ChargePoint(US:CHPT)2024-12-06 21:06Part I Condensed Consolidated Financial Statements (Unaudited) ChargePoint's unaudited financial statements reveal decreased revenue, improved gross profit, and reduced net loss, with balance sheet and cash flow details Condensed Consolidated Statements of Operations Highlights (Unaudited, in thousands, except per share data) | Metric | Three Months Ended Oct 31, 2024 | Three Months Ended Oct 31, 2023 | Nine Months Ended Oct 31, 2024 | Nine Months Ended Oct 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $99,612 | $110,283 | $315,194 | $390,807 | | Gross Profit (Loss) | $22,786 | $(23,946) | $71,981 | $7,714 | | Loss from Operations | $(68,166) | $(153,767) | $(198,050) | $(357,021) | | Net Loss | $(77,590) | $(158,219) | $(218,263) | $(362,861) | | Net Loss Per Share | $(0.18) | $(0.43) | $(0.51) | $(1.01) | Condensed Consolidated Balance Sheet Highlights (Unaudited, in thousands) | Metric | October 31, 2024 | January 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $219,409 | $327,410 | | Total Assets | $966,338 | $1,103,363 | | Total Liabilities | $785,357 | $775,687 | | Accumulated Deficit | $(1,832,635) | $(1,614,372) | | Total Stockholders' Equity | $180,981 | $327,676 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited, in thousands) | Metric | Nine Months Ended Oct 31, 2024 | Nine Months Ended Oct 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(144,265) | $(287,488) | | Net cash (used in) provided by investing activities | $(10,136) | $90,329 | | Net cash provided by financing activities | $16,393 | $300,700 | - The company has a history of net operating losses and negative cash flows from operations since inception, with an accumulated deficit of $1.83 billion as of October 31, 202439 Management believes existing cash and sales will be sufficient for at least the next twelve months40 Note 1. Description of Business and Basis of Presentation ChargePoint, an EV charging systems provider, reports an accumulated deficit of $1.83 billion but anticipates sufficient liquidity for the next year - ChargePoint's business model is centered on networked EV charging systems, cloud services, extended warranties (Assure), and a bundled subscription service (CPaaS)36 - The company has a history of operating losses, with an accumulated deficit of $1,832.6 million as of October 31, 202439 - Management asserts that cash on hand ($219.8 million), along with cash from sales and available funding, is sufficient to satisfy working capital and capital requirements for at least the next twelve months40 Note 5. Restructuring Charges ChargePoint implemented three major reorganization plans since September 2023, including a 15% workforce reduction in September 2024, to cut operating expenses - In September 2024, the company initiated a reorganization plan, reducing its workforce by approximately 249 employees (15%), incurring $9.8 million in employee severance and related costs98 - A previous reorganization in January 2024 reduced the workforce by 223 employees (12%), resulting in $9.9 million in severance costs and $2.7 million in facility exit costs100 - Another reorganization in September 2023 reduced the workforce by 168 employees (10%), incurring $15.6 million in severance and termination charges104 Note 6. Debt As of October 31, 2024, ChargePoint held $299.4 million in convertible debt and an undrawn $150.0 million revolving credit facility Debt Summary (in thousands) | Debt Instrument | Carrying Amount (Oct 31, 2024) | Estimated Fair Value (Oct 31, 2024) | | :--- | :--- | :--- | | 2028 Convertible Notes | $299,410 | $220,000 | - In October 2023, the Original Convertible Notes were amended, extending the maturity to 2028, increasing the cash interest rate to 7.0% and PIK interest rate to 8.5%, and revising the conversion price to approximately $12.00 per share120 - The company has a $150.0 million senior secured revolving credit facility (2027 Revolving Credit Facility) which was undrawn with no letters of credit outstanding as of October 31, 2024126133 Note 7. Commitments and Contingencies ChargePoint faces a class action lawsuit and derivative actions over alleged securities violations, while a $30.0 million restricted cash letter of credit expired in May 2024 - A class action lawsuit was filed against the company and former officers alleging false and misleading statements regarding supply chain disruptions, revenue, and inventory value between December 2021 and November 2023136 - Multiple shareholder derivative actions have been filed, making similar allegations as the class action lawsuit, and are currently stayed pending the motion to dismiss in the class action137 - A letter of credit agreement with a contract manufacturer expired on May 16, 2024, releasing $30.0 million of restricted cash back to the company146 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, noting decreased revenue offset by improved gross margin and reduced operating expenses due to restructuring, affirming sufficient liquidity for the next year - Key factors affecting performance include EV adoption rates, competition, European and fleet market expansion, new product releases, government incentives, and macroeconomic trends like inflation and interest rates179 - The company has seen an increase in customers seeking to disaggregate hardware and software solutions, a shift from its traditional integrated "full-stack" offering, which could impact its competitive position180 - As of October 31, 2024, the company had $219.8 million in cash, cash equivalents, and restricted cash Management believes this, along with sales and available funding, will satisfy working capital needs for at least the next twelve months238 Results of Operations Total revenue decreased for the three and nine months ended October 31, 2024, while gross profit improved and operating expenses decreased, leading to a lower net loss Revenue by Type (in thousands) | Revenue Type | Three Months Ended Oct 31, 2024 | Three Months Ended Oct 31, 2023 | % Change | | :--- | :--- | :--- | :--- | | Networked charging systems | $52,662 | $73,893 | (28.7)% | | Subscriptions | $36,417 | $30,559 | 19.2% | | Other | $10,533 | $5,831 | 80.6% | | Total Revenue | $99,612 | $110,283 | (9.7)% | - Gross profit and margin increased significantly for the three and nine months ended October 31, 2024, primarily due to inventory impairment charges of $42.0 million and $70.0 million, respectively, taken in the prior-year periods213 - Operating expenses decreased across the board due to reorganization plans and cost reduction measures For the three months ended October 31, 2024, R&D expenses fell 32.2%, Sales & Marketing fell 12.9%, and General & Administrative fell 46.3% YoY216221225 Liquidity and Capital Resources ChargePoint held $219.8 million in cash as of October 31, 2024, with access to an undrawn $150.0 million revolving credit facility and an ATM facility, ensuring liquidity for the next year - As of October 31, 2024, the company had cash, cash equivalents, and restricted cash of $219.8 million, down from $357.8 million at January 31, 2024238 - The company has a $150.0 million revolving credit facility maturing in 2027, which was undrawn as of October 31, 2024243244 - An At-the-Market (ATM) facility is in place, with $158.6 million of common stock available for sale as of October 31, 2024 During the quarter, the company sold 2.2 million shares for net proceeds of $3.0 million245 Quantitative and Qualitative Disclosures About Market Risk ChargePoint is exposed to interest rate and foreign currency risks, primarily in euros, but a hypothetical 10% change in either would not materially impact its financial position - The company is exposed to interest rate risk, but a hypothetical 10% change in interest rates would not materially impact the value of its cash and cash equivalents265 - ChargePoint has foreign currency risks from its international operations, mainly in euros A hypothetical 10% adverse change in foreign exchange rates would not result in a material loss266267 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of October 31, 2024, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of October 31, 2024270 - No changes in internal control over financial reporting occurred during the quarter ended October 31, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal controls271 Part II - Other Information Legal Proceedings The company is involved in various legal proceedings, including a consolidated securities class action lawsuit and related derivative actions detailed in Note 7 - The company is subject to legal proceedings in the ordinary course of business More detailed information is available in Note 7, Commitments and Contingencies274275 Risk Factors ChargePoint faces significant risks including a history of losses, intense competition, supply chain disruptions, substantial indebtedness, and ongoing securities litigation - The company has a history of losses and negative cash flows and expects to incur significant expenses and losses for the near term, with profitability dependent on the continued adoption of EVs278299 - ChargePoint faces significant competition from hardware manufacturers, software providers, and other network operators, including Tesla's supercharger network The adoption of the SAE J3400 (NACS) standard by major EV manufacturers presents a risk if ChargePoint cannot adapt its network effectively279310 - The business is exposed to supply chain disruptions, component shortages, and reliance on a limited number of suppliers, which could impact production, costs, and ability to meet demand282327333 - The company has substantial indebtedness through its 2028 Convertible Notes and a 2027 Revolving Credit Facility, which impose restrictive covenants and require significant cash to service, potentially limiting business flexibility290508514 - ChargePoint is currently subject to a securities class action lawsuit and shareholder derivative actions related to alleged false and misleading statements, which could result in substantial damages and divert management's attention523 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or issuer purchases of equity securities during the reporting period - There were no unregistered sales of equity securities or issuer purchases of equity securities during the reporting period548549 Other Information No directors or executive officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the three months ended October 31, 2024 - No directors or executive officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the third quarter of fiscal 2025552 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits include certifications from the Chief Executive Officer and Chief Financial Officer as required by SEC rules, along with Inline XBRL documents556