Q4 2022 Blink Charging Co Earnings Call
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At this time all participants are in a listen only mode and a question and answer session will follow the formal presentation.
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I'll now turn the conference over to your host fatality Stella.
Vice President of Investor Relations Sir Please go ahead.
Thank you Ali.
Welcome to <unk> fourth quarter 2022 earnings call.
On the call today, we have Michael <unk>, founder and Chief Executive Officer, Brendan Jones, President and Michael Rama Chief Financial Officer.
Today's discussions will include non-GAAP references.
These are reconciled to the most comparable U S GAAP measures.
<unk> of our earnings deck.
You may find the deck, along with the rest of our earnings materials and other important context on Blake's Investor Relations website.
Today's discussion May also include forward looking statements about our expectations.
Actual results may differ from those stated the most significant factors that could cause actual results to differ are included on page two of the fourth quarter 2022 earnings deck.
Unless otherwise noted all comparisons are year over year.
Regarding the Investor Relations calendar.
<unk> charging will participate in the Roth MTN Investor Conference on the 14th of March.
The JP Morgan Energy conference on the 20 <unk> of June in New York City.
This fall our announcements for additional investor events in the future.
And now I will turn I'll turn the call over to Michael Parkas founder CEO Blake charging go ahead Michael.
Good afternoon, everyone. Thank you for joining us.
Before I dive into our record financial results for the year I would like to reflect on 2022, which was a transformational year for the EV industry and even more so for Blake.
Industry Wise, we saw a record year for electric vehicle sales globally and this trend is only poised to accelerate based on consumer preferences and strong governmental incentives.
With vehicles are becoming more commonplace on our roads and highways as global EV sales grew by 68% year over year with Evs, achieving around 10% market share for the very first time and the vast majority of consumers, who try and easy never go back to an internal combustion engine vehicle again.
In fact, many Oems are going electric with their mainstream offerings, and making them more affordable in order to achieve scale, which will ultimately lead to price parity with their internal combustion engine offerings. Just think of the impact. This will have on societies and the environment in the next 10 to 15 years.
Mobility is being revolutionized in a way that has only happened once before when people went from horses and carriages to self propelled vehicles.
This shift to electric vehicles will not only change the needs in terms of how we fuel but also puts in place the need for new infrastructure required to service and maintain these vehicles as evs become the dominant means of transportation.
As for Blink 'twenty.
2022 was truly monumental not.
Not only did we increased our revenue by almost threefold during 2022.
When compared to 2021 2021, we fundamentally change what blink represents to the EV charging industry and our position around the world.
Slide four shows our capabilities as the only fully vertically integrated charging company in the United States.
Only a few vertically integrated charging providers globally.
Our ability to design and manufacturer of equipment and ownership of our network as a competitive strength, particularly when paired with our flexible business models as shown on slide five.
With our variety of ownership models, which range from simple network subscription to host owned hybrid or Blink owned and operated we are intensely focused on consistently delivering excellent products and services with an unparalleled customer experience.
Having control over the engineering design and manufacturing of our products and software enables us to efficiently scale the business while at the same time, delivering superior products and customer service as.
As a 14 year veteran of the EV charging industry, we have the expertise to identify and meet customer needs and design are best in class hardware and software offerings to exceed customer expectations in essence, we now control our destiny, while leveraging scale and knowhow.
To generate some of the highest gross margins in the industry today.
As for our financial results you can see on slide six that our fourth quarter revenue grew 184% year over year to $22 6 million.
And our full year 2022 revenue grew 192% to $61 1 million compared to only $29 million last year in 2021.
Our growth significantly outpaces the industry, we are second to none and as a testament to the strength of our experienced team our strategy and our products and service offerings.
Our service revenue grew by 213% in Q4, 'twenty two to $5 $7 million compared to $1 8 million in Q4 of 'twenty, one and importantly, our network fees grew to $2 $3 million in Q4 dollars 22.
That is an increase of 827% when compared with the same quarter last year.
Repeat 827%.
And at very healthy gross margins.
Looking at earnings performance adjusted EBITDA loss for the fourth quarter of 2022 was $14 8 million.
Which is a sequential improvement of $3 million when compared with quarter three of 2022, which was $17 6 million.
Adjusted EPS for the fourth quarter of 2022 was a loss of 41.
Compared to adjusted EPS loss of 47.
In the third quarter of 2022.
Our number of stations contracted sold or deployed grew to 66478 units an increase of 105% when compared to the prior year of 2021.
Our growth in network fees and charging stations is related in part to our strategic acquisitions of semi connect in electric blue in 2020 to.
Reflecting the strength of adding these complementary businesses to the <unk> family.
And subsequent to year end on February 19th.
We closed an oversubscribed registered public offering of common stock for gross proceeds of approximately $100 million.
The newly raised funding will go towards running the business and strategically investing in complementary opportunities. We expect these funds to take us well into 2024.
Also in January we exhibited at CES in Las Vegas, where we unveiled five new charging products for a wide variety of customers here in the U S.
And also for customers in Europe , Latin America, and Southeast Asia.
India for an example.
It's a market, where we expect strong growth in electrification of both two and three wheeled vehicles.
And we have a very very special offering for those compact evs.
2022 was a year of tremendous progress for Blake this.
This growth was enabled in large part by the acquisitions, we closed in 2021 and 2022 as shown on slide seven.
To recap our timeline of recent acquisitions, we acquired blue corner in May of 2021.
Adding over 7000 charging points.
And a strong European network.
This acquisition really opened a window into the lucrative European market for us.
