American Superconductor Corp (AMSC) 2007 Q2 法說會逐字稿

Good morning, everyone, and welcome to the American Superconductor's Second Quarter Fiscal 2007 Conference Call. All participants of this call will be in listen-only mode until we reach the question-and-answer session.

With us on the call this morning are American Superconductor's founder and CEO, Greg Yurek, Vice President and CFO, Tom Rosa, and Investor Relations Manager, Jason Fredette. For opening remarks, I'm going to turn the call over to Mr. Greg Yurek. Please go ahead, sir.

Thank you, Matt, and good morning to everyone. I'm looking forward to providing you with a detailed update on our second quarter accomplishments as well as our plans for the remainder of Fiscal 2007. But before we get into that part of the discussion, Jason will read the Safe Harbor Statement and Tom will walk you through the numbers for the quarter. Let's begin with Jason.

Thanks very much, Greg, and welcome to all of you who have joined us this morning. I'd like to point out that certain remarks we make this morning regarding our financial forecast and other beliefs, plans and expectations constitute forward-looking statements. There are a number of risks and uncertainties that may cause actual results to differ significantly from these statements. Please refer to our Form 10-K, which has been filed with the SEC on June the 14th, as well as our subsequent Form 10-Q filing for information about these risks and uncertainties. All of our SEC filings can be accessed in the investor section of our website, at www.amsuper.com. And now our CFO, Tom Rosa, will begin our discussion of the quarter. Tom?

Thanks, Jason, and good morning, everyone. It's good to be speaking with you again. Financially, this was a solid quarter for us. We came in on plan in terms of our revenues and net loss while also building a significant amount of backlog. This provides us with great confidence in the forecast we provided at the beginning of our fiscal year. And we believe we're well positioned to make Fiscal '08 a year of solid growth for AMSC.

Looking at our top line results, revenue for the second quarter came in at 9.6 million. This compares with 10.9 million in the second quarter of Fiscal '06. For the first six months of the year, we generated 23.6 million in revenues, up more than $500,000 from 23.1 million for the first six months of the prior fiscal year.

Breaking our Q2 sales down by business unit, AMSC Wires generated 1.6 million of revenue, which is down from 3.9 million in the prior year quarter. This year-over-year decline is primarily the result of significantly lower revenues associated with the LIPA cable project, as that project winds down to a successful completion.

We have deferred approximately 2.8 million of costs into inventory related to the LIPA project that we expect to recognize as revenue in Q3, as the incremental funding is provided by the Department of Energy. Supermachines generated 1.5 million in Q2 revenue. This is down from approximately 2.3 million in the second quarter of Fiscal '06. The decline is primarily related to a slight delay in the projected completion date for final assembly and factory testing of our 36.5 megawatt ship propulsion motor for the US Navy, to later in this current quarter.

Power Electronic Systems continues to perform extremely well. This business unit generated 6.5 million in Q2 revenues, up 37%, from 4.7 million in the prior year quarter. AMSC received approximately 15.8 million in new orders during the second quarter of Fiscal '07, about triple the amount in prior year quarter. And we booked 44 million in new orders and contracts during the first six months of Fiscal '07, which is nearly six times the amount booked during the same period of Fiscal '06. In fact, our 44 million of new orders during the first months of Fiscal '07 already exceeds our order performance for all of Fiscal '06.

Of our 15.8 million in new Q2 orders, 13.2 million came from Power Electronic Systems and 2.6 million from AMSC Wires. The $5.3 million NAV-C Motor contract for Supermachines was not received until October, and is therefore not included in our Q2 or six-month order totals. Backlog as of September 30th stood at 42.6 million, of which approximately 25 million is recognizable as revenue over the balance of Fiscal '07. Backlog is up almost 80% from 23.8 million at March 31, 2006, and has more than doubled over the last 12 months.

It is important to note that our Q2 FY'07 backlog figure does not include a total of 6.2 million in new orders that we signed in October. The major contributor to backlog since the end of Q2 was the NAV-C Motor contract I mentioned a moment ago.

These numbers clearly show the progress we've made in building our sales pipeline. They also provide us with great confidence in our forecast for revenues to be in the range of 50 to 52 million. Our focus now turns to building backlog for future years. Our Power Electronics Systems business generated at $215,000 operating profit for the second quarter. We believe we can incrementally grow this figure during the remainder of Fiscal '07. We also expect this business unit to be profitable for the full year. AMSC Wires and Supermachines meanwhile, incurred operating losses of 3.6 and 2.5 million, respectively.

