Blink Charging Co (BLNK) 2023 Q2 法說會逐字稿

Greetings, and welcome to the Blink Charging Company's Second Quarter 2023 Earnings Call. (Operator Instructions) And please note, this conference is being recorded. I will now turn the conference over to your host, Vitalie Stelea, Vice President of Investor Relations. Sir, the floor is yours.

Thank you, Ali. Welcome to Blink's second quarter 2023 earnings call. Today on the call, we have Brendan Jones, President and CEO; and Michael Rama, Chief Financial Officer. The discussion today will include non-GAAP references. These are reconciled to the most comparable U.S. GAAP measures in the appendix of our earnings deck. You may find the deck along with the rest of our earnings materials and other important content on Blink's Investor Relations website. Today's discussions may also include forward-looking statements about our expectations. Actual results may be different from those stated. The most significant factors could cause actual results to differ are included on Page 2 of the second quarter 2023 earnings deck. Unless otherwise noted, all comparisons are year-over-year. Now regarding the Investor Relations calendar, Blink will be participating in the JPMorgan Automotive Conference in New York City on August 10; Barclays' CEO Energy Power Conference on September 5 through September 7 in New York City and HC Wainwright 25th Annual Global Investment Conference on September 11 through September 13, and please follow our announcements for additional investor events in the future.

I will now turn the call over to Brendan Jones, President and CEO of Blink Charging. Please go ahead, Brendan.

Thanks, Vitalie. Good afternoon, everyone, and thanks for joining us today. Before we get into the good results from Q2, I would like to provide a quick refresher on Blink and our capability. Now Blink is the only fully integrated U.S. full-service EV infrastructure provider. And what that means is we control our own design, our own manufacturing, our network services. Our products have been designed to meet any charging needs and with best-in-class reliability. Now in addition to 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 network services, but we also own and operate chargers with flexible offerings. In fact, whether we sell or operate them, there is 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 integration and ability to drive synergistic revenue streams provides us with a competitive advantage and positions Blink for sustained growth and improve profitability as we continue to scale the business.

So now let's transition and let's talk about the performance during Q2. If we move to Slide 6, we are pleased to say that we delivered a record quarter, far exceeding any previous quarters in Blink's 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. Our service revenue increased by 211% to $7 million, and our charging service revenue increased almost 200% to $4.4 million compared to $1.5 million in the second quarter of 2022. Now that is nearly a $3 million increase in revenue at 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. Blink's ability to generate high-margin revenue that is reoccurring in nature is another solid building block as we move towards achievable -- towards achieving profitability. Now Blink's company-wide gross margin in the second quarter of 2030 was another absolute record coming in at 37% compared to 17% gross margin in the second quarter of 2022. Our strong revenue margins and service definitely helped here. However, the majority of the positive margin came from Blink manufactured chargers sold during the quarter and our efforts in the areas of expense management, cost avoidance in our manufacturing process. As we scale our business and increase volumes, we believe we can do even better, our margins will continue to improve as we move forward.

