Blink Charging Co. (BLNK) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. Moving right along here. Thanks again for joining us. This is day 2 of the Cowen Mobility Disruption Conference. It's Gabe Daoud here, Cowen's Senior Energy and Mobility analyst. We're delighted to have our next company, Blink present to us today. From Blink, we have Michael Farkas, CEO; and Michael Rama, our CFO. Guys, thank you so much for joining us. It's good to have you both. Michael, maybe just kick things off, could you give us the elevator pitch on Blink and just introduce the company to maybe those in the audience who aren't familiar with you guys?

Okay. Perfect. Thank you for having us. Hello, everybody. I'm Michael Farkas, Founder and CEO of Blink Charging. Simply put, what really separates us from our peers in the space is we are the only fully vertically integrated EV charging infrastructure company. What that means is not only do we sell hardware to third parties for the most part, and our main focus is really owning and operating those charging stations. So we design and manufacture hardware. We have the cloud-based network that supports all the charging stations, gathers all the data, most importantly, it really is the piggy bank of our system and reconciles all transactions and gets us paid. And then we own and operate a lot of these charging stations in the field, and you can clearly see from our hardware that being an owner and operator gives us a bit of a different perspective on the hardware functionality features and, most importantly, dealing with obsolescence and making sure that hardware is going to be out on the field for as long as possible. So we have a lot of different advantages from being fully integrated. But most importantly, we believe that the future of EV charging is really making money on the fueling side. We believe that the charging stations are the platform, the vending machine, for lack of a better word, of dispensing that electricity. But ultimately, Blink is in the business of selling fuel, and that requires for us to own and operate and deploy charging infrastructure that's ours.

Great. That's helpful, Michael. So maybe just getting into it, you talked about being vertically integrated, also a hardware provider. Could you maybe just talk a little bit about the manufacturing process and supply chain on the hardware and maybe even differences between -- the differences on margin between AC and DC?

Okay. The process is simple. We've been in this business for about 12 years. And in the first generation of all hardware, whether it was AC or DC, it was very exploratory. We are all learning in the marketplace. We're all getting a hang of what's really going to go on, speeds, energy transfer rates, standards and so on. So we all made a bunch of mistakes, and I don't really consider them mistakes. If they're only made once it's really an educational experience. But we've all learned. And it's because of our flexibility of models and owning and operating and also being on the hardware side, it really allowed us to develop a much better piece of equipment. We really understand what the shortfalls were in all the different parts of the deployment in the process, whether it was the hardware side, the networking side, installation side, acquisition and then maintaining those units and then ultimately dealing with the EV drivers themselves. So taking all of that information and data and experience, we developed new hardware, which is our IQ 200, came out about a year and change ago, a little longer. And now we're starting to see some easing traction on that. It's really taking these experience and seeing those issues, building into the hardware so we can have a much better product. And most importantly, charging is about one thing. You can have all these bells and whistles on it and all these cool features and function, but much more I think people want is how fast am I going to fuel my car, how fast can we get off that charging station. That's first and foremost what we did with our Level 2 AC charging stations. We made them the fastest that is possible under the standard, and we're also backwards-compatible. So if there's not enough power at that location, you can still buy our equipment and it's still moderately priced as low equipment -- comparable to a lower equipment. But as you have better performance in the grid, you'll be able to upgrade that hardware with just a software switch on a mobile app and not have to buy another piece of equipment. So we did that on purpose because, obviously, we own and operate our charging stations. We want to make sure that they're in the field as long as possible. I mean in regards to the DC front, Blink, in the past produced its own DC fast chargers and there are a bunch of them out in the field today. And we are now in the process of designing and producing our negative generation of DC fast chargers. And again, seeing a lot of the shortfalls issues, trying to make a really viable business case out of them, I believe we've addressed a lot of the shortcomings in some of our design that integrates energy management and it has some really, really cool functionality that allow us to pull energy off the grid and store it at the lowest cost times and then be able to supercharge cars when they need it for decent rates. So in learning and experiencing the -- all these different issues over the years has really allowed us to develop a much, much better piece of equipment. And again, you learn that more for owning and operating than you would from ever producing hardware. So when you compare us to some of our competitors on the hardware side, we all say there's a lot about -- there's a lot you learn in having experience, right? There's a lot you can do with that experience. It's just not -- it's not a skill set that most of our competitors have because there are no other hardware producers in the U.S. that actually own and operate that equipment in the field. We're the only one.

