Crexendo Inc (CXDO) 2007 Q4 法說會逐字稿

Welcome to the iMergent fourth quarter 2007 and year-end fiscal results conference call.

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

Following management's prepared remarks, we'll hold a Q&A session.

(OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded September 5th, 2007.

I would now like to turn the conference over to Ms.

Kirsten Chapman.

Please go ahead, ma'am.

Thank you, Ava.

Good afternoon, and thank you for joining us for the iMergent fiscal 2007 fourth quarter and year-end results conference call.

With me today are Don Danks, Chief Executive Officer of iMergent; Brandon Lewis, President and Chief Operating Officer; Rob Lewis, Chief Financial Officer; and Jeff Korn, General Counsel.

After reading a short Safe Harbor statement, I will turn the call over to Jeff Korn.

Statements and comments made on this call that are not historical in nature constitute forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

These statements and comments are based on the current expectations and beliefs of the management of iMergent, and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements and from management's current expectations.

For a more detailed discussion of the factors that affect iMergent's operating results, please refer to its SEC reports, including its most recent Form 10-K and Form 10-Q.

The Company undertakes no obligation to update this forward-looking information.

Also, the Company wishes to remind listeners of this call that U.S.

GAAP requires the Company to recognize revenue as cash is received from customers, often over a period of 24 months after the time of sale based on the financing agreement offered to customers.

However, U.S.

GAAP requires the Company to recognize the related expenses at the time the contract is written and no later than expiration of the customer's cancellation period.

Consequently, during periods of growth and sales activity, also referred to as net dollar volume of contracts written, earnings recognized under U.S.

GAAP will generally decline as the finance revenues are deferred and recognized over time, but the related expenses are recognized at the time the contracts are written or canceled.

Conversely, during periods of declining sales activity, earnings results may increase as fewer revenues are deferred, previously deferred revenues are recognized, and fewer operating expenses are recognized as a result of lower sales activities.

The non-GAAP measures, including non-GAAP net income and non-GAAP earnings per share, assume one, the net dollar volume of contracts written is recognized as revenue at the time of the sale, two, certain corresponding cost of revenue and sales and marketing expenses are also recognized at the time of sale, and, three, the income tax provision is based upon an estimated federal, state and foreign statutory blended rate of 40%.

Non-GAAP net income per diluted share is defined as non-GAAP net income divided by the weighted share of diluted common shares outstanding.

With that, I turn the call over to Jeff Korn, General Counsel.

Jeff?

Thank you, Kirsten.

Let me take this opportunity to both address the investigation undertaken relative to our CEO, Don Danks, and provide you with an overview of our current legal issues.

As I announced on our third quarter conference call, the Company, independent members of the iMergent Board, and their counsel, Paul Hastings, conducted a thorough investigation into the facts and circumstances surrounding the allegations in a May 5th, 2007, Barron's magazine article, that Don Danks selectively disclosed material nonpublic information regarding the Company's financial results.

We took the following actions.

The reporter who wrote the Barron's article directed me to the Dow Jones General Counsel office.

I requested any information on the alleged recording, confirmation if a recording existed, and further information from the reporter.

The position from Dow Jones was that the providing of any information would compromise their journalistic independence and compromise First Amendment claims.

We interviewed Don Danks on three occasions.

Don's explanation has remained consistent throughout the investigation, and was not contradicted by anything found in the investigation.

He indicated he was contacted, and then spoke with a person who is a Senior Vice President of a national broker-dealer.

Don believed the person he was speaking with was on the investment banking side of the firm.

Don also indicated the person claimed to be new to the iMergent story.

I contacted both the individual and the firm, and they declined to comment.

We reviewed Don's relevant e-mails and phone records.

I spoke with certain investors at random, and there were other reviews undertaken.

There was no indication of any other person contemplated under Regulation FD being provided with material nonpublic information.

There was no other parties that contacted us to provide any further information.

Don should have confirmed the person's position, and secured an NDA via my office.

As such, his actions likely constituted a violation of Regulation FD.

