Thank you, Chelsea. Good morning, and welcome to CUI Global's first quarter 2017 results conference call.

A copy of the company's earnings press release and accompanying PowerPoint presentation to this call are available for download at the event and presentations page on the Investor Relations section of the CUI Global Web site. With us on the call this morning are William Clough, President and Chief Executive Officer; and Daniel Ford, Chief Financial Officer.

The purpose of today's call is to review the company's financial results for the first quarter and to provide you with management's current perspective on 2017. Following management's remarks, the call will be opened to questions and answers.

A telephonic replay of this call will be available until May 24. You may also access the archived webcast and accompanying PowerPoint at any time on the Investor Relations section of the CUI Global Web site.

As a reminder, this call will contain certain forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities and Exchange Act of 1934 as amended. Such statements are subject to risks and uncertainties that could cause actual results to vary materially from those projected in the forward-looking statements.

The company may experience significant fluctuations in future operating results due to a number of economic, competitive, and other factors, including among other things, our reliance on third-party manufacturers and suppliers, government agency budgetary and political constrains, new or increased competition, changes in market demand, and the performance or liability of our products. These factors and others could cause operating results to vary significantly from those in prior periods and those projected in forward-looking statements.

Additional information with respect to these and other factors, which could materially affect the company and its operations, are included in certain forms the company has filed with the Securities and Exchange Commission. Before starting the call, be advised that management will attend and present at several investor conferences over the next two months.

A full listing of these conferences is available for your reference under the Events and Presentations tab of the CUI Global Web site. With that, I'd like to hand over the call over to William Clough, Chief Executive Officer.

Good morning, Bill.

Thank you, Sanjay. Good morning everyone, and thank you for joining us on our fiscal first quarter 2017 results conference call.

I'll start with a brief overview of our performance for the quarter, after which Dan will review our financial results in greater detail. Once Dan has concluded his remarks, I will provide some additional commentary on several key initiatives we are working on for both our Energy and Power and Electro-Mechanical segments that I believe still have us firmly on a growth trajectory for 2017.

We will then open the call up to Q&A, but let's begin. Our financial results for the first quarter reflected very strong start to the year for our Power and Electro-Mechanical segment, and continued affected business development activities in the Energy segment.

Timing of orders however brought revenue for the Energy segment below last year. Let me address the performance of our Power segment first.

The uptick in order trend we noted in our fourth quarter conference call in March continued through the first quarter. Revenue increased by approximately 5% year-over-year as strengthening industry fundamental growth demand for our products across a distribution base now broadened with the addition of Arrow Electronics in the quarter.

Our direct sales efforts also bore fruit with the receipt of a $1.6 million purchase order from a new customer, a U.S.-based infrastructure installation company that serves retail store environments. Power and Electro-Mechanical backlog stood at $19.6 million at March 31st.

In our Energy segment, business activity in this segment is increasing as the value proposition of our GasPT product resonates with prospective customers. And perhaps the two most clear-cut signs of the gas industry's growing adoption of our GasPT since the signing of our contract in Italy last year, one, we entered into a collaborative agreement with energy market leader ENGIE in the quarter that spanned multiple points for revenue across multiple geographies.

And two, we finally received confirmation of the regulatory change to relax the fiscal monitoring requirements in the U.K. from the U.K.'

s office of gas and electricity markets or OFGEM. This regulatory change was made by OFGEM to specifically accommodate our GasPT technology, and will result in a significant expansion of our technology footprint in both the U.K.

and Western Europe, where in OFGEM is highly respected. Having key referent [ph] customers, such as Snam Rete and National Grid, with ENGIE soon joining their ranks, are critical to the more widespread option of our gas solutions.

You don't get these three market leaders to buy-in to the technology unless that technology is reliable, durable, repeatable, and does what you say it can do. With our GasPT, we have built the replacement technology to the gas chromatograph, and the industry knows it.

As we know from experience with Snam Rete, these large gas operators proceed at a very methodical pace when deploying new technologies that directly impact the performance of their networks. Our opportunity set is substantial, but the conversion of opportunity contract is slower than we would like.

Orders growing approximately $6.8 million from both new and existing customers had Energy segment backlog at $14.3 million at quarter end. Now, let me turn the call over to Dan Ford, our CFO, so that he can run through our financial results in more detail.

Dan?

Thank you, Bill. I'll start with a review of our financial results for the first quarter of 2017, and then focus on our balance sheet.

Total revenues were $17.8 million, a decrease of approximately 14%, from $20.7 million in the first quarter of 2016. Power and Electro-Mechanical segment revenues were $13.7 million, an approximately 5% increase that was driven by increased customer ordering, particularly through our distribution partners, including the addition of Arrow as a distributor in January.

Energy segment revenue was $4.2 million, a decrease of 45%. The decrease in the Energy segment revenue was attributable to the impact of exchange rates on our U.K.

operations following Brexit, the timing of customer project delivery schedules, and the temporary halt of deliveries of gas related to metering, monitoring, and control systems, including GasPT units to our customer in Italy due to the regulatory hurdle we have previously discussed. Bill will update you on this in his following remarks, but as a reminder, the Italy contract is fully funded, and it is our expectation that deliveries will return to previous levels once the regulatory issues are resolved.

Partially offsetting the decrease in Energy segment was a $600,000 increase in revenue in our Power and Electro-Mechanical segment related to the timing of customer delivery schedules, and as a result of sell-through activity through distribution. The consolidated backlog is $33.9 million now that the Power and Electro-Mechanical is approximately $19.6 million, and Energy segment is approximately $14.3 million.

