Smith Micro Software Inc (SMSI) 2013 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Smith Micro Software third-quarter 2013 financial results 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).

Today's conference is being recorded November 7, 2013. I would now like to turn the conference over to Mr. Todd Kehrli of the MKR Group. Please go ahead, sir.

Thank you, Operator. Good afternoon and thank you for joining us today to discuss Smith Micro Software's third-quarter 2013 financial results.

By now, you should have received a copy of the press release discussing our financial results. If you do not have a copy and would like one, please visit www.smithmicro.com or call us at (949) 362-5800 and we will immediately email one to you.

With me on today's call are Bill Smith, Chairman and President and Chief Executive Officer; Andy Schmidt, Vice President and Chief Financial Officer; and Carla Fitzgerald, Chief Marketing Officer.

Before we begin, I want to caution that on this call the Company will make forward-looking statements that involve risks and uncertainties, including without limitation forward-looking statements relating to the Company's financial prospects and other projections of its performance, the existence of new market opportunities and interest in the Company's products and solutions, and the Company's ability to increase its revenue and regain profitability by capitalizing on these new market opportunities and interest in introducing new products and solutions.

Among the important factors that could cause the actual results to differ materially from those expressed or implied in the forward-looking statements are changes in demand for the Company's products from its customers and their end users; customer concentration, given that the majority of our sales depend on a few large client relationships, including Sprint; new and changing technologies; customer acceptance and timing of deployment of those technologies; new and continuing 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 and Exchange Commission, including its filings on Form 10-K, 10-Q, and 8-K, could cause actual results to differ materially from those expressed or implied by any forward-looking statements.

The forward-looking statements contained in this press release and call are made on the basis of views and assumptions of management regarding future events and business performance as of the date of this release, and the Company does not undertake any obligation to update these statements to reflect events or circumstances occurring after the date of this release and call.

Before I turn the call over, I want to point out that in our forthcoming prepared remarks we will refer to certain non-GAAP financial results. Please measure -- or please refer back to our press release disseminated earlier today for reconciliation of the non-GAAP financial measures.

With that said, I will now turn the call over to Bill Smith. Please go ahead, Bill.

Thanks, Tom. Good afternoon, everyone, and thank you for joining our call today.

Last quarter, we reported that our Board of Directors approved a restructuring plan to reduce operating expenses by closing and consolidating certain facilities and reducing our headcount by approximately 26%. This restructuring has been completed, positioning the Company closer to our goal of profitability by the end of the year and resulting in a one-time charge that is reflected in our Q3 earnings.

What is not reflected in our earnings is the remarkable ability of our employees who pushed through this challenging time and continued to service our customers well, move new deals to closure, and evolve our products to solve important problems for the market.

Before I dive into what's next for Smith Micro, I will turn the call over to our CFO, Andy Schmidt, to discuss the details of our third-quarter financial results. Andy?

Thank you, Bill.

First, let me go over our customary introductory items. As we have in past quarters, we have provided non-GAAP results and a reconciliation of non-GAAP and GAAP results. Non-GAAP results discussed in this call net out stock compensation-related expenses and non-cash tax expense, or benefit, to provide comparable operating results.

Accordingly, all results that I refer to in my prepared remarks for both 2013 and 2012 are non-GAAP amounts. Our earnings release, which will be furnished to the SEC on Form 8-K, contains a presentation of selected GAAP financial measures and related non-GAAP financial measures, and a reconciliation of the difference between the two. The earnings release can also be found in the investor relations section of our -- at our website at smithmicro.com.

Moving on, to reiterate, as mentioned in our last earnings call, our Board of Directors approved a restructuring plan in July. This plan involves changes in management structure in order to streamline our organization, facility consolidations and closures, and headcount reductions that amounted to approximately 26% of the Company's worldwide workforce.

The restructuring resulted in a one-time charge of $5.6 million that was recorded in Q3. We estimate that approximately $1.7 million in cash expenditures will be paid out in fiscal 2013.

In terms of our currently completed third quarter, let me provide some detail. For the financial modelers, let me provide the difference between GAAP and non-GAAP P&L metrics. In terms of stock compensation, stock comp totaled $872,000 for the current period, broken out as follows -- $6,000, cost of sales; $144,000, selling and marketing; $217,000, R&D; and $505,000, G&A. While we showed no GAAP tax benefit for the period, due to fully reserving the tax benefit, we are showing a $4.7 million pro forma or cash-based tax benefit.

