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

Yes. Good afternoon, and welcome to the first day of JPMorgan's Energy, Power and Renewables Conference. My name is Bill Peterson, the U.S. Clean Tech and metals and mine analyst. Really pleased to have the team from Blink Charging here. Michael Rama, the CFO; and Michael Battaglia, the Chief Revenue Officer. We're going to do the straight fireside chat. So if you have any questions, please let us know. Thanks for joining and supporting the conference.

Thank you.

So maybe just as we start, and I don't know if you can -- either one of you could take it, but for those who are less familiar with the story, maybe you can -- what is Blink's position in the charging market? How do you see the key differentiators in terms of your hardware and software offering? And obviously, you can go into detail as we move forward.

Yes. Thanks, Bill. I'll take that. So Blink was founded in 2009. We're a U.S.-based company headquartered in Miami Beach, Florida. We have 3 facilities or 3 offices in the U.S. We have 3 in Europe, 1 in Tel Aviv Israel, 2 facilities in India that primarily handle hardware development, software development as well as manufacturing. So the company is one of the only vertically integrated EV charging companies in the industry. And what that means is we design, develop, manufacture our own hardware. We install it, we maintain it, and we operate the cloud-based network that controls all of those chargers, and that is our own network. Second differentiator to Blink is the way we go to market. So where some companies only sell hardware, some companies only own and operate, we actually do both. So we go to market with 4 core business models, one being: We sell hardware, we offer charging as a service. And then we have 2 owner-operator models where Blink owns and operates the charging stations. One of them is what we call a turnkey model, which is where we fund 100% of the infrastructure as well as the equipment at that location. Another is what we call a hybrid, which is a co-investment where the property runs the electrical infrastructure to the parking spot, and we install, own and operate the charger.

Great. Before kind of getting into the core business and the strategy around hybrid versus all these things, we'll talk about a number of things. But obviously, the big news in the industry over the past several weeks has been the decision by some OEMs to move to the Tesla Max charger as well as access -- or eventually get access to the supercharging network. So I guess what -- how does Blink view this news, first of all, how much of a threat is it, if any? And like how should investors think about this threat?

Yes. So for Blink, we don't view it as a threat at all. In fact, we view it as an opportunity, and I'll explain specifically why. So the majority of our business is Level 2. So we definitely have a presence in D.C. It's growing, but the majority of our business is Level 2. And when you look at our charging activity or utilization activity from the company's inception until now, our #1 customer on our Level 2 charging stations are Tesla drivers. And Tesla drivers are using an adapter that comes with the car in order to charge on a J1772 charging stations. So now transition over to D.C. So up until now, we really haven't had that Tesla customer utilizing our DC Fast chargers, because they've been using the Supercharger network. So what this enables us to do now is open up, provide a MAX connector on the DC hardware that we'll be offering, and then it opens up a whole population of drivers that we really haven't seen. So for us, we view it as a net positive, and we're excited about it.

One of the concerns broadly has been that with Tesla's charging network being kind of a -- that [ is in ] their core business that they will have more money to invest and sort of start out and capture more market share in the industry. I mean, why wouldn't that be the case? And I guess maybe even tie that into the broader growth trajectory and opportunities as you -- for the charging network?

Yes. So one of the things to keep in mind, and if you look at data from McKinsey, from PWC other research houses, 90% of all the kilowatt hours that are going to be dispensed are going to be through Level 2 chargers, only about 10% to 15% are going to be dispensed for DC Fast. So that's #1. So we are very focused, again, heavily skewed towards Level 2. Now that said, when we look at the DC market, there's absolutely no way that Tesla can build out their DC Fast infrastructure to service every single OEM that's going to fall in line. So we have GM, we have Ford. We have Rivian, we have Tesla themselves. If anybody here owns a Tesla or that's listening and you own a Tesla, you know that if you go to a supercharging station, there are many instances where there's already a line, right? So they -- the ecosystem is going to need to be built out with companies more than just Tesla, and it will be companies like Blink and others.

No, that makes sense. So let's talk about the, I guess, the strategy and you guys really kind of span across owner-operator and selling the hardware and software. So I guess -- and more of -- you're also vertically integrated. You have a lot of things in your portfolio that stands out relative to other people. So I guess, how should we think about the mix of your revenue across the various buckets that you see it maybe in the near term, but even longer term, 3 to 5 years out?

