U.S. Markets open in 2 hrs 14 mins

Edited Transcript of UQM earnings conference call or presentation 20-Mar-18 8:30pm GMT

Thomson Reuters StreetEvents

Q4 2017 UQM Technologies Inc Earnings Call

Frederick Mar 21, 2018 (Thomson StreetEvents) -- Edited Transcript of UQM Technologies Inc earnings conference call or presentation Tuesday, March 20, 2018 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* David I. Rosenthal

UQM Technologies, Inc. - Treasurer, Secretary, CFO & Principal Accounting Officer

* Joseph R. Mitchell

UQM Technologies, Inc. - President, CEO & Director

================================================================================

Conference Call Participants

================================================================================

* Amit Dayal

H.C. Wainwright & Co, LLC, Research Division - MD & Senior Technology Analyst

* Frank Gildner

* Irving Reifman

* Joseph Vidich

* Randall Hough

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good afternoon, ladies and gentlemen, and welcome to the UQM Technologies Inc. Conference Call. My name is Jesse, and I will be your coordinator for today. (Operator Instructions) As a reminder, this conference call is being recorded for webcast replay purposes.

I would now like to turn the presentation over to Mr. David Rosenthal, CFO of UQM Technologies.

--------------------------------------------------------------------------------

David I. Rosenthal, UQM Technologies, Inc. - Treasurer, Secretary, CFO & Principal Accounting Officer [2]

--------------------------------------------------------------------------------

Good afternoon. Thank you for joining us on UQM's conference call to discuss the year ended December 31, 2017, results and provide an update on key business topics. On the call with me today is Joe Mitchell, our President and CEO.

Before we get started, I would like to review our safe harbor statement with you. 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 may include 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, gaining access to global markets, gaining required certifications, new product developments, future orders to be received from our customers, sales of products from inventory, future financial results, liquidity and the continued growth of the electric-powered vehicle industry.

Important risk factors that could cause actual results to differ from those contained in the forward-looking statements are contained in our Form 10-K filed today, which is available on our website at www.uqm.com or at www.sec.gov.

Now I'm going to present the highlights of the results for the quarter and year ended December 31, 2017. Revenue for the quarter was $2.2 million, up $555,000 or 33% over the same quarter last year. Total gross margins from operations were 37% for the quarter consistent with normal rates. Total operating expenses for the quarter were $2.1 million, the same as the quarter last year. Net loss for the quarter was $1.3 million or $0.03 per common share compared to a net loss, excluding the inventory write-off that we took last year, of $1.5 million or $0.03 per common share in the same quarter last year.

Revenue for the year ended December 31, 2017, was $7.8 million compared to $5.7 million last year, a growth of 38%. This increase was the result of generally higher sales from many of our customers plus the sales of fuel cell compressor systems to our customer in China during the year. Total gross margins from operations for the year were 40% versus 29% in the same period last year. This increase was due to a mix of higher-margin products compared to last year. Total operating expenses during the year were $8.4 million, the same as in prior year. Net loss for the year was $4.8 million or $0.10 per common share compared with a net loss before the inventory adjustment last year of $6.7 million or $0.14 per common share. The total net loss last year with the impact of the reserve to inventory was $0.29 per common share.

Our cash balance at December 31, 2017, was $6.3 million, and our working capital was $7.7 million. As of December 31, 2017, we had borrowed $3.1 million on our line of credit and still had $2.5 million available on the line.

In summary, 2017 was a good year for us with increased sales and stable spending. We ended the year with a strong cash balance. We saw a lot of momentum in the market last year and we continue to see that as we start 2018. We are very encouraged that today, we already have orders on the books for 2018 sales greater than last year's revenue. Our current customers are growing in their respective markets, and we are gaining new customers. Joe will elaborate on this in his remarks. But the momentum of the business is the strongest it has been in many years, and we're very excited about the many opportunities for growth that lay ahead of us.

And now, I'd like to turn the call over to Joe. Joe?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Great. Thank you, David, and good afternoon, everyone, and welcome to our quarterly and year-end earnings conference call. In today's conference call, I will provide you with an update on CNHTC partnership and the CFIUS process as well as key developments for the quarter, including our entry into the Indian electric vehicle market, along with an overview of our business segments including propulsion systems, auxiliary products and engineering services. I would like to start by mentioning a couple of key highlights for the quarter.

First, we continued to make excellent progress on both our short- and long-term goals of expanding our sales, finding new customers and our global expansion initiatives. The results of our efforts in growth strategy are being demonstrated, and we had an excellent year for sales and new business development. As David mentioned, we are off to a great start in 2018 and have already booked more business for this year than all of last year's total revenue.

The CNHTC's strategic partnership announcement earlier this year was a major milestone for UQM and has added a significant dimension to our long-term growth path by establishing our presence in the China market with a major partner. With the closing of the first tranche in CNHTC's investment in UQM, they are currently our largest shareholder and a committed partner. While we continue to work through the CFIUS process, I would like to remind everyone that the CFIUS process and approval applies only to the proposed foreign investment in UQM that exceeds 9.9% and has no jurisdiction over our joint venture or other business relationships and programs that we are working on the CNHTC.

There are some concerns over the IP protection process and national security that we are working jointly to ensure that all issues are addressed and that we have comprehensive and adequate mitigation actions in place to ensure that all stakeholders' needs are being met, including the U.S. Government.

