Universal Electronics Inc (UEIC) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2018 Universal Electronics Inc. Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to turn the call over to Kirsten Chapman. You may begin.

Thank you, Michelle, and thank you all for joining us for the Universal Electronics' First Quarter 2018 Financial Results Conference Call. By now you should have received a copy of the press release. If you have not, please contact LHA at (415) 433-3777.

This call is being broadcast live over the Internet. A webcast will be available for 1 year at www.uei.com. In addition, any additional updated material nonpublic information that might be discussed during this call will be provided on the company's website where it will be retained for at least 1 year. You may also access that information by listening to the webcast replay. After reading a short safe harbor statement, I will turn the call over to management.

During the course of this conference call, management may make projections or other forward-looking statements regarding future events and future financial performance of the company, including the company's ability to anticipate the needs and wants of its customers in a timely -- and timely develop and deliver products and technologies that meet those needs and wants, including the company's advanced control products, which include the continued adoption of our voice remote control and intuitive 2-way home entertainment technologies by existing and new customers.

The continued incorporation of our QuickSet technologies into customer products as expected by management, the continued acceptance and growth of the company's connected home products and technologies, including security and control, temperature controllers and automation and other technologies identified on this call; the timing of new product rollout orders from the company's customers anticipated by the management; the continued trend of the industry in providing consumers with more advanced technologies; the successful completion of the sale of the company's Southern China factory as expected by management; management's ability to manage its business to achieve its revenue margin and earnings as guided; and other factors described in the company's filings with the U.S. Securities and Exchange Commission.

Management wishes to caution you that these statements are just projections and actual results or events may differ materially from those projections. The company undertakes no obligation to revise or update these statements to reflect events or circumstances that may arise after today's date. For further detail on risk, management refers you to the press release mentioned at the onset of this call and the documents the company files from time to time with the SEC, including the annual report on Form 10-K for the year ended December 31, 2017, and periodic reports filed thereafter. These documents, along with the risks identified on this call, contain and identify various factors that could cause actual results to differ materially from those contained in management's projections or forward-looking statements.

In management's financial remarks, adjusted non-GAAP metrics will be referenced. Management provides adjusted non-GAAP metrics because it uses them for budgeting and planning purposes and for making operational and financial decisions, and believes that providing these non-GAAP financial measures to investors as a supplement to the GAAP financial measures helps investors evaluate UEI's core operating and financial performance and business trends consistent with how management evaluates such performance and trends. Additionally, management believes these measures facilitate comparisons with the core operating and financial results and business trends of competitors and other companies.

The non-GAAP measure excludes amortization of intangible acquired -- intangibles acquired, stock-based compensation expense, employee-related restructuring costs, changes in contingent consideration related to acquisitions, the impact of the adoption of ASC 606, the impact of foreign currency exchange rate fluctuations and the related tax effects as appropriate. A full description and reconciliation of these adjusted non-GAAP measures versus GAAP is included in the company's press release issued today.

On the call are -- today are Chairman and Chief Executive Officer, Paul Arling, who will deliver an overview; and Chief Financial Officer, Bryan Hackworth, who will summarize the financials. Paul will then return to provide closing remarks.

It's now my pleasure to introduce Paul Arling. Please go ahead, Paul.

Good afternoon, and thanks for joining us today. For the first quarter of 2018, net sales were $170.6 million, up 5% from a year ago period. Gross margin reached 25.6%. As expected, margins improved sequentially from 23.6% in the fourth quarter of 2017. EPS was $0.62 within our guidance range.

We continue to be excited about the next phase in the home entertainment evolution that use voice activated commands to control advanced intuitive 2-way home entertainment systems. Once again, UEI's technology is at the forefront of these systems. As is typical with innovative technological changes, adoption will take time. And it usually takes more time than we would expect as exemplified by prior technology shifts from analog to digital, from non-DVR to DVR and from standard definition to high definition. The transition will happen and we continue to be excited about our long-term growth prospects.

For example, our QuickSet technology is now designed in platforms that represent nearly 30% of the world's subscribers in the markets we serve. With recent wins in the smart TV space, our QuickSet technology will soon be the system control engine that powers products from leading smart TV brands that represent approximately 40% of the worldwide TV market.

