Beam Global Q4 FY2023 Earnings Call

Good day, everyone, and welcome to the Beam Global Full Year 2023 Operating Results Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Lisa Potok, CFO. Please go ahead.

Hello. Good afternoon, and thank you for participating in Beam Global's 2023 Year-end 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 Q&A 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, April 17, 2024. 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. Next, I would like to provide an overview of our financial results for Beam's fourth quarter and year ended December 31, 2023. Revenue for the fourth fiscal quarter of 2023 set another new record for the company of $20 million, a 154% increase over the $7.9 million reported in Q4 of '22. Revenues for the year ended December of '23, were a record $67.4 million, which was a 206% increase over the $22 million reported in the same period ending 2022. This increase was primarily due to sales to federal, state, and local customers as a result of large orders received in late 2022 for the U.S. Army, Veterans Affairs, New York City and more. We recorded revenues of $8.5 million for our energy storage business from our 2022 acquisition of AllCell Technologies and $3.4 million for our new Beam Europe subsidiary as a result of the Amiga acquisition that closed in October of 2023. Our gross profit for the quarter ended December 31 of '23 was $0.4 million or 2% of sales compared to a gross loss of $0.7 million or 9% of sales in the same quarter of the prior year. Gross profit for the year ended December 31 of '23 was $1.2 million or 2% of sales compared to a gross loss of $1.7 million or 7% of sales in the same period for the prior year. As a percentage of sales, our 2023 gross profit improved by 9%. Excluding the noncash expenses from the '23 gross profit increases the gross profit to $2.1 million. The gross profit has improved due to the increased production levels, which resulted in favorable fixed overhead absorption and improved labor efficiency as well as design changes that were implemented during the year, reducing the unit cost of the EV ARC. Our operating expenses were $5.5 million for the fourth quarter of '23 compared to $7.1 million for the same period in '22. Operating expenses for the year-end December 31, '23 were $17.5 million or 26% of revenues compared to $18 million or 82% of revenues for the same period in 2022. The '23 expenses decreased by 56% as a percentage of revenues. The reduction of expenses in '23 included a $5.3 million decrease from what was recorded in 2022 related to the fair value of contingent consideration expense for the AllCell acquisition. Operating expense increases included commission expense related to the increase in sales the addition of expenses for our new EMEA acquisitions and salaries and consultants. The net loss, $5.1 million or $0.36 per share for the fourth quarter of '23 compared to $7.8 million or $0.77 per share for the fourth quarter of '22. The net loss for the full year of '23 was $16.1 million or $1.30 per share compared to $19.7 million or $1.99 per share for the same period in 2022. As for our cash balance at December 31, '23, it was $10.4 million, this is compared to $1.7 million at December of '22. Our cash increases resulted from a capital raise in June of '23, offset by increased accounts receivable cash payments for the acquisition and operating losses. Our working capital increased from $6.8 million to $23.8 million from December 31 of '22 to December 31 of '23. As a result of the increase in cash as well as accounts receivable and inventories resulting from the increased orders and revenues. I will now turn the call over to Desmond to provide a business update.

