Chris Byrnes - VP Business & Financial Relations Karen Sammon - CEO Bryan Menar - CFO.

Howard Brous - Wunderlich Securities Gary Siperstein - Eliot Rose Wealth Management.

Good day, ladies and gentlemen and thank you for standing by. Welcome to the PAR Technology Fiscal Year 2016 Fourth Quarter and Year-End Financial Results Conference. At this time, all participants are in a listen-only mode to prevent background noise [Operator Instructions].

Now, I will like to welcome and turn the call to the VP Business and Financial Relations, Mr. Chris Byrnes..

Thank you, Carmen, and good morning everyone. I'd like to welcome you today to the call for PAR's fourth quarter and year end 2016 financial results review. The complete disclosure of our results can be found in our press release issued this morning as well as on our related Form 8-K furnished to the SEC.

To access the press release and the financial details, please see the Investor Relations and News section of our Web site at www.partech.com. At this time, I'd like to take care of some housekeeping issues in regards to the call today.

Participants on the call should be aware that we are recording the call this morning and it will be available for playback. Also, we are broadcasting the conference call via the World Wide Web so please be advised, if you ask a question, it will be included in both our live conference and any future use of the recording.

I'd like to remind participants that this conference call includes forward-looking statements that reflect management's expectations based on currently available data. However, actual results are subject to future events and uncertainties.

The information on this conference call related to projections or other forward-looking statements may be relied upon and subject to the Safe Harbor statement included in our earnings release this morning and in our annual and quarterly filings with the SEC.

Joining me on the call today is PAR's CEO and President, Karen Sammon; and Bryan Menar, PAR's Chief Financial Officer. I'd now like to turn the call over to Karen Sammon for the formal remarks portion of the call, which will be followed by general Q&A.

Karen?.

Thanks, Chris. Good morning and thank you for joining us today for our fourth quarter and year end 2016 earnings conference call.

I'm going to start the call today with updates on certain issues reported throughout 2016 including the internal investigation into conduct at our China and Singapore offices and the matter of unauthorized investments made by the company's former CFO.

Regarding the China-Singapore investigation, our Audit Committee conducted an independent investigation with the assistance of outside legal counsel into import/export of products and sales documentation activities discovered during the third quarter of 2016. The investigation is focused on compliance with internal policies, the U.S.

Foreign Corrupt Practices Act and other applicable laws. We've voluntarily notified to the Securities and Exchange Commission and the U.S. Department of Justice and we'll fully cooperate with those agencies. During the three months ended December 31, 2016 we recorded $1.3 million of expense for outside legal counsel and forensic accountants.

Based on the results of the investigation to-date no material adjustments, restatement or other revisions to our previously issued financial statements are required.

We're in the final stages of the investigation; we're remediating the issues consistent with PAR's values and ethics and business conduct policies under the guidance of outside counsel and the Audit Committee. The SEC, DOJ and other governmental authorities have a broad range of civil and criminal sanctions that could be imposed on the company.

We cannot reasonably estimate the potential liability, if any, to the company arising out of the China and Singapore matter. With regard to the matter involving the unauthorized investment of company's funds by the former CFO in the fourth quarter of 2015, we were able to recover 771,000 in the fourth quarter of 2016.

Returning to the performance of the business in the fourth quarter of 2016. This morning, we announce that the company reported fourth quarter revenues from continuing operations of 60.2 million as compared to 56.8 million in the fourth quarter 2015, a 6% increase.

Our restaurant retail segment led this growth with the 21% increase in revenues as compared to Q4 2015. In the quarter, we recorded GAAP net income from continuing operations of 1.9 million and diluted EPS $0.12, compared to net income of 1.3 million and $0.08 diluted EPS in the same quarter in 2015.

On a non-GAAP basis, PAR reported net income from continuing operations of 2.1 million and diluted EPS of $0.13 versus 2 million in net income and $0.13 per diluted share reported in the fourth quarter 2015.

