Bsquare Corp (BSQR) 2007 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you so much for standing by. Welcome to BSQUARE's fourth-quarter and full-year 2007 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (OPERATOR INSTRUCTIONS). As a reminder, this call is being recorded today on Thursday, the 14th of February, 2008. I will now turn the conference over to Mr. Scott Mahan, Chief Financial Officer of BSQUARE. Please go ahead, sir.

Good afternoon. With me today is Brian Crowley, our CEO. Let me remind you that this call is being broadcast over the Internet, and that a recording of the call and the text of our prepared remarks will be available on our website.

I would also like to direct listeners' attention to the Safe Harbor statement contained in our earnings release issued today which applies to the content of this call. During the discussion today, references to this quarter, the quarter, or Q4 mean the fourth quarter 2007. References to the third quarter or Q3 mean the third quarter of 2007. And references to the first quarter or Q1 mean the first quarter of 2008. Further, references to this year or the year mean fiscal 2007, while references to last year mean fiscal 2006.

With that said, let me recap our financial results. We reported total revenue this quarter of $15.6 million, up 11% from $14.1 million in the year-ago quarter, and up 15% from $13.6 million in Q3. This quarter represented our ninth consecutive quarter of year-over-year total revenue increases. We had no 10% customers in the quarter.

Total revenue for the year was $59.4 million, up 19% from $49.8 million in 2006. Our largest customer accounted for 5% of total revenue for the year.

Sales of third-party software were $8.7 million this quarter, up 13% from $7.7 million in the year-ago quarter and up 7% from $8.1 million in Q3. An increase in average sales per customer, coupled with growth in non-Microsoft third-party software sales drove the year-over-year increase, whereas the sequential increase related to increased sales to one large customer and growth in non-Microsoft sales. The growth in non-Microsoft sales related to our acquisition of the Flash business from NEC in the quarter, which Brian will speak to later. The 8% sequential growth slightly topped the 6% expectation provided on last quarter's call.

Third-party software sales were $34.2 million for the year compared to $30.3 million in 2006, representing an increase of 13%. Proprietary software revenue was $1.4 million this quarter, up roughly 60% compared to $874,000 in the year-ago quarter and $886,000 in Q3.

Royalties from certain service contracts, higher reference design revenue, and $364,000 in revenue relating to a customer settlement drove the year-over-year increase. The sequential increase resulted from higher reference design revenue and a customer settlement as well as the fact that Q3 was negatively impacted by a $151,000 OEM royalty overreporting adjustment.

In addition to the customer settlement, this quarter's reference design revenue benefited from $259,000 in royalties from one customer, which we spoke to on last quarter's call. We expect this customer to place further orders in mid 2008.

Proprietary software revenue increased 62% to $4.2 million for the year compared to $2.6 million in 2006. On last quarter's call, we commented that we expected proprietary software revenue to increase approximately 80% on a sequential basis versus the actual growth of 60%. Brian will discuss some of the factors which impacted proprietary software revenue this quarter shortly.

We have commented previously regarding royalties impacting proprietary software revenue related to certain service contracts. In these contracts, we typically accept a lower than average bill rate on our engineering services, in exchange for downstream royalties, some of which may be guaranteed. We recognize $384,000 in royalty revenue from these contracts this quarter as compared to $179,000 in the year-ago quarter and $420,000 in Q3. Royalty revenue from these contracts was $1.6 million this year, compared to $355,000 in 2006.

Service revenue was $5.5 million this quarter, flat compared to the year-ago quarter and up 17% from $4.7 million in Q3. On a year-over-year basis, a decrease in low margin rebillable revenue of $277,000 and a decline in billable hours were offset by an increase in our realized rate per hour, the combination of which had a positive effect on service margin for the quarter compared to the year-ago quarter. The sequential service revenue increase was driven by increases in both billable hours and our realized rate per hour in North America, partially offset by lower rebillable and training revenue.

For the year, service revenue increased 24%, to $21.0 million compared to $16.9 million in 2006. This quarter's billable hours were down 9% year-over-year and up 6% sequentially. The year-over-year decline was driven by substantial prior year Asia-Pac activities associated with the royalty-bearing service contracts. The sequential increase in billable hours was due to increased activity in North America coming off of a somewhat soft Q3.

This quarter's bill rate increased 18% both year-over-year and sequentially. On last quarter's call, we mentioned that two service contracts with Asia ODMs, which contained downstream royalties, were terminated, and instead, we entered into a new service agreement with a North American OEM at higher rates but without downstream royalties.

