UQM Technologies (UQM) CEO Eric Ridenour on Q1 2015 Results - Earnings Call Transcript

Aug. 3.14 | About: UQM Technologies, (UQM)

UQM Technologies Inc. (NYSEMKT:UQM)

Q1 2015 Results Earnings Conference Call

July 31, 2014; 04:30 p.m. ET

Executives

Eric Ridenour - President & Chief Executive Officer

David Rosenthal - Chief Financial Officer

Annie Leschin - Investor Relations

Analysts

Amit Dayal - H.C. Wainwright

Bruce Kureski – Private Investor

Patrick Attard – Private Investor

Randy Hough - ProEquities

Walter Ramsley - Walrus Partners

Keith Brown - Private Investor

Operator

Good afternoon ladies and gentlemen. Welcome to the UQM, fiscal year 2015 first quarter earnings call. Today's speakers on behalf of UQM are President and CEO, Eric Ridenour; and the CFO, David Rosenthal.

At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference call is being recorded today, July 31, 2014.

I’ll now turn the conference over to UQM's Investor Relations Officer, Annie Leschin. Please go ahead.

Annie Leschin

Thank you, operator and good afternoon. With me on today’s call are Eric Ridenour, our CEO and David Rosenthal, our CFO.

During this next quarter we will be participating in the Jefferies Industrial Conference in New York on August 11 and as other events come up, we will make additional announcements. Now I’d like to review the Safe Harbor.

This conference call may contain statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. These could be statements regarding our plans, beliefs or current expectations, including those plans, beliefs and expectations of our officers and directors with respect to, among other things, new product development, future orders to be received from our customers, sales of new products from inventory, future financial results, liquidity and the continued growth of the electric powered vehicle industry.

Important risk factors that could cause actual result to differ from those contained in the forward-looking statements are contained in our Form 10-Q filed today and our Annual Report on Form 10-K for the fiscal year ended March 13, 2014, both of which are available through our website at www.uqm.com or at www.sec.gov.

With that, let me turn it over to Eric.

Eric Ridenour

Thanks Annie and welcome to the UQM, Fiscal 2015 Q1 Conference Call. For this first quarter into our fiscal year, we continue to feel the effects of the late start to the California Voucher program, compounded by some variability in orders by our customers, which resulted in revenues of just over $1 million on par with the fourth quarter, leading to a loss of $1.3 million versus $900,000 last year. Nonetheless, our focus on our strategic priorities remains and I’m pleased to report healthy progress on several fronts.

Since last year’s first quarter we’ve added six new customers to our global customer base, including the addition of two new customers in this quarter. In one of our most promising target markets China, the introduction of a potentially new line of electric buses utilizing in our industry leading products are now operating in China and not only are these buses meeting their performance goals, but we believe that the fact that they are up and running through potential customers through a test drive, and see an actual service was an enormous competitive advantage. Already we are leveraging this accomplishment in our discussions with a variety of other potential partners throughout China.

The growth of our customer base, along with a huge potential in China for our products are just two of the latest example of our commitment to grow this company long term. The effective of the delay start for the voucher program this year has been further compounded by the lack of information on when it would actually start.

This created uncertainty for fleet operators, who as a result decided to either hold-off ordering altogether or focus on non-EV models needed in their line until the incentive plan was firmly in place. Based on our conversation with customers, we expect they will get back on track ordering EVs as the year progresses.

Additionally, while New York and Illinois have funded their Voucher programs, they are yet to begin those programs in earnest, but recently we however heard some positive news that New York has been testing one of our customers EV models for both performance and range and they received high marks and they are hoping to see orders shortly.

To drive additional revenue growth, we are focusing on growing and developing new customers and expanding our presence worldwide. Beyond our efforts here in the U.S. and in China, we are looking at other emerging geographies, where we believe the right elements are in place to drive strong EV and hybrid vehicle growth.

The key characteristics of these territories included environmental concerns, extreme levels of traffic congestion, levels of pollution that threaten the health of citizens and the desire for a significant reductions of CO2 among many other factors.

