Earnings Call Transcript - BLNK Q4 2022

Operator, Operator

Greetings and welcome to the Blink Charging Company Fourth Quarter and Year-end 2022 Earnings Call. All participants are currently in listen-only mode, and a question-and-answer session will follow the formal presentation. I will now turn the conference over to your host, Vitale Stelea, Vice President of Investor Relations. Please proceed.

Vitale Stelea, Vice President of Investor Relations

Thank you, Ally. Welcome to Blink's fourth quarter 2022 earnings call. On the call today, we have Michael Farkas, Founder 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 may find the deck along with the rest of our earnings materials and other important content on Blink's Investor Relations website. Today's discussion 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 fourth quarter 2022 earnings deck. Unless otherwise noted, all comparisons are year-over-year. Regarding the Investor Relations calendar, Blink Charging will participate in the ROTH-MKM Investor Conference on the 14th of March and the JPMorgan Energy Conference on the 21st of June in New York City. Please follow our announcements for additional investor updates in the future. And now, I will turn the call over to Michael Farkas, Founder and CEO of Blink Charging. Go ahead, Michael.

Michael Farkas, Founder and CEO

Good afternoon, everyone. Thank you for joining us. Before I dive into our record financial results for the year, I would like to reflect on 2022, which was a transformational year for the EV industry and even more so for Blink. Industry-wise, we saw a record year for electric vehicle sales globally, and this trend is only poised to accelerate based on consumer preferences and strong governmental incentives. Electric vehicles are becoming more common on our roads and highways as global EV sales grew by 68% year-over-year, with EVs achieving around 10% market share for the very first time. And the vast majority of consumers who try an EV never go back to an internal combustion engine vehicle again. In fact, many OEMs are going electric with their mainstream offerings and making them more affordable in order to achieve scale, which will ultimately lead to price parity with their internal combustion engine offerings. Just think of the impact this will have on societies and the environment in the next 10 to 15 years. Mobility is being revolutionized in a way that has only happened once before when people went from horses and carriages to self-propelled vehicles. This shift to electric vehicles will not only change the needs in terms of how we refuel but also establish the need for new infrastructure required to service and maintain these vehicles as EVs become the dominant means of transportation. As for Blink, 2022 was truly monumental. Not only did we increase our revenue by almost threefold during 2022 when compared to 2021, but we fundamentally changed what Blink represents to the EV charging industry and our position around the world. Slide 4 shows our capabilities as the only fully vertically integrated charging company in the United States and among only a few vertically integrated charging providers globally. Our ability to design and manufacture our equipment and ownership of our network is a competitive strength, particularly when paired with our flexible business models as shown on Slide 5. With a variety of ownership models, which range from simple network subscription to host owned, hybrid or Blink owned and operated, we are intensely focused on consistently delivering excellent products and services with an unparalleled customer experience. Having control over the engineering, design, and manufacturing of our products and software enables us to efficiently scale the business, while at the same time delivering superior products and customer service. As a 14-year veteran of the EV charging industry, we have the expertise to identify and meet customer needs and design our best-in-class hardware and software offerings to exceed customer expectations. In essence, we now control our destiny, while leveraging scale and knowhow to generate some of the highest gross margins in the industry today. As for our financial results, you can see on Slide 6 that our fourth quarter revenue grew 184% year-over-year to $22.6 million, and our full year 2022 revenue grew 192% to $61.1 million, compared to only $20.9 million last year in 2021. Our growth significantly outpaces the industry. We are second to none, and this is a testament to the strength of our experienced team, our strategy, and our products and service offerings. Our service revenue grew by 213% in Q4 '22 to $5.7 million compared to $1.8 million in Q4 of '21. Importantly, our network fees grew to $2.3 million in Q4 '22, which is an increase of 827% when compared with the same quarter last year. I repeat, 827%, and at very healthy gross margins. Looking at earnings performance, adjusted EBITDA loss for the fourth quarter of 2022 was $14.8 million, which is a sequential improvement of $3 million compared with Q3 of 2022, which was $17.6 million. Adjusted EPS for the fourth quarter of 2022 had a loss of $0.41, compared to adjusted EPS loss of $0.47 in the third quarter of 2022. Our number of stations contracted, sold, or deployed grew to 66,478 units, an increase of 105% when compared to the prior year of 2021. Our growth in network fees and charging stations is related to our strategic acquisitions of SemaConnect and Electric Blue in 2022, reflecting the strength of adding these complementary businesses to the Blink family. Subsequent to year-end, on February 9, we closed an oversubscribed registered public offering of common stock for gross proceeds of approximately $100 million. The newly raised funding will go towards running the business and strategically investing in complementary opportunities. We expect these funds to take us well into 2024. Also, in January, we exhibited at CES in Las Vegas, where we unveiled five new charging products for a wide variety of customers here in the U.S., and also for customers in Europe, Latin America, and Southeast Asia. For example, India is a market where we expect strong growth in electrification of both two and three-wheeled vehicles, and we have a very special offering for those compact EVs. 2022 was a year of tremendous progress for Blink. This growth was enabled, in large part, by the acquisitions we closed in 2021 and 2022, as shown on Slide 7. To recap our timeline on recent acquisitions, we acquired Blue Corner in May of 2021, adding over 7,000 charging points and a strong European network. This acquisition really opened a window into the lucrative European market for us. Since completing this acquisition, we have added nearly 5,000 or 70% more charging ports to the existing Blue Corner network. And as a result, the Q4 2022 revenue for Blue Corner grew nearly 50% and is trending very strongly. Adding on to our growth in Europe, in April of 2022, we acquired Electric Blue, adding nearly 1,200 charging ports to our network, and a confirmed order book of approximately 16 million pounds. Finally, in June of 2022, we closed on our largest acquisition ever. We acquired SemaConnect, which in addition to a robust charging network and customer base, also brought key design and manufacturing capabilities for Level 2 and DC fast chargers. This positions Blink to qualify for the buy American requirements of the Inflation Reduction Act. SemaConnect has one of the highest, if not the highest gross margins in the business, which we intend to institutionalize across the entire Blink organization. Overall, Blink is a combination of many acquisitions since we were founded. By adding complementary businesses gradually and strategically, we have built what I believe to be the most talented team in the industry, second to none, allowing us to leverage our collective knowledge to deliver the best products and business models possible. As you can see, on Page 8, we have grown to become a truly global business with over 66,000 chargers sold, deployed or installed in 25 different countries, with much more to come. However, we are not done here. Slide 9 illustrates that the industry is positioned to see exponential growth, as electric vehicles continue to win customers all over the world. Bloomberg predicts that by 2040, we're going to need anywhere between 340 to 490 million chargers globally to meet demand. Today, we're not even close at about 14 million chargers, with many of them not even viable for where we are today. At best, we believe the runway is just tremendously long. Just as the shift to EVs continues to build momentum, just imagine the opportunities that lie ahead for the charging industry, and especially for Blink. We are very excited about the future and are working hard to prepare the company to handle this amazing growth. With that, I'll pass it on to Brendan Jones, our president.

