Crexendo Inc (CXDO) 2017 Q4 法說會逐字稿

Good day, and welcome to the Crexendo Fourth Quarter 2017 Earnings Call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Chief Executive Officer, Steve Mihaylo.

Please go ahead, sir.

Thank you, Renée, and good afternoon, everyone.

I'm Steve Mihaylo, Chairman and CEO of Crexendo.

I want to welcome all of you to the Crexendo Fourth Quarter and Year-End 2017 Conference Call.

With me today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; and Jeff Korn, our General Counsel.

I'm going to ask Jeff to read the safe harbor statement.

After that, I will give some brief general comments relative to the quarter and the year.

Ron will then provide more granularity to the numbers.

Doug will provide a business and sales update.

And then we'll open the question -- the call up for questions.

Jeff, would you please provide the safe harbor statement?

Thank you, Steve.

I want to take this opportunity to remind listeners that this call will contain forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for such forward-looking statements.

All statements made in this conference call, other than statements of historical fact, are forward-looking statements.

Forward-looking statements include, but are not limited to, words like believe, expect, anticipate, estimate, will and other similar statements of expectation identifying forward-looking statements.

Investors should be aware that any forward-looking statements are based on assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed here today.

These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission, including the Form 10-K for the fiscal year ended December 31, 2017.

Crexendo does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

I'd now like to turn the call back to Steve.

Steve?

Thank you, Jeff.

I'm very proud of our team, and I believe we have delivered on what we discussed and what was expected.

The very positive results both for the year and particularly the fourth quarter just mean that we are on the right track and poised for future growth and positive results.

The consolidated revenue in the fourth quarter 2017 improved 22% over the consolidated revenue of the fourth quarter in 2016.

This is strong impressive growth and is a testament to the work we have been doing to continue to improve the business, improve our sales and increase shareholder value.

We expect to continue the growth and improvements in our business.

Our most important segment, the Cloud Telecommunications UCaaS service revenue, has a highly impressive increase of 27% for the year ended December 31, 2017, compared to the year ended December 31, 2016.

I'm convinced this also shows we are clearly on the right track.

Even with the substantial increase in revenue, we still managed to keep costs in line.

I believe we did a remarkable job of containing costs with only a very small increase in expenditures in Q4 2017 compared to Q4 2016.

This ability to manage costs is due to the hard work of our team, who watch every expense.

While we have and will make the necessary investments in our business and will run a highly effective and efficient business, we work every day to get the best value for every expense and investment we incur.

Doug and I always impress to our team that we must have a commitment to increase our performance and to drive improvements to the business.

The type of commitment and team effort is the reason we have achieved the results of being breakeven on a GAAP basis per diluted common share in 2004 (sic) [2017] compared to a $0.04 loss in Q4 2016.

This was an important step and it bodes very well for our being GAAP profitable in 2018.

The results were even more dramatic on a GAAP to non-GAAP basis with a profit of $0.01 per diluted common share in Q4 2017 compared to a $0.02 loss in Q4 2016.

Again, this is only one step in our continued drive to react -- to reach profitability and to increase shareholder value.

Our achieving GAAP breakeven and non-GAAP profitability on the timeline we were expecting is very promising.

It's a remarkable achievement that is essentially a Cloud Telecommunications UCaaS startup that we reached this milestone as quickly.

Now we need to build on that and continue to increase our sales and profitability.

I'm very proud of our people.

We have developed the best products and service in the industry.

We believe we can win the business of any customer who has a need of between 10 and 10,000 telephones.

When the customer compares our solution to that of our competitors, we believe they will pick the award-winning Crexendo Ride The Cloud solution.

We continue to make improvements to our sales process and our procedures.

We continue to work diligently on improving our partner channel, and that resulted in some significant new partners being added to our team during the quarter.

We expect to continue to add significant partners to help with our growth.

This dedication is the reason I believe we were able to enter into a partnership with U.S. Cellular.

I have high hopes our strategic partnership will impact future results positively.

I also believe we will continue to build our new partnership, which should also be positive for the company.

I continue to believe very strongly in our company.

I'm convinced that we will continue to grow the business organically.

We are regularly reviewing potential accretive opportunities and believe if the right opportunities come along, they will be a way to further accelerate our growth.

With that, I'll turn the call over to Ron.

Ron?

Thanks, Steve.

