2023-08-01 17:41:50 ET
Summary
- Blink Charging Company is an owner, provider, and operator of electric vehicle charging equipment and services.
- The company operates in a fast-growing market but faces challenges such as small size, modest market share, and cash burn.
- Blink aims to grow organically and through acquisitions to become a leader in EV charging solutions, but faces intense competition.
Blink Charging Company (BLNK) is an owner, provider, and operator of electric vehicle ("EV") charging equipment and services, and the company was listed on the Nasdaq in February 2018.
Blink operates in a fast-growing market but is challenged in many ways. First, it is a small business with global ambitions which comes with significant operational and management challenges. Second, it has a modest market share in a competitive market. Third, it burns rapidly through cash, and future capital-raising efforts are going to become more difficult given the poor performance of the stock price and higher interest rates. Last, the long-standing Executive Chair and CEO has been replaced but still owns a large chunk of the issued shares.
An ambitious business plan with global operations
Blink designs and manufactures hardware and software for electric vehicle charging stations and networks. The company operates in 27 countries but almost 80% of the chargers are located in North America with the balance mainly in Latin America and Europe.
By the end of March 2023, Blink has sold or deployed 72,939 EV chargers available at commercial operators (such as retail malls, offices, hotels, and airports), government facilities, and private homes and apartments. The charging portfolio consists almost exclusively of slow-charging alternating current chargers with only a small number of fast-charging direct current ports.
Blink offers a variety of business models to clients ranging from turnkey solutions where Blink owns and operates the charging stations, to host owned, and subscription models. Blink also owns and operates a ride-sharing program for EVs in Los Angeles. Under this program, customers rent EVs through a subscription service and charge the vehicles through the Blink charging stations.
Blink intends to grow its business organically and through acquisitions with the ambition to become a leader in EV charging solutions and charging infrastructure. Organic growth is expected to come mainly through the owner and operator model with a primary focus on locations with high utilization potential. The company also intends to continue investing in technology to further improve the management of the EV hardware and user experience.
Acquisitions are a further leg in the business growth strategy. Since 2021, Blink acquired several companies including a Belgium business Blue Corner that owns and operates a charging network across Europe. In 2022, Blink acquired SemaConnect, a North American-based charging infrastructure company with manufacturing facilities in the U.S. and India.
Growing revenues - and losses
The company generated strong revenue growth over the past 2 years, although this was partly the result of acquisitions. In the most recent 12-month period to the end of March 2023, revenues amounted to $73 million - 156% higher than the previous year.
Revenues are mostly derived from hardware sales, this contributed 75% of sales in the first quarter of 2023. Other revenues come from charging fees, network fees, government subsidies and grants, and income from equipment warranties.
The primary operating costs are related to the manufacturing and installation of chargers, electricity costs, fees paid to charging infrastructure hosts, and expenses related to repairs and maintenance.
The cost of personnel is the largest operating cost item and continues to exceed total revenues. Over the past 12 months, the company recorded a net loss of $106 million, the largest in its history as a public company. Over the past 3 years, the company accumulated losses of $334 million.
The gross margin improved in 2022 but dropped back again in the first quarter as the cost of sales increased at a faster rate than the sales. The operating, EBITDA, and net margins remain substantially negative.
Refinitiv
Further rapid EV growth expected
[This is a summary of a more comprehensive industry analysis included in the ChargePoint (CHPT) report linked here ].
According to the International Energy Agency ("IEA"), electric car ("EV") sales reached a total of 10 million in 2022. This was a 60% increase on the previous year representing 14% of all car sales. China was the market leader with 6 million sales; the U.S. and Europe were well behind with EV sales of 0.8 million and 2.7 million respectively.
The IEA expects that global EV sales (including trucks and light commercial vehicles) will continue to grow rapidly reaching 20 million in 2025 and 40 million in 2030. This should represent 30% of all vehicle sales by 2030. The current U.S. Administration targets EV sales of 50% of the overall total by 2030 up from less than 5% in 2021.
Further substantiating the rapid EV growth forecasts are the plans of the major manufacturers of conventional cars to significantly increase their EV production. Among the most ambitious plans are those from General Motors (GM), Volkswagen (VWAGY), BMW (BMWYY), and Honda (HMC).
