Ultralife Corp (ULBI) 2015 Q4 法說會逐字稿

(audio in progress) fourth-quarter 2015 earnings release conference call. At this time for opening remarks and introductions I would like to turn the conference over to Jody Burfening. Please go ahead.

Thank you, Robert, and good morning, everyone, and thank you for joining us this morning for Ultralife Corporation's earnings conference call for the fourth quarter of fiscal 2015. With us on today's call are Mike Popielec, Ultralife President and CEO, and Phil Fain, Ultralife's Chief Financial Officer. The earnings press release was issued earlier this morning. If anyone has not yet received a copy I invite you to visit the Company's website, at www.UltralifeCorp.com where you will find the relief under investor news in the investor relations section.

Before turning the call over to management I would like to remind everyone that some statements made during this conference call will contain forward-looking statements, based on current expectations. Actual results may differ materially from those projected as a result of various risks and uncertainties. These include potential reductions in US military spending, uncertain economic, global economic conditions and acceptance of the Company's new product on a global basis.

The Company cautions investors not to place undue reliance on forward-looking statements, which reflect the Company's analysis only as of today's date. The Company undertakes no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances. Further information on these factors and other factors that could affect Ultralife's financial results is included in the Company's filings with the Securities and Exchange Commission, including the latest annual report on Form 10-K.

In addition, on today's call management will refer to certain non-GAAP financial measures that management considers to be useful metrics and differ from GAAP. These non-GAAP measures should be considered as supplemental to corresponding GAAP figures. With that I would now like to turn the call over to Mike. Good morning, Mike.

Good morning, Jody, and thank you everyone for joining the call this morning. Today I'll start by making some overall comments about our total year and Q4 2015 operating performance, then I'll turn the call over to Phil who will take you through the detailed financial results. After Phil has finished I'll provide an update on the progress against our 2015 revenue initiatives, talk about the focus areas for 2016, then open it up for questions.

For Q4 of 2015, we were very pleased to deliver our fifth consecutive quarter of total Company profitability and positive EPS, generating an operating profit of $0.5 million on revenues of $19.3 million for an operating margin of 2.7%. The Q4 revenue level was very consistent with the first three quarters of 2015 and help us deliver on our 2015 goal of achieving full-year revenue growth and profitability.

B&E revenues of $16.6 million were the highest level of any quarter this year and roughly flat year-over-year with G&D sales up a strong 29%, driven by several global OEM and TLA shipments versus the prior year's fourth quarter. This quarterly G&D increase was offset by lower commercial sales driven by a nonrecurring initial supply chain stocking order for OEM medical device battery packs, and the surgeon 9 volt orders in the fourth quarter 2014.

For our communication systems business, fourth-quarter revenues of $2.6 million were lower than the previous year fourth-quarter revenues of $3.1 million primarily driven by one ongoing project where a new product used in fixed wing aircraft, for which we shipped approximately $600,000 in product in the fourth quarter of 2014, none in the fourth quarter 2015, but are expecting more throughout 2016.

As we close out 2015 we were delighted that the financial performance delivered in the last quarter of 2015 kept a key milestone the Company hadn't seen in a number of years and that was achieving total year topline revenue growth and bottom-line profitability. Total year 2015 revenue was $76.4 million, up $9.9 million or 15% year-over-year. Gross margin was 30.5%, up 140 basis points. Operating profit was $3.3 million, up almost $5 million year-over-year. And EPS came in at $0.18, up $0.30 year-over-year.

We are encouraged to see that our commercial revenue diversification strategy, new product development focus, and operating business model is leading to leveraged earnings growth.

In a few minutes I'll talk about some of the other actions we took in the last half of 2015 that position us well for further top- and bottomline growth in 2016, but first I'd like to ask Ultralife CFO, Phil Fain, to take you through additional details of the fourth quarter and total year 2015 financial performance. Phil?

