Good day and welcome to the Beam Global Second Quarter 2023 Financial Results and Corporate Update. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Kathy McDermott, CFO. Please go ahead.

Thanks, Joe, and good afternoon. Thank you for participating in Beam Global's 2023 second quarter conference call. We appreciate you joining us today to hear an update on our business. Joining me is Desmond Wheatley, President, CEO and Chairman of Beam. Desmond will be providing an update on recent activities at Beam followed by a question-and-answer session. But first, I'd like to communicate to you that during this call management will be making forward-looking statements including statements that address Beam's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Beam's most recently filed Form 10-K and other periodic reports filed with the SEC. The content of this call contains time-sensitive information that is accurate only as of today, August 14, 2023. Except as required by law, Beam disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. After the market closed today, Beam Global issued a press release and our Form 10-Q announcing our fiscal 2023 Q2 and year-to-date financial results. As you will see, we had an excellent quarter. In fact, the best in our history with material improvements across all financial metrics. Since you have the numbers in front of you, I will save you the time of rereading that to you. This press release and our Q2 Form 10-Q are available on our IR website and can also be accessed via sec.gov. In addition, you will find a supplemental information deck on our IR website. And with that, I will turn the call over to Desmond Wheatley.

Thank you, Kathy. And thank you all for joining us today to hear this update on our operating activities for Q2 of 2023. Welcome, everybody. The second quarter of 2023 is now the 10th quarter in a row of growth for Beam Global. But the Beam team has really not missed a beat for the past few quarters and especially this time. The production team produced and delivered over 200 EVRs this quarter. That's essentially the same as all EVRs produced and delivered in 2022, and 2022 was by far our best full year production and deliveries up till this point. In other words, the Beam team is now on a cadence to produce and deliver as many or more EVRs in a quarter than we've produced in any full year prior to 2023. On the energy storage side of our business, we continue to produce more than 10 times more kilowatt hours of batteries than our Chicago-based team was producing before we acquired AllCell in March of 2022. And Q2 energy storage revenues were higher than in any quarter since the acquisition. But remember that we don't count internal use of factors as revenue for that side of our business. This fantastic increase in production and delivery has, of course, resulted in an equally fantastic increase in revenue. The $17.8 million in revenues we generated in Q2 represents a 379% increase over the same period last year. And looking at the first half, we generated around $31 million in revenues, which is about a 312% increase over the full first half of 2022. As I've already said, we're producing about 10 times more kilowatt hours of batteries than AllCell was before we acquired it. And we actually produced about six times more EVRs in the second quarter of 2022 than in the same period prior year. But our costs didn't increase at the same rate. We managed to squeeze all of this growth out of the same buildings, and while we're producing six times and ten times more product, we only increased our headcount by about 1.5 times. We increased our other overheads by even less. So with the same footprint and around 1.5 times more people, we've gone from just over $7 million of revenue in the first half of 2022 to almost $31 million in the first half of 2023. All this increase in production has come from a variety of different factors, and none of them were accidents. First of all, we're just better at what we do. The teams, both on the electric vehicle charging infrastructure product side and also on the energy storage side, have really gelled. I love walking through the factory and watching them. There's clearly a sense of teamwork. Things are moving more smoothly, and people are getting a lot more done with a lot less effort. We put a great deal of time and effort into figuring out how we can do things more efficiently. The people are happy with their work. They know they're getting things done and working smarter, not harder, has made the factory environment safer too. The other thing I love when walking the factory floor is observing how different it looks. We've invested in a lot of new tooling and fixturing, which makes us much more efficient while substantially reducing the opportunity for errors. EVRs are rolling through the factory now faster, more smoothly, more safely, and in far greater volumes. We're already producing more product now than many thought was possible when we first moved into this facility, but the great news is we still have a massive opportunity for further improvements. I believe a lot of work, consideration, some trial and error, and it's a process, not an event, but the team keeps doing it, and the evidence of the success of their efforts is clear to see in the numbers. I mentioned we've invested in a lot of new tooling and fixturing, but as any of you who've looked at our use of cash will have observed, we've not committed significant amounts of capital to these improvements. The fact is, we've done most of the tooling and fixturing ourselves. We have a talented and well-trained team, and no one is more qualified to make decisions about how to improve our manufacturing processes than the people who are actually making the product themselves. I have a corner office with a view of our driveway and the ingress and egress points from the factory. I'm often pleasantly distracted by watching the trucks rolling in, loaded with steel, batteries, electronics, solar modules, and all the other components and materials which are integrated into our products. On the other side, I watch the trucks rolling out with completed EVRs. The level of activity here is completely different than it was a few months ago, but here again, we know we can and will do so much more. Our improved production processes and efficiencies are important because they enable us to produce a lot more product faster at a time when the global demand for EV charging infrastructure is accelerating dramatically. But they're also important because they contribute so meaningfully to our ability to control the cost inputs of our products. Last quarter, I told you that our engineering and operations teams had identified improvements in the way we make our products, which would result in significant reductions in our cost of goods sold and, consequently, significant improvements in our gross profits. I also mentioned that we