Ladies and gentlemen, good afternoon. My name is Abby, and I'll be your conference operator for today's call. At this time, I would like to welcome everyone to the ChargePoint Fourth Quarter Fiscal 2022 Earnings Conference Call and Webcast. All participants’ lines have been placed in listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. And I would now like to turn the call over to Patrick Hamer, ChargePoint's Vice President of Capital Markets and Investor Relations. Patrick, 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 year 2022. This call is being broadcast over the web and can be accessed on the investors section of our website at investors.chargepoint.com. With me on today's call are Pasquale Romano, our Chief Executive Officer; and Rex Jackson, our Chief Financial Officer. This afternoon, we issued our press release announcing results from the fourth quarter and full fiscal year 2022 ended January 31, 2022, 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 fiscal first quarter and full fiscal year 2023 outlook and our expected investments in growth initiatives. 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 December 15, 2021, 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 historical periods in the investor presentation posted on the investors section of our website. And finally, we'll be posting the transcript of our call to our Investor Relations website under the Quarterly Results section. And with that, I'll turn it over to Pasquale.

Thank you, Pas, and thank you all for joining us today. In my remarks, I'll provide an overview of our execution against our Q4 plan and some highlights from the full year that just closed, an update on our technology and business infrastructure and some commentary on how we see this year unfolding. And after that, I'll turn it over to Rex Jackson, our CFO, for a more detailed review of the quarter and the year that just closed and guidance for Q1 and the full year ahead. The mission of ChargePoint has never been more important, and our opportunity has never been greater. This marks our first full year operating as a public company, and it was a remarkable year on many fronts. The investments we made over nearly 15 years set us up to capture the demand we are seeing today across commercial fleet and residential verticals in both North America and Europe. These results further cement ChargePoint as the equivalent of an index for electrification in mobility. Our strong performance and record revenue throughout the year were fueled by growth in charging demand from accelerated EV adoption. EV volumes in North America and Europe were up over 70% in 2021 conservatively. In fact, all our verticals, commercial fleet and residential, were strong. We began the year with revenue guidance of $195 million to $205 million and repeatedly raised guidance, ending the year with over $242 million in revenue, a number that could have been higher if it weren't for supply chain constraints. In the challenging supply chain environment in 2021, we chose to optimize for customer acquisition, leading us to prioritize assurance of supply rather than short-term gross margin preservation. This decision had an impact of 3 percentage points of gross margin for the year and 4 percentage points for the quarter. Given that every commercial and fleet port we sell has attached recurring software subscription revenue and nearly every customer account represents a significant land-and-expand opportunity, this decision should have long-term positive implications for our revenue and our gross margin. Now let's talk about the product portfolio and infrastructure required to scale. We continue to invest heavily in our cloud-based software solution, and our software is designed to support the use cases wherever a driver needs to charge, including residential, commercial, and fleet settings. Our software also covers linkages between those settings. For example, if a customer has primarily depot-based charging that occasionally utilizes ChargePoint on route, that customer can manage those scenarios on a consolidated basis. To give you some examples of the broad use case coverage our software facilitates, we support payment integration in a multitude of ways: energy management, charger deadline scheduling, and many other features we continue to develop and improve for our fleet and site house customers and ChargePoint drivers. We have additionally strengthened our broad software offering through two acquisitions last year. We made a portfolio announcement last year as well, and we are in deployment now with customers and are ramping production throughout this year. Our architecture is highly modularized, so configurations of the exact same hardware are leveraged across commercial fleet and residential verticals. The entire hardware portfolio has been designed in conjunction with our cloud-based charter control system, enabling ChargePoint to address a very broad set of customer requirements with the minimum number of platforms. The large number of integrations we continue to make with the tech and automotive ecosystems are becoming increasingly important as charging moves into the mainstream. Last year, we added to the list of in-vehicle and in-app integrations with partners, including Android Auto, Mercedes, Polestar, and Volvo. The investments we made long ago in establishing a strong distribution channel are paying dividends. Now some highlights from the quarter and the full year indicate the scale we are delivering. Our Q4 revenue of $81 million marks a record quarter and is above the high end of the guidance range we provided on December 7. We finished the quarter with over 174,000 network ports under