Harvard Bioscience Inc (HBIO) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Quarter One 2008 Harvard Bioscience Earnings Conference Call.

My name is Denise, and I will be your coordinator for today.

(OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr.

Bryce Chicoyne, Chief Financial Officer.

Please proceed, sir.

Mr.

Chicoyne, you may proceed.

Good afternoon.

This is Bryce Chicoyne, CFO of Harvard Bioscience.

Thank you for joining us today to discuss our results for the first quarter of 2008.

Chane Graziano, our CEO, and David Green, our President, are also on the call today.

After the Safe Harbor statement, I will turn the call over to Chane and David, who will present an overview of the quarter.

After their discussion, I will present some additional financial highlights related to our balance sheet, then I will open up the call for any questions.

In our discussion today, we may make statements that constitute forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Our actual results may differ materially from those projected due to risks and uncertainties, including those detailed in our annual report on Form 10-K/A for the fiscal year ended December 31, 2007, and other public filings.

Any forward-looking statements, including those related to our future results, represent our as of today and should not be relied upon as representing our estimates of any subsequent day.

Further information regarding forward-looking statements and risk factors is included in the press release issued earlier today reporting our first quarter results.

Please note that during this call, we may discuss non-GAAP financial measures.

For each non-GAAP financial measure discussed, we make available as part of our press release or on our website in the Investor Relations section a reconciliation to the most directly comparable GAAP financial measure.

Additionally, any material, financial, or other statistical information presented on the call which is not included in our press release will be archived and available in the Investor Relations section of our website.

Look on the Investor Relations section and then click on the Investor Presentations or website icon, as appropriate.

A replay of this call will also be archived at the same location on our website.

Our website is located at www.harvardbioscience.com.

Lastly, all financial information presented on this conference call relates to our continuing operation unless otherwise stated.

I would now like to turn the call over to Chane.

Thank you, Bryce, and good evening, everyone.

In the first quarter of 2008, Harvard Bioscience made significant progress on the five major initiatives we outlined as our 2008 operating plan.

We launched a new major catalog in February, entered a new distributor contract with GE Healthcare in April, generated healthy sales of our new microliter spectrophotometer, and made significant progress consolidating certain business functions.

Our revenues increased $2.9 million, or 15% to $22 million during the first quarter of 2008, compared to $19 million during the same period in 2007.

Non-GAAP adjusted earnings per share from continuing operations was $0.08 compared to $0.07 in the first quarter of 2007.

The increase in revenue is primarily due to revenues from our recently acquired Panlab subsidiary and an increase in sales at our Biochrom, UK subsidiary, primarily of our new microliter spectrophotometer.

We believe that as we progress with our 2008 initiatives during the second quarter, we will generate revenues between $23 million and $24 million, and report adjusted non-GAAP earnings per diluted share from continuing operations between $0.08 and $0.09.

We are reconfirming our full year 2008 guidance of revenues between $94 million and $96 million, and adjusted non-GAAP earnings per diluted share from continuing operations between $0.36 and $0.38 for 2008 without any further acquisitions.

Clearly our objective is to close other acquisitions in 2008.

The non-GAAP adjusted earnings per diluted share from continuing operations guidance excludes amortization of intangible assets, the impact of restructuring costs, the impact of future acquisitions in 2008, the impact of stock-based compensation expense, and the impact of tax benefits associated with filing consolidated tax returns for continuing and discontinued businesses.

Lastly, as you read in our recent press release, Bryce has recently resigned to pursue another opportunity.

I would like to publicly thank Bryce for all of his services during his tenure with the Company.

We believe he has created a strong finance team, reporting infrastructure, and we wish him well in his future endeavors.

We're also fortunate to be able to reach out to Sue Luscinski, who has previously served as our CFO, to assist us with this critical role while we actively search for a new CFO.

I will now turn the call over to David, who will go into the quarter and give you status updates on our 2008 initiatives.

David?

Thank you, Chane, and good evening, everyone.

Last quarter we announced our new EPS group plan of organic growth, tuckunder acquisitions and operational improvements.

Based on this new strategic plan, we increased our long run expectations for growth of our non-GAAP adjusted EPS from 15% to 20% annually, 20% to 25% annually.

The first quarter of 2008 shows the beginning of implementation of this plan.

Let me first talk about organic growth.

Excluding the impact of the large Anthos China order in Q1 2007, organic growth was 6%.