believe that we were at or near the end of the hyperinflationary environment which we have been tackling the last couple of years. Finally, I told you that as we increase the volumes of products running through our factory, the impacts of our fixed overhead would lessen, while labor costs per unit would come down. As it happens, we've so far only benefited from the latter of those areas of cost reduction. The engineering and manufacturing improvements that we've identified are just now starting to impact us halfway into this third quarter, which is actually pretty much exactly what I said during my last quarterly report to you. So we did not actually receive any cost reduction benefits in the quarter of a material nature from our improved engineering of the product. I’m always mindful of the massive increases in prices of components and commodities. While we don't see any significant decreases, we do anticipate that this will happen during the coming months and quarters. In fact, we have, for the first time in our history, a full-time purchasing manager to ensure that we are getting the most favorable pricing and the most efficient inventory leverage possible. In spite of not benefiting from these two areas of cost reduction, the Beam team was still able to improve our gross margins by over 12% when compared to the same period prior year. More or less, all of this margin improvement has come from increased overhead absorption and the increased efficiency in our labor, which I already described. Revenue per employee is actually about three times what it was just one year ago. We've now reported positive gross profits two quarters in a row, with the second quarter gross being 100 times greater than the first. I recognize we could have done better. It's hard to grow at the pace that we're growing and to do so efficiently without making errors. We're human. We made a couple of moves in the second quarter which in hindsight were not worth what we paid for them. That's going to happen from time to time, particularly as long as we're growing at this rate. What I'm encouraged by is the fact that the Beam team identified these errors and will not repeat them. So the process, which has delivered a 12% improvement year-over-year in gross margin, continues. We improve, we identify errors, we fix them, we become more intelligent and efficient in the way we produce the product, and as a result of all this, is that, even without the drastic changes or improvements, there's a sort of continual process of cost reduction, which results in further improved gross profits. You can rest assured that we will never consider that project complete. The good news is that the significant cost reductions the team identified in the second quarter are still ahead of us. We're implementing the first of those now and should see the full benefits of them at the beginning of the first quarter of 2024. And again, I think that's pretty much exactly what I said during our last call. And we've not just benefited from operating leverage where our direct costs are concerned. Our second quarter operating expenses, while they have increased 44%, are less as a percent of revenue than they were this time last year, and I think we're getting a lot of benefits from the various investments we've made. Clearly, increases like paying more sales commissions are a very good thing. But we're also adding more depth in management, finance, and crucially for a growing company like ours, human resources. We have a pretty simple rule at Beam Global, which is that if it doesn't make the product, improve the product, or sell the product, we don't invest in it. I'm confident that any increase in overhead spending, which is within our control, so I'm excluding costs like audit and various other public company expenses that are outside of our control, any increases which are within our control are adding value and setting us up for even more efficient and profitable growth. Remember that both our gross and net profit numbers include quite a lot of non-cash items, which do not truly reflect our spending. You can find details of those in our filings. Speaking of cash, we're in great shape where that's concerned as well, with around $24 million in cash and over $37 million in working capital, which I believe is a better metric for businesses like ours. We're in a great position to execute on our future business plans. In case we need further short-term liquidity for significant growth, we still have our as yet untapped $100 million line of credit, which is very competitively priced. Finally, we have no debt. Zero debt. Except as I should mention that we're making payments on a couple of new trucks which we had to add because of the expansion and the number of EVRs that we now have to deliver, which is a good thing. I can tell you that from my point of view, the most important aspect of the growth plans that we have is our expansion into Europe. There are about 405 million cars in Europe at the moment, compared to just under 300 million in the United States and just over 300 million in China. The European Union has announced a law banning all but zero-emission vehicles 12 years from now in 2035. Europe is also very aggressive about tackling climate change and moving towards carbon neutrality in the next couple of decades. This means that they're very focused on integrating renewable energy sources into their energy mix. The fires in Greece this year, which are being tragically replicated in Hawaii at the moment, have sharpened European resolve to a zero carbon energy future while increasing their needs for rapidly deployed infrastructure products. At the same time, the war in Ukraine and the worsening relations with Russia, from which Europe used to buy much of its natural gas used to generate its electricity, have greatly increased the valid perception of energy insecurity felt across Europe. Moreover, it's even harder to deploy grid-tied EV chargers in Europe than it is in the United States. When you put all that together, you see that there will be a lot of electric vehicle chargers deployed rapidly. They don't have enough electricity, and what they do have is nowhere near as secure as it should be. They need to transition to sustainable, renewable energy, and they need to do all of this in the next couple of decades. You certainly want to ask yourself, does anyone have a product that could solve all those challenges? Beam Global does, and it's a product with a great deal of credibility and over a decade of reliable service being used by customers like the U.S. Army, the Marine Corps, New York City, the State of California, and many others, along with a whole host of the best-known global corporations. So, you can perhaps see why a month ago or so, I was very excited to announce that we're entering into the process to acquire a company in Europe which will position us to manufacture and sell our products to