Beam Global

Good afternoon, and welcome to the BEAM Global first quarter 2022 financial results and corporate update conference call. All participants will be in 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 one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Kathy McDermott, Chief Financial Officer. Please go ahead.

Thank you. Good afternoon, and thank you for participating in BEAM Global's conference call for the first quarter of 2022. We appreciate your time today 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 25th, 2022. Except as required by law, BEAM disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. Next, I would like to provide an overview of our financial results for BEAM's first quarter ended March 31st, 2022. In March 2022, we're excited to say that the company closed on its purchase of all cell technologies. The addition of energy storage solutions to our EV charging products is a great partnership with many synergies from a sales and manufacturing standpoint. Because this was an asset purchase, the first quarter of 2022 financial statements include the energy storage business from March 4th closing date through March 31st, 2022. It is not included in the prior year comparison. For the first quarter of 2022, we reported revenues of $3.8 million, 175% increase over $1.4 million reported for the first quarter of 2021. This was the highest revenue quarter in the company's history in a first quarter that is typically lower in revenues. The quarter includes $0.4 million for the energy storage business. Our sales to state agencies and municipalities continue to be our primary market at 69% of total revenues. We also increased our revenues to federal customers based on our increased investment in sales resources and consultants in the federal space. We also saw growth in the enterprise business segment as employees are heading back to the office and looking for EV charging. Gross loss in the quarter and March 31st, 2022 was 0.3 million compared to 0.1 million for the same period in 2021. The gross loss improved by three percentage points compared to the prior year. as a result of the increased production volume resulting in favorable fixed overhead absorption and improved labor efficiencies in utilization. These savings were partially offset by higher material costs for steel and other components due to supply chain shortages and other inflationary pressures. Operating expenses were $2 million for Q1 2022 compared to $1.1 million for Q1 2021. The increases were primarily due to the addition of off-sale expenses for March increased investment in sales and marketing to support revenue growth, and also increased legal and accounting services partially due to the acquisition. The net loss was $2.3 million, or $0.24 per share, for the first quarter of 2022, compared to $1.3 million, or $0.14 per share, for the first quarter of 2021. At March 31, 2022, we had cash of $19.2 million, compared to $21.9 million at December 31st, 2021. The cash decrease was primarily from operating activities and the cash payment for working capital for the purchase of AllSell. Our working capital decreased from $24.6 million at December 31st, 2021 to $21.8 million at March 31st, 2021. 22, excuse me. I will now turn the call over to Desmond to provide a business update.

Well, thank you, Cathy, and thank you to all of you who are listening and who support Beam Global. I'm speaking to you today from the AC Wainwright conferences in Miami, Florida, where I've spent the last few days meeting with the investment community. So my apologies in advance for any outside noises. It's not easy for me to control the environment here, but I'll push through whatever challenges come my way like I always do. 2021 was a year of records for Beam. record revenues, record product deliveries, and record sales. We're continuing that record-breaking streak as we head into 2022 with a new record for quarterly revenues of 3.8 million, up from 1.4 in the first quarter of 2021 and up from 3.4 million in the fourth quarter of last year. Product deliveries in Q1 of 2022 were 250% of what they were in the same period last year. Now, this is a metric which tells us much more of a story than perhaps might first meet the eye, because Q1 has often been a fairly weak quarter for us. Not surprisingly, in the past, we've crammed all the revenue we can into the fourth quarter to hit full-year results, and that's typically left us in a position of starting the new year with low or no backlog sometimes. We certainly did cram a lot of revenue into the fourth quarter of 2021, and it was, in fact, until now, the best quarter in our history. But because our sales growth was so strong in 2021, particularly towards the end of the year, we did not exhaust our backlog even during that record-breaking quarter. On the contrary, we entered 2022 with the strongest combination of pipeline and backlog we have ever had. We also entered the year much better able to deliver on that backlog because of the excellent efforts of our operations and engineering teams in increasing our efficiency and ability to output products. These combined factors enabled us to make Q1 of 2022 far from being a weak quarter, as historically been the case, rather the best quarter in our history with the highest revenues. That increase in revenues and deliveries continued another set of trends that we put in motion during 2021. Our relentless efforts to manage costs and to extract value from every facet of our business and the vendors and partners who support us continued to pay off in Q1 of 2022. You'd have to be in a coma to have missed the impact of inflation across the economy and across the globe. It seems as if everything is getting more expensive, and our observation is that that has been the case during the last several quarters. Our cost structure was impacted in Q1 by increasing costs of inventory, which we encountered during the second half of 2021, and also into the first quarter of this year. Those cost increases span the great variety of materials and components which we integrate into our end products. Steel, aluminum, copper, battery cells, semiconductors, and even mundane items like plasters and plastic parts all came with increased costs. Shipping, a very large cost component of our business, was impacted by higher diesel rates for our internal transportation resources and also by increased third-party transportation costs, which are no doubt being impacted by the same influences we're seeing. And yet, in the face of all these rising costs, which are outside of our control, we actually had a further 3% improvement in our gross profitability as a result of managing what was within our