ClearSign Technologies Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 2, 2025

There are 4 speakers on the call.

Operator

Please note, this event is being recorded. I would now like to turn the conference over to Matthew Selinger of Firm IR Group. Please go ahead.

Operator

Good afternoon, and thank you, operator. Welcome, everyone, to the ClearSign Technologies Corporation Fourth Quarter and Full Year twenty twenty four Results Conference Call. During this conference call, the company will make forward looking statements. 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.

Operator

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. 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 ClearSign's products will be successfully completed, whether ClearSign will be successful in expanding the market for its product, and other risks that are described in ClearSign's filings with the SEC, including those discussed under the Risk Factors section of the annual report on Form 10 ks for the period ended 12/31/2024. Except as required by law, assumes no responsibility to update these forward looking statements to reflect future events or actual outcomes and does not intend to do so. So on the call with me today are Jim Deller, ClearSign's Chief Executive Officer, and Brent Hines, ClearSign's Chief Financial Officer. At this point, I would like to turn the call over to Brent Hines.

Operator

So Brent, please go ahead.

Speaker 1

Thank you, Matthew. Thank you to everyone joining us here today. Before I begin, I'd like to note that our financial results on Form 10 k was filed with the SEC on March 31. With that, I'd like to give an overview of the financials for the fourth quarter and full year of 2024. For the fourth quarter of twenty twenty four, ClearSign recognized approximately $590,000 in revenues compared to $1,300,000 for the same comparable period in 2023.

Speaker 1

The year over year difference in revenues was driven by a decrease in business activity. During the fourth quarter in twenty twenty three, we shipped eight process burners and completed two customer witness tests for our California refinery customer. Whereas during the fourth quarter in twenty twenty four, we shipped two boiler burners and executed a process burner engineering study. Now keep in mind, this process burner engineering study led to a follow on purchase order of 26 burners as noted in our 11/27/2024 press release. For the full year of 2024, we recognized record revenues of approximately $3,600,000 compared to $2,400,000 in 2023.

Speaker 1

This is approximately a 50% increase year over year. This increase was driven by overall year over year increase in business activity. Twenty twenty four revenues were predominantly generated by the shipment of 25 process burners to two separate California refineries. Whereas in 2023, revenues were predominantly generated from the shipment of eight process burners and three separate customer witness tests. Our gross profit margin for the year ended 2024 was approximately 31.1 compared to 34% during the comparable period in 2023.

Speaker 1

This year over year decrease in margin was a direct result of our large 1,200 horsepower 2.5 ppm boiler burner installation. Since this was the first installation of the boiler burner this size, we incurred greater than expected startup costs during the first quarter of twenty twenty four. Now I'd like to shift focus from revenue to cash. Our net cash used in operations for the year ended 12/31/2024 was approximately $4,400,000 compared to approximately $3,200,000 for the same comparable period in 2023. This $1,200,000 year over year decrease was driven by a million dollar decrease in contract liabilities, which basically represents monies received from customers prior revenue recognition.

Speaker 1

Now turning our focus from cash to the full year income statement. Our net loss for the full year 2024 was approximately $5,300,000 which is an increase of approximately $100,000 compared to the same period in 2023. This increase in net loss was due in part to a onetime nonrecurring expense of approximately 400,000 related to our decision to place our China entity into a dormant status. Now I need to note that yesterday on 04/01/2024, we received a letter from Nasdaq stating that we no longer meet the minimum bid price of a dollar per share. As set forth in Nasdaq's listing rules, according to the rules, we have been given a period of a hundred and eighty calendar days or until 09/29/2025 and wish to regain compliance.

Speaker 1

To regain compliance, our common stock's closing price must be at least $1 per share for a minimum of ten consecutive business days during the hundred and eighty day cure period. As of 12/31/2024, we had approximately $14,000,000 in cash and cash equivalents with approximately $50,200,000 of shares of common stock outstanding. From a financial perspective, we believe we are well positioned to meet current customer demands, deliver on our project pipeline and scale our business to profitability. With that, I'd like to turn the call over to our CEO, Jim Deller. Jim?

Speaker 2

Thank you, Brent, the financial overview. As always, I'd like to thank everyone for joining us on the call today and for your interest in ClearSign. We're to use a similar format today to the previous call. We have received overwhelming positive feedback from this change and believe this provides a more engaging and assimilable conversation. Matthew Selinger will lead a question and answer session where we will go through the main content of this call much like the last call.

Speaker 2

We will cover developments in our product line, but I'll also talk about some general themes and strategies that we are implementing and reference this to our sales and product line updates to provide some insight into overarching ambitions and progress of a more strategic nature. We we will end up with an outlook for the rest of 2025 and into 2026 and then as always open up the call for Q and A. A quick note regarding the Q and A, in addition to calling in, if you wish, you can also send in questions ahead of time to our investor relations at mselinger@firmirgroup.com. Great,

Operator

Jim. Let's get started. So as Brent mentioned, ClearSign just recorded a record revenue year. Could you give a little more of what this was comprised of? What led to this?

