ADDvantage Technologies Group Inc (AEY) 2012 Q3 法說會逐字稿

Good day everyone and welcome to the ADDvantage Technologies third-quarter 2012 earnings conference call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Garth Russell of KCSA Strategic Communications. Please go ahead Mr. Russell.

Thank you. Before we begin today's call, I would like to remind you that this conference call may contain forward-looking statements which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events, such as the ability of ADDvantage Technologies and its subsidiaries to maintain strategic relationships and agreements with certain original equipment manufacturers and multiple system operators, as well as the future financial performance of ADDvantage Technologies. These statements involve a number of risks and uncertainties. Participants are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety factors, such as those contained in ADDvantage Technologies' most recent report on Form 10-K on file with the Securities and Exchange Commission.

Financial information presented on this conference call should be considered in conjunction with the consolidated financial statements and notes hereto included in ADDvantage Technologies' most recent report on Form 10-K filed December 15, 2011. The guidance regarding anticipated future results on this call is based on limited information currently available on ADDvantage Technologies which is subject to change. Although any such guidance and the factors influencing it will likely change, ADDvantage Technologies will not necessarily update the information as ADDvantage Technologies will only provide guidance at certain points during the year. Such information speaks only as of the date of this call.

With nothing further, I'd now like to turn the call over to David Humphrey, President and Chief Executive Officer of ADDvantage Technologies . David, the floor is yours.

Thank you, Garth. Welcome to ADDvantage Technologies' fiscal 2012 third-quarter conference call. With me today is Dave Chymiak, Chief Technical Officer; Scott Francis, our Chief Financial Officer; and Ken Chymiak, Chairman of the Board.

Before I turn the call over to Scott who will provide the detailed financial results for the quarter ended June 30, 2012, I will discuss the highlights from our third quarter.

The revenue for the fiscal third quarter of 2012 slightly decreased year-over-year to approximately $8.5 million.

Similar to last quarter, our acquisition of Adams Global Communications helped keep our revenues stable by offsetting the decrease in sales of new equipment from our other subsidiaries.

From an overall market standpoint, we continue to face weak cable equipment sales to MSOs in an uncertain economy. That being said, we still generated net income of $0.5 million and increased our cash position $1 million from March 31, 2012 to $3.2 million. As you may recall, we paid off one of our term loans last quarter for $9.4 million and terminated the associated interest rate swap agreement for $800,000. Although we currently have less cash, our ongoing quarterly cash requirements are less due to the payoff of the term loan.

We believe that with our current cash position, the cash amount from operations from our current subsidiaries are generating, our available $7 million credit line and our strong balance sheet, we have sufficient liquidity to maintain our current working capital requirements and to execute our growth strategy.

The growth strategy is based on a multi-pronged approach. We plan to grow the business organically as well as through an acquisition strategy. We have identified some initiatives within our existing business that we believe will help our top- and bottom-line results. Our initial acquisition strategy will be to look at acquisitions within our industry and expertise which would complement our existing businesses. We have begun the process of reviewing various acquisition targets, but as you know, we cannot predict the timing of when any transactions may take place. There are acquisition opportunities in the marketplace. We just need to identify the best opportunities for us to achieve both short- and long-term growth of our Company. I'd now like to turn it over to Scott who will provide the financial results.

Thank you, David. As mentioned earlier, our net sales for the third fiscal quarter of 2012 decreased $200,000 or 2% to $8.5 million compared to $8.7 million for the same period of fiscal 2011. Revenue from our new equipment sales decreased $0.9 million to $4.6 million for the three months ended June 30, 2012 compared to $5.6 million for the same period last year. This decrease is primarily due to the continued economic downturn in the cable industry, partially offset by $200,000 of revenue from Adams Global Communications which was acquired in May of 2011.

Our net refurbished equipment sales increased $800,000 to $2.7 million for the three months ended June 30, 2012 compared to $1.9 million for the same period last year. The increase in our net refurbished equipment sales was primarily driven by our acquisition of Adams Global Communications.

