StableX Technologies Inc (SBLX) 2010 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the WPCS International fiscal year 2010 third quarter investor conference call. Your host for today's call is Andy Hidalgo, Chairman and Chief Executive Officer of WPCS International. Before I turn the call over to Mr. Hidalgo, please be advised that the participants on today's call will be in a listen-only mode until Mr. Hidalgo has concluded his opening remarks. Upon conclusion of the opening remarks, there will be a question-and-answer session.

In addition, we would like to note that statements about the Company's future expectations, including future revenue and earnings and all other statements made during this investor conference call, other than historical facts, are forward-looking statements and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time. The Company's actual results could differ materially from expected results. In reflecting subsequent events or circumstances, the Company undertakes no obligation to update forward-looking statements.

I will now turn the call over to Mr. Hidalgo.

Good afternoon, ladies and gentlemen, and welcome to our fiscal year 2010 third quarter investor conference call. The agenda for today's call will include a discussion of our third quarter financial results, and our fiscal year 2010 financial expectations. In addition, I'll discuss market conditions and conclude with a review of our strategic development.

During fiscal year 2010 third quarter ended January 31st, 2010, WPCS reported net income of $71,000 or earnings of $0.01 per diluted share compared to net income of $178,000 or earnings of $0.03 per diluted share during the same period last year. For the first nine months of fiscal year 2010 ended January 31, 2010, WPCS reported net income of $843,000 or earnings of $0.12 per diluted share compared to net income of $1.4 million or earnings of $0.19 per diluted share during the same period last year. Revenue for the third quarter was $27 million compared to $25.3 million during last year's third quarter. Revenue for the first nine months of fiscal year 2010 was $76.6 million compared to $82.4 million during the same period last year. The revenue segmentation during the first nine months of this fiscal year was 29% wireless communication, 12% specialty construction, and 59% electrical power.

Consolidated gross margin during the third quarter was 24% compared to 27% during the same period last year. The third quarter decrease in gross margin was due primarily to a cost overrun on a recently completed project, and also the blend of work performed during the quarter. Through the first nine months of fiscal year 2010, the consolidated gross margin has averaged 28% compared to 27% for the same period in the prior year. SG&A expense as a percent of revenue for the third quarter was approximately 21% compared to 23% for the same period last year. For the first nine months of fiscal year 2010, SG&A was 23% compared to 22% for the same period last year.

WPCS continues to maintain a healthy balance sheet with $4 million in cash, $20.9 million in working capital, and $5.6 million of credit line borrowings. Our credit line borrowing to working capital ratio remains favorably low at 27%. We continue to view this ratio as an important indicator of our financial strength and ability to finance our growth from operations.

The $2 million paid towards the acquisition of the Pride Group contributed to a lower cash position in the third quarter. Accounts receivable collections remain stable with DSOs averaging 72 days which is within our expectations. As of January 31 the, 2010, WPCS had a backlog of approximately $49 million and a bid list of $186 million. We are pleased to announce that Bank of America has approved the renewal of our $15 million credit facility for three more years.

The third quarter earnings results were below our expectations. In our guidance planning for fiscal year 2010 ending April 30, 2010, we were looking to achieve approximately $0.06 in earnings per diluted share for the third quarter and $0.14 in earnings per diluted share for the fourth quarter. The third quarter results did not materialize as planned. The primary reasons we did not achieve our earnings estimate in the quarter were due to a delay in bids to backlog conversion, And lower gross margins from a cost overrun on a recently completed project.

In regards to the bids to backlog conversion, this has been an obstacle all year for WPCS. However, there is positive news to report. WPCS was finally able to see a significant conversion in early January when we announced $30 million in new projects. We believe that these projects will help us produce healthier results in the quarters ahead. WPCS has continued to see further conversion of bids to backlog with our recent announcement of another $8 million of new projects.

So, in total the $38 million in new projects that we have announced in the first two months of calendar year 2010 is more than we've announced in the first seven months of calendar year 2009. The fact that we're seeing more bids awarded is a positive indication that business conditions are improving, which we believe will give us the momentum we need to begin to produce much better earnings in the future.

