Capstone Green Energy Corp (CGRN) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter fiscal year 2008 Capstone Turbine conference -- earnings conference call. My name is Akea, and I'll be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question and answer session toward the end of the conference. (OPERATOR INSTRUCTIONS) I would like to turn the call over to your host for today's call, Ms. [Libby] Reynolds, Vice President and Chief Accounting Officer. Please proceed, ma'am.

Thank you and good afternoon and welcome to Capstone Turbine Corporation's conference call for the third quarter of fiscal 2008 ended December 31st, 2007. I'm Libby Reynolds, your contact for today's conference call. Capstone filed it's quarterly report on Form 10Q with the Securities and Exchange Commission today, February 11th, 2008. If you do not have access to this document and would like one, please contact Alice Barsoomian at area code 818-407-3628, or you can view all of our public filings on the SEC website at www.sec.gov. During the course of this conference call management may make projections or other forward-looking statement regarding future events or financial performance of the company within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statement relate to, among other things: future financial performance in attaining positive cash flow; the ability to reduce costs and improve operational efficiencies; achieving positive gross margin; compliance with certain government regulations; opening new markets for our products and attracting large customers to our products; the performance of our products compared to other technologies; new applications for our projects, including the hybrid bus market; our ability to improve overall product reliability; revenue growth and increased sales volume; our success in key markets; our ability to enter into new relationships with channel partners and distributors and other third parties; the energy efficiency and reliability of our products and their ability to address utility capacity issues; value to our customers of new low emissions productions; and the environmental advantages of our products.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties, including the following: our expectations about expansion in the key market may not be realized; certain strategic business initiatives and relationships may not be sustained and lead to increased sales; we may not be able to reduce cost or improve customer satisfaction; our release of new products may be delayed or new products may not perform as we expect; we may be unable to increase our sales and sustain or increase our profitability in the future; we may may not be able to obtain or maintain customer distributor and other relationships that result in increase in volume and revenue; we may not be able able to apply with all applicable government regulations; we may not be able to obtain or develop distribute to dealers in our targeted markets in which case our sales would decrease as suspected; and if we do not effectively implement our sales, marketing, service and product enhancement plan our sales may not grow and therefore we may not generate the net revenue we anticipate. 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 Form 10K, Form 10Q and other recent filings with the Securities and Exchange Commission for a description of these and other risk factors. Because of the risks and uncertainties, Capstone cautions you not to place undue reliance on these statements, which speak only as of today.. We undertake no obligation and specifically disclaim any obligation to release any revisions to any forward-looking statements to reflect events or circumstances as of the date of this conference call, or to reflect the occurrence of unanticipated events. I'll turn the call over to Darren Jamison, our President and Chief Executive Office.

Thank you, Libby. Good afternoon, and welcome, everyone, to Capstone's third quarter earnings call. With me today is Mark Gilbreth, our Executive Vice President and Chief Technical Officer, and Chuck McBride, our Executive Vice President and Chief Financial Officer, as well as Ed Reich, our new CFO. In addition, joining us by phone today is -- from Brazil is Jim Crouse, our Vice President of Sales and Marketing. Today, I would like to start the call with a review of our significant events of the quarter. And then have Ed walk us through the specific financial results. Ed will then turn the call back over to me and I'll discuss our progress towards our strategic objectives and review the progress in each of our key market segments before I open the call up to your questions.

I am pleased today to announce the most successful all around quarter since Capstone went public in 2000. The $9.2 million in revenue was the best since 2001. Our net loss at $7.7 million is the lowest since 2003. Operating cash burn of $3.3 million is the best since going public and a reduction of $10 million from the same period as last year. Inventory decreased $3 million this quarter and is down $5.7 million since March of this year. Backlog increased $10.4 million to a record $13.1 million. And we neared gross margin break even which is an important milestone as we move toward positive cash flow.

In addition, during the quarter we receive a $4 million order from our Russian distributor for our new C200 product. Orders for our new C200 product have exceeded our initial expectations for calendar year 2008. As a result of these orders we have increased 2008 production to 48 units and our calendar 2009 production to 160 units. Results of the last two quarters demonstrate that the new management team, our strategies and new products are gaining significant traction as we continue to execute against our strategic objectives. At this point I would would like to turn the call back over to Ed to review the specific third quarter financial results. Ed?