As a result, we recognized $350,000 of service revenue this quarter relating to services largely performed in prior quarters which accounted for slightly over half of the bill rate increase.

We had expected Q4 service revenue to increase roughly 20% sequentially versus the actual increase of 17%, which translated into softer-than-expected service revenue in Q4 of roughly $100,000. This shortfall related to lower-than-expected low margin rebillable service revenue resulting from a contract signing delay.

Now turning to gross profit in margins, overall gross profit was $4.9 million this quarter or 32% of total revenue as compared to $3.8 million or 27% of revenue in the year-ago quarter and $3.5 million or 26% of revenue in Q3. Overall gross profit was $15.9 million or 27% of total revenue for the year compared to $12.0 million or 24% of total revenue in 2006.

Third-party software margin was 18% this quarter compared to 14% in the year-ago quarter and 17% in Q3. The year-over-year increase was driven by a continued focus on customers which are not completely price-driven and which valued the added expertise, products and services we provide. We continue to maintain a high gross margin on our proprietary software revenue of 98% this quarter.

Service gross margin was 37% this quarter compared to 35% in the year-ago quarter and 26% in Q3. The year-over-year improvement was driven primarily by a decline in low margin rebillable service revenue. The sequential service margin increase resulted from higher North American activity and resulting utilization improvement, coupled with the bill rate improvement noted previously. We increased service revenue more than $800,000 sequentially without experiencing any meaningful increases in service cost of sales. The $350,000 in service revenue we recognized this quarter resulting from a contract restructuring coupled with the roughly $550,000 in Q3 excess capacity we referenced on last quarter's call made this possible.

Moving down the P&L, operating expenses were $3.7 million for the quarter compared to $3.2 million in the year ago quarter and in Q3. Total operating expenses were $13.6 million for the year as compared to $12.9 million in 2006.

Let me focus today on three items which drove the sequential increase and which will also provide some more color on the year-over-year increase. Specifically, professional fees increased $166,000, driven primarily by legal costs associated with the customer settlement I mentioned previously. Sales expense associated with our new Japan activities increase $112,000 approximately half of which we don't expect to recur in Q1.

Bonuses and commissions increased $219,000 driven by higher revenue and year-end bonuses, approximate half of which we don't expect to recur in Q1.

Now I will speak to our bottom-line results. We reported net income for the quarter of $1.2 million or $0.12 per diluted share, up 70% compared to net income of $706,000 or $0.07 per share in the year-ago quarter and up 234% compared to net income of $359,000 or $0.03 per share in Q3. This quarter represented our fifth straight profitable quarter.

For the year, we reported net income of $2.8 million or $0.27 per diluted share compared to a net loss of $466,000 or $0.05 per share in 2006.

Our operating income this quarter of $1.2 million representing an 8% operating margin coupled with prior profitable quarters translated into EBITDA for the year of $3.8 million or $0.37 per share.

Our outstanding share count at quarter end was 10.0 million shares, which increased 35,000 shares from Q3. We had 1.9 million options outstanding as of year end, with an average strike price of $4.36.

Cash and short-term investments increased $1.6 million to $15.0 million during the quarter, and increased $3.9 million for the full year. This quarter represented our fifth straight quarterly increase.

Total non-cash expenses were $347,000 this quarter and $1.5 million for the year. CapEx was $44,000 this quarter and $378,000 for the year.

We currently expect fiscal 2008 non-cash expenses to be roughly $1.9 million and CapEx to be approximately $525,000. 2008 CapEx will include fairly significant costs associated with an expansion of our Taiwan operations.

Headcount including contractors is currently 200 compared to 186 as of the date of our last conference call. Engineering services headcount is currently 126 up from 115.

Now I would like to turn the call over to Brian.

Thanks, Scott. Today, I'm going to provide brief color on our Q4 results, and then discuss our overall goals for 2008 and our outlook for Q1.

I will start with third-party software sales. We had another good quarter of third-party software sales, and we turned in better-than-anticipated results. Overall, we are very pleased with our third party software sales efforts.

Our Microsoft licensing revenue grew by 12% year-over-year, we improved gross margins, and we added two exciting product lines, Adobe Flash and SolidCore S3 control. I will discuss these products more in a moment.

Our relationship with Microsoft is very good, and we're actively collaborating with Microsoft on several sales and marketing campaigns that we expect will have a positive impact on 2008.

We have talked in the past about our strategy to focus our Microsoft licensing sales efforts at customers who value the technical, service, and product expertise that BSQUARE supplies. I would characterize these customers as generally small to mid-size companies that tend to have smaller internal engineering organizations or less expertise with Microsoft operating system technologies.

We have found that this profile of customer exhibits lower price sensitivity than the large customers that place large license orders and view Microsoft licenses as a commodity. By focusing on this profile customer, we were able to improve our overall third-party product's gross margin percentage from 15% in 2006 to 17% in 2007. We will continue this sales focus going forward, and expect to maintain our 2007 gross margin run rate on Microsoft license sales throughout 2008.

During the quarter, we announced the acquisition of the Adobe Flash consulting and distribution business from NEC America. The purchase price for this acquisition was $250,000. We purchased certain technology and programming libraries that enable the Adobe Flash Light software to be ported to various operating systems and processor architectures. BSQUARE also purchased the source code and ownership of several Adobe Flash Light ports that had been previously completed.

In addition, BSQUARE acquired ongoing revenue-generating relationships with customers who are shipping flashlight in their devices. And we hired the Adobe Flash team from NEC America, which consists of three engineers and a sales and marketing professional. As the result of this transaction, BSQUARE also became an authorized worldwide distributor of Adobe Flash Light software.

We are very excited about this acquisition for several reasons. This gives us access to a rapidly growing market. Adobe Flash is a requirement for any device that needs to display compelling Web content such as YouTube videos. The number of devices that will be enabled for Internet connectivity and Web content is growing at a high rate.

A number of our current customers are interested in including Adobe Flash technology into their devices. We also believe that we will be exposed to many new customers in many new markets. In the short time since the acquisition closed, we have been contacted by over 30 customers that have not been BSQUARE customers in the past, but are interested in using Flash technology in their devices. We expected that the demand for Adobe Flash technology would be strong, but honestly, our expectations have been exceeded.

We acquired the technology, expertise, and the rights to sell Adobe Flash into non-Microsoft operating system applications, primarily Linux based. We also acquired several customers who are currently purchasing Adobe Flash licenses for Linux applications. We intend to support all operating systems with Flash technology, and over time believe that this will be an opportunity for BSQUARE to expand its business into adjacent ecosystems.

Our development team is currently working on optimized high-performance ports of the Adobe Flash Light player for Windows CE using our DevKit reference designs. We are also engaged with our silicon vendor partners to provide Windows CE Flash Light ports for various architectures such as the partnership we recently announced with RMI to provide a Flash Light port for the Au1250 processor.

During 2008, assuming that customer demand continues at current levels and that our customers seek commercial success with their devices, we expect that Flash license sales and related servicework will bring in approximately $2 million of incremental revenue and contribute approximately $0.05 per share to the bottom line.

Just after the quarter ended, we announced an agreement with SolidCore to distribute the SolidCore S3 Control embedded product. BSQUARE will be a worldwide distributor of this product, and will be SolidCore's exclusive North American distributor in fiscal 2008.

SolidCore S3 Control provides the ability to completely lock down and prevent unauthorized changes to a device that is using Microsoft's Windows XP, XP Embedded or Windows Server operating system. This includes changes that might be made by anyone who has access to a device, such as a service technician who may accidentally change a device configuration, or an intruder who attempts to gain control of a device. S3 Control also addresses the growing threat from viruses, malware, or spyware by preventing them from altering a device's configuration or unloading a malicious payload onto a device. In addition, S3 Control provides the ability to track, audit, and report on any changes that have been made to the operating environment of a device.

SolidCore's capabilities are important for industries that require a very high level of security and control over devices, such as ATM machines, point-of-sale terminals, medical devices that must comply with HIPAA requirements, and gaming devices.

For BSQUARE, the SolidCore product is a natural addition to our sales efforts. Many of our existing Windows Embedded customers are seeking SolidCore-like functionality, and in a few weeks since the announcement of our relationship with SolidCore, we have engaged in several good opportunities to sell the product.

In 2008, assuming that customer demand for SolidCore materializes as we expect, we believe that we will add approximately $2 million in incremental revenue from the sale of SolidCore technology and approximately $0.05 per share to the bottom line.

Overall, we foresee a positive trend for 2008 sales of third-party products. We expect that both Adobe Flash and SolidCore sales will pull through additional Microsoft license sales and will open up new opportunities for BSQUARE proprietary products and services.

Because both Adobe Flash and SolidCore sales carry higher gross margins than Microsoft license sales, we are currently expecting gross margin sales on third party software to increase from 17% in 2007 to over 18% in 2008.

Next, I would like to update you on BSQUARE proprietary products. We have talked in the past about an Asian ODM who signed a contract to license our Media+ Technology for use in a portable media player device, and then subsequently backed out of the contract. After many attempts to end our dispute with the customer, we finally settled during the quarter for $400,000, of which $364,000 was accounted for as product revenue. We do not expect any further revenue from this customer.

Second, as Scott mentioned earlier, we have a military customer who designed our SmartBuild technology into a ruggedized PDA several years ago. This customer occasionally places orders with us for SmartBuild runtime licenses. And during Q4, we received runtime license orders for approximately $259,000. We expect to receive additional orders from this customer in mid-2008.

Backing out the settlement and SmartBuild revenue, sales of our DevKit reference designs, Schema, and SDIO were down sequentially from Q3, which was below our expectations. Weakness in SDIO was primarily due to several expected orders pushing out of the quarter.

For 2008, we expect SDIO revenues to generally be in the $100,000 to $200,000 range per quarter as compared to approximately $800,000 of revenue for all of 2008.

We believe that customers who are looking for the highest performance, support for new host controllers, and adherence to the latest SD association specifications will find that our SDIO Hx technology offers compelling value. We will continue selling SDIO development kits during 2008, but believe that most SDIO revenue will come from royalties as our customers ship their devices.

Our DevKit and Schema sales suffered in Q4 from two issues. First, we were told during the quarter by several customers that they have elected to delay their decision on starting new projects based on the Marvell PXA family until they receive clear direction from Marvell on the long-term roadmap of the PXA family. This negatively impacted sales of both our DevKit and Schema products in the quarter.

Second, we have made an investment in a new family of DevKits based on a new Texas Instruments OMAP processor family, and we are very excited about the potential of this investment to drive incremental products and service revenue, as I will discuss a moment. In the short term, we have been challenged because TI has not yet formally announced and launch their new OMAP processor family, and this has delayed demand for our product. We expected this announcement in Q4, but TI elected to delay until the current quarter.

Despite these short term challenges, we are very excited about several new activities that we have underway in 2008. Our product team is currently focused on completing the OMAP reference designs I discussed above. We are adding additional functionality that TI and customers have told us will be important for them, including 3-D graphic support, Adobe Flash Light support, and support for various multimedia technologies. We have very good interest in our new OMAP reference designs, and believe that over the next several years, this investment will bring in over $4 million in product and service revenue.

I am very excited about our recent announcement with Sierra Wireless regarding support for the Sierra Wireless radio modules on our DevKit platforms for both the PXA and OMAP architectures. We are adding the Sierra Wireless radio module to our reference design to give customers the ability to adopt our designs into devices that require wide-area networking capabilities.

As we discussed earlier, connected devices are a rapidly growing market, especially for machine to machine type applications. We believe that the combination of our DevKit plus the Sierra Wireless radio will be a cost-effective solution.

For customers who wish to use our DevKit and Sierra Wireless radio in a more traditional handheld or voice application, we intend to add our Productivity+ Suite and phone dialer software to create a complete, connected handheld reference solution based on Windows CE.

We have received good interest on customers regarding this solution, and have already won a service contract to provide such an integrated product for a government customer. We expect to win several more customers using this solution in 2008, and believe that between the product and service revenue, this bundle has the potential to bring over $1 million of incremental product and service revenue in 2008.

We have talked in the past of two significant design wins, one for Productivity+ and one for Media+ that together, we are expecting to 2 to $4 million of royalty revenue in the next several years. We have made good progress with our customers on both designs, and one of our customers has begun actively marketing their device. We hope to make a more formal announcement with that customer in the next quarter.

The other customer is expected to enter market testing with their product in Q2, and the results from that testing will dictate their rollout schedule. We still believe that our estimates of 2 to $4 million in royalties from both of these projects over the next several years is reasonable. However, in order to be conservative in our own internal projections and factor in any potential economic slowdown, we are not predicting a significant amount of royalty revenue to hit in 2008.

We have also talked in the past about our desire to create vertical reference designs for specific applications. We are currently working on two concepts which I think are very exciting. We expect that we will begin applying engineering resources to one of the concepts in Q1 with the goal of introducing the design in the second half of the year. I will look forward to talking about this in more detail on future calls.

Next, I would like to discuss our service revenue and activities. From a customer and project perspective, this was another fairly typical quarter for us. We worked on 60 projects for 47 distinct customers in the quarter, and as usual, our service business was well balanced between Windows CE and Windows Mobile work.

During the quarter, we worked on projects to create multiple Windows CE and Windows Mobile-based smartphones, Windows Mobile-based handheld data collection devices, a Windows CE-based tablet device, retail kiosk, and several new board support packages for silicon vendors.

We entered Q1 with a healthy service backlog, and activity has been good. Therefore, we are currently expecting another sequential increase in service revenue in Q1, which I will speak to in a moment.

Overall in 2008, we believe that the industry trend toward devices that are connected and that include advanced multimedia, navigation, and Internet functionality is a positive one for our overall business and particularly for our service revenue. Our customers are building more complicated devices, and device cycle certainly are not getting any longer. Customers are looking for our help in adapting Windows CE and Windows Mobile to their platforms, as well as help with integrating peripherals, middleware and applications into their devices.

Based on this trend and the demand we see for our services, we expect to see solid growth in service revenue in 2008. We will continue to make investments in building our service expertise during 2008, especially in the areas of multimedia and wireless.

As Scott mentioned earlier, we plan to invest in 2008 to expand our Taiwan operation. We are doing this for several reasons. First, business with our customers in Taiwan is strong. Additionally, with the restart of our Japan activities in Q4, we will need incremental engineering resources in Asia to service what we expect to be a growing Japan revenue line. In fact, we closed our first major contract in Japan Q1, which has already driven the need for additional Asia engineering resources. We expect this to be the first of many new contracts we win in Japan in 2008.

Finally, during the upcoming year, we expect to execute some of our R&D initiatives out of our Taiwan operation. In order to facilitate this expansion we plan to relocate in Q2 to a new facility that will allow us to accommodate up to approximately 65 employees. Incremental expense effect of this larger facility, including rent, moving costs, and additional depreciation, will be roughly $150,000 in 2008 compared to 2007.

Next, I would like to address the status of our royalty-bearing service contracts. As we have discussed in the past, we sometimes enter into service contracts at very low initial rates in exchange for royalties as our customers ship their devices. These contracts usually, but not always, have some level of guaranteed royalties associated with them, and we own any unique IP developed during the execution of the contracts.

For the past several quarters, we have been recognizing royalties from several contracts that we worked on in Taiwan during 2006 and early 2007. The guaranteed portion of these contracts will end in 2008, and we currently expect to continue receiving a lower level of royalties from at least one of these contracts.

Our salesforce has been working on closing new royalty-bearing service contracts, and we currently have closed two new contracts which we expect to begin bearing royalties later in 2008. In addition, we have three other royalty-bearing contracts in the late stages of our pipeline, and currently expect to close them during Q1.

The timing of royalties from these contracts is not clear. Therefore, in order to be conservative, we have forecasted that the royalty revenue from this type of contract will drop later in the year. However, this may change based on new contracts closing.

Finally, I would like to speak to our expectations for 2008 and for the first quarter. Our goal for 2008 is to grow our topline revenue by 15% or more. And we expect to be profitable every quarter of the year.

Now let me talk a little more specifically about each of our revenue components. We currently expect third-party software revenue to increase approximately 15% to 20% in fiscal 2008 based on overall growth in the general embedded market, Microsoft's share thereof, as well as the addition of other third-party software offerings we discussed earlier. We currently expect proprietary software revenue to be generally flat in fiscal 2008, primarily due to the lower royalty revenues stemming from certain royalty-bearing service contracts as the guaranteed royalties periods expire and our difficultly in forecasting how quickly the effect of those royalties can be backfilled -- partially offset by the increased reference designs and related product revenue.

Given the uncertainty of the timing of the 2 to $4 million in royalties from the Media+ and Productivity+ customers discussed earlier, we have not factored any meaningful revenue from these contracts into our 2008 operating plan, which could be overly conservative.

We currently expect service revenue to increase approximately 15% to 20% in 2008 as compared to 2007 based on our pipeline of large service customers; our expectation that the summer slowdown that has affected us in the last two years will do so to a lesser extent in 2008; growth in our sales capacity; and increased revenue from the Asia-Pacific region resulting from our expansion there.

We currently expect third-party software sales to continue to be a significant percentage of our software revenue. And therefore, our software gross margin will likely remain relatively low in the foreseeable future.

As I mentioned earlier, we do expect to see some improvement in third-party software margin based on the addition of Flash and SolidCore. We expect our proprietary software gross margin to remain at relatively high levels.

We currently expect service gross margin to improve approximately 25% in 2008 based on higher activity and revenue levels which should have a positive impact -- effect on our staff utilization, which was negatively impacted by the summer 2007 slowdown.

For the first quarter we expect to see overall revenue increase roughly 6% from Q4 driven by growth in third party and service sales. We expect our service revenue to increase approximately 9% sequentially based on the strength of our service backlog and a very strong sales pipeline.

We expect third-party software revenue to increase approximately 9% from Q4, based upon our sales forecast, a strong start to the quarter, and contribution from Adobe Flash and SolidCore. We expect our proprietary software revenue to decrease approximately 28% sequentially from Q4. We are expecting sequential increases in DevKit, Schema, and SDIO proprietary software revenue, and continued recognition of royalties from royalty-bearing service contracts.

We will not see a repeat of the SmartBuild order that came through in Q4 or the Media+ settlement that benefited Q4. The absence of these two items will drive the sequential decrease. We do expect to be profitable in Q1.

Finally, we have been asked by many investors about what the possible effects a recession might have on our business. Currently we are not experiencing any customer cancellations or significant project delays. Our software and service pipelines are very strong, and customer activity levels in the first month and a half of 2008 have been good. While no business is recession-proof, we do think that the underlying industry trend of demand for connected devices is in our favor, and that the diversified nature of our revenues such that we do not rely on a single segment, such as consumer devices to earn the majority of our revenues, will serve us well should there be a downturn.

We believe that in building our 2008 plans we have responsibly factored for the possible effects of a recession by tying most of our operating expense increases to increases in demand, and by conservatively forecasting royalty revenue as I discussed earlier. We will continually monitor activity levels. And if we do detect any kind of slowing, we will be as proactive as possible in managing our expenses to match our revenues.

That ends the prepared portion of the call today. In closing, I would like to say how proud I am of the BSQUARE team for their great performance in 2007. I believe that as a Company, we are well positioned in the growing market and that we have all the pieces in place to continue our growth in 2008. I would like to thank investors for their interest in BSQUARE. And we will now open up the call for questions.

(OPERATOR INSTRUCTIONS).

Well, Michael, if there are no questions, we will go ahead and just end the call, and thank everybody for listening. And we will talk to you again next quarter.

We do have a question just queued up -- Madhu Kodali, Fertilemind Capital.

I was wondering if you can elaborate a little more on the Flash opportunity -- what kind of revenue per license -- how do you see that evolving?

We talked about the fact that we expect to see about $2 million of Flash revenue overall in 2008. We think based on the activity level that that's a very achievable number for us. And we think that there is going to be some pullthrough of BSQUARE products and services on top of that. We're already seeing that opportunity just in the short time that we have had the Flash technology for us.

Specifically beyond that, I'm not sure exactly what you're asking.

No, actually, that is good. I missed that part with your comments.

[Brian Ross], Sanders Morris Harris.

Congratulations on a great quarter. I did have a question and I apologize if you touched on this at all. I think a quarter or two ago, I asked you guys about your cash and short-term investment situation. And if you were ever interested -- or if it was brought up at all about buying back stock. And I think at the time, you just said you wanted to stay nimble and you're looking into making acquisitions. Is that still pretty much your main focus?

Yes, that answer remains the same. Obviously, we made a small acquisition in Q4. It didn't involve a lot of cash. That's both a good thing and bad thing, depending on how you're looking at it. But one of the things Brian did not touch on is we continue to look at acquisitions. We're always looking at -- at any point in time, we're probably looking at one, two, three different opportunities. But for a variety a different reasons, they don't come through. But if we keep looking, we will find something that makes sense, and probably will involve some cash and stock.

Okay. And then looking forward, with your 15% potential growth rate And revenues, we're looking at -- and profitable every quarter -- I would assume that your cash position would only increase. So if things don't come to you in the next quarter or two, is that something that ever gets brought up, or is it still something potentially to be done in the future?

It is something that we certainly do that we would consider in the future. It is not something that we talk about at every Board meeting. Right now we would rather put the cash to work on accelerating the growth of the business.

Understood. As long as you are looking out for us stockholders, I guess that is the main point.

Yes, absolutely.

Gentlemen, there are no further questions at this time. Please continue with any closing comments.

Well, I think that we are pretty much done here. Thank you very much for listening today. And we will talk to you again next quarter.

Thank you, ladies and gentlemen. This does conclude BSQUARE's fourth-quarter and full-year 2007 earnings conference call. We thank you very much for your participation today, and we wish you a very pleasant rest of your day. At this time, you may disconnect.