Beam Global (BEEM) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to the Beam Global Second Quarter 2021 Financial Results and Corporate Update Conference Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Kathy McDermott, Chief Financial Officer. Ma'am, please go ahead.

Thank you. Good afternoon, and thank you for participating in Beam Global's conference call for the second quarter of 2021. We appreciate your time today and joining us for the 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-Q -- excuse me, 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 12, 2021. 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'd like to provide an overview of our financial results for Beam's second quarter ended June 30, 2021. For the second quarter of 2021, we reported revenues of $2,121,098, a 46% increase over $1,455,158 reported for the second quarter of 2020. Revenues for the first 6 months ended June 30, 2021, were $3,493,490, a 26% increase over $2,772,210 for the same period in the prior year. During the second quarter, we deployed the first 7 of 52 units ordered by the state of California, and we shipped 2 units on the New York City contract. We also shipped the second of our latest generation of Solar Tree products to a customer in California, which will provide charging for full-sized electric buses and heavy-duty vehicles, primarily for the construction industry. During the second quarter and year-to-date, we continue to have strong sales to municipalities. We increased sales to federal agencies utilizing our federal GSA contract, and we believe that trend will continue as a result of increase in federal funding and grant opportunities for EV infrastructure. We also increased our sales to enterprise customers and expect this to continue as employees return to offices. As of June 30, 2021, our contracted backlog was approximately $3.7 million. The gross loss in the quarter ended June 30, 2021, was $273,877 compared to gross income of $55,336 for the same period in 2020. For the first half of 2021, our gross loss was $422,997 compared to gross income of $15,695 for the same period in 2020. The increase in gross loss was primarily due to an increase in cost for the new EV ARC 2020 system that was launched at the end of 2019. We expect to reduce these costs over time. We're also being negatively impacted by increases in steel prices and shipping costs due to high demand. As we increase our production volume, we expect to improve our fixed overhead absorption and improve labor efficiencies. Operating expenses were $1,369,010 for Q2 2021 compared to $888,456 for Q2 2020. We operating expenses for the first 6 months of 2021 was $2,471,685 compared to $1,790,456 for the first 6 months of 2020. The increase in operating expenses was primarily due to an increase in noncash compensation expense for stock option expense and vesting of director shares and increased sales and marketing expense to support our revenue growth. The net loss for the second quarter of 2021 was $1,641,788 compared to $833,957 for the second quarter of 2020. The net loss for the first 6 months ended June 30, 2021, was $2,892,597 compared to $1,776,478 for the same period in 2020. The increase in net loss was due to the increase in gross loss and increased operating expenses. At June 30, 2021, we had cash for $25,308,606 compared to $26,702,804 at December 31, 2020. Cash decreased primarily due to year-to-date operating cash usage, partially offset by the exercise of warrants. Our working capital increased from $28,063,320 at December 31, 2020 to $28,177,437 at June 30, 2021. And with that, I'll now turn the call over to Desmond Wheatley.

