Beam Global (BEEM) on Q1 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by. Good afternoon. And welcome to the Beam Global First Quarter 2021 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the call through August 22, 2021.
Kathy McDermott: Thank you, and good afternoon, and thank you everyone for participating in Beam Global’s conference call for the first quarter of 2021. We appreciate your time today and for joining us for this call. Joining me is Desmond Wheatley, President, CEO and Chairman of Beam. Desmond will be providing an update on the recent activities at Beam followed by a question-and-answer session. But first, I’d like to communicate to you that during this call, management will be making forward-looking statements, including statements that address Beam’s expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the Risk Factors described in Beam’s most recently filed Form 10-K and other periodic reports filed with the SEC. The content of this call contains time-sensitive information that is accurate only as of today, May 24, 2021. Except as required by law, Beam disclaims any obligation to publicly update or revise any information to reflect events or current circumstances that occur after this call. Next, I’d like to provide an overview of our financial results for Beam’s first quarter ended March 31, 2021. For the first quarter of 2021, we reported revenues of $1,372,392, a 4% increase over 1,317,052 reported for the first quarter of 2020. During the recent quarter we ship systems to municipalities, as well as into federal, academic, utility and enterprise business segments. We also provided an EV ARC system to Jeep, a Stellantis brand, and one to their partner Electrify America to support the launch of their project to provide renewable charging at off-road trailheads throughout the United States as part of Jeep’s 4xe charging network. As of March 31, 2021, our contracted backlog was approximately $1.2 million. Gross loss in the quarter ended March 31, 2021, was $149,120, compared to a gross loss of $39,641 for the same period in 2020. The increase in gross loss was primarily due to an increase in costs for the new EV ARC 2020 system that was launched at the end of 2019. We expect to reduce these costs over time and also improve our gross margins as we increase our production volume to improve our fixed overhead absorption and improve labor efficiencies. Operating expenses were $1,102,675 for Q1 2021, compared to $902,000 for Q1 2020. The increase in operating expenses would do -- was due to an increase in non-cash compensation expense, for stock option expense, investing of director shares, increase sales headcount to support revenue growth and increase R&D headcount to help reduce product costs and for product development.
Desmond Wheatley: Thank you, Kathy, and thanks to everybody else for joining us today and for your continued support of -- and interest in Beam Global. Before I get into comments about the quarter and the business in general, I want to thank you all for your patience and give you a brief explanation for our delaying this call on the release of our Q1 results. Let me start by making absolutely clear that there is and was nothing wrong with our financials. I want to congratulate and thank Kathy for her tireless efforts in always producing accurate reporting, which has only ever been described by our auditors as the highest quality. For the last decade or so, we do Solberg and close our audit -- auditors. Solberg did a great job for us, and as you’re aware, we have always filed on time and without controversy. This year, as a result of the significant growth which we hope to achieve and our position on a national exchange, we elected to engage RSM as auditor. This is the first quarter that they’ve been engaged. We’re a simple and easy to understand company with simple and easy to understand financials. Nevertheless, any public company is subject to complex and sometimes hard to interpret the SEC regulations. It took longer than any of us expected for RSM to ensure to their satisfaction and ours that all of our activities were in compliance with even the most arcane SEC requirements. We have together reach comfort that that is in fact the case and have as a result file today. It’s important for me to note that we did not make any material changes to our filings during this period of delay. It’s also important to note that we’re not late in filing our first quarter results. So again, thanks for your patience while we went through this. Now, my comments will be a little bit briefer than usual today, because of course, we just did our full year conference call about a month ago and there’s not been a great deal of change since that time. In fact, the really significant change is related to what is arguably the most important factor in our business contracted backlog and that’s a lot healthier than it was just a month ago.
Operator: And our first question comes from Amit Dayal with H.C. Wainwright. Please go ahead.
Amit Dayal: Hi, Desmond. Thank you for taking my questions.
Desmond Wheatley: Hi, Amit. How are you?
Amit Dayal: Just to begin with, the 52 ARCs that the California Government ordered. Is this part of the $5 million backlog or is this in different to the backlog number in guidance…
Desmond Wheatley: That is in backlog.
Amit Dayal: Okay. Understood.
Desmond Wheatley: Anything that we -- anything that’s contracted, we will describe as backlog.
Amit Dayal: Okay. Got it. Thank you for that clarification. And just one more follow-up from me. So your government orders continue to come through the outlook on that front remains pretty positive. Are there similar opportunities in your pipeline on the enterprise side, excluding sort of the media model where you could see orders for 50 units or 100 units at a time from enterprise type customers?
