Expion360 Inc. (NASDAQ:XPON) Q4 2024 Earnings Call Transcript

Expion360 Inc. (NASDAQ:XPON) Q4 2024 Earnings Call Transcript March 31, 2025

Operator: Greetings, and welcome to the Expion360 Fourth Quarter and Full Year 2024 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 in the Investor Relations section of the company’s website at investors.expion360.com, through April 14, 2025. 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 security 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 Private Securities Litigation Reform Act of 1995.

All statements made on this call today, other than statements of historical facts, 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 incremental revenue to be generated from new OEM partnerships and distributors, potential partnerships with NeoVolta 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 factor section of its annual reports on Form 10-K and quarterly reports on Form 10-Q. You are cautioned not to place any undue reliance on these forward-looking statements, which reflect our expectations 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 publicly update or revise any forward-looking statements. Your host today, Brian Schaffner, Chief Executive Officer and interim Chief Financial Officer, will present results of operations for the fourth quarter and year ended December 31, 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 Web site at investors.expion360.com.

At this time, I will turn the call over to Expion360’s Chief Executive Officer and interim CFO, Brian Schaffner.

Brian Schaffner: Thank you, operator. And good afternoon, everyone. I am pleased to welcome you to today’s fourth quarter and year ended December 31, 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 of who we are and what we do. Expion360 is focused on creating energy storage solutions for our customers, utilizing our core values of safety through third party testing and UL certification, quality, offering an industry leading 12 year warranty and service. We provide customer support for the entire system purchased from us, not just the Expion360 built components. Expion360 designs, assembles and sells lithium iron phosphate or LiFePO4 batteries and supporting accessories for RVs, marine, light EV and home energy storage applications.

Q&A Session

We believe our product offerings include some of the most energy dense and minimal footprint batteries available. We are also deploying multiple intellectual property strategies, advanced research and development capabilities and innovative products to sustain and to scale the business. Our customers consist of dealers, wholesalers, private label customers and original equipment manufacturers or OEMs who are driving revenue and brand awareness nationally. And we complement our wholesale channel with direct-to-consumer sales. Our management team and Board of Directors are experienced across engineering, technology and finance. We believe the combination of these factors positions us to execute our long term growth strategies. I’m extremely proud of the progress that we made in the fourth quarter and remain excited about our future prospects.

Our e360 product line is a preferred conversion solution for lead acid batteries as demonstrated by its sales growth. 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; K-Z Recreational Vehicles, a subsidiary of Thor Industries; and Meyer Distributing, 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.

To highlight some of our accomplishments and milestones in the fourth quarter and early 2025, we have continued our progress in our Home Energy Storage Solutions or HESS vertical. With shipments beginning in January 2025, we believe this product line will benefit from a fast growing battery energy storage market. And consumer uptake can rapidly scale with the introduction of products that improve price, flexibility and integration. We also anticipate HESS will benefit from incentives available through California’s Self Generation Incentive Program and federal tax credits available through the Inflation Reduction Act for home battery systems. Next, we are exploring an collaboration and partnership with NeoVolta to combine our strengths towards a potential collaboration that aims to engineer a US based state-of-the-art battery manufacturing facility and develop innovative lithium-ion battery cell and module product designs.

A formal engagement would enable us to contribute our expertise in design and engineering while NeoVolta plans to provide the necessary capital and manpower. Together, we expect to bring high performance sustainable energy storage solutions to the market to address the growing demand for efficient energy management, in both residential and commercial applications. Our anticipated partnership with NeoVolta and our goal to onshore American made batteries has become increasingly timely with the recent implementation of tariffs. Recently, we partnered with Scout Campers, a subsidiary of Adventure Manufacturing Inc., to equip its high quality campers with our advanced lithium-ion batteries as a standard option, enhancing the energy efficiency and reliability of its products.

Starting with the model year 2025 production, each camper built by Scout Campers features a single Group 27, 132Ah vertical heat conduction or VHC internally heated lithium battery from Expion360. The state-of-the-art battery technology provides superior performance, longevity and safety, ensuring that Scout Campers’ customers enjoy a reliable power source for their outdoor adventures. Additionally, customers will have the option to upgrade the power capacity of their camper by adding a second Expion360 battery, further enhancing their off grid capabilities. Most recently, we closed a registered direct offering and concurrent private placement with institutional investors in January 2025. Aggregate gross proceeds from both transactions were approximately $2.6 million.

