Beam Global (NASDAQ:BEEM) Q4 2023 Results Conference Call April 17, 2024 4:30 PM ET
Company Participants
Lisa Potok - CFO
Desmond Wheatley - President, CEO and Chairman
Conference Call Participants
Christopher Souther - B. Riley
Sameer Joshi - HC Wainwright
Tate Sullivan - Maxim Group
Operator
Good day, everyone, and welcome to the Beam Global Full Year 2023 Operating Results Conference Call. [Operator Instructions] Please note, this event is being recorded.
I would now like to turn the conference over to Lisa Potok, CFO. Please go ahead.
Lisa Potok
Hello. Good afternoon, and thank you for participating in Beam Global's 2023 Year-end Conference Call. We appreciate you joining us today to hear an update on our business. Joining me is Desmond Wheatley, President, CEO and Chairman of Beam. Desmond will be providing an update on recent activities at Beam followed by a Q&A session.
But first, I'd like to communicate to you that during this call, management will be making forward-looking statements, including statements that address beams expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Beam's most recently filed Form 10-K and other periodic reports filed with the SEC.
The content of this call contains time-sensitive information that is accurate only as of today, April 17, 2024. Except as required by law, Beam disclaims any obligation to publicly update or revise any information to reflect events or circ*mstances that occur after this call.
Next, I would like to provide an overview of our financial results for Beam's fourth quarter and year ended December 31, 2023. Revenue for the first -- for the fourth fiscal quarter of 2023 set another new record for the company of $20 million, a 154% increase over the $7.9 million reported in Q4 of '22. Revenues for the year ended December of '23, were a record $67.4 million, which was a 206% increase over the $22 million reported in the same period ending 2022. This increase was primarily due to sales to federal state and local customers as a result of large orders received in late 2022 for the U.S. Army, Veterans Affairs, New York City and more.
We recorded revenues of $8.5 million for our energy storage business from our 2022 acquisition of AllCell Technologies and $3.4 million for our new Beam Europe subsidiary as a result of the Amiga acquisition that closed in October of 2023. Our gross profit for the quarter ended December 31 of '23 was $0.4 million or 2% of sales compared to a gross loss of $0.7 million or 9% of sales in the same quarter of the prior year. Gross profit for the year ended December 31 of '23 was $1.2 million or 2% of sales compared to a gross loss of $1.7 million or 7% of sales in the same period for the prior year.
As a percentage of sales, our 2023 gross profit improved by 9%. Excluding the noncash expenses from the '23 gross profit increases the gross profit to $2.1 million. The gross profit has improved due to the increased production levels, which resulted in favorable fixed overhead absorption and improved labor efficiency as well as design changes that were implemented during the year, reducing the unit cost of the EV ARC.
Our operating expenses were $5.5 million for the fourth quarter of '23 compared to $7.1 million for the same period in '22. Operating expenses for the year-end December 31, '23 were $17.5 million or 26% of revenues compared to $18 million or 82% of revenues for the same period in 2022. The '23 expenses decreased by 56% as a percentage of revenues. The reduction of expenses in '23 included a $5.3 million decrease from what was recorded in 2022 related to the fair value of contingent consideration expense for the AllCell acquisition.
Operating expense increases included commission expense related to the increase in sales the addition of expenses for our new EMEA acquisitions and salaries and consultants. The net loss, $5.1 million or $0.36 per share for the fourth quarter of '23 compared to $7.8 million or $0.77 per share for the fourth quarter of '22. The net loss for the full year of '23 was $16.1 million or $1.30 per share compared to $19.7 million or $1.99 per share for the same period in 2022. As for our cash balance at December 31, '23, it was $10.4 million, this is compared to $1.7 million at December of '22.
Our cash increases resulted from a capital raise in June of '23, offset by increased accounts receivable cash payments for the acquisition and operating losses. Our working capital increased from $6.8 million to $23.8 million from December 31 of '22 to December 31 of '23. As a result of the increase in cash as well as accounts receivable and inventories resulting from the increased orders and revenues.
I will now turn the call over to Desmond to provide a business update.
Desmond Wheatley
Okay. Thank you very much, Lisa, and thanks to all of you for joining Beam Global's 2023 Earnings Call. There's a great deal to go through. So I'm going to talk quickly so that I can be sure to leave some time for questions after my prepared comments.
First, let me start by apologizing that were a little late with this earnings call but we did file within the extension period and we're not actually late with our filings. I also apologize for the short notice, we've been working very hard to get the filings out, and I didn't want to notice the call until we were certain that we were going to do that, of course.
2023 was a very busy year for us with many initiatives coming to a head in the fourth quarter, which have created a lot of extra hard labor, frankly, where the filing of our 10-K was concerned. Let me reassure you that there was nothing controversial about it. It's just that we had a new CFO, a new accounting team joining our veterans, a new auditor, a new ERP and an international acquisition, which all hit in the fourth quarter. Now while all of these things have been planned and are, frankly, very good for the company, it was never our intention to take them all on in the same quarter and certainly not in a fourth quarter.
However, things turning out as they inevitably do, that's where we ended up, and we've had to deal with it. We might have been able to deal with it more quickly, I suppose, but part of what makes Beam Global such a great company is that we're very cost conscious, and we do not have large teams of people sitting around waiting for these sorts of eventualities. We operate a very lean and tight ship so when we have extraordinary requirements, our small but highly effective team has to go into overdrive to perform what is required. [indiscernible] a little at the time, but it's this sort of discipline, which keeps our overheads low and enables us to get more done than any other company I know of with such a very small overhead.
