoint builds durable multi-site infrastructure programs at the state and regional level. In partnership with Eaton, we also commenced a new collaboration with the Santa Monica Department of Transportation to enable the agency's transition to a 0-emission Big Blue Bus fleet by 2032. As part of Santa Monica's $56 million investment in electric transit fleet infrastructure, the project combines ChargePoint's DC fast charging solutions and powerful fleet software with Eaton's electrical infrastructure and energy management solutions to power 1 of the nation's most ambitious public transit electrification programs.

Big Blue Bus plans to deploy 130 DC fast charging ports exclusively featuring the Express Plus line of ChargePoint equipment powered by Eaton. I want to spend a moment on our partnership with Eaton because it is becoming 1 of the most powerful strategic alliances in the energy infrastructure space. This is a deep co-engineered technology and go-to-market partnership that is creating products and solutions neither company could build alone. We are building jointly, selling jointly, and winning jointly across product development, go-to-market execution, and customer-facing solution design.

The joint solutions we have developed address a massive unmet need in residential, commercial, and industrial deployments, where electrical infrastructure, intelligent power management software, and charging hardware must work together as 1 integrated system. No other partnership in this industry can offer what ChargePoint and Eaton deliver together. Customer interest in our joint offerings is accelerating. The pipeline of co-developed opportunities continues to build, and we are converting that pipeline into wins with customers who recognize that this integration is a genuine advantage.

As the world's leading intelligent power management company, Eaton brings scale, global distribution, and 100-plus years of electrical infrastructure expertise. ChargePoint brings the most intelligent and performant charging platform, the best software, and relentless product innovation. Together, we are redefining the category. Turning to our key performance indicators, software-only managed ports, defined as third-party hardware ports managed by the ChargePoint software platform, grew to 138,750 from 135,000 last quarter. Share of ports exceeding 30% utilization at least 1 day in a month, an important leading indicator for expansion demand, reached 141,000 AC ports compared to slightly over 100,000 AC ports in April 2026.

This increase is partly attributable to a change in how utilization is calculated for individual session times. Monthly active users, the equivalent of our user community, increased to 1.55 million versus 1.48 million active users at the end of April. ChargePoint now manages approximately 422,000 ports, up from 406,000 ports last quarter, including more than 46,950 DC fast chargers, up from 44,650, and more than 150,000 ports located in Europe. Globally, ChargePoint drivers have access to almost 1.5 million public and private charging ports versus slightly over 1.4 million last quarter.

In summary, our Q2 results further reinforce that ChargePoint is executing against our 3-year strategic plan. We beat significantly on revenue at $116 million. We delivered all-time record gross margins and effectively burned 0 cash. We began shipping Express, the most advanced DC charging architecture in the world, to meet strong early demand. We put elite leadership in place in Europe with the addition of John Saffrett, and we continue to transform our organization with AI at the core, and we expanded strategic relationships with customers across CPO, fleet, government, transit, and automotive segments, including more than 80% of the Fortune 50.

ChargePoint is a capital-light, AI-enabled, intelligent electrification platform with the most powerful and differentiated solutions in the industry. Growing recurring software and services revenue, the strongest strategic partnership in the space with Eaton, expanding operating leverage, and a central role in the electrification of transportation, autonomous mobility, and the broader energy transition. The fundamentals of our business and our market are compounding. The opportunity ahead of us is exceptional, and ChargePoint is built to capture it. Thank you for your continued support. I'll now turn the call over to Mansi.

Thanks, Rick. As a reminder, please refer to our earnings press release for a reconciliation of our non-GAAP results to GAAP. Principal exclusions are stock-based compensation, amortization of intangible assets, and certain costs related to restructuring, settlements, and non-recurring legal expenses. Second quarter revenue came in at $116 million, above our guidance range of $100 million to $110 million, up 14% sequentially and up 18% year-over-year, marking our fourth consecutive quarter of year-over-year revenue growth. The beat was mainly due to stronger-than-expected hardware shipments, particularly higher home sales.

Breaking that down, network charging systems revenue was $63 million, or 54% of total revenue, up 18% sequentially, and up 25% year-over-year. Subscription revenue was $44 million, or 38% of total revenue, up 7% sequentially and up 10% year-over-year. Other revenue was $9 million, representing the remaining 8%. Turning to verticals, which we report on a billing basis, second quarter billings percentages were commercial 69%, fleet 11%, residential 10%, and other 11%. Geographically, North America accounted for 82% of revenue, with Europe at 18%.

Non-GAAP gross margin was 38%, up 7 percentage points sequentially and up 5 percentage points year-over-year. Results included approximately $4 million of tariff refunds recognized as a 1-time reduction to cost of goods sold. Excluding this benefit, non-GAAP gross margin would have been approximately 35%, reflecting a 3 percentage point sequential improvement and a 2 percentage point increase compared to the prior year period. The underlying margin expansion reflects continued operational improvements across the business supported by economies of scale. Looking ahead, we expect gross margins to remain generally in line with these normalized levels for the balance of the fiscal year.

Hardware gross margin was 21%, up 13 percentage points sequentially, benefiting in part from the previously discussed tariff refunds, underlying operational efficiencies, and mix of products sold. Subscription gross margin rose to 59% on a GAAP basis and was higher on a non-GAAP basis, demonstrating the strong profitability profile of our subscription revenue and continued leverage within the model. Non-GAAP operating expenses declined to $52 million from $54 million in Q1, representing a 4% sequential reduction and an 11% decrease year-over-year, reflecting our continued focus on cost management.

In late July, we completed a company-wide cost optimization initiative that is expected to drive additional operating expense reductions. As a result, we expect non-GAAP operating expenses to be below $50 million on a quarterly basis for the rest of the year. Non-GAAP adjusted EBITDA loss narrowed significantly to $5 million compared with a loss of $19 million in the prior quarter and $22 million in the second quarter of last year. Stock-based compensation was $11 million, flat sequentially and down from $18 million in the second quarter of last year. Our inventory balance decreased nicely this quarter to $179 million from $204 million in the prior quarter as we sold through inventory on hand.

We have consistently highlighted the cash flow benefits associated with reducing inventory, and that dynamic played out as expected this quarter. As inventory levels declined, working capital was released and converted into cash, helping to fund operations while preserving our liquidity. We expect inventory to continue declining over the course of the year, which should further improve working capital efficiency and support additional cash generation. On the cash side, we ended the quarter with $96 million of cash unchanged from Q1, reflecting essentially 0 cash usage during the period. This outcome reflects the combined benefit of improved adjusted EBITDA and strong execution on our inventory reduction initiatives, as mentioned previously.

Turning to guidance, for the third quarter of fiscal year 2027, we expect revenue of $105 million to $115 million, representing 4% year-over-year growth at the midpoint. In summary, this quarter demonstrated significant progress across our key financial and operational objectives. We delivered sequential and year-over-year revenue growth, achieved record high gross margins, and reduced operating expenses, resulting in improved profitability, while lowering cash usage through disciplined execution and cash management. We are committed to building on this momentum and driving continued progress towards sustainable growth, greater operating leverage, and profitability in the quarters ahead. With that, we'll open the call for questions.

We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Colin Rusch with Oppenheimer.

Guys, can you talk about the sustainability of margins? You know, obviously, you made a ton of progress here, and I just want to get a sense of how much of that is related to a little bit better revenue here moving forward through mix, you know, in the growth subscriptions, and how we should think about that trajectory and margins on a go-forward basis.

Thanks for the question. So overall on a normalized basis, margins improved to 35%. And this was mostly due to the improvement in hardware margins. Subscription margins also improved sequentially because of economies of scale. But on the hardware margin side, the increase was because of scale, because we did have higher revenue, so there was better absorption of fixed costs. But there were also improvements in warranty costs, inbound freight costs, warehousing costs, just overall improvements in all operating costs across the board. So going forward, you know, we expect margins to be in the normalized level.

You know, I forgot to mention product mix was an important factor as well. We did sell more of the higher-margin AC products this quarter compared to the previous quarter. So that gave us a boost to the margins. And so going forward, if mix remains the same, we should expect overall margins to remain around this normalized level. If mix shifts a little bit, maybe we end up 1 point lower here or there.

And then in terms of the go-forward technology development, now that you've gotten yourself reset here and on track. How should we think about the product development cycles and cadence of new introductions? Is this kind of an 18-month to 24-month sort of cadence, or are there going to be incremental adjustments that we can think about on an ongoing basis?

I think, Colin, the innovation drumbeat is going to continue as far into the future as we can see. The Express Solo product that we announced is just the first version of the product off the new DC architecture. There are variants of that product targeted at different vertical markets and use cases that will go into production over the coming year and a half. And then alongside that, we've also got new innovation coming on all of our different products from our single-port AC product through our dual-port AC products and even future roadmap around DC beyond the Express platform.

Super helpful. Thanks so much, guys.

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

I wanted to ask maybe just about, like, customer refresh cycles and, you know, how much of the demand or product sales that you all are making maybe on the commercial side of things are new customers versus, you know, customers that are refreshing their equipment and if it's fairly low, when does that maybe start to kick in? Thanks.

I mean, typically, you know, business model is land and expand. So a large percentage of the billings in each quarter comes from prior customers, mostly expansion. There is some refreshment of older equipment, but the stuff that we've had on the ground isn't that old. So it's still largely new equipment purchased by existing customers. Obviously, we've also been adding a lot of new customers on the fleet side, and on the commercial side as well, and in Europe as well.

Got it. And then maybe just on the cash flow side of things, would you expect cash flow for the remainder of the year to maybe slightly improve just given continuation of inventory declines and working capital benefits, or just maybe broadly, how are you thinking about cash flow trends here going forward? Thanks.

I know there are lots of puts and takes, you know, on the cash flow forecast. So it's difficult to say with certainty, but you know, we're confident overall that inventory is going to continue to come down and that is going to continue to release cash. As we did this quarter, inventory came down and funded our EBITDA loss, our capital expenses, our other working capital requirements, resulting in essentially 0 cash usage. So going forward, inventory will come down. It'll continue to be a source of cash. And then EBITDA loss, we've already brought down nicely. So that further reduces the usage of cash.

So, you know, it... This all kind of supports our progress towards cash flow breakeven, as we've noted previously, could position us to generate positive cash flow later in the year. But again, there are a lot of moving parts.

Got it. Thank you.

Your next question comes from the line of Christopher Pierce with Needham. Your line is open. Please go ahead.

If we think back maybe 1 year or so ago, my timing might not be exact, but the kind of, there was this idea that inventory would be cleared, which we're starting to see this quarter. And then you had sort of moved into Asian manufacturing partnerships and those partnerships would drive higher-margin equipment sales. I just, I kind of want to understand, is that still something we should be expecting? I know Mansi talked about what we should expect the second half of the year, but is that still sort of part of the bull thesis here or is Express Solo sort of kind of overwhelmed that? I just want to understand sort of why we don't hear about that as much anymore.

I think we've largely executed our transition to Asian. It's fully executed in fact, Christopher. So the benefits on the existing portfolio of products that we gained from our lower-cost manufacturing strategy are now moving through the P&L and it's partly contributing to the positive margin results you saw us report for the Q2 quarter. Going forward, our product designs are very, very, very cost-focused. So I would expect further margin benefit from the new hardware products like Express going into the market because the fundamental cost structure that is dictated by the design, not what you do in manufacturing, although we're taking advantage of that, is just fundamentally better than what we've had in the past.

Okay, perfect. Thank you. And then, Mansi, I think you said higher home charging sales helped sort of drive a portion of the revenue beat. Can you sort of isolate, should we assume that's in Europe, and if we see continued gas prices, you know, where they are, should we think of that as potential upside to guidance, or is that too 1-time to sort of think about, you know, how the moving pieces kind of drive?

So this, you know, higher home sales was a phenomenon in Q2, and this was all in North America. These tend to be lumpy around large sale days like Prime Day, Black Friday, etc. We don't expect that bump to happen again in Q3. That's why you see kind of the prudent guidance. And then there were also other areas on the revenue side like higher professional services. We sold more regulated credits. There's an increase in other revenue, as you see. So there were a lot of other factors driving revenue higher than guidance in Q2.

Okay, perfect. Thanks for clarifying that. And then just lastly, I think, Richard, in your remarks, you talked about adjacent markets for Express Solo. Can you just sort of give us some big highlights from what markets we should be thinking about?

Stay tuned for more news on that as we take these initiatives to further maturity.

Okay, fair enough. Thank you, everyone.

Just a reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. Your next question comes from the line of Itay Michaeli with TD Cowen. Your line is open. Please go ahead.

Richard, I know on the last call you mentioned how, you know, AI initiatives were helping on a lot of fronts, but including on the reduction of OpEx. I'm curious as we saw the reduction in Q2 and the second half outlook, to what extent are those initiatives coming through and maybe kind of how to think about that even prospectively beyond this year.

I think the impact is now quite significant, quantifiable in terms of OpEx. We've done some really impactful work around business process automation that's allowing us to get more done with less and then repurpose people that had done those jobs into other roles that are more, you know, externally facing value-add rather than just running business process. We've also now doubled our productivity on the software engineering side. We're turning out twice as much code as we were previously, thanks to AI. It's also starting to turn up in our products and our services. So the way we support our customers, the amount of support calls that we take with live human beings is being influenced positively by AI. So it really is impactful across the board.

Also interestingly is having an effect on the way we're set up organizationally and that it's allowing our spans of control to increase without compromising the quality of our leadership or the work, the amount of work we get done. So we're able to really flatten the organization, increase the pace of decision-making through a flatter organization without compromising the quality of our leadership. Recognizing the quality of the work or demanding that people work in an inordinate amount of hours to do their jobs.

That's very helpful. And maybe as a follow-up on just on gross margins, it sounds like the kind of normalized gross margins about 35% in the quarter. Maybe just remind us on kind of the path to get to maybe your target 40% just from here on kind of what has to happen to go up from 35% to about 40%.

There's a number of drivers around that, Itay. Some of those are on the services side. I think there's also opportunities around pricing on the software side that we're beginning to roll out through the course of this year. And then probably the biggest driver is going to be just the fundamental cost structure of the new hardware platforms that we're putting into the market like Express Solo.

Your next question comes from the line of Craig Irwin with ROTH Capital Partners. Your line is open. Please go ahead.

First, I should say congratulations on getting out ahead of your cost structure and really handling that over the last couple of years. It's been hard work, and with revenue uptick, it's nice to see the rewards. So definitely want to make note to say that. Mansi, can you talk a little about the gross margin benefit in the quarter from the tariff refunds? Can you maybe unpack for us what the impact of tariffs was in your April quarter? And will we see a similar tariff benefit? And is that factored in your guidance for the October quarter that we're currently in?

Thanks for the comments, Craig. So on the tariff question, we had incurred these tariffs over the last gosh, 3, 4 quarters since they were implemented. We got a refund this quarter and majority of that, which is about $4.2 million, was reflected in Q2's numbers as a 1-time reduction to cost of goods sold. Um, so if you, you know, margins on a non-GAAP basis were 38%. If you take that $4 million out, they were 35% on a normalized basis.

