Q1 2022 Wireless Telecom Group Inc Earnings Call
We're holding we look forward to talking with you soon please hold the line and we'll be right back with you.
[music].
Good day, ladies and gentlemen, and welcome to the wireless Telecom group Q1 earnings call.
This time, all participants have been placed on a listen only mode and the floor will be open for questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host my Kindle Chief Financial Officer, Sir the floor is yours.
Thank you operator, good morning, everyone and thank you for joining us on today's conference call to discuss wireless Telecom group's first quarter 2022 financial results.
With me today is Tim Whelan the company's CEO .
Before we begin I would like to remind everyone on the call that our remarks today could include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
In some cases such forward looking statements maybe identified by terms such as believe expect seek may.
<unk> intends project anticipate plan estimate or other similar words as well as statements that do not relate strictly to historical or current facts.
The company's forward looking statements are based on management's current expectations and assumptions regarding the company's business and performance the economy and other future conditions and forecasts of future events circumstances and results.
Forward looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results.
Important factors that could cause the company's actual results to differ materially from those in its forward. Looking statements include those risk factors set forth in the company's 2021 annual report on Form 10-K filed with the SEC on March 17th 2022.
The company does not undertake any obligation to update or revise any forward looking information to reflect changes in assumptions the occurrence of unanticipated events or otherwise.
So we want to point out that in addition to GAAP information, we will provide information relating to certain non-GAAP measures.
We believe that presenting these non-GAAP or adjusted measures provides additional meaningful information to investors, which reflect how management views the business.
Reconciliations of GAAP measures to non-GAAP measures are set forth in a reconciliation table in our press release issued earlier today and furnished with the form 8-K filed today with the SEC.
With that it's now my pleasure to turn the call over to Tim Whelan. Thank you, Mike and good morning, everyone.
Our first quarter was an exciting one N V highlight of the quarter was the completion of the micro lab sale.
As we've previously noted this was a transformational transaction, allowing us to pay off our debt and cash to the balance sheet and provide a catalyst for reorganization around our two remaining higher growth segments test and measurement and video baseband and software.
My remarks today will focus on our continuing operations of <unk> M and RBS, which will exclude any consideration of the Michael that business.
Turning then to the first quarter results. We were pleased with the successful close of the transaction the reorganization of our business around the two remaining segments and our efforts to restructure our cost base.
First quarter revenues reflected a very impressive increase in test and measurement revenues of nearly 14%.
RBS revenues, primarily reflected lower hardware card revenue compared to the prior year.
Test and measurement revenues reflect continued wins in applications for satellite communications quantum computing semiconductor test environments, and Wi Fi six measurement.
We expect the continued growth and Leo satellite expansion as well as the expectation for long term growth in semiconductor manufacturing and quantum computing expansion will continue to provide growth opportunities for various TNF solutions, we provide which include noise measurement noise generation and RF.
Postponing measurements.
We are encouraged as well by the continued federal government's focus on the importance of semiconductor manufacturing in the U S and increasing applications for quantum computing.
Additionally over the last five years, we have refresh over 30, new product solutions, including new form factors and brand new instruments to meet the demands of our blue chip customers across a host of critical sectors, including aerospace satellite military government and defense sectors.
Looking forward to the continued success and expansion of our product roadmap and the organic growth opportunity that this is expected to provide.
Turning to the RBS segment.
As evidenced in the first quarter, we will continue to realize some lumpy quarters in bookings and revenues.
However, our long term conviction in the business is based on internal initiatives, we are pursuing to capitalize on secular growth themes underway across multiple vertical markets.
The market growth themes include the much publicized expectation for significant investment in long term growth and <unk> private networks.
Small cell deployment and the related applications and supporting technology needs for building and deploying <unk> networks and <unk> applications.
From a company perspective, we have confidence in our proven experience and differentiation built over the last two years of new customer wins. These.