I want to thank Lisa and her team our new COO, Mark Myers and the operations team and all the other members of the Beam global team who have helped and actually Markham as well our new auditors for getting through this without cutting any corners. People who work 7 days a week and long hours to bring us to this point where we're filing on time and with quality and integrity. I'm proud of them, and I appreciate all that they do. 2023 was the fourth year in a row of really significant revenue growth at Beam Global, both in percentage and absolute dollar terms.
In the fourth quarter of 2023, we generated far more revenue than in any previous quarter in our history. 2023 is the first year in our history during which we reported a positive gross profit, and we've implemented changes and improvements throughout the year and particularly in the fourth quarter, which we believe have set us up for an even better 2024. 2023 was also perhaps the most significant year in terms of strategic growth for Beam Global with our expansion into what is the largest market in the world for our products, Europe.
We continue to improve our intellectual property portfolio with the issuance of several new patents. And we expanded our world-class team with the addition of new operations and finance leadership a very significant expansion of our engineering team and a dramatic increase in the size of our manufacturing team, both as a result of our acquisition, with a much more modest increase in overhead and management personnel. We did all of this while generating GAAP gross profits and dramatically reducing our overhead costs as a percentage of our revenues.
Full year revenues, as Lisa just told you, we're over $67 million, which is 300% of the 2020, $22 million we generated in the prior year. That was over 200% of the $9 million we generated in 2021 and that was 150% of the $6 million generated in 2020. So you can see that while last year was, on the one hand, just a continuation of several years of dramatic growth, it was by far the most material increase in our history. Q4 revenues of $20 million were also about 3x more than the same period in the prior year and more than 10% higher than our previous record quarter, which was the second quarter 2023.
In fact, every quarter in 2023 generated the highest revenue for the same period in any prior year. We were profitable in the gross line for the full year for the first time. Reporting $1.2 million or over 2% positive gross profit for the year. And it's important to point out that, that higher number includes almost $1 million of noncash items associated with, for example, amortization of intangible assets as a result of our acquisition. Without those noncash negative impact to gross profitability and are not cash and a better guide to how gross profits are improving our cash position, we actually generated over $2 million of gross profits in 2023.
We put in place engineering and manufacturing improvements, which should set us up for a very good 2024. In fact, by the end of the fourth quarter, our BOM cost for a single EVR have reduced by about $4,000 or 6% of revenue. If we produce the same number of EV ARC systems in 2024 that we produced in 2023, no growth in other words, we'd have a gross margin contribution of another $3 million from those improvements alone. So with that in context, we borrowed about $10 million cash in 2023.
And of course, there were single items of -- due to the acquisition, new patents and an ERP rollout and all the onetime costs associated with those things. Remember also that the price increase of 8.5% on EVR has not yet contributed to our gross margin because we've not yet worked through all the previously contracted backlog or had not anywhere at 12/31. However, we will start to see the impact of that price increase this year and when combined with the cost savings I just described, we will be in even better shape. Doing some back [indiscernible] in mass, you can see that if we had that price increase on the same number of systems we deployed in '23, again, no growth and no contribution from Europe.
We generate another $5 million or so of growth. Combining these improvements with the $2-plus million gross that we already reported, net of noncash items, in 2023, we get a gross margin contribution of about $11 million, which is actually 110% of the cash that we actually burned last year and net of the noncash and extraordinary items. We're clearly on the right track.
Again, I appreciate the work of the engineering and operations teams who've made these savings happen and the sales team under the leadership of Sandra Peterson for bringing in purchase orders with the new increased pricing. Mark Myers, our new COO, and more about him in a minute, will also impact our gross profit in a positive way through making us more efficient and reducing waste in our operations. As it happens, our new ERP should help with us as it too, makes us more efficient with real-time knowledge of inventory and unit costs. We are striving relentlessly for profitability. We demonstrated in 2023 that we can get there at the gross line, the next target, of course, is bottom line, and that's firmly in our sights.
The lion's share of our revenues continue to be generated through the sale of our EV ARC product line but we also received significant contributions from our battery business and just the beginnings of contributions from our European entity Beam Europe. Although our products and technology are highly complex, our business is actually very simple. We buy raw materials and components, we convert those into products and we sell those products. A tripling of revenue means a tripling of production. The Beam team manufactured over $60 million worth of products from the same facilities and with minimal capital expenditure that have produced just $6 million worth the same 3 years earlier.
I've often said that Beam Global has significant operating leverage and our 2023 results certainly prove that. Even though we tripled our business in 2023, we actually reduced our operating expenses over 2022 and our 2023 net was a 64% improvement over our 2022 net. Undeniably, the long-term trends that Beam Global is shorting are growing revenues, improving gross margins and a significant reduction in overhead costs as a percentage of revenues. In short, we're creating a better and better company with continuing improvements to our fundamentals.
At the end of 2023, we had over $10 million of cash in the bank and almost $40 million of current assets made up of cash, accounts receivable, prepaid expenses and inventory, all of which are essentially cash to us because, as I stated previously, we have a simple business and we convert inventory and receivables quickly and without complication into cash.
Our $40 million of current assets was offset by under $17 million of current liabilities, leaving us with over $23 million of onboarding cash and stuff that will turn into cash within the next few months. We continue to use our balance sheet as a powerful and useful tool, which is helping us improve our margins through strategic purchasing and the creation of certain types of inventory to smooth our production process and timing, which in turn reduces our direct costs per product produced.
