Autoweb Inc (AUTO) 2018 Q4 法說會逐字稿

Good afternoon, everyone, and thank you for participating in today's conference call to discuss AutoWeb's financial results for the fourth quarter and full year ended December 31, 2018.

Joining us today are AutoWeb's CEO, Jared Rowe; the Company's CFO, JP Hannan, and the company's outside investor relations advisor, Sean Mansouri with Liolios.

Following their remarks, we'll open the call for your questions.

I would now like to turn the call over to Mr. Mansouri for some introductory comments.

Thank you.

Before I introduce Jared, I remind you that during today's call, including the question-and-answer session, statements that are not historical facts, including any projections, statements regarding future events or future financial performance or statements of intent or belief are forward-looking statements and are covered by the safe harbor disclaimers contained in today's press release, the slides accompanying this presentation and the company's public filings with the SEC.

Actual outcomes and results may differ materially from what is expressed in or implied by these forward-looking statements.

Specifically, please refer to the company's Form 10-K for the full year ended December 31, 2018, which was filed prior to this call as well as other filings made by AutoWeb with the SEC from time to time.

These filings identify factors that could cause results to differ materially from those forward-looking statements.

There are slides included with today's presentation to help illustrate some of the points being made and discussed during the call.

The slides can be accessed by visiting AutoWeb's website at autoweb.com.

When there, go to Investors and then click on Events & Presentations.

Please also note that during this call and/or in the accompanying slides, management will be disclosing non-GAAP loss or income, non-GAAP EPS and adjusted gross profit and gross margin.

These are non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today's press release and slides, which are posted on the company's website.

And with that, I'll turn the call over to Jared.

Thanks, Sean, and good afternoon, everyone.

In Q4 we continued to execute on our strategic initiatives, as reflected by another quarter of sequential improvement in lead volume and the first time we've generated 2 million leads since Q3 of 2017.

We also began to mobile-enable some of our new car websites, which led to improvements in conversion and resulted in our first sequential quarter of gross margin expansion since Q4 of 2016.

We made progress implementing new traffic acquisition strategies and ramping our new click algorithm during the quarter.

In fact, as of mid-November 2018, 90% of our click traffic was being exposed to the new algorithm and the early results have been promising.

However, there's still work to be done with the algorithm, as we are seeing benefits to revenue per click, but to click-through rate.

To address the click-through rate, we have recently developed an approach to mobile-enable our click product.

We're still in the testing phase, but we believe this product enhancement will be a solid addition to our overall solution for dealers and OEMs, as it's designed to improve display and engagement for consumers who use their mobile device.

All this momentum has been further enabled by the establishment of our full senior leadership team.

Over the last few months, we added a new Chief Financial Officer, Chief Operating Officer, Chief Technology Officer and Chief People Officer.

We now have our full senior team in place, which should increase the pace of change and improve operational execution.

Further, we strengthened our board with the appointment of Chan Galbato, a seasoned executive from Cerberus Capital Management.

Each team member brings a unique but complementary background and skillset to fill critical roles at AutoWeb and we look forward to leveraging all of their leadership experience as we continue to execute our turnaround.

I'll provide more detail on our progress and strategic initiatives later in the call.

But I'd first like to introduce our new CFO, JP Hannan, to walk through the details of Q4 and the full year results.

Before I let him talk about the results, I do want to introduce him.

JP has more than 20 years of public and private CFO experience across various media-related organizations, and I couldn't be more excited to have him as my financial partner.

So with that, we'll turn it over to JP.

Thank you, Jared.

I appreciate the kind words, and I'm thrilled to be here.

Good afternoon, everybody.

So jumping right into our results, fourth quarter revenue came in at $32.3 million.

That was down from $33.3 million in the year ago quarter.

Our advertising revenues were $6.5 million compared to $9.2 million in the year ago quarter.

Click revenues were $5.4 million compared to $7.9 million.

These declines were primarily due to lower click volume and revenue per click, which resulted from an unfavorable advertising mix that Jared will expand on later.

Gross profit during the fourth quarter was $5.6 million compared to $8.1 million in the year ago quarter, with gross margin coming in at 17.5% compared to 24.4%.

This decline was primarily driven by lower revenue and the continued need to improve our cost-revenue efficiency.

Total operating expenses in the fourth quarter were $11 million and that compares to $48.4 million last year.

Please note that the fourth quarter of 2017 also included a goodwill impairment charge of $37.7 million.

On a GAAP basis, net loss for the fourth quarter was $5.3 million or a loss of $0.41 per share on 12.9 million shares.

