Q2 2023 Beam Global Earnings Call

Speaker 1: Good day and welcome to the BEAM Global second quarter 2023 financial results and corporate update.

Speaker 1: All participants will be in a listen-only mode. And should you need any assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker 1: After today's presentation, there will be an opportunity to ask questions.

Speaker 1: To ask a question, you may press star then 1 on your touch tone phone.

Speaker 1: To withdraw a question, please press star then 2.

Speaker 1: I would now like to turn the conference over to Kathy McDermott, CFO . Please go ahead.

Speaker 2: Thanks, Joe. And good afternoon. Thank you for participating in Beam Global's 2023 Second Quarter Conference call.

Speaker 2: We appreciate you joining us today to hear an update on our business.

Speaker 2: Joining me is Desmond Wheatley, President, CEO , and Chairman of Being. Desmond will be providing an update on recent activities that Beams follow by a question and answer session.

Speaker 2: 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 visit our website at www.beams.gov.

Speaker 2: 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, August 14, 2023.

Speaker 2: 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.

Speaker 2: After the market closed today, the global issue depressed release and our form can cue announcing our first, our fiscal 2023 Q2 and year-to-date financial results.

Speaker 2: As you will see, we have an excellent quarter. In fact, the best in our history with material improvements across all financial metrics.

Speaker 2: Since you have the numbers in front of you, I will save you the time of rereading them to you.

Speaker 2: This press release and our Q2 form 10Q are available on our IR website and can also be accessed via SEC.gov.

Speaker 2: In addition, you will find the supplemental information deck on our IR website.

Speaker 2: And with that, I will turn the call over to Devon Wheaton.

Speaker 3: che.

Speaker 4: Thank you, Kathy. And thank you all for joining us today to hear this update on our operating activities for Q2 of 2023. Welcome everybody.

Speaker 4: The second quarter of 2023 is now the 10th quarter in a row of growth being global.

Speaker 4: But the BIM team is really not to out of the park for the last few quarters and especially this time.

Speaker 4: The production team produced and delivered over 200 EVRs this quarter. That's essentially the same as all the EVR systems produced and delivered in 2022. 2022 was by far and away of best full year of production and deliveries up to this point.

Speaker 4: In other words, the Beam Team is now on a cadence to produce and deliver as many or more EV auction a quarter than we've produced in any full year prior to 2023.

Speaker 4: On the energy storage side of our business, we continue to produce more than 10 times more kilowatt hours of batteries than our Chicago based team was producing before we acquired all cell in March of 2022. And Q2 energy storage revenues were higher than in any quarter since the acquisition.

Speaker 4: By the way, remember that we don't kind of internal use of batteries as revenue for that side of our business.

Speaker 4: This fantastic increase in production and deliveries, as of course resulted in an equally fantastic increase in revenue. The 17.8 million revenues were generated in Q2 represents a 379% increase over the same period prior year. And looking at the first half.

Speaker 4: We generated just 31 million revenues, which is about 312% increase over the full forest of 2022.

Speaker 4: As I've already said, we're producing about 10 times more kilowatt hours of batteries than all cell was before we acquired it. And we actually produce about six times more EVOx in the second quarter of 2022 than in the same period prior year.

Speaker 4: But our cost didn't increase at the same rate. We managed to squeeze all of this growth out of the same buildings. And while we're producing six and 10 times more product, we only increase our head count by about one and a half times.

Speaker 4: We increase our order over heads by even less.

Speaker 4: So with the same footprint and around one or not times more people, we've gone from just over seven million of revenue in the first off of 2022 to almost circa one million in the first off of 2023.

Speaker 4: All this increase in production has come from a variety of different factors and none of them were accidents. First of all, we're just better at what we do. The teams, both on the electric vehicle charting infrastructure, product side and also on the energy storage side, have really jelt.

Speaker 4: I love walking through the factory and watching them. There's clearly muscle memory.

Speaker 4: Things are moving more smoothly and people are getting a lot more done with a lot less effort.

Speaker 4: We put a great deal of time and effort into figuring out how we can do things more efficiently.

Speaker 4: The people that have been in their work, they know they're getting things done and working smarter, not harder, has made the factory environment safer too.

Speaker 4: The other part of walking the factory floor, which I love, is observing how different it looks.

Speaker 4: We've invested in a law of new tooling and fixuring which makes us much more efficient while substantially reducing the opportunity for errors.

Speaker 4: EVRs are rolling through the factory now faster, more smoothly, more safely, and in far greater volumes.

Speaker 4: We're already producing more product now than many thought was possible when we first moved into this facility. But the great news is, we still have a massive amount of opportunity for further improvements.

Speaker 4: It takes a lot of work, a lot of consideration, some trial and error, and it's a process, not an event, but the team keeps doing it and the evidence of the success of their efforts is clear to see in the numbers.

Speaker 4: I said we've invested in a lot of new tooling and pastry, but as any of you who've looked at our use of cash will have observed, we've not committed significant amounts of capital to these improvements.

Speaker 4: The fact is we've done most of the tooling and fixering ourselves.

Speaker 4: We have a talented and well-trained team, and no one is more qualified to make decisions about how to improve our manufacturing processes than the people who are actually making the products themselves.

Speaker 4: I have a corner office with a view of our driveway and the ingress and egress points from the factory.

Speaker 4: I'm often pleasantly distracted by watching the trucks rolling in, loaded with steel, batteries, electronics, solar modules, and all the other components and materials which are integrated into our products.

