Universal Electronics Inc Q1 2008 Earnings Call Transcript

| About: Universal Electronics (UEIC)

Universal Electronics Inc (NASDAQ:UEIC)

Q1 2008 Earnings Call

May 7, 2008 4:30 pm ET

Executives

Christiana Pelz - IR, Lippert/Heilshorn and Associates

Paul Arling - Chairman and CEO

Bryan Hackworth - CFO

Analysts

John Bright - Avondale Partners

Steven Frankel - Canaccord Adams

Matt Kather - WR Hambrecht

Andy Hargreaves - Pacific Crest Securities

Jonathan Goldberg - Deutsche Bank

Operator

Welcome to the Universal Electronics First Quarter 2008 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded today, May 7th, 2008. I would now like to turn the conference over to Ms. Christiana Pelz. Ma'am, you may begin your conference.

Christiana Pelz

Thank you operator and good afternoon, everyone. Thank you for joining us for the Universal Electronics 2008 first quarter earnings conference call. By now you should have received a copy of the press release. If you have not, please contact Lippert/Heilshorn and Associates at 415-433-3777 and we will forward a copy to you. This call is being broadcast live over the Internet. A webcast replay will be available at www.uei.com for one year.

In addition, a telephone replay of this call will be made available for 48 hours, beginning approximately two hours after the conclusion of this call. To listen to the replay in the US, please dial 1-800-642-1687 and internationally 706-645-9291. Enter access code 42999604. Also, any additional updated material nonpublic information that might be discussed during this call will be provided on the company's website at www.uei.com, shortly after the call where it will be retained for at least one year. You may also access that information by listening to the webcast replay.

After reading a short Safe Harbor statement, I will turn call over to management. During the course of this conference call, management may make projections or other forward-looking statements regarding future events and future financial performance of the company, including the benefits the company expects as a result of the development and success of products and technologies, including new products and technologies and the company's home connectivity line of products and software, the recently announced new contracts with new and existing customers, and new market penetrations, the continued convergence of the company's technology and trends in upgrading Digital Media services such as DVR, IPTV and HDTV.

The company's continued sales operating income, net income and EPS growth, the ability to attract and obtain new customers, especially in Asia and the strength of the company's financial position. Management wishes to caution you that these statements are just projections and actual events or result may differ materially. For further detail on risk, management refers you to the press release mentioned at onset of this call and the documents the company files from time to time, with the SEC including the annual report on Form 10-K for the year ended December 31st, 2007. These documents contain and identify various factors that could cause actual results to differ materially from those contained in management's projections or forward-looking statements.

On the call today are Paul Arling, Chief Executive Officer and Chairman, who will deliver an overview and Bryan Hackworth, Chief Financial Officer, who will summarize the financials and then Paul will return to provide the vision for 2008.

Now I'll turn the call over to Paul Arling.

Paul Arling

Thank you, Christiana and welcome everyone. We continued our quest to build the world's best access and control technology within the home, to expand our foothold with customers, and to add key new customers, broadening our geographic reach. Our first quarter results have us on track to meet our 2008 full year guidance of revenue growth of 12% to 18% and EPS growth of 15% to 23%, compared to 2007.

During the quarter, we secured several contracts with customers, some of whom are currently requesting we withhold announcements. We also expect to unveil other exciting deals and new technologies and products over the remainder of this year, which will drive our growth in the second half of 2008 and beyond.

First, we are building deeper relationships with our existing customers to use our technology and products to help them grow as well. From the beginning of a relationship, we always evaluate means to expand our role to more product lines. We have been successful with this strategy in the past, with both the top consumer electronics companies and the subscription broadcasters. We have the opportunity with most of our customers to capture more of their business by demonstrating our technologically superior products and great service. The larger global electronics companies are leaders at the cutting edge of innovation and we work closely with them to help them maintain that edge by supplying a portion of their chips and or control devices for some or all of their products.

In the US, where we have been typically strong, we have secured a couple of significant deals with new and existing major subscription broadcasters that are expected to ship during the remainder of 2008 and are embedded in our guidance. We hope to provide more details later in the year. Also we expect to be shipping products to one or more customers here in the US for their solutions that support older televisions as the mandatory digital conversion deadline becomes a reality. We expect these boxes to be high volume and to start shipping in the fall.

