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

Good afternoon. I'm Stan Solomon. I'm the Barclays energy desk analyst, and I'm very pleased to be introducing Blink's CEO, Brendan Jones.

Well, good afternoon, everyone. I sort of fell apart here on my mic. I'm going to put that in the pocket there, and hopefully it doesn't fall out again. So thanks, everyone, for having us. We're going to jump right into the presentation so that we have enough time for Q&A. And I'll skip by the safe harbor statement. I anticipate everybody knows what that is as we move in. So a little bit about Blink. What Blink is, is a full-service EV infrastructure company. And we operate in the United States; then globally, in Europe; some aspects in Southeast Asia; as well as Latin America. And our model is that we're fully vertically integrated. We do our own design to manufacturing. We develop our own network services. And then we provide charging solutions via sales and via an owner-operator model. And this makes us one of the most unique companies in the space because we're the only ones to actually operate in this fashion. Now we like to say this equals sustainable growth and improved profitability over time, and we'll get into this in this presentation, the path towards that level of profitability. A quick look at our leadership team. Another unique thing about the company is, while Blink has been around for quite some time now, our leadership team over the last 3 years has come from within the industry. I have 15 years, going out 16 years of experience. I started with Nissan as the executive responsible for launching their EV and their infrastructure and then progressed through several other companies. Harjinder Bhade was the original CTO of ChargePoint; Mark Pastrone, COO of SemaConnect folded into Blink. Miko de Haan was a member of the second in charge at the largest charging company in Europe that was bought by Shell at one time. And then Mike Battaglia came to us from automotive and J.D. Powers where he participated in EV as well. So a very experienced team has come together over the last 3 years at Blink to really transform the company. The reason we're transforming it is because of the opportunity that's out there. So the global forecast for EV is, right now, it's at 10% worldwide. And that's good from where we started out because I started out hocking Nissan LEAFs and there was no penetration globally at that time. So to get to 10%, 10% is more of a percentage than some of the auto OEM have as their market share. Some of them are 2%, 3% and 4%. So getting up to that is a significant achievement. A little anecdotal on that, California was 22% of sales last month on EV penetration. So even in this country, it's growing significantly. It's predicted by 2040 to be 75% to 100%. And that's not that long ago. I look at it from the perspective of, as much time as I've been in that space, that's the distance we have now between 2040, and I still feel like we just began this journey. So it's coming around the corner pretty quick. If we look at charging, we look at it a couple of different ways. If you first look at it here, it's just this astronomical number of 339 million to 490 million chargers needed by that date. Well, right now, there's not enough manufacturers. There's not enough chargers being produced by any one single company to get anywhere near that, even if you combine them together. So this signifies a tremendous amount of growth in this space that's going to take place. And that's the advantage of Blink and other companies like us that are in the space. So we're counting on that, and we're structurally adjusting the company as we move forward to be able to take advantage of that growth in the marketplace. So if you look at the U.S., in particular, so by 2030, we need 30 million chargers. There's about 4 million in the ground today that are operational. So that leaves a gap of $26 million that companies like Blink, ChargePoint, others out there, got to fulfill the need to make sure the EV driving public has some place to charge. You look at the investment, it's $100 billion more than capital investments needed by 2040 and 90% of all kilowatts dispensed globally, and this is what I call an undisputed fact now. Bloomberg, McKinsey, Pricecooperswaterhouse (sic) [ PricewaterhouseCoopers ] and many others have validated that 90% of the kilowatts dispensed will come from L2 chargers, not DC fast chargers. They just happen to be the sexy chargers that get all the news and all the press. It's going to be L2 chargers that are going to carry the lion's share of charging in the U.S. and globally. So fast chargers are part of our business. They represent about 5% to 10%. We sold 987 already this year, which is the highest in the history of the company. It generated about $10 million worth of revenue. We see that increasing as we move forward, but we're going to continue to take a conservative approach on DC fast charging and a bullish approach on L2 charging as we move forward. You can