When viewing our business objectives, I’m pleased with our progress and results in this quarter and confident that the advancement we made toward our goals for the full year will full positively impact our 2017 performance.

When we spoke last quarter, I reiterated our strategy to invest in our cloud portfolio platforms as a foundation of change for PAR from hardware to a software led solutions based company with diversified revenue channels.

We successfully redirected development resources within the company and increased outsourced development to accelerate project, while moderating expense. We are experiencing the drive for next gen POS adoption and the demand for cloud-based POS subscription software. Evidence of this is the year-over-year and quarter-over-quarter increases for Brink.

Our performance in the fourth quarter is further validation and positions us well going into 2017. Our government segment had a solid year. We concentrated an Intel solution and mission systems contract growth and reported a backlog of 126 million as of December 31, 2016.

I would now like to turn the call over to and welcome PAR’s new CFO, Bryan Menar to give further details on our financial performance in the quarter..

Thanks Karen and good morning everyone. Products revenue for the quarter was 31 million, up 6.7 million, a 27.4% increase compared to Q4 2015. During the quarter the increase in product revenue was primarily driven by hardware sold to a Tier 1 customers, primarily McDonald’s, which represented 30% of total revenue in Q4 2016 versus 22% in Q4 2015.

Additionally, the hardware associated with deployments of Brink POS increased approximately 3.2 million versus Q4 2015. Offsetting these increases was a decrease from our domestic and international channel partners. In addition to 1.9 million decrease in Jack in the Box as we relapsed their 2015 rollout, which was completed earlier in 2016.

Service revenue for the quarter was 12.9 million, up 800,000, a 7.3% increase compared to Q4 2015. We continue to expand our recurring revenue based, which includes both software related services and hardware support contracts.

Recurring revenue increased 912,000, 11.6% increase compared to Q4 2015 due to software up 536,000 and hardware support contracts of 376,000. Recurring revenue for the quarter was 8.8 million or 68% service revenue, compared to 64% in Q4 2015.

We continue to gain momentum with deployments of Brink POS, noting a 114% increase of software-as-a-service compared to prior year. We exited the year with approximately 4.5 million of annual recurrent revenue software-as-a-service contracts.

Contract revenues from our government business was 16.3 million, down 4.1 million, a 20% decrease compared to Q4 2015. This is the result of a decrease in materials and sub contract revenue in a TML [ph] line of business and completion of mission systems contracts, offset by an increase in ISR direct labor and associated value ad revenue.

Contract backlog continues to be significant, as Karen noted, a 126 million as of December 31, 2016, up 2.5 million compared to Q4 2015 and up 3 million from the previous quarter. Product margin for the quarter was 25.4% versus 25.7% in Q4 2015.

Overall our product margin was relatively flat year-over-year with favorable hardware margins offset by a reduction of perpetual license software margins.

Service margins for the quarter was 26.4% compared to 32% in Q4 2015, service margins were down primarily due to 517,000 and accelerated amortization related to discontinued development of a software module.

In addition, margins within certain hardware repair contracts during 2015 were unfavorable due to increased investment to support our service customers. Government contract margins for the quarter was 8.9% compared to 8% in Q4 2015. This improvement is due to favorable contract mix associated with higher margin on a value-added revenue in the quarter.

GAAP SG&A was 8.2 million, up 1.1 million versus Q4 2015, primarily due to legal and advisory fees related to an independent investigation with our China and Singapore offices. Increased sales commissions related to volume offset by reduction in G&A footprint. Non-GAAP SG&A was 6.7 million, down 378,000 versus Q4 2015.

We continue to focus on managing our cost structure and analyze our fixed overhead to reallocate resources to support higher performing products. Net R&D expense was 3.3 million up 1 million versus Q4 2015 primarily driven by software investments made to support acceleration of our Brink and SureCheck product lines.

