Crexendo, Inc. (CXDO) Q1 2014 Earnings Report, Transcript and Summary

Good day, and welcome to the Crexendo First Quarter 2014 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Chief Executive Officer and Chairman of the Board, Steve Mihaylo. Please go ahead.

Thank you, Becky. Good afternoon, everyone. I am Steve Mihaylo, CEO and Chairman of Crexendo. I want to welcome all of you to the Crexendo 2014 first quarter conference call. With me here today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; Satish Bhagavatula, our CTO and CIO; Jeff Korn, our Chief Legal Officer; and our Controller, Kim Reitz. I am going to ask Jeff to read our Safe Harbor statement. After that, I will give you some brief general comments relative to the quarter. Ron will provide some color on the numbers. Doug will provide a business and sales update. Satish will give an update on technology and then we will open the call to questions. Jeff, would you please provide the Safe Harbor statement.

Thank you, Steve. I want to take this opportunity to remind listeners that this call will contain forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. All statements made in this conference call other than statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to words like believe, expect, anticipate, estimate, will and other similar statements of expectation identifying forward-looking statements. Investors should be aware that any forward-looking statements are based on assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company’s filings with the Securities and Exchange Commission, including the Form 10-K for the fiscal year ended December 31, 2013 and the Form 10-Q for the period ending March 30, 2014. Crexendo does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. I’d now like to turn the call back to Steve. Steve?

Thank you, Jeff. This has been a very important quarter. As you know, the legacy receivables are almost completed. Most of the collections will be completed this year, which will be the first year where most of the sales and revenue will be generated from the new telecom hosting model and our web hosting business. It was also an important quarter as this was the first quarter with our more focused direct sales force. We continue to grow our direct sales force, but we have found that this is a slow process. I am convinced that our sales per salesperson will increase, because the direct sales force continues to sell larger businesses than our dealer partners do. We continue to make strides and our maximizing efficiency with the efficiencies with our direct sales force. I am also encouraged by our dealer partner network. We continue to add resources to support our dealer partners. I am very pleased by the caliber of the partners that we are attracting in the level and enthusiasm in the ranks. As I said in our press release, I am fully aware that we still have more work to do, but I am fully convinced that we are making good progress. I am disappointed, but not surprised by the backlog for Q1 2014; rate of growth was slower in comparison to Q4 2013. The reason I am not surprised, this is the history we saw at Inter-Tel. The year would end up strong and start out slow. Our Q4 sales were heavily at the end of the year with some customers rushing to complete the contracting process before year end, including some large orders. I am pleased thus far with the first quarter of Q2 2014. Those who know me and my team know that we are -- that we watch expenses like a hawk. I monitor expenses very carefully and stress to our team that we need to watch every penny. We treat this business very seriously and run it as if it were a startup, and that in essence is what we are. We will continue to grow the business both organically and through accretive acquisitions. We have several acquisitions that we are reviewing, but I cannot go into any detail at this time. I continue to be very excited and confident in our future and I am happy with the quality of our services and products that we put out and the quality and enthusiasm of our very talented people. I know we are in the right space and I know we have the best services and products. With this I will turn the call over to Ron. Ron?

