Comtech Telecommunications Corp (CMTL) 2005 Q3 法說會逐字稿

Welcome to Comtech Telecommunications Corporation's third quarter fiscal year 2005 earnings conference call. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions]. As a reminder this conference is being recorded Wednesday, June 8, 2005. I would now like to turn the conference over to Ms. Stephanie Lamontia (ph) of Comtech Telecommunications. Please go ahead ma'am.

Thank you and good morning. Welcome to the Comtech Telecommunication Corp. conference call for the third quarter of fiscal 2005. With us on the call this morning are Fred Kornberg, President and Chief Executive Officer of Comtech, and Robert Rouse, Chief Financial Officer. A news release on the Company's results was issued earlier this morning. If you have not received a copy, please call me and I will be happy to send you one.

Before we proceed, I need to remind you of the Company's safe harbor language in the following way: Certain information presented in this call will include but not be limited to information relating to the future performance and financial condition of the Company. The plans and objectives of the Company's management and the Company's assumptions regarding such performance and plans are forward-looking in nature and involve certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. Any forward-looking statements are qualified in their entirety by cautionary statements contained in the Company's Securities and Exchange Commission filings. With that I'm pleased to introduce the President of Comtech, Fred Kornberg. Fred?

Thank you Stephanie. Good morning everyone and thank you for joining us today. This morning we will be discussing our results for the third quarter of fiscal 2005 which, as you can see from this morning's press release, were truly outstanding. Strong demand for our products and our participation in high profile programs has fueled our growth during the first nine months of fiscal 2005, and are expected to make fiscal 2005 the third year in a row of significant, record-breaking growth. I'll further discuss our outlook, as well as recent developments, a little later in this call; but first let me introduce Rob Rouse, our CFO, who will review our operating results for the quarter. Rob?

Thanks, Fred, and good morning to all of you. Q3 was yet another strong showing for Comtech across all three of our business segments. Let me begin with the key income statement trends for the three months ended April 30, 2005. Sales for the third quarter of fiscal 2005 were $75.4 million as compared to the fiscal 2004 Q3 level of $51.2 million. The increase reflects significant growth in all three of our business segments, driven by continuing strong demand for our products and our participation is critical programs. Our acquisition of Tolt Technologies in February of this year contributed $5.2 million of sales in the third quarter. Third quarter sales exceeded our previous guidance of 65 million to $67 million, primarily as a result of higher than expected sales in our Mobile Data Communications segment, as anticipated delays in migrating to our next generation transceiver were offset by revenues in other Mobile Data Communications product areas.

Third quarter sales broken out by segment were as follows: 57.3% telecommunications transmission, 29.6% Mobile Data Communications, and 13.1% RF microwave amplifiers. Of the third quarter sales 49.1% were to international end users, 35.5% were to the U.S. government or primes to the U.S. government and 15.4% were to domestic commercial customers.

Our gross profit was $29.5 million in the third quarter of fiscal 2005 versus $20.6 million in the third quarter of fiscal 2004, as a result of the higher sales in fiscal 2005. Our gross margin percentage decreased from 40.2% in Q3 of fiscal 2004 to 39.1% in Q3 of the current year, due to favorable gross margin adjustments on two large over-the-horizon microwave contracts recorded in the fiscal 2004 period. The absence of such adjustments in Q3 of fiscal 2005 were largely offset by continued operating efficiencies, net of changes in product mix.

SG&A expenses in the third quarter of fiscal 2005 increased to $12.9 million from $8.8 million in the third quarter of fiscal 2004, primarily as a result of the significant increase in sales and activity in all of our business segments, expenses associated with Memotec and Tolt which were not in the fiscal 2004 period, and ongoing costs of compliance with corporate governance regulations. SG&A expenses were reduced by $460,000 in the third quarter of fiscal 2005 as a result of insurance proceeds received related to previously-discussed hurricane damage experienced at our facilities in Florida. As a percentage of our consolidated sales, SG&A expenses were slightly more than 17% in both periods.

R&D spending increased significantly, from $4 million in Q3 of fiscal 2004 to $5.3 million in Q3 of fiscal 2005. This increase reflects our continued commitment to investing in the future. We believe that our success in recent years is largely the result of the well-entrenched technology leadership positions that we enjoy, which have been made possible by our focus on, and investment in, the latest technologies.

