Good afternoon and thanks so much for joining day one of our conference. My name is Mahima Kakani and I'm on our Cleantech and Metals and Mining team here at JP Morgan. With me today is Brendan Jones, CEO of Blink Charging. Thank you so much for joining us.
Absolutely.
Just as a reminder, the session is being webcasted, so if you have a question, we'd ask that you speak into a microphone, which will be passed around once we get to that section. Maybe to kick things off. Brendan, can you give us a brief overview of Blink Charging for those investors that may be less familiar with the story?
Sure, absolutely. So first, thanks for having us. It's always enjoyable to come out here, get the message out and talk about this exciting space. So Blink Charging has been around for a long time, but the company's had various different versions of itself over time. The base company actually started in 2009, before there were EVs being sold or anything like that. The basic concept was to provide charging services for when EVs came to market. Since then, it acquired no less than eight different companies over that period of time. Acquired Blink Charging, then changed its name to Blink Charging 2014. But the company really started moving forward in 2018 when it became listed on Nasdaq.
And then it began reinventing itself right around the pandemic, hired new staff, went from about 40 employees- 700 employees that it has today, acquired 6 additional companies to build the backbone, and has emerged as a significant player globally in EV infrastructure. And the distinguishing mark about Blink is that it is a flexible player that provides custom solutions to what site hosts, municipalities, governments, Post Office, others need for their infrastructure solution as opposed to having one dominant solution that that's what they market.
So as a company we sell chargers, but we also own and operate them. We also participate in different business schemes with site hosts so they can share in profits because and share in profits, et cetera. The philosophy is to have flexibility to create long term adoption and good partnerships in this new emerging technology. And then the new world we're finding ourselves in when it comes to transportation and the energy that supports it.
Absolutely. Thanks for that overview. It does seem that you focus on Level 2 from an owning and operating perspective and we're curious why is that?
So we focus on L2 and we'll give you the percentage split. So it's about 90-10 and DCs continue to grow a little bit, but we're still seeing the portfolio hold there. When we look at what we sell though, we get about 13%-14% mix of DCs; we focus on L2, all the data. If you look at McKinsey, if you look at PricewaterhouseCoopers and several other publications, 90%-95% of kilowatts dispensed are going to be L2 charging. It's cheaper to do, it's easier to install and it takes advantage of where the vehicles dwell. Now we like to argue in the U.S. that that vehicle that we put all that money in, we use it a lot more than we do. But you know, the statistic from the DOT has not changed in almost 40 years. They sit 95% of the time.
It's cheaper to charge them when they sit and it's cheaper to install that infrastructure where they sit. So take advantage of that. DC fast charging is important and we believe in it and we install and we have highway projects, but still it only should make up less than 10% of the equation. And that's the way we look at it. But when you look at the share of voice, if you pry marketing analytics to it, everybody talks about DC fast charging, but yet still when we look at kilowatts dispensed, they're dispensed on Level 2 . So it's an interesting dynamic we have in the United States on that topic.
Yeah, it's interesting. When do you think that the DC fast installation issues will begin to subside?
Well, you still need to get a depth and breadth of DC fast chargers in the ground before we hit, let's call it, critical mass out there. So it's going to take still a lot of time to get there. And then we have to be more realistic about how much time it takes to build a station like that. It's not as simple as some people think. The NEVI program is moving right along. It's got delays and then it's got certain levels of acceleration. But building a fueling station that's out there to support multiple vehicles from multiple manufacturers and meet all the safety standards and everything, this takes time to do.
Do you see any structural shifts in the market's competitive dynamics with Tesla seeming to deprioritize its charging business? How does that compare? Maybe in Europe.
So you know, the U.S., what we see, if we're analyzing the U.S. market from an infrastructure company, we see Tesla doing what an automotive company over time should do and they're there to sell cars. Tesla sells 1.3 million vehicles, which is they're a big boy and they have big OEM automotive problems. Now if you look at from the economics of a company, if you're one of the accountants, or we used to call them the bean counters in the automotive business, you're going, okay, I want to do everything that I can to increase the amount of capital available for new models and new services on the vehicles. So where are my cost centers? Well, the cost center is their infrastructure. They're not making any money. So starting to move away from that and saying, let's let third parties take over that part.