While this appears to be an isolated incident, the sharing of material nonpublic information is taken very seriously by myself, the Board and the Company.

The Board has accepted Don's resignation as the Chairman, and appointed Todd Goergen as non-executive Chairman of the Board of iMergent.

The Board also decided to take certain remedial actions regarding Don, including requiring him to attend compliance training, restricting his communications with outside securities professionals, and requiring him to disclose to me on a monthly basis the identity of any securities professionals or investors with whom he has discussed the Company.

Additionally, the Board decided not to grant a salary increase that was under consideration, nor is he eligible for any compensation increases for at least the remainder of calendar year 2007.

Now I will briefly review some of our legal issues.

As most of you are aware, the Company faced two hearings for temporary injunctions, one in North Carolina, and one in California.

Most state statutes, including North Carolina, have three components that comprise a business opportunity.

The first is selling a product which has over initial baseline costs.

Second, the seller makes a representation that the purchaser will earn an amount in excess of the amount paid or the investment made.

And, third, that the seller provides a marketing plan.

Let me make clear, there is nothing illegal nor improper with selling a business opportunity.

The issue is we do not believe we sell a business opportunity and accordingly, we should not register as one.

We believe most customers who purchase a business opportunity expect to receive an entire business in a box, where they can start their own business with everything provided by the seller.

As most of you know, we sell a license to software that enables the purchaser to develop their own website, selling the product of their choice.

We do not believe under the law this constitutes the selling of a business opportunity.

Equally as important, most business opportunities provide a product for resale.

We can't and don't do that.

We do not want to mislead potential customers to believe that we have a product for them to resell, or that when a customer purchases our product, they automatically have a business which is already set up.

The Company has a strict policy which is reviewed during new employees -- reviewed with new employees, reviewed at daily workshops, and weekly preview training meetings.

The policy strictly prohibits its employees from making any representation that a purchaser will earn an amount in excess of the purchase price.

During our workshop, attendees are told numerous times that their results will vary and will depend on their efforts, their products, and how well they sell their websites.

We make it clear numerous times in the workshop and in the contract that results vary, and that we cannot provide a guarantee of results, and we do not provide a guarantee of results.

Also, people are provided the right to take home our software for three days and test it.

This is made clear in our contract and in our customer --- and in our contact with our customer.

Although we provide information on tools and other valuable information which our customers can use to develop their own marketing plans, we do not provide a marketing plan.

Finally, if we were to register as a business opportunity, we believe it would create a number of problems.

First, as indicated before, it would be misleading to buyers to think we were providing them with items we cannot and do not provide.

Secondly, the registration statements usually require the seller to provide information on the sales of its customers, and since we do not provide the product for our customers to sell, we don't have any of that information about what our customers actually do sell.

Coincidentally, the Company has for some time been considering licensing what it believes it is a very valuable marketing tool, our trademarked StoresOnline, which is a Federally registered trademark.

North Carolina, as well as most other state statutes, allow a company to provide a marketing plan if they, in fact, provide a license to a registered trademark, which then creates an exemption from the -- under the marketing plan requirement of the law.

iMergent now has included in its contract a trademark license to StoresOnline.

As such, even if the North Carolina Attorney General were able to convince a court that we provided a marketing plan, we should be exempt from that provision, and therefore we believe, not subject to the Act.

We have accordingly notified the business court in North Carolina that we are filing a dispositive motion asking the court rule that we are not subject to the Act and accordingly, withdraw the injunction.

Let me now address California, particularly the action in venture accounting.

First, the California statute is different from most other states.

The representation required in California is that the seller can earn a return on their investment, which is in excess of the amount paid.

We claim we do not do that, but the District Attorney and the AG have taken the position that the Company does do that, and claims to have tapes of two salespeople doing that.

The Company insists that no such representations are allowed to be made by its representatives, and the disclaimers we make both orally and in the contract confirm that.

As discussed in our 8-K filed August 31st, the Superior Court in California entered a temporary injunction against the Company.