Desmond Wheatley: I think without a doubt I mean, certainly the Electrify America/Jeep thing that we’ve already discussed during this call, it’s a good example of enterprise spending and there are so many other similar opportunities like that in the pipeline. This quarter really was not at all about governments and I mean, I think, obviously, 2020 was a year during that which there is a lot of people who were not going to places of work and not doing very much of anything. And so COVID really had an impact on the enterprise deployment of EV charging infrastructure we certainly saw that. We had a year where we had record revenues in 2020 without essentially half of our opportunities bearing fruit for us because there wasn’t any workplace charging being deployed. However, we think that changes this year, post-vaccine second half, I think, you’ll see a big increase of return to work a lot of workplace EV charging will be required to support that. And then beyond that, with all these new fantastic models that I mentioned in my comments, they’re just going to be a giant requirement for EV charging infrastructure for consumers. In fact, I think it’s going to happen in a way that nobody is really probably anticipating and so I’m very bullish about enterprise. But we won’t turn our back on the government stuff.
Amit Dayal: Right. Of course not. Thank you. That’s all I have. Thank you.
Desmond Wheatley: Thank you, Amit.
Operator: The next question is from Tate Sullivan with Maxim Group. Please go ahead.
Tate Sullivan: Hi. Thank you, Desmond.
Desmond Wheatley: Hi, Tate.
Tate Sullivan: Hi. We’ll talk about the sponsorship opportunity you mentioned partners and the 10-Q noted in addition of a contracted industry expert. Can you just -- do you have multiple partners in addition to outdoor media or dedicated sales, can you just talk about that a little please?
Desmond Wheatley: Yeah. So we are not exclusive with anybody. I want to maintain that position, it’s basically it’s sort of like flag goal a 100 bucks. First one up wins it. But we definitely have engaged a group who does nothing at all but sell corporate sponsorships with a very particular focus on transportation. So they do -- they will have all the buses and trains and everything that you’ve seen with advertising on them. They also do stadiums, and just about any kind of those things you can imagine. So they have a -- what’s good about dealing with them is because they do nothing else this is firmly their area of expertise. They obviously have a very good Rolodex and a great history of making some unusual sponsorships work. I’m really happy to be working with them. I think the important thing to point out to everybody listening about them is although we cover their costs. They really don’t get paid any material amount of money unless they are successful. And so, I think, the takeaway from that is that here’s a group, who is an expert in this space does nothing with it and who is essentially willing to invest and moving this thing forward because they believe that it’s such an excellent opportunity. And while it’s new, a new makes it difficult, it’s new time when EV charging is just coming into its own and they believe and so do I that as soon as we are -- as soon as we start moving on this thing, it’s going to take off like wildfire.
Tate Sullivan: Thank you. Desmond. I’ll turn it back.
Desmond Wheatley: Thank you.
Operator: The next question is from Jacob Green with BTIG. Please go ahead.
Jacob Green: Thanks, Desmond. Good morning.
Desmond Wheatley: Hello, Jacob.
Jacob Green: So part of your sales this quarter, what you achieved in their Wrangler 4xe launch and Moab. And have you had any other conversations with any other OEMs, You talked about Ford in their Lightning about sponsorships and the point charges as a part of their rolling out of there, EV offerings.
Desmond Wheatley: Yeah. We have announced nothing and so there’s therefore nothing that I can say about that. But you can imagine, of course, that we believe that as more of these companies deliver more and more of the sort of product. Secondly, the kinds of products will be very, very popular with American consumers. We do also anticipate that those same consumers are going to be demanding infrastructure and we know that consumers are very impatient, they don’t like to wait for stuff and so we anticipate that that level of patients is going to be transmitted into the infrastructure space. As you know, it’s taking longer and getting more complicated everyday to deploy good site infrastructure between the permitting and construction and electrical work. So I think that we are an ideal solution for this sort of what I’m hoping at some point becomes panic buying as it were. When you’ve got lots of people buying F-150s and Hummers and all the other products that are coming out right now, they’re not going to go away around and they will not be forgiving of people tell them well, it takes a while to permit the stuff or to build or to do the electrical work. They’re going to say as a matter we want it right now and that’s what we are positioned to take advantage of. So I can’t go into any detail on that, but our target it’s not hard to figure out who our targets are.