Due primarily to the delay this fiscal year in converting bids to backlog, WPCS is revising guidance for fiscal year 2010. From a revenue perspective our initial guidance was $112 million and we are revising this estimate to a range of $102 million to $106 million. From an earnings perspective, our initial guidance was net income range of $2.2 million to $2.4 million and $0.31 to $0.34 in earnings per diluted share. We're revising these estimates to net income of $1.2 million to $1.4 million in $0.17 to $0.20 in earnings per diluted share. This means that our fourth quarter's expectation is a range of $0.05 to $0.08 in earnings per diluted share. And of course the fourth quarter ends April 30th, 2010.

Certainly we're not pleased we had to revise estimates, but the delay in converting bids to backlog this fiscal year has had an unfavorable impact on earnings. However, I want to emphasize that the backlog has grown from approximately $28 million at the end of the second quarter to $49 million at the end of the third quarter, which represents a 75% increase. WPCS has a simple revenue-producing model. To recognize revenue, we need backlog, and to generate backlog we need bids. Therefore, our ability to deliver increased earnings depends on a solid backlog and bid list. At the end of the third quarter we had a healthy backlog and bid list. Specifically, we believe that the growth in backlog at the end of the third quarter will give us the opportunity for improved earnings in the quarters ahead.

Keep in mind that WPCS continues to generate profitability through these challenging economic times. Our strategy of focusing on the public services, health care, energy and international markets combined with cost efficiencies from our operations, continues to build a solid foundation for our business. We believe that there are many opportunities ahead for WPCS.

In public services, fiscal stimulus funding allocations are finally making their way to state and local government as evidenced by our recent announcements of new projects. The health care market is upgrading their communications infrastructure at a moderate pace, but it is anticipated that spending allocations will grow once we have legislative certainty on health care reform. The energy sector is also poised for growth as energy companies explore ways to deliver basic energy more efficiently and develop new renewable energy methods.

Lastly, our international business in Australia and China is showing growth potential as these two economies are doing well. As we have stated in the past, the market for communications infrastructure remains active. Communications technology remains a critical component of connecting the global economy and customers have come to depend on WPCS for complete design build capability.

In regards to our strategic development, WPCS is focused on organic growth opportunities but we continue to look for acquisitions that can strengthen our engineering capability, add to our customer base, and of course, expand our geographic skill. In conclusion, the management team believes that we are now in a stronger position to deliver better earnings in the quarters ahead. We are remain optimistic and excited about the future opportunities. But most importantly, we will continue diligently to focus on building share holder value. So, now I'd like to turn the call to the Operator to begin our question-and-answer session. Diane?

We will now begin the question-and-answer session. (Operator Instructions) We have a first question from Alex Kurtz.

Andy, it is Alex. Can you hear me?

Yes, Alex, I can. Thank you.

So I guess what gives you the confidence that the conversion rates are going to continue to be stable going into your Q4 here into next year?

Well, we feel right now we've been waiting. We've had this extended bid list that has taken a while to convert. And this is a timing issue in terms of converting bids to backlog. We believe with that $30 million of announcements, actually $38 million in the first two months. That has been an indicator for us that some of these bids that are still pending, the funding is starting to become available, so that these bids can be converted into backlog. It takes a few to make that conversion.

Understand that all the people in the bid list category felt that they were going to get funding a lot earlier, and that's why we felt we were going to be able to achieve some of the earnings estimates we had anticipated. But now with the bids being converted and now allocations and funding being made available, we feel we're going to see some consistency. Certainly at the end of the fourth quarter we have to see where the backlog stands, but we're seeing a much more rapid pace of bid to backlog conversion right now.

Okay. And cash balance was down sequentially, right?

Correct.

What do you guys thinking about right now as far as your ability to fund the business going forward? And do you think you may have to go back into the equity market to raise more money for the balance sheet?

