Sanjay Hurry - IR Counsel, LHA William Clough - President & CEO Daniel Ford - CFO

Eric Stine - Craig-Hallum Liam Burke - B. Riley FBR Rob Brown - Lake Street Capital Mike Wallace - White Pine Capital

Good day, ladies and gentlemen, and welcome to the Q2 2018 CUI Global, Inc. Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. I'd now like to turn the call over to Sanjay Hurry, Investor Relations Counsel. You may begin.

Thank you. Good morning and welcome to CUI Global's second quarter 2018 results conference call. A copy of the Company's earnings press release and accompanying PowerPoint presentation to this call are available for download on the Events & Presentations page of the Investor Relations section of the CUI Global website. With us on the call today are William Clough, President and Chief Executive Officer; and Daniel Ford, Chief Financial Officer. The purpose of today's call is to review the Company's financial results for the second quarter and to provide you with management's perspective on the second half of fiscal 2018. Following management's remarks, the call will be opened to questions-and-answers. A telephonic replay of this call will be made available until August 21st. You may also access the archived webcast and accompanying PowerPoint at any time on the Investor Relations section of the CUI Global website. As a reminder, this call will contain certain forward-looking statements made within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities and Exchange Act of 1934 as amended. Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in forward-looking statements. The Company may experience significant fluctuations in future operating results due to a number of economic, competitive, and other factors, including among other things, Company's reliance on third-party manufacturers and suppliers, government, agency, budgetary, and political constrains, new or increased competition, changes in market demand, and the performance or liability of its products. These and other factors could cause operating results to vary significantly from those in prior periods and to those projected in forward-looking statements. Additional information with respect to these and other factors, which could materially affect the Company and its operations, are included in certain forms the Company has filed with the Securities and Exchange Commission. With that, I'd like to hand over the call to William Clough, Chief Executive Officer. Good morning, Bill.

Thank you, Sanjay. Good morning, everyone and thank you for joining us on our fiscal second quarter 2018 results conference call. I'll begin this morning with a brief overview of our performance for the quarter, after which Dan, will review our financial results in greater detail. Following Dan's remarks, I will conclude the call with some commentary on our business trajectory for the second half of this year. To begin, our consolidated revenues for the second quarter reflects strong demand in our Power & Electromechanical segment that offset slow uptick in our Energy segment as compared to the prior period. As Dan will discuss in his prepared remarks, net loss for the quarter includes a further $1.3 million goodwill impairment charge against Orbital UK. It also includes approximately $400,000 of foreign exchange loss and $200,000 in marketing costs associated with our well attended Open House event in the UK and our participation in World Gas Conference in Washington D.C. Our Power segment was again a standout performance in the quarter with momentum sustained by strong end-markets and increased distribution. We continue to see strong demand and broad growth across our entire product portfolio. Segment revenues increased approximately 12% over the prior period that was driven by higher distributor sales, volume due to distributor partners such as National Electronics last quarter and Arrow last year are driving greater order flow as these relationships mature and expand. Power segment backlog at quarter-end was $26.5 million, up slightly as compared to $26.1 million at March 31st, and up 31% from $20.2 million at December 31st. Strength in Power backlog is being largely driven by distribution channel partners and we anticipate this momentum to continue to translate to the segment's quarterly revenue performance. In our Energy segment, we anticipated a soft quarter and first half, as the bulk of our UK's projects are scheduled for the second half of the year due to customer schedules and associated delays in the RHI approval taking place in late May for biomethane project in Xanax and expected stronger second half performance is built into Energy backlog which has increased 34% since we started the year and has done so without benefit of new orders from our Italy contract. Energy segment backlog stood at $16.9 million at quarter-end. Our Energy segment performance also reflects slow uptick of our products across the many avenues of growth we've cultivated over the past two years as we await a restart to our Italy contract. We continue to see the market with customers that can scale their orders as their confidence in our innovated Gas Products builds. In the second quarter, we saw signs of traction with a series of orders for biomethane applications in the UK following the recent broader certification of our GasPT analyzer by UK Energy Regulator, OFGEM. After Dan's review, I'll have more to say on how the UK's commitment to moving further away from traditional cost of fuel energy and towards more environmentally-friendly alternative energy sources together with overall UK's longstanding relationship with Energy operators in country positions us to benefit from tailwinds in this market. Now let me turn the call over to Dan Ford, our CFO, who will take you through our financial results in greater detail. Dan?

