Sirius XM Holdings Inc (SIRI) 2009 Q2 法說會逐字稿

Good day everyone, welcome to today's Sirius XM radio second quarter 2009 earnings conference. Just as a reminder, today's call is being recorded. At the conclusion of the speakers' presentation, there will be a question and answer session. (Operator Instructions).

At this time, I would like to turn the conference over to your host for today, Mr. Paul Blalock, Senior Vice President of Investor Relations, please go ahead sir.

Thank you. Good morning everyone. Welcome to Sirius XM Radio's second quarter 2009 earnings conference call. Today Mel Karmazin, our CEO, will be joined by David Frear, our EVP and CFO, and they will review Sirius XM's second quarter 2009 financial results. At the conclusion of our prepared remarks, management will be glad to take your questions.

First I would like to remind everyone that certain statements made during this call might be forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. These and all forward-looking statements are based on management's current beliefs and expectations, and necessarily depend upon assumptions, data or methods that may be incorrect or imprecise.

Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For information about those risks and uncertainties, and more information on the Company, is contained in Sirius XM's SEC filings. we caution listeners not to rely unduly on forward-looking statements, and disclaim any intent or obligation to update them.

As we begin, I would like to caution our listeners today that some of the results may include discussions about actual results and proforma results. Listeners are cautioned to take special care to insure accuracy in looking at today's report.

I will now hand the call over to Mel.

Thanks Paul. Good morning everyone, and thanks for joining us.

Last week marked the one year anniversary of the merger of Sirius and XM. What the Company has accomplished in the last 12 months is extraordinary. We successfully integrated the two companies, captured a significant amount of synergies, offered consumers programming and price choices, now provide a significantly better listening experience for our subscribers, and very importantly, addressed the legacy liquidity issues facing the Company as a result of the debt maturities.

This was all accomplished during the most difficult business environment in recent history. Earlier this year, we communicated to investors that as a result of our merger, we are able to rationalize our cost structure, and as a result, Sirius XM is truly a cash flow growth story. And a great story it is.

As you saw in our press release this morning we increased for the third time since our merger our guidance for 2009 adjusted income from operations, which we also refer to as adjusted EBITDA. We anticipate over 400 million this year, compared with a loss of 136 million in 2008, which is a swing of over 536 million in one year. I believe you will all agree that will be astonishing performance.

Second quarter 2009 results marks our third consecutive quarter of significant growth in positive adjusted EBITDA. With 132 million in second quarter adjusted EBITDA, it is clear that the merger of Sirius and XM is paying off. Compared to one year ago, our adjusted EBITDA improved by approximately 193 million. More specifically expenses that are included in the adjusted EBITDA decreased 187 million, or approximately 28% compared with the second quarter of 2008. Year-to-date we have produced $241 million in positive adjusted EBITDA.

The Company also generated positive free cash flow in the second quarter of 13 million, as compared with negative proforma free cash flow of 169 million in the second quarter of 2008. We grew revenue slightly, which is something very few consumer dependent companies were able to do in Q2. Revenue up 1% and expenses down 28% yield the outstanding financial results we achieved.

Other highlights of the quarter include a 3% increase in subscription revenue over last year, a 4% increase in self pay subscribers as compared with the second quarter of 2008, and I am pleased that the self pay subscribers are virtually unchanged from the first quarter of this year. Total subscribers results including paid promotional subscribers were down 1% from second quarter of 2008, which is a decrease of 185,000 subscribers from the first quarter of 2009. Mostly from the promotional bucket, and a significant improvement compared to the first quarter decline we experienced.

I am also pleased to report that our monthly churn improved to 2% in the second quarter, down from the first quarter of 2009's churn of 2.2%. Average revenue per subscriber, ARPU, also improved to $10.66 in the second quarter of 2009, up from $10.55 a year ago, and also up from $10.43 in the first quarter of this year. Tiered selling, including 'Best of' contributed to this increase. We are also currently restructuring our advertising sales department, and expect that advertising will be in the long term an increase ARPU driver as well.

It also appears that the auto world is improving. Both General Motors and Chrysler emerged from the bankruptcy process relatively quickly. SAR declines appear to have bottomed out. Production schedules are resuming, 'Cash for Clunkers' programs are working, and we are cautiously optimistic that the second half of 2009 will show improvement.

