Blink Charging Co.

Q4 2023 Earnings Conference Call

3/14/2024

spk10: Good day, ladies and gentlemen, and welcome to the Blink Charging Company fourth quarter and year-end 2023 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Vitali Stelia, Vice President of Investor Relations. Sir, the floor is yours.
spk08: Thank you, Ali. Welcome to Blink's fourth quarter 2023 earnings call. On this call today, we have Brendan Jones, President and Chief Executive Officer, 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 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 differ from those stated. The most significant factors that could cause actual results to differ are included on page two of the fourth quarter 2023 earnings deck. Unless otherwise noted, all comparisons are year-over-year. Now, regarding the investor relations calendar, Blink will be participating in taking one-on-one investor meetings at a few upcoming conferences. The first one will be the Roth MKM Investor Conference in Dana Point, California on the 17th of March. The second one will be JPMorgan Energy Conference on the 17th of June in New York City. Please follow our announcements and the Investor Relations website for additional events that we will book in the future. I will turn the call now over to Brendan Jones, President and CEO of Blink Charging. Go ahead, Brendan.
spk09: Thanks, Vitaly, and good afternoon, everyone. Thank you for joining us on this call today. Well, to sum it up, 2023 was a historic year for Blink. It was marked by significant achievements and exponential growth. Now, as some of you know, Blink over the past four years has successfully integrated six strategic acquisitions. And in 2023, we began to demonstrate the powerful consolidated potential of the Blink Enterprises. Now, not only did we leverage our advanced product portfolio and services, but we also began to see tangible benefits from our newly enhanced network launched in 2022. Organizationally, we are emphasizing a culture of continuous improvement and have begun to observe synergies and efficiencies that positively impacted 2023 results across all of our businesses. Operationally, we streamlined our sales, engineering, logistics, and distribution while expanding our manufacturing footprint near Washington, D.C. to capitalize on additional synergies, and opportunities for cost optimization, and a little more on that later in this presentation. Now, if we move to the numbers as illustrated on slides four and five, our total revenues were $140.6 million, marking an impressive year-over-year growth of 130%, and a remarkable seven-fold increase compared to 2020 revenues. Now, let's talk about that again. Seven-fold increase in just two years. Our fourth quarter 2023 revenues were a Q4 record of $42.7 million, representing a year-over-year increase of 89%. our 2023 service revenues grew 111% year over year, amounting to $26.4 million. Now, within this figure, network fees grew 71% to $7.5 million, and Q4 2023 service revenue reached $7.9 million. Now, in even better news from a financing perspective, if you flip to slide six, We previously discussed raising additional funds to guide Blink towards profitability. I am pleased to announce that we substantially strengthened Blink's balance sheet by raising $113 million in gross proceeds via our existing ATM facility. We took advantage of favorable market conditions and did it opportunistically at scale and in a very, very cost-effective way. As a result, we delevered our balance sheet and significantly reduced our interest expense by paying off promissory notes and accrued interest of $45.5 million. With our current visibility, we anticipate that our existing cash balance will be sufficient to reach our positive EBITDA adjusted rate target in December of 24 and beyond. If we now look at slide seven, for full year 2024, we are targeting revenues between $165 to $175 million and a gross margin of approximately 33%. We are also reconfirming our target of achieving positive adjusted EBITDA run rates by December of 2024. Now let's jump over to slide eight. We show the different actions that continue to materialize, that will continue to materialize, excuse me, in 2024 to achieve our adjusted EBITDA target. First, solid revenue growth is expected to contribute significantly to adjusted EBITDA. We emphasize not only the sales quantity, but also the quality of new customers, especially fleets, as they play a crucial role in financing our company's growth. During 2023, we saw important fleet wins in the United States, including the post office and Mack Trucks, just to name a few. We also prioritized revenue generated from our existing customers as an optimal way to finance growth. Second, we anticipate gross margin improvement as we continue to insource a large portion of our product mix. Our decision to expand our Bowie, Maryland facility aligns perfectly with our growth strategy and we are very pleased to have the facility open with production underway. Third, expense management and cost avoidance are currently underway throughout the entire company. We've also implemented a leading software tool to assist in planning and monitoring expenses at all levels of the company we are pleased with this capability as it enables