The higher Supermachines loss, compared to last year, was tied mainly to the delay in the award of the NAV-C contract from July to October, in cost growth associated with the slight delay in final assembly and factory testing on the Navy 36.5 megawatt motor. Our total cost and expenses in the quarter were 17.1 million, with a preliminary breakout as follows, 9.1 million for cost of revenue, 3.6 million for R&D expense and 4.4 million for SG&A.

For the second quarter, the company reported a net loss of 7 million, or $0.21 per share. This compares with a net loss of 6.8 million, or $0.21 per share for the second quarter of Fiscal '06. AMSC had approximately $1 million worth of stock based compensation expense in the second quarter, or $0.03 on an EPS basis. In the prior year quarter we incurred a $100,000 of stock based compensation expense associated with restricted stock only. This increase is due to our adoption of the FAS 123(R) accounting standard.

For the first six months of Fiscal '07, the company's net loss was 13.7 million, or $0.42 per share, compared with 12.4 million, or $0.38 per share in the prior year period. Stock based compensation was 1.8 million or $0.05 per share in the first half of Fiscal '07. This is up from approximately 200,000 for the prior year period. For full year Fiscal '07, we continue to expect that our net loss will be in the range of 23 to 27 million, or $0.68 to $0.79 per share. Given the additional costs related to the rework of non-critical components for the 36.5 megawatt motor, however, our net loss may be towards the bottom-end of this range.

Now let's take a quick look at the balance sheet. At September 30, AMSC had no debt and 46.1 mil in cash, cash equivalents in investments. This compares with 55.4 million the prior quarter and 65.7 million on March 31st. As we had forecast, our cash use was relatively heavy in the first half of the fiscal year. Our burn rate is expected to be down significantly during the second half of the year. In fact, we remain on track to have at least 38 million in cash, cash equivalents and marketable securities on March 31, 2007, which marks the end of our fiscal year.

We expect to collect significant amounts of cash from customers in the second half, including approximately 12 million from the US Navy. As we also previously forecast, we expect capital expenditures for Fiscal '07 to be in the range of 12.5 million to 14.5 million. Almost all of the CapEx is in support of our 344 Superconductor scale up. And now I'll turn the call back over to Greg.

Thanks, Tom. Q2 was an exceptional period for American Superconductor, and we have a lot to cover this morning so let's jump right in. Let's start with AMSC Wires. The main focus of this business has been the scale-up of our second-generation, HTS Wire, known as 344 Superconductores. And on bringing more orders for wires, especially for big projects, several of which we are currently working on.

All of our manufacturing and business development efforts around 344 Superconductors are progressing well, but you'll hear in just a moment. But first, let's bring you up to date on the status of our 1G inventory. As you may recall that we had over four -- we had over 400,000 meters of 1G inventory entering the second quarter. During the quarter, we received orders for nearly 150,000 meters of this wire. This provides us with great amount of confidence in our ability to sell the remainder of this wire by the time we turn on our 2G manufacturing line, late next year. And since we wrote-down all but 85,000 meters of our 1G inventory, in FY '06, all 1G sales above the first 85,000 meters dropped right to our bottom line.

Now, while we are taking care of that 1G wire inventory, which is simply a bridge to the future, the scale up of our 2G HTS wires, for 344 Superconductors is going quite well on all fronts. We have now installed commissioned and qualified 50% of our full-scale manufacturing equipment for 344 Superconductors. So we're well on our way to the 70% benchmark we set for March 31, 2007. And, we remain firmly on plan to scale up to an annual gross capacity of 720,000 meters per year at the end of calendar 2007.

In the meantime, demand for our 344 Superconductors continues to grow and our challenge is shifting to how we keep up with that demand over the next couple of years. Our primary driver for wire demand remains the high capacity HTS cables that can increase power grids for liability and security. HTS cable projects currently under way in the US and abroad are paving the way for the rapid emergence of this market over the next few years.

Back in August, a distribution voltage HTS cable was energized by National Grid in Albany, New York. That project used a Sumitomo Electric Industries cable and Sumitomo Electric 1G, HTS wire. Shortly after that, American Electric Power, or AEP, energized their own distribution voltage HTS cable in Columbus, Ohio. This cable is powered by AMSC wire and utilizes a unique tri-axial cable design from South Wire Cable Company, which is located in Georgia, and which manufactured the cable.

