Digimarc Corp (DMRC) 2008 Q4 法說會逐字稿

Good morning. My name is Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Digimarc fourth quarter 2008 performance and year-end operating results conference call. All lines have been placed on listen-only mode to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (OPERATOR INSTRUCTIONS.) Thank you. Mr. Davis, you may begin your conference.

Thank you. Welcome, and good morning. Mike McConnell, our CFO, is with me. We issued a press release earlier today announcing our 2008 results. The objectives of this call are to summarize and comment on these results, review significant business developments and market conditions, and provide an update on strategy and operations. This webcast will be archived in the Investor Relations section of our website.

Before we proceed, please note that during the course of this call we will be making forward-looking statements regarding management's opinions and expectations about Digimarc's business, its markets, and financial performance. These statements are subject to risks, assumptions, uncertainties, and changes in circumstances. Actual results may vary materially from those expressed or implied by such statements. For more detailed information about risk factors that may cause actual results to differ from expectations, please see the Company's filings with the SEC, including our Form 10-K to be filed within the next few days and our earnings release posted on our website.

During the course of this call, we will also refer to certain non-GAAP financial measures as defined by the SEC in Regulation G. Definitions of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are included in the earnings release for the quarter. The earnings release can be found on the home page of our website.

Any assumptions we offer represent a point in time estimate. Given the current economic climate, we believe it is prudent to embrace a very cautious posture toward assumptions in general. We are offering assumptions in this call for the limited purpose of giving you a sense of our planning assumptions and to provide our views to analysts who may want to model possible future performance. It's obviously very challenging for anyone to try to forecast the general economy and derivatively its impact on individual businesses like ours. We expressly disclaim any obligation to revise or update any assumptions or other forward-looking statements to reflect events or circumstances that may arise after the date of this call.

Mike will begin this update call by commenting on our financial results. I will then discuss our financial and product market outlooks and strategy and operating plans for 2009. Mike?

Thanks, Bruce, and good morning, everyone. I'll begin by reminding everyone of the basis of accounting used in presenting our historical financial results. The digital watermarking business that forms the basis of the current new Digimarc was spun out from old Digimarc this past summer, just prior to the sale of old Digimarc to L-1 Identity Solutions.

As explained in our Form 10 registration statement and to be repeated in our current and future 10-K and 10-Q filings for the next couple of years, the basis of accounting used for the digital watermarking business prior to the spinoff and through August 1, 2008 will be referred to as a carve-out of assets, liabilities, and results of operations from the old Digimarc business that included our ID Systems operations that were sold to L-1.

Old Digimarc enjoyed significant financial leverage from a shared services business model in its costs of delivery, engineering, and SG&A operating functions. We previously noted that the financial information in those carve-out financials for the period up through August 1, 2008 don't include all the expenses that would've been incurred if the digital watermarking business had been a separate publicly reporting entity. We further indicated that initial operating costs in new Digimarc on a stand-alone basis would be higher than those allocated to the digital watermarking business of old Digimarc as we transition to a stand-alone entity.

Therefore, the 2008 financial results that we'll be discussing today reflect a hybrid financial model that combines the carve-out financial results of our watermarking business through August 1 and the actual financial results of new Digimarc from August 2 to the end of the year, as well as some non-recurring transition expenses. And as a result, except for revenue comparisons, it's difficult to meaningfully compare the new and old financial results due to the different basis of accounting used and the expenses associated with the spin-out. With this in mind, in reviewing our 2008 results, the financial highlights include revenues growing nearly 52% year over year benefiting significantly from new service and license revenues from Nielsen.

Gross margin was steady at 69%. Operating expenses increased from $10.3 million to $13.3 million reflecting a number of variables, including increased costs of operating as a stand-alone entity subject to August 1st and the accrual of bonuses for 2008 where there had been none in 2007.

Our cash and investment balance at December 31 was approximately $46 million and our revenue backlog at the end of the year was just about $60 million. In reviewing our fourth quarter results, we note that revenues grew nearly 37% year over year benefiting significantly from the new Nielsen revenues. And gross margin was 69%, a 3-point increase over 2007 reflecting a higher proportion of license revenues.

And finally, our operating expenses grew from $2.4 million to $3.8 million reflecting the change in basis of accounting and bonus accruals that I discussed earlier.

