Oblong Inc (OBLG) 2009 Q1 法說會逐字稿

Good afternoon, everyone.

Welcome to Glowpoint's first quarter 2009 results conference call.

Before we begin, I want to remind listeners that this call is being webcast live over the internet and a webcast replay will also be available on the Company's website at www.Glowpoint.com following the call.

The call is being hosted by the Company's executive officers, Co-CEO's Mr.

Joe Laezza and David Robinson and CFO, Mr.

Ed Heinen.

There will be a brief question-and-answer period following the Company's prepared remarks.

And I would now like to introduce Glowpoint's CFO, Mr.

Ed Heinen who will review the Safe Harbor information with you now.

Please proceed, sir.

Thank you, very much.

The statements contained herein other than historical information are, or may be deemed to be forward-looking statements, and involve factors, risks and uncertainties that may cause actual results in future periods to differ materially from such statements.

These factors, risks and uncertainties include market acceptance, and availability of new video communication services, rapid technological change affecting our demand for our services, competition from other video communication service providers, and the availability of sufficient financial resources to enable us to expand our operations, as well as other risks detailed from time to time in our filings with the Securities and Exchange Commission.

Today's call and webcast may include non-GAAP financial measures within the meaning of SEC Regulation G.

I'll now turn the call over to Joe Laezza, our President, and co-CEO.

Thanks a lot, Ed.

So welcome everyone.

Thanks for joining us today.

With me today are David Robinson, our Co-CEO, General Counsel, and Ed Heinen, our CFO.

David and I are going to present an overview and discuss -- discussion regarding the state of Glowpoint's business and current industry trends, as well as some other matters of importance, while Ed will provide our first quarter 2009 financial results.

After our prepared comments, we are going to open up the call for Q&A.

So that said, in the first quarter of 2009, we continued to grow despite a sharp contraction in the US and international economies.

In the United States alone, gross domestic product declined 6.1% during the first quarter.

The ongoing global recession has had an obvious adverse impact for numerous companies across a wide range of industries and industry segments.

In the video conferencing telepresence space in particular, many of the market leaders reported declines in sales or results.

And for example, Tandberg posted a 15% decline in revenue over the previous quarter, and PolyCom reported a 13% drop in year-over-year sales.

And in one extreme example, Nortel blamed the economy for it's 37% drop in revenues.

In spite of all of this, Glowpoint continues to post both year-over-year and quarter-over-quarter top line growth.

While we're certainly very proud of these achievements, especially in light of the current state of the global economy, we remain focused on our commitments, to both accelerating the growth of our revenue recurring base and achieving consistent positive operating cash flow.

In light of the progress made in the first quarter with new sales, we did in fact, see a higher churn rate than planned.

Churn rate is the measurement of disconnects in a multi-recurring revenue model.

The good news is we have still managed to achieve net incremental growth.

Meaning we didn't disconnect more than we added.

The bad news is that the growth wasn't as impactful as it could have had been, had the sales and installs not gone to replacing some disconnected services.

So, we continue to face a number of challenges in our business, driven by the economy in general, but remain highly optimistic that we will be able to continue to execute on our plan toward the achievement of these goals.

More specifically, given the visibility we already have into the second quarter, assuming we stay on pace, and the current economic conditions do not deteriorate further, we believe that Glowpoint has the necessary traction and capital resources to achieve operating profitability in the third quarter of this year.

I'll now turn the call back over to Ed, who will provide a review of the first quarter financial results and highlights, and upon conclusion of Ed's comments, David will take -- will address the impact of some financial and accounting matters, after which I will provide final few closing thoughts.

Thanks.

Hi to everyone.

We'll now discuss our financial -- our financial results for the quarter ending March 31, 2009.

As we do on most calls, prior to reviewing the financials, I want to remind everyone about the components of our core revenue stream.

This revenue is recurring model drived and products and services that meet our overall strategic goals from a growth margin and core competency perspective.