control. Our teams ground 3% of our cost structure while everybody else's costs are going up. Cost per unit structure, I should be really specific on that. And I've been reporting for some time that as our volumes increase, we'd see a reduced impact from fixed overheads. I've also reported that labor cost per unit would come down as our production cadence increased. Well, the numbers make reality out of my projections. We've seen at least a 10% increase in our BOM costs during the COVID and inflation period, and yet we've reduced our overall cost per unit produced. Combining the 10% increase in bond costs with our 3% improvement to gross margins means that actually the Beam teams had about a 13% impact on cost per unit reductions through internal actions. And take note that the cost reductions we've caused to happen do not yet include the significant reductions in costs we anticipate as a result of integrating our own new battery solutions onto our products instead of using third-party solutions, as we're still doing. Those further savings are in our very near future. By the way, we share the opinion of many experts that pricing stability should return this year. And as a result of that externality and our own internal ongoing cost management efforts, we anticipate further improvements to gross profitability as the year rolls on and as our volumes increase. And we certainly do expect volumes to increase. At the moment, our pipeline is well over $100 million. Adding our new battery company pipeline to that number takes it up significantly higher. We're seeing new and material opportunities from both government and enterprise. We've received purchase orders for our products from internationally recognized corporations, and we continue to advance opportunities for our Driving on Sunshine sponsored network from similarly recognizable corporate BMOs. On the government side of the business, we continue to receive orders from municipal, county, state, and federal entities. We recently announced that we've been awarded a blanket purchase agreement from the federal government. This enhancement to our previously announced General Services Administration contract will make it even easier for federal entities to buy our products at a time when their requirements are rapidly increasing and the urgency around EV charging infrastructure is picking up steam. Many federal agencies will be taking delivery of electric vehicles in the fourth quarter of 2022 as part of the administration's requirement to move away from gasoline and diesel. There is, as yet, not enough charging for those vehicles. Time-consuming permitting, construction, and electrical work make it very difficult to install traditional grid-tied infrastructure on such a short timeframe. And the lack of available grid circuit capacity in many of the intended EV charging locations is daily coming to light. It's also important to remember how important resiliency will be to these government vehicles, and for all EVs, for that matter. Our product's ability to continue to charge vehicles during blackouts and other utility grid failures is an increasingly important selling differentiator for us. Note that many other EV charging companies are starting to add energy storage to their installations, something we've been doing for decades. But theirs rely on the grid to recharge their batteries. Ours do not. Lease operators get that, and as they become more reliant on EVs, they're becoming less forgiving of EV charging infrastructure that's only as reliable as the grid to which it's connected. Of course, these circumstances are what Beam Global's products address in a unique and well-protected manner. Urgency is music to our ears. Lack of utility grid capacity, while it's alarming, is a key ingredient to our success, and it is very real. Resiliency and the importance of maintaining vital fueling infrastructure during disasters is just what we do. In fact, many of the critical cornerstones of our business strategy over the last many years, cornerstones which previously were not recognized broadly, are now becoming central issues at both a local and national level. I believe we're firmly in the lead when it comes to addressing these challenges, and so it seems to our increasingly large portfolio of customers. If you're looking for proof of how mainstream and recognized our products are becoming, you need look no further than the front cover of the Federal Highway Administration's NEVI, or National Electric Vehicle Infrastructure Program Guidance Document. This document offers program guidance on how the $7.5 billion slated for EV charging infrastructure should be allocated by the states and other agencies who will spend the money. The document only contains one image. It's a photograph, and it's on the front cover, and it's of our EV arc systems providing DC fast charging at a rest area in California. That's right. Our products are the only products pictured in the spending guidance document. Google it. It's a nice picture. Further recognition at the federal level came when Congressman Peters recently named us and our products specifically during a televised House Energy and Commerce hearing. saying that being global is creating the sort of innovative products that will be essential to transportation and energy in the future. The essential nature of our products find yet another new opportunity to shine this quarter when the Marine Corps and others used it for a wildfire fighting exercise in California. Who would have thought of that when first looking at being global? There are just so many areas where reliable power that does not rely on liquid fuels or the utility grid is essential. More and more agencies and corporations are looking to Beam Global to provide that power. Two or three weeks ago, I was with a new, very large corporate customer. The person I met with has responsibility for around 500 buildings in the company's network. She's done an excellent job of installing grid tile charging at many of those locations. And yet, there I was meeting with her. And she told me that, and I quote, we saved her ass. It turns out that she needs more charging in those locations and has been informed that there's not sufficient grid capacity on her properties to add more chargers, but she needs them, so she's turned to us. Our EV Arc product is solving her problem. Now, I've been commenting on this future certainty for many years, and now that future is here. Just think of all the buildings across the U.S. which have tapped their capacity and will need more charging in the future. The opportunity for second wave deployments for us is fantastic. Solving for all those people who used up their grid capacity in