Earnings Call Transcript - BEEM Q2 2024

Operator, Operator

Good day, and welcome to the Beam Global Second Quarter 2024 Operating Results Conference Call. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Lisa Potok, Chief Financial Officer. Please go ahead.

Lisa Potok, CFO

Hi, good afternoon and thank you for participating in Beam Global's second quarter of ‘24 operating results conference call. We appreciate you joining us today to hear an update on our business. Joining me is Desmond Wheatley, our President, CEO and Chairman of Beam. Desmond will be providing an update on recent activities at Beam followed by a question-and-answer section. 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 and 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 13, 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 second quarter of ‘24. Our second quarter revenues of $14.8 million, increasing 2% over Q1 of ‘24. 31% of our revenue in the second quarter was derived from commercial customers. For the six-month period ending June 30th of ‘24, our revenues were $29.4 million. We have a backlog of $11 million, and our pipeline of prospective customers has increased to over $183 million, although we cannot be sure of when or if those prospective orders will turn into actual sales. We generated a record gross margin for the second quarter in a row with a gross margin of 16%. The margin improved six percentage points compared to Q1 of ‘24. Our gross profits included $300,000 for non-cash depreciation and intangible amortization, which negatively impacts our profits. Net of these non-cash items, our gross margin was 18%. For the six-month period ending June 30th of ‘24, our gross profit was $3.8 million, or 13% of sales. Our six-month gross profits included a negative impact of $0.6 million for non-cash depreciation and intangible amortization. Our six-month gross profits net of these non-cash items was 15%. The improvement in our gross margin is primarily because we were able to recognize the engineering design changes to our EV ARC that resulted in cost reductions to our bill of materials as well as labor efficiencies. Additionally, there were reductions in material costs, as well as operational improvements and positive margins generated from the acquisition of Amiga. Our engineering and operations team continue to identify further cost reductions and efficiencies, which, along with the support from our Serbian facilities, we believe will improve our gross margins in future quarters. Then for our operating expenses. For Q2 of ‘24, we reported $7.1 million compared to $4.5 million in Q1 of ‘24. The $2.6 million increase is primarily related to a $1.8 million expense related to the change in the fair value of the contingent consideration, which is non-cash for the Amiga acquisition. We also had $300,000 for operating expenses in the quarter for Beam Europe, and then we had $600,000 for commission expenses. Commissions are paid when receivables are collected. Our operating expenses for the six months ending Q2 ‘24 were $11.7 million. These operating expenses included $1.5 million related to the change in the fair value of contingent consideration for the Amiga acquisition, which again is non-cash, and $900,000 for the operating expenses of Beam Europe. The net loss was $4.9 million for the second quarter of ‘24. The second quarter net loss included non-cash expense items related to depreciation, intellectual property amortization, non-cash compensation, our allowance for bad debt, and the fair value of the contingent consideration expense of $2.8 million in 2024. Net loss, excluding the non-cash items, would have been $2.1 million, or $0.14 per share for Q2 of ‘24. The net loss was $8 million for the six months ended June of ‘24. The net loss includes non-cash expense items of $3.5 million in ‘24, and the net loss excluding those non-cash items was $4.4 million for the six months ended Q2 of ‘24. Our cash balance at Q2 of ‘24 was $8.7 million, compared to $5 million at the end of Q1 of ‘24, and this is mainly related to the increased collections from our customers during the quarter. At the end of December 2023, we had cash of $10.4 million. The cash decrease between Q4 of ‘23 and Q2 of ‘24 was primarily due to the cash payments for the acquisition of Amiga of $2.7 million, which we did in early Q1 of ‘24. Our net cash used for operating activities for the period ending Q2 of ‘24 was $100,000. We continue to be debt-free other than some small auto leases and have a $100 million line of credit that's readily available. Our working capital of $16 million decreased $7.8 million from Q4 of ‘23 to Q2 of ‘24, mainly due to the accrual of the non-cash contingent consideration for the Amiga acquisition of $5.4 million. This moves to current liabilities as of Q2 of ‘24 from non-current liabilities at Q4 of ‘23. This contingent consideration is a non-cash earn-out based on revenue targets payable with shares of the company's common stock. Additionally, the decrease was due to the $2.7 million that I've mentioned previously for the cash payment for the Amiga acquisition in early Q1 of ‘24, which was in current liabilities at the end of Q4 of ‘23. Our working capital net of non-cash items was $21.4 million at the end of Q2 of ‘24. I will now turn the call over to Desmond to provide a business update.

