Beam Global

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. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. 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. I would now like to turn the call over to Kathy McDermott, CFO of BEAM Global. Please go ahead.

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 21, 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 shipped 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 31st, 2021, our contracted backlog was approximately 1.2 million. Gross loss in the quarter ended March 31st, 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 was due to an increase in non-cash compensation expense for stock option expense, investing of director shares, increased sales headcount to support revenue growth and increased R&D headcount to help reduce product costs and for product development. The net loss was $1,250,809 for the first quarter of 2021 compared to $942,521 for the first quarter of 2020 due to the increase in growth loss and increased operating expenses. At March 31st, 2021, we had cash of $28,214,029 compared to $26,702,804 at December 31st, 2020. The increase was primarily due to the exercise of warrants, partially offset by operating cash usage. Our working capital also increased to $29,507,478 at March 31st, 2021. I will now turn the call over to Desmond to provide a business update. Desmond?

Thank you, Cathy, and thanks to everybody else for joining us today and for your continued support. of and interest in being 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 delaying this call and 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 Cathy for her tireless efforts in always producing accurate reporting. which has only ever been described by our auditors as of the highest quality. For the last decade or so, we've used Solberg & Co as our 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 our 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 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 reached comfort that that is in fact the case and have as a result filed 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. We currently have over $5 million of contracted backlog, all of which we expect to convert to revenue in 2021. And most of it should deliver before the end of Q3. Combining backlog with our Q1 revenue of 1.3 million puts us in the position of knowing that we'll exceed 2020 revenues in 2021. while still having more than half of the year left to sell. This at a time when we have a growing pipeline and many indicators that our opportunities are both increasing and accelerating in velocity. Those of you who were on the last call will no doubt remember me saying that we were just days away from winning the biggest order in our history. Of course, at that time, I didn't say exactly how many days, but I think most of you know me well enough now to realize that I didn't expect it to be quite this many. At any rate, it did happen, a little later than I expected, but it happened. We received an order for 52 units from California's Department of General Services, with whom we've had a contract in place for several years. This will add to all the other units that we've delivered to DGS and many other California government departments. It's an order that's broken down into 27 separate purchase orders, each of which is directed at a different government office, hence perhaps at least some of the delay. Absent situations beyond our control, we anticipate delivering these 52 units before the close of the third quarter. There are several useful indications to take from this order. First and foremost, it is in a way descriptive of our broader business. It's not and was never a question of if it would happen. It was just a question of when. Everyone involved from our side and from the customer side could see that the order was coming, but none of us could put an exact date on when we would receive it. As I look at the markets we approach, the convergence of clean energy and transportation, I don't think anyone anymore questions if it will happen. The only questions I see now and even the most skeptical press is when will it happen? The shift to this future is, if anything, accelerating and we are well positioned to take advantage of it. This order is a pretty good indicator that that future is rapidly upon us. Many of you will have seen President Joe Biden test driving Ford's magnificent new F-150 Lightning last week. The Ford F-150 has been described as the most popular consumer product in history. It's the top selling vehicle in the United States and has been the top selling pickup truck for 42 years in a row. but this new Ford F-150 is similar only to the old gas and diesel models in that it can carry and tow just as much as they could. As President Biden discovered when he drove it, as soon as you press the accelerator pedal, you find out how very different it is from the previous models. To quote the president, this sucker is really quick. In fact, the F-150 Lightning accelerates from naught to 60 in about four seconds. Compare this to the gasoline and diesel models which take twice the time to reach 60 miles per hour. I think that the president's use of language and indeed the vehicle that he was driving described a significant shift in the future consumer relationship with electric vehicles. Until