Speaker 4: While on the other side, I watched the trucks rolling out with completed EV arcs.

Speaker 4: The level of activity here is completely different than it was a few months ago, but here again, we know we can and will do so much more.

Speaker 4: I've improved production processes and efficiencies. They're important because they enable us to produce a lot more product faster at a time when the global demand for EV charging and the structure is accelerating dramatically.

Speaker 4: But they're also born because they contribute so meaningfully to our ability to control the cost and parts of our products.

Speaker 4: Last quarter, I told you that our engineering operations teams had identified improvements the way we make our products, which would result in significant reductions in our cost of goods sold, and as a result, significant improvements in our growth profits.

Speaker 4: I also told you that we believed that we were at or near the end of the hyperinflationary environment, which would be tackling for the last couple of years.

Speaker 4: Finally, I told you that as we increase the volumes of products running through our factory, the impacts of our fixed overheads would mess them while our labor costs for unit would come down.

Speaker 4: As it happens, we've so far only benefited from the last of those areas of cost reduction.

Speaker 4: The engineering and manufacturing improvement simplified identified are just now starting to impact us halfway into this third quarter, which is I think actually pretty much objective what I said during my last quarterly report.

Speaker 4: So we did not actually receive any cost reduction benefits in the quarter of a material nature from our improved engineering of the product.

Speaker 4: And while it's true that we're no longer seeing domestic increases in prices of components and commodities, we're just to see any significant decreases, though we do anticipate that this will happen during the coming months and quarters.

Speaker 4: In fact, we have the first time in our history are a full time purchasing manager to ensure that we're getting the most favorable pricing and the most efficient inventory leverage possible.

Speaker 4: In spite of not benefiting from these two areas of cost reduction, the Beam team were still able to improve our growth margins by over 12% when compared to the same period prior year.

Speaker 4: More or less, all of this margin improvement has come from increased overhead absorption and the increased efficiency in our labor, which I already described.

Speaker 4: Revenue for employees actually by three times what it was just one year ago.

Speaker 4: We've now reported positive growth topics to quarters in a row, with the second quarter growth being 100 times greater than the first.

Speaker 4: If I'm honest, we could done better. It's hard to grow the patient we're going into to do so efficiently without making errors. We're human. We made a couple of moves in the second quarter of which in hindsight, we're not worth what we pay for.

Speaker 4: That's been a hand from time to time, particularly as long as we're growing at this rate.

Speaker 4: What I'm encouraged by is the fact that the beam team identified these errors and will not repeat them. So the process, which has delivered a 12% improvement year over year goes margin continues.

Speaker 4: We get better, we identify errors, we fix them. We get more intelligent and efficient in the way we produce the product. And as a result of all this, is that even without the drastic changes or improvements, there's a sort of continual process of cost reduction, which results in further improved cost profits.

Speaker 4: You can rest assured that we will never consider that project complete.

Speaker 4: The good news is that the significant cost reduction of the team identified in the second quarter are still ahead of us. We're implementing the first of those now and should see the full benefits of them at the beginning of the first quarter of 2024. And again, I think that's pretty much exactly what I said during the last call. Thank you very much.

Speaker 4: And we're not just all benefited from operating leverage where our direct costs are concerned.

Speaker 4: Our second quarter operating expenses, while they have increased, are 44% less of the percent of revenue than they were this time last year. And I think we're getting a lot of benefits from the various investment fruit mates.

Speaker 4: Clearly, increases like paying more sales commissions are a very good thing. But we're also adding more depth and management, finance, and crucially for growing company like ours and human resources.

Speaker 4: We have a pretty simple rule of being global, which is that if it doesn't make the product, make the product better or sell the product, we don't invest in it.

Speaker 4: I'm talking of the any increase in overhead spending, which is within our control. I'm excluding costs like a audit and various other public company experiences that arise side of our control. Any increases which are within our control are adding value and setting us up for even more efficient, affordable growth. I'm talking of the any increase in overhead spending, which is within our control.

Speaker 4: Remember that both our growth and net profit numbers include quite a lot of non-cash writers, which do not truly reflect our spending. You can find details of those in our filings. You can find details of those in our filings.

Speaker 4: We can get cash. We're in great shape where the last concern as well. With around 24 million cash and over 37 million in working capital, which is utilized, leaves the bet from metrics for business like ours, we're in a great position to execute on our future business plans.

Speaker 4: In case we need further short term liquidity for significant growth, we still have our as yet on-tap $100 million line of credit, which is very competitively priced.

Speaker 4: Finally, we have no debt.

Speaker 5: zero debt

Speaker 4: Okay, so as I should mention that we're making payments on a couple of new trucks which we've had to add because of the expansion and the number of 8 EVOX that we now have to deliver.

Speaker 6: A good thing.

Speaker 4: I can tell you that for my point of view, the most important of the growth plans that we have is our expansion into Europe .

Speaker 4: There are about 405 million cars in Europe at the moment compared to just 100, 300 million in the United States and just over 300 million in China.

Speaker 4: And the European Union has a nice, a lot of bounding all the zero-emission vehicles 12 years from now in 2035.

Speaker 4: Euro is also Europe , where there is also very aggressive about tackling climate change and moving towards carbon neutrality in the next couple of decades.

Speaker 4: This means that they're very focused on integrating renewable energy sources into their energy mix.

