Blink Charging - Q4 2022
February 28, 2023
Transcript
Operator (participant)
Greetings, welcome to the Blink Charging Co. Q4 and year-end 2022 earnings call. At this time, all participants are in a listen-only mode and the question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I will now turn the conference over to your host, Vitalie Stelea, Vice President of Investor Relations. Sir, please go ahead.
Vitalie Stelea (VP of Investor Relations)
Thank you, Ally. Welcome to Blink's Q4 2022 earnings call. On the call today we have Michael D. Farkas, Founder and Chief Executive Officer, Brendan Jones, President, and Michael Rama, Chief Financial Officer. Today's discussions 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 differ from those stated. The most significant factors that could cause actual results to differ are included on page two of the Q4 2022 earnings deck. Unless otherwise noted, all comparisons are quarter-over-quarter.
Regarding the investor relations calendar, Blink Charging will participate in the Roth MKM Investor Conference on the 14th of March and the JPMorgan Energy Conference on the 21st of June in New York City. Please follow our announcements for additional investor events in the future. Now, I will turn the call over to Michael Farkas, Founder and CEO of Blink Charging. Go ahead, Michael.
Michael D. Farkas (Founder and CEO)
Good afternoon, everyone. Thank you for joining us. Before I dive into our record financial results for the year, I would like to reflect on 2022, which was a transformational year for the EV industry and even more so for Blink. Industry-wise, we saw a record year for electric vehicle sales globally. This trend is only poised to accelerate based on consumer preferences and strong governmental incentives. Electric vehicles are becoming more commonplace on our roads and highways as global EV sales grew by 68% quarter-over-quarter, with EVs achieving around 10% market share for the very first time. The vast majority of consumers who try an EV never go back to an internal combustion engine vehicle again.
In fact, many OEMs are going electric with their mainstream offerings and making them more affordable in order to achieve scale, which will ultimately lead to price parity with their internal combustion engine offerings. Just think of the impact this will have on societies and the environment in the next 10 to 15 years. Mobility is being revolutionized in a way that has only happened once before, when people went from horses and carriages to self-propelled vehicles. This shift to electric vehicles will not only change the needs in terms of how we refuel, but also puts in place the need for new infrastructure required to service and maintain these vehicles as EVs become the dominant means of transportation. As for Blink, 2022 was truly monumental.
Not only did we increase our revenue by almost threefold during 2022, when compared to 2021, we fundamentally changed what Blink represents to the EV charging industry and our position around the world. Slide four shows our capabilities as the only fully vertically integrated charging company in the United States and among only a few vertically integrated charging providers globally. Our ability to design and manufacture our equipment and ownership of our network is a competitive strength, particularly when paired with our flexible business models as shown on slide 5. With our variety of ownership models, which range from simple network subscription to host-owned, hybrid or Blink owned and operated, we are intentionally focused on consistently delivering excellent products and services with an unparalleled customer experience.
Having control over the engineering, design, and manufacturing of our products and software enables us to efficiently scale the business while at the same time delivering superior products and customer service. As a 14-year veteran of the EV charging industry, we have the expertise to identify and meet customer needs and design our best-in-class hardware and software offerings to exceed customer expectations. In essence, we now control our destiny while leveraging scale and know-how to generate some of the highest gross margins in the industry today. As for our financial results, you can see on slide six that our Q4 revenue grew 184% quarter-over-quarter to $22.6 million. Our full year 2022 revenue grew 192% to $61.1 million compared to only $20.9 million last year in 2021.
Our growth significantly outpaces the industry. We are second to none, and it is a testament to the strength of our experienced team, our strategy, and our products and service offerings. Our service revenue grew by 213% in Q4 2022 to $5.7 million compared to $1.8 million in Q4 2021. Importantly, Our network fees grew to $2.3 million in Q4 '22. That is an increase of 827% when compared with the same quarter last year. I repeat, 827%, and at very healthy gross margins.
Looking at earnings performance, adjusted EBITDA loss for the Q4 of 2022 was $14.8 million, which is a sequential improvement of $3 million when compared with the Q3 of 2022, which was $17.6 million. Adjusted EPS for the Q4 of 2022 was a loss of $0.41 compared to adjusted EPS loss of $0.47 in the Q3 of 2022. Our number of stations contracted, sold, or deployed grew to 66,478 units, an increase of 105% when compared to the prior year of 2021. Our growth in network fees and charging stations is related in part to our strategic acquisitions of SemaConnect and Electric Blue in 2022, reflecting the strength of adding these complementary businesses to the Blink family.
Subsequent to year-end on February ninth, we closed an oversubscribed registered public offering of common stock for gross proceeds of approximately $100 million. The newly raised funding will go towards running the business and strategically investing in complementary opportunities. We expect these funds to take us well into 2024. Also in January, we exhibited at CES in Las Vegas, where we unveiled five new charging products for a wide variety of customers here in the U.S. and also for customers in Europe, Latin America, and Southeast Asia. India, for an example, is a market where we expect strong growth in electrification of both two and three-wheeled vehicles, and we have a very special offering for those compact EVs. 2022 was a year of tremendous progress for Blink.
This growth was enabled in large part by the acquisitions we closed in 2021 and 2022, as shown on slide seven. To cap our timeline of recent acquisitions, we acquired BlueCorner in May of 2021, adding over 7,000 charging points and a strong European network. This acquisition really opened a window into the lucrative European market for us. Since completing this acquisition, we have added nearly 5,000, or 70% more charging ports to the existing BlueCorner network. As a result, the Q4 2022 revenue for BlueCorner grew nearly 50% and is trending very strongly.
Adding on to our growth in Europe, in April of 2022, we acquired Electric Blue, we also call it EB, in the fast-growing market of the United Kingdom, adding nearly 1,200 charging ports to our network and a confirmed order book of approximately GBP 16 million. In June of 2022, we closed on our largest acquisition ever. We acquired SemaConnect, which in addition to a robust charging network and customer base, also brought key design and manufacturing capabilities for level two and DC fast chargers, positioning Blink to qualify for the Buy American requirements of the NEVI plan. SemaConnect has one of the highest, if not the highest, gross margins in the business, which we intend to institutionalize across the entire Blink organization. Blink is a combination of many acquisitions since we were founded.
