CHARGEPOINT HOLDINGS, INC. The following discussion of the results of operations and financial condition ofChargePoint Holdings, Inc. ("ChargePoint" or the "Company") should be read in conjunction withChargePoint's condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and the audited consolidated financial statements for the year endedJanuary 31, 2021 and the related notes included in the Company's Registration Statement on Form S-1 filed with theSEC onJuly 12, 2021 . This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.ChargePoint's actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" in Part II, Item 1A of this report. OverviewChargePoint designs, develops and markets networked electric vehicle ("EV") charging system infrastructure ("Networked Charging Systems") and cloud-based services which enable consumers the ability to locate, reserve, authenticate and transact EV charging sessions ("Cloud" or "Cloud Services"). As part ofChargePoint's Networked Charging Systems, subscriptions and other offerings, it provides an open platform that integrates with system hardware fromChargePoint and other manufacturers, connecting systems over an intelligent network that provides real-time information about charging sessions and full control, support and management of the Networked Charging Systems. This network provides multiple web-based portals for charging system owners, fleet managers, drivers and utilities.ChargePoint generates revenue primarily through the sale of Networked Charging Systems, Cloud Services and extended parts and labor warranty ("Assure"), which are typically paid for upfront. Assure also includes proactive monitoring, fast response times, expert advice and robust reporting. TheChargePoint as a Service ("CPaaS") program combines the customer's use ofChargePoint's owned and operated systems with Cloud Services, Assure and other benefits available to subscribers into one subscription.ChargePoint targets three key customer markets: commercial, fleet and residential. Commercial customers have parking places largely within their workplaces and includes retail, hospitality, and parking lot operators. Fleet includes municipal buses, delivery and work vehicles, port/airport/warehouse and other industrial applications, ridesharing services, and is expected to eventually include autonomous transportation. Residential includes single family homes and multifamily residences. SinceChargePoint's inception in 2007, it has been engaged in developing and marketing its Networked Charging Systems, subscriptions and other offerings, raising capital and recruiting personnel.ChargePoint has incurred net operating losses and negative cash flows from operations every year since its inception. As ofJuly 31, 2021 ,ChargePoint had an accumulated deficit of$682.1 million .ChargePoint has funded its operations primarily from sales of its solutions, with proceeds from the issuance of redeemable convertible preferred stock and common stock and historically from borrowings under its prior loan facilities. Recent Developments Acquisitions OnJuly 20, 2021 , the Company entered into a definitive agreement to acquire all of the outstanding shares of has.to.be gmbh ("has.to.be" or "HTB") for approximatelyEuro 250.0 million in cash and Company common stock subject to adjustments. has.to.be is anAustria -based e-mobility provider with a European charging software platform. The acquisition is intended to expand the Company's access to the European market. The Company currently expects the transaction to close as early asOctober 2021 . 37 -------------------------------------------------------------------------------- Table of Contents OnAugust 11, 2021 , the Company acquired all of the outstanding shares ofViriCiti B.V. ("ViriCiti") for approximatelyEuro 75.0 million in cash, subject to adjustments. ViriCiti is aNetherlands -based provider of electrification solutions for eBus and commercial fleets with offices inthe Netherlands andthe United States . The acquisition is expected to enhanceChargePoint's fleet solutions portfolio of hardware, software and services by integrating information sources to optimize electric fleet operations. Earnout Shares OnFebruary 26, 2021 ("Closing Date"),Switchback Energy Acquisition Corporation ("Switchback") consummated the previously announced transactions pursuant to whichLightning Merger Sub Inc. , a wholly owned subsidiary of Switchback incorporated in theState of Delaware ("Lightning Merger Sub"), merged withChargePoint, Inc. , aDelaware corporation ("Legacy ChargePoint"); LegacyChargePoint survived as a wholly-owned subsidiary of Switchback ("Merger," and, collectively with the other transactions described in the Merger Agreement (as defined below), the "Reverse Recapitalization"). Further, as a result of the Merger, Switchback was renamed "ChargePoint Holdings, Inc. ". Pursuant to the terms of the Merger Agreement, each stockholder of LegacyChargePoint received 0.9966 shares of the Company's common stock, par value$0.0001 per share ("Common Stock") and the contingent right to receive as additional merger consideration certain Earnout Shares (as defined below), for each share of Legacy ChargePoint common stock, par value$0.0001 per share, owned by such Legacy ChargePoint stockholder that was outstanding immediately prior to the Closing (other than any shares of Legacy ChargePoint restricted stock). In addition, certain investors purchased an aggregate of 22,500,000 shares of Common Stock (such investors, the "PIPE Investors ") concurrently with the Closing for an aggregate purchase price of$225,000,000 . In addition, pursuant to the terms of the Merger Agreement, at the effective time of the Merger ("Effective Time"), (1) warrants to purchase shares of capital stock of Legacy ChargePoint were converted into warrants to purchase an aggregate of 38,761,031 shares of Common Stock and the contingent right to receive certain Earnout Shares, (2) options to purchase shares of common stock of Legacy ChargePoint were converted into options to purchase an aggregate of 30,135,695 shares of Common Stock and, with respect to vested options, the contingent right to receive certain Earnout Shares and (3) unvested restricted shares of common stock of Legacy ChargePoint that were outstanding pursuant to the "early exercise" of Legacy ChargePoint options were converted into an aggregate of 345,689 restricted shares ofChargePoint ("Restricted Shares"). During the time period between the Closing and the five-year anniversary of the Closing