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a04528a3d118248b630b35493c79a123 | Can you provide some details regarding the go-to-market strategy of the China Type B product with its safe market introduction in the summer of calendar year '22? Are you still on track with that deadline? | Thanks for the question. Yes. We continue to be on track with the market introduction starting in August at the Hospac and going through the fall. While we have seen COVID lockdowns in China, and we continue to do our testing prior to submission for regulatory, we are on track for our introduction to the market.
And we remain very optimistic about the ability to win market share Type B segment, which is growing, and of course, the largest part of the China market when we introduced that jointly developed product. | direct | [
"direct",
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"fully_evasive"
] | A |
9112280321fddf82ea2927e6c97d78ac | And then can you touch upon more with the supply chain, what have you been doing and able to do to resolve it? How long do you think that this issue will persist? And we are also in a tight labor market, are you being impacted in any way with this or the hospitals or outpatient centers being impacted in any way by this worker shortage. | So I'll take the second part of that question first. Just again, the COVID environment right now continues or remains very site by site or region to region variable in its kind of the current status. I think that the omicron variant has created some labor tightening and labor shortages in hospitals, but we have not seen any real significant headwind here as it relates to lack of access to institutions, our ability to get equipment installed on customer timing requirements. And so again, we're monitoring the situation closely.
But I'd say on balance, we're still feeling pretty good about, again, access to facilities and maintaining reasonably tight time schedule and on-time schedules relative to equipment installation. Your first question around supply chain and kind of current situation. I would say that it's not a stretch that every company in our space, and of course, a range of industries are dealing with the same macroeconomic set of current impact. Our sourcing and manufacturing teams are working hard at in making sure that areas that we're feeling pressure in, we have good line of sight to.
We're being proactive in terms of trying to manage supply gaps. And at this point, again, they help us at least in the quarter from a product revenue growth standpoint, we actually overachieved the build plan for the quarter and the revenue plan we had internally. For Q3 and Q4, I think we believe that intensity of part shortages will continue to be a factor. But again, we're looking to preserve production capacity.
And as I talked about, the teams are identifying and mitigating risks to try and stay ahead of the shortages. We're working at tightening the interaction from a supplier standpoint, looking for hard purchase order coverage on all critical parts, stretching those out to 12 months, where we can do it, supporting key suppliers by helping them to source raw components. And lastly, early identification of parts and critical components where it looks like we're going to be short and taking advantage of being able to escalate those early in terms of visibility to be able to try to get ahead of them. So I'd say, on balance, those are the primary levers we're operating to.
Again, we've got a heavy bias as it stands for the business overall to make sure we're taking care of installed base customers. So the bias prioritization really is toward fulfillment, making sure that service parts are available and being delivered and trying to manage the costs related to that as tightly as we can without impacting customers. | direct | [
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] | A |
31953f7279f7b35c5d3c416fcc085a88 | I wanted to ask a follow-up here on the supply chain. The macro has certainly been a concern for a while, as I recall last quarter, it sounded like the team is working very hard, but things have remained on track. Just curious what sort of change in the last couple of months. Do you have anything to do with a record revenue and a very strong order book and kind of working through some of your inventory. Does that lead to some of it? And are there things you can do outside of some of these supply chain costs to kind of offset some of the headwinds there? | Yes, Marie. So again, to your point, we had a strong quarter from a revenue standpoint. And I'd say shipments, not unlike many capital equipment companies, shipments aren't usually linear throughout the quarter, and we typically see more heavily weighted shipments of product going to revenue toward the latter part of the quarter. We saw an increase in intensity of shortages and supply chain shortages s we got deeper into the quarter in Q2.
It actually accelerated, I think, in December, especially at a level and at a rate that I'm not sure anybody could have been prepared for. With that said, we have line of sight right now. I talked a little bit about in my answer to the previous question, some of the things and the levers we're operating to with regards to providing more predictability for the production side of the house, so that they know what -- and have line of sight to being able to close gaps that are being escalated and visible sooner than later in the quarter. So I'd say we're doing -- for a company our size, we're doing a lot, and we're being pretty effective at it, and we're trying to get ahead of this.
And -- the -- again, I don't know that it's possible for anybody to predict what will happen with regards to when this release. We're assuming that we're going to continue to see strain and pressure on the supply chain side of this, probably through the end of this fiscal year, so Q3, Q4, and that right now, we're maintaining a line of sight to be able to fulfill and do everything we can to fulfill our latest revenue forecast requirements. So I mean that's really kind of the story at this point. | intermediate | [
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] | B |
7d38bd93302b0e850c2d1a96c0cf9825 | Nice to see it go upwards, but certainly, you beat expectations by great handling, I think, by more than $10 million or so about, $13 million or so versus consensus. It looks like you're ready more than halfway to that revenue for the fiscal year? Curious how you're thinking about cadence and perhaps if it's if there's any conservatism building for COVID or other headwinds. | You're right. The demand has been very strong in the first half. It probably was front loaded in terms of the momentum that we are seeing. I think we're being cautious driving through the uncertainty of the supply chain challenges here in the back half of the year.
But I can tell you, demand is very strong, and that hasn't been the issue. We also have a sizable backlog with customer orders and installation readiness and a desire to complete installation, which is why we raised the guidance on the high end. But it is a wider range just because of the uncertainty around supply. So assuming we're able to navigate like we have in the first two quarters at the higher end of that range. | direct | [
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"fully_evasive"
] | A |
e92488e12566fdefaefa84855f14f779 | First one is just on the new order growth pace in the first half of fiscal '22. It significantly outpaced the market rate and seemingly gained share. I just wanted to ask about the sustainability of share gain trajectory. And I guess specifically, clearly, the new technology launches like ClearRT and Synchrony and Radixact are still in very early innings in VOLO. Are you seeing a nice ASP lift that's helping on the new order growth results, one? And then two, are you seeing any benefit from any disruption in the Varian and Siemens merger. But from -- any details you can share just around the share gains you've enjoyed in the first half and the sustainability, and maybe any color on those two elements that I pointed out? | There's no question that the new product innovation is driving our win rates and driving our order momentum, and we are also seeing a price lift on those products that include the latest innovations like ClearRT, like Synchrony, like VOLO Ultra. And so we do expect that as we continue to innovate across both platforms, that we'll be able to see some price gain on the configurations. And that really just reinforces our strategy of increasing our spend in R&D and meaningful product innovation to help continue to differentiate Accuray technology from competition. In terms of the Siemens Varian, I think that we haven't seen a big change from previous earnings calls.
We do believe that that merger probably has a stronger benefit for the Siemens DI business versus really pulling any business over to Varian. However, I think their platform is based on conventional linear accelerator technology. And I think as the trends toward SBRT and the need for better imaging, better motion tracking and adaptive delivery like Synchrony, they're going to be challenged in terms of the runway for that platform. And we see that as an opportunity for Accurate technology.
We're positioned very nicely to gain share. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
ee44613cbdd6f3b274b12e3400859bbc | So if I look at your EBITDA guidance, it looks like it's -- the reduction is entirely due to the shortages? And I guess if I'm teasing it out, it looks like specifically to service gross margin, not necessarily the product gross margin. Am I thinking about that correctly? | Yes. Yes. It's -- the impacts from a cost input standpoint, Jason, we're very definitely more strongly felt on the service margin side. A combination of inflationary costs related to higher price either prices related to inventory, we're purchasing to support production, early buys, commitments to longer purchase order, hard purchase order requirements, but also higher logistics costs, higher freight for sure.
And especially in the area of service, the replaceable parts network and our service organization, we supply our existing installed base through a network of regional stocking locations. There are 37 of them around the world. So at any given point in time, we've got a lot of parts inventory in a lot of different locations around the world and making sure that we have what we need at the stocking levels that we need it, and where they need to be from a geographic orientation perspective. Created certainly incremental freight costs for us from an expediting standpoint in the quarter. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
3f12e6af370fdc71db33fbacd15946ad | OK. Got it. So I mean with those comments, it sounds like on the product side, at least, the margins have been a little more stable and more closely aligned with historic ranges. Is there a catch-up there? Or is that just logistic -- no, I was going to ask, is that probably going to be sustainable? Or is there a catch-up to be had there in terms of is there some risk there on those gross margins as well over time? | I think if you go back to the prepared remarks that Brandy walked through, one of the things that, from an impact standpoint that we're seeing some quarter-to-quarter variability with is the accounting treatment related to the China JV. And we are -- we aren't -- depending on when in the quarter, the devices shipped and when they're installed or sold through, if you will, to the end user at the time of shipment, we basically take the revenue and the costs and the deferred -- the margin is deferred until the China JV sells through to the end user. And so it isn't always a 100% guarantee that we'll have in the same quarter, those activities taking place. So there is going to be some quarter-to-quarter variability, Jason, with regards to product margin based on some of those impacts.
But I don't think that we're looking at and we're not expecting dramatic falloffs here or headwinds on the product margin side.
That is exactly right. | direct | [
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99e453fbfda5360aebbef180fa1df96a | And then my last question related to all this. In terms of, if I heard correctly, I think you did say that you did raise top line guidance, which is great. I mean, obviously, you had a very strong quarter in the second half doesn't look -- doesn't initially carry the entire upside through, did I hear you correctly when you said there is also potentially some supply constraints and just placing units for the rest of the year and i.e. potentially on revenue? | No. I mean the supply chain, the supply chain variable here is really the one key element to how high up is going to be, if you want to call it that for us. Again, we -- right now, we believe we've got line of sight from a production capacity standpoint in terms of the game plan to be able to get to our forecasted revenue. And so that's tied to the revised guidance.
So as we stand right now, I think, again, it's not without a lot of effort on a lot of people's parts from a product sourcing and production standpoint. But Again, we feel pretty good about where we sit right now on the revenue side. | direct | [
"direct",
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] | A |
1bdd7ebcd069432e795a6a6247d09561 | So a quick one for me. I guess, first, congrats on a really nice quarter. Strong beat on the top line. I'm just sort of wondering, I guess, number one, on the CMS RO bundle, I know it's a little bit early in implementation of that. But I'm wondering what you're seeing at this point are reimbursement sort of in line with what you're expecting? Or -- and do you expect any sort of ASP pressures just kind of looking ahead, I guess, more broadly across the industry? I guess that's my first question. I just have a follow-up to that. | Thanks for the question, Frank. Yeah. We were disappointed that it was further delayed in implementation and got wrapped into some infrastructure initiatives that in December. That being said, it probably provided some additional breathing room for providers, a little bit more time to prepare for the changes.
The reality is, though, what we are seeing is the key trends are still the same. There's an emphasis on value and outcomes over volume regardless of the timing of the CMS decision. There are other drivers in the marketplace. For example, the commercial private payers are really already there.
The biggest payers with two-thirds of covered life -- lives have already changed toward a reimbursement that favors the hypofractionation. Additionally, just the aged equipment of the installed base in the U.S. and the need to upgrade to the older technology to newer performance technology to be able to provide ultra hypofractionated treatments is still a growth catalyst. So we're nicely positioned to capitalize on these trends.