This compares to a net loss of $65.8 million or a loss of $5.22 per share on 12.6 million shares in the year ago quarter.

This improvement was primarily driven by the aforementioned goodwill impairment charge in 2017, as well as a non-cash charge to income tax in the year ago quarter.

For the fourth quarter, non-GAAP loss which adds back amortization on acquired intangibles, non-cash stock comp, severance costs, gain or loss on investment or sale, litigation settlements, goodwill impairment, long-lived asset impairment and income taxes was $3.1 million or a loss of $0.24 per share.

This compares to non-GAAP income of $0.1 million or $0.01 per share in the fourth quarter of 2017.

This decline was primarily driven by the aforementioned lower revenue and gross profit.

Cash used by operations in the fourth quarter was $2.2 million compared to $2 million in the third quarter and $1 million in the prior year quarter.

And note that Q4 was negatively impacted by one-time severance costs totaling $460,000, as well as routine impact of year-end DSO expansion, which results from slower paying customers.

We continue to expect incremental cash burn in the first half of 2019 as we invest in our people, products and technology, with the intention to return to growth and margin expansion this year.

We also expect to improve our liquidity and balance sheet through non-dilutive measures, as we are currently in discussions with various banks for the establishment of new credit facilities.

At December 31, 2018 our cash and cash equivalents stood at $13.6 million.

This compares to $15.8 million at September 30, and $25 million at December 31, 2017.

This decrease from year-end 2017 was primarily driven by our repayment of an $8 million revolving line of credit, as well as severance-related costs.

Total debt at December 31, 2018 was $1 million compared to $9 million at the end of 2017.

And subsequent to quarter end, we paid off the remaining $1 million note and are now debt-free.

Now I'll quickly run through the full year results.

2018 revenue came in at $125.6 million, compared to $142.1 million in 2017.

Advertising revenues were $28.2 million compared to $34.1 million in the year-ago quarter, with click revenues of $23.4 million compared to $28.3 million.

While the year-over-year comparison certainly does not look favorable, it's important to note that we significantly abated the rate of decline throughout the year.

Gross profit during 2018 was $15.3 million compared to $42.8 million in 2017, with gross margin coming in at 12.2%.

That compares to 30.1%.

Adjusted gross profit which excludes the one-time DealerX impairment charge that occurred in the third quarter of 2018, was $24.3 million compared to gross profit of $42.8 million in 2017.

As a percentage of revenue, adjusted gross profits was 19.3%.

Total operating expenses in 2018 were $54.3 million.

This compares to $81.4 million last year.

As mentioned earlier, the 2017 period included a significant goodwill impairment charge.

On a GAAP basis, net loss in 2018 was $38.8 million or a loss of $3.04 per share on 12.8 million shares.

This compares to a net loss of $65 million or a loss of $5.48 per share on 11.9 million shares in 2017.

Our non-GAAP loss in 2018 which again adds back amortization on acquired intangibles, non-cash stock comp, severance costs, gain or loss on investment or sale, litigation settlements, goodwill impairment, long-lived asset impairment and income taxes; was $9.2 million or a loss of $0.72 per share.

This compares to non-GAAP income of $8.5 million or $0.64 per share in 2017.

As you may recall from last quarter, the company introduced several new key operating metrics that we believe are instrumental to understanding the new direction of our business.

These include lead volume and source, lead traffic, retail dealer count, end retail lead capacity, as well as click volume and revenue per click.

We've also completed our click traffic analysis and will be providing this on a go-forward basis as well.

So with that, lead traffic was 32.1 million visits during the fourth quarter, compared to 34.4 million in the third quarter and 26.8 million in Q4 of 2017.

The sequential drop was driven by some of the testing that we've been doing with our traffic acquisition strategies, as we develop ways to reach consumers more efficiently.

Now note that these visits reflect the number of consumers who visit our entire portfolio of lead websites during the quarter.

Also the reported number of visits for Q3 is different from what we provided on our last call, as we're now including visits to a few additional properties that were not accounted for last time around.

So despite traffic being down, we were more efficient with the traffic we generated, as we increased lead volume to approximately 2 million automotive leads, compared to 1.9 million in the third quarter and 1.8 million in the year-ago period.

The sequential improvement was largely driven by conversion rate efficiencies resulting from the mobile enablement of our core websites and continued tuning of our SEM approach.

But note this figure includes new and used vehicles leads invoiced to both our OEM and retail clients.

