Beam Global Form 10-Q Summary
Business Context and Reporting Period
Beam Global develops, manufactures and sells renewable-energy infrastructure products 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 conventional grid infrastructure. This report covers the unaudited three months ended March 31, 2021, with comparison to the three months ended March 31, 2020.
Financial Performance and Position
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $1.372 million | $1.317 million | Up 4% |
| Cost of revenues | $1.522 million | $1.357 million | Up 12% |
| Gross loss | $149,120 | $39,641 | Loss increased $109,479 |
| Operating expenses | $1.103 million | $902,000 | Up 22% |
| Loss from operations | $1.252 million | $941,641 | Loss increased $310,154 |
| Net loss | $1.251 million | $942,521 | Loss increased $308,288 |
| Net loss per share | $0.14 | $0.17 | Improved per share due to higher share count |
| Net cash used in operating activities | $855,783 | $1.553 million | Use decreased $697,493 |
Gross margin was approximately negative 10.9% in Q1 2021 versus negative 3.0% in Q1 2020. Management attributed the deterioration primarily to higher initial costs for the EV ARC 2020 product, increased steel prices and higher shipping costs. Operating expenses increased due to higher non-cash compensation, sales personnel, research and development headcount, legal expense and other costs.
Revenue consisted primarily of product sales of $1.265 million, with maintenance fees of $11,243, professional services of $3,750 and shipping and handling revenue of $98,820, offset by $6,848 of discounts and allowances.
At March 31, 2021, cash was $28.214 million, working capital was $29.507 million and total assets were $34.464 million. Total liabilities were $3.949 million, consisting largely of operating lease liabilities. The company reported no interest-bearing debt outstanding; its prior related-party convertible note, PPP loan and auto loan had been repaid before the period end. Accumulated deficit was $52.273 million.
Cash increased by $1.511 million during the quarter. Financing activities provided $2.423 million, primarily from warrant exercises, while operating and investing activities used $855,783 and $55,574, respectively. Inventory increased to $1.553 million from $1.093 million at December 31, 2020.
Material Changes Versus the Prior Comparable Period
- Revenue increased 4%, supported by shipments to municipalities, federal agencies, a university, a utility company and enterprise customers, including Jeep and Electrify America.
- Gross loss expanded substantially as the company continued to absorb launch and production costs for the EV ARC 2020, while steel and shipping costs increased.
- Operating expenses rose 22%, including increased sales and research and development staffing and higher stock-based compensation.
- Operating cash use improved from $1.553 million to $855,783, partly because the prior-year period included repayment of a related-party deferred compensation note and larger working-capital uses.
- Financing cash inflows increased to $2.470 million from warrant exercises, compared with $282,350 in the prior-year period.
- Weighted-average shares increased to 8.765 million from 5.523 million, reflecting prior equity issuance and warrant exercises.
- Government customers remained significant, representing 70% of Q1 2021 revenue versus 82% in Q1 2020. Three customers represented 32%, 12% and 10% of Q1 2021 revenue.
Guidance, Outlook, Risks and Unusual Items
Management reported a March 31, 2021 backlog of approximately $1.2 million and expects demand for EV-charging infrastructure to increase. The company highlighted its GSA Multiple Award Schedule contract, proposed federal investment in electric-vehicle infrastructure, geographic expansion, workplace charging demand and potential outdoor-media sponsorship opportunities as growth drivers.
Management expects gross margins to improve with higher production volumes, better overhead absorption, labor efficiencies, lean-manufacturing initiatives, vendor negotiations and possible reductions in battery and solar-panel costs. However, management stated that it cannot predict when or whether the company will achieve positive cash flow and may need additional equity or debt financing until it does so. Management believes existing cash is sufficient to fund liabilities and operations for at least the twelve months following the filing date.
- COVID-19 caused delays and cancellations in the opportunity pipeline, although management stated it did not materially affect Q1 2021 financial position or results.
- The business remains exposed to demand volatility, competition, technological obsolescence, loss of incentives, raw-material and shipping-cost inflation, customer financing constraints and the need to raise additional capital.
- Customer and government concentration creates revenue and collection risk.
- As of March 31, 2021, $28.219 million of cash deposits exceeded federally insured limits.
- The company disclosed a material weakness related to manual inventory, manufacturing and purchasing processes and stated that disclosure controls were not yet sufficient to ensure timely reporting. Management planned to select an ERP system in fiscal Q3 2021.
- The company had a five-year facility lease through August 2025, with total undiscounted future minimum payments of $2.949 million as of March 31, 2021.
- There were no material pending legal proceedings and no material off-balance-sheet arrangements.
- After quarter-end, warrants for 18,233 shares were exercised for $114,868, and additional restricted stock grants were approved for directors and the CEO.
Important Facts for Investors to Verify
- Whether revenue growth converts into positive gross margins as EV ARC 2020 production scales.
- The pace of backlog conversion and the sustainability of government and major-customer demand.
- Cash burn, warrant-exercise proceeds and the timing or terms of any future capital raise.
- Progress in remediating the inventory and manufacturing-control material weakness and implementing the planned ERP system.
- Exposure to steel, component, labor and shipping-cost inflation.
- Potential dilution from 337,633 outstanding stock options and 576,946 outstanding warrants as of March 31, 2021.
- The effect of customer concentration and federal, state and local government procurement cycles on quarterly results.