We have $21 million in working capital, so we have sufficient receivables. And actually with the Bank of America line being approved, renewed, that short-term debt will move into long-term debt. So our working capital increases at the end of the fourth quarter. So, we have enough in working capital, and enough in business momentum now with the new backlog number, to be able to fund growth from internal operations including that $15 million credit facility from Bank of America. So, we haven't made any decisions that equity financing is required. We're still looking at acquisitions. And if there are acquisitions that are appealing, that can possibly be accretive for us, we will consider it.

Right.

But now the terms of growth, in terms of funding internal growth, the $15 million facility, the $21 million in working capital, is sufficient to be able to generate the kind of earnings that we're hoping for in fiscal year 2010.

One last question here. Have you guys thought about maybe expanding outside of your current, data networking focus maybe into core enterprise data networking, capabilities, to build out that expertise? Is that an area that you think about expanding into, networking and storage or are you guys more focused on the wireless base for the foreseeable future?

Well, I mean the market you mentioned Alex is a very lucrative market. I think it has a lot of potential, a lot of promise. The only thing we're concerned about is our skill set getting into that sector. We have looked at that. We would probably make an entree into that sector through acquisition, if the right acquisition presented itself. It is a market we're looking at.

So, I think it does have tremendous promise. I know you cover that market well. And it does have that potential promise. Right now, though, we are soliciting a lot of bids in the health care, energy and public services sector which hopefully will give us the opportunity to increase earnings.

Thanks, Andy.

Thank you, Alex.

Next question comes from Rick Grubbs.

Hi, this is Rick Grubbs from the Ukasha Group of RedChip. Good afternoon guys/ Just a couple of quick questions, I think. I was just curious, in looking at your bid list, from last quarter, it was around $245 million. It's down to $186 million now. I'm curious if you have any color into or insight into those opportunities and whether or not they were totally just dropped by the municipalities or other entities or were they granted away, or other competitor win them away? Do you have any sense of where that business went.

Yes, Rick, that is a very good question. When we were sitting with a $245 million bid list, it was extensive. It was well beyond the realm of what we're used to seeing. And what comprised that $245 million was a number of state and local municipalities that all thought they were going to get funding. So when the allocation started to reach the state and local level, we started to determine who the winners and losers were going to be.

So, you saw a sort of correction to a more manageable bid list activity. So basically in answer to your question, those were not awarded. Well, some were awarded to other s obviously, but for the most part, those were funding allocations that were not approved. But they did ask for bids because everyone wanted to submit for funding allocations primarily in state and local municipalities.

I think what is more manageable for us, and has been our average for the last several years, is $125 million to $150 million bid list activity. Having it at $186 million is high. But at least it generates a lot of bid activity which hopefully we can apply a certain percentage of to convert the backlog.

Right. I understand. And can you gives us, in that bid list what the break down is between public service, health care, energy and corporate enterprise sectors?

Yes, the breakdown in bids is 40% public services, 15% health care, 32% energy, which is a new increase.

Yes.

And it is being driven by solar arrays that we have been asked to bid. And 13% in corporate enterprise.

Okay. So, that is a pretty sizeable jump in the energy space.

It is a very sizeable jump. And it's one that we look at as a very positive step, because energy, especially renewables, has been slow to develop. But we're seeing again some of the fiscal stimulus funding reaching that sector. And we're seeing an increase in oil, and we're seeing more interest in producing wind and solar solutions. We've had a big increase in solar requests of late. And we think that's very promising. To get a healthy energy sector, along with a healthy public services sector, is going to give us more opportunities to increase that back log number in the future.

Great. Thank you. Just another question, or two . You mentioned in your prepared remarks and in the press release, that was a delay in the backlog conversion and project cost overrun. And just wondering if, kind of from a visibility point of view, are there other projects that are in the works that are experiencing cost overruns, or anything that we should, you know, be thinking about in terms of impact on margins?

Well, it's a good question, and it is an unfortunate circumstance, without a doubt. WPCS does thousands and thousands of project on an annual basis. And there is projects that we make more margin on, because we're all fixed bid. There is projects that we make less margin on. And then there is projects that you lose money on. Unfortunately in this particular instance we lost $400,000 on a particular project. That project came at the wrong time. Obviously losing money on a project is not a healthy thing. And it came in to a time where our earnings were thin.

