Q1 2023 Heliogen Inc Earnings Call
Good morning, and welcome to the Hela your tank.
Leo Jenne, Inc. First quarter 2023 conference call.
As a reminder, today's call is being recorded.
This time, all participants are in listen only mode.
A question and answer session will follow the prepared remarks.
I would like to turn the call over to Louis Baltimore Hello Gents.
<unk> President of Investor Relations for opening remarks and introductions.
Thank you operator, and good morning, everyone. We're glad you could join US today for our first quarter 2023 conference call.
With us on today's call are Kristie O V. I, a daily <unk>, Chief Executive Officer, and Kelly roster, our interim Chief Financial Officer.
Hilliard you initiatives results yesterday afternoon in a press release that can be found on the investors section of our website at <unk> Dot 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 the company's future operations and financial performance.
<unk> implementation of the Companys strategic plan and growth initiatives plans to prioritize sales of the company's industrial steam product and installation of commercial scale projects expectations for scaling the companys concentrated solar thermal technology.
Discussions with potential customers and commercial contract progress.
Actual results could differ materially from those 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.
That could cause actual results to differ materially can be found in yesterday's press release and other documents filed with the SEC by the company from time to time.
During 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 in the investors section of our website.
And was furnished on form 8-K with the SEC.
Play off this call will also be available on the investors section of our company website. This afternoon.
And with that I'm pleased to turn the call over to Kristy <unk> our CEO .
Thank you Louis good morning to you all and thank you for joining us during our last call six weeks ago I shared our vision for how we will leverage the technological innovation as a key region to deliver value and opportunity for our company and shareholders.
Our strategy is grounded in aggressive pursuit of our core pillars of mission driven success.
Clothing sales contracts installing our first commercial scale projects and extending our cash runway.
Every member of the Hela Gen team is aligned on these pillars and job performance as measured by progress against these goals. We have a singular focus that is already yielding results and we are bullish on our capacity to deliver.
Let's dive into pillar number one P. Neogen continues to demonstrate the value of this technology in a substantial role we'll play in the world energy transition to net zero by building a backlog of signed contracts and converting that into revenue.
As we previewed in our last call. Our initial targets are steam consumers and we're focused on projects in the heavy industry and food processing sectors.
To that end, we've already substantially increased our pipeline of projects with multiple potential customers in the queue ranging from qualified lead to due diligence to detailed contract negotiations.
Our target customer 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.
We are seeing meaningful progress, particularly on those early adopters interested in multi phased projects with the first phase being a single module installation with potential for much larger multi module expansion opportunities. After a successful first phase.
We continue to build our backlogs are pursuing sales contracts for industrial steam product, which is he read his products commercially ready for adoption today.
We've established a market ready expect and plan for the steam unit.
However, while we are excited by the market response, the sales cycles for these commercial scale projects is long.
Although we must anticipate a significant lag between contract execution and meaningful revenue generation. Our strategy of building project backlog will allow us to more swiftly demonstrate our product and generate expanded targets.
In addition to direct product sales to be a general leverage our technology positioning in the industry to pursue additional revenue to both reduce our cash burn and to expand our footprint in the marketplace.
Our sales team has been substantially augmented and reoriented to constantly grow our pipeline through a daily challenge on how can we better identify projects that can close and move forward quickly.
In addition, we are leveraging our perspective customers isn't ancillary source of expanded opportunity for.
For example, conducting feasibility studies is one way we are coordinating with customers focus on adopting <unk> technology as a way to decarbonize their industrial processes.
The feasibility study process, where we evaluate factors such as the customer's facilities available adjacent land and direct normal irradiance or DNI allows us to assess in real time, how our technology can augment and further service customer operations.
Practice was to incur this cost as part of the customer acquisition process power.
However, we've now transitioned our process to monetize the results and information from these studies, which holds significant value to the customer and beyond the potential technologies that going forward, we'll conduct appropriate feasibility studies on a paid basis, which has the additional benefit of aligning customer interests with ours by giving them some skin in the game earlier in the process.
Customers are generally supportive of this new structure because it provides a clearer stage gated way for us to jointly move forward.
Key to achieving our pillar of closing contracts is the addition of capacity within the sales team, we've made internal changes, including additions terminations and realignment to better streamline our process from lead generation to execution.
Our regional structure has already allowed us to rapidly deliver proposals into the hands of perspective customers to contact and engage more customers to reach the go no go decisions faster and ultimately to secure more binding contracts.
As CEO I'm laser focused on continuing to improve and optimize our ability to sign new deals and build our backlog.
