燃料電池能源 (FCEL) 2017 Q2 法說會逐字稿

Good morning.

My name is Tracy, and I will be your conference operator today.

At this time, I would like to welcome everyone to the FuelCell Energy Second Quarter 2017 Conference Call.

(Operator Instructions) Thank you.

Mr. Kurt Goddard, you may begin your conference.

Good morning, and welcome to the Second Quarter 2017 Earnings Call for FuelCell Energy.

This morning, FuelCell Energy released financial results for the second quarter of 2017.

The earnings release, as well as a presentation that will be referenced during this earnings call, is available on the Investor Relations section of the company website at www.fuelcellenergy.com.

A replay of this call will be available approximately 2 hours after its conclusion on the company website.

Before proceeding with the call, I would like to remind everyone that this call is being recorded, and that the discussion today will contain forward-looking statements, including the company's plans and expectations for the continuing development and commercialization of our fuel cell technology.

I would like to direct listeners to read the company's cautionary statement on forward-looking information and other risk factors in our filings with the U.S. Securities and Exchange Commission.

Delivering remarks today will be Chip Bottone, President and Chief Executive Officer; and Mike Bishop, Senior Vice President and Chief Financial Officer.

Now I'd like to turn the call over to Chip Bottone.

Chip?

Thank you, Kurt.

Good morning, everyone, and welcome.

Please turn to Slide 4, Highlights.

We are pleased to add 10.2 megawatts of new contracts and commitments to our expanding list of customers.

These include our first project with PSEG Long Island; CMEEC, AN electric energy cooperative in Connecticut; and another university, Trinity College in Hartford Connecticut.

Our PPA-based generation portfolio is continuing to grow, including assets under construction, and recently announced the portfolio is nearing 30 megawatts.

This is a significant milestone that Mike Bishop, our Chief Financial Officer, will expand upon shortly.

Our company has obtained marketing rights at the Asian market from POSCO Energy, our South Korean partner.

Asia is the home to almost 60% of global population and represents a sizable market opportunity for our entire solutions portfolio.

We have already submitted proposals to utility customers in South Korea.

Additionally, under our Memorandum of Understanding, we are in discussion with POSCO Energy regarding the existing installed fleet in South Korea and potentially supplying modules under existing service agreements.

We are advancing our carbon capture solution with ExxonMobil, executing other contracts and responding to new interest.

We are engaging utilities regarding our unique long-duration energy storage solution and are encouraged by their interest and receptivity.

A recently announced award from the U.S. Department of Energy is contributing to our efforts to commercialize this competitive, cost-effective solution.

We are pleased to have Connecticut House Bill 7036 passed just yesterday, which provides a path to over 100 megawatts of fuel cell projects.

We have numerous catalysts globally that we are advancing, which I will discuss in more detail later, along with our growth pathway, after Mike reviews our financial results for the quarter.

Mike?

Thank you, Chip.

Good morning, and thank you for joining our call today.

Please turn to Slide 5 titled Financial Summary.

FuelCell Energy reported total revenues for the second quarter of 2017 of $20.4 million compared to $28.6 million for the prior year period.

This year-over-year change is a result of our transition to selectively retaining projects on balance sheet, which generate continuous monthly electricity sales through power contracts of up to 20 years as opposed to selling power plants and recognizing product sales at one time.

Also the prior year period included export sales that did not recur in the current period as our Asian partner, POSCO Energy, now manufactures locally under license and royalty agreements.

Gross profit for the second quarter of 2017 totaled $400,000 compared to a gross loss of $200,000 incurred in the same period last year.

Production volume is lower than last year as we control costs and manage inventory levels, resulting in negative product margins for the second quarter.

Gross profit from service, generation and Advanced Technology, in aggregate, offset the negative product margins, leading to a nominal gross profit.

Production levels will be increased as the backlog supports, which is expected to lead to margin enhancements as existing production assets are currently underutilized.

Operating expenses totaled $11.9 million for the second quarter of 2017 compared to $12.6 million for the prior year period.

