Blink Charging - Q2 2023

Transcript

Operator (participant)

Please note, this conference is being recorded. I will now turn the conference over to your host, Vitalie Stelea, Vice President of Investor Relations. Sir, the floor is yours.

Vitalie Stelea (VP of Investor Relations)

Thank you, Ali. Welcome to Blink's second quarter, 2023 earnings call. Today on the call, we have Brendan Jones, President and CEO, and Michael Rama, Chief Financial Officer. The discussions today will include non-GAAP references. These are reconciled to the most comparable U.S. GAAP measures in the appendix of our earnings deck. You may find the deck, along with the rest of our earnings materials and other important content on Blink's Investor Relations website. Today's discussions may also include forward-looking statements about our expectations. Actual results may be different from those stated. The most significant factors could cause actual results to differ, are included on page two of the second quarter 2023 earnings deck. Unless otherwise noted, all comparisons are year-over-year. Regarding the investor relations calendar, Blink will be participating in the J.P.

Morgan Auto Conference in New York City on August 10th, Barclays CEO Energy-Power Conference on September 5th through September 7th in New York City, H.C. Wainwright 25th Annual Global Investment Conference on September 11th through September 13th. Please follow our announcements for additional investor events in the future. I will now turn the call over to Brendan Jones, President and CEO of Blink Charging. Please go ahead, Brendan.

Brendan Jones (President and CEO)

Thanks, Vitali. Good afternoon, everyone, and thanks for joining us today. Before we get into the good results from Q2, I would like to provide a quick refresher on Blink and our capabilities. Now, Blink is the only fully integrated U.S. full-service EV infrastructure provider, and what that means is we control our own design, our own manufacturing, our network services. Our products have been designed to meet any charging needs and with best-in-class reliability. Now, in addition to all that, we are unique in the marketplace because we have diverse and synergistic revenue streams. Not only do we sell a variety of chargers and network ser-services, but we also own and operate chargers with flexible offerings. In fact, whether we sell or operate them, there is virtually no difference from an operational standpoint.

We use the same processes and contractual relationships to undertake commissioning, deployment, service, maintenance, and uptime monitoring. Overall, we believe that our vertical integration and ability to drive synergistic revenue streams provides us with a competitive advantage and positions Blink for sustained growth and improved profitability as we continue to scale the business. Now let's transition, and let's talk about the performance during Q2. If we move to slide 6, we are pleased to say that we delivered a record quarter, far exceeding any previous quarters, in Blink's performance history for the company. Our second quarter 2023 revenues increased nearly threefold to $32.7 million when compared with $11.5 million in the second quarter of 2022.

Our second quarter revenue growth of more than 100% was almost exclusively organic and was driven by strong demand for our products and an unprecedented growth in services. Our service revenue increased by 211% to $7 million, and our charging service revenue increased almost 200% to $4.4 million, compared to $1.55 million in the second quarter of 2022. Now, that is nearly a $3 million increase in revenue at a 68% gross margin, which includes the depreciation expense. Importantly, our network fees, which are recurring in nature, increased by an impressive 253% to $1.7 million. Blink's ability to generate high-margin revenue that is recurring in nature is another solid building block as we move towards achieving profitability.

Blink's company-wide gross margin in the second quarter of 2023 was another absolute record, coming in at 37%, compared to 17% gross margin in the second quarter of 2022. Our strong revenue margins and service definitely helped here. The majority of the positive margin came from Blink manufactured chargers sold during the quarter and our efforts in the areas of expense management, cost avoidance in our manufacturing process. As we scale our business and increase volumes, we believe we can do even better. Our margins will continue to improve as we move forward. In the second quarter, we contracted, sold or deployed 5,830 chargers globally. It's important to mention here that DC fast chargers are increasingly becoming a larger portion of our revenue mix.

Blink chargers dispersed during this quarter, 16 gigawatts of energy across all of Blink Network globally. If we look even deeper, as you can see, the second quarter was Blink's strongest ever and another record-setting quarter for the company. We have been laying the groundwork to build our footprint and capture market share and customers for more than three years. This quarter is a testament to the success of our strategy and the strength of our business model. We believe that these positive results demonstrate that our strategy is working. Importantly, we are optimistic that as the focus on building EV infrastructure intensifies, the momentum in our industry and our ability to capitalize on favorable market conditions will continue.

