best 3 burner gas grill for the money ClearSign Combustion Corp. (CLIR) CEO Stephen Pirnat on Q1 2018 Results - Earnings Call Transcript
ClearSign burning(Nasdaq: CLIR) 2018 earnings call in the first quarter of May 23, 2018 at 4: 30 p.m.Stephen pinat, Vice President of Corporate CommunicationsChairman & CEOBrian Fike-In the afternoon, welcome to the 2018 conference call on ClearSign burning for the first quarter.All the participants will be listening-only mode.[Operator's note] after the speech today, I have the opportunity to ask questions.[Operation instructions] Please note that this activity is being recorded.I would now like to hand over the meeting to Lou Basenese, vice president of corporate communications.Please continue.Thanks to Austin, you are welcome to attend 2018 performance call of ClearSign combusteion Corporation in the first quarter.In this conference call, the company will move forwardLook at the report.We remind you that any statement that is not a statement of historical facts is forward --Statement.This includes comments on the company's forecasts, expectations, plans, beliefs and prospects.These statements are based on judgment and analysis as of the date of this conference call and face many important risks and uncertainties that may lead to actual results as described in the outlookLook at the report.Risks and uncertainties related to the forwardThe forward-looking statements made in this conference call include, but are not limited to, whether on-site testing and sales of ClearSign products will be successfully completed and whether ClearSign will successfully expand the market for It products, as well as other risks described in ClearSign's public periodic document to SEC, including the discussion of the risk factors section of the 2017 annual Form report 10-K.Investors or potential investors should be aware of these risks.ClearSign is not responsible for updating these forwarding-Forward-looking statements that reflect future events or actual results do not intend to do so.I'm talking to Steve pinat, chairman and chief executive of ClearSign today;Brian Fike, chief financial officer of ClearSign.With this, now I want to transfer the call to Brian Fick.Please continue, Brian.Brian FikeThank, Lou, thank you to everyone who joined us today.Before I hand over the phone to Steve, I will review our results of 2018 as they were reported on our most recent Form 10Q.We lost $2 this quarter.3 million, compared to $2 lost.4 million in the first quarter of 2017.Our sales were up 47% from $530,000 in 2017 to $360,000. Most of this quarter's revenue has to do with a closed ground torch project, and once through the steam generator project, we report the backlog of revenue at the end of the fiscal year just completed.Gross margin was 25% of sales compared to 30% in 2017.Our expectation is that our gross margin will normalize by about 50% as we increase the number and consistency of double-sided installations.As most of you know, we completed a stock issue in February 27 and sold 5,750,000 shares for $2.$25 per share, raising net income of about $11.9 million.We ended the quarter at about $11.2 million yuan in cash, still in debtfree.We continue to monitor cash outflows and look at alternative financing methods that can include strategic partnerships and/or modifications to the existing warrants structure.With this, I want to hand over the rest of the phone to Steve.Please continue, Steve.Brian, Stephen pinat thanks for the financial update.At today's conference call, I would like to thank and welcome the participants.Today, we intend to review our progress in 2018 and share our insights into future activities at 2018 and beyond.Controlling emissions, as you know, is a huge, pressing global demand;We believe that ClearSign has a unique position, thanks to our ever-expanding portfolio of products that not only offer solutions at low cost, but also have the potential to gain attractive returns and reduce maintenance requirements by improving efficiency, eliminate costly fines for the Air population.So we're still focused on three key initiatives that leverage our manyProvide billions of dollars of market opportunities for shareholders.The first is to speed up the penetration of existing markets, which we have proven --in-First-class emissions control performance through our patented and proven two-sided technology.The second goal is to open up new international markets, including the most famous China, as well as Europe and the Middle East.Third, invest faithfully in technology development to protect and enhance the competitive advantage of the company and enable it to expand to new markets.In the first quarter, we continue to make progress in all three areas, and I will now review those three.We have recently completed the final phase of $1.1 million torch projectsThe project successfully transformed the duplex technology into a closed ground flare for a major oil producer in California, reducing emissions by 90% compared to the existing controlled technology.Because of this major improvement, we believe this is moreUnit project has created a new vertical industry for this industry, and we think ClearSign is ideally placed to dominate overtime.Near-In the long run, due to the recent increase in production, we expect our initial customers to have additional demand on the basis of renovation and new construction.At the same time, the customer has recently acquired a large amount of assets in one of the country's most regulated areas to increase oil extraction space.You know, as a long-term shareholder, this segment relies on steam generators or OTSGs to facilitate production.The technology has a long history.Long term record of providing best servicein-Reduction of NOx emissions in OTSGs.Therefore, we are excited about the opportunity to help the customer meet the emission control needs of the flare and OTSGs.We look forward to providing an update on both aspects in the coming months.Speaking of OTSG vertical, I am pleased to report that we have successfully completed the following during this quarterProject of