2023-06-06 12:36:02 ET
Blink Charging Co. (BLNK)
TD Cowen’s Sustainability Week Conference
May 19, 2023 03:00 PM ET
Company Participants
Brendan Jones - President and CEO
Conference Call Participants
Gabe Daoud - TD Cowen
Presentation
Gabe Daoud
Good morning, everyone. And thanks for joining us at TD Cowen’s Sustainability Week. We have a great lineup of companies across a number of sectors. So, I hope you enjoy the event. My name is Gabe Daoud. I'm TD Cowen's charging, battery and energy analyst. I'll be hosting a number of companies within the battery and charging sector as part of our mobility and autonomous track. And this morning to kick things off, we're delighted to host Blink Charging’s President and newly appointed CEO, Brendan Jones for a fireside chat.
Blink, as I'm sure you're all aware, is an integrated EV charging provider that will sell hardware and software solutions while also hoping to own some of the stalls. So Brendan, thank you so much for joining us this morning.
Brendan Jones
Absolutely. It's great to be here, Gabe.
Gabe Daoud
Brendan, I think a lot of folks on the line are probably familiar with you, but -- and the Company, but why don't you just start with -- giving you an opportunity to discuss Blink's business model and why you think it's the best way to try to monetize or extract value out of the EV charging space?
Brendan Jones
Sure. Blink has been a company that's been in existence in the EV space since 2009. So, it was one of the original companies that was out there trying to figure out their place in this grand experiment we launched way back when we weren't sure what EVs were. But now as the markets mature, Blink has emerged as a company that offers a variety of solutions. To start with, we're fully vertically integrated.
And what that means is we manufacture our own chargers now, not contract, we manufacture them. We develop our own hardware, I mean, our own hardware and our own software and our own firmware. Then, we sell this equipment with networking services, maintenance contracts, et cetera. And we also install and own and operate it. And we have a varying degree of business models, which we can engage with the public. And the key thing about Blink is to approach site hosts, so that they have some optionality. So, if they want to own equipment, well, we've got a good solution for them. If they want us to own it and operate it for them, well, we've got a great solution for them. If they want to partner it, we have a solution for them as well. And if they want to finance it together, we've got that solution.
So, when we look at the U.S. today, we've got a need for 30 million chargers by 2030. And we've only got about 3 or 4 million in the ground today. So, that's a huge task we have to accomplish. The majority of those chargers are going to be L2, according to McKinsey and other groups out there, some say higher, 90% plus.
So, we're approaching the market from 10% DC, 90% L2 and a variety of solutions. According to Price Coopers Waterhouse, (sic) [PricewaterhouseCoopers] the big opportunity moving forward is workplace, multifamily dwelling, home fleet, and then DC fast charger on the quarters from the amount of chargers being deployed. And we're focusing on those models as well. So, we feel we're positioned well in the marketplace today for growth.
And keep in mind, we talk a lot about the U.S., but we're a global company. We operate in Europe. We're moving into the APAC’s region. We're very active in Latin America today. And the market share globally is 490 million chargers by 2040.
So, what we have to do is continue to perform, lower our cost of goods sold, make sure that we have margin advantage on a move forward with basis and really reap the benefits moving forward. And that's Blink.
Question-and-Answer Session
Q - Gabe Daoud
Great. That’s helpful. So maybe getting into some Q&A now. Can you maybe give folks who are tuned in a sense of Blink’s scale and market share? How many stations have you deployed? How many does Blink own and operate? And then, how do you think about which stalls make the most sense in terms of owning and operating?
Brendan Jones
Yes. So, it's a great question. Right now, as the business model plays out, it's about a 60-40 to a 30-70 split in terms of the sales model. So, the majority of our charges going out are under the sales model. About 30% in the U.S. and Europe come under owner-operator model. So, that's the relative split. And then, the overall number of chargers in the ground sort of reflects that number, as well, right now. They go hand in hand.
