Creative Realities Inc (CREX) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Wireless Ronin 2010 second-quarter earnings 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, this conference call is being recorded.

I would now like to hand the conference over to Ms. Erin Flor, Manager of Communications and Investor Relations. Ma'am, you may begin.

Thank you and welcome, everyone, to our 2010 second-quarter conference call. With me today are James C. Granger, Jim, our Chief Executive Officer; Darin McAreavey, Vice President and Chief Financial Officer; and Scott Koller, President and Chief Operating Officer. After Jim's opening remarks, Darin's detailed financial review, and Scott's sales update we will open up the call to your questions.

Before we begin, please note that the information presented and discussed today includes forward-looking statements which are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results in future periods may differ materially, and you should not attribute undue certainty to our forward-looking statements.

Risks and uncertainties that could cause our actual results to differ from those expressed or implied by forward-looking statements include those set forth in the Risk Factors section of the annual report on Form 10-K we filed on March 26, 2010.

In addition, our comments may contain certain non-GAAP financial measures, including non-GAAP operating loss per share. For additional information including a reconciliation for GAAP results to non-GAAP measures, why the non-GAAP measures provide useful information, and why we use non-GAAP measures, please see the reconciliation section of our press release which appears on our website at www.wirelessronin.com.

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

Thanks, Erin, and good afternoon, everyone. Thank you for joining us on today's call to discuss Wireless Ronin's 2010 second-quarter results.

As I indicated, on the first-quarter earnings call, Scott Koller was promoted to President and Chief Operating Officer. During the time that he has spent in this role, I have become increasingly confident in his ability to take this Company to the next level. The strength of Wireless Ronin continues to grow, and much of this strength has happened under the direction of Scott and Darin McAreavey.

Their team has put great effort into improving the business model. I would like to highlight a few key points from the second quarter of 2010 which took place under the direction of Scott and his team, to illustrate why I have such confidence in him, the team, and the direction of the Company.

Wireless Ronin has clearly demonstrated a capacity for delivering on key financial performance metrics over the past quarter. First, we have recorded the highest level of revenue since the fourth quarter of 2008. Revenues almost doubled year-over-year and increased 78% on a quarter-over-quarter basis.

Our gross margin dollars increased fourfold year-over-year. And gross margin on a percentage basis continued to improve for the eighth consecutive quarter, reaching 48%.

Secondly, WRT is on track to provide a breakeven business model if the Company achieves quarterly revenues of approximately $3.8 million. Scott and Darin along with the rest of the management team have been successfully executing against an ongoing cost-optimization plan to position WRT for a future non-GAAP EBITDA breakeven quarter.

Thirdly, as the press release has outlined, our digital signage products and services are being widely deployed across our key vertical markets of food service, automotive, and branded retail. In addition, we continue to focus on operational improvements including high availability, scalability, and software quality.

Now, with real revenue momentum, we hope to illustrate the true scalability of the business for the second half of 2010 and beyond. We believe the concurrent growth of revenue and margins demonstrates that our business model works.

I would now like to turn the call over to Darin for an update on our financials for the second quarter of 2010.

Thanks, Jim, and good afternoon. We reported revenue of $1.9 million for the second quarter of 2010, a 99% increase from $1 million in the second quarter of 2009. As of June 30, 2010, WRT had received purchase orders totaling approximately $1.1 million for which it had not recognized revenue.

The increase in our year-over-year revenue was primarily the result of revenue generated from four of the Company's marquee customers, Chrysler, Thomson Reuters, YUM!, and ARAMARK. In addition to working closely with Chrysler on multiple requests for additional enhancements to iShowroom, Chrysler is also looking at ways to extend the platform as an effective launch tool for its new 2011 lineup this fall.

We also experienced a favorable increase in sales to Thomson Reuters as it continues to expand its InfoPoint network and its most recently launched interactive application, Reuters Insider. Sales to Thomson Reuters during the three-month period ending June 30, 2010, totaled approximately $400,000, up 126% when compared to the same period in the prior year.

During the second quarter, the Company completed the installation of digital menu boards for 24 additional KFC stores, including all of Jacksonville, Florida. We now have successfully deployed our technology to approximately 200 YUM! brand stores, which we fully host and support through our 24-by-7 network operations center, or NOC.

The Company's relationship with ARAMARK continues to strengthen and represents an installed base of over 60 locations including higher ed, healthcare, K-12, and entertainment.

