Q4 2022 Heliogen Inc Earnings Call
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Good morning, and welcome to the Hela Region, Inc, fourth quarter and full year 2022 conference call.
As a reminder, today's call is being recorded.
At this time all participants are in a listen only mode.
And answer session will follow the prepared remarks, I would now like to turn the call over to Louis Baltimore, Julia Jentz, Vice President of Investor Relations for opening remarks and introductions.
Thank you operator, and good morning to everyone. We're glad you could join US today for our fourth quarter and full year 2022 conference call.
With us on today's call are Kristie L. B I S <unk> Chief Executive Officer.
And Kelly roster, our interim Chief Financial Officer.
He'll neogen issued its results yesterday afternoon in a press release that can be found on the investors section of our website.
Com.
As a reminder, our comments on this call include forward looking statements, which are subject to various risks and uncertainties.
These statements include expectations and assumptions regarding helio, Jens future operations and financial performance, including implementation of heel agents strategic plan and growth initiatives.
Plans to prioritize sales of Helio, Jim's industrials team product and installation of commercial scale projects expectations for scaling the hilli urgent concentrated solar thermal technology discussions with potential customers and commercial contract progress.
Actual results could differ materially from that was contemplated in the forward looking statements any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.
Factors that could cause actual results to differ materially can be found in yesterday's press release and other documents filed with the SEC by Helio Jen from time to time.
This call. We may also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.
More detailed information about these measures and a reconciliation to the most comparable U S. GAAP measures is contained in the press release issued yesterday, which is available on the investors section of our web site and was furnished on form 8-K with the SEC.
A replay of this call will also be available on the investors section of our website. This afternoon.
Before I turn it over to Christy I want to first welcome her to her first conference call as Helio Gen CEO .
Yeah.
Good morning to you all.
There were two things that brought me to hear the agenda, a little over two years ago.
First was the innovative technology, which is uniquely suited to respond to the global de carbonization effort. The second attribute with the quality of the incredibly talented team I joined Dennis CFO as our new CEO I'm laser focused on the current reality.
In order to harness and sell this transformative technology, we must first unleash the collective superpowers that this company.
He neogen does not lack for innovation, which was stage one of the Companys lifecycle.
But our mission critical for stage, two is commercializing and monetizing our product to create value for heavy industry that changes the game for our customers and puts us at the epicenter of producing 100% carbon free solar thermal energy.
As CEO my responsibility as straightforward and exciting.
The goods to customers and grow he reagent revenue backlog.
My track record of delivering and building large scale energy projects positions me and he'll be adjourn for success.
And we are already seeing the effects as we take care of Neogen into stage two.
He region closed the year 2022 facing fundamental challenges, but with a clear line of sight on how to course, correct and ground we.
We identified several areas of traction, but fell short of achieving our most important goals for the second half of the year, which were to close at least one additional contract and to break ground on our first project.
Some of the challenges we faced were external and reflected the constraints facing every public company in this environment.
He needs. It also confronted internal issues that impeded growth and we've made key changes to address these obstacles.
Our stage two mission is clear.
From the technology development phase into the project delivery phase all of our effort is focused on this mission.
In recognition of our reaffirmed mission our board of Directors asked me last month to succeed he reagent Sandra Bell grass and serve as Chief Executive Officer.
The Board's decision was step one in our mission to shift into project delivery.
And it reflected the lifecycle of other technology companies when they experienced challenges transitioning from earlier stages of innovation into commercial deployment and execution.
To meet our stage, two Mercian and project delivery, our team must incorporate market feedback to expand our customer base streamline operations and improve our financial condition.
I'm honored to lead Healy agenda at this pivotal moment and I appreciate the calls and emails of support from our investors and employees together, we have a shared vision for heavy agenda success and that success will be built on three pillars.
Clothing sales contracts installing our first commercial scale projects and extending our cash runway.
As CEO I've taken immediate steps to focus our resources and operations on achieving these goals.
Our first pillar for stage two success is the most fundamental.
Sales.
Your general closed sales contracts by responding to changing market conditions, including the inflation reduction Act, which has turbocharged the demand for green hydrogen and other clean energy technologies. This massive federal program has greatly expanded the opportunity set for our steam product much sooner than we had originally envisioned.
We don't have any agenda innovative technology will play a substantial role in the worlds energy transition to net zero and the industrial customers who are focused on this milestone once we have to offer.
However, we recognize the best way to demonstrate this to the market is by building a backlog of signed contracts and converting those to revenue.
