American Superconductor Corp (AMSC) 2020 Q2 法說會逐字稿

Good day, and welcome to the American Superconductor Second Quarter Fiscal 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. John Heilshorn with LHA. Go ahead, sir.

Thank you, Travis. Good morning, everyone, and welcome to American Superconductor's Second Quarter of Fiscal 2020 Earnings Conference Call. This is John Heilshorn of LHA Investor Relations, AMSC's Investor Relations agency of record.

With us on today's call are Daniel McGahn, Chairman, President and Chief Executive Officer; and John Kosiba, Senior Vice President, Chief Financial Officer and Treasurer.

American Superconductor issued its earnings release for the second quarter of fiscal 2020 yesterday after the market closed. For those of you who have not seen the release, a copy is available at the Investors page of the company's website at www.amsc.com.

Before starting the call, I'd like to remind you that various remarks that management may make during today's call about American Superconductor's future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those set forth in the Risk Factors section of American Superconductor's annual report on Form 10-K for the year ended March 31, 2020, which the company filed with the Securities and Exchange Commission on June 2, 2020, and subsequent reports that the company has filed with the SEC.

These forward-looking statements represent management's expectations only as of today and should not be relied upon as representing management's views as of any date subsequent to today. While the company anticipates that subsequent events and developments may cause the company's views to change, the company specifically disclaims any obligation to update these forward-looking statements.

Also on today's call, management will refer to certain non-GAAP financial measures, non-GAAP net loss and non-GAAP operating cash flow. Non-GAAP net loss is defined by the company as net income/loss before stock-based compensation, amortization of acquisition-related intangibles, changes in fair value occurrence, other noncash or unusual charges and the tax effect of adjustments calculated at the relevant rate for the company's non-GAAP metric.

Non-GAAP operating cash flow is defined by the company as operating cash flow before the China settlement, net of legal fees and expenses and other unusual cash flows or items. The reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found in the second quarter of fiscal 2020 earnings press release that the company issued and furnished to the SEC last night on Form 8-K.

All of American Superconductor's press releases and SEC filings can be accessed from the Investors page of its website at www.amsc.com.

With that, I will now turn the call over to Chairman, President and Chief Executive Officer, Daniel McGahn. Daniel?

Thanks, John, and good morning, everyone. I'll begin today by providing an update on some recent activities, and then provide an update on our grid and wind business units. John Kosiba will then provide a detailed review of our financial results for the second fiscal quarter, which ended September 30, 2020, and provide guidance for the third fiscal quarter, which will end December 31, 2020. Following our comments, we'll open up the line to questions from our analysts.

We had a busy October. Two weeks ago, we concluded an equity offering. Our efforts are focused on continuing to grow our grid business in fiscal 2020 and beyond. We raised approximately $51 million of net proceeds through the issuance of 3.7 million shares of common stock priced at $15 per share. We think it's great that many of our existing institutional investors participated. We also welcomed many new institutional investors. We see the interest in the offering as a positive sign that the market also believes in the growth opportunities in our grid business. I'm personally very pleased by the work and effort put forth by our team to make this happen.

In October, we also announced the acquisition of Northeast Power Systems, Inc., or NEPSI, as we call it. Prior to becoming part of the AMSC family, NEPSI was a privately held company in Upstate New York, supplying medium-voltage, metal-enclosed capacitor banks and harmonic filters. We paid NEPSI $26 billion in cash and approximately 874,000 restricted shares of AMSC common stock at closing. The acquisition of NEPSI directly aligns with our strategic priority to accelerate profitable growth independent of our wind business, broaden our product offering and expand both market reach and market share. The acquisition of NEPSI extends our product offering in the industrial sector of our grid business.

NEPSI is a leader in steady-state power correction. AMSC is a leader in dynamic power correction. The 2 product lines together are expected to provide a powerful synergy. NEPSI has been a partner supplier of AMSC for many years. Strategically, we acquired NEPSI with the expectation that NEPSI will improve the long-term quality of our revenues and earnings, with further diversification by region, customer and product; and most importantly, to accelerate our ability to achieve our goal to reach operating cash flow breakeven.

In addition to expected improvement in the quality of our revenue and earnings, we believe the acquisition of NEPSI has the opportunity to expand our scale and to be synergistic to further expand the market penetration of our D-VAR product. The additional markets served by NEPSI will provide immediate access to customers we did not have access to.

We believe that our strong balance sheet and addition of NEPSI to our grid team positions AMSC for continued grid growth. We continue to be focused on building a more predictable and diversified business.

