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Call Start: 11:00 Call End: 11:48 American DG Energy, Inc. (NYSEMKT: ADGE ) Q3 2015 Earnings Conference Call November 11, 2015 11:00 A.M. ET Executives Bonnie Brown – CFO John N. Hatsopoulos – Co-CEO Benjamin Locke – Co-CEO Elias Samaras – CEO, EuroSite Power Analysts Ralph Wanger – RW Investments Unidentified Analyst – Oppenheimer Unidentified Analyst – Private Investor Operator Good morning and welcome to the American DG Energy Third Quarter 2015 Financial Earnings Conference Call. All participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions]. For your information, this conference is being recorded. As a reminder, a recording of this conference call will be available for playback approximately one hour after the end of the call and will remain available until Thursday, November 19, 2015. Individuals may access the recording by dialing 877-344-7529 from inside the U.S., 855-669-9658 from Canada, or 412-317-0088 from outside the U.S. Enter the replay conference number of 10075343 followed by the pound sign. Now, I would like to introduce Bonnie Brown, American DG Energy, Chief Financial Officer. Please go ahead. Bonnie Brown Thank you Rocco and good day and thank you all for joining us on Veterans Day for our third quarter earnings call. I am Bonnie Brown, American DG’s Chief Financial Officer. On the call with me today are John Hatsopoulos and Ben Locke our Co-CEOs. Also joining us is John Brooke [ph], our VP of Finance. Before we begin I would like to read our Safe Harbor statement. Various remarks that we may make about the company’s future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. We may make forward-looking statements about our future financial performance that involve risks and uncertainties. These risks and uncertainties could cause our results to differ materially from our current expectations. We encourage you to look at the company’s filings with the SEC to get a more complete picture of our business including the risks and uncertainties just mentioned. Also during this call, we will be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of the non-GAAP financial measures used on this call to the most directly comparable GAAP measures is available in our press release and in the tables accompanying that release. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our estimates change and therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today. And I would now turn it over to John Hatsopoulos for some opening remarks. John? John N. Hatsopoulos Ladies and gentlemen thank you very much for joining us. I would like to remind most of you that we are lucky to have Bonnie Brown back on the team. She worked for ten years at Tecogen and then for a short period of time she left us and then she missed us and came back and became CFO of American DG Energy and EuroSite. This is an exciting period for us even though the numbers are a little misleading. We had made a commitment that by 2016, the American operations of American DG will be cash flow positive and we are almost there. We lost only $51,000 for the quarter and even though the number of consolidated was 300,000 or so, 390,000 if I remember correctly, the bulk of it was because of a transition period of EuroSite which some of you might be investors and aware of the EuroSite numbers. It is our belief and goal that 2016 we will be cash flow positive in the United States and as I mentioned earlier, for the EuroSite, EuroSite believes they will be cash flow positive for the year 2016. And most probably we will be cash flow positive for the current quarter consolidated with EuroSite because they will be cash flow positive and will be either cash flow positive in the U.S. or almost there. With that I’d like to ask Ben Locke, who’s really running ADG and -– Ben? Benjamin Locke Thanks, John. So before I go into review of our third quarter, I’d like to provide a quick review of our business for those who maybe new to the call. ADG and EuroSite Power are in the business of selling energy in the form of electricity, heat, and cooling to customers who wish to save money spent on traditional sources of energy. We own the assets to produce the energy onsite and earn revenue as the customer pays ADG a discounted rate for electricity and heat or cooling. This model called an On-Site utility or OSU is quite calm and practical with energy technologies such as wind, solar and co-generation systems. The OSU model is an essential part of any distributed generation infrastructure, since not every customer has the capital or the financial flexibility to own an asset outright. I’d like to reiterate to our investors what the main focus of the company has been recently and how it relates to our plans for growing the company in the future. Our main focus, since the beginning of the year, has been to improve the operations of our existing fleet, in order to increase productivity while optimizing our margins and improving our cash flows. As our results confirm over the past three quarters, we’re seeing solid improvements in our margins. I believe demonstrating robust and consistent margins for ADG is the most important metric to guide our business forward since it is the basis from which we can resume growing the business, confident that each new project will return margins that will lead us to profitability as quickly as possible. With that I’d like to review the results for the