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 Third Quarter Fiscal 2025 Earnings Conference Call and Webcast. All participants' lines have been placed in a 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 Nandan Amladi, ChargePoint's Vice President of Finance and Investor Relations. Nandan, please go ahead.

Good afternoon, and thank you for joining us on today's conference call to discuss ChargePoint's third quarter fiscal 2025 earnings results. This call is being webcast and can be accessed on the Investors section of our website at investors.chargepoint.com. With me on today's call are Rick Wilmer, our Chief Executive Officer, and Mansi Khetani, our Chief Financial Officer. This afternoon, we issued our press release announcing results for the quarter ended October 31, 2024, 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 outlook for our fourth quarter of fiscal 2025. 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 September 9, 2024, 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 certain historical periods in the investor presentation posted on the Investor section of our website. And finally, we'll be posting a transcript of this call to our Investor Relations website under the Quarterly Results section. And with that, I'll turn the call over to Rick.

Good afternoon, and welcome to ChargePoint's third quarter fiscal 2025 earnings call. Today, I will walk through key financial results for the quarter, implications of the recent U.S. elections, and a review of progress made on our strategic plan. Let's start with the third quarter. Our relentless pursuit of operational excellence is translating into positive results as we align our business for growth and manage our operating expenses. We finished the quarter with revenue of $100 million, exceeding our guidance range of $85 million to $95 million. Non-GAAP gross margins remained steady at 26%, and inventory was slightly lower than it was in the second quarter. Operating expenses were also down at $59 million compared to $66 million in the second quarter. In the quarter, we reduced our cash consumption to $24 million, which is down 64% from Q1 of this year. We continue to manage our cash with extreme rigor. The third quarter was notable for the expansion of our work with automotive manufacturers and partners. We completed a project for General Motors, deploying our software for a new use case with a major fast-charging network in the USA. We expanded our footprint at U.S. ports, doing a sizable deal with the Port of Stockton in California. We recently joined forces with SIXT USA, a leading provider of premium mobility services. SIXT and ChargePoint will be working together to test ChargePoint solutions at select SIXT car rental locations in U.S. markets with high EV adoption rates. With our partner Energy Efficiency Pros, we did a large installation for Red Bull's delivery fleet. More installations at IKEA locations went live and we co-hosted a fleet webinar with them to share the case study. The recent U.S. election is likely on many of your minds, but ChargePoint currently does not see any dramatic changes on the horizon that we expect will materially impact our business. We have established our market leadership over 17 years amidst changing political environments, and we will continue to drive the secular shift towards clean transportation. Significant investments have been made across sectors to prepare for this shift. We believe electric vehicles are far superior to their internal combustion counterparts and we do not predict any reversals on the road to electrification. Last quarter, I mentioned green shoots in demand and we continue to see encouraging signs in the market. Charging network operators have been reporting an upswing in charger utilization, a trend we are also seeing at ChargePoint. This is good for the industry as a whole and good for ChargePoint as a supplier of software and hardware to the aforementioned networks. This all demonstrates a need for more infrastructure with our utilization outpacing our port growth yet again in the third quarter. This pressure has prompted customer inquiries about incremental chargers. The utilization pressure is the result of more EVs on the road. The U.S. saw record EV sales in the third quarter, up 11% year-over-year, according to Cox Automotive. It was also a record quarter for the EV market share in the U.S., continuing the stable and sustainable growth pattern I mentioned in our last earnings call. In terms of our own growth, our managed port count now exceeds 329,000, representing 20% more active ports in the field year-over-year. We count 80% of the Fortune 50 companies as customers and we estimate we have avoided the consumption of nearly 500 million gallons of gasoline. In our last call, I introduced ChargePoint's three-year strategic plan. This plan remains anchored upon our four cornerstones of a class-leading software platform, hardware innovation, delivering a world-class driver experience and operational excellence. Year one goals included finalizing our leadership team, revising our product roadmap, right-sizing and ensuring operational excellence. Three quarters into this fiscal year, we have accomplished all of this with the hiring of our new CRO David Vice being a recent highlight. David joined us in September and he is aligning the sales organization to drive growth. Priority for year two of the strategic plan is the rollout of our next-generation software and hardware products. Our next-generation software aggregates our greatest features and capabilities into one formidable platform. Within this platform, a customer will be able to manage anything from a network of chargers to a corporate fleet of cars, trucks or buses. When we roll out these integrated capabilities, we expect to delight our CPO, commercial and fleet customers with the first major proof points of this software-first initiative. The new hardware solutions will be proof points of our enhanced product design and manufacturing strategy, which leverages partners to bring our products to market faster at a lower cost and at improved margins. Year three of the plan is when we expect to reap the full benefits of a top-performing organization, a next-gen portfolio of innovative software and hardware products and operational excellence. To ensure a world-class driver experience, we are continuously improving network reliability. Last quarter, we deployed an AI solution to make it easy for drivers to report problem stations with detailed and actionable information. We knew it would resonate with our drivers, but the results have far exceeded our expectations. Within the first 10 weeks, we received actionable reports that enabled us to resolve nearly half of all reported issues across thousands of stations more efficiently. This tool is materially helping us improve station uptime and increase customer satisfaction. We continue to focus on operational excellence. Proof of this comes in the form of our third quarter results. September sales and marketing focused reorganization has opened the door for new ideas and approaches, and our CRO has been aligning the team for revenue growth and scalable processes. The financial benefits of September's right-sizing became evident at the end of the quarter, and the additional benefits will materialize in the fourth quarter and beyond. We are focused on driving revenue growth while carefully managing our operating expenses. Excellence is also defined by outstanding customer support, and our support capabilities are now winning us deals over the competition. In conclusion, we have accomplished the first year goals of our strategic plan and done so ahead of schedule. Our Q3 revenue and improved operating expenses are proof of this. We are encouraged by the record EV sales in the industry, and we continue to see network utilization demonstrate the need for more charging infrastructure. We are now concentrating on returning to growth and streamlining operations to continue on our path to positive non-GAAP adjusted EBITDA, which is targeted for a quarter in fiscal year 2026. I will now hand the call over to our CFO, Mansi.