now, they've been largely viewed by the broader public as the domain of elitist in Teslas and tree huggers in cars like the Nissan Leaf. What Americans really want are pickup trucks and SUVs, and this year and next, they'll be served up with a whole portfolio of what are simply the best vehicles they've ever had the opportunity to drive. The F-150 will be joined this year by other new entrants like the Rivian and Lordstown's Endurance, and GM has, of course, famously announced the impending arrival of the 1,000 horsepower all-electric Hummer SUV, which has an insane 11,500 foot pounds of torque and will be not to 60 in three seconds. And there'll be plenty of other models to choose from too. Just about every major auto manufacturer, foreign and domestic, has a portfolio of electric vehicles which are either in production or soon will be. The two things all these vehicles have in common is that they're either far superior to the diesel and gasoline vehicles currently produced and most importantly for us, they will all need a place to charge. It won't be at home because most people don't live in homes that can support EV charging and it won't all be tied to the grid because the grid doesn't have capacity to support it all. And anyway, it takes time and money and disruption to connect chargers to the grid. Consumers are too impatient to wait for that sort of thing. What's needed is a rapidly deployed product which could supply the charging that they need where they were already going without disruptive construction and electrical projects. Beam Global is, as far as we know, the only company offering such a product. And of course, we have very good intellectual property protection. One very cool recent addition to the EV lineup is the Jeep 4xe, another product that moves EVs from the edge and places them firmly at the center of consumer interest. Just imagine how fantastic it will be to go four-wheel driving in the wilderness in an electric vehicle. The torque, acceleration, and ability to control each of the driving wheels will make these new off-road vehicles must-haves. of course it won't be easy to deliver grid circuits to wilderness areas and that's probably why Jeep selected the world's best rapidly deployed off-grid renewably energized electric vehicle charging infrastructure product. Take a look online and pull up some of the fantastic images of our EVR product with a very attractive Jeep branding package. Certainly one of the most interesting developments that I've seen in the automotive industry is Jeep's selection of Electrify America to provide and manage their EV charging infrastructure. Electrify America is of course a Volkswagen company and I just don't recall ever seeing another instance where one car company has engaged another car company to provide and manage fueling infrastructure for them. This is a powerful indication of the revolutionary new business models which are going to develop along with the revolutionary technology of electrified vehicles. BEAM is very well positioned to take advantage of these new business models. We are of course delighted that Jeep selected our product and we're also very happy to continue to advance our existing relationship with Electrify America for whom we've already deployed EV art products to support their electric vehicle chargers throughout Central California. Electrify America seems to be doing a very good job of evolving beyond their initial incarnation and we really look forward to continuing to support their infrastructural requirements as they grow. So far there's been a great deal of talk about government tailwinds within the EV industry and it's certainly true that a significant amount of activity around EVs and EV charging infrastructure has been driven by government activity. Governor Newsom in California has announced the banning of internal combustion engine vehicle sales from 2035. There's nothing controversial about this move and in fact it's quite an astute and safe political step to take because, and I'm sure Governor Newsom knows this, by 2035 Californian consumers will not be able to buy anything but electric vehicles anyway because internal combustion engine vehicles by that time will have been banned across most of Europe and it's simply not possible for car manufacturers to make one set of vehicles for the United States and a completely different set of vehicles for Europe and the rest of the world. Governor Newsom's announcement is bold and seems fraught with risk, but in fact, I think that his mandate will not be required because the industry and the consumer will deliver on its requirements before it comes into effect. California is not alone. The state of Washington has one-upped us with a ban on the sale of internal combustion engine vehicles starting in 2030. And there are several other states with similar bans in the works. But again, I don't believe that they will be necessary because I think the consumer and the industry will make the change before the bans come into effect, at least in all the outlier cases. At the federal level, we now have President Biden's commitment to electrify the federal fleet of 645,000 vehicles. The federal government is the single largest consumer of gasoline in the world by far and will become the single largest electric fleet operator in the world. President Biden has also