Ballard Power Systems Inc.
Q4 2014 Earnings Call Transcript

Published: 29 Apr 2015

[Operator:]

Thank you for standing by. This is the conference operator. Welcome to the Ballard Power Systems 2015 Quarter One Conference Call and Webcast. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. [Operator Instructions] At this time, I would like to turn the conference over to Guy McAree, Director of Investor Relations. Please go ahead, Mr. McAree.

[Guy McAree:]

Thanks very much, good morning everyone. Focus of today’s call is to discuss Ballard’s first quarter 2015 financial and operating results. And we have with us today Randy MacEwen, our President and CEO; and Tony Guglielmin, our Chief Financial Officer. We’re going to be making forward-looking statements that are based on management’s current expectations, beliefs and assumptions concerning future events. Actual results could be materially different. Please refer to our most recent annual information form and other public filings for our complete disclaimer and related information. Just want to start this morning by apologizing for being a little bit late getting going. We have been in the process of pushing out a press release that should be crossing the wires fairly soon regarding some commercial news and we’ll be referencing the nature of that commercial news during the course of this call. Randy is going to provide his perspective on our Q1 results, and Tony will then discuss Q1 performance across key financial metrics. Finally Randy will come back and discuss specific deliverables that we are planning through the remainder of 2015 and then we’ll open the call up for questions and answers. So let me turn the call over to Randy.

[Randall MacEwen:]

