eGain Corp (EGAN) 2002 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the eGain Communications (Company: eGain Communications; Ticker: EGAN; URL: http://www.egain.com/) conference call. At this time, all participants are on a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone. If anyone should disconnect and need to rejoin, please dial 1-888-413-4411, and as a reminder, this conference call is being recorded.

I will now like to introduce your host for today's conference, Ms. Karen Keating of FRB/Weber Shandwick. Ms. Keating, you may begin.

Thank you . Good afternoon, ladies and gentlemen, and thank you for joining us for eGain's conference call. eGain will discuss the results for the December quarter and second quarter of its fiscal year ending June 2002. By now, you should have each received a copy of the corresponding press release. If you do not have a copy of the release, please call Verity of the Financial Relations Board at 415-986-1591 or please go to our Web site at www.egain.com. That's egain.com.

I would now like to remind the audience that all statements in this release and conference call that involve eGain's plans, forecasts, beliefs, projections, expectations, strategies and intentions are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on information available to eGain at the time of this release and call, are not guarantees of future results; rather, they are subject to risks and uncertainties that may cause actual results to differ materially from those set forth in this release and call.

These risks include, but are not limited to, the challenging economic environment, the uncertainty of demand for eGain products, the anticipated customer benefits from eGain products, increased competition and technological changes in the markets in which eGain competes and other risks detailed from time to time in the company's filings with the SEC, including the company's annual report on Form 10-K filed on September 28, 2001, and the company's quarterly reports on Form 10-Q. eGain assumes no obligation to update these forward-looking statements.

With us today from the company are Ashutosh Roy, Chairman and Chief Executive Officer, Gunjan Sinha, President, and Harprey Grewal, Chief Financial Officer. To begin management's discussion, I would like to now introduce, Ashutosh Roy, Chairman and Chief Executive Officer.

Thank you, Karen, and welcome everyone to eGain's second quarter fiscal 2002 conference call. Joining me today are Gunjan Sinha, President, and Harprey Grewal, CFO. I will discuss our results, Harprey will review the financial results in more detail and provide forward-looking guidance, and Gunjan will discuss the quarter's operational accomplishments.

Calendar 2001 represented a watershed for eGain Communications. At the beginning of the year, we committed ourselves to three goals: first, gain market share by growing faster than competition; second, rationalize our cost basis with revenues to achieve profitability pro-forma EBDA basis by the December quarter of 2001; and third, to continue to deliver the most innovative eService products.

Against the first goal of growing market share, eGain reported revenue growth of almost 30 percent, increasing to $45 million in calendar 2001, up from $35 million the prior year. This growth outpaced our peer group's growth rate. While eGain grew it's revenues by about 30 percent, revenue declined by 23 percent, ONYX's (Company: ONYX; Ticker: ONXS; URL: http://www.onyx.com/) by 19 percent and E.piphany's (Company: E.piphany; Ticker: EPNY; URL: http://www.epiphany.com/) by two percent.

The second goal we had set for last year was to achieve pro forma EBDA profitability by the December 2001 quarter. We made significant strides toward that by reducing our operating loss by 96 percent in four quarters. For the December 2001 quarter, we reported a loss on a pro forma EBDA basis of $448,000, down from the more than $14 million loss in the December 2000 quarter. From a cost perspective, total costs declined by from $29 million one year earlier to about $11 million this last quarter. We achieved this goal by driving greater efficiencies, improved cost controls and by leveraging our global operating model. As a company, we used our losses significantly while growing our top line faster than our peer group and investing in new product development.

Finally, we set ourselves the goal of continuing to deliver the most innovative eService products on the market. In the latter part of last year, we launched eGain eService Enterprise, our integrated product suite for customer service through self-service collaboration, e-mail interaction and the call center. We also launched global versions of our products where we now support over 64 languages.

Finally, we re-architected our products on the J2EE platform, providing multi-platform support for Windows and Solaris, thereby addressing the enterprise need for scalability and reliability.

Today, we have a product development team that is 170 strong, the same as we did one year ago. While most companies have slashed their R&D teams dramatically over the last year, mortgaging the future for short-term gains, we continue to build and invest for the future.

Looking ahead for calendar 2002, we remain formally committed to the following goals: First, in the face of a tough market, we will continue to gain market share by growing faster than our competition. Second, we will achieve and sustain profitability while generating free cash flow in the second half of this calendar year. Third, we will continue to deliver innovative products and set the standard for eService. For example, this quarter we will be launching new collaboration products in our suite for eSupport and application sharing.