the biggest and, what I think is, the most exciting markets in the world. Amiga DOO is a Serbian manufacturer of steel structures with integrated electronics. If you think about it, that's basically what our products are. It's one of the top manufacturers of smart street lamps in Europe. They've been in business since 1990, and they are profitable. They have 210 employees, of which around 30 are exactly the sort of engineers that we find challenging to recruit in the United States. By the way, those engineers cost less than a welder in California. They're great people, very well educated, they speak English, and they work hard. The facilities, the equipment, the experience, and the personnel required to make our EV ARC products, but they don't have our IP. If they did, it would take them very little learning and investment to start making EV ARCs. We intend to give them that IP as soon as the acquisition is complete. For the last 30 years, they've developed a fantastic reputation for selling quality products to the same customer profile as we've had so much success with in the United States. They have sold streetlights, energy infrastructure, communications towers, and security infrastructure to cities, states, militaries, and corporations in 16 different nations, including the United States. In fact, if you're in Florida, it's not unlikely that you walked under a streetlight manufactured by our target, Amiga. Now, in my list of things that I'm most excited about for this company, right after expanding our business into Europe comes developing the EV standard product. Beam Global is in the process of acquiring one of the top engineering and manufacturing companies in Europe, which develops, manufactures, and sells streetlights. When you combine our intellectual property, our engineering teams, their engineering teams, and their ability to manufacture, you simply can't come up with a more exciting combination regarding EV standard development and Beam Global growth. I've been spending a lot of time in Europe, particularly in Serbia with our new friends at Amiga. I'm increasingly impressed with their capabilities and their enthusiasm for joining with Beam in creating a sustainable EV charging infrastructure powerhouse that we intend to be unrivaled in the biggest electric vehicle market in the world. But the benefits from this acquisition will not only impact our European goals. As I've already mentioned, we will absorb a highly qualified and talented engineering team, which has many capabilities that we seek for our U.S. business. A perfect example of that is the fact that we've had the EV standard patented since 2019, but have not yet produced it because our in-house engineering team has been so busy contributing to the phenomenal growth of our EV ARC product set. After we close this transaction, we'll be able to send engineering tasks to our team in Serbia at the end of any given day and have work products in our inboxes upon our return the following morning, thanks to the difference in time zones. I believe this will dramatically enhance our ability to make improvements to our existing products, as well as to continue to bring new and exciting innovations to the field of clean transportation. Beyond that, I think it's likely that at least in the beginning, we'll produce the EV standard product in Serbia, even for the U.S. market. First of all, our cost structure will be much lower in Serbia. And because, whereas we can only fit two EV ARCs into a 40-foot container, we should be able to stack many EV standards into the same space, meaning that the cost of shipping will be much less impactful than they are with EV ARC. So much so, in fact, that I think it's likely that at least in the beginning, as I said, it will make a lot more economic sense to manufacture all EV standards in Serbia, whether they're deployed across Europe or shipped to the United States. I travel a lot in the United States, Europe, and the Middle East, and I can tell you that everywhere I go, I've met with nothing but enthusiasm for EV ARCs and nothing but impatience for the EV standards. I cannot wait to start to sell EV ARCs in Europe and to complete the development of EV standards. Just letting some jets fly over here, folks. If you all know, we're next to the Miramar Airport, Marine Corps Air Station. Anyway, as I said, I think it's going to make a lot more sense to manufacture all EV standards in Serbia, whether they're deployed across Europe or shipped to the United States. And I was going on to say that having traveled a lot in the United States and Europe, I've met a lot of enthusiasm for the EV ARC and nothing but impatience where the EV standard is concerned. I can't wait to start selling both of them in Europe and to complete the development of the EV standard and to start manufacturing and selling it there and, of course, over here as well in the United States. I'm very confident with the way the due diligence process is going. We've engaged an excellent and highly professional team in Serbia to assist us in this process, both on the legal and business side. I'm very happy with the way the deal is structured, just as I was with the way we were able to execute on the AllCell transaction. This deal is different in that, unlike AllCell, which was an all-stock deal, this is a combination of stock and cash. So I'm delighted that we were able to have such success with the offering we completed in June, with its minimal dilution, no warrants, and less than 9% discount. That unusually clean structure and pricing, along with the incredible demand, the deal was heavily oversubscribed. This was not only an excellent move for the future of Beam Global, but also a significant vote of confidence from Wall Street and the investment community in general. So, yes, I'm very excited about this acquisition, our expansion into Europe and our ability to accelerate the development of EV standard and all the future innovative products that we intend to bring to market. So to conclude, record revenues, record production and deliveries, record gross profits, and all of these metrics improving quarter-after-quarter, record cash and working capital, and a very attractive tax structure, no debt, and a clean balance sheet. The most exciting international expansion I've ever been involved with, and the reality of bringing what might be our largest volume selling product to market with a fantastic international team. The sales team is still bringing in the orders, and the markets we're addressing are growing rapidly, yet still at the earliest of stages. There were certainly other exciting things that happened in the quarter, but I think that for now, what I've shared with you is enough to demonstrate that it is, more than ever, a great time to be Beam Global. And with that, I'll turn it back to the operator and gladly answer any questions that you may have. Thank you. Over to you, operator.

