Beam Global (NASDAQ:BEEM) Q1 2021 Earnings Call

0:01 Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the BEAM Global first quarter 2021 financial results and corporate update conference call. At this time, all participants are in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes.

0:47 A webcast replay of the call will be available approximately one hour after the end of the call through August 22, 2021. I would now like to turn the call over to Kathy McDermott, CFO of BEAM Global. Please go ahead.

1:04 Thank you and good afternoon and thank you everyone for participating in BEAM Global's conference call for the first quarter of 2021. We appreciate your time today and for joining us for this call. Joining me is Desmond Wheatley, President, CEO and Chairman of BEAM. Desmond will be providing an update on the recent activities at BEAM followed by a question and answer session. But first, I'd like to communicate to you that during this call, management will be making forward-looking statements, including statements that address BEAM's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in BEAM's most recently filed Form 10-K and other periodic reports filed with the SEC.

1:54 The content of this call contains time-sensitive information that is accurate only as of today, May 24, 2021. Except as required by law, BEAM disclaims any obligation to publicly update or revise any information to reflect events or current circumstances that occur after this call. Next, I'd like to provide an overview of our financial results for BEAM's first quarter ended March 31, 2021. For the first quarter of 21, we reported revenues of $1,372,392 a 4% increase over 1,317,052 reported for the first quarter of 2020. During the recent quarter, we shipped systems to municipalities as well as into federal academic utility and enterprise business segments.

2:39 We also provided an EV Arc system to Jeep, a Stellantis brand, and one to their partner, Electrify America, to support the launch of their project to provide renewable charging at off-road trailheads throughout the United States as part of Jeep's 4XE charging network. As of March 31st, 2021, our contracted backlog was approximately 1.2 million. Gross loss in the quarter ended March 31st, 2021 was 149,120 compared to a gross loss of 39,641 for the same period in 2020. The increase in gross loss was primarily due to an increase in costs for the new EV Arc 2020 system that was launched at the end of 2019. We expect to reduce these costs over time and also improve our gross margins as we increase our production volume to improve our fixed overhead absorption and improve labor efficiencies.

3:33 Operating expenses were $1,102,675 for Q1 2021 compared to $902,000 for Q1 2020. The increase in operating expenses was due to an increase in non-cash compensation expense for stock option expense, investing of director shares, increased sales headcount to support revenue growth and increased R&D headcount to help reduce product costs and for product development. The net loss was $1,250,809 for the first quarter of 2021 compared to $942,521 for the first quarter of 2020 due to the increase in growth loss and increased operating expenses. At March 31st, 2021, we had cash of $28,214,029 compared to $26,702,804 at December 31st, 2020. The increase was primarily due to the exercise of warrants, partially offset by operating cash usage.

4:33 Our working capital also increased to $29,507,478 at March 31st, 2021. I will now turn the call over to Desmond to provide a business update. Desmond?

4:45 Thank you, Cathy, and thanks to everybody else for joining us today and for your continued support. of and interest in being global. Before I get into comments about the quarter and the business in general, I want to thank you all for your patience and give you a brief explanation for delaying this call and the release of our Q1 results. Let me start by making absolutely clear that there is and was nothing wrong with our financials. I want to congratulate and thank Cathy for her tireless efforts in always producing accurate reporting. which has only ever been described by our auditors as of the highest quality. For the last decade or so, we've used Solberg & Co as our auditors. Solberg did a great job for us and as you're aware, we have always filed on time and without controversy.

5:33 This year, as a result of the significant growth which we hope to achieve and our position on a national exchange, we elected to engage RSM as our auditor. This is the first quarter that they've been engaged. We're a simple and easy to understand company with simple and easy to understand financials. Nevertheless, any public company is subject to complex and sometimes hard to interpret SEC regulations. It took longer than any of us expected for RSM to ensure to their satisfaction and ours that all of our activities were in compliance with even the most arcane SEC requirements. We have together reached comfort that that is in fact the case and have as a result filed today. It's important for me to note that we did not make any material changes to our filings during this period of delay. It's also important to note that we're not late in filing our first quarter results. So again, thanks for your patience while we went through this.

6:27 Now, my comments will be a little bit briefer than usual today because, of course, we just did our full year conference call about a month ago and there's not been a great deal of change since that time. In fact, the really significant change is related to what is arguably the most important factor in our business, contracted backlog. And that's a lot healthier than it was just a month ago. We currently have over $5 million of contracted backlog, all of which we expect to convert to revenue in 2021. And most of it should deliver before the end of Q3. Combining backlog with our Q1 revenue of 1.3 million puts us in the position of knowing that we'll exceed 2020 revenues in 2021. while still having more than half of the year left to sell. This at a time when we have a growing pipeline and many indicators that our opportunities are both increasing and accelerating in velocity.