Currently, we are prohibited, at present, from selling products which have an initial consideration of over $500 and cost less than $50,000, without requiring under the California SAMP Act.

We do not believe that we sell a SAMP under California law, and also believe the statute is unconstitutional.

We have accordingly announced we are filing an appeal of the decision.

We are also filing an expedited appeal seeking a stay of what we believe is a mandatory injunction.

We need to file new appeals on these matters, as the previous appeals relative to the temporary restraining order became moot and were dismissed upon the entry of the temporary injunction.

With that said, I want to briefly discuss what occurred with the prior settlement entered into with Ventura County and the AG's office.

On September 1st, 2006, we agreed to a stipulation which provided for a payment and refunds to certain customers.

The Attorney General's office and the District Attorney's office suggested certain minor changes to our presentation, which we agreed to and made promptly.

With that, the State did not require that the Company register as a seller of business opportunities.

There was no obligation for the Company to register under the SAMP Act.

As always, we will keep our investors informed of all developments on the legal front via 8-Ks.

With that, I will turn the call to Don Danks for an overview of the quarter and the year.

As usual, he will be followed by Rob Lewis, who will deliver a financial review, as well as Brandon Lewis, who will deliver an operational review.

Then Don will summarize our vision and open the call for questions.

With that, I will turn the call over to Don Danks, Chief Executive Officer.

Don?

Thank you very much, Jeff, and thanks to all of you for joining us today.

After my comments, I will then turn the call over to Rob and Brandon for more detail.

We are very pleased with our fourth quarter and our full year 2007.

In the past twelve months, we accomplished so much.

We introduced two new sales teams, bringing the total to nine.

We increased the total number of workshops from over 800 in fiscal 2006 to nearly 1,200 this year.

We invigorated our international sales efforts, growing the number of international workshops from 141 in fiscal 2006 to 264 this year.

We launched our new AVAIL product.

We formed new relationships with third parties provide [to] additional value to StoresOnline Pro Merchants.

With all of these achievements, we are very well positioned for continued growth in fiscal 2008.

Additionally, these actions also translated into financial success for the Company in 2007.

Fourth quarter revenue grew 57% over the same quarter last year.

Our total revenue for fiscal 2007 reached $151.6 million.

Net dollar volume of contracts written, which is a relevant and meaningful statistic to the understanding of the operations of the Company, grew to $46.2 million for the quarter, 40% over the same quarter last year, and $165.3 million for the year, up 66% over fiscal 2006.

Net income for fiscal 2007 was $24 million or $1.87 per diluted share.

Our non-GAAP net income was $23.9 million or $1.86 per diluted share for the year.

During the year, we generated $22.6 million of cash through operating activities and increased our cash and cash equivalents to $36.9 million at June 30th, 2007.

Our overriding objective has always been to deliver value to shareholders.

During the year, we initiated our share repurchase program through which we purchased approximately 708,100 common shares of stock for approximately $14.7 million through September 4th, 2007.

As announced today, we increased the stock repurchase program from $20 million to $70 million.

In March, the Board initiated a cash dividend.

As announced yesterday, to further demonstrate our commitment of returning value to shareholders, our Board of Directors has elected to raise our quarterly cash dividend to $0.11 per common share, an increase from the previous dividend of $0.10 per share.

In addition, we will now be paying the dividend on a quarterly basis.

The next dividend will be paid on September 29th to shareholders of record on September 20th.

We are extremely excited about fiscal 2008.

We believe we can achieve 15% to 20% growth for revenue and net dollar volume of contracts written over fiscal 2007 results, contingent, of course, upon marketing in California and North Carolina.

The contingency refers to the outstanding legal actions in California and North Carolina.

More important information is available in the Company's SEC Form 8-K and 10-K filings.

During fiscal 2007, California and North Carolina combined approximately 14% of revenue and net dollar volume contracts written for the Company.

With that brief overview, I will turn the call over to Rob to review our strong financial results.

Rob?

Thank you, Don.

First, I will review our fourth quarter results, and then discuss the results for the year ended June 30th, 2007.