Yes. So we'll probably both comment on this a little bit. But let's start with overall company revenue. Still about 80% of our revenue comes from selling charging stations and 20% from services. So services can mean electricity sales, it can mean software subscriptions, things like that. So that's on a global basis. If we look at the split between the U.S. and rest of world, we're more heavily tilted towards hardware sales in the U.S. versus, let's say, Europe. In Europe, they're far -- their revenue is far more tilted towards electricity. What we see going forward is that we want to continue to focus on the owner-operator model in the U.S. We actually want to elevate that mix on the owner operator side. And then in Europe, we want to maintain what they're doing on the owner-operator side, but then also add to it more hardware sales. So to bring kind of both entities up to sort of an equilibrium.

And the strategy is really -- is giving the customer the options, right, flexibility. And we don't want a customer to come in and say, I want to buy something, and we're only going to -- only owner operator or vice versa. We want to give flexibility, optionality property owners have flexibility and options in there where they want to deploy. So we want to be able to provide that flexibility and technically don't want to turn down the customer for any type of infrastructure.

Yes. And just building on that, there are some channels that they only want one or the other. So as an example, we're very strong in automotive with car dealers that are meeting the requirements from their OEMs, that's 100% a hardware sale. There is no owner operator there. But on the other hand, when you're working with shopping centers, they're almost exclusively wanting own operate. So that's where the flexibility of Blink comes into play where depending on the channel, we can react and we can provide that solution pretty quickly.

So you made an acquisition last year, and again, so that's actually the ability to manufacture these things. How does that help with the customer acquisition process? And maybe we can just ask it even now, like how does that impact your cost structure or margin structure?

I'll start, yes. So the largest acquisition we did was of SemaConnect last year, and that was a very, very complementary acquisition. We were very strong in automotive. They were very strong in multifamily. We put those two things together, and now we're strong in both. Obviously, we also picked up the manufacturing capability. So one of the things that's important to know about Blink is that a lot of manufacturing of the components happens over in India, gets shipped over to our facility in Bowie, Maryland. The charging stations, L2 are assembled in Bowie, and we are by America compliant today as well as for the standard next year for 55%. So we're already there.

On the margin side?

On the margin side, we're seeing -- we're still continue seeing expansion of the margins. One of the flexibilities is having the owner operator, we're seeing the margin expansion on the energy sales and especially with -- when we're manufacturing the chargers themselves, we'll probably reduce the cost by about 1/3. So our margins just by doing the manufacturing the units internally, our gross margins will increase as a result of -- instead of using contract manufactured units.

So coming back to demand, I guess how much is related to, I guess, energy sales from Level 2? Do you still see this skewed towards Level 2? Or like when does fast charges really start to move the needle and be a bigger part of the mix?

So we're going to continue to kind of go for this mantra, right, which we believe in strongly that somewhere in the neighborhood of 90% of all kilowatt hours are going to be dispersed through L2. So one of the things -- what's interesting about it is that's the forecast. We believe in that forecast, yet all the media attention and all the discussion happens in the inverse, right? Everybody wants to talk about D.C. There are reasons for that, load on the grid, transformer availability, all of those things, right? Yes, and we get that. But people are going to charge at home. I think one statistic is that 70% of all Americans live in a multifamily facility, right, dwelling. So those folks generally don't have their own parking spot with their own charging station going to be available. So we're going to install and we are installing sort of semi public charging stations, right, within, let's say, that multifamily unit that all of the tenants can share and utilize when they need it. So that's going to happen. Workplace charging is going to happen. I arrive in the morning for work. I plug in, by the end of the day, I'm charged and I'm driving home. So where you're going to see DC Fast charging is really in highway applications, which is why the NEVI program is targeting those, right, within 1 mile of designated freeway exits, so that people can interstate, long distances and not change their current behavior.

Let's actually pivot to that sort of policy support. Maybe we can talk about NEVI, and there's maybe some other benefits. But how do you see the current status? We've been hearing that there's generally delayed. But when does this unlock? And what does the NEVI program mean for Blink?

Yes. So first of all, we love the NEVI program. We're looking forward to it. We -- it's not every day that somebody shows up and says they're going to fund 80% of your project. So we're certainly looking forward to it. But what we have seen is a little bit slow. There are a few states that have already issued RFPs. We've responded to those RFPs, and more are coming. We are going to be as a company, we're going to be selective about where we bid on these locations. We're going to be looking at locations that we think are going to have a return on investment, that meet our criteria, and we're not going to veer off that. So for us, we're looking forward to it, but we're going to do it in a very smart way.

So last year is pretty inflationary environment. We've seen some companies be able to pass through some increased pricing. I think Europe generally looks more competitive. But I guess is there further room? How should we think about pricing? I guess in the context to that, a lot of the fear in the industry is that it's going to just -- harbor is going to be commoditized. So how should we think about pricing trends here in the near term and even longer term on your sales?

