Westell Technologies' CEO Discusses F3Q 2014 Results - Earnings Call Transcript

Feb. 4.14 | About: Westell Technologies, (WSTL)

Westell Technologies, Inc. (NASDAQ:WSTL)

F3Q 2014 Earnings Conference Call

February 4, 2014 9:30 AM ET

Executives

Thomas P. Minichiello – Chief Financial Officer and Senior Vice President

Richard S. Gilbert – Chairman, President and Chief Executive Officer

Analysts

Marco A. Rodriguez – Stonegate Securities, Inc.

Todd Brady – Oppenheimer & Co. Inc.

Mike Latimore – Northland Capital Markets

Josh M. Goldberg – G2 Investment Partners Management LLC

Operator

Welcome to the Third Quarter Fiscal Year 2014 Earnings Conference Call. My name is Christine and I’ll be your operator for today’s call. At this time, all participants are in a 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 Tom Minichiello. You may now begin.

Thomas P. Minichiello

Thank you, Christine. Good morning and welcome to our conference call to discuss the fiscal year 2014 third quarter results for Westell Technologies. The news release that we issued last night is posted on our website, westell.com. On this call Rick Gilbert and I will update you on the business and our financial results.

Before I 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, expect, 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 actual results, performance or achievements to differ materially from those discussed. The 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, 2013 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’ve provided these reconciliations to the most comparable GAAP measures in our news release.

Now, I’ll begin by discussing the financial results for fiscal year 2014 third quarter ended December 31, 2013. Rick Gilbert, Westell’s Chairman and Chief Executive Officer, will then provide his perspective and we’ll conclude by taking questions.

For the third quarter of fiscal 2014, Westell Technologies reported consolidated revenue of $25.2 million, a 16% decrease from the record $30 million in the second quarter of fiscal 2014. Revenue this quarter consisted of $14.7 million from the Kentrox reporting segment and $10.5 million from the Westell segment.

Well Kentrox relies on specific projects, some of which ramp down this quarter. The segment still generated its second highest revenue quarter in a recent history. For the Westell segment revenue was impacted by end of year budget cycles typical of the December quarter. However, orders remain strong for our newer wireless products in this segment including tower mounted amplifier or TMAs and distributed antenna system or DAS interface panels.

On a GAAP basis, we reported consolidated net income for the third quarter of fiscal 2014 of $1.9 million or $0.03 per share versus net income of $1.3 million or $0.02 per share in the prior quarter. On a non-GAAP basis, net income for the third quarter of fiscal 2014 was $4.2 million or $0.07 per share, compared to non-GAAP net income of $4 million or $0.07 per share in the prior quarter. Both the GAAP and non-GAAP bottom line sequential quarter improvements of $600,000 or 48% and $200,000 or 4% respectively or attributable to a higher gross margin and lower operating expenses.

We were not only solidly profitable for the quarter, but when compared to the prior quarter, we improve both our GAAP and non-GAAP profit margins and net income on lower revenue. On a year-to-date basis, our GAAP net income for the nine months ended December 31, 2013 was $500,000 or $0.01 per share, compared to a net loss of $5.9 million or $0.10 per share in the same period in the prior fiscal year. Fiscal year-to-date non-GAAP net income was $8.9 million or $0.15 per share, compared to a net loss of $5.4 million or $0.09 per share in the same period last year.

Turning to the gross margin, consolidated gross margin was 48.5% in the third quarter, compared to 41.5% in the second quarter. Contributing to the higher gross margin in the third quarter was a favorable mix, less revenue associated with inventories that were revalued at market prices, when we acquired Kentrox earlier this year. And lower amounts recorded for this quarter for obsolete and excess inventory.

As we stated one of our key financial goals for fiscal 2014 is maintaining consolidated gross margins of better than 40%. For the nine months ended December 31, 2013, our gross margin was 43.1%.

Turning now to operating expenses, consolidated GAAP operating expenses were $10.2 million in the third quarter, compared to a $11.1 million in the second quarter. The primary factor for the $900,000 favorable result was lower amortization expense related to acquired intangible assets. Consolidated non-GAAP OpEx was $8.9 million this quarter, compared to $9.3 million last quarter. The $400,000 improvement was primarily due to lower warranty costs and lower project related R&D expenses. As a result for the second consecutive quarter we generated a strong double-digit non-GAAP operating profit margin.

