ESCO Technologies Inc (ESE) 2006 Q2 法說會逐字稿

Good day, and welcome to the ESCO Second Quarter Conference. Today's call is being recorded. With us are Vic Richey, Chairman and CEO, Chuck Kretschmer, President and COO, and Gary Muenster, Vice--I'm sorry--Senior Vice President and CFO. And now, for the presentation of forward-looking statements and for introductions, I would now like to turn the conference over to Ms. Pat Moore, Director of Investor Relations. Please go ahead.

Good morning--or good afternoon, everyone. The forward-looking statement [indiscernible]. Statements made during this call regarding the future levels and timing of revenue contributions from each segment and operating unit, the results of recent acquisitions, the timing, ultimate value, and quantity of products, software, and services to be ordered and accepted into the Company's contracts with PG&E, growth in the AMR market, and of the Company's AMR business, the impact of the Federal Energy Bill, stock option expensing, fiscal 2006 revenues, EBIT, EBIT margin sales, EPS, and amortization of capitalized software development costs, corporate operating expenses, the success, timing, and cost of product and software development efforts, effective tax rate, the longer term success, revenues, and earnings of the Company, and other statements, which are not strictly historical, are forward-looking statements within the meaning of the Safe Harbor Provisions of the Federal Securities Laws.

Investors are cautioned that such statements are only predictions and speak only as of the date of this call. The Company's actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company's operations and business environment, including, but not limited to, the risk factors referenced in the Company's press release issued this afternoon, which is an exhibit to the Company's Form 8-K, also filed today.

The Company disclaims any intent or obligation to update these forward-looking statements. In addition, during this call, the Company may discuss some non-GAAP financial measures in describing the Company's operating results. A reconciliation of these measures to their most comparable GAAP measures can be found in the above-mentioned 8-K and accompanying press release on the Company's website at esco.technologies.com, under the link Investor Relations, Financial Reports and SEC Filings. I will now turn the call over to Rich--Vic Richey.

Thanks, Pat. Good afternoon, and welcome to our Fiscal 2006 Second Quarter Conference Call. I'll be providing some commentary on our outlook and opportunities, with an emphasis on our communications business. But prior to that, Gary is going to spend a few minutes covering our financial position and performance. Gary?

Thanks, Vic. As noted in the release, our second quarter reported EPS was $0.28 a share and was negatively impacted by $0.04 from three non-cash items called out on page one of the release. The purchase accounting amortization, the tax impact of the foreign cash repatriation, and the completion of a defense contract audit related to a divested subsidiary were not included in our previous second quarter guidance since the valuation work had just begun on Hexagram, and it was too early to estimate both the amortization impact and the amount of cash we would be repatriating within the quarter.

The completion of the defense contract audit could not be reasonably predicted based on its age. Operationally, our second quarter results were at the top end of our guidance, which included--which was included in our February conference call, where we estimated Q2 EPS to be in the range of $0.27 to $0.32, excluding amortization and repatriation.

During the February call, we expected DCSI's AMR shipments in the second quarter to be between $33 and $34 million. DCSI's actual Q2 sales were 36.3 million, driven primarily by the nearly $13 million of sales to TXU. Hexagram and Nexus contributed 6.5 million in sales in the second quarter.

In tests, we expected a 10% increase in Q2 sales versus Q1. Our actual Q2 sales reflected an increase of over 15% driven by the continued strength of our component and chamber businesses. Filtration sales increased approximately 8% in Q2 versus Q1.

In February, we expected consolidated EBIT dollars and margins to be up significantly in the second quarter compared to the first quarter. Our actual results reflect an increase in EBIT of $12.7 million and 9.5 points of consolidated margin as all three operating units showed sequential improvement.

Our effective tax rate during the quarter was unusually high due to the repatriation, as well as lower foreign-sourced income, primarily coming out of Puerto Rico.

Our balance sheet remains exceptionally strong as we ended the quarter with nearly 21 million in cash and no debt outstanding. We were successful in repatriating a substantial portion of our foreign cash and were able to repay the Hexagram acquisition debt we had outstanding during the quarter. In addition, our operations generated $12.6 million of cash. Excluding the amount spent on acquisition, we expect to generate between $20 and $25 million of cash during the year, which includes the ongoing capital spending for the TNG software project.

