Rimage Management Discusses Q4 2012 Results - Earnings Call Transcript

Feb.26.13 | About: Qumu Corporation (QUMU)

Rimage (RIMG) Q4 2012 Earnings Call February 26, 2013 4:30 PM ET

Executives

Jenifer Kirtland - Managing Director

Sherman L. Black - Chief Executive Officer, President and Director

James R. Stewart - Chief Financial Officer

Analysts

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to Rimage Fourth Quarter 2012 Financial Results Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, February 26, 2013. Now I would like to turn the conference over to Jenifer Kirtland of the EVC Group. Please go ahead.

Jenifer Kirtland

Thank you, operator, and good afternoon, everyone. Earlier this afternoon, Rimage issued a press release announcing its fourth quarter 2012 financial results. The release is available on the company's corporate website at rimage.com. Before we get started, during the course of this conference call, the company will make forward-looking statements about its future plans, objectives, beliefs, expectations and prospects. For this purpose, any statements made today that are not statements of historical may be deemed to be forward-looking statements. These forward-looking statements are not guarantees of future actions, outcomes, results or performance. By their nature, these forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from the results discussed in or implied by the forward-looking statement. The discussion of the risks and uncertainties that affect Rimage's business is contained in the company's SEC filings, particularly under the heading Risk Factors and in the press release issued this afternoon. Copies of these documents are available online from the SEC or on the Rimage website. These forward-looking statements are made only as of the date this conference call was initially held and the company assumes no obligation and does not intend to update these forward-looking statements after the date of this conference call, whether as a result of new information, future events, developments, changes in assumptions or otherwise.

In addition, to supplement the GAAP numbers, we have provided non-GAAP information that excludes the amortization of Qumu acquisition intangibles, noncash third quarter 2012 charges related to the impairment of goodwill, a reduction of the value of amortizing intangible assets and the establishment of valuation allowance against our deferred tax assets. We believe that these non-GAAP numbers provide meaningful supplemental information and are helpful in assessing our historical and future business performance. A table reconciling the GAAP loss per share information to the non-GAAP information is included in our financial release. And now I'd like to turn the call over to Sherman Black, President and CEO of Rimage.

Sherman L. Black

Good afternoon, and thank you for joining us on our fourth quarter 2012 conference call. With me today is Jim Stewart, our Chief Financial Officer. This afternoon, we issued our fourth quarter press release. The results represented a solid finish to a transformational year for Rimage and demonstrated a strong momentum for our Qumu secure enterprise video solutions. I will begin with a review of our performance in the fourth quarter, including the potential we see from Qumu and our views on the disc publishing market. Then Jim will provide a more detailed look in the fourth quarter and 2012 financial results and our guidance for the first quarter of 2013. Following our remarks, we'll be happy to take your questions.

Fourth quarter revenues totaled $20.7 million, above the high end of our guidance of $18 million to $20 million. This represented a decline from the fourth quarter of 2011, reflecting a decrease of disc publishing revenues, partially offset by the contribution from Qumu, which we acquired in October 2011. We reported a net loss per share of $0.12, much improved from our guidance of a net loss per share of $0.20 to $0.33 and $0.01 better than the net loss posted in the fourth quarter last year. We ended the year with $50.1 million in cash and marketable securities.

Our results in the quarter were driven by the building momentum of our Qumu products. Qumu revenues totaled $4.3 million in the quarter, 56% above the $2.8 million generated in the third quarter and more than double its $1.8 million in revenues in the fourth quarter of 2011. Qumu contracted commitments were $7 million in the quarter, the best quarterly performance in its history. This compares with $4.5 million in the third quarter. Qumu's backlog of contracted revenue increased $12.7 million at the end of December, compared with $8.4 million at September 30. The increase in contracted commitments represented 6 new enterprise customers respective of industries including food, pharma, high-tech, financial services and transportation. Most of these new customers are large multinational companies that are using video content more and more as a means to increase employee engagement and team collaboration.