Date, eligible former equity holders could receive up to 27,000,000 additional shares ofChargePoint's common stock ("Earnout Shares") in the aggregate in three equal tranches if the volume-weighted average closing sale price ofChargePoint's common stock is greater than or equal to$15.00 ,$20.00 and$30.00 for any 10 trading days within any 20 consecutive trading day period ("Trigger Events"). OnMarch 19, 2021 , a total of approximately 18,000,000 shares of Common Stock were released to eligible former equity holders of LegacyChargePoint pursuant to the Earnout Shares provisions of the Merger Agreement, as the first two Trigger Events had been met. The Trigger Events were met by virtue of the volume-weighted average closing sale price of Common Stock having been greater than or equal to$15.00 and$20.00 for ten (10) trading days out of twenty (20) consecutive trading days following the closing of the Merger. The holders of Legacy ChargePoint common stock (other than restricted stock), warrants and vested options as of the closing of the Merger received their pro rata portion of the Earnout Shares. OnJuly 1, 2021 , a total of approximately 9,000,000 shares of Common Stock were released to eligible former equity holders of Legacy ChargePoint pursuant to the Earnout Shares provision of the Merger Agreement, as the third Trigger Event had been met. The Trigger Event was met by virtue of the volume-weighted average closing sale price of Common Stock having been greater than or equal to$30.00 for ten (10) trading days out of twenty (20) consecutive trading days following the closing of the Merger. Key Factors Affecting Operating ResultsChargePoint believes its performance and future success depend on several factors that present significant opportunities for it but also pose risks and challenges, including those discussed below. 38 -------------------------------------------------------------------------------- Table of Contents Growth in EV AdoptionChargePoint's revenue growth is directly tied to the number of passenger and commercial EVs sold, which it believes drives the demand for charging infrastructure. The market for EVs is still rapidly evolving and although demand for EVs has grown in recent years, there is no guarantee of such future demand. Factors impacting the adoption of EVs include but are not limited to: perceptions about EV features, quality, safety, performance and cost; perceptions about the limited range over which EVs may be driven on a single battery charge; volatility in the cost of oil and gasoline; availability of services for EVs; consumers' perception about the convenience and cost of charging EVs; and increases in fuel efficiency. In addition, macroeconomic factors, including government mandates and incentives, could impact demand for EVs, particularly since they can be more expensive than traditional gasoline-powered vehicles when the automotive industry globally has been experiencing a recent decline in sales. If the market for EVs does not develop as expected or if there is any slow-down or delay in overall EV adoption rates, this would impactChargePoint's ability to increase its revenue or grow its business. CompetitionChargePoint is currently a market leader inNorth America in commercial Level 2 Alternating Current ("AC") charging.ChargePoint also offers chargers for use at home or multifamily settings, and high-power Level 3 Direct Current ("DC") chargers for fast urban charging, corridor or long-trip charging and fleet applications.ChargePoint intends to expand its market share over time in its product categories, leveraging the network effect of its products and Cloud Services software. Existing competitors may expand their product offerings and sales strategies, and new competitors may enter the market. Furthermore,ChargePoint's competition includes other types of alternative fuel vehicles and high fuel-economy gasoline powered vehicles. IfChargePoint's market share decreases due to increased competition, its financial condition and results of operations in the future may be impacted. Europe ExpansionChargePoint operates inNorth America and selected countries inEurope .Europe is expected to be a significant contributor toChargePoint's revenue in future years.ChargePoint is using a portion of the proceeds from the Merger to increase its sales and marketing activities inEurope .ChargePoint is also positioned to grow its European business through existing partnerships with car leasing companies, its recently closed acquisition of ViriCiti, and its pending acquisition of has.to.be. In Europe ChargePoint primarily competes with smaller providers of EV charging station networks. Many of these competitors have limited funding, which could cause poor experiences and have a negative impact on overall EV adoption inEurope .ChargePoint's growth inEurope requires differentiating itself as compared to these existing competitors. IfChargePoint is unable to continue penetrating the market inEurope , its financial condition and results of operations may be impacted. Fleet ExpansionChargePoint's future growth is highly dependent upon fleet applications. Because fleet operators often make large purchases of EVs, volatility may be more pronounced and any significant decline from these customers reducesChargePoint's potential for future growth. Impact of New Product Releases and Investments in Growth As ChargePoint introduces new products, its gross margins may be initially impacted by launch costs and lower volumes until its supply chain achieves targeted cost reductions, such as the market introduction of its Level 3 DC fast charger in fiscal year 2020. In addition,ChargePoint may accelerate its operating expenditures where it sees growth opportunities, which may impact gross margin until upfront costs and inefficiencies are absorbed and normalized operations are achieved.ChargePoint also continuously evaluates and may adjust its operating expenditures based on its launch plans for its new products, as well as other factors including the pace and prioritization of current projects under development and the addition of new projects. AsChargePoint attains higher revenue, it expects operating expenses as a percentage of total revenue to decrease as it scales and focuses on increasing operational efficiency and process automation. Government Mandates, Incentives and Programs TheU.S. federal government, certain foreign governments and some state and local governments provide incentives to end users and purchasers of EVs and EV infrastructure in