Blink Charging Co. (NASDAQ:BLNK) Q1 2024 Earnings Call Transcript

Blink Charging Co. (NASDAQ:BLNK) Q1 2024 Earnings Call Transcript May 9, 2024

Blink Charging Co. beats earnings expectations. Reported EPS is $-0.13, expectations were $-0.23. BLNK isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon everyone and welcome to the Blink Charging Company’s First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode and we will open for questions following the presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Vitalie Stelea, VP of Investor Relations. Vitalie, over to you.

Vitalie Stelea: Thank you, Jenny, and welcome to Blink’s first quarter 2024 earnings call. On this call today, we have Brendan Jones, President and CEO; Michael Rama, Chief Financial Officer; and Michael Battaglia, our Chief Operating Officer. The discussions today will include non-GAAP references. These are reconciled to the most comparable US 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 the Blink’s investor relations website. Today’s discussions may also include forward-looking statements about our expectations. Actual results may be different from those stated and the most significant factors that could cause actual results to differ are included on Page 2 of the first quarter 2024 earnings deck.

Unless otherwise noted, all comparisons are year-over-year. And now, regarding the investor relations calendar. Blink and the team will be attending the B. Riley Institutional Conference in Beverly Hills, California on the 22nd of May, the Stifel 2024 Cross Sector Investor Conference on the 4th of June in Boston, and the JPMorgan Energy, Power & Renewables Conference on the 17th of June in New York City. We will be meeting with investors during all of these events. Please also follow our announcements and our website for additional events in the future. And now I’d like to turn the call over to Brendan Jones, our President and CEO. Please go ahead, Brendan.

Brendan Jones: Sure. And thank you, Vitalie. Good afternoon, everyone. Thanks again for joining us today. Let’s just jump right into the presentation. So let’s go to Slide 4. So, 2024 is off to a strong start with revenues for the quarter growing to 73% year-over-year. That is a first quarter record of $37.6 million for Blink. Blink service revenue increased by 72% to $88.2 million. Now, our charging service revenue increased by 74% to $5 million compared to $2.9 million in the first quarter of 2023, representing a $2.1 million increase in charging revenue. We also recorded a 27% increase in network services fees to $2.1 million for the quarter. And our network servicing fees are reoccurring in nature and they represent what we call a reliable and high margin revenue stream for Blink.

Blink’s company-wide gross profit in the first quarter of 2024 was $13.4 million or 36% compared to $4.5 million or 21% of the first quarter of last year, representing a gross profit increase of $8.9 million or 195% in gross profit. We contracted, sold, or deployed 4,555 chargers globally in the first quarter of this year. Blink’s chargers dispersed approximately 30 gigawatts of energy across all Blink networks globally in Q1 of 2024. As you can see from these numbers, our revenue is becoming increasingly diversified. We have a competitive advantage in our industry because we offer flexible business models and we can provide L2 and DC chargers as well as network and charging services. We can be nimble not only in our response to addressing customers’ needs but also in reacting to changes in the market which allows us to effectively manage revenue generation and profitability.

Our first quarter was characterized by strong performance by the Blink team and is indicative of healthy customer demand. Furthermore, demonstrating our ability to leverage our manufacturing and logistical strengths to meet that demand, vertical integration is working for Blink. If we move to Slide 5, for 2024, we are keeping our full year 2024 revenue target unchanged at $165 million to $175 million. Now, while we had a strong Q1, which we by the way are very, very excited about, we are also seeing some lower bookings in April. We are closely monitoring the market and it’s too early to tell if we will see an impact in the full year revenue targets. We regularly review our pipeline and will provide an update if necessary in the future. However, as a result of several companies exiting the charging space or reducing their presence along with confirmation of some very strong orders in the Q3 and Q4 time frame, we expect opportunities for additional growth in the second half of 2024.

We are also maintaining our target of achieving positive EBITDA run rate by December of 2024, as well as our full-year 2024 gross margin target of 33%, which you’ve already seen that we’ve overachieved in the first quarter. If we jump to Slide 6, we have recently strengthened our balance sheet and are properly capitalized to achieve our adjusted EBITDA run rate target. Our cash and cash equivalents at March 31, 2024 were $93.5 million. Now let’s move on to Slide 7. Let’s take a minute on Slide 7 to discuss what is happening in the industry with demand for EVs and EV infrastructure. Despite reports that EV sales are slowing, Kelley Blue Book indicates that first quarter 2024 EV penetration was 7.3% of sales in the US, which is an increase of 2.6% versus Q1 of 2023.

