Good day, and welcome to the Beam Global Second Quarter 2024 Operating Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Lisa Potok, Chief Financial Officer. Please go ahead.

Hi, good afternoon and thank you for participating in Beam Global's second quarter of ‘24 operating results conference call. We appreciate you joining us today to hear an update on our business. Joining me is Desmond Wheatley, our President, CEO and Chairman of Beam. Desmond will be providing an update on recent activities at Beam followed by a question-and-answer section. 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 and 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, August 13, 2024. 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 second quarter of ‘24. Our second quarter revenues of $14.8 million, increasing 2% over Q1 of ‘24. 31% of our revenue in second quarter was derived from commercial customers. For the six-month ended June 30th of ‘24, our revenues were $29.4 million. We have a backlog of $11 million, and our pipeline of prospective customers has increased to over $183 million, although we cannot be sure of when or if those prospective orders will turn into actual sales. We generated a record gross margin for the second quarter in a row with a gross margin of 16%. The margin improved six percentage points compared to Q1…

Thank you, Lisa. And thank you to all -- the rest of you for joining this call. Q2 has been another very busy quarter for Beam Global with a whole series of new milestones and records. Since our last earnings call, I've personally spent almost half of my time traveling and most of that time in Europe, although I did have a very eventful couple of weeks in Washington, D.C. meeting with leaders on the Hill. My European travel was largely about meeting new customers and investors, but also very gratifyingly visiting locations where the first EV ARCs produced by Beam Europe have been deployed. Just to give you an idea of the scope of our new reach, during my latest trip, from which I just returned two weeks ago, I visited Washington, D.C., London, Belgrade, Budapest, Vienna, Larnaca and Nicosia on Cyprus, and Valletta and Gozo on Malta. I wasn't in any of those locations for fun, although I did have a fantastic time telling the Beam story and promoting our products and our stock to leaders in government, industry, the military, and the investment community. As diverse as that list of locations may sound, what's fascinating is that they all have in common, more or less, the same challenges and requirements as we've observed and for which we've designed a portfolio of fantastic products here in the United States. They all need EV charging faster than traditional methods can provide it. They all need to save money on construction and utility bills. They all have challenges with lack of capacity on the grid, and they're all very worried about what's going to happen to transportation, communications, and industry during future potentially very prolonged blackouts. Beam Global's products solve for these challenges, and now that we manufacture in the…

[Operator Instructions] The first question comes from Sameer Joshi from HC Wainwright. Please go ahead.

Hi, Sameer. How are you?

Hey, good, good. How are you? Thanks for taking my questions. Just an interesting development with the British Ministry of Defence. Can you share what is the possible, like the scope and scale of this say contribution from this source in 2025?

Sorry, Sameer. Can you run that one by me again? I missed that. It broke up a little bit.

Oh, sorry. Can you hear me?

Yes.

Yeah, the British Army potential orders in 2025.

Look, I hate to guess at what any of our customers is going to do in the future. Clearly, as I said in my comments, they have the same challenges and requirements that the U.S. military has. The British government has a similar mandate for the electrification of its entire white fleet by 2027. White Fleet meaning non-tactical vehicles. Just on Cyprus alone, there are 650 fleet vehicles there, all of which we’ll have to electrify and that is going to be the case across British government, military and everybody else. So look, they are going to need an awful lot of EV charging. The British doesn’t – they don’t have as many overseas bases on the scale that the U.S. have by any means, but they have a lot of them. They also have a lot of requirements on the mainland, and our products are very well suited to solving their problems. So, we did an exemplary job. I am really proud of the team that did a fantastic job of both, manufacturing, shipping and delivering in that new market. You can think of that from a logistics point of view for us. We manufacture those products in our new European facilities and then we ship them overland and across the Mediterranean Sea to an island in the middle of the Mediterranean Sea. Then we deploy them successfully on four different military bases in Cyprus without incident. They are up and operating perfectly right now. So I am very proud of the way that went. That will give that customer indication of the value of these products, the ease of deployment and the security of the electricity. Don’t forget, particularly in overseas bases, you are often relying on the locals for electricity, which is not necessarily the best thing from a strategic or tactical point of view. So we are solving an awful lot of problems with them. Lastly, I will tell you this. They view the EV charging as almost a boring aspect of this. What they are really interested in is the other power, the e-power panel, the auxiliary power panel we have on these things and their ability to run other systems. Stuff I can’t even go into detail on, but their ability to do a whole lot else with this dispatchable electricity in these types of environments. So, kind of a long answer to tell you I am very bullish about our prospects with them, but I am not going to put a number on it.

