Wireless Ronin Technologies' CEO Discusses Q3 2011 Results - Earnings Call Transcript

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 |  About: Creative Realities, Inc. (CREX)
by: SA Transcripts

Wireless Ronin Technologies, Inc. (RNIN) Q3 2011 Earnings Call November 4, 2011 10:00 AM ET

Operator

Good morning, welcome to the Wireless Ronin Technologies Third Quarter 2011 earnings call. My name is Christina and I will be your conference operator today. (Operator Instructions) I would like to remind everyone that this call be available for replay through December 4, 2011 starting later this evening. A webcast replay will also be available via the link provided in yesterday’s press release as well as available on the company’s website at www.wirelessronin.com.

I would now like to turn the call over to Erin Haugerud, Manager of Communications and Investor Relations for Wireless Ronin.

Erin Haugerud

Thank you and welcome everyone to our third quarter 2011 earnings call. With me today are Scott Koller, President and CEO, and Darin McAreavey, Vice President and CFO. Following Scott’s opening remarks, Darin will review our financial performance for the quarter and nine months and then turn the call back over to Scott for an operational update. Then we will open up the call to your questions.

Today’s call will be an interactive webcast that will feature presentation slides of our Q3 2011 financial results. To access the webcast, please go to the investor section of our corporate website at www.wirelessronin.com.

Please note that the information presented and discussed today include forward-looking statements made on the Safe Harbor Provision 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 are forward-looking statements, including those set forth in the risk factors section of our Annual Report on Form 10-K we filed on March 22, 2011.

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

Now I’ll turn the call over to Scott Koller. Scott?

Scott Koller

Thank you Erin. Good morning everyone and thank you for joining us on today’s call to discuss Wireless Ronin’s third quarter 2011 results. The third quarter marked our first cash flow positive quarter since going public in 2006. In addition, revenue for the first nine months of 2011 increased 37% to a record $7.8 million. This improvement in year-to-date top line performance validates our business plan and demonstrates our ability to execute.

But before I comment out further, I’d like to now turn the call over to Darin McAreavey, our CFO who will take you through the financial details of our results. Afterwards, I will talk about our operational highlights and business outlook. Darin?

Darin McAreavey

Thanks Scott and good morning everyone. Turning to our financial results; our Q3 2011 revenue decreased 25% to $2.3 million in the prior quarter and decreased 14% from the same year-ago quarter. The decline was primarily attributable to the lower Chrysler deployment which was partially offset by 20 additional Fiat dealership installations for the iShowroom application which is being featured in the Fiat Style Center of the New Fiat Studio Facilities.

We expect continued rollout to the iShowroom branded tower application with future dealership adoptions. The purchase of the iShowroom branded towers will remain within the discretion of the individual dealerships making it difficult to predict our forecasts of timing and value of each order.

Recurring revenue in Q3 2011 generated from our hosting and support services was approximately $400,000 or 17% of total revenue. We do expect that our recurring revenue to increase once we complete the branded tower installations at the dealerships. At the end of the quarter, we received purchase orders totaling approximately $1.4 million that was not recognized as revenue during Q3. We expect to fulfill and recognize those revenues, a significant portion of these orders in the fourth quarter of 2011.

Revenue for the first nine months of 2011 increased to 37% to a record $7.8 million with $5.7 million in the same year-ago period. The sequential improvement in our services revenue was primarily driven by additional orders from Chrysler as a result of further enhancements to the iShowroom application which included content updates and the e-learning programs. Growth in the third quarter 2011 was 49%, up 3% from the previous quarter and declined 50% in the third quarter of 2010.

These margin fluctuations results from to us a slight change in the mix of hardware and software sales during the relative quarters. On a GAAP basis, our Q3 2011 net loss totaled $1.4 million or $0.07 per basic and diluted share which included a $169,000 of non-cash stock compensation expense. This compares to a net loss of $1.4 million or $0.07 per basic and diluted share in the previous quarter and a net loss of $1.4 million or $0.08 per basic and diluted share in the same quarter of year-ago.

Excluding non-cash charges, our Q3 2011 non-GAAP operating loss totaled $1.1 million or $0.06 per basic and diluted share, compared to a non-GAAP operating loss of $1.1 million or $0.06 per basic and diluted share in the previous quarter and a non-GAAP operating loss of $1 million or $0.06 per basic and diluted share in Q3 of 2010. Our GAAP expenses for the third quarter of 2011 totaled $2.5 million sequentially down $300,000 from $2.8 million from the previous quarter and down approximately $200,000 from $2.7 million from the same period in the prior year.

We continued to diligently manage our expenses focusing on achieving a breakeven non-GAAP EBITDA quarter. Now turning to the balance sheet, our networking capital position was $3.5 million at the end of the third quarter compared to $4.6 million at June 30, 2011. Our overall cash, cash equivalents and restricted cash totaled $4.3 million, up approximately $400,000 from previous quarter.

This marks the first time since going public the company has produced an increase in our cash position from operations. As of September 30th, we still had an outstanding balance of $500,000 against the $2.5 million line of credit we have in place with Silicon Valley Bank.

This completes my financial summary. For a more detailed and complete analysis of our Q3 2011 results, I would like to direct everyone to our Form 10-Q, which we expect to file by the close of business today and will be available at www.sec.gov and via our website.

I’m happy to answer any questions you have during the Q&A session of today’s presentation. Now, for an overview of our operational activity and developments, I’d like to turn the call back over to Scott. Scott?

Scott Koller

Thank you, Darin. Our record revenue for the first nine months of 2011 reflects the state of our expanding business and our strong positioning. It also reflects a rapidly evolving digital signage and marketing technologies industry.

I would now like to update you on key wins during the third quarter. We expanded our RoninCast digital signage footprint into the East Avenue Renovation of the Mall of America, one of the top tourist destinations in the country. The Mall of America’s renovation features six unique Wireless Ronin solutions including Guest Services, Walkway ad kiosk, Nickelodeon Universe Schwan’s kiosk, Greeter board system, Elevator promotional displays and Foot court displays.

By presenting visitors with current advertising promotions and sales for retail shops, Mall of America creates a dynamic experience not only for shopping but also for dining and entertainment throughout the mall. Wireless Ronin now fitted the Mall of America with an array of solutions that best fit each environment. Our momentum with Chrysler continues to build and we now have cumulative orders to meet installation permits for our 400 Chrysler and 162 Fiat dealerships.

We also continued to receive orders for enhancements to the iShowroom applications including software and content updates as well as the additional e-learning programs. Our work for Chrysler demonstrates our enhanced focus on integrated marketing technologies. During the quarter, we prioritized both the web and kiosk implementations of iShowroom placing them at the forefront of the sales process within the Chrysler dealerships. With this in mind we created a new set of marketing and training materials. This includes a training dynamically displayed iShowroom content on smartphone, tablet devices as well as desktop browsers and kiosks, all managed via the RoninCast network and content management system.

We believe Chrysler, Dodge, Jeep and Kia brands will continue to roll our iShowroom multiplatform solution. More dealerships will adopt as our technologies relative to single sales experience in the customer showrooms. While Aramark orders were down slightly in the quarter, we realized an expansion of the Grille Works installations on college and university campuses nationwide. Today we are working with Aramark in 239 locations throughout in U.S. and Canada.

Our sales opportunities and pipeline in the QSR market are growing. We continue to receive orders from various customers in the QSR industry as they recognize the benefit of our digital marketing technologies. In addition, we continued to execute on our pilot work in this important vertical. As discussed in previous calls, we are in sixth of the top 20 QSRs, a significant opportunity for our business particularly as we anticipate the FDA announcement for new nutritional disclosure regulations for QSR menu boards.

We are confident that our centralized digital solution will create a operating efficiencies and promote higher proprietary QSRs under the FDA regulations. In terms of our internal operations, we continue to optimize our organization and improve our processes and reduce expenses. During the quarter we continue to strengthen our Board of Directors with the additions of Kent Lillemoe and Howard Liszt. Kent and Howard bring the experience, knowledge and passion we need to drive Wireless Ronin’s continued improvement.

Kent brings more than 30 years of financial management experience in both public and private companies including CFO of MinuteClinic. He also serves on the Board of two medical manufacturing companies, a real-estate investment trust. Given his extensive experience in relationships he will advise the company in capital markets and financial management. Howard joins our Board with 35 years of business management marketing and strategic communications experience. Previously he was CEO of Campbell Mithun a leading national marketing and ad agency. He also brings valuable expertise that will help guide Wireless Ronin’s marketing efforts.

In addition we recently welcomed Jane Johnson as Senior Vice President of Sales and Marketing. Jane’s professional background his skills fit perfectly with Wireless Ronin’s transition to a marketing technologies company. Jane brings substantial marketing background to Wireless Ronin company, bridged the gap that some customers find between information technology and marketing functions.

Jane will also work closely with our partners including our newest relationship with Keyser Retail solutions. The key element to our success is winning major clients and teaming with complementary companies that strengthen our value proposition. We’re excited about our recently announced joint marketing agreement with Keyser Retail Solutions, a provider of menu boards to McDonald’s in the U.S. and a number of other important QSRs. By combining Keyser’s expertise and relationships with Wireless Ronin’s marketing technologies, we can help QSRs effectively control messaging and communications with their customers.

We believe this can provide us a superior ROI for QSRs by driving sales through marketing strategy and technology. Keyser can drive a strategy helping determine the right message when to deliver that message and who receives that message. Wireless Ronin provides the technology to execute on that strategy. This joint offering can help our clients to more integrate and marketing approach that can provide a superior a ROI by enhancing the customer experience in driving lift.

In addition, Keyser brings tremendous amount of experience in installation, support and fabrication coupled with our technology, network operation center, and content engineering, we believe that we have put together a collaborative offering that is unmatched.

In summary, our year-to-date results reflect our commitment to success in driving shareholder value. We continue our efforts to control costs, improve our team, and expand our market reach. We believe we have the key elements in place to capitalize on the future growth of the digital signage and marketing technologies industry. Before we open the call to your questions I would like to express on behalf of the Board and the entire management team our appreciation for the continued support we’ve received from our partners, customers, employees, and shareholders. They’ve all made our progress possible.

Now with that, we’re ready to open the call to your questions. Operator, please provide the appropriate instructions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) One moment please for your first question. And your first question comes from the line of Darren Aftahi with Northland Securities. Please go ahead.

Darren Aftahi – Northland Securities

Hi guys, thanks for taking my question. Couple of things, one, could you maybe give me an idea in terms of your visibility on larger orders maybe specifically with the auto industry further remainder of the year or even maybe a quarter out. And then secondly is your revenue run rate for breakeven still around $4 million I think you had talked to that point in last couple of calls? Thanks.

Scott Koller

Yes, visibility to larger orders, we do have some visibility as we’ve done in the past we don’t provide an awful lot of guidance, but the iShowroom initiative specifically and Aramark initiatives specifically still continues a solid run rate. Q3 showed some of the things we do run into during the quarter, i.e., installing Fiat applications, waiting for Fiat dealerships to actually get built, waiting for Aramark solutions to actually get installed and get internet connections, slow progress in installing some of those applications. But absolutely we don’t see really a slowdown for the long-term and even this near-term coming into 2012 on our progress with those two clients.

Darin McAreavey

Darren, this is Darin here. To answer your question on the breakeven, as you can see based on the reductions in our operating expenses sequential, they were down 300. On a non-GAAP basis they were down to $2.2 million. We expect that will be closer to that $4 million by non-GAAP EBITDA breakeven by the end of the year here.

Darren Aftahi – Northland Securities

Great, thank you.

Darin McAreavey

You’re welcome.

Operator

Thank you. And your next question comes from the line of Marco Rodriguez with Stonegate Securities. Please go ahead.

Marco Rodriguez – Stonegate Securities

Good morning gentlemen, thank you for taking my questions. I just wanted to follow-up on the last question to make sure I understand with your answer, the $4 million revenue run rate breakeven, did you said that you were going to hit that next quarter?

Darin McAreavey

We should get closer to that point. We were $2.2 million OpEx – non-GAAP OpEx in the third quarter. And that should be further reduced in the fourth quarter.

Scott Koller

Yes, I want to be clear there too based on your question is we’re saying that our breakeven would be a $4 million quarter not that we are giving guidance that we’re having a $4 million quarter.

Marco Rodriguez – Stonegate Securities

Okay, perfect. That’s what I’m talking.

Scott Koller

Yes.

Marco Rodriguez – Stonegate Securities

All right, and then in regard to the recurring revenue from your hosting and support, you mentioned on the call and also in your press release that it’s about $400,000. It seems like it’s kind of flat this year-to-date. Just can you talk to me a little bit in regard to that, are you losing clients…

Darin McAreavey

Yes.

Marco Rodriguez – Stonegate Securities

(inaudible).

Darin McAreavey

Yes, I mean there was actually a few factors. One is we did have one non-strategic account that decided not to renew their recurring revenue in hosting support arrangement in the third quarter, that was impactful and then also we still have 200 dealerships yet to install for Chrysler. So although we’ve received the order, we delivered on the order, we still have further dealerships to get installed at that point the services support arrangement will kick in. And then lastly for Aramark, we installed over a 100 sites here last quarter Q3 and we’ll get the full realization of those in the fourth quarter. So it’s a combination of the three.

Marco Rodriguez – Stonegate Securities

Okay.

Darin McAreavey

We do expect that it will increase in the fourth quarter.

Scott Koller

Yes, simply the recurring revenue lags behind the PL due to the installations and getting them ramped up on the NOC. So the recurring revenue does have a lag behind via PL specifically for Aramark and Chrysler.

Marco Rodriguez – Stonegate Securities

Okay, perfect. And then in regards to your gross margin, just taken a look at what you disclosed and what you trade here in this quarter, it seems like you’re having a pretty healthy margins based on the three year historical perspective on hardware and services but software kind of declined a significant amount compared to your history. Any color behind what kind of drove that?

Darin McAreavey

We expect it to increase, you probably noticed sequentially our software down and that was impactful. There is some third-party software that is included in cost of goods sold that was impactful to the margin but we do expect it to bounce back here in the fourth quarter to the upper 80s or low 90s which is historically where we’ve been at.

Marco Rodriguez – Stonegate Securities

Could you quantify how much of that third-party software impacted the margins there?

Darin McAreavey

Let me look and see, it would have been less than $20,000 I believe. Significant.

Scott Koller

Yes, Marco it was like operating system software, virus software other things that make up our image that are resold as part of our image with coupled with RoninCast. So it’s impactful to the margin on software but not really impactful overall.

Marco Rodriguez – Stonegate Securities

Okay. And then just a couple of real quick housekeeping items, what were the new units that you sold in the quarter, if you could provide an update on cumulative media units that you have?

Scott Koller

Yes.

Marco Rodriguez – Stonegate Securities

And then lastly your cash flow from operations and CapEx in the quarter?

Darin McAreavey

Yes, the number of media players that we shipped out was 528 for the quarter. So I’ve got a cumulative count of 7,540.

Marco Rodriguez – Stonegate Securities

7,540 is that?

Darin McAreavey

Right. And then the cash flow from operations was approximately $300,000 for the quarter. Our OpEx was minimal, I mean it was I don’t have it in front of me but I believe it was less than $50,000 for the quarter.

Marco Rodriguez – Stonegate Securities

Okay, great. Thanks a lot guys.

Scott Koller

Okay, thank you.

Operator

Thank you. And our next question from the line of Ty Lilga with Feltl & Company. Please go ahead.

Ty Lilga – Feltl & Company

Hi guys, thanks for taking my questions.

Darin McAreavey

Hi Ty.

Scott Koller

Hi Ty, good morning.

Ty Lilga – Feltl & Company

Good morning. Just wondering if can you just provide an update on where things stand in some of your other clients, Thomson Reuters, KFC and Ford.

Scott Koller

Could you repeat the question Ty, it bumped.

Ty Lilga – Feltl & Company

Sure. Yes, just wondering if you could provide an update where things stand with some of your other clients, Thomson Reuters, KFC, Ford. What happened this quarter, what you see happen in the next couple of months?

Scott Koller

Yes, there was a lot of activity. It was particularly in those three clients, however I will tell you that Thomson Reuters specifically we spend a great deal of time with in the quarter and expect to spend more time in the fourth quarter as we get a clear idea on their plans around taking the Infopoint product line from a cost marketing objective if you will to a profit center. Thomson Reuters had been very quiet. That company itself has had a quite a lot of changes I think earlier in the year, they laid off about 4,000 to 6,000 people. But they’re reengaged now. They’ve got their structure put back together now.

So the conversation with them is taken this product line and taken into our profit center for them. Again KFC was also quite in the quarter, however as KFC plans on going into 2012, they have not been made official by the FDA on what the calorie requirements going to be and when. Although most of our QSRs we’re dealing with are going under the premise that they are going to have to have calorie information on the boards next year and in fact someone gone us for us believing they are going to have to have it in June. However we have nothing really from the FDA that solidifies that.

But they are going on the premises, they are going to have to address calorie information next year and some are even going to the premises as soon as June. So that’s helped us with the conversation, with not only KFC but several of the QSRs. An average menu board is going to cost KFC and anybody else somewhere between $2,000 to $6,000 just to re-skin it and print to get the calorie information up there. So I think it provides a major opportunities for us to take that and is some kind of whether it’s a hybrid, half static, half digital and or all digital play. It gives us opportunity there when we know there is going to be a budget for the menu board anyway.

So I think that’s really important. Ford, Ford continues to be a hunting license. As we mentioned they went about a little differently than Chrysler did. They qualified three vendors, us being one of them and gave us a hunting license to call each and one of their dealerships and that’s what we proactively do. And so we continue to call each one of their dealerships, educate them on digital signage and specifically the service solution that Ford has put together and then land those one by one. But it’s not the corporately endorsed type program that of Chryslers. Does that answer your question?

Ty Lilga – Feltl & Company

Yes, absolutely. Also I was wondering split this new partnership with Keyser when you think about combining a digital and static solution. Is there a certain part of the restaurant or certain menu item where digital signage kind of really pops like where the – like what kind of the – what’s the product where digital you think digital signage can have the biggest impact for typical QSR?

Scott Koller

Well we can start with operational and then go in the marketing. So from an operational perspective, what items vary from franchise to franchisee what are the operational issues in making it short, the menu board has been compliance and where would digital make the most sense. And another operational factor is effective day partying, I mean there is just no comparison between digital and static as far as doing effective day party.

And therefore our marketing perspective what are their higher margin items, what’s your marketing initiative for the plan, and which items and what time of the day do they want to be pushing them. So there maybe kids meals, drinks and certain other things that just don’t day or vary day part to day part to day part and are up there and really aren’t the high margin items are pushing forward. They are just part of the menu. But effective day partying and pushing the high margin items would be definitely a digital play and then there is a really parsed that menu that they can almost guarantee that anywhere from a two to three year timeframe they are not going to change it.

So I think you have to look it from an operational standpoint on supporting a variety of different menu boards within the franchisee network and then what are they trying to push and at what time of day are they trying to push. And you can almost look at any menu board and realize and see the things that deemphasize, see the things that emphasize and figure out what’s going to be static and what’s going to be digital.

Ty Lilga – Feltl & Company

All right, thanks will get back in the queue.

Scott Koller

All right, thanks Ty.

Operator

Thank you. And our next question comes from the line of Dick Ryan with Dougherty. Please go ahead.

Dick Ryan – Dougherty & Company

Hi good morning guys.

Scott Koller

Good morning Dick.

Dick Ryan – Dougherty & Company

So Scott on the Keyser, when you look at that, it’s obviously it makes sense but they are interested in digital with their traditional history. Couple of questions, number one, can you give a sense such you are getting buying from the top there, and also is the focus to go after their central customer right now or are you doing marketing with some of your prospects as well?

Scott Koller

Yes, to answer the first question and then I’ll get into why I am really and as a team we’re really excited about this relation. First question is absolutely we have tying all the way from the top. We wouldn’t have gotten to this agreement without having tying from Bill Keyser himself. Judy Haselberger, the President and CEO and everyone associated including very strong advisory Board they’ve put together as a private company.

So yes, there is absolute tie in from the top to the bottom. And it wasn’t like we had one phone call with them and that seem like a good marriage. They went out, did their due diligence, understood that digital is going to be a part of that menu board that they have a tremendous amount of experience with. And went out one to partner with the right company. So it wasn’t like they just looked on the web, found Ronin and we partnered up. They did a lot of due diligence and this was a courtship if you will that took a majority of this year.

And as far as going to market, we’ve identified where we’re in pilot where we have contacts, their key customers and all of them were on the table to bring the joint solution. And I think that’s really an important when we discuss that joint offering. One of the things we found as we’ve been in pilot with our clients is we bring a very powerful tool to them, and they can do multiple day parts, their strategy can change immensely as far as it goes to that menu board execution. However, we did not bring a lot of the expertise to what the strategy should be behind the menu board. We’re really an enabler.

What Keyser brings to the table is 48 years of saying I know how to merchandize the QSR restaurant from curb to curb. How do we execute, what should be digital, what should be print, how do we build a frame that makes them look seamless. How do we execute on the installation of that frame. And I will tell you in the few calls we’ve already had together in face to face meetings we already had, that has been really well received that we’re asking now what are the higher margin items, when do you want to sell those, When is the opportunity, how often, what’s the frequency with your average customer. They come every 42 days. How do we get them back every 36 days? So even though we’ve been very proud of our technology and bring a very powerful tool to our clients what we now have is a partner that can bring a strategy behind it.

So all the customers on the table, all the customers who get visited and specifically as we are getting a pretty clear indication that callers are going to have to go in the board next year.

Dick Ryan – Dougherty & Company

Can you talk a little bit on the economic sort of relationship what happens with – what might happen from a revenue standpoint from your group of pilots versus what they might bring to the table?

Scott Koller

Yes, depending on us then bringing us into the count, or us bringing them into account, there is a revenue share on not only what we bring to the tables as far as the software, the content, and the hosting but also what they bring to the table as far as strategies, installations, support, service and executions. So basically its seamless to our clients we come in on the backend we work out a financial agreement that makes sense for both companies.

Dick Ryan – Dougherty & Company

Okay. One question on another customer Aramark, I mean I think I heard you say 100 installations in Q3, how does that compare with last year because that Q3 is kind of typically a busy time before colleges get cramped up, how do that compare to last year?

Scott Koller

We don’t have the specifics between Q3 last year but actually if I remember Q3 last year and August was a very busy month for us. It is probably within 25 or 30 installations plus or minus.

Darin McAreavey

Yes they were slightly from a revenue, it was just slightly down Q3 of 2011 compared to the third quarter of last year. Some would have been similar activity level.

Dick Ryan – Dougherty & Company

Okay. So it still enthusiasm on their product of taking this offering forward?

Scott Koller

Absolutely. And as we know Q3 is a busy one for them as they get these food service contracts in place and digital is a part of it, and then there is the mad rush of getting it all installed parts to the universities opening up. And again as I had mentioned on one of the earlier questions, the challenge for us is often we’re shipping equipment before the restaurant or the its even dealt, so we’re waiting on the internet we’re waiting on some place to even hang the monitors, and very similar to the Fiat dealerships.

We have equipment ready to go orders for, but the dealership not even folking grounds yet. So it does cause delays and on the backend but they are very supportive of this product line.

Dick Ryan – Dougherty & Company

Okay, thank you.

Scott Koller

Ryan, thank you.

Operator

Thank you. And our next question comes from the line of Nick Mara [ph] with Sidoti & Company. Please go ahead.

Nick Mara – Sidoti & Co

Hi guys, how are you doing?

Scott Koller

Hi Nick.

Darin McAreavey

Hi Nick, how are you?

Nick Mara – Sidoti & Co

Most of my questions were answered already, I just really one that came to mind is and I just said the operating expenses were up this quarter from last quarter. I was just seeing if you could touch on that, any reasons why would expect going forward?

Darin McAreavey

Actually we’re down sequentially by $300,000. So operating expenses last quarter were $2.8 million, this quarter Q3 they were at $2.5 million.

Nick Mara – Sidoti & Co

Yes and that my comparison to percentage of revenues.

Darin McAreavey

Again we’re kind of focused more on the expenses and sales as not as a percent of the overall revenue knowing the lumpiness to our revenue right now.

Nick Mara – Sidoti & Co

Okay.

Scott Koller

Yes and the revenue is more of a matter of timing then the expenses are.

Nick Mara – Sidoti & Co

Okay. And I know you can’t really get into Chrysler too much so it’s pretty volatile but do you have any kind of outlook on the future with them and if the revenue are going to come back?

Scott Koller

Yes, I think the thing I can say though is if people comfort in their commitment to the program is the expenditure they have on updating iShowroom keeping it current moving into the new product lines and enhancing it is the same regardless if it’s one leadership or 2,000 dealerships. So the cost of corporate to support that program is the same regardless of the volume. So obviously it will be their desire to leverage the investments to as many dealerships as possible, the fact that we continue to get enhancements at iShowroom to continue to push for improvements, not push, ask for improvements be able to support mobile, be able to support iPad, be able to show us again their commitment to the program.

And again those costs are baked regards if there is one or 2,000 dealerships. So obviously they want to leverage it across every dealership. And I can tell you the feedback getting from the ones they do have has been tremendous. So I think you will continue to see them push it more aggressively but it does come in lumps.

Nick Mara – Sidoti & Co

Okay. And then lastly in the QSR market. Have you see the willingness of these restaurants to spend on switching over digital signage?

Scott Koller

I’m more optimistic today than I’ve ever been, just due to the fact that they are going to have address every single menu board one way or the other with calorie information. And I think as I discussed on the last call, mini boards historically have been operational nightmare for these QSRs. They vary within franchise to franchise, pricing varies region to region sites, deserts, offerings vary. But there is really no consequences to poor execution of it before. Really the only consequences were poor operational execution when the menu board was out of compliance.

Now if you take a fact that with the FDA requirement and with calorie information going up there, there is consequences. It’s not just poor operational execution, that the calorie information needs to be correct. It needs to be in the right font size and color and it needs to be accurate. So I think that bodes well for us. In addition three years ago, a lot of our clients were looking at digital menu boards as an operational component and technology, a little bit for technology sake, the ability to maintain compliance and control that from a central location was really, really important.

What we hear about today and what we talk about and even what we’ve done with our first couple of meetings with Keyser and clients is what is the real effect of day party strategy, we can do to drive lift. Even if every single item on my menu board is up 24x7 seven days a week, there are probably still anywhere from three to seven different effective day parts including morning snack, afternoon snack, after school crowd, shift work breakfast and midnight, effective day partying is going to be a very key component to driving lift and the high margin products they want to drive at any given particular time and day.

So it’s not just an operational efficiency now. They understand by its day partying they can actually drive lift. So it gives me a lot of confidence to the fact that they are going to have to go out and make the spend any way to re-skin all of their menu boards even if they do it print that we can leverage maybe not a full digital solution but one that makes sense to take advantage to that effective day party.

Nick Mara – Sidoti & Co

Okay, great. Thank you, guys.

Darin McAreavey

Thanks.

Operator

Thank you. (Operator Instructions) And your next question comes from the line of Arthur Freedman with Freedman Asset Management. Please go ahead.

Arthur Freedman – Freedman Asset Management

Yes, hi Scott, hi Darin, how are you doing?

Scott Koller

Great Arthur, how are you?

Arthur Freedman – Freedman Asset Management

Good, doing good weather here. Just have a couple of questions most of them have been answered. On the cash position under current assets, where December 31 you had a little over $7 million and now you had $4.25 million by September 30th, is there any concern on your part about that number getting lower?

Scott Koller

Yes, I don’t think concern is the right word. In 2011 we spoke about this many times as we are focused on execution with the working capital we need it to move forward. Moving back a little on history, when I became President in May of last year and Jim Granger was still here, the first thing Darin and I and the team did was work on controlling our costs and getting costs down and we continue to do that today.

And then we put a strategic plan in with the help of Michael Howe at the end of the year and the beginning of the year that we think is very, very solid. I think Steve Birke has done a fantastic job of retooling of the Board to provide us with really an extension to our executive management team and a Board that is secured to help us grow the company. We have now a very key relationship with Keyser which we think can accelerate our ability to a better value proposition and accelerating some of this business we’ve been laid forward these pilots.

And I think it’s going to be important that our customers and target customers look at us with confidence that we have the technology, infrastructure, team, and financial resources to support their needs not only today but in the future, they are making a very big financial decisions. So as we get closer to realizing what we’ve been waiting for specifically in QSR, we need to make sure that we continue to invest in our software and infrastructure and network operation center.

So we have to make sure that company (inaudible) properly funded and but we’re still focused 100% on execution but at the same time giving our clients the confidence that we’re going to be here for the long-term.

Arthur Freedman – Freedman Asset Management

So you are not concerned about the $4.2 million that it’s getting too low at this point?

Scott Koller

Concerns is not – we are very happy coming through Q3 with a positive cash flow. We’ll continue to look at cash very, very closely and make sure that we have the resources to support the company. But the concern is not the right word, I think it’s a key thing we look at and we need to make sure that we’re financed. So concern is not the right word.

Arthur Freedman – Freedman Asset Management

Okay. The other thing I wanted to ask that everyone is asking we’re just going to trying to flush out the Keyser. So let me ask you this, are they only working with you in terms of bringing in the hardware for example or they have other peek [ph] vendors they are working away?

Scott Koller

For the hardware like the LCDs and the media players?

Arthur Freedman – Freedman Asset Management

Yes.

Scott Koller

Yes, I mean they are looking to us but at the same time I think our KFC relationship is really what’s going to be the future. If you think about KFC, unlike Aramark, Thomson Reuters and Chrysler where we supply a lot of the hardware, in fact all of it. KFC buys the hardware and installation directly from NEC [ph] provides the software hosting and the tier-one support for the hardware from us. So if there is a hardware issue, we open the ticket, we own the ticket, we escalate on their behalf.

So I would say long-term any massive rollout – the idea about hardware coming to us and Keyser is – I just don’t see it happening, I see as providing software services which is our high margin items anyway. So I’ll put the hardware I mean hardware will come down to maybe some reversal auctions when it comes to the LCDs. I think more importantly its bringing our strategy, our technology. We do add a lot of value to the media player content, software hosting is what you’ll see us primarily have as a built material going into these large rollouts.

Arthur Freedman – Freedman Asset Management

Right. So then in terms of Florida Plastics [ph], are they exclusively work with you?

Scott Koller

Yes.

Arthur Freedman – Freedman Asset Management

They are. Okay. And then the other question I think we all want to know is since just by implication their relationship with McDonald’s, does that – is that going to develop anything for you there or what did you think?

Scott Koller

I would

Arthur Freedman – Freedman Asset Management

(inaudible) you know what I mean.

Scott Koller

I know.

Arthur Freedman – Freedman Asset Management

If we see the work with McDonald’s.

Scott Koller

Yes, it grabs a little attention. I would put it this way. Keyser and their subsidiary Florida Plastics has been a trusted advisor and vendor to McDonald’s for 48 years on how to execute menu boards indoor, outdoor and how to merchandize the store. Digital becomes an important part of what McDonald’s is doing in the future. They still have a very, very valuable resource that has now brought in that type of partner to provide those types of solution. So I would say that they would still continue and actively continue to leverage very key relationship there. So I think that’s the best way I can answer it today.

Arthur Freedman – Freedman Asset Management

Okay, all right, thank you very much.

Scott Koller

Thank you Arthur. I hope you feel better.

Arthur Freedman – Freedman Asset Management

Yes, thanks.

Operator

Thank you. And our next question comes from the line of Tom Pierce with Feltl & Company. Please go ahead.

Scott Koller

Tom?

Operator

Yes Tom, your line is open if you would like…

Tom Pierce – Feltl & Company

Sorry, I had the mute button on.

Scott Koller

Nice hearing.

Tom Pierce – Feltl & Company

Good morning everyone, thank you guys. I just had a little question about this Keyser and McDonald’s as you just mentioned we believe business exclusively with Keyser, McDonald’s sales as since 1965 I believe. And I recently heard McDonald’s saying that they plan at being the first major QSR to have carry account all their restaurants close to coast and they wouldn’t explain how they were going to do it, they usually they knew how they were going to do it. It seems to me the best way to do it would be on a digital sign, but my real question for you is recently I came across an article, it was talking about Starbucks, and Starbucks it is store they have in Times Square, the flagship store. And lots of pictures, they looked kind of interesting, they looked kind of like your stuff so I sent one of my clients to New York to go on and take a look and the comment back was it sure looks like your stuff. Any comment on that?

Scott Koller

We’ve mentioned before that we’re in pilot with six of the top 20. We are under NDA with them so we haven’t really specifically been able to talk about the work we do with them. However I will say in this particular case that we were given permission by Starbucks to talk about this particular application recently at the DSC forums. And present as a case study into very large group of people. So specifically on this application and this installation in Times Square, I will say that we did work with Starbucks to provide a customer experience that is probably unequalled in the industry with a variety of different technologies in there including a very large wall of monitors.

I can’t comment a whole lot further but we did work with Starbucks on that particular application.

Tom Pierce – Feltl & Company

Have you worked with them anywhere else?

Scott Koller

I’ll leave it as that we have a relationship with Starbucks at this point in time and that the only thing we could really talk about is the execution in Times Square.

Tom Pierce – Feltl & Company

One other quick question, and somebody not too long ago from international Dairy Queen and they mentioned that they were testing somebody they would say somebody saw digital menu boards, and in fact they said they were two different companies so it kind of running with, any comments there?

Scott Koller

I really can’t provide any comment there except I think Dairy Queen is an outstanding Minneapolis company.

Tom Pierce – Feltl & Company

Okay, fair enough. Thank you guys.

Scott Koller

Thanks.

Operator

Thank you. And your next question comes from the line of Rick D’Auteuil with Columbia Management. Please go ahead.

Rick D’Auteuil – Columbia Management

Yes, my first question is related to Chrysler. I guess I’d like some explanation on the backlog and the lack of revenue this quarter and you mentioned 200 orders, what’s the hold up if there are orders, I mean the dealerships have already signed off on them, right?

Scott Koller

Yes, I’ll give you some transparency on that. When we get a order for branded tower installation, there is two to four towers going into a dealership. We get an order for that. At the same time EWI the fixed range [ph] company gets an order as well often before us. We send our equipment to EWI who then coordinates with the dealer to build all the equipment into the fixed ring and get it installed. And that could take a high degree of uncertainty to amount of time it may take that. The site itself may have to get internet connectivity out to the dealer showroom, that maybe redesigning their showroom. There is four large pieces of furniture that are going to show up with the technology in side.

So EWI takes over from there and we wait for them to coordinate with the dealer to get it installed. Now once it is installed and we have internet access, we take over and we’re up and running. However, EWI and Chrysler are responsible for taking that integrated fixture unit and getting installed in the dealership and in control of that rollout schedule, not us. We get an order, we ship it to EWI and they coordinate with the dealer. And again in the case of Fiat sometimes it’s sitting their EWI waiting for the dealership to be built. And in other cases like Chrysler they are waiting for the showroom to be remodeled.

So there is a variety of different factors that can speed that up or slow it down. And as you’ve seen historically we get lumps of orders, Fiat had been by once but in Chrysler we get lumps of orders. So once they have a hundreds sets yes, we want this technology. There is an awful lot of other things that have to go on in that showroom for in to go from us to EWI to the dealership and then the internet connection plug-in that we take over from a hosting perspective.

So it’s not like yes, I want it and we sent in a package overnight and up and running. There is an awful lot of coordination between us giving an order to sending it to EWI to getting it installed.

Rick D’Auteuil – Columbia Management

How much of the million core backlog is Chrysler?

Darin McAreavey

Approximately $800,000.

Rick D’Auteuil – Columbia Management

But you talked about having an order for 200 dealerships, I don’t think you’re doing it for – that’s not consistent with the first several hundred thousand.

Darin McAreavey

That 800,000 represents content engineering for (inaudible) project and some other projects that we related to the iShowroom application. It does not represent branded tower installations orders.

Rick D’Auteuil – Columbia Management

So I guess why if there are orders, why isn’t that in the backlog?

Darin McAreavey

Now the 200 that I referred to in the script related to there is a question posed why are recurring revenues flat. We’ve recognized all of – I believe a 100,000 related to the $1.8 million we received back in May. We’ve recognized all but 100,000 of that and that portion relates to the 200 units that were yet to be installed.

Rick D’Auteuil – Columbia Management

Okay. So there isn’t I mean okay, so you’ve already recognized?

Scott Koller

There is a lag between us getting the orders shipping the hardware to EWI and then the lag of it getting installed and start billing recurring.

Rick D’Auteuil – Columbia Management

So I guess now we’re waiting for the orders to get to the 100 mark for another real orders?

Scott Koller

Fair enough.

Rick D’Auteuil – Columbia Management

Okay. And there wasn’t any in Q3, we would have seen an announcement.

Scott Koller

Correct.

Rick D’Auteuil – Columbia Management

Are you expecting any in Q4?

Scott Koller

Again, we don’t give a whole awful lot of line of site. We’ll usually hear from EWI first, but I know that they continue as I mentioned the support of iShowroom is sort of big – big for supporting it whether it’s a one dealership or 2,000 and they have repeatedly told us that they want mass adoption. So is Chrysler pushing that to the individual dealership. So yes, we would expect that the timing again is hard for us because we don’t have line of sight whether they have 60 signed up now, 80 signed up, 90, 99. But yes, we will expect further adoption Rick, definitely.

Rick D’Auteuil – Columbia Management

At one point there was – I thought Chrysler put a hammer over and was going to take incentives away if they didn’t installed that and it seems like that’s not the case anymore otherwise it would be much more activity on the installation side, can you give us an update on that?

Scott Koller

Yes, it’s not part – as we mentioned on our last call I believe it’s not part of the dealer standards program any more. But they believe that they have enough testimony from the once that have got it installed. And enough ROI value into it, that they can sell them without it being a standard requirement, everybody in Chrysler that has initiative ones that be part of the dealer standards program there is overwhelmed the dealers quite a lot.

So if they built the program, can stand on their own, they will put it on their own but I mean I am encouraged by what I see in Chrysler in the news and how well the Fiat is doing. So again when they start talking to us larger dealerships, you remember the good thing about this is the once they participated it was the larger dealerships, the bigger dealerships they had more to lose if they lost coop marketing dollars. As you go further down, if you roll their food chains its less impactful to keep coop marketing dollars away from the smaller dealerships, it’s really not as impactful as the large ones but the testimony from the large ones pays major dividends for us as we sell as Chrysler sells in to the smaller ones.

Rick D’Auteuil – Columbia Management

Okay. So unlike Ford, you don’t have access to the dealers and Ford you have to sell to the individual dealers and then Chrysler takes it, you are not doing that.

Scott Koller

Absolutely correct, yes.

Rick D’Auteuil – Columbia Management

Okay. Just on the McDonald’s/Keyser relationship. Is there – are there obstacles to marry your technology with their technology, do you expect to encounter any issues around that?

Scott Koller

Well absolutely not. In fact their technology is framing installation and print and strategy behind a historic print menu boards. So there is really no integration of technology, I mean what we would want mimic with any QSR not specifically McDonald’s, any QSR is they have a highly automated process on how they get print to individual stores and we would have to mimic that in a digital format. So today stores get print program sent to them on their unique thumb print i.e., what region they are in, what type of food they have on their mix of the food they have, heavily Hispanic, not Hispanic, what not. We have to mimic that in digital, but no there is no issues integrating the two companies offering together.

Rick D’Auteuil – Columbia Management

I mean McDonald’s like Tom had mentioned earlier wants to be first to market with a digital or a calorie count nationwide and they decide to go digital. There is no obstacles for you to hit the ground running in the next couple of months?

Scott Koller

No sir.

Rick D’Auteuil – Columbia Management

Okay. Just so if the QSRs would sort of I guess Tom identified Starbucks as one of the six, and we know KFC is one of the six. How many of that six that you are working with are contemplating a meaningful rollout in early 2012?

Scott Koller

They all are. I think well early 2012, I would gone at more than 2012 early the timing between whether it’s Q1, Q2. There is not, depending on account by account there is not awful lot of clarity. It also varies between account to account whether they are looking at doing something and drive to indoor promotion, sort of footprint varies widely, however I will say that there is really been only one account and it’s not one of our six in the top 50. QSRs that we’ve talk to that has said they will not look at digital in 2012.

So that gives us a high degree of confidence that not only the system currently have and the others were talking to but everyone in that top 50 are contemplating on how to leverage a digital. I think the big advantage we’ll bring to table now specifically with the Keyser relationship is it was really an all or nothing deal that most people are looking at before.

Either do all print, and I do that indoor because the ROIs still pretty tough in the outdoor for an outdoor digital solution due to the cost of the hardware. So then I still have to support two programs or I can put a smaller footprint inside smaller footprint and drive through and balance my program with static and digital, making a more reasonable footprint and still get the leverage I want for those high margin items in the day partying. So I think that’s where the strategy has changed greatly since talking to them originally anywhere from a year to three years ago.

So I think now we have the expertise as part of our offering in a very solid partner with Keyser and I think that’s going to help us.

Rick D’Auteuil – Columbia Management

Does Keyser help you with your KFC relationship, and what are the obstacles there I guess the contemplating a rollout for two years. So is that still an active relationship and are you still there exclusive digital signage [ph]?

Scott Koller

Yes, the both. It’s an active relationship and yes we’re still there exclusive and if you look back over the three years take digital menu boards out of it, I mean I think what KFC has gone through is symptomatic of what the industry has gone through. We had a tremendous amount of traction with them getting up to 200 restaurants 2008 hit 2009 was a really poor economy KFC got beat up mildly specifically in their U.S. market.

And in the same timeframe they’ve gone through two CEOs, three CMOs and a lawsuit with their franchisee. So in addition a launch of grill chicken product that didn’t do as well as they had hoped to that was a 15,000 or so cost each one of their franchisees. So these guys are – they have an awful like going to manage a franchisee network and to get everybody on the same page on any kind of major initiative, there is a challenge however I will say that I see more support than you see throughout the other parts of the system.

They want to differentiate their restaurants. They want to drive lift. So I am very encouraged that the talks are more about strategy of menu boards, digital menu boards. Strategy of integrating with static and not the conversation whether digital is wrong or right for us.

Rick D’Auteuil – Columbia Management

Okay. How about Wendy’s and Jack in the Box have come up in the past, are those still active with you and where do you sort of place them in the… just go ahead.

Scott Koller

Yes, we have not brought up those two specific accounts and again we were given permission to talk about one application on Starbucks but for the most part, those NDAs are pretty solid and we’re just not in a position to any color to that.

Rick D’Auteuil – Columbia Management

You have a new Board member that had a relationship with Wendy’s, you would think if anything that might open the doors there in a bigger fashion.

Scott Koller

I think Mr. Howe has brought a tremendous amount of value to the Board specifically with the background in QSR. It was important in our Keyser relationship. It is important with all of our relationship in QSR. So yes, we’ll leverage him to the best of our ability.

Rick D’Auteuil – Columbia Management

Okay, all right. I look forward to better climbs in the revenue.

Scott Koller

All right, thank you sir.

Operator

Thank you. (Operator Instructions) And your next question comes from the line of Don McKiernan with Landolt Securities. Please go ahead.

Don McKiernan – Landolt Securities

Thank you. I wanted to clarify something on Keyser. They are the exclusive provider to McDonald’s, correct?

Scott Koller

They have been the exclusive provider to McDonald’s for a very long time, yes.

Don McKiernan – Landolt Securities

Right. So therefore McDonald’s but do they supply other QSRs?

Scott Koller

Yes, they have relationships even beyond QSR, Keyser has relationships in retail as well and some other verticals. But yes, specifically they’ve been a very respected into the QSR industry.

Don McKiernan – Landolt Securities

You know how many of the top 20 that they would have besides McDonald’s?

Scott Koller

I don’t have the specific number, I know the few key ones but they are private companies so they are keeping pretty closer with us.

Don McKiernan – Landolt Securities

Okay. And then it seems to me that you’ve been sort of stuck on six of the top 12 or now you call it six of the top 20 that you’ve been working with to some degree. Has that – the names on that six changed at all or is it always the same stuff?

Scott Koller

I don’t think the names in that top six have changed at all. I don’t think they have. I think – no, I think I can say that and that’s once we were in and doing pilot and real meaningful work with, it doesn’t mean the only ones we’re talking to are participating in our fees and are trying to gain traction with us.

Don McKiernan – Landolt Securities

Right.

Scott Koller

But no. Those names remain constant.

Don McKiernan – Landolt Securities

And how about from a competitive landscape standpoint, kind of any QSRs committed to any of your competitors that were of course (inaudible).

Scott Koller

You know what, you would have seen it all of our competitors are private. They would be quick to let somebody know they are getting a large scale rollout. So I think it’s fair to say that not only Wireless Ronin but everybody in our competitive mix are looking for a faster adoption of large scale network. So because our competitors are private, they’ve been quick to go to they daily do or something else to announcing a kind of meaningful relationships. So the fact that we’re not hearing that, nor have the line of site to that gives us confidence that it’s not just us, it’s the industry that’s looking for a faster adoption.

Don McKiernan – Landolt Securities

So far you have not lost any opportunity out there to a competitor?

Scott Koller

Agree.

Don McKiernan – Landolt Securities

Yes. Has any of the competitors gone out of business, you know it’s a kind of a fragmented small industry?

Scott Koller

Yes. You can do some research but yes specifically over the last three years they are either out of business or they are partnering ways to indicate that sending as self-serving into new by themselves was not viable. So we are seeing a consolidation. We are seeing companies joined at the hip but at the same time I think it’s out of survival and not out of much of anything else. For the entire industry, we want adoption. And but I think we continue to be one of the key players.

Don McKiernan – Landolt Securities

All right, great. Well good luck.

Scott Koller

All right, thank you very much.

Don McKiernan – Landolt Securities

Yes.

Operator

Thank you. And our next question comes from the line of Dwayne Kennedy [ph], I’m sorry, who is a Private Investor. Please go ahead.

Dwayne Kennedy – Private Investor

Hi Scott and Darin, how are you?

Scott Koller

Hi Dwayne, how are you?

Dwayne Kennedy – Private Investor

Good. I’d like to have you guys describe how big this Florida Plastic McDonald’s relationship is?

Scott Koller

You’re breaking up a little Dwayne, how big what?

Dwayne Kennedy – Private Investor

How big the Florida Plastic McDonald’s relationship is (inaudible).

Scott Koller

I think it’s a tremendous opportunity for both companies. Again the ability to come into a QSR and say we’re going to take a look at your merchandizing, not just menu boards, your merchandizing from curb to curb that’s the experience, that strategy that Keyser brings to the table and they are very good at it. And then say we’re going to come up with a recipe whatever it may be in static and print and menu broads, promotion boards and the dining room experience and come up with a strategy that could be all digital, its correct, it could be all static or it could be both.

I think there is a huge advantage for us and not just coming in and talking features, benefits about the technology. I think being able to provide an assessment and a recommendation based on close to 50 years of experience from merchandizing and then leveraging our new technology to it, I think is very, very important.

Dwayne Kennedy – Private Investor

So would you describe this as being mammoth?

Scott Koller

I’ll have to look at the exact demolishing of mammoth or ginormous or whatever you want to call it. I am extremely – I will say that the executive team and the Board are extremely excited about this relationship. So I’ll use extremely excited and maybe not mammoth.

Dwayne Kennedy – Private Investor

Okay. So it’s a bigger than a (inaudible).

Scott Koller

Its bigger than a breadbox, yes.

Dwayne Kennedy – Private Investor

Well I think this could be a future of change in (inaudible), don’t you?

Scott Koller

I think it will help us continue to get traction to where we want to and accelerate it even, yes.

Dwayne Kennedy – Private Investor

When do you expect this current [ph]?

Scott Koller

When do I expect? We have already gone out of the gate running talking to every single client we have out there. So we wanted to gain traction as fast as possible.

Dwayne Kennedy – Private Investor

So Florida Plastic is part of (inaudible).

Scott Koller

We are going in joint offering that can help them with the merchandizing of their store, absolutely.

Dwayne Kennedy – Private Investor

Okay.

Scott Koller

In current and future clients.

Dwayne Kennedy – Private Investor

On scale of one to 10, 10 being the best, how was your prediction of this relationship with Florida Plastic?

Scott Koller

In my opinion, not knowing how you’re going to measure that I would say it’s a 10. If I had to go out and find a partner that I want to come into any QSR with a joint offering I think that being able to help them size and provide the technology that we have I would go out and describe a partner like Keyser. So if I had to put a definition of the type of partners we would be looking for to enhance our offering and our value proposition to QSR, I would describe a company like Keyser, so therefore I put in 10 out of 10.

Dwayne Kennedy – Private Investor

Well this is pretty exciting to the future.

Scott Koller

We’re extremely excited.

Dwayne Kennedy – Private Investor

All right, thanks guys.

Scott Koller

Thanks Dwayne.

Operator

At this time, this concludes our question and answer session. Thank you for joining us today for our presentation. This concludes today’s call. You may now disconnect.

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