Clear Blue Technologies International Inc

XTSX:CBLU

Earnings Call Transcript 2021-Q3

[Natalie Smith, Director of Marketing]

Okay. Great. Well, let's get things started here. Hello, everyone, and welcome to our Q3 earnings call. We're very happy to have you here today. My name is Natalie Smith, and I'm going to be moderating the call today. With me, I have our Co-Founder and CEO, Miriam Tuerk; and our CFO, Farrukh Anwar. And then we also have our Investor Relations representative, [indiscernible] of Sophic Capital. So I'd just like to let you know if you do have any questions, we are happy to answer them and look forward to your questions. We're going to try and answer them all at the end as we usually do. So if you could put your questions in the Q&A, then I'll put them on the list and we'll get Miriam to answer them at the end. And if you are having any issues or difficulties hearing us, please feel free to send me a chat message directly or to the group, and we'll try and help you resolve it. So I think with that, I will turn it over to you, Miriam.

[Miriam G. Tuerk, Co]

Thanks so much, Natalie, and good morning, everyone. Before we start, I would like to just remind everyone that there may be some forward-looking statements in this presentation, and you should take them with due consideration that we can't 100% forecast the future. So please be advised of our forward-looking statement. I'm going to provide a quick overview of Clear Blue and talk a little bit about its market size. We're going to discuss the 2021 Q3 results, and then we are going to give out future outlook. So good morning, everyone, and I have Farrukh here with me.

[Farrukh Anwar, Chief Financial Officer]

Good morning, everyone.

[Miriam G. Tuerk, Co]