By adding complementary businesses gradually and strategically, we have built what I believe to be the most talented team in the industry, second to none, allowing us to leverage our collective knowledge to deliver the best products and business models possible. As you can see on page eight, we have grown to become a truly global business with over 66,000 chargers sold, deployed, or installed in 25 different countries with much, much more to come. We are not done here. Slide nine illustrates that the industry is positioned to see exponential growth as electric vehicles continue to win customers all over the world. Bloomberg predicts that by 2040, we're going to need anywhere between 340 million to 490 million chargers globally to meet demand.
Today, we're not even close, at about 14 million chargers, with many of them not even viable for where we are today. At best, we believe the runway is just tremendously long. Just as the shift to EVs continues to build momentum, just imagine the opportunities that lie ahead for the charging industry and especially for Blink. We are very excited for the future and are working hard to prepare the company to be able to handle this amazing growth. I will pass it on to Brendan Jones, our President.
Brendan Jones (President)
Thanks, Michael. Good afternoon to everyone. As you heard from Michael's comments, Blink we had a great year. I'd even say a very, very, very good year, I overemphasized very there.
Now let's jump into some more of the slides. Let's go to slide 11. Now, as Michael stated, within the last 12 months, Blink has contracted, sold, deployed, or acquired over 34,000 chargers, both domestically and internationally. I think we have to keep reiterating this point that bringing the total charge account for the company to over 66,000 chargers since Blink's inception. Now, we have a diverse mix of deployments in the United States and abroad, and the percentages are that 76% of our total company-wide Blink chargers are deployed in North America, and right now, 24% deployed internationally. If we jump over to slide 12, you will see just a partial sampling of our customers.
As indicated, we service a variety of those customers in different industries, we have won multiple contracts with an array of well-established commercial enterprises, multi-family complexes, planned communities, healthcare facilities, fleets, and municipalities around the world. We also just want to reemphasize the important point that Michael made a moment ago, that Blink is the only fully integrated charging provider in the U.S. market, and our capabilities, combined with our flexible business model and superior products, position us very competitively to attract new customers and long-term contracts. With that said, let's jump on to slide 13. What we're looking at now is examples of our innovative product portfolio. We now have a wide variety of products, ranging from residential L2 chargers to high-powered DC fast chargers, as well as our newly unveiled Vision IQ 200, which we'll talk about in a little bit.
With these chargers, we service both residential and commercial locations, including an increasing number of fleets across the U.S. On slide 13, you can see our currently available DC fast chargers. We think it is important to reiterate that Blink is a global company addressing the demand for power in different DC installation settings that vary around the world. We carry a wide variety of DC fast charging offerings to meet customers' specifications. For example, one of our latest addition is a wall-mounted dual port 50 kW DC fast charger, which works well in tight spaces, especially in the densely urban environments in Europe. Regardless of the specific setting, we offer our customers flexible DC solutions and ownership models that provide anywhere from 30 kW chargers to 350 kW and above power.
Let's, let's go ahead and examine slide 13. What this shows is the innovative new product we recently displayed at CES. I'm gonna take you through this slide in different parts of it. In the top center, you'll see our all-new Vision charger. This charger is designed as a two-in-one solution. It has a 55-inch LCD display screen, which create the perfect point of charge advertising solution. Additionally, the Vision offers charging and advertising revenue share models, providing unique solutions for any of our customers. To the right is our new 180 kilowatt DC fast charger, which will be Buy American compliant and compatible with the newest electric vehicle charging architectures. To the left is another introduction, and this is our Series 9 30-kilowatt DC fast charger.
This is a small footprint charging station designed for speed and flexibility, representing Blink's latest solution for fast charging situations across the global markets. If I can take you to the bottom of this slide, in the center is our EQ200 charger. This is an intelligent, affordable, and scalable charging solution designed specifically for the European markets. The EQ200 is future-proofed as it supports technologies like ISO 15118, OCPP 2.0, and bidirectional charging, also known as vehicle-to-grid, or V2G as it's sometimes called. Next is the Series three, and Michael referenced this earlier. This is a flexible and versatile EV charging solution designed for the two- and three-wheeled vehicles for Asian and Latin American markets.
Our primary target market for this charger is currently Southeast Asia, where according to Bain & Company, EV adoption will be 40%-45% for two-wheel and three-wheel vehicles by 2030. Let's keep this in mind. This is a 13 million-14 million of those vehicles will need flexible charging infrastructure. Finally, at the bottom here, we also have the release of the PQ 150 or Energy Kick. What this is is a smart charging cable designed for residential charging in the European markets and perfect for the reimbursement of charging costs for fleet vehicles at home. We're really excited about the vast variety of products we have on the market and those we recently unveiled.
Blink is confident that our product portfolio has a solution to meet charging requirements anywhere in the world. Let's jump to a different topic. As we look at slide 16, in 2022, we completely redesigned and launched our Blink Network and Blink Charging mobile apps. Our state-of-the-art infrastructure, our tech stack, our user-centric approach allowed us to create a technological platform that can be augmented quickly and efficiently without any service disruptions to our customers, and that is key. The Blink mobile app put EV drivers in control by giving them improved capabilities to search for nearby amenities, chargers by zip code, city, business category, or address, and seamlessly integrating EV charging into everyday life. Additionally, drivers can save their favorite charger locations and manage payment information, as well as view payment history and real-time charging status.
The app is also available in both iOS and Android platforms. Now let's jump to 17 real quickly here. When it comes to host benefits, the entire Blink experience has been redesigned with ease of use in mind. Site hosts will also have expanded functionality to create dynamic pricing protocols responsive to various use case locations and schedules. The new cloud-based Blink Network allows site hosts to manage their business in multiple languages across 25 countries. We expect to transition all of our legacy networks acquired via acquisition to Blink's newly launched network by the end of this summer. Let's jump into slide 18. Market growth continues to enjoy the support of government initiatives. Electric vehicles comprised about 10% of all US sales in 2022, and we expect this trend to continue and accelerate.