Thank you, Mike, and good morning, everyone. Earlier this morning we released our fourth quarter and total year results for the period ended December 31, 2015. For the fourth quarter, consolidated revenues totaled $19.3 million, compared to $19.9 million for the fourth quarter of 2014, a decline of $0.7 million or 3.5%. Revenues from our Battery & Energy Products segment -- were $16.6 million.

Sure, Phil.

Revenues from our Battery & Product segment were $16.6 million. $0.1 million lower or less than 1% from the prior year. Government and defense revenues increased by $2 million or 29% over 2014, due primarily to higher shipments to a large global defense prime -- and continued shipments of primary batteries to US government defense DLA. Commercial sales for the fourth quarter of 2015 were $2.1 million or 22% below last year when we had a large sell-in order from some customers. As a result of a higher growth of government defense sales, the split between the commercial and government defense shifted to 46 to 54 compared to 58 to 42 for the 2014 period.

Thank you. Feeling much better now.

Communication system sales of $2.6 million decreased by $0.6 million or 18% from the prior year, primarily reflecting the timing of a large order in the prior year period. On a consolidated basis, the commercial to government and defense split was 39/61 versus 48/52 for the year earlier period. Our consolidated gross profit was $5.6 million compared to $6.3 million for the 2014 period, a decrease of 12%.

As a percentage of total revenues, consolidated gross margin was 28.8% versus 31.7% for last year's fourth quarter, a 290 basis point decrease. The reduction in overall gross margin resulted from a greater weighting of product mix towards government and defense, costs in our Communication Systems segment associated with the ramp up of some new products to large-scale production, and incremental social pension costs related to increased employment in our China facility to meet nine volt battery demand.

Gross margin for our Battery & Energy Products segment was 27.6%, a 240 basis point decrease from the 30.0% reported last year. For our Communication Systems segment, gross margin was 36.4%, representing a 420 basis point reduction from the 40.6% for 2014. Operating expenses represented 26.1% of revenues versus 26.5% for the 2014 period, a reduction of 40 basis points. Operating expenses totaled $5.0 million, a reduction of $0.3 million or 5% from the $5.3 million reported for the 2014 fourth quarter. The 2015 operating expenses included higher R&D spending resulting from intensified new product development activities in response to a market increase in quoting requests, in cost to conduct due diligence in advance of our January 13 2016 acquisition of Accutronics.

Our Q4 expenses also included a $0.15 million non-cash impairment charge related to our McDowell Resort Corporation trademark in accordance with generally accepted accounting principles, to reflect government and defense industry timing delays and the awarding of large contracts experienced over the last few years. Offsetting those increases and similar to previous quarters in 2015, we continued our efforts to reduce discretionary spending as highlighted by the overall reduction in spending.

Operating profit was $0.5 million compared to $1.0 million for the 2014 fourth quarter. The year-over-year decrease primarily resulted from product mix, the non-cash impairment charge, start-up costs associated with the transition of new products to higher production levels, and higher levels of new product development spending. Operating margin was 2.7% for the fourth quarter compared to 5.2% for the 2014 period. Fourth-quarter non-cash operating expenses, including depreciation, intangible asset amortization, the trademark impairment charge and stock compensation expenses amounted to $1.0 million compared to $1.1 million for the year-earlier period. This brings us to adjusted EBITDA, defined as EBITDA including non-cash stock-based compensation expense, of $1.5 million or 8% of sales versus $2.1 million or 10% of sales for the fourth quarter of 2014.

Other expenses, primarily comprised of foreign currency translation and interest expense, netted to $24.000 versus $90,000 in 2014, primarily reflecting favorable foreign currency fluctuations. And our tax provision was $2,000 primarily reflecting the tax benefit associated with the impairment charge, offset by income taxes for our profitable China operation and book tax timing differences related to the amortization of intangible assets.

