Capstone Green Energy Corp (CGRN) 2006 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Capstone Turbine third quarter 2006 earnings conference call. My name is Samuel and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question and answer session toward the end of this conference. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded for replay purposes. I will now turn the call over to today's host, Miss [Melody McCoy]. Please proceed ma'am.

Thank you. Good afternoon, and welcome to Capstone Turbine Corporation’s conference call for the third quarter fiscal year 2006. I'm Melody McCoy, your contact for today's conference call. Capstone filed its 10-Q with the Securities and Exchange Commission on February 9th, 2006. If you do not have access to this document and would like one, please contact me at (818) 407-3740 and I will forward one to you.

During the course of this conference call, management may make suggestions or other forward looking statements regarding future events or financial performance of the Company within the meaning of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These statements relate to future financial performance, approval of our New York City Materials and Equipment Acceptance Application, the advantages such approval would bring, expectations of new product introductions, their performance characteristics and our ability to deliver additional cost reductions among other matters. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including the facts that the Broad U.S.A. MOU is subject to negotiation and execution of a definitive agreement and such an agreement may not result in an increase in sales.

Also approval of Capstone branded products for listening on the General Services Administration schedule may not result in an increase in sales and does not ensure that we will supply products to the Federal Government. Additionally, approval of the application for listing our products on the MEA Index, if and when obtained may not result in an increase in sales. These are among many factors which may cause Capstone's actual results to be materially different from future results predicted or implied in such statements.

We refer to the Company's 10-K, 10-Qs and other recent filings with the Securities and Exchange Commission for a description of these risk factors. Because of the risks and uncertainties Capstone cautions you not to place undo reliance on these statements which speak only as of today. We undertake no obligation and specifically disclaim any obligation to release any revision to any forward-looking statements to reflect events or circumstances after the date of this conference call or to reflect the occurrence of unanticipated events. I would now like to turn the call over to Chuck McBride, our Executive Vice President and Chief Financial Officer.

Thank you, Melody and good afternoon everyone. I'd like to provide you with our results for the third quarter of fiscal year 2006, which ended December 31st, 2005. Our backlog was $10.1 million at the end of the quarter, up over 60% from the prior year comparable quarter. Sequentially, we were down 20% from the second quarter. This decrease was a reflection of the delay in the MEA approval that was expected to be finalized during the third quarter. From our vantage point today and as a result of the delay, we believe it's prudent to move our forecast for cash flow positive to the end of the first quarter of fiscal year 2008. One quarter later than our prior estimates.

Revenues increased approximately 50% year-over-year from $4.7 million to $7 million and sequentially we were up 23% from the second quarter. Gross losses for the second quarter were $2.8 million, an increase of $1.7 million over the second quarter. The benefit of increased revenue in the quarter was offset by changes in reserves for product enhancement programs and inventory valuation charges.

Research and development costs were 3.1 million for the quarter, up 400,000 from the prior quarter. The increase is related to spending for work being performed on government cost sharing programs. Selling, general and administrative costs were $9 million for the quarter, up approximately 2.2 million from the prior quarter. The increase was primarily due to the dispute settlement with IDD for $2 million which we announced on December 31st, 2005. Excluding the IDD settlement, SG&A expenses remained relatively flat compared to last quarter.

Our net loss for the quarter was $14.3 million or $0.14 per share, an increase of 4.1 million from the 10.2 million or $0.12 per share in the second quarter. Included in the $0.14 per share loss was the $2 million settlement charge. Our cash balance increased $22 million during the third quarter from the $44 million balance at the end of the second quarter. The increased cash balance is a result of our registered direct offering of common stock completed in October of 2005 resulting in net proceeds of approximately $39 million. Cash and cash equivalents were 66 million at the end of the quarter. Now, let me turn the call over to our President and Chief Executive Officer, John Tucker.

Thanks, Chuck. Before I begin reviewing the third quarter's activities and accomplishments with you, I would like to take a moment and welcome Rich Atkinson to our Board of Directors. Rich is Vice President and CFO of Pope & Talbot, a wood and pulp products business headquartered in Portland, Oregon. Prior to joining Pope & Talbot two years ago, Rich was Vice President, CFO and Treasurer for Sierra Pacific Resources. Sierra Pacific Resources is the holding company for Nevada Power and Sierra Pacific Power which provides electric service to most of Nevada and portions of eastern California. Rich, we are pleased to welcome you to the Capstone Board.

