Q3 2024 ClearSign Technologies Corp Earnings Call

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Speaker Change: Good afternoon and welcome to the ClearSign Technologies 3rd Quarter 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker Change: After today's presentation, there will be an opportunity to ask questions.

Speaker Change: To ask a question, you may press stars and the number 1 on your touchtone phone.

Speaker Change: To withdraw your questions, please press stars and the number 2.

Please note that this event is being recorded.

Speaker Change: I would now like to turn the conference over to Matthew Selinger of Firm IR group. Please go ahead.

Matthew Selinger: Good afternoon and thank you, Operator. Welcome, everyone, to the ClearSign Technologies Corporation 3rd Quarter 2024 Results Conference Call. During this conference call, the company will make forward-looking statements.

Matthew Selinger: Any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's projections, expectations, plans, beliefs, and prospects.

Matthew Selinger: These statements are based on judgments and analysis as of the date of this conference call and are subject to numerous important risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Matthew Selinger: The risks and uncertainties associated with the forward-looking statements made in this conference call include, but are not limited to, whether field testing and sales of ClearScience products will be successfully completed,

Matthew Selinger: Whether ClearSign will be successful in expending the market for its products and other risks that are described in ClearSign's filings with the SEC

Matthew Selinger: Including those risks discussed under the risk factors section of the annual report on Form 10-K, the period ended December 31st, 2023, and the quarterly reports on Form 10-Q for the quarters ended March 31st, 2024, June 30th, 2024, and September 30th, 2024.

Matthew Selinger: So, except as required by law, ClearSign assumes no responsibility to update these forward-looking statements to reflect future events or actual outcomes, and does not intend to do so.

Matthew Selinger: On the call with me today are Jim Deller, ClearSigns Chief Executive Officer, and Brent Hinds, ClearSigns Chief Financial Officer. So at this point in the call, I would like to turn the call over to Brent Hinds. So Brent, would you please go ahead? Thank you, Matthew, and thank you to everyone joining us here today.

Brent Hinds: Before I begin, I'd like to note that our financial results for the quarter period ended September 30th, 2024, was included on our Form 10-Q filed with the SEC on November 14th.

Brent Hinds: And with that, I'd like to give an overview of the financials for the third quarter of 2024.

Brent Hinds: In the third quarter of 2024, the company recognized approximately $1.9 million in revenues, compared to $85,000 for the same comparable period in 2023.

Brent Hinds: The year-over-year increase in revenues was driven predominantly by the shipment of multiple process burners to a California refinery customer.

Brent Hinds: I would like to note that this quarter's revenue is the largest quarterly revenue figure ever reported by the company.

Brent Hinds: Our year-to-date revenues for the nine months ended September 30, 2024 was approximately $3 million.

Brent Hinds: which is a $1.9 million increase over the prior comparable period in 2023.

Brent Hinds: This is also the largest year-to-date revenue figure reported by the company since inception.

Brent Hinds: Our year-to-date gross profit margin also increased year-over-year by 11% from 22% in 2023 to 33% in 2024, adding approximately $340,000 in profit compared to the prior period.

Brent Hinds: This profit was offset by $394,000 as a result of a one-time accrual estimate related to the decision to suspend our China operations.

Brent Hinds: Our year-to-date net loss for the nine months ended September 30, 2024, decreased by $104,000, which is an improvement of 2.5% over the comparable period in 2023.

Brent Hinds: I need you to keep in mind this net loss improvement includes the $394,000 from our one-time China approval estimate.

Brent Hinds: Now I'd like to shift our focus from the income statement to the balance sheet.

More specifically, cash.

Brent Hinds: Our ending cash balance for September 30, 2024 was approximately $14.5 million.

Brent Hinds: Our net cash used in operations for the quarter ended September 30, 2024, was approximately $1.4 million compared to approximately $1.3 million for the same period in 2023.

Speaker Change: With that, I'd like to turn the call over to our CEO, Jim Deller. Jim?

Thank you, Brent, for the financial overview.

Speaker Change: As always, I'd like to thank everyone for joining us on the call today and your interest in ClearSign.

Speaker Change: The call today, we've decided to change the format from previous calls. We've received positive responses from previous presentations narrated in a question and answer format and we believe that this will provide a more engaging call.

Speaker Change: We've also invited questions to be sent in by email so we're trying something new and we'll be interested in any feedback.

Speaker Change: So Matthew Selinger will lead a question and answer session where we'll go through our different product lines and business updates so the overall subjects and updates covered will be much like our previous calls.

