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Executives

Erin Flor – Manager of Communications & IR

James Granger – CEO

Darin McAreavey – VP and CFO

Scott Koller – President and COO

Analysts

Darren Aftahi – Northland Securities

Rick D’Auteuil – Columbia Management

Dick Ryan – Dougherty

Richard Dearnley – Longport Partners

Adam Peck – Heartland Funds

Wireless Ronin Technologies, Inc. (RNIN) Q2 2010 Earnings Call Transcript August 12, 2010 4:30 PM ET

Operator

Good day, ladies and gentlemen, and welcome to Wireless Ronin 2010 second quarter earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Erin Flor, Manager of Communications and Investor Relations. Ma’am you may begin.

Erin Flor

Thank you and welcome everyone to our 2010 second quarter conference call. With me today are James C. Granger (Jim), our Chief Executive Officer; Darin McAreavey, Vice President and Chief Financial Officer; and Scott Koller, President and Chief Operating Officer. After Jim’s opening remarks, Darin’s detailed financial review, and Scott’s sales update, we will open up the call to your questions.

Before we begin, please note that the information presented and discussed today includes forward-looking statements, which are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results in future periods may differ materially and you should not attribute undue certainty to our forward-looking statements.

Risks and uncertainties that could cause our actual results to differ from those expressed or implied by forward-looking statements, include those set forth in the risk factor section of the annual report on Form 10-K we filed on March 26, 2010.

In addition, our comments may contain certain non-GAAP financial measures including non-GAAP operating loss per share. For additional information, including the reconciliation for GAAP results to non-GAAP measures, how the non-GAAP measures provide useful information and why we use non-GAAP measures, please see the reconciliation section of our press release, which appears on our website at www.wirelessronin.com.

Now, I’d like to turn the call over to Jim.

James Granger

Thanks, Erin, and good afternoon everyone. Thank you for joining us on today’s call to discuss Wireless Ronin’s 2010 second quarter results. As I indicated, on the first quarter earnings call, Scott Koller was promoted to President and Chief Operating Officer.

During the time that he had spent in this role, I have become increasingly confident and his ability to take this company to the next level. The strength of Wireless Ronin continues to grow and much of the strength has happened under the direction of Scott and Darin McAreavey. Their team has put great effort and to improving the business model.

I would like to highlight a few key points from the second quarter of 2010, which took place under the direction of Scott and his team to illustrate why I have such confidence in him, the team and the direction of the company.

Wireless Ronin has clearly demonstrated the capacity for delivering on key financial performance metrics over the past quarter. First, we have recorded the highest level of revenue since the fourth quarter of 2008. Revenues almost doubled year-over-year and increased 78% on a quarter-over-quarter basis. Our gross margin dollars increased fourfold year-over-year and gross margin on a percentage basis continue to improve for the eighth consecutive quarter reaching 48%.

Secondly, WRT is on track to provide a breakeven business model if the company achieves quarterly revenues of approximately $3.8 million. Scott and Darin along with the rest of the management team, have been successfully executing against an ongoing cost optimization plan to position WRT for a future non-GAAP EBITDA breakeven quarter.

And thirdly, as the press release has outlined, our digital signage products and services are being widely deployed across our key vertical markets of food service, automotive and branded retail. In addition, we continue to focus on operational improvements including high availability, scalability, and software quality. Now with real revenue momentum, we hope to illustrate the true scalability of the business for the second half of 2010 and beyond. We believe the concurrent growth of revenue and margins demonstrates that our business model works.

I would like now to turn the call over to Darin for an update on our financials for the second quarter of 2010.

Darin McAreavey

Thanks, Jim, and good afternoon. We reported revenue of $1.9 million for the second quarter of 2010, a 99% increase from $1 million in the second quarter of 2009. As of June 30, 2010, WRT have received purchase orders totaling approximately $1.1 million for which it did not recognize revenue. The increase in our year-over-year revenue was primarily the result of revenue generated from four of the company’s marquee customers

Chrysler, Thomson Reuters, YUM! and ARAMARK.

In addition to working closely with Chrysler on multiple requests for additional enhancements to iShowroom, Chrysler is also looking ways to extend the platform as an effective launch tool for its new 2011 lineup this fall. We also experienced a favorable increase in sales to Thomson Reuters as it continues to expand its InfoPoint network and its most recently launched interactive application, Reuters Insider. Sales to Thomson Reuters during the three month period ending June 30, 2010, totaled approximately 400,000, up 126% when compared to the same period in the prior year.

During the second quarter, the company completed the installation of digital menu boards for 24 additional KFC stores including all of Jacksonville, Florida. We now have successfully deployed our technology to approximately 200 YUM! brand stores, which we fully host and support through our 24/7 network operation center or NOC. The company’s relationship with ARAMARK continues to strengthen and represents an installed base of over 60 locations, including higher ed, healthcare, K-12 and entertainment.

Recurring revenue generated from our hosting and support offering forms the foundation on which we believe we can build a long-term successful business. During the second quarter of 2010, our recurring revenue totaled approximately $300,000, representing an increase of approximately 100% from the same period in the prior year.

Our revenue for the first half of 2010 totaled $3 million compared to $2.4 million in the first half of 2009, representing an increase of 25%.The increase in revenue when comparing the first half 2010 to 2009 was again primarily due to a significant increase in revenue generated from four our marquee customers.

We also generated additional revenue related to recurring hosting which totaled approximately 600,000 during the first half of 2010, 173% increase and 220,000 recognized during the same period in the prior year as our installation base continued to grow. Due to the current economic environment and the lengthy sales cycle associated with deploying large scale digital menu boards, we still are unable to predict or forecast our revenues with any degree of precision.

Our gross margins, on a percentage basis, continue to expand from 39% in the first quarter of 2010 to approximately 48% in the second quarter of 2010 and up from 23% from the year ago period. This represents our eighth consecutive quarter of improving gross margins on a percentage basis.

We have now shown that WRT can achieve gross margins on a percentage basis, which are more consistent with those of other software and software service companies. We do caution our investors that our ability to maintain these high levels of gross margins on a percentage basis can be impacted in any given quarter by shifts to our sales mix. However, we continue to believe over the long-term, our gross margins on a percentage basis will increase as our recurring revenue grows.

On a GAAP basis, our second quarter 2010, net loss totaled $2.1 or $0.12 per basic and diluted share, an improvement from our net loss of $2.7 million or $0.18 per basic and diluted share for the same period a year ago and our net loss of $2.8 million of $0.16 per basic and diluted share in the first quarter of 2010.

Our net loss during the second quarter of 2010 significantly improved over the same period in the prior year as a result of an increase in gross margin dollars of approximately $700,000. Sequentially, we reduced our net loss by approximately $700,000 as a result of $500,000 increase in gross margin dollars and $200,000 lower operating costs.

As we mentioned in our last update, we have diligently been working on a cost optimization plan to drive an even more efficient business model which to date has resulted in overall annualized cost savings of approximately $2 million. Our goal is to increase this amount to more than $2.5 million by the end of September, which at our current gross margin levels of 48% provides for a future non-GAAP EBITDA breakeven at quarterly revenue levels of approximately $3.8 million.

Excluding one-time expenses and non-cash charges, the second quarter 2010 non-GAAP operating loss totaled $1.7 million or $0.10 per basic and diluted share versus a non-GAAP operating loss of $2.1 million or $0.14 basic and diluted share in the second quarter of 2009. Sequentially, our non-GAAP operating loss improved approximately $700,000.

Included in today’s earnings release and financial results is a reconciliation between GAAP and non-GAAP operating loss. This highlights one way in which we look at profitability and cash utilization for the company. It is similar to EBITDA but adjusted for certain other one-time and non-cash items. The supplementary schedule details the items and effects of non-cash and one-time adjustments.

Turning to the balance sheet, at the end of the second quarter of 2010, cash and cash equivalents in combination with restricted cash totaled approximately $8.2 million compared to $10.6 million at the end of March 2009.

As previously mentioned in March of this year, we entered into a loan and security agreement with Silicon Valley Bank to make available a line of credit up to $2.5 million. With the recent savings in operating costs and continued improvements we are seeing in the business, we still believe our current cash balance and access to capital is sufficient to support our operations well into 2011.

Our cash burn for the second quarter of 2010 was $2.4 million, which was up sequentially from $2 million for the first quarter of 2009. The increase in our quarterly cash burn was primarily the result of us coming off a very soft first quarter in building a significant portion of our revenues in the last month of the second quarter. Excluding our cash balances, our working capital accounts increased sequentially by approximately $700,000.

The reported results of our second quarter further demonstrate that we are effectively managing our growth with a goal of meeting our stated targets.

Now, I’d like to turn the call over to Scott for an update on our sales and operational efforts.

Scott Koller

Thanks very much, Darin. We are very pleased with the results of this quarter and with the continued improvements we are seeing with the company as a whole. As discussed in our last call and highlighted by Darin earlier, the company continues to focus on top line sales growth in managing our scalable resource expenses to match projected revenues. We are pleased that the second quarter demonstrates our efforts in both of these key areas.

Now I’d like to provide a quick update on our sales efforts. Staring with automotive, we continue to work closely with Chrysler as it looks to extend the iShowroom platform as an effective tool to launch its upcoming new lineup of automobiles. The web version of iShowroom available at chrysleracademy.com and the digital signage version continue to receive a tremendous of positive feedback from Chrysler and its dealer network.

Examples of the feedback are impressive. In the last six months, iShowroom has logged over 65,000 user sessions at Chrysler dealerships and in the same time period, over 14,000 Chrysler sales consultants have been certified to the training module of iShowroom.

In addition, Chrysler continues to add functionality to the iShowroom including a competitive comparison module that allows users account to side-by-side comparison of a Chrysler vehicle to competitive vehicles, highlighting Chrysler’s product line advantages.

Also during the second quarter, iShowroom was fully integrated into a new showroom design program and the new Chrysler dealer’s standards program. Dealers who meet the criteria of the new standards program will receive up to $200,000 per quarter in cash incentives. For dealers, the cash incentives have the potential to be more significant than the cost of iShowroom which should have a positive impact on iShowroom kiosk sales.

Chrysler has not generated our only activity in this key vertical. As the automotive industry continues to slow but steady recovery, we are seeing strong interest from several automotive manufacturers who want to learn more about the showroom and service department applications of our Ronin Castro automotive product line.

As a result, in the first half year, we have reserved a significant amount of pipeline momentum within the automotive industry. Several manufacturers are considering digital signage for the first time while others are looking to WRT to create their next generation kiosks and/or takeover an existing network.

Interestingly, the digital signage across the automotive industry falls into one or two categories, automotive manufacturers, who are interested in a more consistent impact on their retail showroom environment by elevating their brand and providing real-time sales support. And dealers that are more interested increasing repair work and profitability in the service department by promoting the absolute maintenance in light repair sources and service menu boards.

Moving to our efforts in food service, our relationship with ARAMARK continues to grow and gain momentum. Our installed base grew from 20 locations as mentioned on our last call to over 60 locations which brings to the total installed base to over 400 screens. These additional installations include the new TOPIO’S brand, business signing facilities and ARAMARK’s award winning Burger Studio. ARAMARK and WRT are working together to increase the visibility of the ARAMARK digital signage network to all relative stakeholders within ARAMARK.

Continuing with our efforts in food service, the KFC network continues grow. Second quarter installations and orders totaled 24 locations which included all the Jacksonville, Florida corporate locations and 11 additional franchisee locations. In all over, the company maintains discussions with KFC regarding deployment of the remaining 800 corporate stores, there are still no contractual agreement regarding a system-wide rollout at this time.

Beyond ARAMARK and KFC, our traction in food service continues to strengthen. As mentioned in our last call, we continue our installed test with six of the top 12 QSR companies and in the second quarter, we also lended an additional five pilot tests with QSR clients. It goes with all same that the food service industry along with our efforts in automotive will remain as a key focus for our sales and marketing initiatives.

We believe it’s also important to update you on our relationship with Thomson Reuters. The InfoPoint program continues to flourish throughout the Thomson Reuters network. The installed base best locations is at 320 and growing. In addition to this growth, and as discussed in our last call, Thomson Reuters continues to see a significant amount of interest in the InfoPoint product line from array of different financial institutions.

In conclusion, I think it’s important to highlight some key takeaways from this call. First, activity from key clients Chrysler, ARAMARK, KFC, and Thomson Reuters is providing significant growth in our revenue. Secondly, the Ronin team continues to focus on managing our scalable resource expenses resulting in a significant cost improvement as the company continues to work toward profitability.

And thirdly, we believe that the growth in revenue coupled with a continued improvement in our margins shows that our business model works. As I mentioned earlier, we are very pleased with the results in this quarter and with the ongoing improvements we are seeing with the company. We believe this momentum with persists as we move forward.