management, an increase of 64% year-over-year. Within that, the European port count was approximately 51,000, and the global DC fast-charge port count was approximately 11,500. We're also approaching 300,000 roaming ports accessible to drivers using their ChargePoint account. So if you combine that with 174,000 ports that are directly on our network, our drivers have access to almost 475,000 ports globally. The momentum in our commercial business, which includes everything from retail parking, fueling, and convenience, indicates that businesses of all types are preparing for the electric future. ChargePoint is proud to have over 50% of the Fortune 500 as its customers. Last year, we achieved over 89% year-on-year growth in our commercial business on a billings basis. In 2021, ChargePoint continued to lead across Europe with strategic acquisitions, commercial partnerships, significant roaming progress, and expanded talent base and industry recognition. We made meaningful advances in Europe, and our market share accelerated with the successful acquisition of has·to·be. It was also a banner year on the fleet front. Fleets are electrifying and turning to ChargePoint for charging solutions, as evidenced by the year-on-year billings increase of 132%. In addition to introducing the industry's most comprehensive global electric fleet charging portfolio, we rounded out the portfolio with the successful acquisition of ViriCiti and landed signature account wins in last-mile delivery in transit. We expanded our partnership portfolio to include Element, Gatex, LeasePlan USA, WEX, and Wheels Donlen. These partnerships span fleet management, financial technology services, and leasing providers and represent an opportunity to provide charging solutions for well over 15 million vehicles as they electrify. Now turning to residential. Billings were up 44% year-on-year. Years ago, we calculated that being in all verticals of charging would be a strategic advantage, and our strategy has long included enabling charging where people spend time. Our three verticals came together in residential in a significant way in 2021. Having a residential solution that can be integrated with our commercial and fleet verticals continues to be an advantage, and here are some examples. First, businesses that operate take-home fleets and companies that offer vehicles and fueling as an employee benefit are increasingly turning to ChargePoint to handle charging and the associated reimbursements. Second, as many continue to work from home, whether in an apartment/condo, single-family home, etc., we saw corresponding demand from property owners and homeowners. Third, we continue to partner with a growing number of residential charging programs with utilities throughout North America as they seek expert help to plan for residential fueling demand today and for years to come. We are also being recognized for our innovation with strong consumer ratings and continued recognition from leading publications. The scale of our network is generating a positive environmental impact, with over 3.6 billion electric miles driven to date. By our estimates, drivers have avoided over 145 million gallons of gasoline and over 608 metric tons of greenhouse gas emissions. Now turning to fiscal 2023. We see a steeper revenue trajectory than previously forecast, which we expect will continue for the foreseeable future. The transition from fossil fuels to electric drive will span multiple decades. For ChargePoint, we are forecasting growth rate acceleration from 65% last year to 96% this year. As I consistently mention, we continue to optimize for assurance of supply in this land-and-expand model that has recurring revenue attached to every hardware port sold. Any resulting margin impact last year or this year is not indicative of the long-term margin profile of the company. We expect increasing operating leverage this year and in the future and continue to expect that we will cross through cash flow breakeven even in calendar 2024. I would like to thank our customers, partners, and employees for an exceptional year and their commitment to electric mobility. Our mission requires world-class talent, and I'm pleased that ChargePoint continues to be a destination for top professionals. We doubled our talent pool in the year. We ended the quarter with over 650 employees dedicated to R&D and technology-related functions. Our Board additions included Susan Heystee, former Verizon Telematics leader, and Elaine Chao, former Secretary of Transportation. These additions further round out the Board, which includes leaders from technology, energy, auto, and the investment community. In the U.S., the infrastructure investment in the JOBS Act represents a tremendous opportunity for up to $7.5 billion to accelerate the build-out of charging along highways and in our communities. As we expected and have commented on previously, this new stimulus should substantively manifest in calendar year 2023, rolling for five years. In addition, there are other state and utility programs being formed and in place today, all of which indicate a broad commitment to the electric future. In closing, our ability to achieve 65% revenue growth in fiscal 2022 illustrates the power of our strategy, business model, and operating capability, and these capabilities give me tremendous confidence that we will continue to scale the business with even market growth forecasted to continue for decades to come. We are delivering on our plan, exceeding revenue goals, and executing across all our verticals in North America and Europe. Now, I'll turn this over to our CFO, Rex Jackson, to discuss financials before we move to the Q&A. Rex, over to you.

