摩托羅拉 (MSI) 2005 Q2 法說會逐字稿

Good day and welcome to Symbol Technologies' second-quarter 2005 earnings conference call.

As a reminder, today's conference is being recorded.

At this time, for opening remarks, I would like to turn the conference over to Ms. Lori Chaitman, Vice President of Investor Relations.

Please go ahead, ma'am.

Good morning, everyone, and thank you for joining us today.

If you have not yet seen the press releases, they can be found on our Web site, www.symbol.com/investor.

With me today are non-executive Chairman Bob Chrenc and interim CEO, Sal Iannuzzi.

Other members of the senior management team joining us include Todd Abbott, Senior Vice President of Worldwide Sales, Todd Hewlin, Senior Vice President of Global Products Group, John Bruno, Senior Vice President and General Manager of RFID, and Peter Lieb, Senior Vice President and General Counsel.

Before I turn the call over to Bob and Sal, I would like to remind you that the matters will be discussing today may include forward-looking statements and as such are subject to the risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, including those risks and uncertainties discussed in our most recent Form 10-K filed with the SEC.

We are also presenting some non-GAAP financial information.

A reconciliation of GAAP to non-GAAP items can be found on our Web site.

Symbol assumes no obligation and does not intend to update forward-looking statements made on this call.

Bob, I will now turn it over to you.

Thanks, Lori, and good morning, everyone.

I know this is a bit unexpected and I appreciate you all joining us on such short notice.

As you have undoubtedly heard, Bill Nuti resigned as CEO to take the top job at NCR.

I want to think Bill for his service to Symbol, as he led us through a very difficult period of time for the Company, and I wish him all the best.

The Board has great confidence in the operating plans we have in place and the management team that is executing them.

In addition, we have a lot of confidence in Sal, who has agreed to step in as interim President and CEO while Heidrick & Struggles assists us in our search to find a permanent replacement.

Sal knows our company well, having served previously as non-executive Chairman of the Board and then jumping in with both feet this past spring and joining the management team as Chief Administrative and Control Officer and more recently adding the title CFO.

Seeing as he has his hands full in the coming months, the Board has formed a special subcommittee to provide additional guidance and oversight to the senior management while a new CEO is hired.

I will be Chairman of that subcommittee.

I will close my remarks by saying that the Board believes Symbol has great technology, a solid senior management team, and a talented group of associates.

Now, I will turn the call over to Sal to cover the second-quarter results.

Sal?

Thanks, Bob.

Before I begin to review the second quarter, I want to say that I'm committed to helping Symbol achieve its full potential and appreciate the opportunity.

I'd also like to thank Bill for all his contributions to the Company.

It was indeed a pleasure to work with him.

I wish him continued success in his next endeavor.

Moving onto the second quarter, as you know, Q2 was a challenging quarter for us.

Revenue for Q2 was 428 million, declining 1% versus Q2 '04 and 7% versus Q1 '05.

This is in line with our revised expectation as of July 14.

Product revenue was 83% of total sales or 356 million, relatively flat year-over-year.

Product bookings, on the other hand, were up 6% year-over-year.

Services declined roughly 5% from 72 million or 17% of total revenue, compared to last year.

Before we discuss bookings and demand trends in detail, I'd like to first run through the operating results for the second quarter.

Net product revenue by region was as follows -- the Americas region contributed 65% or 230 million to product revenue;

EMEA contributed 28% or 98 million;

Asia-Pacific contributed the remaining 7% or 28 million.

Product revenue by division was as follows -- the mobile computing division contributed 64% or 234 million to product revenue; the Advanced Data Capture division contributed 28%, or 101 million; of the total ABC product revenue, RFID accounted for 8.6 million, compared to 8.2 million last quarter; the Wireless Infrastructure division contributed the remaining 8% or 32 million.

It should be noted that 62% of our product revenue was derived from products introduced since 2003.

Gross margin in Q2 of 42.7% declined 220 basis points sequentially.

This excludes restructuring and asset-impairment charges of approximately 15 million.

The sequential decline in gross margins was due to incremental rebate promotions, volume shortfall and an unfavorable product mix, and a negative foreign exchange impact.

Operating expense was 175 million, excluding restructuring charges and other one-time items of 28 million, and a $7 million benefit derived from the adjustment for class-action settlement shares.

This was below our original guidance of 177 to 180 million.

