ChargePoint Holdings (CHPT 3.84%) reported its fourth-quarter and full-year fiscal 2022 results on March 2. The report and guidance were impressive, and ChargePoint stock rose 6.7% on March 3 based on the news. Yet, even with that gain, ChargePoint stock remains down about 67% from its all-time high, as broader market volatility rips through growth stocks.
Even in the face of supply chain challenges and rising inputs, ChargePoint is set on growing its market share in North America and Europe as quickly as possible. But that growth also means a much higher cost of revenue and operating expenses. This begs the question: Is ChargePoint's aggressive growth strategy the right decision, or should the company be reeling in spending to get closer to profitability?
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Business is booming
Like many recently public unprofitable companies, ChargePoint went public by merging with a special purpose acquisition company (SPAC). To its credit, ChargePoint has been one of the few companies to go public via SPAC that is hitting or even exceeding its targets.
The company earned $144.5 million in fiscal 2020 revenue and then just $146.5 million in fiscal 2021 revenue as the COVID-19 pandemic stunted its growth. But since then, it has resumed its upward trajectory, earning $242 million in fiscal 2022 revenue and guiding for between $450 million and $500 million in fiscal 2023 revenue.
ChargePoint now has 174,000 network charging ports, a 64% year-over-year increase. Of those 174,000 ports, 51,000 are in Europe, and 11,500 are DC fast-charge ports. ChargePoint grew its residential billings by 44% year over year, commercial by 89%, and fleet by 132%. Commercial continues to be the company's highest-margin segment.
NYSE: CHPT
Key Data Points
Scaling to survive
ChargePoint management said it believes the charging company with market share across residential, commercial, and fleet in both North America and Europe stands the best chance to maximize vertical integration and land big customers. When discussing growth, CEO Pasquale Romano said the following on the company's Q4 fiscal 2022 earnings call:
And if you think about many, many customers, especially on the fleet side but even on the commercial side, they're multinational. And when they integrate with their business systems, they want one partner for that. So it's not only existential from, I think, being able to drive cost structure that's competitive, in fact, better than competitive. It will be best-in-class long term. If we can get to be a scale leader in both North America and the U.S. or North -- and Europe and then also, again, make sure that we can just cover a customer wherever they go.
Over 50% of Fortune 500 companies are ChargePoint customers. ChargePoint's strategy, in essence, is all about shipping as many ports as possible and making inroads with as many customers as possible under the assumption that those customers will stick with ChargePoint as electric vehicle (EV) adoption grows and their demand for charging ports increases over time.
Shooting for the stars
Despite rising costs and a gross margin expected to get hit hard in fiscal 2023, ChargePoint isn't budging from its "land and expand" strategy. It's still ramping up spending to capture as much market share as possible -- even if it comes at the expense of its shrinking cash position.
|
Financial Metric |
Q4 FY2022 |
Q3 FY2022 |
Q2 FY2022 |
Q1 FY2022 |
|---|---|---|---|---|
|
Revenue |
$80.7 million |
$65 million |
$56.1 million |
$40.5 million |
|
Cost of Revenue |
$63.2 million |
$49 million |
$45.3 million |
$31.3 million |
|
Gross Profit |
$17.5 million |
$16.1 million |
$10.8 million |
$9.2 million |
|
Operating Expenses |
$97.7 million |
$81.4 million |
$85.1 million |
$55.8 million |
|
Operating Income (Loss) |
($80.2 million) |
($65.3 million) |
($74.3 million) |
($46.6 million) |
|
Cash and Equivalents Balance |
$315.2 million |
$365.5 million |
$618.1 million |
$609.8 million |
FY = Fiscal year. Data source: ChargePoint Holdings.
In the above table, it's clear to see that ChargePoint is nowhere close to turning a profit and, in fact, is losing more money as it grows revenue. However, the company believes that operating expenses as a percentage of revenue will continue to decrease. The company is investing heavily in research and development (R&D) in fiscal 2023 but estimates its R&D expense will decrease in subsequent years.
It's also worth mentioning that ChargePoint hasn't yet benefited from the $7.5 billion related to EV charging from the Infrastructure Investment and Jobs Act. It expects those benefits to begin in calendar year 2023 and last for five years, on top of other state and utility programs. ChargePoint expects the majority of the federal support to flow through the states, which will then construct their own programs. But ChargePoint plans to be a key beneficiary of this support as it has worked with similar programs previously.
Where to go from here
ChargePoint's accelerated growth and ramped-up spending are unique, given the slowing growth we are seeing across the EV industry. The company's unrelenting confidence in a future dominated by EVs and the need for charging leaves it undeterred by the prospect of a depleting cash position. ChargePoint has made it clear that it is going big or going home. For risk-tolerant investors, that means ChargePoint may be a high-growth stock worth considering now. And for risk-averse investors, ChargePoint's potential failure means it is probably a stock worth avoiding.
