Blink Charging Co. (NASDAQ:BLNK) Q4 2023 Earnings Call Transcript March 14, 2024
Blink Charging Co. misses on earnings expectations. Reported EPS is $ EPS, expectations were $-0.4. 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 day ladies and gentlemen and welcome to the Blink Charging Co. Fourth Quarter and Year End 2023 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Vitalie Stelea, Vice President of Investor Relations. Sir, the floor is yours.
Vitalie Stelea: Thank you, Ollie. Welcome to Blink’s fourth quarter 2023 earnings call. On this call today we have Brendan Jones, President and Chief Executive Officer; and Michael Rama, Chief Financial Officer. Today’s discussions today 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 be different from those stated. The most significant factors that could cause actual results to differ are included on Page 2 of the fourth quarter 2023 earnings deck.
Unless otherwise noted, all comparisons are year-over-year. Now, regarding the Investor Relations calendar, Blink will be participating and taking one-on-one investor meetings at investor meetings at a few upcoming conferences. The first one will be the Roth MKM Investor Conference in Dana Point, California on the 17th of March. The second one will be JPMorgan Energy Conference on the 17th of June in New York City. Please follow our announcements and the investor relations website for additional events that we will book in the future. I will turn the call now over to Brendan Jones, President and CEO of Blink Charging. Go ahead, Brendan.
Brendan Jones: Thanks Vitalie and good afternoon everyone. Thank you for joining us on this call today. Well, to sum it up, 2023 was a historic year for Blink. It was marked by significant achievements and exponential growth. Now, as some of you know, blink over the past four years has successfully integrated six strategic acquisitions and in 2023 we began to demonstrate the powerful consolidated potential of the Blink enterprises. Now, not only did we leverage our advanced product portfolio and services, but we also began to see tangible benefits from our newly enhanced network launched in 2022. Organizationally, we are emphasizing a culture of continuous improvement and have begun to observe synergies and efficiencies that positively impacted 2023 results across all of our businesses.
Operationally, we streamlined our sales, engineering, logistics and distribution while expanding our manufacturing footprint near Washington, DC to capitalize on additional synergies and opportunities for cost optimization and a little more on that later in this presentation. Now, if we move to the numbers as illustrated on Slides 4 and 5, our total revenues were $140.6 million, marking an impressive year-over-year growth of 130% and a remarkable seven fold increase compared to 2020 revenues. Now let’s talk about that again. Seven fold increase in just two years. Our fourth quarter 2023 revenues were a Q4 record of $42.7 million, representing a year-over-year increase of 89%. Our 2023 service revenues grew 111% year-over-year, amounting to $26.4 million.
Now, within this figure, network fees grew 71% to $7.5 million and Q4 2023 service revenue reached $7.9 million. Now, in even better news from a financing perspective, if you flip to Slide 6, we previously discussed raising additional funds to guide Blink towards profitability. I am pleased to announce that we substantially strengthened Blink’s balance sheet by raising $113 million in gross proceeds via our existing ATM facility. We took advantage of favorable market conditions and did it opportunistically at scale and in a very, very cost effective way. As a result, we delevered our balance sheet and significantly reduced our interest expense by paying off promissory notes and accrued interest of $45.5 million. With our current visibility, we anticipate that our existing cash balance will be sufficient to reach our positive EBITDA adjusted rate target in December of 2004 and beyond.
If we now look at Slide 7 for full year 2024, we are targeting revenues between $165 million to $175 million and a gross margin of approximately 33%. We are also reconfirming our target of achieving positive adjusted EBITDA run rate by December of 2024. Now let’s jump over to Slide 8, we show the different actions that will continue to materialize, in 2024, to achieve our adjusted EBITDA target. First, solid revenue growth is expected to contribute significantly to adjusted EBITDA. We emphasize not only the sales quantity, but also the quality of new customers, especially fleets, as they play a crucial role in financing our company’s growth. During 2023, we saw important fleet wins in the United States, including the Post Office and Mac trucks, just to name a few.
