Good day, ladies and gentlemen, and welcome to the Q4 2018 Luna Innovations Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Following managements prepared remarks, we will have a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, today’s conference is being recorded for replay purposes. It is now my pleasure to turn the conference over to the Luna team. Please go ahead..

Good morning and thank you for joining us today. This morning we issued two releases, our fourth quarter and full year 2018 earnings press release, and also released announcing the acquisition of General Photonics.

In addition, we posted to the Investor Relations section of our website a presentation with supplemental information on both announcements. If you do not have a copy of the releases or the supplemental materials, please check our website at lunainc.com. We will also post a replay of this call to our website.

Some of our comments and discussions today are based on non-GAAP measures, specifically adjusted EBITDA. These adjusted numbers exclude the effect of certain non-cash expenses and other items. The adjusted results are a supplement to the GAAP financial statements.

Luna believes the presentation and exclusion of these items is useful in order to focus on what we deem to be a more reliable indicator of ongoing operating performance.

Before we proceed with our presentation today, let us remind you that statements made on this conference call as well as in our public filings, releases and websites, which are not historical facts, may be forward-looking statements that involve risk and uncertainties and are subject to changes at any time, including, but not limited to, statements about our expectations regarding future operating results or the ongoing prospects of the company.

Actual results may differ materially as a result of a variety of factors. More complete information regarding forward-looking statements, risks and uncertainties is available in the company’s SEC filings which can be found on the SEC website and our website.

We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of these forward-looking statements to reflect future events or developments except as required by law.

After our prepared remarks this morning, Scott Graeff, our CEO; Dale Messick, our Chief Financial Officer; and Brian Soller, Senior Vice-President and General Manager of our Lightwave Division, will be available to take your questions. And at this time, I'd like to turn the call over to Scott Graeff, President and CEO of Luna Innovations..

Good morning, everyone. Thanks for joining our call. As Alison [ph] mentioned, we issued two press releases this morning one on our quarterly and full year financial results, and one announcing the acquisition of General Photonics. We have a lot to discuss today.

I'm excited to share with you the details of the significant progress we have made over the last year. We've delivered very strong, consistent, financial results from quarter-to-quarter.

We've simplified our product portfolio, and we've put some of our capital to work in acquiring extremely complementary technologies that will allow us to drive its exponential growth. Simply put, if we normalize for the divestitures we've completed in the past year or so, 2018 was the best year in Luna's history.

I have to start by thanking the Luna team, who stayed laser focused on delivering our goals for the year and continue to serve our customers with excellence. As you all know, even with a robust strategy, nothing happens without the right team. 2018 saw a lot of changes at our company.

But my Luna colleagues, including those whom we welcomed from Micron Optics in Q4, remain dedicated to our vision of being a leader in optical measurement technology that improves accuracy and precision, while reducing risk and cost, and to power growth and value for our global customers. And I think the results speak for themselves.

In addition, I want to extend a hearty welcome to all of our new colleagues from General Photonics. You have built tremendous value for your customers, and together, we'll be able to deliver even more value and growth. We're thrilled to have you join the Luna team.

So switching gears let me now provide an overview of our very strong results for the fourth quarter and full year. In addition, we will review the M&A activity over the past 12 months, including details of today's announcement, and an update on the integration progress of the Micron Optics acquisition announced last fall.

The fourth quarter of 2018 marks the fifth consecutive quarter of double-digit year-over-year growth in our revenues from continuing operations and the seventh quarter of very strong revenue growth. And the performance in Q4 just builds on the enormous progress we have achieved over the course of fiscal 2018.

We've spoken consistently about executing on a strong, clear and focused strategy, and in 2018 saw us do exactly that in a disciplined manner.

As a result, our existing businesses continue to perform well with strong top line growth, which I believe is clear evidence that we're getting a return from some of the internal investments we made that we discussed throughout last year.

In addition, we continue to be interested in further M&A investments that fits squarely within our strategy, and which we believe would accelerate our performance in our two important market verticals; communications testing, and structural testing based on optical sensing.

Luna’s being recognized for the strength of our portfolio and the expansions of our capabilities enabled by some of the M&A work we did in 2018.

I was just in Germany a couple of weeks ago, with about 20 channel partners, and the discussions about in response to our recent recent acquisition of Micron Optics were some of the most exciting I can remember.

