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Zoom Technologies Inc. (NASDAQ:ZOOM)

Q4 2012 Earnings Call

April 16, 2013 9:30 am ET

Executives

Patrick Wong – Vice President, Finance

Analysts

Operator

Good morning ladies and gentlemen. My name is Ashley and I will be your conference operator for today. At this time I would like to welcome everyone to the Quarter Four 2012 Earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key.

I will now turn the call over to our host, Patrick Wong. Please go ahead, sir.

Patrick Wong

Thank you, Ashley. Thank you for joining Zoom Technologies for its 2012 earnings conference call. Hopefully everybody filed their U.S. tax returns or at least filed an extension. I, for one, had to file an extension.

My name is Patrick Wong, Vice President of Finance. We will recap our results of operations for the fourth quarter and the full year results of 2012 and our financial position at December 31, 2012. Afterwards, I will highlight major events for Zoom since our last call. We will also talk about our plans for 2013. Lastly, we will open up the call for questions.

Before we begin, we must make a disclaimer regarding forward-looking statements. During this call, management of Zoom Technologies may make forward-looking statements within the meaning of Section 27(a) of the Securities Act of 1933, as amended, and Section 21(e) of the U.S. Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risk and uncertainties and other factors which may cause the actual performance, financial condition or results of operations of the company to be materially different from any future performance, financial condition or results of operations implied by such forward-looking statements. Further information regarding these risks, uncertainties and other factors is included in the company’s most recent annual report on Form 10-K and in the company’s other filings on file with the U.S. Securities and Exchange Commission.

2012 was very challenging in the global economy. The landscape for mobile devices is ever-changing, and very rapidly at that. Competition has become fiercer and margins have dwindled. No doubt Zoom has been affected by such circumstances as well. Since our last earnings call, Zoom has gone through many changes. I trust that many of our shareholders have seen our press release dated January 7, 2013. We entered into a securities purchase agreements with Beijing Zhumu Culture Communication Company Limited to sell certain operating subsidiaries in China and in Hong Kong. Effectively, Zoom’s primary business moving forward will be to wholesale and distribute consumer electronic and mobile handsets in North America through our current operations, Portables Unlimited, and from our intended acquisitions in the near future.

As a blanket statement, the recently filed annual report of Zoom will reflect this significant event and accordingly many of the line items found on our balance sheet and statement of operations have been regrouped based on our business model and continuing operations moving forward.

Let me now provide you with financial highlights for the fourth quarter and full year 2012. Full details of the financials can be found in the 10-K filed with the SEC on Monday, April 15, 2013.

For the fourth quarter of 2012, we reported net revenue from continuing operations of 10.1 million, down 24.9% from 13.5 million for the fourth quarter of 2011. We attribute the decline in revenues in the fourth quarter to poor economic conditions. Our revenues for the year of 2012 were 49.8 million. 15.6 million of that figure was attributable to handset and accessory sales and the remaining balance of 33.2 million was attributable to activations and residual commission income. Gross profit for the fourth quarter of 2012 was 1.8 million, down 28.4% from 2.3 million for the same period a year ago. Gross margin for the fourth quarter of 2012 was down 14.6% from 2.1 million during the third quarter of 2012.

Our total operating expenses from continuing operations for the fourth quarter of 2012 were 8.9 million compared to 4.3 million for the same period in 2011. Full-year operating expenses for 2012 were 17.5 million, of which 10.1 million was attributable to SG&A and 7.4 million was attributable to non-cash stock compensation expense compared to 4.7 million and 2.4 million for 2011. The significant increase in operating expenses from 2011 to 2012 was for the inclusion of full-year cash-based expenses from portables and decelerated recognition of stock-based compensation for issuance to consultants and employees for the services rendered, the businesses we have sold or are in the process of selling.

The fourth quarter of 2012 loss from operations was 2 million, a decrease of 1.5 million from 3.5 million for the fourth quarter of 2011. As a result of our disposition of certain operations, we incurred an $11.9 million loss on the sale of Profit Harvest and Celestial Digital Entertainment, our respective sales operations and mobile gaming development companies in Hong Kong, which closed on December 31, 2012. We also had an $11.2 million loss on discontinued operations for our in-process sale of TCB Digital, our old manufacturing company in Tianjin, and our sale of Ever Elite and Nollec Wireless, our R&D business in Beijing, which closed on April 5, 2013. The majority of that loss was related to goodwill impairment charges of approximately $9 million.