Administrative and selling expenses are lower year-over-year.

Research and development expenses include continuous development of the high-efficiency SureSource 4000, with the first commercial product expected to be operational in late summer.

Net loss to common shareholders for the second quarter was $14 million, or $0.33 per basic and diluted share, compared to $16.2 million or $0.56 per basic and diluted share in the second quarter of 2016.

Adjusted EBITDA loss reported in Q2 totaled $8 million compared to $10.7 million from Q2 2016.

Cash, cash equivalents, restricted cash and financing availability totaled $124.1 million as of April 30, 2017, which includes: $46.4 million of unrestricted cash; $37.7 million of restricted cash; and $40 million of borrowing availability under the NRG Energy revolving project financing facility.

These figures do not include the net proceeds of $13.8 million from the secondary common stock offering, which closed in May 2017.

Backlog totaled $434.5 million at the end of the current period, as illustrated on the chart on the bottom left of the slide.

At the end of this quarter, service backlog totaled $188 million, generation backlog totaled $184 million, product backlog totaled $13 million and Advanced Technology contract backlog totaled $49 million.

Turning to the inventory and project asset graph on the right side of the slide.

Inventory decreased sequentially by approximately $7 million.

Project assets increased sequentially, reflecting construction activity on 3 projects.

Recently announced projects will lead to inventory reductions and an increase in project assets.

We expect to further reduce inventory levels with anticipated product deployment as we close new project opportunities in Korea and the U.S.

Please turn to Slide 6 titled Financial Model.

We continued to expand the generation portfolio, with construction starting on another project during the second quarter and 2 more projects subsequently announced after the end of the quarter.

During the earnings call last quarter, we shared visibility on near-term on-site pipelines of 14 megawatts, and subsequently, we announced 3 different projects totaling $10.2 million -- 10.2 megawatts, excuse me.

As the table on the right illustrates, we have almost 30 megawatts of projects and potential projects now in process.

We expect to execute on financing the projects that the company will retain in the coming quarters.

We were pleased to announce in March that the Connecticut Green Bank extended a 20-year financing commitment for our Triangle Street project.

I want to reiterate the breakeven targets discussed last quarter.

We have multiple paths to profitability, with cash flows diversified across large markets.

Either 45 megawatts of complete power plant sales or 60 megawatts of generation assets are expected to lead to EBITDA breakeven on an annualized basis.

We expect a blend of both product sales and continued growth in generation assets.

International sales and larger North American fuel cell parks are expected to be product sales, whereas individual power plant projects in North America will likely be retained at generation assets.

Margins from service and Advanced Technology contracts are supported and included in these breakeven targets.

In conclusion, costs are being reduced as inventory is being monetized with project announcements.

As Chip will expand upon, new product introductions and an active pipeline are expected to lead to near-term growth.

I will now turn the call back to Chip.

Chip?

Thank you, Mike.

Please turn to Slide 7 titled Market Updates.

We are executing on a number of large catalysts that I'd like to use as a guide for the discussion.

First, the U.S. adoption and deployment of distributed generation using solutions is happening -- within our solution is happening.

We are adding new utility customers, highlighting the value of clean, affordable and competitive and predictable power that solves grid challenges and enables utilities to retain their large customers.

In April, we announced a grid resiliency project with PSEG Long Island in New York.

This is our first project with PSEG.

Our fuel cell power plant will be supplying predictable power to a PSEG electrical substation under the Clean Renewable Energy Feed-In Tariff II through a multiyear power purchase agreement.

Our plant will be installed in a facility owned by one of PSEG's commercial customers, which will utilize the heat in return for hosting the plant.

This project demonstrates the benefits and competitiveness of predictable distributed power generation, while cleanly enhancing grid reliability and resiliency.

The term reliable refers to power that is delivered round-the-clock, and resilient refers to power delivered during storms or other potential disruptions.

Separately, we submitted proposals, which are currently pending, under PSEG's 40-megawatt fuel cell-only RFP.

PSEG recently provided an update on their website that 3 different clean energy RFPs, including a fuel cell RFP, are moving forward.