We're working very closely with ASTRO and AdvaMed to ensure that when the reimbursement rolls out that is optimized to support SBRT. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
1ff9be2397a7cafd0100677ddd375c05 | Great. And what -- just really quickly, just to follow up to that, I have another one. On ASPs, you sort of expect your competitors to start working down pricing? Or do you expect that to more or less stay the same based on that reimbursement change. | I think it's too early to tell at this time, Frank. We're certainly very sensitive to what competitive move may happen in the marketplace. We are just going to focus on differentiating our technology and the value it brings and price appropriately. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
905c6ce1c815e6bb2814fa5d9842212a | Great. Thank you. And just one last one. On tumor -- on essential tremor and epilepsy, you guys touched on that during analyst day, that's obviously a potentially expensive market. I'm just wondering if you put any bracket around the potential market size, entry, milestones, etc., at this point. | We have not, but we will be introducing -- formally introducing our partnership with Brainlab at the Radio Surgery Society meeting in March, so that will be the first time I think that we come to market together in that partnership. And again, that provides treatment planning that is more familiar to the neurosurgeon. But I think as we move forward, we'll be able to speak more about the market potential in those areas. | fully_evasive | [
"direct",
"intermediate",
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] | C |
4ac15d22572bc30492ab9d4d9f32ac83 | So one competitor has presented some early data at ASCO on its MDM2 inhibitor in LPS. So what do you think of the potential read-through from the presented data to milademetan's competitive positioning into the ongoing MANTRA study? | Of course, we're not going to comment on [inaudible]. However, we're aware that BI's entry into the MDM2 space validates our approach at Rain using MDM2 as a validated cancer target in select patient populations. | fully_evasive | [
"direct",
"intermediate",
"fully_evasive"
] | C |
650aada097edf79a4156a3b447270a67 | Can you elaborate your current thinking and consideration around the first-line strategy in LPS, either with mila monotherapy or maybe perhaps even in combination with other agents? | Yeah, I'm happy to take that one, Yige. So obviously, we want to wait on MANTRA results before starting to articulate subsequent plans. So I think that's first and foremost. But I think we will comment that, if successful -- if MANTRA does have a successful outcome, our expectation would be to expand the opportunity across multiple indications inclusive of frontline liposarcoma. But we don't want to get into the details of what that looks like at this moment in time. | intermediate | [
"direct",
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"fully_evasive"
] | B |
869753cecdd5579b4787fa35907ad0c7 | Could you just provide a little more detail on what you think drove this acceleration in enrollment? And then now with the rapid acceleration, do you think that the top-line data can now come maybe in the early part of first-half '23? | Sure. Happy to answer that. So I think this speaks to two things. First of all, I do want to take this opportunity to call out the excellence of our clinical team and our collaborative partners to -- with this achievement, this incredible enrollment into the study in the last six months. And I think that surpassed expectations both at our level and the physician level. What does it mean beyond that I think it's important. It underlines or underscores the tremendous enthusiasm among physicians and patients for a new treatment option, particularly a targeted treatment option for patients with dedifferentiated liposarcoma, which, as we know, is MDM2-amplified by definition. And so that's really reflected in the enormous enthusiasm to enroll into the study, and we would expect to see that play itself out in future trials and in future circumstances, hopefully, if the study is positive, in the commercial setting as well. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
e73556d838ca87e9c20f608e4ffd366d | On the MANTRA-2 basket trial, any idea what kind of duration of response data you'll have in hand when that reads out top line end of the year? And then the second question, any updates on the RAD52 program. | Yeah. So to answer the first part of the question regarding MANTRA-2, we've messaged in the past that we expect to have 10 patients with a meaningful operational follow-up. This would be at least months or approximately two scans for those patients, as well as the mean duration, and that expectation has not changed. Regarding your second question on the RAD52 program, we are continuing to progress that project. And we've signaled in the past, however, that we have mitigated spend on that to focus on milademetan. And based on that there's some progress in the RAD52 program. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
8de8115626a56bdf7907aab9987a6eb9 | I was wondering, as we are saying in multiple Phase 3 trials, the standard of care or the control arm is outperforming the historical data anything that possibly due to better tumor monitoring or better supportive care. So curious to get your thoughts on if you think the control arm could outperform the seven-year or eight-year-old historic data or whether if there is any concern for that? | Yeah. No, I think this is -- we're looking at data, obviously, from the registrational trial of trabectedin, which is the control arm in our trial. That is a modern clinical trial with robot subset analysis, and we see no indication to expect that the trabectedin will outperform in the MANTRA study compared to its registrational value. Yeah. And let me add, Soumit, that it's, of course, difficult to predict. But as a reminder, in terms of the clinical trial design for MANTRA, we actually did assume that the control arm would modestly be improved it's efficacy from the registrational study. So we did actually anticipate a potential improvement, but still anticipate an opportunity to succeed [inaudible]. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
e017471adf956b9fc682991efec09485 | Are you allowing crossover from a control arm in the trial -- MANTRA trial? | No, we're not. There's no crossover in MANTRA. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
ea8566789e51d57d621190458205b963 | I just wanted to ask about MANTRA-4 since it's one of the things we haven't discussed this evening in detail given the population size and the opportunity for the compound in that CDKN2A population. And as you're looking forward to that trial, I would think that the number of sites that could or would like to participate would be quite a few. Could you just provide a brief discussion, if I may, on are you thinking about a small number? Or would this -- would you get in with both feet and perhaps expand it, including international -- even if it is a Phase 1, I understand? | Yeah. Thanks for the question. Obviously, the MANTRA-4 study is very similar to the MANTRA-2 study, which is ongoing in the fact that this is a basket design, all certain solid tumors, genetically selected patients. So we hope to take the learnings from the MANTRA-2 trial into the MANTRA-4. You could expect probably some overlap in terms of the sites that we'd use. Obviously, as you mentioned, the population is far larger for the CDKN2A loss population, and therefore, we would expect enrollment on a per-site basis to be much, much faster given the select patient population of those. So hopefully, that answers your question. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
00421c3fa32ae68923e092284231241a | Hey, guys, thanks for taking my questions, and congrats on early impressive results. I want to start with the outlook, which was also really strong. Obviously, expecting some nice growth here in Q3 and Q4. Does this assume any meaningful pickup in the national carrier business? Or is this largely just continued momentum in the community broadband segment? | It's absolutely based upon community broadband and the strength that we've seen to date within community broadband and the MSO world. The Tier 1 markets, I would say, we've yet to establish true momentum in that area, so that is not part of the growth initiative we go with outlook. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
66325516b0350c812b42c104a8283f1b | OK. And then just looking at fiscal '21, some really nice growth expected. I mean when you sit here today, are you at all concerned that there has been some pull forward in demand? | Jaeson, I would say there might be a little bit of a pull forward, maybe a little bit of what I'd call panic buying to get them -- get people in place for their orders because there certainly have been supply chain initiatives and just general availability concerns. But in general, I wouldn't say this is -- I have no concern about it being -- ongoing or continually viable. This is absolutely a trend and ongoing momentum. It's not -- in our perception, it's not a spike. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
2b59b06a5cc71fe4ebb212221d278788 | OK. That's helpful. And then just the last one for me, and I'll jump back in the queue. Just want to clarify sort of your comments on the supply chain. Were you at all impacted by constraints in the quarter? | Not at this point. Our group, our procurement group has been doing an amazing job. I would call it spinning plates as we kind of walk through issues between bringing in product. I mean I think it's just to me think about the standpoint that we've got, new products coming in on boats, products coming in on air, then you've got both sitting and waiting to unload. Just trying to be able to put that all together has been a little bit of a challenge, but it did not impact our ability to provide product. If you're alluding to the backlog, that backlog came in. We're -- on our call last in January, we talked about that January had started strong, and it just continued to escalate from there an extremely strong March and providing the same level of general viability as we would on an ongoing basis. And as I indicated in the call, on the preliminary notes, we anticipate to be having majority of the backlog that we have in place shipping in Quarter 3. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
6db0427b11fe13b64cfb29c1044918b7 | Hi, good afternoon, and my congratulations as well on the results. And I wanted to focus on your commentary about at least the beginnings of some visibility extending beyond what's normally a pretty short-cycle business for you guys and some orders scheduled farther out into the future. I wonder if you could give us a little more color perhaps on how far that visibility might extend. And maybe relative to the backlog that you saw in the quarter, significant increase, how meaningful that longer-dated demand is, and whether that's also coming from community broadband. And I'll follow up from there. | Tim, what we see happening in this space is people from a legacy standpoint over the course of, I'd say, the last five years, many of our customers would look at their business and would identify for us, this is what we're anticipating this year. What we're seeing now is a commitment to build out their entire networks and having multiyear initiatives that they're committed to building out and passing the majority of their homes, working through projected take rates. Because, in the past, it was more of an orientation of kind of a build strategy that was success-based, whereas today, I think the success is ensured because broadband take rates are so high, and so there's a longer-term commitment to those builds. As it relates to our backlog, a little of that is staged deployment and that's for builds that were -- orders that we were getting in March. Some from some larger suppliers that we're looking at helping us stage our build and giving us orders that were not long, long term, but saying I want X in March, Y in April, D in June. So that they could get into the production schedule. And we're working to ensure that all of our customers can get the products that they need and not put ourselves in a position -- or our customers in a position where customers might see stockpiling equipment and coming at an expense of others. So we're really trying to work collaboratively with all of our customers so that we can really help ensure they get the products that they need. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
bb6aaa23d64649aa090baa230a24c6bb | OK, thanks. And you mentioned kind of RDOF being in the planning stages. Obviously, awards have been made. From your perspective, is there any dynamic or potential dynamic around kind of spending or planning occurring now kind of in -- perhaps in advance of actual receipt of funds? Or are a lot of these projects separate and distinct from what you might see in your kind of current or core community broadband customer base? | Yeah. I mean revenue to date has -- is very isolated. There's some pockets of RDOF-related business. But principally, this is -- you do not see RDOF funds in our current revenues or in our backlog. And what we see on the RDOF world is people now getting their plans together, putting out their engineering drawings, really going into markets where they haven't been involved in before. So we believe we're going to start to see that revenue in the very tail end of Quarter 3 and then on a more meaningful basis in Quarter 4. But basically, that's a calendar-year 2022 opportunity starting. And what the Feds have asked for and are hoping for is that we can see 40% of those funds that have been allocated to happen in the first three years. So I really think that shows significant opportunity for 2022 and '23 as well. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
3f598c544dc2732d398e1ab26b9bb4e7 | Great. Thanks for that. And over on the -- over on the Tier 1 side of the business, we have seen some dynamics with various of the Tier 1 carriers getting a pretty early and fast start to the year. Now I'm understanding that you're Tier 1 customer base doesn't always match up with some of the kind of near-term strength we've seen in at least high-level spending numbers from guys like AT&T and Verizon. But maybe you can give us a little more color on the dynamics around your Tier 1 business, and what might be driving that to the extent it's not some of the C-band stuff or fiber-to-the-home deployments that the larger carriers are doing. | Yeah. There's a lot of money being spent by the wireless carriers, especially as it relates to C-band, the C-band work. I mean, they spend a fortune on Spectrum, and that C-band work for deployment is principally going to be based at the tower. It's not going to be based at the small cell. So that's good for the incumbent provider that has those towers, and it's good for the consumer because it means that they get 5G service on their cellphones faster. It means that our opportunity for 5G, which is going to be small cell-based has been delayed into the year and potentially into next year. The challenge -- I think, that it's not -- that doesn't mean that, that revenue isn't going to be there. It means a true 5G performance that we want to see in regard to true latency and the high speed as well is still coming, but it has been the reason that we have seen a lack of the same kind of growth has not shown up in the Tier 1 base because of it. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
08630a5a2427b884bde5fb8c5d189581 | Just on the quarter, if you could give us an update on gross margin. Was China accretive to gross margin in the second quarter? And give us an idea of how far Model Y gross margin was versus Fremont Model 3? And then just more broadly on strategy, it seems like your approach to insourcing is varying by region. You're insourcing a lot more in Fremont, but you're relying a lot more on the supply chain in Shanghai. What do you expect your approach to be on insourcing when you eventually open up Berlin and what your Texas factory is going to be? | Yes. Just to start with the gross margin questions. We did see progress on gross margins in China, and that was despite pricing action that was taken. The factory is still not running at full capacity yet as it continues to ramp.