Our overall satellite radio penetration into vehicles manufactured in the second quarter was approximately 52%. We are also pleased with the progress we are seeing at Toyota, with a significant ramp of installs into its model year 2010 vehicles, and this should drive our overall penetration rate into the upper 50s in the second half of the year. We are making a great deal of progress in introducing used car programs, which will add to our companies future growth.

We currently have certified preowned programs with Acura, Audi, BMW, Honda, General Motors, Mercedes Benz, Porsche, and Volkswagen, as well as larger preowned dealers and auction houses. We expect to be announcing shortly the balance of our certified preowned programs with other major auto manufactures. The penetration rate of satellite radio in the preowned world is becoming significant. So over time used car programs will become a new long-term contributor to our subscriber growth. We are also excited about some new products and accessories, which we will be announcing later this month, and bring to market this fall. So stay tuned for some new developments.

In June we took steps to improve our liquidity and balance sheet by refinancing some of our expensive debt. Eliminating quarterly amortizations, improving covenants, and pushing out maturities. You will note in our 10-Q which we will file shortly, we have sufficient funds at both the consolidated Sirius XM, and on a standalone basis at XM. Going forward, we will also be very opportunistic in pursuing further balance sheet improvements.

In Q2 we also introduced our iPhone application, and it instantly became one of the most downloaded applications. We are very focused on our subscribers listening experience, as we continue to improve our content offerings. We want our subscribers to get our content in as many ways as possible, so long as the channel is profitable to us.

We are also excited about the upcoming launch of the exclusive Rosie O'Donnell show, coming to both Sirius and XM this fall, will further separate us from the rest of the pack, without question we have the best content in the entire audio entertainment space. Overall Sirius XM continues to execute very well, despite a challenging but improving auto and economic market. We are modestly more upbeat about the second quarter of 2009.

We continue to enhance our programming and deliver on the benefits of the merger, while we generate additional revenue from our varied streams. From my vantage point it looks like first quarter 2009 net additions was the bottom in subscriber trends, and we expect to continue to see improvements as we did in the second quarter, and going forward.

Let me end by saying that we expect to continue to be focused on integration, cost reduction, and improving our cash flow. But our focus is very much on growth. Growth in subscribers and growth in revenue. We need the auto industry to improve, which we are confident it will. July's SAR improved, it could be just a [head faith], but we hope not, and we are now cautiously optimistic about the rest of this year and 2010.

I am proud of today's results, appreciate your continued support, we will turn the call over to David. After David finishes his remarks, Jim Meyer and Scott Greenstein will join us for question and answer.

Thanks Mel. Sirius XM's third full quarter as a combined company shows phenomenal progress in improving our operating results balance sheet. With a 372 million improvement in adjusted EBITDA from last year's first half, we continue to make rapid progress towards our goals of reducing costs, growing revenue and cash flow, and positioning the Company to capitalize on higher auto sales as the economy rebounds.

Most of the results I will discuss today will be based on proforma combined Company figures without purchase price adjustments, which we believe represent the best way to observe the core trends underlying the business. We finished the quarter with 18.4 million subscribers, down from 18.6 million at the end of the prior quarter. The net subscriber loss of approximately 186,000 in the quarter, was almost entirely related to a decline of 171,000 subscriptions in paid promotional trials, reflecting continued low levels of US auto sales.

Self pay subscriptions were essentially flat declining less than 15,000, or less than 0.1%, one-tenth of one percent, in the quarter, to 15.4 million. With the dramatic decline in North American automotive sales, first half 2009 was down 35% from the first half of 2008. Subscribers and paid promotional trials have dropped 20%, from 3.75 million to just under 3 million at the end of the second quarter. Conversely in the same period our self pay subscriber base has grown from 14.8 million to 15.4 million.

As we mentioned on our last call, we began to see an uptick in self pay churn late in the fourth quarter, as macroeconomic conditions weighed on consumers. These conditions manifested in the higher nonpay rates, and higher deactivations coded to financial hardship, which have continued in the first half of this year resulting in self pay churn rate of 2%. That is up about 30 basis points from the reported Q2 2008 number.

But we were pleased to see the sequential improvement from 2.2% we reported in the first quarter. Particularly in light of the actions taken this year to increase free cash flow growth. That is the $2 per month higher price for family plan subscriptions, the new $3 per month charge for online streaming, and the announcement in June of the US music royalty fee.