We don't view the results of this quarter as a one-off; rather, we believe there is a tremendous opportunity to continue this momentum. With that in mind, if we flip over to slide six, you can see that we are increasing our revenue target for 2023. We are now targeting revenue in the range of $110 million-$120 million, versus our previously stated target range of $100 million-$110 million. This new target is based on our current visibility of the marketplace, our pipelines, and our sales backlog. We are also reiterating our annual gross margin target, in excess of 30% for the full year of 2023, with expected margin accretion in 2024. Now, let's move over to slide seven, and this is a big topic.

It's achieving profitability and how this is a key priority for this management team. Today, we are announcing that we are targeting positive Adjusted EBITDA run rate by December of 2024. We've waited to provide this target until we had visibility to provide a target as realistic and as attainable as possible. We have seen and are seeing the demonstrated success of synergies, vertical integration, proactive cost-saving actions, comprehensive product portfolio, and positive trends in the revenue backlog. We had a very positive second quarter, we are not done yet. This team remains focused on further reducing our operating expense and burn rate through expense management, cost avoidance, and revenue enhancement actions.

In the second quarter of 2023, our operating expense increased related to significant growth since the second quarter of last year, and also due to significant one-time charges, which Michael Rama will detail for you later in this call. Over the past three years, Blink has acquired six companies. Since the beginning of 2023, we have identified and moved forward with more than $8 million in operating expense reductions. We will see additional reductions as we continue combining the functions and integrating the acquired entities into Blink. For 2023, we also expect additional ongoing expense savings for sunsetting legacy networks and leveraging the newly launched Blink Network.

Not only are we eliminating legacy networks, like we just did with SemaConnect Network in June, but our new Blink Network is expected to require less maintenance and ongoing costs than some of our competitors with older and more fragmented systems. In addition, we have more opportunities in the G&A area, especially when it comes to streamlining functions under one ERP system and implementing shared services for core functions. Over the last few months, we have adopted a culture of continuous improvement, and this approach is becoming the mindset across our organization. We do not look at this approach as just a one-time solution, but as the embrace of a data-driven, continuous, methodical, and sustainable improvement plan throughout all aspects of our business.

In fact, we have been working with one of the leading global consulting firms and identified numerous actions with a disciplined plan to achieve additional business savings and revenue enhancement strategies. We remain intent on our goal to focus on our core competencies, which include our intent to unlock the potential value provided by the spin-off of our car-sharing business. We acquired Envoy in the second quarter and already identified over $1 million of ongoing yearly synergies from combining the two entities of Envoy and Blink Mobility. We continue to execute on our plan to IPO Blink Mobility by the end of this year. Let's jump over to slide eight, and we can see the growth to date and the forecasted growth for electric vehicles and the EV chargers globally. We believe we are only at the beginning of this long runway.

There are over one billion vehicles in the world today, with the auto industry adding anywhere from 70 million-90 million vehicles every year. If less than half of those become electric by 2044, then the forecasted charger numbers are nearly 500 million chargers by 2040, and that seems very reasonable. This represents global growth in excess of 30 times. When it comes to the U.S. market, you see on slide nine, you can see that the market is projected to grow to over 30 million chargers by 2030, and over 90 million chargers by 2040. This is approximately $100 billion in investment by 2040.

We think it is especially important to note that according to McKinsey, PricewaterhouseCoopers, or Bloomberg New Energy Finance, the vast majority of chargers, over 90% of them, are forecasted to be Level Two chargers. We agree with this assessment. The industry is still developing, and it's changed greatly over the last 15 years, and it's growing. A new debate now has started in which charging standard will become the predominant one in the U.S. Is it CCS or is it NACS? This question has been in the news recently as we saw significant numbers of OEMs commit to NACS. Now, as it relates to Blink, we are happy to say that we are agnostic, and we are able to provide and support whichever standard becomes predominant. We view the adoption of NACS as a positive development for Blink.

We look at our customers and our segmentation by OEM. Tesla drivers are our number one customer group for Level Two chargers today, and this is partially due to the fact that Tesla has, by far, the largest market share of EVs in the United States. With our newly unveiled 240 kilowatt DC fast charger, which will support both NACS and CCS standards, we believe Blink is in position to capture additional sales and service revenue. Now, if we pivot a little to DC fast chargers on slide 10, you can see that DC fast chargers are a growing part of our business, with about 987 DC fast chargers contracted and sold in the first half of 2023, and about $10 million in revenue this year so far can be attributed to DC fast charger sales.