No, no, this was good color. Thanks for that Desmond. In terms of the pipeline that you had, it has grown nicely from, I think, 160 to 183. Can you provide some color on like, is this mostly Amiga-related or Illinois-based or California-based orders? Also, is there – like, how do you track this? Like, what is your conversion rate from pipeline to orders?

Yeah. The last part of your question is obviously very relevant at the moment. So, just to give you an answer, the majority of the pipeline from a dollar's point of view, it’s still coming from our sustainable EV charging products. We think that we are going to see a significant increase in that coming from Europe, because of course, we are just beginning to get those products out. I am going back over there in a couple of weeks to do some more selling and we are going to hit that hard. But we think we’ll see a really big pickup from that. The majority of the pipeline is still coming from our sustainable EV charging infrastructure products. And then obviously, we are also getting contributions from our battery business in Chicago and then increasingly from the also legacy business. But what I am really excited about is increasing the sustainable EV charging product business in Europe. The last part of your question is obviously something which is on the point of my attention the whole time, because we’ve got a combination of things going on. The good news is the pipeline is increasing. The bad news is that the backlog is not increasing with it, at least not at the pace that it should be, and so let us confront that head-on. The simple fact of the matter is that we – as I mentioned in my comments, our Q2 revenues, we generated those revenues absent about $5 million in federal revenues that we had in the same quarter in the prior year. The simple fact of the matter is that our federal orders, particularly federal government orders, have not transitioned from pipeline into backlog. I was going to say, when we expected them to, but I don’t…

The next question comes from Craig Irwin from ROTH Capital. Please go ahead.

Hey guys. It actually Andrew on for Craig, but how are you doing?

Andrew, how are you?

Good. Good. So, you kind of touched on this on the last question here, but I was wondering if you could provide some more detail on what is working so well in the commercial sales, which is kind of helping out smooth revenue recognition quarter-by-quarter.

Yes. I mean, part of its focus. As I’ve said before, you’ll remember. We used to – a very large proportion of our pie, although it was a much smaller pie in those days, was commercial sales and then government took over from that. COVID really shut down our commercial sales efforts. Inevitably, our sales team ended up concentrating more on the places where they were going to make wins, which was government. Post COVID, we have seen a return to some of these sales on the EV charging side of business. But we are also bringing in revenue from other interesting spots where commercial is concerned. It’s not all coming from the EV charging products. We are seeing a tremendous return to sales of those types of products into commercial, but also contributions from battery sales and to some extent, the legacy business from Beam Global – Beam Europe, although a lot of that is also government-based and that we are selling street furniture to municipalities and other government agencies. Some of it’s focused, some of it is just a natural impact to the market. And then a big part of it from an EV charging point of view is, commercial real estate really didn’t care about EV charging until a year ago even, because it doesn’t impact their lease-up times or their tenant retention. But as we see more and more EVs on the road, we are going to see much more interest on the part of commercial real estate and EV charging. In my opinion, it will become like Wi-Fi. You will not be able to operate a piece of property that has a commercial aspect to it without offering EV charging. And as that happens, we are going to see a lot of increase in demand for EV charging in general. And we in particular, I believe we’ll see a lot of increase in demand, because most pieces of commercial property simply don’t have sufficient electric circuits and certainly don’t want to be digging up their parking lots and their landscaping and everything like that for months on end, to provide it in a way the government entities might be more insensitive to. All of those things lend themselves very much to growth for us in that space. While we are happy with the increase in commercial business that we’ve done, that job is nowhere near finished. And I’ve always said, always, even at the times when government revenues were almost 100% of our revenues, I’ve always said that in the end, this will be a consumer and commercial-led deal and the great majority of Beam Global’s revenues will come from consumer and commercial, although not at the expense of absolute dollars from government, from a percentage point of view.