see all our products. What's really interesting about this slide, when I was asked to come to Blink and leave Electrify America, what have you got? Well, we got 1 charger and another one in development. And that was March 2020. Now when you look down on this page, all but 2 of these are on market today. So the company has grown, developed, acquired, then began manufacturing more product and structurally adjusted in a very significant way that there is not a charger that we have -- there's not a need that we can't fulfill for any opportunity out there in the space. If it's a 350-kilowatt charger we have that. If it's all the way down to a small in-home charger, and if somebody needs a mobile charger for rescue situations, we have that charger as well. So it's a complete portfolio covering the entire space. So if we look at the charging demand, we have now 78,000 chargers that have been deployed in the history of this company, going all the way back to its original founding in 2009. That puts us globally in the top echelon of charging companies and #3 or 4 in the United States since its inception. And here's the mix on where we are U.S. versus globally, 2% internationally and 78% U.S. So the U.S. is really driving our demand. But we see that number increasing in Europe as we move forward. Little bit here about software and manufacturing. So 24 months ago, a little longer, actually, it's about 26 months ago, we decided to scrap our old network and build a brand-new network so that we lead in software and development. And the reason why we needed to do that is a lot of the legacy networks have something what we call plug and play. You can't integrate another software. It's very difficult. You need more design time. And we decided to build a network based on the latest technology that you can plug in any pre-existing network, you can plug in any utility, you can plug in any fleet services or any business, and you can do API configurations and anything at a flip of a switch, and that's what we develop now. So when we're going into India, when we're going into China, we have plants, and we're going to other countries, it's easy to integrate into their systems the way we built the network today. And it's low cost and low maintenance compared to what it was on the old network. And we maintain that. And the key thing to differentiate us is none of it's third-party. So it's Blink developers working on the Blink system instantaneously. I don't need to go out and get a quote and a bid from a third-party developer to go fix my network because it's my network, and my developers fix it 24/7 days a week. And then, as we talked about, we can tailor our business offerings as a result of what we offer. I mean the L2 chargers that we design and build, when we go to service them, we keep it simple. And that's why there's this operational efficiency that exists with L2s that doesn't exist in DC. If I roll a truck, I'm not going out to the field to fix the charger. I'm rolling a truck with a charger in it. I'm popping that charger out, throw it in the back of the truck, putting a new one on. That one goes back to the plant, is refurbished and is recirculated out, the model. We don't throw them out and we don't waste precious hours and labor dollars out in the field fixing something. We do it all in-house. We just get a new charger or a refurbished charger on that site. And it's the most efficient model to be able to use in the U.S., very low-cost. You use a low-cost tech instead of a high-cost premium tech when you do those changes throughout the market. So commitment to expanding. So U.S. manufacturing right now is moving to 30,000 units of output out of our Bowie, Maryland facility. By the end of next year, that will be 40,000 to 50,000, and we're looking for expanding, right now, into a DC fast-charger facility and another L2 facility that will bring us up to 100,000 production in the U.S. while expanding our facilities in India and bringing on an assembly factory in Europe as we move forward. All the charges that we do in the U.S. will be Buy America compliant, according to the Act. And right now, it's only on steel. But on July of 2024, it's got to be 55%. The labor and content in that charger has to be made in America. We're happy to say we're already compliant on that one as well. So we're going to have no hiccups or problems on Buy America quality and move that up. The key is to stay in front of the production curve and make sure that we have the capacity to meet our global demand, and we are continuing our plans to do exactly that. Little picture of all of our customers. We operate across multiple channels: automotive, fleet, hospitality, commercial, multifamily and government. Right now, the fastest-growing ones are fleet, off the chart, red hot right now; multifamily, very hot. We continue to do a great book of business in commercial and automotive. And automotive is the key as we're just at the beginning of automotive now where they've done their initial onslaught, dealer readiness