Thanks, Rick. Revenue for the third quarter was $100 million, above our guidance range of $85 million to $95 million. Networked charging systems at $53 million accounted for 53% of third quarter revenue. This was down 18% sequentially and down 29% year-on-year. Subscription revenue at $36 million was 37% of total revenue, up 1% sequentially and up 19% year-on-year. Subscriptions continue to demonstrate healthy growth. Other revenue at $11 million was 10% of total revenue. This was up 28% sequentially and up 81% year-on-year due to growth in net transaction fees for processing payments and one-time project revenue. Turning to verticals, which we report from a billings perspective, third quarter billings percentages were: commercial, 61%; fleet, 15%; residential, 18%; and other, 6%. The commercial segment has normalized as a percentage of total billings after several large express plus DC shipments in the second quarter. Fleet remains stable, but the pushouts we outlined last quarter due to permitting and construction delays persist. Note that this is business that we expect to capture in future quarters. Our highly-rated home charger, the Home Flex, continued to be a best seller and contributed a strong share of billings in the third quarter. From a geographic perspective, North America made up 83% of third quarter revenue, and Europe was at 17%. Europe remains challenging for the entire EV sector amidst policy and incentive uncertainties. Non-GAAP gross margin for the third quarter was 26%, consistent with the second quarter. Gross margin improved by 44 percentage points as compared to the third quarter last year, a quarter that was impacted by an inventory impairment charge. Non-GAAP operating expenses for the third quarter were $59 million, down 12% sequentially and down 28% from $81 million in the third quarter last year. In September, we reduced our non-GAAP operating expenses by an estimated $38 million on an annualized basis. In the third quarter, we saw a partial impact of the September restructuring. The full impact on our run rate operating expense profile will be evident in the fourth quarter. Non-GAAP adjusted EBITDA loss for the third quarter was $29 million, a fourth consecutive quarter of improvement. This compares to a loss of $34 million in the second quarter and a loss of $97 million in Q3 of last year. Stock-based compensation in the third quarter was $21 million, up from $19 million in the second quarter and down from $33 million year-on-year. Our inventory balance decreased by $7 million in the third quarter from an all-time high in the second quarter. As we continue to sell through finished goods on hand, this should release a significant amount of working capital and we expect to free up cash next year. We ended the quarter with $220 million cash on hand. We reduced net cash consumption to $24 million for the third quarter, which is down 64% from Q1 of this year and is lower than our adjusted EBITDA loss for the third quarter. While we continue to rigorously focus on cash management, we have access to a $150 million revolving credit facility, which remains undrawn. We have no debt maturities until 2028, and we have existing capacity on our ATM. Turning to guidance, for the fourth quarter of fiscal 2025, we expect revenue to be $95 million to $105 million. While we are pleased with beating our guidance in the third quarter, we continue to be prudent in our forward guidance as a result of our recent improvements to the sales and marketing organization. In conclusion, our Q3 was solid, with revenue beating our expectations. As Rick outlined in his remarks, we have taken meaningful steps throughout this year to improve operations and have achieved a more efficient cost structure. This has improved our adjusted EBITDA each quarter this year and reduced our cash usage, a trend that we expect to continue as we progress towards profitability. We believe the trough is behind us. We are improving on all metrics within our control. And with the recent reorganization of our sales structure, we are now well-positioned to capitalize on the opportunity ahead of us. With that, I will turn the call back to the operator for questions.