Turning now to the quarter. Revenue for the second quarter of fiscal year 2020, which did not include NEPSI, came in above the top of our guidance range and grew by more than 50% versus the year ago period. Our grid segment revenue grew 42% versus the year ago period. All grid product lines contribute to the quarter, and the primary drivers were D-VAR and our Ship Protection Systems. We ended the second quarter with more than $57 million in cash. This is before the acquisition and the equity offering.

We believe that our grid segment is on track for another record-breaking year. We remain focused on managing our operations. Our operating cash burn was better than our guidance for the second quarter of fiscal 2020, and our ending cash balance was above guidance for the second quarter.

We made progress with our wind business in the second quarter of fiscal 2020 as well. In fact, wind revenue grew nearly 90% in the second quarter of fiscal 2020 versus the year ago period. We made shipments against our order from our South Korean partner, Doosan Heavy Industries, for our 5.5 megawatt-class electrical control system, or ECS during, the second quarter of fiscal 2020.

During the second quarter, Inox delivered the following approved letters of credit on September 2, 2020: Inox delivered approved letters of credit in the amount of EUR 1.3 million, which translates to approximately $1.5 million for the payment of a portion of the 2-megawatt ECS that Inox was obligated to purchase under the terms of the supply contract. We notified Inox that we would give them until October 5, 2020, to regain compliance with the terms of the supply contract by approving and providing letters of credits in the amount of EUR 4.7 million, which translates to approximately $5.5 million for payment of the remaining 2-megawatt ECS that Inox was obligated to purchase under the terms of the supply contract. On October 1, 2020, Inox delivered these approved letters of credit for payment of the remaining ECS that Inox have been obligated to purchase under the terms of the supply contract and ensured the default set forth in the May 29, 2020, default notice.

I thought it was important to highlight that for you. We did file an 8-K on October 7, which disclosed Inox cure of the default. We thought that was critical for you to understand really where we are with Inox today, and we look to resume our discussions for a 3-megawatt supply agreement with Inox.

At the halfway mark of the fiscal year, our grid business is performing at a very high level. We've been delivering against a strong backlog of grid orders, which not only includes D-VAR orders but also SPS VVO and our REG order. We continue to build on our backlog of grid orders as evidenced by our $15 million order announcement for grid, which we released this past Tuesday. To make it simple, we're going to talk about our D-VAR, VVO and NEPSI products under the name of new energy power systems. So we'll talk about our new energy power and ship protection systems going forward.

As we've discussed over the last 2 quarters, the emergence of COVID-19 has created both operational challenges and macroeconomic concerns for all businesses. AMSC continues to demonstrate that it can operate effectively through times of crisis. I said this early on in the pandemic, and I'm saying it again. We were early to implement physical separation protocols at our manufacturing sites, and we have not missed a beat in production.

This does continue to get harder each quarter. In the U.S., we're now seeing a third wave of cases. We have instituted cleaning protocols for our offices to help keep everyone safe and healthy, which is paramount. We're focused on our people and the parts to make our products as well as strong customer service and product quality. Our factories remain open and have been operational throughout the pandemic.

Now I'll turn the call over to John Kosiba to review our financial results for the second quarter of fiscal year 2020 and provide guidance for the third fiscal quarter of 2020, which will end December 31, 2020. John?

Thanks, Daniel. Good morning, everyone. AMSC generated revenues of $21.1 million for the second quarter of fiscal 2020 compared to $14 million in the year ago quarter. Our grid business unit accounted for 77% of total revenues, while our wind business unit accounted for 23%. Grid business unit revenues increased by 42% in the second quarter versus the year ago quarter primarily due to higher D-VAR and SPS revenues. Wind business unit revenues increased 89% in the second quarter versus the year ago quarter as a result of increased ECS shipments to Doosan and Inox.

Looking at the P&L in more detail. Gross margin for the second quarter of fiscal 2020 was 26% compared to 27% in the year ago quarter. The strength in gross margin for the second quarter of fiscal 2020 was a result of a favorable product mix and high factory absorption within both our grid and wind segments.

R&D and SG&A expenses for the second quarter of fiscal 2020 were $8.6 million. This was up from $7.8 million in the same period a year ago. Approximately 15% of R&D and SG&A expenses in the second quarter of fiscal 2020 were noncash.