Thanks, Darren. Good afternoon, everyone. I would like to provide you with our results for the third quarter ending December 31st, 2007. Backlog at the end of the quarter was $13.1 million of which $11.2 million is short term. Total backlog increased approximately $2.7 million or 26% from the prior quarter and approximately $5 million or 62% from the same period last year. Revenue for the third quarter was $9.2 million, an increase of 61% from the $5.7 million reported for the same period last year with an increase of approximately 28% from the $7.2 million reported for the second quarter of this year. Our gross loss for the quarter was $40,000 or essentially break even compared to $500,000 or 8% of revenue from the same period last year, and $800,000 or 10% of revenue from the prior quarter. This improvement in gross loss from the prior year was primarily due to increased total volume, lower warranty costs offset by lower absorption of overhead and the ending inventory.

Research and development costs were $1.8 million for the third quarter, decrease approximately $600,000 or 25% from the prior quarter, and improved $200,000 or approximately 13% from the same period last year. R&D expenses are reported net of benefit from cost sharing programs such as our UTC funding. During the quarter $900,000 was applied to R&D expense. There was $500,000 of benefits from another source for the same period last year. Overall net expenses were lowest primarily because of the UTC payments that were recognized against R&D. SG&A expenses were $6.5 million for the quarter, an increase of $100,000 or 2% from the same period last year, and increased $600,000 or 9.3% when compared to the prior quarter. The increase from the prior quarter is primarily related to the launch of our C200 and C1000 products. A third quarter net loss was $7.7 million or $0.05 per share, an improvement of $800,000 from the $8.5 million loss or $0.08 per share reported from the same period last year.

Cash balances decreased by $3.6 million during the third quarter. Cash used in operations was $3.3 million for the quarter compared to $5.4 million for the prior quarter and $13.1 million for the same period last year. Capstone benefited from achieving two milestones which generated $4.5 million of UTC funding during the quarter. As of December 31st, 2007, cash and cash equivalents were $42.7 million. Now let me turn the call back over to Darren.

Thanks, Ed. Looking at third quarter of fiscal year 2008 our revenues and backlog increased almost 30%. For the second straight quarter, our new sales organization and new distributors and marketing strategies continue to get positive traction and yield positive results. I was pleased to see the reduction of gross loss to break even which further demonstrates that as cash and product volumes increase, we can achieve positive gross margins, and then drive towards positive operating profits. We have recently received initial orders from several new distributors like Cogenco in the U.K., E-Finity in the U.S./Mid-Atlantic, Cogen Contractors in New York City and Collicutt Energy in California. This is significant as all four of these distributors serve key markets that had been underperforming or unavailable to Capstone products in the past. In addition we received an order for our first C65 liquid fuel product from NTT DoCoMo in Japan. This is significant milestone as it marks the first order for Capstone liquid-fuel C65 product and also is significant because NTT DoCoMo is Japan's premier telecom company providing a wide variety of leading-edge mobile multi-media services.

Also during the quarter we officially launched our C200 and C1000 series product at Power-Gen International in New Orleans. The reception from the marketplace has exceeded our expectations. We have already booked approximately 45 C200s before even the first commercial unit is scheduled to roll off the production line in September. We will continue our product launch strategy Power-Gen Europe in Milan, Italy, in early June. The C1000 is the first megawatt skill microturbine solution that will utilize five C200s in an iso container using a single fuel inlet, exhaust and electrical outlet. It will be light weight, quite and extremely compact in an 30-foot by eight-foot iso shipping container. This (inaudible) will allow Capstone to enter the multi-billion dollar, megawatt scale market and compete head to head with larger gas turbines, natural gas piston engines and fuel cells.

As you look at our Capstone compete with the current players in the megawatt market, you'll see that the Capstone C1000 product stacks up extremely well. The traditional gas piston engines are the low-price leaders in the megawatt scale market, however as Capstone move into larger product, we continue -- we become more competitive and should be on par with most natural gas piston engines from a first-cost basis and have a significant advantage on total cost of ownership. We should be price competitive with other gas turbines and a fraction of the price of fuel cells. When you compare the carbon footprints of these technologies, you'll see the C1000 series is dramatically lower than the natural gas piston engines that meets the same stringent carb 2007 emission standards that today only microturbines and fuel cells have achieved. When you compare the product reliability, Capstone should be significantly more reliable than the traditional natural gas piston engine and extremely competitive with fuel cells and gas turbines. The C1000 will also benefit from functional redundancy with its five turbines in each box. Each turbine has only one moving part and is advantaged by our patented air bearing technology. Capstone will begin taking orders shortly for the new C1000 series of products and expect to ship the first commercial unit in January of 2009.