Okay. Thank you very much, Lisa, and thanks to all of you for joining Beam Global's 2023 Earnings Call. There's a great deal to go through, so I'm going to talk quickly so that I can be sure to leave some time for questions after my prepared comments. First, let me start by apologizing that we were a little late with this earnings call but we did file within the extension period, and we're not actually late with our filings. I also apologize for the short notice, we've been working very hard to get the filings out, and I didn't want to announce the call until we were certain that we were going to do that, of course. 2023 was a very busy year for us with many initiatives coming to a head in the fourth quarter, which have created a lot of extra hard work, frankly, where the filing of our 10-K was concerned. Let me reassure you that there was nothing controversial about it. It's just that we had a new CFO, a new accounting team joining our veterans, a new auditor, a new ERP, and an international acquisition, which all hit in the fourth quarter. Now while all of these things have been planned and are, frankly, very good for the company, it was never our intention to take them all on in the same quarter and certainly not in a fourth quarter. However, things turned out as they inevitably do, that's where we ended up, and we've had to deal with it. We might have been able to deal with it more quickly, I suppose, but part of what makes Beam Global such a great company is that we're very cost-conscious, and we do not have large teams of people sitting around waiting for these sorts of eventualities. We operate a very lean and tight ship, so when we have extraordinary requirements, our small but highly effective team has to go into overdrive to perform what is required. It has been a challenge, but this sort of discipline keeps our overheads low and enables us to get more done than any other company I know with such a very small overhead. I want to thank Lisa and her team, our new COO, Mark Myers and the operations team, and all the other members of the Beam Global team who have helped us, including Markham, our new auditors, for getting through this without cutting any corners. The people who work seven days a week and long hours to bring us to this point where we're filing on time and with quality and integrity. I'm proud of them and I appreciate all that they do. 2023 was the fourth year in a row of really significant revenue growth at Beam Global, both in percentage and absolute dollar terms. In the fourth quarter of 2023, we generated far more revenue than in any previous quarter in our history. 2023 is the first year in our history during which we reported a positive gross profit, and we've implemented changes and improvements throughout the year and particularly in the fourth quarter, which we believe have set us up for an even better 2024. 2023 was also perhaps the most significant year in terms of strategic growth for Beam Global with our expansion into what is the largest market in the world for our products, Europe. We continue to improve our intellectual property portfolio with the issuance of several new patents. We expanded our world-class team with the addition of new operations and finance leadership, a very significant expansion of our engineering team, and a dramatic increase in the size of our manufacturing team, both as a result of our acquisition, with a much more modest increase in overhead and management personnel. We did all of this while generating GAAP gross profits and dramatically reducing our overhead costs as a percentage of our revenues. Full year revenues, as Lisa just told you, were over $67 million, which is 300% of the 2020 $22 million we generated in the prior year. That was over 200% of the $9 million we generated in 2021, and that was 150% of the $6 million generated in 2020. So you can see that while last year was, on one hand, just a continuation of several years of dramatic growth, it was by far the most material increase in our history. Q4 revenues of $20 million were also about three times more than the same period in the prior year and more than 10% higher than our previous record quarter, which was the second quarter of 2023. In fact, every quarter in 2023 generated the highest revenue for the same period in any prior year. We were profitable in the gross line for the full year for the first time, reporting $1.2 million or over 2% positive gross profit for the year. It's important to point out that that higher number includes almost $1 million of noncash items associated, for example, with amortization of intangible assets as a result of our acquisition. Without those noncash negative impacts to gross profitability and as a better guide to how gross profits are improving our cash position, we actually generated over $2 million of gross profits in 2023. We put in place engineering and manufacturing improvements, which should set us up for a very good 2024. By the end of the fourth quarter, our BOM cost for a single EV ARC have reduced by about $4,000 or 6% of revenue. If we produce the same number of EV ARC systems in 2024 that we produced in 2023, no growth in other words, we'd have a gross margin contribution of another $3 million from those improvements alone. In that context, we borrowed about $10 million cash in 2023. Of course, there were single items due to the acquisition, new patents, and an ERP rollout and all the one-time costs associated with those things. Remember also that the price increase of 8.5% on EVR has not yet contributed to our gross margin because we've not yet worked through all the previously contracted backlog as of December 31. However, we will start to see the impact of that price increase this year, and when combined with the cost savings I just described, we will be in even better shape. Doing some rough math, you can see that if we had that price increase on the same number of systems we deployed in '23, again, no growth and no contribution from Europe, we would generate another $5 million or so of growth. Combining these improvements with the $2-plus million gross that we already reported, net of noncash items, in 2023, we get a gross margin contribution of about $11 million, which is actually 110% of the cash that we burned last year net of the noncasual and extraordinary items. We're clearly on the right track. Again, I appreciate the work of the engineering and operations teams who've made these savings happen and the sales team under the leadership of Sandra Peterson for bringing in purchase orders with the new increased pricing. Mark Myers, our new COO, whose impact will also positively affect our gross profit by making us more efficient and reducing waste in our operations. Our new ERP should help us as it also makes us more efficient with real-time knowledge of inventory and unit costs. We are striving relentlessly for profitability. We demonstrated in 2023 that we can get there at the gross line, and the next target, of course, is the bottom line, and that's firmly in our sights. The lion's share of