quarter. Our third quarter revenues of $1.96 million were a bit of an improvement as compared to $1.89 million in Q3 of 2014. But we are very happy with this result given the reallocation of ADG assets that occurred late in the second quarter of this year, which I will review in a moment. Our overall gross margin without depreciation improved a 37.5% as compared to 35.3% in 2014. Our efforts to improve the U.S. fleet performance are even more demonstrated by the strong margins of the ADG North American operations, which were 45.4% for the quarter without depreciation. These margins show that the underlying business model for ADG is solid and will be the basis for growing the business in the future. As Bonnie will describe in more detail in just a few minutes, we’ve also taken many other steps with our expenses with the goal of achieving EBITDA cash flow positive operations in 2016. Before I give a review of our operations, I’d like to remind investors that our fleet consists of three segments; ADG owned and service sites in the U.S., EuroSite owned and service sites in the U.K., and sites jointly owned and serviced with our LLC partner. As discussed in our last conference call, in June we announced an agreement with our LLC partner to reallocate most of the LLC sites, based on tighter geographical footprint and customer relationships. The results gave 100% control and ownership over eight sites consisting of 13 units to American DG Energy, allowing us the ability to make improvements to these sites, to maximize performance and efficiency, as well as maintain the sites with our service partner Tecogen. The reallocation gave 100% control and ownership of seven sites consisting of nine units to the LLC partner. 5 sites consisting of 17 units will remain in the LLC for the time being, but will be under the operation and control of American DG. These changes essentially went into effect in the third quarter. Over the past four months we’ve been evaluating the LLC sites, now under ADG control to determine the best way to improve the operation. In some cases, minor repairs resulting in minimal downtime were made. In other cases more complex improvements were needed resulting in prolonged system downtime. I mentioned in the second quarter call that we anticipated a dip in revenues in the third quarter. As a result of the seven sites moving to LLC control and the downtime of the acquired LLC sites due to upgrade work, fully knowing that the long-term benefits of the changes far outweighed any short-term revenue reduction. As we saw with our revenue numbers, we do not see this dip as expected, rather we saw a bit of an increase in revenues. This is a good indication that even with the reduction due to the LLC reallocation, the improvements made to existing sites more than covered the shortfall. We will continue our efforts to review the LLC in the fourth quarter. In some cases we are expecting sites with new OSU propositions that will improve the customer savings and secure long-term profitable revenue for ADG. If new OSU’s are signed with these sites we will make more substantial improvements to the system which again may result in some revenue loss in the fourth quarter but eventually will result in long-term revenues with strong margins. Turning to our EuroSite fleet, as Paul Hamblyn described in the earnings call earlier today, EuroSite continues to show good results with revenues increasing 20.4% over the third quarter of 2014. EuroSite added one new system to their fleet in the third quarter with a second system added just after the quarter closed. If you are not able to participate in the EuroSite call, their earnings press release gives the instructions for listening to the replay. With the LLC reallocation now complete and with the addition of the system to the EuroSite fleet, as of September 30th ADG’s overall fleet consisted of 120 systems consisting of 76 ADG controlled systems, 16 systems in the LLC, and 28 systems in the UK. Turning back to the North American fleet, as I mentioned earlier, our efforts to improve productivity and operations of the fleet, resulted in the gross margin before depreciation of 45.4%. This is a direct result of our continued efforts to improve site performance. We are continuing to systematically go through existing sites for ways to improve operation with the goal of maximizing the assets potential. In some cases this involves a more detailed engineering view of the system design of the operation. Logically we are focused on larger installations for the smart in depth review as we apply cost benefit analysis to drive our decisions whether or not to proceed with upgrades and how these upgrades are prioritized. We will continue this effort in the fourth quarter and I fully expect a good pay back for this effort as site revenues increased and margins improve. Moving to sales, we are continuing to apply a new level of diligence in evaluating new sales opportunities. In some cases potential sales opportunities that were in the advanced stages of closing have been deferred as result of a more detailed level of analysis, measurement and verification, and construction estimation. It is essential for our future growth that ADG only accepts projects that will assure the deliverer the promised revenue and margins that our analysis projects. With that said the backlog of projects we are seeking to close all meet the stringent criteria for success. I am working very