Thanks, Pasquale, and good afternoon, everyone. First, my comments are non-GAAP, where we principally exclude non-stock-based compensation, amortization of intangible assets, nonrecurring costs related to restructuring and acquisitions, and the effect of the valuation of our stock warrants. Please see our earnings release for a reconciliation of these non-GAAP results to GAAP. Second, after covering our Q4 full-year results, I will guide on Q1 revenue. For reasons I'll explain later, I'll guide on revenue, non-GAAP gross margin, and non-GAAP operating expenses for the full year. Third, consistent with prior calls, we continue to report revenue along three lines: network charging systems, subscriptions, and other. Network charging systems represent our connected hardware. Subscriptions include our cloud services; connecting that hardware; our Assure warranties; our ChargePoint-as-a-Service offerings, where we bundle our solutions into recurring subscriptions; and software revenue from our ViriCiti and has·to·be acquisitions. Other consists of energy credits, professional services, and certain non-material revenue items. Moving to results. Q4 revenue was $81 million, up 90% year-on-year, above our previously announced guidance range of $73 million to $78 million, and up 24% sequentially. We are particularly pleased with this performance given continuing supply chain challenges. We managed as well relative to our guidance commitments, but with demand significantly exceeding supply, our exiting Q4 backlog was significantly higher than any prior quarter in the company's history. Network charging systems at $59 million were 73% of Q4 revenue, consistent with Q3, and up 109% year-on-year and 25% sequentially. Subscription revenue at $17 million was 21% of total revenue and up 57% year-on-year and 28% sequentially. The sequential increase in subscription revenues reflects software activations of recent hardware shifts, as well as stronger take-up rates in Assure, our warranty product, as well as contributions from our acquisitions. Our deferred revenue from subscriptions represents future recurring revenue from existing customer commitments and payments, and continues to grow nicely, finishing the quarter at $147 million, up from $121 million at the end of Q3. Other revenue at $4 million and 5% of total revenue increased 38% year-on-year and was flat sequentially. Turning to verticals. As you know, we look at them from a billings perspective, which approximates the revenue split. Q4 billings percentages were commercial 74%, fleet 14%, residential 10%, and other 2%, reflecting strong performance across all verticals despite supply chain challenges. Total billings for the quarter were up 95% year-on-year and 20% sequentially. From a geographic perspective, Q4 revenue from North America was 88% and Europe was 12%, representing a slight shift to Europe driven by both organic growth and acquisition contributions. In the fourth quarter, Europe delivered $10 million in revenue, growing 184% year-on-year and 35% sequentially. Turning to gross margin. Non-GAAP gross margin for Q4 was 24%. As Pasquale mentioned, we are focused on assurance of supply to land new customers and to expand with existing ones. While this places pressure on our gross margin, we believe this is the right and necessary strategy. Once we land a customer, they tend to grow with us over time and also provide ongoing subscription revenue. It is very important to keep our focus on delivering product and locking customers in. We estimate higher purchase price variances and logistics costs represented approximately 4 margin points net of our efforts to pass-through costs where we can through higher prices and logistics fees. A key point to note is that our prices are holding well, so the key margin challenges are supply chain and mix. Non-GAAP operating expenses for Q4 were $77 million, a year-on-year increase of 83% and a sequential increase of 23%. Stock-based compensation in Q4 was $15 million. Looking at cash, we finished the quarter with $316 million, down from $366 million at the end of Q3. We have approximately 335 million shares outstanding. Turning to the year. Annual revenue was $242 million, up 65% year-on-year, above our increased December guidance of $235 million to $240 million. Network charging systems at $174 million were 72% of total revenue for the year and an increase of 90% year-on-year. Subscription revenue at $54 million was 22% of total revenue and up 32% year-on-year. As we've mentioned previously, subscription revenue is delayed a quarter or more due to activations and is heavily influenced by mix. This year, mix trended materially towards residential and fast-charge solutions, which on a percentage basis have lower software content. Quickly covering verticals for the year. Billings by vertical were commercial 73%, fleet 14%, residential 11%, and other 2%. As Pat mentioned, fleet billings increased 132% year-on-year as that market continues to accelerate and we display leadership. Total billings were up 81% year-on-year. From a geographic perspective, full-year revenue from North America was 90% and Europe was 10%. In fiscal 2022, our European business delivered $25 million in revenue, up 131% year-on-year. As we've said before, Europe is a key growth driver for us, and we are investing accordingly. Turning to gross margin. Non-GAAP gross margin for the year was 24% for the reasons I mentioned earlier and was up 1 point from the prior year. The total supply chain and logistics impact for the year was approximately 3 points. Non-GAAP operating expenses for the year were $240 million, a year-on-year increase of 62%. As you heard in Pasquale's remarks, and I'll look at our guidance, we believe continued heavy investments are the right answer to pursue our product and sales goals. Turning to guidance. As many of you know, now that we're through our first year as a public company, I plan to move to only quarterly revenue guidance. However, given the strength in demand, movements in mix, continuing supply chain challenges, and our conviction around OpEx investments, we think it is better to recenter everyone on what we see this year by giving annual guidance on multiple measures. Starting with the first quarter of fiscal '23, we expect revenue to be $72 million to $77 million, an increase year-on-year of 84% at the midpoint and seasonally slightly down after a strong fourth quarter. For the full year 2023, we expect revenue to be $450 million to $500 million, an increase year-over-year of 96% at the midpoint. This guidance reflects a number of factors benefiting ChargePoint, including new customer yields from significant investments in our sales and marketing capacity in North America and Europe in calendar 2021 and going forward this year, and a healthy customer rebuy rate, which has continued to be 60% or better of our business. Significant product releases this year, as our investments in R&D, product, and operations continue to move our industry-leading portfolio forward. More OEM mandated investment in charging infrastructure at auto dealerships, an area where our broad connected and flexible solutions portfolio has served us well. In fleet, we have seen triple the pipeline growth in medium and heavy trucks year-on-year, and our RFP activity continues to be robust. In residential, we expect more than 100% category growth with increasing sales to new drivers with new utility, auto, and take-home fleet programs, and as we expand multifamily applications. Finally, continued growth in Europe and a full year of contributions from our recent acquisitions. Looking at gross margin for the year: the planning for the challenges associated with mix, which was weighted towards lower-margin products last year, and supply chain to continue slowing margin expansion. With those assumptions, we expect non-GAAP gross margin to be 22% to 26% for the full year. Keep in mind this expectation reflects roughly 6 points of expected supply chain impact. Turning to OpEx. As Pat and I have said, we are investing heavily across all functions to drive our market position and take advantage of the enormous opportunities ahead. We expect non-GAAP OpEx to be between $350 million and $370 million for the year and show leverage on a percentage of revenue basis. Lastly, we remain committed to being cash flow positive in calendar 2024. With that, I'll turn the call back to the operator to take questions. Thank you.

