Expion360 Q2 2024 Earnings Report

Expion360 EPS Results

• Actual EPS: -$26.00
• Consensus EPS: -$27.00
• Beat/Miss: Beat by +$1.00
• One Year Ago EPS: N/A

Expion360 Revenue Results

• Actual Revenue: $1.28 million
• Expected Revenue: $1.36 million
• Beat/Miss: Missed by -$80.00 thousand
• YoY Revenue Growth: N/A

Expion360 Announcement Details

• Quarter: Q2 2024
• Date: 8/14/2024
• Time: N/A
• Conference Call Date: Wednesday, August 14, 2024
• Conference Call Time: 4:30PM ET

Expion360 (NASDAQ:XPON), trading under the ticker XPON on the NASDAQ, is a cybersecurity software company that operates through its Leviathan Security Group division. The company’s flagship offering, the Leviathan Platform, delivers a unified risk management solution designed to help organizations identify, assess and remediate cybersecurity vulnerabilities. By consolidating compliance management, threat detection and data protection into a single platform, Expion360 enables enterprises to streamline security workflows and maintain continuous visibility into their cyber risk posture.

The Leviathan Platform encompasses modules for vulnerability scanning, automated compliance mapping to frameworks such as NIST, HIPAA and PCI DSS, real-time threat intelligence and incident response orchestration. These capabilities are accessible via cloud-hosted services or on-premises deployments and integrate with common IT and security infrastructure, including endpoints, cloud workloads and network devices. Professional services teams support customers with deployment, customization, training and ongoing assessments to ensure alignment with evolving regulatory requirements.

Founded in 2018 and headquartered in Tampa, Florida, Expion360 serves organizations across financial services, healthcare, manufacturing and other regulated industries in North America and select international markets. The company completed a business combination in 2022 to become a publicly traded entity, and its leadership team brings together cybersecurity veterans with backgrounds in risk management, threat intelligence and software engineering. Expion360 continues to invest in platform enhancements and strategic partnerships to address the growing demand for integrated, scalable cybersecurity solutions.

Expion360 Q2 2024 Earnings Call Transcript

Key Takeaways

• We launched our next-generation Group 27 and GC2 series and the slim-profile Edge battery featuring vertical heat conduction, Bluetooth and CAN bus, with shipments starting in Q2 and Q3.
• Q2 revenues declined 26% year-over-year to $1.3 million and net loss widened to $2.2 million due to reduced sales and higher per-unit overhead costs.
• Closed an underwritten public offering raising gross proceeds of ~$10 million, which repaid existing debt and will fund UL certification and commercialization of E360 home energy storage solutions.
• Secured strategic partnerships and distribution agreements with major RV retailers and OEMs—including Camping World, KZ RV (Thor Industries) and Tractor Supply—broadening market reach.
• Expanding into the home energy storage market with modular, scalable systems targeting a forecasted $123 billion global market by 2029, aiming for recurring revenue streams.

Presentation

[Operator]

Greetings, and welcome to the Expion360 second quarter 2024 financial results conference call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded and will be available in the Investor Relations section of the company's website at investors.expion360.com. Before we begin the formal presentation, I would like to remind everyone that certain statements made on this call and through the webcast are forward-looking statements within the meaning of the federal securities laws and are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.

[Operator]

All statements made on this call today, other than statements of historical fact, are forward-looking statements and include statements regarding the company's beliefs, plans, and expectations about its operations, growth prospects, product development and pipeline, anticipated timing of commercial availability of its products, market size and opportunity, and the anticipated use of proceeds from the company's recently completed public offering. While these forward-looking statements represent management's current beliefs and expectations, they are subject to risks and uncertainties that could cause actual results to differ materially. The company has explained some of these risks and uncertainties in its SEC filings, including in the Risk Factors section of its annual report on Form 10-K and quarterly reports on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our expectations as of the date of this presentation.

[Operator]

Except as required by law or the NASDAQ listing standards, the company expressly disclaims any intent or obligation to publicly update or revise any forward-looking statements. Your hosts today, Brian Schaffner, Chief Executive Officer, and Greg Aydelott, Chief Financial Officer, will present results of operations for the second quarter ended June 30th, 2024. A press release detailing these results crossed the wire this afternoon at 4:05 P.M. Eastern Time and is available in the Investor Relations section of the company's website at investorsexpion360.com. At this time, I will turn the call over to Expion360's Chief Executive Officer, Brian Schaffner.