In the U.S., the administration has committed to building a nationwide network of 5,000 chargers, and it is targeting the goal of 50%, that's 50%, of all new vehicle sales will be EVs by 2030, and that's just seven short years away. The White House mentioned Blink in a recent announcement on February 17th regarding the expansion of U.S. manufacturing for and new standards for its Buy American program. Right now, we are proud to say that Blink is compliant with when it comes to Buy American requirements, and we expect to meet the future requirements that will be enacted in July of 2024.
We are targeting production of 100,000 units annually in the U.S., which we expect to achieve in a major part by the expansion of our Bowie, Maryland, facility and with the establishment of a new manufacturing plant for DC fast chargers and L2s that we are actively in the process of identifying the location for that plant. Now let's jump to slide 19, and this is a different topic. This is looking at synergies. When we move on to synergies and the progress we have made this quarter, with the help of McKinsey Consulting, we performed an extensive analysis to discover and outline synergies across the entire global company and especially around the acquisition of SemaConnect. As a result, we identified and are targeting a total of $27.7 million in synergies related to just SemaConnect.
I'm happy to report that $5.3 million of those synergies have already been captured. We have broken down the synergy implementation into three phases. Phase one began in December and focused on sales, marketing, and some aspects of operations. Phase two and Phase three will begin in March of 2023 and will focus on global operations, IT services, technology, and manufacturing. If we look at the $5.3 million number that has already been attained, $4.1 million relates to FTE reductions, and over $1 million will be savings from reducing and simplifying the number of vendors. As stated, we are just at the end of Phase one, and we'll have a lot more information to report over the next several quarters.
As Michael mentioned earlier, when you dig a little deeper into our results, you will see that Q4 adjusted EBITDA improved sequentially by nearly $3 million when compared to Q3 of 2022, and revenue grew more than $5 million compared to Q3. We are narrowing our losses, and at the same time, we are growing our revenue, and we are looking to continue this momentum moving forward. To wrap all this up, you know, 2022 has been a truly an impactful year of progress for our industry and a significant year for Blink. With record growth in all areas of the company, we are elated with what the future holds for Blink. With that, I'm gonna now turn it over to our CFO, Michael Rama, for additional comments.
R. Michael Rama (CFO)
Thank you, Brendan, and good afternoon, everyone. Now turning to slide 21. Total revenues in the Q4 of 2022 grew 184% quarter-over-quarter to $22.6 million, another record for Blink. In addition, Q4 revenues were up 31% sequentially when compared with the Q3 of 2022, primarily driven by the increased demand for our global EV charging infrastructure and higher service revenues. Product sales in the Q4 of 2022 were $15.8 million, an increase of 176% over the same period in 2021 as customers purchased greater volumes of our commercial chargers, DC fast chargers and residential chargers. Product sales for the quarter also included revenues generated from our acquired companies of SemaConnect and EB Charging.
Fourth quarter of 2022 service revenues, which consists of charging service revenues, network fees and ride-sharing revenues were $5.7 million, increase of 213% compared to the Q4 of 2021. The quarter-over-quarter growth was primarily driven by greater utilization of our chargers, the increased number of chargers on Blink's networks, revenues associated with the Blink Mobility Rideshare program and incremental service revenues from acquisitions. As many of you already know, we combine these service revenue line items into one to more accurately differentiate between the product and service aspects of our business. Now operationally, this approach also aligns with our company's strategic goal of increasing the service component of our revenue mix and growing our recurring revenue base.
In time, as EV adoption accelerates and utilization of our charging stations improves, we anticipate seeing a larger mix of revenue coming from services. Gross profit for the Q4 of 2022 was approximately $6.5 million, an increase of 370% over the same period last year and up 35% sequentially from the Q3 of 2022. As a percentage of revenues, gross margin was 29% in the Q4 of 2022, over 1,100 basis points improvement when compared to the same period last year. Sequentially, our gross margin in Q4 2022 grew nearly 100 basis points. As Brendan mentioned earlier, we continue to look at ways to reduce our component and operating costs, which should have a positive effect on gross margins.
Operating expenses in the Q4 of 2022 were $34.2 million compared to $20.5 million in the prior year period. The quarter-over-quarter increase reflects the impact of recent acquisitions as well as our commitment to positioning Blink to capitalize on many EV infrastructure opportunities that lie ahead. At the same time, we remain vigilant about cost reduction opportunities and additional synergies as Brendan mentioned earlier. Last year around this time, we began presenting adjusted EBITDA. Our management believes this non-GAAP measure is useful in evaluating our company's core operating performance because it excludes items that are either significant non-cash or non-recurring expenses.
Adjusted EBITDA for the Q4 of 2022 was a loss of $14.8 million compared to a loss of $9.1 million in the prior year period, largely due to the higher operating expenses, as I just mentioned. Sequentially, Q4 adjusted EBITDA improved nearly $3 million or nearly 3,700 basis points compared to the Q3 of 2022 and improved nearly 5,000 basis points quarter-over-quarter compared to the Q4 of 2021. As you can see, as a percentage of revenues, our adjusted EBITDA improved nearly 40% since Q4 of 2021. Adjusted earnings per share for the Q4 of 2022 was a loss of $0.41 per diluted share, compared to a loss of $0.44 per diluted share in the prior year period.
non-GAAP adjusted earnings per share is defined as adjusted net income, which excludes significant non-cash items such as amortization of intangible assets, non-recurring acquisition-related expenses, and additional stock-based compensation divided by the weighted average shares outstanding. Adjusted earnings per share for the Q4 of 2022 was a loss of $0.41 compared to adjusted EPS loss of $0.47 in the Q3 of 2022. Turning to slide 22, you could see that both revenue and gross profit performance has strongly improved over the last several quarters with significant sequential and quarter-over-quarter growth. As we continue to expand our own and operate strategy, experience greater demand for EV infrastructure and increase utilization rates, we believe we are well positioned to drive significantly improved revenue and gross profit performance moving forward. Moving to our cash position.