Since completing this acquisition, we have added nearly 5000 or 70% more charging ports to the existing blue corner network and as a result, the Q4 2022 revenue for Blue corner grew nearly 50% and it's trending very strongly.
Adding onto our growth in Europe in April of 2022, we acquired electric Blue.
We also call it.
In the fast growing market in the United Kingdom, adding nearly 1200 charging ports to our network and our confirmed order book of approximately 16 million pounds.
Finally in June of 2022, we closed on our largest acquisition ever.
We acquired <unk>, which in addition to a robust charging network and customer base also brought key design and manufacturing capabilities for level, two and DC fast Chargers.
Positioning blinked to qualify for the buy American requirements of the Navy plan.
Semiconductor has one of the highest if not the highest gross margins in the business, which we intend to institutionalize across the entire Blink organization.
Overall Blink is a combination of many acquisitions since we were founded by adding complementary businesses gradually and strategically we have built what I believe to be the most talented team in the industry second to none, allowing us to leverage our collective knowledge to deliver the best products and.
This model is possible.
As you can see on page eight we have grown to become a truly global business with over 66000 charges sold deployed or installed in 25 different countries with much much more to come.
However, we are not done here <unk>.
Slide nine illustrates that the industry is positioned to see exponential growth as electric vehicles continued to win custom over customers all over the world.
Bloomberg predicts that by 2040, we're going to need anywhere between 340 to 490 million charges globally to meet demand.
Today, we're not even close at about 14 million charges with many many of them not even viable for where we are today at best.
Just as the shift to Evs continues to build momentum just imagine the opportunities that lie ahead for the charging industry and especially for Blink. We are very excited for the future and are working hard to prepare the company to be able to handle this amazing growth with.
With that I will pass it onto Brendan Jones, our president.
Thanks, Michael and good afternoon, everyone as you heard from Michael's comment Blake Ted.
A great year, I'd, even say a very very very good year, but I overemphasized Barry.
Now, let's jump into some more of the slides, let's go to slide 11, now as Michael stated within the last 12 months Blink is contracted sold deployed or acquired over 35, 34000, charterers, both domestically and internationally and I think we have to keep reiterating the point that bringing the total charges.
For the company to over 66000 Chargers since blank conception now we have a diverse mix of deployments in the United States and abroad and the percentages are that 76% of our total companywide blinked charges are deployed in North America and right now 24% deployed internationally.
If we jump over to slide 12, Youll see just a partial sampling of our customers, but as indicated we service a variety of those comfort customers in different industries and we are.
Have won multiple contracts with an array of well established commercial enterprises multifamily complexes planned communities health care facilities fleets and municipalities around the world.
We also just want to reemphasize the important point that Michael made a moment ago.
That blink as the only fully integrated charging provider in the U S market and our capabilities combined with our flexible business model.
And then superior products position us very competitively to attract new customers and long term contracts.
With that said lets jump on to slide 13, and what we're looking at now as examples of our innovative product portfolio. We now have a wide variety of projects.
<unk> ranging from residential L. Two chargers to high power DC fast Chargers as well as our newly unveiled vision IQ200, which we'll talk about in a little bit.
These charges, we serve as both residential and commercial locations, including an increasing number of fleets across the United States.
Now on slide 13.
<unk> you can see our currently available DC fast Chargers.
We think it is important to reiterate that Blake as a global company addressing the demand for power and different DC installation settings that vary around the world. So we carry a wide variety of DC fast charging offerings to meet customer specifications.
For example, one of our latest addition is a wall mounted dual port.
Kilowatt, DC fast charger, which works well in tight spaces, especially in the densely urban environments in Europe .
But regardless of the specific setting.
We offer our customers flexible DC solutions and ownership models that provide anywhere from 30 kilowatt charges to 350 kilowatt and above tower.
Now, let's let's go ahead and examine slide 13 now what this shows is the innovative new products, we recently displayed at CES.
And I'm going to take you through this slide in different parts of it so in the top center.
You'll see our all new vision charger that this charger is designed as a two in one solution.
Has a 55 inch LCD display screen, which create the perfect point of charge advertising solution. Additionally, the vision offers charging an advertising revenue share models providing.
Unique solutions for any of our customers.
To the right is our new 180 kilowatt DC fast charger.
We'll be buy American compliant and compatible with the newest electric vehicle charging.
Architectures.
To the left is another introduction and this is our series 930 kilowatt DC fast merger now this is a small footprint charging station designed for speed and flexibility representing blinked latest solution for fast charging situations across the global markets.
Now if I can take you to the to the bottom of the slide in the center is our E Q2 hundred Charger. This is our intelligent affordable and scalable charging solution designed specifically for the European markets.
The <unk> hundred is future proved as it supports technologies like <unk>.
So 15, 11, eight O CPP to point out and bi directional charging also known also vd group vehicle to grid or BTG as it's sometimes called.
Next is the series three and Michael referenced. This earlier this is a flexible and versatile EV charging solutions designed for the two and three wheeled vehicles for Asian, and Latin American markets now our primary target market for discharges currently southeast Asia, where according to Bain <unk> company EV adoption.
<unk> will be 40% to 45% for two wheel and three wheeled vehicles by 2030 now let's keep this in mind. This is a third 10 million to $14 million of those vehicles will need flexible charging infrastructure now finally at the bottom here. We also have the release of the PQ $1 50.
Or energy kick now what this is is a smart shaping charging cable design for residential charging in the European markets and perfect for the Ryan Mersman of charging cost for fleet fleet vehicles at all.