This quarter we added a new customer in Turkey with DMA, who plans to use our PowerPhase Pro 135 in their light commercial vehicle offering. They have the system up and running in a vehicle and are completing testing and certification of that system, which is needed to allow sales.

We also added a new customer in Hungary, Inter Tan-ker Ltd who has built all-electric mini bus. This is the first all-electric mini bus to be approved for use by the Hungarian National and Transport Authority and we are very encouraged by the future opportunity.

We continue to see a variety of similar market developments across the globe, where the desire for clean electric vehicles to help with pollution and reduced CO2 emissions are driving governments to support the move to Hybrid and Electric Vehicles in a variety of ways, including incentives and direct purchases.

The total market for clean and efficient electric powertrain collectively presents a significant potential opportunity for UQM to grow revenue and move us along our path to profitability. To accelerate this process we are adding a new Sale Account Manager who will be responsible to develop these markets.

In other customer news this quarter, Venus Motors, a recent addition to our customer list, just received EPA certification for their vehicle, which will allow them to begin sales. Currently they are in ramp-up phase preparing to the launch the vehicles and should start to increase sales shortly.

Another existing customer, Proterra, announced that they are completing the final phase of build of their original 35 foot bus and are now transitioning to a new 40 foot second-generation bus. Just recently they announced the sales of those first of those gen two buses, the Foothill Transportation in California for delivery in December.

Now this has created a bit of a pause for suppliers like us as they complete this transaction to the next gen buses. Obviously we are very excited by their new second generation bus, because they better meets customer requirements and we are specially given recent statements by Proterra, CEO expressing his beliefs, that as a result revenue with double this year and then double again next year due to the new business. They also announced additional funding of over $30 million by current investors, which will fund this growth.

Turning to China, in that, you read about the challenging smog issues throughout the country. The Chinese government is moving very quickly to address these concerns, by acquiring specific levels of new energy vehicles to be on the road soon.

Our Chinese business development effort over the last two years has begun to take root and our bus program is showing great promise. To-date initial electric buses with our motors and controllers is successfully up and running in China. They are currently completing all the necessary validation and certification testing and in parallel are being shown to officials from several provinces, where growth prospects are very strong.

Our strategic partner anticipates new contracts in more than one of these regions once all of the testing is complete, the operational aspects are in place and all the government approvals are received. Currently these provinces have thousands of buses in their fleets, which they plan to convert to new electric buses to meet the government mandates for new energy vehicles. The timetables we are hearing are quite aggressive and could result in a very quick volume ramp once the contracts and approvals are place.

Simultaneously, we are continuing with discussions with a number of existing and potential Chinese partners who take advantage of all the excitement around the new energy vehicles and this green-field opportunity across additional provinces.

We are also exploring other collaborative partnerships to drive growth. One such partner is Kinetics Drive Solutions in China. They are a transmission company and we talked about it previously. Well many of the first electric busses in China use very old technology induction motors that did not require a transmission. Most of the new buses are moving to newer, more efficient permanent magnet motors with multi-speed transmissions.

The few transmission options for electric buses up to this point, many of our customers who sought our advice on what to use. By partnering with KDS we can offer proven transmission solution that has been specifically tuned to our systems. In addition, KDS can also refer potential customers who maybe looking for a premium electric propulsion systems to us. So together we can address the broader share of the market and deliver a better and more complete propulsion systems with those customers needing this kind of complete solution.

And finally now that we have our TS 16949 certification, we have begun the process for ISO 14,000. This is more focused on environmental management and waste reduction of our plant production areas, but in addition to TS 16949, this certification will also be a key differentiated as we talk to Tier 1 customers and OEMs and we expect to complete this certification within about a year.

So in summary, well our revenues are not what we’d like to see this quarter, the clear and distinct progress we are making in our strategic objectives is becoming evident and we believe it will benefit us long term.

By investing in our business development activities, we’ve added new customers in a variety of emerging territories and reinforce their relationships with existing customers who are designing our advanced products into their next generation vehicles and growth plans. We are seeing initial traction in China where we are pursuing a variety of opportunities, which we believe hold great promise for us going forward.