So we think there's a continued opportunity to optimize the cost structure there.Model Y, as we mentioned last quarter, was profitable in its first quarter of production. And despite the inefficiencies that we had due to the shutdown, we did see pretty substantial improvement in the Model Y margin. And as we said before, the Model Y cost structure and Model 3 cost structure will converge. They're not quite there.
Model Y is still slightly more expensive than Model 3, and it's not yet at full production. And with Model Y carrying a slightly higher price point, you can kind of back into the math there on the relative gross margins.
Yes. I mean, the Shanghai factory is a pretty big factory, and it's continuing to do more and more internally. But it's also -- the thing that's really helping is like there were previously a ton of parts that were made in other parts of the world that were being shipped to Shanghai from every part of the world, and just locally sourcing those components makes a massive difference to the cost of the vehicle. And I mean, the proportion of local sourcing has literally been rising at like 5% to 10% a month from 40 -- it was like 40% at the beginning this year, something like that.
It will be like 80% by the end of this year, maybe more.
There is also a lot -- very strong, very competent and very eager suppliers around the factory in China.
Yes. I will say it like this. The suppliers in China have been extremely competitive, possibly the most competitive in the world.
And so far, we're in negotiations with -- for Berlin, and we've awarded a lot of business, also a lot of suppliers in Germany or the rest of Europe that are eager to support the factory in Berlin, yes.
Yes. Well, obviously, Germany has a great automotive industry and supply chain. So actually, a ton of our suppliers are in Germany within like a few hundred kilometers of the factory. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
bf4fb3b76c13f7d29b035ff374a520d8 | You mentioned in the slide deck a couple of times that you were pleased with gross margin with PTI margin progress, and you expect it to achieve industry-leading operating margins over time. Maybe you could shed a little light on that? Industry-leading for luxury vendors is 8% to 10% PTI.
For Porsche, it's smaller, at 17%. For mass market vendors, it's 5% to 8%. What do we think about? And how much, ultimately, do you believe that EV credits will contribute to that margin? Because I know your margin has been 5% over the last 12 months, but it's actually less than 1%, excluding EV credit. So it's a 4-point contribution right now.
How do we think about ultimately what industry-leading margins are? And how much of that you think is coming from EV credits, regulatory credits? | Sure. I've mentioned this before in terms of regulatory credit. We manage the business -- said differently, we don't manage the business with the assumption that regulatory credits will contribute in a significant way to the future. I do expect regulatory credit revenue to double in 2020 relative to 2019, and it will continue for some period of time.
But eventually, the stream of regulatory credits will reduce.
Yes. I mean, it's worth telling that we're -- buyers of our car in the U.S. received zero federal tax credit, whereas many of our competitors are, like, they get a $7,500 pack tax credit. And yet our sales have continued to do well.
Yes.
Yes. And so what we see is a continued decline in the cost to produce manufacturing and distribute our cars. That cost curve, even for mature products, like the S and the X, continues to come down as we work on that. Model 3, which is our second most mature product, that continues to come down.
You then layer on top of that, as Elon was discussing earlier, the potential for software-based revenue, particularly Full Self-Driving, there's the revenue recognition portion of that that we have today, that that will expand as we release more features. And then you can layer on top of that, in the future, revenue from a ride-hailing network. Operating expenses continue to come down and become more efficient as a percentage of revenue. There's still incredible opportunity there that we were working on, particularly on how customers interact with the company from sales and service and what their flow is and how we get cars to them.
So we continue to see efficiencies there. So in the medium term here, what our modeling shows is in the low-teens operating margin level. And I think there continues to drive the opportunity to drive that up. So I hear your point on the 5% and the 1%.
We're on a bit of a journey here, and we're continuing to be partner. | intermediate | [
"direct",
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] | B |
de0acd554e035a3ba84bb07306626e66 | Elon, you've talked a lot about the mission of the company and really trying to drive EV adoption globally. So how do you think about that trade-off between driving toward industry-leading profitability yet trying to make your cars more affordable and broader? It feels like, historically, you've always picked the path of I'd rather drive more growth and more adoption because, ultimately, that's the mission of the company.
And we even saw it a little bit this quarter with price reductions. You could have probably kept price where it is, sold some units and had better profits, but that's been an ongoing choice that Tesla, as a company, has made. So how do you personally think about that trade-off between -- even if you were to get to industry-leading margins, wouldn't you be inclined to give more of that back to drive a greater adoption more quickly? | Well, I think we actually achieved both when you factor in autonomy. I think we can go way beyond industry margins and have the car be affordable to more and more people and potentially almost everyone when you're factoring in autonomy, but that was really a mega game changer, giga game changer, yes. But I mean, it is important for people to distinguish between two things. There's value for money that our product has, and then there's affordability.
And even if you have real-life money and have value for money, like infinite, if people don't have enough -- if people do not have enough money in their bank account to buy the car, they simply cannot. So then you used to have this cycle or something that nobody can buy, so it is important to make the car affordable. And we will not succeed in our mission if we do not make cars affordable. Like the thing that bugs me the most about where we are right now is that our cars are not affordable enough.
We need to fix that. So we're all making progress in that regard, just sort of steadily gaining progress. So yes, we need to not go bankrupt. Obviously, that's important because that will fail in our mission, but we're not trying to be super profitable either.
Obviously, profitability is like 1% or something, this 1% or 2%. It's not crazy. Last quarter, it was only like 0.1%. So we want to be profitable.
Like I think just we want to be like slightly profitable and maximize growth and make the cars as affordable as possible, and that's what we're trying to achieve. | direct | [
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add62e0c427d9711c3f56e6200fa142f | Could you please characterize the current near-term demand environment for your vehicles? These are obviously unusual times. I think back in Q1, you had indicated record backlog, I guess, at the beginning of this past quarter.
I haven't seen any specific comments about new orders or backlog in the release today. So can you give us some color? | Demand is not a problem, definitely not. We do have some production supply chain challenges we're trying to slow right now. For example, the Model Y, we're body casting, obviously, because it's new technology. It's been tricky to maintain rates and keep growing the rate for Model Y casting, which is -- it's a two-piece casting with a bunch -- and there's about half a dozen other parts that are added on that will transition to a one-piece casting.
In fact, I'm super excited about this. We're going to have a -- the world's biggest casting press is getting assembled right now, actually, in Fremont for the Model Y rear body casting. It's enormous and looks awesome. So it's -- look, the things that are troubling us right now are not demand, that they are just a bunch of firefighting on supply chain and production issues.
Sorry. Yes, don't worry about demand. That's not the issue. | direct | [
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4ab46652be9f7771a17095ad1bafc3e0 | So when you're saying achieving 500,000 deliveries has become more difficult, was it really just a function of the recent shutdowns and some of these supply dynamics? | Yes. It's not true at demand. It's really just a production issue. It's been pretty hard when you've got like a global supply chain, and it's kind of whatever the most effective part of supply chain is that sets your rate.
I mean, the number of rabbits do know how to pull out of a hat for supply chain is insane. Team has done an amazing job. So I think also some of our costs were related to having to use a lot of airplanes to get parts around because of part shortages, so we'll hopefully use fewer airplanes. That will improve our costs, but demand exceeds supply right now.
That's where we are now. | direct | [
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6e608cfc8dee4789b3d16faafcb63f09 | You mentioned a few times the constraint to growth is battery capacity still, and I was hoping you could clarify the scope of the Berlin plans for building right now.
Will there be the battery capacity consistence with the amount of assembly volume you expect to come out of the -- And if not, would you be able to source your battery requirements out of Europe? Or would you have to import batteries from outside Europe to ensure production in Berlin? | OK. We can't say too much about this, except that where there will be local cell production and -- that will serve the needs of the Berlin factory. Drew, is there anything -- Berlin factory. Drew, is there anything -- yes?
I mean, no. That's straightforward enough. I think just adding to what you said earlier about talent and people. Like the same goes in all areas of cell, supply chain, manufacturing materials, design, we are solving this problem, and we're treating it like any other problem that we have solved.
We will solve this problem, talented people to join us as we solve this problem.
Yes. And like -- so my biggest concern for getting our talented people is just probably Berlin because the labor mobility in Europe is not as low. I would recommend changing this. Like somebody wants to leave and join another company.
Sometimes they have to spend six months on garden leave. It's called garden, hanging out in the garden basically, and like this is not a good use of people's time. I mean, if they want us to hang out on the garden, that's fine, but they shouldn't have to.