Speaker 2

I can. But before we start, I can. I think it's good to just to look back a little. You know, if you look back to 2021, but we came at just over 600,000 in revenue, as Brent mentioned, or it it dropped slightly in 2022. Then as Brent mentioned, we're at 2,400,000.0 in 2023, and then closed out last year at 3,600,000.0.

Speaker 2

So last year's revenue was predominantly due to the large refinery burner process order that we shipped out to Los Angeles. That was 20 burners. Those burners are still there on the job sites. We're expecting them to start up in the early in the third quarter of this year. That the installation shutdown has been delayed on-site.

Speaker 2

But in addition to that project, we had some burners shipped out to Curt Energy who continue to be a good customer of ours. And then there are also some midstream water burners that rounded that out.

Operator

Great. Thanks so much. So in in your opening comments, excuse me, you mentioned some higher level themes and strategies. So before we get into the individual product lines, let's let's let's kinda start with that if you don't mind. Could you give a little more say a little more about some some of these themes and strategies you're talking about for 2025 and 2026?

Speaker 2

Certainly. And this is just started some some time ago, I think it's time to start explaining what we are looking to do as as we expect some of results to roll out. So going back to when I joined ClearSign back in 02/2019, our, like, first objective at that point were to prioritize and commercialize the technology that we had as what we called low hanging fruit. That was the oil refinery process burners and the boiler burners. But we gave ourselves a mandate to develop our technology into a form that the clients would need and the clients could use and would be easy for them to install and for the operators to run with.

Speaker 2

But in addition to that, we also realized that we had to develop channels to market and be able to provide these products and technologies in a manner that the customers will use to bind them. What that entailed is or resulted in us forming a collaborative agreement with Zico Inc. Zico is a 30 donor. Zico is the second largest burner manufacturer in the world. And as part of the refining burner supply, it is a requirement that the burners are demonstrated at full scale in an industrial test furnace to prove the emissions and the operation requirements for the customer.

Speaker 2

And also, typically, that the products are manufactured in a shop that has been validated and meets the certification requirements of the refining customers. So we have to come up with a way to deliver products with that capability, and we did that by forming a relationship with Zika. On the boiler burner side, you have to have a customer that provides service to also, you have to have a partner that provides service to customers. And we did that through a relationship with one of the leading well, service comes in California, California Boiler. They take care of the customers.

Speaker 2

They formed a subsidiary called Road Combustion. And with our technology and road combustion providing the controls, they actually deliver the ClearSign technology into the border market, marketed as a road burner. So that I mean, that's a a summary, but that gave us the ability to get the products recognized in the market to make initial sales and to start the growth of our business and as reflected in the revenue. Right? Jumping forwards to today and more recent times, we recognize that there is much bigger opportunity for ClearSign.

Speaker 2

But we have the ability with our patents and our staff to develop technology that's applicable to much bigger markets, and that we can broaden the regions that we sell into the the scope of our orders, actually diversify our portfolio while staying true to the core competencies and the skills of ClearSign. So that is what we're starting to roll out now.

Operator

Correct. So it's kind of in summary, and I think we'll we'll kinda hit on this throughout the call. Because high level themes are diversifying product lines, sounds like diversifying within those product lines, and continue to leverage sales channels. Is that correct?

Speaker 2

Yes. That is. On on the sales channels in addition to pilots like California Boiler and Zico, that we sell a lot to third parties, for example, heater manufacturers as we sell to them. They include our products in their future offerings and will bring orders to us. So as we sell to new either companies, part of that expanding our sales scope is getting more either companies familiar with our equipment, actually signed to more customers.

Speaker 2

They continue to be a sales challenge for us going forwards.

Operator

Fantastic. So let's dive into the product launch. So starting with the process burner line, there have been a lot of developments recently and you touched on this. You mentioned the name Zico obviously in your comments moments ago. Could you touch on that the most recent announcement with Zico and what that means for the company?

Operator

Yes. I can.

Speaker 2

And this was, like, key for us. The announcement was late last year. When we as I mentioned, we first formed the relationship with Zico. The initial requirements were to have access to the burner testing and the manufacturing capabilities of Zico. But as we discussed our collaboration, the right.

Speaker 2

The longer term vision for both of us was that ClearSign refinery process burners would also become a Zika product line. But at the time back in 02/2019, we recognized that the time wasn't right to launch that then because of the newness of the new ClearSign technology. Coming forwards to last year and the progress that we've made and the orders now, obviously, what Zico has seen in ClearSign, we have reached the point that that for both of us, we believe that it made sense to go and move our relationship to this next level. So the announcement was just that. We announced a co branded Zico ClearSign burn burner line.