This growth was driven by the three major organic growth initiatives for 2008 that were identified in our strategic plan.

These are the launch of a new microliter spectrophotometer, the launch of a new Harvard Apparatus catalog, and the launch of two-dimensional electrophoresis product to Hoefer.

I'll address each one of these in turn.

First, the launch of our new microliter spectrophotometer.

By far the biggest driver of organic order growth in Q1 with the introduction of our new microliter spectrophotometer through our global partnership with General Electric Healthcare.

We're encouraged by the initial strong demand from GE.

We expect this new product will continue to drive organic growth in the long-term as it competes in one of the fastest growing markets in life science today.

We estimate that the market for the microliter spectrophotometer is approximately $50 million in revenue and growing 20% per year.

The second organic growth initiative we identified was the mailing of a new Harvard Apparatus catalog.

In Q1 we mailed the first wave of the new 900-page Harvard Apparatus catalog, and we've already received many orders from this catalog.

Because the mailing took place in the middle of the quarter, the overall impact on Q1 orders is still quite small.

We mailed the second wave of this catalog last week.

We expect that this will have a positive effect on Harvard Apparatus organic growth in 2008 and beyond.

It's important to note that all the Panlab products are included in this catalog.

The Panlab products will now be available through our own subsidiaries in the U.S., UK, France, Germany and Canada.

Previously, Panlab was not strong in these countries as we used third-party distributors rather than our own subsidiaries.

This strategy is working well.

So far in 2008, Panlab bookings in the U.S.

are up 14% organically, driven by the strength of the Harvard Apparatus U.S.

marketing.

The third major organic growth initiative we identified was the launch of two-dimensional electrophoresis product in our Hoefer subsidiary.

2D is a major segment in the electrophoresis market and the Hoefer brand name is well recognized there.

In Q1, we launched the 2D product through our international distributors with a major U.S.

launch through ThermoFisher Scientific in April.

We expect the 2D product to contribute to revenue in Q2, and expect it to build throughout 2008 and beyond.

The second overall driver of revenue growth is tuckunder acquisitions.

In October of last year we acquired Panlab.

Panlab manufacturers neuroscience research products in Spain, and is also a distributor for other life science products in the Spanish market.

The neuroscience products are very complementary to our existing Harvard Apparatus products.

We intend to continue to focus on the acquisition component of our growth strategy and expect to add approximately 10% to 15% revenue growth each year through these tuckunder acquisitions.

The third driver of EPS growth is operational improvements.

Our goal is to get our non-GAAP adjusted operating income to 20% of revenue.

We expect 2008 to be an improvement over 2007.

A good example of this focus on operational improvements is how we recently split our electrophoresis business with the spectrophotometer and plate reader business.

Previously these were both managed through our Biochrom subsidiary based in Cambridge UK.

From this one division we've created two new divisions.

We've hired a new general manager to run the electrophoresis business, and a new general manager to run the spectrophotometer and plate reader business.

This will provide a much sharper focus on profit improvement as well as organic growth.

As part of this plan, we've already completed the consolidation of the Hover electrophoresis administrative and marketing operations from San Francisco to the Harvard Apparatus HQ in Holliston, Massachusetts.

In addition, we recently announced the consolidation of our Asys Anthos manufacturing facility in Austria into our Biochrom facility in Cambridge U.K.

We expect this to be largely completed during the second quarter.

The annualized impact is likely to be a gain of approximately $0.02 to $0.03 per share.

This consolidation is not simply a cost reduction exercise.

Bringing hopeful marketing into the Harvard Apparatus headquarters allows the direct marketing expertise of the Harvard catalog and Web business to be utilized to grow the direct business of Hoefer.

Thus, we expect this consolidation will both increase operating margin and increase organic growth.

The launch of the microliter spectrophotometer at Biochrom and the launch of the 2D product at Hoefer are both good examples of how we drive organic growth with new product development.

The new Harvard catalog including the Panlab products is a good example of how we use direct marketing to drive organic growth.

We believe all three of these initiatives will impact our growth rate well beyond 2008.

We believe that with these organic growth drivers in place, the impact of continuing our successful tuckunder acquisition program and continued operational improvements, the outlook for the Company is very bright.

I'll now turn the call over to Bryce to give us some additional financial highlights on the quarter.

Thank you, David.

We held cash and cash equivalents of $13.1 million at March 31, 2008, compared to cash and cash equivalents of $18.2 million on December 31, 2007.

