Good afternoon, and welcome to Blink Charging's Second Quarter 2022 Earnings Conference Call. Please note this conference is being recorded. A replay of this call will be available on the Investor Relations page of the company's website. At this time, I'd like to turn the presentation over to Vitalie Stelea, Vice President of Investor Relations.

Thank you. Welcome to Blink's second quarter 2022 earnings call. On the call today, we have Michael Farkas, Chairman and Chief Executive Officer; Brendan Jones, President; and Michael Rama, Chief Financial Officer. Today's discussions will include non-GAAP references. These are reconciled to the most comparable U.S. GAAP measures in the appendix of our earnings deck. You can find the deck along with the rest of our earnings materials and other important content on Blink's Investor Relations website. Please note, today's discussions may also include forward-looking statements about our expectations. Actual results may differ from those stated. The most significant factors that could cause actual results to differ are included on Page 2 of the second quarter earnings deck. Unless otherwise noted, all comparisons are year-over-year. And now, regarding our business calendar, we have 2 upcoming engagements. On August 10, Michael Farkas, CEO and Founder, will present at the JPMorgan Auto Conference in New York. And on September 7, Blink will participate in the Barclays CEO Energy-Power Conference, also in New York City. And now, I will turn the call over to Michael Farkas, Founder and CEO of Blink Charging. Go ahead, Michael.

Good afternoon, everyone. Thank you for joining us. We had a very strong second quarter of 2022, achieving record revenue of $11.5 million, which represents an increase of over 164% compared to the second quarter of 2021. It's crucial to highlight that our second-quarter revenue doubled year-over-year when excluding our 2022 acquisitions, demonstrating that we have a solid strategy and strong growth on both our owner-operator side and ancillary sales models. In this period, our product sales increased by 170%, service revenue grew by 155%, and recurring network fees rose by nearly 350%. These record results reflect our strong fundamentals and do not yet fully capture the integration of our recent acquisitions of SemaConnect and EB Charging. Our second quarter only includes half a month of Sema's financials due to the transaction closing on June 15. Moving forward, these acquisitions will enhance our sales, network expansion, and product development efforts. During the quarter, we contracted, sold, or deployed 5,630 commercial and residential chargers, a 73% increase from the same quarter last year. Additionally, Blink was awarded an extra $2 million from various projects, raising our total support to $32 million since early 2021. We are also very encouraged by the recent passage of the Inflation Reduction Act in the Senate, which includes consumer incentives for electric vehicles, the conversion of government fleets to EVs, and favorable tax and capital expenditure implications. We believe this will accelerate the transition to electric transportation and increase demand for EV charging infrastructure, aligning well with Blink's strategy and growth plans. A key highlight of this quarter is Blink's acquisition of SemaConnect, which strengthens our position in the charging industry by adding over 12,800 active chargers and 151,000 registered users to our portfolio. This acquisition also provides us with vertically integrated manufacturing capabilities in the U.S., qualifying us for the Buy American mandate of the Biden administration's $7.5 billion EV charging investment plan. Sema's technology portfolio includes Level 3 DC fast chargers, accelerating our market strategy in the fast-charging DC space. Sema also boasts one of the highest margin profiles in the industry, supported by recurring sales, cash flow, and multiple revenue streams. We are looking forward to fully integrating Sema into Blink. Mahi Reddy, the Founder and CEO of SemaConnect, has recently joined our Board of Directors, which we see as a positive addition for the integration process. The SemaConnect acquisition followed two important transactions: our acquisition of EB Charging in April 2022, which expanded our access to the UK and Ireland markets and added nearly 1,200 chargers to our global footprint, and our acquisition of Blue Corner in May 2021, establishing our presence in Continental Europe with plans for significant growth in markets like Belgium, the Netherlands, and France. Our strategy is paying off, evidenced by our recent agreements with Q-Park to deploy nearly 600 chargers across 80 sites in the UK and Ireland. Q-Park is one of the top three parking facility providers in Western Europe, making this partnership exciting for us. Blink's strategic and organic growth is driving our rapid global expansion. Our network is already established across three continents, and we plan to continue expanding. We see significant opportunities for Blink based on our equipment, new software, and compatibility with global charging infrastructure. With a strong projected growth in electric vehicle adoption and infrastructure needs, we believe Blink is well-positioned for substantial organic and strategic growth. A recent McKinsey study suggests the United States could have 48 million EVs on the road by 2030, while Bloomberg New Energy Finance estimates a need for 340 million to 490 million chargers by 2040. Blink is ready to take advantage of this growth due to our strong value proposition. We believe Blink has the most advanced technology in the market, with strong intellectual property and vertical integration capabilities. We offer various business models for our customers to choose from, allowing for flexibility in capital deployment. Our footprint is vast and continues to grow rapidly. I'm also excited about Blink's new global framework, which we view as a transformative development in the EV charging industry. With manufacturing capabilities in the U.S., India, and Taiwan, our international network and equipment portfolio are unparalleled. From New York to Brussels, Tel Aviv, London, and Guam, our branded chargers support six languages and 19 currencies across 21 countries, and this is just the beginning. We have plans for further international expansion and additional features. Whether we own and operate or sell the hardware, Blink aims to provide best-in-class products and services worldwide, facilitating a faster switch to electric vehicles for our customers and site hosts. Now, I'll turn the call over to Brendan Jones, President of Blink, to discuss some of our recent developments.

