Blink Charging - Earnings Call - Q3 2020

Transcript

Speaker 0

Good day everyone and welcome to today's Blink Charging Third Quarter Results Conference Call. At this time all participants are in a listen only mode. Later you will have the opportunity to ask questions during the question and answer session. Please note that I will be standing by if you should need any assistance. And it is now my pleasure to turn today's call over to John Nesbitt of IMS Investor Relations.

Please go ahead.

Speaker 1

Good afternoon, everyone, and welcome to Blink Charging's third quarter twenty twenty investor call. On the call today, we have Michael Farkas, Blink Charging Founder and CEO Brendan Jones, Chief Operating Officer and Michael Rama, Chief Financial Officer. I'd like to take a moment to read the Safe Harbor statement. This conference call contains certain forward looking statements as defined within Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward looking statements and terms such as anticipate, expect, intend, may, will, should or other comparable terms involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future.

These statements include statements regarding the intent, belief or current expectations of Blink and members of its management as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in Blink's periodic reports filed with the SEC and that actual results may differ materially from those contemplated by such forward looking statements. Except as required by federal securities law, Blink undertakes no obligation to update or revise looking statements to reflect changed conditions. I will now turn the call over to Michael Farkas. Please go ahead, Michael.

Speaker 2

Good afternoon, everyone. Thank you for joining us for our third quarter investor call. There's been a tremendous amount of momentum in the EV space and solid progress at Blink since we last spoke. In spite of the pandemic, we have made great progress expanding and upgrading our network, adding new partnerships, executing our acquisition strategy, and further positioning Blink to grow as a leading provider of charging stations around the world. For the nine months, we grew 84% to $3,800,000 exceeding last year's total revenue of $2,800,000 Our third quarter revenue was a little bit more than $900,000 in line with the most recently published analyst revenue estimate, but below consensus purely due to the other revenue estimate being an outlier.

H. C. Wainwright, we know you're still sore about us doing the ATM with Roth. Schwalbe, please get over and stop ready. Before we get into the specifics of the quarter, I wanna make sure we keep sight of the big picture.

The opportunity in front of Blink is enormous, and few companies are better positioned to capitalize on the anticipated significant growth in demand for EV infrastructure as more drivers make the change to electric vehicles. According to Bloomberg NEF's Electric Vehicle Outlook 2020, which provides a global outlook for the EV market, passenger EV sales increased from 450,000 in 2015 to 2,100,000 in 2019 and are expected to reach over 50,000,000 by 02/1940. Bloomberg also expects that more than 50% of new car sales will be EVs by 02/1940. That is a staggering transition of our primary method of transportation, And it will require a very fast rollout of EV infrastructure. Guidehouse Insights is projecting 25% CAGR globally in the number of charging stations now through 02/1930.

And Bloomberg projects that the need for charging stations will top two ninety million by 02/1940, with a value of over $500,000,000,000 worldwide. The long anticipated shift to EVs is happening, and Blink is uniquely positioned to continue playing a leadership role in laying the groundwork for this transition. For Blink, as an early pioneer in the EV infrastructure space, these forecasted adoption rates are extremely gratifying to see. We've just started our twelfth year in this business, and over the years, we have carefully evolved and sharpened our business strategy to take advantage of the changing landscape. So I think it's important to highlight a few key tenets of our strategy.

First, we have developed a very flexible offering for our customers and partners, offering both Blink owned and host owned solutions. In this developing market, one size does not fit all, and customers want options to choose a solution that is right for them. We believe our ability to offer multiple deployment models will help us secure the most attractive locations as we roll out our chargers globally. Second, to fully understand the opportunity in front of us, it is also important to understand that unlike many of our competitors, such as ChargePoint, Blink owns and operates a growing portion of the chargers in our network. As an owner and operator, we sell the pump and the fuel rather than just the pump.

In this model, we pay for the charger for the installation, and then each time a car is charged, we realize a recurring revenue stream from the margin between what we buy the electricity for and what we sell it to the EV driver for. Because utilization of these charging stations is still in the low single digits, commensurate with the percentage of EV sales as a percentage of total fleets, we don't yet generate significant revenue from charging. However, given that the world is still in the nascent stages of EV growth and infrastructure build out, we have great confidence that our owner operator model represents a solid growth opportunity. Our contracts with our property owners are long term exclusive in nature and as utilization of our Blink owned charging stations grow, this will drive attractive and sticky recurring revenues for Blink and our shareholders, which from our experience far exceeds the value potential of solely transaction based equipment sales like ChargePoint. Third, another key aspect of our strategy is that by owning and operating our own chargers, we are able to control maintenance and can ensure the charger is fully operational and updated with the latest and greatest technology.

