Polar Power Inc (POLA) 2017 Q2 法說會逐字稿

Good day everyone and welcome to the Polar Power Third Quarter 2017 conference call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Chris Tyson, Managing Director of MZ North America, please go ahead sir.

Thank you and good afternoon. I'd like to thank you all for taking time to join us for Polar Power's Third Quarter 2017 conference call. Your hosts today are Mr. Arthur Sams, Chief Executive Officer as well as Mr. Luis Zavala, the Company's Chief Financial Officer and Mr. Raj Masina as the Company's Chief Operating Officer. Arthur and Raj will provide a business update which will cover customer announcements, products updates and operational milestones while Luis will discuss the financial results.

A press release detailing these results crossed the wires this afternoon at 4:00 p.m. Eastern today and is available on the company's website, polarpower.com. Following managements prepared comments, we will open the floor to questions for those of you who are dialing in for today's call. Before we begin the formal presentation I would like to remind everyone that statements made on the call and webcast, including those regarding future financial results and industry prospects are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call.

Please refer to the company's SEC filings for a list of associated risks and we also would refer you to the company's Website for more supporting industry information. At this time, I'd like to turn the call over to Arthur Sams. Arthur, the floor is yours.

Thank you, Chris, and welcome, everyone, to Polar's Third Quarter 2017 Earnings Conference Call. As many of you know, Polar recently became public in December of 2016 and last quarter we held our first earnings conference call. The third quarter of 2017 was highlighted with substantial progress made on building a strong, domestic and international sales staff obtaining vendor approvals and increasing our manufacturing resource.

We're continuing o develop new products and improve our existing product lines. These initiatives further diversify our product portfolio and reduce our customer concentration while positioning Polar for substantial growth in 2018.

Unfortunately, relatively poor financial performance in the third quarter as we were not immune to the effects of Hurricanes Harvey, Irma and Maria with our domestic Tier 1 wireless carrier customer. These adverse weather events diverted significant amounts of our wireless carriers manpower away from non-essential activities as wireless carriers deployed significant resources to disaster-struck areas. At the same time, the storms kept us very busy with our new Tier 1 customers. In fact, already in the fourth quarter we received our first material purchase from our newly signed Tier 1 wireless customer for hurricane-affected telecom sites in Puerto Rico, and most recently, new purchase orders from telecom sites in Huston and Florida.

We look forward to continuing our collaboration with all of our Tier 1 customers as we work together to provide solutions to aid in the redevelopment of all hurricane-affected areas and networks. On the R&D front, key progress has been made during the third quarter to solidify Polar's technology leadership and drive growth for years to come. Some of our exciting initiatives at field trials are centered around the battery-free DC hybrid solution for telecom backup. This solution removes all batteries from the site, reducing the CapEx and OpEx costs of cell sites.

And military-wise, we're participating in a program with one of our DC generators as the solution for providing a very lightweight power source for a robotic [needle] for the U.S. Army. We're also continuing our progress on the 200 kilowatt DC generator for datacenters and military applications. Notable progress was also made on the international front after we established the necessary global reach to acquire and support new telecom customers with our DC power solutions during the second quarter.

I spent substantial time during the third quarter visiting our new sales team members in Africa, Singapore, Dominic Republic and Australia, attending various industry conferences and meeting with key contacts and customers generated from our new hires. Although our international carriers are taking longer to close and award solicitations, I'm pleased to report that based upon these meetings and the sequential growth in our international RFP's, that we're close to realizing material revenues for the company in the coming quarters with some of the largest international telecommunication companies.

I'll now turn the call over to our Chief Operations Officer, Raj Masina, who's going to review our reported operational milestones and other market opportunities, our DC power solutions are addressing. Raj?

Thank you, Arthur. So let me start with our sales activity in the domestic market. In the U.S., as Arthur pointed out, the recent hurricane activity has indeed reduced sales in the third quarter as the storm affected several of our customers network sites. As a result of this, some of our customers are accelerating the telecom site hardening (inaudible) that was originally slated for early 2018 to the current quarter. We are now vendor approved to all four of the Tier 1 wireless carriers in the U.S. and this presents us with a massive opportunity we believe Polar Power is uniquely equipped to face. We look forward to working with them as the evaluate our DC solutions across the U.S. and expect material purchase orders in the coming quarters.

