Q2 2023 Blink Charging Co Earnings Call
Greetings and welcome to the Blink charging company second quarter 2023 earnings call.
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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And please note this conference is being recorded.
I would turn the conference over to your host fatality, Stella Vice President of Investor Relations, Sir the floor is yours.
Thank you Ali.
Welcome to <unk> second quarter 2023 earnings call.
Today on the call, we have Brendan Jones, President and CEO , and Michael Rama Chief Financial Officer.
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 debt along with the rest of our earnings materials and other important content on Blake's Investor Relations website.
Today's discussion May also include forward looking statements about our expectations.
Our results may be different from those stated the most significant.
Any factors could cause actual results to differ are included on page two of the second quarter 2023 earnings deck.
Unless otherwise noted all comparisons are year over year.
Now regarding the Investor Relations calendar.
Blake will be participating in the Jpmorgan automotive conference in New York City on August 10th.
Barclays CEO energy Power conference on September 5th sort of September seven in New York City.
<unk> H C. Wainwright 20, <unk> annual Global investment conference on September the 11th through the system.
In September 2014.
Please follow our announcements for additional investor events in the future.
I will now turn the call over to Brendan Jones, President and CEO , Paul Blake charging. Please go ahead Brendan.
Thanks Vitale, good afternoon, everyone and thanks for joining us today before we get into the good results from our Q2 I would like to provide a quick refresher on blank and our capability.
Now Blake as the only fully integrated U S full service EV infrastructure provider and what that means because we control our own design our own manufacturing our network services or products have been designed to meet any charging needs with best in class reliability that we know.
This is all that we are unique in the marketplace, because we have diverse and synergistic revenue streams not only do we sell a variety of Chargers and networks services, but we also own and operate chargers with flexible offerings.
In fact, whether we sell or operate them. There was virtually no difference from an operational standpoint, we use the same processes and contractual relationships to undertake commissioning deployment service maintenance and uptime monitoring overall, we believe that our vertical inaugurate.
And the ability to drive synergistic revenue setting provides us with a competitive advantage and positions playing for sustained growth and improved profitability as we continue to scale. The business. So now lets transition and let's talk about the performance during Q2 if.
If we move to slide six we are pleased to say that we delivered a record quarter far exceeding any previous quarters in.
In billings performance history for the company.
Our second quarter 2023 revenues increased nearly threefold to $32 $7 million when compared with $11 5 million in the second quarter of 2022.
Our second quarter revenue growth of more than 100% was almost exclusively organic and was driven by strong demand for our products and an unprecedented growth in services.
On our our.
Our service revenue increased by 211% to 7 million and our charging service revenue increased almost 200% to $4 4 million compared to 1.55 million in the second quarter of 2022 now that is nearly a 3 million dollar increase in revenue.
You had a 68% gross margin, which includes the depreciation expense and importantly, our network fees, which are reoccurring in nature increased by an impressive 253% to $1 7 million blinks, the ability to generate high margin revenue.
<unk> that is reoccurring in nature is another solid building blocks as we moved towards achievable towards achieving profitability.
No Blake's company wide gross margin in the second quarter of 'twenty was another absolute record.
And at 37% compared to 17% gross margin margin in the second quarter of 2022.
Our strong revenue margin and service definitely helped here. However, the majority of the positive margin came from blank manufacturers charge or sold during the quarter and our efforts in the areas of expense management cost avoidance and our manufacturing process.
As we scale, our business and it creates value.
Volumes, we believe we can do even better our margins will continue to improve as we move forward.
In the second quarter, we contracted solar deployed 5830 Chargers globally, and it's unfortunate the met important to mention here that DC fast Chargers arent increasingly becoming a larger portion of our revenue mix.
[laughter] Chargers.
Disbursed during this quarter.
Six two gigawatts of energy across all of Blake networks globally.
Now if we look even deeper as you can see the second quarter was Blake's strongest.
However, and another record setting quarter for the company.
We have been laying the ground work to build our footprint and capture market share and customers for more than three years.