Great. Okay. So just a quick overview of Clear Blue and what it is that we do. So I thought I would start with our core technology. As you may know, Clear Blue is a solar power solutions and services company. Our customers are telcos, governments and infrastructure providers. We provide power and energy to the world's digital infrastructure. So how do we do that? Well, we make a device called a controller, and you can see a picture of it here on the screen. So what the size of the [ Kleenex box ]? And it is an edge computing power electronics device. It's the brains of every power system we sell. You take one or numerous of these smart off-grid controllers, you connect solar panels into them so that they can generate energy, you connect batteries into it in order to store that energy and then you connect mission-critical telecom devices such as cellphone radios, satellite systems or microwave dishes. It might have a WiFi router or security camera or a streetlight attached. Really, it can support any mission-critical device that's part of the world's digital or IoT infrastructure. Every one of these smart off-grid controllers and we've shipped more than 8,000 of these devices to 37 countries around the world connects to our cloud management platform, which you can see in the background here. There, we have more than 7 million operating days of data, both historical and real time. We get transmissions every 10 seconds or every 5 minutes from every device in the field. And together with our predictive energy and weather forecasting technology, you can see this in the top left corner, and our troubleshooting and remediation tools, this enables us to operate and manage every system that we sell. So that's Clear Blue's core technology. When you look at our R&D investments, all of our R&D energy is spent with the controller, the communications and the cloud computing, predictive data analytics software tools. So what is it that we do? We deliver clean, managed wireless power anywhere, anytime. We put together a highly reliable power source from solar or hybrid power systems. It has built-in communications because it can talk to the cloud. We deliver it in preconfigured prewired power packs. They can be small power packs, medium-sized power packs or large power packs. They can be telecom sites or they can be solar street lights. They are designed for uptime availability. And through our ability to remotely monitor, control and proactively manage it, we delivered the lowest TCO possible. So our service is an Energy as a Service model, we manage and operate every system that we sell. And through that technology, together with modularity, parallelization, sizing and efficiencies, we are able to deliver the lowest total cost of ownership to the customer. Lowest TCO also means lowest upfront onetime purchase capital expense as well as the ongoing operating expense. So it's not a wait 10 years and you've got a return on your investment, your upfront CapEx is lower than with any other technology in the marketplace. So let's talk about what that any other technology in the marketplace is. So this is an example of a recent telecom power system that was installed in the marketplace as early as like 2 months ago. And as you can see, there's a big difference between the leading technology in the marketplace and what Clear Blue does. The first thing you can see is that there's a lot of switches and breakers and fuses and connections. And in order to know whether this breaker has been [ thrown or ] going to manually reset it, you've got to send the guy to the site to throw the switch. Clear Blue has eliminated all of that and put everything here into our controller, our Smart Off-Grid controller. And in our power pack system here that you see on the right, 1 of those, there's 4 of them in this cabinet. One of them is right here. So all the switches, all the fuses, all the breakers, all the connections have been eliminated and put into the controller to be -- make them digital. Well, first of all, digital means instead of a $200 manual breaker, you're talking about a $5 MOSFET or capacitor or resistor or whatever the circuit might be. But the second thing is that, that MOSFET can be remotely managed and control, whereas the physical manual breaker cannot. So what we've really done with our technology is we've moved from analog to digital. And we're the first company in the world that has done that. The second thing we do is because we provide predictive analytics and weather forecasting and energy management, you can eliminate the diesel generator and the gas. So on the -- system on the left, if it runs out of solar energy, let's say, it might be a hybrid solar system, you can't predict or focus -- or forecast or manage how that system is going to perform and what it's going to do. So what you end up having to do is have an unlimited amount of energy, which means you've got a poor gas into the tank. And on the right-hand side with our system, we're only using solar panels or a hybrid system, but most of the time a solar system. And so there's no refilling of the gas, no maintenance to the site. That's the difference between what Clear Blue delivers to the marketplace versus the competitors. So what does that mean for our customer? Well, it's all about our brand promise. So maximum uptime, make sure those telecom sites are up and running and the lights are on all the time. Longest life, don't have the batteries die in 12 months and all of a sudden, imagine if you bought a Tesla and you had to replace the batteries in 12 months. So making sure that the system has the life capacity that it should be and then making it easy to install and maintain, doing all of the installation, configuration, management, control and operation remotely and minimizing and/or eliminating the physical in-person management of the system. The last part, and we believe this is the most exciting part of our business, both from a business financial model as well as from the value we deliver to our customers. We don't just promise something and then send it to the customer and let them figure it out. We actually call the customer after it's installed, after it's operating and let them know how the systems are performing because we deliver the service as an Energy as a Service model where we're operating, managing the system and putting our money where [indiscernible] is to guarantee the performance of the system. And by doing that, we have more knowledge about what's really going on and this cycle in terms of how fast we can incorporate new functionality and new expertise into our product is faster than anyone else in the marketplace because it's as if the entire technology team in the company standing in the middle of Allentown, Pennsylvania or the middle of North Dakota in the wintertime or in the middle of the Sahara Desert in the summertime or outside of an airport in Oman, seeing how these systems are operating and improving the technology over and over again. So a couple of examples of the market and the customers that we're focused on. As you may know, our telecom market, which we've spent the last 3 years going through pilots, building the sales funnel, establishing ourselves in the marketplace, proving our technology and participating in large [ RFP ] processes that can take 18 months to go through. And as a result of all of that work starting in Q4 last year, we started to move from the blade part of the hockey stick to the stick part. In other words, our trajectory is going up and to the right. And that's as a result of a number of key wins, most notably with MTN and Orange, 2 large global telcos. Orange is in 22 countries and MTN, I think, it's 21 countries around the world. And they are doing massive rollout of telecommunications infrastructure. If anything before COVID, everyone understood that one needed to have Internet connectivity, certainly, COVID brought that home and you were seeing all of the infrastructure and UN social objectives and climate change and everything you're talking about the increasing need to deliver high-speed broadband data connectivity to everyone in the world, and we are a part of that movement. So we're very pleased to be able to talk about the customers and partners we have in telecom and the traction that has delivered. In addition to the telecom vertical, which is full of cellphone towers and microwave systems and cellphone transmission partners, et cetera, et cetera, we also have our Illumient systems, which is our North American -- primarily North American marketplace. We do a number of projects internationally, but we focused very much in North America. And there, we are in more than 9 provinces across Canada, in 26 states in the U.S., whether it's rural like North Dakota, which has put I think it's over 500 street lights at rural intersections across North Dakota so that things like the Humboldt bus tragedy, car accidents don't happen. It could be in the middle of Downtown Toronto, where you needed some additional lighting in an area, as you know, we've got lots of urban growth happening with condominiums and more population in the Downtown core at night, especially not just during business hours. And so adding street light functionality is important. And even though it might look that power is only 5 or 6 feet away from that pull this eco-friendly city [indiscernible] Toronto installation. Getting through all of that sidewalk, concrete pavement, through a wall to a device and adding a meter, the cost that has been quoted for 1 of our projects was $35,000 to bring power to a pool in the City of Toronto and much more cost effective by eliminating that infrastructure. So through that business, which we -- was our first product and our first marketplace, we've really got a fantastic list of great customers, the City of Mississauga, Hamilton and Toronto as well as Long Island, New York Department of Transportation, Federal Reserve Bank Internationally, Carrefour, Oman airports, Morocco and a number of other places. So we have 3 markets: our Illumient street lighting market, our cellphone tower -- telecom tower market and we have an upcoming new product being launched that will focus specifically on WiFi -- satellite/WiFi and IoT. As you will see when you see the numbers in a few minutes, our telecom cellphone tower market is the highest growth. It's grown the largest amount over the last 12 months and will again in the next 12 months. And so for that specific market, we've driven down to look at exactly what the size of that market is. So the global telecom tower power market. So the power systems that are sold for telecom towers is USD 5.25 billion market in 2026. In 2020 alone, there were more than 250,000 new telecom towers added into the marketplace. And it's important to understand that as we've moved from 2G to 3G to 4G to 5G, every time we move up, you're getting more and more bandwidth. It's higher-speed data and more capacity. But in order to do that, you have to push the towers closer and closer to closer together. So let's say -- and I'm just making the numbers up for analogy purposes. But let's say a 2G tower is every 100 kilometers, it might be that 3G towers need to be every 50 kilometers and 4G towers need to be every 25 kilometers. 5G towers are going to be street systems. So they are pull-type street systems, as you can see with our illumient business. That's what a 5G tower is going to look like. They're down at the street. So because of that, you have more and more and more infill, you're not done in terms of -- in the end markets where you already are. And then when you look at newer markets, expanding your geographical coverage to new areas where you still don't have coverage very much so in Africa and you have growing population, young populations that are getting older and adoption of cellphones, specifically in Africa. So when you put that all together, you really have a perfect market in Africa. The working age population is growing significantly, and it's going to be the largest working age population in the world by 2050. The median age is very young. And therefore, the kid who's 15 might not have a cellphone, but by the time he is 18 or 20, he probably will. You've got more and more adoption of cellphone technology. You're expanding the geography, you've got evolving technology. They're still doing very profitable, good performing 2G systems, and then we'll go to the 3G, 4G, 5G road. And because of that marketplace, African telcos, which up until now have been almost 100% diesel or gas generated systems, are moving and specifying 100% solar-only systems. So when you put that all together, the highest demand and growth area for telecom off-grid power systems is Africa, and that's the market where we have really focused. So Clear Blue's telecom business, which you'll see in a few minutes, it's grown 1,562% from a trailing 12 months perspective. And that's because the first of the large contracts hit in Q4 of last year, and we're continuing to see more and more of that. So we've grown from 472k to 7.85 million. When you look at the addressable market just for the emerging high solar markets, so Africa, Asia Pacific and South Latin America, there are going to be [ 62,000 ] towers installed in 2022. And that means the addressable market for us is about $628 million in 2022. Well, right now, we're sitting at around 0.93%. So if we move to just 5% or 10% market share in the next year or 2, you can see that the trajectory opportunity is quite significant for us. And there's a lot of runway for this company to grow. So now I'm going to move it over to Farrukh. As you may know, he joined us in December of last year and really hitting his stride. I'm very thrilled to have him as part of the management team, delivering significant value across everything we do and providing the strategic value of what a CFO and a finance department can do. So I'm going to turn it over to Farrukh, now he's going to go through our financials. Farrukh, do you want to start with revenue?