OTSG system in complex waste gas application.The modified device has achieved preliminary on-site test results, with an average NOx emission of 2.2 out of millions, much lower than the current regulatory standard of 5 out of millions.We see this as another industry and therefore a breakthrough that should not be ignored by potential customers and shareholders.I would like to remind you that the cost of deploying our dual technologies to reach these emission levels is a fraction of the cost associated with alternatives such as selective catalytic reduction.As mentioned earlier, ClearSign negotiated more than oneyear multi-Sign a unit contract with this customer for OTSGs double sided technology.Although the specific commercial terms of this agreement have not yet been published.We can share that we are still actively discussing with that customer to support their future needs.Continue our refinery;We are actively working with the Delek refinery in Tyler, Texas to arrange for the installation of the remaining duplex plug-and-play burners into the FCC heater.In our last call, we provided an update that, depending on the performance, we finalized the initial burner installation and the customer requested several modifications, to determine whether it is possible to increase the firing rate of each burner while maintaining the same floor area and NOx emission curves.It is important for investors to understand that this is not possible for existing low NOx and ultra-low NOxLow NOx burners on the market.However, our technical team has determined that it is possible to use dual-link technology.So we made the necessary adjustments and are now waiting for the customer to complete the installation.As is customary in all of our vertical fields, variability unrelated to our technology can affect the time we install.We will continue to provide when relevant updates are available.We also work with Delek to find opportunities to install our technology in their various delayed coker units, and we believe that the inherent advantages of duplex technology will help reduce the bottlenecks of these assets, and improve safety and emissions.In addition, in our refining sector, we continue to work closely with ExxonMobil to develop and deploy our dual-connected technologies.As for the success of the previously announced joint test at ClearSign Seattle headquarters, we have started regular technical meetings to discuss further deployment of our technology at a location at ExxonMobile US headquartersS.Refining and petrochemical business.Once this location is selected and the installation is planned and determined, we will be able to inform the shareholders of our progress.In addition, unlike the previously announced project to work with ExxonMobil, ExxonMobil also asked us to assess the potential of applying our dual technology to heater processors.For those who do not know, this device is available at almost every oil air cushion site and they are used to further separate the oil, and repairs to fire pipes often require expensive and ongoing maintenance due to flame strikes.Since the design of the Duplex inherently eliminates the flame impact, we believe that the heater processor can represent a new and important terminal market for our technology, although initially, we look forward to a clearer understanding of this potential opportunity in future cooperation with ExxonMobil and other refineries.In summary, we are encouraged by continued cooperation and high probability of follow-upOrders from our existing marketAt the same time, we can also report that we expect a significant increase in new business opportunities in the vertical industry we have established.We are having various stages of business discussions with a dozen potential new customers, including multiple super majors.While the recent rise in oil prices is clearly a factor, the demand for clean air, in turn, the affordable NOx emission control provided by Duplex has been there.Therefore, we believe that the increase in pipeline activities is more directly related to our ability to produce technology and our commitment to continue to expand our site installation base in the core market.Including the first quarter, we look forward to announcing new orders in the coming months.Our second focus area is to expand international markets beyond existing ones.We have a clear regulatory mandate based on regions with clear demand for emission reductions, and most importantly, we have improved budgets that give priority to our opportunities.In other words, we focus on international opportunities that bring the fastest revenue to our company.China is the most noteworthy.You will remember that ClearSign is currently working with a large stateIf successful, the state-owned enterprises of China's regional heating Group's large-scale renovation projects will represent hundreds of opportunities for transforming burners and almost thousands of opportunities for renovation in China's regional heating market.At the initial stage of this project, the company expects that experts will identify a large number of burner modifications, if necessary, to simplify the delivery of gas and air, providing an ideal operating environment for our twin links, achieve ultra-low NOx emissions.The degree of modification is consistent with previous plans and installations of other vertical industry customers.It is important to note that we choose to transform the burner of the customer because this is what the customer asks us to do.Since the customer actually has hundreds of such European burners, the customer believes that ClearSign's ability to transform existing burners and upgrade them to Duplex will save a lot of money, and allow them to use existing components such as burner management systems, fuel trains, etc.When marketing new technologies to new customers with huge potential sales in China, it is important to strive to meet the wishes of customers, and that is exactly what we are doing here.While we were unable to do this during the heating season, this was not the result of any failure in the duplex technology, rather it was the result of having to describe multiple operational details of the existing burners on site, because the manufacturer will not give us the design details.If they do, it will greatly simplify and speed up the transformation process.In a competitive market, their reluctance is understandable, as the burner manufacturer will lose its largest single customer when the duplex is successfully installed.Nevertheless, we are encouraged by the progress of our projects in the heating season.Our customers have been very supportive and we will continue to work on the solution before the start of the next heating season to demonstrate double sided technology and meet the test requirements as soon as possible.It is worth noting that the heating area project is only one of the opportunities we are currently seeking in China.The company is conducting advanced discussions with other customers in the refining and petrochemical industries, including customers such as Sinopec and BASF.In addition, as previously announced, with the success of our business in China, strategic investments from potential partners such as Citic will accelerate our efforts.In addition to China, we are also interested in other parts of Asia, including South Korea and Japan, and continue to be interested in our technology throughout Europe and the Middle East.We have a long-termGlobal long-term market opportunities and demand for our technology, and we expect key updates in this area to be available soon.Our last focus area is technology development.We have made encouraging progress this quarter.Fire tube boiler burner designed.As a reminder, this represents an increase of $1 billion in independent third market opportunities.The party is analyzed by the Frost & Sullivan Market.The product is currently in the laboratory development phase and has previously shown promising performance compared to the best products currently on the marketMore specifically, we report NOx emissions of 10 ppm at a concentration of 5% oxygen without the use of expensive flue gas recycling.In the first quarter, we were able to achieve below 3% NOx emissions at 8 ppm oxygen concentration at these levels and successfully expand and expand our operating package lines (including increased rejection)Depending on the industry and region, we can introduce a product to the market with NOx emissions of about 50% less than the existing emission requirements.In other words, we will be a convincing product that we are confident we can sell-Enter key markets including China.That is to say, the latest results and progress have also given us more confidence than ever before, and we will be able to achieve an extended target of 3% NOx at 5 ppm oxygen, this will be a real breakthrough in the industry emissions products.Based on recent progress, we believe that the next step requires us to demonstrate and expand our work in this area.To this end, we are actively evaluating the installation site with potential customers, while exploring a variety of commercial avenues, including our initial vertical plan, in order to license this technology to major boiler manufacturers around the world.I am pleased to report that earlier this week we were awarded a DOE grant to the Office of Small Business Innovation Research and Small Business Technology Transfer projects.The first phase of the grant provided $150,000 in funding over the next nine months starting in July.These funds will be used to expand Duplex's already impressive performance and have the potential to become a technology enabler for product implementation and execution to other vertical markets.If the first phase is successful, the company will be eligible for a potential revenue of up to $1.5 million as part of the second phase of this grant, in the initial funding.This is a major achievement for two reasons:First of all, it represents a test derivative of our original ECC technology that, if successful, can enhance the existing stateof-the-Features and controls of artistic performance provided by Duplex.Second, it represents a non-Dilution means complementing our R & D efforts, a continuing path the company is pursuing.In fact, we have recently been selected to enter the next stage of consideration for two other government grants totaling $600,000.We are submitting the final proposal and expect to make a final decision on both proposals by the end of the third quarter.Whether funded or not, we are still committed to advancing our technology through regular R & D spending.As discussed in the last conference call, we have recently made some technological advances that will allow us to expand to new and important end markets, including aerospace, gas turbines and oceans.With the need for development, we look forward to a clearer picture of these potential opportunities in the future.As of March 30, 2018, our continued commitment to R & D also led to the granting of three more patents in the first quarter, bringing the total number of our patent portfolios to 45 authorizations and 81 applications.Before closing, I would like to provide an update on the regulatory aspects.ClearSign continues to maintain a very symbiotic [ph] relationship with regulators whose interest lies in reducing emissions while the industry is also interested in getting cost-effective solutions.More and more regulators recognize that ClearSign's patents and disruptive technologies have created a paradigm shift in how clean air can be achieved at a lower cost.This has won awards from the southern coast data quality management area of the Southern California demonstration site.We continue to work together.in-The regulator identified a suitable refinery partner and thought we wouldn't have a problem there.In addition, as multiple jurisdictions in our core market are re-examining emission rules, we expect that we will be able to provide NOx emissions that meet the following conditions-In many cases, superior to the best control technology available will result in our technology being designated as BACT.Although this is not a commercial requirement, any such regulatory designation is expected to accelerate the adoption of our duplex computer market.Finally, I would like to reiterate that ClearSign has demonstrated Duplex's ability to deliver solutions that can provide clean air at low cost and have an attractive return.And the next timeIn situations where orders and revenue authorizations are difficult to determine, we continue to demonstrate the effectiveness of our existing deployment base and we are making significant progress towards a broad range of goalsBased on commercialism.In addition, our channels of opportunity with new and existing customers and new terminal markets are expanding.I am still very excited about the potential of the company, our technology and the prospects for turning our current channels into meaningful revenue.At this time, I want to transfer the phone to the operator to ask questions.Question-and-In response to the session operator [operator directive], our first question will come from Dr. Michael Bersek [of the National Securities Corporation.Please continue.Since the second release, unidentified analysts have been relatively unfamiliar with the story;Looks like you have a whole bunch of things going on and I'm a little worried it might--Maybe you're pulling yourself too thin, I'm kind--I don't know. it's like--Let's say it gets wider instead of moving faster.Did I get it wrong?Stephen pinatti thinks your observations are correct and are getting wider and wider.The speed at which It moves forward actually depends more on the customer, their budget cycle, the availability of access assets, and what we can't control.So I don't think it's a problem for us to speed up adoption, and I don't know that it must be something that we should re-focus on ---Certain customers need to install and operate the equipment during pregnancy.The example of Delek is a perfect example, we put these products in, they are very satisfied with the way it works, they come back to us and say, we also want to buy moreWe said, well, we can make it work.When do you want us to ship and then when can you install them.They said, well, it's going to take a while for us to get the budget, make the schedule, and form a team.So these things don't consume our resources, so we don't burn any calories there, but it's a bit frustrating for all of us, but it takes more time than we do.I don't know if this answered the question?Unidentified analysts speculated that in a sense, I was starting to worry that you would burn the money soon and then we--In the absence of a significant increase in market cash flow, it is clear that such stocks will be punished.But if a lot of what you say doesn't burn your money, that's fine.What is your burn rate for a quarter?About $2 Stephen piernath$1 million to $2 million per quarter.Unidentified analyst, you don't have any guidance or even make any sense about the revenue for the next quarter?Yes, we feel it, but we don't provide any guidance.Finally, the analysis of China's affairs for unknown reasons;They did very well, I was a little surprised, actually I don't have it now.I take this back.Thank you very much.Thank you very much for your answer.Operator [operator note] your next question is from Dr. Jim, CEA Inc.Please continue.Unidentified analysts are curious, how is the study of your external consultant showing the installation, comparing the installation operation and capital cost of the illuminated bomb technology superior to the existing installation?Could you please comment on the results you have achieved in existing operations using automatic [ph] technology?-However, if you don't turn them off, your operating costs will be greatly reduced and easy to install online?Stephen Pinetti thinks you mean--As far as calling others is concerned, you are referring to the research that nodan [Dr. engineering] has done in the white paper on the relative costs of SCRs and ClearSign Duplex.Regulators have actually hired Nordan [ph] Engineering to do similar research for them;So research has shown that there is a dramatic-Highlight the word "great savings" between our technology and SCRs, which is not controversial for anyone.Compared to just replacing the burner, an intuitive understanding of what is required to install a selective catalytic reduction system is very simple.So the problem becomes, you know, when the customer is faced with the choice between SCRs and our technology, we don't feel like 99% of the time the customer chose our technology.How about the replacement of these devices by unidentified analysts, as I know some operations are fined for violating the operation.Also, they always go beyond their limits on a regular basis, and installing your technology will allow them to increase elsewhere, and these things will ---Why don't they do that?Stephen pinnatuyu came to an interesting and important point;There are economic reasons to replace SCRs, and we have pointed out to regulators that although--To be clear, SCRs allow a relatively low level of emissions, very similar to what we can do, but SCR also has a reagent called no-water ammonia, it provides about 8 ppm of the water-free ammonia to slide into the air.So in terms of pure emissions, our technology is a better solution that has nothing to do with cost.It costs a lot less, which is just an extra advantage.I don't know why I think so.-You also pointed out that a recent survey showed that although the original SCRs showed that they could produce 2 ppm NOx, overall, there ---Due to the natural operation of SCRs, they are not close to overtime hours, there is no reason to delete them and join our technology, and there is also an argument to reduce the cost of SCR by adding our technology, then you reduce the consumption of the catalyst you need because you remove less NOx from the air because we're going to take it out and we're not creating it at first.I have a lot of different theories, you know.I think the economy will catch up with us in the end, which means that people will see huge savings, which will be good for us.In the short-Why people didn't do exactly what you said or what we said, which confused me because it was obvious, it is difficult for us to understand where our technology has made greater progress.