普拉格能源 (PLUG) 2008 Q3 法說會逐字稿

Greetings and welcome to the Plug Power Inc. third quarter earnings call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Cathy Yudzevich, Manager of Investor Relations for Plug Power, Inc. Thank you, you may begin.

Good morning. Thank you for joining Plug Power to discuss our third quarter 2008 results. Andy Marsh, CEO and Gerry Anderson CFO will be on this call today. The call will be archived on our website at plugpower.com.

This conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, including, but not limited to, expectations regarding revenues and product orders for 2008. These statements are based on current expectations that are subject to certain assumptions, risks and uncertainties, many of which are difficult to predict, are beyond our control, and that may cause our actual results to differ materially from the expectations in our forward-looking statements. These risks include, without limitation, the timing and quantity of orders, shipments and installations for our products, our ability to develop commercially viable energy products, the cost and timing of developing our products, market acceptance of our products, and our ability to lower the cost of our products and demonstrate their reliability, and other risks and uncertainties discussed under item 1-A risk factors in Plug Power's annual report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC on March 17, 2008 and in the reports we file from time to time with the SEC. Plug Power does not intend to, and undertakes no duty to, update any forward-looking statements as a result of new information or future events.

At this time, I would like to turn the call over to Andy Marsh.

Thank you, Cathy and welcome to everyone on the call this morning. I am speaking to you today from Mumbai, India. During today's call, I will discuss the recently passed eight year extension of the Investment Tax Credit for fuel cell technology and what we believe it means for our business going forward. I will also review our third quarter 2008 operation results, giving an overview of activity for each of our product lines, including a discussion of our performance with respect to our public milestones. Gerry Anderson will then provide an overview of our financial results for the quarter. After which, we will open up today's call to questions.

On October 3, Congress passed and President Bush signed into law, an eight year extension of the Investment Tax Credit for fuel cell technology. A long-term extension of the ITC has been a top priority for the industry and it is expected to help accelerate full scale commercialization fuel cell technology. Beginning October 3, our business customers will be able to take advantage of the 30% credit with a cap of $3,000 per kilowatt, an increase from $1,000 per kilowatt. For Plug Power, the Investment Tax Credit applies to our GenDrive and GenCore product lines, which are currently commercially available. We believe that this will have a positive impact on the sales cycle in the very near future. Because the tax credit has been extended through 2016 our customers have the security and dependability on which to build a long-term plan. I would also like to emphasize that this federal tax credit can be used in combination with any state tax credit that may be available, such as in New York and Florida.

Turning to the discussion of our three product lines, our motor power unit continues to see heavy interest from the material handling market. During the third quarter, we received purchase orders for 33 GenDrive power units, primarily from a global customer in food and beverage distribution. Our sales funnel continues to grow and we believe that we're currently at the end of the sales cycle with a few key customers and that we will be announcing more good news on orders prior to the close of the fourth quarter. The revised federal tax credit $3,000 per kilowatt mentioned previously reduces the net customer pricing by approximately 20% for one of our key commercial products, our GenDrive class three power unit, which is widely used to power electric power trucks for high through-put food and retail distribution centers. Some of the key customers and potential customers in this segment were familiar names, Wal-Mart, Kroger, Safeway, Cisco Food and Target stores, which operate between 25 to 130 distribution centers in the United States.

Our salespeople will continue to focus on these and other high throughput food distribution companies. We're currently working on several new greenfield opportunities for orders and installations in 2009. Greenfield sites offer the potential for the greatest financial benefit to our customers by eliminating the need for customers to make capital investments in battery and the associated changers, storage and charging systems. The class three units currently installed in the field are performing well in terms of reliability and cost per hour of operation and we have gained the confidence in new and potential customers in this highly visible market segment.

Our class one product for sit-down, counter balance rider truck, is available for production at our Latham manufacturing facility. We are also in the process of expanding our fields to sales capabilities, by establishing five regional sales territories, each covered by a sales director who will be working directly with large distribution and manufacturing companies. They will also work closely with lift truck OEM national account personnel through prospect and develop new opportunities. In addition to the interest we have received directly from customers, we have received many leads from the lift truck OEMs whose customers have expressed an interest in our fuel cells. There is a constant theme with our prospects.