SG&A of 135 million declined $3 million versus last quarter.

This includes approximately $7 million in legal expense related to the defense of prior management.

R&D of 40 million declined 3 million versus last quarter.

Other expenses was 1 million versus 6.6 million in Q1.

This included a gain of 1.8 million related to the Cisco valuation adjustment, versus a $3.4 million loss in Q1, '05.

As part of our restructuring program, we terminated the Cisco sales transaction in July, which will eliminate $11 million in annual interest expense and reduce the volatility of the Other Income and Expense line on the P&L.

We will record a pretax charge in Q3 of approximately 11 million related to this termination.

Provision for income taxes was 2 million, excluding benefits from restructuring charges and foreign earnings (indiscernible) offset by deferred tax assets, write-downs from the state law changes, and tax effect of the adjustment for the class-action settlement.

Excluding restructuring charges, the benefit from the class settlement and other items, net income was $5 million or $0.02 per share.

Including these items, the net loss for Q2 was $31 million or a net loss per share of $0.12.

Restructuring and asset-impairment charges incurred in Q2 were $42.8 million.

The cost of the program is on track to be 75 to $95 million, resulting in quarterly savings of approximately 15 million with a rough split of two-thirds in operating expense and one-third in cost of sales.

Turning to the balance sheet and cash flow, we ended Q2 '05 with a cash balance of $136 million, down $82 million from last quarter.

The restricted cash balance remains unchanged at 52 million.

The reduction in cash is primarily due to $28 million used to fund operation, which includes $7 million in cash restructuring charges and $27 million in capital expenditures, $18 million in debt repayments.

The Accounts Receivable balance in the quarter was $192 million or 41 Days Sales Outstanding, including the reclassification based on cash received in advance of revenue recognition.

Compared to last quarter, as adjusted for the reclassification, the Accounts Receivable balance was 174 million or 35 days.

Last quarter, we reported an Accounts Receivable balance of 111 million, or 22 Days Sales Outstanding, which included approximately 63 million in cash received in advance.

This amount included 28 million received from one large customer in advance of payment terms.

The reclassification will be disclosed in our 10-Q filing.

The ending Q2 inventory balance of $173 million was flat to Q1 ending balance with turns of 5.7, excluding restructuring and asset impairment charges.

At the end of Q2, total debt was 227 million, which included 160 million in short-term debt and 67 million in long-term debt.

By terminating the Cisco sales agreement, $85 million of the net long-term debt is now classified as short-term debt.

Before I discuss the outlook for Q3, I'd like to provide some color on backlog, total bookings and demand trends.

Total backlog in Q2 was 344 million versus 329 million in Q1.

Total product bookings were essentially flat with last quarter at 384 million, resulting in a book-to-bill above 1.0.

The Americas product bookings grew by 2% on a sequential basis and 9% year-over-year.

This region has the highest exposure to the retail sector, which was weaker than we had anticipated.

We had a few solid customer wins worth mentioning in the Americas, including Gordman (ph) and Modelle.

EMEA product bookings declined 6% sequentially but grew 2% compared to last year.

Despite the challenging economic environments in Europe, we did have some nice customer wins, including DaimlerChrysler and Lieselwank (ph).

Our performance in Asia-Pacific was encouraging with product bookings increasing 13% sequentially and by% year-over-year.

We believe our business in Asia-Pacific is benefiting from new leadership and our ramp-up of new products.

In Asia-Pacific, we increased our partner program to nearly 390 partners in Q2 from just over 300 partners last quarter.

Moving onto product trends, product bookings from our Mobile Computing division were 248 million, increasing 3% compared to Q1, '05 and 14% compared to last year.

The fully refreshed line of industrial mobile computers, including the MC1000, 3000 and 9000, are now in the marketplace.

To date, the booking trends for these products are encouraging.

In Enterprise Mobility Computing, ongoing pilots for the MC50, the enterprise digital assistant, are doing well and are expected to see acceleration in terms of bookings and revenues.

It should be noted that we've decided to split our Mobile Computing division into two entities, the Industrial Mobile Computing division and the Enterprise Mobile Computing division, the better focus on growth and profitability in each segment.

We are excited to have Tom Cienan (ph) coming off 18 years at Hewlett-Packard joining the Symbol team to run the new Enterprise Mobility Computing division.

Product bookings from the Advanced Data Capture division, which includes RFID, were $96 million, declining 12% compared to last quarter and 6% compared to Q2, '04.

