Q2 2020 Tecogen Inc Earnings Call
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Greetings and welcome to the T. Cogen second quarter 2020 earnings Conference call. At this time all participants are name listen only mode question answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it.
Now my pleasure to introduce your host Mr., Jack lighting General Counsel and Secretary. Thank you you may begin.
Good morning. This is Jack wanting them General Counsel Secretary of Chica Jim.
Please note. This call is being recorded it will be archived on the Investor section of our website peak agenda called for two weeks till August 27 2020.
Copy the press release regarding our second quarter 2020 earnings is available when investors section of our website.
I'd like to direct your attention to our Safe Harbor statement included in the earnings press release and presentation.
Various remarks, and we named May make about the company's future expectations plans and prospects constitute forward looking statements for purposes of the safe Harbor provision under the private Securities Litigation Reform Act of 1995.
Actual results may differ different may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the company's most recent annual report on form 10-K, and quarterly reports on form 10-Q under the caption risk factors, which on file with the Securities Exchange Commission available investors section.
For our website under the heading FCC filings.
While we may elect to update forward looking statements at some point in the future. We specifically disclaim any obligation to do so therefore, you should not rely on any forward looking statements as representing our views as of any state subsequent to today.
During this call we will refer to certain financial measures not prepared in accordance with generally accepted accounting principles are gap.
A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our second quarter 2020 earnings and any investors section of our website.
Now I'll turn the call over to Benjamin Locke.
Thank you Jeff.
So as you had agenda on slide four indicates I'll start off with a brief company overview, followed by a summary of the company's performance and results for the second quarter of 2020, which I've noted here.
Product sales are up.
Operating expenses are down.
We could generate 2.7 million in cash in a quarter and our cash balance up the ended the quarter was 2.86 million.
Well then of course to take questions afterwards.
Before I go into detail on the numbers more detail I'd like to provide a short overview of Teekay parent business as shown on slide five.
[noise] Tico, John is in the business of selling and maintaining clean and efficient energy systems that reduce greenhouse gas emissions provide significant operational savings and provide resiliency to grid outages.
We are a leader in distributed generation technology do <unk> due to our longevity and our extensive technical experience.
Our air conditioning and cooling products have the highest efficiency as any other equivalent besides system.
Our proprietary ultera emissions technology ensures the cleanest emissions possible, meaning even the most stringent air quality standards, such as those in southern California.
Our flagship inverted cogeneration product is designed to transition from grid and tie to off grid operation seamlessly providing power to a facility indefinitely until grid power is restored.
He could you have has deployed hundreds to be systems that can operate as microgrids independent of grid operation.
Recently being ranked number three in terms of number of operational Microgrids in 2019.
We are well positioned as our country and the rest of the world looks towards the low carbon future.
Our high operational efficiencies enable significant carbon savings when compared to traditional sources.
And lastly, we have successfully expanded the ultera emissions technology across a range of engine in the sizes from GM engines to generate generator engines from small Ford engine, the big Caterpillar engines and more recently with the Mitsubishi engine on the Forklift project.
The result of the retrofits on these engines. This is the same near zero emissions on par with the fuel cell.
We are considering several options to expand commercialization of our emissions technology and expect to have more to discuss our potential opportunities for altera in the coming months.
Turning to slide six.
Second quarter of 2020 saw revenues of 7.8, 0.4, 4 million compared to 7.87 million in the second quarter of 2019, a 5.5% decrease year over year.
This decline is primarily due to lower installation revenues and our services segment as we close out several large turnkey construction projects and existing construction projects, where slowed due to cobot restrictions.
I will talk in more detail about our service segment in a few minutes.
Importantly, we saw strong product revenues for the quarter, despite the difficult environment from the pandemic.
Our second quarter product revenues of 3.34 million was at 37% increase over the second quarter of 2019, and a 22% increase over the first quarter of 2020.
Our energy production segment was most impacted by the cobot pandemic and facility closures down 52% from the second quarter of 2019.
Fortunately energy production is the smallest revenue segment to the company, but I will go into some more detail about this decline and the timing for rebound on the next slide.
With regard to gross margin, we are pleased our margins improved to 39% from the first quarter margin of 35%.
