Novanta Inc.
Q2 2013 Earnings Call Transcript

Published: 7 Aug 2013

[Operator:]

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the GSI Group Second Quarter 2013 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) I will now turn the call over to Robert Buckley, Chief Financial Officer of GSI Group. You may begin your conference.

[Robert Buckley:]

Thank you very much. Good afternoon and welcome to GSI Group second quarter 2013 earnings conference call. With me on the call is John Roush, Chief Executive Officer of GSI Group. If you’ve not received a copy of our earnings press release, you may get one from the Investor Relations section of our website at www.gsig.com. Please note this call is being webcast live and will be archived on our website. Before we begin, we need to remind everyone of the Safe Harbor for forward-looking statements that we’ve outlined in our earnings press release issued earlier this afternoon and also those in our SEC filings. We may make some comments today both in our prepared remarks and our responses to questions that may include forward-looking statements. These involve inherent assumptions with known and unknown risks and other factors that could cause our future results to differ materially from our current expectations. Any forward-looking statements made today represent our views only as of today. We disclaim any obligation to update forward-looking statements in the future even if our estimates change. So you should not rely on any of today’s forward-looking statements as representing our views as of any date after today. During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent that we use non-GAAP financial measures during this call that are not reconciled the GAAP measures in the earnings press release. We will be providing reconciliations promptly on the Investor Relations section of our website. I’m now pleased to introduce Chief Executive Officer of GSI Group, John Roush.

[John A. Roush:]