our revenues continue to be generated through the sale of our EV ARC product line, but we also received significant contributions from our battery business and just the beginnings of contributions from our European entity, Beam Europe. Although our products and technology are highly complex, our business is actually very simple. We buy raw materials and components, we convert those into products, and we sell those products. A tripling of revenue means a tripling of production. The Beam team manufactured over $60 million worth of products from the same facilities and with minimal capital expenditure that have produced just $6 million worth the same three years earlier. I've often said that Beam Global has significant operating leverage, and our 2023 results certainly prove that. Even though we tripled our business in 2023, we actually reduced our operating expenses over 2022, and our 2023 net was a 64% improvement over our 2022 net. Undeniably, the long-term trends that Beam Global is showing are growing revenues, improving gross margins, and a significant reduction in overhead costs as a percentage of revenues. In short, we're creating a better and better company with continuing improvements to our fundamentals. At the end of 2023, we had over $10 million of cash in the bank and almost $40 million of current assets made up of cash, accounts receivable, prepaid expenses, and inventory, all of which are essentially cash to us because, as I stated previously, we have a simple business and we convert inventory and receivables quickly and without complication into cash. Our $40 million of current assets was offset by under $17 million of current liabilities, leaving us with over $23 million of onboarding cash and resources that will turn into cash within the next few months. We continue to use our balance sheet as a powerful and useful tool, which is helping us improve our margins through strategic purchasing and the creation of certain types of inventory to smooth our production process and timing, which in turn reduces our direct costs per product produced. This is particularly true in our European operations, where the legacy business we acquired has been more seasonal than it's typically been the case with our clean technology products. In Europe, we've already been able to flatten our seasonal production fluctuations by leveraging our balance sheet to create inventory of commonly purchased items. This allows us to maintain a steady production cadence, lowering labor costs per product produced and also to deliver to customers faster when that seasonal buying increases again in later quarters. Our net loss of just over $17 million in 2023 included around $7 million of noncash and one-time items, meaning that we actually burned around $10 million of cash during the year or about $2.5 million per quarter. Dividing that $2.5 million a quarter into the $23 million or so of cash and resources that will turn into cash, you can see that even without generating any more gross profit, we have plenty of runway to continue executing on our strategic plan. But the fact is that we are generating gross profits and improving gross profits at that. Every dollar of gross that we generate is one less dollar of cash burn, and the Beam Team intends to continue in its relentless pursuit of cost reductions, improved efficiencies, and higher revenue per employee. Our revenue growth and gross profit improvement are not adjusted or pro forma, nor is our path to EBITDA positive, which becomes clearer and more tangible each time we report. We remain debt-free, and our $100 million line of credit is still active and available to us in the event that we need to fund very large new orders. While we've reduced our overhead costs as a percentage of revenues, we certainly have not reduced our efforts and investment in strategically growing the company, improving our technology, and continuing to grow our IP portfolio. In 2023, we were granted a new patent for wireless electric vehicle charging powered by renewable energy, which will enable vehicles in the future to simply drive onto our products and walk away, while the vehicle is charged with renewable energy without them even needing to plug in. The automobile manufacturers need to include the receivers on the underside of their vehicles to take advantage of this new technology. But I have little doubt that once consumers understand that this capability exists, they will demand it. And Beam Global will be in a perfect position to provide not just the fastest deployed, most rapidly scalable electric vehicle charging infrastructure, but also the most convenient interface for the consumer. We were also granted several patents in Europe this year for our EV ARC and battery products, and perhaps most notably for our EV standard car-side charging solution. I'll talk more about EV standard later in my comments when I expand on the fantastic things that are happening at our European facility. Finally, we also received patents in China and in India related to our unique and proprietary thermal management technology, which makes lithium-ion batteries safer, capable of faster charging, and more energy efficient. We've made some material and highly impactful changes in additions to our management team during the last couple of quarters. But we've done it with a level of discipline and responsibility, which you should have become used to if you've been following Beam Global for any length of time. In the fourth quarter, Lisa Potok joined us as our new CFO, you just heard from her. Lisa has extensive experience and a solid history of executive finance roles at large public, private, and international companies. Most recently, she was the CFO of a $500 million revenue international manufacturing company. She's growth-oriented and has brought a small but very effective team of finance professionals with her. She's also very experienced in ERP integrations, something of great value to us as we're currently integrating an ERP across the entire company. Lisa and our accounting team have the skills to take us to the next level. They've certainly had a challenge taking over at a time when we're implementing that new ERP, integrating an international acquisition, and transitioning, as previously announced, from our previous auditors to our new firm, Markham. All of these things were planned, but I didn't intend for all of this to take place in the fourth quarter and with the requirement to file a 10-K rather than separately over several quarters with the less burdensome 10-Q process. Still, the team has risen to the challenge. We have our European expansion. We have our ERP, and we filed our 10-K within the allotted time. Another very significant improvement to our leadership team is the addition of Mark Myers, our new COO. Previously, we operated without a Chief Operating Officer, a prudent decision when we were a much smaller organization with much lower production and revenues. We are now a true international organization with very significant growth in revenues and