Their legacy network infrastructure and collaboration tools were designed for traditional data and they're not sufficient to create, manage and distribute video content to the extent needed in today's competitive environment. The beauty of our Qumu software is that it allows organizations to capture, organize and distribute content across our extended enterprise into a wide variety of endpoints, including mobile devices. Corporate communication professionals and tech administrators are able to address the challenges of video and rich content distribution while utilizing existing IT infrastructures. The pace of change inside enterprises and the need to quickly share best practices and the ongoing efforts to drive employee alignment in collaboration is creating a demand for our secure enterprise video solutions. These benefits are becoming more widely recognized as demonstrated by the success of our expanded sales in the U.S. and Europe.

Turning now to disc publishing. Revenues in the quarter declined as expected, down 17% from the fourth quarter of 2011. The decrease continued to reflect soft demand due to economic slowdown in Europe, as well as funding challenges with our government business in the U.S.. While we expect disc publishing to remain challenged, we do see strength in use cases like medical imaging, financial statements and law enforcement applications. Those use cases have high-switching cost or the technology alternatives are less attractive. As a result, we believe the demand for disc publishing will continue for some time into the future.

During 2012, we took actions to reduce our cost and maximize the cash contribution from this business overall. We reduced the management and the sales footprint in North America and Europe. We also reduced G&A expenses in this part of our business. Looking ahead, Qumu is clearly the growth engine of our company. For the full year 2012, Qumu generated $9.8 million in revenues and $19.7 million in contracted commitments. The improving results over the last 2 quarters in 2012 are evidence of its potential. During 2013, we expect revenues to continue to show significant growth. The recent leadership transition with Vern Hanzlik as our Qumu General Manager has gone smoothly and he's driving key initiatives around our sales capability and enhancements to our software products.

In the year ahead, we will focus our business development energy on enterprise portal, collaboration and content management market leaders. This business development effort, combined with a focus on repeatable sales processes are intended to improve the predictability of our financial results and increase our sales. In addition, we believe our 2013 product roadmap will continue to extend our enterprise connectivity with the market leaders. We expect to deliver enhancements to enable off-line viewing and digital rights management, resulting in an even richer and more secure mobile experience. Lastly, we expect to exit 2013 with an improved user experience and better analytics. Our goal is to position Qumu for sustained predictable growth, and we believe we'll make a substantial progress towards that effort during 2013.

Disc publishing is a mature market and our focus will remain on lead generation and sales execution in the stronger markets we serve. In addition, we are committed to strict cost management and maximizing the cash flow from this business. I'm extremely optimistic about the positive outlook for our company and our ability to achieve increased revenue and margin improvements in 2013. I'd like to thank our employees for their hard work and contributions towards solid fourth quarter results.

With that, I'd like to turn the call over to Jim for a review of our fourth quarter financial performance and our outlook for the first quarter. Jim?

James R. Stewart

Thanks, Sherman. I'd like to begin with a more detailed discussion of our revenues. Qumu fourth quarter revenues totaled $4.3 million, 56% above revenue of $2.8 million in the third quarter. Fourth quarter contracted commitments totaled $8.7 million, almost double third quarter levels, and as Sherman noted, the best in Qumu's history. Qumu ended the year with a record contracted commitment backlog of $12.7 million, compared with $8.4 million at the end of September. Qumu contracted commitment backlog increased by nearly $11 million during the year. As a reminder, contracted commitments are defined as the dollar value of signed customer purchase commitments.

Disc publishing sales in the fourth quarter decreased 17% from the fourth quarter of 2011. Unfavorable foreign exchange contributed 1% of this revenue reduction. Disc publishing hardware sales fell 35% from last year's fourth quarter, reflecting a decrease in sales for the government sector, North America, due to ongoing budget issues face by these customers and softness in our international business. Disc publishing equipment represented 24% of total sales in the fourth quarter, compared with 36% in the fourth quarter last year. Disc publishing recurring revenues, including sales of printer ribbons and cartridges, parts and optical media, as well as service contracts declined 7% from last year. Recurring revenues represented 55% of total company revenues in the recent fourth quarter, compared with 56% in the prior year fourth quarter. Fourth quarter sales of consumable supplies decreased 13% compared to last year's fourth quarter, while service revenues increased 14% from last year's fourth quarter. Service revenues were higher, mainly due to better maintenance of tax rates and renewals compared to prior quarters. Evidence management solution revenues decreased from the 2011 fourth quarter due to the decrease in government hardware sales that I mentioned earlier.