$12.5 million was held by our continuing operation, and $600,000 was held by our discontinued operations.

During the quarter we made repayments of $5.5 million on our credit facility, leaving us with no balance outstanding at the end of the quarter.

We did, however, still have approximately $2.3 million of notes payable we assumed in our acquisition of Panlab.

Our net cash position at the end of the first quarter was $10.4 million compared to $10.5 million at December 31, 2007.

Our trade receivable balance was $14.1 million, and inventories were $16.2 million at March 31, 2008.

DSOs were 59 days during the first quarter of 2008, and 57 days for the same period in 2007.

DSOs increased primarily due to our acquisition of Panlab, whose customers pay significantly slower than customers at our other subsidiaries.

Excluding Panlab, DSOs were 55 days during the three months ended March 31, an improvement of two days compared to the same period a year ago.

Inventory turns were 2.9 times for the quarter ended March 31, 2008, compared to 3.4 times for the same period in 2007.

Inventory turns are down primarily due to the reduction in sales at our Asys subsidiary and the building of inventories for certain new product launches.

Finally, the tax rate we expect to apply to our non-GAAP adjusted pre-tax income from continuing operations which excludes the tax benefits of filing consolidated tax returns for continuing and discontinued businesses is expected to be between 30% and 33%.

The comparative periods exclude the capital equipment business, which his classified as discontinued operations unless it was specifically mentioned.

We would now like to open the call for any questions.

(OPERATOR INSTRUCTIONS) Our first question comes from Matt Arens from Kopp Investment Advisors.

Please proceed.

Hi.

Can you hear me okay?

Sure, Matt.

Great.

Well, first of all, congratulations on the quarter, and I certainly share your optimism for the upcoming quarters here with the drivers that you have in place.

But I wonder if you could just maybe take a minute and speak to one of the items that you guys are proposing on the upcoming proxy, the requests for additional stock options.

The number looks awfully large, and as I look across your comparables here, it looks like that it would put you well ahead of the comparables in terms of possible dilution here.

And I wonder if maybe you might just take a minute, talk about the rationale for the request and for the size of the request to help us as we weigh our decisions for voting, please?

Hi, Matt, this is David.

If you look back at the history of the Company, we had a similar request about two years ago, where we asked for and got approval for an issuance of 2 million stock options.

So, I think this request is very much in line with the history of the Company.

Okay.

And how do you guys look at possible dilution, and do you look versus comparables?

And where do you show your ranking on those terms?

Well, the way we look at the overall compensation program, which includes all the normal elements you'd see in any comparable company's plan, you know, base salary, cash compensation, plus incentive bonuses, plus incentives tied to increase in stockholder value through the issue of stock options is benchmarked through a process run by the compensation committee.

We look at comparable companies, similar sizes, similar number of employees.

We look at the positions that people are in and the responsibilities versus similar positions of other companies.

And based off that, the compensation committee really sets the guidelines for the split of overall compensation.

And I think if you look at us compared to other companies, we have, relatively speaking, lower components of cash compensation and relatively higher proportion of stock-based compensation.

The other thing we also want to consider, we do an analysis with ISF.

We do the typical burn rate analysis and we go through the process with ISF.

In addition, it's also -- the philosophy is not to have to go back to the shareholders every year to request additional shares.

So, this isn't a one-year request.

We would expect that this would last two to three years for us.

Okay.

All right.

Well, thank you for that additional color and, again, we certainly look forward to the results over the next couple of quarters with all the things you guys have in place, which should keep the growth growing here.

So, again, congratulations on that.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of [Kwan Thom] from [Salumet].

Please proceed.

Hey, guys.

Can you guys hear me okay?

Sure.

So, I was just going through the press release there, and on the organic growth table that you guys have there, can you just remind me that 0.1% organic growth in this first quarter, was that including the one-time order that you had last year?

Yes, Kwan.

Shortly after we acquired the Anthos business, we received a relatively large order tender from China that covered several quarters.

If you take that out of the business and look at what the underlying growth rate of the business has been, it's been -- organic growth has been about 5%.

If you look at what's happened since we introduced the new microliter spectrophotometer to Biochrom through General Electric, the last couple of quarters, our organic growth, if you take that out is actually 6%.

And as we go forward in the second quarter, third quarter and fourth quarter, we see organic growth continue to accelerate from that product line as well as from the catalog that we launched in February, and we send out additional copies this month.