-Southern California is a perfect example where regulators themselves decide independently that our technology is so obvious that they are willing to fund a project as an iceTry the circuit breakers at the refinery so they can see how much they can save.On the combustion control system, the unexplained analyst was once the customer [could not identify] and we used the rep.You don't have to go to China to sell these things, you need to have a story, I mean, it would be great if you could sell to China.This reminds me of the movie "oil for light in China"-Brian was in 1930.The oil of Chinese lamps and lanterns is nuclear in China, but here you can sell something through representative organizations, not in--Looks like you can't--All you need to do is read this report and read your other information;You 've listed all the good reasons why they should replace it, who's been contacting them all the time and why they don't.Do you have a sales job in that field?Can you do this using a rep or something?Just target it.I want to know what you're doing?[Can't see it].Stephen PirnatWe has a representative in California.Analysts of unknown reasons, why not let them solve it?Stephen PirnatWell, the answer to this question is to have a client.Are you calling an investor or working on an interview rep because it sounds like you're going to be a good rep.Unidentified analysts have a lot of experience in this area, I am an important shareholder of your company, we can discuss ---How can I help you get this done offline.Our next question comes from [.Please continue.Unidentified analysts try to understand why in China, your technicians don't look at the installation and realize that it may take longer for the problem to be solved once the installation starts ---When you announced it-I and some other investors think that this installation will be in place and run during the end heating season.It seems that the issue has to do with the existing device, and someone should be able to look at it and say that it needs to be modified, or that we should start with a different installation unit, or we should make it clear to everyone that this will require some meaningful changes.Stephen PirnatI will give you a simple answer.I think the client himself has hundreds of such burners as well, so it's not like there's another simpler burner that needs to be repaired;The burner representing most of the list he is interested in remodeling is this particular design, and--Because we can't access any design data and we can't--Customers don't allow us to participate and measure this ---And get the information that we need to solve all the unknown problems initially.It's not that we didn't realize it would be complicated, it's until we finally got the burner report and started the measurements we 've done now.At that time, we did not know what the internal workings of this particular burner were, and we did not know what.Now, we have done something similar to another competitor of my previous company, and we are in the same position;In fact, we have asked them about the burner, and they take it for granted, forget it, why are we helping you.In this particular case, we were able to talk to the customer quickly, and by the way, the customer was Era [ph], let's take the burner apart and get the information needed to modify the burner.As far as China is concerned, it took a few months for this process due to a series of administrative and regulatory reasons, we can't go in and take things apart and measure anything we want, let it run in our way.The reason we are willing to take risks is that this is what the customer wants us to try.We do not have this opportunity.Unidentified analyst, but now you're gone.Season, there is no time issue to determine what needs to be done and hopefully put it in the right place before the upcoming heating season?This is our point of view, yes.Unidentified analysts are just another problem, which has some sort of connection to my first question, which is why they are not as deep as I thought they were.Have you actually signed a commercial installation contract this year?Stephen Pinetti will say no.Our next question comes from Jack Myer [ph], a private investor.Please continue.Unidentified analysts talked about the burn rate of 2 to 2.1 per quarter.You have some runway in cash but the amount is not amazing.Depending on what you think or think at this point, where do you see the burn rate starting to drop so that the runway will be a little bit more?There are two basic questions, Stephen Pinetti believes.One is, of course, getting orders to reduce the burn rate because you have income is the preferred route.Is this the most critical, no doubt?This is, of course, the easiest to understand.As we said in our prepared remarks, we have other options that we can look at in terms of funding, perhaps from the pending warrants submitted by the Chinese people to strategic investors to the technology of Prepaid royalties if anyone wants permission.Therefore, in addition to the most obvious increase in sales and revenue from sales, we have other financing options.If we focus on income rather than other kinds of funding, when do you look at income based on what you think of the land?When did you see the revenue start?At the level where the burn rate will therefore fall?Stephen Pignat, we have not made any statement about this timing.This will end our problem.and-answer session.I would like to turn the meeting back to Steve Pignat to hear his closing remarks.Mr.Pirnat, you can continue with your closing remarks.Thank you, Stephen pinat.Thank you for your support and dedication to me all the time.As I said earlier, we are confident in the way to achieve a wider commercial application of our technology and have multiple prospects for achieving meaningful revenue.To this end, we look forward to communicating more success in the coming weeks and months.Thank you all.The meeting is now over.Thank you for attending today's speech.You can disconnect now.