This quarter is a testament to the success of our strategy and the strength of our business model. We believe that these positive results demonstrate that our strategy is working and importantly, we are at the optimistic that as we focus on building E V. As the focus on building EV infrastructure intent.
But the momentum in our industry and our ability to capitalize on favorable market.
Conditions will continue we don't view the results of this quarter as a one off rather we believe there is a tremendous opportunity to continue this momentum.
With that in mind, if we flip over to slide six you can see that we are increasing our revenue target for 2023.
We are now targeting revenue in the range of $110 million to $120 million versus our previously stated target range of 100 to 110 billion. This new target. It is based on our current visibility of the marketplace, our pipeline and our sales backlog.
We are also reiterating our annual gross margin margin target targeting in excess of 30% for the full year of 2023 with expected margin accretion in 2024.
Now, let's move over to slide seven and this is a big topic, it's achieving profitability and how this is a key priority for this management team.
Today, we are announcing that we are targeting positive adjusted EBITDA run rate by December of 'twenty 'twenty four we waited to provide this target until we had visibility to provide a target as realistic and as attainable as possible. We have seen and are seeing the demo.
Australia success synergy vertical integration pro active cost saving actions comprehensive product portfolio and positive trends in the revenue backlog.
We had a very positive second quarter, but we are not done yet. This team remains focused on further reducing our operating expense and burn rate through expense management cost avoidance and revenue enhancement actions in the second quarter of 2023 art.
Operating expense increase related to significant growth since the <unk> Corp, second quarter of last year and also due to significant one time charges, which Michael Rama will detail for you later in this call.
Over the past three years Blake has acquired six companies since the beginning of 'twenty. Two 'twenty three we have identified and move more with more than 8 million and operating expense reductions, we will see additional reductions as we continue combining the functions and integrating the acquired entity.
Blake.
For 2023, we also expect additional ongoing expense savings for sunsetting legacy networks and leveraging the newly launched Blinked network not only are we eliminating legacy networks like we just did with semi connect network in June , but our new blade network is expected to recur.
Quire less maintenance and ongoing cost than some of our competitors with older and more fragmented systems and.
In addition, we have more opportunities in the G&A area, especially when it comes to streamlining functions under one ERP system and implementing shared.
Services for core functions.
Over the last few months, we have adopted a culture of continuous improvement.
And this approach is becoming the mindset across our organization. We do not look at this approach is just a one time solution, but as the embrace of a data driven continuous methodical and steady and sustainable improvement plan throughout all aspects of our business.
In fact, we had been working with one of the leading global consulting firms and identified numerous actions with the most important plan to achieve additional business savings and revenue enhancement strategies.
We remain intent on our goal to focus on our core competencies, which include our intend to unlock the potential value provided by the spin off of our cares car sharing business, we acquired envoy in the second quarter and already identified over $1 million of ongoing yearly.
Energy from combining the two entities of envoy and blinked mobility.
We continue to execute on our plan to IPO blank mobility by the end of this years.
Next let's jump over to slide eight and we can see the growth to date and the forecasted growth for electric vehicles and the EV Chargers globally.
We believe we are only at the beginning of this long runway there are over 1 billion vehicles in the world today with the auto industry, adding anywhere from 70 to 90 million vehicles every year.
It's less than half of those become electric by 2044 than the forecasted charge. Your numbers are nearly 500 million charges by 2040 and that seems very reasonable and this represents global growth in excess of building times.
When it comes to the U S market, you'll see on slide nine you can see that the market is projected to grow to over 30 million charges by 2030 and over 90 million charges by 'twenty 40. This is approximately 100 billion in investment by 2040.
We think it is especially important to note that according to Mckinsey price Waterhouse, Coopers or Bloomberg, New energy finance the vast majority of Chargers over 90% of them are forecasted to be level, two chargers and we agree with this assessment.
The industry is still developing and it's changed greatly over the last 15 years and it's growing and new debate now has started in with charging standards will become the predominant one in the U S is that Ccs or is it next this question has been in the news recently.