Our retail dealer count was 2,596 compared to 2,577 in the third quarter and 3,008 in Q4 of 2017.

This is our second quarter in a row generating a sequential improvement in dealer count, indicating that our new operating and marketing approach is resonating with dealers, as it's much more focused on delivering a very competitive and attributable cost per sale relative to alternative forms of media.

That said, we do not anticipate a straight-line trajectory or distribution metrics like dealer count and lead capacity, as we still have some work to do to refine our strategy.

Note that this dealer count figure includes the number of franchise dealers contracted for delivery of retail new vehicle leads plus a number of franchised or independent dealers contracted for delivery of retail used leads.

Retail lead capacity was 442,000 lead targets compared to 441,000 in the third quarter and 528,000 in Q4 2017.

This is the first time the company has increased lead capacity since the fourth quarter of 2015.

And note that retail lead capacity is the sum of the number of new and used vehicle leads that our retail dealer clients wish to receive each month during the quarter.

Estimated buy rates for leads we delivered in the quarter was 17%.

Note that this estimated buy rate reflects the percentage of consumers submitting leads that we delivered to our customers represented by the number of these consumers who purchased the vehicle within 90 days of that lead submission.

Our lead source mix for the quarter also remained steady with approximately 80% of the leads being internally generated from our media properties and the other 20% of leads coming from third party lead providers.

We continue to believe a roughly 80-20 mix is the appropriate target to balance quality and quantity of our core lead product.

Through 2018, the company was largely focused on stabilizing the leads business as it comprises the majority of our revenue.

Now that we've stopped those declines and made the turn with leads, our next area of keen focus will be on the clicks.

Our click traffic in the fourth quarter was 6.1 million visits compared to 5.9 million in the third quarter and 6.3 million in the year ago quarter.

The increase was driven by greater lead volumes.

Click volume in the fourth quarter was 6.6 million clicks and that compares to 6.6 million in the third quarter and 7.3 million in Q4 of 2017.

Now given that click traffic increased sequentially for the quarter and click volume remained flat, this would indicate that our conversion was lower.

However, it's important to understand that we're making several changes to this product that will impact short-term volumes, including updating our click algorithm as we're working to tune its performance.

We exposed 10% of our traffic to this new click algorithm on October 24, 25% on November 6, and then 90% on November 13.

Each of these 3 deployments impacted conversion during those time frames.

Tuning this algorithm is an ongoing optimization process and it's going to require continued investment and focus.

Similarly, revenue per click was down to $0.81 compared to $0.84 in Q3 of 2018 and $1.08 in Q4 2017.

The same factors are in play here, given the 3 deployments of our new click algorithm during the quarter, along with a few other factors that Jared's going to expand upon later in the call.

Now with that, I'd like to turn the call back over to Jared.

Thanks, JP.

So as I look back over the last 10 months, I can confidently say that I believe that we've completed the first phase of our turnaround and are in the early stages of the next phase.

We've completed the strategic review of AutoWeb's operations.

We've identified the opportunities and constraints and we've really begun to deploy various initiatives with the intent to return AutoWeb to growth and profitability.

This began with first attacking our lead generation capabilities to stabilize the decline to the largest part of our business; also beginning to integrate our products to create a more unified solution of leads, clicks and emails; and of course, building out the senior leadership team which is incredibly important.

Now during the fourth quarter we made progress on several key initiatives, including improvements to our operational integration and distribution channel effectiveness as well as product quality enhancements.

Now for our distribution channel in Q4, we managed to sequentially increase dealer count for the second quarter in a row and as JP mentioned earlier, increased our lead capacity for the first time since Q4 of 2015.

While these are both solid indicators of the progress we're making, I still believe we have a lot of work to do to refine our distribution channel effectiveness and really do a better job at ramping our relationship with the top 150 dealer groups.

I believe the trend is beginning to bend in the right direction, but I don't anticipate a straight line from here.

We do expect some choppiness for both dealer count and lead capacity, as we continue to evolve our engagement model for both retail dealers and the top 150 dealer groups.

Now a key implementation for us in the fourth quarter was the mobile enablement of our some of our core new car lead generation sites.

As you can imagine, providing a desktop experience for a consumer researching cars on their mobile device does not typically lead to great outcomes.

So we mobile-enabled 21% of our new car sites during the fourth quarter, which represents 90% of our organic new car lead volume, and the overall results have been positive as we've increased conversion and expanded gross margins during the quarter.

Mobile enablement will be a considerable area of focus for us throughout 2019, as we intend to evolve our sites to deliver a better experience for consumers to drive conversion.