Brendan Jones, President

Thanks, Michael, and good afternoon to everyone. As you heard from Michael's comments, Blink had a great year. I'd even say a very, very good year, but I overemphasized very there. So now let's jump into some more of the slides. Let's go to Slide 11. Now as Michael stated, within the last 12 months, Blink has contracted, sold, deployed or acquired over 34,000 chargers both domestically and internationally. And I think we have to reiterate this point that brings the total charge account for the company to over 66,000 chargers since Blink's inception. Now we have a diverse mix of deployments in the United States and abroad. The percentages are that 76% of our total company-wide Blink chargers are deployed in North America, and right now, 24% deployed internationally. If we jump over to Slide 12, you will see just a partial sampling of our customers. We service a variety of those customers in different industries and have won multiple contracts with an array of well-established commercial enterprises, multifamily complexes, plant communities, health care facilities, fleets, and municipalities around the world. We also just want to reemphasize the important point that Michael made a moment ago, that Blink is the only fully integrated charging provider in the U.S. market. Our capabilities combined with our flexible business model and superior products position us very competitively to attract new customers and long-term contracts. With that said, let's jump onto Slide 13. What we're looking at now are examples of our innovative product portfolio. We now have a wide variety of projects and products ranging from residential Level 2 chargers to high powered DC fast chargers, as well as our newly unveiled vision IQ 200, which we'll talk about in a little bit. With these chargers, we serve both residential and commercial locations, including an increasing number of fleets across the United States. Now, on Slide 13, you can see our currently available DC fast chargers. We think it is important to reiterate that Blink is a global company addressing the demand for power in different DC installation settings that vary around the world. We carry a wide variety of DC fast charging offerings to meet customer specifications. For example, one of our latest additions is a wall mounted dual-port 50 kilowatt DC fast charger, which works well in tight spaces, especially in densely urban environments in Europe. Regardless of the specific setting, we offer our customers flexible DC solutions and ownership models that provide anywhere from 30 kilowatt chargers to 350 kilowatt and above power. Now let's go ahead and examine Slide 13. What this shows is the innovative new product we recently displayed at CES. I want to take you to this slide in different parts of it. So in the top center, you'll see our all-new Vision charger. This charger is designed as a two-in-one solution. It has a 55 inch LCD display screen which creates the perfect point of charge advertising solution. Additionally, the Vision offers charging and advertising revenue share models, providing unique solutions for any of our customers. To the right is our new 180 kilowatt DC fast charger, which will be Buy American compliant and compatible with the newest electric vehicle charging architectures. To the left is another introduction and this is our Series 9 30 kilowatt DC fast charger. This is a small footprint charging station designed for speed and flexibility, representing Blink's latest solution for fast charging situations across global markets. Now if I can take you to the bottom of the slide, in the center is our EQ 200 charger. This is an intelligent, affordable and scalable charging solution designed specifically for the European markets. The EQ 200 is future proofed as it supports technologies like ISO 15118, OCPP 2.0, and bidirectional charging, also known as vehicle to grid or V2G as it's sometimes called. Next is the Series 3, which Michael referenced earlier. This is a flexible and versatile EV charging solution designed for the two and three-wheel vehicles for Asian and Latin American markets. Our primary target markets for this charge is currently Southeast Asia, where according to Bain and Company, EV adoption will be 40% to 45% for two-wheel and three-wheel vehicles by 2030. Keeping this in mind, this is 13 million to 14 million of those vehicles that will need flexible charging infrastructure. Finally, at the bottom here, we also have the release of the PQ 150, or energy kick. This is a smart charging cable designed for