Steve mentioned our consolidated revenue for the fourth quarter of 2017 increased 22% to $2.9 million compared to $2.3 million for the fourth quarter of the prior year.

Approximately 92% of the revenue for the quarter was contributed by our Cloud Telecommunications segment, which contributed $2.6 million for the quarter, an increase of 28% compared to $2 million contributed in the fourth quarter of the prior year.

Our service revenue for the fourth quarter of 2017 increased 22% to $2.5 million compared to $2 million reported for the fourth quarter of the prior year.

Product revenue for the fourth quarter 2017 increased 24% to $380,000 compared to $307,000 for the fourth quarter of the prior year.

Consolidated operating expenses for the fourth quarter of 2017 increased slightly by $27,000 to $2.87 million compared to $2.85 million toward the fourth quarter of the prior year.

On a GAAP basis, the company reported a net loss of only $7,000 or breakeven of diluted common share compared to a net loss of $525,000 or $0.04 loss per diluted common share for the fourth quarter of the prior year.

Our non-GAAP net income for the quarter was $111,000 or $0.01 per diluted common share compared to a non-GAAP net loss of $256,000 or $0.02 loss per diluted common share for the same period of the prior year.

EBITDA for the fourth quarter was $8,000 compared to negative $473,000 for the same period of the prior year.

Adjusted EBITDA for the quarter was $100,000 compared to a negative $267,000 for the same period of the prior year.

Now let's look at the full year.

And while we're pleased with the consolidated revenue for the year of $10.4 million as compared to $9.1 million reported for the prior year, that's an increase of 14%, we continue to see tremendous growth in our telecommunications segment.

Cloud Telecom segment contributed 90% or $9.3 million of the consolidated revenue for the year.

That's an increase of 20% compared to $7.8 million contributed in the prior year.

Our service revenue increased 18% to $9 million compared to $7.6 million for the prior year.

Our product revenue decreased slightly 9% to $1.3 million compared to $1.5 million for the prior year.

Product revenue can fluctuate significantly from one period to the next.

Our product revenue is deferred until installations are complete and the services commence.

While our average customers are installed within weeks of completing the sales cycle, large enterprise and multi-location customers seem to take a few extra months to get all the locations installed.

We believe our growth will initially be seen through our backlog.

The Telecommunications segment backlog, which is anticipated to be recognized over the next 36 to 60 months, increased 25% to $19.9 million at December 31, 2017.

That's compared to $15.9 million reported at the end of the prior year.

Our entire management team is laser-focused on scrutinizing every expense.

We reduced our operating expenses for the year by $700,000 or 6% to $11.2 million compared to $11.9 million reported for the prior year.

These results are even more impressive when we consider the 14% increase in revenue for the same period.

On a GAAP basis, for the year, the company reported a net loss of $1 million or $0.07 loss per diluted common share.

That's compared to a net loss of $2.8 million or $0.21 loss per diluted common share for the same period of the prior year.

Our non-GAAP net loss for the year was $112,000 or $0.01 loss per diluted common share.

That's compared to a non-GAAP net loss of $1.7 million or $0.12 loss per diluted common share for the same period of the prior year.

EBITDA for the year was negative $719,000 compared to negative $2.6 million for the prior year.

Adjusted EBITDA for the year was negative $108,000 compared to a negative $1.7 million for the prior year.

At year-end, our cash and cash equivalents, excluding restricted cash at December 31, 2017 was $1.3 million.

And that's compared to $619,000 at December 31, 2016 report.

Operating activities provided $294,000 increase in cash and cash equivalents.

Investing activities provided $252,000 increase in cash and cash equivalents, primarily from the sale of a certificate of deposit.

And our financing activities provided $117,000 increase in cash and cash equivalents.

With that, I'll turn it over to Doug Gaylor, our President and COO, for additional information in business and sales activity.

Thanks, Ron.

I am pleased to report that we had a very strong fourth quarter and a finish to the 2017 year.

Our sales bookings in the quarter and year were up significantly, and we had a 28% increase in sales bookings year-over-year, with our fourth quarter sales registering as the strongest quarter of the year.

The strong sales bookings resulted in the revenue increases that Ron highlighted and helped us post positive cash flow for the second consecutive quarter as well as doubling our non-GAAP income from third quarter, a reduction of our GAAP loss down to nearly 0.

