Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue of $12.1 million for Q1 2024 was within the guided range of $10 to $13 million, indicating stable financial performance.
- Signed a significant mega project deal in Brazil for shipment in 2025, expanding the company's geographical footprint and potential future revenue.
- Achieved a 20% to 26% increase in contracted projects compared to the same period in 2023, demonstrating growth and confidence in meeting the annual guidance.
- Received the 'Refrigeration Product of the Year' award for the PX G, highlighting innovation and market recognition in the CO2 refrigeration sector.
- Successfully completed internal testing of the second-generation PX G, showing improved reliability and performance, ready for beta testing in real-world environments.
Negative Points
- The CFO transition is ongoing, with the current CFO set to leave by June 30, which could lead to uncertainties in financial leadership.
- Reported a decline in the OEM channel revenue compared to Q1 last year, although it is attributed to the timing of project shipments.
- Gross margin in Q1 2024 was 59%, below the guided range of 64% to 67%, impacted by inflation and increased manufacturing costs.
- Operating expenses grew by 11% compared to Q1 last year, adding financial pressure amidst strategic investments and executive transition costs.
- The company experienced a loss in Q1 as expected, with a forecast to remain negative in Q2, posing challenges to short-term profitability.
Q & A Highlights
Q: Three months ago, you talked about a DSL project in India that was pushed into the first half of 2024. What's the status on that? Is it still on track to be recognized before June 30th?
A: (Joshua Ballard - CFO) The project has not shipped out yet, but we are moving along well with it. We still expect it to be recognized this year, potentially in the second half.
Q: Three months ago, there was also a comment about deployments of the refrigeration product being deliberately slowed to improve its reliability. How is that effort progressing?
A: (David Moon - CEO) The second generation of the product is progressing well. We've passed the first milestone of internal testing with good results in reliability and performance. Beta testing in the field in the US and Europe has also shown very good results. We are now moving on to summer site testing.
Q: When do you think you will be ready to put out some updated targets for the future, considering the previous targets for 2026 were seen as aggressive?
A: (David Moon - CEO) We are currently working on our strategy, which we call our playbook. We expect to discuss the out years 2025, 2026, and 2027 by the third quarter earnings call.
Q: You mentioned a desalination (D-cell) customer in Brazil, which is interesting given Brazil's water profile. Can you talk about how big that project is and how it came about?
A: (David Moon - CEO) The project is part of Brazil's initiative to increase potable water supply by 12%. It's our first large desalination project in South America, located in Fortaleza, the fourth largest city in Brazil. The project will produce about 86,000 cubic meters per day and is planned to be online by the end of 2026.
Q: For the PX G deployments ahead of this summer, if all goes well, would you expect these customers to place meaningful additional orders later this year that could translate into significant revenue in 2025?
A: (Unidentified Respondent) The focus is first on getting at least three months' worth of data, which will turn into a white paper in Q4. Once OEMs have this data and feel good about it, they'll start promoting the PX G to their end users. We expect to see some momentum build in the latter half of the year for 2025.
Q: What about visibility for water contracts for 2025? How is next year shaping up in terms of projects?
A: (Joshua Ballard - CFO) We're not ready yet to talk about specific numbers for 2025, but our pipeline is moving on track generally. We'll provide more explicit details in the November Q3 call.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
