Earnings Call: Q1 2021

May 27, 2021

Good morning, everyone. This is Natalie. I'm with Clear Blue Technologies. I'd like to welcome everyone here today. Sorry for the technical difficulties we had. We should be off and running now that we've got everything fixed. I have today here with me Miriam Tuerk, the Co-founder and CEO, and our CFO, Farrukh Anwar. They are going to be presenting today on the 2021 Q1 financials. Just a few housekeeping notes. Please put any questions you have in the Q&A. We will address them at the end of the presentation. Now I'm going to turn it over to Miriam. Good morning, Miriam. Good morning, everyone. Welcome to our Q1 2021 earnings call. I'm joined by Farrukh Anwar, who is our CFO for Clear Blue. Q1 is his first full quarter as our CFO, as he joined us in December of last year. I look forward to him making a contribution to this presentation. Next slide. As always, I would please encourage everyone to remember that there is a forward-looking statements notice that we are trying to provide you with the best information that we can. Please take it with the appropriate warning that things can change in the future, as we've all learned with COVID. Please use your own information and read the forward-looking guidance. From an agenda perspective today, we are going to go over a overview of Clear Blue and provide you with a quick discussion of what our technology and our business is. Farrukh, next slide, please. We're going to go over the 2021 Q1 results, and after that, I will give a bit of an outlook from that perspective. Farrukh, you can go to the next slide on overview and then skip to what we do. Clear Blue is a clean tech company that delivers clean, managed, wireless power anywhere, anytime. If you look at the telecommunications infrastructure and the telephone networks of the world 30 or 40 years ago, everything was cabled, connected together, and today we have evolved to a hybrid system where you have both wireless telecommunications and wired telecommunications. The power infrastructure is where the telecom infrastructure was 40 years ago. Most of the world's power infrastructure is a wire connected to a single integrated electricity grid, and that no longer meets the needs of the world that we have today. The power infrastructure's going to evolve to one that is both wireless off-grid as well as a wired on grid. Clear Blue's business and vision and mandate is to focus on bringing technology and solutions and services that address that new and exploding growth wireless power infrastructure. What it is that we do is we generate energy from various power sources, solar or hybrid wind capability. We take that energy, we put it into energy storage systems, which are batteries and technology, and then we power individual loads. In terms of upfront one-time sales, we sell a one-time power pack system and solution that provides an entire mini electricity grid of energy generation, energy storage, and load and distribution control. We manage and operate that system and solution for our customers. We do that through our cloud platform, through communications, remote management, and control. We do that anywhere around the world. When you take our hardware technology solutions, as well as our Smart Off-Grid management analytics data capabilities, we're able to deliver the lowest total cost ownership solution, both in one-time upfront cost as well as ongoing solutions for our customers with the ability to deliver functionality such as modularity, parallelization, size, and efficiencies. Where do we sell into? We sell into mission-critical infrastructure. We're not the solution for your sailboat in Georgian Bay. We're not the solution for a residential home infrastructure that you want to build off the grid. What we are focused on is mission-critical infrastructure such as telecom, street, smart city infrastructure, lighting, security, sewage, waste management, all of our industrial, commercial, and government infrastructure that might benefit from Smart Off-Grid wireless systems. In order to meet that market, you have to deliver the brand promises that we focus on all the time, maximum uptime, longest life, and easy to install and maintain. You have to build reliability into it, even though the sun might shine or might not shine. It might be plus 35 humidex one day and plus three degrees Celsius the next day. No matter that, you need good, reliable uptime power. The way that we deliver that is through our differentiator. We use data and analytics to provide energy forecasting and management, and we have sophisticated troubleshooting and remediation tools. Next slide, please. Sometimes I find it's a bit hard to visualize what does this mean, and so I thought I would just give you a picture of what a power system for a telecom tower might look like. When you're driving down the highway and you see a telecom tower and there's a small building or shack at the bottom of it, when you go inside, what you will find is a bunch of analog manual devices with physical relay switches, breakers, fuses, connections, a bunch of systems put together. Oftentimes, if it's off-grid, the only way to get a reliable system is to have a generator. You have many systems using generators where you just keep adding gas to that system. Very manual, very maintenance intensive. It's okay when you have a small number of large sites because you can justify sending a technician there every week to make sure everything's good and having gas fuel top up to all of those sites. When you move to thousands and thousands and tens of thousands, hundreds of thousands of sites, what's on the left doesn't work anymore. You need to move to something that is automated, it doesn't require any physical maintenance, and basically what it means is you're moving from the analog world of the 1950s to the digital world of today. What you can see on the right-hand side is