Speaker 2

Zico have now included ClearSign as a page in their own website. We've developed joint marketing materials. And over the last few months, we have conducted, like, teach ins to the Zika sales team because part of this arrangement is that the the very large Zika sales team now has ClearSign technology as an offering that they can discuss and present to their customers.

Operator

So so you're basically saying that with the product maturity, it was deemed that this is the right time. And now there's a co branded product has been launched. Is that is that correct?

Speaker 2

That's correct.

Operator

Okay. Fantastic. And is there any sort of initial feedback you can give in terms of these teachings or working with Zico?

Speaker 2

I mean, it's it's early days yet. But the so the I've been in the teachings. I I was part of them. And the rather, development was met with excitement with the z Zika sales team. We had a lot of discussion following the presentations.

Speaker 2

They seem very enthusiastic. And then beyond that, even just looking at at our team here working with Zika for for example, the marketing teams, the the collaboration and the urgency that they have put together the materials and got the website ready as an example has been very pleasing. So I'm I'm very enthusiastic and excited about this development.

Operator

Yeah. That's a great development, Jim. So also very recently in terms of the process burner line, it was announced that the debut of the M series. Can you give a little background of what the M series is, maybe what it's designed for? What differentiates this from our called our traditional product line?

Speaker 2

Yes. Thank you, Matt. So

Operator

the I mean, before

Speaker 2

we should get into the MCUs, it's probably worthwhile talking about the the midstream market. So we talked a lot about the refining market. The midstream is really the gas processing and the transport part of the the pet's capital business. There is a a different style of heater and a different heater manufacturer that works in the segment. We have the opportunity back in 2023.

Speaker 2

I believe the announcement went out in April 2023 to put a what was then a modified boiler burner into a midstream heater sold by a company called Toltas of Midstream here in Tulsa. And that heater is based down in a petro petrochemical company down on The US Gulf Coast. That burner ran well in that heater. It met the low NOx emissions. That was the reason for ClearSign at least ClearSign burner being selected.

Speaker 2

Following that, we got a lot more engaged in the midstream industry. We right. We sold all these two names you might recognize now of ExoFirm and DevCo. And we also recognize that this was a big opportunity for ClearSign, especially if we could develop a burner optimized for these midstream heaters. The another part of the story is we hired Matthew Martin, our chief technology officer, back late twenty twenty three as part of our plan to grow our capabilities and grow our technology.

Speaker 2

And after high Matthew Martin, we invested in a computer modeling system. What that does is it or one of the things that does is it allows us to test in a simulated fashion a great variety of different product types and product arrangements. And with that, we're able to completely reimagine the the structure of the ClearSign burners. We've essentially kept the same mixing and chemistry that allows us to get the low marks that we do, but we're able to completely rearrange the burner to come up with a very different shape that made it much more efficient to operate in the midstream heater. To cut the story short, we modeled that in the computer.

Speaker 2

We optimized the design, creating drawings from that, took it to manufacture and built that burner right out of the computer modeling, worked with Tulsi and Midstream to install that burner down in Texas Gulf Coast, and it just ran. It gave two two PPM NOx in a much more efficient manner. It ran up and down just you quite was a a great success in terms of a a plan Aurora. It has been a very exciting development for us for Taltese's midstream and for everyone that has seen it.

Operator

And then on the heels of that,

Speaker 2

there was an order announced. Is that correct? A second burner going to Devco process heaters? Yes. Very quickly after the results of that installation came out.

Speaker 2

You know, so we have an NDA. We showed that to Devco. They turned around and placed them all the full one for one of their projects.

Operator

So then you've been out talking with customers about this this new product line and the efficiency savings. Can you give any kind of color of what what the market is feedback or if there's been some proposals, things like that?

Speaker 2

Yes. I can. I mean, everywhere we've shown shown this burner, it has it's got really good reception. We've also been able to do that with Taltzia midstream. They've they've obviously seen our our burn operation.

Speaker 2

The customers that buy the heaters are also the customers that buy our burners. We've we've actually been able to make joint presentations with them. The like, the burners being very well received. And I don't it it certainly days yet. I don't have any developments to announce right here.

Speaker 2

But based on on the reception, we're very excited about what this can do. And the you know, through these conversations, the scope of this midstream industry is is vast and varied. So it's a great opportunity for us to get into different regions and to diversify ourself away from just the offloading of refining part of the industry. Is it safe to

Operator

say there's been a bit of buzz in the industry about this?

Speaker 2

I think that's fair.

Operator

Yes. Okay. And then can you give any more color what what you we might foresee the future of this product line?

Speaker 2

I can. I'm really I'm talking about plans, so be aware this is not done yet. But the right. I'm I'm a technical guy guy by background. Understanding the way this burner works, I believe it has a potential to convert into a very good boiler burner.

