Interchange Corp. Q4 2005 Earnings Conference Call Transcript (INCX)

Interchange Corp. (INCX)
Q4 2005 Earnings Conference Call
February 21st 2006, 5:00 PM.

Executives:

Heath Clarke, Chairman and Chief Executive Officer
Bruce Crair, Chief Operating Officer
Doug Norman, Chief Financial Officer

Analysts:

Clay Moran with Stanford Group
Richard Fetyko of Merriman & Co
Paul Leung (phonetic), Susquehanna Financial Group

Presentation

Operator

Good afternoon. My name is Landon Barodo, and I'll be the moderator for today's presentation, which is being recorded. Thank you for your interest in Interchange Corporation. With me today are the Chairman and Chief Executive Officer of Interchange, Mr. Heath Clarke, Chief Operating Officer, Mr. Bruce Crair, and the Chief Financial Officer, Mr. Doug Norman. Mr. Clark, Mr. Crair and Mr. Norman are going to discuss the Company's financial results for the fourth quarter of 2005. At the conclusion of their prepared remarks, we'll open the conference for questions.

Some of the discussions today will involve forward-looking statements, and I will now read to you the following warnings about reliance on forward-looking statements. Certain matters discussed during this conference call will include forward-looking statements within the meaning of Section 21-E of the United States Securities and Exchange Act of 1934 as amended. All statements regarding potential results and future plans and objectives of the Company, including those made regarding the expected results of modifications to the Company's search traffic, the Company's assumptions regarding the value, growth, margins and dependability of Local.com, and the Company's planned and future search activities are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements.

Important factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, those factors that are disclosed under the heading "Risk factors" and elsewhere in the Company's documents filed from time to time with the United States Securities and Exchange Commission, and other regulatory authorities. Forward-looking statements made during today's call are only made as of the date of this conference call, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances by traffic and usage statistics provided during today's call are from third party service providers engaged by the Company.

Gentlemen, please proceed.

Heath Clarke, Chairman and Chief Executive Officer

Thank you, Landon. And welcome to everybody on the call today. We achieved considerable success in local search since our last call with traffic and revenues exceeding expectations. This is just the beginning. On this call, we are going to explain our strategy to sustain this performance over the long-term. Interchange recorded fourth quarter revenues of 3.4 million, a 16% decrease from the third quarter, and slightly below guidance of 3.5 to 3.8 million. Our GAAP net loss was 3 million. Our non-GAAP net loss was $2.7 million, $200,000 better than guidance of 2.9 to 3 million. We are projecting Q1 revenues of 3 to 3.2 million, with local search revenues growing by 51% to 68% to between $900,000 and $1 million with a projected non-GAAP net loss of $2.9 and $3.1 million.

More than ever, Interchange through our flagship Local.com Search Engine is a tier-one search advertising business. We operated a vertical market called "Local Search" which is projected to grow at a 43% compound annual growth rate through 2010. I will dig into this in a moment. For now, I will say we operate in a fastest growing search advertising sector "Local Search" and we have the best domain name in local search "Local.com". This is a great market for us to be in. We think our interest into this market was well-timed, and our vision is to be number one in local search.

We launched Local.com in August and gained market share each month. Our growth rate surpassed all of our regions, we grew traffic from a half million visitors and one million page views in September to 8 million visitors and 39 million page views in January, which makes us the number 6th pure play local Search Engine by comScore. In achieving this, we've surpassed a number of well-known, well-funded competitors, in some cases doubling their traffic. First, we will be talking about our strategy to grow traffic in a moment.

In our last conference call, we projected Local.com revenues for Q4 to come in at around $400,000. We exceeded this and posted local search revenues of nearly $600,000 in our first full quarter. We expect to grow strongly again in Q1 with local search revenues projected around $950,000. We believe monthly local search revenue will exceed national search during 2006. Revenue for 1000 page views or RPM is an industry term used to describe the rate at which traffic on a website is monetized. Local.com RPM grew from $8 three months ago to consistently over $850 today, and we are seeing things higher than this as we experiment with our marketing mix. This is a sizeable increase in monetization over the past three months. When coupled with the growth in page views from 1 million in September to 39 million in January, we generate much higher revenues as shown by revenue around. We believe Local.com RPM will grow incrementally through 2006. I will talk more in a moment about our strategy to improve monetization of our traffic.

Importantly, we have established Local.com as a leading local Search Engine, while keeping control of our cost. Although we grow our local search business quickly in Q4, we were able to deliver a non-GAAP net loss of $200,000 below guidance.

Our return on ad spend which is the amount of revenue generated for each dollar we spend getting traffic to our site has increased from $0.75 in revenues for dollars spent to consistently over $0.90 in revenues for every dollars spent, which speaks high in our marketing mix. This means we become more efficient with our marketing. We expected improvements in our analytics, and refinement in our marketing mix will grow this incrementally throughout the year. Over those types, local search numbers are going up, and local search revenues are moving strongly and consistently upwards.

Six months ago, Local.com was a concept. Today, we are leading local search business. We have focused on local search, because it has the highest projected growth rate in search advertising, growing from a billion dollars last year to $6.2 billion by 2010. And we believe, we have the assets that could be successfully applied into that market. Today's internet represents the challenger of very large audience of affluent consumers searching for businesses, products and services. Search is a directional media, which means that consumers use search in a similar fashion to direct reason classifieds during the buying process.

Consumers spend around 80% of their income within 50 miles of home, and about 30% of all internet searchers are commercial in nature. Research shows that a full one quarter of all searches on the internet have implicitly local and explicitly commercial intent. These consumers are the ClevelandJewelers search, because they convert into buyers at a higher rate than any other search traffic. Search advertisers pay more for this traffic. As an example, last week advertisers on Yahoo! paid a $25 per click that a keyword "Flowers" and $6 for click for the flowers Erwine. This means advertisers paid a 500% premium for local consumers, because those consumers convert into buyers at about five times the rate of national consumers.

Search advertising is the most effective means of connecting businesses with the sort after consumers. But for all the growth in search advertising, only about 1% of businesses are search advertisers today. Out of the potential market of 35 million businesses worldwide, about 10 million in the US alone. These numbers show we are still at the very beginning of local search advertising, and local is a highly desirable market to be in. Local.com is a leader in this high-growth market, and were gaining market share. In September, we had a half a million visitors, a strong start, and this grew to over an 8 million visitors in January. We believe this is a great result over such a short period of time.

Our overall strategy during 2006, is to continue to build market share by growing traffic to Local.com, improving our search technologies, and developing a local advertiser bay. Achieving these three objectives will allow us to build the three value creators in search. The first is Traffic, the second is Technology, and the third is Advertisers, with traffic being the most important of these three. We believe that traffic and technology are critical for defensible position in local search. Advertisers are the third value creator that drive monetization of the site overall. We believe that securing and building upon all three value creators, we will deliver the best long-term growth for our business in capital appreciation for our share holders.

Now, I will hand it over to our Chief Operating Officer, Bruce Crair to tell us how we are going to build the first two value creators.

Bruce Crair, Chief Operating Officer

Thank you, Heath. To build the first value creator Traffic, we have four traffic acquisition strategies Search Engine Marketing or SEM, Search Engine Optimization (SEO), Syndication of our Results and Advertisers and Repeat Usage. Each of these strategies involves phases, and we are generally in phase 1 of each strategy at this time.

To-date Search Engine Marketing has been our main source of traffic. A recent report from Neilson Net Ratings for January shows Local.com has the third highest sponsored link impressions on Google with our ads being shown 280 million times. This means Local.com ads were shown more than every other Google advertiser, except eBay and shopping.com. Even with that great exposure, we believe our advertising costs are very low compared to our competitors. Our Search Engine Marketing strategy involves three phases. First, broad low cost traffic acquisition. Second, vertically targeted traffic acquisition, and third, expansion of our Search Engine Marketing to additional search networks.

Overall, SEM represents a highly targeted way to bring traffic to Local.com. And we think that for the time being Search Engine Marketing is one of the least expensive forms of branding we can buy. Our second traffic strategy is Search Engine Optimization or SEO. SEO is where we make our data available to other Search Engines, so they can include our information in their search results. The end result is that the users that go to Google may end up on Local.com. For instance, a search for tolling business per volume shows a Local.com listing on Google's first page for those results. Consumers that click through on this listing represent free traffic to us.

Our SEO strategy involves four phases: Experimentation with page layouts for optimal indexing in Search Engines, ramping up the volume of content indexed, improving our page rank, and finally, expanding our SEO to additional Search Engines. We are still in the early stages of phase 1 and our results have been positive. With several hundred thousand pages indexed, and providing Local.com a steady flow of free traffic each day. We are working to develop a scalable framework to make all our content available, in order to drive the maximum amount of no cost search traffics to Local.com. Syndication is our third traffic strategy. Local.com recently launched its domain syndication network with over 60,000 websites.

This network receives a local search results and sponsored listings on geographically named websites such as ClevelandJewelers. Consumers arrive at these sites via direct navigation, which means they simply type in the domain name and via SEO. We monetize traffic on these sites to a combination of sponsored listings, banner and CPA advertising. We believe our syndication product is unique, and that we can grow our syndication network in the coming quarters, thereby improving our reach and gaining additional market share.

Our fourth traffic strategy is Repeat Usage. Our philosophy of Local.com is "Keep it Simple." We believe providing useful information to consumers to a simple search experience will ultimately drive Repeat Usage. Its' still early days, but we have seen a number of repeat visitors to the site increased consistently. We believe this is given part to our great search results, our added content in services and to the frequency consumers have been exposed to our name. These four traffic acquisition strategies are cumulative, and we believe each phase implementation will drive incrementally more traffic to the site.

Our second value creator is our Algorithmic Local Search Technology. Our search results are the fusion of two patent pending technologies, Keyword DNA and web indexing. Keyword DNA numeric data, which is really just information about information, in order to make business listing searchable and user friendly. Our web indexing technology is designed to find and index small businesses websites. We believe, we are the only pure play local Search Engine, it uses both directory and web index search results. We are constantly improving our search technologies and infrastructure to stay ahead of the curve. We have many patents pending and tend to continue to file our new patents in order to protect our investment.

I will now turn it back over to Heath to talk about the third value creator.

Heath Clarke, Chief Executive Officer

Thanks Bruce. The third value creator is advertisers. We are a search advertising business and it means we monetize our Local.com traffic through various forms of advertising including sponsored listing, pay-per-call and banner advertising. Our ads are displayed around our algorithmic listings on Local.com, is a familiar layout common on leading Search Engines. The ads we display today come from our partners such as Yahoo, CitySearch and SuperPages. Consumers who clicks or call the various ones of advertising on our site typically generates revenue for us. Our objective is to continue to develop these types of partnerships in order to increase monetization of our search traffic.

Local.com is developing a considerably user base that we believe is large enough to justify direct sale to advertisers. As a result, we are developing plans to test directive advertiser packages for small businesses. We are not going to detail on this call, what these packages are or when we will release them for sale. But our overall objective is to experiment with different products through different sales channels, in order to maximize the revenue generated from this site. If our test results are positive, we believe that addition of these advertisers to Local.com in our syndication network will have a positive effect on our RPM and overall local search revenue generation.

In summary, there are three main value creators in search: Traffic, technology and advertisers. Local.com continues to build traffic in market share and we are now ranked number six in the pure play local search market. We will continue to develop the most important value creator, traffic through 2006. We are in the second value creator technology in our case of fusion of patent pending algorithmic local search technology. And we intend to develop the third value creator advertisers by testing new products through new distribution channels. In addition of those three value creators with the fastest growing property and the highest growth search advertising market Local Search. This has been no easy task. We have many worthy competitors with better known brands working hard to deliver better products. We still have a long way to go, but our team has executed well and our Company has delivered in local search, and I thank them for the great job they have done. Local search is the right market for us at the right time and more than ever before, we have the right assets continuing to capitalize on this growing opportunity. Our vision is to make Local.com number one in local search.

Now, I will hand it over to our Chief Financial Officer, Doug Norman to review the financials.

Doug Norman, Chief Financial Officer

Thank you, Heath. I will be discussing our fourth quarter results and first quarter 2006 guidance. For a detailed review of our fiscal year 2005 results, please see our Form 10-K SEC that will be filed next month. Our fourth quarter revenue was 3.4 million, which represent a 16% decrease from 4.1 million in the third quarter. This decrease is due to decline in international business and was partially offset by an increase in our local search business. Of total revenue $596,000 or 17% came from our local search initiatives, up from approximately 200,000 in Q3. We had two partners that represented over 10% of our revenues for the quarter. Our largest national search partner LookSmart represented 30% of our revenues for the quarter, up slightly from 28% for the third quarter. Our largest local search partner Yahoo represented 13% of our revenues for the quarter.

Our expenses for the fourth quarter were as follows: Search Serving was $1.9 million or 54% of revenue, for serving expenses decreased from $3 million in Q3 primarily due to one-time overture license fee in Q3 and the decline of revenues in our national business in Q4. No distribution network partner represented more than 10% of our revenue in Q4.

Sales and marketing totaled 1.7 million or 50% of revenue. Sales and marketing increased $267,000 over Q3 primarily as a result of our Search Engine Marketing expense to drive traffic to Local.com.

General and administrative expenses totaled 1.1 million or 31% of revenue. Research and development totaled $1.3 million or 39% of revenue. As discussed in our last conference call, R&D expenses in Q4 included non-recurring items totaling approximately half a million dollars. Amortization and writedown intangibles totaled $594,000, or 17% of revenue, and included a $337,000 one-time impairment of certain intangible items related to the prior acquisition. Interest and other income was $57,000. Our GAAP net loss totaled $3 million. Our GAAP basic and diluted net loss per share per share was $0.33. non-GAAP net loss was $2.7 million for the fourth quarter of 2005, and was better than the prior guidance of 2.9 to 3 million.

Non-GAAP net loss excludes the one-time $337,000, or $0.03 per share impairment as just discussed. Non-GAAP basic and diluted net loss per share was $0.30. Basic and diluted earnings per share was calculated based on 9.1 million weighted average shares outstanding. Fixed asset expenditures were $635,000 for the quarter. And depreciation and amortization was $880,000, which included the $337,000 impairment.

I would now like to provide financial guidance for Q1 fiscal 2005. The Company expects first quarter revenue to be between $3 million and $3.2 million. Most importantly, we expect local search revenues to be between $900,000 and $1 million compared to $597,000 in Q4, which is between 51% and 58% increase. We expect a GAAP net loss of between 3.8 million and 4.0 million or $0.42 to $0.44 loss per share. The above net loss guidance includes an estimated non-cash equity based expense of approximately $925,000 as required by the adoption of statement of financial, accounting standards number 123R. Excluding this, our non-GAAP loss would be between 2.9 and 3.1 million. Non-GAAP basic and diluted net loss per share is expected to be between $0.32 and $0.34 per share. This forecast does not include any potential impairment of intangible assets from our acquisition.

Capital expenditures for the first quarter is estimated to be approximately $75,000. Depreciation and amortization are expected to be approximately $500,000, at which 240,000 is for the amortization of intangible assets. The earnings per share forecast assumes a weighted average share count of 9.2 million. Since the Company will have a net loss, basic and diluted shares are the same since auctions and warrants are not included as they would be considered antidilutive.

Now, I'd like to discuss the balance sheet. As of December 31, 2005, we had 14.3 million in cash, cash equivalents and marketable securities in no material debt. We have the resources needed to execute on our local search plans. I would now like to turn the call back over the Heath.

Heath Clarke, Chairman and Chief Executive Officer

Thanks, Doug. As the numbers show, our national search business continues to be challenged. We spend considerable time and effort working to improve the traffic quality in order to stabilize this business. As local search grows, national search will become a smaller portion of our revenues going forward. 2005 was a transitional year for us. And local search now dominates our planning, our thinking in our future. Let me close with these four key points.

First, we firmly recognize that all our efforts in the end are dedicated to building shareholder value. Accordingly, our most critical long-term objective is to achieve profitability and provide our shareholders with a good return on their capital. This goal is by definition long-term and we will invest in our local search business accordingly. Second, we have a strong capital structure with 14 million in cash to support our growth objectives. Third, we have already achieved exceptional results at Local.com, meeting our exceeding important milestones in traffic growth and revenue. The foundation for early success is based on proprietary technologies, and the efforts of a team of challenges and dedicated people. This amplifies the confidence in our future. And fourth, our vision is to establish Local.com as number one in local search. I'd like to turn it over to the moderator for Q&A.

Questions & Answers

Operator

Thank you. The question-and-answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the "*" key followed by the digit "1" on your touchtone telephone. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, "*" "1" for question. We will go first to Clay Moran with Stanford Group.

Q - Clay Moran

Yes, thank you. I have a few questions. On the national search side, you know, I though that you had indicated that it was stabilizing on the last conference call. Can you sort of address the further deterioration including through the first quarter, and is insight for the deterioration at this point or should we really expect this thing to winddown close to zero here at some point.

A - Heath Clarke

Do you want to answer all or…

Q - Clay Moran

Well, let's go one by one if you don't mind.

A - Heath Clarke

Sure. Thanks for the question, Clay. We did feel that the local, national search has stabilized. We have seen civility as we stated for about a six-week period, I believe on our last call. So based on that data we are going to share that history that we believe to reach civility. Now, ultimately it fell down to a lower level, and you know, we have seen again civility in that national search network, that at this time we are projecting a decline at this point just talking about Q1. Well, we are projecting a continued decline from the national search business through Q1 based on the experience we had in Q4. we are hoping to do better than that.

Q - Clay Moran

So, is this, I mean, can you give any indication on the longer term outlook, is it something that you think that is going to continue to decline, or is it still going to be a significant piece of the Company going forward?

A - Heath Clarke

Well, our view is generally that local search will surpass national during 2006. we are not giving any guidance further out in this quarter for the time being, but as I said, we are projecting in Q1 that what we saw in Q4 will be repeated.

Q - Clay Moran

Okay. And then cash, you have earned about maybe $3 to $4 million of cash in this past quarter. And, you know, based on my model, looks like you are going to have significant cash going forward for the foreseeable future. Are you exploring any strategic alternative, any potential cutbacks maybe in the national side, or possibly other type of alternatives here?

A - Heath Clarke

Well, as far as the local search business, as you can assume the corporate side, we are hiring into that. You know, we intend to grow that. We are certainly, on any given kind of month we are looking at what's the best allocation of our resources. We have spent a lot of time on the national search network. And every business has limited resources, they can't do everything they would like to do. So has to make the decision, like I said, in any given month, what's the best use of the resources that we have and we think that, maintaining as best we can in the national search business is certainly from what we need to achieve, or try to achieve, but also putting a lot of resources into local to capitalize an opportunity something we really should be doing. And we are planning, and we have acted accordingly.

Q - Clay Moran

Is there any thoughts of partnering with somebody that maybe more sizable, and to bring bigger resources to your Local.com strategy.

A - Bruce Crair

Well, we have partnered with Yahoo! with respect to the advertising at the top of the page. And you know, we don't need to partner in our view to stick around. You know, we have a plan to bring the Company back to profitability, we are not talking about those at this time going at beyond Q1. We have a plan to do that, we have sufficient cash to be able to do that, and we will have sufficient cash at the end of that -- substantial amount of cash at the end of that. So we don't need to do anything in that nature other than part of our plan to monetize the site.

Q - Clay Moran

Okay. One more question if I could. You mentioned that your revenues received from your search advertising is up to 90% of that advertising. Are you looking to cross that 100% threshold in this quarter, or can you give us any idea of what your expectation is in that regard?

A - Doug Norman

Yeah, what we are trying to do is to put out numbers when we have seen them on a consistent basis. So that we don’t' overreach. We certainly, and our objective is to get that to 100% and above as quickly as possible and on the Search Engine Marketing side. Of course the Search Engine optimization, every dollar that we bring in traffic is, you know 100% made. And certainly that would go to offset anything that are below in the Search Engine Marketing side. I don't want to give a specific guide with respect to when that might occur, we do have plans of course to get that over to 100% margin and beyond. And like I said, for Search Engine Marketing, our Bruce actually said, one of that, which still in phase I. Phase II and phase III will be able to bring in and achieve the 100% plus on that ad spend. So we think, you know, with phase I and achieving 90 plus percent, that's a pretty good result so far. So as we introduced the other phases in the Search Engine optimization, the repeat usage and so on, we believe that will be surpassing.

Q - Clay Moran

Okay, thank you.

A - Heath Clarke

Thank you.

Operator

Thank you. Once again, that's "*" "1" for questions. Over next to Richard Fetyko of Merriman & Co.

Q - Richard Fetyko

Thanks. Congrats on the progress in the Local.com site guys. I also had a question about the inflection point, which I guess you addressed just now. Sounds like, I guess, I will post my question somewhat differently. First of all, how much share do you think that, I mean, you've achieved quite a bit of growth already with sort of the first phases of your Search Engine Marketing strategy. How material could be in the phase II, phase III and then the SEO (Search Engine Optimization) strategy. How material could that be on your traffic growth. I mean, could we see a doubling of traffic from these levels when everything is deployed fully. And then also timing of the SEO (Search Engine Optimization) strategy, when do you expect to sort of roll that out, it sounds like, you are in early stages of that?

A - Heath Clarke

Yeah, just the SEO, I am going to answer that one first. The SEO has begun in phase I, we are still experimenting with the page layouts for the optimization and so on, in the different indexes, in this case, as we are in Google for the moment. And we have several hundred thousand pages indexed. So we are getting traffic of that today at no cost. Our goal is to -- as we look at phase II is to scale that, and we are in that process right now, we are in the process to develop in the frame right too, scale the content that we make available to Google's index, and of course Yahoo and MSN's index and other Search Engine. We think that will have a material impact on the traffic, and not just our SEO by itself, but the syndication network is also tied into not just direct navigation, but SEO. A site like ClevelandJewelers is an example, when we finished with that, there will be an enormous amount of content that is available for SEO, another is by indexing by Google, Yahoo and MSN specific to Cleveland specific to Jewelers. And we believe that makes for a highly targeted set of information for indexing by Google and others. We think once that scales that will have a material impact in terms of our reach on the Internet from what we do today on Local.com to what we can potentially do on 60,000 and more websites. I think that’s going to be a very substantial volume of units monthly visited that we are going to be touching. And with that in mind that we have set our site on being number one in local search.

Q - Richard Fetyko

Okay, and on the syndication side could you also give us a sense of where you are already on deploying that, and the timing of any kind of revenue impact and then the timing of additional syndication deals.

A - Heath Clarke

Sure, well we are working on additional syndication deals at this time. So we do anticipate that network will grow. As far as the timing of material revenues, it’s almost an immaterial revenue portion of its sign in Q1. We do have material revenues kind of after Q1, or we believe that material at this time. That will really kick in once the SEO kicks in, and as I said we are working on Phase II of the SEO for Local.com. That actually incorporates a portion of the SEO for the syndication network. So, what you can expect to see is that, on a global basis Local.com will have more content index from various Search Engines, and our syndication network in a similar time will shortly thereafter will have a lot more content. Now, unless you actually you know the 60,000 domain names you won't necessarily daily go and check that, but we -- our strategy is to make each of one of the site specifically -- almost a micro-site, where we have a very specific focus with information of what, you know, local businesses, products and services in order to get that index. And, you know, that is 60,000. So, that’s an enormous amount of content we’re going to be making it available shortly after Local.com site fully available. So, we’re working on that in Q1, we anticipate that will kind of come up to speed up possibly between tail end of Q1.

Q - Richard Fetyko

Okay, thanks. So, on the syndication side you basically trying to get the 60,000 domains or so, increases domains ranking within the Search Engine, which increases the traffic that goes to domain names which increases the revenue that you can generate off from those domains. But also increases the traffic to your Local.com site.

A - Heath Clarke

Yeah, the difference between our -- that's what we kind of call the strategy of unique in this particular area of online marketing and traffic acquisition. Our strategy is to have ample branding at Local.com and each of one of those sites. So, consumer goes to ClevelandJewelers whether they arrive there through Yahoo or Google, they are going to see the Local.com brand. And it will, they will be able to click through at one of our logos there to target at search result on Local.com or they can stay on that site, and we’ll see Local.com sponsored listing, banner advertising, pay-per-call advertising, and our algorithmic search results. So, we get access to those consumers for monetization purposes either way, but importantly we get -- they get access to our brand, which we think is a little different from what's being done today.

Q - Richard Fetyko

Okay. Thanks.

A - Heath Clarke

Thanks, Richard.

Operator

Thank you. We will pause just a moment to allow one more final chance to signal by pressing "*" "1". Again "*" "1" for questions. If you’re using a speakerphone, please be sure your mute is turned off to allow your signal to reach our equipment. Once again "*" "1" for questions. And we will go now to Paul Leung (phonetic) Susquehanna Financial Group.

Q - Paul Flueng

This is a question for Heath. It was mentioned that you intend to achieve profitability with the amount of capital that you have, but unless you achieve profitability within six to nine months, I don’t see we have enough capital?

A - Heath Clarke

Sure, thanks for the question. I am not sure, that was a question. Yes we do intend to achieve profitability, and of course we have our projections through this year or next year and the year after as part of our long-range planning. We are only talking about this quarter's number on this call, but we absolutely have a plan to return this Company to profitability, and we believe we have sufficient capital to do that, we have sufficient at that point.

Q - Paul Flueng

Without raising any money?

A - Heath Clarke

Yes.

Q - Paul Flueng

Are you are not willing to come up with those numbers at this time?

A - Heath Clarke

We are only giving Q1 guidance in this call.

Q - Paul Flueng

I see. Thank you.

A - Heath Clarke

Thanks, Paul.

Operator

Thank you. And with no further questions, I would like to turn the conference back over to Mr. Clarke for any additional or closing remarks.

Heath Clarke, Chairman and Chief Executive Officer

Thank you very much. I just like to thank everybody for their questions and interest in the call today. Thank you very much.

Operator

Thank you for your participation, and this concludes today's conference. You may disconnect at this time.

Copyright policy: All transcripts on this site are copyright Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.