ClearSign Technologies Corporation (CLIR) on Q1 2021 Results - Earnings Call Transcript
Operator: Good day. And welcome to the ClearSign Technologies First Quarter 2021 Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Matthew Selinger of Firm IR Group. Please go ahead.
Matthew Selinger: Good afternoon. Thank you, Operator. Welcome, everyone, to the ClearSign Technologies Corporation first quarter 2021 results conference call. During this conference call, the company will make forward-looking statements. Any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company’s projections, expectations, plans, beliefs and prospects.
Brian Fike: Thank you, Matthew, and thank you to everyone for joining us here today. Our financial results on Form 10-Q will be filed with the SEC back on May 17, 2021. The company recognized revenue of $363,000 during the three months ending March 31, 2021 from the completion and delivery of three burners under a product contract with an infrastructure company. Jim will be providing further details on this. The cash burn for the quarter ended March 31, 2021, was approximately $1.5 million, compared to approximately $1.4 million in the same period of 2020. Our cash and investment resources were approximately $10.7 million at the end of the first quarter of 2021, compared to approximately $8.8 million at the end of the fourth quarter in 2020. As of March 31, 2021, the company sold 940,748 shares of our common stock under our ATM program, at an average price of $4.93 per share. Gross proceeds totaled approximately $4.6 million and net cash proceeds approximated $4.5 million. Of these amounts, there are 190,748 additional shares representing net proceeds of approximately $1.1 million that were sold as of March 31, 2021, that settled during April of 2021. Shares outstanding on March 31, 2021 were 31,137,498. It is important to note that with our quarter ending balances, we have sufficient working capital available to carry us well into 2022 and that is without revenue from any other sources.
Jim Deller: Hello, everyone, and welcome. Thank you for joining us for the ClearSign’s 2021 Q1 update conference call. We have had a lot going on these past few months, particularly in the last few weeks. As an aside, it is encouraging to see the consequences of a restrictions imposed to control the Coronavirus start to be relaxed in the United States and signs of our industry and markets here starting to return to more normal operation. I will start the call today discussing our process burner product line. There have been some key developments and achievements in this area. I will then move on to discuss boiler burners with some very significant progress there also. After my prepared remarks, we will open up the call for questions. We haven’t used on multiple projects in the process burner product line. In our last call, we announced the recent startup of two multiburner heater projects in California. I’m pleased to update that both continue to operate well just as reported in our last call. I do appreciate that all our projects, multiburner projects for Exxon Mobil is our most prominent. So I will start with that. At this time, we believe that our burners meet the operating requirements of Exxon Mobil. Importantly, including operation without 18% hydrogen in the field gas over the turndown range and not below the guarantee. As Exxon Mobil fuel gas range requirement and our accomplishment presents an extreme range of fuel guest composition for a process burner, and we believe developing and proving our technology to handle this spectrum will enable them to perform with a fuel gas mixtures in almost all foreseeable refining and petrochemical processes, including consideration of upsets caused by extreme weather outages and other operational emergencies. We are currently scheduling an informal preview of the performance demonstration and closing out a punch list of non-core burner technology related items required as part of our deliverables is mainly related to some ancillary instrumentation that is to be included with the burner supply. When this is completed, we believe we will be to the point of arranging the formal performance demonstration, all of which will take place at the site of our process burner partner Zeeco, Inc. in Broken Arrow, Oklahoma, which borders Tulsa. Ultimately, while as soon as possible, the timing of this formal performance demonstration will be down to the scheduling and logistics of our two teams.
Operator: Our first question today comes from Amit Dayal with H.C. Wainwright.
Amit Dayal: Thank you. Good afternoon, guys. Congratulations on all the progress. It looks like you guys are having a lot of conversations with different partners and a lot of the companies that have already been highlighted previously. Just wanted to get a sense of what the actual pipeline right now is looking like and how much is in the actual backlog that potentially could be deployed by the end of the year post the three units that were installed in California.
