Clearone Inc (CLRO) 2016 Q3 法說會逐字稿

Good morning, everyone, and welcome to the ClearOne 2016 Third Quarter Financial Results Conference Call. This call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to the company's Investor Relations representative, Ms. Cathy Mattison of LHA. Ms. Madison, please go ahead.

Thank you, Skyler. Welcome, everyone, and thank you for joining us today for the ClearOne 2016 third quarter conference call. On the call today are Zee Hakimoglu, President and CEO; and Narsi Narayanan, Senior Vice President of Finance.

Please note this call is being broadcast live on the Internet at www.clearone.com, and a playback will be available for at least three months.

Before we begin, I would like to make the cautionary statement and remind everyone that all of the information discussed on the call today is covered under the Safe Harbor provisions of the Litigation Reform Act. The company's discussion today will include forward-looking information reflecting management's current forecast of certain aspects of the company's future, and our actual results could differ materially from those stated or implied.

Today, Zee will open with a review of financial highlights, the growth strategy and operational accomplishments. Then Narsi will provide a detailed discussion of the financial results. Prior to opening the call for questions, Zee will return with a summary on the company's vision and outlook.

Now it is my pleasure to turn the call over to Zee.

Thank you, Cathy. We have worked hard to make ClearOne the only player in professional AV that brings the full value chain to the AV conferencing, collaboration and network streaming market. We finally achieved this through strategic acquisitions and internal technology development. We were not there a year ago, but we are confident we are there now and have yet to realize the full potential of ClearOne.

We have enhanced our offerings, which have expanded our total addressable market. While our initiatives have started bearing fruit in the form of accelerated growth in video revenue, we expect our new audio solutions will also contribute to drive 2017 growth and long-term shareholder value.

Regarding the third quarter 2016 financial results, revenue was $12.9 million compared to $15.9 million a year ago. While a portion of the decline was not surprising, reflecting the transition to our recently introduced next-generation audio conferencing platform that caused some integrators to delay purchasing our product, it is still disappointing. Nonetheless, we will not allow this near-term challenge to distract from our progress, and we are delighted with our video products.

In fact, Q3 sales for video has more than doubled compared to last year's third quarter and delivered eight quarters of growth out of the past nine quarters.

For Q3, the company reported non-GAAP gross margins of 62% and remain profitable with non-GAAP net income of $2.0 million. We continue to create shareholder value with our dividend and our stock repurchase program.

ClearOne continues to drive ahead, executing on our strategic initiatives, all of which create underlying value for the company every quarter and every year. For example, we received two new patents in Q3. The first patent relates to Spatial Audio Technology, an exciting new frontier for conferencing. The benefits of this patent can be used to improve intelligibility and reduce listener fatigue in a conference.

The second patent relates to Multipoint Videoconferencing Technology. It improves the performance of a video multi-control unit known as an MCU by enabling significant computational savings that can be important for cloud-based video bridging systems. We are forging ahead with the utmost confidence in our products, people and the execution of our strategy. We are enthused by the responses from our partners who have been evaluating our next gen audio platform and who are giving it phenomenal reviews, which match the enthusiasm of our sales and marketing team.

The company focuses on two critically important core pillars to win and grow. The first is providing a compelling business proposition to target and intercept the quickly evolving AV market with differentiated and competitive technology to meet new market need. The second is targeting the business needs of our AV channel practitioners, the integrators and consultants who are the key to selling and servicing this evolving market.

I'll provide more detail on this focus of ensuring ClearOne is meeting the evolving market needs. Enterprise meeting rooms are undergoing significant changes. The mix of workspaces between large, medium and small rooms is changing in favor of increasing the number of smaller spaces. AV technology expectations are also changing to meet the mix of these new rooms. On top of this, the increasing number of workers outside the traditional centralized workspace has become an important factor driving organizational collaboration and communication investment. These remote workers also need ready and easy access to quality conferencing, collaboration and network streaming tools.

In the past, enterprise is focused on designing elaborate boardrooms equipped with the latest, most expensive technology for limited use. These rooms are still being designed and continue to grow, albeit more sensitive to cost. But as I mentioned, conferencing and collaboration needs have extended to smaller workspaces called huddle rooms. These huddle rooms are used for ad hoc and actual conferencing and collaboration. Some pundits in the industry say, the demand is driven by millennials and is growing in double digits.

