Greetings, and welcome to the Expion360 Fourth Quarter and Fiscal Year 2023 Financial Results Conference Call. At this time, all participants are in a 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 on 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.

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 the company's operations, future development plans, growth prospects, product pipeline and development, anticipated timing of commercial availability of its products, beliefs about market size and opportunity, including customer base and market conditions.

While these forward-looking statements represent management's current judgment 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 reports 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 opinions only as of the date of this presentation.

Except as required by law or the NASDAQ listing standards, the company expressly disclaims any intent or obligation to update any forward-looking statements.

Your host today, Brian Schaffner, Chief Executive Officer; Greg Aydelott, Chief Financial Officer; and Paul Shoun, Co-Founder, President and Chief Operating Officer, will present results of operations for the fourth quarter fiscal year ended December 31, 2023. A press release detailing these results crossed the wire this afternoon at 4:01 P.M.

Eastern Time and is available on the Investor Relations section of the company's website at investors.expion360.com. At this time, I will turn the call over to Expion360, Chief Executive Officer, Brian Schaffner..

Thank you so much, and good afternoon, everyone. I'm pleased to welcome you to today's fourth quarter fiscal year 2023 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 RV and marine applications. And as recently announced, our expansion into the light electrical vehicle or LED and home energy source markets, which plan to expand to industrial applications in the future.

We design, assemble and distribute high powered lithium battery solutions using groundbreaking concepts with a creative sales and marketing approach. We believe that our product offerings include some of the most dense and minimal footprint batteries in the RV and marine industries.

We are developing the e360 Home Energy Storage System or ESS, which we expect to bring positive change to the industry in barrier price, flexibility and integration. We are developing multiple intellectual property strategies with cutting edge research and innovative products to sustain and scale the business.

We currently have customers consisting of dealers, wholesalers, private label customers and original equipment manufacturers who are driving revenue and brand awareness nationally, and we have a management team and Board experienced across engineering, technology and finance.

We believe the confluence of these factors position us to execute our long-term growth strategies. I'm proud of the progress that we have made both in the fourth quarter and the full year of 2023 and been very excited about our future prospects.

Our e360 product line, which is manufactured for the RV and Marine Industries, has shown to be a preferred conversion solution for lead acid batteries through its sales growth.

We currently have more than 300 customers across the United States, consisting of dealers, wholesalers, private label consumers and original equipment manufacturers who then sell our products to end consumers. In addition, we also sell products directly to consumers.

We have sales relationships with major RV retailers, including Camping World, a leading national RV retailer, as well as 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 LEDs and home energy storage. Now I'll highlight some of our accomplishments and milestones throughout the year.

In February 2023, our custom 360 amp hour battery passed UL 1973 certification. We also achieved UL 1973 compliance for our 450Ah EX1 batteries earlier this month. In June 2023, we unveiled e360 SmartTalk, an innovative mobile app that allows the seamless integration and management of e360 Bluetooth enabled LiFePO4 batteries.

This technology enables users to wirelessly monitor and manage e360 batteries, providing a view of individual battery conditions and performance, as well as a comprehensive view of the entire power bank consisting of multiple e360 battery packs.

We also introduced our 48-volt GC2 battery, our first three e360 SmartTalk battery for powering golf carts and other LEVs. In August 2023, we strengthened our corporate governance with the appointment of Tech Industry Veteran, Innovator and Business Leader, Tian Nguyen to our Board of Directors.

In September 2023, we introduced a new 4.5Ah 26650 lithium iron phosphate battery cell, which will allow us to increase energy density by over 32% compared to a traditional 3.4Ah 26650 cell.

In December 2023, we announced our entry into the home energy storage market with our introduction of 2 LiFePO4 battery storage systems, a wall mount all in 1 inverter and 10-kilowatt hour battery and an expandable server rack style battery cabinet system that enables residential and small business customers to create their own stable micro energy grid and lessen the impact of increasing power fluctuations and outages.

Lastly, in December 2023, we announced the financing commitments of up to $22.5 million with 3i, LP and Tumim Stone Capital LLC, providing additional operating liquidity and financial flexibility to support IP and product development and our recently launched home energy storage solutions. Greg will provide some additional details on that shortly.