Looking ahead, the market for eService continues to become more mainstream among global 2000 companies. , in a recent report titled "eService Predictions for 2002," noted two significant trends: the first, increased focus on collaboration technologies; the second self-service. eGain is uniquely positioned to take advantage of both these market trends with strong comprehensive products across self-service, collaboration, e-mail management and the call center.

In 2001, we structured our operating model and laid the foundation for a profitable business. We strengthened our management team and we maintained our product development muscle and focus. In 2002, eGain will be relentlessly focused on growing market share with increased distribution leverage. As the economy recovers towards the end of 2002 and beyond, we believe that eGain will be very-well positioned to dominate these service markets based on compelling products, a strong install base of enterprise customers and a superior business model with scaleable, cost-effective delivery and leveraged distribution efficiencies.

With that, let me hand you over to Harprey Grewal, our Chief Financial Officer.

Thank you, Ashutosh. As I have in the past, I would like to remind everyone that, unlike a traditional software company, eGain is pursuing a revenue model. This model consists of sales of both licensed software as well as hosted services.

Let me summarize the highlights of the December quarter results. eGain reported total revenue of 10.2 million, a 27 percent increase from the September quarter. License revenue showed particular strength, increasing by over 115 percent in the quarter. Gross margin improved to 63 percent from 37 percent in the September quarter and in line with our previous guidance. Total costs and expenses, excluding depreciation, fell by 65 percent versus the prior year quarter, falling to 10.6 million, down from 29 million. Net operating loss, on a pro-forma EBDA basis, was 448,000 versus and $11.9 million loss in the September quarter, representing a 96 percent reduction in losses. EPS loss on a pro-forma EBDA basis fell to $0.01 share versus a $0.33 per share loss in the September quarter.

I'd like to spend the next few minutes walking you through the details of our performance. Total revenue was 10.2 million, an increase of 2.2 million or 27 percent from the September quarter. North American revenue totaled 6.2 million, representing 62 percent of total revenue, while revenue from international markets totaled 3.9 million or 38 percent of total revenue. A mix between international and North American revenues were consistent with previous quarters. With regards to revenue mix, license revenue totaled 4.4 million or 44 percent of total revenues. Hosting revenue totaled 1.5 million or 15 percent of total revenue and service and support revenue totaled 4.2 million or 41 percent of total revenue.

Gross margins improved to 63 percent versus 37 percent in the September quarter and improvement was consistent with our guidance and derived from a combination of increased revenues and a decrease in absolute dollar costs. Operating expenses, meanwhile, showed continued improvement in actual dollar terms. Operating expenses decreased for the fifth consecutive quarter to $8.5 million, down from 17 million in the September quarter. This represented a 50 percent decline and reflects a continued drive towards a sustainable and profitable operating model. Operating expenses with a percentage of revenue declined to 83 percent from 211 percent in the prior quarter, generally consistent with our targets to achieve break-even in the quarter.

In terms of product development, product development continued to benefit from the leverage from our Indian operations. Product development expenses in the December quarter decreased to 1.9 million from 4.6 million in the prior quarter. The decrease is all the more impressive given that the total number of employees devoted to product development in the December 2001 quarter is about the same as a year ago. While the head count has remained essentially the same, total costs associated with R& D has fallen by about $4 million. This reflects the on-going leverage of our global operating model. Product development costs as a whole decreased to 18 percent of revenues, from 57 percent in the September quarter.

Sales and marketing expenses in the December quarter decreased to approximately 5.5 million from 8.6 million in the prior quarter. The decrease represents the company's success in leveraging the cost savings and efficiencies derived from partners in addition to better aligning the sales organization in light of the current market environment. Sales and marketing expense, as a percentage of revenue, decreased to 54 percent from 107 percent in the prior quarter.

G&A expense in the December quarter decreased to 1.1 million from 3.8 million in the September quarter. This equates to 11 percent of revenues versus 47 percent in the December quarter.