Jacob Green: Sure. Great. And then just one more from me, just talking about your supply chain and having some other issues with other -- EV companies having some issues that their supply chains and batteries and modules, have you had any issues getting solar modules or batteries for your ARCs?
Desmond Wheatley: So far no. It’s something that we pay a lot of attention to obviously. We’re monitoring all the time. At the moment we have not had any those sorts of delays. I mean nothing material and we are at the moment not anticipating any of those sorts of delays. But we monitor it obviously.
Jacob Green: Okay. Great. Thanks. I’ll turn it back.
Desmond Wheatley: Thank you.
Operator: The next question is from Frank Hart with High Capital Funding. Please go ahead.
Frank Hart: Hello, Desmond and congratulations…
Desmond Wheatley: Hi, Frank.
Frank Hart: … on landing that big order finally.
Desmond Wheatley: Thank you.
Frank Hart: I have two quick questions for you in that regard. One, are you prepared for the avalanche of orders that you’re clearly going to get over the next year as a result of all of the mega trends and things that are going on and your being ready for it. Can your production facilities and financial capability handle it in your current facility?
Desmond Wheatley: That’s just a good question, Frank, and in a way I could say, I have been preparing this 10 -- we are preparing for this for 10 years. What I’ll tell you is we have a facility, which has room for 20x growth. We can get to about 2,200 units a year of our factoring facility moving from one shift five days a week which is where we currently are to three shifts, seven days a week one of them potentially dark or partially dark with automation. We are also in the process now of identifying sub-assemblies and components, which we can start to outsource for contract manufacturing. This will move us away from sort of laborious manufacturing processes that, frankly, we’re not set up to do and move those sorts of processes into highly automated environments and then our people will move from manufacturing to assembly. So single operator who today does one action will in the future opened 50 boxes a day for 50 similar actions. So I think we’re in good shape where that’s concerned. It’s also I never made a secret of the fact that I believe that will have to open a lot more of these even at 2,200 units a year, we’re not going to do anything to scratch the tip of the iceberg of demand, nothing nowhere near it. And so I believe we’ll have to open more of these sorts of factories. Fortunately the footprint is readily available across United States and even globally, and we’ve done the hard work of creating the IP figuring out how to make these things. Scaling this thing up now is going to be a question of cookie cutter and human resources will always be the most challenging aspect of that, but again, fortunately that really intellectually challenging stuff we’ve already done. So this will be a matter of finding good people to do the manufacturing and assembly as we move forward. And then I’ve also got aspirations to move into other markets as well as not just a U.S. opportunity it’s definitely a global opportunity. So you’ll see us certainly unconstrained a lot of time and effort right now looking at Europe, but it’s currently the largest EV market in the world, possible we might see expansion there before we do, so in the United States I don’t know yet, some of this will be driven by demand. And then just answer your question on money. We have more operating capital to be proud at any time in our history. I think anybody would agree we’re very good at managing money and spending it wisely. As I tell everybody, if it doesn’t make the product make the product better or sell the product, we don’t invest in it. That’s our mantra and that’s worked for us so far. So we have plenty of operating capital and no debt at all and that will put us in a position to do what we need to do to scale up. Don’t need to raise money at the moment. But I certainly would if it appeared to make a strategic sense to grow the business to help our existing shareholders.
Frank Hart: None of that is surprising because you’re always ready and ahead of the curve.
Desmond Wheatley: Thank you.
Frank Hart: And as a management CEO and head of your team, which is extraordinary. You are one of the finest CEOs I’ve had the pleasure of running into 40 years. And I can’t…
Desmond Wheatley: Thank you, Frank. Thank you very much.
Frank Hart: … tell you when I get out of watching you do this all day long every day, but I have one.
Desmond Wheatley: Thank you very much, Frank.
Frank Hart: … which is, well, sure, because it’s true. what’s the story and what is the risk to Beam Global of cash flows or others million mile batteries and what’s going on with that technology worldwide?
Desmond Wheatley: It’s great news for us. It’s great news for us anything at all the increase is the adoption of electric vehicles is great news for us. The key thing to understand about this Frank and everybody else is that it doesn’t matter how much capacity a battery has in it, you still have to put a certain amount of interest in the vehicle to prior the number of miles are going to drive. All electric vehicles get between 3.5 miles and 4 miles, Sudan’s get between 3.5 miles or 4 miles per kilowatt hour inclement environments. And whether or not they have huge and long lasting batteries or smaller batteries it won’t make any difference there fill up to charge the same amount and charging is the business that we are in. We are not in the business of selling batteries into cars or anything else. We are in the business of charging and all of those vehicles will require the same amount of charging regardless of how good their batteries are, so it’s nothing but good news for us.