We also prioritized revenue generated from our existing customers as an optimal way to finance growth. Second, we anticipate gross margin improvement as we continue to insource a large portion of our product mix. Our decision to expand our Bowie, Maryland facility aligns perfectly with our growth strategy and we are very pleased to have that facility open with production underway. Third, expense management and cost avoidance are currently underway throughout the entire company. We’ve also implemented a leading software tool to assist in the planning and monitoring expenses at all levels of the company. We are pleased with this capability as it enables robust scenario planning and accountability for every department. And finally, we anticipate the EV market to maintain its recent momentum, benefiting not only Blink, but more importantly the entire industry.
If we move on to page 9, despite various media stories, we remain very optimistic about the EV market and the continued growth. This optimism is fueled by the decreasing cost of electric vehicles and the continuous expansion and improvement of charging infrastructure. The network effect is now taking hold. Now look at the numbers. In 2023, EVs accounted for one of every five vehicles sold globally. In the U.S. in 2023, we saw an increase in EV adoption, accounting for 8% of all new cars sold within the United States. Now, if we look at California, EVs represented 25% of all new car sales. To provide context, Bloomberg New Energy Finance anticipates EV penetration in the U.S. to reach approximately 13% in 2023, marking a significant 500 basis points expansion in just one year.
Now, in Europe, another region where we are active and have three different offices, the EV penetration rate throughout the entire European continent stood at 18% of car sales. But if you start to split this up and look at various countries, France, UK, Ireland, Germany, the Netherlands and Belgium, the percent is much higher. This figure is projected to rise across both western and eastern Europe to about 22% in 2024, with a target of 80% by 2030. And we know that’s a big number, but it’s really not that farfetched. As many of you may know, about 90% of all cars sold in Norway are EVs. Several larger European countries are closely monitoring this trend, and we at Blink are actively studying and adapting to this evolving landscape.
Mackenzie’s:
McKinsey,: Now on to Slide 12. You will see images of our advanced product portfolio. Today we can satisfy the demands of any customer from the product and software perspective. Our versatile Level 2 chargers are used in multiple commercial, residential and fleet applications. At the same time we have made significant strides with our DC fast chargers as you can see on the lower left section of the slide. And importantly our chargers already support the North American charging standard or NAX which we believe will only benefit Blink as more drivers will be able to easily access Blink chargers and charge on our chargers. And of a particular note, just this week we celebrated the grand opening of our new manufacturing facility near Washington, DC, which will further drive our gross margin expansion while improving product quality and reliability.
Federal, State and local government officials were present to celebrate with us this significant milestone. And if you look at Slide 13, we look forward to supporting government programs when it comes to electrifying their fleets and providing EV charging infrastructure in their jurisdictions. Now, the production that is underway at the facility embodies the latest lean manufacturing practices, focusing on efficiency and continuous improvement. We anticipate that it will support an annual production capacity of up to 50,000 chargers and has been designed for flexibility to adapt to our future products and manufacturing needs. Now I have a new announcement. In addition to the manufacturing facility, we have established our global headquarters at the same location near the nation’s capital.
We believe this offers multiple benefits. It brings us closer to our manufacturing operations, allows for better team engagement and brings us closer to some of our largest customers. Furthermore, being located near policymakers involved in shaping the federal government’s transition to electric vehicles is advantageous as we continue to play a pivotal role in this transformative journey. Now if we go to Slide 14 over the years, Blink was able to acquire a number of prominent customers and collaborations with some of the largest fleets globally, automotive companies, commercial and multifamily real estate enterprises, as well as prominent hospitality venues. In 2024 and beyond we will be adding to this list of prominent customers. Now with this I’m going to turn the presentation now over to our CFO, Michael Rama to give you some additional financial detail.
Michael?