robust scenario planning and accountability for every department and finally we anticipate the ev market to maintain its recent momentum benefiting not only blink but more importantly the entire industry if we move on to page now despite various media media stories we remain very optimistic about the EV market and the continued growth. This optimism is fueled by the decreasing cost of electric vehicles and the continuous expansion and improvement of charging infrastructure. The network effect is now taking hold. Now look at the numbers. In 2023, EVs accounted for one of every five vehicles sold globally. In the US in 2023, we saw an increase and EV adoption accounting for 8% of all new cars sold within the United States. Now, if we look at California, EVs represented 25% of all new car sales. To provide context, Bloomberg New Energy Finance anticipates EV penetration in the U.S. to reach approximately 13% in 2023, marking a significant 500 basis points in expansion in just one year. Now in Europe, another region where we are active and have three different offices, the EV penetration rate throughout the entire European content stood at 18% of car sales. But if you start to split this up and look at various countries, France, UK, Ireland, Germany, the Netherlands, and Belgium, the percent is much higher. This figure is projected to rise across both Western and Eastern Europe to about 22% in 2024, with a target of 80% by 2030. And we know that's a big number, but it's really not that far fetched. As many of you may know, about 90% of all cars sold in Norway are EVs. Several larger European countries are closely monitoring this trend, and we at Blink are actively studying and adapting to this evolving landscape. Now let's turn to page 10. The proliferation of EVs globally requires rapid improvement in EV charging infrastructure. According to McKenzie's new data, the United States is projected to have over 28 million chargers by 2030. And that's from a bit over $4 million today. The global market is expected to grow at a 25% CAGR through 2030. And the investment required for this is expected to be about $260 billion. And if you look across all major research done in this area, it doesn't matter whether it's McKinsey, PricewaterhouseCoopers, or Bloomberg, most chargers are expected to be level two chargers. because drivers will mainly charge vehicles where the vehicle will idle most of the time. This is backed by the US Department of Transportation, which shows that on average, vehicles sit about 95% of the time. On page 11, in terms of deployments, since Blink's inception, we have sold, contracted, or deployed 89,825 chargers. 78% of this is in North America, with the majority of the remaining chargers are in Europe. Now on to slide 12. You will see images of our advanced product portfolio. Today, we can satisfy the demands of any customer from the product and software perspective. Our versatile level two chargers are used in multiple commercial, residential, and fleet applications. At the same time, we have made significant strides with our DC fast chargers. as you can see on the lower left section of the slide. And importantly, our chargers already support the North American Charging Standard, or NACS, which we believe will only benefit Blink as more drivers will be able to easily access Blink chargers and charge on our chargers. And of a particular note, just this week we celebrated the grand opening of our new manufacturing facility near Washington, D.C. which will further drive our gross margin expansion while improving product quality and reliability. Federal, state, and local government officials were present to celebrate with us this significant milestone. And if you look at slide 13, we look forward to supporting government programs when it comes to electrifying their fleets and providing EV charging infrastructure in their jurisdictions. Now, the production that is underway at the facility embodies the latest lean manufacturing practices focusing on efficiency and continuous improvement. We anticipate that it will support an annual production capacity of up to 50,000 chargers and has been designed for flexibility to adapt to our future products and manufacturing needs. Now, Of a new announcement, in addition to the manufacturing facility, we have established our global headquarters at the same location near the nation's capital. We believe this offers multiple benefits. It brings us closer to our manufacturing operations, allows for better team engagement, and brings us closer to some of our largest customers. Furthermore, being located near policymakers involved in shaping The federal government's transition to electric vehicles is advantageous as we continue to play a pivotal role in this transformative journey. Now, if we go to slide 14, over the years, Blink was able to acquire a number of prominent customers and collaborations with some of the largest fleets globally, automotive companies, commercial and multifamily real estate enterprises, as well as prominent hospitality venues. In 2024 and beyond, we will be adding to this list of prominent customers. Now, with this, I'm going to turn the presentation now over to our CFO, Michael Rama, to give you some additional financial detail. Michael?
