Heliogen, Inc. (NYSE:HLGN) Q4 2022 Earnings Call Transcript
Heliogen, Inc. (NYSE:HLGN) Q4 2022 Earnings Call Transcript March 29, 2023
Operator: Good morning, and welcome to the Heliogen, Inc. Fourth Quarter and Full Year 2022 Conference Call. As a reminder, today's call is being recorded. I would now like to turn the call over to Louis Baltimore, Heliogen's Vice President of Investor Relations, for opening remarks and introductions.
Louis Baltimore: Thank you, operator, and good morning to everyone. We're glad you could join us today for our fourth quarter and full year 2022 conference call. With us on today's call are Christie Obiaya, Heliogen's Chief Executive Officer; and Kelly Rosser, our Interim Chief Financial Officer. Heliogen issued its results yesterday afternoon in a press release that can be found on the Investors section of our website at heliogen.com. As a reminder, our comments on this call include forward-looking statements, which are subject to various risks and uncertainties. These statements include expectations and assumptions regarding Heliogen's future operations and financial performance, including implementation of Heliogen's strategic plan and growth initiatives, plans to priorities sales of Heliogen's industrial steam product and installation of commercial scale projects, expectations for scale in Heliogen's concentrated solar thermal technology, discussions with potential customers and commercial contract progress.
Actual results could differ materially from those contemplated in the forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. Factors that could cause actual results to differ materially can be found in yesterday's press release and other documents filed with the SEC by Heliogen from time to time. During this call, we may also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for, or in isolation from, GAAP results. More detailed information about these measures and a reconciliation to the most comparable U.S. GAAP measures is contained in the press release issued yesterday, which is available in the Investors section of our website and was furnished on Form 8-K with the SEC.
A replay of this call will also be available on the Investors section of our website this afternoon. Before I turn it over to Christie, I want to first welcome her to her first conference call as Heliogen's CEO.
Christie Obiaya: Good morning to you all. There were two things that brought me to Heliogen a little over two years ago. First was the innovative technology which is uniquely suited to respond to the global decarbonization effort. The second attribute was the quality of the incredibly talented team I joined then as CFO. As our new CEO, I'm laser focused on the current reality. In order to harness and sell this transformative technology, we must first unleash the collective superpowers of this company. Heliogen is not left for innovation, which was Stage 1 of the company's lifecycle. But our mission critical for Stage 2 is commercializing and monetizing our product to create value for heavy industry that changes the game for our customers and puts us at the epicenter of producing a 100% carbon-free solar thermal energy.
As a CEO, my responsibility is straightforward and exciting: deliver the goods to customers and grow Heliogen's revenue backlog. My track record of delivering and building large scale energy projects positions me and Heliogen for success. And we are already seeing the effects as we take Heliogen into Stage 2. Heliogen closed the year 2022 facing fundamental challenges, but with a clear line of sight on how to course correct and grow. We identified several areas of traction but fell short of achieving our most important goals for the second half of the year, which were to close at least one additional contract and to break ground on our first project. Some of the challenges we faced were external and reflected the constraints facing every public company in this environment.
Heliogen also confronted internal issues that impeded growth, and we've made key changes to address these obstacles. Our Phase 2 mission is clear: shift from the technology development phase into the project delivery phase, all of our effort is focused on this mission. In recognition of our reaffirmed vision, our Board of Directors asked me last month to succeed the Heliogen's Founder, Bill Gross, and serve as Chief Executive Officer. The Board's decision was step one in our mission shift into project delivery, and reflected the lifecycle of other technology companies when they experience challenges transitioning from earlier stages of innovation into commercial deployment and execution. To meet our Stage 2 mission of project delivery, our team must incorporate market feedback to expand our customer base, streamline operations and improve our financial condition.