Moving to the balance sheet, we generated cash of $5.3 million in the third quarter, bringing to $86.8 million of our total cash and short-term investments at December 31st, 2013 and no debt. Improved net income and working capital were key drivers in further strengthening our balance sheet. As we stated previously another one of our key financial goals this year is for the business to be cash flow positive. On a fiscal year-to-date basis we have generated positive cash flow from operations of $700,000.

Now let’s take a deeper look at the third quarter results by segment. Revenue for the Kentrox segment was $14.7 million in the quarter, down 9% from a record $16.1 million last quarter. While revenues remain strong this quarter, the sequential decrease was primarily due to the project-based nature of the business, which resulted in record high revenues achieved in the prior quarter. Kentrox segment gross profit was $8.8 million and gross margin was 59.8%, compared to $8.1 million and 50.4% last quarter.

The margin improvement was due to a lower impact of fair value inventory adjustments from the Kentrox acquisition and a more favorable mix. Kentrox segment R&D expenses were $900,000 in both third and second quarters as a result Kentrox segment profit was $7.9 million, compared to $7.3 million last quarter.

Revenue for the Westell segment was $10.5 million down 24% from $13.9 million last quarter, but up 19% from the year-ago quarter. While demand continued to be strong for new wireless products in this segment, the sequential revenue decrease was primarily due to the seasonal variations that are typical of the December quarter. Added record high revenues in the prior quarter for TMAs and DAS panels.

Westell’s segment gross profit was $3.4 million and gross margin was 32.6%, compared to $4.3 million and 31.1% last quarter. While the gross profit decreased as a result of the lower sequential revenue, the margin increase due to lower amounts recorded this quarter for excess and obsolete inventory. Westell segment R&D expenses were $1.6 million, compared to $1.8 million last quarter. As a result Westell’s segment profit was $1.8 million, compared to segment profit of $2.6 million last quarter.

And with that review of the key financial results I would like to now turn the call over to Rick.

Richard S. Gilbert

Thanks, Tom. As usual I’ll make a few observations about our results and then open the call for your questions. Our third fiscal quarter which ends on December 1, is always difficult to forecast. This is due to the combination of year-end budget management by some of our customers and fewer available business days during the quarter. Despite those challenges, our third quarter results were well within the range of what we had expected and more important, we generated a profit on GAAP basis.

Let’s start with Kentrox. As discussed in previous calls the Kentrox business segment, relies specific project roll outs. During the third quarter, two large projects ramp down toward completion, which resulted in a 9% sequential decline in Kentrox revenue, but with strong profit and margins. This was expected and included in our forecast for the quarter. At this time we expect some additional revenue declines in this segment, while we continue to identify new intelligent site management projects. Several such projects are at various stages in our sales pipeline and we are focused on closing these opportunities, as well as expanding our business with current Kentrox customers.

In the Westell segment, we continue to experience good sales of both our tower mounted amplifiers and our distributed antenna system interface panels. However, a significant TMA shipment was moved from the end of Q3 to the first week of Q4 which led to a sequential decline in the Westell segment revenue. Again we were not surprised by this action and note that the Westell segment revenue still grew 19% relative to Q3 a year ago.

At this time we expect a solid fourth quarter from the Westell segment with revenue increasing sequentially from Q3. On the product development front, we introduced our Optima mobile applications, which are now available in both the Apple and Google app stores and have been welcomed by our customers as valuable additions to the Optima Management System. We also introduced the RMC-700, a cost effective control device for smaller remote locations.

This device coupled with the Optima mobile apps, adds more depth to the Kentrox product line and will certainly expand our sales opportunities in the M2M marketplace. During the third quarter, we also added several new features to the TMA and DAS product lines due to specific customer request. Okay, at the corporate level, our business development team continues to actively examine strategic acquisition candidates, in order to expand our product portfolio, help achieve our long-term revenue goals.

While I cannot speak to either of the specifics of the time, potential deals at this time, we are treating M&A very seriously, and I am pleased with our progress in this area. Although we avoid giving specific guidance, we expect our fourth quarter results will allow us to achieve all our stated financial goals for FY 2014, including the $100 million revenue stretch goal that I introduced during the last earnings call. The other key FY 2014 financial goals are to achieve 40% gross margins, consolidated gross margins and a positive cash flow was about 70% of our revenue coming from wireless products. Finally, as we approach the end of our fiscal year 2014, we are concentrating on a complete review of our strategic and financial plans for the new fiscal year, which kicks off on April 1.