However, the China market is still by far the largest electric vehicle market in the world and continues to grow, and we are committed to establishing our presence in this major market. CNHTC is our main strategic partner and remains committed to UQM. Even though we have faced some regulatory hurdles, we will do what is in the best interest of UQM and all stakeholders. With CNHTC as our strategic partner in China, we are in a much stronger position as a company, and we will continue to discuss the status with the CNHTC deal in more detail later during this call.

As I mentioned, the China market remains a key focus for us, and we continue to grow our business in this region. As examples, we received orders and will be delivering on a number of systems to Sinotruk for vehicle certification in the coming weeks. These deliveries will include both PowerPhase Pro and PowerPhase HD systems, where Sinotruk is sourcing the transmission from local Chinese partners and performing the integration work. We also received a major order from KESHI for their mining vehicle applications. KESHI has received full MA Certification to sell these zero emission vehicles into the mining industry in China. To our knowledge, this is the first in China for this application, and we look forward to much more success with this customer.

The fuel cell market in China is also very large, and our fuel cell compressor systems are a major component for these systems. Our major Chinese OEM customer launched their first low-volume production fleet and is moving into the next stage of expansion as evidenced by our announcement last week of follow-on sales. The fuel cell compressor product line is another strong point with continued sales to the China market along with our domestic customer orders.

Another major new initiative for us is the E-axle application in our alliance with Meritor. Meritor continues to display the E-axle system and work on the development program with UQM's full support and are receiving very positive market feedback. With Meritor, we have moved into the next development phase of producing functional prototypes in samples for vehicle applications. Key milestones we'll be looking for will be validation of the functional samples along with a number of vehicle trials, hopefully later this year, with the anticipation of production next year. Obviously, with any new application, the timing will be determined by the ultimate end customer, but we are jointly working with Meritor to ensure a high-quality product that we feel will have a broad global acceptance and great potential.

Another upcoming highlight I want to mention is that we will be displaying and speaking at the Electric & Hybrid Vehicle Show in Hanover, Germany this May. What is of particular interest is that we will be jointly displaying our DT system with Eaton and Pi Innovo. The interest and success of the DT system is garnering very positive attention and results. That leads me to the next point that I would like to discuss, which is the recently announced purchase order from Ashok Leyland for a number of DT systems for the India market.

Our sales and business development team have been working with Ashok Leyland for quite some time to secure this order, and we have been competing against all of the global competitors. For a company like Ashok Leyland, a major Indian commercial vehicle manufacturer, to select UQM in our DT systems is a major testament to our company's capabilities and increasing global presence. More importantly, for us to be on the ground floor in India with a customer like Ashok is a major win for UQM, and I cannot overemphasize the importance and long-term benefits of this opportunity.

Now I would like to talk about some of the highlights of our propulsion systems and auxiliary products along with our engineering services.

Regarding propulsion systems, we continue to see strong sales and growth in several new and existing customers. Firstly, in reemphasizing our global growth strategy, the purchase order we received from Ashok Leyland is for the PowerPhase DT electric-drive system that includes a 2-speed transmission for transit bus application. The initial order of 51 systems for Ashok's demonstration fleet will be shipped during 2018 for a pilot program for electric transit buses in India. The initial production is anticipated to begin in 2019, and we will be working with Ashok to help develop our localization strategy for India.

This order signifies the first step in the development program to gain market leadership and drive the overall India electrification initiative. Upon successful completion of the initial demonstration program, Ashok Leyland plans to move forward and grow the India EV market with additional zero emission vehicles incorporating the UQM electric drive technology.

The Indian government has publicly stated that they plan to move a significant percentage of their vehicles to electric by 2030, which opens up a very large new market for UQM, and we are very excited to support our new strategic India customer and establishing our presence in this market on the ground floor. During this quarter, we also received a follow-on order from Proterra for the UQM PowerPhase HD drive systems, supporting Proterra's increased demand. We expect to deliver the order throughout 2018 and are pleased to see Proterra continue to build and develop its leading-edge electric bus technology utilizing the UQM powertrain system. We also believe that the increased demand for Proterra vehicles is a sign of the rapidly expanding market for heavy-duty electric bus technology in North America.

Additionally, we received a $1.2 million order for explosion-proof e-drive systems from KESHI for the China mining vehicle market. The shipments are scheduled to take place during 2018, and we see this as the beginning of a long-term growth opportunity for UQM. As you may recall, we signed a cooperation agreement with KESHI back in 2015, and KESHI has been working on getting their full Chinese Mining Authority or MA Certification completed. This took a little longer than expected, but we are thrilled to see KESHI moving to production with their zero emission electric vehicles using our powertrains. KESHI is moving forward to production and the strategy remains consistent: that they will do final assembly and test in China for the explosion-proof electric propulsion systems using a kit supplied from UQM here in Colorado.

We also announced another new customer in Lightning Systems, who has chosen UQM as its strategic EV propulsion system supplier for their EV platforms. Lightning will be using our systems in their Ford Transit Van EV application that was recently on display at The Work Truck Show in Indianapolis earlier this month and received very positive reviews. Lightning has a number of data sites lined up and anticipates going to production later this year or early next year.

We also received an order from our customer DANNAR for a new application called the Mobile Power Station, or MPS, utility vehicle. This vehicle will be powered by UQM's electric drive systems. DANNAR's MPS is a heavy-duty EV design for infrastructure maintenance and disaster response and the first in a new class of electric work machines. UQM completed the shipments for the HD 950T propulsion systems in early 2018.

We continue to support Zenith for their shuttle and delivery vans using our systems, along with a number of marine applications and have engaged with a number of other customers who are in the early development phases and cannot be publicly announced at this time.