Sequentially, there was a bit of decline when you view EVs in terms of the number of vehicles sold as compared to Q4 of 2023. This decline is primarily due to Tesla volumes. As the other nine leading EV manufacturers, excluding Tesla, reported EV sales growth of over 50% in Q1 of 2024. And that includes Hyundai, Kia, Ford, Mercedes, Cadillac, BMW, and others. Additionally, we saw on March 27th, 2024, that Hyundai revealed an ambitious $50 billion investment to secure the top three spot in the EV market. We continue also to see growth in Europe and specifically the markets where we generate a significant amount of charging service revenue. In Belgium, the Netherlands, UK, and Ireland, EVs continue to gain significant momentum with robust growth.

In Belgium, battery electric vehicle registrations increased nearly 50% in Q1 2024 versus Q1 2023. In the Netherlands, there was growth of nearly 20% versus last year. And in the UK, according to The Guardian newspaper, a record number of chargers were installed in Q1 of 2024. The UK also recorded a number of battery electric vehicle registrations this month of March, representing nearly 25% of all cars sold in the country. In the US, McKinsey currently forecasts over 28 million charges will be needed by 2030. And globally, EV infrastructure spending is forecasted to be about $260 billion by 2030, with about 90% of those chargers being L2. Now, moreover, industry data shows that EV infrastructure significantly lags behind the current EV fleets on the roads today in the US and also lags to some extent in Europe.

We also see increasing consolidation in our industry with certain of our competitors choosing to reduce their presence or in some cases, even pull back entirely. Blink sees these as opportunities to grow and deploy our disciplined operating models in both the L2 and DC fast charger markets. Now let’s pivot over Slide 8. You can see that cumulatively as of the end of Q1 of 2024, Blink has contracted, sold, or deployed nearly 95,000 chargers since the company’s inception, on the way to exceed 100,000 very soon. Now if we look at that geographically, 77% of the total company-wide number is attributed to North America and then 23% to Europe and some other international locations. Now let’s move over to Slide 9. You can see our innovative product portfolio and flexible solutions for both L2 chargers and high-powered DC fast chargers.

The variety of products we offer appear to a — appeal to a broad and diverse range of customers. Our Series 7 and 8 chargers, which are produced in-house in the US at our Bowie, Maryland facility, are the most popular Level 2 model among our customers. Now, if we move to Slide 10, it shows a representative group of our customer base, including many recognizable names across commercial entities, multifamily complexes, planned communities, healthcare facilities, fleets, and municipalities around the world. As we said before, we take advantage of places where vehicles idle and sit. And just last week, we announced that Blink was selected as one of the official electric vehicle chargers and network service providers for the state of New York. We are excited to have this opportunity to work in close cooperation with New York authorities to electrify the state and municipal fleets, provide public charging for employees, for residents, and for visitors of the city.

So with that, I will now pass the presentation over to Michael Rama, our CFO. Michael, take it away.

Michael Rama: Thank you, Brendan, and good afternoon, everyone. Turning to Slide 12, total revenue in the first quarter of 2024 grew 73% year-over-year to $37.6 million. Product sales in the first quarter of 2024 were $27.5 million, an increase of 68% over the same period in 2023. This was primarily due to customers purchasing greater volumes of our commercial charges. First quarter 2024 service revenues, which consists of charging service revenues, network fees, and carsharing revenues, were $8.2 million, an increase of 72% compared to the first quarter of 2023. The year-over-year growth was primarily driven by greater utilization of our chargers in the US and internationally. The increased number of chargers on Blink networks and revenues associated with our carshare programs.

Our gross profit for the first quarter of 2024 was $13.4 million, an increase of 195% or $8.9 million over the same period last year. As a percentage of revenues, gross margin was 36% in Q1 2024 compared to 21% in the same period of the prior year. Importantly, we improved our gross margin in Q1 nearly 200% on revenue growth of 73%. This is primarily due to the shift to higher margin product, increased vertical integration of charger manufacturing, as well as higher gross margins from service revenues. Operating expenses in the first quarter of 2024 were $30.9 million, which is a decrease of 13% or an improvement of $4.5 million. This decrease is especially notable when compared to total operating expenses as a percentage of revenues, which showed nearly an 8,100 basis point improvement in operating expenses year-over-year.

Within this number, compensation expense was down $7.8 million or 34% year-over-year and SG&A was down 8% or about $700,000 versus the same period last year. Excluding the impact of the non-cash charge related to a change in fair value of a consideration payable of $1.7 million, the actual reduction in overall operating expenses in Q1 would have been $6.2 million or 18% versus the prior year. This is the result of reductions in executive compensation and discipline, cost reductions, and cost avoidance actions achieved through continuous improvement efforts. Adjusted EBITDA for the first quarter of 2024 was a loss of $10.2 million compared to a loss of $17.8 million in the prior year period. This is an improvement of $7.6 million year-over-year.

