Blink Charging Co. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020; filed November 13, 2020. Blink owns, operates and supplies EV charging equipment and network services. At quarter-end it reported 15,716 deployed charging stations, including 6,944 on the Blink Network.
Financial results
| Metric | Three months 2020 | Three months 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0.91 million | $0.76 million | $3.78 million | $2.06 million |
| Gross profit | $0.37 million | $0.12 million | $1.09 million | $0.49 million |
| Gross margin | 40.5% | 15.9% | 28.8% | 23.8% |
| Operating loss | $(3.91) million | $(2.79) million | $(9.95) million | $(7.49) million |
| Net loss | $(3.91) million | $(2.62) million | $(9.90) million | $(6.75) million |
| Loss per share, basic and diluted | $(0.12) | $(0.10) | $(0.34) | $(0.26) |
Q3 revenue rose 18%, led by product sales (+74%); company-owned charging-service revenue fell 49%, which management attributed primarily to reduced utilization during COVID-19. For the nine months, revenue increased 84%, mainly on product sales (+270%), while company-owned charging-service revenue declined 39%. Nine-month revenue growth did not translate into improved operating results: operating expenses increased 38% to $11.04 million, including higher compensation and general and administrative costs. Q3 net loss widened 49%; nine-month net loss widened 47%.
Cash flow and liquidity: Cash was $14.86 million at September 30, versus $4.17 million at December 31, 2019; working capital was $12.98 million versus $5.79 million. Nine-month operating cash use was $10.16 million, compared with $7.37 million a year earlier. Investing activities provided $2.10 million, including proceeds from sales of marketable securities; financing activities provided $18.78 million, principally from the ATM equity offering and PPP loan. Management said cash on hand was expected to fund operations for at least 12 months after issuance of the financial statements, while cautioning that additional financing may be needed and is not assured.
Debt and balance sheet: Notes payable totaled $868,553, primarily the $855,666 PPP loan, with $306,535 current and $562,018 non-current. PPP forgiveness had not been confirmed by quarter-end. Total liabilities were $7.21 million and stockholders’ equity was $16.24 million. The filing reports an accumulated deficit of $179.41 million; Blink had not achieved profitability.
Material changes, outlook and risks
- Margins and costs: Gross margin improved in both comparative periods, but operating losses grew. Q3 product cost of sales was unusually low relative to sales; management attributed the year-over-year decrease partly to a $290,533 reduction in the provision for excess and obsolete inventory. Nine-month product costs rose with sales volume, while network costs increased 119% to $464,009.
- Equity financing and dilution: Through September 30, Blink sold 3.52 million shares under its $20 million ATM program for $18.95 million gross proceeds. Through November 11, sales reached 3.57 million shares and approximately $19.5 million gross proceeds. Common shares outstanding increased to 31.75 million from 26.32 million at year-end. The Series D preferred stock converted into 1.64 million common shares.
- BlueLA acquisition: Blink acquired BlueLA Carsharing on September 11 for $1 plus contingent consideration of up to $1 million if a City of Los Angeles agreement amendment is obtained by the specified deadline (potentially extended to March 31, 2021). The contingent amount was recorded at a fair value of $245,000. BlueLA’s city agreement includes operating obligations; the filing describes at least 200 charging stations at approximately 40 locations and costs of approximately $20,000 per month during the initial term.
- COVID-19 and business outlook: Management reported reduced station usage and lower charging-service revenue, and some equipment shipment delays. It said it did not then expect a material change in overall product demand, but the pandemic’s future effects on demand, customer payment capacity, operations and liquidity were uncertain. No quantified revenue or earnings guidance was provided.
- Legal and unusual items: A settlement with the former president totaled $400,000 and was recorded as expense in the quarter, including $125,000 of compensation-related matters. Two securities class actions were consolidated; a shareholder derivative action was stayed pending a motion to dismiss. Blink disputed the claims and said it intended to defend them. A separate invoice dispute was settled for approximately $48,000.
- Controls: Management concluded disclosure controls and procedures were not effective at September 30 because previously reported material weaknesses in internal control over financial reporting continued. Remediation was underway, but not complete.
Investor verification priorities
- Track operating cash burn against management’s stated 12-month liquidity expectation and the availability and terms of future financing.
- Confirm the PPP loan’s forgiveness outcome and any repayment obligation.
- Verify BlueLA’s City of Los Angeles contract amendment, contingent payment, operating commitments and acquisition economics.
- Assess whether product-sales growth and gross-margin improvement are sustainable, given the sharp decline in charging-service revenue and inventory-provision effects.
- Monitor share issuance, remaining ATM capacity, warrant exercises and resulting dilution.
- Follow the consolidated securities litigation, derivative action and progress in remediating internal-control weaknesses.
- Consider customer concentration: one customer represented 32% of nine-month 2020 revenue; two customers accounted for 38% of quarter-end receivables in aggregate.