closely with the sales team to make sure that we only accept jobs that will meet our projections since these will be the project that materially contribute to our revenue and profitability goals. Our goal is to close at least one of these new projects in the fourth quarter. With that I would like to turn it over to Bonnie for a little more a discussion of the financials. John N. Hatsopoulos Before Bonnie gets on, I would like to add that our Board has been very excited about the success that Ben has had. And they contributed to group of money to buy shares because we felt that the shares were thoroughly undervalued and to the best of my knowledge we have already, the Board has already bought 600,000 plus shares in the open market and they are continuing to do so. Bonnie, sorry I wanted to add this. Bonnie Brown That is okay. I wanted to add a little detail from some of the highlights that Ben discussed earlier. First, our operating expenses for the quarter have decreased by $102,000 or 8.3%. Of particular note is the decrease in general and administrative expenses which decreased 28.4% or $222,000. Management has made a focused effort to improve efficiencies in tearing down of our operating expenses is evidence of that efforts. We will continue with these efforts into the coming year. Second, we are quite excited that our non-GAAP EBITDA cash outflows for American DG in North America have decreased to $51,000. We see this financial metric as a sign that we are moving in the right direction towards the goal of being in an EBITDA cash flow positive position in the not too distant future. As John said, our goal would be to reach a positive position at some point in 2016. And with that I will turn it back to Ben to discuss the next few months. Benjamin Locke Thanks, Bonnie. So looking forward to fourth quarter and beyond, I’m very confident that our efforts to improve margins on our existing fleet combined with a very selective addition of new projects, and the continued improvement of operational expenses, that Bonnie mentioned, will result in EBITDA-positive cash flow operation in 2016. Once we achieve this goal, we will be in a much better position to add new projects to the fleet and resume growth of the company knowing that the fleet is maximizing productivity and profitability. EuroSite continues to make tremendous progress in the U.K. and we expect more project announcements in the coming quarters. In summary, I believe the ADG’s business model is strong. The fundamental economic drivers for an OSU model remain favorable and customers continue to value the resiliency of the grid outages that the Tecogen’s equipment provides. With that I’d like to turn it over to the operator for any questions. Question-and-Answer Session Operator Thank you. [Operator Instructions]. And our first question comes from Ralph Wanger of RW Investments. Please go ahead. Benjamin Locke Hi there, Ralph. Ralph Wanger Hi guys. Looking at the fleet, at this point we’ve been running a very static number of systems, is that correct? Benjamin Locke Yes, that’s correct, Ralph. Ralph Wanger Yes, so and at some point over the – in – I gather some point in the next year we’ll be resuming sales efforts and try to increase the size of the fleet? Benjamin Locke Yes, yes. The plan is we have a couple of sites that are under construction now, in the back log. Of course we’re finishing those up, that’s going to add to the fleet. And then we have, as I mentioned, we’re being very, very diligent about only selecting a couple of new projects in this near-term with the cash that we have available to make sure that they’re the best returning projects we can do in the near-term. And then when we reach this cash flow positive operation, which again, we really feel strongly it’s going to be in 2016, our cash balance is going to start going up instead of down. That will really be the enabler to us to accept a lot more projects going forward. So what you can expect then Ralph, in the few quarter is we’re going to have a few more systems coming online, because they’re under construction now. We’re going to announce a couple of more projects that were very selectively chosen, and then we’re going to see the cash flow positive operation as a result in 2016. Benjamin Locke Ralph, this is John Hatsopoulos. Charlie Maxwell who is listening right now felt very strongly and so did we, but he was the leader, he’s also our Chairman. That don’t try and grow the company till you start making some money and we all agreed with him and that is the strategy we are following. Benjamin Locke I mean we’re making a lot of extra money now without even having booked new projects. That’s – and that’s very positive. Ralph Wanger Yes. Well that’s great. But then you’re going to have to crank up a marketing effort which I presume has gotten extended, now sales force tends to get pretty rusty if they’re not closing, if they’re not out getting deals? Benjamin Locke Yes, yes. Ralph Wanger And what -– so how are you going to go about rebuilding a marketing effort? Benjamin Locke Yes, well the sales team has been very fortunate to be working very closely with Tecogen and that you probably imagine how this goes Ralph, if a sales prospect wants to buy a system, Tecogen does it and if Tecogen salesman finds a project that wants to be an OSU, it goes down the hall to American DG. So the sales structure is always going to be there for our OSUs and we also have, what