Now let me turn to our key markets and give you an update on how we're performing. In Europe and Russian markets continue to grow -- show growth from last year and have been the first to adopt the new C200 products. In addition in size markets like Germany France and Spain and Italy should continue to drive Capstone products into biogas, landfill and wastewater treatment plants. The market in New York continues to be prime opportunity for Capstone's products, because of its need for clean and reliable power solutions and it's active buildings make up 79% of the city's greenhouse gas commissions. On December 2nd, Mayor Bloomberg announced a new rule outlining the safe use and installation of micro-turbine systems in residential and commercial buildings in New York. The mayor indicated that the new rule will help New York meet its commitment to reduce greenhouse gas emissions city-wide by 30% between now and 2030, and it helps for real estate development communities to build more efficient green products in the future. During the quarter we received new orders from our New York distributors for over $1.3 million. Capstone and its partners will continue to work the real estate community, KeySpan and [con ad] to help the city of New York meet it's environmental and power requirements and to move toward a more sustainable city.

The New York hybrid electric bus market opportunity continues to move forward. This is an application where the micro-turbine acts as a battery charger for an all electric bus. The electric bus that's powered by our turbine provides lower emissions, less noise and vibration and improved fuel mileage, and you combine with the higher reliable and lower total cost of ownership, it's a natural fit for transit properties around the world looking to cut emissions, improve pull-out rates, lower operating expenses and improve overall customer satisfaction. Our partner, Designline has received positive feedback from demonstrations in New York, Orlando, Charlotte, Los Angeles San Diego and many other key markets looking to purchase thousands of [ATV] buses over the years. Another strategic advantage we have in the transit market is our fuel flexibility as micro-turbines can operate on diesel, biodiesel, compressed natural gas and even propane. We anticipate seeing significant orders from Designline and our European partner, EPT in the coming quarters as these dozen of bus demonstrations turn into orders for bus test fleets.

California remains a strong market opportunity which has been limited absent our 2007 carb certified product. With our (inaudible) certification from the resources board in September we are now engaging this key market and have recently booked two orders. The only gas sector again had a strong quarter with significant orders from large owned gas companies worldwide. We continue our aggressive marketing strategy to position Capstone as the industry standard for generation and rolling gas flow through megawatts both on shore and off shore applications. Capstone has been successful in the oil and gas market as these petroleum exploration, production and transportation companies are focused on the reliability, maintainability and total cost of ownership. Because I this I will look to strengthen and broaden our global outreach efforts as we attempt to gain additional market share in this key market. During the quarter we announced a new distribution partner in Brazil called Fluxo Petroleum Services, who has a tremendous experience in the oil and gas sector and a great relationship with Petrobras, the Brazilian natural oil company. Petrobras has been an excellent supporter of the Capstone project as Petrobras continues to add to their already large fleet.

In addition, we're also looking for other areas around the world to strengthen our oil and gas outreach. We're currently looking to add a partner in the U.S. to handle the Gulf Coast area and we continue to work hard in Asia with a major focus on the markets in China, Japan and India. In our recent U.S. clean energy trade mission to China and India we signed a new distribution agreement with Shanghai Tech Steal Petroleum, or STS. STS has tremendous experience in the oil and gas sector in China. This expands our distribution in China for oil and gas and for combined heat and power. We're still in discussion with a candidate in China for the resource recovery market and we'll update you when we finalize that search. China's a tremendous market opportunity and they look to double the country's renewable energy to 10% of the country's electric consumption by 2020. In 2005 alone China's at $7 billion of renewable energy capacity. We're also heavily focused on India as they effect goals of electrifying 18,000 remote villages and meeting 10% of energy demand with clean energy by 2012. Today Capstone does not have solid distribution partners in India and has limited amount of demonstration projects. However I feel our clean, green and reliable product is an excellent fit for the Indian market. I'll update you on our progress in this key market in the coming quarters.

With the ever growing global environmental awareness and shifts in corporate and government policies it's important that Capstone branding reflect the capabilities of our green products. When people think of green energy they think of solar, wind and fuel cells. We continue to work hard to increase the awareness of micro-turbines and show the world our place in providing green reliable energy and improved efficiency. Last quarter we announced the launch of the Capstone's ultra low emission products that meets the stringent California Air Resources Board 2007 requirements and opens up the California market. This quarter we announced our new ultra low emission product has been certificate to operate on not only natural gas, but now digester and landfill gas. Certification to the new carb 2008 fuel emission standard makes Capstone the industry leader in low emissions technology worldwide. Achieving these stringent carbon emission levels we're meeting the same mission requirements as fuel cells with a fraction of the price per kilowatt and with more fuel options and operational flexibility. As the world continues to look for cost efficient solutions to energy efficiency, sustainability and ways to combat climate change, I believe our new ultra low emission product will be a tremendous value to our customers worldwide.