Speaker 4: The fires in Greece this year, which are being tragically replicated in Hawaii at the moment, have sharpened European result to zero carbon energy future, while increasing their needs for rapidly deployed infrastructure products.

Speaker 4: At the same time, the war in Ukraine and the worsening relations with Russia, from which Europe used to buy much of its knackle gas used to generate its electricity, has greatly increased the valid perception of energy and security felt across Europe .

Speaker 4: Oh, and Simon Hartridge, the boy, great tied EV Chargers in Europe , then it is in the United States.

Speaker 4: When you put all that together, you see that they're going to be an awful lot of electric vehicle chargers deployed rapidly. They don't have enough electricity, but they do have as nowhere near as secure as it should be, and they need to transition to sustainable renewable energy, and they need to do all of this in the next couple of decades.

Speaker 4: You sort of want to ask yourself, does anyone have a product that could solve all those challenges?

Speaker 4: Being global does. And it's a product with a great deal of credibility and over a decade of reliable service being used by customers like the US Army, the Marine Corps, New York City, State of California, and many others. And a whole host of the best known global corporations.

Speaker 4: So you can perhaps see why a month ago or so, I was very excited to announce that we're entering into the process to acquire a company in Europe which will position a manufacturer, seller of products, to the biggest, and what I think is the most exciting market in the world.

Speaker 4: Amiga D.O.O. is a Serbian manufacturer of steel structures within the Greek of electronics.

Speaker 4: It's one of the top manufacturers of Smart Street Lapse in Europe . They've been in business since 1990 and they are profitable. They have 210 employees, which are on authority, are exactly the sort of engineers that we find challenging to recruit in the United States. By the way, those engineers cost less than a welder in California. They're great people. They're very well-educated. They speak English and they work hard. They have the facilities, the equipment, the experience and the personnel will look forward to make our EVR products. But they don't have RIP.

Speaker 4: If they did, it would take them very little learning and investment to start making EVO ox. We intend to get them that IP as soon as the acquisition is complete. For the last 30 years, they developed a fantastic reputation for selling quality products to exactly the same customer profile as we've had so much success with.

Speaker 4: states, militaries and corporations, and 16 different nations, including the United States.

Speaker 4: In fact, if you're in Florida, it's not unlikely that you walk under streetlights manufactured by our target, Amiga.

Speaker 4: Now, in my list of things that I'm most excited about for this company, right after expanding our business into Europe comes developed in the UV Standard product.

Speaker 4: Beam Global is in the process of acquiring one of the top engineering and manufacturing companies in Europe which develops, manufactures and sells street lights.

Speaker 4: When you combine our intellectual property, our engineering teams, their engineering teams and their ability to manufacture, you simply can't come up with a more exciting combination where EV standard development and being global is concerned.

Speaker 4: I've been spending a lot of time in Europe , and particularly in Serbia with our new friends at Amiga.

Speaker 4: I'm increasingly impressed with our capabilities and the enthusiasm for joining with being in creating a sustainable EV charging infrastructure powerhouse that we intend to be unrivaled in the biggest electric vehicle market in the world.

Speaker 4: But the benefits from this acquisition will only impact your European goals.

Speaker 4: As I've already mentioned, we'll absorb a highly qualified and talented engineering team, which has many capabilities that we seek for our US business.

Speaker 4: A perfect example of that is the fact that we've had the EG standard pattern since 2019, we have not yet produced it because our in-house end year in team has been so busy contributing to the phenomenal growth of our EV arc on upset.

Speaker 4: After we close this transaction, we'll be able to send engineering tasks to our team in Serbia at the end of any given day and have work product in our inboxes upon our return the following morning. Thanks for the difference in time zones.

Speaker 4: I believe this will dramatically enhance our ability to make improvements to our existing products as well as to continue to bring new and exciting innovations to the field of clean transportation.

Speaker 4: Beyond that, I think it's likely that at least in the beginning, we'll produce the EB standard product in Serbia, even for the US market.

Speaker 4: First of all, our cost rock will be much lower in Serbia. And because we can only fit two EVRs into a 40 foot container, we're sure they'll be able to stack many EV standards into the same space, meaning that the cost of shipping will be much less impact than they are with EVR. So much so in fact.

Speaker 4: I think it's likely that at least in the beginning, as I say, it will make a lot more economic sense to manufacture all of these standards in Serbia, whether they're deployed across Europe or ships to the United States.

Speaker 4: I travel a lot in the United States and in Europe and the memory and I can tell you that everywhere I go I've met with nothing but enthusiasm for EDR and nothing but impatience for the future.

Speaker 4: I cannot wait to start to sell UTR from Europe and to complete the development of EU standards.

Speaker 3: Thank you.

Speaker 4: Just laying some jets fly over here folks. If you all know, we're next to the Miramar Air Corps Marine Corps Air Station.

Speaker 4: Just like some debt fly over here folks, you all know where that's the Miramar Air Corps Marine Corps Air Station. Looks like that's that.

Speaker 4: Anyways, I said I think it's going to make a lot more sense to manufacture all EV standards in Serbia whether they're deployed across Europe or shipped to the United States. And I was going on to say that having travelled a lot in the United States and Europe I've met a lot of enthusiasm for the EV arc and nothing but impatience where the EV standard is concerned.

Speaker 4: I can't wait to start selling both of them in Europe and to complete the development of EV standards and to start manufacturing it and selling it there and of course over here as well in the United States.