I would also like to take a moment to welcome Bruce Beckwith to the Capstone team. As our new northeast regional Vice President of sales, Bruce brings to Capstone a track record of proven performance at WESCO Liberty Electric and prior to that was engaged on a daily basis for 30 years in the greater New York area's commercial and industrial electrical subcontracting industry. Bruce's regional and industrial experience will further strengthen the Capstone's sales team efforts in the northeast region as we continue to focus on the rapidly growing opportunities that exist in the greater New York City area for our Capstone branded products.

Additionally, I'm pleased to announce Brian Delamer as our new Vice President of Customer Service. Brian joins the Capstone team after a successful 18-year career with General Electric. He leaves GE, where he was the Customer Quality Manager for Tampa Electric's TECO Energy. Prior to the TECO assignment, Brian was GE’s manager of their Technical Risk Group where he was responsible for analyzing and negotiating their portfolio of long-term service agreements. Brian started his career at GE as a hands-on maintenance field engineer for their on-site power turbines and leaves as a trained Six Sigma Black Belt customer quality manager. Welcome aboard, Brian.

I hope as you can tell from my voice, everyone at Capstone is excited about the new members that have joined the Capstone team. These seasoned professionals allow us to continue to build a world class organization which will achieve new levels of performance and success. Now, as Chuck mentioned earlier, we had a very positive quarter, with revenues increasing to $7 million, up over 50% from the prior year's comparable quarter and up 23% from the last quarter.

Even with the delay of the MEA backlog was up over 60% over prior year. During our last call, I reviewed with you a number of activities undertaken and accomplished. This quarter was no exception. Let me share with you the progress, I believe, we are making on numerous fronts.

First, let me provide you with an update on our New York City Department of Buildings MEA activities for Capstone branded products. We continue to work with the Department of Buildings and the various regulatory agencies in New York City to finalize our MEA filing. We have made considerable progress and while we have not yet received our final MEA approval, we are submitting projects to the Department of Buildings this month totaling approximately 2 megawatts of turbine cells. We also recently announced that Capstone branded products have received the General Services Administration GSA schedule approval. This approval was granted for the initial five-year period from January 2006 to January 2011. Capstone microturbines are the only microturbines to be awarded this important U.S. Government procurement approval.

We proactively took this step and created this opportunity to provide Capstone branded products to one of the largest potential distributed generation buyers worldwide. The GSA acts as a catalyst for nearly $66 billion in annual federal spending. That's more than one fourth of the U.S. Government's total procurement dollars. The GSA approval unlocks another important market sector opportunity for clean, efficient, secure and cost effective Capstone branded on-site energy solutions.

During the demanding evaluation and negotiation process, the GSA requested that Capstone confirm our capability to provide a minimum of 300 units for fiscal year 2006. So as you might expect, we are very excited and pleased with this significant accomplishment. Recently, we announced what I believe to be another very significant milestone at Capstone. We announced the signing of a memorandum of understanding with Broad U.S.A. Incorporated. As you may know, Broad U.S.A. Inc. is the wholly owned subsidiary of Broad Air Conditioning, whose headquarters are located in Beijing, China.

If you go to their website, you will read that they specialize in the design and manufacture of absorption chillers powered by clean and recyclable energies, which is what the exhaust of the Capstone microturbine supplies. They also state on their website that their chillers have been sold in over 40 countries and that they maintain a greater than 50% share of the chiller market in China. And they hold the NO. 1 market share position in the Americas and several European markets for absorption chillers. While Capstone has had previous integration experience of our microturbines with Broad chillers, this memorandum of understanding was negotiated to prepare the framework to formalize a long-term joint working relationship between our two Companies.

The focus of this relationship will be to utilize Broad's 20, 40 and 60 ton absorption chillers integrated with Capstone's microturbines to create a seamless integrated solution which will maximize the chiller heat recovery efficiency from the microturbines exhaust heat. The significant initiative reflects a new level of industry cooperation in the sale and servicing of these combined turbine chiller system solutions and we envision the enhancement of our cookie-cutter concept to include the Broad/Capstone package cogeneration system. So that jointly, we will meet the growing market demand. We are very proud that a company the caliber of Broad has selected Capstone as its partner to develop this new industrial solution.