At this time, I don’t expect to make any dramatic changes to our strategy or previously stated financial goals. In particular, we intent to continue focusing on the wireless market and to expand our business through both organic growth and additional strategic acquisitions. In short, I believe the current quarter will allow us to successfully complete FY 2014 and leave us well positioned for continued growth next year.

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

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question is from Marco Rodriguez of Stonegate Securities. Please go ahead.

Marco A. Rodriguez – Stonegate Securities, Inc.

Well, good morning guys. Thank you for taking my questions. I was wondering if you can talk a little bit more about Kentrox in the inventory adjustments you had in there. I also see that there was a deferred revenue adjustment those all impacted the cost of goods, is that correct?

Thomas P. Minichiello

Yes, good morning Marco, this is Tom. Yes, that’s correct. Go ahead.

Marco A. Rodriguez – Stonegate Securities, Inc.

I’m sorry. Can you kind of compare because I don’t have the numbers in front of me, but obviously the sequential increase was pretty high on the gross margin aspect. And I think you said that you had less of an impact from I guess reserves for that, from last quarter can you kind of walk us through that?

Thomas P. Minichiello

Yes, sure. So, on the Kentrox side there were two major drivers for the gross margin, one was the mix of products, we had a higher software content this quarter. And then the other item was as you know with the purchase accounting the inventory that we acquired at the acquisition gets revalued up to basically at sell price. And so when we sell those going forward on the GAAP numbers there is no margin. But we had a good amount of that in the first couple of quarters, but we had much less of that this quarter. And so on a GAAP perspective that will cause a favorable sequential comparative. Your other item that the inventory, you know that’s more on the Westell side, but all three impacted the consolidated margin improvement.

Marco A. Rodriguez – Stonegate Securities, Inc.

Okay. And are you expecting any I guess noise for lack of better word entering Q4 for the Kentrox gross margin?

Thomas P. Minichiello

Well, the mix will, changes by quarter and we are heavily dependent on that, the step up inventory is depends on how many of those units that we sell in the quarter. So that will vary, I don’t expect to see the same sort of mix in the current quarter we are in, in the fourth fiscal quarter.

Marco A. Rodriguez – Stonegate Securities, Inc.

Okay. And when do you think than I guess what I’m trying to drive that is and I apologize for lack of my communication. The inventory adjustments up or down based on the acquisition. When do you think that kind of run this course and we just see basically product mix impacting gross margin there?

Thomas P. Minichiello

Yes, that’s good, good question, we’ll see, it won’t end by the end of the fiscal year, we’ll still see some of that rolling into fiscal 2015, but it’s going to tail off over time.

Marco A. Rodriguez – Stonegate Securities, Inc.

Okay, got it. And then for Kentrox revenues what was the growth rate year-over-year and what was the level of revenues last year?

Thomas P. Minichiello

Yes, sure. In the third quarter, same quarter last year was $9.2 million versus the $14.7 million this quarter.

Marco A. Rodriguez – Stonegate Securities, Inc.

Got it, okay and then coming over here to the Westell, the gross margin number looked a little bit weaker than which you guys did in Q1 fiscal 2014 on roughly the same revenue level. Can you talk a little bit about what drove that there and what sort of expectations you might have there as we kind of progressed through this calendar year?

Thomas P. Minichiello

Sure, the, look the Westell segment has number of different product line, so it will always be highly dependent on the mix among those six or seven different product lines. So that’s you can count on that sort of moving it around quarter-to-quarter, but it will be, if you noticed in the second quarter actually when we had the higher revenue, we were higher, if you takeaway the charge that quarter for the inventory. So it’s also going to depend on volume and the more that we can generate on the top line on that segment, it should go higher on the gross margin again depending on mix.

Marco A. Rodriguez – Stonegate Securities, Inc.

Got it, okay. And then the amortization expense kind of a housekeeping item here. Is that a good number for this quarter for modeling purposes going forward?

Thomas P. Minichiello

Yes, it is.

Marco A. Rodriguez – Stonegate Securities, Inc.

Okay. And then inventory sequentially went up a fair amount. Can you talk a little bit about the drivers there and then how should we be thinking about the levels here in the next few quarters?