In previous quarters, I have provided EPS guidance on an EBDA basis, earnings before depreciation and amortization. As I discussed then, EBDA is the basis of our profitability measure. During the December quarter, pro forma EBDA equaled a loss of 448,000 versus a loss of 11.9 million in the prior quarter, representing, as I noted before, a 96 percent decline in operating losses. A per-share basis, this equated to a $0.01 loss compared to a loss of $0.33 in the prior quarter. Net loss during the December quarter, excluding non-cash and restructuring charges which we common refer to as EBA, was 2.3 million compared to a loss of 13.8 million in the September quarter. On a per-share basis, this represented a $0.06 loss compared to a $0.38 loss in the September quarter.

At this point, I would like to quickly turn to the balance sheet. DSOs decreased under the December quarter through 85 days from 107 days in the prior quarter. Looking ahead, we are planning for DSOs in the 80- to 85-day range in the March quarter falling over time to a 70- to 80-day DSO range by the end of the calendar year.

In terms of cash, the company's cash balance continues to remain strong. Cash in short-term investments for the September quarter were approximately 22 million compared to approximately 30 million in the prior quarter. The ending cash balance was in line with our previously-stated goal of 20 to 25 million. End of quarter, we used the cash from 13 million in the September quarter to 8 million in the December quarter. We expect our cash balance to fall to between 17 and 19 million in the March quarter, reflecting a continued decrease in the cash burn rate. Beginning with the second half of the calendar year, we expect to begin generating cash.

In terms of guidance looking ahead, eGain is projecting revenue for the March 2002 quarter of 10 and a half to 11 million. The percentage increase is in line with our cash in the market place as well as acknowledgment of the continued weak market environment. For calendar year 2002, as Ashutosh noted, we are again committing ourselves to gain market share by growing faster than any of our competitors.

From an expense standpoint, we will continue to focus on exploiting the leverage that comes from selling to global 2000 accounts, taking advantage of our global operating model as well as deficiencies derived from provided processes and continued cost containment initiatives. In doing so, we expect a slight increase in our overall cost and expenses in the March quarter consistent with the increase in our revenues.

We estimate that gross margins in the March quarter will be in the 60 to 65 percent rage. This will result in a March quarter EPS on an EBDA basis on the range of a penny loss to break even. We would expect continued improvement over the course of the calendar year.

Depreciation expense for the March quarter should be approximately a million and a half to 1.6 million and should remain fairly consistent over the course of calendar year 2002. From a cash perspective as was noted earlier, we expect to decrease our cash burn rate to three to $5 million in the March quarter so as to end up between 17 and 19 million of cash at the conclusion of the quarter. Beginning with the second half of the calendar year, we expect to begin generating cash.

I would now like to introduce Gunjan Sinha, our President of eGain, who will discuss business development from the December quarter in more detail.

Thank you Harprey. Despite market conditions, eGain continues to expand its customer base, adding new customers while deepening its relationship with existing ones. In the December quarter, eGain's new customers included Aegis Communications Group, an industrial leader in integrated marketing services, Bayer (Company: Bayer; Ticker: BAY; URL: http://www.bayer-ag.de/), one f the world's largest health care and chemical companies, Charter One Bank, one of the 25 largest bank holding companies in the United States, Siemens, one of the world's largest diversified conglomerates and People Magazine, one of the leading weekly magazines.

Existing customers who deepened their relationships with eGain include ABN AMRO, Barclays Bank (Company: Barclays Bank; Ticker: BCS; URL: http://www.barclays.co.uk/), DaimlerChrysler (Company: DaimlerChrysler AG; Ticker: DCX; URL: http://www.daimlerchrysler.com), Gymboree Corporation (Company: Gymboree; Ticker: GYMB; URL: http://www.gymboree.com/) , HSBC Holdings (Company: HSBC; Ticker: HBC; URL: http://www.hsbc.com/), Staples (Company: Staples; Ticker: SPLS; URL: http://www.staples.com/) and Vodafone (Company: Vodafone; Ticker: VOD; URL: http://www.vodafone-airtouch-plc.com/).

Consistent with previous quarters, approximately 60 percent of new applications sold in the quarter resulted from new customers, with the balance coming from existing ones. In the market where the gross rate is expected to increase substantially, we believe that a balanced mix of revenues from existing and new customers is a critical indicator as to the overall strength of the company.