This is particularly true in our European operations, where the legacy business we acquired has been more seasonal than it's typically been the case with our clean technology products. In Europe, we've already been able to flatten our seasonal production fluctuations by leveraging our balance sheet to create inventory of commonly purchased items.
This allows us to maintain a steady production cadence, lowering labor cost per product produced and also to deliver to customers faster when that seasonal buying increases again in later quarters. Our net loss of just over $17 million in 2023 included around $7 million of noncash and one-time items, meaning that we actually burned around $10 million of cash during the year or about $2.5 million per quarter. Dividing that $2.5 million a quarter into the $23 million or so of cash and stuff that will turn into cash, you can see that even without generating any more gross profit, with plenty of runway to continue executing on our strategic plan.
But the fact is that we are generating gross profits and improving gross profits of that. Every dollar of gross that we generate is one less dollar of cash burn, and the Beam Team intends to continue in its relentless pursuit of cost reductions improved efficiencies and higher revenue per employee. Our revenue growth and gross profit improvement are not adjusted or pro forma and nor is our path to EBITDA positive, which becomes clearer and more tangible each time we report. We remain debt-free, and our $100 million line of credit is still active and available to us in the event that we needed to fund very large new orders.
While we've reduced our overhead cost as a percentage of revenues, we certainly have not reduced our efforts and investment in strategically growing the company, improving our technology and continuing to grow our IP portfolio. In 2023, we were granted a new patent for wireless electric vehicle charging powered by renewable energy, which will enable Motus in the future to simply drive on to our products and walk away while the vehicle is filled with renewable energy without them even needing to plug in.
The automobile mobile manufacturers need to include the receivers on the underside of their vehicles to take advantage of this tactic technology. But I have little doubt that once consumers understand that this capability exists, they will demand it. And Beam Global, will be in a perfect position to provide not just the fastest deployed, most rapidly scalable electric vehicle charging infrastructure, but also the most convenient interface for the consumer. We were also granted several patents in Europe this year for our EV ARC and battery products and perhaps most notably for our EV standard carside charging solution. I'll talk more about EV standard later in my comments when I expand on the fantastic things that are happening at our European facility.
Finally, we also received patents in China and in India related to our unique and proprietary thermal management technology which makes lithium-ion batteries safer, capable of faster charging and more energy [indiscernible]. We've made some material and highly impactful changes in additions to our management team during the last couple of quarters. But we've done it with a level of discipline and responsibility, which you should have become used to if you've been following Beam Global friendly length of time.
In the fourth quarter, Lisa Potok joined us as our new CFO, you just heard from her. Lisa has extensive experience and a solid history of executive finance roles at large public, private and international companies. Most recently, she was the CFO of a $500 million revenue international manufacturing company. She's growth-oriented and has brought a small but very effective team of finance professionals with her. He's also very experienced in ERP integrations something of great value to us is we're currently integrating an ERP across the entire company.
Lisa and our accounting team have the chops to take us to the next level. They've certainly had a [indiscernible] of for taking over at a time when we're implementing that new ERP, integrating an international acquisition and transitioning, as previously announced from our previous auditors to our new firm, Markham. All of these things were planned, but I'm going to say that it was not my intention that this should all take place in a fourth quarter and with the requirement to file a 10-K rather than separately over several quarters with the less burdensome 10-Q process.
Still, the team has risen to the challenge. We have our European expansion. We have our ERP, and we filed our 10-K within the allotted time. Another very significant improvement to our leadership team is the addition of Mark Myers, our new COO, we've previously operated without a Chief Operating Officer and there was a time when that was appropriate and even prudent when we were a much smaller organization with much lower production and revenues. We are now a true international organization with very significant growth in revenues and production.
Operational excellence and increased efficiencies across the company are more important to us than they've ever been. Having a competent person in this role may be the single most important factor in our continuing and relentless pursuit of improved profitability. Mark is certainly qualified. He's a machine. He has held senior executive positions in both U.S. and international manufacturing companies. He was a senior consultant at McKinsey and prior to that, had a distinguished career in engineering in the U.S. Nuclear Navy.
Many of you will know that I went to see as a young man, and I can tell you that on a personal level, I'm delighted to have a Chief Operating Officer who shares that experience with me. Although I kind of help pointing out that I was one of the same failures that stayed above the surface of our oceans, well, Mark was one of the crazy ones who was a nuclear submarine did something that I would never have done. Mark has only been with us for a few months, but the impact of these activities are clear and highly visible in our U.S. facilities.
The way our team is operating in improved safety, reduction of waste and the sort of increased efficiencies, which are essential to our continuing improved profitability. I'm absolutely delighted to have him on board and associated anybody who's invested in this company. These ads are also excellent business continuity contributors in the, I hope unlikely event that anything ever happens to me. The leadership is qualified to and capable of continuing to operate and grow Beam Global without me. By the way, I hasten to add that I'm fighting fit and I'm still full of enthusiasm and excitement for what we're doing and our growth prospects.
I'm not going anywhere but it makes good sense to have depth and diversity in the leadership team, no matter what happens. At the Board level, Tony Posawatz, Peter Davidson and I continue to serve, and we've added 2 excellent new members. In December, Judy Krandel joined our Board. Judy came to me with excellent references from the banking and investment communities. Actually, our first matter because he was and continues to be an investor in Beam Global.