Thanks, Guy and welcome everyone to our Q1 2015 earnings conference call. At Ballard we have strong conviction in the underlying merits of our business, including growth opportunities in large addressable markets, the resiliency and diversification embedded in our customer centric business model, the quality of our team, the strength of our brand, the competitiveness of our technology and intellectual property and a growing sales pipeline with a foundation built on repeat customer business and complemented by attractive new customers. Our balance sheet is strong and we enjoy substantial leverage in our cost structure. We continue to work to build a sustainable business promised on strong competitive positioning, attractive growth and sustainable profitability. To accomplish this we are focusing on two growth platforms, Power Products and Technology Solutions. We have made demonstrable progress in both of these platforms so far this year. So let’s first turn to an update on our progress in Power Products. Our first commercial market segment in Power Products in telecom backup power. While we had an expected slow first quarter in the segment, we are pleased to announce this morning a major commercial breakthrough. This morning we received an initial purchase order for 100 ElectraGen methanol backup power systems from a new customer in India, Reliance Jio Infocomm Limited or RJIL. This commitment comes after successful completion of an extensive 12 months competitive trial period, in which RJIL trialed fuel cell backup power systems from several vendors with Ballard ultimately being selected. This initial tranche of 100 units is the first of the series of planned deployments in RJIL’s Indian network in 2015 and 2016. The deal marks an important commercial milestone for telecom backup power growth strategy with a signature customer in a major emerging market. RJIL is a subsidiary of Reliance Industries Limited, India’s largest private sector company with businesses across the energy and materials value chain and a strong presence in the rapidly expanding telecommunication sector. As the only company with a Pan-Indian broadband wireless access license, RJIL is in the process of building out a new 4G telecom network, which requires the acquisitions of hundreds of new base station towers. India is one of the fastest growing telecommunications markets, with more than 10 million new subscribers added each month. Approximately 300,000 telecom tower in India face electrical grid outages in excess of eight hours on a daily basis. So there is an acute need for reliable, cost effective and clean backup power solutions with extended duration capabilities. This is right in our sweet spot. Notably, India’s Department of Telecommunications has mandated that tower companies reduce their dependence on diesel generators by powering at least 50% of rural towers and 20% of urban towers with clean energy systems. Increasingly telecomm network operators in India are looking to zero emission fuel cell technology as an extended duration solution that effectively addresses these needs. So we’re very excited with this break-through progress we’re making in India with RJAL. We’re also excited about some of the other scale deployment opportunities for telecomm backup power in key geographic growth markets that we’re working through our sales pipeline. As we turn our attention to the U.S. telecomm backup power market, we can also now report that Ballard has successfully met all outstanding conditions stipulated by the New York City Fire Department in order to gain certification of our methanol fuel systems for roof-top deployments. You recall this is an under-served market in major metropolitan centers in the US were diesel and battery options are not able to effectively compete. This approval, the first of its kind was an important dating hurdle that now enables us to continue trial and commercial deployment discussions with potential U.S. telecomm customers. We believe we’re now in a very strong competitive position to begin addressing this unmet need with a differentiated solution in 2015 and 2016. So, now let’s move to the second segment of Power Products material handling. In Q1, we experienced significant year-over-year growth in fuel cell stack shipments to Plug power for the material handling market. We continue to strengthen our collaboration with Plug as they secure repeat and new customer business. They continue invest in their business to offer customers a simplified turnkey solution with a value proposition based on productivity. The last segment in our Power Products platform is our development stage markets including bus. Ballard is currently enjoying tremendous sales momentum in bus, indeed we are consistently winning the global fuel cell bus business. In just four months, we’ve already have clear line of sight on sales of our proprietary HD modules for 39 buses including 21 in Europe, with our partner Van Hool tending United States with Partners BAE and El Dorado and eight with a new Chinese partner. In addition, we’re making real and measured progress in the Chinese tram market. In March, only a few short months after receiving an initial purchase order for HD7 modules, the world’s first hydrogen fuel cell powered fixed rail electric tram was successfully demonstrated at CSR Qingdao Sifang in Qingdao China. CSR Sifang is a central yield company that manufactures high speed trains and mass transit vehicles. CSR Sifang the city of Foshan and Ballard are collaborating on the possible commercial deployment in significant fuel cell tram project in the city of Foshan in 2016. So to summarize, we’re making great progress in each of our power product segments. We’ve also made important progress in our Technology Solutions platform. Importantly, we closed a landmark transaction with Volkswagen, through which we surface considerable value from certain electrical property assets bundled with leading intellectual capital embedded in our specialized engineering services. The transaction not only underpinned positive net income of $7 million in the quarter but also put $29 million of cash on the balance sheet and positions us to realize long-term value from the automotive sector. As a remainder, our Volkswagen engineering services contract now extends through March 2019. We also signed new Technology Solutions projects, including on-boarding a new global automotive OEM customer as well as finding the next phase of work with [indiscernible] technologies for a high value military application. Lastly, we have high customer engagement on a number of exciting licensing opportunities in China that we’re advancing through our sales pipeline, including in bus and tram. With that I’ll now turn the call over to Tony who’s going to review our first quarter financial results.

[Tony Guglielmin:]