Thanks, Michael, and good afternoon to everyone. As Michael talked about, it has been a very important and exciting quarter for Blink. We're going to begin with Slide 11, and not only in the last quarter did we have a strong financial performance driven by solid fundamentals, but we also accomplished the acquisitions of EB Charging and SemaConnect. If we look just at EB Charging in the U.K., it has a unique business model for the owner-operator side of the business, where typically, in the U.K., we are able to get 80% of the CapEx covered by government entities. This is particularly attractive to us, especially since the U.K. government recently increased its commitment for the number of chargers by 10-fold to 300,000 by the end of the decade. Alongside this, the government is committed to GBP1.6 billion to increase public EV infrastructure. The acquisition of EB Charging will allow Blink to tap into the opportunities for growth, and increases Blink's footprint across Europe by leveraging synergies with Blue Corner or other European entity in Continental Europe. Now adding to that synergy, the SemaConnect acquisition brings Blink unmatched speed to market, reduces cost, lowers expenses, and increases revenue growth and flexibility. It is another step towards our vision of creating the leading global electric vehicle charging ecosystem. It added thousands of chargers and registered users to the Blink portfolio, while further enhancing our comprehensive suite of smart hardware and software solutions for both retail and commercial applications. And we cannot say enough about the talented individuals at SemaConnect and the industry knowledge they bring to Blink. We have essentially doubled our head count through this acquisition. If we transition and now look at Slide 12, as the world continues to struggle with broken supply chains and chip shortages, SemaConnect vertical integration is key to achieving end-to-end design in in-house manufacturing. It will allow us to control the timeline for delivery of products that will satisfy multiple customer demands. And these will effectively contribute to better cost management and industry-leading margins. We also believe that the in-house manufacturing capacity will be key to leading increased demand. In the United States in particular, SemaConnect's manufacturing facility in Bowie, Maryland allows us to become Buy America compliant, while we get to control the intellectual property and the quality as well as the future ramp-up in capacity. Same also applies to our manufacturing facility in India. As we combine our complementary in-house engineering and software capabilities, we will be looking to leverage economies of scale across the board. As a matter of fact, we are already doing it. Our sales teams have started working hand-in-hand and addressing opportunities as one team, complementing each other's lead generation and product offerings. If we flip now to Slide 13, when it comes to synergies on the revenue side, our plan includes upgrading existing SemaConnect customers to a new Level 2 Blink chargers and transitioning them to the new Blink network. The hardware and accessories we revealed at CES this year have received great reviews from our existing customers. As a result, we are also looking to increase the number of chargers at high-utilization SemaConnect sites, thus increasing hardware revenue for each incremental charger sold. As we evaluate each site and our relationship with those new owners, we plan on providing SemaConnect customers with the option to switch to the hybrid revenue model, thus increasing the lifetime value per charger by about 10 to 15 times. We believe this will be a win-win situation, especially with customers who are looking to ease the cost of owning and operating a charging site. And besides the revenue synergies, we believe we have multiple opportunities on the cost side, in both cost optimization, revenue, expense avoidance, and cost reduction. When it comes to hardware, we'll be leveraging SemaConnect's low-cost manufacturing capabilities with a targeted cost reduction for us of approximately 30%. I will say that again, 30% cost reduction. This is significant. This is a decrease from our current costs. Regarding talent, we are very excited to welcome SemaConnect's employees to the Blink family and scale these talented team members across the entire organization. More than 1/4 of SemaConnect's employees are highly skilled engineers with complementary skill sets to what we have today. And last but definitely not least, we plan to optimize our sales and customer service efforts to leverage scale and deliver the best quality of service and sales experience in the EV industry today. If we transition to Slide 14 now, within the last 1 month, Blink has contracted, sold, deployed, or acquired over 5,631 chargers, both domestically and internationally, bringing the total charger count for the company to over 51,000 since Blink's inception, which also includes the SemaConnect chargers. We have a healthy mix of deployments in the United States and abroad, with 74% of the total company-wide Blink chargers deployed in North America and 26% deployed internationally. Consumer demand for electric vehicles is steadily increasing, and the forecast from reputable thought leaders was very optimistic, as Michael outlined