As mentioned earlier, in addition to revenue recognized each period in the income statement, management believes the net dollar volume of contracts written each period is a relevant and meaningful statistic to the understanding of the operations of the business, and represents gross dollar contracts written during the period, less estimates for bad debts, discounts incurred on sales of trade receivables, and estimates for customer returns.

For the quarter ended June 30th, 2007, total revenue was $44.3 million compared to $28.2 million for the quarter ended June 30th, 2006.

Commission and other revenue was $9.5 million compared to $4.4 million in the prior year quarter, representing 115% increase.

The increase was the result of improved -- of improvement in our residual revenues and other revenues from our customers and approved providers.

For the quarter ended June 30th, 2007, net dollar volume of contracts written was $46.2 million compared to $31.4 million in the 2006 quarter, representing a 47% increase.

The increase was primarily the result of the increase in number of workshops conducted during the period, and the increase in commission and other revenues.

Total operating expenses were $38.2 million for the current quarter compared to $25.6 million for the same period of the previous fiscal year.

General and administrative expenses were $5.2 million during the current quarter compared to $3.3 million in the prior year quarter, an increase of 58%.

General and administrative expenses increased due to an increase in wages of $925,000, financial service fees of $307,000 due to the increased collections on trade receivables, an increase in professional fees of $202,000, an increase in legal fees of $107,000, and the remaining increase was the result of a general increase in costs associated with the increase in operations.

Net income was $5.3 million or $0.41 per diluted share in the fourth quarter of fiscal 2007, compared to net income of only $2.2 million or $0.17 per diluted share in the fourth quarter of the prior fiscal year.

For the quarter ended June 30th, 2007, non-GAAP net income was $6.6 million or $0.51 per diluted share, compared to non-GAAP net income of $4.0 million or $0.32 per diluted share for the quarter ended June 30th, 2006.

When reviewing our year-end financial results as compared to the same period last year, please keep in mind our change in business model was effective in the second quarter of fiscal 2006.

In December of 2005, the Company changed its business model to, number one, limit certain free services to a period of one year for all customers who purchase the StoresOnline software prior to December 20th, 2005, and, two, begin charging customers for those services as part of customer support.

This change in business model resulted in the recognition of product and other revenue of $108.0 million in December of 2005, of previously deferred revenue which would have been recognized in future periods had the change in business model not occurred.

Please note, after this period, as this event will no longer impact our comparisons, we do not intend to report non-GAAP net income and non-GAAP net income per share.

For fiscal 2007, total revenue was $151.6 million compared to $185.1 million in fiscal 2006, which included the aforementioned revenue recognition of previously deferred product and other revenue of $108.0 million.

For the year, net dollar volume of contracts written was $165.3 million compared to $99.8 million last year.

Operating expenses for 2007 were $132.2 million compared to $85.8 million in the prior year.

For the year ended June 30th, 2007, general and administrative expenses were $17.2 million compared to [$13.] million last year.

General and administrative expenses increased due to an increase in wages of $1.6 million, an increase in stock option expense of $807,000, and an increase in financial service fees of $543,000 due to the increased collections on trade receivables.

And the remaining increase was the result of a general increase in costs associated with the increase in operations.

The income tax expense for the year was $2.7 million compared to a benefit of $8.3 million for last year.

For the year, net income was $24.0 million or $1.87 per diluted share, compared to net income of $110.6 million or $8.76 per diluted share in fiscal 2006.

For fiscal 2007, non-GAAP net income was $23.9 million or $1.86 per diluted share, compared to $10.2 million or $0.81 per diluted share in the prior fiscal year.

Net cash provided by operating activities for the three months ended June 30th, 2007, was $8.5 million, bringing the annual total to $22.6 million.

This was offset by purchases of our common stock.

During the three months ended June 30th, 2007, we have purchased approximately 360,000 shares for approximately $8.8 million.

During fiscal 2007, we purchased approximately 654,000 shares for approximately $13.7 million under our stock repurchase plan.

As of June 30th, 2007, we had $36.9 million in cash and cash equivalents.