As of December 31st, 2022, cash and cash equivalents was $36.6 million. Following the close of the quarter, Blink closed on an oversized public offering with gross proceeds of $100 million. We are pleased to have closed fiscal year 2022 with record Q4 and full year results. We believe we are building a solid foundation for continued growth as EVs are becoming more and more common among consumers and demand for our products and services, service grows. I will now turn the call back over to Michael Farkas for a few final comments. Go ahead, Michael.
Michael D. Farkas (Founder and CEO)
Thank you, Michael. 2022 was a truly transformational year for Blink Charging, and to the entire industry. I am very proud. I'm actually, I'm beyond proud of our team and what they've accomplished this year. From completing and integrating two large acquisitions to launching a brand new redesign from the ground up Blink Network, new mobile applications, also introducing a number of best-in-class products for both Level 2 and DC fast charging. It has been an intense year, but it's also been a very rewarding year for us. As you look at the EV charging industry, we have positioned Blink Charging to be truly unique. Number one, we are a truly, fully vertically integrated EVSE provider with software and hardware, engineering, design, manufacturing capabilities, and we're providing the most flexible ownership models, period.
Number 2, our charging solutions range anywhere from simple Level two home charger to some of the most sophisticated DC fast chargers in the market. Number three, over the years, our flexibility allowed us to create strong partnerships and acquire a diverse client base that speaks for itself. The clients we have are just amazing. They're just amazing companies. Number fourth, electric vehicle charging TAM is positioned for gargantuan growth. It's forecasted to increase at more than 30 times current levels over the next decade and a half. Number five, to position ourselves for this growth, we have expanded our global footprint and scale in over 25 countries and counting. Finally, six, the last two quarters have shown that our strategy works as we have achieved some of the highest margins in the entire industry. We drove strong results in 2022.
With our visibility today and our optimism around the opportunities we're seeing in the marketplace, we are targeting 2023 revenues in the range of $100 million-$110 million and targeting gross profit in excess of 30% for full year 2023. With continued solid operational execution, we believe we are well positioned to generate continued growth and improved margin performance. We are excited with what the future holds for Blink. With that, we will now open the call for questions.
Operator (participant)
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. 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 Matt Summerville with D.A. Davidson. Please go ahead.
William Jellison (Equity Research Analyst)
Hi, good afternoon. This is William Jellison on for Matt this afternoon. Luke, I wanted to start out by asking you about reliability of charging stations, because we've started to come into the public consciousness a little bit more, making sure that our public infrastructure is reliable and can be depended upon. I won't ask for specific performance indicators on Blink reliability. What I'd more so like to learn a little bit more about is what Blink is doing to drive continued improvements in the reliability of the network going forward. I'd love to hear what you're thinking about with that.
Michael D. Farkas (Founder and CEO)
That happens to be a great question, and it's something today that's plaguing a bunch of networks. Without a question, historically, if you look back, the first generation of the technology that was launched, whether it was ChargePoint, Blink's original hardware, you know, even General Electric, you know, Siemens, Schneider, and even the big boys, whomever they are, all the gen one equipment was not made up to par. The reason why it wasn't because we really didn't understand the terrain. Remember, these are high-powered electrical equipment that is subject to the elements and conditions. Really there's been a lot of improvements, you know, with the generational changes of hardware over time.
That's even more so for DC fast chargers, that's where you're hearing most of these operational problems with, and people driving up to a charger not being able to charge their car and moving on. I'm not gonna say we haven't had any issues. We've had. Most of the issues that Blink has had has been in prior generation equipment and network prior before we bought the company and took over those assets. Unfortunately, they were legacy issues. We've gotten rid of most of those issues. Again, you deal with equipment going off and you have to service it and take care of it, and that's really the main focus.
The DC fast charger operators, like the EVgo's, the Electrify Americas and some others, they've been really bearing the brunt of those issues and problems, because DC fast chargers are a lot more complicated and require a lot more maintenance. Brendan, do you wanna add anything to this? You're on mute.
Brendan Jones (President)
Sorry about that, guys.
Michael D. Farkas (Founder and CEO)
Okay.
Brendan Jones (President)
A couple of points, but first, you know, just reiterating what Michael said, definitely the complexity of DC chargers is five times what it is in the L2 charger. I think, you know, it was a year of awakening for the industry, as Michael said. Everybody now is taking quality very much seriously. Blink is participating in quality analysis with both the DOT and in California separately with CARB and CEC. So we're examining everything we're doing, and we're collaborating with the industry, not to just improve our quality, but to assist in the improvement of quality across the board. We also, you know, saw a little bit of an unusual blip in the summer. All networks faced an unprecedented event when it came to the sunsetting of the 2G and 3G networks from all the providers.
That created a significant disruption for everybody. Most of us all worked together. We upgraded a lot of the equipment to the 4G and 5G system, but you did have this depth and this big bubble there for a little bit of time where everybody was working to catch up. Now everybody's getting on the same page. Blink is definitely focusing on making sure that we deliver the highest level of quality. When we install DC fast chargers, we're going to do that knowing that we have to double down on these and understand from a call center, from a network operations perspective and from a maintenance provider, that we have to ensure that when the customer gets to the charger, they can charge. And we're moving forward with all those activities now as we speak.
William Jellison (Equity Research Analyst)
Understood.
Michael D. Farkas (Founder and CEO)
To add to what Brendan said, you know, Blink is really focused on deploying Level two charging stations. A lot less maintenance, a lot less issues. You know, it's a lot less common when you drive up to a Level two charging station that you're gonna have these issues. As we deploy our next generation of DC fast chargers, we believe we're gonna be addressing a lot of those maintenance and operational issues of the current generation of DC fast chargers.
William Jellison (Equity Research Analyst)
Understood. Thank you for that. As a follow-up, with the capital offering now successfully completed, I'm curious as to how Blink is thinking about capital allocation moving forward, deciding between organic investments in your own manufacturing or innovation capabilities or additional acquisitions of assets that might bolster the Blink Network going forward.