Our tax provision for the fourth quarter of 2014 was $91,000. Net income was $0.5 million or $0.03 per share compared to $0.9 million or $0.05 per share for the same period last year. The net impact of the non-cash trademark impairment charge on fourth-quarter EPS was $0.01. Our weighted average shares outstanding have decreased from 17.374 million shares for the fourth quarter of 2014, to 15.271 million shares, reflecting the repurchase of shares over the past year and weighting the timing of those repurchases. The reduction in average weighted shares outstanding accounted for 0.4% of EPS improvement in the fourth quarter.

For the 2015 year, consolidated revenues totaled $76.4 million, an increase of $9.9 million or 15% over the $66.5 million reported for 2014. During 2015, we continued our penetration into commercial markets which helped to smooth out the quarterly sales spikes we have reported in previous years. As a point of reference, sales for each quarter of 2015 ranged between $19.0 million and $19.3 million. Revenues from our Battery & Energy Products business were $65.3 million, an increase of $8.5 million or 15% over last year. And revenues from our Communication Systems business also grew 15% from $9.8 million in 2014 to $11.2 million in 2015. The operating leverage of our business model, combined with increased sales, resulted in an operating profit of $3.3 million for 2015. The year-over-year improvement in operating profit of $4.8 million consisted of a $2.9 million contribution from the 15% increase in sales, a $1.0 million contribution from the 140 basis point improvement in gross margin to 30.5%, and $0.9 million contribution from the reduction in operating expenses from 2014.

Driven by the solid operating performance, net income was $2.8 million or $0.18 per share compared to a net loss of $2.1 million or $0.12 per share in 2014. The Company's liquidity remains solid with year-end cash on hand of $14.5 million, no debt, working capital of $41 million and a current ratio of 4.8.

By comparison, the cash on hand at the end of 2014 was $17.9 million. The use of cash during 2015 primarily reflects the $9.2 million cost of our share repurchases, partially offset by our strong operating performance. Our accounts receivable days sales outstanding metrics continue at very favorable levels. And inventory decreased by over $2 million, or 8% from last year. Our strong balance sheet continues to provide us with flexibility in evaluating and executing our strategic capital allocation plans.

As an example, the cash on hand at the end of 2015 provided the funding for our acquisition of Accutronics in January 2016. In summary, the actions we have taken to strengthen our business model while preserving our strategic investments and building a strong balance sheet are demonstrated in our 2015 results. While we are pleased with the leverage clearly demonstrated in our business model in 2015, along with the continued growth in commercial sales for our Battery & Energy Products business, the [Viper] Award for our communication systems business and our recent acquisition of Accutronics, we remain intent on driving sales to unleash the full leverage of our business model.

I will now turn it back to Mike.

Thanks, Phil. Over the last several years our focus on revenue growth has consisted of three core element. Expanding our market and sales reach, new product development and pursuing acquisitions.

As we entered 2015, the Battery & Energy Products business was starting to capitalize on commercial market diversification, with several newly developed revenue streams to offset what had been at that point a noticeable government and defense decline. Our new Medical Device Products ware gaining traction and we were seeing a surge for nine volt batteries driven by some legislative changes for smoke detectors, particularly overseas. For the Communication Systems business, after several years of new product development in pursuit of larger program projects, our focus in 2015 was to actually contract a deal and start realizing revenue.

Looking back at 2015, we hit on each of our revenue initiatives. Driven by market and sales reach expansion and new product development, each segment of our Battery & Energy Products business, commercial and government defense, as well as total Communication Systems business, all grew by double-digit rates.

In addition, at Comm Systems we also did indeed receive a major contract award of $8.2 million. And finally at Battery & Energy Products, with most of the due diligence performed in 2015 we recently completed the strategic bolt-on acquisition.

For 2016, our strategy is unchanged. We will continue to build on our progress towards more sustainable revenue growth by remaining focused on expanding our market in sales reach, new product development and pursuing acquisitions. For marketing and sales reach expansion in our Battery & Energy Products business we will continue to work on diversifying our customer base outside of our core US government defense market by growing our commercial and international revenue. To that end, we are very excited to have completed the acquisition of Accutronics Limited based in Newcastle-under-Lyme in UK, for approximately $11 million on January 13.