Now to provide information on the Company's cash flow and balance sheet position. For the year ended December 31, 2016, cash provided by operations of 11 million was primarily due to the net income and add back non-cash charges. Networking capital provided 1.2 million due to customer deposits offset by an increase in inventory.

Cash used in investing activities from continuing operations was 7.1 million for the year ended December 31, 2016, versus cash generated of 7.5 million for the year ended December 31, 2015.

In 2016 capital expenditures of 3.4 million, were primarily for PAR's new ERP system, improvements to our owned and leased properties, as well as purchases of computer equipment associated with our software support service offerings.

Capitalized software was 2.7 million and was associated with the investments in various restaurant retail software platforms. Cash used by financing activities from continuing operations was 2.2 million for the year ended December 31, 2016 versus cash used of 7.7 million for the year ended December 31, 2015.

In 2016, the paid the third Brink Software Inc installment of 2 million in addition the payments of long-term debt of 151,000 and payment of stock activity of 17,000. The inventory balance increased 4.7 million during 2016, primarily due to inventory procured for Q1 2017 deployments specifically tied to our global Tier 1 accounts.

During the quarter were able to managed demand for Q1 2017 deployments, while controlling our inventory balance of 26.2 million, a 3.5 million decrease compared to Q3 2016. Inventory turns were 4x for our domestic and international operations, which is consistent quarter-over-quarter.

Accounts receivable increased 1.2 million compared to December 31, 2015 primarily due to growth in revenue. Restaurant retail segment day sales outstanding improved from 59 days as of December 2015 to 49 days as of December 2016. Government day sales outstanding increased slightly to 44 days versus 42 days as of December 2015.

This concludes my formal remarks and I would like to turn it back to Karen..

Thanks Bryan. Now the report on our segment performance in the quarter and business highlights starting with our government segment. Throughout 2016 and continuing forward, we are focusing on growth through high margin, high tech contract in the Intelligence, Surveillance and Reconnaissance business and increased mission systems contract as a prime.

Through new contract wins, we’ve increased software development and systems engineering direct labor talent to our team. Over the past 12 months, we’ve added new and expanded contracts with the air force research lab, NSA and DARPA that achieve our goals of higher margin revenue in expanded focus areas for Research & Development.

Increased adoption of situational awareness technologies were PAR functions as the prime integrated have spurred complementary projects and revenues, and we are promoting the tech solution including PAR’s value-add tech connected platform to federal [technical difficulty] agencies.

The mission systems business is successfully transitioning from a portfolio based on small business credentials to a more expansive portfolio that leverages our reach history of operations and maintenance excellence software and systems engineering and program management success.

In the last quarter, we announced new contract award supporting the U.S. Air Force in Puerto Rico and in Intel solutions contract with the AFRL and DARPA. Turning to our restaurant retail segments. To ensure that we maintain a leadership position and growing the recurring revenues portion of our business.

We are investing in our innovative solutions portfolios in the customer success. In this recently ending quarter, our software as a service revenues grew 87% over the fourth quarter last year and software related service revenue increased 36% led by the increasing demand of Brink.

Our Brink solution continues to outperform our expectations and restaurants continue to embrace cloud solutions as their next-gen in-store technology engine. Our Brink solution that includes software as a service hardware and associated revenues grew 4.7 million in the fourth quarter from the same period in 2015.

The MRR grew 122% over the same period in 2015. The ARR for Brink totaled 4.5 million versus 2 million at the end of 2015. We increased the number of deployed stores by 32% over Q3 as we completed the implementation of 482 new sites with Brink. As of December 31, 2016 the aggregate number of restaurants installed with Brink totaled 2,453 sites.

New bookings in the quarter totaled 1.2 million in ARR. The backlog of ARR as of December 31, 2016 including all concepts awarded, but yet to be onboarded, represented over 10.6 million, up 1.6 million from the 9 million reported in Q3 2016.

Since our last call we announced several new customers that include a high performing fast casual restaurant organizations including MAD Greens, Erik's DeliCafé, and the Qdoba Grill.