Frank Hart: Great. Thanks.
Desmond Wheatley: Thank you for your questions.
Frank Hart: Sure.
Operator: The next question is from Vikram Bagri with Needham. Please go ahead.
Vikram Bagri: Good evening, everyone. Desmond I had a couple of quick questions, first off, is there a way to define how large the Jeep Stellantis opportunity, can be longer term where these EV ARCs are initially being placed and I know, I recognize, I’m asking a hard question. But is there any context, you can provide in terms of how many krill heads they plan to place, these EV ARC and we have plans to places EV ARCs in cities as well longer term?
Desmond Wheatley: I think that’s a sort of question that probably would be much easier answered by Stellantis and Electrify America then by me. And the truth is even if I knew I wouldn’t be able to say anything about it. But, look we think it’s an excellent product. We know there are lots and lots of location and it’s not just Jeep, there are lots of other companies making these new vehicles are going to be going off-road and everything else. There are lots and lots of locations around the country where they’re going to need EV charging and where the grid doesn’t exist. So we see all of them as opportunities. I’m not going to speak specifically about what Stellantis might be up to or anybody else for that matter. But I do think it’s pretty obvious, that there’s a huge opportunity here. And don’t forget, we have the only rapidly deployed, totally off bridge, infrastructure solution charges that supports antibodies electric vehicle charger and antibodies electric vehicle charging service. So as I said earlier, our time is all the EV charging companies times together because we support all of the good ones ourselves already and as we see more and more of these companies pushing into places where the grid doesn’t exist. We will definitely be there to support it with our patented products. But I don’t think it’s worth making too much of that, because that will still be an edge case. The simple fact of the matter is Wall Street Journal says they are somewhere between 500 million and 1.2 billion parking spaces in United States, a huge number of them are going to have EV chargers at them and our products are better for even just in a parking lot it turns out not that easy to get power even into our parking lot and so we’re going to be very well positioned for that. We’ll certainly take advantage of all the off-road stuff, but I think it will be a niche. And I definitely don’t want anyone thinking of us as a niche product because that’s not what we are, we are a solution that solves for everybody everywhere that we can see the sky.
Vikram Bagri: Great understood. And as I said I recognize it’s a hard question to answer, and it’s probably a better question for Stellantis and Jeep. But as a follow-up, I think you indicated in your prepared comments that the pipeline of orders remains extremely robust. Despite these large orders moving from pipeline to backlog space, that pipeline has replenished pretty impressively so, two questions on that front. One, it seemed like to replenish that pipeline rapidly, Despite these orders moving from pipeline to backlog there are probably larger orders in that pipeline. So can you comment on how large the on average these new orders are, if the size of orders has increased overtime this year versus last year? And two, you talked about EV Standard being launched at the back half of the year. Is there anything related to EV Standard in that project pipeline and/or in backlog, and if yes, could you talk about the performance of the EV Standard, the pricing on there, the margin expectations on there and how are you thinking about launching that product in back half of the year?
Desmond Wheatley: Okay so the second half of your question for us. There is no EV Standard opportunity in our pipeline at the moment. We’ve always been very conservative about this we build products we get them ready to go before we sell them to people and that’s where we are with EV Standard. So we have not included any EV Standard opportunities in the pipeline at the moment. I still believe that EV Standard could end up being our highest volume sale product, maybe by far. Just because of the nature of it and had the sort of city environment that fits into that curbside charging solution, but as of right now the pipeline doesn’t include that. To the first part of your question I definitely think that we’re seeing and it’s not just me sales team agrees saying that we’re seeing a shift from 1Zs, 2Zs that we’ve had in the past when people have dip their toe in the bath just to see if the product works and see if they can get an understanding of it. We’re now seeing that shifting away from 1Zs, 2Zs up to, is it 4Zs, 5Zs and then we believe that turns into 10Zs, 15Zs and 20Zs to 30Zs and so on so forth. So there is a general shift and it’s and it’s positive for us in terms of increasing sizes of opportunity is coming.
Vikram Bagri: Great, and thanks Desmond. That’s all I had. I’ll follow up offline for other questions, Thanks again.
Desmond Wheatley: Thank you. Thank you.
Operator: The next question is from Gabe Daoud with Cowen. Please go ahead.
Desmond Wheatley: Hi Gabe.