International sales were down 18% from the fourth quarter of 2011. International sales in the quarter represented 35% of total sales, compared with 41% in the fourth quarter of 2011. On a constant currency basis, including Qumu, sales in Europe were down 8%. Excluding Qumu, Europe sales fell 17%, largely due to soft demand from the economic slowdown there. Sales in Asia Pacific were down 7% compared with the prior year, reflecting weakness in China and Australia.

Moving down the income statement. The gross margin was 51% in this year's fourth quarter, the same as the margin in the fourth quarter last year and improved from 48% in the third quarter. The higher sequential margin was the result of an increased mix of Qumu software sales.

Operating expenses in the quarter totaled $12 million, a 6% decline from the same quarter a year ago. Fourth quarter 2011 expenses included a partial quarter of Qumu operating expenses as we acquired the business on October 10, 2011. Fourth quarter 2011 also included $1.1 million of nonrecurring Qumu acquisition costs. Fourth quarter 2012 expenses include higher Qumu operating expenses and approximately $500,000 of one-time severance costs.

R&D expenses were $2.9 million in the quarter compared with $2.6 million last year, higher due to a full quarter of Qumu R&D in the fourth quarter of 2012. Fourth quarter of 2012 SG&A expenses totaled $8.9 million versus $9.9 million a year ago, lower due to not having non-recurring Qumu acquisition costs in 2012, partially offset by increased Qumu spending for international sales expansion and the severance costs.

For the fourth quarter, we generated a net loss of $1.1 million, or $0.12 per share, compared with a net loss of $1.4 million or $0.13 per share in the fourth quarter of 2011. Excluding the amortization related to the Qumu intangibles, our fourth quarter 2012 loss was $0.09 per share.

Turning now to a brief recap of 2012 results. Revenues totaled $79.4 million, a decrease of 5% from 2011, driven by a decline in disc publishing revenues, partially offset by the contribution from Qumu, which we acquired in the fourth quarter last year. We reported a net loss of $48.3 million for 2012 on a GAAP basis, which included 3 noncash charges totaling $40.7 taken in the third quarter. These charges included impairment charges related to the Qumu acquisition and a charge to establish a valuation allowance against our deferred tax assets. Excluding these noncash charges and the amortization of Qumu intangibles, the non-GAAP loss was $5.7 million or $0.57 per share in 2012. This compares with a net income of $2.8 million or $0.29 per diluted share in 2011.

Turning to our cash balance and usage. Cash and marketable securities totaled $50.1 million at the end of December, compared with $59.2 million at the end of September. During the quarter, we used $8.4 million to repurchase 1.4 million shares of Rimage common stock under our expanded stock repurchase program. We used $300,000 for capital expenditures and cash used in operations was $200,000. For total year 2012, our cash and marketable securities balance declined $20 million. This decline was driven by $9.8 million for share repurchases, $5.2 million for dividends, $2.5 million for capital expenditures, cash used in operations of $1.9 million and $500,000 additional investment in BriefCam.

Turning now to our financial outlook for the first quarter of 2013. We expect revenues to be between $19 million and $21 million. We expect a net loss of between $0.18 and $0.30 per share. Excluding the amortization relating to Qumu intangibles, we expect the non-GAAP net loss to be between $0.16 and $0.28 per share. This projections reflect no tax benefit on the losses projected due to the establishment of a deferred tax valuation allowance for tax purposes.

For the year 2013, the company expects consolidated revenues to grow compared to 2012. Qumu revenues are expected to grow greater than 50%. This Qumu growth will be partially offset by a decline in disc publishing revenues. Consolidated cash from operations is expected at approximately breakeven levels. The company has approximately 778,000 shares remaining on its repurchase authorization and may repurchase shares from time to time during the year depending on market conditions.

That concludes our formal remarks. Now, Sherman and I would be happy to answer any questions. Operator, could you open the line up for Q&A please?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Greg McKinley with Dougherty & Company.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

I wonder if we could you just start off and revisit the disc publishing business and then maybe I can ask questions on Qumu. So you referred to some cost reduction efforts there. Where are you in the process of right sizing the cost structure in that business, and is there any way that you can quantify for us where the headcount went from and where it is to and where you are in the process of getting that where you want it to be, please.

