Blink Charging Co (BLNK) 2022 Q2 法說會逐字稿

Good afternoon, and welcome to Blink Charging's Second Quarter 2022 Earnings Conference Call. (Operator Instructions) Please note this conference is being recorded. A replay of this call will be available on the Investor Relations page of the company's website.

At this time, I'd like to turn the presentation over to Vitalie Stelea, Vice President of Investor Relations.

Thank you, Alice. Welcome to Blink's second quarter 2022 earnings call. On the call today, we have Michael Farkas, Chairman 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 in the appendix of our earnings deck. You can find the deck along with the rest of our earnings materials, another important content on Blink's Investor Relations website. Please note, today's discussions 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 2 of the second quarter earnings deck. Unless otherwise noted, all comparisons are year-over-year.

And now, regarding our business calendar, we have 2 upcoming engagements. On August 10th, Michael Farkas, (technical difficulty) and Founder, will present at the JPMorgan Auto Conference in New York. And on September 7th, Blink will participate in the Barclays CEO Energy-Power Conference, also in New York City.

And now, I will turn the call over to Michael Farkas, Founder and CEO of Blink Charging. Go ahead, Michael.

Good afternoon, everyone. Thank you for joining us. We delivered a very strong second quarter of 2022 highlighted by record revenue of $11.5 million, an increase of over 164% over the second quarter of 2021. It is very important to note here that from an organic growth perspective, excluding 2022 acquisitions, our second quarter revenue doubled on a year-over-year basis, which proves that we have a solid strategy and robust growth on both our owner-operator side and the ancillary sales models.

During the second quarter, our product sales grew by 170%, service revenue grew by 155%, and recurring network fees grew by nearly 350%. Our record second quarter results are reflective of our strong fundamentals as these results do not -- and I repeat, do not yet fully reflect the integration of our recent acquisitions of SemaConnect and EB Charging. In fact, our second quarter results include only half of a month of Sema's financials since this transaction closed on June 15.

Going forward, the recent acquisitions will only accelerate our momentum in sales, network expansion and product development. In the quarter, we contracted, sold or deployed 5,630 commercial and residential chargers, an increase of [73%] same quarter last year. During the same period, Blink was awarded an additional $2 million from various (technical difficulty) $32 million since the beginning of 2021.

In addition, we are extremely encouraged by yesterday's passage of the Inflation Reduction Act in the Senate. We believe that the Act provisions for consumer incentives for both new and used electric vehicles, conversion of government fleets to EVs, and its favorable tax and CapEx implications will contribute to a faster transition to electric transportation, resulting in higher demand for EV charging infrastructure. This aligns well with Blink's strategy and our future growth plans.

On Slide 5 is the most important highlight of this quarter, which is Blink's acquisition of SemaConnect. The combination of Blink and Sema creates a powerhouse of the charging industry, adding over 12,800 active chargers and 151,000 registered users to Blink's portfolio of chargers. And as importantly, this acquisition provides Blink with vertically integrated manufacturing capabilities in the U.S., which instantly qualifies Blink for the Buy American mandate within the Biden administration's $7.5 billion EV charging investment plan.

Sema's large portfolio of technology and intellectual property includes Level 3 DC fast chargers, which significantly accelerates Blink's go-to-market strategy in the fast-charging DC space. And financially, Sema has one of the highest, if not the highest, margin profiles in the industry with a strong recurring sales and cash flow model and multiple revenue streams. We are very pleased with this acquisition and look forward to continuing the integration of Sema into the Blink family. Mahi Reddy, Founder and Chief Executive Officer of SemaConnect, joined the Blink Board of Directors recently, a great addition which will positively impact the integration process.

On Page 6, you can see that SemaConnect acquisition was preceded by 2 other very important transactions. In April of 2022, we closed the EB Charging acquisition in UK, giving us access to the UK and Ireland markets and adding nearly 1,200 chargers to Blink's global footprint. As a part of that transaction, the acquired and confirmed order book was about $16 million, which is being fulfilled as we speak. Prior to that, in May 2021, we acquired Blue Corner in Continental Europe, establishing initial presence there with plans to grow significantly in the fast-growing European market. This includes countries such as Belgium, Netherlands, France, among many others.

Our strategy is paying off as demonstrated by the recently announced agreements with Q-Park to deploy nearly 600 chargers across 80 sites in the UK and Ireland. Q-Park is one of the 3 largest providers of parking facilities in Western Europe, so we're extremely excited about this new partnership.

Blink's strategic and organic growth has contributed to our fast global expansion. As you can see on Slide 7, our network is already established on 3 continents and key markets within each, and we are looking to expand further from here. We think that there is significant opportunity ahead for Blink because of our equipments, our new and updated soon-to-be-revealed software, and our network are compatible with the charging infrastructure in most places on the globe. Combined with strong projected growth rate in EV penetration and EV infrastructure needs, we think Blink is very well positioned for substantial organic and strategic growth.

In fact, a recent study from McKinsey published in April of this year, argues that the United States alone could have 48 million EVs on the road by 2030, 48 million. And globally, Bloomberg New Energy Finance recently pointed the need of between 340 million to [450 million] chargers by 2040. I'm going to repeat that, 340 million to [490 million] chargers, it's massive. And interestingly, when you think about only 3% of those are projected to be superchargers.

