Creative Realities Inc (CREX) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Wireless Ronin Technologies third-quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Later we'll conduct the 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 Haugerud, Manager of Communication and Investor Relations. Ma'am, you may begin.

Thank you, and welcome, everyone, to our 2010 third-quarter conference call. With me today are Jim Granger, 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 from GAAP results to non-GAAP measures, how 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 wirelessronin.com.

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

Thanks, Erin, and good afternoon, everyone, and thanks for joining us for today's call. Well, we are obviously very pleased with the results of the third quarter, which again illustrate that our business model works.

First, we continue to receive additional orders from our marquee customers -- Chrysler, Thomson Reuters, YUM! and ARAMARK -- resulting in an increase of revenues to $2.7 million, a 148% increase for the third quarter on a year-over-year basis.

Secondly, gross margins hit an all time high of 50% in the third quarter.

Thirdly, we are starting to see real movement and traction with large-scale rollouts. First, Chrysler has begun the rollout of its retail branded tower salon concept featuring iShowroom to the dealers. Today, Wireless Ronin has received $1.2 million worth of orders to install over 400 screens to 100 locations and we clearly anticipate additional orders in the near future. Secondly, with the rollout of our RoninCast software and services for all 2,000 Snap Fitness locations, which is the fastest growing franchisor of compact, state-of-the-art 24 by 7 fitness centers.

And fourth, during the quarter we recorded the lowest quarterly non-GAAP operating loss of $1 million in the Company's history. Both Darin and Scott will provide some additional commentary on these items during their remarks.

I continue to applaud the successful leadership efforts of Scott Koller, Darin McAreavey, and their team, along with all the WRT employees for their perseverance and dedication. If current trends hold, I believe their hard work will soon be rewarded in achieving a non-GAAP EBITDA breakeven quarter. Now that we see early signs of larger-scale rollout commencing, we can show the true scalability of the business model to our shareholders.

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

Thanks, Jim, and good afternoon, everyone. We reported revenue of $2.7 million for the third quarter of fiscal 2010, a 148% increase from $1.1 million in last year's third quarter. As of September 30, 2010, we had received purchase orders totaling approximately $1.7 million that had not been recognized as revenue.

The increase in our year-over-year revenue continued to be generated primarily from our marquee customers -- Chrysler, Thomson Reuters, YUM!, and ARAMARK. Also as Jim mentioned during the third quarter 2010, Snap Fitness awarded Wireless Ronin a 2,000 site software and services contract.

At September 2010, we received a $1.2 million order from Chrysler to outfit a total of 100 dealers with Chrysler's retail branded tower salon featuring the iShowroom application. During the third quarter, we also recognized total revenue of approximately $700,000 from ARAMARK, which is the largest amount of quarterly revenue recognized from this customer in Wireless Ronin's history.

During the third quarter, we also successfully completed the installation of 37 new locations, which more than doubled the total number of ARAMARK sites managed by our Network Operations Center or NOC. Our recurring hosting and service revenue during the third-quarter 2010 totaled $352,000 representing an increase of 189% from the same period in the prior year.

Since the majority of our third quarter orders including Snap Fitness, Chrysler, and ARAMARK were received and/or processed during the last month of the third quarter, the additional hosting and service revenue for these installs will be reflected starting next quarter which will further increase our recurring revenue.

Revenue for the first nine months of fiscal 2010 totaled $5.7 million compared to $3.5 million for the same period in the prior year, representing an increase of 63%. The increase in revenue when comparing the first nine months of fiscal 2010 to the first nine months of fiscal 2009 was again primarily due to the business generated from our marquee customers. As our installed base grew, we obtained additional recurring revenue related to hosting and services, which totaled $960,000 during the first nine months of fiscal 2010, representing an approximate 180% increase from the same period in the prior year.

Our recent order activity demonstrates that our customers, existing and new, are now beginning to commit capital dollars towards large-scale digital signage deployments. However, until we see a broader rollout from our existing customer base, we are unable to provide future revenue guidance at this time.