So in conclusion I'm very proud of my management team and the entire Capstone organization for delivering the best overall quarter in the company's history. I believe this management team continues to execute against its business plan and product strategies, we'll be able to realize our short-term goal of making Capstone a global leader in clean green energy solutions for an ever-changing world. With that I would like to open the call for questions.

(OPERATOR INSTRUCTIONS) Please stand by for your first question. Your first question comes from the line of Sanjay Shrestha. Please proceed.

Congratulations, guys, on a good quarter. A couple of quick questions. Darren, you mentioned quickly here that your largest C1000 project is going to compete against most of the natural gas engine and the total cost of ownership is going to be below some of the other guys. Can you actually talk about that. Is that going to be the case right out of the gate or do we need a certain level of volume to compete with the other types of technology? And if so, what volume do you need for that? And two, can you give us more specific detail as to the total cost of ownership for your C1000 product versus some the other recent events out of there?

Sure. Sanjay, thank you. The volume on the C1000 will automatically go up as we drive C200 sales up. We've seen tremendous sales already and obviously I've mentioned it's exceeded our expectations and we've had to raise production levels in response to that. We're already come out with our list pricing for the C1000 and C200 and it is on par with what we've seen on GEJenbacher and Caterpillar. Obviously as our production ramps up, our margins will only get better and be more competitive in the marketplace. From a total cost of ownership perspective, it will be very similar to our smaller products, it will be around $0.01 to $0.015 per kilowatt, depending on length of service contract. We'll be offering factory protection plans between one and nine years which is very competitive with what's out there in the industry. Typically the reciprocating engines are between $0.02 to $0.025 if you consider both scheduled and unscheduled maintenance, so we believe the product will have not only reciprocating engine pricing, but fuel cell emissions and the reliability of a gas turbine.

Terrific. Terrific. And one other thing. Obviously, you guys are increasing the unit C200 from [$48] to [$160]. Now for you to do that, is it really more about increasing the shift from one to three or do we need to do anything to the capital equipment as well? One. And two, Darren, it's been a phenomenal last few quarters. We did have some pretty big bookings here in the last quarter and this as well so do we need to worry about a potential lumpiness here given that we're still rolling out new product and still in a ramp up phase building the service contract? Can you talk about that a little bit?

Sure. Sure. Let me handle the first one. The C200, we've already have the plan in place to build that product. The C1000 will be packaged outside into the box by a subcontractor, so there is not a lot of new capital equipment that wasn't already scheduled to go into place as part of the ECC development program. Your second question --

Talking about the potential lumpiness from a new booking standpoint on a quarter to quarter basis.

Yes. Obviously, our business, as small as we are, is always going to be lumpy. The C200 by nature and the C100 are bigger projects and bigger orders so that's going to lead to lumpiness. The way I like to look at the business though is revenue and backlog together on a quarter by quarter basis gives us a little better understanding where the business is going. The big order slipped from the week outside the quarter that's going to give us some lumpiness.

Got it. But given the backlog trend we should not see that lumpiness to materialize right away in any near term quarters, correct, is that a fair assumption?

That's a fair assumption but it's always with the caveat that the customers can move orders around. We cannot force them to take product. So again, look at the overall revenue and backlog together for the next several quarters to tell the whole story.

Terrific. That's great. And one last question for me. In terms of this great trend on the backlog side, can you -- I know you talked a little bit about the end market dynamics of the traction you're getting. Can you talk about that that backlog number, how much of that is a service component? And in that backlog it sounds like C200 makes up the majority of it so you can talk about some of the key end market and the product mix in that backlog?

First let me say, we do not give breakouts on our backlog but you've seen the last couple of orders so you can get a feel for how much is traditional business and how much is C200. There is no service in our backlog number or accessories. We only show backlog on a unit case basis. So the backlog of the unit service which is growing and accessories which is growing is not in that number.

Got it. Terrific. Once again, congratulations on a great quarter here, guys.

Thank you, Sanjay.

Your next question comes from the line of Walter Nasdeo. Please proceed.

Thank you. Good afternoon, guys.

Hi, Walter.

So -- just so I understand, you're not expecting any additional capital expenditures on the C200. You've got capacity in place to meet those, to meet the demand and the expected demand?