Now our order patterns can fluctuate in this emerging business. We believe that over time our diversified customer base will become a significant advantage as customer’s ramp volumes and we build a more consistent revenues stream. As customer reengaged with the California Voucher Program and sort out other constrains and issues, we expect orders to improve over the remainder of the year driving increased revenues.

With that, I’ll turn it over to David to discuss the financials in more detail.

David Rosenthal

Thank you Eric and good afternoon everyone. I’m going to share with you the financial highlights of our first quarter results.

Revenue, in the first quarter was $1 million, flat with the previous quarter and down from $1.9 million in the first quarter of last year. As expected, revenue for the first quarter continued to be impacted by the delay in the California Voucher Program, as well as the timing of various customer orders.

Gross profit margins for the quarter performed well, reaching 40% versus 34% in the first quarter of last year. This strong performance was a result of changes in product mix and increased average selling prices. Though despite the $900,000 short fall in revenue in absolute dollars, gross profit decreased only about $250,000 compared to the same quarter last year.

Selling, general and administrative expenses for the first quarter were $1.1 million, a reduction of 9% versus the same quarter last year. Our commitment to maintaining a streamlined infrastructure continues as we monitor our spending levels and look for other efficiencies as we move forward.

Net loss for the quarter was $1.3 million or $0.03 per common share, compared with a net loss of $916,000 or $0.02 per common share for the comparable quarter last year.

The company continues to be in a strong financial position and remains well capitalized. We ended the quarter with $9.5 million of cash and short-term investments, working capital of $19.2 million and no debt.

Our strong balance sheet is a key competitive advantage, as our business development activities accelerate, affording us the opportunity to develop future partnerships and perspective customers, while at the same time being prepared to ramp up production as our customers demand.

At this point, I'd like to turn the call back to the operator for questions. Operator.

Question-and-Answer Session

Operator

(Operator Instructions) And first we’ll hear from Amit Dayal of H.C. Wainwright. Please go ahead sir.

Amit Dayal - H.C. Wainwright

Thank you. Good afternoon everyone. Just really quickly on the revenues for the quarter, could you break the split between revenues from customers versus revenues coming from government initiatives?

Eric Ridenour

We normally don’t split. We have the two fields as you saw in the report between the contract services and the rest of the customers. But we don’t do further splits from that. Sorry.

Amit Dayal - H.C. Wainwright

Okay. And just from a forward perspective at least for the next quarter, you said though these voucher related revenues maybe fluctuating depending on what situations are happening in different states, should we expect revenues for the next quarter to be somewhat in line with what we saw this quarter or are there any other catalysts that could provide some upside?

Eric Ridenour

Yes. I think a better way to look at it is, we believe this quarter was held back a little bit by a number of different things going on with our customers. Obviously they order in clumps and for various inter-center reasons, there wasn’t as many. One of those is the voucher program because of its uncertainty we know for it. In fact that one of the customers that we expected to see some orders, we know they still intended to do the orders, but they told us that they held back on when they applied for the service, but we’ll be doing them as the year progresses. So I think we will see things going back towards normal for us and improving as we go forward in the year.

Amit Dayal - H.C. Wainwright

And just last question I guess. Focusing on China, are we recognizing any revenues from China yet or is this something that should happen may be over the next few quarters. And live pilots are going over there. Could you just give us some color on some of those types of metrics if you are able to share?

Eric Ridenour

Yes, I mean basically we had as we announced a few sales all ready at China. Very limited at this point, because we are going into the pilot programs, the ones that are up and running.

The way we see China based on the discussions we had with partner and as I mentioned, is that they are all pretty aggressive that once they kind of get all the things in place and unfortunately because its sort of a new industry for them also, there’s a number of factors, they are doing batteries, BMS systems, full systems, attached and prove out and certification items that they are all working through. They really aren’t there yet, but when they come, we expect them to come very quickly.

The forward peaks we are seeing is the pretty aggressive ramp-up and we feel pretty comfort. We’ll be ready because there will be a capacity we already have in place and the fact that the units that we are talking about, we are already buildings towards them and other customers, but we feel pretty good we will be there, we think are probably the other parts that they will damp it down just a little bit as this is normal in a launch phase.

But I think compared to what we are seeing with some of the other vehicle, I think this will be a much faster ramp. So again, once they come on, we would expect them to come on pretty fast.

