American DG's (ADGE) on Q1 2016 Results - Earnings Call Transcript

| About: American DG (ADGE)

American DG Energy Inc. (NYSEMKT:ADGE)

Q1 2016 Results Earnings Conference Call

May 13, 2016, 11:00 AM ET

Executives

Bonnie Brown – Chief Financial Officer

John N. Hatsopoulos – Co-Chief Executive Officer

Benjamin Locke – Co-Chief Executive Officer

Analysts

Haydn Cole – Essex Asset Management

Tom Retol – Private Investor

Andy Rieger – Private Investor

Mike Wuzuka – Oppenheimer

Walter Schenker – MAZ Partners

Operator

Good morning and welcome to the American DG Energy First Quarter 2016 Financial Earnings Conference Call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. In addition to management Charles Maxwell, American DG Energy’s Chairman and energy industry expert will be available to take your questions during the Q&A session. [Operator Instructions] As a reminder, this conference is being recorded.

The recording of this conference call will be available for playback approximately one hour after the end of the call and will remain available until Friday, May 20, 2016. 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 10084854 followed by the pound sign.

Now, I would like to introduce Bonnie Brown, American DG Energy’s Chief Financial Officer. Please go ahead.

Bonnie Brown

Thank you. Good day and thank you all for joining us on our first quarter 2016 earnings call. I’m Bonnie Brown, American DG Energy’s Chief Financial Officer. On the call with me today are John Hatsopoulos and Benjamin Locke, our Co-CEOs, John Estabrook, our VP of Finance and Robert Panora, Director of Operations.

Before we begin, I’d 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.

I now turn it over to John Hatsopoulos for some opening remarks.

John N. Hatsopoulos

Ladies and gentlemen thank you very much for joining us. This is a period of transition for American DG and with the goal of the returns of our existing facilities rather than continue on growth. We do have a good backlog which Ben Locke my Co-CEO who by the way has done a spectacular job along with Bob Panora in improving the returns of the existing equipment which I believe are about 60 and we are well on our way.

I think Ben will tell you where we stand. Our returns are improving; we believe that sometime this year if not whole year will be cash flow positive. Anyway that's our goal and by the way, it’s not a projection, it’s a goal.

With that I'd like to ask Ben to give you an update of where we stand.

Benjamin Locke

Thank you, John. Before I go on to review of our results, I’d like to provide a quick review of our business for those who might be new to the call. ADGE and EuroSite power are on the business of settling energy into form of electricity, heat and cooling to customers who wish to save money spends on traditional sources of energy.

We own the assets that produce the energy onsite and earn revenue as the customers pay ADGE a discounted rate for electricity and heat or cooling. This model called On-Site Utility or OSU is quite common 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, so it’s not every customer at the capital or the financial flexibility to own the asset outright.

As I stated in stated in past calls and John has just mentioned, our main focus last year and continuing into this year is to improve the operation of our existing fleet, in order to increase productivity while optimizing our margins and improving our cash flow. Our result of the past quarters and continuing into the first quarter of this year confirmed the success of this effort as we are seeing solid improvements in our margins.

I believe demonstrating robust and consistent margins for ADGE is the most important metric to guide our business going forward. We have also undertaken efforts to reduce our operating expenses with good results.

With that, I’ll review the financial results for the quarter; followed by an update on operations which Bonnie will provide detail on. Our total revenues for the first quarter were approximately $2.2 million compared to approximately $2.5 million in the first quarter of last year. This reduction in revenue was expected with the reallocation of the underperforming LLC sites in mid-2015. Revenues for the quarter were also adversely affected by other factors such as weather and lower utility rate at some of our sites, which Bonnie will provide more detail on just a few minutes.

Our margins excluding depreciation however improved slightly to 32.7%, a 5% increase over the first quarter of 2015. This reaffirms that our efforts to improve performance and reduced costs are affective even with the milder weather and changes in utility rates this quarter. We have achieved on non-GAAP EBITDA cash flow positive quarter with an inflow of approximately $81,000, as opposed to outflows of approximately $430,000 in the comparable prior year period another milestone that supports our efforts over the past year are successful.