Thank you, Bill, and good morning everyone. Before I review our second quarter results, as a reminder, CUI Global has adopted the new revenue recognition standard known as ASC Topic 606 for fiscal 2018. All financials presented today as well as those found in the PowerPoint Presentation that accompanies this call are based on these new revenue rules unless otherwise stated. As such, our financial results for the second quarter are not directly comparable to those of the year-ago period. They are reported under the old revenue rules. To give you an apples-to-apples comparison, we're also providing for your convenience what our second quarter and year-to-date results for 2018 would have been as reported under the old revenue rules. Financial results presented under the old revenue rules are directly comparable to 2017 and can also be found in the PowerPoint presentation. I refer you to notes two and three of our condensed consolidated financial statements found in our Form 10-Q for the quarter ended June 30, 2018, for a detailed explanation of revenue recognition under both the old and new rules and a cumulative effect on our results. Turning to our consolidated results for the quarter, total revenue was $23.1 million as compared to $22.5 million for the second quarter of 2017, reflecting a $2.1 million increase in revenues from the Power &Electromechanical segment, offset by $1.5 million decrease in revenue in our Energy segment. Largely as a result of lower contribution from our Energy segment, consolidated gross profit margin was 350 basis points low last year at 33% for the quarter end. As a reminder, our Energy segment experiences improved margins when it sells more of its leading technology solutions including GasPT and VE Sampling Systems which offset lower margin integration type work. Resulting from the lower margin consolidated gross profit decreased in the second quarter of 2018 to $7.6 million compared to $8.2 million in the prior year period. Consolidated selling, general administrative expenses for the second quarter were $9.2 million, an increase of $0.5 million or 6% compared to the prior year Q2 reflecting higher exchange rates contributing to higher translated cost at Orbital UK and increased activities in support of the increased revenues and marketing efforts across both segments during Q2 2018, including our attendants and booth presentation at the recent World Gas Conference as well as the Open House held at our UK facility. While SG&A expenses increased in absolute dollar terms as a percentage of revenue SG&A increased one percentage of revenue for the quarter end and improved approximately two percentage of revenue for the year-to-date period. Adjusted EBITDA loss for the second quarter was $2.4 million compared to $0.8 million in the second quarter of 2017. For the second quarter, we recorded a $1.3 million goodwill impairment charge associated with our Orbital UK subsidiary to reflecting ongoing and longer than expected temporary halt in shipping of our GasPT devices under our contract with the Italian customer, and a generally slow market in the UK related to Brexit, including a slowed biogas industry symbolized by an extended delay in UK's approval of the domestic and non-domestic renewable heater scheme until late May. As you are aware we also incurred an impairment charge in the fourth quarter of 2017. We test for impairment in the second quarter of each year and when events or circumstances indicate that the carrying amount of goodwill exceeded it's fair value it may not be recoverable as of the case in Q4. The remaining goodwill related to Orbital UK amounts to $3.2 million. As a result of this impairment charge, net loss for the quarter was $4.8 million or $0.17 per share compared to a net loss of $1.6 million or $0.07 per share for the same period last year. Turning to our segment revenue and gross margin, I'll start with our Power & Electromechanical segment, revenues for the quarter were $20.3 million compared to $18.2 million last year, an increase of 12%. On a sequential basis Power & Electromechanical segment revenues increased 19% reflecting continued strong orders within the segment and their associated deliveries as well as normal seasonality in the industry that typically troughed in Q4 and peaked in Q2 and Q3. We continue to benefit from electronics market upcycle, the broader base of business we have established over the past several years with new distribution partners, as well as from new design wins and new product introductions. Gross profit for the