We are really excited about the vast variety of products, we have on the market and those we recently unveiled right now Blink is confident that our product portfolio has a solution to meet charging requirements anywhere in the world.
Now, let's jump to a different topic as we look at slide 16 in 2022, we completely redesigned and launched our blank network and blinked charging mobile apps.
Our state of the art infrastructure, our tech stack, our user centric approach allowed us to create a technological platform that can be augmented to quickly and efficiently without any service disruptions to our customers and that is key now Blake mobile App put EV drivers in control.
By giving them improved capabilities to search for nearby amenities charges by ZIP code city business category or address and seamlessly integrating EV charging into everyday life.
Additionally, drivers can save their favorite charterer locations and managed payment information as well as view payment history and real time charging status.
The App is also available in both iOS and Android platforms. So now, let's let's jump to 17 real quickly here. So when it comes to host benefit.
The entire blinked experience has been redesigned with ease of use in mind signposts will also have expanded functionality to create dynamic pricing protocols responsive to various use case locations and schedules.
New cloud based Blake network allow site has to manage their business and multiple languages across 25 countries. We expect to transition all of our legacy networks acquired via acquisition to Blink newly launched network by the end of this summer.
Now, let's jump into slide 18 market growth continues to enjoy the support of government initiatives.
Electric vehicles comprised about 10% of all U S sales in 2022, and we expect this trend to continue and accelerate.
In the U S. The administration is committed.
<unk> committed to building a nationwide network of 5000 charges and it is targeting the goal of 50% that's 50% of all new vehicle sales will be evs by 2030, and Thats, Jeff seven short years away.
The White House mentioned Blink in their recent announcement on February 17th regarding the expansion of U S manufacturing footprint and new standards for its buying American program. So right now we are proud to state that Blink is compliant.
When it comes to buy American requirements, and we expect to meet the future requirements that will be enacted in July of 2024.
So we are targeting production of 100000 units annually in the U S.
Which we expect to achieve in a major part by the expansion of our Bowie, Maryland facility and with the establishment of a new manufacturing plant for DC fast Chargers and L. Twos that we are actively in the process of identifying the location for that plant.
Now, let's jump to slide 19, and this is a different topic. This is looking at synergies some when we move on to synergies and the progress. We have made this quarter with the help of Mckinsey consulting we performed an extensive analysis to discover and outlined synergies across the entire global company.
<unk> and especially around the acquisition of semi connect.
As a result, we identified and are targeting a total of $27 7 million in synergies related to just semi connect and I'm happy to report that $5 $3 million of those synergies have already been captured.
We have broken down the synergy implemented patient into three phases phase one began in December and focused on sales marketing and some aspects of operation.
Phase two and phase three will begin in March of 2023, and will focus on global operations services technology and manufacturing.
If we look at the $5 3 million number that has already been obtained $4 1 million relates to FTE reductions and over $1 million will be savings from reducing and simplifying the number of vendors. As stated we are just at the end of phase one.
We will have a lot more information to report over the next several quarters.
As Michael mentioned earlier, when you dig a little deeper in terms of results you will see that Q4, adjusted EBITDA improved sequentially by nearly $3 million when compared to Q3 of 'twenty, two and revenue grow more than $5 million compared to third quarter.
We are narrowing our losses and at the same time, we are growing our revenue and we are looking to continue this momentum moving forward some.
So to wrap all this up 2022 has been a truly an impactful year of progress for our industry.
A significant year for Blink with record growth in all areas of the company, we're elated with what the future holds for Blake, so with that I'm going to now turn it over to our CFO Michael Rama for additional comments.
Thank you Brendan and good afternoon, everyone now turning to slide 21 total revenues in the fourth quarter of 2022 grew 184% year over year to $22 6 million another record for Blake.
In addition, fourth quarter revenues were up 31% sequentially when compared with the third quarter of 2022.
Primarily driven by the increased demand for our global EV charging infrastructure and a higher service revenues.
<unk> sales in the fourth quarter of 2022, or $15 8 million, an increase of 176% over the same period in 2021 as customers purchase greater volumes of our commercial Chargers DC fast Chargers and residential Chargers.
Product sales for the quarter also included revenues generated from our acquired companies of semiconductor and EV.
Fourth quarter 2022 service revenues, which consists of charging service revenues network fees and ride sharing revenues were $5 7 million.
Increase of 213% compared to the fourth quarter of 2021, the year over year growth was primarily driven by greater utilization of our Chargers. The increased number of charters on blinks networks revenues associated with the blank mobility Rideshare program and incremental service revenues from ACA.
As many of you already know we combined these service revenue line items into one to more accurately differentiate between the product and service aspects of our business.
Operationally. This approach also aligns with our company's strategic goal of increasing the service component of our revenue mix and growing our reoccurring revenue base in Thai is easy adoption accelerates and utilization of our charging stations improves we anticipate seeing a larger mix of revenue.
Coming from services.
Gross profit for the fourth quarter of 2022 was approximately five six was approximately $6 5 million an increase of 370% over the same period last year and up 35% sequentially from the third quarter of 2022.
As a percentage of revenues gross margin was 29% in the fourth quarter of 2020 to over 1100 basis points improvement when compared to the same period last year.
Sequentially, our gross margin Q4, 2022 grew nearly 100 basis points.
As Brendan mentioned earlier, we continue to look at ways to reduce our component in operating costs, which should have a positive effect on gross margins.
Operating expenses in the fourth quarter of 2020 to $34 2 million compared to $20 5 million in the prior year period, the year over year increase reflects the impact of recent acquisitions as well as our commitment to positioning blank to capitalize on many EV infrastructure opportunities that lie ahead.