the form of rebates, tax credits and other financial incentives. These 39 -------------------------------------------------------------------------------- Table of Contents governmental rebates, tax credits and other financial incentives significantly lower the effective price of EVs and EV infrastructure to customers. However, these incentives may expire on specified dates, end when the allocated funding is no longer available, or be reduced or terminated as a matter of regulatory or legislative policy. In particular, the credits under Section 30C of the Code which benefit investments in EV infrastructure may be reduced or become unavailable if not extended in future years. Any reduction in rebates, tax credits or other financial incentives could reduce the demand for EVs and for charging infrastructure, including infrastructureChargePoint offers.ChargePoint also derives Other revenue from fees received for regulatory credits earned for participating in low carbon fuel programs in approvedU.S. states.ChargePoint claims these regulatory credits only if they are not claimed by purchasers of its EV charging stations; only a small percentage of its customers currently elect to claim such credits. If a material percentage of its customers were to claim these regulatory credits,ChargePoint's revenue from this source could decline significantly, which could have an adverse effect on its revenue and overall gross margin. Prior to fiscal year 2021ChargePoint derived a slight majority of its Other revenue from these regulatory credits. However, revenue from this source as a percentage of total revenue has declined in recent quarters and it may continue to decline over time. Further, the availability of such credits depends on continued governmental support for these programs. If these programs are modified, reduced or eliminated,ChargePoint's ability to generate this revenue in the future would be adversely impacted. Impact of COVID-19 InMarch 2020 , theWorld Health Organization (the "WHO") characterized COVID-19 as a pandemic. The impact of COVID-19, including changes in consumer and business behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. The spread of COVID-19 has disruptedChargePoint's supply chain and heightened its freight and logistic costs, and has similarly disrupted manufacturing, delivery and overall supply chain of vehicle manufacturers and suppliers, which has led to fluctuations in EV sales in markets around the world. These ongoing supply chain challenges and heightened logistic costs decreased gross margins in the three and six months endedJuly 31, 2021 andChargePoint expects gross margins will continue to be adversely affected by increased component, freight and logistic expenses through the remainder of the fiscal year. As a result of the COVID-19 pandemic,ChargePoint initially modified its business practices (including reducing employee travel, recommending that all non-essential personnel work from home and canceling or reducing physical participation in sales activities, meetings, events and conferences), implemented additional safety protocols for essential workers, and implemented temporary cost cutting measures in order to reduce its operating costs. The Company may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers, suppliers, vendors and business partners. While the ultimate duration and extent of the COVID-19 pandemic depends on current and future developments that cannot be accurately predicted, such as the extent and effectiveness of containment actions and vaccinations, it has already had an adverse effect on the global economy, the ultimate societal and economic impact of the COVID-19 pandemic remains unknown. The effect of the COVID-19 pandemic can also vary over time and across the geographies in whichChargePoint operates. For example, variations in work-from-home policies can cause fluctuations inChargePoint's revenues, and the Company believes that since people are not yet fully back to work it has not yet seen the full return of commercial customer demand for its products. The conditions caused by the COVID-19 pandemic, such as more permanent work-from-home policies, are likely to continue affecting the rate of global infrastructure spending, and thus to continue to adversely impactChargePoint's gross margins as the Company's commercial business contributes higher margins than its residential and fleet businesses. Further, the COVID-19 pandemic could continue to heighten supply chain pricing and logistics expenses, and could, for example, adversely impactChargePoint's gross margins through heightened supply chain expenses, and could adversely affect demand forChargePoint's platforms, lengthen its sales cycles, reduce the value, renewal rate or duration of subscriptions, negatively impact collections of accounts receivable, reduce expected spending from new customers, cause some of its paying customers to go out of business and limit the ability of its direct sales force to travel to customers and potential customers, all of which could adversely affect its business, results of operations and financial condition. 40 -------------------------------------------------------------------------------- Table of Contents Results of Operations & its Components Revenue Networked Charging Systems Networked Charging Systems revenue includes revenue related to the deliveries of EV charging system infrastructure, which include lower priced Level 1 home chargers typically sold to drivers, Level 2 AC chargers for commercial use and Level 3 DC fast charging systems for urban/corridor charging and for fleet operators. A majority ofChargePoint's Networked Charging Systems revenue is presently derived from the sale of Level 2 AC chargers.ChargePoint recognizes revenue from sales of Networked Charging Systems upon shipment to the customer, which is when the performance obligation has been satisfied. Subscriptions Subscriptions revenue consists of services related to Cloud, as well as extended maintenance service plans under Assure. Subscriptions revenue also consists of CPaaS revenue which combines the customer's use ofChargePoint's owned and operated systems with Cloud and Assure programs into a single subscription. CPaaS subscriptions are considered to contain a lease for the customer's use ofChargePoint's owned and operated systems unless the location allows the customer to receive incremental economic benefit from regulatory credits earned on that EV charging system. Lessor revenue relates to operating leases and historically