Recurring revenue generated from our hosting and support offering forms a foundation on which we believe we can build a long-term successful business. During the second quarter of 2010, our recurring revenue totaled approximately $300,000 representing an increase of approximately 100% from the same period in the prior year. Our revenue for the first half of 2010 totaled $3 million compared to $2.4 million in the first half of 2009, representing an increase of 25%.

The increase in revenue when comparing the first half 2010 to 2009 was again primarily due to a significant increase in revenue generated from four of our marquee customers. We also generated additional revenue related to recurring hosting which totaled approximately $600,000 during the first half of 2010, a 173% increase from $220,000 recognized during the same period in the prior year, as our installation base continued to grow.

Due to the current economic environment and the lengthy sales cycle associated with deploying large-scale digital menu boards, we still are unable to predict or forecast our revenues with any degree of precision.

Our gross margins on a percentage continue to expand from 39% in the first quarter of 2010 to approximately 48% in the second quarter of 2010 and up from 23% from the year ago period. This represents our eighth consecutive quarter of improving gross margins on a percentage basis.

We have now shown that WRT can achieve gross margins on a percentage basis which are more consistent with those of other software and software service companies. We do caution our investors that our ability to maintain these high levels of gross margins on a percentage basis can be impacted in any given quarter by shifts to our sales mix. However, we continue to believe over the long term our gross margins on a percentage basis will increase as our recurring revenue grows.

On a GAAP basis, our second-quarter 2010 net loss totaled $2.1 million or $0.12 per basic and diluted share, an improvement from our net loss of $2.7 million or $0.18 per basic and diluted share for the same period a year ago and our net loss of $2.8 million or $0.16 per basic and diluted share in the first quarter of 2010. Our net loss during the second quarter 2010 significantly improved over the same period in the prior year as a result of increase in gross margin dollars of approximately $700,000.

Sequentially, we reduced our net loss by approximately $700,000 as a result of $500,000 increase in gross margin dollars and $200,000 lower operating costs.

As we mentioned in our last update, we have diligently been working on a cost-optimization plan to drive an even more efficient business model, which to date has resulted in overall annualized cost savings of approximately $2 million. Our goal is to increase this amount to more than $2.5 million by the end of September, which at our current gross margin levels of 48% provides for a future non-GAAP EBITDA breakeven at quarterly revenue levels of approximately $3.8 million.

Excluding one-time expenses and non-cash charges, the second-quarter 2010 non-GAAP operating loss totaled $1.7 million or $0.10 per basic and diluted share, versus a non-GAAP operating loss of $2.1 million or $0.14 per basic and diluted share in the second quarter of 2009. Sequentially, our non-GAAP operating loss improved approximately $700,000.

Included in today's earnings release and financial results is a reconciliation between GAAP and non-GAAP operating loss. This highlights one way in which we look at profitability and cash utilization for the Company.

It is similar to EBITDA, but adjusted for certain other one-time and non-cash items. The supplementary schedule details the items and effects of non-cash and one-time adjustments.

Turning to the balance sheet, at the end of the second quarter of 2010, cash and cash equivalents in combination with restricted cash totaled approximately $8.2 million compared to $10.6 million at the end of March 2010. As previously mentioned in March of this year, we entered into a loan and security agreement with Silicon Valley Bank to make available a line of credit up to $2.5 million. With the recent savings in operating costs and continued improvements we are seeing in the business, we still believe our current cash balance and access to capital is sufficient to support our operations well into 2011.

Our cash burn for the second-quarter 2010 was $2.4 million, which was subsequently from $2 million for the first quarter of 2010. The increase in our quarterly cash burn was primarily the result of us coming off a very soft first quarter and billing a significant portion of our revenues in the last month of the second quarter.

Excluding our cash balances, our working capital accounts increased sequentially by approximately $700,000. The reported results of our second quarter further demonstrate that we are effectively managing our growth with the goal of meeting our stated targets.

Now I would like to turn the call over to Scott for an update on our sales and operational efforts.

Thank you very much, Darin. We are very pleased with the results of this quarter and with the continued improvements we are seeing with the Company as a whole. As discussed in our last call and highlighted by Darin earlier, the Company continues to focus on top-line sales growth and managing our scalable resource expenses to match projected revenues. We believe that the second quarter demonstrates our efforts in both of these key areas.

Now I would like to provide a quick update on our sales efforts. Starting with automotive, we continue to work closely with Chrysler as it looks to extend the iShowroom platform as an effective tool to launch its upcoming new lineup of automobiles. The Web version of iShowroom available at chrysleracademy.com and a digital signage version continue to receive a tremendous amount of positive feedback from Chrysler and its dealer network.