announced his intention to deploy half a million publicly available EV charging stations on America's highways in the next few years. Perfect fertile ground for our products. In June of this year, we'll be taking part in the Electric Mobility Symposium at Marine Corps Air Station Miramar. There'll be a fantastic selection of electric vehicles both manned and unmanned at that event. The Marine Corps, like all branches of the US military, is working hard to decarbonize and wean itself off the terribly expensive, both in terms of money and human lives, reliance upon liquid fuels. Our EVR product will be prominent throughout the symposium, charging all types of electric vehicles, and will also be demonstrating its transportability on our arc mobility trailer and its rapid deployment capability. Everything about the EVR, its autonomy, its transportability, its rapid deployment, makes it an excellent choice for the future warfighter and their fueling requirements for the fantastic array of electric tactical vehicles which are coming. Interestingly, the Marine Corps, like many other fleet operators, probably every other fleet operator, starting to recognize that internal combustion engine vehicles are increasingly becoming a liability. They recognize that as manufacturers move to electric portfolios, it will become harder and harder to source spare parts and service for internal combustion engine vehicles. So it's not just about decarbonizing or about reducing reliance on liquid fuels. It's also about their recognition that there's an end coming to the era of the internal combustion engine vehicle and that they need to be in front of that process, not behind it. We intend to help them. All of these moves towards electrification, whether they be at the federal, state, or the municipal government level, or driven by enterprise or consumers, have one thing in common. They all require a significant and rapid increase in the availability of electric vehicle charging infrastructure. Beam Global produces the fastest deployed, most scalable, most robust and lowest total cost of ownership EV charging infrastructure solution available in the world today. We support all the major brands of EV charging products and service providers behind them. Our products are immune to blackouts, provide energy security and are clean and green and made in America. Sounds like a winning combination to me. The California order, the way it was placed and the reasons behind it is not, in my opinion, anomalous. I believe that this is an indication that for all the reasons mentioned above, we're going to see a significant increase in the need for rapidly deployed and resilient off-grid EV charging infrastructure. It also signals a recognition on the part of government that a significant percentage of our future fueling infrastructure must be independent with locally generated and locally stored electricity if we're to defend ourselves from a catastrophic failure in the fueling system caused by a grid failure. Of course, this is exactly what our products are designed to do. And this is exactly the sort of evolution of thinking that has formed the basis of much of our investment thesis over the years. I fielded some questions about California and New York and the apparent inactivity with those customers during 2020. Actually, we've never stopped receiving orders from the California contract. And while New York had other things on their mind during 2020, we've recently received an order from them for our new EVR 2020 product. They look forward to seeing the floodproof unit, having had years of service from our previous excellent but not floodproof models. California's Governor Newsom has committed over a billion dollars to the electrification of transportation. California has also just become the first state in the U.S. that will require rideshare operators such as Uber and Lyft to transition from gasoline to electric vehicles in their networks by the end of the decade. I think it's very obvious that there will be a requirement for a significant increase in the availability of public EV charting infrastructure and at a pace which far exceeds anything that we've seen during the last decade. We have the fastest deployed, most scalable, most robust EV charting infrastructure solution available today. And this most recent order from the state of California demonstrates that they recognize the value of our products and the resilient, clean, off-grid, locally generated, locally stored electricity which they deliver. Interestingly, and tellingly I think, The funding for this latest acquisition came from California's Office of Emergency Services. With around 20 million cars on California's roads, there will be a requirement for several million publicly available EV chargers and a huge increase in capacity in the delivery of electricity. I believe that we're ideally positioned to play a very significant role in delivering this increasing capacity in a rapidly deployed and highly scalable manner. It surely is not a coincidence that California has renewed our contract and increased its scope to include more of our products and also to make it available to any other government entity which wants to use it. Two weeks ago, I spent several days in Washington, D.C. with our new lobbying consultant. This new consultant is very well known and very