The increase in amortization of intangibles reflects the Memotec and Tolt acquisitions. And our operating income increased during the third quarter of fiscal 2005 to $10.7 million from $7.3 million during the third quarter of fiscal 2004. And as you can see from our 10-Q filed earlier today, all three of our business segments posted strong increases at the operating line.

Interest expense was consistent during the periods at approximately $700,000, and this interest primarily relates to our 2% convertible senior notes. Interest income increased to $1.2 million for the third quarter of fiscal 2005 from the 324,000 for the third quarter of fiscal 2004, due to higher interest rates and a higher level of investable cash driven by our strong operating cash flow in fiscal 2005.

The provision for income taxes for the third quarter of fiscal 2005 includes a tax benefit of $1.1 million, primarily relating to a reassessment of the valuation allowance against our deferred tax assets. Accordingly, our effective tax rate for the quarter was approximately 25%. As a result of the higher level of pre-tax income, we estimate the effective tax rate for the fourth quarter of fiscal 2005 to be approximately 33%. The third quarter tax provision includes incremental expense to bring our year-to-date effective tax rate up to this new rate of 33% excluding the adjustment that I referred to earlier.

Net income for the quarter ended April 30, 2005 was $8.4 million, or $0.32 per diluted share, compared to $4.8 million, or $0.20 per diluted share, in the prior year period. And, as we discussed in our few last investor calls, the diluted EPS amounts reflect full dilution from our convertible senior notes pursuant to recently promulgated accounting rules. This means that in calculating diluted EPS, we assume that the notes convert and the additional shares are issued, and then we also assume that the interest expense that is currently in our P&L would not be incurred. Note 8 to our consolidated financial statements, in the Form 10-Q that we filed earlier today, has a chart that shows the calculation of this diluted EPS. Earnings before interest, taxes, depreciation and amortization, or EBITDA, were $12.6 million for Q3 of fiscal 2005 versus $9 million for Q3 of fiscal 2004.

Turning to our balance sheet, the strong cash flow from operations of $49.5 million for the first nine months of fiscal 2005 has resulted in another all-time high unrestricted cash balance of $205.3 million. We plan on using these cash resources to fund future organic growth as well as pursue acquisitions. Despite the significant increase in sales, our accounts receivable have decreased. In fact, including unbilled receivables, our days sales outstanding based on Q3 sales have decreased to approximately 46 days and, excluding unbilled receivables, have been reduced to under 40 days.

As we predicted during the last investor call, inventories increased in Q3. The $45 million in inventory as of April 30, 2005 reflects our need to stock adequate levels of inventory to ensure we meet our delivery obligations on several high profile programs. Our backlog remains strong as of April 30, 2005 at $153.6 million compared to $83.5 million as of July 31, 2004 and $159 million as of January 31, 2005. All-in-all, Q3 of fiscal 2005 exceeded our expectations and is ongoing tangible evidence of the strong competitive positions we have established in each of our business segments. And now back to Fred.

Thanks, Rob. First I'd like to discuss recent business developments in each of our three business segments and then provide guidance for Q4 fiscal 2005 and share some thoughts on fiscal 2006. As you know, our largest business segment, the Telecommunications Transmissions segment, has continued to post outstanding operating results quarter after quarter. And in the third quarter of fiscal 2005, was no exception. In fact, the quarterly sales in this segment exceeded the $40 million mark for the first time ever.

The largest product line in this segment is our satellite earth station product line. As a reminder, we offer a complete line of satellite earth station products and have established Comtech as a one-stop shop for customers such as domestic and international commercial satellite and network integrators, as well as U.S. and foreign governments. Our primary focus here continues to be in the satellite modem area where we believe we have the leading market share and our technology continues to be the de facto standard in optimizing satellite bandwidth utilization using our patented turbo product coding technique; thus, significantly reducing transmission costs for our customers.

Bookings in this product line for the first nine months of fiscal 2005, which were at their highest level ever, have been a reaffirmation of our well-established leadership position. We're not, however, resting on our laurels. We are continuing to reinvest heavily in this product line and are in the process of introducing three major industry-leading technology solutions; such as carrier to carrier, which allows our modems to transmit and receive at the same frequency, thereby providing significant bandwidth and transmission cost efficiencies. Such as our Memotec access devices and voice gateways, which allow our customers to consolidate multi-service traffic such as voice, video and data; and such as a new coding technology called load density parity-- parity check, or LDPC, which represents another major breakthrough in forward error correction technology.