Desmond Wheatley, CEO

Thank you, Lisa. And thank you to everyone else for joining this call. The second quarter has been incredibly busy for Beam Global, with many new achievements and records. Since our last earnings call, I’ve spent nearly half my time traveling, mostly in Europe, but also had an important couple of weeks in Washington, D.C., meeting with key leaders. My travels in Europe focused on connecting with new customers and investors, and it was exciting to see the locations where the first EV ARCs made by Beam Europe have been deployed. Just to illustrate our expanding reach, during my recent trip, I visited Washington, D.C., London, Belgrade, Budapest, Vienna, Larnaca, and Cyprus, along with Valletta and Gozo in Malta. While I wasn’t visiting those places for leisure, I enjoyed sharing the Beam story and promoting our products and stock to leaders in various sectors. Interestingly, despite the diversity of these locations, they share similar challenges regarding the need for faster EV charging, cost savings on construction and utilities, grid capacity issues, and concerns about future blackouts affecting transportation and industry. Beam Global's products address these challenges, and with our manufacturing capabilities in the U.S. and Europe, we are reaching the largest potential markets globally. Since our last update, we've delivered products across numerous states in the U.S. and several countries in Europe. More than half of our new orders in the second quarter came from new customers, which helped grow our customer base. Key new clients included major public transportation providers in California, a global supplier of Advanced Mobility Products, the Sacramento Municipal Utility District, and the U.S. Federal Railroad Administration, among others. We're particularly excited about working with the British Ministry of Defense, which faces similar challenges to our largest customer, the U.S. military. Earlier this year, we secured a contract that allows the U.K. government to purchase our products without a lengthy competitive process. The British Army quickly utilized this contract to purchase ten EV ARC systems for deployment at four military bases in Cyprus. Those systems were shipped from our Beam Europe facilities, and the deployment was completed recently. I visited those bases and am optimistic about further collaboration with the U.K. military. The Commander of British Forces Cyprus, who drives an electric Land Rover, now uses an EV ARC every morning, powered by our products. Our battery division is also progressing well, having been awarded a contract for a custom battery design for a major multinational company. We are encouraged that these initial designs could lead to larger production orders. Our battery technology is also being integrated into wildfire detection systems in vulnerable areas and we’re developing prototype batteries for an automotive OEM’s motorsports division. A significant highlight since our last discussion is the signing of our first distribution agreement with Jesse Group, a Spanish logistics and technology firm, which will distribute our products throughout Spain, Portugal, and the Spanish-speaking Caribbean, providing after-sales service as well. This expansion not only increases our sales footprint but also allows us to service customers in larger geographical areas. We received our first order from Jesse just a week after the agreement, which is a strong validation of our partnership. We plan to grow through adding more distributors and agents both in Europe and the U.S. While our direct sales team has done a great job so far, we now feel ready to engage third parties to help us reach a broader audience without increasing our overhead. Beam Global is executing solidly on our strategic plan. In Q1 of 2024, we achieved record revenue for a first quarter, and while Q2's revenue didn’t set a new record, it was still higher than Q1 at $14.8 million. Our gross profits in Q1 were the highest ever, and we surpassed that in Q2, achieving more gross profit than in any previous quarter. After excluding non-cash items, we reported approximately $2.7 million in gross profit in Q1 with an 18% gross margin, which was an increase from $1.8 million and 10.1% in Q1 the previous year. This gross margin figure did not yet reflect the benefits of the 8.25% price increase we announced last year on most EV ARC systems deployed during the quarter. This price increase is expected to positively impact our gross profitability as we work through the backlog. In Q2, our net losses, excluding non-cash items, were about $2.1 million, which aligns closely with our gross profit for the quarter, showing a trend of improvement. Analyst estimates had us at a $0.21 loss per share, while our actual loss was around $0.14, indicating better-than-expected non-GAAP performance. This improvement is attributed to our focus on profitability and reducing costs through engineering and operational enhancements. We believe further margin improvements will come as the price increase fully takes effect. Our goal is to exit the year with significantly better gross margins compared to Q1, which should lead us towards positive cash flow. With stable operating expenses, this trajectory makes cash flow more attainable, and we're targeting significantly higher gross margins in the long term. We project that if gross margin improvements continue alongside steady revenues, we could generate positive cash flow. Notably, we've sustained a steady growth in sales, reporting across-the-board eight-digit sales quarterly, despite not having secured huge orders like in 2022. The value of our purchase orders in Q2 of 2024 was approximately 36% higher than in the previous year. Our pipeline is currently over $180 million, the largest in our history, and includes a focus on commercial enterprises such as amusement parks and large corporate facilities. Beyond 2024, we anticipate that the rebranded EV Standard, now BeamSpot, will be a significant contributor to growth. We’re also seeing our strategy of approaching non-government commercial customers pay off, with commercial sales accounting for about 30% of revenues this past quarter, up from 10% a year ago. Interestingly, while our federal government contributions decreased by about $5 million compared to the previous year, our overall revenues still increased, indicating we compensated for the shifts in federal order cadence by boosting our commercial sales. Our strategy of diversifying revenue by targeting various sectors and expanding geographic reach and product offerings is on track. We expect more new revenue opportunities with the launch of BeamSpot and other upcoming products. Moreover, we have made significant strides in integrating our European acquisition, scoring our first $1 million order for EV ARC within five months of the deal, a feat that took over five years to achieve in the U.S. The legacy business we acquired is also growing, enhancing our efforts in clean technology sales in the largest market for our products. The European operations will be beneficial for our profitability for several reasons, including a competent team that operated profitably before our acquisition and reduced production costs for EV ARC systems compared to the U.S. This will positively affect our overall financials. Our ending cash balance improved to $8.7 million at the end of Q2, up from $5 million at the end of Q1, largely due to incoming payments from significant accounts. Our working capital, crucial for evaluating our cash health, shows promise, with our current balance standing at $21.4 million, despite containing over $5 million in non-cash items related to the contingent consideration for the Amiga acquisition. Excluding these non-cash factors, the working capital was just $600,000 less in Q2 than in Q1, which suggests we are moving towards positive cash flow. We’ve also advanced significantly in developing our curbside charging product, BeamSpot, having assembled most components and readying for the first installations. I believe this product could become a major seller. We’re also pursuing some substantial opportunities and are optimistic about winning them. Despite some negativity surrounding the EV sector this year, I believe that the long-term transition to electrification remains inevitable and that beam products will continue to draw investment and yield returns as the industry matures. Automakers will eventually find ways to manufacture EVs more profitably than traditional models. Challenges like charging infrastructure and grid capacity persist, but these represent opportunities for Beam Global. I anticipate the upcoming U.S. elections could trigger discussions about IRA funding, but I believe that regardless of the outcomes, energy security and made-in-America products will maintain bipartisan appeal. Overall, we’re committed to providing essential products and improving our profitability. With our expansion plans and sufficient cash to execute our strategies, I’m optimistic about our future. Thank you for your continued support. Our best days are ahead of us. I will now hand it back to Lisa and the operator to take your questions.