an example of a Clear Blue Smart Off-Grid solution that we might provide for telecom. No generators, no gas, no relays, no switches, no breakers, no go reset the breaker because the dryer and the microwave are running at the same time. None of that happens. Everything is done from a remote management control. Clear Blue has, because we focused on this market before anyone else did, we have the market leadership in this technology and solution. As a result of that and the growing market demand, we are strongly established as the market leader and are looking forward to very strong growth in this market. Next slide, please. In terms of looking at some of the key applications and verticals, we right now today have two key physical verticals that we are focused on. One is in telecommunications. Telecommunications actually has its own sub-verticals. We are focused today on 2G, 3G, 4G rollouts in rural and countryside applications where there is no connectivity today. It might interest everyone to know that there are almost 4 billion people who are not connected well to the internet today. There is significant movement and investment being made in that market, and we are the power provider. Examples will be of our Uganda installation. We have a project that we're doing with Facebook and a company called Mayu in Peru. We have a lot of activity happening in Nigeria. There is an entire ecosystem of partners that we are working with in order to meet the need and provide the solution in this marketplace. Next slide, please. Our other vertical is our street infrastructure vertical, using streetlights and smart city infrastructure to light up various different applications. In the telecom world, when we went from wired to wireless, the part of the world that was already wired, like Europe or North America, moved to wireless phones more slowly than the part of the world where there was no wired communications. We're seeing the same thing in street lighting. Our business is both in Europe and emerging markets like South Africa and the Middle East, as well as in North America, but most of our bread and butter projects are across North America. It's a fabulous suite of customers, people like New York and North Dakota Department of Transportation, a number of cities across North America. Right now we're doing projects like rural intersections, city areas where it might be very difficult to get power to a pole. If you look at the second slide here, you can see a system in downtown Toronto. The reason why they've gone Smart Off-Grid is because, look at all the landscaping and the concrete and the tiles, interlocking brick below. The cost to get power to that pole would have been prohibitive, whereas just putting an Smart Off-Grid system works very nicely. City of Hamilton, railway infrastructures, and the ilk. Next slide, please. Just in summary, what it is that we deliver is we build and sell technology, off-grid power systems. We use third-party solar panels and industry-leading technology for batteries. In the case of lead acid, we use market batteries. In the case of lithium, we now have our own branded battery in order to meet this specific use case and need. The key to our technology is the brains of the system, the power electronics, the control, and the software, which sits in our charge controller and our other power electronics device at the site, but then talk to the cloud. To that, we then parallel that one-time sale with an ongoing service where we manage and operate every single system we install. What that means for our customers is they get maximum uptime, longest system life, and the easiest to install and manage. Next slide, please. Just in conclusion, a big part of our business is Energy as a Service. We manage and operate the power and systems for our customers on an ongoing basis. That delivers significant value to our customers and assures them that they will have the experts behind the technology managing and operating their systems, as well as it builds a recurring revenue service model for Clear Blue, which we consider to be significantly valuable. Next slide, please. We're now going to turn to our 2021 results. At this point, we're going to move on to the next slide, please, Farrukh. I'm going to turn it over to Farrukh, who's going to give you an update on our financials. Good morning, everyone. Q1 quarterly revenues were CAD 3,459,000, a 1,352% increase over Q1 2020, and a quarterly revenue record for Q1 of the year. Trailing four-quarter revenue was a record CAD 7,244,647 for the company in 2021, which is an 87% increase over the previous trailing four-quarter period. A significant growth resulting from higher sales in the African market, fueled by the growth in the telecom sector. If you move on to the next slide, where we're talking about our annual sector and regional results. For trailing four-quarter of 2021, the lighting vertical posted a 41% decline year-over-year, but as a result of the launch of our Energy as a Service business, wherein we see significant growth in our recurring revenue offset somewhat by declining one-time revenue. For the trailing four-quarter 2021, our telecom sector vertical posted a 414% increase compared to 2020. As you're aware, 2020 was impacted by COVID, which caused the office closure last year and also a delay in large contracts. Starting in Q4 of 2020 and continuing in the recent quarter, three of our key accounts began their large rollout programs. As you would have seen from our guidance, we see telecom projects often going through POC, then first installs, and then large rollouts. Fiscal 2020 saw increased POC and first installed activity, which has now been followed by more substantial orders. Geographically, the Canada and Middle East Africa markets grew 84% and 237% respectively, driven by both telecom and lighting projects. The U.S. market actually experienced strong sales growth in the