7:16 Those of you who were on the last call will no doubt remember me saying that we were just days away from winning the biggest order in our history. Of course, at that time, I didn't say exactly how many days, but I think most of you know me well enough now to realize that I didn't expect it to be quite this many. At any rate, it did happen, a little later than I expected, but it happened. We received an order for 52 units from California's Department of General Services, with whom we've had a contract in place for several years. This will add to all the other units that we've delivered to DGS and many other California government departments. It's an order that's broken down into 27 separate purchase orders, each of which is directed at a different government office, hence perhaps at least some of the delay. Absent situations beyond our control, we anticipate delivering these 52 units before the close of the third quarter.

8:01 There are several useful indications to take from this order. First and foremost, it is in a way descriptive of our broader business. It's not and was never a question of if it would happen. It was just a question of when. Everyone involved from our side and from the customer side could see that the order was coming, but none of us could put an exact date on when we would receive it. As I look at the markets we approach, the convergence of clean energy and transportation, I don't think anyone anymore questions if it will happen. The only questions I see now and even the most skeptical press is when will it happen? The shift to this future is, if anything, accelerating and we are well positioned to take advantage of it. This order is a pretty good indicator that that future is rapidly upon us. Many of you will have seen President Joe Biden test driving Ford's magnificent new F-150 Lightning last week. The Ford F-150 has been described as the most popular consumer product in history. It's the top selling vehicle in the United States and has been the top selling pickup truck for 42 years in a row. but this new Ford F-150 is similar only to the old gas and diesel models in that it can carry and tow just as much as they could. As President Biden discovered when he drove it, as soon as you press the accelerator pedal, you find out how very different it is from the previous models. To quote the president, this sucker is really quick.

9:19 In fact, the F-150 Lightning accelerates from naught to 60 in about four seconds. Compare this to the gasoline and diesel models which take twice the time to reach 60 miles per hour. I think that the president's use of language and indeed the vehicle that he was driving described a significant shift in the future consumer relationship with electric vehicles. Until now, they've been largely viewed by the broader public as the domain of elitist in Teslas and tree huggers in cars like the Nissan Leaf. What Americans really want are pickup trucks and SUVs, and this year and next, they'll be served up with a whole portfolio of what are simply the best vehicles they've ever had the opportunity to drive. The F-150 will be joined this year by other new entrants like the Rivian and Lordstown's Endurance, and GM has, of course, famously announced the impending arrival of the 1,000 horsepower all-electric Hummer SUV, which has an insane 11,500 foot pounds of torque and will be not to 60 in three seconds.

10:11 And there'll be plenty of other models to choose from too. Just about every major auto manufacturer, foreign and domestic, has a portfolio of electric vehicles which are either in production or soon will be. The two things all these vehicles have in common is that they're either far superior to the diesel and gasoline vehicles currently produced and most importantly for us, they will all need a place to charge. It won't be at home because most people don't live in homes that can support EV charging and it won't all be tied to the grid because the grid doesn't have capacity to support it all. And anyway, it takes time and money and disruption to connect chargers to the grid. Consumers are too impatient to wait for that sort of thing. What's needed is a rapidly deployed product which could supply the charging that they need where they were already going without disruptive construction and electrical projects.

10:59 Beam Global is, as far as we know, the only company offering such a product. And of course, we have very good intellectual property protection. One very cool recent addition to the EV lineup is the Jeep 4xe, another product that moves EVs from the edge and places them firmly at the center of consumer interest. Just imagine how fantastic it will be to go four-wheel driving in the wilderness in an electric vehicle. The torque, acceleration, and ability to control each of the driving wheels will make these new off-road vehicles must-haves. of course it won't be easy to deliver grid circuits to wilderness areas and that's probably why Jeep selected the world's best rapidly deployed off-grid renewably energized electric vehicle charging infrastructure product. Take a look online and pull up some of the fantastic images of our EVR product with a very attractive Jeep branding package.

11:45 Certainly one of the most interesting developments that I've seen in the automotive industry is Jeep's selection of Electrify America to provide and manage their EV charging infrastructure. Electrify America is of course a Volkswagen company and I just don't recall ever seeing another instance where one car company has engaged another car company to provide and manage fueling infrastructure for them. This is a powerful indication of the revolutionary new business models which are going to develop along with the revolutionary technology of electrified vehicles. BEAM is very well positioned to take advantage of these new business models. We are of course delighted that Jeep selected our product and we're also very happy to continue to advance our existing relationship with Electrify America for whom we've already deployed EV art products to support their electric vehicle chargers throughout Central California. Electrify America seems to be doing a very good job of evolving beyond their initial incarnation and we really look forward to continuing to support their infrastructural requirements as they grow.

12:39 So far there's been a great deal of talk about government tailwinds within the EV industry and it's certainly true that a significant amount of activity around EVs and EV charging infrastructure has been driven by government activity. Governor Newsom in California has announced the banning of internal combustion engine vehicle sales from 2035. There's nothing controversial about this move and in fact it's quite an astute and safe political step to take because, and I'm sure Governor Newsom knows this, by 2035 Californian consumers will not be able to buy anything but electric vehicles anyway because internal combustion engine vehicles by that time will have been banned across most of Europe and it's simply not possible for car manufacturers to make one set of vehicles for the United States and a completely different set of vehicles for Europe and the rest of the world. Governor Newsom's announcement is bold and seems fraught with risk, but in fact, I think that his mandate will not be required because the industry and the consumer will deliver on its requirements before it comes into effect.