The Power and Electro-Mechanical segment has continued to see an increased ordering, as discussed during our year-end 2016 earnings call. To give you a better perspective of this trend, over the past six months, ended March 31, 2017, the segment has seen an increase in customer orders of approximately $3.6 million, a trend that continues through April as well.

Using constant currency, the last six months of ordering history for the Energy segment has been generally flat exclusive of the spike in orders during Q1 2016 for that initial GasPT order from Italy for 400 units. We are confident our backlog schedule, recent orders won, opportunities pipeline, and overall outlook for each segment will result in growth for the year 2017 despite the decrease in revenues during the first quarter.

Consolidated cost of revenues as a percentage of revenue increased to 68% from 61% last year. The percentage varies based upon the mix shift within both of our business segments, as well as contract labor costs within our energy segment and foreign exchange rate.

For the Power and Electro-Mechanical segment cost of revenues as a percentage of revenue was 68% compared to 64% in the prior year. The majority of this change is associated with product mix sold and production costs due to underutilization within our Canadian production facility.

We've implemented cost-saving measures during Q2 that are expected to save approximately $600,000 of production costs through October this year, which will have a direct positive impact on cost of revenues as there will be greater utilization of the remaining cost towards production. For the Energy segment, cost of revenues as a percentage of revenue was 69%, compared to 56% in the prior year.

The increase is due to a less favorable product mix in the first quarter of 2017 due to the aforementioned temporary halt of deliveries to Italy. Gross profit was approximately $5.7 million or a 32% margin, versus $8 million or a 39% margin in the prior year impacted by those items discussed surrounding the cost of revenue.

The Power and Electro-Mechanical segment generated gross profit margins of 32% compared to 36% last year, and Energy segment generated gross profit margins of 31% compared to 44% last year. We are focused on improving margins within our Power segment through increasing efficiencies and controlling variable costs at our Canadian manufacturing facility, and through new product and technology interactions into the marketplace.

The Energy segment experiences improved margins when it sells more of its leading edge technologies, such as the GasPT and VE sampling systems which offset lower margin integration type projects. During Q1, the Energy segment was more heavily weighted to integration as a significant Italian project for GasPT is to remain on hold.

We expect margins in both the segments to improve during 2017 through improved product mix sales of higher margin technology based products in both segments, and as well as efficiencies at our Canadian manufacturing facility. Selling, general, and administrative expenses decreased $700,000 to $8.6 million from $9.2 million in the prior year.

This is due to lower bonus payments and lower severance costs in 2017, as compared to 2016. Selling, general, and administrative expenses increased to 48% of total revenue, compared to 45% of total revenue due to the lower revenues.

So, most of the efforts being undertaken to address improving gross margin on sales through improving utilization, we are focused on reducing selling, general, and administrative costs as well. We are working to reduce [indiscernible] by approximately $1.25 million on an annualized basis during 2017.

The necessary steps and improvements have already begun, and expected to be fully enacted during Q3 2017. Our EBITDA loss $3.3 million compared to an EBITDA loss of $1.7 million for the reasons mentioned previously.

Net loss was $3.9 million or $0.18 per share, compared to a net loss of $2.7 million or $0.13 per share last year. Cash and cash equivalents stood at $3 million at March 31, 2017, a decrease of $1.7 million since December 31, 2016.

Finally, we did not sell any shares under our at-the-market equity program associated with our S-3 filed in March 14th and related prospectus filed in March 31st. In addition, the company is exploring the sale [indiscernible] Oregon headquarters facility.

Any sale is likely to close within six months time given the robust local real estate market, and would be expected to return a substantial amount of equity back to the balance sheet in the form of cash, while at the same time paying off the mortgage note. This concludes my prepared remarks.

I will now turn the call over to Bill.

Thank you, Dan. As we look ahead to the second quarter and the second half of the year, we are focused on expanding our opportunity set for our gas products to generate growth and convert opportunities already in the pipeline into contracts.

For those of you who are new to the CUI Global story, our strategy leverages our Power and Electro-Mechanical business, a profitable strong cash generator, to support the potential for greater and longer term growth offered by our Energy business through disruptive technology that offers lower cost, significantly lower maintenance cost, and rapid measurement time to the gas measurement market. Energy market trends validate our strategy, at the time with the use of gas globally is increasing to the more strict emissions regulations and historically low prices, our gas technology products are uniquely positioned to address operators demand for technology solutions that enable sustainable energy, climate change mitigation and the response for use of resources.

Let me spend a few minutes on our pipeline of opportunities that have the potential to drive growth this year, let's begin first with the Energy segment in an update on ENGIE, since we last spoke we have developed two opportunities with ENGIE, one of which is nearly ahead of us. First, we are in the process of finalizing a business relationship with Endel, ENGIE's integration subsidiary to deploy as many as 1000 biomethane in the grid skids over the next several years.

Looking forward to announcement from reserve purchase orders in the next couple of months, the second is with regard to the ice technology we licensed from ENGIE as part of our collaborative agreement. Snam Rete has expressed a very strong interest in this technology giving that its 3300 optics into use same optics for which we were awarded the contract for GasPT are clearly delivering non-odorized gas which is a significant safety issue.

Testing at field trials of our odorized solution will begin in July, while we're in the very early stages of this process, we believe the potential for growth from Snam Rete alone could be material to us in 2018, staying with Snam Rete as the tariff anti-trust issue is not yet resolved. As a reminder, ours is a 3300 unit contract that is fully funded, we have delivered 400 GasPT units on the first purchase order and expect the second purchase order for 100 units per month upon resolution of the tariff issue.