Our revenue from repair services was $1.2 million for both the three months ended June 30, 2012 and 2011. Our cost of sales decreased $200,000 to $5.9 million for the three months ended June 30, 2012 compared with $6.1 million for the same period in 2011, and our gross profit was $2.6 million for the three months ended June 30, 2012 and 2011. Our gross profit margins were also 30% for both the three months ended June 30, 2012 and 2011.

Our operating, selling, general and administrative expenses increased $200,000 to $1.8 million for the three months ended June 30, 2012 from $1.6 million for the same period of fiscal 2011. This is primarily attributable to increased personnel costs resulting from the AGC acquisition. Income from operations decreased $200,000 to $800,000 for the third fiscal quarter 2012 from $900,000 for the same period of last year.

Our interest expense significantly decreased to $7000 for the three months ended June 30, 2012 from $200,000 for the same period last year. This decrease was a result of paying off one of our term loans in March 2012 and the termination of the associated interest rate swap agreement. Our net income was $500,000, or $0.05 per basic and diluted share for the three months ended June 30, 2012 and 2011. Our EBITDA was $800,000 for the three months ended June 30, 2012 compared to $1 million for the same period last year.

Our cash and cash equivalents balance as of June 30, 2012 was $3.2 million compared to $10.9 million at September 30, 2011. As we mentioned earlier, the large decrease in our cash is due to paying off one of our term loans in March for $9.4 million and terminating the associated interest rate swap agreement for $800,000. Although the debt payoff lowered our cash position, there were several benefits to us from paying off the debt, including avoiding an interest rate increase on a term loan of 100 basis points this November, having to refinance the $5 million balloon portion of the term loan in November 2014 and also lowering our current overall interest payment. And although our cash position is down compared to recent quarters, we increased our cash position another $1 million since March 31, 2012 and we continue -- and we expect to continue to generate positive cash flow from our current next operation.

In addition, we still have the $7 million credit line in place in case we need additional financing for any working capital requirements as that becomes necessary or to help fund our acquisition strategy. Our overall debt position was $1.7 million at June 30, 2012 compared to $1.8 million at March 31 and net inventory decreased $900,000 to $23.9 million as of June 30, 2012 from $24.7 million at March 31, 2012. We're still focused on increasing our overall cash position and believe we're in a position to do that given our reduced long-term debt.

Now onto our results for the nine months ended June 30, 2012. Total net sales decreased $100,000 or only 1% to $26.7 million for the nine months ended June 30, 2012 from $26.8 million for the same period of last year. Our new equipment sales decreased $2.9 million or 16% to $15.6 million for the nine months ended June 30, 2012 from $18.5 million for the nine months ended June 30, 2011. The decrease in new equipment sales was primarily due to the continued economic downturn in the cable to television industry and the negative impact of the Cisco agreement, partially offset by $1.7 million of revenue from Adams Global Communication.

Our net refurbished sales increased $3 million or 65% to $7.6 million for this nine months ended June 30, 2012 from $4.6 million for the same period of last year. The increase on our refurbished equipment sales was primarily due to revenues from AGC.

Net repair service revenues decreased $200,000 or 6% to $3.5 million for the nine months ended June 30, 2012 from $3.7 million for the same period last year. Our cost of sales increased $200,000 or 1% to $18.9 million for the nine months ended June 30, 2012 from $18.7 million for the nine months ended June 30, 2011. The increase in cost of sales was primarily due to lower overall margins on equipment sales. This was due primarily to increased sales of customer premise equipment from Adams Global Communication which includes modems and set-top boxes. These products sales typically yield at a lower margin than most of our other product lines. Our cost of sales as a percent of revenue was 71% for the nine months ended June 30, 2012 and 70% for the same period of last year.

Our gross profit decreased $300,000 or 3% to $7.9 million for the nine months ended June 30, 2012 from $8.1 million for the nine months ended June 30, 2011. Gross profit margins were 29% for the nine months ended June 30, 2012 as compared to 30% for the same period to last year. Operating, selling, general and administrative expenses increased to $700,000 or 15% to $5.4 million for the nine months ended June 30, 2012 compared to $4.7 million for the same period of last year. The increase was due primarily to increased personnel costs of $500,000 resulting primarily from the acquisition of AGC. Income from operations decreased $1 million or 28% to $2.5 million for the nine months ended June 30, 2012 from $3.4 million for the same period of last year. Interest expense increased $600,000 to $1.1 million for the nine months ended June 30, 2012 from $500,000 for the same period last year. This increase is due primarily to the $800,000 payment made in order to terminate the interest rate swap agreement in March 2012 in connection with paying off the associated term loan. This is partially offset by lower interest expense since paying off the term loan in March 2012.