Finally, we continue to look for new applications globally as our quality, performance, power density and packaging options are key features in the selection of UQM products.

And now moving on to our auxiliary product sector. Our auxiliary product sector led by our fuel cell compressor systems remains a key focus area and an important part of our strategy. We have put considerable effort into redesigning our motor and controller to be more cost-effective for this market, and this has resulted in a follow-on wins in China for fuel cell applications.

Last year, we delivered a number of systems to China and North American customers, and the Chinese OEM launched a major demonstration fleet of fuel cell vehicles that included our compressor systems. During this quarter, we received a new follow-on order from our Chinese OEM customer for our compressor systems. The delivery of the fuel cell system to this customer was a significant element of our 2017 results, and we look forward to localizing and continuing to reduce costs to take advantage of this expanding global market. Additionally, we continue with our aerospace HVAC system deliveries, the Air Comm, as part of our ongoing business.

And now moving on to our engineering services sector. We remain focused on obtaining funded R&D projects that support our road map. Meritor and E-axle program has been a major-funded development program for us, and we are in the discussion stages with Sinotruk and others for development programs that will support our road map and lead to future product opportunities.

Now I would like to provide you with a further update on the CNHTC partnership and the CFIUS process. As announced in early March, and at the request of the CFIUS committee, us together with CNHTC, with new CFIUS application to allow more time for review and consultation with the intention of resubmitting the application once the concerns of CFIUS have been addressed. As I mentioned previously, the CFIUS jurisdiction is over the direct investment in UQM and not over our commercial business relationship. And currently, CNHTC is our largest shareholder.

We have met numerous times with the senior leadership of CNHTC both here in UQM and in China, and I can tell you that they remain committed to work with us and see us as a key partner in their electrification strategy.

Our mutual goals have not changed, and there are a number of options available to us to execute on our strategy. We are following the process and continue to work with the CFIUS committee to find resolution of their concerns.

As a further example of CNHTC's commitment to UQM, they have placed a number of orders for drive systems that we are delivering for both our HD and Pro product lines for multiple vehicle applications. Furthermore, we are working with CNHTC at multiple levels, from vehicle applications to JV planning and executive-level interface, and expect these relationships to continue as we work together towards mutual success in the market. It is important to note that most all major players in our market today have partnerships in China, and this is obviously a key element for UQM's growth strategy. And currently, we plan to be manufacturing in China by early 2019 to support this market and clearly establish our presence.

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

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question comes from Amit Dayal with H.C. Wainwright.

--------------------------------------------------------------------------------

Amit Dayal, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Technology Analyst [2]

--------------------------------------------------------------------------------

Just a question about CNHTC and CFIUS. What is the time line that you think this is on pushed out towards? And then, is this basically requiring sort of a restructuring of the arrangement that you had initially sort of put together?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [3]

--------------------------------------------------------------------------------

Amit, regarding the time line, it's a little bit fluid. I mean, we continue to meet with CFIUS, and our attorneys, both from CNHTC and UQM, are in regular conversation with the CFIUS group looking at what are their concerns. As far as the restructuring of the deal, I think it's a little bit early to say how that would be restructured. Without going into some of the details, I can't go into right now, is a lot of this is going back to CNHTC and Sinotruk, and a lot of the things that are going on globally with their business. So those are really the main areas that are being looked at. And as I mentioned in the comments, I think the very positive is, our business relationship, I don't see, being affected. And we've been working with these guys for quite some time. We've got a number of these trials going on to get their vehicles certified, and we've got a number of options open to us of how we can go forward to execute on the strategy. The executive team from CNHTC was here a few weeks ago, and we discussed what our options are. And one thing was made very clear from their chairman was they are committed to UQM. The strategy remains the same, and we're going to find a way to work through this.

--------------------------------------------------------------------------------

Amit Dayal, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Technology Analyst [4]

--------------------------------------------------------------------------------

Got it. And my follow-up is around the revenue outlook for 2018. I am guessing, in your prepared remarks, you said that you already have orders on the books that exceed the revenue levels in 2017. I was just trying to see how much more we can add here? And where potential new orders will come from?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [5]

--------------------------------------------------------------------------------

Yes. I think that's a great question, Amit. I wish I can give you more guidance on it. But I think this is -- the market is evolving. Yes, the nice part is again, we're probably well over $8 million of already booked business for the year. I think with a lot of our customers, as I mentioned, like with Meritor, it's really going to be dependent on the speed of their launch and how quickly they start to come up. Same with the things going on in India and also in China. I mean, there is a little more predictability of what's happening in on the North America side with customers like Proterra and so on, but the major growth is going to be coming from the new customers that we've been identifying. So I think the positive is the revenue is growing. How fast it's going to grow is probably a bit of the open question. But it's nice to see that level. In early March, we already had that business booked and again pursuing a lot more from that end.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

Your next question comes from Randy Hough with ProEquities.