Initial installations indicate the Snam Rete is seeing the ROI we expected, so we have every confidence that deliveries will restart once the issue is resolved. As I previously noted, OFGEM has formally relaxed the accuracy requirements for fiscal monitoring solutions like our GasPT, you may recall that OFGEM cited specifically our GasPT when it initially proposed the relaxation.

With this relaxation, OFGEM is making available the speed advantage with the GasPT can accurately analyze gas on its network and its optics and at lower price point. In essence, the relaxation is a deliberate effort by OFGEM to get a less cost faster, it's still highly accurate analyzer onto its network to make it easier for their operators to get biomethane into the network.

In effect, OFGEM is enabling UK gas networks to go green with CUI Global. In terms of market opportunities this makes smaller optics in the UK and Western Europe potential customers of our biomethane integrated grids in GasPT solutions.

We have been preparing for this eventuality and later this month and in early June we will be hosting two industry open house days and our U.K. facility to showcase our GasPT to prospective customers.

As part of this event, we have set up a side by side comparison of our GasPT device in operation on a simulated high pressure pipeline right next to the practice available competitive gas chromatograph, demonstration which uses OFGEM approved sample gases in an OFGEM approved sampling configuration will show that while the GasPT accurately displays minute changes in the gas quality within seconds the gas chromatograph with its eight minutes cycle prime can fail to show changes of as much as 25% for more than 30 minutes. If you look at slide 6 in the slide deck to this call we have provided a slide charting that time difference and its effect you will note on the chart that the actual gas called the changes dramatically and approximately one hour, 26 minutes, 34 seconds.

The green line, the change accurately noted almost a view of our GasPT represented by the blue line, a change that was not fully recognized by the GC for more than one hour of the redline. Interestingly according to OFGEM study, the amount of natural gas which translates a 10 inch high pressure pipeline in only eight minutes is enough gas to operate 560,000 residential customers for a period of 24-hours, gas which is simply invisible to the gas chromatograph under the best of conditions.

We have invited more than 300 industry representatives from throughout U.K. and Western Europe to these two events further building on OFGEM decision last week we were awarded the following contract to stand the distribution of unconventional gas essentially bio methane within the U.K.

regional distribution network. This 36 month development contract awarded by our partners DNV GL under the U.K.

National Gas Network innovation, competition scheme studies the feasibility of deploying a modified GasPT product that could influence a policy change within the U.K. regarding CV measurement and billing for residential customers.

Longer term this compares the way for further deployment of our GasPT much like OFGEM's relaxation does for us today with commercial customers. However example the potential market size in the U.K.

for the DNV GL application would include more than 17 million residential customers amounting to an estimated 50,000 GasPT analyze. In France, with ENGIE we are contemplating a similar fiscal scene which would apply to more than 21 million residential customers supplying a number greater than that in the U.K.

Turning to North America, we continue to aggressively pursue opportunities with large operators there. Through our Houston office, we are pursuing VE-Probe opportunities with the region's largest gas operators.

Earlier this month, we conducted live in-field testing of our VE-Probe, in fact some of the world's major gas operators. The test conducted at the Southwest Research Institute in Antonio, Texas consisted of our placing one of our VE probes with this proprietary [indiscernible] into a pipeline directly next to a standard probe.

We then ran standard natural gas through the pipeline at 20% pressure, then stepped up to 40%, 80%, and finally 100% pressure. The VE-Probe maintained a constant force of 1G across all pressures and velocities while the standard probe experienced as much 20G at 20% and up to 500G of force at 100% pressure.

The performance of the two probes were both measured and videotaped from various angles. The results as expected confirmed the viability, reliability, and durability of VE technology when compared to a standard pipeline probe.

Southwest Research, a highly respected R&D problem solver providing independent premier services to both government and industry clients, will be preparing and publishing a whitepaper documenting the results. Both the whitepaper and the video will be posted to our Web site in the very near future.

With regard to our ethylene opportunity, we are nearing the end of that pilot stage phase and hope to report on results as we speak again next quarter. Finally in Canada at this very moment, we have a team in Calgary and Ottawa working to obtain the necessary certification for our GasPT with measurement to Canada.

Certification that we believe will catalyze demand for our product. Concurrently that same team is pursuing a multi-pronged approach with our distributor Benchmark to expand market awareness of our capabilities through our partner ecosystem as well as our efforts.

In that regard, we have upcoming meetings scheduled with both Alliance Pipeline and TransCanada among others. Turning to Power and Electromechanical segment, the electromechanical industry is in the early stages of up cycle, giving a boost to demand in the market segments we serve.

In particular, lead times across the industry are being extended and distributors are investing in inventory. This is a positive trend as we service a significant amount of our customers through their channel for both new design and production business.

To that end, we have been winning more larger customers. This is something we have been working on for quite a while.

And our efforts in new product introduction and in our sales organization are becoming production business and beginning to generate revenue across multiple industries. We added Arrow as a global franchise distributor in the quarter.

All the trends are quite positive with them. And we believe with their presence globally as well as their ability engage with closed fulfillment business, will expand our sales footprint particularly in geographies in which we have been historically underrepresented such as Europe.

With regard to ICE BLOCK which has been developed and is manufactured at our Canadian facility, our baby units are proceeding very well in their field trials. For those of you who follow Intel, you may have noticed the General Manager of its Data Center Solutions Group keynote speech at the recent OCP U.S.

summit in March. If you haven't, we link to an archive copy in the meeting room section of the CUI Global website.

At about 8 mins and 15 secs, you'll hear Intel self identify itself as one of the ICE BlOCK's beta customers and articulate the ICE BLOCK technology's value proposition to datacenter market. We remain on target to post initial ICE BLOCK revenues later this year with a ramp forecasted in 2018.