residential charging in European markets and perfect for the reimbursement of charging costs for fleet vehicles at home. We're really excited about the vast variety of products we have on the market and those we recently unveiled. Right now Blink is confident that our product portfolio has a solution to meet charging requirements anywhere in the world. Now let's jump to a different topic. As we look at Slide 16, in 2022, we completely redesigned and launched our Blink network and Blink charging mobile apps. Our state-of-the-art infrastructure, our tech stack, and our user-centric approach allowed us to create a technological platform that can be augmented quickly and efficiently without any service disruptions to our customers. And that is key. The Blink mobile app puts drivers in control by giving them improved capabilities to search for nearby amenities, chargers by zip code, city, business category or address, seamlessly integrating EV charging into everyday life. Additionally, drivers can save their favorite charger locations, manage payment information, and view payment history and real-time charging status. The app is also available on both iOS and Android platforms. So now let's jump to Slide 17 real quickly here. When it comes to host benefits, the entire Blink experience has been redesigned with ease of use in mind. Site hosts will also have expanded functionality to create dynamic pricing protocols responsive to various use cases, locations, and schedules. The new cloud-based Blink network allows site hosts to manage their business in multiple languages across 25 countries. We expect to transition all of our legacy networks acquired via acquisition to Blink's newly launched network by the end of this summer. Now let's jump into Slide 18, market growth continues to enjoy the support of government initiatives. Electric vehicles comprised about 10% of all U.S. sales in 2022, and we expect this trend to continue and accelerate. In the U.S., the administration is committed to building a nationwide network of 5,000 chargers and is targeting the goal of 50% of all new vehicle sales to be EVs by 2030. That's just seven short years away. The White House mentioned Blink in a recent announcement on February 17 regarding the expansion of the U.S. manufacturing footprint and new standards for its Buy American program. We are proud to say that Blink is compliant when it comes to Buy American requirements, and we expect to meet the future requirements that will be enacted in July of 2024. We are targeting the production of 100,000 units annually in the U.S., which we expect to achieve in a major part by the expansion of our Bowie, Maryland facility and with the establishment of a new manufacturing plant for DC fast chargers and Level 2s, which we are actively in the process of identifying the location for that plant. Now let's jump to Slide 19. This is a different topic looking at synergies. With the help of McKinsey consulting, we performed an extensive analysis to discover and outline synergies across the entire global company, especially around the acquisition of SemaConnect. As a result, we identified a total of $27.7 million in synergies related to just SemaConnect, and I'm happy to report that $5.3 million of those synergies have already been captured. We have broken down synergy implementation into three phases. Phase 1 began in December and focused on sales, marketing, and some aspects of operation. Phase 2 and Phase 3 will begin in March of 2023 and will focus on global operations, IT services, technology, and manufacturing. Looking at the $5.3 million number that has already been attained, $4.1 million relates to FTE reductions, and over $1.9 million will be savings from reducing and simplifying the number of vendors. As stated, we are just at the end of Phase 1, and we'll have a lot more information to report over the next several quarters. As Michael mentioned earlier, when you dig a little deeper into our results, you will see that Q4 adjusted EBITDA improved sequentially by nearly $3 million compared to Q3 of '22. Revenue grew more than $5 million compared to the third quarter. We are narrowing our losses, and at the same time, we are growing our revenue. We look to continue this momentum moving forward. To wrap this up, 2022 has been a truly impactful year of progress for our industry, and a significant year for Blink, with record growth in all areas of the company. We are elated with what the future holds for Blink. I will now turn it over to our CFO, Michael Rama, for additional comments.