On top of these solid accomplishments for the quarter, we were also thrilled to announce that we have teamed up with U.S. Cellular to provide our Crexendo-hosted communications and UCaaS solutions for the U.S. Cellular business and government customers and prospects.

U.S. Cellular is the fifth largest full-service wireless carrier in the United States, and they have an extensive customer base that we'll be introducing to Crexendo's solutions.

Since onboarding the U.S. Cellular sales teams in February, we have seen a tremendous amount of excitement from their team to have our offering in their portfolio and have already started building a great pipeline of opportunities, and we are already seeing solid opportunities being generated from the relationship.

Our entire team has been diligently focused on increasing sales, managing expenses and improving our bottom line, and this quarter was a true testament to their efforts.

In addition to adding the U.S. Cellular to our partner channel, we also had our most successful quarter of the year in recruiting and adding new partners to our program.

Many of these new partners were able to contribute sales results during the quarter, which is a strong testament to the fact that we are recruiting stronger partners and are focused on a quicker onboarding process to help them get out of the gate strong with the Crexendo offer.

Our concentrated effort to focus on larger more, technical partners, along with our training initiatives for our partners, resulted in our partner channel having their strongest bookings quarter to date.

Our partners were able to contribute multiple sales with total contract value in the 6 figures during the quarter, including our largest sale of the year, which was a large 120-location sale for a regional retail organization.

Our direct sales efforts were also strong for the quarter, highlighted by 5 significant multisite sales opportunities that contributed to the strongest direct sales performance for the year.

The direct team is focused on larger major accounts and multi-location opportunities continues to have successful results.

Our strong sales bookings for both channels helped our contracted backlog increase nicely as we experienced a 9% increase for the quarter and a 25% increase year-over-year.

On the operations and engineering side of the house, our focus on cost management helped reduce our consolidated operating expenses by 6% for the year compared to 2016 with 14% consolidated revenue growth during that same period.

And our award-winning in-house engineering department continues to impress, delivering new enhanced capabilities during the quarter, including text and chat functionality, enhanced collaboration capabilities, enhanced ACD features and a new low-end Crexendo desktop offering.

We're excited to be presenting at 2 upcoming investor conferences in March.

The first conference is the ROTH investor conference being held in Orange County, California next week on March 12 and 13.

And the second conference is the Sidoti & Company investor conference being held in New York on March 29.

Both conferences will provide us the opportunity to highlight Crexendo's growing success to the investor community.

We post our presentations on a link on our website at www.Crexendo.com/investor, and we will update that link later this week with the presentation that we will be presenting at both conferences.

Finishing 2017 with a strong quarter in sales, revenue and cost management along with a strong growth in our partner channel has positioned as well to continue building on that progress as we begin 2018.

I'm extremely excited about the new partnerships with organizations like U.S. Cellular and others, and the momentum that we are building will allow us to continue to execute our business plan for growth and profitability.

I'm confident that Crexendo will be able to execute on our plans in the year ahead and that we are better positioned now more than ever to deliver.

I will now turn it back over to Steve for any additional comments.

I think you said it all, Doug, and I appreciate that, you and Ron.

Renée, we'll now open it up to questions from the audience.

(Operator Instructions) Our first question comes from Mike Crawford with B. Riley Financial.

Would we be wrong to project $15,000, $20,000 a month in monthly recurring revenue growth?

Or is that something that you would expect to accelerate now that you have the U.S. Cellular and other partners out there working for you?

Well, are you talking about sales growth or earnings?

Service revenue.

Recurring revenue?

Yes.

I think that's totally achievable.

Because that's the way you've been growing...

YI think it's too early -- yes, it's too early in the U.S. Cellular deal.

We just kicked that off in the second part of February, so we're just now really starting in that relationship.

So it's too early to project what the volume of deals they will be taking.

Yes, but I think Mike was asking about total revenue.

Is that correct?

No, monthly recurring revenue.

Oh.

Well, no, but I mean, the increase in monthly recurring revenue month-over-month.

Right.

So...

U.S. Cellular would be part of that.

And then secondly...

Are you asking if it was all U.S. Cellular?

He's asking, are we going to still continue to grow at this rate or at a higher rate?

I think that's what he's asking.

Well, it will start to accelerate.

But U.S. Cellular, as Ron pointed out, is brand new and we're just getting them up to speed.

But eventually, probably mid-second quarter or beginning in the third quarter, you're correct.