second quarter was $7.3 million or 36% essentially the same gross profit percentage on higher revenues in the prior period. Our Energy segment produced revenues of $2.8 million down from the $4.3 million, we reported last year. The year-over-year variance reflects the timing of customer project schedules and the generally slower UK market that has continued into 2018. Bill will provide some commentary shortly on the passage of the RHI incentive program in the UK that we expect will result in improved order flow in the second half of the year. In our Energy segment, revenues for the quarter were more heavily weighted towards lower margin integration projects. As a result of the decreased revenues and lower margin mix gross margin for the quarter fell to 14% from 39% last year. Further increased integration volumes, spread fixed costs that impacts gross profits and the second half of 2018 is forecasted to have a significant increase in these type projects particularly through the UK operations as the current customer backlog demonstrates. Consolidated backlog was $43.4 million at quarter end compared to $32.8 million at December 31, 2017. Backlog for the Power & Electromechanical segment was $26.5 million, an increase of $6.3 million compared to $20.2 million at December 31. This increase reflects the inclusion of ICE Block order received in Q1 2018 as well as the continued uptick in the power market. The Energy segment backlog at quarter end increased $4.3 million to $16.9 million compared to $12.6 million at December 31, 2017. For the first half of the year we generated consolidated revenue of $45.1 million compared to $40.3 million in the same period last year with increased Power & Electromechanical segment revenue offset by slightly lower Energy segment revenue. Power & Electromechanical revenue grew 17% to $37.3 million from $31.8 million in prior period. Energy revenue was $7.8 million compared to $8.5 million last year a 9% decline. Consolidated gross profit for the six-month period was essentially even at $14.2 million compared to $13.9 million in the prior period, reflecting unfavorable segment mix associated with lower sales of higher margin products in our Energy segment and the decline in Energy segment revenues. Likewise consolidated gross margin fell from 35% to 32%. On a segment basis, Power & Electromechanical deliveries -- delivered a gross margin of 32% or 100 basis points below last year's 34%. This decrease in margin for the Power & Electromechanical segment was primarily the result of the approximately $900,000 Q1 royalty expense to Virtual Power Systems included in cost of revenues. Energy segment reported gross margin of 22% compared to 35% in the prior period reflecting the mix of lower margin integration projects during the quarter and delays on higher value integration project for the second half of 2018. SG&A increased $1.2 million in the six months period to $18.4 million from $17.3 million in prior year period reflecting increased cost in both our Power & Electromechanical and the Energy segment that were primarily due to higher selling expenses on higher Power & Electromechanical segment sales and higher professional fees in the Energy segment. We expect SG&A expenses over the balance of the second half of 2018 to decrease slightly associated with various initiatives and the completion during Q2 at our World Gas Conference and Open House event and the related cost in the Energy segment. Research and development was relatively flat at $1.4 million compared to $1.2 million in the prior period. We expect research and development over the balance of the year to continue at its current rate. As a result of the increase in SG&A, the adjusted EBITDA loss widened to $5.2 million compared to $4 million in the first half of 2017. Net loss for the year was $8 million or $0.28 per share compared to a net loss of $5.4 million or $0.26 per share in the prior period. As a reminder, net loss for the first half year includes a goodwill impairment charge of $1.3 million. In terms of our balance sheet, we ended the quarter with cash, cash equivalents and restricted cash of $7.8 million. This compares to $12.6 million as of December 31, 2017. Supplementing our cash balances, we have borrowing capacity available to us in the form of our undrawn $4 million line of credit with Wells Fargo and about $1.2 million left available of an approximately $2 million overdraft facility also with Wells Fargo maintained by Orbital UK. This concludes my prepared remarks. I will now turn the call back to Bill.