Michael D. Farkas (Founder and CEO)
Okay, great question. you know, we got caught in a little bit of, you know, a zone, okay? We, we all know that there's literally $billions and billions that are now gonna be earmarked for our industry, okay? Whether that's for building facilities, the deployment of infrastructure, subsidizing rebates and all these kind of amazing things. The, the capital that we raised was really a bridge to get us to a lot of that funding. We believe in the future, and we've been, you know, I'm sure people who have been on these calls before have heard us say this, you know, we've been looking for, you know, non-dilutive capital or very little dilutive capital. The industry is really getting to that point.
We're seeing it in Europe, where there's banks that are financing deployments now. We're gonna see stuff like that happen here. It's really about utilization. You know, we're gonna look to use this money, the capital we just raised, to really handle the operations of our business to grow our business. We believe in short order, there are gonna be some very interesting mechanisms to finance some of the capital requirements like the new build-out, as well as, you know, the new facility, as well as, you know, being able to deploy a serious amount of charging stations.
Operator (participant)
Thank you. Our next question is coming from Craig Irwin with ROTH Capital. Please go ahead.
Craig Irwin (Managing Director and Senior Research Analyst)
All right. Good evening, and thank you for taking my questions. Michael, the one thing that really stood out to me was the more than eightfold increase in network fees in the quarter. Something really fundamental seems to be going on there. Can you maybe talk us through what the margins are on those, what's driving growth there, and how this is likely to take shape? Do we continue to see this outsized growth, you know, multifold increases, materializing over the next number of quarters?
Michael D. Farkas (Founder and CEO)
Yes. I'm gonna let Michael Rama address the margins and so on. This is part of, you know, selling hardware to third parties. This is, you know, recurring fees of selling energy and other services. We're gonna see a massive growth in a lot of our recurring revenue models. That's because there are a lot of people who are buying charging stations and we're deploying a lot of charging stations. When we sell a charging station, we get a network fee every single month paid by that property owner. Yeah, we're gonna see a lot of increases and as we deploy more and more charging stations, and I can tell you, we haven't seen anything yet.
You know, there's just a tremendous amount of growth we're gonna see in this business. You know, I'm gonna repeat it again, I've said this a bunch of times. You know, you look at what Bloomberg's numbers are and others, you know, you're talking three, four, five hundred million charging stations needed by 2040. We're, we're lucky if we're at the tens, we're not even there yet. Especially viable ones. You know, if you heard some of the reports that came out a little while ago, you know, EVgo came out and said they need to have this go EVgo ReNew. That's them acknowledging that many, many, many of their DC fast chargers, their legacy DC fast chargers, all need to be pulled out of the ground and replaced. We don't have to do that.
You know, we're in a much better position than that. We just deploy at new locations and are constantly getting more and more of those locations. The margins, and to address what you're referring to, on the margins of that business, you know, on the processing fees, on the networking fees, they're massive. Michael can fill you in a little bit more.
R. Michael Rama (CFO)
Yeah. Craig, just to add a little bit more color to that, you know, the SemaConnect acquisition, it came with a vast, very large network. Even though they're, you know, selling third party, hardware sales, but there's stickiness in the network revenues that we're getting from that business. That's where we're really seeing that take off in the third and Q4s of 2022. The expectation is that will continue as the network keeps growing, as we put more charges on the networks, on our combined networks.
Yes, as Michael mentioned, the margins are strong, and that's why we've always been looking at the service part of the business to grow that because we know the margins on that business are gonna continue to expand, whereby the hardware end of the business over time could get commoditized. That's the benefit of a very well-balanced portfolio of revenue offerings, is to have that mix of gross profit potential, if you will.
Craig Irwin (Managing Director and Senior Research Analyst)
Excellent. If I could maybe ask for just a little bit more color? You know, there's some fringe elements that have been suggesting your utilization on your network is materially different than your peers. We know that not to be true. Can you maybe talk about utilization on the network and how utilization contributes to this growth that you're seeing?
Michael D. Farkas (Founder and CEO)
We're seeing an increase of utilization. There's no question about it. When you average in, you know, our European operations, even more so. Again, you're looking at a difference between a portfolio of, let's say, solely DC fast chargers, where you'll see even a much, much lower utilization rate versus AC chargers. And you have to realize, it doesn't take a very large utilization rate for Level 2 charging stations in the public domain, multi-family parking garages. It doesn't take much utilization for them to be very profitable. We're without a question seeing a huge increase in those utilization rates. Mike, you wanna elaborate on that a bit?
R. Michael Rama (CFO)
Yeah. As you could see quarter-over-quarter, our charging revenue part of the business has sequentially been increasing. That's again, more charges on the network, more own and operate. As we've always mentioned, there's, you know, the charging and utilization has been going hand-in-hand a bit with the penetration of EVs to overall vehicle sales. As we're approaching that 10%, we're starting to really see pick up traction where we were just 12 months ago, where it was in, I think it was the middle single digits, 5%, 6%. We're seeing that in our portfolio of chargers, where the utilization is trending positively and increasing because of there's just more EVs on the road to be charged.
Craig Irwin (Managing Director and Senior Research Analyst)
Absolutely. That's good news. Thanks again for taking my questions.
Operator (participant)
Thank you. Our next question is coming from Sameer Joshi with H.C. Wainwright. Please go ahead.
Sameer Joshi (Senior Equity Research Analyst)
Yes, thanks for taking my questions. Congrats on a great quarter. Would you comment on your position with the V2G opportunity, given that you have this build on, I mean, own and operate model? Does it lend itself favorably to the V2G opportunity?
Michael D. Farkas (Founder and CEO)
Yes. By owning and operating the chargers, we're able to monetize V2G when there are programs that allow that to take place. You know, again, it's about having the right equipment, and having the right relationships with utilities. Brendan, you wanna expand on that a bit?