As a matter of fact, if you look at what's happened so far this quarter, you can see that the impact that catalog on U.S.

sales for the Harvard Apparatus business is 12%, 13%.

So, we're anticipating good, strong support from that catalog.

And the third part of our growth strategy is really the impact of 2D electrophoresis, and that's just getting off and running as we launched it really through Fisher, and we'll expect impact from that in the second half of the year.

So, we're very optimistic about organic growth going forward, extending from the 5% range that's been actually over the last couple of years, if you take away the large China tender.

We think we can approach the 10% organic growth rate.

This is David.

I can just comment on that, too.

We did 6% organic growth in the first quarter excluding the one off start that Chane has mentioned.

And although we laid out three things that are driving organic growth right now, in the Q1 results, there was really only one of those that had much effect, and that was the launch of the microliter spectrophotometer through GE.

That's something we expect to continue to grow.

As I mentioned, it's a $50 million market.

It's not like this is a tiny, tiny niche.

This is a substantial market with spectrophotometry.

Spectrophotometry is about $500 million market, but this piece of it is about $50 million, that's greater than 20%.

There are very few markets within (inaudible) today that are growing 20%.

So, we feel very optimistic about that as being a long-term growth driver, not just something for the first quarter.

But, as I said, that was really only one of those three things we identified that really had much of an impact in first quarter.

The Harvard Catalog was mailed halfway through the quarter.

We received lots of orders from it, but it was all toward the end of the quarter.

So, the actual impact is quite small.

It will have a full quarter impact in Q2, and for the 2D electrophoresis product, as I mentioned earlier, the launch of those products through the distributors happened with some of these national distributors in March, and Fisher U.S., who is probably going to be one of the biggest distributors of that product line, actually took place in April.

So, it had no impact on Q1 results, but obviously we expect that to have an impact on Q2 results.

Got it.

Got it.

That makes sense.

And a lot of companies have mentioned Easter, the timing of the Easter holiday sort of impacted their growth a little bit.

Can you just comment on that?

Was that an impact on your growth rate this quarter as well?

Yes, that's something, to be honest with you, we did not forecast in our guidance.

It was in first quarter this year instead of typical second quarter.

Our average orders per day because our business is lot like a consumable, has the characteristics of a consumable business, and therefore orders per day are important.

And our orders per day are like $175,000 or so from our catalog business alone.

And clearly the international business you lose three or four days during the Easter season.

So, I can't sit here and say specifically the impact, but I'm sure it had an impact on the quarter.

I mean, have you sort of looked at it and then if you sort of took out the timing of the Easter, your organic growth rate could actually have been a little bit better than the 5%, 6% range that you had given there?

Sure.

I mean, if you look at a half a million-dollar -- because it's probably of that size, because a significant portion of our business is international on both Biochrom as well as Harvard's business.

That's another 3% or so.

Got it.

Got it.

And so in Q2, we should get some benefit of that, right?

And add into that there's catalog, and you said that's been accelerating your sales growth.

We should be able to see organic growth rate of at least 6% or maybe even possibly better now that we don't have any more of the one-time order?

Yes.

I believe we're pretty comfortable with the 6%.

And, to be honest with you, our goal is much higher than that.

So, it seems like you guys are well on track to the full year here.

And so with one quarter in the bag, it probably gives you guys a little bit more visibility and more comfort with your full year guidance then?

Yes.

I mean, I believe we're very, very comfortable with our full-year guidance.

Okay, that makes sense.

And then, David, did I hear you say correctly that the impact of all the restructuring and some of the savings from that restructuring program were actually net you a $0.02, $0.03 benefit this year?

On a full year basis, Kwan, not -- we don't get the full year benefit in this year because -- for instance, take the Asys Anthos relocation.

That will be relocated from Austria to Cambridge in the UK.

Most of that will be done by the end of this quarter.

So, we'll start to see the benefit of that in the third and the fourth quarters in terms of our reported results.

So, we're not going to see a full year impact this year.

We'll see about a half a year impact probably.

The full year impact will be $0.02 to $0.03 positive.

Got it.

Got it.

So, it certainly gives you an easier way to get to your 15% to 20% long-term EPS growth rate, now that you have this program in place.

Yes, absolutely.

And then as far as acquisition, can you just remind us or just maybe the timing of that, and if you're expecting to do a couple of small deals or a large deal, and just how accretive these deals potentially could be?

This is David.