In conclusion, our opportunity set for our energy price in fiscal 2017 is considerable. And our rebound in electronics market bodes very well for growth in our Power and Electromechanical segment supplemented by our ICE BLOCK technology.

The management team and I are focused on growing our revenue to reach our goal of profitability and enhanced shareholder return. This concludes my prepared remarks.

Operator, please open the call to questions.

Hi, Bill. Hi, Dan.

Hey, how are you doing?

All right. How are you?

Good.

Good. I just wanted to start with ENGIE.

So you talked about the odorization opportunity there in testing in July. Just any thoughts -- I know it's early, but any thoughts on how long that testing may be, and then, you maybe just refresh my memory on the economics of that system?

Yes, it is early on. I think we've had indications from them that the testing for this will be three to six months.

There is no regulatory requirement, so there's no issues regarding certification or anything like that. Odorization is something that is simply managed today by making sure the deodorant [ph] level is properly dispersed into the pipeline.

And again, it's not something that's regulated. It's done by the individual carriers and transporters.

Snam is quite eager to get something in place because they understand that these, actually, 7,000 optics [ph] where they're delivering non-odorized gas is really a catastrophe waiting to happen. I mean, obviously you can understand that these consumers who are using that gas, mostly industrial consumers, but who are operating office spaces and others with this gas run the risk of having a leak that's undetected.

And that could be obviously a catastrophic problem for them. So they want to resolve it.

And they're talking as if they're very interested in moving forward very quickly. Now, for them, very quickly is a matter of months, not a matter of days or weeks.

But again, I think the indications we've got is that the test will be three to six months. The economics will be difficult to say.

We believe that the units, we're still in the initial beta phases with those. We're going to deliver a production level market to them -- rather a production level unit to them in July.

We think that unit will be between €7,000 and €10,000, something in that frame. I'm assuming that they'll roll it out much like they're rolling out the GasPT to the first 33,000, the largest customers first.

So again, I mean, you can do the math. They're going to obviously get some kind of a discount because of the size of their order, but I think the units themselves will be between €7,000 and €10,000 a piece.

Okay, and is that -- I mean, the regulatory issuance, which are impacting GasPT is that something that it would also apply to this or are they two separate things?

Two very separate things; GasPT, remember, has to provide accurate repeatable measurements that are used for fiscal monitoring. So they have to be certified as accurate, as durable over a lengthy period of time.

Odorization is not -- much like VE-Probes, there's no regulatory buy that looks at odorization, but it looks at gas sampling. All that has to happen is the operator needs to be satisfied that the gas is being property oderized.

And realize you're replacing no odorization at this point, so they're eager to get something in place. And the problem with the current technology involving odorization is it requires a constant gas flow.

And the optics that they're talking about don't have a constant gas flow. It's intermittent gas, and so you have to have something unique, and that's what this system addresses.

So, again, no regulatory issues, simply the field trials to make sure it does what we say it will do. And then I think we'll be talking about deployment.

Yes, got it. Okay, thanks.

Then just the biomethane opportunity you mentioned that you expect some purchase orders here in the somewhat near-term. I mean is that -- now that you're into that a little closer -- I mean if you're able to speak on it, do you have any thoughts over what timeframe that rollout may be?

I mean, honestly it's multiple years, but any clarity there would be helpful.

Yes, I think the rollout itself they're looking at two to three years, that's a thousand units over the next two to three years. But I think we'll see some beginning purchase orders in the next couple of months.

They're eager to get started. And I think that was one of the things we talked about in another conference call.

Initially, their integration unit that we were meeting with started to talk about, well, we have to test the unit, we'll have to see if it works. And they were told immediately by ENGIE's R&D division, you don't have to test it, you don't have to see it works.

We know it works. We know it's durable, it's already been certified.

So that was taken out of the mix. So really, now it's just a matter of them getting their build schedule up and running, and then sign the order.

So we expect to see that. The other side of the biomethane is we also expect to have some pretty good news on biomethane to grid skids in the U.K.

We have, I think, five out for bid right now. We have already reduced the bid price, because we are now able to eliminate the gas chromatograph, you can simply use our GasPT.

So we expect to get most, if not all of those bids. And those are all very -- £300,000-£400,000 projects that should be quite profitable, and will fall into this year's revenues.

Okay, got it. Maybe last one from me, just on the balance just to clarify.

Did you say that you're considering a mortgage on the Oregon facility, and just -- I mean, you previously had thought that you may do that on your U.K. facility, so just clarification on that?

No. Eric, the comment was that -- we actually have a mortgage on the Oregon facility.

What the comment was is that the real estate market where our Oregon facility is at has seen some pretty good growth in value. And so we are looking at doing a sale and leaseback of that property, where we would essentially cash out our equity and pay off our mortgage, brining cash back to the balance sheet.

A pretty good amount of cash it looks like based on what we're hearing, and pay off that long-term note as well. So, in general, just strengthening up the balance sheet and capitalizing on that asset's increasing value, while at the same time locking in a reasonable market lease.

And at the U.K. facility, as you did note, we still have the option to get a mortgage on that if we choose to.

Currently it's completely unencumbered, owned outright.

All right. Thanks a lot.

Hi, thank you. That biomethane to skid opportunity, 1,000 units over two to three years, and expecting appeal in the next couple of months, we are expecting a sizable appeal to start?

I mean, how should we think about that progressing?

I really don't know. What they've talked about is -- that's why I said they'll have to look at their build schedule.

These big companies don't order product to sit on the shelf. In other words, they'll set up a build schedule depending on what that build schedule is, that's how they'll order the product.