Trade receivables, net of allowance for doubtful accounts, increased to $38.9 million.

As of June 30th, 2007, we had working capital of $35.8 million and current deferred revenue of $30.3 million.

The deferred revenue balance represents historical sales for which the Company cannot immediately recognize revenue.

The costs and expenses we incur as these deferred revenue amounts are recognized as product and other revenue are expected to be insignificant.

Consequently, we do not consider deferred revenue to be a factor that impacts our liquidity or future cash requirements.

Working capital net of deferred -- current deferred revenue as of June 30th was $66.1 million.

Now we'll turn the call over to Brandon, who will provide you with a review of the business.

Brandon?

Thanks, Rob.

Our target market continues to grow, and according to the Retail Indicators Branch of the U.S.

Census Bureau, e-commerce retail sales in the U.S.

has grown from $5 billion of sales in the fourth calendar quarter of 1999, to $33.6 billion of sales in the second quarter -- second calendar quarter of 2007.

Additionally, e-commerce retail sales as a percentage of the total U.S.

retail sales, has grown over six times, from just over 0.5% in fourth calendar quarter of 1999, to over 3.3% in the second calendar quarter of 2007.

During the quarter, all nine sales teams were fully operational and worked hard to serve the demand we experienced for our StoresOnline Pro software.

As you know, in fiscal 2007 we began testing a Spanish speaking sales team.

After extensive testing, we were not completely satisfied with the return on investment.

It is typical when we introduce a team to a new market, our return on that market is lower than our average return for an established market.

We then adjust marketing, et cetera, to increase our ROI.

However, this time, we had an immediate need in an existing market.

Therefore, in our second quarter, we transferred the team to serve the English speaking market, which instantly increased this team's return on investment significantly.

In the future, we intend to evaluate launching another team to Spanish speaking markets.

During the current quarter, we conducted 333 workshops with 70 international workshops, compared to 248 and 68 respectively in the same quarter of last year, representing a 34% increase.

Over the full year, the number of workshops conducted grew 47% to 1193 compared to 812 in 2006.

For the year, we had 264 international workshops compared to 141 international workshops last year.

These increases were driven by increased demand, the expanded salesforce, and our efforts to expand international sales.

The average purchase during the fourth quarter was $5200, consistent with the prior year quarter.

The percentage of buying units making a purchase at the workshop increased to 28% during the fourth quarter compared to 26% last year.

Finally, cash sales ratio at our workshop was 55% of total workshop sales in the quarter, compared to 58% in the prior year quarter.

These figures can be impacted by the number of international workshops, which historically have carried greater close rates and cash sales, especially in the UK and Australia.

As we reduced the number of international workshops in the fourth quarter, we experienced lower close rates and cash sales than the third quarter.

As you are aware, we've been pursuing additional revenue streams through various partnerships and product introductions.

We have finished testing our marketing partnerships with the financial institutions we announced in December of 2006.

Unable to create a satisfactory partnership, financial or otherwise, we will not proceed with these financial institutions.

However, we do continue to investigate and test new marketing partners using a different model.

During the quarter, we formed agreements with third party vendors to offer ancillary products, thus increasing the value proposition of StoresOnline Pro.

Through the StoresOnline community, we aggregate thousands of small businesses and aggregate their purchasing power.

The vendors wanting to tap our StoresOnline community offer our merchants discounts, and iMergent offers the vendors product placement on our platform and marketing to our merchants.

In turn, each time our customers transact with one of these partners, iMergent earns a commission.

While the revenue is immaterial to iMergent, we believe these partnerships enhance StoresOnline Pro's functionality.

I will outline four recently signed agreements that incorporate tools into the StoresOnline Pro platform and further our merchants' capabilities.

First, Microsoft adCenter, which provides a pay per click advertising platform for budgets of all sizes and offers an exclusive low cost way to attract visitors to our customers' online business.

Second, Logoworks enables logo and graphic design services to help streamline the process, so logo design and branding can be created quickly and at a relatively low cost.

