Alteva's CEO Discusses Q3 2013 Results - Earnings Call Transcript

Nov.13.13 | About: Alteva (ALTV)

Alteva Inc. (NYSEMKT:ALTV)

Q3 2013 Earnings Call

November 13, 2013 10:00 a.m. ET

Executives

Jordan Darrow – Darrow Associates, Inc.

David Cuthbert – President and CEO

Brian Callahan – EVP and CFO

Analysts

Chad Cooper – Ascendiant Capital Markets

Jason Revland – Blueprint Capital Management

Aram Fuchs – Fertile Mind Capital

Operator

Good morning and welcome to the Alteva's Third Quarter 2013 Financial Results Conference Call. All participants will be in a listen-only mode. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Jordan Darrow. Please go ahead.

Jordan Darrow

Thank you. Before we begin, we remind you that statements made during this call may contain forward-looking information within the meaning of the Securities Act of 1933 and Securities Exchange Act of 1934. Forward-looking statements are all statements other than statements of historical facts which reflect management’s expectations regarding future events and operating performance and speak only as of today, November 13, 2013. Forward-looking statements are based on current assumptions and announcements made by the company in light of its experience and its perception of historical strengths, current conditions are expected due to developments, regulatory matters and other factors if believes are appropriate.

These statements are subject to a number of assumptions, risks and uncertainties and factored into the company’s filings with the Securities and Exchange Commission, future growth and profitability, general economic and business conditions, the business opportunities that may be presented to you and perceived by the company, changes in law, regulations and other factors, many of which are beyond the control of the company. A more comprehensive discussion of the risks and uncertainties impacting the forward-looking statements included herein can be found in the company’s Annual Report on Form 10-K and other periodic reports filed with the U.S. Securities and Exchange Commission.

Listeners are cautioned that these statements are not guarantees of future performance and the actual results or developments may differ materially from those projected in any forward-looking statements. All subsequent forward-looking statements attributable to the company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, to supplement discussion relating to the consolidated financial statements and results as prepared in accordance with Generally Accepted Accounting Principles or GAAP, Alteva uses a non-GAAP measure of adjusted EBITDA.

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization adjusted to exclude non-cash stock-based compensation, severance related expense, and nonrecurring charges associated with the disposal of USA Datanet. A reconciliation of adjusted EBITDA to net income or loss can be found in a table at the end of the company’s earnings result press release issued yesterday, which is also available in the investor relations section of Alteva’s website. The company believes that non-GAAP financial information provided in the release and is maybe discussed during this conference call, can assist investors in understanding and assessing Alteva’s ongoing core operations and prospects for the future and provide an additional tool for investors to use in comparing Alteva’s financial results with other companies in Alteva’s industry and a broader technology sector, many of which presents similar non-GAAP financial measures to investors.

At this time, I would like to introduce the members of management on the conference call. We are joined by David Cuthbert, President and Chief Executive officer; and Brian Callahan, Executive Vice President and Chief Financial Officer. We will begin with an overview and discussion of recent highlights followed by a review of the financial results.

And now I have the pleasure of turning the call over to David Cuthbert. David, would you please begin?

David Cuthbert

Thanks, Jordan. I'd like to welcome the investment community to our third quarter 2013 financial results conference call. Consistent with our stated business objectives, Alteva’s third quarter results reflect our focus on profitable growth, financial strength and building an increasingly positive position within the most attractive segment of the unified communications market.

During the third quarter, we produced record setting results for several important metrics as well as delivered improvement on other operational fronts. I’ll begin by discussing the changes we’ve implemented and then move on to the operations and financial improvements. On September 1, 2013 we completed the sale of substantially all of the assets of the company’s USA Datanet business for approximately $600,000 subject obviously to customary post-closing adjustments.

This transaction supports Alteva’s growth strategy by creating internal efficiencies and streamlining the UCaaS business by eliminating a non-core platform. The reduction of costs gained by this asset sale is intended to improve the overall profitability of the business, yet it also will reduce our UC segment revenues by $2 million on an annualized basis. This non-core platform is not part of our ongoing growth strategy and the legacy costs associated with the platform have been negatively impacting the profitability of our unified communications as a service business.

Excluding USA Datanet business, we set several new records that highlight the progress we had been making. Our leading unified communications as a service platform continues to demonstrate its value to our target markets while offering substantial leverage that enables growth in our top and bottom lines. Here are some of the results of our successful execution of our strategies. Our UC revenues reached the highest levels on a quarterly basis. Our UC segment also reached an all-time high as a percentage of consolidated revenue.

Net of the number of users sold with USA Datanet, our hosted seats and service reaching our highest level in history as of September 30, 2013. Gross margin as a percentage of sales for the quarter was at a record level since the company entered the unified communications market. Additionally, adjusted EBITDA and net income have hit the highest levels since we entered into the UC market as well. This is the third consecutive quarter in which we’ve shown impressive progress on most of these measures. These results are driven and powered by our sales and marketing efforts, which are successfully positioning Alteva as a premium service provider for middle market business customers.

Even when we exclude USA Datanet revenue and seats, our seats and service at September 30 grew 11% from the second quarter 2013 and 60% from the year earlier period. Additionally, our retail customers made up approximately 75% of the UC revenue base with an average revenue per user of $45. While we expect our UC revenues to increase at an annual growth rate comparable to that of the overall UC market, we are committed to this growth with an emphasis on profitability and margin enhancements. With regard to the market, Alteva is well positioned in an extremely dynamic and exciting market for both investors and customers.

It is clear that companies are motivated to make technology moves to the cloud and this includes for their communication infrastructure. As a result, the competition in this space is changing as more service providers see growth opportunities in the cloud. Our deep experience in unified communications and service along with the quality of service our brand represents in the space, it’s servicing our growth well. As a result of these influences and the available resources to the company, we will continue to strategically invest in our organic sales and marketing initiatives to capitalize on the growth opportunities available in the market.

These investments are expected to focus on channel partner relationships and broader distribution channels. Additionally, on the strategic front, we expect further consolidation within the industry. In this regard, we will remain attendant to the strategic market to evaluate opportunities that may complement our organic growth efforts.

With regard to our recent product launches, I’m excited about the opportunities we have as a result of our deep link integration, our Alteva mobility applications and our offering expansion in the United Kingdom. In regard to the latter, we recently peered with a UK provider to offer a seamless international solution to our customers with businesses in the United Kingdom.

This offering will enable these companies to leverage our cloud solution with the benefit of local members and dialing on either side of the pond. We strongly believe this will add increased benefit to our customers and we already have implementations pending for this recent release. We will continue to evaluate other opportunities for international offerings as well. As far our telephone segment, despite the fact that we continue to lose wire line customers at the rate of the national averages, we’re seeing steady revenue performance over the past 12 months by modest gains in broadband service revenue and increased rates from our access line service.

Our expense management initiatives have also enabled us to secure acceptable margins in the segment. As for improving the company’s financial position, we’ve seen substantial improvement each quarter this year. A key element in this improvement is that we reduced our bank debt by 15% from the end of the second quarter. This debt reduction was achieved as a result of the allocation of proceeds from our Orange County-Poughkeepsie Partnership for O-P investment, which previously was used to fund our dividend payments.

Among other notable achievements, we are honored to have our hosted call center solution awarded to the communications solutions product of the year award from TMC and the editors of Internet Telephony and Customer magazines. In addition, our UCaaS solution was recipient of the 2013 Internet Telephony Excellence Award presented by TMC’s Internet Telephony magazine. This award underscored our previous sustained record of delivering business transformation solutions designed to increase productivity and efficiency for our customers.

I’ll now like to update everyone on the Orange County-Poughkeepsie Partnership or the O-P agreement. The O-P is our partnership with Verizon Wireless. Our share of the earnings of the O-P was $1.9 million for the third quarter of 2013, but we received the cash distribution of $3.25 million due to the guarantees in the O-P agreement. We are also guaranteed to receive that same amount for the fourth quarter. We will continue to evaluate our put decision for April of 2014, based on the 2013 earnings and the 2014 projections Verizon provides us in Q1 of 2014.

As we stated last quarter, our focus continues to be on managing the company for continued profitable growth and effectively controlling expenses. As our consolidated revenues grow, we expect to realize, improve its profitability given a leverage we have in our UCaaS platform. This leverage will allow us to increase UC segment revenues without meaningful additions to the fixed portion of our expense structure.

Across-the-board, the third quarter was a success and it sets us on course for further improvement in the future as we continue to grow. And now, for more -- for a more thorough review of the third quarter of 2013 financial results, I’ll turn the call over to our Chief Financial Officer, Brian Callahan. Brian?

Brian Callahan

Thanks, David. I’ll begin my remarks by addressing our growth, which as David mentioned has been driven by our UC segment operations. Our consolidated revenue was $7.5 million for the third quarter, an increase of over 7% from $7.1 million in the same period the prior year and up from $7.4 million sequentially from the second quarter of this year. Revenue increased 13% excluding the revenue from USA Datanet business that was sold.

UC revenues were $4 million in the third quarter of 2013, an increase of 12% from $3.6 million in the same period of the prior year and an increase of 3% from $3.9 million in the second quarter. This segment’s revenues increased 27% from the same period in the prior year and a 11% from the prior quarter excluding the revenue from the USA Datanet business that was sold. The increase in UC segment revenue reflects the successful implementation of our organic growth initiatives. As a percentage of consolidated revenue, the UC segment contribute approximately 54% of revenues in the third quarter of 2013 as compared with 51% in the same period of 2012 and 53% in the second quarter of 2013.

Telephone revenues were $3.5 million in the third quarter of 2013, a 2% increase from $3.4 million for the same period of the prior year. The change is due to increases in select service rates that took effect earlier this year and growth in a number of broadband internet customers, which was partially offset by a decline in access lines. The telephone segment contributed approximately 46% of the revenues in the third quarter of 2013 as compared with 49% in the third quarter of 2012 and 47% in the second quarter of 2013.

Gross profit increased 21% in the third quarter of 2013 to $4.4 million from $3.6 million in the same period of 2012. Gross profit as a percentage of revenue also increased to 58% in the third quarter of 2013 from 51% in the third quarter of last year and 57% last quarter. The continued improvement in gross profit primarily reflects the substantial increase in revenues contributed by the UC segment and our ability to leverage existing infrastructure, and the impact of the cost reduction initiatives, including the USA Datanet sale and the previously disclosed workforce reduction in the Telephone segment.

Selling, general and administrative expenses in the third quarter of 2013 were $5.2 million, as compared with $6.2 million in the same period of the prior year and $6.3 million in the second quarter of 2013. The difference in SG&A expense was primarily related to a reduction of wages, including the impact from the restructuring of the Telephone segment in the second quarter of 2013, other expense management initiatives implemented throughout the year, and higher severance cost in the third quarter of 2012. In the third quarter of 2013, we recorded nonrecurring items of a $129,000 of severance for workforce reductions primarily in the telephone segment and $404,000 for charges related to the USA Datanet sale.

Moving on to other income, income related to distributions from the O-P agreement for the third quarter of 2013 and 2012 was $3.25 million in each period. The company had net income of $563,000 for the third quarter of 2013, which was an improvement from the net loss of $922,000 in the same period of the prior year and net income $40,000 in the second quarter of 2013. Basic and diluted net income per share was $0.09 for the third quarter as compared with basic and diluted net loss per share of $0.16 in the same period of the prior year and earnings per share of $0.01 in the second quarter of 2013. There was basic and diluted shares of $5.8 million for the third quarter of 2013 and basic and diluted shares of $5.7 million in the same period of the prior year.

We had adjusted EBITDA of $2.9 million in the third quarter, an increase of 220% from $0.9 million during the same period the prior year. We define adjusted EBITDA as earnings before interest, taxes, depreciation and amortization adjusted to exclude non-cash stock-based compensation and nonrecurring charges including the severance related expenses and charges associated with the disposal of the USA Datanet.

Alteva had $719,000 of cash and cash equivalents at September, 30, essentially flat with the level at the end of June. At the end of the third quarter, we had a working capital deficit of $12.8 million. The working capital deficit primarily relates to the company’s credit facility recorded as current debt since the maturity date is June, 30, 2014. At September, 30, the company’s working capital deficit improved by approximately $2 million or 14% since the end of the second quarter. The improvement was primarily due to the decrease in borrowings under our TriState credit facility to $12.3 million at September, 30, from $14.5 million at June, 30, 2013.

Our total borrowing capacity is $17 million. The company also has the ability to incur up to $5million of debt for capital leases under the terms of our present credit facility. The capital lease bucket can be used to fund future growth including purchases of seat licenses, which are required to add new seats to or platform. At the end of the third quarter we had approximately $250, 000 outstanding under capital leases. As we discussed last quarter, starting in the third quarter we began reducing the amount of debt outstanding by reallocating O-P distributions from paying dividends for debt reduction.

During the third quarter of 2013, we received $3.25 million in cash from distributions from the O-P. Capital expenses totaled a $135,000 during the third quarter of 2013 as compared to $2 million for the same period in the prior year. The reduction in capital expenditures was primarily a result of plan timing of lower CapEx in 2013 as a result that the investments already made throughout 2012. These investments have established a foundation and the scalability for 2013. Our operating performance fares to result of our successful strategic planning. That concludes my remarks. We now like to open the call for Q&A. Operator, would you please proceed?

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. (Operator Instructions) The first question is from Chad Cooper of Ascendiant. Please go ahead.

Chad Cooper – Ascendiant Capital Markets

Hi, thank you. Couple of questions for you guys, the USA Datanet business was sold effective 91, so is it basically one months of that revenue that is not included in this quarter’s numbers?

David Cuthbert

That is right, Chad.

Chad Cooper – Ascendiant Capital Markets

So I guess my question is, I mean the UC business is supposed to be this high growth business and you guys grew a $100,000 in the quarter, just for UC from $3.9 million to $4.1 million give or take, is that correct?

Brian Callahan

No, from a quarter-to-quarter standpoint that -- yeah, comparing --yeah, that was correct. We’re really quite pleased with the growth we’re seeing over the previous twelve months, so a lot of the revenue in that segment is trailing as well. As you put on seats and users, revenue continues to pick up, so over the past twelve months, we’ve added about 60% of our overall user base. So we like the trend that we’re seeing on the growth side, you’ll have a quarter-to-quarter fluctuation, some of that is attributed to -- also to the nonrecurring charges, the equivalencies that can fluctuate from quarter-to-quarter with timing as well. But -- so yeah you’re right in the overall net adjustment, but the growth trend is what we’re excited about.

Chad Cooper – Ascendiant Capital Markets

So I guess, help me understand the users on the platform grew by 11% quarter-over-quarter?

Brian Callahan

That's right.

Chad Cooper – Ascendiant Capital Markets

Help me understand how that since we can't see it, but you can -- what does that mean for like future revenue that we're not yet seen, because that quarter-over-quarter growth is great, but to me $100,000 on a very small revenue base is not that great. So help me understand like you are seeing that we're not seeing.

Brian Callahan

Yeah. So there -- the user base is certainly a blended retail and wholesale users, so which has added throughout that quarter. Those users can be added at any point through that quarter. So from, obviously July 1st, all the way through September 30, so you realized the full impact of those users, especially a month after they come on to the platform. So generally speaking, you're going to see the full impact of user additions the quarter after they're currently added.

David Cuthbert

And just to clarify, the revenue increase excluding was more like 300,000 to 400,000 range when you check out all the USA --

Brian Callahan

Excluding the -- I'm sorry, excluding the USA Datanet, yeah.

David Cuthbert

Again, three months Q3 -- in Q2 and two months in Q3.

Chad Cooper – Ascendiant Capital Markets

So I get the year-over-year growth. I guess I'm still kind of wondering, I mean, you had $3.9 million in revenue in the March quarter. When do you think we're going to start to see some sequential revenue uptick? And again, this is -- I think it's twofold, its small revenues, but you also have small sort of ASP, so those go hand-in-hand. But should we see more of an uptick in the December quarter for the UC revenues or is it more going to be looking into 2014.

Brian Callahan

I think, you are going to see the impacts quarter-over-quarter. I mean, there is obviously net adjustment with USAD that's impacting the overall UC revenue in the third quarter. But as we go forward, over the next few quarters, you're going to see these net C [ph] that's grow the revenue sequentially as we continue to put them on.

Chad Cooper – Ascendiant Capital Markets

Is there any update or anything you can share on selling the old war with [ph] business?

David Cuthbert

No there is no update or anything I could share on that at this point in time. We're managing that business I think quite well. I think it's -- we've obviously liked the margins on that business and where we are right now from an operating standpoint. So that is what it is and we'll continue to manage the business and look for strategic opportunity in every direction and make sure that overall the business appropriately maximizing our resources.

Chad Cooper – Ascendiant Capital Markets

So you are not like working with any financial advisor to look for a buyer of those assets?

David Cuthbert

We haven't discussed any of that at this time.

Chad Cooper – Ascendiant Capital Markets

I guess the last thing is not really a question, but more a comment. You've added some new board members and I guess as a shareholder I'd like to respectfully ask the board to kind of look at board compensation for companies of similar sizes of Alteva and review the compensation to the board. Thank you.

David Cuthbert

All right. Thanks, Chad.

Operator

The next question is from Jason Revland of Blueprint Capital Management. Please go ahead.

Jason Revland – Blueprint Capital Management

Good morning, every one.

David Cuthbert

Good morning.

Jason Revland – Blueprint Capital Management

You have hinted that industry consolidation -- when I hear that I think of possible acquisition, so I just post the question of what kind of company would interest you and how would it strategically complement your business, should you make an acquisition?

David Cuthbert

Yeah. There is a lot -- obviously, a lot of activity in the market today. We're certainly paying attention to it and looking at it. As far as what my complement, what we're doing, I think, I'd really feel comfortable that our technology solution where it is today. I think it stakes up extremely well as compared to the rest of the market and feel quite confident about that. So I don't know that additional technologies or services or something that's squarely or on a cross here at this point in time. But if we were to be looking at acquisitions and evaluating them, I think it's looking at broader distribution channels. I think its expansion in sales and marketing and expanding on the infrastructure and the platforms that we currently have and looking for those accretive opportunities as they might present themselves.

Jason Revland – Blueprint Capital Management

Okay, great. Would you say that you’re actively looking or passively looking?

David Cuthbert

I would say that I’m remaining very attentive to the market right now Jason. So I think it’s just knowing the players out there and knowing who is doing what and paying attention to those things. And if the right opportunity presents itself through that, constant and regular involvement in the market and we feel that it’s the right move for the company; we would certainly evaluate it very seriously.

Jason Revland – Blueprint Capital Management

Okay. Given that you didn’t mention anything about business, is it fair to say that your previously stated Q1’14 profitability or EBITDA profitability targets are still on track?

David Cuthbert

Yeah, I feel very comfortable with the trends that we’ve seen. I think you could see the quarter-over-quarter improvement in the key metrics and specifically in the adjusted EBITDA metric. So I think we’re at where we thought we would be and we feel very comfortable with that. The one thing I'd say is that as I look at the competitive landscape going forward and we’re working through our 2014 budgets right now, I want to make sure that we’re making the right investments in sales and marketing to maximize our growth in this increasingly competitive market.

From the fixed component of the -- G&A side, I feel quite comfortable that those levels are appropriate. I don’t expect any material change in those at all because we have the corporate infrastructure that we have that we need to grow this company effectively and we’ve talked about that in the past as well. So we like where we are, we like where we’re going, I certainly like the trends and the profitability and the growth and we’re going to continue to evaluate that as we go.

Jason Revland – Blueprint Capital Management

Okay. Thanks gentlemen for the time.

David Cuthbert

Thanks, Jason.

Operator

The next question is from John Swanson of JAS Capital [ph]. Please go ahead.

Unidentified Analyst

Gentlemen, good morning and nice job on growing smart and really managing the costs especially on the UC revenue as well, I like to see that increase. On that UC revenue, a little housekeeping here, can you tell me how much of that UC revenue is recurring revenue?

David Cuthbert

Approximately 90% of the UC revenue is recurring. So the 10% of the equipment in the UCs [ph] it will fluctuate here and there per quarter, but generally speaking that's about right.

Unidentified Analyst

Okay. Speaking of equipment, is there a margin on equipment sales? Do you have to – I know, I believe some of your competitor may be subsidising the equipment to get orders in. Is that something that you have to do as well?

David Cuthbert

Yes, it can certainly vary from deal to deal, but margins on the equipment are fairly thin. That is really the commodity to the overall solution. So we have to be competitive on the equipment as we include it in our sales, certainly not the margin maker of the overall business.

Unidentified Analyst

Sure, okay. One broader question kind of on the industry focused line. There is a lot of [indiscernible] coming from [indiscernible] business customers [indiscernible] on the industry, how do you see the market change now?

David Cuthbert

I think there is a high level of consolidation and competition in the market, there’s a lot of opportunity in the market. So I think that there are obviously quite aggressive companies that are servicing a certain niche. So I think companies will continue to move in to the space because of the opportunities for growth here. So, we compete against those companies quite well. I think that our service and delivery model and our overall solution is in a great place as we go against those companies in a competitive landscape. So we like our position, but certainly understand that increased competition will happen in the market as well.

Unidentified Analyst

[Indiscernible], thank you.

David Cuthbert

Thank you.

Operator

[Operator Instructions]. The next question is from Aram Fuchs of Fertile Mind Capital. Please go ahead.

Aram Fuchs – Fertile Mind Capital

Aram Fuchs, Fertile Mind Capital; I was wondering in the [indiscernible] business you’ve paired down costs, you have to balance that with – making sure that you have cut that and also I'm just curious what you can tell us about the internal customer care metrics on that business?

David Cuthbert

Yeah, so the customer-care metrics we’re really quite pleased with. I think we have not seen detraction as we’ve cut costs in the service levels that we’ve provided to our customers. And that's something that's extremely important to us beyond just having sort of a customer service responsibility, we also have a regulatory responsibility and when we look at expense management there, we’ve got to make sure that we don’t cut into either. And so we take that responsibility very seriously and look at cost management through both of those lenses.

Aram Fuchs – Fertile Mind Capital

Okay. Related to the -- this IBDW pensions can be quite rich, quite generous. You’ve decreased the liability there; can you talk about on the pension and post-retirement benefits? Can you go through the math and how that worked?

David Cuthbert

Sure, I mean, the pension plan is frozen and frozen for a few years or so. So really what we’re doing is we’re contributing to it as well as we obviously have seen some improvement in the performance of the assets that are in there. So either way I think we estimated maybe about $1.1 million going into it this year and I think about $800,000 or $900,000 happen through the nine months. So we expect to continue to have to pay that down, although we’re doing -- a lot of looking through the asset breakdown and where that stuffs being managed and looking at the opportunities also – help reduce the amount of cash we have to put in through active management of the assets.

So that’s something obviously we work with a lot of outside providers. But it’s something we’re going to manage, we’re going to look at and like I said, it’s not growing from the standpoint of the people in the pond it's a frozen pension plan.

Aram Fuchs – Fertile Mind Capital

And the traditional definition, frozen pension means that the people you have offered to it are still getting it, but you’re not offering it to anyone else, right?

David Cuthbert

Correct.

Brian Callahan

Yeah, correct no new users. No new participants.

Aram Fuchs – Fertile Mind Capital

Okay. And then on the employee option restricted stock, is there something that you’ve told the street about – you’ve granted quite a few of those this year. Is there something going forward that we can model in, extrapolate out or maybe you can help us on that?

David Cuthbert

We haven’t really provided much guidance on that. We did a grant in the beginning of this year related to a lot of management changes that had occurred. So I mean there’s normally a plan that obviously the compensation committee or the board helps to put together the cash and non-cash components of that. But obviously we had a – we talked about earlier this year, a little bit larger than normal, more of a non-recurring type grant with a lot of the management changes. So we definitely saw a little bit of a spike this year and especially with some of the changes.

But we haven’t provided any additional guidance except for what's in the proxies to talk about and as we do the next proxy, that will be laid out as well.

Brian Callahan

I mean I think philosophically our decision will be obviously to use those kinds of grants to attract and retain the quality of management and the talent that we have in this company within a reasonable level. And we were close with the board to find those levels.

Aram Fuchs – Fertile Mind Capital

Okay, great. Thank you.

Brian Callahan

Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Cuthbert for any closing remarks.

David Cuthbert

Thanks a lot. I’d like to conclude today’s event by thanking all of you for joining our third quarter 2013 earnings results conference call. We hope that we provided you with the necessary transparency to better understand our business and our growth potential. The third quarter results once again demonstrated the progress that we have been making in growing our top line, managing our expenses and improving our profitability. We look forward to speaking with you again on next quarter’s call and welcome the opportunity to speak with you directly prior to that time. Brian and I will be presenting at the Sixth Annual LD Micro Conference on December 5 and hope to see you there. Thanks again for participating on our call and have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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