Thank you. We will now begin the question-and-answer session. Your first question comes from Colin Rusch with Oppenheimer. Your line is open.

Thanks so much, guys. Well, could you talk a little bit about the margin trajectory that you're expecting on the gross margin side? Obviously, you guys have adjusted some of the manufacturing, the component supplies shifted a little bit, but just want to get a sense of how that's trending for you and how we should think about that on a multi-quarter basis.

Yeah. Hi, Colin. I can take that one. So, from a gross margin perspective, we ended at 26% in Q3. I expect it to be flattish to maybe improve slightly in Q4, but the majority of improvement or meaningful margin improvement will be realized next year as we sell through our existing inventory and really start seeing the benefits of our Asia manufacturing.

Okay. That's super helpful. And then, just in terms of the sales process, can you talk a little bit about the efficiency per headcount that you're seeing with the sales team as well as the win rate that you guys are seeing in terms of the bids and how that's flowing through the sales funnel?

Yeah. Thanks, Colin, for that question. I've really been pleased with our new leader, David Vice, and the impact he made in, quite frankly, a quarter that was disrupted through the restructuring that we executed during the quarter. But the progress we've made across a variety of initiatives in the sales and marketing area yielded results in Q3, and I'm optimistic about the continued impact those changes will have going forward. They include things like areas of focus on certain segments, by geography, clarifying roles and responsibilities within the sales and marketing organization, up-leveling sales skills, standardizing processes for moving deals through the deal stages as we take those through to win and execution, a focus on our partner program, our channel partner program, improving that, along with the way we generate interest in the company's products from a marketing perspective and process that through into the sales organization for execution.

Appreciate it, guys. Thanks so much.

And your next question comes from the line of Bill Peterson with JPMorgan. Your line is open.

Hi, good afternoon. Thank you for taking my questions. I wanted to revisit your comments about not anticipating any significant changes with the new administration. It's widely recognized that there are expectations concerning tariffs and the potential removal of 30D tax credits. Regarding tariffs and your cost structure, could you clarify how we should assess the impact on your margin expectations if a tariff is implemented? Would you consider reallocating any capacity back to North America? How should we approach the topic of margin expansion for the next year and beyond in light of this?