As we saw a significant numbers of Oems commit the next.
As it relates to Blake, we're happy to say that we are agnostic and we are able to provide and support whichever standard becomes predominant we view the adoption of Max as a positive development for Blaine we.
We look at our customers and our segmentation by Oems Tesla drivers are our number one customer group for a level two charges today and this is partially due to the fact that Tesla has by far the largest market share of evs in the United States with our newly unveiled 240 kilowatt DC fast charger with.
We will support both NEC and see that Ccs standards. We believe Blake is in position to crash capture additional sales and service revenue.
Now, let me put a little bit D. C fast heart Chargers on slide 10, you can see that DC fast Chargers are a growing part of our business with about 987 E. P. Fast Chargers contracted sold in the first half of 2023 and about $10 million in revenue this year so far.
It can be attributed to DC fast Chargers sales now.
Now, let's jump over to slide 11, you can see examples of our innovative product portfolio.
Which has advanced and flexible solutions for both level two Chargers in high power DC fast Chargers with these offerings, we serve as both residential and a variety of commercial customers and are prepared for the increased demand whether it would be due to nervy or natural inflections of customer preference.
For Evs.
Let's jump to slide 12.
Within the last 12 months Blink has contracted sold deployed or acquired over 5830 Chargers, both domestically and internationally, bringing the total charge of talent for the company to nearly 79000 Chargers since blinks inception.
78% of the total company wide Chargers is attributed to North America, and 22% to international locations.
Now on slide 13, we show a parcel sampling of our customers. They represent well established commercial entities multifamily complex as planned communities health care facilities fleece and municipalities around the world. We are very proud of our contract with United as postal service.
And as a reminder, the contract.
Those up to a volume of.
What are your 1500 charges over the next.
The next three years and Blake has quite been quite successful and these numbers are reflected in our financial results.
Fleets are becoming a wider segment of our business our government and commercial enterprises are converting to E d's to save on operating costs.
So with that I'm going to turn it over to Michael Rama Our CFO , Mike we'll take it from there.
Thank you Brendan and good afternoon, everyone turning to slide 15 total revenue in the second quarter of 2023 grew 186% year over year to $32 $8 million and the six months ended June 32023, total revenue grew 156%.
To $54 5 million.
Product sales in the second quarter of 2023 or $24 $6 million, an increase of 179% over the same period in 2022.
In the six months ended June 32023 product sales were $41 million a growth of 143% over the same period in 2022.
This was due to customers purchasing greater volumes of our L. Two Chargers and DC fast Chargers.
Second quarter 2023 service revenues, which consist of charging service revenues network fees and car sharing revenues were $7 million, an increase of 211% compared to the second quarter of 2022 for the six months ended June 30th 2023 service revenues were $11 8 million.
An increase of 213%.
The year over year growth was primarily driven by greater utilization of our charters in the U S and internationally. The increased number of charges on blinks networks revenues associated with Plaint mobility car share program and incremental service revenues from the acquisitions.
Gross profit for the second quarter of 2023 was approximately $12 $3 million, an increase of 528% over the same period last year as a percentage of revenue gross margin was 37% in Q2 2023 compared to 17% in the same period of the prior year.
For the six months ended June 32023, gross profit was approximately $16 $8 million, an increase of 375% over the same period last year as a percentage of gross revenue gross margin was 31% compared to 17% in the same period.
As mentioned as Brendan mentioned earlier, our strategy of vertical integration and in sourcing of manufacturing as well as cost avoidance and cost optimization efforts have contributed to the continuous increases in our gross margins.
Now operating expenses in the second quarter of 2023 were $52 $4 million compared to $23 $9 million in the prior year period.
Year over year increase reflects the increase in non cash share based compensation of $10 $6 million in Q2, 2023 versus Q2 2022 increases in non cash amortization of intangible assets of 900000 as well as operating as two operating expenses associated with the 2020.