Conversion rate was approximately 44% in the quarter, roughly flat for the past three quarters, but down versus the prior year, reflecting the materially higher production penetration rate we have in 2009 over 2008. We are addressing self pay churning conversion rates in this economic climate with a variety of targeted offers, improving Best Practices and training throughout the organization, and increasing focus on retention efforts across the board.

There will be a continuing impact on churn going forward from the higher multi-subscriber and online screaming pricing, as well as the implementation of the US music royalty fee which began August 1st. How much will it impact churn, really it is impossible to know, but these are the right actions to take at this point in time to drive improved profitability and cash flow.

Total revenue grew approximately 1%, or $7 million versus the same period a year ago, to $608 million, primarily driven by 1% growth in weighted average subscribers, and a 1% increase in ARPU, offset by modestly lower equipment revenue. The increase in ARPU would have been higher on a subscription-only basis, as Mel mentioned, as we did see a decline in our advertising revenues. Ad revenue fell 33% to 13 million, in-line with dismal ad sales results throughout media, but was up slightly on a sequential basis from the first quarter.

For the third time in three quarters as a combined company, Sirius XM delivered positive adjusted EBITDA reaching 132 million, compared to negative 61 million in the second quarter of 2008, a 193 million swing to the positive. Obviously the big driver here was our lower cash operating expenses, where we saw a 28% reduction versus the prior year's quarter, resulting in lower cash operating expenses of approximately 187 million.

On a margin basis adjusted EBITDA reached 22% of revenue, compared to negative 10% in the second quarter of 2008, and a positive 18% in the first quarter of 2009. While some of the cash expense reduction is from a lower SAC associated with lower gross additions, we also improved SAC per gross add by 20%, and accelerated our constant fixed costs which were down 33% in the quarter.

Every single expense line item used in adjusted EBITDA declined from the prior year. Satellite and transmission declined 27%, programming 14%, sales and marketing 53%, G&A 33%, and engineering 35%. Even the revenue share royalties was down 5%, as we saw improvement from the renegotiated GM contract, which offsets the effects of higher OEM mix, and higher performance royalties, versus a year ago.

SAC as reported on the income statement was 81 million, down 46% year-over-year, of the $70 million in savings versus the prior year, approximately 52 million was due to lower gross adds, and about 18 million due to greater unit efficiencies as SAC per gross had declined 20% to $57. Summing up our operations, revenues were up 7 million, contribution margin was up by 20 million, pre-SAC EBITDA improved by 121 million, as we reduced fixed costs, and adjusted EBITDA improved by 193 million, taking us from a negative 10% margin to a positive 22% margin.

Consolidated net loss improved 16% to 171 million compared to 203 million a year ago, excluding a one-time noncash loss on redemption of debt, due to write-off of deferred financing fees and beneficial conversion feature. Our net loss would have improved to approximately 64 million. Excluding a noncash 24 million impairment of capitalized installment payments related to the bankruptcy of 'Sea Launch,' our net loss would have improved to approximately $39 million.

To conclude, some final comments on liquidity and cash flow. Sirius XM ended the second quarter with 542 million of cash and equivalents, having successfully raised $500 million in proceeds from XM's senior secured debt offering, which was upsized by $175 million, due to overwhelming demand. That cash raised at a yield of 12.875% was used to repay 325 million of XM bank debt costing 15%, and replace the 15% Liberty Media second lien debt that was due to be drawn on December 1st. The new bond effectively defers 500 million of principle amortization from the next two years to mid-2013, significantly improving XM's liquidity profile, and removing any financing requirements through at least that point in time.

Following the closing, we went into the market in July, and repurchased 179 million of XM's 10% debt due on December 1st. We will continue to look for opportunities to improve our balance sheet going forward. As Mel mentioned, we are pleased to increase guidance for full year adjusted EBITDA to greater than 400 million this year. This is our third increase in guidance in the first full combined year of our merged Company, and in the midst of an incredibly weak macroeconomic environment. The economy will improve, and our Company is well-positioned to benefit from an improving economy.

With that, let's open up the line for questions.

Thank you. (Operator Instructions). We will go first to Lev Polinsky, JPMorgan.

Hi, good morning and thank you for taking my question. A couple questions that I wanted to ask. One is from the CRBC that you are starting to pass through, I was wondering if you have any data points on what kind of impact that is having on churn, or any other kind of data points on how that is improving the number of longer term subscribers? And then any comments that you can make on where ARPU can go over time? Thank you.