Right. Thanks very much, Kathy, and thanks, everybody, for joining us today for your continued support and interest in my favorite company, Beam Global. The last few months have been really good for the electrification of transportation and also good for Beam Global. Since the end of Q1, we've received the largest order in our history, seen our pipeline increase dramatically, maintained a healthy backlog, set a world record, been added to the Russell 2000 and grown our business across federal, state, municipal and enterprise customers while receiving follow-on orders from 2 of our most important accounts, amongst other things. In the second quarter, we generated more revenue than in any second quarter in our history even as the country was still struggling to recover from the COVID pandemic. Q2 was a record-setting quarter from a revenue point of view, but it's a record that we look forward to breaking again and again. As of June 30, the first half revenue we recorded and the contracts we've signed into backlog when combined equaled more than all of full year 2020 revenues. We expect all of that contracted backlog to be converted to revenue within 2021 with 1 or 2 possible and, I think, immaterial exceptions. Said another way, by midway through the year, we had sufficient revenue and contracted backlog to beat 2020, our previous best year with 6 months remaining in 2021 to continue to add to the largest pipeline we've ever had and convert that pipeline into backlog and, of course, revenue. I've commented to you for some time that I was confident that we would start to experience an acceleration in the adoption of electric vehicles. And as a result, an increased urgency in the requirements for electric vehicle charging infrastructure. I believe that we're beginning to see that acceleration, both in the broader transportation and electrification industry and, importantly, in the order velocity and size issued to Beam. Increased urgency and demand for EV charging infrastructure is core to our investment thesis and to the product portfolio which we've developed. It's because we're confident that there will be an increasingly rapid requirement for EV charging infrastructure and that the traditional methods of deploying and supporting in-ground and utility grid powered infrastructure will be insufficient that we've developed the products we have and invested in the future we see coming. Receiving the largest order in our history from California's Department of General Services was, I believe, not an isolated incident, but rather a harbinger of things to come. These certainly seems to be being backed up by the realities of our order book. Whereas in the past, we've seen often orders for 1 or 2 units, we're now also seeing single purchase orders for multiple units. For example, we recently announced that the Ventura County placed an order for 10 units and that the Tennessee Valley Authority ordered 4 EV ARC 2020s and 2 ARC Mobility transportation systems, which generally only people with large fleets order. And looking at our pipeline, I can clearly see that these types of orders rather than being anomalous are increasingly becoming the norm. Also interesting is to note that while our previous orders were heavily weighted towards municipal governments, we started to see a return to entrants in our pipeline from enterprise customers as well as growth in state and federal orders. We did expect that as Corporate America returns to the office post vaccine, there would be an increased requirement for workplace charging. I believe that the lack of enterprise orders we saw in 2020 was simply a pause. And as people return to work increasingly in electric vehicles, any opportunities we may have missed in 2020 will return this year and next and perhaps with an increased level of urgency due to the lack of activity in 2020 and the increasing number of employees driving the fantastic range of new EVs which are now available. Remember that in 2020, we generated more revenue than in any previous year with almost no contribution from corporate workplace charging. In previous years, this source of business was a significant contributor to our top line. And we're not seeing any deceleration in government interest for our products. And so I think it's reasonable to suggest that as workplace charging activity returns to pre-pandemic levels and probably, in my opinion, much greater levels of activity that all of that growth should be further accretive to our top line. Backlog as of June 30 was approximately $3.6 million. That is a reduction from the $5 million backlog I reported during the last earnings call. But that's not alarming. Backlog doesn't grow the business, revenue does. It's our job to convert backlog into revenue. And we did so during the second quarter at a greater rate than during any previous second quarter in our history. A more useful way of looking at backlog is to recognize that at June 30, we still had a healthy backlog and one which is greater than the delta between the previous backlog I described and the revenue we recognized during the period. This is, of course, can only be explained by selling and converting pipeline into backlog. During the previous earnings call, I told you that I've been eagerly watching our pipeline reported sales force as it danced around the $50 million market. We had never in our history had a pipeline that large. It was exciting, and I believe strongly indicative of the thrilling future we have in front of us to push through that significant milestone. Well, push through it, we did. And I'm happy to report to you today that our pipeline now exceeds $75 million. It took us our entire history to get to $50 million. And in the last quarter, we've added another $25 million in pipeline. That tells me something. Too early in our evolution process to be able to have -- or to accurately forecast when or even how much of our pipeline will convert to backlog. However, as I've mentioned to you in the past, we took a fairly conservative view of opportunities which we have to pipeline. And we have historically had pipeline to backlog conversion rates which are higher than at least I've seen in previous businesses. I do not believe that these conversion rates will deteriorate. On the contrary, I think that we're going to see a growing pipeline and our conversion rates will be at least as good, if not better, than they have been in the past. There are several contributing factors which support this belief. Firstly, government tailwinds for our industry have strengthened significantly during 2021. At the federal level, President Biden has committed to electrifying the entire fleet of federally owned vehicles, some 650,000 in all and currently the largest consumer of gasoline in the world. The largest consumer of gasoline in the world will become the largest electric fleet in the world, and I believe that we are well positioned to play a significant role in the provision of the charging infrastructure that fleet will certainly need with our Made in America rapidly deployed EV charging and disaster preparedness products. We now have a general services administration contract in place, which allows federal agencies to purchase our products without having to go through any competitive process and without having to do technology or company betting. While we've sold to federal agencies in the past, the