trailing four quarter of 2021 over 2020. However, due to the change to the EaaS, which is our Energy as a Service recurring revenue model, the one time in-year revenue was lower than in 2020. In terms of our bookings, Miriam, do you want to walk through our bookings slide? Thanks, Farrukh. In 2020, we began reporting our bookings at the end of each quarter to provide as much information as we can to shareholders in the investment market. We define bookings as all future Illumient and Energy as a Service deferred revenue that's been pre-purchased and/or contracted by customers, as well as committed order contracts where projects and customers where we have purchase orders, contracts, and/or deposits, and of course, which do not include the revenues that we have. If something comes in quarter and we ship in the quarter, then it won't show up in bookings because it's already sold and shipped. At the end of each quarter, we will be reporting these numbers to give you some guidance on what's happening in the future. As at March 31st, 2021, our bookings were almost CAD 2.4 million, as can be seen in the table here. The amount of revenue that is in 2021 and the remaining of the year is another CAD 1.2 million, and the remaining is in 2022 and beyond. Recurring revenue assists us in providing leadership in the marketplace. It is the basis upon which we are able to maintain our market leadership, our technology leadership, and it builds strong customer loyalty and differentiation in the market. It's key for mission-critical applications, which is the market we're going after and one of the reasons why we're getting significant success in the market. Over to you, Farrukh. As you know, 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. As the graph indicates, notwithstanding the downswing due to COVID in Q2 of 2020, our recurring revenue is growing significantly. Because every system is sold with ongoing Illumient monitoring and management, Clear Blue has the most extensive data collection of production systems in the world, with over 5.4 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 transactions 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. In terms of our gross profit, our gross margin was 22% of sales for the quarter, down from a gross margin of 32% in the same period of 2020, but it was mainly resulting from a strategic one-time deal to support a major customer in their first rollout in Africa. Clear Blue provided certain towers and fences along with its core product in the current quarter. Excluding this one-time deal, the gross margin percentage of the company actually remained relatively consistent at 30% for the quarter. Trailing four quarter gross margin increased to 27% of sales, up from a gross margin of 22% in 2020. 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 margins. In terms of our operating expenses, management of operating expenses has been a key focus of the company through this period. Quarterly operating expenses decreased by CAD 239,000, basically around CAD 240,000 to CAD 1,024,864 for the three-month period ended March 31, 2020 versus CAD 1,264,337 for the three-month period ended March 31, 2020. Operating expenses for the trailing four quarter ended March 31, 2021 were CAD 4,389,751, a decrease of around CAD 1,026,854 or 19% compared to the same period ending Q1 2020. This reduction was mainly due to government COVID-19 funding support of around CAD 995,816 and lower bad debts written off by around CAD 146,044 for the trailing four quarter ended March 31, 2021. Our adjusted EBITDA. Beginning in 2020, the company is now reporting on adjusted EBITDA, which is a non-IFRS metric. For Q1 2021, adjusted EBITDA was negative CAD 416,969 versus CAD 903,424 for the comparative period in 2020. We choose to keep the government subsidies out of the adjusted EBITDA calculation because it is a unique one-time event. Clear Blue's non-IFRS adjusted EBITDA for the trailing four quarter of 2020 was a negative CAD 3,103,830 as compared to the respective comparative of CAD 3,673,380. That was our financial result for Q1. Miriam, do you want to take over for the next slide? Yeah. Thank you, Farrukh Anwar. In summary, I think we had a fantastic Q1, it was our best quarter ever, and it follows a strong Q4 of 2020. We did in Q1 three large rollout projects for three different customers shipped in the quarter. Each of those rollout customers do have plans for follow-on. It's part of an ongoing program that's a multi-year program. We saw strong growth in one-time revenue. We saw strong growth in recurring revenue. We kept our margins in a pretty good situation. On the market side, we were very thrilled to be named a top performer on the TSXV over 2020. We were named one of the top 50. We also began trading on the OTCQB in the States during the quarter. From a company perspective, we're continuing to focus on managing operating expenses, growing our margins, and delivering strong value for customers and shareholders. Next slide, please. I'm now going to spend a bit of time talking about where we're going from here. I think you've started to hear us talk about the fact that we are the market leader. Next slide, please. We did that with some very strong reflection and caution before we started to talk about that. It really comes from this slide. 