CalAmp Corp. (NASDAQ:CAMP) Q2 2017 Earnings Conference Call September 29, 2016 4:30 PM ET
Nicole Noutsios - IR, NMN Advisors
Michael Burdiek - President and CEO
Rick Vitelle - CFO
Mike Walkley - Canaccord Genuity
Mike Crawford - B. Riley & Company
Jonathan Ho - William Blair
Greg Burns - Sidoti & Company
Howard Smith - First Analysis
Welcome to the CalAmp Second Quarter Earnings Release Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to introduce your host for today's conference call, Nicole Noutsios, Investor Relations for CalAmp. Nicole, you may begin your conference.
Thank you for joining us on today's conference call to discuss CalAmp's second quarter 2017 financial results. This call is also being broadcast live over the web, and can be found on the Investor Relations section of our IR Web site. With us today are CalAmp's President and Chief Executive Officer Michael Burdiek; and Chief Financial Officer, Rick Vitelle.
Before we begin, let me remind you that this call may contain forward-looking statements. While these forwarding-looking statements reflect CalAmp's best current judgment, they are subject to risks and uncertainties that could cause actual results to materially differ from those forward-looking projections. Risk factors that could cause CalAmp's actual results to materially differ from its projections are discussed in the earnings release which was issued today, and is also available on our Web site, and in our most Fiscal 2016 Annual Report on Form 10-K that was filed on April 20, 2016, with the SEC.
With that, it's now my pleasure to turn the call over to CalAmp's President and CEO, Michael Burdiek.
Thank you for joining our call today. We reported second quarter revenues of $90.5 million, up 30% year-over-year, and consolidated gross margin of 42%, the highest in the company's history. I am very pleased that the company continues its rapid pace of innovation, expanding our product portfolio and leadership position in the connected vehicle marketplace. Rick will discuss our financial results and outlook in detail later in the call.
Before we get to that, it's important to note that we continue to be impacted by macro conditions in North America that have resulted in softer than expected demand from key customers for MRM telematics products. Though we have experienced weakness through the first half of this year, we are seeing some firming of demand, and are optimistic that we will see MRM product revenues begin to improve later this year and into fiscal 2018.
As we look to the future, we continue to invest in innovative telematics solutions and we remain highly confident that we will see strong growth from our LoJack channels, as well as a pick-up in demand in growth from CalAmp's core businesses. Our pipeline of opportunities is very healthy and we recently won two important MRM telematics device customers that we have been nurturing for some time that I will discuss in some detail later in the call.
During our second quarter, we had solid results from our telematics systems business despite the continued softness in demand for our MRM telematics products. On the commercial front, we continue to make progress on realizing revenue synergies with LoJack customers and channels. LoJack's stolen vehicle recovery product sales in the second quarter were strong, and international licensee sales were somewhat ahead of the expectations. One region where we are experiencing strong momentum is in Latin America, where multiple LoJack licensees are moving quickly to integrate CalAmp's range of MRM telematics devices.
On the Products front, we made excellent progress on our strategic roadmap, reinforcing our position as a telematics system innovator. We continue to focus on delivering a converged CalAmp LoJack roadmap for products and telematics services targeting auto dealer channels globally.
At the recent CTIA Super Mobility tradeshow, CalAmp launched the LoJack-branded LotSmart and SureDrive telematics applications. LotSmart was developed with significant input from LoJack dealer channel partners who see the opportunity to use telematics to optimize dealer operations and enhance the customer buying experience. Auto dealers can then monetize their investment in LotSmart with incremental revenue generated from SureDrive, a new connected car mobile application for consumers which incorporates our industry-leading Instant Crash Notification or ICN technology, among other services, and lays the groundwork for the rollout of novel applications and services in the future.
We are also pleased to report that we recently received certification of ICN via independent insurance industry research company, CESVIMAP, which provides objective evaluations of crash test results for vehicle repair and other collision damage services to insurance companies in Europe, Latin America, and China. This is CalAmp's first independent certification of ICN by a major insurance industry testing organization.
On the MRM telematics products front, we are excited to report that one of the largest telematics service providers in North America has chosen various CalAmp LMU and TTU telematics device lines for its range of fleet and asset management solutions. Our portfolio of industry-leading telematics devices were selected by this important new customer to deliver critical vehicle data in real-time and to support a wide array of applications, including those developed to fulfill electronic logging data compliance mandates. This significant customer win comes on the heels of another key win with Omnitracs, which was the large new opportunity that we discussed in our last quarterly earnings call.
As we look at our software and subscription services business, we continue to be impressed by the performance of LoJack Italy. This wholly-owned LoJack licensee is growing over 60% year-over-year, and is expected to maintain its strong momentum. We continue to believe that by developing leading aftermarket connected vehicle solutions and leveraging the LoJack channels, we can achieve our target of $100 million annual run rate for recurring revenues within the next two to three years.
LoJack Italy is an empirical example of the opportunity for CalAmp to leverage the LoJack brand and telematics technologies to build a high growth aftermarket telematics service business on a global scale.
Key enabling technology that we believe will facilitate our recurring revenue growth ambitions is the CalAmp Telematics Cloud service, an application-agnostic service platform that bundles hardware, connectivity, and critical backend software services. During the recent CTIA event, we announced that two customers, MapAnything and Chevin have chosen the CalAmp Telematics Cloud service to enable their respective telematics application offerings.
With these additional customers, we now have six companies that rely on our telematics cloud service to power their telematics solutions, including one in Europe. We also believe there is a near-term opportunity to transition LoJack Italy and other LoJack licensees to the CalAmp Telematics Cloud, thereby creating a clear pathway towards achieving our recurring revenue goal.
Moving on to our network and OEM products, which includes products sold to OEM customers, such as Caterpillar, and networking products sold to utilities and other industrial sectors, revenue was in line with expectations. Revenue from Caterpillar was down somewhat sequentially following a very strong first quarter, with revenue in line with expectations year-to-date. We continue to collaborate with Caterpillar on a number of new initiatives, and will keep you updated on expanded programs.
With that, I will now turn the call over to Rick Vitelle, the Chief Financial Officer for a closer look at our second quarter financial results and Q3 guidance.
Thanks, Michael. My commentary will include reference to the non-GAAP measures, Adjusted Basis net income, adjusted EBITDA, and adjusted EBITDA margin. Our Adjusted Basis net income excludes intangibles amortization expense, stock-based compensation, acquisition and integration expenses, and includes certain other adjustments.
Our adjusted EBITDA excludes interest, taxes, depreciation, amortization, stock-based compensation, and includes certain other adjustments. A full reconciliation of these non-GAAP measures with the closest corresponding GAAP basis measures is included in our second quarter earnings press release that was issued earlier today.
Consolidated revenues for the second quarter was $90.5 million, up from $69.8 million in the second quarter of last year. This increase is primarily due to the acquisition of LoJack early in our first fiscal quarter, which contributed revenue of $31.9 million in the second quarter.
Telematics Systems revenue was $55.7 million in the second quarter of which 53% represents sales of MRM products, and the remainder represents the contribution of LoJack's products business. Software and subscription services revenue was $15.0 million in the second quarter, up 37% year-over-year as a result of LoJack's contribution. Across all of our SaaS and recurring service platforms we had approximately 605,000 unique subscribers at the end of the second quarter, compared to approximately 589,000 subscribers at the end of the immediately preceding quarter.
Network and OEM product revenue was $13.1 million in the latest quarter. This is composed of sales of CalAmp's existing products with no contribution from LoJack. Sales to Caterpillar in the second quarter were $6 million, with revenue year-to-date of approximately $15 million. Our Satellite business generated revenue of $6.7 million in the second quarter, down 16.5% from last year's second quarter. As previously announced, the sole customer of our Satellite business has ceased purchasing our products as a result of a consolidation of its supplier base. And consequently our Satellite business was closed at the end of the second quarter. GAAP basis consolidated gross margin was 41.6% in the second quarter compared to 36.2% in the second quarter of last year, which in the latest quarter is new record.
This improvement is due to the inclusion of the higher margin LoJack products and services in the latest quarter, as well as a year-over-year increase in second quarter gross margin of our MRM products business, from 32.6% last year to 36.0% this year.
In OpEx our R&D sales and marketing and G&A expenses in the second quarter as a percent of revenues were 6.5%, 14.0%, and 12.5% respectively. Over the remainder of fiscal 2017 we expect OpEx as a percent of sales will remain at or close to these levels. The GAAP basis net income in the second quarter was $0.5 million or $0.01 per diluted share compared to net income of $3.5 million or $0.10 per diluted share in the second quarter of fiscal 2016.
Our non-GAAP net income in the second quarter was $10.1 million or $0.27 per diluted share compared to $9.8 million or $0.27 per diluted share in last year's second quarter. Adjusted EBIDTA was $12.9 million in second quarter of fiscal 2017, with an adjusted EBIDTA margin of 14.2%. This compares to adjusted EBIDTA of $11.8 million and an adjusted EBIDTA margin of 16.9% in the second quarter of last year.
Now moving on to our liquidity position and balance sheet, in the latest quarter, we had total cash and marketable securities of $117 million and total outstanding debt of $143 million, which represents the carrying value of the $172.5 million face amount of our 1.58% convertible notes that we issued last year.
Net cash provided by operating activities was $11.0 million in the second quarter. Our consolidated account receivable balance was $68.8 million at the end of the second quarter, representing an average collection period of 62 days while total inventory was $28.0 million representing annualized inventory turns of about eight times.
The acquisition of LoJack has expanded CalAmp's global footprint with nearly 26% of revenues in the latest quarter generated outside the U.S., up from 17% in last year's second quarter. Also MRM product sales in Europe in the second quarter were up roughly 50% both sequentially and year-over-year, thereby contributing to CalAmp's strong international revenue growth.
Our GAAP basis, consolidated effective tax rate was 15% in the first half of fiscal 2017 compared to 37% in last year's first half. The primary reason for the lower effective tax rate in fiscal 2017 is that a substantial portion of the company's pre-tax income is taxed in international jurisdictions with lower rates.
For fiscal 2017 as a whole, we expect that our non-GAAP tax rate will be about 5%. With the wind down of our legacy satellite business now complete, we expect to see a modest revenue uptick in our core business in the third quarter with consolidated revenue in the range of $81 million to $87 million. At the bottom line, we expect third quarter GAAP basis results of operations to be in the range of a net loss of $0.02 to net income of $0.02 per diluted share, and non-GAAP net income in the range of $0.24 to $0.30 per diluted share, with adjusted EBIDTA in the range of $11 million to $14 million.
In addition, we expect our core business to steadily strengthen as we exit the year with growth momentum building as we enter fiscal 2018.
And with that, I will turn the call back over to Michael to provide some final comments.
Thank you, Rick. In closing, I would like to make a few comments. While we saw some continued weakness during our most recent quarter, we continue to make substantial progress against our strategic roadmap. The LoJack acquisition has exceeded expectations thus far, and we are even more optimistic now than before that the LoJack brand and dealer channel relationships will be highly monetizable.
In addition, recent MRM key customer announcement along with signs of firming demand from legacy customer lays the foundation for a bright future, with prospects for stronger growth later in the year and into fiscal 2018.
With that, I am pleased to open up the call to questions. Operator?
Thank you, Michael [Operator Instructions] Your first question comes from the line of Mike Walkley.
Hey, thank you. Mike, maybe you can just walk us a little bit through the MRM business and the new customer opportunities like Omnitracs and the other unnamed customer, and it's kind of balanced that together with the softer than expected guidance just due to the cautiousness in North America. Is it due to what's going on with some consolidation in the industry or maybe you can just give us some more granularity on what led to the guidance that was below our expectations?
Sure. Thanks, Mike. I will try to take those in order. I mean, clearly, we are very excited about this new customer announcement. It's also nice to be able to name Omnitracs overtly as opposed to handout it like we did in the last earnings calls. But those two customers are quite important. We've talked about our initiatives to try to win over the best class in the North American market as it relates to MRM telematics opportunities, and obviously those are two big scores for us.
Just to try to relate what kind of impact that they could have collectively over time as we begin to integrate or further integrate our products into their fleet and asset management portfolios, we think they could be as material to our financial results as Caterpillar has been thus far. So it is significant, and it's important, and gives us confidence as we look forward, and believe that our MRM products business is actually on the right track, despite the softness we've experienced recently.
To try to give you some color on what's happening overall in that business, it was relatively flat quarter-to-quarter. However, as Rick pointed out in his prepared remarks, we actually had a record quarter for MRM telematics product sales in Europe, up substantially from the prior quarter, which is quite heartening, given what's going on with currency issues in Europe and the U.K. in particular. So that's a positive.
The North American market has been soft. It's remained soft through Q2. However, for fleet product sales in Q2, they were up a little bit from Q1, and really the softness in our MRM telematics portfolio was actually in the asset tracking area, not so much the fleet space. So there are a number of reasons why we're optimistic and believe that perhaps the worst is behind us as it relates to the outlook for our MRM telematics business.
Okay, and just to build on that, anything from the consolidation slowing purchasing impacting it, and any comments on competitive environment? Are you seeing potential share losses or you think it's just some customers on a slower macro just taking some time to work through inventory?
Yes, I don't know if I can ascribe any of the softness or weakness to consolidation. That could've been a factor, not really sure. I will say that of the softness we've experienced in North America, it's been relatively broad-based. Each of our top five customers over the last several years were down substantially in the first-half of the year as compared to where they were a year ago. For the majority of those customers we're actually the exclusive supplier of telematics devices. Or in the other cases where we're not exclusive, we're actually the exclusive supplier of certain types of products in their overall offering. So we don't believe that we've seen any deterioration as it relates to competitive strength. In fact we think it's the opposite.
We think that the situation and the backdrop that's caused our short-term results for the last couple of quarters to be weaker than expected is fundamentally a macro condition.
Okay, great, thanks. And just one last question, I'll pass it off. Just to -- saw at CTIA some of the product announcements. Just maybe share some feedback to the new products for the LoJack channel such as SureDrive, and how you think that could add to the business model over time.
Yes, thanks. Well, we made kind of a cluster of announcements during CTIA but really centered around two themes; one was the CalAmp Telematics Cloud. We're very excited about our positioning with that platform and we made a couple of announcements at the show. We continue to nurture some interesting opportunities. We're considering moving over to our cloud service so that they can become more efficient and more agile as they roll out new applications and new services in their end markets. So we think that's a great subscription growth opportunity. Then the other cluster of announcements is really around LotSmart and SureDrive, which are our dealer lot management and consumer sell-through applications.
As we talked about in the prepared remarks, LotSmart was developed very much with dealer input, and really was quite a product marketing exercise that we embarked on right after the LoJack acquisition. And I would say we've been quite efficient as relates to being able to roll out that application with really broad-based North American auto dealer input. So we think we're very much on a good track there. And there's lots of interest on that application, in particular from some of the larger dealer groups who have significant challenges in managing inventory, and thereby the customer buying experience, when consumers come on to the lot looking for a specific make or model of vehicle that they may have researched in advance online.
And obviously dealers are going to make investments in enterprise applications, they want to monetize those in whatever way they can. And what makes SureDrive so compelling is it gives the dealer an opportunity to monetize that enterprise efficiency application, generate incremental revenues and profits utilizing the LoJack brand which is well-recognized and accepted among consumers, so it resonates very, very well, we're excited. And we think that over the next couple of quarters we'll be able to make some more material announcements as it relates to customer wins and revenue contribution there.
The next question comes from the line of Mike Crawford.
Thank you. Could you provide a little bit of additional color on your revenue mix for products relating to solar array controller and positive train control?
I can give you a little bit of color. So, we lumped our solar customer in with our energy segment if you want to refer to it as that. And energy revenues for us, just to give a historic benchmark have ranged between $4 million and $6 million a quarter. And again, solar is part of that, private radio product sales to utilities; oil and gas customers is part of that, ruggedized routers sold into other industrial energy applications are part of that. In the latest quarter it was -- energy revenues were to the lower end of that $4 million to $6 million range, the prior quarter right about in the middle of that range. And going forward I don't expect that range to vary much. It's a relatively slow growth for a no-growth market opportunity for us.
And as we focus on telematics and growth initiatives there I would expect that over time energy revenues will become much less material than they've historically been for us. So I'd say it is a lumpy business. And I would say we took our lumps in the second quarter coming in at near just about $4 million of combined energy product revenues.
And then your other question was related to positive train control product sales I believe. In the quarter, it was actually pretty strong, but we expected it to be relatively strong. We had a confluence of regional rail operators order products that we shipped within the quarter. Looking ahead we expect it to be down a little bit, but we're going to come off what has historically been a pretty high number that we experienced in Q2.
So, positive train control may be $8 million-$9 million a year revenue?
It was just under $8 million last year. I think the outlook this year is generally in the neighborhood of your guidance there.
Okay. And then, Michael, what is it that you are seeing as evidence of firming demand from legacy customers in MRM products, and why do you think that you had this broad-based I guess weakness, particularly in Asset Tracking?
So sort of few items that I think give us confidence as it relates to the worst being behind us, number one, entering Q3 we started at a higher backlog level than where we started last quarter. So that's clearly a positive. Obviously the two important customer wins that we talked about earlier on the call, that being Omnitracs and the unmentioned one. They're both large, and over time we expect the business to grow, and become quite strong and sustainable actually for a long period of time. And the last thing that I think gives us material confidence is the fact that our international business is so strong even with the currency exchange challenges that we faced, in particular over the last quarter with the whole Brexit phenomenon and the devaluation of the pound versus the dollar.
So with a broader more diverse customer base, with North America lagging a little bit, but yet the outlook for North America improving if for no other reason than for the two new customer announcements that we just made, it gives us a lot of confidence that, again, the worst is behind us as it relates to MRM telematics product sales.
Okay, thanks. And then last question relates to the connected vehicle. What are you seeing in terms of feedback and traction on some things like SmartDriverClub and other usage space insurance type of applications? And then separately, what kind of revenue impact or how long do you think it'll take to see a meaningful revenue impact from the new products that you're putting into the LoJack channel?
Okay. Again, I'll try to take them in order. So we haven't talked about SmartDriverClub actually in a couple of quarters, but I'm glad you brought it up. The team there is making what I would term excellent progress. They launched their service and went public in April of this year, and they've been engaging with all the major auto dealers across the U.K., they had a lot of positive feedback initially even before they announced the launch of their consumer application suite. I recently had an opportunity to catch up with them in face-to-face meetings and review their overall pipeline and I'm quite pleased with where they are today. And I think the outlook for that business is very, very positive. And I would expect that they're going to have a few interesting announcements over the next few months.
Obviously SmartDriverClub is not only focused on the traditional connected vehicle applications, but also keenly focused on sort of an innovative, if not disruptive approach to auto insurance underwriting, utilizing a core telematics platform, including our Instant Crash Notification service as enabler into understanding the risk factors associated with certain types of drivers. And as it related to ICN we talked about the independent industry certification and the resonance on our Instant Crash Notification service and our ability to deliver it through any number of platforms, whether it's direct, through our fleet management platform, whether it's as a telematics cloud service, like with CTC, or if it's delivered as an over-the-top service, we see broad-based interest, not just in the insurance industry, but with enterprise customers who are interested in managing and monitoring their assets, and the human factors around the operation of those assets.
So we think that the ICN technology has broad-based appeal. We think it's a critical enabler into potentially disrupting the insurance marketplace in different ways. It obviously has a great bundling benefit to the SureDrive sell-through application that we're branding under the LoJack brand. As it related to revenue contribution or material revenue contribution from LotSmart and SureDrive, we expect to see some modest revenues late in this year. And I'm not willing to step out and give you a more formal forecast or outlook as to what the contribution might be when we get to some sort of run rate level. But I think it's safe to say that we think it's a growth catalyst for LoJack and LoJack-branded products.
And in many ways, the fact that we've offered these dealer lot management solutions and SureDrive as a consumer sell-through application branded LoJack, it's actually solidified I think the relationship that we've had with many of the larger dealer groups in the United States. Because they now know and believe that the older legacy LoJack stolen vehicle recovery offering is not a dead end. So it's given us opportunities to reengage with those dealers, and it's given them the opportunity to contemplate new and interesting consumer-recognized branded solutions that allow us to get a larger share of the consumer's wallet.
Your next question comes from the line of Jonathan Ho.
Hi guys, good afternoon. I just wanted to start out with LoJack. Can you talk a little bit about your progress in terms of broadening LoJack beyond sort of the state that it was in prior to the acquisition, as well as giving us maybe some sense of what types of investments you need to make for some of these new products either from a marketing or a training perspective for the channel.
Sure, great question, Jonathan. So telematics married with the course -- LoJack stolen vehicle recovery product allows us to almost instantaneously expand the serviceable market without necessarily having to make the investment in the infrastructure to cover those regions that aren't covered with the legacy LoJack communications infrastructure. If we're able to communicate with the LoJack stolen vehicle by a different communications pathway, which would be facilitated obviously by telematics, then we can avoid the infrastructure investment to expand that serviceable market, which is really an interesting opportunity. So there are many dealer groups that operate outside of the 29 states that LoJack has traditionally covered. And they've been eager to find a way to expand that service offering. So they have a common offering throughout all of their store network.
And telematics is going to give us that opportunity. So as soon as LotSmart is completely released to market, we have -- it have in effect expanded the serviceable market for the LoJack core stone vehicle recovery product offering.
Got it, got it. And then, can you talk a little bit about the linearity of the quarter? I mean, with some of the softness that you guys described, I am just wondering if this is shifting some of the orders more to the back-half of the quarter, or whether you are just seeing maybe a little bit of less visibility as a result of that?
I am not sure if that was focused on one segment or another, or it was a consolidated. Yes, I would say there is a deferral effect. I mean, if you listen to our last earnings call, we talked about this inventory overhang issue. So in theory, once the slack is taken up in the supply chain there, then we would expect to flow business to comeback. And so, to a certain extent there is this disruption that's occurred, and I do believe that the flow business from our key customers will get back to historically levels, but just not as soon as we thought it would.
You are welcome.
The next question comes from the line of Greg Burns.
Good afternoon. Just a question about the Chevin partnership and then taking the telematics cloud and bring that into fleet market, what is the incremental revenue opportunity for you in the fleet market with your telematics cloud solution? And I guess for Chevin, specifically, and maybe more broadly as you roll it out to additional fleet customers?
Sure. Well, I think there is -- that maybe a two-part question. What's our incremental fleet management service, incremental service opportunity there and then what -- how big is the opportunity with anyone of our customers as it relates to the CalAmp's Telematics Cloud service?
So, on this call, and in fact last quarter we talked about that sort of medium-term target of $100 million recurring revenue. We think most of that growth from where we are today to $100 million comes in the form of fleet management service revenue, or in more generic CalAmp's telematics cloud revenue growth. And we think, the near-term incremental opportunity for us is really amongst the LoJack licensees beginning with LoJack Italy, which of course is a wholly-owned entity in Europe.
So, there are number of LoJack licensees that are keenly interested in moving over to a cloud service like CTC, because it gives them ability to build an application suite very, very quickly. It gives them an opportunity to get to market with something scaled and secure much faster than they otherwise would, given the relative size of many of these licensee entities.
Okay. And then, I just wanted to get clarity on your view on the fleet inventory issue that you are referencing last quarter into this quarter, do you feel like that inventory has been burn through and now at the point where they do get back to more flow or do you still there is some inventory overhang that's still out there?
We think there is still some. I mean, our guidance into Q3 didn't look like a hockey stick recovery. We don't expect one. So we expect some modest improvement into Q3 and further improvement from there.
Okay, thank you.
You are welcome.
Your next question comes from the line of Howard Smith.
Yes, good afternoon. Thank you for taking my question. I am just trying to gain a little visibility into your visibility as you work with your larger customers, particularly on the MRM side. So we talked on a couple of questions about the inventory and working through that and things. I understand your backlog is higher going into this quarter, but do you generally work with your larger customers? Did they work with you to give you a rolling two, three months forecast? And then true it up as it goes along with specific orders, or is it more, you kind of get the orders as they come, maybe you can just give us a little color on how you work with some of your larger customers on these issues?
Sure, great question. Well, we have made a number of changes this year as it relates to our overall sales organization and infrastructure. So I would say our level of engagement with key customers, in fact, not only key, any customer is much better today. I think you could actually call it an "Engagement." So I think as it relates to visibility and interaction with our customers as it relates to their near/medium-term outlooks for product demand, it's probably better than it's even been. And shame on us for not having had that level of engagement in the not too distant past.
Nonetheless I think, given how engaged we are, you know, our sense of where our customers are, what their long-term outlook is as well as their short-term outlook, I think we are in much better position today than perhaps we have ever been in history, as it relates to that level of engagement and visibility into our customer's business.
That's very helpful color, thank you.
You are welcome.
At this time, there are no further questions. This concludes the question-and-answer session.
I would now like to turn the conference back over to Michael for any closing remarks.
Thank you again for joining us today, and we look forward to speaking with you again next quarter.
Thank you for your participation. This concludes today's conference call. You may now disconnect.
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