RealNetworks, Inc.
Q2 2015 Earnings Call Transcript

Published: 6 Aug 2015

[Operator:]

Welcome to the RealNetworks Second Quarter 2015 Earnings Call. At this time all participants are in a listen-only until question-and-answer portion of the call. [Operator Instructions] Today’s call is being recorded. If you have any objections you may disconnect at this point. I would now like to introduce our first speaker, Drew Markham. You may begin.

[Drew Markham:]

Thank you, Zack, and welcome to the RealNetworks second quarter 2015 conference call. Before we begin, I remind you that some matters discussed today are forward-looking, including statements regarding RealNetworks future revenue, adjusted EBITDA, and operating expenses, and trends affecting its businesses and prospects for future growth and profitability. Other forward-looking statements include the Company’s plans to implement its strategy, and invest in its products and initiatives, as well as the expected growth, profitability and other benefits from those activities. All statements other than statements of historical fact are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. We describe these and other risks in our SEC filings. A copy of those filings can be obtained from the SEC or from the Investor Relations section of our corporate website. These forward-looking statements reflect RealNetworks expectations as of today, August 5, 2015. The company undertakes no duty to update or revise any forward-looking statements made during this call, whether as a result of new information, future events, or any other reason. We will present certain financial measures on this call that will be considered non-GAAP under the SEC’s regulation G. For a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, please refer to the information included in our press release and in our Form 8-K dated and submitted to the SEC today, both of which can be found on our corporate website at investor.realnetworks.com, under the tab “financial information.” With me today are Rob Glaser, Chairman and CEO; and Marjorie Thomas, our CFO. Rob will discuss Company’s strategy and the progress the company has made in recent months. Then Marge will provide a financial review of the second quarter of 2015 and the outlook for the third quarter of 2015. After their prepared remarks, they will be pleased to answer questions. Now, I’ll turn the call over to Rob.

[Rob Glaser:]