Thomas P. Minichiello

Yes, we do have a higher inventory balance at the end of the year, as Rick noted we had a, we were ready for some customer shipments in December one of which ended up happening in early January. So that’s one of the reasons that at the end of the year you see a higher balance. And we’re always carefully managing inventory, but it’s a balance Marco, between managing our working capital and meeting customer delivery dates.

Marco A. Rodriguez – Stonegate Securities, Inc.

Got it.

Richard S. Gilbert

So Marco, this is Rick. We’re going to have to let other people ask some questions here certainly. You want to either give us a call after the call for more or get in for questions after we get a few other people in, okay.

Marco A. Rodriguez – Stonegate Securities, Inc.

All right. Got it, thanks a lot guys.

Richard S. Gilbert

Thanks Marco.

Operator

Thank you. Our next question is from Todd Brady of Oppenheimer. Please go ahead.

Todd Brady – Oppenheimer & Co. Inc.

All right, good morning. Thanks, nice quarter guys. I apologize for the sharp voice little under the weather. Rick question for you. The cell tower business ownership of cell tower is changing rapidly it seems to serve the boards, reshaping itself and based on Westell and its partners. How are you guys positioned? What’s your level of confidence as you are beginning the strategic thinking looking at end of fiscal 2015 and tell us little bit more about what you’re thinking on that area of your business? Thanks.

Richard S. Gilbert

Well, Kentrox likes the changes taking place in the cell tower ownership structure because Carroll towers where you got multiple carriers using a single tower owned by a third party often, it tends to be advantageous because there tends to be service level commitments that need to be monitored. That requires remote site management or intelligent remote site management. And when I refer to some of the things in our pipeline relative to Kentrox, some of those are, some of the new owners or people that have the Carroll model that aren’t current customers. So, we do like the shift that’s occurring, it’s occurring on a basis in a number of countries worldwide and we think it’s a good opportunity for us.

Todd Brady – Oppenheimer & Co. Inc.

Okay, just a quick follow-up on the Kentrox position, we all know that it’s very, very projects specific model. But as you guys said today your level of confidence on the international side versus the domestic side, if you have this conversation six months ago you’ve seen to be pretty excited about the opportunities internationally, you guys have seen obviously some good projects domestically, how things change, have they changed, have they improved. Give us just some color on what you guys see going forward internationally versus domestically? Thank you.

Richard S. Gilbert

Sure. Nothing fundamental has changed on the international front, when we talked about this in the last few calls, we said well, we have a lot of business in Australia, we have had in the past businesses obviously in South Africa, we start business in South Africa. But South America, Latin America were the parts that we thought were the most interesting new opportunities for us. That really hasn’t changed, with one exception and that’s one of our big projects was within NBN Co and as you can tell by reading the news.

There has been a big reorganization at NBN Co, there is consideration of change in the fundamental architecture in the NBN Co which we think in the long-term will be advantageous to us, that our big rollout at NBN Co is one of the two projects that really ramp down toward completion and being the new architectural [ph] review. And that could take some time. I mean this is government review taking place down in Australia.

I mean it’s a good customer for us, we like them, I think they like us and we do expect some additional opportunities in the long-term with that customer. That’s the only big change on the international front. And again, no fundamental changes on the domestic front with the same customers we’ve always work with, we are still working with, but things are still driven by budget, budget cycles and project cycles. And we knew that, when we acquired Kentrox and there is nothing unexpected that we are seeing here.

Todd Brady – Oppenheimer & Co. Inc.

One final question, then I’ll go back into the queue, but on the Westell business, you picked up a small contract with the Toronto Subway System with this. And can you just talk a little bit more about how that fits into Westell’s growth going forward, not just next quarter, but as you begin the strategic plan end of fiscal 2015 and trying to achieve that goal of taking the company up to $200 million or exactly just the Ethernet side of the business into the equation? Thank you.

Thomas P. Minichiello

So as you said it was a small contract, it’s an interesting contract for us, it’s a similar to the Transit Wireless activity in New York. And we see these kind of Transit Wireless like contracts taking place in Toronto and other cities. We like to be involved in those, but relative to our overall numbers its small, much bigger for us obviously is the TMA business and especially the DAS business going forward, we see as being much bigger place for us because they are bigger customers and much higher volumes.

Todd Brady – Oppenheimer & Co. Inc.

Great, thank you guys, keep up the good work.

