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Good morning, and welcome to Telkonet's Second Quarter Earnings Conference Call. As a reminder, today's conference is being recorded.
Before I turn the call over to Jason Tienor, Telkonet's Chief Executive Officer, I would like to read the following statement. Certain statements included in this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties such as competitive factors, technological development, market demand and the company's ability to obtain new contracts and accurately estimate net revenues due to variability in size, scope and duration of projects and internal issues in the sponsoring client. Further information on potential factors that could affect the company's financial results can be found in the company's registration statement and on its reports on Form 8-K filed with the Securities and Exchange Commission. Telkonet is under no obligation to update items discussed today to reflect subsequent developments.
Lastly, I would like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of Telkonet's website at www.telkonet.com.
With that, I would like to turn the call over to Jason Tienor, Telkonet's President and CEO, to discuss the results. Mr. Tienor, you may begin.
Thank you, Operator. Good morning to everyone, and thank you for joining us this morning. Let me begin by apologizing for the change in date and time of the call from our normal schedule. Unfortunately, we had to shift our event due to a time-sensitive trip that I'd be leaving on this afternoon. I hope that we didn't cause too much of an inconvenience to anyone. But for those unable to attend the full call this morning, please remember that, as the operator said, it will be available on our website for complete reply.
I'd like to begin by saying that we're energized by how the year has begun and the growth ramp that we're encountering. Having completed our fourth straight quarter of growth year-over-year and quarter-over-quarter, we recognized a positive shift in the commercial IoT industry and our successful ability to capitalize on it. Our momentum continues to build, as evidenced by the strong backlog and pipeline that we continue to carry and the growth and success of our channel partners as proof of our forward-looking strategy.
While we continue to recognize negative pressure on our performance due to the unfortunate import tariffs that have been leveled against our products, we continue to work to counter this adverse impact. And while continued review and analysis of alternatives is being completed, including working with some of our largest partners to evaluate the benefit of utilizing shared manufacturing resources, we've been unable to identify the solution for the current moment. One positive development is that our current manufacturer has taken steps in the unfortunate event of a prolonged situation to alleviate this pain in the first half of next year through the repositioning of the manufacturing facilities, thus removing the impact of the tariffs at that time.
Additionally, while the 2019 appetite for IoT or automation solutions has dramatically expanded from what we've seen in the past years, we continue to recognize a growing impact due to current economic uncertainty created by the global unease in financial markets and trade wars. We're keeping a constant watch on how this arrest is affecting each of our markets and the overall economic environment. With the reduction in the current market uncertainty and the return to a more stable economy, we believe we'd see a surge beyond the current growth phase of our target markets.
Moving forward, we're excited to announce today that our 2019 second quarter once again demonstrated the strength of our solutions, our market penetration and recognition and the growth of our channel relationships. Recognizing quarterly revenue of approximately $3.6 million, the largest quarter in the history of the company, resulting in 20% growth quarter over prior year's quarter and 38% growth year-to-date. In addition, the revenue generated by our channel partners increased 30% quarter over prior year's quarter and 12% year-to-date. This continued momentum demonstrates that 2019 is shaping up to be a record year overall.
With half of the year in the books, we've already recognized 75% of last year's full year revenues. The success of our marketing and sales efforts and growth in our partner channel continues to drive these results to new heights.
And expansion of our international market activity has also contributed to this growth. Having seen an 11% growth in the year-to-date international sales performance, we continue to see strong growth and enormous potential for this channel. On a side note, the trip that I'll be leaving on this afternoon is to accompany, one of our most active international partners at one of their largest conferences, as well as visit several of their new and potential customers to present our integrated solutions. Relationships like these have fueled our current growth and expanded Telkonet's penetration into secondary markets, such as military, health care and MDU/MTU. We also continue to expand our distribution capabilities as well with ongoing discussions with new OEM partners and manufacturers. The opportunity to expand the market access through strategic integration, initiatives and agreements provide significant ability to increase revenues with minimal additional costs.
A few of the other highlights for the second quarter include the completion of the first phase of a domestic military housing project in partnership with one of our largest ESCO partners, increasing governmental revenues to 13% of total revenues when compared to the prior 6-month period; the identification of a long-term strategic initiative to offset the tremendously negative impact of our ongoing import tariffs; and the through the quarter's performance, we were able to shatter the previous revenue per employee high by 18% at $74,000 per employee for the quarter.
