Waste Energy Corp. (WAST) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining today's conference call for Waste Energy's shareholder update. Before we begin, I'd like to read our forward-looking statement and get the legalities out of the way. Please note that today's call may obtain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections of our business and the industry as well as our beliefs and assumptions. Forward-looking statements may include, but are not limited to, statements about our future operations, plans, objectives, goals, strategies, expected financial results and timing of future events. Actual results may differ materially from those expressed or implied in these statements due to the variety of the risks and uncertainties, including those detailed in our filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any of these forward-looking statements, except as required by law. So with that, thanks for joining us today. My name is Scott Gallagher. I'm the Chairman and CEO of Waste Energy Corp. The purpose of today's call really is to provide an update of our operations and what's going on because our business is starting to kind of come together pretty quickly after a long period of work to complete this pivot as we did move the change from kind of a bunch of separate businesses, one of which was this one, but now to focus exclusively on the waste energy business. We made that decision last September, went through the name change, ticker symbol change, changed our financials, discontinued operations, all that good stuff. So we're completely finished now with our audit. Our first quarter numbers are out. We've signed our first contract as a waste energy company, and things are beginning to come together now. So I wanted to take some time. We'll do this on a more regular basis. Before I start, I would definitely like to encourage everyone to reach out and follow us on our social media channels. As things start to develop here, we're going to communicate a lot in real time as these things develop. Next week, I'll be heading to Houston, and we'll have some social media posts, again, real time as that develops. So what I'd like to start now is kind of before we get into the details of the business model, our site development, the financials, I want to start off by just explaining why waste-to-energy exists, why we made this pivot and why we think it's the right time to do something like this. I'll start off real quickly with kind of a state of the union of this business and discussion about -- specifically about plastic and tire waste. As most of you probably know, just in kind of high-level general terms in the U.S., waste is a complete mess. We have more landfills than any other country on earth. We generate more plastic waste than anyone else, and it's kind of a mess. And each year, we generate about 40 million tons of plastic waste, and we discard about 300 million used tires. The vast majority of that waste ends up in the landfill. Results -- or expectations had been that we were doing better with that and estimates were about 9% of recycling of plastic waste. They recently dropped back to about 5% to 6%. So there's about 35 million tons of plastic waste being dumped in our landfills every single year. And that's just from the U.S. There's about 10 million tons of plastic waste that's ending up in our oceans. Now all these things obviously have horrific effects to the environment and a bunch of other things like the food and the microplastics being found in our bloodstream. In the U.S., we ship hundreds of thousands of tons of plastic, which was news to me over these last 6 months when I heard this, I didn't think this was still going on. I heard about it in the past. But we ship hundreds of thousands of tons of plastic to places like Malaysia, Vietnam, India, Mexico. For example, in California alone, last year, they sent 56,000 tons of plastic to Mexico. That's just last year. In Southern California, I think there's a couple of shareholders on the call that are from Southern California, they're seeing the results of that, the sewage that's coming out from the Tijuana area, plastic waste washing up on the beaches or closing beaches, it's just a mess. And unfortunately, the way that this industry is right now, it's not set to change much. If anything, it's going to get worse. We're aware of about 11 to 12 companies in America that are in the same industry that we are, whereby -- what I mean by that is they're converting plastic waste into something. But most of them, and I would venture to say around 90% of them are essentially converting that plastic waste into a new feedstock to make more plastic. And that's dramatically different than what we're doing. And there's a whole bunch of challenges associated with that business model that we don't have to worry about. One is that in order to do that, you need a very pure waste stream. The way we run the business is every piece of plastic we touch is eliminated, and we can process any type of plastic. So we don't have to focus on that very narrow feed stream. And so with all this in the market, estimates are by 2030, we'll produce more plastic waste substantially than we do today. Same thing with tires, there'll be substantially more plastic waste in 5 years than there is now. So all the stuff that's happened over the last 20 years, environmental media, we've had some bad experience with already. Nobody is really solving these problems or really discussing solving their problems. Somebody tries, they get shut down, everybody pokes holes in the environmental side. Meanwhile, the environment is dying before our eyes. What's happening in the ocean is just -- is horrific. And despite decades of these, the vast majority of this waste is still ending up in landfills. I visited several landfills and transfer stations over the last 6 months or so. And every one of them said the exact same thing that basically everybody who's sitting home, rinsing out their plastic, putting it out to the curb, hoping it's going to be recycled, roughly 90% of that is ending up in the landfill or being shipped to some third world country where it's ending up in the oceans, lakes, rivers, beaches, stuff like that. So despite all this work, the damage now is not theoretical