Tucows Inc (TCX) 2008 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Tucows Inc.'s fourth quarter and year-end 2007 conference call. I would like to remind everyone that this call is being recorded. I will now turn the call over to Ms. Leona Hobbs. Please go ahead, Ms. Leona.

Thank you, Operator. I'll start with a clarification. This is the first quarter 2008 conference call. Good afternoon and thank you for joining us today. With me is Elliot Noss, our President and Chief Executive Officer, and Michael Cooperman, our Chief Financial Officer.

Earlier this afternoon, Tucows issued a news release reporting our results for the first quarter of fiscal 2008. The news release and other information are available on our web site at about.tucows.com and just click on Investors.

Before we begin today, I would like to point out that the matters we will be discussing include forward-looking statements and as such are subject to risks and uncertainties that would cause actual results to differ materially.

These risk factors are described in detail in our documents filed with the SEC, specifically the most recent reports on Form 10-K and 10-Q. We urge you to read our securities filings for a full description of the risk factors applicable to our business.

I would now like to turn the call over to Elliot.

Thank you, Leona. Good afternoon and thanks for joining us today. On today's call, I'll provide an overview of our business during our first quarter ended March 31, 2008. Mike will then review the financial results before returning the call to me for a discussion of our growth opportunities.

Turning to the first quarter, revenue for the first quarter grew by 5% compared to the first quarter of last year to $18.7 million, which I will note is the second highest revenue total in our history. The highlights include domain portfolio services revenue up 9% sequentially and 42% over the first quarter of 2007. Email migrations are on track and are expected to finish toward the end of Q2 as expected with material financial benefits. Traditional domain registration showed the benefits on a unit basis of last year's price drop and retail revenues were up 7% sequentially and 36% over Q1 '07.

Our results for the quarter were in line with our expectations. And while the net income and cash generation may not appear strong when compared to previous periods, I would like to stress that we continue to expect these numbers to be comfortably up year on year as the benefits of our work pays off.

I would now like to review our progress by revenue source. First, domain registration -- the price reduction on domain registration we implemented in August 2007 is having its intended impact as evidenced by the increase in transaction volume during the quarter. Renewal transactions are up 18% year over year. New transactions from small resellers to whom the price reduction was targeted are up 15% year on year. This is a very positive turnaround for us in this business segment, where we had previously been losing business. Most importantly, we've had an increase in deals won during the quarter. The domains pipeline is bigger than it has been in quite some time and is growing.

Our largest competitors in this segment have all moved further away from wholesale to retail, media, and corporate services, allowing our focus on this segment to have greater impact and benefit. In the numbers, you will start to see this progress in the second quarter and especially the latter half of the year when the year-on-year comparisons no longer have the large impact of our price cut.

Next our domain portfolio -- this continues as the part of the business with the highest growth for the next while. Last quarter, we talked about progress in our plan to put a regular sales process in place for direct navigation names, those names we felt did not have a huge appeal for small business, but which generated advertising revenue. Today we disclosed our first transaction under the new process. We sold roughly 3700 names for a little under $1 million. This revenue will be recognized in our second quarter of fiscal 2008. This was a little bit of a catch-up transaction, making up for the fact that it was the first such sale of the year. Thus most of this could be thought of in a sense as Q1 revenues.

Our process has been validated by the buyers in this subcategory. We have not only concluded a transaction and nailed down the transaction process, but we now have buyers ready for more. And we have some who sat on the sidelines in the first sale and are now eager to get in.

This is all very important as the regular sale of direct navigation names provides meaningful certainty to the revenue stream for this segment. We believe we have now created the most efficient means of monetizing the expiring domain name stream of any registrar. And this makes the increased volumes and wins in our traditional domain registration service that much more lucrative and synergistic.

The direct navigation portion of this business is up 45% year over year and 23% sequentially. The move to a new supplier in Q4 last year continues to provide benefits. And remember that when we make a sale of direct navigation names, like the large sale we made last June or the one we just made, it has the effect of holding down direct navigation revenue. So this increase is even more impressive.

Last quarter, we discussed our plan to have a sales resource dedicated to selling premium names and gems. We are now up and running and expect this effort to begin contributing in the second half of the year. We are very pleased with how domain portfolio services is shaping up. It is a great example of how strong financial progress invariably follows strong operational progress by a couple of quarters. Domain portfolio services should continue to show great growth for years to come. It is clearly the growth engine for Tucows for 2008 and looks well up to the task.

