Q4 2023 BioLargo Inc Earnings Call
Greetings.
Welcome to borrow Largo annual fourth quarter of 2023, earning results conference call. At this time all participants are in a listen only mode. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I would now like to turn the conference over to Brian <unk> you may begin.
Great. Thank you operator.
Good afternoon, everyone and welcome to bio <unk> 2023 annual results conference call by now everyone should have had access to the earnings press release, which was issued prior to market open and the 10-Q report filed with the SEC. This call is being webcast and is available for replay.
Our remarks today may include statements that are considered forward looking within the meanings of securities laws, including forward looking statements about future results of operations business strategies and plans our relationships with our customers market and potential growth opportunities. In addition management may make additional forward looking statements in response to your question.
Forward looking.
Statements are based on management's current knowledge and expectations as of today and are subject to certain risks and uncertainties and may cause the actual results to differ materially from the forward looking statements.
Tailed discussion of such risks and uncertainties are contained in our most recent Form 10-K Form 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 now hand, the call over to <unk>, Chief Executive Officer, Dennis Calvert.
Hey, Thank you Brian This is Dennis Thank you everyone for joining us we're gonna cover quite a bit of territory. I also want to mention Charles Darwin, Our CFO has joined us as well that'd be presenting some of the financial information is also available for Q&A.
So just a real quick.
Review of who we are and what we're doing right myeloid better it's a big calling focus on purposeful innovation to mix changed for good clean air clean water and remember our strategy and vignette prove it and partner partner for SaaS, It's a critical component.
So who are we right well safe harbors Brian cover that.
So with that quite well innovators and scientists passion about doing something important for sustainable innovation human health driven by this purpose.
For best in class solutions lots of engineering heavy engineering emphasis and focus on problems without solutions.
We do know of course since the first acquisition of the biological psychology in the spring of 2007, and we have years of innovation that multiple platforms. We call. The biomarker of engine. The innovation engine at the corporate office. We have we have deep engineering staff joined us about five years ago, making significant contribution our company up in Canada is now.
Called Biologging, Canada heavily emphasized our focus on R&D recipient over 100 grants.
A critical piece of the puzzle as well as me as we delve into some of these advanced developments for our technologies.
I'm not going to cover all the details, but I did want to publish these details so that when you look back to what you can see some of these nodes, but the punchline is clearer medical is really focused on product launch and we've recently made some significant acquisitions of capital equipment for a contract manufacturer contract manufacturer great critical clearance has gone through the regulatory the design.
The complete safety protocol QA QC contracts out manufacturing very important contracts that manufacturing build distribution through relationships that's that partner component.
And we're in the process now preparing for some significance we've been talking about that for months its very close at hand, and we're excited about the future for clearer.
Energy, it's a new technology, we have built a small manufacturing facility, we're making cells for testing we're on a journey there its quite exciting and we've got a number of partnerships that are in development stage, we're talking about that in a minute of course, we can't Miss O&M environmental for odor and a blockbuster relationship with tooth Inc.
It continues to break records a trend that's astonishing and there was the financial results speak for themselves there, they're just impeccable.
And we heard just the other day, they're calling it the fastest the fastest growing odor control product in the world right.
So a lot of social media buzz on that product its incredible they've done a great job and then of course, our water solutions company right biological equipment solutions and technologies. This is now brought together all the innovations we've got first customers in Paphos, We've got significant robust pipeline and are all of our operating it supports that.
Enterprises are commercializing those technologies, it's arduous rich and we think that it'll be significant.
Yeah.
I'll now pass this to Charlie dark and to talk about the results for the year and some of the commentary on that Charles wants to step in here with me.
Okay, great. Thanks, Dennis.
Personally, it's really been exciting times for the company.
And for me to be involved with the company.
So very excited to be here and it was a great year for us.
We had a 108% year over year increase in revenue.
Our stockholders' equity with very little debt and our cash balance was $3 $5 million.
On this chart you can see the accelerate accelerated revenue growth from 2021, culminating in $12 2 million in 2023, and even in the 2023 year growth has accelerated.
The fourth quarter revenue of $4 4 million.
It was a 64% quarter over quarter increase from 2020.
Third quarter 2023.
Although we had a net loss of $4 6 million in 2023 is still a 90% decrease from 2022.
The net loss contained.
Noncash expense, 60% noncash expenses, so from a cash basis. We are we had a really really good year.
Most importantly, our cash burn has declined dramatically.
Biological almost we almost broke even in the fourth quarter as we're showing right here.
And the cash used in operations was really only $2000.
So.
Back to you Dennis.
Yeah, that's a great summary, real quick anyway.