But I want to say that WPCS has had a history of performing extensively on and proficiently on projects. And it's a rare instance when we lose money on a project, but it does happen to be in all fairness it does happen. It happens with every engineering company. But we have a history of consistent success in delivering on thousands of projects on an annual basis. There is no projects that we have right now that we look at as problem projects.

Okay.

That is not to say that it will never happen in the future, but considering what we do from a volume perspective and how we deliver on projects, losing money is something that's far and few between for WPCS.

Great. Thank you. And just a couple of housekeeping items and I want to ask about the kind of the overall picture, I guess. But, in the be they renewal of your credit facility, are there any major changes in the covenants and do they make any specific requests? Or any kind of asset coverage, or anything like that, or the same?

No, it was renewed under the same parameters and provisions of the previous credit facility. We're pretty happy to be able to continue our relationship with Bank of America. And certainly they've shown a lot of confidence in WPCS as well.

So, the only thing that's different is the interest rate, which varies of course. But that is the only change. And I believe our interest rate now, which will be published in the 10K when we finish it at year-end, is at hold on one second. Let me ask our CFO.

Hi, this is Joe Heater. Our current borrowing rate is prime minus one. So it is 2.25%. The new rate, it will be prime or LIBOR plus 2.75%. So that the new interest rate will fall somewhere between 3.15% and 3.25%. So still very competitive rates when you look at a tight credit market today, and an uncertain global economy. A lot of companies who are renewing their interest rates are renewing facilities are seeing interest rates at more than 5%. So I think we have a very competitive rate which is an indication of our strong overall financial performance.

Great. Got it. Thank you. And while we're on the balance sheet, have you completed your, will you be doing a goodwill test this quarter. Or will you do that in April? And do you anticipate any changes in the carrying value on the goodwill?

We do the goodwill impairment testing each year for the annual 10K, which will happen in the June-July time frame. And we don't anticipate any impairment issues at all going forward. And we haven't provided guidance, yet, for fiscal year 2011. We haven't provided any guidance yet. We'll collect the budgets. But, again, the guidance estimates in the RedChip research report, we feel are achievable. So, we look forward to a healthier fiscal year 2011, for sure.

Great. And one last question and then I want to ask about the overall market out there, again. But do you have the sector breakdown for the backlog for the $49 million backlog?

Yes, I do. It was very high on the public services side because of that final, finally seeing state and local municipalities get funded through this fiscal stimulus package. So the backlog was 75% public services, 15% health care, 4% energy, and 6% corporate enterprise.

Okay. Great. That is a large jump in the public services. But sort of fits with I think with what we would expect. Which kind of segues into I guess my last question, and in turning around these stimulus funds, and we all know that the public services sector is strapped for cash right now. And I am curious as to the amount of business that is either out for bid or under contract, that is being awarded just based on the financial ability of the (inaudible) government now versus the amount that kind of sitting back hoping to get a stimulus allocation which is coming out very, very slowly?

You mean in terms of the projects for state and local municipalities in terms of?

Right.

Well, every project that we see on our bid list, and that's been converted to backlog, is for state and local municipalities, is fiscal stimulus funded. Now, there are some state and local municipalities that did not get in on the allocation, initially. And they can get in on the allocation subsequently. And there are some that may not get allocated until their revenue, until they do it internal through revenue production which will probably take quite a while, because we're probably a couple years off from state and local municipalities obtaining or achieving that tax revenue base through this economy. So, we're just focussed on the $30 billion that was allocated for communications infrastructure for state and local municipalities through the ARRA.

Of the of the 30 -- there is 30,000 state and local municipalities. That's an average of $1 million per state and local municipalities of course. And we certainly feel we can get a good share of that activity. But beyond that funding, we don't see any funding available from internal resources at the state and local municipality level. Now, we think there is a few years that we have to be able to generate this project activity. A and maybe at that time after two, maybe three years, you can see a healthier economy. And maybe the state and local municipality will fund these infrastructure projects accordingly. The demand for communications infrastructure has not changed.