earlier. When it comes to growth in charging infrastructure, our global network of chargers has steadily expanded quarter-over-quarter, and we expect this to continue well into the future. On Slide 15, as you can see from the logos and verticals, this is a very comprehensive list and speaks to the breadth and depth of our products and services. We won numerous multi-year contracts with a variety of well-respected commercial enterprises, health care facilities, multifamily complexes, planned communities, and municipalities. SemaConnect's equally comprehensive portfolio significantly complements Blink. In fact, we are seeing tremendous opportunities to grow our customer base in the near future. Now if we move over to Slide 16, this gives us an overview of our stations deployed in key geographic locations throughout the United States and Europe. As you can see, with the SemaConnect acquisition, our customer base has expanded significantly to over 423,000 drivers registered within our portfolio of chargers. We have offices in 9 locations across 5 countries, serving customers in more than 21 countries. Internationally, we are building the momentum achieved by Blue Corner and combined with our recent acquisition of EB Charging. On Slide 17, just to remind everyone, we have launched and will be launching several exciting products in 2022 including Blink's advanced fleet management software and the accompanying mobile app designed to be used with the advanced MQ 200 hardware. MQ 200 was launched this past quarter and the initial feedback is very positive. The combination of hardware and software will provide a 360-degree fleet ecosystem. Moreover, we are preparing for the launch of an entirely redesigned Blink mobile app and cloud application, which is based on the latest tech stack and will make EV charging even easier for drivers and operators. We are excited about the innovative Vision charger designed for retail locations, which has now been completely redesigned, as can be seen on Slide 17. In addition to that, HQ 200 is a residential charger which is fully networked and will allow customers to stay within the Blink network even in their homes. And also as important, the newly added Series 8 family of chargers, which allow customers to use their credit cards to pay for service, which is in fact a requirement effective January 1, 2023 for retail and public locations in California. Overall, we have a comprehensive portfolio of charging solutions to fit the needs of any customers, public or private, with the capability to penetrate numerous different markets. If we now go to Slide 18, this provides an overview of the historic $1.2 trillion federal infrastructure bill that includes an estimated $7.5 billion to be used for building the nationwide infrastructure to support the anticipated growth and adoption of electric vehicles. Since January 2021, Blink has been awarded $32 million in grants from several different state organizations. We now have a tremendous opportunity to add to this number by capturing as much as possible of the $17.5 billion and aid in the expansion of our charging footprint. If we now flip to Slide 19, this shows some of our big wins. Our business development teams from Blink, SemaConnect, Blue Corner, and EB are working together to develop and close deals across a large spectrum of customers, from established automotive OEMs and suppliers, to large real estate developments and management firms, to local government fleets, to retail and entertainment companies, among many others. On the government side, 2 recent examples of our purchasing agreements with 2 governmental organizations are Region 1 Planning Council in Northern Illinois and Florida Sheriffs Association cooperative purchasing program. The Northern Illinois Council government helps local governments and agencies save time and money by leveraging the buying power of its 20 plus members within 6 county jurisdictions. The contract for EV charging equipment services for up to 10 years will enable members of our Region 1's Council of governments to participate under any of Blink's deployment models with favorable negotiated terms as awarded. The initial plan estimates up to 700 charging stations to be installed over the term of the purchasing agreement. Also in July, we announced a successful contract award with the Florida Sheriffs Association cooperative purchasing program as an efficient vendor for electric vehicle stations. CPP vendors, Blink products will be made available to CPP participants providing them with direct access to Blink's EV charging stations. Blink now has the potential to reach and contract with thousands of state and local agencies, municipalities, and educational organizations across Florida. All in all, we are very, very pleased with our performance in the second quarter. Our fundamentals are strong as we delivered record financial performance in Q2, even without realizing the full benefits and synergies from recent acquisitions. The SemaConnect acquisition is transformational for Blink. We not only doubled the size of our employee base with some of the best talent in the industry but acquired key manufacturing capabilities and product know-how that positions us to continue to grow and benefit from the $7.5 billion infrastructure plan. We are excited for what's next for Blink.

