Tantalus Systems Holding Inc

TSX:GRID

Earnings Call Transcript 2022-Q4

[Operator]

Good morning, and welcome to the Tantalus Systems Fourth Quarter and Year-End 2022 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Deborah Honig, Head of Investor Relations. Please go ahead.

[Deborah Honig, executive]

Thank you for joining us to discuss Tantalus Systems financial results and operating performance for the 3 and 12 months ended December 31, 2022.Tantalus issued these results in a press release yesterday, which is posted on the company's website. Joining me today on the call from Tantalus Systems herein referred to as Tantalus or the company is Peter Londa, President and Chief Executive Officer; and George Reznik, Chief Financial Officer. During the call, we will make forward-looking statements about Tantalus busines. These statements are subject to certain risks and uncertainties, which could cause actual results to differ materially. Tantalus refers conference call participants either today or in the future to the company's forward-looking statements contained in the presentation and also available on our website at www.tantalus.com. Statements made on this call reflect management's analysis as of today, March 15, 2023. Management does not assume any responsibility or obligation to update forward-looking statements made during this conference call unless required by law. Please note that the financial information referenced on today's call is stated in United States dollars and in accordance with IFRS, unless otherwise stated. The company is also presenting selected non-IFRS financial measures, including gross profit, gross profit margin, core business expenses, adjusted EBITDA, annual recurring revenue referred to as ARR and adjusted working capital. Tantalus believes these non-IFRS measures provide meaningful information to investors. However, they do not have a standardized meaning and are not likely comparable to similar measures presented by other issuers. I will now turn the call over to Peter Londa, President and CEO. Please go ahead, Pete.

[Peter Londa, executive]

Thank you, Deborah. On behalf of our Board, management team and employees. George and I are pleased to provide an update on our business through the fourth quarter of 2022. We will aim to work through our presentation efficiently this morning and provide ample time for questions during today's call. Overall, we are pleased with our performance through Q4 and ended 2022 strongly by setting a new high watermark for revenue generated in the quarter at $12.2 million. The strong revenue results in Q4 led us to finishing 2022 with $39.6 million of revenue, representing 23% growth year-over-year. As George will explain in further detail, our gross profit margins remained strong through Q4 and actually increased year-over-year. The improvement in gross margin is a direct reflection of the hard work by our employees to navigate supply chain constraints and inflationary pressures throughout 2022 and serve as a testament to the value we deliver to the utilities we serve. Given the strong revenue and gross profit margin, I'm pleased to report that we delivered slightly positive adjusted EBITDA in Q4, which is a nice change from the past several quarters. Looking at the last 6 months of the year, we operated the business at nearly neutral adjusted EBITDA. Over those last 6 months of the year, we delivered negative $300,000 of adjusted EBITDA, the bulk of which -- the bulk of our negative adjusted EBITDA for the full year, $2.4 million was recognized during the first 6 months and was tied to heavy investments in our new TRUSense Gateway offering and the acquisition of Congruitive in Q1. We fully understand the sensitivity of operating with negative adjusted EBITDA in the current macroeconomic climate, but believe we made prudent decisions to accelerate investments in R&D and execute the acquisition of Congruitive given the robust market opportunity before us, and we further believe that these near-term investments will enable Tantalus to accelerate our growth over the next several years. To that end, we enter 2023 with sufficient flexibility in our balance sheet to maintain our ongoing investments and existing operations with approximately $5.9 million in cash and positive working capital. Our cash figure does not include an additional $700,000 of restricted cash that is tied to an ongoing utility deployment. We remain in good standing with our senior lender, and I would also note that we do not have any risk tied to the recent default of Silicon Valley Bank. On Slide 4, I'd like to briefly highlight a few operating milestones achieved by our team in 2022. We surpassed 3 million distributed intelligent endpoints and continue to demonstrate an ability to scale our user community, which surpassed 270 utilities in the aggregate. Additionally, our sales organization set a new high watermark for orders closed in the calendar year by converting $42 million out of our sales pipeline in 2022. Shifting focus to our R&D initiatives where we are investing heavily, I am pleased to report as reflected in our March 7 press release that we completed our alpha version testing of our TRUSense Gateway that included 8 utilities. Completing the alpha testing marks an important milestone for our team towards the commercialization of our new product offering. Given the amount of money we are investing in the TRUSense Gateway and the positive impact we expect the product to have on our business will cover our progress and next steps with respect to the TRUSense Gateway towards the end of today's presentation. In addition to the progress with the TRUSense Gateway, we also continue to stand up pilots and are responding to requests to demonstrate our new SaaS-based data analytics offering. With respect to the acquisition of Congruitive completed earlier in 2022, we are nearing the completion of the internal integration process and are centering our attention on business development activities to drive revenue in future periods. While Congruitive did not meet our internal expectations with respect to revenue contributions in 2022, we continue to finish strategic pilots with thought-leading utilities which will provide a strong set of use cases to demonstrate the value of the software capabilities that we've acquired. In addition, the Congruitive of software will become an integral component to our broader TRUSense gateway offering. We anticipate Congruitive to make a meaningful contribution to revenue and profitability in future reporting periods. In summary, we believe our team delivered strong financial results in 2022, made substantial progress on key initiatives, executed and integrated our first acquisition as a public company and further strengthened our foundation for the future. George will now walk you through our financial results. Go ahead, George.