And we will take our first question from Shreyas Patil with Wolfe Research.

Yes. To follow up on the previous point regarding the improvement in gross margin from fiscal '22 to '23, you mentioned that you are accounting for about 6 points of supply chain challenges. First, is this based on your current observations? Are you experiencing a tighter supply chain at this time, or is it more of a precautionary measure? Second, you referred to an unfavorable mix. Could you elaborate on that and its potential effects?

Happy to answer your question, Shreyas. Regarding your first point about our gross margin assumption, you are correct that we are anticipating a 6-point headwind. This is influenced by what we are currently experiencing and the revenue guidance we provided. Meeting our numbers is one thing, but it’s a challenge when approaching suppliers for increased supply during tough conditions. We understand the difficulty in securing supply, and it’s a primary focus for our company as we aim to grow with our customers. That's the main factor at play. As for your second question about mix, we have been consistent in previous discussions. Our gross margins are usually highest in the commercial sector, followed by residential and then DC fast charging. When these components are bundled into fleet applications with integrated software, it significantly alters the dynamics, and that aspect is becoming a strong segment for us. However, predicting this shift is challenging. The general trend is that moving away from commercial toward residential and corridor or urban fast-charge applications will slightly lower our margins.

And we will take our next question from Colin Rusch with Oppenheimer.

Could you talk about where the incremental OpEx investments are going and where you think the return on those is? Is a lot of that incremental investment going into R&D? Or is it more on the sales side?

Yes. Colin, we’re ending the year on a strong note and have been quite consistent in our approach. In terms of sales and marketing, we are increasing our spending based on our capacity planning. This year, we are making a significant effort to expand our reach both domestically and in Europe. We have solid coverage in Europe and are adding more countries, while also improving our presence in the U.S. As our vehicle numbers grow in the United States, it’s essential to be widespread because many people are eager to invest. Our investments in sales and marketing align with our business growth, and we are seeing some leverage from this. R&D spending is increasing, but I anticipate that it will taper off significantly as a percentage of revenue. This year is crucial for launching new products, as Pat mentioned, and we need to prioritize those. General and administrative expenses are growing at a much slower rate since we have already faced the costs associated with being a public company, so you shouldn’t see much expansion there. Additionally, a significant portion of R&D is allocated to new product development, which includes costs for product introduction and testing. We are currently using some products to ensure we can finalize our major releases this year, but you can expect that spending to decrease next year.

