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..

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..

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..

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..

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..

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

Thank you. Good morning, everybody..

Good morning Rob. Good to talk to you..

You as well. On SG&A, you have done a lot. I know there is hard decisions in there.

Is the run rate of the adjusted number, I guess this quarter reflective of where you are going to be at 13 or 14, there is still action going on within the quarter that we should think about a leaner rate for the rest of the year?.

Yes, absolutely. So, yes, we do expect to have a leaner rate for the rest of the year. So, I will be looking more to our Q2 financials as being more of an indicator for where we will be for the rest of the year as compared with Q1..

Okay. And then just could you review for us your Proxima project, the timeline, the time to revenue, volume production is interesting. The total budget, if you would. And I am not sure if you have equity partners there or not..

Yes, sure. So, the Proxima project, we are very excited about this project and partnering with the City of Lancaster to execute that. We were pleased to participate last week in a big event that they had with their Pacific Hydrogen Alliance.

And look, we are really excited to be part of that solution as part of their becoming a hydrogen hub for the region. So, in terms of where we are at the project, we are in the early stages of design engineering.

We are – for those who may not be familiar that the hydrogen facility that we are using Heliogen’s steam units to deploy, and that’s what we will be feeding the electrolyzer in partnership with Bloom Energy. And for that project, we expect to break ground towards the end of this year or early next year.

And what’s driven that timeline is really the permitting process. We have a number of permitting activities going on. We are making good progress there. And then in terms of the overall timeline, once we break ground, the critical path overall for the project beyond permitting is through long lead equipment items.

And so that’s really what’s going to drive the schedule. And we feel confident about our capabilities and our ability to execute, and we think this will be a really wonderful flagship project for us once completed.

And in the meantime, we are pleased to share that the kind of early adopters that we have in our pipeline are not waiting for Proxima to be completed for us to move forward on Phase 1 of the types of projects that we are looking to start on..

Okay. That’s great. Thank you. I will just do one more and I will get back in line. But I was going to ask about – the last quarter, we talked about engineering services potentially very large long-term cuts.

And I was going to ask about progress points and timeline for that because I believe it was fairly new last quarter, like you have an increased amount of bubbling, so I wonder if you can comment on that [indiscernible].

And then as I mentioned earlier on what was in the were very helpful, but just how many you have printing, I think you used of contract negotiations seem to imply serious movement down the path here. So anyway, sorry, comment on that large long-term customer and how they fit within the whole mix of your potential backlog..

Yes. Okay. I will tackle that first one that you asked initially on the engineering services contracts that we talked about a little bit on the last call. So yes, we are getting started with that. So, that’s going to be something that we will have some Q2 revenue coming from.

The most exciting aspect of that contract is that it really is addressing opportunity that we consider to be kind of part of the holy grail of what Heliogen’s technology will be able to do.

And some of the long-term aspirations that we have and really that fit with overall energy transition and decarbonization for heavy industry is this focus on, okay, how do you focus on the hard-to-abate emissions reductions for sectors such as the cement industry, calcining for lithium extraction.

So, those are the kinds of things that this engineering services contract is going to be geared towards.

And so that’s the most exciting element of it, given that when Heliogen first demonstrated its successful proof of the IP working at our Lancaster facility that already exists in California, that’s really what the premise of Heliogen’s technology holds.

And in the near-term, as mentioned, we are focused on this pipeline of the steam units, which is our commercially ready available product now. That’s what we are focused on getting into the market today at commercial scale.

So, the transition to answering that question on where we are with the pipeline, I am pleased to share that we have advanced a number of qualified leads, I would say, 7 to 10 that are in the pipeline of these various stages of negotiation into the project definition and commercial negotiation stage.

So, we are at that stage with this realm of 7 to 10 projects that are already there that we have already qualified in the last couple of months. So, we are really pleased with that progress and look forward to reporting more out as we close contracts later in the year..

Thank you, Christie. I will get back in line. Thank you..

Thanks Rob..

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

Good morning. Thank you for the time. I was curious, Christie, your last comment, I think you said 7 to 10 leads that sound like they are – I don’t know if later stage is the right way to put it, maybe that’s too aggressive, but farther down the path than maybe some others.

Is there any kind of other metrics you would be comfortable sharing about within that 7 to 10 or broadly about the pipeline, just to kind of better get our arms around kind of the size of this pipeline for you guys? And kind of on a related topic, how many do you think is a realistic number for you guys to manage in kind of the near-term given both I would imagine capital, financial and human capital constraints of running the business.

What’s a good number of projects that you guys would like to be moving forward to in kind of the near medium-term?.

Yes. I think Jeff, thanks for the question. If we can get a couple of projects signed and into the contracted phase before the end of this year. That would be a huge measure of success and an increase over what we did last year.