This one tri-axial cable in Columbus, Ohio which contains all three phases necessary for a circuit, is able to carry as much power as 18 large, copper cables. The advantages for electric utilities are quite obvious. The AEP's HTS cable how now been serving nearly 9,000 homes and businesses with glitch-free power for more than three months.

The third domestic HTS cable project taking place right now is on Long Island. And it's the most aggressive undertaking to date. As the world's first transmission voltage HTS cable, this half- mile system, that will be more powerful than all previous HTS cables combined and will able to serve more than 300,000 Long Island power [Inaudible --technical difficulty] customers. This cable project is managed by American Superconductor and uses American Superconductor HTS wire.

Groundbreaking for the cable project took place in August. The three cable conduits are now laid in the ground, including an extra conduit for a future HTS cable based on 344 Superconductors, and all of the supporting infrastructure is now in place. Energization is now expected to take place in the May/June time frame rather than in March, the original date we had targeted for commissioning. This is due to a delay by a subcontractor in qualifying the high voltage cable terminations, which are the transitions from the HTS cable to the copper system already in place in Long Island. The terminations for this project have now been fully qualified and all other aspects of the project are moving forward successfully.

In addition to these three US cable projects, the moment was increased in August when the Department of Energy issued a request for proposal for $90 million worth of HTS projects that mandated by the Energy Policy Act of 2005. The focus of this RFP is on HTS cable projects, although other demonstrations are also expected to be funded. We are pursuing this funding aggressively for a major HTS cable project that we utilize 344 Superconductors and that we expect will require a substantial fraction or production capacity for 344 Superconductors over the next few years. The deal we've recently extended its deadline for proposal submissions from November 2006 to January 2007. This naturally, pushes out the contract awards dates, probably into the May/June time frame. And that's not untypical with DOE proposal and contracting cycle and it's why we did not forecast any revenue from this source of funding in our current fiscal year.

While all of these projects are taking place here in the US, we're seeing building interest abroad as well. Earlier this week, we announced that an important strategic business alliance which Shanghai Research Institute, or SECRI, as we call it. SECRI is the leading standardization institution for China's wire cable industry. And virtually all new cable technologies must be certified by SECRI. We'll initially be working with SECRI on a relatively small demonstration HTS cable. An AM team is going there early November to start the project, in fact. And we believe this could lead to a much bigger cable project, going into the commercial Shanghai grid in the not too distant future. We'll keep you posted on that front.

The strategic alliance with SECRI gives us yet another entry point for the Chinese electric power market. A market we believe that holds tremendous potential for American Superconductor, not only for HTS power cables, but also for other grid solutions such as D-VAR, Super VAR, and DVC. The call that we've already sold wire into China for three small HTS prototypes that have been demonstrated there successfully including a cable, a fault-current limiter and a transformer.

We also have orders for PowerModule Systems for 620 wind turbines in China. Nearly 150 of these systems have already been shipped and we expect more orders going forward. To support and accelerate our sales into Southeast Asia and China, we have opened sales offices in both Singapore and Beijing. In fact, the Beijing office just opened yesterday. We are now conducting job searches to fill additional positions in these locations to support our current business development, sales and field service activities. And in the not too distant future, we plan to begin to hire to support manufacturing in China and Southeast Asia of non-critical components to reduce our costs and increase our margins. And we'll keep you up to date on all that in future calls as well.

Let's move on to Supermachines, a business that is making great progress on two major HTS rotating machines. But first, commercial Super VAR synchronous condenser remains on schedule to be shipped to the Tennessee Valley Authority in December. Given that this is the world's first commercial HTS product for power grid, which will be a major milestone, not only for us, but for our entire industry. Our second Super VAR unit will be shipped by the end of March '07, on schedule. Both machines will be going to a Kentucky aluminium mill that needs to stabilize its voltage in order to enhance manufacturing productivity. While that is happening, we continue to have active discussions with TVA and other utilities to secure additional Super VAR orders. And we remain optimistic that a new order will be placed by the end of our fiscal year.

The other major project on Supermachines docket is our 36.5 megawatt HTS ship propulsion motor. By the way, if you prefer horsepower as the measure of power, that's a 49,000 hp motor. The motor is now undergoing final assembly and factory testing in Philadelphia. If you want to see a really great photo of this motor, in the assembly process, go to our homepage at www.amsuper.com. The motor will be shipped to the US Navy near the end of the calendar year.