That is correct. We have a little bit of CapEx in there but it's already part of the program we have with UTC.

Right. Okay. So there's no additional that you foresee right now.

That is correct.

Okay. So then let me jump over to -- you mentioned some orders coming out of New York. What do you see in there as far as the ramp up to kind of the levels that we were talking about a couple of years ago, when you were working with KeySpan and things like that? Are you starting to see some real traction like that, or are you still getting one off?

No. I would say we booked four orders in the quarter. Obviously, it's early, but we're happy with that result. Total is $1.3 million. I think it's more important that it wasn't a single order for $1.3 million, it was four orders for $1.3 million. All of the legacy sites that had gone in before we had the problem with the building department and fire department, are up and running, so that gives us show cases to show customers. KeySpan is being very support in doing seminars and promoting our product so we hope to achieve the ramp we talked about before, obviously though it's early. Bloomberg support was great to come out in support our product, so next quarter we can give you more definitive on what the growth looks like, and we can draw a couple more points on the charts. But so far so good, we're very happy with the early results.

Okay. So you're in a pretty decent position then -- I keep coming back to capacity because assuming that you get a real hockey stick kind of trend on demand here, and it's kind of -- with the 60s and the 200s. And are you able to kind of meet a big demand if it does in fact hit over the course of the next few quarters?

Yes. We've got capacity, Walter, to do about 2,000 machines without any major CapEx, several hundred thousand dollars but not any big money. We have plans in place to take the factory up to 4,000 unit capacity with another $10 million to $12 million in CapEx. So no new bricks and sticks, just some new machines. So we think 4,000 capacity with additional CapEx will get us over any hockey stick we're going to see. Obviously, those are the kind of problems we want to have and then we can look at moving some manufacturing off shores or other components that we can move off shore as the numbers get above 4,000. So we're still running single shift. We have got a lot of capacity still. We've run full blow SAP. Our founders did a lot for us as far as putting together a facility. So we're very excited about meeting any potential hockey stick that comes our way.

Okay. Well listen, I appreciate it very much. Have a good afternoon.

Thank you, Walter.

Your next question comes from the line of Eric Stine of Northland Securities. Please proceed.

Hi, guys. Congratulations on the impressive results.

Thank you, Eric.

Very good to see. Well, a lot of the questions have been answered, but I wanted to touch on the service business. I know that that's been a business an initiative you're focused on and if you could just talk to some of the trends you've seen or the progress you've made in the after-market.

Sure. Sure. We had another great service quarter. Each quarter we've shown growth on the service size of the business both in accessories, spare parts and factory protection plans. Probably next quarter or the next two quarters will give you a little more granularity on the service business. As an anecdotal statement I said before, if we had all 4,000 of our machines under service contract, SPC, we'd double our revenue. So big opportunity on the service side.

Obviously the better our machines perform the harder it is to go back to a customer who hasn't had a failure in three years and sell them a factory protection plan, but that's still part of our initiative as we go forward. We want to make sure that all new products especially C200 are sold with service plans, we're making that part of the sales process. Service is a great opportunity for us going forward. Our meantime to repairs are done. When I first got to the company we had great [MTBS] but our meantime to repairs were over 30 days. We're now down in the 48 hours to seven days, depending on the location of the customer. Still more work to do there, but much, much better improvement thatn we've seen in the past. So service is a key initiative for us going forward.

Okay. And also, I know that Jim was in China on the U.S. clean energy trade mission, and I know you signed STS as a distributor, but I was just wondering if he could speak to just the overall atmosphere there and the opportunity you see going forward.

Yes. We have Jim on the line from Brazil. Jim, can you hear in us? He must have dropped off. He may have dropped off. I'll go ahead and answer it for him. China as a whole is a tremendous market as we talked about in my script. We have got two distributors, one focused on CHP and CCHP. Now with STS focussed on oil and gas. They are the [walkshaw] reciprocating engineer distributors. They've got a lot of traction in the marketplace and they are very excited about our clean technology and ability to meat the demands, and not only in oil and gas but coalbed methane and coal mine methane and other opportunities. We're still looking for a distributor for renewables, primarily to focus on the landfill business. There are over 800 landfills in China with a megawatt of capacity or less on each landfill. Currently they are flaring at all of about 30 of those applications. So tremendous opportunity from the landfill side.