Now let's jump over to slide 11. You can see examples of our innovative product portfolio, which has advanced and flexible solutions for both Level 2 chargers and high-powered DC fast chargers. With these offerings, we service both residential and a variety of commercial customers and are prepared for the increased demand, whether it be due to NEVI or natural inflections of customer preference for EVs. Let's jump to slide 12. Within the last 12 months, Blink has contracted, sold, deployed, or acquired over 5,830 chargers, both domestically and internationally, bringing the total charger count for the company to nearly 79,000 chargers since Blink's inception. 78% of the total company-wide chargers is attributed to North America and 22% to international locations. Now on slide 13, we show a partial sampling of our customers.

They represent well-established commercial entities, multifamily complexes, planned communities, healthcare facilities, fleets, and municipalities around the world. We are very proud of our contract with the United States Postal Service, and as a reminder, the contract goes up to a volume of 41,500 chargers over the next three years, and Blink has been quite successful, and these numbers are reflected in our financial results. Fleets are becoming a wider segment of our business as government and commercial enterprises are converting to EVs to save on operating costs. With that, I'm going to turn it over to Mike ama, our CFO. Mike will take it from there.

Michael Rama (CFO)

Thank you, Brendan. Good afternoon, everyone. Turning to slide 15, total revenue in the second quarter of 2023 grew 186% year-over-year to $32.8 million. In the six months ended June 30th, 2023, total revenue grew 156% to $54.5 million. Product sales in the second quarter of 2023 were $24.6 million, an increase of 179% over the same period in 2022. In the six months ended June 30th, 2023, product sales were $41 million, a growth of 143% over the same period in 2022. This was due to customers purchasing greater volumes of our L2 chargers and DC fast chargers.

Second quarter of 2023 service revenues, which consists of charging service revenues, network fees, and car sharing revenues, were $7 million, an increase of 211% compared to the second quarter of 2022. For the six months ended June 30th, 2023, service revenues were $11.8 million, an increase of 213%. The year-over-year growth was primarily driven by greater utilization of our chargers in the U.S. and internationally. The increased number of chargers on Blink's networks, revenues associated with Blink Mobility car-sharing service program, and incremental service revenues from acquisitions. Gross profit for the second quarter of 2023 was approximately $12.3 million, an increase of 528% over the same period last year.

As a percentage of revenue, gross margin was 37% in Q2 2023, compared to 17% in the same period of the prior year. For the six months ended June 30th, 2023, gross profit was approximately $16.8 million, an increase of 375% over the same period last year. As a percentage of gross revenue, gross margin was 31%, compared to 17% in the same period of the prior year. As Brendan mentioned earlier, our strategy of vertical integration and insourcing of manufacturing, as well as cost avoidance and cost optimization efforts, have contributed to the continuous increases in our gross margins. Operating expenses in the second quarter of 2023 were $52.4 million, compared to $23.9 million in the prior year period.

The year-over-year increase reflects the increase in non-cash share-based compensation of $10.6 million in Q2 2023 versus Q2 2022. Increases in non-cash amortization of intangible assets of $900,000, as well as operating expenses associated with the Q2 2022 acquisition of SemaConnect. Operating expenses in the six months ended June 30th, 2023, were $87.7 million, compared to $40.5 million in the same period of the prior year. Please note, included in operating expenses for the three and six months ended June 30th, 2023, are the impact of additional non-cash share-based compensation and a one-time non-recurring payment to our former CEO, as well as the non-recurring bonus payment expense related to the performance milestones achieved by our CTO.

The milestones relate to the design and launch of Blink's recently implemented new network. We believe Blink's new network will be beneficial well into the future as we sunset the legacy networks and onboard a significant number of new chargers. Our investment in the development of the Blink Network has already started to pay off, with the elimination of the legacy SemaConnect network in June of 2023, and with European networks currently in process of migrating. The key takeaway here is we incur these expenses now, and by doing that, we reduce the ongoing operating expense moving forward. That will directly benefit our bottom line and bring us closer to profitability and positive free cash flow generation. As Brendan mentioned earlier, we are focused and committed to further reducing our operating expenses and burn rate through...

burn rate through expense, key expense management, cost avoidance, and revenue enhancement actions. Adjusted EBITDA for the second quarter of 2023 was a loss of $13.5 million, compared to a loss of $15.6 million in the prior year period. This is an improvement of $2.1 million year-over-year, as we expect this trend to continue as we realize more business savings, as we mentioned earlier. In the six months ended June 30th, 2023, Adjusted EBITDA was a loss of $31.3 million, an increase from a loss of $28 million in the same period of the prior year. The slight increase in the first half loss is attributable to the results in the first quarter of 2023.