Okay, thanks. So the first point is as you probably are aware that Sirius started its subscription service in 2002. And the price was $12.95. And has not had a price increase on that $12.95 since then. After that period of time, the Company added content like Howard Stern, and the NFL, NASCAR, and various other programming elements without changing the price point.

So though we certainly would love the idea in this economic time of having consumers get the best price we can afford we think that we have an extraordinary value proposition that we are giving to our subscribers. So I think that as David pointed out, we have no way of knowing what the impact would be. What we know is, that we will be recouping hundreds of millions of dollars of cash. And that it was the right decision to make. We hope and we believe, that based on our subscriber satisfaction levels, consumers love our product. And we think that for under $0.50 a day, we still offer a terrific offer for them.

So we remain very optimistic, we expect that the churn will increase. But it was again the right decision to do. And as it applies to ARPU, we believe that is something that will continue to grow, continue to grow as we add more buyers of our packages, as we are charging for streaming, and various other things, advertising will improve, and that will have a beneficial effect on us.

The other thing too just be aware of, is that the copyright royalty funds that we will be capturing will not be reflected in ARPU, it will be reflected in revenue, and that will also significantly increase our revenue, but it won't affect ARPU.

Thanks so much.

Up next from RBC Capital Markets, we will go to David Bank.

Thanks, good morning. A couple of questions. Mel, can you talk a little bit about whether or not you started to work on any broader strategic synergies with DirecTV, or any of the other kind of Malone entities? Now you have had some time to kind of digest your guys, the investment that they have made.

The second question is in terms of a reverse stock split, I think with the stock kind of remaining down around this dollar level, even with actually some pretty impressive stock price performance, it probably hinders some of the broader institutions from participating in the stock. Can you update us on your thought in terms of a reverse split?

And two other questions thanks for taking. The first is can you give us a sense of what the take rate and the stickiness has been on the iPhone app, after the promotional period, where the service is free is passed, what percent of customers actually have been signing up for the paid product?

And last, on the royalty pass through, can you just review for us the impact on the cost of goods sold, the royalty payment, what it is doing to, how it goes up as a percent of margins, and what you think the impact is on a subscriber contribution. So it sounds like given the pass through that you are giving subscribers, it is probably a wash, but I just want to make sure.

Let me start, David will pipe in. So regarding our relationship with our newest large investor Liberty Media, our relationship is terrific. We have had a number of Board meetings since they joined with us. John Malone, Dave Flowers, Greg Maffei have all been active participants at our meetings, and are making a contribution to our Company. We have a very good relationship, and have had with the folks at DirecTV. We are open for doing things together, but there is nothing specific that I can talk with you about that we have done together.

But it is something that we would certainly be looking to do, again it would have to be at arm's length, because they are obviously, though they are common shareholder, they are also different shareholders, and we have to make sure that anything we do together would be as a result of the best interest of both shareholders.

Regarding the stock split issue, NASDAQ has informed us that as of August the 1st they have resumed the rule of the $1 bid. The requirement says that if for 30 consecutive days your stock is trading below a dollar, that you have six months in which to respond to that, and correct it. There is also an additional period after that.

So the situation is something that if in fact Sirius XM stock does not trade above a dollar, we would have to take actions, which would mean a reverse split within the next year. We think that that is not a very fair policy. I have written a letter to the SEC about the subject. We believe that that should be a company decision, and not a regulatory decision. We believe that our Company has such a very significant market cap, our market cap is over $2 billion, based on the float that is outstanding.

And we believe that there should be a dual test, it should be the stock price under a dollar, and let's call it a $500 million market cap rule. Warren Buffet is able to have a stock that is trading at over $100,000 a share, we think that our share price is more friendly to investors, than is a $100,000 share price. But again, that is not within our control. Obviously we will make sure we are listed, so that if in fact the only way we can do that is to do a reverse split, so be it.

We are also optimistic that with the financial performance that the Company has been experiencing, and now that the merger is done, and now that we are not just promising on what is going to happen, but are delivering it, that investors will recognize it, and maybe it will take care of itself. But we are not in control of that.

On the iPhone, we thought that the iPhone was a very smart launch for us. We did it in a very good way that, again what we are offering, unlike an awful lot of applications on the iPhone, is we are not offering free service. What we are offering is the free download and a week's trial. So this was never designed that we believe we were going to get a significant number of new subscribers.