We believe these products and services offer the greatest prospects for high margin sales and growth, and therefore our sales and markets efforts are predominantly focused on promoting them.

Our core revenues comprised of managed VNOC services, managed network and B2B business exchanged services, multi-point bridging as well as event and professional services.

We remain focused on these because they are in line with our corporate strategy, and accordingly meet our margin contribution requirements.

Noncore revenue includes our ISDN resale business and certain projects which involve the integration of various hardware components, or procurement of hardware components for our customers that we do from time to time, in support of some high profile customers.

Our concentration on core revenue streams has again generated continued, consistent year-over-year growth for the quarter ending March 31, 2009.

With monthly recurring and related revenue increasing 12.4% to $4.8 million for the quarter, as compared to the same period in 2008.

Revenue from multi-point bridging increased 16.3% to $1.2 million.

Compared to the fourth quarter of 2008, the monthly recurring and related revenue increased 6.1%, and revenue from multi-point bridging increased 19.9%.

Our ISDN resale business decreased to 41.3% to $0.36 million for the year-over-year quarter, and decreased $75,000 or 17.2% sequentially.

Please remember that is a planned reduction in revenue, consistent with our strategic focus on higher margin recurring revenue business opportunities.

The combined total revenue increased 7.4%, to $6.4 million for the year-over-year quarter, and 7.7% sequentially.

The company's gross margin increased 14.4%, to $3 million for the quarter, from $2.65 million in the same period a year ago, and sequentially 26.2% from the fourth quarter.

Gross margin as a percentage of sales was 47% for the quarter, as compared to 44% a year ago and 40.1% in the fourth quarter.

On our last call, we mentioned that we incurred various costs prior to realizing the associated revenue for large contracts already won.

That expense continued into the first quarter of 2009, without the benefit of a full quarter of revenue.

For example, we expanded our VNOC global support capabilities, and incurred the related costs associated with this, and most importantly our directly related to contracts with numerous marquee customer, now part of our monthly recurring revenue mix.

Our operating expenses increased by 32.4% to $4 million for the quarter, as compared to $3 million in the same period a year ago, and decreased by $132,000 from the fourth quarter.

The primary component of this increase were two-fold.

First, there were approximately $600,000 of increased expenditures incurred in connection with our transition to 24/7 global support already discussed above.

These expenditures were primarily related to increased salaries and benefits attributable to that service expansion.

We had to incur the cost, prior to the full revenue ramp expected from in-house contracts that justifies the additional expense.

As the revenue comes online, the costs will be more than offset and a healthy margin for quarters going forward.

Second, we incurred a one-time charge of approximately $400,000, associated with the separation expenses related to the resignation of our former CEO and two other board members.

Unfortunately, these increased expenses and separation costs of about $0.9 million, outpaced the combined revenue increase in margin improvement, resulting in a loss from operations of $0.96 million for the first quarter of 2009, which was an improvement from last quarter's loss of $1.7 million, but up from the loss of $0.36 million from the year-ago period.

This increased loss from operation should not repeat itself, as the full benefit of the revenue associated with the expansion we realized going forward.

Also, we do not expect the same magnitude of nonrecurring expenses in the second quarter.

Therefore, normalized operations should be improved sequentially in the second quarter of 2009, as our key operating metrics continue to reflect consistent performance improvement.

One material change that has impacted us and many other companies is the implementation of Emerging Issues Task Force Issue No.

07-5, determining whether an instrument, or embedded feature is indexed to an entities's own stock.

EITF 07-05, which became effective January 1, 2009, and requires to account for derivative liability or warrants.

This is a new accounting pronouncement that took effect for the first time, during the first quarter of 2009.

David will elaborate a bit on what this means, but in the first quarter this noncash item which will never be paid, and is simply a reclassification from equity to liabilities for the value of our warrants, resulted in a charge of $1.1 million in our statement of operations, and a $4.03 million long-term liability on our balance sheet.

I'll conclude with our cash position on March 31, 2009.