13:34 California is not alone. The state of Washington has one-upped us with a ban on the sale of internal combustion engine vehicles starting in 2030. And there are several other states with similar bans in the works. But again, I don't believe that they will be necessary because I think the consumer and the industry will make the change before the bans come into effect, at least in all the outlier cases. At the federal level, we now have President Biden's commitment to electrify the federal fleet of 645,000 vehicles. The federal government is the single largest consumer of gasoline in the world by far and will become the single largest electric fleet operator in the world. President Biden has also announced his intention to deploy half a million publicly available EV charging stations on America's highways in the next few years. Perfect fertile ground for our products.

14:19 In June of this year, we'll be taking part in the Electric Mobility Symposium at Marine Corps Air Station Miramar. There'll be a fantastic selection of electric vehicles both manned and unmanned at that event. The Marine Corps, like all branches of the US military, is working hard to decarbonize and wean itself off the terribly expensive, both in terms of money and human lives, reliance upon liquid fuels. Our EVR product will be prominent throughout the symposium, charging all types of electric vehicles, and will also be demonstrating its transportability on our arc mobility trailer and its rapid deployment capability. Everything about the EVR, its autonomy, its transportability, its rapid deployment, makes it an excellent choice for the future warfighter and their fueling requirements for the fantastic array of electric tactical vehicles which are coming.

15:06 Interestingly, the Marine Corps, like many other fleet operators, probably every other fleet operator, starting to recognize that internal combustion engine vehicles are increasingly becoming a liability. They recognize that as manufacturers move to electric portfolios, it will become harder and harder to source spare parts and service for internal combustion engine vehicles. So it's not just about decarbonizing or about reducing reliance on liquid fuels. It's also about their recognition that there's an end coming to the era of the internal combustion engine vehicle and that they need to be in front of that process, not behind it. We intend to help them. All of these moves towards electrification, whether they be at the federal, state, or the municipal government level, or driven by enterprise or consumers, have one thing in common. They all require a significant and rapid increase in the availability of electric vehicle charging infrastructure.

15:53 Beam Global produces the fastest deployed, most scalable, most robust and lowest total cost of ownership EV charging infrastructure solution available in the world today. We support all the major brands of EV charging products and service providers behind them. Our products are immune to blackouts, provide energy security and are clean and green and made in America. Sounds like a winning combination to me. The California order, the way it was placed and the reasons behind it is not, in my opinion, anomalous. I believe that this is an indication that for all the reasons mentioned above, we're going to see a significant increase in the need for rapidly deployed and resilient off-grid EV charging infrastructure. It also signals a recognition on the part of government that a significant percentage of our future fueling infrastructure must be independent with locally generated and locally stored electricity if we're to defend ourselves from a catastrophic failure in the fueling system caused by a grid failure.

16:47 Of course, this is exactly what our products are designed to do. And this is exactly the sort of evolution of thinking that has formed the basis of much of our investment thesis over the years. I fielded some questions about California and New York and the apparent inactivity with those customers during 2020. Actually, we've never stopped receiving orders from the California contract. And while New York had other things on their mind during 2020, we've recently received an order from them for our new EVR 2020 product. They look forward to seeing the floodproof unit, having had years of service from our previous excellent but not floodproof models. California's Governor Newsom has committed over a billion dollars to the electrification of transportation. California has also just become the first state in the U.S. that will require rideshare operators such as Uber and Lyft to transition from gasoline to electric vehicles in their networks by the end of the decade.

17:38 I think it's very obvious that there will be a requirement for a significant increase in the availability of public EV charting infrastructure and at a pace which far exceeds anything that we've seen during the last decade. We have the fastest deployed, most scalable, most robust EV charting infrastructure solution available today. And this most recent order from the state of California demonstrates that they recognize the value of our products and the resilient, clean, off-grid, locally generated, locally stored electricity which they deliver. Interestingly, and tellingly I think, The funding for this latest acquisition came from California's Office of Emergency Services. With around 20 million cars on California's roads, there will be a requirement for several million publicly available EV chargers and a huge increase in capacity in the delivery of electricity.

18:25 I believe that we're ideally positioned to play a very significant role in delivering this increasing capacity in a rapidly deployed and highly scalable manner. It surely is not a coincidence that California has renewed our contract and increased its scope to include more of our products and also to make it available to any other government entity which wants to use it. Two weeks ago, I spent several days in Washington, D.C. with our new lobbying consultant. This new consultant is very well known and very well thought of in Washington, D.C., forms part of our increased investment in government relations, which I've committed to over the last year. We now have one full-time employee the Washington-based lobbying firm I just mentioned, and also another consultant who helps us identify funds which our customers can use to buy our products. I believe that this investment in government relations cannot be better timed.