It also should be noted that we recorded a $5.6 million restructuring charge, which we consider to be an extraordinary event. As such, I will provide our pro forma operating metrics with restructuring expense and without restructuring expense. For the third quarter, we posted revenues of $8.7 million and a loss of $0.35 per share GAAP and $0.20 per share non-GAAP. Excluding the restructuring charge we took this quarter, our non-GAAP third-quarter loss per share was $0.11.

Revenue for the quarter compares to $11 million for the same period last year. International revenue was approximately $500,000 this quarter across all business groups. Our wireless segment reported revenues for the quarter of $7.2 million, as compared to $9.6 million last year. Our productivity and graphics segment posted revenues of $1.5 million, as compared to $1.4 million last year.

Total deferred revenue at September 30, 2013, was $2 million.

Switching to gross profits, non-GAAP gross margin dollars of $6.3 million compares with $8.9 million used in the same period last year. Non-GAAP gross margin as a percentage of revenue was approximately 71.6% for Q3 2013, compared to 80.8% for Q3 of 2012. The reduction in gross margin is primarily due to product mix.

Non-GAAP gross margins by segment are as follows -- wireless, 72%; productivity and graphics, 67%.

Switching to operating expenses, non-GAAP operating expenses for the third quarter of 2013 were $12.8 million, excluding restructuring charges. Q3 2013 operating expense was down $1.5 million sequentially from Q2 2013 and down $1.2 million year over year.

Continuing with the year-over-year perspective, engineering expense decreased 9%, selling and marketing expense decreased 7%, and administrative expense decreased 9%.

Non-GAAP operating loss for Q3 was $12.1 million, or $6.5 million excluding restructuring, as compared to a loss of $5 million in Q3 of 2012. Non-GAAP net loss for the third quarter was $7.5 million or $0.20 per share. Taking out restructuring expense, the current-quarter loss was $4 million, or $0.11 per share, as compared to a loss of $2.4 million, or $0.07 per share, last year.

Cash decreased $5.4 million for the quarter, closing at $18.1 million at September 30, 2013. Uses of cash this period included $680,000 for IT infrastructure equipment, primarily to support our CommSuite products.

Reviewing our restructuring efforts, as I previously noted, we have completed a restructuring which included downsizing our workforce and our facilities. We saw the partial impact of our restructuring efforts in Q3 resulting in a reduction of operating expenses of $1.5 million from Q2 2013.

Looking forward to Q4, we expect total non-GAAP operating expense to be slightly under $11 million, assuming no unforeseen nonrecurring expenses.

In other matters, as you all know, Smith Micro is a NASDAQ Global Select company. Our stock has traded below $1 for 30 consecutive days now, and as expected, we did receive the standard NASDAQ letter outlining their standard compliance terms, informing us that we are not in compliance with NASDAQ's minimum bid requirements for our common shares. In essence, we have until May 6, 2014, to meet the NASDAQ compliance rules. We will continue to monitor the minimum bid price of our common shares and will consider all our options in order to regain compliance regarding the minimum bid requirement.

We believe that by executing on our business strategy in the near future that our stock price will rise above $1 -- the $1 minimum bid price, and we will be in compliance. However, there can be no assurance that the Company will be able to regain compliance with NASDAQ stock market listing requirements or that our stock will remain listed on NASDAQ.

In terms of our 10-Q filing, we expect to file our quarter-end 10-Q by the end of the week, which will represent our final financial statement for the period.

At this point, I will turn the call back to Bill.

Thanks, Andy.

While we spent much of the third quarter restructuring our business, we now look forward to a very productive Q4. We continue to leverage our strengths in connectivity, policy-based control, and premium services to pivot our solutions for current customer needs and emerging markets.

As a result of these efforts, our continued focus on closing deals, and cost savings gained from the restructure, we believe a fourth-quarter turnaround that allows us to become profitable is within reach. Our goal remains the same as previously stated, which is to achieve profitability in Q4.

Our current product leader is our CommSuite solution, which continued to show good growth in the third quarter, up 58.5% year over year and up 14.5% sequentially from the preceding quarter.

One of the unique features in CommSuite that contributes to its commercial success is the gateway server. It provides integration to operator, billing, and notification systems and automatically provisions new services, making it easy for premium features to be rolled out to subscribers using a variety of purchased options.