We've line of sight to achieve our Brink implementation goals of 2,500 restaurants in 2017 and are focused on doubling this number to achieve 10,000 total deployed sites with Brink by the end of fiscal year 2018.

We continue to build out features to the software, the newest release contains kiosk management, improved delivery capabilities, expanded EMV and gift card support and advanced conversational ordering. We're executing to our Brink strategy which in 2017 includes QSR and Tier 1 opportunities.

We successfully contracted with our first Tier 1 Brink customer and are currently in the field test phase. This total opportunity includes 5,000 sites in the U.S. with software, hardware and services which we expect to start implementing in 2018.

PAR's SureCheck platform is gaining momentum as we focus on asset management, automated temperature capture and business intelligence for grocery along with the checklist management features that yields larger operational efficiencies.

We have expanded our industry targets and are seeing specific segment initiate pilots including contract food, sea store and food manufacturers. In Q4 we won new SureCheck customers including a multinational ready to assemble furniture retailer. This company is using SureCheck for their in-store restaurants and food concepts.

Two other new customers include Silicon Valley based companies that are using SureCheck in their domestic corporate campus dining facilities.

We're seeing an increased demand for IoT, the Internet of Things, with nearly every SureCheck opportunity and discussions regarding the role of SureCheck with omnichannel in markets of all types and sizes is expanding.

IoT is evolving with the convergence of multiple technologies including wireless communication, real time analytics, machine learning, commodity centers, and embedded systems all communicating with each other through a common network of solutions.

For SureCheck the Internet of Things creates an opportunity to measure, collect and analyze an ever-increasing variety of statistics. We believe that SureCheck will be key to omnichannel success as our solution enhances order fulfillment by utilizing its RFID technology.

Food category such deli, produces and dairy will have predetermined checklist loaded that will verify items were picked correctly, bagged to standard and temperature checked to FDA regulated law to ensure FSMA compliance, waste reduction and consumer demands.

SureCheck is currently installed in 7,000 sites and to-date users have completion 26 million observations and noted 82,000 exceptions. SureCheck pilot projects cross several industries and include over 21,000 sites. In the fourth quarter, we deployed a proprietary SureCheck advantage hardware solutions to Wegmans' market.

We are currently in the final stages of deploying 845 devices to their 92 store networks. SureCheck and Brink together continue to be key components of our overarching strategy of annuitizing our business by increasing margin rate [ph] software recurring revenues for PAR.

Our focus and execution strength has influenced the growth on a recurring revenue portions of our business. In this last quarter, our company grew total software recurring revenues significantly, 36% over the prior year’s quarter and grew 33% in fiscal year '16 over 2015. As of December 31, 2016, recurring revenues totaled 8.8 million.

In 2017, our priorities include the expansion of our Brink and SureCheck portfolios leveraging our infrastructure to achieve our financial objective and transitioning our major accounts into additional new business opportunities globally. We continue to diversify the business and reduce dependence on our hardware service accounts.

Our focus on software led solution is important to PAR, not only to smooth our revenue, but to increase margins and shareholder value. Diversity also addresses the fact, the POS hardware will continue to be commoditized and there will be more points to sale that reduce the demand of POS hardware including tablets, kiosk and bring your own device.

We’ve been planning for these changes and executing to our strategy with notable achievements. Growing our recurring revenues will reduce the impact of this eventual disruption, as such we continue to focus our efforts on expanding our customer base and our business outside of restaurants where we have traditionally competed.

Through the efforts and accomplishments of our employees in 2016, our company enhanced our product platforms increased our development capabilities and focused on ensuring that we have a productive global organization with a strong balance sheet.

We invest time and energy into cultivating a cautious culture that attracts, retains and engages the best talent in our industry. One of the most valuable achievements was to create clear, well-developed core values that service as the foundation upon which we higher, recognize and reward PAR people. It is an exciting time for PAR.