Our entered orders were strong and our backlog remained solid at March 31, as we generated nearly 255 million in year-to-date orders, including the 100--or I'm sorry--including the 15 million of acquired backlog from Nexus and Hexagram. As I have noted in previous calls, EBIT within the communications segment will continue to be impacted by our investment in SG&A across the businesses. The majority of this spending is the result of our outlook for the AMR business and is being spent on marketing, new product development and program management to enhance our pursuit of additional IOU opportunities.

As we move through fiscal '06, we expect to maintain this level of investment as we continue to introduce new products, features, and software enhancements to our overall AMR product offering. Additionally, as of March 1, we began amortizing the TNG capitalized software since Version 1.5 became commercially available and during March was delivered to an electric utility customer.

As a reminder, throughout 2006, although we cannot recognize revenue on the PG&E contract, we continue incurring additional indirect costs such as engineering and R&D associated with this contract, as well as other IOUs in the pipeline that will hit the P&L in '06.

Regarding the balance sheet, inventories, excluding the addition of Hexagram, decreased $4 million in the quarter, primarily as a result of the significant increase in Q2 sales at DCSI. Other assets increased compared to December 31, due to the additional capitalized software expenditures related to the ongoing development of higher versions of TNG, as well as capitalized intangible assets related to Nexus and Hexagram.

I'll be happy to address any specific financial questions during the Q&A. And now, I'll turn it back over to Vic.

Thanks, Gary. To start, I wanted to recap our top level perspective regarding our businesses and the role they play in support of our mission, which, of course, is to maximize shareholder value over the long-term. In that regard, our focus is on the profitable growth of our businesses.

With respect to filtration and test businesses, they are performing in line with our expectations and making contributions. They both have solid management teams that are well-focused on improving--improved performance and have opportunities to expand their contributions. In the near term, we'll probably have more upside opportunities in the test business.

The test and filtration businesses taken together provide a solid foundation and help support the investments we are making in the communications segment where we continue to see significant upside opportunities for an extended period of sustained growth beginning in fiscal year 2007. I believe we're exceptionally well-positioned to capitalize on the opportunities and deliver the significant growth.

There are a number of items we support [indiscernible] perspective. The PG&E program, where between DCSI and Hexagram, our contract value is in excess of $500 million. Our customers public expressed both the satisfaction with the initial performance and an expectation they will receive a positive decision from the Public Utility Commission in July of this year.

Beyond the PG&E program, DCSI is in what appears to be the final stages of a pilot program at another major investor-owned utility. Our system is performing well and our customers are in the process of finalizing their business plan for a system-wide roll-out. If the business plan is approved, we expect to play a major role in the full deployment of their system.

In terms of other activity in the IOU space, there are a number of major utilities making tangible progress and solidifying their plans, including a second major utility in California, which could represent another significant opportunity for both Hexagram and DCSI.

Outside of the IOU market, the electric co-ops remain active. We continue to expect that the co-op market will provide a solid foundation of profitable foundation for DCSI. Additionally, we are working to strengthen our alliances with other participants to ensure that our position is maintained or enhanced.

We are also seeing a heightened activity in the municipal water market, and we're particularly encouraged by the feedback we've received at Hexagram on some of our larger outstanding proposals in this market. As with DCSI and the co-op market, Hexagram is also in the process of extending its alliances in the water market.

On the software side, Nexus continued to have a number of opportunities, and we're expanding their visibility in the marketplace through interaction with our other AMI businesses. We're particularly enthused about Nexus' recently announced selection by PPL to deliver a full suite of software products, which will interact with DCSI's AMR system. With respect to our new partners in the AMI business, Nexus and Hexagram, our outlook is that both businesses will be accretive in fiscal 2007, and Hexagram is expected to contribute significantly, assuming the PG&E program stays on schedule.

Beyond that, we see a wide range of incremental benefits to be drawn from DCSI, Hexagram, and Nexus working together. The benefits extend from a broader market presence through a more complete suite of products into several operational opportunities, including some we didn't anticipate, such as the RF-10 [indiscernible] that our ETS subsidiary can offer, and the plastic molding expertise that Filtertek is providing to DCSI and Hexagram.

In order to assure that we get all of the benefits that are available through the collaboration with our new partners, we have established a structured framework for identification and implementation of these opportunities, which I am leading, together with the executive management of our operating units.

This is an exciting time for ESCO. In the near term, we're focused on execution to assure we can deliver on the opportunities. We offer an extended period of sustained growth, both through incremental improvement and test and filtration, and a step change in the contributions from our communications business.

