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ClearSign Technologies (CLIR): The CTO and VP of Burners - Inside the Engineering Platform Built to Scale · WTR Small-Cap Spotlight

• 0:01
  SPEAKER_01: Welcome to the WTR Small Cap Spotlight Podcast.
• 0:04
  SPEAKER_01: I'm your host, Tim Gerdeman, Vice Chair and Co-founder and Chief Marketing Officer of Water Tower Research.
• 0:11
  SPEAKER_01: In today's podcast episode, I'm being joined by Matt Martin, Chief Technology Officer, and Jeff Lulalan, VP of Burners at ClearSign Technologies, NASDAQ Ticker Symbol, C L I R.
• 0:25
  SPEAKER_01: ClearSign is a Tulsa-based industrial technology company whose proprietary ClearSign Core technology prevents NOX pollution at the sources.
• 0:36
  SPEAKER_01: This helps refiners, petrochemical producers, and gas processors meet tight emissions rules without costly backup cleanup systems.
• 0:45
  SPEAKER_01: WTR's recent fireside chat with CEO Jim Deller covered ClearSign's business catalyst and the path to break-even.
• 0:53
  SPEAKER_01: Today we'll go another layer deep, exploring how the team builds products and wins customers and why its toolkit keeps opening new markets.
• 1:02
  SPEAKER_01: Also joining is my WTR equity research colleague, Peter Gastrite.
• 1:06
  SPEAKER_01: Matt, Jeff, and Peter, good morning and thanks for joining me.
• 1:09
  SPEAKER_00: Good morning, Tim.
• 1:11
  SPEAKER_01: Good morning.
• 1:13
  SPEAKER_01: Matt, let's kick things off with you.
• 1:15
  SPEAKER_01: I'm going to uh ask can you tell our listeners about your background in combustion and computer modeling and what brought you to ClearSign?
• 1:23
  SPEAKER_03: Thanks, Tim.
• 1:24
  SPEAKER_03: My route to combining combustion with computer modeling is likely unique in time and place.
• 1:29
  SPEAKER_03: I started out in the industry about 27 years ago with data collection and programming for predictive NOx models.
• 1:35
  SPEAKER_03: During this same time, I was also programming an early AI-based system to advise combustion health and refineries and petrochemical plants.
• 1:42
  SPEAKER_03: This was a combination of an expert system, first principles, and what would later become known as machine learning.
• 1:48
  SPEAKER_03: We had an opening to run the CFD simulations, and my manager asked if I wanted to try it out, and the rest is history.
• 1:54
  SPEAKER_03: But the stage was set, the combination of multiple modes of simulation, empiricism, and first principles to advance the art.
• 2:01
  SPEAKER_03: Oddly enough, my interest was never really in the technology in itself, but rather in using it to advance the business goals.
• 2:08
  SPEAKER_03: I came to ClearSign because I saw the opportunity to be on the cutting edge of something that was both new and realizable.
• 2:14
  SPEAKER_03: The interest is not, can we make a cool gadget?
• 2:17
  SPEAKER_03: It's can we make a viable technology that meets a need.
• 2:20
  SPEAKER_03: For ClearSign technology, it's of course a bonus that we get to achieve cleaner and healthier air.
• 2:25
  SPEAKER_03: The fact that Jim, Jeff, and I introduced profitable and successful technology together in our prior work life, that of course helped my decision to come on board.
• 2:34
  SPEAKER_01: Great.
• 2:34
  SPEAKER_01: Thank you for that overview, Matt.
• 2:36
  SPEAKER_01: And uh moving on to you for a moment, Jeff.
• 2:37
  SPEAKER_01: You spent a long career in the process burner industry before joining ClearSign.
• 2:42
  SPEAKER_01: What is your broader background and what convinced you to make the move to ClearSign?
• 2:46
  SPEAKER_00: Thanks for the question, Tim.
• 2:49
  SPEAKER_00: My background, I've been in the industry for 34 years, straight out of college.
• 2:53
  SPEAKER_00: Um, touched on all aspects of the business from project management, field service, sales, and product testing.
• 3:00
  SPEAKER_00: Um, what really convinced me to join ClearSign was I observed a what appeared to be a disruptive technology uh trying to emerge in the industry.
• 3:09
  SPEAKER_00: And um, Jim Deller had left uh our prior employer about three months earlier.
• 3:14
  SPEAKER_00: I met him for lunch one day and looked him in the eye and said, tell me this thing works.
• 3:18
  SPEAKER_00: And Jim said it worked, and he outlined a vision to make it a successful product, and I was sold at that point.