Speaker Change: We will review our product line starting with our process burners and then move on to boiler burners. Now for that, I want to give some attention to our flare product line since there has been a recently announced order and additional activity there.

Speaker Change: I'll wrap up by discussing the outlook for the rest of the year and into 2025.

Speaker Change: Yes, certainly, this was definitely a record quarter for us by a long margin.

Speaker Change: I think it's also significant to look back over the trading 12 months because our business is lumpy. If you look back over the 12 months it's also a

Speaker Change: record periods a period for us and you'll see that our revenue flows are significantly increasing.

Speaker Change: was also important, and as Brent stated, there was an 11% increase in our

gross margins accompanying that.

revenue.

Speaker Change: that is good. From my perspective, I believe there is room for improvement with further volume and efficiency gains, but overall with the increase in revenue.

revenue and margin, I truly believe that business is...

is definitely going in the right direction.

Speaker Change: And so that revenue, as Brent mentioned, was mainly attributed in a sense to one order. Would you mind kind of diving in and giving us a little more detail of that order? Yeah.

every quarter.

Speaker Change: So this course was primarily driven by the 20-burner order that shipped out to Los Angeles. Those burners were shipped from Zico out to Los Angeles and were finally in California.

Speaker Change: We were expecting them to be started up early next year. We have learned that that will be delayed. The clients clarify that it's got nothing to do with ClearSign, but the start of those burners will now be in place.

around the middle of 2025.

Matthew Selinger: But Matt, if I can, just to comment on that order. These burners are going into two heaters. These are two large heaters in a very prominent refinery in the LA refining hub. One heater is fitted with eight burners and one is fitted with 12 burners.

Matthew Selinger: And the reason I'm bringing that up, and I know it's going to be the middle of next year now, but when these are up and running, I really believe that these are going to be a significant reference for us. These will be the biggest heaters we have in operation at that time.

Matthew Selinger: and I believe that having that reference and this performance in that LA hub is going to be a significant catalyst for our

increasing the future sales.

Speaker Change: Great. Well, let's continue with the process burner line. Can you give us some more color on the pipeline and outlook? I think when we left off last call, there was another large order that actually fell into this quarter. But maybe start off from there, kind of talk about that other order.

relevant because it also gives some insight into

Speaker Change: future revenue expectations as well. So at the time of the last call, we just announced a, in fact, the largest order we received to date. This is for 26 burners going into a Fortune 500 Global PepsiCon.

Speaker Change: petrochemical company down on the U.S. Gulf Coast. That order was received, by the way, from an engineering manufacturer called Bewolco USA. And if you get a minute, I'd really encourage you to look that company up so you understand the type of company we are.

dealing with.

Speaker Change: The oil on the Gulf Coast has some special operating requirements, but we've got the technology to do that. And also, the recent 100% hydrogen flexible fuel burner that we have started to sell, in combination with the new CFD model that we've invested in, have really been some big drivers between.

Speaker Change: that led to us receiving that order. That order is going well and it

Speaker Change: You know thinking of revenues certainly one of these shipless burners it gives some idea what to expect

Speaker Change: But beyond that, we also have two other orders in progress for current energy.

Of course Curt is a repeat customer for us.

Those orders are incidentally also using this flexible fuel U.

Speaker Change: Hajin Verner and we're in further discussions with Kern about some other orders that we we expect they're going to need.

next year.

Speaker Change: And then, so earlier this year too, Jim, there was the BACT designation, and maybe kind of, you know, maybe kind of address that again. What is BACT? And are you seeing that helping, you know, kind of drive business our direction?

Speaker Change: So I think yes, so switching from looking at what's in-house and the revenue flow to what's driving our sales, we're seeing a lot of interest in the Prosperena product line across the board.

There are some drivers, Matt, as you mentioned. The fact...

Speaker Change: review that was done by the South Coast Air Quality Management District and announced.

early in the year.

Speaker Change: Those of you who don't know, BANT is Best Available Control Technology. It is a review of new technologies that's run in California, run by all the airports in California, but administered by the South Coast Air Quality Management District.

Speaker Change: They've reviewed two of our installations for a period of over a year with quarterly meetings and feedback.

Speaker Change: And the result is that the performance that was documented from those installations have reset their definition of best available control technology for single burner process heaters and for multiple burner process heaters. That is recognized throughout the industry.

Speaker Change: We believe that is a very good, validated reference for us.

Speaker Change: in the same period while we're talking about sales and enhancers. We conducted a burner demonstration with Zco.

Yep.

back in August.