Thanks, Randy and good morning, everyone. I’ll now take you through our key financial metrics for the quarter for each of our key market starting with Power Products platform. Overall for Power Products, we generated revenue of $4.9 million roughly flat to last year, but with a shift in product-mix. Our telecomm backup power revenue in the quarter was $0.6 million down $2.3 million year-over-year. This expected decline in the quarter resulted from fewer product shipments largely the result of continued delays and receipt of orders from several telecomm players. As indicated in our outlook call in February however this is a challenging market with a lengthy sales process, which is particularly evidenced in Q1. However, we are building a solid foundation this year for significant growth, including our enhancement this morning regarding an order for India. In material handling, Q1 saw continued growth with revenue up 29% to $2.6 million. This is consistent with Plug’s expectations for significant positive growth in its GenDrive systems shipments this year and we continue to expect growth in stack shipments for material handling throughout the year. In development stage markets revenue increased significantly year-over-year to $1.7 million. This was driven by an increase in bus module shipments in the quarter, including three HD7 modules shipped to our new partner in China with five more to be shipped to that customer this year. We expect development stage revenue to grow in 2015 supported by power module shipments to OEMs in the U.S., Europe as well China as Randy outlined. Technology Solutions revenue in Q1 decreased 51% to $4.4 million. However this decrease as a result of particularly strong first quarter last year, which included revenue from previous licensing contracts in China and a different cadence of the Volkswagen engineering services contract, which was more heavily weighted to the first half last year. Based on our pipeline of opportunities and the expected cadence of the VW contract through the balance of 2015, we do expect significant growth in Technology Solutions through the balance of the year. Overall then top-line revenue for the quarter was $9.3 million down 34% year-over-year, due largely to the variance in technology services revenue as just discussed. Gross margin for the quarter was 11% down 14 percentage points from 2014. This was primarily due to unabsorbed manufacturing overhead cost resulting from the reduced level of product shipment as well as the shift in Q1 revenue mix, particularly the absence of the high margin licensing revenue in China. As Randy mentioned however we do have visibility to a number of new licensing opportunities this year. In terms of gross margin for 2015 then with overall growth in top-line revenue, as well as a larger contribution from Technology Solutions for the year we do expect gross margin to improve throughout the year. Cash operating cost in the quarter increased 25% to $7.9 million, this reflected higher research and product development cost resulting from lower hours spent on engineering services given the cadence of the projects as well as the reallocation of resources to the resolution of field issues related to ElectraGen deployments in a specific geographic market as we discussed on our last call. We do expect though that cash operating cost will normalize closer to a run rate in the $7 million range per quarter through the rest of the year. Given the lower gross margin and higher cash operating cost in Q1 adjusted EBITDA declined to negative $5.1 million compared to negative $1.8 million in Q1 last year. Net income in the quarter was positive $7 million compared to a loss of $3.8 million in Q1 last year this reflected the gain on sale of $14.2 million from our intellectual property transaction with Volkswagen. Earnings per share was also positively impacted by this transaction to positive $0.05 per share in Q1, compared to a loss of $0.3 per share in Q1 last year. Cash used by operating activities improved 19% to negative $5.4 million, comprised of cash operating losses of $5.8 million, offset by net working capital inflows of $0.4million. Finally, in terms of liquidity, we ended Q1 with a very strong cash reserves of $47.6 million. Our cash position was bolstered in the quarter by approximately $29million with the close of the Volkswagen transaction. In summary than, we are seeing demonstrable prove points to support our expectations for strong growth through the full year weighted towards the second-half in power products, including telecom backup power, material handling and bus markets, as well as in technology solutions. Before I turn the call back to Randy, I mention a few upcoming events, we hope to see many of you there. And we will be speaking at the National Fuel Cell Symposium on May 7th in Sacramento, California along with senior representatives from Bloom Energy, Tusan [ph] Fuel Cell, Fuel Cell Energy and GE Fuel Cells; the Cowen Technology Media and Telecom Conference in New York on May 27th to 28th and the Stifel Industrial Conference on June 16th in New York City. In terms of some other events we will be hosting Ballard’s Annual General Meeting here at our headquarters facility in Vancouver on June 2nd and we are also planning to host an Investor and Analyst Day later this year, currently schedule for Thursday October 1st in New York City, there will be more details forth coming regarding this even. With that let me turn the call back to Randy, to speak about some specific deliverables going forward.

[Randall MacEwen:]

Great, thanks Tony. When we started the year we plotted an ambitious plan with a number of key objectives for 2015 these objectives included, securing orders from at least two new key telecom backup power accounts, continuing to grow our material handing business, growing bus module orders in U.S., the European theater in China, securing at least one new megawatt scale distributor generation project, growing our power product sales backlog and opportunity pipeline entering 2016, launching our next generation products with enhanced performance and reduced cost specifically our next generation air cool stack, methanol fuel backup power system and bus power module, continuing to grow the Technology Solutions business including securing at least one new automotive OEM, completing the build out of our commercial sales team and investing in revise go-to-market strategy, improving our financial performance driven by revenue growth and gross margin expansion, maintaining a strong balance sheet and reviewing complementary M&A opportunities in order to scale our business. So far in 2015 we have made good progress against a number of these objectives and look forward to providing you updates later this year. Lastly, I would like to extend a warm welcome okay the newest member to the Ballard Board of Directors, Jim Roche. Jim has a very strong background in high technology and growth companies including his 10 year as a founding member and executive of New Bridge Networks. Jim’s recent appoint as a board member is an important step in our board renewal efforts. So with that let’s now turn the call back over to the operating for questions.