process has been laborious and time consuming. We've already received the first orders from federal agencies using our GSA contract and observed that the process has been far easier and far faster both for us and for our new customers. In the last few days, the Senate has passed a $1 trillion infrastructure bill, which includes over $7 billion for the rollout of electric vehicle charging stations. That's more than been spent by the entire industry in its history. There are other funds slated for the hardening and improving of our electrical infrastructure in general. And it's important to remember that our products do not just provide electric vehicle charging infrastructure, but also a secure source of emergency power during blackouts and brownouts. If you look at some of our more recent press releases, you'll note that there's an increasing presence of funding from disaster preparedness agencies being directed towards the purchase of our products. It's long been part of our strategy to create EV charging infrastructure products, which are not only the fastest, most scalable, lowest total cost of ownership solutions available, but also important disaster preparedness assets and that they continue to provide EV charging and emergency power during the increasing number of grid outages that Americans are experiencing. The United States has a strategic petroleum reserve, or SPR, which was created in the 1970s during the OPEC oil prices to ensure that we never run out of oil or diesel or gasoline. Fuel is such an important part of all of our lives and the broader economy that we simply can't afford to be in a position where we can run out of it. Electricity is the fuel of the future, and yet there's no strategic electric reserve. In fact, we're already at capacity in most markets, which is why New York suffers blackouts during August when people turn up their air conditioning and the same thing happens in California during heatwaves. Of course, we're all aware that there are many other reasons why the power goes out as was amply demonstrated in Texas earlier this year during a cold snap. It's inconvenient and even dangerous and certainly expensive to lose power today, but think how much more impactful it will be when the transportation sector is relying upon electricity as a fuel. Our products are immune to centralized grid failures and to continue to operate even during very harsh weather conditions as was demonstrated when we survived both Hurricanes Irma and Maria and their 185-mile per hour Category 5 winds. Our products are forming the beginnings of the strategic electric reserve, which will be vital to keep this nation's transportation fuel security in the future. The 52-unit order we received from the state of California was an excellent example of this. The first of these EV ARC systems are already providing rapidly deployed and renewable, energized EV charging infrastructure to multiple state agencies across California, agencies like CAL FIRE and the California Office of Emergency Services. They will also importantly provide a source of emergency power to those agencies and to others who need it, whether the power is cut off due to public safety power shut offs, wildfires, heatwaves or some other event. Note that the funding for these 52 units came from the California Office of Emergency Services themselves, a clear indication that the state has recognized the value of Beam products, not just as a rapidly deployed EV charging infrastructure but also as important disaster preparedness assets. Governor Newsom announced a ban on the sale of internal combustion engine vehicles starting in 2035. This was not a controversial announcement. The state of Washington has already outdone California with its own ban commencing in 2030. Several other states have announced plans to follow suit. At the same time, almost every major European nation has announced similar bands before 2040, starting less than 3.5 years from now in Norway. Ask any automotive manufacturer, and they will tell you that they cannot build internal combustion engine vehicles from the United States and electric vehicles for Europe. We are going to electrify this market. That's no longer in question. Bloomberg recently reported that U.S. will need to deploy something in the order of 120,000 EV chargers every month for the next decade. California alone will need over 200,000 publicly available chargers every year simply to support Governor Newsom's mandate. And to put that in perspective for you, there are less than 100,000 publicly available chargers deployed across the United States today after a decade of work. It seems obvious to me at least that a rapidly deployed and highly scalable solution, which is not reliant upon the utility grid and which provides so much more than simple EV charging infrastructure must play a significant role in this gigantic opportunity. But it's not just the increase in government opportunity, which leads me to feel so confident our pipeline will continue to increase, and so too will our backlog and revenues. The fact is I've always believed that this will be a consumer-led revolution. Henry Ford's Model T transformed the way consumers access transportation. Until the Model T, automobiles have been the domain of elitists, people who could afford handmade and generally rare vehicles. After the Model T, everyone had a car. One could say that during the last few years, electric vehicles have also been the domain of elitists in Teslas and environmentally conscious members of society in cars like the Nissan LEAF. I believe that Ford is in 2022, for the second time in its history, are going to completely revolutionize the way consumers view personal transportation. The introduction of the Ford F-150 Lightning may be the most pivotal event in the transition from internal combustion engine vehicles to an entirely electrified fleet. The Ford F-150 is already the top selling vehicle in the United States and the top-selling pickup truck for over 40 years. The new electric Lightning will have all the capabilities of its diesel and gasoline predecessors, but it will accelerate from 0 to 60 in 4 seconds and it will never require a trip to the gas station or expensive scheduled maintenance. Also priced competitively with other traditional pickups, it's just impossible for me to imagine a future where U.S. and indeed global consumers will continue to go to dealerships and select slower, more expensive, more problem prone vehicles than the fantastic new selection of electric vehicles, which will be available in the coming months. So the combination of significant government tailwinds and investment, both in the United States and abroad, combined with the oncoming consumer revolution will ensure that there's a massive need for EV charging infrastructure for the next several decades. I do not believe that it will get easier, cheaper, faster or more reliable to deploy grid-tied charging. As the low-hanging fruit opportunities, where sufficient electric circuits are available close to places where people park, are plucked. In fact, I believe it will become more expensive, more complicated and more time consuming as the demand and urgency increases to put the grid-tied stuff in the ground. While it's becoming more complicated and more expensive for the traditional construction and electrical projects required to install a grid-tied