We've also neared the end of an extremely rapid engineering project by reaching the prototype stage of one of our newest products, the EcoInput, marking an imminent market release of this innovative new device. And lastly, we completed a full intelligent automation deployment of the first property for the Marquee proper brand in partnership with one of our strongest partners, JCI. While profitability has not reached our expectations due to a number of factors, we continue to make the necessary adjustments in order to make this a reality.
The largest factors impacting our quarterly performance included, as mentioned, the significant impact of the ongoing tariff battle, resulting in almost 1/3 of the quarter's total losses; a noncash impact of $70,000 in inventory reserve and an additional $40,000 in bad debt, totaling almost 1/4 of the quarter's total losses; and the impact that the global economic uncertainty has on the commercial spending of our target markets.
Several of the precautionary measures that we continue to implement to offset these include: continued research and recognition of alternative manufacturing resources to address the ongoing import tariffs; improved inventory planning to increase inventory turns and limit slow moving items; sales campaigns designed to assist in moving slow-moving items and reducing existing inventory volume; expanding our marketing efforts across secondary markets to alleviate the strain placed in adding one target market; increased channel campaigns to leverage the strength of our channel partners and scale of their pipeline; and finally, continued operational and SG&A adjustments to bring spending in line with ongoing performance, while maximizing ongoing growth opportunities.
While we continuingly review our operations and structure to adjust to emerging trends, market performance and other variables, one of the most significant impacts this year has been that of the import tariffs levied on our manufactured products. While we initially believe that the issue would be short-lived and resolve itself quickly, the situation has evolved in this manner. Thus, while we initially wore the full impact of tariff expense on our own financials, we made a decision during the second quarter to move through a process of repricing our product catalog, enabling us to share the burden of the tariffs with our customers and partners and return our product margin to a normalized range. Thus, we expect to see the results of this exercise recognized fully beginning in the third quarter.
Finally, with regards to our strategic industry review, we continue to have ongoing discussions on several fronts. The second quarter performance strengthens the value of the organization when participating in these discussions. And my impending trip this evening is actually a result of these discussions, and we hope to solidify our value in these conversations through continued operational performance and growth.
With that, I'd like to hand the call over to Telkonet's Chief Financial Officer, Gene Mushrush. Gene?
Thank you, Jason. Ladies and gentlemen, good morning, and thank you for joining us. Today, I'll be summarizing our 201 second quarter and year-to-date financial results. For the quarter ended June 30, 2019, Telkonet recorded total revenues of $3.6 million, a 20% increase compared to $3 million for the same period prior year. Increases in the hospitality and governmental markets were instrumental in this growth. Recurring revenues grew 23% to $189,000 compared to the same period prior year. Gross profits for the quarter were $1.4 million, down 8% from $1.5 million last year, contributing to the decreases or increases in logistical expenses, inclusive of import tariffs, use of installation contractors and the inventory obsolescence reserve, offset by a 3% decrease in material cost as a percentage of product revenues.
During the quarter, tariffs imposed on Chinese imports resulted in an adverse impact of approximately 5% on gross profits. On a related note, last month, our Chinese supplier informed the supplementary plants to have a Vietnamese manufacturing facility operational by mid-2020.
Operating expenses for the quarter were $1.9 million, a 10% increase compared to $1.7 million for the same period in 2018. Selling, general and administrative expenses increased 14%, primarily attributable to increases in professional services, the bad debt reserve and personnel-related expenses.
Despite the monetary increase, operating expenses as a percentage of revenues fell to 54% compared to 59% for the same period prior year. We incurred operating losses of $504,000 and $209,000 for the quarters ended June 30, 2019 and 2018, respectively. We reported negative adjusted EBITDAs, a non-GAAP measure of $485,000 and $190,000 for the quarters ended June 30, 2019 and 2018, respectively.
Total year-to-date revenues of $6.3 million represented a 38% increase compared to prior year. Similar to current quarter results, increases in the hospitality and governmental markets were key factors in this improvement. Product revenues derived from value-added resellers and distribution partners were $4.7 million, an increase of 30% compared to the prior year period. Recurring revenues increased 43% to $366,000.