37 countries, more than 400 customers, good coverage across the United States, multiple countries in Africa, more than 7,000 units deployed, and significant amounts of data. From that perspective, we have a strong platform to grow from, and we see ourselves growing stronger and stronger in terms of enhancing our penetration in the North American marketplace, and in the global marketplace from a smart city and African lighting market. Our telecom sector is really starting to move now. We still have new POCs and first installs coming, of course, to build the funnel for future growth. The key partnerships and the initial projects are all transitioning to large-scale rollouts, and we have multiple partners who are doing multiple project rollouts. We have proven to them and established to them that we are a key partner in what they're trying to achieve. We're very excited about that. Our energy service is growing strongly in North America. Illumient is offered across the world. Energy as a Service, which is a more comprehensive step-up. Think of it like the basic plan versus the premium plan in terms of recurring revenue managed services. We rolled out energy-as-a-service in North America a year and a half ago, and it is our plan to begin offering energy-as-a-service in the telecom African marketplace later this year. It's a key driver for our growth. Next slide, please. In terms of the streetlight business, I think you all understand that there is a strong focus on spending for clean infrastructure. It's top of mind with many governments. You can see investment and focus moving away from traditional old school energy sources such as oil and towards new clean tech infrastructure. This is happening both in Canada and the U.S. For that reason, we're seeing strong growth in the marketplace. When you look at some of the announcements, Conrail, New Jersey, and Pennsylvania, Hy-Vee partnership across the Midwest, you can see us being mainstream. From our perspective, we love doing parks, we like doing pathways. It's a wonderfully nice area to do. The key aspect is to, as the market moves to mission-critical infrastructure that's part of security, safety for streets, highways, roadways, rural country intersections, those are exciting advancements for us. Energy as a Service has been well received in the marketplace and is having a big and material impact on the value and the growth of our business. Our go-to-market strategy in this area is really to work on partnership strategies, and that is proving successful for us. It helps our local agents. It gives us local content, our local people on the ground who can work with the local governments and businesses to plan rollouts. Next slide, please. As a result of our business in Africa, we have actually opened an office in Kenya, and I thought you might like to see the team and the office there. We have technology people, service people, and now also salespeople in Africa, and the level of activity that we are seeing there is quite exciting and quite positive. We're thrilled to be able to welcome our African team. We are planning on expanding into the Latin American marketplace more strongly later this year, and that is on our to-do list. From a telecom perspective, it is a complex ecosystem of many players. You have different backhaul operators. You have different cellphone radio providers. They turn into tower operators who supply the solutions to the large tier 1 providers. Oftentimes you'll hear me talk about people like IHS, also with their new brand, Carolina West Wireless. They are all supporting customers like you will have heard of, like MTN, who's the largest mobile telecom operator in Africa, Orange, which is a large global player, Vodafone, Vodacom, 9mobile, et cetera. We are establishing ourselves in partnerships, in projects, in references, and in relationships across this entire stack in the marketplace to get ourselves well-integrated with people. Next slide, please. Why has Clear Blue been the winner in this new age? What is it about us that is allowing us to help these customers do what they need to do? The answer is really the word smart in our Smart Off-Grid. Everybody likes smart. Everybody likes beautiful, intelligent things. What does it mean from a business perspective? When you look at our customers, what it means from a business perspective is if they look at their business case, which has a high upfront CapEx and then an ongoing operating expense, and oftentimes these customers are doing a risk model where they're launching, they're basically getting a franchise from that area of operation, and it depends how much revenue they're going to get. They might have great success, or they might not have great success. When they go with Clear Blue, the upfront CapEx is the lowest in the marketplace. When they go with Clear Blue, the ongoing OpEx is the lowest in the marketplace. Because of our light CAP operation, because we have the data analytics for energy and weather, you can size the system smaller. It's not just reducing margin or cutting your profit. It's all about reducing the amount of solar panels and batteries you have to buy in order to meet a business need. We use our predictive analytics, all of the information we have in the field in order to be able to deliver that value proposition. That's what makes it so compelling, and what makes us have the success that we have. The R&D investment and the data analytics and the operational business model, all of that put together is what basically drops right to the bottom line CAD in value to the customers and the business that we work with. When you put that together with a very strong customer and partner-oriented culture. About a month ago, you date and you get married and with a customer, so they order some equipment, everything's great in the sales process, and then you start implementing and sometimes it changes. I was talking to a customer a month or two ago, and I said, "What is it we need to do better?" His answer was, "Just keep being the Clear Blue that you have been to date." That was after we had already done installation and systems up and running. It's really in the culture and the mandate and the mission of this company to think about running things and not just shipping hardware. Next slide, please. We are the market leader. We have a technology leadership position, and that is a big moat. In the number of gates, the amount of data, the number of transactions, and the ability to take that data and allow