Heliogen, Inc. (NYSE:HLGN) Q1 2023 Earnings Call Transcript May 15, 2023

Operator: Good morning and welcome to the Heliogen, Inc. First Quarter 2023 Conference Call. As a reminder, today’s call is being recorded. [Operator Instructions] 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 first quarter 2023 conference call. With us on today’s call are Christiana 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 the company’s future operations and financial performance, including implementation of the company’s strategic plan and growth initiatives, plans to prioritize sales of the company’s industrial steam product and installation of commercial scale projects, expectations for scaling the company’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 company 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 on 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. And with that, I’m pleased to turn the call over to Christiana Obiaya, our CEO.

Christiana Obiaya: Thank you, Louis. Good morning to you all and thank you for joining us. During our last call 6 weeks ago, I shared our vision for how we will leverage the technological innovations of Heliogen to deliver value and opportunity for our company and shareholders. Our strategy is grounded in aggressive pursuit of our core pillars of mission-driven success, closing sales contracts, installing our first commercial scale projects and extending our cash runway. Every member of the Heliogen team is aligned on these pillars and job performance is measured by progress against these goals. We have a singular focus that is already yielding results, and we are bullish on our capacity to deliver. Let’s dive into pillar number one.

Heliogen continues to demonstrate the value of this technology and the substantial role will play in the world’s energy transition to Net-Zero by building a backlog of signed contracts and converting those to revenue. As we previewed in our last call, our initial targets are steam consumers, and we’re focused on projects in the heavy industry and food processing sectors. To that end, we’ve already substantially increased our pipeline of projects with multiple potential customers in the queue, ranging from qualified leads to due diligence to detailed contract negotiations. Our target customer is divided into 3 cohorts. Early adopters ready to move, those who want to see full commercial scale projects first and those who want to license our technology.

We are seeing meaningful progress, particularly on those early adopters interested in multiphase projects with the first phase being a single module installation with potential for much larger multi-module expansion opportunities after a successful first phase. We continue to build our backlog through pursuing sales contracts for our industrial steam product, which is Heliogen’s products, commercially ready for adoption today. We’ve established a market-ready spec and plan for this steam unit. However, while we’re excited by the market response, the sales cycle for these commercial scale projects is long, although we must anticipate a significant lag between contract execution and meaningful revenue generation, our strategy of building project backlog will allow us to more swiftly demonstrate our product and generate expanded targets.

In addition to direct product sales, Heliogen will leverage our technology positioning in the industry to pursue additional revenue to both reduce our cash burn and to expand our footprint in the marketplace. Our sales team has been substantially augmented and reoriented to constantly grow our pipeline through a daily challenge of how can we better identify projects that can close and move forward quickly. In addition, we are leveraging our prospective customers as an ancillary source of expanded opportunity. For example, conducting feasibility studies is one way we’re coordinating with customers focused on adopting Heliogen’s technology as a way to decarbonize their industrial processes. The feasibility study process, where we evaluate factors such as the customers’ facilities, available adjacent land and direct normal irradiance or DNI, allows us to assess in real time how our technology can augment and further service customer operations.

Prior practice was to incur this cost as part of the customer acquisition process. However, we’ve now transitioned our process to monetize the results and information from these studies, which hold significant value for the customer beyond the potential technology fit. Going forward, we’ll conduct appropriate feasibility studies on a paid basis, which has the additional benefit of aligning customer interest with ours by giving them some skin in the game earlier in the process. Customers are generally supportive of this new structure because it provides a clear stage-gated way for us to jointly move forward. Key to achieving our pillar of closing contracts is the addition of capacity within the sales team. We’ve made internal changes, including additions, terminations and realignment to better streamline our process from lead generation to execution.