The smart TV market is strategically important as an estimated 70% of consumers worldwide actively use their smart TVs to access over-the-top streaming services. Nonetheless, our guidance for Q2 is below consensus and below what we expected. This is due to several factors. At this point, I think it's important to take a step back and explain the reasons for these customer order fluctuations that are currently -- that we are currently experiencing.

First is inventory rebalancing. Cable industry customers routinely order slightly more than they deploy for a period of time and then order less than they deploy for a period or 2 to bring their inventories back down. These ordering patterns cause an ebb and flow effect but balance out over the longer term.

Second, when the industry is in the transition as it is right now and our customers are planning an exciting new system upgrade, some of our customers may reduce orders of the existing platform in front of the planned upgrade. This behavior is not pervasive in that very few of our customers have exhibited this behavior, and while such order patterns may affect the short term, new product purchases will rise to equal deployments. So these truncated order patterns resolve themselves with time.

Third, from time to time, companies put in place constraints that free up capital for other strategic priorities such as acquisitions. Again, these constraints historically get relaxed with time.

Next, I'd like to discuss the widely reported effects of subscriber losses by cable and satellite companies. Clearly, the subscriber losses, if sustained, can and will have a negative effect on our long-term business. We do not think that these losses are the primary contributor to the Q2 sales decline mainly because there have been subscriber declines in prior periods, yet our business grew due to the increased share in the sale of higher-value products to consumers.

Obviously, subscriber count and our sales results in the short term are far from perfectly correlated. It is also important to note here that these future projections presume a static world. Many industry participants, including many of our current customers, have introduced or are planning to introduce, home entertainment platforms that combine the best of both worlds. That is, a combination of live TV programming supplemented with popular over-the-top services, all access through an intuitive, easy-to-use interface powered by UEI technology.

As I have said before, change does not come without tumult. The exciting changes in our industry have our customers deploying products that are more technically advanced, easier to use and more intuitive than ever before. These movements in order patterns have always affected our business. For us, most times, it is positive. In Q2, however, the effect is forecasted to be negative. That said, during this year's first quarter, several positive events have occurred.

In our Pay TV or subscription channel, we continue to see a strong uptick in the number of active design wins for our voice remotes globally. Today, we have over 20 new voice remote control products that are in development or going through design review. In EMEA, we are working with 4 of the largest MSOs on their next-generation platforms. These advanced platforms are currently in or are planned to go into field trials this quarter and are expected to roll out in the back half of 2018.

Also, our international sales funnel continues to be strong as operators worldwide are actively looking to launch advanced remote control platforms, including many with voice. This is, of course, true in higher ARPU markets such as North America, Europe, Japan and others, but it's now also true in emerging markets such as Latin America and India. As you may recall, at CES 2018, we announced our Android TV voice remote platforms. Early indications for these new remotes show a positive trend and we expect to introduce these products with 3 new mid-tier operators in India and Latin America later this year. We also are actively involved in 4 more voice control proposals in EMEA that we expect to close next quarter.

Further, our world-leading QuickSet platform continues to penetrate the global pay TV channel. Recently, we have expanded our list of QuickSet technology adoptees by adding 3 new operators, 1 in the Americas and 2 in the Asia-Pacific region, that combined, represent a potential addition of 12 million subscribers. This will bring our global QuickSet penetration to operators that represent nearly 170 million subscribers worldwide or nearly 30% of the markets we serve.

In our consumer electronics OEM channel, Samsung and Sony, which represented nearly 1/4 of the global television market in 2017, both released their 2018 smart TV models, with UEI's QuickSet integration. We are also actively working with several other leading smart TV platforms that are expected to launch in 2019. When these new wins launch, our technology will be embedded in television brands that represent nearly 40% of the global TV market.

In our climate control product category, sales continue to be strong as customers such as Daikin and Toshiba have now launched their Wi-Fi connected platform solutions using UEI's embedded low-power RF technology. These wins are primarily in our APAC region and we continue to win new connected home product designs in HVAC, lighting, motorized shades and personal hygiene.

According to ABI Research, these product categories are projected to grow between 20% and 50% annually over the next 4 years. In our security sensor business, late last year, we began shipping to a major consumer DIY security customer. We recently finalized more new products for this customer, and their launch is planned to start in Q3. We expect to see continued growth in this business during the second half of this year.

With that, I'll turn the call over to our CFO Bryan Hackworth for a review of the financials.