Our products solve the operational problems and associate costs of managing a battery charge and change system. We've been recently asked to participate in a Yale National Dealer Meeting which is owned by NACO on November 17, to introduce both our class one and class three products through the Yale Deal Principles. This is significant in part as NACO is one of the top two manufacturers of class one lift trucks with deep ties to some very large and well-known companies that have been testing fuel cell applications such as John Deere, Federal Express and General Motors and others. We also expect to deepen our distribution and product development relationships with crown equipment and Toyota Raymond throughout 2008, 2009 and beyond. They are the dominant suppliers of class three lift trucks in the high throughput distribution market and have been forth coming with new sales leads.

In January 2009, we will be participating in the Pro-Mat show in Chicago which is the largest material handling show for the North American market. Based on our experience at previous trade shows, we expect this show will also generate many new sales opportunities for our GenDrive products. Within our continuous power division, the Research and Development of both the low temperature and high temperature GenSys products and technologies continue to meet our expectations.

We continue to explore the applicability of our low temperature GenSys to the wireless telecommunication market in India, and obviously, that's one of the reasons I am in Mumbai today. We believe that India offers a unique market opportunity for remote primary power given the rapid expansion of wireless communication service into rural communities, coupled with severe power shortages and lagging infrastructure.

In August, we completed a field trial in partnership with Tata Tele services and Hindustan Petroleum that was designed to test performance of the GenSys fuel cell in the LPG refueling infrastructure for cell tower applications in rural India. The GenSys system was used as a primary power source for meeting the sites total power load consisting of the DTS equipment, air conditioners and AC lighting. This system ran for more than 2,100 hours and produced 6.285 megawatt hours of electricity during the scheduled time period. We are incorporating the learning from the trial into our next generation, low cost, high volume system design and expect to have commercially available product in 2009.

Our latest high temperature [pen] micro combined heat and power pre-commercial prototype was on display last month at the fuel cell (inaudible) in Phoenix. It also generated great interest at the innovation exhibit sponsored by National Grid at the international gas union research conference in Paris which was attended by all major gas utilities from around the world. As part of an ongoing Research and Development program jointly by the DOE at EU, we currently have prototype systems installed and under test in Plugs power labs in Latham and [Appledorn]. Our partner [Valot], is testing an additional prototype in Germany. We are in the process of establishing a stakeholder group to help guide product development and commercialization activities. (Inaudible) will receive prototype systems for evaluation, provide insight and guidance into customer requirements and needs and help define our go-to-market strategies.

Three strategic members of the natural gas industry have signed on thus far, representing markets in North America, Europe and Asia and the initial stakeholder meeting will take place next month. We continue to see great potential for this product and believe our deliberate approach will pay off with a commercial product that truly can save customers money and reduce their carbon footprint. The micro-CHP GenSys is expected to penetrate the consumer and like-consumer market with a drop in replacement for residential heating systems that offers high efficiency, lower life cycle costs and significant decrease in greenhouse gas emission compared with incumbent technologies.

During the third quarter, we continued to make in roads with our GenCore product. Of note was a deal with Rittal, one of the world's leading suppliers for enclosures and housing technologies. Under this agreement Rittal will integrate Plug Power's GenCore fuel cell technology in their enclosures to create the Dry Cell 5,000. Rittal will manufacture these hydrogen fuel cell units for sales into the chemical production, traffic and tunnel infrastructure, information technology, and telecommunication industries. Rittal has an extensive sales and customer support infrastructure in more than 120 companies. We expect to leverage this relationship to expand our addressable market portfolio. We can't say for certain when the Rittal relationship will translate into orders. Our expectation is that the number of orders could be in the hundreds over the next 12 to 24 months. Given the preceding discussion, as some of the marketing activities around our three product lines, I'll now turn to an update of where we stand against our corporate milestone.

As stated during the second quarter call, over the second half of 2008 we expect 150 to 200 GenDrive orders and 50 GenCore orders. We have also stated our expectations to limit net cash use for operating expenses to $55 to $60 million for the full year inclusive of working capital needs to ramp inventory to meet future sales orders. Our third quarter GenDrive orders total was only 33 units. We reaffirmed our milestone target of 150 to 200 units for the later half of 2008 as we have many other potential deals in our pipeline and believe that additional significant orders will materialize during the fourth quarter. With respect to GenCore, we received (inaudible) orders during the third quarter and we remain confident that we will reach 50 orders for the second half of the year. As you know, considering financial resources is especially important during these difficult financial times. The measures we've taken to control operating expenses are already paying off. Our operating cash burn for the third quarter was less than $11 million, inclusive of capital equipment purchases. Year-to-date we were at $43.9 million net cash use for operating expenses including capital equipment. We reaffirmed our guidance to complete the year with an operational cash burn in the $55 to $60 million range. I'll now turn the call over to our CFO, Gerry Anderson, to present an overview of Plug Power's third quarter 2008 financial results. Gerry?