19:12 Our full-time employee, Brad Grotus, has already secured meaningful changes in both state and federal rules which now ensure that our solution is both recognized and eligible for important programs and funding. Our funding consultant has joined me on several webinars in which we demonstrate our products and then show various funding resources available to help our customers pay for them. We've realized additional sales as a direct result of these efforts. It's early days with our DC lobbyists, but my first trip to DC demonstrated to me that they are indeed well connected and very supportive of our efforts. Over the next few weeks, I will be meeting with high level staff on house energy and commerce, house transportation and infrastructure, Senate Environment and Public Works and Senate Finance.

19:57 Although we sold a lot of products to various government agencies over the years, we've historically not aggressively focused on receiving funding from any arm of the government. Moving forward, we will make sure that our important contribution to the electrification of transportation and to energy security is not missed by any arm of government and that we're supported and have access to an equal playing field and that we're recognized as the leaders that we are. While in Washington, D.C., I had several fruitful meetings with members of the federal government and find them to be very much in support of what we're doing. And why wouldn't it be? It didn't hurt that I was there just as the Colonial Pipeline fiasco was shutting gas off the Northeast. It was easier than ever to speak about the value of fueling infrastructure that's independent and resilient. So it seems to be a cross-aisle agreement that infrastructure spending, particularly transportation infrastructure spending, is something that can be agreed upon in a bipartisan manner. Even the electrification of transportation no longer seems controversial or too political. And of course, energy security has always been a safe area for agreement.

20:57 Finally, nobody in Washington thinks it's a bad idea to use American products to reach these worthy goals. In many ways, our products seem to be tailor-made to satisfy the aspirations of those who are engaged in deciding how stimulus and other infrastructure dollars will be spent. Certainly was a very good idea for us to spend eight months going through the rigorous vetting process necessary to finally be awarded a federal GSA contract which enables any federal agency to buy our products without having to go through a painstaking and lengthy process. We've already seen the fruits of this contract vehicle. We've now received several purchase orders through it and we believe that many more are coming. In fact, in the first quarter we received a purchase order from a federally funded entity who's bought from us several times before. The difference in the experience was not trivial. Whilst in the past conditions had to be just right and a good deal of work had to go into receiving orders from this entity, this time it was a simple, quick, painless process.

21:48 A very good harbinger for what is, I believe, to come. We were involved in a couple of excellent press events during the first quarter and since. San Diego's new mayor, Todd Gloria, cut the ribbon and spoke at a press conference, which I was honored also to be invited to speak at, and which took place in front of two of our EV Arc products recently purchased by the city of San Diego. Each of those EVOX systems was charging five Chevrolet Bolts, also recently purchased by the city, as part of their ongoing plan to electrify their entire fleet. This was an excellent opportunity for us to demonstrate our product's ability to charge multiple vehicles and deliver to them all of the daily range replenishment they require from a single parking space-based product. San Diego has ambitious plans and an ambitious climate action plan, and we're delighted that this new administration is so enthusiastic about our products.

22:38 We look forward to providing them with much more EV charging infrastructure and energy security. Later, I found myself in Kansas City to join the mayor of the city of Olathe to do a ribbon cutting and press event there, introducing six EV arc systems, which they've recently deployed. I think it's fair to say that San Diego and Olathe, Kansas are about as different as any two cities in one nation could be. And yet the EV arc product fits equally well in both their requirements. There are about 19,000 municipalities in the United States. EBR is currently deployed in over 100 of them. Our pipeline, which is larger than it's been at any time in our history, leads me to believe that we'll make eight roads into the other 18,000 and some at an accelerating pace in the coming periods. And it's not just municipalities who are benefiting from our products.

23:25 We just announced that for the first time, the entertainment industry, in the form of one of the world's best known and best loved brands, has for the first time started to use our product to provide electric vehicle charging and Clean Energy on the set of one of their new productions. We delivered for the first time the Forest Service and also placed EV Arc in our nation's capital, Washington, DC. Again, these deployments demonstrate the fantastic variety of different opportunities Beam Global addresses. When considering our total addressable market, one can genuinely say that it's equal to all other EV charging companies TAM's put together. and all charging scenarios, whether they be for sedans, medium duty, heavy duty or even for aircraft and other electric transportation solutions. All of these new opportunities and anticipated growth are focusing our attentions on our ability to scale our production and to improve our gross profit. There's no question that volume will be the single largest contributor to our improved gross profits. as we spread the overhead costs in our facilities which has room for 20 times growth across a larger number of products.

24:31 We're in the process of making improvements to our factory facility which we believe will make us much more efficient. Increased efficiency will mean an increased ability to throughput product as well at the same time reducing risk and increasing quality and of course and importantly reducing cost. I've mentioned many times before that other factors will contribute to cost reduction. such as the decline in the price of batteries and solar modules and other components which we integrate into our products. These inputs are outside of our control, unfortunately, but they do not require any investment from us. We're also concentrating heavily on things that we do control. The engineering team is working tirelessly to make changes to both our EV arc product and our solar tree, which we believe will increase its quality and reduce the cost to produce it. During the first quarter, we were able to announce a 12% increase in energy delivered from our EVR product.

