ADDvantage Technologies Group Inc (AEY) 2015 Q4 法說會逐字稿

Good day and welcome to the ADDvantage Technologies fourth-quarter 2015 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Garth Russell of KCSA Strategic Communications. Please go ahead, sir.

Thank you, operator. Before we begin today's call, I would like to remind you that this conference call may contain certain 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 the future events, such as the availability or 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 departments of 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 materially differ from actual future events or results due to a variety of 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 here to included in the ADDvantage Technologies most recent report on Form 10-K filed earlier today.

The guidance regarding anticipated future results on this call is based on limited information currently available on ADDvantage Technologies, which was subject to change, although any such guidance and factors influencing it may change, ADDvantage Technologies will not necessarily update the information as the Company will only provide guidance at certain points during the year. Such information speaks only as of the date of this call.

During this call, we also present certain non-GAAP financial measures in our press release and financial tables issued earlier today, which is located on our website at addvantagetechnologies.com. You will find a reconciliation of these non-GAAP financial measures with the closest GAAP financial measures and a discussion about why we think these non-GAAP financial measures are relevant. These financial measures are included for the benefit of investors and should be considered in addition to and not instead of GAAP measures.

With nothing further, I would 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, everyone, to ADDvantage Technologies' fiscal 2015 fourth-quarter and year-end conference call. With me today is Dave Chymiak, our Chief Technology Officer, and Scott Francis, our Chief Financial Officer.

Before I turn the call over to Scott, who will provide the detailed financial results, I wanted to briefly reflect on the operational and strategic advances we made through the year. First and foremost, we reported 22% growth for fiscal year 2015, which reflects the success of our strategy to scale and diversify our operations. As a result, we also generated a very healthy 97% year-over-year increase in consolidated EBITDA to $3.8 million. These results were driven by the acquisition of Nave Communications in February of 2014.

As a reminder, this strategic acquisition marked our entry into the telecommunications equipment sector.

I am disappointed to report that we experienced weakness in the telco sector during the fourth quarter. We attribute this decline in sales to a slowdown in the broader telco industry, which we believe is being driven by the anticipated -- anticipation of market consolidation. This uncertainty has led to delayed decisions, I'm sorry -- delayed decision-making by our customers who invest in their networks. We continue to receive updated market intelligence from our sales team and industry associates that the broader industry continues to be slow, and this effect is also being felt by our competitors. This industry weakness is carried over into our fiscal first quarter of 2016 as we will most likely experience a continuing decline in revenue. Moreover, the general consensus is that this is a temporary reaction to short-term market conditions and, as such, will remain actively engaged with our telco customers so we are poised to immediately take advantage of any positive swings in demand.

In the cable TV segment, we continue to experience a broad and long-term trend of declining sales in the industry. While we are not pleased with this performance, lumpy revenue on a quarter by quarter basis is inherent in the cable TV business. In order to execute on our growth strategy during the fourth quarter, we opened a new subsidiary in Arizona, which we discussed on our last quarterly call.

Despite lower overall revenue in fiscal 2015, the cable TV segment still remains profitable and contributes positive cash to the Company's cash flow. Moreover, due to improved margins in the streamlining of its business activities, EBITDA for the cable TV segment increased 39% during the fiscal year of 2015. In the current quarter, we are also dealing with a further decline in market demand for the cable TV equipment. We believe this is due, in part, to recent pending merger transactions with major customers in our industry. All although it is too early to say exactly how long this will last and what impact the market shift will have on the current quarter and future quarter results, we are adjusting as appropriate. As we have described previously, our lean business structure offers us the ability to expand and retract in line with sales opportunities. Most importantly, at the core of our business, we have a strong sales team in place with a proven track record and solid industry knowledge. These two factors, combined with the Company's expansion into the telecommunications equipment distribution market, are expected to allow us to remain profitable in 2016.

With that, I will now turn the call over to Scott Francis, our Chief Financial Officer, who will take you through the financial results in more detail.