For their fiscal year ended August 31st 2015, Accutronics generated revenue of approximately $12.5 million. This acquisition supports our diversification into commercial markets by expanding our participation in medical devices, while providing broader global market reach with the European OEMs. Accutronics Limited is a well-run profitable company with a compatible business model and is a leading designer and manufacturer of smart batteries and charger systems for high-performance portable and handheld electronic devices, primarily serving the medical device market throughout Europe. The top areas presently served include ventilators and anesthesia devices in the Cardiology segment, and portable x-ray devices in the Diagnostic Imaging segment as well as medical monitors and endoscopic devices.

Driven by aging populations, the demand for cardiology and respiratory devices is anticipated to grow over the next several years at mid- to high single-digit growth rates. As such, the complement refit of Accutronics positions Ultralife well for further penetration of, and growing revenue streams from, this attractive commercial market. Other benefits of this strategic investment include but are not limited to establishing a platform in Europe not only for medical but other commercial products, becoming more local in serving our European government defense customers [in] OEMs, and providing logistical support for selling our other global products into Europe. As an ongoing established business we will see the increased acquisition revenue immediately, and expect their contribution to be EPS accretive within 12 months.

In our core Battery & Energy Products government defense business, a broadening group of international and domestic OEM business partners remains active as we ended 2015 and head into 2016. In the fourth quarter we shipped custom solar charger solutions to a Middle East country, land warrior batteries to Australia and New Zealand customers, vehicular chargers to an international prime contractor, and significant quantities of our MKM large-format battery product through a strategic partner in support of mobile electric hybrid power systems. We also received a three-year DLA IDIQ contract with two one-year options for batteries [vetted] at a maximum of $3.1 million and used in specialized communications networks. So while continuing to diversify our overall revenue, be it more commercial market penetrations, we are in fact also diversifying our US government defense base by pursuing opportunities in international markets and from a broader range of US government defense contractors.

Regarding new product development for B&E, as a core revenue growth initiative and a commitment to our customers to help them achieve their mission and competitive advantage, progress in this area remains a key indicator for us of future revenue opportunities. At B&E in Q4, revenues derived from products introduced less than or equal to three years ago was 25% of our sales, more than double the percentage from the first half of the year, demonstrating the vitality of new products on an ongoing revenue streams.

In 2016, we will continue to develop new products and evolve existing products through multi-generational product planning for communications, [space] and security, medical, energy storage, asset tracking vehicle and other applications. Our approach is to leverage our expertise in applying and building military grade batteries for performance and reliability and targeting industrial and commercial opportunities where the operating characteristic in economics of our lithium battery and charger solutions can be fully realized. We have recently brought on board additional sales business development as well as new product development resources to grow our capability to serve increasing opportunities.

For market and sales reach expansion at Communications Systems, the 2015 calendar year finished with the initial shipments to an OEM for the Army, of the vehicle installed power enhanced Rifleman [APA-K] or VIPER product as we call it, following the September capture of the $8.2 million contract award. These shipments will continue through Q3 of 2016. We also remain focused on efforts with our Special Forces customers globally and have continued to ship recently developed new products to USSOCOM and their affiliates to support the family of special operation vehicles where quoting activity has increased for the next run of vehicles to be fielded in 2016. The Communication Systems team is also working with international business partners and will be participating in two separate upcoming tests and evaluation events in support of the US special forces customers.

These events allow us to further understand capability gaps, emerging requirements and voice of the customer inputs to further assist our team in the development of new products to support ongoing global operations. Both our domestic and international business activity levels increasing, whether it be through OEM distribution or other end-user channels, and as our efforts to support product integration evaluation testing mature, we are focused on securing the next large program win for 2016. Our Communications Systems new product development activities in Q4 2015, new products represent over 32% of total Communications Systems revenue, driven largely by the MRC VIPER and the MRC Universal radio vehicle adapter.

