Frequency Electronics Inc Q2 FY2024 Earnings Call

Greetings and welcome to the Frequency Electronics Q2 Fiscal ‘24 Earnings Release Conference Call. At this time all participants are in a listen-only mode. As a reminder, this conference is being recorded. Any statements made by the company during this conference call regarding the future constitute forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this conference call. It is now my pleasure to introduce your host, Thomas McClelland, President and Chief Executive Officer.

Thank you, and good afternoon everyone. From a financial point of view, as was the case last quarter, we have encouraging numbers to report. And I continue to be confident that we're on a sustainable path of growth and profitability. We have a lot of exciting new business and are confident in our ability to execute profitably going forward. As everyone should be aware, we publicly announced three relatively large contracts, one right after the other during the month of November. These contracts were a long time in the making, and originally we anticipated getting under contract much sooner. However, in the end, this occurred after the close of Q2. Because these contracts have been anticipated for some time, we've been able to prepare ahead of time and are thus in an excellent position to hit the ground running, so to speak. We have every reason to be confident in our ability to execute these programs successfully. In addition, we anticipate additional smaller contracts to be coming online over the next few weeks/months. And we will make public announcements as appropriate. All in all, we're experiencing significant growth and have good reason to believe that this trend will continue going forward. Let me briefly highlight the financial results before Steve fills you in on the details. Revenue, gross margin, and operating income are all up compared to Q2 of last fiscal year and holding steady compared to Q1 of this year. The backlog is holding steady at around $50 million at the end of Q2 and is anticipated to grow significantly based on the new orders that we got in November. So in summary, I believe our efforts have put us on a sustainable positive trajectory of growth in our core business. The company remains committed to achieving sustained profitability and cash generation going forward. At this point, I'd like to turn things over to Steve Bernstein, our CFO, who will go through the numbers in a lot more detail.

Thank you, Tom, and good afternoon. For the six months ended October 31, 2023, consolidated revenue was $25.9 million compared to $17.2 million for the same period of the prior fiscal year. The components of revenue are as follows. Revenue from commercial and US Government satellite programs was approximately $9.5 million or 37% compared to $7.8 million or 46% in the same period of the prior fiscal year. Revenues on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the FEI New York segment. Revenues from non-space, US Government, and DOD customers, which are recorded in both the FEI New York and FER Zyfer segments, were $15.8 million compared to $8 million in the same period of the prior fiscal year and accounted for approximately 58% of consolidated revenue compared to 47% for the prior fiscal year. Other commercial industrial revenue was $1.4 million for the six months ending October 31st, '23 and '22. The significant increase in revenue for the period compared to the same period in the previous fiscal year was related to contract awards, resolution of technical problems from the previous fiscal year, and improvements made by management. For the sixth month ended October 31, '23, gross margin and gross margin rate increased as compared to the same period of fiscal year '23. The gross margin dollar increased as a direct result of an increase in revenue. The gross margin rate increased significantly due to the fact that many of the technical challenges faced in the prior fiscal year have been resolved and as a result, the related programs are now moving forward and running more efficiently. Previous programs that sustained lower margins due to technical issues are near completion or have completed. For the six months ending October 31, '23 and '22, SG&A expenses were approximately 19% and 23% respectively of consolidated revenue. The percentage of consolidated revenue decreased by 5% due to an increase in sales for the six months ending October 31st, '23 as compared to the six months ending October 31st, '22. The increase in SG&A expense for the six months ending October 31st, '23 as compared to the prior year period was largely due to an increase in professional fees, payroll, and associated costs. R&D expense for the six months ending October 31st, '23 decreased to $1.3 million from $1.7 million for the six months period ending October 31st, '22, a decrease of $400,000 and were approximately 5% and 10% respectively of consolidated revenue. R&D decrease for the six months ending October 31, '23 was primarily due to a shift of employees between production and development depending upon availability, scheduling, and necessity. The company plans to continue to invest in R&D in the future to keep its products at a state of the art. For the six months ending October 31, '23, the company recorded operating income of $3 million compared to an operating loss of $5.4 million in the prior year. Operating income increased due to a combination of an increase in revenue, gross margin, and the effects of cost-cutting measures instituted by management that began in fiscal year '23. Other income can be derived from reclaiming of metals, refunds, interest on deferred trust assets, or the sale of fixed assets, interest expenses related to deferred compensation payments made to retired employees. This yields pre-tax income of approximately $2.9 million compared to a $5.4 million pre-tax loss for the prior fiscal year. For the six months ending October 31, '23, the company recorded a tax provision of $13,000 compared to $2,000 for the same period of the prior fiscal year. Consolidated net income for the six months ending October 31, '23 was $2.8 million, or $0.30 per share, compared to a $5.4 million loss, or $0.58 per share in the previous fiscal year. Our fully funded backlog at the end of October '23 was approximately $50 million compared to $56 million for the previous fiscal year ending April 30, 2023. The company's balance sheet continues to reflect a strong working capital position of approximately $25 million at October 31st, '23, and a current ratio of approximately 2 to 1. Additionally, the company is debt-free. The company believes that its liquidity is adequate to meet its operating and investing needs for the next 12 months and the foreseeable future. I will turn the call back to Tom and we look for your questions soon.

