Q1 2021 Kimball Electronics Inc Earnings Call
Good morning, Ladies and gentlemen, my name is Sarah and I'll be your conference call facilitator today at this time I would like to welcome everyone to the Kimball electronics first quarter fiscal 2000 to 21 financial results Conference call. All lines have been placed in listen only mode to prevent.
Any background noise I try to keep our speakers opening remarks, there will be a question and answer for you, but Kimball will respond to questions from analysts I noticed you ask a question during the question and answer segment. They see the pressing star and the number one on your telephone keypad and questions will be taken in the order of 50 hours a week.
Today's call November 4th Monday, 20 will be recorded and may contain forward looking statements as defined under the private Securities Litigation Reform Act of 1995.
Factors that may influence the outcome of forward looking statements can be seen in PMD, but I won't report on form 10 piece for the year ended June thirtyth when different entity Sweeties dip.
The panel for today's call is then Sharon Chairman of the Board and Chief Executive Officer, and Mike sort of guess Cantor, Vice President and Chief Financial Officer of Kimball electronics, although like Detroit to be scalable to Don Charron Mr. Chardan you may begin.
Thank you Sir.
Welcome everyone to our first quarter conference call.
Our earnings release was issued yesterday afternoon on the results of our first quarter ended September 32020.
We have posted a financial summary presentation to accompany this conference call Big.
It can be found on our Investor relations website within the events and presentations tab for if you are listening via the webcast you can follow along by advancing the slides or download them from the downloads tab on the webcast portal.
I will begin by making a few remarks on the quarter and then turn it over to Mike for the financial overview.
After that we will answer any questions that you may have.
We are very pleased with the operating results we delivered in the first quarter of fiscal year 2021.
We set new quarterly records for sales operating income net income and diluted earnings per share, while generating strong cash flow from operations for the second consecutive quarter.
Beyond our excellent financial results, we never lost sight of the fact that the health and safety of our employees remains our number one priority and we continue to make every effort to keep our facility safe.
The number of our employees testing positive for Cobi 19 has been kept at a low level and disruptions had been kept to a minimum.
Because of the discipline response, an extraordinary effort of our people around the world. We were able to continue to perform our mission as an essential business and support the significant increases from our medical customers for their respiratory care and patient monitoring products.
In the first quarter of fiscal year 2021 sales in our medical vertical increased 25% compared to the first quarter of fiscal year 2020, and were up 3% sequentially setting a new quarterly sales record for our medical vertical.
We expect the sales in our medical vertical to normalize and begin to approximate pre COVID-19 run rigs during the second quarter of fiscal year 2021.
Sales in our automotive vertical continued to gain momentum during the first quarter of fiscal year 2021, increasing 61% from the previous quarter and down just 5% from the first quarter of fiscal year 2020, we expect to sales in our automotive vertical will return to be called at 19 lever.
Sales in the second quarter and steadily increase throughout the fiscal year 2021.
October one 2020.
[noise] marked at two year anniversary of our G.E.S. acquisition GBS was slightly accretive to our EPS for the first quarter of fiscal year, 2021, which was a significant improvement when compared to the first quarter of fiscal year 2020.
It is important to note that while we continue to gain traction with the new business pipeline for G., Yes, we do have a degree of seasonality in that business with the fiscal second quarter being the weakest. However, our backlog of orders for machines to be shipped in the third and fourth quarters of fiscal year 2021.
Has been growing nicely.
Our cash conversion days for the quarter ended September 32020 were 76 days up from 73 days in the quarter ended September 32019, but were down five days when compared to the fourth quarter of fiscal year 2020 watt of volatility and demand has made it difficult for us.
To achieve our inventory objectives and das our cash conversion days objectives, we remain committed to our inventory reduction goals and actions.
We invested $8.5 million in capital expenditures in the first quarter of fiscal year 2021. The majority of these capital investments were for capacity expansion and to support the launch and ramp up of new programs.