It's speculative exactly what's going to happen based on what we know so far, Bill, but we don't manufacture in China, for one thing. We also have manufacturing operations up and running in the United States, and we've had those for a long time. So, if it became cost effective to shift more production to the U.S., that's clearly an option that we have available to us right now today if we need to do that.

Okay. Thanks for that. You commented earlier that Europe has been challenged. We saw a lot of negative year-on-year growth trends for many of the countries. France is pulling back in subsidies. I guess I'm trying to get a sense of how you feel about the strategic rationale of Europe at this stage. Would you consider divestment to shore up the balance sheet as your program unfolds? Or I guess, maybe asking another way, how synergistic are the businesses at this stage?

We're committed to Europe and we remain committed to Europe. Despite the short-term uneasiness there, I think the long-term prospects look strong. Furthermore, we've got multinational customers that, by being present both in Europe and North America, give us a competitive advantage, to serve them across both continents, and those are some very important customers to us. So, we will continue to focus on Europe. The other thing I'll tell you is that the focus on sales and marketing that we executed in Q3 was very North America centric, and we're now going to turn a lot of that focus to Europe, and have no reason to expect similar improvements like those we saw in North America.

That's helpful comments. Thank you.

And your next question comes from the line of Mark Delaney with Goldman Sachs. Your line is open.

Good afternoon. Thank you very much for taking the questions. Rick and Mansi, you both alluded to your view that the business has troughed and you see some signs to be optimistic heading forward. In light of everything you're seeing in the broader market, you spoke a bit on Europe, we've already spoken a bit on public policy, maybe you can just double-click a little bit more on what gives you that confidence around the business momentum heading into this coming fiscal year?

Yeah, I think the other thing that gives us confidence is the continued diversity of EV selection that rolls into the market from the auto OEMs. I think that we are firmly convinced and probably biased that EVs are far superior to internal combustion engine cars as a product in general. And, knowing that we now have a broader selection of vehicles coming both in terms of price point, size, shape, form, class, I think that's going to continue to drive EV adoption. So, I'm very optimistic that a broader selection of cars is going to help move things forward.

And specifically, Mark, in terms of where we see revenue growth coming from, there are, you know, a number of green shoots. One is closing deals that have already been pushed out from this year. In many cases, we're getting indications of potential expansions as well. On the fleet side, there are large deals that we've already won specifically in the e-bus space that are expected to ship next year. On the commercial side, there are government and navy related wins that we've already booked, that are expected to ship next year, as well as auto dealership deals we've won. Residential has been a strong sector for us as well, and we have forecast of growth in volumes from our channel partners. And then, of course, there is a continued increase in subscription revenue. So, all of this will contribute to a growth in revenue for us specifically next year.

That's helpful. My follow-up question, I think more for you, Mansi. You spoke about some additional cost reductions you expect to flow through this coming quarter. Can you be a bit more specific around what to expect around OpEx or OpEx savings and how sustainable that lower run rate may be in the coming year? And I guess, you just to conceptualize what that might mean, to the extent there is downside to the business from a top-line perspective, and I understand that's not your expectation, but if there were because of macroeconomic or policy changes, do you think ChargePoint could take more cost out, or would that be hard to do given how much you've already done on that front? Thank you.

Overall, in terms of operating expenses, we eliminated $38 million from our annualized operating expenses on a non-GAAP basis as part of the September restructuring. This translates to approximately $9 million per quarter, with two-thirds of that effect reflected in Q3. In Q4, we will fully realize this impact. We do not anticipate any further changes to the operating expenses run rate beyond the restructuring carried out in September for Q4. This run rate is expected to continue into next year. There will, of course, be some investments in specific areas of the business where we deem it necessary and where we expect direct revenue benefits. Beyond that, I believe this run rate is solid as we head into next year. Regarding the second part of your question, we consistently evaluate our operating expenses for efficiency improvements. There are numerous areas, such as travel, entertainment, facility costs, software expenditures, and external consulting services, where we will continue to seek greater synergy.

Thank you.

And your next question comes from the line of Steven Fox with Fox Advisors. Your line is open.