There is an incredible demand for conversion from analog to digital in state and local municipalities, for police cars to have video surveillance, to have data laptops for 911 dispatch centers, for water utilities, water treatment. There is a tremendous need for infrastructure there. That has not changed. But funding will be something that we have to navigate through. Does that answer your question, Rick?

Yes, it does, yes, absolutely. Basically what you're saying is that 100% of the work being done is being paid for by the stimulus money from the ARRA, which you and I agree will take several years, at least a couple of years for the municipality to stand on their own feet (inaudible) to move forward. I know part of the delay has been part of the fact that the state and local governments haven't really had the personnel or the ability to really kind of work through the paperwork, and get the applications in and it is going to take a long time to get this money in the system. So from what you're saying, though, it sounds like that's really starting to happen in a big way. So maybe that will kind of pick up some speed or something when we go through this year.

Yes, absolutely. There is phases, Rick, in this process, and the first phase being the application phase. The second being the administrative phase. And the third the allocation phase. And we're starting to see the administrative phase. I think we've gotten past Phase I.

We're getting through the administrative phase and we're start to go see the allocation phase. So that is an incredibly important milestone for WPCS. I can't emphasize enough the significance of announcing contracts in the first two months of this calendar year. It has a significant bearing, because as I said prior, we must have backlog to be able to generate the revenue to be able to generate the earnings.

So it's a promising trend. Of course, it's disappointing it's taken this long to make that conversion and certainly disappointing that we have to revise guidance for our shareholders. We wish it would have happened earlier, but it is a very difficult economy to navigate through and predict as to when these projects are going to actually translate into revenue-producing, revenue production for WPCS. But now we're seeing it change. And we hope that that will show some consistency through this change for the next several quarters.

That's great. And do you have sort of a sense of where your bid list is headed in the next quarter, and possibly your backlog concerning got some idea on fourth quarter, fiscal fourth quarter, EPS. But just kind of curious about where you think this bid list and the backlog may go.

I can just generally say, Rick, that it is a positive trend. I can't specifically say what number we're at today, because we report on a quarterly basis, obviously, within the parameters of public information. But we're seeing a positive trend. I can certainly say that.

And a diverse trend. As we said, we saw that the energy market has recently been active. So we really believe that with a healthier energy and healthier health care sector, it will be able to help us along with the public services sector. We see public services being very active, obviously, for the stimulus dollars that are available, but we're still waiting for healthcare and energy to really kick in. But hopefully, we'll be able to see that in the next few quarters ahead.

Fantastic. Thanks, guys. I appreciate the answers.

Thank you , Rick.

Next question comes from Max Thompson.

Good morning or afternoon. Indeed, how are you?

Good.

Hi, I have a general question with regards to where the Company is gone in the last three fiscal years. If you look at the top line, what you see is that it's been hovering in the $100 million to $105 million, $110 million range for the 2008, 2009 and this year. However, if you look at the earnings of the company, it's gone from sales $4 million to $1.7 million or $8 million, to $1.2 million to $3 million this year.

What WPCS has done is gone through a number of acquisitions over the last several years which based on the numbers hasn't really helped the top line because that's been a constant the last several years. Because of the earnings, obviously that has gone down, not up. And I'm wondering, and from your vantage point, this is a management issue. Is this something that is attributable to the economy or the product mix, or do you really feel like we're not getting the kind of margins that you should be getting in the jobs that we are bidding for? Because to do $110 million in top line, and generate $1 million in bottom line, I mean, that amounts to about 1%. I was wondering if you could give me your thoughts on that.

Well, Max, that's a very good question, and there is certainly a deficiency in earnings. And it's related to the economy. What happens in this economy when it contracts, is that there is fewer projects with the same number of engineering firms bidding these projects. So what happens is the margin goes down.

And we went down from a high, I think, in fiscal year 2007 where we produced $0.72 in earnings, with a higher margin. We went down to low 26% gross margin which impacts the business tremendously. And not only that, but we're bidding with more bidders, which is causing us to be more competitive from a gross margin perspective. So the economy has severely impacted the earnings potential of WPCS, without a question.