There were no shares purchased in the first quarter of fiscal year 2021, as a result of the COVID-19 environment. Our plan has been temporarily suspended until further determination by our board.
For fiscal year 2020, a total of $8.8 million was read was returned to our shareowners by purchasing 623000 shares of our common stock.
Which brought our total to $76.7 million and 5.1 million shares purchased since October 2015, under our board authorized share repurchase program.
And lastly, as I stated earlier I'm, so proud of our people around the world and our collective response to the cold in 19 pandemic.
Our strong company culture, and core values that have and will continue to help us get through this together.
Our number one priority will continue to be keeping our employees healthy and safe and we will continue to deliver on our promises to our customers.
With our strong cash flow and balance sheet. The company is in a solid position and we are committed to build success in the future.
Now I will turn it over to Mike to discuss our first quarter results in more detail. We will then open the call to your questions.
Mike.
Thanks, Don.
During my comments I will be referring to the slide deck, Don mentioned, which can be found on our investor relations website within the events and presentations tab.
Or if you are listening via the webcast you can follow along by advancing the slides on webcast portal.
As shown on slide three our first quarter net sales were $331.7 million, which was a 6% increase and as Don mentioned, a new quarterly record compared to net sales of 313.4 million in the prior year first quarter.
The increase in net sales compared to the prior year was driven by increases in the medical vertical.
And to a lesser degree the industrial vertical partially offset by a decrease in the automotive vertical.
Foreign exchange rates favorably impacted our net sales, 1% compared to the first quarter a year ago.
Slide four represents our net sales mix by vertical market.
Our automotive vertical was down 5% compared to the same quarter a year ago.
However, the automotive vertical was up 61% sequentially as the automakers began to return to pre COVID-19 run rates during the quarter.
Our medical vertical was up 25% in the current quarter compared to the prior year first quarter to a new quarterly record of $127.1 million, reflecting the continued increase in demand for medical assemblies.
Typically those related to respiratory care and patient monitoring products.
Our industrial vertical was up 8% from a year ago, primarily due to improved sales of automation test and inspection equipment.
Higher end market demand for climate control products, which were partially offset by decreased demand for smart metering products.
Lastly, our public safety vertical sales were $13.3 million, which were down 23% from the prior year first quarter, primarily due to the continued phase out of certain programs.
Our gross margin in the first quarter reflected on slide five was 9.2% a 210 basis point increase from the first quarter of last fiscal year.
Gross margin improvement compared to the first quarter of last fiscal year was driven by a number of factors, including higher volumes and favorable product mix.
GDS, gaining traction with significant improvement and positive contribution.
Lower material cost us component shortage premiums have subsided.
And more efficient use of our manufacturing capacity and footprint.
Adjusted selling and administrative expenses slide six in the deck were $12.6 million in the first quarter up $1.5 million in absolute dollars and up 30 basis points compared to the prior year first quarter.
The increase in selling and administrative absolute dollars was primarily driven by higher profit sharing bonus expense, resulting from or overall strong financial performance in the quarter.
Adjusted selling and administrative expenses excludes changes in the fair value of our surplus ability, which is directly offset in other income expense from changes in the fair value of the serp investments.
Adjusted operating income in the first quarter came in at $18 million or 5.4% of sales and as shown on slide seven in the deck and improvement from $11.1 million or 3.5% of net sales in the same period, a year ago driven by the increase in gross profit previously.
Mentioned.
Adjusted operating income excludes changes in the fair value of our surplus ability.
And in the first quarter of fiscal year 2021 excludes $300000 of income recognized related to proceeds received from a class action lawsuit of which we were a member.
Other income and expense.
Was income of $2.1 million in the first quarter, which compares to expense of $2.4 million in the first quarter of fiscal year 2020.
Other income net in the current year first quarter includes 2.2 point $4 million in net foreign currency gains.
$500000 in gains on the surface investments, partially offset by $800000 of interest expense.