us to improve our solutions for customers and meet the needs of their business case. There's a huge market that's now moving, and you can see everywhere in the market, whether it's public sector, private sector, large players like Facebook, Google, Amazon, Starlink, Tesla, or governments, regulatory bodies. Governments are now saying, "If you want a license to operate in my market, you're going to provide rural connectivity and internet connectivity." New technologies such as the next generation of Satellite Wi-Fi that's coming. We've got the first-mover advantage. We've established leadership in the marketplace. We've proven it to people. In that entire ecosystem, the consultants, the contractors, the project managers, the entire stack top to bottom are seeing that and sharing that information for each other. Now that we're moving into the larger contract rollouts, making sure that their experience stays the same with the large rollouts as they have had with their first installs and the pilots is a key part of the focus of what we're working on today in the company from a go-forward perspective. Next slide, please. For 2020, what is the outlook? As we continue to build out our R&D, we're going wide and deep in the rural rollouts. Number one job one this year is that at the end of this year, when those large rollouts are up and running in the field, the customers feel the same way then as they do today. That is our top priority in the company beyond anything else. We are continuing to do that through service, through team, and through everything we're doing. We're also making sure that we do that in our technology platform to deliver that. By the way, as we deliver that increased value for the customer, it allows us to also increase our margins for Clear Blue to pay back all of our R&D investment that we have done into the company. Using that base, we are focusing on traction. We're ensuring the success of the launch roll-ups. We're expanding our presence with new partners in new geographies. We're going to develop the next two pillars of telecom growth. Satellite Wi-Fi is something that we are involved with. We are doing projects today, and they're at the early stage, and we hope in the future to be able to announce some larger partnerships. Of course, after that, we start to move into 5G and maintain our leadership position across everything we do is what we see happening in 2021. Next slide, please. In summary, management is not sitting back on our heels assuming that everything's all good to go. We feel confident and strong in that we are poised and positioned for significant growth in 2021. We're not taking it for granted. We are all over it for success, but our sales funnel and backlog is quite strong and building. We are growing our partner network and solidifying it. Our technology is proving out its strong leadership in the market. Our service model is a huge asset and differentiator, and our team. I do want to shout out to the team because people say, "Well, why is data so important?" Data and the expertise that is behind it. As this company has grown with our senior team and our growth in our sales, our service, our solutions, our operations, our production, and our technology team, I'd love to list 50 people, and I started last night with naming a few names. You know who you are in Clear Blue, but they are running with things. They are making sure things are working well, very diverse team, as you know, and they are the ones that are making it happen. I love to hear from customers when they say, "We're so happy with your service team," or this project implementation, or this technology resource, or this demo person. I can't say enough about the team that we've built in the company, and I'm honored to be able to present and share with you today the results that they have achieved. Next slide, please. Oh, one last thing. You all know, and if you've heard me speak before, teams at companies are built by communities. When I say teams, I also mean our shareholders, our investors, our investment bankers, our financial partners. All of you have helped to make it successful. I think part of that is when you ask us questions. We're going to open it up to questions now, and asking to, Natalie will curate the questions. If your question doesn't get answered, we try to answer them all, but we don't want to take up too much people's time. Please don't ever hesitate to reach out to me. I do try to respond as soon as I can. If I can't respond sometimes it's because I have to be quiet about certain things, but I do enjoy very much engaging with shareholders and investors and institutional investors. Natalie, do we have any questions just to work on? We do, yes. I'll just ask that you try and speak up a little bit, Miriam. It's getting a little bit fuzzy on the audio there. If you could just try and speak up a bit more, that'd help a little bit. I will do that, but that's not ever happened in my lifetime where I have to speak louder, so I will speak louder. Go ahead. The first couple questions regarding EBITDA. In response to your statement on the last earnings report for Q4 of 2020, you had said that you thought that Clear Blue would be EBITDA positive for this first quarter of 2021, but it looks like we've got a bit of a ways to go there. Have things not gone as planned? Could you elaborate? Very good question. I think that things have changed a little bit in that respect, and I think it's really about the growth that we see coming beyond Q1. We hired two additional sales people. We hired a production manager. We expanded our finance team, and we expanded our service team. As we did our 2021 budgeting and planning, preparation for scaling and being able to respond, I hope some of the next growth will be, what's your capacity for shipments and deliveries? Are you going to hit a wall where you can't ship as much as what customers are asking for? That