Going forward, you know, we don't have many more, you know, we don't have too much refund remaining. There's a little bit here and there. And as it comes through and as we sell through, those products will reflect them on the P&L. But the guidance for continued margins around that normalized level does not include any expectation of further tariff refunds.

Okay, so then just to be crystal clear on that, you seem to be expecting a reduction in tariff benefit in your upcoming quarter, but continued fundamental improvement in the product portfolio, in the margins you're generating, cash impact, et cetera. Is that a clear way to put it?

Yes, that is correct.

Perfect. Thank you very much.

Your next question comes from the line of Ryan Pfingst with B. Riley Securities. Your line is open. Please go ahead.

You talked about the early access shipments of the Express Solo. Can you just remind us how we should be thinking about that product ramping here in the coming quarter?

Good question. So production is starting now. We've got backlog that we're fulfilling with what we call early access units. If you happen to be in our neighborhood, come charge on 1 that is installed at the back of our building and charging cars every day. We also have 1 installed at an Eaton Innovation Center in Pittsburgh. So if you're in that neighborhood, feel free to go charge at that point. That charger and additional shipments are going out now almost every week or every other week of these early access units and then we ramp into production starting now with production inventory available in our fiscal Q4.

Okay, I appreciate that. And then as you guys ramp, is there anything to be aware of from a supply chain perspective or otherwise that could be a potential strain for you guys as we expand here?

Generally speaking, we've got this under control. The supply chains have been affected by the AI data center build-out. Obviously, memory prices have increased. We've recognized all of that in our product costs and pricing forecasts. Silicon carbide modules are also in demand due to the data center build-out, but we've got strong partnerships there and commitments to the supply chain to get what we need. So we're feeling pretty confident that we've got supply covered for the demand we see now.

Thanks, Richard.

This concludes today's conference. Thank you for participating. You may now disconnect.

Good afternoon, everybody. This is day 1 of the JPMorgan Natural Resources Conference. My name is Mark Strouse. I cover clean energy and power infrastructure here at JPMorgan. This next session is with ChargePoint. So very happy to have Rick Wilmer, President and CEO; and Mansi Khetani, CFO. Welcome. Thank you very much for joining.

Thanks, Mark.

Thank you.

So maybe, Rick, if I can just kind of start off, maybe just spend -- for folks that are less familiar in the audience, just give us a quick intro on what ChargePoint is all about.

ChargePoint is one of the largest EV infrastructure providers in the world. And we serve all the different submarkets within the EV space, including home charging, commercial charging and fleet charging with our geographic focus being here in North America and in Europe.

Great. Okay. So let's see. I think you've now delivered 3 consecutive quarters of year-over-year revenue growth. Can you just talk about what's giving you confidence that this is durable? What are kind of the biggest risks that you see sustaining that momentum through the back half of the year?

Yes. I think we've turned a corner. The industry went through a pretty significant down cycle when I think the public realized it would be harder to switch to EVs from a driver behavior standpoint than originally anticipated. And some of the auto OEMs didn't get the right product into the market.

Tesla had addressed the market, obviously, much earlier than the traditional OEMs and really targeted the affluent buyer that was climate conscious. That was a fairly saturated market. So when the traditional OEMs came out with the vehicles that attack the same market, the transition just didn't happen.

Then when we elected the current administration and all the government incentives and/or penalties to transition to clean energy went away. That was a second blow. The worst of it is definitely behind us. And what's happening now is that free market forces are starting to drive the market because a lot of the government incentives, at least here in North America, are gone.

And what's most fundamental to that is that EVs, I think a lot of people are realizing are just a better product than a gas car. Completely biased as 100% EV family, but the cost to operate is so much lower, and that gap has only increased as the price of gas has gone up as a result of the Iran conflict. The driving experience is better. I've had my current vehicle for well over 2 years and never taken it for service. And for us, at work, we provide free charging as an amenity for our employees who haven't paid for fuel in years either. So it's a superior product, and I think that the general public is starting to recognize that.

And what's helping in that regard is, one, the penetration of EVs continues to increase, albeit gradually here in North America compared to Europe. But you've got a lot of vehicles that -- EVs that were leased that are coming into the market as used cars. So you've got now cars at price parity with an equivalent gas car with the same mileage. So you no longer have a premium to get into an EV if you're going into an EV that's coming off lease as a used vehicle.

You also have a lot of compelling EVs coming into the market now that a lot of the non-Tesla OEMs have learned their lesson about what the market wants in terms of a vehicle. Ford has announced a new low-cost truck platform. Pictures are starting to show up online. You've got a start-up called Slate funded by Jeff Bezos that's bringing a sub-$25,000 small pickup truck to the American market. And a bunch of the Asian OEMs are bringing in some pretty compelling vehicles under $40,000.

So if you want to -- if you're a 2-car family and you want to go EV, you're typically going to do that for your daily driver where you don't have to charge on the road, you can charge at home or charge at work. And now you've got vehicles that are addressing that use case. So I'm optimistic that things are turning around in North America from a vehicle adoption standpoint.

What we're seeing on the fleet side is that's a purely TCO-driven story, where if I can deliver goods or people less expensively with an electric fleet than with a gas-powered fleet, I'm going to switch to electric. And we've seen the availability of vehicles in the fleet space improving. And again, due to the high cost of liquid fuel, the TCO model continues to tip in the favor of EV.

We've also got technology that we've developed ourselves that's going to help that equation. If you look at the TCO model for a fleet, it's driven by the cost of the vehicles, the cost of the infrastructure to charge them and then the cost of the fuel to operate them. And we are at a point where I think the equation is now clearly tipping in favor of electrified delivery vehicles.

In Europe, it's a bit of a different story. You didn't have the turmoil that we had here with the administration change and all the changes to the EPA rules around tailpipe emissions or tax incentives for charging or electric vehicles. Europe has stayed pretty steadfast in their commitment to mitigating climate change. I think the -- again, their lack of fossil fuels and the Iran war conflict has only strengthened their commitment and their urgency to go all electric because they cannot -- they're not energy independent and they're not going to get that true energy independence without a clean source of energy.

So in Europe, we're seeing a very healthy macro environment and a stronger growth profile in Europe. So I'm very excited about a bunch of the new products that we're putting into the market that were built to be global products, not specifically for just North America or just Europe. And we may get to talk about our new DC fast charger here later in the talk, but that product is the first DC product, for example, we're bringing to Europe and early indications are very positive that, that's going to be a winning product in Europe.

Okay. Well, let's go there. Express Solo. Okay. So the early access units are fully committed. How should we think about the production ramp time line, your initial volume contribution to revenue and kind of the margin profile relative to your legacy DC products?

Yes. So let me start off with what the product is. This is a new DC fast charger with a different architecture than every DC fast charger that's been out so far. And it changes the architecture in a way that's extremely beneficial in 2 ways. Number one, it reduces the cost of the product.

So to the question, Mark, about why is this going to be different than our prior products from a margin perspective, it's because the architecture drives lower cost. If you think about a DC charger, one of the key metrics is how much power does it deliver. This is a 600-kilowatt DC box. The cost per watt on this box is very, very competitive and lower than anything we've ever done in the past. So we would expect to generate much better margins on a product like this than we have with our products historically.

But back to the architectural difference, I don't want to go too technical here, but if you think about the grid, the grid is AC. It's alternating current. That's what's in your house, that's what's in your workplace, that's what's everywhere. A car wants DC, direct current. So when you plug a charger into the grid, you're taking the alternating current and converting it to DC, right? When you hear about solar and inverters and microinverters, that's exactly what they do. They're taking solar energy that's DC and converting it to the AC that your house needs, okay? We're going the opposite direction. We're taking the AC and converting it to DC, which is what the car needs.

Then you convert that DC voltage to the DC voltage that the car wants, so it can charge in the most efficient way possible. That is a lot of expensive power electronics to do all that conversion. We have architected it in a way where we minimize the amount of power electronics and we pack it together in a very dense footprint. And it allows us, for example, to integrate clean energy sources like solar or battery energy storage directly into the charger with no inverter because we have a DC grid forming in the charger that allows us to accept storage and solar without any inverter. This is a massive cost reduction.

The other advantage to this design is that it's very small in terms of its physical footprint. And when you talk to an autonomous vehicle fleet, a European charge point operator, a European fleet, Europe, especially where all the dimensions are smaller, the streets are narrower, the parking spaces are smaller, real estate is a premium. And if you can develop a smaller charger that delivers more power than any other charger on the market today, you end up with a very significant advantage in terms of the flexibility to design your parking lot, the cost of construction to put the chargers in. And then again, because of the efficiency of the electronics and being able to directly integrate with battery storage and solar, you're saving a lot on operating costs because you're not turning electricity into heat through all these different electrical conversions that happen in a traditional design.

So we believe this is a very unique design that's got some very significant competitive differentiation. The demand for it is it's completely oversubscribed right now. We've got more demand than we can supply as we begin to ramp this into production. We'll be delivering our first unit probably in about a week or 2, and then we'll deploy a bunch of early access units through into the fall. And then our fiscal Q4 ends on January 31, and our goal is to be delivering production units in our fiscal Q4.

Okay. Have you quantified kind of what your capacity looks like? You said demand is oversubscribed. If you can't meet all of, well, I don't know, your existing footprint, what does that look like on like an annual basis?

So from a capacity standpoint, we've got a lot of flexibility to expand capacity to meet demand. We'd probably be more constrained by supply chain because some of the components that we buy are components that are used in AI data centers. But if we make purchasing commitments further -- far enough in advance, we'll be able to secure what we need to meet the demand that we expect to see on this product. And quite frankly, I look forward to the day where all the stress is on our operations teams to build enough as opposed to our sales teams to sell enough.

Yes. Okay. So kind of tying a couple of things in there. Can you talk about the European business, kind of the -- what percentage of your business that is today in revenue? Where do you think that goes kind of near- to medium-term? And how does Express Solo play into that? I mean you mentioned some of the aspects of that smaller charger and whatnot. What does that do to your mix of business over time?

I think the European mix is going to increase. I talked about within the next 3 to 4 years, getting to 50-50 revenue split between Europe and North America. Today, it's about 80-20, with 80% of being in North America. And I think that is, again, just an artifact of the strength of the European market and their commitment to the transition to clean energy and electric transportation.

And the Express product, I mean, much of that early demand that's been committed is in Europe. The first units will ship next week or 2 to a European company that's a big freight company operating large trucks. So we've got a lot of interest from the European market.

And when you look at just the opportunities in Europe, the number of opportunities that are 10 million plus, the quantity of those is more than what we're seeing in North America. Deals like that exist in North America, but the number of them in Europe is larger.

So just again, overall macro opportunity in Europe looks stronger and Express squarely fits a very important use case in Europe, or 2 use cases, which is, again, fleets and charge point operators that are offering public charging. Both -- a lot of growth in both markets in Europe, and this is really a product that's very well suited for both markets.

Yes. Okay. Can you talk about the Eaton partnership? Yes, we think it's a meaningful differentiator, particularly around the DC grid architecture and the home charging. Can you talk about how you're communicating that value prop to your customers today? Where are you in terms of commercial traction?

So the Eaton partnership was originally catalyzed by innovation. And if we take the product I was just talking about, the Express product, the one we just announced that I just opined on, there's a version of that product that can be a DC-only product. This now doubles the energy or the capacity of that product. You go from a 600-kilowatt product to over 1 megawatt. But if it's a DC-only product, it needs to plug into a DC grid. DC grids are getting built for AI data centers. They're getting built for factories. But they're somewhat bespoke large projects.

So when we realized we could build a DC-only version of this product that even -- that reduced the cost even further for an operator of this product, we knew we needed a partner that was building the grid. And that is how the Eaton partnership formed. It was originally around coupling this, a DC version of this product, which we call the Express grid, with a DC microgrid that would be built by Eaton. And this will be an architecture, a footprint that will be coming for charging sites all over the world because it's so cost-efficient, both from a CapEx and an OpEx standpoint.

What happened since then is all kinds of other opportunities for innovation opened up with Eaton. For example, Eaton has a product line called Able Edge, which are smart breakers for home panels. What that allows us to do with our new home charger is in a very cost-effective way, enable the vehicle to home use case, which in the U.S., I think the primary need is my power goes out and I want my house to run from my car, not from a noisy generator that's burning liquid fuel in my yard.

So with the AbleEdge smart breakers and our new home charger, we're able to put V2H capability in along with home charging without a panel upgrade, without a service upgrade. Today, in many cases, in the U.S., if you want to put EV charging in, not even vehicle-to-home, you need a panel upgrade or a service upgrade. So that's another good example of innovation where we should be able to reduce the cost of getting home chargers in, especially with vehicle-to-home capabilities very effectively.

Another example, Eaton has solid-state transformer technology that comes off a medium voltage transmission line. If you can go from medium voltage transmission into a solid-state transformer and down to charging, you're again touching new benchmarks of capital costs that are lower than anything that's out there today. So there's other areas of innovation we're working on with Eaton around energy management beyond what I've talked about, but there's just a whole slew of opportunities to bring value to the market that we couldn't do by ourselves.

Great. All right. So you've talked about AI as a driver of OpEx efficiency and product innovation. Can you talk about what you're seeing as the most measurable impact today and kind of what the product road map looks like for customer-facing AI features?

Yes. So there's really 4 areas of AI focus within ChargePoint. And we're the only EV charging company in Silicon Valley. So we're at the epicenter of the AI innovation engine that we're living in, and we're very committed to adopting AI. So we've got 4 areas of adoption. One is customer support. We're using it to handle support cases and not have human beings have to take those calls, and that's saving a significant amount of money. That capability is ramping up.

The second area is just business process automation. So for example, in Mansi's area, our CFO, we were able to reduce our accounts receivable team from 20 to what, 4 or 5 because we're able to automate the accounts receivable process with AI tools. That applies to many repetitive business processes across the country, order management, order entry, accounts payable, accounts receivable, there's a multitude of examples.

The third area is in just code generation. So we're an Anthropic user. We used their latest models to generate code. And I was -- a fascinating story. We ran -- we used an AI agent to run a competitive analysis. And we found a start-up company that was in the fleet space that did software-only that had some advantages over what we were offering. We were able to use an AI agent to analyze their solution versus ours. It produced a very coherent, concise competitive analysis report. I was on a flight home from Europe. I took that report, and I personally wrote a PRD to cover the most important feature gap we had versus this competitor. I walked into the office Monday, got with our Chief Software Development Officer. He brought a couple of engineers into the room. We vibe coded that feature live in a conference room with the CEO writing the product requirements document, and it went live to the market in 13 days. That feature would have been a 6- to 9-month development in the old way.

