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Westell Technologies, Inc. (NASDAQ:WSTL)

Q3 2013 Earnings Call

February 05, 2013, 09:30 am ET

Executives

Brian Cooper - SVP & CFO

Rick Gilbert - Chairman & CEO

Analysts

Mike Latimore - Northland Capital

Jeff Linroth - Leaving It Better

Brian Horey - Aurelian Management

Gary Siperstein - Elliot Rose

Operator

Welcome to the Third Quarter Fiscal Year 2013 Earnings Conference Call. My name is John and I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to CFO, Brian Cooper. You may begin Brian.

Brian Cooper

Thank you, John. Good morning and welcome to our conference call to discuss the fiscal year 2013 third quarter results for Westell Technologies. The news release that issued last night is posted on our website, westell.com. On this call, Rick Gilbert and I will address our results and progress.

Before we begin, please note that our presentation and discussion contain forward-looking statements about future results, performance or achievements financial and otherwise. Words such as should, believe, expects, trend and similar expressions are intended to identify such forward-looking statements. These statements reflect management's current expectations, estimates and assumptions. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause Westell’s performance, or achievements to differ materially from those discussed. A description of factors that may affect our future results is provided in the company’s SEC filings including Form 10-K for the fiscal year ended March 31, 2012, under the section Risk Factors.

The forward-looking statements made in this presentation are being made as of the date and time of this conference call. Westell disclaims any obligation to update or revise any forward-looking statements based on new information, future events or other factors. Our presentation today also will include non-GAAP financial measures. We have provided reconciliations to the most comparable GAAP measures in our news release.

I will begin this morning with a review of our third quarter financial results. Rick Gilbert, Westell’s Chairman and Chief Executive Officer, will then provide his perspective and we will conclude by taking questions.

For the third quarter of fiscal 2013, Westell Technologies reported consolidated revenue of $8.9 million. Revenues are almost entirely from the Westell Division which produced a strongly positive 16% increase over Q3 a year ago.

Net loss for the quarter was $2 million compared to net income of $19.8 million in the third quarter of FY12. The prior year includes a $20 million gain on the sale of Conference Plus which is now a discontinued operation. The non-GAAP comparison which excludes discontinued operations is a net loss for the quarter of $1.4 million versus the non-GAAP net loss of $0.5 million in the same quarter last year.

EPS for the third quarter was a loss of $0.03 per share on a GAAP basis and a loss of $0.02 per share on a non-GAAP basis. The non-GAAP EPS was a loss of $0.01 per share in the third quarter last year.

Coming back to the Westell Division, our 16% revenue growth rate was fuelled in large part by increasing acceptance of our new products for wireless networks. These include distributed antenna systems or DAS products; tower-mounted amplifiers for cell-site optimization and Ethernet network interface units and switches. In spite of a seasonally slow third quarter, revenue from these new products more than doubled from our second quarter and they amounted up to 11% of our $8.9 million of revenue in the third quarter. In addition, we had year-over-year increases from most of our traditional product categories during the quarter. We are looking to carry this momentum into the coming quarters.

Gross profit for the Westell Division was $3.1 million in the quarter, up from $2.7 million in the third quarter a year ago. Gross margin was 34.8% about the same as both last quarter and the prior year quarter. Gross margin continues to carry absorption burdens and incremental costs for ramping up new products.

Westell Division operating expenses were $4.4 million, compared with $3.3 million in the Q3 a year ago; as we continued our investments in sales and marketing and in supporting and developing our new products. Expenses were down slightly from the $4.6 million that we incurred during Q2 this year.

On this basis, the Westell Division posted an operating loss of $1.3 million for the quarter. The CNS division is now focused on Homecloud. Division revenue includes recognition of deferred revenue as is associated with the legacy business we have exited.

Expenses were $400,000, down from $1 million in the prior quarter, which included a one-time expense of approximately $0.5 million to resolve the dispute. We are also reducing Homecloud spending following it's release on September 26th.

I should also note that we had some one-time charges affecting our discontinued operations. This include an after-tax charge of $0.9 million for a pending indemnification claim related to Conference Plus, offset by an unrelated tax benefit of $0.3 million.