well thought of in Washington, D.C., forms part of our increased investment in government relations, which I've committed to over the last year. We now have one full-time employee the Washington-based lobbying firm I just mentioned, and also another consultant who helps us identify funds which our customers can use to buy our products. I believe that this investment in government relations cannot be better timed. Our full-time employee, Brad Grotus, has already secured meaningful changes in both state and federal rules which now ensure that our solution is both recognized and eligible for important programs and funding. Our funding consultant has joined me on several webinars in which we demonstrate our products and then show various funding resources available to help our customers pay for them. We've realized additional sales as a direct result of these efforts. It's early days with our DC lobbyists, but my first trip to DC demonstrated to me that they are indeed well connected and very supportive of our efforts. Over the next few weeks, I will be meeting with high level staff on house energy and commerce, house transportation and infrastructure, Senate Environment and Public Works and Senate Finance. Although we sold a lot of products to various government agencies over the years, we've historically not aggressively focused on receiving funding from any arm of the government. Moving forward, we will make sure that our important contribution to the electrification of transportation and to energy security is not missed by any arm of government and that we're supported and have access to an equal playing field and that we're recognized as the leaders that we are. While in Washington, D.C., I had several fruitful meetings with members of the federal government and find them to be very much in support of what we're doing. And why wouldn't it be? It didn't hurt that I was there just as the Colonial Pipeline fiasco was shutting gas off the Northeast. It was easier than ever to speak about the value of fueling infrastructure that's independent and resilient. So it seems to be a cross-aisle agreement that infrastructure spending, particularly transportation infrastructure spending, is something that can be agreed upon in a bipartisan manner. Even the electrification of transportation no longer seems controversial or too political. And of course, energy security has always been a safe area for agreement. Finally, nobody in Washington thinks it's a bad idea to use American products to reach these worthy goals. In many ways, our products seem to be tailor-made to satisfy the aspirations of those who are engaged in deciding how stimulus and other infrastructure dollars will be spent. Certainly was a very good idea for us to spend eight months going through the rigorous vetting process necessary to finally be awarded a federal GSA contract which enables any federal agency to buy our products without having to go through a painstaking and lengthy process. We've already seen the fruits of this contract vehicle. We've now received several purchase orders through it and we believe that many more are coming. In fact, in the first quarter we received a purchase order from a federally funded entity who's bought from us several times before. The difference in the experience was not trivial. Whilst in the past conditions had to be just right and a good deal of work had to go into receiving orders from this entity, this time it was a simple, quick, painless process. A very good harbinger for what is, I believe, to come. We were involved in a couple of excellent press events during the first quarter and since. San Diego's new mayor, Todd Gloria, cut the ribbon and spoke at a press conference, which I was honored also to be invited to speak at, and which took place in front of two of our EV Arc products recently purchased by the city of San Diego. Each of those EVOX systems was charging five Chevrolet Bolts, also recently purchased by the city, as part of their ongoing plan to electrify their entire fleet. This was an excellent opportunity for us to demonstrate our product's ability to charge multiple vehicles and deliver to them all of the daily range replenishment they require from a single parking space-based product. San Diego has ambitious plans and an ambitious climate action plan, and we're delighted that this new administration is so enthusiastic about our products. We look forward to providing them with much more EV charging infrastructure and energy security. Later, I found myself in Kansas City to join the mayor of the city of Olathe to do a ribbon cutting and press event there, introducing six EV arc systems, which they've recently deployed. I think it's fair to say that San Diego and Olathe, Kansas are about as different as any two cities in one nation could be. And yet the EV arc product fits equally well in both their requirements. There are about 19,000 municipalities in the United States. EBR is currently deployed in over 100 of them. Our pipeline, which is larger than it's been at any time in our history, leads me to believe that we'll make eight roads into the other 18,000 and some at an accelerating pace in the coming periods. And it's not just municipalities who are benefiting from our products. We just announced that for the first time, the entertainment industry, in the form of one of