is definitely something that when we looked at it, we said we want to err on the side of the right resources to make sure we're planning for ahead. We do see the great potential for additional orders to come and making sure we're ready for it. We adjusted our operational model with a bit of additional expense, and we're focused along that area. We have also increased our R&D a little bit for some new market opportunities that we have that we can talk to you about later this year. We really, when balancing the long-term view of where this company is going to go and the potential to take us order of magnitude and then order of magnitude above that, we judged that it was better to make sure that we weren't overly lean in what we were doing, and that resulted in a little bit of pressure. I will also comment, if you look at the MD&A, as you know, our target margins are in the mid-30s. It was a bit lower than we had expected. Part of that was due to the one-time order. Within that order and across everything we see, you will have seen that steel costs went up 48%, solar panel costs have gone up 30%, lithium costs have doubled in size. When you're talking about, for example, everybody's talking about what it costs to go and buy a piece of two-by-four of plywood, we are seeing significant market pressures across the board, both in our supply chain procurement. That's requiring extra work to make sure we have alternative sources that we're sourcing it where we need to source it, also in our shipping logistics, getting things there in time. When things like we couldn't find containers cross my desk, we are making sure that that doesn't have an impact on our top line for the year or an impact on our customers, and that also had some pressure on margin. I will comment that guidance from the market tells us, and history tells us if you go back to 2008, that this upward blip that we're seeing right now is not something that will be permanent. There's lots of discussion about how fast it'll come back down again, and we do have the ability to price things in over a longer period of time, but we will support the quarter. I think the two main impacts to Q1 EBITDA were a decision to make sure we're doing the right things for future growth and recognizing bottom-up that that needed a little bit more investment. Investing in growth from a sales perspective and team capacity perspective, also some pressure in shipping costs going out the window compared to what was even forecasted a week before. People are calling us and saying, "I can't meet your price. I just need to be able to let me say take that ship, and you have to pay whatever comes." Some of that is occurring. We don't see it as a long-term indicator of lower margins. We do think that we will get there. Great. Thank you. Just to follow up on that, do you have an expectation of when you will become EBITDA positive? The short answer is no. We're not providing guidance on when we will become EBITDA positive. Certainly, improving it is an ongoing management metric and focus. If you look at the trajectory over the last two years, you will have seen that we have improved it significantly. We've proven that we have the ability to build a business that's profitable at good margins. We've proven the ability to, as we scale, we're not linearly scaling our expenses at the same time as we're doing our revenue. You're seeing significant increases in revenue without significant increases in operating expense. I'm not able to provide forward guidance from that perspective. There's a lot of uncertainty, and I don't think at the size that we're at with the lumpiness that we have. All I can say is our plan to continue to improve it and get to EBITDA positive as soon as we can be. Following on that, it's probably a similar answer. We have one that would like to congratulate us on our strong revenue growth, but wants to know if we expect the average revenue growth and what we expect that to be over the next one to three years. I assume it's probably a similar answer. Yeah. The reason why we give you trailing 4 quarters forward guidance is because we want you to look at the long-term trajectory growth. We still have a lumpy business. I can tell you based upon where we are today, that Q2 won't look similar to Q1. If you look at our historical quarters, you can see very small quarters and very big quarters. In terms of trajectory, we do see strong growth. We do see that our sales funnel is growing, we do plan on having the hockey stick continue to go upwards as it has over the last 2 quarters. Okay. Thank you. A couple questions here now on our global sales. Do you have a breakdown for each vertical segment by geographic region? They'd like to know why the U.S. revenues went down. Oh, sorry, did you hear Natalie, or did you not hear Natalie? No, I did. Basically, the U.S. revenues didn't actually go down. It was because of our Energy as a Service. Our U.S. revenue is basically more of a lien, and as I said in the meeting, it looks like our revenue's gone down, but it's basically a one-time revenue that's been now spread over the future as Energy as a Service. Over the future, we're going to get more revenue, and that's why it appears that the one-time revenue's gone down. Okay. Thank you. We have another question about who our customer is in Russia. Looks like we're having a little bit of a technical issue with Miriam. Are you back with us? Maybe, Farrukh, you can jump in for these. What is your midterm operating margin on a more normalized basis in the next two to three years? As you can see, our margins are pretty steady. Excluding this one-time deal, our margins are around 30%-31%. We would continue to focus and try to have our margin around the same level. I would say a little bit north of 30%. Great, thank you. Do you have any debt on your balance sheet? We do. Our main debt is our long-term debt from a finance institution, and