25:27 12% increase in energy means 12% increase in the miles delivered to our EV driving users. These increases in energy delivery came about as a result of the fantastic efforts of our engineering team. We're currently deploying our solar tree product to power full-size buses in the state of California. and the engineering team has been similarly engaged in making sure that we're taking the steps required to improve our efficiencies and reduce our costs with that important product set. As a result of this focus, we're not currently committing time or resources to producing our patented EV standard product. However, we believe more than ever that the EV standard is a vital solution to one of EV charging industry's greatest challenges, curbside charging. And as such, will provide a significant revenue source for us in the future.

26:15 Our current engineering roadmap and plans include focusing on the EV standard in the second half of 2021. Another major initiative that deserves mention is, of course, our Driving on Sunshine program. The process of attracting sponsors to this opportunity is thoroughly underway. Updates on this are sort of binary in nature, nothing to report until we have a sponsor signed up. I can tell you that we and our partners are thoroughly engaged in this, and I remain as confident as I've ever been that we will get a sponsor. It's a process, not an event. It takes longer than I want it to. I'm a very impatient person and nothing happens as quickly as I want it to. A three minute egg takes too long in my book, but it's something that has never been done before and we're working with very large organizations. They have departments and processes and we have to work at their pace.

27:01 Getting the city contract took longer than I anticipated, but we got it done. I'm sure the same will be the case with the sponsors. Finally, I'd like to welcome Nancy Floyd to our board of directors. We tragically lost Bob Schweitzer, who passed away during the first quarter. That was a dreadful event on every level. But if any silver lining existed on that dark cloud, it was that we were able to attract Nancy to our board. Look her up. She has a fantastic history of picking winners in the clean energy space. We're very lucky to have her on our board, and I'm bound to say she's very lucky to be on it. Welcome, Nancy. So to wrap up, we have an excellent backlog and pipeline position. We have sufficient revenues year to date and backlog to ensure that we will beat 2020 and we still have seven months left in the year.

27:49 We have historically high levels of working capital and no debt. The EV industry is really kicking into gear and we're anticipating a post-vaccine acceleration of EV charging infrastructure across both government and enterprise. Our products are better than ever and we're working hard to improve close margins on all of our products. Again, volume solves all and it certainly looks as if volume is coming. We're going to have a busy and excellent 2021 and all the years beyond. Thank you for your time and attention. And I'll now hand it back to Kathy and take any questions that you may have. Please keep them brief and restrict yourself to a single follow-up as we want to make sure that everyone gets a chance. And in the event that I don't get to you, you can always follow up directly. Kathy? Ladies and gentlemen, we will now begin the question and answer session.

28:41 To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Amit Dayal with HC Wainwright. Please go ahead.

29:09 Hi, Desmond. Thank you for taking my questions. Hi, Mel. How are you? Just to begin with, you know, the 52 arcs that the California government ordered, is this part of the $5 million backlog or is this in a different, to the backlog?

29:28 No, that is in backlog. Okay, understood. Anything that's contracted, we will describe as backlog.

29:37 Okay, got it. Thank you for that clarification. And just one more follow up from me. So, you know, your government orders continue to come through, you know, the outlook on that front remains pretty positive. Are there similar opportunities in your pipeline on the enterprise side, you know, excluding sort of the media model, you know, where you could see orders for 50 or 100 units at a time from enterprise type customers?

30:02 I think without a doubt, I mean, certainly the Electrify America slash Jeep thing that we've already discussed during this call is a good example of enterprise spending. And, you know, there are so many other similar opportunities like that in the pipeline. This quarter really was not at all all about government. And I mean, I think obviously 2020 was a year during which there's a lot of people who were not going to places of work and not doing very much of anything. And so COVID will have had an impact on the enterprise deployment of EV charging infrastructure. We certainly saw that. We had a year where we had record revenues in 2020 without essentially half of our opportunities bearing fruit for us because there wasn't any workplace charging being deployed.

30:49 However, we think that that changes this year. post-vaccine second half. I think you'll see a big increase of return to work. A lot of workplace EV charging will be required to support that. And then beyond that, with all these new fantastic models that I mentioned in my comments, there's just going to be a giant requirement for EV charging infrastructure for consumers. In fact, I think it's going to happen in a way that nobody's really properly anticipating. And so I'm very bullish about enterprise. But we won't turn our back on the government stuff. Right.

31:22 Of course not. Thank you. That's all I have. Thank you.

31:25 Thank you, Ivan. The next question is from Tate Sullivan with Maxim Group. Please go ahead.