Interesting often people.
You have to dig a little deeper, but as you dig into the use of cash we want to remind people that there is some projects and some business development like clear of medical where we've accelerated some of the expense in preparation of launch a product in a big way and is it just kind of comes with the territory and same thing really for which was prime.
Merely financed with outside investment.
Important.
Outside investment is the key and the same thing for the battery technology outside investment brought in about $1 million, just under $1 million and we use that money to invest in equipment some of that sebastien activities.
<unk>, a rather nominal overhead in the development phase in preparation of proving our batteries and getting ready for commercialization. So <unk>.
So while it expanded so did the opportunities that's basically I want make sure we're covering that concept.
Anything else Charlie.
No not at the moment like I said it was a great year for us and performed.
As Joseph.
Yeah, and then you know maybe just we believe that the trend of this performance will continue now when we say that we always have a little caveat. We're into Q1 now we're not in a position to provide guidance, but what we can say is the trend is continuing we have had a great first quarter.
And there's always a caveat because theres a couple of numbers that we just won't know we just won't know for another probably 30 45 days at least and that's primarily the royalty and the work in process and those will impact revenue.
But what we can say is that trending and then significant performance in Q4.
We'd expect a similar type performance if not more to continue in Q1 and beyond now we always we always have that caveat a lot of the results, we don't control, especially when we're partnering with third parties to take product to market. So if they are able to continue their historic trend like too.
And they continue that trend from 2022 to 2023, and then 2024.
It's gonna make a just a blockbuster year for that long ago, and so we anticipate that trend to continue.
Okay.
Michel the equities increased now there's a number you know everybody wants is why do you put this number and just remember when we contemplate the potential uplifting to a national exchange. This will be a big network. It's been a very important number nasdaq's puts that at about $5 million also make sure that our burn rate as low as we're demonstrating with improved cash flow as we did in Q4 as read.
Whose climb the rate of increase of overhead is nominal the minute. We believe it will continue to stay so and that'll give us the ability to continue to accumulate cash and ultimately build net shareholder equity.
Yeah.
So proof we cover that just to remind everybody the business deal remember where the company was formed by Ikigai Martin works unions, a business deal with a company called <unk> two.
Manufacturer product using our technology, we control the manufacturing for them on a cost plus basis, we'll get the mom and warranty excuse me royalty.
And then we participate ultimately and the exit of proof if it's ever sold for 20% of the exit they stated their mission to achieve 100 million dollar run rate and at that point, they would consider some sort of exit.
And we and we are on track for that.
Last last counts on our side was close to $10 million.
Which is which is means that pool has a shot continuing if this continues its current growth rate and it stated target at 20% quarter over quarter as a chance to double again. This next year. So it's a big part of our business and we're very grateful to them they've proven exceptional at their ability to build a brand and compel customers Tonight to buy this.
Susan.
Post the great products of course, and it's a wonderful testimony to the science behind the products.
And even in the industrial side right. It's this is these are products that they work and poes value proposition hinges on the claim that it can completely eliminate odor.
Completely eliminate odor dose for dose when delivered right and proper way. It's good that it's going to provide a reaction that breaks down the other compounds that won't come back.
It's drawing many national retail accounts, it's continuing to expand again the numbers speak for themselves our new.
New products are the wipes have been launched and puppy pads for introduced it.
Global Pet Expo, it's a great little side story.
They brought puppies in the shot in the Booth put a bunch of folks with ads in the middle of the booth everybody wants to step therapies and of course, the products really eliminate odor in an incredible way and so this is another great testimony to the long cycle of innovation by a larger that allows us to turn up these products on demand for an existing distribution channel.
That incremental innovation is profitable and meaningful in many many ways. So we're grateful for that.
We expect great things from Pud to continue.
We wanted to highlight clearer because we've started putting some money to work here and we did mention this in the K and again I just want to make sure. We're clear we're working with a third.
Third party that's contract manufacturing third party FDA compliant manufacturing.
We're not we're not going to be in the factory business.
We're gonna be in the contract with the factory business.
Building through distribution. So our role really focuses on the design. The QA QC you have to aid compliance the position and the training for distribution to take a product to market.
Just committed to about 800000, that's ongoing.
Worth of equipment that will go on site for a contract manufacturer.
I just want to note that the contract manufacturing at this stage for this type of product is also quite significant and they've made substantial commitments to be able to support what we believe is gonna be a significant rollout.
It's all in preparation we are anxious for more news.
Bioclastic start via clear as a as a wound care product focus on wound care, so that would be like diabetic ulcers that sort of work.
Oh, here's a great product to its not quite ready for market.