We jokingly called that project Mission Impossible because we did something that would not have been possible prior to the advent of AI. We now have Mission Impossible 2 kicked off. Mission Impossible 3 is about to get kicked off. So the pace of innovation, especially on software that we're able to deliver with AI is remarkable, and we've seen it firsthand.

And then the final area, which you asked about, Mark, is how is it showing up in our products. We've got a multitude of features. In fact, Mission Impossible 2, which I won't talk about in detail because it's not launched, is an AI-driven feature. But we've got other capabilities coming, things as simple as dynamic pricing. If you're offering EV charging to a constituency and you're charging for electricity and you want to be profitable or break even depending on what your use case is, you can change pricing as a function of demand. And you can use AI algorithms, AI calculations to figure out what the optimal pricing is to maximize the profitability of your site while keeping your drivers happy and not driving them away either because the prices are too high or because all the stalls are filled up with cars. We've got a whole bunch of examples of AI use cases coming in the products beyond just the example I mentioned here.

Okay. So I think within the Level 2 market in North America, you've got roughly 70% market share. Just kind of talk about what you've seen during this cyclical downturn that you saw kind of competitors exiting? What kind of -- how does that set you up for market share gains now if you are right that we are coming out of this?

Yes. I think the Level 2 market, which we also refer to as the commercial market, can really be broken into 2 major segments: retail and non-retail. Non-retail is primarily workplace, but you can think about educational institutions as non-retail. And then retail is retail. It could be this hotel, a parking garage, a restaurant, a shopping mall, you name it. If they want you to come there and spend money, that's retail.

The thing that ties that whole market together is that charging is a discretionary purchase. It isn't core and mission-critical to their business the way it is in fleet. So when you're selling commercial charging, why is the customer putting that in? Well, the reason they're putting that in is to attract the people they care about to come to that place. If it's at work, it's a way to retain employees or attract climate-conscious employees that are really smart that you'd like to have come work for your company. If it's a hotel like this and you're trying to compete for occupancy or bookings, if you offer EV charging, you may have an advantage versus your competitor across the street. So level -- that's what Level 2 charging is all about.

And the reason I tell that story that way is because we build the whole ecosystem, which is what makes our solution so powerful. So we have the largest community of drivers in the U.S. on the ChargePoint app. We call that an e-mobility service provider solution. So if we're providing the charging to this hotel, for example, and we have the largest community of drivers that we can make aware that this hotel has charging available to them, we can now create synergy between our driver community and our business community that is purchasing commercial chargers.

Then you get into all sorts of interesting ideas on how do we help the InterContinental hotel drive their core business through charging? If you're a rewards member, can you get free charging with your hotel stay? Can you reserve a charger as a rewards member? Are there -- there's a myriad of ideas. And again, Europe is further ahead here. We've got European customers that have implemented charging at retail stores that can tell you down to the second, how much longer a shopper stays if they're charging at the store? And how much more the -- how big -- how much bigger the basket size is?

So for retail, in particular, charging is becoming a more and more important way to drive the core business of the retailer because the number of EVs on the road is going up, especially in the coastal parts of the country where penetration is pretty high. So we've got the solution and the driver community to help these businesses drive their core business through EV charging. And I think that's only -- that value prop is only getting stronger as the number of EVs on the road goes up.

Okay. Any questions? Not yet. Can you talk about the software-only managed ports? I think you've got about 135,000 now. How central is that to the kind of the longer-term model? And do you think that dilutes or enhances the value of the integrated hardware-software platform?

That's a great question, Mark, and it kind of relates to your last question. So we have a lot of non-ChargePoint hardware that we manage with our software. So if you go back to the software stacks in this business, there are really 2. One software stack manages the charging hardware. How do you set pricing? Do you allow for people to reserve chargers? Do you make it unaccessible and a private charger like at a workplace where you don't want the public coming in? That's the charging software system. We call it the Charging Management System, or the CMS. The other big software stack is what manages the community of drivers. I've referred to that earlier, the eMSP.

So what's happening back to the market consolidating is you've got big customers that have a lot of chargers in the ground from hardware competitors that have gone out of business or going out of business or exiting a region. And they still have useful life. And that customer who spent their hard-earned capital dollars putting their chargers in wants to continue to use them. Our CMS, the software that manages the hardware is capable of managing third-party hardware.

So it's a key business KPI for us because if you see that increase, it's telling you 1 of 2 things: we're capturing market share from competitors that are going away, or we're winning customers that have what we call brownfield implementations where they've got prior hardware in the ground, they want to expand with us, but they don't want to lose what they've invested in that prior hardware. So they're using our software to not only manage the new ChargePoint chargers that are going in the ground, but all the legacy hardware that they have in the ground.

Got it. Okay. Can you talk about gross margins? So I think they're near record levels. Can you walk through the bridge from the current 32% pro forma gross margins to kind of the longer-term target? What are some of the milestones that we should be tracking?

Sure. So we're about -- 40% of our revenue is subscription-based revenue, which runs north of 60% gross margin. And then the other 60% is hardware, which if you do the weighted average math, it's not very good gross margin. So I referred -- I mentioned this earlier when we talked about the new Express DC product. We have, as part of our focus, really put a lot of effort and energy into designing cost-effective hardware. It is a major priority for us. It's a higher priority focus than it's ever been. And we expect to earn much better margins on hardware going forward.

So if the subscription revenue continues at its current levels, maybe with some incremental improvements, but we take a significant step-up on hardware margins, which we fully expect to do, I'd like to see us get north of 40% gross margin going into the future as the new hardware starts to become a significant percentage of our overall revenue, moving up from the mid- to low 30s where we are today.

Okay. And then similar kind of on your -- maybe just kind of talk about your cash flow on your -- or your EBITDA kind of catalyst that we should be looking for to kind of inflect into profitability? Any commentary on when you think that could potentially occur?

The sooner the better. We're pushing towards that goal very, very aggressively. And the math for us is very simple because we're a capital-light company. Revenue times gross margin has got to be bigger than OpEx, and we're very actively managing all of those lines. We just talked about the gross margin line. We expect to see revenue growth, particularly as a result of our new products and the fact that they're going to be targeting the European market where we have not had DC products available previously.

And we're very, very focused on OpEx. In the last quarter, we reported our OpEx came down through the utilization of AI and just continued relentless focus on spending. I think you'll continue to see our OpEx trend down for a while before it reaches a steady-state level. So working all 3 lines in the equation very aggressively to get to that EBITDA milestone as quickly as possible.

And if I may add, from a cash perspective, for us, because we're a capital-light business model, we don't really have much CapEx. EBITDA is a very close approximate for cash and cash usage. And so as Rick mentioned, as EBITDA loss comes down, we should need to use lesser and lesser amount of cash.

And at the same time, we are bringing inventory down. In Q1, we brought down inventory by a significant amount. As we continue on that path and continue to bring inventory down through the year, that will release working capital. That helps cash. And so we expect to be cash flow break-even and start generating positive cash as early as later part of this year, earlier than getting to EBITDA break-even.

Got it. Okay. With that, we can wrap. Rick, Mansi, thank you so much.

Thank you.

Thank you. But if you want to chat, we're here. Great. Thanks for listening. I love talking about our story.

Great. Thanks, everybody.

Ladies and gentlemen, thank you for joining us, and welcome to the ChargePoint First Quarter 2027 Earnings Call.

[Operator Instructions]

I will now hand the conference over to Audrey Dion, Head of Investor Relations. Audrey, please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ChargePoint's first quarter fiscal 2027 earnings results. This call is being webcast and can be accessed on the Investors section on our website at investors.chargepoint.com. With me on today's call are Richard Wilmer, our Chief Executive Officer; and Mansi Khetani, our Chief Financial Officer.

This afternoon, we issued a press release announcing results for the quarter ended April 30, 2026, which can be found on our website. We'd like to remind you that during the conference call, management will make forward-looking statements, including our outlook for the second quarter of fiscal 2027. 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 2, 2026 in 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 reconciled 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 post a transcript on this call on our Investor Relations website under the Quarterly Results section. Thank you. I will now turn the call over to our CEO, Rick Walmer.

Good afternoon, and thank you for joining us. Q1 was a strong start to the fiscal year and an important proof point in ChargePoint's evolution from a business anchored and disciplined operational execution to a business also driving growth. ChargePoint's Q1 revenue was above the top end of our guidance range, extending our return to year-over-year growth to a third consecutive quarter. We sustained our strong gross margins, continued to reduce operating expenses as well as advanced hardware, software, AI and partnership initiatives that will define the next phase of this company. As we enter the third year of our 3-year plan, we have become a stronger, leaner, more focused platform company that we believe will deliver durable growth. Our model is capital-light by design. We sell charging hardware, software and services to institutions that want to offer charging services, but we do not own the charging assets. Our customers own and operate the infrastructure while ChargePoint provides the complete technology platform that powers it.

Turning to Q1. We delivered revenue of $102 million, above the top end of our guidance range. This reflects improved demand, continued customer confidence in our platform and disciplined execution across the company. It also marks the third consecutive quarter of year-over-year growth. Non-GAAP gross margin remained strong at 32%, driven by pricing discipline, operational efficiency and the durability of our software-led capital-light business model. As our new products enter the market in volume later this year, we expect overall gross margins to increase to new record levels. These gains will be sustainable due to improved cost structures, greater operating leverage, higher-value software and services and a business model that becomes increasingly efficient as we scale.

We are now 1 quarter into the third year of our 3-year strategic plan. That plan rests on 4 pillars: Capital-efficient hardware innovation, software leadership, world-class driver experiences, and operational excellence. Year 3 is about driving growth and doing so profitably.

We have added a key new executive to put maximum focus on this next phase of our strategy. Jyothi Swaroop has joined ChargePoint as our Chief Marketing and Growth Officer, leading our global go-to-market and growth strategy. Jyothi brings extensive experience leading global marketing, sales and business development and revenue operations for enterprise technology companies, including Oracle, Dell EMC, Veritas and DDN. He has built and skilled go-to-market organizations in highly competitive markets and brings a rare combination of enterprise technology depth, go-to-market rigor strategic storytelling and growth leadership. We are thrilled to have him join the team.

We are seeing renewed customer interest driven by our new products, rising utilization across our installed base, improving market conditions, and customers increasingly favoring scalable, reliable platforms. A central driver of this next phase of growth is Express Solo, the world's fastest stand-alone DC charger. Express Solo delivers up to 600 kilowatts to a single vehicle and is the first product based on our new DC architecture, which we believe is superior to any other solution in the market. It provides approximately 40% higher power density than competing solutions in the industry's smallest footprint. Early access units are already fully committed reinforcing that Express Solo aligns squarely with customer demand for high-power economical, compact and scalable infrastructure. Alongside product innovation, artificial intelligence is becoming a meaningful advantage for ChargePoint, not only for our own operations, but increasingly in the software capabilities we deliver to customers.

We are deploying AI across 4 major areas: software development, customer support, AI-enabled product capabilities and business process automation. AI is already producing measurable operational improvements as evidenced by our Q1 OpEx performance. And we expect to achieve further OpEx benefits as we continue to aggressively drive enterprise-wide adoption of AI. The bigger opportunity is customer-facing. Upcoming product releases will expand the role AI plays and how customers manage, optimize and monetize charging infrastructure.

We are building AI into our software platform to help customers operate charging infrastructure more intelligently, which means better diagnostics, faster issue resolution, smarter energy management, improved uptime, reduced costs and better decisions about when and where to expand capacity. And this is all happening at a pace previously unimaginable. We are demonstrably accelerating software delivery through the use of AI. AI at ChargePoint is not theoretical, it's accelerating the pace of innovation, enriching our product offerings, reducing operating expenses and enabling us to scale revenue without increasing costs.

Let me now turn to the broader EV market. We believe the transition to electrified transplantation remains inevitable and new market dynamics are causing the transition to accelerate. First, the cost advantage of operating an EV compared to an internal combustion vehicle continues to widen as gas prices rise. Second, EV purchase prices continue to converge with internal combustion vehicles while consumer choice is expanding. Used EVs are now near price parity with comparable gas vehicles and the abundance of used EVs is increasing significantly.

Furthermore, new EV models, including offerings below $35,000 are entering multiple segments. These 2 dynamics are translating directly into increased EV demand. Industry data shows sustained month-over-month growth in both new and used EV sales, along with rising inquiry volumes across major car shopping platforms. Europe remains strong, where sales of fully electric cars in Europe's main auto markets jumped by almost 1/3 in the first quarter of 2026. This is important because once drivers go electric, they rarely return to internal combustion. EV retention rates consistently exceed 90%. Every EV sold becomes a long-term driver of charging demand.

We believe the opportunity ahead is larger than the market currently appreciates and charging will be embedded into workplaces, retail sites, fleet depots, multifamily housing, hospitality locations, commercial facilities, logistics hubs, energy systems and future autonomous vehicle operations. This AI-enabled mobility, autonomous transport and distributed energy infrastructure scale, reliable charging will become increasingly mission-critical. Notable customer wins in Q1 included securing our largest transit fleet order to date, delivering DC fast charging solutions to support Santa Monica's big blue bus fleet of e-buses as part of the transit agency's goal of total electrification by 2032.

We also expanded our relationship with OBE Power to deploy 2,500 charging ports this year at multifamily residences. This is significant because OBE has developed a scalable program featuring ChargePoint solutions at little to no cost to landlords. In Canada, we deployed more DC fast charging equipment with ChargePoint operator, Papillons. And in the U.S.A., we began a relationship with Citibank who selected us to provide their workplace charging solutions.

Our partnership with Eaton remains a significant strategic advantage. We continue to collaborate closely across product development and go-to-market execution, expanding our reach into new customer segments and accelerating adoption of next-generation AC and DC solutions. There are strong early signals validating the innovation we are bringing to market with Eaton, creating unmatched differentiation. This partnership strengthens our innovation road map while enhancing scale, credibility and execution velocity.

In terms of key performance indicators, including the new ones we introduced last quarter, software-only managed ports defined as third-party hardware ports managed by ChargePoint software grew to 135,000 from 130,000 last quarter. The share of ports exceeding 30% utilization on at least 1 day and a month, which we think is an important leading indicator for expansion demand remains slightly over 100,000 AC ports in April 2026.

Monthly active users, the equivalent of our user community slightly increased above 1.48 million active users at the end of April. ChargePoint now manages approximately 406,000 ports up from 385,000 ports last quarter, including more than 44,600 DC fast chargers up from 41,000 and more than 145,000 ports located in Europe, up from 131,000.

Globally, ChargePoint drivers have access to over 1.41 million public and private charging ports versus 1.37 million last quarter. In summary, Q1 reinforces that ChargePoint is executing against its strategy. Growth has returned. Margins remain strong and will get better. AI is having a multifaceted beneficial impact. New products are entering the market soon. The long-term market fundamentals continue to strengthen. ChargePoint is becoming a stronger, more focused, more disciplined company built for the next phase of electrification. Investors should value ChargePoint as a capital-light software-led platform company with powerful differentiated hardware, recurring software and services, strong partners, operating leverage and a central role in the energy transition.