Thank you, Steve. Consolidated revenue for the first quarter of 2014 decreased 3% or $69,000 to $2.1 million compared to $2.1 million for the fourth quarter 2013 and 31% from $3 million for the first quarter of the prior year. Net loss for the first quarter of 2014 was $1.6 million or $0.15 per diluted common share [audio gap] compared to a net loss of $398,000 or $0.04 per diluted common share for the first quarter of the prior year. The loss before income taxes for the first quarter of 2014 was $1.6 million compared to a loss before income taxes of $635,000 for the first quarter of the prior year. As you may recall during the first quarter of the prior year we released our lease abandonment accrual of $606,000 as a result from the settlement of a lawsuit which reduced expenses by this amount resulting in a smaller loss for the first quarter of the prior year. As of March 31, 2014, we had cash and cash equivalents including restricted cash of $4.3 million compared to $3.6 million at December 31, 2013. On February 28, 2014, we entered into a sale leaseback transaction with the company’s CEO. We sold our corporate headquarters, land, building and some fixtures for $2 million and entered into a lease agreement with rent payments payable in Crexendo common stock. Cash used for operations for the first quarter of 2014 was $1.3 million compared to $1.8 million for first quarter of the prior year. Cash provided by investing and financing activities for the first quarter 2014 was $2 million compared to cash used for investing and financing activities of $57,000 for the first quarter of the prior year. Some segment highlights, Crexendo network services revenue increased 148% to $955,000 for the first quarter compared to $385,000 for the first quarter of the prior year. Revenue for the first quarter increased 20% from $798,000 for the first quarter -- fourth quarter of 2013. At March 31, 2014 our backlog was approximately $7.2 million compared to our backlog at December 31, 2013 of $7 million, an increase of approximately $200,000. We are excited about this positive trend in our network services segment revenue which primarily relates to hosted telecommunication products and services. The majority of our network services contracts are 36 month to 60 month contracts, and the backlog is expected to be recognized as revenue over this period. Crexendo web services segment generated revenue of $253,000 a decreased of 53% for the first quarter compared to $533,000 for the first quarter of the prior year. We anticipate that our revenue from our web services segment will continue to decline as that’s our strategic decision to limit provisioning of web services to our enterprise-sized customers. As a result in the shift in focus, our backlog has decreased to $208,000 compared to $1.3 million for the first quarter of the prior year. This shift in focus will allow us to focus on our rapidly growing network services segment and concentrate upon our website hosting and website development software. StoresOnline segment revenue decreased 58% to $865,000 for the first quarter compared to $2.1 million for the first quarter of the prior year. StoresOnline revenue generated from website hosting services and cash collected on EPTAs, on our extended payment term agreements. Revenue related to cash collected under EPTA agreements decreased 77% to $320,000 for the first quarter of 2014 compared to $1.4 million for the first quarter of the prior year. Web hosting revenue decreased 27% to $505,000 compared to $639,000 for the first quarter of the prior year. Revenue generated from StoresOnline segment will continue to decrease as we collect the remaining receivables from our EPTA agreements. And based on our current collection rates, we expect to collect approximately $380,000 to $400,000 in cash from those EPTAs over the next 12 months. Interest income from EPTA receivables decreased 75% to $51,000 for the first quarter compared to $206,000 for the first quarter of the prior year. This interest income will continue to decrease as our receivable balance on EPTA receivables decreases over time. Based on the remaining receivables out there we have pretty much reached the bottom of the barrel there. And we should see revenue growth going forward in the remaining web services and network services segments. With that I will turn it over to Doug Gaylor, our President and COO for additional comments on sales and operations.

Thanks, Ron. Q1 was the quarter of change for us as Steve had mentioned. So in Q4 2013, we had record sales and we successfully sold a higher percentage of our pipeline. As such it was important that we work on rebuilding that pipeline during Q1. In addition of rebuilding our pipeline in Q1, we continued to monitor cost and rightsize our direct sales channel by eliminating underperforming sales representatives as we mentioned on our previous call. We did see a significant increase in our telecom revenue as we fulfilled and activated a record number of desktop ports for the quarter on our telecom cloud, including a very successful implementation of one of our largest installations to date. The large amount of installations helped us increase telecom revenue 20% over the prior quarter, and even with the large amount of backlog that was fulfilled during the quarter we still saw an increase in our revenue backlog of 4%. Our telecom revenue of nearly $1 million for the quarter was 2.5x our revenue for the same quarter in 2013. Additionally we added 11 new dealer partners during Q1 as we continue to see increasing positive results from that channel. We want to make sure that we have the right dealers and therefore, we are very selective when we are recruiting new partners. We look for partners that have established customer bases, established sales representatives and experience in the cloud. We are very optimistic about the quality and capabilities of the partners that are joining the program and expect continued great success in adoption from this channel. Q2 has started off with record sales contributions from our dealer partners and our pipeline of opportunities being worked by the channel continues to see significant growth month-after-month as new partners get on-boarded into our system. Lead generation continues to be a core focus for us and we are seeing very positive increases in the number of affiliate partners and referral partners joining forces with Crexendo. We added 20 new affiliate partners during Q1 and 23 new referral partners during the quarter. Affiliate partners are companies or organizations that generate leads for Crexendo’s telecom services by placing a banner advertisement on their website highlighting our services. If a lead is submitted through this program and it gets sold, an affiliate partner is rewarded with a commission start to - up to 10% of the value of that opportunity. In a similar fashion, referral partners can also submit lead opportunities to Crexendo without the requirements of placing a banner ad on their website and still receive a significant commission benefit based on the value of the opportunity. Both programs had an impact on leads and on sales in Q1 and we anticipate continued growth and success from each of these programs. We also continue to have success within targeted associations and verticals that we have made large commitments to, focusing on specific solutions for these organizations along with a very strong list of extremely happy clients in these verticals, has generated tremendous opportunities and sales that we anticipate will continue to grow. We continue to eliminate cost out of the organization and have implemented a number of quality work groups within the company to identify and improve processes in the organization that will help us conserve capital and help us reach profitability quicker. Empowering and challenging our employees to help build a better, more efficient organization provides us a richer, more fulfilling culture within a start-up organization. Upon completing the sale of our facilities during Q1, we added a significant amount of cash to our balance sheet and every employee is committed to preserving that cash and that cash balance by building processes that allow us to do more for less. We are regularly reviewing and carefully evaluating accretive acquisition targets and anticipating - and anticipate having positive news on this front during Q2. As the industry continues to grow and expand, we have seen a number of smaller hosting providers looking for synergies with larger, more established host. And that, in many cases, is a perfect fit for Crexendo. By consolidating data centers and cost redundancies, accretive acquisitions will accelerate our efforts to get to profitability. As we continue to add more desktops and minutes of usage to our network, we can negotiate better rates and terms with our core network providers, which also, in turn, helps us in our bottom line. As we begin Q2, I am very excited about the opportunities ahead and our ability to capitalize on these opportunities with a controlled release of our web builder Slingshot, also with the potential acquisitions that we have slated, new product releases, strong partner sales and strong pipelines, Q2 is shaping up to be a very exciting quarter. So now I will turn it over to our Chief Technology Officer, Satish Bhagavatula for an engineering and technology review. Satish?