In terms of the quantum of what’s in the pipeline, one of the things that I mentioned in the initial remarks is that we have this kind of framework of starting with a kind of single module commercial scale implementation, and we are calling that Phase 1.

And then Phase 2 with many of these customers becomes – Phase 1 being the tip of the spear and then Phase 2 is after the Phase 1, the larger scale and where we get the economies of scale, commercial scale execution of a larger pipeline behind that.

And so that’s the model that we are in these discussions with a number of customers on and so hopefully, it gives you a little bit of perspective. So, if we are talking about in the grand scheme of things, the – under a megawatt for each of these kind of first phase installations and then maybe the second phase becomes in the tens of megawatts.

That’s kind of the order of magnitude that we have been talking about. We also have other larger-scale prospects on the horizon. So, for example, we have talked before on prior earnings calls about the Brenda Solar Energy Zone, which would have capacity to support very large-scale projects that are in the 200 megawatt equivalent order of magnitude.

And so we start to look at a lot of opportunities there. We have had reverse inquiries from equity investors interested in participating in that project. And so we have a number of things on the horizon there..

Got it. That’s very helpful. Thank you. And my other question, can you give us kind of the latest timing updates or projections on the Capella project? How we should think about that timeline kind of progressing towards commissioning or other key milestones we should be keeping our eyes out between now and then? Thank you..

Yes. So, Capella is in the stage of design engineering. And as we have been working through that process with our partner, Woodside Energy, one of the key milestones will be completion of the front-end engineering design or FEED stage.

And so as we complete that later this year, that will be the trigger point, after which we will be prepared to place a lot more of the long lead items, and that’s going to be what drives the bigger increase in revenue that we expect in 2024.

So, we really expect both the revenue, the groundbreaking, major long-lead equipment items, that’s going to all be something that you will see ramp up in 2024 after we complete the front-end engineering design study that is going to be wrapping up later this year..

Got it. Understood. Very helpful. Thank you..

Thank you for the questions Jeff..

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

Thank you. And Christie, thanks for all the comments around the work you are doing on sales generation in the backlog, and you have been pretty transparent about it.

So, I am not trying to dig for more details on that exactly, but I am curious on the 7 to 10 kind of opportunities prospects, processes that you are running right now, how has your changed sales process helped to kick those off or not? I mean were those 7 to 10 that were there nine months ago and are coming to fruition, or has how you revamped both, I guess the product and the process led to a faster pace on things entering the sales funnel and hopefully moving through it..

Yes. Rob, that’s absolutely been the case. And we have seen – really within these last three months, we have been able to accelerate those from where we didn’t actually have them meaningfully in any sort of lead qualification or generation process to this stage just within the last couple of months. And so we are really pleased with that progress.

And one of the things that has made that possible is this revamped sales effort where we are able to qualify leads more quickly and get proposals into the hands of customers more rapidly than before. And the key to being able to do that has been the fact that we have locked in our products.

We now have the spec, the execution plan for our steam unit, and that’s something that customers can now see consistently from us, which was not the case previously before a couple of months ago. And so that’s something that we look forward to continuing to expand.

And of course, you can imagine that we have got a lot of new prospects and leads that are continuing to enter the pipeline, so we look forward to that number being a lot bigger over the next couple of months..

Okay. That’s fantastic. Thank you. And one last one. I think you said you entered – we will use – I don’t know how long load the factory and if you anticipate making billing stats for other projects yet this year. And I will be done there. Thank you..

Hey Rob, would you mind repeating that? For summary, I don’t know if it was on our end or your end, but we lost your audio for a couple of seconds at the beginning. So, if you could just repeat the question..

Sure. I beg your pardon. So, high-volume manufacturing for Proxima, I am not sure I know how many heliostats that project takes. I don’t know how long that will kind of keep your factory running and whether you anticipate at this stage anyway, the potential to make Heliogen that front yet this year. That’s all..

Yes. Okay. Got it. Yes. So, hi, I can say that given the capacity that we have in our Long Beach manufacturing facility and the world-class facility that we have, heliostat production will not be our rate limiter for being able to execute projects over the next couple of years.

I will say that for Proxima, given the scale of that project, that’s going to be in the kind of 1,000 heliostat range. So, it’s not a huge number of heliostats, but we are – it was so exciting for the whole team.

I mean we had a great opportunity to watch the heliostats coming off the line from the fully qualified manufacturing line for the first time, and that was such an energizing moment for the entire team. And so we are looking forward to ramping that up a lot as we start to actually find other contracts going forward..

Perfect. Thank you so much. I look forward to hearing news as it develops and in the next quarter. Appreciate it..

It sounds good. Thanks Rob..

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..

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..

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