Operator, Operator

The first question comes from Sameer Joshi from HC Wainwright. Please go ahead.

Sameer Joshi, Analyst

Hey, good, good. How are you? Thanks for taking my questions. Just an interesting development with the British Ministry of Defence. Can you share what is the possible scope and scale of this, say, contribution from this source in 2025?

Desmond Wheatley, CEO

Sorry, Sameer. Can you run that one by me again? I missed that. It broke up a little bit.

Sameer Joshi, Analyst

Oh, sorry. Can you hear me?

Desmond Wheatley, CEO

Yes.

Sameer Joshi, Analyst

Yeah, the British Army potential orders in 2025.

Desmond Wheatley, CEO

Look, I hate to guess at what any of our customers is going to do in the future. Clearly, as I said in my comments, they have the same challenges and requirements that the U.S. military has. The British government has a similar mandate for the electrification of its entire white fleet by 2027. White Fleet meaning non-tactical vehicles. Just on Cyprus alone, there are 650 fleet vehicles there, all of which we’ll have to electrify, and that is going to be the case across British government, military, and everybody else. So look, they are going to need an awful lot of EV charging. The British don’t have as many overseas bases on the scale that the U.S. has by any means, but they have a lot of them. They also have a lot of requirements on the mainland, and our products are very well suited to solving their problems. So, we did an exemplary job. I am really proud of the team that did a fantastic job of both manufacturing, shipping, and delivering in that new market. You can think of that from a logistics point of view for us. We manufacture those products in our new European facilities and then we ship them overland and across the Mediterranean Sea to an island in the middle of the Mediterranean Sea. Then we deploy them successfully on four different military bases in Cyprus without incident. They are up and operating perfectly right now. So I am very proud of the way that went. That will give that customer an indication of the value of these products, the ease of deployment and the security of the electricity. Don’t forget, particularly in overseas bases, you are often relying on the locals for electricity, which is not necessarily the best thing from a strategic or tactical point of view. So we are solving an awful lot of problems with them. Lastly, I will tell you this. They view EV charging as almost a boring aspect of this. What they are really interested in is the other power, the e-power panel, the auxiliary power panel we have on these things and their ability to run other systems. Stuff I can’t even go into detail on, but their ability to do a whole lot else with this dispatchable electricity in these types of environments. So, kind of a long answer to tell you I am very bullish about our prospects with them, but I am not going to put a number on it.

Sameer Joshi, Analyst

No, no, this was good color. Thanks for that, Desmond. In terms of the pipeline that you had, it has grown nicely from, I think, 160 to 183. Can you provide some color on like, is this mostly Amiga-related or Illinois-based or California-based orders? Also, is there – like, how do you track this? Like, what is your conversion rate from pipeline to orders?