[Brian Schaffner, CEO at Expion360]

Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's second quarter 2024 financial results conference call. For those of you who might be new to our story, I'd like to start by giving a brief overview of who we are and what we do. Expion360 focuses on the design, assembly, and sales of lithium iron phosphate, or LiFePO4, batteries and supporting accessories for RVs and marine applications. As recently announced, we are also expanding into the light electric vehicle, or LEV, market and the home energy storage market, and we have plans to expand into industrial applications in the future. We design, assemble, and distribute high-powered lithium battery solutions using groundbreaking concepts while employing a creative sales and marketing approach. We believe our product offerings include some of the most dense and minimal footprint batteries available.

[Brian Schaffner, CEO at Expion360]

We are developing E360 home energy storage solutions, which we expect to bring positive change to the industry with regards to key areas of differentiation, including price, flexibility, and integration. We are also deploying multiple intellectual property strategies, advanced research and development capabilities, and innovative products to sustain and scale the business. We currently have customers consisting of dealers, wholesalers, private label customers, and original equipment manufacturers, or OEMs, who are driving revenue and brand awareness nationally and complement our wholesale channel with direct-to-consumer sales. Our management team and board members are experienced across engineering, technology, and finance. We believe the combination of these factors positions us to execute our long-term growth strategies. I am proud of the progress we made in the second quarter and remain excited about our future prospects.

[Brian Schaffner, CEO at Expion360]

Our E360 product line, which is manufactured for RV and marine industries, is a preferred conversion solution for lead-acid batteries. We currently have more than 300 customers across the United States, consisting of dealers, wholesalers, private label customers, and OEMs, who then sell our products to end consumers. In addition, we sell products directly to consumers through our e-commerce platform. We have sales relationships with major RV retailers, including Camping World, a leading national RV retailer, KZ Recreational Vehicles, a subsidiary of Thor Industries, and Meyer Distributing, Inc., a leading national marketer and distributor of automotive and RV specialty products.... We believe we have a strong reputation in the lithium battery space, which we plan to continue leveraging to broaden our distribution channels as we expand into adjacent verticals such as LEVs and home energy storage. Now to highlight some of our accomplishments and milestones in the second quarter.

[Brian Schaffner, CEO at Expion360]

On April 18, we announced substantial pre-orders for our next generation Group 27 and GC2 series batteries, which now include our proprietary vertical heat conduction, or VHC technology. The new versions also include higher amp hour, 4.0 and 4.5 amp hour cell technology, SmartTalk Bluetooth, and CAN bus communication. Shipments for these orders began in May. On April 30, we released specifications for our home energy storage solutions, DC-coupled home energy battery, which is expandable in 5 kW increments up to 80 kW, and for our AC-coupled all-in-one home energy battery, featuring a 10 kW battery paired with a built-in 5 kW inverter, which is expandable in 10 kW increments up to a total of 40 kW.

[Brian Schaffner, CEO at Expion360]

On May 8, we announced the launch of the Edge battery, which utilizes a modular design for off-grid power storage solutions and is available in both 12.8 volt and 51.2 volt configurations. It features a slim profile that maximizes available space without compromising performance. With dimensions of just 4.2 in height, 17.5 in width, and 21.9 in length, the Edge offers flexibility for installation in a variety of applications, from mounting on the wall of vans to fitting into tight spaces in RVs. The Edge's slim design maximizes available space without compromising performance. The Edge incorporates VHC technology, SmartTalk Bluetooth, and CAN bus communication. We began shipping the Edge to consumers during the third quarter.

[Brian Schaffner, CEO at Expion360]

On May 16, we announced our new e-commerce retail partnership with Tractor Supply Company, the largest rural lifestyle retailer in the United States. We did this to offer our products online for shipment to customers in 49 states. Expion360 products are now available on Tractor Supply's website, including our Group 24 and 27 batteries, our Aura Power Cap, and portable solar bundle to start. On August 6th, we announced a partnership with KZ Recreational Vehicles, or KZRV, a subsidiary of Thor Industries, Inc. This collaboration will integrate our cutting-edge battery technology into KZRV's premium offerings, enhancing the off-grid capabilities of their vehicles. KZRV's Boondocker package, renowned for its exceptional off-grid features, will now include 3 51.2-volt, 60 amp hour Edge VHC heated batteries, with an option to add a fourth battery.

[Brian Schaffner, CEO at Expion360]

In addition to the Boondocker package, KZRV will offer two Group 27 100 amp hour VHC heated batteries as an option to their standard off-grid solar package. Most recently, on August 8, we closed an underwritten public offering with gross proceeds to the company of approximately $10 million. The net proceeds from the offering were used in part to fully repay the 3i note. We also terminated the equity line of credit previously entered into with Tumim Stone Capital, LLC. We intend to use the additional net proceeds from the offering to advance the commercialization of our home energy storage solutions and pursue other key growth initiatives. We believe that we have strategically positioned our battery portfolio across multiple market segments, each of which I will quickly touch on.