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instruction] The first caller is from Matt Koranda from ROTH Capital Partners. Please go ahead.

[Matt Koranda:]

Good morning, guys. Thanks for taking my questions and congratulations on the RJIL announcement.

[Randall MacEwen:]

Thanks, Matt.

[Matt Koranda:]

So, I just wanted to start off by understanding what you guys went through in the trial process if you can just point to some specifics about what enabled you guys to win that contract and what other large fuel cell providers were you up against in the trial?

[Randall MacEwen:]

Hi, Matt, so it’s Randy here. So our understanding from Reliance is that there were six or seven different fuel cell technologies that they were trailing, affectively side-by-side for the past year. In terms of the milestones they are looking at or how they looking at the technology from a competitive perspective. Obviously significant amount of time invested in the economic value proposition, but from a trail, technical trail perspective really looking at performance characteristics and extended duration run-time, and having the right size unit for their application. So I don’t know what information Reliance might be issuing or releasing on this, but I think that’s probably what we can comment on at this time.

[Matt Koranda:]

Okay, great. And then with the increased visibility you guys now have in the shipment volume for the ElectraGen for the year, can you just help understand related thinking on the production side of things there? Are you looking at options in terms of contract manufacturing to lower costs or are there other things you can do on that front to help lower some of your production cost?

[Tony Guglielmin:]

Sure, so I mean first of production cost we’ve invested quite a bit here over the last number of months in terms of looking at ways to simplify our production process flow in our Tijuana [ph] facility. I was just down there a few weeks ago and I think we’ve made a lot of progress in the last number of months in some of the key things safety, quality. But what impressed me most was the production yield results we were starting to see significant improvement there, that will help of course. I think the key though really is the scaling and getting volume so that we can have our production overhead cost properly absorbed. We obviously didn’t see that in the first quarter. So I think that’s a key variable for us to start to get scale into the production facility we currently have. Longer term we have been over the last number of months we’ve spent a considerable amount of time talking to about four or five different contract manufacturers, with an RFQ to try and get some quotes on them on what it would look like to get product builds by them in different geographic markets with certain volume assumptions. I think by the end of June we should have the better visibility on the outcome of that process and whether or not there is some opportunity there. I would view that as upside our current base plan is to continue to improve and look at the cost structure we have and scale through volume.

[Matt Koranda:]

Okay great, that’s very helpful. And then just turning to the bus modules for a moment. A lot in the pipeline there a lot actually in the backlog here. Could you just help us understand in terms of cadence of deliveries for 2015 what to expect?

[Tony Guglielmin:]

Sure it’s Tony here. Yeah I would say, certainly there is no question the cadence will be very much weighted as far as the balance of the year towards the back-half of the year. So I wouldn’t be looking for much improvement in Q2 but certainly as we go into Q3 and Q4 we would expect to see some. So basically we’ve got the balance of that China orders will be delivered or expect to deliver this year. We’re making some progress particularly as Randy said in the U.S. with some trails. The only thing I’d comment on as we’ve talked about earlier is the Van Hool order we have we are expecting that to start to slip into 2016 as they’re looking to using the new HD7 module in the platform. So they just went through a little bit design work. So I would think about the back-half of this year, but also some of that will well into ‘16 as well.