The third, Makau Corporation provides online training services to companies, including Dell Education Services, IBM Partner Channel, and other Fortune 100 companies, and offers StoresOnline Pro merchants with access to additional computer, marketing and accounting training at reduced rates.

And finally, VeriShip provides shipment auditing services for merchants to find credits from FedEx and UPS shipments.

And now I will update you on AVAIL, our new telephone, voicemail, e-mail, fax, phone service product, developed to complement iMergent's website development software.

Customers are responding to our AVAIL product at our workshops, with about half of the customers purchasing the AVAIL product.

We are anxious to get continued feedback before we release this product through other already identified channels.

As we have said before, our goal is to sign 20,000 to 30,000 AVAIL customers by the end of our fiscal year 2008.

As you may recall, the initial setup cost is $99, with a monthly subscription of $39.95 a month, plus time overages and applicable taxes.

We have been pleased with our customer response to date, but obviously, the long-term benefit relates to recurring revenue.

We believe we will have a better understanding of the product's stickiness in the next few quarters.

Finally, we continue to test the prospect of a professional version of StoresOnline Pro.

To date, we have not had any significant results.

Nonetheless, we continue to believe that this is an interesting venue, and we'll evaluate opportunities in the future.

I would like to reiterate that we're very pleased with the strong fourth quarter and year end we are reporting today.

We look forward to updating you on more new product initiatives as we continue to bolster our offerings and drive increased value from our customer base.

And with that, I will turn the call back over to Don.

Don?

Thank you very much, Brandon.

In summary, throughout 2007 we executed on our growth strategy by enhancing our technology, ensuring outstanding customer service, driving more revenue streams, increasing the number of sales teams and workshops to leverage our infrastructure and actively developing additional marketing partnerships and other initiatives to realize more value from our core StoresOnline Pro customer base.

I want to reiterate we are proud of the incredible results we've reported for 2007.

Revenue of $151.6 million, 66% growth in net dollar volume contracts written over prior year to $165.3 million, and net income of $24 million.

Our success enabled us to increase shareholder value by initiating and then increasing the cash dividend, as well as initiating and then increasing a stock repurchase program to $70 million.

Looking to 2008, we are energized and we will continue to enhance our technology, refine our business, focus on growth and returning value to shareholders.

As Brandon mentioned, our target market continues to grow.

From what we have been experiencing in the marketplace, we believe this trend will continue.

And we are poised to capture the growth with our best of breed software and outstanding customer service.

We are confident we are taking all the right steps to continue to grow our business.

It is part of our culture to work hard to refine all aspects of our business to remain the leader in serving this burgeoning e-commerce market.

As I said, contingent upon marketing our products in California and North Carolina, we expect fiscal 2008 revenue and net dollar volume of contracts written to grow from 15% to 20% over fiscal 2007 results of $151.6 million and $165.3 million respectively.

And with that, that concludes the prepared remarks.

Operator, I would like to open up the call to Q&A.

(OPERATOR INSTRUCTIONS) [Jeff Bash].

I notice, Rob, on the receivables that in view of the percent financed this quarter being 45%, I would have expected the amount to have grown at least in line with trend.

However, it grew far lower than trend.

I also notice that the percentage for doubtful allowances also went down this quarter, so apparently something went on there.

Would you please let me know what it is?

Sure.

Let me answer the first question first.

As far as -- so the rate of the increase wasn't as large as you were expecting.

Is that the first question?

Correct.

The rate of the increase wasn't as large just because our volume on sales, our net dollar volume of contracts written, was down compared to the last quarter.

However, it still increased due to the strong results of the quarter.

But it didn't grow as rapidly just due to that.

The second question was why did the allowance as a percentage of gross receivables come down.

And it came down, I believe last quarter; as of the end of March, it was at about 35%, and then it came down to about 31%.

If that's correct.

Correct.

That's correct.

And the reason being is that we've been going through an Oracle implementation throughout the year, and we haven't -- because of the Oracle implementation, as of March 31st, we were unable to go ahead and write-off receivables that have been fully reserved for as of March 31, due to the system change we're going through.