I mean, those are now Europe. We know what we're talking about. | fully_evasive | [
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2bc82b53e3882113b5225770356a4a99 | Shankar, you mentioned some delays due to the activity that's happening in India. Do you have a sense of when you might be able to complete the EUA filing -- application? | Keay, as I stated, we're working very hard with our partners at Bharat Biotech, and they it's taking longer than anticipated. We are planning to still complete the EUA application in the coming weeks. | intermediate | [
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] | B |
1639f40fb5ba7d297ac7a31edcd14dff | I think the first one is just additional info on what's really needed from the folks in India to kind of finalize the EUA application, like what data sets are you missing or what information are you missing and you're waiting for? | Zegbeh, as you know, this is a very large clinical trial. And at the conclusion of the interim Phase II -- I mean the second interim results from the Phase II clinical trial, we had to put all the data together. It's an enormous amount of effort. And in the middle of the pandemic, obviously, this crisis in India has caused some delays. Also just as everybody has admitted, there is large amount of safety database you have to pull together along with efficacy. That's what they're working on. | intermediate | [
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28a855bc6743eaafe44cec9fd6953b97 | OK. So you do need some some safety and then some efficacy data that you're waiting on. And then the follow up question is regarding the master file. I know submitted it but I was just wondering when you anticipate getting some feedback from the FDA. And when you do get that feedback, are you going to communicate it publicly? | Again, it's the normal course of business and FDA communications depending on if it's a feedback concerning, there are some anticipatory questions or clarifications needed, that's the reason we're collaboratively working with the FDA so we can incorporate anything else, any information -- additional information in the EUA. That's the plan. And obviously, we may not be going into all the details. | intermediate | [
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85c6313f6964b979ee387b67e4b5408d | Understood. And then just the last one, really impressed with the continued execution on the ophthalmology pipeline. And today I was just wondering if you can provide just a little bit more granularity as to what needs to be completed because it's nice that you do have capital to kind of support some of those efforts but just any detail as to what's needed for the next steps for OCU400 and OCU200 [Inaudible] | Yes, so OCU400, as I stated, we have successfully completed manufacturing up to 200 liter scale, potentially commercial scale, and so the next step is for the preclinical toxicology studies are in progress. As soon as we complete those studies, we get the reports. We'll be ready to file the NDA, which is -- we are anticipating to file that later part of this year. | intermediate | [
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9047e3622dae975643161601705c5773 | My question has to do with the emergency use application and when you expect to hear an answer back from the FDA. If positive, what would that mean in terms of rollout and how would it fit with the current vaccination programs? | Yes. Again, it will be -- we're anticipating it's going to be a similar process to other companies. After we file the emergency use authorization application, typically the agency takes three to four weeks to make a decision and have a meeting with ACIP. And after that, we will be ready to roll out the vaccine just as all the companies have prepared. | direct | [
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d7b2092a04f0277c940a2839bb5b0320 | Just for my edification, if you could, please help us try to distinguish between the filing of the master file and what you'll need to do in terms of the emergency use application. What are the differences there in terms of, like, data, in terms of what else you need to be providing? | Yes, so we are following FDA guidance on EUA for COVID vaccines. So based on the guidance, master file is the step in to include all preclinical manufacturing and any other data prior to Phase III. So that gives an opportunity for FDA to review and provide additional comments prior to filing a EUA. And so that's the process we have completed and our file is quite extensive. And the second step is filing the emergency use application just as all the other companies have done. So those are the two. So that application will help primarily the second interim analysis up to that point, 120-some patients, what we have announced before. Safety, efficacy, including the new variant data, which is coming out, which will be part of that application. | direct | [
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9de6cc2a4c09dbe965075165752188f7 | Very good. So obviously, going into this, you -- FDA has already reviewed quite a bit of your data so do you still have a sit down with the FDA for a pre EUA discussion? And is that -- and that discussion will happen before you also have another discussion with the BARDA? Are these two separate discussions? And how should we think about the timing of all this in the course of getting COVAXIN into the hands of Barda? | Yeah, the FDA process, it's a similar process to other companies. we are in -- collaboratively working with them. We're continuously communicating with them. And so obviously, we will be notifying them in communications when we are failing the EUA. And that that conversation, that communication, those are different from BARDA. BARDA is independent. And obviously, working with the BARDA and the administration, so those discussions are ongoing. So they're like in parallel. Obviously, they're not linked. | intermediate | [
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23f56edf4813e6628369a8424e47fb1e | OK. Last question for me. With all the energies that are being spent on COVAXIN and trying to get COVAXIN across the finish line, how are you on your resources to not only get COVAXIN through but also to get for Phase I/IIs clinical trials get started on OCU400 early next year? | So we are -- actually, we also announced we are also increasing our internal resources. We got also good-sized excellent team of -- team of solid experts supporting COVAXIN development, including in our future clinical trial plans and everything else. In addition to that, internally we're beefing up the team. We recently announced we hired a senior vice president of manufacturing and supply chain. He has tremendous experience from vaccines and gene therapy expertise, and very highly regarded person in the industry. And so we're building a very strong manufacturing team under him. And similarly, we're going to beef up other functional areas in the organization as we continue to grow this year. And that's going to support, as you stated, starting with our OCU400 gene therapy program, which we are trying to file the IND in the better part of the year and initiate clinical trials, plus our other ophthalmology programs we're planning to initiate, as you stated, four Phase I/II clinical trials and comprising OCU400, OCU410 gene therapy, as well as OCU200, and we'll be supporting them. We are beefing up the resources every day. | direct | [
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a63f724bdb7b4dfd7ee1b76a98a5ee64 | The first one I have is in regards to the potential usage of COVAXIN as a booster. Have you considered what work or understanding we need to go into this to determine when somebody should receive this and the number of doses? And then how are you and your partners thinking about tracking the long term durability of COVAXIN as all of the companies just generally speaking or trying to determine how often these boosters will be needed? | OK. So I'll separate the two questions. The booster studies again, we are still preparing the protocols. Typically you have to wait for any boosters for the required. In the COVAXIN case, we're doing the booster after 28 days after the first dose. Similarly, if -- you want to space them out. For other vaccinees, at least a month or more, and that could be determined. Our clinical teams are headed by Dr. Bruce Forrest, an expert in this field, and over again to make those additions in the upcoming months before we file the protocol with the FDA. And the second part is are you going to monitor long-term durability? I think our partners have already published extensive data. I think in the Lancet and others and they're continuing to monitor the long-term durability of this vaccine. And typically what is important is I think the missing piece people have to understand it's not just the safety and efficacy. Efficacy is a at one time if you're measuring as a part of the Phase III clinical trial and it's really important to measure the responses -- similar responses and decent responses. And that's where you're going to get the durability on. | direct | [
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dd2bf1eff17c2cff09a32a5c83939a5c | And then just to go off of RK's question, how should we be thinking about the near-term spending projections, including your comments about expanding the headcount as well as planning a pediatric study, and evaluating some of these booster dose studies? | Yes. Thank you, Shankar. So, Kristen, good question. So we obviously raised some capital very recently both in the quarter as well as the end of last month with the $100 million RDO. So with that, we have a very strong balance sheet. We have been hiring many people over the last few months and we have bolstered our team quite a bit both on the vaccine side as well as on the ophthalmology side, so the activities are progressing well on that front. And with all of this capital that it's raised, it's more than sufficient for us to do kind of -- put in place any of the clinical plans for a pediatric study as well as continuing on with our original clients on the RPO program. So we feel very well -- this is -- at this point in time very confident that it is sufficient for all our program plans as well as our hiring plans. | direct | [
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94e14aae7d5ecd203efd40676f6148d4 | Thank you so much. And then my last question is whether you anticipate any issues related to the current travel ban to India as it relates to manufacturing and inspection or anything else regarding that partnership. | Yes, the travel ban again, Kristen, very closely monitoring. Just as any other country, these breakouts are going to come up across the globe and again we cannot anticipate how long it's going to last. And as far as any potential inspections and all, agencies are conducting these days it is still inspections. So they have some flexibility on that. | intermediate | [
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48896966dd455a4835556e03f5a1c3c8 | Hey, guys. I just wanted to do a quick follow up on something that was triggered by Kristen's question. I was just wondering for the doses that are going to be coming over the initial doses, particularly from Bharat, is that still the plan or you now considering having the initial doses come from the U.S. manufacture? | That is still the plan, Zegbeh, while we are in parallel working that the U.S. contract manufacturer. | direct | [
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879fb60d5396c655abce7bf8f6fc7585 | Good morning, all, and nice quarter against the pretty challenging backdrop on the macro front. Maybe if we could just start on the carbon capture side, you kind of -- you guys provided an update on the Illinois program. Maybe could you just talk to the potential you see, we've seen some private companies and whatnot announced projects around large scale carbon capture pipelines and sequestration facilities. Could you just talk to how you're viewing that market potential outside of the University of Illinois project and that's something that's of interest? | Yeah. I think, as you know, that there is some going something also is happening in North Dakota, Wyoming and some other area, but we are working with the university almost over a year. And we have the land and we know exactly where we will be drilling, and we are evaluating all those things. So we seems to be ahead of most of other people who are at the stage.
It takes approximately two -- from start to end, it takes about two to three years before you're really able to drill your -- before you drill your first well with this characterization well. Then you test it to make sure how much it can handle the CO2 in that area. And then you have to get the permit, which is V6 permit, and then you have to have before you start injecting. So it certainly is a long process. I can certainly can see some of those, as you mentioned, pipelines are building. But I think -- we think we have to have a storage first. And if we don't have a storage, that pipeline can bring the CO2 and where exactly we are going to store that. So we -- our thinking is, we should have a storage well and then we'll take the next step about the pipeline. So that's the direction we are going compared to other people who are really discussing the pipeline only.
And Zafar, we think people are going backwards on this. They're doing the pipeline, which -- that's nice to have a pipeline, but you could always struck CO2 in if you don't have a hole to put it in, which we think is the most important thing. It doesn't really mean anything. So we are working on the hole first. And assuming we can get that done, then we'll work on the pipeline and deal with that and deal with the delivery. But if you don't have a hole, in our opinion, you really -- if you don't have a place to store the product, you're really not even a ground -- you're not even in the ballgame in our opinion.
Because the permitting process alone from EPA while after you drill that and you really realize that this is the proper location and from characterization well then injection well then you -- first you get the permission from the state and then need to take a permission from EPA, U.S. EPA, that takes about six months to 12 -- six to 12 months. So I think that's why it is important to start the well first so that way by the time we have well ready, the pipeline can come and bring it that too. And as I've mentioned previously that we have some non-binding agreement with some of the ethanol facilities in Illinois who are willing to also supply the carbon to us. So we are looking at that way to make sure we have storage facility first before we go to the pipeline side. | direct | [
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d6d68d5dfa0322286e9a2d049a0f0cb7 | No, I think that makes a lot of sense. Stuart, maybe a question for you and Zafar as well. I talked about -- as you know, as is natural, you guys are always kind of looking at the potential ethanol plants that you could expand to and depending on the quality of the plant and that sort of thing. Could you just discuss how you see that market today versus maybe a year ago? And historically, we've seen some deals go across recently, some sales, some purchases on the ethanol facility side. But just curious, how you're viewing that market? | There are plants for sale right now. A lot of our competitors seem to be emphasizing other products. So there are definitely plants for sale. For us to buy one, we'd have to find something that fits our mode of operation, which is they have the best plants, good locations, good corn supply. I mean, those are fewer to find, but they potentially are out there. We'll see what happens. It's an interesting time because we're probably the company that most seriously takes -- that takes the ethanol industry most seriously. And we think the ethanol industry, especially if it can become close toward zero carbon industry has a huge future ahead of it. And that's our opinion other people in the industry seem to be backing away. So we're pretty excited about possibilities there, but you never know what will happen. | intermediate | [
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] | B |
26e7707a951a172c203597e93117fd38 | And maybe just one more, Zafar, maybe for you. You talked about the crop yields and how they're shaping up this year now that lot more corn planted this year than last year with the increase in demand. Can you just talk to the specific regions you all supply from and how you're seeing that shape out? I know it's early days and I'm not sure if you can get a sense of that yet, but just curious if that's something you can comment on? | Yeah. I think, as you know, the plant is the -- the corn last year was planted about 90 million acres, I think they are -- I just saw the report actually from future average that were sold that it's going to be -- probably going to be flat, close to 93.6 million corn acres will be planted, that's about 3.1% more than last year. As you know, the insurance value is close to I think $4.65 approximately somewhere. So I think we will see that certainly due to insurance value and also corn prices staying above $5 at this time and will be more acres will be planted this year even compared to last year. But certainly, we have also seen farmers has enough money and they are really keeping that in the storage and not bringing out there in selling. So we have seen the both things.