For further discussion of our results, our business and financial models, and the risk and prospects for our business, I'll refer you to the Form 10-K that we expect to file here in the next couple of days.

Looking forward, we believe that any financial assumptions offered in the context of the prevailing general economic conditions is particularly challenging and should be viewed cautiously. With this in mind, we'll share some observations and our current planning assumptions regarding potential 2009 financial performance.

Thus far, financial performance in Q1 is looking pretty similar to Q4 2008 at the revenue line and a little less favorable at the net results line due to an anticipated revenue mix change and lower interest income from lower rates of return on our cash investments. We expect financial performance in the ensuing quarters to improve due to growth in revenues and later in the year a higher proportion of licensing in the revenue mix.

Our operating expenses for the year expected to be less than $15 million, including a portion of the $2.3 million of stock-based compensation that we allocate between operating expenses and cost of revenues. At these levels and compensation of revenues and expenses, we would expect that gross margin percent for the year to be in the mid 60s. GAAP earnings might show a small loss. Adjusted EBITDA, or earnings before interest, taxes, depreciation, amortization, and stock compensation, would be in the neighborhood of $1.5 million. Cash flow -- I'm sorry, free cash flow, defined as operating cash flow less capital expenditures, would be positive after taking into account more than $1.3 million of capital expenditures, the majority of which expected to be related to patent costs. Both adjusted EBITDA and free cash flow would be better than GAAP earnings due primarily to more than $2.8 million of non-cash charges for stock compensation and depreciation.

Our financial projections and operating plans represent expected values based on our assessment of the most likely unfolding events over the course of 2009. We could experience significant unquantifiable volatility in light of the state of the economy. The principal risks to our plans and projections revolve around the global recession and its possible effects on adoption of our technology and the stability of relationships and well-being of our commercial business customers.

The other major factor is the pace and ways in which the massive restructuring of the media and entertainment industry that we're anticipating unfolds. Despite the general economic gloom, we still believe there may be upside to our projections, including the possibilities of less effects of general economic conditions on our business than anticipated, continuing progress in media and entertainment and the adoption of our technology for a broader range of media and entertainment applications, greater than anticipated success of our business partners, and the prospects of entering into new significant business relationships, including several identified potential partners. Regarding this last opportunity, there is some possibility that we may choose to spend above our current budget levels to encourage prospected partners to engage if necessary.

Bruce will now provide an overview of our markets, strategy, and operating plans for 2009 and beyond.

Thanks, Mike. Our Company is in good shape to weather the global recession having an experienced stable management team, significant partnerships with leading central banks and Nielsen, a large high-quality patent portfolio, more than a dozen business partners operating under license to our technology, a strong balance sheet with more than [$6] of cash and no debt, nearly $60 million of business and backlog, and a high-quality, stable, and motivated workforce.

Mindful of the generally high levels of volatility, we developed a conservative business plan for 2009 and we are executing well against it. With all the economic turmoil, we have redoubled our vigilance in monitoring our product markets for risk and opportunities. We continue to see indications in the IT and media industries that are favorable to broadening adoption of our technology, but it is difficult to assess the effects of the recession on these judgments.

I continue to believe that the next step in the natural evolution of computers is for them to learn to better see and hear and understand their surroundings and react to the world around them. I see this as a technological imperative that could be slowed by the recession, but not denied. The benefits to society, industry, and economy of reducing dependence on keyboards and mice as means to take advantage of computing power and facilitating broader adoption of embedding computer technology into the fabric of our lives and simplifying the means to gain technological advances are profound. And we continue to believe that Digimarc's technology can be a key enabler of this sea change.

Regarding the execution of our strategy, the Company's top objectives during 2009, as we outlined in our last call, are to successfully reposition post spin-off Digimarc in product and financial markets; exceed our financial goals; provide excellent quality of service to the central banks and Nielsen service contracts and help other business partners to deal with market challenges and grow their businesses; and to enter into significant new business relationships. We're off to a good start. The spinoff of new Digimarc has gone quite smoothly. Thus far, we continue to operate consistently with our financial goals. We are absolutely dedicated to fostering the success of our business partners, notably the central banks and Nielsen.

With respect to other business partners, we are being diligent and proactive in assisting them to exploit opportunities and deal with the challenges that they face. And as to new relationships, we are doing foundational work for some outreach to new prospective partners. This area of the plan is more complicated than usual due to the extraordinary volatility in the economy. Nonetheless, we intend to engage with several prospective new partners during the year.