Now, we're seeing some movement towards the owner-operator model. But keep in mind, the owner operated model is really a purpose placed charger. So, about three years ago, we installed a very-disciplined process of identifying where these silos would be and making sure we get this high degree of utilization. And that's what's key. So, we reinvigorated the system. And since then, so if you look at the total portfolio of owner operated charges now for all of Blink, 50% of those, and the majority of those 50% were installed over the last three years during the true acceleration period, they're at double digits utilization. And we go back to our model and look at okay, what do we need?
So, if it is an owner-operator, we need 80 months to get to a return on investment. And that -- the key part, that's a return on seat. That's just not making that charger economically positive in terms of EBITDA and cash flow positive. That's making it return on investment. You cross and compare that to a DC fast charger model, you’re seven to eight years before you're getting cash flow positive, then the return on seat is even harder. It gets augmented a little bit if you do have dollars from the Biden administration, dollars from other grant, and things like that.
So, while we have focused on those dollars and getting it, we're going to do 90% of our chargers L2 because of that quick return. And that's where the drivers are going to be.
Gabe Daoud
Okay. That's helpful. Okay. So, you think L2 provides better station economics and utilization versus DC. Is that right?
Brendan Jones
Well, it's not just the better station economics, it's the available capital globally, to install the number of ports we need. So, if we look at -- the question is, where's the new gas station of the future? Well, the new gas station of the future is in your home. It's in your multifamily dwelling. It is in your workplace. It's augmented by DC fast chargers on the highway and at quick stops. But that's the gas station of the future. And from a capital and investment perspective, when you look at it 15 to 1, that's an average on the cost of an install of a DC fast charger. So, when you want more ports, and unfortunately -- and this is the hard part for us as Americans to swallow. Those vehicles we drive, according to the Department of Transportation, they sit for 95% of the time. So, take advantage and be exploitive to this new fueling station, which is just about everywhere.
Gabe Daoud
That makes sense. Okay. So, maybe shifting gears a little bit. You mentioned hardware, big part of the business, now starting to manufacture your own equipment, given the SemaConnect acquisition and their facility in Maryland. So maybe just talk a little bit about where you are on realizing some of the synergies with SemaConnect -- where you are in the gross margin side on the hardware, and where could that go over the medium to long-term?
Brendan Jones
Yes, absolutely. So, the synergies on the manufacturing side are still unfolding to a degree. We're still working through equipment that is from legacy third-party, as we've worked to eliminate that globally. That's going to be about right now a 6 to -- year transition in its full amount. That means both in the United States, Europe and otherwise. We're still going to have 10%, perhaps 20% of product. And that's probably on the aggregate that comes from contract manufacturing. Those are things that just don't fit into our manufacturing scope for what we're trying to do. But the U.S., for the most part is going to be all Blink manufacturing equipment, out of Bowie on the L2 side, and a new factory on the DC fast charger side.
So, on the Bowie side, we've already secured the additional facility. And it's -- so we have one spot in Bowie and right next door to it, we got lucky, this is next spot. And that's, for the post office and other things, we made a guarantee, we're going to increase line. So we're up to a line and a half to two shifts, shift and a half, I should say. Now, we're going to add another line on that increased capacity. And Gabe, if you go back to some of the press releases, we said we’d get that up between 40 and 50 over the next coming year. So, we’ll be at 30,000 units capacity out of that at the end of this year. And then we're going to add to get it up to the additional 10,000 and 20,000 units after that over time. Correspondingly, in India, which is parts manufacturing, to a degree because we build in the U.S. on the L2, all the way down to the sub assembly. So, we're Buy America-compliant already on the L2 line as a result of that.
We've acquired more land in India to increase our parts production’s facility that build the base level components for the chargers. So, we're doing twofold.
And then, the last part of that, as we've talked about is the DC fast charging manufacturing site. And we have a final decision on that. It's actually scheduled for today. But we'll make an announcement later, a little tease. But we're going through the final real estate evaluation at 5 o'clock today on that and we'll have a further announcement.
So, really in a good position. What we have to focus to is sell down. And what our strategy is, is stay in front of commoditization, right, control our cost of goods sold. Don't assume that we're as efficient as we are everyday be kaizen, both on our production and in our manufacturing facility. So we continue to take cost out of the equation and be competitive.