Michael Rama, Chief Financial Officer

Thank you, Brendan, and good afternoon, everyone. Now turning to Slide 21, total revenues in the fourth quarter of 2022 grew 184% year-over-year to $22.6 million, another record for Blink. In addition, fourth quarter revenues were up 31% sequentially compared with the third quarter of 2022, primarily driven by the increased demand for our global EV charging infrastructure and higher service revenues. Product sales in the fourth quarter of 2022 were $15.8 million, an increase of 176% over the same period in 2021 as customers purchased greater volumes of our commercial chargers, DC fast chargers, and residential chargers. Product sales for the quarter also included revenues generated from our acquired companies, SemaConnect and others. Fourth quarter 2022 service revenues, which consist of charging service revenues, network fees, and ride-sharing revenues, were $5.7 million, an increase of 213% compared to the fourth quarter of 2021. The year-over-year growth was primarily driven by greater utilization of our chargers, the increased number of chargers on Blink's networks, revenues associated with the Blink mobility ride-share program, and incremental service revenues from acquisitions. As many of you already know, we combine these service revenue line items into one to more accurately differentiate between the product and service aspects of our business. Operationally, this approach also aligns with our company's strategic goal of increasing the service component of our revenue mix and growing our recurring revenue base. Over time, as EV adoption accelerates and utilization of our charging stations improves, we anticipate seeing a larger mix of revenue coming from services. Gross profit for the fourth quarter of 2022 was approximately $6.5 million, an increase of 370% over the same period last year, and up 35% sequentially from the third quarter of 2022. As a percentage of revenues, gross margin was 29% in the fourth quarter of 2022, over 1,100 basis points improvement when compared to the same period last year. Sequentially, our gross margin in Q4 2022 grew nearly 100 basis points. As Brendan mentioned earlier, we continue to look at ways to reduce our component and operating costs, which should have a positive effect on gross margins. Operating expenses in the fourth quarter of 2022 were $34.2 million, compared to $20.5 million in the prior year period. The year-over-year increase reflects the impact of recent acquisitions, as well as our commitment to positioning Blink to capitalize on many EV infrastructure opportunities that lie ahead. At the same time, we remain vigilant about cost reduction opportunities and additional synergies, as Brendan mentioned earlier. Last year at this time, we began presenting adjusted EBITDA. Our management believes this non-GAAP measure is useful in evaluating our company's core operating performance, because it excludes items that are either significant non-cash or non-recurring expenses. Adjusted EBITDA for the fourth quarter of 2022 was a loss of $14.8 million, compared to a loss of $9.1 million in the prior year period, largely due to higher operating expenses. Sequentially, Q4 adjusted EBITDA improved nearly $3 million, or nearly 3,700 basis points compared to the third quarter of 2022, and improved nearly 5,000 basis points year-over-year compared to the fourth quarter of 2021. As you can see, as a percentage of revenues, our adjusted EBITDA improved nearly 40% since Q4 of 2021. Adjusted earnings per share for the fourth quarter of 2022 was a loss of $0.41 per diluted share compared to a loss of $0.44 per diluted share in the prior year period. Non-GAAP adjusted earnings per share is defined as adjusted net income which excludes significant non-cash items such as amortization of intangible assets, nonrecurring acquisition-related expenses, and additional stock-based compensation divided by the weighted average shares outstanding. Adjusted earnings per share for the fourth quarter of 2022 was a loss of $0.41, compared to adjusted EPS loss of $0.47 in the third quarter of 2022. Now turn to Slide 22; you could see that both revenue and gross profit performance have strongly improved over the last several quarters with significant sequential and year-over-year growth. As we continue to expand our own and operate strategy, experience greater demand for EV infrastructure and increased utilization rates, we believe we are well-positioned to drive significantly improved revenue and gross profit performance moving forward. Moving to our cash position, as of December 31, 2022, cash and cash equivalents were $36.6 million. Following the close of the quarter, Blink closed on an oversized public offering with gross proceeds of $100 million. We are pleased to have closed fiscal year 2022 with a record fourth quarter and full-year results. We believe we're building a solid foundation for continued growth as EVs are becoming more and more common among consumers, and demand for our products and services grows.