Speaker 4: I'm very confident with the way the due diligence process is going. We've engaged an excellent and highly professional team in Serbia to assist us with this process, both on the legal and business side.

Speaker 4: I'm very happy with the way the deal is structured, just as I was with the way we were able to execute on the all-cell transaction.

Speaker 4: This seal is different in that, unlike also, which is an all stock deal, this is a combination of stock and cash. So I'm delighted that we were able to have such success with the offering we completed in June with its minimal dilution, no warrants, and left for 9% discount.

Speaker 4: That unusually clean structure and pricing along with the incredible demand, the deal was heavily oversubscribed, was not only an excellent move for the future of being global, but also a significant vote of confidence from Wall Street and the investment community in general.

Speaker 4: But yes, I'm very excited about this acquisition. Our expansion into Europe and our ability to accelerate the development of EV standards and all future innovative products which we intend to bring to market.

Speaker 4: So yes, I'm very excited about this acquisition. Our expansion into Europe and our ability to accelerate the development of EV standards and all future innovative products which we intend to bring to market. So to conclude.

Speaker 4: about this acquisition, our expansion into Europe and our ability to accelerate the development of EV standards and all future innovative products which we intend to bring to market. So to conclude, record revenues.

Speaker 4: record production and deliveries, record gross profits, and all of these metrics improving quarter after quarter. Record cash and working capital, and a very attractive tax structure. No debt and a clean balance sheet.

Speaker 4: The most exciting international expansion I've ever been involved with, and the reality of bringing what might be our largest volume selling product to market with a fantastic international team.

Speaker 4: The sales team is still bringing in the orders and the markets we're addressing are going rapidly and yet still at the earliest of stages.

Speaker 4: There were certainly other exciting things that happened in the quatra but I think that for now what I've shared with you is enough to demonstrate that it is more than ever a great time to be being global. And with that I'll turn it back to the operator and gladly answer any questions that you may have. Thank you. Over to you operator.

Speaker 1: We will now begin the question and answer session. To ask a question you may press star then 1 on your touch tone phone. If you are using a speakerphone please pick up your handset before pressing the keys. And to withdraw your question please press star then 2.

Speaker 1: At this time, we will take our first question, which will come from Craig Irwin with Roth MKM. Please go ahead.

Speaker 7: Good afternoon and thank you.

Speaker 1: Hey, hey, hey doesn't think thank you for taking my questions Congratulations. This is where I should start. I mean another really solid quarter and lots of progress here um, thank you, you maybe you

Speaker 1: Can you maybe update us on the savings per unit? The last quarter you talked very specifically about $12,000 in savings per unit that you wanted to achieve. It sounded like you had a very clear plan. Can you maybe update us on what's been addressed at this point?

Speaker 1: you know, how this is likely to taper in over the next couple of quarters. And, you know, the larger items on that list, if you could maybe share with us what's been adjusted, or what's been changed, and what's likely to be changed sort of in the schedule over the next couple of quarters.

Speaker 4: Yes, okay, an excellent question and one that we give a great deal of thought to as you can no doubt imagine here. So the first thing to say to you is that nothing has changed. I'm still committed to that $12,000 so is the engineering and the operation teams.

Speaker 4: The second thing to point out is that as yet, at least in the numbers that we've announced in the second quarter, we have not benefited in any meaningful way from that. So we essentially still have that full $12,000 in our future in terms of cost reduction. The gross profit generation in this quarter came purely for fixed costs.

Speaker 4: vendors we got some reduction in cost because of the higher volumes and again the sort of plateauing if not reducing of the inflationary environment. As far as when we expect to get those say the remainder of the savings that we're looking at here I am putting knows that I'm an optimistic and enthusiastic person.

Speaker 4: But I think even with my optimism enthusiasm, it's realistic to suggest that by the beginning of the first quarter of 2024, we should have those changes integrated into the product and therefore be benefiting from the cost savings. Some of them we're already starting to integrate now halfway through this quarter.

Speaker 1: Excellent. So that's a pretty quick execution plan. So I like that. The price increase you discussed previously, 8.25% on May 1st. So knowing the timing and the prior commitments and backlog, do you think that it's possible that this helps us during the current quarter or is it more likely the December quarter where we start to see the benefit of this price increase lifting gross margins as well? Yep, a good one. Yes, so again, first thing to point out, no benefits on that at all in the numbers that we've just announced. So the gross improvement was not as a result of the price increase. Thank you for asking me about that.

Speaker 4: I'll tell you what happens sometimes we will get customers that have very urgent needs for example What's going on in Hawaii at the moment? I'm not telling you that we're doing anything in Hawaii But I will tell you this that if people called us from Hawaii and urgently wanted EV arcs right now We would go back to our existing backlog customers and ask them if it's okay If we saw a few in and those would likely benefit from the cost increases. So there are instances

Speaker 4: where we might slot product into the build queue, but it won't be meaningful until the first quarter of 2024.

Speaker 1: Understood, that makes sense. And then last question, if I may, your adjusted margin discussion is always very useful just to understand how we are making real progress. Can you maybe share with us what the non-cash amortization for all-cell was in the quarter?

Speaker 1: and if there were any other one-time items that impacted the gap gross margins.

Speaker 1: any other one-time items that impacted the gap gross margins? I think give me the amokisation please.

Speaker 8: Um.

Speaker 9: And.

Speaker 4: with me, for example, we're just looking at it right now. Sorry, I don't have it on tip of my tongue.