Amit Dayal - H.C. Wainwright

Thank you. I’ll get back in queue.

Eric Ridenour

All right. Thanks Amit.

Operator

And next we’ll hear from Patrick Attard (ph), a private investor.

Patrick Attard - Private Investor

Hello. Yes, could you please give us an update on Coda and whether or not we have sold all the motors that we had that were in inventory from them?

Eric Ridenour

Yes, as far as from Coda themselves, obviously they are still progressing through their bankruptcy. The court part of it kind of downed and now it’s a wrap-up as they go through all the asset liabilities and all that stuff, which unfortunately takes quite a bit of time. There hasn’t been anything new from that in this quarter. We watch that pretty much on a daily basis, so we’ll see if there anything changes.

From the standpoint of the inventory we continue to sell it down. We have identified as you know, as we’ve gone through the press release that a number of those new customer are using the Coda inventory or derivatives of the Coda inventory. And so as we sell to those and continue to grow, we’ll continue to sell down and our expectation is that certainly with what they are telling us, they are looking at over a period of time that we should have no issue. We are selling it all down and in fact they are potentially getting back into production with it.

Patrick Attard – Private Investor

When do you think we would have sold all the Coda motors that we’ve had in stock. When do you think all of those will be sold?

Eric Ridenour

Again, it really gets into the vagaries of the market. We get lump numbers of where they are visioning going out in time, but certainly no forecast that are precise. So it would take some amount of time, but again I think as we see these guys ramp-up, each of them individually and then collectively, we should start seeing some progress happening over the next quarters and then certainly over the next few years we’ll see it all gone and again, it could come a lot quicker than that. It just depends on how fast the actual growth and how each of them individually. Again, we have the collective numbers that are in excess of what our inventory are, t least on a projection basis.

Patrick Attard – Private Investor

Okay. Also, did I hear you correctly on the previous question from the previous person there that you said you are already building motors for the Chinese customers, because you are anticipating a large order from them.

Eric Ridenour

No, to be clear the statement was that we have sold motors in to China, but it’s a small queue. We don’t build to an order bank and so therefore we will only build with orders in place for motors. But what we do have is the production capacity already in place, because of the work that we’ve done in the multi-phase line that we put in. The fact that we are able to re-purpose a lot of these Coda assets into this still used line that will be able to build both the small and the larger variance of our motors and controllers and so for that reason we are ready to go quickly, but again we’ll wait for orders. So I want to make sure. I’m glad you asked to clarify that.

Patrick Attard – Private Investor

Okay. And also I know that we’ve got the capacity to build 36,000 units a year right with the company there, at the plant. How many do we actually have to build to start becoming profitable? Do we have to build 10,000 motors, 20,000 motors before we actually become profitable?

Eric Ridenour

We don’t give the direct guidance, but it’s smaller than the numbers you’re saying.

Patrick Attard – Private Investor

Okay, so it’ll be less than 10,000 motors before we can become a profit?

Eric Ridenour

And again, right. There’s a 1,000 variables as you know between cost and all others. I don’t want to go any further than that. I’m just saying that we don’t need to be anywhere near those kinds of capacities. We believe under the current set of cost and margins and everything else, but again, we don’t give forward guidance for that reason. So, I’ll give you a hint, but not much more than the hint.

Patrick Attard – Private Investor

Okay. Thank you very much.

Eric Ridenour

All right, thank you.

Operator

(Operator Instructions) And next we’ll hear from Bruce Kureski, a private investor. Please go ahead.

Bruce Kureski – Private Investor

Do you anticipate more sales out of these high horse power of the 220 and the 250 and the 950T or more of the 135,150 versions of our electric motor?

Eric Ridenour

Yes, I think the market for us is bigger in the heavy-duty version, but the smaller versions and some of the applications may have -- as we do those may have bigger runs. The margins are all tight around those. So again, pretty typical of what you see in the car versus commercial truck business is that the truck volumes are always much lower, margins are better. As you get to the car side volumes are much higher, but the margins are less.