Our net income attributable to common shareholders for the nine months ended June 30, 2012 decreased $800,000 or $0.08 per diluted share from $1.8 million or $0.18 per diluted share for the same period a year ago, and our EBITDA for the nine months ended June 30, 2012 as $2.7 million compared to $3.7 million for the same period of last year.

This concludes the financial overview for the quarter ended June 30, 2012. I will now turn the call back over to David.

Thank you, Scott. We believe that the major cable television operators in the US will not perform major upgrades to their systems in the near future. However, we believe this could provide opportunities for our service business to grow as the equipment will need additional repairs as it ages in the field. We also believe that there will continue to be increased demand in broadband data services which the cable operators will need to address. Our Company is ready to assist them with those needs as well.

We're also working on trying to identify new product offerings for customers and expand our existing relationships. We will consider our inventory -- we still consider inventory to be a key asset, but we are continuing to decrease inventory levels while maintaining the proper inventory mix, so we will be well positioned to react effectively to shifts in the industry. We have a strong balance sheet with sufficient cash on hand and a line of credit available for us to execute our growth strategy. We remain committed to exploring all options to create long-term sustainable growth in our business in order to position ADDvantage Technologies for the future and ultimately increase the value for shareholders.

This concludes our prepared remarks. I would now like to turn the call back over to the operator and open the call up for any questions.

(Operator Instructions) Paul Andrew, private investor.

Hey, Dave, I think this was your first full quarter as CEO, so congrats on that first of all.

Thank you.

So just a couple of questions, first your allowance for AR and excess inventory as a percent of sales are way up. Is this a sign of further deterioration in your customers, in your customer base, or just conservativism; what's going on there?

Thanks for the question, Paul. Really with the AR itself, we're not -- it is more of just a conservativism. We've left that balance there just as an insurance policy, almost, just to kind of help us with in case the industry does deteriorate further or the economy does deteriorate. That has been our balance out there for awhile. But we have not seen a deterioration on our collections at this point. And as evidenced in our cash flow, we're in good shape on that front.

All right, and then moving on to acquisitions, I know you've had to languish without acquisitions for quite a while now. In terms of one size and then the capabilities, are you looking for new products, are you looking to kind of expand your geographic footprint? What are -- a little bit more detail on what you're looking for on the acquisition front.

Paul, thank you for the question as well. That's a difficult question answer. I guess the way I'd answer it the best I can is we're looking at all of the above. In particular, we're looking we're going to look at inside our industry. Long-term, we'll probably look outside the cable industry as well, but in the short term, we are going to be looking for things that are accretive to our existing operation that add value. Those could be regional plays, those could be new product plays and different types of opportunities. Outside of that, I can't be any more specific.

Okay, and then just in terms of opportunity costs, you guys are trading on your working capital right now. How do you think about weighing the cost of an acquisition versus, say, increasing your share repurchase?

Well, certainly, we are actually considering the opportunity to do a share repurchase, but our first goal is expansion which will tie up our capital through an acquisition. So that's our first strategy. If that's not successful, we think that we could certainly increase the value of our shareholders through a share buyback.

Okay, and then I know you said you were considering all opportunities for increasing shareholder value. I mean, insiders own 50% of the Company. You've got some excess cash, plenty of borrowing capacity. Has there been any thought to taking the company private at this point?

You know, Paul, in the past, we have considered that. I think right now, what we were looking at is, on various fronts, we believe that there's still -- if we can execute the growth model, we think we could still benefit our shareholders, not just our two owners or major owners, which is the 48%, but then also all of our other equity holders out there. So we're hopeful that that would still work. Obviously, if it does not, just as Dave was talking about, we could look at a purchase of stock, we could look at possibly going private, but we need to provide exit strategies for everyone, and that's what we're trying to look at.