spk07: Thank you, Brendan, and good afternoon, everyone. Now, turning to slide 16, our Q4 2023 revenues grew 89% year-over-year to $42.7 million, another record fourth quarter for blank. Total revenues for 2023 was an absolute record at $140.6 million, a 130% increase compared to $61.1 million for the full year of 2022. As Brendan mentioned earlier, Only two years ago, our 2021 full year revenues were nearly $21 million, which represents about 15% of current 2023 full year revenues of $140.6 million. Now, product revenues for the fourth quarter of 2023 were $33.4 million, an increase of 112% over the same period in 2022. Product revenues for the full year of 2023 were $109.4 million, an increase of 138% when compared with full year 2022. These increases were driven by strong demand for our commercial level two chargers and DC fast chargers, as well as our ability to satisfy increasing levels of demand. Fourth quarter 2023 service revenues, which consists of charging service revenues, network fees, car sharing revenues were $7.9 million, an increase of 40% compared to the fourth quarter of 2022. Full year 2022, full year 2023 service revenues more than doubled to $26.4 million, representing a year-over-year growth of 111%, driven by greater utilization of our chargers, increased number of chargers on Blink networks, and revenues associated with the Blink Mobility Car Share Program. We break out these service revenue lines to differentiate between product and service businesses more accurately. Now turning to gross profit, gross profit increased 63% to $10.6 million or 25% of revenues in the fourth quarter of 2023 compared to gross profit of $6.5 million or 29% of revenues in the fourth quarter of 2022. Gross margin decreased in the fourth quarter of 2023 when compared sequentially to the third quarter of 2023 due to increased year-end warranty and maintenance expenditures as well as adjustments related to discontinued components. Now, excluding the impact of these items, the gross margin for Q4 2023 would have been approximately 30%. Gross profit for the full year of 2023 increased by 172% to $40.2 million or 29% of revenues compared to gross profit of $14.8 million or 24% in the full year of 2022. Gross margin for the full year of 2023 increased when compared to the full year of 2022 primarily due to higher mix of in-house manufactured units, which carry a higher margin and increased utilization of charging. Now turning to operating expenses. Operating expenses in the fourth quarter of 2023 decreased 16% to $28.7 million, compared to $34.2 million in the fourth quarter of 2022, while we grew quarterly revenues by 89% year over year. Most of the decrease in operating expenses was driven by 27% reduction in year-over-year compensation expense for 2023. Operating expenses for the full year of 2023 $239.9 million compared to $104.1 million for the full year of 2022. The increase in operating expenses for the full year is primarily driven by $105.9 million related to a non-cash goodwill and intangible assets impairment charge, as well as the impact of a one-time non-recurring payment to our former CEO and a non-recurring bonus related to the performance milestones achieved by our CTO related to the design and launch of Blink's recently implemented new network. It is very important to mention here that these impairment charges are non-cash and they do not impact our operations in any way, shape, or form. Excluding the impact of the $105.9 million non-cash impairment charge and one-time compensation related items, the operating expense for full year 2023 would have been $134 million. Now, as a percentage of revenues, this amount represents a reduction of approximately 7,500 basis points, while revenues increased by 130% year over year. Of note, 2023 operating expenses include $3 million of expenses for our 2023 acquisition of Envoy. Now adjusted EBITDA for the fourth quarter of 2023 was a loss of $14 million compared to a $14.8 million in the prior year period. As a percentage of revenues, our adjusted EBITDA metric improved nearly 3,200 basis points compared to Q4 2022. This is a 50% improvement year over year, reinforcing our trajectory to positive adjusted EBITDA run rate by December of this year. Now, adjusted EBITDA for the full year of 2023 was a loss of $57 million compared to an adjusted EBITDA loss of $60.3 million in the full year of 2022. The adjusted EBITDA for the three and 12-month periods ended December 31st, 2023, exclude the impact of stock-based compensation, acquisition-related costs, one-time non-recurring expenses, non-cash impairment charges, and non-cash loss on extinguishing of notes payable. As Brendan mentioned earlier, several factors are expected to give get us to positive adjusted EBITDA run rate by the end of this year, including revenue growth, expense management, and cost avoidance actions that are materialized based on our actions to rationalize our operations, consolidate facilities and support functions, and build scale into our manufacturing and sales processes. Earnings per share for the fourth quarter of 2023 was a loss of 28 cents per share. compared to a loss of $0.55 per share in the prior year period. For the full year 2023, earnings per share was a loss of $3.21 per share compared to a loss of $1.95 per