In this and future calls, we will spend more time discussing our patent portfolio. Our patents are core to our value proposition and not well understood by investors. By the end of 2008, our portfolio has grown to more than 480 US and foreign patents, with more than 400 patents pending in digital watermarking, media identification and management, and related technologies. Twenty-three patents were issued during Q4, including 13 in the US and 10 in foreign countries.

In the US, we expanded our portfolio with new patents supportive of our pervasive computing vision. These new patents extend our portfolio in emerging applications of hearing and seeing computing devices that use content recognition technology to provide payoffs like web links and services in response to the sampling of audio or image content.

We also expanded coverage of new digital watermarking techniques for video, music, and other music -- and other media types, and broadly added to our digital watermarking portfolios in Europe, Japan, and Korea and received our first patent in India. We filed 30 new applications in the fourth quarter, evidencing our continuing investment in creating IP and broadening our portfolio.

The quality of our patents was recognized during the quarter as we were ranked among the world's most influential patent portfolios according to the Patent Prowess Survey published in the December issue of IEEE Spectrum magazine. Ranked third in the computer software category, Digimarc placed among such esteemed companies as Microsoft, SAP, Symantec, and Oracle. Our score in this survey placed us among the leaders in several other categories including computer systems, computer peripherals and storage, and electronics.

In closing, I believe we have a clear and conservative strategy embodied in a thoughtful, well-articulated operating plan that acknowledges and accommodates to the best of our abilities the uncertainties posed by turmoil in the financial markets and global recession. The macro trends that guide our value creation strategy appear still intact. We will move forward cautiously with substantial assets and a clear direction and sense of purpose.

This concludes our prepared remarks. Thank you very much for your interest and support, and we'll now take questions.

(OPERATOR INSTRUCTIONS.) Our first question comes from the line of Bill Gibson with Nollenberger.

Good morning. Bruce, you talk about extending -- and sounds like an extension on digital watermarking in the hearing and seeing technologies. Does that also, in today's environment, open up the opportunity for an acquisition of maybe complementary technologies? Are you seeing anything out there along those lines, maybe out of the VC community?

There are opportunities, Bill. Our view with respect to the private sector, and we are looking at it carefully and continuously, is that given venture funding cycles that we expect there to be a fair number of reasonably good young companies on a starvation diet around mid-year, and so if we see anything we like at this stage, we probably wouldn't be inclined to act on it for a while because we think prices will improve. But I think in the second half of the year there are going to be opportunities that deserve scrutiny in the private sector for technology acquisitions.

Okay, and just one last question and then I'll get back in the queue. You talked about the foundational research for -- or foundational work for new potential partners. Does that include some of these consortiums of people that are acquiring patents for groups of companies?

The statement in the script doesn't specifically refer to them, but more to business partners akin to what we already have that would foster the development and delivery of products and services. Those guys, as you know, hopefully are aware of us and will gain further insight as they study us more and recognize the value in our very large and timely intellectual property. But when I talk of partners there, I'm really talking about adding more licensees who are operating companies.

Got it. Thank you.

Our next question comes from the line of Adam Fisher with Bernham.

Hey, how are you?

Good.

Good, Adam.

Good morning, Adam.

Just kind of on the revenues, you talked last quarter kind of about a baseline of $17 million, I think, of book revenue going into the year. Is that right?

That's right. Out of our backlog we had -- obviously, the plan includes about 17, I think I said $17.5 million that roll in to 2009.

And then today you talked about kind of revenues growing versus last year quarter over quarter. Is that the right -- or year over year, is that -- did I hear that correctly?

We -- what we clarified today was that revenues for the first quarter would be similar to what they were in the fourth quarter of '08 --

Right.

But we would see increasing revenues in the balance of the year over the first quarter run rate.

Okay. So we should essentially pass our 2008 revenue?

Well, if you would extrapolate the Q4 actual revenues and add to that some increasing numbers for the balance of the year, one could surmise that's possible, yes.

Okay. Can you just give us an update, Bruce, on kind of the Blu-ray -- our positioning in Blu-ray, our positioning in digital cinema, and maybe anything that may have come out of Nielsen since we last spoke?