[George Reznik, executive]

Thank you, Pete. As Pete highlighted already and as reflected on Slide 5, we delivered $12.2 million in revenue for the quarter, representing 60% growth over the prior year period. The $12.2 million of revenue represents the highest quarterly revenue to date for the company. Revenue contribution from our software and services was 31% in Q4 2022 as compared to 36% in the prior year due to the large volume of revenue generated from our connected devices in the quarter. As you may recall, shipping and deploying connected devices leads to additional software and services for Tantalus, which also leads to increasing recurring revenue. As a reminder, our recurring revenue is comprised of SaaS subscriptions, software maintenance, technical support and hosting services. In Q4, recurring revenue was $2.2 million, representing 18% of total revenue recognized in the quarter compared to $1.7 million recognized in the prior year period. We will continue to report on our recurring revenue given our focus to leverage the data we continue to capture from connected devices in the field. Shifting topics as reflected on Slide 6. Despite inflationary pressures on our supply chain and overall costs, we were pleased to witness strong gross profit margin at 45% for the quarter compared to 44% in the prior year period. Disaggregating the gross profit margin further, the percent contribution for our connected devices increased to 33% in Q4 2022 compared to 30% in the prior year period due to product mix, supply chain management and a price increase. Gross profit margin from our Software and Services segment remained strong at 73% for Q4 2022 compared to 69% in the prior year period. We believe that the strong gross profit margins across both segments of our business validate our team's ability to navigate through a challenging business environment and demonstrates the value and differentiation of our solutions. Moving down the income statement on Slide 7. We believe the comparison of operating expenses, adjusted EBITDA and net loss are best compared to the prior quarter rather than the prior year as our 2021 results did not include the expense profile and operations of Congruitive, which we acquired in January 2022. Our operating expenses consist of sales and marketing, R&D and general and administrative items and is exclusive of share-based compensation and depreciation and amortization expenses. Our operating expenses for the quarter increased to $5.4 million from $5.2 million in the third quarter due primarily to increased investment in the strategic R&D initiatives, inclusive of the TRUSense Gateway, offset by increased operational efficiencies and the favorable impact of the lower Canadian dollar during Q4. As a reminder, we generate revenue in U.S. dollars, while a sizable portion of our expenses are incurred in Canadian dollars. Our strong revenue performance, coupled with strong gross profit margin and prudent cost management enabled us to make significant strides in the quarter towards returning to positive adjusted EBITDA. Adjusted EBITDA positive $104,000 in the quarter reflects a material improvement as compared to negative $1.3 million in the prior year period. Our adjusted EBITDA result is also an improvement from last year, particularly given that last year's results do not include the operations of Congruitive. While not reflected on the slide, we also believe it is important to note that Tantalus operated at near neutral EBITDA for the trailing 6 months of 2022 by generating negative $300,000 of adjusted EBITDA across Q3 and Q4. Tantalus reported a net income of $160,000 in the quarter, which is expressed net of significant noncash expenses, inclusive of depreciation and amortization, stock-based compensation, in addition to the reduction of a deferred tax liability attributable to the Congruitive acquisition. This reflects a remarked improvement over the prior year net loss of negative $2.2 million before Congruitive was factored into our financial results. Turning our attention to the full year income statement results. We are pleased to report that our revenue increased to $39.6 million, representing 23% growth over the prior year, as outlined on Slide 8. Revenue from software and services increased by 25% to $13.1 million. Our software and services revenue in 2022 represented 33% of total revenue for the year. Recurring revenue, as referenced, represents historical revenue recognized in the period. Annualized recurring revenue, or ARR, represents the total recurring revenue anticipated to be generated over the future 12-month period at a point in time and is a forward-looking balance pertaining to future performance. Recurring revenue recognized during 2022 increased to $8.65 million from $6.8 million, representing a 27% increase year-over-year. We entered 2023 with annual recurring revenue of $9.8 million at December 31, 2022, which increased from $7.2 million a year ago, representing 36% growth in our ARR and another milestone for our company. Gross profit increased to 48% from 45% in 2021. We increased -- we witnessed the increase in our gross profit margin despite navigating inflationary pressures throughout the year, and we believe the increase reflects the value of our solutions, direct oversight of our supply chain by our team and proactively implementing a price increase earlier in the year. Adjusted EBITDA was negative $2.4 million in 2022 as compared to negative $1.7 million in the prior year. Please note that the adjusted EBITDA results for 2022 reflects the increased investments in R&D to bring the TRUSense Gateway to market, the acquisition and ongoing investment in Congruitive, which, again, was not reflected in our 2021 financials and higher costs impacted by inflationary pressures. We generated a net loss of $5.2 million in 2022, inclusive of $600,000 of Congruitive acquisition-related costs compared to a net loss of $7 million in the prior year. The net loss is expressed net of significant noncash expenses comprised of share-based compensation and depreciation and amortization expense. The company also incurred higher finance expenses during 2022 due to the additional term loan as part of the Congruitive acquisition and higher interest rates experienced. As reflected on Slide 9, the company ended the fourth quarter of 2022 with $5.9 million in cash exclusive of $673,000 restricted cash, pertaining to a customer bond, which is anticipated to be released in mid-2023. This compares to $5.7 million of cash as of September 30, 2022. The closing cash position at the end of Q4 is impacted by the accounting of our deferred revenue. Due to the timing of Tantalus payments for the company's annual recurring revenue at the beginning of the year, we witnessed a decline in cash and adjusted working capital towards the end of our third quarter. The company commenced its 2023 invoicing cycle during Q4 for our ARR, so we anticipate collecting significant cash through early 2023, which provides a slingshot effect on the balance sheet. The company continues to generate positive adjusted working capital, which increased to $5 million as of December 31, 2022, from $4.2 million as of September 30, 2022. The company had total assets of $37 million as of December 31, 2022, with total debt of $10.4 million at this time, which increased from the prior year balance of $8.1 million due to the term loan obtained for the Congruitive acquisition. We believe that our balance sheet remains sufficiently capitalized to support our ongoing investments in R&D and core operations. I now turn the back -- the call back over to Pete.

