Hi, everyone. Thank you for joining us. We've got Clear Blue reporting their Q1 fiscal 2023 results shortly. Miriam Tuerk, CEO and co-founder, will walk you through the earnings. At the end of the call, we'll take some questions. There's two ways you can submit your questions. Please feel free to use the Q&A tab at the bottom, at which point, I'll probably read the questions out. Alternatively, please feel free to email the questions to us at investors@clearbluetechnologies.com or all, A-L-L, at sophiccapital.com. With that, over to yourself, Miriam.
Thanks, Nikhil. Good morning, everyone. Good afternoon, everyone in Europe. Going to go over a bit of an overview of Clear Blue. There's been a lot of changes around the new products that we have. I'm very pleased that Farrukh Anwar, our CFO, is with us here today, and he is going to lead the discussion on the Q1 2023 results. At the end of the presentation, I'll give us a bit of an update on what our outlook looks like, we'll take it open to questions. You know, the world has really changed for Clear Blue.
We did a lot of heavy lifting in 2022 to position ourselves for strong growth and really to get lift off and strong leverage from the significant R&D investments that we've made and the significant market leadership that we have with our product intelligence, data, analytics, and operational performance. We raised more than CAD 10 million in non-dilutive capital last year. CAD 6 million of that comes in pure grants over the next three years. That helps our balance sheet, it helps our cash, it helps our EBITDA and net zero cash burn objectives. We acquired a pretty critical company that is got one half of the two-part story required to take advantage of the huge movement investments now happening related to solar.
Clear Blue's products were good for new installations and new deployments, but when it came to the world of the existing telco tower with existing diesel generator and larger grid connections, we didn't have the best fit. We could do it, but it wasn't the best fit. With the acquisition of eSite Power Systems, which we concluded in January of this year, in 21, we now have a fantastic product offering, when put together with Clear Blue's Illumient services to go after that market. That market is now moving significantly with many, if not all, of the larger telco and TowerCos moving towards solar, not just because of the focus on climate change, but mostly because of the cost of diesel and servicing those sites.
If you look at it, you know, January 1, 2022, we had two products out in the marketplace, Illumient and Nano-Grid. As of July 1 of this year, we will have five products in the marketplace. Illumient, the core, traditional product that we have. Senti, our new Illumient all-in-one streetlight. Nano-Grid, our telecom product that is great for satellite sites and satellite cell phone sites. eSite Power Systems, which is good for the larger retrofit, hybrid, diesel, grid, and solar systems. Lastly, our Pico-Grid smart off-grid power system, which is perfectly aligned with the IoT marketplace. With the addition of eSite Power Systems, which is the Swedish company, it's been in the market since 2008. It's got more than 1,000 sites up and running on its patented eSite power technology.
We added a number of strategic and large customers, we increased our customer, our country coverage. We've now got a nice active customer, for example, in Vietnam, that we've gotten, I think, three orders from since the beginning of the year. We're really moving into the core network of telecom and into core infrastructure with IoT. We're doing retrofit large-scale hybrid power up to 30kW now with our eSite Power Systems. In our Illumient and infrastructure, you're starting to see mission-critical infrastructure projects, runway extension projects at O'Hare Airport, interstate highway exchange. You know, the 2023 is certainly very different from 2022, and the trajectory for both bookings and everything going forward is looking quite positive. We are cautiously optimistic. Just to go over our product line.
If you remember your decimal world, you had the micro, the nano, and the pico. So eSite Micro is the previous eSite product with the addition of Clear Blue's Illumience management service and technology, cloud-based analytics, our service team, as well as we now offer a full solution, not just the eSite system itself. We're addressing a market that's anywhere from 3 to 30kW . Our Nano-Grid product continues to be a really great asset. We're moving forward with a lot of satellite projects in that marketplace and satellite cell phone systems. It is servicing 20 watt up to 3kW systems, and our Pico-Grid product, which begins shipping commercially in early Q3, so July, is a multi-device
It can support up to four different devices, a lot of different IoT applications. Certainly, Wi-Fi hotspot is a great application. We have some agriculture applications coming in, security camera monitoring, and a myriad of other opportunities, smart city projects that we're talking to a couple of customers about for our Pico-Grid product. Just to summarize on our Illumient product. Over the last eight to 10 years, we had the STRADA Series, which was really a lead-acid, very large, significant infrastructure, big, heavy pole that was really good for the part of the world where you're better off going lead-acid than anything else, highways and roadway series type projects, good for all weather and for really high-powered lights.
The beginning of last year, we launched our Cami product, which is really the movement towards lithium technology, good for warmer weathers and also higher-powered lights, and one of our biggest orders this year has come out of that Cami product launch. The new Senti product, which we will begin shipping commercially in Q3, as I mentioned, is our all-in-one solar streetlight. When you talk about Pico-Grid and Senti, one of the things that's very different about these two products is these are mass-market products. These are products that are in a box. They're sitting on a shelf. There isn't a custom engineering project, a custom design project required for each of these projects to ship, like you would have with an eSite project or a Nano-Grid project or even a large Illumient product.
This is something where we'll have volume sitting on the shelf and at distributors, and customers can buy it. It's in a box. It weighs, you know, something I can lift up and walk out the door with, and it's ready to go. You just open it up, and anyone can install it. On the Pico-Grid side, it will power IoT devices around the globe, whether it's water pumps for agriculture, Wi-Fi access points for the large satellite global rollouts that are now happening as a result of $ billions of investment by the largest satellite companies. We all know the Elon Musk Starlink story, but you may have noticed that there was a major successful launch of the ViaSat-3 first rocket.
That is a very high speed, 1 terabyte per second, large capacity satellite that's coming online now. More will be coming online. We have a strategic partnership with them. On the ground, those satellite systems are going to be talking to Wi-Fi routers and access points and satellite modems, and those devices require power on the ground. In many cases, solar off-grid is the better solution. One, potentially because there's no power in the area, very applicable in the emerging markets. Two, even when you're talking about large urban areas, in downtown cores, it's not easy, oftentimes, getting power to a little device that you want to mount on a pole, whether it's a security camera or some sort of a sensor. Pico-Grid is perfect for that. Senti is an all-in-one solar streetlight.