Gabe Daoud
Looking forward to the announcement on the DC facility. So, stay tuned for that. And talk about what about your European strategy on the hardware front? Is that still with contract manufacturers, or s that -- or you have a Blink own facility out in Europe as well?
Brendan Jones
Yes. So, what we're doing in Europe is we're playing through as we are everywhere, the contract manufacturing obligations. It's a little bit different of a constellation in Europe that it is in the United States. We have different types of equipment there that we sell on a dominant level. And as an example, with a strong majority of the cars that are sold in different areas of Europe are leased, and leased through employees. We do a lot of in-home charging there, doing agreement with the different leasing companies that exist throughout Europe. And we're moving that product to manufacturing, the date is to Blink manufacturing, the date is TBD, right now, but there'll be a transition there. And as our standard L2 product, over time there's going to be a transition there as well. So across the board, even in Europe, we're going to move to controlling our own destiny and around cost of goods sold in as many places as we possibly can.
Now, what you're going to see is in emerging markets and the new markets. You might have to have an assembly facility and you might have to have more local content. So, every time we analyze a market, we look at that variable, what the rules and regulations are and see what the best pivot is for Blink.
Gabe Daoud
Okay, great. That's helpful. Maybe give us an update on supply chains. How are lead times on key components? Whether it's plugs, fans, enclosures…
Brendan Jones
Improved significantly.
Gabe Daoud
Sorry?
Brendan Jones
They've improved significantly. Really, right now in terms of DC fast charging, the times have come down. And that was the big delay, right? We were able to get L2s built, what a lot of companies did is you -- you de-content it a bit to be able to get a unit out there. We're happy to say that all the chips and everything we're building, especially for plugging charge, 15118, et cetera, are all now in line in all the chargers that we're producing.
You're still seeing sometimes delays in flat panels and sometimes in power supplies, and PCB boards. But it's really -- it's scattered now than more than it was -- before it was consistent across manufacturing, and supply chain, but now it's scattered. There is still on the DC fast charging front a significant delay in transformers, which is outside of our control. And that's still the number one variable out there when you're planning lead time for an install and then a commissioning of the system is the transformers.
Gabe Daoud
Yes. I mean, any thoughts on when the transformer shortage issue could potentially improve from…
Brendan Jones
We've had some conversation with utilities and the utility associations. And they're looking at an incremental improvement plan. There's already some notice of reduction in time. And what they have to do is keep up with that. Because you imagine, you've got the navy [ph] dollars coming out, right, and states are doing that. So the push for more transformers to be able to fulfill the nation's highways with DC fast charging, you're going to see that continue.
Now, from our perspective, the majority of our installs don't need a transformer. So, we have to work with the utilities on the DC fast chargers as we are with Florida right now and the big install we're doing there 25 locations across Florida's highways, so. But when you look at the L2, the majority of times you don't, and then you can engage in energy management strategies much easily on the L2 front, which helps mitigate load and distribute energy evenly to augment the need for a transformer to be brought in. But where it needs, we’ll bring it in. Because that's the right way to do it, especially as capacity increases are needed across the grid.
Gabe Daoud
Okay. And also just want to remind folks who are tuned in, feel free to use the link that you’ve all been provided to ask some questions, and I'm happy to work those in.
Brendan, why don't we maybe shift gears a bit? You guys have been very active from an M&A standpoint, building the Company through a number of transactions most recently -- semiconductor, which I mentioned. Can you maybe -- and this is a question that we got in from the line. What are some of the implications of consolidation in the industry? We saw Shell buy Volta not too long ago, and there's just been a number of transactions within the space. So, maybe give us a little bit of color on the implications of consolidation or whether you think Blink will continue to be active as well?