Great. Thanks for the color there. My second question was great to see the second straight quarter of very strong gross margins. You really did a great job parsing out the details there on the call. First off, the two-parter. One, I guess, how much of the backlog do we have to burn through to see the price increases impact our gross margins? And secondly, you talked a bit about the European manufacturing, hypothetically, building the base plates in the EU, 2% to 3% gross margin improvement there. Is that kind of what will drive the further increases after you get to double the 1Q levels that you talked about?

Yes. So, first thing to point out is actually about 20% of our Q2 EV ARC sales did have the increased price. So, that did contribute, only a fifth of them, but that did contribute and we are rapidly coming to the end of that backlog that we had. There's a few stragglers left over. So the majority moving forward will include the price increase, so we should benefit from that. Inevitably, because I don't have the exact number of units we've got left in backlog with the pre-pricing. And I will say this, a couple of our larger contracts, the GSA type contracts and also California DGS contract, it's harder for us to integrate that new pricing into them. That's a longer process. And we won’t – we will not turn down sales from them in the meantime. So that could create some stragglers where that's concerned as well. But moving forward, in general, we're moving into this new pricing structure and we expect that to be beneficial. On the savings from Europe, its way beyond theoretical now, or hypothetical I think is the word to use. It's actual. We actually know because we've done it. That we can produce the base price, in particular this one item which happens to be a very expensive part of the EV ARC. It's the ballast and traction pad, which gives the system its stability in a parking space. We know for a fact that we can produce those at something like, I don't know, 6% or 8% lower price impact on our COGs, on our BOM, the BOM aspect of our COGs. But even after shipping them to us across the sea in a container, of course, you can put quite a few of them in a container. We can still…

Perfect. Well, that's great to hear. Congrats on that continued progress. And I'll hop back in the queue.

Thank you very much, Andrew.

The next question comes from Ryan at B. Riley. Please go ahead.

Hey, Desmond. Thanks for taking the call.

Hi, Ryan. How are you?

Good. Thanks. I'll stick with the margins and congrats on the improvement again this quarter. Wondering, what are the additional levers you can pull to enhance margins further beyond the price increases and international manufacturing capacity as we look to next year and ‘26? Is it mostly scale or are there other areas that you are looking at?

Yeah, so there's no question about scale. No question that volume helps us. And again, I know there are, to go back to our previous question about the mix between pipeline and backlog, I know that that's going to raise some eyebrows and maybe even concern, but I'm not worried about that. I think we, as I said, I know what these orders look like. I personally am confident that this is moving right, not going away. So I think we get that return and increase in volume. That will definitely help us. Beyond that, we still have elements of engineering and operational improvement, which we still haven't fully benefited from yet. I think we're going to see further benefits from our activities in Europe. And then the truth is, you got to remember that we are – we've been operating in what for us has been a hyperinflationary environment. I think – don't quote me on this, but if you want to quote me, double check on this. But I think we've seen something north of 30% increase in the prices that we have paid for our BOM since the beginning of the inflationary period back in COVID, 30%. And if you think about that, what that means is we have absorbed all of those costs and yet brought our gross profit to 16% GAAP, 18% net of non-cash items, which is amortization of intangible asset value resulting from our battery company deal. So we essentially, we've absorbed a 30% increase in costs and we're a BOM heavy company. Labor is a low part of the contribution to our deal. So absorbed 30% increase in costs due to inflation and yet brought our gross profitability from minus 15% to positive 15% at the same time, which is basically like…

Great. I really appreciate that additional color. For my follow-up on the BeamSpot, what are the final boxes to check before that hits the market? When do you see that ramping to the point where it becomes a meaningful portion of the overall sales mix?