Speaker Change: that went very well. That allowed us to show our burners running in a multiburner heater, giving lead engineers and consultants

Speaker Change: and representatives of many of the top refining and petrochemical companies the chance to look not only at our standard burner technology but we also again were able to present our

and Doug Hogan. Thank you. Thank you. Thank you.

Speaker Change: hydrogen burner technology to them. Great, and that was done at the ZECO facilities, correct? Yes. Yeah, so speaking of ZECO, how is that relationship going?

No, it's Wu.

Speaker Change: It's really been going very well. Zegel has been a very solid partner for us back since 2019.

form the relationship. Now as we've

Speaker Change: increased our business. They obviously, they build all of our process burners. They're aware of the burners we shipped, like the 20 burners that went to California, shipped from Segoe. They're aware of the 26 burner order that we've

Speaker Change: recently received, and others, and aware of the quotes that are going out because we have to schedule resources with them. They're also aware of the hydrogen burn-in development we've done.

I really believe with that visibility into our growing business

We've increased our status with Zco.

Speaker Change: and last week we were able to meet with them and discuss a joint branding of a ClearSign Zco process burner line. So the intention is that Zco will actually start now to promote

Clear Science Process Burner Technology under their own name.

Speaker Change: and to market it and to brand it and promote it with our own.

Speaker Change: global sales team. So we met with them, we set a date for us to present our technology to their

North American sales team and also discuss things like

Speaker Change: Brandy, website promotion, etc. So this is a huge development for us.

Very excited about it.

Speaker Change: Wow, that is great news, and I think it's a development that many of us have been waiting for. So from here, let's shift, if we could, Jim, to the horizontal process applications. This also seems like an area of business that's gaining quite a bit of traction. Would you mind giving us a little color on what you're seeing in the horizontal process?

Speaker Change: applications. Yes, certainly. You know this is a fairly new product line for us.

it's it's one that

Speaker Change: I'll be honest has spread further than we anticipated well when we started it

Speaker Change: So just for everyone, the horizontally fired process heaters, these are small heaters often going into the midstream industry, that's typically gas processing. But also we're finding there are a very wide variety of different industries that

Speaker Change: are going into. We recently received an order or in fact two orders, repeat orders from Exotherm going into the power generation industry as an example. Those orders going into Oklahoma and Missouri, so expanding our national footprint.

Speaker Change: We've also recently sold a, in fact our largest burner to date, to another midstream heater manufacturer.

Devco and the first of these mainstream heaters.

Speaker Change: Berners was sold to another company here in Tulsa called Tulsa Heated Midstream.

Speaker Change: But why these are all important is not just that water flow rate, although that in itself is important, but the repeat inquiries and the uptick of interest and just the flow of future opportunities from them.

Speaker Change: is really exciting. So that actually brings up another question, Jim, kind of regarding sales channels or channel partners. It seems to be a growing part of the ClearSign story. How do you see this continuing to roll out and kind of present business opportunities for ClearSign?

Yep.

Speaker Change: And Matt, if you don't mind, let me take a step back. So when I joined the company in 2019, and back at that point, we laid out a strategic plan to develop ClearSign as a business.

Speaker Change: All right, just for everyone, the past of that, one was focused on the technology, right? We had to take the technology at the time and develop that into commercial products that met the customer's needs.

Speaker Change: and that would be delivered to them in a manner that the customers were...

Speaker Change: meetings. That led to the partnership with Zco because to process burners you have to be able to deliver burners with the credentials of a company like Zco and access to a test furnace and from manufacturing facilities that they are

Speaker Change: willing to work with and have approved on the boiler burner side.

We

Speaker Change: partnered with California Boiler. They are the customer-facing service team that actually set up Rove to carry our product line.

Speaker Change: But as another part of that plan, we're aware that the company is funded by investor money. We needed to keep the company asset light.

yet to really...

Speaker Change: leverage the potential of ClearSand technology, we had to have a means to expand our sales force and get national and ultimately international reach. And the way we planned to do that was by working through partners. So partners obviously like Zico and California Boiler were able to leverage their sales team. I'll refer back to the recent comments about Zico and why I'm so excited there.

Speaker Change: In the midstream heaters, we're selling to heater manufacturers. Now those heater manufacturers are out chasing their own work, chasing their own clients with their own industry.

Speaker Change: They are using clear sign burners with our capabilities installed in their products to make them competitive

Speaker Change: What that essentially means for us is that the sales teams and the marketing of these new partners, the midstream heater manufacturers in this case, become an extension of the Clearsign sales team.

Speaker Change: The ultimate goal that leveraging these companies and expanding the sales reach allows us to punch above our weight and have a much greater sales outreach than we could just operating as ClearSign alone. So we're very much developing this business and plan to develop this business through partnerships.