Thank you, Paul. As a reminder, our results for the first quarter of 2018 as well as the same period of 2017 will reference adjusted non-GAAP metrics.

First quarter net sales were $170.6 million compared to $162.3 million for the first quarter of 2017. Business Category net sales were $159.2 million compared to $151.3 million in the first quarter of 2017, representing growth of 5%. This growth was driven by the continued transition to advanced platforms with strong performance in Europe and Asia, partially offset by slightly lower performance in North America. In addition, our home security sensor business continues to be a growth driver as more households are likely to add our security sensors to the networked home.

Consumer Category revenue was $11.4 million compared to $11 million in the prior year quarter. Gross profit was $43.6 million or 25.6% compared to 26.7% in the first quarter of 2017 and 23.6% in the fourth quarter of 2017. As expected, our gross margin percentage improved sequentially reflecting operational improvements at our China factories. Operating expenses were $32.3 million compared to $31.7 million in the first quarter of 2017. R&D expense was $5.9 million compared to $5.4 million in the first quarter of 2017, reflecting our continued investment in technologies that enhance the user experience.

SG&A was flat at $26.4 million compared to $26.3 million. Operating income was $11.3 million compared to $11.8 million. The effective tax rate was 14.5% compared to 19.4%. Net income was $8.8 million or $0.62 per diluted share compared to $9.2 million or $0.62 per diluted share in the prior year period.

Next, I'll review our cash flow and balance sheet at March 31, 2018. We ended the quarter with cash and cash equivalents of $40.2 million compared to $62.4 million at December 31, 2017. As noted in the 8-K filed on April 17, we expect to complete the sale of our Southern China factory by June 30 of this year. Our gross proceeds based on the current exchange rate will approximate $54 million. DSOs were approximately 83 days at March 31, 2018, compared to 72 days a year prior. Net inventory turns were approximately 3.5 turns at March 31, 2018, compared to 3.8 turns a year prior.

Now turning to our guidance for the second quarter of 2018. As Paul noted, certain customers are reducing orders to rebalance their inventory, preserve capital and manage their platform transitions. We expect these actions to impact our near-term results. As such, we expect net sales to range between $158 million and $166 million compared to $177.9 million in the second quarter of 2017. EPS is expected to range from $0.35 to $0.45 compared to $0.78 in the second quarter of 2017.

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

Thanks, Bryan. As I have said before, strong companies become stronger as they manage challenges and the path to growth is never smooth. Those messages still ring true. Our industry and the industries we serve are at the beginning of the next technology sea change, and UEI's technology is leading the way. Our customers are working feverishly to bring systems with differentiating user interfaces, enabling one-touch view and connected voice that their subscribers can't live without.

Some early adopters have already launched voice-enabled devices with UEI technology, while many others are in design or testing stages. While we do not control the pace of launch or adoption, with the preponderance of new products already being powered by our technology, we are primed to capture this great opportunity. We will continue to innovate, create more industry-leading technology and improve our operations. All of which will contribute to enhanced shareholder value over the long term. We are the de facto standard for what TV and home controls will be in the future. Stay tuned.

Operator, we'd now like to open up the call for questions.

(Operator Instructions) Our first question comes from Greg Burns of Sidoti & Company.

Just wanted to understand, I guess, the issues with the order rates in your channel. Is that mostly around reducing orders for legacy products? Or are you seeing customers that maybe are already in rollouts reducing their orders for their advanced remotes? Like, where is the variation that's negatively impacting you coming from with your customers?

Greg, it's a good question. It's on the current platforms they have out. Unfortunately, there are -- the majority of industry participants haven't yet introduced their next-generation platform. There are some out, but I would say the majority of the order truncations have been with -- not having to do with new platforms, simply because many of those new platforms are not currently out.

Okay. And I think we ran into this similar issue maybe a year or so ago. Could you maybe give us an example of how this has kind of worked out in the past? And what's your view for the balance of the year? Do you expect the second half to be stronger as these order patterns kind of work themselves out?

Yes, I can't -- well, I can't provide that future guidance. It's been our long-standing policy to only provide guidance for the current quarter. I would just say that, typically, all the things that we mentioned in the prepared remarks have been true before, maybe not to the level they were for our guidance for Q2, but customers over time have had order patterns where, again, they ordered maybe a little bit more than they needed for a couple of periods and then they order a little bit less than they need because it is certainly a truth that over the long term, purchases must equal deployments, right? So if you order a little bit more than you deployed in any given period or number of periods, then there'll be a number of periods where you'll order less then you deploy and you'll bring your inventories down.