Blink is positioned to take advantage of this incredible growth environment due to our strong value proposition. As you can see on Page 8, we believe Blink has the most advanced technology in the market right now with strong intellectual property and vertical integration capabilities globally. We offer multiple business models to our customers for them to choose how they want to deploy their capital, anywhere from full ownership to no capital requirement and minimal involvement. And we have an extremely large footprint that we believe will only keep growing at a very, very accelerated pace.

On Page 9, another thing that I'm tremendously excited about is Blink's new global framework empowered by our recent acquisitions, which we believe is a game-changer in the EV charging industry. Despite having manufacturing capabilities in the U.S., India and Taiwan, our international network and portfolio of equipment is unparalleled today. Anywhere from New York to Brussels, Tel Aviv, London, even to Guam, you can use the same [lead network] and branded chargers in 6 languages, 19 currencies across 21 countries, and we're only getting started. We have a lot of other countries and many more features to follow.

In essence, whether we own and operate or sell the hardware, Blink strives to deliver best-in-class products and services globally. This is what enables a faster transition to EVs and what helps our customers and site hosts to make the switch to EVs and to Blink.

With that, I'll turn the call over to Brendan Jones, President of Blink, to discuss some of our recent developments.

Thanks, Michael, and good afternoon to everyone. As Michael talked about, it has been a very important and exciting quarter for Blink.

We're going to begin with Slide 11, and not only in the last quarter did we have a strong financial performance driven by solid fundamentals, but we also accomplished the acquisitions of EB Charging and SemaConnect. If we look just at EB Charging in the U.K., it has a unique business model for the owner-operator side of the business, where typically, in the U.K., we are able to get 80% of the CapEx covered by government entities. This is particularly attractive to us, especially since the U.K. government recently increased its commitment for the number of chargers by 10-fold to 300,000 by the end of the decade.

Alongside of this, the government is committed to GBP1.6 billion to increase public EV infrastructure. The acquisition of EB Charging will allow Blink to tap into the opportunities for growth, and increases Blink's footprint across Europe by leveraging synergies with Blue Corner or other European entity in Continental Europe.

Now adding to that synergy, the SemaConnect acquisition brings Blink unmatched speed to market, reduce cost, lower expenses, revenue growth and flexibility. It is another step towards our vision of creating the leading global electric vehicle charging ecosystem. It added thousands of chargers and registered users to the Blink portfolio, while further enhancing our comprehensive suite of smart hardware and software solutions for both retail and commercial applications. And we cannot say enough about the talented individuals at SemaConnect and the industry knowledge they bring to Blink. We have essentially doubled our headcount through this acquisition.

If we transition and now look at Slide 12, as the world continues to struggle with broken supply chains and chip shortages, SemaConnect vertical integration is key to achieving end-to-end design in in-house manufacturing. It will allow us to control the time line for delivery of products that will satisfy multiple customer demands. And these will effectively contribute to better cost management and industry-leading margins.

We also believe that the in-house manufacturing capacity will be key to leading increased demand. In the United States in particular, SemaConnect's manufacturing facility in Bowie, Maryland allows us to become Buy America compliant, while we get to control the IP and the quality as well as the future ramp up in capacity. Same also applies to our manufacturing facility in India.

As we combine our complementary in-house engineering and software capabilities, we will be looking to leverage economies of scale across the board. As a matter of fact, we are already doing it. Our sales teams have started working hand-in-hand and addressing opportunities as one team, complementing each other's lead generation and product offerings.

If we flip now to Slide 13, when it comes to synergies on the revenue side, our plan includes upgrading existing SemaConnect customers to a new Level 2 Blink chargers and transitioning them to the new Blink network. The hardware and accessories we revealed at CES this year have received great reviews from our existing customers. As a result, we are also looking to increase the number of chargers at high utilization SemaConnect sites, thus increasing hardware revenue for each incremental charger sold.

As we evaluate each site and our relationship with those new owners, we plan on providing SemaConnect customers with the option to switch to the hybrid revenue model, thus increasing the LTV per charger by about 10 to 15x. We believe this will be a win-win situation, especially with customers who are looking to ease the cost of owning and operating a charging site.

And besides the revenue synergies, we believe we have multiple opportunities on the cost side, in both cost optimization, revenue, expense avoidance and cost reduction. When it comes to hardware, we'll be leveraging SemaConnect's low-cost manufacturing capabilities with a targeted [cost for us] per unit of approximately 30%. I will say that again, 30% cost reduction. This is significant. This is a decrease from our current costs.

Regarding talent, we are very excited to welcome SemaConnect's employees to the Blink family and scale these talented team members across the entire organization. More than 1/4 of SemaConnect's employees are highly skilled engineers with complementary skill sets to what we have today. And last but definitely not least, we plan to optimize our sales and customer service efforts to leverage scale and deliver the best quality of service and sales experience in the EV industry today.

If we transition to Slide 14 now, within the last 1 month, Blink has contracted, sold, deployed or acquired over 5,631 chargers, both domestically and international, bringing the total charger count for the company to over 51,000 since Blink's inception, which also includes the SemaConnect chargers. We have a healthy mix of deployments in the United States and abroad, with 74% of the total company-wide Blink chargers deployed in North America and 26% deployed internationally.