has not been material. Subscriptions revenue is recognized over time on a straight-line basis asChargePoint has a stand-ready obligation to deliver such services to the customer. Other Other revenue consists of fees received for transferring regulatory credits earned for participating in low carbon fuel programs in approved states, charging related fees received from drivers using charging sites owned and operated byChargePoint , net transaction fees earned for processing payments collected on driver charging sessions at charging sites owned by its customers, and other professional services. Revenue from regulatory credits is recognized at the point in time the regulatory credits are transferred. Revenue from fees for owned and operated sites is recognized over time on a straight-line basis over the performance period of the service contract asChargePoint has a stand-ready obligation to deliver such services. Revenue from driver charging sessions and charging transaction fees is recognized at the point in time the charging session or transaction is completed. Revenue from professional services is recognized as the services are rendered. For the remainder of fiscal year 2022,ChargePoint expects revenue to grow in both networked charging systems and subscriptions due to increased demand in EV and its related charging infrastructure market. July 31, Networked Charging Systems 2021 2020 Change (dollar amounts in thousands) Three months ended$ 40,874 $ 21,368 $ 19,506 91.3 % Percentage of total revenue 72.8 % 61.1 % Six months ended$ 67,674 $ 41,025 $ 26,649 65.0 % Percentage of total revenue 70.0 % 60.6 % Networked Charging Systems revenue increased during the three and six months endedJuly 31, 2021 , compared to the three and six months endedJuly 31, 2020 , primarily due to higher demand from customers resulting in higher volumes of systems delivered across all ofChargePoint's major product families. 41
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July 31,
Subscriptions 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ 12,082 $ 9,811 $ 2,271 23.1 %
Percentage of total revenue 21.5 % 28.1 %
Six months ended $ 22,906 $ 18,815 $ 4,091 21.7 %
Percentage of total revenue 23.7 % 27.8 %
Subscriptions revenue increased during the three and six months ended July 31,
2021 , compared to the three and six months ended July 31, 2020 , primarily due to
growth in the number of charging systems connected to ChargePoint's network.
July 31,
Other revenue 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ 3,165 $ 3,778 $ (613 ) (16.2 )%
Percentage of total revenue 5.6 % 10.8 %
Six months ended $ 6,051 $ 7,893 $ (1,842 ) (23.3 )%
Percentage of total revenue 6.3 % 11.7 %
Other revenue decreased during the three and six months ended July 31, 2021 ,
compared to the three and six months ended July 31, 2020 mainly due to fewer
regulatory credits transferred.
Cost of Revenue
Networked Charging Systems
ChargePoint uses contract manufacturers to manufacture the majority of its
Networked Charging Systems. ChargePoint conducts the remainder of its
manufacturing
in-house.
ChargePoint's cost of revenue for the sale of Networked Charging Systems
includes the contract manufacturer costs of finished goods. For ChargePoint's
limited
in-house
production, cost of revenue for the sale of Networked Charging Systems also
includes parts, labor, manufacturing costs, and allocated facilities and
information technology expenses. Cost of revenue for the sale of Networked
Charging Systems also consists of salaries and related personnel expenses,
including stock-based compensation, warranty provisions, depreciation of
manufacturing related equipment and facilities, amortization of capitalized
internal-use
software, and allocated facilities and information technology expenses. As
revenue is recognized, ChargePoint accounts for estimated warranty cost as a
charge to cost of revenue. The estimated warranty cost is based on historical
and predicted product failure rates and repair expenses. Costs incurred for
shipping and handling are recorded in cost of revenue.
Subscriptions
Cost of subscriptions revenue includes salaries and related personnel expenses,
including stock-based compensation and third-party support costs to manage the
systems and helpdesk services for drivers and site hosts, network and wireless
connectivity costs for subscription services, field maintenance costs for Assure
to support ChargePoint's network of systems, depreciation of owned and operated
systems used in CPaaS arrangements, amortization of capitalized
internal-use
software development costs, allocated facilities and information technology
expenses.
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Other
Cost of other revenue includes depreciation and other costs for ChargePoint's
owned and operated charging sites, salaries and related personnel expenses,
including stock-based compensation, as well as costs of professional services.
July 31,
Cost of networked charging systems revenue 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ 35,384 $ 20,408 Six months ended$ 59,126 $ 39,024
Cost of Networked Charging Systems revenue increased during the three and six months endedJuly 31, 2021 , compared to the three and six months endedJuly 31, 2020 , primarily due to an increase in the number of Networked Charging Systems delivered. July 31, Cost of subscriptions revenue 2021 2020 Change (dollar amounts in thousands) Three months ended$ 7,830 $ 4,452 $ 3,378 75.9 % Percentage of subscriptions revenue 64.8 % 45.4 % Six months ended$ 13,470 $ 9,225 $ 4,245 46.0 % Percentage of subscriptions revenue 58.8 % 49.0 % Cost of subscriptions revenue increased during the three and six months endedJuly 31, 2021 , compared to the three and six months endedJuly 31, 2020 , primarily resulting from an increase in stock-based compensation andChargePoint expanding its network of charging systems. July 31, Cost of other revenue 2021 2020 Change (dollar amounts in thousands) Three months ended$ 2,130 $ 1,069 $ 1,061 99.3 % Percentage of other revenue 67.3 % 28.3 % Six months ended$ 4,041 $ 2,692 $ 1,349 50.1 % Percentage of other revenue 66.8 % 34.1 %
Other cost of revenue increased during the three and six months ended
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Gross Profit and Gross Margin
Gross profit is revenue less cost of revenue and gross margin is gross profit as
a percentage of revenue. ChargePoint offers a range of Networked Charging
Systems products which vary widely in selling price and associated margin.