Other notable accomplishments over the quarter include the reduction in outstanding convertible debt. Last week we eliminated 9.3 million in convertible debentures that was due in May of 2018 in exchange for approximately 14.7 million shares of EuroSite power. With this swap of EuroSite power shares and exchange for partial elimination of the convertible debt American DG Energy reduce the convertible debt outstanding 9.2 million. The company is pursuing a similar debt exchange transaction for the remaining convertible debt outstanding and expect to complete that subsequent transaction in the coming weeks. This transaction substantially improves ADGE's balance sheet and along with the improvements in margins put ADGE in good position to complete their remaining site improvements and our project backlog. And also eliminates the risk of potential shareholder dilution that may have resulted from a debt to equity conversion. And as I mentioned our efforts to reduce expenses is showing results. Our overall operating expenses have decreased to $1,080,00675, a 21.2% improvement over the first quarter of 2015.

Turning to EuroSite. They received almost $370,000 in 2016 from the U.K. government for construction activities in 2015. The enhanced capital allowance program in the U.K. is a cash energy tax incentives for energy saving plant and machinery, which includes CHP system. Also this week EuroSite raised $7.25 million in the private placement. I encourage you to listen to EuroSite’s earning call on Monday for more detail on their progress.

With that, I’d like to turn it over to Bonnie for more detail on our operations. Bonnie?

Bonnie Brown

Thank you, Ben. I'll be providing an overview of the company’s operations for the first quarter of 2016, more specifically the performance of the systems we are operating here in the United States. Throughout 2015 and 2016, the company has focused on improving domestic fleet operations, which consists of 76 fully owned systems and 16 that have shared ownership with our LLC partner.

As we discussed in our last call, we recognized that with efforts these systems could provide significantly better financial returns. In the first quarter of 2016, energy production by CHP system improves for the ADGE fleet by 1% as compared to the same period in 2015. We consider this a positive outcome given the unusually warm winter experienced in the Northeast United States where our fleet is located. With those who lived in this region will not soon forget the winter of 2015 with record cold temperatures in snowfall and as a sharp contrast to one year later.

Quantitatively speaking the difference is evident when heating loads are compared, Boston [ph] which is typical with reduction in the 2016 Q1 heating load of 30% in the same period in 2015.

While energy production was up by 1% reported revenue declined by 12% due to lower utility rates in the range. However just as utility production cost has dropped due to lower natural gas prices ADD has life like benefit. ADGEs cost to reduced electricity year-over-year have declined more or less in proportion to our revenue. Consequently our gross margin has not suffered by deduction improved by 5%.

While electricity prices are down overall, we are encouraged to see electric rates in Massachusetts climbing. We are hopefully this trend will continue and expand into other regions. Our initiatives to improve existing fleet performance has been on two tracks. First has been to selectively complete evaluations and upgrades to those sites that have unrealized potential for revenue and margin. This a very successful strategy, our four clients [ph] sites in New York City area that comprised 37% of our fleet have collectively increased production by 7% in the first quarter of 2016 as compared to the first quarter of 2015.

The second track can cause fleet-wide improvements that follow four basic areas; communication, instrumentation, water treatment and demand management. Water treatment has been found to be very effective and inexpensive preventative maintenance measure. In addition, more expensive site instrumentation that’s accessible through the Internet can help us diagnose and correct problems quickly and efficiently.

Regarding demand management, we have taken a fleet-wide initiatives to increase our revenue by billing more customers for this additional unbilled financial benefit. Let me explain, commercial towers in the U.S. typically include a significant charge associated with the facilities peak usage. Even if the peak period is only for a few minutes. From an ADF perspective, realizing this benefit requires two elements. First, we must manage the CHP system, such that it is always operational considering key facility usage. Second, we must add additional on-site instrumentation such as the benefit is recorded for accurate invoicing.

While this initiative is just under way, we have greatly refined the implementation process and hope to upgrade most of the fleet by year end to include this additional billing and adjust our operating strategy accordingly. We were pleased to have built approximately 50,000 for demand saving in the quarter, a 60% increase from the same period in 2015. We would like to exercise this increased revenue has no associated cost, except for that one-time case instrumentation setup.

As mentioned last quarter, we assumed a full ownership of eight sites from our LLC partner. Our efforts thus far have been focused on upgrading needs to our standards. While we have made good amount of progress it is required a significant down time of units while the work is being performed. Our expectation is that we will bringing most of these sites back to full operating status in the next two quarters.

