Charles & Colvard Ltd (CTHR) 2012 Q2 法說會逐字稿

Good morning, and welcome to this second-quarter 2012 earnings conference call. (Operator Instructions). Please note, this event is being recorded. I would now like to turn this conference over to Randy McCullough. Please go ahead.

Thank you, Operator. Good morning, and thank you for taking time to join us in recapping Charles & Colvard's second quarter that ended June 30, 2012.

As I have said in today's press release, we are pleased to see our sales revenue continued to grow in response to our branding strategies and sales initiatives.

As previously reported, we formally launched our new Forever Brilliant color enhanced moissanite gemstone the first week of June during the JCK trade show in Las Vegas, the largest jewelry industry trade show in the US. This effort was supported with product inserts in two of the major trade magazines, oversized banners in key areas of the trade show floor, and a Charles & Colvard informational booth, all featuring Forever Brilliant. Over the past 60 days, we've received quite a bit of attention and interest from a number of retailers and wholesalers.

During the second quarter, we've shipped approximately 5,000 carat of Forever Brilliant loose gemstones. As of today, our open orders exceed 2,000 carat. Additionally, our international partners are currently working with our sales team to launch Forever Brilliant during the third quarter. We believe, based on consumer feedback, that Forever Brilliant will continue to grow not only in sales revenue, but also as an increasingly important brand for Charles & Colvard as we execute future branding initiatives of our strategic business plan that focused on expanding consumer awareness.

Additionally, Moissanite.com and Lulu Avenue are both developing and becoming more significant to our sales growth, validating our business plan. As a result, more consumers become aware of the value proposition of moissanite, which offers greater brilliance and fire than diamonds at significantly lower prices. We believe our investments in these direct-to-consumer retail channels, while still adversely impacting our bottom line today, are positioning to drive both substantial revenue and profits in the near future.

Moissanite.com has a new improved look and feel in work, targeting September for an official launch, replacing our current site with a much more intuitive web presence. Over 100 enhancements will be included. A few examples are intelligent search, providing more relevant results, suggesting products and categories; recent [see] frequency monetary module to increase lifetime value of consumer; personalized content to improve conversion rates; [carda band width] module to remarket missed sales opportunities; My Account section, which is a dashboard for consumers to view their purchases, check status, credits, store credit card info, and track packages; a new favorites wish list and gift registry functionality, which allows consumers to compare multiple products side by side, share with friends, and save for future visits; search optimization engine focused on publishing and back link strategy related to highest conversion keyword phrases; enhanced social commerce such as product reviews, Q&A; and product wall to increase conversion -- conversation with customers; site load time and speed increase through optimization of server environments; and integration with our new ERP system for improved services.

In addition, over 200 new items are being added to our current site. Average traffic is now over 65,000 visits monthly, and conversion rates continue to increase versus our 90-day trend. These are all very good signs, validating what we are doing is working well. Several Web promotions to further the awareness of Charles & Colvard moissanite are scheduled for the remainder of the year.

Lulu Avenue has focused on building up and higher supporting tools for new style advisors. Some of the results and activities begun are video training and support of new style advisors was launched in June and is being utilized during training calls; Lulu Avenue shipments are now coming out of Houston through a third-party logistics supplier, who already supports a number of direct selling jewelry businesses; a successful outreach program and software tool was set up and is providing additional leads; new style advisors signing up exceeded one per day average in June.

Our largest customer continues to be Jewelry Television, JTV, for which we produce all of the moissanite jewelry that it sells. A significant number of shows are scheduled for the remainder of 2012, including a relaunch of their Elite brand that is targeted to feature Dixie Miller as host. Dixie has represented Charles & Colvard successfully in a number of prior ventures over the past years.

In addition, JTV will be showcasing some of the new color-treated stones such as pinks and blues. And of course, the star of the Fire shows, Charles Winston, will be ever present, potentially breaking his own hourly sales record this fall.

The second-quarter sales revenue was collectively dominated by Charles & Colvard's wholesale distributors. We are experiencing a nice increase in loose gemstones sales as these distributors grow their moissanite finished jewelry business, which we expect to continue to grow over the next two quarters as we support them with trade magazine ads and co-operative advertising.

Also, we have completed implementing the initial phases of our new jewelry-specific ERP system and are shifting the focus of our resources to enhancements that should provide improved services and support to not only our wholesale customers as they grow their moissanite business, but also our direct-to-consumer retail subsidiaries as they continue to evolve.