We will take our next question from James West with Evercore ISI.

Well done.

Thank you. Thanks, James.

First question from me, Pat, your business has shown impressive acceleration, but you're also accelerating at scale, which brings different challenges. How are you approaching the operations? I know Rex just mentioned some of the changes in products, sales, and marketing. But how do you view the operational requirements for running the business now that you are reaching this scale and experiencing significant revenue growth simultaneously?

So James, to answer your question, a significant portion of the increase in our operating expenses is being allocated to enhancing our internal business systems. We are reassessing how we onboard customers and activate our stations. We are focusing on improving our port activation rate and the support rate for our sales channel. A substantial part of our business still operates through the channel, as this is crucial for achieving necessary market coverage. We are observing a high transaction rate. In summary, we are investing broadly. It is essential that we invest operationally. Additionally, from a manufacturing standpoint, we have a strong team in place and are continuing to invest, particularly as we navigate supply chain challenges. As you can see, our growth last year compared to the previous year was noteworthy. This year's growth is almost double, but last year's was 65%, showcasing effective execution amid many challenges, thanks to significant investments in our operations team. This team is supported by various key contract manufacturers. Part of our strategy is to closely collaborate with our contract manufacturers and supply chain partners to ensure we have the right infrastructure to manage our growth. Therefore, we are making comprehensive investments, which is reflected in our operating expenses.

And we will take our next question from Bill Peterson with JPMorgan.

Nice job on the execution. I wanted to talk about the fleet business and how the opportunities are for the year. As you look at your offering, what do you see as your key differentiators? Or would it be in software or your ability to apply better cost of ownership? How should we think about the business opportunities and your growth outlook, I guess, or compared to the U.S.? Like you started easing the way, and how should we think about that opportunity for this year, especially next year?

I just want to make sure I heard the question correctly; there was a little bit of background noise. You were referring to just the value proposition around fleet as the first part of your question?

Yes, really the focus on fleet and the value proposition.

So the easiest way to think about it is customers, especially fleet customers, don't want to be the integrator. The many reasons we're doing exceedingly well in that vertical is that we can help them design and lay out their depot. We can provide a broad set of software functionality that they can integrate with their business systems seamlessly. We have a hardware portfolio that you saw us announce last year that is rolling out now to customers, and we'll be ramping that throughout the year. It has been designed in conjunction with that software to work seamlessly. As you might expect, part of your question was about the total cost of ownership side. What we're providing in support services, the modularity lends itself towards very easy spares maintenance on site for fleet, etc. It's really the whole package, and we take care of it all for our fleet customers. I'll stop there, but there's a lot more we could say; I think you get the picture. If you could remind me of the second part of your question, I couldn't hear that.

Yes. When considering growth in Europe, will it be driven by Europe or the U.S.? How should we evaluate that growth opportunity in relation to your full-year guidance?

As Rex mentioned in his remarks and I mentioned in mine, Europe is a big part of our future. We believe that the first company to achieve significant market share in both North America and Europe will have a scale advantage. Many customers, especially on the fleet side but even on the commercial side, are multinational, and when they integrate with their business systems, they want one partner for that. 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 establish ourselves as a scale leader in both North America and Europe, making sure we can cover a customer wherever they go. If you remember from my remarks, the bleed-over from the other segments is significant. Fleet reinforces residential, residential reinforces fleet, commercial gets reinforced by both and vice versa. It really is working. This being in all the verticals provides us a big competitive differentiation. So again, on the growth side, we see it coming from everywhere.

And we will take our next question from Mark Delaney with Goldman Sachs.

I was hoping to speak more on the subscription line. Even though the press release talks about that segment growing more slowly last year, the sequential pickup there was very good, and the sequential growth rate was higher than total revenue overall. So maybe first, if you could comment on what led to that increase? I mean, I think you alluded to activation timing, so was that the driver of the pickup in subscription? As you are thinking about the guidance for this year, how should we think about subscriptions? Is it going to see any timing issues? Or should we expect to have stronger growth there this year?

Yes. The baseline observations we've previously shared regarding timing are important because software generally experiences a time lag once it is activated. The recent increase you've noticed is primarily related to the revenue from acquisitions. We completed one acquisition in Q2 and another later in Q3. Q4 marks the first quarter where both acquisitions are fully contributing, which is beneficial. Additionally, we've made significant efforts to expand our Assure warranty program to more customers, as it is crucial for everything to operate smoothly and look appealing, which is central to our value proposition. These factors are key contributors to the growth in that area.