Our host owned option is an important part of our flexible deployment models, but once the charger installs, the host is entirely responsible for maintaining the unit. In many cases, that's fine. But sometimes our host owners allow the units to degrade. This is not your main wheelhouse. This is not what they do as their main line of business.

It sits in their garages. And historically, there are times we haven't been able to do much about it. Think of it like an automobile sale. Once the car is sold and it's off the lot, the car company no longer has any oversight in maintaining that vehicle. And as much as a BMW or an Audi or a Ford would love for all their cars on the road to be perfectly maintained, unfortunately, they do not have control once that car is sold, even when the warranty is still in effect.

To combat this issue and to strengthen our brand perception, we have rolled out a strategic infrastructure improvement program to support the upgrade of host owned equipment. In the third quarter, we upgraded 89 charging stations to our Level two IQ 200s. This is the fastest Level two charging station available. In addition to enhancing the driver experience with Blink designed equipment, many of these upgrades are converting our host owned partners to Blink owned multi year revenue share agreements. So the owner operator model provides attractive long term economics because we realize a recurring economic benefit each and every time someone uses our charger.

And it also ensures high quality control for the units in the field. We are currently focused on deploying the most chargers we can in the most attractive locations with the most positive potential utilization. During the quarter, made a lot of progress expanding our network with the installation, sale, acquisition, or deployment of six sixty eight charging stations across 25 states during the midst of COVID, of which 200 of those charging stations came as part of our acquisition of Blue LA. Three zero seven charging stations were sold and deployed commercially, with 62% of those being Blink owned and operated, which means we pay for that infrastructure, we pay for that investment, and we wait for a revenue stream to come. Those do not generate instantaneous revenues.

89 of these were swaps from the first generation chargers, in keeping with the initiative I just detailed, which is to upgrade equipment in the field when we have that opportunity. Notably, California represented over 50% of those installations. As I just mentioned, during the quarter, we announced our acquisition of Blue LA, which included an additional 200 chargers. Accordingly, we have strengthened our sales force and resources to heighten our presence and drive our efforts to expand our California footprint. These efforts are especially critical now as the state recently affirmed its full commitment to EV use with the announcement of an executive order from Governor Newsom which will ban the sale of new gas powered personal vehicles by 02/1935.

No more gasoline cars, only EVs after that point. A key component of our growth lies in our ability to continue to expand our footprint, both domestically and internationally. So we are very pleased to have significantly increased our market presence despite the pandemic. Finally, we're working hard to attract the most experienced and knowledgeable people to the Blink team. Since March 2020, we've hired 25 people with 19 of those being newly created.

We've added new positions across the organization, including at our headquarters in Miami Beach, at our Phoenix facility, our sales and technology positions in California, and several sales positions across the country. These are very exciting times for our industry and our company. Now I'll turn the call over to our COO, Brendan, who will review some of our recent progress. Thank you.

Speaker 3

All right. Thank you very much, Michael. Good afternoon, everybody. It is a pleasure to speak with everyone. It continues to be a very, very busy time at Blink as evidenced by many of our recent developments and the announcements.

So I'll jump right in and review just a few of the highlights. In August, as Michael mentioned earlier in the call, we launched a program for existing Blink EV charging locations to upgrade their first generation equipment to Blink's new fast level two charging station, the IQ 200. Our goal in this initiative is to expand and improve the Blink network of equipment. And during the past year, we've upgraded over eight eighty four charging stations to the new 80 amp IQ 200 as part of a strategic initiative to improve infrastructure. As part of this promotional program, we are providing upgraded equipment to existing hosts when they enter into a new multiyear revenue share agreement with Blink.

This offering gives our host partners the chance to provide the best equipment in the marketplace. And with the revenue sharing structure, Blink becomes a partner with the owner operator rather than solely providing hardware. Also in August, we received a follow on order from Enter Energy for 150 level two and DC fast charging stations to be deployed in The Dominican Republic. This order valued at over $1,000,000 will be fulfilled during the fourth quarter and is a follow on to the company's previously announced $1,200,000 purchase order for 200 charging stations with EnerEnergy. With these orders, EnerEnergy has purchased three fifty blank level two DC fast chargers and residential charging stations.

