Clear Blue Technologies International Inc.

Good morning, everyone. Welcome. Thank you for joining us today. We're just going to give a couple more minutes here to let everybody get joined up. And then we're going to get things started. Okay, welcome everyone. Thank you again for joining us today for the Q3 2022 earnings call. My name is Natalie Smith, and I'm here today with Miriam Turk, our CEO, and Farouk Anwar, our CFO. So just a few little items before we get started. If you have any questions, we welcome your questions. So please just put them in the Q&A or in the chat and we will take care of them after the presentation. And if you're having any trouble or issues, just message me in the chat. And this presentation is being recorded and will be posted on our website about an hour after this presentation concludes. So with that, I think that's it. I'm going to turn it over to Miriam.

Thanks, Natalie. Good morning and good afternoon, everyone. Thank you so much for joining our Q3 2020 earnings call. It's been a tough quarter. I'm not going to make it a rosy picture. Clear Blue's not happy with the results of Q3 2022. And we'll be very frank during this presentation about why that's happened and what the situation is. But we're also going to provide you with all of the work and activities we've done to ensure that we make it through this economic downturn. And it is truly the economic downturn that has impacted us. So it'll be a good part of the presentation on the 2023 outlook and what we're doing there. I would encourage you to ask any questions that you have. And for those of you who know me, I try to be as accessible as possible. And I'm very happy to have any conversations that anyone wants to have offline. Just reach out to me. My email's at the end. So, Farouk, our steadfast CFO, is here joining me, and I'm going to dive right in. First of all, of course, this presentation will have some information and some thoughts from a company perspective of forward-looking information, and we ask that you always take that with a grain of salt. We're giving you the best of our knowledge and ability, but it is forward-looking and not 100% guaranteed, so please take that into consideration. In terms of the agenda, we're going to talk a little bit about Clear Blue and what we've seen happening in the market. And there's been a lot of change and activity in the market this year. You could probably say that the economic and the war and the gas prices and all of those things, climate change issues of 2023, have had a very negative impact on our current results. But from a total company outlook perspective, they've had a huge positive impact. And we're going to try to, in a balanced way, talk about both of those things in this presentation. We're also going to talk about the Q3 2022 results. And then last, but most importantly, talk about the outlook. So I'm going to just start with Clear Blue. And I want to talk a little bit about the market trends. And I think that power and power infrastructure has renewed importance. People didn't used to worry about having power in any part of the world. If you were in the emerging markets and you had a diesel generator, you just went and got gas and filled up the generator. It didn't sound nice. It didn't smell nice, but you had power. Now all of a sudden you've got gas shortages and the cost of gas is way too high. In the developed marketplace, all of a sudden you have discussions about rolling blackouts. You have, we've already seen in North America, you know, power outages are now a normal thing where they were unheard of maybe even 10 years ago. Massive power outages in some places like hurricanes and tornadoes and things like that in Florida and Atlantic Canada. And then more minor ones like, that are being affected everywhere. So there's a huge phase shift happening in everything related to power. And all of a sudden power is something that is of keen conversation, especially for our friends in Ukraine. So what are we seeing on the ground around that? So let me give you just a couple of examples. um tower exchange is a large tower telecom tower community and we've been working with um a number of of telcos uh in the marketplace and as an example one of the telco cios um said in october at the tower exchange because we met with him at mwc in march and he said in the last six months the world has changed for us the cost of diesel has gone crazy My number one priority now is to invest CapEx in my own towers and co-invest with my tower company suppliers to deploy solar at every tower and get off of diesel. So that is an announcement of a major program to take a huge infrastructure base of grid and diesel and grid diesel infrastructure and convert all of those systems into a solar and solar hybrid infrastructure. And of course, we don't do diesel. I mean, we can support a diesel generator, but that's not our focus business. Our focus business is adding solar to energy infrastructure. So all of us, not only new projects for that customer, but the existing infrastructure just moves smart dab middle of what Clearblue does. Then let's talk about IHS Towers. So they announced in October their carbon reduction roadmap, which is called their Green Project. And they've announced that between now and 2024, they're going to spend $214 million in CapEx to go green. And again, what we're doing is taking the existing... infrastructure