31:30 Hi. Thank you, Desmond. We're talking about the sponsorship opportunity. You mentioned partners, and the 10Q noted an addition of a contracted industry expert. Do you have multiple partners in addition to outdoor media or dedicated sales? Can you just talk about that a little, please?

31:50 Yeah, so we are not exclusive with anybody. I want to maintain that position. It's basically sort of like a flagpole at 100 bucks. First one up wins it. But we definitely have engaged a group who does nothing at all but sell corporate sponsorships with a very particular focus on transit, transportation. So they do, you know, all the buses and trains and everything that you've seen with, you know, advertising on them. They also do stadiums and and just about any kind of this thing you can imagine. So what's good about dealing with them is because they do nothing else, this is firmly their area of expertise. They obviously have a very good Rolodex and a great history of making sort of unusual sponsorships work.

32:36 I'm really happy to be working with them. I think the important thing to point out to everybody listening about them is that although we cover their costs, they really don't get paid any material amount of money unless they are successful. And so I think the takeaway from that is that here's a group who is an expert in this space, does nothing with it, and who is essentially willing to invest in moving this thing forward because they believe that it's such an excellent opportunity. And while it's new, and new makes it difficult, it's new at a time when EV charging is just coming into its own. And they believe, and so do I, that EV As soon as we start moving on this thing, it's going to take off like a wildfire.

33:23 Thank you, Desmond. I'll turn it back to the queue. The next question is from Jacob Green with BTIG. Please go ahead.

33:32 Hello, Jacob. Part of your sales this quarter was with Jeep and their Wrangler 4XE launch and Moab. Have you had any other conversations with any other OEMs? You talked about Ford and their Lightning, about sponsorships and deploying chargers as a part of their rolling out of their EV offerings.

34:00 Yeah, we have announced nothing, and so there's therefore nothing that I can say about that. But you can imagine, of course, that we believe that as more of these companies deliver more and more of this sort of product, particularly the kind of product that's going to be very, very popular with American consumers, we do also anticipate that those same consumers are going to be demanding infrastructure. And we know that consumers are very impatient. They don't like to wait for stuff. and so we anticipate that that level of impatience is going to be transmitted into the infrastructure space. As you know, it's taking longer and getting more complicated every day to deploy grid-tied infrastructure between the permitting and construction and electrical work. So I think that we're an ideal solution for this sort of, you know, what I'm hoping at some point becomes panic buying, as it were.

34:45 You know, when you've got lots of people buying F-150s and Hummers and all the other products that are coming out right now, they're not going to want to wait around. They will not... be forgiving of people telling them, well, it takes a while to permit this stuff or to build it or to do the electrical work. They're going to say, it doesn't matter. We want it right now. And that's what we're positioned to take advantage of. So I can't go into any detail on that, but our target, it's not hard to figure out who our targets are.

35:14 Sure. Great. And then just one more for me, just talking about your supply chain and having some other issues with other EV companies having some issues with their supply chains and batteries and modules. Have you had any issues getting solar modules or batteries for your arcs?

35:35 So far, no. It's something that we pay a lot of attention to, obviously. We're monitoring all the time. But at the moment, we have not had any of those sorts of delays. I mean, nothing material. and we are at the moment not anticipating any of those sorts of delays, but we monitor it, obviously.

35:57 Okay, great. Thanks. I'll turn it back. Thank you. The next question is from Frank Hart with High Capital Funding. Please go ahead.

36:07 Hello, Desmond, and congratulations on landing that big order finally. I have two quick questions for you in that regard. One, are you prepared for the avalanche of orders that you're clearly going to get over the next year as a result of all of the mega trends and things that are going on and you're being ready for it? Can your production facilities and financial capability handle it in your current facility?

36:47 Yeah, so it's a good question, Frank. In a way, I could say I've been preparing for this for 10 years. What I'll tell you is we have a facility which has room for 20X growth. We can get to about 2,200 units a year of our factory facility, moving from one shift five days a week, which is where we currently are, to three shifts seven days a week. one of them potentially dark or partially dark with automation. We are also in the process now of identifying sub-assemblies and components which we can start to outsource for contract manufacturing. This will move us away from sort of laborious manufacturing processes that frankly we're not set up to do and move those sorts of processes into highly automated environments and then our people will move from manufacturing to assembly.

37:38 So single operator who today does one action will in the future open 50 boxes a day for 50 similar actions. So I think we're in good shape where that's concerned. It's also, I've never made a secret of the fact that I believe that we'll have to open a lot more of these. Even at 2200 units a year, we're not gonna do anything to scratch the tip of the iceberg of demand, nothing, nowhere near it. And so I believe we'll have to open more of these sorts of factories. Fortunately, the footprint is readily available across the United States and even globally. And we've done the hard work of creating the IP, figuring out how to make these things. Scaling this thing up now is going to be a question of cookie-cuttering. Human resources will always be the most challenging aspect of that. But again, fortunately, the really intellectually challenging stuff we've already done.