--------------------------------------------------------------------------------

Randall Hough, [7]

--------------------------------------------------------------------------------

Let's go back to India for a moment, if you would. I noticed in the release that there was a commitment to buy 50 units in the first order over -- to be delivered over the course of 2018. I'd like to get your feel for why 50? It seems to me, most of the work we've done in the past with new customers were in the order of onesies, twosies, 3 or 4 or 5 with the exception of Audi perhaps. But it seems to me like 50 is a pretty significant number. I'm wondering if you can share this -- what you perceive as the strategy behind an order of that size, initial order of that size?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [8]

--------------------------------------------------------------------------------

Yes, well, Randy, I think a couple of -- really, a couple of key items to note with Ashok is the nice part when you start dealing with a company like Ashok Leyland and their presence in the market, they've got the capacity and capability to do far more than a onesie, twosie. I mean, they can fund that and get that product out in the market and running. And that just gives, I think, a little insight into what the potential for this customer is. The results, obviously, that we have with that drive and some of the other trials we've done, but mainly with Proterra there, I think now has exceeded probably close to 6 million miles of fleet time on these drivetrains is showing the reliability and performance. And Ashok is saying, this Powertrain after we've looked at, say, there were many, many competitors, and all the big ones were competing against us to win this business, and they selected UQM. And that's why, as I mentioned, we couldn't be more excited to be on the ground floor with a company like Ashok. So, obviously, they're going to run this first fleet, get it up and running. And this is another one where we're not sure where the forecast and the numbers are going to top out at, but it's got a awful lot of potential. And another key part is, obviously, I mentioned about Eaton being involved. We've been working for a long time with Eaton. They are compressor supplier on the fuel cell product. They are transmission suppliers on the DT. We're tied very closely to them. And bringing customers like Ashok is getting the attention of suppliers like Eaton to be able to support this business and help us to grow with it. So that is, again, another very, very key element. Us being over at Hanover in May at that big show in Europe and having Eaton right alongside with us at that display and promoting this product and may be looking at other products, is again a true testament to where we are as a business and where the growth is going to be coming from.

--------------------------------------------------------------------------------

Randall Hough, [9]

--------------------------------------------------------------------------------

Just a follow-up on that, Joe. When that DT arrangement with Eaton was first announced, we discussed on the conference call, the significant competitive advantage that comes to UQM because of the -- especially because of the gearing on that arrangement in the Eaton box and the significant miles already displayed or realized in the Proterra bus, and that pretty much the competition would be extremely small given that the pack -- the total package of our motor with their transmission. Can you -- is that still the case today in your mind? Or give me a feel for the, if you would, give us a feel for the competitive advantage we have around the globe with that package?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [10]

--------------------------------------------------------------------------------

It's still an advantage. As I mentioned earlier, Sinotruk -- let me step back, again, that Eaton -- it's a multi -- it's a 2-speed transmission. And that, obviously, gives us a lot of advantages with a smaller motor and higher performance range that we're able to get. We do know that there's other competitors in China that are starting to enter the market, and people are starting to look at transmission solutions. It's been really one of the Achilles heel of people in China trying to get in and get a transmission that is anywhere near as reliable as the Eaton model. Eaton is looking this now and seeing the business, and we're, again, in the early discussions that Eaton's got opportunities to make improvements there, to reduce cost, to look at even more efficient systems. So what we've got to do is keep our lead and continue to work with them. And like I said, when you see companies like Ashok coming in and expressing that interest, the volume is real. When you're dealing with a one-offs and even the low 20-, 30-, 50-type systems, it's hard to get the attention of a company like an Eaton to enter into this market. But now, they're fully engaged in this project. And I think we're going to see a number of improvements coming forward in the future with this overall driveline.

--------------------------------------------------------------------------------

Randall Hough, [11]

--------------------------------------------------------------------------------

Would they be -- take the posture of a Tier 1 here? And that's my last question.

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [12]

--------------------------------------------------------------------------------

That's still open. Like I said, we're not opposed to a company like Eaton taking a Tier 1 position. So again, it's something that we will be discussing, but there's no firm decision one way or the other yet.

--------------------------------------------------------------------------------

Operator [13]

--------------------------------------------------------------------------------

Your next question comes from Joe Vidich with Manalapan Oracle Cap.

--------------------------------------------------------------------------------

Joseph Vidich, [14]

--------------------------------------------------------------------------------

Great progress on all these announcements, really commend you all. I just want to -- just a couple things. A little more -- if you could give a little more information on exactly how big Ashok Leyland is and -- in terms of the current production of buses and trucks. And then along with it, how long did that process takes for you guys to win that order?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [15]

--------------------------------------------------------------------------------

Yes, they're -- as a company, last number I think were -- they're about a $3.5 billion company. And they're headquartered out of India, but I know they've got subsidiaries around the globe and are very well connected. This was probably close to a year process, Joe, that we've been working with Ashok to present our data, present the business case, look at pricing of where we could be long term and short term. One of the biggest advantages and a big selling point is, and I go back to our power density, I mean, people don't realize the competitive advantage that, that gives us long term. Is when you look at our competitors, especially with the direct drive systems, the cost of that motor is going to be a function of the magnets, aluminum, steel and copper that's in there. We're using a lot less to get the same performance as many of our competitors. So when you look at the volumes that Ashok is talking about and how we will be able to localize this in India, we've got a very compelling business case, and that's what gave us the advantage and why Ashok selected this drive system. And obviously, the field performance, there's not much out there in the way of a -- or really nothing of a transmission-driven system, and Ashok realizes the benefits. They talk about these India buses. We know they're going to be overloaded. We know they've got very extreme duty cycles. And this performance that we're able to provide and again, having a partner like Eaton that's supporting us as well and they were engaged in this Ashok acquisition, was a big selling point of us winning this business.

--------------------------------------------------------------------------------

Joseph Vidich, [16]

--------------------------------------------------------------------------------

Right. Right. That's -- it's very exciting, I have to admit it.