This division had the highest exposure to the global retail segment and was hit the hardest relative to our expectations.

To further complete our bracketed product strategy in this division, we recently launched the LS9203, an entry-level projection scanner which combines value, price and solid performance.

As for RFID, we are confident that approximately $40 million in revenue is attainable in 2005, given the level of bookings and interest in RFID.

We introduced the Next Generation XL 00 Reader that is software upgradable to gen 2 and reads both class 0 and class 1 tags.

The DC600, a fully integrated, modular RFID portal for (inaudible) We're pleased with the progress we are making at Wal-Mart, the Hong Kong Airport, as well as with other early adopters.

We are pleased with customer feedback, product quality and booking trends.

However, we still have work to do in terms of improving the profitability of this division through value engineering and supply chain ramp up.

Product bookings from our Wireless Infrastructure division increased 23% sequentially to $40 million and were down 3% year-over-year.

We were encouraged with our sequential growth in bookings, as the market continues to shift away from traditional wireless access (indiscernible) to wireless switches.

We continue to drive innovation in our wireless infrastructure division with the launch of new product and features sets during the quarter.

Moving onto Q3 guidance, at this time, we are only providing topline guidance for one quarter.

Based on the level of bookings and backlog, we're forecasting revenue for Q3 to be approximately flat with Q2.

Before we open up the call for questions, I'd like to make a few closing comments.

The Board, the senior management team and myself are aware of what needs to be done at Symbol and we are fully committed to doing it.

We are confident that, with our restructuring efforts well underway, we will achieve the results that we set out to achieve.

Most importantly, I want to thank our fine associates for their continued commitment to Symbol and to our shareholders.

I want to also thank all of you for joining us on such short notice.

Operator, please open up the lines for Q&A.

Thank you.

The question-and-answer session will be conducted electronically. (OPERATOR INSTRUCTIONS).

Ajit Pai with Thomas Weisel Partners.

Good morning.

Two quick questions -- the first would be about headcount during the quarter and where you expect to finish the year in terms of headcount.

Then the second question would be, in terms of the verticals that you're focusing on, could you prioritize the verticals that you're focusing on for growth right now?

Thank you for the question.

First of all, I will take it with regard to headcount; then I will have Todd respond with regard to our vertical strategy.

With regard to headcount, we plan to be at approximately 5,000 people by the end of -- I'm sorry, Q4.

Todd, with regard to verticals?

Yes, from a vertical standpoint, the six verticals that we have been identifying as our key focal points remain our key targets relative to the strategy.

We would see growth coming from primarily from the areas of manufacturing, travel and transportation, and healthcare going into next year.

Philip Alling with Bear Stearns.

Bob, a question for you -- I just wanted to get a sense from the Board as to whether it was surprised by Bill Nuti's resignation and if you could give us a little bit of color there.

Yes, thank you.

Yes, Bill was fully engaged here up 'til the day that he announced his resignation, and we were a little surprised.

We actually discussed -- or he was in discussions last week, and I believe he made his decision at the end of last week.

Therefore, it was announced Sunday night.

But we were a little surprised with the decision.

Also, with respect to the CFO position, should investors expect that a search is underway for both a CFO and a CEO?

No, I think Sal was appointed CFO when Mark left a few weeks ago and is going to continue in that role and also in the Interim President and CEO role over the next few months until we find a permanent CEO.

Then Sal will just continue his duties; he has a lot on his plate in the next period of months here.

Operator, next question.

Jeff Kessler with Lehman Brothers.

Yes, what I'm interested in is when you are looking for the next CEO, what are the specific types of qualities or we will say assets that that CEO has to bring that -- I'm not saying are better or worse but perhaps different than the last team that you had?

Are you going to be looking for someone who is basically nuts-and-bolts-oriented and is going to be involved?

I know that Bill was involved heavily in the turnaround of the Company.

Are you going to be involved in looking for someone with qualities that are going to be a more, what we will say inside, day-to-day, and I suspect less promissory-type of operator?

We're going to be looking for a quality individual who can lead this company, has some technology background, some CEO leadership.

We have a conference call later on today with Heidrick & Struggles to actually discuss those qualifications, and we will be elaborating more at that time.

But trust me, we will be looking for a person who has the leadership qualibilities (ph) to take this company to the next level and continue the -- based on the strong technology that we have and to grow the Company going forward.

Reik Read with Robert W. Baird & Company.

Can you guys just talk a little bit about the sales force issue that has come up here?

In the last couple of conference calls, you guys have talked about a fair bit of turnover, which has led to an immature sales force.

Can you talk a little bit about -- Sal, now that you're looking at this problem, what are your plans to deal with this?

How much turnover will continue to result here?

Are you aligned with salesman in the correct verticals that you are attempting to crack?

This is Todd Abbott;

I will take that.

Fundamentally, as we have been communicating, the turnover challenges that we've had over the last 2.5 years through this restructuring and retooling of the Company has really stabilized over the last six months.

We've had a leadership team now in place in Asia for six months that now is delivering very consistent results.

In the U.S. and in the TAZ (ph) operations as well, consistency now for the last two to three quarters and the results there continue to be much more consistent.

It's in Europe where we've had some challenges.

Not as we've reported, I'm stepping in to help stabilize and really tweak the processes there.

We fundamentally have the right teams in place, but in an application-driven business, which is what enterprise mobility computing is all about, it takes time for that stabilization to translate to driving new incremental demand with our customers.

We believe that we are on the right path.

So stability -wise, we've achieved good stability over the last several quarters.

It's now about really adding, to that team, the incremental coverage that we're looking for and some of the other growth verticals, and get more balance with our vertical coverage.

So it's really truly incremental coverage at this point, not replacing churn or retention that is used that we've got within the sales organization.

Just one more quick question -- on the forecasting side, you guys have talked a little bit about the accounting issues and how the changes there -- or what has been in place has been a little bit of an issue.

Can you talk a little bit about how good right now are your systems giving you visibility into the inventory positions at the number of distribution centers that you serve?

Is this creating any of the issue with forecasting, in addition to how the accounting policies have played out?

First of all, I want to be clear that with regard to our financial (indiscernible) and the numbers we are reporting today, it has no bearing whatsoever.

We believe that the system we have in place is very robust, and we are very, very confident with regard to the quality of the numbers.

With regard to forecasting, because of some of the methodologies again that are in place, it just naturally makes forecasting much more difficult because of timing of data, sometimes the quality of data intra-quarter or intra-month.

There's just a wide variety of issues that make forecasting difficult.

What we are doing -- we fined-tuned our program in this regard since our last conversation -- that we are addressing tightening as much as we can all of the -- looking at each of the practices and methodologies that we have in place and eliminating as much of the noise, if you will, intra-month -- looking at -- or intra-quarter -- looking at methodologies to get better data, more accurate data, so that we can improve our forecasting capability.

Having said that, I believe also, as we said in a prior call, there's always going to be -- as long as some of these methodologies exist, there's always going to be some degree of nebulousness when it comes to the forecasting.

Therefore, we're going to probably go to a wider birth (ph) so that we can give you a range but it's not going to be -- we're not going to be able to do it on a very narrow basis.

I want you to also know -- and take this opportunity to make sure everyone understands -- we are not going to change any accounting practice or methodology unless it is totally vented (ph) with both our auditors, Ernst & Young, as well as with our outside examiner.

It is only if we believe and they believe that it will enhance our controls and result in better information to you all that we will make any change.

So again, as we've said in the past, this is why this is not a change that is going to happen quickly.

It requires thought; it requires research; and we will only do it once we're comfortable.

Ted Wheeler with Buckingham Research.

Good morning.

A couple of things -- you mentioned the Cisco transaction and that interest savings or interest costs will come down and I guess you talked about that happening in July, so that's all happening in front of us.

Is that how to interpret that?

Yes, that transaction was torn up, in essence, in roughly mid-July.

Going forward, you'll see the benefit of that -- actually you'll start to see the benefit of it in Q3.

Okay, and then the restructuring of 75 to 95 million, I am just a little fuzzy on this.

Is 42.8 the first bite of that or is this the second bite?

I can't recall.

Now, it is the first bite.

Okay, and then the rest of it will come out in the succeeding two quarters I think you guys were talking before?

Correct.

The savings will -- how should we figure the timing on the realization of those?

By the end of '05, we are anticipating savings of approximately $15 million, two-thirds of that, approximately, affecting the OpEx line and the other five in cost of sales.

Just lastly on the guidance, the bookings being up sequentially -- I'm sorry, bookings being up year-to-year.

Is the flat revenues an indication of July activity being a bit softer?