38:23 So it'll just be a matter of finding good people to do the manufacturing and assembly as we move forward. and then I've also got aspirations to move into other markets as well. It's not just a US opportunity, it's definitely a global opportunity. So you'll see us, certainly I'm concentrating a lot of time and effort right now looking at Europe, which is currently the largest EV market in the world. We might see expansion there before we do so in the United States. I don't know yet. Some of this will be driven by demand. And then just to answer your question on money, we have more operating capital than we've ever had at any time in our history. I think anybody would agree we're very good at managing money. and that's spending it wisely. As I tell everybody, if it doesn't make the product, make the product better or sell the product, we don't invest in it. That's our mantra and that's worked for us so far.

39:09 So we have plenty of operating capital and no debt at all. And that would put us in a position to do what we need to do to scale up. Don't need to raise money at the moment, but I certainly would if it appeared to make a strategic sense to grow the business and to help our existing shareholders.

39:30 None of that is surprising because you're always ready and ahead of the curve. Thank you. And as a management CEO and head of your team, which is extraordinary, you are one of the finest CEOs I've had the pleasure of running into in 40 years. And I can't tell you what I get out of watching you do this all day long every day. Thank you very much. Well, sure, it's easy because it's true. What's the story and what is the risk to being global of Tesla's or others' million-mile batteries and what's going on with that technology worldwide?

40:22 It's great news for us. It's great news for us. Anything at all that increases the adoption of electric vehicles is great news for us. The key thing to understand about this, Frank, and everybody else is that it doesn't matter how much capacity a battery has in it. You still have to put a certain amount of electricity in the vehicle to power the number of miles you're going to drive. All electric vehicles get between three and a half and four, sedans, that is, get between three and a half and four miles per kilowatt hour in climate environments. And whether or not they have huge and long-lasting batteries or smaller batteries, it won't make any difference. They'll still have to charge the same amount. and charging is the business that we're in. We're not in the business of, you know, selling batteries into cars or anything else. We're in the business of charging. And all of those vehicles will require the same amount of charging regardless of how good their batteries are.

41:13 So it's nothing but good news for us. Great. Thank you for the questions. Sure. The next question is from Vilcress Bagri with Needham. Please go ahead.

41:28 Good evening, everyone. I had a couple of quick questions. First off, is there a way to define how large the Jeep's Talantis opportunity can be longer term where these EV arcs are initially being placed? And I know I recognize I'm asking a hard question, but is there any context you can provide in terms of how many trailheads they plan to place these EV arcs and if they have plans to place these EV arcs and in cities as well, longer term?

42:00 I think that's a sort of question that probably would be much easier answered by Stellantis and Electrify America than by me. And the truth is, even if I knew, I wouldn't be able to say anything about it. But look, we think it's an excellent product. We know there are lots and lots of locations. And it's not just Jeep. There are lots of other companies making these new vehicles that are going to be going off-road and everything else. There are lots and lots of locations around the country where they're going to need EV charging and where the grid doesn't exist. So we see all of them as opportunities. I'm not going to speak specifically about what Stellantis might be up to or anybody else for that matter, but I do think it's pretty obvious that there's a huge opportunity here. And don't forget, we have the only rapidly deployed, totally off-grid infrastructure solution that supports anybody's electric vehicle charger and anybody's electric vehicle charging service. So as I said earlier, our TAM is all the EV charging companies' TAMs together because we support all of the good ones ourselves already.

42:58 And as we see more and more of these companies pushing into places where the grid doesn't exist, will definitely be there to support it with our patented products. But I don't think it's worth making too much of that because that will still be an edge case. The simple fact of the matter is, Wall Street Journal says there's somewhere between 500 million and 1.2 billion parking spaces in the United States. A huge number of them are going to have EV chargers in them. And our products are better for even just in a parking lot. It turns out it's not that easy to get power even into a parking lot And so we're going to be very well positioned for that. We'll certainly take advantage of all the off-road stuff, but I think it will be a niche, and I definitely don't want anyone thinking of us as a niche product because that's not what we are. We're a solution that solves for everybody everywhere, that we can see the sky.

43:46 Great. Understood. And as I said, I recognize it's a hard question to answer, and it's probably a better question for Sten and Stellantis and GPS. As a follow-up, I think you indicated in your prepared comments that the pipeline of orders remains extremely robust despite these large orders moving from pipeline to backlog phase. That pipeline has replenished pretty impressively. So two questions on that front. One, it seems like to replenish that pipeline rapidly despite these orders moving from pipeline to backlog, there are probably larger orders in that pipeline. So can you comment on how large on average these new orders are, if the size of orders has increased over time this year versus last year? And two, you talked about EV standard being launched at the back half of the year. Is there anything related to EV standard in that project pipeline and or in backlog? And if yes, could you talk about the performance of EV standard, the pricing on there, the margin expectations on there? and how are you thinking about launching that product in the back half of the year?