In the meantime, we have received the first, in what we expect to be a series of contracts, to design and manufacture a militarized version of this HTS motor. The Navy has already provided more than $100 million to AMSC to develop these advanced propulsion motors. So they really have a vested interest in our success here. Based on our successes today, we're very optimistic about winning orders for HTS propulsion motors for the DDG-1,000 class of warships, as well as future Navy warships, such as CGX, all of which represent significant revenue growth opportunities for our company in a couple of years.

Finally, I'd like to bring you up to date on Power Electronic Systems. For those of you new to the story, our Power Electronic Systems business operates out of Wisconsin and provides advanced power electronic for the utility, industrial and alternative energy markets. Simply put, this business is booming, thanks due, in large part, to our success in the wind power market.

During the second quarter, we received orders for wind farms in Australia, Canada, China, New Zealand and the United Kingdom. In a growing number of countries, wind farms must meet certain voltage requirement when connecting to the local grid. And our D-VAR solutions have become the solution for meeting these interconnection standards.

Today we have installed or have orders in hand for D-VAR systems for 22 wind farms around the world. Wind turbines also require electrical systems for the control of power flow and synchronization with the grid, among other functions. This is accomplished with our PowerModule Systems that go right into the nacelle of wind turbines. Power modules have really gotten strong traction in the wind market, particularly with an Austrian company known as Windtec. Windtec has a powerful and unique business model. They design wind turbine systems from the ground up from the platform to the tower, to the nacelle to the electronics and blades. But they don't build anything. They license their designs to third parties that want to become wind turbine manufacturers. These are often heavy industries and construction engineering firms in fast growing economies like China and India.

Once they get the design and know-how from Windtec, these manufactures then utilize local sources for the parts and begin production. Windtec not only gets an upfront license fee for the design, they also get a royalty payment for each installed turbine and they require that the manufacturer purchase the electric system from them. This is where American Superconductor comes in. Our PowerModule Systems have become a core component of Windex's electric system. In May of 2005, we delivered a couple of prototype systems to Windtec.

Soon thereafter, we received an order for 23 power modules for wind turbines that are going into China and Japan. That was followed in February 2006, with an order 150 additional power modules for a customer in China. And, in late September, Windtec placed yet another order, this one for 450 power modules for that same company in China. With the power module's average selling price being in the area of $15,000, for large volume orders. I think you get a sense of the momentum we're building here.

And the success we're having at Power electronic Systems extends well beyond Windtec and the wind power market. We're expecting substantial growth in sales to electric utilities in our next fiscal year, based primarily on orders that we expect to close over the next six months or so, for our DVC, or Dynamic VAR Compensation product offering. DVC sales to utilities could, in fact, far outpace our rapidly growing wind farm business next fiscal year and beyond. We'll talk more about that in future calls as well.

So, in summary, our progress over the last quarter has been excellent. We're on track to achieve our key corporate benchmarks, as well as our financial objectives for the fiscal year and we're now building backlogs for Fiscal '08. We are driving many exciting new opportunities for revenue growth and profitability that you'll hear about later this quarter and next quarter. So Fiscal 2007 has been a year focused entirely on execution in terms of our large scale contracts. We're 100% committed today to making FY'08 a year of solid growth at AMSC. Now, let's open up the call to your questions. Matt, would you please provide the instructions?

Yes, sir.

[Operator Instructions].

Jim Ricchiuti with Needham & Company.

Yes, good morning.

Good morning, Jim.

Greg, question, I have, is on the potential for follow on business. I just wanted to pursue two comments you made. Number one, with respect to the LIPA project that's underway. You alluded to a conduit for possible 344 deployment, and I'd be interested in perhaps, you expanding on the potential length of that, and in the in the second follow up question, just relates to the Navy, and you talked about the awards in total so far that you had with the Navy. As you think about the next series of contracts, could we be looking at something of that magnitude?

Well, back on the--first, on the 344 Superconductors going in Long Island, as you're asking about. Yes, a fourth conduit has been put in place, it's already buried. And the idea is that--and these are 600 meter longs, so the first, the LIPA project that's going on right now, has three 600 meter long, first-generation wire cables. For the fourth conduit, it's also 600 meters long, so that's the answer to your question, would be a single-phase at 600 meters, all 344 Superconductors. That's for anticipation of a future project, there looks like.

Okay.