Our non-GAAP net loss for the second quarter of fiscal 2020 was $2.7 million or $0.13 per share compared with $1.5 million or $0.07 per share in the year ago quarter. Our net loss in the second quarter of fiscal 2020 was $3.7 million or $0.17 per share. This compares with $0.8 million or $0.10 per diluted share in the year ago quarter. Included in our second quarter of fiscal 2019 net loss was a $1.1 million noncash gain associated with the change in the fair value of warrants. This favorably impacted the year ago results. We currently have no outstanding warrants. Please see our press release issued last night for a reconciliation of GAAP to non-GAAP results.

We ended the second quarter of fiscal 2020 with $57.7 million in cash, cash equivalents, marketable securities and restricted cash. This compares with $62.2 million on June 30, 2020. Our operating cash burn in the second quarter of fiscal 2020 was $3.4 million. This came in better than our previous guidance of a $4 million to $6 million operating cash burn.

Now turning to our financial guidance for the third quarter of fiscal 2020. We expect that our revenues will be in the range of $22 million to $25 million. Our net loss on net revenue is expected not to exceed $6 million or $0.23 per share, and our non-GAAP net loss is expected not to exceed $5.5 million or $0.21 per share. The company expects positive operating cash flow to be up to $1 million in the third quarter of fiscal 2020.

Our cash flow guidance includes expected payments from Inox for ECS shipments in the third quarter. This is expected to have a favorable impact on our working capital. As I mentioned in previous calls, our working capital for the business fluctuates from quarter-to-quarter depending on working capital requirements for individual projects. When you look at our cash requirements over recent quarters, our working capital tends to average out any quarterly variations.

Over the last 4 quarters, included in our guidance for Q3 fiscal 2020, we expect our non-GAAP operating cash burn to average approximately $2 million a quarter on an average quarterly revenue of $21 million. This is well within the operating cash burn results we would expect on this revenue profile. We expect to end the third quarter with no less than $80 million in cash, cash equivalents, marketable securities and restricted cash. This guidance reflects the $26 million in cash that we paid in connection with our acquisition of NEPSI on October 1, 2020, and the $51.4 million in approximate net proceeds for -- from our stock offering, which closed on October 26, 2020.

With that, I'll turn the call back over to Daniel.

Thanks, John. Our growth through grid strategy is working. Grid is driving revenue growth for the company, and D-VAR has been the foundation of our grid business. You can see we announced $15 million in new grid orders. Our D-VAR product is currently focused on addressing renewable energy installations and industrial installations like the semiconductor fab. As you know, D-VAR is a power transmission level product, whereas our Volt/VAR Optimizer, or VVO product, addresses the power distribution market. Our NEPSI products are primarily distribution-level products.

We are anticipating a higher volume of VVO shipments in the second half of this fiscal year. We are beginning to see multiunit orders from multiple utility customers. We expect VVO to contribute to our grid growth in fiscal 2020.

Turning to the Ship Protection Systems, which is also part of our grid business. SPS contributed to the strong grid segment revenues in the second quarter of fiscal 2020.

I want to take a moment to recap developments with our SPS with the Navy, specifically for our new shareholders. AMSC Ship Protection Systems are also known as degaussing systems. At AMSC, we call them SPS. The SPS is designed to reduce the magnetic signature of a ship, which can interfere with undersea mines' ability to detect and damage the ship. Our SPS is state-of-the-art. Our SPS utilizes high-temperature superconductors, which replace massive amounts of copper in legacy systems.

The weight saved using our SPS versus legacy systems can be as much as 60 to 70 metric tons on a single vessel. Our SPS became the baseline design for the San Antonio Class amphibious warfare ship, or LPD platform. We believe our SPS for the San Antonio Class should represent approximately $10 million of revenue per vessel. To date, we have 3 orders for our SPS to be deployed on the San Antonio Class vessels, including LPD 28, LPD 30 and LPD 31. We are working closely with the Navy to understand the program timing for LPD 29.

Our SPS team is very busy and focused on continuing to expand the business while we deliver our first systems. We are excited for the Navy's adoption of our SPS system in 2021.

From a capacity perspective, we've been planning for the concurrent manufacturer of multiple SPS orders. We anticipate our SPS' potential for deployment on the Navy's planned 15 additional San Antonio Class ships. Our SPS for the San Antonio Class could represent a potential revenue stream of up to $150 million for this class ship. The San Antonio Class is our first design win with the U.S. Navy.