Our gross margins on a percentage basis continued to expand from 48% in the second quarter of fiscal 2010 to approximately 50% in the third quarter, which is up from 34% from the year ago period. This represents our ninth consecutive quarter of improving gross margin on a percentage basis.

We caution our investors again that our ability to maintain these high levels of gross margin on a percentage basis can be impacted in any given quarter by shifts in 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 third-quarter fiscal 2010 net loss totaled $1.4 million or $0.08 per basic and diluted share, an improvement from our net loss of $2.5 million or $0.17 per basic and diluted share for the same period a year ago, and our net loss of $2.1 million or $0.12 per basic and diluted share on a sequential basis.

Our net loss during the third quarter significantly improved over the same period in the prior year as a result of the increase in gross margin dollars of approximately $1 million. Sequentially, we reduced our net loss by approximately $700,000.

During the third quarter, we successfully completed our cost optimization plan resulting in savings of approximately $2.5 million on an annualized basis, which at our current gross margin level of 50% provides for a future non-GAAP EBITDA breakeven at a quarterly revenue level of less than $4 million based on our current operating expense levels and financial model.

Excluding one-time expenses and non-cash charges, the third-quarter fiscal 2010 non-GAAP operating loss totaled $1 million or $0.06 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 third quarter of fiscal 2009. Sequentially, our non-GAAP operating loss improved $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 third quarter of fiscal 2010 cash, cash equivalents in combination with restricted cash totaled approximately $6.6 million compared to $8.2 million at the end of June 2010.

Our cash burn for the third quarter was approximately $1.5 million, which is the lowest quarterly cash burn in the Company's history and a sequential improvement of approximately $900,000.

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 of $2.5 million. With the recent savings in operating cost and assuming continued improvements as seen recently in the business, we believe our current cash balance and access to capital is sufficient to support our operations well into 2011.

As recently announced, the NASDAQ stock market has approved the Company's application to transfer the listing of its common stock from the NASDAQ Global Market to the NASDAQ Capital Market. This transfer did not affect the trading of our stock and will ultimately result in incremental cost savings to the Company as a result of lower annual listing fees.

In summary, we are very pleased with the financial progress we have made since the beginning of this year, and based on our current order level and expense levels we are growing increasingly optimistic of our ability to achieve our financial goal of a non-GAAP EBITDA breakeven quarter.

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

Thank you very much, Darin. As Darin highlighted, our third-quarter results coupled with the improvements in the second quarter clearly demonstrate Wireless Ronin's continued focus on top line sales growth and our ongoing commitment to managing our scalable resource expenses. In addition, with the Chrysler and Snap Fitness implementations, we see tangible progress toward broader, large-scale rollouts, which is clearly the primary focus of our business model.

Now, for a quick update on our sales efforts. Starting with automotive and to expand on Jim and Darin's comments regarding Chrysler, as a result of the Chrysler's new dealer standards program, interest in the iShowroom program has grown substantially. As discussed in our last call, dealers who meet the criteria of the new standards program will receive up to $200,000 per quarter in cash incentives.

These incentives more than cover the initial investment in iShowroom and the brand towers. Year to date, we have received purchase orders from Chrysler for 100 dealers, which represents 400 brand towers. These initial dealer installations have begun and are expected to be finished in the next 60 days to 90 days.

The brand towers are specific to each of Chrysler's four brands -- Dodge, Ram, Chrysler, and Jeep; and the iShowroom software built on the RoninCast platform has been monetized to present brand specific data to each respective tower.

Dealer solicitation by Chrysler for this program will continue through the remainder of 2010 and into 2011. All dealers signing up for iShowroom agree to a three-year support program paid in annual installments. In addition, Chrysler has awarded WRT a project to modify the iShowroom presentation layer to include Chrysler's newest brand, Fiat, with a launch date of early November 2010.

