Climb Global Solutions Inc (CLMB) 2010 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Wayside Technology Group conference call.

At this time all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session and instructions will be given at that time.

(Operator Instructions).

As a reminder, ladies and gentlemen, this conference is being recorded.

I would now like to introduce your host for today's conference, Ms.

Melanie Caponigro.

Ms.

Caponigro, you may begin.

Thank you and good morning.

Welcome to Wayside Technology's third-quarter 2010 earnings call.

Before turning the call over to Simon Nynens, the Company's Chairman and CEO, I will dispense with the customary, cautionary language, and comment about the webcast for this earnings call.

We released earnings for the quarter at approximately 5 PM Eastern time, Thursday, October 28, 2010.

The earnings release is available at the Company's Investor Relations website at WaysideTechnology.com.

Today's call, including all questions and answers, is being webcast live and is accessed via the website, earnings.com.

A rebroadcast of this call will be available at WaysideTechnology.com.

This conference call and the associated webcast contain time sensitive information that is accurate only as of today, October 29, 2010.

A detailed discussion of risks and uncertainties are discussed in our Forms 10-Q and also in greater detail in our Forms 10-K.

Wayside Technology Group sees no obligation to update and does not intend to update any forward-looking statements.

Now, I would like to turn the call over to Simon.

Thank you, Melanie, and good morning to everybody.

I would like to start this call by thanking everyone here at Wayside Technology Group for delivering record results.

Let me start this quarter by reading an excerpt from an e-mail sent to us by a new software publisher that we signed up days after we held our yearly Lifeboat Conference, just two weeks ago.

The venue was very good.

Also spent some time talking with other Lifeboat vendors at the event and this is the part of the event that was most impressive for me.

Without fail, every vendor partner had the same thing to say about Lifeboat.

They are the best distributive partner we work with.

They are proactive, they are good communicators, they understand what a partnership is, and how the channel works.

They have excellent product managers, etc.

My comments to Dan and Don, Thursday evening, was that in my opinion, this is a reflection on how Lifeboat is being managed.

And you all as a management team should be proud of how your suppliers and resellers view you as a company to do business with.

Now when we visit customers and vendors we try to represent our Company well.

Yet what impresses vendors like these and our customers after they sign up with us is exactly what was said before in that e-mail.

Our team is proactive.

We are good communicators.

We understand what a true partnership is.

We know the products we sell and we know the channel.

If you want to know the difference between us and the competition, just call any of our competitors and ask questions about products they sell.

After that, give us a call and you will know exactly why we are so successful.

We do not have a call menu that drives you crazy, and once you get a live person on the phone they are knowledgeable, courteous, and helpful.

That is why we win, period!

All right.

Now about Q3.

Revenue was up 50%, and income from operations more than doubled at a growth rate of 105%.

Our international sales in Q3 amounted to $9 million or 17% of our total Q3 sales, as compared to $5 million or 14% of our total sales in Q3 of 2009.

As a result of our strong results and our confidence in our team, the board has approved to increase our quarterly dividends by 7% to $0.16 per share.

Cash and marketable securities amount to $14.2 million, representing 55% of equity as of September 30, 2010.

We are very well-financed and ready to invest in our future growth.

Dan Jamieson, our Vice President and General Manager of our Lifeboat division will now discuss Q3 for our Lifeboat division.

Dan?

Thank you, Simon.

Lifeboat's results in Q3 reflect strong year-over-year growth across key segments of the business including increases in revenue, margin, and income from operations.

The crucial growth factors in Lifeboat's robust Q3 results were the successful penetration and expansion of pivotal software lines within a variety of Lifeboat's premier reseller accounts, along with the successful expansion of business within targeted solution providers including value-added resellers, systems integrators, and other consultancy type companies.

Lifeboat signed distribution agreements in Q3 with 10 new software vendors.

These new vendor additions will strengthen Lifeboat's portfolio and enhance our focus in our go-to-market concentration areas including virtualization, security, application lifecycle management, and application and network infrastructure.

Lifeboat's European office continues on a successful growth path.

We continue to add pan-European vendor lines and our capability to process orders in euros, Great British pounds, and US dollars continues to be very attractive to the channel.

Lifeboat's Annual Partner Summit in Atlantic City, New Jersey was a resounding success.

With over 30 software vendors participating along with over 160 reseller partners attending from all around the world including South America, Europe, Canada, and all across the United States.

Thank you, Dan.