Thank you, David. For the fiscal fourth quarter of 2015, our total sales decreased $2.5 million or 20% to $9.6 million from $12.1 million for the same period of last year. Sales for the cable TV segment decreased $1.3 million to $6 million for the three months ended September 30, 2015 from $7.3 million for the same period of last year. Sales for the telco segment decreased $1.1 million to $3.7 million for the three months ended September 30, 2015 from $4.8 million for the same period of last year.

Our consolidated gross profit decreased $1.2 million, or 28%, to $3.1 million for the three months ended September 30, 2015 from $4.3 million for the same period of last year. The decrease in gross profit was due to a $0.3 million and $0.9 million decrease of gross profit from the cable TV and telco segments, respectively. The decreased gross profit in the cable TV segment was primarily due to decreased sales, while the decrease in gross profit from the telco segment was primarily a result of lower overall sales, as well as the impact of lower margin from our recycling operation, due primarily to lower commodity prices.

Gross margin for the cable TV segment increased to 31% for the quarter ended September 30, 2015, from 29% for the same period of last year, due primarily to decreased margin -- increased margin, excuse me, on refurbished equipment sales. Our gross margin for the telco segment decreased to 33% for the three months ended September 30, 2015, from 44% for the same period of last year. This decrease primarily resulted from lower commodity prices in our recycling operation. Our operating, selling and general administrative expenses decreased $700,000 to $2.6 million for the three months ended September 30, 2015, from $3.3 million for the same period of last year. This decrease is primarily due to expenses related to the Nave acquisition earnout and lower payroll-related expenses. Our income from continuing operations for the three-month period ended September 30, 2015, was $0.2 million or $0.02 per diluted share compared with $600,000 or (technical difficulty) per diluted share for the same period of last year.

Our consolidated EBITDA decreased $0.4 million to $0.8 million for the three-month period ended September 30, 2015, from $1.2 million for the same period of last year. The cable TV segment EBITDA decreased $200,000 to $0.5 million for the three-month period ended September 30, 2015, from $0.7 million for the same period of last year, while the telco segment EBITDA decreased to $200,000 to $0.3 million for the three months ended September 30, 2015 from $0.5 million for the same period of last year.

Now turning to the results for the fiscal year ended September 30, 2015. Our consolidated sales increased $7.8 million or 22% to $43.7 million for the fiscal year ended September 30, 2015, from $35.9 million for the same period of last year. The increase in sales was due to an increase in the telco segment of $10.1 million, primarily resulting from the Nave Communications acquisition on February 14, which was partially offset by a decrease in cable TV segment sales of $1.8 million. Our consolidated gross profit increased $3.7 million to $15.3 million for the 12 months ended September 30, 2015, from $11.6 million for the same period of last year. Consolidated gross margin increased from 32% in fiscal year 2014 -- 2015, to 35% -- excuse me -- increased from 32% in fiscal year 2014 to 35% in fiscal year 2015. The increase in gross profit was due to an increase in the telco segment of $3.4 million as a result of the Nave Communications acquisition and an increase in the cable TV segment of $0.3 million in spite of the lower sales from this segment. The increase in cable TV segment gross profit was primarily due to higher gross margins on refurbished equipment sales.

Our consolidated operating, selling, and general administrative expenses increased $2.2 million or 21% to $12.7 million for the 12 months ended September 30, 2015, from $10.5 million for the same period of last year. This increase was primarily due to increased expenses of the telco segment of $2.7 million, which is a result of the Nave Communications acquisition, partially offset by a decrease in cable TV segment expenses at $500,000.

Our income from continuing operations for the 12 months ended September 30, 2015, increased 132% to $1.5 million or $0.15 per diluted share compared with $700,000 or $0.07 per diluted share for the same period of last year. Our consolidated EBITDA increased 97% to $3.8 million for the fiscal year ended September 30, 2015, from $1.9 million for the same period in 2014. The cable TV segment EBITDA increased $700,000 to $2.5 million for the year ended September 30, 2015, from $1.8 million for the same period of last year, while the telco segment EBITDA increased $1.2 million to $1.3 million for the year ended September 30, 2015, from $0.1 million for the same period of last year. Our cash and cash equivalents on hand were $6.1 million as of September 30, 2015, compared with $5.3 million as of September 30, 2014.

