SoftBrands, Inc. F3Q08 (Qtr End 06/30/08) Earnings Call Transcript

Soft Brands, Inc. (SBN)

F3Q08 Earnings Call

August 6, 2008 5:00 pm ET

Executives

Gregg Waldon – Chief Financial Officer

Randy Tofteland – President, Chief Executive Officer

Analysts

Eric Martinuzzi – Craig-Hallum

Joe First – First Associates

Presentation

Operator

Welcome to the SoftBrand third quarter fiscal 2008 earnings conference call. (Operator Instructions) Our speakers today are Gregg Waldon, Chief Financial Officer and Randy Tofteland, President and Chief Executive Officer. After the formal remarks, there will be a question and answer session.

Now, I would like to turn the call over the Gregg Waldon.

Gregg Waldon

Thank you for joining us today as we discuss our third quarter fiscal 2008 financial results which were announced in a press release after the market closed today. I'm Gregg Waldon, Chief Financial Waldon of SoftBrands and with my on the call today is Randy Tofteland, Chief Executive Officer.

Randy and I will make some prepared remarks regarding our third quarter performance and then take your questions. The call today is being webcast. We are accompanying our comments with some slides so if you are listening to the call by phone only you may want to sign on to the webcast to see the slide presentation. Just go to the investor portion of our website and Softbrands.com to sign on.

All statements other than historical facts included in our remarks regarding future operations are as of today, August 6, 2008 and are subject to the risks inherent in predictions and forward-looking statements. These statements are based on the beliefs and assumptions of management at SoftBrands and on information currently available to us. Nevertheless, these forward-looking statements should not be construed as a guarantee of future performance. They involve risk, uncertainties and assumptions identified in filings by SoftBrands with the SEC and we encourage you to review the risk factors in these filings.

As such, we expressly disclaim any current intention to update this information prior to release to our fourth quarter fiscal 2008 financial results. I'd now like to turn the call over to Randy.

Randy Tofteland

We are very pleased with our third quarter results. We posted our highest revenue quarter ever. We delivered solid operating income and delivered $5.5 million in EBITDA. I really want to thank our employees for driving sales while keeping a keen eye on costs and allowing up to produce these solid results.

From a revenue standpoint, our hospitality business had an outstanding quarter benefiting from the large projects we have underway with Red Roof Inns. In this quarter, both our businesses contributed to our operating profitability while at the same time we were able to significantly reduce our G&A costs.

We also announced the appointment today of Jo Masters to the position of Senior Vice President and General Manager of Hospitality. I'll talk more about that in a moment. But with that, let me turn it over to Gregg.

Gregg Waldon

Our third quarter financial results met our expectations for revenue growth. Total revenues in the third quarter were $27.4 million, and increase of 16% compared with $23.6 million in the fiscal 2007 third quarter. Revenue in our manufacturing business was $12.5 million compared with $13 million in last year's third quarter and representing 46% of total revenue.

Hospitality delivered $14.9 million of revenue for the quarter, a significant increase compared to $10.6 million in the prior year's third quarter. Hospitality's third quarter results include significant revenue for projects underway for Red Roof Inns. The accounting treatment for Red Roof Inns is on a percentage of completion basis so we expect variability in how revenues and costs are recorded on a quarterly basis.

We currently have three ongoing contracts with Red Roof Inns. As of June 20, 2008 these first three contracts are over 40% complete which combined represented approximately $10 million of total revenue when completed. The fourth contract which we anticipate signing in the December '08 quarter represents approximately $5 million in total revenue which makes the entire project valued at approximately $15 million as we disclosed in our prior conference call.

As we have said before, most of our large contracts in the hospitality group use percentage completion accounting. Because of this in the fourth quarter, we expect our hospitality revenue to decline on a sequential basis as a result of timely revenues from these large contracts. That said, we still expect our hospitality business to deliver solid results in the fourth quarter and to post double digit revenue growth for the year. From a revenue mix perspective, license revenue was 16% of third quarter revenue, a decrease from 18% in the prior year period although flat from the prior year in absolute dollars.

Third quarter revenues for professional services increased sharply as a result of large implementations that are underway in our hospitality business and growth in the large enterprise area of our SAP business. In total, about 79% of our revenue came from maintenance and professional services in the quarter which is expected to have a high degree of predictability in the near future.