Same time, we remain vigilant about cost reduction opportunities and additional synergies as <unk> is.
Brendan mentioned earlier.
Last year around this time, we began presenting adjusted EBITDA. Our management believes this non-GAAP measure is useful in evaluating our company's core operating performance because it excludes items that are either significant noncash or nonrecurring expenses adjusted.
Adjusted EBITDA for the fourth quarter of 2022 was a loss of $14 8 million.
Compared to a loss of $9 1 million in the prior year period, largely due to the higher operating expenses as I just mentioned sequentially Q4, adjusted EBITDA improved nearly $3 million or nearly 3700 basis points compared to the third quarter of 2022.
And improved nearly 5000 basis points year over year compared to the fourth quarter of 2021.
As you could see as a percentage of revenues, our adjusted EBITDA improved nearly 40% since Q4 of 2021.
Adjusted adjusted earnings per share for the fourth quarter of 2022 was a loss of <unk> 41 per diluted share compared to a loss of 44 four.
<unk> for diluted share in the prior year period.
non-GAAP adjusted earnings per share is defined as adjusted net income which excludes.
Excludes significant noncash items, such as amortization of intangible assets non recurring acquisition related expenses and additional stock based compensation divided by the weighted average shares outstanding.
Adjusted earnings per share for the fourth quarter of 2022 was a loss of 41 compared to adjusted EPS loss of <unk> 47 in the third quarter of 2022.
Now turning to slide 22, you can see that both revenue and gross profit performance has strongly improved over the last several quarters with significant sequential and year over year growth.
As we continue to expand our own and operate strategy.
<unk> greater demand for EV infrastructure and increased utilization rates. We believe we are well positioned to drive significantly improved revenue and gross profit performance moving forward.
Moving to our cash position as of December 31, 2022, cash and cash equivalents was $36 6 billion. Following the close of the quarter Blink closed on an oversized public offering with gross proceeds of $100 million.
We are pleased to have closed fiscal year 2022, with a record fourth quarter and full year results. We believe we are building a solid foundation for continued growth as evs are becoming more and more common among consumers and demand for our products and services service gross.
I will now turn the call back over to Michael <unk> for a few final comments go ahead Michael.
Thank you Michael 2022 was a truly transformational year for Blink instead.
And for the entire industry.
I am very proud I am actually I am beyond proud of our team and what they've accomplished this year.
And completing and integrating two large acquisitions to launching a brand new we can design from the ground up network.
New mobile applications.
We're also introducing a number of best in class products for both level, two and DC fast charging it has been an intense year, but it's also been a very very rewarding year for us.
And as you look at the EV charging industry, we have positioned blink to be truly unique.
Number one.
We are a truly fully vertically integrated <unk> provider with software and hardware engineering design.
Manufacturing capabilities, and we're providing the most flexible ownership models.
Period number two.
Our charging solutions range anywhere from simple level tomb home home charger to some of the most sophisticated DC fast chargers in the market.
Number three over the years, our flexibility allowed us to create strong partnerships and acquire a diverse client base.
Speaks for itself.
Clients. We have are just amazing they are just amazing companies.
For <unk>.
Electric vehicle charging Tam is positioned for gargantuan growth.
It is forecasted to increase at more than 30 times current levels over the next decade and a half.
Number five to position ourselves for this growth.
We have expanded our global footprint and scale in over 25 countries and counting.
And finally six the last two quarters have shown that our strategy works as we have achieved some of the highest margins in the entire industry.
We drove strong results in 2022 with our visibility today and our optimism around the opportunities we're seeing in the marketplace. We are targeting 2023 revenues in the range of $100 million to $110 million and targeting gross profit in excess of 33% for <unk>.
Full year 2023.
With continued solid operational execution, we believe we are well positioned to generate continued growth and improved margin performance. We are excited with what the future holds for blink.
With that we will now open the call for questions.
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One moment, please while we poll for questions.
Thank you.
Our first question is coming from Matt Summerville with D. A Davidson. Please go ahead.
Hi, Good afternoon. This is whaler jellison on for Matt This afternoon.
Hello, I wanted to start out by asking you.
About reliability of charging stations, because we started to see to come into the public consciousness, a little bit more making sure that our public infrastructure is reliable and can be dependent upon.
I'll ask for specific performance indicators on Unblank library, what I'd Marshall would like to learn a little bit more about what blink is doing to drive continued improvements in the reliability of the network going forward.
I'd love to hear what you're thinking about with that.
Okay that happens to be a great question and it's something today that some.
Plaguing a bunch of networks.
Without a question historically, if you look back.
The first generation of the technology that was launched whether it was charge point.
<unk> blinks original hardware.
Even general electric.
Siemens Schneider and even the Big boys whomever the all the Gen. One equipment was.
Not meet up the part of the reason why it wasn't because we really didn't understand the terrain.
And remember these are high powered electrical equipment that is subject to the elements and conditions.
And really theres been a lot of improvements.
With the generational changes of hardware overtime.
And that's even more so for DC fast Chargers, and Thats, where youre hearing most of these operational problems with.
And people driving up to a charge of not being able to charge your car in moving on so I'm not going to say, we haven't had any issues. We've had most of the issues that Blink has had has been in prior generation equipment and network. Prior before we bought the company and took over those assets. So unfortunately with legacy issues, we've gotten rid of them.
Most of those issues.
And again, you deal with equipment going off and you have to service it and take care of it and that's really the main focus.
But the law the DC fast charger operators like the easy goes we electrify Americas and some others they've been really bearing the brunt of those issues and problems.