Recent LIPA board meetings have indicated support, the review teams have completed their work and we expect decisions will come no later than the end of July.

Given our competitiveness and preferred site selections, we are optimistic about our chances.

Installation of our 4 SureSource 4000, with its world-leading electrical efficiency, has continued to progress on schedule at Triangle Street in Danbury, Connecticut.

Suitable for installation in urban and residential areas, our SureSource 4000 provides easy-to-site, megawatt-class distributed generation, with large-scale combined cycle electrical efficiency.

We recently executed a letter of intent with Connecticut Municipal Energy Electric Cooperative, CMEEC, for a long-term supply of 7.4 megawatts of clean, distributed power.

Definitive agreements are expected in the June-July time frame, with project completion in 2018.

The CMEEC project will help our new utility consumer to economically meet their customers' needs for clean and reliable on-site distributed generation.

And it supports the Department of Defense's requirement for energy resiliency and independence.

The project demonstrates how we can help utilities to retain customers who might otherwise take alternative energy supplies and sources while reducing or eliminating capital deployment.

We announced the execution of a PPA with Connecticut's Trinity at Hartford that reduced -- that will reduce their energy cost by approximately 30% annually.

As our steadily growing roster of university customers demonstrates, we can help these institutions affordably meet their clean power and energy independence goals while expanding our generation portfolio and growing sources of recurring revenue.

The 3 new projects mentioned totaled 10.2 megawatts will be added to our generation portfolio.

Once operational, we would have nearly 30 megawatts of generation assets, as Mike points out.

We have 10 megawatts of additional projects, whose profile would complement our expanding portfolio that we expect to close in 2017.

Yesterday, the Connecticut state legislature passed House Bill 7036 that provides a path for the deployment of over 100 megawatts of fuel cell projects.

The legislation passed both the House and Senate with near unanimous support, and is awaiting the signature of government -- the governor, who has been supportive of the fuel cell industry in Connecticut.

The bill's elements are effective either on passage for July 2017, so things can move quickly based on the work we have done previously.

Two aspects of this legislation are very important in the fuel industry in general, and to FuelCell Energy in particular.

First, it enables Connecticut electric utilities to purchase up to 30 megawatts of fuel cell power plants.

The prior version of the legislation was called [Reviewable] Connections and was limited to 20 megawatts, and included solar, but we did quite well given our competitiveness.

This utility legislation is for fuel cells only.

Second, it directs the Connecticut Department of Energy and environmental protection DEEP to issue an RFP for procuring clean energy with a focus on enhancing the reliability and resiliency of energy supply and in a manner which supports in-state economic development.

Solar and onshore wind are excluded from this RFP.

This creates a path for Beacon Falls project and other large scale fuel cell projects.

Our next catalyst is growth in Asia.

Our strategic relationship with POSCO Energy dates back over a decade, and is evolving to meet the market opportunities as well as the changing goals of POSCO Energy and FuelCell Energy.

FuelCell Energy has already assumed marketing and sales for the region, having regained rights for the Asian market, while POSCO Energy will focus on servicing their existing fleet of fuel cell power plants in South Korea and operating the fuel cell manufacturing facility.

Our new agreement gives FuelCell Energy the rights to market our entire portfolio of solutions throughout the Asian market, including the SureSource 4000, carbon capture, distributed hydrogen and storage solutions.

Because these equipment configurations are not included in the existing licensing and royalty agreement with POSCO Energy, the consensual decision regarding the marketing rights involved a valuation of which party is best positioned to market them.

Unlike the U.S. with numerous utilities and independent power producers, plus regulations and requirements are different by state, South Korean power generation is highly concentrated, with only a handful of utilities and independent power producers.

We are already in discussions with most of these entities and have already submitted proposals for multimegawatt projects.

Last Friday, we were advised of an award for a multimegawatt power plant, which can be shipped in 2017, with full commissioning in 2018.

We expect definitive agreements to be finalized in the near term.

We have other proposals pending in a large pipeline of projects in development.