During May and June, that module was completed, and we were able to open up the system to be able to write-off those fully reserved accounts against the allowance.

And so we did it during that quarter, so March was artificially high.

We would have expected it to be coming down from December.

But because of the system implementation, we weren't able to write-off any of these fully reserved for accounts until June.

And then we finally -- we completed that in June, and that's the reason why it went down as a percentage from March to June.

Now, further, your reserve factors are dynamic.

For example, if someone starts paying late and he wasn't paying late before, your reserve factor would naturally increase.

And I am curious, do you see any trends related to the subprime market which affects mortgage holders and stuff like that in your data?

Or -- ?

That's a good question.

Obviously, there is a big concern these days with credit risk.

And we've noticed that we've been monitoring our statistics very closely, and as you had mentioned, and as I discussed on the phone before, we evaluate the allowance for doubtful accounts based upon three criteria.

FICO score of the customer, number two, the delinquency of the customer, and number three, how many payments the customer has made.

And obviously, that's going to fluctuate every month.

But what we've seen is that the collection statistics have remained relatively consistent all the way through July and through the first part of August.

All of our collection statistics have remained pretty consistent, so we haven't seen a deterioration in our receivables at this time.

Do the FICO scores also change dynamically?

Or you only capture that at issue of the contract?

Primarily at the time of issue.

But we will occasionally re-pull -- our finance companies do occasionally pull a FICO score if they see a delinquency, if people start to age.

Okay.

Now, what was the average attendance at workshops in the last quarter?

The average attendance at the workshops this quarter was -- I apologize; that number wasn't given earlier, was it?

No, it wasn't.

93.

Now, the reduction from the 31% last quarter on the buy rate to 28% was somewhat disappointing since I thought that the reason for the 31% was, let's say, structural or process improvements.

Do you really feel that this is entirely due to the reduction in the number of international workshops where the buy rate is higher?

Or has there been some slippage back towards the 25% rate, or just a statistical fluctuation?

Do you have any additional color on that?

Well, this is Brandon speaking.

Historically, I think we're up over the trends of the past, but -- .

Correct.

(inaudible)

But we have found, Jeff, that when we go to the UK and Australia in particular, and we were -- we had a lot of revenue in that March quarter from those two markets, we close at a much higher rate, and we have higher sales, or higher cash sales.

And so that was a huge driver in the increase for us in that March quarter.

We're still working to improve on our presentations and our policies and procedures that we think can drive higher sales rates.

So we are -- I maintain my optimism there that we can get those sales rates up in -- domestically, as well.

Some of us have noticed hiring ads suggesting an interest in possibly doubling the size of your development team.

Can you share any specific purpose for this planned hiring, assuming the numbers are accurate?

And I am not sure, Jeff, exactly what ad you're seeing.

But we have been recruiting quite heavily in our IT and engineering departments to really stay up with the demand of our current product enhancements, as well as new products that we are working on and trying to develop and bring to the market.

Okay.

And finally for Don, have you considered retaining professional advice to help with developing strategies to enhance shareholder value beyond the steps you have already taken?

Yes, we have.

We have been doing that actually for the last several years.

And you will see some of the things that we've come up with at the dividend, the stock repurchase program.

We continue to evaluate ways to maximize shareholder value.

Thank you.

And gentlemen, that is all the time we have for today for questions.

Please proceed with your presentation or any closing remarks.

Thank you very much, everyone, for joining us today.

I am committed to the Company.

Everyone in this management team is completely committed to the growth and continued success to bring and maximize shareholder value.

We're very excited about fiscal 2008, and expect both revenue and net dollar volume of contracts written to grow 15% to 20% over 2007 results, with the caveat, of course, of our marketing in California and North Carolina.

As always, we are focused on driving growth and delivering shareholder value.

We look forward to updating you on our first quarter 2008 conference call in November.

Thank you.

Ladies and gentlemen, that concludes your conference call for today.

We thank you for your participation, and ask that you please disconnect your line.