Q4 2022 BioLargo Inc Earnings Call
Greetings and welcome to the Biological Annual Fourth Quarter 2022 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please.
Press zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Brian [unknown].
You may begin.
Thank you operator.
Good afternoon, everyone, and welcome to <unk> 2020 Annual Results Conference Call.
By now everyone should have had access to the earnings press release, which was issued prior to market open.
10-Q.
<unk> report filed with the SEC.
This call is being webcast and available for replay.
Our remarks today may include statements that are considered forward-looking within the meaning of securities laws, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, and market and potential growth opportunities. In addition, management may make additional forward-looking statements in response to your questions.
Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties that may cause the actual results to differ materially from our forward-looking statements. A detailed discussion of such risks and uncertainties is contained in our most recent.
10-K.
Forms 10-Q and in other reports filed with the SEC.
The company undertakes no obligation to update any forward-looking statements, and with that, I'll now hand the call over to Biologics Chief Executive Officer, Dennis Kelleher.
Hey, Brian Dennis Calvert, thank you very much.
Hello, everyone glad you're here, we're going to we're going to plow through some financial performance metrics very quickly and of course. This is a great time in the company's history.
And so, I think you're going to be quite pleased as we dissect that performance.
Okay.
As you look at the company, we are an innovative solution provider focused on some of the greatest challenges facing our planet: clean air and clean water.
Things that make life better.
Including odor and DFC clean air.
And it's a very exciting time, as you remember, we have an environmental group which is composed of three operating units. We've just added our fourth, which is a battery company; we'll talk about that in a bit. And then, I'd like to remind everyone that Clear was a spinoff.
Excuse me, it was a company that was formed as a subsidiary, leveraging the core technical competency and patented innovations that we have in the field of biologic technology.
Company is organized and its plan to spin out when ready.
And we're going to be breaking down the revenue segments and.
Financial performance very carefully.
Including both those operating units.
Quarter over quarter, we're coming on the seventh.
Quarterly increase in revenue seven consecutive quarters.
And we have published in early January the estimate that we would exceed ours.
<unk> growth for Q4 to Q1 by at least another 50%. Thank you, Matt, seven quarters of <unk>.
Gross top-line revenue growth quarter-over-quarter.
If you run those numbers, that's about 32% per quarter.
It's a pretty good number, and of course, that represents a 132% annual increase over the same period from 2021 to 2022.
Which broke down the comparisons here to give you a glimpse, so you can see them visually of the trend lines. So, for key metrics that are associated with our financial performance.
I'm going to remind everybody that on the revenue side, of course, we have an estimate for Q1. Those numbers are published and will be subject to review by the auditor. We will be coming out with those numbers soon.
As we complete the review with the auditor's assistance, these are preliminary estimates and subject to change.
But we do have confidence in those numbers, as we've stated in our press release.
Big thing that we're almost down to SBA I think we've got an SBA loan clear has got a lot of credits yeah that number is just.
Inconsequential to the daily operation of the company.
Proud of their ability to retire such a significant amount of debt as revenues are climbing.
Our net losses decreasing as well.
Of course, you would expect that as long as we can maintain our SG&A, which we are going to talk about in a second, as the revenue declines.
Our net loss is shrinking, and it has been shrinking quite dramatically.
Note that from Q3 to Q4, there were also included some nonrecurring, one-time charges that totaled about 473,000, and without those.
The net loss number would have been just under $1 million for the quarter.
Again, by far the strongest performance thus far.
As we always say, we're <unk>.
But not satisfied and we think that the trends will continue in our favor.
Although we must give everyone the proper notification, trends don't necessarily reflect future performance. However, we are very optimistic and believe that sales will continue to ramp. We will also maintain our operations status as we have in the past.
Yes.
SG&A versus revenue.
Some big numbers.
Gone from 308.
337, now to 95% of revenue, 90% of revenue.
Again, representing the ability.
Maintain SG&A at a relatively flat level.
So our numbers have not changed dramatically.
As a result of the rising revenue without adding staff, we're watching our pre.
Free cash flow increases in a significant way.
And we do warn that as we expand some of the different revenue streams, like engineering services and project orientation, we will need more staff. So, we're not suggesting that it will remain flat forever, but.
Certainly, from a historical perspective, given our basic operations, we've not had dramatic shifts in the way that we've hired, maintained, and continued to operate. This status and those numbers are going to continue to bear out for us for quite some time. But again, as the revenue is, the revenue mix shifts.
We will see some additional staffing required.
This is a big; this is a big number.
Net cash used in operating activities.
I just wanted to point out that the lowest number in there.
The history of the company $2 $8 million was Houston.