I appreciate your taking time to be with us this afternoon and I'd be glad to answer any questions you may have.

Thank you. (Operator Instructions.) And our first question will come from Richard Eastman with Robert Baird.

I just have a question on the amortization. Gary, is the amortization running at about a $2 million a quarter rate with everything in for the full quarter - with both acquisitions in? Is that about the right number to use?

Are you talking just the intangible amortization?

Yes, the intangible amortization that runs through the P&L.

No. I laid it out on page--.

--Okay. I saw the number was like 1.6 million or something wasn't it? From some kind of--.

--Yes. That seems a little high. Basically, what it's going to be doing, it's--obviously, it was 800,000 in the second quarter, it's going to be 1.1 million in the third, back down to 800,000 in the fourth.

Okay.

And then, it becomes about 500,000 a quarter in '07 and 250,000 beyond that. And why it has such an odd shape is there's a multitude of items in there that have amortization ranging from as short as six months for certain items in backlog, and as long as seven years for other things that are more patent-related type issues. So it will kind of move around like that. But I tried to spell it out to give you an opportunity to look at it each quarter for this year, as well as next.

Okay. I will--I'll find it in the press release here. And then, also, Vic, could you just walk real quickly through the PG&E--the process? There's been kind of this review process going on on the electric side and I think all sides being heard. And what's your understanding of a timetable there for kind of a thumbs up out of the CPCU?

Yes. The testimony has all been completed. In fact, it was completed about 30 days ago. I believe they've written their response. And the current date that PG&E has provided is that they expect a PUC--a decision from them in July of this year. Now that obviously could move a little but. But they're anticipated date and what they've said is July.

Does that also apply to the gas side?

Yes. It would actually be for the overall business case.

Overall--okay. Excellent. Okay, great. Thank you.

You bet.

Next we'll hear from Steve Sanders with Stephens.

Good afternoon.

Hey, Steve.

Hey, Steve.

Gary, a numbers question first. If I think about the $0.15 of lower guidance, I get $0.04 of charges in this quarter, it looks like about a nickel from the tax rate and another $0.04 from amortization in the back half. Does that sound about right?

Yes, that's fair.

Okay. Vic, would you care to expand on your comment about the final stage of another pilot with an IOU?

I don't really think it's appropriate to expand much more than that other than, as I say, we've had a pilot and we've talked about it the last couple of conference calls. And they have gone through the phase and are wringing the system out. So beyond that, I think that's probably the right thing to say about it at this point.

Okay. And then, on the DCSI orders, excluding TXU and the Florida Power transponders, I guess 18 million. How did that compare to what you guys were expecting?

That wasn't--that was pretty much in line with what we were expecting. I mean, we do have a bit of ups and downs that every quarter it's not one of these things where it's going to roll-out four quarters straight in a row. So we had a really strong quarter last quarter, if you remember, and the quarter before that was a bit weaker. So it was in line, I would say, with what we anticipated.

And so, the pipeline going into the back half of the year, should we sort of use the average of the past couple of quarters as a good run rate to think about?

That's probably the right way to think about it. And again, there may be some ups and downs, but that's the way I would look at it.

Okay . And then, TXU, where is that backlog now, including this additional order?

We--go ahead. Yes. We've entered about $37 million in orders and we've taken $21 million in sales. So we have the rest of that 6--the rest of that in backlog.

Okay. And then, the Florida Power order, is that an expansion or a replacement? Just can you give me some existing color on that?

On the load control pieces. Yes, that's just additional units. And they are just adding more homes through the system. So you are going to have over 800,000, probably getting close to 900,000 homes that have our devices in them.

Okay. And then, a final question just on what you've seen from Hexagram since you've closed the deal in terms of order activity.

Yes. It's--again, it's been pretty much in line with what we anticipated. They've got some--as I mentioned in my discussion while ago, we've been encouraged by some of the things we've been hearing from some of the other customers that have yet to make a decision, but--or place an order. But I would say it's in line with what we anticipated. I'd say the early read is we're still very happy with what we've seen there--their system's performing very well.

In fact, we're having our users group here in St. Louis today. And I ran into the guys from WPS and I said, how's that Hexagram system working? Because, as you know, they did the gas portion after we did the electric. And they were extremely happy with the results they were getting. So we feel pretty good about that.

Okay. Thank you.

Your next question will come from Patrick Forkin with Tejas Securities.