And if you remember, last year this time also was very difficult to find the corn and then suddenly after the COVID, the planting season started, the corn was available everywhere and we can buy very cheap. So I think there is suddenly we see farmers are selling not as we like to see, but we see that this year it will be more acreage will be planted than last year, and hopefully depending on weather will be a good crop. | intermediate | [
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] | B |
7bcba58ff8e907d1b9342f60638735ea | Hi, everyone. Good morning. Just I had a question on any -- if you guys had any sort of weather-related production delays this last quarter? And if so, for how long? | There were some delays in area, I think it was slow down as some of those plants are all around actually in South Dakota, North Dakota and somewhere in Iowa also, but that was for about maybe three to four days were slowdown. But it was not more than -- because that was the supply -- due to the supply of natural gas. But overall, it was not any delay. | direct | [
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c6ee526f5d678baf65ac8cba05aa46c6 | Okay, great. And as the economies reopen globally, where do you see the -- I guess, the biggest country? | I think as you can see recently, as I mentioned in prepared remarks, India will suddenly almost in January is 53.2 million gallon India jumped in. And we see always before Brazil and Canada, India was even last year in January was only 13.3 million gallons. So you can see from 33 million to 53 million. I think we see a lot of potential in India. And we have seen in China lately. China in January alone 22.7 million gallons they purchased. And we also see Canada, our neighbor. I think as you can see, they are pushing their carbon credit and even the Supreme Court just stayed the order that what Canadian government is doing to charge the carbon tax, and that will stay.
So I think that all of these things we're going to see that certainly Canada, China, India and Brazil, Brazil is slowdown because due to some of those tariffs. Hopefully Biden administration work with Brazil and remove those tariffs. I think we'll certainly see that growing in those area.
Even some of the Arab -- oil producing companies are buying it to make sure -- due to the environmental reason. | intermediate | [
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555c32ccce6854cd942ccdded62826fe | Just -- Congrats again on another double-digit adjusted EBITDA margin to end the year. Chris, just on the solid backlog entering 2021, can you discuss areas of strength and any update on some of those large opportunities you were chasing? And maybe how you see the business improving throughout 2021 if economies continue to reopen? | Yes. Thanks, Mike. We're actually seeing -- you've seen the traction with new sales, but even coming into 2021, I -- previously we announced the Ryder logistics win. I think it was like June of last year. We only installed six locations at Ryder in 2020, and there's 24 to go. So just on a scale, you can see it's almost a four x or more just with one customer alone. And we also -- Nucor Tubular, there's upside there in Kautex, which we announced last year on the industrial side. The industrial side was probably the hardest hit in 2020, and the fact that we're seeing that come back and come back fairly strong is phenomenally encouraging. On the very large prospects, we're still pushing those. We do have some progress going on. I'm not quite -- because we're going up for Q4 right now. I don't want to get over my skis. But again, that's kind of some of those wins that I mentioned: migrating old customers, like the United States Postal Service, Ford Motor Company. I think when you start seeing us deploy those locations this year, which we hope would start happening before the second half but we're definitely in the second half, that's when you'll start seeing those kind of break free on the industrial side. On the logistics side, those field trials we have are still going on and we expect the culmination here in Q1 and into Q2. | direct | [
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7c6b9ce4a8d6537a89b63eff4249020b | Great. That's helpful. And then just on the quarter, another strong net add of 20,000 to get to 590,000. Maybe you can just talk about where you're seeing some strength? And are you still having any customers turning things off just due to impacted industries or is that behind you now and you should see steady growth barring any virus getting worse? | Yes, barring any virus getting worse, we are seeing -- it stabilized really in Q3, thank goodness, and then we're just seeing that stabilization. We're not seeing any major customer issues at this time as far as people in that kind of financial straits that they need to turn off units in mass. And by the way, we're actually getting to the 20,000 net add. It's just across the board, which is actually good for us. I think if anyone who followed our story early on, it was always continued on one or two customers making or breaking the quarter. And now I think just the breadth of our company helps us just weather those kind of situations much better. So we're not really beholden to one particular customer in a quarter but again, it's really been across the board. | direct | [
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dd8149ecfffc94476841cdff58396f24 | Great. Last question for me, and I'll pass it on. Ned, product sales were a bit higher than expected. Most of those that had been turned on or converted to subs or that give you some visibility into sub growth already into the March quarter. And then at 35% gross margin, I know mix can fluctuate quarter to quarter based on hardware. But is that kind of a good gross margin for 2021 on hardware as you look at kind of your backlog for 2021? | Sure, Mike. Yes. The first part of your question is absolutely. Every piece of hardware that we sell comes with the long-term service contracts. So it's the high product revenue today gives us more visibility into growing service revenue. On the product margins, it's primarily mix. We have products that generate 20% gross margin. And then we have products that generate 45%. So it's really the mix. I think between 30% and 35% on the product side, we feel very comfortable going forward. | direct | [
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3fd913bebd22740ab031f79f63ac5504 | Just curious if you could comment on what you've seen from an order pattern standpoint here in January and February, if some of the momentum you saw late last year has continued here in the first two months of the quarter. | Yes. I mean, again, we're not done and typically, a lot of our sales, like a lot of companies, they come in at the last month of the quarter. But again, we haven't seen it slow down. A matter of fact, if anything, we've seen business activity picking up and -- which is good, especially in our indirect channels because that -- they have more touch points in the overall global economy, especially like in the U.S. economy, which is the biggest markets that we're in. So again, the activity level has been high. I myself attend almost every sales pipeline call. And it's probably the strongest calls I've been in probably in the last two years, even pre-COVID. | direct | [
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ac79a90409f14214d08bd0a70f84d764 | OK. That's helpful. And then could you just give us an update on where you're at with the other rental car company? | Conversations continue. And matter of fact, there is a third-party that's just recently started an RFP in that area. So another rental car company that's also major. So again, we're participating in that RFP as well. So conversations continue there. Again, I think it's going to be slow going with that major rental car company, but I -- the interest level is still there, and we just keep them updated on what we're doing. And it's just really up to them when they want to -- and when they can do a program, right, because they need to do what we call a large-scale field trial, and we have a proposal in front of them right now to do that. | direct | [
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8095632c13ed81b12ec15eaa974d888f | OK. And the last one for me, and I'll jump back into queue. Ned, how should we think about opex ramping here in 2021? | We are going to slightly start investing a little bit more in sales and marketing. As Chris mentioned, we're beginning to see a significant increase in the activity and people doing business. So we are going to start investing a bit but again, very conscious. Our goal is to have profitable growth. | intermediate | [
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13dfd85905ab24a25f69b6287182dc80 | Hey. Good morning. Thanks for taking my questions. Hey, just to follow up on the gross margin front, Ned, I know that there is volatility quarter-to-quarter depending on mix but we've seen a lot of component issues throughout the industry and the supply chains with other vendors. Are you seeing any issues on that front? How is that impacting not only your gross margins, but your ability to ship in service or are you seeing any pushouts on that front? | I'll just talk a little bit about the gross margin, and then Chris can talk a little about the supply chain. When you look at our service gross margins, they're very consistent at 65% and growing. In Q4, the product gross margins were not impacted at all by the supply chain issues. It was just primarily mix. And as I mentioned before, we feel comfortable looking at it going forward. The product gross margins being anywhere from 30% to 35%. As we look forward, the supply chain is an issue not only for us, but the whole industry. So Chris, maybe you want to take that one? Yes. There's -- to be very specific, there's a couple of components, actually module shortages that have been going on that have not necessarily impacted us as of yet, and we're in the middle of, like, making sure they don't. So by pulling in orders, you'll probably see some of our inventory go up just to make sure that we have ample supply for -- and for also for surge, getting back to the other question about large field trials that come to culmination. For modules and supercaps, the long lead times. So that's what we're trying to do right now. It's just remediate any risk and make sure that we can take advantage of upside by pulling in subcomponents and modules early. We don't have to do the build-out of the full product that we can pull in the parts so that we have ample supply. But it is concerning, and some of the long lead times are getting into like six months, right? So you have to plan ahead. | direct | [
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8695d8eff8bf9c599aeb3aaae7ac66f3 | Gotcha. And just to follow up on some earlier comments for clarification with the United States Postal Service. It sounds like now that is moving ahead. It's just a timing issue. And to follow up on your comment on Budget. Is Budget now just specifically through Pointer in Israel or is that expanding out to Budget globally? | Yes, Avis Budget Group -- I mean, by the way, Budget is part of Avis. So in the U.S., some of the 120,000 units they took or could be in the Budget portfolio. This is a licensee of Avis Budget Group. So again, every -- our contract with Avis actually allows us to sell to the licensees, which there's quite a few, like in most of the international countries. So we've had been approached by other countries as well like Mexico, etc. And so whether or not they go with our Avis product directly or they go with a different product that we get -- got from the Pointer acquisition, we're approaching them with like our portfolio of products, and that was a win using one of the Pointer products but it's still a great win for a licensee. Yes. I think you're -- I don't want to get too far ahead yet, but there's great conversations going on there and great planning going on. So once you start seeing -- we'll basically put out an announcement when we can -- when we start deploying at facilities, and we hope that will begin a couple of months. | direct | [
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7062952bcb28df88c624b4df7fcf7567 | Great. And lastly, if I could, just given the mix of business and where you're shifting, you're moving to more value, I'm kind of wondering how you're thinking about recurring revenue from an ARPU standpoint as you start to win some of these higher-value opportunities, including weight on axle and other weight sensor-driven initiatives. And also as you're kind of moving into some different directions, cold chain keeps coming up a lot. I'm wondering if the competitive list of vendors or the short list you're fighting against is changing at all. Thanks. | OK. So when it gets back to like weight on axle and somewhat like -- again, I mentioned our freight camera as well. Those are very high-value type of products that we offer, our freight camera. People don't know we actually do machine learning on imaging. We can tell how trailers are loaded, if there's been a shift in transit. We can actually help you tell you how to unload a trailer now for the first time versus just loaded and empty. That's tied to weight on axle. And you can tell we have more visibility, which can help our customers increase their velocity, and that's actually the whole issue with the industry in general, is there are certain choke points that we're trying to address specifically, like at the point of -- the port of Los Angeles and the chassis container issue out there or it's the getting trucks in and out of yards faster by really knowing where trailers are in the proper location or chassis or containers. So with that, our price point is more of a solution sale now. So what we do is we go into sell a solution to solve a problem, and that does typically include a hardware sale just because there's a hardware component to it in edge computing, but it also includes our analytics and our software. So getting back to the ARPU, it kind of depends on the vertical you're in and the actual solution. But to -- yes, the ARPU is typically going to be higher than our standard would be for -- like a chassis tracking product right now is typically $4 to $5 a month. And then this could be $5 or $6 added on for the extra weight data. And the same with our freight camera, you get an extra dollar. At the same time, by the way, as we move to 5G, we get the added benefit of the lower data rates, and so we can actually send more data, more sensor data through the pipeline. And lastly, on the cold chain question, that's a great question. We are now competing on projects with systems integrators. So by the way, we're now also partnering with the systems integrators. I mentioned Tata Consulting Services. They're the largest in the world, I believe, today. If not the largest, the second. So for us, to actually partner up with Tata is just a phenomenal opportunity for the company. So we can either do it ourselves, which we've done this like with the American Intermodal Management, which we did with Avis, like we did with the United States Postal Service years ago or we can partner up with a stronger partner and go after IoT wins that way. But so again, I think our capability is to be nimble. And I think being an innovatively nimble technology provider in the IoT space is our differentiator. So we can naturally go in, listen to what the problem is, fix the problem. And for that, get remunerated for it. | direct | [
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f0c8e08a0612645840510f4bf4448ddb | OK. And then, Chris, what -- could you maybe give us an idea directionally? I mean relative to the end of last year, what has been the growth in your backlog overall? | I mentioned earlier, I think it's been more broader across the board. Like in Israel with our -- right now, I mean two years ago, there was not any IoT programs going on in Israel -- in our Israel operation. It was all vehicle sales through OEMs and doing SVR. Now 10% of the revenue out of Israel is just all IoT projects. So I mean that's normal two years. So we actually see that trend continuing, and it's a focused initiative. And at the same time, in our logistics segment, which we invested heavily in the Panhandle Group, the 6,000 unit container fleet at the McGuire. And you'll -- we're seeing very good traction uptake. And by the way, we don't even announce like when current customers refresh in that necessarily. But again, that's -- you're seeing a nice, steady progression of sales on the logistics side. And the industrial side has always been the lumpiest part of the business because their capex is all about -- it's a cost center, right? The warehouse and the shipping facility is usually a cost center. So when the economy goes down, you're not going to add cost to a cost center, typically. That's going to be the first thing hit, and so that's what hit us last year. But we're seeing that nice again, because of that business activity picking up, more things being built. So our manufacturing segment in the industrial side is starting to recover, like I mentioned, Toyota manufacturing. And so everything was put on hold at Toyota all -- right at the end. So now we're starting to see that come back to life, which is awesome. | intermediate | [
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94f8c06dfbe6e801575b282e2d929310 | OK. Great. And then lastly, Ned, can you provide us with the components of non-GAAP net income for all of the quarters for 2019 and 2020 for modeling purposes? | Sure, I can. Obviously, it's in the press release, there's a table, Gary, that has the GAAP to non GAAP. So I don't want to read it over the conference. | fully_evasive | [
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2649374d4c6330288876e1336c9a2746 | Hi. Thanks very much for your time and sharing. It's very clear. So we've got two questions. First is on the plans and priorities in the next 12 months. For example, on professional and STEAM. And more details on how the company has reorganized so far accordingly, for example, how many percentage of the organization can be tied to the future plans? | So we believe under the current policy guidelines, we are the first online education company to formally adopt the online teaching services for three- to six-year-old children. And we are the first education company to fully stop all the traffic acquisition spending on the free channels. And I believe we might also be the first one among the top players to have a comprehensive and very rapid reorganization through further classes on our courses given.