Consumer demand for electric vehicles is steadily increasing, and the forecast from reputable thought leaders was very optimistic, as Michael outlined earlier. When it comes to growth in charging infrastructure, our global network of chargers has steadily expanded quarter-over-quarter, and we expect this to continue well into the future.

On Slide 15, as you can see from the logos and verticals, this is a very comprehensive list and speaks to the breadth and depth of our products and services. We won numerous multiyear contracts with a variety of well-respected commercial enterprises, health care facilities, multifamily complexes, planned communities and municipalities. SemaConnect's equally comprehensive portfolio significantly complement Blink. In fact, we are seeing tremendous opportunities to grow our customer base in the near future.

Now if we move over to Slide 16, this gives us an overview of our stations deployed in key geographic locations throughout the United States and Europe. As you can see, with the SemaConnect acquisition, our customer base has expanded significantly to over 423,000 drivers registered within our portfolio of charges. We have offices in 9 locations across 5 countries, serving customers in more than 21 countries. Internationally, we are building the momentum achieved by Blue Corner and combined with our recent acquisition of EB Charging.

On Slide 17, just to remind everyone, we have launched and will be launching several exciting products in 2022 including Blink's advanced fleet management software and the accompanying mobile app designed to be used with the advanced MQ 200 hardware. MQ 200 was launched this past quarter and the initial feedback is very positive. The combination of hardware and software will provide a 360-degree fleet ecosystem.

Moreover, we are preparing for the launch of an entirely redesigned Blink mobile app and cloud application, which is based on the latest tech stack and will make EV charging even more easier for drivers and operators. We are excited about the innovative Vision charger designed for the retail location, which has now been completely redesigned, as can be seen on Slide 17.

In addition to that, HQ 200 is a residential charger which is fully networked and will allow customers to stay within the Blink network even in their homes. And also as important, the newly added Series 8 family of chargers, which allow customers to use their credit card to pay for service, which is in fact a requirement effective January 1, 2023 for retail and public locations in California. Overall, we have a comprehensive portfolio of charging solutions to fit the needs of any customers, public or private, with the capability to penetrate numerous different markets.

If we now go to Slide 18, this provides an overview of the historic $1.2 trillion federal infrastructure bill that includes an estimated $7.5 billion to be used for building the nationwide infrastructure to support the anticipated growth and the adoption of electric vehicles. Since January 2021, Blink has been awarded $32 million in grants from several different state organizations. We now have a tremendous opportunity to add to this number by capturing as much as possible of the $17.5 billion and aid in the expansion of our charging footprint.

If we now flip to Slide 19, this shows some of our big wins. Our business development teams from Blink, SemaConnect, Blue Corner and EB are working together to develop and close deals across a large spectrum of customers, anywhere from established auto OEMs and suppliers, to large real estate developments and management firms, to local government fleets to retail and entertainment companies, among many others.

On the government side, 2 recent examples of our purchasing agreements with 2 governmental organizations are Region 1 Planning Council in Northern Illinois and Florida Sheriffs Association cooperative purchasing program. The Northern Illinois Council government helps local governments and agencies save time and money by leveraging the buying power of its 20 plus members within 6 county jurisdictions.

The contract for EV charging equipment services for up to 10 years will enable members of our R1's Council of governments to participate under any of Blink's deployment model with favorable negotiated terms as awarded. The initial plan estimates up to 700 charging stations to be installed over the term of the purchasing agreement. Also in January, we announced -- in July, excuse me, we announced a successful contract award with the Florida Sheriffs Association cooperative purchasing program as an efficient vendor for electric vehicle stations. CPP vendors, Blink products will be made available to CPP participants providing them with direct access to Blink's EV charging stations. Blink now has the potential to reach and contract with thousands of state and local agencies, municipalities and educational organizations across Florida.

All in all, we are very, very pleased with our performance in the second quarter. Our fundamentals are strong as we delivered record financial performance in Q2, even without realizing the full benefits and synergies from recent acquisitions. The SemaConnect acquisition is transformational for Blink. We not only doubled the size of our employee base with some of the best talent in the industry but acquired key manufacturing capabilities and products know-how that positions us to continue to grow and benefit from the $7.5 billion infrastructure plan. We are excited for what's next for Blink.

And now, I will turn it over to our CFO, Michael Rama, to run through some of the specific results for the quarter. Go ahead, Michael.

Thank you, Brendan, and good afternoon, everyone. Turning to Slide 21, total revenue in the second quarter of 2022 grew to $11.5 million, another record for the company and an increase of 164% compared to the second quarter of 2021. Excluding the 2022 acquisitions, our revenues for the second quarter of 2022 doubled, which demonstrates the solid fundamentals of Blink's business and strong customer demand. We are at a point in the industry where more and more consumers are choosing EVs for their transportation needs and Blink provides the flexibility helping site hosts and consumers make the switch.

Year-to-date through June 30, 2022, our total revenues were $21.3 million compared to $6.6 million for the first 6 months of 2021. What's noteworthy here is that our year-to-date revenues through June 2022 have already surpassed total revenues of $20.9 million for all of 2021. Product sales in the second quarter of 2022 were $8.8 million, an increase of 170% over the same period in 2021, as customers purchase greater volumes of our commercial chargers, DC fast chargers and residential chargers.