We have also been engaged in bringing new sites online and reducing our backlog. We are pleased to report that [indiscernible] project in [indiscernible] and New York is under construction assets, a delay of several years. The site which will have a capacity of 1.5 megawatts will be our largest site to-date [indiscernible] in New York. The construction delay was a direct result of Hurricane Sandy, specifically the extensive parking damage resulted in significant building from changes in beach front areas. This process resulted in several years of permit delays in engineering changes, which is thankfully behind us.

Now I want to turn the call back to Ben to conclude our discussion.

Benjamin Locke

Thanks, Bonnie. So looking forward to the rest of the year, I am very confident that our efforts to improve performance are existing fleet, reduce expenses wherever possible and complete our backlog to contribute revenues with good margins will result in improved financial performance for the company going forward.

Also with the elimination of half our convertible debt and the expectation to eliminate the rest of the debt ADGE will be in excellent financial condition to develop strategy for additional growth. In summary I continue to strongly believe that ADGE's business model is good, the fundamental economic drivers for our OSU models remain favorable and ADGEs business will continue to show improvement in 2016.

Thank you for listening to our call and I'll turn the call back over to the operator for questions.

John N. Hatsopoulos

Before we do this, can I mention something that one of the concerns that we have had is capital and we have been hesitant to expand our fleet because we are not about to raise money at the current stock price or for money for a company that when we had that kind of a debt overhanging us. The demand exists, we do have enough capital to complete our units that we have in our backlog, once we eliminated debt, we have three banks that have shown interest in loaning us money, but those at this point not till we eliminate the balance of the debt.

With that, we’ll open it for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Today’s first question comes from Walter Schenker of MAZ Partners. Please go ahead.

Walter Schenker

If you in fact eliminate the convertible debt on terms similar to which you just did the conversion that will reduce American DG Energy’s interest in EuroSite to roughly what?

Bonnie Brown

1.3%.

Benjamin Locke

The answer is we reduced our holding in EuroSite to about 1.3% Bonnie said.

Walter Schenker

Okay. So extensively the decision was made that you're separating the company, so that [indiscernible] which has - okay so ADGE has to rise or sink as an investment in value based on its ability to grow in the U.S. market and EuroSite which already able to raise Bonnie witnessed in recent announcement and growing backlog and more government support we’ll be able to really – so you don't believe, I’m sorry I’ll rephrase the question. You don’t believe EuroSite is in fact more attractive and that effectively what you're doing is, is reducing the potential for American DGE pretty close and we no longer have an interest in EuroSite.

John N. Hatsopoulos

That’s actually true. The problem is that nobody ever gave us credit for all the shares that we owned at EuroSite and you’ve seen what has been done to the stock, which was trading well below the value of the EuroSite shares. And why this is a decision that we have to make. The second reason is that EuroSite takes a lot of attention from the ADGE management and we needed to separate it especially since their overseas and we’re here. But that's where we are and I’m sorry Bonnie.

Bonnie Brown

It is the debt and in addition, we needed to – we needed to do.

John N. Hatsopoulos

Bonnie is right. If we don’t remove the debt, we cannot borrow money, we cannot borrow money, we cannot grow. If we do with the – and we are in a process of final negotiations to remove the part of the debt that we like to do. Then we can raise at least we’ve been told that we can raise money from bank and institutions and resume the growth of the company if we so desire. But right now $80 million, $90 million worth of debt, even though it was – its three years away, it’s in 2018, May of 2018. The banks and investors were not willing to loan us money, with this of earning. So we had to make a decision, do we want to make the company debt free to allow to borrow money if they need to or do we need to keep going and eventually selling EuroSite shares to pay the debt. Otherwise we could not over the next two years have a profit, the cash flow profit of $18 million.

Walter Schenker

Okay. I got it. Thank you.

John N. Hatsopoulos

You’re welcome.

Operator

And our next question comes from Mike Wuzuka [ph] of Oppenheimer. Please go ahead.

Mike Wuzuka

Good morning everybody. A part of my question was answered by the previous caller, but as a follow-up now. What’s the backlog for the booked projects for the remainder of this year? If you said it I missed it.

