Renovare Environmental, Inc.
Q2 2018 Earnings Call Transcript

Published: 16 Aug 2018

[Operator:]

Good day, ladies and gentlemen. And thank you for standing by. Welcome to the BioHiTech Global Second Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. Before I turn the call over to the company, I want to remind listeners that during the call management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the Safe Harbor forward looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today. And therefore we refer you to more detailed discussions of this risks and uncertainties in the company's filing with the SEC. In addition, any projections as to the company's future performance represented by management include estimate of today August 15, 2018. And the company assumes no obligations to update these projections in the future as market conditions change. This webcast may contain certain forward looking statements provided in the call. And are available at www.bihitech.com on the Investor Relations page. I will now like to turn the call over to Mr. Richard Galterio, Executive Vice President of BioHiTech. Please go ahead, sir.

[Richard Galterio:]

Thank you, operator. Good afternoon, listeners. Welcome again to the BioHiTech Global second quarter 2018 financial results conference call. In addition to myself, with us today are Frank E Celli, our Chief Executive Officer; and Brian Essman, our Chief Financial Officer. I would like to start off by providing a brief overview of our business progress in the second quarter, followed by a more detailed discussion of our financial results from Brian, and then we will turn the call over to Frank, our CEO to provide an overview of our growth strategy for the remainder of the year and into 2019. During the second quarter, we achieved significant growth as we continue to rollout of our cost-effective technology solutions for sustainable waste management. Revenue increased by 65% quarter-over-quarter and gross profit increased by more than 185% as we added a high margin management services revenue stream and expanded the base of our recurring revenue from our food waste digester business. We also achieved several key milestones in the second quarter of that we are confident will serve to build value for our stockholders. First, as many of you already know, earlier this year, we partnered with Kinderhook Industries, $2.2 billion private equity fund in its acquisition of Gold Medal Group, a leading provider of solid waste collection services in several Mid Atlantic markets. As part of that partnership, we took a minority equity stake in Gold Medal and contracted to manage its operations for an annual services fee. In the second quarter, we also teamed up with Gold Medal to launch a new all-inclusive service to its customers that bundles traditional waste management services and BioHiTech sustainable food waste digesters with real-time data analytics, all for one monthly service fee. While Frank will discuss our ongoing strategy with Gold Medal later in the call, Temple University contracted for this service in the second quarter and we are very excited about the future sales prospects for this offering that Gold Medal is just beginning to roll out through its customer network. Second, we received our first patent in the US for a very important component of our cloud-based data analytics platform. This patent for a weight tracking system within an internet-connected device provides us with what we see as a significant competitive advantage and together with several other patents we have pending will enable us to offer services to our customers that others simply will not be able to provide. Third, we were selected as a pre-approved supplier of food waste digesters for a major international hotel chain. We expect to deliver at least 20 digesters to this customer before the end of the year, and are excited about our initial marketing efforts to the more than 150 individual hotel properties located throughout the UK. Fourth, we made further progress in the commercialization of our HEBioT technology which Frank will discuss in more detail later in this call. And last, early in the quarter, we completed an up listening to the NASDAQ capital market and in June our company was added to the Russell Microcap Index. We are confident that this will serve to increase corporate visibility in the financial marketplace and broaden our shareholder base. At this time, I would like to turn the call over to Brian Essman, our Chief Financial Officer to discuss our financial results in greater detail. Brian?

[Brian Essman:]

