Chris Tyson - Managing Director of MZ North America Arthur Sams - President & CEO Luis Zavala - VP & CFO Rajesh Masina - COO.

Craig Irwin - Roth Capital.

Good day everyone and welcome to the Polar Power First Quarter 2018 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. Sir, please go ahead..

Thank you and good afternoon. I'd like to thank you all for taking time to join us for Polar Power's First Quarter 2018 Conference Call. Your hosts today are Mr. Luis Zavala, the Company's Chief Financial Officer and Mr. Raj Masina as the Company's Chief Operating Officer.

Raj will provide a business update which will cover customer announcements, products updates and operational milestones while Luis will discuss the financial results. Due to unexpected changes in the international travel plans, Arthur Sams, Chief Executive Officer will be only available for the Q&A portion of today’s call.

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 Raj Masina. Raj, the floor is yours..

Thank you Chris and welcome everyone to Polar Power’s first quarter 2018 earnings conference call. For today's call, I provide a brief summary on Polar’s Q1 highlights, and then I'll provide an in-depth summary in each of our core markets.

The first quarter of 2018 was characterized by increasing shipments of our DC power systems, both domestically and abroad, including strong shipments to one of our new Tier 1 wireless telecommunications customer, as well as to military contractors. And a continued focus on technology leadership through continued R&D initiatives.

Our sales team made good progress in the quarter as revenues grew 22% quarter over quarter, and our backlog as of last Friday, May 11 now stands at 4.3 million, which is a 72% improvement in less than 45 days since closed.

This impressive growth has come as a result of significant orders by our new Tier 1 US carrier r customer, which has now overtaken Verizon as our largest customer, as well as our increasing your robust military customer base.

As a reminder we are now an approved vendor to the top four US wireless carriers or three if the pending T-Mobile and Sprint merger goes through. And we are also an approved vendor for 35 overseas carriers.

On the international front, our global force is beginning to receive initial purchase orders in key markets such as Namibia and Sri Lanka, which we expect to lead to continually larger purchase orders overtime.

Additionally, we have successfully completed field trials in Malaysia and Japan, while adding multiple new customers in Indonesia, Poland, Australia, Myanmar to name a few to our field trial roaster. We’re starting to execute on our international sales pipeline and we believe we are on the cusp of realizing significant value in this front in 2018.

We look forward to providing further announcements on this front. Outside of our core focus on telecom, we are seeing macro tailwinds from the Trump administration that is both accelerating the pace of progress with our military customers like opening discussions with additional branches of the military and the federal government.

This is evidenced by continued artists with Oshkosh defense as well as a 20 unit certain purchase order for the US Army’s robotic mule project with a key military vendor. Based on our discussions, we believe that the US military and federal government may represent material revenue growth driver for Polar Power on a go forward basis.

In all, we have never been more excited about the progress our team has made and the immense sales opportunities facing us today on several fronts. I'd now like to drill down in each market segment or products address in greater detail. Let's begin with the domestic telecommunications market.

In the US market, we continue to diversify our revenue base to the point where Verizon Wireless is no longer our largest customer. We are an approved vendor as I said, to the top four carriers in the US and continue to see diversified interest across an inclusively broad customer base, spanning multiple end markets.

In the first quarter of 2018, a new US Tier 1 wireless carrier, our largest customer made up 64% of our revenues. The commencement of order for this new Tier 1 carrier began in the fourth quarter of 2017 after we received a multiunit purchase order for our 15 kilowatt backup DC generator.

The initial 57 units were shipped to hurricane affected telecoms sites on the island of Puerto Rico. Hurricane Maria, which lingered our Puerto Rico for 10 days in last September, has caused extensive destruction and the humanitarian crisis in the region.

We believe our rapid response and delivery aided in the redevelopment of Puerto Rico's wireless networks, while solidifying a strong working relationship with a new Tier 1 wireless carrier. In fact, all our units are now deployed in the field and they have been performing exceedingly well given the recent power outages even after the hurricane.

We started to see consistent purchase orders from this new customer since then.

Today in 2018 we've seen an acceleration in their ordering patterns and most recently in the first quarter, we signed a three year commercial agreement with this customer which would allow us to fast track orders to the sub-regions nationally, simplifying the ordering process and making our products comparatively more attractive for buyers.