production. Operational excellence and increased efficiencies across the company are more important to us than they've ever been. Having a competent person in this role may be the single most important factor in our continuing and relentless pursuit of improved profitability. Mark is certainly qualified. He has held senior executive positions in both U.S. and international manufacturing companies. He was a senior consultant at McKinsey and prior to that, had a distinguished career in engineering in the U.S. Nuclear Navy. Many of you will know that I went to sea as a young man, and I can tell you that on a personal level, I'm delighted to have a Chief Operating Officer who shares that experience with me. Although I kind of keep pointing out that I was one of the same failures that stayed above the surface of our oceans, while Mark was one of the crazy ones who was a nuclear submarine — something that I would never have done. Mark has only been with us for a few months, but the impact of these activities is clear and highly visible in our U.S. facilities. The way our team operates has improved safety, reduced waste, and increased efficiencies, which are essential to our continuing improved profitability. I'm absolutely delighted to have him on board and associated with anybody who's invested in this company. These team changes are also excellent contributors to business continuity in the unlikely event that anything ever happens to me. The leadership is qualified to and capable of continuing to operate and grow Beam Global without me. By the way, I hasten to add that I'm fighting fit, and I'm still full of enthusiasm and excitement for what we're doing and our growth prospects. I'm not going anywhere, but it makes good sense to have depth and diversity in the leadership team, no matter what happens. At the Board level, Tony Posawatz, Peter Davidson, and I continue to serve, and we've added two excellent new members. In December, Judy Krandel joined our Board. Judy came to me with excellent references from the banking and investment communities. Actually, our first matter because she was and continues to be an investor in Beam Global. I was so impressed by the due diligence questions she asked, combined with the clear insights she had into the opportunities that the company enjoys and also what needs to be done to grow shareholder value while complying with corporate governance requirements that I asked if she would be willing to join the Board and serve as our Audit Committee Chair. She accepted, and we're now benefiting from her more than 20 years of financial, operational, and investment experience. Judy served as the CFO of both public and private companies. She has board experience at both public and private companies, including the banking sector. And of course, she's an active investor, as I mentioned. Beam is a big part of her portfolio. That's true of all of our directors, by the way. I'm delighted to have her on board and very much appreciate the leadership and hard work that she brings to the Audit Committee. Also in December 2023, George Syllantavos joined our Board. George is the first European member on our Board, and we're delighted to have him as, of course, Europe is now a very large area of focus for Beam Global. George has over 35 years of experience in corporate finance, strategic planning, corporate boards, governance, and entrepreneurship. It's most unusual in that while his operational business dealings have largely been in Europe and Asia, he is also well known and respected on Wall Street and has excellent public company experience, creating, growing and funding public companies and also acting as a CFO. George is based in Athens, Greece and has excellent connections for infrastructure concerns across Europe. Greece is, of course, a highly attractive market for Beam Global Products, and I'm looking forward to making a business development trip with George later this year. Both George and Judy have top-notch experience in public company listings, the capital markets, and M&A. They went through a significant vetting process with all the typical formalities and equally importantly, perhaps, there is an excellent cultural fit amongst all of our Board members who are driven by the same goals — Beam Global's success. So we're continuing to grow a world-class team, both at the Board level and also at the executive and management level. Our operations teams in San Diego, Chicago, and Serbia are demonstrating that they can get better and better at what we're doing while reducing costs and improving our gross profits. Of course, selling our products is the first vital input to our equation for success. There's been a great deal of negative press about the adoption of electric vehicles and their potential future during the last several months. When you look at the actual data, it tells quite a different story. It's certainly true that the percentage rate of growth of EV sales is not accelerating as quickly as it was in 2023. However, these percentages are being measured against far larger absolute numbers. The slowing of growth is not the same as a decline, although you might be forgiven for thinking that was what was going on if you're listening to the media. Year-over-year electric vehicle sales growth in 2023 was about 50%. It's currently forecasted by the experts to be greater than a 30% increase in 2024, again, with much larger absolute numbers. In fact, in the first couple of months of this year, EV sales growth was just under 70%, and I know that Ford, one of the companies often singled out in these stories about slowing EV growth, just announced that they had over 80% growth in EV sales in the first quarter of 2024. It's a funny sort of decline that keeps delivering all these double-digit percentage year-over-year growth numbers. There's also been a lot of talk about whether or not consumers want electric vehicles or hybrids. Certainly, hybrid sales have been increasing dramatically during the last year. But I don't think this means that people don't want electric vehicles. In fact, I think this is a strong indication that they do want electric vehicles, but they're worried that because of the lack of electric vehicle charging infrastructure, they need to buy a hybrid vehicle that can continue operating even if they're unable to charge. Well, Beam Global is in the business of providing the infrastructure that they will need to get them into battery electric vehicles, and no matter what you might read in certain elements of the media, I don't think there's any real doubt anymore that electric vehicles are going to take over in the next couple of decades. I also believe that electric vehicle charging infrastructure will spend the next many years playing catch-up with electric vehicle sales, simply because it's easier to put consumers into electric vehicles than it is to deploy electric vehicle chargers into the environment. That means that as we see the inevitable growth in consumer adoption rates for electric vehicles, we ought to see a more consistent and