PricewaterhouseCoopers: Now on to Slide 12. You will see images of our advanced product portfolio. Today we can satisfy the demands of any customer from the product and software perspective. Our versatile Level 2 chargers are used in multiple commercial, residential and fleet applications. At the same time we have made significant strides with our DC fast chargers as you can see on the lower left section of the slide. And importantly our chargers already support the North American charging standard or NAX which we believe will only benefit Blink as more drivers will be able to easily access Blink chargers and charge on our chargers. And of a particular note, just this week we celebrated the grand opening of our new manufacturing facility near Washington, DC, which will further drive our gross margin expansion while improving product quality and reliability.
Federal, State and local government officials were present to celebrate with us this significant milestone. And if you look at Slide 13, we look forward to supporting government programs when it comes to electrifying their fleets and providing EV charging infrastructure in their jurisdictions. Now, the production that is underway at the facility embodies the latest lean manufacturing practices, focusing on efficiency and continuous improvement. We anticipate that it will support an annual production capacity of up to 50,000 chargers and has been designed for flexibility to adapt to our future products and manufacturing needs. Now I have a new announcement. In addition to the manufacturing facility, we have established our global headquarters at the same location near the nation’s capital.
We believe this offers multiple benefits. It brings us closer to our manufacturing operations, allows for better team engagement and brings us closer to some of our largest customers. Furthermore, being located near policymakers involved in shaping the federal government’s transition to electric vehicles is advantageous as we continue to play a pivotal role in this transformative journey. Now if we go to Slide 14 over the years, Blink was able to acquire a number of prominent customers and collaborations with some of the largest fleets globally, automotive companies, commercial and multifamily real estate enterprises, as well as prominent hospitality venues. In 2024 and beyond we will be adding to this list of prominent customers. Now with this I’m going to turn the presentation now over to our CFO, Michael Rama to give you some additional financial detail.
Michael?
Michael Rama: Thank you Brendan and good afternoon everyone. Now turning to Slide 16, our Q4 2023 revenues grew 89% year-over-year to $42.7 million, another record fourth quarter for Blink. Total revenues for 2023 was an absolute record at $140.6 million, a 130% increase compared to $61.1 million for the full year of 2022. As Brendan mentioned earlier, only two years ago, our 2021 full year revenues were nearly $21 million, which represents about 15% of current 2023 full year revenues of $140.6 million. Now, product revenues for the fourth quarter of 2023 were $33.4 million, an increase of 112% over the same period in 2022. Product revenues for the full year of 2023 were $109.4 million, an increase of 138% when compared with full year 2022.
These increases were driven by strong demand for our commercial Level 2 chargers and DC fast chargers as well as our ability to satisfy increasing levels of demand. Fourth quarter 2023 service revenues, which consist of charging service revenues, network fees, car sharing revenues were $7.9 million, an increase of 40% compared to the fourth quarter of 2022. Full year 2023 service revenues more than doubled to $26.4 million, representing a year-over-year growth of 111% driven by greater utilization of our chargers, increased number of chargers on Blink networks and revenues associated with the Blink Mobility car share program. We break out these service revenue lines to differentiate between products and service businesses more accurately. Now turning to gross profit.
Gross profit increased 63% to $10.6 million or 25% of revenues in the fourth quarter of 2023 compared to gross profit of $6.5 million or 29% of revenues in the fourth quarter of 2022. Gross margin decreased in the fourth quarter of 2023 when compared sequentially to the third quarter 2023 due to increased year end warranty and maintenance expenditures as well as adjustments related to discontinued components. Now, excluding the impact of these items, the gross margin for Q4 2023 would have been approximately 30%. Gross profit for the full year of 2023 increased by 172% to $40.2 million or 29% of revenues, compared to gross profit of $14.8 million or 24% in the full year of 2022. Gross margin for the full year of 2023 increased when compared to the full year of 2022, primarily due to higher mix of in-house manufactured units which carry a higher margin and increased utilization of charging.