Other expense net in the prior year first quarter includes $1.2 million in interest expense and $1.1 million in net foreign currency losses.
The effective tax rate for the current year first quarter was approximately 16% the.
The current period effective tax rate was favorably impacted by an 800000 dollar discreet benefit from the reduction of our state tax valuation allowance related to R&D tax credit carry forwards.
Mix of earnings within our various tax jurisdictions also favorably impacted the effective tax rate in the quarter.
In the prior year first quarter, the effective tax rate was approximately 24% and was unfavorably impacted by a $300000 discrete excess tax expense related to performance shares granted during the quarter.
Slide eight reflects our adjusted net income trend.
Our GAAP net income in the first quarter of fiscal year 2021 came in at $16.8 million with adjusted net income of $16.6 million.
After adjusting for the after tax impacts of the lawsuit settlement proceeds.
This compares to GAAP and adjusted net income of $6.6 million in the first quarter of fiscal year 2020.
Diluted earnings per share in the current year first quarter was 66 cents was adjusted diluted earnings per share of 65 cents. These comparative both diluted EPS and adjusted diluted EPS of 26 cents reported in the same quarter last year.
Cash and cash equivalents at September Thirtyth, 2020 were $73.4 million.
Operating cash flow trends are shown on slide 11.
Our cash flow provided by operating activities during the fiscal first quarter was a strong $20.7 million driven primarily by net income plus non cash depreciation and amortization.
In the prior year first quarter operating activities provided $39.6 million of cash largely driven from increased utilization of third party accounts receivable factoring arrangements.
Our cash conversion days or CCD.
Was up three days for the three months ended September Thirtyth 2020, when compared to the same period in the prior year.
However, it was down five days from the fourth quarter of fiscal year 2020.
Compared to the fourth quarter of fiscal 2020, a decrease in Pts wage or production days sales on hand, our inventory metric was partially offset by a decrease in accounts payable days.
Slide 12 reflects our capital and depreciation trend capital investments in the fourth quarter totaled $8.5 million largely related to manufacturing equipment to increase capacity and to support new production Awards.
Borrowings on our credit facilities at September Thirtyth, 2020 were $111 million, which was down $7 million from June Thirtyth 2020.
Our short term liquidity available represented as cash and cash equivalents plus the unused amount of our credit facilities totaled $159 million at September Thirtyth 2020.
In conclusion, our financial condition continues to be strong and we're in an excellent position to take advantage of growth opportunities and improve operating margins and return on invested capital.
While being able to confront the continued uncertainties caused by the COVID-19 pandemic.
With that I would like to open up today's calls to questions from analysts.
Sarah do we have any analyst with questions in the queue.
Ladies and gentlemen analysts may ask a question at this time by simply pressing star one on your dial pad you may move yourself from the queue presence by do on your diet, but we ask that you are using a speaker phone you pick up your handset before asking your question one moment. Please for.
The first question.
Your first question comes from the line of Joe Saunders time from Sidoti and call you May ask your question.
Hi, and thank you for taking my question and congratulations on a very strong quarter.
And.
My first question is going to be around the gross margin came in very high how sustainable are those puts.
Puts and takes in there and how should we think about that going forward.
As Mike mentioned, there were a number of factors that drove that gross margin number though the one factor that you mentioned that.
Would likely change going forward is that favorable mix favorable product mix factor.
As we stated in the release, we have some shifting going on and both our medical vertical in our automotive vertical.
And so as we think of getting back to sort of pre COVID-19 run rate.
We would see we would expect to see obviously automotive would grow as it walks back to pre COVID-19 run rate medical would decline as we work through the deliveries that were related to the COVID-19 patient care. So.
So that mix.
We will change obviously from the quarter. We just finished and so that's the one factor I would say would not be as sustainable going forward of course that will have to see how those volumes.
Layout here, we're still facing the pandemic and the uncertainties that are related to that but but that mix factor as one I would think we'd want to have a close look at.