[Farrukh Anwar, Chief Financial Officer]

Yes, for sure. And thank you so much, Miriam. All right. So let's start with revenue. So as Miriam said, our revenue is growing significantly and in the markets that we spoke about. So in Q3 2021, the trailing 12-month revenue was around $9,021,716. This represented a 131% increase from $3.9 million in the corresponding previous period, which is mainly attributed to the revenue from contracts with telecom infrastructure operators in Africa. A similar growth of 139% was recognized on a quarter-on-quarter basis for Q3 2021. Miriam, can you move to the next slide? Okay. So on a trailing 12-month basis, the lightning vertical posted a 67% decline year-over-year as a result of the launch of our Energy as a Service business. This has effectively transformed the company's point-in-time revenue from lightning sales to a serial revenue stream that spans over a typical duration of 3 years. As the Energy as a Service revenue flows through the income statement over the life of the EaaS contract, we continue to see a decrease in segment revenue, which is only due to timing. Our telecom vertical has grown exponentially. Even though part of this represents the recovery from subdued growth last year due to COVID-19, the underlying momentum behind the strong performance in the company's organic growth in the Middle East and Africa region, where 3 of our key accounts began the large rollout programs. On a geographical basis, Canada and U.S. sales have decreased. However, this does not represent a slowdown in business and is directly attributed to the transformation from a onetime revenue model to a recurring revenue model for our lightning vertical. Middle East Africa has performed extremely well, which mainly comprises of our telecom business. Next Miriam, do you want to speak about bookings?

[Miriam G. Tuerk, Co]

Sure. So starting in 2020, we started to report on our bookings because as we transfer more and more into recurring revenue. What we sell and the cash we receive is sometimes delivered over time. So we've started to provide you with some visibility to that. In terms of bookings, our total bookings at the end of September was 2.9 million -- almost $2.9 million, which is a small decrease from Q2 of 2021, but definitely a large increase from last year. There is some seasonality that we continue to experience and expect to experience. So the 11% decrease is only related to seasonality. From that, what you can see is that the Illumience deferred revenue is about $1 million of that total, and then upfront purchase orders is about $1.9 million of that business.

[Farrukh Anwar, Chief Financial Officer]

Yes. So as you know that Clear Blue's ongoing management service is a key differentiator and value creator, the company has been building the service and launched its premium Energy as a Service at the end of Q2 2019. And as the chart shows, our recurring revenue has been on upward trajectory sense because every system is sold with the ongoing Illumience monitoring and management, Clear Blue has the most extensive data collection of production systems in the world, with over 7.5 million operating days of site production data, allowing the company to build even smarter and higher-performing products and services. Recently, we passed a key milestone of 10 billion transaction processed between our production power sites and our cloud management platform. This data and the knowledge and expertise behind it is what gives Clear Blue its market leadership position. Miriam, do you want to talk about it?

[Miriam G. Tuerk, Co]

So this is a very interesting chart. You can see that there is seasonality to the business. We regularly will have bigger and smaller quarters and that's why we try to guide the market to look at our trailing 12 months. But what you can see, as we said at the beginning of Q4 that there was a real forklift upgrade in the volume and the growth and the trajectory of where things are growing. And the cellphone towers are continuing to accelerate, the rollouts are moving forward. We expect the traction to continued and maybe even to grow significantly more than it is already today. But I would also add that you've heard us talk about the satellite/WiFi, and that product is launching next year. And it could be the next growth segment for the company to really add over and above what we're doing for cellphone towers.