We aim to capitalize on evolving customer demand and emerging market conditions generated by the IRA and ancillary opportunities we've already begun starting to convert these openings into sales and I'm pleased to announce Helio. Jen has recently signed a contract for engineering services for a potentially large and long term customer who is also a huge investor.
This engineering contract with a rapid response to our outreach to this potential customer and our newly revised operational efficiencies allowed us to close the agreement quickly.
Likewise, our near term sales efforts will focus on moving with speed and leveraging our most available product for adoption that is our industrial steam products because it can have the greatest commercial impact in the shortest timeframe, while helping our customers achieve their emissions reduction goals.
This one product also has the unique ability to provide zero carbon energy for two critical applications. One it can provide steam to be used directly in industrial processes and two it can provide steam to produce green hydrogen when paired with solid oxide Electrolyze yours. These attributes will allow us to focus on our long term.
Hydrogen goals, while driving short term revenue.
This first pillar of clothing sales contracts will be a vital and permanent lessons for our project delivery mission and we have a newly revitalized salesforce with a singular focus on generating a sizable backlog of contracts too.
To achieve project delivery. We are also laser focused on the installation of our first commercial scale projects.
Investors will gain increased confidence in the quality of our products by seeing our projects in the field industrial customers need to see de carbonization technologies at work.
We will meet our goals by putting our product into operation.
Our perspective customer base is divided into three cohorts.
Early adopters ready to move.
Those who want to see full commercial scale projects first and those who want to license our technology base.
By focusing on project installation as a core imperative, we can leverage data from completed projects to unlock demands in that second cohort for whom operating commercial scale project is a must have selection criterion.
He region is prime for success because this list of prospective customers is quite long.
And our shift from technology development to project delivery, we will be aggressive about converting this less from perspective, the contracted as a driving strategy for success.
We are confident that getting projects in the ground will usher in a larger customer base ultimately charting the path for companies, who want to license our technology and build it themselves.
We are well on our way to implementing the second pillar in November of last year, We announced a green hydrogen production project that we intend to build in the city of Lancaster, California. This project will ensure we get a commercial scale project in the ground quickly regardless of the sales cycle there.
This will give us both steam and hydrogen production data, we can use in our future sales efforts along with the source of revenue we call. This project Proxima, we've completed the preliminary plant configuration design and we've secured a site, while we work to permit the site and secure an offtake partner.
Once we secure a contract with the off take partner, we plan to raise project level equity to fund the project.
In the meantime, we have a dedicated team focused on finding deals with early adopter customers, who are open to starting with a single module deployment, which we expect will lead to larger installations. Once they experience the benefits of Healy agenda cutting edge technology.
In addition, we're revising work streams to center this operational necessity and our workflows.
Combined with our sales bogus installation.
Installation will support a viable path to sustainability for the company.
The three pillars of our strategy are integral to one another and none more so than part three improving our financial position by.
By cutting costs streamlining our operations and focusing our efforts on driving tangible immediate results, we can meaningfully extend our liquidity runway.
This should give us the time, we need to deliver on our sales projections.
Install more commercial scale projects and put us in a more advantageous position to pursue our future capital raise that should take us to cash flow breakeven.
During my short tenure as CEO , we've undertaken critical steps to shift is toward extending our liquidity runway.
Although he didn't have sufficient funding to meet our obligations through early 'twenty 'twenty four under our previous plan I've tasked our team was implementing a runway extension strategy to drive that timeline to late 'twenty 'twenty four.
For example, we have quite a significant portion of our R&D efforts, which meaningfully reflects our shift from technology development to product delivery.
We're also deferring further capital expenditures, which we can ramp up once we have additional sales.
In addition, driven by our strategy. We've also just taken the difficult action to reduce our head count by approximately 15%.
We're allocating the majority of our financial resources, and our talent to the areas, where they can make the most immediate tangible impact.
That being said, we've also created a small group with an R&D, who can still work on innovations, which drive future generations of our technology.
By cutting costs streamlining our operations and focusing our efforts on driving tangible immediate results, we've already identified significant cost reductions toward our goal.
By implementing these actions, we expect our liquidity to take us into mid to late 2024.
As he reagent demonstrates progress on our stage two mission guided by the three pillars of closing sales installing projects and improving our financial position I expect to see a substantial transformation and healing agenda economic future, we should be able to measure our achievements and additional interest from prospective customers, which in turn should elicit additional interest from invest.
<unk>, who have been waiting to see more tangible progress and all of this will be reflected in increased viability for huge N a virtuous cycle.