Our balance sheet remains extremely strong with $119.2 million in cash and short-term investments at December 31, 2012, and no debt. Cash and investments were down about $5.2 million during the quarter. The largest use of cash during the quarter was for share repurchases, which totaled 1.4 million shares at a cost of $2.9 million. We now have approximately 58.9 million shares outstanding. The Q3 repurchases nearly exhausted the existing Board authorization. We also increased inventories by $1.5 million to support sales of our new products.

With that review of the key financial results, I would now like to turn the call over to Rick Gilbert, Westell’s Chairman, President and Chief Executive Officer.

Rick Gilbert

Thanks. I think Brian has effectively covered our third quarter results; I will now add a few observations from a strategic perspective. Our fiscal year ends on March 31st and as we approach the end of our fiscal year, the Westell team always take some time to assess our progress and review our strategic plan.

During this process, we revisit the strengths, weaknesses, opportunities and threats of every product segment in our catalogue. We also critically review the key plan assumptions as compared to the actual performance we experience during the year. Finally, we carefully consider possible adjustments to our strategy as we plan, budget and generally prepare for the coming fiscal year.

Our team is currently in the middle of this review process, but I can offer some initial observations. First, our basic strategy has been to focus on developing high margin differentiated products for wireless networks that can be sold to existing customers. This strategy has clearly begun to bear fruit. As Brian pointed out, in Q3 we saw 16% year-to-year gain in revenue which was driven by rapid sales growth from three new product lines; DAS Panels, Tower-Mounted Amplifiers and Industrial Ethernet Switches. It is important to note that each of these product segments pass both of our key strategic tests. They are not commodity items and they target market opportunities that are not well served by the larger telecom equipment providers.

In fact the only product initiative that has yet to bear fruit is the Homecloud project which in fairness was initiated when Westell was still selling commodity DSL gateways. Homecloud is essentially a consumer product and Westell lacks the retail oriented marketing and sales capabilities that we now think are needed to successfully sell this product. As a consequence, we will further limit our spending in this area while we actively seek to sell the Homecloud technology.

So with three out of four new product initiatives making good progress, it is appropriate to ask the question, what adjustments if any should be made to the Westell strategic plan going forward? This of course as the primary question our team needs to answer during the review process. However, even at this stage of the analysis, I can say if we draw a few conclusions.

First, the fundamental elements of our current strategy appear to be sound. If anything, we expect we will accelerate our shift toward greater emphasis on wireless products. I also believe that we need to continue to make investments in our sales and marketing organization with an increased focus on indirect distributions channels.

Finally, we are looking for ways to expand the range of potential acquisition targets, but still maintaining our strategic discipline. We deliberately limited our initial acquisitions search to a narrow range of strategic market segments. But we may now need to expand our search as successful acquisitions remain a critical product of our growth strategy.

In summary, let me be clear that we are committed to building long-term value for Westell shareholders and we also fully understand that we need to return the profitability as soon as possible. In order to accomplish those goals, we need to continue executing our strategic plan in a disciplined manner and to continue achieving a high success rate with our new product initiatives. This is true whether the products are developed internally or acquired externally. I feel we are on the right track and are making good progress on our path towards sustained profitability.

With that, I would like to open the call for your questions.

Question-and-Answer Session

Operator

Thank you. We’ll now begin the question-and-answer session. (Operator Instructions) And our first question is from Mike Latimore from Northland Capital.

Mike Latimore - Northland Capital

So you mentioned the kind of your growth product category I think doubling since the September quarter, are those products being sold into projects that are sort of ongoing here or there, a couple of big projects and you have to sort of start new ones in the March quarter?

Rick Gilbert

No, I think first of all, they are more than doubled.

Mike Latimore - Northland Capital

Okay.

Rick Gilbert

And secondly, they are selling to ongoing projects; I mean there's not a single project you can outline that was responsible for a bump in the sales, so we expect to continue the growth rates.

Mike Latimore - Northland Capital

And then you mentioned that your traditional products did grow year-over-year I believe, what do you attribute that sort of stability/growth, what were the factors kind of stabilizing that?

Rick Gilbert

So Mike in the traditional category, we have some of the tier one TDM products. Those had been in fairly significant decline year-over-year and that really started about a year ago and what we've seen in the last couple of quarters it was a stabilization of those products and actually some upticks.

So that affects both the T1 TDM switches and some of the enclosures that go with that stuff. Some of the other product lines have actually increased also that's enclosures and [CSI] accustomed systems integration which have been doing fairly well, fuse panels continue to do well. So those products are just seeing demand in the marketplace because our customers like them or need them.

Mike Latimore - Northland Capital

And how about what's the kind of new products becoming more important over time, how do you envision sort of seasonality in your business, is it going to be a difference in what you've seen with your traditional product lines?

Rick Gilbert

I certainly think there was a seasonal effect in the quarter we just reported, as there has been every year. And so in terms of seasonality, it really depends on the general nature of outside [plant] business. We are still in outside plant whether its wireless or wireline. So I would expect the third quarter to be seasonal quarter in the future as well.

Mike Latimore - Northland Capital

And just last question on the unallocated corporate expense that was up sequentially, is that kind of the new run rate or will that come down or stay at that level?

Rick Gilbert

I think that's about right and if you look at the expenses in total, they were fairly comparable quarter-to-quarter that's really where we are running right now. Some (inaudible) some adjustments and accruals they go up and down a little bit but that's about right.

Operator

Next question is from Jeff Linroth from Leaving It Better. Please go ahead.

Jeff Linroth - Leaving It Better

I had a question about the target for on the flow chart from the investor presentation, you've got a goal of $200 million run rate by the end of fiscal year ’15. And I wanted to know could you give me some range of overall gross margin you might be shooting for and it can be a wide range but I would like to understand how gross margins might be compared to today's if you achieve what you intend?

Brian Cooper

Jeff, this is Brian. Basically, the products that we are pursuing today and that can change over time of course but we're basically in the same gross margin range that we've been with our traditional products, which is in the 40% to 45% range typically, maybe up to 50%. Some of the products we're interested in but with more software content whatever would probably be beyond the high end of that range but we would so be aiming to be in there. And you know, we're running below 40% right now but we really are with fairly low volumes absorbing, a fair amount of fixed cost into that and we're also absorbing the sort of, unusual cost of first time introductions of some of these new products. So the ramping up of those.

Rick Gilbert

And Jeff, I would like to just expand on that a bit. I mean, it really comes to, I remember our corporate presentation you are referring to as referring to two fundamental elements of the strategy. One is, we're building new products and growing those as we talked about that's been the reasonably successful. We're starting to see results from that.

The other side, of course is acquisitions that we've talked about. And the target gross margins really will depend a lot on what the level of software content is on future products or acquisitions. It's all hardware. If it's all boxes, it will be in the 40% to 50% range, probably around 45% margin as about that you will do if it's going to be a significant software content, it can be significantly higher but I think Brian is right. If I was modeling this, I model between 14% and 15%.

Jeff Linroth - Leaving It Better

Thanks, that’s really helpful. And just one last question, how are you feeling right now about the $100 million rate that you are looking for at the end of this year?

Rick Gilbert

Well, we're going to have find something to buy to get there.

Jeff Linroth - Leaving It Better

Yeah, that’s what's it looks like.

Brian Cooper

Yeah, that’s not an easy part of the process for us to control, but we are working hard on it.

Operator

(Operator Instructions) And we do have another question from Mike Latimore from Northland Capital.

Mike Latimore - Northland Capital

I think last quarter you talked about may be some opportunities with the New York subway system for using your products and may be some products to help repair systems around the Sandy Hurricane, were any either of those kind of influence on the quarter?

Rick Gilbert

Well we did certainly shipped the first phase of the New York subway project and that represented more than 200 cabinets with variety of equipment built into it, our content in those cabinets was somewhat limited to the switches that we are in there as they move forward to future phases. We are working with Transit Wireless which is the contractor doing the subway system to participate in all future phases and to expand our content.

So I think that’s gone well. In terms of Sandy, we saw a little I would say in terms of additional request for some legacy equipment that could be traced back to Sandy. To be honest since it wasn’t forecasted, we weren’t able to ship everything that was requested in the quarter. And you will still see some effects in future quarters from Sandy.

Brian Cooper

Yeah, I also think certainly some of the carrier activity was drilling down inventory on their side rather than immediately replacing orders against the suppliers like Westell. So, there maybe some manifest going forward but we didn't see much direct impact on the quarter from Sandy.

Mike Latimore - Northland Capital

Okay, and then like when you acquired the Antone Wireless, your (inaudible) would be accretive in fiscal ‘14 is that still kind of inside?

Rick Gilbert

Yeah, I think its inside, the TMAs are doing extremely well, and we see it as a very good acquisition. We are selling in multiple regions of a major US carrier and we are obviously accelerating sales of that product as for some of the other new products that we mentioned.

Mike Latimore - Northland Capital

And just to clarify a comment I think, Brian you said, you had increased inventory to in light of the demand for the new product, is that what you said?

Brian Cooper

Yeah, that is right, Mike. It’s a combination of things as we have more demand for those products obviously we need to build inventory and also this as new orders, we often don't have good forecast on them. So we are actually building those products that we have pretty good visibility to on selling but we are building ahead of orders probably more than we usually would, so that’s something we are managing closely but we are building inventory to make sure, we have it, when we have the sales opportunities.

Operator

Final question from Brian Horey from Aurelian Management. Please go ahead.

Brian Horey - Aurelian Management

Just to follow-up on the inventory, is that kind of a one off effect of the orders that you are seeing or do you expect to see inventory turns at a lower level going forward?

Brian Cooper

Brian I think its sort of a one off, I mean as we ramp any new product we may run into the same sorts of requirements for inventory but then as we get the products up to a faster growth rate and a steadier more predictable demand I guess is the important part then its easier for us to keep inventories a little more limited again. So the returns should come back to where we would typically be.

Rick Gilbert

And Brian if I can just add a little bit more flavor on that, when you are ramping the new products like this, it really is important to have the inventory in stock because they aren't necessarily forecasted correctly by the customer. When they get intrigued with a new product they start ordering the product, and if you have to go back to them and say its going to be 10 weeks to deliver they will go elsewhere. So these risk wise we've done an inventory are pretty safe in the sense that we are definitely going to sell everything we built. And they’ve also paid off already in terms of out of out of the blue orders or increased orders in the data area, in the TMA area especially and so we are very comfortable with what we've done here.

Brian Horey - Aurelian Management

Can you guys give us an estimate of what if you would have back out the contribution of Anton what you think the organic growth rate was year-to-year in the Westell division?

Brian Cooper

We can, let me think about that a second but basically the TMAs are still ramping up so they weren't a major part of what we are doing. I mean out of the new products we probably saw a little stronger demand from DAS and Ethernet. So if you do the math its several 100,000 dollars of TMA is actually sold and our visibility to order going forward is more.

Rick Gilbert

I think the problem with the question Brian at least from a qualitative standpoint is the new products weren't introduced until well into the current fiscal year when you talk about year-to-year comparison. Also the legacy products other than cabinets and CSI and some of the power products were in decline, and so if you were to look at just the legacy stuff, the growth rate was flat or down alright. The new products were introduced late in the year and the growth rate has been significant obviously. So I think it’s hard to give you an answer that's very useful based on a quarter and a half of shipping of new products.

Brian Cooper

And what's probably more important here is as we are looking forward our optimism about the product is high. We have very good opportunity of development going on with our customers and so we see really good demand there.

Brian Horey - Aurelian Management

And maybe you can just add a little color on the other new products and what accounts for there, it sounds like a pretty fast ramp for those products amidst that an issue of kind of rapid growth and primary demand in the markets or are you guys, is there a lack of competitive product that you are taking advantage of or maybe you can just give us a little more color there.

Rick Gilbert

Obviously as we've stated a number of times, our basic strategy was to built differentiated products, we didn't want commodity products. We wanted products that were applicable to the wireless networks because we thought that's where the budgets would be and we want our products we could sell to our existing customer set. But the other thing we wanted and I mentioned it briefly in my script is we wanted to pick product areas that were not well served by a larger strategic equipment vendors, because we didn’t want to end up and fighting with giants kind of scenario as we go after the larger customers.

So the reason we're seeing the ramp is again we're selling to our traditional customers which are the two largest carriers in the US and in these areas the DAS Panels for instance have been purchased by both of the major carriers. TMAs, as I said, multiple regions increasing regions on a continuous basis and one of the major carriers. Then of course the industrial switches. We mentioned its project by project basis, but when you start seeing projects like the New York Subway systems selling switches, those start to ramp volumes as well.

So the growth rates really is a combination of having a strategic discipline to build the high products and meet all those litmus tests that is mentioned, but also been able to leverage our current customer relationships to ramp rapidly and go through the pivotal process as quickly as possible and I think we've done that.

Brian Horey - Aurelian Management

So the industrial switches I would imagine is kind of application by application kind of opportunity?

Rick Gilbert

Of the three, that’s exactly right and those are the ones that are applications by applications and some of them are with big customers and lot of them are with utilities or special projects like the New York Subway System. The industrial switches, of course, one of the reasons we want to expand our indirect distribution channels because the people we compete against there are in those channels, people like (inaudible), we believe we have a very cost effective industrial switch that will sell well in those channels.

Brian Horey - Aurelian Management

So other than utilities are there any verticals that stand out on the industrial switch side and given that it’s a kind of application by application kind of market can you may be talk about what the pipeline looks like there relative to what it was like 90 or 180 days ago?

Rick Gilbert

Well the pipeline is increasing; we already mentioned the subway system utilities. There are public safety applications, obviously these things are used in traffic light situations things like that. There are industrial applications in the energy sector that are targets. There is also municipal opportunities, where cities will standardize on a particular industrial switch to deliver municipal capability. But these are really it’s hard to generalize the pipeline on verticals in terms of this is one vertical specifically where we are working on versus another, because a lot of times it is a distribution partner who is looking for a particular kind of switch and for the visibility of [indi] customer somewhat limited at that point. So if we sell through an annexure or [Walker] or one of those guys, they are buying switches for a project.

Brian Horey - Aurelian Management

Understand, yeah.

Brian Cooper

And a lot of times these are integrators that are using in lot of switches or bringing a switch into the project.

Rick Gilbert

But I think the main point I would make is of the three carriers we’ve talked about DAS and TMAs are clearly targeted at primarily the major customers and the DAS area are going to get some secondary business from DAS contractors. In the industrial Ethernet switch area it is for more through distribution channels and it is absolutely project oriented, but all three are going at good rates.

Brian Horey - Aurelian Management

And then finally on the M&A front you guys indicated that you might widen the target range, I guess in terms of the types of products in your markets you look at without getting too granular, can you give us a sense as to kind of directly where your case has shifted or broaden there?

Rick Gilbert

Yeah, I mean it’s a dilemma for us because we also mentioned a number of times, we want to maintain strict strategic discipline and our initial discipline in this area was, we selected very specific market segments that we were interested and we went out look exhaustively at those market segments to find high position targets that we’d like. Then we found some that we liked and I can't go into much more detail on that. That's said obviously we haven't pulled off our second acquisition yet and one other things that I think looking at the strategy right now is have we missed market segments or should we expand our market segments specifically in the wireless areas, and can we expand market segments and still need those reference test, I talked about earlier.

So that's what the team is struggling with right now, but frankly we would like to see more targets. All right because as Jeff pointed out earlier, I mean if we are going to get to our goals, it can't be all through growth of internally develop products or at least can’t be all through growth of internally developed products and still meet those targets on those dates. So we do need the acquisitions and we are looking hard whether there are some additional markets segments we missed in our first round. Does that makes sense?

Operator

(Operator Instructions) And our next question is from Jeff Linroth from Leaving It Better. Please go ahead.

Jeff Linroth - Leaving It Better

Just a follow-up question on Homecloud, I'm sure it’s got to be some level of disappointment, I certainly have a one register a little disappointment myself given the long effort for run up we had to the release of that product. I just want to know one or two assumptions that you made that didn't pan out in a general sense compared to what you saw, I mean I'm imagining from marketing and sales execution but there's also a bevy of competing products and any color you would add in terms of what you expected it didn't quite come out the way you wanted, I know you mentioned the sales channel.

Rick Gilbert

First of all Jeff you didn't buy one.

Jeff Linroth - Leaving It Better

I did shop it.

Rick Gilbert

But basically, I would say its not so much disappointment as some level of ambivalence and the one side we believe we built the best technology in the marketplace for this product and we built it slower than we should have hit the markets more slowly than it should have and I think because of that some opportunities were not available to us.

I also think that we got to a point with Homecloud where we were far enough along on a development project as I said that was initiated during the phase where we were actually selling DSO gateways, yeah far enough long that our view was let's finish the product and technology as really interesting, we have key patent on the product, we have a lot of interesting technology and we are still adding features, in fact literally in the last couple of days we put up an Android app for Homecloud, so it’s a very complete product.

We are happy with it but we simply don't have the capability to do retail level marketing of sales which is really where we have to take this product and that would be a major investment for us and a distraction because if you think about Homecloud relative to again those strategic litmus tests I talked about, it doesn't meet all of them.