For our second goal, acquiring new customers in historically strong regions, as well as expanding into new regions, we have also done well. This morning we announced our new relationship with Audiovox Accessories Corporation, the unit market share leader in the US retail market under familiar brands such as RCA and Acoustic Research. We will be Audiovox's exclusive provider of integrated circuits for all of their remote control devices, as well as develop its mid to high end products. In addition, Audiovox will manage our ONE FOR ALL brand in the North American retail marketplace.

We have also invested to grow our business internationally, which has been extremely successful. New customers this year include, Indovision in Indonesia, Kyway in the Netherlands, TV Cabo in Portugal and Orbit in the United Arab Emirates. These are just a few of the many opportunities that we have been working on. There are a number of subscription broadcasters in high growth regions across the globe that UEI is the ideal partner for and we expect to be talking more about our international developments in future announcements or conference calls.

The third goal is to continue to do what we do best, develop technologies and solutions to help users connect, control and interact within the home. We are recognized as a leader in industry innovation and our goal is to maintain that position and reputation by continuing to develop a broader array of highly functional products that are easier to set up and use than any product on the market and at price points that make them available to the widest possible consumer base.

The products we are developing incorporate both wired and wireless technologies. We will provide more details on them throughout the year, but I can now put our products and services in perspective for you. UEI has been a solution provider since the beginning. We started off developing universal remote controls to enable the operation of multiple devices in the living room. First the TV and set-top box, but over the years UEI has grown to AV receivers, CD and DVD players, HD set-top boxes and Blu-ray players, in fact, anything that enters the home that can be wirelessly controlled.

Of course, each of these versions and each manufacturer or subscription broadcaster requires a wireless control device with its own unique set of functions. Our goal is to bring order to this chaos for the consumer and continue to lead innovation associated with the ever changing home environment. We are excited about the opportunities that we have this year and also the longer term potential of how our industry leading technology can further simplify an ever more complex home. While we do recognize potential economic concerns and the uncertain effect on our industry in the near term, the trend of the global consumer transition from analog to digital, the adoption of Hi-Definition and DVR technology, and the general adoption of digital entertainment technologies worldwide are clear and powerful.

For example, according to In Stat and SNL Kagan Databook, digital cable TV subscribers worldwide are projected to increase by 355% from $44 million at the end of 2005 to $200 million in 2012 and with HDTV the growth is also astounding. Informa Telecoms and Media projects worldwide households with HDTV will triple between 2006 and 2011, increasing from 50 million to 151 million households. Considering these trends, we believe the opportunities for UEI are and will continue to be substantial.

With that, I'll turn the call over to Bryan Hackworth, our CFO, to lead us through the financial discussion. Bryan?

Bryan Hackworth

Thanks, Paul. Net sales for the first quarter of 2008 were $61.2 million, slightly below our guidance of $62 to $65 million. Business category revenue was $48.3 million within our guidance of $47.5 to $50.5 million. Our consumer category revenue was $12.9 million, just below our guidance of $13 to $16 million. Gross profit for the first quarter was $21.7 million or 35.5% of sales compared to guidance of 35.5% of sales plus or minus one point. R&D expense was $2.2 million, consistent with R&D spend in the first quarter of 2007. Total operating expenses were $19.1 million for the first quarter of 2008, within our guidance of $18.9 to $19.5 million.

The 2008 first quarter operating expenses included approximately $1 million of employee stock-based compensation expense, compared to $600,000 in the first quarter of 2007. Interest income for this year's quarter was $896,000 compared to interest income of $588,000 in the first quarter of 2007, reflecting a higher cash balance and a higher interest rate. The effective tax rate was 34.3% within our guidance of 33% to 35%. Net income for the first quarter of 2008 was $2.5 million or $0.17 per diluted share compared to $4.6 million or $0.31 per diluted share in the prior year's quarter.

Turning to our balance sheet review, we mentioned on a previous call that we would aggressively buyback shares in the first quarter of 2008. In the first quarter, we repurchased 500,000 shares for $11.5 million for an average price of $22.91 per share. Including this repurchase, we ended the quarter with cash and cash equivalents of $83.4 million. DSOs were 79.2 days on March 31st, 2008, compared to 69.4 days at March 31st, 2007, due primarily to some of our significant customers extending the time they pay us.