I'm honored to lead Heliogen at this pivotal moment, and I appreciate the calls and emails of support from our investors and employees. Together, we have a shared vision for Heliogen's success, and that successful will be built on three pillars: closing sales contracts, installing our first commercial scale projects, and extending our cash runway. As CEO, I've taken immediate steps to focus our resources and operations on achieving these goals. Our first pillar for Stage 2 success is the most fundamental: sales. Heliogen will close sale contracts by responding to changing market conditions, including the Inflation Reduction Act, which has turbocharged the demand for green hydrogen and other clean energy technologies. This massive federal program has greatly expanded the opportunity set for our steam product much sooner than we had originally envisioned.
We know Heliogen's innovative technology will play a substantial role in the world's energy transition to net-zero. And the industrial customers, who are focused on this milestone, watch what we have to offer. However, we recognize the best way to demonstrate this to the market is by building a backlog of signed contracts and converting those to revenue. We aim to capitalize on evolving customer demand and emerging market conditions generated by the IRA and ancillary opportunities. We've already begun starting to convert these openings into sales. And I'm pleased to announce Heliogen has recently signed a contract for engineering services for a potentially large and long-term customer who is also a Heliogen investor. This engineering contract was a rapid response to our outreach to this potential customer, and our newly revised operational efficiencies allowed us to close the agreement quickly.
Photo by Ronan Furuta on Unsplash
Likewise, our near-term sales efforts will focus on moving with speed and leveraging our most available product for adoption. That is our industrial steam products, because it can have the greatest commercial impact in the shortest timeframe, while helping our customers achieve their emissions reduction goals. This one product also has the unique ability to provide zero carbon energy for two critical applications. One, it can provide steam to be used directly in industrial processes. And two, it can provide steam to produce green hydrogen when paired with solid oxide electrolyzers. These attributes will allow us to focus on our long-term hydrogen goals, while driving short-term revenue. This first pillar of closing sales contracts will be a vital and permanent lens for our project delivery mission.
And we have a newly revitalized sales force with a singular focus on generating a sizeable backlog of contracts. To achieve project delivery, we're also laser focused on the installation of our first commercial scale projects. Investors will gain increased confidence in the quality of our products by seeing our projects in the field. Industrial customers need to see decarbonization technologies at work, and we will meet our goals by putting our product into operation. Our prospective customer base is divided into three cohorts; early adopters, ready to move; those who want to see full commercial scale projects first; and those who want to license our technology. By focusing on project installation as a core imperative, we can leverage data from completed projects to unlock demand from that second cohort for whom operating commercial scale project is a must have selection criterion.
Heliogen is primed for success, because this list of prospective customers is quite long. In our shift from technology development to project delivery, we will be aggressive about converting this list from prospective to contracted as a driving strategy for success. We are confident that getting projects in the ground will usher in a larger customer base, ultimately charting the path for companies who want to license our technology and build themselves. We are well on our way to implementing the second pillar. In November of last year, we announced a green hydrogen production project that we intend to build in the City of Lancaster, California. This project will ensure we get a commercial scale project in the ground quickly regardless of the sales cycle.
This will give us both steam and hydrogen production data we can use in our future sales efforts along with the source of revenue. We call this project Proxima. We've completed the preliminary plant configuration design and we've secured a site where we work to permit the site and secure an offtake partner. Once we secure a contract with the offtake partner we plan to raise project level equity to fund the project. In the meantime, we have a dedicated team focused on finding deals with early adopter customers who are open to starting with a single module deployment, which we expect will lead to larger installations once they experience the benefits of Heliogen's cutting-edge technology. In addition, we're revising work streams to center this operational necessity in our workflows.
Combined with our sales focus, installation will support a viable path to sustainability for the company. The three pillars of our strategy are integral to one another and none more so than part three, improving our financial position. By cutting costs, streamlining our operations and focusing our efforts on driving tangible immediate results, we can meaningfully extend our liquidity runway. This should give us the time we need to deliver on our sales projections, install more commercial-scale projects and put us in a more advantageous position to pursue a future capital raise that should take us to cash flow breakeven. During my short tenure as CEO, we've undertaken critical steps to shift us toward extending our liquidity runway. Although Heliogen has sufficient funding to meet our obligations through early 2024 under our previous plan, I've tasked our team with implementing a runway extension strategy to drive that timeline to late 2024.