Just this week, we shipped a new economical DC power system to another new Tier 1 wireless customer. This product, which is sticker price [competitor] with traditional legacy DC generators will not satisfy, will not sacrifice, sorry, Polar Power's target gross margin structure and it was built at the [director] of the customer and this has seen significant interest. Finally, with respect to our largest domestic customer, I realize there is much concern regarding the drop off in revenues and backlog over the past quarters and I want to provide some clarity that can help frame our relationship and outlook.

During the third quarter, we experienced two advents with our largest wireless carrier customer. We believe the previously mentioned headwinds with the recent hurricane activity and the upcoming rollout of 5G has delayed the normal purchase ordering compared to the same at year-ago quarter. Although we continue to receive purchase orders in our core markets from this customer, the new cell site build-outs are being delayed due to R&D for the upcoming 5G rollout because that could entail a change in the configuration of our product.

As far as the international opportunities are concerned, Africa and Asia are poised to build more than 200,000 sites over the next three years and a majority of these cell sites will be off the grid or have [bad grid]. The telecom customers are looking for reliable and cost-effective solutions to power these sites and we believe we have the right solutions for this market. In fact, we assembled a strong international sales group covering major telecom carriers and tower operators. Full-time Polar sales executives in support in Singapore, Dubai, Australia, Dominican Republic, Romania and South Africa.

I'm also happy to announce that we are now an approved vendor of 32 overseas carriers and are in the process of adding another 46. We anticipate purchase order activity from a few select large international customers and foresee the beginning of a new, of a meaningful, backlog in Q4 of 2017 and Q1 of 2018 as our new international sales hires begin to secure new contract advents. We're currently participating in some large bids and are in advanced negotiations with a few projects that we hope will materialize over the next few months. It should be noted that the international sales cycle is typically six to nine months and through contract award as we mentioned in our last earnings call. Our internal models evaluate the sales teams progress utilizing the five-step progression chart with five being awarding the contract, or being awarded the contract. And as we noted during our second quarter call, our international sales team was implemented and we noted the progression at Step 2 in our model based on dialogue and RFP status.

As of September 30, I'm pleased to report that most of our international sales team [resides] in Step 4 in our progression analysis. I hope that gives you some sense of the progress without naming details like the customer location or the project size, because it's something that our competitors are watching very closely.

As of September 30, 2017 we have international RFP's exceeding over $100 million. As you may recall, also Australian market opportunity was one of our largest revenue drivers back in 2012 and 2013 but due to the immense opportunity in our backyard and the lack of bandwidth, we've refocused our efforts to the U.S. markets, now, armed with substantial capital, we have started to renew our efforts back in Australia, one of our strongest territories we believe for our complete product portfolio outside of the U.S.

After 5 years of field trials in Australia, Polar has successfully demonstrated the reliability of its backup DC power system that no longer requires battery on site. Removing batteries from an on-grid cell site tremendously reduces the operational cost of the site. With the success of this first trial, Polar is currently expanding its field trials to include other major carriers within the territory. Outside of telecom, we saw material progress with orders in new discussions in the military sector. In fact, 28% of our backlog as of September 30 was attributable to orders from military contractors, particularly a Fortune 500 leading manufacturing of specialty [vehicles and vehicles bodies] for military applications.

Notable progress was also made in conjunction with our military sales partner with the U.S., with the U.S. Army, for our custom 20- to 30-kilowatt generator, and we expect to announce a material order as early as Q4 2017. In all, I believe the progress made this quarter has positioned us for robust growth over the next several months. We have reached an inflection point and we believe the investments made year-to-date will drive substantial growth in the years ahead. I'll now turn the call over to our Chief Financial Officer, Luis Zavala for his financial summary. Over to you Luis.