[Brian Schaffner, CEO at Expion360]

The RV segment is recovering, driven by interest in outdoor activities and demand for vehicles that depend on batteries to power systems. Our lithium batteries support these systems and appliances while replacing noisy generators for off-grid power and can be charged either by engine or by solar power. The Edge battery, which is now commercially available, features a custom form factor that includes our patent-pending innovations and other recently developed IP. The Edge incorporates VHC technology, SmartTalk Bluetooth, and CAN bus communication. We began shipping the Edge to customers in the third quarter. Our solutions are also employed in the marine segment to support trolling motors and operating electronics. The third established market segment we serve is the LEV market, such as golf carts, which are undergoing a transition from lithium to lead acid. These LEVs require sufficient power generation and reliability, which our batteries deliver.

[Brian Schaffner, CEO at Expion360]

On December 19, 2023, we announced our entrance into the home energy storage market, including both new home and commercial solar power storage solutions. I will expand on our opportunity in home energy shortly. Finally, we see the industrial applications market as a future growth vertical for us, driven by demand for additional capacities for electric forklift and industrial material handling. We are building a robust IP portfolio across all five of these market segments, and we currently have 11 patents pending. Now I will focus on our market expansion with E360 Home Energy. With the introduction of our two LiFePO4 battery solutions to support home energy storage in December 2023, we are targeting home and small commercial solar users and installers who are interested in a high-performance, modular system with straightforward installation.

[Brian Schaffner, CEO at Expion360]

Our solutions provide scalability and versatility across market channels, including solar installers, electrical contractors, residential and commercial builders, and energy service providers. A view of our home energy solutions can be found on our website at expion360.com/pages/residential. We think the home energy market provides complementary economics to our business model, with an opportunity to generate recurring revenue streams while enabling margin expansion in a market that is expected to surpass $123 billion globally by 2029. That's according to Market Data Forecast. We anticipate using proceeds from our recently closed public offering to provide necessary funding to further develop our new E360 Home Energy Storage Solutions, including completion of the UL testing and certification process, in addition to other requirements for various authorities having jurisdiction. I will now turn the call over to Greg to discuss our second quarter 2024 financial results.

[Greg Aydelott, CFO at Expion360]

Thank you, Brian. For the second quarter of 2024, revenue totaled $1.3 million, a 26% decrease from $1.7 million in the prior year period. This was primarily attributable to the lingering effects of the downturn in the RV market, combined with customers limiting orders in anticipation of the availability of our new products with enhanced features. However, we are pleased to highlight that revenue in the second quarter of 2024 reflects a 32% sequential growth compared to the first quarter of 2024. Gross profit for the second quarter of 2024 totaled $300,000, or 25.5% of revenue, as compared to $500,000 or 26.3% of revenue in the prior year period.

[Greg Aydelott, CFO at Expion360]

The decrease in gross profit as a percentage of revenue was primarily attributable to decreases in sales, which drove higher fixed overhead costs per unit. Selling, general, and administrative expenses were $2 million in both the second quarter of 2024 and the second quarter of 2023. Net loss for the second quarter of 2024 totaled $2.2 million or -$0.30 per share, and net loss of $1.5 million, or -$0.21 per share in the prior year period. The increase in net loss was primarily the result of lower net sales for the second quarter and non-stock-based compensation expense. Non-cash stock-based compensation expense. I will now turn the call back to Brian for a closing summary.

[Brian Schaffner, CEO at Expion360]

Okay. Thank you, Greg. In closing, we remain confident and enthusiastic about our growth trajectory for the remainder of 2024 and beyond. Momentum in the RV market continues, with June 2024 RV shipments up 8.4% year-over-year compared to June 2023, according to the RV Industry Association's June 2024 market report. We continue to work towards additional OEM market penetration by continuing to add features, improve energy density, and develop unique OEM-centric form factors. Notably, we announced substantial pre-orders for our next generation Group 27 and GC2 series batteries with proprietary vertical heat conduction technology, which began shipping in May. The launch of the Edge battery, featuring a slim profile that maximizes available space and incorporates vertical heat conduction, SmartTalk Bluetooth, and CAN Bus Communication, and release specifications for our home energy storage solutions.