They did a brilliant move. I mean, Elon is still one of the smartest men out there that we have today. He said, okay, let me get the standard, the Tesla standard, which now is the NACS standard adopted. So now it's universally adopted. Now all third party companies like Blink and Electrify America and EVgo were installing NACS cables. So he enabled an environment in which you can get third party to pick up the slack and slowly start putting more money into vehicles. New vehicles coming out in the market, less inexpensive vehicles coming out on the market, while infrastructure for Tesla vehicles is still being installed. So it's a brilliant move. It's going to take time to get there, but it's not undifferent than what Henry Ford did when he used to have deals with Standard Oil and then they moved away from those eventually.
So it's a sign of the industry maturing and you'll see more moves and we're happy about that because we believe the independents should be the ones that are driving infrastructure to begin with. Europe is very much the same thing, in that you have more independents in the game. And Tesla over there, you can't have a NACS standard in Europe. So it's all CCS. So it and the majority of infrastructure that's going in the ground is independents, not OEM sponsored.
That's really helpful perspective. We've all heard about the EV deceleration headlines in the news. Kind of curious. What are you seeing in terms of demand trends across your verticals such as fleet, commercial, and residential? Then, are you seeing any demand differentiation between Level 2 and DC fast?
Yeah, it's a great question. We have to say that what we saw and what we're seeing is that things aren't growing as fast as they were before. There's still demand, there's still good sales. They definitely softened more in the United States than in Europe. We're seeing Europe, our business is there continue to operate and are actually increasing. In the U.S. we continue to operate and we are increasing, just not like we did the year before. Some of this is political, but some of it also you have to scrape through the service and see, you know, I'm 40 years in the industry now. I've started on the car side. Tesla does have a little bit of an issue with age in their vehicles. Right? . So they need new models, which is a common big OEM problem.
Product solves all volume problems, newer product sells all volume, product cooler product moves even faster. So they're in the midst of that where they're bringing out, don't count Elon out, don't let Tesla out. Their sales will pop back up. But you have an industry where now I have Hyundai coming in and they just did another $50 billion worth of investment. Their sales are off the chart. Tesla's went down and GM's went down. Everybody else's for the most part went up. And you're going to see these newer OEMs start to take their share of the pie.
Tesla will still be the leader for some time, but we talked about three years ago at similar conferences, Tesla at 70%, 80%, 90% of the market, now they're at 50%. This was natural, this was going to happen anyway. They'll bounce back. But it's great that the space is more competitive now because you're going to get newer and better cars, you're going to get better battery technology, you're going to get longer range vehicles as everybody is competing against it. So this is a win-win overall. We just got to get through this little soft spot that we're going through right now.
Maybe to that end, when should we expect a re acceleration?
I think we're already seeing it. I think the U.S. has different dynamics. So certainly in China there was never a slowdown in acceleration. In Europe there was not a slowdown in acceleration. They're all moving. You have a pause right now. Some people are questioning things, but more EVs are going to be pushed into the U.S. market whether they're domestically produced or not. You're going to see more production from Volkswagen Group, from Hyundai, who's building a new plant from the new startup OEMs in here. And even, you know, we joke while you hear statements from GM. Then they call us up and say, hey, we need more charges for this new program we're doing that we haven't announced yet. So, you know, you've got the politics and the public side.
We'll have to wait and see what the numbers look like at the end of Q2 and Q3 this year. But we're seeing orders increase definitely for Q4 already this year. So that gives us a positive. We're seeing the fleet business continue to pick up. You know, we were a beneficiary of the post office order, which was larger single infrastructure order in the history of the United States at 41,500 chargers. It was originally split between three people, but we're getting the lion's share of it now and that order keeps coming in. So fleet continues to grow. So while you're seeing a little bit of softness right now from on the growth side, on the passenger and privately owned vehicle side, you're still seeing acceleration on the fleet side of the equation, which is very, very good.