Right.

But also from a contracting environment, we tried to target certain markets that had a little bit more resiliency in these economic times, like public services, health care, energy. And then we found out that public services, state and local municipalities had a tremendous revenue-producing problem and budgetary constraints and then we were lucky that they passed the American Reinvestment and Recovery Act in February of 2009. And then we were disappointed that the ARRA was not implemented fast enough. So there are reasons why you see this dip in earnings, but keep in mind this is a company that did $0.72 in earnings per share a few fiscal years back. And we feel confident that we can get back to that level and exceed that level, but we're going to have to have some cooperation from the economy.

But we have cut cost efficiencies. Our employee counts are down. We try to operate this business as efficiently as possible. But it's difficult. It is not easy. And it's very unpredictable in this economy. But this management team is working diligently to try to make that happen.

Ever since in fact last quarter when we spoke, about the same subject of the economy, since we are on the subject, let me ask you this question. In this most recent fiscal quarter something in the neighborhood, I don't have the exact number, but I think it is somewhere in the neighborhood of 67%, 68%, of the companies have actually beat the numbers, which sort of speaks to an improving situation overall for the economy. Now, granted, most of the (inaudible) companies are global companies because they are much larger than the (inaudible) companies. However, even companies that are in the mid-cap area, of course, larger than WPCS, because WPCS is more of a macro type of company than it has currently. But even the mid-cap area what you're seeing is that the majority of companies are in fact seeing better numbers. And that's a recently as the quarter I was just reported. Now, if you are not seeing that with WPCS numbers, is that because we are just simply in a different place in time with regards to our business model? Or, we're really competing? Or is it that I guess is it specific to WPCS, or is it still something that you can attribute to the general climate?

Well, I mean, we have done, we have done an inaccurate job of guidance the last several years. There is no doubt about that. We try our best to figure out our budgets. We go through a very deliberate budget process and come up with a number. And we're basing it on our customers telling us that they're going to go ahead with these projects, they're going to go through, they're going to get them done in May, June, July and September. And we plan on it, and yet the funding doesn't come through. So we've done a terrible job in estimating our guidance, but -- and in hindsight we wish we said $0.20 as opposed to $0.31. And then we would look like a company hitting their estimates versus not hitting their estimates.

But it's a difficult scenario, as I mentioned before, it is very difficult to navigate. I think we can probably focus on being maybe more conservative. We thought we were conservative this fiscal year, but we see the opportunities to be able to generate earnings. And it's a matter for us of getting cooperation from the economy and trying to be even a little bit more effective in estimating what that guidance is going to be going forward.

We're one of the fewer companies that actually provide guidance at our, we have a very small market cap, but we do provide guidance. We feel that it is an obligation to our shareholders to let them know what we think we can do. And we do it in earnest. Obviously we did it in earnest. But, again, we can choose not to provide begins guidance. But then I don't think it is fair to shareholders not to have any idea of what they can do going forward. So we're going to try to be a lot more efficient. But again, this is a company that did $0.72 a few fiscal years ago and we feel we can get back to that range.

As a long-term shareholder, I'm obviously clearly to the point of probably as much as the management team is, maybe even more, because as you know it is quite disheartening to feel like we are turning the corner and realize that we haven't. So I finally wish you the best on the end. Hopefully better times are ahead. But I feel like on a personal level, I suppose, that, you know, the kind of expectations I've had as a long-term shareholder of the Company, is once again dashed, unfortunately. So we shall see, I suppose. Well, Max, that's a fair judgment and a fair assessment.

And we need to fix that. And we need to produce better results. No question.

And we hope we have that opportunity for you and for our other shareholders. Again, the positive news is that our backlog is increased. And that's going to be a basis for us to be able to generate better earnings going forward. But I thank you very much for obviously your questions, Max.

Thank you for your the time Andy. Good luck.

Thank you.

The next question is from Craig Rose.

My name is Craig Rose. I'm with Action Asset Management. Thanks for taking my calls. Andy, you kind of mentioned you're determined to give full-year guidance because investors demand it.