Thank you, Dan. As we move past the halfway point of the year, our strategy remains unchanged namely to pursue large addressable markets with disruptive technologies found in our two segments to deliver higher and sustainable growth to our shareholders. In our Power segment, we continue to move to expand the market footprint and promote our ICE technologies in the marketplace following the receipt of UL and TUB certifications. We are in the marketplace today with channel partners to drive awareness and adoption of the ICE switch and ICE block and our message is a compelling one that is resonating with the data center operators namely that the ICE technology can provide data centers with the ability to embed intelligent visibility and control automation including unlocking previously unusable power capacity for major operational and bottom-line benefits. Staying with ICE for a moment, we strengthened and extended our partnership with Virtual Power Systems or VPS subsequent to the close of the quarter. To an amended agreement, we substantially derisked the partnership with VPS while also positioning us to benefit from secular trends within the data center marketplace to utilize software defined power and infrastructure to simplify the deployment and management of resources. Separately we made an investment of $500,000 in a convertible note receivable with VPS to support the two companies continued collaboration and development of industry transforming SDP Technologies. In brief, we renegotiated and extended the exclusive agreements through 2024 with an automatic renewal provision. We also eliminated the $1.4 million buyout provision and strengthened the agreement to increase protection around the use of the VPS software and technology in our hardware applications. The amendment agreement enables us to benefit from the data center markets adoption of our ICE technology over the long-term. Of equal significance with our investment in VPS, we are supporting VPS's development of Hyper-Converged to Power Infrastructure Solutions. Hyper-Converged infrastructure is a software defined solution that simplifies the deployment and management of data center resources, compute, storage, networking, and power. The IT industry views such a solution as a paradigm shift given their ability to create significant operational and economic benefits for data center operators. According to a January 2018 report by market research firms statistics MRC, the global hyper-converged infrastructure market is expected to reach $17 billion in 2023 from $1.5 billion in 2016. Turning to our Energy segment, I noted earlier that we are seeing traction in the UK market for biomethane applications and those orders coincide with the broader certification of GasPT. Over the past several years, the regulatory, statutory, and CapEx environments in the UK have been driving towards an acceleration in the pace of adoption of renewable energy sources such as biomethane. On May 22nd of this year, UK passed its Domestic Renewable Heat Incentive, a feed-in tariff designed to incent biomethane production. As a consequence, we have seen the RHI catalyze the incremental demand for both our integration expertise and energy products. You have likely seen that the bulk of our recent press releases have been UK biomethane related testing to strengthening order flow for our products with numerous biomethane facilities planned over the next several years in UK alone. We're well positioned to benefit from UKs evolving energy policy. I draw your attention to one of our recent announcements which we make; it takes as a significant development in the industry's adoption of GasPT. We recently secured an award for the UK, on one of Europe's leading manufacturers of biomethane integrated solutions for use of our GasPT technology as a direct replacement for its gas analyzers. In the second half of 2018, we expect to make additional announcements regarding the use of our GasPT and VE Technologies as a replacement for the legacy gas chromatograph technology as operators across the UK recognize the advantages both from an economic and an accuracy perspective of our GasPT analyzer. Staying with Europe for a moment longer let me update you on our Italy project. With the recent formation of an Italian government, our partner Socrates has made operational inquiries to us in support of a restart of the re-metering project. Discussions around build schedules and lead times have taken place. However I want to stress that no timetable has been communicated to us. This is nevertheless a positive development though we are cognizant of that that Italy had been with our government for several months and the new government has a backlog of business to which it must attend. From our perspective, we are ready to begin time deliveries immediately upon notification from Socrates. I would however remind everyone that Socrates has approximately 350 GasPT units, some portion of which will need to be progressed through installations before a second purchase order is issued to us. As a further reminder, the Italian re-metering project is fully funded and given the advantages of GasPT from an ROI and technology standpoint, our device remains integral to the gas operators infrastructure plans. A restart of the Italy project remains a win and not an if and when it does, it will have a significant positive impact on our future revenues earnings and cash flows. Our efforts to see the market with customers that can scale their orders led to a signing of Memorandum of Understanding with Samson AG subsequent to the close of the quarter. Samson with its more than 4000 employees and facilities in 66 plus countries is a leader in flow control solutions in the energy market. Its reputation for innovative technology is purest and its reach global. With this MoU we established our first global sales and distribution for our GasPT, VE Technology and combine GasPTi analyzer and gain access to previously untapped large gas markets such as Russia, China, Africa, and South America. We anticipate signing a definitive agreement to formalize our partnership in the next 60 days with agreement that will include Samson's unit commitments for 2019. Turning to North America, our newly opened user facility is the focal point for our efforts to drive awareness and adoption of our energy products in that geography. We are pursuing preferred vendor status with all major gas operators in North America. The securing of which will drive more project towards us given our much larger facility and increase the opportunities for higher margin integrated sales project and product to these perspective customers. We are also on track in securing North American certification to our GasPT 2 Measurement Canada and are still progressing field trials with a large Canadian Energy operator. To conclude my remarks this morning, I hope to have given you a sense of the breadth and depth of our opportunity set across both of our business segments. Momentum is building in our Energy segment with clear catalysts ahead and as we develop new geographies for additional opportunities. Our Power segment is seeing sustained demand for strong end markets and as we progress the initial rollout of our ICE solutions. Together our two segments put us on the path to growing and sustained revenue growth and ultimately profitability. Thank you for your time and attention this morning. Operator, please go open the call to questions.