The Adjusted EBITDA for the three and six months ended June 2023, excludes the impact of stock-based compensation, acquisition-related expenses, and one-time non-recurring expenses, I, as I mentioned earlier. Adjusted earnings per share for the second quarter of 2023, was a loss of $0.44 per diluted share, compared to a loss of $0.41 per diluted share in the prior year period. In the six months ended June 30, 2023, the adjusted earnings per share was a loss of $0.92 per diluted share, compared to a loss of $0.76 per diluted share in the same period in the prior year. Non-GAAP adjusted EPS is defined as adjusted net income, which excludes significant non-cash items such as amortization of intangible assets, non-recurring acquisition-related, and one-time non-recurring expenses, divided by the weighted shares outstanding.

Turning to slide 16, you can see that sequentially, we saw a significant increase in gross margins when compared with our historic results. This is primarily due to the high demand for our product, our ability to meet the demand, and generally increased utilization. We previously shared our commitment to expanding our manufacturing capabilities to replace contract manufactured chargers with in-house produced units. That strategy is starting to pay off now. We have outlined a detailed roadmap to reduce operating expenses even further. In G&A alone, we see further opportunities resulting from the combination of the four legacy companies that make up Blink today.

Anywhere from IT and network support to streamlining the ERP systems and processes around the globe, we have a well-defined plan, and the team is laser-focused on executing methodically in order to ensure sustained profitability and the target of achieving positive Adjusted EBITDA run rate in December of 2024. There is still a lot of work ahead of us, we are excited as we finally are seeing the positive financial results from our strategy and recent actions. Now I will turn the call back over to Brendan Jones for a few final comments. Go ahead, Bren- Brendan.

Operator (participant)

Mr. Jones, I think your line might be muted, sir.

Brendan Jones (President and CEO)

Hey, sorry about that, folks. To add to Michael's points, we had a great quarter. We had maybe a monumental quarter with our strategy and our growth initiatives we put in place as we see them starting to be reflected in our financial and operating results. We knew this was not going to be easy and would require vision, significant investment, and I will say some difficult decisions. We have taken concrete actions, and as Michael and I outlined, expense reductions, cost avoidance strategies, and revenue enhancements, and we will continue to do so with a commitment to methodical and continuous improvement. As many of you know, this is a tough industry, and we believe there is no other way than focusing on the fundamentals while also growing revenue and being innovative.

That's truly the success: build the basics, focus on fundamentals, bring new product to market, increase revenue. We truly think that our advantage is in our people and in our team, and we are willing to go against anyone in the industry with this team that is behind Blink. With that, that ends our formal conference, and I think we're now ready to take some questions.

Operator (participant)

Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is coming from Craig Irwin with Roth MKM. Your line is live.

Craig Irwin (Managing Director and Senior Research Analyst)

Evening, guys. Thank you for taking my questions. The revenue is obviously really impressive, I would say the gross margins are even more impressive. Can you maybe unpack gross margins a little bit for us? You know, I'm going to guess there'll be some naysayers out there saying, "Oh, one time, not going to happen again." Was there anything one time in there that gave us such a solid number? You know, can it get better from here? You know, there are products in the market that I, I believe do actually have 50% gross margin, but they're sold in much lower volumes these days than they were many years ago.

Any, anything you can, you can give us to help us understand the sustainability of margins and, you know, the potential for continued progress from this impressive level you met this quarter?

Brendan Jones (President and CEO)

Yeah, I mean, as we stated in the previous quarter, and we've continued to state, as we control more of our own manufacturing, we're starting to see margins improve. On our network services, when we own and operate the station, that is simply adding to the good news because the margin is considerably higher than what our target is of 30% for the full year. What we have to make sure is we continue our efforts to sunset legacy products and reduce expenses associated with bringing on more and more of our Blink-built products, whether it is from India or a Bowie facility or coming out of our facility in Phoenix.