We intend to use net proceeds from the offering as working capital and for general corporate purposes to advance the commercialization of our home energy storage solutions and pursue other key growth initiatives. Our reputation for quality in the recreation and LEV markets is a driving force behind our development of home energy solutions that will be the foundation for our future growth. As mentioned before, we pride ourselves in servicing the entire system sold to a customer, not just the battery. We are also a master Victron distributor. We believe we have strategically positioned our battery portfolio across multiple markets, each of which I will touch on. The RV market is recovering with healthy momentum driven by interest in outdoor activities and demand for vehicles that depend on batteries to power their systems.

September 2024 RV shipments were up 7.7% year-over-year according to the RV Industries Association’s marketing report and our lithium batteries support RV systems and appliances, while replacing noisy generators for off grid power and can be charged by engine or 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 heating technology, SmartTalk Bluetooth, and CAN bus communication. We begin shipping the Edge to customers in the third quarter of 2024. Our solutions are also employed in the marine market to support trolling motors and operating cabin electronics. The third established market we serve is the LEV market, such as golf carts, which are undergoing a transition to lithium from lead acid.

These LEVs require sufficient power generation and reliability, which our batteries deliver. The fourth and newest market we serve is the home energy storage market, including both home and commercial solar power solutions. I will expand on our opportunity in home energy shortly. And 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. Across all these markets, we are building a robust IP portfolio and we currently have 11 patents pending. Now I will focus on our market expansion with the e360 Home Energy Storage Solutions or HESS. With the introduction of our two 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.

The company moved up its home energy development timeline due to the downturn in RV sales in 2023. Our team knew that home energy was our future. Development was accelerated and we now have two systems that are in final stages of UL certification and testing. Proper UL certification is vital in states such as California that require UL 9540 certification of the battery and inverter system to qualify for tax credits. Battery storage systems offer a way to capture ROI for a consumer outside of a traditional solar system, utilizing the draw of power into the system during off peak hours and a discharge during peak hours. 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 Web site at expion360.com/pages/residential. In January, we began distribution and fulfilling purchase orders for HESS. These order deliveries reflect a significant milestone in bringing e360 HESS to the market. We believe the HESS product line will benefit from a fast growing market energy storage. The consumer uptake can rapidly scale as well with the introduction of our products that improve price, flexibility and integration. We also anticipate HESS will benefit from incentives available through California’s Self Generation Income Program — Incentive Program and federal tax credits available through the Inflation Reduction Act for home battery systems. 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 according to market data forecast.

We are using proceeds from our 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 discuss our fourth quarter and full year 2024 financial results. Revenue in the fourth quarter of 2024 totaled $2 million, an increase of 131% from $0.9 million in the prior year period. The increase was primarily due to our increased OEM sales. Gross profit in the fourth quarter of 2024 totaled $438,552 or 22.1% of revenue as compared to $205,114 or 23.9% of revenue in the prior year period. The decrease in gross profit as a percentage of revenue was due to OEM customer discounts when purchasing at higher volumes.

Selling, general and administrative expenses in the fourth quarter of 2024 decreased $1.6 million compared to $2.4 million in the prior year period. The decrease was primarily due to reductions in salaries related to a lower employee headcount and lower stock based compensation. Net loss in the fourth quarter of 2024 totaled $251,647, an 88% improvement from a net loss of $2.2 million in the same year ago period. The decrease in net loss was primarily due to our sales growth. Now turning to our full year 2024 financial results for the year ended December 31, 2024. Revenue totaled $5.6 million decreasing 6% from $6 million in the prior year. The decrease was primarily attributable to decreases in the consumer market driving decreases in OEM sales.

Gross profit for the full year of 2024 totaled $1.2 million or 20.5% of revenue as compared to $1.6 million or 26.3% of revenue in the same year ago period. The decrease in gross profit as a percentage of revenue was primarily attributable to lower sales volumes due to the slowdown in the RV industry, resulting in lower economies of scale and fixed cost as well as the liquidation of non-core product increasing the cost of sales above where they would have been without the liquidation. Selling, general and administrative expenses for the full year 2024 decreased 9.6% to $7.9 million compared to $8.7 million for the year ago period. The decrease was primarily due to decreases in legal and professional fees as well as salaries and benefits, which was partially offset by an increase in licenses and fees due to the cash premiums, fees paid when making a repayment on our convertible note, as well as fees for exiting our warehouse lease, one of our warehouses that is.