This partnership realignment also supports the needs of our multinational customers, enabling us to work with them seamlessly around the world.

Our Asian business model will include outright sales of power plants, accompanied with long-term service agreements.

This complements our PPA-based power model in the United States.

I would like to reinforce that we will not be buying or assuming any assets or liabilities of POSCO Energy.

Regarding POSCO Energy, they are refocusing on their large coal and gas fired central generation power plants in South Korea and neighboring countries.

They will continue to serve their existing installed base of fuel cell power plants in South Korea.

POSCO Energy will continue their manufacturing locally to support their installed fleet and is expected to commit to a specified level of modular processes from FuelCell Energy to supplement its own production.

We expect new power plant projects in Asia will initially utilize modules produced in Torrington in the U.S.A.

Over the long-term, as the Asian market grows, we'll leverage POSCO's factory as well.

Our global supply chain already includes purchases for POSCO Energy, and this will continue for the South Korean factory.

This is a thoughtful and synergistic decision where the parties will maintain an active relationship for years to come.

We expect to be successful in Asia due to favorable market dynamics, coupled with our joint experience with POSCO Energy and ability to leverage the installed base.

With a presence in Asia, Europe and North America, we believe carbon capture continues to represent a sizable global opportunity.

Numerous multinational companies are publicly committing to carbon reductions, and we're receiving inquiries from industrial companies in North America and Europe.

Global energy giant ExxonMobil is firmly committed to their relationship with us, highlighting FuelCell Energy in its recent annual report and its annual shareholder meeting presentation.

Our innovative solutions are consistent, with the White House's support of clean coal and domestic job preservation as well as job creation from export potential of our fuel cell carbon capture solution.

The Canadian oil sands engineering study for Alberta Innovates represent a consorting and oil and gas companies has been completed.

The potential next step is a pilot plant and 1 of 2 heavy oil sands processing plants evaluating the study.

We hope to hear about potential next steps from Alberta Innovates in the summer or fall.

The fuel cell carbon capture pilot project located in Southern companies mixed-use coal and gas power plant in Alabama is progressing as well.

We are experiencing growing interest in longer duration storage as we engage with utilities and explain the differences between short-term battery storage and long-duration hydrogen energy storage.

The need for cost-effective solution becomes increasingly urgent as more and more intermittent sources are placed into grid -- electric grids.

We recently announced a contract award to advance the commercialization of our reversible solid oxide fuel cell solution for long-duration carbon-neutral electrical power storage and generation.

Please turn to Slide 8, Summary.

Global market dynamics favor our business model and solutions, while diverse and meaningful near-term catalysts support our growth pathway.

Large-scale utilities seek distributed generation to address the power reliability and resiliency needs.

Asia is a sizable opportunity for utility scale projects as well as carbon capture, distributed hydrogen and storage.

We are actively marketing new solutions and are confident in our ability to capture this business growth in the region.

Our generation portfolio is expanding.

We now have near visibility of almost 30 megawatts of power plants for our generation portfolio, which brings us to nearly half of our EBITDA breakeven target with generation portfolio alone.

With this as our reference, for example, adding approximately 20 to 25 megawatts of power plant sales on an annual basis will allow us to achieve EBITDA breakeven.

We continue to advance fuel cell carbon capture and energy storage, both of which represents significant future potential value.

We are working hard to capitalize in these favorable catalysts through the efforts of our talented team of associates.

Operator, we'll be happy to take questions at this time.

(Operator Instructions) Your first question comes from the line of Eric Stine of Craig-Hallum.

I just wanted to start with POSCO.

I just want to make sure I'm clear on this.

So I know you're targeting the MOU to be finalized later this year.

But I mean, it sounds like you're good to go in terms of going after that market, negotiating things.

I mean, is this something that -- you referenced the multimegawatt power plant where you expect to have definitive agreements.

Is that something that is dependent on the MOU being signed?

Or are you free to go after that market and sign some of these before that happens?

Eric, this is Chip.

Let me answer that.

Now we are moving forward as FuelCell Energy Korea to sign contracts in the country with the utility companies.