Thank you for your support. I'll now turn the call over to Mansi.

Thanks, Rick. As a reminder, please see our earnings press 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, settlements and nonrecurring legal expenses. We believe the non-GAAP figures give a better indication of the underlying performance of the business. Revenue for the fourth quarter was $102 million, above our guidance range and up 4% year-on-year. Q1 marked our third consecutive quarter of year-on-year revenue growth. Network charging systems at $53 million accounted for 52% of first quarter revenue and was up 2% year-on-year.

Subscription revenue at $41 million was 40% of total revenue and was up 7% year-on-year as our total installed base continued to grow. Other revenue at $8 million was 8% of total revenue.

Turning to verticals, which we report from a billings perspective, first quarter billings percentages were: Commercial, 71%; residential, 8%; fleet, 14%; and other, 7%. In terms of geography, North America made up 80% of revenue and Europe was 20%. Non-GAAP gross margin came in at 32%, up 1 percentage point year-on-year.

Hardware gross margin improved by 1 percentage point year-on-year. Subscription margin declined to 56% on a GAAP basis, but was above 60% on a non-GAAP basis. This was due to lower subscription revenue in Q1 as well as our decision to use existing inventory for repairs rather than building new replacement units and parts. We expect overall margins to remain around this level in the near term.

Non-GAAP operating expenses came down to $54 million from $58 million in Q4 and represented a 4% decrease year-on-year. We remain committed to carefully managing operating expenses and expect further reductions in the second half as engineering efforts on new product introductions taper and prototyping costs begin to normalize.

We saw some impact of these trends in Q1 non-GAAP OpEx. Non-GAAP adjusted EBITDA loss was $19 million. This compares with a loss of $23 million in the first quarter of last year. Stock-based compensation was $11 million, down from $18 million year-on-year. Our inventory balance reduced to $204 million from $215 million in the prior quarter. We expect that inventory balance will continue to go down over the year, freeing up cash. We ended the quarter with $96 million in cash. While Q1 tends to be the quarter with the highest cash usage due to the timing of some large annual payments that typically occur in Q1, this quarter, we also had approximately $20 million of nonrecurring cash payments, including the final payment that was due as part of the debt transaction we announced back in November.

We expect to materially reduce cash usage through the balance of the year with the potential to generate positive operating cash flow later in the year as we continue to sell through existing inventory and improve adjusted EBITDA.

Turning to guidance. For the second quarter of fiscal 2027, we expect revenue to be $100 million to $110 million representing a 7% year-on-year growth at the midpoint. Looking ahead, we remain laser-focused on delivering continued revenue growth, improving operating leverage and accelerating our path to profitability. With that, we'll open the call for questions.

[Operator Instructions]

Your first question comes from the line of Colin Rusch of Oppenheimer.

And congratulations on the progress. I wanted to talk a little bit about the product road map from here, obviously, getting Express Solo launched getting some traction on that in the market is very helpful. You've gone through the redesign of the portfolio. But I'm curious about some of the opportunity with autonomous mobile robots, even some directional IP that you have been applied into solid-state transformers and how you're thinking about expanding the portfolio potentially, particularly given the relationship with Eaton?

Yes, Colin, very good questions and you're on a lot of topics that we think about regularly. We've been very focused on understanding the unique charging requirements for autonomous vehicles, and I'm pleased with the progress we've made in gaining that understanding, and we've got some specific developments underway to address those needs on solid-state transformers, stay tuned for news there. That's clearly an area of active opportunity for us. And then on the Express product road map, Solo is just the first iteration of that product. There are multiple derivative versions that serve different use cases and expand capacity that will be coming out over the next 18 months as we fully build out our product portfolio around that architecture.

That's super helpful. I'll ask some detailed questions off-line. But the shift over to the balance sheet. Mansi, the working capital management this quarter looked like a pretty substantial progress for you guys. Could you talk about the cadence around inventory reduction from here? It's something that's been in the [indiscernible] to see the progress this quarter was encouraging. Just want to get a sense of how we should think about that as we go through the balance of the calendar year.

Yes. So we saw a nice reduction in inventory from Q4, down from $215 million to about $204 million. I believe that inventory will continue to reduce from this level because as we had mentioned before, we had pre-commitments with the contract manufacturers. We're seeing through most of those. And that is 1 of the biggest reasons why we saw inventory come down in Q4. And so this reduction of inventory and the progress we've made, we expect will continue through the rest of this year.

Excellent. The final one for me is just on the supply chain side. Obviously, with the redesigned products, you've targeted some lower cost components and looked at the supply chain. I'm just wondering if there's more opportunity just in terms of some of the component availability here or if we should be thinking about increased tightness just given some of the shifts in the global economy as we move into the balance of calendar '26 and into '27?

Yes. I think from a supply chain standpoint, things look pretty good for us. We've got -- our new products are designed with a much higher focus on low-cost. Express Solo is a perfect example, there will be additional products that exemplify that commitment to low product cost as we announce them moving into the future. From a supply chain standpoint, the one thing we are seeing is pressure on memory for sure, as a result of the data center build out. We've done a good job of navigating that. We've got adequate supply, but we're we're seeing some increases in pricing that we need to offset with productions in other parts of the product.

Your next question comes from the line of Mark Delaney of Goldman Sachs.

Starting with one on the top line. You commented on the better momentum and year-over-year growth continuing in the quarter. Maybe you could talk about what your expectation is about the ability to sustain the better volume growth beyond the first half. You spoke on some of the metrics you monitor like use rates on your installed base and some of the partnerships. So what does it all mean for your ability to sustain the recent revenue momentum?

Yes. I think from a market standpoint, Mark, it's being fueled by the dynamics I talked about in the prepared remarks regarding the overall EV market starting to move forward here in the U.S., largely a result of gas prices being so high, a lot of used EVs coming into the market, coming off lease that are at good price points. We also see a lot of strength in Europe from a macro perspective, which is helping us. And then from an internal perspective, as we move into the second half of the year, and the Express product goes into production, we definitely help -- expect that to start driving growth in both Europe and North America.

Understood. And you made a comment, Rick, about trying to take the products and maybe find new growth vectors, Mansi also talked about finding some OpEx efficiency. So maybe help us better understand how is ChargePoint going to manage its efforts to expand the product set and perhaps look for some of these new markets and the potential cost to do so?

Yes. So in terms of new markets, Express is the first DC product we've ever built that's intended to serve the needs in Europe. So that will be all new for us from a DC standpoint and I mentioned in the prepared remarks that the early access units were committed, a bunch of those are committed in Europe customers that we already have largely as part of our de-energized offering -- our software platform offering. So very optimistic about the potential for Europe. And then here in North America, there's plenty of demand from existing customers for DC build-outs. And then I think we've got the opportunity to capture new customers because of how differentiated Express Solo is versus the competitors' offerings.

Okay. And then last just around gross margin. You spoke about some of the new products have been better gross margins embedded in them, I think potentially could be the best margins the company has seen in the comments you made. But then Mansi also spoke about at least a temporary headwind around product mix in the subscription part of the business. So maybe help tie that all together and how investors should be thinking about the gross margin trajectory, both in the near term and then over the medium term? And what sort of level gross margins might be able to reach?

Yes. So in the near term, I think the margins would remain similar to Q1. Obviously, there is the mix impact. So the hardware margin may go up or down a little bit. On the subscription margin side, I covered in the prepared remarks, why we saw a little bit of a reduction, it was a deliberate decision to start using our existing inventory instead of spending additional cash to repair and refurbish parts and so that is going to impact margins a little bit. Again, the dollar value is really low, but the margin percentages get impacted because of that. So we expect that trend to continue. So that results in near-term margins being similar to where they are now.

However, as Rick mentioned, as the new products come in, which will be towards the end of this year, but more meaningful in terms of volume next year, that is when we'll start seeing a step increase in gross margins.

Your next question comes from the line of Itay Michaeli of TD Cowen.

Just a couple of follow-ups from the prior questions. First, I think there's a mention of potential for positive operating cash flow later in the year. Just hoping we could drill a bit more into that in terms of how much of that might be kind of just the inventory release versus OpEx and gross margin and of course, revenue growth as well.

Yes, it's all of the above. So inventory, we expect, as I mentioned, to start coming down. So that should release working capital. We expect EBITDA loss to improve through the year through revenue growth as well as OpEx management that should help cash from operations to get better as well.

Got it. That's helpful. And just on the quarter itself, but with revenue coming in a little bit above above the prior range. Just curious kind of where the upside came in specifically kind of versus your internal expectations last quarter?

I think it was across the board. We saw -- we mentioned the Big Blue Bus deal in Santa Monica fleet. That was a nice win for us. So we've seen good business in fleet. Commercial, obviously, is a strong market segment for us, and we've seen that continue to move forward with expansion business as well as new wins and then home sales also performed reasonably well in Q1.

Perfect. And just lastly, just with some of the new products and new investments, including into the new market expansion, is sort of the current rate of R&D look appropriate for us to sort of model going forward? Or could you see maybe a bit of an uptick as you pursue some of this growth?

Actually, we expect R&D to start coming down in the second half of the year as we see -- as we start fulfilling engineering work on the new products, and prototyping costs are coming down. We're also, as Rick mentioned in his prepared remarks, seeing a lot of efficiency from the use of AI, which I think would also help us bring our R&D cost down.

[Operator Instructions]

Your next question comes from Chris Dendrinos of RBC Capital Markets.

I guess I just wanted to follow up here on the inventory commentary. And I guess I'm curious how you're thinking about inventory management as you move into some of the product launches later this year. Is there any kind of risk of, I don't know, if it's stranded inventory or obsolete inventories, how you're thinking about that?

Mansi had earlier around using new inventory for field replacements is exactly along that theme of managing the wind down of the existing inventory such that there's very little left by the time new products that would obsolete existing products start to ramp into production. So as we look at our forecast and our inventory positions as we get closer to that transition point, the fidelity of that analysis gets more refined and for example, we made a decision on some products to use inventory we have today to replace field units that failed rather than refurb units that were coming back from the field because we did not want to build any further inventory with the forecast we now have in place to drill all that inventory down to very low levels as the new products come into play.

I apologize in a car and some background noise. But maybe just following up and this is more of a bigger picture question on the competitive market dynamics. And you all are doing a good job kind of scaling and launching new products, I guess, just how do you think about the market today from a competitive standpoint and sort of where you sit? And are you seeing competitors come to the table with innovation as well. And just overall, how do you think about that.

Yes. I think on the DC fast order side, where our Express Solo is squarely focused, obviously, we've seen some new announcements. And I've been pleased with all of them because our product is better, and I can explain why if anybody is curious. So that's been good news. I think in general, you're continuing to see consolidation happening we're always paying attention, but there's clearly changes coming as we move forward in the industry.

Got it. I guess maybe I'll buy. Can you explain why the product is better?

Yes, there's 3 reasons. There's 2 major architectural reasons that lead to the most important reason. Number one is our approach to thermal management. You've got a choice between a liquid-cooled system or an air cooled system. Liquid cooling creates a whole bunch of additional cost, makes the product larger and it has catastrophic points of failure. If your cooling system fails, your whole charger fails. The alternative approach is an air cooled system, which is what we've implemented. The challenge there is to make the design of the product lasts for well over 10 years with high-power silicon carbide power electronics with an air cooled solution, and we've mastered that. So that's a big architectural advantage that we have in our product. There are other DC chargers that are air cooled. So this has been a validated approach in the industry.

The second approach or architectural difference is that we've separated the AC to DC conversion, so power comes off the grid is AC power. We convert that to D.C. Then we have a separate stage of conversion that converts that DC power to the DC voltage that the card needs and wants. We've separated that into 2 separate modules. That is different than what's been built traditionally where all the AC to DC and DC to DC conversion has been put into one combined module. We've separated those. That provides tremendous advantages in terms of future iterations of this product, for example, a DC only version that could be built out on a DC grid provided by Eaton that dramatically reduces the capital cost and the energy density of the charger.

There are other benefits to it. For example, there's a DC grid in the middle of the charger that connects the AC to DC and the DC conversion. You can now put multiple versions of this charger back to back and connect them through that DC grid and pull the energy. And if you, for example, put 3 of these together, you could deliver 1.8 megawatts through 1 port on a charger.

So there's a lot more advantages, but in the end, the most profound advantage is aerial energy density. We're able to get 600 kilowatts of energy into a footprint that's smaller than the leading 400-kilowatt charger that's on the market today and real estate matters. When it comes to site design flexibility, the cost of real estate, the ability to plan sites for the future, having a very compact charge of delivering this much power as a real competitive advantage.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, and thank you for standing by. Welcome to ChargePoint's Fourth Quarter and Full Fiscal Year 2026 Financial Results Conference Call. Please be advised today's conference is being recorded, and a replay will be available on ChargePoint's Investor Relations website.

I would now like to turn the conference over to John Paolo Condon, Vice President, Communications. 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 2026 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 Chief Financial Officer.

This afternoon, we issued our press release announcing results for the quarter ended January 31, 2026, which can 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 first quarter of fiscal 2027. 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 5, 2025, 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 a transcript of this call to our Investor Relations website under the Quarterly Results section.

Thank you. I will now turn the call over to our CEO, Rick Wilmer.

Good afternoon, and thank you for joining us. Today, we will provide a comprehensive review of our quarterly performance, share our perspective on current market conditions, discuss the progress we have made toward our 3-year strategic plan and how innovation and execution, supported by our partnership with Eaton and key leadership additions, position us to build confidently for the future.

We delivered a strong finish to fiscal 2026. Revenue for Q4 came in at the high end of our guidance range at $109 million, marking another quarter of year-over-year growth and execution above expectations.

Our non-GAAP gross margin remained at a record high of 33%. We maintained strict cash discipline. Cash utilization from operations was minimal and much better than planned. These results are a clear validation of our relentless commitment to operational excellence, and there's still opportunity for further improvement. This performance reinforces our return to growth trend which we expect to accelerate later this year and into next year as our new products ramp into volume. This growth results from investments in product innovation, partnerships, rising market interest, greater utilization and market consolidation, which have boosted our market share of public ports in North America.

Europe experienced robust double-digit growth, driven by regulations and new incentives. We expect this trend in Europe to continue, further accelerated by our new products.

Operational excellence remains a core pillar of our 3-year plan, and progress here is tangible. We continue to see benefits from tighter cost controls and improved supply chain execution. Station reliability, the quality of deployments and customer satisfaction all continue to improve. Stations that are down, as monitored by our network operations center, or NOC, have been reduced by over half in the last year, and are now below 1%. Over 80% of owner support cases are proactively created by our NOC or driver reports as opposed to a customer having to call us to report a problem.

Other initiatives like picture to resolution, cut-resistant cables and our Safeguard care service are all contributing to high reliability. First-time right deployments have improved to above 95%, which has been driven by our training and certification program. Customer satisfaction, as measured by results from our CSAT survey responses for driver, owner and home support is now at 8.5% or higher on a 10 scale. All of these improvements are driving customer loyalty, which in turn drives expansion business.