Desmond Wheatley, CEO

Yeah. The last part of your question is obviously very relevant at the moment. So, just to give you an answer, the majority of the pipeline from a dollar's point of view, it’s still coming from our sustainable EV charging products. We think that we are going to see a significant increase in that coming from Europe, because of course, we are just beginning to get those products out. I am going back over there in a couple of weeks to do some more selling and we are going to hit that hard. But we think we’ll see a really big pickup from that. The majority of the pipeline is still coming from our sustainable EV charging infrastructure products. And then obviously, we are also getting contributions from our battery business in Chicago and then increasingly from the legacy business. But what I am really excited about is increasing the sustainable EV charging product business in Europe. The last part of your question is obviously something which is on the point of my attention the whole time, because we’ve got a combination of things going on. The good news is the pipeline is increasing. The bad news is that the backlog is not increasing with it, at least not at the pace that it should be, and so let us confront that head-on. The simple fact of the matter is that we – as I mentioned in my comments, our Q2 revenues, we generated those revenues absent about $5 million in federal revenues that we had in the same quarter in the prior year. The simple fact of the matter is that our federal orders, particularly federal government orders, have not transitioned from pipeline into backlog. I was going to say, when we expected them to, but I don’t even want to say that. I don’t have expectations about when they do that. They work on their own timeline. So you could say we have seen some stuff move right, no question about that. We attribute it to certain budget uncertainties and probably to some extent to what is going on around the election at the moment. But here's the important thing. We don’t see any of it disappearing. We see it moving right, but we don’t see it disappearing. And so while from a quarter-by-quarter impact point of view, which of course is tremendously important to everybody on this call, to our customers, federal, state, even municipal customers, they have little or no concern for the beginning or end of quarters, but they do have concern for their long-term infrastructure requirements. And as I say, we are not seeing any of this going away. We are simply seeing it moving right. And that to some extent explains the increasing size of the pipeline without a rational increase in the size of the backlog. What does that mean? It means what I have been saying in these calls for many quarters. We are going to see this sort of lumpiness from our pipeline to backlog conversion point of view. And it is because as I said, one single large federal order changes everything for us. Nobody is asking us these questions anymore. I am confident that that will happen. I am just not going to put a date on when it will happen, because I don’t control that, that’s all. Then the question becomes, okay well, what are we doing as a management team to deal with that? We could sit with our face in our hands and say, the feds haven’t ordered like we thought they were going to, therefore we are missing our numbers. Or we can take active and aggressive steps to broaden the funnel and that is what we are doing. That is why you have seen this increase in commercial sales. That is why you have seen us move into large markets like Europe. That is why you see us bringing new products to market, and that is why you see us expanding our sales resources through the integration of the resellers, distributors and sales agents. All of these moves are designed to increase the size of our funnel, diversify our revenue opportunities and give us more ways to soak up any movement right from some of these large customers. I still believe that all of these sales will come. I think that we’re – this is a very uncertain year for a whole host of reasons as I pointed out before. There is a great deal of uncertainty in the markets, there’s a great deal of uncertainty geopolitically, and then with the elections and everything else coming, we’ve got uncertainty around that as well. That inevitably makes people less inclined to press the buy button. But again, we are not seeing any of this go away. So I think it’s just – obviously we’re, as I said in my comments, we are constantly working on closing those big elephants. But more importantly, strategically for us, is making sure that we have a much wider funnel, so that if something does move right, it is backfilled by something else coming in, probably from a different corner of the planet for all we know.

Operator, Operator

The next question comes from Craig Irwin from ROTH Capital. Please go ahead.

Andrew Brennan, Analyst

Hey guys. It actually Andrew on for Craig, but how are you doing?

Desmond Wheatley, CEO

Andrew, how are you?

Andrew Brennan, Analyst

Good. Good. So, you kind of touched on this on the last question here, but I was wondering if you could provide some more detail on what is working so well in the commercial sales, which is kind of helping out smooth revenue recognition quarter-by-quarter.