We have strategically positioned our battery portfolio across both established market segments and future premium market segments, each of which I will quickly touch on. The Recreational Vehicle and Overland segment continues to grow driven by interest in outdoor activities and demands for vehicles that depend on batteries to power their systems.

Our lithium batteries support these systems and appliances while replacing noisy generators for off grid power and are charged by the engine or by solar. Our solutions are also employed in the boating and marine segment to support trolling motors and operating cabin electronics.

The third established market segment we serve is light electrical vehicle or LEV such as golf carts, which are also undergoing the transition to lithium from lead acid. These LEVs require sufficient power and reliability to which Expion batteries deliver.

For our future markets, we recently announced plans to enter the home energy storage market, including both home and commercial solar power storage solutions. I'll expand on our opportunity in home energy shortly.

Finally, we see industrial applications as a future growth vertical for Expion, driven by demand for additional capacities for electric forklift and industrial material handling. We are building a robust IP moat across all 5 of these market segments in which we have 11 patents pending.

Now for some more detail on our future market expansion with e360 Home Energy. With the December 2023 introduction of our 2 LiFePO4 battery solutions to support home energy storage, we are targeting home and small commercial solar users and installers who are interested in a high performance modular system with straightforward installation.

We are mobilizing quickly with the launch and plan on accepting orders for the new energy systems commencing in the second quarter of 2024, with shipments expected to begin in the second half of the year.

We believe the home energy market provides complementary economics to our business model with an opportunity to generate new revenue streams while enabling margin expansion. Our solutions provide scalability and versatility across market channels.

Some of these channels include solar installers, electrical contractors, retailers and wholesalers, big box stores and franchise hardware retailers, residential and commercial builders, and finally, energy service providers. We believe this launch will support the company's strategic objectives.

I will now turn the call over to our Co-Founder, President and Chief Operating Officer, Paul Shoun to discuss our technology and ongoing initiatives..

Thank you, Brian. To kind of continue on where Brian left off there, we believe our technology offers a myriad of advantages that positions X beyond at the forefront of energy storage solutions.

Firstly, the overall design of our products is characterized by compactness, high capacity and significant reliability, making it an efficient and dependable choice for various applications.

Utilizing lithium iron phosphate chemistry, our technology stands out for its exceptional safety profile, and the chemistry of our battery is widely recognized as one of the safest available.

Another standout feature is our product's ability to charge 2x to 3x faster than conventional lead acid batteries, allowing users to rapidly reach full capacity. Moreover, its higher energy density provides 50% more usable energy compared to a lead acid counterparts, while also being 50% lighter in weight.

Our technology is further distinguished with an innovative mobile app that facilitates seamless integration for wirelessly monitoring performance and accessing analytics. Designed with a user centric approach, it boasts flexibility and modularity, ensuring ease of placement and integration into diverse systems.

Lastly, our batteries extended lifespan of approximately 12 or more years, which is equivalent to 3,000 to 5,000 charging cycles as a testament to its durability offering life cycles that are typically 10 times more than that of a typical lead acid battery.

Expion battery technology excels not only in functionality, but also in its superior aesthetics, design, materials and construction. Its rugged design features an IP66-rated enclosure, ensuring robust protection against a variety of environmental conditions while also facilitating easy placement and seamless integration into different systems.

The use of a fiberglass infused ABS Plastic enhances structural integrity, providing enhanced strength and durability. Furthermore, the battery's case adheres to the UL 94 V-O fire-rating standard, our internal battery cells meet UL 1642, and our complete battery construction meets UL 1973 underscoring our commitment to safety and reliability.

In January of 2024, we introduced our next generation 12-volt GC2 and Group 27 Series Lithium Iron Phosphate Batteries. The new versions now include higher amp hour options, utilizing our 4.0 amp hour cell and our 4.5 amp hour cell technology.

And the latest advancements in power technology features including Expion's proprietary and patent pending vertical heat conduction for internal heating, Bluetooth and CAN Bus communication. We began taking preorders of the new GC2 and Group 27 batteries this quarter with anticipated deliveries in Q2 of 2024.

We're also currently wrapping up UL testing on our new edge battery that has been designed based on the input from several large RV manufacturers. This custom form factor includes all of the recent patents and other IP that we've been developing over the past couple of years and we plan to begin shipping this product in Q3 of this year.