Huddle rooms are equipped with audio, video and display technology like their elaborate large-room counterparts, but need to be scaled to meet smaller spaces and lower budget. The investment for scaled huddle rooms is attractive for large enterprises. As well, the lower investments bring these scaled solutions now within the reach of small and medium businesses.

The proliferation of huddle rooms add significant opportunity for ClearOne. So how has ClearOne positioned itself to win in this evolving market? We are bringing our highly disruptive, scalable and cost-effective audio, video conferencing and collaboration and streaming products to more workspaces and more businesses worldwide.

I'll review a few great (technical difficulty). Our new COLLABORATE Versa product embraces the idea of a scalable huddle room and encourages the bring-your-own-app, known as BYOA, concept. Our new COLLABORATE Pro video conferencing and collaboration products, also scale from huddle room to boardroom to cloud without compromising quality and address the market trends transitioning in a way from high cost big-iron videoconferencing equipment to low-cost appliances and cloud-based services for these tools.

We also have introduced budget-friendly encoder and decoder technology to expand our IT-based network media streaming solution VIEW. These are scaled for extension to the huddle room and will ship before the end of the year.

On the audio side, our competitively priced and highly scalable new flagship CONVERGE Pro 2 platform along with our complimentary microphone, especially the new Beamforming Microphone, equally address the demand of this evolving room mix from huddle to large-scale auditorium. All these new audio products will ship before the end of the year.

Clearly, ClearOne is perfectly positioned to take advantage of the AV market global growth opportunity while enlarging its dominance in the traditional audio conferencing environment.

Now on to the second pillar, which serves the need of the channel AV practitioners who sell and service our solutions in this complex evolving market. In fact, the AV consultants and integrators hold the key to successfully introducing and driving penetration of our solutions for us to succeed. We strive to build outstanding channel relationships and prioritize innovation that make ClearOne their natural choice as their preferred partner. Today, ClearOne is the only player that brings the most complete suite of complementary and coordinated solutions to the Pro AV market that can connect, interoperate and scale across enterprises of any size, for any workspace, for all conferencing, collaboration and streaming applications.

Our complementary solutions were designed from concept stage by ClearOne engineers to seamlessly and easily integrate with each other. This helps AV consultants and integrators to simplify their solution selection and design, secure interoperability, mitigate unforeseen installation problems, eliminate multiple vendors passing-the- buck and avoid post-installation truck rolls. By using ClearOne AV products from soup to nuts, the practitioners can design and install projects quicker and easier, ensure customer satisfaction, get paid faster and preserve profitability. We call this the ClearOne value chain. This chain has helped us secure some great wins. I'll review some of our successes in Q3 now.

For our video conferencing and media collaboration products, wins included two Fortune 100 oil and gas companies, a very large healthcare organization, a Fortune 100 sports apparel company, a major league basketball team, two Fortune 500 technology companies, a Fortune 500 automobile company, a couple educational institutions and projects for U.S. and international governments. For our network media streaming video products, VIEW, wins included a major league football team, a Fortune 500 defense company, a Fortune 500 automobile parts company, a couple of hospitality companies as well as a couple of international government projects. For our wireless mic wins, these included a Fortune 100 technology company, a Fortune 100 healthcare company, a Fortune 100 automobile company and two space research organizations along with a large government project.

In addition, we have a sampling of known opportunities for our just launched CONVERGE Pro 2 audio conferencing platform and Beamforming Microphone 2 that include a very large project with a Fortune 100 automobile company, for which we have already secured a booking for a portion of the project.

Also, in terms of opportunities, we have leading software and technology companies, including Fortune 100 companies in these -- multiple educational institutions, including an Ivy League university, a Fortune 100 capital equipment and manufacturing company, a Fortune 100 metals company, a Fortune 500 bank, a Fortune 100 entertainment company, a Fortune 500 pharma company, a top 10 ranked hotel group, a large utility company, two energy companies, two prestigious consulting companies, a defense research company and a foreign government project. This sampling reinforces our confidence in our strategy and the continuing success of our products.

In summary, we have confidence in our new product set and our profitability gives us the ability to invest in the business and continuously build value, and we are committed to doing just that.

Now I'll turn the call over to Narsi.

Thank you, Zee, and good morning, everyone. Before I begin, I would like to note that I will be discussing certain non-GAAP financial measures. A reconciliation is included in our earnings release.