Examples of this feedback are impressive. In the last six months iShowroom has logged over 65,000 user sessions at Chrysler dealerships and in the same time period over 14,000 Chrysler sales consultants have been certified through the training module of iShowroom. In addition, Chrysler continues to add functionality to the iShowroom, including a competitive comparison module that allows users to cut to side-by-side comparison of a Chrysler vehicle to competitive vehicles, highlighting Chrysler's product line advantages.

Also during the second quarter iShowroom was fully integrated into a new showroom design program and the new Chrysler Dealer Standards program. Dealers who meet the criteria of the new standards program will receive up to $200,000 per quarter and cash incentives. For dealers, the cash incentives have the potential to be more significant than the cost of iShowroom, which should have a positive impact on iShowroom kiosk sales.

Chrysler has not generated our only activity in this key vertical. As the automotive industry continues its slow but steady recovery, we are seeing strong interest from several automotive manufacturers who want to learn more about the show room and service department applications of our RoninCast for Automotive product line.

As a result, in the first half of the year we have observed a significant amount of pipeline momentum within the automotive industry. Several manufacturers are considering digital signage for the first time, while others are looking to WRT to create their next-generation kiosk and/or take over an existing network.

Interestingly, digital signage across the automotive industry falls into one of two categories -- automotive manufacturers, who are interested in a more consistent impact on their retail show room environment by elevating their brand and providing real-time sales support; and dealers that are more interested in increasing repair order profitability in the service department by promoting the upsell of maintenance and light repair services from service menu boards.

Moving to our efforts in food service, our relationship with ARAMARK continues to grow and gain momentum. Our installed base grew from 28 locations, as mentioned on our last call, to over 60 locations, which brings the total installed base to over 400 screens.

These additional installations including the new TOPIO'S brand, business signing facilities, and ARAMARK's award-winning Burger Studio. ARAMARK and WRT are working together to increase the visibility of the ARAMARK digital signage network to all relevant stakeholders within ARAMARK.

Continuing with our efforts in food service, the KFC network continues to grow. Second-quarter installations and orders totaled 24 locations, which included all the Jacksonville, Florida, corporate locations and 11 additional franchisee locations. Although the Company maintains discussions with KFC regarding deployment of the remaining 800 corporate stores, there is still no contractual agreement regarding a systemwide rollout at this time.

Beyond ARAMARK and KFC, our traction in food service continues to strengthen. As mentioned in our last call, we continued our installed tests with six of the top 12 QSR companies, and in the second quarter we also landed an additional five pilot tests with QSR clients.

It goes without saying that the food service industry along with our efforts in automotive will remain as a key focus for our sales and marketing initiatives.

We believe it's also important to update you on our relationship with Thomson Reuters. The InfoPoint program continues to flourish throughout the Thomson Reuters network.

The installed base of InfoPoint locations as at 320 and growing. In addition to this growth and as discussed on our last call, Thomson Reuters continues to see a significant amount of interest in the InfoPoint product line from an array of different financial institutions.

In conclusion, I think it's important to highlight some key takeaways from this call. First, activity from key clients -- Chrysler ARAMARK, KFC, and Thomson Reuters -- is providing significant growth in our revenue. Secondly, the Ronin team continues to focus on managing our scalable resource expenses, resulting in a significant cost improvement as the Company continues to work toward profitability. Thirdly, we believe that the growth in revenue, coupled with a continued improvement in our margins, shows that our business model works.

As I mentioned earlier, we are very pleased with the results of this quarter and with the ongoing improvements we are seeing with the Company. We believe this momentum will persist as we move forward.

Thank you for joining us on today's call, and this concludes our prepared remarks. Now I would like to open the call up for questions.

(Operator Instructions) Darren Aftahi, Northland Securities.

Hi, guys. How's it going? Just a couple quick questions. So a few things. It looked like -- and correct me if I am wrong -- recurring revenue was flat in the quarter. I am just trying to understand directionally where that went. And then I have a couple follow-ups.

Yes, I mean it was. It was up a little bit, but yes, it was right around 300 in the first and 300 in the second.

Okay.

There is a timing issue there, Darren, the timing of installations particularly is some of our more significant. If those installations go near the end of the quarter, then the full impact of the recurring revenue falls into the next period.

Yes, so definitely the installations at ARAMARK, Thomson Reuters, and KFC would then be realized in the reoccurring revenue.