In the second quarter, we contracted, sold or deployed 5,830 chargers globally. And this is important to mention here that DC fast chargers are increasingly becoming a larger portion of our revenue mix. Blink chargers disbursed during this quarter, 16 gigawatts of energy across all of Blink's networks globally.Now if we look even deeper, as you can see, the second quarter was Blink's strongest ever and another record-setting quarter for the company. We have been laying the groundwork to build our footprint and capture market share and customers for more than 3 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. Importantly, we are optimistic that as the focus on building EV infrastructure intensified, 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 6, 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 million to $110 million. This new target is based on our current visibility of the marketplace, our pipeline and our sales backlog. We are also reiterating our annual gross margin target in excess of 30% for the full year of 2023, with expected margin accretion in 2024.Now let's move over to Slide 7, 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 2024. We've 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 demonstrated success of synergies, vertical integration, proactive 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, our operating expense increase related to significant growth since the second quarter of last year and also due to significant onetime chargers, which Michael Rama will detail for you later in this call. Over the past 3 years, Blink has acquired 6 companies. Since the beginning of 2023, we have identified and moved forward more than $8 million in operating expense reductions. We will see additional reductions as we continue combining the functions and integrating the acquired entities into Blink. For 2023, we also expect additional ongoing expense savings for sunsetting legacy networks and leveraging the newly launched Blink Network. Not only are we eliminating legacy networks like we just did with SemaConnect network in June, but our new Blink Network is expected to require less maintenance and ongoing costs than some of our competitors with older and more fragmented systems. In addition, we have more opportunities in the G&A area, especially when it comes to streamlining functions under one ERP system in implementing shared service 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 as just a onetime solution, but as the embrace of a data-driven, continuous, methodical and sustainable improvement plan throughout all aspects of our business. In fact, we have been working with one of the leading global consulting firms and identified numerous actions with a disciplined 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 intent to unlock the potential value provided by the spin-off of our car sharing business. We acquired Envoy in the second quarter and already identified over $1 million of ongoing yearly synergies from combining the 2 entities of Envoy and Blink Mobility. We continue to execute on our plan to IPO Blink Mobility by the end of this year.

Next, let's jump over to Slide 8, 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 million to 90 million vehicles every year. If less than half of those become electric by 2044, then the forecasted charger numbers are nearly 500 million chargers by 2040, and that seems very reasonable. And this represents global growth in excess of 30x.When it comes to the U.S. market, you'll see on Slide 9, you can see that the market is projected to grow to over 30 million charges by 2030 and over 90 million charges by 2040. This is approximately $100 billion in investment by 2040. We think it is especially important to note that according to McKinsey PricewaterhouseCoopers or Bloomberg New Energy Finance. The vast majority of chargers, over 90% of them are forecasted to be Level 2 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. A new debate now has started in which charging standards will become the predominant one in the U.S. Is it CCS? Or is it NACS? This question has been in the news recently as we saw significant numbers of OEMs commit to that. Now as it relates to Blink, we are happy to say that we are agnostic, and we are able to provide and support whichever standard becomes predominant. We view the adoption of NACS as a positive development for Blink. We look at our customers and our segmentation by OEM. Tesla drivers are our #1 customer group for Level 2 chargers 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, which will support both NACS and CCS standards, we believe Blink is in position to capture additional sales and service revenue. Now if you put a little to DC fast chargers on Slide 10, you can see that DC fast chargers are a growing part of our business with about 987 DC fast chargers contracted sold in the first half of 2023 and about $10 million in revenue this year so far can be attributed to DC fast chargers sales.

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 2 chargers and high-powered DC fast chargers. With these offerings, we service both residential and a variety of commercial customers and are prepared for the increased demand, whether it be due to NEVI 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 5,830 charges, both domestically and internationally, bringing the total charger count for the company to nearly 79,000 chargers since Blink's 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 partial sampling of our customers. They represent well-established commercial entities, multifamily complexes, planned communities, health care facilities, fleets and municipalities around the world. We are very proud of our contract with the United Postal Service. And as a reminder, the contract goes up to volume of 41,500 charges over the next 3 years, and Blink has been quite successful, and these numbers are reflected in our financial results. Fleets are becoming a wider segment of our business as government and commercial enterprises are converting to EV to save on operating costs.

So with that, I'm going to turn it over to Michael Rama, our CFO. Michael, 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. In the 6 months ended June 30, 2023, total revenue grew 156% to $54.5 million. Product sales in the second quarter of 2023 were $24.6 million, an increase of 179% over the same period in 2022. In the 6 months ended June 30, 2023, 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 L2 chargers and DC fast chargers. Second quarter 2023 service revenues, which consists 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 6 months ended June 30, 2023, service revenues were $11.8 million, an increase of 213%. The year-over-year growth was primarily driven by greater utilization of our chargers in the U.S. and internationally. The increased number of chargers on Blink's networks revenues associated with Blink 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 6 months ended June 30, 2023, 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 of the prior year.