[Peter Londa, executive]

Thank you, George. Given the extent of the R&D investment made towards the TRUSense Gateway, its impact on our adjusted EBITDA throughout 2022 and the recently shared milestone of completing our alpha testing with 8 utilities, we felt it was appropriate to also provide a brief description of the offering and outline the importance of this initiative towards our future growth. As reflected on Slide 10, the TRUSense Gateway addresses the convergence of critical initiatives that are unfolding across the electric utility industry. To ensure Tantalus is well positioned, we believe the TRUSense Gateway will place us at the forefront of this convergence and put us in an excellent position to support these initiatives for our customers. Turning our attention to the first initiative in the top left corner. Utilities continue to make investments to upgrade their existing metering infrastructure through next-generation AMI technologies that are leveraging edge computing for distributed intelligence. We believe there is still a significant opportunity tied to our historical core competencies in this area and would note that the TRUSense Gateway does not cannibalize our existing solutions. Rather, we believe the TRUSense Gateway will be additive as the device is designed as a color that sits between existing meter sockets on the side of a home or building and an existing meter. Whether that meter includes our edge computing, whether it's a competitor's offering or a legacy mechanical meter. As we enable utilities to gather granular data from the edge of the network, utilities are acting with increased urgency to optimize the grid's performance, particularly with respect to protecting critical assets, such as transformers. We refer to this as grid optimization. The TRUSense Gateway is unique in its ability to measure and monitor extremely granular power quality data from the edge of the grid. By accessing granular power quality data, we will be able to deliver advanced analytics to help utilities protect transformers, mitigate outages, build a more resilient grid and ultimately optimize the performance of their systems. Our TRUSense Gateway will also assist utilities address the emerging broadband divide that surfaced across the United States and Canada during the COVID-19 pandemic by leveraging investments in fiber and IP networks to deliver broadband services in communities that are being left behind by large cable and Internet providers. The U.S. government and the Canadian government have allocated significant stimulus dollars to offset the expense of laying fiber across communities, and we are witnessing an increasing number of electric cooperative utilities actively and aggressively enact plans to deploy fiber and expand their business models with broadband services. And finally, in terms of the emerging initiatives that are converging across the utility industry and arguably most importantly, for the long-term trajectory of Tantalus, our TRUSense Gateway will enable utilities to seamlessly and securely integrate distributed energy resources located behind the meter, such as electric vehicle chargers, smart inverters for rooftop solar panels or storage, power walls as well as smart appliances. By including utility scale access to Wi-Fi and power line communication standards, we will enable utilities to directly connect to devices to support load disaggregation, advanced demand-side programs and enhanced time-of-use rates in order to mitigate imbalances between supply and demand. In terms of the next steps to commercialize the TRUSense Gateway, we are in the process of developing 3 variations to accommodate a variety of different utility deployments, including the use of fiber and IP-capable cellular networks. We believe the fiber version referred to as the TRUSense Fiber Gateway or TFG and the TRUSense Ethernet Gateway, or TEG will be extremely applicable across the electric cooperative and public power utility segment given the amount of stimulus dollars being allocated to solve the broadband divide across the United States. We believe the cellular version referred to as the TRUSense Cellular Gateway, or TCG will be more applicable across the investor-owned utility market segment, which is not a market that we have historically focused on. In terms of next steps that we'll seek to announce throughout this calendar year. We are turning our attention to certifications for the TRUSense Gateway after completing the alpha testing. Specifically, we must work through Underwriter Laboratories known as UL to obtain certification that the TRUSense Gateway adheres to safety standards required to deploy devices across the distribution grid. Upon receiving UL certification, we will commence field trials or