That's the sort of question that I ask around here, Andrew, except you did it without expletives. Bringing a new product to market, particularly a large and complex piece of equipment is always challenging. Nothing ever happens as fast as I want it to. However, as I said in my comments, I can absolutely report to you that our team in Chicago has now done the integration of the components into the column of the BeamSpot, and that we are in fact doing what we need to do in San Diego to be able to stand the first of those up. We're going to do the same thing in our European facilities. The great thing that they will do is, they will give us something real that we can show to people and we intend to do that. It's one of the big reasons that we selected San Diego over Chicago to do the first installations, because we've got a lot of people that we're going to bring by here. I actually show them the system in operation, charging a car, doing what it needs to do. I anticipate a couple of things. The first one is, the first prototype systems that we put out will not be anywhere near as good as those that we take to market. We've learned a lot putting the first of them together. Our engineering team is fantastic. They model everything out. Everything happens on computer screens before we touch anything physical. But inevitably, when we start making them, we find ways to make them better and less expensive and more efficient than everything else, just as we have done with EV ARC. We're going to do that with EV Standard as well, but that will not stop us selling it. The sales cycle we anticipate will be slightly longer with EV Standard than it is in many cases with EV ARC, because we think that the unit sales will be larger and it will be more of a large-scale infrastructure deployment than onesie-twosie sales. Although, as I said last time, I'm starting to rethink that a little bit, because we do now think that there's a lot of opportunity for these in parking lots of shopping malls and places like that, where maybe they would buy one or two or three or four of them, and that sales cycle could be a lot shorter. The benefits to them are tremendous, highly visible, rapidly deployed, and all the other things that go along with it. But let’s – our plan right now is to get the first prototype stood up operating, and then we will start to really aggressively market them here still within this year. Then I think we anticipate that we'll start to see the first meaningful revenue from them into 2025.

Great. I appreciate it, Desmond. I'll turn it back.

Thank you.

The next question comes from Noel Parks with Tuohy Brothers. Please go ahead.

Hi, Noel.

Hi. How are you doing?

Okay. I've got some jets flying over. Just give me a second here.

No problem.

The Miramar flight path I'm on.

Sure.

I think that sounds like the last of them disappearing over the horizon.

Okay. No problem. [Multiple Speakers] Life on the road, I hear you. I was just thinking about, in terms of your sales and marketing organization, and you mentioned larger sales, there's been more stakeholders, less certainty of timing. Are those just internal process things that really vendors is generally able to control within a customer? Or do you feel that from your side, you have the resources to move customers along as fast as you can? And yes, of course, there are cost considerations there about the first one involved in moving it along, the handholding, and the closing and everything. So just, do you feel like those are in balance, what you need and what you can accomplish with just moving customers along?

Yes. So no, I don't think they are in balance and that's why we're making the changes that we're making, but let me come back to that. The new selling resources that we're engaging will not do anything to move our existing backlog along or convert our existing pipeline into backlog. That's not their purpose at all. Our current sales team has done a fine job of that. Our current sales team is responsible for everything in the $185 million or whatever pipeline that we have right now and for all the revenue that we've ever generated. What's actually happened, and I actually view this to be one of the most important aspects of our business today as I'm talking to you. What's happened is, we've talked for many years about engaging with resellers and distributors and agents. And in the past, our own processes, our own sales collateral, our own ability to understand the selling cycle and everything else, has not been mature enough to actively engage outside resources, because frankly, we were kind of learning as well while we were going along. What's changed is that we now are confident, and the product's been developing and changing and everything else, right? But what's changed is that we're now at a point where we're confident enough in the product development. We are confident enough in our understanding of the sales cycle, the customer, the types of customers that people are going after. And we are also confident enough in the developed sales collateral, to where we can finally start to engage outside selling resources. And the reason I'm so excited about this is because, again, go back to what I just said, our internal sales team of four or five people has sold everything that we've ever revenued. Imagine…

Could you sort of quantify it or just give some sense of pace you would think you would be in a couple of Jesse like organizations as partners, a couple of years or faster than that or it takes more time?

