TPCS - NASDAQ

Greetings. Welcome to the TechPrecision Corporation Third Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer will follow the formal presentation. Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Brett Maas, Managing Partner of Hayden IR. You may begin.

Thank you. On the call today is Alex Shen, Chief Executive Officer; and Bobbie Lilley, Chief Financial Officer. Before we begin, I'd like to remind our listeners that management's remarks may contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements as contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of risks and uncertainties in the company's financial filings with the SEC. In addition, projections as to the company's future performance represents management's estimates as of today, February 29, 2024. TechPrecision assumes no obligation to revise or update these forward-looking statements. With that out of the way, I'd like to turn the call over to Alex Shen, Chief Executive Officer, to provide opening remarks. Alex, the floor is yours.

Thank you, Brett. Good afternoon to everyone, and thank you for joining us. I'm happy to report that customer confidence remains high as our consolidated backlog further strengthened to $50.8 million at December 31, 2023 from $44.6 million at September 30, 2023. We have since captured new bookings over $6 million in January and February of 2024. For Ranor, backlog-increased content features both new penetration as well as recapture of significant sole-source content in the defense sector, namely the Virginia class and the Columbia class submarine programs. For Stadco, backlog-increased content features significant recapture of military aerospace sole-source content combined with new penetration into military space launch and aerospace-related tooling. For the third quarter, consolidated net sales were $7.7 million or 8% lower when compared to $8.3 million for the same period 1 year ago. For the nine months of fiscal 2024, consolidated net sales were $23 million or 4% lower when compared to $23.9 million for the same period a year ago. For the third quarter of fiscal 2024, consolidated gross profit was $1.2 million, operating loss was $1 million, and SG&A expense increased by $1 million, primarily due to outside advisory costs in connection with a potential acquisition. For the third quarter of fiscal 2024, Stadco gross profit was essentially breakeven at negative 3% of net sales, a loss of $216,000, in a quarter with a lower number of labor hours available during the November and December holiday calendar. Ranor gross profit was $1.4 million for the third quarter of fiscal 2024. We do expect to deliver our strong backlog over the course of the next one to three fiscal years with both revenue growth and better gross margin. The Stadco turnaround continues. I would like to share one specific success story, which revolves around our customers' requirements for Electron Beam Welding technology. Stadco operates one of the largest electron beam vacuum welding chambers in the United States. We have methodically, overhauled and upgraded. Key components of our Stadco chamber with good results, improving on-time delivery from 25% at start of acquisition to 100% on time today. We have improved throughput 800%. In other words, we can put out eight times as much work today, compared to August 2021 at the close of the Stadco acquisition. As a result, we have been able to recapture customer confidence and secured -- and have secured new purchase orders which feed this specific work center as well as other machining supports to work centers. We continue to focus on tactical execution and risk mitigation, driving both subsidiaries to fully and successfully meet customer expectations, enabling continuous recapture and continuous retention of customer confidence., We all clearly see the positive results of this focus, evidenced by the continued high customer confidence which has enabled us to grow an already strong backlog. We remain highly focused on cash management a critical piece, of risk mitigation and continue to manage and control expenses, capital expenditures, customer advances, progress billings and final invoicing at shipment. I will now turn over the call to our CFO, Bobby Lilley, to continue with the review of our quarter results. Bobby?