Thanks, Steve. We will now turn things over for any questions.

Certainly. At this time, we'll be conducting a question-and-answer session. And the first question today is coming from Brett Reiss from Janney. Brett, your line is live.

Gentlemen, thanks for the opportunity to ask a question or two. Tom, the Starlink satellite program that SpaceX has that so many of the militaries are utilizing in the conflicts that are going on, is the satellite size of those satellites where our atomic clocks and our frequency generators, are these potential sales opportunities?

Currently, none of our products are on the Starlink satellites, nor do we expect to have any presence on them in the future. However, we are in discussions about several other satellite systems that are being developed and launched, and we anticipate being involved in those programs eventually. While Starlink primarily serves as a communication system, we believe our stronger opportunities lie in systems that incorporate navigation capabilities. In these cases, precise timing is crucial, offering significant opportunities for us. Many are concerned about the vulnerabilities of GPS, including the possibility of attacking GPS satellites, jamming their signals, or spoofing them. It is worth noting that jamming signals from low Earth orbit satellites is much more challenging due to their stronger signal levels. Numerous programs are considering adding navigation capabilities to these systems, presenting us with considerable potential, and we are closely monitoring these developments.

These organizations that are looking to develop these similar systems, do you know who they are and do you already have our foot in the door, or is it someone that your salespeople have to first get to know?

No, we know who they are and we do already have our foot in the door in a significant number of these.

Great. I'm going to drop back in queue. Thanks again for another good quarter and have a good holiday.

Okay, thanks, Brett. Thank you.

Thank you. The next question is coming from Chris Vatowski, a private investor. Chris, your line is live.

Hello. Congratulations on great results.

Thank you.

I want to ask first, did the margins go down slightly sequentially because you discussed margin on a six-month basis, but on a quarterly basis it seems like you sequentially had slightly larger revenues. Last quarter you said, barring one-time items, your operating income was a little bit over $1 million and now it was a little bit under $1 million.

Yeah, that's certainly correct. But I think the point I would emphasize is we always anticipate that quarter to quarter, we're going to see some fluctuations in things. As we reported last quarter, there were some one-time events that had a positive impact on those numbers, and those events aren't there this quarter. So strictly speaking, the margin went down a little bit, but I think realistically I would characterize it as pretty much holding steady.

Okay, does your business allow for leveraging and continuing to raise margins as your revenues increase, or would the government economists take that into account when they price your contracts?

Yeah, for our government customer, of course, they scrutinize things pretty carefully and we're subject to audit of all our numbers on any programs that the ultimate customer is the government. But I think that we feel pretty strongly that our gross margin is going to continue an upward trend. Of course, that's not going to go on indefinitely. But we're targeting gross margin of around 50% and we think that we can get there within the next six months to a year.

That is great to hear. You mentioned that backlogs have decreased sequentially again, but you still expect backlog to increase as you secure more deals. Is that correct?

That's definitely correct. I would describe it the same way. It's true that the numbers have decreased a bit over the last quarter, but they're really holding steady. With the new business we secured in November and what we expect in the coming months, our backlog is certainly going to trend upwards because of that.

Okay. That's good to hear. And of the deals you announced, one of them wasn't a US government customer. Is that still a military deal or a civilian deal?

It's not a military deal. Let me put it that way.

Do you expect you can enter the civilian markets in any way?

