Ultralife Corporation (ULBI) CEO Mike Popielec on Q3 2019 Results - Earnings Call Transcript

Nov. 01, 2019 5:10 PM ETUltralife Corporation (ULBI)
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Ultralife Corporation (NASDAQ:ULBI) Q3 2019 Earnings Conference Call October 31, 2019 8:30 AM ET

Company Participants

Jody Burfening – Investor Relations

Mike Popielec – President and Chief Executive Officer

Phil Fain – Chief Financial Officer

Conference Call Participants

Gary Siperstein – Eliot Rose Wealth Management


Good day, and welcome to the Ultralife Corporation Third Quarter 2019 Earnings Release Conference Call. As a reminder, today's conference is being recorded.

At this time, for opening remarks and introductions, I'd like to turn the call over to Ms. Jody Burfening. Please go ahead, ma’am.

Jody Burfening

Thank you, Chanette, and good morning, everyone, and thank you for joining us this morning for Ultralife Corporation's earnings conference call for the third quarter of 2019.

With us on the call today are Mike Popielec, Ultralife's President and CEO; and Phil Fain, Ultralife's Chief Financial Officer. The earnings press release was issued earlier this morning. If anyone has not yet received a copy, I invite you to visit the Company's website, www.ultralifecorporation.com, where you'll find the release under News in the Investor Relations section.

Before turning the call over to management, I would like to remind everyone that some statements made during this conference call will contain forward-looking statements based on current expectations. Actual results could differ materially from those projected as a result of various risks and uncertainties. These include potential reduction in revenues from key customers, uncertain global economic conditions and acceptance of new products on a global basis.

The Company cautions investors not to place undue reliance on forward-looking statements, which reflect the Company's analysis only as of today's date. The company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these factors, and other factors that could affect Ultralife's financial results is included in the Company's filings with the Securities and Exchange Commission, including the latest annual report on Form 10-K.

In addition, on today's call, management will refer to certain non-GAAP financial measures that management considers to be useful and differ from GAAP. These non-GAAP measures should be considered supplemental corresponding GAAP figures.

With that, I would now like to turn the call over to Mike. Good morning, Mike.

Mike Popielec

Good morning, Jody, and thank you, everyone, for joining the call. Today, I'll start by making some brief overall comments about our Q3 2019 operating performance. After which, I'll turn the call over to Bill, who will take you through the detailed financial results. When Phil is finished, I'll provide an update on the progress against our 2019 revenue initiatives, including the acquisition of Southwest Electronic Energy Corporation, which we refer to as SWE, then open it up for questions.

For Q3 of 2019, total company revenue increased 35% year-over-year, boosted by the contribution of the Battery & Energy Products acquisition of SWE and a 62% increase in communication systems sales, driven by shipments under existing contracts for the U.S. Army's network modernization initiatives and other previously announced IDIQs. These gains fully offset a decline in Battery & Energy Products core revenue, resulting primarily from lower government defense sales.

Despite the total company revenue increase, Q3 operating profit was down year-over-year, due to late cycle new product changes and rework at communication systems, manufacturing costs to ramp up production of new products at Battery & Energy Products and investment in engineering and sales headcount to support new product development and future revenue streams. In a few minutes, I'll give you a further update on our revenue initiatives. But first, I'd like to ask Ultralife's CFO, Phil Fain, to take you through additional details of the Q3 2019 financial performance. Bill?

Phil Fain

Thank you, Mike, and good morning, everyone. Earlier this morning, we released our third quarter results for the quarter ended September 29, 2019. We also filed our Form 10-Q and Form 8-K with the SEC and have updated our investor presentation in the Ultralife website. I would like to thank all those who helped make this happen.

For the third quarter, consolidated revenues totaled $27.5 million, representing a $7.2 million or 35.2% increase over the $20.3 million reported for the third quarter of 2018. Overall, commercial sales increased 74.6%, boosted by Southwest Electronic Energy Corporation, or SWE, which we acquired on May 1.

Government and defense sales decreased 3.8% compared to the 2018 period. Revenues from our Battery & Energy Products segment were $22.6 million, an increase of $5.3 million or 30.6% over last year. The year-over-year increase was attributable to the $7.2 million revenue contribution from SWE and a 3% increase in core commercial sales.