We do expect to mobile enable the rest of our new car lead generation sites in 2019.

But as I've said before, mobile enablement is just the beginning.

Ultimately mobile optimization of our sites and products is the goal.

We still have a good bit of work to do in this area, but again I do think that we're making good progress.

As I mentioned earlier, we also recently developed an approach to mobile enable our click product.

This is a critical next step in our mobile enablement plan, as the click product allows us to more effectively monetize our visits.

Further, it provides our clients with a unique opportunity to engage consumers with hyper-relevant messaging in a unique format.

We're in the early stages of testing in Q1 and hope to provide more detail on the product and outcomes over the next couple of quarters.

But we will stay focused on this, as this is something that's unique to us and very important to the business overall.

Moving on, I'd like to elaborate a bit further on JP's comments regarding our new click algorithm in its early results.

So with 90% of our click traffic now being exposed to the new algorithm as of mid-November, we've seen strong improvements in revenue per click when compared to the 10% of the traffic that is still being exposed to the legacy algorithm.

However, the overall revenue per click is still lower than where it was last quarter, and even 1 year ago, as the client mix is far too rich in terms of non-endemic advertisers.

Just as a reminder, endemic advertisers are automotive advertisers.

Non-endemic are folks who are not automotive related.

So of course, endemic advertisers tend to pay more money per click than a non-endemic advertiser.

So we need to continue to focus on shifting this mix back towards endemic clients and we're already taking steps in this direction.

However, we believe this is an area that will require several quarters of focus to get performance back to a level that is representative of its true potential.

Now expanding a bit on the automotive industry at large, we along with most others continue to expect total vehicle sales and SAAR to be down in 2019.

Automotive News recently reported that light vehicle sales were off the slowest start for a year since 2014, with year-to-date sales down about 3%.

I believe it will be difficult for OEMs to maintain the kinds of volumes that they've had over the last few years due to affordability challenges, interest rates increases and a pullback on incentive spend.

However, we continue to believe that we can operate well in this environment, as I believe dealers will seek out their highest ROI marketing channels to drive sales.

And with our detailed attribution and product quality improvements, I believe we will continue to have a strong place in their marketing budgets, as we believe we are one of the most efficient marketing channels they have.

I'm very proud of the progress the team has made, and while there's still much work to be done, we remain fully committed to growing revenue and expanding margins in 2019, as we deploy and execute our various strategic initiatives.

So with that, I think we're going to open it up for calls.

(Operator Instructions) And our first question will come from Sameet Sinha with B. Riley FBR.

Jared, congratulations.

This seems to be a very strong and fast turnaround.

So a couple of questions here.

So let me first start with considering the kind of turnaround phase where you are at and if you combine that with seasonality, can you speak to us about what trends, how do you expect the business to trend over the next few quarters this year?

I understand you're not going to give guidance, but to the extent that you can help us with our modeling, that will be helpful.

Secondly, I'm interested in revenue per click or revenue per lead.

As you have studied the inherent nature of traffic and algorithm and all these; is other benchmarks that you use to figure out where, let's say, revenue per click in a click environment, what's the industry standard right now?

Where are we at?

So that gives us a sense of upside.

I'll leave it at two and then I have a follow-up question.

I'm going to go in reverse order, if that's okay.

So as we think about revenue per click, really what we look at is we look at average revenue per click that a dealer or an OEM or any endemic advertiser would pay to go out and generate that sort of click organically.

So if somebody just went to Google and they generated a click to their website, we think that is kind of a standard by which we look in terms of what our revenue per click should be.

We think we want to be a little bit below that, because of the way we're positioned in the market.

But we think that we have really high-quality traffic.

Because essentially what you've got is you've got double locked-in traffic, right?

You've got consumers who we've collected through our search arbitrage work who've clicked through our ads, gotten to our websites and then have clicked through from the ad page as well for the click product.

So we think that if we can be somewhere in the area of what OEMs and dealers pay for a click like that organically, only give them a better quality product because a consumer has clicked a couple of times to get there; we think that's a good place to be.

In terms of seasonality and trends, we are going to still see some choppiness.

This is again a first-half, second-half story, I think.

The first half we're going to continue to burn a little bit of cash.

We're going to see some choppiness.

And in the second half, we do expect to really make the turn on this business and get it back to growth and margin expansion.

JP, I don't know if you have anything to add there to help a little bit.

Yes, I would just add with about a few weeks left in this quarter, I mean I think the first quarter is largely going to be consistent with what you saw in the fourth quarter.