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [17]

--------------------------------------------------------------------------------

Really, and again, I can't overemphasize to be with where India could go. I mean, they're obviously looking at what's going on in China. The market potential there is huge. Public transportation is a big, big market, and they need to clean up their environment and are moving to electrics. And us getting in here on the very first fleet is a big accomplishment with a lot of upside potential for us.

--------------------------------------------------------------------------------

Joseph Vidich, [18]

--------------------------------------------------------------------------------

Right. Could you also -- with regard to KESHI, you say -- you said it was a large order. I'm just curious how big that marketplace is relative to the bus market in China. I mean, is that -- is a large 50s? Is it -- is there a potential down the road to do 500 units a year in that market? Or what would that market sort of handle?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [19]

--------------------------------------------------------------------------------

It's a fraction of the bus market obviously. Underground mining transportation vehicles are there. KESHI, I think, does somewhere between 500 and 1,000 vehicles per year. So again, compared to the bus guys and again, it's a small market but if we're able to move them to a large percentage of those being electric, it's a nice business for us. And I think key is it's also another Chinese customer, and hence, our business and a lot of our growth is coming in China.

--------------------------------------------------------------------------------

Joseph Vidich, [20]

--------------------------------------------------------------------------------

Right. Right. And I guess my last question then I'll turn it over is just with regard to your building. Is that basically on hold? Or is that -- are you considering that in your capital structure and what you're doing going forward?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [21]

--------------------------------------------------------------------------------

Yes, we still have it on the market. Again, there's a lot of variables going on, what we're going to do and whether -- I'd say for just producing E-drives. It's large for us. It's larger than we need. But I think with where we are today, we've got a lot of other options. So it's there. We've got the line of credit against it that we use roughly about half of it. But there's no urgency for us to be able to move the building and just considering to look at all options regarding this.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

Your next question comes from [Bruce Kirovski] who's a private investor.

--------------------------------------------------------------------------------

Unidentified Shareholder, [23]

--------------------------------------------------------------------------------

I have 2 questions. One is the fuel cell customer with the compressor motor, is there any opportunity for mobility [motor] also in those vehicles?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [24]

--------------------------------------------------------------------------------

We've spoke to them about it. They previously selected another Chinese, actually, internal supplier. So with these guys, it's going to be a challenge to knock out their own in-house supplier. And I think until we actually are localized and producing there, it would be a bit of a stretch to say that we can get the traction drive at this point.

--------------------------------------------------------------------------------

Unidentified Shareholder, [25]

--------------------------------------------------------------------------------

Right. The other question is about the -- given the amount of bad weather around the United States and power outages that happen all over the place, it seems like the growth for the home generator market, its potential is great. How much of exploration have you done in that market?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [26]

--------------------------------------------------------------------------------

Yes, that's not something we've really looked into. I mean, our motors can serve as generators, but it really will become a commodity and something that -- again, we can sell that, but I don't think we're really in the position from a pure scale standpoint and some of our benefits from a traction driver. Would be good for generators, but it's a tough market and as I say, it's not really core to what we're doing today.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

Your next question comes from [Thurman Willis] who's a private investor.

--------------------------------------------------------------------------------

Unidentified Shareholder, [28]

--------------------------------------------------------------------------------

I wanted to move to your continuous comments about protecting the shareholders, and I thank you for doing that. And could we not assume that with the delay in CFIUS that this offers us the potential to diversify our shareholder base and to give us the opportunities to add new partners and other relationships for potential -- from the other grand list of potential customers that you've added because undoubtedly, people are totally impressed with our motors and looks like this would give us an opportunity now to expand that shareholder base and offer us potential for new partners and other relationships. Can you comment?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [29]

--------------------------------------------------------------------------------

Yes, I think on a very high level, [Thurman], as I mentioned that we're going to do what's in the best interest of all the stakeholders. And we've got now the U.S. government as a new stakeholder as we work through this, so we're working our way through that part of it as well. But -- and this process is very fluid, and the nice part why the company, I'd say, is in a great position. We've got a number of options. All the things that you mentioned are possibilities. And again, with Sinotruk and how we move forward with CNHTC and the business that's going on, we're going to do and take the next -- or the right steps that's going to put the company in even a stronger position. So...

--------------------------------------------------------------------------------

Unidentified Shareholder, [30]

--------------------------------------------------------------------------------

And a very short follow-up to that, I am interpreting your statement that CFIUS controls investment by a foreign company and has nothing to do with the business relationship of us getting to China, dealing with Sinotruk, et cetera, et cetera. So it's an investment and not a business relationship, which is very critical. Correct?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [31]

--------------------------------------------------------------------------------

Yes, that's correct, and that's why I want to mention this. Where their jurisdiction is, is on direct investment from foreign entities and U.S.-based companies and that anything over 9.9% has got to go through their approval. And as I mentioned, all of the major competitors and definitely all of the OEMs, you can go down the whole list, they all have alliances in China working on new energy products along with all of our -- or the vast majority of our major competitors.

--------------------------------------------------------------------------------

Unidentified Shareholder, [32]

--------------------------------------------------------------------------------

So it doesn't affect our ability to get to China or a business relationship?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [33]

--------------------------------------------------------------------------------

None. No effect whatsoever.