On our last call, I mentioned that we expect to end the first quarter of 2009 with approximately $1.9 million of cash.

I'm pleased to announce that we ended with over $2 million, and continue to believe that we have sufficient cash to fund our operations with cash flow break even.

With that, I'll pass it on to David.

Thanks, Ed and hello to everyone who joined us on the call today.

Yes, you unfortunately heard it correctly, that we're back dealing with the complexity of derivative liabilities, after working so hard to eliminate them in late 2008.

The past derivative liabilities that Glowpoint wrestled with however, could have required a cash payment based on certain circumstances, so in that regard it was a decent disclosure from a total risk profile perspective.

But again, we cleaned all of that up in late 2008, and the Company remains free of any risk of cash settlements, related to any of our issued and outstanding securities.

The new accounting rules, specifically EITF 07-5, require the company to book a derivative liability, and incur a noncash charge on the income statement.

It will never result, however, in a cash hit to the Company.

During the course of our analysis and subsequent discussions with our auditors, I repeatedly questioned how this is even a liability.

In any event, this noncash charge will distort our results from operations, requiring a big charge up, if our stock price goes up and a big credit, if our stock price subsequently goes down.

The logic describes me as extremely counter-intuitive.

We've spent an inordinate amount of time trying to understand the logic and basis for the new rules.

And frankly, remain concerned that the resulting impact to our financial statements, and run the risk of being misleading, or at the minimum very confusing to our investors.

Specifically, 07-5 requires a quarterly mark-to-market valuation, for any financial instrument that fails to meet a complex two-step test.

In our case, the new treatment is triggered by the fact that the exercise price of our outstanding warrants possess a weighted, average anti-dilution period for any subsequent down round.

We believe the possibility of such an event is remote, and even in the likely event we were able to raise equity at such levels, the fact that the adjustment is based on a weighted average calculation mitigate any net effect.

Unfortunately, 07-5 does not provide any relief based on the likelihood or net impact of such an event occurring.

And that's a standard FAS 5 treatment, but 07-5 exempts that.

We also analyzed our preferred stock and concluded that no derivative liability is required in light of EITF 07-5.

To reiterate, the new accounting is all noncash reporting, but unfortunately in this quarter it means a charge to operations of $1.1 million, because our stock price rose from $0.38 at the end of the quarter, from $0.30 at the start of the quarter.

Like you, we are very frustrated and already initiated discussions with the major holders of these securities, to see how we might be able to eliminate this required accounting.

Until it's eliminated, we'll do the best we can to present to you, our results based on operations.

In that regard, stripping out the $1.1 million charge because of EITF 07-5, stripping out the $300,000 loss on the extinguishment of debt, the $400,000 separation expenses, and the $2 million loss on the redemption of the preferred stock, we estimate our non-GAAP net loss for 2009 was approximately $713,000, as opposed to $4.5 million reported.

As both Joe and Ed have highlighted, we continue to make progress.

Glowpoint remains debt free, except for lease obligations and normal trade payables.

We think this has had a positive reflect on how customers and partners view Glowpoint.

Our viability is not unquestioned.

We can confidently enter into long-term relationships to solve all their video communication needs, and as Ed mentioned earlier, we believe we have sufficient cash to fund our operations until they generate free cash.

The demand for our services increases, and the pivotal role that Glowpoint plays in the value proposition for the video communications industry is gaining more and more traction.

It's true among industry analysts, and also some key partners who are now willing to publicize this strategic value of relationship, in Glowpoint services.

As far as our agenda vis-a-vis the financial community, we've focused on the health of our business, and as I've termed it, proving our business model, and making sure its scalable.

What that means is demonstrating, that for each new dollar of revenue, we will begin to see operating margins make their way to the bottom line.

Joe and I have had the reins for about seven weeks now.

All of the changes that we're implementing have not been realized, but we've charted the right course.

Right now, our estimate is that approximately 50% of each net new dollar of revenue can narrow our loss from operations.