These include the announced wins with Department of Defense <unk> trials LTE Air to ground solutions for Smart Sky networks, and our selection to join a consortium for U K government funded research led by AD, but just to name a few.
We continue to believe the <unk> brand as the leading U S based provider of five G layer, one software architecture, which provides the foundational building blocks for any specialized <unk> communication networks and applications.
Last our funnel of opportunities is robust and includes a number of discussions with prospective customers, which are either in the final stages of discussions we're already have partial signature approvals, which were expected to be completed in the first quarter.
As we mentioned in the press release, we believe we are close to finalizing paperwork on $2 million of commitments over the next several weeks and we are confident that our bookings by the end of the quarter will reflect our belief that we're on a path for continued growth in this segment in 2022.
Turning to profitability I would like to make a number of points are.
<unk> segment has realized five consecutive years of gross margin improvements and in the first quarter of this year T. M. Also realized year over year Q1 improvements of 60 basis points.
We are extremely pleased with the improving gross margin profitability of this segment.
This was due in part to longer term improvement to our specialized products, which have pricing power.
Our disciplined pricing programs and our ability to effectively manage our supply chain and product designs to continuously address cost.
And our RBS segment, we expect we will see our third consecutive year of software and services growth.
And as the revenue mix shifts to a greater proportion of software and services than hardware. We also expect to see increasing gross margins and RBS.
With regard to our operating expenses there was a lot to peel apart in the first quarter and Mike will go through this in more detail shortly but let me make a few comments.
As we reorganized to two segments, we will be reflecting reportable segments and you will see that in today's 10-Q filing.
Our reorganization reporting has included moving people and expenses out of our corporate structure into the segments to reflect the most accurate depiction of segment profitability.
RBS, we continue to operate this segment for revenue growth dedicating our engineering teams to continue investments for backlog delivery for current customers as well as those R&D investments, which we believe will drive future growth.
And TM, we continue to manage this segment for profitable growth and you will see in the segment footnote that Tina profitability is over 25% of revenues.
We are managing this segment for growth and consistent segment profitability.
And at the corporate level, we are evaluating all costs for reductions and improvements.
While we have been very aggressive across the whole company managing cost reductions through a difficult two years of Covid uncertainty.
We are taking a fresh look at this in the context of a smaller sized company without micro lab.
While certain costs are fixed and other costs that are facing inflationary pressures. We are also confident we can manage controls on inflationary pressures and even improve upon other cost line items.
On a consolidated entity level, we are managing the business for EBIT profitability and positive free cash flow from continuing operations. This year and we have set our budgets and targets on this objective.
To summarize the first quarter 2022 results show a transformation of the company.
We have completed the sale of Michael that we have reorganized around our two higher growth higher gross margin segments. We are aligned in these two segments to multiple secular tailwind of significant long term growth and investment trends and we expect to manage our currently smaller sized company to further expand gross.
Margins and improved segment and consolidated EBIT profitability.
With that I'm going to turn the call over to Mike to walk us through the financials.
Thank you Tim Good morning again, everyone.
Before I begin I want to remind everyone that micro lapsed financial results for the first quarter of 2022, and 2021 have been excluded from continuing operations and are presented as discontinued operations net of tax on the statement of operations.
Further assets and liabilities and micro lab as of December 31, 2021 have been reclassified on our balance sheet as assets and liabilities of discontinued operations. The cash flow. However is presented on a consolidated basis.
My discussion of the financial results for the three months ended March 31, 2022 as compared to March 31, 2021 will be on continuing operations that is the results of PNM and RBS unless otherwise noted.
Consolidated revenue for Q1, 2022 decreased seven 2% due to lower hardware and software revenues at RBS offset by a 13, 7% increase in PNM revenue on strong demand for our TNF products, specifically in the military and aerospace and semiconductor sectors.
Quarterly RBS software and services revenue is expected to be lumpy due to the complexity of the projects and the revenue recognition patterns associated with those projects.