As we go forward and then the other I guess point I'd make is we did as Mike mentioned, we did make some improvements in areas.
The utilization of our footprint.
Some of the work we've been doing on our global supply chain initiatives and material pricing and of course, our lean six Sigma efforts, we've doubled down our efforts in a lot of areas to drive productivity in those we would say would be sustainable.
As we as we look going forward.
Okay and in terms of the supply chain, how does sort of normalize now and that pricing has normalized so what do you see in terms of of supply.
Yes, it has normalized from from especially some of the component categories that were in short supply and demand was working hard to catch up let's say a year ago like five quarters ago et cetera.
That that has that supply has has caught up in those key areas like in the capacitors that we talked about in the past and pricing has also returned to more normalized levels. So.
We expect that that that.
Situation has resolved itself as we go forward now.
Okay and then.
Thank you Bob you're.
Ramping new programs.
And also switching I guess programs in medical Paul how how does that affect the gross margin.
Well you know certainly as we look to ramp new programs that that part of the product lifecycle is challenging for us as we ramp up let's say, a new program and get it to its quoted run rate.
But I would say no different in how we look at the model going forward because we do have a number of mature programs that are fully ramped and as you know, especially in the automotive vertical as we as we go forward now and and.
Get back to Prequaled fit 19 run rate.
And actually.
The other point in the automotive vertical that's that's critical to understand is that the inventory levels in the industry, especially in United States are.
Down in terms of finished goods.
And so.
There will be a desire to not only replenish those inventories back to lets say normal levels, especially in the us.
Where were particularly low on inventory here.
There will be two factories buyers coming back to the market and purchasing new cars.
But also replenishing inventory and so we.
We expect.
Several of those mature product lines that have been down in volume, especially last quarter and had been recovering. This this past quarter I should say.
The quarter before that they were down significantly those those volumes and those mature programs will wrap and that will that will help us and help offset some of those newer programs that are ramping up.
Okay, Great and then in terms of their medical wed love to this ability do you have there in terms of sort of Colgate related.
Programs at tapering off and then how the elective start coming back.
Thats, a really good question and one that difficult for us to gain a lot of visibility around in our customers as well what we do know is.
COVID-19 patient care related products that we supported and respiratory care and.
And patient monitoring.
We have worked off the backlog that was there over the past couple of quarters and have met the demand for the most part and so returning to pre Kobe 19 levels will be a decline for those products. What we don't have a good handle on yet are the products that went down.
As a result of COVID-19, as you mentioned, you'll elective surgery related products.
For us were down during this period and how fast will they come back in and there were other.
Product categories that actually declined during the cold at 19.
Pandemic period, while we were ramping up other products they were they were declining.
And these these it would be less critical but important products and how fast they come back is really the degree of uncertainty. We just we just don't have a degree of certainty there and have enough visibility and we're working very closely with our customers. They.
They expected demand to come back, it's just really more around win.
Okay. Thank you and that was all from me for now thanks, Okay. Thank you on you.
Your next question comes from the line of Mike Marando from Wall costs, and then call you May ask your question.
Hey, good morning, Don and Mike, Thanks, Dave well.
Hey.
Doing okay as good as anybody can during this year.
Hey, guys.
Congratulations I'll echo the strong execution that you guys had during the quarter a couple of different things I wanted to.
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Glad to hear that we can finally start talking about GE, asking a kind of a positive light I'd like to dig in a little bit more into the opportunities that you guys are seeing there.
If I think about that business from the acquisition and kind of all beyond there were pressures from that's and that's kind of my AD marketing, particularly in smartphones and.
One thing that I've been hearing a lot about is that all the smartphone market seems to be doing pretty well and we.
We look out call it a year or two that seems like it has some legs to it.
Well can you guys just talk about some.
Some of the opportunities that you're seeing now in GBS that maybe weren't there in the past 11 off.