Thank you, Andy and good morning, everyone. Looking at our third quarter shipment activity, which typically initiates our invoicing to customers, we shipped 38 GenDrive units and 21 GenCore systems, bringing our year-to-date shipment total to 212 units with a total invoiced value of $3.4 million. Andy previously stated our orders for the quarter. 33 GenDrive and 11 GenCore systems which leaves us with 117 and 39 additional orders need respectively to achieve our stated order milestones for tha latter half of 2008. I would like to again emphasize that even with a rather challenging economic environment, we expect to meet or exceed these milestones by year end. At the end of the third quarter our backlogged stood at 218 total units with an in-voiceable value of approximately $5.3 million.

Turning to our statement of operations, total revenue for the third quarter was $4.1 million, of which $1.3 million was derived from products an services and $2.8 million from Research and Development contracts. Year-to-date product and service revenue of $3.3 million already exceeds our full year 2007 total of $3.1 million and is due to both a 38% increase in year-over-year shipped unit volume, and a growing install base that now exceeds 630 total units. Additionally, at September 30, we had $4.1 million of deferred product revenue on our balance sheet and we expect to recognize substantially all of this revenue over future periods as the service contracts for these shipments are fulfilled. Our third quarter 10-Q, which will be released later today, provides further explanation of our revenue recognition policies, as a development stage company and we encourage you to review that document. At $2.8 million our quarterly R&D contract revenue was adversely impacted from some slippage of work due to delays in both receipt of materials from vendors and engineering resource availability. While our quarter-over-quarter revenue was down approximately $900,000, we expect our fourth quarter will ramp back up modestly, however, we are now expecting our full year revenue to be roughly equal to our 2007 performance for R&D contract business. I would also like to point out that during the quarter, the Department of Energy accepted proposals on their new funding opportunity for fuel cell technologies and Plug Power is participating in 13 proposals with a total DOE award value of $18 million. Included in this group are nine proposals encompassing approximately 300 GenDrive units that were submitted by Plug Power customers and prospective customers who requested us to participate in their proposals. We expect the DOE to announce awards in early 2009. Our total cost of revenue for the third quarter of 2008 was $5.6 million and was comprised of $1.8 million for product in service revenue and $3.8 million for R&D contract revenue. Our product and service cost of sales, which is direct materials for units shipped plus materials and labor associated with servicing the installed base, decreased quarter-over-quarter by 35% which is consistent with a 36% decrease in shipped units over the same time frame. Our cost of revenue for R&D contracts comprised of materials, labor and overhead, represented 136% of sales for the quarter, and on a year-to-date basis represents 155% of sales, which is consistent with where we expect to be based on the mix of cost sharing arrangements on our current R&D contracts. Research and Development expenses, costs incurred for internally funded R&D programs, were $7.7 million for the quarter. This represents a 13% decrease over our last quarter, which is attributable primarily to a reduced run rate associated with the restructuring implemented late in quarter two. Selling, general and administrative expenses were $4.8 million for the third quarter of 2008, representing a $3.7 million decrease over our previously reported quarter which included a $3.6 million charge for the restructuring plan announced and implemented in quarter two. Our net loss for the quarter ended September 30, was $13.8 million or $0.16 per share. Included in the net loss was a $789,000 charge for an additional write-down of our auction rate security portfolio and a $1.3 million gain relating to the termination of agreements with technology partnerships Canada. This transaction is more thoroughly discussed in our 10-Q which will be available later today.

