Data source: S&P Capital IQĬhargePoint adjusted gross margins. But, ChargePoint's Underlying Profitability is Nowhere Close to its High-Growth SaaS PeersĬhargePoint GAAP gross margins. It also aligns well with the company's focus on raising its Subscription share of revenue over time. Therefore, the company still relies on its L2 AC chargers as its vital product differentiators in penetrating the EV-charging market. A fast charger is such an expensive proposition for the average shopper use case and consumes so much electrical capacity that it would have been a massive mistake. If you don't match it correctly, you will have a very expensive utilization mistake of the total construction cost and equipment cost versus the number of parking spaces and customers you can serve. It's about matching the end-consumer needs correctly. The average shopper doesn't want to use 元 fast charger if they're in their local area. Moreover, ChargePoint believes that L2 will continue to play a significant role for its customers when deciding whether to install L2 or 元 chargers. Given the company's estimates of achieving a 49% recurring revenue share in the long run, its L2 performance could be pivotal to reaching its goal. ChargePoint also believes that its L2 solutions yield a higher recurring subscription share of revenue. The company derives its revenue mainly from L2 AC chargers, while it's also a key player in the 元 DC fast-charging network. Our deferred revenue from subscriptions representing recurring revenue from existing customer commitments and payments grew nicely, finishing the quarter at over $120 million. Second, for most of our solutions, we began revenue for subscriptions at a fixed time after the associated hardware shipment to accommodate installations, yielding a time lag of at least a quarter. In Q3, the mix again favored DC network charging systems and home, which have a lower ratio of subscription to network hardware revenue. CFO Rex Jackson emphasized (edited):Īs I mentioned last quarter, the change in growth rates between network charging systems and subscription revenue is a function of 2 main factors: mix and time lag. Management updated that the change in the mix had led to the reduction. However, Subscription's share of revenue has been trending down since the start of FY22. Subscription accounted for 20.6% of FQ3's revenue, was up 24.3% YoY, and was up 11% QoQ. It grew its revenue to $65.03M, up 15.9% QoQ and up 78.8% YoY. Data source: Company filingsĬhargePoint delivered a mixed FQ3 where it beat the consensus' topline but missed both adjusted and GAAP EPS. Data source: Company filingsĬhargePoint subscription share of revenue. ChargePoint Focuses on L2 AC Products to Drive Up its Subscription Share of RevenueĬhargePoint revenue segments. The market doesn't seem to buy the SaaS narrative from ChargePoint, as it posted a YTD return of a whopping -50.4%. It has also delivered the worst performance among its peers listed above while also significantly underperforming the market. CHPT Stock YTD PerformanceĬHPT Stock YTD performance (as of 15 December '21).ĬHPT stock has had a disappointing year. Readers can also refer to our previous article as a primer to ChargePoint's business model. We discuss why we think investors should be cautious when comparing valuations of high-growth SaaS stocks with CHPT stock. Moreover, we don't believe the economics make sense for CHPT stock to be afforded such valuations. However, we do not think the company deserves to be assigned valuations typical of high-growth SaaS stocks. We are a SaaS company through and through." CHPT CEO Pasquale Romano emphasized (edited): " We do not sell hardware without subscriptions to our cloud-management software. The lower-margin hardware aspect is its central funnel to attract customers onto its platform for higher-margin monetization through its charging management software services. It doesn't operate EV-charging infrastructure. Readers should note that the company considers itself mainly as a software company. Its business model revolves around its expertise in developing its networked charging system hardware, accompanied by its cloud-based software subscription solutions. ( NYSE: CHPT) is one of the leading players in the US EV-charging infrastructure network. Justin Sullivan/Getty Images News Investment ThesisĬhargePoint Holdings Inc.
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