There's a menu of additional product designs, we think clear.
It is not only a fulfillment of the original innovation that founded the company. So it's a full circle story.
It's also has a chance to be one of the most meaningful impacts and highly profitable operations. So we're anxious to start demonstrating results, they're very active and intense and so standby for more information.
Oh.
T Force, we all know about P. Pause most of these called forever chemicals and everyone seems to have caught on to the fact that <unk> is a big problem.
All kinds of words describe it it's a big problem and people starting to spend money. Some early adopters jumped early some of them probably regret what they did but they did jump early there's a lot of people poised to take action primarily hinging upon finding good answer like ours and also upon regulatory clarity.
And the federal government through the EPA has announced that they'll be coming soon with regulatory standards will be published that will set the case with the clean water Act and others.
Our value proposition again is real simple and one of the deep dives happy to do it offline if somebody wants to talk to it's really very simple be the most excellent collector.
B, they must extend collect them worse and all kinds of different types of water you can save money and where we can create literally two pounds of waste competition grades up to 80000 pounds, if that materials hasn't that require special handling of destruction and handling cost of managing the waste stream is just literally off the chart.
And so our value proposition is efficiency.
Competitive capex and extraordinary lower Opex and it just makes a lot of sense to be the most excellent collector.
The work is continuing.
Here's a great example, you want a truckload of carbon or you wanted pailful of our spent media, which is that P. Fast maybe like collect R. E C.
Well the answer is obvious you want a small pick up you have a small purely been managing cost of construction cost is handling this is low and manageable.
And we go the pilots have been incredible they've done it for over seven states four types of water, including landfill leachate is really important to remember we've been serving the landfill in the waste handling industry now for almost eight eight or nine years, we have national accounts and relationships.
Pause for landfill is a big deal. That's that's that's a tough water to manage.
And P forces extraordinarily common in the landfill and so this is an emerging field of regulatory action. We're doing trials now with some of them. Some some big customers and our results have been highly encouraging and so we believe that'll be as expanded segment for our commercial future for our people our solution.
Mobile treatment unit, you've seen it before was this well we want to show that this unit can go out in the field crew people. It works is basically you can also trade the small body of water, it's a functional unit.
And and.
And you know it's it's a we we it's running all the time is running all the time either in our office or out but really it's the kind of unit that allows us to demonstrate portability and functionality is required.
And then this is a scaled unit.
The unit on the right is an image of a something like a thousand gallons a minute system.
Call that earlier this year, we announced our first <unk> project in New Jersey is underway moneys flowing workers has begun construction, we're targeting targeting successful installation.
Sometimes by November of 2024, so stay tuned for more information on that.
Yeah.
Here, we go our pipeline is robust.
Have a big internal debate about what the pipeline means how much how much business it really represents.
Of course, one of the things we caveat as some of the selling cycles can be long. These are very large capital projects. We've had we've had projects that have taken us six months or a year to get to even to the closing cycle. Some can be even longer but what's happening for us is the we're stacking them up so we go through a scoping, sometimes a bit sometimes not.
Tried to become social source supplier, there's all sorts of relationship there advancing its incredibly demanding work.
It is a.
It's a it's a significant pipeline of business.
And we believe it's kind of like a domino effect you know, what's what's the big caveat well everyone wants to see scale deployment. That's number one show scaled deployment you put it in the field Shlomi Shlomi, where it's working well that's in process as we speak that's number one we're also working with number of government groups to get sponsorship to work through our scaled.
Large scale deployment and I'll just remind everybody you know these are these projects. The low end is probably around the half million dollar range, which is what we're doing currently but they go all the way up to eight and 10 plus million dollars.
So these are these can be big projects and so again, we're in it to win it. We believe we have a winner and we're experiencing the the grind of getting adoption in the marketplace, but we have no fear and we're highly confident in what we're doing.
And the selling partners. The other I'll, just mentioned gear and Callahan real quick.
If youre counting relationship has been great slow long long process to bring new innovation to the marketplace, but the number of projects in this breadth and size and scope lagoon is expanding the dramatic and so again, we're predicting a SaaS and we know it's been a long time coming so both your Italian dialog are anxious to get that done.
<unk>. This is the brand of our battery Tech.
And we like it we think it's a winter and we've done quite a bit of work since we last spoke with our shareholders. So we'll go through a little bit of that.
There's this these articles around the last couple of days one is I want you to point out this is a pause magazine.
Long duration long duration energy storage is key is the core to tripling renewals about 2030, meaning you can't do it without it.
You have some place to store energy too to accommodate renewable energy has to go somewhere the grid just can't store grid is going to use it.
