Smith Micro Software Inc (SMSI) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Smith Micro Software Inc. second quarter 2010 conference call. During today's presentation all parties will be in a listen only mode. Following the presentation the conference will be open for questions. (Operator instructions). This conference is being recorded today, Wednesday, August 4, 2010. I would now like to turn the conference over to Mr. Charles Messman. Please go ahead.

Good afternoon. Thank you for joining us today to discuss Smtih Micro Software financial results for our second quarter ending June 30, 2010. By now you should have received a copy of the press release discussing our quarterly results. If you do not have one and would like one please visit us at www.smithmicro.com or call us at 949-362-5800 and we will e-mail you one immediately.

With me on today's call are Bill Smith, Chairman, President and CEO, Andy Schmidt, Chief Financial Officer, and Tom Mathews, Chief Strategy Officer. Before we begin the call I want to caution that on this call the Company may make forward-looking statements that involve risks and uncertainties, including without limitation forward-looking statements related to the Company's revenue guidance for fiscal 2010, its financial prospects and other projections of its performance, the Company's ability to increase its business and anticipated timing and financial performance of its new products and potential acquisitions.

Among the important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements are change in demand for the Company's products, customers and their end users, new and changing technologies, customer acceptance of those technologies, new and continued adverse economic conditions, and the Company's ability to compete effectively with other software companies. These and other factors discussed in the Company's filings with the Securities & Exchange Commission including its filings on form 10-K and 10-Q could cause actual results to differ materially from those expressed or implied in any forward looking statements. The forward-looking statements contained in this conference call are made on the basis of views and assumptions of management regarding future events and business performance as of the date of this call. The Company does not undertake any obligations to update these statements to reflect events or circumstances occurring after the date of this call. With that said I'd now like to turn the call over to Bill Smith. Bill?

Thank you, Charles. Good afternoon, everyone, and welcome to our second quarter ending June 30, 2010, earnings conference call. We are pleased to report another solid quarterly financial performance. We have posted our fifth consecutive quarter of revenue growth, generated the highest quarterly revenue results in our Company's history of $31.4 million. This represents an improvement of $5.4 million over Q-2 2009 or a 20.7% increase in revenue over the same period last year. In addition to our strong top line growth in the quarter, non-GAAP net income was up nicely, posting $6.8 million or $0.20 per share versus $5.6 million and $$0.17 per share that we reported in the second quarter of last year.

We've recently announced Jim Straight as a new member of our board of directors. I would like to thank Jim for agreeing to join our board. Jim brings to us a strong grounding in wireless marketing gained from his years of experience at Verizon wireless. And yes, Jim, I can hear you now. All in all we are very pleased with our second quarter and first half financial results along with the quality of the operating fundamentals within our business.

In the face of continued challenges provided by a difficult economic environment, we delivered very solid performance and have made further strides in the evolution of our product lines. We look forward to the continued deployment of more ubiquitous and faster broadband mobile services with the coming of LTE and the continuation of the roll out of WiMax over the course of the next several quarters and in the years ahead. Our wireless and mobility unit continued to deliver as the growth engine for Smith Micro. Revenues within our wireless and mobility software unit were $28.3 million in Q-2, up 32.5% year-over-year. We remain energized by our prospects for future adoption of our smart mobility platform within this business segment.

We are also committed to enhancing our offerings to enable new solutions that will deliver a smarter mobility experience for our customers and their end users. Revenues from our productivity and graphics business totaled $2.9 million for the quarter, or 9% of total sales. Which was down 33% from the $4.3 million in Q-2, 2009. The product lines within our productivity and graphics business have been undergoing transformation to support a more software as a service business model for our offerings in the future. This shift is well underway, and I will discuss our vision for this unit later in the call after Andy completes his review of the numbers. Andy?

Thank you, Bill. Okay. First let me go over our customary introductory items. As we have in past quarters we have provided non-GAAP results in the reconciliation of non-GAAP and GAAP results. The non-GAAP results discussed in this call net out amortization of intangibles associated with acquisitions, stock compensation related expenses and non cash tax expense to provide comparable operating results. Accordingly, all results that I refer to in my prepared remarks for both 2010 and 2009 are non-GAAP amounts.