Because DC fast Chargers are a lot more complicated and require a lot more maintenance Brendan do you want to add anything to this.
You're on mute.
Sorry about that guys yeah. So.
A couple.
Points, but first just reiterating what Michael said.
Definitely the complexity of DC Chargers.
Five times, what it is in the L. Two charter I think it was a year of awakening for the industry as Michael said, everybody now has taken quality very much series C. Blink is participating in quality and out analysis with both the Dod and in California are separately with carb and CEC. So we're examining everything.
We're doing and we're collaborating with the industry not just improve our quality.
To assist in the improvement of quality across the board.
We also.
Saw a little bit of an unusual blip in this summer all networks based on the unprecedented event when it came to the sunsetting of the two and <unk> networks from all the providers and that created a significant disruption for everybody and most of US all work together, we upgraded a lot of the equipment to the floor in <unk>.
System, but you did have this depth and this big.
Bubble there for a little bit of time, where everybody was working to catch up but now everybody is getting on the same page Blink is definitely focusing on making sure that we deliver the highest level of quality and when we install DC fast Chargers were going to do that knowing that we have to double down on these and.
Understand from a call center for our network operations perspective, and from a maintenance provider that we have to ensure that when the customer gets to the charger they can charge.
And we're moving forward with all those activities now as we speak.
Understood.
Brendan said Blink is really focused on.
Deploying level two charging stations a lot less maintenance of Atlas issues.
<unk>.
It's a lot less common when you roll up to.
Drive up to a level two charging station that youre going to have these issues.
And as we.
Deploy our next generation of DC fast Chargers, we believe we're going to be addressing a lot of those maintenance.
And operational issues of the current generation of the DC fast Chargers.
Understood. Thank you for that and then as a follow up.
Capital offering now successfully completed I'm curious as to how Blink is thinking about capital allocation moving forward deciding between organic investments in your own manufacturing or innovation capabilities or additional acquisitions of assets that might bolster the blank network going forward.
Okay Great question.
We got caught in a little bit of.
Zone, Okay. We all know that there's literally billions and billions of dollars that are now gone.
To be earmarked for our industry.
Whether that's for building facilities.
Appointment of infrastructure subsidizing rebates and all these kind of amazing things. So the capital that we raised was really a bridge to get us to a lot of that funding.
We believe in the future.
And we've been as I'm sure people who've been on these calls before have heard US say this we've been looking for non dilutive capital or very little dilutive capital. The industry is really really getting to that point, we're seeing it in Europe , where there is banks that are financing deployments now.
And we're going to see stuff like that happen here, it's really about utilization so.
We're going to look to use this money to capital we just raised to really.
Handle the operations of our business to grow our business and we believe in short order that theyre going to be some very interesting mechanisms to finance some of the capital requirements like the new build out as well as the new facility as well as.
Being able to deploy a serious amount of of charging stations.
Thank you. Our next question is coming from.
Craig Irwin with Roth capital. Please go ahead.
Hi, good evening and thank you. Thank you for taking my questions.
So Michael the one thing that really stood out to me was the more than eightfold increase in network fees in the quarter.
<unk> really fundamental seems to be going on there can you maybe talk us through what the margins are on those what's driving growth there.
And how this is likely to take shape do we continue to see this this outsized growth.
Most multi fold increases.
Materializing over the next number of quarters.
Yes, I'm going to let Michael Rama address the margin and so on but.
This is part of selling hardware to third parties.
This is.
Recurring fees of selling energy and other services.
We're going to see massive growth and a lot of our recurring revenue models.
And that's because there are a lot of people who are buying charging stations.
And we're deploying a lot of charging stations and when we sell a charging station we get a network fee.
Every single month paid by the property owner.
Yeah, we're going to see a lot of increases and as we deploy more and more charging stations and I can tell you we haven't seen anything yet.
There's just a tremendous amount of growth we're going to see in this business and I'm going to repeat it again I've said this a bunch of times you look at what Bloomberg's numbers are in others.
Talking three four or 500 million charging stations needed by 2040.
We're lucky if we're at the tens we're not even there yet.
Especially viable ones you know if you heard some of the reports that came out.
A little while ago.
If you go came out so they need to have this go easy go renew.
That's them acknowledging that many many many of their DC fast Chargers the legacy DC fast charge was only to be pulled out of the ground and replace we don't have to do that.
We're in a much better position than that.
Just to put it in new locations and are constantly getting more and more of those locations, but the margins and to address.
Referring to the margins of that business.
On the processing fees on the networking fees, they're massive and Michael can fill you in a little bit more.
Yes, and Craig just to add a little bit more color to that.
The semiconductor acquisition.
It came with a vast very large network and even though there.
Selling third party.
Hardware sales, but their stickiness in the network revenues that we're getting from that business and that's where we're really seeing that take off in the third and fourth quarters of 2022 and the expectation is that will continue as the network keeps growing as we put more.
Charges on the networks on a combined networks and yes as Michael mentioned the margins are strong and that's why we've always been looking at the service part of the business to grow that because we know the margins on that business are going to continue to expand.
Whereby the hardware end of the business over time could get Commoditized. So.
The benefit of a very well balanced portfolio.
Revenue offerings is to have that mix of.
Gross profit potential if you will.
Excellent. So if I could maybe ask for just a little bit more color.
<unk>.
There's some fringe elements that.
Have been suggesting your utilization on your network.
<unk> materially different than than your peers, and we know that not to be true.
Can you maybe talk about utilization on the network and how utilization contributes to.
To this.