And so again for us, I think you’ll probably see more out of the HD, but because of that unique feature anyone of these customers that are using the 135 could have a pretty good run based on again, as they look at their forward projections. But if you had to put the bet down, I’d probably put the bet towards the heavy-duty versions.

Bruce Kureski – Private Investor

Another question, do you anticipate, just beyond Audi are there have other car manufacturers that you are dealing with as customers or potential customers or is it all a truck and bus type situation of customers?

Eric Ridenour

Now, when we look in the total universe of those, we are talking about and things that they are considering we have the range, some cars, a number of as you know, the medium duty vans and light duty trucks that we talked about and then the buses. Those are kind of the three big potential markets and then we are also doing some discussions with people that are outside of the automotive vehicle framework that are using motors and other kinds of applications. We are not ready to give any specifics on those, but it’s not just automotive.

It’s the only point I want to make and then obviously, we’ve had some dealings in the marine market, now through ReGen Nautic, they are getting a lot of interest right now through their recent Boat Shows and other things. So again, at that part we are seeing continued growth in and interest in for more things, even up to all the way to bigger ships, as a matter of fact we are seeing more and more as there’s different harbor and other kinds of restrictions on things.

So, that’s interesting and then we always look at within the aircraft industry, especially the guide of the ATVs and things, where there are less liability stuff, but those might be some interesting things and you’ve seen some things with Chip and others looking at different things. So those are kind of the different ranges and we are talking to somebody and at least one or two or three in each of those segments.

Bruce Kureski – Private Investor

Thank you very much.

Eric Ridenour

Thanks Chris.

Operator:

And Randy Hough of ProEquities has our next question.

Randy Hough - ProEquities

How are you?

Eric Ridenour

Good Randy.

Randy Hough - ProEquities

Good. Just to follow-up on the last questioner, just to get it straight. In China, would there be any reason that they were like green from what your answer was there. We are pretty much looking for 200KW and above, but is there any reason that any agency would be or you would be testing, let’s say 150KW motor for smaller buses. Lets say medium size buses or shuttles and that sort of thing that would need likewise to be authenticated by the powers that will be in their filtering process.

Eric Ridenour

Yes, its actually broader than that Randy and some of the customers that we are talking with, potential customers in China are talking of fill range, including passenger car; potentially the medium duty vans, small trucks and then buses. So I’d say first on their platter is probably buses, but we are in discussions and it’s broader than that.

The new energy vehicle is a much broader listing and those vehicle requirements for each of the cities, the major cities, the Tier 1 and Tier 2 cities at the meet are inclusive. So they can be partially taxi, partially shuttle, partially buses, but what we are seeing is because the buses are so prominent in China that that seems to be a focus of a lot of people and certainly where we put a lot of our time, but some of those people are talking on follow-on’s that range the whole full range.

Randy Hough - ProEquities

Oh wow! Well, that’s good to know, because they certainly need automobiles, vans and trucks over there. Okay and then while we’re on China, as follow-on its certainly terrific to hear that we are, as you pointed out, pretty proud of the fact that we had been selected of these pilot programs in a number of applications, which leads to the question. What’s your view of the competitive landscape over there and have you in fact beaten out other more notable names in getting entrance into these pilot programs.

Eric Ridenour

Well, we can tell you as we know, at least for two of the people we’ve talked to, that they had done a pretty decent search. One actually left us their itinerary as the means to tell us when they would be here, but we were able to guess that depending on which airports they were landing at, who they might have been talking to along the way.

So we do that at lease at this point that as they view their selection process and as they came to us, we do know that in each of the cases they are working exclusively with us or at least that’s what they tell us. I guess you can never know for an absolute certainty, but that they have selected us and we certainly know with one of the partners that we are the only people they are taking to and presumably were the right choice for them and they’ve stated it directly to us.

Now obviously there’s lots of hurdles for us to go through and final pricing and approvals and everything else. So again, we got to get through all those things, but we feel pretty good.

Randy Hough - ProEquities

Great, well that’s that brand that you’ve commented, that brand distinction or brand strength that you commented on a number of times in the past I suppose.