We have a bunch of patents filed for this, we had not launched with our own all-in-one solar streetlight because the product didn't really work to the standards that are required by engineering lighting standards in North America up until now. The performance was too small. You were really talking about, like, a little flashlight, you know, coming out of a out of a device and not enough energy and power to really give reliable power all night long. With the advancements that we have, we now have our own lighting engineer on the LED side, as well as the high performance of Pico-Grid. It's MPPT, it's lithium cells inside. It's not a separate battery.
All of Pico-Grid goes inside the Senti with a high-performance, larger solar panel. All of a sudden, you have an all-in-one solar light that meets, you know, national, provincial state standards for lighting in many, many applications. It ships in a box, you put it on a pole. Away you go. At the other end of the spectrum, we have eSite. eSite Power Systems is the company that we acquired. Esite-Micro is the new product that occurs when you take the eSite product and you merge them together with Clear Blue's Illumience management platform, our management operating service, our big cloud analytics, our predictive analytics, weather forecasting, energy forecasting, troubleshooting, remediation. When you turn it into an entire system.
I started talking with customers about the road to zero diesel, and it's not an easy road. Customers demand higher availability of their cell phone telecommunications connectivity than they do of any other power device. The power can go out, but that internet router better stay up. High availability in telecom is a really key requirement. The rule has always been, just put a diesel generator, turn it on all the time, and I know I've got power all the time. The problem is it's become prohibitively expensive, and we all know the impact to climate change as a result of all of these diesel generators running everywhere. Investing solar kind of gets you one step there, but it's a very limited small site.
If you look at an old-fashioned site, you have a cabinet, you've got air conditioners in it with lots of cooling and fans. If you want to get to a solar-only site, the first thing you got to do is you got to become energy efficient. You have to get rid of air conditioning. A lot of people don't understand that heat and thermal issues kill outdoor systems. Moving out of that nice air-conditioned environment to a non-air-conditioned environment is the first step to going zero diesel. Rather than just trying to make it work with existing technology, that works great when you put it in the fridge, but does not work great when it's not air-conditioned. eSite took the visionary step of designing a passively cooled system that does not require active air cooling.
It took the second step of pulling it outside of the battery cabinet. Inside that cabinet is a bunch of batteries and a bunch of telecommunications equipment, all that power generation switching equipment was really, really hot and adding to the heat in the cabinet, not only affecting the electronics, but the batteries and the things. On the hardware side, eSite-micro, and the converter technology that they've built, and that we are honored and pleased to have as an asset within the merged companies now, is the first step on the road to zero diesel. The second step comes from data analytics. You know that our core technology, and I've got to update this picture and show all the different power devices that are now five or six of them to just one.
Every power device we have, PICO, Senti, Illumient, Nano, eSite, communicates wirelessly to our Illumient cloud platform. In our Illumient cloud platform, we have, to our knowledge, the largest dataset of 12 million operating days of historical data around the world of power communications from lighting systems and solar and solar hybrid operational systems. Using our energy forecasting and management and our troubleshooting and remediation, we deliver maximum uptime, longest life, and easy to install and maintain. On the maintenance side, it's all about how to get to zero diesel. Our customers benefit from this intelligent management capability in many ways. Everybody in the marketplace is talking about AI, and I'm very cautious with how we talk about it, and I want to make sure our investors and our customers and our stakeholders are all aware of where we're going.
The first thing that's important to understand is that it's, it doesn't happen overnight, and, you know, you start at the ground level, and you build over time, and it's kind of a continuous line. I find this capability, this analysis from Gartner, a very good analysis. Understand that we've been talking about big data analytics, and predictive analytics for, since almost the first day that the company has been established. We started off by getting all the data all the time. As that data has grown, figuring out how to manage very, very large repositories of data is a huge endeavor, and we've got an infrastructure that allows us to do that. We have a lot of sophisticated analytics and tools that allow us to leverage information from that data, and we've now moved into predictive analytics.
What is going to happen in the future? As part of our government grant program, we have a CAD 14 million, three-year plan to invest, to take that last step and to begin adding a check mark under AI. The kind of AI we believe we're going to be using is machine learning. There is no check mark there, but we've got the first four check marks, and it's important to understand that the previous competitors in the marketplace can't just start with machine learning AI. They need the data. They need big data. They need domain knowledge about the operation of the site from analytics, predictive analytics, and that capability to move forward before they can add the layer of machine learning, and that's where Clear Blue is going. What's our target objective? Well, first of all, we want to lower the upfront cost.
The upfront CapEx of power infrastructure is the number one limiting factor that limits the ability for people to roll out additional infrastructure in telecommunications. We've been able to demonstrate, independently validated, that you need 40% lower upfront cost versus the competition, in the configuration of those systems using Clear Blue. That's just not lower cost of our stuff; it's less solar panels and less batteries for a Clear Blue smart off-grid system versus a traditional power grid or solar grid system. The next step is, how do we reduce customer diesel consumption? Adding solar will help, but these are very difficult sites, shaded, legacy. They're not out in the middle of a farm, you know, and they're a small footprint.
Using data analytics and performance objectives and energy management is really what's needed, and our target objective is to reduce diesel consumption by 20%-50%. As I said to one CEO of a very large tower company, we're never gonna get to zero diesel on all of your sites, but right now, you have 100% of your sites on diesel. You're gonna reduce the diesel on all those sites by adding solar. If our predictive analytics can take 20%-50% of those sites where you can actually shut down diesel down to zero, that's gonna have a huge impact. It's gonna improve maintenance, it's gonna increase uptime, and then most importantly, from his perspective, maybe it adds 5%-10% profit margin to his bottom line.
Now we're going to turn it over to the discussion of Q1 results, and I'm going to hand it over to Farrukh, who's going to walk you through our financial results. Farrukh, are you there?