Definitely. Of course, in the satellite business, the US government has historically been the biggest player. But there's a lot of activity and more and more coming from other arenas. And the $9 million contract that we talked about in our November press release is an example of that, and we anticipate that there will be more of that going forward.

Okay, that's it for me. Congratulations again.

Okay, thank you.

The next question is coming from Tim Hasara from Sinnet Capital. Tim, your line is live.

Thank you, Tom. I just want to confirm that you mentioned 50% gross margins in the next six months to a year. Is that correct?

Yes. That's our goal.

I assume that the three new contracts you announced in November would have a much higher gross margin to improve the mix. Is that correct?

In general, that's correct. Yes.

And with respect to those three contracts, I would assume that you'll book those as a percent of completion through the term. I guess all three of them are approximately two years. Can you...

One of them is actually closer to three years, and one of them is 18 months, but they will all be a percentage completion.

And with respect to booking those on a quarterly basis, can you give us any kind of estimate or guidance? Would it be somewhat linear for the amount of the contract or more front-loaded, back-loaded? Any kind of color would help model that?

Yes. I think it's pretty hard to model, but I would say that the best approximation would be a linear approximation, probably a little bit more upfront but approximately linear over the course of the program.

Okay, great. I don’t have any other questions. Thank you.

Okay, thank you.

Thank you. The next question is coming from Frank Wysensky, a private investor. Frank, your line is live.

Hi, and your backlog, given the new orders in November, your current backlog must be closing in on about $100 million. And in that light, your inventories, which are high, is that positive, I assume. I'm curious about the personnel though. Do you have enough engineers to put out these contracts efficiently?

Okay. So there are a few things to highlight. First, the current backlog is not $100 million. It's important to understand that when we enter contracts for these programs, we don't receive authorization to spend the entire contract amount at once. The backlog will increase significantly in the coming months, but it won't all happen simultaneously. I also want to talk about our inventory. You're correct that we're emerging from the pandemic and the supply chain issues we faced. Having inventory has helped us navigate those problems. However, we aim to be more aggressive in reducing and managing our inventory moving forward. While we do have a significant amount of inventory, it will be beneficial as we kick off these programs, especially since we have tight deadlines for delivery. Regarding engineers, I've noted in my opening remarks that we've been working on these three programs for some time now. It's been a bit frustrating that we weren't able to get under contract sooner. The positive aspect is that we've been preparing for these programs over the past six to nine months and have been gradually increasing our workforce and hiring engineers. So, we're in a very good position, and I'm optimistic about our ability to execute effectively right from the beginning.

Good. I'm a little curious about how you figured the backlog. You've got contract awards, say, the first one for $25 million. So you don't take all that $25 million, even though it's been awarded, right?

No. We only take fully funded backlog. So in that example, let's just say, a $25 million contract, they give you $5 million upfront and then they progressively fund it accordingly. We would only put $5 million in backlog.

I understand. But I mean it's not like the rest of that $25 million is contingent on anything other than you delivered in the first $5 million, I suppose, right?

It's not contingent on anything, but it's just funding, and we only report funded backlog.

And just to follow up on that, in that particular example, that's a $25 million program, which has that completion in 18 months. So one of the important ways to look at that is that backlog has to surface within the next 18 months. Most of it will surface a lot sooner than that. So our initial turn on was just for a few million dollars, but they will need to turn us on for a lot more money relatively quickly.

Great. I understand. In that same vein, the atomic clock order, which has a potential contract option of $70 million depending upon the effectiveness of the navigation system performance on a demonstration satellite, when is that demonstration satellite going up? And when do you expect to receive confirmation that the product has been effective?

So I think that is currently scheduled for 2027. We would anticipate the determination could occur well before that. But certainly at that point in time, we would anticipate that will be determined. This is a new customer for us. An important thing is for that customer to gain confidence in working with FEI, and so we're doing everything we can to position ourselves to ensure those options get realized.

It's fully expected that there won't be any engineering difficulties like those experienced in past programs.

No, we do not. There is very little new development on this. It's essentially building hardware; it’s a production job. There is every reason to believe we should be very successful on this one.

Okay. One final question for me. Investors look at FEI pretty much as a satellite program company. But the Zyfer and the non-satellite business seem to be going quite well. Are there big orders associated with that business? Or is it more continuing orders, or is it smaller orders, but the numbers are quite impressive?