Hi. Good afternoon. First question, just to round out the question on the backdrop, is it safe to say you're also not seeing any buyer hesitancy related to the new politics from any network customers or anything like that? Can you just give us a sense if there's been a reaction there? And then, I had a follow-up.

Yeah. Hi, Steve. Thanks for the question. No, we've seen literally zero change in terms of buying behavior from our customer base.

Okay. Fair enough. And then, if we could do just maybe a little bit deeper dive on the gross margins, looking at it software versus hardware? Are we thinking that the improvement, for at least a couple more quarters, is just more of a mix of software, or do we start to see the hardware margins start to improve based on everything that you talked about so far? Thanks.

Yeah. So, hardware margins have improved as well. As you saw in this quarter, hardware margins were lower than last quarter. It was mostly due to some incremental freight charges for some raw materials that were moved from a U.S.-based supplier to Asia, more like a one-time impact. So, hardware margins should continue to go up steadily. Hardware margins also kind of are influenced by final mix of product. So, depending on where the mix lands, that will cause some fluctuations, but overall, like I said before, the more meaningful improvements in hardware margin will come around middle of next year when we actually start seeing the benefit of Asia manufacturing.

Great. That's helpful. Thank you.

And your next question comes from the line of Joseph Osha with Guggenheim Partners. Your line is open.

Hi there. Thanks for taking my question. Mansi, you mentioned continuing to free up working capital by reducing inventory. I'm curious if there is any risk of obsolescence or price decline that you might encounter as the time to sell that inventory lengthens. I also have another question.

So, Joseph, just to clarify, you're saying, is there any obsolescence risk in that inventory?

Yeah. Sorry. That's a much more eloquent way of putting it. Thank you.

That's right. So, I mean, pretty much all the product that we have on our inventory right now is product that we're actively selling. We did, as you can remember, take some write-offs earlier, maybe three, four quarters ago on the old generation products. So, now all of our inventory is of goods that we're currently selling, and we expect to sell those through over a period of time. There is always some write-off each quarter. We have variances in terms of maybe changes in standard costs or maybe some really old inventory, which is small. It's kind of normal course of business that we will continue to do every quarter.

Thank you. My other question is about the cash OpEx burn. You've successfully reduced it and are still working on it. Are you close to where you want to be with this, with the idea that future improvements will come from revenue growth? Can we view it that way?

We were very pleased with our cash usage for this quarter, bringing it down to $24 million, significantly lower than the $66 million in Q1 and $50 million in Q2. There were two main reasons for this decline. First, we reduced our operating expenses, which directly impacted our cash usage. Second, we managed to lower our inventory this quarter. In the past few quarters, we had been increasing our inventory balance, which required cash investment. This quarter, we reversed that trend, freeing up cash and reducing our cash burn. We expect this improvement to accelerate next year as we continue to reduce inventory significantly. Given the nature of our business, we are well-capitalized and have minimal capital expenditures. Our cash burn is expected to closely align with our EBITDA loss, which is our goal. In fact, this quarter, our cash burn was slightly lower than our EBITDA loss. We anticipate continuing on this trajectory moving forward. As we approach EBITDA breakeven, we should also reach cash flow breakeven. We could achieve cash flow breakeven even earlier if we see an additional release of working capital resulting from reduced inventory.

Sure. Thanks. Maybe I didn't state the question quite correctly. The cash OpEx, can we think about that as basically being flat, the non-GAAP OpEx going forward?

Okay. I'm sorry. Yeah. So, Q4 will see the full benefits of the September restructuring, so it should be better than Q3. And then, after that, we think it's more or less in a good place. We're not guiding as of now to next year's OpEx, but for Q4, you should see an improvement versus Q3.

Yeah. Thank you very much.

And your next question comes from the line of Chris Dendrinos with RBC Capital Markets. Your line is open.

Yeah. Thank you. I just wanted to follow-up on the longer term outlook for '26 and the positive EBITDA comment. Can you just maybe, I guess, walk us through some of the levers that you all have to achieve that? Is that really just a function of revenue growth, or are there additional levers that you all have to, I guess, manage on your side outside of the kind of macro demand environment? Thanks.