Speaker Change: Jim, thank you for the call there. You did mention the Boiler Burner. So can we shift to the Boiler Burner product line now? There were some recent developments and announcements regarding some very kind of important third-party testing.

Speaker Change: you know, would you mind just giving a little bit more explanation on that?

Simply sit back, get busy.

Earlier this year the results were published from a

Speaker Change: study conducted by the California GET program. So quick background, the California GET program is funded by the gas utility companies in California. It's administered by the South Dakota State Quality Management District.

Speaker Change: They had engaged a global consulting company called ICF to conduct third-party testing to quantify the performance of this new burner technology, ClearSign technology, compared to the other ultra-low-loss burners available in the market.

Speaker Change: That report was published. It's available through our website. We also put a press release out with the link. But to summarize the data, the third-party study found that a boiler fitted with clear science

Ben

Speaker Change: ran and consumed 4% less energy than the burner fitted with or a boiler fitted with the industry-standard burner.

Speaker Change: So to put that in meaningful terms, for a mid-sized 500 horsepower boiler in California with California engine prices, that will provide a savings of about $80,000 per year to our customers.

Speaker Change: Right. Alberta's set out a premium but that $80,000 will more than cover that premium in a single year. So that in itself provides a very powerful

setting proposition for clear sign.

Speaker Change: and the study also found or what we knew was that the clear sign burn is capable of operating down at sub 2.5 parts per million NOx levels.

Speaker Change: The standard industry, Oxlod's burner, I was only able to run down to six parts per million.

Speaker Change: So that is some compelling data. So with that, can you give us an update on kind of the project pipeline in Boilerbirders?

Yes, we have a few, you know, we have...

Speaker Change: All is in progress. There's some burners due to be shipped. There was a, right, the first of a series of four boilers going out to a customer in California. That burner is built and close to being ready to ship. We, of course, have a number of burners now up.

and Operational.

Speaker Change: A couple of pieces of fairly big news that's new right now. We have a very large burner installed in...

Speaker Change: San Joaquin Valley area. This has been installed and out there for a long time waiting for their construction.

Speaker Change: We have finally got to the point that that burner, I believe, is...

I'm about done. It's in. It's up and running.

Speaker Change: As of today, we have actually engaged a third-party source testing company. These are the companies that do the formal measurements. We've had them take preliminary measurements for us.

Speaker Change: because down at the NOx levels we're running at, the analyzers are not all consistent, so we wanted to get their full-spec equipment. They've measured the performance and found that the NOx is under the guaranteed level.

Speaker Change: The final formal source testing and report is being conducted. That's not completed yet, so we don't have the final results. But obviously, at this point, we're optimistic that this is.

Speaker Change: going to be a successful installation for us accepted by the customer.

When it is, I cannot emphasise how...

Speaker Change: important I believe this will be for an installation. The very large boilers operating and requiring less than 2.5 parts per million NOx was the target market that was the primary objective.

Speaker Change: When we initially engaged with California Boiler, we mutually decided to develop a product line and to market it and to put the effort that we have to get into the California market.

Speaker Change: So this, I believe, is going to be a very big benchmark for the ClearSign and our brand that has the road burner in California. And when you say large, can you just quantify how large? Yeah, I mean in...

Speaker Change: Numeric terms is 1,200 horsepower, right? This, in terms of just physically looking at the boiler, this boiler is going to be in the region about 40 feet long. It's probably as big as you could put on the back of a semi-truck.

Speaker Change: It's getting close to as big as fire tube boilers get before they switch over to the larger water tube and power generation boilers. This is one of the biggest. It's not the biggest fire tube boiler, but it is right up there at the top end. So a notable demonstration of our technology. Oh, a huge demonstration. This is almost the perfect big boiler opportunity that people will look to and say, yes, that is a...

Bye.

Speaker Change: and Bonafide Proof, all of the clear sign technology. Great. So we also announced a sale of a boiler last week and didn't know if you, for an asphalt company, and didn't know if you wanted to just get a little color on that sale.

Speaker Change: Yes, you know, it's actually important not so much for the, this is a standard burner for us, it's the burner the client bought was just under 500 horsepower of course our 500 horsepower or the burner model is the one that we'll use.

Speaker Change: How that manifests in the boiler burner business. The process burners aren't necessarily bespoke. There's unique details for every heater and no two of those are exactly the same. That's just the way the industry is. The boiler industry is different. These burners are standard burners and the goal is to have a standard range of burners.

for Standard Pricing.