We also outlined in our last call that Chrysler has not generated our only activity in this key vertical. The automotive industry continues its slow but steady recovery and, as a result, we are engaged at various levels with several automotive manufacturers in addition to our work with Chrysler.

Moving to our work in the food services industry, ARAMARK continues its rollout of brand refreshers for Burger Studio and Topio's as well as several new installs in healthcare and corporate accounts. The total installed base coupled with scheduled deployments is currently at 90 sites. In addition, WRT is working with ARAMARK on several development projects leveraging its existing digital signage network.

On the KFC front, KFC is currently going through its 2011 budget process. We hope to have a clearer insight into KFC's digital menu board objectives for 2011 as a result of this planning.

However, digital menu boards continue to be installed in new store openings and remodels of company restaurants, and it is an option for franchisee-owned restaurants to order at any time. This is encouraging because it further demonstrates KFC's commitment to its digital initiative.

Beyond ARAMARK and KFC, we continue to test, develop, and gain traction in the food service industry. As highlighted in a recent press release, we have a new client in the fast casual space, Mooyah, a rapidly growing fast casual establishment ranked number one in the Fastcasual.com 2009 Top 100 Movers and Shakers.

In everything that Mooyah does, it searches for it calls the wow factor. Mooyah selected Wireless Ronin because we understood the restaurant's unique and creative atmosphere while offering a highly scalable and reliable solution.

Mooyah has indicated that they plan to implement the RoninCast promotional board systems in all of its other restaurants due to the success of the three systems now in place. WRT will provide Mooyah with hardware, RoninCast software, 24/7, 365 support through our NOC and content development.

In addition to our work with ARAMARK, KFC and Mooyah, we continue ongoing market tests with other QSR clients, and this activity is an indication that we are making significant progress in this key vertical.

Now for a quick update on Thomson Reuters. As mentioned in our third-quarter press release, we are starting to see increased interest in the Thomson Reuters InfoPoint product. In September, we received a 50 site order to be deployed at a financial service institution, which has over 3,000 locations. We plan to complete the install in the fourth quarter of this year. In addition, Thomson Reuters continues to develop its relationships with other companies in this space as well as expanding its own internal InfoPoint network.

We have not just developed business from current customers. We have a particularly notable new customer in Snap Fitness. Snap Fitness, the fastest-growing franchisor of compact, state-of-the-art 24/7 fitness centers with locations worldwide, selected WRT to provide software and hosting to all 2,000-plus franchisee locations across the United States.

Snap Fitness and WRT plan to deploy RoninCast software to 1,000 locations by January 1, 2011, with another 500 locations anticipated by June 1, 2011, with the balance by the end of 2011. We are excited to be working with Snap Fitness and are thrilled to support the digital signage needs of such a fast growing company and look forward to providing Snap Fitness with world-class support for its network.

Prior to closing, I think it's important to update the investment community on our development efforts. In September, we successfully implemented our new RoninCast X software into two installations.

This is a significant milestone as it relates to our development efforts, and the initial customer feedback has been tremendous. As a result and with testing completed, we will officially launch RoninCast X in early November with the anticipation and confidence that this development milestone will help fuel our continued success.

In conclusion, similar to our second-quarter results, the news from the third quarter continues to be positive. First, the Chrysler dealer standards program is off to a great start and we anticipate continued success as Chrysler continues to encourage dealer adoption.

Secondly, growth with Thomson Reuters, ARAMARK and Chrysler, coupled with new accounts like Snap Fitness and Mooyah, gives us confidence that our sales and marketing initiatives are generating results.

And in conclusion, our team has demonstrated that we are committed to managing our scalable resource expenses in executing on our business plan as the Company works toward profitability.

Thank you for joining us on today's call and we look forward to any questions.

(Operator Instructions). Timothy Myers, Private investor.

Yes, first of all thank you very much for the information today. Regarding -- Mr. Koller, you mentioned Thomson Reuters in September, a 50 site order; and then you also mentioned another number like 1,000 or something screens or something like that. Can you expand on that or tell me what that number was?