Year-to-date gross profits were $2.4 million, up 15% from $2.1 million last year. Gross margins fell 8% to 38% when compared to last year. Contributing to the decrease were increases in logistical expenses, inclusive of import tariffs and use of installation contractors, offset by a 3% decrease in material cost as a percentage of product revenues. Tariffs imposed on Chinese imports resulted in an adverse impact of approximately 4% on year-to-date gross profits. Year-to-date operating expenses fell 8% to $3.7 million, a net increase due to changes in salary, recruiting efforts and sales commissions as well as increases in legal and audit services remain contributors to this increase. Despite the monetary increase, operating expenses as a percentage of revenues fell 17% to 59% compared to the same period prior year.
We incurred operating losses from operations of $1.3 million and $1.4 million for the 6 months ended June 30, 2019 and 2018, respectively. We reported negative year-to-date adjusted EBITDAs of $1.3 million and $1.4 million in both 2019 and 2018, respectively. We reported $3.4 million in cash and equivalents at June 30, 2019 compared to $6.3 million last year. Cash used in operations during the first 6 months was approximately $2 million compared to $2.2 million the prior year period. An increase in accounts receivable of $1.4 million is the result of growth and timing as opposed to collection difficulties as evidenced by a 10% improvement year-over-year of days outstanding to 70 days. We reported a working capital surplus, measured as current assets less current liabilities, of $4.7 million at June 30, 2019, compared to a surplus of $7.7 million at this time last year. The outstanding balance on our credit facility was approximately $864,000 with an available borrowing capacity of approximately $1.1 million at June 30, 2019, compared to an outstanding balance of 0 with available borrowing capacity of approximately $1.6 million at this time last year.
Our current ratio dropped to $2.2 million from $4.1 million compared to this time last year. Our cash conversion cycle, an indicator of a company's efficiency in managing working capital assets and liquidity, increased to 126 days from 82 days at this time last year. A shorter cycle means greater liquidity, which translates into less need to borrow, more opportunity to leverage spend via cash discounts and an increased capacity to fund the business expansion. Although we are disappointed that the year-to-date loss was relatively unchanged from last year, we are encouraged by the revenue growth for the consecutive quarters while concurrently decreasing material costs as a percentage of year-to-date product revenues, a sign market adoption is improving while not automatically being driven by the cheapest option.
In closing, thank you for your interest, and to our shareholders, specifically, thank you for your continued support. I'll now turn the call back to Telkonet's President and Chief Executive Officer, Jason Tienor.
Thank you, Gene. With that, I'll turn the call back over to the operator to take any questions that the audience might have. Operator?
[Operator Instructions]. Our first question comes from the line of Doug McPeters with RBC Wealth Management.
Jason, those are really impressive revenue numbers and I'm impressed with the way you're growing. However, since you've been leading Telkonet, have we ever made a profit? And do we expect we'll ever make a profit?
Two years. We profited with Telkonet prior to Telkonet's divestiture of EthoStream, yes.
No, I mean when revenues are more than expenses, like you put money in the bank.
Correct. Yes, for two years. I've been here with Telkonet since -- in this role since 2008. Since that time, we have profited 2 years.
Okay. And do we expect we'll ever make a profit in the future?
We absolutely do, Doug. I believe that's why myself and my team are all here is -- the core purpose is to make a profit as an organization, we believe that the way that the market in this industry is moving, we have reached an inflection point that allows us to do that. Unfortunately, we continue to see significant hurdles thrown in front of us, such as you've seen this year, the tariffs are the bulk of the losses of the company as recognized, if we're able to remove those from the equation, we would be significantly closer to approaching it, not just now for the quarter, but for the full year, in its entirety. So we continue to strive to achieve that goal, and we hope that we're moving in that direction.
And do we have any more exposure to Wall Street? Does anybody know that Telkonet exists, especially with the price at $0.13 a share?
That's a hard question to answer. And the fact that we continue to try to publicize the business, both externally to customers, partners and existing shareholders, as well as the audience, in general. If there are any ideas or considerations that you'd like the company to pursue, we're all here. Unfortunately, as a microcap technology stock in the current economy, it's -- you're battling for a very few number of people that monitor this space and this technology, and for a company in our current condition, we're not the most attractive that investors are looking for. But we continue to try to bring new investors into the stock as well as we can.
[Operator Instructions]. Our next question comes from the line of Craig Boost [ph], a Private Investor.