For example, we have cut a significant portion of our R&D efforts, which meaningfully reflects our shift from technology development to project delivery. We are also deferring further capital expenditures, which we can ramp up once we have additional sales. In addition, driven by our strategy, we've also just taken the difficult action to reduce our headcount by approximately 15%. We are allocating the majority of our financial resources and our talent to the areas where they can make the most immediate tangible impact. That being said, we've also created a small group within R&D who can still work on innovations, which drive future generations of our technology. By cutting costs, streamlining our operations and focusing our efforts on driving tangible immediate results, we've already identified significant cost reductions toward our goal.
By implementing these actions, we expect our liquidity to take us into mid to late 2024. As Heliogen demonstrates progress on our Stage 2 mission, guided by the three pillars of closing sales, installing projects and improving our financial position, I expect to see a substantial transformation in Heliogen's economic future. We should be able to measure our achievements in additional interest from prospective customers, which in turn should elicit additional interest from investors who have been waiting to see more tangible progress, and all of this will be reflected in increased viability for Heliogen, a virtuous cycle. Along with favorable market incentives, this should enable us to raise additional capital in the future at potentially more favorable terms than would be currently available to us today.
Now let's talk about the other operational and execution progress that we've made as a company since our last earnings call, including some additional accomplishments from Q1 2023. You may recall that as part of our third quarter 2022 earnings release, we announced that we completed the initial field testing of our autonomous vehicle, ChariotAV's autonomous cleaning functionality, which is one of our execution milestones for 2022. ChariotAV cleans the mirrors autonomously at night just as we intended. After validating this functionality on board the vehicle, it came time to validate its usability in a customer environment. We did this by handing it over to our internal projects team to operate, just like at customer win using the same documentation and receiving the same training.
The vehicle has now successfully accumulated over 125 hours of operational life and over 25 miles traveled since the beginning of the year. Having completed field validation of the autonomous and night time functionalities, we decided, as part of the cost reduction initiatives that I mentioned earlier, to pause further development of the autonomous cleaning vehicle effort until we close and advance additional sales of commercial scale projects. I'm proud of our team for their great work on this and pleased to share with you this video of the ChariotAV in action. We've also made great progress on the design of our next-generation heliostats, which are intended to cost significantly less, both to produce and to install. This next-generation heliostat is a critical part of our margin expansion strategy.
These heliostats will exit our factory fully assembled and with higher packing density. They'll be produced out of less material and they'll be able to be installed autonomously in the field. Instead of using parallel concrete trenches to secure the heliostats of the ground, we've designed them to be pinned to the ground using what are essentially large stakes. As a result of these improvements, we expect these heliostats to cost Heliogen significantly less than our current generation heliostats, including production, transportation and installation without any negative impact to the reliability. We recently successfully completed our first automated installation test of these Gen 5 heliostats at our demonstration facility in Lancaster. And with that, I'll now hand it over to Kelly to review our financial results.
Kelly Rosser: Thank you, Christie. Now I'll turn to our fourth quarter and full year 2022 results. Heliogen reported $4.7 million in revenue on contracts in progress for the fourth quarter, bringing our full year 2022 revenue to $13.8 million. This was near the high end of our revised revenue guidance for the year for which we have provided a range of $12 million to $14 million. The vast majority of our 2022 revenue is from our commercial scale contract with Woodside Energy, who remains a strong partner for us. As we work through our strategic priorities that Christie outlined earlier, we have chosen not to provide guidance for 2023 at this time. This is deliberate as we believe it is important for us to rebuild credibility as we aim to grow our revenue and sign more contracts this year and beyond. We look forward to announcing these accomplishments as we make them. Before we open the lines up for Q&A, I'll turn it back to Christie for closing remarks.
Christie Obiaya: I'd like to conclude these remarks by thanking you for your support. I look forward to delivering on the strategy I outlined for you today as we work to fulfill Heliogen's mission of reducing the world's carbon emissions. Thank you so much for your attention, and I look forward to answering your questions.
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