Thanks, Drew. Good afternoon, everyone and thanks for joining us. Today, I’ll give you an update on the progress we made in the second quarter in turning RealNetworks and putting the company on a path to achieve sustainable growth in users, user engagement, revenue, and profit. I’ll talk about four topics today. First, the launch of RealTimes; second, progress were making at our Codec and IP licensing business; third, the progress of the Rhapsody affiliate and fourth our commitment to simplifying real and reducing operating cost and cash burn as example [indiscernible] pending sale of our Slingo and social games business – Social Casino games business. First, RealTimes which we launched in late May, RealTimes is the brand new product that builds on RealPlayer Cloud, which was launched in late 2013. RealTimes is the fastest and easiest way for consumers to get most of their personal photos and videos. It solves one of the biggest problems consumers face today, too many photos and videos and anonymous [ph] time to organize and show them. RealTimes automatically picks the best moments from consumers’ photo and video camera and turns them into real time stories that can be easily saved, managed, enhanced and shared. It’s incredibly easy and fast to customize real time stories by rearranging clips and photos, changing the duration at any personal sound tracks. RealTimes is great for everyone who uses the smartphone to take digital videos, but it’s especially valuable for parents, who take tons of photos and videos of their kids and are super busy. They need a photo, video solution that creates great results automatically. Recipients don’t even need to download the app to read their stories. Our groundbreaking RealTimes app is available globally on android phones and tablets, iPhone and iPad, Windows PCs and web browsers and will be soon be available on Mac. Over two million users have already downloaded RealTimes in registered accounts, between RealTimes and RealPlayer Cloud, we now have over 13 million users worldwide. While it’s early yet and we have a lot of work to do, were particularly pleased with two aspects of RealTimes, mobile user engagement and business partner interest. Mobile RealTimes users are sharing content about three times more often than the RealPlayer Cloud users. The RealTimes mobile app in android has 4.2 stars rating globally. On the business front, we’ve been very pleased by the interest in RealTimes that partners around the world we’ve shown [ph]. We look forward to sharing more details in the weeks and months ahead. Second, I’m going to provide a brief update on our codec and IP licensing business. I’m joining today’s call from Beijing, China, which is a home of Reals codec and IP licensing business. And for those of you who are not techies, codec stands for decompression and compression. And it is a video technology for how you make video files small and then play them and decompress them. This business which reports into our RealPlayer business segment has evolved significantly in recent years. Historically this business’ primary focus was licensing Real Media Engine and Codec technology to consumer electronic manufactures worldwide. In recent years, we favored [ph] this business to focus primarily on the rapidly growing Chinese market, and we are excellent results. RealVideo Codec called RMVB is very popular in China and it’s the foundation for the business. Last month, at the Mobile World Congress Show in Shanghai, we announced next generation Codec technology called RealMedia HD or RMHD for short. RMHD is a significant step for both relative to RMVB and relative to the most popular official video Codec standard h.264. Indeed, RMHD will deliver up to a 50% improvement in video file size compared to h.264. The initial market focus on RMHD will be China, which of course is a huge market. I’ve spent years here with our China and I’ve been very impressed by both the technical and commercial progress that team is making. Well, it’s too soon to do any victory laps, I’m very pleased to report that this team is doing great work and I believe will create value in the months and years ahead. We will keep you updated on RMHD's progress as the business develops. Third, I want to provide an update on Rhapsody, the online music service company in which we own a significant stake and support through our role on the Board of Directors, including my role as Co-Chairman. During the second quarter of 2015, the Company’s momentum continued to build with its worldwide paying subscriber base growing to over three million users. Not only is our user-based growing, but service usage is growing nicely, as well. In Q2, our users played over 2.7 billion songs which was up 41% from the second quarter of 2014. Rhapsody has successfully made the transition from being a PC service to being mobile centric with over 90% of Rhapsody’s active users now listening on mobile devices and consumer ratings on both android and iOS exceeds 4.0. In sum, we continue to be very pleased with the progress at Rhapsody. Fourth, I want to talk about our simplify Real and reduced operating expenses and cash burn. Lastly, we had depending sale of our Slingo and social casino games business to gaming rooms, a publicly traded London-based on our gaming company for $18 million. By selling our Slingo and social casino business we achieved two objectives. First, we give fair value for the business, strengthen our balance sheet, and reduced cash burn. Second, we simplify our games business, which is now focused on what has historically been our core casual bench. Under leadership of [indiscernible], we believe this business has been stabilized and believe its set for growth in the quarters ahead. Well move to better cash burn, stabilize real and set the company up to growth. With the launch of RealTimes behind us, we will now double our efforts to receive these objectives, during the balance of 2015. Our company will make meaningful progress in months ahead and we are into 2015 in the strongest position operationally, we’ve been in, since my return to Real, three years ago. So with that let me turn the call over to Marj, to review the financials. Marj?

[Marjorie Thomas:]