We continue to see consistent new product development sales of our MRC Universal radio vehicle adapter, and our legacy power supplies and 20 watt amplifier products. For 2016 new product development activity will again be associated with integrated tasks of Communications Systems included but not limited to next-generation amplifier and vehicle adapter products.

In closing, we were delighted to achieve our interim goal of total year revenue growth and profitability in 2015. In addition, during the fourth quarter, while posting profitable results consistent with earlier quarters in the year, we were able to complete the heavy lifting for our strategic European acquisition for Battery & Energy Products and prepare VIPER for full production and Communications Systems, both activities that will favorably impact our revenue stream starting in Q1.

We are optimistic about our revenue growth prospects in 2016 for several reasons. Whereas there continues to be uncertainty and a lack of visibility for predicting major expenditures and contract timing in our US government defense business, our overall starting position for revenue growth in 2016 is better than in recent years. This is due primarily to a stronger beginning of the year B&E backlog, particularly in the commercial market, the layering on effect of the new VIPER contract on our base level Comm Systems quarterly run rate revenue, and a better coordinated global sales effort, including recently added sales and engineering resources to drive new customer relationships and develop new products.

In addition to these organic growth drivers, we will also have the revenue contribution from the new B&E acquisition, Accutronics. Our strategy, business model and operational execution, our resulting in more consistent profitability and now positioning us for more sustainable total year topline revenue growth. The Company's solid balance sheet, liquidity and improved earnings give it that the flexibility to fund organic revenue growth opportunities through new product development end market reach expansion and to seek out and integrate bolt on acquisitions.

In terms of acquisitions, we will continue to pursue accretive opportunities to more quickly gain scale, particular market access or technology, new products and/or skilled resources as the case may be.

Operator, this concludes my prepared remarks and we would be happy to open the call for questions.

(Operator Instructions). Gary Siperstein, Elliott Rose Asset Management.

Good morning, Mike and Phil, congratulations on an excellent year.

Mike, just to start off, I was looking for $0.05 in the fourth quarter so the headline number caused me concern, and I guess I didn't see the full news release yet. So if we take out the one-time charges, I guess you are probably there. In terms of the $150,000 on intangibles, it looks like you had an extra $100,000 plus in expenses on foreign currency translations. And then you mentioned some startup expenses for the VIPER contract, and some expenses for Accutronics.

Can you break out how much the expense was to ramp up for VIPER and can you break out the Accutronics expense in the quarter?

On a qualitative basis, I think your logic is exactly correct. That's how we are seeing the result on EPS from some of those events we mentioned in our prepared remarks. I mean, Phil had kind of (multiple speakers) details on (multiple speakers).

When you look at the truly one-time items, there's really a handful of those. We mentioned in the release the $0.15 million, $150,000 MRC trademark impairment charge that's clearly we believe a one-time item. The other is an increase in our social pension liability related to China. And that is a result of increasing our headcount by over 200 individuals to meet a 9 volt demand, which has been met. And in accordance with generally accepted accounting principles it's not just matching the social pension contributions that they make, it's simply putting a liability on your books based on the total payroll.

So when I take those two items, it's almost $300,000 and it equates to $0.02 a share. And that's the reconciliation back to your $0.05.

The other items that you mentioned, I would not characterize as one-time events because our strategy is clearly to get additional major project wins, and we are going to be going through these ramp-ups to larger scale production. So my hope is that in certain periods we will -- certainly continue to see those.

That's a high-level problem, just spend a little more in the quarter to ramp up for a big order. That's great. Sort of apples and apples, it would've come in a nickel versus a nickel, and as he said Mike in your prepared remarks, it was the highest quarter in the year for B&E. So starting out with government, can you sort of give me a little more color on the cadence, so you sort of averaged between $19 million in $19.2 million both quarters for the year, and government B&E trended up, so that the fourth-quarter number in that area was the highest. Do you see that strength continuing? You just talked about going into the year with the backlog there. Higher than previously.

Is it a combination of all the new products which is doing it, is the government a little looser? Just a little more color on the B&E side.