And then it will start to ramp from there in the back half, as Jared said.

Leads are trending the way we want them to.

But we've got some work to do on clicks.

Jared, I'm going to push you a little more on the revenue per click.

So I mean you have the numbers since you advertise on Google.

And you have your revenue per click number.

So can you help us with what sort of upside are we talking about, 2x to 3x?

Yes is the answer to that.

It's 2-3x.

I mean you know, when you look at our revenue per click last year, we in Q4 it was about $0.80.

The year prior to that it was $1.00.

I think 2x to 3x over time getting back there.

If we're in the $2 to $3 range, it's going to take some time to get there, Sameet.

Don't get me wrong.

It's going to take some time to get there.

But I think that's reasonable, because it's far below what an advertiser would need to spend to go get that organically on their own.

So again, what we're looking for is we're looking to be very price competitive relative to somebody going out there and generating them on their own.

But again, our mix is way off on the click product.

Roughly half of our volume is going to non-endemics right now and non-endemics just don't value our traffic the same way an endemic would.

And again, that's more of a go-to-market approach issue than anything else, which is why I have confidence.

It's not that the product doesn't have value.

It's quite frankly we're not getting in front of the right people and selling the value the right way.

Is that more helpful?

Yes, that's great.

So my final question, when you speak about margin expansion, are we talking about margin expansion at some point in '19 or do you expect expansion for the full year?

Yes, I mean we've got revenue growth and margin expansion in the full year.

And our next question will come from Ed Woo with Ascendiant Capital.

My question is more on the auto industry.

How has I guess some of the slowdown affected you guys?

Are you guys really seeing that impacting your business?

You know, I think we're actually not seeing much of it, at least we didn't in Q4.

And I think one of the reasons was is because the performance has been so depressed that we're actually kind of growing through it.

So we haven't gotten to the point where we're performing so well on that scale right now, Ed, that we get hit by some of the seasonality, just because of the way that we were performing earlier in the year.

I do expect to see a little bit of it this year with the slowdown.

We tend to believe that it is going to be in the high 16s from a SAAR perspective and I do think that the affordability issue from a consumer perspective is going to start to push us in the second half.

But again, we like our position in the market because we think we can compete very effectively with some of the larger players in the space, simply because our media is attributable and we can generate a demonstrable cost per sale that is more efficient than the others in the space and we can do that with good margin in there for us.

So we haven't seen much yet.

But I do think that we will as an industry see a bit of a slowdown.

But again, I like our ability to sell into that environment, because we are going to be focused on a pretty pure and simple sell, which is we're measurable and we think we can be more efficient for you on a cost-per-sale basis than some of the substitutes that are in the industry.

(Operator Instructions) And our next question will come from JP Geygan with Global Value Investment Corp.

Your Q4 numbers show some encouraging trends.

What have you observed so far in 2019 and have you experienced any unexpected setbacks in the implementation of the changes you've made?

Yes, I'll start and then JP can fill in some of the blanks.

You know, again, like JP said earlier, we're seeing good positive trends on the lead side.

Leads were strong for us in Q4.

We think that we've made some changes that are actually real structural systematic improvements to that part of the business.

But you can see some of the softness that we're seeing on the click side.

That has continued into the quarter.

We're attacking those fairly aggressively, but like we said in the initial remarks, that's going to take a bit of work.

And we do expect to get that sorted out throughout the year, but yes, we've seen a little bit of softness continue into Q1 on the click side.

Yes, and I would just add on the expense side, I mean I think there is room to improve there.

I mean I think there are definitely some efficiencies that we can gain as we implement these new technologies and upgrade legacy practice.

And that's been some upside in that that I wasn't quite expecting coming into the quarter.

Okay, how is your dealer network developing beyond simply the retail dealer count?

If you could provide some more detail around that, that would be appreciated.

Yes, absolutely.

So when we think about our distribution channel, I'd break it up into three main buckets.

You've got the retail side, of course.

We actually sub segment out the retail side into the majors or strategics of the top 150 dealer groups.

And then you've got the OEM side.

The OEM side is incredibly stable, no real change there.

That just holds where it is, and we've had that for a very long time.

On the top 150 dealer groups, to be quite candid with you, we didn't make the progress that I wanted to make in the quarter.

We just didn't.

I can tell you that we've hired.

We've made a recent hire in that area and we're going to continue to focus on it.

But there is real opportunity for us in the top 150 dealer group.

But I am a little disappointed with the progress we've made there.

Then on the retail side, as we said, we've got good sequential growth second quarter in a row.