Micron channel partners were really excited about Luna's ODiSI and The Luna partners were equally pleased with the addition of Micron’s products and capabilities to our solutions. So now digging into more details on the financial performance. We grew revenue 37% in the quarter, and 30% for fiscal 2018 versus the comparable year ago periods.

Gross profit margin grew from 42.5% to 49% in the fourth quarter and 40% to 45% for the full year 2018. This is an exceptional expansion of gross margin rate when you consider the puts and takes of the divestitures and acquisitions during the year.

This gross margin expansion highlights the focus of our team, they continue to execute at a high level even with the movement of assets in and out of Luna. Revenues from our Products and Licensing segment, which includes Lightwave and ODiSI grew at a very strong 69% while revenues from our technology development segment grew almost 8% in the quarter.

As a reminder, in addition to ODiSI, Lightwave includes our instruments for testing fiber optic components, and networks used for high speed communications. These products target the growing demand for bandwidth, fueling the development of silicon photonics and the building of more and more data centers.

Our ODiSI instruments measure structural health, and integrity of components and structures. Let me share with you some of the highlights of the progress in our various business divisions, starting with Lightwave. Total revenues in the fourth quarter were up 75% year-over-year partly due to the acquisition of Micron into October of 2018.

Revenues in both our sensing part of Lightwave as well as communications test were up double digits. In our sensing business our ODiSI system continues to gain traction in the market with 12 units sold in Q4, 2018.

We were able to drive this strong performance as a result of investments in the addition of new direct sales hires, enhance channels, and the introduction of our new ODiSI 6100 Platform. The main drivers for ODiSI adoption continue to be the use of new materials such as composites in our main target vertical markets of aerospace and automotive.

In Q4, we delivered multiple ODiSI units into both of those markets, including our first systems directly into one of the big three U.S. automotive manufacturers, certainly a positive sign for the adoption of the ODiSI technology.

In addition, the acquisition of Micron Optics last October was very important to the future of expansion of our sensing capabilities.

Due to the complementary nature of Micron Optics products, we're experiencing a smooth integration with our existing product lines, with our combined portfolios, in particular their Hyperion [ph] line of optical sensing interrogators and sensors with our ODiSI product, we have the ability to provide our customers with a broader range of capabilities, including higher speeds, and sensing over longer ranges.

An example of this integration of 13 of our Hyperion optical sensing integrators into a new bridge tunnel system, which connects three major cities in China's Pearl River Delta region, known as the HZM Bridge, this mega structure consists of three cable state bridges, one undersea tunnel, and two artificial islands.

This bridge tunnel system spans a total length of 55 kilometers, making it the longest sea crossing link ever built. Given the complexity of this bridge, constant and reliable measurement of structural health is critical, and our sensors allow that to happen. Now, let's turn to the communications test business.

This part of the business finished the year with over 10% growth, which was right on track with our internal estimates. Drivers here continue to be the integration of optical and Electra Electric systems in Silicon or generally known as Silicon Photonics.

Over the course of 2018, we invested our communications test segment by adding engineering staff to accelerate our new product platforms, which will result in two product new products in 2019. There are new analyzer aimed at Silicon Photonics test, and a new portable reflectometer designed for aerospace and short haul test applications.

As we think about the priorities for Lightwave in 2019, certainly we will continue the integration of the Micron Optics team into the division. In addition, we will also be focusing on building the team, to support continued growth, by adding engineering and sales resources. We have some exciting opportunities for growth this year.

We have several major new product releases coming in our communications test segment, increased performance and feature updates to our ODiSI platform, and new sensors, which allow even more functionality. Our Terahertz division is continuing the strong momentum built in the first three quarters.

In the fourth quarter, we posted a 72% increase in product sales year-over-year and delivered a robust 68% growth in product sales for the full year. Importantly, in 2018, we expanded sales channels with the addition of six new distribution partners, and increased market exposure through 10 trade shows.

We made robust progress on product sales with a large government defense contractor achieving a formal manufacturing readiness level 7 assessments, and purchasing 5 Terahertz systems for production of the F-35 fighter jet.

And on expense side, we created cost efficiencies for the future by moving to a new facility, which is scaled appropriately to the size of our business and allows for much greater levels of collaboration. As we move into 2019, we'll be focused on leveraging the efficiencies provided by the new facility and our expanding team.

In addition, we will promote new products and capabilities with successful applications, market presence and compelling collateral and web content. In our technology development segment, full year revenue grew 13% year-over-year. As a reminder, revenue in this segment comes largely from third party contract research.