Brendan Jones
Yes. Let's start with the last part. We're going to continue to be inquisitive while focusing on making sure that we achieve the synergies and the efficiencies that we stated and expect through all of these acquisitions. So, that's a big task, right? As you look at acquisitions, where they fail is the failure to integrate in an efficient manner. And you put a lot of OpEx dollars to maintaining different systems, different people, different cultures, et cetera. So, that remains the big focus at Blink. We're -- we've made great strides. We'll have one network sunsetted in the next two to three weeks, and then we'll have the last two networks sunsetted as we move through the summer period of time. So, that is going to be a big accomplishment to achieve these synergies, on the acquisition front.
We're right now in terms of synergy dollars, just on the G&A front. We're approaching $7 million and $8 million in savings, which is significant on that, since we started the first of this year. We're going to continue to push on that front and become a very lean organization with everything that we put together from the dispersed group of companies.
That is a mandate within Blink. It is get lean, get efficient, use our presence for scale, right? And that's what we achieved. Now commonize everything across the board. So, it's one Blink uniformly. And then where it's a redundant process, eliminate. And then use technology to be able to get more efficient over time. So, we're on that mission. We're doing -- I'd give ourselves, before, I'd say we were a B, I give us an A minus right now, still room to improvement. And we got to hit these milestones.
In the industry, consolidation is scale, but you have to do it in a smart way. You have to make sure you can integrate, and what you have is one plus one equals three. There's a lot of one plus one equals two and you don't get much beyond that -- on that. Our thing is make it equal three, make it more.
So, if you think about Blink, so the first thing is look at our product sales. So, we're shifting away from a lower margin to higher margin. We won the post office deal. And right now I can't actually say what the post office feels about us, but let's put it, we got everything done in time. We'd say we get a gold star on our forehead. We certainly hope the post office feels the same way. And we expect more deals on that, because we’ve proven we can deliver, both on the networking side and the product side. And that's the finished efficiencies. Blink standalone would have never gotten that deal, SemaConnect standalone wouldn’t, Blink and when together as one company, we got that deal. Not only did we get it, but we fulfilled it on time this morning.
Gabe Daoud
Okay. That’s helpful. Yes, the scale matters. And I did want to ask about the USPS partnership. They obviously made an announcement for up to 41,500 chargers. So, have you started to recognize revenue from that?
Brendan Jones
So, we'll start recognizing revenue -- and I won't get in the delicacies of the contract. But we're going to start recognizing revenue from the first deployments this quarter. So that'll happen through June. There's aspects of the contract that make sure certain milestones are met before revenue is recognized. And we're now completing the last steps of that.
Gabe Daoud
Okay. And are these simply unit sales, or will you also be earning the recurring network fee from…
Brendan Jones
There is unit sales and a recurring network fee on all of these units. Yes. And then, as you know, we did the first group and we're in a great position with the post office and in talks about the next group that is coming already. I'll share details on that later, because we don't want that to be out there just yet. But it's very, very promising for us, Gabe. It's very exciting, because I'll tell you, in the team, to really hit it out of the park and get it all right, it just invigorates and process improvement and hey, look how good we did on this on all fronts. It becomes infectious on that. So, that has been a big win for the Company, not just in delivering those units, but in that ability to do it and the Company hitting it on time and all the aspects that the post office asked for, we nailed.
Gabe Daoud
Great. Okay. That's great. That's a great achievement. Couple of more questions came in. Could you maybe elaborate on the European strategy and just talk about competition in Europe?
Brendan Jones
Yes. So, competition in Europe is very fragmented. And it's fragmented in different ways with CPOs and MSPs, and then owner-operators like us, right, who were out there. So, our business models are different. And they vary in the different countries. So, in Blink UK, it's a very government intensive model right now, mostly driven by government tenders, where on a lot of the installations we get a significant portion 50% or more, in many cases of the cost offset by the tender and the government agency. Outside of that there's a lot of tenders in the UK that are just publicly facing stations, which are in major locations, and we run the utilization analysis on that. And again, we're in the high-teens on that projected revenue over time and utilization over time on those stations.