Net inventory turns were 3.7 turns at March 31st, 2008, compared to 6.4 turns at March 31st, 2007, due primarily to increased inventory levels required to support new customer wins and our increased share with existing customers. We expect inventory turns will improve through the remainder of the year as sales volume builds with these new and existing customers. Additionally, we have increased safety stock levels of certain high running products in order to keep air freight costs to a minimum.

And now for our guidance. As stated in the previous call, with the exception of 2007, which was an anomaly due primarily to the July, 2007 OCAP deadline, first half sales have historically ranged from the low 40s to the mid-40s and the second half of the year from the mid 50s to the high 50s as a percent of annual revenue. In 2008, we expect more traditional seasonality. For the second quarter of 2008, we expect revenue to range between $69 million and $72 million compared to $71.5 million in the second quarter of 2007.

We expect business category sales to range from $54 million to $57 million and consumer category sales to range from $13.5 million to $16.5 million. We anticipate margins for the second quarter of 2008 will be approximately 35% of sales plus or minus one point. Second quarter operating expenses are expected to be between $19.8 million and $20.4 million, including employee stock-based compensation expense of approximately $800,000. The tax rate is expected to be between 33% and 35%. GAAP EPS is expected to range from $0.23 to $0.27 per diluted share, which compares to $0.31 per diluted share in the second quarter of 2007.

For the full year 2008 guidance, we continue to expect total revenue to range between $305 million and $322 million, which reflects growth of 12% to 18% over 2007 revenue of $272.7 million. Business category revenue is expected to increase 8% to 15% and consumer category revenue is expected to increase 12% to 40%.

Operating expenses are expected to be between $79 million and $84 million. The tax rate is expected to range from 33% to 35% of pre-tax income, resulting GAAP EPS between $1.53 and $1.64 per diluted share. This compares to $1.33 per diluted share for 2007, or 15% to 23% growth. Our guidance includes the Audiovox agreement announced this morning.

I'd now like to turn the call back to Paul.

Paul Arling

Thanks Bryan. Our strategy and execution are very consistent. We thrive by focusing on building the world's best wireless access and control solutions, enabling consumers to easily and affordably control the chaos in a more complex home. On prior calls, we have reviewed our intent to continue to drive our business forward, earning more new customers, delivering break-through control solutions for consumers, expanding our presence globally, and of course, delivering on our financial commitments.

Today I repeat that message. For more than 20 years, we have been successfully serving our business in consumer category customers through various industry and economic cycles. During these cycles, strong companies get stronger. We continue to earn long term relationships with the leading companies in the industries we serve. This hard work has translated into performance. Over the past nine years, we have grown our revenue at a compound annual growth rate of over 12% and for the past five years more than 20%.

The team of people we have at UEI has never been more talented, our market position in the industries we serve has never been better and the products and technologies we're working on, many times with the direct involvement of our customers, has never been more exciting.

Finally, it's a pleasure to note that in March, Forbes.com recognized UEI as one of America's most trustworthy small cap companies for the second year in a row. In addition to Forbes naming UEI one of the 200 Best Small Companies in America, also for two years running.

In summary, we are continuing in our mission to provide everyone the ability to wirelessly connect, control, and interact within their home. We are looking forward to a great 2008. Stay tuned. We'll now open up the call for Q-&-A. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from the line of John Bright of Avondale Partners.

John Bright - Avondale Partners

Good afternoon, Paul.

Paul Arling

Hi, John.

John Bright - Avondale Partners

Hey, guys. Pretty exciting announcement this morning on Audiovox, Paul, can you tell me a little bit more about, there seemed to be more than just one component to it. There seemed to be the chip component to it. There also seemed to be more of the retail component to it. Is this replacing something that already existed or is this something brand new on the retail side and maybe flush it out a bit. I know you mentioned a market share leader for the family of universal remotes in North America, but if there is any terms you can give us or any maybe units you can give us, that would be helpful as well.

Paul Arling

Sure. There are many elements to it. It replaces only one thing that we had a distribution agreement with Computime to distribute the ONE FOR ALL brand in the US and we have transferred that distribution right to Audiovox. So in North America, Audiovox will be distributing the ONE FOR ALL brand, but in addition to that as you pointed out, they have agreed to use our chips exclusively in their remote control products across all of their portfolio of brands, which includes as I mentioned RCA and Acoustic Research and we're also developing along with them mid to high end product that will be introduced in future periods and we'll probably talk more about that as those future periods come about, products that will be sold into the North American market.

John Bright - Avondale Partners

Mid to high end, is there a price point that you would use to describe mid to high end?

Paul Arling

No. Not one that we're willing to talk about right here, but just say anything in any price range is fair game.

John Bright - Avondale Partners

Okay. And then the really exciting piece on it, Paul, that I saw was the market share leader in North America for the Audiovox family. This is a unit, I think we're talking about right now in number of units, is that fair probably to say?

Paul Arling

Yes. There is unit market share leader. They sell more universal remote controls in the US retail after market than any other company.

John Bright - Avondale Partners

Any specific relationships they have on the retail channels that you can note right now that would be, their big distribution channels?

Paul Arling

Well, they're everywhere.

John Bright - Avondale Partners

Yes.

Paul Arling

Audiovox sells to every major retailer in the United States. They've been at it -- predecessor company Thompson under the RCA and other brands, obviously has been at this for a long time. They are the leader in this market and we think for us it's a significant relationship that we've built with them, a partnership agreement really that where we're combining the best of both companies. We're developing industry leading product for them and selling them our embedded technology in the form of an IC for their entire product line. So we're really excited about it not just for this year but obviously next year and beyond.

John Bright - Avondale Partners

Terrific. The other question, you mentioned the FCC deadline coming up, you're going to be shipping some high volume boxes in the fall time period. If I combine that with Audiovox, does that give some of the reasoning behind the more seasonality in '08 than you've seen in historic years?

Paul Arling

Sure. It does contribute to Q3 and Q4 this year, both of those will.

John Bright - Avondale Partners

Are there other reasons for the more seasonality in 2008 than we might have seen previously?

Paul Arling

Well, yeah -- look, we view last year as if you look at the last 10 years, really last year was the anomaly as Bryan pointed out, slightly more than half our sales occurred in the first half last year, which has never happened.

John Bright - Avondale Partners

Right.

Paul Arling

We've had many years over the last six where and again as Bryan pointed out in the low 40% range, 40% to 45% of our annual sales were sold in the first six months of the year and then 55% to 60% were sold in the second half of the year. So, we don't really view this year as the anomaly, it's really last year that was the anomaly.

John Bright - Avondale Partners

Final question, Bryan. You mentioned DSOs ticked up just a bit from some customers extending their terms. Anything concern you on them extending their terms?

Bryan Hackworth

No. I think right now is a tough environment. The economy's -- we're in a tough environment, I think in tough times people hold onto their cash a little longer. So if you're referring to bad debt, I'm not worried about it at all. These are large customers that we've had a long history with. We've never had bad debt issues related to them and I don't expect to be that debt issues in the future, so, they're holding onto their cash a little longer but I expect the DSOs to return to a more normalized level relatively soon.

John Bright - Avondale Partners

Terrific. Gentlemen, thank you.

Operator

Your next question comes from the line of Steven Frankel of Canaccord Adams.

Steven Frankel - Canaccord Adams

Good afternoon. If I look at your guidance, it seems to imply meaningful improvement in gross margins in the back half of the year. Is that from this incremental business from Audiovox or is there something else that will drive gross margins higher in the back half?

Bryan Hackworth

Yes, this is Bryan. I wouldn't say the gross, we don't expect the gross margins to increase significantly. I would say we expect the operating margins to increase significantly. So, right now we are very -- as we’ve stated earlier the back half of the year we expect large or high revenue growth and you look at our operating expenses, the majority of them are fixed. So as we expand our sales in the back half and SG&A is fixed, a high percentage of those sales are going to fall to the bottom line. So, we expect significant operating margin expansion in the back half of the year.

Steven Frankel - Canaccord Adams

And could you give us a peek into what the inventory levels are like in the subscription broadcast customers in the US? You've been through some whip sawing in that market. Where do you think you are now?

Paul Arling

Well, unfortunately we don't have EDI or any other form of electronic measurement of the inventories. It's only through communication with the customers, but our general belief is that they are back to nor normalized levels and the ordering patterns have returned to I guess what you would call a more normal situation. Last year about this time as we pointed out in prior calls, the ordering was fast and furious. Some of it driven by the OCAP deadline and so the inventory levels were built up prior to the July time period, but there is no such event this year that would cause that strange pattern. So the ordering levels are back more to a normal level and from what we can glean the inventory levels are back to more normalized levels as well.

Steven Frankel - Canaccord Adams

And have you started shipping to your recent wins in Asia or those are still to come in the

back half?

Paul Arling

No, we have. We've started to ship to some of the wins in Asia and others we will begin

shipping in the relatively near future here.

Steven Frankel - Canaccord Adams

All right. Thank you.

Operator

Your next question comes from the line of Matt Kather of WR Hambrecht.

Matt Kather - WR Hambrecht

Hi, guys. Bryan, just a couple of housekeeping things up front. On the share count, can you just tell us what's included in the guidance given the buyback that you completed in the quarter, kind of where you are and --

Bryan Hackworth

Sure. In Q2 we used 14.6 million shares.

Matt Kather - WR Hambrecht

Okay. So I had written down you guys are estimating 14.8 million as the average for the year so that still holds or has that changed?

Bryan Hackworth

That's correct, 14.8 for the total year and we said 14.6 for Q2.

Matt Kather - WR Hambrecht

Okay. So the reason that EPS guidance doesn't change is this half a million shares was basically factored into your guidance when you gave it originally?

Bryan Hackworth

That's correct.

Matt Kather - WR Hambrecht

Okay, cool. On the FX, see a nice huge pop in your cash balance, maybe could you just update us on, hopefully you're not speculating this is just some great international revenue starting to flow in but $5 million translation in the quarter, have you repatriated a lot of this and do you expect as international revenues start to increase that you're going to have a lot more FX exposure?

Bryan Hackworth

Well, we do repatriate each year. We have a transfer pricing agreement between our foreign offices and the US, so each year we do repatriate it and last year we repatriated about $10 million. The FX that you're referring to, what happens is we have a pretty sizable cash balance in Europe, so as the dollar weakens versus the Euro, then the cash balance increases and that dealt actually runs through equity. It doesn't runs through the P&L, it runs through equity, so -- but it does affect the cash balance.

Matt Kather - WR Hambrecht

You're not hedging at all?

Bryan Hackworth

We hedge the balance sheet for the P&L exposure. So we do hedge against the P&L exposure. We don't hedge against the equity exposure.

Matt Kather - WR Hambrecht

Okay. And the CapEx pickup, you guys are pretty steady. Thank you for the cash flow statement, by the way. We haven't got that in the past on the press release side is. You've been pretty steady around $1 million CapEx about a quarter actually $2.5 million now. Is this related to specific programs or the international offices just a little bit more color on where you're spending this money.

Bryan Hackworth

Sure. Throughout the year as you know we've grown significantly and our current office in Cyprus we outgrew. So rather than move we ended up expanding the building a bit and it was about $1.5 million to $2 million that's the majority of it.

Matt Kather - WR Hambrecht

So that's just a one quarter thing you see it more returning to sort of normal range the rest of the year?

Bryan Hackworth

That's correct. Then the one other item we do have in the back burner is we are upgrading our European system but it will be much less than that, but we are in the current stage of upgrading our European system, but again it's much less than the build-out.

Matt Kather - WR Hambrecht

Okay. And, Paul, for you guys have, congratulations on Audiovox and some of the announcements you've made. You've also mentioned that, in the US specifically there's some new subscriber. Do you expect to be able to announce wins that are already factored into your guidance by the end of the second quarter or might it not be till later in the year?

Paul Arling

Yes. Well, it depends. I hate to answer the question that way, but it all depends. Customers sometimes wish for us to not say anything at all. Other times they wish for us to not say anything until products are actually shipping for obvious reasons. They don't want anything to leak about their new products, which we're completely respectful of. I think the most important thing is that we have the customers in-house and our product development people and engineering people are working hard on getting these products ready to deliver them. So, as customers will allow us, we hope to through the rest of the year Q2, Q3, Q4, be able to announce some of the exciting things that are going on.

Matt Kather - WR Hambrecht

Okay. All right, thanks a lot. Nice job.

Paul Arling

Thanks.

Operator

Your next question comes from line of Andy Hargreaves of Pacific Crest.

Andy Hargreaves - Pacific Crest Securities

Hey, guys.

Paul Arling

Hi, Andy.

Andy Hargreaves - Pacific Crest Securities

So it seems like everything is pretty much in line with what the expectations were. Was there anything in the quarter in terms of customer wins or pipeline buildings that you didn't expect going in?

Bryan Hackworth

No, I'd say, I agree with your statement. I mean really the story in Q1 was really the same as it was during our last conference call, not much has changed. We believe we're on pace to hit the 12% to 18% top line growth as well as the 15% to 23% bottom line growth. So, the customer wins that Paul mentioned earlier as well as the share expansion and the conversion of analog to digital out in the back half of the year, that's going to propel our growth and we feel like we're positioned well.

Andy Hargreaves - Pacific Crest Securities

Okay. And then in the US, is it more than one new customer that you guys have signed

on the service provider side?

Bryan Hackworth

Well, no. On that we're actually talking there about not just new, but also expansion of relationship with existing customers. So there's a little bit of both of those.

Andy Hargreaves - Pacific Crest Securities

Okay. Is more than one of them brand new?

Bryan Hackworth

There may be more than one brand new, yes.

Andy Hargreaves - Pacific Crest Securities

Okay. And then only other thing, can you give us any commentary on the CD product line? How's that doing relative to your expectations?

Paul Arling

Sure. It's doing real well. In fact, we expect good sales, as you saw the guidance for Q2 was a significant up over prior year Q2. Part of that is due to CD and part of it's due to our ONE FOR ALL sales in Europe. So, both of those are doing quite well.

Andy Hargreaves - Pacific Crest Securities

Okay, thanks.

Operator

(Operator Instructions). Your next question comes from the line of Jonathan Goldberg of Deutsche Bank.

Jonathan Goldberg - Deutsche Bank

Hi, guys.

Paul Arling

Hi, Jonathan.

Jonathan Goldberg - Deutsche Bank

I was hoping you could just give us a little bit more color on sort of bigger transitioning geographically in the business segment. So in the US, I was hoping you could talk about what's going on with subscription TV broadcasters? They've been putting in some pretty good recent numbers recently, defying expectations. What do you attribute that to? Are you seeing them continue their heavy promotion of HD and what not, and also I was hoping you could give us some more detail on what's happening in Europe?

Paul Arling

Sure. Yeah, we think that the consumer is looking for things like HD and DVR and therefore it combined with the subscription broadcaster promoting those, now it's obviously led to growth in the operators themselves, but as we've said for a while now, we believe that the US consumer isn't the only one who's going through this change from analog to digital and then once you have digital, from that to Hi-Definition and DVR and other digital entertainment technologies. So, we're beginning to see that this is not just occurring here in the US, the upgrade cycle, there's an upgrade cycle in various countries across the globe and there's also countries that are just getting started with subscriber acquisition and usually, subscription broadcaster starts with half a million subs and a lot of these will grow to our expectation is that they'll grow from a half a million to 2 million and then 2 million to 8 million. That's pretty much how it's happened as we've seen witnessed here in the US over the last twelve years.

So, we have a presence in most areas of the world now. We have established sales offices in India and Singapore and Hong Kong and of course, have a longer presence in Europe and as I mentioned on the call, wins in Portugal and the Netherlands, the largest cable operator there. We're active in every country, looking for to become the solution provider for the subscription broadcasters in these various countries and we think it's exciting because again it's a little bit different in each region. Some are about new subscriber acquisition and others are about upgrades, but it all leads to the same thing, which is the need for wireless access devices which we can certainly provide.

Jonathan Goldberg - Deutsche Bank

So, are you seeing carrier promotion activity pick up, steady, decrease in the US and historically is that -- can you track that in your results? Does it have a lag impact, if any?

Paul Arling

Yeah, we don't really track that all that closely, of course we talk to customers about their promotional activities because they usually will order in front of obviously much like at retail. They'll order in front of the promotional activities, but I just think there's a latent demand for these things. People go to retail and buy the new 1080P television and they're likely to want to upgrade to provide a 1080 signal to that new 1080P television. So, I think promotion helps, but I also think just the drive towards the new televisions help.

Jonathan Goldberg - Deutsche Bank

Okay, thank you.

Operator

There are no further questions at this time. Please proceed with your presentation or any closing remarks.

Paul Arling

Okay. In summary, we've obviously been hard at work closing important deals and increasing our market penetration. As such, we're on track for another record year in revenue and earnings and we look forward to talking to you guys soon and of course, on the next conference call. So thank you very much for participating today.

Operator

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation, and ask that you please disconnect your line.

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