Eric Ridenour

Yes, it does. I mean again for a small company out of the Colorado, we do get an extraordinary amount of respect over there, no matter who we are dealing with, and again, we are intending to as I mentioned, is that we are seeing this very strong interest from lots of people. So one of the things we are doing while we are doing all this is keeping our eyes wide to make sure that we find the very best partners at the end and the question will always come up somewhere along the win, whether there is exclusivity or no exclusivity and how do you deal with all those things.

So again, we are staying with eyes wide open, continuing to talk to other new people, while we are continuing to progress the talks, where we are its good and for no other reasons to have other competition for your services, just like they might to do the same thing for us. So again, we are ready for our competition.

Randy Hough - ProEquities

Great, great, and then reporting back to your comment on the new Sales Manager, and then I’ll get off and get back in the queue. Just to be clear, is he in addition to the sales force under Adrian or is he replacing Adrian.

Eric Ridenour

No, he’s an addition; a new guy. We just hired him. He’ll be starting shortly here. Accepted this week as a matter of fact, so high energy guy and again what we’ve said and looked at is that we’re sort of the A team, spending a lot of time in China, but we want to also, while we are doing that, continue to spend a lot of the time in all these emerging markets because we discontinue to see this when you have this kind of, whether its Turkey, Hungary, Malaysia, you see the same kinds of things; congestion, population, pollution, CO2; governments trying to make a difference, trying to reach out, trying to do thing.

A few individuals, normally wealth, who want to make a difference and get into those and we want to say that if we’ve already found three, there’s a lot more and lets go find those opportunities to continue to add to our number of new customers and help us again as a collective group. Not every one of them has to grow tremendously. All we need is a few of them to grow tremendously and the more we add, the better those chances are; that on a collective basis we’ll hit the numbers we need to hit.

Randy Hough - ProEquities

That’s the plan. Thank you very much. I’ll get back into the queue.

Eric Ridenour

Thanks Randy.

Operator

And next we’ll hear from Walter Ramsley of Walrus Partners.

Walter Ramsley - Walrus Partners

Thank you. Congratulations. Thanks for taking the question. As far as California goes, what’s the expected revenue run rate out there, once that Voucher program actually gets into full swing.

Eric Ridenour

Again, they have the total program for them and there is a number of guys who play. So there is, as it feeds down, it runs out ultimately in previous years. That’s not been an issue. Hopefully this year it won’t be an issue. There seems to be enough funding in there, and it still takes the customers to progress through there. So we’re aware of at least some guys with some things, but we don’t have a total graph, because we’re one step removed, because we don’t apply for the vouchers, the actual hand manufacturer does. So we, are sort of an indirect beneficiary of it.

Walter Ramsley - Walrus Partners

So, can you give us some idea though of what the impact to the company might be once it gets started?

Eric Ridenour

It’s really hard to say. Again, we get into – its cutting it too fine for unfortunately what we’ve seen and what I’ve seen over the three years. We’ve been surprised on both the up and the down side on each of these things that we have. So we’re just trying to keep out of the making stuff we can’t backup.

Walter Ramsley - Walrus Partners

So are there any states in the United States that are receptors to electric vehicles today?

Eric Ridenour

Well again, there’s a number of them…

(Multiple Speakers)

Well yes, I mean each of these guys that we have are doing business and again, they are each growing at the rates they are growing. Zenith and the airport shuttle business, ReGen Nautic and the marine. Obviously DMA is outside of the states than PT and those kinds of guys that we talked about.

There’s other guys we don’t have on our officially announced list yet, but they are all looking to grow and again, we’ve got a few non-automotive guys that we are talking to that would have expectations to grow.

So yes, we’ve played this in a lot of different ways for us to grow revenue, but we’ll see how it exactly plays out and that’s the part that gets very difficult. We know what they are telling us. They expect for their final market and how they expect to grow over time, but this market has been very tough to predict with accuracy.

Walter Ramsley - Walrus Partners

Basically though that all really comes down like the – if you’re going to make it, I guess if UQM is going to make it big, your going to make it big in China? I mean is that the way to think about it?

Eric Ridenour

I think in the short term that that is probably the biggest catalyst and I think the kind of the sleeping giant is the collection of these smaller groups and having them find the right sweet spot.