Turning to our over-the-horizon microwave product line in this segment, we're also having an outstanding year. We have a strong backlog from our traditional customers which provides a solid revenue base over the next few years. We have been, and expect to continue to be, successful in winning large opportunities in this product line. Our technology is far superior to our limited competition and we are well known as a leading supplier of over-the-horizon microwave modems and systems. In light of the dollar magnitude of the potential opportunities in this market, however, predicting when a contract will be awarded or an opportunity realized can be a challenge; since often times sizable programs relate to government customers and government customers can take a considerable amount of time in committing to a new technology and finding appropriate funding.

With that in mind, we remain excited about the positioning of our technology with the U.S. government. The advancements we have made in this area have opened up applications for our technology that were never before possible. For example, our adaptive eight megabits per second, over-the-horizon adaptive microwave modem allows for the transmission of black-and-white video for the first time over this type of channel; enabling an application such as the backhaul of UAV traffic. We believe we have made a clear and convincing case with various groups within the DOD that this technology should play an important role in its communications infrastructure, and many high-ranking military officials are now supporting the use of our over-the-horizon microwave systems in a variety of applications. At this point, we're working diligently with the DOD in providing the necessary information, doing demonstration tests to obtain that funding; and even funding for a small percentage of the total opportunities could obviously result in a significant growth driver for this product line. We'll certainly keep you posted as this area continues to develop.

In summary, within the Telecommunications Transmissions segment, our ongoing and increasing R&D efforts continue to solidify our leadership positions. We are truly leaders in satellite earth station modems, in over-the-horizon microwave modems and systems and in forward error correction. And being leaders in the markets we serve, is also a fundamental underpinning of our strategy and we intend to continue our focus on future technology innovation by committing significant resources to R&D.

Our Mobile Data Communications segment also had a better-than-expected quarter. As mentioned during our last investor conference call, the U.S. Army is accelerating its transition to our next generation transceiver. We have now completed the integration of RFID capability as well as an enhanced security anti-spoofing feature into our more advanced next-generation transceiver. We have also changed the MTS in-vehicle computer to add features, enhance performance and provide more ruggedness. We view this as a positive development, as it demonstrates the commitment we have to providing the Army with the best technology solution and the Army's commitment to us as its key supplier in this area.

We have recently finalized and negotiated the contract changes required by the transition to this next generation technology. However, as anticipated, this process impacted of the timing of the receipt of MTS orders for the new transceivers and computers, and the related revenue recognized in Q3. We do expect to receive meaningful orders for our next-generation products from the MTS program office in the very near future. The impact of this MTS product line transition on Q3 sales was offset by continued strength in other Mobile Data Communications program endeavors. As such, most of the third quarter revenue in excess of our guidance actually came from our Mobile Data Communications segment. In fact, despite the delays relating to the transition to the new transceiver, as Rob mentioned, Mobile Data Communications segment revenues for the first nine months of fiscal 2005 have already exceeded full-year revenues for fiscal 2004.

The importance of the role our technology plays, both within the logistics and war fighter communities, continues to grow. Our mobile satellite transceivers and related communications networks are critical, particularly when [inaudible] line-of-sight microwave channels are not available. And despite the remarkable growth this segment has achieved in recent years, the MTS and Blue Force Tracking programs continue to be significant future growth platforms; since only a small number of the U.S. Army's logistic and war fighter vehicles to date have been upgraded.

We're also working with other areas within the DOD, such as the Army reserves and and Marines, as well as various prime contractors, in addressing potential needs and applications that our technology can fill. In that regard, our miniaturized third-generation satellite transceiver has been met with much enthusiasm by both government and several of the primes. It is also important to reiterate that as can be seen from the impact of the transition to our second-generation transceiver, which I mentioned earlier, that quarterly bookings sales and profits can fluctuate dramatically from quarter-to-quarter. However, the broader annual trend for demand in this product line has consistently been on the rise and we don't see that trend changing.