We finished the year on a positive note and had significant business opportunities in front of us. 2017 is an important year as we execute change increase efficiencies and reduce costs while investing in our strategic initiatives that will improve our overall performance and profitability.

As I conclude, I want to recognize the significant efforts of my executive team and all PAR’s people who are making a difference as we strive to transform PAR and achieve our strategic goals.

We focus on core values as they defined how we promise to act, represent our character, drive our behavior and work to ensure that our stakeholders inclusive of our shareholders are successful. Thank you for participating in today’s conference call.

That concludes our formal remarks and I will now turn the call over to the operator to start the Q&A session..

Thank you. [Operator Instructions]. And our first question is from the line of Howard Brous with Wunderlich Securities..

Let me start out with, first of all, I think you said 2017 you were looking for 2,500 units deployed, in a sense that was a mistake or [Multiple Speakers] what are the number of units you expect to be deployed in 2017, maybe I heard it incorrectly?.

The 2,500 sites that I referenced, it has to do with Brink..

What do you estimate for '17?.

'17 would be an additional 2,500 over the 2,463 that we ended the year. So as we've talked about, we expect to end the year with about greater than 5,000 Brink sites, doubling that number to end 2018 at 10,000 sites..

And that's deployed correct?.

That is deployed. Those will be revenue generating..

In reference to the expenses that you incurred, legal expenses, what do you think you'll incur for the first and second quarters, if any?.

There will be expense incurred. I don't have the exact numbers, and I don't want to overestimate or underestimate at this time. It won't be 1.3 million, I can tell you that. It'll be significantly less than the 1.3 million that we incurred for legal expenses and for our forensic auditors..

For January and February for Brink, may I ask what were your bookings?.

I don't have that number in front me and but I'll be -- we'll be meeting again in the next month and where I'll be reporting on the quarter. The quarter is solid..

Let me continue, SG&A for -- I guess this goes to Bryan, what could we look for in terms of SG&A as a percentage of sales and could you break that down by division for 2017?.

Howard, I'll not be able to break that down by division 2017 right. What I'm doing right now is just now two months into it, we're analyzing all the costs across the organization right now, percent of revenue. There are opportunities out there that we're reviewing and we'll have better analysis of that over the next quarter, one to two quarters.

2017 is more going to be the analysis of that, as we execute that more, I think in 2018..

Thank you. [Operator Instructions] And our next question is from the line of Gary Siperstein with Eliot Rose Wealth..

The numbers were very impressive in terms of direction and cadence in Q4. Karen, can you give me a little more color on starting with hardware, you called out McDonald’s.

Do you expect that upgrade cycle from McDonalds to last the rest for this calendar year? And we can you tell us, what else might be in the pipeline on the hardware side?.

My expectation is that the McDonald’s upgrade, as they promote their mobile offering, we’ll continue through the first half, I’m confident of the growth in the first half. The second half will be dependent on other initiatives that they have.

We continue to be involved in a number of projects with McDonald’s in addition to upgrading the hardware platform. The second half is less certain than the first half.

And other growth areas include hardware adoption by our other major accounts, we expect that we’ll start to seen deployment of our new ES 8000 series and our other Tier 1s and of course through the adoption of the Brink platform, we continue to see adoption of the hardware 75% to 80% of the accounts that we sell..

Thank you for that color. On the government side, I know you're -- as you commented you’re moving towards higher margin to try to earn the same amount or higher on lower revenue, the backlog was impressive.

Can you give us some color on what you’ve got - what kind of bids you have in or RFPs going forward and what kind of efforts are being made to increased that backlog?.

The government strategy started in 2016 and continue in 2017 is the higher margins ISR contracts without a doubt and in the machine systems where we're looking for opportunities to win some contracts as a prime.

So we expect that as we focus on those initiatives with DARPA, NSA, NGA and different agencies that we will continue to -- we have strong opportunities in all those agencies and with both parts of our business.