charger, it will become less expensive, more efficient and more rapid for us to deploy our products, which will, at the same time, become more energy dense and more capable. It's inevitable. We simply have the right approach at the right time to meet the massive and urgent demand, which all the evidence suggests is coming. So as I've said, I predict that our pipeline will continue to grow, but our conversion rates will strengthen and that our ability to execute on our orders will improve dramatically and profitably as we exploit both government and consumer-driven demand. With that confidence in our near-, mid- and long-term future, we've increased our investments in various aspects of our business, which you've seen reflected in our increased overhead costs. It has to be said that while our overhead costs have increased, they are still very modest. And when compared to any of the other publicly traded companies of our size, remarkably low. We continue to have an excellent discipline where use of cash is concerned. And as I've often said, if it does not make the product, make the product better or sell the product, we don't invest in it. Increased investments have been made in sales and marketing, government relations, research and development and improvements in our factory which are increasing our efficiencies, safety and ability to respond to the growth which we're experiencing and anticipating. Our increased investment in sales and marketing is already paying dividends. Since the end of the first quarter, we received orders from or delivered products to California, Georgia, Hawaii, New Mexico, New York City, Pennsylvania, South Carolina, Tennessee and Washington. As I've already mentioned to you, we've received increased orders from federal and state entities as well as corporate enterprises. The new salespeople who we brought on board have the best collateral we've ever produced in our history, along with increasing numbers of quality videos and other tools which help them sell. We now have the first of our own demonstration EV ARC systems, which we're able to transport to customer sites to demonstrate the magnificent qualities of this product firsthand. I'm sure we'll make more. We're going to need them. A very notable use of this demonstration unit and a couple of others, which when we deployed the EV charging infrastructure at the U.S. Marine Corps Electric Mobility Symposium at Marine Corps Air Station Miramar in the second quarter -- and by the way, I'm under the flight line of Marine Corps Air Station Miramar. From time to time, you may hear a dreadful noise behind me, that's the -- all these magnificent aircraft flying over head. Nothing I can do about it, I'll just try and shout over it. But be aware, it sometimes knocks me off my pace a little bit, but I'll be back to you as soon as I can. The Marine Corps, like all branches of the U.S. military, is beginning to electrify their fleets. Clearly, they will not have the luxury of building out grid tie construction project EV charging infrastructure and particularly on tactical environments. At the EMS, we demonstrated that we could rapidly deploy resilient EV charging infrastructure in remote locations during simulated battle field conditions. We could probably make a very successful business out of doing nothing but supplying the U.S. military for the next several years. I can tell you that our products were very well received by the Corps. And of course, now that we have a GSA contract in place, we'll be able to accept orders from them, and more importantly, they'll be able to place them. A Made in America product which offers rapid deployment and highly resilient source of fuel, without the requirements for generators or other sorts of infrastructure, which seems to be a very good fit. Those decision-makers I've talked with in Marine Corps do not disagree. Another exciting use of our demonstration EV ARCs was to set the world record for the longest flight in a production electric aircraft powered purely by locally generated and stored renewable energy. Towards the end of 2020, we conducted the first ever such test flight to prove that this capability could work. In July, we took our learnings from that test flight and set a new world record. This record-breaking flight took place in California and was covered by 4 major networks and many other news outlets. We've already received inquiries from Australia and Europe as well as the United States from people who wish to use electric aircraft but cannot do so because of the lack of charging infrastructure and the terrible expense and disruption involved in deploying it in airport environments, which are only much more complicated even than typical street and parking environments. There are about 15,000 airports in the United States. I'm certain that they'll all have charging infrastructure in the future because aviation is a major target for carbon reduction. We proved that we can deploy that charging infrastructure rapidly and scalably without going through any of the expensive, risky and lengthy permitting construction and electrical process required to enabling ground -- grid-tied charging. One of the most interesting aspects of our setting this new world record was that we were able to demonstrate that we could use our products originally designed to charge cars to charge an entirely different mode of transportation, airplanes. In the past, different forms of transportation require different types of liquid fuels. Motorcycles and cars used gasoline, buses and trucks use diesel, ships use bunker oil and airplanes use jet fuel or kerosene. It's fascinating to consider that all these different types of fuel will be replaced by one fuel, electricity. Understanding that is important to recognizing the vast opportunity ahead of Beam Global. We're not just making EV chargers. Our products are providing the future of fuel. Beam Global's tagline is clean mobility for all. When we say that, we mean everyone globally and every form of transportation. The Flying on Sunshine world record demonstrated clearly that our products have the capability to deliver our goals. Stay tuned for much more from this exciting space. Government relations has been one of the most significant new areas of investment for us this year. Obviously, with the vast sums of money being considered and planned by the federal government as well as all the activity coming in from the various states, it's very important for us to make sure that we're in front of the right audiences and our voices are being heard where decisions are being made about what sort of infrastructure should be deployed. There have been times in the past when we found ourselves excluded from opportunities because of some inadvertent language governing the deployments of EV charging infrastructure, which includes connections to utility grid. Our government relations team, both internally and through the 2 consultants we have employed in DC have successfully changed or included language in multiple regulations or bills so that now emphasis is placed upon the importance and value of a mix of off-grid and renewable energized EV charging infrastructure. In fact, I think we're doing a very good job of helping those in government understand how risky it will be to have our entire fueling infrastructure align up on the utility grid, which we know fails from time to