So storing balancing the grid critical piece, it's all over the news and then this other article in Google and Microsoft seeking technologies, you know what it really shows is that the customer's ultimate customers. In these batteries are the people that need the matter.
Who's at Big data.
Sure.
The centers Yep renewable energy, yeah people that support the grid utilities.
Heavy industry, they need of batteries and there's a thesis we're going to talk about in a minute on what we think are good battery is and why we have a chance to win big here.
So lithium is a problem you know the fires the real risk is high thermal runaway when one fire lights, another themselves kind of go off and off off the system going there's a huge global supply there's an outcry some of the geopolitical things that are being talked about by politicians and economists globally are impacting this they'd like to see made in America they'd like.
The domestic supply they'd like to see non rare Earth elements, you put to work in the incentives and the things that we won there pretty astonishing.
The IRA and the made in America tax.
There are significant but there's more there's more.
Anyway, I think everybody knows that and it's become really visible sarge well, we have a better battery.
Yeah, we we've it's funny people seem to name we'd call that sodium sulfur we've held liquid sodium sodium battery.
What we've discovered is that the name is a little tricky because the performance of our battery is so different than traditional sodium sulfur, namely that we can perform at extraordinarily much lower temperature.
And it feels to you know really give value to the to the to the name So where we're redefining that we're figuring out how we fit into it.
Competitive fast moving world of competition, but the punch line is we think it's better why is it better well the stats are better not inventing longer lasting.
Proven up to 10 years, we think it's gonna be a 20 year battery, where I need to prove that.
And we can do a domestic supply 100% domestic that's an actual sell its prototype on the right.
Show me, though that we've made some progress.
And the production.
Stats I'm going to go out to the staff now it's too much detail, but I want to show it and I want it to be published so people can really stack it up high energy density.
Right no loss in discharge you know a lot of these batteries. They just sit there and they lose their energy.
I mean, it's not okay, and they're also limited in their scope like lithium.
Charged to 80% discharge to 'twenty, you only get 60% of the functional energy energy storage anyway.
And a nice high voltage and then very low comparable low low operating temperature seems to optimize around one six to see there.
Generally low risk no rare earth elements and the combination make our battery for long duration fixed site long duration energy storage of winter.
Some examples of the various put ups that the competition does and we just wanted to point them out. These are fixed site batteries and we would compete with those designs one megawatt hour and a 20 kilowatt hour design.
We believe that's where the market's going to rest in that 20 foot trailer design.
So this is industrial scale backup for all sorts of different applications.
We're making herself.
We will when we have a sell ready for testing, which we believe is soon we'll be holding that up and saying hey, it's ready for testing and once it goes out we will be validating its its metrics for performance that metric for performance is is our.
Our desire is to replicate the prior data to be able to stand with third party confidence that we have rep. As you know we can present, a viable designed for commercial scale and scale up of manufacturing and that's next this is all located in Oakridge, Tennessee. This we put about 1 million bucks into this so not not 100.
But certainly real money and it and we also had some staff and so we've got some people will talk about that soon.
Very excited about the battery in a months playing out on the next slide.
Yes.
How do you make money with a new battery tech.
Alright, you make money well if you look carefully at the incumbents, who is in the battery business.
They tend to follow a pretty common trajectory.
They spent a lot of money [laughter] first thing they do a lot of money.
Maybe they get government support maybe they don't but there's a lot of money, it's very capital intensive and it's risky and expensive.
And we looked at that and we said you know we don't want to do that we're.
We're not going to do that that said, we're going to focus on.
I'm doing what we do which is event proven partner.
And so as we went out to the marketplace two things happen. The first thing is that we had this little factory. This little plant and we looked at ourselves and said could could we make commercials designed batteries here.
And the conclusion was yes that doesn't mean it doesn't have some some hurdles right staffing and all of that scale and you couldn't make a lot, but you can make commercial design batteries. So we concluded that and we looked around and we said that these processes can be automated something not.
But there's a level of automation that can can occur. We also look very carefully at the components.
Yeah, we we decided really that the components the manufacturing of the components that make our battery was going to be the key linchpin to being able to scale up manufacturing and so then we sat around and we asked ourselves who who once these batteries who need these batteries and I wonder if we ask the question I Wonder if if we could show the world that we had a better bang.
<unk>.
I Wonder who would partner with us to make better batteries for either their own use or for sale.
Right. So just like these articles big data, that's with all the money in the world.
They need these batteries to function.
They need them to function and expand and they'll pay for them and they will invest in them.
And so we really have formulated a model it's still it's still being formulated but we're talking with people and we ask ourselves do we want to sell batteries doing cell battery factories.