Okay, well those are my questions. Keep up the great work, guys. Just kind of wanted to get your thoughts and share what was on my mind. Keep up the great work.

Thank you

Thank you, Paul.

Douglas Ruth, Lenox Financial Services.

Hi, I want to compliment the prior caller; he asked some great questions. Could you give us a state of -- sort of tell us what the state of the industry is now and what you're seeing?

We're seeing -- (multiple speakers) it's spotty. This is Dave. It's spotty. We're having some increases in some areas. Some of our areas are flat, so we think were bottoming out, but we don't have anything specific to be able to tell more than that.

This is Ken. Let me interject a few thoughts on that. We look at our competition, we look at our major customers, and we also look at the industry as a whole.

If you look at the major cable companies that are public, what we have gleaned from them, most of the money that they have been spending on CapEx, other than maintenance on some digital products and CPE products has been on the enterprise side. And I think we all agree that at some point in particular with the Google's latest announcement in the Kansas City market, that in the future, additional bandwidth will be required. I think everybody's kind of waiting to see what the other competitor's doing in the marketplace, and we've seen that in some of the smaller, second- and third-tier MSOs out there that they're looking to expand bandwidth because the real driver right now is a revenue generator that creates the most incremental value and processes on the telephone side and the broadband side. So we are watching that very, very closely.

All we need you to do is find some more Adams Global Communication companies, huh? (multiple speakers) that was a -- are there companies for sale, or what are we -- could you give us a little bit more color on how many things you're looking at or how big they are? Any kind of commentary would be great.

I really -- the answer your question is, no, I can't. All I can say is, yes, we've looked at multiple opportunities in the four months that I have been here and we continue to look for new opportunities. Were about to engage some additional investment bankers to go see if they've got access to additional deal flow. So we're going to continue that track.

You folks are very astute, and we don't mind waiting and just encourage it -- just to make sure you get the right deal for everybody. And do you have an inventory goal of how low you might be able to get the inventory down?

This is Dave again. It's real important to understand, without upgrades coming on, there's not a lot of opportunities for us to buy. Were buying product every day, we're taking advantage, we're getting some good deals, but there's not any large deals. We used to have million-dollar deals, now they're $10,000, $20,000, $50,000 deals.

We are not looking at liquidating inventory as such. We're reducing, we're using up inventory, we've got very good inventory. We're not running into shortages of anything particular right at the moment. Overall, it's just been good, but I believe we will be reduced inventory another 1 million to 2 to 3, but we may acquire something or another 1 million, so it will it's going to continue each month right now.

This is Ken. I think something that's important to look at -- we've reduced our inventory the first nine months of the fiscal year by approximately $2 million, but during that time since the acquisition of Adam's Global, we've also added inventory there to make -- to give them the ability to sell more product. So without that acquisition and acquiring that inventory, we would have been down probably another $2 million or $3 million. So you can see, we've done a pretty good job in that way, and, you know, in particular with the revenue decrease, I think we're doing a pretty good job, sort of normal flow and still making profits on what we're selling.

I agree; you've done a wonderful job. So how long can the industry go without upgrading itself?

This is Dave, I was in a meeting with one of the large MSOs and I made the comment that you guys are going to have -- and I had 15 of them around the table and made the comment that you're going to have to keep your gear going for another 4 to 7 years, and I got a big sigh. This is one of the larger ones, and Dave made the comment that 7 to 10 to 12 years. And they can do it, it's just depending on what's going to happen on technology. They're in a confused state. They really don't know what's going to happen with technology. This is the biggest thing -- they don't know what to do. It's such a big expense to upgrade, to change the pipes, to change everything. So they're in a maintenance type mode as far as right at the moment, but thinking for the next several years.

Is there anything, any technology breakthroughs that are pending at this point?

There several, and we are looking at them. It's not really -- there's always breakthroughs in the chip manufacturers and what they can do and speed. That's their job to do. There's things that we could do -- we've been doing the return path, which is the one that provides the Internet service and everything for your speed when you type in something on your computer that goes backwards to the cable company -- that has to be completely upgraded all the time because people are demanding more. They're sending more pictures, they're sending more things like this, and we think there will be upgrades in that method to the current amplifiers that are out there.