One such service is the launch of our new corporate site yesterday, which provides information on Charles & Colvard in a very professional presentation, enhancing the impression of our brand with consumers and potential investors alike.

Let me take a moment to thank our team who, headed up by Tim Krist, led the effort over the past months to develop this vastly improved site. Further enhancements are in development.

We feel there continues to be significant opportunities to grow our business with the increased consumer awareness generated from home shopping networks, our consumer direct sales efforts, and marketing of our exciting new product offerings like Forever Brilliant color-enhanced gemstones. We remain confident that our moissanite is destined to significantly expand its share of the $120 billion global jewelry market, that our multi-channel sales and marketing strategies will play a key role in Charles & Colvard's growth.

Meanwhile, we believe we are well positioned financially to take advantage of future opportunities with a long-term debt-free balance sheet, healthy operating cash flows, and over $21 million in available working capital.

Someone once said, you must execute in ways that deliver what your consumers want and demand. Success is not the result of marketing gimmicks. It takes hard work, operation alignment, complete focus, and 100% commitment. I just want to take this opportunity to thank each and every one of our Charles & Colvard Associates for all of their efforts and hard work that has brought our Company this far.

Additionally, I want to say that we believe this is only the beginning of something big. Something we will all look back on years from now and say, wow, I helped build that and had a lot of fun doing it.

I would like now to turn our call over to our Chief Financial Officer, Tim Krist, who will review in greater detail the financial results of our second-quarter 2012. Tim?

Thank you, Randy.

As a reminder today, I would like to state that our discussion may include predictions, estimates, or other information that might be considered forward-looking, and while these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially.

Having said that, I would like to discuss the financial results for the three and six months that ended June 30, 2012.

As announced in today's press release, net sales for the second quarter of 2012 increased 69% to approximately $5.1 million, compared with approximately $3 million in net sales during the same period of 2011. Domestic sales for the quarter increased 105% from the same period in 2011 to approximately $4 million and represented 80% of total net sales. International sales for the quarter were unchanged from the same period in 2011 at approximately $1 million, and represented 20% of total net sales.

Our loose gemstones sales during the second quarter increased 65% from the same period in 2011 to approximately $4.1 million, and represented 81% of total net sales. This increase was primarily attributable to robust orders received from our wholesale customer base upon the June 2012 launch of our new Forever Brilliant color-enhanced moissanite gemstone, as well as increased loose jewel orders resulting from the growth of our wholesale customers moissanite finished jewelry lines.

Our finished jewelry sales during the second quarter increased 86% from the same period in 2011 to approximately $968,000, and represented 19% of total net sales. This increase was attributable to our continued focus on expansion into the finished jewelry business through the creation of new sales channels, including televised home shopping networks that are experiencing high levels of success with basic and designer inspired fashion lines of finished moissanite jewelry.

Net sales for the six months ended June 30, 2012, increased 55% to approximately $9.2 million, compared with approximately $6 million in net sales during the same period of 2011. Domestic sales for the six-month period increased 121% from the same period in 2011 to approximately $7.4 million, and represented 80% of total net sales.

International sales for the year decreased 31% from the same period in 2011 to approximately $1.8 million, and represented 20% of total net sales. This decrease was primarily the result of the first-quarter 2011 addition of a new distributor in India with a large initial order to open that market, as well as increased sales to an existing distributor in India during that quarter, along with the timing of restocking orders in the first half of 2012 from our existing international customer base.

Our loose gemstone sales during the six-month period increased 30% from the same period in 2011 to approximately $6.5 million, and represented 71% of total net sales. Our finished jewelry sales during the six-month period were up 189% from the same period in 2011 to approximately $2.7 million, and represented 29% of total net sales.

The improvement in year-to-date sales was primarily due to the ongoing execution of our growth strategies, including initiatives to increase consumer awareness of moissanite's remarketing support of our customer base, expansion of existing customer relationships, the introduction of our Forever Brilliant color-enhanced gemstone, and increased sales of our finished jewelry featuring moissanite.

Our second-quarter comparable sales increased 74% and our first six months' comparable sales increased 58% when compared with the same periods of the previous year. We define comparable sales as active customers with which we generate revenue during both periods on which we are reporting, and we use this as a metric to measure sales growth within our existing customer base.