Speaker Change: that can allow our sales channels, in this case Road Combustion California Boilers, to go out on their own and sell this product without needing input from us. Of course, we help with sales and marketing, strategic sales, et cetera, but the goal is to let them go hands free.

Speaker Change: and just sell as many of these things as they can. When they get an order then to turn around and just place the order with a clear sign and we have ready-made drawings and prints, we place the orders with our fabricator and they fabricate the burners.

Speaker Change: disorder, or the reason for doing that is that gives a highly scalable model with very little need of ClearSign resources and it empowers the sales team to go out and pursue business on their own without needing to get back for quotes or details or engineering input from ClearSign.

This order is the first.

Speaker Change: of that system. It had, I don't believe, any input from ClearSign in the sales stage. We just received a purchase order, the drawings were done, we turn around and place an order that fabricated to deliver this burner. So that is, it is that vision that we laid out in 2013.

Speaker Change: 2019 actually coming through to fruition for the first time in this order.

Speaker Change: Thanks for the detail, sounds like things are kind of starting to hum along. To round out the Boilerburner line, just last month there was a filing regarding the China operations and Brent alluded to this.

Speaker Change: in his financial overview. I don't know if you could just put a touch base on this.

Speaker Change: I can, but I've actually got some notes here, so I need...

Speaker Change: but because this is formal just to pass the details on to everyone. So as you said we filed a form 8k, that was filed...

Speaker Change: October 1st announcing that we're suspending our operations in China and putting our registered business there into a formal state of dormancy by the end of the year. So what that means is we still have the business in China but that business is basically parked and not operational. You might think we're going into hibernation for a period until we choose to revive it.

This decision was a result of an increasingly delayed

Speaker Change: progress to gain commercial traction in China. And as Brent said earlier, there will be some significant one-time costs. Those are mainly related.

to right.

employee termination payments

Speaker Change: but going forwards, our cost to maintain our business in that dormancy status will be minimal but it also gives the ability to maintain that business registration in China. There are additional details, those are available if you look at the Form 8K.

Speaker Change: more detail there for anyone wanting to see more. Great, thanks for the update there. And then just weeks ago, there was an announcement regarding a flare. So, this is a product line that we haven't heard about for some time.

Speaker Change: Again, can you give some color here and talk about what you're seeing regarding this product line?

Yes, I'm actually very pleased to. This is a...

Speaker Change: Okay, and exciting areas for us. So we've, as you may know, we do have some flares out. Sold, I believe it was 2020. I may be slightly off, but out and installed in the L.A. area right through

Speaker Change: California border. Those are up and running and even prior to my joining Clearsign there were some flare technology sales.

Speaker Change: The recent order was for, right, customizing our flare, right, it's the burner element that goes into a flare, this is for customizing our burner element to fit into an existing flare to bring it into compliance with the needs of actually a customer that has

already experienced of click zone flare technology.

Speaker Change: That work is going well and we expect it to roll on to an equipment supply order in the reasonably near future. I don't have an exact date for that yet. But when you bring this up, I actually want to talk about the flare industry and actually the reason that

Speaker Change: It's exciting today. On a previous call, I mentioned that we went to visit the

Speaker Change: The government in the state of California, and especially their environmental regulatory personnel, as they have new admissions requirements there.

Speaker Change: We are seeing the need for different flaring technology in regions like California. Industries are actually different from the standard industries like the upstream oil industry. It's different industries from that.

Speaker Change: as these new regulations are rolled out and as these new energy...

Bye.

Speaker Change: What that means for us is that we have a unique combustion technology. We also have a very strong engineering capability within Clearsign.

Speaker Change: and it puts us in a very strong position to actually be a solution provider for some of these new projects. And this manifests in, there may be flares, there may be quite small thermal oxidizer projects, but it allows us to get into an expansion.

Speaker Change: of not just selling strictly the burner equipment, but actually selling more of a system-wide project.

Speaker Change: When we look at the long-term, our plans, my plans for ClearSign...

Thank you.

Speaker Change: go beyond just the burners and the technology we have today. And a big part of that is getting into a solution provider and a systems provider.

Speaker Change: And one of the reasons that we're particularly excited about this is it starts to debattoe into the role of a solutions provider and putting together a...

Speaker Change: a bigger package that has the potential to greatly expand the sales and the revenue of ClearSign.

Speaker Change: What's exciting? It sounds like the ClearSign brand is getting out there, as well as a reputation as a solution provider. One thing, you mentioned the state of California, but I think you had similar conversations, am I correct, Jim, in states like Colorado?