The strength of eGain's solutions continues to be validated through recognition's and awards to many of our customers who are providing superior customer service. J.P. Morgan, for example, was awarded by Forbes magazine as "Best of the Web" for full-service brokerage, while Cooking.com was featured in Jupiter Media Metrix as being one of the few online retailers with prompt and effective e-mail customer service. Adding to the award they received from Microbanker Magazine for "Best in Remote Banking," eGain customer ABN AMRO was nominated as a finalist in the Aberdeen Group's annual listing "What Works: Top CRM Implementations of 2001."

eGain itself won awards from Customers Interactions Solutions Magazine and KM World. Customer Interactions Solutions honored the new eGain suite, eGain eService Enterprise, with its 2001 Product of the Year Award. In addition, eGain was awarded the 2001 Frost & Sullivan Product Line Strategy" award for the company that demonstrated the most insight into customer needs and product demands.

On the sales organization front, last quarter we strengthened our sales and service capability as well with the appointment of Arnold as Senior Vice President of World Wide Sales and Services. In his role, Arnold brings to bear 20 years of successful enterprise sales and service experience from companies like Oracle (Company: Oracle; Ticker: ORCL; URL: http://www.oracle.com/), Novell (Company: Novell; Ticker: NOVL; URL: http://www.novell.com/) and most recently Aspect Communications (Company: Aspect Communications; Ticker: ASPT; URL: http://www.aspect.com/).

Arnold is a proven executive and has had strong background in building some of the most productive enterprise sales organizations. His appointment reflects eGain's commitment to maximize the world wide sales opportunities. Under Arnold's leadership, we will continue to develop our vertical strategy focused on the financial services and telecommunications sector. Moreover, we'll create a more cohesive partner strategy to successfully to compete in the medium end market place as well as develop stronger relationships with re-sellers and system integrators to more effectively segment and penetrate the global 2000 market for eServices.

In the December quarter, eGain also experienced strong traction with partners and outsourcers, further demonstrating the trend of Web-enabling call centers. eGain entered into key partnerships with multiple outsourcers over the quarter, including Aegis, Experian, Decision One, Connextions and Spherion (Company: Spherion; Ticker: SFN; URL: http://www.spherion.com/). In addition to new outsourcer relationships, eGain signed partnership with several new regional and specialized system integrators. These new SI partners include Braun, a global CRM strategy implementation firm, as well as Aheeva, a Canadian SI with particular strength in the self-service channel. eGain also continued to deepen its existing alliances. The company completed integration of eGain Mail Global with Aspect Communications Technologies. Revenue from partner activities, either direct or indirect, represented approximately 25 percent of revenue for the quarter.

On the product side, customer demand for multi-channel solutions continues to fill the market growth and continued market acceptance of eGain's eService platform with an increasing number of consumers now expecting consistent service across the spectrum of communication channels, be it phone, e-mail, live Web and self-service. Most companies now realize that they need a comprehensive multi-channel communication infrastructure. BWC , in a recent survey of 225 Global 2000 companies, concluded that 60 percent consumers are less likely to do business with a company that does not offer the preferred service.

BWC further continues that companies are struggling to make CRM and option effective for even their best customers, especially in the area of data integration evolved from so many channels. eGain remains strategically positioned to take advantage of these emerging trends. Of total bookings during the December quarter, the e-mail channel accounted for approximately 55 percent of revenues, self-service approximately 30 percent and real time collaboration accounted for the remaining 15 percent.

On the operations side, we saw the continued benefit of our global operating model as Ashu talked earlier. Total cost and expenses decreased by more than $9.5 million or over 14 percent, the fifth consecutive quarterly decline. eGain's success in doing so has stemmed from a targetal approach to realign our total cost and expenses. The global operating model that we have spoke about in the past has been one of the key pieces to the strategy. By leveraging our Indian operations, eGain has succeeded in reducing its costs per head in the December quarter to about $25,000, down from $42,000 a year ago. With most software companies carrying a quarterly cost per head in the 45 to $55,000 range. On a per quarter basis, our cost structure enables us to drive substantially better efficiencies and drop greater profits as we increase our top line moving forward.

The comparative advantage of our operating model allows us tremendous flexibility in driving top line growth and increased market share while maintaining an efficient and sustainable cost structure. By way of example, we have as many employees focused on product development, about 170, as we did a year ago. However, our costs associated with product development have been reduced by over 60 percent during that time frame. At a time when most other people in industry have been forced to reduce their R&D budgets and trading off servicing existing customers and future integration, eGain has defined an operating model that allows us to do both. We know of no other company in the eService market that has committed a similar number of resources to this end.

With that, I'd like to turn back the call to Ashu before we open the line for questions. Thank you.