We recorded net income of $549,000, or two -- $0.03 per diluted share, during the second quarter of 2012, representing an approximate $652,000 improvement relative to a net loss of $103,000, or $0.01 per share, during the second quarter of 2011. Our net income for the first six months ended June 30 was $173,000, or $0.01 per diluted share, representing an approximate $512,000 improvement relative to a net loss of $340,000, or $0.02 per share, in the corresponding period of the prior year.

Operating expenses totaled approximately $2.9 million in the second quarter of 2012, compared with approximately $1.8 million in the same period of 2011, an increase of $1.1 million, or five -- 59%. Operating expenses totaled approximately $5.7 million in the first six months of 2012, compared with approximately $3.7 million in the same period of 2011, an increase of $2 million, or 56%.

Of these increases, sales and marketing expenses increased $1 million, or 187%, and $1.9 million, or 150%, during the second quarter and six months ended June 30, 2012, respectively, when compared with the same periods in 2011. This was due primarily to our ongoing investments in marketing and branding initiatives to better position Charles & Colvard's product lines in the marketplace, as well as marketing investments and key personnel additions in support of our direct-to-consumer Moissanite.com e-commerce and Lulu Avenue home party businesses.

We ended the quarter with a higher level of cash and liquid long-term investments on our balance sheet relative to the end of 2011. Cash and liquid long-term investments totaled $11.5 million at June 30, 2012, up from $10.5 million at December 31, 2011. We generated approximately $1 million and $1.4 million in cash from operations during the second quarter and first half of 2012, respectively.

Total inventory, including long-term and consignment inventory, approximated $34.2 million at the end of the second quarter, down from $35 million at the end of 2011. This decrease is primarily the result of sales, offset in part by purchases during the quarter of jewelry castings, findings, and other jewelry components; fashion finished jewelry in support of our home party direct sales business; and production of moissanite gemstones.

I would like to now turn the call back to Randy.

Thanks, Tim. This concludes our formal remarks this morning, and now we would like to open a call to any questions that participants on the call may have. Operator, can you please open the floor to the Q&A session?

(Operator instructions). Bogart Holland, UBS.

Congratulations on a great quarter. I know you are happy with the results. Are you doing anything to tell the story -- I mean, besides to existing shareholders? Are you having -- do you have the time to get out and tell small companies about what you are doing?

We are actually going to be in New York. Chris heads up our investment relations, and Chris and I are going to work New York next week.

We've done shows -- I say shows. Road shows, I call them, in Atlanta, and I was out on the West Coast a couple or three months ago. So I try to get out there at least a week a quarter, and then a couple of days a month additional.

If I am going somewhere, if I go to California on a business trip, then I will stay over a day or two and have Chris book meetings, and boy, he is really efficient in getting me in front of a lot of people in a short period of time.

Okay. Thank you very much.

[Mark Wright], private investor.

Hi, guys. A couple questions for you. Can you tell me what is going on with Judy Evans? Is there any update there?

Judy Evans line is being put -- part of it is being put on our website, and we have presented Judy Evans line to several companies and we don't have a deal yet. We are working it.

Okay. All right. Early in the call, Randy, you said something and I didn't quite catch it all. It was about Forever Brilliant and international customers. Was Forever Brilliant made available to international customers in the second quarter or is that still coming up?

Well, it came out June 1 and the quarter ended June 30. So the answer is no.

To the extent that they were in the JCK show, and they were, we had meetings with them and discussed it and then what they wanted us to do, and it's very typical, is to mount it in a series of merchandise that they want to see, and we will physically be over there in October -- September. I'm sorry. I'm thinking of flying over in September.

Okay, so it's fair to say the international customers didn't really get in there and buy a lot of Forever Brilliant during the second quarter.

No.

Okay, all right. That's good. Can you tell me how much of the raw SiC is left in inventory? I'm thinking there was 5 million left in May and 6 million in February. Is that continuing to drop down as you are using more raw SiC?

That's a good question.

We are down to about 3.7 million in raw material right now.

Okay. All right. Thank you. And my last question, and I don't know if you can share this with us or not, but I will give it a try, do you have a goal for the number of Lulu reps by the end of 2012 and a goal for the revenue you expect from Lulu by the end of 2012?

We do have a goal for both.

Okay. You can't share it with us?

