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global beam (NASDAQ: BEEM) rallied sharply on Friday after an initially choppy session on Thursday after gains. The initial reaction, according to CEO Desmond Wheatley, was the result of the market not understanding the initial impression.
In that In the quarterly result released Wednesday night, Beam posted a mixed result, not a bottom line despite beating revenue expectations amid record sales. Additionally, the company’s cash pile shrank to $1.7 million from $21.9 million at the end of 2021. The quarter was made somewhat noisier by the
However, analysts indicated that the company should still have “breathing room” with a major milestone to achieve break-even EV ARC gross margins on a GAAP basis for the first time. Additionally, the quarterly net loss that exceeded expectations was largely due to one-time non-cash charges.
According to Wheatley, margin improvements and volume increases should be the focus going forward, indicating the company’s progress toward overall profitability as production increases. For now, he says material costs are starting to come down as efficiency improves.
“As we increase volume, which has been very drastic, the burden of overhead is shared across a greater number of units and therefore the burden on gross margin is less,” he explained. “Beyond that, we are getting more efficient and our engineering teams are improving our product, making it higher quality but less expensive to manufacture, and now we can command better prices from our suppliers as we buy more steel, copper, and components.”
He added that the AllCell acquisition helped improve costs due to in-house battery production at its Illinois plant. Wheatley said the reduced costs from internal use of the batteries “will end up paying for what (Beam) paid for the company.” In his opinion, that will also help the company move towards achieving overall profitability.
Finally, Wheatley said that factoring in cash, inventory, accounts receivable and prepaid expenses makes for a significantly healthier cash balance. As such, he views the $1.7 million 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 stands in contrast to the high ratings for momentum and growth assigned by analysts. The team’s caution also breaks with the bullish sell-side consensus, which sees more than 65% upside for the stock.
key clients
On the growth front, Wheatley talked about growing revenue for the company overall, but also focused on the specific customers driving demand.
In its latest report, the electric vehicle charging company noted that it received the three largest orders in company history in fiscal 2022. This included a $29.4 million contract for the US Army. , an $11.7 million request for the US Department of Veterans Affairs, and a $5.3 million request for New York City. However, Wheatley warned that these large contracts for the public sector are obscuring the return of sales to malls, businesses and other private sector buyers after COVID.
“Since the fear of COVID abated, we have seen a 1,190% increase in business sales, reaching 35% of our revenue,” he explained. “Almost all of it was government sales in the previous year, as businesses and office buildings simply didn’t install chargers.”
Wheatley also pointed to strong year-over-year revenue growth, making the gross increase in sales to business customers all the more striking. Though he noted that the growing interest from customers like the US military isn’t entirely surprising, especially as off-grid technologies like Starlink have become vital to combat capability.
“The truth of the matter is, and I hate to say it, the war in Ukraine is very supportive of our model,” he said. “One of the main reasons the military buys our products is that we can continue to charge their vehicles even in the event of blackouts or blackouts.”
International expantion
Even beyond Ukraine and the region’s extraordinary circumstances, Wheatley sees a significant opportunity on the European continent at large for the San Diego-based company.
In particular, Wheatley, the European Union’s move away from Russian fuel has created an opportunity. That, along with the bloc’s aggressive issuance standards, has paved the way for a disruptor like Beam, he said.
“Europe has become, correctly, very concerned about external fuel sources after relying heavily on Russia for natural gas, for example. Now they are realizing what a fool they had been. Our products are not dependent on any external source of electricity,” Wheatley said. “We don’t have these vulnerabilities either with foreign power sources or with centralized vulnerabilities that come along with the grid.”
So far, the company has not diversified into Europe, but it intends to do so in the coming years.
However, Wheatley noted that concerns about network vulnerabilities apply not just to Europe. He singled out efforts to remove sections of the grid even in the United States as a sign of the major problems that problems with the electrical grid can create. As EV adoption accelerates, that only amplifies the risk of grid-associated power outages, in his opinion.
Shares of Beam Global (BEEM) rebounded around 10% on Friday, rebounding sharply from a day down after earnings and confirming a nearly 30% jump for the stock over the past 6 months. Still, the solar charging company’s shares remained around 30% below last year and significantly below its late-2020 peak.
Read the latest transcript of the company’s earnings call.