The MOU that we signed sets out our ability to do that, and we have immediately taken action and found a lot of enthusiasm and support to do that.

So I would expect in the next few weeks, you'll hear from us with announcement of our first multimegawatt, very sizable project that I referenced in my notes.

Got it.

And so the MOU is simply for -- I mean, is it stack replacements for their existing fleet?

Yes, there's a couple of elements in that MOU.

One was it gave us the right to go after the market, which I just talked about.

The second thing says that we'll work together on how do we and they support their long-term fleet of almost 200 megawatts of customers, which are all utility customers, frankly.

So it was just something we wanted to put out to clarify to the market what our intentions were so everybody understood what was going on.

Yes.

Okay, good.

Maybe just turning to Bill 7036.

You mentioned the 2 aspects, and the second being DEEP and the RFP.

I mean, any thoughts on timing of that RFP?

Has there been any indication there?

And then you mentioned that the first part is fuel cell-only.

The second part, the RFP that you're looking for, is that also fuel cell-only?

Or -- I know it excludes solar and wind, offshore wind, but are there any other technologies in that second bucket?

Sure.

So let me first say that 7036 is a very big deal.

A very big deal.

Something that we said we're working on for quite some time consistently and we brought that to bear.

The first portion of it was the utility procurement allowance that allows for utilities to procure basically generation assets.

That particular aspect, as I mentioned, Eric, is fuel cells only.

So that's good for us.

That's right in our wheelhouse.

We have been having active discussion with the utilities.

They were completely supportive of that legislation.

So those things, I believe, will move fairly quickly here, because many of the projects, we could tee up for that.

We've said all along that we spend a fairly good amount of time and effort in developing projects for the inevitability of these things to happen, some of which, we've developed for the last RFP, but some even in addition to that.

So that should move pretty quickly, and we're well-positioned to take advantage of that.

The RFP itself, again, it's -- there is some, obviously -- it takes effect on passage year.

We expect the governor to sign that bill here any day now.

But that should move quickly as well.

Now that -- the details of that are it excludes solar and onshore wind.

And the reason for that is because if you look at what's in the statute and what's actually in the bill, it wants to address resiliency and on-site assets.

And again, the utility industry is very supportive of that, that particular legislation as well.

And that's a big number.

That could be anywhere in its own of 250 megawatts in total.

Now there is opportunity for offshore wind and some other biomass things to participate in those RFPs, but as we know from the past, those are generally more expensive assets and longer to set up.

So we feel really good about utilizing that vehicle that I just mentioned to push forward on, again, many of the projects -- large projects we developed in the past.

Your next question comes from the line of Carter Driscoll with FBR.

This is Nate on for Carter.

Can you just remind us again for the LIPA award, how many bids you submitted and the range in size?

And how quickly and in what form could you secure funding if you won multiple bids?

So Nate, I'll answer the first part of that, what we did, and then maybe I'll just have Mike answer the second part of, which is the financing of it.

So the RFP itself was to procure 40 megawatts of fuel cells.

What we actually did was, we obviously had worked with LIPA on what they were trying to achieve, which was to put assets at what they considered to be the most important substation.

So they ranked all these different substations and they told everybody that.

So we actually bid well over 40 megawatts of projects of different sizes, anywhere from 19 megawatts, I think the smallest one we bid was like 7. And it's kind of a menu, if you will, for them to figure out which project over which terms they want to -- fits the site the best.

So we would expect that they're going to pick 40 megawatts or thereabouts.

And we feel really good about what we put in and the questions we've gotten and so on and so forth.

So we expect that to move, come to conclusion no later than July, which is what they have in their RFP and had had in their RFP, could be sooner.

Relative to financing, let me turn it over to Mike.

Sure.

Yes, to answer that question, these projects are projects of size.

They put out good cash flow.

An 18-megawatt project, revenues around $18 million a year, with a very strong EBITDA profile.

We've had active discussions with the finance community, both current partners and potential other financiers on these projects, and are confident if we get awarded, that there will be a good market for financing for these projects.