No.

All right. Thank you very much.

Mr. Bruno, Taglich Brothers.

Congratulations, great quarter. I may have missed it in the beginning. What would you say are the demographic characteristics of your customers?

And I guess a follow-up on that. What would you say your main programs or initiatives that you have put in place to basically drive -- look to drive your sales growth with basically the global economy slowing down?

Let me answer your first question first. The demographic we don't believe has changed a lot. It's middle and upper middle America. It's been predominately a 30-year-old-plus female, about 75% of our sales, and I think it continues to track around that, are the consumer. And actually, when we get to the more mature, the 50-plus, the sales actually spike, as they do with $75,000 and up household income.

Now having said that, we're big believers that the young adults will be big consumers for this product once we get it in front of them. I don't think there has been a lot of effort or focus in that category. And we are doing some things on both our moissanite and our Lulu Avenue front to target more of that consumer.

In addition, we are also working with our distributors and they are designing catalogs, one specifically that focuses on young adult bridal merchandise. And there's going to be a pretty concerted effort to target that demographic so that we continue to build on top of what we already have.

And in terms of our sales, what's driving our sales, the economy plays in our favor. With other gemstones increasing substantially, and if you look in the last three years we're talking pretty high double-digit increases, and that helps us. That positions us as even a more affordable luxury item, and we're getting more and more distributors that are willing to take the product and run with it.

In addition, our Lulu parties -- and I have been to several now, the response from the consumer -- and the interesting thing is I don't think it's any different from what we expected. The vast majority have never heard of moissanite. And they just love this stone. They really do. And we just -- we see -- I mean, we have only scratched the surface.

It isn't like we're a mature company like Nike and we have got to build on top of something that has already been maxed out. I mean, we are at the very beginning. This thing has got a lot of potential.

Okay, great. Thanks, guys, and keep it up.

Okay, thank you.

Andy Horwitz, Old School Partners.

Congratulations on a really good quarter. Just looking at your balance sheet, the inventory is around $34 million, if I am correct, roughly, if you add short- and long-term inventory.

Yes, about right.

If you were to liquidate that inventory over a period of time, what do you think the value of that inventory would be for the Company? What kind of cash flow would you be able to generate on that $34 million?

Well, at a full retail value, it's in excess of $80 million.

Okay.

So (multiple speakers). Go ahead.

Okay, and then, if you were to add the cash to that, you -- I mean, it's not really a fair amount, but if you added the cash, get around $90 million altogether in terms of that if you were to liquidate everything. I'm just trying to understand the value there.

Well, liquidation is a dangerous word because that would be kind of a fire sale. If we, over time, were to --

The word is monetize.

Yes, monetize. Over time with a sound business strategy, monetizing this inventory -- one of the advantages that we have is the vast majority of that $80 million would be converted to cash because we already have our cost into it. We may expend some additional resources to mount it in settings for finished jewelry, but that is relative -- from a margin standpoint, a relative minor investment.

Okay. I'm just trying to make a point here is that your market cap is $70 million. You have about $11 million plus of cash. You take that out, you have about a $60 million market cap, net. And then, if you take the inventory into consideration, you're pretty close to -- between the inventory and the cash, so you're trading at basically working capital.

Yes. I mean, our book value is around $2.60 a share. At a full realization of our inventory, we are some -- we should be around a $5.00 stock, in my estimation. And today (multiple speakers)

No, I think it just doesn't make sense that a growth company shows this kind of valuation, given the balance sheet that you have, and really just looking at it on a pure, as we would call it, monetizing of the value, it would seem pretty darn cheap.

Okay, the second issue is Lulu Avenue. Can you give us a little more color? You've had now a whole quarter where you're putting this -- you're sort of testing it out. Can you give us a little bit more color of what you are seeing in Lulu Avenue, the pluses and the minuses, and what would it take for it to really take off, in your opinion?

Yes, we're going to let Kevin Raulston, who is general manager of the Lulu Avenue division, we're going to let him talk to that. But I am going to caution him against getting out there too much what -- because we don't want to give our competition too much of a lead as to what we're doing with some of our strategies. But he will give you some color on it.

Thank you for the question. Specifically what we are doing is we are getting a lot of traction at our home shows, which is what we want. That helps build natively.