On to our email business -- we made fantastic progress this quarter in migrating from our old email platform to the new one. We are down to just a few of the largest customers and expect to be completed around the end of the quarter. Our email platform is now more reliable, more scalable, and much more efficient to operate.

All of that's nice for us and for customers, but what about investors? First, the savings in data center and bandwidth -- average data center cost in the first seven months of this year will be roughly $290,000 per month. In the last five months, it will be less than $90,000 per month. In fact, data center and bandwidth costs in 2007, last year, were in the range of $3 million for the full year. And for 2009, they'll be in the range of only $1 million.

Second, CapEx in the second half of this year will be around $1 million. It averaged nearly $2 million per half for 2007 and the first half of 2008.

Third and most importantly, the sales pipeline is extremely encouraging. I noted three quarters ago that our sales group was finally able to start going out and building a pipeline again. Since November of last year, the email sales pipeline has more than tripled. It is now the highest it has ever been for email by a fair bit. And equally importantly, the first customers have come out of the pipeline and onto the new platform. Our ability to cost-effectively bring their customers from their old services to our new platform are now a key success factor in winning business.

Lastly, during the quarter, we also launched our Personal Names Service, which allows our resellers to offer their customers personal email addresses and web sites using their own last name. We believe this is one of the stickiest Internet services available and the renewal rates we see for this service in our retail business demonstrate this fact and encourage us at the wholesale level.

Our fourth area is retail. This business performed well during the first quarter, up 36% year on year with over 55% of that coming from organic growth. Most importantly, later this month, we expect to re-launch our retail services. Over the last 18 months, our retail business has grown through the additions of retail customers in the NetIdentity and IYD transactions. Neither of those acquisitions was focused on those retail customers, but they did and do provide positive economics.

At the end of it, we found ourselves operating seven different hosting tools and two email systems across three different, unrelated brands. Later this month, we expect to launch our new retail service in beta. This service will eventually unite all of our retail customers under a single, new brand and will do so with what we think is an exciting spin on retailing Internet services.

As part of this strategy, we announced yesterday that we sold most of our shared hosting subscribers to Hostopia. Let me help folks understand that a little better. Each of the three retail brands -- Domain Direct, NetIdentity, and IYD -- primarily sell and sold domain names and email, but each of them had a small hosting component, none of which were more than around 10% of the customers of each brand. Not only were these hosting offerings me-too offerings, but there were as I noted before a great number of different ones across the three brands. This was difficult to market, difficult to achieve synergies across the customer bases, and especially difficult to support.

In working out our new retail strategy, we were very excited about taking a clean approach to domain names and email, one we think takes a fresh look at the way people now use the Internet. That made these hosting assets non-strategic and we were pleased to both find them a good home and generate some cash in the process.

This sets up for a very exciting second half of the year for the retail business that should include an even more improved financial performance.

I will now turn the call over to Mike for a detailed review of our financial results.

Thanks Elliot.

As we anticipated, our results for the first quarter were negatively impacted by three factors -- continued strength of the Canadian dollar, the price reduction that we implemented on wholesale domain registrations in the third quarter of last year to better compete in the increasingly competitive market, and the cost of maintaining multiple email platforms as we continued to transition our customers to our new email service.

Net revenue for the first quarter of fiscal 2008 grew 5% compared to the same quarter last year to $18.7 million, which is our second highest revenue total ever. Growth in revenue was primarily the result of higher domain name registration revenue, domain portfolio service revenue, and retail services revenue.

Cost of revenues including network costs for the first quarter increased by 16% to $14 million and primarily reflect our lower margins following the price reduction of wholesale domain names and the higher registration fees we are paying as a result of the 7% registry price increase from October last year.

In addition, network costs were $592,000 higher than the first quarter of last year, mainly as a result of the additional labor, bandwidth, and co-location costs we incurred in the first quarter of this year as we continued to carry multiple systems at our data centers for our hosted email service, but also as a result of the reversal of an accrual in the first quarter of last year in the amount of $220,000 for some network operation programs that we had set up in prior periods and chose not to pursue.

With respect to the costs associated with the multiple email platforms, as Elliot discussed, we are now in the last stages of migrating our customers to our new hosted email platform. Our new data center is up and running. And with the migrations nearing completion, we expect to realize the benefits and considerable savings we have mentioned on prior calls during the second half of this year.