and converting it to solar. And then lastly, if you look at the North American market, which many of you will know that our lumient solar streetlight smart city business has been a bit quiet the last couple of years, that's about to change. And it's changing for a couple of reasons. One, you know, both Canada and the U.S. have announced significant the Clean Air Act, the Infrastructure Act, And the Canadian government's recent announcement of a refundable tax credit equal to 30% of the capital cost. So the ability to go solar is being empowered from a cash and a funding perspective. And given the issues with resiliency and infrastructure, there is just a very common understanding that this is where we need to go and what we need to do. So the conversations are changing significantly in our favor. So the need for smart off-grid is becoming much more compelling. I think the thing that I haven't really also mentioned is that when it comes from just general climate change, we now all feel it every day. And so people at the end of the day do things that's kind of in their retail personal world. And the concept of going green and doing solar streetlights and that kind of thing is just so fundamental in the fact that we're all living with terrible climate change impacts around the world. So the demand for smart cities and solar streetlight is really starting to increase. We have a really strong pipeline for 2023 of projects that are already expected and moving. Telecom continues to be a key area of focus and a significant amount of investment, not only to get 3 billion people who do not have connectivity, good, strong connectivity to the internet, but also to make that infrastructure green and more reliable. And lastly, Our new PicoGrid product, which is going to be focused on satellite Wi-Fi and IoT, and I'm going to talk a little bit later about what that could mean for 5G, is also something that's starting to grow quite strongly. So just a reminder about what it is that Clearblue does. We... are a power and energy service delivery company. We provide power and energy to the customers and the way that buy our services. And the way that we do that is we have our own technology in around the smarts and the brains of a system. And when you add the right solar panels and the right batteries and the right infrastructure around that to make an entire off-grid power system, you have a reliable energy source. So we sell an entire off-grid power system. We use solar panels that are commonly available. We have our own lithium batteries, which we manufacture in partnership with a company in China. And we have our smart off-grid control technology. That technology is connected to the number one operations management platform in the world. And I say that because when we show it to people and when they see what we have built in our platform and capability, that is the feedback we get from our customers. And with those two things put together, along with Clearblue's own team, we are managing and operating mission-critical devices around the world. So the core technology, solar panels, we're riding the technology evolution wave. Lithium, while we have our own battery, we're using industry-leading cells. We're riding the lithium battery and other energy storage technology wave. What we focused on is the specifics that are required for smart off-grid, nano, and pico-grid systems. And remember that Clear Blue doesn't do microgrid, which is the bigger solar systems that are very commonly deployed in commercial infrastructure, and you see them, you know, along the highway somewhere. What we do is nanogrid and picogrid systems, which are a next level down, and they are better tuned for completely wireless disconnection. connected from the grid off grid. So they're more resilient. They're not subject to a massive outage and you're cutting the cable so that you are eliminating a significant amount of cost from an infrastructure perspective. So that core technology really consists of two pieces. One is we make a power device and that power device has a lot of smart control, smart management, and a number of high availability performance aspects of the technology. It also is designed in a way where we have total ability to control everything in a power system remotely. Think about, you know, 50 years from now when every fridge, toaster, microwave, you know, plug in the house is is remotely controlled. You know, you're a thousand miles away, you're coming home and you decide you want to turn the lights on. You can do that in spots today by adding things into the network, adding your nest for your thermostat and putting in a smart plug. But in our infrastructure, we start right at the power distribution panel. Everything is controlled centrally from our Clearblue controller. And that Clearblue controller talks wirelessly to to our cloud infrastructure. And our cloud infrastructure has the predictive data analytics and the management and control capability to deliver significant value to our customers. So let's take a look at what that means from an on the ground perspective. And this is a picture of two systems that were installed for one of our telcos at the same time last year in Africa. So the one on the left, is a competitor solution. And the one on the right is a clear blue solution. Now, first of all, you can see that if you want to do anything with that system on the