Thanks Rob. Let’s go to the results for the second quarter of 2015. For the second quarter, our total revenue was $34 million, compared to $30.6 million in the previous quarter and $40.8 million in the second quarter of 2014. The sequential increase in the revenue reflects tiny fluctuations in our Mobile Entertainment business, we discussed last quarter. While revenue from some of our legacy products is declining, we are working to reduce costs, optimize our investments, and execute our strategic transition to build a stronger foundation for future growth and profitability. Our total adjusted EBITDA for the second quarter of 2015 was a loss of $15.2 million, compared to a loss of $13.1 million for the second quarter of 2014. For the second quarter of 2015, our adjusted EBITDA loss was better than we guided due to a favorable mix of business and our cost reduction efforts. Our total operating expenses, excluding restructuring related charges in Q2 were down by $5 million year-over-year, as we continued to streamline our operations. Note that our GAAP operating results for the second quarter of 2015 include $2 million of severance and restructuring related to the Company’s expense reduction effort. Now let’s look at our quarterly results by business units starting with the RealPlayer Group. For the second quarter RealPlayer Group revenue was $7.3 million, down 8% sequentially from the prior quarter. This decline in revenue was primarily due to the expected decline in our legacy businesses. Although our RealTime and RealPlayer cloud products have not yet had a material impact on our revenue, we are encouraged by the continued growth in our Cloud user base. Adjusted EBITDA for the RealPayer Group in the second quarter was a loss of $9.4 million, due to our investments in rolling out RealTime and continued enhancements to our cloud based products. Our mobile entertainment revenue was $18.5 million, up $28% sequentially from the prior quarter, due to an increase in our Korean music-on-demand business. You will recall that in Q1, we had a decline in revenue, caused by a temporary reduction in our Korean music-on-demand attribution of royalties. This temporary reduction was associated with a new royalty tracking process stipulated by the Korean government. This is a relatively low margin revenue stream, so it has little impact on EBITDA. Adjusted EBITDA in the second quarter for Mobile Entertainment business was $1 million. Games revenue was $8.1 million approximately flat sequentially from the prior quarter. Slingo Adventure grew and casual games revenue is beginning to stabilize. The adjusted EBITDA for our games business in the second quarter was a loss of $2.4 million. Note that if we exclude to Slingo and Social Casino business, games revenue would have been $6 million and we estimate our EBITDA would have been a modest gain. At the second quarter, we had $111 million in unrestricted cash, cash equivalents and short-term investments. During the second quarter, as we anticipated our cash was negatively impacted by approximately $4 million of cash timing differences associated with our Korean music-on-demand business. In the coming periods, we do not expect this business to materially impact cash outlays. We also had other increases in account receivable of approximately $2 million and payments of severance and other restructuring expenses related to our cost reduction initiative. We understand that the company’s cash burn has been at unsustainable levels, and we’re taking the necessary steps to reduce our cash burn and our cost. As Rob mentioned, we are simplify in our business and working to stabilize the company. Assuming the completion of the sale of Slingo and Social Casino Games and including our headcount reductions in Q2 in July, we will have reduced our headcount by approximately 120 people. We anticipate our annualized operating expenses including marketing expense to be reduced by $17 million adjusting for restructuring charges. We continue to look for ways to gain further efficiencies and expect to see significant reductions in our cash burn in coming quarters. Excluding the impact of the pending divestiture of the Slingo and Social Casino Games business, we expect total revenue of $29 million to $32 million in the third quarter of 2015, with an adjusted EBITDA loss in the range of $15 million to $18 million. If we include the impact of the pending sale, we expect total revenue in the range of $27 million to $30 million and an adjusted EBITDA loss of $14 million to $17 million. Note that the Slingo and Social Casino Games transaction is expected to close during the third quarter, subject to a financing contingency and other customary closing conditions. $10 million will be paid in cash at closing, less closing cost. The remaining $8 million will be payable either all in cash or in a mix of cash and Gaming Realms stock at RealNetwork selection in two installments on the first and second anniversaries of closing. In the third quarter, with the proceeds from the sale and our ongoing cost reductions, we expect to significantly reduce our cash burn. While, we have not yet completed our strategic transition and return to growth and profitability, we made progress during the second quarter of 2015 on executing our plan to revitalize RealNetwork. We released a major upgrade to our cloud products with the rollout of RealTimes. We’ve grown our cloud user based to over $13 million, and our pending sale of Slingo and Social Casino Games business will reduce our expenses and cash burn. And we continue to look for ways to reduce our costs while optimizing our investments in our businesses. Now, Rob, I would be pleased to answer your questions. Operator?

[Operator:]

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Mr. Eric Wold from B. Riley. Sir, your line is open.

[Eric Wold:]

Thank you, good afternoon.

[Marjorie Thomas:]

Hi, Eric.

[Eric Wold:]

Couple of questions for you, one is, Marge, just a clarification when you mentioned the $17 million for the annualized reduction in OpEx from the headcount of games sale, what period is that from when to when? Is that kind of from the end of year to now? Or is that over the last 12 months?

[Marjorie Thomas:]

Yes, it’s really a perspective look. So as you can imagine we have notified individuals in terms of these headcount reductions, and they are happening in various parts of the world. So they will be coming out during the coming month in the quarter. So we won’t see it immediately, but we will see it pretty soon.

[Eric Wold:]

Okay. I guess just asking in a different way than from what your reported in Q2, how much more should we assume comes out to get that $17 million?

[Marjorie Thomas:]

So most of those actions have worked – actually took place in the later part of June and the early part of July, with of course the exception of the games sale, which will happen kind of mid-quarter Q3.

[Eric Wold:]

Okay. And then lastly and obviously on that and the games, where you guys have done a great job in terms of kind of cutting cost, and getting your instruction place. When is the other lever, when is the other lever – maybe a question for Rob, start kicking in terms of seeing growth in the RealPlayer Clouds or RealPlayer agenda, you will need the spend somewhat to – kind of get subscriber conversion and more user adoptions. When should we start seeing that revenue lever in that division really start to accelerate?