Yes, we received an order for Thomson Reuters for a financial services institution for 50 sites to install their InfoPoint. This particular financial services institution has 3,000 sites in total, so the start with the 50 sites is just the beginning of what we hope is a long and fruitful relationship.

Okay, excellent. Thank you very much, all three of you -- Jim, Darin, and Scott. Thank you very much for the information and answering my question.

Darren Aftahi, Northland Securities.

Hi, guys. Just a couple of quick questions. To follow-up on the first gentlemen's question, is this new 3,000 location financial services firm, is this kind of a new avenue with Thomson Reuters in terms of marketing to financial services firms? Kind of different than kind of your core business with them?

Yes, Darren, actually we highlighted on the last call that Thomson Reuters was starting to see interest of their InfoPoint project outside their internal network, and financial institutions looking to it to have sort of an advertising, if you will free entertainment type digital signage application in their waiting area.

And so with that type of interest, the ability for Thomson Reuters to put together a specific template and a specific news based on that company's desires has been well received thus far as they have talked to different financial institutions. So actually this is expansion of their InfoPoint project.

Can you give more clarity, is this 50 site project, it's for a multi-national conglomerate or is this a domestic financial services firm?

Domestic.

Domestic. Financial services firm.

And then my second question and I'll jump back in the queue. In terms of the big jump sequentially in hardware revenue, is that a direct relationship with Chrysler? Is that something that is kind of across the board? And what are your general thoughts in terms of sustainability of that hardware level going forward?

It was largely due to the shipment, the revenue we recognized related to the brand tower order we received from Chrysler.

And I would add Darin, to answer the second part of your question, the sustainability of that, as you know, we will sell hardware when it makes sense for us to sell hardware as part of a package and where margins are appropriate. And so that is what we found in this case.

Do we think that's sustainable? Well certainly we have proven it is sustainable with certain customers -- ARAMARK and Chrysler to be a couple. That being said, other customers will continue to buy their hardware elsewhere and generally that is when we probably could not make much of a margin on it anyway.

Fair enough. Thank you.

(Operator Instructions). Dick Ryan, Dougherty.

Scott, can you give us an add-on from KFC in Q2? It sounds like you added some restaurants either new or upgrades in September. And also were the Thomson Reuters internal network, [no stands add]?

I think the internal network for Thomson Reuters right now is around the 350-unit base. And then we have incrementally added restaurants to the KFC network and I think we are 205, I think we are just north of 200 sites for KFC.

What is Thomson Reuters planning on for their internal network?

I think they will continue to see a big push. They have lots of offices worldwide and numerous places that they can put it. I think you will continue to see a push and probably a little more aggressive than you have seen thus far.

Great. With the introduction of RoninCast X, could we see R&D expenses come down either in Q4 or moving into 2011?

Correct, yes. You will continue to see -- the $2.5 million, the cost optimization plan that we completed, was through reductions we made through the third quarter. So they will take full effect starting in the fourth quarter and one of them is clearly in the R&D area.

Where would you see R&D kind of base out and kind of be a steady state level going forward, Darin, at what level?

What we have got modeled right now is between that $500,000 and $600,000 on a quarterly basis.

Okay. And comment on breakeven kind of at -- below $4 million or whatever the commentary was. Has that been edging up just a little bit? I think it was initially $3.75 million.

No, we said in the last call that it was going to be at $3.8 million, and it's right around in that (technical difficulty) we have run internally here suggests that if we get to $3.8 million at our current margin levels it will be right in -- at that breakeven level.

Okay. One more from you, Scott, the RFPs can you give us a sense, either qualitative or quantitative, what is out there for either QSRs or any of the other channels?

Yes, we continue to see the most RFP activity in QSR by far. I'd say it's a four to one ratio compared to automotive and branded retail. Retail specifically is still recovering from a tough 2009. So the activity I would say, a majority of our efforts when it comes to RFP responses is in the QSR space.