Second quarter 2022 service revenues, which consists of charging service revenues, network fees and ridesharing service revenues were $1.5 million, an increase of 155% compared to the second quarter of 2021. The year-over-year growth is primarily due to the increased utilization of our chargers and an increased number of chargers in Blink's networks. As you know, we combine these 3 service revenue line items into one amount to differentiate between the product and service aspects of our business. And this approach also aligns with our company's strategic goal of increasing the services component of our revenue mix and growing our recurring revenue base.

In time, as EV adoption accelerates and utilization of power charging stations increases, we anticipate seeing a larger mix of revenues come from services.

Gross profit for the second quarter of 2022 was approximately $2 million, an increase of 204% over the same period of last year. We continue to look at ways to drive higher margins, especially in light of ongoing supply chain disruptions occurring globally.

Now, operating expenses in the second quarter of 2022 were $23.9 million compared to $13 million in the prior year period. This increase reflects acquisition-related expenses of approximately $3 million associated with the acquisitions of SemaConnect and EB. It also reflects higher expenses in the areas of accounting, legal, marketing, Investor Relations and consulting. Also included in the operating expenses for the second quarter of 2022 is increased amortization of intangible assets associated with the acquisitions of SemaConnect and EB. This expense will continue, but is non-cash in nature. Furthermore, the increase in operating expenses includes operating expenses from SemaConnect and EB that were not included in the results for the second quarter of 2021.

Because we strive to deliver best-in-class products and solutions, we continue to recruit talented individuals that will contribute to our company's growth and success. Many of those individuals participate in the research and development activity that will ensure that our products, software and innovative solutions remain above competition.

In 2021, we began presenting adjusted EBITDA. Our management team believes this non-GAAP measure is useful in evaluating our company's core operating performance because it excludes items that are either nonrecurring or significant noncash items. Adjusted EBITDA for the second quarter of 2022 was a loss of $15.6 million compared to a loss of $8 million in the prior year period due to the -- higher previously mentioned operating expenses. Adjusted EBITDA as a percentage of revenues for the second quarter of 2022 improved 49 basis points compared to the second quarter of 2021 and for the year has improved 88 basis points.

This quarter, we are also introducing the non-GAAP measure adjusted earnings per share, which is earnings per share, excluding significant noncash items such as amortization of intangible assets and nonrecurring expenses such as acquisition-related expenses. Adjusted earnings per share for the second quarter of 2022 was a loss of $0.41 for diluted share compared to a loss of $0.31 in the prior year period.

Now, turning to Slide 22, our revenues and gross profit performed well in the second quarter of 2022, continuing the upward trend that we've seen over the past several quarters now. As we execute on our flexible solutions of owner-operator strategy and selling of hardware, we believe that we are well positioned to continue driving increased revenues and gross profit moving forward.

Moving to our cash position, at June 30, 2022, the company had approximately $85 million of cash compared to $175 million at the end of 2021. We believe we have sufficient cash on hand to fund our current operations. We are pleased with the second quarter of 2022 as we recorded another record quarter. These improvements in our operating results are a direct reflection of the solid foundation we've built over the past several years, and we believe we're well positioned to capitalize on the numerous opportunities and increased focus being placed on the EV industry.

I will now turn the call back over to Michael Farkas for a few final comments. Michael?

(technical difficulty) Second quarter of 2022 was a transformational quarter for Blink. Not only did our second quarter revenue doubled organically year-over-year, but we closed on 2 significant acquisitions that positioned Blink well to take advantage of the rapid industry growth. We are very excited to integrate EB and Sema into the Blink family and we continue to expand our hardware and software solutions globally.

With that, we will now open the call for questions.

(Operator Instructions) Your first question is coming from Matt Summerville with D.A. Davidson.

Couple of questions. I want to start with the core business. Can you give us some sort of idea when you look organically how much revenue is being derived on a quarterly basis from new customers versus those rebuying from Blink?.

Mike, do you want me to jump on that one or...?

Yes, that will be fine.

Yes. No, obviously, Matt -- organically we're just seeing recurring nature of our revenues from our customers, the good -- we have big customers that we've announced with the OEMs and the many partners that we've had. Organically they continued to buy, obviously the chargers we're deploying into dealerships. So it's a continuous stream, but we're also adding new customers and new opportunities across the board. So, organically, obviously, as we mentioned in our comments, we doubled our revenues quarter-over-quarter, excluding the acquisitions. And we continue to see more, obviously, our customers recurring, but also new ones added to the mix.

I'll add to that a little bit. We do see a lot of new customers. Obviously there have been a lot of property owners that have been sitting on the sidelines waiting to see more traction in the EV space. There's no longer a question of whether or not EVs are going to be the mode of transportation moving forward. We're seeing a lot more of those that have sat on the fence and now putting in orders and looking at it across the portfolio of properties.

There is literally one of the major developers, New York has been sitting for years looking at EV and now we were able to put in 50 units or so in some of their locations throughout the 5 borrowers. So we're seeing guys that have been sitting on the fence and we're seeing a lot more customers who have EV charging in their locations of needing more such a great combination of those new business and recurring.