Gross margins for the first quarter was 25% compared to 32% for the first quarter of last year. The decrease was primarily the result of the impact of the wholesale domain registration price reduction and to a lesser extent on factors like the impact of higher network costs due to our carrying multiple email platforms and the increased cost associated with our portfolio of domain names.

I think it worth noting that we hare expecting the year-over-year impact from the price reduction to be lower in the second quarter as a result of seasonality and even lower in the third quarter when the price reduction will have been in place for a year.

Looking at the gross margin contribution from each of our revenue sources, gross margin from traditional domain name registration services for the first quarter decreased to $2.9 million from $3.2 million for the same quarter last year. Mainly the result of the price reduction I mentioned earlier, this is impacting both our new and renewal transaction volumes. We expect that given the high level of scalability and the synergies with domain portfolio services, this increased volume will have a positive impact on profitability as we move forward.

Gross margin from domain portfolio services increased to $727,000 from $537,000 for the same quarter of last year, primarily as a result of our larger domain portfolio and greater rigor in the selection, retention, and reporting process.

Gross margin for email services was $1.5 million compared to $1.9 million for the corresponding quarter of last year. As you know, our focus is on the service provider community rather than on the enterprise customer. Accordingly, where we have felt it uneconomical, we have chosen not to price compete with enterprise customers that we acquired with the Critical Path transaction, but instead maintain pricing. In addition, as Elliot has stated on previous conference calls, we have been reluctant to add new customers to the new platform in the midst of an ongoing migration to ensure the best possible transition for our existing customers. With the progress we have now made, the email sales team has reengaged and have already built an impressive pipeline and we have started adding customers to the new platform.

Gross margin from retail services increased to $1.1 million from $801,000 for the same quarter last year. The primarily contributor to this growth was an increase of $200,000 from provisioning personalized email through our portfolio surname-based domain names and to a lesser extent the increased volume from the acquisition of IYD in July of last year.

Gross margin from other services for the first quarter fell to $1.3 million from $1.5 million for the first quarter of last year, primarily as a result of a decrease of $238,000 in content revenue. The decrease in content revenue primarily reflects the contraction in the yield from our syndicated Google feeds and to a lesser extent lower advertising revenues through our web site.

Total operating expenses for the first quarter increased by 11% to $5.5 million or 29% of net revenue from $5 million or 28% of net revenue for the same quarter of last year.

Core operating expenses on a dollar basis were essentially flat compared to the same quarter last year at $5 million and down slightly as a percentage of net revenue to 26% from 27%. As a reminder, we define core operating expenses as costs relating to ongoing sales, marketing, development, and administrative costs.

Other operating expenses increased by $484,000 to $650,000 or 3% of net revenue from $166,000 or 1% of net revenue for the first quarter of last year. The increase is primarily the result of three factors.

Let me begin with foreign exchange. As you know, our objective in managing our exposure to the Canadian dollar is to minimize foreign exchange risk by achieving some certainty with regard to our costs by entering into forward exchange contracts from time to time.

For fiscal 2008, we entered into a series of forward-plus contracts with a notional value of $18.9 million whereby $900,000 is converted into Canadian dollars on a semimonthly basis for the period ending December 31, 2008. During the first quarter, we recognized a loss on ForEx transactions of $135,000 inclusive of a loss of $255,000 on the change in the fair value of the forward exchange contracts that were still outstanding at the end of the quarter.

Second, amortization increased by $152,000 to $385,000, primarily as a result of the acquisitions we have made. And third, during the first quarter of last year, we reversed an accrual in the amount of $137,500 for some marketing programs that we had set up in prior periods and decided not to pursue.

With regard to the impact of the Canadian dollar on our results, as I mentioned on our last conference call, we expected the appreciation in the Canadian dollar to have a dampening effect on our results for 2008. In fact, I quantified that if the Canadian dollar remained more or less at parity with the US dollar through 2008 that operating expenses would increase in 2008 by roughly $1.5 million compared to 2007 all other things being equal.

To give you an idea of the impact the Canadian dollar actually had on the quarter relative to last year, if we convert our Canadian dollar first quarter expenses at the prevailing rates during the first quarter of last year, our cash flow and bottom line would have been nearly $800,000 higher. Going forward as the Canadian dollar kept appreciating through the year, we expect that the impact from the Canadian dollar will steadily decline.

Adjusted net income for the first quarter of fiscal 2008 was $1 million compared to $2.4 million for the first quarter of fiscal 2007. Net loss for the quarter was $1.1 million or $0.01 per share compared with net income of $749,000 or less than $0.01 per share for the corresponding quarter last year.