Gabe Daoud: Hi Desmond, how are you?
Desmond Wheatley: All right.
Gabe Daoud: Maybe just on the, I guess following up on the last question around the pipeline, I think last quarter you had indicated it was I guess $40 million, with a 70% conversion rate and the $9 million in agreements with the 70% to 99% conversion rate. And I’d imagine that maybe what those figures are lower. Now, just given that this quarter you just announced, but is there an update on those two figures.
Desmond Wheatley: Actually just looking at total pipeline and I don’t have it open in front of me at the moment. But looking at total pipeline, I watched total pipeline gather around $49 million for a little while there and then it finally poked its head above $50 million. I now is back down in the sort of $47 million range because of course we’ve added $5 million or so from taking $5 million or so out of pipeline and put it into backlog, but pipeline intends to be an increasingly good story for us and that’s just going along with the general trends that we’re seeing in the industry.
Gabe Daoud: Okay. Okay, great that’s helpful and then I’ll just maybe follow up on the margin side, understand that is production levels scale gross margin will follow. But I’m just curious I guess at what production level do you need to see at your San Diego facility to get to that 50% gross margin. Does the facility have to be completely maxed out at 2200 units or so or just trying to think about the progression there on the gross margin side?
Desmond Wheatley: It certainly does not have to be maxed out no, but the some of the gross profit, Some of that trajectory to that 50% gross profit will come in fact the big chunk of it will after we -- well after we reach a certain volume level. So, to the point where we can actually absorb the fixed overheads and pass that through gross profit to the bottom line a really big piece of this is going to come from reductions in cost of things like batteries and solar modules and other stuff. You follow the industry Gabe you know where this is going. We anticipate a further four or four reduction in our cost of batteries in the future. It’s hard to say exactly when that will take place, but all the industry experts are talking about battery prices coming down into the sort of $100 zone. We’re paying quite a lot more than that right now, but we anticipate taking advantage of those cost savings when they come. So it’s a combination of things. But no, we do not need to be operating at full capacity by any means to get to that that level. There were several we quite straightforward steps that we need to take to reduce our costs. Engineering is working on those at the moment. And then of course volume is a very big piece of it, because the fact it’s great to have a facility that’s capable of 20X growth, but it’s kind of an expensive piece of it overhead that offset people know but everybody will be bloody delighted when we’re using it.
Gabe Daoud: Great, thanks Desmond very helpful.
Desmond Wheatley: Thank you.
Operator: The next question is from Richard Batson, a Private Investor. Please go ahead.
Unidentified Analyst: Hey Desmond.
Desmond Wheatley: Hello Richard.
Unidentified Analyst: Hey, my question is, I know from being for me with your company for a few years there used to be you had to have around $10 million to $11 million in revenues to get to that breakeven of course. And it sounds like you might be profitable this next quarter but has it changed or is it still around that area?
Desmond Wheatley: First of all, we’re not forecasting profitability next quarter. Let me be absolutely clear about that, although of course we continue to work the warrants to do everything we can to execute on that. The number has gone up, Richard and the number has gone up for reasons, which have been very open about over the last several months and quarter. And that’s because we are now investing in lots of things that we think are really important for our growth. For example, government relations as I mentioned in our piece we’ve increased sales headcount, we’ve increased marketing spend. We’ve just brought in to the first time in our history government relations. These are increasing expenses but I’ll tell you what hasn’t changed. Our discipline our own money. We do not invest in anything that we don’t believe is in the best interest of the shareholders and that means driving growth of the company. And so our breakeven number will go up as we make these investments but of course, we believe that the increase in the breakeven number will be far more than overcome by the benefits brought about by making these investments.
Unidentified Analyst: Right, well, hopefully the price of batteries coming down will help offset that as well.
Desmond Wheatley: It’s a definitely will.
Unidentified Analyst: Okay, all right I appreciate it Desmond.
Desmond Wheatley: Thank you.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Desmond Wheatley, President, CEO and Chairman for any closing remarks.
Desmond Wheatley: Thank you, Bob. Thanks very much for your questions and thank you to everybody for your time and attention. Again appreciate your patience in this week of delay, don’t forget what I started out by saying, there was nothing to be read into that at all and we didn’t change anything in our filings. As a result of the weaker delay and again hats off to Kathy she worked very, very hard, and she produces a really good product. Beyond that, I’m just grateful to have all of you on Board and thank you for your support and I think this is going to be a great year for us and we are really looking forward it. So thank you.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