We were excited to have an opportunity with our tech solutions and the tech solution developed with the government and our own IP that we are promoting tech connect to promote that within other agencies of the government and state agencies. So it’s early in stages for that platform, but we’re looking for adoptions in the 2017 period..

Thank you and moving to Brink. So you’re adding these various modules to keep or lead over the competition and to make it more palatable for Tier 1 to implement.

I guess starting off, tell us where you stand with Brink vis-à-vis the competition in terms of Aloha and Symphony and Toast and Revel, are they getting closer or you’re spending your lead, just a little color on that please?.

Sure. It’s a good question. We continue to invest significantly in our Brink platform. Our strategy for this year is to concentrate on the requirements for QSR and for Tier 1, and so that has been our stated strategy.

Going back way were concentrating on down market Tier 2, Tier 3 moving forward to QSR, the bigger part of where fast casual fits in, and moving into Tier 1 and we've contracted with our first Tier 1 and are in negotiations with our second Tier 1, as we continue to deploy Brink and follow our strategy.

2018, our strategy continues to promote Brink with some of these multinational customers to expand our footprint outside the U.S. and then horizontally more into table service and with a fully developed solution.

Our competition continues to also invest in their platforms, we see -- like the Oracle Symphony platform, NCR's Aloha platform and we recently noted that Xpiant has started to promote their cloud based solution.

Our new competition, you mentioned Toast and Revel also continued to develop their platforms and we believe that we still have a window of opportunity and we need to continue to focus on our execution, the development strategy to stay ahead of our competition..

So, I guess I'm -- can you define what -- you said you've contracted with a Tier 1, but there hasn't been any announcement.

Is that due to, the Tier 1 doesn't want to be identified or is it something because there's not going to be any revenues maybe recognized till 2018? What does contracted mean and how come it hasn't been announced yet?.

It's a fair question, like many of customers, we've signed the contract, we're in the pilot phase, we've agreed to an announcement later in this year, with the success of the pilot and we do expect revenue from this concept in 2017, but with the majority of the revenue starting in 2018 and going forward..

Can you -- is it possible to narrow that down? Can you start seeing revenue in Q3 for example or is that beginning in Q4?.

With the pilot program, we'll start to realize revenue on a limited basis, but these are small numbers. And I've said in the past and I'll repeat that we don't anticipate -- to get you our stated goal of 2,500 sites -- additional sites in new, our new sites in 2017 we're not reliant on any Tier 1.

So any Tier 1 that we start to accelerate, which is our intent, will help us to close our objectives and achieve our goals even quicker..

You also referenced I guess commencement of some kind of negotiation with second Tier 1, can you give a little more color on that?.

This is the Tier that we've been working with over the course of 2016, we've been in field trial with them for a while.

They have an objective to start deployment in August of 2017 and with the successful conclusion of this contract, it will give us an opportunity for roughly 4,000 sites, which we would expect to start deploying and in the 2018 and through the 2019 period..

So you actually -- is the second Tier 1 actually more advanced in their relationship with you than the first Tier 1.

Is that what you’re saying?.

There is about the same. So with the first Tier 1, actually we have a contract signed and in the second one, we are still in negotiation phase. But follow our negotiating we’re still moving forward..

Okay.

And are there any other Tier 1s that you’re targeted and have begun any discussions with?.

Several. So we have in different stages with several other Tier 1s within the QSR industry. Again focusing on QSR and U.S., they're U.S. based sites, for 2017 with the intend to deliver for these multi-nationals, for international sites starting in 2018-2019..

So a couple is twos, a few is three, is several four or more?.

There are at least four more. Yes..

Okay. And moving to SureCheck.

You mentioned a couple of placements in Q4 that weren’t announced, where they, I think you mentioned a high-tech company out West and was that due to materiality or -- that they weren't announced or due to the customer not wanting their name out there?.