Sequentially, Q1 adjusted EBITDA improved $3.8 million compared to Q4 2023, and significant improvement from just one quarter. Adjusted EBITDA for the three months ended March 31, 2024, excludes the impact of stock-based compensation, acquisition related costs, estimated loss related to underperforming assets of a subsidiary, and the change in fair value related to a consideration payable. Now, earnings per share for the first quarter of 2024 was a loss of $0.17 per share, compared to a loss of $0.53 per share in the prior year period. As of March 31st, 2024, the weighted average share’s outstanding was 99.9 million shares. As of March 31, 2023, the weighted average share is outstanding was 56.5 million shares. Adjusted earnings per share for the first quarter of 2024 was a loss of $0.13 per share compared to a loss of $0.49 per share in the prior year period.

Non-GAAP adjusted earnings per share is defined as net income which excludes the amortization of intangible assets, acquisition related costs, estimated loss related to underperforming assets of a subsidiary and the change in fair value related to consideration payable divided by the weighted average share is outstanding. Now turning to Slide 13, you could see that Q1 2024 reflects significant progress in revenue growth when compared to the same periods in 2023 and 2022. Two years ago, our Q1 revenue was below $10 million. And in Q1 2024, it was about $38 million, a four times growth trajectory in just two years. However, what we believe is equally important about this quarter is that we generated a 36% gross margin and reduced our total operating expenses by over $4.5 million.

So in Q1, revenue was up 73%, gross profit was up nearly 200%, and total operating expenses went down 13%. And if you now turn to Page 14, here we are showing the quarterly growth in our service revenues. Just three years ago, we had less than $350,000 in service quarterly revenues. In Q1 2024, we recorded $8.2 million of service revenues. That is a 24 times increase at a 189% CAGR. The impressive growth is due to the scale and synergies we obtained from acquisitions, as well as new and innovative ways to deliver our services. As for the balance sheet, cash and cash equivalents at March 31, 2024 were $93.5 million. We used $21.5 million of cash in operating activities in Q1 2024, that is nearly $3 million less than Q1 of last year. As of March 31st, 2024, we fully paid off promissory notes and interest of $45.5 million related to the SemaConnect acquisition.

And subsequent to the end of the first quarter, Blink paid off $7 million of notes payable associated with the Envoy acquisition. Currently, we have no cash obligations — no cash debt obligations on the balance sheet. In summary, we had a record Q1 for both revenue, gross margin, and adjusted EBITDA showing significant improvements. This is a result of meticulous planning and decisive actions that started two years ago. And we will now — we will continue to structurally adjust Blink as we move forward. This concludes our — my prepared remarks. I’ll turn the call back over to Brendan. Brendan?

Brendan Jones: Thanks, Michael. So now let’s wrap this up. Obviously, you can all tell we are very pleased with our team’s performance in Q1 of 2024. As you can see from the numbers Michael just reviewed, Blink continues its positive momentum in the marketplace. We showed again that we can deliver. We delivered 73% growth in revenues and 36% gross margin while improving adjusted EBITDA by $7.6 million. At the same time, we reduced our operating expense by 13%, which is a reduction of $4.5 million. Additionally, Blink now has zero cash debt. We paid off all of our cash debt obligations. Our number one priority right now is to continue to structurally adjust the company for future opportunities, as well as changes in the market conditions.

Blink’s synergy, cost cutting, and cost avoidance activities will continue throughout 2024. Our goal is profitability and cash generation that will ensure that Blink can grow sustainably into the future. We fundamentally believe that this is achievable, especially with our culture of continuous improvement that is already showing positive results. Again, very proud of our team and the effort this past quarter. But we are even more excited about the future of Blink. We remain committed to making Blink more flexible, adaptable, and most importantly for this industry, financially sustainable, as we continue to charge towards profitability. Now, that concludes our formal remarks. I think we’re ready to turn it over for some questions. Thanks.

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Q&A Session

Operator: [Operator Instructions] Your first question is coming from Chris Pierce of Needham & Company. Chris, your line is live.

Chris Pierce: Hey, good afternoon, everyone. Thanks for taking the questions. On the April softness, was this — I’m assuming this was before the Tesla news. I think calendar wise that lines up. But I’m just curious because the Tesla news, we’re hearing a lot about the superchargers and the Level 3 chargers that they have out there. But they had been moving down into the Level 2 space and had won some hospitality deals with Hilton and I believe Best Western. So I guess, are you optimistic about those deals being reopened and that kind of creating a revenue opportunity for you guys? I just kind of want to get a sense.