We will continue to make progress and I look forward to providing you with update as we expand and deliver.
Pillar number two is installing commercial scale projects the installation of commercial scale projects will directly impact our achievement of finding more customers and earning more revenue as well as directly impacting here the agenda profitability.
By witnessing our projects in operation prospective customers will gain increased confidence and the caliber of our offerings as.
As companies adopt the imperative and de carbonization industrial customers deserve to see Healy agenda technology and commercial scale operation and we intend to deliver our first projects as quickly as possible to demonstrate our leadership in the field.
As part of this effort back in April we began high volume heavy is that production at our automated manufacturing facility in long Beach, California.
He just asked when this first production run will be used in our proximal hydrogen project in Lancaster, California.
Our newly published long Beach Lookbook provides a detailed perspective on the manufacturing facility and its capabilities you can find that on the presentation section of our Investor Relations website.
We continue to make rapid and confident progress towards this proof of viability, which will increase the ability of healy agenda to deliver new customers and new revenue.
That brings me to our third pillar in our strategy.
Central to our mission of delivering value is the extension of our liquidity runway.
As we discussed in our last conference call, we have sufficient liquidity to reach mid 'twenty 'twenty for.
The extension we've achieved thus far was made possible by a number of Opex and Capex changes, we reduced our head count by approximately 15% as we simultaneously adjusted our financial resources and our talent to focus on the areas, where they can make the most immediate tangible impact.
We cut a significant portion of our R&D efforts, which is reflective of our shift from technology development to project delivery. We also deferred further capital expenditures, which we can ramp back up once we build a larger backlog of contracted projects.
These cost reductions were implemented near the end of the first quarter. So the impact of these efforts will show up in our financials starting from the second quarter of 2023.
We will continue to work to find additional opportunities to reduce our cost structure and non dilutive ways to extend our liquidity runway as we raise additional capital to support our strategic plans.
Combined with building, our backlog with contracts and our delivery of installed commercial scale project. He neogen is poised to continue operations and positioning the company for growth.
With that I'll now hand, it over to Kelly to review our financial results.
Thank you Christie now I'll turn to our first quarter results he'll he agenda reported one $9 million in revenue and contracts in progress for the first quarter. Most of this revenue comes from our Capella project for Woodside energy in the U S Department of energy, we recognize this revenue under percentage of completion basis.
In relation to the cost incurred for the project in 2022, we earned approximately $12 million in revenue from the Capella project as we spent against our partnership with Honda and other key equipment suppliers.
As we are now in the front end engineering and design or feed stage.
Most of the spending is focused on professional services, which cost less compared to capital equipment that encompass the bulk of our spending last year as we get closer to the end of this year and into 2024 will begin ordering additional capital equipment for this project and as a result, we expect to recognize higher revenues at that point.
From a corporate perspective, our SG&A expense included a recovery of $12 $5 million in expense related to Unvested stock options that were required to be forfeited by our previous CEO .
Now I'd like to turn it back over to Christie for closing remarks.
I'd like to conclude these remarks by thanking you all for your support.
Look forward to delivering on our goals and strategy I outlined for you today as we work to fulfill heavy agenda mission of reducing the world's carbon emissions.
Thank you for your attention and I welcome your questions at this time.
Thank you we will now begin the question and answer session.
Ask a question you May press Star and then one on your telephone keypad.
You were using a speaker phone please pick up your handset before pressing the keys.
And two with crowds. Your question. Please press Star then two at.
At this time, we will pause for a moment to assemble roster.
Yeah.
And our first question today will come from Rob Wertheimer of Melius Research. Please go ahead.
Thank you and good morning, everybody.
Hum.
Morning, Rob good to talk to you.
You as well.
On SG&A you've done.
Done a lot I know theres hard decisions there.
Run rate.
The adjusted number I guess this quarter reflective of where youre going to be a 13th or 14th Theyre still action going on within the quarter that we should think about a leaner rate for the rest of the year.
Yeah, absolutely. So yeah, we do expect to have a leaner rate for the rest of the year. So I'd be looking more to our Q2 financials as being more of an indicator for where we'll be for the rest of the year as compared with Q1.
Okay.
And then just could you review for Us your proxy.
Project.
The time to revenue.
Production is interesting.
Total total budget, if you would and I'm not sure if you have.
Equity partners, there or not.
Yeah.
Yeah sure. So the cost of a project. We're very excited about this project and partnering with the city of Lancaster to execute that we were pleased to participate last week in a big event that they have with their Pacific hydrogen.