[Farrukh Anwar, Chief Financial Officer]

Great. Thank you,. So gross margin for the quarter remained high at 39%, which when compared with the gross margin for the comparative period -- prior year period of 40% shows that the company's profitability is sustainable. On the trailing 12-month basis, the company has even registered an improvement in gross margin from 25.4% to 28.9%. The trailing 12-month figures include impact of a onetime strategic deal in Africa, which generated a below par gross profit, but made a strategic sense to us. Excluding this onetime deal of towers and fences, the gross margin was 32.9% of sales for the year-to-date Q3 ended September 30, 2021. This achievement is a result of significant efforts by the company in R&D to prepare for it to scale its manufacturing and supply chain, all of which will support our plans to increase our gross margin. Next tab.Thank you. So for the comparative -- for the current quarter, operating expenses increased by $303,000 (sic) [ $303,034 ] when compared to the same quarter of 2020, representing an increase of 31%. However, including the comparative numbers, is higher government 19 -- COVID-19 funding support of [ $301,000 ] compared to [ $79,000 ] in Q3 2021 -- Q3 2020. So furthermore, stating -- furthermore, starting 2021, the company has met its IFRS guidance on capitalizing R&D expenditure. And therefore, we capitalized R&D expenses of [ $623,000 ] in Q3 2021. After adjusting for these items, operating expenses increased by approximately 55%. For the trailing 12 months ended September 30, 2021, operating expenses increased by $387,000 ( (sic ) [ $387,390 ] or 8% as compared to the trailing 12 months for the same period in 2020. However, adjusting for the capitalized R&D of around $1.7 million, for the trailing 12 months, operating expenses increased by approximately 29%. So the company's revenue has increased by 139% and 131% with a gross margin of 39% and 29.8% for the quarter and trailing 12 months, respectively, whereas the adjusted operating expenses, as mentioned above, increased by approximately 55% and 29% for the quarter and trailing 12 months, respectively, signifying that the company has a high operating leverage and the increase of 139% and [ 131% ] was only matched by 55% and 29% increase in operating expenses. Next tab, please. So for Q3 2021, EBITDA loss decreased by 59%. While on a trailing 12-month basis, the improvement of EBITDA is 36%, as non-IFRS operating expenses have registered modest increase. Almost all the improvement in EBITDA stems from the company's strong revenue growth. Not only is the company's revenue increasing on a trailing 12-month basis, its gross profit margin has also improved from 25% to 29%.

[Miriam G. Tuerk, Co]

So I think what we can say is that 2021 has been -- has had good momentum, and we see the outlook from a go-forward perspective that, that growth is going to continue. Q3 was a strong quarter. We increased our revenue significantly, and our trailing 12 months is now sitting at around CAD 9 million. Our gross margin continues to grow even in the current market. With increasing cost pressures, we had gross margin in Q3, up 39% for the quarter and 29% for the trending 12 months. The volume of units and the recurring revenue are moving up to the right, showing now 3/4 of high trajectory -- sorry, fourth quarter should be -- that's my typo, 4 quarters of high-growth trajectory Q4 of last year plus Q1, 2 and 3. While revenue has more than doubled, operating expenses have only risen by 29%. So we're clearly able to show that there's operating leverage capability in the company. And that's really because of the technology platform and the services that we built into the IP of the company from an R&D perspective. Our non-IFRS adjusted EBITDA is continuing to move towards the positive. And so for this quarter, we booked a small amount, minus [ $329,000 ] of EBITDA. I'm going to talk a little bit now about outlook and guidance. So last quarter [indiscernible] the first quarter that we started to announce a forward 12-month guidance. We do want to couch everyone that there is still quarter-over-quarter seasonality and lumpiness something moves from 1 month to the next, it can have a big impact in terms of what happens in the quarter. So the best results to look at is really trailing 12 month and forward 12 months. It's still early days for the company. And so we wanted to be very conservative on our guidance in terms of making sure that people understand that -- not make sure to people understand, making sure that we will absolutely 100% meet guidance. And so our guidance for last quarter was $8 million. We've upped to $9 million this quarter. As you'll see in a few minutes, we do have visibility to things that would allow us to significantly increase that guidance. But I think the key message here is that this is not a onetime blip of a few orders coming in and then going down. Our ongoing sustainable revenue is moving up and up and up, and we will continue to improve our guidance forecast based upon metrics and actual results achieved to ensure that we can give good comfort to the market of what's happening. So for Q3 2021, our forward 12-month guidance is now set to $9 million, which would be the revenue we anticipate we would be getting from Q3 2021 to Q2 2022. So in terms of the outlook, we have strong indications for a very robust 2022. We've got a lot of active customer planning, both for telecom and Illumient. We do think that Illumient was impacted by the delay in decisions around infrastructure spending in the U.S. Most of our customers don't get funding for their projects. But if you think you might be getting a grant from the government, you might have held back on the number of purchase orders. So we think that the first half of next year is going to be very heavy for Illumient. In the near term, we are anticipating to receive a large order or a number of orders, which would be collectively very, very large. Has the potential to double our bookings from Q3 of $2.8 million. And we believe that, that would not be fully reflected in the guidance that we've given you today. So once we see those materially purchase order deposit in the bank, that would allow us to increase guidance. In terms of gross margin, you will have seen yesterday, we closed second tranche of our convertible debenture. We initially started out looking at raising $1 million to $1.5 million, maybe $2 million, but we got significant interest from the marketplace. And as a result, we announced $4 million and even exceeded that. So we closed $4.4 million in inventory as of yesterday from a convertible debenture. In addition to that, we have increased our inventory position quite significantly. We've done that to make sure that we've got parts in the future. We've also done that to move inventory to Africa, where our customers are demanding quick response, and there are -- for to allow us to overcome the shipping and potential delays that might occur out of China. And so when you put those 2 numbers together, they simply approach double the 2020 revenue. So we have a strong cash position, strong inventory position, and we don't believe we're going to have to raise money in the foreseeable future. Our WiFi Pico product, which we're calling the Pico-Grid product line, we do think that we're going to have early orders for new projects and rollouts in the first part of next year. We are at the pilot stage right now with that product, but we expect that meaningful revenue will start to be contributed in 2023 just where you really going to see that one add another kicker to our revenue growth. From an EBITDA breakeven perspective, we get that question a lot. In the short term with the gross margin target that we have, we see that we would have EBITDA breakeven somewhere in the $15 million to $20 million annual revenue growth, given that our trailing 4 quarters is $9 million, and we doubled our revenue from the previous trailing 12 months. It's possible that, that we see some visibility on the horizon to making it to that target. And that's why we're starting to talk about that, that is the EBITDA breakeven is coming soon, hopefully, to a neighborhood near Clear Blue. So in summary, management believes the company is positioned to finish off the year quite strong and move into 2022 very, very well. We have multiple multiyear telecom rollout contracts underway, and we have more coming. Our sales funnel and backlog is strong and it's building. Our technology is proving out its strong leadership in the marketplace. In terms of that specific order that we are expecting to get imminently, it would be a follow-on contract to projects that we've already done. And so this customer has the experience of the systems actually being installed, actually being serviced, actually being operated by us, and; "Clear Blue" is our best supplier is what the President of the division of that company was told with our VP in the room. And as a result, it's helping to fuel follow-on orders with them as well as them acting as a reference to the rest of the customers in the marketplace. So our service model is a huge asset and differentiator. We put our money where our mouth is. We deliver for our customers, and it's the team that's making that happen. So with that, I'd like to turn it over to Natalie for her to curate some questions. Natalie?