Sure. When you look at the breakout, it's -- clearly I think you have to look back and then you have to look forward. Because one of the things that we experienced this year, Gary, and you asked this I think a couple times on earlier calls, you asked about seasonality. You asked about spikes. And our response has been that we haven't seen a lot of that. By going into more commercial opportunities and building our business on long-standing commercial relationships, especially within medical, we have truly smoothed out the seasonality that we used to see in our business. Or the spikes.

Not to say it won't happen in the future. But when we do look ahead, we look at the backlog, and as Mike mentioned, we do see a rather dramatic increase in both G&D, in both Commercial, which is very encouraging to us, and normally this information is buried in the 10-K. But it's clearly an important measure to us of what to expect from both sides of our business, as we go forward.

That's super, Phil. That's very good. So my initial concern, then, was misplaced, because it would've been a $0.05 versus $0.05 and the revenue continued sequentially what you accomplish each quarter of the year, and it was a tougher comparisons versus last year because I think I had forgotten the stocking order and that one-time Communications order that you had in the quarter that didn't repeat this year. So all in all it looked like a very strong finish to the year in line with what we thought.

And just moving on to the medical portion, your overall corporate margins I guess have been blended at around 30%. What are actually the medical -- exclusively the medical margins?

We don't provide those individually by market segments. But I think qualitatively they are pretty consistent with the overall corporate margin. We look at the two business units, the Communication Systems margins are higher, that's indicated in a number of the public reports that we put out, but associated with that is a much higher new product development expense for some of these projects. One of the reasons why we like this acquisition we recently did is when we looked at the underpinnings of their business model, their margin rates, their growth rates, their operating expenses as their whole philosophy, it just was such a good fit with our core Battery & Energy Products business.

So we like the margins in the medical business, they are not higher necessarily then say the Communication Systems business, they are more consistent with the B&E business. But within that framework of those types of margins, it gives us the headroom to continue to develop new products required (technical difficulty) of the space (technical difficulty), not only to meet individual transactions, but to have an ongoing sticky relationship with those customers.

And moving onto com systems, Mike, you mentioned you had some initial shipments against the startup costs in the fourth quarter on the $8.2 million contract. Can you tell us how much ship -- of that contract shipped in the fourth quarter?

It was in the low 100s of thousands of dollars.

Okay. So you have roughly $8 million going forward, and you mentioned that it should be fully shipped by Q3. Would that be equal dollars in each quarter or is it going to be a ramp?

Fairly equal. Sometimes it take so long to get these contracted, and then as soon as they are contracted everybody wants it right away. So we are trying to do it in a balanced fashion to make sure that we can produce the highest quality, and then it serves the needs of our end-user. Right now, as we see it we think of it as being reasonably equal throughout the first three quarters of next year.

Okay. So $8 million divided by three, whatever that is. $2.6 million, $2.7 million per quarter, roughly?

More or less, yes.

Moving to Accutronics, so you mentioned their margins were consistent with our own medical margins. It sounds like a one and one equals three, that it's wonderfully complementary and additive. Can you give me some more color on the cross-selling opportunities with our own medical products to sell to their customers in Europe and their products possibly to sell to our medical customers here domestically?

There's very limited, if any, overlap. And so some of the resources we talked about bringing on board in addition to some of the other channel partners and marquee type customers are trying to develop, we are really looking at taking immediately the opportunities that this new acquisition brings us in terms of additional products to sell into the United States. And then we are equally looking for having a real genuine platform to drive not only the existing Accutronics products into Europe, but some of our other products that we have in the United States in the medical space.

Interestingly, when we talk to the customers in our due diligence phase, and something that we are very careful about and do it very late stages, we wanted to ensure that there was no hidden things that we weren't seeing relative to ongoing revenue streams. And so we go and talk to the major customers. And what we were delighted to find out was that not only did they have any real issue and we didn't see any immediate issues in terms of the revenue stream, but comment that we heard back from a couple of those customers where they were delighted to see that Accutronics now would have a broader global presence.