We will take our next question from Matt Summerville with D.A. Davidson.

A couple of things. First, I want to think back to the time you issued your SPAC projections. For fiscal '23, you were talking about a number of sub-$350 million in revenue. Here today, talking about $450 million to $500 million, I imagine there’s a component of new customer funnel, rebuy rates, the ramp in subscriptions, all those good new products, all those things. But maybe just rank order of magnitude what's driving that. And then, Rex, if you wouldn't mind, what was the acquisition contribution to revenue in the quarter?

Rebuy rates are about the same, virtually identical. They fluctuate a bit but remain consistently above 60%, generally between 60% and 70%, depending on the quarter due to timing. We’re seeing strong performance from our existing customers because it's an expansion model with vehicles. The main factor driving this is the availability of more vehicles to consumers. Bloomberg New Energy Finance has raised their forecast for auto sales in both North America and Europe. As these sales increase, we naturally see a rise in revenue. We are broadly connected to the EV industry, so we serve as an index in that area. As more vehicles enter the commercial market, it encourages our commercial customers to make more purchases and attracts new commercial customers. Our strong presence in the Fortune 500 in North America reflects this trend. Fleet services are just beginning to expand; the demand for vehicles is definitely there, and the vehicle manufacturers are in the early stages of rolling out new vehicles, so the complete range isn't yet available. This will evolve over time and become a very exciting area for ChargePoint. Additionally, there is significant activity in the residential sector as people need access to charging at home, leading to substantial demand, as highlighted by the figures Rex provided.

The follow-up question was, what was the contribution from the European acquisitions? As we had forecasted, it's approximately $4 million in revenue. From an OpEx perspective, it’s about $5 million, but we won't be breaking those out going forward; I think that gives you a sense of scale.

I do want to point out one thing on that: those are software acquisitions. So that revenue is flowing into the software subscription line. As we've said many times, the growth rate, which is so high in new port adds, the hardware revenue associated with that is recognized in the period. There's a difference in the revenue recognition, and so that drives the disparity in the kind of cursory apparent contribution to revenue between the subscription line and the hardware line, but they're inextricably linked.

And we will take our next question from Ryan Greenwald with Bank of America.

Maybe just going back to the margins and operating expenses. I appreciate the additional color on how you're thinking about fiscal '23 here. Can you just talk a bit about how you're thinking about the operating leverage into the outer years as you think about cash flow breakeven in calendar '24?

Yes. So I think, Ryan, we should first examine the operating expenses as a percentage of revenue for this year compared to last year. Last year, it was around 100%. This year, we expect to see a benefit of about 20 percentage points, bringing it to 76%. Moving from 99% to 76% represents a significant improvement in just one year. As I mentioned earlier, I think research and development should decrease at a faster rate compared to others, while sales and marketing should increase at a stable pace. General and administrative expenses should remain fairly stable. Considering our growth rate next year, while I won’t provide specific guidance for future years, we are at the beginning stages. It’s reasonable to expect meaningful growth in the following years as well, but operating expenses won’t need to increase at the same rate. This is where we gain leverage. We aim to reduce expenses by that 23 percentage points this year; ideally, we'd like to accomplish this two or three more times—if we perform better next year and the following year, and continue to drive operational expenses down, with a goal to reach a crossover in 2024, as we've indicated.

And we will take our next question from Craig Irwin with ROTH Capital Partners.

I should, too, add my congratulations to your execution and how you've set up the company for some impressive growth this year.

Thank you.

The first question I wanted to ask is really it's a simple one, right? Product portfolio. You guys have invested a lot of money, a lot of effort in being ready for some of these different opportunities. I guess the top of mind is maybe fleet. But there is still quite a lot of innovation going on in the EV charging market. There are sort of micro DC chargers, there's sort of the battery in a box, there's a few different permutations that seem to be getting good interest out there from potential customers. We've yet to see if these are going to sell in significant volumes. Can you tell us sort of what you see as top priorities for ChargePoint as far as product portfolio over the next year? Should we expect a similar tempo of introductions, or is that tempo likely to increase from here?

We don't usually make formal announcements about our product rollouts unless through a partnership. Your question relates more to hardware, so I’ll address that. Regarding the fleet announcement from last year, every aspect of that product line is relevant to consumer passenger car charging as much as it is to fleet charging. We design our technology to be applicable across various sectors. Concerning different speeds and configurations of DC chargers, the evolution of the architecture either aligns with what we've already disclosed or is part of our substantial pipeline that we have yet to announce. I can’t provide further details on that. The same goes for AC charging; our coverage is extensive. Regarding your question about batteries, we believe that having a battery on-site is sensible. We focus on energy storage at the site level. When it makes sense to enhance a site, we do not integrate batteries directly into our chargers; we find that it’s more beneficial to implement such solutions at the site level, making it easier to expand in those scenarios. Thus, we do not include batteries in our chargers.

There’s some optimism that some of the money starts flowing later on this calendar year, which would almost certainly be in your fiscal year. How much of the strong guidance that you issued today would you say is related to this anticipated funding flow? Or is that potentially incremental support for what we see as a very strong market?

We have a deep policy team that's done tremendous work over the nearly 15-year history of the company. We’re very close to this. I’ll remind you of comments we've made consistently over the last year. We said programs that are very ambitious, like the infrastructure bill, the funds are dedicated to our space; those ambitious programs take a while in our experience to operationalize. We have a pretty good feel for how long that takes. Our expectation is very conservative. We don’t really expect this to hit our numbers this year. We would expect it to hit in subsequent years. We need to see how the state programs are constructed, as the majority of that money is going to flow through the states. We have a very good track record historically on large participation rates in programs like that. We'd expect to participate significantly if they are constructed as things have been in the past. Nothing is built into this year; the money, as it's currently been discussed by the administration, rolls over five years. The first year it's a little smaller amount, but then it's roughly $1 billion a year over that five-year period, like it’s a little smaller in the first year.

We will take our next question from Stephen Gengaro with Stifel.

Just curious, and I’m sort of trying to tie this a little bit into gross margin trajectory you need to get to that 2024 cash flow breakeven number or cash flow positive. When you talked about the mix, Rex, and you've talked about this before, sort of the mix between commercial, home, and DC fast, the impact that has on margins, has there been anything in the macro regarding EV adoption rates and how that affects where people charge? I'm sort of thinking about this from the standpoint of as the EV adoption cycle accelerates, there's probably more people who can charge at home. So I'm just thinking about how that folds into your mix and margin assumptions?

That's a great question. We've been committed from the beginning as a company to make sure that we have solutions so drivers can charge wherever they need to charge. One of the most important aspects to recognize with EV charging is you don't have to go somewhere to go somewhere. That’s an interesting value proposition if you're a consumer. From our perspective, there may be some folks that purchase an EV that don't directly have available charging infrastructure where they live, but we're seeing very strong growth in our residential business. We're seeing that broad-based. We're seeing both single-family and multifamily setups. Our LeaseCo partnerships in Europe include a home reimbursement for fuel included with your car, part of your compensation package, and we're seeing tremendous growth there. In fact, we're making huge investments software-wise with our partners in Europe in that vertical, anticipating strong growth to continue. Most will at scale have some level of access, whether it be street side, in multifamily or single-family residences.

And we will take our next question from Steven Fox with Fox Advisors.

I was wondering if you could just double-click a little more on the comment about the pipeline for fleet tripling as part of the sales targets for this year. How much of that is customer expansion versus changes in buying plans or site plans that you're seeing, like an expanded size of charging infrastructure by certain fleets to support different areas? How would you describe why that pipeline is going up so much?

Yes, happy to. The main driver is that people are starting to see vehicles coming. Just yesterday, I spoke about receiving a significant number of electric delivery vans. This indicates that vehicles are starting to hit the streets. What truly matters is that people believe this transition is underway. They are preparing because it's entirely an economic total cost of ownership consideration for fleet operators; it isn’t about personal preference or emotions. Our RFP volume, which we have discussed in previous calls, is enormous. It’s a highly active and dynamic area for us. Our win rates are strong. Many are realizing the value of a single-point solution and an integrator like ChargePoint. They are buying into the idea that they don’t want to manage integration themselves; they understand that total cost of ownership will significantly impact their business. Vehicles are beginning to appear on the roads, ranging from pickup trucks to larger models—though 18-wheelers are not yet available. Customers understand they need to prepare, and this segment of our customer base has become increasingly aware.

And we will take our next question from David Kelley with Jefferies.

The auto dealer investment in charging infrastructure that's being mandated, can you talk a bit more about that opportunity and the mix of chargers that you expect to see there?