Turning to the balance sheet, cash, cash equivalents, and restricted cash at the end of the first quarter were $7.5 million, an increase of $1.7 million compared to $5.8 million at the end of the first quarter of last year and a decrease of $587,000 from $8.1 million for the fourth quarter of last year.

This decrease in cash compared to the fourth quarter of last year is primarily the result of our investing $212,000 in acquiring additional equipment and repaying of the capital portion of the bank loan by $479,000. These uses of funds were partially offset by the $117,000 cash we generated in cash flow from operations.

I would like to note that outside of a minor use of $133,000 of funds - to fund cash flow of operations in the third quarter of 2006, this was our 26th consecutive quarter of positive cash flow from operations.

Deferred revenue at the end of the first quarter grew to a record $53.6 million, up 12% from $48 million at the end of the first quarter last year and up 6% from $50.6 million at the end of the fourth quarter of last year.

In closing, I would like to reiterate that for the reasons we have already stated, we do not believe that our results of the first quarter will be indicative of our financial performance for 2008. As a result, we continue to expect to see growth in revenue, profitability, and cash flow in 2008 compared to 2007.

I would now like to turn the call back to Elliot.

Thanks Mike.

If I was an investor looking from a distance at the financial results of Tucows, I would certainly see the last six months as a step back. But remember, strong financials are preceded by strong execution.

Inside the building, the last year or so, and especially the last six months have been marked by some of the best execution at Tucows that I can remember. We believe performance follows.

We built and launched a new email platform and data center and will soon complete migrations from the old system. For inventors, that means drastically reduced operating costs and much simpler maintenance, which leads to increased customer satisfaction and increased sales.

We reduced our pricing for domain registration and changed our pricing methodology, which we have now used to reinvigorate a service that strategically feeds both domain portfolio and email services.

With domain portfolio services, we changed the way that registrars create value out of domain registration while positioning our selves to not only take advantage of revenue growth, but also to create a long-term asset in the domain name portfolio.

We're nearing the beta launch of our new retail platform, which will combine three different, unrelated brands under one new brand, creating immediate opportunities to cross-sell and attract new customers with a differentiated offering in a crowded market.

And on this point, I know that a number of investors are customers of our retail services. I wish to note here that any of you interested in signing up for the beta should email Leona or myself and we'll be happy to get you in.

These are not feel-good operating notes, but are important milestones that enhance our ability to grow revenue and cut costs and will greatly contribute to increased cash generation and profitability right away.

This quarter marks the financial trough. The events subsequent to quarter-end like the sale of direct navigation names can give investors real comfort financial performance improves from here.

And we're far from finished. We will soon be providing some exciting news about the tucows.com web site. We have some other non-strategic assets that we are still looking at realizing value from. And lastly, we have announced today that the Board has reinstated the open market stock buyback program that was previously in place.

Despite the rise in the Canadian dollar, despite the required work we have had to invest in email and retail, 2008 will have solid increases in revenue and cash generation over 2007. Solid financial performance invariably follows solid operational performance.

And with that, I will now turn the call over to the Operator for questions. Operator?

Thank you. (Operator Instructions.) Your first question comes from Thanos Moschopoulos from BMO Capital Markets. Go ahead.

Hi, good afternoon.

Hey Thanos.

Hey Elliot. Regarding the hosting customers that you sold off, roughly how much revenue would be associated with that business? If I do some back-of-the-envelope math, are we sort of looking about $1 million or $2 million a year? Is that about right?

You're closer to your low end than your high end I'd say. We haven't released the financial details, but it's pretty easy to find - people pay revenue multiples in this industry in pretty tight ranges. But you're in the right place.

Okay. And just really a bit more deeper as to the sale that you made following quarter end, I mean, obviously the sale of names will be potentially one of your highest growth areas going forward and still I guess one of the most challenging ones to try to model for outside observers like ourselves. Can you provide me a bit more color as to what type of regularity we should expect to see in these revenue streams going forward and maybe how the process went in this particular instance in terms of time frame, in terms of how the bar was lined up, in terms of how the names were chosen to be sold, that kind of thing?

Sure. And so let me start with the good news, Thanos. This sale is the start of this being easier to model, not more difficult, so good news there for you. The way this worked is we take a bundle of - and you remember we - as we talked about in the past, we really wanted to bring some regularity to this. So we take a bundle of names that literally are from our perspective financial assets. So we're really picking a group of names that's going to be not more than X in total and will provide a specific level of revenue -- that we believe will, you know, based on our historical performance.