share for the full year of 2022. Please note that the impact of the non-cash accounting adjustments to our goodwill and tangible assets, combined with the one-time compensation charges to our CTO and former CEO, negatively impacted year-to-date earnings per share by $1.67. Now adjusted earnings per share for the fourth quarter of 2023 was a loss of 28 cents compared to adjusted earnings per share loss of 41 cents in the fourth quarter of 2022. Adjusted earnings per share for the full year 2023 was a loss of $1.42 compared to an adjusted EPS loss of $1.65 in the full year of 2022. Non-GAAP adjusted earnings per share is defined as adjusted net income, which excludes the impact of stock-based compensation, acquisition-related costs, one-time non-recurring expenses, non-cash impairment charges, and non-cash loss on extinguishing of notes payable, divided by the weighted average share is outstanding. Now turning to slide 17, you can see that Blink has made tremendous progress in growing our revenue base over the last two years. Our revenues grew 671% in just two years. At the same time, we have more than doubled our gross margin from 14% in 2021 to 29% in 2023, and currently targeting our gross margin of approximately 33% for 2024. Now, moving to our cash position. As of December 31st, 2023, cash and cash equivalents totaled $121.7 million, an increase of $85 million compared to December 31st, 2022, and of $55 million compared to the $66.7 million on September 30th, 2023. In the fourth quarter of 2023, we raised $88 million in gross proceeds via the existing ATM. Furthermore, during the first quarter of 2024, we raised gross proceeds of an additional $25 million via the ATM. In total, between November 20, 2023, and February 12, 2024, Blink raised $113 million in gross proceeds via the existing ATM. We accessed the market opportunistically, at scale, and at very cost-effective terms for Blink. As a result, we were able to pay off promissory notes and accrued interest in the amount of $45.5 million, which delevered the balance sheet to avoid significant ongoing interest costs, as well as accelerate Blink's path towards profitability. We are very pleased to have closed fiscal 2023 with record fourth quarter and record full year results. We believe the charging infrastructure industry is at an inflection point, and we're building a solid foundation for Blink's continued and, more importantly, profitable growth. I will turn the call back over to Brendan for his final commentary. Go ahead, Brendan.
spk09: Well, thank you, Michael. So I think you all can see that, without a doubt, 2023 marked a truly transformative year for Blank. We couldn't be prouder of our team and the accomplishments for the year of 2023. But we've said a lot today, so let's recap really quickly here and get to the more salient points. Our revenues surged to over $140 million accompanied by an industry-leading gross margin of 29% in 2023. Additionally, as Michael just iterated, we took advantage of favorable market conditions and capitalized by raising $113 million in cost-effective financing. We significantly reduced our debt obligation and the burden of interest expense on free cash flow. Now, we didn't just do that, but then when you go further at the operational level, if you look at slide 19 in 2023, we materially expanded our U.S. manufacturing with the recent grand opening of our facility near the nation's capital. This allowed and is allowing Blink to consolidate five of our U.S. facilities down to two while increasing production from a Operating and logistics and network perspective, we further consolidated. We also consolidated sales back office functions to reduce operating expenses and improve efficiencies. And then the last one is we have integrated and rebranded our legacy companies of Electric Blue and Blue Corner, who are now Blink UK and Blink Belgium. And we're not done yet. As we move into 2024, the team is laser focused on the targets we have laid out in front. And the number one target is achieving adjusted EBITDA run rate by the end of 2024. Now if we look at what else we're going to do in 2024, it's all listed out on slide 20. We will continue to drive global efficiencies through optimized manufacturing, logistics, distribution, and facilities and back office consolidation. We will execute our cost reductions and avoidance strategies, leverage expanded manufacturing facilities to support growth, reduce COGS, and enhance international product portfolio. we will launch a new multi-market maintenance and service and proactive monitoring network to improve uptime and charger quality and reliability. And we will continue to invest in innovative technologies to improve efficiency and promote continued growth. These tactical and strategic moves will provide Blank with the necessary tools flexibility to achieve our positive adjusted EBITDA run rate by December of 2024. And this is fundamental to Blink's long-term success. Finally, our success in 23 wouldn't be possible without the outstanding team we have in place. And we thank each and every one of them across the entire organization for their tremendous effort this year. As you might imagine, the team is excited about Blink's future, and we look forward to updating you throughout 2024 as we continue to make progress.
spk05: With that, the call is now open for questions.
spk10: Thank you. Ladies and gentlemen, the floor is now open for your questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset, if listening on speakerphone, to provide optimum sound quality. Please hold while we poll for questions. Thank you. Our first question is coming from Chris Pierce with Needham. Sir, your line is live.
spk03: Hey, just two for me. We had an industry leader on the earnings call a couple weeks back talk about, you know, seeing their customers thinking about moving towards a dual sourcing model and kind of having multiple chargers for multiple brands on site. Is that something that gives you confidence in the growth to triple your production capacity? Had that already been contemplated in the model? Or is that something new that's additive to kind of how you're thinking about the future?
spk09: Yeah, it's an enhancement. So it wasn't in the original math when we agreed to expand buoy, but certainly, you know, now we're calculating it in. So we see that as added benefit over time.
spk03: Okay. And then you're guiding at the midpoint to roughly 20% revenue growth. So I just want to kind of, how do we square that with the tripling of the capacity? One seems a little more aggressive. One seems a little more conservative. What's the right way to think about that?
spk09: Michael, you want to handle that one?
spk07: Sure. And, you know, we built our budgets from the ground up. And we're just, you know, we're factoring in. Obviously, we're a bit conservative. You know, as you know, we're conservative in nature. And, you know, as we head into 2024, as we navigate through, you know, some noise, but we feel confident that that range is most appropriate for what we feel is to start out the year.
spk05: Okay, thank you.
spk10: Thank you. Our next question is coming from Stephen Jangaro with Stiefel. Your line is live.
spk01: Thanks. Good afternoon, everybody. Two for me and one to follow up on the question Chris just asked. When we think about the revenue guide for 24, and we think about kind of what the industry seems to be going through right now, just from an adoption rate, all the data points have been a little more negative. But notwithstanding that and your comments on the guide, how would you classify like 24, 5, 6? Like should we think about that? underlying CAGR that you illustrated in the presentation in the mid-20s as kind of a baseline? Is that a good place to start? If so, how do you think about that impact on overhead and margin progression?
spk09: You know, it's a good place to start. Now, you're going to, you know, see different accelerations in different places we operate, especially outside the United States, right? You know, of course, we see we want to gain for larger numbers, right? We want to make sure we have the capacity to take care of what is going to happen in the space, and not just the capacity, but the ability to produce at a high margin. So we're going to be, as Michael said, we're going to be a little conservative in numbers, but we're basing those off of real data. We don't make a decision without looking at what the analysts are saying, whether that analyst is McKinsey or another analyst, looking at what they see as industry growth. Then we cross-apply that with where we're active. And then we look at the segmentation and see, okay, where's our greatest opportunity to expand revenue? And then thirdly, the other leg of that is, you know, when we're looking at our own internal functions, it's what are our other revenue opportunities as we continue to grow and scale the industry. But we think 165 to 175 is healthy and effective. That is, you know, we're going to have a lot of work to do in that, and it's going to enable us to grow our margins as well.
spk01: Thanks. And then as a follow-up, we got to see the new facility this week. When you think about that facility ramping and you have, you know, I think you've consolidated and you've centralized the warehouse and production, et cetera, how should that impact? underlying product margins over the next two years?
spk09: Yeah, it's going to have a positive impact. As you imagine, we've done a couple different things, right? So we had five facilities, one in Miami. We had actually four in the greater Washington, D.C. metro area. We've now consolidated all those to two. And with that, we've also been able to reduce overhead across the board at all those So we're anticipating a positive margin impact for that, but we haven't crystallized those numbers yet. So we have it at a range, and that's something that you're going to see manifest in the Q1 report, which is looking really good, and the Q2 and Q4.
spk05: Okay. Thank you for the details. Operator, the next question, please.
spk10: Sorry, sir. My line was muted by mistake. The next question was from Craig Irwin with Roth MKM. Your line is live, sir.
spk06: Good evening, and thanks for taking my questions. More on the housekeeping side, can you maybe update us on... your DC Fast Charger portfolio, you know, where are we at as far as the new product introductions that you were planning? And, you know, can you maybe break out for us what the contribution was in 2023 and whether or not there was, again, a margin drag potentially in the fourth quarter?
spk09: Yeah. So, you know, our DC Fast Charger fast charging strategy is threefold right now, right? First, we have our own products that are already in the market, which are predominantly fleet applications, and that's our DC-9, which is actually the bestseller DC product we have, and it comes in 30 and 40 kilowatts. It's being primarily used at dealerships, fleets across the nation. Then we have what we call our third-party fleet. outsourced, where we have contracting manufacturing on a blank look and feel charger. And that charger takes up where the DC-9 leaves off and fills our orders, whether those orders are to dealerships, fleet companies, or municipalities. The last piece of the strategy is our own designed DC-240, which the design is done on the charger. And now we're moving towards, you know, certification and final design. So it's in about, in terms of a product in a P2-2 stage, you know, 80% of final. But the engineering aspects, including the silicon carbide modules, that part is all done. And then it's the determination of, you know, our manufacturing partner to build that charger with us. So it's a great question, Craig, but that's where we sit today.
spk06: excellent excellent and then Michael I really appreciate the the clarity on the gross margins you know 30% is a is an impressive number for any producer in this industry can you maybe help us with some of the items that were impacting this fourth quarter gap versus the adjusted number do you have those details to share with us
spk07: Yeah, as we noted in the prepared remarks, you know, a majority, I'd say about a million to a million and a half dollars represented, I'll call it warranty and maintenance expenses or additional warranty and maintenance expenses, as well as we had to expense certain discontinued components from the older, as we're transitioning from the outsourced or contract manufactured product over to the in-house manufacturer. So there's components that we have that we're basically not using as much or just had a kind of expense at the end of the year. So it's a combination of a few things, but mostly on the warranty, maintenance, as well as discontinued components.
spk06: Okay, and then just a little bit more detail there. Can you give us a little color on what the warranty was on? Is this sort of legacy product from many years ago? Or is this something that, you know, is just a minor correction for a more recent product?
spk07: Yeah, it's a combination. No, go ahead, Brendan.
spk09: No, you're doing fine. Okay, I'll take it then. So, you know, there's two phases to it, right? there was the a lot of it had to do with legacy equipment in the field and it's a two-prong approach right you still have customers out there that have the legacy equipment we honored warranty to ensure that uptime and quality of those chargers because as you may know that's one of the number one concerns in the industry so that increased our warranty expense a little bit also when we go through the exercise of replacing those legacy chargers and the customer still wants that type of charger, one of the nuance we're faced with is normally we bring in chargers and we just do a basic rehab. But a lot of these chargers, instead of doing the basic rehab on them, we have to pull out some old components now, which adds to component expense that can't be reused. We're going to get through most of that, so it's going to be a one-time expense, but it particularly hit in Q4. So a lot of older componentry being upgraded and some additional warranty expense to maintain quality out in the field. Now, there's also a correlation to significant revenue and higher charger sales. And then we need to reserve more in warranty as well that played into that. So it was a bit of a multivariable equation that ended up with that result.
spk06: Excellent. And then last question, if I may. Buy in America, right? This is something that your friends at the Department of Energy are big on. Obviously, the President is big on that too. You know, you guys are now, I believe, the best positioned company as far as level 2 supply into North America with the Bowie, Maryland facility. Can you maybe give us a little bit of color as far as the breadth of demand that you're seeing? I know we've talked a few times about going 12,000 to 50,000 units in capacity, and I think there's a plan to go to 100,000 in 2025. You obviously see tremendous opportunity. Can you maybe unpack that for us? Because investors have a tremendous opportunity. around the... Absolutely. Yes.