Q2, 2022 acquisition of summit connect operating expenses in the six months ended June 32023.
Were $87 $7 million compared to $45 million in the same period of the prior year. Please note included in operating expenses for the three and six months ended June 30th 2023 are intact or the impact of additional noncash share based compensation and a one time.
Non recurring payment to our former CEO as well as the nonrecurring bonus expense related to the performance milestones achieved by our CTO and milestones related to the design and launch of links recently implemented new network.
We believe blinks, new network will be beneficial well into the future as we sunset the legacy networks and onboard a significant number of new Chargers our investment in the development of the blank network has already started to pay off with the elimination of the legacy semi connect network in June of 2023 and with European Network.
Currently in process of migrating.
The key takeaway here is we incurred these expenses now and by doing that we reduce the ongoing operating expense moving forward that will directly benefit our bottomline and bring us closer to profitability and positive free cash flow generation.
As Brendan mentioned earlier, we are focused and committed to further reducing our operating expenses and burn rate through.
And burn rate through expense key expense management cost avoidance and revenue enhancement actions.
Adjusted EBITDA for the second quarter of 2023 was a loss of $13 $5 million compared to a loss of $15 $6 million in the prior year period. This is an improvement of $2 $1 million year over year as we expect this trend to continue and we will as we realize more business savings.
As we mentioned earlier.
In the six months ended June 32023, adjusted EBITDA was a loss of $31 $3 million, an increase from a loss of $28 million in the same period of the prior year.
Increases in the first half loss is attributed to the results in the first quarter of 2023.
The adjusted EBITDA for the three and six months ended June 2023 excludes the impact of stock based compensation acquisition related expenses and onetime nonrecurring expenses as I mentioned earlier now adjusted earnings per share for the quarter for the second quarter of 2023 was a loss of <unk> 44.
<unk> per diluted share compared to a loss of 41 cents per diluted share in the prior year period in the six months ended June 30 of 2023.
Adjusted earnings per share was a loss of 92.
Per diluted share compared to a loss of <unk> 76 cents per diluted share in the same period in the prior year.
non-GAAP adjusted EPS is defined as adjusted net income, which excludes significant noncash items, such as amortization of intangible assets nonrecurring acquisition related and onetime nonrecurring expenses divided by the weighted shares outstanding now turning to slide 16, you can see.
See that sequentially, we saw a significant increase in gross margins when compared with our historic results. This is primarily due to the high demand for our products our ability to meet the demand and generally increased utilization. We previously shared our commitment to expanding our manufacturing.
<unk> to replace contract manufactured Chargers with in House produced units that strategy is starting to pay off now.
We have outlined a detailed roadmap roadmap to reduce operating expenses even further.
And that's G&A alone, we see further opportunity opportunities, resulting from the combination of the four legacy companies that make up linked today anywhere from I T and network support to streamlining the ERP systems and processes around the globe, we had a well defined plan and the team.
<unk> is laser focused on executing methodically in order to ensure sustained profitability and the target of achieving positive adjusted EBITDA run rate in December of 2024.
Still a lot of work ahead of us, but we are excited as we finally are seeing the positive financial results from our strategy and we should actions and now I will turn the call back over to Brendan Jones for a few final comments go ahead, Brian Brendon.
Mr. Jones, I think your line might be muted sir.
Hey, sorry about that folks.
So to add to Michael's point, we we had a great quarter, we had maybe a monumental quarter with our strategy and our growth initiatives. We've put in place as we see them starting to be reflected in our financial and operating results.
We knew this was not going to be easy and would require a vision.
<unk> investment and I will say some difficult decisions.
We have taken concrete actions and as Michael and I outlined expense reductions cost avoidance strategies and revenue enhancements and we will continue to do so with a commitment to methodical and continuous improvement as many of you know.
This is a tough industry and we believe there was no. Other way then focusing on the fundamentals while also growing revenue and being innovative that's truly the success build the basics focus on fundamentals, bringing new product to market increase revenue.