We are seeing more and more requirements for multidisciplinary solutions, and our diverse and experienced team is able to quickly develop those solutions for our customers. As we use this segment to investigate future growth opportunities, we can sell early stage products to test the market and receive valuable customer feedback.

For 2019, we expect another successful year of innovation and growth. We're entering 2019 with a larger contract backlog than we had a year ago. Now I'd like to provide some color on our recent M&A activity, starting with an update on the integration progress for the Micron Optics acquisition.

You'll remember that we acquired Micron Optics in mid-October 2018. The company has products in sensing solutions, filters and lasers, with a significant piece of revenue driven by sales of its fiber optics sensing instrumentation, which is very complementary to our ODiSI product, and additionally fits right into our structural test vertical.

Luna and Micron Optic sell into some common end markets, but Micron also brought exposure to oil and gas and civil engineering, newer markets for Luna. And both companies are fueled by continuing trends, driving demand for higher bandwidth. We closed the Micron transaction in mid-October and immediately began working on the process of integration.

We're right on track with our expectations. We've taken the first steps towards cross-functional integration starting with the integration sales, marketing and the engineering teams. And we've already begun the full integration of those teams.

Throughout the next six months, we'll be focused on unifying our brand presence through vehicles like our website, and marketing collateral. We're developing a channel and marketing integration strategy to accelerate the penetration of core markets and maximize our channel leverage.

We'll be merging sales channels to drive both revenue and energy synergies, which while early, are also proceeding to expectations. And we have -- and we have begun the process of system integration across all platforms including Sales, ERP and MRP. Overall, I am extremely pleased with the progress.

When we announced, we said that Micron was a great strategic acquisition, with a profile that would allow a seamless and quick integration in which was adjusted EBITDA accretive in Q4, 2018 and we anticipate to be fully accretive in 2019. And we're right on track, which gives me confidence about the acquisition we announced today.

General Photonics is another acquisition with a terrific strategic profile, just like the acquisition of Micron Optics that fits squarely within our sensing business; General Photonics is in the sweet spot of our com test business. We acquired the company for $20 million, $19 million at closing, and a $1million earn out.

Although 2018 numbers have not yet been audited, I want to give you a better sense for the size of that asset. Last year, General Photonics achieved approximately $11 million in revenue at approximately $2.5 million in adjusted EBITDA, so we expect it to be immediately accretive.

The company is based in Chino California, has approximately 60 employees, approximately 80 patents, and has been in business almost 25 years.

In addition to providing strong opportunities for deeper penetration into our existing customer base, with complementary capabilities at differing price points General Photonics also brings greater exposure to certain geographies, particularly Asia and expanded exposure to various end markets.

The combination will also allow Luna to continue to improve value to customers in critical applications, such as these three; first, a precise measurement in high speed communication networks and data centers that enable faster networks and higher performance devices at a lower cost.

Second, precise optical assemblies for gyroscopes used in guided weapons systems deployed in our country's security systems, and third, precise measurement and control optoelectronics that can be used to make better light our systems, which are key to autonomous vehicles.

As with the Micron transaction several months ago, we're very excited about this acquisition and are confident that this is the right deployment of capital for the right asset. We again expect a smooth integration and I'll look forward to providing updates on our progress in the months to come.

In the meantime, both Luna and General Photonics will be exhibiting at the OFC event beginning tomorrow March 5th in San Diego. This is one of the biggest trade shows of the year. OFC is the premiere event in telecommunications and data center optics.

We look forward to sharing our exciting announcement with industry leaders, who come from around the globe. Both Brian and I will attend and if you're in San Diego, we invite you to stop by the Luna and General Photonics booths. Finally, I'd like to discuss our outlook for the current year.

As discussed last quarter, we had not historically given financial guidance, but indicated that we regularly evaluate disclosures made -- make the most – what disclosures make the most sense. With a close of 2018 fiscal year, and a good track record of strong and consistent performance, we feel that the time is right to provide guidance for 2019.

We've bought and sold certain assets over the last 18 months, which resulted in a more focused organization better situated to scale consistently. So for fiscal 2019, we expect full year revenues to be in the range of $60 million to $65 million with full year 2019 adjusted EBITDA to be in the range of $6 million to $6.5 million.

So to summarize, I'm incredibly proud of the progress and results delivered by the Luna team in 2018. We achieved strong organic growth across largely all of our businesses, while also executing well on strategic acquisitions and divestitures. We've capitalized on the advancement of optical based technologies.

