Introduction: BEEM looked like it was falling off the beam.
Overall beam (NASDAQ: BEEM) started 2021 in a difficult place. In January, Seeking Alpha released a report on short sellers Falling Off The Beam – Beam Global Presents Important Downside risk from @Mariner Research which contained the following key issues:-
1. BEEM’s revenues have stagnated.
2. BEEM’s order book has decreased.
3. BEEM’s products are not profitable.
4. BEEM’s municipal clients face fiscal headwinds.
5. BEEM’s key product, EV ARC, lags far behind networked systems and is more expensive.
Since the report, BEEM’s stock price has fallen 61%. The report arrived at the right time and will have been a very fruitful exchange.
In the 2020 Annual Reports press release, BEEM management appeared to confirm much of what the Mariner report contained, saying that initial costs have started to be high and deployment costs are higher than expected. They also confirmed that the backlog had shrunk, gross margin had fallen and operating costs were higher than expected.
12 months have now passed and I think BEEM has managed to solve all these problems. In my view, BEEM has had an outstanding 2021 on a number of metrics and is now a desirable investment proposition. This article will discuss the progress made by BEEM in 2021 and the reasons for my bullish stance.
Readers should keep in mind that Beam Global is still a small company (market cap $200 million). It has produced an innovative range of solar-powered charging stations, and BEEM has a risk of malfunction warning from Seeking Alpha. Short-term interest is 33% of floatand only 3 out of 6 analysts following BEEM rate it as a buy, therefore due diligence is required.
BEEM products: the competitive advantage.
This San Diego-based company currently has two products for sale, the EV ARC (for solar-powered car charging) and the Solar Tree for solar-powered heavy-duty vehicle charging. 2021 was a breakthrough year for these products; an ARC EV sells for around $65,000, and in 2021 they sold 119, after making 124. That’s up from the 69 systems sold in 2020 (a 72% increase). Call for Source Revenue
Problem 1. BEEM’s revenues have stagnated. Resolved.
They enter 2022 with a record order book for the company, while they ended 2020 without any order book. Sales increased by 131%, which explains the backlog. Call for Source Revenue
Problem 2. BEEM’s order book has shrunk. Resolved.
The EV ARC has several features that stand out from the competition. It adapts to the size of a standard parking space and does not need to be connected to the network. It is the only 100% renewable energy, transportable and off-grid charging option available. The deployment of the EV ARC gives it a significant competitive advantage. It is held in place by gravity, resulting in no permits, no construction, no electrical work and no electric bills.
They can be deployed immediately. On the website, Beam claims their record is 4 minutes! It takes months of competition. It is worth checking out the website for a more in-depth view of these products.
The unit is mobile. An ARC EV can be moved, allowing the customer to track EV charging needs.
BEEM continues to invest and receive results from its government relations department. BEEM has a GSA contract (known as the Federal Supply Schedule), a long-term government contract that makes it easy for government agencies and organizations to purchase. This contract had significant benefits in 2021; BEEM received its largest single order of 52 systems from the California Department of General Services and 21 systems in the US Marine Corps. In total, BEEM has received orders from 20 US states through the GSA. In the most recent earnings call, Desmond Wheatley, President and CEO, gave a very optimistic view of the GSA, saying (P6 para 3) that orders received in 2021 would appear insignificant as the contract s eternizes for the rest of 2022.
Issue 4. BEEM’s municipal customers face fiscal headwinds. Resolved.
Interestingly, utility companies are becoming customers of BEEM where you might have expected them to be competitors. The EV ARK allows utility companies to quickly and easily add resilient charging for electric vehicles. The Ark EV will operate during power outages and blackouts, providing EV charging and emergency power supplies.
Another surprising set of customers are EV charging networks. In 2021, BEEM supplied units to Chargepoint, Blink, Electrify America and ENEL. They will deliver to any EV charging network as they do not offer their own network. BEEM sells the product, not the project.
BEEM currently has a $90 million pipeline, and it’s growing rapidly. They reported that initial orders were increasing and the time between request and order was decreasing.
Problem 5. BEEM’s key product, EV ARC, lags far behind networked systems and is more expensive. It’s not really a problem if utility companies and charging companies buy the product, then its reduced performance compared to a grid system is not an issue.
BEEM Manufacturing Excellence.
Factory investments in 2021 have increased potential production. They now have six final assembly workstations (this used to be a bottleneck). Each workstation can produce one EV ARC per shift. This means that on the current five-day single-shift week, they have the capacity for 1,350 ARC EV units per year (enough capacity to increase sales tenfold). I think it’s quite likely that they’ll run multiple shifts within 18 months.
BEEM has increased plant headcount, improved tooling and equipment, invested in additional training for its staff, increased technical requirements for new team members, and strengthened manufacturing leadership.
This has increased the hourly wage their staff receive and therefore total costs, but the margin improvements are dramatic. They absorbed the increased costs and maintained their margin while increasing production levels. In 2021, COGS increased by 10%, fully absorbed (not passed on to customers) with no impact on the margin, which is excellent. Direct labor cost per EV ARK is down 36% in two years. They said they would pass on some costs in 2022.
Cost control, usually the weak point of these growing small tech companies, is doing exceptionally well. Costs are growing at a slower rate than revenues. Revenue increased 45%, total operating expenses increased 24% and COGS increased 45% after absorbing a 10% increase in suppliers.
Problem 3. BEEM’s products are not profitable. Resolved.
Acquisitive in a good way
Batteries represent the largest cost for BEEM; battery costs are 10% of COGS. Batteries are becoming harder to find and prices are rising. BEEM solved this problem by bringing battery production in-house. BEEM acquired battery and energy storage company AllCell Technologies (Chicago). BEEM believes it has saved 7% on the cost of a battery and, with the collaboration of the two companies, is looking at a savings of 15% in the future.
The deal with AllCell was all-stock and the company had no debt. So no money was needed or raised. Acquiring a related business that will reduce overall costs without diluting shareholders is a sign of disciplined management.
The acquisition of AllCell, in addition to supplying batteries for their EV ARC products, brings other opportunities. AllCell has a range of patent-protected battery and energy storage technologies that will add an additional competitive advantage to BEEM while increasing their marketable products.
BEEM is in a strong financial position, BEEM is debt free and has $21.9 million in cash and short term investments giving it a 3 year cash trail. His track record is solid:
Revenues have been growing steadily, and using information from the last earnings call, I’m forecasting sales of $18 million in 2022 and $40 million in 2023. These forecast numbers are about 1 year ahead of Wallstreet forecasts and would have BEEM become profitable in 2022 rather than 2023 as Wallstreet suggests.
I am confident that BEEM has had a transformational 2021, growing its revenue, improving its manufacturing operations, securing the supply of its critical battery technology, improving its margins and creating significant demand for its products with a wide range of customers.
BEEM has a management team focused on the profitability of its products. They invest in their people and their facilities. They have excellent government and advertising sales, and they operate in a market that looks poised for exponential growth.
They’re small, and that comes with added risk, but they have a strong balance sheet and a great product.
I am a buyer and expect to double my money over the next 12 months.