We do sell in battery factories as a business to be in.
So that will preserve cash that means that we're for higher.
We help our partner.
Build and operate build and then operate battery factory, whether for sale or for their own use.
And participate in that on a licensing basis, so that we can really exploit our.
Key value are key value are our critical metrics that we can perform at which is the design the engineer implementation manufacturing it leverages our core competencies. It also shares well creates extraordinarily high ROI.
And then ultimately we scale up for the production of critical supply chain components with a design that we own that's our battery.
We think that model is a winter.
Okay, and so we've gone out and tested it and the level of response has been extraordinary extraordinary people people come to us and say how many can we build.
So theres a lot of chicken and egg there. So we point that out for everyone. So first things first.
Have a battery that you've proven to a third party specs. So that's what we're doing now okay, we got to get better.
At that point.
All sorts of questions like what do you do with off take and that's why we pointed out this third piece of the puzzle the.
The offtake what are you going to do with the batteries well if you have enough supply. What you learn is that if youre going to be in the energy business, you're going to need some batteries if you're in the renewable energy is required, especially in California, you can't put up solar without a battery.
And we're seeing companies with two year backlogs and production and purchase order forward commitments for for half of half a billion dollars megawatt hours of batteries.
Those are those are forward commitments in the three and 400 $500 million range I understand that there's a competitor that's in the space doing the zinc bromide battery they got $1 2 billion.
Standby orders.
2 billion.
So we look at that and we say you know a better battery has a market.
And we think it's such a good market.
If we can find the right partners, we can exploit the commercially. So this is where we're heading to and then of course Theres a marching order.
The track to success for that technology.
What are you Gotta do well you gotta make some tests themselves you've got to scale up the tax for commercial straight make some partnerships and build out some component manufacturing to ultimately get to scale and we think the market is literally in the billions and we think that we have a very important role to play if you do a deep enough dive, but you're going to find out there's all sorts of people racing.
Being long duration energy storage business, but so far we've not seen a battery company with a technical spec that matches ours. So therefore, we're very encouraged and yes, we have a lot of work to do.
So that's that'll sum it up we're.
We're very excited about you know last year was a great year, we're excited about now.
And I hope we've provided some clarity here on our financial picture and our expectations near term and long term and that's why I will now turn this over to questions.
Yeah.
Great. Thank you Doug that was terrific.
There's been a lot more attention on bio Largo in the recent months and it's been pretty exciting we might have some new folks on the call today.
I was wondering if we could back up to that six year revenue chart I'm that is pretty incredible stuff there.
And one thing I was wondering if you can clarify is to talk a little bit about the <unk> business model.
The parents subsidiary model, you've talked a lot about this cycle of innovation and having a portfolio of clean Tech products, you know, having like irons in the fire the shots on goal.
Versus a traditional model, maybe just product and services sales. So I was wondering if you can just give us a brief history and high level of this past six year revenue chart and how this unique business model plays into this here.
Yeah, I mean, there's a couple of great. Examples there of course, the the odor. The odor business is is that most of the day the testimony of the how the business model consumption and reward everyone right everyone. So the idea of course is that if you go back to the history of the company, we first acquired biologic technology.
And in that process, we discovered and refine the idea that this this chemistry can be used for odor control on a really nice way and by the way. It has many other uses it's a platform technology odor was one of them and.
And we said to ourselves well you know we should make some odor control products and see if we can find a market and it was really hard I mean, it was really difficult because you're out selling first of all what we learned in the other businesses when.
When you say I've got an odor control product that works you usually people say yeah right. They don't believe yet.
There's so many products don't work or they just don't work that well the basket or are they eliminate some of it but they don't completely eliminated it comes back and there's all kinds of stuff that goes on.
So we went vertical well in industrial we decided that we could probably find more success there selling average tickets in the 25 to $50000 gains as opposed to $15 bottle of consumer product, we weren't really well situated plus we haven't done the work yet.
So as a result of that journey, we became expert and odor.
Modify the expert.
It also became expert at all the manufacturing techniques and we built a repository of data to support claims that was beyond reproach.
Because of that work, we were able to recruit a partner called <unk>, Inc. <unk> brought together by the he got marketing works team, who think came to US and say, we think you have $1 billion product and so yeah, we do too.
So in that structure, if you think about it from their side of the equation.
They've got to pick up a product that had gone through all of that development work with all the quote hardest not all the work that all the hardest work achieve.
Achieved with data to support the claims and it gave them a head start.
They test marketed they proved that it had a marketplace for the claims that were being offered they put their creative umbrella around it and then they started executing.