They have been very successful over the past couple of quarters in getting new work, completely new stuff. And there are also continuing orders on their existing products. They went through a rough patch about a year ago but they've surprised us all actually in their ability to turn things around. Things are looking really good at Zyfer at this point in time.

And are the margins at Zyfer similar to the satellite, or is there any difference in the margin structure of those two operations?

Yeah. The numbers aren't that different when you look at them, but the details of how you get there are definitely not quite the same.

All right. Well, thank you very much. I wish you the best of luck in the coming quarters.

Thank you.

Thank you. The next question is coming from George Marema from Pareto Ventures. George, your line is live.

Hi, thanks for taking my call. I had a question about your selling, general, and administrative expenses as well as your research and development expenses. As revenues increase and if you approach your gross margin goals, what would net margins look like?

Steve, I'll let you take that one.

So SG&A on a dollar value number is going to run fairly consistent. I mean, again, if we grow substantially, yes, there'll be some more costs in there. But percent-wise, as you see, it went down for getting the percentage to dollars even as a formula of income is down. We expect it to stay at that current level where it is now unless things substantially grow.

Okay. And you don't expect the net margin to expand as a percentage of sales?

Gross margin or SG&A?

No, net margin. If your gross margin is 50%, what do you expect for the net margin or operating margin?

I would have to look at it, but it will go up. And again, I think, like I said, the actual cost structure will be relatively the same, all in all.

So the SG&A right now is about $2.5 million a quarter. You don't expect that to increase too much?

No, I do not.

Okay. All right. And also after you've won a couple of these big jobs here recently, what kind of the opportunity outlook over the next couple of years look like, the opportunity set? Pipeline?

The opportunities look really great. We’ve been working on these jobs for some time, and we finally got them and that's it. But the reality is that we're overwhelmed with opportunities at this point in time. Space is booming, and I don't see that turning around anytime soon.

Okay. So a lot more. You mentioned you may have some small wins here in the coming weeks/months. Are there any big ones in the pipeline or they've all been won already?

No. There are definitely some other big things in the pipeline, but the big things don't happen overnight. Some of the smaller things are coming in, the big ones, I think we look for some things to materialize in six to nine months, perhaps.

Okay. And if I may ask one last one. Since you were there for many years there, I know you're new as the CEO, but you have some history of the company. Can you kind of maybe compare and contrast or describe maybe qualitatively, the difference between today and back around 2018, there was a similar, I'd say, setup in terms of huge opportunities, a lot of wins, but it just didn't really materialize. What kind of happened then? And what's to prevent everything from falling apart now?

Yeah, a very good question. Of course, there are no guarantees in life, but I think we are doing some things differently. If we look historically, we've had a lot of difficulty with what we refer to as NRE programs, non-recurring engineering or a lot of new development activity. Historically, when those turn into production, we've been able to do so very profitably, but we have been challenged with development. I think one thing that I've made a real effort to do differently is we're bidding these things differently. My experience here has provided me a lot of exposure to these development programs. I know the pitfalls and difficulties. We're pushing back really hard, making sure that we bid these in a way that we feel confident we can be profitable. I think that's one of the elements; the rest is just kind of the devil's in the details. The specific programs that have come online in November, I think have a smaller non-recurring engineering component to them, and they are much more production-oriented. Historically, we’ve been very effective on those. So we're confident in that regard. One of the problems starting in 2018 is that top management didn't understand the programs well. We ended up behind the eight ball from the start in some cases. I’m actively involved in these programs and committed to ensuring they execute effectively going forward. That’s my take on it. We will have to see how things go going forward.

I appreciate that. If I may slip in one last quick one here. I know you guys don't give guidance. Do you have good visibility quarter-to-quarter on what revenues and costs look like or you don't have much visibility?

No, we have pretty good visibility.

Have you considered giving quarterly guidance a quarter ahead?

As of now, we don't guide going forward. Maybe we will continue in the future, but not for now.

Okay. Thank you for your time.

Okay. Thank you.

Thank you. The next question is coming from Michael Eisner, a private investor. Michael, your line is live.

Hi, how many employees do you have at this time?

We have just about 200 employees, including all three sites at this point.

That's full time?

Yes.

Do you also have some part-time employees?