That's great. So maybe jumping to Blink more specifically, where is the company investing its R&D today? What are some of the key areas you think that require more innovation, and are customers willing to pay a premium for those services?
Yeah, it's a great question. You know, it's something we ask ourselves every day when we're making sure that our strategy, especially our R& D strategy, matches up where we see ourselves going locally and globally. Right now the bulk of R& D dollars is going on to the software side and to the SaaS side of the company, which is a growing part of the business. We will see new systems that require a higher level of integration with other systems such as solar, such as other energy management, such as buildings, utilities, et cetera. Energy management as both a philosophy and as a product-based service that you can get, whether that's load management, load curtailment, building management, Vehicle- to-G rid, V2H, Vehicle- to-H ome.
Those services we see coming more into the future as we start to manage energy more an inclusive manner. Not just what's coming from the utility, but what's coming utility to the car, to the home, to our fleet, products, etc. Into our building that we live in and the garages that we park our vehicles in. So that on the SaaS side is going to increase products. We continue to invest in vertical integration. We benefit from 60% of our product we manufacture ourselves. That vertical integration gives us a better margin than most. We don't have the same pressure. Others would be from Chinese based product. We do all of our base parts manufacturing and fabrication in India and then those parts are assembled in a facility in the U.S. and soon to be facilities in Europe.
So we keep investing in that because we stay ahead of the commoditization, especially on the commercial side. And that's why our margin right now as a full service provider is the best in the industry on that. But we do see that the future of the company as we move is that product sales would continue to be strong. They are in the U.S. but in Europe as a leading indicator, our service revenue and service end of the business is much bigger than it is in the United States. And that revenue stream continues to grow. So both together will grow the company, but we will become more of a SaaS company over time and more of a company that is making all of our money on the service side as opposed to on product sales over time. And that's the way it's going to look.
We are investing now to that end. But it's incremental steps. It's not going to happen overnight. It's going to be a 5-7 year plan which we're working on right now.
Yeah, that's really helpful. Color. Can you also maybe touch on some of the measures being taken to help with charger uptime and reliability?
Yeah, there's a lot being done on this topic by the industry and then by the individual companies on defining what real. And we unfortunately, you know, the U.S. and our mindset is we love labels and you know, charging reliability. You know, it's a statement, but what does that really mean? Mechanical breakdowns on L2s are very rare. You have more mechanical breakdowns on DCs than you do on L2s. But even with mechanical breakdowns, what you have the most point of failure. And that's what we call why did the customer failure to charge? It's not really, you know, that the equipment wasn't reliable. It was that either the network or the connection or a credit card swipe, something went wrong and there. And so we have to make sure we understand what that failure is. And that's where the overwhelming majority of failures come into play.
So there's a couple things that we are doing. Of course we're improving the relationships we have with all the carriers, whether they're cellular services. We're making sure that when you look at when that customer either swipes a card, engages the vehicle talks, there's less points of contact. Everything is more fluid in terms of its level of integration. Every time you enter in another step, you enter another point of failure. It also could be a point of success. But we're limiting those amount of points of contact, the steps that the customer has to go through. We found also in this that credit cards, when you have a credit card reader on, is the highest failure rate of everything.
So going much more to tap and go, eliminating credit card readers—that's going to, you know, independent credit card readers sitting out there and chargers sitting out in the environment is not a good thing, especially the old mag stripe ones. You know, we do it if the customer asks for it, but it also becomes the highest point of failure overall. So network integration. Now the other part is the OEMs and the charging companies were working together to better implementation of the standards. And every OEM and every charging company and everybody else adhere to it, to its exactitude. We have interpretations still going on.