I think we're very much on track, but what we've given is our overall growth model, which is 10% to 15% annual revenue growth from tuckunder acquisitions.

I think the most likely outcome is we'll probably due one to two this year.

As you know, you can never really predict when an acquisition is going to take place, but we're working on a healthy pipeline of deals.

Many of these are companies that we've known for a long time.

So, I feel pretty confident in the overall guidance we've given.

Got it.

And then the free cash flow this quarter, if I did my math correctly, was sort of flattish, because you mentioned the receivables and whatnot.

Should we see the reversal of that in Q2 and in subsequent quarters as well, just free cash flow to be positive?

Yes, free cash flow should go back to a positive nature.

I think a lot of that was building of inventories.

I feel like the inventory balance went up we had some stuff due to some product introductions.

We also, if you look at it, the timing of some payments on AP and accrual as well, but you should see that come back.

Did you also build up inventory in preparation for the move of Asys?

We did.

It was also a portion of that as well, probably $300,000 to $500,000.

Okay.

So, it really is just a timing thing rather than something more drastic.

Yes.

We would expect those balances to come down.

Makes sense.

And can you guys just comment regarding GE and the [nanoview] product?

I mean, I hear that they're pretty excited about the product.

Can you just give any sort of anecdotal stories to share about that?

Yes, the launch of the product has been very well received.

We're hearing numbers like that they could meet their minimum commitments to us in the first six months of the year.

So, the initial acceptance in the market has been very positive.

And have you ever disclosed what that sort of minimum commitment was?

You can't do that.

By contract we're not able to do that.

I think the guidance I've said in the past is $3 million to $6 million we would anticipate this year, and I think that's right, and it could be on the high end of that range.

Okay.

And then you say that you have some sales of that in the quarter as well?

I just forgot.

Yes.

There were some sales in fourth quarter and there are also some sales in first quarter that helped drive the organic growth without the China tender to the 6% in each of those quarters.

Okay.

Perfect.

Well, thank you guys, and just keep up the good work.

Your next question comes from the line of Kerry Nelson of Skystone Capital Management.

Please proceed.

Hi.

Good evening.

Just a couple of follow-ups on Kwan's question about the spectrophotometer.

And so in your guidance for this year, can you just give us some color on how you thought about that range of $3 million to $6 million?

Is your guidance including the high end of that range, or how did you think about that?

No, it was not.

It did not include the high range.

It was in the middle.

Okay.

And the sell-through at GE, do you get color on that?

We do get color, but it's like a quarter late.

But, as I said, the initial indications, which are verbal -- we don't have the documented numbers today -- have indicated a very fast uptake of the product.

Okay, that's great.

Could you give some color also on what you expect for the 2D Hoefer product, how much might we expect that to contribute this year?

Sure.

This is David.

We haven't given guidance on that specifically.

I think it's better to talk about that qualitatively.

I think the impact of the microliter spectrophotometer, we think that's going to be a big impact and it's going to be around for a long time to come.

The impact -- and that's because it's really a very novel product in a fast-growing space.

The 2D electrophoresis products are a better product than the current products that are out there, and significant competitive advantages.

But it's not like it's a very novel product.

There are other people who already have 2D electrophoresis equipment.

So, it's really filling out our product line rather, a big expansion of our product line.

So, I think that's going to be a smaller impact, but nevertheless a positive impact compared to the microliter spectrophotometer.

And then the impact of the Harvard Apparatus catalog is probably somewhere between those two, actually.

It's probably more significant than the 2D electrophoresis product, probably not quite as significant as the launch of the microliter spectrophotometer.

Okay.

And then if we move over to the catalog, then.

The last time you shipped a catalog, should you -- I guess as we think about as you mentioned so far this quarter seeing low double digits, low teens type of organic growth already from the catalog.

Is there any experience that you've had in the past in shipping that catalog that you think this launch should emulate, or how are you looking for the definition of good on this catalog launch?

I think if it continues on the trajectory we've seen in April, and April is only one month, so I think we need to be a bit careful of straightlining April.

But, nevertheless, if it continues on that trajectory, I would say it is a very similar experience we've had with prior catalogs, which has been a very positive experience for the Company.

It's been in the 10% to 15% range, Kerry.

Great.

Okay, perfect.

Thanks very much.

And you have a follow-up question from the line of Matt Arens from Kopp Investment Advisors.

Please proceed.