From a financial perspective, maybe the margin profile of some of those products that you are looking to ship later this year.
Sure, Yes, you're right.
What we.
The end markets, we support their today are primarily in the smart mobile device area, the manufacturing of smart mobile devices and.
Of course for the semiconductor space and we do and have been working hard over the past couple of years on a growth and diversification strategy. There. So we do want to.
Obviously expand beyond those two end markets, but we are seeing some strength in the traction that we've talked about is has really been around supporting the manufacture of new releases of some smart mobile devices and and those machines that I mentioned that the back orders have been.
Increasing on.
For deliveries in the third and fourth quarter, primarily in that end market space.
So we do expect that strength to continue and again, we're working hard on a diversification strategy.
If you look at that platform. If you look at CES as a platform.
We're really positioned nicely to take advantage of a lot of the industry forward idle investments that are happening in manufacturing today, and and and the automation and of course, replacing human inspection with machine inspection et cetera. Those are mega trends that have only been amplified here.
This call that 19 pandemic and so we expect that the opportunities will continue to grow for us not only in these end markets, but others as I mentioned that we're working hard to develop.
Yes, the technology company, we don't do the simple stuff in that division, if you will and that business unit. We we are we at a.
Fair amount of technology to solve the problems that our customers are asking us to solve and again, if you think about a manufacturing process to build anything there.
Theres more and more machines going into that manufacturing process and so.
You know and the quality expectations of the output of these manufacturing process just processes just continue to rise to near perfection in terms of the expectation and so it requires and the products. We develop the machines, we develop have a fair amount of.
No how if you will engineering technology in.
Involved in them and so we do expect to command higher margin.
For that business.
We're still developing our expectations still learning about some of those end markets and what they will bear but.
But we do expect because of that technology component that I mentioned that we should see higher.
Higher margins in that in that business.
Great. So as I'm sitting here Jay figures, the ball 200 million in Fiveg and Thats going down 400 is potentially 800 after that that rising tide should continue to benefit yes.
Capacity.
Okay.
Yes.
Great great.
Maybe switching gears a little bit.
No.
Can you help me understand some of the areas that you are seeing at least in the new business pipeline now that it sounds like all auto.
On the demand is coming back a little bit all medical demand kind of tapering off are there any areas that you can talk about that you are seeing maybe a pronounced return in demand.
And is that ahead of what you expected from a timing perspective fall behind what you were expecting.
Just help me understand where you're seeing the most opportunities today, yes.
You know Mike.
Mike I am I am seeing some some more than green shoots if you will in the automotive vertical we'd actually started to slow down even before the COVID-19 pandemic, we had the GM strike.
You know, we had kind of that.
The 678 quarters pre COVID-19, pandemic that were more of a sort of a headwind in our automotive vertical.
And of course, we had to endure the complete shutdown here in the U.S. and for most of Europe, which was.
All of large half of April.
So we endured that and we've come back now and last quarter, we we weren't quite at let's say a pre Kobe 19 run rate. If you. If you look at our 118 million in revenue for the quarter.
We if you look at the second quarter of last fiscal year.
We were we were finishing closer to $135 million. So we're not at pretty cold in 19 run rates.
And it will take a while to ramp production back up in the whole value chain, but.
But but what I wouldn't want lost on that is not only mature programs ramping back up at some of the new launches.
That in some cases were delayed or at least slowed.
By the pandemic and so I really believe we're in a.
Great position to see.
Some steady growth in the automotive vertical.
As buyers come back to the market, which which is a great sign weve actually seen year over year growth car companies reporting growth.
Each region, China, North America, Europe, there are green shoots of growth coming back with buyers coming back to the market and when you look when you combine that with the inventory levels.
In the industry.
I mean, it's it's to me, it's a great story and a great.
Great My starting point to I think a pretty good run. So that's that's one area that and we Didnt mentioned in this script that we did last time.
You know, we are well positioned with the applications we support.