Accordingly, ChargePoint's gross profit and gross margin have varied and are
expected to continue to vary from period to period due to revenue levels;
geographic, vertical and product mix; new product introductions, and its efforts
to optimize its operations and supply chain.
In the long term, improvements in ChargePoint's gross profit and gross margin
will depend on its ability to increase its revenue and continue to optimize its
operations and supply chain. However, at least in the short term, as ChargePoint
launches new Networked Charging Systems products, grows its presence in Europe
where it has not yet achieved economies of scale, and expands its solutions for
its fleet customers, it expects gross margin to experience variability from
period to period. In addition, ChargePoint expects gross margins will continue
to be adversely affected by increased freight and logistic expense as a result
of ongoing supply chain disruptions caused by
COVID-19
and related measures.
July 31,
Gross Profit and Gross Margin 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ 10,777 $ 9,028 $ 1,749 19.4 %
Gross margin 19.2 % 25.8 %
Six months ended $ 19,994 $ 16,792 $ 3,202 19.1 %
Gross margin 20.7 % 24.8 %
Gross profit increased during the three and six months ended July 31, 2021 ,
compared to the three and six months ended July 31, 2020 , primarily due to an
increase in Networked Charging Systems sales resulting from a larger number of
charging systems delivered.
Gross margin decreased during the three and six months ended July 31, 2021 ,
compared to the three and six months ended July 31, 2020 , primarily due to an
increase in stock-based compensation expense and a decrease in other revenue in
the form of regulatory credits transferred.
Research and Development Expenses
Research and development expenses consist primarily of salaries and related
personnel expenses, including stock-based compensation, for personnel related to
the development of improvements and expanded features for ChargePoint's
services, as well as quality assurance, testing, product management,
amortization of capitalized
internal-use
software, and allocated facilities and information technology expenses. Research
and development costs are expensed as incurred.
ChargePoint expects its research and development expenses to increase on an
absolute basis and they may increase as a percentage of total revenue for the
foreseeable future as ChargePoint continues to invest in research and
development activities to achieve its technology and product roadmap.
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July 31,
Research and development expenses 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ 40,410 $ 17,126 $ 23,284 136.0 %
Percentage of total revenue 72.0 % 49.0 %
Six months ended $ 65,784 $ 35,152 $ 30,632 87.1 %
Percentage of total revenue 68.1 % 51.9 %
Research and development expenses increased during the three months ended
July 31, 2021 , compared to the three months ended July 31, 2020 , primarily
attributable to a $19.6 million increase in personnel costs related to a
$13.2 million increase in stock-based compensation expense from restricted stock
unit ("RSU") grants and a $6.4 million increase in salary and bonus expenses due
to headcount growth.
Research and development expenses increased during the six months ended July 31,
2021 , compared to the six months ended July 31, 2020 , primarily attributable to
a $23.0 million increase in personnel costs related to a $13.6 million increase
in stock-based compensation expense from RSU grants and a $9.4 million increase
in salary and bonus expenses due to headcount growth.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of salaries and related personnel
expenses, including stock-based compensation, sales commissions, professional
services fees, travel, marketing and promotional expenses amortization of
capitalized
internal-use
software and allocated facilities and information technology expenses.
ChargePoint expects its sales and marketing expenses to increase on an absolute
basis and they may increase as a percentage of total revenue for the foreseeable
future while it continues to add sales and marketing personnel, expand its sales
channels and expand in Europe .
July 31,
Sales and marketing expenses 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ 21,923 $ 10,966 $ 10,957 99.9 %
Percentage of total revenue 39.1 % 31.4 %
Six months ended $ 37,897 $ 25,167 $ 12,730 50.6 %
Percentage of total revenue 39.2 % 37.2 %
Sales and marketing expenses increased during the three months ended July 31,
2021 , compared to the three months ended July 31, 2020 , primarily attributable
to an $8.7 million increase in personnel costs related to a $4.9 million
increase in salary, bonus and commissions due to headcount growth as well as
revenue growth and a $3.8 million increase in stock-based compensation expense
resulting from RSU grants.
Sales and marketing expenses increased during the six months ended July 31,
2021 , compared to the six months ended July 31, 2020 , primarily attributable to
a $10.1 million increase in personnel costs related to a $6.0 million increase
in salary, bonus and commissions due to headcount growth as well as revenue
growth and a $4.1 million increase in stock-based compensation expense resulting
from RSU grants.
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General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related
personnel expenses, including stock-based compensation, related to finance,
legal and human resource functions, contractor and professional services fees,
audit and compliance expenses, insurance costs, bad debt expenses, amortization
of capitalized
internal-use
software and general corporate expenses, including allocated facilities and
information technology expenses.
ChargePoint expects its general and administrative expenses to increase in
absolute dollars as it continues to grow its business. ChargePoint also expects
to incur additional expenses as a result of operating as a public company,
including expenses necessary to comply with the rules and regulations applicable
to companies listed on a national securities exchange and related to compliance
and reporting obligations pursuant to the rules and regulations of the SEC , as
well as higher expenses for director and officer insurance, investor relations
and legal, accounting and other professional services.