So I think it was good from our standpoint in achieving our objectives, I think it was a good soft landing for them with their customers and their longevity as well.

How many customers do they have during the $12.5 million business? Roughly. Is it 10, 50, 100, 200?

It's in the 100s, but it seems like there's top four or five customers that do a lot of the business. And that's no different than our business.

Right, okay. Super. And in the financing for the deal, were there any contingent payments based on achieving certain milestones?

No, no, Gary. The only adjustment -- it was the traditional adjustment for working capital net cash net debt. (multiple speakers)

Okay. So how do you expect to finance it? How much cash are going to use, how much debt?

It's already been taken care of. It's already been paid entirely 100% out of cash on hand.

Okay. And then can you tell me what their growth profile has been for the last three years? Have they gone from $10 million to $12 million or $8 million to $12 million?

Over the last four or five years, it's been similar in high single digits, low double digits, depending on particular projects.

Okay. And has profitability been steady or has that been increasing as well?

Best that we can see of it, it's been pretty steady.

Super. And can you just refresh me on where we stand now with the NOL carry forward, what the value of that is? How much is left?

The value of that is still around $80 million, the US portion of it is $73 million, $74 million. So not too much changed since we talked about it during the Q3 investor call.

Okay. And what's again just to refresh me, what's the auditor's rule on when we can recognize that and put it in the balance sheet? Is it two years of profitability?

The general way of looking at this is demonstrated in sustained profitability, which certainly is open for interpretation. However, five quarters of profitability certainly works in our favor as we move towards hopefully a very successful 2016.

So let's say if we remain profitable through 2016, whether it's the second, third or fourth quarter when the auditors allow you to recognize that, is it 30% times the $80 million, Phil, that would be put on the balance sheet, or is it Wi-Fi%?

You are a bit low. It's approximately 35%.

So it could be in excess of $25 million?

Give or take. And my other comment, my only comment on that is these are the types of conversations that we look forward to discussing with our auditors.

Okay. When I look at the company currently is a $4.20 roughly book value, if they allow you at some point during calendar 2016 to put that asset on the balance sheet, $25 million on 15 million shares. So that's at least $1.50, so that would get book up to $5.80 and then if you are profitable for the four quarters for calendar 2016, that will obviously add to book as well. So, we could be standing by year-end 2016 with close to a $6.00 value. Are my numbers kosher?

Your numbers are kosher, and as usual they're very well thought out, very logical.

Okay. And then we had spoken on the last couple of conference calls about the due diligence on M&A is sometimes equal, whether the Company that you are looking to buy does $12.5 million in revenue or $35 million in revenue. And I guess this was such a spectacular deal that it made sense to do. But I think some of us are looking also for more of a transformative acquisition, that is accretive on day one to really utilize that NOL, and that really moves the needle. I know you can't make them happen by magic, it's when they show up and this one, as wonderful as it was, showed up first. But is that sort of as well the opportunity you're looking at if something larger comes up down the pipe this year or next year? That could almost add $0.10 or $0.20 in earnings, that would be covered by the NOL and really move the needle? Is stuff like that in the pipeline that you're looking at, or that could happen in the future and you would be willing to do it?

I think we are looking at it the same exact way. And you are correct. This acquisition opportunity came up and it was way too good to pass up. If we look at trying to do the same thing organically and get a business of the size and try to do it ourselves as a greenfield startup, you would fool around for two or three years on operating losses before you start to make money. To be able to go and get into the game immediately at this rate and pay from our own cash flow, just a really sweet opportunity for us.

The other thing that it does for us is it creates muscle memory, it gives us experience in integrating smaller acquisition so as we become a more attractive buyer, and I think our results are making us a more attractive buyer, then when we undertake a large acquisition than we do it successfully as well. So we are really excited about this. I would continue to be looking for acquisitions, tried to refer to that in my prepared remarks, and certainly the same amount of work for a $10 million acquisition as a $70 million acquisition. So if we could achieve a larger acquisition in the future that would fit really well with our thinking.