Additionally, I'm also pleased to announce the introduction of our Capstone Direct Performance Plus service contract to our end user customers. Performance Plus will be offered by Capstone with every Capstone microturbine system sold. Our Performance Plus system agreements will be the vital link between Capstone and our end user customers. A sort of partnership that will keep our customers and their Capstone branded products running effectively and efficiently for years to come.

In creating our Performance Plus service matrix, we used the nearly 10.8 million hours of run time experience, we've accumulated from our operating microturbines worldwide. So our customers get more than a microturbine system, they receive a proven on-site power solution. The most exciting part of a Performance Plus service contract offering is the internet based remote monitoring system we call the Capstone Service Network. This web based network continuously monitors the operation of our customers’ Capstone branded microturbine systems. It provides real time monitoring that immediately notifies Capstone of an event so our service technicians can promptly return our customers' system to on-line status. In the on-site power business, the generator must run when needed. We call that availability. Well 10.8 million run time hours demonstrates we're ready when the customer needs us.

Along with the Capstone Service Network, we're offering our latest to date, most sophisticated advanced power server product to the market place. Our advanced power server control system provides our customers with a level of flexible load and demand control with site specific operating scheduling. This gives each end user site the ability to maximize the run profile performance of their multi-turbine installations in the most cost effective and efficient manner. New load following algorithms increase overall system efficiency and provide optimal electrical load sharing at the customer facility by dispatching microturbine units at varying power intervals. Enhanced time of use functionality will dispatch units to meet power and heating requirements that vary throughout the day while balancing the run time of all units.

Expanded IO capabilities will offer a high level of integration with plant equipment, in some cases avoiding the need for additional PLCs and building management equipment. The advanced power server offers the next step in simplifying distributed generation integration to meet our customers' unique needs.

Now, that we have covered what new products and services we are introducing to the industry, let me shift our discussion to the area of new product development. During our last call, we announced the introduction of our new CR65 microturbine product. You may recall, this is our new medium BTU product which is fueled by renewable energies.

I am very pleased to announce that we are scheduled to deliver our first 20 production units to our distributor in France in mid-March of this year. We believe this product has tremendous market potential, not only here in the U.S. but in Europe and Asia as well.

Let me also provide you with an update on the progress of our C200 testing activities. We continue to conduct our northeast winter performance testing at our New York facility. To date, we have accumulated over 1200 hours of operation without a single system fault or shutdown. This is another positive step in the ongoing development of our next generation of microturbine products.

Before I complete my portion of the presentation and we take your questions, earlier this quarter Capstone accomplished yet another major milestone in product and system performance. Two of our C30 kilowatt machines achieved 45,000 plus hours of near continuous operating time. I mentioned run hours earlier, well at 45,000 hours is over five years of nonstop operation. These particular microturbines are currently in operation at New England Gas Company in Rhode Island. We view this as a very significant milestone because no one else in this industry can make these kinds of statements. It clearly demonstrates the robustness of Capstone products and its components. With that, I want to thank you for joining us today and we'll now take your questions.

Thank you. [OPERATOR INSTRUCTIONS] Your first question comes from Sanjay Shrestha from First Albany. Please proceed.

Great. Thank you. Good afternoon, guys. A couple of quick questions here.

A lot of positive announcement of the GSA Broad U.S.A. and expansion of the sales force in New York. Can you maybe go into more detail in terms of how should we think about that from an order flow standpoint for you guys? Obviously, things are going to be lumpy at this stage but should we continue to sort of see the sequential growth in the backlog here? Can you give us more color on that as much as you can?

Hi, Sanjay, this is John.

How are you, sir?

I'm doing fine, thanks. The obvious, I think answer to your question is, the kickoff now with the GSA and in my comments, I mentioned the excitement we have about being asked our ability to deliver 300 units certainly holds a very high potential for us. As you know, the approval just came in January. So we're now beginning to look at the possibilities of what is available in terms of the various government agencies and their needs for generation.

So I hope I was pretty clear on the potential of what GSA might mean to Capstone in this coming year. Relative to the MEA, what I really hope the point came clear is that our confidence level is now very high in our ability to be successful in the final MEA approval. And we have so much confidence that we're now preparing to submit actual projects before the Department of Buildings which should begin to see a real improvement in our project flow in New York.