So you get one car that'll pull up and charge perfectly on this charger and then another car will go to the same charger and won't because a different nuance associated with the way they develop and how that vehicle receives that charge. And then you have to make an adjustment. You find the adjustment. But in the interim, that customer was not happy because they failed to charge the first time. Testing, testing. We're opening up a brand new testing facility in Bowie, Maryland that has, we can bring six, seven cars in at once, charge them at all the cars as another means of improving quality, maybe sticking on Maryland.
Can you elaborate on the ramp up of the facilities, facility's production capacity and some of the benefits of having domestic production?
Sure. So we made a commitment about two years ago when we did the acquisition of SemaConnect that we're going to take their existing facility and move it up to about 50,000 at a minimum units of production. So that is now done. Capacity is slowly increasing. But we're in that facility in there. And we've also made the decision recently to bring in the headquarters that used to be based in Miami Beach and make that the global headquarters for all Blink Charging there. And now we're bringing, now we're adding the testing center to that. So there's our synergy effects. Number one for the company overall on cost. We collapsed five into two buildings on that. And that was very beneficial for the bottom line. But also, you know, we want to make products that are Buy American compliant.
And we also want to have a presence where, you know, we're providing jobs and they're high paying, high wage jobs. That's, it's one of the things we forget about when we're talking about EVs. It tends to get politicized. Right. But when you look at it from my perspective, first, we are marketing and selling a product that is based on, based on domestically produced energy, not foreign oil, not anything. Second, when we're doing that, we're creating great energy independence for the United States.
Third, we're creating jobs, and not just jobs, but high tech jobs, both at the factory level for where we're building these chargers and vehicles and in the installation level where higher wage electricians are the ones that have to do this. So we very much see EVs and our move in Maryland as a jobs program as much as it is our ability to efficiently manufacture, sell, distribute, and sell EV infrastructure equipment. But we're not done. We have other moves that we're going to do globally and in the United States to make sure we're efficient.
Maybe I'll pause here and see if there's any audience questions. Okay. So where are you in the FedRAMP certification process?
We're almost done.
Great.
So we just made an announcement. We're in the final step and everything looks great. We should have a follow-up announcement shortly that we're done with FedRAMP. We can actually, we're at the point where we can take orders, although we need, in order to fulfill that order, it needs to be completed. So we've made great strides that. We're lucky enough that we have our own development center and you know, Blink when you think about Blink. We don't outsource that. We have a development center in the U.S. and development center in India and they do all of our own development on our network and our certification. FedRAMP was a good win on that. We do quite a bit of federal business. Now we're gonna be doing even more.
We actually have a question from the online platform. This investor is wondering, could you remind us of the economics of your U.S. Government program partnership? How many charging stations are involved? Are they bundled with software? Is it mostly Level 2 or DC fast? To the extent that you can answer that, yeah.
So this is U.S. Government in general. I can't give you the answer on how many different chargers. On the Post Office win, we're one of three players on 41,500. 500 and it's fully bundled up, meaning the network is in there. The maintenance is included in that. What's not in that is the Post Office doing their own installation. For the rest of the federal government, we'll do. We won't sell chargers anymore that aren't networked. We all want it. So we're going to get repeat revenue on the network.
We have a fairly high penetration rate on service contracts. So that. We also believe it's important to have those. So we encourage them so that we're touching the charger, keeping up the charger and that's recurring revenue as well on that. Then as we said, we'll be launching energy management services shortly. We're going to do it in an iterative basis that will go into these services that they can pick up as well when necessary.
That's great. Maybe shifting gears a little bit. How is Blink approaching margin improvements this year and beyond and where there are opportunities to drive better leverage in the business and how much of that is maybe dependent on price increases versus cost savings?
Yes, we're trying to keep the price increases down and not add to inflationary. But where you have to take price because raw materials and goods and labor is increased, we will do that. We haven't done anything significant yet on that topic. We're analyzing it. Margin came out in Q3 at 36%, which was strongest in the industry for overall product and services for a full-service company. We continue to be around that. What we need to do is work on more efficiencies on the DC product line because it has typically lower margin involved in it.