Speaker 2

I think there's potential to modify into a refinery process heat of burner for certain applications. Also, believe that, right, this burner getting two BPM NOx exceeds the requirements of many of the opportunities out in the market. Then we have the ability to take some of the components out, simplify the burner, still come up with what very good knocks in the industry, but come up with a great burner for a much broader segment of the market that doesn't need the super low knocks that the typical ClearSign technology does. That's expanding our market into a much more commodity part of the industry, but still with a very high value because of the NOx and the efficiency that this burner can't deliver.

Operator

So in a sense, you could detune it. So it's not as high performance. So let's say someone doesn't need the Ferrari of burners and and you'd have a larger addressable market.

Speaker 2

Exactly. Yes. You're going back to a standard family car.

Operator

Fantastic. Let's let's to kind of orders in the pipeline. I wanna talk about orders in the pipeline. This is on a kind of our traditional process burner business. Can we talk you referred to some of these, Jim, in terms of we're going to the Gulf Coast.

Operator

Could you kind of give an overview of what we're seeing in terms of our current process burner pipeline? Yeah, we can. And I

Speaker 2

think it's important because it ultimately, this is the backbone of revenue from looking revenue. So we've but we have talked. We've got 20 burners out in California that are shipped. They're waiting to install. Those are scheduled to store, install, and start up early in q three of this year.

Speaker 2

We've previously announced as well there's a a four heater order for a Fortune 500 chemical company down on the Texas Gulf Coast. Those burners are currently in the testing phase soon to be demonstrated to the customer. They are also scheduled for fabrication and also scheduled for installation as startup early in the third quarter this year. So that's gonna be a busy period. And energy continues to be a a great customer of ours.

Speaker 2

They have some heaters there that we are hoping to support them and upgrade the burners in the near future, but we do not have those orders yet. I want to be clear, but that is a project that we are talking about. And and there's other other work with current energy and there's some other projects we're talking about. I think one thing of note a bit more forward looking is we are starting to get involved in the initiating technology discussions for some big, like, mainstream global refinery heater conversion. So this is early days.

Speaker 2

But at the start of a project, there's normally an assessment of the technologies available, a chance to present them right at the scoping or the feed phase of the studies. We have not been involved at that stage before. It's typically a eighteen month to two year or even longer process for that to those projects get through to actual orders, but it's very important to get engaged at the time. And the fact that we're being asked to be included and but because these global customers are understanding what our technology can do for them, and that we've got the credibility to be included in those conversations. I think it's very significant and and from my perspective, very pleasing.

Operator

That's that's great to hear. Let let let's shift to boiler burners now. I think, you know, early last year, there was kind of a state of of orders in the boiler burner sector. And then followed by then the ICF report, which highlighted the efficiency of the boiler burners. But since then, it's been a bit quiet.

Operator

Can you give a little color what's going on? What you're seeing in

Speaker 2

the boiler burner market? I can. And I'm I I don't have a lot of detail. We've obviously tracked and and and dug into this, and the general information we're getting is just that market has been slow at least the past six months, especially in California. There's just not been much activity.

Speaker 2

I think on the good news is the last few weeks, we started to see an uptick in inquiries and sounds like there are are some projects which are being talked about again. So that's very encouraging. I think also just while we're talking to boilers, I wanna know that we did announce the startup of 1,200 horsepower 2.5 PPM NOx burner for a recycling plant up in Bakersfield. That was significant. That I believe that burner is is unique in that performance level, especially in that size range.

Speaker 2

And getting that done and passing the performance test was a big milestone for ClearSign. I think it's worth noting that in addition to that, although is it in the technically in the midstream sector, we did sell and start up our biggest burner ever with Devco in a midstream heater down on The US Gulf Coast. But that burner was actually a a boiler burner. We just able to fit it into the midstream heater to meet the specific needs of that customer. But we now have boiler burners running from our sort our smallest size up to, I think, about 90,000,000 BTU is a very large size boiler burner.

Speaker 2

Great. So we've we've been

Operator

able to diversify within kind of our boiler burner product line itself just by multiple sizes so we could address multiple markets. Is that correct?

Speaker 2

I think that's right. At least it's you we we filled out the range from other very small commercial boilers up to almost some of the biggest applications you will see.

Operator

Okay. Great to hear. So I'm gonna shift here again. You know, we most recently heard about two product lines that we haven't heard from in a while. Those being flares and then sensor.

Operator

So let's take the former there. There was a recently announced flare order that we put out. If you could give a little color on that and maybe talk about that order and then we'll

Speaker 2

talk more about what we're seeing in that sector. Because in that quote you put in that release that you're seeing kind of more activity and interest. We could dive into both of those. We are. So generally for anyone not familiar with what a flare is.