Consolidated gross profit decreased 10% from the prior year period as continued strong gross margins at PNM were offset by lower margins at RBS due to a lower mix of sales from high margin software and services revenues.
Consolidated operating expenses increased year over year, due primarily to nonrecurring divestiture expenses associated with the micro lab transaction of 530000 and noncash stock based compensation expense of 215000 due to equity grants in Q4 2021 in Q1 2022.
These increases were offset by lower legal and professional fees head count costs and other miscellaneous expense reductions.
In Q1, we recognized a 792000 loss on.
$792000 loss on extinguishment of debt, which represents the write off of unamortized debt issuance costs that were on the balance sheet associated with our term loan facility and revolver.
Other income increased 74000 due to our sublease arrangement with RF industries for a portion of our New Jersey headquarters as well as sales of certain assets <unk>.
Consolidated interest expense decreased to 120000 due to the termination of our debt agreements on March one.
Our GAAP loss from continuing operations increased 998000 due to lower gross profit higher operating expenses and the loss on debt extinguishment, partially offset by higher other income lower interest expense and a higher tax benefit.
Our non-GAAP adjusted loss from continuing operations, which excludes noncash amortization of purchased intangibles and stock based compensation expense nonrecurring expenses associated with our sale of micro lab and our loss on extinguishment of debt decreased from a net loss of 130000 to a net loss of one.
Third 17000.
Turning to the balance sheet on March one we received $22 $8 million in proceeds from the sale of micro lab net of certain escrow amounts indirect expenses.
Use the portion of the proceeds to repay our term loan facility with music niche and our credit facility with Bank of America.
Overall, we recognized the gain of $16 4 million on the sale, which is recognized in income from discontinued operations.
On March 31, 2022, our cash balance was $19 1 million.
As you can see we have strengthened our balance sheet ahead of the rising rate environment, which provides us with significant flexibility to invest in growth producing initiatives, while simultaneously pursuing opportunities that return capital to create value for our shareholders.
As noted in our press release. This morning. The board is considering the use of up to $4 million for our share repurchase program that is expected to expect it to be approved in the next few days.
I'll now turn the call back over to Tim for some closing remarks, Thank you Mike.
I am pleased and encouraged with our execution of our strategy, which has transformed the company not just over the last quarter, but over the last several years.
We have completed two successful acquisitions in one successful divestiture.
We have built scale in our <unk> segment by nearly doubling revenues within this segment over the past several years we.
We have added five G software solutions, leveraging our <unk> acquisition of differentiated LTE hardware and software capabilities.
We have launched over 30, new and refreshed products to market and reinvesting in our product Roadmaps and go to market channels.
We have successfully navigated through an exceptionally difficult period of COVID-19 uncertainty and shutdowns, including flexing our cost structure as well as a successful application and forgiveness of the PPP loans.
We have managed through our debt facilities and covenants, which have enabled the successful acquisition of Holzworth and subs subs subsequently, becoming debt free company, which has significantly strengthened our balance sheet ahead of an increasing interest rate environment.
We have continued to transform the composition of our board and consistently reassess the skills matrix for the future ahead.
And now we are managing through the current challenges of inflation and supply chain issues in a competitive environment for talent.
And while we have realized periodic success driving shareholder value higher we recognize that the current trading value does not reflect the intrinsic enterprise value of the company.
In summary, we're now entirely focused on the refresh of our strategy the use of excess cash on our balance sheet and the ability to unlock and maximize shareholder value in the near term.
Expect we'll be able to speak to you more about this shortly.
Thank you and operator, if you could please open the lines for questions.
Certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question you. Please pickup your handset is listening on speaker phone.
To provide optimal sound quality.
Please hold while we poll for questions.
Your first question for today is coming from Amman Galvani. Please announce your affiliation then pose your question.
Hi, Yes. This is a mile from the B Riley and Ned Thanks for taking my question here.