We also need to make sure that as we consolidate the remaining parts of the six companies we've acquired, we're taking all the cost out of the charging side and the manufacturing side as we possibly can to stay ahead of commoditization and stay ahead of the increases in raw materials needed. And then on the company side it's really, you know, we've adopted a bit of. It's no surprise it was 21 years at Nissan's where we're getting fully engaged in Kaizen for the last year now that every day find a way to be more efficient. Literally if you can take $0.05 out of a 10-ft piece of pipe, then that's saving money. And the company is, you know, it's worlds apart than it was last year on this. Each month is different. So we're getting more efficient in the way we're operating as a company.
And we see a lot more progress is going to happen throughout the balance of this year on that. So, you know, you have to make it company-wide. You have to build a culture that you have to be frugal in a positive way, not in a negative way. And then you have to do things that drive revenue simultaneously with more innovative products, more SaaS products, et cetera. And if you can do those two right, you become sustainable. So why we believe in sustainability is an outcropping of what we're doing for the global world. We also believe that it is our mission and goal and to show the industry that an EV infrastructure company and independent can be financially stable. And that's the big mission for 2024.
Maybe touching on that a little bit more. Can you walk us through your path to profitability and are you still on track for that in December 2024?
So we maintained after our Q1 announcement that we aren't changing the EBITDA goal for this year and that's to become, on a run rate basis, EBITDA positive by in December on a monthly. So we, at this point in time, we remain committed to that. We'll have updates as we get to Q2 and where we sit. The year is a little softer, as we said at the end of Q2 in March and May as we looked at results from there. But we are, you know, it's like anything in a company that is this big. We have multiple levers that we have in our war room on our path towards EBITDA. We haven't pulled all those levers. We have, we have some that are contingency measures that may need to be pulled, others that we might not want to pull at all unless we have to.
But we have it down to a science. Our Director of Strategy and PMO, he lives and breathes. He can tell you where every dollar in the company is being spent right now, what will be spent, what we need to have cut, what we need to move. So we have it down to a science. So whether we hit it or not looks good, that we may. But the important thing is that we will walk away with a structure at Blink which no matter what is the framework for sustainability. So we know how to maintain that. And when we say sustainability, there's all sorts of things you can do to be flash in the pan on EBITDA. You can make certain moves and you can reinstate three quarters down the road and say we only cut it temporarily. We're not interested in that.
It has to be sustainable and it has to be for the industry as well as for our shareholders and for the employees.
We have a couple minutes left, so I want to again see if the audience has any questions.
Okay. Come on, I'm easy. Give me fire something at me.
No worries. So maybe for our last question, can you walk us through our upcoming catalyst this year? What should investors really be prepared for and, you know, continue to monitor over the course of the year?
You know, I think investors need to look at two sides of the business. They need to see where revenue is going and where growth is going. Right. They need to pay attention to the car side of the business. And they also need to make sure that companies that are going to be here for the long term that they've looked at, they have enough cash, then that cash that they have isn't encumbered, meaning that it can be put to good use. So Blink has both the requisite amount of cash to get to EBITDA and then we have the vehicle for additional capital in place. So we're sustainable. We don't have any worries about money right now as we move forward. And also, what's that path? Is that path realistic out there? So we believe that we have the right product versus vertical integration.
We have the right path forward in terms of keeping going and being exploitative towards the margin and the revenue we make off of product sales also while heavily investing in other sustainable revenue on the SaaS side of the business, which we see is the natural economic maturation of the company and getting to that. So it's paying attention to the fundamentals, plus the strategic plan and then the overall how flexible is the company? Is it believed that. It's just the way I started out. There was arguments about whether we should do Level 2 versus 110. I'm sitting on panels in San Diego versus General Motors at the Volt at that time, said, "You never need any other infrastructure. Just plug it into a 110 outlet." Well, look where we've come. We're talking about megawatt charging now. So this industry is going to continue to evolve.
There's going to be the next thing and we have to prepare ourselves to be ready for that and to be exploitative towards it when it arrives.
I think that was a great place to end, Brendan.