Our continued deployment of AI is yielding tangible benefits, which we expect to increase substantially as we move through this year as the tools and capabilities continue to advance rapidly. With our headquarters in Silicon Valley, we are at the epicenter of AI innovation, and we view this as a competitive advantage. We are striving to be at the forefront of AI adoption and the benefits we are anticipating are not just incremental improvements, but truly disruptive.

We expect to deliver AI-driven innovation in our products and services to make them more differentiated, valuable and useful. AI for code generation and testing will allow us to deliver innovation faster and more cost effectively. We believe AI will also drive overall operational efficiency where every job in the company that is done on the screen will be performed more effectively. All of this is evidence that our model works. It gives us speed, flexibility, resilience and the ability to invest where we see the greatest long-term returns.

Turning to the broader EV market. while headlines often focus on short-term volatility, the underlying fundamentals remain compelling. Multiple independent sources point to sustained global EV adoption, with particularly strong growth in Europe and continued long-term confidence from automakers and consumers alike.

Global EV sales grew meaningfully year-over-year in 2025, with Europe posting strong double-digit growth, supported by regulatory tailwinds and renewed consumer incentives. Even in North America, where growth moderated, interest in EVs remains resilient, and satisfaction among EV owners continues to be exceptionally high.

OEMs still view EVs as the long-term destination, but the path is proving longer and less linear with hybrids and plug-in hybrid serving as bridges. The next leg of adoption depends less on mandates and more on economics and customer experience. A wave of sub $35,000 EVs arriving in 2026 is designed to hit the true mass market where price parity matters most.

Despite the headlines about the EV slowdown, U.S. fast charging tells a different story. Infrastructure expanded rapidly in 2025, usage grew in lockstep, utilization remains stable and reliability improved. Approximately 18,000 new public DC fast charging ports were added, largely driven by private investment rather than government stimulus. This indicates the charging ecosystem is maturing operationally, not overbuilding speculatively. As vehicle affordability improves and adoption reaccelerates, the charging foundation is being put in place to support it.

This market environment favors companies that can execute, scale efficiently and deliver a seamless experience across hardware, software and services. This is where ChargePoint is uniquely positioned, as evidenced by some notable customer wins.

We have partnered with Ford Pro so that Ford's commercial fleet customers in the U.K. and Germany now have integrated access to ChargePoint solutions across home, fleet and workplace EV charging, providing these businesses with the most innovative and reliable charging solutions. Not only can Ford Pro customers benefit from our hardware and software, they also have access to ChargePoint's expertise for charter installation, site planning and related services.

We also consummated the next phase of our strategic partnership with Raw Charging, 1 of the U.K.'s leading ChargePoint operators. The new multiyear agreement comes with an initial commitment valued at USD 7.5 million. This collaboration strengthens Raw Charging's Connecting Amazing Places campaign, which is focused on normalizing EV charging at destinations rather than solely en route. Also, we extended our work with Georgia Power to new locations, including the prominent Brady Health system in Atlanta.

Innovation remains the engine of our strategy. In the coming months, we will release a major update to our mobile app. This new experience is designed to do more than just help drivers find a charge. It equips them with the ability to choose an experience while they charge. By guiding drivers towards available, reliable amenity-rich and well-priced charging locations, we believe this capability will drive increased utilization, improve economics for station owners and strengthen the value of our network.

We believe we are in a position to influence where drivers choose to charge, which is a powerful example of how software and data can benefit both drivers and site hosts.

With the largest community of drivers in North America on our platform, we have the scale to drive incremental value for ChargePoint.

When we look ahead, our confidence is rooted in 4 elements coming together: execution, market opportunity, innovation delivery and partnerships. Our partnership with Eaton continues to expand our reach and accelerate adoption of next-generation AC and DC solutions. Combined with our improving execution in a market that increasingly demands reliable, scalable charging, we believe we are building a durable platform for long-term growth. In this context, I also want to highlight the importance of Jasper [indiscernible] joining our leadership team as our Chief Product and Software Officer. Jasper brings a wealth of experience in electrified transportation, energy and the scaling of global operations. Jasper's leadership enhances ChargePoint's ability to develop an innovative product road map that encompasses both software and hardware but is also agile in response to the rapidly evolving environment, especially as artificial intelligence creates opportunities in our industry. His approach is anchored in what we believe is the inevitable transition to electrified transportation, ensuring ChargePoint remains at the forefront of innovation, while maintaining operational excellence.

This quarter, we are introducing new key performance indicators. We are sharing these metrics to strengthen the alignment between our strategy and the market understanding of our performance. Let me briefly explain why each matters.

Software-only managed ports are non-ChargePoint hardware ports managed by our software and reflect our software-first strategy. Managing non-ChargePoint hardware expands our addressable market and supports a business model centered on recurring software revenue and sticky long-term customer relationships. Globally, we have nearly 130,000 software-only managed ports, representing approximately 30% of all ports under management. Share of ports exceeding 30% utilization at least 1 day in a month, we believe is an important leading indicator for expansion demand. Utilization above roughly 30% is typically when site host begin evaluating the addition of chargers to maintain a good driver experience. More than 100,000 AC ports recorded time utilization above 30% at least 1 day in January of 2026. The indicating over 7 hours of continuous use per day across workplace, retail and other locations.

Monthly active users defined as drivers utilizing a ChargePoint account is the equivalent of our user community. Monthly active users is a core measure of the network effect. Growing driver engagement increases utilization and delivers greater value to site hosts and customers, reinforcing why our software and network are central to their long-term charging strategy.

At the end of FY '26, we had 1.48 million active users, representing 8% year-over-year growth.

In terms of KPIs we have historically reported, ChargePoint now manages approximately 385,000 ports, including more than 41,000 DC fast chargers and more than 130,000 ports located in Europe. Globally, ChargePoint drivers have access to over 1.37 million public and private charging ports. Together, these KPIs are intended to provide more insight into how our business is performing, our differentiation and how long-term durable value is being created across our ecosystem.

To close, fiscal year 2026 marked an inflection point for ChargePoint. We returned to quarterly growth, managed our cash with discipline, strengthened our operational foundation and continue to deliver innovation that matters. Disciplined execution and a constructive market outlook, accelerating innovation and strong partnerships, we believe ChargePoint is well positioned to build for future opportunities.

Thank you to our employees, partners and shareholders for your continued support. I will now turn the call over to our CFO, Mansi Khetani.

Thanks, Rick. As a reminder, please see our earnings press 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, settlements and nonrecurring legal expenses.

Revenue for the fourth quarter was $109 million, coming in at the high end of our guidance range, up 3% sequentially and up 7% year-on-year.

Network charging systems at $58 million accounted for 53% of fourth quarter revenue, up 2% sequentially and up 10% year-on-year.

Subscription revenue at $42 million was 39% of total revenue, up 1% sequentially and up 11% year-on-year as our total installed base continues to grow.

Other revenue at $9 million was 8% of total revenue.

Turning to verticals, which we report from a billings perspective, fourth quarter billings percentages were: commercial, 78%; residential, 6%; fleet 9%; and other 7%.

In terms of geography, North America made up 77% of revenue and Europe was 23%. Europe was particularly strong this quarter, delivering its highest share of revenue since we became a public company.

Non-GAAP gross margin continued to remain at a record high of 33%, flat sequentially, and up 3 percentage points year-on-year.

Hardware gross margin was flat sequentially. Subscription margin continued its upward trajectory, reaching a new GAAP record of 64% and coming in even higher on a non-GAAP basis, supported by economies of scale and sustained efficiencies in support-related costs.

Non-GAAP operating expenses were $58 million, essentially flat to the prior quarter. We remain committed to prudent expense management, maintaining a disciplined approach that balances current constraints with selective investments in R&D intended to support announced product launches that we believe will position us for long-term growth and margin expansion.

Non-GAAP adjusted EBITDA loss was $18 million. This compares with a loss of $19 million in the prior quarter and a loss of $17 million in the fourth quarter of last year.

Stock based compensation was $13 million, down from $15 million, both in the prior quarter and in the fourth quarter of last year.

Our inventory balance was $215 million, a slight increase from the prior quarter. Although physical inventory levels were modestly lower versus the prior quarter, the overall balance ticked up slightly, primarily due to foreign exchange fluctuations and overhead capitalization.

Turning to cash. This quarter, we made a $40 million payment related to the debt transaction we announced in November. After that payment, we ended the quarter with $142 million in cash. Excluding that payment, full year fiscal 2026 net cash usage was just $43 million, a significant improvement from the $133 million used in the prior fiscal year. We've made substantial progress in reducing cash usage from normal operations over the past year, and this will remain an important area of focus going forward.

The debt exchange announced in November is now reflected in our financials. Because the transaction included a significant discount, the accounting treatment requires us to record future interest payments as short-term and long-term liabilities on the balance sheet. As we pay down the capitalized interest, the corresponding debt balance will come down and there will be no related interest expense flowing through the P&L.

With respect to full fiscal year 2026 results, revenue was $411 million, non-GAAP gross margin was 32% and non-GAAP operating expenses were $231 million.

From a geographic perspective, North America was 83% of full year revenue and Europe was 17%.

For additional full year fiscal 2026 results, see the press release issued earlier today.

Turning to guidance. After a strong fourth quarter, we expect first quarter revenue to be in the range of $90 million to $100 million, reflecting the typical seasonality we see in Q1.

In summary, this quarter, we continued to deliver both sequential and year-over-year revenue growth, achieved yet another record quarter for subscription gross margin and continue to make steady progress towards profitability. We also delivered against our annual objectives around disciplined cash management, reducing operating expenses and significantly lowering cash usage throughout the year. Looking ahead, we will continue to remain focused on disciplined execution and operating expense management, and we are committed to building on the progress we've made in the quarters ahead.

We will now open the call for questions.

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

You've talked about the [indiscernible] opportunity in the past. And so I'd be curious just on the update there as people are making progress. But certainly, as we look across some of the emerging form factors and around the robotics space and physical AI, I'm just curious about how much opportunity there is now in kind of initial interest for where you guys have both from just a pure charging perspective as well as the software platform that optimizes a lot of that network?

Yes. Colin, it was [indiscernible], I think that's what you mentioned. We haven't focused much on that space yet. But with respect to physical automation, I think the bigger near-term opportunity that we're very focused on is autonomous vehicles. We're now investing quite a bit of time in understanding what, if any, unique charging requirements are required by that market such that we can leverage the success we've had already and expand that and become the default charging solution of choice for autonomous vehicle fleets.

Excellent. And then from a cost perspective, you guys are making steady progress. I'm curious about opportunities for continuing to drive those concepts from a hardware perspective or even start driving a little bit of price increase and pushing that through to help support margins. I'm not sure how realistic that is, but just want to get a sense of how you're expecting that to play out here over the balance of the year, knowing that you're only guiding for a quarter?

Yes. Thus far, we have not pushed any price increases into the market, and I don't think we anticipate doing so. The opportunity for gross margin improvement on hardware, and therefore, cost reductions, assuming we don't increase prices, is really hinged on a lot of the new hardware platforms we'll be introducing into the market as we move through this year. We announced our Flex product line last year, which is our single-port AC product for both home and fleet. And that product is ramping now. It's got a better margin profile than our historical single-port AC products. And then we've got our next-gen DC product, which has substantially better margin profile than our current DC architecture and that will be ramping into production in the second half of this year, and we're very optimistic about the prospects for that product.

The market interest right now is very high in that product because not only is it more cost effective than our current DC solutions, it has also got some innovation in it that really reduces overall cost for a customer beyond just the initial capital expenditure related to both OpEx and construction and build-out costs.

Excellent. And just a follow-up on that I want to sneak in here is around inventory reduction. You guys have obviously gone through the product transition. But just curious about when you can start working that inventory balance down a little bit more aggressively?

Yes, I can take that one, Colin. So mix of products sold during the quarter impacts inventory in generally, like I mentioned, even in Q4, while we did see a little bit of a decline in physical inventory, the dollar value that you see on the books went up a little bit because of the impact of foreign exchange on our inventory that is stored in Europe and there was some impact of cost capitalization, which included some tariffs as well, which resulted in a net increase of inventory in the books. As you know, we are managing inventory very carefully. And as we get to the tail end of our prior commitments to our contract manufacturers, we should start seeing a gradual reduction throughout this year.

We'll move next to Mark Delaney at Goldman Sachs.

The company had a press release out in mid-February, highlighting 34% growth in charging sessions and also that it was putting upward pressure on utilization. You saw more on that today highlighting a growing number of users and also the increase in utilization rates. At the same time, guidance for the first quarter implies revenue will be down a little bit year-on-year at the midpoint. So can you help us reconcile some of the progress you're seeing in terms of the user count and utilization rates with the outlook for revenue to be slightly lower year-on-year at the midpoint and 1Q?

Yes. So the utilization they are growing, as we've mentioned before, and that definitely leads to sales cycle kind of kicking off. In terms of the guidance, specifically after coming off of a strong Q4, we're guiding to Q1 based on typical seasonality, where we've historically seen about a 5% to 15%-ish reduction in Q1 revenue versus Q4 because of the seasonal factor and winter months, et cetera. And this is what we've reflected in our Q1 guidance. And besides that, we're taking a prudent approach given the current macro environment. However, you noticed that our range does encompass a growth scenario year-over-year?

Understood. And my other question was around Nevi. There's been some talk of a change in how much domestic content might be needed to qualify. I think last quarter, the company you spoke about more states getting ready to move forward with those, but I'm hoping you can update us on what you're seeing given what could be some changes in the requirement for domestic content and if that's having any effect on your business and outlook for that piece of the market?

Yes. So our understanding right now is that obligated funds are not going to be affected by any rule changes around domestic content. And we've got a strong pipeline of obligated funds that will continue to fulfill this year and maybe even to next year. And then on the non-obligated funds, which may be impacted by any changes, we're going to have to wait for those rules to get finalized before we can assess what, if any, impact it will have on us.

We'll take our next question from Chris Pierce at Needham & Company.

Just 2, I think both for Mansi. If we look at the revenue guidance, the growth you guys have shown kind of think about the rest of the year, and you've kind of given us the playbook for gross margins. I'm just curious, is there any chance for further OpEx leverage or OpEx reductions? Or are we sort of in the late earnings around there? I'm just thinking about the pieces to get to closer to flat adjusted EBITDA?

Yes. OpEx has been relatively flat for the last couple of quarters on a non-GAAP basis. We expect that this non-GAAP OpEx would remain in that current range in the near term. However, we should see a reduction over the year as we get through our engineering efforts on the new products that we've introduced and our NRE or prototyping costs on the engineering side start coming down.

The other comment I'll make there is around AI. We are now seeing a measurable impact on keeping OpEx flat or even reducing it in some areas and then reallocating resources to other areas that have a need through AI implementation. We've got a number of examples and proof points in the company now where this is paying off in real dollars.

