Jeremy Warnick - Corporate Communications Manager
Randy Ortiz - President & CEO
Don Peck - EVP & CFO
Bill Dezellem - Titan Capital Management
Chris Owen - Plaisance Fund
LoJack (LOJN) Q2 2012 Earnings Call August 6, 2012 5:00 PM ET
Welcome to the LoJack Corporation Second Quarter 2012 Financial Results Conference Call. (Operator Instructions). I would now like to turn the conference over to Jeremy Warnick.
Good afternoon and thank you everyone for joining the call this afternoon. Our moderator is Randy Ortiz, Chief Executive Officer and President of LoJack. You will be joined on the call by Donald Peck, Chief Financial Officer. An archive of the webcast will be available through LoJack.com in the investor relation section. Any statements during this call that are not statements of historical fact are forward-looking statements. These forward-looking statements are based on a number of assumptions that involve a number of risk and uncertainties. Accordingly actual results could differ materially; for further information regarding the forward-looking statements and factors that may cause such differences please see the warning regarding forward-looking statements on our Form 10-K for the year ended December 31, 2011.
I will now turn the call over to Randy Ortiz.
Thank you Jeremy and good afternoon everybody. We appreciate the opportunity to share with you LoJack second quarter financial and operational results. I will begin this afternoon with an overview of the results and highlights from our domestic and international business segments. Don will then provide you a detailed financial review of our second quarter 2012 performance and update you on your outlook for the second half of the year. I will share my perspective on the auto industry and the growth we are continuing to see in the U.S. market.
Also update you on the near term opportunities for LoJack and our strategies we move to the second half and the year beyond. Turning to our second quarter results, our domestic performance demonstrates our continued progress in closing the gap between the growth of the retail industry and our U.S. LoJack business.
The U.S. retail automobile industry grew 15% in the second quarter; our LoJack dealer business grew 8%, that 7 percentage point gap to market is a significant improvement in the same period in 2011, only difference was 22 percentage points as LoJack business was declining, although retail automotive industry was growing. What’s driving the improvement in our domestic business let me answer that question by talking first about how we are intensify our focus as a company.
After little more than two fourth quarters since taking the helm of LoJack, I am pleased to report that discipline, targeted strategy we have implemented with our U.S. sales organization is beginning to pay off. Our field force is concentrating its efforts on key top volume dealer groups and strengthening our relationships with general automotive agents. For those of you who are not deeply promoted with the automotive industry, the top 125 dealer groups are responsible for approximately 22% of all new vehicle retail sales and the top 10 groups account for about 9% of all U.S. retail sales.
So it's very important that we have a plan that focuses our resources and supporting these key partners and assist them in growing their financial insurance business and satisfying their customers. To put this into perspective, the importance of finance and insurance department are F&I in these large groups contribute approximately 3.5% of top line revenue. However, they can contribute over 20% of gross profit.
So as new vehicle margins continue to be under (inaudible), a support that’s tangible, value added products like LoJack can provide are very, very important to the financial health of the dealership. Additionally, we continue to grow our automotive agent business, automotive agents play a key gate-keeping role for many dealer groups by consulting dealership management on the right mix of F&I products and of course F&I services to provide a maximum return on investment. As a result of this focused effort, our agent business grew 42% in the second quarter far off pacing industry retail growth.
We believe continued growth with the right agent groups will be an important go-to market tactic as we take full advantage of a rebounding U.S. auto industry. Our domestic business also benefited from favorable market trends in the second quarter, as I previously indicated the U.S. retail auto-industry increased 15% in the quarter and analyst are still projecting the full year retail volume at somewhere in the neighborhood of 11.6 million units which would represent a very healthy 13% improvement from last year.
Market share gains among leading Japanese brands, Toyota in particular help contribute to LoJack’s growth in the quarter. Toyota and Honda each posted market share gains in the second quarter continuing their resurgence after 2011 tragic earthquake and Tsunami in Japan of course the floods in Thailand. In addition to the favorable brand rotation we received from the Japanese brands we also gained traction and some key domestic brands as well.