We expect to release more information about this product and its functionality in the coming weeks. Our main target markets are currently the RV and marine industries. We believe that we are well positioned to capitalize on the rapid market conversion from lead acid to lithium batteries as the primary method of power sourcing in these industries.

We are working with several OEMs on options for power systems to eliminate the need for gas and diesel generators in the RV industry.

We expect several states, including California, to soon ban the use of these types of generators, and we believe we have some of the best solutions for customers to still have the power they need by utilizing our energy storage systems.

Additional focus markets include home energy storage with our introduction of the 2 LiFePO4 battery storage systems that we released in December, where we aim to provide a cost effective, flexible and scalable system for those looking to power their homes via solar, wind or grid backup.

I'll now turn the call over to our Chief Financial Officer, Greg Aydelott to discuss our financial results..

Thanks, Paul. For the fourth quarter ended December 31, 2023, revenue totaled $900,000 down 40% from $1.4 million in the prior year period. The decrease was primarily due to decreases in the consumer market. Gross profit totaled $205,000 or 23.9% of revenue as compared to $317,000 or 22.3% of revenue in the prior year period.

The increase in gross profit as a percentage of revenue was due to a decrease in our cost of goods sold. Selling, general and administrative expenses increased to $2.4 million, compared to $1.8 million in the prior year period.

The increase was primarily due to increases of $423,000 in salary and benefits, $56,000 in legal and professional fees and $88,000 in sales and marketing expense. Net loss totaled $2.2 million increasing from a net loss of $1.5 million in the prior year period.

The increase in net loss was primarily the result of a decrease in sales and increases in stock based compensation, legal fees and sales and marketing expenses. For the year ended December 31, 2023, revenue totaled $6 million, decreasing 16.5% from $7.2 million in the prior year.

The decrease was primarily attributable to decreases in the consumer market driving decreases in OEM sales. Gross profit for 2023 totaled $1.6 million or 26.3% of revenue as compared to $2.3 million or 31.9% of revenue in the prior year period.

The decrease in gross profit as a percentage of revenue was primarily attributable to lower sales volume due to the slowdown in the RV market. Selling, general and administrative expenses increased to $8.7 million, compared to $8,200,000 in the prior year period.

The increase was primarily due to an increase in legal and professional fees offset by a significant decrease in expenses for stock based compensation. Net loss for the year ended December 31, 2023 totaled $7.5 million or $1.08 per share and net loss of $7.5 million or $1.23 per share in the prior year.

Cash and cash equivalents totaled $3.9 million at December 31, 2023, compared to $7.2 million at December 31, 2022. As we announced in December of 2023, we entered into a securities purchase agreement with 3i, LP and under which the company issued a senior unsecured convertible promissory note in the principal amount of $2.75 million to 3i.

We also entered into a common stock purchase agreement, establishing an equity line of credit with Tumim Stone Capital LLC, under which we'll have the right, but not the obligation to issue and sell to Tumim up to $20 million in shares of common stock from time to time.

These financings provide us with additional operating liquidity and stronger financial flexibility to support our product development and growth trajectory. I will now turn the call back to Brian for his closing summary..

Thank you, Greg. In closing, we are confident and enthusiastic about our growth trajectory for 2024. That comes from our experience in the fourth quarter of 2023 and our current 2024 activity to date. While RV shipments in 2023 were down 36.5%, our revenue was down only 16.5%.

We also announced the planned launch of our e360 Home Energy Storage System or ESS that we expect to bring positive change to the industry in barrier price, flexibility and integration.

These 2 LiFePO4 battery solutions will enable residential and small business customers to create their own stable micro energy grid and lessen the impact of increasing power fluctuations and outages. We expect to begin taking orders for the new home energy systems in the second quarter of 2024 with shipments beginning in the second half of 2024.

We believe that our markets are shifting to custom solutions built to spec and our focus on this, while continuing our sales of industry standard products, could combine for a very good year in 2024 and beyond.

Expion360 continues to thoughtfully balance our customer requirements of confidentiality during negotiations and our duty to provide timely information for our valued investors. It is vital that we review and align our press releases with both our customer and our investors in mind.

This is done in such a way to keep insights into our strategies and relationships from falling into the hands of our competition. In 2023, we continued to add features, improve energy density and develop unique OEM centric form factors.