Now turning to operating expenses. Operating expenses in the fourth quarter of 2023 decreased 16% to $28.7 million compared to $34.2 million in the fourth quarter of 2022, while we grew quarterly revenues by 89% year-over-year. Most of the decrease in operating expenses was driven by 27% reduction in year-over-year compensation expense for 2023. Operating expenses for the full year of 2023 was $239.9 million compared to $104.1 million for the full year of 2022. The increase in operating expenses for the full year is primarily driven by $105.9 million related to a noncash goodwill and intangible assets impairment charge, as well as the impact of a one-time nonrecurring payment to our former CEO and a nonrecurring bonus related to the performance milestones achieved by our CTO related to the design and launch of Blink’s recently implemented new network.
It is very important to mention here that these impairment charges are noncash and they do not impact our operations in any way, shape or form. Excluding the impact of the $105.9 million noncash impairment charge and one-time compensation related items, the operating expense for full year 2023 would have been $134 million. Now, as a percentage of revenues, this amount represents a reduction of approximately 7500 basis points, while revenues increased by 130% year-over-year. Of note, 2023 operating expenses include $3 million of expenses for our 2023 acquisition of Envoy. Now adjusted EBITDA for the fourth quarter of 2023 was a loss of $14 million compared to a $14.8 million in the prior year period. As a percentage of revenues, our adjusted EBITDA metric improved nearly 3200 basis points compared to Q4 2022.
This is a 50% improvement year-over-year, reinforcing our trajectory to positive adjusted EBITDA run rate by December of this year. Now, adjusted EBITDA for the full year of 2023 was a loss of $57 million compared to an adjusted EBITDA loss of $60.3 million in the full year of 2022. The adjusted EBITDA for the three and 12 months periods ended December 31, 2023 exclude the impact of stock-based compensation, acquisition related costs, one-time nonrecurring expenses, noncash impairment charges and noncash loss on extinguisher of notes payable. As Brendan mentioned earlier, several factors are expected to get us to positive adjusted EBITDA run rate by the end of this year, including revenue growth, expense management and cost avoidance actions that are materialized based on our actions to rationalize our operations, consolidate facilities and support functions, and build scale into our manufacturing and sales processes.
Earnings per share for the fourth quarter of 2023 was a loss of $0.28 per share compared to a loss of $0.55 per share in the prior year period. For the full year 2023, earnings per share was a loss of $3.21 per share compared to a loss of $1.95 per share for the full year of 2022. Please note that the impact of the non-cash accounting adjustments to our goodwill and intangible assets, combined with the one-time compensation charges to our CTO and former CEO negatively impacted year-to-date earnings per share by a $1.67. Now adjusted earnings per share for the fourth quarter of 2023 was a loss of $0.28 compared to adjusted earnings per share loss of $0.41 in the fourth quarter of 2022. Adjusted earnings per share for the full year 2023 was a loss of $1.42 compared to an adjusted EPS loss of $1.65 in the full year of 2022.
Non-GAAP adjusted earnings per share is defined as adjusted net income, which excludes the impact of stock-based compensation, acquisition related costs, one-time nonrecurring expenses, noncash impairment charges and noncash loss on extinguisher notes payable divided by the weighted average shares outstanding. Now turning to Slide 17, you could see that Blink has made tremendous progress in growing our revenue base over the last two years. Our revenues grew 671% in just two years. At the same time, we have more than doubled our gross margin from 14% in 2021% to 29% in 2023, and currently targeting our gross margin of approximately 33% for 2024. Now moving to our cash position. As of December 31, 2023, cash and cash equivalents totaled $121.7 million, an increase of $85 million compared to December 31, 2022 and $55 million compared to the $66.7 million on September 30, 2023.