we call these, customer agents, these company agents, sales agents that are always looking for prospects. So I don’t think there’s ever going to be a dearth of opportunities for us when we start resuming sales in earnest next year. Ralph Wanger Are those -– yes, is that like an outside distributor that you’re talking about? Benjamin Locke Yes, well no they’re some -– they’re kind of really like, some are small ESCO’s or engineering companies that are always kind if scouting out opportunities. We pay the commission if something closes and they are on the prowl for us. It is a pretty common model. Ralph Wanger Alright, well obviously there is a transition that you have to go through to get the world understanding that you are back in business? John N. Hatsopoulos That is what we are doing Ralph right now and I will tell you, I am very excited about what Ben and actually the whole team has done in bringing us cash flow positive. I feel very strongly that even the consolidation of the fourth quarter of change. Also EuroSite is going through this transition. The fourth quarter, the quarter we are in right now we should be cash flow positive consolidated and we are lucky that the British government has also a law that gives us subsidies for green energy and that is what we are I guess. And the law exists till 2018. So we are going to see a lot of exciting things happening over the next few quarters and frankly this is the reason I think that our Board felt comfortable to put in money in purchasing our stock which have gone close to zero. And we have the bulk of our Board including Deanna Petersen and Elias — Dr. Samaras are all listening in. So if any of you have any thing and of course Charlie, if any of you have anything different to say put your name on the list and we will ask them. Ralph Wanger Okay, now when you do this — now when you start trying to get new systems do you have a balance sheet bind or how are you going to finance it? John N. Hatsopoulos Well, this is where the excitement comes in Ralph. Dr. Samaras who is the CEO and also on the Board of ADG and CEO of EuroSite has two banks that are, actually it was three banks and we are leaving it temporarily at least the third one, that they want to give us capital for facilities starting in Europe. But I visited them accidentally because they have a different name in the United States. It is an Australian Bank, one of them and in Europe they call themselves something else and in the United States something else. And I caught Holy Hell for visiting them. I didn’t even know they were the same ones and they are begging us to take their money. So, we don’t need to sell shares. The moment we sign, we will first sign the Europe which should happen within the next quarter or so maybe sooner and then we will start — when we are cash flow positive in the States we can do it right now. But we can get a hell of lot better terms if we are cash flow positive then we cannot. Then we are almost there. So, capital is not going to be an issue. I have no interest and none of our Board has any interest to sell shares at this level. As a matter of fact they are buying rather than selling. Ralph Wanger I understand that. But even on leasing dues eventually don’t you have to have some capital involved? John N. Hatsopoulos We have enough capital right now for all our operations and these that we already have. Benjamin Locke Yes, the projects that were under construction now and again the handful of projects that we hopefully will be closing soon. We have enough cash to see those through the construction and commissioning stage. That is why we don’t want to add five more projects today. We will add a couple. So, our cash balance can be used for those very worthwhile projects and then again the cash flow will start to be positive next year and for all the reasons John just mentioned give us more options for expanding further. John N. Hatsopoulos But there is also a little secret that we don’t mention only because nobody will believe us. We have a large amount of inventory of units that are not on our cash balance sheet, but if we get orders we’ll ask Tecogen to bring them up, to upgrade them, for some facilities that we have for some reason or another abandoned. So we have another few, I don’t know if it’s a couple of million dollars or $2 million or $3 million order of equipment in inventory that we can be using for other facilities. So we’re in a hell of a lot better shape than we show. Ralph Wanger Okay. Well it sounds -– if you’re going to really be a fast growing business you have to or you’re going to need, sounds like you need capital and you need a lot of marketing effort. John N. Hatsopoulos Well the marketing is Ben’s responsibility. Dr. Samaras and I – our responsibility is for the capital. And as I said, I was amazed at the line-up of banks that want to give us money. Their –- instead of us begging them they’re begging us. And originally they said, “How much money you want?” And I threw a number – I picked up a number from the sky of $10 million and they said, “Can you make it a little bigger?” I don’t know if Dr. Samaras, who is next to me, would like to say something. Elias Samaras Yes, actually they wanted -– they were talking about $13 million, $14 million, $15 million and we said we go slowly. We may need shouldn’t but for the time being we’re picking off $10 million. John N. Hatsopoulos Yes. So I -– we are in a heck of a lot better shape