Okay, so is it fair to characterize your comments as the installations were maybe back-end loaded in 2Q?

Absolutely.

That is a fair comment, yes.

Okay. So then what were the ending media players you guys were managing at the end of the second quarter?

I think we are going to get that -- we need to get that information to you, Darren. I don't have it right on hand here. I don't remember exactly what the last count is. Why don't we follow up with you on that?

Fair enough. Then my last question and I will let somebody else jump in is -- have you guys seen any change adversely in the capital spending environment in the last 30 days with any of your clients, in terms of just pulling back on anything?

There is still that -- there is still a hesitancy. We have been fighting that hesitancy since the end of '08, to be quite honest with you. It is clear that we are still fighting the headwinds of a difficult financial period for the country, and so hesitancy is the watchword from all of our customers as far as capital spending.

That being said, we are pleased that we were able to double revenues on a quarter-over-quarter, year-over-year basis even in the face of those strong headwinds.

Great. Thank you.

Rick D'Auteuil, Columbia Management.

Hi, guys. The gross margin was pretty impressive, and you did that sequentially without even growing the recurring revenue or the NOC business. Can you talk about the mix in the sales mix, hardware versus software? Can you quantify that?

Yes, I mean you can see actually software -- sequentially our software sales were up from what we did in the first quarter. I think there was 70,000 and we did -- what'd we do this last quarter? We did 338, so that obviously had -- because that is almost at 100% margin, obviously contributed significantly.

Then we're just getting more efficient with our services revenue. Also that we saw an uptick in our content services revenue on that margin, along with software development.

And then, obviously, the incremental; we did have some incremental service revenue related to our recurring. That just obviously falls straight to the margin as well.

Okay. Then you mentioned this -- I don't know if you call it backlog, but the $1.1 million. How does that look as far as mix relative to what you just experienced in this quarter?

Should be similar. Yes, should be similar.

So there is a reason for us to believe that we are going to see a drop-off in the next quarter on margin?

Not based on what we see right now, no.

Okay. And maybe I misheard this, but in the prior call I think you talked about a $3.5 million in breakeven; and now you're talking $3.8 million. What has changed incrementally?

That was a target we initially gave, and as we are going through our optimization planning and resource assessment that it just crept up a little bit. But we were giving a range, and we feel comfortable where this is at now, given we are coming to the near end of this plan.

Okay. I know there's issues, some customers don't want you to put out press releases. But maybe generically, did you land any large deployments that maybe you are not able to speak to right now?

Besides saying that we are unable to speak to it, I mean at this point in time we continue to test our activity in the continuous within QSR. As we mentioned we landed five more pilots. Again the very encouraging thing from QSR is stores with locations from 20 to 400 are starting to be more active and a little more nimble than the larger companies.

As Jim mentioned, the hesitancy is the word this year for capital spending in food service, when last year it was just a no-go. So the talk has increased significantly about large-care rollouts; but at this point in time we have nothing we can discuss.

What I would really go back to is what I am so pleased with in this quarter is -- without any large-scale rollout we were able to achieve a doubling of our revenues, which I think bodes well for the Company as those large-scale rollouts do come.

So the vast majority of the revenue came from our four key areas and our key customers, and we are really pleased. What we are seeing is that customers, once they get into this, continue to grow and gain traction.

Then my last comment or question relates to the legislation and the healthcare reform suggesting that the QSR space is going to have to change the way it displays its messages. You guys have at least one solution with digital menu boards.

So as time has ticked along here, we are kind of whatever, six, eight months away from -- probably eight months away from when that is to become effective. You would think some of the QSRs are starting to look at that deadline in the face and may be close to deploying a plan. What are you seeing on that front?

Absolutely.

Yes, absolutely. The activity -- we're starting to hear phrases. What is really encouraging, we're starting to hear phrases as far as digital menu boards pertain as being a cost of doing business.

One thing we have learned and educated ourselves in this space is menu recipes change much more often, which affect calorie count more than you would think, more than the average person would think. So digital is just one way of addressing the calorie information.

But when you couple that with all the other operational issues they already have with limited time offers, pricing changes, new product releases, it really becomes a solid solution and probably the only solid solution to address all of them. So what I am really encouraged about and I already talked about, the smaller people looking at it, is every person in this space is looking at digital menu boards right now. And you're right, I think you will see a lot of activity coming up in the future in this space.

But we can't be quarters away now. It has to be months and maybe even starting to look at weeks away. Are you seeing anybody get that far through the pipeline where they are getting close to deployment? Or everybody is (multiple speakers)

There (multiple speakers) many that are getting close to deployment. What I would say though, remember, the rules -- and just to caution everybody who is on the call. The rules have not been promulgated yet. They have been discussed, but they are still in the process of writing the rules.

And there are -- and anybody wants to put off the expense, right? They want to hope that the rules won't come out so tough; they want to try to do all that kind of planning. I think it is more human nature to say -- I am going to kind of test, look.

And that is why we are engaged with so many of these guys. They're looking at tests, doing pilots. And we are pleased with the number of pilots and the number of tests that we are doing with these guys.

But they will pull the trigger when they absolutely have to. Nobody spends a dollar before they have to. I don't know whether that's -- I think it would be a mistake to say it is weeks; but certainly months and quarters, not years.

Okay. So just to comment on the answer, Jim, at one point we thought that at least the way KFC was deploying this strategy that there was actually a sales lift and a return on the expense. Now we are just talking about it being an expense. Has that part of the model changed?

No, no. They still see it; go ahead.

Yes, I think one of the key things there is they are seeing -- people are seeing positive results from this. But at the same time these aren't particularly nimble companies. They have got a huge process to go through to improve technology to get into a store.

I think KFC has a tremendous amount of information if you think about Vegas, Oklahoma City, Austin, Louisville, and Jacksonville now being completely digital; and Orlando and Boston have a majority digital. They have a tremendous amount of information at their hands. And I don't think they would have moved forward with Jacksonville if that information wasn't positive.

However, it still hasn't turned out to -- we're going to mandate this across the system. And you would think that is the next logical step.

Okay. Thank you.

Dick Ryan, Dougherty.

Thanks, guys. Say, on the operating expense lines, can we see some improvement on the R&D level? That is still kind of hanging around $750,000 on a quarterly basis. What do you think the trending for R&D looks like?

Yes, I mean, we have modeled this out, Dick, where we are going through and finishing up our development efforts here. So we get through the end of the third quarter, then you're going to see a significant drop. I have got it modeled out that it should drop somewhere in the $500,000 mark, quarterly mark, going forward.

After Q3?

After Q3.

Okay. (multiple speakers) Sorry?

Dick, it's really important that we finish the work on the next release. It is -- because we are learning so much from our pilots and trials with these larger companies, the nimbleness and the flexibility and the capability of that software has to be just top-notch for us to truly dominate.

So, it is always tough to spend the money, but I think it is the right thing to do.

Okay. Say, Darin, I missed your comment that the $1.1 million -- what was that? Purchase orders received after what?

That was basically our backlog as of the end of June.

Okay; which was --?

At $1.1 million of orders that we had in-house we had not recognized revenue on.

Okay, so a similar level to Q1. When -- will these be deliverable over the next two quarters in '10 here, or will they stretch into '11?

The majority of them will be delivered in the third quarter.

Okay. Okay. Scott, when you talked about the test pilots, can you address the pipeline? I mean not necessarily specifically companies; but talk about the RFPs that are out there.

I mean, is there rational movement by customers in deploying digital signage? Or are these things still wishes -- that kind of nice-to-have, but not got-to-have?

No, there is a real rational movement to it. Even I think in the last three weeks we have responded to two RFPs in this space.

We can't talk particulars, but again we are probably responding to an RFP in this space at least on a biweekly basis. So the activity is very high.

It is strong activity. It is not kicking the tires anymore. These are -- what we are seeing the difference in RFPs, in my opinion is, here are the must-haves that we have to have from a system. And prior to this, I think a lot of these customers didn't really know what they had to have for their systems.

So the questions are more targeted, the customers are more educated, and I believe there is a real sense of them getting their arms around this, when I would say a year to two years ago it was more kicking tires.

Okay. With the key customers, on the last call you said -- you gave us the 28 for ARAMARK and you said that there would be an additional 50 or so to be added; same thing on the KFC side. Do you have visibility into rollouts over the next quarter or two from the key customers that you can share with us?

Well, if you look at ARAMARK, I mean with 28 at the end of the first quarter and that's over 60 at the end of this quarter, they were pretty significant (technical difficulty) a pretty big chunk of that original 50 we talked about.

And I don't see it letting up, although we don't have a line of sight to all of it, as ARAMARK works as a distributor with lots of folks out there selling the solution along with their other offerings. But I don't see ARAMARK lightening up our load anytime soon. They are gaining significant traction.