In addition, it automatically re-provisions the premium services when users switch to newer handset models, which is often an expensive support problem for operators.

The CommSuite gateway can also play an important role for operators deploying rich communication services. RCS is a set of standards intended to enable enhanced messaging features that work consistently across operator networks. While some operators have launched RCS on their networks, very few have built a monetization engine into their RCS strategy. Our CommSuite solution can be that monetization engine, facilitating purchase and entitlement for new messaging features offered through an RCS client or a CommSuite client.

Another important strength we are leveraging is our ability to design standards-based connectivity components for silicon chip and module makers. In Q3, we delivered mobile broadband interface module, or MBIM, components to a major chip manufacturer, as well as to module makers that are utilizing those MBIM-enabled chipsets in Windows-based devices. We also delivered authentication software that supports wireless Internet service provider roaming, known as WISPr.

Although chipset solutions take a different form and offer a different business case than our previous connectivity solutions, these deals provide validation that our deep domain expertise and connectivity remains highly relevant and valuable.

In regard to our NetWise platform, we were recently selected by a cable -- a leading cable provider in Mexico to help them connect subscribers to their growing network of Wi-Fi hotspots. Our over-the-top NetWise application will provide Wi-Fi discovery, seamless authentication, and mobile data management to their end users, while device analytics will provide user experience insights to the cable provider.

This will be our first non-carrier customer of NetWise focused on user engagement and branding, instead of network congestion and traffic management.

The rollout of Wi-Fi access points by cable providers is a growing trend around the world, allowing them to extend their services and enhance their brands outside of the home. This NetWise deployment in Mexico highlights our flexibility -- highlights the flexibility of our solution as a comprehensive mobile policy platform that can serve a variety of industries and use cases.

As described by several senior executives at the recent Rutberg Wireless Influencers conference, securing mobile devices and reducing the cost and support burden of mobility continues to challenge enterprises of all sizes. Some are trying to implement management policies that support a bring-your-own-device, or BYOD, mobile environment, while others are anxiously waiting for Microsoft to master the tab form factor so they can banish iPads from the workplace.

In either case, the need for secure, cost-effective, and compliant mobile access to corporate systems and information is far from solved by device management vendors today. Our expertise in policy-based connectivity can fill critical gaps in the enterprise mobility market, and we're formalizing partnerships in several key verticals to pursue new opportunities in this area.

Our productivity and graphics business continues to benefit from strong retail and channel partnerships. You can now find Smith Micro Software products on all 1,500 Staples stores, including ScatterShow, a user-friendly application for creating and sharing slideshows using photos on your mobile device, and our newly launched Artist Bundle that contains debut versions of our Anime Studio, Manga Studio, and Poser graphics products.

Q3 revenue from this area of our business was up 6.5% year over year from 2012, and the direct portion of the business was up 30% over the same quarter last year.

Manga Studio 5 continues to be the number one bestseller among all graphic software products on Amazon, and we have strong marketing promotions in place as we head into the holiday season.

As we charge full steam ahead into the month of November, I am reminded that a year ago we celebrated our 30th anniversary, reflecting on the ups and downs of our business and the number of times we reinvented ourselves in the face of changing markets and technology waves. We have worked very hard this year to repurpose our vast array of technologies and have made great strides to right-size our expense structure, while bringing new revenue streams to bear.

I am confident that our hard work will pay off in 2014, and we look forward to a more stable and profitable year that can build on the improved revenue growth in Q4 of this year. I feel very positive about our future.

Operator, we can open the call for questions.

(Operator Instructions). Mike Latimore, Northland Capital.

So I guess in terms of fourth-quarter sequential growth, what are the core sources of sequential growth you might see in the fourth quarter from a revenue standpoint?

As we sit here today, we have already booked a pretty substantial growth over Q3. We are not to the profitability number yet, but we know exactly how to get there. We just have to execute at this point.

We are going to see some pretty strong growth in revenues coming out of a very strategic chip manufacturer in Q4. And we will see some continued recovery from our largest customer as they are now coming out of their merger period, so that is really the drivers for the return to profitability for Q4 and our growth going forward into 2014.

What percent of revenue came from your top two customers in the September quarter?

We just had Sprint as a 10% customer, and they are 61.5%.

Okay. What is the revenue opportunity at this cable company in Mexico?