We will now start the question-and-answer session. At this time, we will take our first question from Craig Irwin with ROTH MKM. Please go ahead.

Thank you for taking my question. This is where I should start. I mean, another really solid quarter and lots of progress here. Can you maybe update us on the savings per unit? Last quarter, you talked very specifically about $12,000 in savings per unit that you wanted to achieve. It sounded like you had a very clear plan. Can you maybe update us on what's been addressed at this point? How this is likely to taper in over the next couple of quarters? And the larger items on that list, if you could maybe share with us what's been adjusted or what's been changed and what's likely to be changed sort of in the schedule over the next couple of quarters?

Yes, that's a great question and something we've given considerable thought to. Firstly, I want to emphasize that our commitment to achieving that $12,000 savings per unit remains unchanged, as does the commitment from our engineering and operations teams. Currently, based on the numbers we've shared for the second quarter, we haven't seen meaningful benefits from that yet. Therefore, the full $12,000 in potential cost reduction is still ahead of us. The gross profit this quarter is primarily derived from fixed overhead absorption, increased efficiencies in our facility, and improved purchasing from some of our vendors. We've experienced cost reductions due to higher volumes and a stabilizing, if not declining, inflationary environment. Regarding when we anticipate realizing the remaining savings, while I tend to be optimistic, I believe it's realistic to expect that by the beginning of the first quarter of 2024, we'll have those changes implemented in the product, allowing us to benefit from the cost savings. Some integration is already happening now, midway through this quarter, and I expect the rest to be in place by the fourth quarter, barring any unforeseen circumstances. This means that by the first quarter of 2024, we should fully realize that cost reduction. Additionally, as I mentioned before, we won't stop there, as we see significant opportunities for further improvements, though these are currently the main points we're comfortable discussing.

Excellent. So, that's a pretty quick execution plan, so I like that. The price increase you discussed previously, 8.25% on May 1. So, knowing the timing and the prior commitments and backlog, do you think that it's possible that this helps us during the current quarter? Or is it more likely the December quarter, where we start to see the benefit of this price increase lifting gross margins as well?

Yes, a good one. Yes. So, again, first thing to point out, no benefit from it at all in the numbers that we've just announced. So, that the gross improvement was not as a result of the price increase, and thank you for asking me about that. I probably should add it in my comments. I think because of the level of backlog that we have, it's likely to be beginning 2024 before we see any meaningful impact from that. It doesn't mean that a few units won't slip through. I'll tell you what happens. Sometimes we will get customers that have very urgent needs. For example, what's going on in Hawaii at the moment. I'm not telling you that we're doing anything in Hawaii, but I will tell you this, that if people called us from Hawaii and urgently wanted EV ARCs right now, we would go back to our existing backlog customers and ask them if it's okay if we slot a few in, and those would likely benefit from the cost increases. So, there are instances where we might slot product into the build queue, but it won't be meaningful until the first quarter of 2024.

And then last question, if I may. Your adjusted margin discussion is always very useful just to understand how we are making real progress. Can you maybe share with us what the non-cash amortization for the quarter was, and if there were any other one-time items that impacted the GAAP gross margins?

Kathy, give me the amortization, please.

Yes, amortization...

Just bear with me for a second. We're just looking at it right now. I'm sorry. I don't have it on the tip of my tongue.

No worries. I don't memorize those numbers either myself. It's just useful. It's very important to understand.

Agreed. Okay, Craig, do you have another question? If not, I'll move to the next one, and then as soon as Kathy pulls those numbers up, I'll throw them out.

That works perfectly. Thanks again for taking my questions, and really congratulations on this impressive progress.

Thanks, Craig. Always a pleasure.

$200,000.

$200,000 is what I'm hearing, by the way, in the quarter for amortization of intangible assets on AllCell.

And our next question will come from Christopher Souther with B. Riley.

Maybe get an update on the pipeline. Last year, the third quarter was big as far as order timing from the customers, and I just want to get any sense of the anticipated pace of order cadence in the second half based on how customer conversations are going? Do you think we'll have similar visibility in 2023 as we did just start this year?

As I've said before, I anticipate that we're going to continue to see lumpiness in order cadence. The good news is that's not being transmitted into lumpiness in revenue growth because we are now more supply constrained than demand. Of course, we're catching up with that. Every quarter this quarter, we've had a 33% increase in units produced over the last quarter and hundreds of percent over the prior year. But I do anticipate that we will continue to see some lumpiness just because of the way the industry is developing at the moment. That's, by the way, one of the good arguments for diversifying our business and our revenue sources. Moving to Europe and doing all those other things. All of these are moves that we're taking that are not just about growth, but they're also just about creating a nice stable consistent growth model for the company. The pipeline is still very, very good, way more than backlog. And as you know, in the past, we've been quite conservative about our pipeline to backlog conversion ratios. And then we nail it every time we backlog to revenue because we never lose an order or not materially anyway. So the sales team, as I say, is still selling. They're bringing in orders all the time. We have stopped announcing all the smaller orders that we get because we feel that we've evolved beyond that. Some people are really upset about that. Some people like to see us announcing every purchase order that we get. Some people get equally upset when we announce them all. We can't make everybody happy. But we've, in general, stopped announcing these things. But you can do the simple arithmetic. You can see we're still selling a lot just because of the revenue versus current backlog. I remain very bullish about our ability to convert our pipeline into backlog in the future. But as I said, just now, we're still going to see some lumpiness in that cadence. The key thing for us is to just maintain steady growth and bring in all the opportunities that we can to support that.