time. And we're hearing from those in power the importance of having some significant percentage of EV charging infrastructure off-grid with locally generated and stored electricity, which will continue to operate even if there's a centralized regional or, God forbid, national failure of the grid. This has been part of our plan from day 1, but it's only been with this investment in government relations that we've been able to put our plan in front of those who hold the purse strings. I'm confident that the dollars we're committing to ensuring a place at this table will be some of the best investments we've ever made. Just this morning, I joined our federal funding consultant on a webinar in which we presented the EV charging and disaster preparedness benefits of our products to over 100 registered attendees in federal, state and local governments. I explained the products and our consultant described the many sources of funds available even without the infrastructure bill so that those prospects can buy our products. The fact that we're Made in America, Cleantech, EV charging and disaster preparedness makes all sorts of buckets of funds available to us, which would not be available if we did not uniquely provide so much value in one product family. Our investments in engineering and R&D are currently heavily focused upon improving our EV ARC product and our ability to produce it efficiently, rapidly and profitably. We've made several changes to the product, which are not evident to the untrained eye, but which improve it and make it easier and less expensive to manufacture. At the same time, we've invested in improvements in our factory. The amounts are modest, but the impacts are very significant, both in increasing safety and throughput. We're also investing in improving our ability to ship our products to our customers with increased efficiency and reduction in cost. Some of the most significant impacts to our gross profitability in the second quarter came from highly inefficient shipping. We lost $25,000 on shipping EV ARC units to Hawaii, one delivery. Consider that impact on our gross profit for the quarter, discounted. We will not let that happen again. We've already implemented changes to our shipping processes, which should dramatically reduce our costs and increase our ability to deliver to our customers on time. Because of our emphasis on cost reduction and improving margins, I've directed the engineering and operations teams to focus on improving our ability to produce and deliver our products profitably. I'm excited by what I see them achieving and by the impacts, I believe, it will have on profitability and throughput. This does not mean that we've taken our eye off new product development or increasing our intellectual property portfolio. During the first half of this year, we successfully deployed our new Solar Tree product, which is currently in use in California charging full-sized electric buses. This product is capable of charging any large-sized vehicle, all up to Class 8 trucks as well as being directed towards a significant growth in what we believe will come from both agriculture and construction equipment as those 2 industries are called upon to reduce their carbon impact. This is already happening, and we can already see both industry and government focusing on those spaces. The new generation Solar Tree is a new product development for us, and we believe it has a significant opportunity. We also increased our intellectual property portfolio during the period, receiving another patent this time from China for our transforming EV ARC product. China is the world's second largest EV market after Europe. It's important that we protect our products and our IP over there, even though I think it's likely that our first international expansion will be a move to Europe. We have nothing specific in the works where that's concerned, but I've made no secret of the fact that I'm looking hard at expanding to Europe, where our products will work just as well as they do in the United States and perhaps be even more popular. The EV standard and new EV ARC products are still on our road map with emphasis on the EV standard, of course. We're still in plan to bring that product to market as soon as possible, but I have to focus our current engineering attention on the increasing interest in EV ARC and our ability to produce it profitably and rapidly. We're currently in the process of seeking new engineering talent so that we can attack more funds at the same time. EV standard will get the attention it deserves, and I look forward to showing it to the world when our priorities permit it. Finally, being included on Russell 2000 was an important milestone for this company. We have no debt, $28 million in operating capital, a clean capital structure and balance sheet and a solid and disciplined management ethos where fiscal discipline and corporate governance is concerned. In fact, we recently introduced and announced a new corporate governance protocol, which I and many of the banks and institutions I communicate with believe should be more broadly adopted. We have ambitious growth plans and the tools and experience to act upon them. We have a world-class board and a proven ability to close contracts and execute on them. We're continuing to pursue our media funded strategy, and I'm happy to report that our partners who are helping us to sell the Driving on Sunshine sponsorship and naming rights network are making solid and accelerating progress in moving us towards success in that space. It's not a minor task. What we're doing is brand new and requires the buy-in from multiple entities and large corporate organizations. But I think that what we're seeing is that our timing is only getting better as the adoption of electric vehicles and the emphasis on decarbonizing global economies becomes more mainstream every day. What was an interesting idea just a year or 2 ago is becoming an imperative, and we are ideally positioned to take advantage of it. I remain as confident as ever that we will be highly successful with this business unit. San Diego continues to be our focus city for the business, but we do now have other cities which are both enthusiastic about the Driving on Sunshine network themselves and interesting to potential sponsors with whom we've spoken. The opportunity is broadening, and I've lost none of my confidence that we will get it done. The combination of increased sales, increased pipeline, increased funding, both government and enterprise, and our increased ability to deliver products either for sale or for recurring revenue models like our media strategy is, I think, very powerful. Throughout our history, there's never been an occasion where I felt that the micro -- the macro trends rather, do not favor our strategy. What I'm seeing now are clear and tangible indicators that those trends are turning into orders and revenue for us. I believe that this will continue and accelerate, and I'm champing it a bit to get on with it. So as the rest of the Beam team. Thank you for your time and your continued support. I've never been more excited or enthusiastic about the industries that we're addressing or our place in them. It's a great time to be doing what we're doing, and I believe that it's only going to get a whole lot better. Now thank you, and I'll turn it back to Kathy for the moment.