spk09: So, you know, we met with federal, state, and local reps all this week. There is a tremendous amount of interest in the Buy America product, right? It resonated through whether it was meeting with Governor Moore or a meeting that took place in the White House just yesterday with the Board of Directors from Blink and Key Management. But all of them emphasized that they believe the volume of Buy in America product they need is exponential in terms of growth. Now, what the Bowie Maryland facility allows us to do is service the U.S. market plus the Buy in America while we can also begin to manufacture chargers for our global markets out of our facility in India. And so, basically, we take the same design and we have a global version and we have a U.S. version, and then we're compliant for everywhere we need to be. And additionally, this flexibility in our manufacturing facilities allows us to move, as we've stated, Craig, one of our goals is to remove the last vestiges of all third-party equipment on an L2 level. We're going to replicate this same strategy in Europe, which is going to bring better gross margin and get it to scale faster, not just in the United States. but across the gold. Now, one of the things that you might imagine is the U.S. post office deal is a testament to getting towards scale. They were at the grand opening. They were more than happy with seeing what we're doing. And they're going to suck up a pretty good percent of those chargers made there. And what a better story that they're all made in North America, right here at Blink's facility outside the nation's capital. So we're really excited about that.
spk06: Fantastic. Well, congratulations on the progress. I'll hop back in the queue.
spk10: Perfect. Thank you. Our next question is coming from Samir Joshi with HC Wainwright. Your line is live.
spk04: Thanks. Good afternoon. Congrats on the progress so far. Just a few questions and clarifications on the revenue outlook. What is the contribution from products versus say network fees and charging revenue that is being reflected in this 165 to 175 outlook. Michael?
spk07: Yeah, we expect the trajectory of the split between the service and the product, you know, to still be pretty consistent with what we've seen, you know, in 2023. As we move forward, you know, our mix at the U.S. has been around 75% product and 25% service and then kind of flip in Europe. We're about 25% on the product side and about 75% on the on the own and operate side. So we're, we still expect in 2024 to see that continue. Um, but it gives us the flexibility as we move forward on having to be able to, uh, you know, maximize on either side, part of the business, either the hardware sales or the, or the server side of it.
spk09: Yeah. And the only, the only modification I'd say to that Samir is we're moving rather quickly through 2024. to expand our sales operations in Europe. So while we have a high presence of owner-operator there as Michael just outlined, there's also an opportunity on sales that we're restructuring all of our European offices to begin to take advantage of at a higher penetration rate.
spk04: Understood. So then the gross margin outlook seems... even more conservative than the top line outlook, right? Because already in the fourth quarter, you had near 30% excluding extraordinary items. Your product sales are projected to grow. That should increase overhead absorption. Your charging revenues are also expected to grow, which should add additional gross profit dollars. It seems that the outlook might be conservative. Am I reading it right?
spk09: Well, the only thing I would say is that for a full-service EV infrastructure company today, and we have many contemporaries in the United States, we've seen their earnings results. We are the leading in margin today. Now, you know, do we intend to rest on our laurels? Well, you've seen we intend to get that to 33%. But it's been our history since last year that when we give guidance, we're making sure that we give it from a concerted and realistic perspective. So 33% is we have a fundamental belief in looking at the numbers and the process and the improvements that we can achieve that target. If there's upsides and we can truly measure that upside and clearly look through the rest of the organization on the finance and accounting side, that there's going to be nothing that impacts that. We may up that guidance as we go through the year, but I think 33% is the right target. And again, that's still class leading. We've got one of our competitors that is showing a decrease next year, which is, you know, the complete opposite direction to where we're going.
spk04: Yeah, yeah, I understand. Thanks for that. Just one last sort of bookkeeping question. Was the $45.5 million paid before December 31st or subsequent December 31st? I'm just not clear on that.
spk07: Michael? Yeah, I'll jump in there. That $45.5 million represented, that was basically the Semiconnect acquisition note that we had out there. So we paid 12 and a half of that in Q4 and the remainder in Q1 of 2024. So with the proceeds generated with the capital, we felt it was most prudent and effective to pay down that overhang, that obligation, and really decrease the expense burden on a go-forward basis. Makes sense.
spk04: Thanks for taking my questions and good luck.
spk05: Thank you.
spk10: Thank you. Our final question is coming from Noel Perks with Tui Brothers. Your line is live.
spk00: Hi, good afternoon. Just had a couple. I wondered, could you talk a bit about multifamily? I think you also mentioned in discussing that briefly a little bit about hospitality, that sector as well. And I think with multifamily, it's kind of that convergence between consumer adoption and with sort of centralized charging. So I'd be interested to hear what you're seeing in that market.