As of September 30, 2015, the Company had inventory of $23.6 million compared with $22.8 million as of September 30, 2014. The increase on inventory position was due primarily to increased inventory in our telco segment of $2.4 million, partially offset by decreased inventory in our cable TV segment of $1.6 million.

This concludes the financial overview for the year ended September 30, 2015. I will now turn the call over to the operator for any questions. Operator?

(Operator Instructions) Doug Ruth, Lenox Financial Services.

Do you think the Company is losing market share to any competitors?

Doug, thank you for your question. I will take the first shot at it, and I will ask Dave to kind of address the -- on the cable side. On the telco side, I don't believe so. I think we are seeing -- at least we are hearing from both our -- a lot of our customers/competitors/suppliers, other brokers are in the same field we are and experiencing declines, actually, a little bit greater than we have. But I think we have maintained our market share in the business. I think the whole industry is seeing some softening on the telco side.

On the cable side, I think, again, we are seeing -- maintaining our market share, at least with certainly our smaller customers, and I will ask Dave to kind of answer a little bit more edification on the cable industry.

I am not finding anything particular that I could see that we are losing anything. One place we are losing, we are losing a few orders to the factory, which we always do. If the customer could wait a month to two months longer than we could -- getting it from us, they can go there and, of course, get a lower price, and we are finding that to be true. I am noticing that our international business is off a little bit, and I am finding our competitors are saying that it is off because of the dollar value, but I can't confirm that.

And what about, with the cash that you have on the balance sheet, what if you invested in inventory? Do you think that that would make a difference, having different inventory than what you have currently?

Yes. Go ahead, please, Dave.

We have not found that to ever be effective unless it is a bargain. I mean, unless it makes sense putting new inventory in, it is a real competitive market on new products that your percentage is six to 12 points and then you have got problems so if you don't sell it. So we are not really into that, and we are seeing are not a lot of buys either.

Doug, I will take a shot at it as well. There is two aspects to our inventory position. One is the hot moving items. The current production on the cable side because we do distribute for OEMs. We have adequate inventory positions. It allows us to take advantage of opportunities when the OEM manufacturers can't deliver from a timing standpoint, and I think we have ample supply of that. Then it is our long-term inventory positions on secondary purchases that Dave talks about that we buy significant discounts, maintain very high margins on that type of product, and I think we have got a very good position still. I think our inventory is strong, continues to drive a lot of our sales.

On the telco side, we purchased Nave about a year and a half ago, and we strengthened their balance sheet by adding inventory into their positions. I think it has increased their margins slightly over time. What we are seeing, when Scott talks about reductions in margin, what is happening there is that we are shifting sales over to -- we are seeing more and more of our sales coming from end-users, which, if it is coming out of their inventory, we see a slightly higher margin, but we also source product out of the telco group and those are at lower margins.

So, as we increase more sales not utilizing our inventory, we will see reductions in margin. But we have a very strong inventory position that still drives a lot of our sales to the telco side as well. So I am very pleased with our inventory. We continue to whittle it down and convert it into cash over time as well.

As a group, you folks are very nice people. You are very astute at what you are doing. But, starting from the beginning of the year, we had the stock price at $2.44. We are at $1.68. All the core shareholders, including the Chymiaks, have seen the value of their investment decline this year. What do you think should be done? What should the Company do, if anything different, going forward than you are doing currently?

Again, we will take those by segment. So on the cable segment, we continue to look for opportunities to expand our product lines, and we are in discussions with an OEM to maybe look at some additional lines of product we can sell. And then, on the -- but we utilized our strong inventory position in that. We also will continue to look at expanding our sales group.

The group 15 years ago was predominantly focused on resellers. So we would sell to other brokers, and that was the model that Dave built up. I think, in the last three or four years, our focus has been more on end-users.

Now, we have got a strong end-user market just by happenstance because customers know that we are the ones with the inventory and they often come to us. But we want to be more proactive in the marketplace on the cable side.

On the telco side, Nave has always been a very proactive market and sales organization. So I think they are utilizing the market that they have got, and they are well in touch with their customers. They maintain a strong base with them. And I think these are market conditions, and I do not believe that this is a sustainable business that -- I'm sorry. Not -- I should say the decline is not sustainable. I think the market will come back to Nave, and they believe that as well.