Inter Energy through its CEPM subsidiary provides energy solutions to more than 66% of the national tourism sector in The Dominican Republic and installation locations for Blink charging stations will include hotels, resorts, shopping centers and gas stations. Now following on Michael's comments, I also want to highlight the extraordinary September announcement of Governor Gavin Newsom's executive order N79-twenty banning the sale of internal combustion vehicles by 02/1935. This is truly a groundbreaking announcement. The governor's move to cut greenhouse gas emissions in the country's most populous state indicates true leadership in helping citizens of all income levels make the change and choose cleaner transportation alternatives. We see tremendous opportunity to help further California's environmental mission and we're very excited about the opportunities represented by our most recent acquisition of Blue LA, the EV car sharing partner to the city of Los Angeles.

This acquisition allowed us to double the number of Blink charging stations in Los Angeles while providing affordable enhanced EV mobility options to community residents. Our goal is to replicate the Blue LA model in other cities throughout California and eventually in other urban centers across the country. Most recently we announced several innovative partnerships including a strategic development production agreement with SG Blocks to bring solar off grid modular EV charging stations to market. Now SG Block recycles cargo shipping containers for use in construction and other uses. And working together, we'll bring our charging stations to their location than others to deploy a rapid and cost effective EV charging solution.

Additionally, we recently announced the deployment of 44 level two EV charging stations at the Elysium, a residential building in Los Angeles with a focus on green living. They are truly a pacesetter in sustainable living solutions and we're proud to be part of their suite of residential amenities. And finally, last month we announced a working partnership with Sustainable Westchester, a leading nonprofit consortium of local municipalities in Westchester County, New York facilitating the effective collaboration of sustainable solutions resulting in healthier, more resilient communities. We're working with them to promote and build out of EV charging stations by providing 50 level two IQ 200 chargers for deployment in the local communities. To give you some context around the potential impact of this partnership, Westchester currently has more than 5,500 registered EVs but only one charging stations per 22 EV drivers.

We like to bring that ratio significantly down. Now I'll turn it over to our CFO, Michael Rama, to run through some of the specific results for the quarter. Thank you very much.

Speaker 4

Thank you, Brendan, and good afternoon, everyone. Blink had a solid third quarter twenty twenty, particularly in light of the continued economic impact of COVID-nineteen pandemic. I thought it would be helpful to first remind everyone of our revenue model. As Michael discussed, a unique advantage of the Blink business model is our ability to provide multiple options to our customers. This flexibility is key in our ability to quickly expand our network.

We offer four business models for EV charging equipment and connectivity to our cloud based EV charging network, And we work with our property partners to help design a program that fits their needs. The four options are as follows. There's a Blink owned turnkey option, which is where we own and operate the charging station. It is utilized in high traffic locations with significant potential for high utilization. In this model, Blink provides the equipment, installation, operations, and administration of the EV charger deployment, and shares a portion of the charging revenue with the host.

Next is the Blink owned hybrid option, which is another model where we own and operate the charging station. It is our most common business model, and it fits more EV charging locations. The hybrid option allows the location to quickly provide the charging stations to their customers in a cost efficient manner. Point covers cost of equipment, operations, and administration, whereas a host location is responsible for the installation. Charging revenue is shared under the hybrid model as well.

Third is the host owned option, which is for those who want to be the owner and operator of the EV charging stations. The host location is solely responsible for the costs associated with the deployment of the EV charging stations. This includes installation, the cost of equipment, the annual network fees, and the cost of maintenance and operations. In the host owned option, the host location receives the entirety of the charging revenue minus network and processing fees. And the fourth option is our newest business model, which is Blink as a Service, which is an exciting option for host locations that want both the flexibility of setting the EV charging rates on the equipment but prefer not to have the upfront capital expense associated with purchasing the equipment.