Along with favorable market incentives this should enable us to raise additional capital in the future at potentially more favorable terms than would be currently available to us today.
Now, let's talk about the other operational and execution progress that we've made as a company since our last earnings call, including some additional accomplishments from Q1 2023.
You may recall that as part of our third quarter 2022 earnings release, we announced that we completed the initial field testing of our autonomous vehicle Cherry Avs autonomous cleaning functionality.
Which is one of our execution milestones for 2022.
Cherry and Avi Queens of mirrors autonomously at night, just as we intended.
After validating this functionality onboard the vehicle it came time to validate its usability and a customer environment. We did this by handing it over to our internal projects team to operate just like a customer when using the same documentation and receiving the same training. The vehicle is now successfully accumulated over 125 hours of operational life and over 25 mile.
Traveled since the beginning of the year.
Having completed field validation of the autonomous and nighttime functionalities, we've decided as part of the cost reduction initiatives that I mentioned earlier to pause further development of the autonomous cleaning vehicle effort until we close and advance additional sales of commercial scale projects I'm proud of our team for the great work on us and pleased to share with you.
This video of the chariot Avi in action.
We've also made great progress on the design of our next generation Heliostat, which are intended to cost significantly less both to produce and to install. This next generation heliostat is a critical part of our margin expansion strategy. The tea leaves that we'll exit our factory fully assembled and look higher packing density.
There'll be produced out of less material and there'll be able to be installed autonomous Lee in the field.
Instead of using parallel concrete trenches to secure the heliostat to the ground, we design them to be pin to the ground using what are essentially large 10 six.
As a result of these improvements we expect these heliostat to cost Healy adjourn significantly less than our current generation heliostat, including production transportation and installation without any negative impact to their reliability.
We recently successfully completed our first automated installation test of these gen five heliostat at our demonstration facility in Lancaster.
And with that I'll now hand, it over to Kelly to review our financial results.
Thank you Christie now I'll turn to our fourth quarter and full year 2022 results Healy adjourn reported $4 $7 million in revenue on contracts in progress for the fourth quarter, bringing our full year 2022 revenue to $13 $8 million. This was near the high end of our revised revenue guidance.
For the year for which we had provided a range of $12 million to $14 million. The vast majority of our 'twenty 'twenty. Two revenue is from our commercial scale contract with Woodside energy, who remains a strong partner for us.
As we work through our strategic priority. Thank Christie outlined earlier, we have chosen not to provide guidance for 2023 and this time. This is deliberate as we believe it is important for us to rebuild credibility as we aim to grow our revenue and signed more contracts this year and beyond we look forward to announcing his accomplishments as we may.
Before we open the lines up for Q&A I'll turn it back to Christy for closing remarks.
I'd like to conclude these remarks by thanking you for your support I look forward to delivering on the strategy I outlined for you today as we worked it fulfill helium mission of reducing carbon emissions. Thank.
Thank you so much for your attention and I look forward to answering your questions.
At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
Debuted using speaker equipment, it may be necessary to pick up your handset before pressing the star.
And our first question comes from the line of Rob Wertheimer Melius Research. Please proceed with your question.
Thanks, and good morning, everybody.
Christian you had in me and the <unk>.
Slide deck and you mentioned in your prepared remarks of signed contracts for engineering services for potentially large long term customer. She said, there's also an investor can you give us any color around that is that simply exploratory as it related to potentially you know real projects that you know maybe any any detail on the the way that was structured in.
The idea behind it thank you.
Hi, Rob Thanks for the question, Yeah happy to expand on that so yes, we're looking forward to starting work on this engineering services contract. The nature of the contract is to do development work in an early engineering design related to Cal signing and that the company that we've got this contract.
It is a portfolio company of the non group, which is doing some really innovative work and renewable energy, including next generation materials for the energy value chain and so really this contract serves as a commercial proof point that he neogen long term strategic goals are attractive to the market and high growth areas like Cal binding, which is a process used in processing.
Battery materials and other critical material input.
And that work is actually also consistent with our recent selection by the department of energy to receive a 4 million dollar award related to Calpine, which we mentioned at the end of last year and so our team will be assessing and applying synergies there as appropriate but yeah. We're really excited about that that contract and the prospect that it brings for us for the long term.
Perfect. Thank you and I had a few others. If I may can you give us a general update on the timeline of what time.
Yeah, absolutely I'll take that one to Rob them on on the Woodside project. That's the Capella project in Kern County, California, Woodside remains an incredibly strong and committed partner for us and we've been making great progress on that project. We are in the engineering design phase and also working.