Good afternoon. Vic, with respect to the extensions on the load control side for FPL, your installed base there, whether it's 800,000 or 900,000 homes, does that give you any competitive advantage for installation of an AMI system at FPL?

Well, I mean, if they chose to put an AMI system in, certainly the substations that we have would support that. And in fact, I think I've mentioned before that when we won the PPL job, one of the requirements--one of the things we had to put in writing, which was easy to do because it already does this--is that they wanted us to be able to--they wanted to be convinced that if they chose to go with a load control system that it would support that. So the substation equipment we put into a utility would support either remote control or an AMR system--or AMI system.

Okay. And then, I didn't quite catch your comments on the other California IOU. Could you go over those again?

Well, I just said that there is one--I think they've made public that they're looking at advanced metering as well . And in fact, as you know, PUC has said that for all three of those utilities to take a hard look and come back and tell them how they were going to implement a system over time.

So one of those remaining two you--you're in the game on? Is that kind of what you're saying?

Well, I think every--there are bids that have been in and certainly we made a bid on the current proposal.

Okay. And then, with respect to now you've got Hexagram and Nexus under your belt, and I understand there's a lot of integration there. Is there anything else that you guys might be looking at or would consider from a strategic standpoint acquisition-wise as you go forward here?

Certainly. Near term we're going to focus on integration of those businesses. But we see this as the growth engine of our business. And there other things that we think that we can do, either from a hardware or software perspective and--as well as starting to look more internationally. That side of the market seems to be picking up pretty significantly. And we're currently evaluating the best approach for us to participate in that.

Okay. And then, on TXU - the 100,000 endpoint order. Where does that bring you in total endpoints for TXU?

Just a little short of 500,000 units that's--I think 465 is the exact number. And we anticipate--and I think everybody is aware of what they've talked about down there with BPL, but we anticipate getting to the million--get to the million units over the next couple of years. And then, beyond that it really depends on how the BPL deployment goes.

From a competitive standpoint, you mentioned BPL. Are you guys hearing anything of substance as to how that's going at TXU or anyplace else?

No. That's--other than there, I mean, a lot of people have put systems in and continue to evaluate it, as I think I mentioned on the last call. As far as we know, it's currently only run in the past about 10,000 homes. And that's not 10,000 homes are utilizing it for this purpose, but that it actually runs past. So it's still in the early stage, I would say, but something we're certainly going to keep our eye on.

Okay. And last question. In reviewing the testimony in the PGE CPUC proceedings, there seems to be some focus on load control by some of the usual detractors - [Turn] [and] DRA - actually pushing for load control. I assume that nothing was included in your bid to PG&E for load control. And do you think there's any potential for add-on possibility there?

Early on, when they were having discussions and it was in the proposal phase, they were looking at doing some level of load control. I think they've kind of backed away from an absolute load control system at least at this time. They're looking more at an approach of behavior modification, if you will. Things like the time-of-use billing, as well as they're looking at--talking about things like set back thermostats, which all of those things are something that provides the consumer with a lot more flexibility and a lot more control versus an absolute load control system.

So I would say that based on the knowledge that I have and the things that I've read, that would be more their approach rather than installing an absolute load control system at least at this time.

Okay. Is it safe to assume that you guys are working on the development of sort of behind the meter applications like the smart thermostat?

Well, we would be working with other people on that development. I mean, a smart thermostat is probably not something we would develop on our own. It's something we would work with third parties to do.

Okay. Very good. Thank you.

We'll now hear from John Quealy with Canaccord Adams.

Hi. Good afternoon. Just in terms of the Nexus Hexagram integration. You mentioned efforts are ongoing. Could you walk us through as much as you can - obviously, with competitive reasons - what types of things you're doing right now given that we've got a few months under the belt of both of those deals?

Sure. What we're doing, John, is we put a structure in place, if you will, to ensure that we've got communications between the engineering groups in each of the three businesses, between the marketing and sales group in each of the three businesses. The operations group. We actually have about eight different groups, which we want to make sure that we're communicating probably, that we're looking for opportunities to work together well, evaluating best practices.

That is--for instance, I mean, this is a small thing. But I just had a discussion with a member of our legal staff today. And he said, hey, I reviewed Hexagram's kind of standard contract that they use. And he said, there were some really good things in there that I think we're going to incorporate in DCSI's and there are some things in DCSI's we can incorporate in theirs.