left, or you want to figure out what's going on, you got to go to the site, figure out, well, why is that breaker switched? And what's going on with this? And I need the technician to have expertise to troubleshoot, to connect to it, to talk to it and do all of those kinds of things. So it's a very expensive system, and it requires someone to go to the site to manage and operate it. On the clear blue side, you send somebody to the site, there's actually nothing he can do. He's just got to make sure those cables are connected properly. There's actually no physical on-the-site control aspect. Everything is set up to run remotely and be controlled remotely. But the second thing that's most important about this is because the first thing, a unit on the left, is standalone and it doesn't have connectivity to the cloud like Clear Blue does. And on the Clear Blue side, we have predictive analytics, energy forecasting, weather forecasting, and the ability to manage the infrastructure effectively. We've been able to demonstrate, and it's been validated independently by Facebook, by Meta, through a project they did last year with a six-month field study that they did independent of us, that, in fact, the system on the left costs 40% less than the system, sorry, the system on the right costs 40% less than the system on the left. So think of it this way. The guy on the left, $20,000. The one on the right, $20,000 up front. And then there's all of the ongoing benefits. So there's a huge compelling value proposition that we deliver to the customer. And when it comes to our technology, you know, it's all about predictive analytics. And now with the STDC grant that we have received, we're going to be moving into artificial intelligence. where we're going to be using the data, and Clearblue has more data than anybody else in the world, to deliver the key value proposition. Energy and weather forecasting to manage and deliver the energy that you need. Maintenance, troubleshooting, remediation, making sure that battery is healthy and has got a long life, and ensuring that we can handle the modular upgrade of our technology and our capabilities from a potential energy perspective. When you put all of that together and the history and the work that we've done as a company, we're very proud of the marquee customers that we have in the marketplace. We're still operating systems for these customers. They're buying new systems. Most of them are long-term partnerships. We do a project every year or every quarter, and we're running and operating these systems on an ongoing basis. That's resulted in strong global traction. And we have systems in production in 37 countries around the world, many states and provinces, more than 400 customers. We're almost at 10,000 units deployed, and we have more than 10 million days of operating. So when you can start talking about the fact that you've processed 10 billion transactions from those devices in the field to the cloud, you leave every other company behind. There's companies out there that have a device where you can connect to it and pull out the data. There's other companies that have this cloud platform or server platform where you can connect to it, put data in and start building something. Think of that like an Excel spreadsheet. compared to online Oracle financials. So Clearblue has the network, the connectivity, the security, the encryption, all of those things that actually, you know, when we plug in, when a customer plugs in a power system anywhere in the world, everybody in the company, including me, says, you know, this customer system came online, has been activated, and here's how it's doing. That's the blue difference. So let's talk a little bit about the market. And I wanted to dive into a couple of market pieces. As you know, the telecom marketplace and telecom tower marketplace is quite a large market for us. And as you can see here, it's growing nicely. but it is a four dot X billion dollar market on an annual basis. So this is the number of new power purchases every year. This isn't the number of towers. This is the number of new power purchases. And when you look at that infrastructure, it really breaks down into about 40% low powered systems, which is less than nine kilowatt, about, 40% medium size systems, which is 9 to 36 kilowatt. And then there's the really large systems, which are 36 to 700 kilowatt. Our target market is the medium and the low market. That's 73% of the entire market. And we've got systems in both the low size up to nine kilowatts kind of bread and butter. But we've got systems that are 10, 15, 20, 25 kilowatts. And I don't think we've hit 25. I think we're 23 kilowatts. But we're modularly scalable. So that's the range. That is also the range where adding solar has the potential to bring significant value. When you're at a high-powered site that's 700 kilowatts, if you want to go solar, you might as well do a microgrid solar farm. But if you want to really deliver value from a solar perspective, it's those low and medium-sized power sites. And when you look at that, it's important to understand that the markets we're already in, we're talking about 20,000 new sites a year. And now that everyone is accelerating away from diesel to a solar hybrid conversion, and there's a huge CapEx spending program being done everywhere in the marketplace to do that, that opens up another 70,000 sites per year. And