And and look we're really excited to be part of that solution as part of their becoming a hydrogen hub for the region. So in terms of where we are the project. We're in the early stages of design engineering, we are known for that.
Who may not be familiar that's the the hydrogen facility that we are using helio Jens steam units.
To deploy and that's what we'll be feeding the electrolyzed or in partnership with Bloom energy.
And for that project, we expect to break ground towards the end of this year early next year, but what's driven what's driven that timeline is really the permitting.
And we have a number of permitting activities going on we're making good progress there.
And then in terms of the overall timeline once we break ground.
The critical path overall for the projects beyond permitting is through long lead equipment items and so that's really what's going to drive the schedule, we feel confident about our capabilities and our ability to execute and we think this will be a really wonderful flagship project for us once completed and in the meantime, we're pleased to share that.
The kind of early adopters that we have in our pipeline are not waiting for approximately to be completed for us to move forward on phase one of the types of projects that we're looking to start on.
Okay.
That's great. Thank you I'll, just do one more and I'll get back in line, but.
I was going to ask about you had last quarter you were talking about.
Engineering services are potentially very large or a large long term customers.
I was going to ask you about progress points in timeline for that because I believe it was fairly early in their last quarter.
Thank you have a.
The amount of doubling so I wonder if you can comment on that.
And then.
Yes.
Earlier our.
What was it that were very helpful, but just.
How many you have hurting.
Hurting I think he used of contract negotiations.
Yeah.
Serious serious stuff.
Movement down the path here, so anyway, sorry comment on that long term customer and how they fit within the whole mix of Europe Central Bank.
Yes, Okay, Oh Oh.
I'll tackle that first one.
That you asked initially on engineering services contract that we talked about a little bit on the last call them. So yes. We are getting started with that so that's going to be something that we'll have some in.
Q2 revenue coming from the most exciting aspect of that contract is that it really is.
Addressing opportunity that we consider to be kind of part of the Holy Grail of what have you done the technology will be able to do in some of the long term aspirations that we havent really that fit with overall energy transition and de carbonization for heavy industry is this focus on okay. How do you focus on the.
Hard to abate emissions reductions for sectors, such as the cement industry, California for lithium extraction. So those are the kinds of things that this.
Engineering services contract is going to be geared towards and so that's the most exciting element of it.
Given that you know when when he neogen first demonstrated its successful.
Proof of the IP working at our Lancaster facility that already exist in California, and that's really what the what the premise of helium technology holds and in the near term as mentioned we are focused on this pipeline.
Steam units switches are commercially ready available products now that's what we're focused on getting into the market today at commercial scale, so to transition to answering that question.
Where we are in the pipeline I'm pleased to share that we have advanced a number of qualified leads to I would say seven to 10 that are in the pipeline of these various stages of negotiation into the definite project definition and in commercial negotiation stage. So we're at that stage with this round.
Seven to 10 projects that are already there that we've already qualified in the last couple of months. So we're really pleased with that progress and look forward to reporting more out it would be close closed contracts on later in the year.
Thank you Christy I'll get back in line. Thank you.
Thanks, Rob.
And our next question today will come from Jeff crop of Alliance Global Partners. Please go ahead.
Good morning, Thanks for the time.
Was curious Christy your last comment I think you said seven to 10 leads that sound like they're off later stages is the right way to put it maybe that's too aggressive but it farther down the path there may be some others. It is there any kind of other metrics you would be comfortable sharing about within that seven to 10 or broadly about the pipeline just to kind of better get our arms around it.
You know kind of the size of this pipeline for you guys and kind of on a related topic. How many do you think is a realistic number for you guys to manage and kind of the near term given both I would imagine capital.
On human capital constraints of running the business.
Now what's the what's a good number of projects that you guys would like to be moving forward to and kind of the near medium term.
Yeah I think.
Jeff. Thanks for the question is if we.
We can get a couple of projects.
Signed and into the contracting phase before the end of this year that would be a huge measure of success and then increase over what we did last year in terms of the quantum of what's in the pipeline you know one of the things that I mentioned in the initial remarks is that we have this this kind of framework of <unk>.
<unk> with a kind of a single module all commercial scale implementation and we're calling that phase one and then phase two with many of these customers becomes you know phase one being the tip of the spear and then phase two is after the phase one the larger scale and where we get the economies of scale commercial scale commercial.
Commercial scale execution of a larger pipeline behind that and so that's the model that we're in these discussions with a number of customers on and so hopefully it gives you a little bit of perspective. So if we're talking about you know in in.
In the Grand scheme of things the under a megawatt for something for each of these.