And sometimes you order two months in advance, maybe three months in advance. It'll depend on how fast they're building the units and how they ramp up.

And then we'll see that as we start to see the purchase orders. Much the same as with Snam Rete, it's 3,300 units that they want, but their initial order was for 400, they've then said that they're going to increase that deployment schedule to a hundred a month.

And so we see that as the next logical step. But we have not gotten a build schedule at all from ENGIE, we just know that there's a thousand units that they propose.

And are you anticipating you would get that entire 1000-unit order?

Absolutely, yes. They, especially now, after what's happened in the U.K., they're quite excited about the fact that they can deploy now in essence a cheaper unit that does the same exact thing as the gas chromatograph.

So, nobody else will get them at this point.

And is this similar in scope to the skid, I mean kind of an apples to apples comparison with the five you have out for bid today?

Yes, except the only difference is, understand, we wont be building the skid, we'll be providing components, like the GasPT and probably some other components, but their -- Endal which is their integration on -- they'll actually be building the skid. So it'll be unlike in the U.K.

where we build the entire skid, here we'll be providing components.

I see, okay. And then the components, obviously some you make and some is it pass-through?

Exactly.

Okay, that's helpful. Obviously, you started to see a little bit of order pickup this quarter, I think on both segments.

Can you give us a sense on how you think about revenue as we progress through the year, the trends you may see Q2 in the back half?

Yes, I think -- again, a lot of it depends on when Snam Rete starts reordering. I mean, one of the things we've talked about internally extensively is that that one customer going back to their build schedule of 100 a month makes this company incredibly healthy overnight.

So it depends on when that happens. And frankly, I don't think they know when it's going to happen, and certainly I can't tell you if they don't know.

But I think as we get to the second-half of the year hopefully that will begin at some point during that second half of the year. So I that will change, I think, quite dramatically the revenue scheme.

But with or without that I think we're going to start seeing increased growth with ENGIE obviously. We've got some nice opportunities in North America with the VE technology, as I mentioned during the conversation we had.

There are several really big Fortune 100 pipeline operators and gas operators generally -- actually come to Southwest Research, and witness what happened with the probe. They're all very excited about that probe, and the fact that they will not have to do the calculations they do with the standard probe, nor will they have to replace the probe on a regular basis because of the lack of that VE, that vortex effect.

We also have a team up right now, as I mentioned, in Canada, meeting with Trans-Canada Alliance. So think we'll see an increased revenue in both segments during the second-half of the year.

The other thing that we'll start seeing during the second-half of the year is in the Power and Electro-Mechanical section, we should start to see some initial revenue from ICE Block. The initial results of that have been quite good.

As we mentioned, since Intel identify themselves, we could tell you that they're one of the beta test participants, and they've been quite impressed, as have the other participants. So, again, we think that the second half of the year is where we'll see the revenue growth.

But you're absolutely right. But segments saw increased ordering this first quarter, $6.8 million in the Energy division, and a nice uptick as well in the electronics division.

So, we'll see I think steady growth from here on.

On the increase and productivity cutting the -- for the $600,000, I'm sorry. Yes, $600,000 saving you are expecting was that more on across the board or was that more to the power and electromechanical segment?

That's primarily in the power and electromechanical segment.

Okay. So we should start to see gross margins pickup in that and was it Q3?

Well, I didn't start to see them taking up in Q2 but yes that full cost savings will be realized by Q3.

Okay. And then, as far as reducing the sales and marketing by $1.5 million per year, what are some of the key savings you will see and what are you doing to achieve that?

It's primarily taking a look at personal seeing where we've got surplus workforce essentially, where we are a little over staffed for the project that we have in place right now. So we are taking a look at certain position in support roles kind of throughout the organization right now to see where we can remove cost that are not being fully unless right now and push some others.

So, that's across both segments, Joe, you are seeing now.

I see okay. And then, lastly for me on this 36 month contract.

What's kind of the revenue opportunity with that, is that meaningful? I know it's a longer term opportunity but I just wanted if there is something as you are doing this?

If you followed the link that I put in the press release to the T&BGL press release see that the total project was £4.8 million. I believe it is and I can tell you that about half of that is coming to us directly and that is really to design and fabricate and manufacture the prototypes.

And then, monitor the adjacent, along with T&BGL, so I think you will look at somewhere around €3 million something like that.

Okay. And is that in the backlog or is that just as a cause?

The right thing in the black spot.

Okay. Okay.

Thank you.

Good morning, I just wanted to move back to up Jim what sort of the unit opportunities that commercial market that you are now able to address with the change in regulation?

Well, the largest part of it is going to be the bio message again that's the big issue that they had and we see that as probably somewhere between 8 and 15 of those units on annual basis and that will continue for three or four years as long as -- certainly as long as supplemental care continues and there is every indication that once there an election, if it is a Tory government that comes in which is likely will be that they will continue that. Then from that of course the big issue we get into that residential market.

The residential market is a much bigger market and you are talking about 17 million customers and we are doing with us Jim and T&BGL at this point is just so you are clear on it is there purpose in putting us into is to be able to give the residential customer the ability to monitor their gas usage on pound basis or on a monitory basis, second-by-second. So they are taking our units four of them and they are connecting at least by a wireless technology to 50 blue in essence with smart leaders.

We currently measure the amount of gas and report that to a smart phone or iPad or whatever else consumer might have. But do not have the currency value necessary to compute the dollar usage or the pound usage for them.

Our device will be used to give them that CV application, so you will end up with customers who can see second-by-second. How much they are spending on their energy and they believe that that will tend to make people conserve, which in essence studies that reveal that it does make people conserve.