That will start to accelerate.

Okay.

Yes, that was my question.

So then, the other question is, you said that there were kind of growth in both of your channels.

So could you maybe clarify a bit further on what percent of new sales you're generating from any internal sales organization both from new and existing customers as well as through the channel?

I'm going to let Doug handle that one since those folks report directly to him.

Yes, our direct sales, obviously, is a smaller percentage than our partner sales, our partners sales is the majority of our sales by far and the majority of our sales are turning the revenues.

So as we look at our direct sales, our direct sales is a much smaller group and they really concentrate on multi-location and larger and major and national type accounts.

And then our partner channel obviously is free to work anything that they can get their hands on.

So if we look at our partner channel, our partner channel is the lion's share of our sales bookings for the quarter, and they continue to grow and had their best quarter in Q4.

And I anticipate that growing tremendously in 2018, especially with the addition of U.S. Cellular.

Our next question comes from Kevin Dede with H.C. Wainwright and Co.

Steve, Doug, Ron, nice job.

Really nice job.

It's great to see positive EBITDA.

Thank you.

Well, there's a whole bunch of other folks that work very hard to accomplish these results.

And we appreciate your comment, Kevin.

Well, please pass it on to all those that contribute.

Just a couple of quick questions.

I think probably the one that's most interesting is the pipeline on the M&A side.

And I'm wondering what you're thinking, I mean, in light of U.S. Cellular and whether or not you think that may have sort of changed or postponed your tactical execution on trying to grow through acquisition.

Well, acquisitions is -- it's a multifaceted situation.

We look at a lot of deals, and because of our relative size and the relative size of the companies we look at, you have a very unsophisticated seller.

And even though we're quite small, I think we have a much higher degree of sophistication than the companies that we target.

We currently have a few suspects or prospects, whatever you want to call them.

But at our relative size, we're very, very particular.

Obviously, we're doing a good job of growing the company organically, but we understand that we'll grow a lot faster if we can do a few acquisitions.

And that's our focus, but our main focus is on organic growth.

And I think our people, especially with the U.S. Cellular and some of the other deals we've gotten recently, are starting to click on at least 7 or 8 of the 8 cylinders.

But we're very particular, Kevin, and we're very disciplined and we intend to stay that way.

But we do have a few that are in the queue and a few that are looking more promising than anything we've had in the past.

Okay.

Is that something that you think happens this year?

Or is it just going to be a function of your negotiation?

Well, I sure hope it happens this year, but there's a lot of moving parts.

There just are.

I mean, stock price, analyst coverage, market makers, the exchange we're on, how fast we grow organically, all of those things.

How well we manage expenses.

You're going to notice one thing that occurred in the fourth quarter.

We had a couple of extraordinary expenses, which go away or get reversed in the first quarter.

So our margins look a little down compared to the previous sequential results.

But that's going to improve, and we'll probably surpass the 66% gross margins of the third quarter.

So we should see maybe 66.5% or even 67% in the first quarter.

And I know my Chief Legal Officer is probably -- has bitten his fingernails off by now.

To that point, Ron, you mentioned backlog expanding.

And you also offered some criteria on how you define it, but you went pretty quick and I missed it.

You said you should expect to realize it in 30 to 60 days or 60 to 90?

I kind of missed that.

Majority of our contracts are over 36- to 60-month contracts, so that's what makes up our backlog as well as uninstalled jobs from recent sales.

And also what Ron said is the smaller deals go in within a month of the time they're closed.

The bigger deals can sometimes take and the multi-location deals can take up to 2 or 3 months to get installed.

And I think that was your question.

Yes, yes, yes.

That's definitely part of it.

I just -- to Ron's point, backlog was up nicely, so congratulations on that.

I think the other -- yes, the other sort of elephant in the room is the U.S. Cellular opportunity.

Do you guys have an exclusive with them?

How would you characterize the way that they'll market you?

How up to speed are they on the advantages that you offer, their enterprise customers?

What sort of customer segment do you think they're targeting?

As much color as you can offer on that would be helpful, I think.

Yes, absolutely.

So exciting, exciting partnership with U.S. Cellular.

So U.S. Cellular went out to a very detailed RFP process to solicit potential partners, and through their total evaluation process, picked us as their sole vendor to move forward with for their hosted telecom and UcaaS solutions.

So they announced that and awarded that to us in December.

