Beam Global 2023 Q3 Form 10-Q Summary
Business Context and Reporting Period
Beam Global develops and manufactures renewable-energy EV charging infrastructure, energy-storage systems, and energy-security products. The unaudited filing covers the three and nine months ended September 30, 2023, with comparisons to the same periods in 2022. The company operates as one reportable segment.
On October 20, 2023, after the reporting date, Beam acquired Serbian manufacturer Amiga DOO Kraljevo to expand European manufacturing, engineering, and sales capabilities. The acquisition was not included in the September 30 financial statements.
Financial Performance and Position
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Revenue | $16.5 million | $6.6 million | $47.3 million | $14.1 million |
| Gross profit (loss) | $0.3 million | $(0.3) million | $0.8 million | $(1.0) million |
| Gross margin | 1.7% | (5.1)% | 1.7% | (6.9)% |
| Operating expenses | $4.0 million | $6.5 million | $11.9 million | $10.9 million |
| Net loss | $(3.6) million | $(6.8) million | $(11.0) million | $(11.9) million |
| Loss per share | $(0.26) | $(0.67) | $(0.79) | $(1.21) |
- Revenue increased 149% year over year in Q3 and 236% year to date, driven primarily by EV ARC deliveries to government customers and energy-storage sales from the All Cell acquisition.
- Federal, state, and local government customers represented 84% of nine-month revenue, compared with 59% in the prior-year period. Federal revenue was $33.2 million versus $3.2 million in the first nine months of 2022.
- Energy-storage revenue was approximately $2.1 million in Q3 and $6.0 million year to date.
- EV ARC deliveries increased to 537 in the first nine months of 2023 from 136 in the comparable 2022 period.
- Gross profitability improved due to higher production volumes, fixed-overhead absorption, labor efficiencies, design changes, and lower material costs. Nine-month gross profit excluding $0.6 million of non-cash intangible amortization was approximately 2.9% of revenue.
- Q3 operating expenses decreased primarily because the prior-year period included a $3.9 million increase in the fair value of contingent consideration. Nine-month operating expenses increased because of higher compensation, sales and marketing, research and development, recruiting, accounting, and facility costs.
- Net cash used in operating activities was $13.8 million for the first nine months of 2023, compared with $15.7 million in 2022. Accounts receivable increased $10.5 million and inventory increased $1.1 million during the period.
- Cash was $14.8 million at September 30, 2023, compared with $1.7 million at December 31, 2022. Working capital was $34.4 million, compared with $6.8 million at year-end 2022.
- Financing activities provided $27.7 million, including $25.4 million from a public stock offering and $2.1 million from the B. Riley committed equity facility. The company issued 198,033 shares under the facility during the first nine months.
- Total liabilities were $12.6 million, including $0.2 million of note payable, $1.2 million of operating lease liabilities, and $0.8 million of deferred revenue. The company also had a $100 million accounts-receivable-backed supply-chain credit facility, but had not drawn on it.
Material Changes Versus the Prior Comparable Period
- Revenue growth materially outpaced expense growth, reducing the nine-month operating expense ratio to 25% from 78%.
- The company moved from gross losses to positive gross profit in both Q3 and the first nine months.
- Net losses narrowed despite increased operating expenses, while loss per share improved partly because of higher share count.
- Cash and working capital increased substantially following equity financing, although operating cash burn remained significant.
- Common shares outstanding increased to 13.9 million at September 30, 2023 from 10.2 million at December 31, 2022. Additional dilution may result from outstanding options, warrants, equity-facility sales, and the Amiga acquisition.
- All Cell contingent consideration declined from $6.8 million at December 31, 2022 to $1 thousand at September 30, 2023 after the issuance of earnout shares and a fair-value adjustment.
Guidance, Outlook, Risks, and Unusual Items
- Management expects revenue to continue growing over time but cautions that government orders may be uneven because of approval and budget cycles.
- Management expects further gross-margin improvement from higher volumes, manufacturing efficiencies, engineering changes, lower component costs, pricing actions, and use of internally developed battery technology. Profitability is expected in the next few years, but the filing provides no specific earnings or revenue guidance.
- Management believes cash and its operating plan are sufficient to fund operations and contractual obligations for at least twelve months from the report date, but expects continued losses and may require additional capital before achieving positive cash flow.
- Key risks include dependence on government programs and large customers, continued operating losses and cash burn, inability to raise capital on favorable terms, dilution, volatile order timing, raw-material costs, acquisition integration, international and foreign-currency exposure, and competition or reduced EV infrastructure demand.
- Amiga consideration included EUR 4.55 million paid at closing, EUR 2.45 million payable by December 31, 2023, 293,675 shares issued at closing, and 158,132 additional shares due by December 31, 2023. Additional earnout shares may be issued based on 2024 and 2025 revenue.
- The company reported a material weakness in internal control over financial reporting related to inventory tracking, valuation, and manual processes. Management was implementing stronger inventory controls and a company-wide ERP system.
- Nasdaq notified the company that it was not compliant with the requirement for a three-member independent audit committee following a director resignation. The company expected to cure the deficiency within the applicable period, but stated that delisting remained a risk.
- Approximately $15.2 million of cash deposits exceeded federally insured limits at September 30, 2023. The company reported access to its deposits following the failure and resolution of Silicon Valley Bank.
- No material pending or threatened litigation was reported, and the company reported no material off-balance-sheet arrangements.
Important Facts for Investors to Verify
- Whether revenue growth and government order activity remain sustainable after the unusually large 2023 increase.
- Whether gross margins continue improving and eventually offset the company’s operating expense base.
- Operating cash consumption, accounts-receivable collections, and the extent to which additional equity or debt financing is required.
- The final accounting, financing obligations, dilution, and integration performance related to the Amiga acquisition.
- Progress in remediating the inventory-related material weakness and implementing the ERP system.
- Restoration and maintenance of Nasdaq audit committee and other listing compliance.
- Concentration risk: two customers represented 52% of Q3 revenue, and three customers represented 76% of nine-month revenue.