Now I will turn to our financial results for the third quarter of 2016 compared to the third quarter of 2015. Net revenue was $12.9 million compared to $15.9 million. And according to an agreement, we recorded three quarters of licensing fees in Q3 of 2015. Year-over-year, video product sales more than doubled. However, this was more than offset by the impact of the global economic slowdown, especially in the Middle East, Northern Europe, Asia Pacific and South Africa and of our transition to our next-generation professional audio conferencing platform, which we launched in June.

Here are the year-over-year revenue change in percentage by region, America, down by 15%; Asia Pacific, including Middle East, down by 23%; and Europe and Africa, down by 38%. Here are the year-over-year revenue change in percentage by product, Professional audio, down by 25%; UC endpoints down by 26%; and video up by 109%. Sequentially, revenue grew 8% compared to $12 million in the second quarter driven by growth in video and professional audio conferencing products. Notably, our video product sales increased in eight out of the nine most recent quarters. Non-GAAP gross profit margin was 62% compared to 64%. The decrease in margin percent reflects an unfavorable shift in product and licensing mix offset by lower inventory obsolescence cost in 2016 Q3.

Non-GAAP operating expenses were $5.5 million, down from $6 million, reflecting lower commissions to independent agents and lower trade show costs. Non-GAAP operating income was $2.5 million compared to $4.2 million. The effective tax rate was 21% compared to 32% a year ago. Non-GAAP net income was $2 million or $0.22 per diluted share compared to $2.8 million or $0.30 per diluted share. Non-GAAP adjusted EBITDA was $2.7 million compared to $4.4 million last year.

Turning to our year-to-date analysis, we see the same factors mostly impacting our results. For the nine months ended September 30, 2016, revenue was $37.9 million compared to $43.5 million for the first nine months of 2015. Non-GAAP gross margin was stable at 64%. Non-GAAP net income was $5.2 million or $0.55 per diluted share compared to $6.4 million or $0.67 per diluted share. Non-GAAP adjusted EBITDA was $7.7 million compared to $10.5 million.

Turning to the balance sheet. We continue to be very strong. Cash, cash equivalents and investments were $40.1 million at September 30, 2016, up marginally from $39.8 million at December 31, 2015, still without any debt. Once again, we paid dividends and $0.05 a share was declared and about $450,000 was paid in Q3. On November 1, a dividend of $0.05 per share for Q4 was declared. Further during the quarter, we purchased approximately 92,000 shares for about $1 million. This brings the total since March 2016 when this latest stock repurchase program was launched to approximately 456,000 shares amounting to $5.1 million. We intend to continue to repurchase our shares in the open market subject to price, volume and other Safe Harbor restrictions.

Thank you. Now I'll turn the call back to Zee.

Thank you, Narsi. We now have critical strategic math to dominate the AV market. We are the only player in the pro AV market that can connect, interoperate and scale across enterprises of any size, for any workplace, for all conferencing collaboration and streaming applications. Through our outstanding channel relationships and prioritization of innovative products, we are well positioned to take advantage of the global growth opportunity by expanding share in the traditional audio conferencing environment and the network media streaming market.

As a distinguished brand bringing the full value chain to the professional AV market, ClearOne is well positioned to return to growth in 2017, while our strong balance sheet will enable us to pay dividends and repurchase stock and invest in its future continuing to create shareholder value. We look forward to reporting our progress in the quarters ahead. Thank you. Operator, we may now open the call for questions.

(Operator Instructions) And our first question comes from Ian Corydon of B. Riley. Your line is now open.

This is actually Mark Drucker on for Ian. Could you please provide a revenue breakdown by product category, professional, unified communications and video boost?

Give me one second. For Q3, the revenue mix for Pro was about 78%, UC was about 11% and video was about 12%.

I'm sorry, the last one was 12%?

Yes, video was 12%. Yes.

Okay. Thank you. Do you think gross margin can return to the levels you achieved in Q1 and Q2 in Q4 or -- and into next year?

We think in Q4, we will be able to maintain our year-to-date gross profit margin, actually.

Okay. And then the year following?

A year following, we have launched the new CONVERGE Pro 2 platform. The margin for CONVERGE Pro 2 platform is marginally lower than our current set of products. So the gross margin mix will depend on several factors, including the regional contribution, size of the projects, volume, all those things. But it's competitively priced, and it's profitable to be marginally lower than the current set of products.