When the team completes the items we are planning, some of which should be in the third quarter, with others to follow later in the year, and these things include automating some VNOC support and services offerings, we should see more than 65% of incremental revenue add to our operating income.

With the model then validated, and as we've announced expected positive cash from operations with certain assumptions and caveats, we believe our enterprise value will then be a respectable multiple of EBITDA, or multiple of revenue, not the two times revenue we're currently at.

That multiple by the way, really puzzles us.

We have a monthly recurring revenue model.

Every month or quarter, we're not starting from square one, we're building on top of the prior or monthly or quarterly revenue.

The marquee customer deals we've won, with more in the pipeline, and the announcements we expect to be forthcoming should all contribute to a higher multiple.

We continue to see video communications of becoming an acceptable alternative to always meeting in person.

You can have face-to-face communications without the cost, lost time and hassle of air travel.

Once people begin using video, we think it will forever become part of the practice.

Video is quickly becoming a mission critical tool.

We encourage all of you on this call to use video, and see how it will transform the way you do business.

If you're planning a business trip in the future, please contact to us and see about using video, as a precursor to your meeting, or perhaps as a complete replacement.

You've invested in Glowpoint and video communications.

If you're not using it, see for yourself, what it's all about.

And with that, I'll turn the call back over to Joe who will provide some closings comments, and open up the call for Q&A.

Thanks, Dave.

So before closing, I'd like to briefly touch on marketing and sales progress.

Market seasons seem to be in our favor, and since last call there have been more favorable conditions supporting video communications.

From continued economic challenges and to awareness of cost cutting, to environmental responsibility coming out of the new Obama administration, and of course global health concerns such as the recent swine flu pandemic.

That said, as mentioned on our last call, and have repeated since, it's all about taking advantage of these conditions by executing and capitalizing now.

We've positioned our products and services to achieve this specifically focused on video operation services, also known as VNOC, conferencing services, and network and B2B exchange services.

This allows us to address the specific demands in the market today, and position the Company's offerings for long-term relevance.

Early this week we launched a new website with updated messaging.

And this is part of the new Glowpoint in execution on the demands in the market for our services, and this will continue to evolve in the coming weeks and months.

Our sales distribution model continues to expand and remains focused on direct and indirect strategy.

Our indirect strategies continue to evolve with more global wholesale partnerships like the previously announced, AVI-SPL agreement.

We also recently announced a strategic alliance with Affinity VideoNet which we hope to sell our services into thousands of affiliated video conference and telepresence rooms in 60 different countries around the globe.

These are critical strategic relationships with major players in the industry that Glowpoint could only dream of getting not all that long ago.

And major players in the industry continue to come to Glowpoint to help them succeed.

For example, we recently announced a new service bundling, we named our VNOC Select service.

In the press release announcing that offering, a senior PolyCom executive said, "working with Glowpoint, customers have access to the broadest range of fully inter-operable standards-based telepresence and visual communication solutions from PolyCom, as well as a range of services from a fully managed.

hosted VNOC to supporting services for organizations with more in-house resources.

The combination gives customers solutions to meet their unique applications and budget and service requirements, as well as complementing their specific IT infrastructure and resource needs." This is a truly powerful statement coming from a market leader in the industry.

We look forward to continuing looking with our partners like PolyCom, to fulfill our mission of enabling a global community, where video communications is part of everyday business life.

A key part of this is our telepresence inter-exchange network which will enable secure B2B, business to business, video communications, regardless of how the enterprise is connected, or what equipment is being used.

We have a number of exciting developments related to this in the works, and expect to be in a position to make announcements as soon as next week, and leading up to INFOCOM, which is an industry trade show where Glowpoint exhibits, that is in mid-June.

So to recap, we've announced and discussed today that we've posted another quarter of core revenue growth, and expect that trend to continue.

We posted strong margin improvements to date, and expect this trend to continue also, as farther operating efficiencies and high margin businesses won and activated.

