ADDvantage Technologies Group, Inc.
Q3 2017 Earnings Call Transcript

Published: 14 Aug 2017

[Operator:]

Good day and welcome to the ADDvantage Technologies Third Quarter 2017 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Garth Russell of KCSA Strategic Communications. Please go ahead, sir.

[Garth Russell:]

Thank you. Before beginning today’s call, I would like to remind you that this conference call may contain certain forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are, among other things, statements regarding the future events, such as the ability of ADDvantage Technologies and its subsidiaries to maintain strategic relationships and agreements with certain original equipment manufacturers and multiple system operators, as well as the future financial performance of ADDvantage Technologies. These statements involve a number of risks and uncertainties. Participants are cautioned that these forward-looking statements are only predictions and may materially differ from actual future events or results due to a variety of factors, such as those contained in ADDvantage Technologies’ most recent report on Form 10-K on file with the Securities and Exchange Commission. Financial information presented on this conference call should be considered in conjunction with the consolidated financial statements and notes included in the Company’s press release issued earlier today and included in ADDvantage Technologies’ most recent report on Form 10-Q filed earlier today. The guidance regarding anticipated future results on this call is based on limited information currently available on the ADDvantage Technologies, which is subject to change. Although, any such guidance and factors influencing may change, ADDvantage Technologies will not necessarily update the information, and the Company will only provide guidance at certain points during the year. Such information speaks only as of the date of this call. During this call, we may also present certain non-GAAP financial measures such as EBITDA and certain ratios that are used with these measures. In our press release and in the financial tables issued earlier today, which is located on our website, addvantagetechnologies.com, you’ll find a reconciliation of these non-GAAP financial measures with the closest GAAP financial measures and a discussion of why we think these non-GAAP financial measures are relevant. These financial measures are included for the benefit of investors and should be considered in addition to and not instead of GAAP measures. With nothing further, I’d now like to turn the call over to David Humphrey, President and Chief Executive Officer of ADDvantage Technologies. David, the floor is yours.

[David Humphrey:]

Thank you, Garth. Welcome everyone to the ADDvantage Technologies fiscal third quarter 2017 conference call. With me today is Dave Chymiak, our Chief Technology Officer; Scott Francis, our Chief Financial Officer; and Don Kinison our Vice President of Sales. Before I turn the call over to Scott to provide the detailed financial results, I want to provide an update on our recent performance and briefly comment on our ongoing strategic initiatives. Sales in the third quarter of fiscal 2017 increased 29% compared to last year, which include sales from our new subsidiary, Triton Datacom, which offset sales decline for Nave Communications. I’m pleased to say that sales from our Cable TV segment increased slightly to $6 million for the third quarter compared to the same period last year. This segment of our business has had fairly consistent sales performance for the last several quarters. For the first nine months of fiscal 2017, revenue was up $600,000, generating an increase in gross profit and positive cash flow for our Company. Looking ahead, we’re in the process of reviewing our various operations and operating results to optimize our performance within this segment, as well as continuing to look for strategic opportunities to leverage our inventory position and technical sales force within the cable TV market in order to gain greater market share. In terms of our Telco segment, we saw sales increase $7 million compared to $4.1 million for the third quarter of fiscal 2016. This is the second full quarter of financials to include the acquisition of the Triton business. The Triton acquisition has further diversified our business, and we’re pleased so far with both, the top line and bottom line performance of the Triton business. While the Triton acquisition highlights the immediate scale that we gained through the addition of Triton business, this benefit was negatively impacted by the continuing poor performance within Nave Communications. In an effort to improve the top line results and therefore the overall operating results of Nave, we’re in the process of implementing several changes by our VP of Sales, Don Kinison. Don has been working with the Nave team on evaluating the market challenges they have faced, in order to develop a revised sales strategy for Nave. While it is too early in the process to discuss specific detailed strategy that Don plans to implement, I can say that it isn’t focused on just one thing. The sales strategy will focus on both who and how we sell to our existing and prospective customer base, as well as the sales organizational structure. We believe that Nave’s performance will be turned around, once the sales strategy and revised organization is fully implemented. With that, I will now turn the call over to Scott Francis, our Chief Financial Officer, who will take you through the financial results in more detail.