Speaker 2

A flare is basically a a waste gas disposal device. It has a a burner inside it to burn the gas to carbon dioxide and water. And the flares that we sell, that burner or flame part is enclosed within a a large cylindrical vessel that can typically be 30 feet tall, maybe eight to 10 feet wide, somewhere of that size. They vary in size, but you'll that's the general size of this equipment. So the order that we have recently made a couple of announcements on was actually a flare sold by a different company.

Speaker 2

It didn't work. It did not meet the emission requirements, and the customer came to us to help out. You we can do that. We have the technology. The first order was for engineering.

Speaker 2

We completed the engineering and demonstrated the customer how we could solve this problem. He turned around and placed the fabrication order, which are now in the process of completing. So just but to put some numbers to this because it's not a standard burden. This all in all, this project will be about $250,000 for ClearSign. It will enable us to take our technology, put it into somebody else's flare body, and show this customer what we can do and give them a reference in the industry.

Operator

But another it's another demonstration that we're show our technology can provide advanced solutions. It's it's a

Speaker 2

great demonstration and and this installation actually was a very we can't mention the name, but the installation, a very key key customer up in Northern California.

Operator

And let me dive into that second part of the question then. What do you kinda kinda infer a bit of a resurgence or re interest in the sector. Can you kinda give a color what we're seeing?

Speaker 2

I can. So, you know, the we're starting to see a need for low NOS players, which is not traditional in the industry, but it's starting to be required. With our intellectual property and with the capabilities we have, we can also develop a burner element of a flare that's capable of burning some very hard to burn waste gases. Typically, within the industry, the the operators will be required to blend some natural gas into those waste gases to enable them to burn completely. Of course, that asset is a a waste disposal system.

Speaker 2

They're just buying gas to burn it, which gets to be very expensive. We can burn these gases, in some case, with minimal and often with no supplemental gas that basically allows us to meet NOx emissions and to save the clients a lot of money. So we're starting to see a request and opportunities for this part of the flaring market. But back to the underlying theme of what we're doing to grow ClearSign and look into the future, having that special burner technology allows us to not only sell the burner, but as it's part of a much bigger system to sell the rest of the system and the flare structure with it. Or in the case of a an oxidized or thermal oxidized, it might be a horizontal vessel.

Speaker 2

It's the same premise that we can put our burner inside that vessel, But then ClearSign can sell a a high value system rather than just the burner element. On the commercial perspective, that takes a hundred thousand or $200,000 burner sale and turns it into a system project that could be valued between 600,000 and $1,200,000 a piece of it. It allows us to greatly expand our our scope leveraging our very special burner technology.

Operator

So that's an exciting development. I mean, so you're talking basically from us potentially moving from selling just components to larger systems.

Speaker 2

That's right. And I think and for everyone to be right very upfront of clue, we have not sold any of these yet. We have engineered these systems. We do have proposals out for this type of technology, and we are engaged in conversations. But they are they're only in that negotiation phase.

Speaker 2

So I I don't wanna mislead anyone and have an or expecting something to come in in the next week.

Operator

Well, it's an exciting opportunity. So then we recently saw that there were four ClearSign Eye sensors placed at a super major refinery. So again, another product we haven't heard from in a while. Could you give a little background on on what on this trial? We know that we needed a trial, and then let's dive into the sensors.

Operator

Yep.

Speaker 2

And trial's fair. Right? So this we've talked about sensors in the past. We have not talked about them for several calls. So the but the announcement was a in essence of a free sample to the customer, but we believe it's significant.

Speaker 2

This will for refinery even to install even free equipment is a big undertaking on their part. They have to shut down. They have to do engineering. They have to install cabling and and control equipment. We have been refining the sensors over time even though we haven't been talking about it.

Speaker 2

And also talking to customers which led to this opportunity now to install it. But if I can, let's take I'd like

Operator

to fill

Speaker 2

in the gaps and explain what these sensors do for anyone not familiar with because they are a very different product to our our burner products. So in a a refinery heater, the burners provide a a big flame, this heat built heater. When you turn the gas on to those burners, you've got to have a small flame there to light that gas so that the flame starts. That small that small flame comes with a pilot. And to indicate to the operator that it's safe to turn the gas on, you will typically have a sensor of some type to prove or to confirm that that flame is in place.

Speaker 2

Now this will often take in place from the control system, but it's that sensor that goes on the pilot and confirms the presence of a flame that we are providing. Alright. There are well established technologies in the industry that do this. There's some optical sensors that look up and we'll see the pilot flame and any flames beyond it. So they're they're effective, but they're not good at specifically indicating just the pilot flame.

Speaker 2

And there's a a very commonly used piece of equipment called a flame rod that mounts to the burner pilot. The challenge with those is that the end of the flame rods, basically its name, actually pushes into the flame. They do burn up and they have frequent maintenance problems, which either leaves a client without any flame indication or requires very frequent maintenance, which is costly for the customers. And that that that maintenance need is actually what drives the excitement when we've talked about our sense of the clients because the difference with our sensor is it does mount a pilot, so it is discreet and identifies only the pilot flame. But the sensing head of the sensor is not in the flame.