For the quarter, weighted average shares outstanding were $88.2 million. Net cash used in operating activities for the third quarter, at $10.8 million, was favorably impacted by the realization of cost savings from our restructuring implemented at the end of the previous quarter. Additionally, during the quarter, $133,000 of cash was used for capital expenditures. On September 30, 2008, the company had $116.3 million in cash, cash equivalents and available for sale securities which equals approximately $1.32 for each common share outstanding. We also closed the quarter with $110.7 million in working capital. Year-to-date, the company has consumed $43.9 million in cash for operating purposes, inclusive of capital equipment. As previously noted, we still expect to finish the year with an operational cash burn of $55 to $60 million including working capital requirements to fund our growth from expected order momentum. Included in available for sale securities and working capital at September 30, 2008 was $57.6 million of auction rate debt securities, which is net of the additional $789,000 write-down taken in our third quarter. As noted in previous quarters, the disruption in the financial markets associated with auction rate securities has resulted in reduced liquidity for these types of securities and recent auctions for such securities have not been successful. Accordingly, the company expect to hold these securities until there is a successful auction or the company sells them in the open market. Securities similar to the auction rate debt securities held by the company are currently trading at a discount on the open market. As has been previously disclosed in May 2008 the company filed a lawsuit against UBS Financial Services, Inc. and UBS AG, the financial advisor that placed the company in certain auction rate securities held in the company's investment portfolio. The lawsuit seeks a return of the $62.9 million of company funds UBS invested in auction rate securities in contravention to the company's investment policy, among other damages. The Company is carefully monitoring developments related to auction rate securities including settlement offers being made in connection with various state and federal agency investigations of the auction rate securities market. Plug Power believes that its position in the litigation is very strong and it will aggressively pursue its litigation. I would now like to turn the call back over to Andy for some concluding remarks before we open the call to questions. Andy?

Thank you, Gerry. Throughout the third quarter, Plug Power has been gaining momentum. Our GenDrive sales funnel remains very active and I expect news of significant orders before the end of the year. Cellular carriers are continuing to look closely at our GenCore product line as evidenced by the new orders booked during the quarter. And we expect our partnership with Rittal to generate sales and revenue in 2009. Our low temp GenSys product is generating great interest in India, potentially huge market. And our high temperature CHP system is moving through its development phases as planned. On top of it all, our measures to control spending are proving to be successful. I'd like also to take this opportunity to welcome Jeff Drazan to the Board of Directors. Jeff and I previously worked together successfully at Valere Power where he was the Chairman of the Board. Jeff is Managing Director of Bertram Capital, a private equity firm that focuses on low middle market companies. He was previously a co-founder and managing director of Sierra Ventures. Silicone Valley Venture firm, with $1.5 billion under management. Prior to Sierra, he served in a variety of operation R&D management positions at both AT&Ts and Bell laboratories. Jeff is a financially savvy entrepreneur and I am confident that his experience and deep knowledge of technology and manufacturing will prove invaluable as he ads a strong voice to our board. Now, I would like to open the call to your questions.

Thank you. Ladies and gentlemen, at this time we'll be conducting the question-and-answer session. (OPERATOR INSTRUCTIONS) Our first question comes from the line of Burt Chao with Simmons Co.

Good evening and good morning, Gerry and Cathy. Thanks for taking the questions. Just two quick ones on the market in general. Have you seen the recent credit environment affect the willingness of your customers to contract forward for deliveries? And secondly, just kind of a bigger picture on the fuel cell market in general. Given the developments that have happened over the last couple of years and just -- even quarters, do you see consolidation as being a trend that might be affecting the state of the industry or the direction of the industry in the near or mid terms?

Let me talk, Burt, about the delivery situation -- about the potential order situation first. I have certainly -- you know, being out with customers, have seen in a number of instances where opportunities in the sales funnel have slowed down because of the credit crunch. But you know, when you're starting with a company, quite honestly with such a small revenue base for products, what we're pursuing is actively building a large sales funnel and by building that large sales funnel, we do expect some customers to drop out. I saw one auto company which appears were thats slowing down because the reduction in buying SUV vehicles, the North American manufacturer. I've also seen in the carpet industry some slowdown because the credit crunch and really the home residential market. But in general, because -- when you're start -- if we were a company that had revenues in the hundreds of millions of dollars, I think the downturn of the economy where you were having repeatable business and repeatable customers, you would have a greater impact. You know -- when you're selling a product in bad times, that offers reduced operating costs on a daily basis, it's actually an opportunity for many customers to open their eyes and say this is a way to make savings and often companies are in cost reduction mode and looking for ways to reduce the cost of their products and when we look at our GenDrive models that we share with customers, that's almost always the case. Looking at the fuel cell market in terms of consolidation, you know, I think it's obvious as the market grows and expands -- that as the market grows and expands there will be some consolidation. I have to say, that is really not the focus of Plug Power today. We believe that with our three product lines, we are uniquely positioned in the marketplace. I think without a doubt, we are the leader in the mode of power -- in the material handling market. I think that our GenCore product is the most reliable in the industry. I had -- Rittal actually told me that they compared our product against another supplier during the selection process and they found 67 deficiencies with the other suppliers and zero with GenCore. And I believe our GenSys products -- you know, there's a compelling value proposition, here in India, when you look at the cost of diesel and the efficiency of diesel generators versus the efficiency of our low temperature GenSys product using LPG, there's a real value proposition to customers today. I hope that answers your question.