Sure. First, with respect to Blu-ray, we continue to wait for word on the publication of the final license, so the manufacturers and studios who are participating are still operating under the interim license. Those that are participating are identified, I believe, on the Verance website. For others on the call, that's V-E-R-A-N-C-E dot com. Verance is the solution provider that was chosen for Blu-ray, and they've published logos of a number of companies they say are licensees of theirs, and Verance is a licensee of ours. So our income from that sector would be derivative of the Verance revenues.

With respect to digital cinema, digital watermarking is a required element of all servers for all theaters that are converting to digital. And we have an established licensing program and we have four licensees who are suppliers of the relevant technology to the theatrical build-out, so we're generating income from that. The pace level of the income trends is governed by the capital deployment associated with digital cinema, and obviously, that's probably going to be slower than it might have been. But I frankly don't know personally what the pace of deployment is there, if it's changed at all. It appears to continue to move forward, and as far as I know, it hasn't been substantially ramped back, but I don't know enough of the details of the many players who were involved in that build-out to provide you with a very detailed view on it. So it's going along. Everyone's licensed. The program is well-established. The watermarking is required, so that's a mature, from a licensing perspective, mature set of relationships.

With respect to Nielsen, we continue to work with them on our joint development efforts, and I continue to believe, and believe all the more strongly as I observe the changes in the media industry that are occurring, that we can provide very significant long-term value to Nielsen in the use of our technology and the way in which we're working with them to deploy it.

How have you factored in any Blu-ray revenue for the year?

Modestly, yes. Again, everything about our plan for '09 is pretty cautious here, and I think suitably so, not because of my view about our value or our operations, but more the context in which we're operating. And that's why as we talked about '09 we felt we could give you some sense of what our assumptions are, but there's a great deal of uncertainty in the general marketplace here. And so we watch it every day and we're ready to adjust if we need to, up or down. But as Mike said, thus far, a couple months into the year, we're kind of doing what we thought we would be doing. So, so far, so good.

Good. Thanks a lot.

Yes.

Our next question comes from the line of Andy Hargreaves with Pacific Crest.

Hi. Good morning.

Good morning.

Good morning, Andy.

Just wondering on the kind of partnerships you alluded to going after, can you give us any more detail on terms of -- I don't expect you to give names, but specific industries or the areas within those industries that you think are potentially offering the most fertile opportunities?

Well, as you say, it'd be inappropriate to identify anyone at this point in time, particularly. But in general, as our portfolio continues to grow and mature in terms of applications turning into IP, we see a broadening reach and relevance to that asset. And so there are many companies now around the world who are beginning to engage more fully in content identification and then the use of intrinsic, what we call intrinsic identification, watermarking being, we believe, the primary means of doing that in the future, but also in the core of our IP, as becoming increasingly relevant. And so the partners would be those who are using inherent identification of content to deliver value to their customers. And so it can go across a broad range of industries and we focus mostly at this point in time in the entertainment industry. So these would be suppliers who operate mostly in media and entertainment in '09.

But, as you know, we also have been expanding our government business and this year we're enjoying quite a good performance in the government sector. And actually one of the areas of greatest comfort in our business in '09 because the commercial sector is subject to, we believe, a significantly higher risk from the volatility and recession than the government operation that we support. Our work, as you know, in government is mostly in international and national security areas, and we do not expect those budgets to be reduced.

On the entertainment side, at least, would you expect the deals that you're going after to be more heavily weighted towards licensing then than the existing business?

You know, it's a little hard to tell. We're pretty transparent about our business style here. We don't like to merely tax someone for the IP. We prefer to find a way to work together to help our business partner to create additional value from which then they give us a little share. And so we're always open in every new relationship to talking about ways in which we can collaborate to help the business partner to grow in ways that increase their profits so that we are not merely a taxing authority here, but really a value creator. And obviously the reason that you can get royalties from patents is that the innovation there has created value for the business partner, but we like to go beyond that and talk about ways in which we could work together if they need our help to build more technology.

Okay. And then --

So it could be a services and license arrangement, it could be merely a license arrangement. These are all -- this is prospecting, so it's all quite greenfield at this stage.

And then, Mike, just kind of excluding the extra expenses that may be associated with going after particular customers, would you expect the expenses through the year to be relatively linear?

You know, they really are other than first quarter is generally a bit higher than most quarters just because that's when all of our legal and accounting -- the majority of legal and accounting fees related to annual report, 10-K proxy are incurred. So that's always a bit higher in that quarter and then they're relatively flat thereafter.