the world's best known and best loved brands, has for the first time started to use our product to provide electric vehicle charging and Clean Energy on the set of one of their new productions. We delivered for the first time the Forest Service and also placed EV Arc in our nation's capital, Washington, DC. Again, these deployments demonstrate the fantastic variety of different opportunities Beam Global addresses. When considering our total addressable market, one can genuinely say that it's equal to all other EV charging companies TAM's put together. and all charging scenarios, whether they be for sedans, medium duty, heavy duty or even for aircraft and other electric transportation solutions. All of these new opportunities and anticipated growth are focusing our attentions on our ability to scale our production and to improve our gross profit. There's no question that volume will be the single largest contributor to our improved gross profits. as we spread the overhead costs in our facilities which has room for 20 times growth across a larger number of products. We're in the process of making improvements to our factory facility which we believe will make us much more efficient. Increased efficiency will mean an increased ability to throughput product as well at the same time reducing risk and increasing quality and of course and importantly reducing cost. I've mentioned many times before that other factors will contribute to cost reduction. such as the decline in the price of batteries and solar modules and other components which we integrate into our products. These inputs are outside of our control, unfortunately, but they do not require any investment from us. We're also concentrating heavily on things that we do control. The engineering team is working tirelessly to make changes to both our EV arc product and our solar tree, which we believe will increase its quality and reduce the cost to produce it. During the first quarter, we were able to announce a 12% increase in energy delivered from our EVR product. 12% increase in energy means 12% increase in the miles delivered to our EV driving users. These increases in energy delivery came about as a result of the fantastic efforts of our engineering team. We're currently deploying our solar tree product to power full-size buses in the state of California. and the engineering team has been similarly engaged in making sure that we're taking the steps required to improve our efficiencies and reduce our costs with that important product set. As a result of this focus, we're not currently committing time or resources to producing our patented EV standard product. However, we believe more than ever that the EV standard is a vital solution to one of EV charging industry's greatest challenges, curbside charging. And as such, will provide a significant revenue source for us in the future. Our current engineering roadmap and plans include focusing on the EV standard in the second half of 2021. Another major initiative that deserves mention is, of course, our Driving on Sunshine program. The process of attracting sponsors to this opportunity is thoroughly underway. Updates on this are sort of binary in nature, nothing to report until we have a sponsor signed up. I can tell you that we and our partners are thoroughly engaged in this, and I remain as confident as I've ever been that we will get a sponsor. It's a process, not an event. It takes longer than I want it to. I'm a very impatient person and nothing happens as quickly as I want it to. A three minute egg takes too long in my book, but it's something that has never been done before and we're working with very large organizations. They have departments and processes and we have to work at their pace. Getting the city contract took longer than I anticipated, but we got it done. I'm sure the same will be the case with the sponsors. Finally, I'd like to welcome Nancy Floyd to our board of directors. We tragically lost Bob Schweitzer, who passed away during the first quarter. That was a dreadful event on every level. But if any silver lining existed on that dark cloud, it was that we were able to attract Nancy to our board. Look her up. She has a fantastic history of picking winners in the clean energy space. We're very lucky to have her on our board, and I'm bound to say she's very lucky to be on it. Welcome, Nancy. So to wrap up, we have an excellent backlog and pipeline position. We have sufficient revenues year to date and backlog to ensure that we will beat 2020 and we still have seven months left in the year. We have historically high levels of working capital and no debt. The EV industry is really kicking into gear and we're anticipating a post-vaccine acceleration of EV charging infrastructure across both government and enterprise. Our products are better than ever and we're working hard to improve close margins on all of our products. Again, volume solves all and it certainly looks as if volume is coming. We're going to have a busy and excellent 2021 and all the years beyond. Thank you for your time and attention. And I'll now hand it back to Kathy and take any questions that you may have. Please keep them brief and restrict yourself to a single follow-up as we want to make sure that everyone gets a chance. And in the event that I don't get to you, you can always follow up directly. Kathy?