Shawn Severson: And then my last question is just, has there been any bias towards the types of customers that are responding to this? I know obviously, the push towards a large global customers and national customers with the internal sales force specifically. Are you seeing any differences in appetite between the types of customers that are engaging on this? And then I’ll step back in queue.
Darren Jamison: Shawn, it’s an interesting question. I don’t think we have enough data to make a statement. I mean most of the folks we’re talking to right now are people that had projects that didn’t go forward because of paybacks being too long. So we’re reaching back out to those folks. So those are people who’ve touched in the last couple of years, rerunning the economics. In general, the IRA bill drops the simple payback by two years. So it was a six year payback. It’s not a four year payback or seven years now five. So we’ve got to reach out to those customers. We run the economics and see if we can get them interested in moving forward in the project. And if they’re not interested in the capital purchase or they instead in looking at an EaaS solution.
I think what’s also interesting, I just returned from Europe and pretty stunned by the IRA bill. I think it puts the U.S. ahead of Europe as far as developing green energy and energy transformation. I think that’s a place that they’re not used to being. So I do think you’re going to see more come out of Europe as they try to catch up to the U.S. and hopefully try to get ahead of the U.S. And so I think there’s more opportunities there. And as I also mentioned, because of the war in Ukraine, we’re seeing oil and gas activity pick back up in Europe as they realize they can’t get all their natural gas from Russia and that the cost of other natural gas and supply is very challenging to find other locations. So interesting times in Europe and interesting times in the U.S., I think, between the IRA build and the impacts of the Ukraine War.
Operator: Thank you. Your next question is coming from Sameer Joshi from H.C. Wainwright. Your line is live.
Sameer Joshi: Hi, Darren, Scott. Thanks for taking my questions. So just following up on the EaaS discussion, you are on track to get to your target of 50 megawatts. Does the IRA and the increased incentives for upfront benefit change your strategy long term and like are you increasing your targeted EaaS deployment next year in the fiscal 2024 year?
Darren Jamison: So it’s a great question. I think right now, we’re really focused on getting to 50 megawatts. If you look at the numbers in the queue, if we were just kind of neutral on margins for our products, be kind of EBITDA neutral for the year. So the negative gross margin on our products because the supply chain issues has dragged down our ability to be EBITDA positive or adjusted EBITDA positive. If we get back to just zero gross margin or just slightly positive and we get the 50 megawatts deployed, we’re solidly EBITDA positive. So that’s really the short-term growth and the short-term goal we need to really see cost of capital going forward. And so how we work on refinancing Goldman and what that looks like, I think will drive what we do going forward beyond 50 megawatts.
So I think when we talk again after the fourth quarter. I hope to have a solid plan in place to say we’re already at 50 megawatts deployed. We’re back into a positive EBITDA territory like we were in Q1 of this year and then hopefully have a rollout strategy on where we go next beyond the 50. But today, we’re fairly focused on executing on that 50. And it’s not insignificant. When we think about it as a business we started three years ago and really had trouble getting lift off because of COVID, but this is accelerating very quickly. And so deploying 50 megawatts, which is closer to 75 or 80 machines around the U.S. and now moving internationally, that’s a lot of activity to undertake for us in a short period of time.
Sameer Joshi: Understood. Thanks for that. Moving to the EV initiative, are you — well, the first question is what is the status of the development of the product? And is this development being done with certain customers in mind and target audiences in mind or as independent developing and then will present it to any potential customers?
Darren Jamison: No. We’re working as one of the largest commercial REITs in the U.S. as kind of our partner right now. They’re providing the chargers. We’re providing the microturbines. We’ve also generated, as you saw a picture in the presentation, a portable version of that. So it was a 180-kilowatt charger with the C200 microturbine. We’ve got a little bit of a battery on board for black starting and some solar PV. But the goal is to be able to deploy these around the country as people bring in electric fleets. We’re finding a lot of folks getting buses and trucks, and then they turn to their utility and they can’t get the additional utility feed power that they need. And so they all of a sudden find themselves with a fleet brand new, but they can’t charge it.
And so we’ve got opportunities here in California. We’re doing stuff Jersey, we’ve got some stuff going on in Chicago right now. So they’re a big company. We’re kind of riding their coattails a little bit. They’ve obviously got a pretty big denture customer base as large as they are. And so I think it’s a good natural fit for us. But it’s early days. So we’ll see how this expands. Obviously, portable is great. We’d rather do more permanent infrastructure. And I think demand for EV charging increases and we electrify more buildings, the number of utilities that are unable to keep up with that demand is only going to grow. And so I think that’s a great opportunity for us. But we’ll look at the landscape as it adjusts and grows and figure out if you want to partner somebody or continue to just work with a few key clients.
Sameer Joshi: Understood. Should we expect initial revenues during calendar year 2023 or 2024 from this?
Darren Jamison: Yes. No, absolutely. We’ve got 7 or 8 megawatts out on rent right now on trailers. We’ve got some permit installations that we’ve quoted that we’re — we think we’ll move forward here this quarter. We’ve done a couple of installations in Europe for permanent EV charging solutions. So yes, this is something that’s driving revenue, both new product sales and through our EaaS business. And I think the really exciting part is how this could grow over the next several years if electric vehicle infrastructure is not put in place and EVs continue to grow at the pace that they’re projected to grow, and this is going to be a huge opportunity for us.
Sameer Joshi: Understood. Just a few on the parts revenues, which were slightly impacted by the Russian sanctions. Was that impact in like sub-million dollar range? Or was it like a couple of million dollars? How should we think of the scale of this impact?
Darren Jamison: Yes. No, Russia once upon on time, it was one of our biggest markets. We’ve got 2,500 microturbines over there. So the ability to not sell new product over there or struggle to get spare parts and make sure that we stay in line with all the U.S. sanctions is definitely impacting us a few million dollars a quarter, if not more. I’d say some of the supply chain issues definitely impacted a couple of megawatts shipments last quarter. So there’s probably another couple of macule of million dollars there as well. So those two things are definitely challenging for us. On the supply chain side, we continue to meet with our various vendors. Unfortunately, when some vendors can’t meet deliveries and others can, we kind of the imbalance in our inventories that we’re seeing today, where we’ve got too much of one part, not enough of the other and inability to hit our target production levels.
So that will be a major focus for us. It has been in the last quarter. We continue to be a major focus for the next couple of quarters until we get our supply chain more balanced and our inventory turns back to 3.5 where we want to see them and not compared to where we are today. Very happy, though, on the receivables side. We’ve really focused on receivables coming out of COVID. As you recall, we were 65 days going into COVID kind of DSO, we hit 156 days as high during COVID. We’re back down to 66 days today. So that’s been a lot of work by the finance team and myself to clean up the receivables and work with the distributors and these customers to make that happen. So good success story there. Now we need to focus on the supply chain side and the balance sheet side, and then continue to keep growing that energy and service business.