Okay. Thank you.

Our next question comes from the line of Steven Becker with Greenway Capital.

Hey. Hey, Bruce. How are you?

Good, thanks.

Can you talk a little bit about what's going on in the music digital rights management space and how you guys could potentially play there?

Yes. Yes, it's a fascinating space. It's one of those that I vaguely allude to in terms of a part of the industry that I think will embrace watermarking ultimately, but I'm not sure how all of this chaos that we find the world in right now will affect the pace of adoption. The music industry has made a significant transition here, actually, the second significant transition. The first was when Napster emerged and they sued everybody. They obviously invested a lot of money, a lot of time, a lot of political clout, and basically failed, in their assessment, not mine. And so then their next reaction was well, okay, then what -- we're going to abandon DRM, and you saw a lot of that in the press. Well, it's almost sort of going through Maxwell's hierarchy here. They now believe that they can't stop people from getting their product and they've come to a realization that if there was some way to understand what was going on and identify specific enjoyment of their product that maybe they could build some value as opposed to preventing people from getting access. And that's where watermarking comes in.

Again, it's a universal intrinsic identifier that can be spotted in all kinds of places and distribution and playback and provide information back to the relevant participants in the value chain. So we think the music industry's getting there, that they are understanding that in order to build a business model they have to know what's going on. They have to then be able to have a good accounting, and if they've enabled both of those things, it's quite easy then to attach marketing services and community and so forth and build value for the consumers who used to be the guys they were trying to prevent from getting access to their music.

So music industry and the music industry association and the leaders of the music industry have been very carefully studying digital watermarking technology for many years. They've been using it in limited ways, largely in their business-to-business distribution of their products and pre-production. And we now have a reason to believe and hope that they will make broader use. But again, in normal times I'd be a little more confident about when that happens, but it could happen pretty soon. On the other hand, it could get deferred. So we're very supportive. We have a number of business partners who are supportive of the music industry. We're ready to go when they're ready to go. And so that's one of the areas that I hope will see some positive development in here during 2009.

And now is that -- would that sort of development occur with a consortium or would it -- is it sort of the only -- the solution would have to be broadly adopted as opposed to being adopted by a single player or participant?

I -- it could go any way they'd like it to go. I believe that the major labels and the trade association for the music industry are quite aware of the technology and there's a, I think, a very supportive environment for it in the music industry. It's up to them, again, you know. Obviously one or more of them have to adopt. And so I think once the ball starts rolling, it will be quite easy for everybody to hop on board. And as you know, most television is watermarked and virtually all movies and music are watermarked for pre-release. It's just not in the general distribution. And so now that digital cinema and Blu-ray are watermarking, those are a couple of the primary means of digital distribution of movies. Music is kind of the next one to get into the fold here in a little bit broader usage. And then our job is to continue to encourage universal encoding; everybody encoding everything at the source and they can actually redundantly encode it later in distribution and then build the application base. That's where the big value comes from. That's always been my proposition here is that we're not looking to sort of quit the game once we get the encoding going. That's just the beginning of the game, and yet we've had to struggle here largely against the IT industry historically to get the encoding done. But I think we're getting there. I think we're -- this is the reason for my optimism and perhaps a strange optimism in such a gloomy context. I think we've got upside, but I'm very cautious about trying to advocate that very strongly in the great uncertainty that surrounds us. So I'm very respectful of the effects that recession or whatever you want to call the environment we're in right now can have on adoption of technology. So, you know --

Can you, Bruce, can you for a lay person help us to understand exactly how the watermarking would be used in a music context? In other words, obviously, the content would be watermarked, but then how would -- would the player read the watermark? I mean, in other words, how would you actually track and/or ensure the integrity from there?

Well, the encoding should be done with a fair amount of complexity in the payload. What I mean by that is that the data that they put into the music ought to enable a lot of applications. And so in the discussions we've had with the music industry, we've talked about layers of payload, layers of encoding.

And at the most basic layer, you would have kind of a copyright flag and maybe an adult content flag. Those are two important values to the music industry and their customers. And so the copyright flag then would be read by devices and network nodes and would say, okay, this is somebody's music. It's copyrighted music. Once the flag is read, what happens then is entirely up to the music industry, all the value chain participants. You would think it would mean somebody should pay somebody, probably, and again, it's not my call, it's theirs. But our triggering can trigger any application they want to have triggered. The adult flag is pretty easy. It would be used to -- in the context where parents want to filter or young people don't want to be exposed to a content that has a strong adult character to it.