Net loss for the year ended December 31, 2024 totaled $13.5 million or $21.03 per share, a net loss of $7.5 million or $108.28 a share was experienced in the prior year. The net loss was primarily a result of the $5 million one-time expense related to a warrant feature triggered by our October 2024 reverse stock split, as well as the increased interest due to the 3i note and increased settlement expense. Cash and cash equivalents totaled $0.5 million December 31, 2024 compared to $3.9 million December 31, 2023. On January 03, 2025, we closed a $2.6 million registered direct offering in private placement priced at market under NASDAQ rules. Net cash used in operating activities totaled $9.6 million for the year ended December 31, 2024 compared to $5.5 million in the prior year period.

In closing, we remain confident and enthusiastic about our growth trajectory for 2025 and beyond. We were selected as strategic supplier by multiple RV OEMs and continue to work towards additional OEM market penetration with new major partners. New recent customers include Scout Campers, Alaskan Campers and K-Z Recreational Vehicles are driving the demand for high quality lithium battery technology for their campers and vehicles. We anticipate with our new OEM partnerships and distributors to generate incremental revenue of approximately $5 million for the fiscal year 2025 with additional new customers expressing interest across our product line, including our next generation GC2, Group 27 and new Edge batteries. The anticipated revenue growth from these partnerships is expected to increase [growth] profits by an estimated $1.4 million for the fiscal year 2025.

We continue to work towards additional OEM market penetration by adding features and improving energy density while developing unique OEM centric form factors. Notably, we announced substantial pre-orders earlier this year for our next generation Group 27 and GC2 series batteries with proprietary vertical heat conduction technology. Those begin shipping in May of 2024. And the launch of the Edge battery featuring its slim profile that maximizes available space and also incorporates vertical heat conduction, SmartTalk Bluetooth and CAN bus communication. Thank you all for attending. Now I’d like to hand the call over to the operator and open up the line for questions. Operator?

Operator: [Operator Instructions] Since we have no questions, this does conclude our question-and-answer session. I will now turn the call over for media questions.

Unidentified Company Representative: Thank you, operator. Our first webcast question today is, Mr. Schaffner, congrats on solid revenue growth in Q4. Can you talk about what products and customers drove the performance?

Brian Schaffner: Yes, we had very solid revenue growth and it was driven by expanding and new OEM relationships. Our products have unique footprints like the Edge and new features, such as our vertical heat conduction and the Bluetooth, and that has really led the way for our revenue growth.

Unidentified Company Representative: Our second webcast question is, gross margins took a dip in Q4 but I am assuming this is a good thing because of higher volumes. Can you talk about the gross margin profile in fiscal year 2025? Does this normalize in the low 20% range or do you see higher GMs with the rollout of your HESS product?

Brian Schaffner: We’ve historically operated just upwards of 20% gross margins. Q4 was in line with that. Management does believe that our home energy storage market sales will help to increase those market levels for the company from our 2024 levels.

Unidentified Company Representative: Our third webcast question is, tariffs are a big topic for those manufacturing outside the United States. Can you speak to what you have done recently to hedge your risk?

Brian Schaffner: Well, first, we brought in more inventory than normal at the end of 2024 and at early 2025 in anticipation of the tariffs to avoid paying these tariffs on product that we knew was going to be in demand. And we can’t predict the tariffs but we have been able to work with some of our suppliers to share the tariff burden. And I guess finally, we have passed some of the tariff costs on to our customers.

Unidentified Company Representative: And a derivative of that question is, how should we think about this relative to your NeoVolta partnership? Does this fast track a US based manufacturing facility and the associated government grants?

Brian Schaffner: We are working on our JV relationship with NeoVolta and it is progressing well. And we are aggressively pursuing onshoring our manufacturing that would be very advantageous for us.

Unidentified Company Representative: And our fourth and final webcast question is, any update on new OEM partners and customers? Are the new products driving new relationships, especially with the slim form factor in RVs?

Brian Schaffner: We are doing well with the new OEMs that we brought on board at the end of 2024. We’re also seeing growth with some of our longer established OEM relationships, so that’s very nice. We expect to be expanding to other OEM brands that are not a part of the original announcement that we made late in 2024. And we believe much of this is due to our expanded product line and expanded features and that this momentum will carry forward in 2025.

Unidentified Company Representative: Thank you. Operator, this concludes the webcast portion of the call.

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

Brian Schaffner: Thank you again for attending today’s call. We are excited about where we’re headed and we continue to look forward to engaging with our investors throughout the remainder of 2025. If we were unable to answer any of your questions, please reach out to our IR firm, MZ Group, who would be more than happy to assist. This concludes our call.

Operator: The conference call has now concluded. Thank you for attending today’s presentation. You may now disconnect.