This is just the first step in that particular business relationship, so I really don't want to go into the details of that as yet. We will talk more about it after we can actually discuss who it is, and take it from there. But it is a meaningful transaction for us going forward.

Okay. Great, thank you.

Charlie Anderson, Dougherty.

I wondered if you could help me by segmenting out in the quarter some of the revenue in the wireless division, CommSuite being one, the Connection Manager being one, NetWise. Just any sort of a mix to give us a feel for that, and then the trajectory of each of those into Q4 might be helpful.

Sure, Charlie, this is Andy. So let's go through it as we have in the past. Our legacy connectivity products, as well as some new offshoots of it, recorded about $1.5 million for the period. Our CommSuite, about $4.7 million; NetWise, about $500,000; and then, we have other types of mix technologies through our enterprise channels and so on and so forth of about [460].

And what Bill was alluding to in his prepared remarks and so on is when you look to Q4, our new technologies are really starting to take hold, and there is going to be different customers that we look forward to announcing at our Q4 that, as you have worked with us for quite some time, we can't announce them until we get approval to.

But it's been kind of a long road working with the new technologies, and I think we are getting a good foothold on our go-to-market tactical approach with these technologies, and it is going to start bearing fruit. As Bill said, we expect a recovery here in Q4 in revenues, and that, combined with our improved expense base, should be again a good signal for everyone that we are getting this show back on the road.

I can add to that, if you like, and just say that while we have seen very consistent growth on the CommSuite side, I think you should expect Q4 and beyond to see some fairly strong growth on the NetWise side. Deals are in place or getting finished at the present time that give me great comfort in saying that the NetWise product is about to take hold.

Great, and then on the core Connection Manager, is that in some sort of path down to zero eventually? Are you still running into a headwind on that or does it flatten out at some point?

There is two ways of looking at it. The USB business is definitely a trail down to zero, at which case we still support our customers that have business clients that have needs, and we will continue to do so, definitely.

However, there are offshoots that Carla can speak to that show where we do have opportunity, that is not a market that completely goes to zero, and I would liken it to device management over-the-air update type software that has been out for quite some time, but still has foothold and still has needs in our different new products or as standalone products.

Yes, absolutely. When you look at different vertical markets, some of them are at different stages in the evolution to new platforms.

And so, one example of that is public safety, for example, where there is a lot of Windows-based devices that are still being used out in public safety vehicles, as well as carried by field agents in that industry, and so they still need basic connectivity. They need secure connectivity, and they are starting to need the ability to automate some of that connectivity over to secure Wi-Fi, et cetera.

So all of our QuickLink capabilities are still applicable in markets like that, where secure connectivity that has to continue to utilize Windows platforms, even as they start to adopt new form factors, there is still some long shelf life over there with the Windows connectivity we have offered.

Got you.

Let me add one thing to that line of thought as well, and that is that it's very difficult, and clearly, we have gone through some challenging quarters in the last few years that are driven by the fact that we had a very strong legacy business that was fading away.

And the good news -- there is a good news to this, and that is that that business is pretty much gone. And so, we don't have to constantly sell new stuff to fill a hole because we're not going to have a hole to fill. It all now goes back up on top.

And so, from my perspective, the most difficult times are behind us. Now starts the fun of trying to move ourselves back out and get ourselves to a meaningful market cap that I think this Company really deserves.

Thank you for that detail. So the chip-related revenue, is that a one-time front-end license, or is that tied to units and we will see that actually grow over time?

You know, this has been actually a series of deals, and so the most positive aspect is it is not a single deal. It has been multiple and numerous deals that actually showed us strength, and it is -- these deals are building and building. So it is not a one type shot.

It's actually very encouraging to us, just based on the numerous deals, and actually, they are fairly broad in their application as far as what we are doing for this industry.

Got you, and then just one last one for me, on the CommSuite side. I think it's primarily been at Sprint and you are basically writing the attach rate of Visual Voicemail. Have you been able to broaden that out to any other carriers yet, and where do you stand on the pipeline for that?

We do have some opportunities in play now. There are ways that we are looking at extending that technology over the top, and as Bill talked about, the support of RCS types of messaging services will allow us to get engaged with some other customers on initiatives that don't have to be tied to voicemail. So that is something that opens more doors for us, as well.

I think another way to think about that is that for many carriers, maybe even most carriers around the world, voicemail -- Visual Voicemail is just viewed as a cost. It is a cost that they have to put up with because that's the business they're in.