for chargers. When we get to 10% and 15% and 20%, they're all going to come back around to increase the number of chargers in there. And we got a good footholding. That's our largest book of business today as we move forward. When we look at financials, we just came off the best quarter in the history of the company. So revenues were $32.8 million. That was up 186%. I mean look at that. Service revenue was $7 million. Network fees were $1.7 million. And then we go look at the amount of charging stations, it was 5,830 for the quarter and then 16 gigawatts dispersed on Blink networks during that time. Deposit, I'll tell you, and this is -- I came out of one company where we're doing a lot of DC fast chargers. When we got in this company, I'm looking at the numbers they were giving me on the month, the input, and I go, "Man, I got a lot of work there," "Well, we'll do 60 chargers this month. We'll do that." Well, we're doing 5,830 a month, and that number is going to increase exponentially. So the company has really, really changed in just 3 years from what it was. So targets. We went out in the third quarter -- second quarter announcement, excuse me, and said, "Hey, look, we're going to revise the target." We came in first at $90 million, then the Street bumped us up to $100 million. And then we say, okay, we're going to bump that up to $110 million to $120 million based on projections. We are on target to meet this. I'm not going to say publicly if we're going to exceed or not. I will say that we're on target to meet this, and I'm very, very happy about the progress towards that. Of course, our job is to challenge ourselves so we can do better, and we will do so. So this will be the highest revenue in the history of the company and we plan next year being on the same trajectory of doubling our revenue year-over-year for the last 3 consecutive years. We'll do it for a fourth consecutive year, which leads up to our next point, is that we're targeting a positive EBITDA run rate by December 2024. All the pieces of the puzzle are in place for us to do this. The difference, when it comes to the way we did it, we didn't do it to make a marketing statement, a PR play to improve the stock price, we did it based on facts, understanding data and looking at where our revenues come in and how and if that is sustainable. And then we came up with a forecast plan that said we can hit the number on that date. Now we're going to try and beat that date, of course. But we did it because we know we can do it, and we want to be in the first in the space that delivers this number out there, EBITDA positive. That's the goal. We believe Blink can do it. The numbers indicate we can do it. Now we've got to show everybody that we can. Another thing when you look at Blink, when we compare it to the other companies out there, we're different in that we're the company that doesn't say no. When you think about the way companies work, we're vertically integrated, so we produce our own charger. And that charger sits there in the middle. It either goes left or right. It goes left to the sales side. It goes right to the owner-operator side. Everything that falls beneath that is the same. You have to commission the charger. You have to network. You still have to install it where they were facilitating the install on the sales side. You still have to have the service contract, maintain the network and replace that charger. Then after all of that, it's the same. The only differential is where they went to the sales and one other end. On the sales side, we still are now selling more service contracts, more maintenance contract, guarantee the quality of that charger. If a site host owns it, so we don't have the quality issues that the industry has been plagued by. When you look across the board, we cover all the aspects like no other company does. Blink does not miss a revenue opportunity where the rest of our competition listed here, they do, because they don't simply have the offering. So key -- when we look at this, what's out there for the investor? So vertically integrated charging ecosystem, flexible business models. Right now, 50% our product is built by Blink. In 18 months, 80% will be built by Blink. So a full suite of EV charging solutions. We never say no to a site host. If the site host wants to own it, okay, we've got that. The site host wants us to own it, we got that. You want to split it, you own part, you pay for the installation, we got a solution for that. Don't say no. Find a solution that works for the site host. Strategic pipelines, we have a fast-growing TAM with significant tailwinds and increasing global footprint and then attractive financial profile. Right now, based on where our stock price today is, where our revenue is currently, after that, we're one of the best buy stock price out there today, and we will continue to be so. We hope to see some upside in the stock price as we move forward. But right now, I've been on Blink in terms of a purchase on stock. We'll open that up for Q&A.