Okay. And then I think I had this right, you had a pretty sizable working capital benefit in the quarter, which helped cash. But if you look at the pieces of it, there was a pretty sizable jump up in trade payables and accounts receivable came down modestly, that I think makes up the bulk of it. Should those reverse in the first quarter? Or is this sort of -- like how should we think about those 2 numbers and the benefit you might see in working capital or the debit in the first quarter?

Yes. So AR, we made a significant progress in collections. We were pretty aggressive this quarter. We'll continue to do that. But you're right, that probably will not be a big benefit in Q1. AP, same thing, it's timing. So sometimes it's up or down. So it's difficult to pinpoint exactly if there will be a benefit or it may be a little bit worse. However, typically, Q1 tends to use more cash. So typically, Q1, we see the highest usage of cash as compared to the rest of the year because we have a lot of software expenses that we have to pay upfront for the rest of the year. So that will impact working capital in Q1. However, through the rest of the year, we should start seeing that coming down. And then as we mentioned before, as inventory comes down, we should see a boost to working capital as well.

Next, we'll go to Ryan Pfingst at B. Riley Securities.

Can you talk a bit about the competitive landscape as the EV market has evolved here in the U.S.? And what kind of opportunities that might present to you in terms of potential M&A or market share gains?

Yes. We won't comment on any M&A opportunities, but it's very active. I can tell you that. There's plenty of assets that are becoming available. We're getting calls. In terms of competitive landscape, we're capitalizing on some exits from the market by certain parties. So there are real opportunities, again, that we're capitalizing on as a result of people leaving the market. So in general, I would consider it favorable and normal for an industry that's going through a cycle like what we were -- like we've been through.

Got it. Appreciate that. And then understanding you don't guide for the year, but what do you see as the main revenue growth drivers by segment or by product in 2026?

It's going to be our new products in addition to the strength we see in Europe. I think it looks fairly steady in North America. We had a very strong quarter in Q4 in Europe. We expect that trend to continue and then be further accelerated by the new products that are now built for Europe in addition to North America, unlike some of our prior products, which were continent-specific.

We'll go next to Itay Michaeli at TD Cowen.

Just to follow up on the last couple of questions. I was hoping you could mention at a high level kind of the various paths the company has to reach positive EBITDA, whether it's -- you have the new products? It sounds like there's some gross margin opportunity, maybe opportunities on OpEx. But when you kind of think about those drivers as well as the EV market overall, kind of how are you thinking about the different ways you have and levers to pull to get the company to positive EBITDA?

Yes. I think it's a combination of things, Itay. It's obviously growth, and as we just mentioned, we're optimistic about Europe, especially as we introduce new products and move through the year with North America continuing to be steady and perhaps opportunities coming about as the attrition of competition moves forward. And then on the gross margin side, again, as we mentioned a minute ago, we expect much better gross margin profiles on all the new hardware products that we're introducing into the market, and that should move our overall weighted gross margin up as we move through the year.

And then lastly, we'll continue to control OpEx and optimize OpEx, again, with AI now starting to show tangible results for us in terms of our ability to keep our costs constant without while growing top line and expanding our product portfolio because of the efficiencies we're seeing through AI implementation in different areas of the company.

That's helpful. And then my second question, Rick, actually is on the AI initiatives. I'm just kind of curious which quarter this year do you think that starts to kind of show through? And kind of how do you see the opportunity progressing even over the next couple of years for the company?

I think for now, what we're seeing, generally speaking, is knowledge work that is done on a screen that tends to be complex but repetitive, we're now using a genetic AI to automate that. So there's quite a number of jobs in the company that fit that profile. And in specific areas where we've implemented solutions, we're doing twice as much work with half as many people. And I think we'll continue to expand that capability across the company. It will also show up in the way we write and test code, which should increase our pace of innovation when it comes to releasing new software features. And then last, we've got some very interesting AI features on the road map that will manifest themselves in our product, primarily on our software side that I think will be really valuable for our customers and the drivers that use our technology.

[Operator Instructions] We'll go next to Craig Irwin at ROTH Capital Partners.

So Rick, over the last many years, technology companies and their charging points outside of their offices have been a great opportunity for ChargePoint. Some of us have been moderately optimistic with the building wave of sort of back to the office. I know the footprints of how these companies are staffing are changing a little bit, maybe that's actually the incremental opportunity. Can you talk about your legacy technology customers that were so very important many years ago, are they coming back in any material way right now? And is this something that you see maybe building in momentum?

I think what we're seeing generally is steady expansion of their networks. We mentioned that new KPI in the prepared remarks around the station that exceeds 30% utilization 1 day in a month. And that -- we had over 100,000 AC ports that met that criteria. And when you reach that threshold, you'll find drivers pull into a parking lot and just have a hard time finding an available charger. So in areas where EV penetration is strong, generally speaking, in North America, the Coasts, we're seeing that metric exceed that 30% number, which drives expansion business. So that remains an important part of our company's strategy is to continue to grow with our customers as the population of EV drivers that frequent those workplaces continues to grow, which is really driven by the cumulative number of EVs on the road. I think a lot of people get fixated on the new EV sales, but what really drives our business is not only new EV sales, but the cumulative number of EVs that are on the road.

So we continue to see good expansion business with our workplace and commercial customers in general.

Okay. Excellent. And then my second question really is about the pathway to positive EBITDA, right? Over the last number of quarters, you've kind of sort of leaned in the direction of wanting to preserve the capacity in the company and see growth help you deliver this with new products and new partnerships. Can you maybe build us a bridge on how we get there? And do you have a set time line that you're looking for? What should we expect as external observers of the company?

Yes, we're going to -- like I just mentioned when I answered a question a moment ago, it's a function of growth, improving gross margins and controlling OpEx. And as you've seen historically, we expect to gradually improve in all areas as we move through the first half of this year. And then I think the acceleration on improvement in all 3 of those, particularly growth in gross margin, will be stronger in the second half as we introduce these new products and we really take advantage of the favorable macro conditions in Europe with a whole suite of new products that we weren't selling into those segments before because we did not have a product offering.

And that concludes our question-and-answer session and today's conference call. Thank you for joining ChargePoint's call. You may now disconnect.

Good afternoon, and thank you for standing by, and welcome to ChargePoint Third Quarter Fiscal Year 2026 Financial Results Conference Call. Please be advised today's call is being recorded, and a replay will be available on ChargePoint's Investor Relations website.

I'd now like to hand the conference over to John Paolo Canton, Vice President, Communications. Please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ChargePoint's Third Quarter Fiscal 2026 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 Chief Financial Officer. This afternoon, we issued our press release announcing results for the quarter ended October 31, 2025, which can 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 fourth quarter of fiscal 2026.

These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations. These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. For a more detailed description of certain factors that could cause actual results to differ, please refer to our Form 10-Q filed with the SEC on September 8, 2025 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 a transcript of this call to our Investor Relations website under the Quarterly Results section.

Thank you. I will now turn the call over to our CEO, Rick Wilmer.

Good afternoon, and thank you for joining us. Today, we will provide a comprehensive review of our quarterly performance, share our perspective on current market conditions, discuss the progress we have made towards our 3-year strategic plan and highlight how our ongoing innovation is shaping the future of e-mobility.

Financial performance this quarter exceeded expectations. Revenue surpassed the top end of our guidance, reaching $106 million, which marks a return to growth. This is a trend we anticipate to continue, especially as we move into the second half of calendar 2026 with many of our new products ramping, our Eaton partnership accelerating and numerous opportunities in Europe that we can now access with our new products.

Our non-GAAP gross margin remained at a record high of 33%. We maintained strict cash discipline with cash utilization better than planned at $14 million. As growth returns, we continue on our path towards positive adjusted EBITDA. Additionally, we successfully completed a debt exchange securing nearly $110 million of deal discounts that benefits shareholders, reducing outstanding debt by $172 million and extending maturity to 2030.

This transaction is a pivotal step in strengthening our financial foundation. By deleveraging at a significant discount, we are shifting enterprise value to shareholders and reinforcing our balance sheet. These strong results confirm the effectiveness of our strategy, and the rigor of our operating model. Our CFO, Mansi will provide further details on this transaction later in the call.

North America continues to see steady sales demand despite headlines to the contrary, as evidenced by key customer wins we will discuss shortly. In Europe, demand is not only robust but accelerating with significant opportunities emerging across key markets. As we move into calendar year 2026, especially the second half, Europe stands out as a potential growth engine fueled by favorable regulatory support, rapid EV adoption and substantial infrastructure investments. This creates an ideal environment for ChargePoint to lead with our innovative new offerings.

At the same time, the competitive landscape in both regions is consolidating, creating opportunities for ChargePoint to expand our market presence and reinforce our role as a reliable partner in EV charging. Supported by these favorable conditions, we are well positioned to pursue steady growth provide strong value to customers and continue advancing the industry.

In terms of customer highlights from the third quarter, we strengthened our partnership with the City of New York by extending our agreement to support its expanding EV infrastructure needs. This ongoing collaboration reinforces our shared commitment to sustainability and positions ChargePoint as a trusted partner in advancing clean transportation. We also launched an exciting program with BMW North America to transform select premium locations into destination charging stations for EV drivers nationwide. Recruitment of site host is now underway.

And finally, NEVI momentum is building again with more than 40 states announcing new plants. We continue to deliver NEVI funded projects, including a recent installation in Landhope, Pennsylvania, where ChargePoint supplied all charging hardware during Q3. ChargePoint now manages approximately 375,000 ports including more than 39,000 DC fast chargers and more than 127,000 ports located in Europe. Globally, ChargePoint drivers have access to approximately 1.35 million public and private charging ports.

We launched our 3-year strategic plan nearly 2 years ago, built on 4 key pillars: efficient and capital-light hardware innovation, software innovation, world-class driver experiences and operational excellence. We are delivering on these promises. Our operational excellence is evident throughout the company with continuous improvement in our gross margins, network reliability and customer satisfaction.

We have made significant strides in utilizing AI for internal productivity which we expect to further accelerate improvements in operational execution. AI is a feature piece of our new software offerings which we believe will provide tangible benefits to our customers.

The second year of our 3-year plan focuses on delivering innovation and driving growth. Our financial results demonstrate that growth has returned which we expect to accelerate because of new products and services contrived in the first year of our plan that are now beginning to enter the market. We believe our new offerings will drive market share gains and margin improvements.

Our innovation engine is performing strongly, further expanded and accelerated by our partnership with Eaton and close collaboration with vehicle OEMs. Our approach to innovation is anchored by our belief that electric vehicles, EV charging infrastructure and the power grid should not operate as independent silos where industry standards dictate sole means of interoperability.

Our new DC product line ChargePoint Express powered by Eaton is a bidirectional capable solution that we believe can be deployed with up to 30% lower capital expenditure, occupies a 30% smaller footprint and reduces ongoing operational costs by up to 30% compared to other solutions. Our new AC product line, integrated with Eaton's AbleEdge smart breaker and smart panel technology is the most cost-effective offering for enabling vehicle to home and vehicle to grid and eliminating expensive panel upgrades and accelerating deployment.

Our hardware innovation is complemented by significant software advancements. We have released a new generation of the ChargePoint platform, a flexible software solution that redefines EV charging management. Completely reengineered and optimized by AI, the platform empowers operators to optimize charging infrastructure on any scale. Soon, we will release a major upgrade to our mobile app, also powered by AI and designed to deliver smarter, more personalized charging experiences.

Customer reaction to these innovations have been overwhelmingly positive. Our solutions do more than meet expectations they are redefining them. We believe the transition to EVs is inevitable and ChargePoint is uniquely positioned to lead. Our road map is clear: deliver innovation, drive growth, capture market share, and improve margins. We are building a business driven by innovation, operational efficiency and a relentless focus on customer needs.

Thank you to our employees, partners and shareholders for your continued support. We are excited about the journey ahead and look forward to sharing more milestones in the next quarter.

I will now turn the call over to our Chief Financial Officer, Mansi Khetani.

Thank you, Rick. As a reminder, please see our earnings press 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, settlements and nonrecurring legal expenses.

I will first go through the results of the quarter and then talk a bit about our recently announced debt reduction. I'm happy to announce that revenue for the third quarter exceeded our expectations coming in at $106 million, significantly above the high end of our guidance range of $90 million to $100 million up 7% sequentially and up 6% year-on-year. Network charging systems at $56 million accounted for 53% of third quarter revenue up 12% sequentially and up 7% year-on-year, marking a return to growth. Subscription revenue at $42 million was 40% of total revenue up 5% sequentially and up 15% year-on-year as our total installed base continues to grow. Other revenue at $7 million was 7% of total revenue.

In terms of geographies, North America made up 85% of revenue and Europe was 15%, consistent with recent quarters. Non-GAAP gross margin remained at a record high of 33%, flat sequentially and up 7 percentage points year-on-year. Hardware gross margin was flat sequentially. Subscription margin continued its upward trajectory, achieving a new record of 63% on a GAAP basis and was even higher on a non-GAAP basis driven by economies of scale and ongoing efficiencies and support costs.

Non-GAAP operating expenses were $57 million, representing a 2% reduction, both sequentially and year-on-year. We remain committed to prudent expense management, maintaining a disciplined approach that balances current constraints with selective investments intended to support long-term growth and margin expansion.

Non-GAAP adjusted EBITDA loss was $19 million. This compares with the loss of $22 million in the prior quarter and a loss of $29 million in the third quarter of last year. Stock-based compensation was $15 million, down from $18 million last quarter and $21 million in the third quarter of last year. Our inventory balance was stable relative to the prior quarter at $212 million. We continue to manage existing commitments with our contract manufacturing partners and anticipate a gradual reduction in this balance over the coming periods. We ended the quarter with $181 million in cash compared to $195 million in the prior quarter reflecting cash usage of $14 million. This compares to $24 million of net cash usage in Q3 of last year.

While quarterly cash usage may vary, we have made meaningful progress in reducing cash burn, and we expect the continued sell-through of existing inventory will further support cash generation going forward.

Next, I would like to address our recently announced debt exchange transaction, which closed following the end of Q3. We believe this transaction strengthens ChargePoint's financial position and represents a meaningful step forward in delivering significant shareholder value. Last month, we completed a privately negotiated debt exchange with existing holders that will ultimately reduce our total debt by $172 million, more than half of the previous balance. The consideration paid included a combination of new senior debt, cash and warrants and reflected a discount of 33%. We believe this deleveraging actions captured at a significant discount, shift enterprise value to shareholders and strengthen our balance sheet.

Key benefits of the exchange include: number one, reduction of total debt by $172 million, more than 50%. Number two, elimination of the 125% change of control premium on the prior notes of approximately $82 million; number three, reduction in annual interest expense by approximately $10 million; and number four, extension of debt maturity from 2028 to 2030.