Yes. Okay. That's helpful. And then so on that point, how are the conversations with your site partners in terms of owning and operating and the economic split? Like how willing are some of your site partners to giving up the economic benefit of owning and operating and charging electricity and earning revenue from the electricity sales themselves? How willing are they to do that?

Okay. So it's a great question. No matter what -- and all we do is all about sales. And you can either have a difficult sale or you can have an easy sale. And trying to give something to somebody that they don't want makes it extremely difficult. By being able to have the multiple methodologies and being able to deploy the hardware, we allow that property owner to have EV infrastructure at their locations based upon how they deploy assets in their portfolio. And I'll give you a perfect -- for instance, you have property owners that control every single service in the location. So if you have a multifamily residential operator, they provide the telephone services. They provide tech TV services. They have washing machines in the place they own. They don't outsource another service. They're somehow involved in every single service that's provided in the locations. Then you have properties on the other side of the game that literally outsource everything. There's not one thing that they do internally in their buildings. And then you have everything in between. Because of our multiple means to deploy our hardware in these locations, it really allows us not to have to sell. If a property owner wants only the equipment then we'll sell it to them. We're not going to catch it for us to own and operate. No matter what, we're not going to get the transaction. So we propose to everybody owning and operating, that's our main business model. But there are property owners like IKEA, like the Whole Foods, they own and operate their charging stations, period. And no matter how hard we want to own and operate our infrastructure there, it's just not the model that they follow. So to simplify, what I'm trying to say is we present a service that is exactly along the lines of what that property owner is usually doing, and that has brought us tremendous clients because when you look at the Cushman & Wakefields of the world, you look at the McDonald's or others, you have one large corporation that may want to have a steady consistency throughout their portfolio or just consistency in technology platforms and so on, but there are all these underlying owners of those properties. McDonald's doesn't own every location. Cushman & Wakefield doesn't own every location that has their name on the door. They represent other property owners. And those underlying customers that they have, again, it runs the gamut of someone wanting to own everything versus someone wanting to outsource everything. So because of having that flexibility of deployment methodologies, that allows us to have those customers where our customers -- our competitors are disqualified from getting them. I'll give you an example. If you have a charge point salesperson walk into a customer and that customer loves the service but they're like "You know something, we're not interested in buying the hardware. We're not interested in installing and paying for it or even managing this. But you could use our location, you install it and give us some rent or give us some revenue stream off of it or revenue share." The ChargePoint salesperson would walk out the door because that's not what they do. On the other hand, if you're looking at, let's say, EVgo or Electrify America, they walk into that customer and they take their service and that property owner is like, "Wow, what a great service. You know something? I want to invest in this. I want to have a piece of this. I want to have a massive revenue share. I'm willing to pay for some of this." Those 2 companies walk out the door. The representatives walk out of the door because that's now what they do. When we come -- when we approach a property owner at Blink we ask them, "How do you deploy your assets? Do you outsource your services? Do you own all these things? Do you own the assets that you're deploying that are not -- they're ancillary businesses but not your core competencies?" We find out what they do. And then we recommend exactly the model that's perfect for them. And because of the experience we have over the last 12 years, deploying at every single type of property you can imagine, under every type of different owners, you can imagine, we've come to the conclusion that these are the necessary deployment methodologies. Otherwise, we're not going to be able to service all of our customers nor have these major nationwide customers, which we now do have because of our flexibility.

