Interview with Beam Global CEO Desmond Wheatley on the Acquisition of AllCell Technologies
This in-depth video interview with Beam Global CEO Desmond Wheatley goes into details about the acquisition of AllCell Technologies. Beam’s Director of Operations, Davis Nacamu conducts the interview Following is a transcript of the interview for reference.
Desmond, we’ve known each other for a while now. I’m excited to be here with you. I’m excited to be here at this plant where we make our products right now, Beam Global, in our home factory, and it’s a big day for us because you’re about to announce a transaction. Can I hear about it please?
Yeah, I’m very excited about it too, and I’m delighted to be here. Thanks, Davis. It’s always great to be here. You can feel the energy in this place; it’s making products that make energy so it’s not surprising. Yes, today we have just announced a transaction which is going to be absolutely transformational for Beam. It’s a strategic acquisition, one of the best I’ve ever seen frankly.
We have acquired AllCell Technologies which is a Chicago based energy storage company. As it happens, it’s an energy storage company whose products we’ve been using for about a decade. Our products are a combination of structure, electrical generation and energy storage. Energy storage is a very important third leg to that stool and in the past we’ve been buying it from other people and giving up margin and everything else. And now we own it, and that’s just going to be a great advantage for the company.
So Desmond, it sounds like it’ll really remove a lot of challenges that you have with this strategic acquisition.
Ya. Look, as I said, energy storage is a cornerstone for our product. It is a three-legged stool—you’ve got the structural element of the product, you’ve got the energy generation, and then you’ve got the energy storage element of our product. These are really the things that are our claim to fame. Our ability to deploy rapidly, without construction, without electrical work, without a connection to the utility grid. None of those things could happen if we didn’t have those three legs. Structure, energy generation and energy storage. Storage has been the hardest thing to solve; it’s been the riskiest area of our business too, and frankly it’s the most expensive part of our bill of materials. More than 30 % of our bill of materials goes to buying energy storage from other people. We have solved for all of that through this acquisition. We’re bringing in a solution that we’ve worked with for 10 years, so it’s de-risked from that point of view. That made the due diligence a lot easier for us. We are recapturing a lot of gross profits and defending our supply chain and we’re putting up a perfect solution now. One that, in the past we were buying solutions which were generated for other types of products, and now we’re able to tailor fit it to make our products even better. So yes, it’s an absolutely perfect strategic fit for us. I’m delighted to have gotten it done.
Can I hear a little bit more about the economics of the deal; specifically gross profitability?
Yes without a doubt. So, as I said in the past, we’ve been buying energy storage from other people—30% of our bill of materials. With that, of course there’s gross profit for those companies. They have to make money too. Now that we own the company we recapture all of that gross profit without paying it to somebody else, and that’s going to have a significant impact on reducing our cost of goods sold because it’s pretty significant and it’s the biggest piece of our bill of materials; the biggest part of our cost of goods sold, frankly. So, just from a gross profit improvement point of view from Beam Global, reducing our cost of good sold is going to have an impact. Beyond that we get AllCell’s respectable revenues, AllCell’s respectable gross profits, and we do that without any debt. They have no debt. We have no debt. It’s an all-equity deal so we’re not using the cash that we have for growth and moving into the future; we’re defending that position as well. So, increased revenues, increased profitability, reduced costs and an all-equity deal. And now we have a fantastic new shareholder in Townsend Capital who sold the company to us as well; so economically a brilliant structure.
Do you think there will be any effect on Beam’s current customer relationship?
Yes. Look we’re getting bigger orders. We’re growing rapidly. A lot of the questions that we are getting from some of these customers now is: Are we able to produce the types of volumes of products that they want? When you start bringing in customers like the Marine Corps and others, their concerns are can we get enough product to them for their massive growth plans into the future.
The fact that we’ve now defended our supply chain. The fact that we now know that we’re going to be able to get the batteries that we need, which is a crucial cornerstone for the product, is a great service to our customers. It’s going to be a great ability for us to continue to execute and grow at the kind of speeds they want us to.
Beyond that, the product is going to get better. Now that we own AllCell Technologies, instead of us shoehorning an existing solution into our product, our engineers and their engineers will work together, and perfect it, so the end product will get more energy dense, more efficient, while we’re reducing costs. So, benefits for the customer for a supply chain defense point of view but also making the products better as well.
Same thing for AllCell’s products and customers?
Yeah. Look, they’ve been aiming at the same targets for a couple of decades in fact—the electrification of transportation. So they’ve been providing energy storage solutions for micro mobility, for electric vehicles, for drones, for submersibles, for aircraft even. We’ve been providing charging solutions for all those modes are transportation. Now we’re going to be able to go to AllCell and say, AllCell, all of your customer base, all the things that they’ve been struggling to figure out how they’re going to charge—it’s the biggest challenge in the industry frankly—we now can deliver them a fantastic solution all from under the same roof.
How does this affect Beam’s intellectual property portfolio, and maybe competitors; are there now more barriers to entry?
Yes. So we already have a really good defense out of the moat that we’ve built with our IP, the patents that we have; they’re all fundamental to the value that we deliver. We have great discipline where patents are concerned. We only go after them if they are a barrier to entry for competition that is something that we can monetize. We’re doubling our patent portfolio through this acquisition, and frankly, the patents that we’re getting from AllCell are in a really important area; this energy storage area. Energy storage is going to be huge when we get to the future. AllCells’s products make battery cells safer by far, more energy capable and longer lived, which essentially reduces the costs of energy that comes out of those batteries as well. All of those patents will now belong to Beam. They will further defend our existing products and allow us to defend the future products that we’re coming up with like EV Standard™ and UAV ARC™. Now we’re just going to have a lot more patents for protection. And they’ll benefit from ours too.
This is an all stock deal. Can you talk about that and, you know, in relationship to the current situation for growth stocks?
There’s been a general rotation out of growth stocks; everybody’s aware of that. And we’ve not been immune to that at all. And we’re using our stock as a currency to buy this. So some people might say, so why would you do that when most stocks are down? Because of the value of this transaction, because the strategic nature of it, because of the revenues, because of the gross profit, because of the cost reductions, and all the other things that come along with it. Frankly, anytime would have been the right time to do this. But beyond that we were able, early on, with Townsend the seller, to start talking about real value, not the ticker, the real value. At the end of the day we’ve given them about 10 % of our company for their company. And Townsend, the seller, essentially, not even really a seller. What they’ve done is they’ve converted 100% of their equity in AllCell into 10% of equity in Beam, now comprised of AllCell as well.
Frankly it’s been a great time to do this. Townsend has been really good; they’ve really recognized the value in this, they’ve been involved in the industry for a long time. They didn’t get too hung up on the ticker price; they were more interested in the broader value creation.
But wait. There’s more…
For the rest of the interview, please view the video. The remaining transcript will be posted soon.
Sincerely,
Desmond Wheatley
CEO Beam Global