Yes, good morning miles maybe start off good morning, guys.
I guess, maybe start off with the gross margin.
What's your expectation for that going forward now that you've got.
Invested micro labs.
Tnn business, it seems to be ramping up nicely.
Should we think about gross margin with 57% you delivered this quarter as a sort of baseline maybe going forward throughout.
Throughout the rest of the year.
Hey, Mark it's Mike. So so yeah, we would expect gross margin to increase to the extent that we deliver more software and services.
RBS.
Software and services were a little down comparative to last year this quarter, but to the extent that we have more of those projects.
Rev. Wrecked we can expect our gross margin to improve if you look back.
<unk> had a couple of $63 70, plus gross margin.
Quarters over the past couple of years, and that's driven highly driven by the mix.
Got it and then just curious about the $2 million of RBS contract that was pushed out into <unk>, you should see that maybe hit your bookings and backlog.
In the second quarter.
That's correct, yes. So we are in final stages, some signatures have been exchanged.
But the the one significant contract within that $2 million.
As a five party agreement and as a result of signatures is simply taking us longer than expected.
To get completed but were encouraged with the funnel of opportunities.
We're pursuing a number of opportunities not just that one and we feel good about the outlook for Q2.
Got it.
Same sort of seven figure deal that you did mentioned on the prior call on the RBS side.
Is that the same sort of deal that.
The $2 million deal that you mentioned in your prepared remarks.
This was one that was previously announced as as win because the.
The customer was announced as when as part of the U S. UK consortium.
So that's correct, but we have other deals in the funnel as well that we're pursuing we feel very good about.
So.
As we mentioned the outlook looks healthy for.
The common agility RBS operation, but these are larger seven figure typically seven figure complex deals in the sales cycle is longer.
Got it that's helpful and then in terms of the supply chain dynamics.
Obviously, you're probably feeling.
<unk> sort of.
On the cost side, but with.
What's your ability to be able to pass that onto your customers that you've been able to like completely.
Completely offset inflationary pressures that you're seeing right now.
Congrats route to inflation, we're not seeing a material impact to date and yes, our solutions have pricing power and price increases can generally be passed on to customers through increased.
Price lists.
With regard to the supply chain.
That's a timing issue, we are seeing seven figure potential impacts to deliveries as we think about quarters in the year.
So we're managing through that risk, but right now we.
We feel good about what we see we may see quarter to quarter fluctuations, but we think the risk of the full year is somewhat limited at this time.
Got it Okay. That's helpful and then.
So in terms of exposure to lifestyle.
You mentioned $350000 was not deliberate.
That sort of the extent.
Of the Russia headwind.
For the business.
Yes. So we had we had that one contract in backlog that we reversed out of the backlog and that went into so that was cancellation bookings in the first quarter.
With regard to the pipeline of opportunities.
There were there were a few six figure opportunities, we're keeping an eye on but they were in the funnel of opportunities we have since reduced our expectation for that final opportunity to zero.
Okay. Thanks for that and then.
In terms of PNM.
Very strong performance there I'm, just trying to get a sense for.
Potential seasonality is there any seasonality in that business I mean, I know last year the team had been seen.
Really saw in the first half, but then sort of.
<unk> was flat and then maybe down in the fourth quarter.
Any color on that would be helpful.
Yes typically.
The bookings and the revenues within test and measurement, our strongest within our calendar Q2, and Q3, which coincides with the second half of the government fiscal year end. So we will see declines in Q4, and that's just part of the natural cyclicality.
I do think that as we think about Q2 and Q3 being the healthiest quarters for bookings and revenue.
I think the.
The event this year, we need to keep an eye on is that supply chain and PD extent certain deliveries component deliveries in June did not come in we may see that impact that TM revenue line, but we feel good those if those shipments move they'll move into third quarter. So within quarters again, it's just the <unk>.
<unk> issues. So we think supply chain may impact, how we think about Q2 and Q3 revenue delivery.