Brendan Jones (President)
Yeah. We're making our chargers, especially all of our new chargers, V2G capable, whether it's a home charger, a commercial L2 or DC fast charger, and whether it's on the owner operated model, whether it's sold. All the new designs will have that capability built into them. As we said during the presentation, the European charger has that built in, and that feature is being added both to the network and to our chargers as we speak. Then we'll, you know, we'll work to monetize it, right? How do you monetize V2G? That's the, you know, the big million-dollar question. We're working with a variety of outside companies on this topic, right now to figure out, you know, how do we work with the consumers?
How do we provide them a solution with the installation of a charger and the vehicle? Because you gotta have the vehicle and the charger to be able to do it right. You know, we'll have more to come on that as we move forward, but the goal is to explore and then to, where possible, to monetize everything we can on that topic.
Sameer Joshi (Senior Equity Research Analyst)
Good. Thanks for that. Just a second question on,
Michael D. Farkas (Founder and CEO)
Sameer, one other thing I wanna add to it.
Sameer Joshi (Senior Equity Research Analyst)
Yeah.
Michael D. Farkas (Founder and CEO)
You know, and, and, you know, I'm sure you've heard me say this before, you know, right now, this is a land grab. We've been in land grab mode for 14 years. There are gonna be many different ways to monetize these locations in the future. The cars are coming. You're seeing more and more people buying these EVs. It's gaining a lot more traction out there. We knew that there were gonna be many ways besides just selling the charging station or getting networking fees or getting processing fees. We knew that ultimately we were gonna be able to sell electricity to the, to the, to the EV owners. Maybe if we're able to aggregate enough electricity over time, being able to then turn some of our hosts into customers of electricity, advertising, V2G.
There's gonna be many different ways for us to monetize these locations as we grow more and more, and as we have more, electricity purchasing, more hardware. All these things factor in what leverage we're gonna have. It's our intent to monetize these locations as our scale grows, and we're able to offer different services and products to our host owners and the EV drivers.
Sameer Joshi (Senior Equity Research Analyst)
Yes. No, I understand.
Michael D. Farkas (Founder and CEO)
It's not only V2G. There's a lot of really amazing ways...
Sameer Joshi (Senior Equity Research Analyst)
Mm-hmm
Michael D. Farkas (Founder and CEO)
... to monetize these locations.
Sameer Joshi (Senior Equity Research Analyst)
Yes, yes. Thanks for that. The second question was about just an update or any visibility on the state level funding and the federal funding dollars coming down. Should we start seeing any benefits from that, or at least the initial positive news from that in the third, Q4? Or do you think it will be a 2024 windfall?
Brendan Jones (President)
Yeah.
Michael D. Farkas (Founder and CEO)
Samir-
Brendan Jones (President)
... it's a great question.
Michael D. Farkas (Founder and CEO)
Go ahead, Brendan.
Brendan Jones (President)
Oh, okay. No, you Okay, I'll hold.
Michael D. Farkas (Founder and CEO)
No, I was gonna tell Samir, you know, again, we're still at the, you know, at the mercy of the government and them getting, you know, their programs together and figuring out all their things, which is happening slowly but surely. You know, it's just a matter of having some patience, and I'm sure Brendan's gonna add to that.
Brendan Jones (President)
Yeah. Only three states are out right now, and one pulled back. Ohio, Kentucky, and Pennsylvania, and Pennsylvania pulled back. A lot of people were waiting to see what the new NEVI rule came out, and Buy America, as we talked about, we're compliant on the L2 side. We're working on compliance, and we'll be compliant with the DC side. You're gonna see some states right now take that into consideration and then figure out your timing. These early guys out are still in. One has gotten responses in, and they're evaluating to see if they require. The other two, you know, they're basically slow walking. You know, after that, we got 47 other states, right? You're not gonna see anything meaningful, especially in terms of funds dispersed.
You're gonna see some awards perhaps as we get into the summer, a few probably in Q4, but the real work's gonna happen in 2024.
Sameer Joshi (Senior Equity Research Analyst)
Got it. Okay. Then just following up on previous questions from Craig. I think your service margins should continue to improve as your network fees grow. By 2025, 2026, what proportion of your revenues do you expect to be from service related offerings?
R. Michael Rama (CFO)
I'll jump in on that. Obviously, as we go forward, you know, we've always tried to keep, I'll call it, strategizing where we do more own and operate. As just as you think you're gonna tilt a little more one way, you get a big order that comes in. Predicting the scale and the balance between the two, you know, we don't mind taking the profits from those, the hardware sales. Again, to the point is we are starting to see a little bit more bigger volume of own and operate.
To get what that split's gonna be, you know, it'd be a nice 60/40 split, maybe at a host versus own and operate, but you never know how that's all gonna shake out when as time moves forward.
Michael D. Farkas (Founder and CEO)
Well, Samir, I wanna add to that.
Sameer Joshi (Senior Equity Research Analyst)
Yeah.
Michael D. Farkas (Founder and CEO)
You know, for a while, we saw a lot of businesses, and we saw a lot of, excuse me, municipalities in the original RFPs, they wanted to own and operate the hardware, similarly with businesses. Now that they're dealing with it and having to provide the service and operate the charging stations, they're realizing that they don't want the headache. Just like they outsource almost all the services they provide, this is something they need to do as well. We're seeing a lot of legacy customers who are buying hardware who now want us to own and operate. We're seeing a complete changeover in municipal contracts, not only here in the U.S., but globally, where they don't wanna operate. They don't wanna own and operate these things. They don't mind subsidizing someone and helping them put them in the ground and...
They just don't wanna deal with the day-to-day. That is a huge, massive benefit for us as compared to some of our competitors. That's why we have the different offerings. You know, that's why we could sell to you, or we can own it in your location. We wanna make sure that we could satisfy every single customer. You know, we are seeing a conversion where prior owners and operators want someone else now managing that service for them. We're seeing, again, a lot of that on the municipal side.
Sameer Joshi (Senior Equity Research Analyst)
Yeah, yeah. No, I agree. I think, you're very well positioned, for that kind of a scenario. Good luck for 2023 and beyond. Thanks.