So, I mean, that's a small thing, and, obviously, we're looking for bigger things as well. But those are the types of things when you get together with these companies that we want to make sure we wring out the maximum amount of benefits. But I really think that the big ones are going to be let's make sure we've got the right products to take together. Let's make sure we're sharing intelligence together so that we're aware of what's going on in the marketplace and what the customer wants, so that we can efficiently develop the right products and go after the opportunities in a coordinated fashion to enhance our ability to win some of those.

In terms of your expectations between the contributions between Nexus and Hexagram, it's a bit tough to tell with the detail you gave. But relative contribution, I mean, would you say that Nexus is running a little higher relative contribution vis a vis expectations versus Hexagram here? Or could you just give us your thoughts of how those guys are progressing on their order books?

Well, from an order perspective, I would say Nexus got off to a really strong start--a little stronger than what we'd anticipated. Hexagram, I would say, is in line with what we'd seen and we took a pretty hard look at the pipeline. But they're consistent with what we had thought was going to be happening at this point. And Nexus is a bit ahead. They had, to my knowledge, the best quarter they've had since they've been a company. And so, that was great. And a big piece of that, of course, was the PG&E contract where, as I mentioned earlier, they bought their full suite of products - the MDM system, the VEE layer, the whole--everything that Nexus sells, PG&E bought.

So that's really going to be good for us because it gives us an opportunity for a customer to go and look at here's the full suite of products, here's all the benefit you can derive by having this full suite of products. Because one of the things we had talked about with Nexus is so many of their customers currently only have one of their software packages--one of their software packages rather than all of their software packages. So one of the real opportunities is to go and try to backsell some of those customers. So with that being deployed at PPL, that's going to be a real benefit to us.

And my last question. Cash flow or expectations for cash flow. I don't think you brought it up in the call or in the document. I don't know--if you did, I may have missed it. But Gary or Vic, could you talk a little bit about what you think cash flow is going to be this year--what you're going to use for CapEx and working capital?

Yes. I think the absolute value is going to be between 20 and 25 million, and that includes approximately 25 million that we're spending this year on the TNG product. And our CapEx, non-software related, should be in the neighborhood of 8 million. And so, from an operational perspective, we're kind of thinking of it in terms of 50+ million, of which we're investing heavily in the TNG.

All right. Great. Thanks.

Next we'll hear from David Smith with Citigroup.

Good afternoon, guys.

Hey, David.

A question on TXU. It seems to be coming in in bits and pieces. And we got a hold of a document this quarter that seems to go over their intentions. And it seems like a longer term roll-up they've got planned as far as AMR goes. But just do you foresee that this will be made into a larger contract or will we see it come in in pieces?

They're--we don't see that they're going to change. At least today, I don't see that they're going to change their approach. And so, it's taken them approximately 18 months I guess to order this first 500,000 systems--roughly 500,000 systems. And so, I would assume that they plan to roll-out the rest of our deployment at least over the next couple of years rather than turn it into one big contract. I mean that's what they've done thus far. I think the reason they've done that today is they just have a different capital cycle. And so, rather than get one approval for an entire roll-out, they've been doing it more on an annual basis.

I got you. So based on this form that we got, it sounds like they're convinced of the technology. But do you see them going with another supplier? I guess that's the risk in this is that they don't--if they don't make a follow order, do you think they'll go with you guys for the whole thing?

Well, I think, as I've mentioned before, they've publicly said they were going to do about 2 million with BPL and the rest with another supplier. And I don't think that now that they have 500,000 of ours deployed, that they would switch suppliers for the other 500,000.

Right.

Obviously, that's an option, but the way our system works because it's substation driven, I think they would not have made the decision if they were going to go with multiple vendors for that. So that's always an option, but I don't think it's a very high likelihood that they would that.

Okay.

Particularly, we continue to perform and things have gone very well down there. And if you perform, there's no reason for them to switch.

Right. Okay. As far as the other IOU contract that you mentioned, should--is that kind of like two or three quarters out, or one to two quarters out? Any idea on the timing on that and the California?

Well, the one I was talking about probably in the second half of the year certainly. Probably in the fourth quarter. It could happen earlier, but probably in the fourth quarter. California, they've not made a commitment yet on when they are going to make a decision. But they're pretty actively talking to folks throughout the summer.

Okay. As far as Hexagram goes, the sales that they put up this quarter, I'm assuming that's--would it all be a co-op, I mean, if [they follow] these sales?