spk09: Yeah, so the first thing is we're seeing that segment grow. Next to fleet, we have that as the highest-growing segment that we're going after right now, and the industry data sort of backs that up. But it's a little bit of two models or even three models you know, coming together to service multifamily dwellings. In some multifamily dwellings, you have the single charger model where you don't need any network access, right? In other models, it's a shared space model where we have to network the chargers and we have to create access credentials to them. And then another in the third spot about multifamily dwellings is third-party garage-based infrastructure, which is not associated with the multifamily dwelling, but it's contracted out. And that requires right now full commercial chargers that are fully networked, but they are reserved for the people who consider that multifamily dwelling their home. Now, what we've done over the last 18 months is make sure that we have a charger for each of those use cases. and we can provide that service. We always recommend network because with network we can build in energy management solutions and with fully commercial charges we can also build in energy management solutions so you can better work with the facility to what you in the future to where you need to curtail use due to a rate card change or a mandate from the public utility, etc. But If they don't need a network charger, we have a solution for that. But we're seeing that, again, predominantly where it is dedicated space, dedicated user, and the owners of the property in terms of the garage don't want networking. They just want a charger there, and they'll monitor and charge the customer fee on their own. So all three of those are what we are servicing today, and we see that service increasing in the future.
spk00: Great. Thanks a lot for the details. And at Bowie, I wonder, can you sort of outline the maybe number of manufacturing lines you have there, maybe the present number and what the capacity is, or just some other way to quantify where you stand now and where the ultimate growth is in your footprint there?
spk09: Yeah, absolutely. So, you know, we moved out of the facility just now, right? And that was servicing up to 15,000 units. And now we expect that need to grow exponentially over time here. And that was a single line that we had there in a very, very cramped space. So now we have three automated lines. One line right now can make up what we were doing out of the old facilities with the second two lines of course, getting that number up. Also, you know, we're working on what we call a standard daylight shift right now, where the technicians come in early in the morning, around 7 to 8, and they work to about 3 on the manufacturing side, and then they do cleanup and restocking before they punch out for the end of their shift. So we're going to get up to the 50,000 unit capacity when we start to add additional shifts and stagger, and even where needed. If we need capacity for a major fleet player, et cetera, and we have to ramp up quickly, we'll add shifts on Saturday and Sunday, which we've done in the past, to make sure that we deliver on time for special customers in unique circumstances.
spk00: Great. And then just one last one. It's very interesting to hear you talk about some of the reorganization you've done on the sales side and the reorientation a bit in Europe. And I wanted you to just talk a bit about the sort of Blink-branded parts of the business versus, for example, on the product side, sort of white-labeled or just entirely within a fleet customer deployment. I'm just interested to hear about the role branding plays in your expanding business model going forward.
spk09: Yeah, so right now everything that we build is blank branded. However, there are some circumstances and we'll allow an additional brand to be added to that and some additional circumstances, and most of these are OEM or particular customer related. We'll re-rebrand the entire charger on a custom contract for them. The third-party chargers, we're fortunate that all the third-party chargers that are not Blink manufactured, we have agreements with them that they're all Blink branded. So they come to us pre-branded, and then we ship them out. So the strategy for Blink, as we said, we're going to move to 80% of all products is Blink manufactured. And we're well on our way to that, and the new buoy facility is going to add greatly to that. Then when we convert European operations over to Blink manufactured product, which we're beginning, we're actually working on the final stages of the design for that charger now, then we're going to do that even further. So the future is that 80% of all the products we sell are built, manufactured, and branded Blink.
spk05: Terrific. Thanks a lot.
spk10: Thank you. As we currently have no further questions in queue at this time, I would like to hand it back over to Mr. Stilea for any closing remarks.
spk08: Thank you, Ali, and thank you to all of you who joined us on Blink's fourth quarter 2023 earnings call as we announced another absolute record quarter of revenue growth and an industry-leading gross margin. This marks the end of this call. We look forward to... communicating with you in 2024. And at this time, you may disconnect.
spk10: Thank you, ladies and gentlemen. This does conclude today's call. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.
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