continued level of demand for the charging infrastructure, which will be required to support that model. We are still seeing strong demand for electric vehicle charging infrastructure. Our pipeline currently stands at about $150 million. It's up again. All of that pipeline is currently derived from the U.S. market. We're not yet including European pipeline numbers because we're just getting our feet under us in terms of selling into that market, although we've already had notable and material successes. In March, we announced that we've been awarded our first European government supplier agreement on the U.K.'s Crown Commercial Services, which is the main purchasing vehicle for U.K. government entities. This is essentially the same as the GSA contract, which we have with the federal government in the United States and not dissimilar to the contracts that we have with states like California. These contracts allow government entities to buy our products without having to go through any further commercial due diligence or competitive purchasing programs. All of that analysis and competition is undertaken before they grant their contracts to us. And once the contracts are in place, we're able to sell our products to them in a streamlined manner. It's not easy to win these contracts, but it's clearly a good strategy for us, as demonstrated by the tremendous growth that we've had in both federal and state sales over the last couple of years. Now we have our first such agreement in place in Europe, and I feel confident that it won't be our last. I feel equally confident that as these types of contract vehicles will deliver the same sort of growth and performance for us in Europe as they have done in the United States. In fact, the conditions in Europe could be considered a good deal more favorable for our products than they are here. So after we announced that we've been awarded this contract, we announced the first purchase order from the U.K. Ministry of Defense, which was written against this contract. The purchase order was for $1 million worth of EV ARC and an art mobility trailer, which will be produced in our Serbian facilities and shipped to the British Army for their overseas bases on the Island of Cyprus. This is an absolutely fantastic win for us, and I believe it is a harbinger of a great deal more to come. It took us five years to get our first $1 million contract in the United States. It's taken us less than five months to get there in Europe. I was already very enthusiastic about our acquisition in Europe before we received this purchase order, and I have no less enthusiasm now that we're already producing and selling our EVR products into that massive market. The Beam Team has been selling well in the United States as well. Though we've not recently received another very large order, like the $30 million purchase order we got from the U.S. Army a couple of years ago, I do believe that it's likely to happen again and again. In the meantime, the sales team has been bringing in lots of excellent smaller orders. This is clearly evidenced by the fact that we have over $150 million in the pipeline today and that we had over $20 million in contracted backlog at the end of 2023, having generated just under $70 million during that year. Put those two together, and you get about $90 million of contracts, and again that is from the U.S. only; European sales are ahead of us. We do still expect lumpiness in our order cadence as the EV charging industry continues to evolve. From time to time, I believe we'll receive large orders, which will drive up our backlog. As we become more efficient and are able to deliver more units faster, we should expect to see that backlog come down, offset by the steady flow of purchase orders that the sales team brings in. Short-term lumpiness does not, in any way, make me anticipate anything but long-term growth, and the most effective way for us to offset this lumpiness in sales cadence is to continue to diversify our customer base and product offerings, and that is exactly what we're doing. Our acquisition in Europe has opened up the largest market in the world for our products, and we've already demonstrated our ability to sell into that market. Bringing new products like EV standard to market will create opportunities for large and smaller orders, which should further stabilize and reduce the lumpiness in our order cadence. Our battery business and the legacy business, which we continue to pursue through our Beam Europe acquisition. Government sales remained the strongest contributor in 2023, with sales to the federal government in the United States comprising the largest segment. That's hardly surprising, considering that the U.S. federal government has the largest fleet of vehicles in the world and is today the largest consumer of diesel and gasoline, but will tomorrow be the largest consumer of electric vehicle charging infrastructure. Our GSA contract and the blanket purchase authority that rides with it creates an excellent opportunity for us to sell into what is by far the world's largest customer. We saw more evidence of the validity of this opportunity when we received a follow-on order from the U.S. Army for $7.5 million worth of EV ARCs and another order from the Department of Homeland Security for about $5 million worth. These are normally good indications of continuing opportunity with the federal government, but also the potential for material follow-on orders from existing customers. State-level and municipal sales also remained strong last year, and I'm also really encouraged by the fact that we've continued growth in our commercial sales. In fact, about 5% of all the sales we made last year were to commercial entities, not government. It's worth remembering that prior to COVID more than half of our sales were commercial. We're actually selling more to commercial today than we were then. But of course, our sales across the board have grown so much that even though we are selling more now to commercial than we were prior to COVID, at today's sales levels, that only equals about 5% of total sales. I expect that we'll continue to see significant activity from government entities in the quarters and years to come, but I do also anticipate that we'll see an increase in our commercial sales. In fact, in the future, I believe that commercial sales will dominate. As we start to add data from Beam Europe to these considerations, I expect these numbers to grow in an absolute sense, but I also expect that we'll continue to have a strong government-led sales machine because after all, our products are transportation and energy infrastructure products, which have long been the domain of government spending. Let's spend a couple of minutes on Beam Europe. In October of last year, we closed upon the acquisition of what was then Amiga, a Serbian-based manufacturer of steel structures with electrical components integrated into them. Amiga, now Beam Europe, was and remains, for example, the fourth largest streetlight manufacturer in Europe. It sold