[Natalie Smith, Director of Marketing]

Great. Thank you, Miriam. [Operator Instructions] So I've got a few here that we can get started with. It's a question about the cash position. How should we think about your cash balance and working capital going forward, especially in light of various supply chain issues that are well known? Do you need more cash? Or with the private placement that closed yesterday, is the company well capitalized to execute on its 2022 growth plan?

[Farrukh Anwar, Chief Financial Officer]

So I can take that question. So as you can see that our products are resonating well with the customers, there's increased demand and there's this revenue that's increasing, right? So we needed money for that, and we did get it. Right now, we are sitting at a cash position of around $2.8 million, and then we've got around $3 million in inventory. So this takes us way -- this is more than what we need right now. And we don't have any plans to look for additional funding. And we still have like our BDC facility of $2 million which we did not utilize and we don't have any plans to raise any equity. I think the funds that we have right now, plus the inventory would take us well beyond next year.

[Natalie Smith, Director of Marketing]

Great. Thank you, Farrukh. So moving on here, we've got some questions around orders. So Miriam, you mentioned a large potential order in early Q1 of next year in the press release. Can you give us some more context around the order and your level of comfort for 2022 revenue growth?

[Miriam G. Tuerk, Co]

So this order is -- we started working with this customer as early as in 2016, 2017. We were actually part of the business planning and strategy work around this entire rollout next phase of rural telephony and a new business model, a new approach of the customer. We've done pilot project, then we've done -- we did a proof of concept, then we did a pilot project, then we did an early rollout, and we did a larger rollout. And so this is really the momentum to move more aggressively and quickly in terms of rollouts coming forward. So the sales cycle has been quite a few years. And it's a follow-on order to what we have. I think the only reason that I said in the press release early 2022 is that it always takes a little bit longer to actually get the purchase order in hand in the deposit, but it is extremely imminent and very active planning being done at the most detailed level, so shipping quotes and Ts and Cs and payment terms and all that kind of stuff. So we are quite optimistic about it happening quite quickly. And it's not the only one in the funnel. And so I think our outlook is quite bullish at this point in time.

[Natalie Smith, Director of Marketing]

Okay. Great. Moving towards the satellite/WiFi product that you mentioned, can you give us more context on that solution, the product efforts, and how the path to opening this market compares to the path for opening the cellular tower system market?

[Miriam G. Tuerk, Co]