Thank you, Robert, and greetings, everybody. Welcome to the call. We do appreciate your continued interest in GSI. So today, we’re pleased to announce our results for the second quarter and on the whole financial performance is very much in line with our expectation. For the most part, we have solid execution and very good cash generation across the company, despite the sluggish economic recovery we continue to see across most of our end markets. Revenue was $85.3 million and our adjusted EBITDA was $12 million. Both of those figures were in the upper portion of the guidance ranges that we have previously communicated. GAAP earnings per share from continuing operations was $0.02, which was impacted by a purchase accounting, as well as restructuring expenses related to our ongoing efforts to streamline and focus the company. Non-GAAP EPS, which is a new metric we intend to report going forward was $0.14. Robert will cover EPS results in much more detail in his section. One of the highlights of the performance was our cash generation. We’re very pleased that we’re able to generate over $13 million in operating cash flow and we ended the quarter with just $43 million of net debt. We expect to continue to reduce our net debt through the balance of this year. So during Q2, market conditions were about what we expected, we’re still a bit of a mixed picture. Our reported revenue was up 21% year-over-year due to the inclusion of NDS in our results that on an organic basis, sales declined 1.7%. We were, however, able to generate growth in several areas, including the scanning market and in spindles, where we experienced some degree of recovery in the PCB drilling market. Our scientific laser revenue grew slightly on a year-over-year basis, but this was due to revenue recognized from the large contract with the French government that originated two years ago. The underlying scientific market remains very weak for us. In the quarter, we did have a few different sources of headwinds with respect to growth. Optical encoder revenue was down over 20% versus last year driven entirely by a difficult comparison from a large one-time upgrade program in 2012 for data storage customer. All other encoder sales were up in the quarter, and in fact, we’re seeing accelerating growth in emerging and encoder applications in the medical and industrial automation market. We also had a slight decline in our CO2 laser revenue. We’re working with our new CO2 management team to bring several new products to market in the coming quarters that will enable us to drive sustainable CO2 laser growth in the future. Our fiber laser revenue was also down in the quarter and I will comment on this topic in more detail in a few minutes. In the medical market, we continue to see good medium-term growth potential, but the demand we’re seeing this year has been a bit unpredictable. At present, we’re seeing some customers push out orders based on delays in hospital CapEx spending. Now, this appears to be tightening and there is an increasing portion of the hospital spending that’s directed at IT investments rather than equipment. Our overall medical business did not deliver growth in the quarter, and we now expect flat conditions for the balance of the year. From an orders perspective, the overall company ran at a book-to-bill ratio of about one in the second quarter, and on a year-to-date basis, we are just slightly over one. Most of our OEM customers are ordering from us on very short lead time, so our visibility is quite limited. Having said that, we do see some overall improvements in demand as we move through the year. In the first half of this year, organic growth was negative thereby less than 1%. In the second half of the year, we expect to see low single-digit organic growth with broader contributions to that growth some more of our business line. The economic recovery still appears very sluggish from our perspective, but we do see opportunities where we are able to work with our OEM customers to bring new capabilities to the market in growth application. I would like to offer you some perspective on our market outlook for the balance of 2013. We have seen recent improvements in the manufacturing sector in both the U.S. and Europe. China remains a bit of a question mark, but based on these favorable trends, we now expect mid single-digit organic growth in the second half for our industrial market revenue base, which account for 40% of our overall revenue in Q2. With a limited recovery we are seeing in the PCB drilling market, we now expect the microelectronics market which was 17% of Q2 sales to deliver low to mid-single-digit organic growth in the second half. As discussed, the medical market which accounted for 36% in Q2 sales is expected to be flat for the balance of the year. And also as I had mentioned the scientific market which accounted for 7% of our Q2 sales faces continued challenges related to government by the constraints. And we expect our second half sales organically to climb by a low-teens percentage. So turning to our growth platform, scanning solutions was clearly the highlight. Our Lightning II all-digital scanner continues to generate significant growth in application such as converting, via hole drilling and materials processing. This product offers the highest speed and accuracy, as well as the lowest drift available in the industry. Our scanning solutions orders were up 50% and revenue up 37% on a sequential basis with the sales being up over 60% versus a year ago. Scanning solutions revenue for us is now at $17 million annualized run rate with significant future growth opportunity. On the medical components front, the NDS acquisition integration is largely complete, sales channel integration with GSI medical product is ongoing and a number of common leads and opportunities have been identified. Our primary priorities for NDS are to bring on board a permanent business leader and to successfully complete a key new product introduction for the radiology market that is scheduled for Q4 of this year. We expect this new product to contribute several million dollars of incremental annual revenue once it’s launched. We are also pursuing several follow-on acquisition opportunities that we have identified subsequent to the NDS transaction that could further strengthen our market position in medical components. As I mentioned, the medical market itself has been rather inconsistent this year, starting weak, then improving, and now slowing again. NDS sales were approximately $17 million in the second quarter, which is a bit sort of our internal projection. We saw similar shortfall in thermal printers, which by the way we have recently rebranded as NDS. Overall, hospital CapEx appears to have tightened during the quarter and several customer orders were pushed out. I’ll note that during Q2 we began to ship optical encoders to a large surgical OEM customer for a new system that is targeted for market lunch in 2014. This program represents a multimillion dollar annual growth opportunity for us. Turning to fiber lasers, our efforts in this area face increasing challenges within the second quarter. The low cost fiber laser architecture that we have discussed on previous call has proven to be difficult to manufacture with [EOS] and rework significantly impacting the cost savings that we targeted with its architecture. This has delayed the launch time. At the same time, we’ve seen that market price levels have declined more and faster than we have had anticipated. The combination of these factors has led us to be much more cautious and selective in pursuing fiber laser revenue, resulting in a decline in our revenue in Q2. We still expect fiber laser revenue to be in the range of $9 million to $10 million this year, but based on all of these developments, we are considering several different options to reduce the operating losses we’re incurring. We have an intention to return the business to a near break-even profitability on a run rate basis by year-end. As a company, we continue to make progress in building our organization and talent base. We recently named the new business leader for our JK Lasers pretty much, that encompasses our fiber laser activities. And we also brought on board a North American sales leader and a product marketing leader for Cambridge Technology, Optical Scanning business, and a new Director of Financial Planning and Analysis at the corporate office. We continue to find the challenges attractive to the unique opportunities and challenges inherent in being part of the transformation of GSI. Each of these individuals brings new talents, capabilities, and fashion into our organization and makes it much stronger as a company. And we are better positioned to achieve our [optimal] strategic goal. So with those comments, I would like to now turn things over to Robert to cover the financial results in more detail. Robert?