These increases more than offset lower government and defense revenue associated with a large 5390 battery order in 2018 and the timing of sales to global defense primes. Including SWE, the sales split between commercial and government and defense was 78-22 compared to 59-41 for the 2018 third quarter, and the domestic to international split was 51-41 compared to 54-46 last year.

Revenues from our Communications Systems segment were $4.9 million, an increase of $1.9 million or 61.6% over last year. During the quarter, we increased shipments of vehicle amplifier adapter systems to support the U.S. Army's network modernization and other initiatives under the delivery orders announced in October 2018. Shipments of vehicle communication kits under an IDIQ with a major defense contractor, also announced in October 2018, and shipments of Universal Vehicle Adapters under an IDIQ contract with the Naval Air Warfare Center, announced in June 2019.

By contrast, in the 2018 third quarter, we were not shipping under these contracts. And shipments included several small volume legacy flow products. On a consolidated basis, the commercial to government and defense sales split was 64-36 versus 50-50 for the year earlier period, reflecting both our acquisition of SWE and the year-over-year increase in core battery commercial sales.

Our consolidated gross profit was $7.9 million compared to $6.6 million for the 2018 period. As a percentage of total revenues, consolidated gross margin was 28.6% versus 29.7% for last year's third quarter, a decrease of 110 basis points.

Gross profit for our Battery & Energy Products business increased 30.1% to $6.1 million from $4.7 million. Gross margin was 27.1%, a decrease of 10 basis points, from 27.2% reported last year due primarily to incremental costs associated with the transitioning of several new products to high-volume production.

Gross margin for the 2019 period, which also negatively impacted by the completion of the sell-through of the opening inventory of SWE, which had been written up to fair market value at the time of the acquisition in accordance with purchase accounting, resulting in a 26 basis point reduction in reported gross margin for the segment.

For our Communications Systems segment, gross profit was $1.7 million, an increase of $0.4 million or 30.2% compared to $1.3 million for the year earlier period. Gross margin was 35.5% compared to 44.0%, a decrease of 850 basis points due to late cycle product changes and rework relating to the Vehicle Amplifier Adapter systems for the U.S. Army as well as sales mix.

Operating expenses totaled $6.6 million compared to $4.5 million last year, an increase of $2.0 million or 44.3%. The increase was primarily attributable to the addition of $1.5 million as a result of the acquisition of SWE and a $0.4 million or 32.1% increase in core engineering and technology spending for the high-volume of new product development and testing.

As a percentage of revenue, operating expenses were 23.8% compared to 22.3% for the year earlier period. Operating income for the third quarter of 2019 was $1.3 million compared to $1.5 million for the 2018 period, representing a decrease of 12.9%, as higher operating expenses, driven by new product development, more than offset the increase in gross profit. And operating margin was 4.8% for the 2019 period versus 7.4% last year.

Adjusted EBITDA, defined as EBITDA including noncash stock-based compensation expense, was $2.3 million or 8.4% of sales, a decrease of 6.7% from the $2.5 million or 12.2% for the third quarter of 2018.

On a trailing 12-month basis, adjusted EBITDA is $9.5 million or 9.8% of sales. Our tax provision for the third quarter was $225,000 compared to $86,000 for the 2018 period.

As a result of reversing the valuation allowance on our U.S. deferred tax assets at year-end 2018, in accordance with generally accepted accounting principles, we utilized a 21% tax rate on the U.S. portion of net income, resulting in an overall effective tax rate of 19.6% to determine our reported tax provision for the third quarter of 2019. This compares to an effective tax rate of 5.7% for the year earlier quarter and a cash-based effective tax rate for the 2019 third quarter of 5.2%. We expect that our deferred tax assets will offset U.S. taxes for the foreseeable future.

Including the interest expense and debt incurred to fund our recent SWE acquisition and using the 19.6% effective tax rate, net income was $0.9 million or $0.06 per share compared to net income of $1.4 million or $0.09 per share for the third quarter of 2018.

Adjusted EPS was $0.07 per share for the third quarter of 2019, bringing our trailing 12-month adjusted EPS to $0.35 per share. We define adjusted EPS as EPS excluding the provision for noncash U.S. taxes expected to be fully offset by our net operating loss carryforwards and other tax credits.

The company's liquidity remains solid, with cash on hand of $7.1 million, working capital of $50.7 million and a current ratio of 3.8. We will continue to carefully manage our liquidity to fund organic new product development, strategic capital expenditures and M&A, while reducing our acquisition debt.