Thank you, Rich and good afternoon to everyone. We achieved strong revenue growth of 65.5% for the second quarter of 2018, with total revenues of $909,000 as compared to $549,000 in the second quarter of 2017. Quarter-over-quarter growth was driven by our new management service revenue from Gold Medal as well as by a 25.1% increase in revenues, recurring revenues from our digester rental and data analytics platform. While revenue related to our digestive business showed a healthy increase, the increase in actual units deployed was even greater at 57.3% due to the successful launch of our revolution series digesters that are list at a lower price point. Additionally, we do not believe this level of growth is indicative of the progress and strength that we have seen in our pipeline, as the customer opportunities we are pursuing with several current and potential customers for deployments of multiple units in their respective locations. We anticipate these larger scale customer orders will have longer sales cycle, but we believe it will lead to an increase in our growth trajectory later this year and become more pronounced in 2018. Gross profit for the second quarter of 2018 increased by 185.4% to reach $485,000 with gross margin increasing by 23.4 percentage points to 53.3% The primary drivers for the increase in gross profit include the addition of our Gold Medal management services revenue which through the leveraging of our existing management team has not resulted in incremental cost. And an 11.4% increase in gross margin from our digester rental and service business, which reached 37% as we benefit from a greater base of revenue generating units in the field. We expect rental margins to remain at higher levels as our installed base grows. And as our new smarter line of digesters require less maintenance. Margins from equipment sales declined to 32.1% compared to 41.5% as we continue to focus away from direct sales model with the exception of certain reseller markets. Second quarter operating expenses is relatively quiet with last year's quarter increasing by only $49,000 to $1.72 million. The slight increase was mainly due to an $84,000 foreign exchange expense in this quarter compared to a foreign currency gain of $35,000 in last year's second quarter. To a lesser extent, we also had increases in sales, marketing personnel and fees associated with NASDAQ up listing in April. These increases were largely offset by $195,000 decrease in professional fees primarily related to marketing and investor relations and a $22,000 decrease in R&D spending. Our loss from operations decreased by 17.8% to $1.2 million when compared to the same period in 2017. Now to our balance sheet. Our cash balance at the end of the second quarter was $1.1 million with shareholders' equity of $4.2 million. This compares to cash of $901,000 with a shareholders deficit of $11 million as of December 31st, 2017. The significant improvement in our balance sheet was a result of mandatory conversion of debt into common stock upon achieving our NASDAQ up listing in April, as well as a conversion of additional debt into equity during the first quarter. I will now turn all over to Frank to discuss our growth strategy for the remainder of this year and into 2019.

[Frank Celli:]

