(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the results of operations and financial condition of ChargePoint Holdings, Inc. ("ChargePoint" or the "Company") should be read in conjunction with ChargePoint's condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and the audited consolidated financial statements for the year ended January 31, 2021 and the related notes included in the Company's Registration Statement on Form S-1 filed with the SEC on July 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. Overview ChargePoint 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 of ChargePoint's Networked Charging Systems, subscriptions and other offerings, it provides an open platform that integrates with system hardware from ChargePoint 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. The ChargePoint as a Service ("CPaaS") program combines the customer's use of ChargePoint'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. Since ChargePoint'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 of July 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 On July 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 approximately Euro 250.0 million in cash and Company common stock subject to adjustments. has.to.be is an Austria-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 as October 2021.
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COVID-19 In March 2020, the World 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 disrupted ChargePoint'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 ended July 31, 2021 and ChargePoint 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 which ChargePoint operates. For example, variations in work-from-home policies can cause fluctuations in ChargePoint'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 impact ChargePoint'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 impact ChargePoint's gross margins through heightened supply chain expenses, and could adversely affect demand for ChargePoint'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.
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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 ended July 31, 2021, compared to the three and six months ended July 31, 2020, primarily due to higher demand from customers resulting in higher volumes of systems delivered across all of ChargePoint's major product families.
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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.
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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 $ 14,976 73.4 % Percentage of networked charging systems revenue 86.6 % 95.5 % Six months ended $ 59,126 $ 39,024 $ 20,102 51.5 % Percentage of networked charging systems revenue 87.4 % 95.1 %
Cost of Networked Charging Systems 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 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 ended July 31, 2021, compared to the three and six months ended July 31, 2020, primarily resulting from an increase in stock-based compensation and ChargePoint expanding its network of charging systems.
July 31, Cost of other revenue 2021 2020 Change . . .
Sep 10, 2021
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