• 3:25
  SPEAKER_01: Excellent.
• 3:26
  SPEAKER_01: Well, thank you for that overview as well.
• 3:27
  SPEAKER_01: And uh, Peter, over to you.
• 3:29
  SPEAKER_02: Hey, thanks, Tim.
• 3:30
  SPEAKER_02: So hi, Matt and Jeff.
• 3:31
  SPEAKER_02: Um, you know, for investors, I think it makes sense for us to start with the uh engineering uh behind ClearSign's technology, and then we can work our way out to the uh the markets that it's uh it's opening up.
• 3:42
  SPEAKER_02: Uh so Jeff, uh, you know, your CEO, uh Jim Deller, has explained uh on our platform uh how ClearSign prevents NOx rather than uh cleaning up afterwards.
• 3:51
  SPEAKER_02: Uh from your perspective on the engineering side, uh, what is happening inside the flame uh and why has that been so hard for the industry to achieve what uh ClearSign has achieved?
• 4:02
  SPEAKER_00: Sure.
• 4:03
  SPEAKER_00: Yeah, the I think the basis of uh combustion, you're trying to lower emissions, and the trick is flame temperature.
• 4:10
  SPEAKER_00: So if you can imagine uh a flame volume has uh it's not uniform in temperature across its uh across that envelope.
• 4:18
  SPEAKER_00: And so the trick to lowering NOx is using uh clear science proprietor technology, uh we found a way to minimize the peak flame temperatures, which drives the NOx down.
• 4:28
  SPEAKER_00: So we're we're attacking not only what's referred to as thermal NOx, but we're also attacking the NOx where it's formed in the flames uh roots by cooling off those temperatures.
• 4:39
  SPEAKER_02: And then you know, following up on that, Jeff, the emissions compliance uh is the entry point here, uh, but clear sign delivering improved customer profitability is really the the key, it looks like.
• 4:52
  SPEAKER_02: So, you know, how can burner design influence a heater's throughput, yield, and uptime?
• 4:56
  SPEAKER_02: And I'd love to get your perspective on you know how these factors can change the conversation with your customers.
• 5:03
  SPEAKER_00: Sure.
• 5:04
  SPEAKER_00: Um from a uh the hard mechanical part, um, our equipment uh we tend to engineer to order.
• 5:11
  SPEAKER_00: So it goes what was referred to in the industry as hole for hole.
• 5:14
  SPEAKER_00: And really all that means is that they can shut the heater down, pull the existing equipment, ours bolts back in place, minimal uh modifications in downtime, so they can do a burner change out inside of a week, whereas if they shut down to retrofit with an SCR, that you know could be a much more extended period of time.
• 5:32
  SPEAKER_00: So um that reduced downtime leads to a lot, you know, uh less lost profit, if you will.
• 5:38
  SPEAKER_00: I'd I'd like Matt actually to touch on the finer points of the uh how the you know efficiency improvements and um throughput can be increased uh through his background with CFD.
• 5:48
  SPEAKER_03: Yeah, sure, absolutely, Jeff.
• 5:50
  SPEAKER_03: The you know, we can use CFD or computational fluid dynamics to model our equipment specifically and the customers' uh heaters and furnaces, which lets us tailor our equipment to work with theirs.
• 6:04
  SPEAKER_03: But uh, you know, zooming out a little bit, there are certain processes in general, such as olefin's production, um, hydrogen production, and even the crude furnace in uh refinery, that what matters is not just that you're delivering the heat through our burners, but how you deliver the heat can have a direct impact on the customer's yield and their uptime.
• 6:26
  SPEAKER_03: So by tailoring the burners to work with the customer system or their process, we can actually deliver demonstrable increases and uh in yield and uptime and reduce coking, for example, or or do uh increase product production.
• 6:42
  SPEAKER_02: And uh thanks for that, Matt.
• 6:43
  SPEAKER_02: And on CFD, could you elaborate a little bit more on exactly what the CFD is and how has that evolved over your career?
• 6:51
  SPEAKER_02: Uh and how is uh you know ClearSign using that, uh, you know, using the CFD different from uh others in the industry?
• 6:58
  SPEAKER_03: Sure, Peter.
• 6:58
  SPEAKER_03: Uh computational fluid dynamics or CFD that we've been referring to, it's a method to solve with rigor uh chemistry and physics on computers.
• 7:07
  SPEAKER_03: So over my 27 years of experience in doing this, it's evolved from essentially a cool toy into a must-have for many fields.