We put out a press release in December.

December is their busiest time of the year, so they didn't want to kick it off with their sales teams until after the first of the year.

So we actually did our kickoffs with their sales teams in early February, and we're doing one more for their East Coast sales representatives and sales teams here this week.

So that process is educating and getting their sales teams excited about having this into their portfolio.

So their sales representatives handle primarily business accounts only, and so the sales team and the marketing focus that we have right now is for their complete direct business sales team to be out there looking for opportunities within their customer base along with potential prospects and future customers for them.

We have been received extremely, extremely well because again, they're in these businesses on a daily basis.

Maybe not on a daily basis, but they're in these businesses all the time, and so it's just another opportunity for them to have a revenue stream by selling a service that is complementary to what they're already selling.

So the excitement is extremely high.

We've gotten a tremendous amount of leads already in the pipeline.

We've already made sales off of leads that had been generated just in the short time since we've done our training.

So the excitement level on both ends is extremely high.

They are marketing and soliciting the product to their customer base, and so they're going to be ramping that up now that we've kicked off the product with their team.

So we couldn't be more excited about the potential opportunities that exist.

And this is just going through their direct channel right now.

So we're excited that if we have great success here, that we can roll this out even further to their brick-and-mortar stores and agent channels potentially, so...

And one thing you have to remember, Kevin, is we intend to support this account with sort of the white glove treatment, but it takes time.

Even if we got a rush of orders today, as Ron pointed out, it would take a month to install those orders.

So the whole thing is growing, and I don't expect to see an awful lot of impact in the first quarter.

We may see some impact in the second quarter, and then it will start to ramp in the third and fourth and into '19 and so on.

Okay.

How would you characterize the size of the customer base that they're going to target with your services?

Say, versus -- I know you mentioned one large deal in today's call, but just, say, with your, I guess, your core group of customers.

Would you say they are a comparable size?

You think U.S. Cellular is going after a sort of larger, bigger opportunity?

Yes, I think we have a very nice overlay with our demographics and their demographics.

Our average size customer today is about 21 stations.

So as we look at growing that, they definitely fit very nicely in there.

Their core concentration is business customers, so any customers from obviously smaller end, with 3, 4, 5 stations, all the way up to large enterprise opportunities.

But their core competency is in the markets that are not the major metropolitan areas, so they're going to have a lot of customers that are right in our sweet spot.

So we anticipate them being very complementary for us because their customer demographic is very, very similar and very comparable to our customer demographic.

And I guess, I'm kind of curious, too, Doug.

Do you think that -- I know Steve mentioned that he's not expecting an immediate impact, but are you expecting to chase down more similar type arrangements with some pretty high-profile companies?

Or how do you think is the best way to think about your partnering efforts going forward?

Yes, that's obviously the game plan.

As we look at our partner channel today, U.S. Cellular is now our largest potential partner size-wise, but we've made some other nice inroads with other nice-sized organizations that have joined on to be partners over the course of the last 6 months, not nearly as large in size as U.S. Cellular, but very nice regional-type-sized organization.

But the approach to go after U.S. Cellular is not stopping there.

So we've got a lot of targets that we have currently identified, and we have some conversations and some good evaluations going on currently.

So I'm excited that hopefully at some point this year, we'll have a similar type of announcement, if not multiple announcements of similar type arrangements.

And last question from me, Doug, since I have you, would -- in a U.S. Cellular type implementation, would that customer expect you to bring your equipment in?

Or would you work, I guess, on software support of a network that was already up and running?

Obviously, with our solution, our solution is a completely hosted solution, so we're going in there and providing our equipment on their current Internet platform.

So for one of their customers, we're going to provide our services over their current Internet connectivity.

We also have done testing and have the capability to put our solution over their cellular network as well, so for customers that may not be in an area where they can get readily available service in the cable company or their local exchange company.

We've got our product and solution working on LTE and 4G for some of their remote areas as well.

So it's going to be very complementary.

I wouldn't anticipate that being the norm, where we will be putting our services over their cellular network.

But in some cases, that might be the case.

But it's also something that's a great solution for disaster recovery because they can offer the cellular network as a disaster recovery network in case their main Internet connectivity goes down so that their telephone service would never skip a beat.

So again, very complementary and a good opportunity for us to work within their network.

But the majority of sales and the majority of opportunities will be riding on the customer's existing Internet connectivity.