Speaker 2

It sits about an inch below the flame in the cool zone. So it's expected to be a much more durable and reliable piece of equipment.

Operator

Okay. Let's talk about the market on this numbers here. Jim, what is the addressable market do you believe in terms of these sensors? Maybe touch on maybe our sales price and what is the what is

Speaker 2

the typical order look like? Yes. So this is not only a different technology. It's a different project from a a commercial perspective. So the one thing I really like about the sensors is it is not applicable to only low loss regions or only certain regions.

Speaker 2

These sensors are applicable to every refinery burner in the world. Right? So the the scope of where this can be applied issues. Now not every to be clear, not every burner has a pilot and certainly not every burner with a pilot has a sensor. But there is a an awful lot of them do and this makes it a very big opportunity for ClearSign.

Speaker 2

The sensor are a relatively small device. They're gonna be a out of the box product for us. They're all standardized. They'll sell for somewhere in the region of $4,000 apiece. But one of the other beauties of this product line when it's rolling is we expect them to sell in multiples into a a heater supply all at once.

Speaker 2

There will be ones and threes and fives, but I expect common of these orders to roll and then they write tens, twenties up to some 50¢ as per order. So I think there is a it's a different business model for us, but I think it it it's got to take off, but it it could be a very worthwhile product line for us, which is why we've been working on it for and kept it going over the years.

Operator

That's very interesting. So it's the volume off the shelf and another technology solution being sold to the same customer base that our addressable customer base.

Speaker 2

Yes. So I think going to the right. The objective of of diversification broadly in ClearSign, it's a a very different part of the industry. It's not tied to regulations. It's not tied to decarbonization.

Speaker 2

It will smooth out our revenue flow. I think gives just gives us another separate line of business while still playing to our core customer base and and core technology strengths.

Operator

Right. And just for clarity too, this is a ClearSign product. Right? Not necessarily a Nerion project. Nerion dimension in the past, but this

Speaker 2

is a ClearSign project. That's correct. Yeah. The the sensor is is is manufactured and sold as a as a ClearSign product. Great.

Operator

I'm gonna shift to you, Jim, and maybe address some macros. A lot of companies are talking about some of the macros out there. One, obviously, in terms of supply chain. One, a lot of companies are focused on our tariffs. You know, are we seeing any effect of tariffs or, you know, in our current, you know, project pipeline or proposals, anything like that?

Operator

We are I mean, where

Speaker 2

it shows up is in the other cost of goods. ClearSign burners are built largely out of stainless steel materials. That material price is affected. So we are seeing increased pricing from our vendors. Now we we can also put and have put language in our proposals to allow us to accommodate that to make price adjustments to the extent that we can.

Speaker 2

So we're we're aware of it. We're working around it, but it I think it's fair for everyone to be aware that we are we are seeing increased pricing at present. Our vendors are attributed to the tariffs.

Operator

Okay. So, you know, in wrapping up the call, you know, are there any main takeaways you'd like to leave with us kind of in summary?

Speaker 2

There are. I mean, we've you know, we tried to stress here and and bring out is the what we're trying to do to grow the ClearSign business and set us up for expansion going forwards. So leveraging our sales channels, certainly pushing hard on the products we've got is important. And I think on on that note, we're looking for benchmarks just going forward. What I'd look for is on the inside, looking for sales leads through the Zico sales team.

Speaker 2

I think from as an investor, I would certainly be looking out or recognize the importance of a a burner sale resulting from a a z code lead will be a very big first milestone on that front. I know I said it, but I'm I'm very excited about the m one burners. You know, certainly look out for sales in the midstream industry and our growth in the midstream industry. I would also stress what think is the importance of a a slightly despect or detuned burner going out into the commodity market and expanding our scope into that much larger portion of the industry. Also, the development of that burner into boiler burner applications, potentially refinery burner applications.

Speaker 2

This I my personal right now, we've sold one. We got one burner operation for Ambro. Very excited about the potential of of the m series burner. I think, you know, the right. The concept of systems projects leveraging our flaring technology and and the low BTU gas technology into either an oxidizer or a flare and the sale of some of those bigger systems and showing the industry that ClearSign can deliver that type of technology, what we can do.

Speaker 2

When given the scope of those projects from a a revenue perspective, I think that would be very significant for ClearSign, so I'll look out for that. And then finally, we've talked about the census. And we already have another request for quote. All centers actually from the same refinery or or the same company into a different refinery. We've also been we're also talking to another global refiner who is interested in that technology.

Speaker 2

Just haven't. It. So I think there's real potential there for that clear SANI sensor. We're also looking for that to roll out and scale up.