Turning to REG. ComEd has agreed to install its first resilient electric grid, or REG system, as a permanent asset within Chicago's electric power grid. In July, we announced that ComEd broke ground and had begun construction on its REG system. We are delivering hardware to the project. We are providing technical support during construction. We are on schedule for delivery of the system and anticipate energization in 2021 per ComEd's schedule.

AMSC and ComEd have proceeded with the engineering assessment of a proposed second REG system in Chicago. ComEd's second project, if agreed to and undertaken, would utilize AMSC's REG system to interconnect multiple existing substations in Chicago's central business district. The second project is expected to be larger in scope than the first and provide greater reliability, resiliency and load serving capabilities during outages as well as other grid disruptions.

With the first system secure, we believe that future deployments of REG will be derisked. U.S. utilities are focused on our execution of this first Chicago project.

Now I'll turn to our wind business. For those of you who are new to the company, we serve the onshore wind market through our partner, Inox Wind in India. We have been supplying 2-megawatt electrical control systems, or ECS, to Inox for several years. These 2-megawatt ECS go into a wind turbine AMSC has designed for Inox. We are encouraged by Inox's stated desire to lower the levelized cost of energy further by way of a new wind turbine. Inox has indicated a new 3-megawatt turbine is an integral part of its long-term strategy to deploy wind power in India.

Inox has stated that the 3-megawatt platform is a great fit for the competitive tariff environment in India. After the 3-megawatt prototype turbine that we design as commissioned, Inox will then seek type certification for the operating turbine.

We expect to work with Inox to build a 3-megawatt production supply chain and put in place a 3-megawatt ECS initial production order and support the already growing demand for their 3-megawatt turbine. We believe we're well positioned to support Inox's requirements and look forward to doing so.

We service the offshore wind market through our partner, Doosan Heavy Industries, in South Korea. We are the exclusive supplier of ECS units for Doosan's 5.5 megawatt offshore wind turbine. The South Korean wind market presents a long-term opportunity for us, as does the global offshore wind market. South Korea has mandated the development of renewal energy sources as part of its plan for long-term electric power supply. And Doosan has publicly expressed its desire to secure a large share of this accelerating South Korean wind power market. Our wind team is working closely with Doosan, and we look forward to potentially penetrating the global offshore wind market with Doosan.

In the second quarter, we made shipments of our 2-megawatt electrical control systems to Inox, and we made shipments of our 5.5-megawatt class electric control systems to Doosan. We believe we're well positioned to support expansion of our onshore and offshore wind business.

In conclusion, at the midpoint of fiscal year 2020, our D-VAR business is performing very well, especially after a bit of an acceleration at the beginning of the fiscal year. Our VVO team is preparing for expected higher volume shipments in the second half of this fiscal year. Our REG team is planning to deliver the REG hardware to Chicago this year on schedule. We are manufacturing SPS for the San Antonio Class ship platform LPD and expect delivery of our first system in 2021. We are supporting Inox with commissioning in the field and are providing -- and have been providing more 2-megawatt ECS products as they need it. We are currently integrating NEPSI into AMSC. We expect to grow grid revenue again in fiscal year 2020.

I'm very pleased with what our team here at AMSC was able to accomplish so far this year. We certainly had a very busy month of October. I'd like to personally thank our employees for their hard work and dedication, and I want to thank the Inox team for working together with us to be able to resolve some challenges and continue to position their business for success while positioning our business for further success in 2021. The hard work is paying off. We're keenly focused on our ability to achieve our goal of profitability. I look forward to reporting to you again following the completion of our third fiscal quarter of 2020.

We'd like to take questions now from our analysts.

(Operator Instructions) Our first question comes from Philip Shen, ROTH Capital Partners.

First one is on REG. Dan, I was wondering if you could give us a little more color on the REG opportunities beyond ComEd with the success that you're having there. I know it's utility scale, meaning it takes time. But I was wondering if you could give us a sense for the progress you're making with the other utilities.

Yes. We continue to work with multiple utilities. We've developed, we think, a very healthy pipeline of potential projects. We've talked about that in the past. What we do really realize is everybody now is focused on the successful delivery and execution of the system with ComEd.

So ComEd has been a really great partner to be able to deal with. They are very excited about helping us market it to other utilities. And we know there's certainly -- we've had a bunch of conversations with a number of U.S. utilities. So we're really focused on 2021 delivery of those systems, and we think that opens up a tremendous opportunity for the company.

Great. And then shifting to VVO. What's the latest there in terms of number of utilities that are steadily buying based on inventory and stocking as opposed to testing? And then how many more utilities are in the pipeline that you guys are working with to develop regular steady volume?