Got it. And then, this one maybe a little bit more for Brendan. But I was curious, you mentioned in your prepared remarks that Sema will provide a basis by which you can reduce your cost of goods sold, I believe you said by 30 percentage points. Is there a way to sort of break that out a little bit, Brendan, in terms of how much may be coming from labor versus supply chain/procurement? How should we be thinking about what sort of underpins that 30 percentage points?

Yes. Well, for obvious reasons, we're not going to break it out by dollar amount, but it's a combination of both labor and the manufacturing type of the chargers and being direct. As you imagine, if you look at our current portfolio of chargers without SemaConnect, some of that is -- it's our design. It's full contract manufacturing, meaning the contracts are designed kind of how we want to build and then they build it, right?

With SemaConnect, that model flips. It is our design again, however, it's our technicians and everyone is building it from the ground up. They are our employees, they are not contract employees. It's our manufacturing facilities, not contract. We're not selling from one end to the other to create a margin. So all that creates a reduced COGS for us to be able to sell. And then, when we combine those 2 systems together, even on Blink product, that's going to give us the reduced cost.

Our next question is coming from Stephen Gengaro with Stifel.

2 things for me. The first, when you talk about the deployed and sold units, I think it was like 51,000, can you give us a sense for how many of those are revenue generating assets for you from a service revenue perspective, from a charging perspective?

Yes, I'll jump in. There is about -- there's quite a few. Obviously, this includes all our networks. I just want to be clear that the 51,000 that includes between our core Blink, the Blue Corner that we acquired, EB as well as SemaConnect. So, a lot of what's acquired through EB and SemaConnect already all networked on their systems. And then -- so probably good -- of the 51,000 probably good 2/3, maybe is on a network -- some sort of a network that we're in the process of combining and that we'll see synergies on that as we move forward through integrations.

Okay. I'm trying to sort of backfill and trying to figure out sort of how to think about utilization and kind of ultimately what kind of revenue per deployed chargers we can think about on the charging revenue line, right? And I was just sort of trying to see if there's any way to -- any color you could add to that.

Well, obviously, there are different business models that we have. And some of the companies that we acquired really sold hardware. And we're going to start introducing using our owned and operating model on some of these companies we acquired. Our owned and operate model has a much more robust potential for revenues than just having a charging station that we sold to a third-party and it's on our network and we get a few dollars a month for it.

So, again, we believe long-term as more and more EVs on the road, utilization kicks up. And as that happens, these charging stations become financially very, very, very profitable. So, as things progress, as we integrate these networks together where we have a very, very nice mix of different products and services. Some of it will be monthly connectivity fees and processing fees and not much on the sale of the energy, similar to charge points model.

Again, that's part of what we do as well. But our focus here is really to try to own and operate as many of the charging stations as possible. And I'm sure you've run the models and seen how potentially profitable, especially the Level 2 charger stations can be once they're out in the field. So, as things progress and as this integration takes place, we'll be able to give a lot more visibility on that.

Great. And then, just one other one. You started providing us with sort of the adjusted EBITDA numbers recently, I think it was last quarter or the quarter before. I was just curious, by doing that, you, in some way, suggest to me that, that number is headed towards breakeven/positive territory at some point. And it's a good measure of sort of progress for you as we look forward. Any guidance on sort of when we would see EBITDA get to the breakeven level?

We look at that continuously, obviously where we focus on investing in the business obviously driving top line revenue. And then, obviously as we start going through the integration and synergies with the recent acquisitions, we target and we have a target and a goal. The first is to reduce the EBITDA losses and then we get -- it could be a couple of years out. So -- but we're mindful, we want to be proactive. We will be making a lot of efforts over the next 12 months as we're integrating the acquisitions to really, I like to call it, chop down some of the wood, right? So -- but it's a high priority of all of ours and our initiatives.

Great. It seems like a lot of good...

I'd like to add to that a little bit. Operating and developing technology in our space is not inexpensive. And having 4 companies being able to share one footprint, one customer service, one back-end, one mobile application, there will be tremendous economies of scale in integrating all of these companies and these networks. A lot of savings, a lot of really good features that we're combining from the different networks. So there's some really interesting and good times ahead of us. And through this all, we are, as Michael mentioned, we are looking to sharpen the pencils and really start focusing on chopping the wood and getting rid of expenses that are unnecessary. And there's a bunch of them now that we have overlapped. So it's really a great opportunity for us.

Our next question is coming from Chris Souther with B. Riley.

Given all the moving pieces with EB and half a month of Sema financials, could you give us a sense of what the run rate would have looked like had SemaConnect been in the business for the full quarter? I just want to get a sense of what the revenue run rate from SemaConnect and EB would have looked like on a pro forma basis for revenue and as well as kind of gross margins for that product sales segment? And a better sense of the OpEx and what we should expect going forward after we had those and back out some of those acquisition expenses?

Yes. This is Michael, I'll jump on that. As we put in the deck, you'll see there's a bit of a pro forma in the appendix and where we've called that what the company we would have looked like on a combined basis from the beginning of the year, we would have looked like. I believe the combined revenues for the quarter would have been about $17 million for the quarter and about $32 million and change for the first 6 months. So -- but that doesn't take in consideration, I think, moving forward. So, obviously there's growth anticipated. And so -- but it gives us to give a little bit of a hindsight what 2022 would look like for the first half on a combined basis pro forma.