44:58 Okay, so the second half of your question first, there is no EV standard opportunity in our pipeline at the moment. We've always been very conservative about this. We build products, we get them ready to go before we sell them to people. and that's where we are with EV standard. So we have not included any EV standard opportunities in the pipeline at the moment. I still believe that EV standard could end up being our highest volume sale product, maybe by far, just because of the nature of it and the sort of city environment that it fits into, that curbside charging solution. But as of right now, pipeline doesn't include that. To the first part of your question, I definitely think that we're seeing, and it's not just me, the sales team agrees, think that we're seeing a shift from 1Z, 2Zs that we've had in the past when people have dipped their toe in the bath just to see if the product works and see if they can get an understanding of it.

45:56 We're now seeing that shifting away from 1Z, 2Zs up to, is it 4Z, 5Zs? And then we believe that turns into 10Z, 15Zs and 20 to 30s and so on and so forth. So there's a general shift and it's positive for us in terms of increasing sizes of opportunities coming.

46:17 Great. Thanks, Desmond. That's all I had. I'll follow up offline for other questions.

46:23 Thanks again. Thank you. Thank you. The next question is from Gabe Dowd with Cowen. Please go ahead.

46:30 Hello, Gabe. Hey, Desmond. How are you? All right. Maybe just on the I guess following up on the last question around the pipeline, I think last quarter you had indicated it was I guess $40 million with a 70% conversion rate and then $9 million in agreements with a 70% to 99% conversion rate. I'd imagine that maybe both of those figures are lower now just given that this quarter just announced, but is there an update on those two figures?

47:04 actually I just looking at total pipeline and I don't have it open in front of me at the moment but looking at total pipeline I watched total pipeline dither around 49 million for a little while there and then it finally poked its head above 50 million and now it is back down in the sort of 47 million range because of course we've added five or so from taking five or so million out of pipeline and put it into backlog but pipeline intends to be an increasingly good story for us and that's just going along with the general trends that we're seeing in the industry.

47:38 Okay. Okay, great. That's helpful. And then I'll just maybe follow up on the margin side. Understand that as production levels scale, gross margin will follow. But I'm just curious, I guess, at what production level do you need to see out of your San Diego facility to to get to that 50% gross margin. Does the facility have to be completely maxed out at 2,200 units or so, or just trying to think about the progression there on the gross margin side?

48:07 Thank you very much. reductions in costs of things like batteries and solar modules and other stuff. You follow the industry, Gabe. You know where this is going. We anticipate a further four-fold reduction in our costs of batteries in the future. It's hard to say exactly when that will take place, but all the industry experts are talking about battery prices coming down into the sort of $100 zone.

48:53 We're paying quite a lot more than that right now, but we anticipate taking advantage of those cost savings when they come. So it's a combination of things. But no, we do not need to be operating at full capacity by any means to get to that level. There are several really quite straightforward steps that we need to take to reduce our costs. Engineering is working on those at the moment. And then, of course, volume is a very big piece of it because it's great to have a facility that's capable of 20x growth, but it's kind of an expensive piece of overhead. That will upset people now, but everybody will be bloody delighted when we're using it.

49:31 Great, thanks Desmond, very helpful. Thank you. Again, if you have a question, please press star then one. The next question is from Richard Batson, a private investor. Please go ahead.

49:45 Hey, Desmond. Hello, Richard. Hello, Richard. Hey, my question is I know from being familiar with your company for a few years that used to be you had to have around 10 to 11 million in revenue to get to that break-even part, and it sounds like you might be profitable this next quarter, but has it changed or is it still around that area?

50:10 First of all, we're not forecasting profitability next quarter. Let me be absolutely clear about that. Although, of course, we continue to work towards that and do everything that we can to execute on that. The number's gone up, Richard, and the number's gone up for reasons which I've been very open about over the last several months and quarters. And that's because we are now investing in lots of things that we think are really important for our growth. for example, government relations, as I mentioned in our piece. We've increased sales headcount. We've increased marketing spend. We've just brought in, for the first time in our history, government relations. These are increasing expenses, but I'll tell you what hasn't changed, our discipline around money. We just do not invest in anything that we don't believe is in the best interest of the shareholders, and that means driving growth at the company.

51:04 And so, you know, Our break-even number will go up as we make these investments, but of course we believe that the increase in the break-even number will be far more than overcome by the benefits brought about by making these investments.

51:20 Right. Well, hopefully the price of batteries coming down will help offset that as well.

51:25 It definitely will.

51:28 Okay. All right. I appreciate it, Desmond.

51:31 Thank you. This concludes our question and answer session. I would like to turn the conference back over to Desmond Wheatley, President, CEO, and Chairman for any closing remarks.

51:43 Thank you, Pat. Thanks very much for your questions, and thank you to everybody for your time and attention. Again, appreciate your patience in this week of delay. Don't forget what I started out by saying, that there was nothing to be read into that at all, and we didn't change anything in our filings as a result of the week of delay. And again, hats off to Kathy. She worked very, very hard, and she produces a really good product. Beyond that, I'm just grateful to have all of you on board and have your support. I think this is going to be a great year for us. We're really looking forward to it. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.