• 7:14
  SPEAKER_03: And this ranges from things like F1 cars to airplane design.
• 7:18
  SPEAKER_03: And of course, we're using it for combustion.
• 7:20
  SPEAKER_03: Uh Clearson uses CFD in a different way from most of the others in our industry uh from how they've approached it.
• 7:27
  SPEAKER_03: Uh, we actually demanded and have achieved through careful selection of tools and a honing of the sub-models results that are predictive with an engineering accuracy rather than just indicative.
• 7:37
  SPEAKER_03: Uh, because of this, we can now predict KPIs such as NOx performance, heater efficiency, and flare destruction efficiency that tie directly to our customer values to the extent that in many cases we don't need physical testing.
• 7:50
  SPEAKER_03: Strategically, using CFD for us, it ties into our asset light method of operation.
• 7:56
  SPEAKER_03: It allows for further optimization of the product, and in the near future, it'll help enable AI forward design for our products.
• 8:04
  SPEAKER_02: And then uh, you know, continuing uh with the you know physical testing, how should we think about the you know computer modeling and physical testing working together at ClearSign, for example?
• 8:15
  SPEAKER_02: You know, when does a design need full-scale testing?
• 8:18
  SPEAKER_02: Uh, and when can it go straight from the computer, you know, out to the field?
• 8:23
  SPEAKER_00: Sure.
• 8:23
  SPEAKER_00: I'd I'd like to compliment Matt first um uh getting ClearSign established with our own CFD processes and our team.
• 8:31
  SPEAKER_00: Uh it's been a huge uh bonus for us to to uh cracking doors open.
• 8:37
  SPEAKER_00: Um I'd also like to point out when when Matt was talking about the uh you know CFD, one of the it one of the nice things about CFD, um if you go back in time, if I had a mole of fuel and a mole of air, it burned in the model.
• 8:51
  SPEAKER_00: Uh so it was very difficult to determine flame front, which is really important to us.
• 8:55
  SPEAKER_00: Um with the modeling Matt does, um not only can he determine the proper uh stabilization point of the flame, but he also gives insights to us um on startup because they actually start the burner up in CFD the same way uh we would try to do so in the field.
• 9:13
  SPEAKER_00: And it's really been uh critical because you in prior prior years, prior decades, CFD could not determine the flame front, nor could it determine um stability, and the insights Matt gains from CFD actually leads us to be able to uh uh rapid prototype products to field.
• 9:33
  SPEAKER_00: So we've got equipment like our M series burner, um, went straight from CFD to the field, started up.
• 9:39
  SPEAKER_00: Customers are very complimentary on how easily it is to start.
• 9:43
  SPEAKER_00: Um we have a flare technology that's gone straight from CFD to field and past emissions testing.
• 9:49
  SPEAKER_00: So those are huge steps because it saves us a lot of money and testing time.
• 9:54
  SPEAKER_00: Where physical testing comes into play is on the process burner side of our business.
• 10:00
  SPEAKER_00: Uh our clients are um you know oil majors, um, they're very conservative and they like to lay hands on things and see it, uh, even though the CFD does give you a wealth of information.
• 10:10
  SPEAKER_00: Um there's an industry standard called American Petroleum Institute API that also uh writes guidelines for our industry that dictates burner testing.
• 10:20
  SPEAKER_00: Um I've always viewed it.
• 10:21
  SPEAKER_00: Um burner testing is cheap insurance.
• 10:24
  SPEAKER_00: You can go out, look at it, uh, lay your hands on it, and test it before it gets out in your in your uh in your your field application.
• 10:32
  SPEAKER_00: Uh Jim always likens it, uh Jim Deller, our CEO, always likens it to test driving a car.
• 10:37
  SPEAKER_00: Um Marrying the two technologies together, the test and the CFD, uh testing gives you, you know, you can use your five senses to look at the burner.
• 10:46
  SPEAKER_00: Um CFD takes that single burner test and looks at the the burner in process heaters whereas multiple burners you can look at as a system and and predict uh future you know potential problems in the field.
• 10:59
  SPEAKER_00: So that really uh helps us out selling the product.
• 11:03
  SPEAKER_02: And I've learned that your refiners and and and chemical producers, which are your customers, that they're famously uh conservative buyers.
• 11:11
  SPEAKER_02: Um, how do engineering studies and the customer testing kind of help a newer company build that very important trust and get into a customer's uh approved vendor list?
• 11:20
  SPEAKER_00: Sure.