Jim Deller: Hi, Amit. Good afternoon. It’s good to hear from you and thank you for joining us. You’re correct. We are -- as we highlighted we are already engaged in a lot more high quality of opportunities. We are seeing inquiries from the major users and also the engineering companies that support them, which we have not seen in the past and that is very encouraging. I really take that as being an indication of the company being considered as more mainstream. And that’s all on the process burner side. On the -- our boiler burners, particularly 5G boiler burners, since we made the announcement, as an example, making announcement with California Boiler and our intention to develop a product line reflecting the sub-2.5 ppm NOx that we’ve achieved with 125 horsepower burner. We have seen a lot of inquiries from the other verticals I’ve referenced in the call. Those are great interest there also. We are working with California Boiler to push through the additional burn size in that range to get them to market. Also, just to reflect on the opportunity we have there. In California Boiler having a series of rental boilers that we can use to prove those burner sizes and those main boilers can then be deployed to rental customers gives us the immediate ability to actually get these burners out into the field and allow our prospective customers get their hands on the technology and get used to seeing it and to basically see what our burners can do their own eyes. So we do see things speaking, obviously, a great development and the opportunities that we’re getting exposed to through these partnerships.
Amit Dayal: Right. Understood. Thank you. And then, with Exxon, I guess, we should just continue to expect that things are still in play. But just wanted to confirm your commentary on the call, has everything that was supposed to probably happen in the first half of 2021 now been shifted to first half of 2022 in terms of when you could actually get of these demonstrations out of the way?
Jim Deller: So, first of all, the interest the Exxon, because we’ve actually made great progress with Exxon, this was a -- this was more than a project, right? This is not -- we talked about the other suit major project, and I just referenced that as a comparison. This is a more typical scope with a standard specification. That order was received late January. We demonstrated it. We completed the testing for that burner last week and it is -- it will ship very early in Q3 with an installation also later on this year in Europe. The Exxon project has a very wide operational scope. We believe and through conversations with Exxon we believe that we have met all of the operating requirements. The punch list by reference is nothing to do with the coal burner technology, it really is instrumentation and you appreciate the burners that we have in test, all the burners that will be shipped down to the Baytown site. So there’s some tidying up and polishing to do to get those ready to go. We are in active conversations with the Exxon engineers and the process from getting an idea of where we are. The process to complete this project, we’re in active conversations with the Exxon engineer, about having him come up to Tulsa to do a personal witness of the burner and to check out the performance and make sure that he is comfortable with it. At which points, he will then engage the rest of the stakeholders with an Exxon that will be part of the formal witness test and if they just down to making travel plans and have them coming up to Tulsa to view the process. So the -- yeah, the change in schedule is just a couple of weeks. Unfortunately, the installation that I referenced is moved into the year 2022. So while that’s a milestone, in terms of actual time, it’s not that significant, especially not considering the magnitude of this project.
Amit Dayal: Okay. Understood. And with China, I know you guys made a lot of progress in early part of this year already with your efforts to commercialize over there. So are we just in sort of a little bit of a development period, I guess, until we see maybe orders materialize for you there, like, how -- what are -- what is happening on the ground actually over there? And is there anything that would come up in terms of deployment opportunities for that market?
Jim Deller: Yeah. So, certainly, one thing I want to highlight is, we have a 5G boiler burner plan and China is by far the big market for that. But in terms of being successful in China, first of all, means developing that product line. And especially with the restrictions of COVID, we had to come up with another way of doing that and have really focused our efforts on working with California Boiler in developing a product line and burners. These are exactly the same burners that we will then be deploying in China. We’ve proven that we can get the product certified there. We’ve proven we can manufacturer in China. We have developed a very strong relationship with truly a massive company in China with Shuang Liang Boiler Company. We are carefully seeking first adopted customers. But I will emphasize carefully, because while we’re at this early stage of launching an entire product line, we don’t want to miss that by rushing, justifying the first sale. So we do look forward to that first sale, don’t get me wrong. But it is much more important for us to focus on the big picture and the goal there is to launch a comprehensive product line into the mainstream industry of China.
Amit Dayal: Okay. Okay. That’s all I have today. I will take my other questions offline. Thank you.
Jim Deller: Great. Thank you, Amit.
Operator: Our next question comes from David Brown , a Private Investor.
Unidentified Analyst: Hi, Jim, and congratulations for all of the milestones that are being met and continuing new business opportunities. My question was mainly a follow up on the firetube boiler with China, the different sizes. I’m imagining, what I’m hearing is that you are developing with California Boiler some much larger firetube boilers, a 500 horsepower and a 350 horsepower. Your current product line is 125 horsepower firetube boiler that is ready for market in both the U.S. and in China. I just wanted to get some clarification on the process with China, I know that they -- I think if I’m remembering correctly from the last call, you will have to get Chinese government approval, no matter for different sizes. So if you perfect a 500 horsepower and a 350 horsepower, I would assume that you’re going to -- be going to the process, could you give us some more color on that process and how it would play out?
Jim Deller: Certainly, and your observations are good and correct. We’ve -- we believe the hard one was the first in China. So getting that 125 horsepower burner, also now we had to work out the process, we had to form the agreement with Shuang Liang Boiler and basically work out everything that was required by the Chinese authorities to complete that certification process. As we develop the burner sizes in California, we will manufacture sister burners in China and then basically repeat that process. So what that entails is building a burner which is complete with a control system, installing that in a boiler. And although, and I will stress it, not confirmed at this point, but we fully expect that to be with Shuang Liang, we will then go through exactly the same steps of building our burner, installing it, ensuring it runs correctly and then we basically book the government agencies, they come and spend a -- I think last time it was a couple of days, we expect their process to get shorter as they get more familiar with us. And they check out instrument -- instrumentation, they check out the burner, they make sure it runs and meets their requirements. We expect them basically submit their data back to the, I guess, the senior people within the Chinese authority who then review it and issue the certificate. But having done this -- I really believe having done this the first time and worked out the process and all the contacts, we are now just following on exactly the same footsteps with the repeat sizes as we sequence through the different boiler size in California.
Unidentified Analyst: Okay. Very good. Thank you for that. And just one follow up on the dairy, you mentioned dairy industry. I would imagine that would be something to do with homoge -- heating homogenization of milk or something of that nature. Could you explain that, you mentioned that, obviously, they’re not real comfortable with the SCR, with the ammonia, as complications with food products. So could you give a little more color on exactly what the kind of the -- what the opportunity is in the dairy industry and what the heater would be?
Jim Deller: David, I think the fact that I cannot give you all the details you are asking. It is actually a strength we do. We are building our asset light company. And part of that is we’re working with very strong channel partners. That is a clearly a question I would love to put in California Boiler who are expert in their area and work with these guys day in day out, because we very appreciate the industry just like we probably do with our HVAC systems at home, you’ll have a service companies that use reliably, the industry do the same thing and California Boiler provides their service to them. And they know these plants intimately and their needs and provide routine service. And that’s one of the reasons that we really select them and work with them as a channel partner. So I don’t want to claim knowledge or something I’m really not a reliable source of information for. Otherwise you also take that as a strength, because that’s the strategic model of this business is to find and work with the channel partner and sales agents who do.
Unidentified Analyst: Okay. Great. So that helps because that means that this is an opportunity that’s come up through your partner, basically your partner recognize, hey, this is a good fit here. So that’s appreciated. I think that you have many partners now in the asset light model and this is -- they’re paying off now for you it sounds like. So that’s okay.
Jim Deller: Great. Thank you, David.
Operator: Our next question will come from Robert Kecseg with Las Colinas Capital Management.
Robert Kecseg: Thank you. Hi, Jim.
Jim Deller: Hi, Bob.
Robert Kecseg: I wanted to…
Jim Deller: Good afternoon.
Robert Kecseg: Hi. Yeah. Good afternoon. I wanted to ask you about the firetubes, since you were able to achieve even a lower NOx in the firetube application. I wanted to know if there was any difference in the industry in a couple of areas, both the operating oxygen and the turndown ratio, because I know the industry is used to certain levels on those two things and I just like you to comment about how this compares to what the industry is used to?