Benjamin Locke

Yeah, well, the backlog is a combination of ADGE and North America and EuroSite. EuroSite has a backlog and we’re on seven projects and I imagine Paul will give some detail to those on his call on Monday. So I’ll speak to the ones on ADGE side, a big portion of the backlog is project that Bonnie mentioned. A couple of buildings or five building specifically in New York that underwent tremendous construction delays and permitting problems as a result of Sandy and there was a huge knot to untangle, but we've been successfully able to untangle that and now construction is going on in a very brisk pace. So we’re happy about that, so the hope is that those units will come on soon. They’re not going to all come on at once, but come on sequentially, but we’ll have more updates on that. So that’s five units, we've got another project that’s nursing home, that is got - a unit that is very near commissioning. So that should be starting very soon. We have another project we announced the Salvation Army I know earlier this year. That is in the midst of getting construction bids to make sure that all the estimates that we put together in the OSU match was coming in from the actual contractors. And then we have a few projects with a very large location of our Stevens University as many of our systems, many of our co-gen, many of our CHP system installed. We had two CHP systems and two chillers that we've been planning to install there that have been stuck behind Stephen's own construction schedules. They are knocking down buildings and putting up new buildings and so they are very good customers all of ours. So we are patiently waiting for them to get through their own construction planning before we’re able to install the backlog of systems there.

So I’d say Mike, the main thing you should be looking for in terms of backlog accomplishment is certainly this large lunar project and this nursing home in New Jersey.

Mike Wuzuka

Well it seems to me that the future of this company is to add systems and from what I'm gleaning from the conversation today a couple of things. First of all at some point in time and Bonnie can probably address this better, we will no longer consolidate EuroSite if I'm correct in interpreting once the debt is extinguished and the EuroSite final ownership of EuroSite shares is transferred to new owners. Without the EuroSite consolidation, it seems to me that ADGE at least going into 2017 for all intensive purposes is in a caretaker status and that worries me because the future is booking systems and building systems and bringing them onto the operating fleet and I am little concerned about whether we are going to refocus our attention and adding to the fleet.

Benjamin Locke

Yet, Mike, so I can understand you're feeling that way, but I don't believe that is the case. What we've been doing very conscientiously is making sure that the company is in a good place before we start growing it to the next step. I think certainly before taking on a multitude of new projects, we absolutely had to make sure that all of those things that Bonnie mentioned about instrumentation, water quality, how we measure demand, how we get revenues is optimized as much as we can and we’re getting there, number one. And number two making sure that our balance sheet is strong enough to support as John mentioned getting funding to start new projects. So there is no lack of potential new project for us and in fact we’re kind of eager to start some of these new projects and continue to grow the business. But we have to be disciplined on the efforts that we’re doing right now to make sure we’re in good position to do that.

John N. Hatsopoulos

This is John and I want to add something to what Ben just said. We would negligent if we as a company with a huge debt that sounds, we can wake up some morning and we know we cannot pay it. On the other hand by making the company cash flow positive, then the future of the company is very positive and that’s what we decided to do. The board decided to do it. As a matter fact, we have on the confidence goals charging Maxwell was the leader of this kind of strategy. And we feel that we have – if we have a company by the end of the year that can have a future is the right thing to do. Now whether it's caretaker or no caretaker as long as cash flow positive it’s going to be around for a long time.

Mike Wuzuka

Okay. Then as a follow-up there was a think piece I think on April 26 where it was announced that the state of New York and six utilities have joined into a new program, I think it's called solar progress partnership, where the state of New York and the local utilities are going to promote solar systems and as a green energy effort, if you will. And I'm beginning to get – be a little curious as to how that might impact ADGE going forward because it seems that the state of New York now is moving toward and the local utilities, apparently six of them in the state of New York are moving toward solar projects and how will that impact ADGE and the ADGE efforts in and around New York City?

Benjamin Locke

Sure, Mike, I can talk about that a little bit. Certainly solar gets a lot of attention. There are I'm familiar with the project that you mentioned. But just equally there are CHP projects that the state is putting focus on as well. So I don't think the existence of that initiative doesn't mean that that's the only kind of game in town indeed there are very good programs that continue to evolve for CHP, particularly in very high demand regions like in New York et cetera. So I'm not worried that that solar focus is going to take away from the focus on CHP because there's plenty of attention there. Secondly, I will that Tecogen came out with the new product, I'm not sure if you’ve been following that, but the new Tecogen product is specifically designed to accept other types of distributed generation inputs. Its inverter, just to get a little technical here, its inverter is rated for higher, than what the CHP output is. Meaning that the CHE can be running and you can have solar imports or battery or wind, but we’re talking solar to supplement. So I think the new Tecogen product is a new tool for ADGE to look at solar as an overall system to be deployed in some of these areas.