anymore. Plastic -- microplastics are showing up in our food, obviously, in the fish by the amount of plastic that is dumped in the ocean. This is showing up in human bloodstreams. We've got some firsthand knowledge of that. There's obviously many reports about microplastics being picked up in bloodstreams. So this is obviously a global -- it's a global crisis, but for the size of the amount of plastic that's generated in the U.S. and the U.S. in particular, it's something that, for some reason, these technologies because of the environmental component or lack of understanding of the environmental component, they're not utilized here, and that's why we have the most landfills on earth. So the reality is if we don't take bold steps now with some kind of scalable action, we're going to leave an irreversible mess for our kids to deal with. We're going to hand the next generation a legacy of toxic landfills, poisoned ecosystem, wasted resources. And all this stuff has really come back to why Waste Energy was created. Some of the older shareholders on the call will know that the original model for this business was to use waste to power a Bitcoin mining project. And then in 2022, when the crypto market dropped from $3.2 trillion down to about $800 billion, the economics didn't work and it was shelved. I joined the company in 2022 and began looking into this business and was, number one, stunned by the fact that there was -- there are very few companies doing this in the U.S. And second, it's just the size and scale of what this real problem was. Everybody knows there's a plastic problem, but I didn't -- I wasn't aware it was as bad as it really is. So what we're here to do is not recycle or manage plastic or waste, our goal is to eliminate it. Every piece of plastic that we touch is eliminated. We divert it from the landfill. We convert it into usable energy source such as diesel fuel, carbon black, syngas or carbon credits generated along the way. And then that plastic has gone. It's not used for feedstock to make more plastic. So our mission is pretty simple. Once we stand up our first location, the business model is relatively simple. We're not talking somebody into buying a picture of a monkey and telling them it's going to be worth $1 million in 2 years, we're selling gas. So if we can't sell gas effectively, we need to start a new business. And I think the reception for our business so far has been off the charts for the people that we've talked to. We're in active negotiations right now for an offtake agreement. We are looking to partner with someone to purchase our first $10 million worth of fuel that we create from these locations. And so the business will have 2 real sides to it that matter. One is the feedstock side. And on the feedstock side, everything that we process will be at free or better, meaning that the customer gave it to us or they paid us to take it. And on the offtake side, initially, anyway, we're looking for somebody to agree to buy a year's worth of our fuel from us at a discounted price to the market. And based on the type of business that we're in, we have different set of economics relative to our cost than other suppliers of diesel fuel have. So with that, we've designed a business model that obviously is both financially compelling and environmentally necessary. Again, pretty straightforward. ARC system converts plastic and tires into 3 commercially viable products and then syngas. So the products are low-sulfur diesel fuel, carbon black, carbon credits. And then we use the other gas called syngas, which is more of a junk gas that is burned off. We use that to power our burners so that the machine kind of heats itself, which is very important, both from a cost perspective and also from an economic -- or from an environmental standpoint. So our initial project will be a 15-ton per day system with the ability to increase that capacity to 30 tons. We'll operate 5 days a week. So that's 75 tons of diverted plastic per week, which equates to just under 4,000 tons per year with 1 machine. You can double that when we add the second machine. So the way that it works is our first system is a processor of the plastic tires, and then we have a refinery. And one refinery can handle 2 of the front-end reactors. So we can add another 15 tons to that first site. So that first site will start up with 15 tons. And by the end of the year, we're hoping to get the second 15 tons added to it. And again, this is not a build-and-wait type of business model. This is a revenue-on-day-1 strategy. So once this type system is spun up, permitting is completed, installation is completed, we begin generating revenue. We've decided on Texas as our final location after evaluating North Carolina, Ohio and Florida, had some issues in North Carolina and Fayetteville, in particular, that we just decided to take a pass on. We like North Carolina. The state has very good laws and a very good model relative to getting a business up and running. But we just decided that as a first -- as a smaller, newer company, we don't -- we need to get this up and running. We need to get this built. We need to get this model approved, and Texas is a place to do it. They have a long history in energy. They're really the capital in the country of energy-type businesses like the one that we're getting into. So ultimately, we believe that we can build out a national or potentially even a global footprint. Our model is, again, relatively simple, and it's replicatable. So we're building these sites to be close to the source. So that's kind of the -- the more efficiently we can run each location, the more profitable they'll be. And this first one will essentially be kind of a rinse and repeat. We'll have -- the permitting process is very similar in states. Obviously, in Texas, as a state that really understands the energy business, they have a very clear and business-friendly regulatory and permitting pathway for us. They're a long-time leader in energy production. So they really understand the business, they understand the technology. So there's a much shorter learning curve there from -- as compared to some of the other states. We will be next week moving our offices. So we'll be opening a corporate office in Houston. And then we are talking