Michael Farkas, Founder and CEO

Thank you, Michael. 2022 was a truly transformational year for Blink and for the entire industry. I am very proud. I'm actually beyond proud of our team and what they've accomplished this year. Completing and integrating two large acquisitions, launching a brand new redesign from the ground up network, new mobile applications, and introducing a number of best-in-class products for both Level 2 and DC fast charging. It has been an intense year, but it's also been a very rewarding year for us. As you look at the EV charging industry, we have positioned Blink to be truly unique. We are a fully vertically integrated EV charging solutions provider with software and hardware, engineering, design, manufacturing capabilities, and we're providing the most flexible ownership models available. Our charging solutions range anywhere from simple Level 2 home chargers to some of the most sophisticated DC fast chargers in the market. Over the years, our flexibility allowed us to create strong partnerships and acquire a diverse client base that speaks for itself, and those clients are industry leaders. Electric vehicle charging is positioned for significant growth; it's forecasted to increase at more than 30 times current levels over the next decade and a half. We have expanded our global footprint and scaled to over 25 countries and counting. The last two quarters have shown that our strategy works as we have achieved some of the highest margins in the entire industry. We drove strong results in 2022 with our visibility today and our optimism around the opportunities we're seeing in the marketplace. We are targeting 2023 revenues in the range of $100 million to $110 million and targeting gross profit in excess of 30% for full year 2023. With continued solid operational execution, we believe we are well-positioned to generate continued growth and improved margin performance. We are excited about what the future holds for Blink. With that, we will now open the call for questions.

Operator, Operator

Thank you. Our first question is from Matt Summerville with D.A. Davidson. Please go ahead.

Will Jellison, Analyst

Hi. Good afternoon. This is Will Jellison for Matt this afternoon. I wanted to start out by asking you about the reliability of charging stations, because we've started to see this come into the public consciousness a little bit more, making sure that our public infrastructure is reliable and can be depended upon. I won't ask for specific performance indicators on Blink reliability. What I would more so like to learn about is what Blink is doing to drive continued improvements in the reliability of the network going forward. I'd love to hear what you're thinking about with that.

Michael Farkas, Founder and CEO

Okay, that was a great question. It's something that today is plaguing a bunch of networks. Historically, if you look back; the first generation of the technology that was launched—whether it was ChargePoint, Blink's original hardware, General Electric, Siemens, Schneider, and even the big boys—remember that all the Gen 1 equipment was not made to par. The reason why it wasn't is because we really didn't understand the terrain. These are high-powered electrical equipment that is subject to the elements and conditions. There have been a lot of improvements with the generational changes of hardware over time. That's even more so for DC fast chargers, which is where you're hearing most of these operational problems. People driving up to a charger not being able to charge their car and moving on. Most of the issues Blink has had have been in prior generation equipment and networks before we acquired those companies and took over those assets. We’ve eliminated most of those legacy issues. However, you deal with equipment going offline, and you have to service it and take care of it; that has been our main focus. DC fast charger operators like EVgo, Electrify America, and others have really borne the brunt of those issues because DC fast chargers are much more complicated and require significantly more maintenance. Brendan, do you want to add anything to this? You're on mute.