Do you have any idea Proxxon will comprise what percentage of overall revenue?

Can you repeat -- overall revenue, I did not get the first point?

So my interpretation as you're saying, you're not 100% certain because there's new product coming online that has a lower margin. And I'm just asking them, is there any sense that we can get what revenue contribution you're expecting from Proxxon?

Okay. When I was talking about long term, the CONVERGE Pro 2 platform is our -- will be our flagship product. Remember our current professional product line contributes close to -- the mixers. They contribute close to -- along with microphones, they contribute over 70% of our revenue. That's the entire professional audio ecosystem. So that would be our flagship. So when we talk about the margins, I'm talking about -- it affects the overall gross margin for the entire company actually. It's not just a fraction.

Okay. That's helpful. Thank you. Last question for me. Is $2.4 million the right quarterly SG&A run rate that we should be thinking about going forward?

We are currently benefited by lower commissions that due to lower turnover. A portion of our commissions are linear to our revenue. So when revenue goes up, you will see increase in that part of sales and marketing expense actually.

Okay. That is helpful. And with revenue expected to increase in 2017, you're thinking that SG&A will rise?

Yes.

Our next question comes from Lisa Springer from Singular Research. Your line is now open.

You gave us some ideas about what's in the pipeline in terms of interest in Fortune 100 companies. Of the companies you've talked about, what's the mix between those that have been existing Tier 1 customers that were switching to the new technology and companies that are totally new customers for ClearOne?

That's a great question, but I'm afraid I don't have the answer to that. We've been selling into Fortune 100 and 500 companies basically for the life of ClearOne. So we will always continue to do that. I can't give you the mix, but I can tell you certainly that we -- maybe the more important question is that we've had an opportunity to sell these video products into some of our existing customers, and that's important to us.

Okay. And the other question I wanted to ask you, you mentioned the two new patents. When might we see products that are incorporating the technology from those patents.

In those patents, we are actually using some of the technology in our video products, that's one. And in many of our patents, for the most part, we use the patents in our products because we come up with the ideas early in their development. But on the spatial audio, I would say that those are patents that are in development. Did I answer your question?

Yes.

(Operator Instructions) And our next question comes from Chip Saye with AWH Capital. Your line is now open.

Are all of the SKUs shipping now for the Pro audio the new upgraded next generation products?

No. We have 10 SKUs, and we will be shipping all SKUs by the end of the year, including the Beamformer.

Are we shipping the Beamformer now?

We're not shipping the Beamformer 2 now. It belongs with our CONVERGE Pro 2.

Okay. Secondly, you went through a lot of wins, I think, or examples of customers. Can you talk about in the video business to growth, what are some of the use cases you were seeing for the business you sold this quarter?

Well, the use cases for video -- media collaboration and videoconferencing are, really, exactly as I described, which is they want a low-cost solution in smaller rooms for media collaboration. In some cases, they love our camera, in some cases they love the entire solution. We offer both cloud-based and room appliances. And for larger organizations, people still need in-rooms. As I mentioned, they may have workers outside the facility, but they still have facilities with rooms where they want to meet and our price points and our functionality is second to none.

Okay. I was wondering because I made some calls to the channel, and I heard your UNITE 200 camera is doing really well, and I just wondered would that be for the huddle rooms that you're discussing?

It can be used for the huddle rooms, and it is used for smaller rooms. It can be. It depends on the application, but you certainly need very good audio and a good camera for any function where you're going to be doing conferencing or collabs -- especially conferencing. It also can be used with the network media streaming solution, because an IT camera, which it is -- very powerful, by the way -- it can also be a source for streaming applications such as security or video, training videos, schools, etc. So it really crosses the divide for all video applications.

All right. This is for Narsi, I guess. Narsi, the shares bought back in the quarter, I think, you purchased 226,000 shares in the quarter. Is that right? Or is it since the beginning of the program?

No. We have purchased 92,000 during the quarter. I think it was like 456,000 so far since March when we started the program actually. So total (multiple speakers) --

So what was the price paid for the shares bought in the quarter? Do you have that.

It's about $1 million. It's about $11 a share.

Our next question comes from George Melas from MKH Management. Your line is now open.

Zee, thank you for the color that you provided on the deals and on the pipeline. Can you help me understand a little bit better the pipeline. You talk about one potentially very large deal where you've done -- you've had some bookings. The deals that you mentioned in the pipeline, are these deals that your manufacturers rep or your VARs, are you working together with the VARs? Can you help us explain that?