Kind of first phase installations, and then maybe the second phase becomes you know in the in the tens of megawatts, that's kind of the order of magnitude that we've been talking about we also have other larger scale prospect on the horizon. So for example, we've talked before on prior earnings calls about the Brenda solar energy.
Which would have the capacity to support very large scale projects that are in the 200 megawatt equivalent.
Order of magnitude and so we start to look at you know a lot of opportunities. There we've had reverse inquiries from equity investors interested in participating in that project and so we have a number of things on the horizon there.
Got it that's very helpful. Thank you and.
Oh My other question can you give us kind of the latest timing updates or projections on the Capella project, how we should think about that timeline.
Progressing towards commissioning or other key milestones, we should be keeping our eyes out for between up between now and then thank you.
Yes, so capella is in the stage design engineering and as we've been working through that process with our partner Woodside energy one of the key milestones will be completion of the front end engineering design or feed stage and so as we complete that later this year that will be the trigger.
After which we'll be prepared to place a lot more of the long lead items and that's going to be what drives the bigger increase in revenue that we expect in 2024. So we really expect both the revenue the groundbreaking a major long lead equipment items, that's going to all be something that you'll see ramp ramp up in 2024 after we.
Fleet. The front end engineering design study that is going to be wrapping up later this year.
Got it understood very helpful. Thank you.
Hi, Thanks for the questions Jeff Yeah.
Thank you and our next question is a follow up from Rob Wertheimer of Melius Research. Please go ahead.
Alright, Thank you and Chris Thanks for all the comments around the work Youre doing on sales generation in the backlog.
<unk> been pretty transparent about it so I'm not trying to dig for more details on that exactly but I am curious on the seven to 10.
Opportunities prospects processes that you're running right now.
How has your changed sales process helped to kick those off or not I mean were those seven to 10 that were there you know nine months ago.
Coming to fruition.
Or has how you revamp.
Revamped both I guess the product and that is in the process led to a faster pace on things entering our sales funnel unhelpful.
Yeah, Rob that's absolutely been the case and we've seen really within these last three months, we've been able to accelerate those from where we didnt actually have them meaningfully in any sort of lead qualification of our generation process to this stage just within the last couple of months and so we're really pleased with that progress.
One of the things that has made that possible is this revamp sales effort, where we're able to qualify leads more quickly and get proposals into the hands of customers more rapidly than before and the key to being able to do that has been the fact that we've locked in our our products. We now have the spec the execution plan for.
Our steam unit and that's something that customers can now see consistently from us which is not which is not the case previously before a couple of months ago and so that's something that we look forward to continuing to expand and of course, you can imagine that we've got a lot of new prospects and leads that are continuing to enter the pipeline. So we look forward to that number being a lot bigger over there.
Next couple of months.
Yeah.
Okay. That's fantastic. Thank you and one one last one.
I think you said you entered.
For us I don't know how long ago, the factory or if you anticipate making any stats for other projects yet this year and that will all be done there.
Hey, Rob would you mind repeating that for somebody I don't know if it was on our end of year end, but we lost your audio for a couple of seconds on it at the beginning so if you could just repeat the question sure.
Beg your pardon so high volume manufacturing for Proxima I'm not sure I know how many steps that project takes I don't know how long that will kind of keep your factory running and whether you anticipate at this date anyway, the potential to make helix.
Projects yet this year.
That's all.
Oh, yes, okay got it yeah. So I can say that given given the capacity that we have in our long beach manufacturing facility and the world class a facility that we have.
He is that production will not be or a rate limiter for being able to execute projects over the next couple of years.
I will say that for proxima given the scale of that project, that's going to be you know in the kind of thousand thousand heliostat range. So it's not a huge number of heliostat, but where it was it was so exciting for the whole team I mean, we had a great a great opportunity to watch the videos that coming off the line from the fully.
<unk> qualified manufacturing line for the first time and that was such a energizing moment for the entire team and so we're looking forward to ramping that up a lot as we start to actually find other contracts going forward.
Perfect. Thank you so much I look forward to hearing news as it develops and then the next quarter I appreciate it.
Sounds good thanks, Rob.
At this time, we will conclude the question and answer session.
I would like to turn the conference back over to Chris Christie L. P. I asked for any closing remarks.
Thanks Alessandro.
We've been so energized by all the positive support that we received from investors that are reaching out and.
Kind of reinvigorated and excitement for the business and we look forward to updating everyone more as as time progresses. So looking forward to sharing more updates and thanks, everyone for your attention.
The conference has now concluded we thank you for attending today's presentation and you may now disconnect your lines.
Okay.