Super. Just a couple more and I'll give someone else a chance. Mike, in your prepared remarks, you mentioned three-year with two one-year option IDIQ award a company got. What was the value on that?

Maximum value was $3.1 million.

Now you mentioned it in your remarks, but it wasn't a separate news release. Is it because it was an IDIQ or it didn't meet materiality?

It was really because it's sort of an ongoing product line that we've continue to sold. It wasn't particularly new or material and you sort of made that judgment that it was the sort of business as usual. But we also want to try to show and to be very transparent about the fact that we are continuing to get core government defense business and that's what's going into our backlog and our conference moving into next year.

Okay. Lastly, in terms of -- I know you don't give guidance, but when I look at the base business at $76 million, if I layer on $12.5 million for Accutronics, and I assume no organic growth even though you grew the base business by 15% last year, and I keep that at $76 million and I add $12.5 million for Accutronics, and I conservatively say no growth there, just $12.5 million, and then you add on $8 million from the Comm Systems contract which will be delivered, I get $95 million and then, obviously, if there is any organic growth for the base business in Accutronics, that could push towards $100 million. And obviously during the calendar year we have 10.5 months left, you could secure another Comm Systems order or you could make another accretive acquisition.

So -- and then I go to the base business doing $0.18 for the year, and again if I have conservative and assume no growth from now EPS growth on the flat revenue, and I assume $0.01 or $0.02 for Accutronics later in the year, and then if the Comm Systems business has roughly the same general margins as normal Company revenue, $8 million time 30%, $2.4 million, so there's $0.15, $0.16. So when I slice and dice it, and I'm not asking you to comment because I know you don't give guidance, but when I look at the situation, we could have a company that goes from $76 million to $95 million to $100 million, and from $0.18 to $0.35 or $0.40, very conservatively.

So I'm laying that out because you always talked about say-do, doing what you say, and about getting some sponsorships to the stock, some analyst reports, some coverage so we can get a better valuation. And then you layer on top of the $95 million to $100 million in revenues and the $0.35 to $0.40 you layer on top that the NOL could get on the books, so book value could be about $6.00. So, when I look at all that, it seems like fair value right now is at least $7.00 or $8.00.

And you know, you're still capitalized under one-time sales.

So I guess my question then is twofold. Should we hire another IR firm who can do a better job getting us visibility, getting guys into conferences, getting analysts to follow us and write us up, get some sell side coverage because they haven't obviously accomplished that over the last five quarters of profitability. And are you guys now that you've done what you said, the say-do, are you willing now to go out and tell the story, because I think there's very -- in a bad stock market, a very uncertain future at least at the minute, there are probably very few companies, maybe it's not apples and apples but maybe just Google and Facebook that are going to be able to show 30% revenue growth and possibly 100% EPS growth.

So, my question is are you guys ready now that you've shown and done the say-do to tell our story?

I know that's a very thoughtful and appropriate input to make. We may not have done a lot of conferences over the last year, but we have talked to between 25 and 30 new investors. We've also spent a lot of time going out and seeing customers.

I have personally engaged on a one-on-one over 45 key customers in the last year. I think the story continues to get out why we continue to build the story. We will continue to work on trying to talk to as many potential investors as possible, but we are just trying to allocate our time as best as we possibly can between shareholders and investors, through new potential customers, particularly in some of the market conditions that we are faced with on a global scale right now which you read about every day, and trying to keep our employees all heading in the right direction and run our operations. So whether or not we work with the different IR firm, I don't want to even address that at this point.

But we hear your comments, we are continuing to tell the story, continue to build the story and there's really not much more I can say about it at this point.

That's perfectly fair. Thanks very much and congratulations again on a great year.

Thank you, Gary.

(Operator Instructions). There appear to be no further questions from the phone. I will turn the call back to our moderator for any additional or closing remarks.

Thank you once again, everybody, for joining us for our fourth-quarter 2015 earnings call. We look forward to sharing with you our quarterly progress on each quarter's conference call in the future. Have a great day.

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