And as I've mentioned before, our production capabilities fit squarely into the sweet spot of this growth. I'm really excited about what we accomplished this past year. We see this performance as a validation that our strategy is working and that our target markets are rich with opportunity for continued growth.

And with that, I'll turn the call over to Dale to review the fourth quarter and full fiscal 2018 financial results in more detail.

Dale?.

Thanks, Scott. Let me first cover the performance for the fourth quarter, and then I'll talk about our full year results.

As a reminder, with the sale of our off our optoelectronic components business in July of 2018, the operating results of that business for both 2018 and 2017 have been reclassified to discontinued operations in our income statement.

The income statement also includes the results of Micron Optics from the October 16th 2018 close through the end of the year. Our revenues for the quarter ended December 31st 2018 were $13.5 million compared to revenues of $9.9 million for the same period of the prior year representing a 37% year-over-year increase.

The year-over-year increase in fourth quarter revenues was comprised of a 69% increase in our product and licensing segment along with an 8% increase in our technology development segment continuing the strong revenue growth performance delivered throughout the fiscal year.

Within the Products and Licensing segment, revenues in our Lightwave division grew 75% versus the fourth quarter of last year and Terahertz revenue grew 72%. Our gross profit increased to $6.6 million for the quarter, compared to $4.2 million for the same quarter of last year, representing a gross margin of 49% in Q4, 2018 compared to 42% in Q4 2017.

The gross margin improvement reflects the changing mix of our revenues with 59% of our revenues coming from the product and license segment in the fourth quarter of this year, compared to 48% in the fourth quarter of last year, in addition to smaller margin improvements within both of the operating segments.

Operating expenses were $6.1 million or 45% of revenue for the three months ended December 31, 2018 compared to $4.6 million or 47% of revenue for the three months ended December 31, 2017.

The increase in SG&A expenses is primarily due to $751,000 in transaction related cost associated with the acquisition of Micron Optics in October and $800,000 of expenses associated with the operations of the company following the acquisition.

With the year-over-year increase in revenues and gross profit and close management of our operating expenses, we recognize pretax income from continuing operations of $0.6 million for the fourth quarter of 2018 compared to a loss of $0.5 million for the fourth quarter of 2017.

Net income from continuing operations decline slightly to a loss of $0.1 million for the fourth quarter of 2018 compared to approximately breakeven for the fourth quarter of 2017 due to the allocation of income taxes between continuing and discontinued operations.

In terms of income related to discontinued operations for the fourth quarter of 2018, we recognized an additional gain of $1.1 million from the sale divested Opto business. Amount shown as discontinued operations for the fourth quarter of 2017 also reflect the operations of the Opto business during that period.

Net income attributable to common stockholders for the three months ended December 31, 2018 was $0.9 million compared to a net income of $0.4 million for the three months ended December 31, 2017.

For the full year 2018, our revenues were $42.9 million compared revenues of $33.1 million for the same period of prior year representing a 30% year-over-year increase. We drove more of that revenue to gross profit delivering $19.4 million or 45% of revenues in the period compared to $13.4 million or 40% of revenues in 2017.

Further, with our continued focus on expenses, we improved operating income to $0.9 million for the full year from a loss of $2.2 million last year despite the increased but very necessary investments we made in sales, marketing and engineering resources that we’ve mentioned on the past couple of earnings calls.

Net income attributable to common stockholders was $10.7 million for 2018 compared to $14.5 million for 2017.

The decline in net income attributable to common stockholders was due to discontinued operations which included the gain recognized on the sale of the high speed optical receivers business in 2017 compared to a lesser gain associated with the sale the Opto Electronics business in 2018.

And finally, we improved net income per diluted share from continuing operations to $0.04 for full fiscal 2018 from a loss of $0.5 per diluted share during 2017. We ended the quarter with $42.5 million of cash, up from $37 million at the end of 2017.

At the end of 2018, the principal debt balance was $0.6 million which is scheduled to be paid off in May of 2019. Our working capital increased to $56.1 million at December 31st, up from $44 million at the end of last year.

And I want to conclude by saying that from a financial perspective I cannot be more pleased with a strong and steady performance our team delivered throughout the past fiscal year.

We took a strategic and deliberate approach to investments and managed our expenses prudently ensuring that we were able to provide a greater percentage of our revenue through the profits. Scott provided you with our annual guidance. So you have a sense for how we believe the year will shape up.