[Robert Buckley:]

Thank you, John. During the second quarter of 2013, GSI generated revenue of $85.3 million, an increase of 21% from $70.4 million in the second quarter of 2012. The NDS acquisition accounted for roughly 23.7% revenue increase year-over-year, while changes in foreign exchange rates adversely impacted revenue causing a roughly 1% decline in revenue. Excluding the impact of the NDS acquisition and changes in foreign exchange rates, the company’s revenue decreased by 1.7% compared to the second quarter 2012. Turning to our segments, sales in our laser product segment for the second quarter of 2013 decreased 0.7% to $46 million, compared to $46.3 million one year ago. Excluding the impact of foreign exchange laser product segment revenue was flat year-over-year. Sales of our scanning solutions product increased by more than 65% year-over-year due to strong demand for our Lightening II digital scanning subsystem. This was offset by a sales decline in our fiber laser products. As John mentioned earlier, due to the competitive dynamics and [blades] and moving to a lower cost architecture we have chosen to be more selective in our pursuit to the fiber laser business, will be evaluated in several different options to include the profitability, this business will go minimizing losses by the end of the year. Sales of our precision technology segment for the second quarter of 2013 include 63.3% to $39.3 million from $24.1 million in 2012. The NDS acquisition added approximately 17 million of sales for this quarter. Changes in foreign currency rates adversely impacted our sales by 1.2% compared to the prior year. Excluding NDS and the impact of foreign exchange rate fluctuations, revenue declined 4.7%. The decline was largely attributed to decline in sales volumes and our optical encoder product line, which was impacted by an upgrade program for customers and the data storage market in 2012, that did not repeat in 2013. The decrease is partially offset by an increase in sales volume for air bearing spindles product, which predominately served the mechanical drilling and printed circuit board. Turning to profitability, second quarter profit was $34.5 million or 40.4% gross margin, compared to gross profits of $30.7 million or 43.6% gross margin during the same period last year. Laser products second quarter gross profit was $17.9 million, reflecting a 39% gross margin, compared to $18.9 million or 40.7% gross margin for same period last year. The 1.7 percentage point decline in gross margin was primarily attributed to our fiber laser products. To a lesser extent, gross margins were also adversely impacted by our scientific lasers and new product introductions resulting in some near term margin pressures like we ramp up volumes. Precision technology second quarter gross profit was $16.6 million, reflecting a 42.1% gross margin, compared to $12 million or 50% gross margin for the same period last year. The NDS acquisition accounted for $5.6 million of the increase in gross profit from the prior year. NDS gross profit included 800,000 negative impact from the amortization of developed technology and inventory fair value related to the NDS purchase accounting during the second quarter. However, the overall 7.9 percentage point decrease in gross margin was caused by a combination of purchase accounting adjustments as a result of the NDS acquisition and the adverse impact of a loss in sales related to a one-time customer upgrade program in the data storage market. Operating expenses amounted to $30.2 million in the second quarter of 2013, which included $1.6 million of amortization of intangible and $1.1 million of restructuring expenses. This compares to operating expenses of $25.6 million in the second quarter of 2012. Second quarter 2012 operating expenses included 700,000 amortization of intangibles and $2.5 million of restructuring expenses. Our operating expenses increased year-over-year as a result of the acquisition of NDS. Excluding NDS, our operating expenses actually decreased as a result of our restructuring actions taken in the prior year. Research and development expenses were $6.8 million or 8% of sales during the second quarter, compared to $5.6 million or 8% of sales during the second quarter of 2012. R&D expenses increased in terms of total dollars during the second quarter due to the acquisition of NDS. This was partially offset by lower employee compensation and professional services as a result of prior year restructuring initiative. SG&A expenses were $20.6 million or roughly 24% of sales during the second quarter, compared to $16.8 million or roughly 24% of sales during the second quarter of 2012. SG&A expenses increased in terms of total dollars due to the acquisition of NDS that remain flat on the percentage of sales basis. Operating income amounted to $4.3 million or 5.1% of sales in the second quarter of 2013, compared to $5.1 million or 7.2% of sales in 2012. Laser products operating income for the second quarter of 2013 increased $300,000 or 8.5%, compared to the second quarter of last year. Precision Technology’s operating income for the second quarter of 2013 decreased by $1.5 million or 24% compared to the prior year. The decrease was due to higher amortization of intangibles and inventory fair value step up related to the acquisition. Excluding this, precision technology is generated operating income as a result of the lower operating expenses. Adjusted EBITDA non-GAAP financial measure, which includes the adjustments noted in the non-GAAP reconciliation attached to our earnings press release was $12 million in the second quarter of 2013, compared to $11.9 million in the second quarter of 2012. Diluted earnings per share from continuing operations was $0.02 in the second quarter, compared to $0.13 in the second quarter of 2012. The decline in diluted earnings per share is largely the result of higher amortization of intangibles and inventory fair value step up, charges related to restructuring, fluctuations of foreign exchange rates, and higher income tax provisions. As mentioned during last quarter’s earnings call, we are now providing an adjusted non-GAAP earnings per share metrics. Non-GAAP earnings per share that includes the adjustments noted in the non-GAAP reconciliation attached to our earnings press release was $0.14 in the second quarter of 2013, compared to $0.15 in the second quarter of 2012. Turning to the balance sheet, as of June 28, 2013, cash was $52.1 million, while total debt was $95.3 million. The weighted average interest rate on the senior credit facility was 2.55%. The company completed the second quarter 2013 with approximately $43.2 million of net debt as defined in the non-GAAP reconciliation table in our earnings release. Operating cash flow for the second quarter of 2013 was $13.1 million. For the first six months of 2013, operating cash flow was $17.7 million. The improvement in our operating cash flow is driven prominently by better working capital management in the quarter. Capital expenditure for the first half of 2013 were $2.3 million. We continue to expect CapEx to be between $5 million and $6 million for the full year. On May 3, 2013, we concluded the sale of the Semiconductors Systems business to Electro Scientific Industries for $8 million in cash subject to customary networking capital adjustments. We received net cash proceeds of approximately $5 million after paying restructuring expenses and divestiture-related fees. We also completed the sale of our East Setauket, New York facility resulting in $4.3 million in net cash proceeds in the quarter. During the fourth quarter of 2012, we reached a settlement agreement with the IRS and the Department of Justice regarding the IRS orders for 2000 to 2008 tax year. This settlement was finally accepted by the Congressional Joint Committee of Taxation during the second quarter of 2013. We expect to receive cash refunds in the amount of $12 million to $13.5 million in the third quarter of 2013. As of today or the third quarter, we received a partial refund of $9.8 million. In addition to the cash refund, the company also expects to realize the benefit related to carry back and carry-forward of certain non-net operating losses, which will result in either a refund of tax payments made in the carry back periods or lower income tax payments in the carry-forward period. Turning to the third quarter of 2013, we expect revenues for our continuing operations to be in the range of $85 million to $87 million. The upper end of this range represents low single-digit organic growth. Turning to profit, we expect the third quarter of 2013 adjusted EBITDA to be in the range of $12 million to $13 million. Our operating expenses and gross margin should largely be in line with our second quarter operating expenses and gross margins. We expect our non-GAAP tax rate to be in the 36% to 39% range. I should note that our non-GAAP tax rate is largely impacted by tax planning initiatives not yet executed, we are working aggressively to implement our plans here, and we would expect that the consequence of this year’s tax rate decline as we enter 2014. In addition, we continue to expect to pay cash taxes for the year in the range of 15% to 20%. Depreciation and amortization should be around $5 million. We expect $1 million to $1.5 million of restructuring expense in the second half of 2013 related to our 2013 restructuring plans. And finally, with the receipt of the IRS refund, we expect our third quarter of 2013 net cash position to be roughly $25 million. For the full-year 2013, the company continued to expect revenue from continuing operations of approximately $345 million, which will reflect a return to organic growth in the second half of 2013, where organic growth in the range of 3% to 4% for the remaining six months of the year. While we’re seeing some recovery in our end markets, we remain cautiously optimistic. In addition, we expect full-year 2013 adjusted EBITDA of approximately $50 million. This compares the $41.6 million for the full-year 2012. Finally, we expect net debt at the end of the year between $15 million and $20 million excluding any debt that may be incurred or assumed in connection with any future acquisitions or share buyback program. This represents a significant reduction in debt following our $82.5 million purchase of NDS Surgical Imaging in the first quarter of this year. We continued to believe that acquisitions will provide the highest return for our shareholders. Our acquisition pipeline remains slow with a number of very attractive acquisition target, particularly in the medical OEM component space. The cash generated by the business combined with our available credit facility gives us plenty of resources to pursue these transactions. However, to the extent of these transactions are not actionable in the next six months. We believe the share repurchase will be attractive at these stock price levels. We do not believe, we are at the point of making a final decision on this yet. But we do expect to conclude on this in the second half. This concludes our prepared remarks. I now like to open the call up to questions.

[Operator:]

(Operator Instructions) Your first question is from Lee Jagoda of CJS Securities. Your line is open.

[Lee Jagoda:]

Hi, good afternoon.

[Robert Buckley:]

Hi, Lee.

[Lee Jagoda:]

So Robert, can you just walk us through your assumptions behind the guidance for net debt of less than $20 million at year end, both in terms of the operating and non-operating cash. And more specially, does it include expected real estate sales?

[Robert Buckley:]

It does not include expected real estate sales. So the only thing I would take into account is our operating cash flows on a conservative basis and then the IRS refund.

[John A. Roush:]

Some of which is in hand and some of which is not yet in hand.

[Lee Jagoda:]

And how does that tax refund compare to sort of the, I guess, 15 to 17 range that you had perviously spoke about. And the reason I’m asking that is, as you’ve got the component that you expect to receive and then you got the carry back and carry-forward component?

[Robert Buckley:]

That’s correct. So there is way to think about it is, there is roughly $13 million to $13.5 million worth of cash refunds, and then another $4 million to $5 million worth of carry back and carry-forwards, and given the profitability performance of the company that we look to take advantage of that and probably next year 2014.

[Lee Jagoda:]

Okay, great. And then just shifting gears a little bit, can you talk about the revenue and the losses incurred in fiber in Q2. And maybe provide a little more detail with regards to what it means to be more selective in pursuit of the fiber laser?

[John A. Roush:]

Well, I would just say that you are going to see probably the revenue, you aren’t going be drilling a whole lot there. With the cost structure that we have, we’re just not just taking orders. We are losing something on the orders a $1 million a quarter. And our goal is to kind of cut that run rate down to – maybe we don’t get to break-even, but we get close to break-even exiting the year. And that’s going to involve controlling costs carefully in a few different options, but just not taking sales at the rate that we thought we could. I mean, we can win some of the orders, but it is not just worth doing so. We’ll still end up the year with as I said, it’s somewhere in the $9 million to $10 million range in fiber.

[Lee Jagoda:]

And I guess, by keeping fiber lasers you got to feel that there is some benefit beyond just achieving break-even. How you think about the upside opportunity, again, like you say at this given cost structure?

[John A. Roush:]

Well. I mean, we are thinking through a few different options there, so we haven’t made a decision on what exactly we’re going to do. There is still an opportunity to possibly get, a lower cost architecture in the market, which would then open up the growth opportunity. But it’s just sort of the matter of how long that takes and what the ultimate cost is to get to that and sort of a time cost relationship. And we’re sort of – what we’re telling you is, we’ve been rethinking that.

[Lee Jagoda:]

Okay. I’ll hop back in queue. Thank you very much.

[John A. Roush:]

Thanks, Lee.

[Operator:]

(Operator instructions) The next question is from Joe Bess of ROTH Capital Partners. Your line is open.

[John A. Roush:]

Hi, Joe.

[Joe Bess:]

Good afternoon, gentlemen. Just a piggyback on the last question. What sort of acquired this technology to lower cost architecture in the market? What would that need to be – what would you need to do for that happen?

[John A. Roush:]

Well, I mean, there are several different approaches, but we have developed what we view as a novel approach to how to construct the inner workings of a fiber laser, the diodes and the how the light is generated, and how that’s coupled into the fiber, and how the fibers itself is configured. The whole different set of changes to the technology that when you sort of cascade all that, you take a lot of cost out of the system. What we found is that it works, but it’s not manufacturable. Thus far, so the question is, can we get through those manufacturing issues in what timeframe and can we bring partners into help with some of that?

[Joe Bess:]

Okay. And then the tax credits, when do you expect to receive the remainder of the tax credits?

[Robert Buckley:]

You mean, the carry back and carry-forward NOLs?

[Joe Bess:]

You received $9 million so far $9.8 I believe. And then when are you expecting to get the remainder of the carry back, carry-forwards?

[Robert Buckley:]

So, the card $12 million to $13.5 million of cash refunds we’ve received around $10 million thus far. I hope to complete the collection of that before the end of the quarter.

[Joe Bess:]

Gotcha, great.

[Robert Buckley:]

The carry back and carry-forwards, I’ll be able to take advantage of those in 2014 once we completed a couple of items.

[Joe Bess:]

Okay, gotcha. And then thinking about acquisitions a little bit more, you talked about (inaudible). Are you guys seeing opportunities for acquisitions outside of the medical market in considering kind of the little lower slower trajectory that you’re seeing for the medical growth opportunity, are there things outside of medical that make sense at this point?