Thank you, Gunjan. At this point, we would be happy to answer questions. Operator, we are ready for questions.

Thank you, sir. Ladies and gentlemen, if you have a question at this time, please press the one key on your touch-tone telephone. If you question has been answered or you wish to remove yourself from the queue, please press the pound key. Once again, if you have a question at this time, please press the one key on your touch-tone telephone.

Our first question comes from Bob Becker of Argus Research. Your question please.

Good afternoon. Harprey, could you outline what you expect capital expenditures to be over the next six months?

Certainly. Last quarter capital expenditures and December quarter were about 550,000. We expect cap ex in the range of 250 to $350,000 for the next two to three quarters.

Per quarter?

Exactly. So about 600,000 over the next six months.

OK, and I'll toss this question out to anybody. Given that you really want to gain market share from your competitors, could you highlight some of the advantages in eGain's products over that will allow you to do that?

Sure. The most important thing that we have as an offering in the market is the comprehensive nature of our solutions in eService which means that customers look at not just at one channel, just not at e-mail management, not just at self-service, not just at collaboration tools, but at the entire solution and that's something which is becoming more and more a differentiator between eGain and any other player in the market for eService, and that speaks to as well.

And in competitive bid situations, what are customers most demanding? Are they looking for concessions in price, are they looking for product delivery time, what's really winning the deals right now?

I think that the top three things that are important to a customer in this market, number one is the strategic of a vendor with the customer's business needs so our understanding of some of the verticals that we have been focused on, like financial services, like telecommunications and now in outsourcing, we find that that's a very important part of the vendor selection process.

The second thing is the ability to deliver not just products but also solutions built on top of those products and that is the function we find more and more of being able to bring scaleable delivery capability to bear on the problem.

And the final thing, which is definitely true is that customers are particular about price in this market. There's no question, and so flexibility in price is an important consideration.

And I think one of the things that - this is Gunjan - just to add to what Ashu just mentioned, given the way we have architected the company, we have clear competitive advantages to be able to price our offerings and yet drive and deliver a profitable business at the same time.

OK, thanks.

Thank you, Mr. Becker. Our next question comes from Sudhar Srinivasan from Cantone Research. Your question please.

Good afternoon, gentlemen. Great job on cutting down the costs as expected. The first question is, the previous quarter, did you notice any advantage in your proximity to profitability while you were trying to meet clients, was that one of the reasons or was it one of - was it a priority for a sale as such? Was I clear in addressing the question or ...

Yeah, the question is clear. From a customer's perspective, what is important is the viability of the vendor as a strategic partner.

OK.

And so they are keen to understand the long-term plan, the product roadmap, and how does eGain intend to accomplish those goals that it has set for itself. We have seen time and again that customers have felt pretty comforted by our strategy of being the best in a niche, which is eService, and our ability to deliver over the last several quarters, both in terms of product as well as in terms of business metrics, has been very comforting for our customers.

OK. And what's your average selling price at this point? What's your ASP?

The average selling price is about 250,000 on the license side which rose from about 235,000 the previous quarter.

OK. You know, I just want to present a scenario. I'd just like your comments on it, OK? Now, given the relative advantage of a tangible ROI proposition which eService has and, you know, the current market sentiment added to it which we do see when we do our channel checks, that people would really like to see results or real numbers before they take a position, would you expect or do you foresee a greater, more aggressive move from bigger players like into the eService segment? I know they already play a role but do you see this as one of the reasons why they could possibly be getting it?

I think that in the next 12 to 18 months, there is no question that some of the bigger players will look at the space and say this looks interesting. However, the difference between focused leaders like eGain and larger players that might be interested in this segment is, very simply put, about five generations of product development, about 800 plus customers that are referencable and customers who have desire to benefit from eService from eGain, and finally, the focus that eGain has in this environment and on this market place, backed up with the operating model and the cost structure that we have where we can be very competitive, we can afford to prove to customers the value proposition and then be able to work with them over a period of time to create a valuable business out of them. It's something which I think is going to be a very strong competitive advantage for us.

OK, so - but then do you see the same kind of reasoning in the sense my interest is that, for instance, if you have having a front office solution, I know of implementations which have taken greater than two years and still they haven' seen the end of the road and, you know, you guys have something which is very, very easily definable. It's probably something which I could calculate early on and try and see if I could possibly fit it into my business plan. So, is this also going to play a role in your CRM strategy as such and would eService play a greater role CRM strategy as going forward in the coming year or is it going to be more of analytics and front office or how exactly would that play out?