I don’t know why, the customer doesn’t -- maybe they think this is a competitive advantage for them. So they have requested that now use their name. It’s a trend, when you’re working with this very large company, they really limit how much you can advertise their adoption of your platform.

So there was two companies that are Silicon Valley based both of them came through contracts food partners and which is an area where we’re seeing a lot of adoptions, or more adoptions..

Are you also -- is there any -- in terms of your pipeline going forward on SureCheck, are you doing pilots for trials with any -- I don’t know if you'd call them Tier 1, but like large chains, similar -- nothing similar to Wal-Mart, but something along those lines and would that be domestic or is there any international trials as well?.

Yes, to both. So we are working with some very large organizations and in the restaurant industry in C-store, which are smaller, but large for C-store in food manufacturing and then through contract food..

Okay, super. And then just swinging back to Brink for a second. You mentioned foreign countries or international.

Is that for 2018 and I guess you'd start with maybe English speaking countries like Australia and Great Britain for example? And then is there like 2019 to get into other foreign languages or can you just help me with that timeline?.

Sure. The international plan is based on a number of factors including language. Language and physical requirements are the big hurdles for going international along with distribution and support. So, when we look at our success outside of the U.S.

we are establishing our footprint with customers that we expect to win or that we've already won and their multinational needs. We also are looking at areas of the world where adoption of cloud based solutions will be successful so they have the technology infrastructure to be able to support a cloud based solution.

So, our plan to -- we've created our go forward plans and are executing to them, '18 is pretty clear and it does happen to be UK, Ireland, Australia.

But that doesn't mean that those plans could change, we've had development efforts towards those, so that's likely to be pretty concrete, but if other opportunities present itself we'll have to evaluate it..

And Bryan I know it's early days, but can you sort of give us some insight into what you see and areas where you can help Karen and the organization become more efficient and more profitable?.

Yes, Gary that was an important question right there. I have spent -- in the background right, spent past two months obviously sitting with various cross functional team members, really grabbing conceptual understanding of the business strategy and where we're going.

Also understanding our cost structure, understanding our product mix and our margins as you're well aware.

There is a pretty decent range, as those go across, so kind of educating the team as to the impacts of that as we shift more on a higher percent into software, and what does that mean from an impact top line to bottom line also looking at it from a government perspective, we're noticing that as well as in the quarter which Karen highlighted during today's conference call.

How the ISR has been impacting us, helping out from the bottom line as we moved away from the PMO. In regards to, I know that -- Howard had asked a question regards to SG&A, we'll be getting more into that as we get into Q2 and analyzing what we have in there as well.

So there are I think a number of different areas, I've also obviously spent time to get my hands around the investigation also going on in China and Singapore, so that's taken up some of the time as well, feeling that I have a pretty good grasp of that right now, everyone's been very helpful.

So it's kind of at the point now, I'm readied now to kind of start thinking through on the execution of some of these ideas that we do have, but been spending the past two months really getting my hands around everything..

And my last question is, I think in the PowerPoint and Karen in prior presentations when you talk about the ERP system you talk about some substantial savings that can come out of that when it goes live.

So I guess first question is, what's the target to go live and can you quantify what those expense savings could be?.

We call our ERP upgrade optimal, and that's going to -- it's going live in phases, starting with the CRM upgrade in early April. The ERP upgrade will happen in the third quarter and we're targeting -- are quite this period, at the end of July beginning of August to minimize disruption.

We are putting together our plan, our changed management plan which include the cost reductions and are targeting roughly $4 million of expense, of annualized expense reduction..

Okay. That’s significant. Super. That’s all I had. Congratulations again on the quarter. Thank you very much..

Good talking to you Gary..

Thank you. And ladies and gentlemen I’m not showing any other further questions in the queue. I would like to turn the call back to management for final remarks..

Yes. Thank you everyone again to participate in the call today. We appreciate it and we’ll be available through today, if you want any follow-up questions. Thank you..

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program and you may all disconnect..