Speaker 1: No worries, I don't memorize those numbers either myself.

Speaker 1: It's just useful. It's very important to understand.

Speaker 10: Agreed.

Speaker 3: 2, 1.

Speaker 4: I'll take Craig, do you have another question? If not, I'll move to the next one and then as long as Cathy pulls those numbers up I'll throw them out.

Speaker 1: That works perfectly. Thanks again for taking my questions and really congratulations on this impressive progress.

Speaker 4: Thanks Craig, always a pleasure. 200,000 is what I'm hearing by the way in the quarter for amortization of intangible assets on old sell.

Speaker 1: Fantastic. Thank you so much.

Speaker 11: Thank you.

Speaker 1: Hey, thanks for taking my question. Maybe we can get an update on the pipeline. Last year, the third quarter was with day as far as order timing from the customers. And I just wanna get any sense of the anticipated pace of order cadence in the second half. Based on how customer conversations are going. And do you think we'll have similar visibility in the year, 2023? We did just start this year. You know, as I've said before, I anticipated we're gonna continue to see lumpiness and order cadence. The good news is that's not being transmitted into lumpiness and revenue cause because we are now.

Speaker 4: But I do anticipate that we will continue to see some lumpiness just because of the way the industry is developing at the moment. That's, by the way, one of the good arguments for diversifying our business and our revenue sources, moving to Europe , doing all those other things. All of these are moves that we're taking that are not just about growth, but they're also just about creating a nice, stable, consistent growth model.

Speaker 4: for the company. Pipeline is still very, very good. Way more than backlog. And as you know, in the past we've been quite conservative about our pipeline to backlog conversion ratios. And then we nail it every time we backlog to revenue because we never lose an order, not materially anyway.

Speaker 4: So the sales team as I say is still selling, they're bringing in orders all the time. We have stopped announcing all the smaller orders that we get because we feel that we've evolved beyond that. Some people are really upset about that, some people like to see us announcing every purchase order that we get, some people get equally upset when we announce them all. You can't make everybody happy.

Speaker 4: The key thing for us is to just maintain steady growth and bring in all the opportunities that we can to support that. Yeah, okay, well that's helpful. And maybe just on the European expansion, if the acquisition closes in third or fourth quarter year, what would be, you think, the timeline to get to production for the EVR and start to see some sales of EVR in Europe after the acquisition? Yeah, I think that's a good point.

Speaker 4: What do you think this does to potential timelines for the EV standard product to be developed and ready for market year? I'm having to sort of bring to myself a little bit on this acquisition because you never want to fall in love with a deal and I can assure you I won't and it's not closed so it's closed. We're going to due diligence now if we find things in due diligence that we don't like.

Speaker 4: But by the way, I'm not anticipating that, but if we do find things that we don't like, we may change the deal or not even proceed with it. But I'm not, at the moment, I'm not hearing any alarm bells. I'm not seeing any red flags at all. And as I say, I have a very, very professional team who's going through that due diligence process alongside us.

Speaker 4: With all of that said, I am still hopeful and planning to close within 2023, the acquisition in Europe . What I like about these guys so much is that they have everything that they need to make EVRs today.

Speaker 4: In fact, I just sat my team down, my management team down the middle of this week and took them through a 25 minute walkthrough. I'd videoed walking through our five acres half of the under roof with all the equipment and materials and everything to make product in that market. And I can tell you there was a lot of excitement from the team here. None of them had been there.

Speaker 4: They don't have an IP, as I said, and that's what makes them so attractive as an acquisition, because with our IP, they become a fast, far more valuable entity. And at the moment, we're only planning on paying about one time's revenue for them. We're getting all the buildings and all the land and everything else, and those buildings and that land have already appraised.

Speaker 4: about what we're paying for them. Never mind a little bit more actually if you include the equipment. I'm sorry I'm beating her in the bush a little bit but to answer your question they will be able to start making EV arc very soon after we acquire them. We may still send them some specialized electronic parts and things that we make in our facility that are harder to take on.

Speaker 4: but they'll be able to do the line share of it very early on. I said, hey, quickly, we can sell them there. We're already, as you can imagine, sort of testing the walkers with our eye, have been for a couple of years. I already have customer prospects over there who, as I say, are very enthusiastic about the product. It's different, enthusiasm is different than a purchase order. Nobody knows that better than I do, but we're pretty good at...

Speaker 4: That will be job number one from an engineering point of view. We will commit a team immediately to the development of easy standard. And the great thing is, this is what these guys do. They design engineer and manufacturer street lights and increasingly with smart components integrated in solar panels, sensors, electronics and lots of stuff.

Speaker 4: So what we're going to be doing is just adding a bit more than what they're used to doing under our patent, which is good in the United States, you have found Asia for that product. And it's going to be job number one to get that thing up and running as soon as possible.

Speaker 12: Appreciate that. I'll hop in the key. Thanks.

Speaker 12: All hope to be kissed. Thanks. Thank you.

Speaker 1: And our next question will come from page Sullivan, with Max and Group, please go ahead. Hello, today on Hello and Grazita Grossprofit, Margin of 3% 2. And I mean, based on the level of efficiency, it sounds a reached, will you continue that?

Speaker 1: the cadence of production that you currently have, maybe build up inventory and maybe we'll see some fluctuation in the gross profit margin. How should we look at that? You mentioned lumpy orders before.