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. The year-over-year increase reflects the increase in noncash share-based compensation of $10.6 million in Q2 2023 versus Q2 2022, increases in noncash amortization of intangible assets of $900,000 as well as operating expenses associated with the Q2 2022 acquisition of SemaConnect. Operating expenses in the 6 months ended June 30, 2023, were $87.7 million compared to $40.5 million in the same period of the prior year. Please note, included in operating expenses for the 3 and 6 months ended June 30, 2023, are impact -- are the impact of additional noncash share-based compensation and a onetime nonrecurring payment to our former CEO as well as the nonrecurring bonus payment expense related to the performance milestones achieved by our CTO. The milestones relate to the design and launch of Blink's recently implemented new network.

We believe Blink's 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 Blink Network has already started to pay off with the elimination of the legacy SemaConnect network in June of 2023, and with European networks currently in process of migrating. The key takeaway here is we incurred these expenses now. And by doing that, we reduced the ongoing operating expense moving forward. That will directly benefit our bottom line 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 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 -- as we realize more business savings as we mentioned earlier. In the 6 months ended June 30, 2023, 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. The slight increase in the first half loss is attributable to the results in the first quarter of 2023. The adjusted EBITDA for the 3 and 6 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 $0.44 per diluted share compared to a loss of $0.41 per diluted share in the prior year period. In the 6 months ended June 30, 2023, the adjusted earnings per share was a loss of $0.92 per diluted share compared to a loss of $0.76 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 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 capabilities to replace contract manufactured chargers with in-house produced units. That strategy is starting to pay off now. We have outlined a detailed road map to reduce operating expenses even further. In SG&A alone, we see further opportunities resulting from the combination of the 4 legacy companies that make up Blink today, anywhere from IT and network support to streamlining the ERP systems and processes around the globe, we have a well-defined plan, and the team 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.There is 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 recent actions.

And now I will turn the call back over to Brendan Jones for a few final comments. Go ahead, Brendan.

Mr. Jones, I think your line might be muted, sir.

Sorry about that, folks. So to add to Michael's point, we had a great quarter. We had maybe a monumental quarter with our strategy and our growth initiatives we 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 vision, significant investment, and I will say, some difficult decisions. We have taken concrete actions in; as Michael and I outlined; expense reductions, plus 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 the tough industry, and we believe there is no other way than focusing on the fundamentals while also growing revenue and being innovative. That's truly the success, build the basics, focus on fundamentals, bring new products to market, increase revenue. And we truly think that our advantage is in our people and in our teams, and we are willing to go against anyone in the industry with this team that is behind Blink.

So with that, that ends our formal conference. And I think we're now ready to take some questions.

(Operator Instructions) Our first question is coming from Craig Irwin with ROTH MKM.

So the revenue is obviously really impressive. But I would say the gross margins are even more impressive. Can you maybe unpack gross margins a little bit for us? I'm going to guess there'll be some naysayers out there saying, "Oh, one time, not going to happen again." Was there anything onetime in there that gave us such a solid number? And can it get better from here? There are products in the market that I believe do actually have 50% gross margin, like they're sold in much larger volumes these days than they were many years ago. Anything you can give us to help us understand the sustainability of margins and the potential for continued progress from this impressive level you met this quarter.

Yes. I mean, really, as we stated in the previous quarter and we've continued to state as we control more of our own manufacturing, we're starting to see margins improve. And on our network services, when we own and operate the station, that is simply adding to the good news because the margin is considerably higher than what our target is of 30% for the full year. So what we have to make sure is we continue our efforts to sunset legacy products and reduce expenses associated with bringing on more and more of our Blink field products, whether it is from India or a buoy facility or coming out of our facility in Phoenix. So the key there to really maintain and make this sustainable is not to say, a, well, all that focus on reducing costs, that was a onetime thing. No, that's a permanent part. Expense reduction is a permanent part of Blink. Making sure that we're efficient in everything we do is continuously important. And then building our own chargers, having a reduced cost on network fees, not paying expensive software development costs because we have it all outsourced. It's all in-sourced at Blink. We have to double down on all of that. And as we continue all of those efforts, you're 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 through. We still had some of that. But so far, so good, and this is a disciplined approach. So I think all that wrapped together contributed to it, and it's also contributed to our success moving forward.