2022.
But notice in the fourth quarter, with revenues rising.
Our net cash used in operations.
Actually went to a negative.
So, what that means is, for the first time in the history of the company.
We actually generated cash from sales.
That was greater than the net cash used in operating activities and occurred in the fourth quarter, as revenues continued to rise primarily from post-talk.
Talk about that as well.
That's a big deal, so take that.
And a net shareholder equity increase of about $4 million over five years, again as revenues continue.
New product lines expand with a revenue base; we think that number is going to continue to grow.
And we.
We think it is also going to be dramatic.
And so, we're anxious to prove that.
To share some additional financial information, all of which can be traced to the 10-K specifically.
We just want to point out that.
Consolidated revenues had 167% versus <unk>.
Q3 to Q4, excuse me <unk>.
'twenty, 167%.
40% growth Q3 to Q4.
Representing a 132%.
Year-over-year comparison from 2021.
When you break that down by our subsidiaries, which again, as published in our K.
Where are we talking about segment reporting?
Of course, the engineering group is slightly down not as big a number but still had a record a record year.
51% year-over-year increase.
In the first half of 2021, and we think that that's reflective of the lumpiness and the nature of very large capital projects, our engineering group is involved.
And so as we mature we can.
Level out some of that lumpiness, but we would attribute most of that to that sort of arrangement.
O&M environmental that handles all of our all of our odor and POC products of course is knocking out of the park, primarily because of the proof product and its national expansion, which we've been talking about in detail 180, 82% year over year, 403%.
Increase from Q4, 2021, and 56% growth quarter over quarter from Q3 to Q3 Q3 to Q4.
While our water of course is our R&D group, everyone knows that the net loss is about 604,094% of that number, attributable to R&D than clear is just out of the gate with this first customers.
About $14 million all in – that's cash and non-cash charges last year – and we think that it has an incredibly great opportunity for expansion now.
The sales network is put in place and first client adoptions are starting to gain some traction. So, it's a very exciting time.
I just wanted to point out that in the <unk>.
Preliminary revenue estimates for Q1, we expect that rate of increase to exceed 50% in Q1.
From Q4.
We've just as we pointed out in Q4 is the first time that we generated positive net cash from operating activities in the first time in history of the company.
Capital is good, and it's improving continually based on sales as well.
And flex which is great.
And then I just wanted to point out that 50% of the net loss in 2022 was attributable to noncash expensing expenses.
And roughly half that or 26%.
As represented in research and development (R&D).
And R&D is a critical part of our business, as we all know our AUC, the battery tech.
Enhanced developments it clearer all are a result of significant R&D.
Estimates.
While showing image we're in the process of building portable units for the AUC email Paphos.
We've got a couple of units that have been fully built, and now we're putting those into trailers and including all sorts of technical pieces that make a function of the market. We're very excited about this; it will allow us to get in the field pretty quickly.
Not as fast as we'd like, but certainly on track, and as we know, we've got our first customer engaged. We've made proposals on scaling up.
Commercial piloting process.
It would be phase one, including some enhanced.
Technology to be used in our system for treating water, and that would be Phase II. We're in the process of finalizing to go forward with Phase II now. In Phase III, there would be a full-scale system, which can be quite large, and that system is probably about nine to 12 months away from the go decision, something like that. We don't know exactly.
But it is moving forward; we also have a backlog of prospective customers.
At this stage, as you might imagine, early adopters are where we're focused.
I'm merely early adopters or industrial clients not necessarily as a rule, but that's what you would expect and we've got a number at the table, which is good and so we are in the process of pricing scoping.
Essentially, developing a design profile for the customers.
And then working with them to get through the questions and answers that they may have missed.
Just wanted to point out, before we move on, the P-faucet opportunity.
It was just recently published the testing limits the guidelines for drinking water.
Even at four parts per trillion, for a number of the <unk> compounds.
Got four parts per trillion of such a remarkably low number.
It is.
It means that parts for Trillium would be like two years or three grades of sand in a couple of swimming pools.
Ordinarily low.
And because of that testing limit is so low it means that.
The marketplace is highly sensitized to the challenge that's been presented.
Our system has evidence.
Nine or 10 trials that are able to achieve a non-SEC status; as far as we know, we're the only solution that can meet that test to achieve a non-detect number. Non-detect is the equivalent of - we've removed all the piece parts, in layman's terms - to a level at which science cannot detect any residual. It's a big deal.
So we're busy, we've also developed a national selling channel and so we're busy processing those opportunities and what that means in terms of processing opportunities and known scoping.
Our full design.
Preliminary testing pricing quoting permitting regulatory.