The exchange utilized a portion of our existing cash made possible by the significant improvement in cash usage over the past year. Over the last 4 quarters, our net cash usage was less than $39 million. This compares to a net cash usage of $178 million over the 4 quarters prior to that. The progress we have achieved in managing cash usage provided the confidence to pursue this transaction which meaningfully reduced our debt burden at a substantial discount. We believe this represents a prudent decision for the company and our shareholders.

We view this transaction as a transformative step forward for ChargePoint, one that strengthens our financial position and reflects our continued focus on disciplined capital management and commitment to creating long-term value for our shareholders.

Finally, moving on to guidance. For the fourth quarter of fiscal 2026, we expect revenue to be $100 million to $110 million representing a 3% year-on-year growth at the midpoint. While we remain cautious in light of the broader macroeconomic environment, we are confident that revenue growth will continue as we execute on our strategic priorities.

In summary, this quarter, we delivered sequential and year-over-year revenue growth, achieved another record quarter for subscription gross margin and continue to make progress towards profitability. The operational improvements we have implemented over recent quarters position us well to capture future growth opportunities. In addition, the significant debt reduction announced strengthens our financial foundation and enhances our ability to execute on our long-term strategy.

We will now open the call for questions.

[Operator Instructions] Your first question comes from the line of Colin Rusch with Oppenheimer.

Congrats on the capital optimization here. I'm curious about the product evolution and the confidence that you're projecting around calendar year next year. Can you talk a little bit about any demand that you're seeing from virtual power plants, some of the geographies that are potentially in kind of tight supply situations from an electricity standpoint and products that you're seeing that are starting to emerge outside of NEVI that could actually help inflect demand in a meaningful way as you go through the calendar year next year?

Yes. Thanks, Colin. I think on 2 fronts, 2 things we've announced that both tie into the DPP play are, one, the new Flex product line that we announced since fully V2G and V2H enabled that is particularly cost-effective and powerful when paired with the Eaton smart breaker and smart panel technology. This is something we showed at the RE+ show earlier this year, and that will be -- that will start rolling out in 2026.

And then on the other end of the spectrum, on the DC fast charging product that we've announced our new Express line, there is a configuration of that product that can integrate directly with the DC grid and the amount of capital savings that is enjoyed by doing so due to the elimination of a lot of power conversion and being able to integrate directly with solar and battery, for example, along with improved electrical efficiency provides not only full bidirectional charging but very significant economic benefits in terms of CapEx and OpEx.

And I guess if I can have a follow-up, I'm just curious about the potential for inventory reduction throughout the course of this year as you work through some of the remaining items that you have on the balance sheet and go through some of this product transition.

So we've made some strategic decisions to wind down certain commitments with some of our contract manufacturers. And as a part of that wind-down process sometimes involves having to take some remaining components, which add to inventory. But I think we will see a small decline in Q4, most likely in the inventory balance but we expect a more material decrease throughout next fiscal year as we sell through the existing inventory and manage our supply.

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

I also had one on inventory but more with respect to the gross margin potential. And I think in the past, the company had thought that as it works through some of the older inventory and shift these new products, there is an opportunity for that to expand margins. With what you're seeing in the business today and some momentum you've spoken about with these newer products, can you speak a bit more around whether or not you still expect those new products to drive gross margins to the upside as they start to become a bigger contribution to the mix. And just anything you can share in terms of the timing as to when you may start seeing a bigger mix of those as you think about the inventory dynamic.

Yes. Mark, so I think improvements in hardware margin in the near term will be entirely driven by product mix due to the fact that we've got inventory already produced and ready to ship. We anticipate hardware margins to remain around the current levels until we start selling through that existing inventory. Now in the current hardware margin that you see today, we are seeing some benefit of Asia manufacturing but we expect to see a larger improvement from Asia manufacturing as we sell through our existing inventory. And as we start releasing new products, we'll expect margin improvement. But that should come in towards the latter half of next year. But overall, hardware margin always depends on the final mix.

Your next question comes from the line of Chris Pierce with Needham.

Can you hear me?

Yes, Chris, go ahead.

Okay. Perfect. You've spoken kind of constantly to the second half of calendar next year and projects in Europe. Can you just remind us like lead times, are these projects that you're sort of already negotiating and feel confident that you've won? Or is this just confidence in the new product suite that you're rolling out?

It's probably more the former. I was in Europe recently personally meeting with many customers talking about these new products. And as I mentioned in the prepared remarks, the response was overwhelmingly positive. There's a lot of people excited about our new DC architecture that I referenced a moment ago and the questions. And I'm quite confident that we'll win a number of fairly significant deals in Europe as we bring that product to market in the second half of next year.

Okay. And then just lastly, are these consumer-like passenger car products? Or are these -- are you starting to see fleet wins? Or are there not enough fleet vehicles out there? I just kind of want to get a sense of where you're seeing the momentum.

It's a combination of both. The new DC architecture is really well suited for passenger vehicle DC fast charge, but it also is really an ideal architecture for megawatt charging for large trucks. And we've talked to our customers in both of those areas, specifically in Europe.

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

I guess sort of housekeeping relative to your expectations on the last quarter call, you came in nicely ahead of expectations. Can you provide some color of what came in better than expected? And then anything notable within the network hardware in terms of mix?

And then just adding the second question on here to get back in the queue. Within your expectations for the second half of next year, your growth expectations, would this, in your view, be enough to push you to profitability?

Yes. So in terms of the first part of the question, Bill, the significant beat was mostly due to a boost in residential billings due to the expiration of the federal EV credits that we saw. We saw a huge boost in sales of our home product. The commercial did well also compared to the prior quarter but the significant beat was mostly due to this boost in the residential billings.

In terms of growth in the second half in EBITDA, we're not guiding to a time frame, but EBITDA as Rick mentioned before, will come with growth in revenue which we are significantly focused on. And as we've mentioned before, with the new products and the increased demand in Europe and the Eaton partnership we think the second half should be pretty strong.

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

Yes. I wanted to follow up a bit more on the Eaton partnership and hopefully, just asking you to provide a bit more information about where you're at with that relationship? How that partnership is going? And I guess just any broadly, any extra information you can provide?

Yes, I would characterize that as exceeding expectations. The amount of innovation we've been able to unlock compared to what I expected when we began the relationship has increased again to exceed expectations. I gave a couple of examples earlier on our home -- via home solution that is really differentiated from the market as a result of our partnership and innovation and collaboration with Eaton and likewise on the DC fast charge, the DC only version of that on a DC grid built by Eaton is a very differentiated product.

So expectations exceeded. Operationally, we're working very well with Eaton, shipping a lot of co-branded product this past quarter that we just closed and expect that to continue to grow.

[Operator Instructions] Your next question comes from the line of Craig Irwin with ROTH Capital Partners.

So Rick, the part of your prepared comments that was a big surprise is the NEVI funding. The fact that this is driving installations today. Can you maybe talk about the runway here as far as the financing? And whether or not you're seeing some of the financing from the states come through in a more material way now that some of the uncertainty out of DC is behind us?

Yes. With respect to NEVI, we are seeing projects move forward. As we mentioned in the prepared remarks, 40 states now are active in NEVI and awarding contracts, and we're active in many of those.

And are you seeing similar levels of support similar levels of financial support and sort of subsidy for new stations? Or are these basically flat, improving? How would you characterize any change there?

Kind of returned to where it was before it was passed. I think it's a good way to characterize it.

And with no further questions in queue, that will conclude today's conference call. You may now disconnect.

Good afternoon, and thank you for standing by, and welcome to ChargePoint's Second Quarter Fiscal Year 2026 Financial Results Conference Call. Please be advised today's conference is being recorded, and a replay will be available on ChargePoint's Investor Relations website. I would now like to hand the conference over to A.J. Gosselin, Director of Corporate Communications.

Good afternoon, and thank you for joining us on today's conference call to discuss ChargePoint's Second Quarter fiscal 2026 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 Chief Financial Officer.

This afternoon, we issued our press release announcing results for the quarter ended July 31, 2025, which can 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 third quarter of fiscal 2026. These forward-looking statements involve risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from our expectations.

These forward-looking statements apply as of today, and we undertake no obligation to update these statements after the call. For a more detailed description of certain factors that could cause actual results to differ, please refer to our Form 10-Q filed with the SEC on June 6, 2025, 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 reconciled 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 a transcript of this call to our Investor Relations website under the Quarterly Results section. Thank you.

I will now turn the call over to our CEO, Rick Wilmer.

Good afternoon, and thank you for joining the ChargePoint's Second Quarter Fiscal 2026 Earnings Call. We are pleased to report solid results for the quarter. Second quarter revenue was $99 million, landing at the top of our guidance range. Non-GAAP gross margin improved sequentially with Q2 results coming in at 33%. This figure is notable as the highest gross margin we've reported since becoming a public company, and we successfully mitigated tariffs to achieve it.

Cash management was exceptional with our ending balance at $195 million, only $2 million below Q1's close, largely driven by structural OpEx changes we've been making over the last year. Our collaboration with GM is also progressing with nearly a dozen sites and more than 50 new fast charging ports and many more scheduled to launch this year. Overall, ChargePoint now manages over 363,000 ports, including more than 37,000 DC fast chargers and 123,000 located in Europe.

Globally, ChargePoint drivers can access nearly 1.3 million charging ports. We achieved this performance despite the uncertainty, particularly in North America. Within the U.S., passenger EV sales growth slowed to a 3% year-over-year increase. The forthcoming expiration of the consumer 30D EV tax and 30C alternative fuel vehicle refueling credit are also sources of concern for future EV adoption, along with the evolving tariff landscape. This has translated into delays for major projects we have won and extended expansion build-outs, but no project cancellations. So while we are making solid progress on our path to non-GAAP adjusted EBITDA breakeven as we saw over the past year, considering these delays and their impact on revenue, we've determined we will be best positioned if we push out our EBITDA breakeven beyond this year.

This is to ensure we can fund product innovation and commercialization efforts, which we expect to drive durable revenue growth. Uncertainty aside, we believe our go-to-market strategy and innovation put us on a firm footing to drive growth, win market share and hit EBITDA positive in the coming quarters. Regarding our go-to-market strategy, we are rapidly operationalizing our partnership with Eaton, and that work will be largely completed this quarter.

Since this partnership was announced in May, we continue to build confidence that together, we will accelerate the deployment of electric vehicle charging infrastructure across North America and Europe. We have already introduced our co-branded product, expanded our channel reach, accessed new strategic accounts and started generating new streams of revenue together. We are delivering innovation, which has been accelerated and expanded because of our partnership with Eaton.

The Express line of DC charging solutions powered by Eaton and announced last week combines the strengths of both companies to deliver more power and less space with massive scalability along with the easiest and fastest installation. It features Eaton hardware for grid connectivity plus V2G capabilities. The net result will be substantially lower CapEx and operating costs and faster deployment time lines. It will change the game in terms of the economics of DC fast charging for our customers.

We are also codeveloping bidirectional home charging solution with advanced energy management. The integration of ChargePoint's Flex Plus chargers with Eaton's AbleEdge smart panels and breakers enables vehicles to supply backup power to homes and also automatically adjust EV charging based on the home energy usage to allow homeowners to install EV charging. The behind-the-meter insights will help utilities manage grid stress and transformer loads.

We expect this synergistic type of innovation will deliver real value to homeowners, utilities and auto OEMs, while at the same time driving market share gains. Both the new Express line of DC solutions and Flex product line were designed to not only deliver market differentiation, but also cost effectiveness. We expect both product lines to have a positive impact on our hardware gross margins.

Moving to markets. Europe seems promising going forward. Rho Motion reports a 26% year-over-year increase in European EV sales during the first half of the year, which is a strong indicator of future charging demand in Europe. We believe the current infrastructure cannot support such growth. With the innovation and new products we are delivering, we will be well situated to capture much of this demand.

In summary, despite an uncertain environment causing delays, we delivered strong results. We are operationalizing our strategic Eaton partnership, which accelerates innovation and expands our reach. We are delivering game-changing products poised to strengthen our market share and profitability. Internally, our team continues to execute with excellence. Our long-term thesis remains intact, validated by the strength of our pipeline, the positive reaction to our new products, and the new partners and customers we're actively signing.

I will now turn the call over to our Chief Financial Officer, Mansi Khetani.

Thanks, Rick. As a reminder, please see our earnings press 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, settlements and nonrecurring legal expenses.

Revenue for the second quarter was $99 million, at the high end of our guidance range, sequentially higher than the prior quarter and down 9% year-on-year. Networked charging systems at $50 million accounted for 51% of second quarter revenue. Subscription revenue at $40 million was 40% of total revenue, 5% higher sequentially and up 10% year-on-year as our total installed base continued to increase. Other revenue at $8 million was 8% of total revenue.

Turning to verticals, which we report from a billings perspective, second quarter billings percentages were commercial 75%, fleet 11%, residential 10% and other 4%. From a geographic perspective, North America made up 84% of revenue and Europe was 16%. This was relatively consistent with the first quarter. Non-GAAP gross margin was 33%, growing by 3 percentage points sequentially and 8 percentage points year-on-year. This is attributable to higher hardware margins, higher subscription margins as well as subscription revenue growing as a percentage of total revenue.

I'd like to point out that this was our seventh straight quarter of sequential non-GAAP gross margin improvement. Hardware gross margin increased 1% sequentially despite the impact of higher tariffs. Subscription margin continued to grow, reaching another record high of 61% on a GAAP basis and was even higher on a non-GAAP basis, reflecting economies of scale and continued optimization of support costs. Non-GAAP operating expenses were $59 million, up 3% sequentially and down 12% year-on-year.

The small sequential increase this quarter was mainly due to a temporary increase in R&D spend as a result of higher NRE and contractor spend related to the development of our recently announced new AC and DC charging product architecture. This increase will persist in the third quarter, but we should see the spend gradually coming down in Q4 and then further reducing next year. We are continuing to closely manage operating expenses, balancing investments that we believe will lead to significant future growth and margin expansion while also being mindful of current constraints.

Non-GAAP adjusted EBITDA loss was $22 million. This compares with a loss of $23 million in the prior quarter and a loss of $34 million in the second quarter of last year. Stock-based compensation was $18 million, flat to last quarter and down from $19 million in the second quarter of last year. Our inventory balance remained virtually flat to the prior quarter at $212 million. While this balance didn't decrease due to existing commitments with contract manufacturers, we continue to drive towards a gradual reduction in inventory over the next few quarters, which will free up cash.

Speaking of cash, we ended the quarter with $195 million of cash on hand versus $196 million in the prior quarter, resulting in cash usage of less than $2 million. This compares with $49 million of cash usage in Q2 of last year and $29 million in Q1 this year. We have been able to significantly reduce cash burn over the past few quarters, mainly due to spend reductions and working capital management. Our $150 million revolving credit facility remains undrawn, and we have no debt maturities until 2028.