And when they started executing because they sort of took the ball and went took it from US I said will carry it into the endzone, let's go.
And then we can focus on our key.
Value contribution of managing the supply chain working with claims doing some creative work and supporting them in that rollout and of course now the rest is history.
That product is.
That'd be clipping around clipping, along around $60 million on a run rate basis on their end.
That means our.
Our revenue for that for that kind of a production will continue to scale up we generally think it's around 20, 25%.
They're producing.
We believe they will achieve the $100 million plus run rate and if they stay on target it could be a lot sooner than people realize that's an example of a hybrid model where we've invented it we've proved it and then we partnered and through that partnership we maintained the supply chain roll.
And we've maintained an equity role in the in the exclusivity in exchange for instance, 70, and we got a small royalty role to give acknowledgment to the innovation itself well those three revenue streams are compelling and I always remind people. There's also an exit.
And the exit could be big.
In the same business principle applies all the assets in our portfolio, they're all built for that kind of business model.
And so just as a matter of fact, if you look at the clearer model, we think that the clearer model not only is it the full circle story for the company's entire journey from its innovation at inception, now well over 20 years ago.
The high purpose for healing people right.
Right protecting people from from infection persons post surgical infection control at such a high value proposition saves lives. So that's one but number two the model itself.
Can exploit that same kind of opportunity because what we really have done has proven the claim supported the data taking it through the journey of regulatory approval the build out of manufacturing support the contracting with third party manufacturers the installation of specialized equipment to make it happen. So what do we now.
And then what when your partner to significance.
Instead of trying to replicate that that distribution channel that another company has probably spent 15 or 20 or 30 plus years building, we tap into it with a value proposition that allows for instant revenue and margin recognition for them.
And in exchange for that typically does become long term partners or potential some sort of right to acquire the company in the future. That's typically how that deal would go. So so that's the model and I think the same thing is going to happen for the battery check for sure I think we're gonna have to do quite a bit more work on the P fast and waterside before it becomes that kind of target.
For partnership, but that's okay, because we can make money all the way through and so we're heading that direction too. So I hope that answered the question Brian.
Yeah. Thank you very much.
So yeah about proof I mean, that's kind of the star in the portfolio right now how are things going with proof and what are we anticipating for Q1 24.
Yeah. So again, we mentioned this earlier and so just to repeat there's caveats on anything Thats forward looking there because we we won't know royalty revenue and we don't know some of the work in process for existing orders what I can say is that the order flow is matching past production and exceeded it so the <unk>.
Order flow.
So now the opinion on royalty and depending on working process, where that shakes out we're gonna see numbers comparable to the last quarter if not more.
And we think that trend will continue so there.
You know the one thing about the team the marketing team at proof as they do what they say and they say our mission is to achieve 20% quarter over quarter growth. So everybody can run their own number there.
Great quarter over quarter.
Growth for the next year and the financial implications to our company are dramatic.
Yep.
Several investors have written in wondering about.
Some or any of other biological products generating revenue.
Well yeah. That's a good question you know in the water and pathos right. So P forces is really a water solution company that includes P. Farce is the way to say that and Theres a number of things going on there we actually represent some products that were manufactured by other people, where we've got distribution rights.
The idea is to go into a customer and say how can we help you.
And if they say I've got a need you know we've got the knowledge and the talent and the engineering staff to pull that off whether it's our innovation or not so in the solution business as a way to enter the market I think it's I think it's really good.
And so some of that occurred in the past, which is nice and some will continue in the future. So that's good.
Key focus however is to get our technologies launched in that market. The odor control business has a very much diversified portfolio I mean, they do a lot of things missing systems pumps service trailers trucks I mean, it's just trucks without forever water systems on trucks is a better way to say it anyway, there's a lot going on to make money and that's the thing.
Is that are ancillary to the ultimate agenda odor control and then as evidenced by the incorporation of P. Foss for potential treatment of leachate those become brand X you know product extensions into a selling portfolio, where we already have national corporate accounts. Great example.
Where the the operations to support each other.
And then relative to innovation, there's an entire portfolio, it's not that it's not important we focus on the things that are more immediate and commercial but you know as we said there's at least eight technology platforms of the company and we're exporting a handful and some of those are its not the right time, there's some work to do they'll come in they'll come to US later, but we.
Do believe the nature of our company.
Will allow us to introduce new products over and over and over them on a continuing basis and we're committed to that we're also always looking at outside technologies to incorporate with ours lot of innovators, bringing their technology to our company for potential use because we do have some market share and we're really good at that quote early adoption phase of doing the grinding work.
Get it seeded in the market so.
Anyway, I hope that answers the question.