then we've got some convertible debentures. We recently paid our short-term debt, so we had a short-term debt of around CAD 1 million, which we paid off. We've got around CAD 2.4 million of long-term debt and around CAD 600,000 worth of convertible debentures. Thank you, Farrukh Anwar. I'm back again, apologies. Great. One more question on the financial side. Was the quarter very back-end loaded? When do you expect to be collecting your outstanding accounts receivables? Yes, it was. Our main customer that we shipped our goods to Africa, and it was around the end of March. Most of those are, as you can see, looking through our MD&A, those receivables are backed by LCs. Those are basically based on the presentation of documents. We've received some of the money, and then the rest is based on X days of bill of lading and Y days of bill of lading. We would expect to receive all of our receivables soon and within this month, I think, or early next month. It just depends on what the timeframe is from the date of the bill of lading. Yes, the sales were right near the end of March. The shipment happened right near the end of March. Okay, thank you. Miriam, we had a question about who the customer is in Russia. The customer in Russia is an Illumient lighting system. It is just a small project we did in Russia, in Moscow, but it is an Illumient lighting project. Okay, thank you. One more question here. Do you have, it says, an American sales office? We do not today. We expect to have one established in the next few months. Perfect. That's all the questions that I'm seeing so far. I think with that, Miriam, I'll let you tie things up for today. Actually, hold on, it looks We have one more question, and it says: Do you provide guidance for 2021? The guidance that we provide is the bookings, and we've also talked about number of pilots and first installs for telecom that was previously announced in, I think, the last presentation. The type of guidance we're providing is where we've got solid numbers to share with. In terms of true, full guidance like large corporations, we're still too small as an organization without enough trend history and predictive capabilities to provide solid guidance. It's still early stage, and we do expect revenues to be lumpy on a go-forward basis. That is normal. Okay. Actually, it looks like we've got a few more coming in here. With one more question here, how is the COVID situation going with regards to the business? In terms of impact at Clear Blue, we have very strong practices in place. We haven't had any outbreaks or any shutdowns as a result. Most of our employees work remotely to keep the number of people in the office very, very small, and by that I mean almost always less than 10. We had, I think, three or four employees who've gotten it, but not in the office and was able to keep it out of the office. We have had a couple of employees who've had some very traumatic deaths. We had two employees who both had lost their mother and their father within a few weeks, so I think it's touching everyone. Where we do see it is supply chain parts reliability. We are now having to plan out rather than planning parts and volume forecasting two, three, four, five months out with only a handful of long lead time items. We now have to plan everything out 12 months. It's changing on a daily basis, and getting and shipping things is also a big challenge for us. From an operational perspective, there's lots of logistical challenges, both downstream in terms of supply chain and upstream in terms of getting things to our customers. Okay. Following on that, are you seeing any inflationary pressures in your supply chain? Absolutely. As I mentioned, for example, steel prices have gone up by over 50% in the last few months. Solar panel prices have gone up since the beginning of the year and are forecasted to increase. The price of lithium has gone up significantly. Now, not all of that is hitting us because we have relationships and volume procurements and volume purchasing. It's not impacting us at a huge extent right now. As we go forward, it will either price itself into agreements over time, and we do have provisions in some contracts. We try to cover ourselves in terms of, if there's a big market change in a certain cost of a commodity like lithium, then we have to pass that on to our customer. There has definitely been significant increases in that area. It is a risk. Right now it's a managed risk. Right now it's under control, but it is a risk that we have highlighted. Okay. Two related questions to that are you able to pass the cost pressures to customers? Specifically, what does the supply chain look like for microprocessors? We do make sure that we have the ability, either the contract is ending or there's price quoting per deal or whatever. If it's a longer-term price formula that we have an ability to adjust and vary things as prices go up and down, et cetera. In terms of microprocessors, we're okay right now. The big challenge that we have is that the U.S. has announced that they are going to be turning off all 3G in the United States next year by April 1. We have to move to 4G processors, and you can't get them anywhere in the marketplace. They're six to eight months delayed. We do have some pressures in that respect, but the implications are that we're developing alternative sources. It might require our R&D time to do a port from one cell modem to another cell modem for no other reason than supply chain reasons. Those types of things we're trying to avoid, but right now, as I said, it is being managed and we're okay. Okay. Thank you. What's the typical conversion rate from proof of concept to commitment? I want to mention a proof of concept is not a, "Let's prove out that the Clear Blue power system will work." What it is, it's a proof of concept that the telecom network design will perform at a certain level in a