Thank you for joining us on today’s call and this concludes our prepared remarks. Now I’d like to open the call up for questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) Our first question comes from Darren Aftahi from Northland Securities.

Darren Aftahi – Northland Securities

Hi, guys. How is it going?

Darin McAreavey

Hi, Darren.

Darren Aftahi – Northland Securities

Just a couple of quick questions. Afternoon. So few things, it looks like and correct if I’m wrong, recurring revenue was flat in the quarter and I’m just trying to understand kind of directionally where that went? And then I have a couple follow ups.

James Granger

I mean it was. It was up a little bit but yeah, I mean it was right around 300 in the first and 300 in the second.

Darren Aftahi – Northland Securities

Okay.

Darin McAreavey

There was a timing issue there Darren, the timing of installations particularly at some of our more significant. If those installations go near the end of the quarter, then the full impact of their – of the recurring revenue falls into the next period.

Scott Koller

Yeah. Definitely the installations at ARAMARK, Thomson Reuters and KFC would then the realized in the reoccurring revenue.

Darren Aftahi – Northland Securities

Okay. So is that fair to kind of characterize your comments as the installations are maybe back end loaded in 2Q?

Darin McAreavey

Absolutely.

James Granger

It’s a fair comment, yeah.

Darren Aftahi – Northland Securities

Okay. And so then, what were the ending media players you guys were managing at the end of the second quarter?

James Granger

I think we’re going to get the – we need to get that information to, Darren I don’t have it right on hand here. I don’t remember exactly what the last count is. This is the one we follow up with you on that.

Darren Aftahi – Northland Securities

Okay. Fair enough. And then my last question I want to make and I’ll jump in is, have you guys seen any change adversely in the capital spending kind of environment in the last 30 days with any other clients in terms of kind of just pulling back on anything?

James Granger

There is still that – there is still the hesitancy. We’ve been fighting that hesitancy since the end of ‘08 to be quite honest with you. And it is clear that we are still fighting the headway – head wins of a difficult financial period for the country. And so, hesitancy is the watchword from all of our customers as far as capital spending. That being said, we’re pleased that we were able to double revenues on a quarter-over-quarter and year-over-year basis even in the face of those strong head wins.

Darren Aftahi – Northland Securities

Great. Thank you.

Darin McAreavey

Thanks Darren.

Operator

Our next question comes from Rick D’Auteuil from Columbia Management.

Rick D’Auteuil – Columbia Management

Hi guys. The gross margin was pretty impressive and you didn’t add without even growing – sequentially without even growing the recurring revenue with the NOC business, can you talk about the mix of – in the sales mix hardware versus software. Can you quantify that?

James Granger

Yeah. I mean you can see our actually software – sequentially our software sales were up from what we did in the first quarter. I think there was 70,000 and we did – we do this last quarter, we did 338 so that obviously had because that’s almost at 100% margin obviously contributed significantly and we’re just getting more efficient with our services revenue also that we saw an uptick in our content services revenue on that margin along with software development and then obviously the incremental – we did have some incremental service revenue related to our recurring and that’s obviously falls straight to the margin as well.

Rick D’Auteuil – Columbia Management

Okay. And then, you mentioned this – I don’t know if you call a backlog, but the 1.1 million, how does – how does that look as far as mix relative to what you just experienced in this quarter?

Darin McAreavey

Should be similar.

James Granger

Yeah. Should be similar.

Rick D’Auteuil – Columbia Management

So there is no reason for us to believe that we’re going to see a drop off in the next quarter on margin…

James Granger

Not that you saw what we see right now.

Rick D’Auteuil – Columbia Management

Okay. And you maybe I misheard this, but I – in the prior call I think you’ve talked about a 3.5 million in breakeven and now you’re talking 3.8. What has changed incrementally?

James Granger

That was a target what we initially gave and as we’re going through our optimization planning and resource assessment that it just creped up a little bit but it’s we’re giving a range and we feel comfortable where this is at now given we’re coming to the near end of this plan.

Rick D’Auteuil – Columbia Management

Okay. And I know there are issues some customers don’t want you to put out press releases and but maybe generically, did you land any large deployments that maybe you’re not able to speak to right now?

Darin McAreavey

The same thing that we’re unable to speak to – I mean at this point in time, we continue to test – our activity continues within QSR, so we mentioned we lended five more pilots. Again the very encouraging thing from QSR is stores with locations from 20 to 400 are certainly more active and a little more nimble than the larger companies. As Jim mentioned, the hesitancy is the word this year for capital spending and food service when last year it was just a no-go. So the talk has increased significantly about large scale roles but at this point in time we have nothing we can discuss.

James Granger

And what I would really go back to is what I’m so pleased with in this quarter is without any large scale rollout, we were able to achieve a doubling of our revenues, which I think bodes well for the company as those large scale rollouts do come. So the vast majority of the revenue came from our four key areas and our key customers and we’re – we’re really pleased what we’re seeing is that customers once they get into this continue to grow and gain traction.

Rick D’Auteuil – Columbia Management

So and then my last comment or question. It relates to the legislation in the healthcare reform suggesting that the QSR space is going to have the change the way it displays its message and you guys have at least one solution, well with digital menu boards. So as time has ticked along here, we’re kind of whatever six, eight months away from probably eight months away from when that’s to become effective, you would think some of the QSRs are starting to look at that deadline in the face and maybe close to deploying a plan. What are you seeing on that front?

James Granger

Absolutely.

Darin McAreavey

Absolutely. The activity – we’re starting to hear phrases. What’s really encouraging, we’re starting to hear phrases as far as digital menu boards pertain as being a cost of doing a business. One thing we’ve learned and educate ourselves from this space is many recipes change, bullish more often which affect calorie count more than you would think, more than the average person would think. So digital is just one way of addressing the calorie information but when you couple that with all the other operational issues they already have with limited offers, pricing changes, new product releases, it really becomes a solid solution and probably the only solid solution to address all of them. So what I’m encourage about and I already talked about the smaller people looking at it is every person in this space is looking at digital menu boards right now and you’re right. I think you’ll see a lot of activity coming up in the future in the space.

Rick D’Auteuil – Columbia Management

But we can’t be quarters away now. It has to be months and maybe even starting to look at weeks away and are you seeing anybody get that far through the pipeline where they’re getting close to deployment or everybody looks at…?

James Granger

No. There are many that are closer to deployment, what I would say though remember the rules and just a cautionary but it is on the call, the rules have not been promulgated yet. They have been discussed but they are still in the process of writing the rules and there are – anybody wants to put off the expense, right. They want to hope that the rules won’t come out so tough they want to try to do all that that kind of planning. I think its more human nature to say I’m going to count, test, look and that’s why we’re engaged with so many of these guys. They’re looking at test, doing pilots and we’re pleased with the number of pilots and the number of tests we’re doing with these guys. But they’ll pull the trigger when they absolutely have to. Nobody spends a dollar before they have to and I don’t know whether that’s – I think it would be a mistake to say it’s weeks but certainly months and quarters not years.

Rick D’Auteuil – Columbia Management

Okay. And then so just a comment on the answer Jim. At one point, we saw that at least the way the KFC was deploying their strategy that that there was actually a sales lift and the return on the expense and we’re just talking about being expense. Has that part of the model changed?

James Granger

No. No, they still see it. Go ahead.

Darin McAreavey

Yeah. I think one of the key things there is, they are seeing. People are seeing positive results from this but at the same time, these aren’t particularly nimble companies. They’ve got a huge process to go through to improve technology to get into the store. I think KFC has a tremendous amount of information, if you think about Vegas, Oklahoma City, Austin, Louisville, and Jacksonville now being completely digital, and Orlando and Boston have a majority digital. They have a tremendous amount of information at their hands and I don’t think they had to move forward with Jacksonville until if that information wasn’t positive. However, it still hasn’t turned out to we’re going to mandate this across the system and you would think that’s the next logical step.

Rick D’Auteuil – Columbia Management

Okay. Thank you.

James Granger

Thanks.

Darin McAreavey

Thanks.

Operator

Our next question comes from Dick Ryan from Dougherty.

Dick Ryan – Dougherty

Hi, thanks guys. Say on the – on the operating expenses lines, can we – can we see some improvement on the R&D level, I may not still kind of hanging around 750,000 on a quarterly basis. What do you think the trending far and then looks like?

James Granger

Yeah. I mean we’ve modeled ourselves, Dick where we’re going. We’re going through and finishing up our development efforts here and so we get through the end of the third quarter and then you’re going to see a significant drop. I’ve got that modeled out of it to drop somewhere in the 500,000 mark – quarterly mark going forward.

Dick Ryan – Dougherty

After Q3?

James Granger

After Q3. Yeah.

Dick Ryan – Dougherty

Okay. And then, I missed… sorry.

James Granger

Dick it’s really important that we finish the work on the next release. It is – because we are learning so much from our pilots and trials with these larger companies, the nimbleness and the flexibility and the capability of that software has to be just topnotch for us to really dominate. So it’s always tough to spend the money but I think it’s the right thing to do.

Dick Ryan – Dougherty

Okay. So Darin, I missed your comment that the 1.1 million, what was that purchase orders received after what?

Darin McAreavey

No that was basically our backlog as the end of June.

Dick Ryan – Dougherty

Okay. Which was…

Darin McAreavey

At 1.1 million of orders that we had in-house. We had not recognized revenue on.

Dick Ryan – Dougherty

Okay. So a similar level to Q1. When will these be deliverable over the next quarters in ‘10 here or it will stretch into ‘011?

Darin McAreavey

Majority of them will be delivered in the third quarter.

Dick Ryan – Dougherty

Okay. Okay. Scott when you – when you talk about the test pilots, can you address the pipeline, I mean not necessarily specifically companies but talk about the RFEs that are out there and I mean is there rational movement by customers and deploying digital signage or these things still kind of wishes that kind of a nice to have but not got to have?

Scott Koller

No. There is – there is real rational movement to it. I mean even this – I think in the last three weeks, we’ve responded to two RFEs in this space and we can’t talk particulars but again we’re probably responding to an RFE in the space at least on a by weekly basis. So the activity is very high, it’s strong activity is not kicking the tires anymore, it’s needed to subset – what we’re seeing the difference in our opinion to my opinion is, here are the must haves that we have to have from a system and part of this, I think a lot of these customers didn’t really know what they had to have for their system. So their questions are more targeted, their customers are more educated and I believe there is a real sense of didn’t get our arms around this when I would say a year to two years ago, it was more kicking tires.

Dick Ryan – Dougherty

Okay. And with the key customers, on the last call you said, you gave us the 28 for ARAMARK and you said that there would be an additional 50 year or so to be added, same thing on the KFC side, do you have visibility into rollouts over the next quarter or two from the key customers that you can share with us?

James Granger

Well if you look at the ARAMARK and in which when you – at the end of the first quarter and that’s six – over 60 at the end of this quarter they were pretty significant, a pretty big junk of that original 50 we talked about and I don’t see it letting up although we don’t have line of site to all of it as the ARAMARK shorter worse as the distributor would lock the folks out there, selling the solution along with their other – their other offerings but I don’t see ARAMARK lightening up there our load any time soon. They’re gaining significant traction. KFC again has sort of been on market-by-market continued to test, continue to gather data and in the immediate future I don’t see that changing but at the same time I think they’re seeing some real positive results. And as long as the other customers again, as we mentioned, the organic growth with KFC, Thomson Reuters, Chrysler and KFC is not monumental but it looks like it’s for revenue and it still short of a full scale rollout. So again one of our major – our major goals here is to make sure that company can grow and the business model works short of a rollout and with one rollout this company builds toward profitability. So we continue to focus on most key verticals.

Dick Ryan – Dougherty

You talked about Thomson Reuters working with Financial Institutions, have they – have they contributed to revenue outside of their network with other customers or hasn’t that developed as yet?

James Granger

Not at this point in time, right now, a majority of our revenue is geared towards supporting their internal Intel point network.

Dick Ryan – Dougherty

Okay. And one question on Chrysler. Has there – has there been delivery or have they done deliveries to dealers of the iShowroom key out, I know there was a mailing or a pretty aggressive marketing plan put in place, can you share any snippets from that?

James Granger

Yeah. Yeah, there has been deliveries and again dealers are starting to signup for the new dealer standards program so I – so we mentioned in the script that we believe that’s going to generate additional chaos sales…

Erin Flor

We were doing about one a week I think.

James Granger

Yeah, about one a week since the release and we believe this is going to gain a lot more momentum with it being included and not optional and the dealer standard programs. Again the dealers have the ability to capture some real cohort dollars if they participate 100% in the dealer standard program and the signage is just part of that.

Dick Ryan – Dougherty

Okay. Thank you.

James Granger

Thank you, Dick.

Operator

Our next question comes from Richard Dearnley from Longport Partners.

Richard Dearnley – Longport Partners

Hi, good afternoon.

James Granger

Good afternoon.

Richard Dearnley – Longport Partners

I’m new to your companies; it sounds like were the KFC stores in Jacksonville company-owned or franchise?

Darin McAreavey

Company owned.

Richard Dearnley – Longport Partners

And is the – is the fact that one of the – there seems to be a delay in KFC, kind of, that you were talking about. You’re negotiating company-wide standards here. Is the – is their delay related to the no rules yet?

James Granger

No. I think their delay is basic. They’ve had a tremendous lot of changes at KFC and currently right now, they have a legal issue between the franchisees and the corporate that’s a little duty to – too detail to get into but I think they’re going to need to – they’re going to want to resolve that. They’re going through their annual operating budgets for 2011 at this point in time. So they’ve got – they’ve got just a lot of moving parts, and during this program as well you know we got a new President and a new CMO. They’ve recently had another CMO change. So bringing new people on board and getting familiarized with the program and educating them has been part of our task too. Again they’re just not a real nimble company. They’re going to test us 100% and deploy when they’re good and ready.

Richard Dearnley – Longport Partners

Thanks again. And I was led to believe that they were seeing double-digit comp store sales increases when they put this in is that am I in the right ballpark there?

James Granger

Well, I will tell you this. They’re receiving positive feedback, very positive feedback from lifts, but they have yet to share any of that with us. So I don’t know what your source was as far as, but they keep that pretty close to the chest i.e., they’re in no mood to educate their companies. (inaudible)

Richard Dearnley – Longport Partners

Yeah, of course. Okay. Thank you.

James Granger

Thank you.

Operator

Our next question comes from Adam Peck from Heartland Funds.

Adam Peck – Heartland Funds

Good afternoon, gentlemen.

James Granger

Hi, Adam.

Darin McAreavey

Hi, Adam.

Adam Peck – Heartland Funds

When you look at the 3.8 million breakeven, how does that break down between hardware software and services?

James Granger

Well, again, it was more just on – us maintaining a margin of 48% and I don’t – we don’t see a whole lot of movement rather put mix distribution different than what we’re currently doing right now to maintain that 48%.

Darin McAreavey

If mix did change a lot, it could impact that but right now just with what we’re seeing in the pipeline and what we’re seeing going forward the mix looks to be consistent.

Adam Peck – Heartland Funds

But, so it would be roughly 50% services, 30 hardware and the balance software?

James Granger

Correct.

Darin McAreavey

Yeah.

Adam Peck – Heartland Funds

Because that has, it’s improved quarter-over-quarter whereas last quarter it was 7% software now it’s up to 18%, as a percent of sales.

James Granger

Right.

Darin McAreavey

Correct.

James Granger

Yep, that’s where we’re pleased with.

Adam Peck – Heartland Funds

Okay. And any changes in the competitive landscape?

James Granger

Yeah, I think there is a digital signage as the assessment being market, more competition comes into it and some competitive means it seems like it seems to be a little bit of a revolving but what we’re starting to see the time and time again and automotive and food services it’s the same three or four competitors that we’ve always seen. So it hasn’t really changed a lot and all of this – another thing that has changed I think this is important as everybody has really sort of realized there can’t be everything to everyone. So people have focused on different niches but we have chosen our three and branded retail automotive and food service, other people have chosen hostility, other people have chosen an array of different focuses. So we’re starting to see the same three or four players in our market quite a lot but I think there is going to be a little bit more focus as people understand they can’t be everything to everyone.

Adam Peck – Heartland Funds

Okay. Thank you.

James Granger

Thanks Adam.

Darin McAreavey

Thanks, Adam.

Operator

(Operator instructions) I’m showing no one else in queue at this time.

Erin Flor

Okay. I’d like to thank everyone for his/her participation on today’s call. The dial in information from domestic and international locations along with the archived recordings can be found in our website at www.wirelessearning.com. Thank you and good bye.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This concludes our program for today. You may all disconnect and have a wonderful day.

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Source: Wireless Ronin Technologies, Inc. Q2 2010 Earnings Call Transcript

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