In addition -- Dave Humphrey -- in addition to what Ken and Dave have both said, basically when we look at the large MSOs, which are not primarily our market play. We're generally selling to the second- and third-tier players. But we do sell to those top tiers as well.

If you look at those as a group, they are losing about 1 million to 1.5 million digital customers, or TV customers, if you will, but they're gaining twice as many broadband and almost the same number of telephony customers. So they themselves are seeing this shift, and Dave and Ken have alluded to that, that this broadband we see is a bigger play for them in the future, and it's certainly a significant revenue driver for them especially if consumers demand more and more broadband capacity.

You know, it used to be broad, then it was kilobytes, now it's megabytes, now it's multiple megabytes. Those just increase the demand. And with the social networking -- that's what Dave is alluding to -- there is increased two-way communication. It used to be, you'd download a lot of volume, but you didn't upload a whole lot; you just made requests for information. Now, you're sending pictures and video to other people. So the two-way demand has significantly increased as well, and that's affecting the MSOs.

Okay, well, thank you for answering my questions, and best of luck to you.

Thank you very much.

Aram Fuchs, Fertilemind Capital.

Just one quick question about the inventory. What are you -- the Adams asset, how much inventory did that increase the overall inventory number?

Well, when we bought that, it was less than $600,000, but we had to give in some -- go out and buy some more inventory in order to meet this volume. Otherwise, we would not have had the inventory for them to sell. So approximately between $2 million and $2.5 million is what we've increased that inventory.

Now a lot of that they've sold, but we continue to keep that because in that business, in the CPE business, or consumer premises business, it takes quite a bit of inventory because we have to recondition it. And so you always have some -- and for a big order, you have to have a certain amount of inventory on hand. So somewhere in that area, because I think that inventory remains between $2 million-2.5 million seems to be the base level that we've established.

Right, and again, and always hard to look at a business from the outside just looking at your consolidated public accounts that you've given the SEC filings, but you're content with the decline in inventory turns? I mean, you think you're serving your customer right while maintaining an efficient working capital structure?

To answer that, I think the issue is, number one, under certain limitations, we're prohibited from buying certain products through Cisco for inventory. The other is, it's all a function of demand. So I think we've got a pretty good balance. Now, we're trying to reduce all we can and make the margins and make the profit, but it's all about -- we would love to have more revenue, but more revenue would reduce inventory. So it's kind of like the dog chasing the cats. You know, it's a vicious cycle. We don't have that number yet. To say we'd like to be at a certain point, yes, but if an opportunity becomes available, as Dave has stated, on used gear particularly, I mean if there is -- if there is a deal out there we don't know about and we think we can sell and make some good margin, we're going to take advantage of it. That's what's happening in the Adams situation, we've had to go out and be able to buy some. A lot of the gear, there's been some big opportunities that we did not -- we didn't step up to the table because we had the sufficient inventory based upon the demand. So we weigh that all the time, the opportunity and the availability to make a profit in a relatively short period of time. And Dave in our Motorola house continues to reduce the new inventory level that we had. But, again, as the new equipment, particularly the line gear, that has not been a robust industry for the OEMs nor us for the last year or two. But that inventory is good inventory, it's current inventory, and I think it's just a matter of time when it will sell. Dave, what do you think?

Aram, one thing I can make a comment on -- other than internationally, I don't see where we're losing any orders by our inventory status. In other words, we've got sufficient inventory. We used to sell a lot of product in the last Latin America, and a lot of those items we can no longer sell because of Cisco's distributions method. But overall, I'm very comfortable. We don't lose orders because we don't have something, so I'm very satisfied the way the inventory is going. Like we said, our inventory would have been $3 million, probably less without Adams, $2.5 million, and actually at $3 million, and our cash would've been higher, but we would not have had the revenue at the top.

Again, one last point -- this is David Humphrey again. Just to reiterate, we anticipate we may actually be increasing purchases that will go into inventory in the near-term. But in that same near-term, we will continue to decrease our overall inventory quantities, as Dave has already mentioned.

Right. And then, Dave Humphreys, that is, we see the balance sheet which is -- your net equity is much higher than your current market cap. And I'm just curious what assets you think that the Company has that are not being valued by the market that could create potential synergies between acquisitions, you know, other distribution companies. Or is there something in that equity that you can -- that is sort of a diamond in the rough that the market is not seeing?

Aram, that's almost impossible for me to answer. Now you're asking me to actually predict what the market sense of my Company is. I can only tell you what my sense of the Company is, and I'm very excited about the opportunities here to grow the business both organically and through acquisition. Hopefully through those two processes, we'll increase the value of the stock and get our value up above the book value of the Company.

Okay, thanks for your time.

[George Gaspar], Private Investor.

Yes, good morning. I've got a question -- if you tried to lay out the numbers that you utilize cash to repay debt and utilize cash to make the Adams acquisition, Kansas City, and what all went into that, what cash flow would that equal?

I'm sorry -- I don't quite follow your question. Could you ask it again?

I'm looking for how much you've deployed in repaying your debt, number one; it was $9 million plus. And how much since the acquisition of Adams Kansas City -- how much has gone into that acquisition for purchase, for inventory build, for facility? Can you equate how much money that you've utilized in combination with those two things?

This is Ken. As Scott has talked about, we paid off almost $10 million in debt and termination fees, and then we had the acquisition of that we talked about, the inventory increase, and we also bought a building. So, you know, you put them all together, I figure somewhere around $15 million.

$15 million.

In totality, so $5 million and $10 million is what he's saying.

I got you.

Those are highly wound numbers.

Pretty close, though.

Okay, and the comments, Dave, you were making regarding the sense of what your key customers are talking about in terms of the need to keep their networks operating for beyond 10 years. Does this give you confidence to go out and buy more inventory to recast, refurbish at this point in time? I know you mentioned about getting rid of inventory, but how do you see the other side of the equation if there's a possibility that maybe your key customers start stepping up to the plate here?

Well, one thing, we have accumulated a lot of really good, clean inventory, and I mean we're talking volumes on it. We are in the process of buying anything that make sense. We're watching more what the larger cable companies have in their systems. We're buying more of that type item, paying maybe 5% to 10% more than I'd like to or would have, but we're being very selective on what we're buying. So it's -- we're not accumulating very much of the good inventory, great inventory, but we also have great inventory in stock. We're whittling it down, and that's what's going to be able to put in more inventory, but also be able to sell at good margins our existing inventory.

One thing we all have to remember, and I think Dave Humphrey said it well, is as they're not rebuilding the plants, they're going to do more and more maintenance, and I think that's an opportunity for growth for us because we are already in that space. We do approximately $5 million a year.

And the other part is, if they're not rebuilding, they are going to need -- they have defective equipment. You can't repair it; you have to replace it with used gear, our reconditioned gear, and that's the market we like. That's a very good market for us, and as suggested, during 2008-2009, when a lot of our competitors did not have the cash, we had the cash and we were out there buying because there's only one or two MSOs, the larger ones that we're building. You've got a remember, a lot of the large MSOs have not rebuilt in the last three years in large numbers, so we're in pretty good position on the refurbished gear and if they need new gear at some point that -- we may get to that point where the used gear is not available, they have to do the maintenance side with new gear, and we have that new gear also in inventory.

Okay, and then, lastly, you look at your strategy, when you start looking around to find some company, small operators to integrate into your operation on an acquisition basis. What 1 or 2 most important areas that would be aligned to building opportunity for you? Is it -- can you share anything with us on that, what your strategy would be? What's out there that you're not doing now that you have the capability to, you know, move toward, but you don't have in-house now?

I guess, that's a difficult question to answer, not because it's so much of a hard answer. I'm hesitant as to how much I want to reveal to the market what we're looking at. You know, we'll look at going to look at service businesses similar to what we're already doing. As we mentioned, we think there's going to be an increase in demand for service as some of the MSOs don't upgrade their systems. So we look at players that are already in that space similar to ours.