And we truly think that our advantage is in our people and in our team and we are willing to go against anyone in the industry with this team that is behind Blake so with that that ends our formal comments, but I think we're now ready to take some questions.
Thank you at this time, we will be conducting a question and answer session.
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One moment, please while we poll for questions.
Thank you our.
Our first question is coming from Craig Irwin with Roth and Cam.
Your line of sight.
Evening guys. Thank you for taking my questions. So the revenues, obviously really impressive.
But I.
I would say the gross margins are even more impressive.
Can you maybe unpack gross margins a little bit for US you know, they're there I'm going to guess there'll be some naysayers out there, saying Oh, one time not going to happen again.
Was there anything one time in there that gave us such a solid number.
And you know can it get better from here you know there there are products in the market that I believe you actually have a 50% gross margin, but they're sold in muscle or volumes. These days than they were many years ago.
Anything you can you can give us to help us understand the sustainability of margins and.
You know the potential for continued progress from this impressive level you've met this quarter.
Yeah, I mean, it really as we stated in the previous quarter and we've continued to state is we control more of our own manufacturing, we're starting to see margins or in Paris.
And on our network services, when we own and operate the state station that is simply adding to the good news because the margin is considerably higher.
One of our target as of 30% for the full year. So what we have to make sure is we continue our efforts to sunset legacy products and reduced expenses associated with bringing on more and more of our blink build products, whether it is from India or a buoy facility.
We're coming out of our facility in Phoenix. So the key there to really maintain that makes it sustainable is not to say, hey, well all that focus on reducing costs that was a one time thing no. That's a permanent part expense reduction as a permanent part of blank, making sure that we're efficient in everything we do is continuously.
And then building our own Chargers, having a reduce cost on network fees not paying expensive software development costs, because we have it all outsourced its all in source that Blake, we have to double down on all of that and as we continue all of those efforts.
Youre going to see our margins continue to improve we're going to stick with our 30% because we as you saw in Q1, we had a lot of legacy products, we have to get get through we still have some of that but so far so good and this is a disciplined approach. So I think all of that.
Wrapped together contributed to it and it's also contributed to our success moving forward.
Fantastic Fantastic and then a question directly related to the revenue side.
The nervy funding is starting to find its way into the market.
Maybe shape for US you know what your participation is likely to be as far as you know subsidy funding over the next several quarters do you expect this to to to continue to support your growth rate and the overall level of demand for your products out there.
Yeah, we've been successful with them without finding and we're going to continue to be.
Successful with or without that however, we are targeting a number of states. We're not going to go after all 50 states. We're targeting another stays were targeting routes that we believe are highly accretive to high utilization.
And we're targeting in states, where they're sticking and maintaining closer to the 80% to a funding level. Some states are electing to go lower because the Navy guidance only says. He says you have you can do up to 80, but some states are going a lot lower we like DC fast charging but also.
Where we understand the cost associated with them the breakeven point and the long term.
Turn on C that is associated with D. C fast searching even if you get 80% funding for <unk>, So we're going to pick and choose and take what works for Blake.
Right now you've got six seven states in other artist P. Only one state outward winners and they still have another round to do out of Ohio. So we're at the very very beginning of it.
Well congratulations guys. This is a really impressive quarter I'll go ahead and hop back in the queue. Thank you.
Perfect. Thanks, Greg.
Yeah.
Thank you. Our next question is coming from Matt Summerville with D. A Davidson your line is life.
Hey, Matt Thanks, Good evening.
Four of them are different business entities cause they hold onto him like a security blanket, but what we're doing is using universal systems for the globe and having the same system in England as we used in the U S. The same in England as we used in blue corner in Belgium, and the Netherlands in India and everywhere else throughout the world. So that is gonna.
Go on I'm, not going to give you a dollar amount because we're actually just getting into the forecasting face on how much more we have to go on synergies, but it's gonna be a continuation cost avoidance and and and cost reduction is going to be a theme and the company and I think that's the big take.