Speaker 4: Yeah, at the moment we do not intend to build up any inventory. At the moment we're building it as fast as we, I mean, we're delivering as fast as we can build to customers. I've said before I'm very keen on the idea of pre-95 turning certain components and subassemblies so that we can get better. And we just, as a matter of fact, at another management meeting about...

Speaker 4: which are offering not the most expensive parts and having those pre-magnified tricks. So we would have sort of whipped inventory if you like without incompletely product inventory. But that's planning right now. That's not what's happening at the moment. At the moment we're, everything that we're producing, we're shipping directly to customers and we can foresee that continuing starting with the next couple of waters.

Speaker 4: We do intend to get better. As far as the margin is concerned, as I said in my comments, we'll never consider – this is the Golden Gate Bridge. You know, you start painting at one end, you go to the other, as soon as you're finished, congratulations, start all over again. That's the instructions to the team here, engineering and operations and purchasing. Figure out how to get cost savings.

Speaker 4: when you think you're going to start all over again. We won't stop with that. And as I've said before, my goal is to get to a 50% gross profit with this product gap. And I believe we can do it, and we're going to make some significant steps in that direction. The 3% that we've picked up right now, remember, has not come from any changes to the product.

Speaker 4: Those changes are still in front of us, and so we should not lose that 3%. When we add the other cost savings, those will be appreciated to those cost savings. $12,000 we've already mentioned, and then we get the 8.25% increase when the sales price increase starts to kick in as well. So I think we're, you know, look, life's hard. Business is tricky. As I said before, this is a process, not an event.

Speaker 1: And then on Amiga, you gave some comments about the diligence going, well, what are some of the main due diligence steps to close? Is it doing your own audit of their financials or what are some of the main steps to come if you can?

Speaker 4: Yeah, so I could tell you without a doubt that the biggest milestone, and I have not covered it across it yet, although we anticipate that that will take place here not too distant from now, was doing the environmental studies on the property. I mean, we're buying five acres over there. We're going to own the land. We're going to own the buildings. Remember, that will mean no rent burden. I mean, if rent's a big piece of our cost overhead here, we won't be paying rent over there. Obviously, I didn't want to buy a piece of land and then discover after I've bought it that we've got a half a billion dollar remediation project because it's hazardous materials or something on the site. So I'm having it screened right now. I'm hoping to get the results of that before too long.

Speaker 4: the current owners and current management team don't think there's anything wrong, but that doesn't mean that we won't find something. And that's why we're going through a very, very extensive due diligence process to make sure that we've uncovered the skeletons. There will be some. I don't mind uncovering skeletons. I just want to know where they are so that we can work with them and make sure that the Christ and everything else is adjusted accordingly.

Speaker 4: I want to talk to you about this. Yeah, if I may one thing about just I don't miss this is a business which cash flows which has no debt which does not use credit accounts. I mean basically they they they're it's a it's very tightly run profitable business and they're they're spending a lot of money improving their facilities right now and all of it has come out of cash flow. So they're they're disciplined. They're we're not taking only debt with acquisition. We're you know we're and we're getting a team of people who have demonstrated for 30 years that they can build a business and sell in 16 nations. I like them so far. I like them.

Speaker 1: Just last for me is I saw that Florida accounted for 20% of revenue in 2Q. Have you have you called out Florida a large customer in Florida before or is it some commercial clients as well?

Speaker 4: I mean, I think a lot of it actually, the concentration thing is always a little tricky for me, right? We often talk about concentration. For example, we'll say we're concentrated in California. I mean, California is anywhere between the fourth and the eighth largest sovereign economic state in the world. We're concentrated here. It's like saying we're concentrated in a country.

Speaker 4: Same thing going on in Florida, because it wasn't that Florida was the customer. In that situation, we were delivering product to Veterans Administration, I think, largely. I'm just looking at Kathy for a nod or a head shake here.

Speaker 4: Miami-Dade County. I mean, it could hardly be any more diverse. It just happened geographically. We were on the other side of the border with Florida, which by the way is a great state for our products. There's plenty of sunshine there. And don't forget, we're wind-grated to 160 miles an hour have survived Cassegris, 500 and 4th winds and are flood proof to 9.5 feet.

Speaker 4: So we're very well-futed to that market. I don't think it's all that surprising that we have such a large number of sales there. But again, it's not as though there were all through one contract. I don't view that as concentration anymore than I view the federal government as concentration. The US Army, the Marine Corps, veterans administration, the labs, whatever, they're all their own budgets, their own interests, their own guidance.

Speaker 12: Thank you, Desmond. Thanks, Jay. And our next question will come from Abhishek Sinha with Northland. Please go ahead. Hi, Abhishek. How are you? Hi, guys. Good quarter. This is Kailash on behalf of Abhishek Sinha. So, just wanted to know about your European expansion and how you guys spoke about manufacturing there as well. So, just wanted to know about your cost competitiveness with your product in Europe and how you're seeing that. Yeah. So, I think that's a good news thing for us.

Speaker 4: Because it's actually Hard to deploy electric vehicle charging infrastructure in Europe than it is here It's more expensive to dig Chinese and go through the permitting and planning. There's a lot of you know I mean as I've said before Edinburgh where I'm from if you dig down six inches in Edinburgh You go back 300 years. You never know what you're gonna encounter when you dig trenches and having else at that

that. On the European side of things, the good news is of awesome management team over there, if they think that we need to hire an EV infrastructure sales team because of course that hasn't been what they've done in the past. They want to try and do it with their existing sales team because if you think about it, they have all the relationships. They've already been selling street light, street burn, it's another stuff. Two cities, two.

to municipalities to the same thing I've posted, but states and nations that the first thing we're gonna do is go back to their existing customers list and say we now have EV charging products off grid when you've been energized made in Europe , without the interest into you. So we've got this tremendous pool of customer opportunities.