Desmond Wheatley, CEO

Yes. I mean, part of its focus. As I’ve said before, you’ll remember. We used to – a very large proportion of our pie, although it was a much smaller pie in those days, was commercial sales, and then government took over from that. COVID really shut down our commercial sales efforts. Inevitably, our sales team ended up concentrating more on the places where they were going to make wins, which was government. Post COVID, we have seen a return to some of these sales on the EV charging side of business. But we are also bringing in revenue from other interesting spots where commercial is concerned. It’s not all coming from the EV charging products. We are seeing a tremendous return to sales of those types of products into commercial, but also contributions from battery sales and to some extent, the legacy business from Beam Global – Beam Europe, although a lot of that is also government-based and that we are selling street furniture to municipalities and other government agencies. Some of it’s focused, some of it is just a natural impact to the market. And then a big part of it from an EV charging point of view is, commercial real estate really didn’t care about EV charging until a year ago even because it doesn’t impact their lease-up times or their tenant retention. But as we see more and more EVs on the road, we are going to see much more interest on the part of commercial real estate and EV charging. In my opinion, it will become like Wi-Fi. You will not be able to operate a piece of property that has a commercial aspect to it without offering EV charging. And as that happens, we are going to see a lot of increase in demand for EV charging in general. And we in particular, I believe we’ll see a lot of increase in demand, because most pieces of commercial property simply don’t have sufficient electric circuits and certainly don’t want to be digging up their parking lots and their landscaping and everything like that for months on end to provide it in a way the government entities might be more insensitive to. All of those things lend themselves very much to growth for us in that space. While we are happy with the increase in commercial business that we’ve done, that job is nowhere near finished. And I’ve always said, always, even at the times when government revenues were almost 100% of our revenues, I’ve always said that in the end, this will be a consumer and commercial-led deal, and the great majority of Beam Global’s revenues will come from consumer and commercial, although not at the expense of absolute dollars from government from a percentage point of view.

Andrew Brennan, Analyst

Great. Thanks for the color there. My second question was great to see the second straight quarter of very strong gross margins. You really did a great job parsing out the details there on the call. First off, the two-parter. One, I guess, how much of the backlog do we have to burn through to see the price increases impact our gross margins? And secondly, you talked a bit about the European manufacturing, hypothetically building the base plates in the EU; 2% to 3% gross margin improvement there. Is that kind of what will drive the further increases after you get to double the Q1 levels that you talked about?

Desmond Wheatley, CEO

Yes. So, first thing to point out is actually about 20% of our Q2 EV ARC sales did have the increased price. So, that did contribute, only a fifth of them, but that did contribute and we are rapidly coming to the end of that backlog that we had. There are a few stragglers left over. So the majority moving forward will include the price increase, so we should benefit from that. Inevitably, because I don't have the exact number of units we've got left in backlog with the pre-pricing, and I will say this, a couple of our larger contracts, the GSA type contracts and also California DGS contract, it's harder for us to integrate that new pricing into them. That's a longer process. And we won’t – we will not turn down sales from them in the meantime. So that could create some stragglers where that's concerned as well. But moving forward, in general, we're moving into this new pricing structure and we expect that to be beneficial. On the savings from Europe, it's way beyond theoretical now, or hypothetical, I think is the word to use. It's actual. We actually know because we've done it that we can produce the base price, in particular this one item, which happens to be a very expensive part of the EV ARC. It's the ballast and traction pad, which gives the system its stability in a parking space. We know for a fact that we can produce those at something like, I don't know, 6% or 8% lower price impact on our COGs, on our BOM, the BOM aspect of our COGs. But even after shipping them to us across the sea in a container, of course, you can put quite a few of them in a container. We can still pick up this 2% to 3% gross or COGs reduction, gross margin improvement in the U.S. with manufacturing and shipping from our European facilities. Now, a couple of things come from that. First of all, we're going to do a lot more of that. We're going to identify more pieces and parts that we can manufacture in our serving facilities. Because remember, while we have 50,000 square feet under roof here in the U.S., we've got 250,000 square feet under roof and acres of land upon which we can inexpensively expand in our Criable facilities. So they wanted a tremendous amount of room for expansion there. And one of the things I actually like about this is, the extent that we can pull some of those requirements out of this 50,000 square-foot facility in the U.S. What that does, that allows us more opportunity for expansion in this facility without having to expand elsewhere to do that, because we can reduce the number of tasks that are taking place here, but the ones that we can do inexpensively into our European facilities, and then just concentrate on aspects of the manufacturing and assembly that should happen in this facility. So lots of benefits will come from that, but it's far from hypothetical. The cost savings are already coming into effect, and we will start receiving the first of those ballast and traction pads in the fourth quarter with that reduction in costs, again, attached to it. So nothing but good news coming from that, and not hypothetical, actual.

Andrew Brennan, Analyst

Perfect. Well, that's great to hear. Congrats on that continued progress. And I'll hop back in the queue.

Desmond Wheatley, CEO

Thank you very much, Andrew.

Operator, Operator

The next question comes from Ryan at B. Riley. Please go ahead.

Unidentified Analyst, Analyst

Hey, Desmond. Thanks for taking the call.

Desmond Wheatley, CEO

Hi, Ryan. How are you?

