Categories: US

Powering the future – A deep dive into ChargePoint Inc’s business

ABOUT THE COMPANY

ChargePoint Holdings, Inc. (CHPT) provides electric vehicle (EV) charging networks and charging solutions in the United States and internationally. It offers a portfolio of hardware, software, and services for commercial, fleet, and residential customers. The company was founded in 2007 by Richard Lowenthal, Dave Baxter, Harjinder Bhade, and Praveen Mandal and is headquartered in Campbell, California, USA.

INDUSTRY

The electric vehicle charging station market was valued at USD 5.86 billion in the 2023. It is expected to reach USD 53.25 billion at a CAGR of 44.44% over the next five years. The growth of this market is being driven by factors such as the increasing adoption of electric vehicles, government initiatives for the deployment of charging infrastructure, and the development of new and innovative charging technologies.

KEY MARKET PLAYERS:

Tesla: Tesla is one of the biggest players in the EV market and also offers EV charging infrastructure through its Supercharger network.
EVgo: EVgo is a leading provider of public fast-charging infrastructure for electric vehicles, with over 800 fast-charging stations across the United States.
Blink Charging: Blink Charging is a provider of electric vehicle charging stations and services with over 15,000 charging ports across the United States.
Electrify America: Electrify America is a subsidiary of Volkswagen Group of America that provides electric vehicle charging infrastructure across the United States, with over 800 charging stations in 45 states.
Greenlots: Greenlots is a provider of EV charging infrastructure and network management software solutions for public and private charging stations.

BUSINESS MODEL

ChargePoint, Inc. is a California-based electric vehicle (EV) charging station company. Its business model centers around designing, developing, and manufacturing charging stations and other related hardware and software for electric vehicles. ChargePoint operates a comprehensive charging network that connects EV drivers, businesses, and organizations to more than 133,000 charging points in over 55 countries.

ChargePoint operates a network of charging stations across North America and Europe that enables EV drivers to charge their vehicles quickly and conveniently. The company offers various charging solutions, including Level 2 charging stations that can be used for charging at home, at work, and in public places, as well as fast DC charging stations for commercial use.

ChargePoint makes money primarily by selling its charging equipment to businesses and organizations, such as property managers, parking lot operators, and fleet managers. In addition to the hardware, the company also provides software solutions for managing and operating charging stations. ChargePoint charges a fee for using its charging network, which is collected from EV drivers who use its stations.

The company’s business model is based on the growing demand for EVs and the need for reliable and convenient charging infrastructure to support their adoption. By building and operating a network of charging stations, ChargePoint is positioned to benefit from the growth in the EV market and the increasing demand for charging solutions.

REVENUE

ChargePoint’s revenue growth in Q4 2023 is impressive, almost doubling on a YoY basis to $152 million. However, it is below the management guidance of $165 million, which may indicate some challenges in meeting their targets. The company is ramping up production of its charging units as electric vehicles become more popular, and it is gaining market share. However, it is not performing as well in Europe as it is in the USA.

ChargePoint’s Q1 2024 projected revenue of $127 million shows a YoY increase of 56%, which is positive, but it is less than the previous quarter’s YoY increase. This may indicate a potential slowdown in growth, which the company will need to address.

The company’s projection of achieving $2.1 billion in revenue in FY2025 is ambitious. Whether ChargePoint can reach this number without any additional capital raising or existing cash on their balance sheet remains to be seen. It will depend on several factors, including the company’s ability to continue to gain market share and successfully navigate the competitive landscape.

GPM

ChargePoint’s gross profit margin (GPM) staying flat at 22% while trying to ramp up production could be due to several factors such as supply chain management (SCM), cost of goods sold (COGS) increase, transportation cost increase, and competition increase.

However, US infrastructure bill investing billions of dollars into the electric charging grid could be positive for companies in the electric vehicle charging industry, including ChargePoint. The bill includes funding for electric vehicle charging infrastructure and tax credits for the installation of charging stations. This could help to further accelerate the adoption of electric vehicles in the US, creating more demand for charging stations.

EARNINGS

ChargePoint’s net loss increased from $60 million to $78 million on a YoY basis. However, the good news is that the net loss as a percentage of revenue decreased, which indicates that the company is making progress towards profitability.

CASH FLOW

ChargePoint’s cash flow from operations for the TTM ended Jan 31 decreased to a negative $267 million from a positive $157 million the previous year. This is a significant decrease and could be a concern for investors. However, it is important to note that ChargePoint is a high-growth company that is investing heavily in expanding its business and gaining market share. As such, it is not unexpected for the company to have negative cash flow from operations, especially in the early stages of its growth.

ChargePoint currently has $395 million in cash and equivalents. This provides the company with a runway of approximately one year before needing to raise additional capital through debt or equity financing.

OPINION

While the company has shown an increase in revenue and is gaining market share, there is no surety on profitability given the flat gross profit margin. Furthermore, there are many players entering the EV charging space, which could make it challenging for ChargePoint to maintain a dominant market position.

Krishna Shah

Krishna is a 25-year-old finance enthusiast, driven by his passion for numbers and the world of finance. Hailing from Mumbai, India, Krishna has successfully completed both his bachelor's and master's degrees in finance from the University of Mumbai. To further enhance his expertise, he has also cleared the rigorous CFA (Chartered Financial Analyst) Level 3 examination, demonstrating his commitment to professional growth. Krishna kick-started his career at KPMG, where he gained valuable experience in the transaction services domain. His analytical skills and attention to detail soon led him to transition to Deloitte, specializing in business valuations. However, Krishna's interests extend beyond the realm of finance. He has a profound love for sports and adventure, which he actively pursues during his leisure time. As an amateur footballer, Krishna enjoys the thrill of the game and the camaraderie it fosters. His dedication to pushing his limits has also led him to become a certified open water diver through PADI (Professional Association of Diving Instructors), allowing him to explore the captivating underwater world. But Krishna's adventurous spirit doesn't stop there. He has completed not one but two treks in the majestic Himalayan mountains, challenging himself physically and mentally while soaking in the breathtaking beauty of nature. These experiences have shaped him into a resilient and determined individual, always seeking new heights to conquer.