Got it. Got it. Yes, the flexibility is certainly key and attractive to the business model. And so within that, on your owner and operator model, you do offer 2 different solutions, what you call turnkey and hybrid. Could you maybe just talk a little bit about the differences between the 2? And what percentage of the electricity revenue that you guys share in between the 2 models?

It's very simple. Both of those models are utilization base for us. We make our money at the sale of electricity. On our hybrid model, we partner with the property and the property covers the cost of the installation. We pay for the hardware, manage the process and manage the entire service and solution. In that model, it's typically a 5-year contract with 2 5-year extensions. And as we deduct in our connectivity fee and our processing fees and after we deduct electricity, it's typically a 60-40 split in our favor. In our turnkey solution, where we pay for everything, that's a 7-year contract with 2 7-year extensions. I think on the hybrid, I don't know if I mentioned it was 5 years with 2 5-year extensions. These are exclusive in nature with the sole provider in the location. There's no one else who can provide service -- charging services. And by the way, it's not just for EV. It's just for any vehicle whatsoever that requires electricity for servicing. Whether it's a scooter or whether it's a bike or whether it's going to be one of these flying drones that are going to be coming that are powered by electricity, any vehicle that's powered by electricity is our exclusive domain in filling in those locations.

Okay. That's cool. Yes. And so obviously, being owner operated, your model benefits from an increase in utilization. Clearly, today, utilization is quite low just given low EV penetration. Could you maybe just talk about your expectations for how utilization trends over the next couple of years and hopefully throughout -- through the decade?

Yes. So if you look at utilization and you look at sales per fleet, EVs versus the rest of the fleet, they're kind of in line with each other. We're seeing -- where you're seeing more increased EVs on the streets, you're seeing impact in utilization. Obviously, with just low sales of total fleet sales being EV, it does correlate with utilization. But without a question, as more EVs are on the road, that will definitely impact utilization rates. The good thing about our technology, it's -- all of our charging stations are smart charging stations. They're connected to a network, and we're able to see usage. And based upon demand, we're able to install more charging stations in those locations. And the good thing about our contracts, as I mentioned earlier, they're long-term in nature, they're exclusive. They're for a very long period of time. And the great thing about them is we're allowed to deploy additional charging stations in those locations as demand requires. So when you look at our contracts, it's not about just one parking spot. It's the address. It's the entire address. And if that address has 20 parking spaces, we have the right to light up as many of them necessary to support the demand in that location. Or if they have 15,000 or 20,000 parking spaces, again, that's our exclusive right. And again, whether it's a hybrid which is, for the most part, a 15-year program versus our turnkey solution, which is a 21-year program, we have a long, long period of time on an exclusive basis to be able to provide EV charging solutions at those locations. And again, it also doesn't discuss whether it's AC or DC. Some people think, hey, we're an AC company. You've got to realize, it costs $5,000 or $6,000 to put an AC charging station in a location to get us the same right that it cost $50,000 or $60,000 to put the smallest DC solution in a location. We're at the point we're looking at this as a land grab and building out our footprint. And our contracts are not dependent upon the technology type. It's about length of term, exclusivity and us putting in the right equipment at the location based upon what that location needs.

Okay. That makes sense. That's helpful. And then as you're owning and operating, could you maybe just talk about what like the biggest cost component is from the operating side? Is it just simply electricity?

Existing installations. When you look at L2, the L2 component when you look at the deployment, the expense is, for the most part, it's the installation. The hardware is a little bit less. On the DC side, both the hardware and the installation are very expensive. And when you look at the electricity component, on L2, slower trans rate, the electricity is typically going to be cheaper than what we would have to pay on the DC side.

Okay. I want to get to some questions that are coming in from investors. One here, so as you think about your future partners, do you think it's more geared towards property owners, retailers or maybe even traditional fuel stations? And then just any thoughts around acquiring lots and owning the space for deployment of chargers?

