VA Software F2Q06 (Qtr Ending Jan 31, 2006) Earnings Conference Call Transcript (LNUX)

Feb.22.06 | About: SourceForge, Inc. (LNUX)

VA Software (LNUX)

Q2 2006 Earnings Conference Call

February 21st 2006, 5:00 PM.

Executives:

Kathleen R. McElwee, Chief Financial Officer, Principal Accounting Officer and Sr. VP

Ali Jenab, Chief Executive Officer, President

Analysts:

Doug Whitman, Whitman Capital

James Gilman from Cross Research

Jon Hickman of MDB Capital

Paul Oppenheim, OMT Capital

Jon Hickman, MDB Capital

Joel Hausman (indiscernible) Little Creek.

Louis Buck, Private Investor

Robert Evan, Private Investor

Sony Roy, Private Investor

Operator

Welcome to today’s teleconference, at this time all participants are in a listen-only mode. Later there will be an opportunity to ask questions during that Q&A session. I will now turn the program over to Ms. Kathy McElwee. Go ahead please.

Kathleen R. McElwee, Chief Financial Officer, Principal Accounting Officer and Sr. VP

Thank you. Good afternoon and welcome to VA Software’s Conference Call reviewing our Second Quarter Fiscal Year 2006 Financial Results. Let me remind you that this discussion will include forward-looking statements, which we made pursuant to the safe harbor provisions of Section 21-E of the Securities Exchange Act of 1934. Investors are cautioned that statements made during the call that are not strictly historical in nature, constitute forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those set forth in such statements.

Forward-looking statements on this call include in particular, statements regarding management’s plans and objectives for future operations and financial performance, expected benefit from ongoing improvements to products and services, customer prospects and market opportunities, geographic expansion and sales for the company’s SourceForge Enterprise Edition solution. Increased profit to the company’s online media site, industry and technology leadership and collaborations with the company’s strategic partners.

Factors that could cause actual results to differ from our forward-looking statements are specified in our press release announcing the company’s quarterly results released earlier this afternoon. VA does not take any obligation to update forward-looking statements, VA cautions investors not to place undue reliance upon any forward-looking statements and recommends that investors review the company’s filings with the Securities and Exchange Commission including the risk factor section of VA’s Annual Report on Form 10-K for the year ended July 31, 2005 and Form 10-Q for the quarter ended October 31, 2005. These documents are available at the company’s website Vasoftware.com and at the SEC site.

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, VA reports non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results which could be found in VA earnings release announcing our financial results issued earlier today. They are also posted on the company’s website. A replay of this conference call will be available on our website later today. The replay will also be available by telephone at (800) 688-7036 or (402) 220-1346.

Now I will turn the call over to VA Software’s President and CEO, Ali Jenab.

Ali Jenab, Chief Executive Officer, President

Thanks Kathy. Good afternoon and thank you for joining us today. I am going to make a few opening remarks and then turn this back to Kathy McElwee our CFO to review the financial results. We will then open the call for question.

I am extremely pleased to report that VA Software had its first profitable quarter ever. During the quarter ending January 31st we generated $1.1 million or $0.02 per share in income from continuing operations. As many of you aware we sold the assets of Animation Factory subsidiary to Jupiter Media in late December. Including the result of continuing operation profits were 10.5 million or $0.17 per share. Our financial results for the previous year have been adjusted to reflect only the results of our continuing businesses. We charge software, media and e-commerce. In these businesses revenue grew by 57% to $40.7 million during the second quarter.

Software revenue almost doubled to $3 million, our media business had another strong quarter growing 34% to $2.7 million and our e-commerce business had a very strong holiday season with revenue growing by 56% to $9.1 million. The final measure of our financial success during the quarter was our cash flow performance. Operations generated $3.8 million in cash during the quarter. The net cash proceeds from the sale of Animation Factory were 8.1 million and we completed the quarter with a cash and investment balance of $47.8 million. Obviously we are extremely proud of our financial performance, but I want to highlight some operational events that will help sustain the performance that we just posted.

We had expanded our geographical presence for our software business with the signing of ASERVO as an authorized reseller in central Europe. VA has sold the SourceForge software solution to 147 customers. Our Slashdot and SourceForge.net sites were recognized by the press as representing the future of the web and media. We continue to provide our advertisers with innovative custom publishing solutions and we announced ongoing improvements to SourceForge.net, the world’s largest Open Source software development site.

Let me go into bit more detail on each of these events. Today we have focused our sale with SourceForge Enterprise Edition in the United States supplemented by sales in Japan. We have an extremely strong lead flow coming out of Europe due in large part to the popularity of SourceForge.net in Europe. In order to capitalize on the opportunity available in this area, we have signed ASERVO, a German based IT services company as an authorized reseller of SourceForge Enterprise Edition. ASERVO will be signed under SourceForge Solution in Germany, Austria and Switzerland.

During the second quarter we grew the install base of SourceForge adding CapGemini, one of the world’s leading provider of system interpretations and implementation of other technologies JasperSoft, Objectif Lune and Windemere Information Technology Systems along with several Japanese entities. We have sold our solution to 147 customers during the last four years that we have been marketing the product.

Let me go into the OSTG sites. OSTG site, SourceForge.net and Slashdot continue to be recognized by the media, advertisers and the community as the online leader in what is increasingly known as the participation age. Through an innovative publishing approach that enables the audience to collaborate with one and another and actively participate in the content on the sites. These sites have recently been acknowledged by Fortune in an article titled "Future of Media" and by Forbes as "Best of the Web" and "Top Blog". The OSTG network also continues to see measurable success with scalable innovative custom publishing programs for major clients such as AMD, HP, IBM, Citrix and Rackspace. Recent programs have included AMD large scale audience outreach initiative and portals on Slashdot and SourceForge.net. The long-term renewal of the HP Linux Reference Architectures microsites on Linux.com, ITManagersJournal and NewsForge.

And a number of programs for IBM including IBM Migration Factory and IBM Solaris to Linux and Power Architecture. This past quarter OSTG also launched the large-scale worldwide program for IBM to promote downloads of Apache Geronimo server as a second phase approach to their large scale branding initiatives around WebSphere Application Server Community Edition.

OSTG continues to rank highly against all other online technology networks according to third-party research firm Nielsen//NetRatings @Plan. According to the @Plan Winter 2005-2006 release, OSTG has once again ranked number one among visitors who go online to seek technology news, a spot that network has held since 2003. OSTG also ranks number one for delivering visitors in the computer software industry who are technical staffs and who are professional and managers.

On the technical and operational side, OSTG has recently outsourced its site measurement and metrics services to Google Analytics. Google Analytics measure site traffic by IAB industry standards and provide the advertisers with additional comfort that comes from a trusted third-party source. According to Google Analytics, the OSTG network of sites delivers more than 30 million unique visitors and more than 270 million page views monthly.

Finally we continue to make improvements through SourceForge.net. We announced support for Subversion to complement our current Software Configuration Management system which is CVS. We also updated the back-end of our search offering to use an Open Source solution which is Apache Lucene.

Our next schedule improvement is an improved presentation of the site's software map categorization followed by search results. All of these enhancements are being made to improve the site’s functionality and user experience.

We are very excited about the growth opportunities for the OSTG media business. Now I’ll turn the discussion over to Kathy for a financial review. Kathy?

Kathleen R. McElwee, Chief Financial Officer, Principal Accounting Officer and Sr. VP

Thanks. As you saw in our press release, our continuing operations generated $0.02 in income on both the pro forma basis and on a GAAP basis which was above the breakeven plus or minus a penny guidance that we provided on the last conference call.

Second quarter revenue for continuing operations increased to 14.7 million well ahead of the above 12 million guidance provided on the last conference call. Software revenue increased to 3 million from last year’s 1.5 million. As previously announced we sold our largest software transaction ever during the quarter. That helps drive the average order size to 126,000 compared to the 45,000 booked during the second quarter of fiscal 2005.

Our media business grew by 34% to 2.7 million, year-over-year we nearly tripled our average CPM rate during the quarter from about $9 to about $26. Our top advertisers during the second quarter included AMD, IBM, Dice, Microsoft, HP and Rackspace.

E-commerce revenues generated by ThinkGeek grew by 56% to 9.1 million as both the number of orders processed and the average order size increased compared to last year. Gross margin dollars for the second quarter of fiscal 2006 increased 79% to 6.9 million. The improvement compared to last year was the result of improved margins in all three businesses.

The GAAP second quarter net income was 10.5 million or $0.17 per share compared to last year’s second quarter loss of 700,000 or a penny of share. These results include the contribution from discontinued operation. In December we sold the assets of our online images business Animation Factory. As a result, the online images business is accounted for the discontinued operation in all financial information presented for fiscal 2006. On a continuing operations basis, second quarter net income was 1.1 million or $0.02 per share compared to the second quarter fiscal 2005 net loss of 900,000 or $0.01 per share.

Turning to the balance sheet, we finished the quarter with a cash and current investment balance of 43.1 million which when combined with long-term investments of 4.7 million totaled 47.8 million. We generated 3.8 million in cash flow from operations and received net cash of 8.1 million associated with the sale of the Animation Factory. For our third fiscal quarter of 2006 we expect revenue to increase by about 30% to about $9 million compared to last year’s third quarter continuing operations revenue of 7 million. And our third quarter fiscal year 2006 EPS to be breakeven plus or minus a penny excluding the cost associated with options expensed on the FASB 123R. Ali?

Ali Jenab, Chief Executive Officer, President

Thanks Kathy. Before we open this for question, I like to make a few closing comments. We had a terrific second quarter and we feel that the momentum is growing. We have a strong platform of software and advertising business for the third quarter. Our install base continues to purchase more licenses as the use of SourceForge within the enterprise grows because management and developers see the value of the product.

Traffic for our online media sites continues to grow and our sales of advertising are increasing as advertisers need a positive result of their marketing efforts. We are excited about the investments that we are making in SourceForge.net. Our overall focus is execution and building a sustainable profitable business.

Operator, we’ll now take questions please.

Question-and-Answer Session

Operator

Operator Instructions. We will go ahead and take a question from the side of Doug Whitman of Whitman Capital, go ahead please.

Q - Doug Whitman

Hi guys, congratulations on the strong numbers and having profitability. If you could talk a little about the receivables which wasn’t really talked in the financial commentary, but there was –as I don’t think I’ve ever seen a company decline receivables as much as you guys did from down to 23 days if I am understand it correctly. A little bit what goes behind that or linearity and kind of, also on the media side, on the advertising side kind of longer how the prospects are looking on a longer-term basis?

A - Ali Jenab

Okay, let me take that, I think Kathy you can take after that, basically detail attention in executing on all fronts during the quarter including cash collection. So, we put a major push into cash collection to make sure everything that was out there was collected and that was the reason you have seen great results as far as the receivables concerning that. And then Kathy if you want to, add anything on top of that…

Q - Doug Whitman

I would assume then going forward, even despite all of that you could have continue the great effort with that, that 23 days is not a sustainable level, I don’t – you don’t normally see companies that low?

A - Kathleen McElwee

We have seen that in the past, a year ago we had, the way I calculate DSO at 26 days, this quarter 25 days. So I increased that, going for something along that – 30 days is reasonable. Don’t forget that we do have a e-commerce business that really doesn’t have that many days of receivables associated with that, right it’s a cash business essentially.

Q - Doug Whitman

Great.

A - Ali Jenab

Let me comment on the media side. I feel that we’ve been working really hard to build the nice pipeline of activity moving forward. We had our focus in two fronts, one actually to grow the revenues but the second as far as new sales team to focus on quality advertisers and focus on our CPM rates going up. And as you have seen in this quarter our average CPM went up to $26 from $9 a year ago and I feel that with some of the activity that we have, we should see nice growth in the next quarter on the media side of the business. You should see a stronger growth than we’ve seen in the past quarter on the media side.

Q - Doug Whitman

Okay, great. Well, thank you guys.

A - Ali Jenab

Yeah, thanks Doug.

Operator

Thank you, we have a question from the side of James Gilman from Cross Research, go ahead please.

Q – James Gilman

All right, congratulations Ali and Kathy on the nice results this quarter. Question in reference to the growth in the media and software, Ali, you just mentioned that, you expect to – in the next two quarters to see some results there, continued growth in the media. Of the two you focus on software and media, which of those two do you think more long-term are going to produce the, will be the growth engine for your organization?

A - Ali Jenab

I feel that both businesses have nice growth potential for us. Naturally, I’ve always felt that on the media side we’ve really got so such room to capitalize on existing traffic, you guys do that properly and that – for the short-term we give this a bigger opportunity to grow the revenues faster on that side. But software also, the interest on the software side is extremely strong out in the marketplace. And we have some seven-figure deals that we work on and that as we close in the past that helps with the revenue growth. So both are strong but if I could pick one for the next 12 months pie will be at media side but longer-term they both could produce pretty nice results for us.

Q – James Gilman

Okay, in reference to your seven-figure deals, do you have a target goal that you’d like to have each year on the number of deals in that range?

A - Ali Jenab

As many as possible, I guess. But our goal is to keep focusing on keeping the customers happy and trying to close a few from in a year. I don’t necessarily have a particular target because at the end of the day we want to make sure we got happy customers and if we got multiple six-figure deals that will do it for us too. So, no I don’t have any preset numbers that we shoot for.

Q – James Gilman

Okay. Again congratulations on the nice results you had this quarter.

A - Ali Jenab

Thank you, thanks a lot.

Operator

Thank you our next question comes from Jon Hickman of MDB Capital, go ahead please.

Q - Jon Hickman

Hi, can you tell me, I know that you had a big software sale here in the quarter from CapGemini, but kind of on a more going forward basis, what would you expect the sales to existing customers of SourceForge to be to like what percentage?

A - Ali Jenab

So, Jon if we take quarterly numbers aside on ongoing basis, we are hoping that our software business would go anywhere between 30% to 50% year-over-year basis. Now some quarters because of the large deal boundaries it could be up or down but I just, it’s really hard to try to give a prediction on a quarterly basis. But on annual basis we should have that kind of growth. Now naturally we got handful of accounts that we work on and if we’re successful in closing some of the larger deals, you’re going to see a stronger in growth like we did this past quarter. But on ongoing basis if you average out for the full year, I would expect 30% to 50% growth.

Q - Jon Hickman

Now that, how much that would come from existing customers, that are just buying, they are buying at additional fees, I mean do you have enough history that you can make a guess with that?

A - Ali Jenab

It fluctuates quite a bit from quarter-to-quarter, because if you got one brand new account like we did last quarter that brings in the seven-figure deal, actually it helps the number.

Q - Jon Hickman

Yeah.

A - Ali Jenab

But on an average basis I would say its 50-50 split.

Q - Jon Hickman

Okay.

A - Ali Jenab

But it varies quite a bit by quarter, but we do work, our goal is adding new accounts and in feeding that account base to make sure growth and then actually because the product is lot more mature and its very attracted to customers that we are able to actually get large deals closed right off the shoot rather than received in the market first.

Q - Jon Hickman

Okay and then this might be for Kathy, just, I am sorry I missed on the accounting here, none of the revenues and none of the expenses from…

A - Kathleen McElwee

Animation.

Q - Jon Hickman

Animation Factory were included in the presentation until you get down to discontinued operation.

A - Kathleen McElwee

Right, so what you are looking on an ongoing basis is yes, Animation Factory and the press release just the one number which is income from the discontinued operation what we say fiscal 2005, when you, when we file our Q there will be a little bit more detail that will be provided.

Q - Jon Hickman

Okay.

A - Kathleen McElwee

Okay?

Q - Jon Hickman

Thank you.

A - Kathleen McElwee

You are welcome.

Operator

Operator Instruction. We’ll take a question from Paul Oppenheim of OMT Capital, go ahead please.

Q - Paul Oppenheim

Hi Ali, hi Kathy congratulations on the quarter.

A - Ali Jenab

Thanks.

Q - Paul Oppenheim

Couple of questions, one, can you starting to see that from advertisers as well as mainly the SourceForge communities oh, excuse me the Slashdot community on the innovated advertising we’re seeing such as the AMD is that – how is that resonating of both the community as well as the potential advertisers in the future.

A - Ali Jenab

I think both is good at this point; we will just see much more positive feedback on both sides.

Q - Paul Oppenheim

Excellent, excellent are you seeing good clicks through as far as within the community and then if you mix up those pretty well then. And next question I had was just on the gross margin, on the e-commerce gross margin at 28%, can you give us some more detail what was driving that into the – at the high level to sustain going forward?

A - Ali Jenab

In general our e-commerce group did an excellent job during the quarter. And our focus has been to avoid low margin like electronics type of products and focus on products that we can have extended margins. Again the group, there is a lot of t-shirts and lots of stuffs to sell, they have substantial margins on it and our focus has not been just revenue growth, it is revenue growth with attractive gross margin associated with it. So our intent is, try to keep the product mix, so our margin is above what you normally see in e-commerce business. But also this year we’ve had tremendous traffic to the site and tremendous conversational rate of orders. Average orders went up and the number of orders went up substantially, so our overall conversion to the site was fantastic.

Q - Paul Oppenheim

Excellent, excellent. On the advertising side, can we have something in the CPMs with the gross margins sequentially came down a little bit. Can you add into that from outsourcing or what was driving the gross margin in the quarter, I just had something little will still trending in that 60 area, where it should look like?

A - Ali Jenab

Overall gross margin has revenue growth, so that business should increase, I don’t specifically know, Kathy there was something within the fixed cost, that caused that or?

A - Kathleen McElwee

There wasn’t anything specific, I mean as our traffic grows what we do is, we do see more downwards and more verification, so we did see some operations cost except nothing of a, except function processing, so we do see, those kind of ongoing increased earnings on, they won’t necessary go linearly with revenue growth.

Q - Paul Oppenheim

Okay, great and then last question, I had is just on fully diluted share account, is that correct that 62 million or is there further options there should be included there?

A - Kathleen McElwee

That is the fully diluted share account.

Q - Paul Oppenheim

Okay, great. Thank you and congrats again.

A - Kathleen McElwee

Thank you

A - Ali Jenab

Thank you. Thanks Paul.

Operator

Thank you. You have a follow-up question from Jon Hickman of MDB Capital. Go ahead please.

Q - Jon Hickman

Hi, I’m sorry, one last question.

A - Ali Jenab

No, problem Jon.

Q - Jon Hickman

Now that you have, maybe you don’t have enough (indiscernible) either but can you talk a little about what’s been happening– with the on-demand, SourceForge on-demand?

A - Ali Jenab

We don’t have financially, I don’t have enough data to be able to tell you financial fact by any means, but what I could tell you the initial reception on the product is been pretty strong, again its more for a mid market and smaller size market, some of the leads that we get for 5 or 10 users that they have been attracted to it. But at this point, it’s early to see after free trial what kind of conversion rates beginning in all that, so at this point I don’t have any further update on it.

Q - Jon Hickman

Okay, can I have one more question?

A - Ali Jenab

Sure.

Q - Jon Hickman

Okay so what’s your, I mean if you had one thing you’re going to focus on this next quarter or worry about so that, through, occupy most of your time what -- what is that?

A - Ali Jenab

You know it’s probably not one thing, it is going to be three – it’s actually four fronts. We’re going to focus on media revenue growth, e-commerce, make sure that e-commerce revenue is growing and is healthy and software revenue growth. And then all of that is going to result into the bottom-line and also cash management. So, I don’t think there is only one thing that we could focus on, it’s a type of business that you’re going to make sure you’re watching every piece of the business and we’re going to keep focused on all of those.

Q - Jon Hickman

Okay, thanks.

A - Ali Jenab

Sure.

Operator

Thank you. And you have a question from Joel Hausman (indiscernible) Little Creek. Go ahead, please.

Q - Joe Hosman

Yeah, congratulations on the nice quarter, sorry I came on little bit late and I just heard the revenue guidance for fiscal quarter Q3 of 9 million, I assume that assumes no seven figures software deal, is that correct?

A - Ali Jenab

Well, first of all we don’t get guidance by each line of business. Second, if you know our historical performance 2Q is always very strong because of the e-commerce revenue, revenue wise, but again always focused on year-over-year growth, that we’re guided to a 30% growth which is probably the strongest guidance that we’ve given. So, no comments on the seven-figure transaction but overall we’re still, I feel like it’s a pretty healthy growth and also with that revenue we got it to EPS of breakeven plus or minus a penny.

Q - Joe Hosman

Thank you. One other question, other than the CapGemini seven-figure deal in fiscal Q2, where there any other seven-figure deals in the software business?

A - Ali Jenab

In the past?

Q - Joe Hosman

Yes, in the quarter, itself.

A - Ali Jenab

No.

Q - Joe Hosman

Okay.

A - Ali Jenab

No.

Q - Joe Hosman

And did you discuss the, whether the CapGemini deal was, you know a million or was over few --.

A - Ali Jenab

No.

Q - Joe Hosman

Okay. Thank you very much.

A - Ali Jenab

We didn’t have actually discussed the CapGemini it was the seven-figure deal, that’s anyway just for these check out.

Q - Joe Hosman

Okay. Thank you.

Operator

Thank you. You have a follow-up question from Doug Whitman of Whitman Capital. Go ahead, please.

Q - Doug Whitman

All right, just, I may have missed it, the discuss go over one of the metrics and maybe it’s too early to have the metric completed but one of the metrics we’ve been watching as a percentage of your pages that are sold, roughly do you have a figure what it was last quarter?

A - Ali Jenab

It’s actually below 10% Doug.

Q - Doug Whitman

Okay.

A - Ali Jenab

And the reason it’s below 10% is we’re making sure we increase the quality and the CPM rates first, and as you do that some advertisers go dark and then they come back and it’s a right approach and we’re going to start seeing that piece come up. So, the first piece we decide to attack is fixed sale pricing on average CPM basis and then go after gaining the sell through.

Q - Doug Whitman

So, you got a very large experienced team there, how many quarters roughly did I think that as you take these start getting the percentage up?

A - Ali Jenab

Third quarter, you should see stronger year-over-year growth on the media side of the business that we’ve seen in the first and second quarter. First and second quarter was in the 30, third quarter should be well north of 50% year-over-year growth.

Q- Doug Whitman

Great, okay.

A - Ali Jenab

Okay.

Q - Doug Whitman

Thank you.

Operator

Thank you. Operator Instructions We’ll take a question from Louis Buck a Private Investor. Go ahead, please.

Q – Louis Buck

I’d like to congratulate you on a great quarter. I’m a retired broker and I’ve been an investor in your company now for about a year and a half and one thing that I’m concerned about is that we all operate in a level playing field and it is a little disconcerting to me to see the last two or three days the volume grow up, so high and the stock price to go up so high and the stock price to go up. And I doubt if it was just speculation on its part and, I am afraid that maybe some people were informed that this is a real good quarter that they were that you are going to report and took advantage of it. And I am just concerned about that as an investor.

A - Ali Jenab

One comment I would make is, I feel pretty confident that our team has been very good at managing the information and not communicating that to anybody. I did have a presentation at SRA Conference that was received extremely well last Wednesday. And it was my standard presentation – and it was my standard presentation that I did under AeA, the last November before. And both from the webcast to the public information so you are welcome to go listen to what exactly said on that. Other than that there has been no other communication with any parties and that all basically what I can say from our perspective.

Q - Louis Doug

You must have converted some people at the conference last Wednesday?

A - Ali Jenab

Their reception was very strong on the story of where we are going with the company.

Q - Louis Doug

Do you think, was there anything non-public to discuss with that?

A - Ali Jenab

No.

Q - Louis Doug

Because, okay well.

A - Ali Jenab

And it was again, it was webcast that available to anybody who wanted to listen to us.

Q - Louis Doug

Okay, well, thank you very much.

A - Ali Jenab

You are welcome.

Q - Louis Doug

Again congratulations on a great quarter.

A - Ali Jenab

Thanks.

Q - Louis Doug

Thank you.

Operator

Thank you. We’ll take a question now from Robert Evan, a Private Investor. Go ahead please.

Q - Robert Evan

Yes, I would like to know what the, what you are really considering on major competition and how are you doing with institutional investors?

A - Ali Jenab

So, let me take the major competitors out first. I feel that on the websites we are very uniquely positioned, actually there is going to be all kinds of smaller entities that are going to come after us. With trying to dominate the open source marketplace, but I feel like both Slashdot and SourceForge had predominance presence on the web. On the software front, I feel like any tools vendor such as IBM, Borland, lot of the new players and also private company named CollabNet is a direct competitor with us in certain front but that’s basically the landscape for us. As far as the institutional investors, I see what’s gets published like everybody else does when people buy and sell this stuff. So naturally that’s if you go on the web and look at who is the biggest holder, that’s basically, we’ve had the information that we get, we don’t get anything special as far as who is holding, how many shares and where.

Q- Robert Evan

Thank you.

Operator

Thank you. We will now take a question from Sony Roy, a Private Investor. Go ahead please.

Q - Sony Roy

Yes, my question is very simple. I have been an for the perhaps six years at VA, we strongly support the concept, I would like to know if IBM (indiscernible) the company or I think as I speaking to companies somehow?

A - Ali Jenab

I am sorry, I missed part of that question. Your phone was going in and out. I know it was regarding IBM but I couldn’t tell what the question was.

Q - Sony Roy

Okay, first of all I want to congratulate you for your performance.

A - Ali Jenab

Thank you.

Q - Sony Roy

I’ve been a investor for the past 6 years.

A - Ali Jenab

Yes.

Q - Sony Roy

But and I currently own about 20,000 shares. What my question is, I wanted to know if IBM has a stake in this company currently?

A - Ali Jenab

Not that I’m aware of. So, your question was those IBM own a piece of VA and not that I’m aware of but anybody can own up to 5% of the company without disclosing with us, so not that we are aware of.

Q - Sony Roy

All right and my last and final question is, what is the outlook in terms within the next three years?

A - Ali Jenab

We don’t give more in the quarterly outlook at this point, we feel like we are just turning the corner and turning this company and hopefully sustainable profitability and we, I feel like its pretty responsible for me try to give two year guidance at this point. So we are doing it quarter at a time and maybe within the next 12 months or so, we feel comfortable enough to start giving longer-term guidance but at this point I feel like it’s prudent to say with the same course of action that we’ve done in the past.

Q - Sony Roy

Wonderful, I want to again congratulate you, I think your performance has been excellent.

A - Ali Jenab

Thank you, thank you very much.

Q - Sony Roy

My pleasure. Bye-bye.

Operator

Operator Instruction. It appears at this time there are no further questions, I will turn it back over to our moderator to any closing remarks.

Ali Jenab, Chief Executive Officer, President

All right. Thank you very much, since there are no further questions. Thanks very much for joining us this quarter and we will talk to you on our next quarterly call. Thank you. Bye.

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