Okay, great.

And then just in terms of monetizing projects, how do you think about product sales versus generation revenues?

Is it dependent on the project size, where you'd like to keep bigger projects out the balance sheet?

And what would be the project size threshold there?

Just any color on that would be very helpful.

Sure, Nate.

This is Mike again.

Yes, as I said in my remarks, if you look at Europe and Asia, in particular, those projects are projects of size and will be product sales.

The model in Korea is utility ownership, so we would sell those and that would be top line revenue.

Similar to North America, as we just talked about the LIPA, those are sizable projects that we would expect to sell.

When you look at projects of the profile that we currently have in our generation portfolio, those were projects anywhere in the range of 1.4 megawatts up to 7.4 megawatts, on-site projects that we would likely retain.

So that's kind of the range.

On-site projects in the range of 1 to 7 megawatts, likely retained on balance sheet, where we'd bring in debt financing as we've done in the past.

Anything above that, typically, product sales.

Your next question comes from the line of Jeff Osborne with Cowen and Company.

A couple of quick ones.

Can you talk about, Chip, any programs with PSEG above and beyond the 40 megawatt feed-in tariff that are still active for bids from you folks?

Sure.

Yes.

So we have -- the projects -- the first one that I mentioned that we already have came from another program that they had.

So we got something out of that.

Then of course, you have the 40-megawatt RFP.

We are working with them on a number of other projects, not just PSEG, but -- I think your question was PSEG Long Island specifically, but broader than that, because of the state's energy policy development that they created here, so I can't say too much, Jeff.

But we do have other projects that we're working with folks with PSEG on, yes.

And do you think, without specifics, could any of those have a decision in calendar '17?

Yes.

Yes?

Yes.

I would expect those to have a decision in calendar '17.

Perfect.

And then 2 for Mike.

Mike, can you talk about what roughly the production levels would need to be to be breakeven on the gross margin line?

I heard you gave the EBITDA, but just the margins were a little less than anticipated in our model with the underutilization, so I just want to think about how to model that.

Yes.

Sure, Jeff.

So from a product sales perspective, very low product sales this quarter.

What's currently in backlog is a combination of EPC projects that we're finishing up on and some spare parts.

If you look at the kind of the negative margin there, about $2.5 million or so of, I'd say, under-capacity that we need to cover, so that will come, as I said earlier, likely from Korea sales or larger product sales in the U.S. We can get there at a production value in the range that we're at today, 25 megawatts.

Right now, that's been going into inventory and servicing on the fleet, but there's more beyond just modules as the complete power plant as well as EPC.

So we can certainly cover that in the volume range of 25 megawatts.

Okay, got it.

And then the last question I had was on the generation revenue.

And again, thanks for breaking that out as it becomes more meaningful.

But one, A, a suggestion; and B, just a clarification.

The suggestion would be, if you're highlighting the uptime of these systems, is there a way, similar to the geothermal industry, that you could report megawatt hours or gigawatt hours of generation for the fleet?

That would be helpful.

Because the reason why I asked is that it looks like generation revenue was down about $0.5 million sequentially for the same size fleet at roughly 11.2 megawatts.

So I just -- solar, I'm used to the seasonality, et cetera, but I was expecting that number to be a little bit more stable and have that type of variability.

Did you have any outages at any of the facilities or some other variable I'm not thinking of?

Yes.

No, sure.

Fair point, Jeff, and appreciate the idea there.

Yes.

In the quarter, we did have some planned downtime.

We were implementing a micro grid at one of the facilities, so we did take an outage, which impacted revenue.

There is some variability in the generation revenue with incentive-type revenue.

But I think as we've laid out the beginning of the year, we expect, for this fleet, 11.2 megawatts to generate annual revenue in the range of $7 million to $8 million, I'd say, Q2, lower-end of that range and potentially higher later in the year.

And certainly, as these other assets come online, continue to increase generation revenue.

Your next question comes from the line of Colin Rusch with Oppenheimer.