Thank you, Alex. Net sales for the third quarter of fiscal year 2024 were $7.7 million or 8% lower, when compared to the same quarter a year ago. Direct labor hours charged to projects were lower at both segments. Consolidated cost of sales, were $6.5 million or 5% lower than the prior year period, due primarily to the lower revenue recognized during the third quarter. Consolidated gross profit was $1.2 million or 23% lower, compared to the same quarter a year ago. SG&A expense increased by $1 million, primarily due to outside advisory costs in connection with a potential acquisition. Operating loss was $1 million for the third quarter of fiscal 2024. Interest expense increased due to more borrowing under our revolver loan and higher interest rates. There was $2.6 million of outstanding debt under the revolver loan at December 31 2023. Net loss for the third quarter was $865,000, compared to net income of $134,000 a year ago. For the nine months of fiscal year 2024 net sales were $23 million or 4% lower, when compared to the same period a year ago with $13 million for Ranor and $10 million for Stadco. Cost of sales were $20.1 million or 1% higher than the prior year period, due primarily to a decline in absorption rates as a result of -- as a lower number of labor hours were utilized during the period. Gross profit was $2.9 million or 29% lower, due primarily to the decrease in net sales. SG&A expense increased by $636,000 or 14%, primarily due to an increase in outside advisory costs in connection with a potential acquisition. Operating loss was $2.2 million due to lower net sales and increased SG&A expense. Interest expense increased by $76,000 due to more borrowing under our revolver loan and higher interest rates. Net loss for the nine months of fiscal 2024 was $1.9 million compared to a net income of $24,000 a year ago. The prior year period included a one-time gain of $624,000 from the ERC tax credit refund. Moving on to our financial position for the nine months ended December 31, 2023. Cash provided by operating activities was $1.2 million. Cash used for the capital expenditures was $2.8 million. Financing activities provided net cash of $1.4 million, primarily from the borrowings under the revolver loan. Our total debt was $7.6 million on December 31, 2023 compared to $6.1 million at the end of March 31, 2023 as we borrowed an additional $1.9 million under the revolver loan in fiscal 2024. Cash balance at December 31, 2023 was $0.4 million compared to $0.5 million at March 31, 2023. Working capital was negative at December 31, 2023 as we reclassified all of our long-term debt to current because of certain debt covenant violations. With that I will now turn the call back over to Alex.

Bobby, thank you. For those on the call today who may not be very familiar with our company, TechPrecision is a custom manufacturer of precision large-scale fabricated and welded components and precision large-scale machined metal structural components. The components that we manufacture are customer-designed. We sell to customers in two main industry sectors Defense and Precision Industrial, predominantly Defense. We do most of our work in industries that are highly sensitive to confidentiality, which preclude us from speaking publicly about many things that a company not operating in these fields might discuss. As such there are real limits as to what I can discuss and sometimes those limits change. Please understand that my saying I am not allowed to discuss that is based on customer requirements and the environment in which we conduct business. Even though I have read the last statement at every conference call for the last several years, we continue to get questions both written and oral or hear about individuals making statements that what I am saying is not accurate. That it is the board silencing me or that I alone am making these decisions. As I have said repeatedly over and over again, we are not the ones making these rules, not me, not the board. The decision as to what we can say is based solely and completely on rules, rules from our clients. These are not my rules. These are not the Board's rules. There are many things we would love to speak about, but we are restricted. It is the same for all of our direct competitors. As a final point, I do not see these clients changing these restrictions any time in the near or even distant future. So please do not expect anything to change. Where we can speak about it, we will, but we will not jeopardize our relationships with our clients and we will not jeopardize the future orders we expect to receive from them. TechPrecision is proud and honored to serve the United States defense industry, specifically naval submarine manufacturing through our Ranor subsidiary and military aircraft manufacturing through our Stadco subsidiary. We aim to secure and maintain enduring partnerships with our customers. Overall, in both the Ranor and the Stadco subsidiaries, we continue to see meaningful opportunities in the defense sector as evidenced by the strength and continuing growth of our backlog. We are encouraged by these prospects for growing our revenue and increasing profitability in future quarters. Operator, we can open the line for questions.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question comes from Mark Gomes with Pipeline. Please proceed.

Hey, Alex. Congrats on the rebound in order and backlog consistent with what we're seeing in the industry. So that's nice to see. How do you feel about your cash and access to capital right now for operations? You're not looking for a forward-looking statement, but obviously you have an idea of what you need going forward. Monique, do you feel safe about what you've got there?

Well, I think let me answer the question if we feel safe about what we have. We do feel safe about what we have. I'm going to turn the rest of the more technical stuff over to our CFO, Bobby.

We still have a facility that we've had for the last year in place with our bank and we did go up at the end of Q3 but we're in the process of renegotiating that facility and borrowed in anticipation that the negotiations might not be done at the end of Q3. The borrowing is back down and we still have that facility.

Yeah. That's great to hear. Thank you for that. And then with anticipated increases throughout the industry, I know you guys spent quite a bit of money on CapEx in recent quarters, which as you stated on the last call, be safe to say that that's for capacity expansion. How you feel about your human capital expansion as -- you having any luck on the hiring front?