We shipped over 100 units to this customer in 2017 and as reported last time, we already have orders in hand for several times that quantity, many of which will hit in early to mid 2018. This customer that's provided us with a healthy forecast for the full year and further evidence of this is reflected in our growing backlog.

In the fourth quarter of 2017 and into the beginning of 2018, we commenced and completed a six month test and evaluation with another Tier 1 wireless carrier in the US, for a customized, more economical DC power system.

This solution was built to the customer specifications and we were recently added to the national monitoring system and anticipate initial purchase orders in the second quarter of 2018. This product is price competitive to legacy AC generators, while not sacrificing our target gross margin structure.

We anticipate by scale implementation of this product across this customer's network over the next year. The recently announced merger between T-Mobile and Sprint is approved by the electory bodies and finalized is expected to be a net positive for Polar Power.

We are an approved vendor at both firms, though we have more significant discussions regarding DC power systems with the farmer and we believe the merger could lead to a notable increase in interest in our DC power systems due to the strong push to be a leader in developing 5G infrastructure.

Also during the first quarter of 2018, we maintain progress with our legacy Tier 1 wireless carrier Verizon after completing their internal, in sales personal changes. The result of these changes have been well received and we have recently been invited to enter into a national RP for backup generators.

This customer remained our second largest customer, generating 27% of our net sales during Q1 of 2018. During 2017, we established and assembled a strong international sales group covering major telecom carriers and tower operators through the world.

Full time sales executive and support that established during 2017 in Singapore, Dubai, Australia, the Dominican Republic, Romania, Poland and South Africa. I am pleased to announce that as of today, we are an approved to 35 overseas carriers and we are in the process of adding another 40.

Our international sales force continues to execute upon our global growth strategy and we believe of course to realize in the international revenue ramp that we have been anticipating. We are pleased to report initial purchase orders in both Sri Lanka and Namibia, as well as the successful completion of field trials in other parts of the world.

With have several customers conducting field trials as of now and we believe many of them will lead to sales in the later half of the year. The recent win in Namibia positions the company as a complete turnkey solutions provider.

In Sri Lanka our initial two sides cover the bad grid and off grid applications and this customers indicated future sites are being procured for the next 12 months.

As our new international sales - sales high begin to secure a contract wins and continue to win purchase orders current clients, we anticipate increased purchase order activity from select international customers and foresee the beginning of a meaningful backlog in the second half of the year and could be as early as Q2 of 2018.

These efforts are evidenced by the significant increase in backlog since the close of the first quarter. Outside of the initial purchase orders were received in Namibia and Sri Lanka. we were also anticipating other large areas in both Asia Africa.

As you may recall, the Australian market was one of our largest revenue drivers for the company back in 2012 and 2013 were due to the immense opportunity in our backyard and limited bandwidth that we had, we refocused our efforts to the lucrative US market. Now since we are armed with good capital resources. we have renewed our efforts in Australia.

And as I mentioned earlier in the call we established and administrative presence in Australia to provide a regional footprint there that will allow us to better compete with small local firms, and believe that our sales relationships mature, Australia will again become a notable revenue driver for power.

Outside of telecom, we continue to see some material progress with orders and new discussions in the military sector. We have seen some notable sales to-date and have even more substantial sales forecast with Oshkosh, Fortune 500 leading manufacturer of specialty vehicles and vehicle bodies for military applications.

Additionally we also completed the testing phase of a lightweight DC power system for the US Army a robotic mule project which received phase II approval. The product will supply power to the Army robotic and autonomous systems which is a global military strategy to remotely provide surveillance, transportation and reconnaissance over wide areas.

Thereby increasing the standoff distances, survivability and reaction times in battlefield. The Army has indicated that it wanted to buy anywhere between 2700 and 5500 robotic mules for brigade combat team, depending on affordability and budgets.

And it's in the middle of selecting contractors after bringing in several vendors with, eight different vehicles in 2017 for performing operations tests. I'm happy to report that in Q1 we received a PO for 20 generators for this program and this is reflected in our current backlog.