In the case of Sprint, it is viewed as a profit center. We make money for Sprint. The more money we make for Sprint, the more money we make for us. That message is getting out there, and carriers are now coming to us and saying, okay, exactly how does this work?

And I think this is all part of the recovery that we see ongoing. We are looking at recovery on the NetWise side with some meaningful growth. We are looking for growth in the CommSuite area as well.

And there is some great plays on the connectivity front; they just aren't the old traditional plays. They are not necessarily PC-based applications. They're applications that are found in devices, in modules, and in silicon. And it's really just taking some of our core strengths and repositioning them to a new market and a market that has significant upside.

Thanks so much for taking my questions.

(Operator Instructions). Rich Valera, Needham & Company.

I was wondering if you could give a little more color on the chip-related business you are expecting in 4Q? You gave some color in your prepared remarks. If you could just kind of go over the couple of the different opportunities you had there on the chip-related software side, that would be great.

Part of what we are doing, Rich, is taking components that are associated with connectivity and security and we're helping the industry to move those down the stack.

So we have seen for a while now that the way applications are evolving is they are either moving over the top or some capabilities are moving down the stack, built into the devices. And so, we are providing some of the connectivity and security components down the stack that will allow devices to ship with standards-based capabilities already built in at the chip level.

But what those will still require as those devices roll out, whether it's in M2M form factor, into handsets, into other types of tablets, et cetera, they will still require management. And so, basically you can think of these devices as now having manageability built in, but they are still going to require management.

So as we use our components to make these devices manageable by default, built-in management and standards capability, we are going to be able to take advantage of that by having management policies available, whether it is to operators, to vertical markets in M2M, to enterprises, et cetera, to now use our policy capabilities to provide the policy management on top of those devices, and the applicability will be broader because it is now built into the chip.

Yes, I can add that it's probably fairly reasonable to expect that this silicon customer will cross over the 10% barrier for Q4, so this is meaningful business.

And just in terms of the specific technology, I think you mentioned MBIM, is that -- and what else? You mentioned, I think, something else as well.

Yes, WISPr. So MBIM is a Microsoft standard for broadband connectivity that we actually worked on with Microsoft and other companies as part of the USB Implementers Forum organization.

And it allows broadband connectivity to be standard across multiple operating systems. So that is connectivity components that we are providing for broadband connectivity, and the other area was called WISPr and it allows for authenticated roaming across different network types. And so, we're helping to take those components and make them available into the chipset, as well.

Great, that's helpful. And then, Andy, just wondering how you are thinking about cash usage in the fourth quarter and beyond, if you are willing to venture that far?

Sure, I mean, the part that probably needs a little bit of clarification is we had a -- we showed a $5.6 million restructuring charge, and as I mentioned, we would see approximately $1.7 million in cash used to support that.

We have seen the majority of that cash hit already -- hitting in Q3, and what we will see in Q4 will be a lot less because it's more facilities based, runrates at facilities as we look to release certain space and whatnot, and those efforts are going very well and are very expedited, of course.

So that we won't see a big drain from restructuring on cash. Basically, it is going to mirror our operating profit or loss. And as you know, we are pushing very hard to be profitable in Q4, which means either we are -- we're at breakeven, but if we are not, it is not going to be a big cash burn.

And so, I think probably the most fundamental communication really at this time is with the restructuring efforts that we've actually put in place, combined with these improved revenue metrics that we've been alluding to, the cash burn, if any, is going to come way down. And so, starting with $18 million at September 30, when we look forward, we have taken big steps to mitigate that risk.

Sure. And I guess the remainder of that $5.6 million, it sounds like there's about $3 million left of that. Is that expected to hit in the first part of 2014?

Again, not all of it will be cash based.

Okay.

So part of it is we are writing off assets, writing off lease (multiple speakers), and so on and so forth.

And then, we are writing off the complete leases. In some cases, we may have had a 10-year lease where we are choosing to write off, based on assumptions. And just like any other restructuring reserve, we can come in favorable. We are doing our best to be prudent, make sure that we have enough reserved, and -- based on our best estimates, of course, but we don't want to miss the wrong way. We want to make sure we cover all the risks.

Great, that's helpful. All right, thank you.

Howard Smith, First Analysis.

