Desmond Wheatley : On the note – yes, on the earnout. So very quickly, because I do want to make sure we give some time to other questioners. But very quickly on the earnouts. 2024, the trigger point for the earnout is $13.5 million. Anything that they do in excess of $13.5 million, they’ll get $2 worth of shares for every dollar worth of revenue that they do in excess of that. And then in 2025, they’ll have to exceed whatever they do in 2020 core by 135% in order to get the next trigger and then the same rules will apply. In no event, can they have more than 19.9% of the shares. So it doesn’t matter how well they do. And of course, we want to do incredibly well, and we’re going to do everything that we can to support them to do incredibly well because it’s great for the company.
But in no event can they own more than 19.9% of the shares. The shares that they do receive both for the initial consideration and for the earnouts will be restricted 14 stock with a 6-month restriction on them. When they do – if they lift those restrictions, they are further restricted to sell no more than 4% of weekly volume forever. So there’s no danger that the sellers worthy to do this. And again, they’re all staying — continuing to work for us and vital to the operator. I’m really glad to add them, and I’m very glad to have them tied up with these earnouts and with these restrictions. But in the event that they did decide to sell their shares, they can sell no more than 4% of weekly volume. In other words, having no meaningful impact on trading as a result of their adding shares into the marketplace.
I think we need to move to the next question now, operator, please, because I’ve got to give some other people some time.
Operator: The next question comes from Abhi Sinha with Northland Capital. Please go ahead.
Abhi Sinha: Hey. Thanks for taking my question. Quickly I wanted to understand the profitability in fourth quarter. I know in first quarter next year, you’d laid out pretty clearly. But in fourth quarter, what should we look at sequentially in terms of gross margins?
Desmond Wheatley : Yes. So I’m quite encouraged by the fact that we are – the EV ARC that we are now building have most of the cost savings built into them. So we won’t get a full quarter full fourth quarter impact to those cost savings, but we’ll certainly get a significant impact of it. And so you should be looking at materially improved gross profitability in the fourth quarter. But the first quarter of next year, especially by the end of it, we will get all of the cost savings integrated. That will happen early on in the quarter. I mean those that we’ve identified, again, it’s a never-ending story for us. We’re not going to quit. But by the end of the first quarter, when we’ve burned through all of our existing backlog, then I think you should also anticipate to see that 8% or so increase in price starting to join with the cost reductions to give us even more impactful gross profitability.
And again, as I said in my comments, we’re looking at the mid- to high 20s from a percentage point of view, just with these savings alone, and we — again, as I said in my comments, you can see that from a beer point of view, when we look at how much money we’re going to save on painting and sandblasting and forming the base pad as well as many other processes. Those are opportunities for us and things that we’ve already targeted in the United States to in-source as a means to save money, that will take a little bit more time to do that because, of course, unlike Beam Europe, we don’t have the existing facilities to do that, but there’s nothing scientific that prevents us from doing it. It’s just the further snaps to take.
Abhi Sinha: Sure. Thanks. And from earlier comments, did you imply or are you implying that you might get EBITDA breakeven next year? Or did I hear it wrong?
Desmond Wheatley : I said people ask me if we can do that, and I think that the arithmetic clearly shows that we could do it. So for more than that, I’m not going to say some of that will, of course, come down to decisions we make about investment and growth and other things. But certainly, it’s easy on the back of an attend show how we could do it.
Abhi Sinha: And the last one I have is for the sales of battery, can you comment on like how should we model that the trajectory there? And what should we look at the battery margins versus comparing that with the sales of like the EVR margins?
Desmond Wheatley : Not orders. very much more diversified. We have the EVR single product margin is pretty fixed on it, improving but fixed, whereas with the battery, we got quite a lot of different types of products, and the margins are different across the board. The big thing for us about the batteries is they’re saving – the battery business is saving us a lot of money on our core business and also bringing us these other revenues, as I said in my comments. This is part of our strategy to diversify our opportunities for revenue because of this lumpiness thing that we know exists. So getting that extra $6 million boost from the acquisition that we made as well as all the production of batteries for our products and all the cost savings and everything else that they delivered has been really meaningful to us.
But we intend to continue to grow the battery business. And like any other aspect of our business, we intend to continue to improve the margins where that’s concerned no different than the rest of what we’re doing.
Operator: Our next question comes from Noel Parks with Tuohy Brothers Investment Research. Please go ahead.
Noel Parks: Just a couple of things. I think you might touch on this but I just wanted to maybe hear a bit more about the advances in water and wind resiliency that you announced over the course of the quarter. And I’m just curious, is – are those initiatives something that’s just a matter of continuous improvement? Or are we going to see future sort of generations of just other things that you do to sort of higher than the units and provide the resiliency?