In summary, the actions we are taking to drive profitable growth remain our highest priority. Our intent remains on driving volume and sales through further organic and synergistic initiatives supplemented with accretive M&A to release the full leverage potential of our business model.

I will now turn it back to Mike.

Mike Popielec

Thank you, Phil. For 2019, we continue to be focused on increasing our revenue growth opportunities through diversification, market and sales reach expansion, new product development and strategic CapEx and accretive acquisitions.

For the overall Battery & Energy Products business, this strategy continues to be market and sales reach expansion into global commercial markets and international government defense markets, thereby lessening our historical concentration in the U.S. government defense market. To that end, we remained very excited about the SWE acquisition, as it is another step in diversifying our end markets to not only grow revenue but also to mitigate the lumpiness and unpredictability of some of our U.S. government defense revenue streams.

The acquisition was clearly EPS accretive in Q3, its first total quarter as part of the Ultralight portfolio, net of our acquisition, amortization, interest, taxes and pro forma corporate allocation expenses.

Revenues met expectations and in addition to battery pack revenues from its traditional oil and gas end markets, we saw an uptick in revenue from SWE's SeaSafe product line, which is part of its subsea electrification focus. Including SWE, the Q3 2019 total commercial and international government defense revenues represented over 80% of our total B&E sales.

The initial 100-day functional tactical integration plans are substantially complete, and we are now transitioning SWE into other regular Ultralife operating cadences, such as implementation of a standard cost system, preparation of a 2020 operating plan and participation in our just completed annual 3-year strategic growth planning process. We intend to continue to expand SWE's wallet share with new and existing customers in our core oil and gas space, while also pursuing new revenue growth opportunities in subsea electrification, currently a small, yet exciting growing new market.

We also plan to fully leverage the acquired SWE technical talent base, through global engineering councils and other mechanisms, such that we can deliver more exciting new product developments in other areas of the company.

Both the oil and gas and subsea electrification markets were largely previously unserved by Ultralife. However, they share attributes similar to our core businesses, and that they involve mission-critical niche applications with competitive differentiation based on superior service, quality and reliability, and long term, high-value proposition customer relationships.

Reviewing medical revenues. In Q3 2019, Global medical sales represented 19% of total B&E sales, yet were down slightly as compared to last year's third quarter, due primarily to nonrecurring revenue associated with one particular customer. In general, key medical device battery and charger product shipments were made in Q3 2019 for a wide range of applications, including breathing devices, medical cards, infusion pumps, digital X-ray and surgical robots.

New delivery orders also continued for existing customer blanket and/or multiyear agreements and in Q3 2019, totaled over $2.6 million.

In terms of other commercial and international government defense end markets, some specific transactions in Q3 2019 included an international government defense order for $1.1 million for our 2590 batteries expected to start shipping in Q4, an OEM prime follow-on order to a Q2 land order or your battery award, an oil and gas customer initial trial order of battery packs for a measure well drilling application, and a SeaSafe battery order for a new subsea electrification customer.

Lastly, for B&E's U.S. government defense customers, key shipments and follow-on orders in Q3 2019 included a range of batteries for energy storage and tactical communications. However, Q3 2019 revenues were down year-over-year, driven by some shipment timing lumpiness from the DoD through DLA as well as by some of our OEM prime channels.

During Q3, we did receive from DLA a new 5-year IDIQ, with total maximum value of $14.4 million for our BA-5368 battery, which is used for a variety of military applications such as in detection and imaging. The amounts and timing of deliveries under this contract are at the discretion of DLA and are expected to start in 2020.

Battery & Energy Products now has over $84 million of untapped IDIQ contract potential for military battery revenue. In addition to the $14 million IDIQ for 5368s just received, this includes a $21 million IDIQ for 5390s and a $49 million IDIQ for 5790s, both received in 2017. After a lengthy, rigorous and patient first article testing process, we expect to finish our portion of the 5390 battery fat testing by the end of this year, and of the 5790 battery by around the end of Q1 2020, such to and approved by an order from customers, these new battery IDIQs could start generating revenue by mid-2020.

In the meantime, we are positioned to fulfill periodic request from DLA for spot buys of a legacy 5390 batteries as current inventories are consumed.

Regarding B&E new product development. During the third quarter, activity continued across numerous projects, including a new digital X-ray battery, a next-generation ruggedized modular large-format energy storage battery, a new military communications backup battery, multiple public safety radio batteries, a thin cell product for the smart label market and at SWE, they are drilled that to gauge new product development.