We are. In conjunction with CapEx, you bring up a very good point. A human machine interface needs a human to interface with the machine to make it work. So as we increase our capacity as well as capability, we have -- for example, I go back to the success story I shared with -- stick with Stadco's welding chamber, the electron beam welding chamber that we have has been upgraded with several key components, but also the manpower that's driving it is a very critical piece of driving that 8% -- 800% -- excuse me, 8x, 800% throughput increase. So yes, we have had -- I wouldn't say luck. I think we have been methodically grinding away to make sure that whatever gains we make with our humans and with our machines, we do not drop back. We have been able to maintain that throughput. So it's good news. Thank you for the question.

Thank you. And then final question, in consulting with some investment banking professionals, they indicate an amount of borrowing that one could expect you be able to attract in order to close this pending acquisition. And the amount that they provide, the range they provide, leaves quite a bit left over that would presumably have to come through equity, but your equity is obviously depressed at this point in time. How do you feel about your ability to pay for this acquisition? And what other -- how do you feel about the -- how optimistic are you, your ability to even to close it?

Mark, I don't mean to sound negative or closed, but I've been instructed to -- that we cannot legally speak about the acquisition, the potential acquisition, at this time.

I understand. Was there any part of that question that you are able to speak on?

I think I need to err on the side of caution and just obey my instructions.

Fair enough. I'll back into the queue. Thank you very much.

Mark, one more thing before we leave you, I think one -- I think one thing we can say is the potential acquisition activities continue.

Yeah, that's very clear from the forecast that you provided, which were pretty optimistic, and I think you did a pretty good job explaining the methodology by which you think that you can hit those numbers. So -- and that's consistent with what we're seeing in the industry. So that was nice to see that as well as the order flow coming through, which -- I think what a lot of folks are waiting on bated breath to figure out is not so much, is the deal going to close, but can it even be closed, given your situation. And so that's -- I think that's a big part of the frustration out there, which is why I asked the questions.

Understood.

The next question comes from Greg Schlatter, Private Investor. Please proceed.

Yes. I've got just a couple of questions. Since you managed to be consistent on losing money this quarter, am I reading this right that you having to borrow money to pay legal fees to find out if you can acquire this company? I mean that what's going on you're borrowing money to pay the legal fees, do you even see if you can purchase the company?

I think -- go ahead, Bobby.

There has been some borrowings. There's also been inflow of cash from operations. But yes, there have been some borrowings for some of the expenses.

So my question, you can't even pay the attorneys out of cash to acquire a company that size, how on earth do you expect to be able to pull a deal off, one; and two, once it is pulled off how do you even manage the cash flow within that company when you have -- what do you have $400,000 in the bank and that's it?

I believe that you are mischaracterizing our report. Thank you.

Thank you. The next question comes from Ross Taylor with ARS Investment Partners. Please proceed.

Thank you. A couple of questions. Alex, what level of capacity do you think you're running at in Ranor and also in Stadco? It would strike me that the revenues you're running at are a fraction of what you're capable of running at. I'm trying to get a handle on how much unused capacity you're sitting on in those two facilities?

Quite a bit. I think it varies with the ebb and flow of the business, but we have open capacity. We have also ups and downs of the PO flow and the material flow coming in. And it's a question of really timing and product mix that sometimes is going to help us and sometimes does not. Our order flow is good. Our capacity is available and we have more open capacity.

Okay. Why have you not stepped away from DoD business in an effort to utilize more of your capacity even on a temporary basis? I could see what it would allow you to add to your workforce to volume to get them worked up so that when you get these important opportunities from the DoD, you'd be ready not only to execute but execute at a very high level if you were bringing on more outside business. The company used to do a lot of industrial. It seems you have abandoned that segment. Why was that decision made?

Well, if you remember back then the company used to do a lot of business with potentially over 1,000 customers. And much of the time when we do that much business that is so fragmented, the losses continue to mount. Instead of concentrating our forces on one set of specifications and one business sector, these are small companies that don't deal well with a fragmented approach.

Okay. In the recent information that you published with regard to the acquisition, I'm not going to ask you about that. But what struck me as you're offering the three-year forward view on expected revenues, expected EBITDA and the like. You don't give us a quarter out. Why is it that you're able to give us three years of information on Votaw, and you're not able to give us about three months on TechPrecision?

Sorry, Ross I must – no, the numbers include all three -- well two current subsidiaries as well as the acquisition of Votaw. It combines all three.