Whether it's a combustion engine driven car or whether it's electric complete electric vehicle and we one of the real significant growth areas inside of our automotive vertical are the are the electronic assemblies that we shipped to our customers who ship to fully.
Fully electric vehicle manufacturers and that's that's been a great story for us and we expect it to continue to grow as.
As we are fortunate there to be on one of the most popular electric vehicle brands in the world. So.
That's a that's a neat story to within the automotive vertical.
It did it did medical piece is definitely going to change.
I think it's good news for the World, if we don't need to build a lot more COVID-19 patient care product that means there's less hospitalizations were getting the pandemic behind us.
And so we will see that drop back down to normal levels.
Question is tough question is how fast some of the other products come back that have really been down for a couple of quarters now during the pandemic is as you know they those were not deemed critical to care and so things like elective surgeries were being postponed and other products that we serve and our medical Verde.
Cool.
We saw decreases and it's really because they just were not critical to care in this pandemic, but that we do believe that business will come back our customers believe it will come back and.
Medical has been a.
Great growth story for us and our ambition is to keep it at great growth story for us going forward.
Absolutely.
Lastly from me just from a capacity standpoint, how are you guys feeling right now and your ability to well.
Well the demand that seems to be coming back are you capacity constrained will there need to be additional capex.
You know.
Our utilization as Mike reported that was one of the factors that drove up our gross margin our utilization is.
It's fairly high and we have parts of our footprint geographically that are reaching capacity and so we are we are looking at that very carefully and making making plans.
And to be ready to expand to support the growth.
The one thing I would say about just bricks and mortar and square footage. Our plan. There is to expand where we are when we need to and not necessarily a new country strategy like we did with Romania, which was our last greenfield and so there will be a capex component of that but.
But not the sort of greenfield long ramp up to breakeven kind of scenario, we're focused on growing our footprint, where we already are in leveraging our talent in those in those areas. So.
Some of the hot parts of our footprint today, and I say hot I mean.
Parts of our footprint that customers are really wanting to grow.
Hi land, Mexico of course, when we did Romania, Poland was at full capacity and they remain at full capacity. So so we we have parts of our footprint that we're pretty full and we're strategically planning to expand our square footage as we need.
So the way I would want you to think about it is not.
I've said this several times in the past.
When we're running at a growth rate that we want to we talk often about our goal in the past we've talked often about our goal in the past for growth organic growth to be around that 8% number.
Least upper single digit that we would we are growing at that rate, we would expect our capex for equipment capacity to approach depreciation or be around depreciation the rate of depreciation and so but when we have to expand our footprint that really sits on top of that kind of spend.
Being profile and so if you think about having to expand 100000 square feet for example, and it's $10 million of capital to do that.
That's sort of sits on top of the normal capex run rate that would support adding equipment capacity and to launch new programs.
Great Don and Mike I appreciate you, taking the questions and the color that you provided I hope you guys stay safe as well due to Mike Thanks, Mike.
Your next question comes from the line of Richard Greenberg from Donald Donald Smith and call you May ask your question.
Good morning, guys.
Don I just wanted to follow up on the margin issue. You would previously you had talked about this 8% sales growth and along with that in the medium term you were saying you would hope to get to a.
A 4.5% operating margin you, obviously exceeded that this quarter part of that mix has some other more sustainable items are you willing to kind of reset that number now or I mean, what should we be thinking longer term as your goal operating margin yes.
Yes, Great question, Richard I, you know, we obviously had some.
Some nice tailwinds. This this quarter and like point of those out in the factors that he mentioned, yes, I do I would say that we expect that the improvements that we've made in those margin items that were mentioned that we believe are sustainable.
Should have us more consistently landing in a landing pattern around our longtime stated goal 4.5 as you know we we havent been we havent been consistently hitting the 4.5.
And had a great quarter. This quarter, obviously at 5.4, but we would expect that we would start to be more consistent landing pattern around 4.5.