Our earnings release which will be furnished to the SEC on form 8-K contains a presentation of the most directly comparable GAAP financial measures and the reconciliation of the differences between each non-GAAP financial measure provided in the press release and the most directly comparable GAAP financial measure. The earnings release can also be found in our investor relations section of our Web site at www.smithmicro.com. In detailed manner for financial modelers let me provide the difference between GAAP and non-GAAP P&L metrics. In terms of stock compensation, stock comp totaled $2.9 million for the current period, broken out as follows; $25,000 for cost of sales, $778,000 selling and marketing, $658,000 for R&D, and $1.44 million for G&A.

In terms of amortization, the total for the current period was $2.3 million, broken out as follows; $1.5 million for cost of sales, $768,000 for selling and marketing. Okay, moving on. For second quarter we posted revenues of $31.4 million and diluted earnings of $0.05 GAAP and $0.20 non-GAAP. Revenue for the quarter was an all-time record up 21% from the second quarter of 2009. International revenue was approximately $3.7 million this quarter across all business groups. Our wireless segment reported record revenues for the quarter of $28.3 million as compared to $21.4 million last year, an increase of 32.5%.

Within the wireless segment, connectivity and security posted revenues at $21.1 million compared to $20.1 million last year. Multi medium, backup and messaging and mobile device products posted revenues of $7.2 million compared to $1.3 million last year. Offsetting overall gains in our wireless sector, our productivity and graphics group posted revenues of $2.9 million as compared to $4.3 million last year, a decrease of 33%. And finally, we reported approximately $121,000 of other revenue which compares with approximately $281,000 for second quarter of 2009. Total deferred revenue at June 30, 2010 was approximately $2.7 million.

Switching to gross profit, non-GAAP gross margin dollars of $28.9 million increased $5.6 million or approximately 24% from the same period last year. As a testament to overall quality of our revenues, our revenue increased 21% year-over-year while our gross margin dollars increased 24% for the same period. As follows, non-GAAP gross margin is a percentage of revenue was approximately 92.3% for Q-2 2010 compared to 89.7% for Q-2 of 2009. Non-GAAP gross margin by product groups was follows; Wireless, 93.5%, productivity and graphics 82.7%, and other revenue 49%. As we've noted before, our margins are driven strengthly by product mix.

Okay. Switching to operating expenses. Non-GAAP operating expenses for the second quarter of 2010 of $20.1 million is an increase of approximately $400,000 from Q-1 driven primarily by increases in head count in facilities. The increase in expense is as expected. From a year-on-year perspective, non-GAAP engineering expenses increased 22%, selling and marketing expense increased 22% and administrative expense increased 38%. It should be noted that administrative expense includes the cost of additional facilities expense and lease hold improvements.

Total non-GAAP operating expense has increased 25% year-over-year driven by planned infrastructure growth and by acquisitions. Non-GAAP operating margin for the current period was 28.3%, higher than our benchmark 25%. Current period operating margin compared similarly to operating margin of 28.1% for Q-2 of 2009. Non-GAAP operating profit for Q-2 was $8.9 million, an increase of $1.6 million or 22% from the prior year. Non-GAAP net income for the second quarter was $6.8 million or $0.20 per diluted share as compared to $5.6 million or $0.17 last year.

Cash generated from operations for the quarter was approximately $7 million. Primary uses of cash for the period were capital expenditures of $2 million. Capital expenditures were primarily lease hold improvements and investment in the ERP system and IT infrastructure. Overall, we posted yet another quarter of improved operating metrics and strong cash flow. Looking forward to the balance of 2010, we're pleased with our first half year performance.

At this time we'll hold steady with our previously announced guidance of revenues between $125 and $135 million. Gross margins will be between 90% and 92%, and we will continue to target operating margins of 25% with the caveat that acquisition tend to lower our margins for one to two quarters post acquisition due to integrated related expenses. Finally, taxes continue to be in a state of change given the state and federal deficit spending. At this time we are still estimating that our 2010 cash-based tax expense will be 25% to 27% of non-GAAP net income. As tax law changes through the year, I'll provide an update to this metric. In terms of housekeeping we expect to file our current period 10-Q this week which will represent our final financial statements for the period. At this point I'll turn the call back to Bill.

Thanks, Andy. As we've mentioned earlier, revenues from our wireless and mobility segment increased 32.5% over the second quarter of 2009. We delivered solid results from every product category within the segment. As we make progress towards deploying our suite of smart mobility offerings. We continue to deliver our market leading intelligent connectivity solutions to key wireless carrier customers such as Verizon, AT&T and Sprint. These customers all contributed nicely to our results in the quarter with each accounting for a minimum of 10% of our revenues.