[Operator Instructions]. Our first question is from Eric Stine with Craig-Hallum. Your line is now open.

All right maybe just I want to start with Samson in that MoU it sounds like optimistic but you get something done here pretty quickly but just curious I mean how do you view that playing out I mean is this something where it sounds like it's pretty detailed that they're very familiar with your technology, is this something that you expect to be a contributor even in 2018 more meaningful in 2019 or I mean is this one where it's similar to some of your other distribution agreement or it's a wait and see before you know that it's going to be successful or not?

Yes, I'm pretty enthusiastic about Samson. There a big operator. They're very familiar with the technology and they came to us to put this deal together. We’re actually tentatively scheduled to announce the formal agreement at their Gas Tech in Spain in September, so they're pushing hard to get that agreement in place by then if that does occur, I expect to see some impact this year towards the end of this year, certainly the big impact will be in 2019. But again I think we could see units rolling out later this year, they want to in essence take over our distribution network absent North America and the UK, we would keep that but they want to take over the worldwide global distribution of the product. And they are quite well-positioned to do that, so I think there this could be very exciting opportunity for us.

Got it. Maybe just turning to Orbital and specifically North America with the new facility, I know the energy and the order levels weren't where you wanted in Q2 but just curious I mean now that you've got that bigger facility, what pipelines looking like but also when you look at that pipeline, is that one that includes integration work but also your gas products or maybe you can just give the mix of how you think that plays out going forward?

Backlog right now is up 34% from the end of last year to today and that 34% frankly is largely the UK because we've had a delay in their biomethane projects because that RHI delay. The used facilities continued to grow at pretty good pace they are -- they haven't slowdown at all and we've seen a bigger uptick in projects in new facilities come online not very little of that frankly that backlog is the new technology. There are some GasPTs in there associated with the biomethane. There's also a project in there for national grid to replace a bunch of low end gas from us with the GasPT, so there is some GasPT revenues in that backlog but predominantly it is all integration work, so any of these bigger projects, any of the commitments by Samson or obviously the restart of the Italian project will dramatically shift the backlog and the mix of products going out.

From conversations you’re having with the market out of the Houston facility. I mean is that something that you anticipate changes overtime that that it does include those gas products or should we think of that as that really is going to be an installation hub for you --

No, no.

I’m sorry integration, I apologize integration.

Yes, they are definitely pushing product sales effect. They're the ones dealing almost exclusively with Canada for example. So they are definitely pushing product sales and they are seeing some demand starting to ramp up. We've had reorders as we mentioned in couple of press releases we've got reorders from the big compressor group that we are dealing with the Northeast, so again the -- all North American products sales goes through Houston.

Okay, maybe last one for Dan. I know that you last call you had talked about your expectation that you'd be cash flow positive in the second half. Just wondering if that’s still your plan?

That's we're still pushing for yes that they were working towards exact and as you’ll know the energy segment is significantly back half weighted, so that's really improve the position of the company of operating and cash wise, so that's where we're pushing towards, yes.

Our next question is from Liam Burke with B. Riley FBR. Your line is now open.

Bill, can we talk a little bit about the ICE system you talked about a lot of interest from the large providers, how is the deployment going with existing commitments and could you give us a sense as to how close you are to looking at new orders from new customers?

Sure. We’re under fairly restricted NDAs about naming customers. I can’t tell you because VPS has named them, SAP is now rolling the product out, we're going to do a proof of concept and instead of doing a proof of concept they're actually rolling out initial deployments to one of their smaller data centers, so we have SAP. We've talked in the past about Intel they’re on board. We have another probably seven or eight beta testers if you will though it's a product not a beta product that's out there and we're seeing good adoption, these are new -- very new technology but it addresses a very significant problem in the data center market which is energy and energy usage. So I think that as time goes on, we're going to see more and more traction develop. We expect to see orders developing towards the last half of this year with delivery starting the first and second quarter of next year.

Great. And getting back to Samson, the commitment would be to be your exclusive distributor globally and are they more of a systems integrator or a street distributor as technology sophistication on their part?

Yes, they are 107-year-old German manufacturing company, what they do is they manufacture valve rays, large pipeline components and analyzers for the oil, gas and petrochemical industry. They are very, very well known particularly in Europe and South America, they’re very, very effective in what they deliver and what’s happened is over the course of the last year, year-and-a-half they’ve changed their philosophy and instead of being a component provider they want to now be a systems provider, they want to provide entire solutions and the GasPT direct begin to that change in business and that’s what they are working towards. So they have already 4,000 employees across 66 countries, so they’re very much world-wide, they have manufacturing facilities in India, they have actual manufacturing facilities in China and in Russia and then of course their large manufacturing operation is in Germany and Frankfurt. But what they’re looking to do, what they would like to do is be world-wide exclusive distributor, we have basically told them they’re going to run that and the earning is going to be showing what they can do taking over the distributor network outside of North America and UK where we’re already present and that’s why I think the agreement that we come up with and that we hope to announce we will have unit commitments, we will have things that they’re going to have to meet, milestones they are going to meet if they want to move forward and become the kind of partner that we hope they will be.