Yeah. As you're giving -- so you actually have pretty long visibility, not only on Votaw, but also on your two businesses. I think it would be very helpful to your investors if you were -- if it didn't take this acquisition, which by the way I'm strongly in favor of, I think the acquisition when it's done will be a homerun. I think that those who don't quite understand what's going on or where the money is coming from. I think it's quite clear. This is a deal that you're financing on Votaw. This is likely to deal with a strategic investor or investors involved on Votaw who are likely to be providing perhaps taking the equity and providing the debt. I'm just guessing on that, but that's my experience. And when the company is taking over someone much larger than they are usually done in this type of fashion, and they're also proven to being profitable. It's just strikes me as they would actually be -- you can do it. So it would be helpful if you did do it. You do talk about the fact you can't give us insight. No one's asking you about specific programs. So the idea of being able to talk about the combined company, you've got four -- at least four major programs possibly others and the like. So that would be helpful. Also have you been finding in here that you're picking up business from -- are you primes or those who are employing you bringing new business from others who are not able to execute?

Some of this information is in the public arena as far as what you just alluded to in the second part of your lessons. Those of us that cannot execute are out there.

Are you winning business that others had that they were not able to execute on? It's a simple yes or no question. I'm not asking program specific, but I don't know why you wouldn't be able to answer it.

Well, the reason I'm not able to answer is because somebody has told me that you're not going to talk badly about people who have lost their business. But I think you're on the right track there with your question. Is that good enough?

No. Not actually. I think this is part of what the crisis we have with investors is that you -- that's a question that can be answered. I don't think you need to dance around it. I think you need to build a bridge with us. Quite honestly if you built a bridge with us, I think the stock would be $6 to $8 a share not $4 a share, because I think when you look at the economics and you've laid them out for this acquisition this is what I have referred to others as your Graham moment. You have a chance to literally do for this company, what happened to Graham over the last year or so, 14, 15 months where its stock went parabolic. And it's done without growing backlog has not grown revenues EBITDA and the like. If you look at what's going seasonally in out years expected, you're looking at a home run.

Let me try to rephrase myself then Ross, if you give me a chance.

Certainly.

So I think the holistic way to -- not only do we have --new orders come from several different places. One is the offload from our clients. One is new part numbers that become designed and released with the new capabilities of the nuclear submarines. And certainly, when there is a competitive bid, we are winning those. So perhaps that's a much better and more comprehensive way to answer your question.

So you're winning new orders, new part numbers and you're picking up business implied from others who have struggled to execute on their end. That's kind of basically where I'm getting to. Is that correct?

Yes, inclusively, yes.

Inclusively. Okay. Now you've lost money in eight of the last 11 quarters. You've made money in two and broken even in one. What is it going to take short of the closure of this acquisition which will I think change that. But short of that what's it going to take? And why can't we get this company to where it's making money?

If I can perhaps characterize this. Ranor by itself is in a much better place. It's had 10 years of good recovery whereas Stadco was a very damaged suffering turnaround that we acquired. We acquired it and closed it in 2021. There have been certain success stories and the -- much of the deferred maintenance has been a big drag on earnings and on profits. We're not over the hump yet. It continues to be a turnaround but we do have success stories and we continue to methodically really thump down these problems that occur. You'll recall that a few months ago, we had a number of different machines suffering at the same time and drastically causing a loss at Stadco. So put together, yes, we are suffering. Separated, the focus really needs to be twofold. One is to preserve the gains that we have made at Ranor and continue to be profitable and increase that profitability. We are at an inflection point now, especially with Ranor. We are not at that inflection point completely with Stadco. So sharing the success story is showing some progress and the progress is not good enough to reverse the flow completely for both subsidiaries and TechPrecision at the same time. We are also spending money on the potential acquisition because that's what we need to do to get through our activities and our steps. So there is a combination of three things that are contributing towards the recent anyway numbers. I expect this to get better.

And did you indicate that Stadco was breakeven operationally this or close to it this quarter?

Yes. Question

Okay. So you are getting quite close to this.

Yes operationally the loss is I mean a negative 3% of sales basically. We're almost there not there yet. I remember back in the day, we were carefully delineating black and white. We were still red we reported red. We're still -- once we got black it was perhaps even a very, very small amount of black. We would like to cross that line soon with Stadco.