Mike Wuzuka

And then as a final follow-up there have been a series of announcements in and around New York City where large companies like Johnson Controls and Honeywell and to some extent Siemens are entering the CHP market with offering for instance school districts - entire district projects in a single relationship spread over a number of years. From a competitive standpoint what’s our ability to compete with companies like Johnson Controls, Honeywell, Siemens and it’s my understanding now that even Kohler is going to be getting into some sort of combined heat and power systems. And how can we compete against these guys?

Benjamin Locke

Sure. Yeah, I’m familiar these large ESCOs have such large national presence that their whole business model is to send an entire city or an entire town or entire school district to do everything from insulation, window replacement, solar and now as you rightly point out CHP is a part of that. I don’t think we could compete with them, with that breadth of energy services that they provide. I think ADGE has expanded our charter a little bit, not just to be CHP and chillers, but we’re also looking at boiler work. I don't think we’d want to compete with them for those far-reaching projects. I think our niche is a good one and that projects that are kind of a underneath the radar of these large ESCOs working again with residential, with hospitality and with healthcare and YMTAs and things of that nature is our sweet spot where we don't rub up against these big guys. And so I think that’s the answer and I don't think we want to compete with these guys, we stay away from their turf and they’re generally staying away from our turf.

John N. Hatsopoulos

But Ben, again this is John. I thought in some cases the Honeywells and the Siemens and Johnson Controls have been customers of ours.

Benjamin Locke

Well, they’ve been customers of the equipment.

John N. Hatsopoulos

Of Tecogen.

Benjamin Locke

Of Tecogen, yeah, but not ADGE.

John N. Hatsopoulos

That is correct.

Mike Wuzuka

Okay, well. I appreciate the update.

Benjamin Locke

Sure. Mike, thank you.

Operator

[Operator Instructions] Our next question comes from Andy Rieger [ph], a Private Investor.

Andy Rieger

Real quick questions for Bonnie, this is just more of just a curiosity question or just from balance sheet and cash flow. What does the pro forma liability section look like? Do we kill all of the convertible debentures spoke to the $1.5 million and the $17 million and the notes payable to the related parties or what does that long-term section look like, once all these transactions are completed.

Bonnie Brown

Well, some of the debentures will remain – some of them are EuroSite, so you have to remember our balance sheet is consolidated as presented here. So I can speak to ADGE, because EuroSite has not done their earnings call or released their earnings yet. So our goal is to remove all of the debt from ADGEs books. So there will be no debt on ADGEs balance sheet, which is just a convertible.

John N. Hatsopoulos

Andy, we said this, the consolidation adds the debt of EuroSite, so once the presentation stops ADGE will have zero debt.

Andy Rieger

No. I get that, I was just making sure that all I’m saying I just wanted to confirm that.

Bonnie Brown

Okay.

Andy Rieger

That’s it. Thank you.

Benjamin Locke

Okay. Thanks, Andy.

Operator

[Operator Instructions] Our next question comes from Tom Retol [ph], a Private Investor. Please go ahead.

Tom Retol

I’m sorry, I got disconnected, so I don’t know if this question was just asked or not, but what’s the decision made to the exchange EuroSite stock instead of ADGE stock for the reduction or the elimination of the debt?

John N. Hatsopoulos

We had to pay the debt somehow, so we traded the stocks of EuroSite, unfortunately because there is very little float in the marketplace, does not trade and it trades by appointment. So we couldn’t have sold shares of EuroSite in the open market without – to pay off the debt. So we had to make private deals with private investors. That’s the only to do it.

Tom Retol

Okay, so the debt holders would prefer to have EuroSite stock as opposed to ADGE stock?

John N. Hatsopoulos

We don't want to dilute ADGE, no, no, we didn’t want to do it because if we gave $0.30 of whatever the stock is right now shares would have had to give them almost all the company to pay it off. So this is not what we thought is the best interest of our shareholders. Selling, giving shares even if there was to it, we didn't even want to consider this kind of thing. So our goal is not to pay the debt with our ownership of the company, we don’t want to give away the ownership, the company wants get its act all together as we are planning to do will be more valuable.