Even though once decline year over year as the 44% margin in the second quarter of 2019 was the result of a one off revenue event.
We'll talk more about our margins in just a minute, but our guidance has always to have our margins in the 35% to 40% range and I'm glad we on the high end of that guidance.
Turning to our operational expenses, our efforts to control costs and improve business processes are resulting in gradual but sustainable reductions in our opex with the second quarter 2020, showing a 9% decrease year over year and a 13% decrease from the first quarter of 2020.
The end result for the quarter was a net loss of 654000 compared to a loss of 357000 in the second quarter of 2019, and an adjusted EBITDA of negative 363000 as compared to an adjusted EBITDA of negative 205000 in the second quarter of 2019.
So while our goal of course is to reach profitability. We are encouraged that our core revenue contributors of product and services, we're not as critically impacted by Corbett as many other companies have.
Slide seven shows our definition and calculation of adjusted EBITDA.
Despite the negative negative EBITDA for the quarter, we generated 2.66 million in cash from operations in the quarter versus cash outflows of 2.1 million in the second quarter of 2019.
I think that it's probably one of the most important takeaways from the quarter.
That brings our cash and equivalents balance at the ended the quarter. The 2.86 million a significant improvement from our cash balance of 878000 at the end of 2019, when we also 2.8 million our line of credit.
As we get closer to reaching our profitability goal, we expect to build on our cash balance to fund future business growth.
Moving to slide eight I'd like to provide some provide some more color on our quarterly revenues in each segment.
First as I mentioned, we saw product revenues increased 37% year over year, and 22% higher than the first quarter of this year.
Product sales were led by cogeneration with only a small contribution from chiller sales.
This is not indicative of any negative trends of chiller sales instead relating more to tight customer timelines for delivery delivery of many of our cogeneration systems in the quarter.
I fully expect higher chiller contributions next quarter as we continue to finding opportunities for gas cooling as a compelling alternative too expensive electric chillers.
And importantly, our backlog for cogeneration and chiller products remained strong as I will discuss in a moment.
Next with regard to our service revenues. Please be reminded that this segment consists of service contracts and parts, which is the real own them services piece.
And our turnkey installation services, which is more construction activity.
Although the overall service revenues declined 21% year over year. This is mainly due to turnkey installation projects in 2019 that finished or our close definition.
And while cobot also adversely impacted our installation service revenue in the quarter those projects that remain in our installation portfolio, our resuming as individual states allow.
As I've mentioned in recent calls our goal is to focus on manageable cost effective installation projects and work with construction partners on larger more complex construction projects.
Moving to our service contracts and parts piece of the service segment.
We saw revenues declined slightly as OEM services to some facilities, including the own them services provided to our on energy production sites were curtailed due to cobot restrictions and closures.
The fact that we only saw a 4% drop in revenues year over year and our services demonstrates that the steady growth, we see an OEM contracts each quarter was enough to almost offset the revenue declines in the quarter due to cobot restrictions.
We fully expect our service contract revenues to resume their upward trends as cobot restrictions are east.
Turning to energy production as I mentioned earlier, we saw a large decline in our energy production revenues as a result of kobin restrictions and facility closures.
I would like to point out that the market segments of our energy production sites, most impacted by coded or hotels health clubs and recreational facilities, whereas large residential buildings maintain operation.
We are seeing some gradual opening of our energy production sites in these markets, but the timing of some of these sites reopening is still undetermined.
Fortunately this segment is the smallest contributor of revenue to the company at the current time, so the impacts are muted.
But we will work with our energy production customers to accommodate their reopening and resume our energy production services since that will also resume our contracted over them services revenues to be sites.
Lastly on the side, we saw our overall gross margins come in at 39% as compared to 44% in Q2 19, when we had a one off activity on our services segment.
Importantly, our second quarter margins increased over the first quarter of 2020 margins of 35%.
Primarily due to improvements in our products margin.
We have internal goals to push our margins, even higher but for now I am maintaining our guidance of overall gross margins of 35% to 40%.
Turning to slide nine I'd like to reiterate some of the key takeaways from the quarter.
First our core business of product sales and service performed well despite the enormous challenges of the cobot pandemic.
Product sales were up both year over year in quarter over quarter.