Michael D. Farkas (Founder and CEO)
Thank you.
Brendan Jones (President)
Thank you.
Operator (participant)
Thank you. Our next question is coming from Oliver Hong with TPH. Please go ahead.
Oliver Hong (Equity Research Analyst)
Good afternoon, everyone, and thanks for taking my questions. Just on the owned and operated model, kind of a follow-up to the prior question. Y'all have a growing footprint looking at the charger growth getting up to 66,000 or so. Y'all mentioned working on converting legacy owners of SemaConnect Chargers to the owned and operated model. Just kinda wondering how that was going and was also hoping for a bit more detail in terms of how many of those chargers are revenue generating chargers under either a Blink-owned turnkey or hybrid-owned business model and what the split between those two sit at today?
R. Michael Rama (CFO)
I'll jump in just a little bit, and then I may, on the right now there's almost 5,000 chargers that are owned by us at, on our networks. There's, you know, a lot. Again, remember the 66,000 is historical legacy that goes back over time, and it's all types of chargers, you know, DC fast chargers, commercial chargers, private chargers, all types of chargers, home chargers, ones that are not on network and all that stuff. You know, we have a big portfolio that's generating, you know, obviously not. Remember, it's just not the, you know, it's not just what we that's owned by us, but it's also what's in our networks.
We have over 50,000 units that are in our Blink networks that generate some kind of revenue that's generating from a network piece. There's a, you know, bit of a split between that and what's own and operate.
Brendan Jones (President)
As it relates to the SemaConnect portfolio, we are just at the beginning. We've identified multiplicity of different site hosts that want to engage in the owner/operator model, especially as Michael said, they wanna switch to the charging as a service as opposed to own and operate it themselves. We've already won a significant contract in that area. Now we're gonna accelerate this as we convert the SemaConnect network over to the Blink Network, and that's happening within 30 days of today. Then we combine all the portfolios together and cross-sell to everyone. We expose all of SemaConnect customers to the owner/operator and the hybrid model. We have a unified pricing plan, a unified product portfolio to offer them.
We're already seeing some very significant positive momentum in this area, and even things that we'll be able to talk about later on about awards that we have a high degree of confidence that we will receive as well. All the legwork is ongoing, and it's pretty intense on both those topics. It extends beyond. It's also penetrating the multifamily dwellings even deeper than we previously have, and making sure that everybody knows that the new company, the combined company, has more products, more services, and more affordability in it based on some of the moves we're making from the manufacturing perspective. The best is yet to come.
Oliver Hong (Equity Research Analyst)
Awesome. That's encouraging to hear. For a second question, just kind of on the manufacturing side of things. I think it was back mid-2022 when y'all kinda announced that deal, y'all were running close to a 10,000 unit run rate. Just wanting to get a sense for where that is today, how optimally that facility is running relative to the maximum run rate that it's fully capable of.
Brendan Jones (President)
Yeah. What we've done is... And again, there's two different, you know, things happening simultaneously. We've increased the productivity out of Bowie already. We pushed up to between 12, 13, about to hit 14,000 units on that. We did that without adding much, right? We're moving to a second shift out of there as we speak, and that's to push the output above 3,000 units, moving it up to 4 per month. We're gonna add some square footage in the similar area to get that up to the target. Now we're gonna have a phased approach. We're gonna get it up to 25, then 30. We're gonna add more square footage, then move on up to the 40 and then the 50,000 range out of that facility.
The one change is we elected not to do a third shift because given all the quality concerns, and the inconsistency in third shift manpower, we decided to keep it at two instead of going to a third, and just increase the square footage. All of that is on track. You know, we feel very confident about that to be able to meet the product demands of our customers from there. In addition to that, you know, the new manufacturing footprint calls for a minimum of 10,000 DC fast chargers, and the remaining 40,000 will go also to L2 production. We're gonna build up Bowie and get that at maximum output, and then we're gonna also do the manufacturing on the L2s out of the DC fast charger plant as well.
Oliver Hong (Equity Research Analyst)
Awesome. That's helpful. Thanks for the time, guys.
Brendan Jones (President)
Sure.
Operator (participant)
Thank you. Our final question today will be coming from Chris Souther with B. Riley. Please go ahead.
Christopher Souther (Senior Equity Analyst)
Hey, guys. Thanks for taking my questions here. I certainly appreciated the SemaConnect's cost and revenues synergies commentary. Can you talk a little bit more about the overall OpEx trajectory? I'm trying to get a sense, you know, with some of these in-progress targets, where you think, you know, leverage for EBITDA breakeven and the timing of that might shake out, you know, based on...
Brendan Jones (President)
Yeah.
Christopher Souther (Senior Equity Analyst)
some of that OpEx trajectory.
Brendan Jones (President)
Yeah. Sure. You know, what you saw on the slide and what we talked about, right? First, as it relates to you know, FTE reduction, we've only hit the first phase of that, right? And we will expect more of those. In phase two and three, what we're going to be examining is operational cost. Some remaining operational costs here in the U.S., but also globally, and where those synergies exist. Then secondly, it's going to be the same thing we're going to do in technology, and then in I.T. support globally. As you might imagine, we're transitioning one network in 30 days, then two more networks over the summertime.
As we make those transition, the support staff and the folks that were working on the older network, the ones that were suppliers of, you know, the software that supported it and the sub-vendors, all those are gonna be eliminated. As we move further into 2023, you will see us having additional operational reductions. Additionally, as you might imagine, we did a product rationalization study, and we're moving more to some of the product out of SemaConnect. Our own manufacturing, our parts building out of India, then our assembly out of Bowie and the new site when we got it, that's at a much lower cost of goods sold.
We're gonna have this additional synergy that's gonna start roll in, and we're already starting to see it roll in right now, and we'll report that in the next quarter, where we start to make more profit off a single charger sale and win more customers 'cause we're able to position the portfolio with the new Network and the lower cost of manufacturing, give us a bigger margin and a greater share of market.