Greg Yurek. And on the Navy project, you're asking about the follow-on potential there?

Yes.

Well, again. We got the first in what we expect will be a series of contracts that is the design optimization and ultimately manufacturing of a 36 megawatt class motor for the Navy. We expect to get more contracts in that regard, maybe by the end of this fiscal year, certainly in the beginning of next fiscal year. And then, this would lead to competition for hull number-three for the DDG-1000 destroyers. And we think we're very well positioned to be selected for the propulsion orders for hull number-three. When we look at that, now Jim, we're talking about revenue on the order of $20 million per motors. There are two motors per ship. And by the way, there have been a total of seven ships authorized at this point and time. They're building the first two hulls as we speak and so hull number-three would be the one we're targeted on.

Jim Ricchiuiti. But before that's awarded, in terms of future follow on business, these would be orders that in all likelihood, would be given incrementally as opposed to one order--these would be a series of orders that potentially could flow out?

Yes. And, Jim, we've been saying that for a year. That this is not going to be like the $70 million contract that we got to build the first one. That these would be a series and that's what we've been saying all along. So you go through this process here, design optimization, you build components, they'll be component building in all of this. Testing of things. To optimize off of the base of the 36 and a half megawatt motor that's in Philadelphia right now at the naval shipyards. So, again, the real target here is to go through that series of contracts that leads to being selected for hull number-three.

Okay, Thanks a lot.

Yes

[Operator Instructions].

Bill Benton with William Blair.

Thank you. Good morning. It's Corey Tobin standing in for Bill. Just one quick question on the wind farm opportunity. Obviously a lot of growth expected there in Fiscal 2007. As we look out toward Fiscal 2008 and beyond, is the 50% number a good number to look towards in terms of opportunity for growth in that business? Or should we expect it to accelerate off that level?

Well, you're talking about 50% off this year's revenue?

That's right.

Well, first of all, we have no forecast out there now, and we won't be putting out forecast until we get to our first call after the end of the fiscal year. So, I'm not going to give you any forecast on that. But, clearly, the wind farm is a great growth opportunity for us and we just keep penetrating new markets, such as now, China, the UK is booming for us. So we expect continued strong growth going forward, but we're not at a stage where we put out any forecast.

Okay, great. Thank you.

Sure.

Walter Nasdeo with Ardour Capital.

Good morning.

Hey, Walter.

If I understood correctly, you're expecting 25 million of the backlog to hit the rest--in the remainder of 2007, is that correct?

That's right, Walter.

Do you have any idea how that breaks down by sector?

Yes, we can give you a sense of that. We're forecasting, as you know, revenues in the 50 to 52 range. We're at 23.6 to date, so the remaining revenue will be focused mostly on the AMSC wires and car electronics systems areas. We haven't given out exact guidance on the splits between those three business units, Walter, and I don't think we're prepared to do that at this point.

But I will just emphasize that the bulk of the revenue that we expect to achieve from the backlog that we had as of September 30th, will come in those two areas, Wires and Power Electronic systems. And of course, in addition to that backlog that we had as of the end of September. We just booked as $5.3 million NAV-C motor contract which will also contribute some additional revenues on the Supermachine side.

Okay. So there will be something kind of taken up on the Supermachines a little bit?

Yes, Walter. We're expecting additional funding, as we said, a series of contracts. So they'll be a contribution there, from Supermachines, as well.

When I was reading through this press release this morning, I saw a term that I have not seen for a long time pop up, and that was SMEDS. Do you see much activity in this area, or because with first-generation wire, is it something that would even be considered with second- generation wire, or does it become more efficient, or is it just something somebody else is giving a swing at?

Well, there are SMEDS projects very actively going on today. In particular, in Korea, which is where we got an order recently for a first-generation wire as well as Japan. They're actually putting these units into industrial sites, semiconductor fabs in Japan. We also see activity going on in China. In fact, there's some of our wire there, for a HTS SMED demonstration.

So, there continues to be a strong interest in superconducting magnetic energy storage, or SMEDS. In particular focused on industrial- power quality. The question about first-generation versus 344 Superconductors, 344 Superconductors is much better product for that kind of a system, so these entities in these various countries develop their SMEDS products. We think it again, provides another opportunity for our 344 Superconductors.

Walter Nasdeo. Okay. All right, thank you very much, then.

Sure.

Robert Smith with the Center for Performance Investment.

Morning.

Good morning, Bob.