I do want to add a reminder about Luna’s typical seasonality as you consider our annual guidance, remember that each year Q4 is typically our strongest quarter and Q4 is usually our slowest -- for Q1, I'm sorry, is usually our slowest. That said, we’ve entered 2019 with good momentum and we are well situated to deliver another strong year.

And with that, I’ll turn the call back to Scott..

Thanks, Dale. At this time, I’d like to open the call for questions. Brian Soller, our Senior Vice President and General Manager of Lightwave Division which is a fiber optic test and measurement business is with Dale and me at this time and also available to ask -- address any of your questions. Operator..

Thank you. [Operator Instructions] Our first question comes from Dave King of B. Riley FBR. Your line is now open..

Hey, guys. This is actually Lee Krowl filling in for Dave this morning. Thanks for taking my questions. First, just wanted to start out on the General Photonics announcement obviously, very in line with your M&A strategy.

But I was wondering if you could provide additional color just perhaps deal timing closer, synergies, as well as maybe break out the 19 million, whether that’s cash or stock?.

Sure. Well, General Photonics is right in our communications test vertical. So, they sell components and equipment that are on the lower end of the vertical that we sell on. So it completes our market vertical nicely. And we use a lot of the same rep firms and I’ve known them for years and well respected.

The $19 million is cash that we use to acquire General Photonics. I don’t recall the other.

Was there any other part to that question?.

Just the anticipated timing of the deal closure?.

Yes. We closed it at the last Friday..

Yes. The deal closed on Friday, Lee..

Got it.

And then, are there any associated cost savings, perhaps synergies consolidation of facilities, anything like that?.

Yes. I don’t think right now we’re looking. There are some cost savings associated with some overlap in potential opposition. But for the most part we’re continuing to run the operations in California.

And I think there's a lot of structural synergies that will go on with combining the sales teams that our sales folks know the products that General Photonics sell and we’ll be able sell and vice versa. So there’s a lot of synergies from that perspective. But not a lot of expense synergies..

Got it. That makes sense.

Obviously providing guidance for the full year, significant vote of confidence; could you maybe just break out the sources of visibility that gives you the confidence in that guide and maybe some of the specific drivers?.

Yes. I mean, I think we look at it and we’ve always through that that guidance was something we wanted to get to. We want to do it at the right time. And I think in seeing the consistent quarter-over-quarter performance in the Lightwave Division and the backlog that we have in our technology development division, we felt this was the right time.

We gave guidance in Q4 of 2018. There were enough moving parts in 2018 that we felt we need it to provide some guidance to you folks in Q4. And when we step back and looked at we thought giving top line and adjusted EBITDA for the year was the right time. Again there was a lot of moving parts in divestitures and acquisitions in 2018.

We put a supplemental deck out there on our website that gives you kind of a normalized pro forma 2018 that includes a full year of the Micron Optics, and then we’ve given a little bit of color here on what General Photonics did in 2018.

And we thought to help sum that all up providing the guidance for full year was the right time and we felt that the last six, eight quarters that we’ve had that it was the right time to give guidance..

Got it. Last one from me. Just based on where we had EBITDA for 2019 and kind of backing out – excuse me, yes, 2019 and just kind of backing out the assumptions for General Photonics. It seems like there's some gross margin accretion.

Can you maybe talk the trend in gross margin for the full year?.

Yes. Lee, certainly we expect the product side of the business to continue to grow at a faster rate than the technology development side of business. And so with that comes a overall increase in the blended margin. I wouldn’t look for monumental jumps in the market.

I think that's the two segments individually will kind of maintain where they are and that will – as the mix changes that will drove the blended rate out..

Got it. And then, you guys mentioned facilities transition. I have to go back and remember if you guys mentioned on the last call.

But is there is a CapEx component to that to start the year as you guys move over and bring that facility on line?.

No. This is a relatively small facility for the Terahertz operation in Michigan..

Yes. When we sold the Picometrix to MACOM, TeraMetrix stayed within the MACOM facility for 18 months and it was time to move. We moved into a facility that fit and moved all of our equipment into that. We don't see a capital expense set..

Of course -- yes, there’s no accounting standard that all the leases will be capital leases. Of course, our 2019 will reflect that, but there’s not an incremental lease that comes in..

Got it. Thank you for taking my questions guys..

Yes. Appreciate it..

Thank you. Our next question comes from Christopher Sakai of Singular Research. Your line is now open..

Hi. Good morning..

Good morning..