So, right now, that's the stable model. What we're doing in the UK is expanding away from just owner-operator and the sales opportunities with the lineup of product as well, to get our own fair share of that. And that we just began in this year with more of an intensive push on that happening in Q2 here. When we appointed Mike Battaglia, as the Chief Revenue Officer, one of his opportunities is globally align revenue wherever possible, align where our major revenue is coming from in the U.S., and others. And that's a combination of sales and owner-operator. So, our big opportunity in Blink UK is more sales opportunity, more revenue. While, right now, I need more staff in the UK, because the business that's coming in, we're full time, we're installing, we're procuring, we're getting charges in the ground, and we're driving revenue.
Now, when you go to Belgium and Netherlands and France, it's sort of the same thing, but different. So the markets are very mature. So utilization is a given, right, which is very different from the U.S. You still have to do the same level of analysis, but you’re putting a charger in the ground, you're going to get it. The difference there is the energy model and the energy situation with the utilities, they're very different. There's a lot of pressure on it, you have major fluctuations in the kilowatt prices in Europe. So, you have to be very on in terms of your forecasting when you're negotiating a contract there. Because many of them call for a cap on kilowatt sales. So, there is right location, right time, right contract, making sure that you've got a chance to reap revenue from there. And then, again, this is where we have an opportunity because of global expansion and global product, getting into the sales model a little more, because it's dominated the owner-operator right now, out of Europe. So, we're going to expand there on the sales model to have more revenue, and they get the sticky revenue that you're going to get from the networking services, maintenance contracts that go along with it.
So expansion. Now what we're going to do right now is organic expansion. So, we're moving into other countries and there's going to be announcements on this coming out shortly. But right now, we're going to go organic, until a really good acquisition opportunity pops up. And then we're going to look back to see what our capital position is, our partners are from a financing and then make a decision on it.
So look for a lot more organic growth right now. Look for still an inquisitive time towards acquisition -- inquisitive look towards that acquisition and look for an increase in product sales to add to the revenue we're getting from the owner-operator model. That's Europe now for us.
Gabe Daoud
Okay, great. Couple of other questions came in. I'll maybe combine them into one. But, do you think in this environment, just given what we've gone through on the supply chain front, companies and including yourself, will have to carry more working capital? And then -- so how do you think about working capital? And then also, I guess, relatedly, how do you think about cash needs and just cash burn and timeline to free cash flow positive?
Brendan Jones
Yes. So, I do think companies are going to need, depending on how intensive their DC fast charger model is, they're going to need to carry more capital, right? We tend to focus on DC fast chargers where there's funding available, or where the business case is just crackerjack on. Boom! You're looking at it and you go, we're going to get a return on this no matter what. So, the analysis is going to dictate capital. So, the heavier DC fast charging, the more capital you got to have on your books. L2 lower capital, faster return on that and still a lot of L2s, there's a lot of capital available as well, grants and things from utilities, et cetera, across the United States. And we're fully exploitive of those.
So, it's a concern, and you have to look at your different vehicles that you have available to use. Whether it is it special financing that you do on a project basis, whether it's just a straightforward capital race, you have to exploit all of them as we move forward to be able to realize this future.
Now, when it comes to Blink, we keep a very strict eye on a daily basis on where our capital position is. We keep in contact with our bankers on a daily basis, and have plans laid out and different pivots built into them, as our capital needs materialize, where we're going to pivot, where we're going to go to.
Our goal, as we indicated, and we said, we have a window on where we're going to be cash flow positive. We know that we gave some guidance and said, we're looking at the end of 2025 is a target, no commitment, right now. We're saying, we're going to get to -- that's the target in the short-term for EBITDA. And then we're -- our eyes on free cash flow positive. So, we're going to continue to hold to that on there. We see that on our horizon, if we follow our plan, hit the right number of charges by market, continue to make sure we're cost efficient in everything we're doing.
So that's -- we’re feeling good about that right now and I think more optimistic, maybe than some, at this point in terms of a company, because the L2 engine, I'm telling you, with 30 million needed by 2030 and 90% of those being L2s, okay, we think we're in a great position to reap benefits long-term. That's what we're very optimistic about Blink. That's just the U.S. by the way. That was just a U.S. number. That's not even Europe.
Gabe Daoud
Yes, because there’s a lot of chargers, need a lot of chargers.