Perfect. Yes, that's really helpful. Maybe just on the gross margin piece, then given you've talked about SemaConnect having the really strong gross margin profile, I wanted to get a sense of where that would have stood if you could.

We didn't get that granular, to be honest, obviously because some moving parts with synergies and -- but obviously, we look at that as -- I look at as upside from us, from a post acquisition that we would realize going forward.

Okay, that's great to hear. And any sense, if you could kind of quantify the revenue opportunity as well as the cost side of upgrading SemaConnect's existing footprint. I'm sure it's early days, you're kind of working through conversations with some of those customers to the [bank] owner model as well as expanding footprints at some of those sites. But just wanted to get a sense of -- how you guys would quantify what that opportunity looks like just with the existing footprint over the next or 3 years or kind of the roadmap there.

So, let me jump in and answer this one. So, we are cracking the numbers on that as we speak. So far, they're very promising. And some of you might know we contracted with McKinsey Group to do 2 things: first, the initial synergies analysis between the organizations; and then second, the roadmap to achieving those with definitive numbers and a plan to be implemented to achieve that.

We're in the final stages now of validating the numbers and then we're going to kick off the plan. So, as soon as we validate those numbers, we can make them available. But at this point, we need 1 or 2 more weeks to get those (technical difficulty). But the big number is, it's very lucrative both in the revenue enhancement thesis and in the cost avoidance thesis.

Michael, you want to add any clarity to that?

No, I'm fine.

Okay. And maybe my last one here. Could you give us a sense -- I understand kind of with the large Blink network base, a lot of the acquisitions were just going to restrict product sales. So I want to get a sense of the mix more recently, like this past quarter, even if you could between owner operated, commercial, residential sales of the deployment. It seems like we're getting really good momentum on the product side even before SemaConnect. So, maybe just -- I think you've kind of given a clear like, hey, where long-term you think -- that mix sounds like it should -- you think it will be going, but curious where it is today and kind of the next couple of quarters based on what visibility you do have?

Brendan?

Is that one going to me? I'm sorry, I thought Michael, it was about the mix of sales and revenue. Mike, are you...?

Yes, I guess, on the sales, right, side of it. So, obviously you could still see we're generating about 70%, 80% -- 75% of our revenue still coming from the product side of it. But we're still looking across the board looking at what have we contracted, we're still looking at a pretty good even split between owner operated and hardware sales, so -- as we move forward.

So, again, it takes a little bit more time, obviously, as the service revenues as you get them deployed and start realizing and as the utilization start to really kick in, that's where we're going to start seeing the -- as we saw, the call to turn towards more towards service revenues as opposed to the product mix, if you will. But the -- so these sales have been pretty mixed -- pretty close to 50-50 on the sales versus owner operated type sales.

Okay. That's helpful. I'll hop in the queue.

Our next question is coming from Oliver Huang with Tudor, Pickering, Holt.

First one, just on the compensation and G&A line item. The quarterly increase understandably is coming from growing the business in addition to acquisitions and acquisition-related costs. But I was wondering if there is any incremental color on how we should be thinking about the run rate for each of those line items, especially with the comment of doubling the headcount from the Sema acquisition over, call it, the next 12 months or so?

Well, obviously we'll see that accelerate a little bit, right, not to the tune -- remember, it's going to be relative to the acquisition side from the SemaConnect standpoint. So we'll be able to give a bit more color coming on later this month to that because we're actually going to be filing the pro forma financials with SemaConnect towards the end of the month. So that is from an acquisition standpoint. So we'll be able to provide a bit more color on some of that. But obviously, there will be an increase in the salaries, but that's not going to account consider any synergies that, as Brendan mentioned, that's going to be developed, that's we're going to work through, as well as the scale that we're going to have that will relate to the increased volume that we anticipate.

Okay. And for a second question, I was just wondering on the manufacturing facility, is there a time line in terms of being able to expand that facility from the 10,000 to 50,000 units? And in terms of going beyond that, is there any sort of rule of thumb in terms of how we should be thinking about costs and how long such a build out would kind of take?

So, the time line is being established now, so we're not ready for prime time, but we'll have it within the next 2 or 3 weeks. The cost is low. So, first, when we're going up over a period of time getting up to, let's call it, the 40,000 unit mark, and that's coming out of our facility in India. And our facility in India is basically manufacturing the parts and the facility in Bowie is assembling the chargers is to way to look at it.

So, the first aspect of that was going to be able to do with just shift -- added shifts from going from 1 to 2 to 3 shifts. Then the second stage of that is cruising the line capacity out of our building 3 and 4 there in India and then increasing the capacity out of SemaConnect in Bowie by adding additional shifts there as well.

So, the first stage, adding shifts up capacity. Second stage, add some tables and tooling. In the original estimate, the tooling and table adds are very low in comparison. So we're not looking at a massive CapEx to get it expanded out. We're looking at additional shifts primarily and some minor upgrades in tooling and equipment in order to get there. We'll have more definitive data out in the next 2 to 3 weeks as we finalize the synergy plan.

Okay, perfect. That's helpful.

Our next question is coming from Noel Parks with Tuohy Brothers.

I have a few things I wanted to run by you. I guess, sort of as just a reality check, could you sort of ballpark how many models, in other words, ones that you plan to either have going live or are going to continue in production, will the combined companies have that they'll be selling? I imagine there's going to be some rationalization, some overlaps where you will favor one company's existing model from another.