Thank you, Brian. While we've achieved some important successes in the quarter, we're confident we can do much better as we start to gain momentum in our mission that changes the way we think about managing waste in the United States. We recognize that our company's deploying waste management technology solutions to an industry that has changed very little in decades. And that means we face a unique set of challenges that requires us to think a little outside the box. It's not enough for us to say that we can have the positive impact on the environment, while lowering customer costs and increasing waste management industry profits. We have to prove it. This is one of the main reasons why our partnership with Gold Medal is so important. Managing Gold Medal's operations provides us with significant high margin revenue, but it also gives us the opportunity to demonstrate how our technology can deliver a competitive advantage to a traditional waste services provider. The bundled service offering with Temple is very exciting and really just scratches the surface of how Gold Medal delivered a positive, all-inclusive sustainable solution that benefits the customer, the waste services provider and of course BioHiTech. We believe that as other traditional providers see that success, they want to do the same thing and we're working very hard to make that a reality. The next phase of delivering a true zero waste platform that is actionable today is through our HEBioT technology rollout. Earlier in the quarter Gold Medal acquired Apple Valley Waste services provider in the mid-Atlantic region. BioHiTech, Apple Valley and in surrogate USA, co-owned the first HEBioT facility in the US, which is in late stage construction in Martinsburg, West Virginia. I'm pleased to announce that BioHiTech has now signed a letter of intent to acquire up to an additional 30% stake in that Martinsburg facility from Entsorga for stock in BioHiTech. Should we complete this acquisition, it would make BioHiTech the largest owner of the facility; enable us to consolidate its operations in our financial statements, most likely in the fourth quarter when it is scheduled to be commissioned. We anticipate this acquisition when I had over $7 million in revenue to BioHiTech in 2019. And generate fairly significant positive cash flow. While there's no guarantee we'll complete the transaction, it's important to note, we have completed two transactions with Entsorga companies in 2017 and we control the development rights to their HEBioT technology in 11 states in the District of Columbia. With the facility's completion only months away, BioHiTech and Gold Medal have already started to make market a turnkey zero waste solution using digesters traditional services and HEBioT processing in Martinsburg to a select group of Gold Medal's customer, and we're pleased with the initial response we've received. In addition to the progress in Martinsburg, we're making substantial inroads in the permitting process in New York State and are hopefully we will receive our first local permit sometime in the fall. We've also begun exploring the possibility of sighting a facility in South Philadelphia at Gold Medal's recently required transfer facility. Gold Medal has control of significant feedstock in the area. And this facility is permitted for mixed-lease which should help to shorten the permitting process substantially. In the coming years, we expect to have at least two or three HEBioT facilities in various stages of development that are either company owned or co-developed with strategic partners or municipalities. Recent global events are also creating a significant tailwind for the rollout of HEBioT facilities in the US. As many of you may be aware, China banned the importation of non-industrial plastics as of January 1, 2017. And are imposing significant restrictions on other plastics as well. For decades as much as 50% of our plastic recycles ended up in China each year. And this new ban has sent many municipalities scrambling for solutions as recycling costs have begun to skyrocket. This has led to preliminary discussions with municipalities and large commercial generators about utilizing HEBioT to hedge against future single stream recycling costs. Because HEBioT facilities can safely use plastics in the production of an EPA approved solid recovered fuel. We're discussing the concept to these municipalities coming and recyclables back with the municipal solid waste. The mixed waste would be processed at our HEBioT facility to achieve as much as 85% landfill diversion of the total waste stream, while reducing truck traffic cost and environmental impacts. This plan will be actionable in West Virginia in 2019 and mainly to other co- development projects in the coming years. In our digester business, we continue to build recurring revenue through the deployment of our digesters and data analytic platform. We see strength in our pipeline that could lead to a significant increase in the pace of installations, and we have begun a ramp inventory and anticipation of larger multi-unit orders from customers and grocery and hospitality. Revolution Series Digesters continue to be well-received. And we've added members to our sales team to drive further growth. We're working on some interesting new product innovations and we expect to provide more information about our development efforts in the near future. Before I turn the call over to your questions, I'd like to thank each and every one of our employees for their dedication and helping us to positive --to position the company for sustainable long-term growth. And I'd like to thank our investors for entrusting a portion of their investment dollars in our company. We're confident that we are in the right place at the right time to have a positive impact on our environment, while generating significant long-term value for our stockholders. And we look forward to building on the positive momentum we've generated in the first half of 2018. Operator, this concludes our prepared remarks. And you can now open the call to questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Ron Nash with Nash Partners. Please proceed with your question.

[Ron Nash:]

Good afternoon. Frank, you mentioned on the HEBioT all the facilities that are you guys are hopefully going to be going into. How do you plan to fund them? Because I am curious that some of these facilities I think require quite a bit of capital.

[Frank Celli:]

Hey, Ron. How are you? So, yes, I mean these depending on a few variables mainly the size and capacity of the HEBioT facility slightly based on geography and general site conditions and whatnot. These facilities will cost anywhere from $27 million to $33million a piece. Again there are certain variables that can impact that. We finance the plant in West Virginia using municipal bonds. So we do have a book of current bondholders who are interested in potentially providing debt financing going forward for future projects. So that's obviously an option that we could explore. We've had discussions with multiple project finance companies and of course our current senior lender Comerica Bank who we've got a long working relationship with. So we've been successful in providing the bulk of the financing needed through debt financing. I think that's likely we'll be able to continue down that path particularly after the West Virginia facility is up and running for a period of time. As far as any equity component may go I think we've got a slew of options in front of us. We've contemplated the idea of special-purpose vehicles where we could partner with a project finance company on a project-by-project basis. Certainly any facilities that we cite within the Gold Medal footprint in all likelihood Gold Medal and Kinderhook would want to participate, co- participate in projects like that. So it's our belief that the bulk of these facilities 80% to 85% of the capital required, we should be able to provide some type of debt financing. Whether that's long term municipal bonds or a traditional senior debt, but particularly after West Virginia is up and running. The feedback we've gotten from the market is that your project finance on these things should not be a challenge.