Got it.
And given the current trajectory of what Youre seeing now is that fair to say that you'll see.
Some material sequential growth in the <unk> segment in the second quarter.
We are carefully evaluating sequential growth in PNM again, we've got some June deliveries of components for shipments and so that could make for a flat or even down quarter for PNM, but we're tracking that carefully.
So shipments don't commit in June again, we feel good that there'll be an in third quarter.
Got it.
More question from me.
For RBS I mean.
$2 million.
Comes in in the second quarter was sort of the trajectory.
For the RBS segment for the rest of the year.
Well, we feel good we came in with a higher backlog for RBS, we're tracking some large opportunities.
Again were in some final stages of discussions so if those are.
One in the timeframe, we expect and delivered in.
And the revenue recognition components, we expect we feel good about the growth opportunity for RBS in the year, so with the consolidated higher backlog with what we're seeing in the funnel and opportunities we feel good about the growth opportunity for the consolidated business and within each of the two segments for the year.
Got it thank you I'll pass it on.
Great.
Thank you Mark.
Your next question for today is coming from David Wright. Please announce your affiliation then pose your question.
Good morning, David Wright Henry Investment Trust.
Good morning, David.
You said that.
You wanted to.
One of the objectives and I assume it's tied to the incentives is managing for positive free cash flow results. This year is is that GAAP free cash flow or are you going to put non-GAAP adjustments on that.
That would be non-GAAP adjustments.
Adjustments.
Call It continuing operations David.
We would exclude.
The the ins and outs of the micro lab divestiture and the term debt and all that stuff. The goal, we're managing to be cash flow positive for continuing operations right.
Alright, but shouldn't that be behind you and Thats. My second question, you've got half a million dollars of M&A integration.
In your non-GAAP reconciliation.
Is are those expenses done or is that could it be an ongoing category.
So with regard to the micro lab transaction those should be done.
In Q1.
Do from time to time have nonrecurring expenses.
That pop up as we go through the through the course of the year. So again as we look at our internal forecasts from continuing operations. Excluding any one off projects that we may have we expect to be cash flow positive.
Okay, and then you talked a little for a while there Tim on profitability and it seem to all be around improving gross our gross margins.
When when do you expect the company to be <unk>.
Profitable on a GAAP basis.
On a GAAP basis of course, we have to work through the considerations around taxes, which are a little bit more complex David given the transaction the impact on taxes that would be my first comment obviously, we don't have any any more interest expense the debt has been extinguished.
Then we have to consider the impact of depreciation and amortization. So we're trying to give greater visibility through some non-GAAP EPS metrics and hopefully that will help you.
As you evaluate the profitability of the company down to net income line.
Well, Okay. Let me, let me phrase it differently does the board.
Have any expectation that the company is going to be operating GAAP profitably at some point in time.
Yes, we're moving forward on.
That.
Again, we feel good about the reduction of interest expense I address the fact that we're looking at our operating expenses across the company as a smaller public company.
And we feel good with with revenue increase from gross profit increase that we'll be able to.
<unk> achieved the objective of.
Net income profitability.
Would you hope to be profitable GAAP basis, and 18 months.
I don't have a timeframe for you on that right now we haven't provided that guidance. Okay. And then my last question you alluded to some possible updates on.
How how you wanted to deploy the extra cash that you have you had previously announced that you would have a strategic plan for us at the annual shareholders meeting is that is that off the table now.
No I think we're on track for more information.
The annual shareholder meeting.
But should we expect anything before the meeting.
That's hard to that's hard for me to forecast or predict at this time.
Okay, great. Thank you for taking my questions.
Great. Thank you Dave.
Your next question for today is coming from Michael Potter. Please announce your affiliation then pose your question.
Our monarch capital group.
Good morning, guys.
Michael.
The $2 million.
RBS contracts that got pushed out from Q1 into Q2.
Just a single contract versus multiple contracts.
