Beam Global Form 10-Q Summary
Business Context and Reporting Period
Beam Global develops and manufactures renewable-energy infrastructure for electric-vehicle charging, energy security, disaster preparedness, outdoor media, and energy storage. The company operates as one reporting segment and sells products including EV ARC, Solar Tree DCFC, EV ARC DCFC, and Beam AllCell battery systems.
This unaudited Form 10-Q covers the three months ended March 31, 2023, with comparisons to the three months ended March 31, 2022. The filing was dated May 15, 2023. The company had 10,760,195 common shares outstanding as of May 9, 2023.
Key Financial Metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $13.020 million | $3.770 million | Up 245% |
| Gross profit (loss) | $0.005 million | ($0.305 million) | Improved |
| Gross margin | Approximately 0.04% | (8.1%) | Improved by approximately 8.1 percentage points |
| Operating expenses | $3.846 million | $1.975 million | Up $1.871 million |
| Loss from operations | ($3.841 million) | ($2.280 million) | Widened |
| Net loss | ($3.831 million) | ($2.278 million) | Widened |
| Basic and diluted loss per share | ($0.38) | ($0.24) | More loss per share |
| Net cash used in operating activities | ($0.619 million) | ($1.907 million) | Improved |
| Cash balance at period end | $0.990 million | $19.176 million | Down from $1.681 million at December 31, 2022 |
Revenue consisted primarily of $12.811 million of product sales. The company delivered 152 EV ARC units in Q1 2023 versus 45 in Q1 2022. Federal customers generated $10.6 million of Q1 2023 revenue, compared with $0.8 million in the prior-year quarter. Two customers represented 80% and 10% of revenue, respectively; the U.S. Army alone represented 80% of revenue and 76% of accounts receivable.
At March 31, 2023, total assets were $40.982 million, current assets were $23.456 million, total liabilities were $19.130 million, and stockholders’ equity was $21.852 million. Accounts receivable were $6.882 million and inventory was $12.745 million. Working capital was $5.5 million, reduced by a $6.8 million current contingent-consideration liability related to the AllCell acquisition.
The filing does not report conventional bank debt on the condensed balance sheet. Liabilities included $6.778 million of contingent consideration, operating lease liabilities totaling $1.537 million, accounts payable of $7.080 million, and accrued expenses of $2.578 million. In March 2023, the company secured a $100 million credit facility with OCI Group, but the provided filing text does not clearly state amounts drawn, pricing, maturity, or other material terms.
Material Changes Versus the Prior Comparable Period
- Revenue increased $9.250 million, primarily from fulfillment of a large federal backlog and $1.8 million of energy-storage revenue from the AllCell acquisition.
- Federal revenue increased by $9.8 million year over year. Government customers represented 86% of Q1 2023 revenue versus 69% in Q1 2022.
- Gross margin moved from a negative 8.1% to approximately breakeven. Excluding $0.2 million of non-cash acquired-intangible amortization, management stated that gross margin would have been approximately 1.8%.
- Operating expenses increased to $3.846 million, reflecting the inclusion of a full quarter of AllCell costs, higher research and development spending, audit fees, administrative compensation, and non-cash compensation.
- Operating cash outflow improved by $1.288 million, mainly because of increased accounts payable and accrued expenses, partially offset by higher accounts receivable and inventory.
- Cash declined by $0.691 million during the quarter. Financing provided $0.258 million, including $0.158 million from the committed equity facility and $0.100 million from warrant exercises.
- Shares outstanding increased to 10.238 million at March 31, 2023 from 10.178 million at December 31, 2022. The company also issued 200,000 warrants for investor-relations services, with a stated grant-date fair value of $1.6 million.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
Management expects revenue growth, higher production volumes, improved labor efficiency, lower battery costs from the AllCell acquisition, supply-chain cost reductions, and lean-manufacturing initiatives to improve gross margins. Management expects new pricing and design changes to begin benefiting results in Q2 2023 and later periods.
The company expects to remain loss-making for a period of time but believes it can become profitable in the next few years. No formal revenue, earnings, or margin guidance was provided, and management stated that positive cash flow cannot currently be predicted.
- The business is highly dependent on government customers, particularly the U.S. Army and other federal agencies, and revenue timing may be uneven because of customer approvals and budget cycles.
- Management identified continuing risks from insufficient capital, persistent losses, potential dilution, raw-material and component cost volatility, supply-chain disruptions, competition, technological obsolescence, and changes in tax incentives or government funding.
- The company had only $0.990 million of cash at March 31, 2023 and may need additional equity or debt financing until it achieves positive cash flow. It had the right, but not the obligation, to sell up to $30 million or 2.0 million shares under the B. Riley committed equity facility.
- Outstanding warrants totaled 624,306 shares and could potentially generate approximately $6.1 million if exercised, subject to market conditions and holders’ ability to exercise.
- The company reported a material weakness in internal control over financial reporting related to inventory tracking, valuation, and manual manufacturing processes. It began implementing stronger inventory controls and a new ERP system, scheduled for completion in July 2023.
- Approximately $0.9 million of cash deposits exceeded federally insured limits. All deposits were initially held at Silicon Valley Bank; the company stated that it had full access to the funds after the transfer to Silicon Valley Bridge Bank and subsequently established Bank of America accounts.
- No material pending or threatened litigation was reported, and the company stated that it had no material off-balance-sheet arrangements.
Important Facts for Investors to Verify
- Whether the $100 million OCI Group credit facility has been drawn and its interest rate, collateral, covenants, maturity, and availability.
- The sustainability and quality of the sharp revenue increase, including the timing of remaining federal backlog deliveries and customer concentration.
- Whether gross margins improve as anticipated after AllCell battery integration, supply-chain pricing changes, and manufacturing initiatives.
- The company’s cash runway and need for additional equity or debt financing, including potential dilution under the B. Riley facility and from warrant exercises.
- The terms and eventual share settlement of the $6.778 million AllCell contingent consideration obligation.
- Progress in remediating the inventory-related material weakness and completing the ERP implementation.
- The filing’s cash-flow discussion refers to a $4.1 million net loss for Q1 2023, while the condensed statements report a $3.831 million net loss; investors should verify the intended amount.