Service contracts and parts were only down 4%. Despite numerous size curtailing, our halting service due to the pandemic.
I fully expect our service contracts revenue to resume its steady upward trend the rest of the year barring any resurgence of the pandemic.
Our installation activity is also resuming though not to the revenue levels of 2019, as we have scaled back from large complex turnkey installations.
And lastly, total revenue contribution isn't as much as products and services, we see a slower recovery in our energy production revenues at some facilities, such as hotels and health clubs slowly start to reopen.
The next key takeaway is our strong cash position.
As I mentioned, we increased our cash generated from operations by 2.66 million in the quarter as opposed to cash outflows of 2.1 million in the second quarter of 2019.
Our quarter end cash and equivalents balance was 2.86 million.
Next the improvements we are seeing in our operational expenses are taking hold with our opex down 9% year over year and down 13% quarter over quarter.
I expect further reductions in our opex in the coming quarters as we continue to find ways to improve our operations.
And lastly, our backlog remains strong with 10.4 million and product backlog and 2.7, a backlog in our installation services.
With that I'd like to turn the call overtly operator for questions.
Thank you, ladies and gentlemen, I will now be conducting the question and answer session. If he would like to ask your question. Please press star one on your telephone keypad confirmation from the indicate that your line is in the question Q You May Press Star Q. If you would like your move your question from the Q for participants do you think speaker equipment, it may be necessary to pick up your hands.
The floor pressing the star keys, one moment, please let me pull for questions.
Thank you. Our first question comes from the line and the dial with HC Wainwright. Please proceed with.
Your question.
Thank you good morning I admit.
Hi, Ben.
Good morning to sort of discussion from last quarter about exposure to New York market for you guys.
Hi, how are you seeing sort of improvements in that.
And for you.
Hi, good backlog picked up from there any color on you know how I'm Dan market is recovering from thank you.
Sure.
With regard to New York recovering with regard to the pandemic or New York regarding their their their policies and the like.
No I mean as much as you could go were.
Turning to focus more on the pandemic, but generally has been as additional color that'd be helpful.
Sure Yeah, I understand I'll cover both.
Its a.
We were able to maintain our services.
And for our sites in New York for the most part throughout the pandemic with the exception of as I mentioned, some facilities closed up the hotels in the light, but but as I said, most a lot of our portfolio of services as multi unit residential and those those if anything maintain their populations right because people were staying at home.
We're starting to see that.
Loosen up a little bit sites or start in the open back up again in New York.
So I think when im encouraged by that I'll tell you where I see the opportunity here Im. It is is I think what this is Don is created to have a burden on a lot of facilities a cash for a non facilities further operation and in their lives an opportunity forum for our our Eightg about our energy production model.
Albeit with our partners as you know I meant we've got our project finance partners, but there is certainly opportunity now to come in with them with these always use these prepaid savings plans, where they don't have to put any money down.
They can get.
Their energy or their hot water there cooling it doesn't have to be cogeneration. They can replace their chiller. They may have to replace a half a million dollars worth a chillers and I don't have half a million dollars, but we with our project partners have set of financial arrangements not just for Cogen, but for our chiller systems, where they can get installed at zero cost to them.
And they can.
The ease the with the capital birds. So we're starting to see the market pick up a little bit certainly construction is happening again, our construction projects are starting to resume not just in New York, but Massachusetts, and other places and New York as a whole is starting to kind of come back to business and and as I said I think there might be an opportunity in this for sort of a resurgence or up another.
Effort at these energy production platform so.
I'm happy to clarify any part of that if you like.
Yeah, well along those lines have you started to.
Pad or bring anything into the pipeline from this opportunity where are you still a little bit away from being able to come back.
Sure No. We are we are our pipeline is has new projects.
In New York, just at the tough to be not to settle the audit you know ending our in our backlog our projects that are knew.
That are going to occur in New York in there for advertising there in for the same drivers that have driven our product in New York on all these years, even though there's not the incentive in there. It's it's the the energy savings of course and now in New York, particularly as it is local law 1980, 997 that sets requirements for a greenhouse greenhouse gas.
Production your carbon reductions from for for buildings by certain timelines.