Yes. So when I get that question, I usually think about it in terms of margin enhancement, how can we maintain or improve margins? And for us, there's really 3 levers we can pull. Michael mentioned one of them, which is cost of goods and manufacturing our own equipment in order to stay very, very competitive. The second is pricing power on network services. So for every charging station that's connected to our cloud-based network, there's a monthly fee attached to that, and we think there's pricing power there. We're going to take a price increase here pretty soon. And then the third lever is obviously electricity sales. So for Blink, again, as we can put the right charging station in the right place at the right time and make sure that we have a clear ROI on that, that those electricity sales are recurring, high-margin revenue. So even if the hardware side of the business gets commoditized or there's price pressure there, we think we can more than make up for it, especially on the owner operator model on the electricity side.

Especially as we see utilization rates go up, right? As we see utilization rates go up, that will automatically -- our cost -- on our kilowatt costs are going to be maintained, but we'll see an increase in margins on the kilowatts as we're selling them and the increase in utilization.

Let's pause for a second and see if anybody has any questions. Wait for the microphone, please.

Minutes versus a per kilowatt basis for charges. How are you seeing that from a trend on vehicles becoming faster and faster to charge and commoditizing the power off of that play. Does that make sense?

Yes. Are you looking for the way we charge for the...

Yes. So I know that you -- most of you...

Time based versus kilowatt hour basis?

Yes. And most of your revenue right now is coming from Level 2, which almost is immaterial at that point. But on your screen here, you have a Level 3 charger. How does that play into effect when you have time based versus per kilowatt and what the vehicles can accept?

Yes. So good question. So for Blink when we own and operate the charging station, we default to per kilowatt hour. So there's about -- I think there's 6 or 7 states still in the U.S. that mandate time. So in those states where it's a law, obviously we comply with that, and we price based on time. But everywhere else, we're pricing based on per kilowatt hour. I'm not sure I followed the irrelevance of the L2, but the -- just to give you a couple maybe interesting points. And when we install a Level 2 charging station turnkey, meaning we fund 100% of that installation, if the charger returns 10% utilization or more, our ROI is about 2.5 years. If it's a hybrid where we're just funding the station, not the infrastructure, again, same 10%, it's about 18 months. So the ROI is pretty short. So I'm not sure if that 100% answered your question, but okay.

Any other questions? So I guess one of the big sort of I would call it concerns in the industry is that outside of Tesla, like a lot of the other networks are not reliable. So I guess, what is your views on that? What is the company doing to address reliability? How important is that as part of your customer acquisition targets and just satisfaction across the customer base?

So Bill, it's one of my favorite topics. So let me start with, number one, we need to come to a common definition of what uptime needs, right? Because you have some people reporting charger uptime. You have other people reporting station uptime. And what that means is they could say their station uptime is 100% if they have 10 chargers, but 9 of them are down and one of them is active, right? So I don't know that that's always the best measure. For Blink, I can tell you, it is front and center, maybe the #1 issue that we're seeing from customers, meaning what is important to prospects and to customers is station uptime, and that comes up in 100% of the conversation. So we are ensuring that our systems and processes and internal focused are very much geared in that way. So one example is when you have cloud-based network charging stations, you can monitor those stations from a central location. So we do that out of Tempe, Arizona as well as Bowie, Maryland. And then we do things like for Tier 1 clients, we actually check their charging stations, the health of their charging stations every day, and we initiate proactive service events, if necessary. And then finally, guys like us sitting up here, we have KPIs built into our bonus programs that are actually tied to uptime. So it is taken very, very seriously at Blink. And it's a central issue in the industry right now.

Last year, obviously, everyone was caught up guard by supply constraints. Where are we today? Are there any headwinds that remain? And maybe outside of that, I mean, permitting tends to be an issue. But how is that evolving as well?

We're seeing the -- what was headwinds now we're seeing that being relaxed. We're seeing supplies available. We were proactive last year, middle to the end of last year when we were -- before we were manufacturing, I guess, you could say, we were accumulating or acquiring chargers proactively. So we were ready for any constraints or higher volume increases and stuff. So we were proactive in securing that inventory. And the supplies now as we're manufacturing, we're seeing a relaxation of any constraints, at least on our -- on the near term.

Yes. We're also seeing improvement on the DC Fast charger lead times. What continues to be a challenge are utility transformers, right, is that's still a year. There are some utilities that are quoting more than that. So that's the gating factor right now, I'd say, more than our own equipment.

I want to come back to some market opportunities. And one of the end markets that looks interesting for broadly as the fleet opportunity. So you [indiscernible] a contract to provide charging for the U.S. postal service. Can you elaborate on that? And what other sort of momentum you see in the fleet space?

