Blink Charging Co. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020; filed August 13, 2020. Financial statements are unaudited.
Business context
Blink owns, operates and provides EV charging equipment and networked charging services. Its models range from company-owned stations to host-owned stations and fixed-fee service arrangements. At quarter-end, Blink reported 15,151 deployed charging stations, plus 305 commercial chargers on other networks and 8,166 non-networked residential stations.
Key financial results
| Metric | Q2 2020 | Q2 2019 | First half 2020 | First half 2019 |
|---|---|---|---|---|
| Revenue | $1.57 million | $0.72 million | $2.87 million | $1.29 million |
| Gross profit | $0.41 million | $0.31 million | $0.72 million | $0.37 million |
| Gross margin | 26.3% | 43.9% | 25.2% | 28.5% |
| Operating loss | $3.02 million | $2.38 million | $6.04 million | $4.70 million |
| Net loss | $3.03 million | $2.24 million | $5.99 million | $4.13 million |
| Net loss per share | $0.11 | $0.09 | $0.22 | $0.16 |
- Revenue rose 120% in Q2 and 122% for the first half, driven mainly by Generation 2 and DC fast charger sales. Product revenue increased to $1.27 million in Q2 and $2.05 million for the first half.
- Company-owned charging-service revenue fell 70% in Q2 and 34% in the first half, which management attributed primarily to lower utilization during COVID-19. Network and warranty revenue also declined.
- Gross margin compressed as product costs and network expenses rose. Operating expenses increased 27% in Q2 and 33% in the first half, led by compensation and, for the first half, higher general and administrative costs.
- Operating cash used was $6.52 million for the first half, versus $5.21 million a year earlier. Investing activities provided $2.16 million, primarily from selling marketable securities; financing provided $4.02 million, including ATM proceeds and a PPP loan. Cash declined to $3.82 million from $4.17 million at year-end.
- At June 30, cash was $3.82 million, marketable securities $0.16 million, working capital $2.99 million, and gross notes payable $0.87 million. Total liabilities were $5.55 million. Accumulated deficit was $175.50 million.
Changes, financing and outlook
- Operating results remained loss-making, with first-half net loss increasing 45% year over year. The 2019 comparison included a $310,000 gain on debt settlement that did not recur in 2020.
- Blink sold 1.66 million shares through its ATM program by June 30, for $4.00 million gross proceeds; $0.60 million had not yet been received at quarter-end and was collected subsequently. Through August 10, it reported approximately $17.8 million of aggregate gross ATM proceeds. The program authorized up to $20 million and carries a 3% agent commission.
- The company received an $855,666 PPP loan. It had used $764,025 by June 30 and had not received forgiveness notice; forgiveness is uncertain. The unforgiven balance is payable over two years at 1% interest.
- Management said cash on hand was expected to fund operations for at least 12 months after issuance of the statements. It also expected ongoing operating cash outflows and higher operating expenses, and stated that additional financing may be needed; access to capital on acceptable terms is not assured. No specific revenue or earnings guidance was provided.
- COVID-19 reduced station utilization and delayed some equipment shipments. Management had not observed a significant overall financial impact through the period, but warned that prolonged economic disruption could adversely affect demand, customer payments, results and liquidity.
- Subsequent to quarter-end, Blink signed a non-binding term sheet to acquire certain operator assets and committed up to $2.2 million to a related state project; a $1.76 million grant was expected upon completion. The filing describes rights to project assets and grant funds if an acquisition agreement is not completed.
Risks, contingencies and unusual items
- Disclosure controls and procedures were deemed ineffective because material weaknesses in internal control over financial reporting continued. Management described remediation work, including control documentation, review processes and NetSuite-related controls.
- A former COO’s employment lawsuit sought unspecified damages alleged to exceed $1 million, including claims against the company and certain officers. Blink said it intended to defend the case; the claims were not covered by its existing corporate insurance. A separate vendor lawsuit was settled in July 2020 for approximately $48,000.
- Two customers accounted for 43% and 11% of Q2 revenue; for the first half they represented 38% and 10%. This customer concentration creates revenue and collection exposure.
- Blink estimated approximately $282,000 to repair company-owned deployed chargers. It also reported a $3.60 million supplier purchase commitment, payable upon delivery of charging stations.
- Revenue growth was concentrated in product sales while charging-service revenue weakened; the filing notes that LCFS credit values are market-dependent. Management also cited a $162,500 first-half network-system upgrade cost.
Most important facts to verify
- Whether the ATM proceeds reported through August 10 and the remaining availability under the $20 million program are consistent across the filing and subsequent disclosures; the filing contains slightly different share counts in different sections.
- Whether the PPP loan ultimately qualified for forgiveness, and the amount, if any, that remained repayable.
- Progress on internal-control remediation and whether management later concluded the material weaknesses were resolved.
- Developments and potential financial exposure in the former COO litigation, and the status, funding and grant conditions for the proposed operator/project transaction.
- Whether product-sales growth translated into sustained margins and whether charging utilization recovered after the COVID-related decline.