And they are quite large capital.
Investments as well so theres a lot going on there we're excited about it and of course, we want it faster, but we nonetheless are.
Confident that our value proposition.
It has been only enhanced with.
With the increasing regulatory pressure and that's being put on the system. We're also seeing a lot of people that jumped early a lot of customers that jumped early for compliance and now they have installed systems that have no potential to achieve a four parts per trillion testing limits.
They just can't do it impossible. So we think the opportunity is got a.
There's a lot of opportunity; it's expanding, number one, and number two, it's got a lot of increased pressure to make wise moves. So, we're in a good spot.
Thanks, just to move faster, but we're doing that.
Talks about proof briefly.
They announced that in Q2, it will start rolling out in Wal Mart nationwide.
Preliminary tests were very successful. Remember that we are the supply chain partner here; we make.
The product we delivered on a wholesale basis had a cost plus margin.
And then we get small royalty on sales and we participate in their eventual exit for 20% of the exit this is Ben.
Full Circle example of the business the business plan what can be done.
We believe that this product can take us to profitability.
It has very much that potential.
And the numbers speak for themselves, and so this has been a great situation, of course, want to.
Thankfully for the partners, Ikigai and the team at <unk>, who are executing there.
Special skill lies in telling a compelling story in such a way that people can quickly recognize the value proposition and make a purchase decision.
I always tell the story I'd like to watch: people watching the infomercial.
And nine times out of 10.
After they watch it, someone will say:
By that product.
That's the point that's exactly the way it's working so theyre now in Chile, which is the largest nationwide online retailer for pet products of course, Amazon of course direct to consumer.
AD budgets have been expanding, we expect that to continue and everyone's very excited about <unk> because, if you haven't seen it, go to <unk> dot com.
Haven't tried the product? You should make sure you try it.
The battery technology is very exciting.
This is something that worked out, and we worked on it for quite a significant amount of time. There was a group of people who were reclaimed experts who have developed.
This battery at least five years, we think up to eight years of design work that went into making this battery feasible for the marketplace and I would say they are at least 10 years ahead of their time and know that Tesla has really opened up the market for battery energy storage.
Everybody knows about that; what's the rampant?
Paul for renewable energy.
Balancing the grid.
During renewed, renewable energy.
Recharging electric vehicle batteries.
Testing inputs and outputs, so that you can arbitrage the cost of electricity at the lowest time, meaning peak and off-peak loading.
There's a huge opportunity.
Morgan Stanley was quoted as saying that they thought the battery industry would become bigger than the chip industry.
Over the next 10 years, this is a very dynamic space. So, this battery is a sodium-sulfur battery that has a series of features that make it competitive and more attractive than a lithium battery in many ways. Now, we're talking about fixed-site batteries.
That might go alongside an EV charging station.
One that you might place next to your house, or a building next to a window.
Some of them generating wind energy or.
Any sort of renewable energy. This is a great way to store that energy. It's also a great tool for.
For balancing the peaks and valleys of demand on the grid.
And that's, so that's.
Long.
Duration energy storage.
As identified, one of the key markets for batteries over the next 10 and 20 years.
Deal as the World is moving towards renewable sources and essentially electrifying the nation.
So the trick here is to now get into production. We believe in the project.
The team that developed this battery has done the R&D so.
So, we believe that we're now going to be able to replicate that work.
Produce prototypes and move immediately in a pretty short timeframe into a commercial mode now to us commercial noticed first build these prototypes second validate it meet the claims that we were that we have we have had.
Had the privilege of receiving from the development work and we also announced our public announcement that one of the co-developers and builders and engineer has joined our team as well. So we are in the building batteries mode.
I think it's very exciting, as it's a huge market.
It fits a niche market, and the simple takeaway is that it's a better battery.
A better battery.
For certain applications that are currently not met in the market.
And one of the big things that really is attractive about this batteries. There is no risk of runaway fires.
So when you if you haven't seen, go to go to an internet search.
<unk> been putting in lithium battery runaway fire risk and Youre going to get an education, it's pretty amazing what's going on.
So you'll be learning more of that as this advances in its early stages.
But we're very excited about this opportunity for the company.
Okay in summary.
I'll just say, and we'll open this up for questions. It is the greatest, so it's a great time in the history of the company. We are proud of our success. We think we are still just scratching the surface of the opportunities, and we're anxious for the marketplace to recognize us, recognize our financial performance, and we think that over time, the market will.
<unk> recognizes in many ways that our company is undervalued. So, let's pause for a moment and focus on Q&A.
Great. Thank you, Dennis.
Excellent overview on kind of status report of where we're at.