Although product sales continue to be fueled by our QuickLink mobile connectivity managers, we saw significant improvement from our other wireless product offerings across our customer base in the quarter. Mobility product lines outside of our connectivity and security include mobile device management, multimedia and content management, along with the acquired messaging products, visual voice mail, and push to talk which came to us via our core mobility transaction late last year. Results from the combination of these products were up nicely in the quarter. We see our overall results as a positive indication that our mobility product portfolio, which is designed to support a comprehensive set of applications across a wide universe of connected devices, is being accepted by our customers.

Net revenues resulting from the core mobility acquisition continue to track with our guidance, and we are delighted with a very successful launch by Verizon of our new push to talk version for the blackberry devices in this quarter. In addition, we have picked up a new visual voice mail win with an emerging wireless operator that we expect to roll out by year's end. We have also expanded a key relationship with a current customer to include a visual voice mail version that will include enhanced voice to text transcription services in the coming quarters. We see these as positive results, and an indication that our strategy to deliver smart mobility products for both the client and server are meeting the requirements of our customers.

The Smith Microsmart mobility platform strategy leverages multiple technology components to support many applications that share common modules, architecture and code in an efficient manner. We have designed our platform frameworks for both client and server applications, and we have designed them to work together. One recent example of successfully deploying our platform strategy is with the Sprint EVO 4G phones where every phone ships with a Smith Micro Device Management Client and the Smith Micro Visual Voice mail Client. With the embedded device management client we can automatically update the visual voice mail client to add new features such as in the future use for our voice to text module. Then provision and enable the service over the year without having to touch the device.

On the server side, we leveraged multiple smart mobility components to address policy management, for our connection manager and DM clients. In addition, we support management of applications and device updates, data collection for analytics and diagnostic reporting, and we also enable service provisioning and activation. These capabilities not only differentiate our products but serve to help our customers better understand their end user's habits, and in doing so provide an improved user experience. This ultimately assists our customer in improving subscriber retention while reducing the challenging costs associated with customer churn. Our server platform development is a key component of our smart mobility strategy, and we have made great strides over the past year of building a comprehensive suite of offerings that create value for our customers and enhances the capabilities of each of client applications.

We have seen new applications in demand for our mobile device management products. During the quarter, we have added our second seven figure European customer outside of Nokia to use our DM suite. We have made this technology a key part of our portfolio for the future, and we see these capabilities for managing policies in an intelligent way as a clear differentiator for our entire mobility product line. We continue our work on integrating our full complement of technologies, such as compression and optimization, IP mobility, security and analytics into the Smith Micro Smart Mobility Platform. These technical capabilities serve to enhance our product value and improve the connected digital lifestyle experience.

As we move into the era of 4g wireless, with mobile Internet access available anywhere, we will be prepared to further capitalize on the growth presented by these developments. Our productivity and graphics unit has been hit hard by the softness in consumer spending. Frankly, this consumer softness has been deeper than we anticipated, and is showing little ability to recover in the near-term. As a result, we have chosen to retool this unit around their core technologies of compression and graphics and to infuse our corporate strengths of smart mobility into a new dynamic business case for the unit. We are shifting more of our product lineup toward online solutions that can address opportunities for not just consumers but for professionals and enterprise users as well.

The shift toward a software to service model can build recurring revenue streams that develop nicely over time. We launched the first of our new offerings called Send Stuff Now, which is an advanced cloud based secure file delivery service. Send Stuff Now leverages our StuffIt compression and security technologies to deliver and manage files providing the most secure method for transporting important information and files to the new connected mobile world. Embracing our position as the leader of smart mobility, we have released Send Stuff Now apps to the apple iPad and iPhone.

We will also release a Microsoft outlook plug in and an app for Android later this month. We will follow these with new releases that support Blackberry and Windows Phone7 in short order. This is our first cloud based service initiative in this unit, and we anticipate several other productivity and graphics animation products emerging in 2011 that will utilize the cloud based service model. We have a great vision for the productivity and graphics unit going forward, but the next couple of quarters will be challenging with the consumer on the sidelines.