I was so impressed by the due diligence question so that she asked, combined with the clear insights she had into the opportunities that the company enjoys and also what needs to be done to grow shareholder value while complying with corporate governance requirements that I ask if she would be willing to join the Board and serve as our Audit Committee Chair. She accepted, and we're now benefiting from her more than 20 years of financial, operational and investment experience. Judy served as the CFO of both public and private companies. She has board experience at both public and private companies, including the banking sector. And of course, she's an active investor, as I mentioned.
Beam is a big part of our portfolio. That's true of all of our directors, by the way. I'm delighted to have her on board and very much appreciate the leadership and hard work that she brings to the Audit Committee. Also in December 2023, George Syllantavos joined our Board. George is the first European member on our Board, and we're delighted to have him as, of course, Europe is now a very large area of focus for Beam Global. George has over 35 years of experience in corporate finance, strategic planning, corporate boards, governance and entrepreneurship. It's most unusual in that while its operational business dealings have largely been in Europe and Asia, is also well known and respected on Wall Street and has excellent public company experience, creating, growing and funding public companies and also acting as a CFO. George is based in Athens, Greece and has excellent connections for infrastructure is concerned across Europe.
Greece is, of course, a highly attractive market for Beam Global Products, and I'm looking forward to making a business development tool with George later this year. Both George and Judy have top shop experience in public company listings, the capital markets and M&A. They went through a significant vetting process with all the typical formalities and equally important, perhaps, there's an excellent cultural fit amongst all of our Board members who are driven by the same goals, Beam Global's success. So we're continuing to grow a world-class team, both at the Board level and also at the executive and management level.
Our operations teams in San Diego, Chicago and Serbia are demonstrating that they can get better and better at what we're doing while reducing costs and improving our gross profits. Of course, selling our products is the first vital input to our equation for success. There's been a great deal of negative press about the adoption of electric vehicles and their potential future during the last several months. When you look at the actual data, it tells quite a different story. It's certainly true that the percentage rate of growth of EV sales is not accelerating as quickly as it was in 2023. However, these percentages are being measured against far larger absolute numbers. And the slowing of growth is not the same as a decline, although you might be forgiven for thinking that, that was what was going on if you're lying to media to form your opinions.
Year-over-year electric vehicle sales growth in 2023 was about 50%. It's currently forecast by the exports to be greater than 30% increase in 2024, again, with much larger absolute numbers. In fact, in the first couple of months of this year, EV sales growth was just under 70%, and I know that Ford, one of the companies often singled out in these stories about slowing EV growth, just announced that they had over 80% growth in EV sales in the first quarter of 2024. It's a funny sort of decline that keeps delivering all these double-digit percentage year-over-year growth numbers. There's also been a lot of talk about whether or not consumers want electric vehicles or hybrids.
And certainly, hybrid sales have been increasing dramatically during the last year. But I don't think this means that people don't want electric vehicles. In but I think is the opposite. I think this is a strong indication that they do, in fact, want electric vehicles, but they're worried that because of lack of electric vehicle charging infrastructure, they need to buy a hybrid vehicle that can continue even if they're unable to charge. Well, Beam Global is in the business of providing the infrastructure that they will need to get them into battery electric vehicles and no matter what you might read in certain elements of the media. I don't think there's any real doubt anymore that electric vehicles are going to take over during the next couple of decades.
I also believe that electric vehicle charging infrastructure will spend the next many years playing catch up with electric vehicle sales, similar because it's easier to put consumers into electric vehicles than it is to put electric vehicle charters into the environment. That means that as we see the inevitable on EV nest and consumer adoption rates for electric vehicles, we ought to see a more consistent and continued level of demand for the charging infrastructure, which will be required to part of the model. We are still seeing strong demand for logic vehicle churning infrastructure. Our pipeline currently stands at about $150 million. It's up again.
All of that pipeline is currently derived from the U.S. market. We're not yet including European pipeline numbers because we're just getting feet under us in terms of selling into that market, although we've already had a very notable and material successes. In March, we announced that we've been awarded our first European government supplier agreement on the U.K.'s Crown Commercial Services, which is the main purchasing vehicle for the U.K. government entities. This is essentially the same as the GSA contract, which we have with the federal government in the United States and not dissimilar to the contracts that we have with states like California.
These contracts allow government entities to buy our products without having to go through any further commercial due diligence or competitive purchasing programs. all of that analysis and competition is undertaken before they grant their contracts to us. And once the contracts are in place, we're able to sell our products to them in a streamlined manner. It's not easy to win these contracts, but it's very clearly a good strategy for us as demonstrated by the tremendous growth that we've had in both federal and state sales over the last couple of years.
Now we have our first such agreement in place in Europe, and I feel confident that it won't be our last. I feel equally confident that as these types of contract vehicles will deliver the same sort of growth and performance for us in Europe as they have done in the United States. In fact, the conditions in Europe could be considered to be a good deal more fertile for our products than they are here. So after we announced that we've been awarded this contract, we announced the first purchase order from the United Kingdom's Ministry of Defense, which was written against this contract. The purchase order was for $1 million worth of EV ARC and an art mobility trailer, which will be produced in our Serbian facilities and shipped to the British Army for their overseas basis on the Island of Cypress. This is an absolutely fantastic win for us, and I believe a harbinger of a great deal more to come.
It took us 5 years to get our first $1 million contract in the United States. It's taken us less than 5 months to get there in Europe. I was already very enthusiastic about our acquisition in Europe before we received this purchase order. I have no less enthusiastic now that we're already producing and selling our EVR products into that massive market. The Beam Team has been selling well in the United States as well. Though we've not recently received another very large order, like the $30 million purchase order we got from the U.S. Army a couple of years ago, I do believe that it's likely to happen again and again and again. In the meantime, the sales team has been bringing lots of excellent smaller orders.