July 31,
General and administrative expenses 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ 22,732 $ 4,466 $ 18,266 409.0 %
Percentage of total revenue 40.5 % 12.8 %
Six months ended $ 37,199 $ 9,555 $ 27,644 289.3 %
Percentage of total revenue 38.5 % 14.1 %
General and administrative expenses increased during the three months ended
July 31, 2021 , compared to the three months ended July 31, 2020 , primarily
attributable to a $9.7 million increase in personnel costs related to a
$7.9 million increase in stock-based compensation expense resulting from RSU
grants and stock option grants, a $1.8 million increase in salary expense due to
headcount growth, a $2.8 million increase in consulting expenses as well as a
$5.4 million increase in professional services fees related to acquisitions and
expenses associated with an underwritten secondary offering of shares held by
certain selling stockholders in July 2021 ("Secondary Stock Offering").
General and administrative expenses increased during the six months ended
July 31, 2021 , compared to the six months ended July 31, 2020 , primarily
attributable to a $15.7 million increase in personnel costs related to a
$13.9 million increase in stock-based compensation expense resulting from RSU
grants and stock option grants, a $1.8 million increase in salary expense due to
headcount growth, a $5.2 million increase in consulting expenses as well as a
$5.4 million increase in professional services fees related to acquisitions and
the Secondary Stock Offering.
Interest Income
Interest income consists primarily of interest earned on ChargePoint's cash,
cash equivalents and short-term investments.
July 31,
Interest Income 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ 25 $ 37 $ (12 ) (32.4 )%
Percentage of total revenue - % 0.1 %
Six months ended $ 47 $ 280 $ (233 ) (83.2 )%
Percentage of total revenue - % 0.4 %
46-------------------------------------------------------------------------------- Table of Contents Interest income decreased during the three and six months endedJuly 31, 2021 as compared to the three and six months endedJuly 31, 2020 due to lower returns on investments. Interest Expense Interest expense consists primarily of the interest onChargePoint's term loan which was paid off inMarch 2021 . July 31, Interest Expense 2021 2020 Change (dollar amounts in thousands) Three months ended $ -$ (793 ) $ 793 (100.0 )% Percentage of total revenue - % (2.3 )% Six months ended$ (1,499 ) $ (1,628 ) $ 129 (7.9 )% Percentage of total revenue (1.6 )% (2.4 )% Interest expense decreased during the three and six months endedJuly 31, 2021 , compared to the three and six months endedJuly 31, 2020 , primarily due to repayment of the term loan inMarch 2021 . As ofJuly 31, 2021 ,ChargePoint had no outstanding loans. Change in Fair Value of Redeemable Convertible Preferred Stock Warrant Liability Redeemable convertible preferred stock warrant liability is subject to remeasurement to fair value at each balance sheet date. Changes in fair value of redeemable convertible preferred stock warrant liability are recognized in the condensed consolidated statements of operations.ChargePoint adjusts the liability for changes in fair value until the earlier of the exercise or expiration of the warrants and conversion of redeemable convertible preferred stock into the Company's Common Stock. July 31,
Change in fair value of redeemable convertible preferred stock warrant liability 2021 2020
Change
(dollar amounts in thousands)
Three months ended
$ -
- % (32.9 )%
Six months ended
9.6 % (16.2 )%
The change in fair value of redeemable convertible preferred stock warrant
liability during the three and six months ended July 31, 2021 compared to the
three and six months ended July 31, 2020 was primarily due to changes in the
fair value of Legacy ChargePoint's redeemable convertible preferred stock
through the date of the Merger. As of July 31, 2021 , ChargePoint had no
outstanding redeemable convertible preferred stock warrant liabilities.
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Change in Fair Value of Common Stock Warrant Liabilities
Common stock warrant liabilities consist of publicly-traded warrants ("Public
Warrants") and private placement warrants issued to NGP Switchback, LLC
("Private Placement Warrants") which ChargePoint assumed in connection with the
Merger and are subject to remeasurement to fair value at each balance sheet
date. ChargePoint expects to incur an incremental income (expense) in the
condensed consolidated statements of operations for the fair value adjustments
for the outstanding common stock warrant liabilities at the end of each
reporting period or through the exercise of such warrants.
July 31 ,
Change in fair value of common stock warrant liability 2021 2020
Change
(dollar amounts in thousands)
Three months ended $ (10,421 ) $ - $ (10,421 ) - %
Percentage of total revenue (18.6 )% - %
Six months ended$ 33,340 $ -$ 33,340 - % Percentage of total revenue 34.5 %
- %
ChargePoint recognized a$10.4 million loss during the three months endedJuly 31, 2021 due to the change in the fair value of common stock warrants during the respective period the warrants were outstanding.ChargePoint recognized a$33.3 million gain during the six months endedJuly 31, 2021 due to the change in the fair value of common stock warrants during the respective period the warrants were outstanding. Change in Fair Value of Contingent Earnout Liability Contingent earnout liability was accounted for as a liability as of the date of the Merger and remeasured to fair value until the Earnout Triggering Event was met for the first two tranches inMarch 2021 and the Earnout Shares issued. InMarch 2021 , the remaining earnout liability for the third tranche converted to be accounted for as equity. The Earnout Triggering Event was met for the third and final tranche inJune 2021 and inJuly 2021 the Earnout Shares were issued.July 31 ,
Change in fair value of contingent earnout liability 2021 2020
Change
(dollar amounts in thousands)
Three months ended $ - $ - $ - - %
Percentage of total revenue - % - %
Six months ended $ 84,420 $ - $ 84,420 - %
Percentage of total revenue 87.4 % - %
ChargePoint recognized a change in fair value of contingent earnout liability of
$84.4 million for the six months ended July 31, 2021 , due to the decrease in the
fair value of ChargePoint's common stock after consummation of the Merger.