[Randall MacEwen:]

And may I could just add a couple of comments there. I think the key here is that in the bus, the fuel cell bus market we are consistently winning the business. There is no doubt that we are hands down the leader in this market segment. And so an interesting thing in terms of the Van Hool opportunity and the announced 21 buses in Europe actually I had dinner with Van Hool last night and what they’re doing is they’re actually designing more of a purpose built bus that accommodates the fuel cell module. And so because of that internal development program they have that will take some time for them to validate that and working collaboratively with us to make sure that they optimize this fuel cell bus. They’re very bullish on the opportunities in Europe long-term. So in terms of timing I would just be cautious that there are - we’ve seen historically that it takes longer for these deployments to happen particularly in Europe. I think I’d also point out that the HD modules we’re not just seeing progress in bus, but we’re seeing progress on the tram side as well. And I think the demonstration project we launched in March in China is a very real validation that the technology offers value proposition there. And hopefully later this year we’ll have more this year in terms of the details of that collaboration with CSR Sifang and the city of Foshan where they’re looking at a fairly significant deployment in 2016.

[Matt Koranda:]

Okay, great. Very helpful. And then last one from me here guys. Inventory kicked up a bit sequentially I just wanted to hear if you could comment a bit on what’s going there, is that just building inventory to deliver on bus, is there a telecomm backup power component in there as well given the new order you announced, just help understand what’s happening there?

[Tony Guglielmin:]

Yeah. Very much the backup, it is the backup power telecomm order we’re sitting with a number of finished goods that we will expect to start delivering in Q2, so it’s principally in backup power.

[Matt Koranda:]

Okay, great. I’ll jump back in queue, guys. Thank you.

[Randall MacEwen:]

Thanks, Matt.

[Operator:]

The next question comes from Rob Brown from Lake Street Capital Markets. Please go ahead.

[Rob Brown:]

Good morning.

[Randall MacEwen:]

Good morning, Rob.

[Rob Brown:]

On the telecomm order in India, you have 100 units under order, but how many units in total will Reliance be putting out on their program and do you expect sort of continued groups of 100 thereafter?

[Randall MacEwen:]

Yeah. We expect the program to be in the range of 400 to 500 units in 2015 and 2016. The initial tranche is 100, obviously we need to do a very good job in that first 100 to secure the follow-on orders, but that’s what we’re intending to do.

[Rob Brown:]

Okay, great. And then as U.S. what sort of the latest timing in terms of thinking on the U.S. projects. Do you expect those to turn the order maybe in 2016 or is that still too hard to get visibility on?

[Randall MacEwen:]

Yeah, I think the way we characterize the U.S. opportunity for telecomm backup power and particularly the roof-top market where we have - we take a very compelling competitive advantage as 2015 would be very much a foundational year in that market. So we will have some deployments in 2015, but I don’t view them as scale deployments, they will position us for 2016 though in that market segment very strongly.

[Rob Brown:]

Okay, good. Could you kind of give us how many material handling units you sold in the quarter and maybe your sense on how that rolls out throughout the year?

[Randall MacEwen:]

Yeah. I think Rob I think the challenge here is we obviously have a customer that’s a publicly traded company and reports a few weeks after us. So I think going forward, we’re not going to provide the number of units that we ship in the material handling segments.

[Rob Brown:]

Okay, fair enough. But is that sort of a backend weighted in general your overall comments or…

[Randall MacEwen:]

Yeah, I mean if you look Plug Power’s revenue history, they’ve been very back end weighted the last few years and that’s where we see our shipments pattern for 2015 as well.

[Rob Brown:]

Okay, good. And last question on the VW contract the cash that came in the quarter could you remind us is there any more cash to come in or what sort of the booking of any remaining revenue over there?

[Randall MacEwen:]

Right. So the net cash that came in was $29 million on the balance sheet in Q1. We have an additional $9 million of net cash for the second tranche of the IP transfer project. So that second tranche we have deliver by February of 2016, there is a possibility we may do that this year.

[Rob Brown:]

Okay, great. Thank you.

[Operator:]

[Operator Instructions] The next question is from Carter Driscoll from MLV. Please go ahead.

[Carter Driscoll:]

Good morning, guys. So just a follow-up on the Indian win and congratulations on that. In terms of moving from the initial 100 units to subsequent tranches can you maybe highlight or put an order what the primary factors you believe would allow you to win the second or third partial orders of that order, is it delivery, is it performance? And then as a follow-up lower cost or lower price points as you get into the subsequent tranches maybe if so you could give us maybe a rough gauge about what they might encompass per tranche?

[Randall MacEwen:]

Yeah, Carter thanks for the question. Let me just clarify that, there are no specific additional conditions we need to go through, no technical or pricing or other discussions. We have very clear visibility on the larger scale orders at this point, it’s a matter of delivering the product on time with the right reliability performance characteristics. It’s also the function of the seasons there in India and timing for deployments based on the appropriate weather conditions.

[Carter Driscoll:]

Okay. So as long as you perform there is very little chance of being displaced, is that fair characterization?

[Randall MacEwen:]

Yeah, so it’s our business to lose.

[Carter Driscoll:]

Okay. And then my next question is of the IPO was transferred to VW I know you had mentioned you are able to retain some of those rights to sell it in non-automotive have you been able to engage or have any discussion with the use of that specific technology obviously other OEMs than VW?

[Randall MacEwen:]

Yeah, it’s an excellent question, we’ve had a lot of interest not just from OEMs in the auto space, but just generally because the technology as you point the intellectual property we have all non-automotive applications including bus and tram. And so we are certainly looking at licensing opportunities globally for valid technology including that portfolio as well.

[Carter Driscoll:]

Okay. And my last question a little difficult to answer, but of the different next generation product and modules working on this year, could you remind us again or give us I should say a frame work over what types of cost reductions you anticipate maybe so broadly or if you could highlight one or two products and then maybe the pass through you think you are going to be able to push to the customer, how much you would be able to save versus how much you are going to have to pass through to customer?

[Tony Guglielmin:]

Sure Carter, Tony here. Yeah, certainly all of the areas we are moving forward as Randy said a number of these, the cost reductions we are - we will see some modest amount towards the end of this year. So this is really a foundation year to get these products through development so the cost reduction impact will be seen more in 2016 and beyond but just to give you a couple of high level metrics, Randy mentioned our new air cool stack we are looking at something in neighborhood of about 25% cost reduction by 2017. We talked about the HD bus module, the current module that’s about a 35% reduced cost, again that is something as these modules start really rolling out later this year in ‘17 we will start to see that. And again of course EGME system this is the next generation of the methanol system could do something in the neighborhood by the time we completely rollout our new version could be anywhere in the 25% to 40% cost reduction over the next couple of years. So there are some fairly some standard ones, but I would be thinking more about ‘16 and ‘17 and we will certainly have more to say as we get into the year on the timing. To your question on pass through there is no question our objective is to improve gross margin on our products; you have seen some weaker gross margins in the last couple of quarters. So we are certainly going to passing some of that through to the customers in order to be competitive, but our objective is to increase our product gross margins at the same time and we think we have got the capability of doing both as we launch these new programs.

[Randall MacEwen:]

Just to add a couple of comments there, Carter. So we will have on October 1st our Investor and Analyst Day that’s a current plan date and we will be going through in some detail the technology and product roadmap including cost out opportunity as well as performance enhancement. What I would say as a preliminary comment is that from a product design perspective some of the things that we are looking at in 2015 there are near-term and low risk. So the cost out we are talking about aren’t volume dependent it’s very much I would call them low risk design enhancements that enable cost out and are dependent on volume. So obviously volume will help, but we need to address both in parallel.

[Carter Driscoll:]

Great and I look forward to that day. Thanks gentlemen, I will get back in the queue.