And then a question directly related to the revenue side. The NEVI funding is starting to find its way into the market. Can you maybe shape for us what your participation is likely to be as far as subsidy funding over the next several quarters? Do you expect this to continue to support your growth rate and the overall level of demand for your products out there?

Yes, we've been successful with and without NEVI funding, 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 other states. We're targeting routes that we believe are highly accretive to high utilization. And we're targeting states where they're sticking and maintaining closer to the 80% funding level. Some states are electing to go lower because the NEVI guidance only says you have -- you can do up to 80%, but some states are going lower. We like DC fast charging, but also we're -- we understand the costs associated with and the breakeven point and the long-term return on seed that is associated with DC fast charging even if you get 80% funding from NEVI. So we're going to pick and choose and take what works for Blink. And right now, you've got 6, 7 states in on (inaudible) only 1 state out with 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.

Our next question is coming from Matt Summerville with D.A. Davidson.

Nice quarter. A couple of questions. Can you maybe talk about -- I mean, you've discussed kind of all these things you're doing from a cost standpoint, from a structural standpoint. Can you talk about savings realized to date, how much incremental you should realize in the back half of '23. And just based on what you've identified at present, what that roll forward should look like into '24? And then I have a follow-up.

Yes. I mean we -- as you saw, we talked about, so just in 2023, we set some additional synergy savings that came in, in the back end of 2022. So when we focus on G&A, we did about another $8 million already, and those are going to take effect -- some of them have been slightly realized. You'll see some of them have severance associated. So they'll -- the net effect will come in, in Q3 and then in Q4. But then we have additional targets to get through. And that's both from a G&A perspective and then from a vendor related. So every time we combine a network or reduce, we're also sunsetting vendors. Now sometimes we have to clean those vendors from our different business entities because they hold on to them 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 use in the U.S., the same in England as we use in Blue Corner in Belgium, in The Netherlands and India and everywhere else throughout the world. So that is going to go on. I'm not going to give you a dollar amount because we're actually just getting into the forecasting phase on how much more we have to go on synergies, but it's going to be a continuation. Cost avoidance and cost reduction is going to be a theme in the company, and I think that's the big takeaway. 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 going to have to do continuous improvement every day, every week, every month, every quarter in order to make this company one of the best in the industry.

Then as a follow-up, I'm curious, you talked about reaching EBITDA -- 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 milestones?

Yes. So it's a great question. We see free cash flow manifesting later in 2025. We're not going to give guidance on that yet. But there will be a need for some additional cash raises as we move forward. As we've stated many times, we're looking at all instruments available for Blink from funding, whether it be debt, equity raises, convertibles, et cetera. Michael Rama, the CFO, is focused with the tally on that every day on where additional capital is going to come from. But also, we're going to get a lot of that capital simultaneously from continuing to increase revenue. If you look at revenue, we keep increasing revenue by over 100% over the last 3 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 with EBITDA, we see that in December 2024. Then we'll see a tax rate positive flowing right after that, there will be a raise. That helps us get there.

Our next question is coming from Sameer Joshi with H.C. Wainwright.

Brendan, Michael, congrats on all the progress. Just getting a little bit granular on the 5,800-plus units installed. What proportion of these were DC fast chargers? And also what proportion of these were owned versus deployed at other locations?

Yes. So I'll tell you on DC fast chargers it's significantly less than 5% of the total. When you look at the 5,000 number for the quarter and then you look at the 10,000 -- I mean, roughly 1,000, I'll average it up DC fast chargers that have been sold and deployed this year. It's a fractional number at best. So it continues to be a small percent. What we're goaled right now is we want to get DC to 5% of the portfolio and then push it up from there. But when we do DC, as an owner-operator model, 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 -- again, a high margin on the product and it also contributes greatly to revenue. Michael, do you have the split for last quarter on owner-operated versus sales?