So, we have put together a number of slides here on the financial health and strength of the company.
Can you spend a little time talking about?
Just like the general market and what's going on there. If there is going to be a recession. How has the financial strength of dialogue is going to endure a storm like that.
Yes. Thank you.
Yes, of course, macroeconomic impacts touch everyone at some level. I think the good news is that these businesses have revenue-generating assets or not.
So sensitive to recession.
One of the meaningful things about the pet industry, for example.
<unk>.
Even when there's a recession, people still.
Bill will spend money on their pets.
And the other <unk>, of course.
<unk>.
Agnostic to that because it is a mandate, Pam.
And the EPA is.
Federal government is coming down hard and they're also putting billions of dollars in subsidy into the marketplace.
The customers can get this contaminant out of their water.
Human health is at risk, okay.
So not too sensitive.
And the capital markets, we're always sensitive.
Everyone's afraid of the capital markets.
Then they'll look at the small stock like ours, and say, 'Oh, should I be letting this rise or not?' I think the good news is, with our performance so remarkable and the prospects of near-term performance, I think we will be one of those companies that can actually rise up as well.
As the market is under pressure, that's my basic take.
Alright excellent.
Okay. So we have some great questions here.
One in particular, I mean, I might be able to answer this, but we have a question here about stock price and valuation.
And our investor relations efforts.
What are we doing in the investment community to increase awareness?
Yes, I mean, we do a lot. Actually, we spend real money on getting the word out.
We communicate.
Whenever there is.
Of course, in material news, we're obligated to make announcements, but we're also doing quite a bit on our blog and our social media. It's funny because I hear this a lot from investors; they say, 'I need more press releases.'
And I say, have you read our blog?
When you looked at our Twitter now.
If you look at all the other things that we're doing to put information out, you often hear 'no'.
So.
We would encourage everyone to really plug into all of those networks. Because we are very active, there are also some really interesting chat rooms and social media that I was talking about, which have hundreds and hundreds of people connecting with us.
So we're doing more and more, and I think with the financial performance as well.
We will be in a position to evaluate new opportunities to get the word out.
<unk> conferences and having.
More tools and resources to promote awareness of the company. So, I expect it will rise naturally, and we're certainly committed to it.
If somebody has specific ideas and they want to tell us what they think it is, I'm happy to review those as well. Just send me an email.
Okay, great. Thank you for that, and yeah, just to follow up, we have active promotional campaigns going for IR. We did a really solid job.
Snail, mail campaign at the beginning of the year that was well received.
Interviews were trying to get Dennis on a weekly basis. So, we were just on Benzene, for example.
So look for those.
Video interviews and articles about dialogue out there are quite a few online that we continue to add every day.
Another question here is do we have a ballpark guess on when we'll realize some significant non proof revenue.
Well, we think so.
As you may recall, back in August we announced the start of some large engineering services projects. Our client has informed us that they will be moving forward in Q2. We believe these projects can be significant; of course, we are waiting for our client to pull the trigger and say go.
Very similar to the carrier Italian situation that is.
Based at least six to nine month delay.
But it is moving forward, and there are significant projects on the table. We're anxious to get the first win.
And I think theyre going to be quite meaningful so those so all of those are in.
Potentially in the very near term.
Mrs.
Some of them are long projects that will point out you don't get all the money at once. You engage in work that could take a year and a half, but they are significant and I think they are notable, relative to historical financial performance.
Can match or.
Certainly a multiple of the historical revenue for the engineering group, so it will be quite meaningful.
We are optimistic and confident.
I'd say, "Let's say, we are knocking on the door.
Great great.
Another question around <unk> so.
We understand we don't control when proof might get sold.
However, what is the current thinking in regard to what (unknown) would do with funds from an event like that?
Well, that's a good question.
Yeah right now.
The way we generally think about opportunities like that is, the longer we go, the better it gets.
We've found a channel we found a formula that's working.
Right right right.
<unk> is making all ships rise, and we'd like to see that mature.
Remember, the stated goal of Inception was to reach about $100 million before they would seek an exit.
So.
Estimating something like three to 700 bucks on a multiple of revenue, so it's big numbers.
Beautiful thing is that when that happens if and when that happens, which we believe it has a good chance to do.
It will fully qualify the company.
For let me say it better: It will certainly qualify the net shareholder equity and cash requirements to uplift the company to a national exchange, which by itself would be a significant value proposition for shareholders.
To be able to market the investment opportunity to the broader marketplace of institutional shareholders.
By and large, which now represent at least 90% of the marketplace, are prohibited from purchasing our equity.
So being able to move up to that level would be a big deal. It also would give us the kind of capital to accelerate sales and infrastructure for some of the longer-term assets like [unknown].
Remember that in the odor and odor control category, we have many product designs for multiple markets that would also give us tools to execute all selling channels. We really like the business model of leveraging partnerships, because these partnerships often have significant distribution capabilities, similar to what we've done with Derek.
And the proof.
And so we like those a lot because they create leverage. Sometimes they're harder to get started; they're slower, and sometimes not.
Not as predictable, but when you find the right partner.
We've done the hardest work to get that product positioned in the marketplace, and then leveraging it through distribution, we think the marginal cash flow and profit opportunity are multiples of what it would take to do it yourself. So, we'd like to continue that, and I hope that answers the question.
It's hypothetical, but having that kind of capital base would certainly be valuable for everyone.
And our shareholders.
Yep.
Onto a more specific question.
We had announced a distributor for sales of Cooper dine in the auto paint industry. Is there any update on the sales for that?
Yes.
Actually occurring, there are sales occurring in a couple of accounts or under our belt.
As best I can recall the detail the numbers are not huge yet.
If they were meaningful, we'd be reporting them, but what I can say is that the response from our distributor.
And from the marketplace is surprisingly good.
And so, it's early and it's going to take some time to really build traction there, but we're doing it.
So our internal sales team has really attach themselves to that channel. So that we can mature it out and make that success financially successful and were predicting that it will be so.
Not really much else to report, other than that the efficacy has been confirmed on a number of occasions, including trials with customers.
And that distributor is now <unk>.
Promoting, assisting, and introducing us and our solutions to that marketplace. So, in its early stages, I'm often amazed when you talk about these big distributors.
They're busy; they sell a lot of products and focus on where they make the most money. So when a distributor takes on a new product.
Sometimes, it's slow to get them to focus and redirect their energy to a new product that doesn't have significant history with sales traction. But they all like something new. Then, one day they look back and say, 'Hey, we've got a hot one!' and all of a sudden it gets adopted within the networks. So, that's kind of what's happening, and it's very common where we face.
The same kind of obstacle so hope that answers the question.
Alright.
There are a number of questions about <unk> and AUC, which we'll get to.
Before we do, can you give us the outlook for Clara?
<unk> is being held with other hospitals.
How does the price of bioclients compare to the established products?
Yes, great question.
So.
Again, another full-circle story.
People may or may not realize that we were.
Had our our brains tuned on the role in medicine.
This chemistry.
15 years ago.
And the barrier to entry is so high and so we found our way through that barrier to get FDA clearance. We now have a couple of hospital systems that have purchased the product.
It's called a physician and let me let me describe the mechanics of that is called the physician preference item.
What that means is that a surgeon.
Our wound care professionals.
<unk> that item.
And they choose it because of its feature group.
And in our case the future group is check as we say checks all the boxes as compared to the competition.
So, I think we've done some things.
Really smartly, actually, one way is that we didn't invest in manufacturing. A lot of companies in that space start with building factories, and we didn't.
We leveraged existing outsource capabilities, so that we keep our capital requirements low, and that's caused a little bit of margin, but it gives us flexibility on our nationwide footprint. That's one smart move.
The thing we did is we focus on key opinion leaders clears website youll see a pretty impressive group there very impressive groups.
Key opinion leaders go through a process of understanding and learning, just like everybody else. What's happening now is they have experience doing some clinical work, and you are talking about it.
They have personal experience to be able to call.
<unk>.
The person that controls the formulary for the surgery center or in a hospital or wound care clinic.
Hey, hey, you really need to know about this one. I want to use it.
Once that happens, you then end up with the committee, and the committee goes through a technical review process. In some cases, that can take five or six months. Now, the good news is, once you're in, you're in.
So that's happening.
And that process in the meantime, Steve Harrison the CEO. It clearer has gone out and built a sales channel.
Yep, so I'm going to say the number is about 35 or so reps now on board.
And there are a couple of channel partnerships that are in negotiation, which, if they happen, can be quite significant, and we're again very optimistic about them.
Because.
The feature group of the product checks all the boxes.
All of those; the whole technical explanation, but gentle, broad-spectrum biofilm efficacy.
The idea of residual sustained antimicrobial activity in the wound bed is a big deal. It continues to perform in many cases up to two and three days, with a 72-hour proven residual. Answered the COVID-19 efficacy while maintaining non-cytotoxic claims means it doesn't destroy tissue. Remember, the FDA approved it as is.
Non rents out product.
Non rents you'd have to rent it out and you put it in and you leave it.
And that's a big deal for surgeons, right? Because they're all looking for the edge - the edge for better patient outcomes and the edge for reduced infection rates.
And so this is a product that checks all those boxes and the other thing Thats happened I want to point out to the to the world because you may not realize that I mean, unless you unless you know this world you might not know this one.
The idea that we've known about for these products.
10-plus years.
But the marketplace has shifted.
And the reason it's shifted over this timeframe is that the competition sometimes had really loud voices, lots.
Lots of money and loud voices, but guess what? Their products are falling out of favor.
And the reason they are falling out of favor is because now there's enough history in the marketplace to realize that in many cases they are cytotoxic to skin tissue.
And many have shown systemic toxicity for human-to-human bodies.
And so, what was once a great product in the eyes of the marketplace.
Is now not a safe product.
And so, with that regulatory awareness and clinical example, two things have happened. One is people are more aware of the need for these tools as infection control tools, and the second is that the products they have been using have some drawbacks that they may or may not have fully realized but are now very obvious clinically.
Papers being published, so when we walk in, right.
Right.
In a market that is established for these products, we have a selling differential.
To check the boxes where the competition cannot is a big deal.
So you know as they say timing is everything.
Being patient.
The barrier understands the difference; the future group is special.
Other people start to pay off we didn't overinvest in infrastructure like factories and now we're in a position where we can bring a really high value product to a marketplace and I think the thing I just want to remind everyone. As this is a product that is sold by.
Technical professionals to anD or a wound care nurse.
Technical professionals, so it's a very technical sale. I've had a chance to participate in a couple of them.
Like a lunch and learn for engineering, it is very similar where the products are produced and the response is kind of universal. It's like they go, 'Oh my goodness, I didn't even know that was possible.'
Alright, and Thats sort of the the beauty of the product. So it's got a great future.
He said one day Clear is going to grow up, have a bunch of revenue, and become its own standalone company. I think that's a lot closer than people realize.
We have to perform first, and that's what's about to happen. So, I'll be anxious to see those revenues start to grow, and we will all have a cheer.
Great. Thank you for that.
So, let's change speeds here. We've got a number of questions about some water products.
So <unk> is able to get P fast down to non detect levels.
Tanya is becoming one of the leading voices speaking on PFS in light of that as the biologic of mean, well-known in the <unk> community and.
Our capabilities to provide low-cost, low-carbon footprint solutions.
It's a good question.
<unk>.
It's getting there.
Yes.
If you think about.
The things that we're doing.
Right now, I would say the general reaction would be.
Great idea.
Have they built a full scale system yet in the field that solve the problem of the major level and.
And that's, probably the number one universal objection at the moment.
And so, that won't be solved until we do it, and that's what we're doing with our first project. And so, it's very important. We also have others that we call early adopters, with whom we can do the same thing.
And then also.
Industrial sites, where you don't have to do 3000 gallons a minute.
Smaller projects, where you can really control the size of these units and the Capex there is big units or just massively significant.
We've seen CIS.
Systems installed in the third 30 plus million dollars range, okay.
So when when the.
When the municipal municipal clients are making decisions.
So often they're going to go with what the engineers know to be historically proven and scalable.
They are very hesitant to take on an early adopter, as the technology has not been scaled up yet.
Very high volume, so that's an inherent objection that we face.
So the answer is with our rep organizations and our channel partners.
We are not worried about the volume of prospective customers.
What happens, though, is out of that menu of large numbers, where.
We're focused on meeting the needs where the client has the ability to be an early adopter at this stage.
And that narrows the pool.
So generally, you would say municipals are not going to do it. Although, we have a couple of municipals that may be able to move forward.
Forward sooner, I think the mobile units are going to be very important as well, to be able to go out on a mobile unit because once you see it.
You can see that it is scalable.
If you need to do twice the volume, you do twice the modules.
Due to 100 times the volume, you do 100 times the modules.
It's not rocket science, okay, but you have to do it, and at some level, you have to answer those questions from a credibility perspective, so people can feel comfortable that you're not going to get hurt.
Now, we offer performance guarantees for some people; that will work for others, it might not, so.
Again are we satisfied well, we're doing pretty good I mean, we're recognized expert.
Tonya's work and again we.
We, as a company, decided that it was really critical.
To understand the regulations.
Activity, what it means to a customer teach them so without teaching we're actually we're actually teaching engineers for continuing education requirements. So amazing.
And going through what it is, what it is not, what's going to happen, and what the future looks like, and then having good technology choices. And then, of course, in that, they realize that we have a technology that fits a void in the market.
So it's working quite well.
I think broad adoption.
Is going to be a function of.
Of getting those first couple of big wins under our belt.
And then we'll watch that really expand dramatically. So that's the way we think about it.
Next step for us.
Alright, any update on Aqua co.
Decatur, there had been a proposal out there to a prospective customer. Close to any deals with that?
Well, we think so.
The work there has been pretty intense and awkward, but it's been great.
Got a thriving business and committed to the water space, but not quite in the same business that we are. However, they come across opportunities with clients, and so yes, it's very exciting still, and we've got.
A quite large project that appears to be in the running, so I'm hopeful in the next quarter. We can make some successful announcements about those moving forward, but we're working very closely with our channel partner to see if we can get them done.
Alright.
How many ADC projects can be in motion at any time, given the number of channel partners we have?
Are they able to deal with customers with little or no resources needed from the biologic team?
<unk>.
Yeah. So far so good I mean, the way to think about that is there is there are some only so many hours a day.
And so, we do want to grow that department.
We have more engineering support, and what.
And when we say engineering support, we're talking about selling the engineers, talking on bidding, and scoping in project proposals.
These proposals.
People may or may not realize, but when you make a proposal for a capital expenditure of this nature.
Talking about.
Books that you're right and these little books you're talking about specifying treatment trains, design elements, preliminary design, costing, and timelines, it's quite robust.
And it takes a lot of work. So, we are able to meet that need with the projects that are coming in, but the first thing we do is really try to figure out if it's a.
If it's capable of being an early adopter.
Right, I mean, everyone comes in with their wish list, and then the question is.
Does that wishlist make sense?
Are they going to be able to get through their political decisions at this stage of our game?
And if not, we're going to focus on the ones that we think we have a chance to do that with.
Yes, today it's working. I can see in the relatively short order that we're going to continue to grow the staff we'd.
We'd like to grow the department with sales in hand."
As opposed to grow the department hoped to get sales.
So, we're sticking with that strategy for today.
A lot of pressure on the company to show financial performance.
To me, that means that we spend our money very carefully, and we find our way into that market. Then we have a swell of demand, and we're backfilling to grow and get that right. Now, that is the strategy I think if we were sitting on.
$30 million.
That we could certainly grow those departments with the.
The teams in staffing.
And push it into the market in a bigger way than extraordinary cost.
Extraordinary costs, so right now we're unsure.
At the pool, the other thing I'll mention too is that the figure and Kellyanne relationship has really expanded.
And it's funny; we were good a year ahead, a year and a half, maybe two years ahead on the <unk> business and.
And now the market is catching up to the awareness side, and so because of our intimate work with Kellyanne, who works with all these different projects, Dave actually moved forward with the adoption of our AUC for their industrial clients to focus on pathogen removal as well. It's a big deal.
Remember they've been in business 100 years and with.
Are customers.
And again, given the new regs coming in Paphos.
Anybody that's in an industrial setting - I shouldn't say anybody, editorially - many of the people in industrial water.
Setting of an industry that uses water.
There's going to have to 10 with wastewater.
And likely pause.
So it's a big one, so I'm pretty excited about that, and we are so thankful to be with that team. They just froze at what they do, so.
Should have some wins under our belt soon, and put that question to rest. We also should see the level of <unk> activity increase.
And that's pretty news on the <unk> expansion; it's pretty new – pretty new decisions.
Yeah, and in that vein of thought.
Question here is, can you comment on when <unk> could be ready for a second PFS client?
Oh, yeah, we're ready now.
I mean, we're doing it, we're doing it as we speak.
So Randy is a funny word radios in intellectually ready technically ready staffing and I'm not sure what that means.
We are commercial now, and we can build commercial systems that work.
So, if somebody has a problem and they're capable of saying, 'Yes, at this stage, based on where we're at as a company, then we should do it.'
Nothing holding us back.
Great great glad to hear that the question.
Yes, yes, certainly I'd like to hear that.
You recently said that phase III on the AUC project is nine months away. When will we begin now, as that's the big client revenue?
Well, yes, so phase twos will be pretty nice revenue. So so.
So on phase one we've got some revenue booked in for the consulting project scoping the bidding the pricing all the things that go into that for the customer as well as some preliminary testing on their water, which we did and validated that we can indeed take care of the <unk>.
Phase two, then, is a field unit with staff.
Two began a treatment process to run over time and do the validation work on the design side.
Because that will set the stage for a very large system.
And so in this case, those proposals have recently been fully delivered and scoped. It also includes the treatment system for a.
For some of the large water water outlets that they have.
So, additional equipment. So, that's a big project, and we're hoping to hear from them soon about their desire to move forward with that. They've indicated that they are interested in moving forward promptly.