Thank you, Raj. Net sales totaled $3.0 million in Q3 2017 which is a decrease of 59% as compared to $7.5 million in Q3 2016. The decrease in net sales was primarily a result of a decline in sales of DC power systems to our largest Tier 1 wireless carrier customer coupled with a price reduction in DC power systems that took effect March 2017.

Backlog totaled $1.5 million at September 30, 2017 as compared to $1.7 million at June 30, 2017. The decrease in backlog at the end of Q3, 2017 as compared to the end of Q2, 2017 was attributable to a decrease in sales of DC power systems to our largest Tier 1 wireless carrier customer. Growth profit decreased 76% to $0.8 million in Q3 2017 as compared to $3.4 million in Q3, 2016. Gross profit margin as the percentage of net sales remain declined to 27% in Q3 2017 as compared to 45% in Q3, 2016.

The gross profit for Q3, 2017 was negatively affected by price reduction on the Company's DC power systems and increased use of production staff in R&D projects. The Company has made substantial improvements in its production facility and product line during 2017 and continues to believe that gross profit margin will improve to the 40% to 45% range in the later part of 2017 particularly as the volume of sales increases.

Operating expenses increased to $1.5 million in Q3 2017 from $0.8 million in Q3 2016. The increase in operating expenses was primarily due to several major R&D projects such as engineering changes to DC power systems to meet new customer requirements and the ongoing improvement of a new hybrid power system for international markets.

Net loss totaled $0.4 million or negative $0.04 per basic and diluted share in Q3 2017 compared to net income of $1.8 million or $0.24 per basic and diluted share in Q3 2016. The decrease in net income was primarily due to the aforementioned projects. Cash at September 30, 2017 totaled $14.8 million as compared to $16.2 million at December 31, 2016. The substantial balances of cash as of the comparative periods ended September 30, 2017 and December 31, 2016 resulted from the net proceeds of $17 million from the Company's initial public offering in December, 2016.

In summary, we believe the third quarter financial performance was negatively affected by a disarray as several hurricanes that impacted the United States and its territories cost to our customer base. These effects are temporary though and since the close of Q3 of 2017. We have already made considerable progress as our current backlog totals $1.7 million and that's after shipping approximately $2 million in sales in Q4 2017. We expect to -- with respect to our outlook of 2018, we are highly confident our financial performance will demonstrate a significant year-over-year improvement. I will now turn the call over to Arthur. Arthur?

Thank you, Luis. The first 3 quarters of 2017 were utilized to build the necessary foundation that will support substantial growth for years to come. We are confident based upon our conversations with key customers and partners around the globe, that the more markets for DC power solutions are strong, growing and rapidly in need of our product.

Moving into the fourth quarter, we've never been more confident about the future of Polar Power and our teams ability to create value for the shareholders. We have a strong balance sheet, a record number of vendor approvals and we are continually offering an innovative suite of products to meet market demand. We look forward to sharing more on our developing story at the up and coming Benchmark Micro Cap Discovery Conference on December 14 in Chicago. At this time, I'd like to open up the call to questions from our listeners. Operator?

Thank you. (Operator Instructions) We'll go first to Craig Irwin from ROTH Capital Partners, your line is open.

So Arthur, I wanted to ask about the reference you made in the script, in your prepared comments, about your anchor telecom customer and some of the design changes that you requested. Can you say if this is related to their choice of a different cellular technology for the next generation rollout or is this something that they're asking for to harden the product that they've been taking?

Okay, I think we might have a little confusion or I'm not understanding your question. You're asking about our primary principal customer. It's the newer Tier 1 carriers that have been requesting minor design changes to our product.

Oh, okay. Okay, fantastic. Sorry, I mixed that up a little bit. So, the newer guys want you to spend R&D dollars. So then as far as your anchor customer, can you comment maybe on the linearity of installation that you would expect over the next few quarters? Is it reasonable to expect installations to continue at current levels or is there a basis to expect higher revenue contribution from your anchor customer over the next couple of quarters?