Brendan Jones
Absolutely.
Gabe Daoud
And then, another one came in, I think we know the answer to this one. But USPS deal, that's not an exclusive deal, right? They're also working with other…
Brendan Jones
Yes. There's two other vendors in on the USPS deal. We were the first to deliver. But there's other vendors. USPS has not made any statements on who's going to get this or that and we don't want to -- we're not going to speak for them on that topic. Our job is to focus on Blink and over-delivering.
Gabe Daoud
Okay, great. Maybe -- just a few minutes left here. Maybe -- let's hit on another question that's been pretty topical these days, Tesla, not only opening up the supercharger network but forward -- made the announcement recently to move forward with the NACS adapter on new EV models, I believe in 2025. So, maybe just give us, from your perspective, what you think that means for the industry?
Brendan Jones
Yes. I mean, it creates confusion. But my background -- in days gone by, I was the Chief Executive responsible for the proliferation of CHAdeMO. So, I've been in this space before on this topic. I think, standards battles first, it's not what the industry needs, right? It becomes a distraction, instead of us focusing on getting chargers in the ground to service the public. That's statement number one.
Statement number two though is for Blink, our perspective is that 90% of our business is elsewhere anyway, so we got a 10% issue here. And then, we look at the other OEMs, we look at just the comment made from the CharIn organization, who represents a lot of the OEMs in terms of the CCS standard globally, and they came out pretty hot and heavy against it.
We're going to wait and see. And if the movement from Tesla is truly an open standard, that we fully expect Tesla to make the cables and the software associated available to everybody else and the great thing about Blink and what we're doing. So, the DC fast charger is done with final design, it's done with technical overview, it's done with componentry, and the specs of the componentry that are going to go into it. In terms of adding another cable and having it being a Tesla cable, that's not a big deal for us.
So, we'll comply with the industry if there's a need in a business case to have it. But here's the salient point. If I go out into the garage right here, and we got a whole bunch of chargers and batteries that are always full, because we're right next to the Miami Beach Convention Center. There's Teslas and Ford charging on those chargers right now. And that's not going to change, Gabe. It's the same adapter that's been in existence on the L2 plug forever, Teslas charge at Blink stations every single day. Fords will charge on them every day. So, we're on the edge, we're not as affected as the DC fast charger companies. And we're going to keep monitoring. We will pivot on a technology footprint, as the market dictates.
Gabe Daoud
Okay. Well, that's great, Brendan. Just -- we're out of time here. But before I let you go, just quickly, when do you think we get some navy awards? I did want to ask about that. Do you think it's later this year or next year?
Brendan Jones
Yes. I think it's going to be later this year. There's a lot of structural adjustment that, everybody has good intention. The Biden administration has been great on this. But as we're struggling, adjusting, especially on the DC manufacturing footprint side, and then on the transformer side, there's some delays in the system right now. They're early states, which five of them are out right now. They have a strong possibility of awarding in the summer, or in the Q3, Q4 timeframe. But the majority of the states are still significantly behind that right now.
So, let's look. We're going to be very selective about where we engage, right? There has to be a return on investment. And it has to be cash flow positive eventually, for us, because we're not in this not to make money. We got shareholders, we got to take care of, we got to public we need to serve. So we're going to be very selective and make sure we pick the right sites at the right time. And the states need to be aware of that, right. Because what the states are doing is the Biden administration has given them 80% and they make a decision whether they want to award 80% or not. In the rural routes, we're hoping that the states understand that that economic model is really tough. So, you need to give 80% match share in order to make it work.
Gabe Daoud
Okay. Very clear. Okay. Well, thanks a lot, Brendan. We're out of time.
Brendan Jones
Absolutely. Always great talking to you, Gabe.
Gabe Daoud
Yes, likewise. Best of luck for rest of the year.
Brendan Jones
All right. Thank you, my friend. All right. Bye, bye.
Gabe Daoud
Bye, bye.
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Blink Charging Co. (BLNK) Presents at TD Cowen's Sustainability Week Conference (Transcript)