We are seeing an increase in the number of subscribers who are signing up for the $2.99 fee, to be able to stream the product, in addition to having it, so a satellite radio subscriber who also has an iPhone is now able to do that, with an incremental $2.99. But the numbers and breaking it down is not something that we are doing. But you should not consider them to be a very significant number, related to our number of subscribers. But it is the right thing for us to do. We continue to believe in it, we will continue to do more of these things.

Your last question on the RIAA sound exchange rule, I will turn over to David.

As you know, the decision from the Copyright Royalty Board came down about 1.5 years ago, and was retroactive to the beginning of 2007. So the increased costs associated with the Copyright Royalty Board decision have been reflected in the P&Ls since, in essence the beginning of 2007.

As it relates to what will happen to margins, well with costs clearly already in the P&L, and now having the freedom under the merger order to begin passing through those costs to subscribers, that it will represent an increment to margins once it rolls through the billing system. We began implementing it on August 1st. It is something that we implement as subscribers come up to their next billing event, and so you should think of the rollout of it as something that takes several months minimum.

Did it play a role in the guidance raise at all, or was it not material enough to make a difference?

Well, I think that the increase, everything plays a role in the guidance raise. Certainly we planned for this increase since the date of the merger. We knew it was coming. So it has always been factored into our outlook for the future.

But I think the fact with the guidance raises is that the Company's performance, in terms of achieving the synergies of the merger, has really been nothing short of spectacular, and that is what is really driving the raising guidance.

Thanks for taking so many questions.

We will hear next from Brett Harriss of Gabelli & Company.

Hi, I just had a quick question on the SAC cost decrease. Could you just talk a little bit about what is driving that, is it equipment costs coming down, is it installation costs coming down, are reactivations in the preowned market affecting that yet?

So the reactivations in the preowned market affect it a little bit, but not a whole lot at this point, the weight is pretty much still on new equipment going out there. It really is sort of an 'all of the above.' We are driving unit costs down that, retail side of the business and the direct to consumer side of the business, that the subsidy levels are smaller now than they were a year ago, that in the OEM business, as automakers continue to make migration from the black boxes in the trunk, to integrated head units that subsidies come down.

And the pull down of automotive inventories in the course of the second quarter also has an effect on it, that with for instance Chrysler shutting off production there for first 60 days, and not shipping cars, that we weren't incurring SAC for the Chrysler side of the businesses, as they were drawing down inventories to support sales, which become growth adds for us.

So it is a little bit of a mix of everything. But I think the way that you should think about it is that net/net the reductions year-on-year are real. So that we quite a while ago established a $60 target for SAC for gross adds that we have effectively hit that target. As we look out into the next couple of years, we will set new targets that are lower, and we will go after those.

Great, thanks.

Up next from Barrington Research, we will go to Jim Goss.

Hi, thank you. Actually before I take or get into the questions, I was going to ask just a follow-up on the discussion you just had. David, are you implying with the Chrysler issue of being sort of an unusual event, that the third quarter SAC might be a little higher, because it wouldn't have that one-time element relative to all the other issues you raised?

Think of it as inventory. If we were drawing down inventory in the second quarter, and as the automotive economy rebounds, and automakers begin to build inventories again, that part of SAC would turn around. But because it is a blended number, it is a little tough to pick out, and give you guidance on how one component is going to react.

Obviously when Chrysler starts its production again, then we will be receiving the prepaid that we get from them for the subscriptions, and therefore the subscriber number will increase, which is where we didn't see that in the second quarter.

Right. Mel I have a question for you, in terms of the overall end game, ultimate end game sort of in the subscriber base, on a sustainable basis, if you go back five or ten years I think we were all thinking in terms of 40 million or 50 million, when Sirius and XM were each adding more than a million a year. Now maybe with the adjustments you have seen, and changes in the competitive situation, if you look at the new addition, and the new models and the conversion rate, whatever you think that might be maintained at, and the retail issues, where do you think a reasonable three or five, or longer term subscriber trend can be?

I think what we are seeing, is that about 90% of the American people have decided that television is something that they feel that they should pay for. There are still about 10% of the people, homes, that are not getting cable or satellite television. That we see that we have probably been if not the fastest, certainly one of the fastest growing, subscription companies.