Jim Deller: Certainly, I mean, there is a wide range of different products in the industry. The -- our turndown range meets the requirements of standard burners. I mean, if I take a step back, our goal has been to develop products that provide truly a superior performance that are easy to operate and as normal as possible for these tooling companies. A boiler burners meet the normal turndown range. The low NOx that we’re achieving is at a -- at least equivalent versus a lower oxygen level than the typical lowest NOx alternatives on the market and particularly comparing to there is a metal mesh stabilized burner one of the variants out there. But bear in mind, a lot of the other burners that get down to very low NOx have other complications such as re-circulating fluid gas and the extra boilers and the extra energy utilized into pulling the fluid gas from the stack and blowing it back in through the burner as well. So in terms of all the utilities that we would acquire, we are -- I think we’re certainly in line, I would actually claim to be slightly better than our and I’m not saying we have any peers, but then the other burners are claiming they have a lowest NOx on the market.
Robert Kecseg: Okay. And the -- can you talk about the level of oxygen for operation usage in it, the oxygen concentration?
Jim Deller: I can. I mean the -- so the numbers. So just a clarification for everyone, talks about numbers here, we have 125 horsepower commercial boiler in facility in Seattle, where we run most of the testing and development of our burner. So I’ve got numbers from testing here. They actually exceed the numbers that we’ve posted. We’ve run the data coming to mind. I’m really careful here. But the -- in general terms, the data coming to mind, we run in option numbers, we got NOx down below 2 ppm. And I think we’ve mentioned that in the past and the oxygen levels up to achieve that have been in the 7% to 8% outer region. But as we -- if we allow ourselves to get up to the north of 2 ppm NOx, obviously, the oxygen levels can be reduced. As we continue to develop a product we’re actually working out how low in the full operation still need that critical NOx level.
Robert Kecseg: Okay. And then the other area is, you mentioned the shipment back, I’m talking about the process burners now.
Jim Deller: Yeah.
Robert Kecseg: You said, install this year that the European client should be completed shipping in the third quarter. So if we look at that transaction, because everyone’s concerned about the length of time before we get cash flow and don’t have to continue to get new financing to push the company forward. So that’s really the level of risk that people are looking at, I think, on the call. That one, as you said, was the order, or I guess, in January, and expect to get it shipped in the third quarter. And I guess that would probably be for the process heater type thing is probably more conventional, if you’re already in business, like, say Zeeco or another seller of the same product. Is that kind of a normal type of thing of order to shipment of six months to nine months typically?
Jim Deller: It is. We’ve actually got two good data points for a -- what I really suggest is a more normal operation. I think the excellent project because of the magnitude of the development has somewhat skewed that perception. But we have both the infrastructure projects. So just to remind everyone, the infrastructure project is three burners. We received the order mid-October 2020. We did test that burner and that burner shipped in February of this year. That burn has started up and in the quarter is basically said that we are expecting the formal release of the test data from that burner. The second supermajor is actually now our first supermajor, because this is going to be the first integration into a supermajor refinery. That order was received right at the end of January this year. I think we actually announced it very early February. It’s scheduled to ship. So the testing was complete. It completed last week. And it is scheduled to ship at the start of the third quarter this year and to be installed later on this year. The installation dates can move a little bit, they are not in our control. So I can’t give an exact date of the actual installation, but it’s comfortably inside this year.
Robert Kecseg: So that project…
Jim Deller: We generally measure that on build date to ship date is the window that really drives our business and our finances.
Robert Kecseg: And then jumping back to the burner boilers in the California Boiler relationship, I tried to look up something about them being a private company and it seems like their services that they provide their customers is beyond what most of us think as a manufacturer’s rep. Saying a manufacturer’s rep is more of a sales force. So…
Jim Deller: Yeah.
Robert Kecseg: … would you like to elaborate a little bit on the capabilities of California boiler and the relationship they have with these customers?
Jim Deller: Yes. It’s important. We do choose our partners carefully. And the objective is to leverage what we have this special. So we have a very special burner technology. And we aim -- we are staying at asset light. So our role is to provide the technology and to provide that and inform that is repeatable and scalable. What California Boiler brings the table is the rest of the picture. They have relationships with the customers. They have the expertise and experience to provide the customization and engineering to modify the control systems, so on a boiler burner is the control systems are typically the customized part of a project that is exactly what California Boiler do. They will specify if it needs to be new. They it will modify what’s there, if it needs to be reworked. They will take the standard core product we will provide and then they will handle the installation, they will handle the controls, they will handle the startup and they will handle the service. In addition, because of their network and location and ongoing business in California, they also have the customer relationships. So they will actually bring in inquiries on the orders, which lead to that business. And then really beyond that, looking at it from a product line rollout, they have the rent fleet and they have the market knowledge to help us get this product line from a great technology to a commercial business through deployment of the rental boilers, working on the size of boilers and then deploying those rental boilers and getting the marketing and experience out to our customers in the field.
Robert Kecseg: Okay. Great. And then one other thing just to clear up, you mentioned the other two sizes on the firetube 500 horse and 350 horsepower. Have those already been designed and built or you’re still in the kind of the process of doing that before you can send them to California Boiler?
Jim Deller: So, first of all, there are more sizes, those are just the two that we are knocking out quickly. If you look at a boiler burner product line, we will continue to fill in the rest of the sizes as well. The 500 is designed and we are manufacturing the 350 is designed. The actual manufacturing is not initiated yet. But there are -- we sequence that because you can only work on one boiler at a time. So we basically line these up to flow back-to-back to get knocked out as quickly as possible, but also efficiently considering the resources that we and California Boiler have because running -- and very few people would have a fleet of different size boilers just ready to run concurrently. All the main parts are optimized then at the same time. So we’re doing these back-to-back in series.
Robert Kecseg: Okay. And then lastly, I just want to say, thank you for the effort to keep the cash burn at $1.5 million again, I think, that’s really great and the whole -- all the people in the company deserve credit for that, because that’s really our, that’s really important to the shareholders, I think. Thanks very much, Jim.
Jim Deller: Thank you, Bob. I appreciate your questions.
Operator: Our next question comes from Robert Harvey , a Private Investor.
Unidentified Analyst: Thank you, Jim. You’re only allowed to take questions from people named Robert. It appears.
Jim Deller: Thanks.
Unidentified Analyst: So actually I have three questions. One on, I believe you said the last time in the call that one of the reasons that Exxon was taking longer was because they were asking for more potential configurations. And I just wonder if you has the market opportunity it’s taken longer to meet or to test these different configurations. And I just wonder you can say a little bit more about whether or not that’s expanded the market opportunity with them. Now there’s been delayed but is the market opportunity larger than what was originally expected? That’s question one.
Jim Deller: Certainly, the breadth of the operating requirements that Exxon have requested is, I believe the most extreme that I have experienced working in this industry from 1996. I think the fuel gas range is, well, they -- I would say that, well, they’ve through multiple processes and multiple different upside conditions and going back looking through all the data, the breadth of all of the different operating units on the plant, they’ve taken the highs and the lows, and asked us to accommodate everything. And I’ve done that for a reason. And that was the reason that we have really persisted to meet all of these requirements is the reason and that is the same reason that they gave us all these requirements is Exxon is doing this as a validation project and we did not want to eliminate, sorry, limit the applications that they are considering in any way. So while it has taken some time, and certainly, considerable effort, it is a very worthwhile endeavor. And I think we need to also look at the bigger picture that while this project is for Exxon, it is being watched, as we believe by all of the other supermajors in the industry. So the -- this really is truly a very large validation project, getting these burners through these tests, demonstrating all of these requirements is going to be a very big achievement and a huge milestone for us.
Unidentified Analyst: Great. Thank you. Along the lines of the other majors who are interested and maybe this is just inferring and correctly here, but you mentioned that, you’ve had an increase in engineering increase. As a late person looking at the Shell court decision in the Dutch Court, and so on, it seems the politics are coming in your direction. Are you sure that everyone who needs to know about ClearSign knows about them? Knows about you? Is there rather than waiting for engineering inquiries, are you doing within scope and finance restrictions? Do you feel you’re doing everything you can as this environment, I think, is coming in your direction politically to make sure that all the potential buyers of your product are getting in line, frankly?
Jim Deller: That’s hard to quantify. I think there’s a few people. I mean, we do not rely on inquiries coming in, and the inquiries that come in are, ultimately, if you look back our -- come from outreach and promotion. And one of the big activities have been going through right now is making sure the word gets out, we need the world to know that we are open for business, especially within the engineering and operating community around the refiners and boiler companies. From a personal standpoint, I will never believe that we are doing all of the average that we shouldn’t be. I mean, you’ve never rest on your laurels. You’ve always got to be thinking what else can we do and I am -- whilst I think we have done a good job of promotion and the ClearSign is truly becoming an established brand. I’m never going to say that we don’t need to do any more. We absolutely do it through whatever channels, but always with these new channels, whether it’s conferences, whether it’s publications, one of the big events that I’m really looking forward to is being able to talk more about the installations that we have, because having an established case study and references from the industry and being able to use the names and the statements from those operating companies is very powerful. Getting through the excellent test and getting those burners into the field is going to move us forward in terms of listing greatly. We’ve talked about the infrastructure projects and the second global supermajor or we are now the first global supermajor that we’ve just tested for getting to the point that we can discuss the details of those projects and actually talk about who that really is and get their testimony. All of these are things that we do. We take very seriously. So that -- there’s a lot to do, marketing is extremely important and I’m not sure you can ever say you’ve done it all. It’s…
Unidentified Analyst: Great.
Jim Deller: It’s always a goal.
Unidentified Analyst: Great. Thank you. My final question is, I noticed that you have a change in, you are looking I guess for a CFO and your -- I believe the headquarters or you’re moving to Oklahoma, is that can that’s at least temporarily disruptive? How’s that going and when will that be completed?
Jim Deller: So the -- our business is and has steadily been transitioning to Tulsa and it has been now for some time. So we are doing this in a way not to be disrupted. We two -- we have two active offices. The -- like our major partners Zeeco is in Tulsa, as are the -- it’s where the industry is based, is where the customers come for combustion equipments, where the suppliers are, is where the workforce the experience in this industry are based. And to be successful, we do need to, I won’t say, locations, everything has industry, but it’s certainly very important. But we have migrated there more than shutdown one office and move. We are continuing activities in Seattle and we certainly need to support the West Coast. And we are being very careful for it not to be disruptive and we are not doing that roughly.
Unidentified Analyst: Got it. Thank you.
Jim Deller: Thank you, Robert.
Operator: Our next question comes from Jeff Feinglass, a Private Investor.
Unidentified Analyst: Hi, Jim. Hey. Thanks for taking this question. Can you expand a little bit, you mentioned this earlier, what -- how are your relationships with Zeeco change once the Exxon personal witness testing is completed?
Jim Deller: Hey, Jeff. Thank you. This is a -- it’s actually -- it’s a really big milestone for ClearSign and it’s what we work for on, right, in our asset light strategy. So Zeeco -- just the context, Zeeco is the second biggest process burner manufacturer in the world. The process burner industry requires customized projects. The clients are very conservative and rely on name and reputation. And we need a sales team as well, we have the sales people, but we need a much broader platform. Zeeco has all of those resources and the agreement we have with them is that we will basically integrate with Zeeco. And what sort of -- to explain the depth is, what will come out of this is that there will be a new Zeeco/ClearSign Core burner product line. We’ve always strived to be the Intel Inside. We will work with Zeeco. We will benefit from their infrastructure. They will benefit from having a truly best-in-class unique burner product line. And together we will market that product line and meet the needs of the customers. What we’ve been doing up till now is basically proving our product to the industry to get ClearSign established to get the other brand recognized. But a really big step is one leveraging the resources and combining with Zeeco. So we then are working through the assets of truly a global company. And secondly, that global company will then be carrying ClearSign Core as they need the -- a very much the unique ultra low NOx process burner in the industry.
Unidentified Analyst: Got it. Got it. Well, thank you for that.
Jim Deller: Thank you, Jeff.
Operator: This concludes our question-and-answer session. I’d like to turn the call back over to Jim Deller for any closing remarks.
Jim Deller: Thank you everyone. That does conclude our call for this quarter. I do appreciate your time and I really appreciate your questions and your interest and following ClearSign, and I look forward to talking to you all in the near future.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