products into 17 nations, including the United States. If you walk down the street in Miami, it's likely that you worked on the street lights manufactured by Amiga. I've been looking for an international expansion opportunity for several years. I've considered many and even negotiated with several of them, but prior to Amiga, I've not found anything that meets the extremely high standards that we have where an acquisition is concerned. I'm delighted that none of the other opportunities worked out because I doubt I could have found a better fit than Amiga to become Beam Europe. They have the skill sets, the experience, the machines, equipment, and facilities required to mass produce our products. All they lacked was our IP and know-how. We have a great deal of credibility and existing relationships and in many cases, contracts with customers who have more or less the same profile as those customers with whom we've had a great deal of success in the United States. For more than 30 years, Amiga has been selling steel structures with integrated electronic components, basically similar to our products for on-street applications to cities, states, nations, militaries, and large corporate entities. These are exactly the sort of customers to whom we'd be selling our renewably energized EV charging and energy security products at a time when these sorts of products could not be more in demand. With the acquisition of Beam Amiga, Beam Europe came into existence on 6 acres of land, which we own, with 250,000 square feet under roof equipped with all the machines and facilities required to manufacture Beam Global's products. In fact, we're far better equipped in Europe now than we are in the United States. This will have significant impacts on the economics of producing our products over there because there are several expensive processes that we outsource in the United States, but which we are self-performing in our European facilities. Let me give you a single and very meaningful example of this. Our engineered ballast and traction path, which forms the base of our EV ARC product is formed using a large curved plated steel with structural enhancements. In the United States, we do not have a machine which is capable of rolling the curve into that plate. As a result, we have to outsource that process to a third party. This is not cheap as we pay third-party margins and the disruption and expense of transporting the parts to that facility and then back to our factory where we can complete the base pad. Beam Europe, on the other hand, has a machine on-premise which is capable of performing that role without the plate ever leaving our factory there. Beam Europe also has sand blasting and painting facilities, which means that another of our most expensive processes is performed in-house, while it's outsourced in the United States. We don't pay third-party margins, and we don't have the cost, complexity, and risk of transporting the plate to perform that process or the process of rolling the plate. As a result, our ballast and traction pad costs 45% less to manufacture at Beam than they do in our U.S. facilities. The ballast and traction pad is one of the single largest cost contributors to the EV ARC, so you can see that saving 45% on each of these plates will have a significantly beneficial impact on our gross profitability. There are other examples, but this gives you a good indication of another reason I'm so enthusiastic about our prospects in Europe. Further economic benefits are derived from the fact that just about everything is less expensive in Serbia than it is in California or Illinois, where we produce our products in the U.S. And because we own the land and buildings and all the equipment and machinery, we do not have lease liabilities or other payments to make to enable the production of our products. Our timing on entering the Serbian market can hardly have been better. While it's still in the early stages, there's a great deal of investment from both the United States and Western Europe in Serbia. The people are well educated and have a great work ethic. The country is well positioned centrally in Europe with good access to the event and all of Western Europe as well. Serbia can trade tariff-free with the European Union because it's not yet in the European Union, and thus is not subject to the rigorous and expensive regulatory and compliance environment which exists there. At the moment, it looks like Serbia will, in fact, join the EU, but not until 2030, which means that we'll have about essentially a 6-year opportunity in which to grow our European enterprise in a very business-friendly environment. Europe represents a huge opportunity for us because it's the largest automotive market in the world with over 400 million cars. To put that in perspective, the United States has 290 million, and China has 319 million. So 400 million is obviously a significant market. Beyond that, Europe has announced an outright ban on the sale of anything but zero emission vehicles by 2035, just 11 years from now, and committed to having zero carbon electricity by 2050. Perhaps also true that Europe generally has a more positive view towards renewable energy and the environment than we do in the U.S., which I believe will only make our products more popular over the years. Our ability to deploy EV ARC products without doing any construction or trenching will be even more compelling in ancient cities where digging down six inches is like a journey back in time. The war in Ukraine has made Europe very aware of its vulnerabilities in its centralized grid infrastructure and its reliance on foreign sources of carbon fuels to generate electricity. Our products are, of course, immune to centralized grid failure and generate and store all of their own electricity. So our timing is very good in this regard as well. At some point, and I hope I'm not sounding too optimistic here, the situation in Ukraine will resolve, and there will be a massive rebuilding effort. I do not imagine that there will be a great deal of investment in gas stations and 20th-century technology when that rebuilding takes place. The situation in Ukraine is closer to our Serbian facilities than Denver is to San Diego. You can be certain that when rebuilding efforts start, Beam Europe will present our rapidly deployed EV charging, energy storage, and electrical infrastructure products manufactured in the region. We never want to exploit these types of situations, but undeniably, it seems like an excellent opportunity for us. Of all the fantastic assets and opportunities that Beam Global gained as a result of this acquisition, the human resources have to be the greatest. We have 210 excellent employees, most of whom have been with the company for many years and are, as a result, highly experienced in the areas which are so important to our success. All those 210 employees, over 30, are advanced degree engineers, most of whom speak excellent English and all of whom create fantastic work products. Since the acquisition, and if I'm honest, even before we closed, those engineers have been working with our U.S.