The investor call with Beam Global (NOT an earnings call–that’s the end of March) just finished. Since I submitted a question to IR and introduced the company, I figured I should write up my notes. Reminder that the ticker is BEEM.
CEO and CFO were on the call. The CFO did not speak. Brief intro by Desmond Wheatley, CEO. Most of the 75 minutes or so was on questions.
I’m going to lump the questions into categories–which the company largely did, but these are not exactly in order. All questions were submitted ahead of time–no analyst questions unless they were submitted with the others. All questioners were anonymous to those listening.
TIMING QUESTIONS
Q: When will there be positive EPS?
A: Not going to guess at dates. They have a small float. It is “on the visible horizon.”
Q: When will ARC be sold in Europe?
A: They just completed the Amiga acquisition in Q4. Sales team hard at work. We will “see sales sooner than later.” The time to ramp sales in Europe will “beat the socks off the time it took in the US.”
Q: When will EV Standard be available? (My note: I’m not sure of the product referenced here, but I think it is the street charging via streetlight product they just acquired with Amiga–now Beam Europe.)
A: “Soon.” Because it already existed and had contracts and patents with Amiga, they are bringing it quickly to market.
Q: When will Amiga’s historical financials be disclosed?
A: When required. They closed the acquisition in Q4, so some level will be required in that report. More as time goes on.
Q: When will the factory start doing double shifts?
A: When the first shift is as efficient as possible and it is needed to meet demand. Occasionally they do run 1.5 or 2 shifts now, but Wheatley believes there are more efficiencies that can be achieved. He pointed out that they had 300% growth last year and absorbed that growth in the same factory.
Q: When will the volume push them to 10% gross margins?
A: Right now. They are there. It is the “current level.” That will show up along with the price increase in Q2 and 2H of this year. Then it will improve from there.
MACRO TAILWIND/HEADWIND QUESTIONS
Q: OMG…EV sales are declining! How will that affect your business? (My note: There were several questions that boiled down to this.)
A: EV sales are still accelerating, just not at the same pace. It is still very much a growing market; it is still the future. Government regulations require it in some places (especially Europe). Beam provides infrastructure and infrastructure is playing catch-up. There will be lumpiness in EV sales. There will be far less lumpiness in infrastructure trying to enable that growth.
Wheatley pointed out that the EV sales (and manufacturing) slowdown was due primarily to the lack of infrastructure and cost. He made the point in as many ways as there were questions that fixing the lack of infrastructure was exactly their business. He has not heard or seen a single thing about a slowdown in demand for infrastructure.
He pointed out that the cost for EVs was currently close to equal the cost of ICE vehicles that were similarly outfitted. A lack of stripped down EV options, made them more costly when there were stripped down ICE options.
He then stressed that 47% of the current workforce in ICE vehicles is dealing with parts that are not needed in EVs. He sees the cost trends in EVs only going down with the cost of ICE vehicles rising dramatically.
Lastly, part of the infrastructure problem is not just charging stations but the ability of local grids to handle charging infrastructure. Their systems can be connected to the grid, but don’t require it.
Q: Government mandates/incentives for EVs slowing?
A: Not in Europe. The trend will take over in the US. It will have to. Will depend on the administration. But they are diversifying their revenue stream for that reason.
Q: Tesla vs Beam on fast charging?
A: First, most people don’t need fast, except on long trips. He thinks the majority of chargers will only need to be a medium speed as current owners charge at home or at work over a longer period of time.
Second, Beam doesn’t make chargers. They make the infrastructure that powers whatever charger you want to put into it. They are charger-agnostic.
Q: Are they being helped by the Infrastructure Bill?
A: Indirectly. There’s a trickle down effect from those who receive grants.
Q: What about disasters? You have chargers in California. How did they do with the recent atmospheric river rainfall?
A: Just fine. The ARC systems are designed to work in a flood of 9.5 ft and 160 mph winds. They have a system in the Caribbean that has already withstood 185 mph winds. Their CA units are just fine. P.S. EVs fare better in floods than ICE vehicles.
Q: What about places that don’t get a lot of sun? Can you operate?
A: Yes. It will still be cheaper than the alternative. Less sun means a smaller charge (fewer miles) for off-grid use, but the low cost compared to installed charging systems will still earn them business. And since their systems can be connected to the grid if needed, full charging is still available for less.