Regarding B&E's strategic CapEx project at our Newark, New York facility, low volume production of the new premium 3-volt product is now underway. And in Q3, we continued providing samples for qualification testing to customers.

Our high-speed line is fully installed and final integration and commissioning efforts continue as we transition from a low volume equipment to the higher speed line. As a reminder, this new product will serve the rapidly growing IoT wireless devices market, next generation 3-volt smoke alarms, asset tracking devices and metering. It will provide customers with world-class product performance, safety and a competitive price value proposition as well as a supply chain proximity of a U.S. manufactured product.

We are also making progress on our thionyl chloride cell upgrade project in China, involving numerous process improvements, which will help us expand our total available market with newly identified commercial and industrial applications.

Regarding communication systems, in Q3 2019, new product development revenue from products less or equal to 3 years old, represented approximately 75% of Communication Systems revenues. These shipments included, the remainder of the Naval Air Warfare Center order for UVA radio mounts, as well as additional vehicle amplifier adaptors and mounted power amplifier systems for the U.S. Army's army network monetization initiatives. The U.S. Army's Handheld, Manpack, Small Form Fit program and leader radio continuous operational testing with following contract opportunities anticipated in 2020.

Also, in Q3, a major defense contractor exercised its first option year, of a previously announced $9.5 million IDIQ for non-standard commercial vehicle communication kits. Under this contract, which consists of a base year plus four option years, we shipped approximately $1.6 million for the base year portion in 2019.

We are pleased that the option year exercise have now begun and are currently awaiting notification of the amounts and timing of deliveries under this first option. Initiatives continue with the focus on new product development for ancillary products, supporting new two channel radios in installation and various communication packages, vehicles and airborne systems.

Another new product development example is a recently completed lightweight power supply that will support emerging multichannel Manpack Radios. We also continue new product development of various amplifier variants to support new radios in fixed, vehicle and dismounted operations. Communication Systems remains well positioned to support quick turn and new product development requirements for ongoing military initiatives and future programs.

In closing, for the third quarter of 2019, we were very pleased to see solid year-over-year revenue increases in both of our business units. At Communication Systems, driven by shipments under the U.S. Army's network modernization initiatives, and a Battery & Energy Products from the acquisition of SWE. We were also delighted with the accretive EPS contribution of the new acquisition.

Through the first nine months of the year, total revenue was up 14% year-over-year. As we near the end of 2019, we remain focused on delivering profitable growth in 2019, by continuing to fulfill communication systems, vehicle amplifier adaptive system orders in our backlog and from solid SWE performance.

Finishing out 2019 and heading into 2020 at Battery & Energy Products, we are targeting project completion and revenue realization from several multiyear projects currently underway. These include, but are not limited to, the $21 million 5390 IDIQ, the $49 million 5790 IDIQ, the $14 million 5368 IDIQ, the new three-volt product line, the new ER product line, new smart U1 batteries and several other new medical and subsea electrification application battery packs.

At Communications Systems, we are focused on actively pursuing follow-on and other new product development driven integrated communication system program revenue opportunities. Integrated system market expansion is strong, and we are leveraging our existing products and intellectual property to realize products to provide line of sight to growth with new OEM partners over the coming year.

As a company, we are strengthening our capability to pursue and capture new revenue opportunities as a result of the investments made in 2019, in organic engineering and sales headcount as well as from leveraging the technical, sales and marketing and operational resources from the new SWE acquisition.

And finally, our strong balance sheet, solid cash flow from operations and the disciplined execution of our business model by our management team afford us the opportunity to simultaneously pursue organic revenue growth through new product development, invest in strategic CapEx for competitive advantage and seek additional bolt-on acquisitions.

Operator, this concludes my prepared remarks, and we'll be happy to open the call up for questions.

Question-and-Answer Session


[Operator Instructions] We'll now take our first question from Gary Siperstein from Eliot Rose Wealth Management. Please go ahead, sir.

Gary Siperstein

Good morning, Mike and Phil.

Mike Popielec

Good morning, Gary.

Gary Siperstein

So I just want to drill down on the fact that you had some changes from a customer, I guess, in the quarter, which hurt earnings. I think we saw that happen in Q1, and then it seems like you got it fixed and then had a big $0.13 Q2. So I'm just curious, was the problem this quarter, the same customer? And was it a different kind of adjustment you had to make after satisfying their first adjustment and then having the good shipments and earnings in Q2? Just a little more color on that, if you would.