Through the permitting process, that's all going well and we have expectation to start construction on that project and 2024.
Okay.
A few more if I may I think you mentioned in your prepared remarks, you'll see that there's the three buckets of potential customers, including licensing do you have any.
Expansion on that potential for licensing what kind of partners might want to do that whether you need you know a number of installations first before licensee as practical or how you think about that potential opportunity.
Rob that's a great question you may recall that early on and you know even even starting several years ago and Helio Jens trajectory licensing has always been a part of our long term desired business model and what we've found you know our expectation has been that there's going to be a cohort that I mentioned in my.
The remarks that well, one well want to license and we've actually found that there are some that have reached out to us proactively looking to explore the opportunity of licensing, particularly in other parts of the world that weren't on our near term strategic priority list and that includes places in the middle East where the solar resource is.
And so we are open to exploring those kinds of things. We've had several parties are proactively reach out to us on that and so we're exploring what that looks like we do expect that some parties will want things like guarantees and operating data in order to enter into licensing agreements, but for the ones that are currently reaching out we're absolutely open to that on an opportunistic basis.
Especially if the the DNI you know the solar resource is high for a particular area and the avoided cost is something that makes sense for us.
Okay perfect. Thank you.
And then I had one more on sort of a backlog of potential orders before moving to cost structure, if I could.
Just obviously if you sign an order there is the whole design and engineering phase, there's environmental approvals et cetera. So are you able to give us any.
Further detail or any thoughts on how your prospect pipeline stands. If there are 123, many potentials that could come into construction in 2024, when you think about balancing that versus your cash runway.
Yeah. Thanks for the question. So there are definitely some things that we have that could come into construction in 'twenty 'twenty four and what I would say is the fact that we're now focusing on our most available product are most ready product, which is our steam unit means that it opens us up to <unk>.
Other opportunities of shaping a module that is smaller and more nimble and so we've we've done some adoption of our technology to make it more attractive to early adopters with a smaller commercial scale module and that comes with a significantly lower price tag to match or beat their avoided cost of fuel and so what we found is that this helps with.
You know, helping customers get over that perspective timeline of integration and being able to see the perspective of real operating data and to better navigate this the smaller unit will allow us to start something that could be earlier and so yes, we absolutely have prospects that could go into a construction during 'twenty.
Four depending on the location and of course as you're probably familiar there are parts of the U S and other parts of Mexico, and things like that where there are easier to permit location than others and so wherever the lowest hanging fruit is that's where we're gonna be focus.
Okay, perfect I had known about the smaller scope combined with a focus on.
Steam generation is that hydrogen focus towards that have interest in the smaller project scope and cost from more industries than just hydrogen.
Yeah, the benefit of our steam unit is that it can actually be used both for industrial processing, which you know in areas like consumer themes, such as then in food processing and you know where we're talking to for example, a company that manufacturers animal food and this is an area where that kind of theme is used.
We also have opportunity to use the same unit in pretty thing at green hydrogen and when paired with an electoral either and provided with the the augmentation of powder.
And so that that genie and it can be used for either of those purposes and it really gives us a lot of optionality and the other benefit of the seam unit is you know when you heard US talk a lot about our standard five megawatt module that was more of a a.
A constraint from a power module standpoint, where the smallest available commercial scale.
Turbine that can run with reasonable efficiency is in the five megawatt range, which is why that was the smallest unit that we typically consider for a power project, but for a steam unit, we don't have that constraint and so it opens up a lot more possibilities, which also then gives way to faster timelines for installation. If we want to do you know are a commercial scale module.
For a customer that is in the near term.
Perfect. That's very helpful. Thank you. So just just to more to close out on the finances.
$6 9 million asset impairment charge is that related to you know potential.
Production you just started up four four for Rio.
Or something else and does it indicate anything on our prospects on that on that particular potential.
Hi, Rob This is Kelly. Thank you for the question, yes of the $6 9 million Youre, referring to the majority of this is related to capitalized costs related to the Rio Tinto project.
Yeah, Thanks, Kelly and I'll I'll add more color to that dialog with Rio does remain open and in fact, they've been proactive about reaching out subsequent to our leadership change, including having new team members on their side visit our site in Lancaster, but at this point without a finalized contract our chief commercial officer, Tom Doyle is directing his team.
To focus on them and their efforts on other prospects, where we see a fresh path forward to lock in contracts and so we made the decision to take that write off at the end of 2020 to you on the REO Capex and you know we remain very supportive of REO and their de Carbonization plans and remain open defaulting them into our project deployments in the future.