Brendan Jones, President

Sorry about that, guys. Yes, a couple of points. First, just reiterating what Michael said. The complexity of DC chargers is five times that of the Level 2 charger. It was a year of awakening for the industry, as Michael said. Everyone is taking quality very seriously now. Blink is participating in quality analysis with both the DOT and in California separately with CARB and CEC. We're examining everything we're doing and collaborating with the industry to improve not just our quality but the overall quality across the board. We also saw an unusual disruption this summer when all networks faced an unprecedented event due to the sunset of the 2G and 3G networks from all providers, creating significant challenges for everyone. We worked together to upgrade equipment to the 4G and 5G systems, but this did create a delay. Blink is focusing on delivering the highest level of quality and ensuring that when a customer arrives at a DC fast charger, they can charge successfully. We are actively moving forward with all of these activities.

Michael Farkas, Founder and CEO

Understood. To add to what Brendan said, Blink is focused on deploying Level 2 charging stations, as they involve a lot less maintenance and have fewer issues. It’s less common when you drive up to a Level 2 charging station for issues to arise. As we deploy our next generation of DC fast chargers, we believe we’ll address many of those maintenance and operational issues with the current generation.

Will Jellison, Analyst

Understood. Thank you for that. As a follow-up with the capital offering successfully completed, I'm curious about how Blink is thinking about capital allocation moving forward. How do you decide between organic investments in your own manufacturing or innovation capabilities, or additional acquisitions of assets that might bolster the Blink network going forward?

Michael Farkas, Founder and CEO

Okay, great question. We know there are billions earmarked for our industry for building facilities, deploying infrastructure, subsidizing rebates, and all of these amazing initiatives. The capital we raised serves as a bridge to access that funding. We've been looking for non-dilutive capital or very minimally dilutive capital. The industry is rapidly approaching that point. We're seeing it in Europe with banks financing deployments, and we expect similar developments here, focused on utilization. We'll look to use the capital we just raised to manage our operations and grow the business. We believe there will be interesting mechanisms to finance capital requirements for new installations as well as expanding our facilities.

Operator, Operator

Thank you. Our next question is coming from Craig Irwin with ROTH Capital. Please go ahead.

Craig Irwin, Analyst

Good evening, and thank you for taking my questions. Michael, the one thing that really stood out to me was the more than eight-fold increase in network fees in the quarter. Something fundamental seems to be going on there. Can you maybe talk us through what the margins are on those? What's driving growth there? And how this is likely to shape going forward? Do we continue to see this outsized growth multifold increases materializing over the next several quarters?

Michael Farkas, Founder and CEO

Yes, I'm going to let Michael Rama address the margin and related details. This is part of selling hardware to third parties, leading to recurring fees from selling energy and other services. We're going to see massive growth in a lot of our recurring revenue models. Many people are buying charging stations, allowing us to deploy more charging stations. When we sell a charging station, we receive a network fee every month paid by that property owner. Yes, we will see significant increases, and I can assure you, we haven't even scratched the surface of our potential growth. We will need between $300 million and $500 million in charging stations by 2040. Today, we’re at just around 14 million, with many not being viable. The margins on the processing fees, on the networking fees, are very considerable.

Michael Rama, Chief Financial Officer

Craig, just to add more color to that, the SemaConnect acquisition, it came with a significant network. Although they primarily sell third-party hardware, their stickiness and the network revenues we are receiving from that business are really taking off in Q3 and Q4 of 2022. The expectation is that this will continue as our network expands with additional chargers. The margins are strong, and that's why we clearly see the service part of the business growing due to the expectations of increased margins, whereas the hardware side may become more commoditized. Thus, our range of revenue offerings is well-balanced to ensure profitability.

Craig Irwin, Analyst

Excellent. If I could maybe ask for just a little bit more color. Some fringe elements have suggested your network utilization is materially different from that of your peers, which we all know not to be true. Can you maybe talk about utilization on the network and how it contributes to this growth?

Michael Farkas, Founder and CEO

We are continuing to see increases in utilization. When you average in our European operations, this becomes even clearer. You're looking at differences between a portfolio solely of DC fast chargers, where utilization rates can be lower compared to AC chargers. It does not take a very large utilization rate for Level 2 charging stations in public multifamily parking garages to become very profitable. However, without question, we’re seeing significant growth in our utilization rate. Mike, would you like to add anything?