Unidentified Analyst, Analyst

Good. Thanks. I'll stick with the margins and congrats on the improvement again this quarter. Wondering, what are the additional levers you can pull to enhance margins further beyond the price increases and international manufacturing capacity as we look to next year and ‘26? Is it mostly scale or are there other areas that you are looking at?

Desmond Wheatley, CEO

Yeah, so there's no question about scale. No question that volume helps us. And again, I know there are, to go back to our previous question about the mix between pipeline and backlog, I know that that's going to raise some eyebrows and maybe even concern, but I'm not worried about that. I think we, as I said, I know what these orders look like. I personally am confident that this is moving right, not going away. So I think we get that return and increase in volume. That will definitely help us. Beyond that, we still have elements of engineering and operational improvement, which we still haven't fully benefited from yet. I think we're going to see further benefits from our activities in Europe. And then the truth is, you got to remember that we've been operating in what for us has been a hyperinflationary environment. I think – don't quote me on this, but I think we've seen something north of 30% increase in the prices that we have paid for our BOM since the beginning of the inflationary period back in COVID, 30%. And if you think about that, what that means is we have absorbed all of those costs and yet brought our gross profit to 16% GAAP, 18% net of non-cash items, which is amortization of intangible asset value resulting from our battery company deal. So we essentially, we've absorbed a 30% increase in costs and we're a BOM heavy company. Labor is a low part of the contribution to our deal. So absorbed a 30% increase in costs due to inflation and yet brought our gross profitability from minus 15% to positive 15% at the same time, which is basically like a 60% improvement in cost reduction when you combine those two things. We've still got more to do. We're getting better and better at this, engineering improvements, operational improvements. And then the fact that we are now starting to see stabilization in price of components and even reductions in price of components that we integrate. The chief amongst those would be battery sales. Battery sales dropped precipitously for the first 10 or so years that we made the product. We thought that that was going to continue without stopping. But then when COVID came along, battery sales turned around and started getting more expansive again. We had to absorb all of that. Remember, we never increased our prices during any of this, until this latest price increase, which I've expanded on enough for everybody to hear about it. So there's a combination of things going on, larger market forces at work, but also just most of it's going to come from our own improvements. Frankly, the other thing that's really cool is we're learning from our Europeans. The truth is they have been doing what we have been doing in this building for the last three or four years. They've been doing it for 30 years. They are really good at it. It's just been a great combination, frankly. And so between all of us, we're going to continue to drive the prices down and I think we've still got a lot further to go. I have said in the past that my goal is to get to 50% gross profit, and I'm standing by that goal.

Unidentified Analyst, Analyst

Great. I really appreciate that additional color. For my follow-up on the BeamSpot, what are the final boxes to check before that hits the market? When do you see that ramping to the point where it becomes a meaningful portion of the overall sales mix?

Desmond Wheatley, CEO

That's the sort of question that I ask around here, Andrew, except you did it without expletives. Bringing a new product to market, particularly a large and complex piece of equipment is always challenging. Nothing ever happens as fast as I want it to. However, as I said in my comments, I can absolutely report to you that our team in Chicago has now done the integration of the components into the column of the BeamSpot, and that we are in fact doing what we need to do in San Diego to be able to stand the first of those up. We're going to do the same thing in our European facilities. The great thing that they will do is, they will give us something real that we can show to people and we intend to do that. It's one of the big reasons that we selected San Diego over Chicago to do the first installations, because we've got a lot of people that we're going to bring by here. I actually show them the system in operation, charging a car, doing what it needs to do. I anticipate a couple of things. The first one is, the first prototype systems that we put out will not be anywhere near as good as those that we take to market. We've learned a lot putting the first of them together. Our engineering team is fantastic. They model everything out. Everything happens on computer screens before we touch anything physical. But inevitably, when we start making them, we find ways to make them better and less expensive and more efficient than everything else, just as we have done with EV ARC. We're going to do that with EV Standard as well, but that will not stop us selling it. The sales cycle we anticipate will be slightly longer with EV Standard than it is in many cases with EV ARC, because we think that the unit sales will be larger and it will be more of a large-scale infrastructure deployment than onesie-twosie sales. Although, as I said last time, I'm starting to rethink that a little bit because we do now think that there's a lot of opportunity for these in parking lots of shopping malls and places like that, where maybe they would buy one or two or three or four of them, and that sales cycle could be a lot shorter. The benefits to them are tremendous, highly visible, rapidly deployed, and all the other things that go along with it. But let’s – our plan right now is to get the first prototype stood up and operating, and then we will start to really aggressively market them here still within this year. Then I think we anticipate that we'll start to see the first meaningful revenue from them into 2025.

Unidentified Analyst, Analyst

Great. I appreciate it, Desmond. I'll turn it back.

Desmond Wheatley, CEO

Thank you.