The key there to really maintain and make this sustainable is not to say, "Hey, well, all that focus on reducing costs, that was a one-time thing." No, that's a permanent part. Expense reduction is a permanent part of Blink. Making sure that we're efficient in everything do, we do is continuously important. Then building our own chargers, having a reduced cost on network fees, not paying expensive software development costs because we have it all outsourced. It's all insourced at Blink. We have to double down on all of that. As we continue all of those efforts, you know, you're going to see our margins continue to improve. We're going to stick with our 30% because we, as you saw in Q1, we had a lot of legacy product we have to get, get through.

We still have some of that, but so far so good, and this is a discipline approach. I think all that wrapped together contributed to it, and it's also contributed to our success moving forward.

Craig Irwin (Managing Director and Senior Research Analyst)

Fantastic. Fantastic. Then, a question directly related to the revenue side. The NEVI funding is starting to find its way into the market.

Can you maybe shape for us, you know, what your participation is likely to be as far as, you know, subsidy funding over the next several quarters? Do you expect this to continue to support your growth rate and the overall level of demand for your products out there?

Brendan Jones (President and CEO)

Yeah, we've been successful with and without NEVI funding, we're going to continue to be, you know, successful with or without that. However, we are targeting a number of states. We're not going to go after all 50 states. We're targeting other states. We're targeting routes that we believe are highly accretive to high utilization. We're targeting states where they're sticking and maintaining closer to the 80% to funding level. Some states are electing to go lower because the NEVI guidance only says you have you can do up to 80, but some states are going lower. We like DC fast charging, also we understand the cost associated with and the break-even point and the long-term return on C that is associating with DC fast charging, even if you get 80% funding for NEVI.

We're gonna pick and choose and take what works for Blink. Right now, you've got six, seven states in on an RFP, only one state out with winners, and they still have another round to do out of Ohio. We're at the very, very beginning of it.

Craig Irwin (Managing Director and Senior Research Analyst)

Well, well, congratulations, guys. This is a really impressive quarter. I'll go ahead and hop back in the queue. Thank you.

Brendan Jones (President and CEO)

Perfect. Thanks, Craig.

Operator (participant)

Thank you. Our next question is coming from Matt Summerville with D.A. Davidson. Your line is live.

Brendan Jones (President and CEO)

Hey, Matt.

Matt Summerville (Managing Director and Senior Research Analyst)

Thanks, good evening. Nice quarter. A couple questions. Can you maybe talk about, I mean, you've discussed kind of all these things you're doing from a cost standpoint, from a structural standpoint. Can you talk about, you know, savings realized to date, how much incremental you should realize in the back half of 2023? Just based on what you've identified at present, what that roll forward should look like into 2024. Then I have a follow-up.

Brendan Jones (President and CEO)

Yeah, I mean, as you saw, we talked about. Just in 2023, we've had some additional synergy savings that came in in the back end of 2022. When we focus on G&A, we did about another $8 million already, and those are going to take effect. Some of them have been slightly realized. You'll see some of those, some of them have severance associated, so the net effect will come in in Q3 and then in Q4. Then we have additional targets to get through, and that's both from a G&A perspective and then from a vendor-related. Every time we combine a network or reduce, we're also sunsetting vendors. Now, sometimes we have to cleave those vendors from our different business entities because they hold onto them like a security blanket.

What we're doing is using universal systems for the globe and having the same system in England as we use in the U.S., the same in England as we use in Blue Corner, in Belgium, in the Netherlands, in India, and everywhere else throughout the world. That is gonna go on. I'm not gonna give you a dollar amount because we're actually just getting into the forecasting phase on how much more we have to go on synergies, but it's gonna be a continuation. Cost avoidance and cost reduction is going to be a theme in the company, and I think that's the big takeaway. It's not something we do when we're trying to hit a number. It's something we do as a business now.

We're gonna have to do continuous improvement every day, every week, every month, every quarter, in order to make this company one of the best in the industry.

Matt Summerville (Managing Director and Senior Research Analyst)

As a follow-up, I'm curious, you talk about reaching Adjusted EBITDA positivity on a run rate basis by the end of next year. Could that also coincide with free cash positivity? In that regard, how should we be thinking about your capital needs between now and when you achieve those milestones? Thank you.