There's a question right here.

I'm [ Richard Brambos ]. I'm new to the story. So like, do you only make money selling the L2 charger? Or do you have sort of recurring revenue stream that you can get?

Yes. So on the owner-operator model, the recurring revenue is from kilowatt sales. And on the sales side, the recurring revenue is from networking fees that are paid monthly on a per port basis. It's $20 per port on it. And on service and maintenance contracts, it's recurring revenue. So either side of the equation, we get recurring so that we have that sustainable revenue for the long term. Is that really that good that I answer all your questions? Come on. You got to have one.

I'm William with Barclays. Just a quick question on the expansion, right? What are some of the challenges that you foresee or even like current challenges to sort of scaling up the charging stations across not just nationally but internationally?

Yes. It's a great question. And the whole industry is struggling. So the first is capital, okay. We prefer the L2 model at Blink because it's not as capital intensive as the DC model. So the DC model is capital plagued, and that's why you see a movement towards the OEMs funding infrastructure in the U.S. and globally because they're doing the same thing in Europe. Because you're not going to get a return on C on most of your DC fast-charger installations, 7-, 8-, 9-, 10-year churn rate. While on L2, you can get a return in a year to 18 months on that capital investment on return on C. But that's the biggest constraint, and you saw the capital demands we outlined there. City and municipalities are structurally adjusting, so they're ready for it. After capital, it would be cooperation with utilities. And utilities playing an active role and not necessarily profiteering within the space, they're having rate cards and rate reform that facilitates EV adoption. Demand charges can kill the economic business model for a charger in the particular area. So that's the second biggest hurdle. But beyond those two, today, it's a much better environment to install globally and then in the United States than it was even 5 years ago.

I think you alluded to this, but I'd love to hear a bit more just about how you capture the economic versus the utility capturing the economic. Like, how does that work?

In terms of the kilowatt sales?

Yes.

So we buy kilowatts in the public arena at whatever the rate card, and we mark that up, a sale of kilowatt to the consumer for the convenience of using the charger. We have more flexibility in that model in Europe as the rate structures are that way. That's why when we look at our service revenue, there's a large part of it that's Europe, a, because the rate structure is more beneficial to us; and b, because the utilization is higher in Europe. In the U.S., we can buy between $0.12 and $0.15 a kilowatt hour on average, some states are higher, and we can sell it between 29% and 59% depending on the region.

On EV car sharing, I noticed that you've gotten into the business. How big can that be? Can you explain how that works with the charging stations? Or is that just completely separate?

So no. So we have 2 power sharing services in the Blink portfolio, one is called Envoy, which is private car sharing; and one called BlueLA, which is a public car sharing. Also within that, we had a $7.5 million grant to replicate the BlueLA structure throughout New Jersey. So it's complementary because they are all EVs. They need charging. But we think of that business at Blink as a stand-alone business. So we see it as growing. And there are more grant dollars that are being made available. With the grant win in New Jersey, we're now seeing grant applications populate other cities to replicate those type of car sharing things. For us, we provide charging services to them. That's the way we see it, and we monetize that. We will be spinning off the mobility platform, the Blink mobility platform. The banker has been selected. The due diligence is in process. We're looking at having that spin-off as early as December, January of this year on that. And that will be a stand-alone entity that Blink is a significant shareholder in. But it will be separate from Blink, and we will provide them with shared services from an IT perspective, turn it into a profit center as opposed to right now, it's an operational expense.

So you're mentioning that like the growth is not really in the quick chargers. But I was wondering if you can elaborate a little bit more on that because I think -- I mean, my understanding of this space is that what really holds a lot of people back is range anxiety, right? So if I'm going to take like a long road trip down to, say, Maryland. [ If it's a friend ], I'm not worried about hogging my car in my office or at home or worry about taking a long road trip and I have nowhere to put my car in and I don't want to wait 12 hours to let this fully charge, and I'm on my way, right? So should charging be a way to facilitate that sort of anxiety or reduced the anxiety?