Thank you, Doug. Greetings everyone, I am glad to report that we made significant improvements to our services, products and technology during Q1 of 2014. These enhancements have been in the areas of increased operational efficiency of our cloud services, improved features and new functionality in our telecom platform, maintenance of our current web hosting platform and development of our new web platform code named Slingshot. As our telecom customers continued to increase, we have seen a remarkable growth in the traffic and stress on our infrastructure. The recent successful implementations of one of our largest install to date, with approximately 1,200 endpoints, demonstrates their infrastructure and telecom platform is scalable and it can withstand the continued growth of the Crexendo base. We continued to make more improvements to adapt to the growing needs of our telecom, data, connectivity and high availability of our solution. We executed new contracts with Level 3 to fit Tier 1 carrier to improve our new network reach to our customer premise, reduced latencies and deliver higher quality voice services to our customers through the public internet. We started a new build out of -- by bringing an additional fiber into our facility to allow for additional diverse entrances. These new agreements will help us improve our service margins greatly due to further reduced telecom cost. We take great pride in delivering services over the public internet which no other carriers and other providers are able to do. We continue to invest heavily in adding enhanced external monitoring capabilities to our platform and availability of services vital to our cloud offerings for both telecom and web. The continuous analysis, monitoring and evaluation process better prepares us from system outage in the public internet upstream from us, telecom carriers, upstream from us and faulty equipment within our infrastructure. Our goal is to continue to build, operate, and manage a state-of-the-art cloud infrastructure. Our store 7.0 platform continues to service most of our web hosting and e-commerce customers today. Although, we have ceased to add major new functionality to our 7.0 platform, we continued to make small improvements and regular bug fixes to adapt to the changing landscape due to search engine updates, browser updates and internet standards. While supporting our existing e-commerce platform, our development team is focusing on developing our next generation web builder, Slingshot. We started a beta trial offering of Slingshot at Biola University by introducing Slingshot in their January course offering. We also introduced Slingshot to a few web agencies, developers that specialized in developing websites for businesses. The acceptance has been great in both these diverse clientele. We received great feedback which we are taking into consideration as we get closer to a wider availability of the product. We feel confident that this platform will enable us to increase our web hosting presence. On our telecom platform, we continued to rollout new updates every four weeks. During Q1 of 2014, we added support for many more devices. Crexendo platform now supports higher density 16-port and 48-port Grandstream Gateways. This new device support enables Crexendo to meet the needs of our prospects with large legacy analog infrastructure while still adapting their business to our cloud technology offering. We also added support for wireless DECT phones, which has proven to be a great enhancement to our portfolio. During this quarter, we also rolled out much anticipated hot-desking capability. This functionality greatly enhances our ability to implement customer deployments such as call centers, multi-set enterprises with roaming and seasonal employees when hot-desking is enabled on a phone, an employee can walk up to a desktop, login on the desktop phone and use that phone as their own for the duration of their visit. We continued to add such productivity features every release thus enhancing our product and service offering. During Q1 2014, heavy emphasis was made on the integration of PBX Central and the KBx platform into Crexendo’s infrastructure. This consolidation of data centers and infrastructure will bring additional cost savings thus improving our margins and operational efficiencies. We continued to look into synergistic technology partnership opportunities to help us grow our product portfolio. We continued to adapt -- adopt more cloud technologies to allow for greater automation of our business, which in turn improves our margins and enables us to better serve our customers. With that, I will now turn it over to Steve Mihaylo.