That's a good question. I think what we are seeing in the market is very clearly even customers who have either deployed very large CRM implementations or in the process of implementing CRM or rolling it out across a global sort of organization, are still making investments in eService-focused solutions that can provide very rapid, tangible ROIs. And so eGain, in several cases, ends up working alongside an existing investment of either a or a PeopleSoft (Company: PeopleSoft; Ticker: PSFT; URL: http://www.peoplesoft.com/) or a . And that's something which we find more and more that customers are comfortable creating parallel investment in eService for the short-term and the tangibleness of the ROI, even while they may have made larger, slower-deploying implementation investments in the CRM area.

OK, and who do you meet on CS calls since who is your most prominent accomplished at this point?

Today we see - again, we have the most comprehensive solution so, you know, our strength is across all three channels of self-service collaboration and e-mail management, backed by an enterprise knowledge management capability, so when we are in e-mail - in customers that may be having an initial paying point of e-mail we will see more often.

Where we have customers who have an initial paying point of collaboration we might see players like Cisco (Company: Cisco; Ticker: CSCO; URL: http://www.cisco.com/) or players like eShare (Company: eShare; Ticker: ESHR; URL: http://www.eshare.com/) in that space.

Where you have self service oriented needs in the beginning we might see different competitors.

So the competition varies depending on what is the entry point of the immediate need that customers have. However, when we get in we are very quickly able to show them - show the customer, the entire value proposition of eService which is a strategic kind of direction for a company. And they're comfortable being able to start out with one or the other applications and then build from there.

OK. Wonderful. I know your addressed this point during the conference call, but I would just like to ask you again. Do you think the current operating cost, it's just great, looking at those numbers, is this sustainable as you drive your revenues upward during 2002?

Yes, this is Gunjan here. Let me - I think what we have done is truly brought our costs down to reflect the realities of the market and the business.

And what we are - what - the way we've architected the company clearly in the R&D and the product development side we are - we have the leverage and the scale. But we're also extending that to other back office, and front office functions across the organization.

So we definitely anticipate that as our top line grows, we will have relative - relative to that slower requirement increase cost structure. And we will be able to take advantage of the global operating model in place.

OK. All right. Maybe this is a question for Harprey. Have you decided on FAA as 142 on goodwill amortization, Harprey? I guess you're still debating about it?

Exactly. We - we have until July first to make that decision. And the decision we have made is that we have two entry points. We could have made the decision after December 31st, or we could make it July 1st. And we made the decision to look at it July 1st. At this point, we don't feel any impairment charge is necessary for any of the acquisitions we've made.

OK. So it's going to be July 1st.

Exactly.

All right. All right, thank you.

Thank you, sir. Once again, ladies and gentlemen, if you have a question at this time, please press the one key on your touch-tone telephone.

Our next question comes from Aryeh Sheinbein from Chelsea Capital Partners. Your question, please.

I guess this question is directed more towards Harprey. I guess the question for clarity is going forward on the next quarter, based on from what I can tell, the - the operating cost here was about eight-and-a-half this quarter.

And I based on I guess your guidance of 17 to 19 million in cash at the end of next quarter, based on that I'm assuming that you think the cash burn is going to be approximately three to five million.

Exactly.

OK. And with the top line staying only at about 10-and-a-half to 11.

Exactly.

And based on the comments and additionally going forward after that I guess the real question I guess is, what's going to be the driver at that point to get the reversal in the sense that you're getting - I'm assuming obviously the time line has to grow to a certain point. But is the - the net cash burn going to come - continue to come down. Or is this pretty much where we see everything leveling off?

No, exactly. I - our goal and as we've laid out and done our analysis we would expect for the company to begin actually generating cash in the second half of this calendar year. In the March quarter, you should see a burn of three to five million.

In the June quarter, you should see a very marginal burn of cash. We don't expect our cash to fall significantly below the $17 million range.

And starting in the September timeframe we should start seeing an increase in our cash burn - an increase in our cash balance from our ability to generate cash.

OK. Great. Good quarter. Thanks.

Thank you, sir. Gentlemen, at this point it appears we have no further questions. Would you like to continue with any closing remarks?

Well I just want to thank everyone for joining us today. And we look forward to speaking with all of you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Good day.