what we refer to as beta testing for each device with already identified utilities. Assuming we remain on schedule, we are seeking to activate field trials for the TFG and the TEG towards the end of Q3 or early Q4. Once we finalize field trials, the TFG and TEG will be made available for sale, which we are targeting to deliver by the end of this year. The cellular version or TCG, will also require FCC verification, which will push the commercialization of this version into the first half of 2024. While we are mindful of not placing our balance sheet at risk, management believes we are prudently allocating capital at the expense of near-term adjusted EBITDA to take advantage of an opening in the market that we expect will lead to long-term sustainable and profitable growth for Tantalus. To that end, the TRUSense Gateway diversifies our path to generate revenue across existing and prospective utility customers. And our team has been extremely pleased, it shows in Q1. We believe the TRUSense Gateway represents approximately a $1 billion opportunity for us to pursue, and we are actively and aggressively working to not only accelerate the delivery of the overall TRUSense Gateway but also securing initial commitments from utilities to generate a solid return on our invested capital. As we turn our attention towards 2023, we wanted to end our Q4 earnings call with a few additional updates. While we will not be providing financial guidance this year, we have entered 2023 with favorable visibility to deliver another year of strong growth. While we may witness negative adjusted EBITDA in the first 2 quarters of this year, we are aiming to deliver positive adjusted EBITDA for the full calendar year in 2023. We believe our balance sheet remains sufficiently capitalized to support our ongoing investments in R&D and our core operations. And as we accelerate the commercialization of the TRUSense Gateway and prepare to build inventory, we'll evaluate additional working capital requirements with our lender as appropriate. From an industry perspective, utilities continue to face unprecedented challenges to support the electrification of everything, while simultaneously being mandated to decarbonize their industry. We are witnessing an expanding sales pipeline as utilities act with additional urgency. Investments in fiber across the electric cooperative and public power utility sectors are substantial and places Tantalus at a true inflection point upon delivering our TRUSense Gateway. As highlighted in our Q4 earnings press release, fortifying a utility's power transformer fleet is becoming a significant priority as outlined by the American Public Power Association, the National Rural Electric Cooperative Association and the Department of Energy in the United States. Given the urgency related to protecting transformers, we are working quickly to also commercialize our new artificial intelligence enabled data analytics tool to protect transformers, and we will look forward to providing additional updates throughout 2023, as we work to proactively enable utilities to manage and protect these critical assets with our capabilities. In terms of ongoing supply chain constraints, we are witnessing continued normalization for our high-volume products with improving visibility from our contract manufacturer. With that said, we all are still witnessing fluctuations in lead times from our metering partners and anticipate some impact to our revenue profile on a quarterly basis this year. In terms of the broader economic outlook, we are witnessing the utility industry continued to accelerate investments in the modernization of the distribution grid, particularly given the near-term challenges associated with extreme weather and the impact electric vehicles will have on reliability, and we believe these investments will continue despite the current recessionary environment. Further to our previous updates, we have also identified and are tracking 8 legislated programs that represent $400 billion of stimulus funding, which are applicable to our technology. This represents an unprecedented amount of investment flowing into our sector. We are actively engaged with a number of utilities that are submitting applications for stimulus funds at the state and federal level. While the economic indicators across the U.S. and Canada remain uncertain, we believe Tantalus is well positioned to benefit from very favorable drivers across our utility industry, particularly as we secure new utilities and deliver cutting-edge solutions. That brings our formal presentation to a close. And at this point, we'll open the lines for Q&A. Thank you for your time and attention today.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Gabriel Leung with Beacon Securities.

[Gabriel Leung, analyst]

Pete, if I look at Q4's operating expenses as sort of the baseline, how much of a step-up do you think you'll have to incur this calendar year or, I guess, in Q1 as you go through the UL certification for TRUSense and also for the -- getting prepared for some of the field trials as well later in the year?

[Peter Londa, executive]

Gabriel, thanks. The high-level answer to your question is there'll be some increases but not like what we saw in the first half of 2022, Gabriel. George, maybe you can provide some more specificity to the question?

[George Reznik, executive]

Yes. No, of course. I mean if we look year-on-year, Gabriel, good morning, we will have -- we did $21.3 million of OpEx last year, and this is excluding share-based comp, noncash amortization depreciation. And we see that increasing slightly on a calendar year basis. It will be a bit front-end loaded for the reasons you said. Also, we really are seeing we're -- have some impact of inflation costs that we're managing through, offsetting by operational efficiencies, but we are emerging from COVID. We're seeing increased trade show activity, particularly in Q1, which distributes active and that we attended as well as the investments we set in R&D. So the front half will be a little bit higher and trail down towards the second half. But that gives you the magnitude on the year-on-year point on what we're expecting. It's going to be a slight increase, but not a significant increase over 2022 total OpEx.

[Gabriel Leung, analyst]

Got it. Just moving on to gross margins. With the price increases that you've implemented, I guess, a loosening supply chain, if you will, do you anticipate continued improvements on the gross margins, particularly on the connected device part of your business?

[Peter Londa, executive]

Yes. Gabriel, I think there's still some upside on both connected devices and our broader software and services gross profit margin contributions. So as we go into 2023, our expectation is we should see another year of increase not significant but increase year-over-year. And it's -- our manufacturing and supply chain team have been really working around the clock now for over a year to navigate -- to navigate the circumstances. But I think we've got a pretty good handle on the current circumstances and barring any significant surprises. At the macroeconomic level, we should be in a good position to continue to see some uplift from the connected devices contribution. I'd also add that our expectation is the TRUSense Gateway. As we get that commercialized will be additive to our gross profit margin contribution from connected devices as well.

[Gabriel Leung, analyst]

Got you. That's helpful. And one last question for me. Clearly, obviously, you're past the apha testing days of the TRUSense. Now are you able to offer any commentary from the -- from some of your initial output testing customers, utility customers, number one? And number two is, once you get past the field trials, how do you -- I know it might be a tough question to answer, but how do you anticipate the purchase orders will come in for this product? Is it going to be a few at a time? Or do you think there's going to be a big purchase or that will come in from this initial group of field testing customers?

[George Reznik, executive]