• 11:21
  SPEAKER_00: Yeah, you could imagine uh you know emerging technologies or new technologies that get introduced to the field, um, they don't have there's no experience list.
• 11:29
  SPEAKER_00: And so it's hard to point to an installation and say, hey, look, we're successfully doing it over here.
• 11:34
  SPEAKER_00: So um CFDN testing can be used in combination to basically uh stage gate the process, uh, minimize their their initial cost input to evaluate the technology.
• 11:45
  SPEAKER_00: And it's kind of, I don't want to use the word sneaky, but it is kind of sneaky because it allows us to get uh a product in front of them, uh get them comfortable with it, and then once they've reached that position, um, they can go to their management and get us basically approved on their manufacturing list uh to get a product in place.
• 12:04
  SPEAKER_00: So it's it really helps uh us give them a low-cost way to value with the technology.
• 12:10
  SPEAKER_00: And then obviously both sides can back out if we see a problem that one of us doesn't want to tackle.
• 12:16
  SPEAKER_00: But um that obviously leads to field installations.
• 12:19
  SPEAKER_00: And yeah, if you want to go from early adopters to mass acceptance, uh field installations are where it's at because you get your users list built up, they get more comfortable because now they see it's been in service for a period of time, and then uh they they see the range of application.
• 12:34
  SPEAKER_00: So it um but CFD testing for sure can get your get your foot in the door in a much more scientific method, which helps them sell it up to their management team.
• 12:45
  SPEAKER_02: Okay, thanks.
• 12:46
  SPEAKER_02: That's that's really interesting.
• 12:47
  SPEAKER_02: I I want to turn over to the uh uh to Matt to talk about uh the platform kind of step back.
• 12:52
  SPEAKER_02: Um, you know, investors often think of ClearSign as a single burner story, but that which is definitely you know is not.
• 12:59
  SPEAKER_02: Um Matt, could you help sort of illustrate for investors how the ClearSign Core Toolkit carries over across process burners, flares, and midstream products, and how does that speed up uh new product development?
• 13:11
  SPEAKER_03: Absolutely, Peter.
• 13:12
  SPEAKER_03: You know, the analogy of a toolkit is actually a great one.
• 13:15
  SPEAKER_03: We're now at a point as a company with our patent portfolio and technology development where we can carry key features from one technology to the next.
• 13:23
  SPEAKER_03: So actually, certain components are reusable between designs, between the process burner, the flare, and so forth.
• 13:29
  SPEAKER_03: The core components or the platform uh developed in the process burner have been able to be carried over into these other applications with some great results.
• 13:38
  SPEAKER_03: Similarly, our M1 and M25 burners build on this idea by reusing the component technologies and kind of the process side design of the burners in different market verticals.
• 13:48
  SPEAKER_03: So now we can follow this design pattern into other adjacencies as well, such as hydrogen reforming, ethylene production, or process air heating.
• 13:56
  SPEAKER_03: So, really, it's not only about the technology, it's about this repeatable work process.
• 14:01
  SPEAKER_03: Uh, starting with a reliable digital, digital first prototype, we can reuse the components from our toolkit and then move into physical testing only when required.
• 14:11
  SPEAKER_03: And that helps us help keep us asset-light, right, while still producing more reliable and higher performing products.
• 14:19
  SPEAKER_02: Okay, so that that makes sense, Matt.
• 14:22
  SPEAKER_02: So with but with so many possible applications, how does a team at ClearSign kind of decide which opportunities to pursue?
• 14:28
  SPEAKER_02: And and how do you sort of you know avoid becoming a custom engineering shop that solves one-off problems?
• 14:34
  SPEAKER_02: Yeah.
• 14:34
  SPEAKER_03: I'll preface this by saying that I spent several years in product marketing, which was a very valuable uh time for me.
• 14:41
  SPEAKER_03: It's true that usually if you solve a problem for one customer, others likely have a similar problem in our industry, but that's not really enough to build a scalable business.
• 14:51
  SPEAKER_03: So I've learned the hard way when working other under other systems that you need to think market first and not technology.
• 14:58
  SPEAKER_03: So the market viability and fit govern where we spend our development time.
• 15:03
  SPEAKER_03: You know, we'll look at the we'll look at the size of the market, the number of installations, uh, the overall fit of our technology before we start pursuing a new style of product.
• 15:11
  SPEAKER_03: So our priorities are always set for growth when we're looking for for where to spend our technology investment.
• 15:18
  SPEAKER_02: So on here, uh, you know, Matt or Jeff, you might uh both have some uh input uh on this question, but you know, parts of the combustion industry, as I understand it, they still rely on, you know, let's call it rule of thumb uh engineering.