So again, as we talk to them and they talk to us, what their government’s telling them and things like that, there is good belief that we can see sort of mini China’s here. They are certainly not the scale that China is at, but certainly there’s the same kind of political wins and wherewithal and things like that. So again, we think all of those can be sparks and obviously like I said, a big win would be great for everyone and we’re working really hard to get that.

Walter Ramsley - Walrus Partners

And then just, one last thing if you don’t mind. There’s being some talk in the papers – I don’t know exactly what’s going on in China, but talk about how the government is becoming somewhat protectionist towards the electric vehicle industries. That they are kind of precluding manufactures outside the country from getting some of their tax benefits and others subsidies. So does that have any bearing on you? You’re going to have to move to China to cash in on this?

Eric Ridenour

Well again, there’s two parts to that question. The first part is that we don’t anticipate – those kind of rules have been in place for a long time. That if you’re not building in China, you can’t get yourself any of the benefits, whether it’s a stamping plant or engine plant or tax imported cars have of a huge extra burden on duty and taxes and things than cars built inside the country don’t have.

But right now the people we’re talking to, they are inside, so we don’t see that being an issue. But certainly we’ve seen other incentives to try and get more electric vehicle. They drop the excise tax. They talked about China do things like – if there are things like a test where you can get things moving quicker. So we’ve seen some positive things also.

The second part is, we believe that whenever we have significant volume in different regions, it probably make sense to be in that region, but that’s more a business decision from the stand point of cost, transportation, closeness to the market, the amount of lead time in the order and delivery cycle and other reasons.

So there probably will be some time in the future where it might make sense depending on how the volume is growing and other things, and government incentives and things will also be part of that business mix, but we’ll do it on a rational business judgment region.

Eric Ridenour

Okay. Well it’s sound good. So congratulations again, thanks.

Walter Ramsley - Walrus Partners

All right, thank you.

Operator

And Keith Brown, Private Investor has our next question.

Keith Brown - Private Investor

Good afternoon and thanks for your continued good work. You mentioned earlier that orders will improve this year. How does that tie in with believability and time frame for motors to bus companies in China? Are we talking months or we talking years?

Eric Ridenour

I’d say, first I’ll make sure that I do my proper caveat on forward looking statements, as the anticipation is orders will improve. I never can guarantee anything with my crystal ball.

Keith Brown - Private Investor

I understand that.

Eric Ridenour

Yes, I just want to make sure everyone else does also, but on the China, I would say that again, the people we are talking to would like to see things in months, whether that’s six or 12. The expectation, again, I think the government approval process is such that it’s kind of before the end of that, for the beginning of it and then it really is a question of – is all the infrastructure ready and setup to go. It depends on who they pick for battery and battery packs and battery modules and all those kinds of things that it takes to get the battery system up and running.

And so depending, if they pick guys that are already up and running like we are, then we could be much faster to react. But I think like I guess that the numbers these guys are writing down are pretty aggressive and they want them quickly and I think like I said, in my dealings with China, normally the desire is much faster than the actual reaction. But I think for everything we’ve seen, it will be pretty impressive, even at the low end it will be impressive for us on our growth.

So again, the exact timing has too many other factors in it. We can’t control them, including the government, but in listening to them and all that, it’s certainly not years and years and its certainly not tomorrow. But I’d say in the fairly short term – in my world, in the very long term, the investor world, which is six or 12 months, we probably should start seeing something in actual movement and then again, how quickly and all that still has to evolve here.

Keith Brown - Private Investor

Thank you.

Eric Ridenour

Thank you.

Operator

And Irv Reisman (ph) of Reisman & Altman has our next question. Please go ahead sir.

Unidentified Participant

Yes, on a positive note, the last time I checked there are 16 manufacturers registered in the California program and eight are UQM customers, so hopefully that program will start going. Are you familiar, this week former Energy Secretary Chu and his team at Stanford announced a breakthrough within battery with a 300-mile capability? Are you familiar with it and do you know if they have a corporate partner on that project?