Yes. We're still tracking where -- I don't have the specific numbers, but we're still tracking where we still -- the product is still outpacing obviously the own and operate. But own and operate still is hanging tough. It's a good area to be in. We're still -- obviously, you see our own and operate charging revenues continue to increase in Europe, especially. So our split on revenue is 80:20, we're still -- we're not in that proportion in selling the units. I'd say we're still closer to 60% versus 65% to say, 35% on the product sales side of it.

No, we want to -- just to add to this point, because I think it's a great question. We want to make sure that everybody understands; to a degree, it makes no difference. The support structure, whether it's owner operate or we sell a charger is the same. So there's no duplicated systems. If we sell it, we follow the same process, if we own and operate it, we sell it. Now the capital distribution is different on it. But the system is the same. So we're going to take revenue in the space where revenue exists. And we're never going to say no to our customers, whether they want to buy a charger or own or operate a charger. And I think that is our uniqueness. We'll be exploitive to both models, owner operated or sales.

In terms of the onetime charges or expenses this quarter, I just wanted to understand the 11.663%, that's the stock-based component and then the 11.632% is the onetime recurring expense. The onetime recurring expenses are also stock related but for the previous year. Is that correct?

Michael?

In the stock based yes, the stock-based comp includes about close to $6 million in the -- I'll call it, there's part of the separate settlement, there were shares that had to be issued. There was acceleration of share-based expense that had to be accelerated into the quarter. So that is reflected in the -- actually in the share-based comp line. And then the 11.6% is relative to, I'll call it, the cash portion of the consideration that had to be done in Q2.

S

o once you exclude these onetime costs, the OpEx, what is the OpEx level? Is it closer to the 1Q number with some inflation? Or -- but the question I'm getting at is, when you say Q4 2024 EBITDA breakeven, are the costs at that level going to be comparable to today's costs?

Yes. I'll add that if you look at our Q1 operating expenses versus Q2, when you strip out the -- when you strip out, I'll call it, the several one-timers, plus included in Q2 was Envoy, the new acquisition. When you strip those out to be on apple-to-apple's basis, our OpEx expenses for the Q2 was probably about $0.5 million or so less than Q1. Remember, as Brendan mentioned, we still had about -- we saw some severance and synergies that we're flushing through in Q2. So -- and we continue to rightsize those areas as we move forward. So I would look at not -- we continue to monitor each one of those areas. And I think I don't want to say we want to look at Q4 as a proxy. We want to look at the business as a whole and continue to scale in the appropriate areas and makes sense that the duplication of efforts right size and the right expense profile is adequate for the size company we're expected to be as we keep going forward.

I think 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 adjusted EBITDA breakeven in December of 2024 takes that into account or not?

Yes, there's definitely leverage in there. And obviously, that's part of the -- what we're looking at as part of the leverage come -- is going to come from the consolidation of the networks, 4 networks down to 1, and then the vendor related to that support of that system. So there's definitely going to be scale in one ERP system and a shared service that we're going to be able to imply and push through to the entirety of the company not here just in the U.S. but internationally as well.

Congrats once again on all the progress.

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

Can you give us a sense as to the revenue came to the rest of the year? I mean, if you put up the same revenue you had in 2Q for third and fourth quarter, it seems like you'd already at kind of the high end and typically, revenue has kind of grown throughout the year. I just wanted to get a sense of how you guys were thinking about the (inaudible) cadence for this year, if there's anything different going on.

Michael, you want to hit it first because I couldn't hear all the question.

No. But yes, the -- to start out, obviously, as you do the math, you're right, it seems to be closer to the top. We're being conservative, right? Because obviously, as we move forward, we're reflecting anything that certain unknowns that we're not aware of, but we see a strong pipeline. We see a strong backlog. And we're just -- like to be a bit conservative, to be honest, right? And we feel that this is the appropriate level to come out with at this time.

And then can you give us a sense as to how much of the legacy products you still need to burn through product gross margins in the mid-40% range. I'm just kind of curious if there are any reasons that should come down in the back half of the year here, if that's kind of a new good run rate kind of as we go forward?