certain configuration and can be integrated into the telecom network. It's a telecom proof of concept supported by the power. It's not really a test of our technology. Sometimes those projects move forward quickly, and sometimes they don't move forward quickly, and sometimes we win versus we don't win the deal. I would say if we're doing a proof of concept, we're not losing the business because we lost in a competitive tender. What's happening is the movement from proof of concept to first install, and from first install to large rollout isn't happening or isn't happening as quickly. Most of the time, it relates to their inability to get funding. We had last year, at the beginning of the year, I forecasted potentially five customers that were going to move forward with MTN rollout. We knew that all five wouldn't roll out. We didn't assume that all five happened. Three of them have moved forward. Two of them are still flopping around trying to get going, and the jury's out whether they will happen or not. I think we see probably 50% conversion rate from a POC first install to a large rollout. That would be probably what I would say. Some of them we know about, so it's just a phase. We've got a contract where the customer signed a contract for a large rollout. They're just going through the technology steps of POC first install, and we know those. We take that into consideration in our sales funnel forecasting. Great. Thank you. Another question here on how the Africa business office is going. A question about is NuRan's sales in every contract? I'm not totally sure what that means. Can you talk about how the Africa business is going? Yeah, I think I can answer the NuRan. Okay I think I know what the question is. For Africa, things are going very well. I think we are in seven or eight countries. We ship to Benin and Ghana and Cameroon and Nigeria and DRC and Uganda and Zambia and South Africa and South Sudan. The list is Egypt. The list is getting longer and longer, all at various different stages. Africa's moving, and it's moving very well. As I said, some faster, some slower, but it's coming nicely, and we see multiple partners moving at the same time. It's not just one customer or one contract. In terms of NuRan, we had previously announced a Cameroon deal with them. I think they've since announced that that deal is bigger than they had originally announced. We have the contract for Cameroon with NuRan. They went to competitive tender on the DRC project, I believe as a result of whatever reasons, which is fair and fine, and we are working through that process with them, and hopeful that we will be the selected vendor. It's never done till it's done, but we're going through that competitive RFP process with them, and once we have news, we will let you know. Okay, thank you. I think you actually answered another question in that one as well. What is the amount of business that is in the pipeline and contracted backlog? That was in our deck from a backlog perspective. We have a total of CAD 2,341,000 worth of bookings, which includes just under CAD 1 million of Illumient Energy as a Service deferred revenue, and another CAD 1.4 million worth of purchase order contracted business. Of that, CAD 1.2 million will be delivered in 2021 through the remaining three quarters, Q2, three, and four, and CAD 1.1 million is for next year and beyond. Okay, thank you. The last one we've got here is why are the contracts so cyclical? Capital budgets and construction year. North American Illumient, for example, is very cyclical. It's zero in Q1, one or two small ones in Q2, and most of it is August, September, October, November delivery and installation. When they do a construction project for a roadway, the last thing that gets installed is the streetlights. We regularly see. The only time we have revenue in Q1 is when it's kind of left over from Q4, and it's just a little bit late. Also, most people have budget years from January 1 to December 31st, and even though they have a budget for next year, it doesn't get confirmed until the beginning of the budgeting year, and then the purchase order comes. It's very regular from that perspective. In the telecom sector, we see a little bit of the same thing because they make annual commitments, then they start the planning in January, then they make their orders. The timelines are always a little bit lumpy in terms of which quarter the most. We traditionally see Q3, Q4 being our biggest quarters. Q1 was a bit of an anomaly from that perspective. It was a huge quarter for us, and we hope that as we go global and as we get more long-term multi-phase contracts, that will flatten out and average out, but it is the nature of the beast. Okay. No one wants to install a street pole in North Dakota in February. Thank you very much, Miriam. I'm not seeing any other questions come in, so it looks like we've answered most of the questions for today. Again, we've got one more here. Let me just grab this one. Again, I think we'll maybe take this one as the last one because we're a little bit over time. If you do have any additional questions, we'd be happy to follow up with you by email. Sales in the U.S. are Illumient with the EaaS model, and they've grown every year. In 2019, CAD 100 sales. I think that's Miriam's response to Rick. That's me. Oh, okay. that's me answering it to Rick. We're good. Okay, thank you. No, that was me. Thank you so much for everyone's participation and attention and interest on this call. I believe we'll be putting it on the website as a recording for you to share with any other investors who might be interested. Natalie, I'm going to turn it over to you to say goodbye. Thank you so much. Okay. Yes. Thank you, everyone, and we should have this recording posted momentarily. We really appreciate you joining us today and look forward to more updates as we move forward. Thank you. Thank you. Bye bye. Thank you.