Yes. We're starting to see multiple utilities now taking multiple units. We believe we've been able to understand and well position VVO as a solution for residential solar and the problems that distributed generation represent on the distribution grid. We feel really good about where we are with VVO. We said, in 2020, we're going to supply a limited number to the commercial market, make sure we have everything right. That all seems to be correct. We see an acceleration in production. We were hinting at second half producing more VVO units.

We feel really good about it. I look forward to being able to talk, hopefully, more specific about specific utilities in the future, but we really do think we have something that fits really nicely into our grid growth as well as our mission for smarter, cleaner, better energy.

Great. One more, if I may. On NEPSI, I think the revenue run rate for them over the past 3 years was $25 million or so. So now as you are further along in the integration process and as you look through to next year, calendar '21, do you see the potential where you can already kind of get past that $25 million? Perhaps you guys can couple -- there's more synergies now with both dynamic and static power corrections. So do you think there might be more synergistic sales where you might be able to drive that $25 million run rate even higher?

Phil, I absolutely do. But I think the way we want to try to look at it now is almost a combined product line from what we offer with D-VAR, VVO and NEPSI for this idea, this new energy power systems.

Because we're trying to focus on building and continuing to grow penetration in the renewable market, we've entered into industrial with semiconductor fabs. NEPSI takes us further into industrial with their product line. So we're really focused on that as kind of the core of the business to continue growth, keep that drumbeat going over the next years.

So going forward, as we kind of get to the next quarter and into the next year, you're going to hear us talk much more about integrated product line and the markets it serves than really talking about the alphabet soup of products that we have. When we've talked to investors, they seem to prefer that. They get that. And that's why even with the latest order, we talk about $15 million combined, certainly driven by D-VAR, which is really where the business has been. And I'm really proud of what the team has done so far together with NEPSI. I think it's really a good fit for us. And I'm really optimistic about not just the near term, but really when we think of longer-term growth potential for that part of the business.

Our next question comes from Colin Rusch with Oppenheimer.

Looking at the Ship Protection System reality over the near term and the economic downturn potentially impacting federal budgets, what can you tell us in terms of how much information you gained from the individual ship procurement folks in terms of budget issues potential for folks trying to actually use cash that they have sooner than later to [work from] down the road. Just any help on the dynamic around that is super helpful.

Yes. We certainly see challenges coming given the economic situation. I guess we remain optimistic that those can turn with the change or better control going forward with the pandemic. To date, we really haven't been affected by it. When we look at the specific ships that we have orders for, those are all ships that have been planned and appropriated and procured, and that money is being spent. So I don't see an immediate impact coming to SPS.

I don't know what's going to happen with the election. It looks like it's a going cleaner direction like we like. I don't know what the effects for the military that will be over the next, call it, 2, 3 years. But when you look at the backlog that we have currently for LPD, that's going to cover us certainly for the next couple, several years. So we're remaining vigilant to try to continue to grow that business on other platforms.

There is a plan to build ships. Typically, when the parties change control and things, we still have -- the military will still have a need to build ships, so there'll still be a need for ship protection system, certainly. And we think that we benefit from kind of a cleaner environment move there.

So one of the things SPS certainly can do is reduce operating costs from those ships. So we think we really do have something that fits not only in the near term, but the long term for the Navy.

That's super helpful. And now that you've closed the NEPSI acquisition and augmented the balance sheet, how much -- and I know this is a short time frame, but as you think about the pipeline of opportunities on grid and customers that will actually sit down with you now, can you characterize the order of magnitude of change in the opportunity set and the number of customers you're dealing with now that company's in a different position, both from a product and a capitalization perspective?

Yes. No. I think the way you're asking the question, Colin, is exactly how we're thinking about it. But utilities see us even in a stronger position given our broader product line, given our stronger balance sheet. Today, utility business has been on the horizon for us. We have sold some D-VAR but not a lot to utilities, what we sell in the way of VVO. We're really focused on utilities. Obviously, REG's focused on utilities. So this new energy power system offering, we hope that there'll be applicability for utilities.

I think, directly, what we see with utility projects is there are near-term concerns about COVID, given the availability of labor, to be able to continue to do work. It doesn't really affect us today. As I said, we don't have a lot of exposure today from a revenue standpoint on utilities. But going forward, I think the offering is very strong and so far been very well received from our discussion with utilities.