How is that (inaudible)? Any of them coming up for award or they kind of at the early stages or how would you characterize that?

It is a mix, there are some of them at the early stages, there are some we hope to see awarded here in the next (multiple speakers).

(Inaudible) by New Year; one came in this quarter and we can get the other one very similar coming in pretty shortly.

So to answer the question and try not to be vague, but we have some that are very early development, we have some that are on cusp of making a decision.

Great. Thanks, guys. I'll get back in line.

Lee Canaan, Braeburn.

Hi, this is Lee Canaan from Braeburn Capital. You guys sound about as upbeat as I think I ever heard you and I have to say that this is probably the first time that, Scott, you spoke slow enough that I could almost take notes.

Well, I took advice from some investors.

Anyway, you sound very upbeat and it's pretty exciting because I get the sense that there is an internal feeling that you really have turned the corner and you have got sustainability ahead of you.

Scott, if you could expand just a little bit on the current marketing sort of approach. I am going to take a little bit different approach on the question.

How is new business coming in these days and sort of what percent do you have to go out and get, what percent comes in over the transom, what percent is coming in from referral? And then I have got a bunch of questions after that.

Okay, the business comes in in a variety of different ways. In QSR being added to these RFPs there is a handful of players who are being invited to most of the RFPs. It is really the same five or six companies being invited and we are included in that mix.

We have the internal sales effort that calls to qualified leads to every single QSR, automotive, and branded retail location or entity that has 20 or plus locations. So we are constantly trying to connect with these clients to get an idea where they are at with digital signage. Are they coming out with an RFP in the near term and do they need somebody to help them even create the RFP.

So we take a very active approach and once we get to the right person within that entity that is going to make a decision or at least head up the effort to explore digital signage, it then gets passed off to the regional VP that takes it from there and moves forward with the opportunity.

So there is word of mouth in QSR, definitely word of mouth in automotive via the iShowroom video that we did has exchanged a lot of hands and it has actually brought in interest from other manufacturers. So there is a direct effort on our part, there is a referral effort, and then there is that word of mouth effort. And I would say right now that we are generating a lot of it ourselves.

That sounds a lot more proactive than in prior quarters where it sounded like you would go to a convention to make exhibition and hope the business kind of came to you. So Scott, do you have enough staff to be able to handle all this?

Yes, and we need to appropriately and when the timing is right make sure that our Senior VP of Sales and Marketing, Terri Sayler, has all the resources she needs to increase our penetration and increase our revenue. She has done an outstanding job and a lot of this is a result, Lee, of us being much more focused going into 2009 and into 2010 on what products and where we will sell them.

We have really focused very hard on automotive, QSR, branded retail, and within each one of those we have an interactive, a non-interactive, or a service/menu board component. Three products, three verticals, and focused very hard on making sure that we have the software, the sales and marketing support, and the NOC support for those specific applications.

So Terri has done a fantastic job of driving the sales force for results, holding them accountability for their quota and their sales targets, and we are seeing the result of it.

Thanks. Thinking of those sales results, it was $1.7 million of purchase orders in total for the fourth quarter that came in?

No. As of the end of September, we had $1.7 million worth of purchase orders we have yet to take revenue on.

So, that is $1.2 million of that would be Chrysler, the way I understand this then? You said that was a purchase order for the fourth quarter?

No, $1.7 million in total --

Actually, let me -- of total as -- let me ask this differently. Where does it stand today?

I am sorry, you need to be clearer. Where does what stand today?

Well the one point --

Where we stand today in terms of our total backlog?

Yes.

I do not have that as of right today. Again, as of the end of September we are at $1.7 million. I do not have that number right handy right now.

Okay.

But, Lee, the $1.7 million backlog walking into the fourth quarter does not include the entire $1.2 million. We did recognize Chrysler revenue in the third quarter from the $1.2 million purchase order.