I was wondering if you could give us any color on the difficulties that a lot of private companies are having doing additional rounds of financing.

Is that helping you guys in terms of valuation for some of your tuck-in acquisitions that you're looking at?

Matt, this is David.

We've typically paid four to six times operating margin for pretty much all of the businesses that we've acquired into the continuing operations of the Company.

And that spans a period of time from 1996 to 2007.

And despite the fact that the stock market went up astronomically in that time, and valuations went up and then they crashed after that, we really paid very consistently that sort of price.

And that's because the companies we acquire tend to be small, private companies that are typically not venture-backed.

I won't say none of them are venture-backed, but they're typically not venture-backed.

They're typically owned by the founder.

They're often family businesses.

And so the valuations of those businesses have really not moved very much over time compared to the stock market type valuations.

So, a short answer to your question is no, we've not seen any impact on valuation from the private equity markets over the last -- on the kinds of deals we're looking at doing.

And overall, I know from time to time you guys certainly have stayed disciplined in what you're willing to pay for these tuck-in properties.

But from time to time I know, as we've had discussions, you've commented that maybe at certain points there was a lot of unrealistic thoughts from these founder types about what the valuation should be.

Have we seen that come down, or maybe it expands the opportunity set for you, or has that not really been a factor?

I think what we've been looking at, Matt, in recent times, I don't think it's a major factor.

Probably the biggest factor we have is some of the deals that we're looking at are larger and it's getting public accounting auditing done because they are significant to us.

If you look at the pipeline that we have today, we probably have companies totaling revenues in the $70 million to $80 million that have the potential to close over the next couple of years.

But they're all in process.

Until they're done, they're not done.

And as we think about these possible tuck-in acquisitions, I'm assuming they're still along the lines of your strategy of staying with smaller pieces of capital equipment and things that are more in the sweetspot of your current business.

Is that the correct thinking?

Absolutely.

As a matter of fact, most of them today that we're looking at are very complementary to the Harvard business through the catalog.

Great.

Great.

I know that's been where you've had the most success historically, so I'm pleased to hear that.

Thank you.

Thanks.

You have another follow-up question from the line of Kwan Thom.

Please proceed.

Hi, guys.

Sorry to bug you guys again.

But if I look at the free cash flow for you guys in fiscal year 2007, it looks like it was around $10 million in free cash flow.

With the earnings a little bit higher this year, do you guys envision that free cash flow to grow roughly in line with net income as well?

We don't actually forecast that, Kwan, but the two do move pretty close to each other, particularly if you look at the non-GAAP adjusted numbers --

Yes.

-- it wouldn't be so well correlated, because of the noncash charges.

But if you look at the non-GAAP EPS, that's going to move pretty close to overall cash flow with a few ins and outs of timing of payments and things like that.

But other than that, I think they're going to move pretty close to each other.

So, as we look at the non-GAAP EPS, roughly moving about 20% thereabout, it wouldn't be out of question to think of the free cash flow to grow 20% as well.

So, maybe go from $10 million free cash flow in '07 to maybe $12 million in 2008 then?

Yes, I think excluding things like restructuring costs.

Yes, I think you're on the right track, there Kwan.

Okay.

And then with the free cash flow, obviously the acquisition is something that you guys take a look at, but is there a plan to sort of return some of that excess cash back to shareholder?

Maybe do a share buyback or a dividend of some sort?

Well, we have a share repurchase amortization in place, Kwan, so that is one element that we can use to deploy some of that cash.

But the way we've always looked at this is we look at investment in a new acquisition very much the same way we look at investment in our own stock.

We're going to put that cash to work where we think we can generate the highest returns for stockholders.

And that's the way we've always looked at it, and that's not changed.

Okay.

And were you guys active in Q1 at all as far as your share buyback is concerned?

We have not bought back any shares under the plan to date.

Okay.

Is there like a threshold where you guys feel more comfortable buying the share at?

I think what we can say is there are parameters, but it's not right for us to disclose those parameters, because they could be used to gain the system.

Okay, okay.

That makes sense.

But it is out there and you guys have intention of buying back shares when the conditions are right?

Right.

Okay.

Thanks, guys.

At this time we have no further questions in queue.

I'll now turn the call back over to Mr.

Chane Graziano.

Please proceed, sir.

We appreciate everyone joining our conference call today.

We are very energized by the prospects.

We look forward to another strong year of revenue and earnings growth.

Thank you and have a great evening.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Have a great day.