I can tell you, even on Thursday morning, I'm involved in presentations with customers and discussions around those things. Let's talk about 5G for a second. And I've talked in the past about the fact that we see that as a future opportunity for Clear Blue. And we're getting to the point now where it's starting to be something where we're going to be more active in. We really got the first 5G rollout starting to happen yesterday. in 2022 and 2023, mostly in Western markets where power is less of an issue. It's interesting because in the Western markets, if the grid goes offline after a few hours, the cell towers start to lose power and they stop. In Africa, the grid goes offline so often that the telcos have to keep them running even when there's no grid. So they don't get the get out of jail for free card. Oh, we don't have any power from the grid. The cell service is going off. They've got to keep them up and running with diesel generators. So they almost have a more onerous service level than we have here in markets where the power infrastructure has traditionally been more reliable. But we've always talked about the fact that there's going to be a need to put in 5G kind of at the street level at every tower. And that's really the 5G small cell market. And you can see here in 2021, pretty small market, $0.9 billion. This was $900 million market. But when you go to 2028, it's an $18 billion market. So what is a 5G microcell consume? It consumes between 10 and 40 watts. Well, at 10 to 15 watts, it's a picogrid system. And at 20 to 40 watts, you might be into a nanogrid system depending upon where it operates. So mission-critical infrastructure, small power, needs to be reliable, needed to drive cars that are going to be driverless cars and drones and all of those things and all of the 5G services that we need that's going to be needed for a smart city. And every time you put one of those on a pole, and you can see here what an example 5G cell looks like, connecting it to the grid is going to be expensive. And so the opportunity for clear blue products in the 5G microcell is an area that we're going to be focusing on in 2023. Early days still, but definitely a growth opportunity for us. So that's a little bit about Clearblue. We're now going to turn to our Q3 2022 results. I'm gonna turn it over to Farouk and then later on, I'm gonna come back and talk about the outlook and what 2023 looks like.

Thank you so much, Miriam. Thank you everyone for joining. All right, so we're going to start with revenues. The global macroeconomic environment has become quite challenging. Renewed COVID-19 restrictions in China and the war in Ukraine has put pressure on global supply chain. This has resulted in part shortages throughout the world. As a result, some of our customer rollouts and deployments have been affected, decreasing revenue for the quarter and trailing for quarter accordingly. Specifically, two of our customers have delayed projects due to telecom equipment shortages and delays in financing, which together impacted Clearblue's revenue by more than $2.1 million in its 2022 year-to-date revenue. You can see on this bar chart, we can see that the quarter-by-quarter impact on revenue resulting from delayed customer rollouts. Next chart, please. BW's lightning vertical is made up of one-time revenue and energy as a service deferred revenue. As a result, the company continues to grow its energy as a service offerings. We have been seeing a gradual decrease in a one-time lightning revenue and corresponding increase in energy as a service recovering revenue. The 18% decrease in lightning revenue is a result of the same shift with revenue to be generated over the next three years. The decrease in U.S. revenues is directly attributable to the shift in the Lightning revenue. Our telecom vertical has grown over the past few years. Large system rollouts of customer projects began in Q4 2020, showing strong growth in the competitive periods during 2021. However, due to the global supply chain issues, rollouts have delayed and pushed projects to 2023, resulting in a decrease in revenue for the quarter and trailing for quarter of 2022. However... We continue to have a good relationship with these customers and we're working with them to accommodate their revised rollout schedule. So as I spoke in the previous slide about recurring revenue, we can see over here that the recurring revenue, which is the revenue that company earns from its energy as a service, Illumion's ongoing management services and cloud software, every single system Clearblue has ever sold includes an ongoing services component. Clearblue manages and operates these power systems on an ongoing basis for our customers. This is at the heart of our business and value proposition. As telecom customers increase wireless telecommunications bandwidth to support an ever-growing customer base, so too do the power needs of those sites. This ongoing growth of telecom systems and the ongoing operations and maintenance of power needed to keep the systems functioning is what drives the growth in our recurring revenue. As you can see, the addition of our telecom customer rollouts is having a nice impact upon the growth of our recurring revenue. For the trailing four quarter period, recurring revenue grew 51% to $736,000. For Q3, revenue was up $143,000, up 14% from the same period last year. Next slide, please.