Yes. So we can elaborate as far as what's public, right? And what's public is the fact that they -- we signed kind of a blanket purchase agreement for up to 41,500 charging stations over the next 5 years, roughly. We received our initial order for 5,000. We are actively shipping against that. They're receiving that product in Kansas, and they are then redeploying it out from that central location there. So we are doing extremely well with that. We passed first article testing with flying colors. And the credibility for Blink associated with that selection in the fleet space is hard to measure, right? It's very important for us. It's opened a lot of doors in the fleet space for us to start to make inroads. So we're doing that both, on the charger sales side but also on the network integration side with fleets.

Yes. So you guys have a strategy in your -- or have a footprint in Europe. How does that market differ? How is it the same? What are the key opportunity set that you have in Europe that maybe is unique relative to that region compared to the U.S.?

Yes. Europe is an important strategy for ours. Over the past 12 to 24 months, we acquired two companies, one in Belgium and the other one in the U.K., I guess, technically not in Europe. But so it's a strong opportunity. The EV penetration rate in Europe is more advanced than the U.S. It was -- we have a headquarters in Amsterdam. That's actually centralizes the whole European footprint. And so we look at that as an anchor for the rest of Europe and that whole region. So it's a very important play for us. The -- in Europe, actually, there's more of the owner-operator model is much more dominant in that footprint and that versus the U.S. So as Mike mentioned earlier, we're trying to normalize both markets, on the U.S. side as well as the European site, both owner operator as well as hardware sales.

Yes. And the only thing I'd add to it is the two acquisitions that we made, Blue Corner in Belgium and EV in the U.K. They're strong within their respective markets, but they've historically only operated in those markets. So now what we're able to do is scale that, right, is to take that, expand our operational footprint, our sales footprint and move into other countries within Europe. So we're already making headway there. We have activity in the Netherlands now. So that's new. We have salespeople there now that are closing deals. And we will continue that kind of across the continent.

Maybe -- so you just talked about M&A. So I guess, are there other areas that in your portfolio looking to strengthen. I mean what is your view also on just consolidation in the space more broadly?

We're -- by definition, our company, we've been built on acquisitions. I think to date, we've done over 10 acquisitions to build the company over the past 3 years. I think we're up to six -- five or six, I'm losing count on each end. But we're always active in the M&A front. We're opportunistic. This year, we're spending a lot of time on integrating those acquisitions from the last 12 to 24 months. So it's important to digest those acquisitions, squeeze out and monetize those benefits. We're always inquisitive on other M&A activities. It's got to be strategic -- fit our strategic model, our geographic preferences and our strategies.

So obviously, your footprint today, you've made these acquisitions, but if we think about your ability to address the vast market opportunities, how do you balance, I guess, raising -- expanding on your go-to-market teams, spending more on sales, marketing folks, applications, all those kind of things versus trying to drive operating leverage in the model. How is your view on that?

Okay. So one of the ways that we have attacked that is through a robust channel strategy. So instead of taking all business direct and just adding people, adding people, adding people in order to be able to do that, we've aligned with some really strong electrical industry channel partners. So if you're familiar with companies like Graybar and WESCO and Rexel, and there's a bunch of them, right? And they're very good partners of ours. So we've made a concentrated effort to work with those companies that have very, very large national footprints. And obviously, that gives us access to not only to just a broader geography, but it enables us to see opportunities that we wouldn't see on our own if we were just trying to add salespeople quickly. So we're going to do -- we're going to employ very smart expansion strategies that limit the amount of heads that we need to add. That's how we're going to market for sure.

Okay. I guess how does Blink feel about your current cash position? Is any liquidity required as you scale your business? I mean, I guess, what kind of levers do you have to raise capital as needed?

Yes. Obviously, cash is always -- cash is king, as we know, in this growing space and the infrastructure needs. As of March 31, we had $103 million in cash. We have an active ATM that we look to utilize. And we know capital is going to be needed. So we're always looking -- we are looking at various strategic fundraising capital through debt financing or the government funding that's very prevalent is also European, Greenback funding that's available. So we're looking at all options. And we analyze the cost of each of those. And when you make decisions based upon an ROI and an IRR on those capital needs.

Okay. Going to stop and see if there's any questions here from the audience before moving forward. Okay. I want to come back. So maybe you could speak -- it wasn't really impressive, you obviously see this DC, but maybe you could speak to the product portfolio and what it looks like today, because you've actually made -- since we had you guys here at our autos conference last year, you've actually kind of made a lot of advancements in that. So what's next? What are you working on from a technology roadmap?