Our Cogen systems, and our Chiller systems is one of the biggest banks for your Buck in terms of greenhouse gas savings for the building because as I mentioned in our slide we are arqule, our efficiencies are so high as compared to heating and cooling and powering a building from from the grid.
But you're going to get greenhouse gas reductions by putting in our equipment. So thats an opportunity for us as well and then of course the resiliency piece you know every time, there's an outage or there was some threats of outages or this past quarter, we mobilize our guys and make sure the olive oil topped off in people feel good on knowing that they have a piece of equipment that can keep the lights on should the grid good.
So I think the key fundamental drivers in New York are still there.
The incentives are there any more but again I think the savings that we show and in particular to be avoided penalties of carbon taxes. So.
Still make it a very good proposition for us.
Thank you for that Ben.
Just maybe one modal mice and onboard the operating a cost for and I know you brought that down.
And you will still within the ratings or what you sort of guide for the gross margins.
So onboard these from should we expect similar levels of performance for the remainder of the year.
Or should we anticipate some variance relative.
Okay.
Okay.
Gentlemen, it sounds fine you may still be on you.
Yes, I am sorry about thank you for that operator, yes, so I'll answer that I met with regard to our our margins.
As you saw product margins went up I want to keep our margins our product margins up there I.
I think we can even get a little bit higher we've got a lot of goals to do that with our supply arrangements et cetera.
Our service margins are certainly going to improve this past quarter. The margins took a hit because again colgate related that just.
Things became very inefficient and it became very difficult not difficult, but more challenging.
Work environment, our service margins are certainly going to increase and I, absolutely think we're going to keep chipping away at our Gionee a little bit more so I think youre going to see improvements.
Next quarter.
And the rest of the year on our margins then on and on our Opex.
That's all I have been appreciate appreciate all your earnings as thank you great. Thanks Summit.
Thank you. Our next question comes from Alex Blanton with clear Harbor asset management. Please proceed with your question.
Hi, I already.
Just a few.
Housekeeping.
Questions at the beginning and then some more questions later.
But I was wondering why you are only going to keep this call archive for two weeks.
There's no cost to archiving and why don't you can turn for you Alex I'll answer that offline when maybe you get your next question. Okay. Then.
Also I was suggesting it seems you get to release out before the market opens I think it came at about 10.
A good that's just a common practice to give people a chance to review it yes, Alex our PR company had a glitch. This morning with one off we usually we usually get them outright at nine o'clock and we will continue to get them off at nine o'clock. We just had a glitz. This morning, sorry about that is that is that why that I can't find the slides on the web.
Either.
Perhaps I'll get with you offline after $1 to make sure you have I don't think there. They are posted I would also suggests that you post a transcript of the call.
Do you do that Gordondale, yes, Alex will do that and I will take all that up with the what can we talk about the quarter sure. Okay.
First I wanted to talk about.
Local law 97 could you explain more about that.
Sure local on nine might have a good idea the actually put out something from the company like that a memorandum something on this big Alex It sounds like it's not one of those things I think it's that so defining to our company that it's worth spending that time and effort, but I will describe it to basically it sets a HM.
Timeline for for you get your energy profile, you greenhouse gas profile of your building down over the next five to 10 to 15 years in order for New York to reach their carbon reduction goals.
And so that that the each building it looks at that timeline and thats make determinations and how they can reduce their carbon footprint or will be penalize with the tax.
Related to them. So how soon so penalize, what's what's C is there a time pressure on this at all or.
How does it.
It's scales Alex it scales over the next five to 10 years I.
I don't think heavy duty fines and levy start kicking into maybe five years down the road a little bit I think you can read some of your goals before then.
I don't have the exact in front of me, but but suffice to say what we do of course I mean, you can only put in so many led lightbulbs right to move the needle.
Terms of your your footprint, but putting any put switching all of your chili's over to gas.
And using heat recovery that's have at.
90% efficient system in their instead of your electrics that moves the needle and using the cogen anything thats any piece of equipment. That's that's going to be it very very high efficiency is going to move the needle. So therein lies the opportunity and Alice I will say on this too. This is also being felt out a little bit I mean this local on 97 the administration could change it could go away.
Perhaps.