We made further progress towards profitability, and believe we could see positive cash flow from operations in the third quarter of 2009, assuming trends in revenue and operating costs continue, and of course the economic condition impacts do not change.

We have establish the a product offering that continues to be validated by the maturing market for managed services, and further grown and developed our global distribution capabilities with new and increased productivity in our in direct channels.

So finally some closing thoughts.

We've discussed today that the Company continues to trend in the right direction, and anticipate this to continue.

Most importantly, in support of this statement, we have all of the right ingredients in place to make this continued trend a reality.

From the market and industry conditions, to a further reinforced foundation and product offering, the ingredients are there.

As mentioned, we've been working on the messaging and product offering with the new website launch, and with this exercise that there has been a lot of discussions around case studies and success stories, and all of those kind of things that go on a website.

And interestingly enough, what we do not discuss often is the story developing about Glowpoint as a Company.

In this respect, as with any good book, this story is getting more interesting, and I would submit to be a success story at this point, of which the final chapters are upon us.

Translating this into sustainable results, is and will continue to be the primary objective, with priorities remaining focused on driving profitable growth and increased shareholder value.

With that, I'll turn it over to the moderator, to open the call up for questions.

Moderator?

Thank you.

(Operator Instructions).

Our first question comes from the line of [Jim Wookie] with WM.

Please proceed.

Hey, Joe, hey David.

Hi.

Good job on the call.

You had a lot of good things, a lot of good information.

First, looking, you touched, and I'm glad you did, on the TEN initiative, how big of an opportunity to you see this?

And if you could put it in layman's terms or explain what TEN is really all about.

Yes, sure.

So the -- so this is a previously announced offering, as you know.

Right.

But it's our telepresence inter-exchange network offering.

The awareness at information and buzz, if you will out in the market right now supports the application of business to business video communications.

And companies like Cisco, have a promoting exchange offering they call Telepresence 2.0 and the next generation has matured in to something Tata recently announced, which is their Global Meeting Exchange, and AT&T has their flavor of it, and BT has their flavor of it, et cetera, et cetera.

The one common denominator is A, it's specific to Cisco technologies and B, it's closed to the carrier's networks, meaning the carriers can only offer it to customers who consume their own network services, and in the telecommunication space, the big carriers don't always play nice.

So a big gap, in realizing the true value from B2B, and driving greater adoption of video, is ultimately having an open-standard based the capability which would ultimately bridge the gap in islands -- of what we call islands of video out there.

So Glowpoint's initiative has been focused on capitalizing on that, and solving that problem, but more importantly is more of a established community, that we're now leveraging to publicize, and make available for all video users, whether it's telepresence or room systems, to communicate with that established group of users on the exchange, and others in public community environments.

Inter-operability is part of that too.

How far are we away from commercializing that?

Is that still -- is that in the idea stage, or how far are you going to bring that type of service to the market?

Yes, that a good question, so -- s two-part answer here.

First and foremost, Glowpoint's core offering, and what we use to refer as the Glowpoint network or cloud, that is the exchange, and there is ultimately at this point over 6,000 different video units connected to it, made up of over 800 different businesses.

So they can in fact communicate with each other on a B2B exchange type of basis.

So it's been established, it's not a -- it's not a nice to have, what is ultimately evolving here though, and is somewhat until the infancy stages, frankly, is this concept of bridging carriers networks in a manner that doesn't just pass IP traffic, if you will, but ultimately does it in a standard way, that solves the plug-and-play type of securities in plug-and-play right now, so that's why it's in the infancy and also drives consistent and ease of use.

As with anything, this is obviously a great opportunity to viral adoption, but it's not very easy to accomplish today.

So in that regard, it's somewhat infancy stages.

Any idea what size of a market we're looking at?

Well if you look at the numbers relative to the amount of deployed video systems in the world right now, it's in excess of 1.5 million.

If you look at numbers of telepresence systems deployed, and PolyCom talks about they deployed over 50,000.

Tandberg, similar numbers, Cisco, similar numbers.