Blank provides the equipment, maintenance and operations for a low fixed cost for the duration of the contract. The host location receives the entire unit charging revenue minus network and processing fees. Now moving on to some financial results for the 2020. Revenue

Speaker 2

for

Speaker 4

the 2020 grew to $905,000 Hardware sales drove the revenue increase for the period with a 74% increase. This increase was attributable to the increased sales from generation two chargers, home units, and DC fast chargers when compared to the same period in 2019. Third quarter twenty twenty revenues were impacted by the timing of certain orders that we expected in the third quarter, but are now expected to be completed in the fourth quarter. For the nine months ended 09/30/2020, revenue grew 84% to $3,800,000 compared to the nine months ended September 3039. This is noteworthy because our revenues for 2020 have already exceeded full year 2019 revenues of $2,800,000 Charging service revenues from the company owned charging stations was $163,000 for the quarter, a decrease from last year due to the impacts of COVID-nineteen, but a doubling over 2020.

As stay at home regulations were lifted, we've seen a steady uptick in usage of our charging stations. We expect over the medium to longer term to see the continued growth in the charging service revenues from our owner and operator charging stations due to more electronic vehicles on the road and our expansion of the Blink network of chargers. In terms of expenses, operating expenses for the quarter increased to $4,300,000 from $2,900,000 primarily driven by increased compensation expense as we continue to scale the business to prepare for and create the dynamic growth we anticipate. We have strengthened our executive, marketing, sales, IT and operation departments. Our net loss was $3,900,000 for the quarter compared to a net loss of $2,600,000 last year.

Now a few comments about our cash and liquidity. At the close of the quarter, we had $14,900,000 in cash. Our financial position has strengthened and the capital market environment in the EV space has never been stronger. During the 2020, we created a $20,000,000 ATM program. From April 1720 through 09/30/2020, we sold an aggregate of 3,500,000.0 shares of common stock under the ATM for aggregate gross proceeds of $19,000,000 With that, we will now open the call for your questions.

Speaker 0

And we'll take our first question from Sean Selverson with Watchtower Research. Please go ahead.

Speaker 5

Thanks. Good afternoon everyone. Michael, I wanted to spend a little bit of time on the Blink owned and operated model. It obviously has some interesting parts to it. I guess a two part question is I'm trying to understand how to model this.

First, can you provide some color on the current utilization rates? But also very importantly, I'm trying to understand, you know, as you deploy these going forward, you know, how do we think about utilization rates and timing of that? In other words, does it just grow with EV, you know, cars on the road? Or how do we think about the growth in there faster than the industry, slower than the industry? And also how the profitability changes on that, you know, as the utilization increases?

I assume it has a pretty high contribution margin.

Speaker 2

Okay. In regards to utilization, during our last call, you know, we we basically stated that we weren't really disclosing utilization rates. Bottom line is, if you really look at the EV industry, plug in hybrid EV industry, when you're looking at that space, you're looking literally at low single digits of of of entire fleet sales if you're looking at passenger vehicles throughout The United States. And our utilization is very similar. It's low single digits.

But what we do see is as more cars are available on the road, in tandem with the increase in percent we are also seeing increasing in utilization. And as more and more cars are on the road, REVs, it will directly impact utilization.

Speaker 5

And as the utilization goes, how does the margin profile look for you? I mean, let's say, you know, you're going from 10 to 50% to 70% utilization at, let's say, a single unit somewhere. How do you think about profitability of that particular deployed unit?

Speaker 2

Okay. So when you're looking at, from a perspective of utilization, one of our charging stations, let's say Blink owned, is something that's a turnkey solution that we pay from A to Z, At 5% utilization rate, we would make about $20 a month. At about a 10% utilization, it would be considerably higher. The number that one really wants to look at in trying to figure out what value can be brought as an investor. Where do they want to invest their capital?

Do you wanna invest your capital in the EV space, which is what we're doing in the infrastructure side is more of the picks and the shovels than it is for the searching of the gold. I would say the gold searching for is more of, like, finding the right EV producer who's gonna score. And and historically, if you look at the automotive markets, and that's really where my background is. Not not that I work in the auto industry, but my passion my entire life has always been automobiles. And if you study the market, you'd realize that 99% of all auto manufacturers have gone bankrupt.

And and I'm not joking. It's it's actually over 99%. What we do is we supply the cars no matter who makes the car, whether it's GM or Ford or Mercedes or BMW or Rivian or Tesla or BMW or Audi. You know, we we don't gamble on who that is. We're gonna make sure that whoever in that car that's being driven around, no matter who manufactured, we're the one who could supply the fuel.

