Beam Global Form 10-Q Summary
Business Context and Reporting Period
Beam Global develops and manufactures renewably energized infrastructure for electric vehicle charging, outdoor media, energy security, and disaster preparedness. Its products combine solar and/or wind generation with battery storage and are designed for rapid deployment without extensive grid construction.
This unaudited Form 10-Q covers the three and six months ended June 30, 2021, compared with the same periods in 2020. Beam operated in one reportable segment.
Financial Performance and Position
| Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 |
|---|---|---|---|---|
| Revenue | $2.12 million | $1.46 million | $3.49 million | $2.77 million |
| Gross income (loss) | ($0.27 million) | $0.06 million | ($0.42 million) | $0.02 million |
| Gross margin | (12.9%) | 3.8% | (12.1%) | 0.6% |
| Operating loss | ($1.64 million) | ($0.83 million) | ($2.89 million) | ($1.77 million) |
| Net loss | ($1.64 million) | ($0.83 million) | ($2.89 million) | ($1.78 million) |
| Net loss per share | ($0.18) | ($0.16) | ($0.33) | ($0.34) |
Six-month revenue increased 26%, driven by federal and enterprise customers and continued municipal demand. Product sales were $3.24 million, representing most revenue. Government customers represented 78% of six-month revenue, compared with 75% in the prior-year period.
Gross profitability deteriorated despite revenue growth. Management attributed the decline to higher initial costs for the EV ARC 2020, underutilized production capacity, higher steel prices, and increased shipping costs. Operating expenses rose 38% for the first half to $2.47 million, including higher sales and marketing, research and development, and non-cash stock-based compensation.
At June 30, 2021, cash was $25.31 million, compared with $26.70 million at December 31, 2020. Working capital was $28.18 million. Six-month operating cash use was $3.75 million, investing cash use was $0.21 million, and financing provided $2.56 million, principally from warrant exercises. Inventory increased to $1.94 million from $1.09 million, and accounts receivable increased to $2.81 million from $1.79 million.
The filing reports no outstanding conventional debt at June 30, 2021. Lease liabilities totaled $2.29 million, including $0.44 million current and $1.85 million noncurrent. Future undiscounted operating lease payments totaled $2.79 million. Cash deposits exceeding federally insured limits totaled $25.17 million.
Material Changes Versus the Prior Comparable Period
- Q2 revenue increased 46% to $2.12 million; first-half revenue increased 26% to $3.49 million.
- Q2 gross margin declined from 3.8% to negative 12.9%; first-half gross margin declined from 0.6% to negative 12.1%.
- Q2 net loss increased by $0.81 million, and the first-half net loss increased by $1.12 million.
- Operating cash use increased from $2.36 million to $3.75 million for the first six months.
- Financing cash inflow increased primarily because warrant exercises generated $2.64 million, compared with $0.32 million in the prior-year period.
- Shares outstanding increased to 8,897,955 at June 30, 2021 from 8,482,387 at December 31, 2020, primarily reflecting warrant and equity award activity.
Guidance, Outlook, Risks, and Unusual Items
Management provided no formal numerical revenue, margin, or earnings guidance. It reported a June 30 backlog of approximately $3.7 million and expects growth from federal, municipal, and enterprise customers. Management highlighted the Federal General Services Administration contract, proposed U.S. infrastructure investment, expanded sales and marketing efforts, and potential growth in workplace and public charging.
Management expects gross margins to improve with higher production volumes, better overhead absorption, manufacturing efficiencies, vendor negotiations, and lower component costs. However, it stated that the timing of positive cash flow cannot currently be predicted and that additional equity or debt financing may be required before the business becomes cash-flow positive.
- COVID-19 caused delays and cancellations in the opportunity pipeline; management stated that it had not materially affected the quarter but future impacts remain uncertain.
- Key risks include continued operating losses, insufficient capital, customer financing constraints, demand volatility, competition, raw-material cost increases, technological change, litigation, and shareholder dilution.
- Four customers represented 66% of Q2 revenue in aggregate. Government customers represented 78% of first-half revenue, creating customer and funding concentration risk.
- The company reported a material weakness in internal control over financial reporting related to manual inventory, purchasing, costing, and manufacturing processes. Management was evaluating ERP systems and planned to select one during 2021.
- Subsequent to quarter-end, 89,800 stock options were exercised cashlessly, resulting in 33,142 shares issued and $543,937 withheld for taxes. Authorized common shares were increased from 9.8 million to 350 million in July 2021.
- The company adopted ASU 2020-06 retrospectively without financial statement impact and continued to classify its public warrants as equity.
- No material pending or threatened litigation was reported.
Facts Investors Should Verify
- Whether the $3.7 million backlog converts into revenue on the expected schedule and at acceptable margins.
- Whether EV ARC 2020 production costs, steel prices, shipping costs, and overhead absorption improve sufficiently to restore positive gross margins.
- The pace of cash burn relative to the $25.31 million cash balance and the timing of any need for additional financing.
- Customer concentration, particularly exposure to government budgets, grants, and procurement cycles.
- Progress in remediating the material weakness and implementing an effective manufacturing and purchasing ERP system.
- The dilution impact of outstanding warrants, options, subsequent exercises, and the substantially increased authorized share count.