With whom we have a great deal of credibility already, because they're already buying the product from Amiga, what will be being Europe , we're just gonna go back in the time with all the exciting products set. I mean, I really, the way all that works, I like to add more sales people over there, we'll do it. But it's very, very well aligned with what we're doing at the moment, which is part of reason I'm so enthusiastic about it.

Okay, thanks. Thank you, Dr. Schiff. And our next question will come from Chris Pierce with Needham. Please go ahead. Thank you. Thank you.

Hi Chris. Oh, hey, Desmond, just one. You know, 18 million in revenue, give or take, and back log down 18 million. I know you've talked about pipeline to back log. You can just refresh us kind of what kind of, I guess I'd love to get some color on the pipeline and when the pipeline might convert to back log. And then...

Talked about lapping the third quarter last year or somebody asked about it. Were there any one-timers in the third quarter last year? Was there any, anything that drove government agencies or your customers to kind of purchase in the third quarter last year? It was just you guys kind of knocking down doors. Just want to get a sense of what you're kind of copying against.

Yeah, so I think you said 80 million in revenue and backlog came down to 18 minutes. I wanna be absolutely clear, that did not happen. We, our backlog didn't come down anywhere near as much as our revenue went up and that's because we have been selling during the quarter. So we have been converting pipeline into backlog during the quarter.

And the reduction in backlog is not commensurate with the increase in our revenues. But to answer your other part of your question, yes, we had some very significant large orders at the end of the third quarter of last year, federal government orders, and that's not a coincidence. The federal...

budget year end September 30th, and we do see more activity at that time of the year than other times of the year. Although I actually think some of that might diminish in the coming quarters, just because of the urgency amongst the federal government to get EV charging deployed him.

Two or three weeks ago I was in Washington DC, met with the Department of Transportation, Department of Energy, met with representatives from the White House and several senators and congressmen. And I can tell you that all of the focus right now on electrification is about getting infrastructure in the ground. We're very well known. Our product solutions are very well known. As I say, the White House already knows about us.

So I think some of that, you know, the September 30th thing might become less important moving forward. It certainly was significant last year, but I'm not gonna guess right now on the, on what pipeline to back or conversion will get.

this year except to say that historically we've had a very good record of converting pipeline to backlog. I think it was over 70% last year or more than that actually. More than that. I think we converted something like, we started the year with an $80 million pipeline and converted 76 of it to backlog in the year. That's pretty much unheard of in any business, but it's a good goal for us to keep going after.

Okay, perfect. I appreciate the detail. Thank you. Thanks, Chris. And our next question will come from James Nicolek, a private investor. Please go ahead. Hello, James. Yes, hi, Desmond. Congratulations on a good quarter on the strategic move into Europe .

A couple of questions. First one on the backlog. Looks like you've got about a two month backlog based on the second quarter production rate. Are you still planning on increasing your production rate going in the third quarter?

So just not to be combative, James, but I think you mean a two-quarter run rate based on our second quarter. Sorry. Yeah, so are you still contemplating increasing the breaching rate?

As I said at the moment, we are still supply constrained. So we still have customers who would like us to be getting the product to them faster than we're getting it to them. We're going to continue to do what we've done all along, which is be sober in our approach to that. You know, there are people who asked me last year, why don't you just convert all of that back while the revenue.

fundamental gains from that. So you will see us continue to execute on the backlog and the best and most profitable way that we can. It's not realistic to expect that we're gonna have continue to have quarter of a quarter of percentage growth increases like we have. If not, if not, the reason simply because the previous quarter numbers are so much higher than they used to be, it's hard to have those texts and multiples on top of them. But also, I don't...

unsustainable way. There's no eminent plans to increase the production rate over the second quarter.

Oh, well, we're still increasing the reduction rates. I didn't say we weren't not going to do it. I just said we're, it's not increasing the reduction rates is more of a, in response to customer requirements than it is just some sort of goal that we have. We still expect that there's going to be a tremendous amount of growth in front of us. And so being able to produce more product faster is of course very important to us.

Okay. Second question related to the backlog on the price increase. Any resistance on new orders from customers and are you bound on some of the larger government contracts that you have by the old pricing?

Those are the key very good questions. So far, we have not received any pushback from customers. And as I mentioned, when we first announced this price increase, we believe me there were a lot of hair tugging, especially on my part. I was really disinclined to do that, because I think it's so important to grow our place in the market.

The reason I ended up doing it after every we reviewed the same thing every quarter and I've done for a long time for years in fact, you know, what should we be doing with pricing? And it wasn't until the sales team could just loop me in the eye and say we will see no negative impact as it was all of this price increase because people's urgency is such that they want the product and not even worried about that part of it.

And so far, I have to say, nobody's making liars of them. So I think, especially with the amount of inflation, remember, we've increased our prices by much less than our vendors have increased their prices to us. So we can very easily justify these price increases.

The reason we've done it less than the vendors have increased the prices of us is because I still feel that so much opportunity rests in our ability to just get back for what we're doing. And that has been demonstrated and will continue to be demonstrated. As far as your question about the logic government contract, yes, when we have a contract with the logic government, it's priced.