Yes, yeah, fantastic.

Speaker Change: So Jim, that covers my questions regarding the business. So I don't know if at this point you'd like to take a moment for final summary and use some thoughts on the business going forward.

Speaker Change: Thank you, Matt. I guess we've let back. That was a new way of presenting the update from the company, so we'll be very pleased to hear from anyone on if you liked it or if you didn't.

I want to reflect back on the financial numbers.

Speaker Change: in the 10 queues filed last week and the Brents summarized.

for this afternoon.

Speaker Change: I want to look back over the last 12 months, I want to emphasise that, I think this is a very significant...

Speaker Change: development for ClearSign. Yes, the revenue is lumpy and it will continue to be lumpy for some time. It is also significantly more meaningful than at any time in ClearSign's history.

Speaker Change: During the call I've referred back a few times to the strategic path we laid out in 2019 as a framework for how the clear sign business is developing.

Speaker Change: I do that because I think the framework is meaningful. It helps to understand how the specific items and developments that we talk about that may appear normal or face value provide an interwoven building block of a highly integrated asset like company.

and how we're growing that have national reach.

Speaker Change: and recognition and how we are growing and the importance of growing that with our partners.

So building a network of companies.

Speaker Change: actually comprising our sales network. I can't mention all of them, but the ones that we can include by name, I'll just run through some key ones here. Of course, Zco. Zco are key for what we do. They've been a fantastic partner.

Speaker Change: And again, I want to emphasize the recent developments, the conversation we've had about jointly marketing a co-branded Zco ClearSign process burner. We will keep you updated as that rolls out. It will be a process. I cannot emphasize how big of a step forward this is.

Speaker Change: Four clear signs, but I didn't mention in the call Just putting Zico in perspective. They have in the region of 2,500 employees. They've got 30 offices worldwide

Speaker Change: They are a true global company and the ability to promote our technology and to actually have Zco promote our technology as a Zco burner with Clearsign technology is I think has massive potential for Clearsign.

Speaker Change: Secondly, California Boiler and Road Combustion, they are the customer facing and sales partner we have. They are based in California. They have offices and affiliates.

Speaker Change: in other regions of the country, especially strong in the West Coast. Working with them, we recently had this big success, or we believe the big success, we're waiting to formalize, of that very large Boise startup and the 2.5 ppm guarantee in California.

Speaker Change: We talked about Powolko and the large 26-burn order going down to the Texas Gulf Coast. Please look up Powolko on their website. They are a prominent engineering company. They work with the who's who of the refining and petrochemical companies.

Speaker Change: throughout the world, but especially in the U.S., and then in the midstream heater original equipment manufacturers. I mentioned we're now seeing a repeat flow of inquiries from Tolls Heater Midstream, Devco, and Exotherm, who gave us the repeat orders just these last few months.

Speaker Change: So, stepping back, we aren't growing, and please note, we've grown our installation base.

Speaker Change: In California, we're both existing and repeat customers, and we've got larger installations coming, especially with the 20 burners going out to the California refinery. We're now making headway into Texas for larger engineering firms, and I mentioned Berwalco, and heater manufacturers, and Fortune 500 customers.

Speaker Change: There's a lot of attention to our new flexible fuel hydrogen burner, and we have several projects in the execution phase utilizing this new technology.

Speaker Change: We have a pipeline of projects to be shipped, installed, and in the engineering phases, the largest we've ever had, and we have recently had the notable developments in our boiler burner product line, which is the burner in California.

Speaker Change: in the progress of our sub 2.5 ppm large boiler burner range and also the California GET report giving us third-party validation of a compelling financial case for the purchase of our boiler burners.

Speaker Change: and again that report is available through our website. It's also available through links from the press release we put out. When reflecting on what we've achieved

Speaker Change: I want us all to acknowledge that this takes more than just people showing up for work.

Speaker Change: from our finance team, our technical and order execution teams, to Ashley who's constantly creating and improving our marketing and sales materials, which by the way includes our website.

Speaker Change: and LinkedIn posts. I want to extend my sincere gratitude for the buy-in and dedication of all our ClearSign employees.

Speaker Change: And in the same thought, I want to thank Zco from the leadership to the staff we interact with on a daily basis, and California Boiler, especially for their commitment to taking care of our mutual customers and getting the job done.

Speaker Change: So with that, I'd like to open up the call for questions.

Please operate it.

We will now begin the question and answer session.

Speaker Change: To ask a question, you may press star, then the number 1 on your touchtone phone.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing any keys.

Speaker Change: Do we draw your question? Please press star then the number 2.