On the R&D front, we continue to drive forward technology and invest heavily in R&D which we believe will continue to solidify Polar Powers absolute technology leadership and drive growth for years to come.

Specifically, during the first quarter we commenced marketing of lower cost Summit Series Hybrid DC Power System for off grid and bad grid applications in the international markets. We have commenced marketing for the lower cost compact 15 kilowatt horizontal system to compete with AC generators and the telecom replacement in the domestic market.

On the operational front and to support the expected ramp in 2018, we expanded our manufacturing in infrastructure with the addition of a new 29,000 square feet production facility, while simultaneously increasing production staff. This is expected to reduce lead times and create notable operational efficiencies.

We also are currently entering a long term contract with vendors for favourable appraising and starting to buy direct from manufacturers as opposed to distributors. This would reduce our overall cost of goods it started to bring certain process in-house as well as to reduce the cost and improve the quality.

In fact Arthur right now is in Japan and that's further evidence that very aggressively positioning to shore up our engine supply chain. We believe these investments we have made in our production infrastructure will allow us to rapidly scale as begin to realize new purchase orders throughout the remainder of 2018.

And now, I believe the first quarter of 2013 signaled the beginning of the revenue ramp that they had been preparing for over the last couple of quarters that well position for robust growth over the next several quarters. I will now turn the call over to our Chief Financial Officer Luis Zavala for his financial summary.

Luis?.

Thank you Raj. Net sales totaled 4.9 million in Q1 2018, which is a decrease of 2% as compared to 5.0 million in Q1, 2017. The decrease in net sales was primarily a result of the price reduction in our DC power systems. Of note, the number of DC power system so than the first quarter was 15% greater than the same period in 2017.

On a sequential basis, net sales increased 22% in Q1, 2018 as compared to 4.0 million in Q4, 2017. Backlog total 2.5 million at March 31, 2018 as compared to 1.8 million at December 31, 2017 and 1 million at March 31, 2017. As of May 11, 2018 backlog totaled 4.3 million, a 72% increase as compared to March 31, 2018.

The increase in backlog at the end of the first quarter of 2018 as compared to the end of 2017, was attributable to an increase -- to increase sales or largest Tier 1 wireless telecommunications carrier customer, as well as increasing sales to military customers.

Gross profit decreased 0.3% to 1.5 million in the first quarter of 2018 as compared to 1.9 million in the first quarter of 2017. Growth profit as a percentage of net sales declined to 30% in the first quarter ‘18 as compared to 39% in the first quarter of 2017.

The gross profit in the first quarter of 2018 was negatively affected due to the price reduction and our DC power systems that took effect in March 2017, coupled with an increase in cost of materials as a result of volatility in the steel market and other raw materials markets.

We made substantial improvements in the production -- we made substantial improvements in our production facility and product line during 2017 and continue to believe that gross profit margin will improve to above 35%, particularly as the volume of sales increases. Operating expenses increased to 1.8 million in Q1, 2018 from 1 million in Q1, 2017.

The increase in operating expenses was primarily due to an increase in sales and marketing as well as research and development expenses. Net loss in the first quarter of 2018 total 0.3 million or negative $0.03 per basic and diluted share compared to net income of 0.6 million or $0.06 per basic and diluted share in the first quarter of 2017.

Cash at March 31, 2018 total, 11.7 million as compared to 14.2 million at December 31, 2017. The decrease in cash as of the comparative period ended March 31, 2018 and December 31, 2017 largely resulted from a 1.8 million quarter over quarter increase to our accounts receivable.

This is mainly a timing issue caused by the delivery of a large order late on the quarter. We expect accounts receivable and cash flow to normalize as we move through 2018. In summary, we remain in a strong financial position and have made investments necessary to support future growth.

The first quarter of 2018 represents a new era of growth for Polar Power. As initial international purchase orders began to materialize alongside our strengthening relationship with our new Tier 1 wireless carrier customer.

We continue to win new supplier approvals and successfully conducted field trials in key international markets are strong macro tailwinds supporting us on a go forward basis for both the capital expenditure requirements for 5Gs in the United States and increase the infrastructure investments by international carriers.

Assuming regulatory approval, we view the T-Mobile’s acquisition of Sprint as a strong net positive well as well. We continue to diversify our revenues across our growing customer base, both in the telecommunications and military markets. I have never been more optimistic regarding folder powers future as I am today.

As a member of management team, we believe we have the potential to create significant longterm value for our shareholders. We look forward to sharing more on developing story as soon as we announce upcoming investor conferences and roadshows in key cities across the United States.

At this time, I like to open up the call to questions from our listeners.

Operator?.

[Operator Instructions] We'll go first to Craig Irwin with Roth Capital..

Good evening and thank you for taking my questions. So Raj and Luis, my first question is about the gross margin target. Obviously that was the widest Delta versus my financial model. You know, revenue ahead is a really nice thing, but you need margin kind of hang in there.

You mentioned that you're optimistic about achieving that 35% gross margin run rate.

What do we need to see that? I mean, what's the revenue run rate we need to see that and is there a positive mix shift needed to push out as well?.

Hey Criag, this is Raj. A few things in here, one is, we do have some inefficiencies with regards the buying prospects because they're still using some of the distributors to meet the shop lead times so that customer's were on.

So gross margin is impacted with that one, while you are establishing a direct relationship with manufacturers? It has a lead time associated with it and you know, I'll say that it might take three to four months. So between now and then we'll have to buy from distributors, have to keep the line moving. So that's one thing.

And also writing the cost and putting some overtime into play here in order to, meet the high demand. So our gross margins are also effected by that run.

And in the future since we're planning for that kind of demand with better forecasts and more communication with the customer, we believe that will address those concerns and we'll bring it back up to that 35% or more that Luis mentioned.

Great. Thank you for that. So, my second question is about the lease for the new manufacturing space.

First, can you remind us what the approximate capacity is today with the shift in pricing for the first facility? And can you maybe describe for us what sort of a commitment you needed from a prospective customers to make the decision to go out there and start paying rent on a monthly basis to bring online a additional capacity for later in the year?.

I guess I can answer that one. Okay. I'm thinking from a hotel room in Japan and I work closely with the sales crew international and the amount of orders that we see coming our way and the amount of time it takes to a schedule, additional manufacturing facilities, we didn't want the two to cross negatively.

We've got very high confidence that the orders would come in, therefore justifying our spending the next three months, four months, commissioning additional production facility.

Craig that your answer your question?.

Yes, that does.

And could you also talk about the approximate capacity at the existing facility either on a quarterly or annual run rate? If we were to talk roughly in revenue production capacity?.

Let me defer that one to Raj or Luis. .

Sure. So our current production facility is 40,000 square feet and we're running about 50% to 55% our production capacity currently on one shift. And the new facility that we mentioned is 29,000 square feet. So you could kind of, put that into perspective there. .

Excellent. That's really good to hear. So then, in order for you to be fully utilized on your first facility, pushing into your second facility, you would need to ramp your purchase volumes quite dramatically.

Can you maybe describe the process that you're going through, and the potential efficiencies that you would see from several fold increase in your purchasing.

And as a public company, are you seeing the vendors and distributors of your various parts be a little bit more flexible and a little bit more accommodating as you work with a little uncertainty around the timing of some of your customer contracts?.

Let me address that. In the new facility, one of the first thing that we're currently installing is a robotic spray, our current painting vendors are not able to keep up with our volumes right now with our increasing volume. So to reduce our production costs we're putting again in a robotic spray booth into our new facility.

Currently I'm in Japan and our first direct shipment of engines will be leaving in June. Things are going well with direct negotiations with our engine suppliers and we were able to achieve very significant price reduction.

Where we have a clear understanding of our engine manufacturers, production rates and limitations and I would say so far my trip here is going very well. Engine and painting is our major..

Arthur? Call is dropping.

I think. I think he might have lost the line..

Yeah, I'm back. I'm back. .

We missed about the last 10 seconds, Arthur. .

Where did I leave off?.

Paint booths and engines are your major issue. .

Yes. And that's been our focus with the new facility. All the other components, most of the other components we've done pretty good at securing additional volume and we don't see too much risk there. .

That's really good to hear. The next question I wanted to ask is about your major Tier 1 carrier that fits driving revenue right now. The revenue from this carrier was up about 75% in the first quarter over the fourth quarter.

Can we expect this to ramp based on your current delivery schedule? Is this something where you're scheduled out through the rest of the year or do you do you expect them to release orders on a weekly or monthly basis? We used to deliver to?.

Raj, you want to take up that one?.

Yeah, I can do that. So the answer Craig, is that it's a combination. One is, we do have some good forecast by the US Tier 1 clients here. And so will be – we are expecting purchase orders on a weekly basis.

And on top of that, we’re also expecting some purchase orders, -- some bulk purchase orders coming from the new carriers that would be, that could become fit as a blanket PO setup and they'll have some release schedules based on that one. So it's a combination of both..

And the new a blanket order.

What is the approximate timing for you to receive that from the customers? This is something you would expect in the next couple of weeks or a couple months? What, what should we think about that from the investor side?.

Yeah, I mean, I can’t basically comment on the timing of that one. Because once again, you're working with these large carriers that have their own schedules to deal with and lot of things that are going on their end.

So we've been, told that it's imminent, it's coming and, at this point of time will not be able to effectively say the particular date on that one. .

Okay. .

Let me add to that too. Let me add to that too, is that some of our predictions in the past haven't, may have fallen short. If a carrier says that they're going to issue a purchase order next week they could actually mean next month or next quarter. So they're not that accurate in delivering their POs.

There's a lot of bureaucracy there that creates delays, but we're confident that the orders would come. And again, we're preparing for the onrush. One thing I forgot to mention earlier besides the a paint booth and the new facility is we're adding about a $600,000 worth of automated processes for punching the machines, stamping machines and fold.

I mean punching the sheet metal, folding it, so we're buying some more robotic equipment to do the sheet metal and the cabinet fabrication. .

Excellent. Excellent. So the, the next question I wanted to ask is about the military. You're Oshkosh order. It's really nice to see shipments against that. There were two things you called out in the press release, the 20 units purchase order for a DC power systems for robotic mule for the army. And then the US defense manufacturer of military vehicles.

I think you said that was point 0.8 million. Can you give us an idea on the diversity of military programs that you're competing for? Do you see a lot of competition in this niche? When we walked around DSCI in London last year, I know this is one of the largest shows in the world for military equipment.

I didn't see any other generator manufacturers really focused on meeting the needs of some of these emerging applications.

How do you expect this to evolve for Polar?.

Good question. I appreciate that. First of all there isn't too much competition in DC generators even though the army has been or the US military has been our longest customer on DC generators dating back to 1989, the relative number of quantities is relatively small, but growing. They still are heavily based with the AC generator legacy.

It takes a while to turn them around, as they get more and more dependent on the need of power and energy in the field, the transition to DC is going to speed up. And of course we'll get more competition.

Now our competition out there as typically companies that will take a product, any product and build it against the contract, those companies, no matter how large they are, are not as competitive as a company that has this product off the shelf.

Now to gain more military business, we have to increase the size and power of our unit and we literally have to cover the range of 3 kilowatt to 200 kilowatt, and when we fully develop that range, it will be the strongest supplier in the military for DC product..

Great. That's good to hear it. Congratulations on the progress and I'll go ahead and hop back in the queue. Thanks for taking my questions..

[Operator Instructions] We'll go next to a [indiscernible]. .

Good afternoon. And congratulations on the progress to Art, Raj and Luis.

On the business model, just some clarification did you say in terms of quantifying the top line, would the 5 million be the watermark? I'm, I've reached blind, begin to realize efficiencies both from labor as well as the supply chain procurement and thereby hit your target margin level?.

Luis, Raj you want to take that one..

Yes. Yes. I will hop on that one. Thanks Art. Ashok, this is Raj.

On a 5 million level, it's probably a good point for us to get some good buying power with materials going to manufacturers and things like that, but in terms of gaining the manufacturing efficiencies that were referring to it, it's more than the 7 million and above, where you could realize those efficiencies, in terms of the efficiencies.

Plus, Arthur also mentioned the new machines that bought into commission in Q3 of this year, which would also enhance efficiencies..

Its telco versus -- Raj given you a renewed momentum and a penetrating a new account. Are you seeing better auto visibility around because historically you are seeing spending forecasts September, October timeframe for the following fiscal year.

So are you seeing you know, the domestic carriers releasing more information into the supply chain partners and thereby giving you better visibility there as well. And a related question….

The answer is yes. .

Okay. And then I think the reason that positioning was the carriers are focusing more on hardening.

Are you seeing more capacity expansion plan and place over your forecast Raj?.

The question is regarding the southeast United States? Is that what it is?.

Yeah, I mean I'm talking about the Hurricane affected areas, right? I think there reasonable focus, functional focus of the carriers, what are you seeing more capacity expansion programs over a budget forecasting cycle?.

Yeah. Its like all these areas are fighting against each other within these telecoms for budgets. Southeast and northeast are probably we’ve been told that they have been getting the bigger pie, bigger piece of the pie rather. So because they're more prone to hurricanes and other calamities.

So you'd been told once again by the new carriers, that we’ve been receiving orders or we’re expecting order in the future. But most of these systems would be deployed in the northeast or the southeast areas of the country. .

Then, you can tell them what there's international opportunity, I think it highlighted Malaysia and Rajesh you are right, in terms of one of the key opportunities for this year, you are waiting to get better granularity in terms of both the timing and the revenue opportunity which you start this year with a two year program.

And so could you update us on that front, please?.

Okay..

I didn't, I didn't get all of that, it’s difficult to for me to respond to that... .

Okay. Arthur, I will take that, sure. Ashok, so your question was regarding the international opportunities that we’re chasing in Africa, in Asia and Australia. And as I said in my script recently we believe that this, Namibia is a good healthy opera going to be building a lot of new sites there. Now that is critical.

That is actually a stepping stone, I’d say into following us into turnkey solutions provider as oppose to just a generator or a power systems provider. So that's one large contract which we are excited about.

Also, there'd be, we received a couple of initial approaches are from one of the largest towe operator in the world for a couple of sites in Sri Lanka, as part of large rollout program they have. They are collecting all the requirements for the rest of the year.

So you do a similar relationship like what we have with US carriers here, it could be on a dry down basis every time they needed a generator, a battery bank, a solar site they are trusting us. So we are pretty excited the contracts we have in our pipeline,.

Raj, in terms of one of the opportunities is that just wondering additional color was the RFQ maybe you approved for in Malaysia, right? And I think the overall contract is big and you are waiting for more information in terms of how much you're involved with the project, right, two year program.

‘18 and ’19, I was wondering if you have additional color on that?.

Yeah. Ashok at this point of time, I'm not-- releasing information on outstanding fees for known reasons, competitive reasons. So yeah, this point of time you can't answer that question.

But yeah, these are the number of RFPs we can say confidently – comfortably that the number of of RFPs, number of projects that we are participating in has increased multi-fold and it has been increasingly steadily quarter over quarter. .

Yeah. And the opportunity Raj out there and Luis, the historical legacy relationship has been surprise and in terms of you’d indicated approved to go to phase two a with an additional contract in terms of reaching phase 2 of the qualification cycle.

At this point we have visibility and the auto floor and is it still on 19 and 20 opportunity from a timing perspective,.

I would say that that 19 and 20 would be, fairly correct. But again, when you're dealing with government bureaucracy, you never know when exactly you're going to get the contract until you received it. .

Okay.

But it also, in terms of competitive positioning, I think this particular contractor who's using your generator or through the competition by landmark, right, from a technical perspective is it fair to assume that you're the lead dog for this opportunity?.

I don't think that we can really speak to the competitiveness of our prime contractor on that. I guess we're proud of our equipment and we may have a rosier outlook on it. But I think that would be more or less or more independent analysts to review the competitive between the various for suppliers into that program. .

Thank you very much and congratulations for your team. .

Thank you. [Operator Instructions] We'll go next to Matt Laviteck [ph] with [indiscernible]. .

Good afternoon. Thanks for taking my question. My first question is regarding the T-Mobile Sprint merger, the proposed merger that you mentioned before as being a net positive in terms of outlook to the company, if that merger is there to close.

T-Mobile recently mentioned a post merger synergies that they're expecting from decommissioning a large number of sites. And from a large number of sites that will no longer have to be built. So that, you know, in the face of it that that kind of stands a little bit at odds with what you had mentioned before.

So I thought it'd be great if you guys could provide a little bit of color about why you expected it to be a net positive and what the drivers are?.

I can go ahead and address that is quite simple. Most of T-Mobile sites and Sprint sites as far as our knowledge are not well hard and they don't have generators that there. The advantage to us that we see is, is that Sprint gets more funding to harden their sites and T-Mobile continues, hardening their sites.

It's not like we're going to be really losing market share. Even though we supplied generator set the T-Mobile a few years back, they simply didn't have the budget or the priority rather to purchase more equipment from us. That wasn't their priority. Now we expect that to change with revenues coming in or investment dollars.

Did I answer your question?.

That does, that's very helpful. Thank you.

Would you be able to provide an update on the 200 kilowatt unit? I believe in the past you've mentioned that being a significant driver and R&D expenses and it will be helpful for providers to not wait on progress there?.

We’re slowing down on that a little bit because the need to increase our production rates. So, and also the demand for customization from our new care carriers. So that diverted us a bit and slowed us down. We expect to pick up pace on that again in June. .

Are you, are you seeing a few been working with customers on specifications for, for that unit? Is that something or you're seeing a lot of demand for?.

Actually in terms of best vacations, customers have very little specification. Is that, it's a situation if there, if it's there, they'll buy it and adapt to it. .

Right. Well, thank you for that.

Can you help us understand a little bit the timeline that you would expect to transpire between moving from completion of field trials that you've mentioned on to actual booking of orders? I think you mentioned completing a number of field trials in Japan and Malaysia, and I know you can't get too specific in terms of timing, but it'd be helpful if you could quantify that in terms of orders a month? What are we, how should we think about that?.

Well, the thing is, as I tried to explain a little bit earlier in the call is that you complete a field trial, customers happy. We usually typically see the expectation. But being able to predict when he's going to give you the signed purchase order is something that, I don't see us being able to predict or any of our competition.

It happens when it happens. What I actually experienced is, you complete field trials and either you wait, maybe soon as to three months and maybe the longest is three years before they purchase.

We've implemented a little bit stronger program, but saying look, if we complete the field trial can we commit to a contract, a delivery day? And so that's kind of like a new approach for us. .

Great. Thank you. Final question you mentioned not seeing much in the way of competition in the DC space. In some of the prepared comments since today's release, there's a note of a number of pricing pressures that you're experiencing and no doubt you've discussed working with suppliers to mitigate that.

But how do you best address, you know, the mentioned competition to mitigate these effects moving forward?.

By increasingly delivering more complete systems and services. For example being competitive in a battery delivery, there is when we ship a generator on a off grid site or on a bad grid site we see the generator is live a rectifiers. We supply the batteries so the customer has a more turnkey solution.

Long time ago or last year, really, that's not a long time ago, we would define a turnkey flip system as being able to provide the solar, solar controller, batteries and generator. Now the customers are willing to take that step further by providing a rectifier by providing installation. I'm in Namibia.

They're asking us to provide the towers themselves, which we're in the process of doing. So its, so what I would call climbing higher and higher on the food chain and being able to meet more of the customer's requirement.

I mean, the customer, what he would like to do is I guess on the golf course and have someone else, build his fight and take care of his requirement. .

Thank you. I appreciate your comments and congratulations on a nice quarter gentlemen. .

And that does concludes today’s question and answer session. At this time I'll turn the conference back to the speakers for any additional or closing remarks. .

Okay. Thanks everyone for joining us on our call today. We have many dedicated and hardworking people throughout the company. From our sales, marked being international folks, their engineering team who keep our DC power solutions constantly evolving. A sincere thanks from all of management to all of you. We could not do it without you.

Lastly, if you weren't able to address all of your questions on today's call, please feel free to contact our on invest relations from MZ Group. We'd be happy to answer them. We look forward to speaking on our second quarter financial results conference call.

Operator?.

This concludes today's call. Thank you for your participation. You may now disconnect..