And we still look to leverage our growth in China as well as India, as I talked about as a market we've got the not gotten market in the past, but we're spending more time, especially after the recent trip. We're talking with potential strategic partners and trying to figure out a way to capture that market. So both China and India are still not near term plays and very much we'll start seeing in the next three or four quarters some good growth coming from that area. Close in the next two quarters I'd say that most of the growth will come from oil and gas as it's been. Europe continues to be very strong and I'm very excited about the HEV market in not only New York and the U.S., we're also seeing great opportunities in the Middle East, China, India, the UK. A lots of areas folks are looking for hybrid buses.

Okay. So, to touch on the HEV market, is that -- have you seen an increase in the activity there or is it pretty much status quo as far as the things are moving along steadily and you would expect orders to come?

I think if you look back probably two or three quarters ago, it's increased about 10 X. The amount of demonstration projects going on both Designline and EPT, our European partner, are backed up where people want demonstrations and they can't get to them fast enough. So the inquiries are out there, getting more and more specs. There was a recent article that came about both in New York and Orlando about the performance of the Designline bus, it's quieter, it's more efficient, so the opportunities are all up, and we believe the demonstrations are going to turn into initial orders for test fleets, as those test fleets perform well then we'll move into mainline purchasing, so this is a huge opportunity.

Okay. That's great. I guess I'll back into line, and again congratulations on the results.

Thank you.

Thanks, guys.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Jason Simmons, please proceed.

Hi, guys. Thanks for taking my call, and congratulations. Quick question for you. Do you think you'd be cost competitive at some point, not for CHP installation, but say for peak shaving installations associated with putting back up gen in and having some type of program where you could obviously have a share savings program, a peak shavings program, with regard to cost competitives to [Arisa]?

Definitely. It depends on how many hours you're going to run. A lot of our installations are 3,000 to 4,000 hours a year installation for peak shaving. We are competitive in those areas. Straight stand by or very limited peak shaving is still a challenge for us, but on our product road map we are looking at designs to basically take our 80,000 hour engine and turn it into an 8,000 or 10,000 hour engine using less expensive components and really get our cost down for more of a stand by or light duty application. So not something -- not a product we have today, but something we do have on our radar screen and we're looking into product development path. As to the C200, our real issues are increased efficiencies for all of our products, especially the C30 and C60, and then we'll look at the stand by market and other applications where we can go with the cheaper first cost solution.

Okay. Okay. And just with respect the HEV opportunity as it pertains to New York, what is the total addressable market there, how do you see that business being split up, and when would you anticipate the first orders to be let? And I guess how many buses do they order in a given year per se?

New York is the largest transit in the U.S. They have about 6,600 buses. They're currently ordering about 700 hybrids a year today. Obviously they've got to replace that fleet over a yearly basis. So big opportunities in New York. New Jersey is right behind them in size, but there is also very large applications in the west coast as well. New York is really the bell weather though.

I was just recently in Italy, the Milan transit was watching New York. There were asking about our product. So as New York goes, a lot of folks will go. We fully expect, knock on wood, that New York will order a test fleet here shortly, and that L.A., Chicago, San Diego, Orlando, Milan, a lot of these other bigger cities will follow suit. It should be noted that we do have product in the UK running today. Have been for several years. We have got product in Japan, we've got product in Europe, so this is not the first application of the product, it's just more getting into widespread use. People are really looking at hybrids and specifically our product because it does act like a battery charger, and it's so quiet, fuel efficient and highly reliable.

Good stuff. Alright. Thanks very much.

Thank you, Jason.

There are no more further questions at this time.

Well, great. I want to thank everybody for calling in, and being part of this earnings call. I just want to take a second and thank Chuck, our outgoing CFO, for sticking with us and finishing this quarter. He's done a great job in training his replacement which is always a good value for an executive. I believe that is the seventh CFO that Chuck has trained. So its a testament to his ability to not only lead an organization, but also groom his people. So I want to thank Chuck and I'll let Chuck say a couple of words here.

I want to thank the entire financial community. It's been great the last two and a half years here. It's been wonderful. Really starting to see what Capstone can begin to do and just how effective we can be in the market. It's exciting to see our new products, it's exciting to see our new distribution. I think my teammates are doing a great job, and we'll hopefully continue to see that kind of performance, which is it really exciting. New opportunity, if any of you are interested, I'm the new CFO for Craig Venture's company, Synthetic Genomics, focused on biofuels, and we're down in La Jolla. So if any of you folks are interested, I can't help but give this commercial. I'll talk to you guys later.

I look forward to the day, Chuck, that we can be running your fuels in our product here at Capstone. So hopefully it's an opportunity for us to work together in the future.

Sounds great.

All right. Thank you everybody.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.