So in the next couple of months, we will focus on two assets. First of all, we will focus on our organization, focus on talent and focus to delivering the best product. In the past seven years, I think the previous wealth we have accumulated across the organization, our brand and the recognition we have realized that is time. So we will continuously to let our organization position to grow in a healthy and more powerful way.
We will continuously train our talent, so that our people can have a better growth. And then we will continuously to improve and optimize our products. We will develop the product that our customers really like, so that we can use our products to represent our organization service plans.
So according to the current policy, the double reduction policy mainly focused child free education and after school tutoring. I believe, in spite of the uncertainty brought by these certain policy monitoring, we will focus on three business lines. First, professional education. As you know, we have started this assessment since 2016, and we have accumulated a lot of experiences.
We have heavily also made some trial and errors. And I believe as we adjust our operating model, we will make some breakthroughs definitely in STEAM courses. As I spoke earlier, we have tried programs, and we have seen a lot of great data. So going forward, we will further explore the STEAM courses.
Lastly, we will try the vocational education and also digital products. We are having some exploration and according to our long-term development plan and the position of the company, I believe, we will do something great. | intermediate | [
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dd1f491a2e45c60af8cce9783951367c | Thank you. Got it. The second question is regarding not-for-profit organization. So the MOE has published a document specifying the measures of online education reregistration. So would you mind sharing the company's registration progress so far? And if registered as not-for-profit organization, how will that impact shareholders, for example, the onshore, offshore assets? | Thanks, Stephen. On September 16, the MOE and other six government ministries jointly announced a guidance stating the online education institutions needs to change from the registration-based regime to an approval-based regime. And for compulsory education service provider, like all the service providers need to be approved as not-for-profit institutions by the end of this year. So this is like a high-level instruction.
And according to the announcement, the proactiveness of being approved is that the organization has to be registered with the government in the past, which Gaotu has already done in 2020. We were already on the list issued by the Beijing Education Bureau. So other requirements to be approved also include having qualified offline training centers, having secured data and the privacies and so on. So we will strictly follow the notice to ensure full compliance and maintain frequent communications with the regulators.
But besides the announcement, we are talking to the regulators on a weekly basis, just try to get a more detailed instructions about how it should do for the following months. So it's still in ongoing status. We will update you once we have a clear and specific instructions. | intermediate | [
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fc20b91a363000915bd129a73d65ee95 | Hey. Hi, management. May I ask a question on the staff optimization, given the big change of our focus from the subject-based tutoring to the other area? How big would the staff optimization? And when would you think it would last? And what would be the cash impact to the -- over RMB 5.5 billion of cash we have on hand? | Thanks, Mark. So we reacted in the shortest time right after the double reduction policy was released. So the restructuring was already done back in July and August. We closed certain operating centers outside of Beijing, and we also paid for the severance costs for some of the employee layoffs.
So it's a tough decision to make. But making that decision quickly also lets us a precious time and room to think about our future and make the right decisions. So we expect our company size and employees' scale to be stable in the short term to support us to explore our new businesses. And also from the cash perspective, like I just mentioned, we have around 5.5 billion of cash and cash equivalents and short-term and long-term investments on hand.
Even like we paid for the cancellation penalties for leasing agreement or the severance cost for our employees, that still left us sufficient cash to continue to develop and explore new business and support our business in the future. So we are in sit -- so I think the key for us to think about is like how to provide a high level -- high quality of learning products that meet the demand for vocational education, for professional education for STEAM courses. And like Larry just mentioned, we are also developing our digitalization products to provide more efficient learning methodology for our customers. So we will try our best.
Larry just mentioned, this is our -- the third time for us to kind of like explore for the new business. We will try our best to assure you that the team still holds the faith in the future of the education industry and also in the company. Thanks. | intermediate | [
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7fb4cd9d2c6cc01e86449e20a56834e2 | Thanks. May I know what's the number of TA we have at this moment? | After all the restructuring for our employees, we still maintain sufficient tutors to support the learning service for our first semester students. So the number fits of our current company size. And we will adjust the employee scale and led the skill to fit the future development of our company. | intermediate | [
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ea342629c58ef52c4e786639c76a1f4b | So, we've been seen some headlines around a little bit slowing growth in the Indian economy. I know the government just passed a major stimulus package. So, I just wanted to get your view on your business. Are you seeing any impact from the slowdown on a macro level in India? How is the demand picture looks like for Sify? | Yes. So, Greg, this is a very interesting question. In fact, yes, there is a general feeling of a slowdown in the market. However, enterprises -- and that's what I mentioned in my statement previously -- that enterprises are looking for cloud-based models, which are -- and people like module[Phonetic]. And with our construct of the business, in fact, we are taking away contracts from the so-called established players like IBM or DXC's or Wipro or HCL. I know, in fact quite a few contracts we have moved away from them, annuity contracts, long-term three to five years contract.
The slowdown in a way is helping us. I mean, I didn't exactly want to be sound negative about the slowdown. But I think there's a big opportunity for companies like Sify in the slowdown, where we will be able to deliver on our integrated solutions at a lesser cost than the traditional IT services provider. So, we look this as an opportunity. | direct | [
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13121e4ec2ce8d66aeb868a1ae0e8b43 | I know you've talked in the past about having a vertical focus and maybe you've been experimenting with some new billing models, when you pay go kind of[Phonetic] -- IT service billing models. Can you just talk about those initiatives, how maybe that differentiate you in the market? And are you seeing that focus drive increased demand? | Yes. So, in fact, there are some engagements -- very active engagements, which are going on in the market in that particular model. And we are seeing very, very interesting trends like, for example in India, we have seen adoption of Cloud and Cloud-flavored models in the insurance segment. But the banking segment has been -- they have been shy of moving to Cloud. But we are seeing, started enrollments, we're closing to the banking segment, the banks are actively talking about moving to cloud.
And now, there is a big opportunity for companies like us, who are [Indecipherable] in data centers as well as on cloud, and the relevant partnerships with the hypyerscale provider. So, the amount of the money as those banks or the insurance company are spending earlier in buying infrastructure. At the moment, it is moving to consumption-based models. We are the front-runner in those kind of projects. And these are -- and interestingly, these are all multi-year annuity projects. | direct | [
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b159df7ce01c12ffbabd7abdc368df9f | Now looking at the -- your data center business, can you just give us an update on the number of data centers, you currently operate? What the plans are in terms of bringing on additional capacity this year? And how much of that capacity is already sold? | We have about 10 facilities across the country, predominantly in Mumbai, most of it is in Mumbai. With the overall IT power capacity of 60 megawatt, which is substantially sold, we have limited inventory in couple of facilities. We are continuing to expand on our data center footprint, which is happening presently in two of the existing facilities, where we are adding additional modules. And we are also in the process of evaluating the timing of commencement of greenfield data center projects on the lands, which we own. I don't want to sound forward-looking at this point of time, but we are actively evaluating those in terms of timing of when we would like to commence that. | intermediate | [
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009bef9cb4280baa9065f43c23892e3d | When you say commence, like break ground on building them or they're already built and going live -- breaking ground? | You're right. | fully_evasive | [
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f8bc0e3d5095ccad3e8c0e54f0fd9c54 | So, when we look at the second half, are you bringing on new -- or do you have already built DCs that are coming online in the second half, I just wanted to kind of understand it, if we're adding capacity here in the second half? | With again, an element of caution, regarding sounding forward-looking, in respect of two of our existing data center, we are creating additional capacity, which is additional modules in the existing facilities. And in one of the town, one of the cities, a data center build, which is in progress will go live in this quarter. | direct | [
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5eafba0558228a7beb93a994f8abede8 | And how much of the capacity in that new data center that's going to go live is already sold? | Okay. The new IT power capacity, which will get added over the next six months, should be about five meg. And in terms of customer occupancy, it will happen in phases. They would [Indecipherable]. | intermediate | [
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1c4a01d4db124b10e572db73ed939a61 | And with the investments you're making on your data centers and your network, what do you expect capex to be for the full-year? | The capex for the full year based on our current plans should be close to about INR350 crores, INR3,500 million[Phonetic], which works to close to about INR50 million to INR60 million[Phonetic] at the commit. | direct | [
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6f1121e02ebad3570d8d79d8f7178c98 | Now looking at the -- your Application Integration Services and your Technology Integration Services, those have been pretty volatile. I know you lost a large government customer in the application business, but how should we think about those two businesses in terms of growth? Are those still growth drivers, are they going to become less meaningful going forward, how should we think about those two? | So, Greg, -- so let me first cover the Technology Integration Services business. As you know, this is more of a project-based business. So, I mean -- so there would be revenue reflection either on the upward trend or downward trend or maybe neutral also, based on the number of projects which are getting implemented during the quarter and which we were able to recognize the revenue. So, this is with respect to TI -- the Technology Integration Services business. But the good news is that with our Integrated Data Center Services, Network Services as well as Managed Services, we are seeing a pretty good growth of this business, with respect to our business line. So, this is about the Technology Integration Services business.