Before I turn the call over for questions, I would like to offer some further observations and perspective on our business. Our core wireless and mobility business is very healthy, and performing well, as we move toward the next era of emerging 4G high speed wireless data. Looking ahead to the coming quarters and beyond, we see opportunities for software and solutions to help deliver better experiences for the mobile Internet user as we prepare for the emergence of more and more globally-connected devices. The coming deployments of higher speed network such as LTE with Verizon planning to launch in a number of markets by year end will drive more users to new mobile broadband services.

We are still in the early stages of what is sure to be a long-term trend toward an increasingly connected and mobile world. Smith Micro's core competencies in the field of connecting devices, networks, content and people continues to evolve, expand, and increase in relevancy. We are delivering results for our customers today, and we are committed to investing in R&D to create smarter mobility software and service platforms that will offer further growth for our business going forward. We've executed on another solid quarter, growing revenues and earnings.

We are now focused on the challenges ahead for the balance of the year. We face this challenge while difficult economic conditions linger, particularly affecting our consumer facing productivity and graphics offerings. As a result, we see revenues from this group coming in softer than internal expectations over the next two quarters. When we announce revenue guidance at the beginning of the year we told you that we would update you at the mid point. We've posted two solid quarters of revenue and profitability and we are reiterating our guidance with annual revenues landing within the original range of $125 million to $135 million.

However, given the persistent softness we see in the consumer segment, we believe that the challenge of getting into the upper end of the range will be more difficult without a meaningful improvement in the macro economy in the back half of the year or the realization of faster than expected deployment and adoption of 4G networks. We do, however, feel more certain than ever that when 2010 comes to an end our second half will be up sequentially from the first half and we will have delivered strong profitability to the bottom-line. By delivering the strong results, we will have achieved solid year-over-year growth for all four quarters of 2010. With that, operator, I'd like to turn the call over to you for questions.

Thank you, sir. (Operator Instructions) . And our first question comes from the line of Larry Harris with CL King. Please go ahead.

Wow, thank you. A question about the new product initiatives such as Send Stuff Now. We've seen certain margins from that business segment. Could those margins change, could there be additional R&D? What should we be thinking about profitability in that segment going forward?

This is Andy. Let me give you kind of run you through the P&L of what that looks like. Again as you know we're just launching the product. Once we get to more meaningful revenues in that area, again it's just launched so getting started here, it should run at about a 80 point gross margin basis. And of course, we would expect all of our businesses to contribute at a op margin of 25% as with all of our businesses.

But like any other initiative that we have, we pretty much needed to get into seven figure per quarter revenue to actually get to the right operating metrics. Right now again there's not what you would expect is we're going to put some marketing spend into getting that product out over the next couple quarters. In 2011 is when we'll start seeing that particular product or our expectation is that we'll start performing at those type of metrics.

Okay. Okay. And in terms of Verizon, you mentioned that it was a 10% customer this quarter. Is there a more precise number available?

Yes. Sure there is. It's a 10% plus customer. It was actually 38%.

38%. Okay, great. And then finally, and I know certainly you can't speak for customers and such in terms of their launch dates and how many markets and there's a lot of I guess commentary out there. But if they were to move things forward a few weeks or move them back a few weeks, could that have in terms of launching LTE could that have an impact on fourth quarter revenues or it probably wouldn't have a material impact?

Well, if we move it forward obviously it would give us more sell time assuming that the offering, and I really do assume this, is something that the market wants to invest in. So I think LTE is probably going to deliver on the promise. So if it moved up, obviously that would help. If it slipped back, that may not really impact us. Because the first customer to launch is Verizon. You will see a build out as they get ready to launch. And we probably realize pretty much the same revenues.

Understood. Okay. Thank you.

Thank you. Our next question comes from the line of Lauren Ye with J. P. Morgan.

Hi, guys, how's it going?

Very good.

Just had a question about the connectivity. Looks like it was just down a bit sequentially. Anything going on there? Is it more volumes or pricing?

Lauren, this is Andy. It's all RevRec. That has to do with a legacy AT&T contract from the PC tell NSG acquisition. If you look at deferred revenue you've got a jump there for the period of over $1 million. So it's a bit of timing from Q-1 to Q-2. In essence, the quarters were somewhat consistent. In terms of connectivity. And the slight difference you see is just revenue accounting. But when we look at especially the top three carriers, they're growing consistently year-over-year from our perspective. So perhaps that helps a little.