Hey, Robert.

Yes, I think I caught, a while back, a little blurb in the Financial Times, about the Japanese going ahead with their magnet project, a 10-year project. You're involved in that, aren't you?

You actually read that in the newspapers?

Yes. That was asked in the accident in France, and they reiterated their cognitive approach and that they were going to begin a 10-year project.

Yes, well, look. I didn't realize it got out into the public, so if it is, I'll confirm that. Yes, they are going forward, and obviously, we're very excited about that. Just a year ago, they demonstrated the first HTS electromagnet on the MagLev running at over 300 miles an hour, and why did they do that? It's because they firmly believe that HTS is a much more rugged solution for the superconductor MagLev that they've been developing all these years. And it's going to be cheaper for the system they intend to put in from Tokyo to Osaka. That run, and they've allowed us to talk about this publicly in the past. That run itself will require well over 100,000--100 million meters of HTS wire. So we sure hope they go forward. They are going forward now and we hope they're successful.

It's just another example of the many market opportunities that are emerging, one after the other. So, our focus is not there to day, but it's certainly a market that we think is going to put a big draw on our wire manufacturing plant.

Jim Ricchiuti from Needham & Company.

Greg, I wonder if you'd just talk a little bit about where you see 344 pricing, the end of '07, the end of '08, the end of '09. If you're willing to.

Yes. We actually have an investor presentation on the website that shows that -- our pricing curve as a function of volume, as a function of time, in other words, so you can look there. So without trying to quote those intermediate years, out memory here, I can tell you that that tells us we're in the $9, $10 range in '09. Certainly in '010 we're in the $9 range. That's price to a customer, dollars per meter for our customer. And we think that will be very competitive, generally speaking, and in fact, very competitive relative to the price performance of ratio of copper.

So, copper remains to be--at high prices. It seems to be in a trading range. All the experts tell us that they don't see that coming down for a good long time. So, we've said it before, we're going to be priced competitively with copper by the end of this decade.

And if you were to tick off, maybe two or three of the main hurdles to getting to those levels?

Well, we've demonstrated and announced back in, I think it was July, certainly in the second quarter there somewhere, that we had reached commercial grade performance lows with our 344 Superconductors over a long length by our high volume, low cost manufacturing process. That's a key kind of thing. We said, at that time, we already demonstrated much higher electrical performance than we've ever--could expect out of first-generation wire. And when we get to those levels, 200 amps in our standard wire dimensions, as the 344 Superconductor has, you're there.

The other factor, of course, is not just the electrical performance, but the cost of manufacturing. And as we look at our forecast, not just for pricing, but also cost, we think our costs are going to be down to a point where we will have very nice gross margins on that wire product and we'll be very competitive with copper. So, it's really scaling up the volume production that's the other key component. [Angela San Marie], which runs our wire business, is really on schedule, if not ahead of schedule in the scale up process. We think we're going to do it, Jim.

Okay, thank you.

Yes.

[Operator Instructions].

Robert Burke with Morgan Stanley.

Greg, a while back you had mentioned the possibility of joint venturing with other electric motor makers for commercial versions of the ship-type motor that you're working with the Navy on. And I just wondered, is that still in the cards, and where do you stand as a --something that's--we've got to wait for further development of the Navy motor before you can get the interest from the people in the industry to partner up with you, or do you have anything going?

Well, Bob, I think you have the right idea. In general terms, we remain in active discussions with leading motor manufacturers, no question about that. Some are more active than others. But you're right. They want to see this 36.5 motor operating in the Navy facility if you in fact catalyze them, I'll say, to take that that next step.

Remember, we do have a partner right now, in Northrop Grumman Marine Systems, for these motors, in terms of the manufacturing and the first selling these motors to a particular customer called the US Navy. And our objective here is to expand beyond the US Navy to other Navies around the world, as well as commercial marine opportunities. And there are other companies, we believe, that are better suited to address those markets. So, we'll leverage the success of the 36.5 megawatt motor, I believe, into forming an appropriate partnership with somebody to increase our sales. Quite frankly, that's what it's all about.

Thank you.

Sure, Bob.

Well, we have no additional questions at this time. I'll turn the call back over to Mr. Yurek for any additional closing remarks.

Thank you for your attention today and your good questions. We appreciate that. We look forward to updating you at the next conference call. Thank you very much.

That does include today's conference. Thank you for your participation, and you may disconnect at this time.