Perfect and then my last one Christine you've obviously outlined some of the potential to extend your runway.
I assume.
The R&D you've done in the demonstration facilities you've put up.
Wow, you to kind of move to commercial sales without trying to invest in future technologies at the same rate as that runway extension largely you know.
The announcements you've made on 15%.
Employment cut in R&D is there anything else that plays into that and how do we think about your quarterly expense rate I guess not so much for Cuba represent a very good <unk>, but as you may remember that <unk> three chip.
Yeah, absolutely, Rob you're exactly right. The four key results on cash burn do not reflect our pace of spending going forward and we've already identified significant savings in the source of those savings are from actually a combination of things it's from operating expenses, including some of the R&D work that where we're limiting our.
Focus on R&D activity and it also comes from deferring capital expenditures, where we had in our previous plans to expand our manufacturing facility and we're going to wait until we have additional sale contracts locked in and so we will not be you know accelerating.
Accelerating any manufacturing capex until we get those orders online. We also have as I mentioned taken the difficult decision to release about 15% of our employees and so it's a combination of all those things and we want to make sure we're positioned to deliver and I think that going forward. We're.
To be in a stronger position to be able to reduce our our spend given on our narrower strategic okay.
Wonderful Chris Thanks, so much for the informative responses I appreciate it thanks.
Thanks, Rob.
Sorry, our next question comes from the line, Jeff Grant with <unk>.
Global Partners. Please proceed with your question.
Good morning, Thank you for the time.
Was curious to maybe start on an approximate project in Lancaster, you guys mentioned preliminary designs completed and working towards permitting there.
Any kind of early projections on what the go forward timeline looks there in terms of what that permanent process looks like timing for potential offtake partner or is that is that a 2023 event realistically or how do you guys kind of see that playing out.
Yeah, Yeah, Great question. Thanks for the question and good to speak with you. This morning.
So on the path to a product yet we're very excited about that prospect and the fact that we'll get both the steam and the hydrogen covered on that prospect.
In terms of timing, yes, it will depend on both permitting and also lead time for equipment, but absent constrains on those you know if there weren't limiting factors on either of those two areas just to give you a sense of the timeline. Our single module steam unit that would go into that pairing with the Elektra wise there can be installed within a few months and so the timeline is.
Quick abbs and permitting of lead time for equipment, and we look forward to updating on those milestones as we go forward.
Yeah.
Got it thank you and on the the Gen. Five helio stats certainly some encouraging news there or would you say those are kind of commercial ready. If you will in terms of future installed installations or is there some more work to be done internally and kind of a related point any kind of cost quantification that you guys have in <unk>.
What that would provide you going forward.
Yeah, absolutely great question. So on the Gen. Five here that I'm really proud about what the team has been able to accomplish there and there is still work on the manufacturing side to be able to implement the design on the capex that we'll be implementing the gen. Five the heliostat vine at how that actually gets rolled out.
Air manufacturing facility, but from a timing perspective at Flanders up well with the perspective for future contracts, including the existing contract we have with Woodbine on the Capella project and so that timeline will meet what we need for delivery to the field and so that's the nature of the work that has to go on the Gen. Five he is back.
And from a cost perspective, the delta between the Gen. Four he is that in the Gen. Five heliostat when you consider both the cost of the materials the production the transportation and the installation of the entire heliostat deal, it's about a savings apples to apples of about 75% for the heliostat it.
And to give you some perspective, the heliostat feel represents depending on the nature of the project anywhere between you know typically in 15 and 30% of the overall project cost so with the significant improvement that the team is able to deliver here.
Great I really appreciate that color and if I can sneak one more in I know, it's there's only announced a few weeks ago, but any kind of early findings or takeaways you'd care to comment on regarding the corporate strategy Committee or would you say some of the commentary today is kind of embedded in how some of those conversations have been.
Yeah, Jeff I'd say that's spot on is exactly as you said the committee has been incredibly supportive and the the remarks from today reflect the you know the the oversight and the support that we've had from the committee and you know really looking forward to continuing to flesh that out and looked at them going forward.
Great. Thank you for the time today.
Thank you Jeff.
And we did have some questions submitted via email however, they've been answered already I will now turn it back over to Christie for her closing remarks.
Wonderful. Thank you well really appreciate everyone's time and attention. This morning, and all of the support that we've had from people, calling in an email and but we're really excited and our entire team is energized by the strategic goals that I outlined for you earlier on the call and look forward to delivering and updating you in the months to come.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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