[Brian Schaffner, CEO at Expion360]

Before we get to the Q&A portion of the call, we are again excited to have recently announced our partnership with KZ Recreational Vehicles, a subsidiary of Thor Industries, for integration of Expion360's 51.2-volt, 60 amp hour Edge VHC heated batteries and new Group 27, 12.8-volt, 100 amp hour VHC heated batteries into KZ RV's premium offering. Thank you all for attending, and now I would like to hand the call back over to our operator to open up the line for questions.

[Operator]

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. And at this time, we will pause momentarily to assemble our roster. And the first question will be from Brian Lanthier from Zacks Small Cap Research. Please go ahead.

[Brian Lantier, Senior Analyst at Zacks Small Cap Research]

Hey, good afternoon, gentlemen. I was wondering if you could talk a little bit about the previous press release from April. At this point, do you feel like you've filled the majority of the substantial pre-orders for the Group 27 and GC2 batteries that you cited in that press release?

[Brian Schaffner, CEO at Expion360]

Sure. Thanks for the question, Brian. Yes, I did check with the shipping before this call, and we have placed all of the shipped everything that had been pre-ordered at this point.

[Brian Lantier, Senior Analyst at Zacks Small Cap Research]

Great. And can you talk a little bit about the thought process behind the new equity financing versus the previous financing that was in place with 3i and Tombstone?

[Brian Schaffner, CEO at Expion360]

Sure. The previous financing, you know, relied on a convertible note and an ELOC, and we just didn't get a lot of traction related to either volume on the shares or with the price of the shares to be able to use that effectively. You know, we tried to do that so that it represented a less dilutive model as far as bringing cash into the company for operations, and that's why we had to pivot away from that to the new capital raise, the public offering that was done earlier this month.

[Brian Lantier, Senior Analyst at Zacks Small Cap Research]

Okay, great. And, I guess the last one would be: Do you have a timeline or an estimate of when we would know what the exercise price will be for all of the warrants and the total number of warrants issued?

[Brian Schaffner, CEO at Expion360]

Sure. That's a great question. You know, portions of the structure of that August 8 public offering are still subject to shareholder approval. Our shareholders meeting, it's like Friday, October 4, October 3, whichever the Friday is. And you know, we have faith in our shareholders that they will go ahead and approve some of the portions of those the structure. And you know, we also have faith in the value that they see in our company, but ultimately, that dilution factor is gonna be reliant on their approval and shareholder confidence.

[Brian Lantier, Senior Analyst at Zacks Small Cap Research]

Okay. All right. Thank you.

[Operator]

Again, if you have a question, please press Star then one. At this time, I would like to pass the baton to any webcast questions that may have been submitted. Our first question asks, "What effect will an anticipated drop in interest rates have on your current market segments?

[Brian Schaffner, CEO at Expion360]

That's a great question. You know, it's my opinion that lower interest rates would help increase the demand for RVs, makes it easier to finance them. Also, lower rates historically have helped with return on investment calculations, which are very vital to selling into the home energy market as well. So I think that it would be very favorable for us to see a drop in interest rates.

[Operator]

Our second webcast question asks, "This was a highly dilutive event. Tell us how the cash raise sets the company up for future success.

[Brian Schaffner, CEO at Expion360]

Sure. Our company believes that the home energy market, with its size and its growth, is a key component for our future growth, and this raise brought in the capital that'll be used to advance the commercialization of our home energy solutions and to pursue other key growth initiatives. So that is why we raised the funds.

[Operator]

Our last webcast question asked, "Talk to us about the dilution effect related to your August 8th public offering.

[Brian Schaffner, CEO at Expion360]

Sure, sure. As discussed, before with the call-in question, really, portions of the structure from August 8 have to be approved by our shareholders as part of that public offering. And we do have faith in our shareholders and the value they see in our company. We think, though, that the dilution factor will be completely reliant on their approval and on their confidence in our company going forward.

[Operator]

That concludes our webcast Q&A. Thank you. Ladies and gentlemen, this concludes our question-and-answer session, so I would like to turn the conference back over to Mr. Schaffner for any concluding remarks.

[Brian Schaffner, CEO at Expion360]

Thank you so much for attending today's call. We're excited about where we are headed, and we look forward to continue to engage with our investors throughout the second half of 2024. Just a note, if we were unable to answer any of your questions, please do reach out to our IR firm, MZ Group, who would be happy to assist you. This concludes our call.

[Operator]

Thank you, sir. The conference has now concluded. Thank you for attending.

Participants

Executives

• Brian Schaffner, CEO
• Greg Aydelott, CFO

Analysts

• Brian Lantier, Senior Analyst at Zacks Small Cap Research