• 15:30
  SPEAKER_02: Um, where has ClearSign found customers who were poorly served by existing suppliers?
• 15:37
  SPEAKER_02: And what is that, what is that sort of you know, uh bringing more engineering rigor look like uh in those markets?
• 15:46
  SPEAKER_03: Yeah, I think that one thing I'll say is using the advanced tools such as CFT, the CFT capability we've developed, uh design space exploration, and hopefully in the near future, suitable AI, we can actually look inside the flames and develop combustion technology rather than the old-style iterative physical design.
• 16:04
  SPEAKER_03: So some markets that we've entered into, they've not really rethought their design principles in decades, which is a pretty large gap.
• 16:11
  SPEAKER_03: And these are usually the areas with the lowest hanging fruit.
• 16:14
  SPEAKER_03: Uh so the CFT does let us retrofit our technology into some very old designs.
• 16:19
  SPEAKER_03: We may work on heaters that are 40, 50, 60 years old while reducing implementation risk when we do that.
• 16:27
  SPEAKER_02: So uh yeah, I've I've got a couple of uh you know final uh closing questions for each of you.
• 16:32
  SPEAKER_02: So let's start off with Jeff.
• 16:34
  SPEAKER_02: Um, what would success in larger, more demanding applications such as ethylene plants mean for ClearSign?
• 16:41
  SPEAKER_00: Sure.
• 16:42
  SPEAKER_00: Yeah, with the with the the burner application, and and obviously in our past lives, um you develop a technology and then you look to adapt it uh across verticals.
• 16:53
  SPEAKER_00: And so you know you get a process burner working, uh, you've got a stable platform of technology to work from, and so you adapt it to in our in our uh in this example, I'd say reforming and ethylene.
• 17:05
  SPEAKER_00: Um those jobs are are technically more difficult, but the payoff's huge because you go from a refining project that may have you know zero to 40 burners to reforming where it's going to be somewhere between 20 and 200 burners, and in ethylene, uh you could have 30 burners to 500 burners on a single project.
• 17:25
  SPEAKER_00: So you can imagine your unit count goes way up, and if you can start winning those big projects like that, uh you know the growth for ClearSign could be geometric.
• 17:35
  SPEAKER_02: Uh and then Matt, for you, what's the one thing uh you'd most like investors to understand about the platform that you're building at ClearSign?
• 17:43
  SPEAKER_03: Yeah, so I think it's important to note that we're putting the people, the tools, and the processes in place to move our technology into the market.
• 17:51
  SPEAKER_03: And not only our current technology, but also new technologies that are still on the drawing board.
• 17:58
  SPEAKER_02: Okay, that's great.
• 17:59
  SPEAKER_02: Well, Matt and Jeff, thank you so much for uh joining us today.
• 18:01
  SPEAKER_02: I think investors really appreciate uh a deep dive like this to sort of you know check under the hood, so to speak.
• 18:07
  SPEAKER_02: Uh this has been a great uh you know compliment to the events that we've hosted with Jim Deller, and I really think it helps uh investors understand the platform and ultimately the team that's uh driving clear science growth.
• 18:17
  SPEAKER_02: So, you know, thank you so much to to both of you.
• 18:20
  SPEAKER_00: Yeah, Peter, thanks for to your team and yourself for uh taking time with us.
• 18:24
  SPEAKER_00: Appreciate it.
• 18:25
  SPEAKER_01: Thank you.
• 18:25
  SPEAKER_01: Jim back over to you.
• 18:27
  SPEAKER_01: Thank you.
• 18:27
  SPEAKER_01: Thank you, Peter, and uh Matt and Jeff, thanks so much for joining us.
• 18:31
  SPEAKER_01: That was a really interesting deeper dive into uh ClearSign technologies and uh appreciate your time today.
• 18:36
  SPEAKER_00: Thank you for having us.
• 18:37
  SPEAKER_00: Yeah, no problem, Tim.
• 18:39
  SPEAKER_01: Thank you for listening, and don't forget to subscribe as well as visiting wwwatertowerresearch.com to stay up to speed on the company's small cap written research reports, podcasts, fireside chats, industry specific symposiums, and conference schedules.
• 18:55
  SPEAKER_01: We will see you next time for another edition of the WTR Small Cap Spotlight Podcast.
• 19:00
  SPEAKER_01: Finally, a special thanks to the producer and editor of the podcast, Kristoph Fitzpatrick.