To accommodate the expected growth in EV sales, the charging grid will also have to expand and improve, especially in North America. The IEA estimates that there were 2.7 million public charging points worldwide in 2022 of which 1.8 million were installed in China, followed by Europe with 570,000 and the U.S. and Canada with 160,000. This will have to expand to 13 million chargers by 2030 with large-scale expansion in the U.S.
The U.S. government intends to build a network of 500,000 public EV chargers on the major highways and $7.5 billion has been earmarked for an expansion of the EV charging infrastructure.
Intense competition
Competition to provide charging infrastructure in the U.S. and European markets is intense. Blink competes mainly in the slow charging market where the company faces competition from Tesla (TSLA), ChargePoint, Electrify America, Shell, and EV Connect. Competitors in Europe include Wallbox, Allego, Shell Recharge, and Total Energy.
According to the U.S. Department of Energy , Blink holds a market share of 3.4% of all publicly available charging point connectors in the U.S. and Canada. ChargePoint is the market leader with 38.3% of all chargers, followed by Tesla with a 21% share. In the fast-charging direct current market, Tesla dominates with 62% of all charging ports compared to 0.3% operated by Blink.
In a recent development, General Motors agreed to install the North American charging standard as developed by Tesla into its EVs from 2025 onwards. In return, Tesla will open 12,000 chargers on its Supercharger network to GM customers in 2024. Previously, Tesla also indicated that it would make 7,500 of its U.S. chargers available to all EVs by the end of 2024. Other major companies that are investing in the building of charging infrastructure in the U.S. include BP, Hertz, General Motors, Electrify America, Mercedes-Benz, and Ford.
The company had shareholders' equity of $344 million by the end of March 2023, and total debt including long-term leases of $4.4 million. Cash and short-term investments amounted to $103 million after the company issued $100 million in a common stock issue earlier in the year.
Cash flow from operations amounted to -$95.2 million for the 12 months ending 31 March while capital expenditures amounted to $6.1 million. This implies that the company has enough cash on hand to continue operating for the next 12 months.
The issued share count of the company has gone up by 172% since the listing in 2018. The last issue was done at $12 per share and an issue in July 2021 at $41 per share. This will prove to be highly dilutive to shareholders when the company becomes profitable.
The capital raising options will also become more difficult in a higher interest rate environment while the depressed stock price makes equity issues expensive.
Corporate governance
Mr. Ritsaart van Montfrans (age 51) was elected as the Chair of the board of directors in May 2023, having been a board member since 2019. He has a background in entrepreneurial ventures, including EV charging, in Europe.
In May 2023, Mr. Brendan S. Jones (age 59) became the President and Chief Executive Officer. He joined Blink in 2020 as the company's Chief Operating Officer. Previously he worked at Nissan North America where he was part of a team developing the Nissan Leaf, and the EV charging companies, Electrify America and EVgo.
Mr. Jones replaced the long-serving CEO and Executive Chair of the Board, Michael D. Farkas. We note that Mr. Farkas' employment was terminated 7 months before the end of his employment contract.
The top shareholders are Michael Farkas (10.6% of issued shares), BlackRock (4.8%), Vanguard (4.2%), and Trilantic Capital (3.8%). Mr. Farkas was a large and active seller of Blink shares in the few past months.
The annual compensation of the executive officers consists of three components: a base salary; variable pay such as an annual bonus, and long-term incentives in the form of equity awards.
The former CEO, Michael Farkas received a total compensation of $15.9 million in the 2022 fiscal year of which the stock awards component made up almost 80%. The new CEO earned $2.1 million which will be stepped up in his new role.
A realistic valuation is likely impossible
Blink has made losses every year since the listing in 2018 with a record loss recorded in the last financial year. Analysts who follow the company expect further rapid growth in revenues over the next 3 years. However, losses are also expected to continue in 2023-25 totaling $278 million.
Any effort to value Blink runs into the challenge of a massive forecasting risk and a wide range of possible outcomes in my view.
By Deon Vernooy, CFA, for TSI Wealth Network
For further details see:
Blink Charging Challenged By Red Ink