We believe there's going to be a decent miss and need for all different types of locations AC, DC. The partnerships that we look at, it really is across the board. There are great locations in all different type of property types. What's most important to us is potential utilization. That's where we focus. Again, we're an owner and operator. Our business is about -- is ultimately selling fuel. So when we deploy our own capital, we're obviously going to look more favorably on a location that there's 24 hours of potential charging times versus something that may have 10 or 11 or 12 hours of charging times. And that's where we're going to focus on capital. So urban garages, hospitals, like we've been doing municipalities, urban areas, the areas that we have been focusing on growing our business. There has been discussions and some thought about us looking at -- that's not necessarily buying but partnering in a deeper way with some garages and looking at some future solutions on the autonomous side, which would require maybe having a whole building where you could have access to maybe solar on the rooftops and battery storage on the top couple of floors and then the ability of autonomous vehicles being able to come in and out and charge themselves. We believe we have an amazing solution on the hardware side for that, which is our inductive parking bumper charger. We believe that's going to get a lot of traction in the industry in the coming years.

Okay. That's exciting. Okay. Another question from investors. So obviously, for the companies who are in the owner operating model, they could be deploying hardware to site owners who don't necessarily care about generating revenue off electricity. They're ultimately giving it away for free. So I guess just how do you think about your business model in a sense that some competitors or just some other site owners could be selling something that's essentially free?

We've been -- there's -- you're paying for it some way, one way or another as nothing in life is ever for free. Ultimately, I like some of the models that some of our competitors have. But when you really look at it, and you're really looking at being able to cover those locations for free, the financial model doesn't make sense. And I'm not going to mention specific names, but just think about this logically, you have a big sign, right, and you're getting paper eyeballs, and you need to charge several cars. How many of those big signs in a row can you put where you're going to be getting paid that same amount for advertising dollars? We know because we've explored those options. Every one of those next sites and next sites, next sites, right near the other, you're losing dollars from an advertising perspective. But if you're having to charge those cars for free, you're not losing cars. So as you're more successful in that model, the more you're going to end up losing money. I guess they may be having a different way of looking at it or maybe they think ultimately they're going to start charging for those services. We used to provide charging hardware for companies and locations that gave away their services for free. And again, when it's 1 or 2 cars and there are not many out there, it's great. But when it starts to become more mainstream and more cars on the road, you don't see retailers giving away gasoline. They won't give away electricity. There are some buildings now today that have a few tenants that have it and they give it away for free. And I can tell you how buildings right here in our neighborhood, the same thing, they gave away services for free. And now I have the president knock -- tap me on my shoulder because he knew. And there again, now we have 7, 8, 10 cars in the building that are looking for electricity, and it costs a few hundred dollars. The rest of the building is not thrilled to subsidize the fueling of only a few members of their community. So ultimately, the free advertising model, while it does have some legs to it -- and just to know, we do have some really interesting options on the advertising side that we're going to be introducing with a very, very beautifully designed pedestal. But ultimately, there has to be a charge for that electricity. We look at the advertising component as ancillary income to our charging stations. And that's how we built our model, which is sustainable. Again -- just again, logically, you're not going to have 2 big signs right near each other and be able to capture the same advertising dollars. It loses its effect. In order to be able to provide these garages with the amount of energy that they're going to need to fuel those cars, a free model is not sustainable.

Okay. Yes, definitely, we'll look forward to more detail around like the media and advertising potential from you guys. Okay. And so another question we had here. And what about opportunities or properties that are not grid connected. We just hosted right before you guys a company, Beam Global, who offers, obviously, complete solar solutions. So just any thoughts around like partnering with them or just to provide stations for properties not on the grid?