Approximately 52% of total revenue came from maintenance revenue in the quarter compared to 61% in the same period last year. Our maintenance revenue and manufacturing declined from 8% in the prior year quarter. This year over year change looks more dramatic than it actually is since the prior year quarter included a change in how we priced and bundled certain support renewal offerings and the timing as to how we recorded the revenue.

Essentially, some of our base customers were given an option on the support renewal offering in January 2007 with the ability to consummate this renewal offering through April 2007. Because of this, we recorded approximately $.4 million in catch up support in the June 2007 quarter. As a result, our maintenance revenues in manufacturing were slightly lower than the second quarter of 2008, and on a year to date basis are down about 3% which is acceptable for our Legacy business.

The SAP business makes up a small portion of our total overall maintenance revenues but as we mentioned last quarter, we anticipate that the total revenue growth of the SAP business will offset our base business revenue attrition in late fiscal 2009.

Our maintenance revenues in hospitality were up nearly 10% compared to third quarter fiscal 2007 due to the contribution of support revenues from large hospitality transactions. As a result of this growth our total company maintenance revenues were essentially even with the fiscal 2007 quarter.

Total gross profit was 63% for the quarter, an increase from 59% in the same quarter of the prior year. Our gross margin for license revenue was 88% in the current quarter compared with 79% in the third quarter of 2007. Our gross margin for maintenance was 73% up slightly from 72% in the same quarter of the prior year while gross margin for professional services was 41% up sharply from 3% in fiscal 2007 third quarter.

Our hospitality group was the largest contributor to this margin increase as it posted a significant boost in the services margins which were over 50%. This is the result of the Red Roof Inn contract and significant third party services work, personnel utilization on some of our larger contracts such as Navy Lodges and outside referral fees. Our hospitality services margins are expected to range from 30% to 35% over the next several quarters.

Let me turn to our operating expenses. Overall, our operating expenses excluding the restructuring costs declined about 2% in absolute dollars and over 7% as a percentage of revenue from the prior year quarter. Sales and marketing expense was $4.6 million in the quarter, a decrease of 14% compared to the prior years quarter and down about $4 million on a sequential basis. Most of the decrease related to the lower selling expense.

Our goal for fiscal 2008 is to hold sales and marketing expense in the 19% to 21% range and through the third quarter, we are just under 20%.

R&D costs of $4.3 million in the quarter are up $.9 million on an absolute dollar basis compared to the prior years quarter and represent 16% of revenue as a result of higher research and development expenses in our hospitality business as we communicated in our last conference call. R&D expense in the third quarter was slighter higher than our spending level in our second quarter and we anticipate a similar level of spending in the fourth quarter.

We expect the level of R&D expenditure in fiscal 2008 to be at the high end of the range of 15% to 17%. In fiscal 2009 we plan to dial back our R&D spending. To help offset these increased R&D costs in fiscal 2008, we are watching our overall company expenses closely in the fourth quarter.

G&A was $4.6 million in the third quarter or 17% of revenues, a decrease from the prior year quarter. G&A benefited from lower contract expense and professional services fees. Our goal for fiscal 2008 is to have G&A at approximately 21% of revenues which is where we are at on a nine month basis.

Our GAAP operating income for the June quarter was $3.8 million or an operating margin percentage of 14% which is the highest percentage we have had as a company. Our non-cash expenses for the quarter were 123 stock based compensation expenses of $.4 million, amortization of intangible expenses of $.8 million and depreciation of $.3 million.

SoftBrands posted operating income of $3.8 million in the third quarter compared to an operating loss of $.4 million in third quarter fiscal 2007 which included restructuring charges of $1.6 million in our manufacturing business.

Looking at our two businesses, manufacturing generated operating income of $2.7 million in the current quarter and hospitality generated an operating income of $1.1 million. We don't expect to repeat this level of operating income performance in the fourth quarter primarily due to the scheduled services to be provided and the resulting impact from our accounting for our large percentage of completion hospitality contracts, and the expectation of a higher mix of third party revenues.

We recorded a tax provision in the June quarter of $3.2 million. Based on our current forecast for the remainder of fiscal 2008, we anticipate that our full year tax provision will be approximately $2.2 million, almost all of which is anticipated to be a non-cash expense. Because of how we use our NOL carry forwards and the effects of valuation allowances on good will due to acquisitions, there will be a significant change in our quarter to quarter tax provisions or benefits and therefore significant fluctuations in our overall effective tax rates. Our effective tax rate on a more normalized basis will be approximately 38%.

We completed the current quarter with a net loss available to common shareholders of $.1 million compared to a net loss available to common shareholders of $2.1 million for the same period of the prior year. The loss for basic and diluted common share was zero compared with $0.05 per share loss in the prior period.

This slide shows EBITDA results for the quarter as calculated per our Wells Fargo Foothill financial covenant. This covenant is calculated on a rolling 12 month basis. SoftBrands credit agreement with Wells Fargo Foothill requires us to maintain specified financial ratios and satisfy other financial condition tests. We delivered approximately $5.5 million in EBITDA this quarter and on a rolling 12 month basis we are at $11.9 million which is approximately $7.9 million above our EBITDA covenant.

We forecast on a monthly basis which updates our estimates for revenue and operating income for all of fiscal 2008. Based upon our most recent forecast, we currently believe that we will be in compliance with all of our covenants for the September quarter.

Looking at the balance sheet, we ended the quarter with $12 million in cash and cash equivalents, an increase from $9.4 million at the end of the second quarter. Our cash provided by operations for the nine months ended in June 2008 is estimated to be $2.0 million compared to cash used by operations of $.9 million in the same period in the prior year.

Our accounts receivable balance of $24.5 million, an increase from $22.8 million on March 31, 2008 was due primarily to the substantial revenue increase in the quarter. Our collections team continues to make good progress in collecting our aged accounts receivable balances.

Our deferred revenue was $26.6 million at the end of the third quarter, a decrease of approximately $3 million from the end of the second quarter which is to be expected for SoftBrands as most of our maintenance renewals are in the March quarter. With that, let me turn it back to Randy to provide additional perspective on our financial performance and outlook.

Randy Tofteland

Before I review the performance of the hospitality business, let me review with you the announcement we made today about a new leader for our hospitality business. Jo Masters, who is currently General Manager of our hospitality business here in the America's, has been appointed Senior Vice President and General Manager of Hospitality. The appointment is effective on October 1, the first day of our new fiscal year. She takes over the post from Steve VanTassel.

Over the past months it has become increasingly clear to both Steve and I that the leader of the hospitality business should be based in Lake Forest, the main office for the hospitality business. Steve was not able to move to California and as a result, we began an internal search for his replacement. Jo brings a strong hospitality background to this position and an extensive knowledge of the complexity of our global commercial business. She has been with SoftBrands for eight years and I am confident she will be a strong leader for this dynamic, growing business.

As Gregg mentioned, our hospitality business delivered a very strong performance in the quarter both from a revenue and a profit standpoint. As we highlighted on our last call, we are working with Red Roof Inns to provide them with a full suite of products for their 325 hotels. This will be our largest deployment of our epitome and core products to date. When the project is fully completed, it is expected to generate more than $15 million in revenues for SoftBrands.

We have delivered on the first major milestone for Red Roof Inns, a customized, centralized accounts receivable functionality and business intelligence application. These applications have been deployed into Red Roof Inns production environment and are expected to go live shortly. The business intelligence functionality provides Red Roof Inns management the basis reports used to run their business.

The accounts receivable solution is new and was built from scratch. It allows greater flexibility in gathering and presenting information on customer spending at their hotels. Roll out of our core central reservation system is expected to occur in the first part of calendar year 2009.

Our development team has done a great job for Red Roof Inns. The project has gone extremely well as our company cultures are a good fit and both teams are committed to the success of this project. The final phase of Red Roof will be implementation of our Epitome property management system which is scheduled to start in 2009.

We made substantial progress in the quarter rolling out our Epitome solution at Navy Lodges. We rolled out 14 properties in the third quarter and are now about 86% complete on our PMS roll out. As you may recall, we entered into this contract in fourth quarter of fiscal 2007 to deploy enterprise software across Navy Lodges worldwide lodging operations, which are civilian like hotel accommodation for members of the U.S. Navy.

Another key project in the U.K. market is also well underway. We have started the first two phases of the [Devere Venues] project which represents the first U.K. based hotel group to deploy or core epitome and Emerald point of sale, or POS products. The initial part of the project focuses on implementing our Emerald POS system and our core central reservation solution across their 28 properties.

Part of the reason for our strong revenue performance in the quarter was a result of incremental product sales to our customer base. In addition to our third party revenues, we're up strongly as we are gaining traction in our POS and CRM solutions, and we continue to have success in the Boutique Hotel market with our Epitome product. [Kenton Hotels] is a good example of this type of customer which originally deployed Epitome at 35 properties and has now grown to more than 45 properties.

In June, we attended a hospitality businesses most important trade show of the year, HITECH or The Hospitality Industry Technology Exposition and Conference. At the show, we announced the scheduled new releases of our core and Epitome solutions which will be available in the third quarter of the calendar year. Core CRF's version 2.7 will include a re-engineered call center application, an improved wait list management feature and improved room selling tools.

Epitome version 4.03 enhancements will include improved guest invoice management and user permissions and customizations for our military client base. Our development organization in hospitality is performing well as we have increased funding for product development, product management and quality assurance. Our R&D in hospitality is up 40% year over year and we are making good progress on improving the scalability and stability of our Epitome and core products to meet the needs of complex hotel groups.

In fiscal 2009 our spending will be lower on a percentage basis. So in summary, we expect a strong year for our hospitality business in terms of revenue growth and the business is trending in the right direction in terms of profitability. But one of key goals going forward is to improve the profitability of this business.

Now let me turn to our manufacturing business. Our manufacturing business delivered a strong quarter in terms of margins and operating income, its strongest performance of the fiscal year with both our base business and SAP business contributing to the operating income increase. The good operating performance is a result of the restructuring actions we took 12 months ago and much improved consulting.

Our manufacturing business posted a revenue decline in the third quarter as a result of soft license revenues and the comparison against the strength of the prior year quarter. In third quarter fiscal 2007, our maintenance results benefited from price increases we implemented.

We are pleased with the revenue we are generating with our SAP business which is consistently growing quarter to quarter but we did not deliver to our expectations on license revenues this quarter as several deals slipped into the fourth quarter, but our consulting revenues were strong, the majority of which were in the large enterprise implementations.

Our expanded partnership with SAP has already resulted in a significant increase and large enterprise leads and current opportunities. As I mentioned on our last call, the partnership includes shared performance goals and commitments by both parties to pursue an SAP centric solution at the plant level with large SAP customers.

Our channel business is growing and achieving a preferred status with SAP that few partners receive. In the third quarter, our channel business delivered mixed results. We were involved in quite a few opportunities and were selected in several more that we actually received. Those deals did not close in the quarter.

The sales cycle has become elongated and transactions are becoming a bit harder to close because manufacturers are becoming more conservative due to uncertain economic conditions. Two of the channel deals that slipped out of the quarter we have now closed, and we are confident the deals that we have been selected in will close. But the cycle is longer. We have also seen more larger enterprise prospects delay projects so although we're pleased with our sales activity, we are not immune from the uncertain economic conditions.

At the beginning of the third quarter we closed a record setting deal with Hyper Tech Systems in Quebec, a computer electronics manufacturer. This was a 100 user agreement for [inaudible] for SAP Business One, one of the largest SAP Business One deals in North America. We feel that we have the ability to secure more of these larger CPO's because of the support from SAP in the U.S. market for B1 deals at this size.

And we're very pleased that we have become one of SAP's first extended business network partners, or EBPN. In essence, this will allow us to recruit our own B1 ForthShift addition partners who will get SAP privileges because of their affiliation with us. Their transactions will be for full licenses including SAP Business One and give SoftBrands more control of the revenue stream.

In addition, when SAP discovers an opportunity in one of our vertical markets, they're beginning to give that opportunity directly to us versus one of their traditional Business One partners. We are one of just a handful of SAP partners to achieve EBPN status. We think this will result in larger revenue opportunities for our channel business as we will be able to focus these partners solely on ForthShift addition opportunities.

And while most of the revenue from our channel program comes from North America, we are seeing our pipeline in Europe improve. While this is still small in comparison to our North American business, we are focusing on the on the street selling and are optimistic about this market for ForthShift addition going forward.

From a development standpoint we're now working on a new release of ForthShift addition that has the potential to gain more momentum with enhanced functionality and better architecture. We also see this as a product well suited for Europe and Asia markets due to its localization capabilities.

Our base business was slightly below expectations in the quarter. Our maintenance revenue declined compared to the prior year quarter in part due to the difficult comparison which Gregg mentioned. We did see higher than expected attrition in our U.K. customer base but the U.S. and Asia are seeing better than expected attrition.

In June, we introduced the new release of ForthShift software 7.5. This is an important release for our customer base and it demonstrates our continued investment in our base manufacturing products and our commitment to our customers. The release includes a new business intelligence module and customer driven enhancements.

Our consulting business continues to perform well. We see a real opportunity with ForthShift customers who have been using their systems for many years, to go in and reinvigorate their use of the system based on how their businesses have evolved. This type of business system review has really gained traction and let to increased productivity.

So in summary, our third quarter results in manufacturing were satisfactory in terms of profitability but slightly below our revenue expectations for the quarter. For the full fiscal year, we expect our manufacturing business to post revenues essentially even with the prior year.

Finally, SoftBrands is updating the guidance we provided in May for our fiscal 2008 results which is tracking within the lower end of that guidance. We now expect revenue of approximately $100 million, operating income of 4% to 5% of revenues and EBITDA of approximately $12 million.

As we did last quarter, we have provided more details about our fiscal 2008 revenue expectations, gross margin targets and expenses on these two slides which will be posted on the web site as part of this presentation.

With that, we'd now to happy to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Eric Martinuzzi – Craig-Hallum.

Eric Martinuzzi – Craig-Hallum

The revenue range that you had out there was $100 million to $105 million. You're now at the low end of that. You talked about weakness in manufacturing. Does that explain the comfort level with the lower end versus a mid point or higher?

Randy Tofteland

Yes it does explain a little bit of it but there's also some revenues I talked about with hospitality and the accounting for some of the percentage of completion of contracts. That ends up being a big part of it as well.

Eric Martinuzzi – Craig-Hallum

You've got some good backlog here as far as professional services go. That was up phenomenal growth rate in the hospitality side. How sustainable is that? Do we get this for a quarter or two or is this for the foreseeable future?

Randy Tofteland

We would point back to some delayed projects that we had as you recall in both the Navy and the Navy Lodges and we had more bench depth that we were getting fully utilized last year. As you can tell from these numbers, we're now fully utilized and we've been indicating that that was coming. We saw a nice pick up last quarter and as you can see from these numbers we were pretty much flat out in this quarter.

Gregg had given you some visibility that our expectation is as we look forward in hospitality that margins in the 30% to 35% range which of course as you know in application software is very strong, world class type of margins. So yes, we are confident with the visibility that we can see in those projects rolling forward in hospitality.

Eric Martinuzzi – Craig-Hallum

In your press release you commented about your expectation for manufacturing to grow in 2009. Should we assume that hospitality will also be growing in 2009?

Randy Tofteland

Yes.

Eric Martinuzzi – Craig-Hallum

That manufacturing growth, if you can give us names that would be great, but does it really just come down to rolling our the ForthShift addition that some of these larger enterprises locations?

Randy Tofteland

Yes. We continue to grow that ForthShift addition business quarter to quarter. We're inching on the point where we can start to move the whole business on a growth trajectory. As I commented about the upcoming release that we have coming forward of the ForthShift addition which is a very important, the 9.0 release is a very important release for us. It is the ultimate release where there is absolutely no code from any of our past product co-mingled into that.

It will give us the flexibility to develop functionality on top of that platform at a much faster rate and as importantly will now fully leverage all of the aspects of SAP's powerful Business One product so the gains that we can get internationally now because of that upcoming release is why we have some optimism of what we can see in growth coming from Europe specifically. So it is driven by ForthShift edition in the channel as well as what we believe to be further large enterprise business coming our way.

Operator

Your next question comes from Joe First – First Associates.

Joe First – First Associates

I was curious around the trust. Has there been any report made recently on the status of that? Is there anything going on with that?

Randy Tofteland

Not officially that we're aware of. I know there's been inquiries that have come in here as well as around the trust activities as to the typical annual trust report that folks are looking for. But to the best of our knowledge that report has not been issued yet for 2008 so maybe that's an optimistic sign. We would like to be believe that the benefactors of the trust would like to believe the same, but we have no formal statement on that.

Joe First – First Associates

When was that supposed to have come out?

Randy Tofteland

Generally over the last couple of years the trust report as I recall has come out generally in the spring so it would be delayed compared to what the last couple of years' reports have been.

Operator

You have a follow up question from Eric Martinuzzi – Craig-Hallum.

Eric Martinuzzi – Craig-Hallum

Going back to some of the line items in the P&L, the tax, that was a fairly large number and obviously we would have seen a much better flow through on the EPS had we not had to take that tax allowance. As we look forward for Q4 here as well at the year, what do we use again?

Gregg Waldon

In total for the year we anticipate a tax provision of about $2.2 million. So if you take a look at where we were in Q1 and Q2, we had huge tax benefits and so this is the first quarter we've swung to an actual provision and so I'll have another provision in Q4 and the net for the four quarters will equal about $2.2 million.

Eric Martinuzzi – Craig-Hallum

So like a $1.1 million number for Q4?

Gregg Waldon

Does that give you any greater clarity on the out year for those of us modeling here?

Gregg Waldon

No, we're still working through some of the implications of the NOL carry forwards, but in general I would say we have one more year of lumpiness consistent with what we've had in '07 and '08 as we burn through these NOL's. But going forward beyond that, I would anticipate something more realistic in the 38% tax range.

Eric Martinuzzi – Craig-Hallum

Could you speak to head count both where you started out the quarter April 1, where you finished at July 1, and then if you could comment geographically where you added and where you trimmed?

Randy Tofteland

It's been pretty consistent between the beginning of the quarter and the end of the quarter. We rolled out as of June 30 around 775 employees and I don't thing we were up or down more than a handful and so the components really didn't change even on a geographic basis.

Gregg Waldon

The one factor on that, that may be surprising when you look at the increase in our de-spending on that is we are augmenting the number of quarters spend that we communicated we would be doing a few quarters ago, we are augmenting some of that with contractors. So when they wind up the projects it's not a head count drop. It's a funding drop that will go away.

Where we have had some increased head count, I would say its been the large enterprise consulting area as those projects continue to roll forward and actually grow nicely as we get inside the walls of some of our large customers. We're continuing to add expertise that are large enterprise consulting experts.

Eric Martinuzzi – Craig-Hallum

On the manufacturing side, I think it was prior to this year there really wasn't a compensation element for the SAP folks who were really your point people at these large enterprise engagements. Has there been continued good traction there? Do you feel like the word's gotten out that there's a benefit to working with SoftBrands ForthShift edition in particular?

Randy Tofteland

We saw a very nice spike in our large enterprise pipeline in the last quarter from that relationship with SAP.

Eric Martinuzzi – Craig-Hallum

The operating expenses here, we did see that sequential decline, 14.6 down to 13.4. How sustainable is that? Is it something that we can use as a run rate?

Gregg Waldon

I think that a fairly sustainable rate and you can use that as a run rate certainly for the fourth quarter of fiscal '08 as Randy had talked about, and I think I talked about in my script, we do plan on ratcheting the R&D expense down going into fiscal '09. So that would be the one key metric that you would want to take into account.

Eric Martinuzzi – Craig-Hallum

In the commentary you did speak to it as far its impact on the manufacturing side, but on the hospitality side, has there been any issues? You're winning large deals and you continue to implement those, but I know these are long pipelines. Have there been any issues with project push outs or longer sales cycles on the hospitality side?

Randy Tofteland

Not materially. Where we can feel the economy on our hospitality customers, they're guarding their dollars so Gregg's receivables team has to, many friendly reminders to make sure that we get cash moving, but on the sales cycle themselves, we have not seen it as we have seen in the manufacturing side.

Eric Martinuzzi – Craig-Hallum

On the EBITDA covenants you're in good shape there this quarter, it looks like for next quarter, remind me again where do those plateau out at and do you feel like the momentum in the business puts you in good stead for that?

Gregg Waldon

In the September quarter we have a 12 month rolling target of $11.75 million and thereafter, it's a rolling $12 million.

Eric Martinuzzi – Craig-Hallum

That's assuming we get growth out of both sides of the business. There's no reason we shouldn't be able to be in compliance.

Gregg Waldon

Correct. In a perfect world it would be nice to get in excess of $3 million per quarter and we feel pretty confident even in fiscal '09 that we will do that.

Randy Tofteland

If you do that math on where we've got it here, approximately $12 million for the year, $5.5 million was generated in our June quarter. If you add up where we need to be in Q4, we'll be carrying the last couple quarters of Q3 and Q4 of our fiscal '08, will give us some nice coverage as we move into '09.

Operator

We have no further questions.

Randy Tofteland

We appreciate your interest and we know that there seemed to be some additional activity and interest in our call from what we can tell from this quarter, not in questions, but from conference call attendees which we appreciate.

We will remind you that our next call will be in December. It will be our full year earnings, so it will be a little bit longer delayed than the normal quarterly calls, but we look forward to updating you on our full fiscal results of 2008 in our next earnings call in December.

Thank you for joining us.

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

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

If you have any additional questions about our online transcripts, please contact us at: [e-mail]. Thank you!