Yes, sure. I can touch on it briefly. So, the product -- or what we're calling, the product rationalization study, it's in its second phase. So, in the first phase, we reviewed all the products. We looked at COGS, production capacity, acceptance in the market, all the reveling data you want to look at. Now we're going to go to the second phase is that is, okay, what do we move forward with and what we dealt. There is some favorites identified within that, but also there is nuances. And we mentioned earlier, the Series 8 charger, which has a credit card reader already built into it, which is unique, because it's not a slap on version of a credit card. That is going to be Blink SemaConnect combined together charger for sale in California for all publicly accessible places, because in 2023, beginning in January, that's the only charging you can install there as a result of the California mandate on that topic.

Then we're going to continue to rationalize that portfolio out and we're going to combine together. Now down the road in the future, we'll talk about the different changes to look and feel and everything. But we got about a week or less in that rationalization study, it's along with all the other synergy products we're going through. First review look great. And the idea is on making sure we can get the right amount of the product, the highest quality product at the right cost of goods sold out to the public. And as you know, we're going to be hesitant at first to shutting off any one of our producers of chargers, because chargers are in demand right now. Most manufacturers cannot deliver upon the orders that they have today. So there'll be a degree of running parallel to make sure we can fulfill the backlog of orders we have.

I do want to add to that just a bit. This is Michael Farkas. It's very important for us not only to trim our product line to make sure it satisfies our customer base, but really, what we call, Gen 3. And that's really the combined integration of Sema's strengths and Blink's strengths and having that hardware fill that role. So while we're already on Gen 2 and we have amazing equipment across the board and we do look towards the future, and that future is going to be where we're going to receive really just tremendous amounts of benefit from the integration of the companies.

So, there is tremendous savings today, great product line. And as Brendan mentioned, the requirements in California is not only California to have a credit card swipe on those chargers. There are many other states that follow exactly what California does. One of the attractive things about Sema was the fact that they had a product readily available to meet those needs in California. And there are very, very few, if any, other of our competitors that can fulfill those requirements. So we have the major, major advantage from most of our competitors in that regard.

I wasn't aware of that. And I think...

It's interesting -- it's very interesting because people look at the transaction that we had with Sema, and the purchase price was $200 million. But people aren't really familiar with the fact that one of the largest investment banks in the world was going to do a $2 billion pre-money deal on Sema when the markets were at its height. So I agree with you. Those were very, very frothy valuations both the bottom-line. When you look at how we purchase companies in the past, we've always bought them for a very good pricing.

And we really look at the deal. Although again, the valuations of the past are not the valuations of today kind of being able to buy a company for 10% of the value that a Goldman Sachs of the world was willing to offer them. And then, we were able to take advantage of market timing as well as all the amazing things that Sema brings. It's another transaction that the Street today just doesn't really fully value. Very, very similar to the acquisition we had in Europe, standalone on its -- if it's standing on its own 2 feet, the market would value that company at $1 billion and change. But being a part of Blink, we still have not received that value. Really look at us according to some of our competitors EVgo and ChargePoint and they have many multiples of our market cap. But we own and operate which some of them don't, and we have thousands or tens of thousands of charging stations on the ground and they're 10% of our size or maybe 2 or 3 times our market cap.

So, again, I think when the Street really fully realizes the acquisitions that we've made and what their independent and individual values (technical difficulty) them together with Blink, I think that there'll be a repricing and (technical difficulty).

Right. I absolutely agree that there is definitely a disconnect there. I just have one other thing I wanted to ask sort of about just on the ground with the current Sema business. Can you just talk a little bit about what logistics and maybe if you can even speak a bit to the cost of their sort of maintenance, repair, module replacement or equipment upgrade cycles, like I'm just curious, are there expenses in those lines pretty similar analogous to yours, different in some ways I know because of regulation...?

I would say, very different. And the reason why is, as an owner and operator, you have a different philosophy in developing hardware. Our competitors, which none of them own and operate the charging infrastructure after it's sold, they build equipment with upgrades built in. That's their model, I mean like a cell phone. We look at our equipment like a hot water heater or refrigerator and we want it to last many, many, many years without upgrade cycles. And if there has to be an upgrade cycle, we don't want to have to rip out the entire machine. We want to be able to use that machine and maybe change the motive or changing RFID part of those things change.

Obsolescence is extremely important to us. Our competitors, it is to them as well. But what their philosophy is, they want the unit to become obsolete and we don't. So, our business is to have those units in the field as long as possible, because we're going to generate the money off of the sale of the electricity through those charging stations. So, there is a reason why General Motors selected our hardware to be in their dealerships. There is a reason why Subaru did. There is a reason why Audi did. These are industry veterans that literally benchmark all of this hardware against each other. This is not just some property owner that doesn't know what they're doing, immediately rip these things apart and there's a reason why some of the biggest investors in EV are using our charging stations.

And this is not just blindly. This is something that they went through by benchmarking, by putting one unit against each other. There is a reason why a Blink is getting chosen, it's because of our philosophy and how we build the hardware. We're just an owner and operator and there is no others that do what we do. If you look at any of the other owner operators, you're looking at EVgo, they don't make their own hardware. They don't have their own network. You look at Electrify America, it's the same thing. So, it's just a different philosophy. So, again, our hardware is lasting longer because it's designed to do that. Our competitors' hardware is designed to become obsolete after a couple of cycles, so you have to buy new hardware. You follow?