Is that our upper limit no. We've got plans to grow beyond 4.5, I think the first step is just consistently land around 4.5, but we've got some ideas about how we can get.
North of 4.5 and set our goal higher than that what we've been talking a lot about as a management team has a list consistently get to 4.5 on it.
On a consistent basis, and then let's talk about where we can go from there.
Okay, and then regarding capital usage as you said.
Hold off on the buyback.
She is growing you talked about acquisitions could we maybe revisit that in balance force you your thinking on what we've already talked about capital spending but your balance.
Balance foresee buybacks debt paydown and more what you're thinking in the in the M&A area.
Yes, it's a topic on our board agenda Board meeting agenda next week, we talk about it in each and every board meeting in terms of our sort of capital desired capital structure and capital allocation.
I'll start with our priority is going to be continue to be organic growth and.
To the extent that we continue to have success growing organically, we will put a priority on organic growth now that being said you can do the math on our cash flow from operations expected cash flow from operations.
We will have excess capital beyond what we need for organic growth.
The priorities after that yet paying down debt is certainly one.
At some point, we we put our share repurchase program on hold just to be.
Ill mindful of the pandemic and making sure we kept ourselves in a strong financial position.
As we gain more confidence on on the outlook, where we will we restarted our share repurchase program certainly that will be a discussion next week in the board meeting and then finally acquisitions.
This is this is kind of a tough period looking at targets quite frankly in this pandemic and so we are we do.
I want to remain acquisitive, we would look at strategic targets, primarily in the medical space, especially within DCM ask sort of like what we did with Medivators four years ago. If you recall that act.
Acquisition, those would be some ideal targets.
But we'd have to be pretty pretty confident in terms of what's happening with the pandemic and and just the target itself to move forward there.
I think the priorities would would lie on the on the first three items I mentioned.
Okay.
I mean, when you when you take a cold hard look at.
Acquisitions that you've made in the past it seems that there is maybe some successes, but certainly a little bit of near term disappointments. You did have the goodwill impairment you took last year are you at all.
Has that changed since you at all a little bit.
And to say, we're pretty we're doing a great job of growing organically our stock arguably is pretty cheap maybe we should just stick to.
What we know and not necessarily add more goodwill and intangibles and.
And hold off on on acquisitions.
We've talked about that a lot Richard over the years and the short answer is yes, we were not happy with.
With a slow start we got with the GDS acquisition.
Go up a little bit higher in look at the acquisitions, we've done over the years. They have really been strategic acquisitions that brought key capabilities or a market presence that we were seeking and so those are really more long term kinds of pay offs.
You know that the Medivation of acquisition, we did four years ago got us into a whole different area of capability in market and is doing very well with that.
Oh, Gee us very slow start that again, the strategic assets that we brought into the company with GPS or.
To help us.
In other areas of our core Dms business. Even for example, but it's hard not to go through an acquisition like GPS have have.
We have conducted impairment study found that youre impaired have to take that charge was our difficult things that that yes, they do impact us as management and I would tell you they impact our board in their oversight of what we're doing from a strategic standpoint.
Organically, if we can continue to grow like we've grown these.
These acquisitions that we would look at would be more about bringing a capability that we don't have today or on the market.
A market access point that we don't have today those would be the big drivers behind in acquisition and so it's not it's not about adding it.
Using that tool as a tool for growth as much as.
As it is adding capabilities developing those and then you know again kind of pushing them back towards our organic growth plan.
Plans with our existing customers.
Okay. That's helpful. Thanks, a lot guys. Good luck thanks Richard.
Okay. I noticed you may ask your question at this time by Sam Depressing Star then the number one on your telephone keypad.
There are no further question at this time I will turn the call back to Mr. sharp.
Thank you Sarah Thank you everyone that brings us to the end of today's call. We appreciate your interest and look forward to speaking with you on our next call. Thank you and have a great day.
At this time listeners may simply hang up to disconnect from the call. Thank you and have a good day.
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