This is clearly evidenced by the fact that we have over $150 million in pipeline today and that we had over $20 million in contracted backlog at the end of 2023, having revenue just under $70 million during that year. Put those two together and you get about $90 million of contracts and again from the U.S. only, European sales are ahead of us. We do still expect lumpiness in our order cadence as the EV charging industry continues to evolve. From time to time, I believe we'll receive very large orders, which will drive up our backlog. As we become more efficient and are able to deliver more units faster, we should expect to see that backlog come down, offset by the steady flow of purchase orders that the sales team are bringing in.
Short-term lumpiness does not, in any way, make me anticipate anything but long-term growth. And the most effective way for us to offset this lumpiness in sales cadence is to continue to diversify our customer base and product offerings, and that is exactly what we're doing. Our acquisition in Europe has opened up the largest market in the world for our products, and we've already demonstrated our ability to sell into that market. Bringing new products like EV standard to market will create opportunities for large and smaller orders, which should further stabilize and reduce the lumpiness in our order cadence. Social our battery business and the legacy business, which we continue to pursue through our Beam Europe acquisition. Government sales remained the strongest contributor in 2023 with sales to the federal government in the United States, comprising the largest segment. That's hardly surprising, considering the fact that the U.S. federal government has the largest fleet of vehicles in the world and is today the largest consumer of diesel and gasoline but will tomorrow will be the largest consumer of electric vehicle charging infrastructure.
Our GSA contract and the blanket purchase authority that rides with it creates an excellent opportunity for us to sell into what is by far the world's largest customer. We saw more evidence of the validity of this opportunity when we received a follow-on order from the U.S. Army for $7.5 million worth of EV ARCs and another order from the Department of [Human] Security for about $5 million worth. These are normally good indications of continuing opportunity with the federal government, but also the potential for material follow-on orders from existing customers.
State level and municipal sales also remained strong last year and I'm also really encouraged by the fact that we've continued growth in our commercial sales. In fact, about [indiscernible] of all the sales we made last year were commercial entities, not government. It's worth remembering that [indiscernible] COVID more than half of our sales were commercial. And we're actually selling more to commercial today than we were then. But of course, our sales across the board have grown so much that even though we're selling more now to commercial than we were prior to gold. At today's sales levels, that only equals about 5% of total sales.
I expect that we'll continue to see significant activity from government entities in the quarters and years that come, but I do also anticipate that we'll see an increase in our commercial sales. And in fact, in the future, I believe that commercial sales will dominate. As we start to add data from Beam Europe to these considerations, I expect these numbers to grow in an absolute sense, but I also expect that we'll continue to have a strong government leading sales machine because after all, our products are transportation and energy infrastructure products, which have long been the domain of government spending.
Let's spend a couple of minutes on Beam Europe. In October of last year, we closed upon the acquisition of what was then Amiga, a Serbian based manufacturer of steel structures with electrical components integrated into them. Amiga, now Beam Europe was and remains, for example, the fourth largest streetlight manufacturer in Europe. It sold products into 17 nations, including the United States. If you walk down the street in Miami, it's likely that you worked on the street lights manufactured by Amiga. I've been looking for an international expansion opportunity for several years. I've considered many and even negotiated with several of them, but prior to Amiga, I've not found anything that meets the extremely high standards that we have where an acquisition is concerned.
[indiscernible] I'm delighted that none of the other opportunities worked out because I doubt I could have find a better fit than Amiga to become Beam Europe. They were exactly what I was looking for. They have the skill sets, the experience, the machines, equipment and facilities required to mass produce our products. All the lack was our IP and know-how. We have a great deal of credibility and existing relationships and in many cases, contracts with customers who have more or less exactly the same profile as those customers with whom we've had a great deal of success in the United States. For more than 30 years, Amiga has been selling steel structured with integrated electronic components, basically where our products are for on-street applications to cities, states, nations, militaries and large corporate entities.
These are exactly the sort of customers to whom we'd be selling our renewably energized EV chargering and energy security products. So the task was simply to rebrand Amiga as Beam Europe, send them our drawings, designs, engineering and know-how deliver our sales collateral and trained their sales team to go back to their existing customers until after 30 years of good experience with Amiga's products, they could now rely on Beam Europe to deliver them those products and a whole new suite of renewably energized EV charging solutions and energy security storage solutions at the time when these sort of products could not be more in demand. With the acquisition of Beam of Amiga, Beam Europe came into existence on 6 acres of land, which we own with 250,000 square feet under roof equipped with all the machines and facilities required to manufacture Beam Global's products. In fact, we're far better equipped in Europe now than we are in the United States. This will have significant impacts on the economics of producing our products over there because there are several processes and expensive processes at that, which we outsource in the United States, but which we are self-performing in our European facilities.
Let me give you a single and very meaningful example of this. Our engineered ballast and traction path, which forms the base of our EV ARC product is formed using a large curved plated steel with structural enhancements. In the United States, we do not have a machine, which is capable of rolling the curve into that play. And as a result, we have to outsource that process to a third party. This is not cheap as we pay third-party margins and the disruption and expense of shipping the parts to that facility and then back to our factory where we can complete the base pad.
Beam Europe, on the other hand, has a machine on-premise, which is capable of performing that role without the plate ever leaving our factory there. Beam Europe also has sand blasting and painting facilities, which means that another of our most expensive processes is performed in-house while it's outsourced the United States. We don't pay a third-party margins, and we don't have the cost, complexity and risk of transporting the play to perform that process or the process of rolling the plate.