The application business obviously, as you are aware, this online test was a big business for us. We lost that contract. But at the same time --- our other application services business portfolio, which are more cloud-centric, which are digital services-centric, we have incubated lot of business lines or a lot of products, we have introduced, which are expected to drive the growth going forward. And we are also -- I mean getting newer contracts may not be as big as that specific customer, but we expect our application business to grow in future. | direct | [
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] | A |
26477a35bf87b7654e361d7669e8206d | Has there been any movement on the data privacy bill, in India, any progress there? | So, the data privacy is on. In fact, if you recollect some of my earlier statements during this conversation, almost all the cloud providers, global cloud providers are setting up their infrastructure in India right from Amazon, Microsoft, and the latest one being Oracle and Google. So, on one hand, the government has given a mandate, the data has to -- although there are conversations which happened on this specific subject, but the cloud providers are not waiting for that. They are setting up their cloud infrastructure in India. So, I think the data -- localization of data, data privacy, these are issues which will add the growth of data center and the cloud business in India. I mean, cloud business, which service from India.
The data privacy bill is yet to be enacted as a law. However, government has reiterated its commitment to bring it out as the legislation soon. So, the draft bill was issued last year. In between, we had the election, so that bill could not be taken up. And government is continuing discussions with all the parties concerned to incorporate their suggestion and bring about that particular bill as a lawsuit. | direct | [
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] | A |
ea9ee4299b88516cfff75a226ade0cc4 | And when you talk about all the large global cloud players setting up their infrastructure in India, should we view that not as them coming in and competing with you, but then coming in and utilizing your services more partnering with you? | Yes. In fact, they are more of our partners than competition. In fact, we have data centers, which are at a very low latency with those customers, with those hyperscale providers who are setting up their infrastructure in India. So, it helps us to service our clients in terms of their hybridcloud or multi-cloud adoption. In fact, in the coming days, you would see growth being triggered around our partnership with those hyperscale providers. | direct | [
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] | A |
2d85d9bc86e8cd6698c8174a91bba195 | And then lastly, what was the total debt at the end of the quarter? | Total-term debt. Total-term debt was about $100 million, approximate. | direct | [
"direct",
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] | A |
bf3da374109030f6fa077b12c85efd45 | And the tax rate going forward, what's a good tax rate to model the business at? | So, the new tax rates, which the government has announced, comes with a few riders in terms of availing some of the past equivalent of AMT, which we have in US. We have in India, what is called the minimum alternate tax credits, which we are having. So, we are evaluating as to the timing of when we should start using the benefit of a lower tax rate. So, for the time being, we are in the erstwhile tax rate, claiming the benefit of the past AMT equivalent, MAT tax credits, which we are eligible. | intermediate | [
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] | B |
5966db297280ef2a060a1f0f095b884c | So, I'm sorry, I have missed it. But what like -- what is your -- the effective tax rate now and maybe I guess what could it go to, once the new tax rates are implemented? | Effective tax rate now is about 32% to 33%. And once the new tax credit gets adopted, which probably could be next year or the following year, it depends on how the MAT credits get avid. At that time, the rates would be 25%. | direct | [
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6dab6fa9fbf21a4a7a1ec8a17d7844b6 | If I look at your SG&A and what is the rate that it's been running at so far this fiscal year, it's at a lower rate than last year. Can you explain what's going on there and what you think[Phonetic] that's kind of the new run rate? | Yes. The SG&A we had some one-time expenses in the previous period. What you see in the current fiscal and you can compare it with what's happened in the previous quarter as well, represents the run rate at the moment. | intermediate | [
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c03184548538ecbaca4872bc368037c3 | And then, as you were talking about Tech Integration and App Integration segments, I wasn't sure that I understood the bottom line on the Tech Integration, where you mentioned it's project-based and that there is some opportunities to grow. But what is the conclusion there? Do we think that this is a segment that overall we should expect over the 12-month longer-term periods to have growth to it or not? | Yes. Overall, you can't expect because we are -- in fact we have won some of very large deals as we speak. So, those projects are expected to be kind of executed and revenue realization happening over the next six months. | direct | [
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3f0718516c4ce5e4dfe0f120805fa99a | Basically on your telecom-centric segment, I just wanted to, what would you point to to be kind of the growth drivers there that we should be thinking about? | Fine. So, let me respond to this. Telecom services, if I break the portfolio of our overall telecom services, we have our traditional MPLS and Internet Services, and then we have the new services like the Network Managed Services, the Network Transformation Services, the hyperconnect, telecom services connecting various data centers as well as the hyperscale cloud. Plus on top of that, we do quite a few very large, chunky network integration projects, where the customers use our telecom infrastructure plus third-party infrastructure, but we manage the entire project. So, while the MPLS -- MPLS is a run rate business, but we are seeing lot of traction around Sify's overall Integration Services and Managed Services business, including hyperscale connectivity. So, we will continue to grow that business. In spite of the fact that on the traditional MPLS, there are some mobile operators, who are expected to eat away some pie of that from a mobile telecom perspective, from module-related[Phonetic] service provider perspective.
And we are going on the business -- So, overall we are continuously growing on that. | direct | [
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] | A |
b7749e6cc992635dd708e75473286b69 | And then my last question -- just what I have understood what I think I heard you say on the Data Center business that you had a combined 60 megawatts today. You're going to be adding five megawatts in your fiscal second half on top of that. Is that the way to think of it? | You're right, Allen. | direct | [
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] | A |
5d92d9b3babdab06311ed1bb9e4aa72f | Let's start if we could with OBX and your comments infer that you're starting to see some green shoots once again in that segment. So the question is, when do you expect the OBX rentals to return to the prior peak quarterly run rate levels? | That's a very good question, Bill and thanks for calling in. I don't know that we could actually go so far as to say they'll reach prior levels that they were. I mean that remains to be seen. I certainly think the opportunity is there for that to occur. But as far as the green shoots, we are already seeing that. We have contracts that are under way now -- new contracts and ones that are about to begin. And we're certainly answering quotes for those that some of them even extending into the next fiscal year. So I mean, it's a good question, but I don't really have an answer for you. I think this is going to be contingent on how the recovery takes place and how these projects get scheduled. There's certainly been some disruption actually within the actual service providers, as it were so some of that has to get sorted out as well. | intermediate | [
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] | B |
0d3fd370e6c6dcd2fac1e50ad5768b89 | Is it your sense that from this point forward that at least for the foreseeable future you will have sequential increases in revenue from the OBX rentals? | I think that we believe the demand is going to increase so to what extent that would lead to in your mind sequential increases in revenue, then there is certainly likelihood, that's the way it will manifest. | intermediate | [
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"fully_evasive"
] | B |
e7d8bc8cb1c30acff39ebec42ae47595 | So relative to the -- I'm going to call it a no-bid tender, the tender that was out that you chose not to bid on. Would you please give us an update on that? And is it still the PRM system that is number one, I guess in the lead in terms of potential opportunities? | Discussions with that company are ongoing and continuing. There are other oil companies that we are also talking to. So which one would manifest first, I really couldn't say because this interest is pervasive. And I think oil companies are realizing that to maximize these resources, which they've already learned to do that PRM is again going to continue to provide a good way of doing that. That being said, I can't tell you which of those companies that we're currently in discussions with would manifest into a first system, but we think we can accommodate any and all of them as they would come on board. As we said, we don't expect any of that to translate into any sort of revenue in this fiscal year certainly, but nonetheless discussions keep going. | intermediate | [
"direct",
"intermediate",
"fully_evasive"
] | B |
9d6f0f42270761d4947741b42bb19a05 | Let me take this a step further. Your comments just in answering the question seem more favorable than maybe what we've heard in the past and certainly more favorable that if someone were new to the company and heard that you hadn't sold a system since 2012, it sounds like something different is unfolding. Would you maybe expand upon that or just correct me if I'm wrong. | No, I think things are unfolding differently and it's certainly with more interest that's being expressed. If you think about it, the oil companies -- their reactions have had to deal with a destruction of demand in the last year. So the focus on oil companies has been how to navigate that particular circumstance and with the economy shutting down, air travel, just demand in general. What they're now grappling with is the recoveries and the demands that that will now place on their existing resources.
They've already learned that there is a lot of success gained in being able to leverage existing resources. OBX is a part of that as they are exploring and examining reservoirs near their existing platforms and infrastructure. And to this extent as I've mentioned before, there is a interest now extending into the deepwater, as we have a lot of OBX -- our deepwater version of that product in play. So I certainly believe that with that new focus on being able to adjust to an increasing demand, I think that brings new attention to PRM especially in light of maximizing their existing resources. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
59498f373e7833d2e8dff067dd0f9c72 | Rick, I'm going to -- one more question, please. And this is from a point of | No, I think your original perspective is actually the more correct one. The PRM systems generally speaking are located above a reservoir. They can be quite large as you well imagine. But the OBX, it's more utilized in examining nearby potential resources, so where there is a reservoir oftentimes, there are other reservoirs that are very near that one. So to that extent, I think the OBX is extending beyond the imaging capability of the PRM systems. To some extent they can see out and beyond the geologies that they're centered over. But for the most part that requires the additional exploration effort. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
5e1d4e96d23881e325bd32daef56241e | Let's switch to Quantum and Border Security please. Mark, I have a few questions. But how about if we just start with having you give us an update in terms of what you are seeing and where? Maybe just -- let's just start there, just with an update and just kind of open it up for us if you would please. | I've never known you to ask such a specific question before. I'd be delighted to. The update is contract performance is going very well on the revenue that everyone is aware of. I'm very, very, very pleased with what we have been able to accomplish from the architecture design, the manufacturing and the deployment of our system. It's a one in the kind system and we now have it in the ground and operational.