We have had a few customers across time, that will try to run down inventory of the prior generation. And when you're in a state of industry transition, you'll sometimes see this, where customers will interrupt an order pattern more severely in front of a new product introduction. And then, you'll have another effect, which is sometimes, in these companies, constraints get put in place on procurement to preserve capital for other strategic alternatives that those companies are pursuing.

Sometimes you'll see all of those things happening at once, in one company. Sometimes you'll see one of those things happening in one company. I mean, it varies in each individual circumstance. So unfortunately, in Q2, we're seeing numerous customers and, in some cases, top 10 customers that have an interruption in their order pattern driven by one or more of these reasons.

Okay. And I don't recall you calling out FX from your non-GAAP adjustments previously. Can you just help us understand where that FX headwind is coming from?

Yes. We did it -- we announced it last quarter, Greg. So we started doing it last quarter. And what we're trying to do is we're trying to show consistency and a constant comparison between quarters, and FX played a factor. So in order to compare it apples-to-apples, we went to a constant currency basis. So the headwinds, it's mainly in China, where the dollar has weakened versus the RMB. So you get a little bit of headwind on that. But that's fluctuated over time. Since -- for the last 10 years, it's kind of escalated between CNY 6.3 and, call it, CNY 6.8, that range. So again, in order to compare apples-to-apples, we went to a constant currency FX. We're using essentially the average exchange rate in Q1 '17. So we get, again, a constant comparison.

So your non-GAAP EPS guidance for next quarter also backs out the negative impact of currency?

For this quarter, that would be true. It can be positive or negative. In this quarter, it would be back out a negative, that's correct. But in the long run, it won't benefit us or hurt us because it's -- sometimes the exchange rate goes in your favor and sometimes it doesn't. So it's just in order to, from an operating point of view, to be able to compare us on an apples-to-apples basis.

Our next question comes from Steve Frankel of Dougherty.

Paul, I'm sorry, I didn't quite understand your answer to the first question. Are you saying that the majority of these order reductions are on advanced platforms or the older platforms that they're trying to flush from the system?

Well, again, it's on whatever current platform they're on because that's how they typically run. They order the platform they're currently deploying.

Well, okay, so let's narrow it down. So it includes...

Most of our customers -- since most of our customers are not on their advanced platform yet, if you do a customer count, the majority of them would be on the historical platform simply because they haven't introduced the new platform yet.

But are there material customers on the new platform that are also producing their run rates?

There could be. It's -- whatever their current platform -- whatever current platforms they're buying, whether they're advanced or the non-advanced platform that came before it, they will -- they truncate orders for the reasons mentioned.

I guess, I'm having a hard time kind of squaring this with the optimism 3 months ago that you had multiple new customers ready to ramp. And you named names, which you didn't normally do. What's -- in just sometime in the last month or so, you've seen these order rates fall off a cliff. That's what's changed in the world? Or have we also had deployments slow down?

Well, no. I mean, we've mentioned the customer names. They're still going -- they're in trial or testing depending on the customer. So those are all still true. Over the last number of months, the orders have come in slower than we would've expected them to.

Okay. And where did Comcast end up for the quarter as a percentage of revenue? And if there's any other significant customers like DIRECTV, can you call those out?

Yes. Comcast came in at 23.1% for the first quarter, and they were the only 10% or greater customer.

Okay. And to try to square the significant sequential drop in revenue with the earnings guidance, are we going to see continued sequential gross margin improvement despite the fact that you're going to have to take an overhead hit because of the lower run rate?

Yes, it's a good question. I think we're going to see continued improvement in our factory production. I think we've -- the guys have done a good job in streamlining the process and becoming more efficient. I think we're -- from an efficiency standpoint, in terms of what we had to improve to get to where we were at our Southern factory, I think we're probably about 60% of the way there. So there's room to grow there. But to your point, the headwinds we'll have is -- if the sales are lower, then production will be lower and so will overhead absorption. And then there's other variables that go into COGS that are difficult to predict like commodity prices and things of that nature. But I should -- we should see improvement from an efficiency standpoint, but then from a -- if the sales don't pick up and we aren't able to produce, then there will be a little bit of offset on an overhead absorption point of view.