I'm not one of those investors. I take my risk, it's my decision based on the knowledge I have. And the knowledge you provide us with about your business. I can make judgments on how profitable you might be in the future on my own. So that would not stop me from investing in the Company. And I think the only way to rebuild confidence is to stop giving guidance. And that might, in this uptick in the economy, if we're having that, and you're seeing a pickup, it might give you an opportunity to attract some new shareholders with surprising numbers if you can provide them in the future. Just my opinion.

Well, Craig, I appreciate that opinion. We're going to take that under consideration. We certainly--

You are trying to rely on government financing. And government doesn't work right now. So just figure that your numbers are always going to be off, at least they have been for more than two years. They have been off for three years. So, look, the business, it is what it is. It is a tough economy.

Everyone agrees with you there, but it is going to be. I talked to you about this a year ago, it is virtually impossible. Everyone stopped giving guidance a year ago, but you were confident to do it. People shouldn't be confident because we don't know what kind of shadow economy is going on right now. But I don't think you need to do it. And I think the only way to build confidence is just perform. And any time you make a promise and you miss it by a penny, someone is just been defeated? So let everyone else make their models and predict numbers. You just manage the business. Try to get margins up, and win more orders. And the price of the stock will take care of itself and all of these people on these phone calls will be happy. But I don't think you need to give guidance.

Craig, you make a very valid point and I have to tell you honestly that the management team is considering your approach as we finish this fiscal year. Because of the things you mentioned. It is difficult to navigate. We thought we could. We thought we could effectively navigate. We thought we could effectively predict when these contracts were going to hit, but we were wrong. We were absolutely wrong. And maybe there is a time right now to say, look, let's just focus on delivering good strong double-digit EPS quarters going forward. And forget about trying to hit this target which has been very elusive for us for the past three years.

From this level it's a lay-up for you guys. Just manage the business, with the orders that you can get, if it picks up, without the guidance, you'll have those numbers. Okay?

My other thing s we have been talking about the business and fall-out because some municipalities are not going to get financing and what not. Internally you guys have to have a number on which you're winning on this stuff. Is it you're goal to win 30%, 40%, 50%. Is there some sort of number like that?

We've only focussed on 20% as a number, 20% of bids. That's been our number. But it went up dramatically for the last couple of months. We won quite a number of contracts. So it's been going back and forth. We haven't had, it's been volatile for the last few quarters. But we try to, going forward, we try to focus on 20% of bid activity.

Okay. One other thing. Regarding acquisitions, you've done it a lot in the past, it hasn't paid off as the prior questioner said. I would beg you, manage what you've got. And make it what you have work before you buy anything else.

You make--

My only suggestion.

You also make a very good point, Craig, because we do have enough organic growth potential with what we have, meaning the ten operation centers, that we have on three continents, that we can achieve numbers that will be satisfying for shareholders. So you make a very valid point, Craig.

Organic growth two years ago estimates were 10%. I don't know if we've gotten anywhere near that.

No, no, we're not. Year-over-year there is very little organic growth.

Right. So that's probably in the construction and engineering business overall. You're not going to find it anywhere. Australia, Japan, China, anywhere.

So I don't know. It's going to be tough year-over-year. So who knows? But thanks for taking my questions. You guys are. This is a tough environment. Every business is. They've got their work cut out for them. Keep doing what you're doing, get orders, but reevaluate whether or not you want to give full-year guidance. You won't prevent anyone from not owning your stock if they see it as a value.

I appreciate your comments, Craig. And we're going to take what you said under serious consideration. We have been thinking of it as well.

Because tough rebuild your credibility. It's majorly in question.

Agreed.

And thank you very much.

Thanks, Craig.

There are no further questions in queue.

Okay. Diane, you can go ahead and summarize then.

I would like to thank all the participants on the WPCS International fiscal year 2010 third quarter investor conference call. A replay of this investor conference call will be available for a period of five days by dialing 402-220-2946 . 402-220-2946. And entering 58841. 58841 as the program identification number. This will conclude the call.