But when you look at it, we are positioned in two different ways. One is we are a direct-sales jewelry company offering an opportunity for women to make supplemental income, and playing to that strength is one of our key goals in the last part of this year. And it is something we are completely focused on.

The second thing we are focused on is offering great fashion jewelry that is tied into and incorporates moissanite. So when you see the third-quarter catalog come out in September, if you were to get one, you will see the moissanite actually placed in with fashion jewelry in a positive way that I think is going to show people how it gets merged in. For instance, the classics that you buy with us fit in with the everyday jewelry that you mix with it, and we're having a good time with that. We're getting good results, people are happy and excited, and we're pleased with where we are.

Okay. And what will it take to get the traction that you need to sort of get this thing to have a bit of momentum that it would start to spread?

Well, I think that is always a dangerous thing to say what will do it.

I can tell you that we have two efforts that are going on. One is ongoing testing. We consider everything that we put out there by category, color, type, price point, and want to understand what is resonating with the population that is buying our product and the people who are joining the business.

The other thing is when we find something that works -- for instance, we know that people are interested in the business opportunity. How do we leverage that? And Randy spoke to that earlier when he mentioned some of the things that we are doing. One is an inbound marketing effort. And that will help.

But everything takes time. We are really in an incubation state, and we are testing, moving forward, and whatever works, we are hitting it again. So that is pretty much all I think I can say at this point.

All right. Thank you.

[Joe Lascala], Aegis Capital.

I had a follow-up question on Lulu Avenue. I know it has been asked a couple of different ways, but just two different questions. Have you guys broken out -- the operating expense of $1.1 million, have you broken out how much of that was applied to Lulu Avenue? I know it's in the release that some of that is towards Lulu Avenue. Have you broken out in specific how much was applied to that area?

We have not currently broken those out, just because they are currently in a development stage.

We're looking to -- obviously, we continue to look at when may be an appropriate time to split those numbers out because I know the investment community is interested in it. But until it becomes a more significant part of our revenue, we currently have not done that.

Okay. And then, one more follow-up, maybe on the last gentleman's theme. How are we to focus on seeing success in the Lulu Avenue party business from a geographical standpoint? Is that something that we should look for, how many states that you are in, or do you break it down by how many -- I don't even know how you look at it. How many members are leading corporations in various states? How are we to look at the success geographically with that?

I wouldn't be able to get into specifics right here, but I can tell you we were going -- every time we had a new state added, we were turning on the sales tax functionality. It has gone to the point where in the last two weeks, the growth in multiple states is such that we actually turned on all states for sales tax.

We are -- yes, we are growing, and that is what we want to see. We are having pockets of growth in Ohio, California, here in North Carolina. We are enjoying that. But we are seeing growth nationwide.

And interest.

Yes, the real driver there is the number of stylists. And the great thing about -- and I am not an expert in direct selling, but we have got an expert on our Board now, and Kevin and Ann have been in this business for a few decades. Although Ann doesn't look that old, Kevin does.

But the driver -- the great thing about this is exponentially it starts to double. And once you reach 100, then 100 is recruiting another 100 and it becomes 200, and then at 200 they are recruiting another 200 and it becomes 400. Four becomes eight, eight becomes 16. So when you reach that critical mass, then it really starts to roll, and you almost have to be careful and hold the reins on that so that you don't outgrow your systems and your merchandise support.

Obviously, we're not going to sit here and buy merchandise for a three-year mature company. And so, it is a delicate balancing act. I am really, really pleased at the number of stylists that they signed up in the month of June, and July so far is way ahead of plan.

Great. Thank you, guys.

Michael Weiss, Joslynda Capital.

Really good quarter. Question I have for you, looking back sort of as a report card, looking at what are things are doing extremely better than planned, what things are maybe not doing as well as you would have thought. And you said you've been at some parties. How were the initial reactions? Are they -- are you -- how are the sellthroughs, and can you give us a little color on that?

Yes, let me -- I'll give you my view, and I just returned from two weeks' vacation so I came back with a clear head.

Michael, I was really, really pleased to see that all of our systems support, all of our selling arms of the Company, everything seems to be clicking. It just -- sometimes it just feels right, and it feels really good.

If I had one area, if you want the one disappointment for me, the one disappointment for me, and we have not given up, has been that we have not been able to close a deal with a major. We have been able to have conversations and we continue to have conversations, but that is one goal that I personally have that I just haven't been able to get done yet.