Well actually that is good. So the $1.7 million then is largely composed of the $1.2 million, Chrysler.

No, it's not.

Is Snap Fitness? You said you are going to be doing, what, 1,000 locations by January for Snap?

Correct.

Correct.

Okay, so that would be in the $1.7 million?

Correct.

Okay; and Mooyah, is that included in there, too?

I do not know off the top of my head whether or not that one is included or not, I'd have to check. It would not be significant if it is for dollar amounts.

It sounds like pretty much that $1.7 million will be realized in the fourth quarter, the way these things come in and sort of get deployed pretty quickly. Is that the correct way of thinking about it?

It would be our anticipation that we would try to revenue as much as we could during the quarter; and we will be working diligently to do that in the fourth quarter here.

If you don't mind I would like to ask about a couple projects. Back this summer, we snagged Mall of America and got, what, one of -- I can't remember if it is five or six wings; and that came in as a referral. So, somebody came knocking on your door saying, we heard you are great, and we want you to do this. How is that working out for them?

It is working out real well, we have a very strong relationship with the Mall of America. As they build out each of the remaining five sections -- there are six total, but the five sections -- we will be doing the digital signage implementation just as we did the first section.

The key is, it is a part of a larger remodel of that, of each of those wings. So there is some timing to it, but we will be digital signage component in each one of those.

Great. So you got basically all six. Did you put out a revenue associated with that one wing? I can't recall.

I don't think we specifically mentioned how much.

Yes, I don't think we specifically mentioned on what the opportunities were for each section.

It was a multi-six-figure opportunity, though.

Yes, it was a big one as I recall.

Right, it was.

Moving on to the ARAMARK-Anaheim Convention Center that was another big one, at least in terms of visibility. You installed 18 menu systems there.

When we see you announce a contract like that, how should we think about that? I mean, in terms of recurring revenue, in terms of first -- is there a way to break that down, or they just all just way too individual?

Let me check that. Let's turn it over to Darin because they are very individual. And so it is hard to characterize in a single sentence. Darin?

In terms of the amount of revenue and when we take it obviously in the case of like the Anaheim, I know that there was -- I believe there were 18 screens, so there would a hardware component, software and services related. And upon installation then there would be an ongoing hosting and support revenue stream.

And I can't sit to tell you exactly what that monthly amount is, but rest assured we are billing and collecting it on a monthly basis. And it just varies based on the size of the implementation obviously.

You mentioned in the press release that you expected -- let's see if I get this right -- $600,000 of additional hosting revenues on an annual basis from an additional 6,600 nodes. So that would come up to about $90 per year in hosting revenues per node. Am I looking at that one correctly?

No, I think in total what we said in the press release upon the implementation of installing all of the Snap locations, the 2,000, and the anticipation order of what we already have and what we have been communicated that we will be receiving from Chrysler that we will have in excess of 6,600 nodes we will responsible for.

I want to make sure, can I -- if I interrupt Darin here, I apologize, but Lee we were struggling with how exactly to write that. What we are saying is with the orders that we have already communicated to you about, we already talked about, we had clear sight to 6,600 nodes. And tomorrow we will get some new sales in and will add to that clear line of sight of greater than 6,600 nodes.

And if you noticed optimism in our voices that is exactly the reason that you do.

Well, I definitely notice optimism. It's a far cry from a few conference calls ago and I appreciate it. One more quick question here about that, for example back to the ARAMARK-Anaheim Convention Center with the 18 menu systems installed, would that be 18 nodes? Just want to understand what (multiple speakers)?

Correct.

Okay, got it, got it. And last question. Okay, go ahead. Sorry.

No, I just wanted to clarify your reference to the $600,000 of annual recurring revenue. That would be incremental to the $352,000 that we recognized this quarter as an ongoing basis. So it is not our total recurring revenue stream.