Telepresence is ultimately really driving a good tipping point for the industry, and greater adoption experience is the experience is completely different from what has been there in the past, and maybe it's the next level of video and all of this good stuff.

But at the end of the day, your numbers are big and the question is how quickly will this take affect and until it's very simple, it's not going to be viral, and that's what Glowpoint is focused on, making it easy and simple for it to become a viral, easy process to participate in.

Okay..

Are we doing that on our own or working with some strategic partners.

Definitely not all on our own.

There are multiple means out there in which certain exchange capabilities are already there.

We fully intend on planning to partner with many of the carriers, and other providers that provide this type of service.

And ultimately establishing a global community in that regard, and having carriers connect to it as well.

But in terms of the go-to-market strategies, we do expect a strong adoption and support, based on some of the early indications in the industry from the analysts and other partners.

Do you know of anybody else in the space, thats attempting or doing the same thing we're doing right now?

Well, sure.

I mentioned the Cisco -- right.

But that's all closed.

And Ecoystem and drive.

But there are some other carriers and service providers out there that do in fact, bridge the gap between network providers as well, yes.

Okay.

Next question, looking at our pipe, what's is the status to date, and how much of that is being driven by direct and indirect, on the sales force standpoint?

The state of the sales pipeline is -- is strong.

One thing I will say is that there has been a lot of activities around our piece.

In the beginning of last year, with the advent of Telepresence and Cisco entree into the market, there seems to be a flurry of activity around sort of decisions being held up, and going to RFP because everyone sort of got a little confused when Cisco introduced their definition of telepresence, and all and that shook loose.

But I would say the second round of that has become much more informed, much more intelligent.

There is a lot more data for large enterprises to go and pursue.

There is a lot more reasons they're going and launching campaigns, whether it's a green initiative or whether it's to cut cost long-term.

So it's not just an easy sales process is what I'm saying here, but certainly an encouraging indicator that there is a lot of RFP type activity.

Unfortunately, the reality of RFP's are, they do not happen overnight.

The sales cycle on those type of sales are a bit longer than the everyday business.

So I would suggest that the state of the pipe is very healthy, in that regard.

And you asked from an outlook perspective, like we said, we anticipate the trends that we're realizing to continue.

Okay.

Last question.

The $600,000 in whatever -- not the.

To expand the service capabilities?

Correct.

Yes.

What kind of number do we anticipate for Q2?

Well, that number is not part of our on going operations, so are you -- we're not expecting any --

I know.

So I'm just doing the back of the envelope math, and 600 and 400 was a million dollars.

And we lost roughly 9 -- what was it, 960, 970?

Yes.

It seems like with business ramping, I'm trying to figure out why we wouldn't be profitable in current quarter?

Well, the second quarter you should see the 600 will still stay there as our cost, the 400 hundred for the separation should disappear, and the positive will be the additional revenue being picked up in the second quarter.

As was mentioned before, the only potential impact that would be negative, would be the churn on some of our current customers.

But again, if we're able to maintain the churn with the expected revenue that we do have with contracts on hand right now, that increase in revenue, in addition to the reduction of the separation agreement, is where we're hoping to get approaching the break even for the net loss -- for the operation line, and definitely by the third quarter, we expect to be hitting that point.

Okay.

Guys, good job.

Thanks a lot.

Thanks, Jim.

(Operator Instructions)

I guess, Jim, I answered all of the questions.

Jim did a good job of asking all the right questions, I suppose.

And our next question comes from the line of Mr.

Mark Hanzlik with Glowpoint.

Please proceed.

Yes, hi gentlemen, just a couple of questions here.

Looking at where we're at as far as what we're doing on the Investor Relations side here.

I wonder if we could go into a little about how we're going to try to get this Company discovered as we sit here.

These conference calls seem to be all going together, and they pretty much sound the same as we move forward.

It seems like there is always an extra charge that sets us back here from profitability, and I'll trying to figure out where we're going on the investor side, if you could explain that.