Just wanted to touch on the gross margin improvement for the quarter and the year.

Just wanted to see what were the main drivers to this improvement?.

Yes. I mean, I think what you’re seeing is our gravitation to clean the story up and become a Fiber Optic based test and measurement instrumentation company here.

And adding the Micron Optics piece of the business and divesting the Opto Solutions business, helped our gross margin a lot as well as adding more a higher percentage of instrumentation versus the technology development.

So, I think the combination of the two you saw where the blended gross margin has increased and will continue to stay that course if not get even better with on a blended basis due to the acquisitions we announced today which maintains, is consistent with our Lightwave gross margin..

Okay.

So, the acquisition of General Photonics, will that help gross margin?.

Yes. Yes. On a blended basis, I mean, they – like we talked in 2018, it did nearly $11 million and they have instrumentation like gross margins which are in the mid 50s to lower 60s..

Okay, great.

And then, lastly on your revenue guidance what are the main drivers there to get to that $60 million to $65 million guide?.

Well, we continue to believe that on the product side of the business that we’ll be mid to upper teens.

And when you blend that in with the acquisition that we have and if you look, like I said I encourage you to look at the supplemental deck that’s out on the website that gives you pro forma look at 2018 including a full year as if we owned Micron Optics for full year and then adding this General Photonics and seeing that type of growth.

We’ve always said that we were looking at mid to upper teens overall company I should say, I stand corrected there, overall company mid to upper teens. So, and the technology development piece of the business is in the 8% to 10% growth like they did last year.

So, when you blend that together with the product side that kind of gets you into that range of revenue growth..

Okay. Thanks..

Thank you. [Operator Instructions] Our next question comes from Tim Savageaux of Northland Securities. Your line is now open..

Good morning guys. This is Greg on for Tim. Thank for taking my questions.

First, could you provide an update on where you have seen growth opportunities within silicon photonics?.

Hey. This is Brian. Yes. So the market for silicon photonics continues to equip along pretty well. And the latest kind of overall growth statistics we’re seeing for the next few years are sitting in the low 20% range and lot of that’s driven by continued build out of data, communications that structure and kind of looming 5G implementations.

So, what we’re seeing is some tooling up amongst the component manufacturers given those two kind of micro drivers in our customer base in particular in the U.S.

and Indonesia, and in fact the first two months of the year here we’ve seen an uptick in the kind of production demand flowing through to the main OEMs in order to increased production typically you need more test equipment, and so that’s been a nice year for us and we expect to see that. It’s still early.

But we do expect to see that trends continue here in 2019..

Yes. I’d say, we’re big believers in this communications test vertical that we’re in. And that really is what led to the acquisition we announced today.

General Photonics is squarely right in middle of that vertical at a lower price point and we believe there’s a lot of ability to leverage off that to get into some customers and upsell them in some other products as well. So, we really believe in this vertical as well as the sensing..

Yes. As we touch a lot of the same customers and so from a strategic perspective we have historical Luna products at the kind of high end of the market.

And what this acquisitions does for us is really fleshes out the product portfolio and gives us a blend of entry level price points, mid level price points and then the kind of the typical high end Luna test equipment to sell into a customers that we’ve been – we’re working with for a years already.

So that will be a nice edition for our plan here in 2019..

Got it. That’s very helpful. And then I guess secondly, appreciate the color that you provided on General Photonics market focused and I guess specific applications.

Just wondering do you have any major customers?.

They do – they have a handful of major customers for there coil, fiber coil and module for business. They had a pretty strong diversification of customers. So the revenues in that $11 million range as Scott mentioned are well blended throughout quite a few customers. But they have handful customers at the top of the range.

And we’ve talked to them and they’re happy and we’re looking forward to continue to move forward with them..

Yes. And I don’t think we see anything that jumps out from a customer risk perspective? Or we heavily weighted in any one or two customers, nor do we see geographic concentration that would provide pause on us on risk. It’s a pretty well diverse..

Good to hear. Thanks..

Thank you. [Operator Instructions]. One moment please. And I’m showing no further questions at this time. So I’d like to turn the call back over to Scott Graeff for any closing remarks..

Well, thanks everyone for joining us today. As you heard on the call, we’re incredibly proud about the strong results our employees deliver through 2018. And we have no reason to doubt that we will carry that growth momentum forward throughout 2019. This completes today’s call. Feel free to reach out to me directly if you have any questions. Thanks..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. And you may now disconnect. Everyone have a great day..