And what we don't want to do is taken our (inaudible) major investment step while we have good success with the wireless products that we are putting in the market we want to stay focused.

At this point, what we doing is, as I said, looking to sell the Homecloud technology and we will see where that goes, but in terms of the product, you should have bought one Jeff. It’s a good product.

Jeff Linroth - Leaving It Better

Well, that's exactly what it looks like to me it’s a good product. Early in the development phase, I suspect that you have this understanding of what the sales model would be or what the sales channel and models would be like, did something change, did the sales model change or did something else change?

Rick Gilbert

I think sales models changed to some extent, remember again when we initiated the product we initiated it because we were being asked by some of our major carriers that bought [PSL] gateways coded run applications on gateways and so we came to the conclusion that we needed to do a sidecar we designed Homecloud and started building it speculatively. Then we sold the division that would have been the target division for selling Homecloud and at the same time because of the amount of time it took to actually get the technology to where we wanted, the major carriers, sort of went a different direction.

They all went toward and if you look at them, whether it's Verizon, AT&T, Xfinity you name it, they all went for a simple phone control and security applications and that’s their division. You know the (inaudible) division and the home monitoring divisions, things like that. So those represent single applications on a Homecloud platform, but the Homecloud platform is probably significant overkill in order to those kind of applications for large carriers. And so as you said, one of our biggest channels became not viable and our other options of course was then to sell it in a retail environment and that led us in to the analysis that we are simply are not capable of doing that with their resources we have.

Operator

Next question is from Mike Latimore from Northland Capital.

Mike Latimore - Northland Capital

Just one more question on Homecloud. I guess, (inaudible) the expenses for Homecloud being in sale margin in the quarter?

Brian Cooper

Well, we're ramping them down, Mike. I think we ran around in the 400,000 and probably include some other things, but we will be coming down from there.

Operator

Our next question is from Gary Siperstein from Elliot Rose.

Gary Siperstein - Elliot Rose

Just following up on Homecloud, you mentioned in your description of how you came to the decision that it was the best product out there even though it was feature rich. Is there a possibility as oppose to just leaving it on the shelf and reducing expenses to license it to another player who might have an ability to sell into the consumer market?

Brian Cooper

Well that’s really what I was saying when I said we were exploring selling the technology. So licensing or outright sales the Homecloud technology is certainly a viable option.

Rick Gilbert

Yeah and we definitely think there are players out there who have the capability to do something with those product, we just don’t think that’s it a very natural move for us to do it.

Gary Siperstein - Elliot Rose

I came on the call late. I saw in the news release how much stock you bought in the buyback program, how many more shares do you have to buy and if you’ve utilized the allocation will you be doing another authorization?

Brian Cooper

So this is Brian, I will tell you that we are basically done with the authorization there is $100,000 or something still underneath it, but we have exhausted it and at this point the Board of Directors obviously makes those decisions and we have not gone a conclusion of what we would do next, but there is no new authorization as we speak.

Gary Siperstein - Elliot Rose

But just to talk to that point, you have more than ample cash over $2 a share in cash and the business is making great progress, and it seems like you are probably not going to bet the company on the next acquisition and shoot the whole load. So it seems like there is more than enough cash to have a buyback under book which will ultimately prove to be accretive and under cash per share and still make acquisitions, so why is there a hesitation.

Brian Cooper

Gary we’ve already done a significant amount of repurchase, I don’t know that there is hesitation per se. I think we are looking at our strategy as Rick described. We do have opportunities for acquisitions that could use significant amount of cash. We probably have more on the books than we would use for those purposes today but that is the decision we just haven't taken here.

Rick Gilbert

Yeah, I think this is Rick just add to that, I think all your points are good points, but those are the exact things being considered by the Board of Directors as an approach at the end of the fiscal year and decide what the next steps are. You know we have purchase $10 million shares of stock roughly on these programs and at this point I think the Board simply want us to take a pause and consider the next step carefully.

Gary Siperstein - Elliot Rose

Fair enough, thank you very much.

Operator

(Operator Instructions)

Rick Gilbert

Well, looks like we have answered the questions that are under on the screens. So thank you very much for joining us. We look forward to the next call and we look forward to still reporting good progress for next call, thank you.

Brian Cooper

Thanks everyone.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may all disconnect at this time.

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