We'll then place them in - essentially in an account that will allow a pre-screened group of buyers to follow along through the course of roughly 30 days. They can all watch the names. They can see how they perform. They can see them, the usual - viewing the usual metrics that they as inventory holders are very familiar with. And at the end of the process, they bid.

Okay. So I guess what gives you confidence that this can become more regular is you're basically choosing the batch size, you're choosing when and how to make the pre-screening available. So, again, as long as you keep doing this on a regular basis--

What gives me - Thanos, what gives me the most comfort is that the buyers are saying hey, bring it on. We'd love more, right, more than anything else. We'd like to do this on a regular basis. Regular might be monthly, it might be bimonthly. But it's a regular basis where there's always some names kind of under viewing and there's always some names under transactions. We have an inflow of names every month, right? We think it's appropriate to have an outflow as well.

Right, okay. Okay, that's to say it seems that the appetite's there as far as the buyers that you've lined up?

Oh, yes. There's - look, from a buyer's perspective, if you're in that business, this is a great financial investment. One of the things that we're choosing to do here -- I'll be explicit about it and who knows, maybe I'll take some heat for this. We are certainly selling less than we think our multiple should be in the market, right? So it would be easy for me to just pile up this revenue and kind of hype things a bit. And I don't think that's the right long-term approach to value, though, right? So these are good financial investments. There'll be no shortage of buyers.

Okay. Regarding the names that you're holding onto, how far along are we in the process in terms of getting your optimization partner to really go back and sort of optimize landing pages there? Is that process pretty much complete? Or is there still further room for upside as they go back and try to squeeze out more revenue from it?

So I think there - first of all, there's always room for upside and tweaking. I would say that the big optimizations we've taken advantage of. There's a little bit of optimizing to do on a portion of the inventory, maybe 15% or so of it that really hasn't been optimized yet. And then you can start to look for more micro opportunities. That can be names that might fall into a certain category that you can get outsized returns on, that type of thing.

Okay. And just finally on the email business, I guess you covered a lot of this in your prepared remarks. I had thought that we'd see a bit more growth by this point in time. Again, is it really an issue where you're just sort of waiting for the migration to be complete and once that's done we should have some of the deals that have been in the pipeline start to come to fruition?

Well, I think that as much as anything else, migrations are a non-trivial task. And they really consume a lot of the time and effort of everybody. It's not a technology exercise in isolation. Sales, account management, marketing, those people are all spending lots and lots of time working through the migrations. And when I say that, they've got to prepare customers. They've got to work with customers on specific one-off needs that they might have. The bigger the customer, the more complicated their needs.

So it takes up a lot of the energy and time in the - sort of in the building. But on top of that, I think that we're just starting to get to the place where fruit is ripening in the pipeline. So we're seeing more deals fall out with more and more regularity. And once we're finished with migrations, then we can really start to turn and focus a bit more on the self-serve business where there's really big opportunities as well.

Okay. Great. Thanks a lot. I'll get off, pass the line.

Thanks.

(Operator Instructions.) Your next question comes from Rob Cavallo from Research Capital. Please go ahead.

Hi guys. How are you today?

Hi Rob.

Just a couple quick questions for you. Maybe just taking a step back looking at the - I guess the G&A costs you're - in the non-core, maybe you can just quickly recap those again? I got I guess $135,000 all inclusive was related to the FX impact. Amortization, what was - sorry, the amortization figure again you stated was - was that $385,000?

That's right.

And then there was $137,500 from an accrual last year that was reversed, so I'm assuming that means that the $166,000 last year plus the $137,000 would be a better--

Would be a better comparative--

Would be a better comparison, okay, so I do have that straight. And then on the gross margins, did you indicate the gross margin was going to be going lower over the next quarter or two?

No, I said the - that the impact of the price reduction would have less of an impact in the second quarter, less of an impact in the third quarter, because the price reduction occurred in the third quarter of last year, so it will have been around for a period of the third quarter for a full year.

Okay, sorry about that. I misunderstood. Another quick question -- I guess do you know - can you give me a rough ballpark number of domains you do have under management at quarter end?

Yes, it's a little bit under 6.8 million now. And that's direct. And then there's another 1 million or so indirect. Six and 7 million, something like that, 6 million, 7 million, 8 million.