During the third quarter, we also completed our acquisition of Tolt Technologies. Tolt is a value-added reseller with significant experience in providing turnkey employee solutions to large enterprises, including hands-on experience with customers that have trucking fleets. We believe the commercial trucking market is the most fertile area for commercial applications for our Mobile Data Communications products. In purchasing Tolt, we acquired a business of scale with a sales infrastructure to supplement our existing commercial efforts. The Tolt operation now includes all of our commercial mobile data communications resources and initiatives. Tolt sales, as Rob mentioned, for the third quarter were 5.2 million at approximately break-even. In the longer term, we seek convergence between in-cab and in-warehouse technology platforms for commercial trucking customers, for which we believe we are uniquely positioned in light of our existing in-cab, Comtech capability and Tolt's in-warehouse capabilities.

As you can see, Q3 was a busy and successful quarter and a Mobile Data Communications segment; as we exceeded revenue expectations, made significant progress on the next-generation product transition for the MTS program, and completed the acquisition of Tolt.

Before we move on to the next segment, I wanted to acknowledge the contributions made to our Company's success by Pres Windus who served as the President of Comtech Mobile Datacom for the past three years and who has been with Comtech for over 29 years. As you know, Pres announced he will be retiring this year. He has served in numerous capacities in his many years at Comtech and was instrumental in the success in this segment for-- in the recent years. Dan Wood has taken over the reins as President of Comtech Mobile Datacom. We hired Dan last October in anticipation of Pres' retirement. He has significant experience in the operational, marketing and financial aspects of many businesses and has already established himself as an effective and respected leader. The transition of leadership is going quite well and Pres will continue to work as a senior adviser to Dan for the balance of 2005.

And now, to our third segment, RF microwave amplifiers. To say that this segment is having an outstanding year would be an understatement. Sales more than doubled in the third quarter of fiscal 2005 compared to the third quarter of fiscal 2004. Demand has been particularly strong for our defense-related products, whether being used to jam improvised explosive devices, or IEDs, intercept unfriendly aircraft or a multitude of other uses, our high power broadband amplifiers are key components in many high-profile military programs. A significant growth driver in fiscal 2005 has been our participation in the very high-profile program to counteract IEDs using microwave jammers. Our customer, a prime contractor, and the end customer, the U.S. government are aggressively seeking to increase the rate at which these units are deployed. The acceleration of deliveries could have a significant impact on our quarterly revenues. The program also has substantial follow-on potential.

This segment, which had lagged behind our other two segments in its growth during the past few years, is contributing to our sales and profits in a big way in fiscal 2005. Fiscal 2005 is shaping up to be a truly breakthrough year for our RF microwave amplifier segment.

Before I discuss guidance, I wanted to mention that with more than 200 million in unrestricted cash, we continue to actively pursue acquisition opportunities. However, as we have shown in the past, we have not and will not change our criteria for evaluating potential acquisitions.

I also wanted to mention that during the third quarter we completed a 3-for-2 stock split, which we believe enhances the liquidity in the market for our shares and makes our shares more accessible to individual and institutional investors.

And now on to guidance. Obviously, as I've mentioned in previous conference calls, there continues to be many factors that make the projections of revenues and EPS very difficult, including the quarter-to-quarter fluctuations in bookings and revenues in certain of our product lines.

That being said, I will provide guidance for the fourth quarter of fiscal 2005 and then make a few general comments about fiscal 2006. Keep in mind that as Rob mentioned earlier, our diluted EPS guidance reflects the full dilution from the assumed conversion of our 105 million convertible senior notes and does not assume any benefit from an accretive acquisition which, if it happened, would further-- further our growth in this area.

With that in mind, our diluted EPS guidance for the fourth quarter of fiscal 2005 is $0.33 to $0.34. Fourth quarter revenues are expected to be between 82 and $84 million. This yields a full year's fiscal 2005 diluted EPS guidance of $1.33 to $1.34 on revenues of between 292 and 294 million. Our guidance takes into consideration, among other things, the slippage out of Q4 of previously assumed fiscal 2005 Mobile Data Communications segment revenues into fiscal 2006 as a result of the transition to our second-generation transceiver. On the other hand, Q4 revenues relating to the IED jammers in our RF microwave amplifier segment are likely to increase in light of the customer's accelerated delivery timetable.

As I have mentioned in past conference calls, our quarterly results can fluctuate significantly from quarter-to-quarter. At the risk of being repetitious, we strongly encourage investors to continue to view our performance on an annual basis. As far as fiscal 2006 is concerned, we see continued growth despite the extraordinary results posted in fiscal 2003, 2004 and the record guidance of fiscal 2005. We're optimistic that 2006 will be another record year, our fourth in a row.

In summary, all three of our business segments continue to outperform their peers. With strong leadership positions in important technology areas combined with participation in high-profile programs, we see ample opportunities for continued organic growth. And with the financial liquidity provided by our strong balance sheet, we can pursue selective acquisitions to complement our current product portfolio and technologies. We look forward to completing another record year in fiscal 2005 and we see clear signs that fiscal 2006 is shaping up to be another record-breaking year for sales or earnings. Thank you very much.

Also an updated investor presentation will be posted to our website at www.ComtechTel.com shortly after this call. And now it's your turn to ask questions. Operator?

[Operator Instructions]. Rich Valera, Needham & Company.

Fred, I think in your previous call with respect to fiscal 2006 guidance, I think you'd suggested that you expected year-over-year growth across each of your three segments. Would you still consider that an active assumption?

I think our visibility at this point I'd probably continue to see that, yes.

And the other thing you'd mentioned as far as '06 guidance was you expected 300, at least 300 million of revenue. Can-- we can assume that's still-- still an active assumption?

Well, I think the-- the 300 million that you referred to, I think we predicted that about three years ago, that we would end 2005 with about $300 million in revenue; but that was with organic and acquisition growth. I think we can safely say we're-- we're coming very close to that 300 million in '05 without, really, any major acquisitions; and, certainly, '06 will break that number.

Great. And so-- and there's-- at this point there's nothing baked into your forward outlook with respect to your two opportunities in the OTH area with the-- the U.S. government, is that fair?

Yes, that's fair. Our only-- our only problem with those opportunities is really visibility into the exact timing of the funding.

And-- and at this point though, in terms of backlog in that segment, the OTH, you feel like you have in excess of a year's of back-- of backlog, is that-- is that fair?

Yes, I think as I mentioned in the-- in my-- in my script here that we certainly have enough backlog for a couple of years.

At this point-- okay. And could you just give us that, Rob, you usually give us the backlog by segment. Could you give us those numbers?

The backlog as of April 30 in the Telecom Transmissions segment, which includes our over-the-horizon microwave product line, was 98.6 million; in the Mobile Datacom product segment it was 21.1 million; and in the RF microwave amplifier area it was 33.9 million. Keep in mind, as Fred said earlier, in the Mobile Datacom area, we are expecting a-- a very sizable order in the near future related to that new product transition that we're going through that we thought we would have had in-- in Q3. So from a backlog point of view, we expect that to increase very soon dramatically.

Great. And just one final question and I'll yield the floor here, but on the-- the RF amplifier side, it sounds like you are expecting quite significant sequential growth there. Could you put any sort of magnitude on that Rob? I mean you were at about 10 million this quarter, could we see like 15 million in revenue sequentially on the-- the RF amplifier side?

That number, Rich, is not out of the question. Again, there's two kind of variables in Q4 that we have related to programs in particular the first is the Mobile Datacom MTS program which we're assuming is going to kind of shift out to the right a little bit into '06. The amplifier opportunity, we're assuming is going to somewhat come into the quarter. So I don't really want to give a specific number, but that type of range is not completely unreasonable by any means.

Mark Jordan, A.G. Edwards.

I'd like to talk a little bit about the commercial initiatives that seem to be starting with regards to Mobile Data. Could you talk about where you are in terms of addressing-- or building a business with regards to Tolt? And do you expect that it would be '06 before that becomes a profitable business for you, or is this really something that you'll be still in a building mode to breakeven through '06 and with a goal of reaching a profitable stride as you move into fiscal '07?

Well, I think, as I mentioned, Mark, we're really one quarter into the acquisition or even a little bit less. We have moved all the commercial applications that we started and the efforts that we started in our Mobile Data Communications corporation into Tolt right now, and Tolt now has the responsibility for all commercial work in this area. I think we certainly had a number of programs, as I mentioned before, which were beta-- beta programs with a number of customers and those will obviously continue under Tolt's umbrella. We expect-- we expect, as I mentioned, the in-cab and the-- and the warehouse areas to kind of merge for us and give us some orders for our transceivers and basically some orders for the-- for the Tolt type of business. So I think we see the Tolt business being marginally profitable in '06.

Okay. Looking at the Savi Technology relationship that-- that you announced a few months ago. At one point in time I believe Savi was considering building up an RF network around the number-- a number of the major international container ports and with their historical strength in intelligent tags, yours with-- with satellite communications, again marrying those two together; if-- if they went forward with that buildout and the idea of moving forward with aggressive tagging of containers moving around the world that could develop into a significant market. What is your understanding as to Savi's game plan with regards to building out this wireless infrastructure in the major container ports?