But other than that, we are making a lot of headway on all fronts. We are doing significantly better than I thought we would be, based on where we have been in the past three or four quarters. And it's really starting to pay off.

And when are you really starting to roll out the parties? Is that in August? Was that an August event or September?

We turned on all of our systems April 17, so that has only started in earnest. That is when people could log in. They could join the business online. They could submit their orders electronically. They had the support that they needed to get going.

So I would say it's started, and we're trying to reach that critical mass that Randy referred to.

We're moving. This thing is -- the ball is rolling. This is not stagnant, trust me. You'll -- if things keep going the way they're going, we'll all be pleasantly surprised in the near future.

And I was going to ask you, and it sounds like this quarter is continuing the momentum you have been seeing in the second?

I have no reason to believe it won't.

I mean, we are -- this is Tim. We are beginning to experience more seasonality factors in our business. So third and fourth quarters traditionally are stronger in the jewelry business, so we expect that they will be good quarters.

Thank you.

Andy Horwitz, Old School Partners.

One of the things in the release you had was that your net income was $549,000 after an approximate $802,000 investment in consumer direct business models. How much of that $802,000 investment do you think will be ongoing for the rest of the year, Q3 and Q4?

Well, basically what that $802,000 is is the cost of running our two operating subsidiaries. So the majority of it is personnel, which will continue through the remainder of the year.

Some of it may actually increase with respect to, for example, spending with Moissanite.com. We have started to Google AdWord spending and so forth. So it may very well increase, but the goal obviously with advertising is that your revenue grows along with it, preferably more than your expenditures do. So that number will probably stay at least at that number, and it may go up.

So one should assume that -- and how high do you think that number would have to go up? Is there a variable or fixed cost, fixed number, or as sales go, will a portion of it also go up?

Well, it is a mix of variable and fixed. The personnel, I think that -- obviously that's a fixed number and I think that our head count is about where it needs to be. There may be a few additions here and there for, for example, customer service personnel, but they won't be significant in terms of dollars.

And as far as the variable portion, I mean, with advertise -- marketing and advertising, that's variable. We are trying to drive revenue specifically with it. So that could increase, but the goal would be to increase the revenue along with it. If that answers your question appropriately.

Yes. Okay, fair enough. What would be the incremental gross margin to sales once you get this thing going?

Yes, that is a difficult question to answer on a conference call. I mean, there are a lot of things that affect your margins.

We've got a pretty robust wholesale business that is both loose stones as well as finished jewelry that have different margins, so the mix affects that. And of course, on Moissanite.com and Lulu Avenue, because we are selling retail direct to consumer, in theory our margins would be higher than at the wholesale business. But again, it depends on the mix of products being sold.

So it's really hard to give you an incremental margin number off the cuff like that. So there is no reason to believe that our margins won't continue to remain relatively strong where they're at.

Will the Lulu Avenue margins be the same as the rest of the business?

No. And actually, the gross margin of Lulu Avenue is higher for the fact that we pay commissions. Roughly 25% commissions get paid to the sales representatives, which hits our sales and marketing line, not our margin.

(Technical difficulty) so Lulu Avenue will be higher margin or lower margin?

Lulu Avenue, for the nature of the items that they are selling, will be a sufficient margin in order for the business model to be profitable. I am not saying it will necessarily be higher than our other product lines.

Okay. Beautiful. Thank you.

(Operator Instructions). Jeff Kone, Wall Street Capital Partners.

Good morning, and nice job on the quarter. Over the last few months, you have seemed to move the Company forward in a nice manner and the stock has moved the other direction.

It appears that there is a large and persistent seller, and nobody seems to be able to find the person. And if you are out there and listening, if you could make yourself known to Chris, then maybe we could get you cleaned up and that way you, rather than driving the stock down, would get better prices and us that own it would be able to have the stock be more in sync with the Company. So just thought I'd take advantage of this forum. Sorry to waste anybody's time and I will let you get back to it.

Thanks, Jeff.

This concludes our question-and-answer session. I would like to thank all -- I would like to turn the conference back over to Randy McCullough for any closing remarks.

Thank you, Operator. Once again, I'd like to thank everyone for taking the time to participate in our call today. I hope that you share the enthusiasm for the remainder of 2012, and we look forward to talking to you again in our third-quarter investor call. Thanks again, guys.