that one would believe by looking at our stock Ralph. But the market is the market, so that is one thing that unfortunately we cannot control. We tried but we can’t. Operator Thank you, sir. Our next question comes from Michael Zook [ph] of Oppenheimer. Please go ahead. Unidentified Analyst Good morning, everybody. Benjamin Locke Congratulations on your royals. John N. Hatsopoulos Congratulations. You and I talked about the baseball team. And you told me not to count on it. Unidentified Analyst Well, thank you. Well, we came through. Just one question regarding the balance sheet, I noticed that the outstanding amount of the convertible debentures went up compared with December 30th to September 30th by almost $1 million. I think the convertibles are due in 2018, is that correct? John N. Hatsopoulos I don’t know why they would go up, unless it’s the consolidation with EuroSite. Because American DG here in the United States has not borrowed $1 more than what we had… Bonnie Brown From December… John N. Hatsopoulos Three or four years ago and we still have another three years, May – in May to pay it off. And as a matter of fact we have prepaid all the interest for the next two and half years. And I was just… Bonnie Brown When did that happen? John N. Hatsopoulos That happened about eight months ago, 10 months ago, Joan? Bonnie Brown During 2013. John N. Hatsopoulos Anyway I did it so I should remember. And I was very annoyed at the accounting process, where even though we prepaid it, it goes on the P&L, even though we don’t pay it anymore because we’ve paid it. So we have no interest to pay for the $20 million, part of which by the way is to me, $2.5 million is mine. And we’ve gotten the share, the interest till the end of the convertible. But I don’t know why it should have gone up. Bonnie is the accountant. Bonnie Brown Yes, I — go ahead. Benjamin Locke No, I was just going to say, we’ll figure it out and give you a call back, Mike. Bonnie Brown Right. I have a… Unidentified Analyst That’s fine going forward. The next question is what is the status with ADGE and any marketing effort with the Ilios type units. Is ADGE a marketing arm for Ilios units or exactly what’s the relationship there? And is there a substantial opportunity to grow that part of the business? John N. Hatsopoulos There is -– they are -– they have a right to do marketing in Europe. As a matter of fact we have an agreement with them that even if our distributors and we have a good distributor in Ireland, that if he ever sells anything in their territory and territory I mean making energy for the facility, Tecogen will pay fee to EuroSite. But up to now the big effort obviously of EuroSite has been on a combined unit power. But they have a right to sell equipments. Benjamin Locke And it’s worth mentioning Mike that Tecogen’s working pretty closely with ADG on Ilios in some specific geographies. You might remember we had a press release last quarter of two Ilios units going to -– destined for Hawaii, they haven’t actually been delivered yet. But Hawaii is a perfect market for Ilios, whether it’s selling which ADG would do or just selling the product, of course which Tecogen would do. So there is joint marketing going on in some other geographies like Hawaii, because you’re absolutely right, it’s a perfect product for those areas. Unidentified Analyst Well, I’m looking forward. I think that we should develop a program to expand the effort with Ilios because I think it’s a heck of a product and we’ve got an advantage because we have the technology. And I would encourage the company to again, expand that effort because I think it could add significant incremental revenue and more importantly get our name out into areas where right now we are not functioning or not selling. I think we should go for it. Benjamin Locke You’re absolutely right. In fact one of our guy is in Hawaii right now. One of ADG salesman is in Hawaii right now trying to accomplish that. John N. Hatsopoulos Mike, we have a problem, and I have to be very honest with you. As you know I have a house in the Caribbean, in Nassau to be exact, and I was talking to a group there. And the first answer is, question is. “Aren’t you violating the second law of thermodynamics by creating twice the energy that you put in?” And as a matter of fact in some cases in a new product we have we’re producing three times the energy that we put in. What we need and we -– Ben is doing right now is installing units in various areas of the world so we can demonstrate that we are not violating any laws of thermodynamics. We’re not creating any energy, we’re taking the energy from the atmosphere and that’s what we’re using. But people don’t understand it. You’d be surprised at — I talk to investors. I don’t talk to engineers because I’m not an engineer. But their first question is that maybe you guys are crooks, and you’re telling us that you’re creating something out of nothing. So what Ben is doing is installing units in various parts of the world and tells them, go look at it and asked these customers to verify what we’re saying. But it takes time. It’s not like a magician. When you have a new drug to cure some disease that couldn’t be cured, overnight you have a multi-billion dollar market. In engineering products the users are very hesitant in changing technology. And I shouldn’t be wasting everybody’s time but I will. In 1970s Thermo Electron had developed a furnace that saved