In the fourth quarter of 2023, we raised $88 million in gross proceeds via the existing ATM. Furthermore, during the first quarter of 2024, we raised gross proceeds of an additional $25 million via the ATM. In total, between November 20, 2023 and February 12, 2024, Blink raised $113 million in gross proceeds via the existing ATM. We accessed the market opportunistically, at scale and at a very cost effective terms for Blink. As a result, we were able to pay off promissory notes and accrued interest in the amount of $45.5 million, which delevered the balance sheet to avoid significant ongoing interest costs, as well as accelerate Blink’s path towards profitability. We are very pleased to have closed fiscal 2023 with record fourth quarter and record full year results.
We believe the charging infrastructure industry is at an inflection point and we’re building a solid foundation for Blink’s continued and more importantly, profitable growth. I will turn the call back over to Brendan for his final commentary. Go ahead, Brendan.
Brendan Jones: Well, thank you Michael. So I think you all can see that without a doubt, 2023 marked a truly transformative year for Blink. We couldn’t be prouder of our team and the accomplishments for the year of 2023. But we’ve said a lot today, so let’s recap really quickly here and get to the more salient points. Our revenues surged to over $140 million accompanied by an industry leading gross margin of 29% in 2023. Additionally, as Michael just iterated, we took advantage of favorable market conditions and capitalized Blink by raising $113 million in cost effective financing. We significantly reduced our debt obligation and the burden of interest expense on free cash flow. Now, we didn’t just do that, but then when you go further at the operational level, if you look at Slide 19, in 2023, we materially expanded our U.S. manufacturing with the recent grand opening of our facility near the nation’s capital disallowed and disallowing Blink to consolidate five of our U.
S. facilities down to two, while increasing production. From an operating and logistics and networks perspective, we further consolidated. We also consolidated sales, back office functions to reduce operating expenses and improve efficiencies. And then the last one is we have integrated and rebranded our legacy companies of Electric Blue and Blue Corner, who are now Blink UK and Blink Belgium and we’re not done yet. As we move into 2024, the team is laser focused on the targets we have laid out in front, and the number one target is achieving adjusted EBITDA run rate by the end of 2024. Now, if we look at what else we’re going to do in 2024, is all listed out on slide 20. We will continue to drive global efficiencies through optimized manufacturing, logistics, distribution and facilities and back office consolidation.
We will execute our cost reductions and avoidance strategies, leverage expanded manufacturing facilities to support growth, reduce COGS, and enhance international product portfolio. We will launch a new multimarket maintenance and service and proactive monitoring network to improve uptime and charger quality and reliability and we will continue to invest in innovative technologies to improve efficiency and promote continued growth. These tactical and strategic moves will provide Blink with the necessary flexibility to achieve our positive adjusted EBITDA run rate by December of 2024. And this is fundamental to Blink’s long-term success. Finally, our success in 2023 wouldn’t be possible without the outstanding team we have in place and we thank each and every one of them across the entire organization, for their tremendous effort this year.
As you might imagine, the team is excited about Blink’s future, and we look forward to updating you throughout 2024 as we continue to make progress. With that, the call is now open for questions.
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Q&A Session
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Operator: Thank you. [Operator Instructions] Our first question is coming from Chris Pierce with Needham. Sir, your line is live.
Chris Pierce: Hey, just two from me. We had an industry leader on the earnings call a couple of weeks back talk about seeing their customers thinking about moving towards a dual sourcing model and kind of having multiple chargers from multiple brands on site. Is that something that gives you confidence in the growth to triple your production capacity in Bowie? Had that already been contemplated in the model, or is that something new that’s additive to kind of how you’re thinking about the future?
Brendan Jones: Yes, it’s an enhancement, so it wasn’t in the original math when we agreed to expand Bowie, but certainly now we’re calculating it in. So we see that as added benefit over time.
Chris Pierce: Okay. And then you’re guiding at the midpoint to roughly 20% revenue growth. How do we square that with the tripling of the capacity, kind of one seems a little more aggressive, one seems a little more conservative. What’s the right way to think about that?