[Operator:]

Our next question comes from Jeff Osborne from Cowen & Company. Please go ahead.

[Jeff Osborne:]

Great, good morning. I understand you don’t want to give the material handing units, which is understandable but I was wondering if you can update us on what are the bus units were in the ElectraGen for the quarter if that’s something you would be willing to provide given you don’t have the revenue concentration.

[Tony Guglielmin:]

Yeah, I will say on bus, the bus units we have already talked we announced that we delivered three to the China customer, so between and a few in the U.S. we have about including - we have about four modules that we delivered in the bus side in the quarter and plus some part, we also of course ship some parts and some kits, so the total revenue reflects the modules plus some parts and kits. On backup power, suffice to say with the level of revenue the number of units were large that weren’t material and I think just leave it like that. We will probably have more to see as we go through the year as we start delivering on some large orders, but at the low level of revenue really nothing to comment on in terms of units.

[Jeff Osborne:]

Okay. Just want to make sure it wasn’t practice going forward that you wouldn’t be disclosing those two segments. On the materials handling side without giving the unit number away, was there any noticeable shift in the mix between air and liquid cooled stack in the quarter?

[Tony Guglielmin:]

No material change.

[Jeff Osborne:]

Okay, perfect. And then with the expected mix that you have this year and the line of sight into early next year at this juncture and I’m not sure if you can give it on this call or maybe it’s more a topic for the Analyst Day. But what’s your sense on the breakeven model for the company in light of the cost cuts that you talked about in the current OpEx trajectory?

[Randall MacEwen:]

Yeah, I think from the timing perspective we’re certainly looking at addressing these things in more detail on the Analyst Day.

[Jeff Osborne:]

Okay. And then Randy I was wondered if you could just update us on the Japan backup market for telecom in light of the challenges that you had a few months ago. Where do we stand in terms of kind a reinvigorating in that market?

[Randall MacEwen:]

Yeah actually I’m pleased with the progress we've made in terms of the strengthening the customer relationship. From a technology perspective the challenges that we had I think we’re certainly having hand, so no challenge on that front. So really it’s a matter of getting a little bit of space and time and distance between that event before we can start to see some additional orders flowing from that customers. But we do expect that later this year.

[Jeff Osborne:]

Good to hear. Last question to you, just a comment on the both the prior call as well as today we’re a bit big as it relates to the M&A scenario or tangential areas to tack on as one of your priorities for the year. I was just wondering how do you being a new CEO of Ballard kind of assess what is strategic area that would be able to leverage the skills that you have internally, I am just trying to get a sense of how far straight you’d be willing to go?

[Randall MacEwen:]

So we’ve spent quite a bit of time here at the executive team as well as with the Board recently looking at strategy including M&A as a complementary strategy to organic growth. And looking at filters for M&A transactions including strategic filters and financial performance filters and I feel like we’ve evolved through that process with a very tight criteria. I don’t know that we’re in a position to disclose that yet. We would like to close on a deal as part of the disclosure of where we’re headed. I don’t think it be in my opinion when you say how far away, we’ve identified the business in two platforms Power Products and Technology Solutions and we’re certainly looking as a priority for opportunities that supplement Power products and complement Power Products so that we can start to see some acceleration in scaling there and providing customers with more consultative and solution based approach. So I think the opportunities we’re looking at, clearly we can’t committed to something today because we don’t have any signed up but we’re very confident in the ability to do something this year that will be very complementary and also support financial performance going forward rather than be a drag.

[Jeff Osborne:]

Great to hear, thanks so much.

[Randall MacEwen:]

Thank you, Jeff.

[Operator:]

This concludes time allocated for questions on today’s call. I will now hand the call back over to Randy MacEwen for closing remarks.

[Randall MacEwen:]

Thank you for joining us today. We look forward to speaking with you again in July when we will discuss results for the second quarter of 2015.

[Operator:]

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.