Phil Fain

Sure, Gary. I look at Q3 as an investment quarter, as an investment in our future. For Comm Systems, it was continued investments in the integrated system for probably the most complex military radio that's ever been developed. So in situations like that, you always anticipate complexities with a major technical program, especially with the new radio introduction of, and this program is no different. You have some expected changes, some that are not. And Mike will go into some of the examples on that.

But the point I want to make is that I think you're trying to look at the quarter and trying to pitch and hold it into one specific item or one specific event. In the time since I've been with the company, this is probably the highest volume of transition – of completing development of new products, and then transitioning those new products into higher volume production.

And for us, that's really what Q3 was all about. So we made the necessary investments in the file development and the final engineering and the transition. And I really can't pigeon hole it to one or two items, its several items. And Mike went through the list. So that's how I look at it.

Gary Siperstein

Okay, okay. Phil, that's fair. Now I know you have to do them for the future revenue and to keep the customer happy. And as the product evolves, I guess, based on the second quarter conference call, I – maybe I misunderstood. I thought there was a change from the customer which impacted Q1.

You got the change done, so Q2 was very good. The shipments resumed, and they were at the appropriate margin after you made the changes. So we thought that was history. So are you saying this is a different customer? Or it's just – that's part and parcel, it can happen? It's just a little confusion on that. And when does this – when does the product become steady state?

Mike Popielec

Yes. I mean, there's a couple of moving parts, Gary, this is Mike. In Q1, we were getting things kicked off the ground. There was mount and powering amplifiers and what we call vehicle amplifier adapter. So starting off from really a black start, we started shipping initial units of modern power amplifiers and very, very, very low quantity of initial prototype BAA type amplifiers in Q1.

In Q2, we saw a much higher volume of the mount and power amplifiers be shipped, as those sort of made it up its learning curve. And a small amount of vehicle amplifier adapters being shipped in Q2. So the increase in modern power amplifiers from Q1 to Q2 drove pretty significant positive results in Q2.

Now we're sort of going through that learning curve with the last part of the system, which is vehicle amplifier adapters. There was a handful shipped in Q1, many dozens shipped in Q2. And as we sit here in Q3, just speaking qualitatively, we've probably shipped as many in the first 30, 31 days of Q4 that we did in all of Q3.

So when we're done, we're getting some very solid performance from the final end units. But as the waveforms changed initially as a radio continue to be tweaked along the way, we were sort of the last link in the change, and then we'd have to modify our equipment and hoping we'd have to work in the system.

So I know it's a little confusing, but I think of it really in those pieces, really prototype type shipments in Q1, sort of a good volume of shipments and monopower amplifiers in Q3, the beginning shipment of the vehicle amplifier adapters, to some extent, in Q3. And then, in Q4, we expect a much better volume of vehicle amplifier adapters.

Gary Siperstein

Super, Mike, that clears it up for me. I appreciate that. So – and then going forward, Mike, your script just now is extremely robust about all the opportunities coming to bear and all the different IDIQs that could start going into production in 2020, in addition to the three-volt with the various uses and moving into higher speed production for IoT metering, et cetera. It seems like everything is coming together at the same time.

I know they all have different starting points. And I think you highlighted the middle of 2020, but it seems like all the hard work is starting to finally come together where we could maybe get into more of a steady state. There's always bumps of customers make changes. But it seems as the different products mature and you get into this more higher volume production, maybe some of the volatility will come out of the quarter-by-quarter results. Is that a fair statement?

Mike Popielec

Yes. Another way to look at that is we've been working on a number of these projects for a couple of years. And we recognize we're going to report quarterly earnings every quarter. But you reach a point where you just need to get the projects done.

And so we got to the place where we had a number of things, these things coming together, rather than try to think on dime – for a particular penny here or there. We went ahead and spent the money on technical resources, testing and even some outside resources to really try to drive these projects over the finish line.

So we saw an increase in costs, which is quite rare for us, as you would remember from our history, but we're getting to that point where we want to get these projects done. So we can't pinpoint the exact month or quarter that they're going to hit and – starting in next year, but we're pretty bullish about the prospects for next year.