At the past, though about two years ago.
I believe I don't want to nail myself down on that but it's a it's starting to be understood. New York certainly is setting up committees to understand how they're going to implement it building owners are trying to understand it energy policy farms and trying to understand it we're trying to understand it I think we've got a pretty big pretty good graphs on regardless of the nuances.
But the bottom line is we're going to reduce USIO to footprint I mean, that's that's that's what the bottom line is as long as your equipment is properly installed in running and using heat recovery et cetera.
You are going to reduce that buildings greenhouse gas footprint and that's the takeaway that really try to get through to the customers along those lines, if we assume that.
Joe Biden gets elected he's talked about it two trillion dollar infrastructure program and part of that is reducing carbon footprint.
And I think there was a number mentioned a 50 million buildings needed to be.
Modernized.
Have you can do that at all what what kinda plans are there and how would they affect you.
Oh.
Yes, Alex if there is a lot of opportunity there of course, if it follows the same rubric as of our of our cogeneration systems is we're not going to put these things in places where they can't be efficient.
Can't use the heat recovery that then you're getting not going to get that 90% efficiency. So you still have to segment your market into those those verticals that we know well multi unit residential.
Hospitals et cetera places that use hot water, although that indeed widened because of the picocell now we can get into more.
Industrial processes.
And manufacturing et cetera.
Where they need chilled water systems or even with our Picocell. These refrigerated ammonia systems.
So indeed, there is opportunity, but again you can't just put them everywhere because you have to make sure that you're following your prescription of to get the maximum efficiency.
Equipment and I'll ask if you want to mine jumping back into the queue I want to make sure I give a few more folks the opportunity to ask some questions and then I can circle back to us if that's okay back to me okay. Thank you.
Thank you. Our next question comes from Joe.
Joe Vintage trends and then I'll not overlapping Oracle advisors. Please proceed with your question.
Good morning, John Yes.
Hi, Ben.
Hey, congratulations on getting through this quarter I know, it's pretty rough when.
You guys did pretty well.
I guess my first question is.
Yes, you could you talk a little bit more about the Mitsubishi Caterpillar.
For lift.
JV in and just as an aside if it's kind of curious kind of if given the travel restrictions. If there was it would be the ability to maybe shift the equipment to Japan.
Yes, I mean, maybe.
The mitsubishi's got their own kinda.
Problems I'm sure over there.
We're trying to be respectful not the not the push this particular program in front of them win.
Sure they have their own parties, but with that said of course, Bob is keeping in touch with them or they know what we're doing we know we want to get back on track, we want to get that engine certified.
But yet but Joe there's there's there's there's there's other opportunities to that we're looking at and I didn't really want to talk too much about the emissions right now because we didn't have much in the way of update but thats not to say that that then there will be more activity later in the year. So.
And then I'll, just just hold off giving any more updates on that except to say that Mitsubishi in Iowa, NSR and communication.
We both know we want to get this engine certified but we don't want to rush them to do something because if we think that might we just don't want to the damage to the partnership which is very good partnership right now.
Okay that makes sense.
I was wondering.
With regard to the E G E.
Division.
Thank you talk a little bit more about your your go to market strategy and who.
Our your.
Project Finance partners how are they.
Selling.
Your system.
It seems like there's a lot of momentum and they whether it be school that.
Our with tight budgets or hospitals with tight budget. It just seems like theres some big opportunities there and just wondering if you could just talk a little bit more about.
Your your go to market sure, yes, it's a good question and as I said, we've got.
Four or five project finance partners that that we've worked with and probably another eight or nine of them. There that are begging us to define projects to work with the problem isn't the money honestly.
There is a between all of our project Finance partners.
Sure I could find any amount of money I needed to fund the site. The trick is the fund define the sites that will deliver the earnings that that they need to meet their hurdle rates and it's not as simple as a solar farm or fuel cell work, where you can just kind of drop it down and didnt need to much analysis that is going to use electrons.
As I said, yet for our sites you have to make sure. They got to use all the heat you have to make sure that equipment is entirely using it and again it runs and meets all your hurdle rates for forum.
For the return to these these project finance folks because if they don't.
Then I am in trouble right.
Sometimes so so anyway I.