As a result, our balance and traction pad costs 45% less to manufacture a beam than they do in our U.S. facilities. The balance in traction pad is one of the single largest cost contributors to the EV ARC so you can see that saving 45% on each of these plates will have a significantly beneficial impact on our gross profitability. There are other examples, but this gives you a good indication of another reason I'm so enthusiastic about our prospects in Europe. Further economic benefits are derived from the fact that just about everything is less expensive in Serbia than it is in California or Illinois, where we produce our projects in the U.S. And because we own the land and buildings and all the equipment and machinery, we do not have lease liabilities or other payments to make -- to enable the production of our products.
Our timing on entering the Serbian market can hardly have been better. While [Silica's] early stages, there's a great deal of investment from both the United States and Western Europe and Serbia, the people are very well educated, have a great work ethic. The country is well positioned centrally in Europe with good access to the event and all of Western Europe as well. Serbia can trade tariff free with the European Union because it's not -- because it's not yet in the European Union, it's not subject to the rigorous and expensive regulatory and compliance environment, which exists there.
At the moment, it looks like Serbia will, in fact, join the EU but not until 2030, which means that we'll have about essentially about a 6-year honeymoon in which to grow our European enterprise in a very business-friendly environment. Europe represents a huge opportunity for us because it's the largest automotive market in the world with over 400 million cars. Just to put that in perspective, the United States is 290 million, China, $319 million. So $400 million is obviously a hell of a lot more than that.
Beyond that, Europe has announced an outright ban on the sale of anything that zero emission vehicles in 2035, just 11 years from now, and committed to having zero carbon electricity by 2050. Perhaps also true that Europe is generally more positive view towards renewable energy and the environment that we have in the U.S., which I believe will only make our products more popular over the year. Our ability to deploy EV ARC products without doing any construction or trenching will be even more compelling in ancient cities where digging down 6 inches is like a journey back in time.
The war in Ukraine has made Europe very aware of the vulnerabilities incumbent in its centralized grid infrastructure and its reliance on foreign sources of carbon fuels to generate electricity. Our products are, of course, immune to centralized grid failure and generate store all of their own electricity. So our timing is very good where that's concerned as well. At some point, and I hope I'm not sound too optimistic here, the good guys will win in Ukraine, and there will be a massive rebuilding effort. I do not imagine that there'll be a great deal of investment in gas stations and 20th century technology when that rebuilding takes place. [indiscernible] in Ukraine is closer to our Serbian facilities than Denver is to San Diego. You can be certain that when rebuilding efforts start, Beam Europe will present our rapidly deployed EV charging, energy storage and electrical infrastructure products manufactured in the region.
We never want to exploit these types of situations, but undeniably, seems like an excellent opportunity for us. Of all the fantastic assets and opportunities that Beam Global gained as a result of this acquisition. The human resource has to be the greatest. 210 excellent employees, most of whom have been with the company for many years and are, as a result, high experience in the areas which are so important to our success. All those 210 employees over 30 are advanced degree engineers, most of whom speak excellent English and all of whom create fantastic work product. Since the acquisition, and if I'm honest, even before we closed, those engineers have been working with our U.S.-based engineers on the fulfillment of the EV standard product development.
Our U.S.-based engineers are experts on renewable energy, battery storage and EV charging but we know very little about what it takes to make streetlights. They are complemented by our European engineers who are arguably some of the world's premier experts on street light engineering and manufacturing. We have made tremendous progress in the development of the EV standard product. And while I was in Survey just 3 weeks ago, I saw and touched the structural elements of the first EV standard prototypes, which we will bring to market in the next few months. It was a truly exciting moment for me to see this product, which we've had patented since 2019 in the U.S. and recently received a patent 4 in Europe, actually being made.
We could not have done this without the acquisition and the fantastic team in Serbia, who is now part of the Beam Global family. I'm also absolutely delighted to have the support and leadership of Evan [indiscernible] Beam Global General Manager; and [Alexander Tascovich], who is one of the most operationally engaged sales and marketing leaders I've ever met. Under Evan's leadership, Amiga grew to the point where it could make profitable sales in 17 nations in Europe, Africa and North America. He now runs our European operations and has done an outstanding job of integrating what was Amiga and has now Beam Europe into the Beam global organization. I'm delighted to have him and Alex and every other member of the Beam Europe team on board. By the way a couple of excellent resources which you can take a look at on our website. Firstly, a video of the live tour that Evan and I did of the Beam Europe facilities. It's long and in the quarter, in fact, but that's because there was so much to so and so much to describe. Even if you only skim through the video, I believe that you will gain an excellent appreciation of the quality of the asset we acquired and the tremendous new opportunity for Beam Global's growth, which come with it.
You'll also find on our website a video and [indiscernible] describing the recent utility scale battery seminar, which Beam Europe delivered in Belgrade 2 or 3 weeks ago. This seminar was attended by utility and government leaders from across the Balkans the 4 or 5 nations, which like more -- like most other European countries and to an increasing extent, U.S. states are increasingly requiring the deployment of utility-scale energy storage with all new large solar wind deployments. Beam Europe was approached by leaders in the energy space after they learned about Beam Global's acquisition of Amiga and asked if we could provide energy storage solutions and know-how for their expanding renewable energy deployments.