Operator, would you please queue up for questions?

[Operator Instructions]

I'm just going to -- by the way, before we get started on questions, I'm just going to say this. I'm going to please ask you to restrict yourself to 1 maybe 2 short questions max because I want to make sure that everyone who wants to ask a question gets an opportunity to. And then if it turns out that we run out of questions, then I'm happy to follow up with any of you either on this line or in person at any time.

And with that in mind, our first question today comes from Craig Irwin from ROTH Capital Partners.

Not actually hearing Craig at the moment on my end.

Mr. Irwin, is it possible that your phone is on mute? We'll move on to our next question. Our next question comes from Noel Parks from Tuohy Brothers Investment Research.

Just a couple of things. You talked about the GSA contract and how much that has made the process of your federal procurement easier. Can you just talk a little bit about that? I'm just wondering, is it a shorter series of steps or just the overall faster process?

Yes. I mean as I said in my remarks, we've made federal sales in the past, and it was just agony, time-consuming. They need to have some sort of contract vehicle in place. It needs to be competitive. They need to do all sorts of looking up the kilt as it were. Now that we have the GSA contract in place, all of that vetting, that competitive process, technology process, company vetting and everything is done. So essentially, we've moved from a very time-consuming, lengthy and uncomfortable process, which, frankly, most federal entities don't want to put themselves to, they just won't do it, they're going to find something that is on the GSA contract. We're through that now. They can essentially point and click to buy our product. So we've -- again, it's kind of early days. The federal government doesn't move quickly, as I think we're all aware, but we've already received the first orders from it. They do most of their spending in the -- sort of towards the end of the year, end of third quarter and during the fourth quarter. What we've seen during the early stages with the first purchase orders that we received through the GSA is that it was practically seamless and certainly when compared to the previous opportunity. So that makes it much easier for us. But more importantly, maybe it makes it much easier for them to buy from us and we know that easy is good.