Growth that Youre seeing.
We're seeing that one piece of utilization there is no question about it and when you average in our European operations, even more so.
Again, youre looking at the difference between a portfolio of let's say slowly.
Fast Chargers, where youll see even a much much lower utilization rate versus AC Chargers.
And you have to realize it doesn't take a very large utilization rate for level two charging stations in the public domain multifamily parking garage is it doesn't take much utilization for them to be very very profitable.
But without a question.
Seeing a huge increase in those utilization rates, Mike you want to elaborate on that a bit.
Yes, as you could see a quarter over quarter our charging.
Revenue part of the business has sequentially has been increasing.
Again more more charges on the network more own and operate.
And as we've always mentioned theirs.
Charging and.
Utilization has been going hand in hand, a bit with the.
Penetration of Evs to overall vehicle sales and as we're approaching that 10%, we're starting to really see pick up traction where we were just 12 months ago, where it was and I think it was the middle single digits, 5%, 6%. So we're seeing that in our portfolio of charters, where the utilization is trending positively and increasing because there's just more evs on the road.
That would be charged.
Absolutely that's good news and thanks again for taking my questions.
Thank you. Our next question is coming from Sameer Joshi with H C. Wainwright. Please go ahead.
Yes, thanks for taking my questions and congrats on a great quarter.
Would you comment on.
Your position with the <unk>.
<unk> opportunity given that you have.
It's been done.
Model.
Does it lend itself to.
The BTG opportunity.
Yes.
By owning and operating the Chargers were able to monetize.
<unk> when there are programs that allow that to take place.
Again, it's about having the right equipment.
And having the right relationships.
With utilities.
Brenda you want to expand on that a bit.
So we're making.
Our chargers, especially all of our new Chargers Vijay capable.
Cable, whether it's a home charger a commercial L. Two or do you see fast charger and whether it's on the owner operator model, whether it's sold so all the new designs will have that capability built into it where you already as we said during the presentation. The European Charterer has that built in and that features being added both to the network into our charters as we speak.
And that will we'll work to monetize it right. So how do you monetize.
<unk> and that's the big million dollar question. So we're working with a variety of outside companies on this topic.
Right now to figure out.
How do we work with consumers how do we provide them a solution with the installation of a charger and the vehicle because you've got to have the vehicle and the charger.
To be able to do it right.
And we'll have more to come on that as we move forward, but the goal is to explore and then two where possible to monetize.
Everything we can on that topic.
Good.
Up.
And then just a second question on some of your one other thing I wanted to do it.
And.
I'm sure you've heard me say this before.
Right now this.
This is a land grab.
And we've been in land grab mode for 14 years.
And there are going to be many different ways to monetize these locations in the future.
The cars are coming Youre seeing more and more people buying these evs.
It's getting a getting a lot more traction out there and we knew that they were going to be many ways. Besides just.
Showing the charging station or getting networking fees are getting processing fees, we knew that ultimately we're going to be able to sell electricity to the to the EV owners, maybe if we're able to aggregate enough electricity over time being able to then turn some of our hosts into customers of electricity advertising Vita theres going to be many different ways.
For us to monetize these locations as we grow more and more and as we have more electricity purchasing more hardware. All these things factor in what leverage we're going to have.
But it's our intent to monetize these locations as our scale grows and we're able to offer different services and products to our host owners and that you'd be drivers.
Yes, but it's not only BTG theres a lot of really amazing ways to monetize these locations.
Thank you for that.
The second question was about just an update on any visibility on the state level funding in the federal funding.
Coming down.
Should we start seeing any benefit from that.
Or at least the initial.
Positive.
<unk>.
Use from that in the third and fourth quarter or do you think it will be 18 to 24.
A big influence.
Yes, Sameer a question go ahead Brendan.
Yeah.
Okay.
I was going to say I was going to tell Samir.
Again, we're still.
At the.
At the Mercy of the government in them getting their programs together and figuring out all the things.
Which is happening slowly but surely.
It's just a matter of having some patience and sure Brendan is going to add to that.
Yeah. So only three states are out right now and one pulled back.
So, Ohio, Kentucky.
In Pennsylvania, and Pennsylvania pulled back a lot of people were waiting to see what the new Navy rule came out and buy America as we talked about were compliant on the LTE side will be.
Working on compliance and we will be compliant with the D C side.
So youre going to see some some states right now I'll take that into consideration and then figure out your timing, but these are only guys out are still in one has gotten responses in and they're evaluating to see if they require and the other two they're basically slow walking and then after that we got 47.
When other states right, so youre not going to see anything meaningful, especially in terms of funds dispersed youre going to see some awards, perhaps as we get into the summer.
Few probably in Q4, but the real work is going to happen in 2024.
Got it Okay and then just following up on.
Previous question from Greg.
I think so.
This margins should continue to improve.
Drew.
<unk> 2025 26.
What proportion of your revenues do you expect to be from service related.
Offering.
I'll jump in on that and obviously as we go forward.
We've tried to.
To keep the.
Strategizing, where we do more owned and operate but as just as yet.
Thank you youre going to tilt a little more one way you get a big order that comes in so so predicting the scale and the balance between the two we don't like taking the profit from those the hardware sales, but but again the point is we're starting to see a little bit more.
Bigger volume of own and operate and to get what that split is going to be it will be a nice 60, 40 split maybe at host versus or operate but you never know how that's all going to shake out.
When we started.
Shlomi I want I want to add to that.
For a while we saw a lot of businesses and we saw a lot of.
Excuse me municipalities and the original Rfps, they wanted to own and operate the hardware assembly with businesses.