In particular, with the team change that we've made in New York, one of the things that I would like to make a comment that I'm sure, perhaps, is obvious to the folks who have read those press releases, and I hope, as well by my comments today, us being able to secure Bruce Beckwith from WESCO Liberty Electric only furthers to strengthen our relationship with WESCO, particularly in the greater New York area, because as a member of the WESCO team you might be able to imagine the very positive working relationship he has with a number of the branch managers that exist throughout the greater New York area.

Additionally, you know, when you think about Broad, what I'm very excited about is the philosophical perspective that we have between our two Companies. I found it very interesting in our discussions that led to this memorandum of understanding, that we embrace many of the exact ideals and directions in terms of what is best for the customer. How our systems can work in a very effective way, but more importantly, to bring value to our customers. I was so pleased that Broad embraced this cookie-cutter concept, whether it's a 20-ton unit, a 40-ton unit or a 60-ton solution. The best way to grow revenue is by making your systems solutions as cookie-cutter as possible and have a design that the customer can place on his property in the shortest period of time and thus, giving us a faster acceleration in market opportunity and of course, growth for both our Companies. So we're working on that concept as we speak. And as we know more, I will certainly make future announcements on the progress of this relationship.

Okay. Just one clarification with the GSA, the 300 units is the potential opportunity over the course of the next 12 months.

That's correct.

As we think about the Broad opportunity here with the Broad U.S.A., given the GSA, given what do you think might happen with the MEA and some combined cooling and heating application opportunities. Could we continue to see this 50% kind of year-over-year revenue growth that we saw in Q3 into 2007 fiscal year compared to 2006? Or you're not prepared to comment on that?

I think we'll be better prepared, Sanjay, to comment on that. I would like to let everyone know. I think after -- since I've been here a little over two and a half years, you all probably know our process by now. That right now, we're into our strategic planning process, which we'll announce our efforts as we go into fiscal year 2007 at the end of March.

We were really looking at that so that we can make a projection and determination of the kind of growth rate we can expect. But certainly, these accomplishments should be a very positive impact on our ability to look at that.

Okay. So just a quick follow-up on that then with the CCHP applications. Any update on your status with the UTC and does this change that dynamics at all? Can you give us some more color on that?

Just for clarify, as I said in our relationship with Broad, it's at the 20, 40 and 60-ton level. Our relationship with UTC --

Is on the larger side.

Is on the larger side. What we saw this opportunity with Broad is filling out our product lines for the smaller industrial and commercial customers that have the need for cooling that's less than 100 tons. We certainly have some high expectations that the pure comfort product will be successful 100 tons and above. And for us now it gives us a broad range of Capstone power absorption chiller products for the market place.

And you guys continue to work together? That was more my question. I understood that you're filling out the product line. You're continuing to work with UTC at this point in time?

Continuing to work with UTC at this point in time.

One last question, sir. With this inventory -- the gross margin performance in Q3 with the enhancement of the program reserves and the inventory valuation, how should we think about that in Q4? And with the backlog down sequentially should we still expect nice sequential revenue growth in your revenue going into Q4. Thank you.

Hi, Sanjay, in terms of the warranty and the things, those tend to be more -- about $1 million of that tends to be more just as an event as opposed to ongoing.

Okay.

If you normalize that you'd say our gross loss ran about 25% to simplify that.

Okay. On the sequential revenue performance front, how do you feel about that at this point in time?

Sanjay, we've not given tactical guidance ever and what I can tell you is the business is lumpy in terms of predictability and sequential growth. So we've got a lot of good things coming online I talked to you about, John's talked to you about, not prepared to go to tactical guidance.

The lumpiness flat, up, down, at least direction, can you comment on that?

Sanjay, that's usually what lumpy means. It's been bumpy, I think you’ve had a sense of that. We feel pretty optimistic about where we're headed with these opportunities we discussed.

Okay, terrific. That's great. Thanks a lot.

Thank you, Sanjay.

And your next question comes from Walter Nasdeo with Ardour Capital.

Good afternoon.

Good afternoon, Walter.

I have a question kind of pertaining to what's going on in New York. How much of the backlog can you identify as coming from New York?

The backlog as it exists today?

Yes.

It's right now relatively minor in nature.

Okay. Now, this two megawatts that you're talking about that you're presenting to the building administration, was that generated through the KeySpan relationship and can you kind of discuss how that is developing the relationship?

Well it's -- yes, it's developing on a couple of fronts, Walter. It's both through our relationship with KeySpan, as well as, with our relationship with WESCO. And so it's come from a number of various opportunities that have been brought forward. To say it's just one verses the other, wouldn't be accurate.

