Kopin Corporation
Q1 2013 Earnings Call Transcript

Published: 8 May 2013

[Operator:]

Good morning, and welcome to the Kopin Corporation's First Quarter 2013 Financial Results Conference Call. Today's call is being recorded for Internet replay. You may access an archived version of the call on Kopin's website at www.kopin.com. With us today from the company are Chairman and Chief Executive Officer, Dr. John C.C. Fan; and Chief Financial Officer, Mr. Richard Sneider. Thank you. Sir, please go ahead.

[Richard A. Sneider:]

Thank you, operator. Welcome, everyone, and thank you for joining us this morning. John will begin today's call with a discussion of our strategy, technologies and markets, and then I'll go through the fiscal first quarter results at a high level. John will conclude our prepared remarks, and then we'll be happy to take your questions. I would like to remind everyone that during today's call, taking place on Wednesday, May 8, 2013, that we're going to be making forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. And that these statements are based on the company's current expectations, projections, beliefs and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Potential risks include, but are not limited to, demand for our voice and gesture-controlled body-worn computing technology platform; operating results of our foreign subsidiaries, Forth Dimension Displays and Ikanos Consulting, Ltd.; market conditions and other factors discussed in our most recent annual report on Form 10-K and other documents that we file with the Securities and Exchange Commission. The company undertakes no obligation to update these forward-looking statements made during today's call. And with that, I'm going to turn it over to John.

[John C.C. Fan:]

Thank you, Rich. I would like to take just a few minutes to reconfirm Kopin's multiyear business strategy. The wearable computing wave is coming, and Kopin is uniquely positioned to ride this wave. Kopin has more than 20 years of IP and intellectual property in the wearable computing area and has been focused on making investments necessary to position ourselves as the leading provider of critical components and of licensed concept systems to its partners, who develop branded wearable computing products. Wearable computing is not just another product category. This coming wave represents a secular shift towards computers that are much more integrated into the way we work and live. The question computing investors should be asking are, what is coming next? And which company is best positioned to be a leader in that new market? We believe strongly the future is wearable computing. Advances in cloud computing, predictive data and analytics, microdisplays, optics and voice recognition technology almost dictate that computers will become more integrated into our daily lives. This is likely being less than 10 years, personal computers and smartphones will be relics of the past. As discussed on previous calls, in order to enter the wearable computing market, a company needs to develop competency in several key areas. It needs great IP and technologies in software, speech enhancement, display, optics, chipsets and ergonomics and maybe a few more. We believe we have the strongest IP portfolio in the market to cover all these areas. We filed the first patent in this area in 1993. And now we have more than 200 patents with several new patents filed every month. In the past year, we have also formed a number of strategic partnerships that allow us to offer the highest quality and most comprehensive sets of solutions in these areas. Aside from the recent addition to our portfolio through strategic investments or acquisitions, Ask-Ziggy, for instance, Ikanos, our partnership with Olympus on optics, our partnership with Motorola with their HC1, which is based on Kopin's wearable computing platform. We have recently announced 3 more strategic moves that are in line with or with our goal of being the preferred partnership, the preferred partner in wearable computing. We have announced that the partnership with Edmund Scientific, for instance to distribute the Ruby Module, which is an SVGA microdisplay, which is offered in full color or monochrome version. We also have acquired 4 patents in speech enhancement and noise cancellation for aero sound [ph], and we have filed 14 of our own patents during the quarter. And just this week, Kopin announced the acquisition of the majority share of e-MDT America, Inc., an expert in low-power and analog/digital circuit designs. e-MDT America specializes in designing ultra-low-power driver integrated circuits and backplanes for many kinds of displays, including a reflective liquid crystal on silicon, LCOS displays. Our business model is transforming from a commodity business into a solution-based and license-based business model with higher gross margin potential and growth potential that mirrors the larger companies, such as Qualcomm. As was stated before, 2013 is an investment year to position Kopin to seize the wearable computing wave, which we expect to hit in early 2014. We have been encouraged by the feedback we have received. And we expect to make a number of exciting announcements as the year progresses. Well, with that, I will now turn the call to Richard for the quarter's financial results and guidance. So, Rich?

[Richard A. Sneider:]

Thank you, John. So beginning with the top line, total revenues for the first quarter were $6.3 million compared with $10.9 million for the first quarter of 2002 -- excuse me, 2012, primarily reflecting the expected decline in sales of our products into military applications. Now before we go to the operating expenses, it's important to remember that our expense structure is not tied to the current quarter's revenues or first fiscal year revenue projections, but to our longer-term goals. Gross margin for the first quarter was 107% of product revenues compared with 69% for the first quarter of last year. The decrease reflects manufacturing inefficiencies resulting from the under-absorption of overhead due to lower volume of sales. R&D expense in Q1 of 2013 was $4.2 million, compared to $3 million for Q1 of 2012. The increase reflected an increase in costs to develop body-worn computing technologies. SG&A expense increased from $4.2 million in the first quarter 2012 to $5.7 million in the first quarter this year. The increase for the first 3 months is primarily related to increase of approximately $500,000 for noncash stock compensation; $300,000 related to professional fees resulting from the sale of our III-V product line and investment in KTC; and an increase of about $200,000 of patent amortization. Other income and expense includes a noncash $2.5 million write-down of an equity investment, $220,000 of foreign currency gains and a net $133,000 of interest income. And now this is going to get a little tricky, so hopefully you can follow this. Under the discontinued operations, we recorded gains net of tax of approximately $20.2 million on the sale of our III-V product line and investment in KTC. Included within the gain is an estimated federal and state tax of approximately $13 million. Under Generally Accepted Accounting Principles, we show the gain net of tax in the discontinued operations line. But since we have net operating loss carryforwards to offset the tax, we showed the offsetting benefit in continuing operations, which is why we are showing a tax benefit in the tax provision line of $13 million. Turning to the bottom line. With the completion of the sale of our III-V assets in the first quarter of this year, our net income for the fourth quarter was $21.6 million or $0.34 a share compared with a net loss of $2.6 million or $0.04 per share for the first quarter of 2012. Cash and equivalents and marketable securities, which include consideration received from the sale of the III-V assets totaled $137.5 million at March 30, 2013, compared with $92.5 million at year end. We continue to have no long-term debt. We now have received a total of $55 million from the sale and the remaining $15 million scheduled to be paid to us on the third anniversary of the closing. Capital expenditures for the quarter were approximately 0 and that reflects the fact that last year, we made some significant investments in energy-saving equipment in the fab and we actually received rebates from the energy company. So when you see our cash flow when we file the Q tomorrow, you'll actually see negative numbers. Depreciation and amortization was $1.1 million for Q1 of 2013. Stock compensation expense was $1.5 million for the first quarter and was allocated as follows

[John C.C. Fan:]

Thank you, Rich. Consumer demand is growing for wearable computing products. And I want to assure investors that Kopin is not standing still, waiting for the wave to hit. We're in active discussions with a number of leading technology companies, who are looking to us to accelerate and enable their interest in the wearable computing market. We're not in a position to make any announcement today but are committed to inform you as quickly as we are able to. Our balance sheet is very, very strong and debt-free, as Rich told you. And as we transform to a solution-based and licensed-based model, we anticipate we'll produce faster-growing recurring revenue that will drive higher gross margins. Kopin has been a thought leader for many years now in exactly the areas that will make wearable computing a reality. And the combination of patents, partnerships and people that Kopin brings to the table uniquely position us to ride this wave, which is clearly growing now. We look forward to ongoing discussions with you in the coming months on this exciting area. And now, operator, please open the line for questions.

[Operator:]

[Operator Instructions] Our first question is coming from Matt Robison of Wunderlich Securities.

[Matthew S. Robison:]

Can you -- John, can you talk a little bit about the consumer business? It looks like it was up sequentially in what we would normally consider to be not a very strong seasonal time period. And maybe give us a little flavor of how you think revenue might develop this year.

[John C.C. Fan:]

Well, consumer business, right now, it's still primary in the camera area. We have a new product for our 2 customers, which we're now ramping up for. And those products, so far nobody in the market can make it. But these are still early, they're a new model, so we don't know exactly how the growth run will be. Now of course, later on when -- if people do go into wearable computing, some of them will be for consumers also.

[Matthew S. Robison:]

Well, yes, in the context of the way you report, you put everything but military into the consumer bucket. So that would include Forth Dimension and everything else. So is there anything aside from the camera business that developed in the quarter?

[John C.C. Fan:]

In the consumer?

[Matthew S. Robison:]

Well, the nonmilitary.

[John C.C. Fan:]

Nonmilitary. Yes. There are some early signs of wearable computing activities but nothing to really to separate them out yet.

[Matthew S. Robison:]

And the R&D was all military, the funded R&D?

[John C.C. Fan:]

Funded R&D is all military so far. Or primarily of -- I should not say all, I said primarily military.

[Matthew S. Robison:]

Okay. Rich, did you say depreciation and amortization was $1.2 million or $1.1 million?

[Richard A. Sneider:]

Depreciation and amortization, $1.1 million.

[Matthew S. Robison:]

And what was cash flow from operations?

[Richard A. Sneider:]

I don't have that number. And the reason why is that honestly, our accountants are still debating as to how to properly show the impact on the sale of the III-V business. Apparently, there's a large disparity in practice as to how that affects the cash flow. So I can't really quote you a number. That might actually be different than what the Q is going to say tomorrow.

[Matthew S. Robison:]

Okay. How much was paid for e-MDT? And how many people did you get?

[Richard A. Sneider:]

Yes. We don't disclose -- it did not meet the threshold for disclosure, so we don't talk about the size of it.

[Matthew S. Robison:]

How about the staff?

[Richard A. Sneider:]

It's about half a dozen systems designers.

[Matthew S. Robison:]

Okay. And how should we look at the OpEx outlook?

[Richard A. Sneider:]

That's going to be a fluid situation, and that's kind of why I made a couple of those remarks. The range is pretty significant as to what it could be. And that's why we, historically, have never given loss guidance. But that's why we did it. We think we can meet the loss, but the various components are kind of difficult honestly to give guidance on. Traditionally, we'd give you percentage of the sales, but they're not really linked anymore. R&D isn't tied to the current sales. It's tied to what we think we're going to do in the next couple years.

[Matthew S. Robison:]

Yes. What are the kind of confluences qualitatively that could skew it one way or the other?

[Richard A. Sneider:]

Yes. I mean, the SG&A should be somewhere in the range of last year. The big swing in SG&A is this non-stock compensation because we have certain plans that are mark-to-marketed. And so for instance, this quarter, SG&A was up $500,000 just because the stock price was up. So that's why it gets -- but excluding those types of things, SG&A should be pretty much in line with what it was last year. And then cost of sales is going to run somewhere between 75% and 100% of sales is the best I can give you.

[Matthew S. Robison:]

Okay. And why is -- and that's because the facility is not fully utilized principally?

[Richard A. Sneider:]

And the timing of military shipments.

[Matthew S. Robison:]

So basically, the cost is really a function of keeping the doors open for the military business?

[Richard A. Sneider:]

Right. The sequestration did throw some havoc into it, delayed some shipments this quarter. Our guys are telling me it's moved to the right and we're going to make it up this year. So that's why it's tough to -- and as you know, that's a big gross margin item for us. So that has a big swing from quarter-to-quarter on the percentages.

[Matthew S. Robison:]

Yes. The variable margin, right? So what's the variable margin like for the rest of the business?

[Richard A. Sneider:]

Variable margin for the -- I don't think we...

[Matthew S. Robison:]

What I mean is when you look at the -- when you're not just trying to fill the fixed cost and you're looking at the...

[John C.C. Fan:]

I don't think we ever break it out, Matt. But I think we can give you some general idea. For the wearable computing products, the margin is very good. For our cameras, as you well know, those kind of true high-volume commodity projects, the margin is not as good. But the way we try to solve it is going to products that nobody else can make.

[Matthew S. Robison:]

Sure. Now Rich, what will we think about -- how should we look at taxes for this year?

[Richard A. Sneider:]

Our net tax position, we'll have alt mid [ph] and I expect the total taxes for the year is going to net out to somewhere between $100,000 and $150,000 in the line.

[Operator:]

[Operator Instructions] Our next question is coming from Dan Weston of WestCap Management.

[Daniel Weston:]

Just a few. On the guidance you provided for fiscal year '13, could you let us know what you predict the actual cash loss guidance will be?

[Richard A. Sneider:]

The cash loss, excluding acquisitions, we would expect depreciation to be about $4 million and stock comp to be about somewhere in the neighborhood of $3 million. As I mentioned, there is this swing because some of it is mark-to-marketed. So you can kind of back off about that amount from the net loss to get to an EBITDA, which would be an approximation of cash flow. We're expecting $2 million to $3 million for CapEx.

[Daniel Weston:]

Okay. And then also in terms of the guidance on the revenue side, are you including any potential revenue coming from the wearable computing market or just the existing businesses you have business in now?

[Richard A. Sneider:]

Just the existing businesses.

[Daniel Weston:]

So 0 revenue guidance from any wearable computing?

[Richard A. Sneider:]

I wouldn't call it 0 because we have customers who are developing products. And so we will sell them some displays, some optics. We'll do some things from a component nature. But no real significant licensing revenue, for instance. Or for instance, there's nothing factored in for the Motorola product, which we expect to launch this year, but we just haven't factored anything into it. So I wouldn't say nothing, but it's a de minimis amount.

[Daniel Weston:]

Okay, fine. And then, Dr. Fan, you mentioned that you're turning the business more into a -+ recurring revenue model. Could you just outline that for us in terms of what you expect and how you expect that to develop into a recurring revenue model for you all?

[John C.C. Fan:]

Yes. Our business model now is -- its first focus on would be wearable computing. We do sell critical components. Just to describe the -- I think we can describe the Motorola model, which was announced and we talked about it several times. We licensed our concept model, which is the Golden-i 3.5, to Motorola. They took our concept model and turned it into -- which is now called HC1, which they announced at their launch late last year. And they're going to -- I think they anticipate shipping this year. In the process, with their license fee, which is recurring, we're also in the process they will buy the whole critical component by the optical path. They will buy the whole optical engine. They also licensed our software. So these are all recurring. So we're very much like a Qualcomm model, which we try to emulate obviously, is sell chipsets like Qualcomm did and also license their standards and their IPs. So we are building our IP portfolio, which is already very strong. We're still acquiring and finding a lot more IPs. This is going to be a big area. The whole wearable computing is, I'd say, not just a small, low category or one product alone. It's going to be a whole entire wave. So we've positioned ourselves into IP, which is, as you well know, definitely recurring. And we also will position ourselves in critical areas, not just display, I want to remind you, it's called optical engine. The optical engine means display. You have the optics and you have the chipsets that go with it. And then you put all into a plastic or wherever container you want put in and ship it as an engine. And we do that for military. Now we're shipping to wearable computing. I hope I make it...

[Daniel Weston:]

Yes, that's good. I just have a couple of quick ones. In terms of the patent portfolio you just mentioned in the wearable computing segment, could you refresh our memories in terms how many patents you actually have issued in that specific area?

[John C.C. Fan:]

Issue area, that's a little -- it's clearly shifting -- we have over 200 patents now. Counting is very difficult because we're buying patents as we're buying – just the last quarter alone, we buy 14. The lawyers love us anyway right now, they basically live here. I think we have about 50% -- no, about 45% -- 40% of them related to display and display systems. And I think as you can understand, that's where our original situations are. We have now software, a lot of software patents. We are now -- I'm very glad that we've got the 4 patents for aero sound [ph]. They are the most original patents in this whole area of speech. Those patents come in Japan, United States, China, and they all issue patents. So we're very glad to have that. So we're still building there. In fact, last quarter alone, we filed 3 speech patents. Speech is going to be a big thing for the wearable. If you don't have good sound, good speech, you can forget about wearable. So we are building that. And later on, just stay tuned, we're going to have additional announcement in this area. We want to be the #1 speech in the entire world. So that's another area. And ergonomics, as we well all know, wearing something over your head is a huge issue. And now, well, of course, we have a lot of experience with the military so we know what it does take and what does not take. And we already have patents in it and we're going to find additional patents, some of them are design patents. So I'll just go on and on, we can talk about it. I'm very excited about this area. It's not over yet. We're still are just seeing the beginning part, I would even say the inflection point is being reached. The inflection point will probably be early next reached, and then it becomes very clear. So that's why we're very active in acquiring patents, acquiring companies and people because I think next year, those prices will be very different.

[Daniel Weston:]

Very good. And lastly, you were able to utilize a lot of those NOLs on your sale. Could you refresh us in terms of what the NOL number looks like right now, federal and state?

[Richard A. Sneider:]

We don't have a significant amount of state NOL. We have some R&D credits and things like that. But for the federal standpoint, we have roughly $50 million. You'll notice that there is -- you have to read our footnotes very carefully. About half of that is associated with stock options, so we don't actually put those on the books, but they're there for us to use. So the actual number is around $50 million.

[Operator:]

Our next question is coming from Jim Kennedy of Marathon Capital Management.

[James G. Kennedy:]

John, help me with a few things, okay? As you know, we've been here a while. And what I'm wrestling with is how I look at 2014, all right? So granted this is a building year, an investment year for you. What I'm struggling with is how do we know we get to 2014 and we see any kind of substantial revenue? And obviously anything over 0 at this point on a percentage basis is substantial. But how do I frame that up? We're sitting here at a $20 million run rate. You say you want to buy in stock. You're buying in stock at 10x revenue. How do I know that 2014 comes about and we're sitting here in the fourth quarter 2014 saying, "Well, that was fun, but we derived $5 million worth of revenue and we burned another $15 million in cash." I mean, help me get my hands around the potential in 2014 -- and I'm not asking for guidance, but you ought to be able to tell us about some of the potential applications, where those -- you don't have to talk about customers, but where those applications are in development, where we are in the adoption cycle. What gives you comfort or confidence that in the first quarter or second quarter of '14 that indeed we're going to start seeing what we've all been waiting for on the top line?

[John C.C. Fan:]

Yes. Jim, it's excellent questions, obviously the same questions that we addressed to our board [indiscernible]. I think I have to answer your question in several different layers, different levels. First of all, the most important of all, is that whether we or you or anybody outside believe wearable computing is coming. Of course, we have quite a lot of studies coming out, and it varies in big numbers. So [indiscernible] going through those wearable computing. Yes?

[James G. Kennedy:]

John? Let me just say, okay, I'm over that hump, okay? Wearable computing is coming. It's going to be huge, okay? What I'm asking for is how do I know it's not going to be huge in 2020 as opposed to us seeing substantial growth in '14 and '15?

[John C.C. Fan:]

Okay. So you're over the hump on wearable computing is coming, but you're now -- it sounds like you're not over the hump that wearable computing is coming soon. That's why I'm trying to outline that wearable computing, we believe, is coming next year. So if you don't believe that, if you think it's about 2020, then you're right. Everything can be shifted to the right. And that is the most critical point. We believe and I hope, and I think many studies shows already, and I don't need to quote other studies now, that the number by 2016, 2016 is very large. So that's the most fundamental point. Jim, if you believe it may come in 2020, then you're right. Then I think we'll be shifted to the right. So we don't believe so, and I hope our investors do not believe so. And many studies already say it's not going to be like that. The technologies to make the wearable computing is here. As I mentioned, cloud computing, the voice, the analytics, the optics, the displays, all those are here. What they need to do is put it together, the software. You have to find a couple of cooler [ph] apps. Just like the early days of PC, you find cooler [ph] apps in the word processing, in the spreadsheet. And so smartphone is the same way. You find a cooler [ph] app, and I tell you, thank God for Google. They will find a cooler [ph] app and they're finding some of them. Of course, there are people who are negative about it. Which new device come out, which you were not negative about it? Look at that cell phone when it comes out, people started thought it's being using the desert.

[James G. Kennedy:]

Okay, but John, let me ask it another way, so...

[John C.C. Fan:]

Now the question is the first is I have to convince you they are coming, and it looks like you agree they're coming. Now I'm trying to convince you it's coming now, next year. Now how do you see Kopin's performance? That is [indiscernible] on the metrics that we guided ourselves at.

[James G. Kennedy:]

Okay. If we exit 2014, calendar '14, what's a disappointment for you from this space on the top line? Are you going to be disappointed if we have $3 million? Are you going to be disappointed if we $10 million? Are you going to be disappointed if we have $25 million?

[John C.C. Fan:]

I mean, I answer your question, we do not necessarily judge by that. What we say is we'll be disappointed if Google is successful, the Glass is very successful and we're not one of the big major leaders in this area, okay? That will be a very big disappointment. We'll be disappointed if Google Glass comes out and was a bomb, didn't work, nobody wants it. Nobody wants it.

[James G. Kennedy:]

Okay. Well, I thought that our -- I thought that one of our premises here was that the adoption of what we have developed really will occur on the commercial side, not the consumer side first. We've talked about hands-free in warehouses, hands-free in various occupations. Why is that market -- forget the consumer market, why is that industrial market not the place and the largest place initially?

[John C.C. Fan:]

In our industrial market, we do a different metric. We'll be disappointed if we do not sign up 2 or 3 more guys that already developing products for public safety, for firemen, for medical, for warehousing, okay? So for us, you know that market, that market is a slow, extremely sticky market. It takes time. It's not driven by revenue, it's driven by the big guys, they [indiscernible] build products for assignment. [indiscernible] will take years to get people on [indiscernible] around the United States. [indiscernible] is that you, you're not going to judge by 2014. 2014, you're lucky if the product is already certified. When do you think the municipal guys are going to buy? But however, if you are the only guy selling to the new firemen, this is a big thing. So I think let's don't put ourselves in the narrow context of what happened in 2013 first quarter. It's really what happens, how many guys you signed up. Do you get guys like for firemen? Are you the only guy? Or in the military, are you the only guy for the new military systems? I don't want to put names, but I will say, are those guys going to be put into the system? Are the special ops all going to use it? Does anybody else in the market?

[James G. Kennedy:]

Okay. Then let me ask, in light of the most recent acquisition and you alluded to potentially more acquisitions going forward, what are we -- and maybe the right word is not missing. But what is it that we're trying to fill in here that we need and we do not have a complete solution at this point or that we aren't as vertically integrated as we want to be?

[John C.C. Fan:]

Yes. I think it's actually a very good question. I think we are -- of course, you know we have been working on this for quite a few years, especially in the early days in the military area. I mean, if there's any weakness, I would say we're still with original software. Software as an area is kind of so big and there's a lot of application software. Of course, you can get people to help you to write it. But in many areas, we still need areas of apps for small verticals. For instance, like firemen. You need apps for the firemen. And this app is different, and there's no consumer apps out there. So you need to have partners. You need people to help special verticals for the people. Without the apps, then the firemen cannot use the machine, the device we have built. So these are the kind of things we are now continuing to try and look for how to handle doing the whole.

[James G. Kennedy:]

Okay. And in terms of the buyback, what's the logic there, okay? Obviously, we have a lot of tackling and blocking to do here before we see substantial revenue. Why wouldn't we be shepherding our cash and in the event that it would take longer than any of us think?

[Richard A. Sneider:]

Well, Jim, it's an interesting question, and we have shareholders -- I'll be very honest with you, we have shareholders who are astounded that we're not buying as much stock as we can buy every day because they believe that if, for instance, just Google is successful, then the stock price will rise. And that they believe the market is huge, and we're very well positioned and that you have an opportunity to buy stock at a relatively low price vis-à-vis what people think it will be in 3 or 4 years. And then frankly, we have other investors. You sound like yourself, who are like you're crazy to spend $0.10 on stock buybacks. And so the board goes through its fiduciary responsibility and evaluates situations. And this is the decision that they came up with. But I can tell you that I get calls all the time from both sides of the aisle on this issue.

[James G. Kennedy:]

Well, it's certainly reflective of us getting out of III-V and betting the house on everything. And a stock buyback further increases that bet. So that's my only comment there. Last question, Rich, on the March 30 balance sheet under other assets, what is the additional $15 million? Was that all related to the acquisition? And what is that $15 million?

[Richard A. Sneider:]

Yes. That's the note receivable that will due in 3 years as part of the acquisition.

[James G. Kennedy:]

Okay. So that's actually a note.

[Richard A. Sneider:]

Yes. Well, technically, it's not a note. I have to be careful about that. But it's, in essence, a note. There's not a separate note agreement. It's within the original agreement, but technically, it really is a note.

[Operator:]

Our next question is coming from Matt Robison of Wunderlich Securities.

[Matthew S. Robison:]

Clarification on one of the more boring topics. Rich, the alt minimum tax, you said 100k to 150k. Is that net of the large gain you had in the first quarter? Or is that just kind of a quarterly rate we should look at?

[Richard A. Sneider:]

No, that's the total thing. So what you're seeing there is a gross up. You're seeing a $13 million benefit. And then an equal and opposite amount is in the discontinued ops line, so the 2 essentially net to 0. And there is a roughly around -- actually, the exact number is like $25,000 actual all-in provision buried in there.

[Matthew S. Robison:]

Okay. So going as far as what we should look at for the next 3 quarters, we should be thinking 25k kind of alt min for the next few quarters. And if we wanted to come up with kind of more of a non-GAAP or adjusted EPS number, even for the first quarter looking at continuing operations, we might think of it in those kinds of terms as well, right?

[Richard A. Sneider:]

That's exactly correct.

[Operator:]

I would like to turn the floor back over to management for any additional or closing comments.

[John C.C. Fan:]

Well, thank you, everyone, for joining us today. As a reminder, we have our annual meeting tomorrow at Bingham McCutchen, One Federal Street, Boston at 9

[Operator:]

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.