So I'm a really big believer in draft. You're the [indiscernible] and you're following the main guy and you're letting him pull you along The satellite/WiFi market is a very exciting opportunity for us. Many of the players that we're already working with and have partnerships. We've announced partnerships with Avanti, for example. We have other satellite companies that we're working with and will be making announcements with. They are investing heavily in this marketplace. First of all, you've seen Jeff Bezos and Amazon announcing, I think it's $12 billion to build satellites. You've got StarLink with Elon Musk. You have a number of other large U.S. and international-based satellite companies that are investing significantly. And the reason is that satellite technology has moved from very expensive, low speed to very low cost high speed. And it's a game changer. Many of the systems we're already doing are using satellite as a backhaul. And so the natural next step is to say, you know what, if you're Starbucks and you've got WiFi in every store around the world, why not do 1 contract with a huge satellite company in the U.S. and get satellite/WiFi for every store in the marketplace. Just bypass the telecom companies, bypass the telecom local cellular solutions and data solutions to just go up to the bird and back down again. So we do see that this is a demand of current customers we have. We have signed contracts, we've got pilot projects and we see momentum going forward from that perspective. It is just adjacent to the cellphone tower marketplace that we're in already. And so I see it as a drag. And therefore, we're hopeful that the scale will actually get faster that we won't take 3 years of pilot projects. We're kind of already into that phase. And of course, everything we're doing builds on top of the platform we have. So when you look at the cloud and the software interface and even the Edge computing in the Smart Off-Grid controller that I showed you at the beginning, that's a launch platform for what we're building for satellite. And so it's a multiplier effect from a go-forward. So I think it has the potential to kind of be a second accelerator to our growth trajectory. I think I don't have yet, and that work is underway, exact market sizing, but we are certainly very excited about the opportunity and having lots of activity in the marketplace about the opportunity. And so I think it has the potential to be as big or bigger than the nanogrid telecom cellphone tower business that we're in.

[Natalie Smith, Director of Marketing]

Great. Thank you, Miriam. Now we've got a question about moving back to cash flow a little bit. Would a potential large order put the company on the path to EBITDA breakeven in 2022 since management comments indicate that $15 million to $20 million of annual revenue should be put -- should put the company on this path?

[Miriam G. Tuerk, Co]

So it has been our objective to get EBITDA down. And as you saw, our EBITDA -- sorry, negative EBITDA down, crossing over to positive and then growing up. So our Q3 EBITDA was minus [ $350,000 ], which is getting us almost breakeven. Certainly, around the $15 million to $20 million mark, we -- with our current operating expenses and run rate, we cross over into EBITDA positive. What I will say is that the reason why a company goes into the capital markets, it's -- because it sees the ability to be a huge company, not just a $30 million or $50 million, but a $1 billion company. And as we invest in scaling and new vertical markets, potentially M&A that may be something that we do from an investment perspective. But I do believe that we are going to cross over to positive EBITDA next year, that's certainly a target that we have. But I do couch that with -- if we have a $500 million elephant in the room that we could go and put on the table, not that I want to even elephant, that's a bad analogy. But if we have a big opportunity, we're going to go after it. And so the higher our growth, the better it is to invest in the business. Certainly, if we were to take out our investments in new product lines and new areas, we'd probably be a bit positive now. So yes, the short answer is yes. I think we are on path to positive EBITDA next year.

[Natalie Smith, Director of Marketing]

Thank you.

[Miriam G. Tuerk, Co]

That's our plan.

[Natalie Smith, Director of Marketing]

And how should investors think about gross margin going forward? Can you help us understand how the company could scale large orders without incurring significantly higher operating expenses?

[Farrukh Anwar, Chief Financial Officer]

I can take this. So we can see that our gross margins are pretty high, the 39% and -- for the quarter. And then they were around 30% for trailing 12 months. And even we had this 1 strategic order, that reduced our margin to around [ 29.8% ]. taking that order out, we're well above 32% over there as well. So -- and our revenues have increased significantly. So over the last 12 months, our revenues have doubled. So taking into account these 2 things, we can see that our operating expenses only increased by trailing 12 months by 29%. So we are -- we've got high operating leverage as a company. So as our revenue increases, our gross margin remained around the same. And if our expenses do not increase, which we can see they haven't in the same proportion. I think we would have a positive impact on the bottom line as well as negative EBITDA. So it will be coming to a positive. So I think scaling would be -- would not be an issue with lower operating expense increase.

[Natalie Smith, Director of Marketing]

Thank you, Farrukh. So now we've got a question about whether or not you have any comments on the social media study progress or results to date? I think this relates to the other question that's been asked about the update on the Facebook analysis in South America?

[Miriam G. Tuerk, Co]

So I can answer that question. I don't expect that we're going to have any results until Q1 or Q2 of next year. It's really dependent upon the timing that -- of when they would release that report and when we would have reviewed it. From an internal perspective, we're working with them on a daily basis. And I think it is showing positive results. The thing that I would say is like there are 1 million permutations and combinations. And so one of the things that we've done is also shared and are going to be sharing even more some of the results with some of our other customers in the marketplace. So we expect the published report sometime in the first half of next year. It might be for mobile or [indiscernible] in February. They did generally like to do these reports around when there's a show. So it might be for MWC in February, it might be for MWC in June or [indiscernible] a meeting then. In the meantime, they are already actively working with a number of communications and telco providers talking to them because the key thing is not just to talk to the technology people, but to also talk to the people who are doing business models to say, okay, you've got to do a different business case analysis and look at your approach to the market in order to serve the underserved population. One thing I will say is you will have seen NuRAN did a corporate update most recently talking about the fact that they're seeing higher volume traffic than they had anticipated in their business case. I don't know anything more than what was in the press release related to NuRAN, but we have other customers who are seeing their numbers get blown out of the water in terms of the size and capacity of the actual customer traffic that they're seeing in these business cases. So they made a conservative assumption, okay, let's assume we put in this new service in this area of Nigeria, let's assume this amount of traffic, and we'll do the sizing and they're now coming back to us and asking us to upgrade the systems that we've got in the field to larger capacity because of larger revenue. And of course, that's a huge recurring revenue growth opportunity for us because telecom systems grow. And as they grow, our recurring revenue services or move adds and changes, additional fees, additional services grow nicely, and that's going to start to kick in very soon in our recurring revenue trajectory.

