Q1 2019 Earnings Call
Ladies and gentlemen, thank you for your patience in holding if you would please continue to hold the comps to start in approximately two minutes again. Thank you for your patience and holding the conference should start at approximately two minutes.
Good day and welcome to the American Superconductor first quarter fiscal 2019 earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Mr. John <unk>. Please go ahead Sir.
Thank you Brandon good morning, everyone and welcome to the American Superconductors first quarter and fiscal 29 Gene earnings Conference call I'm John .
Okay.
With us on todays call are Daniel Mcgahn, Chairman, President and Chief Executive Officer John .
Senior Vice President and Chief Financial Officer.
American Superconductor issued its earnings release for the first quarter fiscal 2019 yesterday after the market.
Those of you unable to see and it really is a copy is available in the investor base investors page of the company's website at Www <unk>.
Before starting the call I'd like to remind you that various remarks that management may make during today's call about American doctors future expectations plans and prospects constitute.
Forward looking statements for purposes of the Safe Harbor provisions.
The Securities Litigation Reform Act of 99.
Actual results may differ materially from those indicated by such forward looking statements as a result of various important factors.
And those set forth in the risk factor section of American Superconductor Sad to report on Form 10-K .
The year ended March 31, 2019, which the company filed with the Securities Exchange Commission on June 2019, and subsequent reports that the company has filed.
These forward looking statements represent managements expectations only as of today and should not be relied upon as representing management's views as of any date subsequent to today.
While the company anticipates that subsequent events and developments may cause the company's views to change the company specifically disclaims any obligation to update these forward looking statements.
Also on today's call management will refer to certain non-GAAP financial measures non-GAAP net loss and non-GAAP .
Operating cash flow.
non-GAAP net loss is defined by the company in Denver loss before stock based compensation amortization of acquisition related intangibles and consumption of zero cost basis inventory changes in fair value of warrants other unusual charges or items and the tax effect of adjustments calculated as irrelevant right or the companys non-GAAP metrics.
non-GAAP operating cash flow as defined by the company's operating cash flow for us to normal cells.
Kind of legal fees and expenses and tax effect of adjustments and other unusual cash flow.
A reconciliation of the non-GAAP to GAAP measures can be found in first quarter fiscal 2019 earnings press release.
Company issued and furnished to the Securities and Exchange Commission last night form 8-K.
All of American Superconductor is press releases and as you see filings can be accessed from the investors page of its website and W. W. C dot com with that.
I will now turn the call over to chairman President and CEO Daniel Daniel.
Thanks, John and good morning, everyone.
I'll begin today by providing an update of our grid and win business units.
John can see but will then provide a detailed review of our financial results for the first fiscal quarter, which ended June Thirtyth 2019, and provide guidance for the second fiscal quarter, which ended September Thirtyth 2019.
Following our comments, we will open up the line to questions from our analysts.
Revenue for the first quarter fiscal year 2019 exceeded our guidance range.
In fact, both our grid segment and our wind segment reported increased revenues for the first fiscal quarter of 2019, when compared to the same period last year.
Gross in our grid business for the quarter was driven by strong D var shipments.
Revenue from our Sps product for the U.S. Navy and initial revenue from our Reg deployment project.
D.V.O. also contributed to our great growth in the first quarter of fiscal 2019.
Last quarter I spoke of a record backlog of deep our projects expected to ship. This fiscal year. This is a testament to our continued sales success. Our manufacturing team is also performing very well.
Our supply chain has been able to respond to the increasing demand for D var.
We anticipate that D var shipments should provide a strong base of grid revenues for the remainder of this fiscal year.
We expect even stronger grid growth driven by D. Var in the second half of fiscal 2019 and foresee this pattern continuing into fiscal year 2020.
This is based upon a continuation of the high levels of backlog that we have for D var as well as we have for the overall business. In fact, we have now reported two consecutive quarters, which grid revenues comprised over 70% of total revenue.
Our sales team is focused on building a backlog of D var orders for fiscal 2020 and beyond.
The strength of our D var business is coming from both the renewable connectivity and the industrial segments of the grid market.
Art S.P.S. system is now the Navy baseline the Gaussian design for the San Antonio Class ship platform Ltd.
We anticipate our S.P.S. has the potential for deployment on a total of approximately 15 future ships in this class.
We believe our S. P S for the San Antonio Class could represent approximately 10 million in revenue per vessel.
This could that be expected to Wayne to a revenue stream of about $150 million over the remaining life of the San Antonio class The San Antonio Class is our first design win with the name we are pursuing additional classes of vessels with.
U.S. Navy. Other platforms include but are not limited to destroyers aircraft carriers forgets and littoral combat ships.
We began establishing or Sps manufacturing and product delivery capabilities for LPD 28, and LPD 30 during the first quarter fiscal 2019.
S.P.S. contributed to our grid segment revenues in the first quarter of fiscal 2019.
We are working closely with the need to understand the program timing for LPD 29, and LPD 31.
We are anticipating additional S.P.S. quarters for the San Antonio class.
From a capacity perspective.
We are planning to manufacture multiple S. P S systems concurrently.
During the first quarter, we focused on putting into place the capabilities to deliver on the backlog we have already established.
We believe that we are in position to get more orders in the future.
As you can imagine our production floor and Massachusetts, it's very busy these days.
Our new volte more optimization system or video.
This product addresses the power distribution market. Our sales team has done an excellent job of educating utilities about our video products and we are encouraged by utilities positive reactions to our solution.
We are starting to see repeat orders from utility customers.
And we are delivering multiple units to multiple customers today.
We see a natural diversification in our videos applicability in fact, we shipped our first video product to a non utility customer during the first quarter. This industrial customer plans to utilize our video product to improve power quality on its distribution feeders. We are focused on getting video right in fiscal 2019 for the product and its capabilities.
The go to market strategy, our sales reps nationally are now trained on the new product.
Overall, our video pipeline is developing nicely and we expect to be able to contribute to our great growth in fiscal 2019.
As you know we are diversifying our wind business do saga has a license to manufacture our three megawatt and 5.5 megawatt turbines.
Do sort of recently secured type certification for its 5.5 megawatt turbine, making it the first Korean company to receive international type certification for such a large offshore wind turbines.
Do some currently has more than 150 megawatts in operation and more than 50 megawatts. Beginning construction recent news out of South Korea indicates the construction of a 200 megawatt offshore wind project. Our win team is working closely with do so.
We expect our 5.5 megawatt wind turbine to enter the offshore market with our Korean partner news on heavy industries and look forward to reporting more progress in the near future.
Tucson's management has publicly stated that the term it is significant in that it lays the ground for domestic create technology to play a role in the South Korean governments renewable energy policy and that do sign intends to.
All right cool secure a larger share of the South Korean wind power market.
We hope to announce an order when do some in the near term.
Turning to our Knox, we are encouraged by the progress made in the second one.
And by the fact that IMAX has asked AMC for engineering and design support to facilitate lowering their levelized cost of energy for certain when projects. We're also encouraged by our NOC stated desire to lower the levelized cost of energy even further.
By way of a new wind turbine design.
Our three megawatt class winter.
I want to be clear, though we have not yet signed a three megawatt supply agreement with violence.
However, I Knott's has indicated a new turbine as an integral part of its long term strategy to deploy wind power in India.
We are optimistic about indias when market demand for 83 megawatt class urban and believe we are well positioned to support.
Requirements.
We believe that as IMAX moves towards the completion of secchi, one their focus will shift towards their three megawatt class prototype winter.
The dynamics around significant competitors to high knocks in India are changing.
Which may potentially be positive.
Inox is business.
We are carefully monitoring imax's execution on the second one and second two projects.
Hi, Knox has completed a significant portion of the second one.
And we continue to ship product for sexy too.
We look forward to working with IMAX to secure supply for three megawatt he's yes to support their already growing demand for the three megawatt turbine now I will turn the call over to John to see but to review our financial results for the first quarter of fiscal year 2019, and provide guidance for the second quarter of fiscal 2019, which will at September Thirtyth 2019, John Thanks, Daniel and good morning, everyone.
Hey, Missy generated revenues of 13.8 million for the first quarter of fiscal 2019.
Compared to 12.6 million in the year ago quarter.
But great business unit accounted for 72% of total revenues for the first quarter, well, our wind business accounted for 28%.
Brick business revenues of 9.9 million increased by 10% versus the year ago quarter.
This was primarily due to higher D var revenues and revenues associated with the start of our recently announced right project.
When business revenues of 3.9 million increased by 6% versus the year ago quarter, primarily as a result of increased license and development revenue.
Gross margin for the first quarter of fiscal 2019 was 11%.
Which compares with 31% in the year ago quarter.
The year over year decrease in gross margin for the first quarter was primarily due to a particularly favorable product mix and the great segment in the year ago period.
The more recent comparison purposes gross margin for the fourth quarter of fiscal 2018 was 19%.
R&D and <unk> expenses for the first quarter of fiscal 2019 were 7.7 million. This was down from $8.6 million in the same period a year ago.
Approximately 11% of R&D and as DNA expenses in the first quarter of fiscal 2019 were noncash.
Our net loss in the first quarter of fiscal 2019 was 3.5 million or 17 cents per share compared to 4.7 million or 23 cents per share in the year ago quarter.
Included in this net loss was a 2.9 million non cash reversal of expense associated with the change in fair value of warrants.
Our non-GAAP net loss for the first quarter of fiscal 2019 was $6.2 million or 30 cents per share compared with 3.6 million or 18 cents per share on the year ago quarter.
Please see our press release issued last night for a reconciliation of GAAP to non-GAAP results.
We ended the first quarter of fiscal 2019, with 74.7 million in cash cash equivalents and restricted cash.
This compares with 78.2 million as of March 30, Onest 2019.
Included in the first quarter of fiscal 2019, and cash balance was the final receipt of a $3.1 million payment from the note receivable and interest associated with the sale of our divisions factory.
Our non-GAAP operating cash burn in the first quarter of fiscal 2019 was 4.9 million.
This came in stronger than our previous guidance of 85 to 7 million of reimbursed.
As I've mentioned in previous calls our working capital fluctuates from time to time due to individual projects being serviced out of our business.
In the first quarter of fiscal 2019 or Britain business experienced favorable working capital as a result of accounts receivable collections and milestone billings and future deliveries arrived late in the quarter.
Now turning to our financial guidance for the second quarter of fiscal 2019.
We expect that our revenues will be in the range of 12 to 15 million.
Net loss on that revenue is expected not to exceed 8.5 million or 41 cents per share and our non-GAAP net loss is expected not to exceed 7.5 million or 36 cents per share.
We anticipate operating cash flow to be a burn of $5 million to $7 million in the second quarter fiscal 2019.
This guidance does not include any tax payments and other costs related to the settlement.
We expect to end the second quarter of fiscal 2019 with no less than 67 million in cash cash equivalents restricted cash.
This concludes my review and I will now turn the call back over to Daniel.
Thanks, John .
Turning to rank, we believe that our funnel of opportunities for our resilient electric grid product.
But this funnel is quite significant and we learn more every quarter as we go through with these customers.
We are aggressively going after those opportunities.
We continue to work with major utilities on very specific projects, which we believe show a lot of promise.
We continue to see offense, bringing attention to ring.
And the problems it is expected to uniquely solve.
We believe that the project in Chicago will serve as a proof point for utilities.
We believe that our initial deployment will drive attention to and retire risk for Reg.
Right was chosen by excellent and the Commonwealth Edison Company in Chicago combat to become a permanent part of Chicago's power grid.
We have received approval from the U.S. Department of Homeland security on the contract modification for the first Reg system in Chicago.
He said first Reg system I, just want to make sure that's clear.
The contract modification with DHS approves the scope of Amnesties Reg project Weve comment and is expected to enable us to recover up to $10 million of the project costs.
We began to record revenues this quarter and had been putting into place the operational systems to deliver the project.
We've begun the engineering work and expect to deliver the project hardware in 2020.
We look forward to the successful energization of Reg in 2021.
To conclude.
We expect.
Grow grid revenue again.
In fiscal 2019.
And we have the advantage of supporting our growth was the strongest balance sheet. We've had in recent years.
Our D var business is very strong we are now manufacturing Sps for the Navy. We are now manufacturing rights for combat, we're delivering BB out to the market and our pipeline is developing very nicely. We're supporting do science effort to penetrate the offshore wind market with our 5.5 megawatt turbine we're working closely with inox to adding three megawatt class wind turbine to their product portfolio.
We are executing against our goals and that is to the credit of our employees due to their hard work and dedication.
I do look forward to reporting back to you with the completion of our second fiscal quarter 2019, and at this time brand that we'd like to take questions from our analysts.
Thank you if you'd like to ask a question. Please signal my pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question.
The first question will come from Eric Stine.
Who's going to annualize Johnson.
Hey.
Hey, just just starting with Reg.
The DHS approval for the contract modification.
I mean does that in any way it helps the process because I know ultimately you want to get this you know get the P. you see to allow this to be putting the rate base or that the utility would like to do that does it doesn't help that process in any way I guess would be the first question and then I mean, clearly it sounds like you know the the line of sight as first to more work in Chicago and then also.
Other utilities. So do you think that you know taking this step with DHS helps the process, whether its chicago or other utilities.
Yes, I think you absolutely nailed it because they were in tires that risk. It allows us to get cost recovery for for this this overall program and you have to remember that the reason that we as we understand it that the utility embarked upon this is not just to do this scope because there's a much larger scope that they eventually want to be able to get to so we need to make sure that we continue to deliver on what we said and what we expect and if we do that we do really think that we have a winter not only with exelons potentially in the future, but certainly with many many other utilities as well.
Got it and then HM.
Are you able to quantify the Reg revenues in the corner or is it something that since it's the initial work we should think of it it's pretty small and then maybe you know as you've gotten closer any more clarity as to how you think that plays out over I know what's going to be.
You know multiple quarters through 2020 is that kind of a ratable.
Oh, recognizing that rather than a good way to that's exactly the right way to approach that we entered into the agreement to get the cost recovery late in the quarter. So we're able to build some to the project and in this quarter, we really want to signal to people that pay the projects really underway work. Good work is happening, which means we're able to get the cost recovery wherever the bill that we're able to get revenue for that but I think you're exactly right going forward into the next quarters.
In 19 and into 20 youre going to see.
Ratable might be a good word linear eyes kind of revenue quarter to quarter as we deliver content now there may be surges or or or or.
Reductions in revenue quarter to quarter, but we think that its minimally relative to the total overall business.
Okay got it.
Maybe just turning to D var, a little bit since obviously the orders have been strong there and the results you know I know that you do a lot of work with the best as you've talked about that but when you think about that I mean is there a way to think about.
At least over the last couple of years, what your penetration is with them you know and what you are and just use them as a as an example, what the opportunity is with them going forward.
Yeah, I think in general you have to realize that we've kind of changed our approach a little bit with deep or we were selling principally for renewable connectivity to developers.
We need to do that in the traditional geography that we have been in but we've now have top tier when customers and best. This is a good example, because sometimes they show as a 10% plus customer that as they are trying to develop more more projects and what we see as a lot of winter companies getting into the to the project management project development and delivery and that's with D. Var gets procured so we've been able to build on the back for that with with top tier Winterburn players and that's helped translate into growth for the product line and Additionally, maybe similarly, we focused on industrial customers and we've been able to see a number of large wins there we see those continuing as well we've really changed so the market and kind of the dynamics that we deal with to create what we hope will be a more predictable revenue stream coming out of the grid really driven by deeper.
Got it and then maybe last one for me just turn into the Navy and this is more long term.
But you know you mentioned the additional platforms carriers to Spurs et cetera.
I mean, how should we think about content I know that those are still a little bit of a ways off but when the time comes well should we think of the content the same as the San Antonio.
I think it really depends upon the size the length and the weight and the density of the ship. So we said in our past you know for a small ship, which is a good example might be littoral combat is a shorter in length and lower tonnage shipped those and then the one that we're currently on LPD.
The content there is probably in the range of call. It two to 5 million for the smaller ship and then for large ships like an aircraft carriers example, we've we've traditionally give you might see a a doubling or more of the content $20 million to $25 million number we put out there, but typically fragrances and cruisers and destroyers and L. ships are all kind of mid sized ships. We originally embarked on this we kind of guided to the revenue content would be in the five to 15 million range and then we delivered on LPD with this number that about 10 million. So that gave us some proof point that the pricing was right in the pricing was a winner and they were able to get wins.
So that gives you some color there is a spectrum of ships, but.
Yeah. Most of the ships today that are in the fleet or that medium size. They actually call them large maybe speak but we know what I mean, an aircraft carrier is enormous.
So that's obviously, a larger ships than us and an L.P.D. or destroy or free good or cruiser.
Okay. Thanks, a lot.
Thank you for the question. The next question will come from Colin Rusch with Oppenheimer.
Oppenheimer and company. Please go ahead.
Great. Good morning. This is kristen on for Colin Thanks for taking my questions.
Chris I had a follow up.
Good morning. Thanks.
Just wanted to follow up on the cadence of revenues and the grid business and it does sound like you're expecting sort of an inflection in that in the second half of this fiscal year, but can you talk about what's the lag on gross margins and some of those projects begin to deliver and then sort of related how are you thinking about cash preservation of in the meantime.
Okay. So let me let me hit those and then maybe John can chime in with actual details without kind of go through I don't have it off at a high level.
So you have to understand it and then in the grid business itself, we don't report.
Gross margins by segment, but.
We see that business growing.
Really based upon backlog. So we have backlog at record levels for D. Var, we have backlog levels at very high levels compared to where we thought we'd be with Vvo. When you have the backlog for the LPG ships from the Navy and we have the backlog for Reg one of the challenges with gross margin within the grid business, specifically as you got three new products right Vvo.
Which is in its beginning stages.
I guess the scale to be able to better leverage on the gross margin.
Same thing with Sps I mean, we telegraph, we tried to telegraph as clearly as we could but this is an investment year for S.P.S. for putting capital in place to put the systems to be able to deliver these systems in backlog, we purposely didn't spend prior to getting these orders, but that means you do have to have that spend and that is reflected in the burn and the same thing with rack I mean Reagan the program, where we are sharing costs with DHS for sharing costs with the utility that on a gross margin basis, you know it's not.
So to be direct it's not the best gross margin product, obviously for us out of a lot. So grid is you're seeing the growth coming from the strategy of having these multiple products come online.
But you do have kind of a disconnect that you have a mature product that we're selling into other markets and DMR and then you have three you know infant products when it comes to Vvo Reg and Sps. So those margins over time, I think we'll appropriately as we get to scale.
You want to talk anything any more detail about margin.
Hello.
Uh huh.
Jamie Welch on and then on the cash thing I think you know the way what you can see in previous quarters and the numbers that we're putting out as.
This is kind of the expected burn level that we're going to be able to manage to and we're clearly trying to a single person that we see growth in the business coming principally from grid and that's principally based upon the backlog. So as we get to higher revenue levels, you're going to get better leverage on the gross margin line and on the operating margin, but that's what we're trying to be able to deliver and I think what you're hearing from management today as a lot of excitement that not only do we you know we think it's going to come we have a high degree of confidence they based upon that backlog that we're going to be able to deliver that growth and improvement on the the other financial numbers as well.
Okay, and just as a follow up to that does that backlog number that used to be something that that was disclosed would you be lined up to attempt to quantify the size of that backlog for us at this stage.
Yeah, I don't have any of that in front of me, but you can kind of add up what we had with D. Var. You know what the L. ships are.
You know what Reg as we've disclosed what that you probably have a decent sense even from what you've written yourselves on where you think video is I think you have the math to add together, but we will certainly take that is some feedback that we got to consider how to how do we construct backlog for people. So they can they can understand and get a better picture on it.
Okay and then just.
Level, you know how would you categorize your sales cycle at this stage.
Be it across the various product lines, either and wind are right or D. Var. You are you seeing on any shortening in that sales cycle across any of those product areas. Now that you had some of these larger customer wins under your belt.
Yeah, I think the simple answer is yes, and it's probably yes across the board.
We're seeing.
Cost being designed into repeat customers with D. Var, we're seeing herself being designed they repeat.
You know I think clear with Sps that that should be some recurring business.
That's going to accelerate at the rate that the Navy proliferates and technology through the rest of the fleet. So we do see sales cycles shortening, but we want it to really telegraph that a lot of what the work the sales team is focused on.
Particularly when it comes to the voltage management solutions that our D. Var. Vvo. We're already now in August trying to build backlog into 2020 and beyond we want to make sure that this trajectory continues upward or over a sustained period of time and that's that's the challenge we put forth to the team and that's a challenge that they are already starting to respond to.
Great. Thank you so much I will take that offline.
Thank you for the question. The next question will come from Philip Shen with Roth Capital Partners. Please go ahead with your question.
Hey, guys. Thanks for the questions. The first one is a bit of a follow up on some prior questions.
Maybe from a different perspective, you know you guys.
Put in your prepared remarks, you know that you guys expect to deliver strong grid revenue rose.
This year and.
No you can you just talk through what the backlog could be but just from for modeling purposes and for the simplicity of.
Others are.
Is there any way you can quantify what that growth could be so last year, let's see you guys. I believe we're at 34 million of revenues now we're talking about.
You know low double digits are we talking about.
You know something in the Twentys, if theres any way of quantification I think that could help everybody.
Modeling and see the future. Thanks.
Yeah, I think it's a great question I think it's something that we struggle with because you have to understand and these projects that we do projects can always once you have them and that timing they can always accelerate or decelerate, depending upon the progress of the customers, making their financial milestones and those things. So we try to be very conservative on guiding what we think were able to control, which is really one quarter at a time.
But to kind of do it kind of semi quantitatively or qualitatively, we're now talking about.
D var vvo.
S.P.S. and rang.
All contributing real revenue.
And growing.
So growth on top or grow spells grow, but I cant give ya.
A specific target, but to say that the strategy. We think is working up delivering these multiple projects or products into multiple projects expanding Tam that should translate we think into nice growth for the business overall and certainly that's going to be driven from Britain, but I I don't want to make any news today and put out a new target other than we intend to grow grid and we intend to grow the main products in grid D var, Vvo Reg and Sps.
Okay. Thanks, Stan in terms of Vvo, specifically, you've already given some color there but was wondering if you could talk through you know how many utilities are.
I think you said multiple but what our.
Reordering the video product and then do you expect this.
Have you been successful in getting the utilities to buy into you know just kind of adding this to their their product list and and do you expect that to just be a a product that they you know they don't have to get necessarily Pugh C approval for but they just order off the shelf is that process developing in the way that you had envisioned you know six months or or a year ago. I hope is by 20 2020 felt were they were exactly there. We we never envisioned being you know something that had to go to any kind of Reg regulator I mean this is a.
It does functionality that the distribution utilities know how to manage and.
No the price point and the way the product's design it looks a lot like a transformer. So this is a thing that can be a kind of a stock product for us and the stock product utilities can carry and carrying even extra stuff.
What we're seeing is a fundamental thesis of the market.
Managing residential homes, having solar electric vehicles, managing kind of power quality on the industrial side than Weve done some work with D var, but we see now over a litany of different industries and a smaller size ones vvo becomes directly applicable for so you know all the kind of wins are pointing in the right direction for VBL. So we want to make sure in 2019, we said when we started this years, we're going to place a limited number I'm not going to tell you what that number are but we want to make sure that we get it right that this is something we can copy over and over again and we hope you know as we move on to 2020, it becomes a a noticeable piece of the business and you know from from there you know every time, we learn more things you know, we don't Wanna keep coming back and updating markets and say the market is expanding we need to deliver on the orders that we deliver on the orders of business will be there and we'll see growth continued to come for for many years hopefully in the future.
Great shifting over to your 10-Q that you guys released last night.
I saw micron on there.
You know I think there were 25% of Q1 s revenues can you talk about your relationship with Micron and are they primarily D var customer video or both.
Yeah. So so when we talk about that size of kind of a full factory protection, that's typically D var.
You are seeing some some new names maybe in the fold.
With being 10 plus percent customers.
They're in a capital spending.
Uptick now I think the total semi market now they're spending I think the projections about 100 billion in capital this year.
With the move to a lot of these different memory for mobile devices.
He's fabs are going to have to can we continue to be built over the next few years. So.
We like our relationship with micron, they seem to like our products and relationship with our company.
So it's but it's got to be something that's going to be.
Something we have to limit because a lot of times, what we see are things that are long term future for some of our customers. So I don't want to get any any additional detail Phil over kind of.
For diversification of growth are in demand or those kinds of things.
Okay and one last one from me in terms of Reg a you guys talked about.
You know you emphasize that this is the first drug system any sense as to when the second rig system in Chicago could be announced.
I think stay tuned.
All I can say.
Yes, whats kind of the first one.
Great. Okay. Thanks, Dan I'll pass it on.
Thank you. This concludes today's <unk> session I'll now hand, the call back to Daniel Mccann for closing remarks.
Thanks for some great questions and I think it was a really great quarter. When we think about certainly where we are with Reg you know it's clear the wind business has gone through some challenges.
But we see that potentially changing maybe in the relatively near term we're signaling pretty strong very strongly that we see on the heels of getting certification with do sign of this 5.5 megawatt turbine that we see orders coming in kind of a signal to some of the demand we see coming in the Korean market that.
News on themselves are saying they want to get very large market share in.
We are very pleased with how I inox is handled themselves and the execution of the second one project, we use that as a kind of an indicator for.
Really to help the overall with business. So we're very proud.
That IMAX has gotten to a point, where they've been able to commission a significant fraction of this I don't want to get too far ahead of them because I think they're going to report in the near term, but I know, they're happy with their ability to execute we're very happy with their ability to execute and we're really happy with the relationship that when they run into challenges and these can be challenges that need to be solved in an hour a day.
Our teams really work together as one to be able to purchase those problems for them and its a very good and really working relationship between the companies signaling kind of in the future.
We start to see the beginning Oh.
Some potential growth for IMAX on the three megawatts. So at some point, we're saying that there should be an order there for three megawatt <unk>, yes, not today, but that should be coming in the near term, we do see some changes in the Indian market and the players that may help put I inox in a position where they can come in larger market share which would be great.
We are clearly signaling that we see additional orders coming for asked yes.
We are trying to signal as best we can on the call. So people understand what appears to be increasing demand for D var NBV.
On a specific right now you know, we hope to be able to deliver some more news out of a Reg project. We sense. There is an appetite for that for sure. We there's definitely the potential there was some more pieces of this that I think that will unfold over time.
Realize that our grid business alone has approached $10 million. This quarter. So that's kind of a new milestone when thinking about the business now and hopefully going forward.
It's really starting to get good here at the company and employees are supercharged and to be able to deliver the kinds of things. We're trying to do for customers. We believe are really in a great growth physician for.
2019, particularly on the grid side.
And then I think John went through in the prepared remarks, you know we're at kind of the expected levels of cash consumption at this revenue level.
But based upon the backlog today this should see improvement over the second half and we're trying to directly as we can send that to you. All today, we can't control everything that our customers markets do what we can control and putting in place or capabilities, maintaining or relationships. We've received about supply chain that we think that a lot of the risks to gross I've been retired and that these three new products Vvo Sps and Rag are now being really formally burst. It is a very new company here.
So with that we look forward to being able to talk to you again in a few months and hopefully be able to report even better news. Thank you everybody.
Thank you ladies and gentlemen. This concludes today's event you may now disconnect your line.
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