We think it is short-term. I think we are doing exactly what we need to from an acquisition standpoint. I think Nave added a significant value to the business, and I think we're going to continue on the path of finding that next acquisition to add to the operating base of our Company.

With the large discount -- the stock price to the book value -- how do you feel about re-initiating some sort of a stock buyback at this point?

You know, Doug, that is actually something we might start discussions on internally. With that much weakness on it, we think our stock is a real value right now. I won't make any promises to you, Doug. As you know, I can't do that on this until we make a decision. But I can assure you that we will have some internal discussions -- Scott, myself, and Dave -- around that very subject.

Okay. Well, thank you. I appreciate you holding the calls and telling us what is going on, and I believe in the Company and the people there. So thank you for doing what you are doing.

Thank you very much, Doug. We appreciate your continued support.

[George Gaspar], a private investor.

Just an ongoing comment from your comments to the questioner prior to me. At the bottom of the market this morning, at $1.30, you are selling at one-third of your book value, it looks like to me. And I think that the question about stock buyback was a pretty good one for anyone to ask management at this point in time.

A question on the cable side. A year ago, approximately about now, there were thoughts from you all on what could be a lift-off a year from then, being now, on the field amplifier market coming around because of bandwidth -- the marginal bandwidth that was perceptibly becoming more obvious in the market. Do you have any comments about that?

And, before you answer that, I might just say to you, you may have experienced it in your areas, geographically, but I know in Milwaukee, broader Milwaukee metropolitan area, there were serious slowdowns online with the marketing -- through the Internet. Also, even constantly, Time Warner here is experiencing inability to solve problems in suburbs north of Milwaukee on getting a sufficient amount of speed on the data that is being transmitted by cable.

Now, with that situation, I can't believe we are the only place this is going on. So what is it about the market? I know you mentioned mergers that are stalling this out, but even mergers need to upgrade equipment and keep the field operations going. Now, what is your overview on all this?

Dave, I will let you take the first half of his question.

We are constantly giving out quotes for what you would call the upgrade equipment to them. We are selling some. It is not picking up there as fast as I thought it would. Most of the people are putting their money into budget for 2016 and 2017 to upgrade some of their amplifiers. Time Warner is out trying to upgrade a lot of their equipment. They have got a lot of older equipment out there in certain areas, but a lot of it they don't know what to do. They say, well, we will wait for it, and we will do our minimum amount to get through a merger, in my opinion. Other times, they are out there trying to be aggressive at it and then there is the backlog. But there still is movement, and they are doing a reasonable amount of things in this space, but it is mainly to bring them up to a minimum level.

So as far as the upgrade goes, it still looks like it is six months to a year down the road, George.

Okay.

George, a couple of other comments about the cable industry. Of course, the cable industry has a long reputation of having very poor customer relationships. That is not having anything to do with our business. We are an equipment supplier to them, and that is with you as a customer of the cable business. The cable industry recently, for the first time, is making more money on broadband than they are making money on cable TV. Now, that may seem unusual, and you and I and everybody else paying $100 or more for cable television and $38 to $50 for broadband. But they pay a lot of that money to the producers, the NBCs and ABCs and ESPNs of the world, where 10 years ago ESPN would beg you to carry them on cable TV on advertising. Now they charge you $5 per subscriber per month to be able to carry ESPN. And so that is why they are not actually making more money on broadband for the first time in cable TV, even though they collect more money on cable TV.

So that is one of the shifts, and that is their growth engine as well. They take on -- or they are taking on more and more broadband customers, and that is the ultimate that -- that is going to be the one point that is ultimately going to drive that demand for having to increase the reverse path is it is all about broadband because the cable TV only goes in one direction. It is a unidirectional delivery, and they do have to stay competitive with the telcos that are in this very same market. And now, of course, the telcos and the cable companies are coming together from a customer market standpoint and offering a triple play. You get telephony from either one, broadband from either one, or cable TV from either one. But they utilize completely different infrastructures, which is why we are invested in a telco company that is selling telco equipment to one customer base, and a cable company distributing equipment to the cable markets. And those continue to be -- there is a strong need for that as the demand for broadband continues.

So we feel very confident about our industry and where the market is going. Unfortunately, I don't feel terribly confident about how they respond to customers and how they are ultimately going to fix some of the problems they have got. But, yes, they do need to upgrade their infrastructure as they continue to deliver more and more broadband to a broader customer base, and we think we will take advantage of that marketplace over time.

Okay. Good answer. Thank you. A question here on the acquisition side. Are you getting any closer to zeroing in on another leg on the stool, so to speak? Can you comment past the last quarter when you updated on your acquisition look to you? Anything you can tell us about that?

All I can tell you, George, is we are continuing to look at opportunities. We are in discussions with a company that actually was supposed to happen this afternoon. The guy canceled, but -- and that is pretty common as we are generally in discussions and continuing to look. So we are continuing to solicit additional companies and trying to broaden the scope of opportunities that we can look at. But, no, I don't have anything to report that -- nothing is imminent at this point in time that I can report on.

Okay. All right. And then, on the inventory side, you mentioned an inventory gain for telco reduced on the cable side. How does the cable inventory look relative to where you think the cable business, from your perspective, is going?

I will turn that over to Dave again. Go ahead, Dave.

George, I am comfortable with our inventory. We are not losing any orders to answer part to Doug earlier. I can't see where we are losing any orders because we don't have it in product. We don't handle a lot of the commodity items, a lot of the small connectors, cable, and such, where there is a small margin. But I am not losing any orders that I can tell on our regular equipment because of inventory. And unless we get -- we are not looking at increasing inventory unless there is a special going on. So we are still acquiring a few things, but it is very insignificant in the whole picture right now.

Okay. And then, just back on the telco side, the marketing approach that you are using, do you see at this point with now having Nave in the fold for the better part of the year or more that you can start to expand what they are marketing?

Okay. Yes, let me answer that question a little differently. From a product standpoint, they have a very broad product offering, and even if they don't carry it in inventory, they can source it and they sell it to a customer.

From an equipment standpoint, I think it is fairly broad. Looking at potentially service opportunities within Nave, but I can't speak to those right now. But those are certainly both opportunities on the Nave side and the telco side, and we would certainly look at those in cable. We are already in the repair business, which we call service. So that is more of a service business on the cable side within that space in the telco yet. So those are both potential acquisition opportunities for us.

Okay. All right. And just closing observation from my perspective. As the last gentlemen who was asking questions mentioned, we obviously are hoping that ADDvantage Technologies can come around and take advantage of its market opportunities going forward. You have -- from a standpoint of quality of company, certainly relative to the price of the stock, we would hope that you can leverage your talent inside there and really start to move it forward past the bumps in the road that apparently are still in front of you. Thank you.

Very good. Thank you very much, George. Again, we appreciate your continued support.

(Operator Instructions) Steve Rudd, Blackwell Investments.

Let me start with this. I think, of course, on the day to day operations of the company -- and I really can't have much input -- but I think we really are losing a battle on what I would call the financial management of the business. So I want to just try to focus in on that in the next few questions and (technical difficulty). The first --

I'm sorry, Steve. You are breaking up. We actually can't hear you now.

(technical difficulty) Can you hear me a little better now?

You are still coming in and out, Steve. It is not dead silent now. Go ahead.

(inaudible) another location and maybe it will be a better -- okay. Is that a little better?

Yes. We are picking you up better now. Thank you, Steve.

Okay. Good. Sorry about that. I apologize. So what I was talking about is, I think we need, at least from an input or constructive input basis, the financial management is what I would like to focus on. In the day to day operations, you guys will know more than I will ever possibly learn about it.

So the first question I have is, we just reported a poor fourth quarter and, typically, there ought to be a sign that a company like yours in a difficult situation with this inventory that is sitting on there for a long time would write down the inventory, and there is tremendous advantages to doing that. A tax advantage. There is a financial reporting advantage for when you have later sales and you can do a recovery with better margins on it. And on it goes. And I just -- I have the feeling that maybe you hesitated to do that -- I don't know -- for some nostalgic reason or whatever it is. But it seems to me, if you missed it in the fourth quarter, given that you have just basically announced the bad first quarter, you can take that right down in the first quarter.

In other words, at this point, it is not going to negatively affect your share price, and practically who cares if it doesn't this point. But at least we can set ourselves up to the point where we are more properly reporting the inventory valuation and then able to take advantage of that right now today in the future with better margins when we sell off the inventory in the future.

So I don't know if you have looked into that and it seems to me your accountant should have pressed you on it, but I don't know -- do you have any questions on that or what your thoughts are? I would be interested in hearing.

I will turn that over to Scott to begin with.

Yes. This is Dave. (multiple speakers) inventory probably more times in how we operate and doing it. For IRS purposes, we have to justify that the thing is not worth anything or we have to get rid of it, all different type things. For SEC, we have to make an educated guess of its value. I probably spend more time, as far as accounting, going on that, and we look at it daily. But if something is still worth it, we are still selling it, we are still getting quotes, we technically can't write it off.

But we spend a great deal of time on it on accounting. Over the years -- for 30 years, we have really looked at it different ways, and we are very conservative. If we do have quite a bit of write down on the books. Tax wise, we can't take it off until we dispose of it or justify with the IRS, basically, that we can do it.

Yes. I will take that just a step further. We do all sorts of -- as our year-end audit in each quarter, we go through and look at price testing to make sure our lower cost to market rules are still in place, that, for what we are selling on our terms. We definitely have a different distribution model than maybe what you are used to.

On the surface, it looks like we are not turning our inventory. Therefore, it is ripe for a potential lower cost of market right down, which I think is what you are driving two. Our model is not that. Our model is, we hold our inventory for anywhere from -- it could be a very short period, but up to three and four years. And so -- and that is by design in our model. So just because it is not selling today, doesn't mean it is ripe for a write down, to your question.

And so that -- it is a different look than maybe what a traditional company would do, but that is why you see what you see. And all I can tell you is, as of year-end, we have gone through those price testing models on our lower cost of market, comfortable with that. We are also comfortable with the reserves that we have in place on the cable segment. The potential D&O, i.e., excess and obsolete inventory that we have in place at year-end, and Dave is looking at that. We are careful before we just write stuff off and scrap it because that means you are just taking a loss on it. Granted, it is good for tax, but ultimately if we can sell it, it is going to be a whole lot better in the long run. And that is what we are trying to figure out. I appreciate the questions, but that is where we are at.

All right. I wasn't talking about taking it and selling it for scrap. I was talking about reducing the valuation.

That is what I was telling you, Steve. I can't reduce the valuation if the price testing can't support it.

I got that, but here is the issue. I think that, from a potential management point of view, you folks would want to be writing down the inventory. The other question is, how do you get to that number, and it has nothing to do with putting this inventory out the door or selling it at bargain basement prices.

The next part is, how do you all get to that? And you get to it because the very fact that, yes, you have a different model, gives you plenty of room just to show that that deviation really -- the deviation is probably the standard model. Because the standard model would tell you, you are sitting on inventory three, four years. That inventory must be overvalued. That is the axiomatic result from looking at inventory for that long.

So if you yourself are driven to a better financial results for the Company, then you yourselves would want to drive the write-down in inventory, and now would be the time to take it and it is justifiable. Not that if you are -- for some nostalgic reason, saying, I don't want to write down the inventory, then we are all in this morass. But if you are managing this as solid financial managers, you would say, we want to write it down, and your case for writing it down is very powerful. Indeed, I think your case for not writing it down is extremely weak. So we have a powerful case for writing it down, given that you are practices are deviating from the normal company, you then have the most solid case for writing down your inventory, take it.

In other words, you are being handed, I wouldn't say, a gift, but you are being handed something that is completely supportable by normal industry practices and take it and use it. So try to analyze that a little further, if you would. Give your accountants because I think you are coming out the wrong way on this and unduly tying yourselves up and portending a worse future for yourselves. Instead of taking all the bad news in one shot, let's do it all in one shot and have a better future rather than tying ourselves up and saying, hey, listen, we know you would normally write down our inventory, let me tell you why we don't want to do that, and why don't you just go with it because I think it would be better for the company and that you would report better results. So if you would ruminate on that a little further. I'm sorry. Go ahead.

Hey, Steve. This is David Chymiak. Maybe one thing I could tell you that might you help understand. 80% of our inventory is fast-moving, turning over items as far as within current product models. We may get specials on them, in fact. Our longer items that we have had traditionally is less than 20% of our total inventory in dollars. So even if I reduced some of that, that is the ones we hit our home runs with. But, again, we will take it into consideration, but we do this all the time. In fact, there is a big consideration running through the audience process we go through all the time.

Thank you.

Okay. Well, if you can -- okay. Just a follow-up, too, on something else to say, I don't know if it was the prior question, but one of the items we spoke about on the last call was analyzing the buyback and, just, as you do that, the buyback has to be meaningful. So if it is going to be just shares from time to time in the marketplace, you don't really have that much opportunity to take in many shares. I haven't sold a share, by the way. I mean I just see the Company as so preposterous and cheap that I just can't even bring myself to sell it, although I do think we need to do better things on financial management.

But, with that, I want to focus you guys in on a Dutch auction so that you are doing a meaningful buyback as opposed to announcing a buyback, and then because of buyout periods and restrictions able to pick up only 3000 shares every quarter or so. So I don't know if that Dutch auction concept has come up yet, but who knows? Maybe the 10 Chymiak and the other Chymiaks will want to tender some of their shares. But, at least you can pick up a meaningful number of shares on a buyback.

And, Steve, I'm sorry to interrupt you. I can assure you that the Dutch auction is part of the conversation.

Okay. Excellent. Good. I am glad to hear that. And, finally, we have hired this Dave Humphrey, who is the CEO, and he talked about financial management. I still -- just a feeling as a shareholder and having seen companies with senior owner managers then handing off to some new blood, but I have the feeling he is underutilized. And this is just coming from having been an investor for 30 years now. I would bet if asked, and if he believes he could tell you honestly what his thoughts were, he could probably point to the three, five, eight folks who have been with the Company for 20, 30 years, who the Company would proceed very fine without. And I just hope that you would invite Humphrey to do his job to the fullest in saying, look, here is my list of people I think we are overpaying or we really don't need, and I think this time it is tough for a new CEO, and I have spoken to him. We haven't spoken in months now. But I think prior to the last conference call we spoke one-on-one. He is an enormously polite guy, very respectful, and admiring of what the Chymiaks have done with this business. So I think the to pull him out -- look, I am not going to say he sits in a shell. He doesn't sound that shy on the conference call. But, to pull him out and say, hey, listen, we hired you for a reason. Tell us, as the outsider, because, frankly, Dave Chymiak, you are the insider, and you have been there forever. Tell us, as the outsider, who needs to go and we will look at it really seriously even if it is my best buddy, who we go over to the house every weekend, we will do this in a proper and nice way. But we are going to run this company like a real company and not like an old clubhouse so we are really profitable.

So I am just hoping you will -- I am saying it publicly here so that I am not speaking -- talking out of school, but I just really hope you will invite the full utilization of what I believe you brought him in to do. But I suspect he is probably hogtied from doing. So just to give that some further thought.

And also, thank you again for letting me speak freely. Because sometimes folks they don't want to hear this. I hope it is constructive.

I appreciate your comments. Steve, I appreciate you haven't sold any of your shares yet, and we appreciate your continued support. So thank you for your questions, Steve.

That does conclude today's question and answer session. At this time, I would like to turn the conference back to David Humphrey for any closing or additional remarks.

Thank you, operators. We are pleased with both our top-line revenue growth and EBITDA of this year. Although current shifts in market demand is disappointing, it does not dampen our enthusiasm and only strengthens our determination to focus on profitability and identify new revenue sources for existing businesses through the execution of our business strategy. This activity will include investing in our business by identifying potential strategic acquisitions in the broader telecommunications industry.

I would like to thank our shareholders for their loyalty, support, and patience as we continue to build value. Thank you all.

This does conclude today's conference. Thank you for your participation.