Christopher Souther (Senior Equity Analyst)
Got it. Framing all that as far as kind of, you know, the overall, you know, OpEx for if we're gonna use, say, kind of the Q4, you know, OpEx run rate, you know, does that continue to grow just 'cause there's other areas we are growing as you're, you know?
Brendan Jones (President)
Yeah, I mean...
Christopher Souther (Senior Equity Analyst)
kinda netting out with those reductions?
Brendan Jones (President)
Yeah. There's gonna be some net out, but it's gonna be on the lower end of the scale as well. As you know, a lot of the reductions, and we haven't been very public, but there were a lot of high-end staff on that, and that was just due to duplication, right? You merge a company together, you have a lot of duplication and effort, right? So what you're gonna see as we continue to identify staff in IT and technology and everything, we're gonna have to add manufacturing staff over time, and production workers and assemblers. Now, we can get them depending on where we go.
Michael D. Farkas (Founder and CEO)
You, you're talking much lower cost employees.
Brendan Jones (President)
Yeah
Michael D. Farkas (Founder and CEO)
to handle
Brendan Jones (President)
You took the words out of my mouth.
Michael D. Farkas (Founder and CEO)
... you know, that type of work.
Brendan Jones (President)
Right out of my mouth.
Michael D. Farkas (Founder and CEO)
Exactly.
Brendan Jones (President)
Yeah.
Michael D. Farkas (Founder and CEO)
You know what, Brent, let me grab this for one second. What we're seeing now is a reduction in our expenses because of aggregating the businesses. Obviously we're still gonna grow the business because you see how much we're seeing revenue growth, how many units need to be sold, maintained, operated, and so on, deployed. You know, the business is growing, but what we're seeing here now is still an increase in the revenues, but a decreasing in the losses. We're getting to a very good point here in our business because that's occurring. We're not seeing so much growth in the losses as we've done in the past. Look at the difference between Q3 of this past year.
I mean, this year, Q3 of 2022 versus Q4 of 2022.
Christopher Souther (Senior Equity Analyst)
Got it. Yeah, that all makes sense. Is there, you know, any way you could frame, you know, You gave kind of guidance for 2023, but, you know, targets as far as, you know, EBITDA break even, you know, where either from a revenue run rate or timing perspective, you know, what would be?
Michael D. Farkas (Founder and CEO)
We're gonna give more visibility as the year goes along. You know, this is us starting to, you know, give some visibility to the street and where we're going and some guidance. As things progress, you know, we'll be sharing a lot more information.
Christopher Souther (Senior Equity Analyst)
Okay. Appreciate that. Maybe just, you know, if you could break down, you know, mix between product sales and, you know, Blink-owned deployments in the quarter or any way you could provide, you know, total number of Blink-owned charging ports kind of on the network when we're looking at kind of the, you know, the overall kind of, you know, number on the network.
R. Michael Rama (CFO)
Yeah. As I mentioned on the previous question, I don't know if that was a question or that was an ask for. I'm assuming that was a question. Yeah, you'll see it come out in our filings, but we have about 5,000 units that are Blink owned and then over 50,000 of our historical that are network. You know, there's a big. There's a big unit in the, you know, big number on our network. Again, we added SemaConnect that had a large network, and we're seeing that reflected in that, as you guys saw, the network revenue piece of the business growing.
Christopher Souther (Senior Equity Analyst)
Got it. Okay.
Michael D. Farkas (Founder and CEO)
One of the things that Michael mentioned is, you know, every time, you know, we start growing our own and operate business and we think it's gonna outpace our host sales business, you know, selling the equipment to a third party, we get large orders that change those dynamics. I wanna be very clear, you know, today we're seeing single orders that are larger in size than revenues we did even just a couple years ago. That's where the scale and size of this business is going. Again, I'm not gonna say we're winning all these orders, but we're very competitive. We have amazing hardware, we have amazing equipment. You know, our Level 2s are made in the U.S. There are very few, if any, Level 2s made in the U.S.
It puts us in a position to get certain contracts and orders that others can't, you know, compete in, because their stuff's not made in the U.S. We're in a very good position. Again, you know, as soon as our own and operate business comes in, we have large outside orders that then, you know, put a substantial amount of that business in the host owned. Again, it's good for us. It's a hardware sale, and then we have recurring revenues. You know, we typically have $18 a month, you know, connectivity fees, and then we have about 8% processing fees. You know, on $18, it costs us, like, $3-$4 bucks. That's it. There's huge margins in that business.
You know, when you look at, you know, the processing fees, you know, it's about 8% and about half of it, you know, goes to expense a little less, and the rest is ours. These are very, very lucrative lines of business. You know, what's most important is to be able to service every single customer no matter what they are. It allows us to have major companies that manage different properties, whether it's a McDonald's or, you know, CBRE or any of the others that we work with, they wanna have aesthetic consistency, one vendor to work with, but they wanna be able to deploy equipment at all different types of property owners who have different models of deploying capital at their locations.
Having the variety of models is so important to us. If we have to sell it, we'll sell it. If we have the ability to own and operate it, that's what we'll do. There are times when the property owner wants to make the capital improvements, but they don't wanna deal with the technology or dealing with the managing the service, and we're there for that also. Having the flexibility and the viability that we or the flexibility and as many models as we have, really allows us to just really grow in size and scale. Look at the amount of units and locations we're getting both from an own and operate perspective, and host owned. Our growth is... You know, our growth percentage is second to none in the industry right now.
You know, we'll stand against anybody. Look at it from a revenue scale, how many units we're putting in the ground. We're growing a lot faster on a percentage basis than almost all of our peers. The reason why is the flexibility we have and the ability to satisfy all the customers that we can.
Christopher Souther (Senior Equity Analyst)
Got it. Okay. That's helpful. I'll hop in the queue. Thanks, guys.
Michael D. Farkas (Founder and CEO)
Excellent.
Operator (participant)
Thank you. As that was the last question, it does conclude today's call. We thank you for your participation. You may disconnect your lines at this time, and we wish you a wonderful day. Thank you.
Michael D. Farkas (Founder and CEO)
Thank you.