I think im not worried about the ability to project find there's plenty of project finance out there now some of the company's we're working with.
Our actively looking for projects themselves and that's good <unk>. So they they've got their own business development folks and Theyre talking with my business development folks in our engineers and we and we go hunting together that way for good sites some of the other.
Thats really exception most of the project Finance partners, we work with our kind of waiting for us the brings something to them, they're not out there doing.
What we're looking for cogeneration sites into maybe they can find a site for solar panel, but they would be challenged to find a a good operational site for cogent. So we end up doing a lot of that ourselves not no go to market strategy. How are we doing that in those cases. So of course, we have our our network of engineers and and energy consultants that we.
We work with them, we're constantly in touch with them and anytime we see a prospective project. We say we could sell lets you. We can offer you would PA and so we were always coming with those two alternatives in front of the customer. We're also doing direct mailers I mean, where were worse were sending out oh.
Opportunity cards, if you will to existing customers to old customers to prospective customers to contacts.
You know, it's a tremendous amount of things you can do on the web. These days you know this coal coal that thing, forcing us to stay at home has also created opportunities for new ways to market people new ways to communicate with people go to meetings discussions that can happen more easily than than trying to get yourself down the New York. So I think where we have a pretty good strategy for reaching.
To these customers.
Not just for these project finance things when of course for full for any type of activity relating to the boiler plant I mean, all finance there and I have a project finance partner that would finance the an entire barlett plant upgrade of which I may just be a small part of.
So so you're right there's a lot of opportunity the money there that I have no shortage of project finance people to go to the trick is the find those sites that deliver the economics that they need.
Right right.
Just one other question with regard to this and that it.
So.
You mentioned local law 97 in New York City I'm, just curious if there any other.
Policies that are being put in place around the country.
That are similar nature or if there's incentives anywhere in the us.
That you see on the arising are currently.
Sure sure are those that will of course nationally there was this the ITC the investment tax credit there is that but the most of the incentives are state to state.
And they're typically efficiency incentives as you know the utilities.
You know Eversource and Con Ed and Big utilities.
Get reimbursed for efficiency measures I mean, thats, they're measuring stick is how much efficiency. They can bring to their customer base to the ratepayers and so that's who we are we show up in Hayward incident efficiency, so that they will the rebates in the incentives.
Come from the utilities, often times because they are the ones that need to put these energy saving measures in place that meet their own guidelines. The amount of those incentives can sometimes be prescribed X dollars per kw, sometimes they can be custom.
And more often than not we find ourselves in the custom incentive world because we're doing something that kind of customize we're not putting in a solar panel, we're replacing a and a life with an LCD, we're putting in a you know a highly efficient natural gas killer plant.
Thats displacing electric plant, so a little bit more nuanced, how you calculate those savings, but it's there and the energy company understands and appreciates that and I think thats one of the reasons why we're we're getting more success with our Chillers. It is starting to become more broadly understood. How these chiller systems can not only reduce greenhouse gas benefits, but have other.
Or efficiencies and help the utilities meet their goals.
So I think I covered your question, but if I missed the part of it Joe acting like another circle back to where existing Ben that's great I. Appreciate thats all I have thanks, thanks very much.
You're welcome.
Thank you. Our next question comes from Michael stuck with Oppenheimer. Please proceed with your question.
Good morning, Ben Hi, Mike Nice to hear from you.
Two part question first of all any new developments or opportunities that indoor farming and secondly, how is the Florida operation doing.
Sure Yeah. Good questions Yeah, we we.
Indeed are seeing still continued opportunities and indoor growing I.
I think I might have talked about this before they know that that whole industry is is it a little bit Anna and I don't want to tailspin, but but there was a lot of a lot of they are a lot of work in that and the 2018, and then 2900 started to slow a little bit but that suffice to say that the ones that are still around.
The the indoor growing.
Bunnies that we're dealing with are the ones that were smart enough to understand that they need the aware of operational cost and not first cost and they are aware that they were aware that was going to be a more competitive environment and indeed here. We are today in the middle of 2020, and it has a much more competitive environment for indoor growing but so the that.