Our net loss for the fourth quarter of 2012 was 34.5 million, an increase from net loss of 2.9 million for the fourth quarter last year. As a result of the material restructuring and repositioning of our company by selling China and Hong Kong-based operations, we had to take very significant losses in the fourth quarter and for this year. We expect that these charges are one-time in nature and will not be recurring.

In review of our financial position at the balance sheet date, December 31, 2012, we had cash and equivalents of 430,000 and restricted cash of 19 million as compared to cash and equivalents of 214,000 and zero restricted cash at December 31, 2011. The restricted cash is money held in escrow that will be fully released upon the completion of the sale of all the entities to Beijing Zhumu under the securities purchase agreement. Net equity net of non-controlling interest was 52.1 million at the end of 2012 as compared to 75.9 million at the end of 2011.

Total assets were approximately 235.7 million at the end of 2012 as compared to approximately 182.1 million at the end of 2011. There were 144.8 million of assets that are held for sale as part of discontinued operations. There was also 138.3 million of liabilities of these discontinued operations. Upon completion of the sale of these certain operating units, both the assets and the corresponding liabilities are expected to come off of our balance sheet.

I also wanted to mention that we are pleased with the level of attention and service provided to us by our new auditors, Marcum Bernstein & Pinchuk LLP. Of course we also want to thank our legal counsel, Ellenoff Grossman & Schole for their continued support and advice. Lastly but certainly not least, I want to thank the management team from our subsidiary, Portables.

If I may, I want to read some quotes from our Chairman and Chief Executive Officer, Mr. Lei Gu, that can be found in our earnings press release. Over the last two years, the capital markets have been difficult on our stock. Concurrently, the mobile phone business has faced rapid changes and fierce competition that has hurt our margins. We feel that we need to sell our China-based assets, which are bringing Zoom less than favorable operating results and capital market multiples, and then use that cash to purchase assets that will bring steady positive cash flows moving forward. We believe North America provides opportunities for us to put the cash to good use and generate higher returns.

Chairman Gu goes on to close with the following statement: in 2013, our focus will be North America. Let’s keep our eyes open and get to work on finding some additional businesses that we can acquire and help unlock value. We look forward to a fruitful 2013.

Ashley, that concludes our presentation and we will now take questions.

Question and Answer Session

Operator

Thank you. [Operator instructions]

And your first question is from Alex. Please go ahead.

Alex

Are the sale proceeds fungible for acquisitions at the moment; and if not, when will they be?

Patrick Wong

They will be available for acquisition in Q2.

Alex

Quarter two, is that right?

Patrick Wong

Yeah, I mean we’re in quarter two. To be honest, we’re looking for the right investments and we want to put that cash to use.

Alex

Okay, so just to be clear, there have been no acquisitions made as of yet with the funds.

Patrick Wong

Not yet. If we had, we would have done a release; but we haven’t done anything.

Alex

Okay, thank you.

Patrick Wong

Sure. Thank you for your question.

Operator

Again, that’s star, one for questions. Your next question is from Thomas. Please go ahead.

Thomas

Hi there. I have a question on Page 15 of the 10-K. Under the section that says revenues, which is the first paragraph, it lists two numbers: for revenues 16,589,000 and activation services of 33 million-odd. Are those totally due to Portables or are there some non-Portables numbers in those?

Patrick Wong

As of this moment, the financials that you guys are seeing, in terms of top line revenue those are all Portables numbers. As of this moment, the continuing operations on all the top line is comprised of Portables.

Thomas

Okay. I’m a little hard of hearing – so that’s all Portables? If I back out the numbers that were reported on a quarterly basis previously for Portables, it seems as if the results are kind of dropping off there as the year progressed. Was wondering if you had any outlook on that or if you have any color if maybe the first quarter of this year has looked better for Portables.

Patrick Wong

Sure, let me give you some insight. While we don’t have any hard figures, I’d like to make some comments. Yes, your analysis was correct – there was some decline toward the end of 2012. For our shareholders, I think you guys do know in the past that Portables haven’t been tied to T-Mobile. T-Mobile was in a holding pattern for quite some time. At this point, Portables has made very significant efforts to move the business forward, as well as T-Mobile. I’m sure you guys have seen that T-Mobile is going to be merging with MetroPCS.

So with that said, there is new programs and there is new initiatives, but I would say this – in 2011 when T-Mobile was pretty much up for sale and that did not resolve itself until early 2012, that put T-Mobile’s business in a holding pattern, and as our symbiotic relationship with Portables and T-Mobile, that put Portables in a less than favorable situation. But now they are rolling out a lot of plans. It is taking time for those plans to become solidified and show results. I don’t have numbers for Q1 yet. I understand they may be soft. I don’t have anything to really report on that.

I do know that, and hopefully for everybody that’s in the United States, T-Mobile has been making very significant efforts to roll out new products, especially with the introduction of iPhone. So that’s happening pretty much as we speak in Q2 of 2013, so we really expect the business to pick up in Q2. Like I said, I don’t have any results for Q1 yet but I think that the pick-up is going to be in Q2. That’s been every indication from Portables’ management as well.

Thomas

Okay. Now, I have a question regarding SpreadZoom. We got some numbers in this filing on F39 for the year ended. I was just wondering if you could give us a little color about what this entity is up to and what it’s doing, and how the first quarter looked for it.

Patrick Wong

Unfortunately the answer for SpreadZoom is similar to Portables in terms of Q1 – we don’t have any results for SpreadZoom yet. I would say the entity—it’s still in a situation where we have just resolved the litigation, but it’s a matter of the court handing down action after they’ve made a judgment in our favor. So in that regard, that affects our SpreadZoom business. Our new factory is not fully up and running yet, so as of this moment we don’t expect great results out of SpreadZoom. We’re still—SpreadZoom is still focused on business going to southeast Asia and a lot of export business. Margins have not been great, as I understand. I don’t believe that there will be a big pick-up in margins in Q1 of 2013; but like I said, I don’t have any hard and fast numbers to quote from at this moment.

Thomas

Okay. Thank you. And then finally, do you happen to have an updated number for the current number of shares or anything since the end of the year?

Patrick Wong

I believe it’s in the 10-K. I believe that has the most recent shares outstanding.

Thomas

I was wondering if you’d issued any shares in the first quarter.

Patrick Wong

Don’t think so. I’d have—I apologize. You’ve caught me. We have—let’s see. As of March 28, 2013, we have 29.5 million shares outstanding.

Thomas

Okay, thank you. That’s it.

Patrick Wong

Okay. Thank you for your questions.

Operator

Your next question is from Ray. Please go ahead.

Ray

Good morning, Patrick.

Patrick Wong

Hi, how are you?

Ray

I’m just fine, thank you. I have a question regarding the selling of phones sourced in China into the U.S. and Europe. With the selling of the manufacturing in China – this is a two-part question – where are you going to be sourcing these phones? Is this coming from other long-term relationships in China, or will some of it be from SpreadZoom? And secondly, are there any regulatory restrictions that will be placed on these phones before they can be sold into the U.S.?

Patrick Wong

Let me answer the first question first, and I think we’ll delve into the second question in a second. We will be sourcing—we will source the most appropriate phones for the market from both—you know, I would put it this way. Obviously we sold certain businesses, but that management team is still, quote-unquote, our friends and we’d certainly go to them with the right orders for products and they can manufacture it. At the same time, we will look at other manufacturers as well as other finished products that we can acquire, and we’ll procure and then sell into the U.S.

So the correct phone needs to be sourced from the right solution provider. That may be outside as well as, quote-unquote, our old buddies that manufacture as well. That would include SpreadZoom. SpreadZoom currently is already servicing a lot of customers, and if they have the production capacity for it and the specs and the margins make sense for them, for SpreadZoom as well as Zoom, then that’s where we’ll source products. So the business decisions are predicated on quality and quantity and margin, and of course we like working with managers and teams and folks that we’ve known and have worked with in the past.

As far as your second question in regards to regulation, can you provide some clarity on that question? Maybe I didn’t quite understand it.

Ray

Okay. I guess the question revolves around are there certain phones that if you source in China, do they need to go through a process to prove that they are technologically in sync with U.S. standards, or will you be able to just buy the phones in China that are already approved for sale in the U.S. and sell those?