Great. And could you just talk a little bit more about recent product improvements? You did have an announcement during the quarter that you experienced a 12% increase in the EV ARC charging capacity. So interested in that. And also, you mentioned improvements that are being made to make the product easier to manufacture.

Yes, I think it's absolutely crucial to understand this. It's never going to get easier or there won't be any improvements to digging trenches, pulling cables and pouring concrete. It's just -- it won't. And yet at the same time, our products are getting better. Now this 12% increase in energy density came as a result of our engineering team finding ways to make the product more efficient and just essentially put more sunshine into electricity into the car. We will never stop doing that. And so the product will continue to get better and better, while at the same time, the competition, the general contractor, the electrical contractor, the consultant, the zoning specialist, all the disruption, they have been digging up parking lots, that just doesn't get better. In fact, it gets worse and harder to do during time. So it's fantastic if you were to grasp this, you would see our product getting faster, more efficient and more powerful while at the same time, what you're going to see is increased inefficiencies and difficulties with grid-tied installations. As more code is written, more and more of the low-hanging fruit slots are taken. So that's the 12% efficiency piece. So again, we won't rest on that. The other side of it is, at the same time, I've got the engineering team looking very carefully at how we make the EV ARC, what steps we take, what materials we're using. And essentially, they are tasked with figuring out ways to make it faster, less expensively, but never at the expense of quality. And they've made great strides already. I mean it's -- as you go down the factory floor and you see the teams putting the products together, I do this every day, and my questions obviously are -- questions like, is it -- are we speeding up? Is it getting easier? Is it getting better? And the response that I'm getting from the people who are actually making the product daily are yes, it's getting better. It's getting faster. That will, in turn, reduce our costs and increase our deployment velocity. And we're going to need that because we -- as I said, with a $75 million pipeline, we feel that we are -- it's likely that we're going to start to receive a whole lot more orders, and we need to be able to get them out quickly and efficiently and above all profitably.

Our next question comes from Greg Lewis from BTIG.

Desmond, you kind of touched on it a little bit around the logistics side of it, you called out Hawaii. Clearly, we're hearing a lot about inflation. As we think about that base price for the EV ARC and delivery, is there -- how have those conversations been with customers around potential inflation pressure that you're seeing and kind of as we think about whether it's -- in the event that maybe some of this is in transitory? What has kind of been the message from customers in terms of maybe that $65,000 base price maybe just to melt a little bit higher maybe some of your input costs or early [indiscernible]

Yes. It's an excellent question, Greg. And it's one, obviously, that we're chucking around here all the time. But I'm going to tell you this, you can tell by the fact that I got specific about a specific loss on the delivery, how frustrated I am by the impact that shipping cost had on us during the quarter because it really paints a very inaccurate picture about the direction that we're moving in, in terms of improving gross profitability. $25,000 on a single bloody delivery is just infuriating. However, I got to tell you something, and I'm -- with my usual lack of politics, I'm going to tell you this. It was more us than inflation. We just didn't do a good job of efficiently setting up our deliveries. At least that's where the biggest win is going to come for us. And we've already experienced that. We're getting our hands around this. We're getting better at using our own deployment equipment, not relying on third-party carriers who are reliable. It's not a word you use when you're talking about third-party carriers and the volatility of cost. We can get this under control, and we've already made great strides to do that in this quarter, and we're going to continue to do it. And as I said, I won't let something like that Hawaii incident take place again. So inflation is -- it exists. We're certainly paying more for steel than we use and we don't want to. We're also seeing cost of components coming down on the -- in the longer term, though, the important things like batteries and stuff like that. So I will tell you this. I don't think that the answer to gross profitability for us comes from increasing our sales price. I think the answer to profitability comes from continuing to do what we're doing, which is getting better at making the product and just volume. I've said this to you many times before, it's all about volume for us. We pay less when we buy more. We -- our overhead impacts are less than the product when we buy -- when we do more products. And then we just frankly get better at it, more efficient at it. And in this instance, certainly, where this quarter is concerned, a great deal of the gross profit loss just came out of inefficiency in delivering the book -- not shipping to us and not inflationary impact, but shipping the product from us to our customers. And we know what the problems are, and we can solve them. And I'm telling you today we're going to.