[Ron Nash:]

Frank you mentioned the West Virginia plan that should be coming online fairly soon. What's the timing and when will the revenue stream part to go to the benefit of the company.

[Frank Celli:]

So the plan is a few months away from what we call substantial completion run, which means we'll turn on the lights, we will turn on the equipment, and we will begin to test the equipment. Obviously, that fairly complicated plants so there will be some calibration we need to do and so on and so forth. So in the fourth quarter, we'd expect to begin sort of what we call commissioning. That'll generate some revenue. The bulk of the revenue will be realized beginning in early 2019. So we're expecting 2019 to see a full year of revenue.

[Richard Galterio:]

Ron, this is Rich. Keep in mind that right now we carry our stake in West Virginia as an investment. So it would - we would get our proportionate interest in that as it operates. Should we complete this acquisition LOI that we have with Entsorga, those operations would be consolidated and as Frank mentioned before. We expect that it will do over $7 million in revenue in 2018. So if we complete that acquisition, we would be recording that revenue under the BioHiTech umbrella in 2019. If we did not, we would carry our percentage ownership which is right now in a 17 plus percent, our carried interest would flow through our books in a different way. But we're hopeful we're going to be able to complete that acquisition.

[Ron Nash:]

And one other thing. The plant in West Virginia, the capacity of the plant will that be fully utilized by next year or how do you see it before it starts to get a 100% utilized?

[Richard Galterio:]

Ron. The plant for that facility is to ramp up to its capacity almost immediately. So once the equipment has been calibrated and we've got the green light to really kind of start commercial operation. After Valley Waste which is a Gold Medal company controls enough feedstock in the market to have that plant running at capacity. So we don't envision there being a long lead time to ramp it from 0% to 100% of its capacity.

[Operator:]

Our next question comes from the line of Walter Nasdeo with Ardour Capital. Please proceed with your question.

[Walter Nasdeo:]

Thank you. Good afternoon, gentlemen. I have kind of two-part question. Can you explain a little bit what the benefit of the patent that you received for the network weight tracking system? And how you going to incorporate that into the digesters and what the forward kind of strategy is for that?

[Frank Celli:]

Yes. I'll give you the bridged version of that because it's a fairly complicated answer. So the patent generally covers the measurement, real-time measurement and presentation of weight related data on any food waste disposal device. So it is not just specific to our digesters although obviously that's where the software is embedded and what it was developed for. The benefit of that patent is quite frankly the concept of real-time data measurement and measurement of food waste in particular by a customer to understand their inefficiencies. The behavioral efficiencies they may have, has become to our customers and I'll say this prior to our introduction of the concept of real-time measurement and presentation. I don't recall ever hearing anybody talking about it or seeing it. But so I would like to say in our patent I think proves it was our proprietary idea. The value that customers are placing on understanding their waste in which they create in order to change their behavior to create efficiencies quite frankly is exponentially greater than the cost savings associated with disposing of food waste. Whether that is through our digester or any other mechanism. So we are firm believers that your measurement and accurate real-time measurement not guesses like many of our competitors do, is really key to reducing and helping solve the food waste problem. So the feedback we get from our customers is the digesters are great right. They are cost effective, they're efficient and whatnot, but the data that we're able to provide them to make smart decisions is exponentially more valuable. That patent provides us essentially protection from any competitor with a food waste disposal device trying to replicate that model. So we think it's really valuable. We think it's a good question you asked. It's maybe difficult for the public to understand the value, but once you understand how the measurement of this food waste is important, you can really understand how the idea, the concept and the patent and the intellectual property are valuable.

[Walter Nasdeo:]

And how do guys sort of monetizing that into the product. Will that just be kind of built into the digesters or will that be a separate service or is there a kind of a side pocket revenue stream to that or how do how or how you are going to work that?