Said Al-Hallaj, Beam Global's Chief Battery scientist and the Founder of AllCell Technologies, which is a battery company we bought a couple of years ago, presented to an audience of 40-or-so leaders on battery technologies and utility scale deployments. I followed him and described various different financing scenarios, which Beam Global can offer, all the way from outright capital purchases to Battery Energy Storage as a Service. Serendipitously, I just spent a week in Washington D.C. meeting with various congressmen and with the White House on energy security and EV charging infrastructure related matters.
While I was there, I met with the International Development Finance Corporation, which is a branch of the federal government, tasked with providing U.S. companies with inexpensive and long-term financing to promote the deployment of U.S. technologies in the developing world and also sustainable energy infrastructure in environments like the Balkans. This very significant source of large amounts of capital can with our existing credit facility enable Beam Global to offer competitive rates and terms on energy storage products valued in the tens and even hundreds of millions of dollars.
We've had extremely positive follow-up since the symposium, and this is an opportunity which it once validates Beam Global's broader strategy and our acquisition of both AllCell and Amiga. It was a perfect amalgamation of our company's growing presence and technical progress in areas which could not be more timely or compelling. By the way, that seminar was also attended by the U.S. Embassy over there. We've had tremendous support from the ambassador and his team in that market. Please check out both videos and blog posts when you get a moment. You can find them on our website at beamforall.com. Our acquisition and formation of Beam Europe has, in my opinion, far more than doubled our opportunity for our existing products. It's a larger market with macro tailwinds, which all seem to point to worst products and solutions like ours.
But acquiring Amiga and creating Beam Europe has done more than simply increase our access to markets for existing products. We've added new revenue opportunities through increasing our product portfolio and inherited solid customer relationships, which are exactly the sort of entities, which we target we never made the acquisition. We've also integrated the highly skilled and experienced team that would otherwise have taken us many years and an unknown amount of money and time to create. And of course, we cannot lose sight of the fact that this acquisition has accelerated our development of the EV standard product, a product which I still believe may end up being our biggest revenue producer before long.
This acquisition and the more than doubling of our business was a major strategic undertaking. We now have more employees, machines and equipment in Europe than we do in the United States. And while we lease about 80,000 square feet of factory facilities in San Diego and Chicago, we own 250,000 square feet under roof on 6 acres of land in Europe. We have no monthly payments and no lease liabilities to negatively impact our profitability.
You could be forgiving that, that must -- for thinking that, that must have been a very expensive and highly dilutive activity on our part. In fact, we bought the company for less than the value of the real estate and the hard assets. And when all is said and done, we still have no debt cash in the bank and an almost unbelievably low 14 million shares outstanding. Please compare that to any of our so-called peers or competitors. Before I sum up, just let me say a quick couple of words about our warrants.
When we IPO-ed in 2019 through a traditional process not us back, we issued a unit which comprised a share of common stock and a warrant with a strike price of $6.30. The warrant has traded since that time under the tick of BEMW, BEMW. Most of the warrants, which we issued have been exercised during the last 5 years. But at December 31, 2023, there were still around $400,000 on exercise warrants, which have continued to trade since that time. And in the far left, expire at 5:00 p.m. Eastern on Thursday, the 18th of April, tomorrow. They're in the money today. Following the expiration of the at the ticker BEMW will cease to exist in Beam Global will trade solely under the ticker BEEM.
So to sum up, a tripling of revenues, positive and significantly improved gross profits significantly reduced operating costs as percentage of revenues, a tangible path to cash flow, a growing pipeline and healthy backlog, a major geographic expansion into one of the world's -- well, no, the world's largest market for our products, significant enhancements of our operational engineering and leadership teams, multiple new and meaningful patents and the first physical components of a major new product launch all achieved in the same year and without meaningful dilution.
That was Beam Global 2023. And the best year by far in our history. It's still a great time to be Beam global, and I believe even better times are ahead of us. Thank you for your attention and your continued support of Beam Global, and I'll now return the call to the operator and use our remaining time to answer any questions which you may have. I'll go over a little to you if you want. So operator, we'll go to questions now, please.
Question-and-Answer Session
Operator
[Operator Instructions]
Desmond Wheatley
And if I can just say this, could you try and limit yourself to one question or maybe one quick follow-up because I want to make sure that everybody gets a chance.
Operator
The first question comes from Christopher Souther from B. Riley.
Christopher Souther
Maybe just -- and I appreciate all the color you provided here. Maybe just touching a bit more on the margin improvement expectations. It sounded like you said we had about 4,000 of the 12,000 that we've already been able to recognize here last year. Can you walk through the timing of the remaining there? Or correct me if I was wrong there.
Desmond Wheatley
No. Yes. Look, I think basically, what's happened is we have started to introduce those savings, which I described in the third quarter call. working through inventories and all the other things that we've had to work on, we have not got all the way through that process yet, but I'm confident that we'll continue to improve into 2024.
Christopher Souther
And then where are we as far as identifying some of the further reductions from the in-sourcing components from Serbia are all those kind of incremental? And have you identified any specific things you'd kind of call out there that you could parse out as far as what further reductions might look like?
Desmond Wheatley
Yes. So far, all the indications are that we're going to have far better economics in Serbia than we do in the U.S. And of course, we'll be reporting consolidated numbers. So margin improvements in Serbia will improve our overall Beam Global margins. And also, Chris, the never ending strong paint the Golden Gate Bridge as far as I'm concerned. As soon as we think we're finished, we start all over again. And I do still believe that there are a lot of other margin improvements that can be made in the product and that we will do that. And we're going to get back to after that, frankly.
Operator
Our next question comes from Sameer Joshi from with HC Wainwright.