Thank you, Brendan, and good afternoon, everyone. Turning to Slide 21, total revenue in the second quarter of 2022 grew to $11.5 million, another record for the company and an increase of 164% compared to the second quarter of 2021. Excluding the 2022 acquisitions, our revenues for the second quarter of 2022 doubled, which demonstrates the solid fundamentals of Blink's business and strong customer demand. We are at a point in the industry where more and more consumers are choosing EVs for their transportation needs and Blink provides the flexibility helping site hosts and consumers make the switch. Year-to-date through June 30, 2022, our total revenues were $21.3 million compared to $6.6 million for the first 6 months of 2021. What's noteworthy here is that our year-to-date revenues through June 2022 have already surpassed total revenues of $20.9 million for all of 2021. Product sales in the second quarter of 2022 were $8.8 million, an increase of 170% over the same period in 2021, as customers purchase greater volumes of our commercial chargers, DC fast chargers, and residential chargers. Second quarter 2022 service revenues, which consists of charging service revenues, network fees, and ridesharing service revenues, were $1.5 million, an increase of 155% compared to the second quarter of 2021. The year-over-year growth is primarily due to the increased utilization of our chargers and an increased number of chargers in Blink's networks. As you know, we combine these 3 service revenue line items into one amount to differentiate between the product and service aspects of our business. And this approach also aligns with our company's strategic goal of increasing the services component of our revenue mix and growing our recurring revenue base. In time, as EV adoption accelerates and utilization of power charging stations increases, we anticipate seeing a larger mix of revenues come from services. Gross profit for the second quarter of 2022 was approximately $2 million, an increase of 204% over the same period of last year. We continue to look at ways to drive higher margins, especially in light of ongoing supply chain disruptions occurring globally. Now, operating expenses in the second quarter of 2022 were $23.9 million compared to $13 million in the prior year period. This increase reflects acquisition-related expenses of approximately $3 million associated with the acquisitions of SemaConnect and EB. It also reflects higher expenses in the areas of accounting, legal, marketing, Investor Relations, and consulting. Also included in the operating expenses for the second quarter of 2022 is increased amortization of intangible assets associated with the acquisitions of SemaConnect and EB. This expense will continue, but is non-cash in nature. Furthermore, the increase in operating expenses includes operating expenses from SemaConnect and EB that were not included in the results for the second quarter of 2021. Because we strive to deliver best-in-class products and solutions, we continue to recruit talented individuals that will contribute to our company's growth and success. Many of those individuals participate in the research and development activity that will ensure that our products, software, and innovative solutions remain above competition. In 2021, we began presenting adjusted EBITDA. Our management team believes this non-GAAP measure is useful in evaluating our company's core operating performance because it excludes items that are either nonrecurring or significant noncash items. Adjusted EBITDA for the second quarter of 2022 was a loss of $15.6 million compared to a loss of $8 million in the prior year period due to the higher previously mentioned operating expenses. Adjusted EBITDA as a percentage of revenues for the second quarter of 2022 improved 49 basis points compared to the second quarter of 2021 and for the year has improved 88 basis points. This quarter, we are also introducing the non-GAAP measure adjusted earnings per share, which is earnings per share, excluding significant noncash items such as amortization of intangible assets and nonrecurring expenses such as acquisition-related expenses. Adjusted earnings per share for the second quarter of 2022 was a loss of $0.41 for diluted share compared to a loss of $0.31 in the prior year period. Now, turning to Slide 22, our revenues and gross profit performed well in the second quarter of 2022, continuing the upward trend that we've seen over the past several quarters now. As we execute on our flexible solutions of owner-operator strategy and selling of hardware, we believe that we are well positioned to continue driving increased revenues and gross profit moving forward. Moving to our cash position, at June 30, 2022, the company had approximately $85 million of cash compared to $175 million at the end of 2021. We believe we have sufficient cash on hand to fund our current operations. We are pleased with the second quarter of 2022 as we recorded another record quarter. These improvements in our operating results are a direct reflection of the solid foundation we've built over the past several years, and we believe we're well positioned to capitalize on the numerous opportunities and increased focus being placed on the EV industry. I will now turn the call back over to Michael Farkas for a few final comments.