[Frank Celli:]

Well it's already embedded in our system. The data analytics platform and the weighing system are already inside our machines. What it does along with some of the other patents that we have pending is makes it very difficult if not impossible for someone to offer the real-time data side directly from what's being put in. So we aren't necessarily charging extra for it as a result of this patent. And but what we are doing is sort of in our opinion making it way more difficult for any competitors to offer the same type of information. So if you would you rather have a digester that doesn't tell you anything or would you rather have a digester that in real-time can plays an important role in your supply chain management. So that's where it's important for us. It's going to make our customer base a lot more sticky. And it's also going to help us to be able to offer solutions to new customers that really no one is going to be able to offer. So it's a great and super important first step. We have other patents that we're hopeful to get and we think the portfolio of patents around it will really --will really separate us from any competitors that might come into the business.

[Walter Nasdeo:]

Yes, obviously, it's a high differentiator and especially as you layer in more technology going forward. I guess you're right. I mean it really does differentiate you from exact --from everybody else out there and what they're doing. So well thank you very much, it clear that up guys, thanks.

[Operator:]

Our next question comes from the line of Stuart Flint with Dylan Capital. Please proceed with your question.

[Unidentified Analyst:]

First of all congratulations to everybody for the progress you guys have made in the last six months. And I hope it continues, expect it will, sure. I have to questions. One is do you have any thoughts on the number of digesters you'd need to have deployed in the rental model for that part of the business to be a breakeven?

[Richard Galterio:]

Yes. We've put obviously a lot of thought and where our models start to become breakeven. We have a lot of fluid pieces going on right now. When you talk about our digester business on a standalone, the margins are improving; the base is improving. And I think as we increase the trajectory of that which Frank's alluded to and some of the things that are going to come on. I wouldn't want to give you an exact number of units that we would have deployed that would make that business start to bring incremental cash flow to the rest of the business. I don't think we're far from that. I think where we are right now is with the management services revenue stream with the digester business, and with this potential thing that we're going on with the HEBioT business. We do think that EBITDA profitability is something that we can attain in 2019. From a cash flow perspective, it's difficult to say right now because the way our model works is obviously we deploy the digester. And there are upfront costs that are regarding that because we put that out there and we lease it back, and our model is really an IRR model or return on investment. So as we deploy we're certainly going to be deploying assets that are going to be requiring us to put out cash. If we finance those assets like we have with Comerica. They should be starting to eat into corporate overhead relatively quickly and probably next year. But as we deploy the cost of the digesters is going to be a little upfront loaded. So that will balance out over time and the more digesters we have out there, the greater the recurring revenue stream will come in and start contributing not only to us being able to add more digesters into the field but also start to take a bite out of corporate overhead.

[Unidentified Analyst:]

Okay. Second question is can you guys speak to the state of the recycling market in the United States and what's going on in China? And how that affects your business in either a positive or negative sense?

[Frank Celli:]

Yes. So this is Frank. That's obviously a major topic in the United States impacting not only the industry but impacting your municipalities all over the country right now. Look, from BioHiTech perspective, I'll give you the positive news is the challenges associated with the Chinese ban and it started with China. It's now kind of rolling over into other countries in Indonesia and whatnot. The ban on importation of plastics, as well as fiber soap paper products has gotten unbelievably stringent. And over the course of the years in the US we have moved to what we call predominantly a single stream model. So that's where everything is kind of thrown in one bucket together and collected at the curb. And then delivered to a plant where there's a bunch of automation and equipment and whatnot that's supposed to separate all these commodities. The challenges associated with all of that infrastructure is that we put so many eggs in the basket of China that their unwillingness to take material that's got labels of what we would in the industry call contamination that are minimal is essentially prohibiting the US recycling companies from being able to access those international markets for commodities. What that all mean is there's too much supply of this single stream recycling. There's not enough demand domestically and because of that the cost to process recyclable materials are skyrocketing. I mean geographically dependent but what we're seeing in the Northeast US are fees for recycling that are approaching to those for municipal solid waste. That's a real problem. It's a real problem for municipalities around the country because they're used to budgeting even no charge for recyclables even rebates in certain cases. And that's just completely dried up. So the good news for BioHiTech is that --I don't-- recycling, it doesn't really have an impact on our digester business because as you know we focus on food and foods really not part of that recycling challenge right now. Our HEBioT business, however, I think while I was excited about it before this, I'm more excited now because to keep it simple if you think about what's the components of recycling they're all fairly high BTU content materials other than the glass right. Yes, you take the metals out which are recycled and what you have is a really high quality fuel product sort of consolidate recycling at the curb back with municipal solid waste. And be able to deliver all of that material in one truck instead of two trucks gives us a major advantage over the other traditional systems in place. So as I said in my presentation, yes, we're talking a municipality is about saying, hey, let's take a truck off the road, put it all in one truck, deliver it to our facility, we will convert 80% to 90% of it to fuel and you have a higher diversion rate at a cost that's equal to or less than what you have right now. So we think it's great news for our HEBioT business, bad news for the United States probably.