Yes. So the first portion of your question, Gabriel, and it's a good one. So thank you for asking it. So we can provide additional color. The commentary and feedback from the 8 participating utilities in our alpha field trial, we're extremely favorable and positive. And I complement the product marketing and engineering team within our organization that have really been living and breathing this product now for almost 18 months. The feedback is that we not only validated the use cases that we set forth in the alpha testing. I think the utilities were surprised at the level of granularity that we can deliver for power quality. And it's the abbreviation in the industry is AVPQM, which means effectively 256 samples per cycle. So we are talking subsecond type data that ultimately will enable us to deliver harmonics, wave length capture and a number of other statistics that utilities just have economically not been able to access at every edge device. And that's what this device -- that's what the TRUSense Gateway will deliver. So I think folks are -- the feedback was that they were overwhelmed favorably in terms of the granularity and what that means for their system operations and planning. And last but not least, we were able to demonstrate leveraging the Wi-Fi capability that's embedded in the device to connect to other devices and to support the broadband initiatives that utilities have. So by connecting to optical network terminals. So I think it was better than we expected, Gabriel. And that's -- you'll see some of that as you attend our users conference in a few weeks, I think. The second portion to your question is, it's a little bit hard to answer just yet. But what I would say is I think we are going to see as we go from field trial to available for sale and then utilities planning, we're seeing a variety of different scenarios. There are some utilities that are talking to us about a comprehensive blanket purchase order to roll out the TRUSense Gateway across their footprint. And in that circumstance, we'd be looking at a large contract that then based on deployment time frame, there'll be multiyear deployments by the way, but over -- through those multiyear deployments, is sort of calling off what they plan to deploy on a calendar year as they work through their budgeting process. So I think we'll see some utilities that give us a blanket purchase order, which is pretty substantial. I think there'll be other utilities that take a more measured approach that, especially in year 1 of sort of 12 months from commercialization as they roll it out, I could see some contracts in anticipation of full deployment but orders that are just for that 12-month period before they really understand the configuration, the deployment and the departments that is going to touch across their organization. So I think we'll see a little bit of both. As I look at it, the highest priority that we have beyond getting the 3 versions commercialized will be validation from utilities that they are committing to the product and ultimately beginning at the commencement of deployments. But I do expect that we're going to see a significant inflection point, both in our visibility to future revenue profile through backlog as well as what we refer to as kind of flow revenue from utilities that commit to the full deployment but may not necessarily give us an order right upfront, if that makes sense.

[Gabriel Leung, analyst]

That's perfect. That's really helpful. Then for me. Congrats on all the progress.

[Operator]

The next question is from Yuri Lynk with Canaccord.

[Yuri Lynk, analyst]

I'll go at the prior question a different way. Do you have a rough estimate, Pete, of what the -- what type of revenue opportunity is represented just by the 8 utilities that are testing the TRUSense Gateway?

[Peter Londa, executive]

I think through comprehensive full deployment, Yuri, my internal number is about $200 million.

[Yuri Lynk, analyst]

Okay. Just switching gears to the Congruitive -- just curious, you inherited about 40 investor-owned utilities, which you typically don't deal that much with. Are you seeing any opportunity to sell your legacy products, your endpoints and such into these utilities? Or what -- how should we think about your opportunity to maybe cross-sell some legacy products into them?

[Peter Londa, executive]

Yes. So within those 40 utilities approximately from Congruitive, I'd say they all remain -- for the most part, they all remain active. A number of them tied to Congruitive's history around substation automation. And so I think there is an opportunity for us to upgrade existing substation automation deployment or I should say, legacy substation automation deployments with the new core competencies that Congruitive has developed and delivered. So I think there's growth within those customers, a good subset of those customers with respect to the new Congruitive software. As it relates to the core to your question, I think where the vast majority of our focus is going to be across the IOU segment and those existing customers is with the TRUSense Gateway, particularly the cellular version. As it relates to large efforts around rooftop solar programs, EV charging programs or microgrids that the IOUs are focused on today. There's an outside chance that at some point, we could potentially offer a portion of the broader AMI or metering capabilities. But my gut instinct here is the IOUs are going to look for the vendors that have a number of reference accounts with well over 1 million to 1.5 million deployed endpoints at one utility. And while we have 3 million connected endpoints across our entire user community, that's just not the scale that we've been at. So I think instead of trying to put a square peg to a round hole with that said, there are always exceptions to the rule that we could pursue. I think that where we are focusing our time and attention is positioning the cellular version of the TRUSense gateway and everything that it brings to enhance an existing AMI deployment that a utility has whether that enables us to expand with AMI over time, that might be the pathway. I do think though there's a strong capability for us to increase the contributions from that captured customer base and as a result, increase our presence with the investor-owned utilities. I hope that sort of answers your question.

[Yuri Lynk, analyst]

Yes. That makes sense. Okay. Well, congrats on a strong finish to the year, and we'll chat later.

[Peter Londa, executive]

Yes, I appreciate it, Yuri. Thank you.

[Operator]

[Operator Instructions]. Showing no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Peter Londa for any closing remarks.

[Peter Londa, executive]

Thank you, operator. I'd just say before we conclude the call, I'd like to thank our entire team, all of our employees and our Board of Directors for all the time, attention and hard work throughout 2022. I'd also like to thank everybody for joining today's call and for your continued support and interest of Tantalus. As a reminder, we encourage you to visit our website at www.tantalus.com to stay updated on our company's activities. Operator, we can now disconnect. Thank you all.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.