Well, the way we work is we have a model, which includes distributors, value-added resellers and our own sales team as well as our own manufacturing reps. In some cases, our own sales guys may approach a direct customer and know about it and then we'll share that with a distributor. In other cases, the manufacturing rep may know of a project and lead that project and our sales guy may know about it. It's not a 100% crossover. Right now, I would say that the distributors are not as deeply involved because we have not been stocking products yet.

Okay. And those customers that -- or those deals that you mentioned, are these deals that they have committed to you? Or that you are working on in a competitive situation?

Well, of course, there's hardly any situation, in fact, I can't think of one, where it is not competitive. But we have brought in the demo units that we had, that we distributed to our sales and the demo units were shown and described, and it looks like they have made pretty good commitments that when the shipping product comes, it looks like they have somewhat committed that it will be a ClearOne product. Of course, anything can happen. But these were opportunities that we felt confident about and that we're sharing with you because we think it's important for you to know that the market has embraced our new solution, our new platform.

Okay. And so how do you see the uptick of that product compared to other products that you've brought to the market, especially the first-generation CONVERGE Pro?

Well, the first generation -- actually, we've had five generations. We had the AP, the ZAP, CONVERGE Pro 1 and now CONVERGE Pro 2. In fact, they were probably a model before that, before my time. Nevertheless, we have a very solid footing in the Pro audio conferencing-installed market, and we anticipate that we will establish our footprint as we always have. Of course, there are more competitors in the market, but we think that we're going to be adding features, and as I said, the entire value chain that makes our products extremely attractive.

I will say also that our Beamformer 2 is very unique in the market. We have competitors trying to basically duplicate our Beamforming 1, which they have not succeeded at all. In fact, it was the basis for one of our wins recently for the CONVERGE Pro 2 that we spoke about. So we are very far ahead in terms of technology and the value to the integrator consultant. And some of it is product, but some of it is brand and value, as I mentioned, profit, profitability support and that has -- continues with CP 2.

Okay. And is the Beamformer 2, is that going to be attached to the Pro 2? Or are you going to sell it separately?

No. The Beamformer 2, like its earlier version, Beamformer 1, is sold with the CP 2, because there is some advanced functioning between the two, which makes its performance superior in the market.

Okay. And then a quick question on your audio distribution product, the Matrix. I think that it went back to the drawing board. Is there any sense that you're going to bring that to the market in 2017?

Yes. In fact, I didn't mention it on this call. Good catch, I must say. But we are still working on that product. The product hasn't really gone back to the drawing board. We did release the core elements, which are the Matrix switch-back fabric for that solution, and we are working on the low-cost endpoints, which again will scale. And we will announce that product at next InfoComm with a firm shipping date.

Okay. And that's the next InfoComm that's going to be in next June then?

Yes. We're hoping to be shipping near that time, maybe a few months later, but that's certainly on the drawing board still.

And then regarding the video product, to what extent are those sold separately from your audio, I mean, in different customers -- to different customers? Or to what extent are your VARs sort of leveraging their relationship with their customers and basically adding -- selling those, the video and the networking, the streaming as well?

Okay. That's a little bit -- the answer is we're going to our existing customers, of course. We're introducing our new video products. But note that our video products span from cloud all the way to a professional video system, which includes our mixer. Our Beamforming mics can also work with our ceiling mics. So when they buy these units, we pretty much integrate it as a SKU, the audio component. For example, if you're in a room and you want to buy a low-cost appliance, we've already got the audio component added to it. So they know us for their -- our audio. Now we're getting to have them know us for our video, but the SKUs are complete, audio, video, control, etc.

Okay. And then maybe without -- maybe I didn't ask my question correctly. But how -- maybe something like what percentage of your video sales are to customers that don't have your audio? So is it to new customers as opposed to leveraging the end customer relationship that you or your VARs have?

I'm afraid I can't say. We've been in business so long, and we don't always have exposure to every end customer, especially if they're smaller. The distributor will ship it themselves, and we to the integrator, who will then ship it to the end customer. So we don't have full exposure to every end customer. So I couldn't answer that. But as I mentioned before, we're pleased that some of our Fortune 500 and 100 customers have taken a look at our video products and have purchased.

Okay. And then just final question. The Sabine manufacturing transition, is that complete? And the inventory scrap, is that because of a product redesign or what was the reason for that?