We got our first subscribers in 2002, and we have over 18 million at this point today. So the idea of where we could be five years from now, or ten years from now, or three years from now, is that we are all confident it will be much larger, we are all confident that we are now at a point where we are a profitable company, we are a company that is generating free cash flow at the current levels, regarding how successful we can be, we had provided some guidance before we went through the Lehman Brothers collapse and the difficulties.

I don't think that there is anything in that guidance, that is so inconsistent to where we are today. But for what year those numbers may apply to. But we believe that as people buy cars we are going to continue to get subscribers. Our churn rate when you compare it to other subscription businesses is a very manageable churn rate.

So that you will be able to see that we will continue to grow subscribers as people buy cars, whether or not it be new cars or previously owned cars. We are going to get subscribers from other areas as well. We continue to offer phenomenal programming, and as long as we continue to do that, I don't know what the competitor that you are concerned about, that is different today than it was going back, there was five years ago when satellite radio started, there was an iPod.

Terrestrial radio was a lot more competitive at that time. They were a stronger competitor to us than they are today. There is a lot of internet, radio stuff out there, but we have over $2.4 billion of revenue. I don't know who you would look to as being our competitor, though recognizing that there is a lot of technology out there, and we do have a lot of competitors. So, no, we feel very good about our long-term prospects. We are feeling obviously, we always believed in our long-term prospects. It was the short-term prospects that were more challenging, and as a result of the merger and resolving our liquidity, we are feeling equally good about short-term, as well as our long-term prospects.

The last issue I would raise would be, on the programming side you have merged most of the programming with the exception of some of the premium services that are still attached to one or the other. Do you see a point that those would be merged as well, or do you think you might even consider premium pricing for certain services at some point, which I know you have not done historically.

Yes, we have as you might recall our commitment at the time of the merger was that for three years we would not raise that basic $12.95 price point. So that July 28 of 2011, we are hopeful that we have the latitude to do all kinds of pricing initiatives that we feel would be in the Company and our subscribers best interest. Until then what we have done, is that we have carved out a mechanism for us to have some tiered pricing, which has worked in subscription businesses, and we think is very desirable. So by keeping best of, it gives us an opportunity to have this tier, and two years from now, we will look at what other changes we might want to make in our pricing structure.

Thanks very much.

And our final question today from Janco Partners, we will go to Murray Arenson.

Yes, thank you, good morning. I wonder if you spend a little more time going over the preowned market, and maybe just talk in terms of, how big you see that market, try and size it up as an addressable market, and maybe taking a look at what the trigger points are that make that meaningful, and how much of it you can capture by going directly through the manufacturers preowned market, as opposed to all of the other used car sales?

Great. So let me have Jim Meyer do that, because he has really been spearheading our program.

We are very excited about the growth potentials of second and third owners of factory installed satellite radio. I think you can actually do your own projections relatively quickly. If you look at the rapid growth that satellite radio experienced, and is continuing to experience for factory installation, and then lag it by approximately 3.5 years, which you can pick your own target, whether it's 39 months or 42 months, we use about 40 months as to when the average person turns that car back in. You can quickly see how many cars will be reentering the market, and in the next three years it is millions, okay.

The next biggest challenge is effectively finding them. We are doing lots of things up front today that we weren't doing a couple years ago, for instance to properly identify that the car is equipped with satellite radio, so that second owner can easily find it.

And then we are working our first major objective, was to capture the lion's share of certified preowned, and we are happy with the progress we made in the second quarter of getting those programs in-line, and you will see us now just like we learned how to convert new cars, we will work very hard on actively marketing, and learning what cadence and what offers work to convert the biggest share of certified preowned.

You are then going to see us expand our efforts with some of the bigger independent entities. We have a very strong relationship with the Penske Automotive Group for instance, and we are working with them, and we are working with others to properly evaluate what is the most effective way to find these subscribers. Finally we are working very, very hard on independent sources for obtaining that then data, coupled with that second owners contact name and address, so that we can effectively market them.

I am very, very bullish on this channel. I think it is a huge, emerging channel. It will take the proper amount of time, both for those cars to emerge to second and third owners, and for us to be able to effectively learn the best way to market them.

So thank you all for joining, thanks for joining us. We are really pleased with our quarter, and we look forward to delivering many more good ones for you.

That concludes today's conference. We thank you all for joining us.