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

Your first question is coming from Matt Summerville with D.A. Davidson.

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

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

Yes, that will be fine.

Yes, Matt, we are seeing a consistent and recurring flow of revenue from our customers. We have significant partnerships with OEMs and other partners, and they continue to make purchases, particularly with the chargers we are placing in dealerships. This creates a steady revenue stream, and we are also bringing in new customers and exploring new opportunities. As we noted earlier, we doubled our revenues quarter-over-quarter, not accounting for acquisitions. Our current customers are consistently returning, and we are also adding more to our customer base.

I'll add to that a little bit. We do see a lot of new customers. Obviously there have been a lot of property owners that have been sitting on the sidelines waiting to see more traction in the EV space. There's no longer a question of whether or not EVs are going to be the mode of transportation moving forward. We're seeing a lot more of those that have sat on the fence now putting in orders and looking at it across the portfolio of properties. There is literally one of the major developers in New York that has been sitting for years looking at EV and now we were able to put in 50 units or so in some of their locations throughout the 5 boroughs. So we're seeing guys that have been sitting on the fence and we're seeing a lot more customers who have charging in their locations needing more such a great combination of those new business and recurring.

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

Yes. For obvious reasons, we cannot disclose specific dollar amounts, but it involves both labor and the type of manufacturing for the chargers. As you can see, our current portfolio of chargers, excluding SemaConnect, relies on full contract manufacturing, where the contracts are tailored to our specifications. However, with SemaConnect, this model changes. It is still our design, but now our technicians are building the chargers from scratch. They are our employees, not contract workers, and we utilize our manufacturing facilities instead of contracting out. We are not reselling to generate a margin, which leads to a lower cost of goods sold. Additionally, when we integrate these two systems, even with Blink products, we expect to achieve further cost reductions.

Our next question is coming from Stephen Gengaro with Stifel.

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

Yes, I'll take this one. There are quite a few details to cover. The 51,000 figure includes our core Blink network, the Blue Corner we acquired, EB, and SemaConnect. Much of what we've acquired through EB and SemaConnect is already integrated into their systems. So, out of the 51,000, approximately two-thirds are connected to some form of a network that we are currently working on combining, which will create synergies as we advance through the integration process.

I'm trying to understand how to evaluate utilization and determine the potential revenue per deployed chargers on the charging revenue line. I'm looking for any insights you might provide on this matter.

Well, obviously, there are different business models that we have. And some of the companies that we acquired really sold hardware. And we're going to start introducing using our owned and operating model on some of these companies we acquired. Our owned and operate model has a much more robust potential for revenues than just having a charging station that we sold to a third party that is on our network and we get a few dollars a month for it. So, again, we believe long-term as more and more EVs are on the road, utilization kicks up. And as that happens, these charging stations become financially very, very profitable. So, as things progress, as we integrate these networks together, we have a very, very nice mix of different products and services. Some of it will be monthly connectivity fees and processing fees and not much on the sale of the energy, similar to ChargePoint model. Again, that's part of what we do as well. But our focus here is really to try to own and operate as many of the charging stations as possible. And I'm sure you've run the models and seen how potentially profitable, especially the Level 2 charger stations can be once they're out in the field. So, as things progress and as this integration takes place, we'll be able to give a lot more visibility on that.

