Electric vehicle (EV) charging network company ChargePoint Holdings (CHPT 0.31%) warned investors in mid-November that its fiscal 2024 third-quarter earnings would be disappointing. That earnings report was just released, and the results were as advertised.
To make the situation seem even more concerning, ChargePoint also replaced its CEO last month, making this the first quarterly report with new CEO Rick Wilmer at the helm. The quarterly results for the period ended Oct. 31 were in line with what ChargePoint pre-announced about three weeks ago.
A sharp turn in the wrong direction
ChargePoint reported a 12% year-over-year decline in revenue and hit the middle of the range it provided in its recent pre-release. That helps explain why the stock didn't react strongly to the news. But the $110 million in quarterly revenue was also a sharp sequential decline from the $150 million reported in the prior quarter. The annual and sequential drops in sales represent a major step back for the largest EV charging network, not named Tesla.
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Key Data Points
The report itself didn't move ChargePoint stock, largely because shares had already dropped by 33% over the last month. There was good reason for that, too. The declines in both annual and sequential revenue are in stark contrast to the growing sales ChargePoint had been seeing. Consider that revenue soared by 94% in the company's fiscal 2023 period (ended Jan. 31, 2023) and the 65% year-over-year growth in fiscal 2022.
Losses also mounted for ChargePoint, with the company reporting a loss from operations that grew by 85% versus last year. That was partly due to a $42 million impairment charge "to address supply overruns related to product transitions and to better align inventory with current demand."
ChargePoint's sales are dropping, and losses are growing.
Two-pronged headache
Therein lies part of the problem. And that problem doesn't have a great solution. ChargePoint has been counting on the adoption of EVs growing in both North America and Europe. But that growth has slowed for many EV makers planning to challenge Tesla and take some of that company's leading market share.
Legacy automakers are throttling back plans to invest in building new electric models in the wake of a demand slowdown. Even Tesla CEO Elon Musk acknowledged that the economic environment of higher interest rates has impacted consumers' abilities to purchase new EVs. That macroeconomic picture helps explain ChargePoint's declining sales, but another serious headwind just appeared on the horizon.
Several Tesla competitors have negotiated with the EV leader to allow non-Tesla owners to use its Supercharger fast-charging network. Now, ChargePoint is accelerating the production of Tesla-compatible chargers using Tesla's North American Charging Standard (NACS) plugs.
Tesla has also started selling its charging hardware to third parties for the first time. In October, Tesla and BP announced a $100 million deal for the energy company to purchase Tesla's fast-charging equipment. Tesla followed that with another deal to sell its ultra-fast-charging equipment directly to a third party in the U.K.
Still optimistic
Even with those headwinds, ChargePoint management remains optimistic. The new CEO still believes the company will deliver positive non-GAAP adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of calendar year 2024.
The company also still held about $400 million in cash and equivalents on its balance sheet as of Oct. 31. But that cash won't last long if Tesla continues to expand sales of its Superchargers while overall EV sales growth slows.