[Natalie Smith, Director of Marketing]

Okay. Great. Another question here. Could you speak to the pipeline funnel of opportunities? Has it grown? And can you quantify the potential Blue Sky opportunity if they all convert?

[Miriam G. Tuerk, Co]

So our sales funnel is sitting at around $450 million, which has grown significantly and continues to grow from an opportunity perspective. Earlier this year, we added 2 salespeople in Africa, which helped us just to respond to the tsunami of inbound demand and opportunity and really expand our footprint beyond the customers that we've talked about so much in the last 6 to 12 months. We also hired our first Spanish speaking Latin American sales rep. And so those guys are at the earlier part of the sales funnel in terms of new customers, people telcos and countries. So getting into Brazil, getting into Mexico, we're not in Brazil, huge market opportunities, and those discussions are going well. So we've tried to show the Blue Sky opportunity when -- just for cellphone when we showed the market. And really, the Blue Sky opportunity, I'm just going back a little bit to show you those numbers. Sorry, it's farther back than I thought it was. The -- this is the very aggressive you will have seen on the previous slide. I showed it's a $5 billion marketplace, and we know the other number that people talk about is that $53 billion is being invested into Africa telecom infrastructure. But we narrowed it down and say, okay, well, how much of that is towers? How much of that stuff we wouldn't do? And right down and we wanted to get 100% market share to be $628 million revenue next year. I believe we can get significant market share. And so 0.93% market share is nothing, and we are going to go after this entire pie. So the sales funnel is $450 million. And the market is $628 million. And from a Blue Sky perspective, I believe this company has the ability to be a $500 million revenue company in a few years.

[Natalie Smith, Director of Marketing]

Okay. So following on that, any comments about the stock price and low volume, despite the good trajectory and it look for Clear Blue?

[Miriam G. Tuerk, Co]

It's such a great buying opportunity, in my opinion. I've always said if you know me as a person, I'm a pretty [indiscernible] person, and part of that was because I had a very strong father. And oftentimes, I just want against what he said, but my dad said to me once, Miriam, keep your head down and just build the business. We are keeping our head down and we are building this business. And when the stock goes up 30% in a day, I don't stop working at night and say, "Well, true, everything went up 30%." And when it went down, it went down at this level. Recurring revenue companies can get a 10x multiple rule of 40 companies can get a 10x multiple. And certainly, a 6 to 8x multiple is kind of bread and butter. We are undervalued. It will catch up with us. People were worried about cash. We're still small. We're not known. We're under $10 million revenue. Next year, cash is not a worry. Growth is significant. We're going to get over $10 million in revenue when bigger institutions will start to pick us up, and we're getting to EBITDA positive. So I just think that there's 3 or 4 people standing on the spring. And as soon as those feet come off of the spring, it's going to bounce. So I think it's undervalued, and it will catch up with us. We have invested in Sophic Capital, in going to capital markets events, in going to Europe. I spent a fair amount of time in Europe and I'm doing that. So part of what we do is, first, make sure the company is scaling to the level it needs to and executing well, bringing on for route, bringing on Natalie. She has only been here a year and getting the rest of the team to grow nicely has been a key focus. My focus is more and more turning towards working with shareholders. We have no visibility in the U.S. market. That's not going to last long. And so we're doing everything we can to make sure that the stock starts to come in line to where it needs to be. Of course, you know that the market has been brutal, and we are going to follow the market just like everybody else. And so I don't think it's going to last is the short term. And I think the fact that we were able to raise $4.4 million at a $0.40 stock price is indicative that nobody else thinks that it's the right price is where it's sitting today. But I'm sure there are many more experts on this call than I.

[Natalie Smith, Director of Marketing]

That -- oh, we got one more question here. So again, if you guys have some questions, please feel free to throw them in the Q&A here. How correlated is your business to economic cycles?

[Miriam G. Tuerk, Co]

I have a 4-quadrant approach to the marketplace: Private sector, public sector, emerging markets, developed markets. Our U.S. business has not grown as fast as the other segments would have this year. And I think I don't know why, but I think it's because of the delay in the infrastructure. We see a big blip coming next year, and the first 2 quarters is going to be significant, we think. So I've always assumed that certain markets, certain verticals are going to have different cycles. We certainly see seasonality a lot. Street lights tend to be spring fall. Telecom, we're still learning, but I think that certainly planning for the following year kind of capital markets, et cetera, et cetera. For their capital budgets, you see some cycles there. So our business plan is to diversify in enough verticals and enough markets that I'll pull back in one area will not have an overall negative impact on the company. So I'm trying to build -- we are trying to build a business that's resilient irrespective of what's happening in the market. But the investment in clean tech is omnipotent. The investment in getting away from infrastructure that's too expensive and takes too long is omnipotent. And the investment in digital infrastructure, like there's no stopping that train. There's just no stopping that train. And those are the intersection where we play. So I believe our markets are the best markets to be in.

[Natalie Smith, Director of Marketing]

Thank you very much, Miriam. So I think that's all the questions I've seen for now. But again, if anyone has any follow-up questions [indiscernible] after, feel free to e-mail us. The contact information provided. And one quick one that just came in here. Are there any issues on battery supply?