And that's really, if you look at transportation, the money is in the fuel. It's not in the car and it's not in the gas pump. It's actually the one who supplies the fuel. And that's where we try to focus Brings Business on. But the real thing that one must look at when they're trying to figure out which of the companies in the infrastructure space do you wanna invest in, which has the most possibility for long term growth.

When when you own and operate a charging station in our model and and Or you're a charging station owner, a host owned unit. If you look at our model between us and ChargePoint, if there's a 10% utilization rate, our unit will make a host owner, a property owner, about $26 a month. With a charge point unit, it's only $20 a month. Their fees are more expensive, number one. Number two, our charging stations are more powerful.

The faster you're able to get the power into the car, the more money you make on a on a per transactional basis. But when you're really looking at it from owning the unit like us that we do versus what ChargePoint does, at 10% utilization when we own the unit, we'll make about $300 and change, $316 a month, and ChargePoint can make $20 a month off that same charging station. We make $316 a month, They make $20 a month. That's a 10% utilization. At 25% utilization, ChargePoint makes $27 a charging station per month, and we make $793 a month with our charging station being in our model.

So, you know, when when you look at where you wanna go, there's no question our model is more sustainable, and the revenue produced by owning that charging station is much, much greater than just having it on your network and selling it once upon a time.

Speaker 5

So it's clear the test of preferred strategy for Blink obviously can be much better economics. How does that impact, or the capital needs, let's say, capital deployment with that in terms of the owner operating strategy there in particular? You know, is it expensive to deploy these burning capital? How are you how are you getting them deployed in the field from a financing standpoint?

Speaker 2

Okay. So, yes, there's obviously an investment that we need to make versus a competitor who sells the hardware. They typically make money off the the hardware itself, and then they have a small recurring. We have to invest money in the ground. And while the payback takes a little while, again, remember, listen to the numbers.

I told you, at at 25% utilization, the difference is $27 a month in profit for ChargePoint and we do $793 Now at 50% utilization, is very, very high, they're at $38 and we're at $15.88 dollars So yes, you have to invest a little bit more money in order to get that kind of return. But there's a big difference also because in our model we have exclusive rights for very long periods of time to be the sole provider of EV infrastructure in that location. So it's not like just selling a charging station and the owner of that property puts it in a parking space. When we provide our services, when we invest our money into our property owner partner's locations, we have long term exclusive contracts to provide those services. And it's not just that spot, it's every single parking space in that location.

Speaker 5

I just have one last question. I know it's gonna be a hard one to answer, then I'll kinda step back. But when you when you talk with your customers and your partners out there, you know, why are they choosing one strategy versus another? I know it's of having the flexibility to pick one model versus the other. But, obviously, for you, the more attractive model being Blink owner operated, how do you how do you pitch this to a customer or partner, and why do they pick one versus another just in a kind of a general thought process?

Speaker 2

Okay. What we're seeing and the type of customers that we're dealing with, when you look at like the Cushman Wakefields, when you look at the parking garage operators, when you look at the McDonald's, these are companies that manage properties that belong to another party. So we may have our desire to go down a certain path, and the manager, whether it's a property manager or it's a garage management company, they may have their own path. Property owners all have their own models on how they operate their business. There are property owners that outsource every single service.

Whether it's washing machines if they're in multi family, but they outsource everything. There are others, property owners, who handle everything from a to z, no matter what it is. So because we have companies that have vast scale and they represent different types of owners, the reason why we're getting selected by them to work with them is because because of our flexibility. Because McDonald's has owners, certain ones that wanna own the hardware. They have other ones that don't wanna take technological risk, they're willing to maybe pay for the, you know, the the installation.

They have other ones that have a great location. They don't wanna put up a nickel or a penny. They just wanna get rent or a revenue share. So because of our flexibility, we're able to handle these companies where our competitors sometimes are unable to because not having that same type of flexibility.

Speaker 5

Great, thanks Michael.

Speaker 2

Thank you.

Speaker 0

Appears that there are no further questions. I'll turn the call back over to the management team for any closing remarks.

Speaker 2

Thank you everybody for joining us. And we're looking forward to a very exciting year ahead of us. Hopefully with COVID being behind us and more people traveling on the road, it should increase utilization accordingly. And with our new hardware offerings and partnerships, we're very excited about being able to deploy a lot more equipment over the next year and two. We're looking forward to some very exciting times.

Thank you everyone. We appreciate it.

Speaker 0

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time.