Yeah.
Right.
Hmm.
Another question here, it's kind of changing gears and when is the New Jersey AUC project expected to start and when will we begin to recognize revenue.
Oh, that's a good question you know it started already so we're getting deposits and our target is to install this as mentioned in the slide deck by November November of this year, so that'll all be in 2024.
Relative to the quarter by quarter revenue recognition I hate to even spend a lot of time on that because it'll be whether or not we've earned versus deliverables and it needs to go through a pretty sophisticated accounting analysis, but if we achieve that target worst case, we'll see recognition in Q4.
So it's in process and so I don't know Charles do you have anything to add to that or did I get it right.
There he might not be avail, sorry, I muted.
Yeah, I figured I'm, sorry, I didn't know that that's that's correct yeah, that's exactly right from an accounting perspective.
So you'd probably record some deposits and they all work in process.
And say Oh, well it's.
The contract is preclude it is the provision of the contract is deliver me a working unit that means you probably can't road revenue and so you get that done.
That's correct. So it'll it ended up in either customer deposits or deferred revenue and then when we start to deliver on the actual product we'll recognize revenue.
Yeah and in that process that accounting treatment is going to not 100% or it could.
B the primary thing that will go on with the water solution company, that's kind of the way. It works. Some of these projects will take a year you know they're big.
Now expands so which is good you know ultimately translate to revenue and profit itself.
But there's a lot of work and it's a business that's not little widgets. These are big complicated machines and they they solve a big problem people pay a lot of money for them.
So we think it's a good business and as we establish yourself it'll it'll be worth.
With our investment of time energy and money. So alright go ahead Brian.
Yeah, changing gears again, so the claret deal was expected to close in Q1 can you say today that your expectation is the deal will close during this month.
So yeah, Here's a thing you know we don't control a lot of that we just don't I mean, that's that's the trouble that's the problem with them.
We're waiting on a lot of people.
I wish we picked some better words in the past right because what was clear to me.
This side and watching all of this activity is there's a lot more going on in deciding if you have a partner that's going on is the launch a significant product.
I mean, you know big scale.
And it's a lot of work and it's it's an FDA compliant product going to go into some significant distribution.
The energy the work that's happening is in preparation of that.
And it's a lot of work and so for a small company like ours, that's a big that's a big load.
And we've been carrying that load pretty pretty nicely. So I'm proud of that ability of the team at clear is exceptional they brought in some incredible talent highly skilled highly knowledgeable in the field.
It is expensive, it's not cheap clear spend some real money, they're going to spend some more real money, but the reward.
Is amazing.
Amazing.
And it will be amazing and again you got it you got to remember this is now over 16 years of investing.
I think when you get it right 13 years of investing over $16 million.
And so to now and watch it come to fruition.
Think the most important thing we can do is pick really good partners and get it right.
And that's what we're doing we're making really good partners are getting it right. So right means ready ready for the kind of scale. We're talking about so is it gonna close. This month, we don't actually know that's really the better way to say it could it could be next month it could be a couple of months, we don't think we're into a.
The situation, where we wonder if we're gonna find the distribution that we seek we believe that's going to happen.
So I hope it soon.
Well there you go great.
Great.
Alright, so we have a few financial questions here.
None: So if you or Charlie you want to take a stab at the first one is can.
Can you help us understand why 108% increase in revenue only cut company losses by 500000 in 'twenty three or 'twenty two.
Yeah, I'll take a shot at that Spanish.
Go ahead, thanks, Charlie Okay. So.
If you look at our numbers the increase in revenue.
Our gross profit we maintained our margins at the gross level, which is really really good at it.
It's about $3 $3 million and then it was offset by an increase in our other our expenses SG&A, but also.
A good thing we also increased our R&D.
Spending.
So as part of that offset the R&D went up as well.
Increasing our battery venture.
And if you look at our other income it's probably another 300 plus thousand dollars that it went down and that's largely from last year, where we had bigger P. P forgiveness and.
Higher or larger cash credit so if you put that altogether.
Drives a net wash down by about $500000.
Okay.
Another one yeah, let me let me just let me just point out there that on the.
Net operating income on the <unk> operation, which is very the most the most mature operation and the company, let's just make sure we're clear call. It what it is threw off a cat and net cash of $4 3 million.
It's just it's an astonishing thing I mean, it's it's awesome.
And that's that's designed by design, it's designed to do that that's the way the business model works and so all these others need to do the same thing reach a level of maturity find the right partners get large distribution in the same type of dynamic will occur for them as well so.