Away, it's not something we do when we're trying to hit a number it's something we do as a business now.
We're gonna have to do a continuous improvement every day every week every month every quarter in order to make this company one of the best in the industry.
That is a follow up I'm sure. If you talk about reaching EBIT adjusted EBITDA positivity on a run rate basis by the end of next year could that also coincide with free cash positivity and in that regard how should we be thinking about your capital needs between now and when you achieve those milestone.
Yeah. So so it's a great.
Question, we see free cash flow manifesting later and in 2025, we're not gonna give guidance on that yeah, but yeah, there will be a need for some additional cash or raises as we move forward as we stated many times, we're looking at all instruments.
Available for Blink from funding, whether it be desk debt and equity raises convertibles et cetera, Michael Romola CFO is focus with the tally on that everyday on where additional capital is going to come from but also we're gonna get a lot of that capital simultaneous.
<unk> continues to increase revenue if you look at revenue.
Keep increasing revenue by over 100 per cent over the last three years and we see that trend continue so as we continue to reduce expenses continue to bring new products and increase revenue and bring in some additional capital as we said we <unk> we see that in December 2024, then we'll see.
<unk> <unk> casually positive flowing right after that there will be a race that helps us get there.
Thanks for the.
Thank you.
Next question is coming from Samir Joshi.
C Wainwright.
Mine is nice.
Thanks, Thanks, <unk>, Michael Congrats on on the progress.
Just getting a little bit granular on the 5800 plus units installed what proportion of these word D. C false charges and also what proportion of these were wound.
<unk> <unk>.
Location.
Yeah, So I'll tell Ya on D. C. Fast burgers is is significantly less than five per cent of the total and you look at the 5000 number for the quarter and then you look at the 10000, I mean, <unk> roughly 1000, all average it up D C fast charges that have.
Been sold and deployed this year, it's it's a fractional number best so it continues to be a small percent. What my goal right. Now is we Wanna get D. C to five per cent of the portfolio and then push it up from there, but when we do D C. They <unk>.
As an owner operator model. It we want to continue to make sure we get funding to put them in the ground when we do it as a sales model. It's a different thing we we again a high margin on the product and you know and it also contributes greatly to revenue Michael do you have the split for last quarter, an owner operated verse.
Sales.
Yeah, you know we're.
Still tracking where I don't have the specific numbers, but we're still tracking where so the product still outpacing obviously the own and operate my own and operate is still <unk>.
Tough, it's a good area to be and we're still obviously you see are on it.
You know charging revenues continue to increase in Europe , especially so are split on revenues 80 20, we're still.
Not not proportionate and selling the units I'd say, we're closer to 60 65 to say 35 per cent on the on the product sales side of it.
But we want to you know.
Just to add to this point because I think that's a great questions.
We want to make sure they're brand sense to a degree it makes no difference the support structure, whether its own or operate <unk> charges. The same so there's no duplicated systems.
If we if we sell it we followed the same process. If we owned and operated we sell it now the capital distribution is different on it but the system is the same so we're gonna take revenue in the space, where revenue exists and will never Gonna say no to our customers, whether they wanna buy a charger on owner-operator charger and.
I think that is our uniqueness will be exploited to both models owner operator or sales.
Understood.
Thanks for that in terms of the one time.
Charges are expensive this quarter just wanted to understand.
The 11th.663, that's the <unk> and then the 11.632.
Is the one time recurring expense.
The one time recurring expenses are also stock related but for the previous for you is that right.
Nah Stock-based.
Stock-based calm includes about close to 6 million and the I'll call. It there's a part of the separate settlement. There was shares that had to be issued there was acceleration of sure based expense that that'd be accelerating to the quarter. So that is reflected in the actually in the sure based cop line and.
Then the 11.6 <unk> <unk> relative to the alcohol cash portion of the consideration that had to be done in cute too.
Understood. So so once you exclude these one time costs. The opex what is the optics level is it closer to the one two number with some inflation or.
The the the question I'm getting that is.