Okay, got that. Now, I get that it was incremental, but I was mixing apples and oranges with the -- adding in the current nodes. So it was actually --

Okay. I just wanted to make sure that was clear to you.

Yes, no, it is clear now. I appreciate that. Okay. Last question here, are you seeing any seasonality at all this year? In other words, does there seem to be a feeling that there is a fourth-quarter push to get some of these systems deployed?

With retail being the softer of our three verticals right now, retail is the one that usually provides that type of seasonality as they shut down before Thanksgiving and really don't do anything until January 1. So I think we may still see a little as people go through the budget process and plan for the following year, but I don't think it will be as wide a swing as we have seen in the past based on the influence of retail.

Sure. Thank you very much for your time. That's all I've got right now. I can drop back into the queue.

(Operator Instructions). Dick Ryan, Dougherty.

A couple of follow up guys. Scott, you mentioned something specific about Fiat in early November and I am not sure if I caught that. Is that something independent of the dealers' showroom standards program or what?

Yes. What we have been awarded thus far is to take the iShowroom that you have seen even in our conference room, Dick, and add Fiat as a brand to it. And they have been pretty hush-hush about the look and feel of that Fiat brand, but we are pretty excited to add that to iShowroom.

Currently, the brand towers are for the other four product lines. But clearly any one of them can turn into a Fiat. So for example, if the dealership is just Chrysler, Dodge, and Fiat, the brand towers will reflect that only.

So again, we can put the content any place we want to, and from the iShowroom we can turn on or turn off a brand as we see fit or as Chrysler wants to. So, it is adding that product line to the iShowroom, which will then be available on Chrysleracademy.com and then be available into the showroom when needed.

Do you have visibility into the first 100 that maybe they signed up for the iShowroom, but they were Fiat-based or don't you have that visibility?

We do not have visibilities to that yet. Again, Chrysler has been pretty hush-hush as fast as Fiat goes. This is -- they feel like they have something special coming out here and they are looking for a wow factor if you will. So, they have been pretty hush-hush.

Okay. And one other question for me, back on the RFP side and your commentary that kind of the usual cast of characters get invited or kind of show up for the RFP. Strategically, what are you guys thinking from a partnering standpoint?

I mean you got NEC, but it is not an exclusive on either side. I'm kind of hearing out there that some larger entities are moving into this space or getting interested in this space. What is your strategy there from a partnering concept?

Well, Dick, we are constantly in conversations with various partners and potential partners throughout the industry. They may be people who provide hardware, they may be people who provide services, they may be people who are connected to, for example, the restaurant industry in other ways or in more traditional way.

But we continue to take a high interest in creating those partnerships that deliver on what we see as providing our value-add. And we've really got something unique here with our mission-critical application, our Network Operations Center, and a total solution particularly -- really in these three verticals, but particularly in the QSR industry.

And the answer to your question is, yes of course we like our relationship with NEC. We think it's a strong relationship; we value it. But we constantly look at the potential for relationships and partnerships across the industry. Again whether they might be hardware, software services, other -- or as I mentioned to you, other parts of the people who are dealing in that same industry.

Okay. Any of RFPs that are out there, are you formally partnering with anybody in addition to NEC? Anybody else?

That would be a difficult thing to have on a conference call like this. We would handle that on a case by case basis.

Okay. Great, thank you.

Tom Pierce, Feltl & Company).

Nice quarter. Well done.

This is the question, now a good catalyst for you guys would be the telecom issue. I definitely think the boards are supposed to be or menu boards are supposed to reflect in margin next year, not [in force early on]. But that is a great catalyst for you guys, I would suspect. Any comments on that?

Well, clearly, it is a driver in that vertical right now, the space management and it comes down to a pure space management issue. And what we have learned in this vertical is calorie count can change probably more frequently and does than even pricing.

So, it becomes an operational management issue and a space management issue. So clearly, it is one of the key drivers in menu board adoption, digital menu board adoption in QSR.

Very good. I look forward to many more and better conference calls yet.

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