If that test is positive and if they see conservation on the basis of those 200 customers, then I think that deployment can occur but again understand something, that's a three year process, so we are very early on -- this is not something you can see in the next few months. It's definitely multi-years, but the payout is as many as 50,000 analyzers to be deployed throughout U.K.

and many, many more than that in France and across Western Europe. It will be much smaller if you will much lower MSRP unit, it's something we could put together.

They are not quite as aggressive by the act they are seeing and not quite as aggressive about the speed. But again it's going to be a different unit, but it will have to be a unit like ours, that has no service gas that's very, very low maintenance and could be deployed broadly without a lot of service.

So again, we're at the beginning stages of what could be a very huge deployment. So that's the opportunity, gentleman.

Okay, thank you. And then, on Italy, you said you delivered 400 units; how many are actually installed and running now?

And I guess, related to that, what's sort of the remaining hurdles there in the regulatory issue?

Sure. I think my understanding is there is around 30 to 35 that have been deployed and broadly across those 30 to 35 they're seeing an increase of around 15%, 1-5 percent, in there of billable revenues, which is dramatic if you think about it because of the same customers getting the same gas who are now in essence seeing 15% more revenues coming to Snam Rete.

So again, I think, they're definitely eager to get them out there because they see a big return on investment. The tariff issue is a -- as I've explained in the past, it's an antitrust issue that was raised by the industry.

It was something that stamped to their discredit, actually had not thought of in the original proposal. And what it is simply this, it's a voluntary program where they're paying to buy the optics, I assume that everybody does that then there'd be no issue.

The problem is if there are people or entities who choose not to buy the optics or not to sell the optic to the Snam Rete, they were forced to pay the same tariff as those who did, which the regulator found to be an antitrust issue. There had to be a resolution where if a person or an entity did not participate, they would have an opportunity not to pay the same tariff.

So that's what they're in the process of doing is trying to set-up a tariff scheme that would address that potential antitrust issues. And again, that's -- it's nothing more or less than that, but it is a difficult -- apparently a difficult regulatory issue that they're trying to get over.

Okay. I think that's a good overview.

Right.

Thank you. Good morning, Dan, and good morning, Bill.

Just as a follow-up to the previous question, why is only around 10% of those units deployed? I mean what's holding them back from putting together the units in the field?

Because they can't buy the optics; it's just all regulatory scheme. What's been deployed is -- or optics is that they already own.

Their scheme is to buy the optics and then retrofit the optics, not just with our GasPT, they're retrofitting with new flow meters or flow computers. They're putting on some pressure gauges.

They're updating them to some regulatory changes that the EU is insisting on. So they're actually going to buy those optics, and they cannot do that until they take care of this regulatory issue.

So what's happening is, not just us, but the Tier 1 contractor who is installing these is in essence waiting and they're very upset about it. Frankly, they're putting more pressure on than anybody is, our distributor is obviously, SOCRATES, who are in Italy, they're putting pressure on because they want to get the commissioning done, and obviously we're putting what pressure on we can as well, but the problem is they can't move forward with the purchase of these optics until they take care of this traffic issue.

So what they've deployed are those optics that they own themselves.

Understood. And just moving on to the sort of the gross margin softness this quarter; do you expect this could potentially bounce back in the second quarter or will it take a little longer to sort of come back to normalized levels?

We think it's going to begin improving this quarter, yes.

Okay, understood. And then, just on the sort of the higher level revenue outlook for the year, it looks like there are a several interesting opportunities in the pipeline, but in relation to the year-over-year softness, do you think we still have a chance to sort of grow revenues at somewhat higher levels than last year?

Yes. We don't -- obviously I mean we don't do forecasting but I think it's going to be a growth year, and I think it's going to be -- obviously it's going to be a growth year compared to last year.

And I think that you'll see that towards the second half of the year. Yes, if you're asking me if the revenues we think will be higher than last year, we do think that.

Understood. And in relation to sort of ramping business development efforts on the Power segment, you know, agreement with Arrow, I guess, plays into that, are we doing anything else sort of to capitalize on the improving cycle in that space?

We're doing -- I mean, and that's a pretty broad question. Yes, we're doing lots of different things.

We've done various programs with our four distribution channel partners, which are they're on top 10, if not the Top five or six globally for distribution. Our marketing team and our reps are all out and our direct sales guys are out working with direct customers as well.

We're participating in certain conferences, we were at APAC this year, we're going to the Distribution Conference here in May, we are advertiser putting on new products, we're continuing to bring on new product introductions and then of course we're working on doing the ICE Block through its regulatory certifications with UL and CUV and getting that to become a saleable product to reach out to customers like Intel as mentioned earlier. So those are the -- I guess those are the main initiatives going on through the Power segment to reach new customers and further penetrating existing customers.

Understood. That's all I have.

My other questions have already been answered. Thank you guys so much.

Thanks.

Hi, good morning guys.

Hi, Jeff.

Just a couple of questions, can you give us an update on what is going on with the GE?

Not much, I think the same thing that we talked about last time, it's still working at their commercial division in Italy in Florence, we did receive a couple of brief comments from them that it's performing as expected, we don't have a timeline on what that means, they are the ones who do make the decision about packaging those, so they would be the ones that could say we're going to put it on the builder materials which is what we're really waiting for. Again I don't really have an update other than what we have talked about in the past.

And there is no timeline on that, they work at their own pace, again I guess the good news is no news, there has been no indication that it is not doing exactly what we thought we're doing what it's supposed to do.

Okay. And then you talked about the ethylene plant and get some points in the not too distant future, is there a second wave here of ethylene plants being planned in the U.S.

what is your sort of outlook about at what point in the process you might be able to get into dialog with people?