Okay. Well, it appears that you are working in that direction. It also strikes me as if my read is right that this deal will not only be a home run for the company, but I think it -- and this is I think the frustration investors have is if indeed everyone is waiting on the financing. I think a lot of people are waiting and expecting there to be a public equity offering something that you hire someone to go out and try to shop millions of shares in the public market, if my read and experience is right, you don't do that. And I think it's imperative therefore you get this deal closed, and you prove me right or wrong, because you prove me right, the stock is going to be back where it was and better, because the numbers you put out the other day are absolutely fantastic. If you can get that in this company even with a significantly larger shareholder base, if you double your shareholder base, that's still a home run deal. And I would like to see that deal close. And I'd like to see us get therefore where we can get the profitability, because patient is not a virtue I was born with. And while I have supported you I am losing my patience. And I'm losing my patience, because I think that this deal was communicated poorly, and I don't think we should be sitting here with a $4 stock looking at this deal. I think we should be looking at the stock that actually is probably higher than it was when you announced the deal, if these numbers are correct or even close to right. So thank you. I'll let someone else queue on year here.

Thank you.

Up next is Mark Gomes with Pipeline. Mark, please proceed.

Yes. First, I'd like to -- I agree with everything Ross said, that was kind of a command performance. I do commend your response to him, Alex. So when you asked about stealing business, I understand not talking bad about competitors, but that was -- you found a way to answer that question without talking badly specifically about any competitors. So that's sort of thing where best done proactively as opposed to proactively shutting a question down. I think that's where a little frustration comes in. That being said, are you go to provide any kind of color commentary whatsoever any regarding what gives you confidence in the Volta forecast numbers? In other words, you -- without telling us of course you know what businesses they're in. What programs they're working on things like that. Can you tell us a little bit about the confidence you have that that will continue that -- you're not buying a business that's at its peak, but is going to continue to be robust?

I'm going to answer this question, Mark, and not going to avoid this. I'm going to carefully answer this question. So I'm just -- give me a moment here. So number -- the numbers that we published reflect part of the answer to your question, which is do we expect this to fall flat? Do we expect it to already be peaked? The numbers do show that. The numbers show an increase.

I understand that

I would -- I'm sorry Mark, there was another part of it is the -- I pride myself on releasing information that I believe in. I'm not sure how far that goes with all of us, but I do that.

Yes, that adds a little bit of color to it. We deal with forecast every day and might obviously, the forecast you put out was clearly the best forecast that you believe that you have at your disposal. My question is more around the confidence in the I can put together a forecast and tell you, well this is my best guess, but I don't know how much confidence I have in or this is my best guess and I'm 100% confident in it. So that's where the cost of that question was.

Understood. And I think also the forecast as we had pointed out in an answer to an earlier question is a combined forecast.

Right. That was clear from your commentary on the methodology. It was very good what you put there. And then

Okay.

I guess last question. Your -- the deferred maintenance issues that you're working through Stadco. What inning are we in? Is this the eighth inning? Are we one or two quarters away from being out of the woods there? How does it are we 75% of the way I don't know however you want to kind of characterize it qualitatively not something that we're going to hold you in a new solver, but when you say we're almost there what does almost mean?

I think there's a two-part answer to that question. As we implement and execute some of the deferred maintenance we are winning. So we illustrated one win. Okay. The other piece of it that is not so apparent is the ability to hold the line and not let it back slide is the other piece that's a hidden piece and not so apparent to any of us that are not in the execution and operational role of running these machines and making sure they don't backslide and fall apart again. That piece is going pretty well meaning if you compare our performance to a quarter -- quarter-by-quarter comparison to a year ago. A year ago we were negative 2% of net sales and we're able to hold that despite the mishaps that were -- that happened this fiscal year from last -- from the quarter a year ago. I'm not sure I'm coming across very articulately right now. But the point is, this quarter negative 3%, essentially, breakeven. The quarter a year ago was 2% also essentially breakeven. We are attempting to not only fix and implement deferred maintenance, but whatever gains we have our job is to hold the line and not let it back slide. And that piece of it seems to be going well. We just need to continue to repair what we can to make sure that whatever is repair doesn't backslide. How does that translate into what inning we are? I'm not able to quite tell yet to be honest. But we're more ahead than behind. With the recovery of Ranor it took a number of years. We are in the third year now with the Stadco acquisition. So I think there should be more good things to come. We need to also timing-wise it would be good. And also product mix wise it would be good for our customers to really support us by giving us business that dovetails into the high throughput machines that we've recovered. So, if we can highly populate the electron beam welding team, that would help quite a bit. But the good -- that's the good part. Will they do that? They are doing that to a certain extent. We need more of it. So, at the very least, we now have equipment and people that are ready to take on much more than we ever have before in the history of Stadco in certain pieces and certain work centers. I'm sorry for the very long explanation but I'm trying to give color and trying to build a bridge.