Transaction Costs Expensed
Transaction costs consist of legal, accounting, banking fees and other costs
that were directly related to the consummation of the Merger. Transaction costs
related to the issuance of shares were recognized in stockholders' equity
(deficit) while costs associated with the warrant liabilities and
non-capitalized
amounts were expensed in the condensed consolidated statements of operations
upon the completion of the Merger on February 26, 2021 .
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July 31,
Transaction costs expensed 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ - $ - $ - - %
Percentage of total revenue - % - %
Six months ended $ (7,031 ) $ - $ (7,031 ) - %
Percentage of total revenue (7.3 )% - %
During the six months ended July 31, 2021 ChargePoint expensed $7.0 million out
of $36.5 million total transaction costs, that related to the warrant
liabilities assumed as part of the Merger.
Other Income (Expense), Net
Other income (expense), net consists primarily of foreign currency transaction
gains and losses.
July 31,
Other income (expense), net 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ (189 ) $ 563 $ (752 ) (133.6 )%
Percentage of total revenue (0.3 )% 1.6 %
Six months ended $ (174 ) $ 131 $ (305 ) (232.8 )%
Percentage of total revenue (0.2 )% 0.2 %
Other income (expense) decreased during the three and six months ended July 31,
2021 as compared to the three and six months ended July 31, 2020 due to
unfavorable changes in foreign exchange rates.
Provision for income taxes
ChargePoint's provision for income taxes consists of an estimate of federal,
state and foreign income taxes based on enacted federal, state and foreign tax
rates, as adjusted for allowable credits, deductions, uncertain tax positions,
changes in deferred tax assets and liabilities and changes in tax law. Due to
the level of historical losses, ChargePoint maintains a valuation allowance
against U.S. federal and state deferred tax assets as it has concluded it is
more likely than not that these deferred tax assets will not be realized.
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July 31,
Provision for income taxes 2021 2020 Change
(dollar amounts in thousands)
Three months ended $ 65 $ 48 $ 17 35.4 %
Percentage of profit/(loss) before provision for
income taxes (0.1 )% (0.1 )%
Six months ended $ 103 $ 105 $ (2 ) (1.9 )%
Percentage of profit/(loss) before provision for
income taxes (4.0 )% (0.2 )%
The provision for income taxes did not significantly fluctuate during the three and six months endedJuly 31, 2021 as compared to the three and six months endedJuly 31, 2020 . Liquidity and Capital Resources Sources of LiquidityChargePoint has incurred net losses and negative cash flows from operations since its inception which it anticipates will continue for the foreseeable future. To date,ChargePoint has funded its operations primarily with proceeds from the issuance of redeemable convertible preferred stock, proceeds from warrant and option exercises for cash, borrowings under its loan facilities, customer payments and proceeds from the Merger. As ofJuly 31, 2021 ,ChargePoint had cash, cash equivalents and restricted cash of$618.5 million .ChargePoint believes that its cash on hand, together with cash generated from sales to customers will satisfy its working capital and capital requirements for at least the next twelve months. From inception toJuly 31, 2021 ,ChargePoint has raised aggregate net cash proceeds of$615.7 million from the sale of shares of redeemable convertible preferred stock and$477.5 million from the Merger and the concurrent purchase by certain investors of shares of Common Stock pursuant to separate subscription agreements (the "PIPE financing"). During the six months endedJuly 31, 2021 ,ChargePoint received$117.6 million in proceeds from the Public Warrants. InMarch 2021 ,ChargePoint repaid the entire loan balance of$35.0 million plus accrued interest and prepayment fees of$1.2 million . Long-Term Liquidity Requirements UntilChargePoint can generate sufficient revenue to cover its cost of sales, operating expenses, working capital and capital expenditures, it expects to primarily fund cash needs through a combination of equity and debt financing. IfChargePoint raises funds by issuing equity securities, dilution to existing stockholders may result. Any equity securities issued may also provide for rights, preferences or privileges senior to those of holders of Common Stock. IfChargePoint raises funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of Common Stock. The terms of debt securities or borrowings could impose significant restrictions onChargePoint's operations. The capital markets have in the past, and may in the future, experience periods of upheaval that could impact the availability and cost of equity and debt financing.ChargePoint's principal use of cash in recent periods has been funding its operations and investing in capital expenditures.ChargePoint's future capital requirements will depend on many factors, including its revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, expenses associated with its international expansion, the introduction of network enhancements and the continuing market adoption of its network.ChargePoint has and may in the future enter into arrangements to acquire or invest in complementary businesses, products and technologies.ChargePoint may be required to seek additional equity or debt financing. In the event thatChargePoint requires additional financing, it may not be able to raise such financing on acceptable terms or at all. IfChargePoint is unable to raise additional capital or generate cash flows necessary to expand its 50 -------------------------------------------------------------------------------- Table of Contents operations and invest in continued innovation, it may not be able to compete successfully, which would harm its business, results of operations and financial condition. If adequate funds are not available,ChargePoint may need to reconsider its expansion plans or limit its research and development activities, which could have a material adverse impact on its business prospects and results of operations. Cash Flows For the Six Months EndedJuly 31, 2021 and 2020 The following table sets forth a summary ofChargePoint's cash flows for the periods indicated: Six Months Ended July 31, 2021 2020 (in thousands) Net cash (used in) provided by: Operating activities$ (61,198 ) $ (50,069 ) Investing activities (7,788 ) 41,052 Financing activities 541,590 125,365