But the KeySpan relationship is still developing?

It's still moving forward.

Okay, now as far as approval goes, I mean this has been going on for quite a while. .Are you getting any sense of where they are in the decision making process? I know it's a bureaucracy but --

I hope I tried to indicate on my comments section that I'm confident -- if you recall in our last call, we talked about the MEA process and sort of my reluctance to put our customers in an awkward position, if we didn't feel we were that close to an approval.

My pronouncement today is, I feel very confident that moving forward, we're very close to that final approval, hence, my willingness to go forward and present these projects before the Department of Buildings for approval.

Okay. You would expect then upon approval to really ramp up the effort here in New York?

That's certainly our target, Walter.

Okay. And then, just so my thinking is clear on it, then you would look to replicate this type of procedure in other major cities around the country?

Gosh, Walter, you're the first one that I think has mentioned that. If it hasn't been clear, in the two years that I've been here, I think the one thing that I've learned about distributed generation that has always made it a tough nut to crack, and that is, how do you get these particular projects who have multiple architects and engineers and other consultants involved in the implementation of our product to be a an effective, quick, timely solution for our customers? That to me has been the $64,000 question, if you will.

This cookie-cutter concept that I continuously put forward and talk about, in my view, is the answer of speed-to-market so we can minimize the efforts through the permitting and the application and installation process so that we can speed up the embracing of our product as a distributed generation solution thus, enhancing our ability, not only in New York, but this is going to become our standard throughout the U.S. as well as, other parts of the world.

Because if I've got an engineered package that shows proven performance and can be implemented to solve an on-site solution in a timely and efficient manner and bring the kind of paybacks that we believe our product can bring to a customer in both efficiency and savings, then I think, we're on the right trail to success. I really do.

If I could just quickly shoot something over to Chuck. On SG&A going forward, two parts of it. The number's fairly robust. Is this mostly S or is it mostly A?

Most recently it was mostly S. Then remember in the -- compared to last quarter it was only a $200,000 increase from prior quarter. And additionally, we'll be looking at opportunities to do further streamlining of G&A as we go forward. We’re looking at opportunities there.

It takes a certain scale and that scale should be relatively flat as we get top line growth further increased. The thing that should be driving it is, you would expect to see some amount of additional sales cost, as you grow. But you wouldn't expect to see your G&A should be flat or declining as we go forward.

As far as modeling goes, is this a fairly good type of number to use for the near term?

Yes.

Thank you very much.

[OPERATOR INSTRUCTIONS] And your next question comes from Harold Weber with Smith Barney. Please proceed, sir.

Hi, guys, how you doing?

Very well, Harold. How are you?

Can you give a little view on what's happening with Japan and the other overseas things which were pretty active last couple of quarters?

Japan is active but is probably pretty flat for us at this point in time. You may be aware that we developed our relationship with Shanghai Aerospace in China. That's starting to come online and we're starting to get some activity there, albeit, it hasn't generated any strong order development as yet.

Europe continues to be very positive. You may have picked up, Harold, in my comments, my pleasure of announcing that our CR65 units, our first deliveries will be made this quarter to our distributor in France. We see renewables in particular in Europe as a real plus for us in this coming year. And now that we have a 65 kilowatt machine to offer in the biogas sector, it makes the economics for our customers in that sector much more exciting, and the paybacks much more positive. Because as you can imagine, our only previous biogas product was our C30. So now you can install one 65, where typically before, you had to put in two 30s. It will help on installation costs and of course, the effectiveness of this new CR65 with its improved performance, we see that as being a real positive as we move forward into our fiscal year 2007.

Is that product readily compatible to use the domestically here as well?

Absolutely, without a doubt. That's why we decided to call it our medium BTU product because it will burn on numerous renewable fuels. We're really excited about its capability.

It works on all the methane digester gas, all that stuff?

Yes, sir.

I know there's been -- I've seen quite a bit of interest from some municipalities on the East Coast and this type of --

When you think about it, Harold, in terms of waste water treatment plants and other -- one of the things I believe we learned, and of course, why we developed the 60-kilowatt plus version was that, having a little mushroom farm of a bunch of 30s just doesn’t get it done as an economical solution. Albeit, I'll tell you that we're very excited to carry on the exceptional reliability performance of our biogas product into the 60 because the C30 has been a phenomenal performer as it relates to its performance and reliability.