Yes. The estimates are a bit around 20% of the overall portfolio is going to be legacy products we want to work through. But what we didn't do is rest on our laurels and just said: Okay, we're going to have to get it. We're going to have a margin impact where possible. And we already achieved one result. We renegotiated some of the prices on the third-party contracted charters. We successfully did one significant group out of Europe. So they're in there. But instead of as we begin to play through that remaining inventory net use case, it's going to have less of a negative impact and even to some degree, a positive impact on margin 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 L2s that came from our contract manufacturer, but we're going to see most of those wiped out by the end of the year, and they're less than 10% right now of the overall inventory that's coming through. So we feel pretty good there. There's still some work to do, but we're focused on it where we can renegotiate and get a lower price. We're working on that as well. But you're going to -- our goal is to get clean on all legacy equipment moving into 2024.

And then just last one. Last earnings call, you provided some color around the top 50% of your Blink-owned charging network, the utilization being double-digit percentage and you talked about more metrics for the full fleet forthcoming. I just want to see if there's any update you could provide there?

Well, I mean, yes, it continues to be good. And on the owner operating model, especially on the L2 side, 3 years ago, we reinvented the system in which we placed chargers on the owner-operated model. And ever since we did that and undertook that very methodical data-driven approach. The overwhelming majority are in 15% or higher of utilization of those, and that is showing in the charging revenue that we're happy. We use that same model in Europe to predict optimum locations as well. And as you can see by the numbers, the utilization numbers are increasing there. And when you talk to an owner operator, that's the key thing. We don't believe in a philosophy where you have an obligation to put a charger in where you're not going to get the utilization. If we own and operate it, we're only going to place it in where some -- we know that it's 15% or better. And we're breakeven at 10% utilization on every L2 installation. On DC, you got to get 20% or better to start getting into positive station economics. But on L2, we're starting to hit home runs. We're going to continue to drive that as we move forward.

Our next question is coming from Stephen Gengaro with Stifel.

So curious your sort of updated thoughts on this. When we think about charging in general, just kind of from a big picture perspective, when you think about Level 2 versus DC fast, how do you think the market evolves? And everybody's talking NEVI, but how do you think sort of the habits of drivers evolve as far as demand for DC charging versus the demand for Level 2 charging in urban areas, et cetera?

Yes. I mean it'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% of my charger is on an L2 and we were 90%. And then you look at the use cases when you include commercial fleet and 90% of the charging is predicted to be L2. The driver experience becomes if they're going on a trip, DC fast charger, if there's somehow in the major metros and they didn't charge, they need a DC fast charger. But the economics, and if you were going to hit the 30 million chargers that need to be installed by 2030, the most economical way to do it is L2 and take advantage of where the cars sit. And that math proves true in the ownership experience. they go, "Well, I much prefer to plug in when I'm sitting at the doctor's office, and I'm there for 2 hours. And the expense, the kilowatt expense is at a cheaper cost. When you look at what it takes to charge a Porsche Taycan on a 350-kilowatt charger and you're talking 90-plus percent a kilowatt hour, the economics don't work out. That person is only going to want to use that charger, if it's the last resort. And that's on a trip, going to grandmother's house, do whatever. But if they got a charger in their multifamily dwelling, that's a Blink charger and it's at $0.39 a kilowatt hour they're going to go to that and charge them overnight people.

That's helpful color. Just as we think about that, how do you think about Blink's strategy sort of behind that sort of a world we are living in now?

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 expand into multifamily dwelling, as we do more fleet business, et cetera. The ecosystem is going to expand in L2. And you're going to see L2 starting to use battery backed systems, which we're doing in Florida on the DC level and 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 or whether we're producing them in the United States. But that's the key to us is that vertical integration, I don't have added expense. I'm not going to a change order if I have a third-party manufacturer and I say, "I want this feature on it, and I'm paying 40% 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 going to be what sets us apart. We can stay in front of commoditization where others cannot.

Thank you. We have reached the end of our question-and-answer session. So I will now turn the call back over to Mr. Stelea for any closing remarks.

Thank you all for your interest in Blink Charging. At this time, we're going to end the 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.