[Rob Glaser:]

Well, I guess, this is Rob, hi from Beijing. So we tend to not to do sort of micro-level guidance, they are obviously a multiple leverage associated with the RealTimes and RealPlayer Cloud. One lever, of course, is growing the user base and monetizing that base. And we are in the phase right now, where our primary focus is getting the user base up, getting engagement up with the product. That’s the classic sort of foundation that any – those are based on. There is also leverage, which I alluded to, but I was pretty careful, I just said, with potential partners, who find value in what we’re doing. And we can monetize those partners in bunch of different ways. And I look forward to updating you guys regularly on that, but these calls with regard to specifics we tend to be historical rather than perspective. And in this particular case that means our answer is going to probably be a little bit more elliptical than what you would want, which is we’re describing generically the kinds of levers we have, but we’re not making specific forecast as to when those levers kick in or how they manifest themselves.

[Eric Wold:]

I understand. Thank you.

[Rob Glaser:]

Good talking to you.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Mr. William Meyers from Miller Asset Management. Miller, your line is open.

[William Meyers:]

Hi, Rob, thanks for taking the question. A few quarters back you were talking about ring-backs program and I haven’t heard an update on that lately. Can you tell us something about that? How that’s going.

[Rob Glaser:]

So, if you look at the Mobile Entertainment business, which obviously we announced had a small additional profit. The ring-back tone business rolls into that business, and it’s one of that business’ main products. We go to market in two different ways, there we have a direct consumer product called LISTEN. And then we have various white-label products that we offer in partnership with carriers. We choose not to do a specific update this quarter beyond. The last quarter what we’ve talked about is how we are pivoting the LISTEN investment to focus more on leveraging that asset with partners. We are seeing significant interest in partners, but given that most of those partners are large two-one carriers. They announce things when they want to. And we have no new announcements with regard to that business in Q2 for the announcements we are making today. But we can then see significant interest in the LISTEN product with the carrier channel that we’ve had already have with pivotal products, so that can obviously [ph] be our primary strategy in that business. Marge, you have anything?

[William Meyers:]

Okay.

[Marjorie Thomas:]

No, that was good. Thanks.

[William Meyers:]

Okay, thanks on that. And I'm looking at Rhapsody, the page you first go to when you open up the site, and it’s got three months for $1 program right now. Has that been going on for a while? And is that one of the main ways that the three million users have been reached?

[Rob Glaser:]

That program is relatively a new program. I think that program would fall into the countering punching the launch of Apple Music category because Apple Music has a three months trail associated with it. And we thought well they have three-month trial will give you a great deal on three months, as well. So I think that was in that context. And note, the user growth over the past year has been primarily through the scale up of carrier partners. The directed consumer growth has varied in different regions, in some regions has been modest, and some regions it’s be a little more significant. But if you look at the growth with that business of raw [ph], I don’t think Rhapsody publishes breakdowns. A significant part of that growth has been through partnerships with carriers that’s turned out to be a great strategy for Rhapsody. Rhapsody has partnership with T-Mobile in the United States partnership with several carriers in Europe. Partnerships with Telefónica affiliates [ph] VIVO [ph] in Brazil and several other affiliates in Latin America. So in those three regions, Americas, North America, Latin America and in Europe, we have seen significant growth in that carrier partner channel as probably this thing will be biggest driver to subscriber growth and usage growth as I pointed out in Rhapsody.

[William Meyers:]

Okay. And thanks for the update.

[Rob Glaser:]

Sure.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Mr. Dan Weston from Westcap Management. Sir, your line is open.

[Dan Weston:]

Yes, hi, thanks very much for taking the questions. Rob, in relation to the Codec business you spoke of, are you currently receiving any license revenue from the Codec business today?

[Rob Glaser:]

Yes, absolutely. We have chosen not to break it out it rolls up into the RealPlayer sector. But we have a number of licensees and that revenue stream certainly the Chinese part of that revenue stream has been performing very solidly for us.

[Dan Weston:]

Did you say very steadily?

[Rob Glaser:]

I said it has been a solid performer. We don’t – we have not historically broken out that particular line of business it’s showing up inside the RealPlayer business so kind of what’s happened is the IP Licensing business both in terms of revenue and profit has been sort of subsumed under the whole RealPlayer business. We are not taking any decision to break it out separately we may or may not to in the future the major reasons we are talking about it today are one the announcement of the next generation of Video Codec, which we think in the quarters ahead could become a significant driver of value creation for that business and the fact that I’m visibly in Beijing, we didn’t wanted to do aware weld on this. We have a great team here, we are proud of it the fact that had my trip coincide with the earnings call with the catalyst plus to use today today’s call to talk about the business.

[Dan Weston:]

Got it, got it. Okay and then in your press release, you mentioned that you’re taking steps to refocus RealNetworks to the best opportunities, generating cash from non-core assets. I want to focus in on that part. Can I assume that one of the non-core assets that you are seeking to monetize or generate cash from is Rhapsody.

[Rob Glaser:]

I would say, exactly the same thing on the topic I said before. We think Rhapsody is a very valuable business and the macro trend as we continue to build the subscriber base is that the business is becoming more valuable over time. That being the case, in a situation like this you look at various alternatives for the business and you make analytical decisions. In the case of the opportunity to sell the games business, to Social Casino and Slingo business to Gaming Realms, that was an example of a business where we were open to conversations. But it is not – we would not run a process or anything like that on that business. And the folks of Gaming Realms basically we’ve introduced today and they expressed their interest in that deal. And we are able to construct that deal that was fair value. So that sort of an interesting multi template and it’s a sample our oftentimes you get offers that are compelling that are kind of – you take them and you study them, when they come in. In the case of business like Rhapsody, we are not in a process for selling Rhapsody. At some point you might say, hey, should we run a process for this? You might consider that there is number of factors there, number one, we have a partner in that business Columbus Nova so anything we do there, we do along with Columbus Nova. Number two, you will also say what’s the best way to create value in this business between running it, as we have been bringing partners in we’re running a process like that. But right now I think, our view is that business is proceeding, it’s growing it’s in a sector that has become a [indiscernible] increasingly strategic. Obviously, when the big playerlike Apple enters the business, it can be double edge sword. People are going to say, oh my God, that big player is going suck all the oxygen out of the room. The Flipside is, oh my God, that big player is confirming the fact that the paradigm shifting and the service that Rhapsody offers and there’s leader in that’s becoming the dominant mortality you have people are going to experience this for music. While we certainly look at the former, I think, we view the latter as a very significant factor. And so we think taking a macro view that the value of the business is something that time is our friend on. So we are not going to operate in a way that’s different to that. But I think we – once we went below 50% of our business we said basically this has going to from being a strategic asset to being a financial asset and we’re treating it accordingly in the same way that you might say a PE investor or VC might look as an asset. Where you don’t – the way the most PEs say follow into everything they own is for sale at the right price and nothing is for sale at the wrong price.

[Dan Weston:]

Very good I appreciate the commentary. On the note since you do break it out in your queue are you able to give us revenues and operating metrics for Rhapsody on the call today?

[Rob Glaser:]

I will refer to Marge on that. We talk to our partners a lot about what metrics Rhapsody is comfortable sharing from a competitive standpoint, obviously there’s some that’s fall out of our financials that get disclosed. But I’ll refer to Marge to point you to what additional metrics beyond the ones that I spoke to can be communicated in a way that’s consistent with commitment to partners. Marge?

[Marjorie Thomas:]

Yes Rob and Dan, we typically don’t disclose Rhapsody since it is more of an equity method investment for sales at this juncture I’d rather not.

[Dan Weston:]

Okay because you normally do break it out in your 10-Q, on revenues and losses don’t you?

[Marjorie Thomas:]

Yes that’s right. Yes, we will be filing that tomorrow.

[Dan Weston:]

Okay, fine. And then my last question Marge, you bit enough to give us the pro forma numbers on the games division have your Slingoand casual casino games has been sold last year. This year $610,000 positive EBITDA, could you give us what that would have been for last year as well please?

[Marjorie Thomas:]

Yes, that was just for Q2.

[Dan Weston:]

For Q2, yes for Q2 last year.

[Drew Markham:]

Yes we have not taken a decision to whether to do any further look back on the breakout of that number. If and when the Gaming Realms business closed in order to apples-to-apples we might well do some further things that allow people to look at sort of the game business at an [indiscernible] basis keep going forward versus what it looks like. But we decided at this point while we’re in the middle of a transaction, the right thing to do is to say, here’s what Q3 – Q2 would have looked like without the business. Here’s the Q3 guidance if things closed and then will go beyond that. We’ll give consideration to how much further going beyond that once the deal closures.