At another layer up from that, you can facilitate commerce. That is, that you could say okay, not only do I know this is copyrighted, I know who originated it and I know who distributed it and I know what kind of programs and rights are associated with that. And thus, I'm going to deliver goods, services, and community in the context. Envision a website or a player in which now it says, okay, I know that this is a particular song. Maybe it's a music video or something, and so I'm going to deliver a special on the concert tickets, because I have the right and interest in doing that.

And so there are a whole bunch of applications that cascade above the basic application of I know what this thing is. And we have fully articulated, along with our business partners, precisely the kind of payloads that would support those kinds of applications. And so it's a build out of those applications that delivers great value of which we should get our fair share, which would then create a very attractive income stream for our business.

So that's kind of how it works. It's really -- you just got to -- it's -- unless you encode, you can't do any of those things, and that's what the music industry has learned through experience and experimentation as -- more than sort of an intellectual exercises here. And that's why I gave the brief history is that yes, you try to stop everybody because you're panicked. And then when you find you can't stop them and you get over the panic and you say, "Okay, well, I guess I have to surrender." And then you surrender and you go, "Wait a minute. I surrendered, but I'm not getting any money from this. How do I get money from it?" And then they come around to, "Oh, if I know what's happening to my product, I can get paid, and not only can I get paid, but I could deliver more value to the customer."

See, and that really is the kind of transcendental model we've been advocating forever is don't use our technology to stop people from getting new product. Use our technology to bring more value to your customers and be able to extract the fair compensation for delivering that value. So I think the music industry is there. I think they get it now. It's taken a long time, but I think they get it. And so I'm optimistic that they will move toward implementation, subject to all the economic issues that are going on. In other words, I don't know what happens to budgets in any given company. They're, obviously, going to be under extreme pressure. So whether they say, "This is so important we have to do it, we're going to do it despite circumstances," or they say, "Well, we'd love to do it, but we've got to wait a little while," is a decision I can't intuit. It's going to go wherever it goes. So we're ready to go when they're ready to go, and we hope it's soon, but we don't know exactly what the timing --

And again, when you say "they," would -- it literally could take the form of a one-off relationship or more likely it would have to take the -- it would take the place of some sort of consortium and/or group?

Well, the leadership of the music industry still resides in what are called the labels, the major labels, so --

Yes.

-- the they is them. Okay? And the supply chain is among our business partners. I'm not going to be more specific on that.

But, in other words, could you create a relationship with a label or would it have to be with all of the labels?

One or more. Yes, yes. Again, it's up to them. Any way they want to go would be fine.

Terrific. That's very helpful.

That's where the trade association can be helpful to its members and has been helpful over the years in studying new technologies, including ones like ours. So that's the -- one of the general functions of the trade association. So all of the members get educated and then it's an individual company decision whether to invest and move forward.

Okay. Very helpful. Thank you, Bruce.

Yes.

(OPERATOR INSTRUCTIONS.) Our next question comes from the line of Kevin Henehan with KMH Capital Advisors.

Hello, Mike. Hello, Bruce.

Good morning.

Hi, Kevin.

Hi, Mike. Can you tell us, you said that the cash would go down a little bit at the end of the year due to some payables that you had associated with carving out the ID business that you sold. Is that all done? Should we expect that that going forward won't be an impact anymore?

That is pretty much done. There's still a couple hundred thousand dollars of lingering merger-related liabilities that will be paid out over the next couple of quarters, but pretty much done at this point in time.

Right. And you mentioned the Nielsen revenues. Is that, if you can tell us, is that the first revenues that you've actually received from that relationship?

We had received Nielsen revenues in 2007 and actually prior on some other licenses that we had.

Oh, on other businesses?

Yes.

Okay. All right. Thanks and congratulations.

Thanks, Kevin.

Thank you.

(OPERATOR INSTRUCTIONS.) There are no further questions at this time. Mr. Davis, do you have any closing remarks?

Just to say thinks to everyone. We appreciate your continuing interest and support and we'll carry on with our plans and you can trust us to continue to be very, very diligent in trying to understand the environment and meet our investment appropriately. So thanks very much.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.