FormerXBC Inc XEBEQ

RE:Conference Call

[GGreen]

Great (balanced) summary... I would recap it as 2 steps back and 1 steadier step forward. I largely agree with your points and would add after listening to the call twice:

-ve takeaways (let's get these out of the way):
- didn't want to comment on COO's departure - his comments spoke volumes! Now that we know more about the mess in H2 '20, hard to agrue against the hard position that the Board (or maybe CEO) took; points for acting quickly even though it hurt the stock price.
- awful Q across the board on all counts and although COVID came us a few times I think they have owned up to the execution missteps (project mgmt and cost estimates, revenue recognition, credit risks => poor controls due people being asleep at the wheel. CFO gets a pass because he just joined otherwise he would probably exited stage left with the COO. While on the subject of the CFO - he didn't. Not sure if ESL was the issue but the he did not answer several questions eg. further revenue scope of projects in Q1 & Q2 that would have 0%GM. Answers re: project (and internal) controls and processes going forward were weak (actually disappointing)
- Q1 & Q2 revenues will continue to be dragged down by 0% GM projects (they didn't asnwer Q re: scope of these projects so we could gauge impact) - so don't be surprised by weaker GM%s in H1
- additional revenue / GM risks in H1 '21, if they were bad at estimating project costs and had weak proposals how many of those "weak" contracts are in the sales pipeline or still in the quotes log? CEO said "Some items in quote log may be abandonned" - so why are they included in the quote log?
- crazy high G&A costs in Q4 which they tried to explain in a waterfall chart but my operational concern is around the integration risk around the numerous acquisitions (and plan for 5 more in FY21)

+ve takeaways (which although may not appear to be as numerous, from a quality perspective they outweigh the -ve points IMO):
+ see original post (BGX standardized, modular product should address many of the problems the saw in FY20) - listen at 63 mins mark for more info
+ HyGear & Inmatec acquistions are going to be equal to or most likely outweigh the value from the BGX product); decentralized, on-site, effecient, green production of Hydrogen, Nitrogen & Oxygen. This should tie well into industry sector tailwinds
+ GNRQC - XBC Infrastructure efforts folded into this JV; tailwinds from PSPGNR Qc program; 20 projects being reviewed with expectation to have 2 approved for funding (someone was asking about any reference to BOO, my understanding from CEO's comments that BOO is now part of efforts in GNRQc JV. I woundln't hold too much hope for this with 12-18 months
+ bonus points???: who knows perhaps GREEN Hydrogen will allow for premium pricing compared to Gray or Blue Hydrogen generation
+ GAAS higher margin business sounds good, now prove it with installed systems
+ reasonable revenue forecast for FY21 (forecast now only includes revenue from business where acquisition has closed.... it's about time!)
+ Great cash position ($169M) now let's see them use it wisely and accretive acquisutions or getting a Tier 1 COO - take that into account when you're looking at the mkt cap and then ask yourself if perhaps the stock is oversold?

Everyone's got a different starting position from a cost basis perspective and emotions that will drive out of that. I know that if I had bought at (or held through) $11 and then held through the recent fall I would be very grumpy right now BUT if you assume starting from here and look forward: I would say that mgmt has done a reasonable job of explaining what happened and how they're going to fix it going forward (I still want to read through the MD&A), I think they have the makings of a strong RNG + hydrogen (O+N) generation tech & service company once we get through perhaps a rocky Q1 & Q2.