[Operator:]

Our next question comes from the line of Brian Greenstein with Ardor capital. Please proceed with your question.

[Brian Greenstein:]

Hi, guys, congratulations also on what you've done so far on the quarter and beyond that. I will follow up to Stu's question. Frank you referenced actually earlier in the call even the plastics. Can you clarify if the HEBioT technology could accept a predominantly plastic waste stream?

[Frank Celli:]

It's the best waste stream we could get other than PVC which you cannot be in the plastic stream. That's delivered as fuel, but we've got automated equipment installed in the plant to remove PVC. Other than PVC, when you look at the plastic components of recycling, they're all --they're oil based products right. So high BTU content almost no residual, so the speed in which we can process plastics into a solid recovered fuel. The more plastic the better for us quite frankly which is why we're pretty excited about the challenges around the single stream market.

[Brian Greenstein:]

So would you envision - just as a quick follow-up, would you envision taking feedstocks from recycling collectors specifically those entities that have purely gathered recycled plastic products?

[Frank Celli:]

So the answer is originally no but now yes. We had originally planned on most residual material. So kind of all the small scraps of plastics and paper that are generated in Murf that are typically paid for by a Murf to get rid of .We had always envisioned stream of that material as a feedstock for the HEBioT plants. It's a better option than landfilling, wasn't too recently that we started to get enquiries from actually some companies that have large volumes of plastic residue that are first and now either landfill them or pay fees similar to a landfill to hopefully recycle them. So it's not a feedstock we originally envisioned, but we didn't see this coming quite frankly nor did --I don't think any industry experts. So it's certainly a viable feedstock for us in the future,

[Richard Galterio:]

Brian I think it's also very much more likely that as it continues to become a higher and higher cost like just for example in Philadelphia five years ago they were getting paid money for their recyclables. Now they're paying I think those number I saw was $38 to get rid of them. I think ultimately it's going to make sense for the municipalities to do what Frank said before and just mix all the stuff together and send it to the HEBioT where that's possible. Certainly, we'll get it from other places but I think our idea is we're going and locate these facilities in areas where that also makes sense to us. So we think a lot of it is going to end up coming directly from mid municipal waste streams.

[Operator:]

Our next question comes from the line of John Marc O'Brien with Ardour Capital. Please proceed with your question.

[John Marc O'Brien:]

Good afternoon, gentlemen. And again congratulations on a great quarter. I had two questions or two lines of questions. One is on the data component of your technology and maybe you could speak a little bit about two facets. One how you guys envisage potentially linking the collection of that data on the blockchain at all with the multiple companies that are now trying to follow the origin of that food waste i.e. food companies and others? So that would be one part of that and two, can you talk a little bit about version two of that IOT which was the industrial the IOT and kind of when that might be rolled out or what the plans are for that? Then I had a separate question on the plant but we could start with that.