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

We continuously evaluate our focus on investing in the business and driving top-line revenue. As we proceed with the integration and synergies from our recent acquisitions, we have set goals. The primary goal is to reduce the EBITDA losses, which may take a couple of years. We are proactive in our approach and plan to make significant efforts in the next 12 months during the integration process. Reducing inefficiencies is a top priority for our team and our initiatives.

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

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

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

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

Yes. This is Michael, and I'll address that. In the appendix, we've included a pro forma where you can see how the company would have appeared on a combined basis from the start of the year. I believe the combined revenues for the quarter would have been approximately $17 million, and around $32 million for the first six months. However, this does not take into account future growth expectations. It does provide some insight into what the first half of 2022 might have looked like on a combined pro forma basis.

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

We didn't dive deeply into that, mainly due to some complexities with synergies, but we see it as potential growth for us from the acquisition that we expect to benefit from moving forward.

It's great to hear that. Can you provide an estimate of the revenue potential and the costs associated with upgrading SemaConnect's current operations? I understand it may be early in the process, and you're having discussions with customers about the ownership model and expanding at certain sites. However, I would like to understand how you would assess the opportunity presented by the existing footprint over the next two to three years and what the roadmap looks like.

So, let me jump in and answer this one. So, we are cracking the numbers on that as we speak. So far, they're very promising. And some of you might know we contracted with McKinsey Group to do 2 things: first, the initial synergies analysis between the organizations; and then second, the roadmap to achieving those with definitive numbers and a plan to be implemented to achieve that. We're in the final stages now of validating the numbers and then we're going to kick off the plan. So, as soon as we validate those numbers, we can make them available. But at this point, we need 1 or 2 more weeks to get those. But the big number is, it's very lucrative both in the revenue enhancement thesis and in the cost avoidance thesis.

No, I'm fine.

Okay. My last question is about the recent sales mix. I understand that with the extensive Blink network, many acquisitions have limited product sales. I'm looking for insight on the recent mix from the last quarter, specifically between owner-operated, commercial, and residential deployments. It appears we're gaining strong momentum on the product side even before SemaConnect. While you've shared your long-term expectations for the mix, I'm interested in understanding the current situation and what you anticipate for the next couple of quarters based on your visibility.

Brendan?

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

Yes, on the sales side, we are generating about 70% to 75% of our revenue from products. However, we are still examining our contracts, and we see a fairly even distribution between owner-operated and hardware sales as we progress. It does take time to realize service revenues as they are deployed and utilization increases. This is where we expect to shift more toward service revenues rather than product sales. Currently, sales are roughly split 50-50 between sales and owner-operated types.

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

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

We will see some acceleration, particularly related to the acquisition of SemaConnect. We will provide more details later this month when we file the pro forma financials for SemaConnect. Regarding acquisitions, we will be able to share additional insights. There will be an increase in salaries, but this won't reflect any synergies that will be developed, as Brendan mentioned, which we will work through, along with the scale we expect to achieve in relation to the increased volume.

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

The timeline is currently being set, and while we're not fully ready yet, we expect to have it operational within the next 2 to 3 weeks. The cost remains manageable. Initially, we plan to reach the 40,000 unit mark from our facility in India, where we are manufacturing the parts, while our facility in Bowie focuses on assembling the chargers. The first step involves increasing shifts from one to two and then to three. The next phase will enhance production capacity at our buildings 3 and 4 in India, along with boosting capacity at SemaConnect in Bowie by adding more shifts there as well. The first stage centers on increasing shifts for capacity, while the second stage involves adding tables and tooling, which we estimate will require minimal capital expenditures for expansion. We primarily anticipate adding shifts and making slight upgrades to tooling and equipment to achieve this. More concrete information will be available in the next 2 to 3 weeks as we finalize our synergy plan.