So I guess to go a little further off of that last call. As far as maybe gaining some exposure, what about our future plans to get listed and do a reverse split so that we could get listed?
Thank you, Craig. The question on the annual proxy with regards to reverse listing gives us the ability to do so at the appropriate time. So we don't have definitive plans as the timing of when that should be. We do feel, as the company, that it should take place as part of a larger transaction and a larger activity that the company undertakes. We continue to have conversations around that and how it might be best utilized. So I can't share with you definitive timing, Craig. But understand that because we have it on an annual proxy and because we continuously are discussing it, it is something that the Board always has on their consideration.
Okay. And I guess one last question. If you could elaborate a little more on those manufacturer initiatives to reduce tariffs in the first part of this coming year, if that could be started earlier? Or at the least, if -- how they plan to do this, and if it'll just be for the first part of the coming year?
Yes. No, absolutely. We've actually started down this path of how we could impact the tariffs on our operations by first reviewing a number of different manufacturers outside of our current manufacturer, which is based in China. Unfortunately, the cost of the alternative RFPs that we put into the market were significantly higher than our current manufacturer. So our next step was to begin discussions with existing partners of ours, much larger manufacturers of other products or parallel products and determining whether their existing facilities might work better for us and whether we could, through increased scale and working alongside with them cooperatively, receive better pricing.
We're still actually moving through that exercise and that we found a couple of vendors that work with one of our largest partners that we're waiting our numbers back from. So there are other avenues that we are currently pursuing that might have a more short-term impact because those vendors already have facilities outside of Mainland China. The last, the avenue that we have put in place that will begin to decrease our tariff cost next year is through our existing vendor, what they're currently doing is moving facilities outside of China and enabling the existing production that we're conducting with them to take place outside of the purview of the tariffs themselves. So if, to further your question, if we could have that occur sooner, we would love for that to be the case. Unfortunately, that's entirely in their hands with regards to how quickly they can move those facilities and have them up and running and moving our production through those lines.
You will see that initiative to go any further than the first part of next year. It kind of seemed to me that you were indicating that it was maybe just for the early part of the year, and I didn't know if that was something that would just be temporary? Or would it be something you could make more permanent if this tariff situation doesn't resolve itself?
We would expect it to be more permanent, Craig, because they're opening the facilities and running a [indiscernible] facilities, as long as those facilities will remain open, we continue our production through them.
Okay. I guess, maybe one last question. It seems to me our cash reserve was pretty close to half of what it had been a year ago. I'm just wondering, we seem to be burning through cash quite a bit. I'm just wondering, is that a concern of yours that the cash reserve went down as much as it has? Is that something we can get resolved whereas we don't continue to burn through it?
It's a very astute observation, Craig. And obviously, it is a concern. Cash is the strength in the business, and for us, obviously, cash is going to be a concern because of the rate with which its dropped. The difference, though, between where we were last year and where we are this year is that, understandably, a business cannot grow without spending cash. We cannot sell more without having more significant inventory. We cannot install more or have more products displaying without burning through and increasing our collectibles and increasing our inventory. So if you look at the end of the quarter, we were carrying $2 million, $2.5 million in inventory, which is roughly double of where we were last year at the same time. At the end of the quarter, we were closer to, I think, $2.6 million or $2.7 million in accounts receivables, which is, again, I want to say 30% higher than where we were the year before.
So while they cash may be consumed more quickly, we also have significant cash held in inventory and accounts receivables and ongoing projects, which aren't being accounted for in the current order. We had a number of projects a large than $0.5 million that are taking place during the second quarter as well as during the first quarter, and those projects extend beyond the boundaries of the quarter and thus are not accounted for in the actual quarterly revenues. So while cash seems to be consumed far more quickly, it's actually being consumed because we're growing fairly quickly at this point in time as well. Having said that, it is a constant concern and consideration in every decision that we make, and understand that we will be monitoring it very closely at the end of this at constant conversation at the Board level of that line where you spend, grow or you moderate to make sure that you're secure.
And I just want to point as well is that over the last 6 months, that cash burn rate has slowed compared to what was witnessed in the prior year.
Okay. So it sounds like it really is getting better. Do you have any plans to, if we need to, to increase our cash reserves, such as possibly a rights offering?