Yes, great. Thank you so much and congrats on the traction in India.

Thank you.

Our next question comes from the line of Trey Cobb with Stephens, Inc.

Good morning.

Good morning.

Good morning, Trey.

Andy I know on the last call you said you were looking to increase the size of your GenDrive sales team. Can you give us an update there and kind of the benefits that you see -- have seen currently or see going forward in the near term from doing that?

Sure. We have added four individuals to our GenDrive sales team and we have placed them regionally across the country and most of them have come on board over the past month, so, I have to say, Trey, they're in a bit of a learning mode at the moment and we've been taking them around to key potential customers, aligning them up to really work the details of the deals. You know, so, if you look at our sales team at the moment, we're led by Tom [Hoying] who was an executive at Crown, a leading forklift truck manufacturer. We have another seasoned individual in Tennessee, Tony Trout, and four additional sales folks we'vedded to the team in the last three months. And when I look at the sales funnel, we have -- you know, we have a great deal of opportunities, many customers and this is really an opportunity. When we look at this market, we believe the servable market in our business today is over 100,000 units and that a good deal of that is getting opportunities to be in front of people and present our value proposition. We think now that we have a sales force which has the reach to get to customers. And I have high expectations for the next year and I'll be happy to share that the next conference call.

Alright. Great. And then I think you said you booked 44 units in the quarter with 34 (inaudible) -- around 75% of them coming from GenDrive. Is that how we should be thinking about that going forward, kind of a 75/25 breakdown between GenDrive and GenCore?

You know, in today's market, the GenDrive value proposition is very strong. And the customers -- the potential customers it serves is rather wide. So, I think when you look at GenDrive, I think this relationship of three to one, four to one, is probably a good relationship to be thinking about, Trey, GenDrive versus GenCore. You know, with the change in administration and I think still some uncertainty about the Katrina ruling, you know, that ratio could change with the Katrina ruling. I would expect during the next 15 months to look at that kind of three to one, four to one type ratio.

Okay. Great. And then on the operating expense side, they obviously dropped down quite a bit, appears to be from the restructuring. Is this kind of the run rate level that you see going forward or is there --

Gerry, I'll let you handle that one.

Yes, Trey. Again, I think in our last call we mentioned that we expect our run rate to be in the low to mid-40s going forward. If you look at our total operating spend including cost of sales, which was about 18.6 and you back out the non-cash items, depreciation and amortization of a $1.7 million and the non-cash stock comp which was $1.7 million, that would put you at a gross spend of about $15.2 million, less our $4 million in revenues, puts you at about $11 million. Obviously we are continuing to look at other areas in G&A that we can shrink our spend and the one caveat I would say is obviously with our supply chain we need to keep driving down our cost of materials so that we get some positive impact in gross margin as we sell more units.

Okay. Great, guys, thanks for taking my call.

You're welcome.

Sure.

Our next question comes from the line of Megan Moreland with Barber Capital.

Good morning, I just have two quick questions. Could you give give us a little more color on the product lead times that you have and how much of the 218 units that are currently in the backlog will be realized by the end of the year. And also an update on the smart hydrogen divestment, you had mentioned last month that they wanted to divest of their 35% holding, where that currently stands? Thank you.

Gerry, do you want to handle that?

Sure. In terms of the backlog -- the 218 units in the backlog, about 124 of those units are on the GenCore side which tend to be much longer lead times. Several of those are with a distributor that's handling some South African market opportunities. On the GenDrive side, the 94 units that we have in backlog there, we are working on right now, several of those are class ones as Andy mentioned, our class one 5,000-pound product is now in serial production in Latham. So, we do have some orders that we need to meet by the end of the year and the rest that we would expect in early 2009 to complete those and fulfill those orders. In regards to the Smart Hydrogen situation, there's been media around smart hydrogen selling their 35% stake in Plug to OGK3 and right now, what has been publicly disclosed as they've entered into a share purchase agreement with OGK3 and there are a number of contingencies that need to be satisfied prior to the closing of the transaction including smart hydrogens obtaining required US government approvals and the consent of Plug Power. Currently Smart Hydrogen remains a 35% shareholder. No transfer has taken place. And the board of directors of Plug Power is currently in discussions with smart hydrogen about the proposed transfer and we are carefully considering the request for consent.