[Scott Francis:]

Thank you, David. For the fiscal third quarter of 2017, our total sales increased 29% to $13 million from $10.1 million for the same period of last year. Sales of the Cable TV segment increased $0.1 million to $6 million for the three months ended June 30, 2017 from $5.9 million for the same period of last year. The increase in sales was due to an increase of new equipment sales and repair sales of $200,000 and $300,000 respectively, partially offset by a decrease in refurbished equipment sales of $0.4 million. The increase in the new equipment sales and repair sales is due primarily to an overall increase in our market demand. Sales for the Telco segment increased $2.9 million to $7.0 million for the three months ended June 30, 2017 from $4.1 million for the same period of last year. The increase in sales for the Telco segment was due an increase in used equipment sales and new equipment revenue of $3 million and $100,000, respectively, which was partially offset by a decrease in recycled revenue of $200,000. The increase in Telco used equipment sales was primarily due to the Triton Datacom which offset the continued sales from Nave Communications. As David mentioned earlier, Don Kinison is addressing the lower sales at Nave Communications. Consolidated gross profit increased $300,000 or 8% to $3.8 million for the three months ended June 30, 2017 from $3.5 million for the same period of last year. The increase in gross profit within the Telco segment of $500,000 offset by a decrease in the Cable TV segment of $200,000. Gross margin for the Cable TV segment was 31% for the three months ended June 30, 2017 compared to 36% for the same period of last year. Our gross profit margin for the Telco segment decreased to 27% for the three months ended June 30, 2017 from 32% for the three months ended June 30, 2016. The decrease in the gross margin was due primarily to lower margins from equipment sales related to Triton Datacom and lower gross margin for refurbished equipment sales from Nave Communications, as a result of an increased percentage of sales to resellers as compared to end-user customers and increased sourcing of equipment to fulfill equipment sales. Our operating, selling and general administrative expenses increased $700,000 to $3.8 million for the three months ended June 30, 2017 from $3.1 million for the same period of last year. This increase in expenses was due to the Telco segment of $800,000 due primarily to operating expenses of $800,000 from Triton Datacom, and Triton Datacom earn-out expenses of a $100,000. The increase in the Telco segment was partially offset by $100,000 decrease in operating expenses in the Cable TV segment. Net loss for the three months ended June 30, 2017, was $67,000, or $0.01 per share, compared with a net income of $316,000 or $0.03 per share for the same period of last year. Our consolidated EBITDA decreased $300,000 to $400,000 for the three months period ended June 30, 2017 from EBITDA of $700,000 for the same period of last year. The Cable TV segment EBITDA decreased $100,000 to $500,000 for the three months period ended June 30, 2017 from 600,000 for the same period of last year, while Telco segment EBITDA decreased $200,000 to a loss of approximately $100,000 for the three months ended June 30, 2017 from an income of $100,000 for the same period of last year. The Telco segment includes earn-out expenses of $100,000 for the three months period ended June 30, 2017. For the nine months ended June 30, 2017, total sales increased 26% to $36.4 million from $28.9 million for the same period of last year. Sales for the Cable TV segment increased $600,000 to $17.6 million for the nine months ended June 30, 2017 from $17 million for the same period of last year. The increase in sales was due to an increase in new equipment sales and repair sales of $500,000 and $900,000, respectively, which was partially offset by a decrease in refurbished equipment revenue of $800,000. The increase in the new equipment sales was due primarily to increased sales in the first and third quarters of 2017, which was partially offset by general decrease in demand in the second quarter. Sales for the Telco segment increased $6.8 million to $18.9 million for the nine months ended June 30, 2017 from $12.1 million for the same period of last year. The increase in sales for the Telco segment was due to an increase in used equipment sales and recycling revenue of $6.6 million and $0.2 million respectively. The increase in Telco equipment sales was primarily due to Triton Datacom. We recognized revenues from Triton Datacom starting on October 14 of 2016, which was the date of the acquisition. This increase was offset by the continued lower sales from Nave, which we addressed and as discussed earlier in the call. Consolidated gross profit increased $1.7 or 18% to $11.5 million for the nine months ended June 30, 2017 from $9.8 million for the same period of last year. The increase in gross profit was in both the Cable TV and Telco segment of $0.4 million and $1.3 million, respectively. Gross margin for the Cable TV segment was 34% for the nine months ended June 30, 2017 compared to 33% for the same period of last year. Gross margin for the Telco segment was 29% for the nine months ended June 30, 2017 and 35% for the nine months ended June 30, 2016. The decrease in gross margin was due primarily to lower gross margin from equipment sales related to Triton Datacom, and lower gross margins for refurbished equipment sales for the remaining portion of the segment as a result of an increased percentage of sales to resellers as compared to end-user customers and increased sourcing of equipment to fulfill equipment sales. Our operating, selling and general administrative expenses increased $2 million or 23%, to $11 million for the nine months ended June 30, 2017 from $9 million for the same period of last year. This increase in expenses was due to the Telco segment of $2.2 million, partially offset by a decrease in the Cable TV segment of $200,000. The increase in the Telco segment was due primarily to operating expenses of $2 million from Triton Datacom, acquisition-related cost of $200,000, and Triton Datacom earn-out expenses of $200,000. In addition, for the nine months ended June 30, 2016, the Company’s reported a reduction of expense of $200,000 for the March 2016 earn-out accrual related to the Nave Communications Company acquisition. Net income for the nine months period ended June 30, 2017 was $161,000, or $0.02 per diluted share, compared to $486,000 or $0.05 per diluted share for the same period of 2016. Our consolidated EBITDA remained relatively flat at $1.8 million for the nine months ended June 30, 2017 and June 30, 2016. The Cable TV segment EBITDA increased $600,000 to $1.8 million for the nine months period ended June 30, 2017 and $1.2 million for the same period of last year. The Telco segment EBITDA decreased $600,000 to a loss of $16,000 for the nine months ended June 30, 2017 from $541,000 for the same period of last year. The Telco segment EBITDA includes the impact of Triton Datacom acquisition-related cost of $200,000, and Triton Datacom earn-out expenses of $200,000. Cash and cash equivalents were $3.7 million as of June 30, 2017 compared with $4.5 million as of September 30, 2016. The decrease in cash was due to cash used in investment activities of $5.5 million, offset by cash provided by operations of financing activities of $2.3 million and $2.5 million, respectively. The cash used in investing activities resulted primarily from the acquisition of Triton Datacom of $6.6 million and the final and annual installment payment related to the Nave Communications acquisition of $1 million. This was partially offset by payments received on our note to the YKTG Solutions joint venture of $2.3 million. The cash provided by financing activities was due to cash borrowing of $4 million to finance the Triton Datacom acquisition, partially offset principal payment on our notes payable of $1.5 million. As of June 30, 2017, the Company had net inventory of $22.7 million, compared to $21.5 million, as of September 30, 2016. Also at June 30, 2017, we were not in compliance with one of our debt compliance covenants, which was our fixed charge coverage ratio debt covenant with our primary financial lender under our credit and term loan agreement. We notified our primary financial lender of the covenant violation and on August 8, 2017, the primary financial lender granted a waiver of the covenant violation. Although the violation has been waived as of June 2017, we believe that the Company may again be out of compliance of the debt covenant as of September 30, 2017. This covenant violation was due primarily to lower operating results from Nave Communications of fiscal year 2017. Given our ability to continue to service our debt, our past relationship with our primary financial lender and a sales strategy we’re implementing within Nave, which we discussed earlier, we expect to be able to obtain covenant waivers from our primary financial lender until such time that we are in compliance once again with our debt covenant. This concludes the financial overview section of our remarks. And I’ll now turn the call over to the operator for questions.

[Operator:]

[Operator Instruction] Our first question comes from George Gasper, [ph] private investor. Your line is open.

[Unidentified Analyst:]

Thank you. Good morning. First question on the financial statement. Notes payable are in the current liability area. I assume that can you address how much of that relates to the Miami acquisition and what happens to this notes payable situation? And when does -- I assume you’ve got to refinance that and would it -- be considered into a long-term debt situation as opposed to current liability?

[Scott Francis:]

Yes. So, George, this is -- and you’re right, we did classify the entire note payable balance in as a current portion, but that is primarily due to the covenant violation and the fact that we couldn’t guarantee quote unquote that we wouldn’t be in violation within the next 12 months period. And as we already said on the call, that’s subject to getting our Nave Communication sales volume up thereby getting better margins down to bottom-line. Right? So with that said, we had to put 6.8 [ph] all as current, but we’re not having to refinance because we did get a waiver from our bank. And what that effectively means is we’re running business as usual in payments term. So, no acceleration as debt payments, nothing that’s going to happen out of the normal. So, this next quarter, we will make our normal principal as we always would have. And it’s just a classification issue that we are having to do from an accounting side. Does that help answer your question?

[Unidentified Analyst:]

Yes, okay. All right. And is that majority of what’s there on note -- that $6,829, 000, how of that much is from the acquisition.

[Scott Francis:]

The acquisition itself, we borrowed $4 million in the acquisition. And if I recall correctly, it’s about -- we’re somewhere in the 3.5, 3.7 still left on that, probably about 3.7 right now. But, of course that’s not current. We’ve -- of the balance, I think the reclass was -- we’ve pushed 4.5 million, 4.6 million up into -- into current for long term. So, that’s how it’s going to work.

[Unidentified Analyst:]

All right. I’d like to get into the various operations in terms of segment outlooks. And could you -- I don’t know if you mentioned this, is decommissioning business that you’re into on cell towers, was there any revenue in the quarter and have you been paid back for the advancements that you made to the joint venture?

[Scott Francis:]

So, related to YKTG Solutions, where we’re at right now is as we’ve stated, this year we collected over $2 million against it; we’re now down to $300,000 left on our book related to investments for what was recorded. about roughly, if I can give rough numbers, about $200,000 of that was related to the wireless provider and other 100,000 was leftover with the partners, as where we have recorded right now. That’s not the entire amount that we advance but that would get into not having to record any losses. So, we’ve got -- that’s where we’re at right now. We’re -- and I have collected already a decent amount of that -- of the amount still left with the provider, as of now, as of mid-August here.

[Unidentified Analyst:]

And there is no activity going on anymore with that joint venture, is that?

[Scott Francis:]

No. Right now, it’s pretty quiet on the -- there’s nothing related to the decommissioning project. We’ve got some little cleanup things on some billings and so forth, but nothing of magnitude.

[Unidentified Analyst:]

And the next one is the that Cable -- the TV Cable segment outlook, anything that you could relate on the going forward view of the business?

[David Humphrey:]

George, we don’t make forward looking statements, but always give the opportunity for Dave to kind of tell us what he’s seeing in the business these days. Dave, if you don’t mind, I’ll turn it over to you.

[Dave Chymiak:]

We’re seeing more activity for looking for pricing on fiber optic nodes and shifting a little bit and what’s out there, the marketplace is needing a lot of bandwidth for the forward direction right now more than they’re reverse path and that’s where the demand is right at the moment.

[Unidentified Analyst:]

And how does that -- can you expand your business do you think on the basis of how you view things now if there is the revenue stream?

[David Humphrey:]

That would be a forward projecting statement. But again, I’ll let Dave answer from an industry wide standpoint, what he’s seeing again.

[Dave Chymiak:]

George, we’re gearing up for it inventory wise. So, we’re seeing a lot of quotes for it. So, we’re gearing up for it.

[David Humphrey:]

There’s plenty of opportunities that’s Dave certainly has already alluded to but we’ve got the inventory, we’ve got the sales people ready to answer any of our customers’ needs.

[Unidentified Analyst:]

And can you edify any further on this amplifier situation that you all have spoken about for a couple of years now, thinking that this was going to move forward in some pretty significant manner? Is there any identification of that business occurring or not?

[David Humphrey:]

We’re still quoting and everybody is postponing basically right now.

[Unidentified Analyst:]

And then, on the communications area, Nave, what’s the prospect for getting that in the black and moving forward on a revenue stream basis?

[David Humphrey:]

George, I can tell you that it’s really all about sales, and we have got the right guy here at the table, Don Kinison to do that for us. I fell very positive about what’s going to happen in the future. I just can’t give you projection as to when, but I’m fully confident that Nave will be back in the black.

[Don Kinison:]

Good morning, George. I can tell you over the last couple months, we have been doing a pretty extensive review of the sales and the operational aspects of the organization. Not prepared to speak to at this time as we are starting to implement some of those changes, no all of them have been implemented yet. We’ll be prepared to speak to that in future.

[Unidentified Analyst:]

And can anybody make a comment about the Miami acquisition and how that’s viewed at this particular time on a growth basis going forward relative to what the revenue stream was when the operation was acquired?

[David Humphrey:]

George, they are not growing a lot but they are certainly operating the way that we have expected them to. And I think we could see some potential long-term synergies and Don’s got a lot of experience in that segment of the market. Unfortunately, we are not going to bring it to bear but he really needs to focus all of his energies on Nave as we have already talked about in the call. But I think long-term, we see some opportunities on the Miami Fort Lauderdale/Triton acquisition.

[Don Kinison:]

George, I have had a moment to spend a little bit of time with Triton since I’ve come onboard to ADDvantage, very pleased with the organization, structure and functionality. Although we are point a review as well the sales and operational aspects of the business, don’t feel it’s necessary to do it at this time, as it’s the focus -- Nave is David’s focus.

[Unidentified Analyst:]

And going forward, I know I asked this last quarter, I believe. I know that AEY is still not part of the value line, small, midcap publication, and there are a lot of companies that are smaller than ADDvantage Technologies that are listed in there. Is there any reason to think that you would try to get ADDvantage Technologies included in that circulation that comes weekly on small, midcap range area?

[David Humphrey:]

I think, George, you make an excellent suggestion. I think at this point in time, we wouldn’t probably actively pursue that until we get our Nave business turned around. But, when we do give that, I think that’s an excellent suggestion, and we will take a serious look at it. Dave, do you have any thoughts or comments on that?

[Unidentified Analyst:]

All right. thank you.

[Operator:]

[Operator Instructions] Our next question comes from Sam Rabotski with SER Asset Management. Your line is open.

[Sam Rabotski:]

Tell me, with the acquisitions you have made, have you saved any -- what have you saved so far in consolidation and what you expect to save?

[David Humphrey:]

I’m not sure what your question is when you talk about save.

[Sam Rabotski:]

What’s that?

[David Humphrey:]

I’m not sure how to answer your question, I’m not sure mean by what we saved.

[Sam Rabotski:]

In other words, have you -- I mean, have you saved, have you -- what -- have you been consolidating anything, do you expect to consolidate to save cost for duplications?

[Scott Francis:]

So, Sam, this is Scott. The acquisitions that we have done, haven’t been primarily on a synergistic relationship. When we did the Nave acquisition, it was completely different segment, a marketplace than what our Cable segment were. So, it wasn’t meant to be a synergistic, as well as even Triton, albeit in the similar type of space but definitely different customer base than how it sales. So, what I can tell you is we’re on a -- back office wise, we’re working and getting everyone on our same systems and our AP credit collections, all those types of things, payroll. So, that’s where the savings will come in, but not as much on the operational aspects of it; it’s mostly in the back office.

[Sam Rabotski:]

And as far as the inventories you’re carrying, what would you say the aging, is it one year, two-year, three-year, the obsolete 3 million credit that you have, does that cover any potential obsolete or what would you say the age of your inventory is?

[Scott Francis:]

I will address the second part of your question first. The $3 million that we have rounded there is, is meant to cover; of course an estimate but it is meant to cover, not just obsolete inventory but potential of any accessed inventory that we might have as well that we just can’t sell. So, that is meant to cover that. As far as the first part of your question, what’s the age; that varies significantly depending on which segment of the business you’re talking about. So, if I can talk a little bit to the Telco side. If you look at Triton, they are more of a traditional, shall we say a reseller that’s going to refurb and sell what they have. So, they are not going to hold inventory very long. By its very definition, it’s older inventory because it may be because some it is -- this isn’t brand new out of the box, because they’re refurbishing used equipment. Right? And then, as far as our Nave folks go, they are more of a reseller model, so they will hold their inventory level longer than our Triton business. But, they are definitely not someone that’s going to be holding out there 3, 5, 10 years. They are going to recycle their excess inventory supply and so forth to the extent they can sell. So they are probably -- I can’t give specific ages, but it’s going to typically be less than a two-year type model. And then, as far as Cable, that’s a whole other world. We have a different model at Cable. We have everything from brand new in the box to subset literally can be 15 years old to service our industry. Because literally we have players in our industry that needs stuff that’s 15 years old to replace but then they also have things that are brand new out of the box. So, it varies greatly depending on which part of the inventory that we’re looking at. I don’t know, Dave, is that fair?

[Dave Chymiak:]

That’s fair. Some of it is older. The big thing on the cable side, a lot of product is available from the manufacturer for 10 years, 15 years to be purchased. So, it’s not a big turnover like, we don’t have a lot of software and the cable industry and our equipment that’s out there, in fact there is none. And at the end, if there is a bigger turnover in software, becomes a factor on a lot of inventory that’s old over five years.

