Document Security Systems' (DSS) CEO Jeff Ronaldi on Q2 2014 Results - Earnings Call Transcript

Aug.12.14 | About: Document Security (DSS)

Document Security Systems, Inc. (NYSEMKT:DSS)

Q2 2014 Earnings Conference Call

August 12, 2014 4:30 PM ET

Executives

Jeff Ronaldi – CEO

Philip Jones – CFO

Analysts

Bob Wasserman – Dawson James Securities

James McIlree – Chardan Capital Markets LLC

Charles Black – Union Square Associates

Operator

Good afternoon. Welcome to Document Security Systems’ Second Quarter 2014 Results Conference Call. My name is Adam and I will be your operator today.

Joining us for today’s call is DSS’ CEO Jeff Ronaldi, and CFO Phil Jones. Following their prepared remarks, we will open up the call for your questions. Then before we conclude today’s call, I’ll provide the necessary cautions regarding the forward-looking statements made by management during this call as well as information about use the company used non-GAAP financial information. I would like to remind everyone that this call will be available for replay starting later this evening. A webcast replay will also be available via the link provided in the earnings press release as well as available on the company’s website.

Now, I would like to turn the call over to DSS’ CEO, Mr. Jeff Ronaldi, sir, please proceed.

Jeff Ronaldi

Thank you Adam and welcome everyone. Thank you for joining us today. About a half hour ago, we issued our second quarter 2014 results and press release which is now available on our website. We reported a return to revenue growth in the quarter of 14% from the year ago quarter and up 35% from the previous quarter. Contributing to the particularly strong sequential increase in revenue and making at a record for second quarter with the timing of certain packaging orders that slipped from Q1 to Q2. Looking at our results on a comparative first half basis revenue with a record overall for the first six months of the year up 6% from the same period a year ago. This record revenue was driven by continued strong demand in our printed products and growth in demand for digital solutions. In printed products, our continued focus on pipeline growth and cost control as the growth overall, and continued profitability within each division.

In our technology divisions, our results reflect sequential growth and operational scalability as we continue to invest in our AuthentiGuard program and our intellectual property portfolio. The quarter was highlighted by our first secured labeling customers to implement AuthentiGuard, this win illustrates the potential to build high margin fully integrated sales of secure printing solutions with our digital brand protection solutions. The quarter was also highlighted by additional strategic investments in our patent portfolio which has grown to over 120 active patents and over 25 patent applications covering our brand protection software and internet and hardware products and services. All these highlight AuthentiGuard continued progress in achieving each of the goals we identified as key to our overall corporate strategy.

Now before I go further I’d like to turn the call over to Phil to take us through a more detailed discussion of our financial performance. I’ll return to talk about our operational activities and outlook and then open the call to your questions. Phil?

Philip Jones

Thank you Jeff. As Jeff mentioned, our total revenue increased 14% to $4.9 million in the same year ago quarter. Printed product revenue increased 15% to $4.4 million this growth was driven by increase in packaging sales offsetting decreases in commercial printing and plastic product sales. Technology sales services and licensing revenues increased 4% to $476,000 driven by higher sales from our digital group.

Cost of goods and expenses totaled $7.1 million up 16% from the same year ago period. The increase was due to higher depreciation and amortization costs totaling $1.3 million compared to $229,000 in Q2 of last year. This increase was partially offset by a 69% decrease in stock-based compensation expenses in the second quarter of 2014. Cost of goods sold which excludes depreciation and amortization increased 26% to $3.2 million in the same year ago period. This increase was driven by a higher percentage of packaging sales as a percentage of total printed product sales in Q2 of 2014.

Adjusted EBITDA loss and non-GAAP metrics and our proxy property and cash flow totaled $633,000. This compares to an adjusted EBITDA loss of $171,000 in the same year ago quarter. The greater adjusted EBITDA loss reflected higher professional fees incurred from our IP monetization activity compared to the year ago period where the majority of the professional fees incurred were related to our merger with Lexington Technology Group in July of last year. These professional fees were specifically excluded from adjusted EBITDA last year.

The professional fees in Q2 of 2014 included cost for lawyers and consultants related to our IP monetization efforts. The fruit of these efforts is evident by our acquisition of 90 active semiconductor patents as well as continued progress in our 7IP enforcement campaigns during the quarter.

In our printed products business, adjusted EBITDA increased 2% to a positive $466,000 from the same year ago period. We managed our printed products business with cash flow in order to allocate the majority of the cash generated into our higher growth potential areas. This division is well positioned to deliver consistent financial performance improves as the solid financial foundation for other higher growth potential divisions. Net loss for the second quarter totaled $2.3 million or $0.06 per basic and diluted share, this compares to a net loss of $1.9 million or $0.09 per basic and diluted share in the second quarter of 2013.

Now turning to the balance sheet. At quarter end we had $1.6 million in cash and restricted cash. We also have $1 million available to our packaging division under a revolving credit line. We expect our technology management division to receive a $1.5 million milestone payment in Q3 of this year to help meet our general operating cash needs. The unit component of our business strategy is that we have proprietary access to private project funding, private project funding capital from IP savvy investors which increases our IP investment capacity. As a result during the quarter we added 90 active patents covering certain methods and processes in the semiconductor industry.

As we communicated in our last call the 7.5 million common shares which were held in escrow related to the Lexington merger will retire as of July 1. This reduced our total shares outstanding by 14% to approximately $42 million – I’m sorry 42 million shares.

This concludes my prepared remarks. Now I would like to turn the call back over to Jeff.

Jeff Ronaldi

Thanks Phil. Reflected in our Q2 financial results was our continued strong progress across all our core business groups. In our printed products group, we’re encouraged by our ability to generate double-digit revenue growth and a healthy EBITDA margin. Based on the hard work and important decisions we’ve made last year, we believe this division is poised to deliver revenue and EBITDA growth in 2014. As Phil mentioned, we managed this business for cash flow and we planned to allocate the majority of the cash generated in the higher growth potential areas like digital solutions and Tech Management.

Our long-term target financial model for the division is to cover all of our corporate operating costs as well as fund a portion of our IP investment initiatives. We believe this model neutralizes operating risk and provides patient shareholders with significant upside potential at IT licensing.

A potential high growth area for DSS is our digital solutions group. AuthentiSuite our comprehensive digital brand protection range of solutions helped brand owners protect against product diversion, counterfeit, theft and other costly and damaging occurrences. We continue to diversify our pipeline and advance our technology offering demonstrated by the win in the second quarter with the consumer products company. As customer contracted with us for fully integrated print and digital solution involving sales of secured labels by our premier divisions, and the licensing of AuthentiGuard by our digital division. Prior sales of AuthentiGuard had involved on the licenses digital solution with customer handling the printing themselves. Our ability to sell an integrated print and digital solutions increases our revenue and profit potential for AuthentiGuard and we will continue to pursue these sales opportunities whenever possible. This win reaffirms the strong value proposition of our TENA suite platform as well as the secured printing and packaging solutions.

As an innovator company we continue to face the need to educate the market about how AuthentiSuite can transform current business practices within brand protection both in the physical and digital domain. As a result, we continue to face long sales cycles. However, the response and feedback regarding AuthentiSuite has been and continues to be overwhelmingly positive and we remain confident that we are turning the page on a new chapter on our digital business.

On this note our sales team has been effectively building and expanding our AuthentiGuard pipeline of prospective customers. We are currently in varying stages with several of national brands about implementing our AuthentiGuard technology.

AuthentiGuard is an ideal representation of our business model which involves developing and acquiring IP that enables us to bring innovative products and service offerings to market or actively licensing our IT portfolio.

As many of you know our go-to market strategy with both commercialization and IT licensing is designed to maximize potential returns on our IT investments. This approach provides patient public equity investors unique access with stable and diversified business model that capitalizes on the $120 billion global IT licensing market.

Following this strategy, over the last year we have effectively extended our patent portfolio by adding more than 90 US patents across the range of technology areas including brand protection, software and internet, peripherals and semiconductors. We also introduced several new products to the market and expanded our active licensing program offerings.

During Q2 we acquired over 115 patents covering certain methods and processes in semiconductor industry bringing our total portfolio to more than 120 patents issued in the US and abroad and 25 patent applications pending.

Also during the second quarter we filed a patent infringement lawsuit against Lenovo and the District Court for eastern district of Texas, our complaint alleges infringement by Lenovo of DSS patent that relate to systems and methods of using low power wireless peripheral devices. The case is currently in the pleading stage. Along those lines we are encouraged by the progress and advancement of our seven active disputes. Today’s earnings release include an update on our contract dispute with Coupons.com as well as status of other key patent enforcement efforts and cases.

I’d like to take a moment to cover some of the highlights. In our contract dispute with Coupons.com. We are waiting a decision to Coupons motion for summary of judgment. We expect to receive a decision any day now. In the Bascom Research case, as many of you know earlier this year, the Facebook and LinkedIn cases were stayed by the U.S District Court for the northern district of California pending the outcome of Alice versus CLS Banking in United States Supreme Court which was decided on June 24.

To be sure the Supreme Court did not invalidate all software patents and the impact with that decision will be felt on a patent-to-patent basis. Following the Supreme Court’s decision, a case management conference is scheduled for August 22, at which time the parties will propose timetable for the remainder of the case and the VirtualAgility case on July 10, a three judge panel of the U.S. circuit issued a divided opinion granting a stay pending the CBM proceedings. For our arguments and the CBM proceedings were held on July 14.

We currently expect the case to resume in Q4 of this year which would be in the [marketing hearing] would likely to occur in the first half of 2015. In our case against Apple, on March 3, 2014, Apple filed a motion to transfer venue of the case from the Eastern District of Texas to the Northern District of California, which is pending a ruling by the District Court for the Eastern District of Texas. We are encouraged by the direction of progress of these suits and we will continue to provide updates to shareholders regarding factual information events that advance or hinder our outstanding cases. I also encourage you to view all our active disputes on our corporate website at www.dsssecure.com as well as via the pacer service at www.pacer.gov.

Additionally, we have included a slide in our investor presentation that provides the status of each dispute as well as the anticipated milestones and timeframe. You also may download the presentation from the IR section of our website.

Many of you follow the IP litigation space closely and as you know they continue to evolve [as new case file as] written. A number of recent Supreme Court cases have impacted patent law and IP owners will always deliver the baseline of uncertainty due to the changing opinions of the court. However, it appears us for the moment that [for our] legislative approach for patent reform has passed in May, US Senator Patrick Leahy dropped the patent reform bill aimed at reducing patent litigation brought on by non-practicing entities or NPEs. We believe the removal of the bill eliminates additional uncertainty for IP owners.

It is also worth pointing out that while new legislation could affect NPEs or those who do not follow industry standard corporate licensing practices. We do not see having a greater impact on our company for operations than it will on other technology companies like (inaudible) or Microsoft to seek the license for IP portfolio.

A major goal for us in 2014 and going forward is to grow and diversify our intellectual property portfolio and in fact potential legislation and patent reform could provide opportunities for us to acquire high quality technology and IP assets at attractive valuations given the increased uncertainty in the marketplace.

Since 2012, we have systematically expanded our patent portfolio from 15 issued patents to more than 120 patents today along with seven active cases on file. (inaudible) in these cases are multi-billion dollar companies who are the who’s who in technology. We believe that speaks to the quality of our IP as well as the monetization opportunity on the horizon. We are committed to further expanding our IP portfolio and increasing our licensing efforts as well as introducing new product this year.

Looking ahead, we expect 10 cases on filed by year end and at least ‘15 by the end of 2015. So in summary, we have many exciting prospects and a very ambitious agenda for the remainder of 2014. Our expectations for the future remain high as we build up on the momentum we’ve established and see a widening pipeline of growth opportunities ahead.

With that, we’re ready to open the call for your questions. Operator?

Question-and-Answer Session

Operator

Thank you. At this time, we will be conducting a question-and-answer session. (Operator Instructions). Our first question is from the line of Bob Wasserman with Dawson James Securities. Please proceed with your question.

Bob Wasserman – Dawson James Securities

Thanks. Hi Phil, hi Jeff. Congratulations on the accomplishments during the quarter. My question is related to the first AuthentiGuard sale, and I know Jeff you mentioned a little bit more about, had given more color about this in your second prepared remarks, but maybe you could give us a little bit more information if you could, is that a recurring revenue stream and is the growth within the first customer and perhaps more within the various industry segment, maybe there is more in that more company related to that?

Jeff Ronaldi

Sure. Thanks Bob and thanks for participating. Almost all of our sales with our AuthentiGuard can be used -- because it’s based on number of units sold.

Bob Wasserman – Dawson James Securities

Okay.

Jeff Ronaldi

So we should expect it to be recurring and on a per use basis and again unfortunately we have to apologize for not being able to disclose to the customer, but that’s the nature of this business, we don’t want to give the bad guys the formula how this works. So we honor the non-disclosure agreement that we signed with them and will not disclose who they are.

But having said that, your second question about are there more opportunities in the same sector and the answer is yes. Just recently I was on Bloomberg talking about the counterfeit market how big it is and how much it is growing and pretty much anyone who manufactures anything is at risk of being getting their product knocked off. So anyone who makes something is potentially a target or of sales prospects for AuthentiGuard. So our pipeline is forward having a lot of conversations with a lot of brand owners and we’re excited about it.

Bob Wasserman – Dawson James Securities

Okay. Well great I know the confidentiality but just any chance that you might have some type of sales piece related to this or maybe an example I know in the past you had given examples of in your trade literature as to what AuthentiGuard can do and here is a…?

Jeff Ronaldi

Yes, what we might able to do in the near future is put together a case study but we can’t disclose who it is or what market it is (inaudible)

Bob Wasserman – Dawson James Securities

Okay. A little more information there. And also just one question on the IP space. Maybe perhaps give us a timeline on your next catalyst or next milestone coming up this fall I think you mentioned maybe by the end of the year in the best you might have a -- now that the space (inaudible) next milestone in the IP area?

Jeff Ronaldi

We have a number of cases, and I wouldn’t put too much concentration in any single case. The strategy is to build a good solid portfolio of several cases and the point to the next available milestone it could be a number of things and we’ve talked about expanding our patent portfolio so it could be acquiring new assets it could be establishing a new IP campaign with some of the assets we already have acquired, but in the Bascom case on August 22 there is a hearing to determine the go forward for that case. So there is a chance that the judge will set a market hearing before the end of the year possible that we’ll let the judge decide.

Bob Wasserman – Dawson James Securities

Okay. But you’ll get some feedback from the judge at least by about timing and within a certain amount of time after the hearing?

Jeff Ronaldi

Yes.

Bob Wasserman – Dawson James Securities

Great. Okay. Well thanks again for taking my questions and congratulations on the quarter.

Jeff Ronaldi

Thank you very much.

Operator

Our next question comes from the line of Jim McIlree with Chardan. Please proceed with your question.

James McIlree – Chardan Capital Markets LLC

Yes. Thank you. So you mentioned that you are going to have 10 cases by the end of this year and 15 by the end of next. But I’m just curious as to how you can say that with such specificity, are you trying to negotiate with the infringers first and you are just getting nowhere so you feel confident that’s where you’ll get to or does it relate to the patent portfolio that you purchased during the quarter or is it something different or a little of both?

Jeff Ronaldi

It’s more on the lines of what’s in our current portfolio and the amount of time and effort we spend will identify a case before proceeding. We do not buy with the hope of finding a case, we’re pretty sure if we buy something and if you recall we spoke about the 100 and some patents that we purchased in the first half of this year. Within there is some embedded licensing opportunities and unfortunately in the current climate, many times you have to file before you can even have a conversation with potential infringers. So we will file and if the defendants are willing to have a discussion we would be more than happy to have a discussion with them. But the reason we can say with some confidence is that we own a pretty large portfolio now that have a lot of opportunities in it.

James McIlree – Chardan Capital Markets LLC

And so that of the incremental cases that you are anticipating to file by the end of this year or next. How many of those relates to the portfolio that have been recently acquired.

Jeff Ronaldi

In the short term we’re at seven we said we get the 10, so that is 3. I think we have more than three in the portfolio that we’ve already acquired. The reason I am confident about growing it to 15 through next year is the – our pipeline is full. I mean it’s hard to keep count of the number of opportunities that have crossed our desks in the last six months, but its well over 25,000. And of those 25,000 we’ve suggested two or three of them. We have a very rigid due diligence process to identify good assets and once we find a good asset we believe it is a licensing --. We’re not acquiring assets just for sake of having large numbers we’re acquiring what we believe is litigation quality assets which is significantly different than licensing quality assets.

James McIlree – Chardan Capital Markets LLC

And the portfolio that you acquired in Q2 or in the first half, did those have any residual obligation or contingent obligations that you would be required to comply with. Do they share in any license fees or litigation settlements?

Jeff Ronaldi

If you’re referring to the seller, do they get a piece of it?

James McIlree – Chardan Capital Markets LLC

Correct.

Jeff Ronaldi

The answer is no.

James McIlree – Chardan Capital Markets LLC

Okay fantastic.

Jeff Ronaldi

The sellers sold it outright.

James McIlree – Chardan Capital Markets LLC

Great. Thank you very much and good luck with everything.

Jeff Ronaldi

Thank you.

Operator

(Operator Instructions). Our next question comes from the line of David Hawks who is a private investor. Please proceed with your question.

Unidentified Analyst

Hi great quarter. I just had a quick question about the acquisition. I see (inaudible) database is with the South Korean foundry [Dongu] hi-tech. have they done similar deals in the past or are you guys the first yield they’ve kind of partnered with.

Jeff Ronaldi

Thanks David and I think you’re the first person who did their homework to find out where these assets came from so congratulations. Have they done a deal like this in the past, it’s hard for me to tell. I have never done a deal with [Dongu] prior. They provided us a very large portfolio and assets that ticks through it. We did our diligence we hired technical experts and we identified the assets we wanted. So we didn’t buy just 100 patents from a pile that they pushed to us. We handpicked the 100 and some patents out of a much larger pile that they provided. But I can’t tell you whether they’ve done something like this before.

Unidentified Analyst

Okay just a follow-up question. Is this something that can be used for the core business or this for assertion purposes only?

Jeff Ronaldi

Everything we buy we acquire with the intent of supporting our product and services. These are a lot of assets and many of these assets are in semiconductor space. And we’re (inaudible) with our products and services within the AuthentiGuard product. There are two things that are happening, one is you need to use your smartphone to use the AuthentiGuard products and many of these patents cover the building of semiconductors for the smartphone. The second piece is we’re in development of a standalone reader that so we can do a reader for AuthentiGuard and within that is also the need for semiconductor chips. So all these patents have [inaudible] to our products and services.

Unidentified Analyst

Okay. One last question. Was the acquisition U.S. only or were there are foreign patents attached to it?

Jeff Ronaldi

There were foreign counterparties.

Unidentified Analyst

Okay the litigation kind of doing some international model it’s really important that when you’re acquiring stuff new assets as you probably know that to focus on international as well.

Jeff Ronaldi

I agree with you wholeheartedly.

Unidentified Analyst

That’s all I have. Thanks for taking the questions.

Jeff Ronaldi

Thank you.

Operator

Thank you. Our next question comes from the line of [Jeremy Snider] who is a private investor. Please proceed with your question.

Unidentified Analyst

Thank you. Thanks for taking my call hello everyone. I am a relatively new investor and so forgive if this question has been raised before, but great progress on the litigation elements or the prospects of litigation. But in the Tech segment, it’s clear that the technology segment is what’s driving most of the P&L loss. I’m wondering if you can add a little bit of color to kind of what makes up this cost and if it is the expense behind them is really driving more to drive future revenue that we’ll see the benefit of when you expect that perhaps those losses like turnaround on the technology segment side.

Jeff Ronaldi

Sure. Thanks Jeremy. So I think I’ve been asked this question or this type of question before, which is I keep hearing that you’re doing better but you continue to lose money. While the reason that we continue to lose money is while we have worked hard to fix the legacy business and make it cash flow positive. We’ve added a new business line that has been losing money and that’s specifically tech management or patent monetization. So the cost associated with patent with the tech management is the cost associated with identifying, finding, analyzing and supporting an IT licensing campaign which includes all the legal cost associated with and thanks to lawyers and experts and everything else along the way.

This is an investment and we expect to return on our investments. The timeline associated with it varies and it varies based on the venue that you choose to [file on] or you get transferred to and as we’ve learned from the Bascom case or some of the other ones. It’s up to the judge to keep the case going through their process. Historically, we would expect an IP investment to pay off somewhere between 18 and 36 months and since we’ve made some of the investments in the last 12 months we should start seeing some return on those investments relatively shortly six to 12 months if we stay on schedule on the cases.

Unidentified Analyst

Fantastic. Okay, great. Thank you for the additional insights.

Jeff Ronaldi

Thank you.

Operator

Thank you. (Operator Instructions). Our next question comes from the line of Charles Black from Union Square Associates. Please proceed with your questions.

Charles Black – Union Square Associates

Hey Jeff nice quarter. The question is should you earn a significant win in an upcoming case. How would you consider deploying the capital in addition to acquiring any new assets or further support your IT campaign. Would you consider issuing for example special dividend?

Jeff Ronaldi

I anticipate and hope we have that problem in the near future. But having said that we have talked about it and that’s the possibility and we should reward the shareholders who are with us through this process. And I guess it comes down to the amount and what’s available and if a special dividend is appropriate we would definitely consider doing that.

Charles Black – Union Square Associates

So when were a long line is $30 million $40 million. Is that something that will be viable?

Jeff Ronaldi

It’s hard to comment on it because it’s not in front of us. But we would contemplate doing that yes.

Charles Black – Union Square Associates

Thank you.

Operator

Thank you. Our next question comes from the line of Matt Rodman, who is a private investor. Please proceed with your question.

Unidentified Analyst

Great quarter. Just a couple of questions following up on the litigations. First in the coupon case and I know you mentioned that you’re expecting to have the summary of judgment decision any time now. Did the judge give indication as to when the trial will be scheduled if he denies the decision.

Jeff Ronaldi

No, typically they don’t provide that type of insights. If he denies our summary of judgment which is what we’re hoping we should expect to go to trial before the end of the year.

Unidentified Analyst

Fantastic thanks. Following up on the Facebook-LinkedIn litigation, I know in your press release you mentioned and I was aware that it was a CBM review filed on May 22. Is my understanding correct that only a tax one of the four patents that issuing that in those cases?

Jeff Ronaldi

I believe that answer is yes I have to go check. But I believe the answer is yes.

Unidentified Analyst

Okay great. That’s very important obviously because if there are four patents and only one it’s a less of a chance that the case would be stayed pending that result. And lastly just following up on the Apple litigation, I know you mentioned that the trans-promotion is pending and as we all know some of these trans-promotions can be pending for a long time if that the East District of Texas. Am I correct is the Marksman is currently scheduled for November and do you have any insight as to whether or not the case will proceed to Marksman if it’s not transferred.

Jeff Ronaldi

If the case is not transferred we expect to get a Marksman, I’ll say that first, the other thing is have to be the company has a rule try to not to comment on the activity of the individual case or what a judge is going to do just because they can get us in trouble. Having said that again if the case is not transferred we expect this to stick to the schedule that has been outlined. And your question about whether the transfer venue hearing has happened. The answer is no but we’re actively going through the litigation process it’s like discovery. So we all had to hear to whatever the court decides. But we have the reason to believe that we would not be transferred out of East District of Texas.

Unidentified Analyst

Is that because of the results of the office you guys have staff now in that district.

Jeff Ronaldi

Yes, we have operations in eastern district of Texas which should just supply our ability to file where it’s convenient for us.

Unidentified Analyst

Okay great. Fantastic keep up with the great work.

Jeff Ronaldi

Thank you.

Operator

Thank you. At this time, this concludes our question-and-answer session. I’d now like to turn the call back over to Mr. Ronaldi for his closing remarks.

Jeff Ronaldi

Thank you for joining us on our call today. I want to thank you for your continued support and patience as we continue to build DSS into a leading technology innovator. Lastly, if we weren’t able to address all of your question on today’s call please feel free to contact us directly or contact our Investor Relations firm of ALS Group and we would be happy to answer them. I look forward to speaking with you soon. Operator?

Operator

Before we conclude, I would like to provide the DSS’ Safe Harbor statement with important cautions regarding forward-looking statements made during this call as well as the statements regarding the company’s use of non-GAAP financial information. Forward-looking statements on this call including without limitations statement related to the company’s plans, strategies, objectives, expectations, potential value, intentions and the adequacy of resources are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act and contain words such as believers, anticipates, expects, plans, intends, and similar words and phrases.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from results projected. In addition, to those factors noted, other important factors risks and uncertainties to results notes differences include but are not limited to those disclosed in the risk factors section of the company’s annual report on Form 10-K for the fiscal year ended December 31, 2013 previously filed with the Securities and Exchange Commission. Forward-looking statements made as part of this call are being made as if today August 12, 2014 and the company assumes no obligation to update the forward-looking statements or to update the reason why those results could differ from those projected in forward-looking statements. During the call today, management discuss adjusted EBITDA at in the press release issued today you will find additional disclosures regarding these non-GAAP financial measure. A reconciliations of net loss to adjusted EBITDA.

Thank you for joining us today for our presentation. You may now disconnect.

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