That's another consideration, Craig, that the Board has taken under advisement as part of the strategic industry review and conversation with the investment bank, we consistently review all the alternatives available to the business. So there are other cash-based opportunities available to us as well. The one thing that we want to do is maximize shareholder value. So rather than pursuing an activity such as that too quickly, we want to make sure that we're not taking on undue expense or equity investments if the company is going to be able to achieve that profitability inflection point at this point.
Our next question comes from the line of Joe Christie [ph], a Private Investor.
I just want to follow up on the cash burn question. And Gene, you just touch on it and said it's slowing. For the quarter ended June 30, with $500,000 loss and worth $3 million cash. Where do you see is the, I guess, the monthly or quarterly cash burn going forward with the backlog that we've got? And maybe an SG&A or whatever to try to -- how long do you think we can continue on the same course?
Well, if all things, if nothing else changes, which I don't think is a realistic approach, it's a simple mathematics. Cash flows used in activity basically compare to the cash. As Jason had mentioned, I have approximately $2.4 million, $2.5 million in AR that's going to be coming in probably late this month. To give you a factor, we are averaging over $300,000 of cash burn from April 1 of '17 through 12/31 of '18. So for literally, what, not 24 months, but 18 months. From January 1 through 6/30, that's now a little bit over $200,000. As revenues improve, as well as cost are reduced or mitigated, that burn will continue to drop, in my opinion.
We've got what $1.1 million left on the credit facility as well?
Correct. And that's asset-based that's tied to predominantly my AR balance.
Got you. Okay.
So revenue that's it's improved, that means my AR is improving, which means I have better borrowing capacity on that line as far as not necessarily relying on my pure cash reserves.
Right. And obviously, I understand completely the build in AR, obviously, a decrease in cash flow, it's just more about the net loss that's going to, -- at the end of the day, continue to eke away at the total cash available. So I guess that's what I'm trying to figure out, too, the theme of these calls is what's -- what do you see as a projection in terms of being able to whittle down the net loss per month going forward?
Well, it needs to be a combination of both increased revenues as well as some cost restructuring. I mean, that's going to be the key point.
Got you.
If you look at the first two quarters of this year, half of our losses are -- approximately half of our losses are attributable to the tariffs. So the sooner the situation works itself out, the more quickly we cross that goal line of profitability. But in the meantime, outside of everything that we can do with tariffs, as Gene mentioned, we continuously review our strategic operations and how we can affect the expenses associated there to achieve those results, regardless of where the tariff situation might be at.
So I understood, obviously, about the factory in Vietnam and everything. But in terms of being able to acquire the product at those -- without the tariffs, are you saying that the facility will be up and running kind of January 1, so that any new acquisitions of new product going from January 1 -- -- or is it something that you don't really see being able to get the product at the on -- tariff prices, I guess, to the second quarter of 2020?
The plans that have been communicated to us and it's very much in the preliminary stages is that they will be operational by mid-2020. Does that mean our full product line is going to be manufactured at the facility? I would venture to say no, because we can't afford business interruption either moving the entire product line. Obviously, it needs to be done in phases. But we're also held to what their construction schedule is as well. Obviously, they face risks just like anyone else, a bad weather season can delay construction, things like that. So I want to be pretty clear here, mid-2020, in my opinion is what they've given us as best case scenario.
Got you.
But may be overpromising and under delivering, possibly. But I don't think our expectations should be February 1, 2020. Every widget that we manufacture is now coming out of Vietnam.
Okay. Yes, I guess it just looks like, again, as long as we can continue to grow revenue and keep expenses down, I mean, the cash can last longer, just trying to get a feel for kind of when the drop-dead date is, or when you have to start cutting back operations. But I guess we just have to see it. As long as revenues continue to grow, that should help us out.
Our next question comes from the line of Brian Nelson, a private investor.
Great job working hard and making things move. My question was Vietnam labor compared to Chinese labor. Last...
Honestly, it shouldn't impact our pricing significantly. We're not going to recognize much of a gain or much of a loss. What the analysis that our current manufacturer completed when looking for whether they should reposition their manufacturing resources was where they recognize the least impact to their existing pricing for customers.
Our next question comes from the line of David Belport with Wells Fargo.
Listen, two questions. One, the bad debt expense, could you expand upon that for a second?