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

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

Sure, I can briefly address that. The product rationalization study is currently in its second phase. In the first phase, we evaluated all the products, examining cost of goods sold, production capacity, market acceptance, and various relevant data. Now, in the second phase, we're determining which products to move forward with and which ones to discontinue. Some favorites have been identified, along with some nuances. For example, the Series 8 charger boasts an integrated credit card reader, making it unique compared to traditional slap-on credit card versions. This charger will be part of the Blink SemaConnect combined charger for sale in California, as starting in January 2023, that is the only type of charging station that can be installed due to California regulations. We will continue to rationalize our portfolio and consider future changes in design and functionality. We have about a week left in this rationalization study, alongside our review of other synergy products, and initial feedback has been promising. Our focus is on ensuring we deliver the right number of high-quality products at competitive costs. We will be cautious about discontinuing any of our charger producers, as there is currently high demand and many manufacturers struggle to meet their existing orders. Therefore, we will likely operate in parallel to meet our backlog of orders.

I do want to add to that just a bit. This is Michael Farkas. It's very important for us not only to trim our product line to make sure it satisfies our customer base, but really, what we call, Gen 3. And that's really the combined integration of Sema's strengths and Blink's strengths and having that hardware fill that role. So while we're already on Gen 2 and we have amazing equipment across the board and we do look towards the future, and that future is going to be where we're going to receive really just tremendous amounts of benefit from the integration of the companies. So, there are tremendous savings today, great product line. And as Brendan mentioned, the requirements in California are not only for California to have a credit card swipe on those chargers. There are many other states that follow exactly what California does. One of the attractive things about Sema was the fact that they had a product readily available to meet those needs in California. And there are very, very few, if any, other of our competitors that can fulfill those requirements. So we have the major, major advantage over most of our competitors in that regard.

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

It's interesting because people often look at our transaction with Sema, which had a purchase price of $200 million. However, many are not aware that one of the largest investment banks was considering a $2 billion pre-money deal for Sema when the market was at its peak. I agree, those were very inflated valuations at the time. Throughout our history, we have consistently purchased companies at favorable prices, and we analyze each deal thoroughly. Although past valuations differ from today's, we managed to acquire Sema for 10% of what a major investment bank was prepared to offer. Moreover, we capitalized on market timing and the valuable contributions Sema brings. This is another investment that the market currently fails to fully appreciate. Similarly, our European acquisition would likely be valued at over $1 billion if assessed independently, yet being part of Blink, we have not realized that value. When compared to our competitors like EVgo and ChargePoint, which have market caps several times ours, we own and operate a vast number of charging stations, while some competitors do not. Once the market fully understands the true value of our acquisitions and their individual contributions, I believe we will see a repricing.

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

I would say, very different. And the reason why is, as an owner and operator, you have a different philosophy in developing hardware. Our competitors, which none of them own and operate the charging infrastructure after it's sold, they build equipment with upgrades built in. That's their model, I mean like a cell phone. We look at our equipment like a hot water heater or refrigerator and we want it to last many, many, many years without upgrade cycles. And if there has to be an upgrade cycle, we don't want to have to rip out the entire machine. We want to be able to use that machine and maybe change the motive or changing RFID part of those things change. Obsolescence is of utmost importance to us. Our competitors, it is to them as well. But what their philosophy is, they want the unit to become obsolete and we don't. So, our business is to have those units in the field as long as possible, because we're going to generate revenue off of the sale of electricity through those charging stations. So, there is a reason why General Motors selected our hardware to be in their dealerships. There is a reason why Subaru did. There is a reason why Audi did. These are industry veterans that literally benchmark all of this hardware against each other. This is not just some property owner that doesn't know what they're doing, immediately ripping these things apart and there's a reason why some of the biggest investors in EV are using our charging stations. And this is not just blindly. This is something that they went through by benchmarking, by putting one unit against each other. There is a reason why Blink is getting chosen; it's because of our philosophy and how we build the hardware. We're just an owner and operator and there are no others that do what we do. If you look at any of the other owner operators, you're looking at EVgo, they don't make their own hardware. They don't have their own network. You look at Electrify America, it's the same thing. So, it's just a different philosophy. So, again, our hardware is lasting longer because it's designed to do that. Our competitors' hardware is designed to become obsolete after a couple of cycles, so you have to purchase new hardware. You follow?