Okay. Maybe just on the European expansion, if the acquisition closes in the third or first quarter here, what would be, you think, the timeline to get to production for the EV ARC and start to see some sales of the EV ARC in Europe after the acquisition? And what do you think this does to potential timelines for the EV standard product to be developed and ready for market here?

I find myself feeling a bit amazed about this acquisition, as it's important not to become overly attached to a deal. I can assure you I'm keeping a level head. The deal isn't finalized until it is fully closed, and we're currently conducting due diligence. If we discover any concerns during this process—which I don't expect—we might have to reconsider the deal or even decide not to go ahead with it. Currently, I don’t have any cause for concern; there are no warning signs or issues. Our highly professional team is working alongside us in this due diligence. With that in mind, I remain optimistic about finalizing the acquisition in Europe within this year. What I find particularly appealing about this team is that they already possess everything required to start producing EV ARCs. Just earlier this week, I gathered my management team to give them a detailed tour of our facilities, showcasing our five acres of space, half of which is equipped with everything necessary for production in this market. The team reacted positively since it was their first time seeing the facilities in person. The reality is they are capable of making EV ARCs right now. However, they currently lack our intellectual property, which increases their attractiveness as an acquisition. With our IP, they would become significantly more valuable. Presently, we are planning to pay approximately one times revenue for the acquisition. This includes all the buildings and land, which have already been appraised at our purchase price and possibly more when factoring in the equipment. To directly answer your question, they'll be able to start producing EV ARCs shortly after the acquisition. We may need to provide some specialized electronic components that are more complex to manufacture, but they will handle the majority of the production very quickly. Regarding sales, we've already been exploring the market over there for the past couple of years and have received enthusiastic interest from potential customers. While excitement doesn't guarantee orders, we have a good track record of converting that enthusiasm into actual sales. I won’t commit to a specific timeline for when sales will commence, but I don’t anticipate it will take a long time. In terms of developing the EV standard, that will be our top priority from an engineering standpoint. We will assign a team immediately for this task, which aligns well with their existing expertise in designing, engineering, and manufacturing streetlights with smart components like solar panels and sensors. We will build on their capabilities by integrating our patented technology that is protected in the United States, Europe, and Asia for their products. Getting this up and running as soon as possible will be our primary focus.

And our next question will come from Tate Sullivan with Maxim Group. Please go ahead.

And great to see the gross profit margin of 3%, too. And I mean, based on the level of efficiency, it sounds you've reached, will you continue the cadence of production that you currently have, maybe build up inventory, and maybe we'll see some fluctuation in the gross profit margin? How should we look at that, given you mentioned lumpy orders before?

At the moment, we do not plan to accumulate any inventory. We are producing as quickly as we can to meet customer demand. I have expressed my interest in pre-manufacturing certain components and sub-assemblies to improve our responsiveness to larger orders. This involves identifying complex parts that are not always the most costly and ensuring they are pre-manufactured. We envision having some inventory of these parts instead of completed products, but that is still in the planning stages. Currently, all our production is going directly to customers, and we anticipate this will continue for the next couple of quarters. We aim to enhance our processes. Regarding margins, we view this as an ongoing effort, akin to continuous maintenance. The team is tasked with finding cost savings continuously. My goal is to achieve a 50% gross profit margin for this product gap, and I believe we can reach it with significant progress ahead. The current 3% increase is not a result of product changes, which are still forthcoming, so we should not lose that margin. Additional cost savings will also contribute positively. We've mentioned $12,000 in savings, and there will also be an 8.25% increase when the sales price adjustments take effect. Business is challenging, and improving our processes is a journey rather than a one-time event. We have a talented team focused on making ongoing improvements, and I am optimistic about seeing positive changes through the end of this year and into the first quarter of 2024.

And then on Amiga, you gave some comments about diligence is going well. What are some of the main due diligence steps to close? Is it doing your own audit of their financials? Or what are some of the main steps to come if you can?

Yes, I can confidently say that the most significant milestone we are working towards is completing the environmental studies on the property we plan to acquire. We are buying five acres, which means we'll own both the land and the buildings, eliminating our rent expenses—an important aspect of our overhead costs. I wanted to ensure that after purchasing the land, we don't face a $0.5 billion remediation project due to hazardous materials on the site. We are currently conducting screenings and hope to have the results soon. Additionally, we are reviewing their financials, contracts, meeting with their customers, and conducting market studies to understand their future prospects and validate the information we have received. The company's founder was an engineer who passed it on to his son, also an engineer. This individual is solutions-focused rather than sales-driven. I consider my extensive experience in mergers and acquisitions reassuring, and I am not encountering any red flags at this time. However, we are conducting comprehensive due diligence to uncover any potential issues. It's important to identify any problems so we can address them and ensure that the pricing reflects that. Moreover, this business has strong cash flow, no debt, and does not rely on credit accounts, demonstrating financial discipline. They are currently investing heavily in their facilities from cash flow. We are not incurring debt with this acquisition and will be working with a team that has successfully built and sold in 16 countries over the last 30 years, which I am quite pleased about.

