CarCharging Off to the Races?
CarCharging Group, Inc. (CCGI: OTC) producers electric car charging stations. It partners with property owners such as shopping malls or parking garages to operating the charging stations and collect fees from electric car owners. At the end of September 2013, the last time the company reported financial results. CarCharging had eighty-seven strategic partnerships with a gaggle of private and public entities such as Walgreens, Icon Parking, the City of Miami Beach, and the Pennsylvania Department of Environmental Protection. A mobile app helps car owners find locations by city or zip code.
CarCharging has reported a total of $502,833 in revenue since its inception in September 2009, of which $194,210 was in the most recently reported twelve months. While the company earns a gross profit on its sales - 29.4% average over the past five years and 30.4% in the most recent twelve months. Unfortunately, compensation for its employees looms large on the CarCharging income statement, leaving a net loss of $20.3 million in the last twelve months. Since inception the reported net loss was $37.6 million.
Since much of the company’s compensation and general and administrative costs have been paid using common stock and options, cash earnings look a bit more encouraging. Operations have used a net $7.4 million in cash since inception, of which $1.5 million was used in the twelve months ending September 2013.
Even though it appears management is making some headway in penetrating the car market and has made progress in getting the cash burn under control, it does not mean CarCharging is off to the races. The company has a bit of debt already and has precious little cash on its balance sheet. CarCharging become public through a reverse merger and has not had the benefit of developing strong relationships with institutional investors such as venture capital, private equity or managed funds. It has yet to attract research coverage by a sell side analyst.
The lack of strong sponsorship in the capital markets is a drawback for a company that needs expansion capital. At a dollar and two bits, CCGI shares trade more like an option on the company’s business model than as a multiple of future earnings. The stock has been somewhat volatile, falling to a low of $0.71 in late October and from a high of $2.00 at the beginning of August 2013.
CarCharging appears to have gained some momentum in the electric car market. In December the company announced progress in its joint initiative with Nissan, installing charging stations for Nissan’s Leaf at a marquee shopping center in Palo Alto, California. The mall serves families living in Silicon Valley. The company has also partnered with Standard Parking at a commercial facility on Constitution Avenue in Washington DC very near the U.S. Capital and the White House. While it is not likely the President is very worried about charging locations, making a good impression on Congressional decision makers and their staff has to be helpful.
There is more change on the road ahead for CarCharging. In October 2013, it won the bid for Ecototality’s Blink car charging network. This the second time in as many years that CarCharging has scooped up the assets of a defunct electric vehicle charging service provider. It also acquired the assets of 350Green after that charging operation failed. CarCharging reportedly paid $3.3 million for the Ecototality assets, including over 12,000 installed electric vehicle charging stations, a number of 110 DC Fast charging stations and the Blink network. The deal dramatically expands CarCharging’s footprint, but also complicates the company’s financial profile.
Expect more acquisitions in the future - and more financial complications. In 2013, CarCharging also acquired Beam Charging, an independent car charging serve that caters to parking garages in the New York Metro area. So far the company has kept the Beam branding. In the future it seems plausible that CarCharging will continue rolling up small, independent service providers that are pioneering electric car charging services. There could be efficiencies in uniting them under one brand and marketing campaign.
Consequently, an investment in CarCharging will require some work by investors beyond simply reading the headlines and checking earnings (or loss) per share. Then it will be a matter of how much risk an investor is willing to assume in an unproven business model.
Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries.
Neither the author of the Small Cap
Strategist web log,
Crystal Equity Research nor its affiliates have a beneficial
interest in the companies mentioned herein.
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