Of course, it's up to the customer to pull the trigger.
So we shouldn't have soon.
And then, once that's done, it's about nine months to get to the full-scale project or so; let's say nine to 12 months. That's assuming everything stays on target with the timelines. So, we're not positive that it's based.
Based on what we've just described in the proposal.
We can meet that timeline if they are ready to meet it.
And so, that's a big deal: the scope of phase three.
Easily north of $15 million, just so you get perspective, phase two is probably low-end, the half a million.
Hi, and it would probably be about $4 million, depending on the choices that the customer mix.
So, we should have revenue streams, assuming they move forward.
Great and last.
Last question here: the day.
Can you talk about licensing AUC to big water companies.
Yes, I mean, we're open to channel partnerships.
So that might work licensing is a funny theres a lot of ways you do licensing we like the supply chain.
<unk> of that to deliver design.
Because we will continue to.
Refine optimize expand the AC in perpetuity, it's kind of the nature of the Beast.
So, we wouldn't be anxious to make somebody a license for them to reinvent it.
And.
Give up our edge.
So, what we would do is look at the supply chain agreement and a support agreement, where we are a part of that – it's our intellectual property, not theirs.
So would we work with Big Engineering Company has big water companies sure of course, and Thats to me Thats only a matter of time, we've already got a number of interested which is good.
Everyone has the same basic need.
Cut to the chase, you got it. You have to show them that you've scaled the technology.
And you can go to a very high volume flow rate.
And that's in progress as we speak.
We are not afraid.
To be clear, we're not afraid we're not concerned this is what our engineers have been doing their whole career and this one in particular is it's really easy to make an argument of its scalability.
But having said that.
Many, many clients will have a hard time saying 'yes' until it's done.
So it's just the way it is.
Alright, thank you for that.
Yeah, those are all the questions for today.
What is going on with the BK key?
Partnership.
Can we expect some revenue there?
It's hard to know, actually, so this is our.
Our partners.
Including Odin, tell us that their customers like the product.
And that they're having success in trials.
And.
And the same thing for unknown and other reports, we get from our partners is.
Mostly good.
I think mostly because what's missing our sales.
And so, it's hard to predict. That's the unfortunate nature of this business at this stage, as we are heavily relying on them.
Not the other way around.
So, if we can support them, we do. If we can help them with selling, we expand the scope to help them push through.
Barrier to entry, like we had to do.
We had to do that too; just like the odor control business, we had to go vertical and do everything.
When you guys came in to make a deal.
All of the work was done.
All the work is done, and because all the work was done, they've got immediate adoption and turned into revenue. Blink Blink is in 90 days so.
Fixed $96 six months, 90 days, or six months.
Pretty quick, and then, of course, they're singularly focused on marketing a product too - with the big.
So, the big exit potential, and they're very skilled, so all of that plays out to all these, yeah. So, our relationship with <unk> is great, of course, we want more revenue. They paid us, but it's not really material.
Have struggled to get adoption. I think COVID-19 hit them pretty hard. Now that it's kind of over, the question is, are they?
How focused are they?
And do they want to see it thrive and prosper? We do talk to them probably every 60 days, which is good, and we're constantly helping them and supporting them with intellectual knowledge, testing data, and support. So it's active.
And then the question of the million dollar question. That's being asked is when can we expect revenue I have no idea how to answer that.
We don't know if we did we'd tell you.
So they need to go out and get into the market, and I think eventually they will, by the way, just like us when we launched our vertical strategy in the other GSE market, especially on the industrial side.
The first customers NAND, is it hard again?
Got it.
And of course, we now have the proof of claim and technical support. So again, we remain optimistic in all of these.
It's just the sort of the nature of breaking in some way, I would characterize it.
No.
As they say horsecar persevere have some faith.
And we're doing all those things.
Very good. Well, those are all the questions for today. I really appreciate you taking the time and being thorough in the presentation.
<unk> answering.
Yes, let me just close real quick.
Right time of the year right time of the season for <unk>.
I think we believe the trending will continue as it has now for.
A number of years, and so they are becoming material, and so.
We'll keep our nose to the grindstone and keep pushing this through and then know that are.
Interest from other parties and partners is expanding dramatically and we're getting we have a really good reputation in industry and so we're going to protect that and then look for ways to leverage exponential growth and margin.
That's the key, and we've now got enough historical evidence to really be very discerning about how to take those next steps. So, it's a very exciting time in the company and.
Say a prayer that the world economic crisis doesn't block everybody.
And I think there's a lot of optimism there too, even in the face of those hurdles. So.
Erika <unk>.
Thank you Dennis.
Thanks, everybody.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.