Yes. Thank you so much. Hello, everyone.
Here you go.
All right. We're going to start with revenue. Revenue for Q1, 2020 was CAD 262,000, which yielded a trailing four-quarter result of 1.6 million. Q1, typically, Q1 orders are typically overflows from previous year, and as a result, this year's Q1 continued to be impacted by a difficult 2022 economic environment, wherein most customers paused their capital spending and financing of new infrastructure. Next slide, please. Okay. Let me talk about our revenue. If you look at our trailing four-quarter revenue by different verticals and regions. Clear Blue's lighting vertical is made up of one-time revenue and Energy-as-a-Service recurring revenue. As the company continues to grow its Energy-as-a-Service offering, we have been seeing a gradual decrease in one-time lighting revenue and corresponding increase in Energy-as-a-Service recurring revenue.
The 20% decrease in lighting revenue is impacted by the same shift, with the revenue to be generated over the next three years. The decrease in U.S. revenues is also largely impacted by customer projects delaying, you know, delays in customer projects waiting for the infrastructure and zoning acts. We are now in a place that, you know, our future outlook is looking good for our lighting business. Our telecom vertical has been growing consistently over the past few years. For the first time, we saw a decline in this vertical during the previous 12 months. This decrease can be attributed to global macroeconomic environment, which we saw that where we saw that certain telecom rollouts were delayed, resulting in a decrease in revenue for the quarter and trailing Q4 of 2022.
Customers also delayed their CapEx expenditure in 2022, which caused project to add up. We still continue to have good relationship with these customers and are working with them to accommodate this revised rollout schedule. When we speak about bookings, you will see that the orders have now started to increase and flow into the company. Next slide, please. As I said, in our previous slide, this is the impact that we see in the shift. Illumient's an EaaS, Energy-as-a-Service, recurring revenue. Recurring revenue is the revenue the company earns from its energy-as-a-service and Illumient's ongoing management services and cloud software. Every single system that Clear Blue has ever sold includes an ongoing service component. Clear Blue manages and operates the power systems on an ongoing basis for our customers.
This is at the heart of our business and our value proposition. As telecom customers increase wireless telecommunication bandwidth to support their ever-growing customer base, so as well, the power needs of those sites are also increasing. The ongoing growth of telecom systems and ongoing operations and maintenance of the power needed to keep the system functioning, is what drives the growth of our recurring revenue. As you can see, addition of our telecom customer rollouts over the years is having a nice impact upon the growth of our recurring revenue. Recurring revenue is expected to increase every quarter as Clear Blue sells more units with a subscription model and as the company's base of telecom installations grow.
Telecom systems tend to grow their capacity and power consumption, which also increases the recurring revenue for Clear Blue. For the trailing Q4 period, recurring revenue grew 75% to CAD 856 thousand. For Q1, revenue was CAD 212 thousand, up to 40% from the same period last year. Next slide, please, Miriam. Do you want to speak about our bookings?
Sure. We, as you all know, had a brutal 2022, and the results in Q1 sort of carried over from that because most of our Q1 results come from what's left over in Q4 bookings. Beginning in Q1, we saw a real change in the numbers. We're really thrilled to be able to talk about the fact that our bookings in Q1. I can see there's an error on this slide. The top number is correct. Total bookings increased to CAD 3.5 million in orders, which is up more than 50% from the amount that we had at the end of December. At the end of December, the bulk of the revenue was built out over the next two or three years.
The recurring revenue proportion of backlog of that, but in Q1, we started to see new orders, which have a year one component as well as a year two, three component. We're working very hard now, for those bookings to ship and be delivered in Q2 and Q3. It typically takes four to six months. The actual range is anywhere from two to six months, for orders to transfer from bookings into revenue. As we've seen orders come in the early part of the year, we expect to convert into revenue this year. Farrukh?
Thank you, Miriam. If we look at the graph on the right, we see that the company has been able to grow its margins over the years, so now we are maintaining margins at mid-30s range. With high inflation and increasing commodity prices, there has been a pressure on the company's margins. However, in most cases, the company has managed to either innovate lower costs elsewhere or pass portion of these increased costs of materials to its customers. The trailing Q4 gross margin remains consistent at 34% when compared to the comparative period. Given the acquisition of the eSite Power Systems at the beginning of the current quarter and other cost pressures on the company, we expect overall margin for 2023 to be in the mid-30s range.
This can be seen in the gross margin for the current quarter, which was at 36% compared to 41% in the comparative quarter of 2022. Next slide, please, Miriam. About the operating expenses. In this, in this environment of high inflation and resulting higher costs, management is focused on reducing operating expenses where possible. In Q1, the operating expenses decreased by 11% compared to the same period in 2022. The operating expenses included $310,000 worth of eSite operating expenses. The revised operating expenses relating to the company for the three months, if we exclude the eSite, was around $1 million. There's an actual decrease in operating expenses of 32% when compared to March 31, 2022.
This is mainly related to travel and labor costs were lower compared to the comparative quarter. Research and development expenses decreased by 147,000, and rent for our warehouses decreased by around $28,000 compared to Q1 2022. The decrease was partially offset by an increase in professional expenses, which were higher at around 25,000, and depreciation of property, plant, and equipment, which was around 32,000, and this was mainly eSite related equipment. For the trailing Q4 ended March 31, 2023, operating expenses increased by around 168,000 to $5.6 compared to 5.5 million in the previous period.
Excluding eSite operating expenses, you know, our total operating expenses were around CAD 5.3 million, which is an actual decrease of 3% when compared to 2022. Next slide, please. Here we speak about our EBITDA and Adjusted EBITDA. If you look at this table, you can see that EBITDA was slightly positive at the quarter end, by CAD 25,000 as compared to 919,000 negative in the comparative quarter of 2022. This result includes an impact of government R&D grants. The company has signed a number of contracts with the government or, you know, different, these are different projects, and the grants will flow to the company over the next three years.
Because this is a consistent policy stretch, basically this is a grant that we are getting on an ongoing basis from the government to support our R&D expenditure. That's why EBITDA number is a very important number for us, you can see a positive because the government grants are included in there. However, when we take out the effects of these government grants, the difference between EBITDA and non-adjusted, non-IFRS Adjusted EBITDA is mainly because of our government grants. Adjusted EBITDA loss increased by 32% for the quarter and increased 22% on a trailing 4 quarter basis. The delta in non-IFRS Adjusted EBITDA between Q1 and Q1 2022 can be attributed to an increase in revenue and an increase in operating expenses from eSite.
Thank you so much, Miriam.
Thank you, Farrukh. What does Q1 tell us? Our hope and our belief is that it is a launch pad for upward revenue growth, that we are done with the wonderful 2022 experience that we all don't want to repeat. We did do a lot of work in Q1 and a lot of foundation items. The closing of the eSite acquisition is something that is material for the company, and will add an important high growth product to portfolio. As we just ramped up sales, and sales tend to take 12 to 24 months from a sales cycle perspective, you're going to see eSite start to come online. It's still a small amount in the funnel and early stage in the funnel, but that's going to be changing over time.
Q1 is oftentimes, other than if we get, like, a, one big order or something that carries over, Q1 has traditionally, over the company's history, been a very low revenue quarter. We've had years where it's 5%, 7% of the total year. It was low again this year, as it often is, because it was impacted by 2022. The bookings, which is the orders for the rest of the year and the backlog going forward, were strong at CAD 3.5 and subsequent to the quarter, they grew to 4.6 million thus far in Q2. We've been working hard to build our recurring revenue base, and we finally have it off. We've been growing that nicely, so we grew it by 40% quarter-over-quarter to CAD 212,000 per quarter.
I look forward to having a trailing four quarter of recurring revenue of more than CAD 1 million. gonna be happy when we get there. Gross margin was stable for the quarter at 36%, which is a pretty firm statement given the fact that supply chain issues and low revenue. As of today, the company has CAD 5.6 million of available signed contracts for government funding. CAD 3.8 million of that is in grants, and 1.8 million is in the form of a 10-year interest-free loan, and that funding is outlined over the next two years. Put all of that together, if you compare the balance sheet from December 31 , the balance sheet end of Q1, we have improved our balance sheet.
We've increased our working capital nicely. It is our plan to continue to focus on doing that and improving it. Cautious optimism. Bookings are strong, really happy on the sales side, got some great momentum. It always takes a little bit of time to have a turnaround, and, you know, as customers execute in 2023, the bookings and orders have come back up. We've got a robust sales funnel. That's looking good. eSite is contributing revenue. There was revenue in the quarter for eSite. There will be a follow-on revenue in Q2 and Q3. The sales funnel is building nicely as Clear Blue ramps up its sales on this product. Reestablishes relationships with those customers, et cetera, et cetera, as our Illumient service.
Beginning in early Q3, Pico-Grid and Senti will begin shipping, and both of them have strong market interest. In terms of key sales activity, we are focused on continuing the momentum around Illumient in North America. Been very happy with the results year-to-date, and now focused on making sure that we, you know, put pedal to the metal on that as more and more customers are looking to solar lighting first and are looking to capitalize on the tax benefits and tax credits that flow to both tax-paying entities and non-tax-paying entities, read: cities and municipalities. We've seen a market change in activity and some really good channel and partnership relationships that we've built, and we're working on continuing that momentum. The power COEs and the telcos behind them are investing heavily in solar upgrades.
Almost every customer we're talking to is converting their existing non-solar power systems to solar hybrid. This is the market that eSite-micro is perfect for when married with Clear Blue's Illumient product. We've got a number of customers who have trials planned and active in Q2 and Q3. Those are all their proof of concepts with their end customers, all being planned for setups and rollouts for larger rollouts in 2024. We are heavily focused on the active success of these pilot projects. In addition to the pilots, we've got a large number of RFPs that hit the streets that we've been qualified for. You have to be selected as a vendor that's allowed to bid on those projects.
Oftentimes, vendors will split the business to multiple customers because of multiple suppliers, because they don't want to put everything in one basket. To get selected as a vendor, if you do your job well, can oftentimes mean you're gonna get a slice of supply, and we have a number of proposals underway. Our Nano-Grid business is expanding. We're doing a lot of projects with satellite companies, and e-learning. Avanti has a major e-learning program, and we are a partner of that partnership. We've got a first pilot up and running, and all of those projects, again, phased rollouts over time. We do see more Nano-Grid shipments coming online in Q2, Q3, and hopefully in Q4. We're launching Senti in North America, and we're launching Pico-Grid.
Both of these products are low dollar volume products, so it takes some time for the volume to grow, and that's why we're saying that the revenue impact will be small in 2023, but we start to see larger revenues impact in 2024. It's not that we're not gonna ship anything in 2023, it's that it's gonna start out small, and because they're a small dollar item, it's in a box ready to ship, you know, mass market type product, it'll take some time for that to grow. What are the catalysts for value creation? When I look at how are we going to get us back to the point where our, you know, stock market valuation is more reflective of the actual value of the company, and what are the catalysts that are gonna show that?
In 2023, you're going to see North American sales growth. Nice to see a good mix between emerging and North American markets. You're going to see eSite-Micro sales in the retrofit marketplace. Really focusing on our high top funnel for converting to actual bookings and orders in hand, demonstrating cash flow breakeven at $2 million quarterly revenue, and a return to at least 50% plus growth rate year-over-year is where we think we're going to get at. Beyond 2023, you add all of that, you know, 2024 has got a good growth rate from 2023. We start to show those trends. We show good organic growth on the top line. We also have the opportunity to turbocharge it with M&A.
If you see what we are going to demonstrate with eSite, that is a very good example of the company's ability to do an acquisition, to integrate an acquisition, and where one plus one equals three. We believe that as we demonstrate that success with eSite this year, that's going to enable us to turbocharge our other M&A targets and grow the business significantly. All of that put together to show and demonstrate an established track record of consistent EBITDA growth. In terms of our outlook, we have a much wider product line. Our sales funnel and order book is diverse. One of the things that's great about the order book that we have, is we have multiple deals across multiple markets and products.
Unfortunately, that means you don't see a press release with an, you know, "Clear Blue received one single order for $5 million." Fortunately, what that means is we've got multiple engines firing with many orders and books. We're happy to see that diverse and multiple orders and bookings. We'll be announcing more orders as they come. When you see a small, nice, half million-dollar order, you know, 20 of those are way better than one big one. That's what we're focused on. We have strong booking momentum, and we need it to continue in order for us to have a really fantastic year. The critical need from Clear Blue's perspective is you've got to get the orders in hand, and then you've got to convert them to shipping.
It's critical that we have the timelines for the orders to actually convert from bookings to shipping. Orders can generally will have anywhere from two to six months, most of the time in booking timelines. If it's two months, you can get an order in October and ship in December. If it's six months, you know, if it isn't in hand in Q3, you know, it starts to roll over to next year. We are very focused and continue to have an objective of our target plan for 2023 to achieve positive EBITDA and net zero cash burn. So far, we're on track to that, and we are going to continue to do everything we can to make sure that we deliver on that.
What that means is a continued ruthless focus on the balance sheet and cash, continues internal to the company and will continue. That's all we have. I'd like to open it up, to questions. If perhaps, Sophic, do you want to maybe curate the questions?
Thanks, Miriam. As a reminder, once again, if you have any questions, please feel free to use the Q&A box at the bottom or send an email to investors@clearbluetechnologies.com or all@sophiccapital.com. We do have a few questions that have come in, so let me try and organize them a little bit in terms of, you know, maybe guidance, bookings, revenue, and then working through the costs in that order. Back to speaking, Miriam.
Okay.
The first question we have is: I know you're not providing guidance, but in your comments you said 2022 was not as typical a year as you might have seen in the past, and 2023 would be. Should we be thinking closer in terms of $8- 9 million on the top line in terms of 2023 revenue?
As you know, and I'm going to reiterate, we are not giving guidance at this time. There's been too much market uncertainty and where our numbers are at, but that sounds right. It's, you know, kind of in the ballpark of where we're trying to go.
Okay. The next question is somewhat similar. Moving down the income statement a little bit, it's asking about the outlook and being cash flow neutral or cash neutral, rather. The outlook mentions that 2023 revenue could be cash neutral/EBITDA breakeven at roughly CAD 9 million in revenue. Can you help us understand the revenue visibility you need to attain the next level, since order intakes this year, according to your previous press releases, correspond to about CAD 4 million in 2023 revenue? Are you expecting another CAD 4- 5 million in orders in Q2 or Q3 of this year?
The first thing I would like to mention is that it's important to remember that when Clear Blue gets an initial order from a customer, that order always includes the upfront initial sale shipment of the equipment. It also includes the first three years of the ongoing service management. Deferred revenue, recurring revenue, that gets booked as an upfront amount. We also receive the cash. An example might be, we might have a project for an interstate highway in the United States. It might be, you know, let's say it's a million-dollar project. It's not a million-dollar project, but we'll say it's a million-dollar project. Just for purposes of size. Of that, you might have $500,000-700,000.
That's one-time revenue, you also then might have CAD 300,000- 500,000 of deferred recurring revenue. Even though that's deferred revenue where we won't see the revenue this year, the company receives all of that cash. Depending upon the booking, when we get the booking and we ship, we receive full payment for two years ahead of time, and that assists us in our cash. As our bookings backlog grows, we will let the market know. At this time, the trend is positive, and we believe the trend will continue through Q3 and beyond. We need the timeline for those orders to be such that we'll be able to ship in fiscal 2023.
Our high prom sales funnel shows potential that we could achieve those numbers. We are cautiously optimistic that we can make it this year rather than having them delay into next year. That's the critical thing, is when will the bookings come in, and how quick can we convert them to revenue?
Okay. Somewhat similar question that's came in, and maybe you can clarify a bit more. How satisfied are you with the bookings year to date, and what is your target in bookings for the next six to nine months?
I'm very satisfied, doing the happy dance on the bookings to date. As I said, it's not just because of the number, it's the diversity. It's across all products and all markets. Many of these bookings are phases in projects that we have with customers. You know, while things got paused last year, you know, they've restarted the programs, and their plans are to do stage rollouts. It's indicative that the halt has stopped, you know, we're pressing go. We've got the pedal to the metal again. You know, the hope is that it's not just these orders, but that the follow-on phases continue to go forward. We're also seeing, you know, good interest in eSite, good interest in Pico-Grid and Senti.
That has us being quite positive from you know, really bullish in terms of the bookings we have. Bookings is a good news story right now, and we're very happy. We need it to continue, and we need it to execute deliver through the rest of this year.
We've got a couple more on the order intake and bookings, and then there's another one on the sales funnel. Let me take it in the order of the order intake. The increase in order intake beginning in Q1, 2023, that was referenced in the MD&A, I think you might have just alluded to this. Is that pertaining to your previously paused projects or more from new projects? In other words, where do you expect further strength in order intake that you expect in 2023?
I think it's a good mix of existing customer follow-on phases and new customers. Many of these projects were indeed orders we had anticipated in 2022 and have now come in. Some of them are part, as I said, of multi-phase projects where future phases are expected. Customers are moving forward, but with caution. For instance, we saw one customer break their 2023 order into two phases. They said, "Well, this is the quantity we're going to need, and then at the end of the day, the purchase order we got is, well, you know, we're just going to be cautious, make sure everything keeps going the way it should be, and we see everything the trends continue on their side." They placed an order for, you know, the first phase of that piece.
There's a possibility we'll get a second phase this year. We are seeing those multi-phases starting again, but we have some exciting new orders from new customers. We have now started to see the impact of U.S., Canada, and international programs investing in climate change initiatives. We expect that to continue and to grow. Our focus is growing our existing customer base, adding new customers to that base.
We have one more on order intake. Can you help us reconcile your order intake factories, your dates, and bookings referenced in your MD&A? For example, Q1 order intake was around CAD 3.5 million, and Q1 quarter end bookings were about 3.5 million. However, bookings at the end of Q4 were around CAD 1.9 million. Does this imply that bookings should increase by another CAD 1.9 million? Furthermore, year to date, order intake has been around CAD 4.6 million. Does this then imply that the current bookings number should be CAD 1.9 million plus 4.6 million, or roughly about 6.5 million? Why is there a time lag between order intake and then the sort of announced bookings in your MD&A?
Okay. I think I understand the question and how there could be some confusion. When we report bookings, we have bookings and bookings backlog. Because as a recurring revenue company, you want to know, you know, how much future guaranteed revenue you have. In our MD&A results, what you saw on the table is our bookings backlog. Please understand that number is always a point-in-time reference. You would not add the year-end 2022 number to the Q1 number. I'll work with Claris to make sure we're a little bit clearer on bookings backlog versus new bookings. Each quarter there are new bookings and new shipments, which are puts and takes to the booking backlog number. A booking is defined.
by us as clearly we're having received some formal notification, a purchase order, a contract, or a letter of award. The timeline between when a booking occurs and when revenue is recognized is impacted by the time needed for a contract, if there's a contract required, not always. Most of our projects are not contracts, but the deposit payment, engineering, design, and sign off, which is the piece that can take a little or a large amount of time, and then the manufacturing and shipping timeline. The time between a booking and a shipment can vary. Typically orders ship between two and six months of booking. Then, of course, it's important to remember that recurring revenue is delivered over three years.
As our recurring revenue grows, more and more of the bookings will be delivered over a three-year period, and you're going to see our bookings backlog grow.
Changing tracks a little bit. We've got a question about the sales funnel. Can you quantify your sales funnel, and how large is it?
The first software license, because we use a lot of open source software. The first software license the company paid for when we started the company was Salesforce. We are forensically detailed on our sales funnel, and we slice and dice it into multiple categories. We have a written, documented rule as to what the percentage probability is in the pipeline. At any given time, our sales funnel is in the CAD 300- 400 million, CAD 450 million, CAD 350 million dollar range. That is the sales funnel over the next four to five years. It's things and projects we have visibility to. In order for a project to hit that sales funnel, it has to be a real project.
It's, you know, the customer is ABC Joe, and he's doing telecom project Y or roadway project Z. I'll give you an example of one that's in the sales funnel. There's this huge bridge from Manhattan to New Jersey that's planned to be redone in about two to three years. We've done the engineering layout, we've done the design, we've done the solar proposal. Who knows if they're gonna go solar, but it's a real project. That's in our sales funnel, but it'll show as a low probability, and it'll show, you know, as something that would close in 2026. The more important piece is, what's our higher probability funnel and our shorter term? What's possible to close this year? That number, we ruthlessly scrub on an ongoing basis.
We analyze it, we break it down into high prob pipeline, and in high prob, we have forecast and commit. That number has been growing quite strongly. I believe it's sitting at around $40 million for this year of high-prob pipeline. So those are real deals that are imminent. We have budget, authority, need, and most importantly, timeline validated that they would be orders for this year. With a high-prob funnel of possible orders this year of about $40 million in a total sales pipeline of $300- 400 million, we are looking for another, you know, $5 million in bookings, $6 million in bookings, 10 million in bookings this year to blow it out of the water.
We have a follow-up question on the bookings backlog. What is your current bookings backlog? Where would you like it to realistically be in the next six to nine months?
I don't know that I can answer the second one in terms of bookings backlog, where I'd like it to be. Right now, it's as in the MD&A, it is CAD 3.5 million is our current bookings backlog, and we have broken out for you what revenue we believe will be in the forward 12 quarters in the next 12 months and what revenue will be after that. That can show you from that perspective. In terms of where I want it to be, you know, I'd like to get the order today and have it ship tomorrow. When that happens in quarter, you don't even see it in bookings. We get the order, and we ship. We will have received orders in Q1 and Q2 that never show up in bookings.
You know, I'd like every order to go, which would mean my bookings number would be quite small, but my recurring revenue, I'd like to see it grow quite significantly. The one-time backlog, I'd like it to go down because I'm shipping very quickly on an ongoing basis. The recurring revenue backlog, I'd like it to be growing significantly CAD 2 million, 3 million, 4 million because I wanna go from CAD 1 million in recurring revenue to CAD 3 to 7 million to 12 million, and we are on track to making those kinds of numbers.
I suppose given that, we are talking about CAD 2 -6 million in booking timelines between when you get a book and when you ship, I'd like our bookings backlog to be around CAD 8 million because, you know, I would be a very happy camper if we did CAD 15 million this year. I'm not saying we're gonna do CAD 15 million. Where would I like it to be? I think that's where I'd go on vacation. I'd say I can take a week off.
The next question is about revenue. What impact in terms of incremental revenue % do you expect the introduction of EagleRift to have?
I think this year, Pico-Grid and Senti will be below CAD 1 million in revenue. I actually wouldn't want it to be bigger than that. You have to follow the concentric circle model of building your business, and those are two new products. I don't wanna ship 10,000 of them in the first, you know, in the first shipment. We have to grow that business in a paced way so that we can validate in the field the use cases, find any tweaks, identify any bugs, you know, improve the release process, et cetera, et cetera. It will be under CAD 1 million this year. Anything more than that, I would slow it down to make sure that we've got enough, you know, traction to validate.
Next year, my hope is that you will see. I have no idea, north of CAD 1 million for sure, but, you know, I'd like to see CAD 3 -5 million from Pico-Grid and Senti. That's just off the top of my head. I'm not saying I've got the funnel or anything. That's not guidance. Don't hold me to that. Just giving you my best feel.
Next question, somewhat in a similar vein, but a little bit more quantitative. How is the integration with eSite proceeding? Is it mostly complete, and are there any revenue synergies that you can point to?
The eSite integration has gone really well, but it's still early days. We completed phase one of the integration. We've integrated them into the org chart. We've integrated the team members. We've got good team building, people working together. We are slowly getting the integration of the processes. I can tell you that Q1 was a brutal quarter for Farrukh because he had to consolidate eSite's financials. That was the first quarter where we did that. That's not a trivial exercise, and we are a pretty lean team. From that perspective, it's all going well. From customer base, it's going well. Stabilizing and securing the supply chain is something we're still, you know, lots of work coming and focused on.
And there's, it requires some focus to make sure that that's all stabilized and going forward. I think in general, it's going very well. I don't expect any problems going forward, just a lot of hard work. What was the second part of the question? Oh, on sales. Yeah, really happy with the synergies. You know, one of the pilot projects that we're doing that we're very excited about, is a marriage of a Clear Blue customer and an eSite customer. Those two customers are working together on a very big initiative. When eSite and Clear Blue merged, you know, we brought the two together. We have eSite customers who are keenly interested in Clear Blue.
We have eSite customers who are asking us to implement and buy our Illumience's three-year service and service team to operate and manage their sites for them. That has done very well. We've had a couple of eSite customers who are kind of screaming about it. As soon as we acquired the company, we brought the team, in Africa and the skill sets and the management process and the tools, our integration has begun. The full integration of first phase of the full integration of eSite with Illumient will be delivered in the fall. We're on a roadway there. Similarly, we have eSite Clear Blue customers who just grabbed that eSite product, said, "I ought to go," and are very keen to go.
The synergies on the sales side between the two businesses was significant and really huge benefit for both of us.
You can fast a little bit. We've got about half a dozen questions more in terms of the cost side and balance sheet and governance and whatnot. We're also coming up on the hour, you know, my guess is okay if we keep going, we'll put the recording up on the website. How should we think about the gross margin going forward? Q1 was about 36%. Is a 30%-35% range appropriate, given the eSite acquisition and the current state of the global supply chain?
Farrukh?
I can take that. Given the acquisition of eSite at the beginning of the current quarter, and, you know, it's still early days, and there are other cost pressures on the company as well, as I mentioned in my presentation. We expect the overall margin for 2023 to be in the mid-thirties range, you know, 30% to, 32% to 35%, 36%, around that time.
Next question, I guess, just moving down the income statement, they're asking, you know, what's a good way to think about operating costs going forward on a combined Clear Blue plus eSite basis? Based on the MD&A, it looks like Clear Blue's OpEx was about CAD 1 million in Q1, and eSite was roughly another CAD 300,000. As you win more orders, do you need to increase your team size?
As I said earlier, you know, we did undertake a good, strong cost cutting exercise in 2022. You can see that after the cost cutting exercise, we reduced headcount salaries and reduced other expenses as well. If you take out eSite, let's keep eSite for to the side for now, you can see that our costs have gone down significantly compared to Q1 of last year. With eSite, as we typically, the majority of the eSite costs are the salaries. As we complete their integration, we expect the salaries for eSite to go down. However, we do see market pressure on salaries of our own employees because, you know, inflation and whatnot. Many of these people work in Africa and all of which have experienced significant inflation.
There will be need to some increases in our cost for salary growth. As we scale our revenue, we need to hire additional resources, but as of right now, the growth is expected to be quite small this year. We are continuously forecasting our budget and cash flow as, and as revenue grows. You know, we are pressed to deliver more to our customers, and we might hire more people. On a continuing basis, our operating expenses have already been slimmed down. The things that I would see, would, just as I said, increase would be some salary pressures that we have on our internal staff.
Could you summarize the additional non-derivable capital remaining on the U.S. government grants, and interest-free loans? Are you expecting any more cash disbursements from these programs in the near term?
Yeah, for sure. As of May 29, the company has CAD 5.6 million of available government funding, with 3.8 million receivable in government grants and 1.8 million receivable in the form of the, you know, FedDev 10-year interest-free loan to fund, you know, our plans going forward for the next three years. Subsequent to the quarter end, we did receive approximately CAD 1.2 million in additional disbursements, and that was mainly government grants. The receivables from FedDev was slightly delayed because of the government strike. We do have, you know, around CAD 300,000, two claims receivable from FedDev.
As the people go back to, you know, the FedDev goes back to work and, you know, they start processing our claims, so we will, we expect some around CAD 300,000- 350,000 more in the short term, to be received from FedDev.
The next question is asking about, you know, cost philosophy on a broader level. You're involved in many different markets and product lines. Each of which could be a focused business in itself. There seems to be some limited sales traction in any given market, and yet the focus seems to be R&D with limited cash flow to support it. How do you plan to exit from this cycle?
It's a really good question about are there related businesses and a lot. I think what I would say is, when it comes to Africa, Pico, Nano, and eSite have a lot of synergies. For example, in our satellite business, we're seeing where there's a plan to be a fairly large hub and spoke model. One Nano-Grid to power the satellite dish, and then a whole bunch of Pico-Grids around it. There are strong synergies between Pico and Nano, and in that telecom vertical. We had a lot of conversations in Clear Blue around Illumient and the North American marketplace. Remember that even though we talk about the world, our sales focus is Africa and North America.
The other stuff is getting dragged in from other markets by customers that we already have or customers, you know, that are going there. We are very concentrated in two markets, Africa and North America. In North America, our Illumient business was pretty quiet the last few years and not going in the high growth trajectory that we felt it could. We did a pretty comprehensive review last year and the year before, looking at our Illumient business and why, you know, was it us, was it the market, et cetera, et cetera. I think really two things have occurred. One, the Infrastructure Clean Air Act, it's having a material impact.
Glad that we're still in that business, and we stay focused in that with 1 person supporting an entire network that's pretty well established, and doing a good job in building that business. The second was that the ability to just buy an all-in-one light that included solar power is where the major market growth happens. The Senti product has got to be the bulk of our revenue growth in that North American marketplace. That is a valid question, and it was one that we undertook and analyzed ourselves, but given the Infrastructure Clean Air Act, the Canadian government subsidies, we've seen a big growth on that side and demand and interest and use case validity for Senti and our ability to sell it that way, we think that's still a good decision to be in.
In Africa, our three products do have synergistic opportunities. I don't think I can think of any customer where we're only talking about one product. We're talking about multiple. For example, eSight, Nano, Pico, there's all conversations going on with all multiple customers. There's good synergistic value there. I agree with the investor's question about, you know, do we go beyond that until we're scaled much bigger than this? That's a really good question, and one of the reasons why we were pretty focused on what fit into the company as a product needed to be synergistic, and that was the eSight acquisition.
In terms of the question of when we flip R&D versus sales, our biggest asset is that we have this big moat, that it is not simple and easy for anyone. Today, our biggest competitor is Huawei, and it's not just Huawei on the telecom. They are going after the power. So we've got lots of projects where it's us against Huawei. Our biggest moat and advantage is the fact that even a company with lots of money cannot just go out and build what we have overnight. You have a cloud infrastructure, you have a communications infrastructure, you have hardware products, you have systems, you have service teams, you have data analytics, you have all of that.
That does mean that our carrying costs and operating costs are higher than other competitors in the marketplace, where they just, you know, build a little product. They have a little hardware guy, you put a little software port in, you can download the data into Excel spreadsheet, away you go. It's completely different to what we do. What I would say, though, is that we made a very clear market decision to make sure that our R&D program was supported through grants and investments. That is a big part of the hypothesis. We cannot just do R&D without the government grants to support that investment at this point in time, and that is why we spent a good chunk of time and effort to make sure we could secure a good R&D grant program to secure our R&D investments.
Now, the name of the game is to grow sales and operations. I believe that we are very close, and I'm gonna open a bottle of champagne when we cross over to trailing four quarter CAD 10 million. We are very close to that, and once the company gets into the CAD 12- 15 million range, now it's time to start adding sales people on that side. I think the other piece that we made a deliberate strategy discussion on is the Pico-Grid and the Senti product, our mass market product. They don't require the same overhead of engineering, project management, customer support, that a Nano-Grid or an eSite project would, and that is a big part of our growth strategy.
Again, we have to invest in R&D in order to have a platform that's scalable, and we have done that, but I think that that's going to help a lot as well. That's a bit of a long answer, but I, Nikhil, did I answer the question?
I believe so, yeah. Following through, I guess we've got, two last questions left. Two or three years ago, you stated plans to retire or change roles in a few years.
Mm-hmm.
Is that still the plan to change roles soon, and does the board have a succession plan?
No, it is not my plan to change soon. After everything we went through last year, I wanna have five years of fun, and very keenly interested in the company. We made some personal changes in our personal situation, myself and my husband, and we are now spending a big chunk of time in Africa, where there's a significant amount of customer partnership strategy, investor interest, and that is going to continue in the foreseeable future for the next few years. I serve at the pleasure of the board and the pleasure of the investors, so it's not necessarily a given. The board is quite demanding, quite rigorous, and really supports me to be the best CEO I can be.
If at some point it makes sense for me not to be the CEO, we will embrace that and make it happen. It's very difficult to build a succession plan for a person. What you really need to do is to build a team and an engine where no single person has that, you know, it's all in one person. Clearly, we've done a lot of work in the last 18 months to do that. We have a good. The amount of things where I'm personally involved in running the business has gotten less and less and less. We have good operations management at the management level below me.
From a succession planning perspective, while I hope people would miss me, I believe that if we had to make a change, the board could make that change, and the management team in place could support whoever would be brought in to take that going forward.
The last one seems to be very soon you'll get a PDF copy of this presentation. I believe we usually put it up on the investor section of our website, not the recording, but the PDF as well. I guess we'll do the same this time.
Yes, we'll put both the PDF of the presentation and the recording up on our website as soon as we can.
Well, I just got one last follow-up. Are there plans to transition to an independent board without company insiders?
Not without company insiders. We will, we plan to have the company insiders be part of the board on a go-forward basis. However, growing our board is something that we do discuss, and it is our hope that we will potentially add some activity to the board in this year. We talk about it quite frequently. It is very hard to find board members. It's probably, you know, I think that there are two critical, most difficult hires that you can make. I don't know which one would come first. It's very hard to hire good salespeople. You know, most people will know you can hire 20 salespeople, and two work, and the other 18 don't.
Finding good board members who have the time and energy to contribute materially is not an easy thing. We do have a very good group of advisors and investors who we have as an extended family. All those government grants come with bankers who review our plans and give us advice, BDC, the bankers, all of those kinds of people. We have advisors who are observers and advisors to the board, which we regularly bring in. We have Sophic Capital on the IR side, and our two independent board members, Steve Parry and Jane Kearns, do a lot of work for the company. I will comment that we're very ruthless on making sure that we do the right corporate governance.
As an example, we have two levels of approval of all salaries, all changes. We have group reviews of everything. Anytime there could be an appearance of a conflict, the insider board members will remove themselves from that conversation. Steve Parry and Jane Kearns have led the charge. Additionally, you know, we'll go to Steve and Jane and say, "You know, where do you think we're at on the board, and what should we do?" They're helping us to add and grow it appropriately. Hopefully you'll see some changes in the future. We're open to adding them, but it's got to be the right people, and they're not easy to find.
There are no more questions in the queue at this time. Miriam, I don't know if you want to make any closing remarks, but we're done with the Q&A portion.
Yeah, I think, closing remarks, we've had a lot of support from everyone who is a stakeholder in the company, shareholders, investors, bankers, suppliers, partners, employees, and customers. I think we are through a very difficult 2022. The trajectory change is visible. You can see it in the bookings. We see it in how the company is very busy, and we also commented that we're, we seem to be firing on all cylinders, so we're running well and operating well as a company. We thank you for that. We are really appreciative of that support. We spend 18 hours a day making sure that we deliver on the promise to all of you.
Great. Thank you for your time, everyone. That's the end of the Q1-2023 Earnings Call. Thank you, next.
Thanks, everybody.