Yes, definitely. Great. The next question is I guess specifically that $7.2 million in the multi media and other area, or not other, but the everything that's in there. That's quite a large jump from last quarter. Was there a specific product that's making this ramp? Or is that the Verizon stuff that's actually --

Here's great news. The great news is that the portfolio play is really starting to kick in. And all three product groups that comprise that area back at the messages, multimedia, and mobile device management, all three were seven figure players in the quarter. So that's great. It's all looking good across all fronts.

Now, you should expect in this area that won't have a -- you won't have a material impact on our results in future quarters, but for all these businesses they're just now stepping into the seven figure range per quarter which is just basically starting from our viewpoint. Which means that it will be a little bit choppy in each of those areas in each business group. Because when you start out these type of products, there's a mix of customization and adaptation as well as recurring revenue.

And as that shifts around in the beginning quarters of launches, it's a little bit more skewed towards one time revenue versus recurring revenue to where each of the product groups will take turns being a lead dog if you will each quarter. But it's a fantastic start in that all three of them are contributing very significantly. We expect them to continue to do so as we go forward.

Okay. Was there any one that made a larger -- what was the one with the greatest growth, I guess?

The largest one right now and what we should expect for the upcoming quarters is backup and messaging products.

And also Bill mentioned that there was another win in device management, Lauren, a seven figure win in device management for the quarter. So that was nice. And frankly the push to talk launch at Verizon with the Blackberry offering was a nice roll out launch for us as well. So as Andy said, really all three of those core areas are starting to ramp up.

Okay. Great. So last question is around I guess the margin guidance of 25% again. So it looks like you've increased margins March and June. I guess can you just talk about, Andy, maybe the thought of maintaining this 25% kind of guidance when it looks like you're running above that?

We just want to always keep caution in terms of -- we are in build mode. We've got LTE launching here in Q-4 which is going to require considerable effort. It has all along, but will continue to require effort. Send Stuff Now is a very interesting product that as we were talking with earlier caller we're getting really prepped for 2011. That's going to take some marketing spend here in the next two quarters. So 25% is what we consider to be our benchmark that we'll hit that for you. But can it go up a little bit? Yes, it can. But we'd just like to keep people cautioned that we do have some important investment to do for the future.

Okay. So I guess more specifically are we guiding a little down then for September and December?

We like to keep it at 25%, the model at that -- with the idea that there are some investments that we do have in our internal models that we'd like to make, and timing is what it is will come in more at our guidance. And if the timing is a little bit, if we're skewed a little bit on our timing then we bubble up.

Okay. Great. Thank you so much.

Thank you. Our next question comes from the line of Chad Bennett with Northland Capital Markets. Please go ahead.

Yeah. Just kind of talking about or hitting on the back half language that you used. You talked about solid year-over-year growth. Not to get too detailed here, but I think the blended year-over-year growth rate for the first half is somewhere around kind of 22% to 23%. I mean, would you consider that solid year-over-year growth? And is there any reason why we would be materially off that kind of up or down?

Well, yes, I think I consider that very solid, especially when you consider that we're doing it in the teeth of what is still a very strong recession an we haven't really come out of it yet. The so I think to continue to grow our business and to execute and to enhance our profitability and our cash flow, we've done pretty good yeoman job.

Okay. So that's -- there should be no different way of thinking, then, for the second half?

Not following your question.

In terms of the propensity of your year-over-year growth in first half relative to second.

Yes. Okay. I think you have to think of it a couple ways. We've said that because of certain conditions like what's going on in the productivity and graphics group, and the fact that they're so front facing to the consumer and the consumer is clearly on the sidelines, that is going to be -- you're not going to see the growth that we would normally expect to see in that business unit in the back half of the year. So, yeah, that's going to make you want to be a little bit more cautious as to how you view the back half of the year. And make certain change that would just fall out to.

Okay. From when we gave guidance early in the year, have our thoughts regarding LTE, 4G, impact and this year changed at all?

No. No. We are very bullish about the entire Wimax roll out. A number of our customers are in the middle of. We're very excited about the first LTE roll out by Verizon. And others will follow. So I think that is a major event, and that's a major catalyst for our business case. And will be so probably for the next couple of years.