Brendan Jones (President and CEO)

Yeah, it's a great question. We see free cash flow manifesting later in 2025. We're not gonna give guidance on that yet. There will be a need for some additional cash raises as we move forward. As we've stated many times, we're looking at all instruments available for Blink from funding, whether it be debts, debt, equity raises, convertibles, et cetera. Michael Rama, the CFO, is focused with Vitalie on that every day on where additional capital is gonna come from. We're gonna get a lot of that capital simultaneously from continues to increase revenue. If you look at revenue, we keep increasing revenue by over 100% over the last three years, and we see that trend continue.

As we continue to reduce expenses, continue to bring new products and increase revenue and bring in some additional capital, as we said with EBITDA, we see that in December 2024, then we'll see cash free, cash free positive, flowing right after that. There will be a raise that helps us get there.

Matt Summerville (Managing Director and Senior Research Analyst)

Thanks, Brendan.

Operator (participant)

Thank you. Our next question is coming from Sameer Joshi with H.C. Wainwright. Your line is live.

Sameer Joshi (Senior Equity Research Analyst)

Thank, thanks. Hey, Brendan, Michael, congrats on all the progress. Just getting a little bit granular on the 5,800+ units installed, what proportion of these were DC fast chargers? Also, what proportion of these were owned versus deployed to at other locations?

Brendan Jones (President and CEO)

Yeah, I'll tell you on, on DC fast chargers, it's, it's significantly less than 5% of the total. When you look at the 5,000 number for the quarter, and then you look at the 10,000, I mean, roughly 1,000, I'll average it up, DC fast chargers that have been sold and deployed this year, it's a, it's a fractional number at best. It continues to be a small %. What we're goal right now is we want to get DCs to 5% of the portfolio and then push it up from there. When we do DC, as an owner-operator model, we want to continue to make sure we get funding to put them in the ground. When we do it as a sales model, it's a different thing.

We, we get a high margin on the product, and, you know, and it also contributes greatly to revenue. Michael, do you have the split for last quarter on owner-operated versus sales?

Michael Rama (CFO)

Yeah. It, you know, we're still tracking where I don't have the specific numbers, but we're still tracking where we're still the product is still outpacing, obviously, the own and operate. Own and operate is still hanging tough. It's a good area to be in. We're still. Obviously, you see our own and operate, you know, charging revenues continues to increase in Europe, especially. Our split on revenue is 80/20. We're still not in that proportion in selling the units. I'd say we're still closer to 60 or 65 to, say, 35% on the product sales side of it.

Brendan Jones (President and CEO)

You know, just to add to this point, because I think it's a great question. We wanna make sure that everybody understands, to a degree, it makes no difference. The support structure, whether it's own or operate or we sell a charger, is the same, so there's no duplicated systems. You know, if we, if we sell it, we follow the same process. If we own and operate it, we sell it. The capital distribution is different on it, but the system is the same. We're gonna take revenue in the space where revenue exists, and we're never gonna say no to our customers, whether they want to buy a charger, an owner or operator charger. I think that is our uniqueness. We'll be exploited to both models, owner, operator, or sales.

Sameer Joshi (Senior Equity Research Analyst)

Understood. Thanks for that. In terms of the one-time charges or expenses this quarter, just want to understand the $11.663, that's the stock-based comp, and then the $11.632 is, is the one-time recurring expense. The one-time recurring expenses are also stock related, but for the previous CEO. Is that right?

Michael Rama (CFO)

No.

Brendan Jones (President and CEO)

Michael?

Michael Rama (CFO)

In the, the stock-based comp includes about close to $6 million in the... I'll call it, there's part of the severance settlement, there was shares that had to be issued. There was acceleration of share-based expense that had to be accelerated into the quarter. That is reflected in the, actually in the share-based comp line, and then the $11.6 is relative to the, I'll call it, the cash portion of the consideration that had to be done in, in Q2.

Sameer Joshi (Senior Equity Research Analyst)

Understood. So once you exclude these one-time costs, the OpEx, what is the OpEx level? Is it closer to the 1Q number with some inflation? The, the, the question I'm getting at is, when you say Q4 2024, EBITDA break even, are the costs at that level going to be comparable to today's costs?

Michael Rama (CFO)

Yeah, I, I, I'll add that if you look at, at our Q1 operating expenses versus Q2, when you strip out the, the several one-timers, plus included in Q2 was Envoy, the new acquisition. When you strip those out to be on apples-to-apples basis, our OpEx expenses for the Q2 was about $500,000 or so less than Q1. Remember, as Brendan mentioned, we still have some severance and synergies we're flushing through in Q2. We continued to rightsize those areas as we move forward. I, I, I would look at, you know, We continue to monitor each one of those areas, and I think, I don't know, say we want to look at Q4 as a proxy.