Now that they are dealing with it and having to provide the service and operate the charging stations. They are realizing that they don't want the headache, and just like the outsource.
Almost all of the services. They provide this is something they need to do as well. So we're seeing a lot of legacy customers, who are buying hardware, who now want us to own and operate we're seeing a complete changeover.
In municipal contracts not only here in the U S, but globally, where they don't want to operate they don't want to own and operate these things they don't mind subsidizing someone in helping them put them in the ground and but they just don't want to deal with the day to day that is a huge massive benefit for us.
As compared to some of our competitors again, that's why we have the different offerings. That's why we could sell to you or we can own. It in your location, we want to make sure that we could satisfy every single customer.
So.
But we are seeing we are seeing a conversion where prior owners and operators want someone else now managing that service for them and we're seeing again a lot of that on the municipal side.
Yeah, No I agree I think we're very well.
Position.
For that kind of a scenario.
Good luck for 2023 and beyond.
Thank you.
Thank you. Our next question is coming from Oliver hung with T. P. H. Please go ahead.
Good afternoon, everyone and thanks for taking my question.
Just on the owned and operated model kind of a follow up to the prior question, but you're off a growing footprint looking at the charter growth getting up to 66000 or so.
You all mentioned working on converting legacy owners of Sema Chargers to the owned and operated model just kind of wondering how that was going and was also hoping for a bit more detail in terms of how many of those charters are revenue generating chargers under either a blink on turnkey or hybrid owned business model and what the split between those two set out to.
<unk>.
I'll jump in just a little bit and then maybe.
On the.
Right now there is about 49, almost 5000 charges that are owned by us.
On our networks.
And there is there is.
Again remember the 66000 is historical legacy that goes back over time, and it's all types of Chargers.
You see fast Chargers commercial Chargers private Chargers, all trucks, a starter home Chargers ones that are not a networked all that stuff. So, but we have a big portfolio. That's generating obviously, that's why we're just not the.
It's not just what we thats owned by Us, but its also whats in our networks and we have over 50000.
Or could 2000 <unk>.
Units that are in our networks to generate some kind of recur.
Some kind of revenue that is generating from a network piece. So so there is a.
We have a split between that and what's owned and operated.
Yes, so as it relates to the semi connect portfolio. So we are just at the beginning so we've identified.
Multiplicity of different sizes that.
Want to engage in the owner operator model, especially as.
Michael said, they want to switch to the charging.
As a service as opposed to own and operate it themselves. So we've already won.
A significant contract in that area now we're going to accelerate this as we convert the semi connect network over to the Blake network and Thats happening.
30.
<unk> 30 days.
Today, and then we combined all of the portfolios together and cross sell to everyone. So we expose all of <unk> customers to the owner operator in the hybrid model.
We have a unified pricing plan.
<unk> product portfolio.
To offer them and we're already seeing some very significant positive momentum in this area.
And even.
Things that we'll be able to talk about later on about awards that we have a high degree of confidence that we will receive as well. So all the leg work is ongoing and it's pretty intense on both those topics.
And extends beyond its also.
Penetrating the multifamily dwellings, even deeper than we previously have.
And making sure that everybody knows that the.
The new company the combined company has more products more services and more affordability.
In it based on some of the moves we're making from the manufacturing perspective.
So the best is yet to come.
Awesome, that's encouraging to hear and for a second question just kind of on the manufacturing side of things I think is back mid 2022. When you all kind of announced that deal you all running close to 10000 unit run rate just wanted to get a sense for where that is today how off.
That facility is running relative to the maximum run rate that is fully capable of.
Yes, so what we've done.
Again, there's two different.
Things happening simultaneously so.
We've increased the productivity out of buoy already so we pushed up to between 12 13 about to hit 14.
<unk> units on that and we did that without adding much right. So we're moving to a second shift out of there as we speak and that's the push the output above 3000 units moving it up to four per month, then we're going to add some square footage in a similar area to get that up to.
The target now we're going to have a phased approach we're going to get it up to $25 30, we're going to add more square footage than move on on on up to.
The 40, and then the 50000 range out of that facility. The one changes we elected not to do a third shift because given all the quality concerns.
And the inconsistency in third ship mouth power, we decided to keep it at two instead of going to a third.
And just to increase the square footage so all of that is on track.
And so.
So we feel very confident about that to be able to meet the product demands of our customers from there but in addition to that.
The new manufacturing footprint calls for a minimum of 10000 DC fast Chargers and the remaining 40000 will go also to El <unk> production. So we're going to book buildup buoy and get that maximum output and then we're going to also do the manufacturing on the <unk> out of the DC fast start their plant as well.
Awesome. That's helpful. Thanks for the time guys.
Sure.
Thank you.
Our final question today will be coming from Chris <unk> with B Riley. Please go ahead.
Hey, guys. Thanks for taking my questions here.
I certainly appreciate it.
Semiconductor cost and revenue synergies commentary.
Can you talk a little bit more about the overall opex trajectory I'm trying to get a sense.
With some of these in progress targets.
Where you think leverage for EBITDA breakeven in the timing of that might shake out based on that Opex trajectory.
So sure. So what you saw on the slide and what we talked about right. So first as it relates to you.
FTE reductions so we've only hit the first phase of that right.
And we all expect more of those in phase two and three.
Going to be examining his operational cost of <unk>.
Some remaining operational cost here in the U S, but also globally and where those synergies exist.
Then secondly, it's going to be the same thing that we're going to do in technology.