Thomas P. Minichiello

Thanks, Todd.

Operator

(Operator Instructions) Our next question is from Mike Latimore of Northland Capital. Please go ahead.

Mike Latimore – Northland Capital Markets

Hey, great good morning. Nice results there. On the Kentrox side, I guess little more softer in the quarter, is that tied to a sort of one customer buying more software, is that more broad based and I guess is this kind of several one-time event, or do you see more software competition going forward?

Richard S. Gilbert

Well, it varies by first of all the second part of our question, again, it obviously varies by project and by quarter and by rollout, obviously when there is more software the mix, the margins go higher, in this particular last quarter it was primarily driven by one customer and some orders from that customer, I think, as we look quarter-to-quarter this can be very hard to rationalize, well what’s going to happen in a specific quarter relative to what happened in the previous quarter because it is really driven by individual projects. The good news is the product line as well received, our customers are happy with our products and it really is one on these cases where it’s just matching the budgets to the project cycles and getting the follow-on projects from existing customers as well expanding our business with new customers. And in the sales cycle at Kentrox has always been a long sales cycle, but we’re well involved in a number of pipeline projects that we’re pretty happy with.

Mike Latimore – Northland Capital Markets

Are those projects at current customers or at new prospects?

Richard S. Gilbert

Both, there is a not a single current customer that I know if they doesn’t have a follow-on project that we’re interested in and working with and there are a number of new customers that we have to add any business with that we are working actively.

Mike Latimore – Northland Capital Markets

Are those customers looking to certainly a Kentrox or the new prospect also to your TMAs as well?

Richard S. Gilbert

The two segments really are only related in the sense that we use Kentrox management capabilities on as many of our product lines as we possibly can. So the answer, you mentioned TMA specifically, the Kentrox product is not used to manage the TMAs, there are other methods to manage TMAs relative to the rest of our product line. Kentrox is often involved in the discussions.

Mike Latimore – Northland Capital Markets

And in your guidance of about a $100 million that is a GAAP revenue numbers, is that right?

Richard S. Gilbert

Yes.

Mike Latimore – Northland Capital Markets

Okay. And then can you give a rough estimate of what TMAs and DAS combined contributed in the quarter as a percent of revenue?

Thomas P. Minichiello

Well, we did just over 70% including Kentrox in those two Mike. I have to look up the number more specifically that you’re asking for.

Mike Latimore – Northland Capital Markets

All right, it is, just fairly last one. How our evaluations looking in the M&A environment, are they big regions or they okay now or how do you think about evaluations out there?

Richard S. Gilbert

They are mixed and it’s hard to generalize, I mean it’s a case-by-case basis. We are seeing things, and we find attractive, but we’re also seeing valuations that are pretty egregious. So it makes those decisions pretty easy for us however when we run into one of those.

Mike Latimore – Northland Capital Markets

Okay, great. Thanks.

Operator

Thank you. We have no further questions. I will now turn the call back over to Rick Gilbert for closing comments.

Richard S. Gilbert

Well, it looks like we have a question possibly from Todd on my screen.

Operator

Yes, he is just queued up as I was saying that, I apologize. Todd Brady, your line is now open.

Todd Brady – Oppenheimer & Co., Inc.

Rick, this is a follow-up to Mike’s question about M&A, if guys know all [indiscernible] with this company is going to have to reported cash and used cash as part of your 2015 strategic thinking. My question is what is the biggest area of concern, as you look at your current business and you’re ramping up a very, very successful turnaround to fiscal 2014, you invited the company, you brought in some key personal that you’ve got the various heads all positioned. What is the area of the business that would keep you up at night?

Richard S. Gilbert

Well, the area of the business that always keeps me up at night for my entire career has been continue into execution of the plans both strategic and tactical and executing at a high level of confidence by the whole team. That’s the best sort of the night we nightly concern there. That said, you mentioned M&A it’s important to us, we’ve said to get to our number and remember we are shooting for a $200 million run rate number by the next, end of the next fiscal year. To get to that number we need to find, acquire and successfully integrate which is always a trick. Some candidate companies that match our strategic plan and our financial plan and that is , that’s always a challenge, but as I’ve said in the call we are very satisfied with our current progress in that area and we hope to be able to talk about things as we go forward more.

Todd Brady – Oppenheimer & Co., Inc.

Great. Thank you, guys.