We want to look at the business as a whole and continue to scale in the, in the appropriate areas. It makes sense that the duplication of efforts, right size and, and the right expense profile is adequate for the size company we're expected to be as we keep going forward.

Sameer Joshi (Senior Equity Research Analyst)

Yeah, understood. I think 2nd part of my question was just trying to get to, is there operating leverage in this with the current cost structure, and that your Adjusted EBITDA break even in December of 2024, takes that into account or not?

Michael Rama (CFO)

Yeah, there's definitely leverage in there, and obviously, that's part of the what we're looking at as part of the, the leverage is gonna come from the consolidation and, and right, of the networks, four networks down to one, and then the, vendor related to that, that support of that system. There's definitely gonna be scale and, and one ERP system and a shared service that we're gonna be able to imply and, and, and push through to the, the entirety of the company, not here just in the U.S., but internationally as well.

Sameer Joshi (Senior Equity Research Analyst)

Understood. Great. Thanks a lot, and congrats once again on all the progress.

Michael Rama (CFO)

Thank you.

Brendan Jones (President and CEO)

Thanks.

Operator (participant)

Thank you. Our next question is coming from Chris Souther with B. Riley. Your line is live.

Chris Souther (Senior Equity Analyst)

Hey, guys. Can you give us a sense of the revenue cadence for the rest of the year? I mean, if you put up the same revenue you had in Q2 for third and fourth quarter, it seems like you'd already be at kind of the high end, and typically, revenue has kind of, you know, grown throughout the year. I just wanted to get a sense of how you guys were thinking about, you know, seasonal cadence for this year, if there's anything different going on.

Brendan Jones (President and CEO)

Michael, you want to hit it first? Because I couldn't hear all the question.

Michael Rama (CFO)

No, about the, yeah, the, Just start out, obviously, as you do the math, you're, you're right. It, it does hit me, you know, closer to the top. We're being conservative, right? Because obviously, as we move forward, we're, you know...

... we're reflecting anything that, you know, certain unknowns that we're not, not aware of, but we see a strong pipeline. We see a strong backlog, and, you know, we're just like to be a bit conservative, to be honest, right? We feel that this was the appropriate level to come out with at this time.

Chris Souther (Senior Equity Analyst)

Got it. Okay. You know, can you give us a sense as to how much of the legacy products you still need to burn through? You know, products, gross margins in the mid-40% range. I, I'm just kind of curious if there are any reasons that should come down in, in the back half of the year here, or if that's kind of a new good run rate, kind of as a go forward.

Brendan Jones (President and CEO)

Yeah, you know, the estimates are that around 20% of the overall portfolio is going to be legacy products we want to get work through. What we didn't do is rest on our laurels and just said, "Okay, we're going to have to get it. We're going to have a margin impact." Where possible, and we already achieved one result, we renegotiated some of the prices on the third-party contracted chargers. We successfully did one significant group out of Europe. They're in there, but instead of, as we begin to play through that remaining inventory in that use case, it's going to have less of a negative impact, and even to some degree, a positive impact on margin as we play through that inventory. In the U.S., we are beginning to really start to play out of all third party now.

We have some remaining in-home chargers and some remaining L2s that came from our contract manufacturer, but, you know, we're gonna see most of those wiped out by the end of the year, and they're less than 10% right now of the overall in-inventory that's coming through. We feel, we feel pretty good there. There's still some work to do, but we're focused on it. Where we can renegotiate and get a lower price, we're working on that as well. You know, our goal is to get clean on all legacy equipment moving into 2024.

Chris Souther (Senior Equity Analyst)

Okay. Then, just the last one. Last earnings call, you provided some color around the top 50% of your, in, you know, Blink-owned charging network, the utilization, being, you know, double-digit %. You talked about-

... some more metrics for, for the full fleet, you know, forthcoming. Just wanted to see if there was any update you could provide there.