We have some part-time. We work with some consultants and we have some contracts with some outside engineering contractors.

All right. So you hired more people. The three contracts, the first two, the technology is already proven on the first two? The $25 million and the $19 million.

Yes.

That's great. Now can these companies, whoever you are dealing with, give you more business on these two contracts?

Yes.

Right, just the first part of like, for example, the $25 million that will be done in roughly two years or so, that could go through another $20 million, say.

I want to make sure I don't mislead. It's not like there are contract options going forward. But that is a major satellite supplier and we've had many contracts with that particular company over the years. We will have many more going forward. In fact, we do currently have other contracts with that company. I have every reason to believe that if we're successful on that particular program, it will lead to other satellite programs for us going forward.

Well, it should work because you're using technology that worked before.

Absolutely. One of the things we pointed out in the press release is that this is a $25 million program, but from beginning to end, this is an 18-month time period. The ultimate customer is the US government, and this is sort of a test to see if we, and of course our customer, can deliver in this shortened timeframe. Typically, a program like this would take roughly three years to achieve the same goals. We're trying to accomplish it in half that time. We see this as a significant challenge, but one that we are fairly confident we can meet. If successful, there could be a lot more business opportunities that follow.

All right, well, that's good to hear. But right now, these three contracts, I assume you've already started working on them.

That's correct, yes.

So the clock is already ticking because you didn't start just today. When the data contract was arrived, it came in.

We are moving forward very aggressively on all of these.

And the $9 million one, is that new technology? Or have you done that work before?

No, that's not new technology for us. That's based on an atomic frequency standard, but that is an existing FEI product that has already gone through qualification testing and so forth. We do not anticipate any major difficulties in production.

All right. And who owns the technology for that, you or the customer?

We own the technology.

Is that on all three contracts?

Yes.

So once you create it for them, they can't take the work to someone else?

No. No. Definitely not.

All right. So you get the R&D, which is key. And that one you mentioned it could be $70 million over 6 years. Is that more because they don't want to give you the whole thing at once?

I have to be cautious about what I disclose because, under this contract, there is a significant amount of specific information we cannot share. This involves a navigation satellite system. The products we are delivering will be used on a demonstration satellite. If the demonstration satellite proves successful, there is a strong likelihood that the options will be exercised. Launching a satellite system is costly, and various factors could lead to challenges beyond our control. It is essential for our customer to gain trust in our products. We believe the outlook is positive, but we are also aware of possible obstacles.

Just for example, someone may make the part that attaches to your part. And if they can't make it, that would be an example of something that could go wrong, hypothetically.

Yes, that's the kind of thing that could go wrong. I'm not saying that this will happen on this program, but it's plausible based on previous projects where geopolitical issues can severely impact timelines.

Yes, that can always happen. But you're comfortable with these three contracts?

Yes.

And the third one, is that the three-year one that you said earlier?

That's correct, yes.

All right. So all these contracts could yield more work on. But right now, you expect a couple of just smaller contracts over the next couple of months?

That's correct.

All right. And I think SpaceX is launching about half the rockets at this point, right?

I don't know the exact number, but they're pretty busy, yes.

It's not really your concern. You just need to focus on making the product. I think that's all I wanted to ask. It seems like the backlog will continue to increase, and your revenue rose this quarter. That trend has been positive for about a year and a half, so well done there, and it looks like the backlog has been on the rise as well. Thank you for your time.

Thanks, Mike.

Thank you. The next question is coming from Frank Gasser, a private investor. Frank, your line is live.

Yes, thanks for taking my call. I'm curious if you could say something about not the present technology, but future technology. In particular, several years ago, there was mention of an atomic clock, which could be a game changer. I haven't heard much about that since. Could you elaborate on that?

Yeah. So we are currently working on an advanced atomic clock. In fact, we're going to do a demonstration tomorrow for our government customer on that one. That's based on a post optically pumped rubidium standard. That technology is anticipated to make an order of magnitude improvement in the capability of these kinds of clocks. The demonstration tomorrow is not for a space-based atomic clock; it's for terrestrial applications. We believe that this technology can work very effectively in the space environment also. That's just one thing. We are seeking funding to develop even more advanced clocks. We can't feasibly fund that development internally. We're pursuing external funding.