We're tracking a handful of contracts Michael the one the one most significant where we have partial signatures is approximately a million and a half there are others, though.
Okay, so the $1 $5 million with UK contracts part of this consortium.
That was pushed from Q1.
And what you hope to be imminently in Q2.
Correct I said the next several weeks I think that's a good timeframe.
Okay, and then 500000.
Additional contract signings also pushed out from Q1 into Q2.
That's correct. It was a it was a particular name that was acquired.
Another company.
That acquisition apparently.
Had some provision that.
Our commitment over a certain value had to be cleared and that added some approval process to.
What we hope will be a good Q2 win.
Okay.
That one also you think will be in the next couple of weeks.
That one yes, I would say the next month or so.
Okay.
And then we have obviously, our sales pipeline of RBS contracts or potential contracts going into Q2.
We should not been solved.
Have those also been pushed out further.
We're we're working the funnel as you know as we always do Michael So.
I don't see a lot of other pushes but they can happen. These are these are complex deals and.
<unk>.
Again, we feel good that Q2 should reflect a fairly positive booking trajectory.
Right, but if it's I'm just trying to get the understanding of.
Timing and expectations of $2 million of all of these bookings were kind of push outs from Q1 into hopefully some time here in Q2, the expectations of the tip of the Q2 signings.
Which have not been signed yet contracts set up Apple side, Yes, I would expect that.
It would be $2 million plus sites.
In Q2, unless we're seeing correct push outs.
No correct I made the comment that for the first half of the year by the time, we're done second quarter in the first half of the year.
We're hopeful that the the booking results for the first six months will reflect that we are on a growth trajectory. So so you're right.
Our booking expectations for Q2 are higher than $2 million.
Okay.
So if it's I don't have the numbers in front of me here, but.
What were the bookings for RBS and <unk>.
First half of 2021.
So we have we don't break that out separately, but if you think about it we had $8 million change in revenue.
Last year for RBS, so an expectation for growth there would mean that we're hopeful we'll have an outcome of $4 million to $5 million of bookings in the first half of the year.
Okay.
Got it.
It should be a very very active next six weeks for RBS.
Contract sales.
Correct, it's been a very very active last four months Michael.
We hope they come to fruition over the next two months.
Got it.
Okay.
Excuse me not to be certainly good to see and obviously with that.
I'm, assuming we should.
You see a bump up in gross margins as well.
When those are delivered correct.
Some of those are longer.
Longer term and delivery.
But I would characterize most of what we've seen the funnel is between six and 12 month delivery.
So we would see second half.
Recognition.
Yes.
How many of the RBS contracts on the <unk> side.
Move to commercialization phase at this point.
And then maybe it would be helpful to just remind you as shareholders of <unk>.
How.
These contracts kind of move from.
Development to prototyping to beta to commercialization.
I'll translate your commercialization and production volumes.
I would add that our customers will see production volumes.
Potentially as soon as Q4, but most within 2023.
So youre correct in the sense that the sales cycle now as the delivery of technology building blocks for our customers' applications. Those applications then have to go through a period of trials and labs, and then field tests.
We provide port services, along that period of time and so the initial sale of the software licenses recognized typically within the first three months of delivery depending on the acceptance cycle. We then go through a series of customization services, which then could also be recognized as milestones and then we entered the support phase.
Of that contract, where we continue to earn some support services.
As the customers then move into production certain of those customers have royalty components when they move to production. So that that complete end to end customer relationship cycle can be measured in years.
Where the delivery of software as the first three months. The next three to six to nine months is delivery of customization and then the year thereafter as the support services as they go to production I believe most of our customer contracts will see production volumes in 2023.
Excellent. So basically the revenue that we're seeing at this point is from RBS in the face of the tip of the iceberg.
Yeah, Brian .
If the front end is this is all pre commercialization.
That's one of the most part correct yes.
Okay.
Okay.
Okay.