No.

At this point in time, we're not in a position to give any guidance with regard to July, but given the discussion we just had on methodologies, etc., we feel that the most comfortable number that we can give or forecast that we can give is flat quarter-to-quarter.

(OPERATOR INSTRUCTIONS).

Sam Doctor with JP Morgan.

It's actually Paul Coster here.

Good morning.

Two quick questions -- first of all, the outbound management team, we're talking of 15% operating margins through the cycle.

Is this something that you are targeting?

If so, in what timeframe?

I have a follow-up.

I'm sorry, could you repeat the question, please?

Bill and Mark were talking consistently about 15% operating margins being attainable through the cycle at Symbol, and it was the target operating model.

Is that still your operating model?

If so, what timeframe should we be thinking about now?

I think that is very much still our operating model, and I believe we are looking towards the end of -- the mid to the end of '06.

Okay, thank you.

The second question is the economy is pretty good at the moment.

The second half is typically quite strong for Symbol.

Bookings sound okay.

New products are in the pipeline, yet revenue is flat.

I heard the last explanation, but it sounds like the overall tone here, in terms of the core business, is quite positive.

Am I correct or are all of the issues that you're countering sort of pretty much internally sort of originating?

Well, certainly we are very bullish on our business and the prospects for our business in the future.

In terms of timing and in terms of forecasting, as I said, we are comfortable at this point in time forecasting through -- giving the forecast that we did regarding Q3 but not much more beyond that.

Kevin Starke with Weeden & Company.

Wal-Mart just released 4.4% same-store sales comps; we've been seeing numbers like that for about two months now.

Durable goods orders are up by about the same magnitude.

So, I'm wondering if you can sort of qualify this weakness in retail you're seeing.

In your view, why is the topline not translating into higher capital spend from your customers?

Because what we saw in the last quarter is a very slow start within retail in the U.S. and some real challenges economically in retail in Europe.

The slow start really, frankly, concerned them and there was a lot of slowness.

I'm talking about the retail sector overall.

There was a slowness and a delay from a capital expenditures standpoint.

While the last two months have been strong, there is a level of cautiousness in our retail customers in the retail segment overall to turn the spigot back on relative to capital expenditure at the rate that we've historically seen.

We think that they really require another couple of months here to really have the confidence level necessary to turn the projects back on.

They are coming back on, but they are coming back on in smaller bites rather than the large commitments and the large rollouts.

Bob, could you tell us what legal expense was during the quarter and if there's any update on the SmartMedia suit?

Peter, would you like to take that one?

Yes.

I don't think we've been reporting our total legal expense, but what we have been reporting is the expense related to the defense of our prior associates as well as the expense related to assisting the government in prosecuting the former associates.

That number is between approximately 6 and $7 million, and it remains at approximately that level today.

Regarding SmartMedia, there is still no update.

The oral argument in the Appellate court was June 3, and we are awaiting a decision from the Appellate court.

David Sterman with Halpern Capital.

Can you just shed a little insight on -- I don't fully understand the structuring of the Cisco termination and the pushing into current maturities of long-term debt.

If you can talk a little bit about the makeup of the current portion of debt at this point?

First of all, the Cisco transaction was in essence a financing transaction where we held a significant number of shares of Cisco stock and we had a collar in essence on those shares to collateralize a loan on those shares.

The interest, the effect of interest rate on that loan was close to 7%.

By tearing up the transaction, what we have accomplished is eliminating -- eliminated that interest cost, which was running approximately $11 million per year.

In addition to that, what I said is that it stopped subjecting us to the volatility of the mark-to-market on the derivative on the shares.

Okay?

The movement to short-term debt, the 85 million or so, was done simply because we tore up the transaction early in Q3 and that caused the change in the classification of the debt from long-term to short-term.

Okay, thank you.

Jeff Kessler with Lehman Brothers.

First, so you still hold the Cisco shares, but you just got rid of the collar, the derivative?

No, we tore up everything.

The shares are gone; the debt is gone.

It is completely off our books at this point.

Can you talk about DaimlerChrysler, the DaimlerChrysler deal at all?

Sure, I will turn that over (indiscernible).

Any of the details relative to specific wins would be posted on the Web, based upon what approval we've gotten with our customers.

Can you just say something about headcount, current versus headcount -- 5000 at the end of the year?

Our current forecast -- where we started out our restructuring, headcount was approximately 5600 people.