Sure. That's a sub-vertical that we've been in for a lot of years. We know it quite well. As dealerships convert more of their inventory to electric, they have the normal care and feeding for their pre-delivery inspection and maintenance groups, where they deploy a variety of charging infrastructure, different speeds and feeds to suit the particular scenario. They typically have some form of charger in the service bay. It will tend to be either an AC charger or potentially a low-end DC charger in a service bay. You'll see the PDI facilities typically have a fast charger; the redelivery inspection doesn't take very long. You’ll typically see a medium capacity fast charger. Up front, you’ll see a combination of AC and DC chargers. We expect it to be a robust segment for us, and eventually, it saturates. That said, I think we're years away right now; there's a lot of infrastructure to change over.

And we will take our next question from Vikram Bagri with Needham and Company.

Most of my questions have been answered. I have a housekeeping question. When I look at the port activations in the fourth quarter, it seems like most of the growth came from Europe. Can you discuss the kind of growth you are referring to? Which sub-segment is contributing to this growth? What is your strategy for 2023? Do you plan to enter new regions and markets within Europe and beyond? Additionally, was there any specific reason why the growth in old activations in the U.S. wasn't as strong, outside of Europe?

Yes, a few points to consider. It's important to note that our port count does not include residential ports. We have a strong residential business that we value, but those aren't reflected in our activated port count statistics. The reason for the slower growth you mentioned is due to a shift in our business mix over the last few quarters. We've seen less commercial workplace and retail hospitality activity in AC ports, while there's been more focus on DC ports, which cover a range of applications. A DC port costs more than ten times an AC port. This might lead to better revenue, but it does result in slower growth in port count. Additionally, as we expand our presence in Europe, it's done through acquisitions. Some ports added are not sold since we often sell software alongside the hardware, not the hardware alone, which can make the numbers appear skewed toward Europe. The key factor here is activation. We may have had a very strong quarter with product shipments, but most of what we deliver in Q4 won’t be operational until the following quarter because it needs to be installed and activated.

And we will take our next question from Kashy Harrison with Piper Sandler.

Congrats on the revenue, OpEx leverage and guidance.

Thank you.

I would like to discuss gross margins for a moment, if that's alright. You mentioned that gross margins are experiencing some pressure as we enter calendar '22 due to rapid growth. It seems likely that your growth rate will be quite strong as we begin calendar '23, based on the guidance provided for the second half of the year. Could you outline some of the initiatives you're implementing to enhance gross margins as you approach calendar '23 and '24? Additionally, I would appreciate any insights on how to view subscription gross margins in the future.

Yes. I think the question is what are the things that could go well as we look out at the '23 and '24 from a gross margin perspective. I’d start by saying that we've had 3 or 4 quarters of some of the hardest work I've seen anybody do. The fact we've managed to eke out even a point improvement for last year to me is quite remarkable. We've been struggling with mix, and insurance and supply in the face of a high growth rate is really, really hard. It's also hard when you're introducing new products, which we're definitely doing this year. Running things through the supply chain and saying, 'I not only need to know if you can supply this, but I need very much with them in week one and I need more in week two and more in week three.' That's a headwind. It's very much a headwind. Having said that, as the supply chain things ease, I think there are some documented internal cost reductions by products that we will roll through as quickly as we can once we get past the assurance of supply issue. I think we have some favorable things happening in the subscription line from an acquisition perspective from a growth in our core business perspective. There are a lot of things we're doing because our support organization lives in that line. There’s a lot of leverage and automation and other improvements we can get there. Lastly, if the weather clears and we can get that 6 points I referenced in my script back, life is good.

And ladies and gentlemen, that concludes our question-and-answer session. I will now turn the call back to Pasquale for closing remarks.

We'll wrap up this call, which is pretty much on our anniversary as a public company by thanking you all for a tremendous amount of great earnings call questions over the last year. We're really happy where we are and the progress that we've made. It's been quite exhilarating here as a company. I want to thank all the ChargePointers out there. I know many of them are listening. It's been a great journey for everyone in our first year as a public company again. Exciting times to come. You’re seeing us at the beginning of a very, very, very long multi-decade growth cycle. I can't emphasize that enough. This is not normal circumstances for most markets. Most markets don't have a growth curve nearly as steep, nor do they have a period of growth that lasts as many years as this home will likely have. We are, as I tell folks here all the time, plus or minus at 1% penetration, depending on whether you're talking about North America or Europe into the fleet of vehicles out there, less so for fleets; for consumer passenger cars, plus or minus 1% or so. A company like this can turn in these results at that level for how early we are in penetration; we have enormous expectations for what this looks like in just a few years. Thank you very much, and we will see you next time.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.