It's obviously, a very frustrating time, we're sitting with a company with a.
With.
Our enterprise value below $20 million.
At this point.
We're all kind of scratching our head.
We find ourselves at this.
The level.
What is the market missing Tim in regards to.
You all of our company special to accompany that.
The analysts have $33 million in revenue expectations for this year.
So we're.
Not even one times.
Revenue, we're expecting to see.
Cash flow positive for the year were basically neutral.
On EBIT adjusted EBITDA basis for Q1 so.
We're sub $20 million of enterprise value.
Yes. So my first point there Michael is I think the broader market conditions are clearly were caught up in that I mean, the same could be said for the the Dow the S&P. The Russell 2002 thousand or so companies that are also made 52 week lows here over the last month. So clearly there is there's a disconnect.
Central volatility in the overall broader market is my first point My second point there would be this is really the first quarter, where we have disclosed and published the impact of the results of micro App and the Standalone results of the segments. So I think that the clarity and transparency of the business we will continue.
Work on the communication it's out there now we can speak to the 10-Q and the separation of micro lab.
I'm not sure if the markets have fully appreciated the amount of cash on the balance sheet and the impact of wiping out the debt getting rid of the covenants and paying down and being interest free now so I think that as we as we emerge from this as we continue to build the company and drive top line and drive profitability I think there'll be a growing sense of appreciation.
Jason I would hope that broader market conditions improved as well.
Okay.
But if just looking at a one year chart.
A year ago.
We're almost at the same price that's before the market rolled over.
We had a spike up which we enjoyed in the <unk>.
Middle of the summer, which was short lived.
And then a continued downturn. So so we can't really blame this on market dynamics.
Yes, Mike certainly that's not that's not helping.
My prepared remarks noted acknowledged the fact, we don't believe reflects the current enterprise intrinsic enterprise value. The company and we are entirely focused on how we unlock that and address and maximize shareholder return in the short term.
Working we're working hard in those endeavors.
Okay.
The $4 million potential share buyback I think is.
It's just inadequate we don't need $20 million of cash on the balance sheet to operate. This company. This is record amount of cash as we've never had this amount of cash on the balance sheet.
How are you coming to a 4 million share buyback number.
Yes, so as we go through the analysis, Michael we evaluate all the potential requirements for cash from organic growth initiatives to other growth opportunities. The decision was largely about maintaining optionality in the future and so this this $1 million could change it could.
Grow larger but right now it helps us maintain optionality as we work through the final stages of our planning.
And it's the start so.
I don't think this is the conclusion that.
With $19 million on the balance sheet and a 4 million commitment. This is not necessarily at the termination of commitment of the other 15 for other purposes, it's about maintaining optionality as we work through our planning it could change.
I hope it does.
I think of the $4 million to me is.
Vastly insignificant, especially when we just sold our micro locker $23 million plus were cash flow breakeven hopefully positive for the year. We had some tremendous growth initiatives that don't require a lot of capex.
Potentially moving forward.
Of a long term investor in this company that I would like a return on investment.
I don't think that.
Lot to ask our board of directors that that should be there are number one focus is.
As a return for the shareholders.
So I definitely appreciate.
<unk> that Michael and I think the board fully appreciates that.
So we understood, but we do understand the input.
We felt again this was a good first step good first start it's not the end result.
But rather than deferred delay any action for a period of time, we felt that moving on something.
Getting something approved was important and getting started in this regard. So so again I think I think over the coming months as we complete our work. We may have more that we can talk about in December may may or may not change, but we think there's a good starting point Michael we do appreciate your sentiment we did we serve.
We've taken that into consideration and the board is fully aware of some of the input.
Okay I'll get back in queue. Thanks, great. Thank you Michael.
There appear to be no further questions in queue I would like to turn the floor over to Kim for any closing comments.
Great. Thank you everyone for joining us today, and we look forward to speaking with you again soon thank you have great day.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.