[Operator Instructions]. Our next question is from Rob Brown with Lake Street Capital. Your line is now open.

On the Samson deal, if you get orders are those stocking orders for them or those orders that go into systems that they are deploying?

They'll stocking orders for them, go to them as a sell-through not a sell-to but they will be generally used as components for systems, they’ll be selling on to their customers, they have a large array of customers that we have no contract with now things like Nestle’s where they use huge amount of gas to rose coffee beans, they are big representatives in the glass and ceramics businesses throughout Europe. So they’re going to have the ability to enter into systems that we would not have any focus on at all. And again I think largely those stocking products will be used for there in unit 10 users.

Okay, good. Thank you. And then on the UK biogas market, you received certification I guess could you just give us little more color on how that market is developing now that you have a certification, you said there is a bit of delay, what's kind of the next steps, is there anything more to do on the Government side or do you just a matter of the market developing at this point?

Yes, the market is developing, we’ve already got and we’ve announced as we got and we’ve already got there is around I believe seven or eight units that we’re putting together right now there are about half a million pounds piece of that $750,000 piece, we’re also getting orders from other entities who are building the skids for our GasPTi which is being used now because of the option certification. But really the delay was getting the approval through the Parliament, as you remember, the reason they call for a new government which ended up late last year causing the UK government to in essence take a pause for three or four months and they’re now catching up with all sorts of things. RHI was one of those things, they pass it in May 22, so now you have a bunch of people, big companies, really major companies who all are putting together skids and what we’ve done is really gone after the market with our expertise and incentivize people to place orders, we think there will be as many as 21 to 24 units let out before the end of this year, I think we’ve already gotten bids on 14 or 15 of those, I think like I said we’ve already captured probably eight to 10 of those, we think we’ll get the large majority of them and then the build start but again everything was contingent on the RHI being passed that has passed and now it’s just a matter of getting the individual projects going.

[Operator Instructions]. And we have a question from Mike Wallace with White Pine Capital. Your line is now open.

Thinking about Energy margins second half 2018 here, how do you see them progressing as you increase utilization in Houston and UK?

Back up to the low 30s, this quarter was exceptionally lower due to the -- this lack of volume going through out of the UK office to the scheduled customer. So we should see that returning quite significantly back to the 30s.

Over the mid-30s or what you're thinking?

[Indiscernible] that's what we expect to see. And then as GasPT should GasPT ramp up and that will have a bigger impact on it.

Okay. So GasPT could add to the low 30s? Hello.

Yes, that is correct I said, sorry it must not have come through.

Off to the agreement, the new agreement with VPS, does that agreement changed the margin structure with them?

Doesn’t change the margin structure, it does increase the term of the agreement exclusivity, it increases our right to retain some of the IP that we’ve developed on our end and protect our developments there even beyond the term of the agreements. So it’s more about vicinity, exclusivity and protecting IP but the economics are more or less the same.

The investments you’ve made, tell us a little bit more about that?

Basically what we did is we got involved with them, it’s a convertible note that will give us an equity interest in the company, it allows us to have we believe more input into what they do and where they do their sales and whatnot. And I think it also it creates stronger partnership, it was the way that we got them to agree that withdraw the provision regarding potential release of us, it also as Dan mentioned protected us in the -- of our IP and basically created a much bigger and stronger partnership.

And I’m showing no further questions. I will now like to turn the call back to Bill Clough for any further remarks.

Just to conclude I've said from the beginning of the year that this second half of the year should be very strong second half for us, we still see that as being the case, we think that we’re going to see additional projects with both the Energy segment and additional growth in the electronics division, I think as evidenced by the growth in the backlog in those segments. So I look forward to talking to you next quarter and again if there are any questions or if anything that any needs you are certainly welcome to call us individually. Again thank you for your support and that ends our conference call.

Ladies and gentlemen, thank you for participating in today’s conference. You may now disconnect. Everyone have a great day.