Eric Ridenour

I’m not. I mean again, there’s so many battery announcements. I kind of don’t dig in. What I know for sure is there’s some significant stuff that will happen over time; this could be it. So again I’ve watched tremendous growth in battery technology, getting the cost down and doing things. I mean it wasn’t that long ago that we are always talking 1,000 or 1,200 a kilowatt hour and now we’re talking 600 and people talking much less than that certainly test flow with a gig effect, your talking significantly less than that.

So I know that everyone that’s tied into batteries are working on things and I know some of the breakthroughs are doing it. We can dig into that a little bit and I can send you a note if we can find specifics around that. It’s just I’ve seen so many in my years. I never believe the first press release.

Unidentified Participant

Okay, any comment at all on SAAB or Audi.

Eric Ridenour

We’re in the whole pattern and both of them like I said, the SAAB, they are doing their internal work. They haven’t made any external discussions with anyone that I’m aware of since the last announcement and Audi continues to send out press releases and things that I think gives you the same feeling we had. Is that they are sort of in still a whole mould internally and haven’t really made those firm discussions, which is consistent with what we’re seeing.

Unidentified Participant

Okay, and one final thing. You talked about the Coda motors and specifically the Coda motors that were in Coda’s position that would now be under the jurisdiction of the bankruptcy court. Do you still feel you have an opportunity to reacquire those?

Eric Ridenour

We are still watching those. Again, they are in China. They went through a number of hands. They are not clear, but again, I think we will absolutely be staying as closely in touch with those as we can.

Unidentified Participant

Okay, thank you.

Eric Ridenour

Thanks Irv.

Operator

(Operator Instructions). We will take a follow up from Amit Dayal of H.C. Wainwright.

Amit Dayal - H.C. Wainwright

Hi, thank you. Just one question on the number of new customers in the quarter. Outside of the Hungarian customers, were there any other new sign ups?

Eric Ridenour

The DMA in Hungarian at that Inter Tan-ker was at two and again, we announced DMA because it happened after, close of last quarter, but before the conference call. So sometimes you get it, where it accounts in two, but it actually was put in place in this quarter, so those were the two.

Amit Dayal - H.C. Wainwright

Thank you.

Eric Ridenour

Thank you.

Operator

And Walter Ramsley of Walrus Partners also has a follow-up.

Walter Ramsley - Walrus Partners

Thanks. On the rare-earth situation, if you are going to focus on China, that you are going to be able to get all the rare-earth you need form China and kind of put the product that you are developing to replace them on the backburner or what are you going to do there? How is that project even coming along?

Eric Ridenour

Yes, practically its all coming along very well. We just reported out in June at the DOE conference, the status of it and we are actually doing quite well compared to some of the – the other one was GE, so I guess there’s not a lot of others. There’s one other that we are seeing a similar kind of award.

Much further on it, we had motors up and running in test and again, we still believe that right now the dynamics are such the prices have come way back down, availability is very easy right now because of the high price. Like a lot of people have done, design out or at least reduction in amounts needed in other regions, plus we saw and continue to have the other external minds outside of China continuing to progress.

So for the near term future, because that’s all I can ever predict, is that it seems pretty good, but we still really like the idea of having flexibility and the ability to change over should those pressures come back. Anytime you still have a majority of the world supply in one country and various and some political reasons, as well as business reasons that somebody might do something, we think it’s a good idea.

So we are going to continue that program again. It’s co-funded with the DOE in a 75/25 cost share, so that’s good for us as we try and explore it and we think its good for in the long term for us to have options.

Walter Ramsley - Walrus Partners

Okay, that sounds great. Thanks.

Eric Ridenour

Thank you.

Operator

And that does conclude today’s question-and-answer session. Mr. Ridenour, would you like to make any closing remarks.

Eric Ridenour

Again, we feel pretty good as we look to the future. We certainly see a lot of different opportunities as we are seeing these different centers around the world and different hotspots so to speak of.

In electric vehicle interest and intensity, certainly China is going to continue to remain a big focus for us and certainly for management team motors in X period of time to try and bring those things to closure and we’ll continue to work on the right things and keep moving the business forward.

So with that, I thank all of you for taking the time to listen in on our conference call today and I look forward to continuing to report good progress in the future. Thank you.

Operator

And that does conclude today’s conference call. Thank you for your participation.

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