-based engineers on the fulfillment of the EV standard product development. Our U.S.-based engineers are experts in renewable energy, battery storage, and EV charging, but we know very little about what it takes to make streetlights. They are complemented by our European engineers who are arguably some of the world's premier experts on street light engineering and manufacturing. We have made tremendous progress in the development of the EV standard product. While I was in Serbia just three weeks ago, I saw and touched the structural elements of the first EV standard prototypes, which we will bring to market in the next few months. It was a truly exciting moment for me to see this product, which we've had patented since 2019 in the U.S. and recently received a patent for in Europe, actually being made. We could not have done this without the acquisition and the fantastic team in Serbia, who is now part of the Beam Global family. I'm also absolutely delighted to have the support and leadership of our General Manager and other leaders who are among the most operationally engaged sales and marketing leaders I've ever met. Under their leadership, we have grown to the point where we are creating profitable sales in 17 nations across Europe, Africa, and North America. He now runs our European operations and has done an outstanding job of integrating what was Amiga and is now Beam Europe into the Beam Global organization. I encourage you to check out the resources we have on our website. Firstly, a video of the live tour that our team did of the Beam Europe facilities. It's long and informative because there was so much to describe. Even if you only skim through the video, I believe that you will gain an excellent appreciation of the quality of the asset we acquired and the tremendous new opportunity for Beam Global's growth that comes with it. You'll also find a video describing the recent utility-scale battery seminar that Beam Europe delivered in Belgrade 2-3 weeks ago. This seminar was attended by utility and government leaders from across the Balkans. The four or five nations represented learned about Beam Global's acquisition of Amiga and were asked if we could provide energy storage solutions and know-how for their expanding renewable energy deployments. Our Chief Battery Scientist presented to an audience of approximately 40 leaders on battery technologies and utility-scale deployments. I followed him and described various financing scenarios that Beam Global can offer, all the way from outright capital purchases to battery energy storage as a service. While I was there, I also met with various congressmen and with the White House on energy security and EV charging infrastructure related matters. This very significant source of capital can, with our existing credit facility, enable Beam Global to offer competitive rates and terms on energy storage products valued in the tens and even hundreds of millions of dollars. We've had extremely positive follow-up since the symposium, and this is an opportunity which validates Beam Global's broader strategy and our acquisition of both AllCell and Amiga. It was a perfect amalgamation of our company's growing presence and technical progress in areas which could not be more timely or compelling. By the way, that seminar was also attended by the U.S. Embassy over there. We've had tremendous support from the ambassador and his team in that market. Please check out both videos and blog posts when you get a moment. You can find them on our website at beamforall.com. Our acquisition and formation of Beam Europe has, in my opinion, far more than doubled our opportunity for our existing products. It's a larger market with macro tailwinds, which all seem to point to more products and solutions like ours. But acquiring Amiga and creating Beam Europe has done more than simply increase our access to markets for existing products. We've added new revenue opportunities through increasing our product portfolio and inherited solid customer relationships, which are exactly the sort of entities we target. We've also integrated the highly skilled and experienced team that would otherwise have taken us many years and an unknown amount of money and time to create. And of course, we cannot lose sight of the fact that this acquisition has accelerated our development of the EV standard product, a product which I still believe may end up being our biggest revenue producer before long. This acquisition and the more than doubling of our business was a major strategic undertaking. We now have more employees, machines, and equipment in Europe than we do in the United States. While we lease about 80,000 square feet of factory facilities in San Diego and Chicago, we own 250,000 square feet under roof on 6 acres of land in Europe. We have no monthly payments and no lease liabilities to negatively impact our profitability. You could be forgiven for thinking that this must have been a very expensive and highly dilutive activity on our part. In fact, we bought the company for less than the value of the real estate and the hard assets. When all is said and done, we still have no debt, cash in the bank, and an almost unbelievably low 14 million shares outstanding. Please compare that to any of our so-called peers or competitors. Before I sum up, just let me say a couple of quick words about our warrants. When we IPO-ed in 2019 through a traditional process, we issued a unit which comprised a share of common stock and a warrant with a strike price of $6.30. The warrant has traded since that time under the ticker BEMW. Most of the warrants which we issued have been exercised during the last five years. But at December 31, 2023, there were still around $400,000 in exercise warrants, which have continued to trade since that time, and they will expire on Thursday, April 18, tomorrow. They're in the money today. Following the expiration of the warrants, the ticker BEMW will cease to exist and Beam Global will trade solely under the ticker BEEM. So to sum up, a tripling of revenues, positive and significantly improved gross profits, significantly reduced operating costs as a percentage of revenues, a tangible path to cash flow, a growing pipeline and healthy backlog, a major geographic expansion into what is now the world's largest market for our products, significant enhancements to our operational engineering and leadership teams, multiple new patents, and the first physical components of a major new product launch all achieved in the same year and without meaningful dilution. That was Beam Global 2023 and the best year by far in our history. It's still a great time to be Beam Global, and I believe even better times are ahead of us. Thank you for your attention and your continued support of Beam Global, and I'll now return the call to the operator to use our remaining time to answer any questions you may have. I'll go over a little to you if you want. So operator, we'll go to questions now, please.