Well, I think we're waiting for the results from the one that we're obviously testing, once we have those results and what they told us the customer and it's a very large Fortune 100 customer they told us, they will share the results with us and we will be able to use those in our marketing efforts so obviously we're waiting for that so, we have some strong evidence that it doesn't we have to do. And once we have that our sales people will be out immediately pushing and obviously will be negotiating with that customers well because they have a various plans of their own to see that is all timing and here is what dependent on, those plans are shut down routinely for maintenance that's when this that tariff installation would have to occur as to when each individual plan has been shut down for other maintenance.

So, again it would be time around those shutdowns and that would be a plant-by-plant shutdown decision. So but again this is we get that information believe me will be out there pushing this, there is no reason for us to keep it secret.

Got it. And do you know if that customer recently announced a new very large ethylene plant?

If I said that, I'd be identifying the customer, which I am committed not to do, right.

All right. And then, the -- I guess there's some biogas initiatives going on both in Quebec and in California where they're paying some crazy amount for biogas versus natural gas; any clarity on what kind of opportunities might be developing there?

Yes, we have seven bids out right now for us North America rather four biogas units. We have two in Toronto and five in California there is I think four in California, I think one in Oregon and we again there's no time frame as to when we get those back to this went out.

I want to say late last year. These were you know again it's kind of new for everybody in North America but you're absolutely right they are, they are moving forward and we expect to get some if not all of those simply because we have such a leadership role in Europe as to producing these skids, but we have the bids out and we certainly are pushing we are sales people call them at least weekly you know trying to find out what the status of the bids are and none of those, none of those bids have yet been granted.

So, again we're definitely looking in that direction, and they are California, Oregon and I think it's the city of Toronto for two.

Okay, and any kind of update on progress with daily dramatics?

Yes, they're doing very well. In fact they partnered with us on this demonstration we talked about at Southwest Research, they actually brought some really, really prominent operators to the demonstration who actually watched it and have asked for films to give to their procurement department.

And then, we are seeing sales from them. We don't have an individual breakout what the sales are, Dan?

It's not material to disclose yet, but we are -- really the key was that relationship is getting in front of the customers that for example the ones that were brought into that demonstration test at Southwest Research because it's not that thermal hours that we are looking to get the business. We're actually looking to penetrate their customers for the larger sampling systems like the ethylene plant type of sampling systems, the discrete analyzer, so…

But it's a project relationship.

Understood. And then what is the outstanding mortgage on the Franklin business part building?

Well, you even knew the business partner name; it's 3.4 million.

3.4 million, okay, great. Thanks so much.

Welcome.

Hi, Bill. Could you clarify an issue in Italy in terms of Snam Rete having to purchase the offtake locations?

What does that mean? Who owns them now?

And is there an incentive to sell them to Snam Rete?

Yes, the owners of those facilities now are the individual big operators. The power supply -- I am sorry the power generation station, the steel mill, the ceramics factory.

Those offtakes are owned by the individual consumer; the big industrial consumer. And here is the incentive, the EU issued a regulatory change for these types of offtake.

They took effect in January and has to be completed within 12 months. That regulatory change by the EU is going to require a substantial investment by the owners of those offtakes to update those offtakes.

There is a number of different things they have to do and I couldn't give you the details. But it's a relatively extensive update that they have to do.

Snam saw that as an opportunity to go to those big consumers and say, look, here's what we will do. We'll take that cost that you have to invest in that offtake off your hands and in addition we will pay you.

We want to buy the offtake back, so we'll own it. And we want to buy and easement in perpetuity to be able to come in and service our equipment.

And for that purchase, we will provide to you the update that the EU requires. We'll provide you a new flow computer and actual analyzer that will tell you the specific amount of gas you are getting.

So what…

So should I read into that as Snam Rete has to go out and negotiate with 2900 offtakes?

No, it's not -- they are all standard -- so, no, it's not a negotiation. In other words, there will be set price and a set purchase.

And so it's not a negotiation because they are all the same. They are all standardized.

There is not 2900 different offtakes. They are all very, very standard.

Jim, it's more like an easement to gain access to your national gas meter in our house. It's just an easement type of access.

It's not actually buying the land and everything. It's…

I guess where I am going with it is in terms of the timing is Snam anticipating being able to accomplish 2900 shall we say contracts or agreements in a very short period of time?

Yes.

Or, is this a multi-year effort?

No, this is a three to five year program. But that's what it's always been a three to five year program.

But the program was never delayed by negotiating the terms. The terms are set.

They can set the terms. The problem is as I mentioned before is it's got to be voluntary.

They can't simply take the offtake. It's got to be voluntary.

But it's a set fee that they would pay and set in essence tariff that each operate would pay as a result of that. The problem is they didn't take into account those operators who would simply say, no, we don't want to sell our offtake.

We will take care of it ourselves. We are going to invest the money and move on.

Those people need a second tier tariff and that's the issue. So it's not a complicated -- it's not a complicated negotiation nor is it a complicated situation once they have the tariff scheme setup proper.

Okay. And then a question for you, you sit upon resolution of the tariff issue.

You are anticipating orders of 100 a month to be installed. With 365 of them still on the shelf, is that going to be an issue?

Are they -- you are assuming 100 a month, do we need to get those 365 installed first? And if so, how long would that take?

Yes, I think they will definitely install it. Well, they want to install all 365, but they will certainly install to a base where they have maybe a 100 or 150 left.

So we will have somewhat of delay. But again they were fully prepared even at the outset is installed 50 a month.

I can tell you right now that the Tier 1 contractor, who got this deal, has got team standing by. Their rate installed 200 to 300 a month if they can get them.