Okay. Thank you.

You're welcome.

Our next question comes from the line of Jeff Osborne with Thomas Weisel Partners.

Yes, good morning, guys. I was just curious with the tax credit, how should we think about pricing when that takes effect next year? Will you be able to capture that pricing by raising prices or will you pass that all on to the customers?

Jeff, I think it's fair to say that some of that we will be able to capture and some of that we will be passing on to customers. I think probably a good way to think about it, I would think about it at about a 50/50 split. I think what's really important for the market is that for us to have additional units in the marketplace and as our products are in customer's hands and we have more sites that we can take other customers to, and increase our references, I believe that our ability to offer -- to capture higher prices will improve dramatically.

Makes sense. And then along that same vein, can you just talk about so far year-to-date or since you've arrived, Andy, how much cost you've taken out of the product, not necessarily from an OpEx, which is where most the focus has been, but more on the cost of goods sold, what we should think about that. What you've done so far and what to look for going forward?

You know, I probably -- let me tell you how I'm thinking about it. You know, I have been spending a good deal of time working with our supply chain team and fundamentally we're looking at the higher cost items in the products. If you take, for example, our F1 product, the top 10 components represent 80%, 85% of the (inaudible). When I think about it, I think a company like Plug, on a quarterly basis -- and I think it's important for a company like Plug to be thinking in terms of quarters in driving costs down, we've been looking at 5% to 7.5% per quarter. And I think if you -- when we tally up the score cards since my arrival for the third and fourth quarter, we'll be in that range.

Should we think about that pace -- ?

Oh, and on an annual basis, Jeff, just to kind of annualize it for you, I would be thinking in terms of 25% to 30% for next year.

For next yer? Oh, okay, excellent. And then the last question is just a -- you mentioned a -- five regional territories for sales. Are the bulk of those people new? I'm just trying to get a sense of how -- to the extent the sales force has been shaken up or is it pretty much kind of legacy Plug Power people still intact and then you've added opportunistically in GenDrive. I'm trying to get a sense of the regional -- .

Yes, that's a good question. Jeff, I have actually added new as well as moved some individuals. I've had two individuals join us in the last 10 days who came from the outside. And I had a third individual who I attracted back from (inaudible) who once worked at Plug Power and a fourth one we moved from the GenCore business.

Great. Thanks much.

Our next question comes from the line of John --

You know, what I would like to add to that too, Jeff, is that individuals we have in the motor power business that have been with us and they've been there six or seven years, and they are really -- understand the market, understand their customers, understand the industry and I think that one of the reasons I think we're uniquely positioned for the future is (inaudible) of their skills. I'm really pleased with their performance.

Our next question comes from the line of John [Spatzinat] with Citi.

Good morning, folks. Quick question on the emerging opportunity in India. Can you comment on where the units might be manufactured initially and if you have any thoughts on contemplating the use of Plug fuel stacks or a third party similar to some of the other industry news that's occurred over in India?

John, you know, I think that's known that our -- for our low temperature GenSys product we are using powered stacks. Our high temperature product is different. So, the opportunity in India will be leveraging Ballard stacks. From a manufacturing strategy point of view, it really depends upon the size of the opportunities that we capture. You know, we have probably one of the best manufacturing facilities in this -- certainly the best in this industry, in my opinion in Latham, very highly skilled and certainly initial production would come from that facility. You know, as the market grows here, certainly one needs to support the market locally and I would expect that we would be doing integration here in India.

Thank you very much.

Seeing as there are no further questions, I would like to turn the call back to Andy Marsh for concluding remarks.

I'd like to take this opportunity to advise everyone that Plug Power will present at the Stephens, Inc., Fall investment conference at New York's Palace Hotel, in Manhattan on November 18 at 3:30 Eastern. The presentation will be Webcast and archived on our website. Thank you for your questions today. Again, we appreciate your time and interest in Plug Power. I look forward to speaking with you further in New York and on our next conference call. Thank you, everyone.

Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation.