RMG Networks' (RMGN) CEO Robert Michelson on Q3 2016 Results - Earnings Call Transcript

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About: RMG Networks (RMGN)
by: SA Transcripts

RMG Networks (NASDAQ:RMGN) Q3 2016 Earnings Conference Call November 3, 2016 9:00 AM ET

Executives

Robert Robinson - Senior Vice President, General Counsel and Secretary

Robert Michelson - President and Chief Executive Officer

Jana Ahlfinger Bell - Executive Vice President, Chief Financial Officer

Analysts

William Gibson - ROTH Capital Partners

Eric Gomberg - Dane Capital Management

Joshua Seide - Maxim Group, LLC

Operator

Good day, ladies and gentlemen, and welcome to the RMG Networks Third Quarter 2016 Earnings Call. At this time all participants are in a listen-only. Later we’ll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would like to introduce your host for today's conference, Bob Robinson, General Counsel. Sir, you may begin.

Robert Robinson

Thank you, operator. Good morning everyone and thank you all for joining RMG’s third quarter 2016 earnings conference call. Joining me on the call today are Bob Michelson, Chief Executive Officer and Jana Ahlfinger Bell, Chief Financial Officer.

RMG issued its third quarter 2016 earnings press release today, which can be found on the company's Investor Relations page at ir.rmgnetworks.com along with the slides accompanying the remarks during this call. These slides can also be found by registering through the webcast link.

Before we start, I would like to remind everyone that some of the statements that will be made today on the call will be forward-looking. These forward-looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company.

All forward-looking statements involve risks and uncertainties that could cause actual results or outcomes to differ materially. Such projections and statements of expectations should be interpreted in conjunction with the risk factors and other disclosures that may affect our results, all of which can be found on the company's Form 10-K, Form 10-Qs, and Annual Report and other related SEC filings.

During this conference call, we will also disclose a non-GAAP financial measure, adjusted EBITDA. Income or loss from continuing operations, the GAAP measurement most directly comparable to adjusted EBITDA is found alongside the non-GAAP financial measure in the third quarter 2016 earnings press release that I previously referenced and which is available on the Investor Relations section of our Website. Reconciliations between GAAP and non-GAAP financial measures are provided in the financial tables at the end of the third quarter 2016 earnings press release.

At this time, I would like to turn the call over to Bob Michelson, our Chief Executive Officer.

Robert Michelson

Thank you, Bob, and good morning everyone. Thank you for joining our third quarter earnings call.

I am as excited as about this earnings call as any I've participated in and I look forward to providing this update today and our strategic and financial performance in the third quarter. Let me start by indicating that the third quarter was a major transitionary period for our company. The last quarter was a culmination of one and one-half years of diligent work including developing and deploying compelling business strategies, recruiting a world-class leadership team relentless reducing our cost structure and delivering enhanced products and services for our customers, all the with the aim of achieving not only profitability but long-term annual profitability.

The progress we made in the third quarter provides solid evidence that we are well on the way to begin achieving our long-term goals. First and foremost, I am delighted to report a positive adjusted EBITDA of $85,000 in the third quarter. Equally important is the evidence that the many tenants of our overall business plan are working. Following is a detailed review of the many elements illustrating the progress achieved in the third quarter. I will focus this review on three core components.

First is revenue growth; second is the progress we made in our key solution areas; third is a growing reliance and impact of the new partner channel strategy deployed that leverages strategic partners to drive faster revenue growth without a corresponding increase in SG&A. I will start by highlighting the quarter-over-quarter increase in revenue growth of 9%.

This growth was fueled by the continuing performance of the North American sales organization. North American sales increased 20% year-to-date compared to last year and even faster in Q3 with sales increased of 29% on a year-over-over basis. The traction we are gaining each quarter is encouraging and a direct result of the improved sales effectiveness and our focus on larger, more profitable deals.

Internationally, we experienced a noticeable rebound in sales within Eurasia during the quarter following a slowdown over the last several quarters as a result of the economic uncertainty associated with Brexit. This rebound is encouraging. In the Middle East, oil price volatility continues to impact the region in a significant way. As a result, many of our customers have slowed spending and delayed the timing of certain orders. We continue to work closely with these customers and believe these orders are merely delayed.

Despite the oil price volatility, we are optimistic on the long-term outlook for the geography given our strong pipeline and key partnerships in the region. The second area I'm highlighting is the progress we have achieved in advancing several of our key solution areas, specifically supply chain, internal communications with our new robust mobile solution and a brand new solution offering for large, indoor and outdoor digital screens that is named RMG MAX.

The first solution area I'm going to highlight is RMG's Supply Chain Solution and the customer progress we achieved in Q3. As indicated over last several quarters, RMG has chartered into supply chain industry as a core focus segment. Our strategy to penetrate the segment has included developing a robust solution, establishing RMG's industry expertise and credibility, building a significant sales pipeline, converting the sales pipeline to paid pilots and, finally, converting pilots to general customer rollouts.

I am pleased to report that we have made significant progress in each area. The RMG solution has been well-received in the industry, and several of our co-consultants have been featured as keynote speakers at two recent supply chain conferences. As a result of our new higher profile, credibility and sales activities, we have built a sales pipeline including over 40 supply chain prospects.

As indicated on our previous call, RMG was contracted earlier this year to deliver pilots with three significant global companies. I'm delighted to report that each of these pilots have been extended as our respective customers have engaged RMG to investigate the feasibility of rolling out the pilot functionality across our organizations in 2017 and beyond. If the deals are completed, each of these rollouts have the potential to be a million dollars or more.

Beyond these three pilots, our internal sales efforts continue to grow our pipeline beyond the 40 prospects. Further, these pipelines continues to grow in size as a result of our efforts of our strategic supply chain partner, Manhattan Associates. I will provide more detail about the progress we are making with our channel partner, Manhattan. The supply chain business segment is progressing nicely and we believe it may become a significant revenue producer for the Company for the long term.

The second solution offering I want to highlight is a new RMG solution that caters to mobile users. During the third quarter, we released a major upgrade to our InView family of products with InView Mobile. InView is RMG's innovative internal communication solution that extends the ability of employees who view internal communications versus digital screens to now enable employees to view internal communications with content that is pushed to their desktop computers.

InView Mobile now extends this even further. Internal communications will go from not only employee desktops but also to employee mobile devices. InView Mobile allows companies to push centrally-managed KPIs, actionable real time performance metrics and employ communications to employee mobile devices worldwide. InView Mobile helps companies reach up to 100% of their employees to expose them to critical information when and where they need it most.

This enhanced functionality is a major advancement and of keen interest to our customers. I'm excited with the new mobile release of InView which now gives RMG a full-spectrum solution for internal communications including digital screens, desktops and, now, mobile devices. This elevation in RMG's InView capabilities and reach elevates the value of our software to customers and we believe it should drive increased sales opportunities in each of our solution areas.

The final solution offering I want to highlight is our announcement made just last week which featured the launch of our new RMG MAX product. RMG MAX is a flexible LED display solution for indoor and outdoor market applications that marries RMG's state-of-the-art visual communication solution with new cutting-edge LED panel technology. MAX LED has a unique angling system that can be installed in a curve or a full circle with a horizontal or vertical orientation for unique, eye-catching configurations featuring ultra-high brightness that is suitable for even environments with the brightest of natural light.

RMG MAX also offers embedded audio, energy efficiency with low heat emissions and front-to-rear serviceable panels. RMG MAX has been designed to operate in even the harshest of weather conditions, enabling it to be a solution in practically any outdoor environment. RMG MAX is addressing a large and growing market.

To put this in context, according to global market insights, the LED display market for outdoor digital signage is projected to grow at a compounded annual growth rate of 26.5% from 2016 to 2020 and eventually will exceed $22 billion in revenues by 2024.

We believe we have an excellent opportunity to attract interest in the RMG MAX from our current customers, many of whom we are already providing other digital signage solutions to just not marketing or selling large LED screens. This is a rich potential Greenfield for us to attack.

Our customers include some of the largest companies in the United States and throughout Europe and the Middle East. We believe we have an opportunity to develop a new revenue stream and enhance our current offerings to our current clients. We are also in discussions to extend sales beyond our current customers by engaging partners who are adept at penetrating segments we do not currently sell to.

The final major area I want to highlight is our progress with our partner sales channel. As we have discussed in our past several calls, we have elected to incorporate a key strategy to accelerate the growth of our revenues by establishing and leveraging strategic partners to promote and sell our products. We called this our channel strategy. We believe that using this third-party sales channel is an ideal conduit to promote faster revenue growth without the proportionate increase in sales had cut in cost.

During the second and third quarters, we have launched three major partnerships with established industry leaders in several of our key solution areas. We are making significant progress in each solution area with these partnerships and are excited by the opportunity each it provides to RMG. The first partnership I want to highlight is the one we announced in Q2 with Manhattan Associates, one of the legal providers of software solutions designed to manage supply chains, distribution and inventory systems.

We believe that integrating RMG's supply chain visualization solution into the product offerings that Manhattan sells to its impressive global base of more than 1,300 customers provides us the platform to materially expand our reach into the market and accelerate sales.

During the third quarter, we performed comprehensive joint-account planning, provided product and sales training to the Manhattan sales team and rolled out sales and marketing collateral. I am pleased with the progress we made during the third quarter and believe we are on track with the milestones we have set for this partnership. As we continue to aggressively move the partnership forward, we expect sales opportunities with Manhattan to follow typical sales cycles and believe we will be seeing our initial sales in early 2017 and ramping up throughout the year.

I'm equally encouraged and excited about our prospects with a new strategic partnership completed in the third quarter with Ragan Communications, the nation's leading internal corporate communications consulting company. Ragan will be actively educating and promoting RMG's InView's software. As I indicated a few moments ago, InView is a powerful platform for visual communications that uses real-time messaging, intuitive graphics, video and social media delivered across desktop, mobile and tablet devices to enhance employee engagement and reach up to 100% of staff both on-site and remote.

Ragan has established presence to the market, a strong reputation and a wide reach that will enable us to engage with some of America's leading internal communications executives and influencers. Simply put, our partnership with Ragan materially expands our reach into the internal communication market and provides us with a platform to reach a wider cross-section of potential customers and accelerate sales. We kicked off our partnership with Ragan on September 29 at a global employee communications conference conducted in conjunction with and at the corporate campus of Microsoft.

I had the opportunity to emcee one-half of this even, which allowed me to address more than 150 executive internal communication leaders during multiple talks and focus sessions that often featured our InView product. If we were merely just a sponsor for this event, we would realize some valuable publicity and the ability to distribute marketing materials with attendees.

However, as a result of being a strategic Ragan partner, we were asked to deliver a one-hour keynote speech, which featured InView and the benefits it could provide to address large corporate internal communication needs. This speech proved to valuable to RMG in that in the 30 days since this summit, we have received over 30 new sales leads. These leads will take a couple of quarters to move through our traditional sales cycle so we don't expect to begin seeing an impact on our sales until 2017, but I couldn't be any more pleased by the progress we have made thus far.

And finally, in the third quarter, we announced another key strategic technology sales partnership with Airbus DS Communications. Airbus is the leader in 977 call handling systems in the United States. As the leader, 60% of all emergency calls in the United States are received by Airbus. Our partnership enables our Airbus' clients to integrate RMG's visual communication solution with real-time data displays into Airbus' system.

This new RMG Airbus solution delivers a complete visual communication solution providing critical detail in real-time, which increases effectiveness to adjust workflow, improve labor efficiency and provide, at the end of the day, better customer satisfaction to 911 call center staff and anyone that calls into 911 call centers.

This Airbus partnership provides RMG a meaningful long-term opportunity to integrate our contact center solution into their industry-leading call-handling platform for public safety and allows us to reach into a market segment, 911 contact centers, that we would not have been able to target as deeply with our direct sales teams.

During the third quarter, we closed our first two Airbus customers and generated approximately $100,000 in sales. We see the potential to scale this relationship and penetrate many of the 2,800 Airbus customers. I couldn't be more pleased with this significant partnership and initial traction we have gained, and look forward to the significant potential opportunity this partner provides us for the immediate and foreseeable future.

In summary, I am more excited about RMG's prospects than I have ever been. We are seeing tangible progress in our key strategic initiatives which translated to improving sequential financial performance during the third quarter. To discuss our third quarter financial performance in more detail, I'll now turn the call over to Jana.

Jana Ahlfinger Bell

Thank you, Bob, and good morning, everyone. Our third quarter financial report showed a significant sequential improvement over the second quarter of 2016 with sequential revenue growth, a substantially narrow loss from continuing operations and a positive adjusted EBITDA. For the third quarter of 2016, total revenues were $9.5 million which increased 9% from $8.7 million in the second quarter of 2016, a decrease from 7% from $10.2 million in the third quarter of 2015.

Product revenues of $4.2 million increased 37% from $3.1 million in the second quarter of 2016 resulting from continued strong sales performance in North America and a noticeable rebound in sales from Eurasia. Maintenance and content service revenues of $3.5 million remained flat in the second quarter of 2016. Professional services revenue of $1.8 million decreased 15% from $2.1 million in the second quarter of 2016. This was resulting primarily from a large third-party project implementation that we did in the second quarter of 2016.

Gross margin was exceptionally strong at 63.6% compared to 58.3% in the second quarter of 2016. This increase resulted primarily from favorable sales mix with a higher proportion of software sales, but also a non-reoccurring credit in the third quarter of 2016 to products and maintenance cost from the component manufacturer and resolution of a vendor billing matter. Total operating expenses were $6.9 million, an increase of 5% from $6.6 million in the second quarter of 2016 resulting primarily from investment and sales and marketing initiatives.

GAAP loss from continuing operations of $887,000, improved by approximately $400,000 from a loss of $1.3 million in the second quarter of 2016, resulting primarily from higher revenues and improved gross margin. As a reminder, the financial results associated with RMG Networks Airline Media Networks business have been excluded from continuing operations and are recorded as discontinued operations due to the completion of the sale of this business last year.

Positive adjusted EBIDTA of $85,000 significantly improved from the loss of approximately [$403,000] in the second quarter of 2016. We define adjusted EBIDTA and non-GAAP measure as income or loss from continuing operations with adjustments for interest expense and other income, income tax gain and loss on the change of warrant liability, depreciation and amortization expenses and stock-based compensation expense.

Taking a look at our balance sheet and capital structure. As of September 30, 2016, we had $1.5 million in cash and $1.1 million in outstanding borrowing under our line of credit. The Company's book value as of September 30 was $6.8 million. During the third quarter, we received two initiatives which we believe will provide us with additional financial and operational flexibility to continue funding our strategic plan and growth initiative.

In September, as previously disclosed, we entered into amendment of our loan agreement with Silicon Valley Bank. Under the amendment, we adjusted the minimum EBITDA covenants for September through December 2016 and agreed to determine the 2017 minimum EBITDA covenants in a later date. The amendment increased our annual interest rates spread over the primary by 50 basis points. We exceeded the minimum EBITDA covenant requirements for September and are currently in compliance.

Additionally, in October, we followed the SEC a shelf registration which provides us with the ability to offer in the future up to $10 million in various equity or equity-linked securities. We are pleased that the Form S-3 went effective yesterday, so we have this as an option for the Company.

We considered several factors in making this decision, including the ability for the company to have access to the capital markets for growth of working capital, strategic initiatives and investments in technology development. Since the shelf remains effective for three years, we wanted to ensure it was flexible enough to accommodate our strategic plans and growth initiative.

While we filed this registration statement for $10 million, any specific capital raise is restricted by the SEC Baby Shelf Rules, which in the near term would limit the size of an offering to under $5 million. As we continuously evaluate the capital and liquidity requirements for the Company, we also focus on the concerns of our shareholders with respect to their existing investments. We're excited with both announcements and believe these are positive developments for the Company in implementing our strategic plans.

Bob, I will turn the call back over to you.

Robert Michelson

Thanks a lot Jana. Quarter-by-quarter we're making steady and continuing progress against our strategic plan and I believe we are well-positioned heading into the fourth quarter which historically is our strongest quarter of the year. I'm as optimistic as I've ever been about the long-term financial prospects for the Company.

I believe the strategic elements we have put in place over the past couple of years, the solid evidence that many of these strategic initiatives are progressing smartly in conjunction with our outstanding leadership team positions the Company to take advantage of our large, addressable market, our superior product offerings and our strong go-to market plan.

Our focus will continue to be on building the key initiatives of our multi-year strategic plan by investing in our products and continually improving our business efficiency, generating ROI for our customers and achieving long-term growth in shareholder value.

With that, I would now like to turn the call over to the operator for Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from William Gibson from ROTH Capital Partners. Your line is open.

William Gibson

Hi, Bob. I've got a question about RMG MAX. Is this potentially opening up new markets, particularly outdoors? Is that something that Manhattan would do or are you going to go after new markets?

Robert Michelson

As you take a look at these LED screens, the application is both for indoor and outdoor. Our solution is absolutely positioned and we will be aggressively pursuing both markets. The outdoor one is a very big industry segment as indicated in the industry data that I provided. There's 26% CAGR and growing to a $20 billion industry. Yes, we're going after it. Manhattan would not be a partner that we would use. There are a number of partners that we are in discussions with that have relationships with Outdoor Signage World.

In addition, we brought somebody onto our team about three months ago who is running our channel program, and he used to work for Clear Channel, which is, as you probably know, a major out-of-home business. He has a number of strategic relationships that he's brought to the table. So we're excited. This is a big segment to go after and consistent with what I said earlier, we are always looking for ways to grow the business without having to have a proportional increase in SG&A. So we will be using partners in addition to our sales team. That's a long answer to it.

William Gibson

Yes. And from a modeling up a profile, what does that do? What's the gross margin on something like that? Is that more of a pass-through or do we get to change it? Go ahead.

Robert Michelson

Yes. When you look at the sales, I think there are three things that these out-of-homes will bring to us. One is a real shot in the arm in being able to increase revenue, I think, fairly significantly. Two, it’s going to get us into customers we've never really dealt with in some cases. I'm not saying we're not going to go to our current customers. And three, this is a little more subtle, when you have a large out-of-home screen or could be in a corporate environment or could be in a shopping center, you still need to have the software that drives the content and the content management system plus media players, which has been the core of RMG's business.

So we will be in a position to sell what we do really well and we'll be one of the few companies that kind of puts it all together. Now, just like when we are selling a Samsung or LG screen to a customer, it's a lower margin than selling our own propriety media player. Yes, the margins for this business will be less than our current margin but we're look at this as all really kind of incremental revenue for the business.

William Gibson

Okay, thank you.

Operator

And our next question comes from Brian Kinstlinger from Maxim. Your line is open.

Joshua Seide

Hi, this is actually Josh standing in for Brian. Thanks for taking the questions. Can you elaborate a bit on how the pipeline of opportunities has expanded over time in both size and scope? Are there any additional metrics like average contract value or volume of bids outstanding, overall you might be able to share to give us a sense of the pipeline overall or maybe a number like the number of pilots overall currently ongoing? Thank you.

Robert Michelson

Yes, sure. We have not been giving specific guidance on the items that you indicated. Those are reasonable questions, I do not have my fingers on that data right now. I can tell you, from a strategic standpoint, we have a deliberate program to go after larger deals. And that doesn't necessarily mean we're changing who we're selling to, it's going to our current customers and having higher caliber sales reps that do more sophisticated account planning, go higher in the organization and get bigger transactions.

Over the last two quarters, we have been tracking that internally, and the number of large deals - and we looked at two categories. One, our categories of over a $100,000 and the second is category over $0.5 million. Both of those in the pipeline and the deals that we have closed have increased dramatically. And I like to use the old adage, it's just as hard to sell a $50,000 deal as a $250,000 deal or a $500,000 deal. It's amazing in talking to sales reps, if you're not really getting them focused, they kind of get lost in the weeds. But I think we’ve not only focused on that, I think we are really beginning to realize that. And you had a last question.

Jana Ahlfinger Bell

About pilots.

Robert Michelson

About pilots, yes. The supply chain is interesting. Our strategy is, once we find a prospect in the supply chain that is interested in us, we want to be able to do a pilot and the best way to get to a pilot is to have the customer say, I get your value proposition. I accept your invitation to come out and spend a couple of days walking the plant floor of the distribution center with me and then putting together sample metrics and screens that would go on each functional area within my plants or my distribution center. We had found every time we have done that, it has converted into a pilot.

We have right now eight of those things either scheduled or have occurred recently. Those are the walkthroughs at these new prospects. If history indicates the same behavior, then those would all become pilots, but none of them are as of today, I believe that we have a good shot and I will say, of those eight, six of the eight are big, giant global companies, the ones we're going after. So I believe our strategy is working and what we've prayed internally. Our consultants have got, I think, developed a great reputation in the industry, and we're seeing results.

Joshua Seide

That’s helpful. And then just as a follow-up, how should we think about the Company's sales investment evolving over time, or should we except that channel partnerships will be the primary growth drivers for the Company's topline?

Robert Michelson

Yes. In growing our company, we've got three things that we think about. One is to drive more sales per employee. That's a number that we certainly track and we believe the productivity of our sales organization should on its own be able to go up at least a third. So that is our first attempt and goal, is to get more productivity, more sales without spending more money.

The second is to add salespeople, obviously, to go into potentially geographies we're not in or where folks have expertise in solution areas that we don't necessarily have. And we are pursuing a handful of increases in our sales organization to support that, so adding salespeople.

The third is, as you indicated, is the channel partner network. We believe the channel partner can be generating $5 million to $10 million of incremental business growth. I'm saying that's potential, and that's what we see right now with the partners we're working with. We think that can only increase as we add more partners and the business grows. So as you have seen, this management team has really been relentless on reducing our operating expenses, and as Jana reminded me last night as we were talking about this and she said, Bob, you've made that statement, but we're going to be adding salespeople.

Yes, we will be selectively, but we will be doing it prudently because we want to grow the business particularly where we could be opportunistic.

Joshua Seide

That’s helpful. Thank you.

Operator

[Operator Instructions] And our next question comes from Eric Gomberg from Dane Capital Management. Your line is open.

Eric Gomberg

Thank you. Good morning.

Robert Michelson

Good morning.

Eric Gomberg

Just curious just in terms of last quarter and you usually have a good fourth quarter or sequentially higher fourth quarter, can you talk any about the linearity of last quarter and did it improve each month? And maybe a little more color on the momentum, as I said, there is momentum in the fourth quarter. You're getting pretty close to operating breakeven, so just wondering how you're thinking about that at this point.

Robert Michelson

Eric, thank you for that question. What's fueled our growth most recently has been United States. I indicated our sales growth in Q3 was up 29% year-over-year on a quarter-over-quarter basis where it was probably 10% – I don't know what the number was 11%. Europe sales increased too.

We have seen a historical phenomena that Q4 is our best quarter. We certainly expect that phenomena to occur again in Q4 with one caveat, and that is, I suggested, our revenue growth in the U.S., we believe, is in a continued – even maybe a more accelerated pace. We think Europe's doing really well. The outlier, one we really don't have a perfect handle on is the Middle East.

We have actually orders in the millions of dollars in the Middle East that we have, but we are waiting for some down payments. The customers indicated we're absolutely doing these things, as you would expect, they've signed a contract with us. But they said, we're just waiting for some things to clear up with the economy. We believe they're going to come in, but because of the price of oil has such a disproportionate impact on their economy compared to any commodity I'm aware of around the world, that's the unknown.

So I think there's more beta associated just with what’s going on in the Middle East. I mean we still feel very comfortable about the foundation of our business and we believe we're going to have an upped Q4 and sequential growth as we had in the past with just that one caveat.

Eric Gomberg

Okay. And then curious on the S-3 and how you're thinking about that. It doesn't look like there's a cash crunch; you have credit with Silicon Valley Bank. You're getting close to kind of not really burning any cash at this point or not that much. Would you consider deal anywhere around here or given this just kind of three years of latitude, how do you think about where your stock is and raising capital?

Robert Michelson

Right. Well, I mean, one of our roles is certainly – key role is to protect our stockholders and to generate the greatest long-term return and we believe the stock is incredibly underpriced today and are not a big fan of doing anything that's going to be dilutive. We have this as an option for the business. One of the things that – the good news when you grow rapidly is your revenues grow. The bad news is, is you need additional working capital. So there's that that's out there, which I guess could be a lot of different ways, but that’s out there.

As Jana mentioned, we have other potential needs as the Company grows, so we will be opportunistic. If we think there's a good reason to use the money, we would do that. But I think what's important to note is that in spite of this being a registration for $10 million, we have a physical limit based upon SEC rules and which as Jana indicated, it's less than $5 million, so we would not expect if we did anything for it to be anything near $10 million, obviously. If we did a raise, we certainly would want to do everything we could to protect our current shareholders and to put them in the best position to be able to participate so they wouldn't be dilutive.

Eric Gomberg

Okay. I'm curious on your comment that you feel the stock is undervalued and maybe you're prohibited because of the S-3 being out there, but what's your thought on insiders stepping up and buying some stock down here?

Robert Michelson

That's a great question. I think there's two things. One, as I just said and you repeated, that the stock is undervalued; and two, as I've indicated, I feel as good about this business as ever. I can't speak for everybody else on the leadership team, I can only speak for myself. I've got the idea of some of the other leadership team members; I think we'd all like to be able to invest more money in the business, but we are restricted in investing now due to – it's a quiet period. And as soon as there is an opportunity, when there isn’t a quiet period or we're allowed to by law, it's something I'm going to seriously consider, but I am restricted from doing that today, but it is an incredibly undervalued stock. So it's why I stopped talking.

Eric Gomberg

Sorry. If I could, just one last question. You touched on this. It sounds like RMG MAX may – will take on a partner, hopefully, or two or someone appropriate. But just wondering, if you're looking at 12 months or 18 months, what you did with Ragan and Manhattan Associates and DS Company, I mean really big partners, high quality.

If we're looking at 12 months or 18 months, I mean are there going to be another three things that are currently additive – that are additive to what the current business is or one or five? Like how do we think about kind of the pace of progress and the opportunities that you see for expanding partnerships?

Robert Michelson

Well, consistent with what I said earlier, one of the more clever ways to profitably grow your business is to use channel partners. We did not have anybody running that program, we brought somebody in full time. So that's a serious strategic initiative. I'd be disappointed if we don’t add other channel partners over the next 12 months to 18 months.

Eric Gomberg

Okay, great. Thank you very much.

End of Q&A

Operator

And at this time, I’m showing no further questions. I would like to turn the call back to Bob Michelson for closing remarks.

Robert Michelson

Thank you, operator and thank you investors and friends and employees that are listening to the call. We certainly enjoyed the opportunity to share with you results of Q3, and your leadership team and all the employees will be working hard. In Q4, we look forward in the – beginning of the year, reviewing our results for Q4. Thank you very much.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.