Turning to guidance. For the third quarter of fiscal 2026, we expect revenue to be between $90 million to $100 million. While we continue to guide cautiously given the challenging and constantly changing macro backdrop, delivering revenue growth and ultimately reaching non-GAAP adjusted EBITDA breakeven and generating positive cash flow remain our primary focus areas.

As Rick mentioned, given the macroeconomic headwinds, the trajectory of revenue growth required to get to non-GAAP adjusted EBITDA breakeven in a quarter will take longer to materialize than this year, but we expect to continue to make progress towards profitability and reducing cash burn, which we have managed to do well over the past year. We will now open the call for questions.

[Operator Instructions] your first question comes from the line of Colin Rusch with Oppenheimer.

Now can you just talk a little bit about what the trajectory is on OpEx? Obviously, R&D is remaining at some elevated levels along with the G&A. Just want to get a sense of how that should trend over the balance of this fiscal year?

Colin, I'll take that one. Yes, as I mentioned in my prepared remarks, OpEx was slightly higher than Q1 because of some investments we did on the R&D front. We have spent on prototyping as we're releasing these new products and releasing the new AC and DC architecture. Those are temporary onetime, if you will, NRE costs.

And then we also had elevated expenses on the contractor side this quarter. Now we expect this to persist in the next quarter because we're really in the middle of releasing all of these products. There's a lot of activity going on around that. But I think it should come down gradually in Q4, and then we'll manage it better next year.

Great. And then just from a sales perspective, we all know what's going on in North America and then kind of the digestion of the new policy. But I'm curious, in Europe, other geographies where you're seeing any potential higher growth opportunities, particularly with the Eaton relationship and global footprint there. Are there other areas that you see the products ending up that could surprise us in some way around the growth trajectory?

Yes. I think -- Hi, Colin, I think the overall macro conditions in Europe are looking better right now than they are in North America. Hopefully, things will start to clarify in North America once we get through the tax credit expiration in September. But in Europe, a lot of the products that are driving some of the incremental OpEx spend that Mansi alluded to are targeted at Europe, where we did not have solutions to serve those use cases in the past.

So the Flex product line that we've announced a month or so ago will launch in Europe here soon. In fact, we've now got inventory position in Europe to begin fulfilling early sales. And then the new DC Express architecture that we also announced will be targeted at Europe, where in the past, we have not had a DC product that was developed by us available in Europe. So we are optimistic about Europe as we move forward into the new year. It's a combination of a more positive macro environment and new products to serve that market that we believe are quite differentiated.

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

I guess maybe to start here, I just wanted to follow up on that last question in regards to the AC architecture or the new AC launch in Europe. Can you maybe speak to the initial kind of interest levels there? And you mentioned inventory -- I guess, maybe what's the channel looking like? And what has been the response from the dealerships -- dealer channel there?

Yes. So it's very early, Chris. We've just moved the first bit of inventory into Europe. We've had successful early access customers. And we're beginning to build up our channel interest and target our end customer base in three major geographies in Europe, the U.K., France and Germany. We've got all the approvals necessary to serve all the markets, all those different product configurations based on the requirements in each of those major European geos. So we'll be really getting clarity on the overall demand that we expect early on with this new product as we move through this quarter, but early indications have been positive.

Got it. Okay. And then maybe as a follow-up here, we're only, I guess, a month or 2 removed from the passage of the [indiscernible], but just kind of thinking about the demand outlook in the sort of, call it, lower for longer outlook in the U.S. -- I guess, how are you thinking about the company's positioning here just given the changes in that dynamic? Are you financially in the right place? Do you need to change personnel or strategy at all or slow down maybe some of the development going forward?

No, I think just the opposite. I mean, within the constraints of our OpEx envelope, I really believe the path to success is to deliver innovation to the market, which we've clearly been doing as we've moved through the year with some of the more significant innovations just announced recently that we mentioned a minute ago. The market -- this whole industry went through a hype cycle. It collapsed in 2023. I think there's going to be ongoing demand for EVs.

There are indications that, that's happening. I think I've seen data from Cox that July will be a record sales for EVs in North America, largely as a result of the tax credit expiration coming up this month. But what that tells us is that there is interest in EVs and demand for EVs if the price point is right. And I think we're seeing a lot of good innovation on the vehicle side. You can look at Ford's new platform announcement. Slate Auto, they announced their new vehicle.

There's just a bunch of things happening out there that are going to bring the selection up and the price down on EVs, which we believe will drive overall demand for EVs and thus charging going forward into the future. This down cycle is obviously putting pressure on everybody. And I think the industry is going to ultimately consolidate as a result of that. And I believe we're in the best position to capitalize on that.

We're the biggest company with the biggest balance sheet. We serve both North America and Europe. We've got a strong product portfolio spanning from home all the way up to DC fast charge along with all the software to manage it for every use case. So I think we're in a great position going forward.

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

I was hoping, first, you could elaborate more on what you're hearing from customers with respect to their project plans, in particular for North America. Rick, I think you mentioned some projects are being delayed, but not canceled. Can you share more on what you think it would take for customers to move forward with those delayed projects? And then any context they're sharing about how they're thinking about project timing, especially with the 30C tax credits for charging stations set to go away?

Yes, good question. And I think there's -- like we've got some -- we're being cautious about our look forward. I think our customers are as well. They all again, remain committed to their projects. We've literally not heard of one project cancellation. But I think once the tax credits go away and we see what that means to EV sales, you'll see some more decisiveness in the market regarding moving forward and hopefully not canceling or pausing, but we're waiting for that to happen to provide some clarity.

Beyond that, it is the typical stuff that causes project delays. It's getting grid upgrades. It's construction time lines. It's all the things that we've historically seen in the past where customers that are doing big projects, particularly often have kind of best case time lines as if everything goes well and then a permit gets delayed, the weather disrupts a construction project and all of a sudden, things are moving out. So that factor continues to persist, but it hasn't changed much.

Okay. My other question was for you, Mansi, on the gross margin. Nice to see the improvement you reported this quarter. You've spoken in the past about the potential for the hardware gross margins to continue to improve as you work off inventory of older product and shift your mix toward the lower-cost product that you're building with contract manufacturers. Maybe you can share more where you are in that process? And as you fully make the transition, how much do you think it could help the hardware gross margins?

Yes, Mark. So what we saw this quarter was hardware margins improved sequentially by a percentage points -- by a percentage point and this was because of -- we actually did see some products coming from Asia at lower cost, but we also saw improvement in warranty costs, and we saw efficiencies in non-BOM-related costs. which drove the margins up. Going forward, I think those factors will continue to benefit us. And then depending on inventory and sell-through, we should start seeing the benefit of the Asia manufacturing as well.

Your next question comes from the line of Mickey Legg with The Benchmark Company.

I want to dig in on the competitive landscape and how that's evolving a little bit. Could you talk about how you view your software and the moat you've built around that now that peers seem to be moving a bit harder into operation and software platforms?

Yes. Mickey, good question. I think we've got a state-of-the-art software platform that continues to evolve and modernize. We've now got a hybrid cloud solution. The amount of AI that we're integrating into the product is very interesting and exciting. I think it's going to unleash some real value for our customers. I also believe and know, quite frankly, that we can unlock all kinds of value by having our software work with our hardware.

While we're happy to have our software managed third-party hardware, which we do all the time, which is oftentimes a requirement for customers, we'll continue to do that. But we remain committed to develop hardware as well because we know that our hardware plus our software can create more value and do things that can't be done with just stand-alone software.

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

I was just curious, at least out in California, we're seeing a lot of increased DC charging setups, money going into DC charging. I was curious, do you think that's taking share from Level 2 where people thought Level 2 might have higher share in -- if we look back a couple of years to what people might see now? Or what are you guys doing around that? Or do you think the idea behind the question is wrong? I just kind of want to get a sense of Level 2 demand, DC charging demand, how are you kind of fitting both those buckets and what you're seeing?

We don't see DC cannibalizing AC demand. I mean, there are different use cases. And as we've talked about more than once, the vast majority of charging is done at home and at work, which is typically Level 2 charging. On the financial side, though, we are seeing a lot of interest or a reasonable amount of interest, I would say, increased interest from financing partners behind DC fast charging for general public charging. We've had some good success with partners that we've found that want to work with us to deploy DC fast charging for general public.

And then if we go back to the inventory -- Mansi, this one sort of would be for you. Is that something you have in the inventory now? And I guess with the inventory dollars staying where they are, but things are changing under the surface, I just wanted to kind of check in on any outsourcing risk or DC, AC, new product versus old product, how you kind of frame all that?

Yes. No, I mean we -- our inventory balance has a variety of different products and different volumes of all the different products. And we're managing that based on the arrival of the new products. We're watching that closely.

Again, the release dates of the new products and the general availability and increased volume is going to take some time, and we're kind of watching each product level with their release date and inventory balance and managing that. But in terms of -- if your question is about shortage or any kind of movement needed from one product to the other or the need to kind of source more, we don't see any of that.

Your next question comes from the line of Craig Irwin with ROTH Capital.

So cash use this quarter was really tight, right? You guys have been squeezing a lot of cash out of receivables, inventories, prepaid, I mean, payables, so everything was a contribution this quarter. Can you talk about the ability to continue squeezing the balance sheet for cash? And the new products that are launching for the end of the year, do they need a cash contribution for inventory for us to see the revenue start to ramp? Or can that be offset by continued progress bringing down balances from other products?

Craig, so I think there may be quarterly fluctuations in cash usage. Obviously, Q2 was fantastic in terms of cash usage, we used less than $2 million. But -- there may be slight quarterly fluctuations depending on the timing of receivables, payables, sale of inventory, et cetera. But we do anticipate that the overall trend of declining annual cash usage will continue, and it's entirely possible that because of our capital-light business model, we might get to the point where we generate cash in a quarter before we achieve EBITDA profitability.

And we anticipate that we will particularly benefit from this when we start to bring inventory balance down. In terms of the new products, I don't think it will impact inventory because I think the overall inventory reduction trajectory should still happen, and it should release cash because obviously, the inventory number as it stands now is pretty high.

The other comment I'll make, Craig, is that the supply chain time lines or lead time is pretty balanced with the sales cycles now in many cases. So unlike the COVID days, for example, we don't need to build far in advance of demand such that we can adhere to customer lead time requirements. We can balance that pretty effectively now.

Understood. And if I could squeeze another one in on the gross margin side. Can you maybe talk about the commonality of parts in the new products that you're launching? I know a lot of your products introduced to date have had substantial commonality in the architecture and components to drive purchasing leverage. Is there maybe a change in architecture or an evolution here? How much do the new products benefit from the pre-existing buy? And would you expect these products to potentially be margin accretive heading into the end of the year?

Yes. So at a part level, there's probably not that much commonality between the old products and the new. There are some exceptions, for example, charging cables or charging cables. They don't change very much from product to product depending on Level 2, Level 3, for example. What is common is the vendor base. And the leverage we have with the supply base is really driven by the amount of business we concentrate into certain suppliers as opposed to specific individual parts that we buy from them that may change as we move on from product generation to product generation.

Congratulations again on the progress this quarter.

Thanks, Craig.

Your next question comes from the line of Ryan Pfingst with B. Riley.

I'll just ask a couple of follow-ups on Europe. It looks like it's almost 20% of revenue right now. I'm curious where you think Europe could go in terms of ChargePoint's overall revenue mix over the next few years? And could you remind us if there are any material differences in terms of your economics in Europe compared to in North America?

The economics aren't a lot different. The different European countries have different regulations and requirements, which makes it a bit more complex from an inventory standpoint to make sure you have the right product for the right country, for example. But that's fairly minor relative to the overall dynamics of the business comparing North America to Europe. We're not guiding revenue beyond this quarter, but the fact that we've got hardware products going into Europe that are our products that we haven't been able to offer previously implies that Europe will definitely be growing for us.

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

I would like to follow up on gross margins. It's been asked a few different ways. But -- but just looking ahead, how should we think about steady-state margins for hardware when you're really past any sort of existing inventory and you're on, I guess, an optimized platform. What should that look like over the long term, I guess, on a go-forward basis as well as subscriptions. I think you've been doing some work there to optimize that part of the business as well.

Just trying to get a sense for how we should think about steady-state margins. And I guess you mentioned you're navigating tariffs, but could you quantify the impact of these so we can at least understand what level of impact there is? Should we get any relief or conversely if tariffs become more, I guess, impactful?

Yes. Bill, I'll take that one. So I'll start with the subscription margins. I think subscription margins should continue to improve with economies of scale and ongoing efficiencies in our support organization. Our revenue keeps growing, but we don't have to scale costs up. So that's -- the improvement should continue, as you said, is more than 61% on a non-GAAP basis this quarter. I think that trend continues.

On the hardware side, again, as we see products coming in from Asia, if margins should get better. We saw improvement in warranty costs, other efficiencies and non-BOM costs, all of that could help. However, on the hardware side, the overall margin really depends on the mix of products sold, which is difficult to predict.

So it's hard to call out an ideal state. There are a lot of moving parts there. And also overall, for margin, there is a fact of Subscription revenue as a percentage of overall revenue. If that improves, obviously, margins go up. But as we start selling more hardware, that could impact overall margins.

The other comment I'll make, Bill, is that the new products, we expect to have higher baseline margin profiles than any of our existing products. We've been very focused on not only designing for features, functionality, broad applicability, but also for cost profiles.

Yes. And then on the tariffs -- so we have a lot of tariff mitigation already in place. We have a spread out manufacturing base across the globe, which we're kind of leveraging to manage tariffs. It wasn't really meaningful within this quarter. And like I said, we were able to mitigate the tariffs that we had and whatever we did incur, we actually -- we had improvements that kind of overcame that. So I don't think there is that much of an impact based on what we know today. Of course, if that tariff environment changes, then things could change.

[Operator Instructions] Your next question comes from Jon Windham with UBS.

This is Jon. Hopefully, you can hear me okay?

Yes.

Perfect. You'd mentioned the potential for consolidation in the industry. I was wondering if you could talk through if there's been any early signs of that in Europe or U.S. or anywhere you can sort of point to? Appreciate it.

Yes, Jon, I can't talk to anything specifically, but it seems like it's quite active. There's a lot of interesting conversations going on.

Maybe to ask the question sort of a little bit differently. And without asking anything specific in terms of where it would be, what would you see the advantages? So as an analyst, when we're looking at this is taking out OpEx as a percentage of revenue, greater network scale. If you could just talk through what you think the advantages of consolidation would be, I'd really appreciate it.

Yes. I think it's pretty typical after you go through a hype cycle and you end up with a lot of companies getting started during that hype cycle with what looks like an exciting fast-growing market, then you get overcrowding in terms of the competitive landscape. And you've got people that are trying to survive and they tend to try and fight on price and they race each other to the bottom and they end up in a situation where they just don't have an economic model that no longer makes sense.

Your next question comes from the line of Ryan Pfingst with B. Riley. And we have no further questions in our queue at this time, and that does conclude today's conference call. Thank you for your participation, and you may now disconnect.