So it's a great thing and and I think diversity is really critical for the company as well you know we're trying to stay within our means we're leveraging our core competencies and we're leveraging opportunities to expand with partners and it just provides extraordinary return when you get it right and so that's what we're doing to make sure we get it right go ahead.
Another financial question here last year, we had an all time record Q1, 'twenty three but then Q2, we saw severe drop.
And revenue and so folks are wondering if you could give us some color. We can expect the same type of decline in the coming months here.
We talked about this in the past that was the lumpiness of signing national accounts.
Remember, that's when the Walmart rollout occurred.
And you know what what Walmart rollout is notorious for doing what Walmart wants to do that's.
The way it works.
And so they do it on their schedule and their timing and everybody plays law and that's great everybody's happy to be there, okay, but that did create some lumpiness because of the way poof needed to prepare for that was to build up an inventory supply are sufficient to meet the need at whatever level on whatever timeframe is required.
And that led to some Lumpiness. We also mentioned in prior quarters that potential could occur again as additional national accounts I think the dramatic nature of Walmart is one of the first ones and so early in the game for US just highlighted that Lumpiness and I and I don't anticipate we don't see and we don't have visibility currently.
<unk> two a similar sort of performance.
Okay. So it's hard for us to say it won't happen I don't know that we know enough to say that but we don't see it happening. So we can't forecast at this moment.
None: And we don't expect it.
We're getting that is basically we're getting a leveling out because of the diversity of their revenue base.
Which is quite good.
Yeah.
Got it alright answer yeah, okay.
Okay, Yeah that was great our final questions save the best for last right.
So when do you expect to stop the dilution of shares that we continue to see quarter after quarter.
This gets back to generating revenue streams besides coops.
Yeah, I mean, we're always we've we've curtailed a lot of that so dramatically that's something to be proud of and ultimately it will come down to reaching a point at which excess cash flow exceed our need for.
Investing activities.
SG&A associated with.
Fulfilling these these business models to the point at which they can cash flow themselves.
And so it's a delicate balance and we think we're doing we're winning we're winning on their battle, it's it's become less and less of an issue, but the appetite for grows for Biologging you know as opposed to the other day on social media you know mediocrity is not part of our DNA.
There's no complacency sitting here anywhere.
So when people you know if we wanted to stop expansion.
Sit back and make all our money supporting a product and a consumer category I guess, we can do that and show a profit I'm not sure that's going to drive shareholder value the way a battery check that can disrupt a multibillion dollar market will do.
So we think its worthy of investment and we do it carefully and we stretch ourselves, but that careful expansion is.
Really the name of the game for US now the good news is we've got so many at a level of maturity. The Bakken all start to change. So just let's just imagine for a minute, let's just imagine for a minute that we get an exit on one of these assets. So we pick up a check for $100 million.
Did you do something good.
Yeah, how about $500 million.
I mean, you just have to realize that what we're doing here is building out technical assets that will change these markets.
And their value proposition as far beyond tomorrows sale, it's getting sale is getting adoption getting partners and then it's watching these technologies and these these game changers changed the game.
And when we changed the game these issues go away.
So yeah, we're on the right track and we want to be very careful and I think we've been pretty diligent you know people that look at the scope of what were doing most often you know what they say how could you do so much with so little.
How could you do so much with so little that's what we've done.
And that is that innovation that thing that we do with innovation to prove it up by the market proved out partner it out that's a winner and we're good at it. So I think we should pursue it.
So hope that helps.
Very good yeah.
Great answers.
That's all we have time on our side for questions today.
Yeah, Let me ask Charlie is there anything you Wanna St clothing Charlie.
No I as I've said, it's been a great year for performance and.
Generating cash and AR on.
Accounting and finance side it feels good that we're making significant progress.
Towards getting to the cash flow breakeven and then I think your delusion issue becomes less and less of a problem.
Yeah he meant.
Yeah, and this is Dennis I want to say to everybody. Thank you think you know the patients really tested a lot of people you know I wish some of this had been faster. It took a long time to get here. We're in a we're in a moment in time, where.
We've got some critical mass that sort of as I say the flywheel is spinning on its own now some level.
And we're credible in ways that we were not before.
That credibility is so critical to find market adoption for some of these solutions and we got an impeccable staff I mean, just it's a remarkable what we are able to do especially within our means our resources. So we think the future extraordinarily bright and we're just going to keep marching in locking down the milestones and I think.
None: This next year will be another record breaker.
And I think we're going to see him on with it which are these current business opportunities are throwing off a lot of money a lot of cash and that'll be very helpful for everyone to so there we go thank.
Thank you for joining us.
Thank you Dennis.
Thank you everybody talk to you soon.
Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.