Richard S. Gilbert

Thank you. Marco, you had another question.

Operator

Yes, Marco Rodriguez your line is now open.

Marco A. Rodriguez – Stonegate Securities, Inc.

Yes, hi guys thanks for taking my question here. Rick, I was wondering if you could talk a little bit about any sort of leading indicators that you monitor as it relates to your strategy and how you are kind of feeling about them?

Richard S. Gilbert

Well, there is a lot of different metrics we monitor. One of the interesting metrics that we are looking at are from a financial standpoint just to not the first strategy is revenue per employee and revenue per day, and when we’ve seen increases in revenue per employee. And in terms of full time employees we currently have something like a 179 people full time, if we can complete our goal of $100 million a year, you can do the calculation, that’s pretty good metric relative to where we were four years ago. And in terms of, if there is a flatter of other metrics we monitor, but the other reports that I had look at on a daily basis are the revenue and bookings by product area to watch the trends we see in that and look for start that we are not expecting.

Marco A. Rodriguez – Stonegate Securities, Inc.

Got it. And then just another quick follow-up to the M&A and landscape again not looking for anything specific or just any other additional color on maybe an increase in opportunities you are seeing, a decrease in opportunity or anything that you just kind of provide a little more color on that? Thanks guys.

Richard S. Gilbert

Yes, its, again we have very, very specific target areas and that limits the number of viable targets to a small number and again its difficult to go beyond the statement that we are satisfied with our progress in finding the right candidates and moving the process along and we have a significant executive resources applied to this area, it’s an important part of our ongoing strategy and you are right we can’t say anything beyond that at those time.

Marco A. Rodriguez – Stonegate Securities, Inc.

Okay, thanks guys.

Operator

Thank you. Our next question is from Josh Goldberg of G2 Investment Partners. Please go ahead.

Josh M. Goldberg – G2 Investment Partners Management LLC

Hey guys, good results. Two quick questions, first I guess on the Kentrox business you talked about how the margins increased because of some inventory that was lower margin inventory when you acquire the company. Can you give us a flavor of kind of what the right margin profile, gross margin profile of Kentrox kind of should be as we look forward, I mean obviously there is a big step up this quarter. And the question really is you need to be closer to this quarters gross margins going forward or last quarters. I realized a lot of its projects driven et cetera, but as you kind of budget that $200 million run rate and Kentrox being a piece of that. What’s the right gross margin profile for that?

Thomas P. Minichiello

Yes, Josh, this is Tom. We’ve always looked at it as right around the 50% mark for Kentrox, let me move around quarter-to-quarter, but that’s probably a good, a good gross margin to think about for the business.

Josh M. Goldberg – G2 Investment Partners Management LLC

Okay. And based on your comments that you sort that the business to be better on the Westell, the original Westell [ph], Kentrox could be down a little bit in the fourth quarter, is that seems as though you are confident that you are going to be above $100 million for this year, is that correct?

Richard S. Gilbert

I’ve said that we currently expect to meet all our stated FY 2014 financial goals including the stretch goal of $100 million revenue near for FY 2014 on a GAAP basis, yes.

Josh M. Goldberg – G2 Investment Partners Management LLC

Actually great.

Richard S. Gilbert

By the Josh, I’m happy to see you got the work through that snow.

Josh M. Goldberg – G2 Investment Partners Management LLC

Yes. And just final question from me, that’s okay. When you look at that $200 million run rate I know some of it is going to be led by acquisitions, but organically what do you think your fiscal growth rate to be next year versus this year? Thanks again.

Thomas P. Minichiello

We target.

Richard S. Gilbert

Yes, thanks. On organic basis for any business that we have or expect to acquire, we target a 15% growth rate, which we think in telecom is a fairly aggressive number, often we see 10% to 15% on well operated company. So, if you look at our general planning for next year, we look at our position in current businesses, we look at about a 15% growth rate year-over-year plus whatever we can bring in on an acquisition basis and that’s pretty much where what we expect.

Josh M. Goldberg – G2 Investment Partners Management LLC

Okay, great. Thanks so much.

Thomas P. Minichiello

Thanks, Josh.

Operator

Thank you. At this time we have no further questions. I will now turn the call back over to Rick Gilbert for closing comments.

Richard S. Gilbert

Well, thank you very much for joining us and we look forward to the next call.

Operator

Thank you. And thank you ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.

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