Okay. Great. One more final one. I mean, clearly, it sounds like you're making big in military. I guess I kind of wonder, I mean, you guys have good quarter, boosting revenue. Is there a little bit of chicken and egg maybe with the military as they kind of think about relying on you to kind of -- for more equipment than you're currently producing? I'm just kind of curious, as you talk to some customers, maybe are they interested in the product, but maybe that they need some more comfort around your -- Beam's ability to kind of scale up. Has that been a headwind at all?

In the past, yes, there's no doubt about it. In the past, when we didn't have these sort of big customers like New York City and the State of California, Caltrans and others, I have no doubt that people had doubts about our ability to perform. However, we're constantly swaging those doubts. I mean we're delivering right now to these 52 units to multiple different agencies across California, CAL FIRE, Cal OES, Caltrans. These are not early adopters or risk takers and they're buying the product. And it's not because we're a California-based company, by the way. They competitively saw a product which could do what ours can do and selected us. Now where the military is concerned, again, not early adopters, not -- I mean it's really incredible even talking to them. In fact, I just had a conversation with some of the military the other day that said, I've got $1,000 computer in my hand here, but I can't use it. I have to use my 1995 Dell whenever I want to do military business. They're kind of joking and laughing about it, but it's true. Having said that, they are under mandates to clean their fleets up. When you talk about clean up federal fleets, it includes military, all but tactical. And even tactical is going to go that way. But in the meantime, they've got massive fleets of other vehicles, which they're going to have to go electric with. And if you think about the base environment and if you think about the dynamic nature of the way they deploy and all that sort of stuff, as I said in my remarks, they cannot go through the process of constructing and doing all the other things that are required to put grid-tied stuff in the ground. So whether or not they have doubts about us from our size and everything else like that, the need that they have is so acute and so immediate and our ability to fulfill it is so immediate. And doing this demonstration project to EMS was just a fantastic opportunity for us to get a lot of video and get in front of a lot of people and the congressional interest in it and everything else, too. So I can't speak for how quickly they'll move. But like a mighty battleship, when they do move, you don't stop them, you don't turn them around. And I think, as I said, we're very well positioned. American-made product, energy security, clean tech, EV charging all rolled into 1 product that can be rapidly deployed without construction or any of the other risks or variable costs. I just think we're very well placed to take advantage of it while I can't forecast how quickly they'll move.

Our next question comes from Tate Sullivan from Maxim Group.

Desmond, following up on shipping and handling, just in the queue and where you break out your revenues, I see you do get some revenue from shipping and handling. Is that a negotiation customer by customer? Is it standard that you include a standard shipping fee in the EV ARCs or can you just review that?

It's more location by location. I mean we do have certain set rates, particularly when we're using our own transportation system, the ARC Mobility system, which is a very good way of delivering product at very low cost. I mean our incremental cost, the cost of diesel and the price of the driver and amortization of equipment, of course. And we build the trailer ourselves and even sell it to other people. So when we're doing it ourselves and we control it ourselves, it's a good enterprise. You're right. We get revenue from it, we can do it profitably when we're doing it ourselves. Where we get to trouble is when we're quoting customers to deliver to locations, and sometimes it's a month or 2 later before we go there. And in the case of Hawaii, they just doubled the cost on us without so much as a buyer lead, and we were not able to go back to the customer and impose that cost increase on them. And we didn't think it was wise to at this point in our evolution because we want to evolve into Hawaii, and it was important to us to get out there. So there was some sort of more decision-making process in that as well. We could have just said, no, we're not going to do it. But of course, as you know, we're attempting to grow and the bigger the footprint, the more we're seen, the more we sell. So the -- I guess you could say in a way that loss was a marketing expense for us. And we don't classify it that way. Of course, it goes -- it's COGS. But in a way, I view it as an SG&A cost. So it's -- there is volatility there. The prices have gone up. There's no question about that. We've definitely seen inflation in transportation at the moment. I think it is -- there is an element of a transitory nature to it because -- of course there's a lot of activity right now, which didn't take place during COVID, which is taking place right now. I think that supply and demand will recover that to a certain extent. But the real opportunity here is in -- within our own control. We need to do more of this ourselves, and we need to get better at planning it and better at controlling it. And I'm telling you, we are taking the steps to do that internally right now.