Brendan Jones: Yeah, I mean, sure, we can’t get into specifics. But, I think the thing that we can say factually is we’ve received quite a bit of inbound inquiries already when the news came out and we put ourselves in a position that we’re poised to take advantage of them when they actually materialize into an offer order an order. So yes, it has created some momentum for us and we have the products and services and charges to take advantage of that and we intend to do so.

Chris Pierce: Is that Level 2 momentum or just broad based across Level 2 and Level 3?

Brendan Jones: We’ve actually received inquiries on both.

Chris Pierce: Okay, okay. And then just on the cash burn versus the cash balance and getting — exiting this year positive adjusted EBITDA, I don’t want to specifically ask about ‘25, but just kind of, it looks like there might be some tightness going into the end of the year based on Q1 cash losses. How should we think about the remainder of the year and kind of potential financing needs as you see it?

Brendan Jones: Yes. As we’ve stated, we have enough cash on the books to get through EBITDA positives. We’re not going to make any statements just yet in terms of free cash flow for 2025, although we’ve said previously that is the goal. So it’s that balance to when does that goal is achievable. We are investigating opportunities that we may have as we move into 2025. But as we said and said before, we will not be engaging in any equity raises or dilution-like activities throughout this year, but we will have more to come on that topic as we get into most likely Q3 and Q4 this year. Michael Rama, any additional follow-up to questions on that?

Michael Rama: No, I think you — not for me.

Brendan Jones: All right.

Chris Pierce: Okay, thank you.

Operator: Thank you very much. Your next question is coming from Craig Irwin of ROTH MKM. Craig, your line is live.

Craig Irwin: Hi, good afternoon, congratulations on a really strong revenue quarter. So, Brendan, you guys are crushing it on the gross margin side, right? You’re well above the guide for 33% coming in almost 36% this quarter. Can you maybe talk a little bit about where this strength is coming from? And you maintained your guide for this year, so should we think about potential expenses or inefficiencies for gross margins as Bowie, Maryland starts to ramp? Are there other business mix items that you may be factoring in the guidance that has you give a number that’s consistent with what you’ve guided before but lower than your recen…

Brendan Jones: Yeah, I mean, there’s always continuing to work ourselves out of some legacy product and we’ve been doing a fairly efficient job of that. There’s still a little bit to go, but it’s nothing — it’s not a game changer. And we took some of that this quarter as well. So it really is two things that add up to this equation. It’s continuing to push hard on vertical integration and take cost out of the equation. That’s both in the US production side and on the parts manufacturing and sub-assembly side in India. Then also, it’s pushing for an increase in Europe of more efficiencies and cost savings on the owner-operator model, where that revenue that we’re generating off of chargers we own and operate continues to be a class-leading margin.

And that also has a big positive effect. Not only is that revenue growing considerably month over month, quarter over quarter, year-over-year, but also it’s becoming more profitable. When you compare us to other in the marketplace in terms of margin on owner operator, we’re the gold standards. We set the bar for everybody else there. We’re well above EVgo and others in terms of margin on the owner-operator side of the equation. So you wrap those two up together, you take a look at the networking fees that we get and that those are scalable from L2 to DC fast charger and then added software that we’re going to be coming out in the market with around energy management and other services that we need in the marketplace to grow. And it continues to add to that margin.

And that’s why we really believe the flexible business model combined with operating in Europe and the United States and doing both the sales of hardware and services and networking services and the owner-operator models really making us flexible and adaptable as the market changes.

Craig Irwin: Excellent, thank you so much for that. My second question is about the progress towards positive EBITDA at the end of the year. So if we’re thinking, you know, it’s not really a positive EBITDA quarter, but positive EBITDA month, so that you’re breakeven, you need a fairly substantial move on either lower costs or higher margins if we assume that you execute at the high end of your guidance for revenue. So can you maybe help us understand how we balance lower SG&A costs and salaries and comp as you consolidate these five facilities down to one and reposition the business? I guess there’s probably outside expenses too that you’re eliminating. Can you maybe just help us frame this out? Consensus is a long way from breakeven EBITDA, right?

Brendan Jones: So where I can, there’s certain activities we can’t disclose yet because of the sensitivity of them, as you probably are aware. But we’ve announced that we are going to, and we’ll have the spin-off completed this year, Blink Mobility, and that includes the BlueLA car service. So that is going to remove a large chunk of it in that simple action. Then also, we are engaged in cost reduction activities across a multiplicity of the businesses. That will be revealed more as we move into Q2 and indeed in Q3. Those include expense reductions. There is some structurally adjusting certain businesses and reorganizations that will result in savings on headcount, et cetera, in there, and there’s also the closing of non-performing assets.