to several different sites, and we hope to secure the first location here within the next 1 to 2 weeks. So again, as I mentioned on the -- follow our social medias because once we get this, we want to make sure that shareholders are -- we consider them partners, and we want you to know that we've got our first location, and we're starting the process of opening up. So the process will -- being in the Houston DMA gives us proximity to fuel buyers, lots of feedstock done there, carbon credit trading markets. It's just an ideal launch pad for our first site. The permitting process also is very streamlined. So again, as compared to other states, they have what's called a permit by rule process that we're applying for, which will allow us to get the permitting air quality certificates up and running much faster than we would in other states. So as of today, our machine is completely built. We're grabbing the parts from all over the place where we've had them built. And we anticipate everything arriving into Texas next month and then being up and running in August. Worst case, it could bleed into September a little bit. There's a lot of work. These are a very big machine and a lot going on here, but we anticipate commercial operations. Our target right now is August, could be Q4, but then we generate first revenues immediately. So within the first couple of days, we start generating revenue of $15 million -- or 15,000 tons per day. So let's see, next is what I'd like to do is kind of discuss the part of the model is just so people kind of understand what we're building here. There's 2 types of sites that we'll build. The hubs will be like our first one where it's a fully integrated site with a system that converts the waste into fuel, has fuel refining and offtake capabilities. And then there'll be like the spoke sites, which are strategic locations across initially in Texas and then in other states to secure the high volumes of feedstock that we need and that also have more favorable regulatory conditions. We're currently looking at expanding later into those other states of Florida, North Carolina and Ohio. We're in different levels of negotiations in each one of them. Obviously, in the first one, when we get the second site up, the economics increased dramatically. So we're looking forward to get that second 15-ton capacity up and running as quickly as we can. We've started to kind of expand our team. As you saw, we announced an addition to our advisory board yesterday, we're honored to have a gentleman by the name of Leonard Enriquez join the company as an adviser. And Leonard has an entire career of very in-depth waste energy experience that we are super excited and honored to have him join us. I would encourage everybody to look at the press release and go through his bio. He ran a company -- I was Vice President of a North American company that he grew from $200 million in revenue to over $1 billion and ultimately a $2 billion expansion for one of the largest waste energy companies in the world. So he just -- he really understands this stuff. It's fun to talk to him because there's very few people that understand the side of the business the way that he does. He's an MIT graduate, speaks 4 languages. He's -- we're just very lucky to have someone like him on board. We're building out the rest of the team on the -- once we finish the site. We have the leadership in place right now to run the Texas site. And again, the goal with the Texas site is to build it out and kind of codify the system so that the second and third and fourth sites, it's the same, whether we build it in Houston or San Antonio or Dallas or North Carolina or Ohio, the waste is the same. The system will be the same. So we're looking to kind of codify the system and create a repeatable, scalable model that can grow this company over the next 24 to 36 months with multiple sites. So within the state of Texas alone, our goal is in the next 24 to 36 months to be running at least 90 tons per day, which would be 3 flushing systems. But our long-term value -- long-term vision for the company is really to kind of establish this system and this technology as a new energy kind of a new space within the market. That's not just solving the waste crisis, but it's generating a new U.S.-based source of clean energy. And there's a number of environmental components on the carbon credit side that we're trying to solve as well with an automated carbon credit patent application, which I'll talk to at a later date. But so that's just to summarize, that's -- again, I just wanted to make sure everybody has got a sense of what we're doing, how the business is working. We've gotten to the point where we spent really since 2021, trying to get this first machine up. We finished building all the components. We've got them all now, and we're shipping them from around the country really to get them all into Texas by next month. So the next 60 to 90 days should be very exciting. We'll be as transparent as we can again through social media, through press releases, keeping everyone informed. Definitely, feel free to reach out to me via e-mail or phone call. We did just change our domain name, try to simplify the branding of the company. So we're wec.eco now. And so we'll change up all the e-mail addresses and some of the forms on the sites and that kind of thing to make sure that we're easy and accessible to answer questions and respond to you as best we can. Again, I know thank you pretty much for -- I'd like to thank all the shareholders for hanging in there during the 10-K and the 10-Q. Those were a bigger lift for us as a small company and going through the completion of the pivot, but we've got everything behind us now, and we're ready to go. So our first commercial machine is built and ready. We're finalizing a Texas launch site here in the next couple of weeks, which will be announced. And we will be having, like I said, regular calls to keep everybody up to speed on things. So again, thank you very much for taking some time today. Like I said, I just wanted to get everybody up to speed on things. Feel free to reach out to me, go to our social media channels. And again, thank you very much for taking the time. I appreciate your support, and I look forward to talking again.