Tom Retol

Okay. Thank you.

Benjamin Locke

Thank you, Tom.

Operator

And our next question comes from Haydn Cole of Essex Asset Management. Please go ahead.

Haydn Cole

Good morning, thanks for taking my question. I'm just thinking about sort of like the recent change to getting cash flow positive here in the quarter, which is I think very positive and I guess, what I’m interested in the margin even though it is kind of steadily improving 1% again this quarter. It seems like the profitability is most leverages by the utility rates. So I'm wondering like on a going forward basis, how we feel about that. You know because it seems like that if the end goal they pay their goal the shareholders is to see more value creation that maybe there's some things that we – are you all got thinking about managing the downside risk of more deflation and utility pricing? Are you thinking about that?

Benjamin Locke

Yeah, I think a lot about that, and I’ll answer it in two ways, as Bonnie mentioned as energy prices go down and electric rates go down we’re hedged a little bit by the fact that our operating expenses for running the equipment also go down because the gas is going down in price, well the gas bills that we’re paying are going down. So we have a natural hedge against reduced electric rates that way. Secondly, the electric rates are not to too much of attention [ph] here but are complexed with different utilities. That I think what Bonnie described as the demand portion of an electric rate versus the basic you know what you everyone understands is that cents per kilowatt hour is very nuance and sometimes you see one go down and the other go up. And if ADGE is not in the position to take advantage of that change in tariff structure, particularly the demand component then you're right, then we start to lose out. So I think one of the ways that we’re reacting to the changing utility structure is to make absolutely sure that we have all those things that Bonnie mentioned in terms of instrumentation, monitoring et cetera to make sure that we’re able to capture the demand component. So that if the demand component - if the cents per kilowatt goes down, but demand component goes back up, we’re able to benefit from that. So those are the two things that I think we can do. Now in general electric rates are trending upward, I think if you speak with energy, any energy analyst and certainly Mr. Maxwell is one of the best of them, will agree that over the long-terms infrastructure drives electric costs, certainly in New York that’s the case. So in the long term I think we’re going to continue to see healthy electric rates to support our business model.

John N. Hatsopoulos

I want to add to what Ben has just said, that one of our directors is a gentlemen called John Rowe. He was the chairman and CEO of their largest I believe nuclear facilities electric production facility in the United States. And this is his feeling also, that on the long-term basis utilities will find a way to get there bond or flesh.

Benjamin Locke

Yeah and then certainly as we mentioned before the influx of more solar just puts more of the cost burden of the electric utility on the other rate payers, like any analyst will substantiate that that’s the problem. It’s a problem facing the overall electric utility industry today is the promulgation of more distributed generation. That’s good for our business model.

Haydn Cole

Yeah, and then I guess, so I like that I cannot agree with those things and I don’t know if that’s good or not, but I feel like that we’re aligned fairly strategically on those thoughts. And I guess, the thoughts that I’m also curious about is it seems like there's a lot of strong ties and great connective tissue obviously with Tecogen and their technologies. I wonder strategically on a going forward basis, how much more we can reasonably I guess, speculate that we’re going to benefit from their different and new technologies because the recent one if I’m not mistaken is more focused on autos and doesn't really have an impact on utilities, on-site utilities.

Benjamin Locke

Yeah, that’s though completely separate from American DGE.

Haydn Cole

Right. But do we think about kind of what they - because we’re using their technology essentially like is there any concern that I don’t know, don’t have access to newer things that they're developing because they’re more sort of going into another direction and not on-site direction?

Benjamin Locke

Yeah, I don’t think so, Tecogen’s core business model remains as CHP equipment, as well as the heat pumps and chillers and the improvements that Tecogen is making on those, I mentioned the new CHP product that’s got a lot of innovation, plus all of that is going to help out American DGE. Now the efforts that Tecogen is making on the auto emissions, that’s a different business that Tecogen is going to go after, but that doesn't take away from their core business of making equipment.

Haydn Cole

Okay. All right. Thanks guys.

Benjamin Locke

Thanks very much.

Operator

And that concludes today’s question-and-answer session and today’s conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful weekend.6

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