Sameer Joshi
Just a quick one. The backlog of $22 million, I think you mentioned it doesn't include anything from Beam Europe. Do you have like a -- what kind of visibility do you have in Europe right now in terms of pipeline and backlog?
Desmond Wheatley
Yes. As I said, we're still getting our feet under us where that's concerned. The European business before we acquired it, was much less concerned with backlog. And it's not even a term that they used. However, they've had a steady and growing business. which we are enhancing, as I mentioned in my comments, to using our balance sheet to help them smooth out their cash position. Previously, this is a company, by the way, that had no debt. It was accretive acquisition, had brought no debt with it. I didn't even have any credit. I count or anything. They did everything out of cash that they generated from sales. So we've been able to help with that make them more efficient.
And I think we're already bearing fruit from that. At the moment, we have none of that backlog is included in the number that I quoted. However, obviously, we are now starting to look more carefully at the contracts that we have in Europe and then we certainly added to the backlog with the purchase order from the U.K. MOD. I'm happy that we're able to report that we've got these backlog numbers without Europe right now because I believe that Europe will be a significant contributor in the future. But I need to get everybody much more confident with those numbers before we start talking about them publicly.
Sameer Joshi
Understood. And just one clarification on the same backlog number. The $7.4 million from U.S. Army and $4.8 million from the DHS, those numbers are not included in this $22 million. Is that correct?
Desmond Wheatley
I'll tell you what you're going to have to come back to me on that because we -- I'm not sure how much of any of that we've executed on right now.
Operator
Our next question comes from Craig Irwin with Roth MKM.
Unidentified Analyst
It's Andrew on for Craig. Congrats on the continued progress. You talked about in the -- on the call a little bit accelerating interest from commercial customers government sales and government -- federal customers has really continued to drive the growth. But can you kind of expand on the opportunities you're seeing with your commercial customers?
Desmond Wheatley
Yes, it's really been across the board. I mean, I think we made an announcement that we did some sort of notable things that we've got a large automotive, we're not allowed to now -- by the way, I know it's really frustrating for people, but a lot of times we get purchase orders from large commercial customers who for whatever reason, don't want us to name them. And as I've said before in these calls, I'm not going to upset them and potentially hurt future business with them by doing -- going against the issues.
But that was on the battery side of our business. And then on the commercial side of our -- on the EV charging and EV ARC infrastructure side of our business. We've just seen, as I said, quite a significant return to commercial entities ordering these products now since they evaporated almost nothing during COVID. And I think that's a trend that we expect to see continue. Certainly, as a larger percentage of our -- of that $150 million pipeline now coming from commercial customers.
And that's a really good thing. And my long-term feeling is, frankly, while it's totally appropriate that there are significant government tailwinds at this period of the evolution of this industry. I do in the end, think that our business will be -- will end up being more commercially driven than government. But we're very happy to take the government business for the time being.
Operator
Our next question comes from Tate Sullivan with Maxim Group.
Tate Sullivan
On the U.K. military, the $1 million a quarter, and it takes you less than 5 months to get that. Is there -- do you need a similar contract structure for a country in the European Union is or other paths to go to military orders, please?
Desmond Wheatley
I'm sorry, coincidentally, I had the military flying over when you asked that a bunch of Marine Core jetliner. But I think what you asked me was -- can we use the government contract from which the U.K. MOD acquired the EBR in other nations in Europe? Or will we have to get different contracts for different nations? And the answer is, no, we cannot. I'll keep my political thoughts for myself, but especially because Britain exited the European Union through the Brexit process, they're stand-alone where that's concerned.
Nevertheless, a fantastic customer I really want to point out, by the way, that us winning that U.K. contract had nothing to do with my national origins, although I am originally from the U.K., the better part of it, north of the border in Scotland but had actually nothing whatsoever to do with that. It was just a U.K. has a need for a product like ours, particularly in the overseas basis. Cypress is the first of those, which were which we're executing on. We will need to go and get other contracts in other nations.
And believe me, we're going to do that. And part of the good news about the acquisition that we made in Europe is although they haven't been selling our types of products, they have been selling, as I said, straight to furniture-type infrastructure. to government entities for a long time. So they're very well versed in this type of thing. We're going to go back to all those existing customers and just and add new -- our new products that market to them.
But yes, we will have to go through that process, and we will do that because I say it's been very useful to us in the U.S. in terms of our growth year. And I think the European Union and broader Europe. We'll probably be more government-facing where infrastructure is concerned even in the U.S. is -- so it's a challenge for us. But one thing that we've learned is when we win one of these types of contracts, it's always easier to win others because there's a kind of -- nobody wants to be first to be second thing in government, but also much of the work that you have to do in winning one of them is very much copy and pastable into the other applications for other types of things and most of them have very similar qualification requirements.
So if we qualify for one, it's unlikely that we wouldn't qualify for others.
Operator
So we're at time now, but I'm prepared to go over for a few minutes if there are any other analyst questions. Otherwise, we can -- I know you're all very busy, so we can call it a close.
A - Desmond Wheatley
Okay, operator, that sounds like it. That's it. Thank you, everybody, for your attention. As you can no doubt tell, I remain bullish about Beam Gold in fact more bullish than I've ever been a far bigger and much, much better company than we were just a short period of time ago, and we're only going to get a whole lot better from here out. So thank you for your continued support and interest.
And as always, feel free to get directly in touch with the company or with our IR firm core IR, anytime you have any other questions or thought we'd love to hear from you. Thank you very much.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