According to Bloomberg, Ford, General Motors and Chrysler all reported auto sales to surpass analyst estimates keeping the industry on track for a strongest year since 2007. The favorable full year estimates for the auto industry are fueled by lower interest rates, certainly more subprime credit availability and an aging fleet. One additional strong indication demand comes from the Experian automotive grow which is now in late June they were 17.3 million more light duty vehicles with 7 years and older on the road in the United States then there were just three years ago.
I am also encouraged by industry estimates for plant unit production with analyst projecting a 12% to 15% increase in production for the third quarter. The continued building of inventory to meet demand is also good news for LoJack; dealers with more inventory tend to be more likely to prelude LoJack units which we believe is a best approach for selling the LoJack brand.
Turning now to our international business, revenue for the second quarter of 2012 declined roughly 30% to 6.4 million from the 9.1 million in the same quarter last year. As economic turbulence continues to dramatically impact the European Union facing a tight credit market, severe austerity measures and the prospect of rising unemployment, the last thing many Europeans are thinking about is purchasing a new car. As a result of Europe’s light vehicle market is forecasted to decline 7% in 2012 according to European Automobile Manufacturing Association.
However, I will see against the backdrop of its declining auto industry, LoJack Italy continues on a positive trajectory. In the second quarter, our base of subscribers increased 46% from a year ago to 24,280 subscribers. Obviously, an incurring trend and a sharp contrast compared to the 19% decline in new vehicle registrations.
Regarding our international business outside of the EU, based on our discussions with top licenses we believe market conditions that have impacted the timely submission of orders should be resolved in the second half of the year.
Now before turning it over to Don, just want to touch on one other business segment and I think it's a very important one it's our commercial business segment which continues to prosper. Commercial grew 32% in the second quarter compared with the same period a year earlier. To the first half of the year in 2012, commercial revenue is running 70% ahead of last year reflecting the growth of the rental construction markets. Our ruggedized LoJack recovery equipment solution was providing equipment owners a piece of mind according to expense equipment to the job site.
Now let me turn the call over our CFO, Don Peck for the financial review.
Thank you Randy and good afternoon everyone. As I review our second quarter financial results today all comparisons will be to the second quarter of 2011 unless otherwise noted. U.S. revenues increased 6% on an 8% increase in dealer unit volume. As we continue to narrow the gap between our performance and U.S. retail automotive sales generally. Our commercial unit continues to outperform, posting a 32% increase in unit volume. As Randy mentioned our commercial performance underscores not only the rebound of the rental and construction markets but the value of our LoJack recovery equipment solution has in these sectors.
Revenues generated from the combination or direct sales efforts and our motorcycle product increased 2% year-over-year. Our international segment revenue declined 30% to 6.4% from $9.1 million in the second quarter last year. Lumpy ordering patterns from several international partners contributed to a 34% decrease in international licensee product revenue. In Argentina, we continue to work with our licensee in its efforts to allow for the importation of our product into that country and we hope to get those matters resolved soon.
We resumed the delivery of units to our Brazilian licensee during the quarter and also expected our shipments to South Africa will accelerate before the end of the year. As we have discussed for several quarters, significant variations in the order patterns of our international licensees are expected to continue. This will continue to effect both revenues and growth profit percentages on a quarterly basis.
As Randy also indicated revenue from our Italian operations increased quarter-over-quarter despite the economic difficulties there. In fact revenues grew a robust 18% as our subscriber based has climbed to more than 24,000 from the 22,000 at the end of the first quarter, 20,000 at the beginning of the year and 16,600 at the end of the second quarter last year.
Revenue related to our all other segment increased by $181,000. Our SCI cargo business increased 25% to $836,000 while our SafetyNet business increased 39% to $49,000.
Consolidated gross profit as a percentage of revenue was 52.1% up from 51% in the same quarter last year and well ahead of our corporate goal of 50% reflecting continued supply chain and manufacturing efficiencies which reduced the manufactured cost of our products. Operating expenses of $18 million increased 5.3% for the 17.1 million in the same quarter last year.
The increase was due primarily the personnel costs with new hires mainly in sales and IT and an increasing consulting expenses as we continue to explore potential growth and expansion opportunities for the company and its brand.
Outside legal expenses were actually down slightly from the same period last year and down about $700,000 from the first quarter of this year. We now have a trial date in the California region our litigation set for February, 2013. In an arbitration hearing set in the liability base of the Brazilian licensee litigation set for March 2013.
As a result we do expect to have significant outside legal expenses over the next few quarters as these matters move toward resolution. Our operating loss for the second quarter was approximately $1.5 million compared to operating income of $51,000 for the same quarter last year.
We had adjusted EBITDA of $437,000 in the current quarter as compared to adjusted EBITDA of $2.5 million in the second quarter of last year primarily due to lower revenue and higher operating expenses partially offset by a higher gross profit percentage.
In other income expense, during the second quarter of 2012 we had a $315,000 negative valuation adjustment and the carrying value of our investment in Absolute Software common stock. Due to a reduction in the market price of those stock compared to a 420,000 gain recorded in the same period last year, for a swing of a $735,000 or just over $0.04 per share.
Year-to-date the carrying value of the Absolute Software stock is actually increased $200,000. Our foreign exchange gain or loss for the quarter went from a gain of $110,000 last year to a loss of $36,000 this year for a swing of just under $0.01 per share. This exchange gain or loss results from the impact of currency fluctuations on our inter-company balances mostly due to euros and Canadian fluctuations which we are looking to minimize.
Income tax expense for the second quarter of 2012 reflects a provision of our Irish subsidiary. Net loss in the current quarter was approximately $2.2 million or $0.13 per share compared to net income of $221,000 or $0.01 per share in the second quarter of 2011.
The company had negative cash flow of $2.8 million in the current quarter. Our $2.5 million from net loss included approximately $2 million of non-cash stock based compensation and depreciation. Balance sheet changes had a $4.4 million negative effect on our operating cash flow, including a $3.4 million decrease in accounts payable and current liabilities.
We also had capital spending of $542,000 during the quarter as we made additional investments in Tower Infrastructure, police tracking units and computer equipment. Our Canadian debt increased $598,000. During the quarter, we also repurchased 31,332 shares of LoJack stock on the open market for $96,000; 1.281813 million shares remain in our board approved repurchase authorization at the end of the quarter.
Our cash and cash equivalent balance on June 30, 2012 was $41.6 million compared to $49.6 million at the end of last year. As of June 30, 2012 we had approximately $12.3 million of debt outstanding against our Canadian credit agreement, with borrowing availability of another $15 million on our revolving line of credit. We are in compliance with all financial covenants.
Stock based in the quarter was $650,000. Depreciation and amortization was $1.3 million during the quarter. Turning now to look at our year-to-date performance, our domestic revenues improved 16% over the first six months of last year with our U.S. (inaudible) value up 7% and our commercial volume up 70%. The lumpiness of our international revenues was evident during the first half of the year with our international licensees business so far this year down 26% over the same period last year.
The revenue from our Italian subsidiary was up 10% for the first half of the year. Our gross profit percentage for the first six months of 2012 was 53.3% or 300 basis points better than our performance during the first half of last year, 190 basis points of that improvement was due to the revenue and growth profit realized on the transfer of extended warranty contract liabilities during the first quarter of this year.
With the other 110 basis points of improvement resulting from supply chain and manufacturing efficiencies. The increase in operating expenses from $34.7 million last year to $37.3 million this year relates mostly to increase to personnel cost as well as an increase in year-to-date outside legal expenses and outside consulting expenses, partially offset by a decrease and depreciation expense.
With regard to our guidance as we explained our two previous earnings call we expect the U.S. retail automotive market will grow this year which in turn will strengthen our domestic revenues. International revenues are expected to remain volatile particularly until the issue of Argentina’s trade restrictions is resolved.
For a full year 2012, we reaffirm our expectation that consolidated revenues will increase 3% to 7% over 2011. Domestic revenues are expected to be higher year-over-year positioning us for growth or international revenues are likely to remain quite lumpy quarter-over-quarter and down year-over-year.
In addition, we expect full year 2012 adjusted EBITDA as a percentage of revenue to be generally consistent with the percentage of achieved in 2011. With that our review I will turn it back to Randy.
Thank you Don. Since becoming CEO and President of LoJack, I have had the pleasure of talking with the great many dealers, the leadership of the largest dealer groups in the country, agents, our international licensees, certainly our law enforcement partners and consumers about what makes LoJack products so compelling and we can continue to improve on the mission that begun over 25 years ago.
As to what makes LoJack the premium stolen vehicle recovery solution on the market, I have repeatedly heard these words, safety, security and protection. These are the reasons we have an install base of 9 million LoJack systems in the market today and can tell a domestic recovery rate of more than 90% for cars and trucks and SUVs. That’s why we have relationship with literally 1000s of law enforcement agencies around the world, that’s why we have already started to expand our product portfolio to full advantage of these brand attributes.
It's been eight months since I have taken the helm of LoJack and I have to tell you based on my 30 years of experience in the auto industry, this assignment is pretty much playing out as I envisioned it would. I spent the first couple of months getting oriented with LoJack business, taking inventory of our people, our processes and of course our organizational help.
The first and second quarters of the year were spent getting out to meet our clients both domestically and internationally to strengthen relationships with key business partners who are absolutely critical to delivering in our near term business plan but additionally armed with good voice of customer feedback from my travels I spent a good part of the last few months assembling a realistic, strategic vision for LoJack that builds on the enduring value of our RF based stolen vehicle recovery business against the backdrop of other GPS based services that have struggled to match LoJack success in the stolen vehicle recovery space.
Now we are confident we have got a great product. Great integration with law enforcement, a strong distribution network and maybe most importantly a really strong brand. These advantages will allow us to expand the product offerings that will be linked to LoJack’s primary brand attributes of safety, security and protection. To that end we have begun the piling of the LoJack total recovery system which offers recovery assistance for your vehicle, your identity and your laptop. Additionally, we've recently appointed (inaudible) VP of Corporate Development and there will be a separate announcement going out that will details Doug’s experience but in this new capacity will be responsible for the development of our global market representation footprint, our products and technology collaboration with other companies and of course capital allocation along with Don Peck, our CFO.
I am also pleased to report that we have formerly launched a search for a cheap technology officer to advance LoJack’s efforts to continuously develop products and services, our customers want and value.
There is obviously going to be few more event driven quarters as we work under ordering patterns and country risks associated with some of our key licensees, fully develop our focus U.S. go-to market plan. In addition, we are working very hard to clean up outstanding legal issues. Before I close our prepared remarks this afternoon I would like to quickly run through some of the key tenants of the strategy that will drive our success going forward.
First, our new sales, planning and analysis team is providing greater organizational insight into the auto industry, its production, its inventory management, brand and name plate movement and of course in data that drives the financing and insurance offices. All this data will allow us to become a smarter and more nimble business partner.
Second, we are allowing our resources to drive volume with the largest US dealer groups; we're also looking to expand our relationships with agents. As I mentioned (inaudible) LoJack sales through agents grew 42% year-over-year in the second quarter, obviously far suppressing industry growth. The agent expansion program will provide us access to dealer groups who has not been selling during the past.
And third, we'll be increasing our integration with dealer partners as we develop systems and prophesies and make the training, purchasing, scheduling and installation of LoJack and our product offerings easy for our dealer partners and the consumer.
And fourth, expanding and strengthening of our international presence is an important component of growing the LoJack business.
In summary, the stuff we're taking to grow our domestic business combined with the continued stability of US auto market positioned us well for the future. Today, I'm apply the lessons learned over a three decade motor company and assigns both domestic and international to make LoJack a stronger, more successful company. Our customers, dealers and licensees have valued this to share, we are listening, we are implementing and we are growing. I look forward to continuing LoJack's leadership as a premeditate store vehicle recovery system and extending our global brand into exciting new products and services.
Now Don and I will be happy to take any of your questions. Thank you.
(Operator Instructions). The first question comes Bill Dezellem from Titan Capital Management.
Bill Dezellem - Titan Capital Management
Relative to Italy, I was a little bit confused relative to the growth in the subscriber base. Is that basically a pinpoint number of Q2 versus the end of Q2 '11?
It definitely is, Bill.
Bill Dezellem - Titan Capital Management
With that in mind, what was the new subscriber number in Q2 relative to Q2'11 and then also Q1 of this year?
This is Don Peck. As I mentioned in my comments, I don't know what the subscriber was, increased was the last Q2 but the end of period on to subscribers at the end of Q2 last year was 16,600 compared to 24,280 this year.
So that was the point I was making, just quarter to quarter.
Bill Dezellem - Titan Capital Management
I'm sorry. I was looking at it from the prospective of new subscribers in each of the three quarters, this one Q2 of '11 and Q1 of '12. Are those numbers that you have handy?
I don't have last year's, the net increase would be the difference between the two.
Bill Dezellem - Titan Capital Management
And then, in the second quarter you had personnel and consulting costs go up. Would you describe where are the personnel cost increases were and particularly what roles the consultants were playing that throw the cost?
Well I'll have to consult a one person about our personnel. On the consultant front, by and large it is on two fronts. One, to get a real good understanding of the telematics landscape as it relates to what I call the auto industry connected car, cargo and people tracking. So I think it was important as we look to our strategic plan and we had a good understanding of the size of those segments and what the growth opportunities look like in the future and certainly, how those segments will a fit for LoJack as it positions as a brand today and where we want to take it in the future. Beyond that, we also do some work on the actual, what I would characterize as business process work, interaction with our dealers and the consumer.
So that on the spectrum of people in the educational or learning phase, the actual transaction phase, buying the product at the retail level and specifically the F&I office and then of course the ownership life cycle and that was really important that we understood exactly what was going on and so that we learn by own phase of the customer interaction. So we obviously can work better, specifically domestically but also internationally with our partners on how we develop processes and we're truly customer driven. And not just through the lens of the dealer or the (inaudible) manager but through the consumer as well.
So I would tell you, those were the two big buckets of consulting expense and certainly we're looking at our internal systems as well and we've embarked upon some consulting expense there as we look at enterprise projects to update and improve our systems as we become a more data driven company.
On the headcount front, we went from 607 employees at the end of last year; we're now at about 620 with increasing five in sales and five in IT picking up the bulk of that difference.
Bill Dezellem - Titan Capital Management
And then the final question for now is Canada, wasn’t any reference to that market in the opening remarks. What insights can you share with us as to what's happening there?
Okay, the revenues were down slightly year-over-year about 13%. So they are still profitable and EBITDA positive. I would tell you Bill, Don and I both have been up there and met extensively with the Canadian team. I am comfortable with the leadership team there. I think there are a couple of things going on there. First of all, they are just starting to make inroads into the dealer part of the business and I would tell you that the difference there from a dealer perspective versus the US business is that, the (inaudible) model there probably doesn't exactly mirror the US model and its early days, but we are required really to train the dealers on the benefits of LoJack to the consumer that storm there for a recovery product versus LoJack as a product that really is viewed in its early stages as inventory lock protection. So it may not seem like a big distinction to the untrained eye but certainly as we go our dealer business, we're going to have to get out there and educate and train for starters the Quebec and Ontario dealers on the real economic benefits of LoJack as it relates to being a pure solo recovery product, not just inventory lock protection.
Bill Dezellem - Titan Capital Management
Thanks guys. I would like to follow up on that. Does that basically imply, is that you have more near term challenges in Canada because of that extra leg work that's required, but conversely once you get past this extra leg work, you are in fact it means that you will have more likely a bigger business and a business that you have more control over and I guess more ties to the dealers out there than you would in the US.
I would look at it this way Bill. I think it will definitely present us some opportunities to grow that business, there's no question. We're just scratching the surface in the dealer business beyond inventory lock protection. So there's defiantly some upside opportunity there. But I also think too as we streamline and add consistency to our go-to-market processes to have an approach that more closely mirrors the US business, I think is beneficial as we support Canada from our Cayman offices here to a mall that's, like I said, is much more aligned whether the way we go to market in the US as opposed to the way its constructed today. And I don't think that's a big leap honestly. I think we can get there in relative short order.
(Operator Instructions). The next question comes from Chris Owen from Plaisance Fund.
Chris Owen - Plaisance Fund
Just wondering if you could share how to sort of key highlight in accounts you referenced, have reacted to your approach of, I think you've had a pilot without any experience. I'm sure you talked to potentially another life players and I think you have seven million (inaudible) for the third quarter. Could you just talk about what they are telling you and what we should look for more trials or what are your milestones and penetrating those accounts?
I have a couple things. Like you said, in the first half of the year, I really have devoted a fair amount of time to getting out to talk to the very senior leadership of these organizations. So and I'll just take them off for you. AutoNation, (inaudible) SONIC, Asbury, Group One and I think that was some of the leadership team that had been entitled even though they sell the Skyland product today, they sold LoJack in the past, and I tell you the consistent theme is this. They view LoJack as a good tangible value add product in the F&I office and so as all those groups and I mean all of them, look to streamline the menus and their offerings in the F&I office, I will tell you that I didn’t get any negative feedback that these groups would not give LoJack fair consideration as we focus more specifically on growing the business together with them with the exception of (inaudible) as I said they've commenced to the Skyland product now. Doesn’t mean we built to comment on that.
But I will tell you this, our restructuring is going to allow us to get into the rhythm and strategic planning things of all these groups which for 2013 comes up here in a couple of months. But certainly we're not waiting to just get involved in their annual planning process to make a difference in the business there. The restructuring that really got launched last year is focused on making sure that we service those accounts on a more regularly timely basis and really get actively involved in training their people to present the value proposition of LoJack. And I think it's really important that specifically went out there to meet with the senior leadership of all those organizations because as I said in my opening comments, you start to taking off the top of those groups. Its 9% of the retail volume in the United States. So it's really important that we look to those groups and look to getting more consistency of performance across our networks. Because I just tell you in all honesty, there is no question that we have some dealers in their network that perform those at very, very high levels and some obviously not so much.
So our goal is to reduce that variability and to provide a measure of consistency to the LoJack training and the sales processes and as we've always also talked about become easier to do business with. We are just wrapping up the development of an integration project called Car Inc. which should develop help with the actual registration scheduling and installation of the LoJack units but I'm not really to tell you that we have absolute timing commitments here to launch that widespread across all those major groups. But certainly we've worked in conjunction with some of the largest DNF providers to develop this integration approach and ultimately that's our goal, is to be integrated into those large groups, systems and processes. So LoJack is a hard add as a product that needs to be scheduled and installed for the customer, doesn’t become an inhibitor in the F&I office. Quite frankly, it will be viewed as another touch point to surprise and delight the consumer. That's really our goal.
Chris Owen - Plaisance Fund
And then in terms of would you actually expect progress to manifest itself in trials or would it simply be more regulators blocking and testing?
So I would tell you for the remaining portion of the year, I've seen more improvements from as you said, and I think that right, blocking and tackling. Hopefully not with the fundamentals of the business. Longer term, I think it's becoming an integral part of the strategic planning process which by the way they've opened the door too. So when I say our foot's in the door, it's well in the door. The door is wide enough for us to become increasingly better partners with these large groups and as I said, I was very, very pleased with the response given to me and the leadership team as we personally call each one of these accounts.
Chris Owen - Plaisance Fund
And you called out several international geographies where you seem to have clear expectations and stabilization in the second half of the year and then Argentina, perhaps really the same, Brazil and South Africa. Could you just take a few moments to go through each of those and provide the background there?
I have every expectation that South Africa will deliver on the budget promises that we have in our plan. There's no doubt about it. We have started to conduct business with Brazil again, which is a good thing because certainly there is significant market demand there and then I would just throw in a couple of other markets. We've been pleasantly surprised by some of the volume coming out of Mexico. We think that's an opportunity to outpace our plan for that market. We've started to get some business from the UK which is going to surprise, against the backdrop of the other European markets that obviously are not doing so well based on what the car industry's at.
And the other issue obviously is Argentina and let me be real clear on this because I want to be transparent as I can be. We had no revenue in second quarter from Argentina. So certainly, our expectation isn't to have the year come and go without any revenue from Argentina. Our licensee there, we've been in close contact with. They've been winning conversations with the very highest levels of the Argentinian government. So we have confidence that in the back half of the year, we're going to bring in our international plan. Can't predict the timing exactly as Don characterized it. It's lumpy at best, but certainly based on the feedback we've been given from key licensees we're not walking away from our external guidance and Don, if you want to add anything.
Chris Owen - Plaisance Fund
You mentioned, enhancing corporate development and this technology aspect and should we read into that looking at new products and technologies or why are those necessary and…
This is what you can read into corporate development. We needed somebody in a group in this organization who can look at through our important work streams both domestically and globally. Do we have the right market representation footprint to grow this global brand and we needed somebody to study that in a meaningful way because it hasn’t been done in some time through LoJack. Secondly, I needed somebody to take a hard look at product cycle plan enhancement and development, both what we would develop organically and also what we would look at from what I would characterize as a collaborate initiatives with other technology providers. So we need really certainly to have somebody look at our product lifeline.
And last but not least, the third, key work stream for this person that will all be on conjunction with Don is really looking at capital allocation. So as we develop the strategic vision for LoJack, what we want to conduct business, what our product offerings look like. Certainly we need to look at our capital allocation and how we fund LoJack strategic vision as we go forward. Now is the really the primary reason for bringing some focus to the company and hiring somebody in the corporate development. And certainly on the cheap technology officer front. I just tell you that I think it's very important that we accept the fact in our own technology capabilities and our own PD factory; we don't have all the good ideas of the technology space rustle to the ground.
So certainly we’ve got good and capable people here. But I also want to have somebody in the cheap technology job who will sell on the changing landscape of technology, the other changing landscape of technology to make sure that we stay ahead of the curve and don't get myopia and just look internally and say, what are we developing here to meet the wants and needs of our consumers. We need to look outside of LoJack with the Best Buys of the technology space to make sure that we have somebody that can collaborate with those respective partners.
At this time I am showing no further questions, I would now like to turn the call back over to Randy
Well thank you all for your interest in LoJack. Certainly it's an exciting time for LoJack. We're bored by the fact that as a domestic industry continues to grow, we're bored by the fact as we believe we have strong distribution in the US and a strong partners that we can leverage, continue to grow our business and certainly we're staying very close to the international business to make sure that we bring in the LoJack business as consistent with the guidance that we communicate externally. So thank you for your time and we’ll talk to you soon. Thank you.
Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.