And then in it support globally as you might imagine we're transitioning one network in 30 days then to more networks over the summer summertime as we make those transitions the support staff and then the folks that were working on the older networks the ones that we are.
Suppliers of the software that supported it and the sub vendors all of those are going to be eliminated. So as we move further into 'twenty two 'twenty three you'll see we will see us having additional operational reductions now. Additionally, as you might imagine we did a product rationalization study and we're more.
Moving more to some of the product out of semi connect so our own manufacturing our parts building out of India than our assembly at a buoy in the new site. When we got it that's at a much lower cost of goods sold.
So we're going to have this additional synergy that's going to start roll in and we're already starting to see it roll in right now we'll report that in the next quarter.
We start to make more profit off of singles charter sale and win more customers, because we're able to position the portfolio with the new network and the lower cost of manufacturing give us a bigger margin and a greater share of market.
Got it yes, so frame and all of that as far as kind of the overall.
Opex for if we're going to use say kind of the fourth quarter Opex run rate.
Does that continue to grow just because theres other areas. We are growing as you are.
Yeah.
Check out with with those reductions, yes, there's going to be some net out but it's gotten beyond the lower end of the scale as well so as you.
A lot of the reductions and we haven't been very public, but there were a lot of high end <unk>.
Jeff on that and that was just due to duplication right you merge a company together you have a lot of duplication of effort right.
So what youre going to see as we continue to identify staff.
And technology and everything we're going to have to add manufacturing staff.
Overtime and production workers and assemblers now we can get them, depending on what you're talking you're talking a much lower cost employees to handle the words out of my February .
Yeah. So.
Let me grab it from ones that what we're seeing now is a reduction.
In our expenses because of aggregating.
Aggregating the businesses and obviously, we're still going to grow the business because you see how much we're seeing revenue growth how many units you need to be sold.
Maintained operated.
And so on deployed so the business is growing but what we're seeing here now is still an increase in the revenues, but are decreasing in the losses.
So we're getting to a very good point here in our business because that's occurring.
We're not seeing so much growth in the losses as we've done in the past looking at the difference between third quarter of this past year. I mean this has this year third quarter of <unk> 22 versus fourth quarter of 'twenty two.
Got it yeah that all makes sense. So is there any way you could frame.
You gave kind of guidance for 2023, but mill targets as far as EBITDA breakeven, where either from a revenue run rate or a timing perspective.
We're going to give more visibility as the year goes along.
This is starting to.
To give some visibility to the street and where we're going with some guidance.
And as things progress.
We will be sharing a lot more information.
I appreciate that and maybe just.
You could breakdown mix between product sales and <unk>.
<unk> deployments in the quarter anyway, you can provide a total number of <unk>.
Charging ports kind of on the network when we're looking at kind of the.
The overall kind of.
On the network.
Okay.
Yes, there's about as I mentioned on the previous question about those question or.
And ask for so so I'm, assuming that was the question, but yes.
You'll see it come out in our filings, but we have about 5000 units that are that are blank owned and then over 50000 of our historically that our network. So there's always a big.
Theres, a big unit and the.
Picking up on our network to get we'll get we added semiconductor that a large network and we're seeing that reflected in that as you said.
I saw the network revenue piece of the business growing.
Got it okay and one of the things that Michael mentioned is every time, we start growing our owned and operated business and we think thats going to outpace our host sales business showing the equipment to a third party.
We get large orders that change those dynamics.
And I want to be very clear.
Today, we're seeing single orders.
That are larger in size than revenues, we did even just a couple of years ago.
The scale and size of this business is going.
Again, I'm not going to say, we're winning all these orders, but we're very competitive we have amazing hardware or we have amazing equipment, our level twos or meat in the U S. There are very few if any level twos made in the U S. It puts us in a position to get certain.
Contracts and orders that others can't compete in.
Because the stuff is not made in the U S.
And where we are in a very very very good position.
But again.
As soon as our owned and operated business comes in we have large outside orders that then.
Put a substantial amount of that.
Business in the host one but again, it's good for US it's a hardware sale and then we have recurring revenues, we typically have $18 a month.
Connectivity fees and then we have about 8% processing fees on $18 a cost us like three or four books.
So there's huge margins in that business.
When you look at the processing fees.
It's about 8% and about half of it goes to expense a little less than the rest of the dollars. So these are very very lucrative lines of business.
And it allows us what's most important is to be able to service every single customer no matter what they are.
And it allows us to have major companies that manage different prop.
Properties, whether its mcdonalds or CBRE or any of the others that we work with.
They want to have a standard consistency one vendor to work with but they won't be able to deploy <unk>.
Women at all different types of property owners, who have different models of deploying capital at their locations.
And having the variety of models is still important to us and if we have to sell it we will sell it and if we have the ability to own and operate it. That's what we will do and there are times when the property owner wants to make the capital improvements, but they don't want to do with the technology youre dealing with the managing the service and we're there for that also so having the flexibility and the viability.
The flexibility and as many miles as we have really allows us to really grow in size and scale look at the amount of units and locations. We're getting both from an owned and operate perspective.
And <unk> our growth is our growth percentage is second to none in the industry right now.
We'll stand against anybody looking at from a revenue scale, how many units were putting in the ground, we're growing a lot faster on a percentage basis than almost all of our peers.
And the reason why is the flexibility we have an ability to satisfy all the customers.
Can.
Got it Okay. That's helpful I'll hop in the queue. Thanks, guys.
Excellent.
Thank you.
The last question it does conclude today's call.
We thank you for your participation you may disconnect. Your lines at this time, we wish you a wonderful day.
Thank you. Thank you.