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Beam Global (NASDAQ:BEEM) rebounded sharply on Friday after an initially choppy session on Thursday post-earnings. The initial reaction, according to CEO Desmond Wheatley, was a result of the market misunderstanding the initial print.
In that quarterly result posted on Wednesday evening, Beam posted a mixed result, missing on the bottom line despite exceeding revenue expectations amid record sales. Additionally, the company’s cash pile slipped to $1.7M as compared to $21.9M at the close of 2021. The quarter was made somewhat noisier by teh
However, analysts indicated that the company should still have “breathing room” with an important milestone in reaching breakeven EV ARC gross margins on a GAAP basis for the first time. Further, the net loss for the quarter that outpaced expectations was largely driven by one time, non-cash charges.
According to Wheatley, the margin improvements and volume increases should be the focus moving forward, signaling the company’s progress toward overall profitability as production ramps. At the moment, he indicated that costs of materials are beginning to come down while efficiency improves.
“As we’ve increased volume, which has been very dramatic, the overhead burden is shared amongst a greater number of units and therefore the burden on gross margin is less,” he explained. “Beyond that, we are becoming more efficient, and our engineering teams are improving upon our product, making it higher quality but less expensive to make, and we are now able to force better pricing onto our vendors as we buy more steel, copper, and components.”
He added that the acquisition of AllCell helped improve costs due to the in-house production of batteries at its Illinois plant. Wheatley said that the lowered costs from internal use of batteries “will end up paying what [Beam] paid for the company.” That will also aid the company’s strides toward reaching overall profitability, in his view.
Finally, Wheatley said that the factoring in of cash, inventory, accounts receivable, and prepaid expenses makes the cash balance significantly healthier. As such, he considers the $1.7M cash balance that drew attention as ultimately illusory.
To be sure, Seeking Alpha’s Quant Team retains a Hold rating on the stock, largely due to the remaining uncertainty about profitability. That metric is contrasted with high marks for momentum and growth assigned by the analysts. The team’s caution also breaks with the bullish sell-side consensus, which expects over 65% upside for the stock.
Key Customers
On the growth front, Wheatley talked about the company’s rising revenue overall, but also homed in on the specific customers fueling demand.
In its latest report, the EV charging company noted that it received the three largest orders in company history in fiscal year 2022. This included a $29.4M contract for the U.S. Army, an $11.7M order for the U.S. Department of Veterans Affairs, and a $5.3M order for New York City. However, Wheatley warned that these big contracts for the public sector are obscuring a comeback for sales to shopping centers, businesses, and other private sector buyers post-COVID.
“Since the fear of COVID has abated, we saw an 1190% increase in commercial sales, reaching 35% of our revenues,” he explained. “It was almost entirely government sales in the prior year as businesses and office buildings just did not install chargers.”
Wheatley also flagged the strong revenue growth year over year, making the raw increase in sales to commercial customers more eye-catching. Though he noted that rising interest from clients like the US military is not entirely surprising, especially as off-grid technologies like Starlink have become vital to warfighting capability.
“The truth of the matter is, and I hate to say it, the war in Ukraine is very supportive of our model,” he noted. “One of the big reasons that the military buys our products is that we can continue to charge their vehicles even in a blackout or brownout.”
International Expansion
Even beyond Ukraine and the extraordinary circumstances in the region, Wheatley foresees significant opportunity ahead in the European continent at large for the San Diego-based company.
In particular, Wheatley the European Union’s shift away from Russian fuel has created an opportunity. That, coupled with the bloc’s aggressive emission standards, has paved the way for a disruptor such as Beam, he said.
“Europe has become, correctly, very worried about external fuel sources after being very reliant upon Russia for natural gas, for example. They are now realizing how foolish that had been. Our products do not rely upon any external source for electricity,” Wheatley said. “We don’t have these vulnerabilities either with foreign sources of energy or with centralized vulnerabilities that come along with the grid.”
As of yet, the company has not branched out into Europe, but intends to do so in coming years.
However, Wheatley noted that the concerns about grid vulnerabilities apply not only to Europe. He highlighted certain efforts to take out sections of the grid even in the United States as a sign of the major issues that problems with the power grid can create. As EV adoption accelerates, that only amplifies the risk of power outages associated with the grid, in his view.
Shares of Beam Global (BEEM) bounced about 10% on Friday, rebounding sharply from a down-day post earnings and bookending a nearly 30% jump for the stock in the past 6 months. Still, the solar-charging company’s stock remains down about 30% in the past year and significantly below its late-2020 peak.