Thank you, Satish. Becky, at this point we are ready to open the call up to questions.

[Operator Instructions] And we will take our first question from Neal Goldman with Goldman Capital Management.

First on the web hosting with the introduction of Slingshot, when would you expect to start accelerating that business? And what’s happening to the college program?

Yes, the college program is going to continue in its present form for at least another quarter or two. We are hopeful that by the September timeframe when the new semester starts, we will be able to introduce the product and -- reintroduce the product and services to more colleges and more universities. We are also going to be attending trade shows where developers will present. So I would expect to start seeing trickle of revenue in the third quarter and then start growing in the fourth quarter and beyond.

Okay. In terms of where we stand now, what sort of level of sales we need on the telecom side to get to cash flow break-even on a quarterly basis?

Right. It’s going to be both telecom and web hosting but primarily telecom for this year. And I would say around $1 million a month should put us into profitability. At our current rate of growth we will be there probably in the first or second quarter.

Of next year, okay. Steve what are you -- what percentage of Internet America do you own?

I am not exactly sure, but it’s probably about 43%, 44%.

Okay. And I noticed -- you put out an 8-K, but I noticed they hired a firm about a month ago to help them assist them in this process, and yet in the 8-K, you made a comment that they have not responded whatsoever, I mean -- and also I bought some shares after the announcement of Internet America, but is there a fiduciary responsibility to have a shareholder vote or to at least respond to your offer, or to seek alternative offers?

Yes. Jeff as you can realize I am at somewhat of -- at a conflict here, so I am going turn this over to Jeff Korn to answer. Jeff?

Neal, let me just give a little background before I answer your question, and I am not sure I am going to give you answer that fully satisfies you. But you may have noticed that today we released our own 8-K, because we had a Board meeting this afternoon. And the Board directed me to inform Internet America that our offer to discuss acquiring all of the shares was withdrawn. Our offer to discuss acquiring the shares was withdrawn. The Board was, I would say at a minimum, highly surprised that we could not even get the courtesy of a phone call. Now I realize the question you asked is whether there is a fiduciary obligation to have engaged in some conversation, and I frankly don’t know -- I know their 8-K said that they engaged a law firm. I do not know what they did or who it is that they are receiving advice from. And I really don’t want to be critical about their peoples’ advice, but I would just say, in my opinion, it’s always better to fulfill your fiduciary obligation by engaging in conversation.

But aren’t they subject to major losses by shareholders for not trying to either negotiate a better offer or at least seek alternatives or what have you. I mean, it puts them at major risk, I would think.

Neal, anybody with a filing fee and the ability to word process can file a lawsuit. So, I’d say anything is possible.

We’ll go to our next question from Craig Samuels with Samuels Capital.

Quick question with respect to Internet America. Your filing suggests that you are walking away, is that the interpretation?

Again, I am going to answer. Steve is trying to not discuss this, in light of the fact he is their larger shareholder. All I can do is what I was instructed to by our board, who directed me to inform Internet America that our offer to discuss, our offer -- what was an open-ended offer to engage in conversation has been terminated. What will happen in the future? I don’t know and I can’t -- I can’t help you read the tea leaves any better than I can.

With respect to -- I heard Doug mention in the prepared remarks some comments about additional M&A activity. Doug, is there - Doug, can you quantify or provide anymore color on those comments?

Craig, I am going to answer that one. As I said in my opening statement, we are looking at some very interesting opportunities. We're close on one, but beyond that, I can’t really comment until we have a press release.

What size deals are you guys looking for typically?

We are starting off a little small, probably in the range of $500,000 to $1 million a year because they are easy to integrate, but we are open to acquiring much larger companies even as big as $8 million to $10 million.

Okay. And then with regards to Slingshot, are you able to discern at this point in time what Slingshot could mean in terms of revenue going forward with the pricing, et cetera?

Yes. It’s a little premature, but one of the benefits of Slingshot is that it’s a very robust builder and I may get Satish involved in explaining the technology, but obviously we are looking for larger enterprises on the developer side, where we can charge more for the hosting. WordPress, as an example, gets $2,000, $3,000 a month per website to host on larger enterprises. And this is a market we are going to look into, but on the university side, these are going to be small websites, a couple of pages up to about 10, and you are not looking at much there. So, the real opportunity is on the enterprise side with developers, and really the huge numbers will be on the side of the universities and that’s partly a marketing situation. And we also look at the ability to put affiliate links on just about every website that we build, but you are going to have to stay tuned for a projection on revenue numbers. But I can tell you this; we wouldn’t be investing as much time and effort, and we have a dedicated staff of engineers working on this, if we didn’t believe in this business, if we didn’t support it 100%.

Right. And then I didn’t hear, I joined the call a few minutes late. Did you mention how many sales folks you have on the payroll at present?

I don’t think that’s really important at this point. I mean, we can tell you, but the thing is they are selling more and more. We are getting about $100,000 a month in productivity out of each salesperson. So, that’s $1.2 million. And that’s very significant, because just as early as or as late as 3 to 6 months ago, it was half of that. So, we are getting more productivity out a fewer people than we were when we had twice as many people. And we are also replacing anybody that we now cut, whereas we didn’t do that last quarter. An interesting thing about that is our expenses didn’t come down with the reduction in force that we had in January, because we had severance cost and other things involved. You are going to see a significant reduction in expenses in the second quarter and beyond and you are also going to see revenues start to come up. For instance, a large account that Satish and Doug spoke about provided very little revenue, if any, in the first quarter. So you are going to see all of that revenue start flowing through the books. I am really excited about where we are and how well our data center and our services and everything that we are doing, that technology-wise is holding up. It’s absolutely phenomenal. I don’t think any of our competitors have ever installed a site as big as the one we just cut over about a month ago. And I can tell you this, we have got probably 5 or 10 of those that are 300, 400 desktops or more running very, very successfully and very smoothly. We have got the ability to add features and functionality on the fly, whereas our competitors are mostly using other technology that they are licensing. So, that gives us a leg up in this industry.

Right. And then last question from a competitive standpoint, did you guys have any notable competitive wins in this most recent quarter against some of your other public companies, publicly traded companies?

I feel that every deal that we get is probably significant compared to our other public entities such as RingCentral and 8x8, because their average is only about 10 or 15 desktops per deal. And we are already on an average of probably 25 or 30. So, we are double them, which I consider a major win in itself. We still have customers that don’t realize that we are already working on one digital network; it’s called the cloud or the internet. And the end users are still installing CPE equipment, and from day 1 that stuff is -- that’s customer-premises equipment, from day 1, it’s obsolete. Everything is going to the cloud. Just think of all the things that you do as an individual on the cloud, you don’t realize it, but every single thing you do on your smartphone or mobile computer is on the cloud. Everything you do at home when you are using the internet is on the cloud, from Netflix to banking to you name it on Amazon. And now you can even order an automobile through Tesla and others and build it the way you want it, the color, the interior, and all of that on the cloud. It’s a not a question if; we are already there, it’s just that there is some adaptors and then there are some others that prefer to ride around in the horse and buggy.

And Craig, I would say that the high percentage of opportunities that we won throughout the quarter and even historically have been against the legacy players out there. That is much more the competition as we see it today and displacing them and beating them out of opportunities. It’s rare that we see 8x8 and RingCentral on multiple opportunities, especially on the larger enterprises, because as Steve said, a lot of their customers are focused on smaller size opportunities. When we get into the medium size and small enterprises, we typically see the legacy players out there, which is good for us because it’s a much easier sale against the legacy players than when we are competing against other hosted providers, because the other hosted providers obviously have a similar message.