Can you talk a little bit about the discussions with POSCO at this point in terms of restrain around warrantees and wrapping projects as you start building things out under this new arrangement?

Is that on the table?

Or should we be thinking about that risk coming to you guys?

Yes, Colin.

This is Chip.

Let me take that.

So we're deploying our business model that we used here for that.

And what I mean by that is, obviously, you have EPC contracts, and then you have service agreements, okay?

So the same service agreements we have here, the same terms would apply there.

So figured it out, it's no different than here.

So as far as POSCO's involvement in these things, clearly, some of these customers, not particularly the one I was referring to, but they got 200 megawatts of customers already.

And so they have units running.

So we work with them, where we have a customer that might have existing assets there and figure out what we do with both the new opportunity as well as the existing installed base.

But we always come up with our own terms and have a direct responsibility, by ourselves.

(inaudible) operates the plants.

We'll take any -- service agreements are directly with us, and we'll put those, as Mike said, in the backlog for service, things like that.

That's super helpful.

And then thinking about the existing portfolio of assets.

As you had more operations -- operational history, and obviously, you've got good credits on the other side for the offtake, is there an opportunity to refinance those assets and free up a bit of cash on the balance sheet?

Sure.

This is Mike.

Yes, that's always an opportunity.

These assets generate great cash flows, have gotten the interest of different financing partners.

But it's also important to the company to get to EBITDA positive and retain cash that we can from the project.

So I'd say, as the portfolio grows, we'll look at refinancing opportunities and bringing in other financing partners into it and continue to grow it that way.

Excellent.

And then one final one for me.

So you talked a lot about the opportunity with utility type for distribution companies.

But the economics for micro grids and systems, distributed generation replacing usually generated electricity, looks pretty meaningful to me and potentially has a different sales cycle.

Could you talk a little bit about how you're building the sales team?

And what you're seeing in terms of that opportunity and the cycle time on those sales?

Yes, Colin.

This is Chip.

Well just let me answer the sales team question.

We have kind of a -- are very collaborative, but we have different focuses.

So one portion of our sales team focuses geographically.

The second one, focuses on development of things to support the big RFPs and stuff like that.

And then the third one, we have national accounts.

So once we get a Pfizer account or something like that, then we obviously try to not just go nationally, but internationally, right?

Because we can represent -- our products are the same globally, our business model's the same, we can execute.

We have an execution team in Europe.

We have an execution team in Asia.

So we can truly represent ourselves as a global company.

So I think the question then is, can we create value for these people?

And everybody, all these different customers, have different ways of evaluating either value they need to see or value that we can create for the end user.

I think the case in point was this project we received for the municipal utility, I mean, we were helping them out retain a customer, and the pricing we put on the table for them for the project itself was very competitive with what they were getting from, frankly, wholesale markets and didn't have put any money in the field.

So we have a value proposition that's pretty strong, whether it's in Korea or, like I said, in Connecticut or other places in the United States.

So it just varies, and our guys are very good at figuring out -- it's not about us, it's about them.

And they figure out what customers' problems they're trying to solve or what are the other choices and how can we help them make a choice for us.

So I would say, Mike has a commercial finance guy who's well that supports our team.

We have application engineering that supports the sales team.

So we have a very collaborative team that goes out to try to make sure that we can, a, figure out the value we can create; and secondly, how do we make sure we get the project done.

Because the other thing that's in our calling card, is when we do a project, it gets done; it gets done with the budget, it gets done to the time frame that we commit to.

So I would say we have a talented group of people trying to figure all those questions out and supported by a lot of people at the company, including myself, and Mike and Tony and others.

There are no further questions at this time.

Mr. Chip Bottone, President and Chief Executive Officer, I turn the call over to you.

Thank you.

Thank you, everybody, for joining today in the call.

I hope what you saw here is that we're executing on very meaningful catalysts that we've been talking about for some time.

And we're very excited and bullish about what we're going to be able to deliver here.

So with that, I just want to say thank you very much again and have a great day.

And we'll see you on the Quarter 3 call.

Thank you.

This concludes today's conference call.

You may now disconnect.