As part of our restructuring effort, that would come down to approximately 5000.

Then, our plan, as part of our reinvestment plan included within our overall restructuring plan, is that we will probably add back, in sales and product development areas, somewhere in the vicinity of between 2 and 300 people over a span of time.

But there, we can't be very accurate into exactly what quarter that will happen.

We will do it as opportunities arrive to recruit the right people and also what we see in terms of the economy and the direction of revenue here at the Firm.

Chris Quilty with Raymond James.

I just wanted to make sure I got the guidance correct.

You only gave sequentially flat revenues is the only guidance for the third quarter?

Correct.

A follow-up question on the retail vertical -- can you distinguish -- is the problem primarily with large, Tier 1 deployments that are more complex in nature, or does it also drill down into the sort of Tier 2, Tier 3 retailers also?

It applies to both the large strategic as well as the Tier 2 retailers.

Okay.

It looks like, if I got the numbers correctly, the wireless sales were down about 25%.

I'm presuming that -- was that mostly due to just the falloff in retail activity?

Historically -- so there was a falloff on revenue but not on bookings, so in fact, the velocity on the bookings side on wireless we're quite pleased with.

There was a quite strong quarter-on-quarter growth.

I didn't go back to look, but did you have a large order last year?

Yes, we did.

Okay.

On the Mobile Data Capture side, it looks like sales were down 5%.

Does that reflect the impact of the Intermec termination?

No.

So you still had Q2 sales from Intermec or to Intermec?

The impact on any Intermec business has already been flushed out over the last several quarters.

There's no impact on this past quarter.

Okay, so that was just generally reflective of the slowdown in retail?

Correct.

Ajit Pai with Thomas Weisel Partners.

Could you give us an update on the IP sort of litigation that's happening with Intermec right now, you know, your manner in which you are thinking about it?

Can you repeat that question?

Yes.

The IP litigation that's going on on RFID with Intermec as well as some of the other areas, Wireless LAN -- the manner in which you are thinking about that litigation, if there's been any change on that thinking?

The one thing that's developed since I think we last talked is that Intermec (indiscernible) Wall Street and the ITC (ph) (indiscernible) and they are not RFID patents.

We've taken a look those patents.

We feel fairly strongly that we do not infringe those patents.

The new lawsuit, we are examining whether their patents are valid.

We also believe there is a good chance that, even if they were valid and even if we infringed them, that we will be able to design around those patents so, that's the way one update.

In terms of our overall view, we continue to believe that, if all the patents that they have sued us on that we do not infringe any of the patents -- that we have strong validity (indiscernible) to the ones that we've had the time to examine, and that our position in affirmatively against them is quite strong.

You will remember that we have sued them on our wireless patents, an example.

Those are the same patents where we had success in our litigation against Proxon (ph);

We have sued them on a number of other patents that we believe cover strong portions of their product line.

If you look at it a little broader, outside of RFID in your sort of core Domino and scanner business, are the competitive dynamics getting more intense?

Are you seeing any sort of increased pricing pressures in certain geographies, or are things very much almost the same as when you last spoke with us on the subject?

I think, anytime you see customers slowing down, you're going to see typically an increase in competitive pressures, but it's something that -- out of the ordinary that we would expect and that we are prepared to respond to, given all the focus we've had on value engineering and cost reduction of our products.

Ted Wheeler with Buckingham Research.

On the retail marketing or the retail market dynamics, is there any possibility that the slowness there is linked to the retail customers needing to fine-tune and sort get onboard with an RFID strategy, and that they are sort of holding back on some things while they sort that out?

Are we maybe facing a fairly long period while this process goes on?

No, I think the two are very much disconnected.

We've got various retail customers at various stages in the adoption curve, some in production rollout, some in early pilots, some in early tests and some waiting by the sidelines.

That really is not having any impact relative to their traditional enterprise mobility or data capture deployments.

It really is just an impact, from our perspective, relative to their business being impacted with a slow start to the spring.

You have to remember, in retail, there's only so many months, so many quarters of deployment capability as they typically get ready for Q4.

So there's just been a level of conservatism to their deployments as they go through the year, being impacted by their bottom line, their topline and bottom-line economics.

Okay, thanks.

David Sterman with Halpern Capital.

My question has been answered.

Thank you.

There are no further questions at this time.

That will conclude today's audio conference.

We thank you all for your participation.

Have a great day.