We're not only able to arbitrarily just sort of increase prices whenever we want to, however there is a process to do that. And we have gone through and are going through that process to adjust our major government contracts so that moving forward, they will be reflective of the new price. But again, any of that will be in any material impactful to us before the first quarter of 2024. Let's.

And then two specific questions on the due diligence process in Europe . I'm not sure about Serbia versus Western Europe , but today they have a similar social structure, especially for the management group, so that...

If you have to lay somebody off for a downturn, there's usually a pretty significant liability that you would be purchasing. Is that, could you give us some clarity on that?

yes so you want to think that we like about Serbia is that it's not as yet in the european union uh... all indications are that it will be in twenty thirty but as yet is not in the european union

And however, it has the rights to trade as though it is. So tariffs free trading in Europe , but without any of the compliance that comes along with being a European Union member state. I think we've got a little honeymoon period of ahead of us of some six or so years, where that will be the case. Nevertheless,

You are right to point out that it is not as easy as it's supposed to be and I'm not really supposed to be in the United States. Particularly in California, California is a state where we're as an employer was supposed to have the right to terminate somebody's employment without much ado about tenneling. But of course that the reality is quite different. So those, what you're pointing to will exist.

However, the other side of that coin is that the cost basis for what we paid people is so much lower over there. As I mentioned in my comments, we're fully qualified and very excellent engineers making less money than a welder in California. And so the price that we might have to pay, you know, covering somebody for two or three months after they're laid off or whatever, will be...

got a quote from the from the team and again it goes back to the things that think back to things are just much less expensive in Serbia than they are here. Okay thank you very much. And our next question will come from Noel Augustus Parks with TUI brothers. Please go ahead.

Hi, good afternoon. Just had a couple questions.

most aggressive in terms of

Well, I guess in terms of what you're seeing today with the deployments from past transactions and now in terms of new orders, any particular trends you're seeing?

Yeah, so actually a lot of new customers, although some of them might be coming through these existing contracts that we have in places. As I mentioned to you before this goes back to this concentration thing, you know, for example, last year, the state of California issued a new contract to us. In a way it was a bit like replacing an old one for them not like to do that. So it was a new, competitively like contract. One of the things that they did was they made that available to any other...

to any governmental entity that site in disaster preparedness as one reason for buying our product. And of course our product is very well suited to that because we continue to charge vehicles during blackouts and we have the emergency power and we're flood proof and hurricane proof and all that. Take that back when not hurricane proof. Proofed up to 160 mile in our winds but survive under hurricane winds.

just buy through the California contract or buy through the GSA contract if you can. And we've had quite a lot of instances of that. I think, again, as I said, we continue to see a pick up of commercial customers. There was a very government-heavy there for a while during the COVID period, but we've seen a continuous pick up in commercial customers. Otherwise, the cost of board, federal, state, municipal from the government side and across the board on commercial customers and quite a lot of new customers, but also quite a lot of a continued customer. So I would say a healthy mix. Great. And just a question about Amiga. As far as their particular revenue mix, do they have a higher service cost?

component and I wonder if that has any advantages for you if services be which they have a Sort of larger service organization sort of like, you know servicing their legacy equipment out there You mean from a recurring revenue point of view?

Yes, exactly. Yeah, so they do get recurring revenue from service. Although it has to be said, it's minimal. They have a pretty good service organization. But again, much like us, much of what they're making does not require a lot of service. And so that's not been a major area of focus for them. I'll tell you one area of shift that will be, that they were already focusing on part of.

they built a stadium, a sporting stadium in Africa, an incredible project, logistically and everything else from the ground up. That's fun to do and it's, you know, and I mean, it's not the business we want to be in. We do not want to be doing construction projects. We don't want to, we want to be doing product not project.

And as I say, you know, serendipityously, they had already made that decision themselves. Although their revenue numbers are very high from those things incredibly risky, the margins are generally not that great. They're much better just sitting in their factory and pumping out products. That's what we want them to do moving forward. And then we will, you know, go after recurring revenue in a whole host of different ways. I mean,

with the management team over there. Just to be fantastic, particularly to the point of the street lights are renewably energized where we could offer something like that as a service because of course, we wouldn't have a utility built to recapture. So there are lots of opportunities there, but at the moment it's mostly making products and selling it.

there just would be fantastic particularly to the point of the screenlights are renewable energized where we could offer something like that as a service because of course we wouldn't have a utility built to recapture. So there are lots of opportunities there but at the moment it's mostly making products and selling it. Okay great the tough for me.

Thank you. We're coming up here on things. Happy to take another one. If there is one other way thing, we should wrap up.

And this concludes our question and intercession. I'd like to turn the conference back over to Desmond Wheatley for any closing remarks. Good, thank you, all for answering the game. Thank you everybody for listening and also for the excellent questions. I mean, I can't do better than just the recap that I gave. Fantastic growth in revenues, strong balance sheet. Still have an incredibly attractive capital structure. Just look at a few shares outstanding we have.

You know, I, as I mentioned earlier, I've spent a lot of time in Europe and in the Middle East over the last months. All the growth that you've seen take place at, at Beam Global has been taking place without my active in, in, I'm very proud of the team. I've done a fantastic job and if any of you are worried about me writing a more cycle, what they've demonstrated is that they can grow this business without me being around.

and looking forward for more great stuff from us because we're only just getting started.