When you see Q4, 2024, EBITDA breakeven all the costs at that level is going to be comfortable to today's costs.
Yeah, I'll I'll I'll add that if you look at our queue, one operating expenses versus Q too when you strip out the when you strip out I'll call. It the the several one timers plus included in Q2 was envoy the new acquisition when you strip those out to be an apple at the apples basis, our our.
Opex expenses for Q2 was how about half a million or so less than Q1 memorized Brandon mentioned, we still had about we still have some severance <unk> or flushing through in queue to so and we continued to right size those areas as we move forward So I I.
I would look that nuts.
<unk> you know Q.
Continuing monitor each one of those areas and I think I don't know what to say we want to look at you for as a proxy we want to look at the business as a whole and continue scaling inappropriate areas and makes sense that duplication of efforts right side and in the right expense profile is adequate for the site company, where expect it to be as we keep going forward.
Yeah.
I think the second part of my question was just trying to get to is there operating leverage in this.
With the current cost structure and that your <unk> breakeven.
December of 2024 takes that into account or not.
Yeah, there's definitely leverage in there and obviously that's part of the what we're looking at as part of the the leverage comes gonna come from the consolidation and.
<unk> Oh, the networks four networks down to one and then the.
Vendor related to that that supported that system. So there's definitely gonna be scale and in one ear piece system and it Sir shared service that we're gonna be able to imply your name and pushed through to do the entirety of the company not you're just in the U S, but internationally as well.
Great. Thanks, a lot then the congrats once again on the on the progress.
Thanks.
Thank you. Our next question is coming from Chris further with be Riley. Your line is nice.
Hey, guys. Okay can you give us a sense as to the revenue came to the rest of the year.
Put up the same revenue to queue for third and fourth quarter. It seems like you'd already via Canada I am.
And typically.
Revenue has kind of grown throughout the year and I just wanted to get a sense of.
How're you guys were thinking about.
Thanks for the tea or if there's anything different going on.
Michael you Wanna hit at first cause I couldn't hear all the questions.
No about the yeah the <unk>.
Just start out obviously as you do the master you're right it seems like.
You know closer to the top we're being conservative right cause obviously as we move forward. We're we're reflecting anything that you know certain unknown is that we're not not aware of but we see a strong pipeline C. A strong back backlog and you know, we're just like to read the conservative to be honest right and and we.
Feel that this was the appropriate level to come out with at this time.
Okay, and then can you give us a sense to how much of a legacy product you still need to burn through you know.
Product gross margins in the mid 40 per cent range I'm just kinda curious if there are any reason for that.
Come down in the back half of the year here, if that's kind of a new good run rate kind of wanted to go forward.
Yeah I you know the estimates are that around 24% of the overall portfolio is gonna be legacy products, we Wanna go or through but.
We didn't do is rest on our laurels and just said, okay. We're gonna have to get it and we're gonna have a margin impact where possible and we've already achieved one resolved be renegotiated some of the prices on the third party contract charters. We successfully did one significant group out of your.
So they're in there, but instead of as we begin to play through that remaining inventory and that use case, it's going to have less of a negative impact and even to some degree a positive impact on Martin as we play through that inventory.
In the U S. We are beginning to really start to play out of all third party now we have some remaining in home Chargers and some remaining L. Two that came from our contract manufacturer but.
We're gonna see most of those wiped out by the end of the year and they're less than 10% right now all of the overall inventory that's coming through so we feel we feel pretty good there.
There's still some work to do.
But we're focus on it where we can lean negotiate and get a lower price we're working on that as well, but you know you're gonna our goal is to get clean on all legacy equipment moving into 2024.
Okay, and then just lost one.
Earnings call you provided some color around the <unk>.
50 per cent of your.
Clinton's charging network utilization.
Double digit percentage and you talked about metrics for the coffee you know forthcoming just wanted to see if there was any update to provide their.
Well I mean, yeah. It continues to be good and you know on the owner operator, especially on the L. Two side you know three years ago, we reinvented the system in which replays charges on the owner operated a model.
