Q2 2019 Earnings Call
Ladies and gentlemen, thank you for your patience in holding leads continue to remain holding on the mine. This conference will begin in approximately two minutes. Once again. Thank you for your patience in holding and please continue to remain holding on to mine. This conference will begin in approximately two minute.
Thank you.
Good day and welcome to the American Superconductor second quarter fiscal 2019 earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Sanjay Hurry. Please go ahead Sir.
Thank you.
Good morning, everyone and welcome to American Superconductor second quarter fiscal 2019 earnings conference call.
Right.
Mr Relations.
Doctors Investor Relations.
Today.
Chairman President.
John Casino.
Sure.
American Superconductor issue.
Earnings release for the second quarter.
Yesterday after market closed.
Not yet seen.
Copies are available in the investor.
The company's website.
Yes.
We're starting to call I'd like to remind you that various remarks of management may make during today's call about Americans.
Future expectations plans and prospects constitute.
Steven.
For purposes of the Safe Harbor.
Securities Litigation Reform Act.
Yes.
Actual results may differ materially from there.
As a result of various important factors.
For the risk factor section.
Americans.
Okay.
At March 31.
The company filed with the FCC.
29 gene subsequent reports.
At the company has filed with the FCC.
These forward looking statements represent management's expectations.
Today.
Be relied upon as representing management's views as of anything.
Today.
The company anticipates that subsequent events and developments may cause.
These views to change companies, specifically disclaims any obligations.
Statements.
Also on todays call management for certain non-GAAP financial measures.
Net loss and non-GAAP operating cash flow.
non-GAAP net loss as defined by the company has not income or loss before stock based compensation gain on the China settlements nodes.
Position them acquisition related intangibles.
Fair value awards.
Unusual charges are items.
Tax effect of adjustments calculated the relevant range for the company non-GAAP metric.
non-GAAP operating cash flow as defined by the company operating cash flow before the China settlement.
Legal fees and expenses tax effect of adjustments.
Her unusual cash flows or items.
The completion of the non-GAAP measures to the most directly comparable GAAP measures can be sounds in the second quarter fiscal 2019 earnings press release.
Issued furnished to the FCC last night.
Okay.
All of American Superconductor is press releases and then she filings can be accessed from investors age of his website again www dot fantasy though.
I'll now turn the call over to chairman President and CEO Daniel.
Thanks.
Good morning, everyone.
I'll begin today by providing an update of our grid and win business units starting conceivable that provided detailed overview of our financial results for the second fiscal quarter, which ended September Thirtyth 2019.
Provide guidance for the third fiscal quarter, which will end December 31st 2019.
Following our comments, we will open up the wind the questions from analysts.
In fiscal 2019, we're focused on building a more predictable and diversified business.
You're anticipating significant growth from our grid segment.
Revenues for the second quarter fiscal 2019 came in at the upper end of our guidance range grid revenues increased over 50% when compared to the same period last year.
Great growth was driven by strong D var shipments revenue from our Sps product for the U.S. Navy.
You know shipments to utilities and from our Reg deployment project.
In our win business do song intends to enter the offshore wind market in Korea, with our 5.5 megawatts product.
In India, we continue to support I Knox with our two megawatt onshore projects product.
We remain vigilant at managing or operations.
Our operating cash burn was better than our guidance range and our ending cash balance was above guidance.
At the halfway Mark for fiscal year or written business is performing at a very high level.
We are delivering against a strong backlog of written orders.
That's the start of the fiscal year, we have maintained or sales momentum, while further strengthening our backlog and extending our great visibility into fiscal 2020.
D var shipments to both industrial applications and to renewable applications were both strong in the second quarter for fiscal 2019.
We anticipate D var shipments should provide a continued strong base of grid revenues for the rest of the fiscal year.
In the renewable segments are de Boer product is connecting wind farms to the transmission grid.
In the industrial segment D. Var is stabilizing electrical power for sensitive industrial operations, such as semiconductor manufacturing.
In addition to our D var strength, we're starting to see real momentum with or video product.
And we are seeing repeat orders from utility customers and are beginning to deliver multiple units to multiple customers.
You're very encouraged by this the work we've done with utilities is paying off.
We expect video to contribute to our great growth in fiscal 2019.
Turning to our ship protection system product for the U.S. Navy.
Our efforts in fiscal 2019 are focused on putting into place the capability to deliver on our contracts for LPD 28.
And Lpds Dirty.
At the same time, we began generating revenue on these contracts.
We are anticipating another San Antonio class S.P.S. border. When it is released this could be LPD 29, or LPD 31.
Other Navy platforms that we are pursuing for Sps product include but are not limited to destroyers aircraft carriers forgets and littoral combat ships.
We are anticipating additional S.P.S. orders for the San Antonio class and from a capacity perspective, we're planning for the manufacturer of multiple Sps systems concurrently.
Now I'll turn to our wind business.
Those of you are new to the company, we signed an agreement would do signed in 2017 to design and exclusively supply East, Yes units to do signs 5.5 megawatt offshore wind turbine.
The South Korea, when market is expected to present, a long term opportunity for us.
As does the global offshore wind market.
Almost 98% of South Korea's energy requirements are met with imported energy sources.
Currently over 40% of its total electricity generation is derived from coal.
South Korea has mandated the development of renewable energy sources as part of its plan for long term electric power supply.
The government has called for 13 Gigawatts of offshore wind to be installed by 23 and.
So the long term target of at least 30% renewable energy by 2040.
Tucson has publicly expressed its desire to secure a large share of the south Korean wind power market.
If recently secured type certification.
Towards 5.5 megawatt turbine, making it the first Korean company with type certification for this class of offshore wind turbine.
Its management has publicly stated that the 5.5 megawatt turbine is significant and that lays the ground for domestic Korean technology to play a role in the South Korean government renewable energy policy.
We recently announced a 5.5 megawatt he's yes order from do something worth approximately $9 million.
Our winter and team is working very closely with Tucson.
Look forward to potentially penetrating the global offshore wind market with do so.
Turning to India.
We are carefully monitoring imax's execution on the second to project.
We continue to ship two megawatt easiest inox for second to during the second quarter.
As a reminder, I inox, one 300 megawatts from the psyche to auction.
According to IMS Nox delays with the build out of the grid in India.
Has negatively impacted all wind turbine manufacturers in India.
We believe wind turbine manufacturers, including I. Nocs are working hard to reduce built up inventories and get back on schedule.
As this relates to us our inventories which consists of both when didn't grid.
Increased by about $3.5 billion during the second quarter fiscal 2019.
So we're talking about low single digit millions with respect to easier inventories.
Per our supply agreement and to manage our risk I knox's required to post letters of credits before they ever see will ship orders.
Hi, Knox's currently delinquent on its obligation to post letter of credit resets Vcs, that's I Nox forecast into purchase under the terms of the two megawatts supply contract.
We are working with high Nox to regain compliance with our strategic two megawatts supply agreement.
We believe that I noxious working through their inventories of two megawatt easy, yes, and two megawatt wind turbines.
Moving on to the three megawatt class product.
Hi, Knox's stated that the three megawatt class platform is a great fit for the competitive environment in India.
After the three megawatt class prototype turbine is commission.
Nox is expected to then see type certification for the operating turbine.
We look forward to working with sign ups to build the three megawatt class Dcs production supply chain. We also look forward to putting in place the three megawatt class supply contract to support their already anticipated demand for the three megawatt class winter.
Now I'll turn the call over that John can see but to review our financial results.
Second quarter fiscal 2019.
Provide guidance for the third fiscal quarter of 2019, which will end December 31st 29 team.
Thanks, Daniel Good morning, everyone.
Famous see generated revenues of 14 million for the second quarter fiscal 2019.
That's a 14.9 million in the year ago quarter.
Our grid business unit accounted for 82% of total revenues, while our wind business unit accounted for 18%.
Great business business unit revenues increased 52% versus a year ago quarter, driven by higher D var revenue and higher right right revenue.
Well a win business unit revenues decreased by 65% versus a year ago corridor as a result, a fewer shipments to China.
Looking at the piano in more detail gross margin for the second quarter fiscal 2019, 27%, which compares to 24% in a year ago quarter.
The strength in gross margin was driven by primarily.
Favorable project contribution margins within a great business unit.
Research and development and SGN <unk> expenses for the second quarter fiscal 2019 were 7.8 million.
And to 7.4 million in a year ago area.
Approximately 12% of R&D and SGN, a expenses and the second quarter fiscal 2019 were non cash.
Net loss in the second quarter fiscal 2019 was 800000 or 10 cents per diluted share.
This compares to a net income of 22.6 million or $1.10 cents per diluted share in the year ago quarter, which included a gain on the China settlement of 28.7 million.
Our non-GAAP net loss for the second quarter fiscal 2019 was 1.5 million or seven cents per share compared with a non-GAAP net loss of 2.7 million or 13 cents per share in the year ago quarter.
Please see our press release issued last night for a reconciliation of GAAP to non-GAAP results.
Operating cash burn in the second quarter fiscal 2019 was 4.6 million this was better than our previous guidance of five to 7 million dollar Casper.
We ended the second quarter fiscal 2019, with 68.6 million in cash cash equivalents marketable securities unrestricted cash.
This compares with 74.7 million as of June Thirtyth 2019.
Turning to our financial guidance for the third quarter of 2019.
We expect our revenues will be in the range of what seem to 17 million on.
Net loss on that revenues expected not to exceed 7.2 million.
What's enforce here and our non-GAAP net losses expected not to exceed 6.5 billion EUR 31 cents per share.
Company expects operating cash flow to be a burn of four to 6 million in the third quarter fiscal 2019.
I didn't does not include any tax payments or other costs related to the settlement.
We expect to end the third quarter fiscal 2019 was no less than 61 million in cash cash equivalents marketable securities unrestricted cash.
With that I'll turn the call back over to then.
Thanks, John .
I like to conclude today's call. The some comments on the recent progress to my comment.
The federal regulatory commission or.
Two weeks ago, we jointly announced today MSC and comments are proceeding on the engineering assessment for a proposed second Reg system in Chicago.
The purpose of the contemplated second project is to increase rig resilience in the downtown Chicago business district by networking three existing sub stations with her Reg system.
The second project is contemplated to be larger in scope for the six times larger than the first.
And provide greater reliability, resiliency and load serving capabilities during outages or other green disruptions.
Combat expects the rank project will be less disruptive to the downtown area and will not require the significant infrastructure expansion.
New substation.
We look forward to executing on our first project with comments and continue conversations regarding the second proposed project.
Now, let me take a moment to discuss Fercs approval.
Tom adds rank proposal.
FERC is the main governing body when it comes to defining their framework by which utilities are allowed to recover their investments in the transmission network.
This is important because while rig systems provide value to both the distribution and transmission networks.
The rig capability in this case is more analogous to conventional transmission assets.
Burke recently granted comments request to recover it's portion of the cost to construct and operate and maintain.
Both projects through its transmission rates.
We believe this is very positive free and Missy.
And it has accelerated conversations we're having with other utilities regarding the deployment of our rigs product.
Clearly utilities and now regulators are beginning to understand the capability and the value of our Reg system.
In conversations with other utilities, we've learned that regs expected benefits include substantial improvement to the reliability and resiliency of one of the oldest power grid systems in the U.S.
Keeping the power flowing in one of the most densely populated cities by interconnecting a few critical electrical substations.
Modernizing and improving grid resiliency with.
Which is subject to natural catastrophic events, while minimizing project cost and disruption in a large U.S. urban center.
Serves as a properly environmental friendly option for increasing load growth without disrupting the city's vertical growth and yet another U.S. city.
Potentially quadrupling power reliability that as otherwise not feasible with traditional equipment in a critical U.S. city.
We have a lot going on with Reg.
We're very proud of the accomplishment, so far and look forward to.
Being able to talk in more detail about rank in the future.
I want to reiterate though that we expect to grow grid revenue significantly in fiscal 2019.
I think it's clear that our business with D. Var is very strong.
Our delivering and seeing great news and Vvo and how we're delivering not to the market.
We're busy working on our two Sps orders for the Navy.
We're working hard on delivering capability of the Reg system for the first project in Chicago.
For supporting do some efforts to penetrate the offshore wind market with the 5.5 megawatt wind turbines and our 5.5 megawatt he's yes.
We are working closely with I docs to support their efforts, yes, we are growing without liner.
I look forward to reporting back to us the completion of our second fiscal quarter of 2019 and at this time I should tell we'd like to open up the lines of questions from analysts.
Thank you very much ladies and gentleman that that's tied to live by to open the floor for questions.
With my to ask a question. Please signaled by pressing star one on your telephone keypad now if you are using a speaker phone. Please be sure yet your mute function is turned to us to allow your signal to be true Clinton and again, that's still a one to ask a question well pause for just a moment to allow everyone an opportunity to.
No for questions.
My first question will come from Eric Stine, Craig Hallum.
Hi, Daniel again.
Good morning Air flooring, just wanted to chat about the FERC authorization I guess you know one should we view this as kind of.
You know a blanket.
Lincoln approval for other utilities.
Or is this something where it's a template in this kind of sets a precedent that it's gonna be.
Fairly easy for utility to go this route with transmission and be able to put it into rate base.
I think it'd be really director, what we've seen in our conversations with utilities is an open question.
Do we look to classify ranked as a transmission assets or in distribution assets. This is something we've talked about on prior conference calls.
To get rate recovery on the distribution side.
Involves the state regulators and that's something that distribution utilities very familiar with how they spend capital.
Happening in this case is FERC is getting involved because in this case, it's being determined that it behaves more like a transmission Massa.
Which is interesting in many ways Reg behaves exactly like a a transmission assets with the exception that it operates a safer lower voltage.
We had been in conversations with multiple utilities at their senior management level and I don't think that they knew.
What's the FERC would or would not approve I think this does create a case.
Where the FERC has been able to rule in a ways I think is very favorable to the products that is reg.
And I think it serves as additional risk reduction so potentially accelerate deployment of Reg in a variety of cities across the U.S. for a variety of reasons, which I went through in the call. We think this is really big news for us because it gives clarity and certainty that rate recovery is directly possible.
And you mentioned on the distribution side, you know dealing with steep Pcs, which is which is common but I mean is this something or I mean any thoughts on you know if you go the transmission route whether that kind of speeds to process just in terms of.
De risking and and regulatory approval.
It really depends on a case by case basis. So it is in some cities.
Maybe.
Capped at what they're able to do in the way or rate cases, and changes in Costa Rica Irrs for a variety of different reasons I can think of some cities for instance, when there were some acquisitions one of the things that they had the promises they weren't going to raise the distribution rates.
My having potentially to funding sources.
Either the transmission rates through FERC or the distribution rates through the state regulator. It gives really the utility the option to position. This in a way that they can get recovery I'm thinking of analysis and potential for for two pathways to payment and whichever one is better for the rate payer and better.
For the utility from an expediency standpoint.
Hope to see the utility go down there was an open question prior to this what would FERC.
I think and I think we have some inkling now the FERC can think of ranked as a transmission assets.
Okay got it and I would think that you know this goes a long way towards answering you know what's kind of in the open question is does does another utility need to see Reg in the ground that first project in Chicago in I guess this would this would mean de risking it in that that that's not the case.
I think that at least in the case in Chicago, it's clear that they do need to see it in order to go forward with a second project.
I think with this really does is when we announced we were going forward with the project with Chicago.
A lot of what we talked about was.
Things that we don't fully talk too because we're not a regulated utility, but they have to deal with all the time, which is the regulatory risk.
The news in this FERC judgment is that for the first project and also for the second project that regulatory risk has been reduced dramatically.
Got it.
Okay, maybe last one for me just on Vvo, clearly, you're seeing repeat orders I know ultimately your goal is to where this is kind of a stock product I mean, it's that any of those utilities to that point or is that something that you know you should look at going forward.
Yeah, I think the nice thing, we're starting to see or multiple utilities by multiples of the same exact products. So what we're trying to test and develop.
Believe is we're starting to see the beginning of that.
Going to be able to manage this year to make sure that we get it rained every time, we shipped utilities that we're shipping the same product over and over again and I think will help.
Add to the diversification of potential growth that could come from the view in the future.
Okay. Thanks.
Thank you I next question will come from Cowen Bash Oppenheimer.
Thanks, so much guys.
It's you're looking at some of its growth and the utility side, you know and you know a diverse are increasingly diverse customer side can you talk a little bit about.
So for some of the seasonality on lumpiness to smooth that and that business as her gulfport is that something that where we could see a little bit more city or stay line in terms of the growth or is it that continue to be a little bit quarter to quarter.
I think it's kind of in between calm we're trying to make an effort here to make it less lumpy to make it more predictable by addressing more markets that have more predictability.
If you look kind of the trend of the grid business.
He has to be growing which means you don't see.
Great Lumpiness or retreats and revenue.
It is a project based business and if those projects are large and occur over cult multiple periods, you might see spikes and and retreats and revenue because of that.
Generally as we look at how our pipeline lays out of the future.
Our objective of trying to diversify the revenue even within grid is happening and.
We know this is a business that has always been considered lumpy. We think it's valuable to the how we run our business and we think it's valuable to to shareholders.
To reduce the volatility in this business and we're seeing we think some of the beginning of that does that mean it was great certainty. We go forward and that's behind US that's to be seen it will try to do the best we can call on the telegraph that if we know that a project as margin going to has to come over multiple periods.
But we think the general vector for all this is moving upwards and that's what we want to achieve.
Great and then just from a.
Manufacturing and marketing perspective.
Yeah, obviously, we've been kind of a look at all go back here in the last five quarters or so.
Talk a little bit about bad becoming more consistent and driving cost reduction as you get up to higher funds I have one one last question.
It broke up a little bit so you're asking about cost reductions in regard to what specifically cone.
The manufacturing side.
Your ability to drive out costs as you scale at volumes and how we should think about the margin profile.
I think.
The grid business, we're trying to do exactly that and that's something that.
Thank you can look at the previous financials and see that we've been able to expand margins even at these revenue levels.
We need to have more regular business.
You know throughout both segments, but to speak specifically on grid.
We are introducing some some new product lines that will change the missed mix and potentially change margin, but over a longer term periods and next call. It several years as we expand revenues, we should be able to expand margins.
The fixed cost themselves don't see to scale very much and then the operating margin there's great deal leverage there because the six costs overall down always all the way to the Opex line don't need to expand at a rate that approaches anywhere near where revenue hopefully will expand so we think we're going to start to see.
The expansion of those margins, but again period to period things are going to flopping around and John will try to go through detail. It's really a question to the size of the numbers right half a million dollars or a million dollars me me to have a positive or negative impact on numbers, that's probably larger than than.
What it really means that the business I think the better we can try to.
Accurately communicate those the more predictable you can see margins become overtime.
Perfect and then one ton of one on <unk> I mean, obviously this has done a a challenging situations for you guys were has some lack of visibility a lot of.
Certainty from policy perspective, and clearly working through some issues, but this has right now.
Hi.
How how aggressive can you be without blowing up the relationship to be honest is this something whereas it's getting to be time to walk away inside.
Partner potentially and that size market or do you feel like there's there's a pass forward with these guys.
To get to something that's that's more reliable for your business.
Yeah, We think if you focus on the long term there certainly is a proper pass.
We continue to work together.
We're in a bit of a transition from the two to three megawatts. We are doing to use as you work on we have been continues to work on the three megawatts design Knox.
In close contact with them.
We tried to be as clear as we came with the information that we have on what's going on as the market.
Every other signal, we see outside I, inox and kind of the regular media is the number of players that are going to be operating in the middle market in the next two or three years is a very small number.
Hi, Knox believes that they're going to be one of those players we're going to hear from Inox. We think later in the weeks, we'll probably report their results.
Their conference call, they're optimistic I believe about their ability to gain additional orders.
You know at this point, we just kind of have to work through the relationship with them.
We tried to be clear on the call to understand we make sure that we manage our collection risk by putting the letter of credits in place and advance we're trying to work through those issues issues with I Inox and we hope to report back you know better information.
In future periods.
Okay. Thanks, so much guys.
Thank you My next question will come from Philip Shen Boss capital partners.
Hey, guys. Thanks for the questions I'm, just a follow up on the I Knox topic.
Specifically do you have a sense for how long this delay and taking delivery can last.
Have they see northern anyway that it could be short term or where do you think there's a chance that occurred last you know more than a couple of quarters for example.
Yes, so I don't really know and I really don't have enough information even speculate you know what we see as in the summer months.
Finally, connecting secchi, one to the grid.
And they're doing that 18 months at 24 months behind the original schedule.
The way that said Q2 was originally contemplated design was almost to be an extension the second one.
It's leveraging all of the same existing grid infrastructure.
Inox talked about on this on this question on their call they kept saying plug and play plug and play that was the words they jump using over and over again basically saying that the location is sat on the grid to plug all this stuff in and that should not be the rate limiting step to allow them.
Two or two.
Do what they need to do for second too.
We're going to manage our risk the best we can't we're going to try to manage the relationship that was the best we can we see this is a transition I can't tell you how long it's going to we're going to be in it there's more demand beyond second to that.
At least is scheduled to start coming in 2020, so I.
I think it's an overall question of risk in the Indian market one of the protect projections look like for India and when we look at outside third party sources. They all show growth coming in the next few years. So.
We're in a good position from a cash balance standpoint, we're in a good position and what we're doing on the grid business. We feel like we're doing all the things that we can control and then we want to be a patient and good partner to Iducs, where we can.
Okay, great. Thanks for colors Dan.
Coming back to Reg.
No its first approval to rate base, obviously as Grayson theorists and.
Yeah as you mentioned in your prepared remarks has accelerated in conversations I.
Was wondering if you might be will expand on some of those conversations or are you getting more utilities to the table or.
Is it kind of the existing pipeline that you shared with us in the past.
If those conversations are celebrating any sense of timing has to oh, if anything can happen when I wouldn't be fantastic.
Yes, I think you know the pipeline that we're developing for for Reg is persistent we've done a pretty thorough canvassing of.
You asked utilities that isn't to say that there aren't stones that we haven't I covered what we learn in each account is.
Drivers that make it exciting for them to look at adopting I'm seeing those things become more common threw out which is kind of what I tried to go through fill in the part of the prepared remarks are these four or five mean dean's here that we're seeing not ones, but over and over again.
And your really waiting for the relief as some constraint.
<unk> construction or building or gentrification, a specific critical assets it needs additional hardening the kinds of things utilities normally a need to react to.
We see this market accelerating but we do understand that utilities move on the three to five year typewriters, we do see the advent of vvo, helping to have conversations because tactically wouldn't be bow does that helps.
Make the grid work smarter today, but it helps us uncover additional opportunities for right. So.
I see the potential here certainly to build a very nice business. We think we had a great partner in excellent and comment that's going to help us with this first project and get that done that's what we're focused on as a company.
And if we're able to deliver other orders in the future. It's certainly something that we're actively working on I'm very proud of the effort that the team has put forth.
Dealing with utilities and being able to sell D var from the transmission side, the vvo when the distribution side and regular were between.
Okay. Thanks, Dan and then in terms of the last one here coming back to V show.
You mentioned multiple utilities are taking multiple orders when do you think that could become.
You know a single utility could become a steady flow of orders, where you just see that you know.
Maybe you have that now can we don't know about it but do you see that steady and expect this city flow. So that this is just an off the shelf purchasing and no regulatory approval required I know that's the case now but.
What are your thoughts on that we wrap is out around the corner for us.
Yeah, I think you should look into 2020, that's though we're hoping to be able to report back some things like that we're seeing early indications that those things should happen. We're seeing early indications that we think we've got feature set of the product right.
We want to go through this year and make sure that that we're convinced of that that utilities are convinced of that but you know we kind of set in the prepared remarks that we're starting to see multiple utilities by multiple units, which is what we want.
Yes.
One last thing on TV or is there customization for video.
'cause it sounded like a unit in your prepared remarks, you said you didn't make sure where he was an answer to Eric you didn't make sure.
That they get the right.
The video products is there some degree of customization.
So I hope is simply filled no. That's what we're trying to test is that when we looked at how we sell D var to configure to order solution.
The things that gives us the high performance in knees, yes, configure to order solution, we can tailor that to that like her environment that turbine is going to operate that's going to give us performance.
That type of business has additional cost has engineers that need to supported what we're trying to do in vivo as to help diminished the volatility by having more business that has a regular beat but when we talk about it being a make the stock product. It means basically shipping the same product over and over again without additional end.
We're nearing touch labor to configure it. So we wanted when I say get it right. It means we want to get the complete feature set set right.
So that that same article could be shipped to multiple utilities in multiple quantities.
Can do that a lot of the things I think that you've talked to us about Eric's talk to us about and certainly Collin even on the call about the volatility are these are all the things that are going to diminish the volatility in the overall business, which we think is valuable.
Yes that will make sense, so ah, thanks, and I'll pass it on.
Thank you very much at this time, we have no further questions. Nick you sounded that just turn the conference back over to Mr., making for any closing remarks.
We appreciate everybody's tension and commitment to what we're trying to do here.
We talked a couple of years ago go about growth through grid.
Your objectives. This year are all about growth through grid.
I mentioned, a little bit earlier, I'm very proud of the team and the focus that we brought to this not only from sales, but being able to be in production and service and support.
We are building a growth business here with grid and you're just now starting to see the beginning of that we hope to be able to report back.
Great news in future periods.
We're going to keep working on Reg with ER.
Comment in Chicago, We think that's a very important project that we got to execute on well.
We have to execute well on the delivery of our ship protection systems to the Navy as well and the business that we talked about a few years ago that we want to have a very diversified by product line business.
We see that coming very soon here a lot of the hard work is done and hopefully the benefits will start show more and more in the financial results. Thank you everybody. We appreciate it.
Thank you very much ladies and gentlemen, thank you for joining US today. This now concludes today's conference. You may disconnect you have no nine and have a great Reston week. Thank you Jim.