[Frank Celli:]

So to answer the first question, I'm certainly not the most proficient in software code. Bill Kratzer, Our CTO would be the guy to really explain in detail. I can give you the high level is we are now providing a feed, a live feed to multiple what I would call with Fortune 500 companies that are receiving the data from our digester and are directly linked into their purchasing system. We're doing that in a variety of different ways. The one that comes to mind John Marc is barcode scan. So, yes, we're doing some barcode scanning where we're hitting the SKUs with a barcode scanner attached to our digester. We're extrapolating that data where you're marrying a pound to PL let's say just for our simple example. And then that is being directly fed into the procurement system. So that those companies can now marry together hey not only weight but weight of a specific product from a specific vendor or purveyor. So that they can more accurately monitor their purchasing needs as well. It really quite frankly, it's a mixed bag of tricks. Yes, so that happens to be at a major produce distributor. But I know in UK, we're doing it with a French fry company in a mall setting where they're now monitoring how many actual --I am sorry not French fries, baked potatoes. How many actual potatoes they're preparing and throwing out at the end of the day. So the beauty of the system that we've got is and I think I should emphasize this to every investor. This is not a can program, this is not a Microsoft program. This isn't something off the shelf right that we sort of you're modified. Yes, this is software that is ours homegrown written by our own developers in Harrisburg, Pennsylvania and that gives us a lot of flexibility to be able to customize their work to the requests of the customers. I think from a CEOs perspective, I think the way we view all of our products is, look, you got to give the customer what they need. And that's where I think the industry has been challenged quite frankly. As we know there are Fortune 500 companies requesting better solutions to ways recycling, to MSW removal and you need to rise to the occasion right. So it was very important to us to be able to customize and meet whatever customer's needs we have because retail restaurant chain is different than a hotel which is different than a hospital which is different than a produce purveyor. So that's the high level. If you wanted really more detail and you wanted to get under the hood, you can --you have a call with our CTO, Bill Kratzer.

[Richard Galterio:]

We just wanted to finish your question on the IOT part of it. The IOT part of it, we believe has applications outside of our own business essentially turning PLC control devices into more smart type of equipment. It works really well for our digesters because our digesters can talk to people and sort of tell them what's going on in a much easier way for them to understand where a PLC device can't do that. We've worked with a couple of companies to provide our IOT services for --I wouldn't necessarily say some waste devices and some things like that. And we are always working with some other companies that could lead to other opportunities outside of our own sphere of waste management. It's not a big focus of ours that we're building a business outside of that. If that comes along and we're working with someone that we could utilize our technology to roll that out. We're happy to provide that. We got a lot on our plate to do what we're doing now, both with the digesters and the HEBioT and putting that all together. So that's really the primary focus.

[John Marc O'Brien:]

And all of that's great because it further embeds you and creates a stickier kind of link to the entire supply chain that you're connected to. So that sounds great. Can you comment a little bit now to move towards the larger facilities? Because we talk a lot about the municipality side, the feedstock provider. I would be curious to hear your comments on sort of how the offtake side is developing, how --what kind of maybe updates you can provide as far as further especially in the given the Trump era, reasons that are underscoring the need for like the cement companies or other off takers to be using this is. Are the winds still behind your back as far as that-- as far as the offtake --?

[Richard Galterio:]

Absolutely. Any business or for that matter utility that uses coal right now. While coal has become a little bit more relaxed under this administration, certainly the ability to use our EPA solid recovered fuel in conjunction with coal would work great. So to the effect that the Trump administration and coal usage doesn't hurt us. And it certainly could help us but the demand for renewable fuels is continuing to grow. Our plan is to put facilities in places where we know we have an end user, and there are plenty of them. And I'll put it to you this way. There's no shortage of targets for us on the offtake side, for us to build plants with. So when the feedstocks right and when the offtake part of its right, we will be there and that's what we're looking to do. They're telling us we've got to wrap this up. So if you have any additional questions please feel free to give us a call. We're happy that you came on --everyone came on the call and we're looking forward to delivering on the great promise of our company's technology.

[Operator:]

Ladies and gentlemen, this does conclude our question-and-answer session. And I would like to turn the call back over to Mr. Celli for closing remarks.

[Frank Celli:]

Okay. So I'll just like to thank everyone for joining the call today. And we look forward to updating you all on our progress in the next quarter.

[Operator:]

This concludes today's teleconference. You may now disconnect your line. Thank you for your participation.