Yes. So there's the hardware side and there's the software side. So on the hardware side, we have the full complement of Level 2 charging stations from 30 amps to 80 amps, and that's the top end of the Level 2 spectrum. And then on the DC side, everything from a 30-kilowatt station on the low end to 360, and we'll be going beyond that on the DC side. So no, that's just the offering. What's really next for us is implementing aspects of vehicle-to-grid, V2G. So the first iteration of that for us is going to be plug-and-charge. So one aspect of V2G is the ability for the car and the charger to authenticate, so that you don't need to swipe a credit card, you don't need an app, you don't need those things. Now in order for that to happen, the car needs to be equipped with plug-and-charge, and the charger needs to be equipped. So both of those things have to happen in order for there to be a handshake for that to authenticate. But before the end of the year, we're going to have plug-and-charge functionality enabled. We already have thousands of charging stations actually in the market that have the 15 -- they call it -- it's the [ 15-11A ] chip that enables V2G. So we're working on pushing that software out before the end of the year to enable plug and charge. So that's there. Then what's on the screen is our newly announced Blink manufactured DC Fast charger. So that is going to start at 180 kilowatts. What we announced last week. I think it was last week, it was 240 kilowatts which is combo NAC-CCS connector, and that's based on silicon carbide technology. So kind of latest and greatest stuff, but really, what we're focused on is providing the full range of hardware, but also implementing the software solutions that the market needs now. So V2G is something that we have on the roadmap that we're looking to, but it's not something that we're implementing tomorrow. We're going to start with plug-and-charge.

Just maybe a little bit more on software. What would you say is unique about your offering and maybe even tied to the fact that you guys have both, hardware and software? And how important is that for things like handoff, interoperability, connectivity, things like that?

Yes. So there's a couple of aspects to the software side. Number one is when we have our own hardware and we have our own software, we can control the entire process. So a concrete example of that is we're able to develop firmware and own the firmware, soup to nuts rather than sourcing from the third party. So if we source our hardware from the third party, they will typically own that firmware. So if an issue arises or there's a feature that we want built in, we're having to push a third party to do that. We're kind of at the mercy of their timeline, their expertise, et cetera. So as we bring more of this in-house, we again, control our own destiny. So that's one. The second piece of it from the software perspective is just the breadth of our network. So when you are a customer and you install a blank charging station and it's connected to the Blink network, you are now part of a publicly viewable and accessible network of thousands of charging stations from coast to coast in the U.S. or again, similarly in Europe. So rather than, let's say, a smaller company that doesn't have much experience or breadth or scope, you don't kind of get that advantage.

So I guess, as we kind of come to the end of the [indiscernible] here, I guess, we think about the year in aggregate and maybe you come here next year, what will the team have achieved by then? What are the key sort of milestones that we should be looking out for?

Yes, we're excited for 2023 and going forward. We have a lot of initiatives that we have in the works. Again, 2023 is a year for integration, scalability. And we're really looking forward to as we head into 2024, where we have target views for achieving EBITDA -- adjusted EBITDA positive and really turning the trend -- the negative trend around and really excited about the opportunities, the integration of the teams, the networks that we are integrating. We're still operating four networks that will be combined into one during 2023. So just a complete scalability of the company and really positioning it for the continued advancement of the EV revolution and adoption.

Just last question: Just anything we didn't cover today, you want to make sure that investors are, I guess, clear on.

Yes. I would say it's not necessarily something that we didn't cover, but I do want to reemphasize, right, because what we -- the question we get is: Why are we different than anybody else? And it's really -- it really comes down to a couple of things. One is, again, fully vertically integrated. We control that process from end to end. And then secondly, the flexibility with which we go to market in terms of the 4 different business models and even our ability to pivot off those. So our focus is to bring recurring high-margin revenue into this company. And we're going to do it even when we sell charging stations. So if we sell a charging station to a customer, we can do things like ask for a percentage of the revenue in exchange for maintenance services, right, so that they don't have to worry about it. So anywhere that we can get a hook into recurring revenue from the utilization of the charging station, that's what we want to do. But we are very unique in the sense that we can take advantage of any opportunity, whether it's a hardware sale or whether it's an owner operator.

And I would just add that also, given our now manufacturing capabilities, we can pivot, make changes. Just an example with the new -- what's going on with the connectors, we could pivot very quickly and be able to adapt and change and whatever else is going to come forward in the future, in the evolution and revolution of the EV charging space.

Well, Michael, Michael. Thanks a lot. That was insightful. Appreciate it.

Thanks, Bill.

Thank you. Thank you, Bill.