Lastly, we strengthened our balance sheet following financing commitments of up to $22.5 million, which provides us with additional operating liquidity and financial flexibility to support IP and product development and our recently launched home energy storage solutions.

I thank you all for attending and would like to hand the call back over to the operator to take questions..

[Operator Instructions] Our first question is from Brian Lantier with Zacks Small-Cap Research..

I'm excited to hear about some of the new markets, but first I want to circle back and ask a question about the RV industry. As you noted, the RV industry is talking about maybe a 10% bounce back this year.

Is that in line with what you're thinking? And secondly, there seems to be some shift in mix in the RV industry away from the larger motor homes and toward lower cost towable.

Do you see that shift having any impact on Expion?.

We are seeing an uptick in interest based on conversations with our strategic partners that seems to indicate that the RV market is recovering.

With relation to the mix, since we are a premium product, we have not seen a larger focus from the RV or OEM industry on the towables versus the more premium, more expensive RVs and that is our focus and our main area for the OEMs..

Could you talk a little bit about the distribution strategy for the home energy product? Do you have any additional agreements in place that you just can't announce yet or is that something that we're going to be looking forward to throughout 2024?.

Yes, you can look forward to those throughout 2024..

In the LEV market, like the RV market, the manufacturers are really concentrated. The industry is really concentrated among a handful of players.

Have you had any conversations with some of the leading LEV manufacturers yet?.

Well, there is the concentration of the major cart manufacturers. There also is a very, very large market to be had for some of the cart converters. In addition to that, custom cart builders, electric forklifts, other material moving systems that are electrified as well.

So there's a large market that we're focusing on related to LEV, not just the big three manufacturers..

And Greg, I don't know if you can disclose this yet right now, but have you issued any shares under the stock purchase agreement subsequent to 1231?.

Under the stock purchase agreement, for 3i?.

Or the -- I'm not sure how you pronounce it, Tumim..

Tumim, yes. We have. It's roughly about 38,000 shares..

[Operator Instructions] Our next question is from Roy Smith with New River Capital..

I guess first off, from the prior question regarding the house, the home energy storage industry. I got to believe that the total addressable market is much larger than RV and much more stable. There's some questions around new OEM agreements and milestones.

Any further sort of thoughts on the strategy and bringing in new OEMs and milestones around the home energy storage business?.

Sure. Appreciate that question. As indicated, we really, we anticipate beginning to take those orders in the second quarter with deliveries commencing in the second half and of course any of those that are material will be announced in a timely manner to our investors..

And then I guess secondly, with respect to new products that are to be launched or are currently under development, any color you can give us around that and some of the focus there?.

Sure. We've announced the new products that we're currently concentrating on. To keep our competitive advantage, we plan to disclose any new or developing products when it's appropriate..

Thank you. There are no further live questions at this time. I'd like to turn it over to questions from the webcast..

Our first webcast question asks, when will there be data sheets for the home energy storage system that you will be building..

Sure. That's a great question. We will be release -- starting to release those, data sheets for both of those form factors next month, next month meaning April..

And the next webcast question asks, what types of partnerships could be explored for the LEV market?.

So we already answered that one. That was the one related to cart conversions, custom cart builders, electric forklifts and other electrified material moving systems, and mainly mentioning those because we need to think outside of the top 3 cart manufacturers, but that's a target as well..

And our next question asks, will you need to raise more capital?.

Well, outside of 3i, Tumim Capital Funding, we will continue to explore our capital needs, and we will employ the right strategies when appropriate..

Next webcast question asks, what are the industry verticals for the new GC2 battery?.

These batteries are designed for multiple uses and they can be installed in LEVs, RVs and in off grid applications..

And our last webcast question asks, can you provide an update on the state of the lithium supply chain and how that might affect your manufacturing capacity and costs and pricing?.

Sure. That's a great question. It comes up often. The current outlook for the lithium supply is very positive. We have experienced cost reductions over the last 6 months and we do constantly monitor the lithium supply worldwide and including new mining potentials that could come on online here in the United States in the coming years..

I would now like to turn the call back over to Mr. Schaffner for his closing remarks..

I would like to thank everyone for attending today's call. We are excited about where we're headed and looking forward to continuing to engage with our investors in 2024. If we were unable to answer, some of your questions, please reach out to our IR Firm MZ Group would be more than happy to assist. This concludes our call..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..