Our retooled structure has already allowed us to rapidly deliver proposals into the hands of prospective customers to contact and engage more customers to reach the go decision faster and ultimately to secure more binding contracts. As CEO, I am laser-focused on continuing to improve and optimize our ability to sign new deals and build our backlog. We will continue to make progress, and I look forward to providing you with updates as we expand and deliver. Pillar number two is installing commercial scale projects. The installation of commercial scale projects will directly impact our achievement of finding more customers and earning more revenue as well as directly impacting Heliogen’s profitability. By witnessing our projects in operation, prospective customers will gain increased confidence in the caliber of our offerings.

As companies adopt the imperative of decarbonization, industrial customers deserve to see Heliogen’s technology in commercial scale operations, and we intend to deliver our first project as quickly as possible to demonstrate our leadership in this field. As part of this effort, back in April, we began high-volume heliostat production at our automated manufacturing facility in Long Beach, California. The heliostat from this first production run will be used at our Proxima hydrogen project in Lancaster, California. Our newly published Long Beach look book provides a detailed perspective of the manufacturing facility and its capabilities, and you can find that on the Presentations section of our Investor Relations website. We continue to make rapid and confident progress towards this proof of viability, which will increase the ability of Heliogen to deliver new customers and new revenue.

That brings me to our third pillar in the strategy. Central to our mission of delivering value is the extension of our liquidity runway. As we discussed in our last conference call, we have sufficient liquidity to reach mid-2024. The extension we’ve achieved thus far was made possible by a number of OpEx and CapEx changes. We reduced our headcount by approximately 15% as we simultaneously adjusted our financial resources and our talent to focus on the areas where they can make the most immediate tangible impact. We cut a significant portion of our R&D efforts, which is reflective of our shift from technology development to project delivery. We also deferred further capital expenditures, which we can ramp back up once we build a larger backlog of contracted projects.

These cost reductions were implemented near the end of the first quarter, so the impact of these efforts will show up in our financials starting from the second quarter of 2023. We will continue to work to find additional opportunities to reduce our cost structure and non-dilutive ways to extend our liquidity runway as we raise additional capital to support our strategic plans. Combined with building our backlog contracts and our delivery of an installed commercial scale project, Heliogen is poised to continue operations and position the company for growth. 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 first quarter results. Heliogen reported $1.9 million in revenue on contracts and progress for the first quarter. Most of this revenue comes from our Capella project for Woodside Energy in the U.S. Department of Energy. We recognize this revenue on a percentage of completion basis in relation to the costs incurred for the project. In 2022, we earned approximately $12 million in revenue from the Capella project as we spent against our partnership with Hanwha and other key equipment suppliers. As we are now in the front end engineering and design or FEED stage, most of the spending is focused on professional services, which cost less compared to capital equipment that encompassed the bulk of our spending last year.

As we get closer to the end of this year and into 2024, we will begin ordering additional capital equipment for this project. And as a result, we expect to recognize higher revenues at that point. From a corporate perspective, our SG&A expense includes a recovery of $12.5 million in expense related to unvested stock options that were required to be forfeited by our previous CEO. Now, I would like to turn it back over to Christie for closing remarks.

Christiana Obiaya: I would like to conclude these remarks by thanking you all for your support. I look forward to delivering on the goals and strategy I outlined for you today as we work to fulfill Heliogen’s mission of reducing the world’s carbon emissions. Thank you for your attention and I welcome your questions at this time.

Q&A Session

Operator: [Operator Instructions] And our first question today will come from Rob Wertheimer of Melius Research. Please go ahead.

Operator: And our next question today will come from Jeff Grampp of Alliance Global Partners. Please go ahead.

Operator: Thank you. And our next question is a follow-up from Rob Wertheimer of Melius Research. Please go ahead.

Operator: At this time, we will conclude the question-and-answer session. I would like to turn the conference back over to Christiana Obiaya for any closing remarks.

Christiana Obiaya: Thanks Alison. Well, we have been so energized by all the positive support that we have received from investors that have been reaching out and with kind of reinvigorated excitement for the business, and we look forward to updating everyone more as the time progresses. So, I am looking forward to sharing more updates soon. Thanks everyone for your attention.

Operator: The conference has now concluded. We thank you for attending today’s presentation, and you may now disconnect your lines.