I wanted to just check if my thinking is right regarding CommSuite. I think of that as a more regular recurring-type revenue, where the other parts of the wireless business depend on attach rates of devices being sold through. Am I thinking about that right?

Yes, CommSuite is really focused on providing recurring revenue through the purchase either of like a monthly subscription to a premium service, but it also has additional revenue options, such as advertising components where we can revenue share on advertising out to the handset, and being able to do such things like purchase content from within an application, things that we have talked about in the past like avatar message components where I can create avatars or send them to peers, et cetera.

So there is different ways to monetize through CommSuite, and that is one of the reasons why we are excited about its potential opening up, particularly with the rich communication services. Because while in the past it had been part of the voicemail application and it is just extending voice-related features, now it can be managing and monetizing non-voicemail related features, other types of messaging, video services, things that involve VoIP, voice over LTE, as well.

So there is a number of ways to use the CommSuite platform to monetize different types of messaging applications, and our business models are intended to drive recurring revenue out of that.

Right, and so that being the case, and that's a significant part of the business, historically in wireless there has been some seasonality, and I know a lot of things are being shuffled around here. It is tough to gauge as things ramp and otherwise, but do you feel that -- it looks like you are going to have some nice sequential pickup in Q4, but from a seasonal perspective as we look beyond that, how do you think that might shape as we go into 2014?

Because the revenue coming out of CommSuite is a recurring model, there may be seasonality as to how many new handsets are sold by a given carrier, but in the macro picture, they have a set number of end users that are using their service.

And because we are on every Android and now Windows 8 phone that is out there, whether it is a new phone or a phone that has been in service for a year or two, we're still gaining revenue. And (multiple speakers)

Right, no, I know for CommSuite. I just meant on some of the non-CommSuite (multiple speakers) how seasonal that might be?

You can see some seasonal impact in the NetWise front because that requires new devices to enter the market. But there is none in the CommSuite.

Sure, and Howard, let me just add one more part to NetWise. What has been interesting to me is that when you look at the evolution of Smith Micro, back in the fax modem days we sold technology to a specific industry. Connectivity, we were selling to carriers, and as we have been talking, we are finding different types of large OEMs and infrastructure players that are very significant to the whole wireless ecosystem that actually are interested in our NetWise product.

As we look forward in that area, again it may not be subject to seasonality, it is going to be more subject to rollout as far as catching up. So as far as everything that has been deployed and where they are going in the future, we are just starting with them. So you're in that beginning part of a deployment, so that you wouldn't see seasonality until you get more mature.

So the key takeaway is it has taken us a couple of years here to find really what the best market is for this new technology, and I think we are finding it.

Great. Changing topics, just for second, to P&G, first a housekeeping and then maybe a follow-up. FastSpring was a significant customer last quarter. What is the revenue recognition for that channel? Is it on sellthrough or is there some type of sell in?

You are kind of catching me on the stump here. FastSpring?

I'm sorry. I will follow up separately on that. It's a disclosure and a filing.

So let me just ask a broader question, is there anything as it relates to P&G? You talked about some of the reasons why -- some good things that were happening and some products that were up. It did decline some sequentially. I'm just curious. Where is the weakness there, at least on a sequential basis?

Sure, well, let me just start with that. Keep in mind that the P&G side is primarily Internet sales, if you will. Let's call it 70% plus, and we have a lesser exposure to the big-box sales.

Those products basically, or that business, revolves around product releases, and there are specific releases at different times of the year that will drive quarterly sales. And we have done our best, basically, to actually pace and phase those depending on product so that we can mitigate seasonality, but the existing products, the business at one time was larger. It's down now at a particular size that is sustainable, and it's basically riding key marquee products that have a good following and expect to have a good following on a go-forward.

So once again, that is a business that has been right-sized, let's call it that way, but it looks very strong as far as stability. And again, the marquee products have nowhere to go but a good stability or even better. They have very strong followings.

Great, thank you. That's it for me.

Thank you. At this time, we have no further questions. I would like to turn the conference back over to Mr. Todd Kehrli for any closing remarks.

Thank you, Operator. I would like to thank everybody for joining us today. We look forward to updating you on our progress over the coming months. And of course, if you have any other questions, feel free to call MKR and we will be happy to answer your questions. This concludes our call.

Ladies and gentlemen, this does conclude the Smith Micro Software third-quarter 2013 financial results conference call. Thank you for your participation. You may now disconnect.