Yeah. Thanks, Chris. So, as you saw this year, we've made significant progress towards getting to adjusted EBITDA positive by managing our cost structure. So, that helps on the OpEx side pretty significantly. The two levers that will get us there are revenue growth and gross margin improvement, right? So, revenue growth, as I laid out, there are a number of green shoots that we're seeing that gives us confidence in that in revenue growing next year. And then, on the gross margin side, as we start seeing benefits of Asia manufacturing next year, we should see that trending up as well. So. we'll see a combination of all of those three factors getting us there.

Got it. That was it for me. Thank you.

And your next question comes from the line of Chris Pierce with Needham. Your line is open.

Hey, good afternoon. Rick, I just wanted to make sure I followed something you said. Year two, which is next year, you're going to have next-generation software and next-generation hardware. Does the next-generation software work on hardware in the field? And then, I just want to understand the timing of the inventory drawdown and the introduction of next-generation hardware better.

Let me address the first part of your question, Chris. All of our software is fully compatible with our previous products and will also support the new products we will be launching. Additionally, our software platform is open, which allows us to manage a variety of third-party hardware even if it isn’t ours. Therefore, we ensure compatibility with older generations, newer generations, and third-party hardware. What was the second part of your question again, Chris?

I'm curious about the timing. You mentioned that next-generation hardware will be available next year, but you also have current inventory that you need to reduce. It appears that both events are occurring at the same time, and I'd like to understand how the inventory reduction aligns with the introduction of next-generation hardware.

Yeah. So, we are very diligent about aligning supply with demand, and we're confident that as we introduce new products, the products, if they do replace a prior product and are not something new, that will manage that transition effectively to avoid any significant obsolescence of an older product. And we've looked at that very carefully and are confident that we're in fine shape in that regard.

Okay. Perfect. And then, can you just touch on the Essential cloud plan that you released that you talked about at the end of October? Does this sort of put you on the path to being an owner operator or a quasi-owner operator since you're taking revenue from the drivers now, and this allows customers to have a lower monthly cost burden? I just want to understand the path that you're on or if this is just more of a special project for multifamily dwelling type buyers?

No. Good question, and thanks for asking that question. It definitely does not put us into the position of being an energy seller. That is not our business. That would put us in competition with our customers, and we have no plans to do anything like that. So, this is really an easy to buy or an easy to consume way to take care of your licensing requirements to ChargePoint. So, rather than every year get a renewal notice for your software or your enhanced warranty services, we just deduct that from your driver revenue until the amount you owe us for those services are paid, and then you could cover the rest. So, you forego the hassle of getting renewal notices as a customer and having to get a quote from us and pay the invoice. It just happens automatically. It also improves our internal efficiency because we don't have to do all that renewal work on an annual or however long the term of the license is.

Okay. Perfect. Thank you.

And your next question comes from the line of Gabe Daoud with TD Cowen. Your line is open.

Hey, afternoon, everyone. Thanks for taking my questions. Rick, I was curious if you could maybe give us a bit more color on this software you deployed for GM, a new use case with a major fast-charging network in the U.S. Just curious if you could maybe talk a little bit about that, and if you outlined or identified additional use cases for this new software, I guess?

Yeah. We won't go into too many details about that. It was a significant project, and it also applies to things we can do with other auto OEMs.

Okay. Fair enough. Thanks for that. And then just as a follow-up, Mansi, you mentioned gross margin next year will ultimately also depend on mix. So, I was curious if you can maybe level set a bid and give us an update or maybe rank within the portfolio like level 2 is CP6000 now the more margin-rich product versus CT4000 or CPF50 the new one like more margin-rich? And similarly on the DC side, which express offering would be the most margin-rich at this point?