But I think you also were maybe alluding to what's on the desktop, Kevin?

Correct, yes.

We also support Yealink, Cisco, Polycom.

And I think we just recently added Grandstream or we will?

We will.

But one of the nice parts about a lot of the opportunities that we're currently working, one of the first opportunities we sold actually has no desk phones, and it's just complete software and mobile applications that Crexendo provides for the customer that doesn't have a need for a physical desktop.

So we're going to be installing our apps on their cellular devices so that they'll have a complete mobile application running our solution in tandem with their typical cellular offering.

(Operator Instructions) Our next question comes from private investor, [Ken Kamen].

I'm sorry, who is he with?

Ken Kamen.

Oh, Ken.

Yes.

So I have to say, as a longtime shareholder, and I'm sitting in traffic since the call has started and I'm leaving Philadelphia.

Everyone's trying to beat this northeaster.

And I've only moved 3 miles since the call started.

But this is a pleasant car ride -- but it's a pleasant car ride because you reported breakeven and you're threatening to be profitable.

It's a fabulous car ride.

So congratulations to a lot of detail that you guys have put in to making that happen.

My question, I've got a couple.

One, in the prior caller, I asked a ton of my questions about the U.S. Cellular deal.

But does it require any investment on your part?

And as an adjunct to that, do you see the company needing any more cash infusion from where we are now going forward?

No, it's purely a partnership arrangement with them, so it's not a capital-intensive arrangement.

So they're finding the opportunities; we're working the opportunities.

So from a cash investment, we'll help with some marketing efforts, and we've done some meet-and-greets by traveling to their kickoff meetings for their different regions.

But it won't be a capital-intensive endeavor at all.

And they've got a nice marketing program to get the message out to their customer base as well.

So we're going to be working in tandem with them.

So no, I don't anticipate it being a large capital drain at all for us to have the partnership be successful.

But One of the things that you have to be aware of, we're continually improving our platform.

90% to 95% of it is software based, and our engineers are improving it as we speak.

About 5% of it is hardware-based.

And that 5%, we're making some incremental investments in that as we go along.

But as Doug said, it's not going to be anything that's outside the norm.

The [root] of my question is whether you needed to do anything internally to be able to ramp up for that business.

Do you see the company needing more additional cash infusions over the next 12, 12 months?

There are some things that we could use cash infusion for, but they're on the back burner right now.

As we get a little bit bigger, the answer is yes.

I would expect maybe in the next 12 to 18 months, we're going to need a little bit more cash.

But we'll generate in cash flow next year, what, $1.5 million to $2 million.

While your attorney [indiscernible]

We'll go to the next.

Well, he's probably going nuts and I think he hung himself.

But no, seriously, on a non-GAAP or an EBITDA basis, we're generating significant cash over and above what we have budgeted for next year.

That's great.

And just one last -- I was going to say, is there anything particular about the fourth quarter that helped you to be profitable that won't be there in the first?

Or are you kind of expecting profitability now every quarter going forward?

Well, we've been telling people that we would achieve non-GAAP income this quarter, the fourth quarter, and probably GAAP income in the first quarter.

And we expect that to continue based on our current assumptions.

But we have no control over the weather, the economy and a whole bunch of other things.

Interest rates, you name it, waters, plagues.

Our next question comes from private investor, [Kevin Walsh].

Steve, I've got, I guess, a follow-up question from our last caller, just to tie up the loose end.

In Q3, the long commitment you have for the company was extended to May of 2018.

And I'm wondering if that's been rolled to May of 2019 or if it's going to be.

No, actually, in 2018, it expires.

Our auditors have taken all of the precautionary language out of our 10-K.

They feel that the company has made significant progress and adequate progress.

And they're quite pleased with our progress.

So the answer is no.

It's not necessary.

Wow, that is great.

Thanks, Steve, and thanks again for all you do for us and for keeping us afloat.

And I hope all the naysayers, who [from our bulletin board], sold a year ago are not here to enjoy the turnaround.

Well, you bet, Kevin.

And I'm going to comment on that.

Everyone in this room is financially invested in our company.

And our employees, for the most part, have stock options.

The senior management has stock options.

And as a result of that, we have a group that's highly motivated and highly committed.

And I see nothing to change that dynamic going forward.

And at this time, we have no further questions.

Mr. Mihaylo, I'll turn the conference back to you.

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