[Dan Weston:]

Okay, okay, I understand. Well, thanks for taking the questions, I’ll jump back in.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Aron Pinson from LPS Financial. Your line is open.

[Aron Pinson:]

Hey Marge, Rob thanks for taking the question. In regards to the Rhapsody $5 million loans that you and Columbus Nova load had in filing in last quarter’s filing, any update on that, or any chance you can provide more color, why you needed to provide these loans to subsidiary company? Where they running out of their cash, the kind of cash bundle which is growing, any color would be appreciated on that?

[Rob Glaser:]

Marge, I refer to you on what we said publically already and then I’ll commentary – public commentary on top of that.

[Marjorie Thomas:]

Sure, yes. So we are expecting that that loan is going to be repaid back. The term of the loan is actually come through in 2018, but we’re actually expecting that we’ll see that loan be repaid sometime in the second quarter – excuse me, third quarter.

[Aron Pinson:]

And how would Rhapsody get the cash to do that or again any color because it seems very strange, where Rhapsody as a business just based on the financials you guys breakout in the Qs and Ks. It seems like they were operating practically on a breakeven from a net profit loss standpoint. And then sort of suddenly they started losing $7 million, $8 million, $9 million a quarter. And then you talking about obviously the business growing where you could just assume that our sales were growing the only reason the net loss was increasing was because of higher marketing sales, advertising and things like that. I guess what – which direction I’m heading here is there has been some media reports that Rhapsody is looking to raise some funds to sell a portion of themselves perhaps Sony was reported, probably not a great source, but either way just seems very strange where obviously you guys won’t be able to give them $5 million every quarter, but if they are losing last three quarters we’ll see tomorrow what the last quarter was, but you’re talking about $8 million, $7 million, $9 million sequentially over the last few quarters. It just seems like it’s been used to borrow that $10 million just for that quarter, there’s something has to givehere.

[Rob Glaser:]

Well I’d say a few things. One of things that I don’t know about of financials what you see is a difference between Rhapsody’s gap and Rhapsody’s cash characteristic. So I wouldn’t necessarily read too much in like, for instance in the case of GAAP you’ve got non-cash stock charges and the line that would chill up from employee option expenses, et cetera. The other thing that I would say is, I don’t think we or Rhapsody have been particularly specific about what the purpose of the loan was, but I will say that it was not for general operating proceeds, it was – there were certain strategic things that Rhapsody was in conversations regarding, and the loan was made specifically in a context of those strategic conversations, and will be repaid in the context of the conclusion of those strategic conversations, let’s say. But that’s a – I think it’s probably let us far as we’re comfortable going. Rhapsody hasn’t previously disclosed any activities that would be the sort of counterpart of that. So I think it’s fair to say that we along with our partners in Rhapsody thought that there was some interesting opportunities for Rhapsody and it turned out that the loan was made in that context. And the loan we think will be repaid in a timely fashion and we felt fully comfortable if that was the case. And there’s a difference between the technical terms of the loan which as Marge says, are longer and what we’re expecting the repayment which will be a lot sooner.

[Aron Pinson:]

Okay. And I’m just making an assumption here, but you guys are probably not interesting to – in commenting of those rumors about, or perhaps Sony taking an equity stake in Rhapsody?

[Rob Glaser:]

That is a correct assumption. Any conversation that Rhapsody is having with strategic partners, any announcement of those are properly made solely by Rhapsody and not by us, and even if there are rumors in the press that’s, lot of people will remember a lot of things some which turn out to be accurate and which don’t turn to be inaccurate. So we’re not going to comment any further on that or any other particular rumor.

[Aron Pinson:]

Fair enough. Good luck on the turnaround of the core businesses guys.

[Rob Glaser:]

Thanks.

[Marjorie Thomas:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] And speakers as of now there are no questions on queue. You may proceed.

[Marjorie Thomas:]

Thank you very much, appreciate it. Talk to you in the next quarter.

[Rob Glaser:]

Thanks everyone, take care, have a good day, I guess afternoon. We’re in the States in afternoon evening, and good bye from Beijing.

[Operator:]

And that concludes today’s conference. Thank you all for participating. You may now disconnect.