Speaker Change: Great. And Constantine, this is Matthew Selinger. We also received quite a number of questions via email ahead of time, so I'm going to go ahead and start by reading off some questions here.

Please go ahead.

Jim, directionally, where do you see margins heading?

And I'm dead.

Speaker Change: As I mentioned in the call, we saw a very significant improvement in the numbers that Brent reported.

Speaker Change: I do believe that there is room for efficiency gains, certainly with the volume we're expecting in the future as well.

Speaker Change: So there was a, you know, an increase. There may be a room for that increase again, just looking at the mix of projects we're targeting in the future. But we do expect, I think the key thing to emphasize is that we do expect the margins to improve even further than the improvement that Brent reported in the financials here today.

I've got another one for you here, Jim.

Speaker Change: During the most recent conference calls, we've not heard much about NIRION and the ClearSign Eye Sensor Technology. Visiting their website, it seems like a lot's going on. Would you be able to give some insight on to the relationship and what's going on there?

Speaker Change: Yes, certainly. Thank you. And whoever asked that question, thank you, Fisk.

Speaker Change: Now here's the part about business we've been very focused on the burner.

Speaker Change: business in the course. So for those of you who don't know, Narion is a company it's

Speaker Change: It's affiliated with Clearsign, but it is an independent company that was set up in Seattle by an engineer that used to work for Boeing.

Speaker Change: ClearSign has not only burner technology, we have a sensing technology.

Speaker Change: and Nora was set up to, with agreement with us, to develop applications using the ClearSign sensing technology.

Speaker Change: and especially in fields that are not core to the expertise we have at ClearSign, but to look at things like, obviously with the engineer coming from Boeing in aerospace, transport, and a lot of other applications.

Speaker Change: I'll expand this a little. So we do have the standard burner sensors, they're actually a burner product line. Narion is helping us also finalize that technology.

Speaker Change: We believe that we're going to have industrial installations on a demonstration basis of the pilot sensors in the, let's say, reasonably near future.

Speaker Change: through Gnarion, they've also adapted and engaged industrial partners or a

Speaker Change: Blair Pilot Sensing Technology or a development of our sensor into FLIR applications, we also expect through that work

Speaker Change: that we'll be able to get some field at least demonstration units and hopefully commercial traction.

and the reason in their future.

Speaker Change: But getting into the core business of NARA, they've got a number, if you look at the website, they have a number of really interesting projects. I think the most prominent one at this point is one feature of the ClearSign sensor is it is an extremely fast sensor.

Speaker Change: and they have engagements to adapt that for what I'll describe.

Simplify is a

Speaker Change: performance monitoring for a new and growing form of jet engines. There's a lot of interest there.

Speaker Change: That is a longer range prospect. I believe the opportunity and the potential market is huge.

Speaker Change: But in terms of time frame, you'd appreciate that projects like that, getting into technology like that, do take longer to come to fruition. So that's going to be further out than the 12 to 24 months that we're looking at for

Something to show from the

Speaker Change: Burnham and Flair flame sensors but there's a I'd encourage you to look at that NORAM website and just see what they're doing

Speaker Change: We set the contract up for the work with Norion just to leverage our science and technology, realizing there's some very big opportunities. Norion is self-funding, so it's a win-win for them and a win-win for us.

All right.

[inaudible]

Speaker Change: Another question, Jim, I've noticed some new hires posted on LinkedIn. Could you give some color on these hires? Secondly, do you foresee additional or are there any positions you're actively looking to fill?

Yes, you know, we've, we have, we've hired

recently hired two new engineers.

Juan Darmick is reporting to our Chief Technology Officer.

Speaker Change: And the second, Samuel, is reporting to the group headed up by Jeff Llewellyn, who oversees Burnham Business.

so

Speaker Change: And the bottom line, the reason we brought these people in is our business is growing, we are getting incredibly busy, and we need some more resources in the office to handle our growing business. And what's really important, and the reason we did this now, is that both Matt Martin and Jeff Wellen are very well-known and respected engineers.

in our field are incredibly effective.

as customer facing and business development.

Speaker Change: people and, quite frankly, as a business, we need to get them out in front of the customers. And as we get busy and they get consumed with more production and product development work, personally,

It.

slows them down from doing that.

Speaker Change: So we've hired two great engineers, they will give us some bench depth, they will handle the ongoing work and really free Geoff and Matt up to focus on technology development and being out in their customer facing role of developing our business.

Speaker Change: So you asked about looking forwards. Right now we do not have any open positions but that said as our business grows it is I do expect that we will have open positions.

