Beam Global 2021 Q3 Form 10-Q Summary
Business Context and Reporting Period
Beam Global is a San Diego-based cleantech company that develops, manufactures and sells renewably energized infrastructure, primarily off-grid electric-vehicle charging systems, outdoor media platforms and energy-security products. The filing covers the three and nine months ended September 30, 2021, with unaudited GAAP financial statements. The company operated in one reportable segment.
Key Financial Metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Revenue | $2.02 million | $1.24 million | $5.51 million | $4.01 million |
| Gross loss | $(0.21) million | $(0.19) million | $(0.63) million | $(0.17) million |
| Gross margin | (10.3%) | (15.3%) | (11.4%) | (4.3%) |
| Operating expenses | $1.48 million | $0.91 million | $3.95 million | $2.70 million |
| Net loss | $(1.69) million | $(1.10) million | $(4.58) million | $(2.88) million |
| Net loss per share | $(0.19) | $(0.17) | $(0.52) | $(0.50) |
| Cash flow from operations | Not separately provided for the quarter | Not separately provided for the quarter | $(5.16) million | $(3.23) million |
At September 30, 2021, cash was $23.08 million, working capital was $26.13 million and total assets were $31.09 million. Total liabilities were $3.64 million, consisting primarily of operating lease liabilities totaling $2.18 million; the filing reports no outstanding conventional debt. The accumulated deficit was $55.60 million. Cash declined from $26.70 million at December 31, 2020.
Nine-month investing cash outflow was $0.53 million, including $0.47 million for equipment and $0.06 million for patent costs. Financing cash inflow was $2.07 million, principally from warrant exercises, partially offset by $0.61 million used for taxes related to cashless option exercises.
Material Changes Versus the Prior Comparable Period
- Q3 revenue increased 63% year over year; nine-month revenue increased 38%, primarily from deliveries under a 52-unit California order and increased federal-agency sales.
- Despite higher revenue, the nine-month gross loss widened to $0.63 million from $0.17 million. Management attributed the deterioration to higher production costs for the EV ARC 2020, increased steel and component prices, and higher shipping costs.
- Q3 operating expenses increased 63%, and nine-month operating expenses increased 47%, reflecting higher sales and marketing, research and development, stock-based compensation, director compensation, insurance and public-company costs.
- Nine-month net loss increased $1.70 million to $4.58 million, while operating cash use increased $1.93 million to $5.16 million.
- Inventory increased to $2.13 million from $1.09 million at year-end 2020, and accounts receivable increased to $2.48 million from $1.79 million.
- Shares outstanding increased to 8.95 million from 8.48 million at December 31, 2020. At September 30, 2021, options to purchase 222,383 shares and warrants to purchase 542,823 shares remained outstanding.
Guidance, Outlook, Risks and Unusual Items
Management reported new orders of $5.4 million during the third quarter and a backlog of $7.1 million at September 30, 2021. It expects demand for EV charging infrastructure to benefit from government investment, the federal GSA Multiple Award Schedule contract, and growth in corporate and public charging markets. No formal revenue, earnings or margin guidance was provided.
Management expects production efficiencies, lean-manufacturing initiatives, vendor negotiations and higher production volumes to improve per-unit costs and gross margins. It also expects elevated steel and transportation costs to continue for several quarters. Management cannot predict when, or whether, the company will achieve positive cash flow, although it believes available cash is sufficient to fund liabilities and operations for at least twelve months from the report date.
- Revenue concentration is significant: one customer represented 74% of Q3 revenue and 36% of nine-month revenue. Government customers represented 71% of nine-month revenue.
- COVID-19-related supply shortages, longer lead times, shipping disruptions and higher costs remain risks, although management stated the pandemic had not materially adversely affected the nine-month results.
- The company has incurred recurring operating losses and may need additional equity or debt financing before achieving positive cash flow, creating potential dilution and financing risk.
- Management concluded that disclosure controls were not sufficient as of September 30, 2021. A material weakness remained relating to manual inventory, purchasing and product-costing processes. Selection of a new ERP system was delayed and was expected in early 2022.
- The company had $23.18 million of cash deposits above federally insured limits.
- No material pending or threatened litigation was reported. The company reported no material off-balance-sheet arrangements.
- Subsequent to quarter-end, an employee received an option to purchase 20,000 shares at an exercise price of $26.80 per share, vesting over four years.
Important Facts for Investors to Verify
- Whether the $7.1 million backlog converts into timely deliveries and cash collections, particularly given customer and government concentration.
- Progress toward positive gross margins, including the effect of EV ARC 2020 production costs, steel prices, transportation costs and manufacturing utilization.
- Cash-burn trends and the adequacy of the $23.08 million cash balance if operating losses continue.
- Accounts receivable collection timing and the effect of the $1.01 million inventory buildup on liquidity.
- Remediation of the material weakness and implementation of the planned ERP and inventory-control systems.
- Potential dilution from outstanding options, warrants and future capital raises.
- The company’s ability to scale sales beyond the California order and reduce reliance on government and individual-customer revenue.