Michael Rama, Chief Financial Officer

Yes; you can see that quarter-over-quarter, our charging revenue has been sequentially increasing. This tracks with more chargers on the network and more own and operate engagement. As we've mentioned, utilization has been positively correlated with EV penetration in overall vehicle sales. As we approach that 10% mark, we're starting to see the momentum we lacked just 12 months ago when we sat in the middle single digits.

Sameer Joshi, Analyst

Thanks for taking my questions and congrats on a great quarter. Would you comment on your position with the V2G opportunity, given that you have this built-on, own-and-operate model? Does it lend itself favorably to the V2G opportunity?

Michael Farkas, Founder and CEO

Yes. By owning and operating the chargers, we are able to monetize V2G when programs allow for that. It's vital to have the right equipment and relationships with utilities. Brendan, do you want to expand on that?

Brendan Jones, President

Yes, we are making our chargers, especially all new models, V2G capable, whether it's a home charger, commercial Level 2s, or DC fast chargers, whether they're part of the own-and-operate model or sold independently. All the new designs will incorporate this capability. We are currently adding this feature to both our network and chargers. The big question is, how do we monetize V2G? We're collaborating with several companies to figure out how we can work with consumers to provide them solutions for their installations, and we’ll have more on that in the future.

Sameer Joshi, Analyst

Thanks for that. I wanted a second question regarding state-level and federal funding dollars. Should we look for initial positive outcomes from that in the third and fourth quarter, or will it take until 2024?

Brendan Jones, President

That’s a great question. Right now, three states are out; Ohio, Kentucky, and Pennsylvania. Pennsylvania has pulled back. Many have been waiting for updates on the new Buy American regulations. We remain compliant on the Level 2 side, and we’re aiming for compliance on the DC side. Currently, you’ll see states evaluating these considerations, but meaningful awards will likely emerge towards the end of 2024.

Sameer Joshi, Analyst

Understood. So regarding your service margins, do you expect them to continue improving with growth in network fees? What proportion of your revenues do you anticipate will come from service-related offerings by 2025 or 2026?

Michael Farkas, Founder and CEO

As we move forward, we've worked toward a more balanced approach with a potential for a nice 60-40 split between hosts and own-and-operate models, but it’s difficult to predict. We've witnessed a trend where prior owners and operators are shifting to outsourcing this service. We're seeing many municipalities and businesses wanting to transition the management of these chargers to experts like us, as they no longer wish to handle the day-to-day operations themselves.

Unidentified Analyst, Analyst

Good afternoon. I appreciate you taking my question. Just on the owned-and-operated model, with your growing footprint and reaching roughly 66,000 chargers, can you provide any update on converting legacy owners of SemaConnect chargers to the own-and-operate model? Also, how many of those chargers are revenue generating?

Michael Farkas, Founder and CEO

Currently, about 49,500 chargers are owned by us on our network. The 66,000 figure includes some historical legacy legacy assets. They consist of all types of chargers: DC fast chargers, commercial chargers, private chargers, and home chargers. We have a significant portfolio generating recurring revenue across the network.

Brendan Jones, President

As it relates specifically to the SemaConnect portfolio, we’re just at the beginning of converting several site hosts to the own-and-operate model. We've already secured some significant contracts there, and we're witnessing considerable motivation for SemaConnect customers to engage in the own-and-operate model due to our enhanced product offerings. The plan is to accelerate this conversion as we transition the SemaConnect network to the Blink network over the coming days, combining our portfolios and cross-selling. So a lot of exciting synergies are ahead.

Michael Farkas, Founder and CEO

What we have done is increase the productivity out of Bowie already, bringing it to between 12,000 to 14,000 units without heavy investment. We’re moving to a second shift soon, targeting production up to 4,000 units per month. We're expanding our facility square footage too, aiming to accommodate up to 50,000 units later on. With new manufacturing objectives, we'll also fulfill the production of DC fast chargers alongside Level 2s. We're on track and confident about meeting the product demands of our customers.

Operator, Operator

Thank you. As that was the last question, it does conclude today's call. We thank you for your participation. You may disconnect your lines at this time, and we wish you a wonderful day. Thank you.

Michael Farkas, Founder and CEO

Thank you.

Michael Rama, Chief Financial Officer

Thank you.