Sure.

Certainly we do not expect any additional one-time charges on a quarterly basis.

So we believe that's behind us.

There is no guarantees but again we think that's behind us.

I mentioned before, proving the business model.

And once we get to positive cash flow, operating income, I think that's the time that we go out and really do a full-court press on the IR front.

We've been focused really on execution.

Right now with everything that's going on in the marketplace, we're not convinced that any dollars we would spend on any active IR campaign, would necessarily be heard out in the marketplace.

So again, we're bidding our time, we are executing and we think the time will be right in the next quarter or so, two quarters plus, to roll out a more active IR campaign.

Okay.

I'm also looking at the insider trading activity.

And I'm just wondering if -- I'm trying to find, has there ever been anyone with this Company purchase any shares on the open market?

I would think that would by relatively inexpensive way to show some support for the Company?

That is something that we've looked at.

We do have an insider trading policy, with a pretty lengthy blackout periods, but that's a fair question and one that we'll look at.

I think in the past people have bought stock.

The three people participating on this call did invest in a past deal to show support in the Company's future.

Yes, but the problem with that is, I believe everybody knows the way that -- that was priced at a discount.

and then just recently repriced.

So we're talking about somebody actually putting up some of their own money, and going out and buying some shares because this Company -- we do not seem to trade.

I've been involved with this Company for years, and I'm -- we sit out here as investors, we're pretty frustrated that there is no trading, and there is just -- I think that would be a great way to show some support for the Company, especially now with all that's going on.

Duly noted.

Okay.

Thank you.

Thanks.

And our next question comes from the line of Mr.

Jack Gilbert.

Please proceed, sir.

That was the best conference call I've heard since I've been listening, and that's been a long time.

That's great to hear, Jack.

Wait a second, is this really Jack Gilbert?

Yes, it's the best conference call by far.

Thanks, Jack.

I have one question.

Just I saw the 600,000, but looking down a little bit more into detail, I saw general and administrative went from $2.1 million up to $3.1 million.

That's a million dollars.

Yes; again, that was directly related to those increased operating costs as Ed was explaining.

All right.

We're doing that because of for businesses that's on the books, that's going to be coming in.

Yes, it's businesses that going to be coming in.

And I think the important thing to look at is in the fourth quarter, comparing to fourth quarter, we're down about $130,000 in G&A from the fourth quarter.

So from a year-ago, we've done a big ramp up to get 24/7 hiring of people.

That was pretty much accomplished in the fourth quarter, and now we're kind of right sizing it a little bit, and the revenues are starting to materialize at this point in time.

But the two big things, was from last year was the staffing of 600,000, and the 400 for the separation agreement.

The actual -- if you back that out, it has gone down a 200,000 from last quarter.

I'm looking forward to the quarter we're in now.

It looks like we should be very, very close to break even, and you guys are doing a great job.

Thanks a lot.

Thank you, Jeff.

And our next question comes from the line of Sam Schwartz with KMC Corp, please proceed.

Gentlemen, bravo.

Thanks, Sam.

Thank you, Sam.

Much, much improved.

I have one marketing question.

And that is, with your unique position in the industry, have you ever considered with one of the box manufactures, bundling in a la the way Dell or Microsoft does when you buy a PC, and bundle in your service as kind of a pre-packaged kind of phenomena, and thereby the consumer or business customer would specifically have to choose not to select, or opt out of the contractual arrangement?

You have done any thinking on that?

It would seem to me that's a terrific marketing device that the larger successful companies do utilize.

Yes.

Yes.

Funny enough, Sam, I'm looking at David, and smiling and in our next call, we're going to be doing this over video.

We'll have an actual webcast where you can see our body language.

But it's funny, you bring that up.

I recently socialized some of that with the team here, and I literally used the term opt out, because the opportunity is ripe and it's absolute in terms of acceptable business services that Glowpoint is offering, to go and now start attaching it and if you -- it's inherent in the services, and if you do not want it, you have to kind of check the box to opt out.