Brendan Jones (President and CEO)

Well, I mean, yeah, it continues to be good. You know, on the owner operator model, especially on the L2 side, you know, three years ago, we reinvented the system in which we placed chargers on the owner operator model. Ever since we did that and undertook that very methodical, data-driven approach, you know, the overwhelming majority are in 15% or higher of utilization of those, and that is showing in the charging revenue that we're having. We use that same model in Europe to predict optimum locations as well. As you can see by the numbers, the utilization numbers are increasing there. When you talk owner operator, you know, that-that's the key thing.

You know, if, you know, we don't believe in a philosophy where you have an obligation to put a charger in, where you're not gonna get the utilization. If we own an operator, we're only gonna place it in where we know that it's 15% or better. We're break even at 10% utilization on every L2 installation. On DC, you got to get 20 or better to start getting into positive station economics. You know, on L2, we're starting to hit home runs. We're gonna continue to drive that as we move forward.

Chris Souther (Senior Equity Analyst)

Appreciate it. I'll, I'll talk with you. Thanks.

Operator (participant)

Thank you. Our next question is coming from Stephen Gengaro with Stifel. Your line is live.

Brendan Jones (President and CEO)

Hey, Stephen.

Stephen Gengaro (Managing Director and Senior Research Analyst)

Thanks. Good afternoon. How are you?

Brendan Jones (President and CEO)

I'm doing great.

Stephen Gengaro (Managing Director and Senior Research Analyst)

Good. Good. Well, thanks for taking the question. Curious, your sort of updated thoughts on this. When we think about charging in general, just kind of from a big picture perspective, when you think about Level 2 versus DC fast, how, how do you think the market evolves? I mean, everybody's talking about NEVI, how do you think sort of the habits of drivers evolve as far as demand for DC charging versus the, the demand for Level 2 charging in urban areas, et cetera?

Brendan Jones (President and CEO)

Yeah, I mean, it's a great question, and it's been out there in the industry for a long time. The one thing that hasn't changed is the percentages when you look at driver experience and you come back with, "Well, 80% of my charger is on an L2 or 90%." Then you look at the use cases, cases when you include commercial fleet, and 90% of the charging is predicted to be L2. The driver experience becomes, if they're going on a trip, DC fast charger. If they're somehow in the major metros and they didn't charge, they need a DC fast charger. The economics, and if you were gonna hit these 30 million chargers that need to be installed by 2030, the most economical way to do it is L2 and take advantage of where the car sit.

That math proves true in the ownership experience. They go, "Well, I'd much prefer to plug in when I'm sitting at the doctor's office, and I'm there for two hours." The expense, the kilowatt dispense, is at a cheaper cost. When you look at, you know, what it takes to charge a Porsche Taycan on a 350 kilowatt charger, and you're talking 90%+ a kilowatt hour, the economics don't work out. That person's only gonna wanna use that charger if it's the last resort, and that's on a trip, going to grandma's house, do whatever. If they got a charger in their multifamily dwelling, that's a Blink charger, and it's at $0.39 a kilowatt hour, they're gonna go to that and charge up overnight before.

Stephen Gengaro (Managing Director and Senior Research Analyst)

That, that, that's helpful color. Just as, as we think about that, how do you think about Blink's strategy sort of behind, behind that sort of a, of a world we're living in?

Brendan Jones (President and CEO)

I think what we need to do is continue to innovate and provide chargers and provide network service, expand as we move forward into more energy management, more load shedding opportunities as we expand in the multifamily dwelling, as we do more fleet business, et cetera. The ecosystem is gonna expand in L2. You're gonna see L2 starting to use battery back systems, which we're doing in Florida on the DC level, level, and in Philadelphia in a project. We keep seeing we need to innovate, and we need to keep the cogs low on our chargers and continue to reduce the cost of producing these, whether we're producing them in India or whether we're producing them in the United States. That's the key to us, is that vertical integration, I don't have added expense.

I'm not going to a change order if I have third-party manufacturing, and I say, "I want this feature on it," and I'm paying 40% more because it's a third-party manufacturer. I just go and get my guys to do it, and we price it out, and we make it happen. That is gonna be what sets us apart. We can stay in front of commoditization where others cannot.

Stephen Gengaro (Managing Director and Senior Research Analyst)

Great. Thank you for the color. Appreciate it.

Operator (participant)

Thank you. We have reached the end of our question and answer session. I will now turn the call back over to Mr. Stelea for any closing remarks.

Vitalie Stelea (VP of Investor Relations)

Thank you all for your interest in Blink Charging. At this time, we're gonna end the call. You may disconnect.