[Sam Rabotski:]

I guess one of the reasons for asking this question, I’ve been involved with another company that had to write off older inventory because it’s not allowed in certain defense area to be utilized, even though it may be good, it may not be able to be utilized. And I was wondering if there is any products of that nature as part of your inventory.

[David Humphrey:]

No, I don’t think we have a situation like that. We continuously review our inventory, that’s why our obsolescence numbers are the way they are because Dave does carry a lot of older inventory. Dave continues to review them on a quarterly basis, does a detailed review of his inventory of all the operating companies within the Cable group, once a year. We will do a more detailed review of our Telco businesses as well. I can’t promise you that there won’t be write downs as those certainly do exist in a Company like ours that carries inventory but we do try to be diligent on and on top of our business lines, so.

[Sam Rabotski:]

Okay. Now, the other thing is, I guess you’re carrying intangibles and goodwill of 15 million and your stock -- you’ve 10 million shares in the stock that’s trading $1.5, so that’s15 million, your equity is about 41 million. Do you see, based on the stock valuation to have to write off any of this goodwill or intangibles from an accounting point of view?

[David Humphrey:]

What I can tell you there, Sam, is we’ll be evaluating our intangibles and our goodwill; we typically do it in the fourth quarter of the year unless there’s an event that occurs to tell us do it otherwise. There’s certain accounting process that goes through. Once the stock price, i.e. a market value of a public Company is one of those factors that you look at, we look at cash flow projection, historical and our own plan and forecasting mechanisms as well, and then look at also what our asset basis realizations can be. So, there’s all sorts of factors that go into it. I can’t address on this call whether or not I think there would be a write-off or not, other than we review it every single year and make those two factor determination.

[Sam Rabotski:]

On the other side of the coin, even though have you thought of -- I mean, maybe with your covenants you can’t buy stock but instead of doing acquisitions, is there any judgment whether your stock is worth buying, where the prices are relative to doing acquisitions?

[David Humphrey:]

We very much appreciate your question, Sam. This is something the Board has taken up on a couple of different occasions, but we did buy stock back about three or four years ago to complete a commitment that the Board had made 10 years earlier and we completed that transaction. The Board is committed to growing the business through acquisitions and organic growth in our business lines that we have. And so they’re not really -- don’t want to commit any of our capital and our cash positions to buying stock back.

[Sam Rabotski:]

And the final question, based on the technology and the changes that are taking place, is there -- and the fact with all the wireless going on, is there any way that you need to do to make yourself profitable or what do you see of profitability in the future? I mean, you’ve made these acquisitions, you feel strong about what you’re doing, but the question, where do we see profitability happening?

[David Humphrey:]

I very much appreciate your question on that front. I’ll tell you, the real key for us that as these markets continue to evolve, the cable and the telco industry, the place that we play this in the infrastructure space, and really that’s all about transporting not just cable TV telephony service, but of course now the internet which is the growth engine for both industries. And so, it’s all about the pipe. And what Dave and his business really provides is a lot of pipe capacity. And even in the wireless infrastructure while your wireless connects up to your phone wirelessly, it eventually has to hit some infrastructure and get itself back into either the net or into the telephony network. So that’s where we really plan is that pipe, both in the telco and the cable space, and hat pipes can be around a long time...

[Sam Rabotski:]

So, you feel you are ready to be profitable and improve profitability going forward?

[David Humphrey:]

Absolutely.

[Sam Rabotski:]

Well, good luck. I hope you would achieve it.

[David Humphrey:]

Thank you very much. I appreciate it. Thank you, Sam.

[Operator:]

[Operator Instructions] And we have no further questions. I’ll turn the call over to David Humphrey for closing remarks.

[David Humphrey:]

Thank you. Before we conclude the call, I would like to reiterate that our Cable TV segment has performed relatively consistently over the past several quarters. We are in the process of reviewing our operation to optimize our performance and leveraging our inventory and technical sales force in order to gain additional market share. Also, we are making the necessary investments in our Telco segment in an effort to turnaround the lower sales volume at Nave Communications. We look forward to the progress the segment is poised to show, as turnaround strategies implemented over the next few quarters as directed by our VP of Sales. In closing, we are confident that the market opportunity is there and we will bring together the people and infrastructure needed to rip success. Thank you all, to our investors. We appreciate your loyalty, support and patients as we continue to build value together. Thank you all. This completes this call.

[Operator:]

That concludes today’s conference. Thank you for your participation. You may now disconnect.