Okay, excuse my slow response. I'm still trying to recover from my trip to Australia and South Africa and so I'm a little bit under the weather there. First of all, our customers are not asking, our telecom customers, are not asking us to spend really any R&D dollars, it's our desire to spend dollars to lower our production costs, to enhance some of the features that we have to further make it what I would call a no-brainer decision to abandon legacy product and embrace our newer products. With that said, let me have Raj answer some of the other questions that you posed.

Right, with regards to our anchor customer, Craig, yes, ordering patterns -- with the ordering patterns that we have right now, there was definitely sluggishness in ordering and as I said, the headwinds could be -- we believe are the combination of two reasons, one is the recent hurricane activity which is kind of impacted other vendors and, you know, that impact was through other carriers as well and also followed by a pause in -- because of the 5G rollouts they're planning. So, it could be a combination of those reasons.

Okay, excellent.

Also one factor too is that during the storms the other Tier 1 suppliers, or wireless carriers rather, have been keeping us really, really busy.

To go back to your Tier 1 customer that you signed up for Puerto Rico, can you comment whether or not those units have already been shipped and do you expect to need to complete any development or R&D projects before they could take additional units?

For the -- let me actually answer the second question first Craig and the answer is no. No R&D is required to further that product, that is accepted the way it is. But -- and then the first question, the first question is we shipped around two-thirds of that product in the month of October in the last two weeks and the last -- the remaining one-third would be going out later this week or earlier next week.

Okay, excellent. And then just to move on --

We've seen more activity coming from that new customer as well after that Puerto Rico order we basically got follow-up orders from the same carrier which is very encouraging.

Excellent. So then to move on to the military customer that you mentioned, I think you said 40% of a million and a half in backlog that you have right now, so that's a pretty sizable order. Would you expect this to be shipped incrementally over the course of the next several quarters or is this likely to be shipped fairly rapidly in the December/March quarter?

Right, so small correction there. Craig, you said 40%, my script was 28% of our backlog as of September 30 was attributable to that particular customer. You know, we believe that that will grow higher especially since recently they've won more contracts from the U.S. Army and there were press releases to the same. So, we believe the numbers would be higher as a percentage it could be the same or it could be lower because we anticipate more revenues coming from our wireless customers.

Okay, and then the last question, if I may, you threw out some pretty big numbers about the international opportunity that you're chasing, can you maybe describe for us in some detail, I'm not asking you to give away to your competitors exact details but can you give us some detail on the RFP's that you're pursing for shipment between now and the end of June?

A: I'm not sure how we can give that without --

So a few projects in Africa, a few projects in Asia with large wireless carriers that are participating in [bits]. And yes, at this point in time, I don't think we can share anything more than that Craig.

Okay, so what I was trying to get at is, is there anything that you can share with us that would give confidence in a revenue run rate materially higher than $3 million? What would give you confidence that you can see $4 million, $5 million, $6 million in revenue over the next few quarters?

Yes, it's merely the size of the projects that we are participating in and the stage at which we are in those projects as I earlier mentioned in a scale of one to five in terms of the status we're more or less -- most of our sales guys that are around that [bold] stage so that gives us the confidence that -- if the carriers, otherwise there are surprises from the carriers that abandon the project or abandon the sites, we remain confident that there is significant capture ration, conversion ration of those RFQ's into actual orders.

[Operator Instructions.] We'll go next to Steve Emerson with Emerson Investment Group, your line is open.

Well, thank you for your strong efforts and --

Could you repeat that?

Thank you for your hard work. The $100 million of RFP's that you're responding to, if these -- if you receive these, first of all, how many different RFQ's are these and would these be by your current understanding Q4 or mid next year or how would you stage that in your own minds? Hello? Have we lost the line?

We can still hear you at this time.

Okay, we had a dead 30 seconds.

We're back online. Did we lose you again?

No, I'm on.

Okay, what is your question?