Operator, Operator

The next question comes from Noel Parks with Tuohy Brothers. Please go ahead.

Desmond Wheatley, CEO

Hi, Noel.

Noel Parks, Analyst

Hi. How are you doing?

Desmond Wheatley, CEO

Okay. I've got some jets flying over. Just give me a second here.

Noel Parks, Analyst

No problem.

Desmond Wheatley, CEO

The Miramar flight path I'm on.

Noel Parks, Analyst

Sure.

Desmond Wheatley, CEO

I think that sounds like the last of them disappearing over the horizon.

Noel Parks, Analyst

Okay. No problem. Life on the road, I hear you. I was just thinking about, in terms of your sales and marketing organization, and you mentioned larger sales, there's been more stakeholders, less certainty of timing. Are those just internal process things that really vendors is generally able to control within a customer? Or do you feel that from your side, you have the resources to move customers along as fast as you can? And yes, of course, there are cost considerations there about the first one involved in moving it along, the handholding, and the closing and everything. So just, do you feel like those are in balance, what you need and what you can accomplish with just moving customers along?

Desmond Wheatley, CEO

Yes. So no, I don't think they are in balance, and that's why we're making the changes that we're making, but let me come back to that. The new selling resources that we're engaging will not do anything to move our existing backlog along or convert our existing pipeline into backlog. That's not their purpose at all. Our current sales team has done a fine job of that. Our current sales team is responsible for everything in the $185 million or whatever pipeline that we have right now and for all the revenue that we've ever generated. What's actually happened, and I actually view this to be one of the most important aspects of our business today as I'm talking to you. What's happened is we've talked for many years about engaging with resellers and distributors and agents. And in the past, our own processes, our own sales collateral, our own ability to understand the selling cycle and everything else has not been mature enough to actively engage outside resources because frankly, we were kind of learning as well while we were going along. What's changed is that we now are confident, and the product's been developing and changing and everything else, right? But what's changed is that we're now at a point where we're confident enough in the product development. We are confident enough in our understanding of the sales cycle, the customer, the types of customers that people are going after. And we are also confident enough in the developed sales collateral, to where we can finally start to engage outside selling resources. And the reason I'm so excited about this is because, again, go back to what I just said, our internal sales team of four or five people has sold everything that we've ever revenued. Imagine how it's going to be when we've got 50 or 100 similar people around the world, telling the same story to the same type of customer prospects that our internal sales people can't get to because there aren't enough hours in the day that you just can't make that many phone calls. You know there are 380 million people in the United States of America. How many of them can five salespeople call, right? And as we look at Europe and those other markets, and this was really what precipitated us starting in Europe with Jesse, is Europe is different to the United States in that while the EU in particular is one economic block, it's still very culturally different border to border. Frenchmen are not the same as Germans, are not the same as Spaniards, are not the same as Maltese. It's as simple as that, and I know that I'll get letters for making nationalist distinctions or something here, but I'm sure you understand what I'm talking about. And so what we're determined to do is to find people in those environments. Jesse, of course, covers Spain, Portugal, and the Spanish-speaking Caribbean because they are already there. They are culturally and linguistically very aligned, and they are already doing business there, and they have all the relationships there and everything else. Furthermore, I've known Jesse for years. I've been engaged with him for years and know them to be well connected and a well-organized and good platform. There are several other entities just like Jesse out there. And look at what Jesse's done. We signed a distributor agreement with them, and we already have an order from them. This is just a fantastic time for us to multiply up our sales team's efforts, not impacting current pipeline, not impacting current revenues, adding tremendously to the pipeline. That's my plan. That's my intention. And that is my expectation, converting that pipeline to backlog and doing all of it without adding to our SG&A costs. So we will not have an increase in operating costs. We will have no increase in cash burden or anything else, but we will have a tremendous increase in resources out there selling our products, and those resources, by the way, get paid when and only when we successfully collect from our customers for the products that they sell. So it's a very low risk. Yeah, we'll have to invest something in a bit of training and giving them sales collateral and all that sort of stuff. Although in Jesse's case, they actually produce the sales collateral. We just give them guidance on it. But there'll be some investment of time and energy. But the simple fact of the matter is we're going to get a tremendous increase, leveraging off of our selling resources, but without any commensurate increase in our operating and overhead costs. And as I say, outside the technological advances that we've made and the acquisitions that we've made, this is the most exciting thing that we've done for a long time.

Noel Parks, Analyst

Could you sort of quantify it or just give some sense of pace you would think you would be in a couple of Jesse-like organizations as partners, a couple of years or faster than that or it takes more time?

Desmond Wheatley, CEO

Sorry, are you talking about our ability to add to those organizations, or are you talking about their ability to sell? I missed that.