Yes. Thank you very much for providing that detail. I just have one more short aspect. The test you mentioned for tomorrow, is that, in fact, then going to show a significant increase in clock capability?

Yes. We believe that this technology is capable of even more. We're going to demonstrate roughly an order of magnitude of improvement over our current products, but we think that technology is capable of even another order of magnitude improvement if things are optimized appropriately. You have to keep in mind on this particular development; we have limitations like power dissipation, size and weight. It has to work within a wide temperature range. We’re aware that varying applications can demand a different balance of these constraints. We do see a significant performance improvement given the current application but believe we can do even better without some constraints.

Okay. Thank you very much for your responses, and good luck. Have a good day.

Okay. Thank you.

Thank you. The next question is coming from Richard Johns, a private investor. Richard, your line is live.

Thank you. Tom, you were talking earlier about changes in your bidding processes. I wonder if you could expand on that a little further. Would you characterize the contracts, the large and small contracts you're winning as fixed-price contracts?

Most of the contracts we're bidding on are fixed-price contracts. We do, from time to time, have cost-plus contracts. But in general, it's fixed-price contracts. I think in terms of expanding on things beyond that, I think my nearly 40 years of experience here provides me a good understanding of our business and customers. Knowing just how to go about bidding is critical. We shouldn't be giving anything away in cases where we are, if not the sole source, we are virtually a sole source because nobody else can provide the product that's needed. In those cases, we need to ensure we bid profitably. In other scenarios, we look at potential developments and want to invest in them with the idea of significant business potential moving forward. If we don’t see a clear advantage, it's not worth investing. Over the last year, I can think of specific cases where we lost opportunities but did so knowing there was competition with minimal potential beyond the particular program. We could have obtained those but we knew we would lose money; that wouldn’t make sense.

Yes, that sounds as if you're going about the process in a very reasonable fashion. I have another question about your income taxes. They were tiny in recent quarters compared to the historic tax rate. Is that because of loss carryforwards? When do you expect to go back to what I believe was more like a rate in the mid-20s or around there?

It is because of NOLs. The tax we're paying now consists of mandatory state taxes and things of that nature. I can't predict exactly when the NOLs will run out. But I can tell you, as you see performance over the last couple of years, we have a bunch of NOLs going forward that we will be using for a while.

Okay. All right, that's it from me. Thanks very much for the good work you're doing.

Okay. Thanks.

Thank you. We have a question coming from Jeffrey Cohen from Mulholland Capital Management. Jeffrey, your line is live.

Yeah, good afternoon. How are you all? I appreciate all the color. Just real quick, you talked about the target gross margin above 50%. What sort of quarterly revenue run rate would that contemplate?

Steve, do you want to...

We are not completely prepared to provide guidance on long-term revenue growth. However, we are confident that it will grow, and we expect to see the resulting efficiency reflected in our margins.

I appreciate that. But I mean, if 50% gross margin is your target, you must have some sort of underlying assumption in terms of what sort of revenues you need to get there? That's my question.

That target is not based on a particular revenue goal. It's really about how we're bidding new business. The target for new business is a gross margin of 50%. I've discussed specific contracts we've lost because of that target, meaning sometimes we’ll bid lower margins. However, in general, we aim for 50%, as a baseline. It's not reflective of a specific revenue forecast.

Okay. But just so I'm clear, you're not talking about your six- to 12-month goal being you're necessarily getting 50% gross margin on your contracts. You're talking about being able to show that in a quarterly report, correct?

Yes. That's correct.

Can you quantify your bidding activity at all? The amount of outstanding bids or the sales funnel or in some way quantify that?

I don't think I'm prepared to do that meaningfully right now. Qualitatively, the pipeline is pretty full at this point in time. We have a tremendous amount of bidding activity going on, but I'm not really in a position to put a total dollar amount on things at this time.

Okay. Steve, I'm curious about the NOLs you mentioned. Can you provide a rough estimate of what they would be on a cumulative basis?

I don't have the exact number, but I'll say it's approximately $20 million, give or take.

Okay. All right, that’s all I had. Thanks so much.

Okay. Thank you.

And that's all of the questions that we had. I would now like to hand the call back to Tom McClelland for his closing remarks.

Thank you. I think we've been on the call for quite a while at this point in time. I appreciate everybody's participation. I'd like to wish everybody happy and healthy holidays and that's it. Thank you very much.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.