Okay, so high - okay, perfect. And then you said up to maybe just under 8 million--

Yes, I think it's 7.9 million. People should probably get the cake for 8 million ready pretty soon, internally of course. I wasn't asking you for the cake.

No? And then one last question I guess just on the messaging revenue. Could we I guess start looking for this to grow going forward? Or is this trend going to sort of continue that we've seen in the last three or four--

I think we can look for it to grow going forward. I mean, there - it's possible that we could have next quarter kind of around the same number. But if we do, that'll be because there might be another enterprise customer to trade out that'll set off against the ones coming in. But you're seeing pretty much the floor there. And it should - I mean, it - just in the - what I know and what I see, it should grow next quarter.

Okay. But you're saying obviously not necessarily worst case, but this past quarter is sort of your bottom.

Yes. It - if it's not, it's really, really close, like, I mean, in terms of dollars, not in terms of time.

Sure. But then going let's say second half of this year and into '09 is when (inaudible)--

It's going to be stepping up.

Okay, that sounds good. That's actually I think everything I had for now.

Great, thanks.

Thank you.

Your next question comes from Aram Fuchs of Fertilemind Capital. Please go ahead.

Yes, you mentioned that you are now happy with the efficiency of selling the direct navigation names. I was wondering if you can talk about the generics? You previously last year signed up with Fabulous and AfterNic and trying their premium network. Is that working well? I saw Fabulous consummated a pretty generous deal towards Go Daddy to use Go Daddy's retail call centers. What other interesting ideas are out there that (inaudible)--

So there where we're kind of deeply engaged -- and this is the difference between retail and wholesale -- is in getting our biggest customers to start selling it. And it's - we're sold on it. We think that what is demonstrable based on what's going on with Go Daddy and a couple of the other retailers out there that there's very nice money to be made there. And we now have to go through the exercise of having our sales folks able to help our customers learn how to sell it. So it's that indirect that's holding it up, but there's some very specific programs that are focused just on that kind of coming in the second half in that June/July time frame. And I think when you're talking about those premiums, those gems, those brandables, there we're going to see a more immediate financial impact on selling them ourselves directly out of the inventory with some of the efforts like I talked about with kind of the direct sales being put against that. That - those are just very, very lucrative transactions. On a $5,000 name where we're making 20% that we're splitting with our customers, it's $500 our end per transaction. We - when we're selling out of the gems, it's $50,000, $100,000 more per transaction, right? So that's where you'll see the more immediate impact.

And remember that based on the numbers, we can sell three, four, five gems a quarter for ten years and not have a problem, right?

Right. So there's some sort of arbitrary line between pushing it out to retail partners and then the gems, right? Is that what you're - you said there were three different strategies there?

If it's not baked into their who-is lookup theorem, then it's not effective, right? You have - yet it's really teaching them to treat that who-is lookup almost like a search-is from a marketing perspective, all right, if you think about the way that search is commercialized. And it's - and that's changing people's head space because that's not the way they see a domain name lookup right now.

Okay. But that's basically the upsell space. There's no other complication, right?

Oh, no, absolutely. That's just hey, put it in your results, here's how you market it, here's how you deal with a $5,000 transaction instead of a $15 transaction. Here is all of the support that we provide behind it. That's exactly right. And then we have customers interested. Once you've got them interested, then it's okay, let's get it on the roadmap. All right? Just a little code they've got to cut.

And then what can you tell us about the thinking behind stock buyback versus dividend? Is there anything that you can give us color on?

I think that both have a place and that it's going to be situational. We've got a note that we've got to deal with at the end of June, Aram. And I think that's going to take precedence to either. And then it's a question of I'd almost call it tactical versus strategic. Buyback is tactical, dividend is more strategic. In other words, to go down that dividend road is a very long-term decision. And it's not one that sort of where the business and the balance sheet are at this quarter would make a lot of sense. But I think that both of those have their place.

Okay. And lastly, the beta in the retail business, can you talk about what you see about the strategy behind what are you improving there that you think will benefit the retail business?

Oh, I just want to get you in the beta, Aram. You're on my target list.

Okay, I'll be there.

Excellent. And then in a couple weeks, you'll see. And then next quarter when you come on and ask a question, you can tell us how much you like it.

Okay, great. Thanks for your time.

Thanks Aram.

There are no further questions at this time. Please continue.

Great. Thanks Operator. I look forward to seeing you all next quarter.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.