Well, we-- we really have no-- no real knowledge of Savi's expectations in this area. We do have an agreement with Savi to provide RFID tags for our type of applications, for our transceivers; but we really have no-- no real information in terms of their expectations in this area.

Specifically on the-- the pick up in inventory, you went up about almost 7 million, sequentially, in your inventory number. Could you-- is that tied to a couple of specific product lines? Could you give us a little more detail on where that significant increase has occurred?

I'll let Rob answer that.

Mark, I think you might recall from our last call, we did predict that we would see that go up. We had just a tremendous revenue quarter in Q2 and had really-- the inventory had come down to a level, given the programs that we're on, where, I felt we were at a point where we just needed to be cautious about not being in a situation where delivery times were getting tight. And given the nature of the programs we're on, given the improvised explosive device jammers or the Mobile Datacom areas, those are critical programs, even from a troop safety point of view, so the level of inventory at about one times a quarterly cost of sales is about where I'd like it to be.

Jim McIlree, Unterberg, Towbin.

Can-- can you talk a little bit about the Mobile Data transition that you mentioned a couple of times? I'm-- I'm trying to understand the-- it's about a 10 million delta on the Mobile Data side that you had in terms of revenues versus your previous guidance and trying to understand what customer set might have accounted for that.

Well, this is strictly a -- the transition is in the MTS logistics' area, and-- and it's really very simple. The Army asked us to provide RFID and security module capability and wanted it now, and essentially stopped ordering the old transceiver version and waited for the new transceiver version. This has now been completed and, obviously, it took some time; not only to complete the requirements for that transceiver, but also for the contractual changes that had to occur before the Army could start ordering product from us. So that-- that's the kind of slippage that that transition caused, out of the Q3 quarter in terms of bookings and some revenue and we possibly see even shifting it further into '06.

And so who's buying the old-- the first-generation equipment?

The old equipment,or the transceiver which we call the 11 version is-- is still being bought by the war fighter community; like the Blue Force Tracking and others. So that-- that transceiver is-- is certainly not in mothballs. It's just that the-- the war fighter community, at the moment, is not interested in the RFID capability; which will probably change in the future. Now, we are changing, as I mentioned, into our so-called third generation capability because the war fighter community is looking at it differently and they want more data. So we're already in the process of demonstrating twice the rate of data to the war fighter community, or the BFT-- BFT guys, and we expect to even maybe go to four or eight times that data rate. Okay. So it-- it's just the logistics command that has been -- that's-- you're finding the pushouts on. The first- gen stuff for the war fighter is still going gangbusters? Right.

And this, Jim, just impacted the sale of transceivers there are other things that we sell through the MTS contract that weren't as impacted. So that additional revenue--

Like the air time.

Like the air time. Training, things like that, that aren't directly related to it. So, as Fred said, we kind of anticipated that would move from Q3 into Q4 and in our guidance we're assuming somewhat of a shifting into-- from Q4 into Q1 since we don't have the order in hand right now, we're expecting a large order very soon. So we've just assumed that that's going to move out a little bit.

Okay. And then the last on this issue is that the war fighter at times has used the MTS contract to fulfill its needs. Is that less likely to happen now that the second-gen transceiver isn't really what the war fighter wants?

No, because even what the war fighter wanted the first-- on the first few go arounds weren't exactly the same type of transceiver performance or-- or specs. So what we did is, with the MTS office, generated a new line item; and the war fighter community was able to buy that transceiver--

Oh, okay, so that they could still use the same contract but it would just be a different version--

Just another-- just another line item.

Right, right. Okay, that's great and just to circle back I think on Rich-- Rich Valera's question earlier. I think in the prior conference call you guys were talking about revenues in fiscal '06 greater than 300 million. And I just wanted to make sure you're still confident that that's a good number for fiscal '06.

Well, we're-- we're giving guidance for '05 of 292 to 294. I mean, it would be pretty sad if we didn't really beat that number-- substantially.

[Operator Instructions]. And I'm showing no further questions at this time.

No further questions, okay. Well, okay, thanks everybody for your interest in Comtech and we look forward to speaking with you again very soon. Thank you very much.

Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect at this time.