Gary Siperstein

Okay. And with the various IDIQs I guess, they total over $85 million now in totality over a multiple of years. And they represent, I don't know if it was four, five or six IDIQs, but do you expect in calendar 2020 to be shipping on all four, five or six of them? Or will one or two of them flip into – and I know it's at the discretion of the government, but will one or two of them flip into 2021?

Mike Popielec

That's always possible. I mean, we're cautiously optimistic that they hit in 2020, but some could dribble over in 2021.

Gary Siperstein

Okay. All right. That's fair. But you have indications that at least maybe four out of the six or three out of the five will start in 2020?

Mike Popielec

We really don't – I mean, the only indications we would have is that we've completed and getting to the point where we complete our first article testing. At that point, they're free to, once everything signed off, to place delivery orders. So I don't have a specific piece of information that says, yes, we're going to start giving delivery orders for shipments in x time frame. I'm using where we are in the overall milestone schedule and completion of required task to say, okay, we're reaching the conclusion of those paths. The next step would be to start placement of those delivery orders. I don't have any specific information about the exact timing when those delivery orders will be placed.

Gary Siperstein

Yes, understood. And you mentioned in the script a couple of times, the leader radio and the Manpack, is – the Manpack just again, for my clarity, is the Manpack part of Harris? And is the Manpack, a particular the Harris brand of the Leader program? And with testing sort of getting near the end, is that what you were referring to, in that case and that could result in some orders from them in 2020?

Mike Popielec

Manpack is a generic term used regardless of the manufacturing supplier and we're not involved, obviously, in making the radios, whether they'd be handheld or Manpack, but those suppliers are well-known in the marketplace. But just how they factor into our participation is that, as we've said previously, we work closely with our channel partners. We have the utmost amount of being careful in terms of not sharing from one manufacturer to the others as we participate with them to serve their specifications. But what we provide, we provide some cases, the batteries.

For handheld, some as we provide batteries for Manpack, we supply battery worn dismounted amplifiers, sometimes using handheld applications. We supply amplifiers associated with our integrated vehicle adapter amplifier solutions. And we supply other amplifiers for mounted solutions in vehicles. So wherever there's a handheld or a Manpack radio opportunity, we have a product through one of our businesses to support that.

And so when we make those comments, we're just really reflecting on the fact that we're continuing to develop new products to support the deployment of both handheld and Manpack radios.

Gary Siperstein

Okay. That helped. I'm more clear now on that. And finally, in your script, you talked about still hopeful to achieve profitable growth in 2019. So I think we did $0.39 last year, with a $0.07 fourth quarter. This year, you're $0.22 through nine months, you've got October pretty much under your belt and you still said profitable growth in 2019. So that would imply an $0.18 in the fourth quarter. So A, is my math right? And B, with October under your belt, and you're saying that, that must indicate a pretty robust November and December.

Phil Fain

Yes, Gary, the way I personally look at it, the EPS is calculated on both a GAAP basis and what I would call a real-world cash basis. So we're looking for a year-over-year comparison that's consistent. So there won't be a 10-foot note to describing what the differences are.

So my comparison is always apples and apples, meaning I would look at EPS on an adjusted basis, not to say that we're clearly focused on the GAAP [Audio Dip] as well. But the adjusted EPS, and that's the reason why we use it is a better – is the best indication of our business performance and reflect the fact that we have $63 million of NOLs that we're going to use to offset the profitable operations that we're seeing in the U.S.

So I think your math is correct. And my recommendation is that you focus on the adjusted EPS because it's a better reflection of the cash performance of the business of liquidity of the business.

Gary Siperstein

But through nine months, I thought adjusted EPS was $0.23 versus $0.33 or $0.22 versus $0.32, that's not correct?

Phil Fain

Adjusted through three months is $0.28.

Gary Siperstein

Okay. Got you. $0.28. Okay, super. So to get to the $0.39 and to have profitable growth, you need $0.40. So $0.28 – okay, at least $0.12. Got you. All right, thank you, guys. Good luck.

Phil Fain

Thank you.

Mike Popielec

Thanks, Gary.


[Operator Instructions] There are no further questions in the queue at this time.

Mike Popielec

All right. Thank you, everybody, again for joining us for our third quarter 2019 earnings call. We look forward to sharing with you our quarterly progress on each quarter's conference call in the future. As Phil mentioned, we have updated our investor presentations on our website, so please check it out. Thanks very much, and have a great day.


Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.

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