That's the come and go customers, maybe aren't there anymore, but importantly, the customers that still are still there for indoor growing are the ones that already have our stuff in it looking at phase two and maybe phase three and then there that that their design consulting is designing another one so the customers that we still have are the ones that I got to be in it for the long haul and in many cases.
Ones that already have our equipment that repeat customers. So I think the market is still strong it's not as kind of crazy exuberance as it was in 2018 I think if you read anything on the indoor cannabis growing it's slowed down a little bit but the ones that are remaining are the ones that are going to be our long term customers and I think ultimately that's a good thing.
And then follow up how we're doing in Florida, Yes, Florida right. Good good out to Florida is a as as a great market for us.
As I've said before maybe not perfect for Cogen, but absolutely for our chiller systems, and where we're looking at a number of opportunities and we'll be seeing press releases of course normally see press releases, but I think we are seeing good opportunity in Florida.
Of course, having our service center down there.
Very important so that people and customers know that they'll have someone there that can come and make sure that equipments running so yes, and the spark spreads still very strong down there. It's a gas is extremely inexpensive electricity maybe isn't super expensive.
But you can keep those gas prices down you have a very good opportunity and then the resilience piece of course comes on top of that every time, a storm comes through people get worried about their power and and their chiller plant and even if we'd open in the cogent system. If we put an entire chiller plant on gas instead of electric as I said before they can downsize their backup generator capacity. So they can keep.
Their hotel running during an outage because they have their chili's running on natural gas. So you have Florida still a real good market for us and I'm I'm, hoping you will see more press releases related to that in coming months.
And then a follow up question regarding technology.
What's the difference in operations between using natural gas is our fuel source and hydrogen as a fuel source.
I'm going to let Bob take that one because that's right in his wheelhouse.
You didn't run an engine on hydrogen.
And it will perform.
Performed fine you'd have to make some changes hydrogen as some issues with metals imperilment and so forth.
We have not had too much experience with it I know one customer was doing some experimental operationally.
With hydrogen, but I think most.
Most engines no no. The path you have to take to operate on them now having said that.
If you do use hydrogen that that changes the mission story quite a bit.
There'll be no sale to coming out of the engine there will be in a wax of course and that and.
And you still lead to account for that but I don't see hydrogen.
As a real.
Fuel for us.
Long time because of this hydrogen available.
It will be from from renewables it'll be going towards transportation.
Transportation's, where.
It really has an impact.
Even store.
On a vehicle and drive long distance on and you basically.
I have no pollution and.
So little over the available on that so costly to produce you have became mine and you have to produce it with electricity, that's where it's going to find its its application and stationary.
Stuff like guys really doesn't it doesn't show the benefits of it does on a.
Truck or car that has a very low efficiency engine to begin with that's with Thats, where I see it going hope that answers the question.
Well my whole purposes. The question was that Williams companies is getting into hydrogen.
Hi, good distribution, particularly targeting the northeast, which is basically in our backyard.
Was wondering if there were opportunities that was the rationale for the question.
David I, just I'm I'm, not really seeing that right away and I think the pipelines and they're going to have to stay natural gas because all the appliances on the water heaters installs and everything are all set up for certain type of Ah furnaces would operate with natural gas and I think that would be quite a difficult thing.
To do in parallel with existing pipelines.
Gotcha and the one final question.
Are we considering any type of a.
Joint venture or an outsourcing of the Healios technology.
Not right now Mike, it's not something that I think that Weve found a the good use of our efforts on I think.
That's a success, we're having with our chillers.
I think is what I really want to be focusing my attention on.
I don't have any particularly strategic initiative to sell the healios platform that would require some time and effort that perhaps once things stabilize we can consider but it's not something that's enough in the top of my priorities right now well appreciate your comments and look forward to a productive third quarter.
Thanks, Mike I appreciate it.
[noise]. Thank you. Our next question comes from Alex Blanton with clear Harbor asset management. Please proceed with your question. Thanks, Sir Alec fall outs Baby before you ask the question I've got some answers for you Oh good [laughter]. So so the Powerpoint is available on our website. It's in the webcast section.
And so all I will send the link after after this call to do to make sure you have it the transcript will be available 48 hours after the call and all again I'll make sure that you get that as well. Thank you is that going to be on their website. The transcript. So other people get treated yeah, okay, yes, well worth it.