Effects of exchange rates on cash, cash equivalents, and restricted cash
(6 ) 36
Net increase in cash, cash equivalents, and restricted cash$ 472,598 $ 116,384 Net Cash Used in Operating Activities During the six months endedJuly 31, 2021 , net cash used in operating activities was$61.2 million , consisting primarily of a net loss of$2.6 million and non-cash charges of$74.5 million , partially offset by a decrease in net operating assets of$15.9 million . The decrease in net operating assets was primarily due to a$3.0 million increase in accrued and other liabilities, a$9.3 million increase in accounts payable, a$5.6 million decrease in inventories and a$15.9 million increase in deferred revenue, partially offset by a$9.3 million increase in prepaid expenses and other assets, a$7.7 million increase in accounts receivable and a$1.0 million decrease in operating lease liabilities. The non-cash charges primarily consisted of$84.4 million change in fair value of contingent earnout liability,$33.3 million change in fair value of common stock warrant liability and$9.2 million change in fair value of redeemable convertible preferred stock warrant liability, partially offset by$35.9 million of stock-based compensation expense,$7.0 million of transaction costs expensed,$5.6 million of depreciation and amortization expense, and$2.0 million of non-cash operating lease cost. During the six months endedJuly 31, 2020 , net cash used in operating activities was$50.1 million , consisting primarily of a net loss of$65.4 million and an increase in net operating assets of$5.4 million , partially offset by non-cash charges of$20.7 million . The increase in net operating assets was primarily attributable to a$9.3 million decrease in accounts payable, a$7.4 million increase in inventories, a$2.0 million decrease in operating lease liabilities, a$4.1 million decrease in accrued and other liabilities and a$3.3 million increase in prepaid expenses and other assets, partially offset by a$16.2 million decrease in accounts receivable and$4.6 million increase in deferred revenue. The non-cash charges primarily consisted of$4.7 million of depreciation and amortization expense,$2.1 million of stock-based compensation expense and$1.7 million of non-cash operating lease cost and$11.0 million change in fair value of common stock warrant liability. 51 -------------------------------------------------------------------------------- Table of ContentsNet Cash (Used In) Provided By Investing Activities During the six months endedJuly 31, 2021 , net cash used in investing activities was$7.8 million for purchases of property and equipment. During the six months endedJuly 31, 2020 , net cash provided by investing activities was$41.1 million , consisting of maturities of investments of$47.0 million , partially offset by purchases of property and equipment of$6.0 million . Net Cash Provided by Financing Activities During the six months endedJuly 31, 2021 , net cash provided by financing activities was$541.6 million , consisting of net proceeds from the Merger and PIPE financing of$511.6 million , proceeds from the exercise of warrants of$117.6 million and proceeds from exercises of vested and unvested stock options of$1.8 million , partially offset by payment of transaction costs related to the Merger of$32.5 million , issuance of earnout shares, payment of tax withholding obligations on settlement of earnout shares of$20.9 million and repayment of borrowings of$36.1 million . During the six months endedJuly 31, 2020 , net cash provided by financing activities was$125.4 million consisting of proceeds from issuance of redeemable convertible preferred stock of$92.4 million , proceeds from the exercise of public warrants of$31.4 million and proceeds from exercises of vested and unvested stock options of$1.5 million . Off-Balance Sheet ArrangementsChargePoint is not a party to any off-balance sheet arrangements. Critical Accounting Policies and Estimates The Company's discussion and analysis of its financial condition and results of operations are based upon its condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States . The preparation of these condensed consolidated financial statements requiresChargePoint to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. The Company evaluates its estimates and assumptions on an ongoing basis, and base its estimates on historical experience and on various other assumptions thatChargePoint believes to be reasonable under the circumstances, the results of which form the basis for the judgmentsChargePoint makes about the carrying value of assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyondChargePoint's control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact onChargePoint's results of operations, financial position and statement of cash flows. Other than the policies noted in Part I, Item 1, Note 2, "Summary of Significant Accounting Policies," in the Company's notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q, there have been no material changes to its critical accounting policies and estimates as compared to those disclosed in its audited consolidated financial statements as ofJanuary 31, 2021 and 2020 and for the years endedJanuary 31, 2021 , 2020 and 2019. Recent Accounting Pronouncements For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, onChargePoint's condensed consolidated financial statements, see Part I, Item 1, Note 2, "Summary of Significant Accounting Policies," in its notes to condensed consolidated financial statements in this Quarterly Report on Form 10-Q. 52
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