[Miriam G. Tuerk, Co]

Good question. There are no issues with getting the -- buying the batteries. There are issues delivering the batteries. And it's been completely beyond our control. There was a battery fire in the Hong Kong Harbor, which caused the Chinese government to change the regulations on exporting of batteries, and it added about a whole layer of paperwork in an extra 2 to 3 weeks delay that's working itself out because we now plan for it. But in the initial thing that had a huge impact on batteries. The second one is, if you are a shipper and you've got massive oversupply of people wanting to ship stuff, dangerous goods is not your favorite thing. So we have compensated for that by getting ordering batteries ahead of time and getting them on ships earlier. I can't wait for the customer order anymore. So we've got another project that is nice. It's a nice size. It's not the big order we talked about. It's shipping in Q4. We issued the order for the batteries about 6 to 8 weeks before we got the purchase order. We've also ordered inventory and moved to Africa so that it's already there and can be drawn upon. And that's part of the reason why our inventory has increased. It's also the reason why we ended up needing to do this raise in Q4. If it hadn't been for the shipping logistics challenges and the supply chain issues that the market is experiencing now, our raise that we did last December would have been just fine through all of 2021. But we've responded to the market, and we're planning going forward. It's taking a lot of time and energy and a lot of resources to make sure we're on top of that. But so far, we are on top of that.

[Natalie Smith, Director of Marketing]

Just a follow-on question to that. Do you have other sources of batteries outside of China? Have you looked at that as another option? Or is this a global issue that cause?

[Miriam G. Tuerk, Co]

So it's a global issue. Containers is a global issue. Shipping is a global issue. Shortages is a global issue. We do have multiple sources and multiple alternatives, but they're not ideal. We have done a lot of work. So one of the things, our core technology is the Smart Off-Grid controller and the management platform. That's our [indiscernible]. One of the biggest assets of the company is we actually know which batteries work well and which ones don't and which solar panels work well and which ones don't. And so there's a big difference between battery A and battery B. And we've worked with our battery suppliers to make sure that we're offering a good solution to the marketplace at a competitive price point. And so the best solution, as I said, we're not having an issue getting the supply. I just got to get them on boats and get the move to the markets, I need to move them to. It's more a shipping logistics issue. We do have alternative sources, and we're making some changes and some diversification there. But the best way to solve this problem is to get inventory out into the market.

[Natalie Smith, Director of Marketing]

Okay. Thank you. Does anyone else have any questions before we start to wrap things up here? Could you give a couple of seconds to throw on in last minute ones. Otherwise, as you can see here, we've got our contact information

[Farrukh Anwar, Chief Financial Officer]

This is one more about issues -- any issues on solar panel supply.

[Miriam G. Tuerk, Co]

Yes. There are shortages forecasted. There are some pressures in that area. There are certainly price increases. Solar panels globally have gone up about 30% this year. But it's not -- it's more a question of -- I used to have a whole bunch of inventory sitting around, could just go grab some. Now I got to order it and schedule it for a month. It's not the long lead time item that is the most concerning, but we do have to watch it, yes. Everything is a challenge right now, everything can no longer -- prior to this year, you had long -- in the power electronics industry, there has always been long lead time items where this chip or this processor or this resistor or this capacitor is not coming for -- until you can get 1,000 of them in January, you get 500 of them in February. What's changed is you could -- you used to be able to assume 90% of that, you know it, you can get it when you need it. And 10% of it, you've got to be on top of. Now it's the [ Wild Wild West]. You could 1 day think that this particular part has never been a problem, all of a sudden, you can't get it. And I'd like to -- okay, so I'll tell you the story. So I was in Europe and there is a large manufacturer of farming equipment that needed a processor from Siemens and they couldn't get the little processor from Siemens, but it just so happened that Siemens makes a dishwasher that had that processor in there. So the company went out and bought 500 dishwashers just to take the little processor out put it in their farming equipment and they throw the dishwashers out. Everything is a challenge right now. So what I can say is we are on top of it and doing everything we can to make sure that we've got it ahead. We've got good inventory of all the key parts. We're proactively managing it as much as we can. Sometimes you have to do a part substitution. And when you do a part substitution, that requires engineering changes. So that's the biggest challenge is do I need more engineers to deal with the engineering changes? So you change your resistor, you've got to do testing comprehensively to make sure that, that new resistor will do the job. But right now, it's a managed risk that we think is under control.

[Natalie Smith, Director of Marketing]

Thank you very much. So just some keeping here. So we're going to take this recording and posted on the website as well. Our MD&A and our financial results are also on the website right now. So you can go check [indiscernible] and if you have any follow-ups, please let us know. But thank you very much for -- to everyone here today who's joined us for this call. Miriam, would you like to say anything else?

[Miriam G. Tuerk, Co]

I just want to say thank you to everybody for your support in the marketplace and supporting Clear Blue. And please don't hesitate to reach out to [ Nikhil or Marcel ] at Sophic Capital, Natalie or myself, we always appreciate having conversations with investors.

[Natalie Smith, Director of Marketing]

Okay. Thank you very much. Have a great day, everyone.

[Miriam G. Tuerk, Co]

Take care.

[Farrukh Anwar, Chief Financial Officer]

Thank you. Bye.