Absolutely. And that's the intent, but it's in two different ways, though. So I think you're absolutely right. But the majority of your driving life is not on the highway. I mean the vast majority, 97% of it is in your community where you don't necessarily need DC fast charging. And DC fast charging has two elements to it. One is exactly what you said. When you're on that highway drive, you want those kilowatts forced into that battery at a faster rate and you just don't want to sit there. And L2 charging is not practical anywhere on the highway. Anybody recommends it, it's kind of silly. But it's also this effect that cures this term that the industry invented, GM, in particular, called range anxiety, right? And you see the charger and you believe you may never use that charger, but that's why we have questions about the economic model about DC. But you go, "Hey, you know I bought the EV, and I saw all these hundreds of DC fast chargers. I'm going to do it." But all the data suggests the majority of your charging is going to be 90-plus percent on an L2 charger somewhere at your home, your community, your doctor's office, at your workplace, et cetera. So those are the realities, right? But that placebo works. You see it and you will buy. And it builds range confidence, and that's what we see infrastructure companies in the business of is building, range confidence.

Two questions. The first one is your expectation to break even on a cash flow basis. And the second one is that it seems that there's a trend in the industry that like Tesla is like signing up all the partners to kind of consolidate technologies using the electric pump, and Mercedes is doing the same, I think. Like, I don't follow the industry very closely. Like, how would that impact you like as a company? Like, everyone is using like Tesla's like standard or something like that, yes.

Yes. It's a very popular question today is the next standard. And first, it's not a standard yet. A regulatory body has to adopt it. It might be what we saw, the de facto standard that it's moving into. So for us, it's not an issue. It's called an opportunity. If we look at Blink charging stations today on the L side, L2 front, our #1 customer is Tesla. If I go outside the office at work where we have a whole bunch of charging stations, there's Teslas there every single day and there has been for a long, long time. What it does for Blink is it opens up the DC fast charging market to Tesla as well. It's not difficult to hang NACS cable on any charger. Well, the U.S. has had this catharsis and Tesla is making a big and bold move here. Tesla's standard, or NACS, is banned in the rest of the world, especially Europe. You can't do it there. What has grown up in the rest of the world is charging manufacturing, cable manufacturing. So to replicate a NACS cable today, the minute it opened up and we made our desire known to be building to that standard, we got 7 calls from cable and connector manufacturers wanting to bid on our business. And we've selected that. So for us, it's an opportunity. Our 2, 3 designs for DC fast charging will all have NACS cables on it moving forward. In that way, we're going to get more kilowatt sales when we engage in that. But again, that's that 10% of where charging is going to take place, not the 90% that we're dominantly focused on as a company. You had a part two, yes so we targeted that date, but it's going to be -- a whole bunch of variables contributed to that. We had a great -- our gross margin was 37%, and that's strong. Our revenue was high as well. Expense reduction and then enhanced revenue on a single sale. So when we look at a single sale of a charger today, we have a lower attach rate historically, and this isn't in the current because it's improving. Of warranty contracts and service contracts associated, well, you all might have heard that the industry is not happy with quality. So now attach rates on service contracts are going up. So we're offering those assurance products that you're going to have on the charger. So we'll make more revenue now off a single charger in the service revenue categories while increasing revenue and duplicating it, doubling our volume year-over-year as we have for the past 3 years. And when we look at that, and combine everything together on a forecast basis, we see that our path towards EBITDA positive is there. It's a very straightforward linear path that we believe we can get to. But also, I'll leave you with a little just anecdotal, fun fact takeaway. If you look at where our revenue is in 2021, and look at one contract, one single contract I have that will deliver in 2024, it's more revenue than we made in 2021 from one contract. And that's how the industry has changed. And that's one of many that we have in there. So we see our path there. I want to be #1. But if I'm not #1, I'm not worried about it because I'm going to make sure we do it the right way so it's sustainable. And that's our key when we say that number. We'll achieve it in December in a manner which it is sustainable for the long-term health of the company. Is that it? All right. Thank you. Thank you, everyone.