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

Ultimately, when you see what's going on globally, from a legislation perspective, the world is going EV. You see what's going on with the Biden administration. You see what's going on in China; it's all over Europe. It's not necessarily about the cost of the fuel, which is electricity because it just happens to be a lot cheaper than wherever you're going to go with using gasoline. So, it's not necessary about the cost of the power in different areas right now. There is a concerted effort by every single OEM globally to manufacture EVs, even those holdouts like Toyota and Hyundai with their portfolio of plug-ins now. There are no more holdouts. It's every single major brand is committing to stopping making internal combustion engine cars within some of the next 5, 10, 15 years. So, this is no longer about choice. I mean, yes, you have the choice of what car to buy. You can still buy a Ford or Mercedes or a BMW, but really the power source for mobility has been chosen, and it's EV. And the only shortcoming that EVs have is what we do, which is making sure that there is fuel supply for them. And it's us and other companies in the space. There is a whole switch over of mobility that's taking place right in front of our eyes. And you're just going to see all of that investment, all that capital, and all that revenue that was generated from Blink automobiles over the past going from those legacy companies to those that are now fully vertically integrated EV charging company, that can provoke. As we mentioned earlier, we have owners that want to own everything from A to Z. They wanted a car, they wanted to make money with additional revenue streams. We have other property owners that literally just want to provide for the parking space; we handle everything from A to Z, they make no capital expenditure whatsoever on their parks and wish to have a revenue share model with them. And we have every single different point of methodology in between. It really gives us an advantage over our competitors, especially with the theme that we've built. All these calls in the past, we were always taken to task about not spending enough on R&D. We weren't big on technology. We were big on just getting a footprint, big on building our base of locations, and our model was fund upon. But now, look at the base of locations we have and all the property owners we have. And now the technology that we've developed as we've built an amazing tech team both here and in India. And now, we're leaders in that space. Look at our equipment comparative, again our competitors, which speaks for itself.

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

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

So, the current plan for the products listed right there, let me address the HQ. The HQ is following its current manufacturing trajectory right now. As we get through the synergy study, we could see a transition to being produced out of the Indian facility. Then the same thing with the MQ is following that trajectory. Now, the MQ is a very well-received charger in the market today with a very good cost of goods sold compared to other competitive fleet chargers in the market, also with the new state-of-the-art software added to that for fleet management. So, as we talked about earlier, you're going to see some products that may, and then some that may not. The MQ is one that we may maintain the current course. The Vision is in final design now. And as we finish the design of the Vision, and we have a new concept that we're working through and looking at, we'll determine the manufacturing facility for that. And again, we're going to look for the best cost of goods sold we can get into the market where it's highly acceptable. We're going to keep in mind Buy American qualifications because those chargers do qualify, the Vision type charger. So all of that is going to be taken into account. So I don't want to tip the hand one way or another until we finish the study. But I wanted to give you a flavor for, you've got to follow each individual product and some might have a different plan than others.

Got it. And actually just one more. Are you seeing or analyzing your existing customer base to determine if there is a particular type of customer or product that is being adopted more than others?

If you examine the combined portfolio, the focus is on higher power AC chargers for both commercial and public use. These are the volume players for both companies, capable of reaching up to 19.2kW. The emerging area likely to see increased volume is fleet charging, particularly specific L2 fleet chargers designed to be economical and cost-effective. In fleet situations, customers usually own their equipment or use a charging as a service model. These are the two dominant models in the fleet market. Even though there's an increase in volume, it's not yet comparable to the demand for chargers at libraries, parking lots, or multifamily dwellings. Looking at multifamily dwellings, this is currently the least penetrated market in the United States, similar to fleet charging, and is expected to grow significantly. While 19.2kW is a common specification, it might vary. For now, expect more growth in this area, but the main drivers remain the 19.2kW chargers, the IQ 200, and the corresponding charger from SemaConnect, as these are the key volume players.

I'll take my other questions offline.

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