Well -- so again, I'm trying to get to your numbers and it's hard to get there unless I assume a material pick up in gross margin, which seems kind of counterintuitive. So maybe help us out by where are you assuming OpEx is going to be in Q2?

Similar to Q1.

Okay. And what are these contract assets that showed up on the balance sheet all of a sudden?

It's basically receivables. What happened is the -- there was an accounting change that I'm sure you've seen with other companies, and it relates to revenue recognition. So the rules have changed dramatically and what you end up having to do is you end up having to book. In certain situations, you book a sale for inventory that's for custom products, for example, that you haven't even shipped yet. So if you haven't shipped it that means you haven't filled it. You end up having to do a manual drill entry to book AR, and that's what that contract asset is. So all companies had to adopt this starting January 1, 2018.

Again, so this is something that is, in essence, a receivable and we have or haven't seen the revenue associated with that yet?

For GAAP purposes, we have seen the revenue. But like I did for pro forma, I wanted to compare apples-to-apples. So basically for pro forma, I treated the revenue recognition as we have since the company's inception.

I guess, we're having -- I'm having trouble keeping track of all the accounting adjustments. So that $22 million, that's in the $170 million?

Yes. The net effect on revenue for Q1 for this new revenue recognition accounting literature was about $7 million. So under GAAP, it's $164 million. But under the way that we have accounted for revenue for the last 25 years, it's $170.6 million.

Okay. But this whole -- I just want to make sure it's clear that $22 million -- that whole $22 million that's not something that was $22 million in the quarter's revenue?

It is. But then there was -- this is where it gets tricky. There was a -- we lost $29 million that goes into retained earnings as a cumulative effect of an accounting change as of 1/1/2018, and then we picked up $22 million. So actually we lost $7 million from this accounting change. It gets a little tricky.

Well, I guess, Paul, given all the stops and starts of last year and how disappointing that was for investors. Here we are again. How do investors start to get comfortable that this is a business that can grow more consistently?

Well, I guess, I would just say this. The platforms that we're in and the number of them has not changed to the negative, only to the positive. As I said during the prepared remarks, we have 3 new customers that have signed up for a platform that will incorporate this IP connected 2-way QuickSet-enabled technology. At this point, it's a question of, all of our customers who are in fact, as I said, feverishly working to get these things ready for introduction actually getting them all introduced. And we've obviously been disappointed as well that some of them have taken longer than we would have expected. Some of them are not behind. They were expected to come out this year, and we would still expect them to come out this year.

But I guess, the -- for the long term, Steve, this market is in a state of change. These customers all realize that they need to make their interface better, more intuitive, easier to use. And many, if not most of them, are incorporating all of the entertainment options that the consumer wants to watch. So the average person who is watching 5 hours a day of television here in the U.S. is going to watch multiple things, while they -- when they sit down to watch at night. And these platforms contemplate that. But they are technically more difficult to put together and get out. And we are ready on many of these, but our customers have yet to deploy them.

They will, all right, and it's still our belief that -- we're very confident that they will do that, but they have technical issues to work out. So it's continued delay of that. But again, the comfort one should have or discomfort because if people think that they won't roll those out, that's one belief. We believe that all of these platforms are going to launch because our customers are indicating to us the level of work they're putting into this and the level of work we're still putting into getting them ready. It is coming.

And what's your confidence level that this time the factory sale will close on the anticipated deadline?

Yes. I mean, I -- it -- we ended up terminating the first agreement, and we entered into a second agreement with a second buyer. So there's always risk when you're dealing with the government, but things are going smoothly. They're relying on the due diligence that was done by the prior -- previous buyer. And then I can't sit here and tell you it's guaranteed, but things are going very quickly so -- and the hang-up that we had with the first buyer through the due diligence phase, the second buyer does not have an issue with it. So again, it's not a guarantee, but things are moving very smoothly and quickly.

Okay. And let me sneak one more in here. I'm just trying to reconcile your GAAP and non-GAAP numbers. And your -- in one of these breakouts, you quote operating expenses on a GAAP basis at [36] to [98]. But the GAAP P&L has operating -- no. Okay. No, I guess that's right, sorry. No, that's me. Never mind. That's right. Okay. I'll figure it out.

(Operator Instructions) Our next question comes from Jeff Van Sinderen of B. Riley FBR.