KFC again has been a market by market, continue to test, continue to gather data. In the immediate future I don't see that changing. But at the same time, I think they are seeing some real positive results.

As long -- the other customers again, as we mentioned, the organic growth with KFC, Thomson Reuters, Chrysler, and KFC is not monumental; but look what it did for revenue and it's still short of a full-scale rollout. So again one of our major goals here is to make sure the Company can grow and the business model works short of a rollout. And with one rollout this Company goes toward profitability, so we continue to focus on those key verticals.

You talked about Thomson Reuters working with financial institutions. Have they contributed to revenue outside of their network with other customers, or hasn't that developed as yet?

Not at this point in time. Right now, a majority of our revenue is geared toward supporting their internal InfoPoint network.

Okay. One question on Chrysler. Has there been delivery or have there been deliveries to dealers of the iShowroom kiosk? I never there was a mailing or a pretty aggressive marketing plan put in place. Can you share any snippets from that?

Yes, there has been deliveries. And again dealers are starting to sign up for the new Dealer Standards program. So as we mentioned in the script, we believe that is going to generate additional kiosk sales.

We were doing about one a week, I think.

Yes, about one a week since the release; and we believe it is going to gain a lot more momentum with it being included and not optional in the Dealer Standard programs. Again, the dealers have the ability to capture some real co-op dollars if they participate 100% in Dealers Standard program, and the signage is part of that.

Okay, thank you.

[Richard Dearnly], Longport Partners.

Good afternoon. I am new to your Company. It sounds like -- were the KFC stores in Jacksonville company-owned or franchise? -

Company-owned.

Is the fact that one of the -- there seems to be a delay in KFC or you keep talking about you are negotiating companywide standards here. Is their related to the no rules yet?

No. I think their delay is based -- they have had a tremendous amount of changes at KFC. Currently right now they have a legal issue between the franchisees and the corporate that is a little too detailed to get into, but I think they are going to need to -- they are going to want to resolve that.

They are going through their annual operating budgets for 2011 at this point in time. So they've got just a lot of moving parts.

During this program as well we got a new president, a new CMO; they have recently had another CMO change. So bringing new people on board, and getting familiarized with the program, and educating them has been part of our task too.

Again, they are just not a real nimble company. They are going to test this 100% and deploy when they are good and ready.

I see. I was led to believe that they were seeing double-digit comp store sales increases when they put this in. Is that -- am I in the right ballpark there?

Well, I will tell you this, that they are receiving positive feedback, very positive feedback from lift. But they have yet to share any of that with us, so I don't know what your source was as far as -- but they keep that pretty close to the chest. I.e., they are in no mood to educate their competition on (multiple speakers).

Of course. Okay. Thank you.

Adam Peck, Heartland Funds.

Good afternoon, gentlemen. When you look at the $3.8 million breakeven, how does that break down between hardware, software, and services?

Well, again, it was more just on a -- us maintaining a margin of 48%. So I don't -- we don't see a whole lot of movement, or rather [put] mix distribution different than what we're currently doing right now to maintain that 48%.

If mix did change a lot, it could impact that. But right now just with what we're seeing in the pipeline and what we're seeing going forward, the mix looks to be consistent.

So it would be roughly 50% services, 30% hardware, and the balance software?

Correct.

Yes.

Because that has improved quarter over quarter. Whereas last quarter it was 7% software, now it is up to 18% as a percent of sales.

Right.

Correct.

Yes, that is what we are pleased with.

Okay. Any changes in the competitive landscape?

Yes, I think there is -- digital signage is a fast-moving market; more competition comes into it; and some competition leaves. It seems like it seems to be a little bit of a revolving door.

We're starting to see time and time again in automotive and food service it's the same three or four competitors that we have always seen. So it hasn't really changed a lot.

And all of us -- another thing that has changed, I think this is important is, is everybody has really realized they can't be everything to everyone. So people have focused on different niches.

We have chosen our three in branded retail, automotive, and food service. Other people have chosen hospitality. Other people have chosen an array of different focuses.

So we are starting to see the same three or four players in our market quite a lot. But I think there is going to be a little bit more focus as people understand they can't be everything to everyone.

Okay, thank you.

(Operator Instructions) I am showing no one else in queue at this time.

Okay. I would like to thank everyone for his or her participation on today's call. The dial-in information from the domestic and international locations, along with the archived recording, can be found on our website at www.wirelessronin.com. Thank you and goodbye.

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.