--------------------------------------------------------------------------------

Unidentified Shareholder, [34]

--------------------------------------------------------------------------------

All right. And my last question which is a quick one. There was a great article today from Alpha on Ballard and the potential for fuel cells, and I know that we've gotten a couple of nice orders from a confidential China source on fuel cells. Could you elaborate just a little bit more on the potential for fuel cells in the market, please?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [35]

--------------------------------------------------------------------------------

Yes, definitely. I mean, obviously -- I don't know if people have read the market -- or the article that EnergyTech did with Ballard, but it was mainly talking about their business and what's going on globally. But again, the vast majority of the sales today are in China around fuel cells. China has made a huge commitment, again, around new energy and a big part of that is the move the fuel cells on commercial vehicles, passenger cars, even some stationary applications. We...

--------------------------------------------------------------------------------

Unidentified Shareholder, [36]

--------------------------------------------------------------------------------

But we are positioned to take advantage of that?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [37]

--------------------------------------------------------------------------------

Right. We're winning the orders, and we are -- as I say, we have sold samples to many, many customers in China. The customer that we sold now the second production order is probably the leader of number of vehicles that are in China today running fuel cells that are on the road. And as I mentioned, I don't know if people picked up, we had to do a number of changes to move this product from a prototype into the production phase, from cost reduction. And the next step is going to be further cost reductions, localization in China to support this market and continuing to work with Eaton on the compressor side of the business because, again, this compressor has been in the market for a number of years on fuel cells starting back with Ballard. And we've got a number of advantages of our performance and experience. So this has become a very big -- a big part of our business, and you're going to be seeing more in the future as we continue to execute on this strategy and grow our presence in China and through the cost reduction and new product offerings we kind of come out with.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

(Operator Instructions) The next question comes from [Steven Thompson] who's a private investor.

--------------------------------------------------------------------------------

Unidentified Shareholder, [39]

--------------------------------------------------------------------------------

Hi. Can you hear me?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [40]

--------------------------------------------------------------------------------

Yes, we can hear you.

--------------------------------------------------------------------------------

Unidentified Shareholder, [41]

--------------------------------------------------------------------------------

Okay. Great job on the China market and the India market, and it's great to see that we have a presence there. My question would be that does our revenue growth anticipate the possible increase of cost in doing business in China due to our current situations without government? So do we project that there could be an increase due to the current tariff situation? And is that included in our growth -- our potential growth numbers? Because it seems like our regulatory environment in India is a little bit more friendlier, and it seems based upon the numbers that you give, our India market could actually outpace our China market in the future because I know you said our growth came from a lot in China. So that would be my question.

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [42]

--------------------------------------------------------------------------------

Yes, our long-term plan, [Steven], is to be manufacturing in the region that we're going to be selling the vehicles or selling the systems in. So with China, hence the reason to get the JV or whatever other structure we're going to go into China with, we've got to be in that region. So that should take the tariff and duty element out of the growth equation. So that's going to be very key. It's going to be the same with India. It's not so much that it's going to be tariff-driven, but these are very large components. They're heavy, time on either on the water or worse case, in the air, that we've got to be in these regions doing the assembly. So we really haven't factored in a lot of duties and other factors in the long-term growth and revenue calculations.

--------------------------------------------------------------------------------

Operator [43]

--------------------------------------------------------------------------------

Your next question is from [Lowell Highland] who's a private investor.

--------------------------------------------------------------------------------

Unidentified Shareholder, [44]

--------------------------------------------------------------------------------

My question is how much manufacturing capacity do you ultimately see existing in the United States for these products?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [45]

--------------------------------------------------------------------------------

Well, currently, [Lowell], we have lot of untapped capacity here in Colorado, and one thing we are not is capacity constrained. When we originally set up the plants for quota, it had capacity of well over 30,000 systems. And with a lot of the DOE money that came in a few years ago, we even upped that capacity further. So again, we've got ample capacity here to support the market, but I think the key is being in the region and having the adequate capacity to support those various regions.

--------------------------------------------------------------------------------

Unidentified Shareholder, [46]

--------------------------------------------------------------------------------

If you see significant growth, and hopefully, in the United States, would it be wise to retain our property there so you have a site for doing manufacturing in the United States?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [47]

--------------------------------------------------------------------------------

Well, like I said previously is that even at the capacity we have today, we're only using 1/3 of the building. We've got roughly about 2/3 of it that's vacant that we can either sublease. So we don't need the amount of space that we have, and we're just trying to be efficient in our use of resources. So even if we move to a smaller facility, we're not going to be giving up capacity.

--------------------------------------------------------------------------------

Unidentified Shareholder, [48]

--------------------------------------------------------------------------------

Does CFIUS have a concern regarding the manufacturing that will be done in the United States? Or is that not one of their concerns?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [49]

--------------------------------------------------------------------------------

No, that's not one of their concerns.

--------------------------------------------------------------------------------

Unidentified Shareholder, [50]

--------------------------------------------------------------------------------

Okay. Can you elaborate on what their concerns are? Or is that not possible?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [51]

--------------------------------------------------------------------------------

Yes, it's not possible at this point to elaborate.

--------------------------------------------------------------------------------

Operator [52]

--------------------------------------------------------------------------------

Your next question comes from Randy Hough with ProEquities.

--------------------------------------------------------------------------------

Randall Hough, [53]

--------------------------------------------------------------------------------

Again, just for clarification. Is the fuel cell business in China, or anywhere else, I guess for that matter, purely for commercial vehicles? Or is there potential for consumer vehicles as well?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [54]

--------------------------------------------------------------------------------

It is for both. The vast majority of what I've seen so far is going into commercial delivery vans, smaller type shuttle vans. There's some passenger car, but I think as they're putting their hydrogen infrastructure in, that's one of the challenges of having the hydrogen stations that people can get to and get access to. So it makes a lot more sense in the early-adopter stages to be on commercial vehicles.

--------------------------------------------------------------------------------

Randall Hough, [55]

--------------------------------------------------------------------------------

Okay. Good. And that's true generally? Or do you see fuel cells as a viable power source in other major areas around the globe besides China?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [56]

--------------------------------------------------------------------------------

Definitely. I mean, if you talk to the fuel cell guys, they see a lot of advantages over batteries and vice versa, the battery guys over fuel cells. One of the big benefits of fuel cells is it takes the range anxiety away because you can fuel them fairly quickly and get a lot further range with a zero emission vehicle. What we've heard with the Chinese is right now they're putting -- typically, most vehicles have 30 to 50 kilowatts of fuel cell power on there. And the feedback we've been getting here in the last few weeks is they're pushing for even higher capacity of fuel cell on these various vehicles. So from that end, they're definitely looking at this as a -- as an energy source that is very sustainable and got a lot of growth.

--------------------------------------------------------------------------------

Randall Hough, [57]

--------------------------------------------------------------------------------

I don't hear much about that in the U.S., or it's just not been made public in the U.S.?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [58]

--------------------------------------------------------------------------------

Yes, there's a fair amount still going on, but again, it's just a fraction of what's happening in China as with the rest of the zero emission vehicles. We're aware of a number of small demonstration fleets that are taking place. But again, volume-wise, it's why all the fuel cell guys are in China with various partners, and that's a key part of their business.

--------------------------------------------------------------------------------

Randall Hough, [59]

--------------------------------------------------------------------------------

Okay. Now you mentioned being present or having a presence at a German vehicle show here in May, was it?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [60]

--------------------------------------------------------------------------------

That's correct.

--------------------------------------------------------------------------------

Randall Hough, [61]

--------------------------------------------------------------------------------

Yes. Are you going to be there by yourself? Are you going to be there with Eaton or another partner? What's the target market of this show?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [62]

--------------------------------------------------------------------------------

Yes, this a -- there's a show -- a similar show here in the U.S. in September, the electric and hybrid vehicle show. So it's typically the preeminent show demonstrating our technology or where we compete in this market. So the show in Europe, we will have a booth jointly with Eaton and Pi Innovo, demonstrating our platform together with Eaton. So obviously, that's garnering a lot of attention. That's why it's important is we're bringing Eaton more into the fold of supporting this product. They've got a global sales and service reach and an awful lot bigger company than UQM. So we're, again, very excited to see them showing the interest in the product and seeing now that the growth potential is there.

--------------------------------------------------------------------------------

Operator [63]

--------------------------------------------------------------------------------

Your next question comes from Frank Gildner with Investment Brokers.

--------------------------------------------------------------------------------

Frank Gildner, [64]

--------------------------------------------------------------------------------

Joe, last time we talked, I guess it was 6 months ago, you talked about the Proterra bus in Los Angeles. And I see you have that on uqm.com and I've looked at that a couple of times and referred a couple of my engineer [pre-hub] and [steer club] type clients, too, and they got a kick out of the fact that the engineer, I think, is from Proterra, is talking about getting 258 miles per gallon because they have 3.5 gallons as an auxiliary engine in the Proterra bus that runs on a dedicated track in Los Angeles. And Jay Leno looked like he was having a good time doing that. I think that's a hell of a marketing piece. That's why people, I think, are interested in the electric cars and things like that. I don't hear much about it though?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [65]

--------------------------------------------------------------------------------

About Proterra? Or...

--------------------------------------------------------------------------------

Frank Gildner, [66]

--------------------------------------------------------------------------------

Well, about the Los Angeles Proterra bus that gets 258 miles per gallon in an 8-hour shift because they stop and recharge in 5 minutes. They get a 95% recharge the way they have it set up there. I think that's a hell of a setup.

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [67]

--------------------------------------------------------------------------------

Yes, well, again, Proterra, they've got a number of different options between their fast charge and their long-range batteries. I'd have to say, there is an awful lot of publicity. I mean, if you look at the Proterra website and what they're promoting, there's an awful lot there. The nice part about Proterra, they really are the preeminent electric bus supplier here in North America. They have a large percentage of the market and continue to make improvements, and we're very happy to be in the powertrain on all of their buses.

--------------------------------------------------------------------------------

Frank Gildner, [68]

--------------------------------------------------------------------------------

Is there a plant in Georgia? Is it South Georgia?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [69]

--------------------------------------------------------------------------------

No, they've got a plant in South Carolina and the one in Los Angeles area. So they have 2 plants.

--------------------------------------------------------------------------------

Frank Gildner, [70]

--------------------------------------------------------------------------------

Okay. All right. I was just wondering because the -- one of our analysts was talking about a Proterra bus plant, and I thought he said Georgia. Okay. So it's South Carolina. That's great.

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [71]

--------------------------------------------------------------------------------

Yes, Greenville, South Carolina.

--------------------------------------------------------------------------------

Frank Gildner, [72]

--------------------------------------------------------------------------------

I got to get them interested in this because I think you're doing a terrific job.

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [73]

--------------------------------------------------------------------------------

Okay. All right. Thank you.

--------------------------------------------------------------------------------

Operator [74]

--------------------------------------------------------------------------------

Your next question comes from Irving Reifman with Reifman & Altman.

--------------------------------------------------------------------------------

Irving Reifman, [75]

--------------------------------------------------------------------------------

With the dramatic progress in sales this quarter, are you in a position to predict when you'll either break even or show a profit?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [76]

--------------------------------------------------------------------------------

Again, I don't want to get into the forecasting side of this, Irv, yet. I think the potential, as we're seeing in the trends, are all definitely in the right direction. We want to be moving very quickly to that point, and that's probably the best I could say right now.

--------------------------------------------------------------------------------

Irving Reifman, [77]

--------------------------------------------------------------------------------

And do you have enough cash for the full calendar year?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [78]

--------------------------------------------------------------------------------

Yes, no, we're in actually very good position from a cash perspective.

--------------------------------------------------------------------------------

Operator [79]

--------------------------------------------------------------------------------

Your next question comes from [Patrick Attard] who's a private investor.

--------------------------------------------------------------------------------

Unidentified Shareholder, [80]

--------------------------------------------------------------------------------

I was wondering, could you give us an update as to how the progress is coming along with the production facility in China and what is our capacity going to be in there and how soon we will be starting production in there?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [81]

--------------------------------------------------------------------------------

Yes, as I've mentioned earlier, the -- part of the capital that was going to be coming in from the CNHTC investment was going to be to fund the joint venture we were going to be putting up. We've done a lot of the planning and capitalization, but we haven't done our direct investment yet because we couldn't close on the second tranche. The capacity we were looking at was, to start, was going to be about 50,000 systems per year. And it's still our intention and commitment to be manufacturing in early 2019 in China. So we are -- and we've got a couple products. Again, that joint venture was set up to do commercial E-drives for the China market. We still have to -- we could utilize the JV or we could look at other manufacturing strategies to support the fuel cell compressor systems. And that's something that we're working very hard on finalizing our strategy of how we're going to be building those in China as well because that -- we're going to have to be over there in very early '19 to support the potential business that's coming our way.

--------------------------------------------------------------------------------

Operator [82]

--------------------------------------------------------------------------------

Your next question comes from [Thurman Willis], a private investor.

--------------------------------------------------------------------------------

Unidentified Shareholder, [83]

--------------------------------------------------------------------------------

Joe, just wanted to get a quick clarification. You said the China customer we're doing business with in the fuel cell business, did I understand you to say it's one of the larger fuel cell manufacturers in China at the moment?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [84]

--------------------------------------------------------------------------------

It's one of the larger vehicle manufacturers, and they have, I'd say, probably one of the largest fleets that are in the field today on fuel cell vehicles. Unfortunately, we've not been able to get their permission to use their name because they're very guarded. They don't like suppliers using their name in publicity. But again, they're a very large, well-known company.

--------------------------------------------------------------------------------

Unidentified Shareholder, [85]

--------------------------------------------------------------------------------

Okay. And this is in the auto business?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [86]

--------------------------------------------------------------------------------

Yes, they're in the auto and small van business [type].

--------------------------------------------------------------------------------

Operator [87]

--------------------------------------------------------------------------------

And the last question we have time for today comes from Randy Hough from ProEquities.

--------------------------------------------------------------------------------

Randall Hough, [88]

--------------------------------------------------------------------------------

Okay, guys, this is just a comment on taking the burden of forecasting off your back, Joe, since you're reluctant to do it, and I understand why. Isn't it time for this company to seek out professional research coverage in the traditional sense? Looking at where you are this year and what you reported earlier as having more booked business in total revenue than you did to the whole 2017 year and looking ahead to production starting -- volume production starting quite possibly in 2019 from a number of different customers, I think an effort should be made to go out and start presenting or getting yourself on the rolls for industry-related conferences that are held by these different analysts' operations and get the story out and start getting coverage and let them make the forecast for you. Just a comment.

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [89]

--------------------------------------------------------------------------------

Yes, no, we welcome the comment, Randy, and I think you picked up very well of how we're maturing and evolving as a company. And as the business is growing, the stability, the fundamentals that we are starting to see is attracting more interest, and hopefully far -- not far behind that is more coverage.

--------------------------------------------------------------------------------

David I. Rosenthal, UQM Technologies, Inc. - Treasurer, Secretary, CFO & Principal Accounting Officer [90]

--------------------------------------------------------------------------------

Randy, if I -- I'll chime in to say that we do think that we're in a very good position and completely agree with you that we want to be more visible on the Street and get the story out. There are a number of conferences that we're considering this year that we haven't been to in the past, and it's definitely part of our strategy.

--------------------------------------------------------------------------------

Operator [91]

--------------------------------------------------------------------------------

There are no more questions. Mr. Mitchell, would you like to make any closing remarks?

--------------------------------------------------------------------------------

Joseph R. Mitchell, UQM Technologies, Inc. - President, CEO & Director [92]

--------------------------------------------------------------------------------

Yes, definitely. I just want to wrap up by saying that in summary, we are very excited about the bright future and opportunities in front of us as we continue to see global growth in the commercial electric vehicle market and other markets that we serve. Our business is improving with the highest sales in years, and we continue to see many new opportunities with global expansion in India, China and North America. With increased trials of our E-drive systems, growth in our fuel cell compressor system market, execution is going to be key and we remain focused on our strategy. UQM's future and outlook have never been brighter, and I would like to thank you all for your continued support. Thank you, again, and have a good day.

--------------------------------------------------------------------------------

Operator [93]

--------------------------------------------------------------------------------

Thank you, Mr. Mitchell. A webcast audio replay will be available starting today, March 20, 2018, at 7:30 p.m. Eastern. The link can be found on the UQM website at www.uqm.com, click on the Investors then on Earnings Webcast. This concludes today's conference call.