[John A. Roush:]

Yeah, I mean, Joe, I think that’s a fair point. If you just look at the last couple of quarters, you might say, I’m not sure medical is the most ideal space. But I think when you look a little further out, we definitely believe the demographic factors, the long-term growth you support focusing on medical and we’re doing that. But we do see other opportunities that kind of relate into some of our more traditional areas what we play and we’re pursuing those two, so it’s probably a mix. It’s probably 60% of our pipeline focus is medical and 40% is in some of the other traditional markets that we have in precision tech and laser. But what I’ll tell you, it’s not so easily separable, some other things we’ve looked at come with a significant medical exposure, but then some traditional exposure, so it’s not necessarily one or the other.

[Joe Bess:]

Okay, great. And then can you talk a little more about some of the new products that you have coming out in the back half of the year. And what you think that these might be able to do in terms of incremental growth in 2014?

[John A. Roush:]

Yeah well, we highlighted some of those, I mean, one of the most important new products we have coming out is a radiology product that’s coming out in NDS that, I think sort of a multimillion dollar opportunity for us. We also highlighted a new program we have in optical encoders that were shipping, sort of startup quantities now not full rate production quantity, but that’s a multimillion dollar incremental opportunity for us next year. In the scanning area, there is a whole slue of, they are not necessarily new product, they are sort of more the model is we have a new product out there. We have the standard, but with each customer you adapt that so the application requirements of that particular customer and there is a lot of work going on with that that could lead to a lot of growth. So you can point to millions of dollars of opportunity that we have next year, but we all know it’s not quite that simple. Like that you also have some of your revenue base that is some setting, where we’ve been selling into an application for a long time and it’s winding down. So we can’t just take this year and add on your MPIs and say, we’re done. There is always some part as an OEM supplier some of what you designed into is fading down. But we definitely see opportunities.

[Joe Bess:]

Okay, great. And then last question, think about NDS and the integration process (inaudible) there is still – there is remaining some aspects you can do on the sales side, can you talk a little bit more about those and when you think of those might be achieved?

[Robert Buckley:]

Yeah, I would say for the most part they are not 2013 opportunities. I mean what you’re talking about is, when we line up our medical OEM customer base in NDS in the printers business and some of our others products that sell into medical, which would include scanning and will include our optical encoders and will include our color measurement instrumentation. You can line all of that up and say, they all sell into a set of medical customers. And it doesn’t line up perfectly, so in some cases, we’ll have real strength in NDS, but we don’t have much penetration with printers or what have you. And so that’s where we are in the midst of doing this thing, where do we have a real strong relationship in one product and we can pull the other products into that conversation or do it by vice versa. Those aren’t the kind of things that turn into a production order in months, it’s quarters away, because you really face getting the technology in front of the customer, samples, their technical team has to work with that and then ultimately if they do pursue you for a program and then could be quiet a while until see meaningful revenue. But that’s just the revenue acquisition cycle that you have in an OEM business and in a medical business. All right. So, the revenue has a long kind of stickiness to it once you’re in there, but you’re not going to get in three or four months.

[Joe Bess:]

Great. Thank you, guys.

[John A. Roush:]

Thank you.

[Operator:]

There are no further questions at this time. I’ll turn the call back over to the presenters.

[John A. Roush:]

Thank you, operator. So in conclusion, I would like to say that Q2 results were in line with our expectations. The company is executing well and making good progress on our strategic goals. The complexion of GSI and the caliber of our team are greatly improved. The financial results were solid and I would say with respect to the balance sheet the progress was very good. We are getting more predictable as a company and now with the use of a non-GAAP earnings per share metric, I believe the true economics behind our earnings performances will be somewhat easier for investors to understand. The economic landscape still has some uncertainty for us that we generally see an improving picture. We will deliver organic revenue growth in the second half, while continuing to improve the balance sheet and position ourselves for additional milestones in terms of our growth strategy, our transformation of the company is that we think of that in terms of acquisitions. As Robert said if the acquisitions do not materialize, we will take a serious look at share repurchase. But right now, we’re optimistic about the pipeline and the opportunities for the company. So on behalf of the whole GSI team, I would like to thank you for your continued interest in the company and the call is now adjourned. Thank you very much.

[Operator:]

This concludes today’s conference call. You may now disconnect.