That's the ultimate objective, absolutely.

We do think there might be some opportunities to do some of those things, with some of the newer strategic relationships established, so we are considering that.

But yes.

Okay.

Great.

Congratulations.

Right on.

Thank you.

And our next question comes from the line of Mr.

Stanley Weinstein with Stanley Weinstein.

Please proceed.

I just have a couple of quick questions.

Is there any significance to the show that happening now, at least I think it was happening yesterday and today, in New York with Sony?

I think you might be referring to Streaming Media East.

That's the only show I'm aware of that's happening in New York City at this point.

Not -- Glowpoint is not a party to that show?

No.

Well, we attend.

We do have some partners that are part of that.

Ultimately that really just fits into our broadcast solutions, where we have some representation from Sony there, that we would -- that we would obviously get together with and all.

But nothing formal, no.

There's nothing of any consequence that's happening with Sony, though?

No.

Nothing formal, that's correct.

Okay.

And the other question, with all of the 400 named companies that we are involved with, and especially our relationship supposedly with PolyCom, why is it so difficult for your PR people to get us some visibility with PolyCom?

I mean they speak to all of these other companies that they're working with, but you have to be a magician to figure out that Glowpoint is in there at all.

Well, actually, Stanley --

It's like a big secret.

Well, we did do a release with PolyCom named in it and it included a quote from a PolyCom executive.

I saw that.

So that's pretty big.

Historically, you're sharing the frustration that many people have shared, ourselves included, and that is including some of the names of the marquee customers.

In the last three weeks or so, we've had three releases that specifically name some of our partners.

PolyCom was one of them.

AVI-SPL, Affinity VideoNet, so we are now getting the traction, getting the support from our customer and vendor community to be included in our releases.

So I think that's a nice change.

Yes.

And I guess I would add to that to suggest that historically part of the reason perhaps there were some challenges there, was really not recognizing the full value where Glowpoint fits into the Ecosystem and appealing to their business goals.

And the good news is, there has been so much progress made on that front and we absolutely see the opportunity to -- the opportunity to fully take advantage of that on a go-forward basis.

And you heard us answer Sam on some of those opt-out offering and everything.

But David hit on it.

There has definitely been a challenge historically, and a lot of progress in the recent months in that regard.

So stand by, we think there is more to come in that regard.

I'm standing by.

After seven plus years.

Patience is not anything that I have been lacking.

The last question, we seem to always be a quarter behind on positive cash flow.

Do we not have a cash burn issue any more?

We're at the point where we are still burning a little cash in the first quarter, and in the second quarter so far.

But we're right at that point where unfortunately or fortunately, we're hovering there.

If I have some sales tax payments on some of our past stuff, that could hurt us a little bit.

If our receivables from our customers are better than expected.

it helps us go positive with the cash flow.

So we're somewhat at the mercy a little bit, of some of our customers paying on time, but we're right at that point where we're hovering at the break-even point right now, and I wouldn't be able to say that a quarter or two quarters ago.

Okay.

Thank you very much.

That's it.

We have one follow-up question from the line of Mr.

[Jim Wookie] with WM.

Please proceed.

Hey, guys, one quick question, are we participating or have any presence at the Interop show in Vegas next week?

We do not have a booth.

We're not formally participating.

But the good news is, we will in fact be present.

One of our technical leaders are are actually speaking on a panel and was solicited to do so.

And I will actually be out there having some meetings, and probably hanging around some booths there to cover some -- some things.

Excellent.

Thanks guys.

Great.

Thanks.

And there are no further questions in queue at this time.

I would like to turn the call back over to Mr.

Joe Laezza.

Please proceed.

Thank you very much.

So, look, on behalf of the management team here, I speak for all of us.

We look forward to the coming quarters, and would like to again thank everyone for your participation today.

We truly appreciate your continued support, and are incredibly optimistic for what is to come here.

So thanks again.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect, and everyone have a great day.