Yeah. So, we're selling both CT4000, which is our legacy AC product, as well as the CP6000, which is a more premium product, and both are margin-rich. All of our AC portfolios is margin-rich. And on the DC side, with the Asia manufacturing coming on board, that will help the DC margins more significantly.

Okay. Thanks, Mansi. Thanks, Rick.

And your next question comes from the line of Patrick Ouellette with Stifel. Your line is open.

Hey, it's Pat Ouellette on for Stephen Gengaro. Thanks for taking our questions. You'd been optimistic about some green shoot potentials next year and seeing customers significantly expand their deployment plans. Curious if expectations have shifted one way or another. And then, any comments you could provide specifically on the fleet side?

Yeah, I think in general across all segments, especially in North America, we're seeing demand that is pleasing to us and again with the improvements we've made in terms of sales and marketing execution, we're executing on that demand better. So, it seems to be pretty evenly spread across all segments, at least in North America, again, with a bit slower market growth in Europe at the moment. And in fleet in particular, I think we've got some exciting opportunities there, and those tend to come in large deal chunks and we've got some pretty exciting things there that we're working on that I'm looking forward to next year.

All right. Thanks for that. And then, looking into next year with the Asia manufacturing coupled with potential increasing higher margin subscription revenue, could you talk about any associated ramp in margin, understanding you still have to get through the inventory on hand, but just looking for insight on how margin progresses throughout the year? And then, any thoughts on a more competitive market for product sales impacting margin?

Yeah. So, I'll take the first part regarding margin expansion next year. Yes, you're correct. We do expect margin to expand next year. We'll start seeing it happen around the middle of next year. And you are also correct, both hardware and subscription margins should expand, hardware because of the Asia manufacturing coming on board. And then, subscription margins expanding because we will continue to see a larger size of subscription revenue in overall revenue as well as more efficiencies and economies of scale. What was the second part, sorry, of your question?

Yeah. The competitive landscape, it moves around, but in terms of the overall strength of the competition, it doesn't seem to change on an overall basis, in an appreciable way. The one thing we have noticed is that all the investments we've made in our support organization, the example of our AI picture to resolution feature that we rolled out last quarter, those are starting to make a real differentiating factor for us. We're winning deals on our ability to support our customers and make sure their networks stay up and stay reliable.

All right. Thanks a bunch.

And your next question comes from the line of Craig Irwin with Roth Capital Partners. Your line is open.

Good evening, and thank you for my question. I would like to know more about the underlying assumptions in your growth forecast and the path to achieving positive EBITDA, which is a significant milestone. Can you provide insights on the expected contributions from new products in markets you haven't served before, compared to updates on existing products, as well as from organic growth and established products that have existing channels, relationships, and customers?

Good question, Craig. Nice to hear from you. I think next year, the new products that serve new use cases and categories will not contribute much. Those are really going to be developed and launched as we move through the year and start to show significant financial benefit in the following year. So, the majority of the revenue in the upcoming fiscal year, our fiscal '26, which starts on February 1st, will come from our existing portfolio.

Excellent. Thank you for that. And then, just as a follow-up question, we're hearing a lot of interest about sort of an accelerated changeover to the NATS on the part of many sort of third-party network operators. Can you maybe comment a little bit about the availability of the necessary hardware to make that change, whether or not that's something that you could earn incremental service dollars on as these networks are looking to pursue growth with the Tesla fleet versus the non-Tesla fleet, which has been a big boom for many of them over the last few years?

Yeah, another good question. We're in good shape there. We've got our Omni Port solution that we've publicly announced. It's going to begin shipping here very soon. And our parking lot is full of them. And they are used frequently, and it's a really elegant solution that basically makes the connector on your car irrelevant. You can come charge at a ChargePoint station no matter what you have as long as you've got the Omniport solution installed. We do expect customers to spend money upgrading to that solution as we move through into next year.

Excellent. Well, congratulations on the progress bringing down cost. I'll hop back in the queue.

Thank you. And ladies and gentlemen, that concludes our question-and-answer session and today's conference call. We thank you for your participation and you may now disconnect.