But again, we expect that to be choppy.

We think the real growth here is to continue to lean into the OEM side, continue to pick up the retail side.

But I do think the top 150 dealer groups is an opportunity for us that is just not being exploited right now.

Our value proposition aligns very well with their needs and their goals.

They buy media in a similar fashion to the way that OEMs do.

But again, we haven't really built a unique and strong capability there to sell and service to that group of clients which we're definitely focused on.

Has some of your recent hires enabled the company to better address the needs of the OEM dealer group and how do you foresee your internal salesforce developing?

So a couple thing there, one is we actually are expanding the retail salesforce.

We've made a few hires in that regard.

Those folks are actually going to be placed down in Tampa.

That way we can chase the sun across the full side of the country.

We've got an internal sales team as well as an external sales team.

But we've got an internal sales team here in California, an external sales team spread across the country and then we're going to have an internal one in Tampa.

So we're continuing to ramp that, because as we think about salespeople, those folks really start to pay for themselves very, very quickly.

So those are investments, not pure expenses.

On the OEM side, we've made some improvements from a hiring perspective.

But it's less about the sales side in that regard.

It's more about industry knowledge and some of the product work that we've been doing internally.

How do we take our capabilities, bundle and then re-bundle them into forms of media that maybe are a little bit more attractive to OEMs.

Again, early, early days there; we still have work to do.

But I'm at least pleased with the initial steps we've taken.

Okay, and then my final question might be somewhat premature.

But can you discuss expansion or acquisition opportunities that you see, especially considering that you said you were going to reestablish your bank financing while concurrently forecasting a return to growth in margin expansion in 2019.

Yes, that one is a little bit too early to talk about.

So I don't have really much to add there to be honest with you, JP.

We're pretty heads down right now in the core business.

I think some of those things will take care of themselves.

But first things first, we've really got to get this business operating the way that we think it can.

And as we mentioned earlier, we've still got some work to do on the click side.

And we haven't even really talked about the email side, because that's very nascent.

But we think there's real opportunity there as well.

Sure, well the organic growth trends are certainly encouraging, as I previously said and we look forward to continuing to watch it develop.

And our next question will come from Sameet Sinha with B. Riley FBR.

A couple of questions, Jared and JP, just talking about the gross margin.

The gross margin side, under the previous model the company had reached gross margins somewhere in the high 30s.

As you have changed the model, integrated the product, what is the gross margin profile?

What would the gross margin profile look like?

And it could be long-term.

That's fine.

But is it higher, lower or equal to what the previous model could suggest?

And the second question was on the OpEx side.

So sort of that cash OpEx and excluding the one-time expenses kind of failed sequentially.

And as you grow it, JP I think you mentioned there are some opportunities for efficiencies.

And Jared, you mentioned about investment in the sales side.

But can you help us think about other -- where are you investing, where exactly you could find some efficiencies?

Thank you.

Sure, well I'll start.

On the margins, I mean I think we can get margins to a comparable level.

But it's going to take a while.

We're experimenting with a number of things and we are refining the way we do a lot of our SEM expense management.

So I think there's definitely improvement there to be had.

With regard to the OpEx, I mean there's a lot of internal processes, a lot of things, legacy workflows and such that just need to be modernized.

And the byproduct of that will be cost reductions.

And any investments that we should be aware of, apart from the sales team?

No, I mean there's no other major expenses planned.

You know, all the other investments we're making, Sameet, they're investments inside the business and they're not big one-time things.

When we think about making investments, we think about kind of earning the money to pay for them.

So we are going to be transforming our technology stack over the 36 months.

But to be quite candid with you, that's not something we're going to come out and talk about and have a big expense line associated with and merchandise it.

We're going to do that as we go.

Because we think we have to pay for this stuff as we go.

So we aren't really focused on big bang investments.

We're really focused on incremental improvement operationally and that's how we're going to move this business ahead.

Thank you.

At this time this concludes our question-and-answer session.

I would now like to turn the call back over to Mr. Rowe for closing remarks.

Well, I just want to thank everybody.

Thank you for joining the call.

I want to thank the team.

We have seen some good improvement in the business.

We've got a lot of work to do.

But I think we're off to a good start here and we're starting to see some progress being made.

But thank you for your interest.

Thank you for spending some time with us and thank you for your continued interest in the business.

We've got a lot of work to do, but we feel good about where we're headed this year.

So with that, have a good day and hopefully we'll all talk soon.

Ladies and gentlemen, this does conclude today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.