And we're now being able to reference that system in going forward. So as we look to the future, we're going to see where we are going to be able to apply its capabilities for other customers who are interested in similar solutions of such a scale. It's kind of like a PRM type of model. We expected with more frequency, but where we are looking at larger scale opportunity so quarters will bounce around on the low end and then we'll have a big quarter like we did last one. So I'm pretty pleased with where we're sitting right now and the fact that we can go forward and use it as a reference system. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
6ee8382431862ca6d36699598d583fb0 | And in Robert's opening remarks, he referenced that the system should be completed this year. My sense was that it would have been done by the end of March. Was there something that extended or did I just miss interpret the opening remarks? | Both of you are right, to be honest, the system's in the ground doing its job. There is just nuances on the end of the contract that we have to tie up and right now we have a COVID scenario and we have an immigration scenario that is picking our customer's resources. So there's a few loose ends that we clean up contractually that's always part of the contract. And we're just going to put those off for about a month or so, but it's nothing that's of any substantial nature. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
f5c90e5bed42d75f0e117f231b5b0e18 | So I'm going to ask you to characterize what disruption, if any, you have experienced from the administration transitioning and I'm not trying to get you to bash the administration. I think there is disruption that takes place anytime that there is administration change but hoping that you can characterize it, and to what degree it's creating challenges and/or opportunities for Quantum? | I don't think the landscape has changed from our perspective around the administration change. The Border Patrol remains the Border Patrol under Customs and Border Protection within the Department of Homeland Security. And whether you are under the prior administration or this one putting people in place of stability is the biggest factor and that is happening and I wouldn't label it as a boundary between prior and now. Now, overall what's happened with -- not with so much administration, but what we see on the hill remains also the same, which is we have bipartisan support for the types of capabilities that we provide. Because we are doing a job that is a security function and so it enjoys that bipartisan support and that hasn't changed either.
I think also Bill, it's important to sort of make everyone aware that the -- we're not building or we're not a part of building a wall or any of that sort of thing. So, I mean clearly there is -- has been a withdrawal of funds and other work and effort toward it. Where that goes? Who knows. That's something that I guess will unfold over the course of time, but that's not what we were involved in or are involved in. Our technology is advanced in a different way. And if you make -- if you'll remember even in Biden's recent address to Congress he mentioned the fact that even his administration is interested in deploying technology solutions on the border for our security. So that's the area that we really sponsor and employee ourselves doing. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
6ff408fb8a2f79b92b3ae7338506b737 | Great, that's helpful. And the SBIR Phase III approval that you have, does this apply to government contractors or is it just the Border Patrol? And I'm asking this question in the spirit of a prior conference call you had referenced some interaction with contractors. | It does not -- is not bound to Homeland Security at all, it goes across the Federal space. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
d94b2301153b509ea7c59053354748cb | And would that include when working with other -- with a government contractor or would you really need to be operating under whatever level that they have? | No, it is not bound by whether we are the prime or the sub. We can still receive a sole source for the procurement of our systems. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
f98df688471c4453c76a6b9845a50340 | That is helpful. And then you may have kind of partially answered this question earlier but I have been pondering, why a sector of the Border Patrol wouldn't just on their own order a additional equipment to deploy in areas that they see that are high risk rather than coming from the -- I guess, I'll say from corporate for lack of a better phrase, because I thought the SBIR Phase III would allow for any sector to do such a thing. Would you talk to that point and how you are viewing that? | Well, remember the Headwaters for funding within the government start on the hill where they're authorized and appropriated by Congress. And then as they trickle down into the various departments each department does it somewhat differently. Homeland Security has more open buckets, if you will for funds whereas Department of Defense is far more site. So it remains in DC at that level within the Border Patrol and that's how they then choose to go forward with where they deploy because they view the -- all borders, it's not just our southern borders holistically to decide where best to apply those resources. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
e3f8fced240609de983bb4329e04963e | I wanted to dive into a couple of topics. First of all pleased again that the cash is ever-growing, it's great for the balance sheet, using its repurchase stock gives us a lot of confidence. I wanted to ask about the GCL contract that seems to be performing well. What do you think would trigger reclassifying that from deferred revenue to another line item on the balance sheet, such as unrestricted cash, etc? | We actually recognize that sale in this quarter, so we no longer have that recorded as deferred revenue, it's actually revenue now.
And I mean as it was the entire story, I mean there was a case where through the public financial statements of SA Exploration they had in times past indicated in their filings that they were under risk of not remaining a growing concern. So that sale was to them prior to that following -- that filing and that prompted us that we needed to hold that as a reserve on revenues. So that's what ended up putting it on our balance sheet over the course of time. But since then they've gone through a bankruptcy, emerged from that bankruptcy and more recently we've got an audited financial statement, all of which indicated that as we've mentioned in the press release that probability of full payment on this is high. So it made sense to go ahead and recognize that revenue now that they've emerged. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
251816540b19f85d8beda941295a9d69 | Great. I appreciate your conservative classification of that in prior quarters and appreciate your instincts on their viability as eventually coming through to pay that. That's great to see. Did that -- did those payments once they were reclassified from deferred, did they flow through and add to the unrestricted cash number? | I think they were already in the cash statement on the balance sheet.
Yeah. That's correct. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
dafbf384f4e198e94df5768c50eac647 | Great. Moving on to other sales like that, do you expect -- so you had a good OBX, you had a good this GSL sale. Do you expect more like that consistently or do you think it will be more of a lumpy pipeline in the next couple of years? | Glenn, it's going to be lumpy, it always really has. So I think your instinct on that is accurate. That's how it's likely going to manifest in the course of time. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
f14cc8538d43c075c2e85c7c7f9068fc | Okay, great. And then flipping over to new investment Robert, could you repeat having quite -- how should the amount you're expecting to project and invest in new equipment and PP&E? | Yeah. So we think we could invest as much as $3 million toward plant, property, and equipment. We've already put almost $2 million toward that this fiscal year. And then on our rental fleet, depending on what kind of demand we see throughout the rest of the year we expect to spend as much as $2 million. That could change though depending on if things that we don't have visibility to today come up. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
e98f7070bbe0416180cbb432d09a07f0 | So to kind of dovetail to that, if there is no significant PRM award in the next couple of years. If that doesn't contribute, what do you think and you can speak in very general terms and not looking for specific guidance, but what segment or sub-segment do you think would then be the best contributor to top line and bottom line? | Well, I think our -- yeah, our wireless portion of the Oil and Gas markets has historically been the other main producer and I suspect that will remain to be the case. There's traditional products, which typically or the sensors and that sort of thing, those sort of manifest as consumable items as exploration takes place primarily on land. Land exploration is still very much in a depressed state compared to prior norms. So we don't have evidence that that's going to change right away. But to what extent it does, we believe our GCL which is a part of our wireless product line within the Oil and Gas, we believe that would be one that would continue to contribute because it's an easier deployment, less weight, all that, it just makes the seismic survey capabilities easier.
I mean, further to Rick's comments though in the land seismic world, there is a huge amount of stacked equipment that our customers have. So the recovery, it would take a lot of recovery for us to see anything significant within that line of products.
Yeah, the one thing that might accelerate some of that to Robert's point is with this stacked equipment, much of it is older legacy type equipment. Not all of it, but some of it is and to the extent that those are much less efficient and costly to operate than the newer technologies such as we offer today then they may be abandoned in some sense. So we'll just have to see how that turns out. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
74ef948f6d2a8c67d7cf7c9c614cde09 | Okay. Great, thanks for the color on that. One last question, flipping back to PRM, just in general, can you walk us through the lag between if you were -- it just -- it did get an award. What is typically the lag between the award and when the first chunk of revenue gets recognized? | Typically that depends a lot on the size of the contract, the amount of cable we're providing. That has a big factor in that. It also -- it could have some factors based upon weather windows and where this equipment needs to be installed that that could affect when that happens. Typically, it could be as long as 6 months out or up to a year or even more.
It also amounts to sifting through all of the revenue recognition rules of accounting. It doesn't necessarily -- which do not necessarily represent cash flow as those types of contracts manifest. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
a11a06e2be348e62884b19d6c12d3dac | Carbon sequestration and I know Dr. Tinker has -- I've heard excitement in his voice on some past calls. But do we see that as anything that might create business or there have been any interest in that or is that just more of a way long-term opportunity? | No, it definitely has potential as future business. It is a rather infant market with respect to how all that -- I think most focus these days is on the actual capture and storage aspects. Where we would fit in mostly is in the monitoring aspects of reservoir. But keep in mind too that PRM systems really fall into utilization of carbon capture because oftentimes they inject CO2, flood these reservoirs with CO2 to enhance their oil recovery. And they learned where and how to do that oftentimes by monitoring the reservoir and its changes with the PRM. So the PRM actually becomes a carbon sequestration management tool in those situations where they are actually using CO2 for that enhanced oil recovery. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
243398922499abe53ef9c077291ccfc8 | Yeah. Thank you. Sally, just first, best wishes on the personal challenges you're fighting through. On the business, so I get that it's kind of early, and you're going to wait till February to give us the KPIs to track and measure your progress against. Just from the changes that you've made thus far, any early indicators that you can kind of share or is it just too soon? | I think it's a little soon, Jeff. I mean, certainly, there are some green shoots that we're seeing in terms of improvement in customer experience scores. At New York NOW summer, we saw a 30% improvement among exhibitors. So some of those things that we're doing and the measurements we're putting in place are starting to show some positive effect. But it's really going to be 2021 before we've got everything implemented and really rolling out to its full impact as you've heard, as we've gone through the list of various initiatives that we're undertaking. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
62ae6967e796b2521a1a27ba46943d5b | Got it. And then Phil, I guess, I'm a little confused by just the cancellation -- the hurricane cancellation math and insurance. So I know that you're insured for lost profitability and business disruption. I guess, I'm just surprised that there would be a $6 million insurance benefit on $7 million of lost revenue, that sounds high. So is that right? And there was something in the Q about maybe needing at some point to reimburse exhibitors for out-of-pocket expenses. So what I'm wondering is, is the $6 million benefit all recognized this quarter, but there's some future expense against that that's not accrued. Just trying to help understand the -- why the $6 million insurance proceeds would be so high on $7 million of lost revenue. | Sure. I mean the anticipated revenue we didn't book was the $7.1 million. We saved $1 million in running the show. We didn't -- that show didn't take place, but obviously most of the costs were incurred beforehand. So we saved $1 million versus the lost revenue, and that's why -- that's how the event cancellation works. It's the net financial impact to us. So you'll see in the commentary around cost of revenues that it says one of the items affecting the quarter versus the previous quarter was the savings in the show. So that's how we get to $6.1 million. The reimbursement to exhibitors is we had two insurance policies. We had one which was for us to reimburse us for having to give refunds to customers and then we purchased a secondary policy, and that's the one that we will receive cash in Q4 and we will pay out exhibitors for the cost they had that were incremental to the booth cost. So the primary pays their booth costs back to them and sponsorship costs what they paid us. And then we had a secondary one, which is what is referenced in the Q. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
bbb5de8f01663216dc962b01af2a99d5 | OK. And then just last for me. Any kind of rough sizing of -- you've obviously are in-flight with implementing lots of initiatives. Like how much of the expense related to them is recognized in year-end 2019 versus how much will be incremental for initiatives expense in 2020? | So we have approximately $2 million of the cost of the new team and the initiatives that started to be kicked off. If we annualize that, it's probably another $3 million next year. So $5 million is a run rate subject to other initiatives or investments that become -- could start to be implemented next year. We've talked about a lot of the things that we are already kicked off, but there are other things in the pipeline that maybe will have an impact in 2020 as well. | direct | [
"direct",
"intermediate",
"fully_evasive"
] | A |
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