We'll look at products that, you know, the Adams Global took us into another area which was CPE, where we weren't a real strong player in the CPE space, and that's added value to us. So we're going to look at any other plays in this space. I guess the one thing we're thinking about long-term is maybe some additional value in the broadcast side, and we've looked at equipment plays on broadcast. That's not -- we're not suggesting we're going to be in the broadcast business, but again, we're an equipment distributor, so we're going to see if we can expand our broadcast side of the house as well, either through acquisition or through new products, which we have already done through Fujitsu and Triveni. Those are two products we've added in the last couple of years, and a lot of that is sold on the broadcast side.

Okay, all right, thank you.

Thank you, George.

[Charles Koosmiller], Private Investor.

Good afternoon, gentlemen, most of my questions already asked; I guess I've got a couple I can ask. The role of the Chief Technology Officer, can somebody tell me -- I'm thinking if your Company is a re-value-added reseller I'm wondering where the CTO role is?

Well I'm going to answer that on behalf of the CTO sitting here. If I understand your question, you're asking, if we're not a high-tech company, why do we have a CTO role in the Company.

(multiple speakers) that's the question, yes.

Very good, well, Charles, what I'm going to tell you is, I believe that one of the strong competitive advantages that we have here at our Company, at ADDvantage, and specifically in the one company Tulsat, is that we understand our product and our technology that we sell to our customer base better than our customers do, and in some cases even better than the OEM. Now, the OEMs design and manufacture that equipment, so we're not better at it on the equipment they're currently designing and manufacturing. But on the vintage equipment that we continue to sell into this space, I think we can answer questions better than those OEMs that have already stopped manufacturing that product. And that is a real key and a key differentiator in our space. When our customers call us, they expect us to know that equipment, and in many cases we can tell them what you're looking for doesn't exist anymore, it hasn't been made for 10 years. But we could take this part from this piece of equipment and this part from another one and put together what you ultimately need this equipment to do to replace what you're taking out of service.

Let me answer that, this is Ken. Dave is in that role at the corporate level, but he also is the President and runs the largest division. So it's just an added responsibility, and he reviews the purchases, particularly on the used gear, and he also assists on the sales of gear, and -- when it gets time to see how that interfaces with equipment the customers looking for. So he plays a multifaceted role in the Company, just not just the technology officer. When we did a reorganization, Dave used to be the Chairman of the Board, and we had to give him a position; that sounded pretty good.

Okay, that sounds good to me too. The other question, again, most of the questions were already asked -- on the expansion, you're in Latin America, and well the (technical difficulty) any expansion in other parts of the world -- Asia, Europe?

One thing about our -- this is Dave. One thing about our business, the US business is, for the line gear and a lot of our product, is different type technology as far as frequencies and specifications. So we're not competitive if they're not very competitive over here.

So to go into Europe and Asia and everything, it's a completely different world, almost like it's a completely different business. Very few items except some of the latest digital type products will work in either situation. Latin America, we're still selling refurbished gear, we're still selling product that we have of other brands, so we do some sales there every week, every day.

What you find out on that is the OEM partners that we have, they have really been aggressive because the domestic market has been very sluggish, and European markets sluggish at this point. They have really spent a lot of their efforts in the Latin America market. They're going direct where one time we were authorized to sell in part of Latin America with Cisco. They're now direct and they spend a lot of their efforts in Brazil because of the upcoming event that's going to take place. So -- and then a lot of those countries, so you know it, they prohibit some used gear going into them because they want generally all-new gear, and then there's -- they put a very substantial import tax on when they bring it into the country. For example, if they buy something for a couple hundred dollars, there may be another $200 of import tax. So what the OEMs have had to do in order to be competitive a lot of times is cut out the middleman.

Thank you very much. That was a very good conference call, I appreciate it.

Thank you, Charles.

And we have no other questions, so I'll turn it back over to management for any closing or additional remarks.

Well, on behalf ADDvantage Technologies, I would like to thank you all for being on the call with us today. We look forward to moving forward together as a Company to try to get our stock price up, to try to increase the value to all of our shareholders. And, as you know, we've got key strategies focused around that, both internally through organic growth and through acquisitions. And so I look forward to visiting with you in the near future. Thank you all.

And once again, ladies and gentlemen, that concludes our conference. Thank you all for your participation.