Just last for me is I saw that Florida accounted for 20% of revenue in 2Q. Have you called out Florida, a large customer in Florida before, or is it some commercial clients as well?

I think concentration can be a tricky topic. We often mention that we are concentrated in California, which is among the largest economic states globally. It's similar for Florida; it’s not that Florida itself was the customer, but we were primarily delivering products to the Veterans Administration there. Miami-Dade County is quite diverse, and we just happened to be positioned geographically next to Florida, which is actually a great market for our products due to its favorable climate. Our products are designed to withstand severe weather, which makes us well-suited for that region. It's not surprising that we had a significant number of sales there, and it's important to note that these sales didn't come from a single contract. I don't see this as concentration any more than I would view our dealings with the federal government as concentration. Each branch, like the U.S. Army or the Marine Corps, operates on its own budget and has its own interests. Therefore, losing one client doesn't mean we will lose all of them, just as winning one doesn't guarantee success with the others.

And our next question will come from Abhishek Sinha with Northland.

Good quarter. This is Kailash on behalf of Abhishek Sinha. So just wanted to know about your European expansion? And how you guys spoke about manufacturing there as well. So, just wanted to know about your cost competitiveness with your product in Europe and how you're seeing that?

Yes, so I think that's a good news thing for us. Because it's actually harder to deploy electric vehicle charging infrastructure in Europe than it is here. It's more expensive to dig trenches and go through the permitting and planning. There's a lot of, I mean, as I've said before, Edinburgh, where I'm from, if you dig down six inches in Edinburgh, you go back 300 years. You never know what you're going to encounter when you dig trenches and everything else like that. So having a product that can be deployed without construction, without electrical work, without any meaningful permitting or anything else, I believe is going to be an even greater benefit for us in the European market than it is here. Beyond that, the European market is much larger and their needs are much more acute, as I've already mentioned. One thing that's nice about Serbia is that it's literally just off the road from Greece. If you think about Greece, if any of you have been, it's a nation of islands, plentiful sunshine, and under-usable grid infrastructure, and it's going to be electrifying in the next couple of decades. So just that one nation alone, never mind all the fires and everything that they've had, our products are absolutely ideally suited for it. As far as cost competitiveness is concerned, of course, there's no competing product over there, so I don't know what to bear it against except the cost of traditional infrastructure deployments. And as I said, I think we'll be more competitive in Europe than we are in the United States, and we're not doing too badly here.

Awesome. Just as a follow-up, just want to know where you see the OpEx as a percentage of revenue in the next coming projects.

I believe we still have significant operational leverage. We are going to hire more people, and there's no doubt about it; it's necessary. With the level of growth we are experiencing, we can't expect everyone to manage without additional support. However, we will be very careful in how we approach this. We plan to increase our sales investments and government relations investments since there will be considerable spending from both government and corporate sources. Corporate spending is returning, and our results support that claim. In Europe, I have asked the management team whether we need to establish a dedicated EV infrastructure sales team, as that hasn't been their focus in the past. They prefer to utilize our existing sales team, which already has valuable relationships. They have been selling streetlights, street furniture, and other products to cities, municipalities, states, and nations. Our initial step will be to reach out to this existing customer base to introduce our new EV charging products, which are off-grid, renewable, energized, and produced in Europe. This presents a substantial opportunity since we have already built credibility with these customers through previous purchases from us, which will be Beam Europe. We will inform them about our exciting new product lineup. If we find it necessary to add more salespeople there, we will certainly do so. All of this aligns very well with our current strategies, which is why I feel so positive about it.

And our next question will come from Chris Pierce with Needham.

Desmond, we reported approximately $18 million in revenues and the backlog also decreased by $18 million. We've discussed the relationship between the pipeline and backlog before. Could you provide us with some updates on the pipeline and when it might transition into backlog? Additionally, regarding the third quarter of last year, there was a question about any one-time events. Were there any specific factors that led government agencies or your customers to make purchases during that quarter, or was it simply your team's efforts to generate business? I would like to understand what competition you faced during that time.