James R. Stewart

Sure. Greg, thanks. This is Jim. As Sherman mentioned, we did take some actions to reduce our cost. In 2012, we streamlined the leadership in North America and Europe. We've also streamlined some of the sales footprint and we've done some consolidating of back office functions for Qumu to reduce G&A expenses. And so you're really going to see the full-act benefit from those actions in 2013. What we have committed and discussed in the past is that we're going to optimize the expense structure as the disc -- around disc publishing as the revenues decline over time. And concurrently, that business is making low double-digit operating margins than we anticipate at least for the foreseeable future to be able to optimize disc publishing expenses around that level. And with that, I think disc publishing is going to be a significant cash generator for us over the next few years. So it's an ongoing process in terms of dealing with the cost structure and we're dealing with it realtime.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay. So, do you see that disc publishing continue to run at a low double-digit operating margin?

James R. Stewart

Yes, that's right.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay, okay. And can you help us in sort of navigating from revenues to that operating margin, you did -- you had a nice 51% gross margin in the quarter. How should we think of the disc publishing business, that's obviously lower, and Qumu was higher. Can you give us a sense where that came in?

James R. Stewart

Yes, sure. The disc publishing -- our overall margins were 51%. And the Qumu software margins really drove the increase from last quarter. And as -- in terms of software margins and where they are at, they're quite a bit higher than our disc publishing margin. And I think over time, what you'll see is our gross margins increased as Qumu becomes a bigger part of our overall business.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay. And then maybe I have some other questions, but I'll let someone else jump in but before I do, can you give us an example of -- you mentioned the 6 large multinational customers who were booked with Qumu this quarter, can you give us 1 example or 2 of how your service and software is being used by them in a way that they cannot either accomplish in-house or with a competing offering, how they went through the process of determining that Qumu had a unique solution in the market and why it's unique?

Sherman L. Black

Sure. I think first of all, this is Sherman by the way. Thanks for joining the call, Greg. When we walked in, we're the -- we're one of the -- there's a handful of companies we're always going up against, and we're extremely focused on video, which is -- it's kind of the extreme data for the enterprise, the hardware, and we come in and find ways to work with your existing encoders. We work with your security systems that you have in place, whether it's LDAP or single sign-on. Most of these companies have made very significant investments in various portals or even CDNs and storage. And what we do is come in and enable video on top of that investment. And when they look at the things that we can do around that from a cost perspective, when they look at what we can do from our -- in regards to security, in regards to our future road map and the things we're going to be able to bring to the table, our ability to hit all the endpoints around mobility, these are places where I think we really stand out.

Operator

Our next question comes from the line of Steve Ryan with Sopra [ph] Capital.

Unknown Analyst

I'll start off, I'd like to commend you guys on aggressively using your stock repurchase program that you had in place. It was nice to see you guys aggressively in the market during the past quarter. Specifically as it relates to the margins that Greg was getting at. You -- in your public filings, in your Qs, you usually breakout what the Qumu margin or the online, the gross margin was -- the online publishing gross margin. Do you have that by end for the fourth quarter?

James R. Stewart

Yes, the Qumu online publishing gross margin was right around 70% and disc publishing was in the high 40s.

Unknown Analyst

Okay. And you also typically breakout the Qumu SG&A and R&D as a part of the overall, do you have that breakdown as well?

James R. Stewart

I don't have that breakdown in front of me, but you will be seeing that shortly in our filings.

Unknown Analyst

Okay. And so going forward, what would be the sales run rate, annual sales run rate that you need to see for Qumu to breakeven? You guided to cash flow, approximately cash flow breakeven. The publishing side, you still think it's going to be a cash generator, so that implies that Qumu is still going to be losing money. At what annual sales run rate does Qumu need to achieve to be breakeven at this point?

James R. Stewart

We're not giving guidance on the overall total year. We gave you guidance on the fourth quarter. What I can say is Qumu revenues are going to grow greater than 50% in 2013. I think that's supported by -- certainly supported by the backlog that we've built up over the course of this year. And we expect obviously to have new contract commitments in 2013. So just achieving that same level of contract commitments in 2013 as we did in 2012, we think supports pretty well, a pretty nice revenue growth expectation for Qumu for 2013.

Unknown Analyst

Okay. And as it relates to your first quarter guidance of $19 million to $21 million on the top line, are you willing to breakout what you think Qumu's contribution for that first quarter will be?

James R. Stewart

Not at this time.

Unknown Analyst

Okay, so I'll ask it another way. As it relates to disc publishing business, the product sales seems like they were $5 million for the quarter, which I think is the lowest market you had in some time. Do you think that on a run rate basis, I know it's a very lumpy business and it's very hard to predict, but are you looking at a decline from that level on the product sales side of the business, or do you think there should be a higher level of run rate going forward?

James R. Stewart

What we've said on the disc publishing business is that we expect revenues to decline in 2013 and at this point, that's as far as we're going to go in terms of the detail around that. But I think you can look at historical trends and get -- and kind of draw your own conclusion about the different elements of the business and the kind of growth to expect or the kind of growth decline to expect.

Sherman L. Black

Yes, Steve, this is Sherman. I think the other thing that didn't happen in '12 is we didn't get this big government deals that we had traditionally received. And so that creates some of the uncertainty that you're hearing from us.

Unknown Analyst

And this will be my last question. As it relates to getting those, I believe the government had awarded you the contract, they just didn't fund it? So have those not hit yet? Are you still anticipating at some point, during the course of '13, that those will actually come through? Or what are you hearing from government contacts?

Sherman L. Black

Yes, I wish we could give you guidance on what the U.S. government is going to do right now. I can't tell. But so far, they have not broken loose.

James R. Stewart

They have not broken loose and so far, the need for that product still exists.

Operator

[Operator Instructions] Our next question is a follow-up question from the line of Greg McKinley with Dougherty & Company.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

I wonder if we could just revisit some basics around the accounting for Qumu so that we're on the same page in terms of how cash flows come in as these contract commitments, I think, are probably feeling some liability recognition from some customer deposits. And then, I know there's 2, I think, primary different types of services you may provide, some of which allows you to recognize revenue upfront, others of which is sort of an amortization period over a service contract life. Can you just refresh our memory on that? And how we should think about your book today influencing the way the $12.7 million, I think, is what you have in the books at the end of 2012, how that's going to run to the P&L next year -- or this year, rather?

James R. Stewart

Sure. So in terms of that backlog of contracted commitments, we had -- we start -- we entered 2012 with really less than $1.5 million of contracted commitment backlog. So when I have mentioned that our backlog has grown almost $11 million, that's a pretty significant difference, entering 2013 from where we entered 2012. And so that obviously is a strong statement on the business. In terms of the types of deals that are in that backlog, we've talked in previous calls about -- that our business is changing and that there are more term transactions or subscription transactions that we are selling to customers. And so what you're seeing in that backlog is, it's really a mix. You're seeing some of those term subscription deals that we've signed up and those are multiyear deals, so you're seeing that as part of our backlog. You're also seeing perpetual deals, which are traditionally what Qumu has done historically. You're also seeing some perpetual deals where, for some reason, we may not be able to recognize that revenue in the quarter in which we signed the deal. For example, there could be an undelivered element of some sort, or there could be acceptance or what have you. There would be a reason why we couldn't recognize that revenue. So you're seeing in that backlog, really, a mix of that -- of those 2 types of revenue. And as we look at 2013, how is that going to get recognized? Obviously, the term deals that we've signed will mostly get recognized ratably over the term of that deal and depending on the customers, there's a mix of that. And then -- but those perpetual deals that we've signed up, typically those go into backlog for just 1 quarter or 2 and they end up getting recognized in a relatively shorter-term way. So that gives you a little bit of feel for the dynamics I hope of what's in our backlog.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Yes, that's helpful. And then in terms of direct cost, you have mentioned gross margins in Qumu were about 70%. Let's say in your cost of sales, are there certain expenses that occur there whether or not revenue gets recognized? I'm just curious about match rate, potentially, it bounces around quite a bit or is that matched directly up addressing your recognition?

James R. Stewart

And is your question specifically around Qumu?

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Yes.

James R. Stewart

Yes, I mean, there is some fixed cost in our cost of sales, have some intangible amortization. We have some -- we also have the cost for our support organization. And so I would say those costs that are, I would say, in the short term or near term, relatively fixed and that's why when you look at our gross margins in the first couple of quarters of the year for example, they were quite a bit lower than what we're showing in 2000 -- or excuse me, in the fourth quarter of 2012. And you can see the kind of leverage that additional gets to really a much higher margin percentage in our Qumu business.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Yes, so that 70% potentially moves significantly higher given the fact that those service center costs and amortization don't really vary with revenues?

James R. Stewart

To a point. Obviously, if you really go revenues, you have to add support costs. But you know, higher revenue definitely does leverage the increasing margins.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Yes. And then I guess just 2 last questions. How does that revenue recognition match up with cash flows? Is this a business where you get the cash first in those customer deposits and then you amortize the revenues over time? Or -- it seems to me that that's more likely the case, but how do you view it?

James R. Stewart

Well, perpetual deals, typically, we're going to invoice for the license and the first year maintenance pretty much upfront, right? And for the most part, those perpetual deals get recognized upfront or in the first quarter after we sign a deal. And so the cash flow is normally what you would expect in enterprise software business. Obviously, maintenance, I guess, renewed on a year-to-year basis. In terms of the subscription deals, there's usually, I would say, a slight weighting towards the front end of a subscription deal. But in general, those subscriptions are billed over the term, and so the cash flow for the subscription term deals is, on average, I would say, recognized over the course of the term.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay. All right. And then lastly, I know you had given us some stats around the breakout of your disc publishing business between equipment sales and recurring revenues, and I missed that. I wonder if you could just repeat that please.

James R. Stewart

Sure. Just one moment while I find that in my notes here. In terms of disc publishing sales, they were 17% -- or excuse me, they declined 17% from the fourth quarter of 2011. The hardware sales fell 35% from the fourth quarter of last year. The disc publishing equipment represented about 24% of our total sales in the fourth quarter, compared with 36% in the fourth quarter last year. Recurring revenues represented about 55% of our total company revenues, compared with 56% last year. Consumable supplies decreased 13%, while service revenues increased 14%. Does that cover it?

Operator

Our next question comes from the line of Steve Bradco with Merrill Lynch.

Unknown Analyst

Anyway, I was just going to ask you. As far as -- I know you guys were pretty aggressive the last quarter, buying back stock, you bought back 1.4 million shares. As far as the 778,000, are you guys restricted or can you still -- can you buy those shares back at any time? Because it seems like based on the price of the stock, with the cash and the marketable securities you have, Wall Street isn't really valuing to get that to disc publishing business, they're not valuing the Qumu business that much compared to what you guys paid for it. And I would say the business is probably worth more now than it was a, year ago, maybe what you paid for it.

James R. Stewart

Yes. And just in terms of the share buyback, we have those shares available. We said we may repurchase shares depending on market conditions. And in terms of it being the right time, there are really no restrictions for us except if we have inside information. I mean, we're limited in our ability to buy back our shares just like a normal shareholder would be. So if we feel we have inside information and something is happening in the business, we would not be repurchasing. Otherwise, we might.

Unknown Analyst

So basically, you couldn't really buy back the last week or 2 until you came out with your earnings because that would be having inside information?

James R. Stewart

That's right.

Unknown Analyst

Okay. Because to me, at $6.70 you know what I'm saying is, it just doesn't make sense that you guys shouldn't do buy backs as much as you can because it's really not valuing you -- your Qumu business than what I think it should be worth.

Operator

Thank you. Ladies and gentlemen, that does conclude our question-and-answer session for today. I would like to turn the conference back to Mr. Black for any closing remarks at this time.

Sherman L. Black

All right. Well, let's thank everyone again for joining us today. We look forward to updating you on our progress during our first quarter conference call in April. Thank you very much.

Operator

Thank you. Ladies and gentlemen, this concludes the Rimage Fourth Quarter 2012 Financial Results Conference Call. We thank you for your participation. You may now disconnect.

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