Please note, operator instructions follow. The first question comes from Christopher Souther from B. Riley.

I appreciate the information you provided. Could you elaborate on the expectations for margin improvement? You mentioned that we recognized about $4,000 of the $12,000 last year. Can you clarify the timing for the remaining amount? Please correct me if I misunderstood that.

No, yes. Look, I think basically, what's happened is we have started to introduce those savings, which I described in the third quarter call, working through inventories and all the other things that we've had to work on. We have not gotten all the way through that process yet, but I'm confident that we'll continue to improve into 2024.

And then where are we as far as identifying some of the further reductions from the in-sourcing components from Serbia? Are all of those kind of incremental? And have you identified any specific things you'd kind of call out there that you could parse out as far as what further reductions might look like?

Yes. So far, all the indications are that we're going to have far better economics in Serbia than we do in the U.S. Of course, we'll be reporting consolidated numbers. So margin improvements in Serbia will improve our overall Beam Global margins. And also, Chris, the never-ending strong paint the Golden Gate Bridge as far as I'm concerned. As soon as we think we're finished, we start all over again. I do still believe that there are a lot of other margin improvements that can be made in the product, and we will do that. We're going to get back to that, frankly.

Our next question comes from Sameer Joshi with HC Wainwright.

Just a quick question. The $22 million backlog you mentioned does not include anything from Beam Europe. What kind of visibility do you currently have in Europe regarding the pipeline and backlog?

Yes. As I said, we're still getting our feet under us where that's concerned. The European business before we acquired it was much less concerned with backlog, and it's not even a term that they used. However, they've had a steady and growing business, which we are enhancing, as I mentioned in my comments. They did everything out of cash that they generated from sales. So we've been able to help with that and make them more efficient. I think we're already bearing fruit from that. At the moment, none of that backlog is included in the number that I quoted. However, obviously, we are now starting to look more carefully at the contracts that we have in Europe, and we certainly added to the backlog with the purchase order from the U.K. MOD. I'm happy that we're able to report these backlog numbers without Europe right now because I believe that Europe will be a significant contributor in the future. But I need to get everybody much more confident with those numbers before we start talking about them publicly.

Understood. And just one clarification on the same backlog number. The $7.4 million from U.S. Army and $4.8 million from the DHS, those numbers are not included in this $22 million. Is that correct?

I'll tell you what you're going to have to come back to me on that because I'm not sure how much of any of that we've executed on right now.

Our next question comes from Craig Irwin with Roth MKM.

It's Andrew filling in for Craig. Congratulations on the ongoing progress. You mentioned during the call that there has been a noticeable increase in interest from commercial customers, with government sales and federal clients contributing to the growth. Can you elaborate on the opportunities you're experiencing with your commercial customers?

Yes, we've seen broad progress across various areas. We recently announced a significant development involving a large automotive client. It's understandable that this can be frustrating for some, as we often receive orders from major commercial customers who prefer to remain unnamed. As I've mentioned previously, I won’t disclose their identities to avoid jeopardizing future business relationships. This pertains to our battery segment. On the commercial side regarding our EV charging and EV ARC infrastructure, we are witnessing a notable resurgence in orders from commercial entities, which had nearly vanished during COVID. We anticipate this trend will continue, especially as a large portion of our $150 million pipeline is now sourced from commercial customers. This is encouraging, and my long-term perspective is that, while it's fitting that government support is significant right now in the evolution of this industry, our business will likely lean more towards being commercially driven. Nonetheless, we are pleased to embrace government business for the time being.

Our next question comes from Tate Sullivan with Maxim Group.

On the U.K. military, the $1 million a quarter, and it takes you less than 5 months to get that. Do you need a similar contract structure for a country in the European Union, or are there other paths to go to military orders, please?

I'm sorry, coincidentally, I had the military flying over when you asked that — a bunch of Marine Corps jet fighters. I think what you asked me was, can we use the government contract from which the U.K. MOD acquired the EBR in other nations in Europe, or will we have to get different contracts for different nations? The answer is no, we cannot. I'll keep my political thoughts to myself, but especially because Britain exited the European Union through the Brexit process, they're stand-alone where that's concerned. Nevertheless, a fantastic customer! I really want to point out, by the way, that us winning that U.K. contract had nothing to do with my national origins—although I am originally from the U.K.—but that has nothing to do with it. It is simply that the U.K. has a need for a product like ours, particularly in their overseas bases. Cyprus is the first of those, which we're executing on. We will need to go and get other contracts in other nations, and believe me, we're going to do that. Part of the good news about the acquisition that we made in Europe is although they haven't been selling our types of products, they have been selling, as I said, street furniture-type infrastructure to government entities for a long time. They are very well versed in this type of thing. We're going to go back to all those existing customers and add new — our new products and market to them. But yes, we will have to go through that process, and we will do that because the experience of winning these types of contracts is that it's always easier to win more afterward. Nobody wants to be first, but also much of the work you have to do in winning one of them is very much copy-pasteable into other applications, and most of them have similar qualification requirements. If we qualify for one, it's unlikely that we wouldn't qualify for others.

So we're at the end of our time now, but I'm prepared to go over for a few minutes if there are any other analyst questions. Otherwise, I know you're all very busy, so we can call it a close.

Okay, operator, that sounds like it. That's it. Thank you, everybody, for your attention. As you can no doubt tell, I remain bullish about Beam Global; in fact, I'm more bullish than I've ever been, a far bigger and much, much better company than we were just a short period of time ago, and we're only going to get a whole lot better from here out. Thank you for your continued support and interest. As always, feel free to get directly in touch with the company or with our IR firm, Core IR, anytime you have any other questions or thoughts; we'd love to hear from you. Thank you very much.

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