Operator

Alright. So so in summary, we can look forward to sales from the diversified product line. We could look at diversified within the product line continuing to, is that correct? Leveraging the current sales channels we've announced and then potentially expanding from component to larger systems.

Speaker 2

I think it's fair. I mean, expanding the scope, expanding the markets. It it it's broadening clear. We have a a strong combustion and industry knowledge. We truly have some very talented designers and engineers here within the company.

Speaker 2

It's leveraging that core competency and expanding our business while being true to the strengths to make sure that what we deliver are pretty high value and products that we can make a profit from. Oh, great to hear. So that's all

Operator

the questions I have prepared for this. So at this point, I would like to turn it back to the operator to open up for a question and answer session. We have also had some questions sent in ahead of time, which I will curate as well. But with that, operator, please open up the lines for questions and we'll start with those. We will now begin the question and answer session.

Operator

Sure. Absolutely. Great. Jim, in regards to proposals, we've heard about proposals on on previous calls.

Operator

What is different now than, let's say, one or two years ago in terms of the proposals you're seeing and fielding?

Speaker 2

That's a fair question. You know, we've we've talked about several themes in this call today. You know, I've I've tried to be upfront. The some of the product lines, especially the system products and the reference to, right, the engagement we have with the major refining projects, especially at the early FEED stage, I've included those to help describe work that we're doing internally within ClearSign on a strategic basis to grow our business for the future. And I'd I I said during the call, I don't want to mislead anyone to expect that those orders are gonna turn very quickly or those those proposals will turn very quickly in into orders.

Speaker 2

We do have, obviously, active sensor quotes that I believe have a potential return into orders. We do have the, the midstream orders. We do have some process burner work that has potential to turn into orders. But I've I have tried to be clear where I've referenced the proposals and and the work we're doing as an illustration of our strategic plans and the changes we are constantly developing with the company to grow the potential ClearSign as separate from the local, the tangible proposals that we are actively discussing as something that we expect to be able to bring in to the company in the foreseeable future.

Operator

Great. Operator, please go ahead and and pull again. And I've got a couple others, but if you wanna give instructions for for for for polling, and then I'll I'll segue into another question. Sure. No problem.

Operator

Great. Jim, here's another question here. There's been some discussion about less clean air initiatives and even some slowing of hydrogen projects. Do you feel at all this puts, for instance, our hydrogen burner, you know, at a market risk?

Speaker 2

Yeah. It's yeah. I mean, obviously, there's been a a common topic in the news. But I think it's it's good to be clear. The, right, the hydrogen burner and the project is titled for a % hydrogen, and that was the driver behind the, the funding and the DOE awards that we have won and fund the development of this burner.

Speaker 2

But the utility of the burner goes well beyond that. The refining customers have a very wide range of gases in their fuel gas, and those commonly swing up to, right, at least 80% or higher. So the development of this burner is to be capable of fuels ranging from a pure natural gas up to 100% hydrogen. What that really means is this is a very fuel flexible burner that is being designed to be robust within the industry and suitable for installation in refineries no matter what their fuel gas blend. So I am confident that this is a very practical and useful burner going into the future, really without regard to the progress or potential timeline of any strictly hydrogen fueled applications.

Operator

Operator, please go ahead and turn over to to any caller questions. Sure. Your first caller question is from Robert Kexpak from Las Colinas Capital Management. Please go ahead.

Speaker 3

Hello. This is Bob. Can you hear me?

Speaker 2

Hi, Bob. Yes. Good afternoon.

Speaker 3

Good afternoon. Yeah. I was gonna bring up the point of, the fact that when you came into the company, there there was a great success in the innovation that was made. And then as you mentioned, it took some time to be able to develop those into an actual product. So from 2021, according to your efforts, we we we had an innovative product and, developed by 2021.

Speaker 3

And so now we're, you know, many years into this. And, the thing that I that I wanna bring forth is that what what you've explained is there's really three things that the innovation yielded. One of those was the reduced maintenance cost on the radiant tubes. The other was fuel savings of from what I've gathered is approximately 3% or more. And then, of course, the much talked about reduced pollution, the reduced NOx.

Speaker 3

The thing that I would say from a sales standpoint, the innovation yielded a lot. But if if we don't mention fuel savings and, all we talk about is NOx, I don't think we're really I don't think we're really giving ourselves enough credit to generate more prospects and more sales. So I I really think, you know, in in in if it's not being printed in your press releases, then I have the feeling that it isn't being emphasized by the people who are involved in generating sales. What what I would what I would ask this question of all that, could you give us some idea of the number of prospects, say, at the beginning of last year to the beginning to now? In other words, give us an idea if there's prospect growth, there's something we can hang our hat on.