Yes, so I think you said $18 million in revenue and backlog came down $18 million. So I want to be absolutely clear that did not happen. Our backlog didn't come down anywhere near as much as our revenue went up, and that's because we have been selling during the quarter. So, we have been converting pipeline into backlog during the quarter. The reduction in backlog is not commensurate with the increase in our revenues. But to answer your other part of your question, yes, we had some very significant large orders at the end of the third quarter of last year, federal government orders, and that's not a coincidence. The federal budget year ends September 30. We do see more activity at that time of the year than other times of the year. Although, I actually think some of that might diminish in the coming quarters just because of the urgency amongst the federal government to get EV charging deployed. Yes, two or three weeks ago, I was in Washington, D.C., met with the Department of Transportation, Department of Energy, met with representatives from the White House and several senators and congressmen, and I can tell you that all of the focus right now on electrification is about getting infrastructure in the ground. We're very well known. Our product solutions are very well known. As I say, the White House already knows about us. So I think some of that, the September 30 thing might become less important moving forward. It certainly was significant last year, but I'm not going to guess right now on what pipeline to backlog conversion we'll get this year, except to say that historically we've had a very good record of converting pipeline to backlog. I think it was over 70% last year, or more than that, actually. It was more than that. I think we converted something like we started the year with an $80 million pipeline and converted $76 million of it to backlog in the year. That's pretty much unheard of in any business, but it's a good goal for us to keep going after.

Okay. Perfect. I appreciate the detail.

And our next question will come from James McCulloch, a Private Investor.

Desmond, congratulations on a good quarter on the strategic move into Europe. A couple of questions. First one on the backlog. It looks like you've got about a two-month backlog based on the second quarter production rate. Are you still planning on increasing your production rate going into the third quarter?

Not to be combative, James, but I think you mean a two-quarter run rate based on our second quarter?

Yes, second quarter. Are you still contemplating increasing the production rate?

As I said, at the moment, we are still supply constrained. So we still have customers who would like us to be getting the product to them faster than we're getting it to them. We're going to continue to do what we've done all along, which is be sober in our approach to that. There were people who asked me last year, why don't you just convert all of that backlog to revenue right now, and everybody will get really excited? We could have done that. We could have thrown money at it. We could have thrown human beings at it and everything else. We would not have done it as efficiently. We wouldn't have got the long-term fundamental gains from that. So you will see us continue to execute on the backlog in the best and most profitable way that we can. It's not realistic to expect that we're going to continue to have quarter-over-quarter percentage growth increases like we have if no other reason, simply because the previous quarter numbers are so much higher than they used to be. It's hard to have those types of multiples on top of them, but also I don't believe is sustainable. So we're not planning on cutting back or doing anything else right now. We're planning on continuing to do what we do, which is take a sober approach to growing the business in a safe and sustainable way.

Got it. There's no imminent plans to increase the production rate over the second quarter?

We're still increasing the production rates. I didn't say we're not going to do it. I just said, increasing the production rates is more of a response to customer requirements than it is just some sort of goal that we have. We still expect that there's going to be a tremendous amount of growth in front of us, and so being able to produce more product faster is, of course, very important to us.

Okay. Second question related to the backlog on the price increase. Any resistance on new orders from customers, and are you bound on some of the larger government contracts that you have by the old pricing?

Those are two very good questions. So far, we have not received any pushback from customers, and as I mentioned, when we first announced this price increase, believe me, there was a lot of hair tugging, especially on my part. I was really disinclined to do that because I think it's so important to grow our place in the market. The reason I ended up doing it after we review the same thing every quarter and have done for a long time, for years, in fact. What should we be doing with pricing? It wasn't until the sales team could just look me in the eye and say we will see no negative impact as a result of this price increase because people's urgency is such that they want the product and not even worried about that part of it. So far, I have to say, nobody's making liars of them. So I think especially with the amount of inflation, remember, we've increased our prices by much less than our vendors have increased their prices to us. So we can very easily justify these price increases. The reason we've done it less than the amount that the vendors have increased their prices to us is because I still feel that so much opportunity rests in our ability to just get better at what we're doing. That has been demonstrated and will continue to be demonstrated. As far as your question about the larger government contract, yes, when we have a contract with larger government, it's priced. We're not able to arbitrarily just sort of increase prices whenever we want to. However, there is a process to do that. We have gone through and are going through that process to adjust our major government contracts so that moving forward, they will be reflective of the new price. But again, I doubt that any of that will be in any way materially impactful to us before the first quarter of 2024.

And then two specific questions on the due diligence process in Europe. I'm not sure about Serbia versus Western Europe, but do they have a similar social structure, especially for the management group, so that if you ever have to lay somebody off or downturn, there's usually a pretty significant liability that you would be purchasing? Could you give us some clarity on that?

Yes. One of the things I appreciate about Serbia is that it is not yet part of the European Union. While it is expected to join by 2030, currently, it has the ability to trade as though it is a member. This allows for tariff-free trading in Europe without the compliance requirements that accompany EU membership. I believe we have a period of about six years where this will remain true. However, you correctly pointed out that the situation is not as straightforward as it should be in the United States, particularly in California. In California, we are supposed to be able to terminate an employee's employment without significant issues. However, the reality is quite different. The considerations you mentioned will exist. On the flip side, the labor costs are significantly lower there. As I noted earlier, highly qualified and excellent engineers earn less than a welder in California. Therefore, any costs associated with laying someone off will be more than offset by the lower wages we are paying them initially.

Okay. We just had an issue with it. It was the legacy costs. If you ever had to terminate for any reason, three times the cost in the U.S., so I didn't, and that's a liability it looks like you'd be purchasing if it's an outright, just a plain purchase and sale. Next question.

Yes.

On the due diligence, the environmental due diligence, are you starting out with a Phase 1 or are you going to start out with a little bit more significant environmental review, pulling core samples, that kind of thing?

We're doing samples.

That can get quite costly, especially if you discover anything. But obviously,

James, it's not going to. We've already got a quote from the team. And, again, it goes back to the fact that things are just much less expensive in Serbia than they are here.

And our next question will come from Noel Augustus Parks with Tuohy Brothers.

Just had a couple questions. I was wondering if you could talk a little bit about, as far as the new order pace, can you give a feel for maybe what the breakout is between new customers versus repeat orders? And I'm just curious at the moment which customer type or vertical is most aggressive in terms of, well, I guess in terms of what you're seeing today with the deployments from past transactions and now in terms of new orders. Any particular trends you're seeing?

Yes. So, actually, a lot of new customers, although some of them might be coming through these existing contracts that we have in place. As I mentioned to you before, this goes back to this concentration thing. You know, for example, last year, the State of California issued a new contract to us. In a way, it was a bit like replacing an old one, but they're not allowed to do that. So it was a new competitively-let contract. One of the things that they did was they made that available to any other governmental entity across the United States or America. As a result, we have seen that. The GSA did the same thing. The General Services Administration at the federal level has made their contract available to any governmental entity that cites disaster preparedness as one reason for buying our product. Of course, our product is very well suited to that because we continue to charge vehicles during blackouts, we have emergency power, and we're flood-proof and hurricane-proof. I take that back. We're proofed up to 160 mile-an-hour winds, but it can survive 100 hurricane winds. So we have had a lot of new customers, but often they've come through existing contract vehicles. That's simply because our sales team is good at steering them to those contract vehicles. It's a very good idea for us. So if somebody comes along, they can either go through a lengthy process of doing an RFP or something like that, but our sales team is saying, hey, why do that? Just buy it through the California contract or buy it through the GSA contract, if you can. We've had quite a lot of instances of that. I think, again, as I said, we continue to see a pickup of commercial customers. We were very government-heavy there for a while during the COVID period, but we've seen a continued pickup in commercial customers. Otherwise, across the board, federal, state, municipal, from the government side, and across the board on commercial customers and quite a lot of new customers, but also quite a lot of continued customers. So I would say a healthy mix.

Great. And just a question about Amiga. As far as their particular revenue mix, do they have a higher service cost component? And I wonder if that has any advantages for you, if they have a sort of larger service organization, sort of like servicing their legacy equipment out there?

You mean from a recurring revenue point of view? Yes, so they do get recurring revenue from service, although it has to be said it's minimal. They have a pretty good service organization. But again, much like us, much of what they're making does not require a lot of service. And so that's not been a major area of focus for them. I'll tell you one area of shift that they were already focusing on prior to my becoming interested in them, and I'm going to continue to enthusiastically pursue this. Previously in their history, they've done some very large projects. I mean, for example, they built a stadium, a sporting stadium in Africa, an incredible project logistically and everything else from the ground up. That sounds fun to do, but it's not the business we want to be in. We do not want to be doing construction projects. We want to be doing product, not project. As I say, serendipitously, they had already made that decision themselves, although their revenue numbers are very high from those things, incredibly risky. The margins are generally not that great. They're much better just sitting in their factory and pumping out product. That's what we want them to do moving forward. And then we will go after recurring revenue in a whole host of different ways. I mean, the streetlight product, it's not impossible that we offer that as a service at some point in the future. By the way, I'm not suggesting we have plans in the works to do that right now, but I've had that discussion with the management team over there. It just would be fantastic, particularly to the point that streetlights are renewably energized, where we could offer something like that as a service because of course, we wouldn't have a utility bill to recapture. So there are lots of opportunities there, but at the moment, it's mostly making products and selling them. We're coming up here on time, operator. I'm happy to take another one if there is one. Otherwise, I think we should wrap up.

This concludes our question-and-answer session. I'd like to turn the conference back over to Desmond Wheatley for any closing remarks.

Thank you, operator. And, again, thank you everybody for listening and also for the excellent questions. I mean, I can't do better than just recap that I gave. Fantastic growth in revenues, strong balance sheet, still having an incredibly attractive capital structure. Just look at how few shares outstanding we have and how low our float is. Great support from Wall Street, a great thumbs up and vote of confidence from Wall Street, and then this expansion into Europe. As I mentioned earlier, I've spent a lot of time in Europe and in the Middle East over the last months. All the growth that you've seen take place at Beam Global has been taking place without my active input. I'm very proud of the team. They've done a fantastic job. And if any of you are worried about me riding a motorcycle, what they've demonstrated is that they can grow this business without me being around, which is just fantastic. I intend to go out and aggressively grow us in every way that I can and let them continue to do the great work they're doing. So thank you all for being involved and I look forward to more great stuff from us because we're only just getting started. It's a great time to be at Beam Global.

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.