Noel Parks, Analyst

No, I just meant like the agreement you signed with Jesse to get to the next one. Is that a quick process, a slow process?

Desmond Wheatley, CEO

Look, I'm going to be very careful not to add anybody to our ecosystem that doesn't do anything but a great job for us. So you'll see us taking a sober approach to this. At the same time, you'll see an awful lot of effort going into it. And this is really kind of a new thing for us, getting the agreements in place and understanding how we're going to do this. So you will see an awful lot of emphasis on it here in the next months and quarters. So in a way, it should be a sort of the reverse hockey stick, where you see quite a lot of activity in the beginning, and then that should trail off as we feel that we've got sufficient entities in place that are within our capability of managing them and producing product for them. But no, this is not a year's thing at all. In fact, I have given instructions to Sandra Peterson, who runs sales and marketing, that this is her number one priority, is the recruitment of these types of entities to leverage up our selling. And again, remember, everything that we've ever revenued has been sold by four or five people internally. Listen, I love our people. They are great. They do a great job. But lots of other people have great sales teams too. And I'm looking forward to having them out there telling our story. I think we've got time for one more question, so you beat me to it. I'm just getting the signal here; we've got time for one more.

Operator, Operator

The next question comes from Tate Sullivan from Maxim Group. Please go ahead.

Desmond Wheatley, CEO

Hello, Tate.

Tate Sullivan, Analyst

Thank you. Hello. Just to call up, on the BeamSpot, did I hear – are you planning to introduce it/roll it out in both the U.S. and Europe? Is that what you said? Okay.

Desmond Wheatley, CEO

Yes, U.S. and Europe.

Tate Sullivan, Analyst

Okay. And then you mentioned some sales for the legacy business for Beam Europe. Have you had a selling to their existing customers? Have you already, I imagine. Sorry, I missed that comment.

Desmond Wheatley, CEO

Yes, we are. We are definitely aggressively selling to existing customers, the new – both the legacy and the new products. And as I said in my comments, we have growth in the legacy business. We've been able to help them. They are very, very good at what they do, but they've operated their business entirely on a cash basis typical of a sole proprietorship. And so we’ve actually been able to help them leverage up the business a little bit in terms of having the right types of inventory on hand, to be able to execute faster on deployments and that sort of stuff. So we've seen growth in the legacy business. We expect to continue to see that. We're going to go after that more aggressively than ever, because it is a perfect lead in for all the other products that we’re going to sell them, but also because we can do it profitably.

Tate Sullivan, Analyst

Great. Thank you, Desmond.

Desmond Wheatley, CEO

Thanks, Tate.

Operator, Operator

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

Desmond Wheatley, CEO

Okay, thank you very much and thanks for the excellent questions. If we didn't get to you, please feel free to call us directly or email us or whatever else. And I know I follow-up calls with most of the analysts after this. So don't worry if you had a question and we didn't get to it. Look, I think that the main thing that aside from all the excellent stuff that we're doing, the main thing that we all focus on here today was that increasing pipeline without the backlog being there. I knew that would raise eyebrows. As I said, I'm confident that we're going to make that conversion. It is a kind of a weird year, but everything's telling me things are moving right, not going away. And again, the management team here, in fact, the entire team at Beam Global is taking all the active and aggressive steps that we need to take to broaden our funnel and that's going to pay off for us. It's already paying off for paying off for us. The orders that we're seeing, the deployments for the MOD that would not have happened had we not made that effort to broaden our geographic reach there. The order that we received from Jesse would not have happened if we hadn't made those efforts. And so the efforts are paying off and they are going to continue to do so. These will – I don't believe that we're talking about dividing into the same size pie here. I think that these will all be accretive to what we're doing. And yes, we've seen a bit of lumpiness; we're going to. But the general trend is onward and upward. And at the same time, we're taking very active and aggressive steps to make sure that we are acquiring as many appropriate targets as possible, so bear with us on that. As I said, I'm very comfortable that our best days are ahead of us and we're a far better company than we've ever been in our history. One other thing that we have not talked about just very briefly is we're coming at the end of our ERP integration. That's been a major job of work for us here. But it's also been very helpful in terms of our getting access to the numbers and being able to do good analysis on the business. And these things also contribute to our margin improvements because we know where to target and we're getting better and better at things. And as a final comment, I'll just put a quick shout out to Lisa Potok and our team because here we are filing a couple of days before we have to, in contrast to our full year and first quarter when, as you know we used our extension. We weren't late, but we used our extensions. But for those of you that were aware, that was a chronic condition, Lisa's got things under control and we're – here we are a couple of days in advance of time. So thank you for that, Lisa. And thanks lastly to the entire Beam team and to everybody that supports us. I love this company and I'm more enthusiastic than ever. Thank you.

Operator, Operator

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