Now, it won't go to that, but I think they could very easily give backup to a 100 a month or 75 a month and go through those in a month or two and they are not going to wait if my understanding is if they get this resolved and when they get this resolved, they are going to want start ordering because again they understand we won't be able to deliver a 100 a month you know, right off the gate although we do have right now some on the shelf that could deliver. The bottom-line is we've told them, we are going to have to ramp up.

So we want them to understand, they go to give us some advance notice. So I think there would be a or maybe a two month period where they are installing the units they already have, but I think once that therapy was is taken care of certainly within 60 to 90 days will be delivering to them.

Okay. And then, last issue.

I guess on the last call you said that you all were looking to be an aggressive acquire and I believe it was complimentary to the gas side of the business, can you comment on any progress there where we are?

Yes, we've identified some opportunities, but nothing that I can really point to at this very moment that we are not, we are really concentrating right. I'm doing two things, one is developing new customers and getting product out to the market and two is in essence streamline the operation and cutting overhead and cutting some cost but again we are going to be opportunistic, we are also looking there are a couple of opportunities that we may take advantage of and we think it's some of those might, say, come to fruition before the end of the year.

Okay. And this will be complimentary to the gas side of the business?

Exactly.

Okay. Thank you.

All right.

Hi, Mike.

Good morning. I just have further question of the ethylene, do du think that the large customer might just order all on the once and sort of delivery schedule with a maybe order one, two, three to time as needed?

We would push them to order more than once, Mike, but I got to be honest with you, these big companies don't do that, that's not how they operate, that's not how Snam operates. Most of them what they do is they don't want to have merchandize sitting on their counter or on their shelf if they are not using.

So that exactly would be a project-by-project as they shut-down a factory or shut-down a plant they will purchase the necessary application in terms of moving at that point. That's what I suspect obviously we would push them to order to deliver when they need them but I think to be, I think to be cautious and to be conservative.

We would expect the order as they needed them.

Okay. But I will tell you what, give me an indication that total, that would give you an indication for total, I mean?

Yes, I believe that absolutely true and again if you look at it's the products are $2.5 million of piece, so every order is important for us.

Okay. Thank you.

First of all, can you talk about ENGIE what's the value that you are going to provide per skid for them, you know, for the components you are going to sell them?

Sure; two things, first of all, the first benefit is the fact that the GasPT is solo maintenance. If you put a $40,000 Emerson GC into one of these skids, you got to have a guy out there at least twice a week calibrating it, you got to make sure that every three to six months you are replacing carrier gas, a calibration gas, you've got all the issues about reliability the fact that about 16% of the time, it's not working for whatever reason, the data calibration, if there is something wrong with it, they just turnout that intangible.

So all those things are increasing cost and remember biomethane operators are not gas operators, you are not talking about Chevron, Shell, BP. What you are talking about is a farming consortium, a landfill operator anywhere we have in essence organic materials that indicate and methane gas has been produced, you have these opportunities.

But these people are not operators, who can afford that -- send the kind of money that often time it takes to put in an operator [indiscernible] gets to do is be first of all very economically installed and then there is little or no name. Our device has got no maintenance whatsoever and it's fast than us it will take news that they need to get for propane injection which is what the U.K.

is doing now. But for nitrogen injection although that will be rare, generally propane injection you want that.

Bill?

Yes.

When I said value, I meant the dollar value.

Dollar value, I'm sorry I apologize. I thought you meant the technical value, so the value of the GasPT the one that they would be purchasing would be the same type that Snam Rete purchased; it's the analyzer only they don't need the high pressure with the high pressure implementation.

And as we talked about historically those devices cost on a one-off basis is around €18,000 to €20,000 and obviously the size of that will determine the discount they would get, so they will get some volume discounts.

Okay. And in terms of doing a 1000, I mean are these going to be custom projects each of these wells in the grids and this is in Europe right that that is the opportunity in Europe not just France but all over Europe?

It's just France, it's just France, it's just France.

Okay, but if each projects the custom project or they going to be a standardized?

No it's a standardized skid, the skids are –the large skid themselves we do the same thing, they're sold as a product in other words we put them together, there is a menu, there is certain things you can get or not get depending on the size of your operations but again they're pretty much a productized piece of equipment.

Okay. Are there a 1000 biomethane are there a 1000 projects in France possible today?

I mean are there…

Absolutely. They are we have the identified locations, they want - they get France is very pro green, energy green gas.

They have a mandate, they need to get a 7 percentage of their gas from renewable by 2020 and its quite, it's a quite large percentage their gas and they're to identify the 1000 locations where they want to install this, they already haven't said.

Okay, so that's not a problem so that's a reason why it could be more.

Could be more.

And could it, but not less?

But not less that my understanding is they've identified the 1000.

Okay, and then the timetable I think you just too early it would have been the first we're going to do it like a demo with a few of the skids and that will happen over like six to nine months and then after that it would start to pick up.

No, I think it could pick up sooner than that, the demo was the odorizer [ph] I was talking about, the skids, the biomethane skid, they're contemplating 1000 units over two to three years, and I have not seen a build schedule. So, I don't know how that's rolled out, but they're talking 1000 units over two to three years.

Okay, thanks.

Okay.

Thank you, Chelsea, and thank you all for attending the conference this morning. As always, Dan and I are available for follow-up.

If you contact Sanjay to schedule time to speak, we would be happy to talk to you. And thank you again.

We look forward to speaking to you in upcoming conference presentations that we have scheduled, and obviously next quarter. Again thanks for your support and we appreciate your time.

Thank you, Chelsea.