Shawn Giordano, our VP for Programmers and TechXtend divisions, will now discuss Q3 for his divisions.

Thank you, Simon.

The sales teams in both the Programmer's Paradise and TechXtend divisions performed exceptionally well throughout the entire third quarter.

We continue to follow through on our goal of providing the best customer service possible in meeting the demands of our customers' IT needs in a very competitive marketplace.

Strong sales throughout the entire quarter resulted in 27% year-over-year revenue growth.

Our focus on solution selling, particularly virtual infrastructure solutions as well as increased order volumes across our transactional software lines among several key publishers, were contributing factors to this growth.

In addition, larger transactions defined as deals over $50,000 also showed a year-over-year increase.

Our sales team teams will continue to focus on delivering strategic value to our customers.

Helping them in the area of server and desktop virtualization, storage virtualization, business continuity, and disaster recovery.

Being flexible in providing the best customer experience possible continues to be our primary focus.

Thank you, Sean.

Kevin will discuss the balance sheet and income statement in a little bit more detail.

Kevin?

Thank you, Simon, and good morning, everyone.

I will discuss our third-quarter financial results on a company-wide basis as well as per segment.

Net sales were $53 million compared to $35.3 million last year, representing a 50% increase.

Sales for our Lifeboat segment were $38.4 million compared to $23.8 million last year, representing a 61% increase.

Sales for our Programmer's Paradise segment were $14.6 million compared to $11.5 million last year, representing a 27% increase.

Gross profit was $5.1 million compared to $3.7 million last year.

Gross profit as a percentage of sales was 9.7%, compared to 10.5% last year.

Gross margin as a percentage of sales for our Programmer's Paradise segment was 11.7%, compared to 11.9% last year.

Gross profit as a percentage of sales for our Lifeboat segment was 8.9%, compared to 9.8% last year.

Total selling, general, and administrative, SG&A, expenses were $3.2 million, compared to $2.8 million (sic - see Press Release) last year.

As a percentage of sales, SG&A expenses were 6%, compared to 7.8% last year.

Selling cost increased by $400,000, the result of the increased volume in the Company's investing in and rewarding employees for sales growth.

Our net income amounted to $1.3 million compared to $600,000 last year.

As a percentage of sales, our net income was 2.4%, compared to 1.7% last year.

On a fully diluted basis, our earnings per share were $0.28 per share, compared to the prior year of $0.13.

Now moving on to the balance sheet.

Compared to our year-end balance sheet, the following accounts had significant fluctuations.

Accounts receivable increased by $7.2 million and accounts payable increased by $4 million, both due to the increased sales volume in the current quarter compared to the year-end quarter.

Our book value per share is $5.40, and equity now stands at $25.7 million.

Cash and marketable securities make up 55% of our equity.

This concludes my remarks.

Simon, back to you.

Kevin, thank you.

Now before we move on to our Q&A session, let me make one more comment.

We thank our vendors, the software publishers, for their trust and partnership.

We like to win, which is what drives us, not making our numbers our internal budget.

It is a great feeling of winning a new line or servicing a customer better than our competition.

We look forward with great confidence in the people who make these results possible -- our team here at Wayside Technology Group.

And to them, I say thank you for your hard work during this past quarter and thank you for your continued passion to win.

Operator, we can now start the Q&A session.

Thank you.

(Operator Instructions).

Alan Weinfeld, Riverfront Research.

A great, great job, Simon.

One of the most fascinating quarters we have seen in, I think, four years.

Thank you, sir, I appreciate that.

Could you give us a little more color as to the 10 new customers and is this the most new customers you had in the quarter since, I don't know, 2007?

Well, let me explain this.

So let me give you a little bit more color on the 50% revenue growth.

If you read the newspapers you believe that the economy is still lagging along.

In IT we have actually -- definitely seeing an uptick in spending -- significant uptick in spending.

In addition to that uptick in general spending, which also causes our competition to sell more, we have seen extraordinary sales growth because we do take market share on the software side.

We are a software-only distributor on the distribution side and there we have definitely seen a significant uptick.

Now on the Programmer's Paradise and the TechXtend division, we saw significant uptick in both hardware sales as well as software sales.

Now with regards to your comment about the 10 new customers, those are 10 new software publishers.

So we typically sign on anywhere, I would say, from 3 to 10, 12 software publishers a quarter.

So 10 is a lot in a quarter.

It is definitely -- it is not a record, but what we see is more and more people coming to us just because our competition is either is more interested in their marketing money than really building a partnership, or just adds some to their product line without any -- without being proactive at all.

So that is to answer your question in terms of why did we grow at 50%.

I hope that answers your question.

Yes.

And on the balance sheet, sure, every shareholder is really appreciative of getting something back in the dividend.

Was there any special reason to raise the dividend today?

I know you have a real small float and you bought shares back in the past.

Is there a share buyback program still going on, or is that finished, or you feel you are still -- you now have a good amount of cash if something comes along, if it is a small acquisition that could fit in anywhere in the world.

To answer that, we have $14.2 million.

Actually, part of the reason that the accounts receivable were higher, like Kevin said, that is because of our increased volume.

We also had about $1 million sale that was just paid that we booked in the beginning of August and that was just paid, I believe, the day after the quarter.

So that was $1 million right there.

So if you look at it, we got about $15 million.

If you look at our finance needs over the next coming years, as I have said when I joined in -- when I became the CEO in 2006, one the first things we did is immediately cancel the standby loan facility because if we would burn through that much money, I said that this company had no reason to exist.

With $15 million, if you look at our financing needs over the next coming years, we are looking to open up an office in Asia next year, but as the office in Europe that turned profitable in Q3, and within two quarters we have that office profitable.

So I don't see a lot of need for cash being used in the operational side other than just to finance our accounts receivable and accounts payable.

So basically what the Board said is we have delivered stellar results in the last couple of quarters as well.

If you look at our dividend yield, it is extremely high.

When I talk to investors, they say, well, [where are] you going to take that away.

I said, well, look at our balance sheet, it is one of the most conservative balance sheets out there as a public company.

So what we have decided to do is increase, show our faith and our confidence in our team, and that is one of the main reasons we invested -- increased the dividend just to show that we, yes, we have enough cash to keep paying this dividend, and we are confident that we can pay that out of current income from operations.

(Operator Instructions).

Jim Stone, PSK Advisors.

Congratulations on a great quarter, folks.

I wonder --

Thank you, sir.

I appreciate it.

I wonder if you could share with us some of the flavoring on actually what happened across the increase, and I am thinking particularly the September over the June quarter.

If you are looking at that, was it any particular areas or two or three areas which accounted for -- was it a particular grouping of software, four, five names, whatever?

Well, if you look at Q2 and Q3 over Q2 that growth basically, Programmer's Paradise did a lot better in Q3 than they did in Q2.

But overall, I cannot -- we had a really good July, we had a good August, and we had a stellar September.

So it was not one month or typically what we see is the last two weeks, there is a lot of large orders in that last two weeks, not really the case this year.

I mean there were large orders, but it was not just because of those last two weeks.

This whole quarter has been strong.

And I really feel like if you look at the programmers they have more orders, more order volume, typically higher orders, so that all went well.

They were large orders but we have that every quarter, they were not particularly, like I said, booked in the last two weeks.

Then if you look at Lifeboat, that is just a continuation of the growth that we have seen in last year in terms of either selling even more lines into our major customers in the DMR section as well as the VARs.

It is just a continuation now and we are really proud to be able to show that growth.

It was not in one line, we had a big order, one of our customers had a big order, ordered it through their distributor, and that is how we booked that revenue.

No, it was a lot of the smaller orders and we saw a general uptick with all of our customers.

Very, very good.

Can you tell us what are the issues that you would see that would allow you to continue a strong growth and then the issues that you see that would say, whoops, the future may not be so good?

Okay, one thing that definitely helped us make our quarter was the rebates from vendors that we get if we grow aggressively.

That was a significant portion of our income from operations.

We really increased sales for our software publishers.

One is a result, I believe, in the general uptick in spending for software, at least the software lines that we sell.

It might not be a general uptick in the overall IT environment, but definitely in the lines that we sell in the software, again, we definitely saw a general uptick so that is good.

In addition, we grew, like I said, because we took market share.

Based on those growth results, we achieved vendor rebates which were quite significant in the current quarter.

So I am not really sure if we can continue to attain those growth rates, but having that said, what do I see out there that would be bad, the customers are happy, vendors are happy unless I see a significant disaster on the horizon, which I currently do not see, I would say, no, we are facing a bright Q4.

But we have to book business every single day.

That is where it all starts so we do not have long-term contract, so it starts every single day.

So we work hard every day to get those results.

(Operator Instructions).

Steve Emerson, Emerson Investment.

Congratulations.

We are finally on the road and I hope sustainably have a new level.

We are all hearing the buzz word, cloud computing.

To what extent, does this represent an opportunity or a threat for you, and how much of our product mix is helped by this trend?

If you look at the cloud computing, years ago, we were talking about electronic software delivery, the ESD model, which seemed to gather a lot of comments.

Then it was virtualization, now is cloud.

While I firmly believe that cloud has a great future ahead of itself in terms of establishing a great footprint in IT, I am not sure if it is going to be the one-fit-all answer.

They are definitely -- the companies are moving toward a cloud environment.

I do think they need a lot of software and I think, we overall, see a general uptick in that because to get to the clouds you definitely first need to virtualize your environment and that is where we definitely see an uptick in spending.

So regardless where it will go with the cloud, because I do not know a lot of customers who will put their ESD systems on the cloud because again that is over the Internet, that is with security concerns, bandwidth concerns.

I do not see that immediately happening in the next six months, but definitely a buzz word.

People are definitely investing again.

And in order for them to get to that point they need to invest in software, and then middleware and technical software that we sell, so definitely a good and positive thing for us.

So what portion of your mix of revenues or what would you guess -- is half of your revenues impacted positively by the cloud or can you -- maybe that segue into the question is by sector, can you possibly give us some mix of business like how much is VM, virtual memory virtualization?

So, again, if I look at the cloud it is very hard to define so it would be very, very hard for us to say, okay, this percentage.

In addition, like I said before, we travel.

There are vendors out there, there are software publishers out there, who are either in the virtualization space but maybe in application development, maybe they are in security, where ever they are, they are dissatisfied with their current distribution partners.

We travel, we go out there, we try to see everyone around them and sign them up.

I am not going to stop and say, okay, well this is a cloud player, so I am just going to sign up the cloud player and stop.

We are going to try to sign up everybody.

So within our royalties we have seen strong growth in all their revenue alliances even in our -- we are on the Programmers and TechXtend sites.

So we are excited about that.

How much of that is because of cloud?

And then also the question came up, how much is that because people were just waiting to renew their software and hardware purchases?

Have they delayed their purchases?

Are they finally -- are they just renewing what they have or are they really investing growth?

I do not know.

I really do not know.

But the thing that I can influence is being flexible, proactive, and knowledgeable about the products that we sell and try to really do a good job in terms of getting them to come back to us to buy what they need.

That is what we can influence and that is what we do well.

Excellent.

And how much of your revenues were Europe or how much of your revenues were done in non-US dollars, outside of US dollars?

Okay, so in Q3 our international sales status outside of the US amounted to $9 million, $8.9 million if you want to be correct or 17% of our total Q3 sales.

Now having that said, there are people here that handle Latin America, Asia, the EMEA section as well that work here.

We also have an office in Canada that handle the Canadian market, and we also have an office in The Netherlands that handles the European market as well as the EMEA and some of the Asia markets.

So we really work hand in hand together to book those international sales.

They amounted to $9 million, as compared to $5 million last year in Q3 of '09.

So we almost doubled those sales as well.

Jim Stone, PSK Advisors.

I am trying to understand a bit.

You said the payments you got from the vendors for the good sales.

Are you saying then if sales were sequentially flat that we might see a margin shrinkage because we would not get as much of the bonus payments?

Yes, that is exactly what I am saying, yes.

Okay, good.

I am glad to get some flavor on that.

Is virtualization still the lion's share of the revenue or is that other parts are becoming more important?

Dan, if would -- within Lifeboat Distribution, Dan can definitely give you a little bit more flavor about that.

Absolutely.

Thank you, Simon.

Yes.

Virtualization continues to be strong trajectory space for us, Jim.

We have been there and in that space for over a decade now, right from the get-go when we started out with VMware.

Over the years, we have signed, enforced agreements with over 30-plus third tool party vendors within that space.

So that is a strong space for us, but also we really see emerging alongside of virtualization now the security space because a lot of what the folks did in virtualization, they jumped in there and it took off real well.

And then security oftentimes became a secondary thought and they realize, well, I am exposed or I have to catch up on the security side.

So our teams here have done a real good job of really kind of cross pollinating our go-to-market strategies in our targeted efforts towards expanding what we have done in the virtualization space by aligning it and then cross-selling security opportunities within those customers.

In addition to that, we have got some strong work being done in the application lifecycle management space and also the application and network infrastructure space.

So we really, really kind of spread out our strengths -- continue to go to our strengths.

We do not have our eggs all in one basket which would be the virtualization basket.

On the virtualization, at what point do you see that we are approaching -- saturation is the wrong word, but it would be a leveling because basically most of the people who would have bought have already bought their virtualization stuff?

Amazingly so, you look at it, and although it may appear that there is some saturation point being approached, that is really not the case if you listen to the main platform providers within that space, VMware included, Microsoft included.

There is still a lot of penetration to be achieved, so there is a whole lot of folks out there that still need to maximize what they are doing in the virtualization space and, I think, we are well positioned to capitalize on that.

Yes, just to add to that, I think in the overall growth ratio they say in terms of the overall IT environment out there, I think, VMware reported two years ago, Microsoft as well, that they were about 4% to 5% in terms of penetration of possible sales.

I think right now they are in the 10%, maybe to 15% range, but that is about it, so we have got a long way to grow.

And to Dan's point, like Intel acquiring McAfee, the security space, there is a lot going on in the security space.

People are really getting concerned that, yes, they virtualized and they put it in the cloud, but how secure is it?

So there is a lot going on in the security space and we are very excited about that.

Alan Weinfeld, Riverfront Research.

They list a bevy of competitors and different Internet sites around you guys, but are the two most that you see in your competition Ingram Micro and Tech Data, or is it someone else, or a different group?

That is a great question, Alan.

So Ingram Micro and Tech Data, great companies in their own right, but they are very different companies from Lifeboat.

They are broadline distributors.

Hardware is their primary concern.

Software is oftentimes their secondary concern.

Here at Lifeboat it is our primary concern.

It is what we focus on, it is our forte, it is one of our greatest differentiators from the broadlines, in addition to the fact that our reps are knowledgeable about the products that we distribute.

So when you call it to us, if a reseller calls into Lifeboat, they are not just going to get somebody to give our price in a SKU, and then if that person has a technical question, they are not going to tell them to call the manufacturer.

We are going to really work hard to answer those questions and become a true extension of the vendors that we represent.

So that, combined with our really day-in and day-out efforts to offer extraordinary customer services, is what really sets us apart.

So we have some overlap with Ingram and Tech Data, but really, we are primarily two fundamentally different companies.

We are a value added distributor worldwide.

So in terms of your question if you want to look at the websites that list our competition some of them list the software publishers, and I think sometimes rightfully so, because they are large direct sales teams and the question is are you booking most of your sales through the channels, or is it a strategic decision to sell directly to end customers.

But if you want to compare us to public competitors out there -- and, again like Dan said, that is our value proposition, that it is not to say, okay, we are better or anything, and those two companies that you mentioned is just a different approach.

I want to be very clear about that, we highly respect the players in the field.

But if you look at public competitors in terms of Lifeboat you would look at companies such as Ingram, Tech Data, Synnex, Arrow, Avnet, those would be the players.

If you look at TechXtend and Programmer's Paradise, a highly fragmented field, highly fragmented field.

And I cannot really say that the large customers of Lifeboat the DMRs, CDW, or Insight, SHI, Zones, PC Connection that they would be a competitor of Programmer's.

Programmer's is a very, very niche kind of software and TechXtend is the value added reseller.

There are 10,000 of them in the US, so I cannot really mention a public competitor of those companies.

And, Shawn, I think you mentioned the number that you were up, it was a pretty strong number in the TechXtend business year over year, I might have missed it.

That is correct.

It revolved around infrastructure solutions?

Yes.

What is important to note to add to kind of the similar vein in what Dan had said, if you look at that type of business and we focus on the methodology of the worldviews, virtualization is kind of a broad term today.

So you have storage virtualization, server virtualization, desktop virtualization, I/O virtualization.

There is a lot of complementary technology here -- complementary technologies here in this space and we are focusing on helping our customers solve these problems.

So we bring them the choices and the best possible decisions and help them make those decisions when they are looking at these technologies.

So that attributed for a good percentage of that growth.

Are you going to -- because that is such a huge growth business, and it was only started I think a few years ago, are you going to break that out like Programmer's, Lifeboat and then TechXtend on the income statement in the future or that is just too small a number for investors to care about this point, or how are you looking at it?

It is more in terms of our customers that we serve.

If you look at the requirements to disclose that separately -- and it is not even the requirements to disclose it separately, I firmly believe that -- like I said years ago, we decided to split up Lifeboat and Programmer's because we all felt that would give investors a better feeling for our business, where is the growth.

And they are two completely separate businesses.

If you look at TechXtend, we look at it as the corporate division of Programmer's Paradise.

So they are really always working hand-in-hand.

And it is more the corporate environment that requires a little more than the technical niche that Programmer's serves when it comes to TechXtend.

So I would not -- it is based on the customers, you look at it, I don't not think it would give you an additional -- any additional information to break that out.

But should we divert in terms of customer focus or the products that we sell, they become distinctfully different then, yes, we would break that out.

(Operator Instructions).

George Melas, MKH Management.

Good morning, gentlemen.

You have done, it seems like you have done a great job of broadening your software publishers.

Are you able to do the same thing on the customer side at Lifeboat, or are you sort of relying more and more on a smaller number of customers there?

I would tell you one thing and, Dan, can definitely give you some more flavor on that.

Definitely, there is a lot of consolidation going on.

Like I said before on the value-added resellers side, there are, I think it still 80,000-plus companies in the US that serve that market.

So it is highly fragmented, there is definitely a lot of consolidation going on.

Are we definitely selling more to our top customers?

Absolutely, we are selling more and more lines.

You could say some of our customers now buy everything that they can buy from us, they buy it from us.

So that is great to see.

We have garnered a lot of market share there.

But I tell you one thing, why is Lifeboat successful?

It is because they are able to grow new relationships to get into new markets for software publishers, and we do so in a very proactive basis.

I can give you one example of one of our top five software publishers that had a goal of bringing on new associate partners -- and Dan and I will visit him in November.

And we are definitely one of the few distributors that they have that was able to grow them into new markets.

And not only to sell them -- to get a value-added reseller to buy just one product from them, but they were ordering multiple times from us.

That is the most important factor and that is where a lot of software publishers see growth, and I think rightfully so.

So it is our job to bring on new software publishers, but there is not a lot of new young people who say, let us start a value-added reseller.

The key is, if you sold them one product how can you get them interested and make sure it is not just a one-time buy, how do we get them interested in new products, how do we get them to sell your solution and get them to sell more of that?

And for that, you need a proactive sales force, which is what Lifeboat is.

And just to add to that, I think, our approach is a two-pronged approach to Simon's point.

One of the many things I love about our Company is we are looking at our existing customers, we are really working hard to expand those existing relationships within the large account resellers.

Within the DMR's, we have our business targeted at that a portion of our business and our efforts on our sales force.

And then on the other prong, on the other hand, we also are really going after those solution drivers -- the value-added resellers, system integrators, consultancy tech companies.

And our value proposition aligns so well with their needs because they inherently need to know more about the products that they are sourcing.

So that is our efforts.

And again, we align it with our value proposition which we keep it simple.

We were focused on software and we are delivering extraordinary customer service day-in and day-out and we are knowledgeable about the software we distribute.

Jane (inaudible), Private Investor.

Good morning, congratulations, well done by everyone.

I just wanted to ask somebody -- you did mention opening an Asian office and I was wondering when that might be up and running?

It is like the European office or our international sales.

We are definitely very flexible.

We can be up and running in two months, should we desire so.

Right now that is not in the plan.

Like I said, we are looking forward to opening an office next year, when that is will be based on discussions with our software publishers in terms of who wants us there.

If you look at Latin America, the resellers in Latin America, we have Spanish and Portuguese speaking representatives.

We travel to Latin America multiple times a year, we have conferences, there are specific country visits and they have are very pleased with that representation.

Those customers have indicated, as well as the software publishers have indicated, that they do not desire us to be physically there.

And again, we are not a hardware distributor, so we do not need a bank and a warehouse in those countries.

We are a sales and marketing machine for them who inform the reseller.

So we not necessarily have to be in that geography to really handle the territory for software publishers.

Having that said, and I just came back from an Asia trip two weeks ago, Asia represents a formidable opportunity for us.

And I firmly believe that Asia is definitely, A., going to grow tremendously; B., attack our software piracy

.

There they are going to grow into the next phase of their economy and they are definitely going to attack that software piracy rate.

So there are great growth opportunities for us there.

And should the software publishers desire so, we have to be ready.

That is why we look into it and that is why I indicated somewhere next year we are going to look into opening an office in

(Operator Instructions).

I am showing no further questions at this time.

Great, thank you, [Sid].

Thank you to our investors for being on the call.

We look forward to report our Q4 numbers in January.

Ladies and gentlemen, thank you for participating in today's conference.

This concludes our program for today.

You may all disconnect and have a wonderful day.