The only thing that has changed from January when we gave guidance, if at all, has just been, as Bill pointed out several times, the consumer facing products. Again, everyone is optimistic that the second half of the year is going to be better, but all economic forecasts are such that it is not going to be a big change from where we sit today. So we look at that business as being flat through the year, first year quarter, not growing from first and second quarter where typically we see seasonality in our productivity and graphics before you see an up tick in Q-3 and Q-4. We don't expect to see an up tick in the product group. We expect it to be flat with first half.

Okay. Okay. And the 10% customers in the quarter, and I didn't quite catch them all, I heard Verizon, AT&T, and was there a third?

Sprint.

What was the third?

Sprint. Okay. Okay. And then I guess in terms of I think you talked about new products on top of the Send Stuff Now product that you announced a couple of weeks ago in the back half. And I heard you talk about kind of server-based provisioning and analytics and what not. I guess what should we expect for new products in the second half of the year?

Okay. We have two products that are very close to launch right now. So I would say this sort of set some kind of expectation, assume that they launch within the next 30 to 45 days. You will then probably have at least two more launches and possibly more before the end of the year.

Okay. All right, guys, thanks. Okay.

Thank you.

Thank you. Our next question comes from the line of Scott Sutherland with Wedbush Securities. Please go ahead.

Great. Thank you. Good afternoon, good job on the quarter, guys.

Hey, Scott, thanks.

A couple questions. First of all I want to get back to the margins. Are you implying 25% for the year or just getting your goal is 25% for Q-3 and Q-4 so you're going to actually exceed the other guidance for the year because of the out performance in the first half?

Just three and four so we will exceed the 25% for the year.

Okay, great. And can you kind of on the connectivity and security, can you talk about are you still seeing some customers ramp? What's the pipeline of potential new customers, potentially especially device OEM or international customers?

Okay. Let's first talk about our larger customers. And first off you're seeing the continued roll out of Wimax, the numbers and the adoption continue to look promising and it's clearly growing. When you look to the roll out by Verizon, of LTE, we think that's a significant game changer. And you'll watch the other carriers as they move to 4G as well.

All of this is a very dynamic, very exciting part of our business case and should really fuel our growth. As I said, for a couple of years if not more. So now to talk about offshore. We're getting a lot of traction offshore. We haven't really talked that much about it. And I think what I'm going to probably say is yes, I think we're going to have some more customers in the connectivity and security space as well as our other wireless spaces. But I'll just wait until the deals are done, the ink's dry, and then we'll talk about them.

And lastly on the device OEM side, are you seeing any more traction there?

Yes, some. But you know, if you catch the spirit of what it is we're doing, we're talking about a smart mobility platform. And that platform is designed for carriers. And that's where all of our investment and all of our real heavy focus is going. Yes, we're still selling device management and we're out selling that to other device manufacturers. But if you really want to focus on where the real growth is going to be, and where the real money is going to come from going forward, it's in the build out of this software platform that provides a couple of access points. You can access the platform either through the connection manager or the DM client.

It provides you all the basic services in the area of analytics, policy management, video capabilities that we're going to talk more about video in the next month or two. And it allows you to layer on top of that a number of service applications that can enhance the carrier's ability to generate profits. And they all work in concert with each other. And so when we talk about where we're going at our major customers, we're going to more and more and more products. That doesn't mean we're moving away from the ones we already have. We're enhancing our offerings and we're going to sell them more things. And that gives us a much stronger role and a much more important opportunity for us going forward. I hope that answers your question.

Yeah, that does answer the question. The last question I had is, obviously 4G has had a big driver. How would you or how can you guys benefit from people upgrading Windows7 on their laptops and portable computers? Is that driving a lot of increasing in option now? Is this more of a 4G opportunity?

Scott, I think we're still seeing a replacement cycle going on from XP to Windows 7 devices. And every time there's a knew client that's added to Windows7 device for a user that previously had XP, that's a new license royalty for us. So we continue to see that. Obviously we view 4G as the primary lever in the market place for us. But there's a nice little benefit from Windows7 upgrade cycle.

Okay. Great. Thank you.

Thank you. (Operator Instructions). One moment, please. And at this time I'm not showing any further questions. Management, please continue.

I want to thank everyone for joining us today on our conference call. Should you have any further questions please feel free to give us a call and we'll look forward to speaking to you at our next quarterly conference call.

Thank you, ladies and gentlemen. That does include our conference for today. Thanks for your participation. You may now disconnect.