And ever since we did that in under such that very methodical data driven approach you know the overwhelming majority are in 15% or higher of utilization of those and that is showing and the charging revenue that we're having me use that same model in Europe can predict optimum.
Locations as well and as you can see by the numbers the utilization numbers are increasing their and when you talk to on or operator, you know that that's the key thing you know if you.
You know, we don't believe in a philosophy, where you have an obligation to put a charger in where you're not gonna get the utilization. If we owned and operated we're only gonna place and then where some we know that is 15 per cent are better and we're breakeven at 10% utilization on M. B L. Two installation in D. C. You Gotta get 20 or better.
To start getting into positive station economics, but you know on L. Two we're starting to hit home runs we're gonna continue to drive that as we move forward.
I appreciate it thanks.
Thanks.
Thank you.
Next question is coming from Stephen Jen Garo, that's T for you.
<unk>.
<unk> good afternoon, how are you [noise].
I'm doing great.
Good good well thanks for taking the questions. So.
Curious you're sort of update your thoughts on <unk>, when we think about.
Charging in general just got it from a big picture perspective, when you think about level two versus D. C fast.
How do you think.
The market evolves from everybody's talking about navvy, but how do you think sort of the habits of drivers evolve as far as.
Demand for D. C charge, you versus the demand for level, two charging an urban areas and Sarah.
Yeah, I mean, that's a great question and it's been out there in the industry for a long time, but the one thing that hasn't changed is the percentages. When you look at driver experience and you come back with well 80 per cent of my Charger is on an L. Two or 90 per cent and then you look at the use cases cases when you include <unk>.
I shall fleet and 90 per cent of the charging is predicted to be.
L L L to the driver experience becomes if they're going on a trip D. C fast Burger if there somehow in the major metros and they didn't charge they need a D C fast charger, but the economics and if you were gonna hit the 30 million charges that need to be in.
<unk> by 2030, it's the most economical way to do it is L. Two and take advantage of where the car set.
And that math proves true and the owners ZIP experience. They go well I'd much prefer to plug in when I'm sitting at the Doctor's office and I'm there for two hours and the expense. The kilowatt suspense is at a cheaper cost. When you look at you know what it takes to charge a Porsche Python on a 350 kilowatt charger.
And you're talking 90, plus per cent a kilowatt hour. The economics don't work out that person's only gonna Wanna use that charge or if it's the last result, and that's on a trip going to Grandma's house do whatever but if they got a charger in their multifamily willing that's a blight charger and it's at 39 cents a kilowatt hour, they're gonna go to that.
In charge of February 1994.
That's that's helpful color just as as we think about that.
How do you think about blink strategy sort of behind behind that sort of a of a world we're living in.
I think what we need to do is continue to innovate and provide chargers and provide network service expand as we move forward into more energy management more load shedding opportunities as we expanded the multifamily dwelling as we do more fleet business et cetera.
[noise] ecosystem is gonna expand in L. Two.
And you're gonna see L. Two starting to use battery back systems, which were doing in Florida on the D. C level a level in in in Philadelphia in a project. So we keep saying we need to innovate.
We need to keep the Cogs low on our Chargers and continue to reduce the cost of producing these whether we're producing them in India.
We're producing them in the United States.
That's the key to US is that vertical integration I don't have added expense I'm not going to change the order if I have third party manufacturer and as I say I want this feature on it and I'm paying 40 per cent more because it's a third party manufacturer I just go and get my guys to do it and we price it out and we make it happen.
That is gonna be what sets us apart, we can stay in front of Commoditization, where others cannot.
Great. Thank you for the color appreciate it.
<unk>, we have reached the end of our question and answer session sorry, when they return to call back over to Mister <unk> for any closing remarks.
Thank you all for your interest in Blaine charging.
This time, we're going to add him to call you may disconnect.
Thank you. This concludes today's conference and you may disconnect. Your lines at this time and we thank you for your participation.
[noise].