GROWTH-COMPETITION-MOAT QUESTIONS
Q: Do you have an objective for deploying a certain number of units?
A: The TAM is every car parking space in the world. We hope to take a percentage of that. Conversations in DC have indicated that about 25% of charging there needs to be off-grid. They are really the only game in town for that.
Answer for a different question referenced the sales cycle being longer but the volume larger for the EV Standard (streetlight product).
Q: Do they have funding for growth? They have not used their line of credit. What circumstances would make them tap that.
A: There are institutions eager to fund whatever they need into the billions of dollars. So, yes, they can get whatever funding they need for growth. They would tap the line of credit if they got a very large order and needed to.
Q: What protection do they have from competitors?
A: Competitors? If anything, they are afraid of the lack of competition since competition makes everyone smarter. When that should come along, as it must, they will have the first-mover advantage.
Q: Will someone take them over?
A: “We get more attractive every day, even if we don’t get married.” His goal was value for shareholders. (My note: He did not seem averse to being acquired nor desperate for it.)
Q: Any threats to growth?
Biggest need is getting the right talent. The Amiga acquisition was a big help in that regard. He also named market sentiment as a threat because the business will be lumpy. That threat can be mitigated with enough diversification, which they are working on. “Fortune will favor the bulls.”
Q: What’s your moat?
A: Patents.
REVENUE-USE OF SHARES-COMPENSATION-PRICE ACTION Q’s
Q: What about recurring revenue? Is there any? (My note: This was the substance of my question. Clearly I wasn’t the only one asking.)
A: Correct that it does not exist now. Whatever the customer asks for, they get. Lots of that happening. Potential for recurring revenue in the future would be contracts for the maintenance and servicing for the EV Standard (the streetlight product) and licensing for networks of ARC systems. They are making plans to bring in additional streams.
Q: Will you be making more acquisitions?
A: Yes. They still have holes to plug in their offerings. They aim to diversify and if the right company comes along that can help them do that, acquisition is definitely on the table.
Q: Why aren’t they using debt for acquisitions? Why dilute shares?
A: Don’t want to be paying interest. They want to be first to the profitability finish line. Debt would be an obstacle to that. Being able use shares as currency is “one of the few benefits to being a public company.” We take advantage of that.
They have just 14M shares outstanding-very low float. No institutional investors are worried about them acquiring with stock. Larger institutions would actually like them to have a higher float. They are focused on share value. (My note: the lack of debt and low float was emphasized in several places.)
Q: Why didn’t Beam participate in the small-cap market rally at the end of 2023?
A: We’re not a small cap. We’re a micro cap. Look up “trends in micro caps” and compare that chart with ours.
Q: What is Sales & Marketing doing to diversify client base? Seems like all government contracts.
A: They had commercial contracts first. Covid wiped those out. Government came in. Commercial sales are now “roaring back.” They do not intend to rely on just one kind of client and work actively to diversify.
Q: (There were a number of questions about board members selling stock, using stock as compensation, why is C-Suite getting bonuses, wondering what incentives they were putting out to boost the stock price, stock deals, etc. These were countered with the reality of how it all works, the regulations that are in place, the need to retain good talent, and the checks and balances for making sure compensation is in-line with other similar companies. Wheatley pointed out that they are actually in the bottom 50% of companies for compensation.)
Session was recorded and should be available soon here.
My take overall: I thought the call was a good thing for them to do; but it also made plain that having analysts who cover the company/industry asking questions makes for more interesting and informative answers!
For me, the most helpful emphasis was that they are NOT a charging system. They are the infrastructure for charging systems and work with any/all chargers. I knew that, but have still drifted back and confused it in some of my discussions with others.
I think they have an incredible advantage and will do very well. I wish the CEO was more mission driven, and I wish he were more conversant with the tech. Maybe he is–there weren’t really tech-related questions. But true techies work that fascination into every conversation anyway. I’d like to know more about how they are innovating.
They seem to be innovating through acquisition, which is fine if they do it well. That seems to be the case so far and is not unlike a tiny Palo Alto in that regard (which has been a great performer for me). Wheatley is a strong advocate for the company, and I like that he stresses efficiency, discipline, and getting to profitability.
Happy to be in it for now, and am eager to see how it plays out. The opportunity seems both insanely large and obvious.
JabbokRiver
Long BEEM, 7.37% position at today’s close.