The question is, can you give us any better information on the staging, possible staging or needs of the customers for this $100 million in RFQ's, which I understand is your international pipeline and then how big your domestic pipeline? And I'm trying to understand when -- what kind of staging is this possible, are they asking for mid-2018 delivery? Is there much in the way of mid or late 2017 and to give further color, you mentioned that your prior lead customer is delaying things because of trying to define what they need for 5G. How long a process do you expect this to be? And is this also a factor in the delaying other RFP's or contract awards or ready to ship with other people?

Okay. Yes, so Steve, it looks like there's a lot of questions in there.

I'm sorry to make it complex, but just trying to get a color to what extent the 5G delay is something that's going to be common to the other carriers or just your former lead customer?

With the 5G there's so many questions going around with the industry as to what it would be like, what are the requirements and what would be the infrastructure. So I can't say how long that degree of confusion will last. I would say that in terms of some of the other Tier 1 customers we're currently working with, that they're not worried about it, maybe as much as our anchor customer. Maybe the -- our newer Tier 1 customers have so much catch-up to play in [hardening] their site that they're not worried about the role of 5G and it's our requirements. I can't say for sure because I don't have that much visibility and a lot of the exchanges that I've been to, when --

We lost you again.

One moment please.

Are you back?

Yes, we're now using a cell phone.

Okay.

Where did I drop off at?

Well, you were just saying that the lead anchor customer is in the delay mode while they evaluate 5G and you were saying that your other new big telecom customers in the U.S. are not as worried as they don't have as many harden cell sites. So if I interpret what you're saying, it looks like they're going to go ahead unimpeded?

They'll go ahead, I'm not sure if I can add the word unimpeded. But I also want to say is that our overseas customers in the developing world are not even talking about 5G. As we mentioned overseas will be our largest market. And as Raj mentioned, we recently got approved in over 30 major wireless carriers overseas and we're in the process of getting certification for 40 more. I mean, just think of those numbers of wireless carriers if we capture a small percentage of their business, we will be doing quite wonderfully.

Excellent. Now, is it one site where you've done tests or you're the backup without an expensive battery and is this international or international and domestic and how does that change the economics in favor of your customers using your equipment?

We have one field trial that's been going on for about five years. The field trial is in Australia and it's located in Melbourne and just as a matter of coincidence I was in Melbourne last week, drove by it, and it's in a busy street right across the street from Costco in Melbourne, Australia. A number of companies, other wireless companies have seen that site and we generate a lot of interest.

What that technology does is it uses a capacitor to provide the transitional power switching from the grid to the generator set. In other words, it provides power while the generator set is starting up and that way you don't have any interruption of power, not even for a nanosecond.

Excellent.

The technology removes the cost of purchasing batteries, installing them and then replacing the battery two years or four years into the future and then the cost of disposing hazardous waste. So over a ten-year period, there's a significant cost savings with this technology. At first it was quite expensive five years ago, but we've managed to lower the cost of it significantly so it's a whole new ballpark for us now marketing the product at a much lower cost.

Okay, so this would reduce the site by $5000 a site or $20,000, it would go down to $12,000, how can we quantify this and what's the next step? When do you expect this to be rolled out?

That numbers is difficult to derive because some sites are happy with 20 minutes of backup where other sites want eight hours or more of backup. On the site that needs eight hours or more, we could be talking about a led acid battery cost of somewhere between $8000 to $15,000; it depends on the size of the load.

Yes, the bottom line [feel] is that you -- the carriers across the world including the U.S. and millions and millions of dollars, I mean, we've got a -- on batteries -- well, hundreds of millions of dollars. I mean, we've got a recent conversation with a Tier 1 carrier that they spend more than $25 million every year on just batteries alone. So this would significantly reduce operational costs of the site by eliminating them.

Excellent.

The resistance to adopt technology is the same story for other disruptive technologies whereas, wow, can I really eliminate my battery? Is it too good to be true? Well, it's got a field trial of about five years, quite successfully. The next question was some of our other carriers is me too. I want to do a test site, I won't need to do it as long as five years but I'd like to do -- I'd like to have the direct experience and so what we've been doing is manufacturing some of these units and shipping them out to field trials.

While engaging [was] the first one that has done the demo successfully while engaging [him] on the value and things like that; going to the next step in our stages.

We'll take our next question from Jeff Kobylarz from Stone Harbor Investment, your line is open.

Luis, I wanted to ask you, at the end of your comments, you said -- I think you said that the company shipped $2 million in the fourth quarter-to-date?

Yes. Jeff, that's correct.

Okay, and you said the backlog as of -- in the fourth quarter is $1.5 million?

No, as of today our backlog is $1.7 million.

Okay, all right and then I think you said the next line was the fourth quarter you expect to be up substantially year-over-year in revenue?

That's what we're expecting.

Right, okay. All right and then as far as the -- you cited international RFP's of $100 million and in the second quarter call it was mentioned that your RFP's you were bidding on was $75 million. So did the second quarter RFP's kind of roll into this $100 million?

Yes, some of them did, yes.

Okay, all right and where there --

If we could comment on those RFP's, you know, once the project materialized - this is Raj, Jeff. Once the contract materializes, you know, it will be spread over a period of time. So the shipments will be spread over a few quarters depending on the size of the project and their rollups.

Right, okay, but so that -- the $75 million that was talked about on the second quarter call, are you still waiting to hear back on who the winner is or have some of that $75 million been awarded to other vendors? Anything you could say about that original $75 million?

Firstly, it's several of them, it's not just one single project, there are multiple projects, several customers, that totaled to around 35. So I want to make that clear. The second thing is, answering your question, it's more like moving into the next step. I mean, as we said, it was Step 2 last time that we gave that number and now, some of that (inaudible) to Step 3 and Step 4 and some of the new customers have entered making that into $100 million plus members overall. So different stages (inaudible) right now.

Okay, all right, so there's still the exchange of data or whatever that's involved in these next steps so you haven't been eliminated from the competition. Got it, okay, just wanted to make sure I understand your jargon there. Okay. And then also it was said, I think Arthur you said that during the hurricane your other Tier 1 customers, and not your legacy customer, kept the company really busy and can you elaborate on what they kept you buys doing?

Questions. When a new carrier comes online he turns the information over to his architect and the engineers and the different service personnel and then they come back to you, they came back to Polar, and they say, okay, how do we integrate this into the site? How do we do this, how do we do that, because they have not had familiarity or exposure with our products. So we're asked questions.

The other thing we're doing with is talking to customers saying, okay, can we get this done, is this possible? Can we get 20 units right away, can we do this, can we do that? So, it's been a lot of questions. I've spent a lot of time fielding those questions and at the same time, training some of our new sales support or sales directors, to answer those questions. So, yes, so my recent trips prior to the hurricane, about a week before the hurricane, was to Haiti and the Dominican Republic getting some of our customers there ready for storms; I just didn't expect it was going to happen a week after I left.

Yes, okay. And then lastly you mentioned about your overseas customers that you were approved by over 30 major carriers and then you were in the process of getting certification from another 40. Can you say how many cellular subscribers that those 30 major carriers have roughly?

The -- how can I say, Raj or Luis may have better insight to those numbers but in terms of my thinking is that it's fairly large quantities of subscribers. It would be hard to track the number of subscribers to various Telecoms in the different countries but let's just say that the needs are great especially since many of these sites are off grid which is where our strengths lie.

Okay, and I just want to try to extrapolate the U.S.A. has 3 or 4 carriers and hundreds of millions of users and...

Maybe the (inaudible) is about somewhere between 500,000 to 3 million users per carrier.

Another way of looking at it Jeff, I think is that we're pretty much there with all of the top carriers around the world, that's where you're trying to get to. Like the four carriers in the U.S. they have more than 80% to 85% of subscribers. So whenever we say these 32, these are not small carriers, I mean, these are global carriers, you have presence in multiple countries so we are definitely dealing with them.

Or here's the other thing is that you may be dealing with a country that has only 20, I mean, two million population, but they encompass a large area, let's say larger than California, let's say. They'll buy more generators per user than someone in Cape Town South Africa where the population density is higher and the area is smaller or South Africa as a whole.

So the number of subscribers to generator set is really based upon country to country, area to area.

(Operator Instructions) I'll pause for a moment to give everyone a last chance to signal. And we do have Andrew (inaudible) with (inaudible) Capital, your line is open.

You guys mentioned negative financial results for the past quarter due to the hurricane. Would you care to quantify any of that?

We had -- the hurricane actually -- what we're referring to is that our Tier 1 wireless carriers were focused more on resolving issues of the hurricane. So it prevented them from focusing on their core business which is what caused some delays. We actually also had some delays in the supply chain such as [engines] that were delayed and to the later part of October. So as a result, it did affect our revenues for that quarter.

I understand that. I'm just -- I know that you guys used it as an at least partial explanation for the revenue [bit] and I was wondering if you cared to quantify the effect of those extreme weather...

Varying degree. I think what we're trying to get across is that I think it was a larger impact on our anchor carrier but slowing us down there. The other factor is that our new wireless customers, carriers, and tower operators are a little bit slower than expectation coming on with contract awards or purchases.

Yes, a significant portion of that fell into Q4, instead of Q3.

Okay, and so you guys are saying that you're currently unable to quantify that effect but you believe it was significant, is that correct?

We believe -- if we were to put a dollar to it, it's close to $500,000.

And we'll take our next caller, Eric Duncan from Moloney Securities.

Just touching base with you on the quarter, obviously this one was a little bit disappointing, you had a number of factors that were a little bit outside of your control. I just wanted to touch base on something an earlier caller had mentioned as well as you had mentioned in your prepared remarks. In the Q4, you mentioned that your expectation, you didn't give a number, but you said you expected it to at least be higher year-over-year, is that correct, on a revenue basis?

Yes.

And so just to be clear, you did over $7.2 million in the Q4 of 2016, correct?

That was actually our best quarter for the 2016.

Better next year.

Excuse me?

I was just trying to clarify your question to Luis.

Q4 of 2017 will be better than Q4 of 2016 on a revenue basis, that is my question?

We really can't say it but based on the way this quarter is going, there's a very -- it's very likely that it will.

Okay, because you said it earlier in this call so I just wanted to be clear that that's what you were saying.

Yes.

And so I guess the rest of the question is with a backlog at $1.5 million, I know that your international RFP's have gone from $75 million to $100 million, that sounds positive. How do you -- and you said you've already done $2 million approximately in revenues for the Q4 so far. So where -- how are you going to fill that gap of approximately $5 million? Do you have orders that you think that you'll complete in this quarter, are these things that are in hand or things that are still yet to come is what I'm trying to get a feel for.

Sure, so without going into much of a projection here Eric, what's happened is the momentum has started with a new Tier 1 carrier. We announced at press release that we've got an order for 57 units, so we've got follow-up orders to that one; 8 here, 12 there, 30 there, 20 there, so we moved into the triple-digit orders with that new customer and the forecast that they've given to us are pretty encouraging and they've also told us that it's because of this hurricane activity and since several sites are down, they want to pull some of those numbers from next year to this year, in terms of [hardening] their infrastructure. So that gives us a [conference] that Q4 would be better than Q3.

And so just to -- and that sounds good and good explanation and -- but it's not that Q4 is better than Q3 it's that Q4 is better than Q4 of last year, the year-over-year thing, that's what you were saying, correct? You're trying for it at least, that's fine. I'm not going to hold your foot to the fire on that too much. What -- and so the orders that you just received with this new Tier 1, initially those were some emergency style orders for -- relative to these hurricanes. Have you received orders beyond the scope of that initial emergency type of contract? You just mentioned that -- and do you have a number of units shipped on that or is that something you're willing to give up?

Some of them did ship, some of them are sitting in the backlog and the backlog number is obviously improving every day. So some of them have already -- some of them are [ready] to ship.

Okay, good. Well, keep up the good work and hopefully next quarter will be a little bit better.

And we have no further questions. I would like to go ahead and conclude the call for today. Thank you for your participation, you may now disconnect.