well over 40% of the energy for heat treating and hardening and making parts for aerospace and none of you would touch it. Because they thought that this was something crazy. You don’t save 40% of the natural gas. Then we got lucky. There was a shortage of natural gas, most of you are too young to remember the 70s, I’m at a certain age that I remember these things. And we went from 5 million in revenues for furnaces to 300 million or 400 million or 500 million, I forget the exact in less than five years. But in the beginning they wouldn’t touch it because they were scared that we had something that was some kind of a fraud. And this is the way production engineering is addressing new technologies. And again, it’s very difficult to understand, unless you are in the business. Any way maybe I answered your question Mike. Unidentified Analyst Well I appreciate that and I think we should -– you’ve got a lot of smart guys back there and I’m sure we can figure out a way to get the story out and to start booking some sales, because I know the technology works, I’m convinced of that. And now it’s just a matter of getting people on board. So my encouragement is let’s go for it. Appreciate the comments this morning and look forward to improvements in 2016. Benjamin Locke Thanks, Mike. Operator [Operator Instructions]. Our next question comes from Thomas Ore [ph], a private investor. Please go ahead. Unidentified Analyst Hey good morning, guys, how are you? Ralph Wanger really asked all the questions that I had written down with respect to growth. I mean, look, I understand what we’re doing. We stabilized our operations. I think the expense control is excellent. SG&A down is really good. I like the discipline in the new products. But I also heard Elias this morning on the EuroSite call talking about how we can pretty much get any project financed in Europe now. John, you’ve mentioned in -– that we have companies almost throwing money at us. I guess my sense is aren’t we being a little too conservative? I mean, I think what I’d like to see as an investor is maybe a little better balance of operational discipline with some sales growth, as a – I see what we’re doing, the market clearly doesn’t see it, but it will eventually. But I think until we get to a point where we can announce five or six or seven or eight orders per quarter, the stock’s just mired here with sellers. I mean we operate a 119 systems at the end of the Q2, then 121 and that’s just kind of in the trend for so long now and I know we’re closer to seeing better sales growth, but I would suggest perhaps since cash is available, we have cash on our balance sheet, it looks like we’re in good shape in Europe that we could flick the switch on maybe a little stronger on the sales growth side. So I would just put that out there as maybe something to rethink a little bit now, ratchet that up a bit as we move into the latter part of this year? John N. Hatsopoulos Tom, I think this year is over. I mean its November already. But I think by sometime the middle of next year, you’re going to see, get what you desire, at least that’s our goal. But and again, especially in the United States, being cash flow positive here is a difference between 5% interest rate versus 8% to 10% interest rate. And we’d like to be able to negotiate. As I said, I personally went to the bank and they begged me to give me money. So, but -– and they were very frank about it that the difference of cash flow positive versus not is almost double. And if you borrow money then you don’t borrow it for overnight, you borrow it for a long period of time. Interestingly enough, the company -– the bank that wants to loan us money is also trading natural gas and they have -– we have already signed with them at a huge discount at least in for Europe for natural gas prices which would increase dramatically. I know this is not a EuroSite call, but will be increased dramatically the returns of EuroSite because that’s our primary cost out our kind of service. Elias Samaras Tom this is Elias, I just want to add to what John said from our experience in Europe, before we became cash flow positive the banks wouldn’t even consider talking to us or if they were talking they were talking about double-digit interest rates. Now that the situation has changed, the banks not only are talking to us but they are giving in rates that we will announce probably for this quarter as well, that are fantastic rates, that we wouldn’t imagine. Therefore what John said, he’s right, turning to cash flow positive and that eventually would certainly open the door for the banks talking to ADG also. Unidentified Analyst Well since we’re basically there with cash – if we’re cash flow positive effectively now or in fourth quarter or next year and we’re saying that on the call and you can say that to a lending institution why would we defer any new deals there? Why wouldn’t we just get on the sales thing and go with growth right now? I mean, I don’t understand why we have to wait a couple of more quarters and kind of slug along as we get our locked and – why do we have to protect our cash then? If we have access to all this cash then and Ben said earlier, well we want to conserve our cash to make sure we get all our installations in, why do we have to be conservative at this point? Can’t we be more aggressive? Benjamin Locke Yes, well, the main thing, I’m not sure it came across in my remarks is we don’t want to take any bad deals. Unidentified Analyst Okay. That I get, I understand that. Benjamin Locke Yes, and… Unidentified Analyst It sounds like you have other, you probably could take and you are just holding off until another couple of quarters? Benjamin Locke Well, no, I think what happens is when you start to enter in a phase of M&V, doing the measurement and verification, and then doing much more construction. It prolongs the deal closure time, becomes a lot more – a lot longer of the closure process to go through all those steps. And believe me the sales men, it drives our sales men crazy that I come in there and I say, “Well, you got to do this and you got to do this,” and they’ll say “Come on, I just want to close the deal,” and but, no, we can’t just close the deal unless we do these steps. That’s what kind of -– I think some of our projects didn’t go those steps before and I want to make sure we don’t repeat those mistakes. So believe me Tom, when we do announce deals and if I were to have four deals come up and I don’t have the cash in the bank to do them but they’re really, really good deals, because they passed every hurdle that I put in front it, as John said we’ll get the money and we’ll do it. We won’t turn those deals down. Unidentified Analyst Okay. That’s good to know. Now Ben, out of our backlog of 19 systems, are those all solid from your perspective in terms of their profitability and their viability are those all good? Benjamin Locke Yes. Most of them are. I know that there’s one large site that has six units that are in construction now. One of them is close to being completed. Some of the others, and I don’t have the exact breakup in front me, I can give you a call offline Tom, but I know that some of the other ones in backlog are at this one particular university that we have many systems running. And when you work with the university, one minute they want it and the next minute the building has a data center or something and then it’s on hold. So some of them are delayed in time, but I’d say the majority of them are in fact in construction and will be running quite soon, especially that one larger one which is Luna Park, I know we’ve mentioned before. Unidentified Analyst Got it, one more quick and then I’ll jump off. I listened the EuroSite call this morning was excellent. I think, the company seems to have gone through a lot different iterations of how it reports its press releases. Sometimes its standalone with EuroSite in there, sometimes it is blended. I would say that for me it’s a little hard still to kind of sort through now and understand the operations of both in this single press release. And I’d love to hear something and see something more standalone from the company EuroSite related to the Corona Energy deal and some other stuff. I mean there were some excellent points in there that Elias touched on, and John, that aren’t as clear in the American DG press release so – I don’t know if I’m just not getting something else or if something’s to come, but I just throw that out there maybe as…? John N. Hatsopoulos Tom, again, we’ll try and give a little more details and especially for Europe. Because this quarter that we’re in its going to be a great quarter for EuroSite. Again, it is imposed so I don’t want people to think… Unidentified Analyst Those four colors alike Elias were fantastic. I just love to kind of see those be more highlighted. If you are not, if you weren’t on the call this morning you probably aren’t going to be able to see those. They are not visible in the ADG press release. I just think, it was — they were so strong and so compelling, I just love to see those maybe out a little more visible to investors, that’s all? Benjamin Locke Yes, it is a fair point and we always try to strike a balance at how much we want to repeat versus EuroSite. But I think John we are looking at each other nodding our heads that we will make sure we do a little bit more of that next time around. Unidentified Analyst Alright guys, great expense control, great operational turnaround and look forward to the growth. Nice to hear, see that Zooks [ph] Royals won the World Series and we will move on. Thanks very much. John N. Hatsopoulos You should congratulate Charlie because he is the one that pushed us on what we are doing right now. It was his thoughts and suggestions as our Chairman who has been a very active Chairman in spite of his youth. Unidentified Analyst Listen we are very fortunate to have Charlie. I have worked with him for 15 years. He is one of the most brilliant guys I have ever worked with and I will say also that I am very impressed with the new Board additions with Joan and Elias and everyone else and everyone’s efforts. So, I think we have made a remarkable turnaround for the company over the last 12 months. So, good job by you guys. Thank you. John N. Hatsopoulos Thank you. Thank you everybody. Operator Thank you. Seeing there is no further questions, I would like to thank everyone for participating today. This concludes today’s event. John N. Hatsopoulos Well, I think we should — again thank you all very much. It is an exciting period for us and again it was exciting when we started, then we went into trouble, and we are right back where we should have been for a long time. Thank you very much. Operator And thank you all for attending today’s event. You may now disconnect your lines. Scalper1 News
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