Yeah, I had a hard time finding inside they werent evidence they work with Didnt agree with the webcast part.
At all.
Yes. It is now I'll send you the link.
Okay. Thank you.
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The Canadian operations.
It seems to me that they would be less restrictive by coincidence.
Canada has a very little infection rate.
Well when anybody from the U.S. it.
Huh.
So how is that going.
Is that a better operating environment right now.
Hi, Alex this buphenyl right I think I know a little bit more than Ben about this the.
The.
Most of our business in Toronto area was you know.
Somewhat the same as the U.S. in today's few months ago. They were.
Instruction projects were told to stop.
Our folks ended the country to do work they'd have to.
Our quarantine for two weeks and so forth. So is it turned out the projects we're involved with more exempt from the construction restrictions as many were in New York, if they were related to certain types of.
Construction projects and I guess the.
The requirement that we have to go in the country and all that quarantine now that that also was weighed as well so.
Really wasn't a lot different than the U.S. in my opinion same you know in terms of what Toronto did I don't know about other provinces and so forth, but they are very much like the U.S. city and.
But at the end of the day, we were operating.
Fine you know the construction projects one on our guys who are able to guys. We have to two people working in now that are Canadian citizens. There they have no restrictions and working fine.
Okay, great and.
And also.
Is there a.
Hey marketed.
Sure.
Better ventilation as a result of coal that.
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This would be a renovation retrofit types and saying were.
Bill this would would retrofit or.
They are cooling system to provide better the ventilation is there any.
As a market like that developing.
Perhaps.
I think the prevailing.
Theory, as you want more air move flowing through your building Oh, you want you want to you want to keep those though the HCFC or whatever they are cubic feet of air moving through a building.
And I think what they have advised some people to do is on their air conditioning set some air conditioning systems, bringing outside air some air conditioning systems re circulate inside air.
And then that the largest systems do a little bit of both.
So I think there advising some of these air conditioning systems to adjust themselves to maybe be a little bit less efficient, but bringing more outside there to keep that airflow going now whether that's going to lead people to do an overall a redesign of their chiller plant to towards the technology that might bringing more air or something reactive like that I've not seen.
But but again, we're still only you know I'm not sure if people have reacted that far ahead on it.
But I don't I don't see anything directly relating to US is just just notionally I understand that there isn't need an for people that bringing more outside air and get more airflow going.
Yeah.
Hi.
Do you have any and fine.
Do you have any.
Thoughts on when you you might turn profitable on a sustainable basis.
Yes, well Alex.
I want to be profitable now [laughter]. Unfortunately.
The World got Deltatech terrible blow here I'm, not just myself and not just the people around me and not just our company you know everyone and and thankfully, we didn't get hit us artists as hard as some of these other industries that absolutely got decimated.
So oh, but so I think we're fortunate that we made the progress that we did my goal is still I'd like to be profitable by the end of the year.
That's my goal and striving towards that and then each quarter. After that I told me Michael each quarter to get up every morning, and they get profitable the next quarter after that so as much as I can control the things around me.
That's that's what we're striving for and I think we'll get there I mean this was a pretty good quarter, Alex I know, it's hard to see what those negative numbers in there, but but but but without Kobe. Those service numbers are right back up right, yes, without yes, without Kobe those energy production numbers or maybe not back up to 2019, but they're back up there and maybe that EBITDA number isn't isn't negative any.
More but I didn't want to play the games of maybe just because if we were here where we are now with coded and we had to deal with the hand, we were adult.
But absolutely and I can't say this enough, though as hits, we took in service our barring any resurgence of the pandemic.
Are going to go away and we'll see those service revenues come right back up where they should be we'll see the margins come back up where there should be maybe the energy production will come back to where it should be able to improve a little bit and so and as long as we keep that order flow for our products going we'll be in good shape.
Okay. Thank you very much.
Thank you Alex.
Thank you. It appears we have no additional questions at this time, so I'd like to pass the floor back over to management for any additional closing comments [noise].
Well. Thank you all for listening to our calling a as always we'll be sending any more updates as they happen.
Say say.
Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect. Your lines at this time.
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Oh.
Hmm.
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