the first waves of EV charging deployments that they did in the traditional grid type method. I'm very happy to solve that problem for them because they will need more chargers after they run out of circuit than they needed when they used up what was available to them. By the way, I just took delivery of a brand new Rivian R1T pickup truck this week. I think I made the down payment about two years ago, and I can tell you it was worth the wait. Not to 60 in three seconds in a pickup truck. You have to experience it to believe it. And when you do, you will be certain of one thing. EVs are going to own the future, and they're going to do it a lot sooner than many anticipate. That means that there'll be a whole lot of demand for our products because the EVs will come a lot faster than the grid upgrades. And I believe we'll see many more customers, like the one I just described to you, who need charging but don't have available circuits. Lots and lots of new customers with urgent needs. And while we're getting a lot of new attention and orders from entities with whom we've not done business in the past, we're still providing solutions for some of our excellent current and past customers. just about the best endorsement of a product you can get. For example, the state of California's Department of General Services, who last year gave us the biggest order we've received in our history, so far that is, continues to order meaningful volumes of our EVR product. We recently received purchase orders for 23 more units to be delivered in the coming months. The combination of year-to-date revenue, booked backlog, record high pipeline and the integration of new revenues and pipeline from our battery business are setting 2022 up to be an excellent year and a launch pad for many more excellent years thereafter. We're advising our customers to get their orders in as soon as possible, especially large orders, so that we can get them into our increasingly crowded order queue. Our acquisition of AllSelf Technologies, which closed on March 4th, 2022, is moving through its integration stage of evolution. Beam Global's energy storage business has already made significant sales, like the $2.3 million order we received shortly after closing the transaction. This is adding to our backlog in revenue, and we're delivering orders on those orders today. We're also in the final stages, and I'm very excited about this, of development of a new Beam Pack battery solution for our EVR products, which will be integrated into all EVRs soon. We expect the first EV arcs to leave our San Diego factory with beam packs in them as early as the beginning of June. The packs are being manufactured in our Chicago facility. I've seen them, and I'm delighted with their quality, ability to scale, and also, crucially, cost. Because remember, bringing down the cost of batteries will have a significant impact on bringing down our overall cost per unit. Battery supply chains are under a lot of pressure at the moment. During the last few months, we've seen cost increases for battery cells for the first time in over the 10 years that I've been involved in this industry. There are further cost increases to come before we return to what the entire industry expects, a prolonged and inexorable lowering of battery cell prices. These are extraordinary times indeed. Had we not made this acquisition, it's quite possible that we would not have received sufficient batteries to fulfill our charging business's requirements. But we did make the acquisition, and we're now about to backfill shortages elsewhere with our own superior product and at a lower cost. I'm delighted. Even the first generation of packs that we're producing are costing us less than we were paying for externally sourced product. But I believe the cost-cutting journey for battery storage is only just beginning. Our engineers and scientists on both the charging and the storage side of the business are working together to engineer battery solutions which are ideal for our products and at significantly lower costs than the more generic packs we've been using to date. There's never been a more important time to take control of battery supply chains. And while we still see cost increases on commodity cells, steel, conductors, and other components used in making these battery packs, we're confident that we can continue to reduce the cost contributions to our charging products. Remember that batteries constitute not far off one-third of our bill of materials, so any cost savings we can achieve in this area will be meaningful to our overall cost model. Beyond that, we're very excited by the other areas of our battery business and by the opportunities which we see. The world is increasingly electrifying, and the move to untethered, battery-powered products is plain for anyone to see. We intend to advance our technology leadership and thermal management, safety, energy density, and data so that our batteries offer the best, safest, and most connected solution for an increasing universe of customers. Being able to provide safety from thermal runaway, that's fires and explosion for those of us who are not experts, and also superior level of data connectivity at the battery level will, I believe, be significant differentiators for us. Energy density, long life, safety, and telemetry are key ingredients to successful battery integration. And we've demonstrated abilities in each area today and a roadmap of developments which will soon further enhance our leadership in these important opportunities. So to sum up, we remain well capitalized. We have no debt. We have record revenues, record product deliveries, record backlog and pipeline of opportunities. We're cutting our costs even in the face of historically high inflation and we're increasing our throughput and efficiency. We uniquely have a battery storage solution, which is central to our own products and the products of our battery-only customers. We've diversified our revenue opportunities whilst defending our most critical supply chain. And we've positioned ourselves to take advantage of the unprecedented spending in EV charging, energy security, and carbon reduction efforts that are taking place at both governmental and enterprise levels. Business is never without challenges, but I can tell you that thanks to the efforts and dedication of the Beam team, ours is going according to plan. From my point of view, Beam Global has never been better positioned with so many growing opportunities and an improved ability to execute on them. It's a great time to be on the Beam team. Thank you for your attention, and I'll now return the call to the operator and answer any questions you may have. Operator?