I'm not -- was Desmond on? If he was, great guy, I'm -- I consider him a friend. They have a great product. Having the ability to have a charging station connected to a mobile solution off-grid in emergency situations, we believe in that product line. Our charging stations have actually been attached to their solution in the past. We believe in an off-grid solution, and we partnered with SG Blocks to have something that Beam has but a bit more on steroids. Their ratio of energy storage to solar capacity to the units, they're at a 2-unit configuration. We're in the process of converting a 40-foot container into a mobile solution, new solar panels. Both created an off-grid potential with 8-car charging capability. So again, it's a solution that we -- there's definitely a market for it. And I believe that our solution, combined with the Blink chargers, some amazing energy storage, we believe it will be a much more economical solution on a per-unit basis than any of our competitors.

Got it. Got it. Okay. That's helpful. And then recently, some EV charging company CEOs, perhaps maybe even you did, met with the National Climate Adviser Gina McCarthy. Just curious, I guess, if maybe you did participate. And obviously, if it's a certainly a private conversation, don't want to share anything -- I wouldn't want you to share anything that you're not comfortable with. But just curious about what came out of the conversation and what other major policy trends are you kind of focused on this year.

Very simply, the Biden administration is in full support of electric vehicles. It's that simple. And it's not only happening in this country, it's happening globally. We're going to see a lot of help from the government. Even under the former administration, there were a lot of grants and rebates that were available, and I believe that we're going to see even much more so. I mean people don't understand what the administration discusses when they talk about 500,000 charging stations. They're not referring to 500,000 plugs. They're talking about a charging station from a perspective of a gas station. And when you go to a gas station, you typically see 5, 6, 7, 10 plugs that are available. So when the Biden administration is talking about 500,000 charging stations, they're looking about anywhere between 2 million to 3 million charging plugs that they're looking to have deployed. As in the past, where we were a main recipient of government grants and rebates and having the ability to being able to deploy our infrastructure using government help and capital, we believe that that will be available to us in the future as well. And we're looking forward to being able to help the administration in fulfilling their goals of getting these charging stations out there.

Got it. Got it. Okay. That's helpful.

We're excited. There's going to be billions of dollars available both from the DoE level, the DoT level to the different clean cities coalitions out there. We're extremely excited about the money. I mean just think about it like this, in a lot of programs under the former administration, for every 2 $0.10 we invested, we got $1 of assets. So when we put up $1, and we will get 80% reimbursed to us. Now imagine being in one of the fastest-growing industries since the creation of mankind and actually being subsidized 80% of it by your local governments, by the government, it's the scene what's going on right now. And we just happen to be in the right place at the right time. It only took us about 12 years to get here. But it's now really the groundwork that we laid in being able to create a massive footprint throughout the country is now -- we're now really being able to take advantage of it.

Totally. Totally. Yes. And that's -- obviously, the government support only improves the economics. And maybe on that point, just on the turnkey and hybrid or just owner-operated solutions, what's like the payback period on your capital investment for those 2?

Okay. So I need to be somewhat specific here. Okay. So our hybrid model, as I mentioned, it's 5 years with 2 5-year extensions, and our turnkey solution is 7 years, with 2 7-year. And there are some variations here and there, but that's for the most part how we've done them. If you're looking at a 10% straight line utilization rate on both of those models, and to say that our network is doing 10%, it's not. And obviously, we're in the low single digits. So -- but we do have units that are higher than that utilization rate. So we could tell you that it's possible and it's not even possible -- I mean, it's possible even in a single-digit feed sale numbers. So there are units that do more than 10%, and we have a decent amount. So when you look at that number, 10% straight line utilization on our hybrid model into less than a year. On our turnkey solution, it's less than 2 years. And we have a substantial amount of time still left over in order to be able to make even more money than just our investment.

Right, okay. Pretty economic stuff. Okay. Well, look, guys, running out of time here. Maybe Michael, I'll just leave you with if we were to come back here next year, what do you think the biggest achievement would be for Blink over the next year?

I can't say. I would say a lot more units in the ground, a lot more relationships that really validate Blink's technology and what we've accomplished over the last more than a decade.

Awesome. Sounds great. Well, we look forward to it. Thank you again, guys, for joining us. Enjoyed the conversation.

Thank you for having us.

All right. Thanks, guys. Take care.