Well, they--theirs are all really municipals and I--they probably had a little bit with WPS and Corpus Christi I guess is the other one.

Okay. And then, just a last thing I didn't catch. On the guidance you talked about it earlier. But can you just again break that down and just run it by really quickly? I didn't catch it.

Okay. It--obviously, when we put out our last guidance we did not include the amortization of the intangibles. We certainly hadn't recalculated the repatriation and the changing effective tax rate and certainly hadn't included the gain from that defense contractor. So net/net, what we're saying now is that GAAP guidance - what you'll expect to see in the financial for the year - is $1.05 to $1.15. And basically, when you back those events out of the equation, we're essentially back within the range of our previous guidance of $1.20 to $1.30.

Okay. And then, $0.04 roughly from the intangible I think you said or the caller said. I didn't catch what the numbers were there.

Yes. It's 2.7 million of pre-tax, so it's probably a little closer to $0.06 or so--$0.06 or $0.07 at the effective tax rate.

Okay.

And the repatriation, obviously, falls straight to the bottom line since it is taxed.

Yes.

And so that's the biggest item.

Got you. Great. Okay. Thanks, guys.

Okay.

(Operator Instructions.) We'll now hear from [Ben Sun] with Canaccord Adams.

Well, my questions have been answered. Thanks.

We'll hear from Chris Summers with Greenlight.

Hi, guys. As you guys look out into over the medium term, wondering how you see the split between I guess fixed network in the communications segment with utilities versus the solution that [ITRON] currently offers with their drive-by system. I know that in the last couple of years, you guys have been fairly competitive. But a lot of industry consultants seem to say that fixed network is the way to go and currently ITRON doesn't have a viable large-scale deployable fixed network solution that's actually been deployed.

So I wanted to hear I guess where you think the mix between your technology--or I guess fixed network technology is versus the drive-by technology over the next two to five years. And then, how you guys are positioning yourselves to take advantage of your current favorable competitive position. Thank you.

Okay. Well, the majority of the RFPs that we've seen come out recently - I'm talking about in the last two or three years - for new deployments--and I think it's important to make that distinction - for new deployments - have been really geared toward the fixed networks. If you look at what happened at--in TXU with PPL, with PG&E, with--the vast majority of the new deployments have really been focused toward fixed network. And I think that will continue to be the case.

Now having said that, I mean, there have been some smaller ones and certainly expansions of existing drive-by systems that have been there. So what we are focused on are the new deployments. And we think we've done a pretty good job of positioning ourselves. We made a big investment, and we've been talking about our investment in SG&A for the past two years. And we'll probably continue to talk about it because that's what it's going to take to be successful.

That's really the reason that we've made--are making the investment in TNG that we've made. We actually made the decision to do that close to two years ago--about two years ago. And we started making that investment because it wasn't just to satisfy the PG&E requirement. Having said that, had we not been making that investment, we probably wouldn't have been successful with PG&E. Because if you look at the requirements they laid out in their RFP, it really took the capability that we've now--are now in the process of developing to satisfy that.

So if you look at the hardware products that we are introducing, if you look at the software that we've developed, I think we've done a good job of positioning ourselves to be successful as these new--or these IOUs make this decision to go forward.

Great. Another follow-up question. I guess this might be less material. But more people are making noise over this broad--broadband over power line. And I didn't know if this had any implications for something like your technology or even on like a meter manufacturing side, or if it's kind of total separately and it would be built separately and the energy consumption would be totally different.

Well that--again, the thing with BPL is it is a pretty new technology. The thing that I always point to when people talk to us about BPL is that we have a system that's been proven, it's in proven scale, it's been deployed in a large number of locations. We're currently reading over--well over 1 million meters at BPL and 1 million meters--close to 1 million meters at PREP in Puerto Rico, and 600,000 meters at WPS. So as people talk about BPL, I mean, the technology does work on a small scale. I mean, there's no denying it. I think the question is, is it going to be--is it able to be scaled up, is it going to be cost effective, and when are those things going to take place.

So it's something, again, that we keep our eye on and we want to stay close to and we want to understand it. But today, I would say we have a lot of things to offer a utility customer that BPL doesn't.

Great. Thanks a lot. You guys have answered all of my questions. Thank you.

You bet.

And there appear to be no further questions at this time.

Okay. Well, thank you all for joining us this afternoon, and we'll talk to you next quarter.

That does conclude today's conference call. Thank you for your participation.