Patrick Wong

So I think what you’re asking is, are we going to buy ready-made, completed solutions that can be sold in the U.S. right now, or are we going to be having custom-built new products for the U.S. market? I think the answer to that would be yes. Obviously whenever there is own-branded or, quote-unquote, private label own-branded products, you’re going to experience higher margin, but that solution and that R&D cost needs to fit with the size of orders. Ready-made phones are great; that would be more of a trading and wholesale distribution business which we believe may not have slightly as high margins but maybe volume-wise it would be a little higher volume as well as quicker to market.

As far as ready-to-use and regulation, in terms of phones a lot the technology—I mean, everybody is familiar with 3G and now there’s 4G LTE. A lot of that technology revolves around the chips that go into the phones. Obviously we work with SpreadZoom – they provide chipsets. We’ve worked with MTK in the past, who really uses Qualcomm licenses. So those—as long as you’re putting the right chipset in, they are pretty much ready for U.S. markets or North American, European markets. Each market has its own bandwidth or spectrum that those chips need to work with, but it’s really about putting in the right chips.

Now there are test—when you put a phone to market, there is testing that has to happen as well as you have to go through CE and other verification processes for safety, and those costs depend. Those can be picked up either on the buy side or they can be picked up by the manufacturer, so that’s based on the RFP that’s put together for that specific buy.

But not to give you a longwinded answer – basically yes, they go through regulation but there’s a lot of things that are pre-regulated and ready, and then there are those that require additional work and spend.

Ray

Okay. And Patrick, longwinded is good. We’re dying for information out here, so let me just follow up on something you said there. You said 3G and then other phones. Would 3G then be the highest, most sophisticated phone that you’d be looking at selling, and then what do you think the difference would be in terms of mix between 3G and sub-3G type of technology?

Patrick Wong

I think we are not limited, but I would be honest with you – the expertise now revolves around 3G as well as 2G. 2G’s are feature phones that go to, like, places like southeast Asia. 4G LTE is a new technology. Everybody is still ramping up on their learning curve right now. We certainly are in the midst of that learning curve as well. I think 3G would be quicker to market, but I think the marketplace is telling you that you need to go to 4G as well. I don’t think it’s a choice – you have to go there. But I would say that we’re ready at 3G, but I think 4G would take a little bit of time to get there.

Ray

Okay, thank you very much, Patrick.

Patrick Wong

Thank you for your question.

Operator

And again, if you would like to ask a question, please press star, one at this time. Your next question is from Frank. Please go ahead, sir.

Frank

Hi Patrick. Yes, I have a few questions. My understanding is that the numbers is telling us that Portables lost 7.1 million in the fourth quarter; and given that, I’m wondering how worried we should be and what the chance is there’s going to be a big cash sink.

Patrick Wong

No, no, no. The loss—let me explain that a little bit. I would first say that the financials have—they look fairly different from the format that they were in prior to this quarter. Why? Because we sold a lot of stuff, so we have discontinued operations and we have continuing operations. At the same time, we have a lot of SG&A and we had a lot of non-cash equity-based compensation. As I’d mentioned earlier, a lot of these are, I would say, one-time charges. Let me explain – in our discontinued operations, which are our China and Hong Kong-based operations, there were employees as well as consultants, and people that rendered service to us that we issued stock compensation to as well as employees receiving employee stock options. Now, they are no longer part of Zoom, so instead of amortizing out those expenses over longer investment schedules, we went ahead and accelerated and took all those cost in 2012.

I would say that we—as you can tell, our statement of operations and our balance sheet is relatively conservative. We try to take—tried to, quote-unquote, clean up our balance sheet and whatever expenses that are related to sold operations, we took those expenses. So understand that our loss from continuing operations as well as a lot of those expenses, one, they are non-cash expenses; and two, they are really one-time in nature. There will not be a lot of unamortized non-cash expenses as well as one-off items going forward. We don’t really expect many of those one-off items going forward in 2013.

Frank

I guess it would—can I interrupt you? What I’m not understanding is the press release that I’m looking says, quote, loss from continuing operations of 7.1 million for the quarter.

Patrick Wong

Yeah, I know. I guess my point is that you’ll see in our P&L that there are—the stock compensation is taken there in above the line, just because it’s all grouped together. So I apologize if that may become a little bit of a misnomer, but that relates to a lot of things that were written off as well. So those are—I would say they are gone. We purposely didn’t split up the stock compensation into more than one place.

Frank

So can you comment on what Portables lost in the quarter?

Patrick Wong

Well basically if you’re looking purely at Portables’ business, just go ahead and take out the stock compensation, all the non-cash equity-based compensation; and I think there is probably about 3 million in G&A that’s non-Portables related. Do keep in mind that we still have Zoom holding level and some other intermediate holding companies that have regular expenses. Now, we’ve cut that down. We’ve cut down a lot of expenses and costs, but loaded in there is public company costs, the expense of being on NASDAQ, the expense of auditors, the expense of legal counsel – things of that nature. We’re certainly looking to scale that back as far as costs and get that under control relative to top-line revenue.

Frank

Okay, so that’s encouraging. My next question is you said that the new factory is not up and running yet, but can you comment on how complete it is? Two or three quarters ago, you said that the building was up but they were still finishing that.

Patrick Wong

Yeah, I personally have to say that it’s pretty much in the same fashion that it was, because at that time they were still in the midst of litigation. Now after an appeal, we got a favorable—basically we won the ruling. They appealed, and even with the appeal it’s still in our favor; however, as with anything, it’s one thing to come down with a decision. It’s another thing to enforce it and to continue building it out, so that’s really where we stand right now.

I’ll be honest with you – I think you can see from our balance sheet, other than our—you know, we’ve pretty much earmarked the cash on hand for North American acquisitions, so we’re not setting aside huge, huge chunks of cash for SpreadZoom. We will finish that build-out, but I would say that it’s just like anything – if you throw a lot of money at it quickly, it’s going to build out a lot faster. But we would rather put the money to work in the U.S. faster.

Frank

Okay. Then my last area is I’m concerned by the related party transactions, which have been there for a while. Can you comment on the 11 million due from Leimone Industrial and 9 million due from SpreadZoom? What’s the chance of that going away, and why such large numbers?

Patrick Wong

Well SpreadZoom, obviously, is the investment, so it was in the early set-up phase so it hasn’t been fully capitalized yet. We’ve capitalized part of it but not completely yet, so obviously to get it running you’ve got to lend it some money and lend it some money to get it really moving and fully running on its feet. It will completely stand on its own once it’s fully capitalized and everything is running smoothly. As you would expect, with an operation that takes a little time, especially with the factory not having been fully completed yet. So from that aspect of it, we don’t think it’s a problem and we believe that should resolve itself over time.

I would say this – with the sale of a lot of these operations, a lot of the related party items have gone away. Tianjin Leimone, we’ve done business with in the past, as you would look in our prior financial statements. That has a lot to do with purchasing of materials and so forth, so SpreadZoom probably will still do business with Tianjin Leimone. From our perspective, from Zoom perspective, we expect those to go away and those to be recovered.

I would say one thing – if we didn’t think that money was coming back, our auditors certainly would have made us write it off. We’re confident that money is coming back, so that’s why it’s still sitting there.

Frank

Would you care to say when?

Patrick Wong

Sorry?

Frank

Like when? In other words, are we talking a month or two, a year, or how long?

Patrick Wong

I don’t have an exact time. That’s something that I’d have to go back to our CEO and see if he has a timeline on that. I don’t know. I apologize.

Frank

Okay, thank you.

Operator

Your next question is a follow-up from Ray. Please go ahead.

Ray

Yes, Patrick. Just quickly as a follow-up on SpreadZoom, obviously there was a building that was done. Could you address where the equipment came from and possibly will there be needs for purchasing a lot of equipment to get this operation up and running, or was it existing equipment that was transferred over?

Patrick Wong

There’s not a lot of new equipment yet. They’re going to buy new equipment. It’s not super-expensive equipment. It won’t—I think there’s a lot of leasing programs or there is bank financing, so it’s really a matter of down payment versus buying them outright. So there will be some CAPEX. We haven’t signed anything in terms of commitment, so we don’t carry any capital commitment on our financial statements. But there will be spend on that. Right now, it’s really the matter of completing the building and then bringing over some of the assets from TCB into SpreadZoom. But to be honest with you, a lot of that equipment is a little bit old and depreciated, so they’re really just looking at new SMT, new service mount equipment to bring in there. Like I said, they would probably bank finance that, and you can’t really—if you’re going to pay financing, you have to put in new equipment.

On the flip side of that with the new equipment, the yield on the machines is quite a bit higher, so there should be improvement in efficiency and utilization on that side of it.

Ray

Okay. And then just my final question there – given the fact that you are not a majority owner but a minority owner in that business, can you address what the actual operating role might be for Zoom moving forward in that relationship? Is it just a financial investment or do you have technical people providing expertise and management of that operation?

Patrick Wong

Well, let me tell you because this is a great question, and in fact our auditors asked a similar question. Off the top of my head, let me just give you some insight. SpreadZoom has I think, like, seven board members and I think Zoom contributed two of those board members. I think there was two board members, and so, one, obviously we’re involved in the overall decision-making process. Now, SpreadZoom is in the early set-up phase, so from a personnel standpoint as of this moment, a lot of the personnel comes formally from Zoom’s team. So really running that operation right now is a lot of Zoom people. Now, they are going to continue to hire outside so that it’s not Zoom dominated or it’s a not a, quote-unquote, Zoom subsidiary but a Zoom investment. That’s really what I understand of how that operation is going to be run, but if you’re setting anything up, you have to get your hands dirty and put it together.

So the Zoom team had the—as you can tell from the name, Zoom really has the operational manufacturing expertise. Spreadtrum, which is the spread in SpreadZoom, they are the chipset providers and they provide technical and other types of expertise; and the third investment and owner is the Tianjin government, so they provide relationships, subsidies, and help with moving product and exporting it. So that’s the makeup of that joint venture, and by the makeup of the players you can kind of tell how the whole thing comes together. But certainly from the manufacturing side, Zoom has been heavily, heavily involved and provided a lot of the management and operations people.

Ray

Okay, thank you. And I’m sorry, one final thing – do you anticipate a timely release of Q1 results, or do you think that that will be delayed?

Patrick Wong

You know, I just—right before this call, I sent an email to our auditors and said, hey, can we set up a timeline for our 10-Q, Q1 filing? It’s a little bit predicated on Portables. As you can see, they make up a very significant part of our financial statements now and getting numbers from them to consolidate in is really key, help from our auditors to make sure they review all those figures. And believe me – I’m not the pass the ball kind of guy, but do understand a lot of what Portables does, as we all have said time and again, is highly related to what T-Mobile does, so it’s a matter of T-Mobile getting timely and useful information to Portables.

Let me just give you some additional insight, just from an accounting side of it. To be honest with you, they had purchased SAP last year to install at Portables, but that wasn’t terribly successful because of the huge, huge amount of customization. So now they’ve purchased what they call Microsoft Dynamics, which used to be Great Plains, which is a step up from the current accounting system. So we always applaud Raj, the CEO of Portables, because he’s very into automation and he’s into divesting money; but obviously when you’re running on tight margins and numbers aren’t great, you don’t have a lot of CAPEX to spend even if it’s just on software. But he’s spending money and we’re trying to get that installed, but as you would expect installing a new accounting system is not an overnight or easy process. But that’s what they are trying to do so that on a go-forward basis—I cannot promise you what Q1 internal timeliness will be, but on a go-forward basis they are really trying to make reporting more real-time and quick.

At the same time, because—you know, we keep our fingers crossed that T-Mobile is merging with MetroPCS. MetroPCS is a New York-listed company, so they are subject to U.S. listing requirements too, so they have to file timely as well so now they will have to get out information quickly. So I know it’s a caveat, but it’s pretty important because of the correlation. It’s pretty important, so I think those two drivers will help to move it along. I’m keeping my fingers crossed that we can try to get information early, but we are really trying to make efforts to get this process better and faster, because you guys need information to make decisions and thought processes about Zoom’s financials.

Operator

And at this time, sir, I’m showing no further questions.

Patrick Wong

Okay, no more questions? Okay. Well, we’d like to thank everybody for being on the call. Basically, I look forward to seeing you guys, hearing from all of you on the earnings call for Q1, which is just around the corner, and hopefully we’ll have some good-looking results and more of a forecast going forward of what Zoom’s plan and business model will be. Thank you everybody.

Operator

Thank you ladies and gentlemen. This does conclude today’s conference call. You may disconnect at this time.

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