Narsi, can get that?

Actually, it's a combination of few things. One is, of course, the type of raw materials and things that we used in our own facility. We find that it would be easier and better for them to source their own things and the version of things change, and we don't get to use those products, that's one reason. Second reason is when you go through this list of things that we have always been using and when you go through this full revamp of trying to clear out the shelves and looking at what to be used, what not to be used, we find out things that are no longer viable. It's more -- so you go through that process.

So we -- it's a complete investigation of what -- some things also got damaged actually when you go through several transit issues. Some of the products are moved to Salt Lake City, some were moved to our outsourcing facilities outside. We had to inspect them and ship. You lose some parts due to that process. So all these things happen. But the transition itself had been smooth, and it's done actually. The manufacture is going fine. We are still going through some inventory ramping up in terms of -- you remember, we introduced a lot of different frequencies and things. So we're aligning our forecast and production to meet those demands. It's a little bit of a challenge, but the production itself is running smoothly actually.

And our next question comes from Dennis Van Zelfden with Brazos Research. Your line is now open.

Zee, from a big picture standpoint, do you see any letup in the global headwinds such as currency, economic conditions, etc., that have negatively impacted revenue over the past several quarters?

Well, what of course we're subject to is the same for any business that is interested in making capital expenditures to grow their business. In the Southwest, we have the challenge with the oil companies. Their investments in the capital equipment is less than it was that when oil was flying high. Eventually, they will retool their business models and everyone is retooling their business model, so that they can continue to grow based on the conditions that we have.

Europe -- Northern Europe was a little bit impacted, obviously, more than a little bit impacted when the Brexit fear was going along. Southern Europe has been in a malaise, I think, since the beginning of their recession. And quite frankly, I don't see a big change there. The Middle East was doing very well with oil, but again, they are putting investments not only in oil infrastructure, they're repositioning, so that they could add other industries for their survival, and they're doing that in Dubai, for example, which is hospitality and other things. In China, the government crackdown on corruption was very, very severe and people and businesses were very careful in constructing new projects, the building construction slightly slowed, more than slowed, I should say.

So overall, every economy has been impacted by their own specific issue. But the good news is I think companies are adjusting to it. And for the ClearOne offering, we do not offer -- while we have high-end systems, every one of our solutions from soup to nuts gives us the ability to offer a complete suite from audio to video, upscale solutions based on their investments. The entire huddle room concept is one that's sort of a new economy concept, where they will put more rooms, lower price, so that they could get better efficiency out of their organizations. So I think we've got the right products at the right time for today's economy to make the most of it, and we see growth ahead.

Okay. Well, it does seem like your features, your performance, your technology, your value and so on and so forth are in fact better than what's out there, but yet you're still not immune to what's going on in the world.

No, we're not immune. We could only -- go right ahead.

I was going to say do you see any light at the end of the tunnel with respect to those global headwinds. Those things that you mentioned, are they getting better or are they getting worse?

I wish I was a predictor of the economy, I am not. But I can say that given the conditions we have today, things, of course, if they improve will only get better, but we have the right solutions. If they get worse -- I should not say if they get worse, but I do believe we have the right solutions to scale and meet -- the tools that businesses still need to survive.

Let me give you an example. Our COLLABORATE Pro, say, 600 or 300, it's what you call a Swiss Army knife. In one solution that ranges in price from say $5,000, $4,000 all the way up to $11,000 as opposed to prior systems that could cause $100,000 and more, we include videoconferencing, display technology such as wireless presentation, solutions such as BARCO that are separately -- separate units, we have a capture station, all based on software. We could do whiteboarding, recording, streaming, wireless presentation, videoconferencing both in the cloud and in the room, traditional videoconferencing to interoperate with traditional systems. All of this for just a few thousand dollars. This is where the market is going. And we have the solutions across the span of our products including our Pro audio, which is highly, highly scalable now to meet those budgetary needs for technology investment. I'm extremely confident that we have positioned ourselves not just because of the economy, because of the technology that's available to do this.

Okay, thank you. Hopefully they all get better.

Yes, we all hope so, Dennis. Thank you.

At this time, I'm showing no further questions. I would like to turn the call back over to Zee Hakimoglu for closing remarks.

I thank you for your time and look forward to updating you in the quarters ahead. Thank you. Operator, back to you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.