Brendan Jones: Michael, do you want to handle that one?
Michael Rama: Sure. We built our budgets from the ground up and we’re factoring in. Obviously, we’re a bit conservative. As you know, we’re conservative in nature and as we head into 2024, as we navigate through some noise, but we feel confident that that range is most appropriate for what we feel is to start out the year.
Chris Pierce: Okay. Thank you.
Operator: Thank you. Our next question is coming from Stephen Gengaro with Stifel. Your line is live.
Stephen Gengaro: Thanks. Good afternoon, everybody. Two from me and one to follow up on question Chris just asked. When we think about the revenue guide for 2024 and we think about kind of what the industry seems to be going through right now, just from an adoption rate, all the data points have been a little more negative. But notwithstanding that and your comments on the guide, how would you classify like 2024, 2025, 2026? Should we think about that underlying CAGR that you illustrated in the presentation in the mid-20s as kind of a baseline? Is that a good place to start? And if so, how should we think about that impact overhead and margin progression?
Brendan Jones: It’s a good place to start. Now you’re going to see different accelerations in different places we operate, especially outside the United States. We see — we want a game for larger numbers. We want to make sure we have the capacity to take care of what is going to happen in this space, and not just the capacity, but the ability to produce at a high margin. So we’re going to be, as Michael said, we’re going to be a little conservative in numbers, but we’re basing those off of real data. We don’t make a decision that without looking at what the analysts are saying, whether that analyst McKinsey or another analyst looking at what they see as industry growth. Then we cross apply that with where we’re active, and then we look at the segmentation and see, okay, where’s our greatest opportunity to expand revenue?
And then thirdly, the other leg of that is when we’re looking at our own internal functions. It’s what are our other revenue opportunities as we continue to grow and scale the industry? But we think 165 to 175 is healthy, and that is we’re going to have a lot of work to do in that, and it’s going to enable us to grow our margins as well.
Stephen Gengaro: Thanks. And then as a follow-up, we got to see the new facility this week. When you think about that facility ramping, and I think you’ve consolidated and you’ve centralized the warehouse and production, et cetera, how should that impact underlying product margins over the next two years?
Brendan Jones: Yes, it’s going to have a positive impact. As you imagine, we’ve done a couple of different things. Right. So we had five facilities, one in Miami, we had actually four in the greater Washington, DC metro area. We’ve now consolidated all those to two. And with that, we’ve also been able to reduce overhead across the board at all those. So we’re anticipating a positive margin impact for that. But we haven’t crystallized those numbers yet, so we have it at a range. And that’s something that you’re going to see manifest in the Q1 report, which is looking really good, and the Q2 and Q4.
Stephen Gengaro: Okay, thank you for the details.
Brendan Jones: Operator, the next question please?
Operator: Sorry, sir, my line was muted by mistake. The next question is from Craig Irwin with ROTH MKM. Your line is live, sir.
Craig Irwin: Hi. Good evening, and thanks for taking my questions. More on the housekeeping side, can you maybe update us on your DC Fast Charger portfolio? You know, where are we at as far as the new product introductions that you were planning? And can you maybe breakout for us what the contribution was in 2023 and whether or not there was, again a margin drag potentially in the fourth quarter?
Brendan Jones: Yes. So our DC Fast Charging strategy is threefold right now. First, we have our own products that are already in the market, which are predominantly fleet applications. And that’s our DC 9, which is actually the best seller DC project product we have. And it comes in 30 kW and 40 kW. It’s being primarily used at dealerships fleets across the nation. Then we have what we call our third party outsourced, where we have contracting manufacturing on a Blink, look and feel charger. And that charger takes up where the DC 9 leaves off and fills our orders, whether those orders are to dealerships, fleet companies or municipalities. The last piece of the strategy is our own designed DC 240, which the design is done on the charger.