Speaker Change: coming up to execute the orders we work and to keep our business growing, but also those positions will be part of the order execution. So if you're looking at the overhead of the company, I do not expect that to actually increase the overhead as that will be part of the

Speaker Change: are at the cost absorbed by the projects and they'll be bought in to handle our work and as our work grows.

Speaker Change: Jim, here's one from the analysts that cover us. They unfortunately were unable to attend the call. But Jim, how would you describe your current pipeline compared to a year ago?

Okay, that's...

Jim Deller: It's grown substantially. The orders we're getting and the people we're talking to are much more mature. The orders are big and we've seen that the 26 orders going down into Texas, working with companies like WALCO.

Jim Deller: If you just look at, I know you can't see, but the frequency of the inquiries we're getting in, we're now getting in multiple inquiries a week rather than an inquiry every few weeks. And just handling that and looking at, that's one of the key measures that I look at internally.

Jim Deller: It's just looking at the number of quotes we're putting out and the frequency, and that is just constantly picking up at a very pleasing rate, so it's looking very promising.

Speaker Change: Great. So there's been a few questions very similar to this one, and I'll kind of summarize it here, you know. With the new administration coming to place next year, will a focus on reducing NOx emissions remain important? I know you can't see the future.

Speaker Change: Here's a second, A and B, and could more focus on production in the United States be beneficial for ClearSign?

Yeah, you know, I've.

I truly wish I had that.

Speaker Change: calibrated crystal ball. Look I've I've been in this industry now for about 30 years so I've seen multiple administrations come and go and typically the start of every administration there's great expectations one way or the other and the reality is that the influence they have is

Speaker Change: significantly less than what we expect at the start of the administration. Just the timescale of the projects and what we work with is is measured in years so that the administration will come and go before they've had a significant effect.

Speaker Change: Regarding the NOx emissions, they are primarily controlled by the local states. They are based on the need to

Right, adjust ground level ozone down to...

Quite standard levels that were set out.

Speaker Change: many years ago. So we do not expect any significant change there. I mean from what we're hearing, there's

Speaker Change: focus on decarbonization. That, you know, is a periphery to us. We are mainly focused on MOX emissions and operating efficiency.

Speaker Change: But also bear in mind that most of our customers are global companies, a lot are based in Europe. They all post their own environmental mandates and their objectives there on their websites and they are driving towards that. So I think they are...

Speaker Change: self-motivated to achieve their environmental goals. So again, changes in the administration don't dictate to the companies the goals they set for themselves, especially not when those companies have an international

I'm holding.

Speaker Change: I think on the other side, just looking forward to talking to our clients, one area of encouragement maybe I don't think related to the

Speaker Change: to the political climate, we are seeing a increased interest in LNG, that's liquid natural gas export and production.

Speaker Change: and we believe that there is a likely an uptick in in that business next year which will, for us, that's very relevant to the horizontal process burden business and those are the clients I referenced earlier on today.

Great.

Speaker Change: Here's another question that came in, Jim, and I think you've addressed this actually a couple of times in your comments, but somebody's asking...

Speaker Change: Could you please provide some color on the essence of the relationship with Zico? So maybe just kind of surmise what you said earlier.

Yes, this is, and this is...

I'll be seeing you.

Biggest step forward for Clear Signs Road.

Speaker Change: a long time. This is a, so Zinko have, the relationship we're having with them has basically taken the next step forward.

In the recent developments, we are, right.

Speaker Change: Taking steps now to jointly market ClearSign products, that gives the Zcoz sales team a product to promote that has the capabilities of ClearSign technology.

has a dual branded process burner.

Speaker Change: When the Zico sales team is worldwide, they're obviously a truly a leading global company and having them promote clear-signed

Speaker Change: is a huge step forward for us. It's what we envisioned back in 2019 and to get to this point and having this

Speaker Change: development in our collaboration. It's certainly a very big deal for ClearSign and obviously from Zco's side they have seen what we're doing and are doing this because they believe it's a very big deal and a big opportunity for Zco also.

Speaker Change: We don't have any questions over the phones at this moment. This concludes our question and answer session. I would like to turn the conference back over to Jim Deller for any closing remarks. Sir, please go ahead.

Well, thank you.

Jim Deller: I'd like to thank everyone for your interest and taking the time to participate today.

Jim Deller: We look forward to updating you regarding our developments and speaking with you on our next call.

Jim Deller: In the meantime, please keep checking in for developments on our website. That's www.clearsign.com

Jim Deller: And for more behind-the-scenes updates, I really encourage you please to follow us on LinkedIn.