Speaker 3

Because in order to get these sales up to $1,620,000,000 dollars, if if you if you have, let's say, hypothetically, 15 prospects now, you you're gonna have to generate a lot more prospects to really materially increase the sales because so many of them take so long and there's things that fall through. So could you give us some idea about how many prospects we had maybe at the end at the beginning of last year compared to where we are now at the beginning of this year?

Speaker 2

K. So, Bob, let me take, I'll answer the best I can. Let me try and unpack, right, some of the points you've brought up. I think addressing the right. Just your statement about efficiency.

Speaker 2

Just to point out, we put press releases out, to be honest, mainly for the purpose of keeping investors updated with the progress of the business. Those are separate from the marketing materials and the sales presentations and the conference presentations, etcetera, that we make to customers in the industry. And I can give just a right. As a quick example, we talked a lot about the m one burner with the, right, the marketing brochures for that burner. In the industry, we express efficiency as the excess air levels the burners operate at.

Speaker 2

That's the key driver, and that's what the clients recognize. That is specifically called out on the sales brochures, but those are not the materials that are obviously discussed in the investor forum because they tend to get very technical and the language we use is different. So I I appreciate your point and absolutely agree that it's very important to stress the values and the cost savings to the customers, but we we do reference the efficiency, these, the operability, the turndown range, the speed of burners we bought up. Those are actually all referenced. For example, on the m one burner sales materials, there are many facets of our burners that we produce.

Speaker 2

I I'll be honest. I don't have specifically the data that you talk about between last year and now. I can tell you that the range of projects and the number of quotations and the different products that we're engaged in are significantly greater now than they have been in the past.

Speaker 3

Okay. And I I just wanna add too to the emphasis on fuel savings because, you know, in business, if you can save money, it's, you know, it's it's materially it's a it's a material thing. I I just took a look at DEBCO's website and Tulsa Midstream. And both of them on their website, they mentioned that they were seeking fuel savings. And it didn't take me very long to find it.

Speaker 3

So I I'm just saying, in in the press releases that you put out to us, I I've only really heard about NOx. It's been, you know, NOx reduction, NOx reduction. And I really think in business, the fuel savings part of it is very, very meaningful. And I think that's just, you know, if if that's what this innovation produces, then it should be something that's really emphasized.

Speaker 2

Okay. Hey, Bob. You your comments were appreciated. I note them. Thank you very much.

Operator

Operator, I'm going go ahead and read another question here. There's a number of questions actually around Zika itself and about the Zika agreement. One question Jim is about the geography the agreement covers. And then any sort of color you can give on everybody wants to do the rollout, right? How do you kind of foresee the rollout there?

Operator

You can speak in general terms. Yes.

Speaker 2

So I think the first part, our agreement with Zico is so first of all, it is specifically for refinery process burners, but that agreement is global. Right? So as we are marketing this as a Zico product, and the ClearSign burn becomes a Zico product line, and Zico is a global company with manufacturing and servicing, I believe, on every continent, This is this gives us a global reach. Now with that said, in areas like, China, I am not ready to roll the the refining process burners out in China. I do not want to expose our IP there.

Speaker 2

I don't think the Chinese will pay a price that makes sense for ClearSign. So I'm I'm not saying that we are going to just push our technology out over the entire globe, but the other ZCO agreement, should we choose to, does give us that access as of when we are ready. In terms of the rollout, right, this is a a slow turning industry, and I hate to use that word, but we we're we're in the phase right now of I think we're well along the way with the marketing materials. We have started to educate the Zico sales team. I expect that they will be, like, talking to their customers and start to develop leads, at which point we will engage with them and, like, join them talking to the customers.

Speaker 2

But to roll that stage forward through the negotiations and completion of of the projects and placing of the orders, just to put a timeline, I believe it is going to be into 2026 by the time that we start to see orders resulting from that Zico engagement. And I'd like, just because I don't want to give the impression that have people disappointed when it it does not come in quicker because it it is going to take some time just even after we engage with the customers, those customers to go through and just to go through their normal process of the engineering and the evaluation and actually placing the orders.

Operator

Operator, are there other questions? There are no further questions at this time. I would like to turn the call over to CEO, Jim Deller, for closing remarks.

Speaker 2

Thank you, operator. As we end this call, I want to thank you, our investors, for your continued interest and support of ClearSign. I do also want to thank and acknowledge all of our employees. We have a small and cohesive team that has shown great dedication, flexibility, and open mindedness that we've pushed out our business into these new areas. This has required a great technical development and engineering prudence, thorough work in our sourcing and project planning by teams developing and presenting our proposals, and even the development of new accounting processes to support our customers in new ways.

Speaker 2

It is very much recognized and appreciated that all this has and continues to be done in addition to the sales, marketing, and engineering and product supply and startup and all of the operational support that make up our day to day operations. With that, I'd like to conclude the call.

Operator

Sorry. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating. I'd ask that you please disconnect your left.

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Earnings Conference Call
ClearSign Technologies Q4 2024
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