Paul, just a follow-up on the introduction of NextGen. Maybe you could just frame for us what inning you think we're in for those NextGen deployments. And just wanted to confirm that you do expect your revenues to resume growth. And do you still think it's just a matter of when, not if in your view?

Yes. Well, the question on inning, I'm not quite sure. It might be the one out in the second inning. I'm not quite sure. It's relatively early, though, because again, there's so -- there are a small subset of the worldwide industry that have begun their implementation of these programs. So there's quite a few that have not yet. So I would say it's very early at this point. As far as our confidence in these platforms getting introduced, it's high. Again, we're obviously working with these customers to prepare for these implementations. And I don't really see any sign that they're not committed to putting these out. They are committed to putting them out. In fact, in many cases, they put a great deal of work behind this. And maybe one of the reasons that they're delayed is they want to make sure they're as good as they possibly can be before they introduce them because they're presuming they want to make a large impact when they put it out. So some of the delays have probably been caused by that, but our confidence that these programs are going to move forward is high.

Okay, that's helpful. So no signs of them scrapping any projects at this point?

No, we have no canceled projects.

Okay, very good. And then you mentioned the new Pay TV and TV OEM projects that will drive growth in the future, and I think you spoke toward 2019. Can you expand on that a bit those projects? And I guess how you see them contributing to revenues and maybe order of magnitude, if there's anything you can add there?

Yes, sure. The 2 that we have announced were for '18. As you probably know, the TV design cycle is annual. And typically, their designs would be finalized by either now or this summer for 2019. So the designs are -- and then the designs are typically introduced at the beginning of the year, typically around CES. And then the products are either shipped at CES or shortly thereafter. And that's the typical design cycle in TV. So this year, 2 major brands, and we were able to name these, Samsung and Sony, have designed in. Samsung had done it actually for years before and has increased the number of SKUs under the QuickSet technology. But those 2 brands are adoptees of our engine within their TV, and they account for about 25% -- those 2 brands account for 25% of the world's television sales.

We're currently closing on multiple other brands, that would bring that number to about 40%. So other names that we can't yet mention that we expect to have this technology designed into in the 2019 products, and those brands will account for 40% of the TV market worldwide.

Okay. So even if they're using -- if they happen to be using OTT on these new TVs -- these new smart TVs, you're built into those?

That's correct, yes. And our technology is what would control those TVs. And typically, it's QuickSet. So if you connect other things to the television, it will not only control the over-the-top service that they may have resident in the software of the TV, but it will also control the other things that you've plugged in. So if you plug in an Xbox or a -- your live TV feed, your cable box, it will be able to control anything connected to that television.

Okay, great. And then one other follow-up I had. Maybe if you can just give us kind of your latest thoughts around -- Comcast I think announced that they were partnering with Netflix, if I'm not mistaken. I just think that sort of speaks to the either/or arguments around linear versus OTT. Maybe you can just touch on that partnership. It seems to suggest that it's more about integration than it is about either/or.

Sure. Yes, Comcast has done that. They've obviously built a great product. They were the lead in this worldwide. And they've built their X1 platform a few years ago now, and have incorporated over-the-top services within their interface. So they're one of the leaders here where they've combined the live TV option with the most popular over-the-top services, that can be voice activated. So they've put all of those entertainment options into one easy-to-use interface.

We do see this as a general trend in the industry, and we think there are going to be many who adopt this platform. Because frankly, they, like us, believe that the winners in the future are going to be those that build platforms that give the consumer what they want to watch, when they want to watch it. So one could easily sit down tonight and watch the NBA playoff basketball game and then voice activate Netflix to go off and watch their favorite show there -- binge-watch their favorite show there. And they will all get that within one easy-to-use intuitive voice-activated interface. So we think these platforms are going to become more popular as time goes on.

So would it be fair to say that some of the new platforms that have not been rolled out yet are likely to also include OTT services?

Correct, that's correct.

There are no further questions. I'd like to turn the call back over to Paul Arling for any closing remarks.

Okay, thank you for joining us today and your continued support of our company. I'd like to note in the next month or so, we will be at several conferences: B. Riley FBR Institutional Investor Conference, Baird's Global Consumer, Technology & Services Conference and Piper Jaffray's 38th Annual Consumer Marketplace Conference. We look forward to seeing you all there. Thank you and have a nice day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect.