IEC Electronics Corp.
Q4 2017 Earnings Call Transcript

Published: 6 Dec 2017

[Operator:]

Greetings and welcome to the IEC Electronics Fourth Quarter and Year-End 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Audra Gavelis, Director of Marketing and Investor Relations. Thank you, you may begin.

[Audra Gavelis:]

Thank you for calling in. On the call this morning, we have Jeff Schlarbaum, President and CEO; as well as Michael Williams, Chief Financial Officer. Before we get started, I would like to take a moment to read the Safe Harbor statement. This conference call contains certain statements that are or may be deemed to be forward-looking statements. These forward-looking statements, such as when the Company describes what it believes, expects or anticipates, will occur and other similar statements include, but are not limited to statements regarding future sales and operating results, future prospects, strategic initiatives, turnaround efforts, the capabilities and capacities of business operations, any financial or other guidance and all statements that are not based on historical facts, but rather reflect the Company's current expectations concerning future results and events. The ultimate accuracy of these forward-looking statements is dependent upon a number of risks and uncertainties that may cause the Company's actual results or performance to be different than as expressed or implied by these statements. Specific risks and uncertainties include, but are not limited to, those set forth in the Company's earnings release issued immediately before this call. And in the Company's most recent Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our other reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or correct any of the forward-looking statements contained herein whether as a result of new information, future events or otherwise, except as required by law. I will now turn the call over to Jeff Schlarbaum. Please go ahead, Jeff.

[Jeffrey Schlarbaum:]

Thank you, Audra, and good morning, everyone. We finished fiscal 2017 with a solid quarter, which contributed to our improved results for the second half of fiscal 2017 as compared to the first half of the year. Both revenue and profitability increased in the second half of fiscal 2017, enabling us to exit the year largely at the levels we had anticipated. As most of you know, the first half of the fiscal year was characterized by volume contractions from two key customers. However, in the second half of the year, we saw volumes return from one of these customers. In addition, we have won a number of new programs from existing customers and we started converting new customers as a direct result of our revitalized new business development program. The new program activity from some of our existing customers as well as the activity from new customers demonstrates the positive effect we are experiencing from our improved customer satisfaction levels we achieved through our solid operational execution as well as from our restructured sales and marketing platform. The changes we made to our sales process during the past year have been focused on improving the quality and the quantity of new opportunities in our sales funnel and we are pleased with the progress we’ve made to-date. We are continuing to transform our business with the focus on strengthening our pipeline to aggressively reestablish consistent organic revenue growth. As the first half of fiscal 2017 demonstrated having a robust pipeline of new customers and programs is vital to driving those sustained growth over time and positioning us to overcome the inevitable future fluctuations that occur in the marketplace. During fiscal 2017, we continue to focus on our three key turnaround initiatives to improve margins and profitability, fix the balance sheet, and reestablish sustained organic growth. Despite the challenges during the fiscal year, we were able to deliver margin performance better than our industry average and we ended the year profitable despite the 24% overall reduction in sales volume. Our balance sheet remained strong providing financial flexibility and it positioned us well as we compete for new programs and customers. We believe this environment our reputation as a high performing provider of design and manufacturing solutions for lifesaving and mission critical products gives us a strong competitive position from which to drive revenue growth and continued profitability. As we've discussed previously, we expect slight increases in our debt position and inventory to occur due to the number of early stage new programs we're currently onboarding and expect to continue to onboard over the next few quarters. This phase of early lifecycle builds represents everything from setting up and developing mature supply chain structures to navigating the learning curves associated with developing efficient and robust manufacturing methods for these complex products over the long-term. During fiscal 2017, we proactively controlled our cost during the first half volume contraction. We will also be careful to keep the critical resources whose skills and expertise were important to supporting our highly complex programs. As a result in the second half of fiscal 2017 as expected, we have the resources in place to execute as some of the prior lost volumes returned and to support a number of new programs and customers during this initial onboarding phase. We are focused on continuing to diversify our customer base and our portfolio of customers include several Fortune 500 companies, who are leaders in the respective industries. We closed fiscal 2017 with revenue distribution of 28% in medical, 52% in aerospace and defense, 18% in industrial, and 2% in the other category. Aerospace and defense revenue exceeded the 50% of total revenues largely as a result of the softness we experienced in the medical sector. The strength of our existing aerospace and defense business as well as the number of new programs we were able to ramp up over the course of the fiscal year, offset the temporary contraction of our medical business. Over time, however, we expect to see a more balanced distribution as we ramp up business from other sectors. We are energized by the opportunities we are seeing as we convert new programs from our existing customer base and capture new customers, and we believe we are on a good position to reestablish organic growth as we move forward into fiscal 2018. We are continuing to make progress on our new customer acquisition initiatives and we believe we are effectively engaging potential customers to cultivate future relationships and become their manufacturing partners of choice. We believe our reputation as a leading U.S. provider of solutions, utilizing our advanced engineering capabilities, and laboratory services, and minimizing supply chain risk combined with our diverse manufacturing services as a competitive advantage as we work to broaden our partnerships with both potential and existing IEC customers. Most recently, we are named “Supplier of the Year” by ViaSat, one of our longstanding key customers and recognition of this excellent performance we've achieved in the past over the last year. We remain committed to our – and focused on continuing to expand our existing relationships with current customers, while also attracting new customers to support our organic growth initiatives. We entered into several new customer relationships in the fourth quarter of fiscal 2017 and we believe the combination of new programs and new volume will drive momentum as we enter this new fiscal year. A year ago, I reported that backlog as of September 30, 2016 was $54.1 million. This year, despite the contraction from two major customers in the first half of fiscal 2017, the backlog as of the end of this fiscal year September 30, 2017 grew to $72.1 million representing 33% increase year-over-year. Furthermore, in the two months since the start of fiscal year, our backlog is already increased by more than 25%, which we believe reflects the growing customer confidence and our ability to maintain high levels of operational performance as well as demonstrating the continued success of our improved go-to-market program. I will now turn the call over to Mike Williams to review the Company’s financial performance. Mike?

[Michael Williams:]

Thank you, Jeff. Revenue for the fourth quarter of fiscal 2017 was $27.6 million, a decline of 2.8%, as compared to the same quarter last fiscal year, but a sequential increase compared to the revenue of $26.5 million for the third quarter of fiscal 2017. The Company experienced declines in its medical and industrial market sectors year-over-year, but had an increase in the aerospace and defense sector. The medical sector decreased $3.7 million was primarily related to a decline in demand from one customer who is continuing to managing its supply chain needs and working through end-market dynamics. We don't anticipate that this customer will increase their demand significantly in fiscal 2018. The industrial sector also declined $1.1 million due primarily to one customer whose end market is up. Aerospace and defense sector saw a net increase of $4 million year-over-year. The primary driver was increased demand from existing customers. New customer demand was offset by programs ending for other customers. Gross profit for the fourth quarter fiscal 2017 was $3.5 million or 12.6% of sales compared to $3.3 million or 11.5% of sales in the fourth quarter of fiscal 2016. As volume and revenue growth began to come back, we are seeing the positive impact of gross profit. Structural changes we made a year-ago played an important part improving gross profit year-over-year and slightly lower revenue. Selling and administrative expenses decreased to $2.5 million and represented 9% of sales in the fourth quarter of fiscal 2017 compared to $2.8 million or 9.9% of sales in the prior fiscal fourth quarter. The $300,000 decrease in selling and administrative expenses in the fourth quarter of fiscal 2017 was primarily due to lower wage related expenses. The Company recorded net income in the fourth quarter of fiscal 2017 of $800,000 or $0.07 per share compared to net income of $200,000 or $0.02 per share in the fourth quarter of fiscal 2016. Now looking at the full-year results, revenues decreased 24% to $96.5 million with declines across all three sectors. The medical sector decreased by roughly $26 million, aerospace and defense was down $700,000, and industrial decreased by almost $4 million in fiscal 2017. Gross profit margin was 11.7% in fiscal 2017 as compared to 16% in fiscal 2016. The reduction of volume and composition of product mix year-over-year had the most impact to gross profit. As Jeff mentioned, new programs and new customers require a higher levels in material and resources when compared to more material product lines. However, our proactive cost reductions in labor and overhead costs in the first half of fiscal 2017 help lessened the impact of the lower revenue throughout the fiscal year. Selling and administrative expenses decreased to $10.2 million for the fiscal 2017 as compared to $14 million in fiscal 2016. Selling and administrative expenses as a percentage of sales decreased to 10.6% as compared to 11.1% in the previous fiscal year. The decline in expense is primarily due to our cost-reduction efforts to lower wage and related expenses by $2.6 million, driven mainly by headcount reductions as well as higher severance cost incurred in fiscal 2016 of $500,000. We have reduced legal and professional expenses by $600,000 compared to 2016 and had a reduction in our bad debt expense of $200,000 during the fiscal year due to improved cash collections process. Fiscal 2017 net income was $81,000 or $0.01 per share as compared to net income of $4.7 million or $0.47 per share in prior fiscal year. Again despite significant reductions revenue year-over-year, our proactive approach less in the impact and we achieved results that were slightly better than breakeven in fiscal 2017. Now turning to our balance sheet, we continue to focus on our cash conversion cycle. Inventory as of September 30, 2017 was slightly higher in our fiscal 2016 year-end balance. However, we were anticipating a substantially lower Q1 fiscal 2017 revenue number versus our expectations for the same period in fiscal 2018. Therefore, we believe our forward-looking on-hand inventory levels reflect a better position. Managing inventory is a constant focus and as Jeff mentioned, a challenge when you're preparing for new programs related to growth in sales. For the fiscal year ended September 30, 2017, the Company's cash flow from operations was $1.8 million largely impacted by the reduced earnings. However, in Q1 of fiscal 2017, we completed the sale leaseback of our Albuquerque facility for $5.8 million, which more than fund our capital purchases for the fiscal year of $3.5 million. As we continue to invest in new equipment and technology. Our total debt with our banking partner ended the year at $15 million versus $19.6 million as of the end of last fiscal year. With that, I’ll now turn the call back over to Jeff.

[Jeffrey Schlarbaum:]

Great, thanks Mike. Fiscal 2017 certainly started out with some challenges. However, we are pleased to see the second half fiscal 2017 unfold as anticipated with volume coming back and new program growth from exiting customers. In addition, we are beginning to see the results of our improved sales pipeline and new customer conversions. We enter fiscal 2018 optimistic about the additional opportunities we’re seeing in the pipeline from both existing and new customers. That being said, our onboarding process for new customers is a lengthy one. So on the pipeline activity is good, it does take some time to develop convert, qualify and ramp up new programs before they have – needle moving effect on the bottom line. Market recognition for IEC as a high performing partner providing design and manufacturing solutions for lifesaving and mission-critical products is growing. In fact, earlier this year, our analysis and testing laboratory was the first in the industry to receive enhanced ISO 17025 accreditation with the additional scope of specific test methods developed for the detection and avoidance of counterfeit components. This illustrates our continued commitment to minimizing supply chain risk for the lifesaving and mission-critical products we support and differentiates us from our competition. Our enhanced sales organization is doing a good job of ensuring that we're in front of the right customers for the right programs. Our sales pipeline has continued to grow and become more robust as we look to expand our business. We had previously identified fiscal 2017 as a bridge year for IEC. During fiscal 2017, we have continued to rebuild our customer sales funnel to overcome the challenges associated with volume reductions from key customers and to reinstate proven practices to drive sustained growth. As we move into fiscal 2018, we are focused on driving organic growth through the sales execution and reestablishing our leadership position in the marketplace by continuing to surpass customer expectations with operational excellence. We will continue to be diligent with our margin performance and our management of assets. We believe, we executed well and made a great deal of progress in fiscal 2017 and we enter fiscal 2018 energized by the opportunities we’re seeing in the marketplace. With that, I will now turn the call over to questions.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Ben Klieve with Noble Capital Markets. Please proceed with your question.

[Benjamin Klieve:]

All right. Thank you. So few questions, first Jeff, question regarding the second medical device customer that you touched on a bit. I guess I'm just curious if you can elaborate a bit on that relationship here and especially to what degree of any real visibility as to the return of this business and keeps getting pushback to the right. Are you tracking leading indicators that suggest – this was coming back in a visible manner here or are you just kind of at their mercy of – when they say that that this business could return?

[Jeffrey Schlarbaum:]

Ben thanks for the question. And so let me say couple things. One is, as you know, I’m not committed to speak on behalf of our customers and market dynamics. What I can say to you is that the relationship is in very good standing. We are a strategic partner. The assemblies that we build to them – for them have been the same assemblies we built in the past and they expect us rebuilding in the future. The business volume isn't what it was in the past and it’s very hard for me to predict what it will be in the future. So we are focused on doing is continuing to diversify our customer base by engaging the end market customers that align with our business model. And as I said in the past, onboard and create additional program opportunities from which to grow for the long-term. So we expect this customer to be a customer of ours for a long period of time going forward, but it just is very difficult for me to predict the volume that we expect to return and at what pace and over the course of what period of time.

[Benjamin Klieve:]

Okay. I understand and respect that. That certainly makes sense. The new customer base that you’ve developed in the backlog is certainly exciting. And one thing I'm curious about is, on the third quarter call, you noted about $2 million of revenue coming from two of your new customers. I'm wondering if you could identify in Q4, what the level of revenue that came from either of those two or other new customers in general. Is that a figure you're able to provide?

[Jeffrey Schlarbaum:]

Yes, $2.5 million.

[Benjamin Klieve:]

$2.5 million. Okay, perfect. And then with ViaSat specifically, I'm curious where they had 10% of customers at any point in Q4 or even in the fiscal year?

[Jeffrey Schlarbaum:]

I'm sorry. I missed that, Ben. What was – restate the question please.

[Benjamin Klieve:]

Production at ViaSat, where they had 10% of customer in Q4 or in the fiscal 2017?

[Jeffrey Schlarbaum:]

A 10% customer, yes, so they were – yes, they were 10% customer, yes.

[Benjamin Klieve:]

Okay, great. Perfect. And then last one for me, for Mike. Mike, I apologize I was furiously typing away during some of your comments. I’m sorry if I missed this here. You noted the year-over-year gross margin improvement in Q4, but just pulling back a bit in the fourth quarter, was that just to the initial cost of the new contracts that the lower margin nature of those new contracts or there are some other dynamic or one-time charge that although included in gross margin in Q4?

[Jeffrey Schlarbaum:]

So Ben, this is Jeff. Let me take a stab with that. What we really saw in Q4 was the – a couple things. One is we grew new programs from existing customers largely in the aerospace and defense sector, which you saw in terms of our revenue distribution for the year. So we saw strength in the A&D customer base both from existing and new programs in the quarter. As we've talked about in the past, the mix is something that's hard to predict, but with the mix comes the dynamic of the material is much higher, the raw materials are much higher percentage of the overall unit price in the aerospace and defense products within the medical sector. Even though in terms of how we priced our products and the rates we use are virtually the same. We have a much higher material content, which affects the gross margins, and so that's one. And the second is that we onboarded in Q4 a number of new programs, not only from existing customers, but from some new ones that are starting to ramp up as we go through the qualification phase. And it's just the inefficient process of these new program ramp ups that will work our way through, and we're going to work our way through it in Q1 and we’ll probably work our way through it for the next couple of quarters, but it's obviously a good sign that in their investment in our future and it's new revenue growth. But there is a cost to ramp them up in the initial phase and that was the other factor that occurred in Q4.

[Benjamin Klieve:]

Okay, fair enough. Perfect, Jeff. Thanks for the comments. I’ll jump back in queue.

[Jeffrey Schlarbaum:]

Thanks Ben. Appreciate it.

[Operator:]

[Operator Instructions] Our next question comes from the line of Nehal Chokshi with Maxim. Please proceed with your question.

[Nehal Chokshi:]

Yes. Thank you. You mentioned the backlog increased 25% was up from a year-ago or one quarter ago levels?

[Michael Williams:]

Yes. Good point Nehal. Let me clarify. So from year-over-year, we saw increase from fiscal September ending fiscal 2016 to fiscal September ending 2017 a 33% increase year-over-year. Since September 30 ending fiscal 2017, and now we've seen additional increases in our backlog of over 25%.

[Nehal Chokshi:]

Okay. Well, all right. And just to get some context of that 25% increase since September 30, is that typical relative to the year-ago periods or that's a typical?

[Jeffrey Schlarbaum:]

Well, again it’s – when you look at the recent history, obviously have a long history with the Company, but as of recent history the change of control occurred in the early 2015 timeframe. And at that point, we were sort of surviving on the backlog of business we had as we work to overhaul the financial and operational execution. So in the recent past at the new phenomenon that we're seeing this much strength in the first quarter relative to the bookings, but I think if you go back many, many years ago, we probably saw some growth and momentum in the first quarter from a bookings perspective, but it hasn't occurred in our recent past.

[Nehal Chokshi:]

And is that duration of backlog, what is the duration of backlog, is it six months or much more…

[Jeffrey Schlarbaum:]

Yes. It’s pretty much about a year. Some will be a little less and some a little more, but on average it's about a year's worth of demand.

[Nehal Chokshi:]

Okay. Good. And then I just want to make sure I hear this correctly regarding that second medical customer. You said that you do not expect an increase from – and demand from them in fiscal year 2018 relative to the current levels, is that correct?

[Jeffrey Schlarbaum:]

Yes. So again I'll try to clarify the best I can. So in terms of the volume that we experienced from that customer in fiscal 2017, we expect those volumes to be up in fiscal 2018. Yes, my comment to Ben was more related to the magnitude of which we see the increase is very hard to predict and we certainly don't see it at the level that we saw in 2016, but we do see improvement from 2017 to 2018.

[Nehal Chokshi:]

Okay. I understand. Okay. And I think you say that you – that’s because you expect them to continue to manage their supply chain. Did I hear that currently as well?

[Jeffrey Schlarbaum:]

Again, that’s the one Nehal, where I have to be careful not just speak on behalf of their business and what's going on in their end markets, but what I can say is that as recent as you know the mid part of last month, we had strategic business reviews with them. They reaffirmed their commitment to the relationship and our position as a strategic partner to support their electronic manufacturing both today and into the future. So I guess that’s the best color I can give you for now.

[Nehal Chokshi:]

Okay. That's good. And then just for levels, I think for December quarter, I recognize that you don't give guidance, but it is correct to say that there is typically a Q-on-Q seasonal downturn for December quarter, correct?

[Jeffrey Schlarbaum:]

Yes. That’s actually a very, very good point. So typically we see and this is very much a historical trend, so in the first quarter of our fiscal year, the October through December period has historically been our lowest quarter of the year and historically has been a material drop off from our Q4. However, having said that, I don't see a material drop off from Q4 as we look into fiscal 2018. I guess the good and the bad of that is that we have a number of these new customer and existing customer new programs. And we're onboarding those, we started that process in Q4 and we will continue that process in the Q1. So I think that's going to help dampen some of the softness, but it’s also increases the level of unpredictability as we just battle with the challenges of the first phase ramp up. There is supply chain challenges, there is manufacturing challenges. So I guess the long and the short of it is, we don't see the same level of drop-off that we have in the past in Q1 offset by these new program and just a matter of how much traction we can get on these new programs in the fiscal quarter.

[Nehal Chokshi:]

But due to yield of new programs ramp up rather, there would be probably some gross margin pressure on a Q-on-Q basis?

[Jeffrey Schlarbaum:]

I think that's a fair statement. I think that's a very fair statement.

[Nehal Chokshi:]

Okay. And just to be clear during September quarter, what percent of revenue was coming from programs that were ramping up or you had lower than material yields?

[Jeffrey Schlarbaum:]

I would say somewhere in the neighborhood of 10% to 15%.

[Nehal Chokshi:]

And you’d expect that to go further up into December quarter?

[Jeffrey Schlarbaum:]

That’s really correct. Yes, that will go up in the fiscal quarter coming up as well as in future quarters ahead.

[Nehal Chokshi:]

Okay. Thank you.

[Jeffrey Schlarbaum:]

Thank you.

[Operator:]

Our next question comes from line of Alex Gates with Clayton Partners. Please proceed with your question.

[Alex Gates:]

Hey good morning, guys. I think Nehal answered or asked, I should save two of my quick questions. But Jeff, just so overall clarified here on the backlog, you are implying that you had 72 at the end of the quarter and we should – basically you grew 25% on that 72, is that correct?

[Jeffrey Schlarbaum:]

That's correct Alex, yes.

[Alex Gates:]

Okay, just wanted to clarify that. And then I was again going to ask about that second medical customer. So it sounds like going into 2018, you're not going to be back, you don't expect to be back where you were in 2016 with the two medical customers. But it's certainly not going to be a major drop-off or a zero from those two?

[Jeffrey Schlarbaum:]

Yes, when I look at the aggregate businesses from those two, you're absolutely right. They won’t be at the levels we saw in 2016, but there will be improved levels from what we saw on 2017.

[Alex Gates:]

Got it. Got it, and then the progress you have had on the pipeline has been pretty great and obviously you've got some traction with the defense side? Have you had any other notable traction on the industrial or medical side that you can discuss?

[Jeffrey Schlarbaum:]

Yes, I mean we actually we have – business coming from not only the medical sector, but the industrial sector. The strength has been coming more recently from the aerospace and defense, but in our pipeline is pretty diverse. Our pipeline of new customer opportunities and so as we convert additional opportunities has been moved forward in the fiscal year, I see that to coming from all three major sectors that we’ve support.

[Alex Gates:]

Great and then I guess one last one on the gross margin pressure that Nehal was talking about as you onboard these guys. I wonder that onboarding process take, is it normally one quarter impact or depending on the contract size, can it be pretty lengthy?

[Jeffrey Schlarbaum:]

That's a very good question Alex. In terms of the onboarding, there's a number of stages right. So we go from receiving in order to ready in the factory, procuring the materials, and then executing the build and then delivering to the customer. And so in some cases, its the challenges with the supply chain, as we’re putting in place for the very first time and the end market dynamics associated with lead time of certain critical components. And then other pieces are – and so that can cause delays obviously and getting things ramp. And then usually it takes us two or three builds to work out a number of the bugs in the early ramp up. So we get to more efficient and mature manufacturing rhythm. So could it take the couple quarters? Absolutely. Should that startup phase run out over the course of the year? Absolutely. So someone between a couple of quarters and over the course of the year that we streamline manufacturing get into much more efficient rhythm.

[Alex Gates:]

Got it, okay. That does it for me. Thanks guys.

[Jeffrey Schlarbaum:]

All right, thanks Alex.

[Operator:]

Thank you. Our next question comes from the line of Allan Lyons with Vestal Venture Capital. Please proceed with your question.

[Allan Lyons:]

Thank you, operator. Good morning, Jeff and Mike. Just a couple quick questions, is it reasonable to interpret based on your growing backlog that you could attain the levels of revenue that you did on the average for the periods 2013 to 2016?

[Jeffrey Schlarbaum:]

Is it reasonable to believe how that you're talking about the revenue levels…?

[Allan Lyons:]

Just to reckon that, correct.

[Jeffrey Schlarbaum:]

Yes. I don't think that's an unreasonable expectation. The key sort of assumption is the timing associated with some of these new programs, which is a challenge. But in general, I think those revenue levels are where we’re headed back to.

[Allan Lyons:]

Okay. Few measure – the effect on each of the quarters of the start up costs and giving them the new programs or existing customers new programs or new customers onboard, so that one could say, although it's pretty regular you have it lately. But I’m just wondering if quarter-by-quarter you could say, well we earn $0.07, but we would earn $0.10 at these one-time startup cost for these customers hadn't happened. It seems like you're onboarding with new customers does affect your results and I don't know if you measure those net effect.

[Jeffrey Schlarbaum:]

I think it’s a fair question and one that Mike and I'll take and try to give some greater color on the future call. I think what I can say to you today, Al in terms of the overhead pressure that we will see from the new customer onboarding. Is that if you look at our gross profit margins in 2017 on aggregate and you look at the gross profit margins that we achieved in 2016, we're probably somewhere in the middle as we start to progress through and work our way through 2018. And that's sort of the best way I can characterize it today. And then we'll take that and maybe try to give additional color in the future.

[Allan Lyons:]

Okay. Understand. Any comments on the progress set in Albuquerque during the quarter?

[Jeffrey Schlarbaum:]

Yes. What I can say, I’m really pleased with our Albuquerque operation overall and their performance for the fiscal year 2017. So one of the things that we weren’t able to do in the past is align any needle moving a new customers into that factory as we were sort of just holding our own out there. This year we anticipate onboarding number of new customers and new programs in that facility given their operational improvements, so things are going well.

[Allan Lyons:]

Okay, great. Well good luck for the fiscal year. Thanks.

[Jeffrey Schlarbaum:]

Great. Thanks Al.

[Michael Williams:]

Thank you. End of Q&A

[Operator:]

Thank you. We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

[Jeffrey Schlarbaum:]

Well, thank you, everyone for calling in. We appreciate that. We look forward to speaking to everyone again after our Q1 results. Thank you.

[Operator:]

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.