Great. And then just last one, supply chain optimization with the combined company. Could you give us a sense of how much purchasing power component, cost reduction and -- you can see and how soon that might start to flow through the P&L?

Yes. I think it's a very good question. It's something that we continue to look at. As we announced the acquisition, it really wasn't one of the main drivers for us. We think that there may be some savings there. But really, the margin expansion comes with revenue growth. There may be some margin expansion coming from the combined supply chain. But I think if we continue to drive the growth, that's going to be the main driver for improved gross margins.

Our next question comes from Eric Stine, Craig-Hallum.

So I was hoping just -- I know we've touched a lot on grid here, but just maybe dig in a little bit on wind. So just with Doosan, is my math right? I think you're maybe getting close to or in the back 1/3 of the initial order for the 5.5 megawatt, just curious. I mean, obviously, Doosan got big plans. And a little bit more color on this call that you're talking about potentially taking that global. So just thoughts on what you may see that next 5.5 megawatt order from Doosan.

Yes. Right now, we're working on commissioning the first wind farm, which is utilizing the ECS from that order. The team is optimistic that maybe in the next year or so, maybe it's 18 months -- I don't really know. It's tough to say, will it be significantly larger than the first order? That's certainly something we want to work on. I don't want to promise that.

But it's really going to depend upon the pacing and how Doosan gets their orders going. All the indications in Korea seem like that's moving in a positive direction. It's hard to prognosticate for things that are beyond the year, but we will see business in the future from Doosan. In the near term, we're really focused on making sure we're doing what we can to support Inox, making sure we deliver 3-megawatt turbine to a prototype level and certify all the things we talked about in the opening remarks and get that first initial production order.

So that really is going to be the impact on our '21 business. If we look beyond '21 into '22, then we'll see, we hope, additional business coming from Doosan out there.

Got it. And your commentary -- and you just mentioned it with Inox. I guess I was kind of curious, as you've gone through this process where they were not in compliance with the agreement and they've secured that, is it something where, despite that, you were doing some of that pre-work for the 3-megawatt turbine? Or is that something that we should view now that we're, what, a month removed from that curing under the 2-megawatt agreement that now things really start?

Yes. I think I would focus -- it's exactly you say, in the latter that it's almost a restart of the 3-megawatt program. We've got to get it to prototype, get it built, get them to get orders. They've been talking about already 160 to 200 units that they have coming for orders.

So we hope that 2021 represents really the beginning of a ramp in volume for the 3 megawatt. We do see continued demand coming, Inox telling us, for the 2 megawatts. So we're very happy with how the grid business is taking us and driving us. I'm really happy that we've been able to focus on that and execute very well on the grid side of the business. And I think we have a nice option value coming in wind, starting with Inox with some 2 and 3-megawatt maybe next year; and then beyond that, expansion again with Doosan.

Got it. Maybe last one for me. You talked a bit about NEPSI. But I'm just curious, I know it's early, but what feedback are you getting from customers whether they're -- well, whether they're new customers and they're seeing your products for the first time or maybe your customers that now they're seeing NEPSI, just some initial feedback, realizing that it's still pretty early.

Yes. Feedback I've got is very, very positive. The team is really jazzed. It allows us to think a bit differently we sell not only their products, but ours, opens up bigger TAM and larger markets for us.

So the integration is really focused on the front end. Can we get the leverage from selling? Can we sell more of their product? Can we sell more of our product? And we continue to focus on growth in the industrial market. That's really where the team is headed, and we hope to be able to report back to you, guys, that those efforts are continuing.

There are no further questions in the queue at this time. I'd like to turn the call back over to Mr. McGahn.

Thanks, Travis. A lot of it is about scale. We really didn't tread any new ground today with you guys. I think we feel really good about how the business is performing. I think some of the comments John Kosiba said about the math and the model and the results, I think, are very telling that we said we were going to get to certain levels in the business. We've been able to get there. We still have further to go. We think NEPSI certainly helps us get there a bit faster.

Now we have a very nice balance sheet that keeps that strength for our grid customers. And I'm very, very optimistic about the future. I don't know where we are with the election, but that could turn out to be a positive thing for us as well.

So as we get to the halfway point here in 2020 and we already start thinking about next year in 2021, the future looks certainly very bright for the company. We want to continue to do the things that we've been doing, and we think that will continue to translate into future growth.

Thank you, everybody, for your attention. Appreciate it. I know it's a tough day with a lot of names out there reporting and such. So we're very happy for those of you that were able to listen live to the call. Thanks.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.