Yes. We approach our bad debt with at least 1 component, if not 2. The 1 component is your general reserves based upon the last 24 months of activity that's applied against an AR balance. So as you can imagine, as my AR has grown, so will that general reserve based upon strictly mathematical percentages. And the second component will be, actually, specific customers that I have reserved. At the end of June, I have reserved for three customers, all have balances of greater than $10,000 apiece.
Okay. Okay. I was just curious as to how that worked. It just sounds pretty standard. Second question, kind of a probably one on the most people's minds. The Roth Capital engagement that happened in July of '18. Could you expand upon -- I know you're going away, Jason, or you guys are going away and seeing what's going on, but I'm just wondering if there's anything moving the needle here because the stock just can't get on its own way, earnings are just trying to push through to profitability and continue in the tariffs, obviously, continue to put pressure. But once it's all said and done and the smoke clears, I'm just wondering, who is out there that you -- or is something out there that can basically move the needles for a shareholder value in this stock, whether it's a merger or someone taking the Street over, some kind of a connection. I'm just wondering if you could expand upon that, your Roth Capital engagement?
Sure. So through the course of the last year at this point, we've had a number of conversations, not only with partners that we deal with, but with other organizations in the markets that we service and how their parallel or complementary product lines might service and work well with ours. Through all of those conversations, we've had numerous discussions along the lines of M&A, along the lines of a joint venture, along the lines of simply how we might cooperatively import together, which is, to be very honest, one of the reasons that you see our channel partner revenues grow. So significantly, it's due to a lot of those conversations. We've begun working with a lot of new partners met through those conversations that have brought significant new business to us, which is why, as I mentioned earlier, I'm going on this trip, this international trip, as -- through one of the very serious conversations we've been having with a much larger entity that feels largely within the current markets that we do. They brought us through their international regions and started sharing our product line and how our integrations work. And in the last 6 months, we've seen an enormous surge in the business internationally simply because of this one relationship.
So we're trying to foster and grow it. And this particular party continues to watch the company's performance and how well we're dealing with these regional distributions that they have ongoing. So as I mentioned earlier, we continue conversations on an ongoing basis. A number of our conversations were placed kind of on hold, waiting to see what the second quarter results were like, what the current industry appetite is for our products and services. They're waiting to determine whether IoT is growing or not. Unfortunately, there are external impacts, as we talked about throughout the call, but we're hoping with these starting to trend off, and I saw it, just as this call has been ongoing, that the U.S. delayed their tariffs on some of the items that they were planning on instituting here in September until December.
Yes, I just hear it this morning.
Yes, it might be a great sign for us. But as we see some of those uncertainties begin to change, Dave, we expect that these conversations will pick up a bit of steam. We continue to have them during the near term, and they continue to bring new opportunities to us. But without having more certainty for you, that's about all I can share at this moment in time.
Okay. Last question, and again, you guys know this and, certainly, you like the response that I do. Typically, your third and fourth quarters, since your first and second quarter and so far this year, obviously, a terrific quarter. If it continues that way, how does historically, your third and fourth quarter pan out? Obviously, not to know the numbers and I'm not asking anything that is not public. Just, in historically, how does third and fourth quarter compare to first and second?
There's typically a slight drop from the second quarter, but a leveling off between the third and fourth. So a ramp is typically the first quarter is the worst quarter of the year for us. We see a dramatic shift up in the second quarter because we start educational deployments. They all happen during the off-season for universities. And then as they tail off in the third quarter, we're back to the other secondary markets as well as hospitality, which is what drips down just a bit in the third and leveling off in the fourth, with people closing their budgets. So as we share, we expect to see a significant increase year-over-year, full year results, which is really what we're funding right now. But as we mentioned during the response to one of the questions, we have to manage the difference between the rapid growth that we're seeing, but maintaining a certain level of safety cash flow that we want to have in the bank. So while we could possibly see more growth than what we would see during the year, it's a conscious effort at this point in time, Dave.
All right guys. Good quarter. Hopefully, this trip is going to be something significant, and hopefully will be. But good luck to you guys.
Thank you. You have a great afternoon.
There are no further questions in the queue. I'd like to hand the call back to management for closing comments.
Thank you very much, operator. Thank you to everybody for joining us for today's call. If you have any further questions, please don't hesitate to reach out to us at ir@telkonet.com. We wish everybody a great morning.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.