A little different front. Has there been any issue plus or minus in regards to the fact that nat gas has gone up in price rapidly? It's come back quite a bit now. But how does it change the proportional operational monetary characteristics?

In the target markets that we go after and you have followed Capstone for some time. When we talk about spark spread. When you look at the cost of natural gas and you also look at the cost increases in utility rates, as we see the market today, we're really holding pretty well in terms of our spark spread advantage in those areas where it's attractive to use distributed generation solutions.

So right now, when we look at paybacks in the New York region, as an example, our paybacks are still holding really nicely to be very attractive for our proposed customers.

I would think in some cases that would just be an added incentive to add the cooling part to the equation.

When you start looking at it, you know, Harold, I really expected you to bring up the Broad relationship because from one of our previous calls, if I remember correctly, you brought the point forward that said, you know, why not have a smaller machine?

Right.

Well that's what we're working on, Harold.

Will they have or will -- jointly will you have a package ready to be commercially marketed by the springtime for the coming cooling season?

You know what, I can't predict that right now. As we mentioned, we just developed this relationship. We're in the early stages of the planning process. Quite frankly, it's moving forward briskly, but I'm not prepared to give you any secrets on when our announcement will be.

No problem, I just assumed that the fact that you announced it a couple months ago. I figured the plan was to try to have something ready within five or six months to go forward business-wise.

We'll give you an update because as I hope you gathered from my comments, I'm very excited about this Broad relationship. In a very short time, I can tell you the working relationship is incredibly positive. And when it's incredibly positive, you can make great strides over a short period of time. So we'll keep you apprised.

Thanks, guys.

You're welcome, Harold.

And your next question comes from Abhi Kanitkar with Rho Capital.

Hi, guys. Congratulations.

Hi.

I am looking at the gross margin in the quarter. Just wondering, the additional reserves taken for product enhancement and the inventory valuation charges, are those each one time events or will some portion of those be pullilng through in future periods as well and can you elaborate on more specifics there?

I'll take that. They should be relatively nonrecurring. You can't say that ultimately you won't ever have an adjustment or warranty adjustment. We did do a standards roll and reviewed all of our current costs and everything and made the update in the quarter. The total of those two items [being very clear] was $1 million.

$1 million was the total and it's nonrecurring, relatively speaking, yes? Secondly, can you give an update on the elevator product?

I'll take that one. It's from a design perspective, we're moving forward with it. It's been incorporated into our MEA request with the Department of Buildings. And what we're doing now, as you might expect is we're developing the package to take into account the various differences in controls that exist between each of the major elevator companies, because each of them uses specific style of control. And therefore, we're going to broaden our package offering so that it will be available to the major elevator manufacturer and suppliers.

I'm not sure I quite understood the take away message. I think I heard that there's some additional work to do around integrating with the different manufacturer?

We need to do a little more integration, which is important. And we know what those controls are. And we'll be announcing in the not too distant future, the actual release of our first packages.

Okay, terrific. Congratulations.

And your next question comes from Kent [Holden] with Gagnon Securities. Please proceed, sir.

Good evening, gentlemen. I had a clarification question, I guess. The backlog was $10.1 million?

That's correct.

Okay, because I thought in the Q I saw 12.8.

That's megawatts.

That helps. I was curious. The sales increased about 50%. How much of that was in units and how much in price?

It was primarily driven in units. Although, last year we did bring through a price increase, which you've now seen roll through in prior quarters as well. The big driver was unit performance.

How many units were in this quarter?

For competitive reasons, we don't disclose the number of units that are out there.

Then you pushed another price increase last week?

Yes. It actually goes into effect in February.

Okay, that's 7%?

Yes. And you know also -- we also have the benefit of the 65, which gives you an extra value proposition that we’ve also priced.

Okay. Okay. Great, thank you very much.

You're welcome.

We have no further questions in the queue at this time. I'll turn the call back over to management for any further closing remarks.

Well, I hope you can tell that the team here at Capstone is very excited. We're moving the ball forward and we're really delighted with the number, the announcements and the accomplishments we've made through the last quarter. We will keep you apprised on progress as we move forward on all fronts and want to thank you so much for your support and joining us on the call today. Thank you very much, everyone. Good afternoon.

Thank you ladies and gentlemen for participating in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.