Absolutely, absolutely. I do just want to ask just a little bit tied to that. Given that you're going to be seeing ultimately about a 30% lower cost with the manufacturing integrated through Sema, I'm just wondering, does that cost differential have any impact on sort of maybe your regional growth in different areas of the country? I'm just thinking of EV adoption and EV charging trends that have sort of correlated in some places with high power cost markets versus low power cost markets just the speed of deployment. I was wondering if your big cost headings is going to change that and have for you any?

Ultimately when you see what's going on globally, from a legislation perspective, the world is going EV. You see what's going on with the Biden administration. You see what's going on in China, it's all over Europe. It's not necessarily about the cost of the fuel, which is electricity because it just happens to be a hell of a lot cheaper than wherever you're going to go with using gasoline. So, it's not necessary about the cost of the power in different areas right now. There is a concerted effort by every single OEM globally to manufacture EVs, even those holdouts like Toyota and Hyundai with their portfolio of plug-ins now. There are no more holdouts. It's every single major brand and those are committing to stopping making internal combustion engine cars within some of the next 5 and 10, 15 years.

So, this is no longer about choice. I mean, yes, you have the choice of what car to buy. You can still buy a Ford or Mercedes or a BMW, but really the power source for mobility has been chosen and its EV. And the only [shortcoming] that EVs have is what we do, which is making sure that there is a fuel supply for them. And it's us and other companies in the space. There is a whole switchover of mobility that's taking place right in front of our eyes. And you're just going to see all of that investment all that capital all that revenue that was generated from Blink automobiles over the past going from those legacy companies to those that are now supply (technical difficulty) fully vertically integrated EV charging company, that can provoke (technical difficulty).

As we mentioned earlier, we have owners that want to own everything from A to Z. They wanted a car, they wanted to make money with additional revenue streams. We have other property owners that literally just want to provide for the parking space, we handle everything from A to Z, they make no capital expenditure whatsoever on their park and wish to have a revenue share model with them. And we have every single different [point of methodology] in between.

It really gives us an advantage over our competitors, especially with the theme that we've built. All these calls in the past, we were always taken to task about not spending enough on R&D. We weren't big on technology. We were big on just getting a footprint, big on building our base of locations, and our model was fund upon. But now, look at the base of locations we have and all the property owners we have. And now the technology that we've developed as we've built an amazing tech team both here and in India. And now, we're leaders in that space, look at our equipment comparative, again our competitors, which speaks for itself.

Great.

Ladies and gentlemen, we have time for one more question from Sameer Joshi with H.C. Wainwright.

Just a quick one actually on the products that have been launched or are in the process of being launched. Would the SemaConnect manufacturing capability be able to manufacture those, the MQ 200, the Vision IQ, the Series 8 and the HQ 200?

So, the current plan for the products listed right there, let me address the HQ. The HQ is following its current manufacturing trajectory right now. As we get through the synergy study, we could see a transition to being produced out of the Indian facility. Then the same thing with the MQ is following that trajectory. Now, the MQ is a very well received charger in the market today with a very good COGS compared to other competitive fleet charges in the market, also with the new state-of-the-art software added to that for fleet management on that. So, as we talked about earlier, you're going to see some products that may, and then some that may not. The MQ is one that we may maintain the current course.

The Vision is in final design now. And as we finish the design of the Vision, and we have a new concept that we're working through and looking at. We'll determine the manufacturing facility for that. And again, we're going to look for the best COGS we can get into the market where it's highly acceptable. We're going to keep in mind Buy in American qualifications because those chargers do qualify, the Vision type charger. So all of that is going to be taken into account. So I don't want to tip the hand one way another until we finish the study. But I wanted to give you a flavor for, you got to follow each individual product and some might have a different plan than others.

Got it. And actually just one more. Are you seeing -- or looking at your existing customer base, do you have a concentration of a particular type of customer and/or a particular type of product that is being adopted more than others?

Well, I guess if you look at -- and this is factual. If you look at the combined portfolio, the chargers that are being focused on are the higher power AC chargers for both commercial and public use. Those are the volume players for both companies out there. Both of them can go up to 19.2kW on there. The new emerging space that is now going to start to see higher volume is fleet charging and specific L2 fleet chargers that are designed to be economical and cost effective, because in the fleet situation, the customers typically own their equipment or go into some sort of charging as a service model. They're the 2 dominant models that are in the fleet space.

So those are picking up in volume, but it's still not seeing the same level as you're going to see for chargers at library, chargers in parking lots, chargers in multifamily dwellings. Now, when we look at what we're going to put in multifamily dwellings, again, that's the least penetrated market in the United States. So, like fleet, we're going to see a big increase in that segment as well. And that's not always the 19.2, sometime it is. So look for an increase there. But right now, it's the 19.2, it's the IQ 200 and the similar complementing charger on the SemaConnect side. Those are the volume players.

I'll take my other questions offline.

Ladies and gentlemen, this concludes our Q&A session today. We would like to thank you for your interest and participation, and you may disconnect your lines at this time. Thank you.