Sorry, are you talking about our ability to add to those organizations, or are you talking about their ability to sell? I missed that.

No, I just meant like the agreement you signed with Jesse to get to the next one. Is that a quick process, a slow process?

Look, I'm going to be very careful not to add anybody to our ecosystem that doesn't do anything, but a great job for us. So you'll see us taking a sober approach to this. At the same time, you'll see an awful lot of effort going into it. And this is really kind of a new thing for us, getting the agreements in place and understanding how we're going to do this. So you will see an awful lot of emphasis on it here in the next months and quarters. So in a way, it should be a sort of the reverse hockey stick, where you see quite a lot of activity in the beginning, and then that should trail off as we feel that we've got sufficient entities in place that are within our capability of managing them and producing product for them. But no, this is not a year's thing at all. In fact, I have given instructions to Sandra Peterson, who runs sales and marketing, that this is her number one priority, is the recruitment of these types of entities to leverage up our selling. And again, remember, everything that we've ever revenued has been sold by four or five people internally. Listen, I love our people. They are great, they do a great job. But lots of other people have great sales teams too. And I'm looking forward to having them out there telling our story. I think we've got time for one more question. So you beat me to it. I'm just getting the signal here, we've got time for one more.

The next question comes from Tate Sullivan from Maxim Group. Please go ahead.

Hello, Tate.

Thank you. Hello. Just to call up, on the BeamSpot, did I hear – are you planning to introduce it/roll it out in both the U.S. and Europe? Is that what you said? Okay.

Yes, U.S. and Europe.

Okay.

Actually no, we should be able to introduce it in ‘24, but I anticipate revenues from both markets in ‘25.

Okay. And then you mentioned some sales for the legacy business for Beam Europe. Have you had a selling to their existing customers? Have you already I imagine. Sorry, I missed that comment.

Yes, we are. We are definitely aggressively selling to existing customers, the new – both the legacy and the new products. And as I said in my comments, we have growth in the legacy business. We've been able to help them. They are very, very good at what they do, but they've operated their business entirely on a cash basis as a typical of a sole proprietorship. And so we’ve actually been able to help them leverage up the business a little bit in terms of having the right types of inventory on hand, to be able to execute faster on deployments and that sort of stuff. So we've seen growth in the legacy business. We expect to continue to see that. We're going to go after that more aggressively than ever, because it is a perfect lead in for all the other products that we’re going to sell them, but also because we can do it profitably.

Great. Thank you Desmond.

Thanks Tate.

This concludes the question-and-answer session. I would like to turn the conference back over to Desmond Wheatley for closing remarks.

Okay, thank you very much and thanks for the excellent questions. If we didn't get to you, please feel free to call us directly or email us or whatever else. And I know I follow-up calls with most of the analysts after this. So don't worry if you had a question and we didn't get to it. Look, I think that the main thing that aside from all the excellent stuff that we're doing, the main thing that we all focus on here today was that increasing pipeline without the backlog being there. I knew that would raise eyebrows. As I said, I'm confident that we're going to make that conversion. It is a kind of a weird year, but everything's telling me things are moving right, not going away. And again, the management team here, in fact, the entire team at Beam Global is taking all the active and aggressive steps that we need to take to broaden our funnel and that's going to pay off for us. It's already paying for paying off for us. The orders that we're seeing, the deployments for the MOD that would not have happened had we not made that effort to broaden our geographic reach there. The order that we received from Jesse would not have happened if we hadn't made those efforts. And so the efforts are paying off and they are going to continue to do so. These will – I don't believe that we're talking about dividing into the same size pie here. I think that these will all be accreted to what we're doing. And yes, we've seen a bit of lumpiness, we're going to. But the general trend is onward and upward. And at the same time, we're taking very active and aggressive steps to make sure…

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