Don't ever apologize for giving a long-winded answer. I think the communication that you're providing on this call is reminiscent of a few quarters ago when you started a move in that direction. And trust me the feedback from the substantial number of folks that own the stock due to my coverage, it waxes and wanes with your communication and on this call it's greatly improved and I appreciate that and I'm sure they will as well. Thank you.

Thank you.

The next question comes from Richard Greulich with REG Capital Advisors. Please proceed.

Good afternoon. First of all, I apologize. I was only able to get on the call about five minutes ago. So, I may be covering something that was covered. The first thing I heard was when Ross was saying even if you double your shares that's great whatever. Have you discussed at all shares or debt financing?

Again as I alluded to earlier, I've been instructed to not speak about the potential acquisition.

Okay. Who is the firm or the firms that are you working with you on the financing?

I think for anything that you have for the potential acquisition, you need to refer to the press release that just went out. And it stays in there what we can say and are saying at this time.

Well, this is the first time I've ever heard somebody making -- looking to make an acquisition without naming the brokerage firm or the adviser that's helping them obtain financing. Could you say that who that is?

I cannot at this time.

The next question comes from Ross Taylor with ARS Investment Partners. Please proceed. Ross, your line is live.

I wanted to touch on a couple of things go quick. I'm not sure I should come back and ask the questions after I got the way of reviews. But Alex, V-22 tiltrotor Osprey has been grounded for some time. The program is deeply troubled at this point. The Navy and Marines are flying their CH-53Es at a much higher rate. It was my understanding that those airplanes have been hours-limited before. I know the Israelis hour-limited theirs. Are you seeing business coming back into Stadco for the CH-53E?

I can tell you that we have -- we see business for D, E and K.

Okay. Okay. I actually know a K flew over my house on Saturday rather I thought that was interesting big and actually surprisingly quiet. So that is a real positive situation developing there in that. Second is, we've seen some of your peers talk about the availability of funding whether it be from the Federal Government. The government is working very hard to build out its Defense Industrial Base infrastructure. Talking to people in your industry, there are a lot of small companies, sub-$100 million dollar companies many of which are in positions like you are. Is the Federal Government or are your customers legitimate sources of financing should you need it for work or not for financing the acquisition, but for actual operational work?

I think I'm allowed to say, on this next piece. So I would re-characterize that as customer-funded CapEx.

Okay. And that is available to you. And you've made it...

That has been made available and partially executed.

Okay.

I'm sorry Ross by Ranor.

By Ranor. And when you -- yeah which makes sense. When you do that, does that come with backlog? Or does that come with a promise of future backlog?

Well, I think it would be foolish to have funded CapEx to our company and not give them anything to do.

Well, technically backlog is -- there's a technical definition of backlog. You have your definition and the like. So they might well basically -- obviously they're giving it to you to do something but it might be -- is it something that actually shows up in your $50 million plus backlog which by the way it's nice to see you finally get to that number? Or is it something that…

I can answer that question very clearly. The -- it does not show up as backlog, because our definition of backlog is actual purchase orders for components that we manufacture.

Yeah. And that's what I was getting at. So you have that, but it's likely that you have more -- that you have a -- and it is clear from what you laid out earlier this month on the three years that you have visibility well beyond this year and that is why you're confident. And that is why this deal in the end. When it gets done a year or two years three years out will actually not appear to be a step over the line and a moment of insanity but actually a rather smart transaction that changes the fate in the future of this company in a favorable fashion?

Yes sir.

Okay. I'll give it back to someone else. Thank you, sir.

Thank you.

We have reached the end of the question-and-answer session. I'd now like to turn the floor back to Alex Shen, for closing remarks.

Thank you everyone. Have a great day.