Yes. And one more brief comment, Craig. I personally I don’t know about the other people in this room, but I personally think that our other hosted providers like RingCentral and 8x8 don’t have the capability to do a large instillation like we can. So, as Doug pointed out, our only competition in the larger arena usually is customer-premises equipment or legacy equipment.

Right, that’s a good metric. And then the last question, do you feel like revenue is bottomed out and as we move throughout the calendar year, revenue should accelerate sequentially?

Yes. As Ron pointed out, we are at the bottom of the legacy revenue. We have less than a $0.5 million to collect over the next 12 months and we have definitely bottomed out. So, most of the comparisons, you are going to have to look at quarter-to-quarter versus the previous year and you will see a sequential increase in revenue quarter-to-quarter.

Right. So, it should be blue skies from here. Good luck.

I don’t know about blue skies, but we play in weather called meteorological conditions as well. We can do it on instruments.

At this time, we have one question remaining in queue. [Operator Instructions] We’ll take our next question from William Meyers [ph] with Miller Asset Management.

I was hoping you could tell me a little bit about the sales cycle and the instillation cycle. Is there a typical amount of time for a customer from when you contact them until you actually switch on their service and how does that work?

Yes, I will let Doug handle this one. I do have a brief comment. Obviously, the larger the deal, the longer it takes to close it. Some of these big deals have taken as much as 6 months or a year. On the smaller ones, some of them we're able to close in a few days or right on the spot. And it does take a little bit of time to implement. And Doug, do you want to add more to that?

Yes, typical sales cycle for us from start to finish is typically about 4 weeks, but as Steve said, we have got opportunities. We do a lot of vertical association trade shows. And we have actually closed opportunities on the spot within just chatting with somebody at the trade show and doing a quick evaluation on what their current expenses are and showing them our solutions. So, as quickly as an immediate day of meeting-type sale, to some opportunities. Obviously the bigger opportunities, the 500,000 station opportunities sometimes will take a month to cultivate and get to closure. Once we get agreements on an opportunity, we try and move forward with fulfillment. Typical fulfillment for us is a minimum 2-week window, more than likely 3 weeks to get something implemented and fulfilled. Bigger opportunities again take a little bit longer as we have to do a lot more diligence, a lot more coordination to make those big opportunities, the 100,000 and 500,000 station opportunities come through the fruition, but we have got an extremely, extremely well-documented, well-vetted out process to fulfill an opportunity. Our operations group headed by our VP of Operations, Rich Braband, does a phenomenal job of taking a order and getting it completed and getting customer satisfaction out of it. So, our customer satisfaction ratings are extremely high. We monitor those and measure those quarterly and -- not knowing what our competitors are, because they don’t publish that information, but I got to think ours got to be, if not the highest in the industry amongst the highest in the industry.

Okay. And one last question if I may on the Slingshot, you talked about some of your marketing ideas. Is there going to be a direct sales force similar to the one that you use for the telecom for Slingshot or is it going to really be working on another model?

Well, it will mostly be through trade shows, but there will be a certain number of direct people working with the universities. Right now, we just kind of spread the responsibility around and some of our engineers are working directly with the beta testers to make sure that we answer any of their concerns or tweak it to make sure that functionally it works well for a novice as well as it does for an advanced programmer developer that can handle HTML, XTML, JavaScript and all the other stuff, but we do that at the front end of the process. They just answer whether they write code or whether they are a drag and drop-type user. So, if they answer yes or no, it puts them into the appropriate software platform.

And keep in mind that, with Slingshot, we are going to be offering that application, that software out to web developers. So, in many cases, the web developers will be the sales force out there. Those are going to be the ones that are building on Slingshot and then we will get the hosting revenue off of that. So, we’ll get that residual benefit of universities and developers out there using the platform. And from that perspective, there is really not a sales force involved. It is their university students or it’s their developing teams out there, those are going to go find and acquire the clients and build it on our platform and then we get the residual benefit of the hosting revenue.

[Operator Instructions] We have no further questions at this time. So, I turn the call back over to our speakers for any additional or closing remarks.

I have no more additional remarks. I can tell you each quarter that passes I become more and more committed as do our people and we are all very excited about this business. And we look forward to talking to you again after the second quarter ends. Thank you very much and good afternoon.

That does conclude today’s conference. We thank you for your participation.