Crexendo, Inc. (CXDO) Q2 2010 Earnings Report, Transcript and Summary

Good day everyone, and welcome to the iMergent, Incorporated Second Quarter Calendar 2010 Financial Results Conference Call. Today's conference is being recorded. At this time I'd like to turn the conference over to Mr. Steve Mihaylo, Chief Executive Officer. Please go ahead sir.

Thank you, good afternoon everyone. I'm Steve Mihaylo, the CEO of iMergent, and I want to take this opportunity to welcome all you to the iMergent second quarter 2010 quarterly results conference call. With me today are Clint Sanderson, the President of our StoresOnline and Crexendo division. Jon Erickson, our Chief Financial Officer, David Krietzberg, our Chief Administrative Officer, Jeff Korn, our Chief Legal Officer. I'll have Jeff Korn read our Safe Harbor statement. After that I'll give you a brief overview of the quarter. Jon Erickson will then provide some granularity on the Q2 numbers, and then we'll open up 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 likes 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 upon 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 fiscal year ended December 30, 2009 and the Forms 10-Q for the periods ended March 31, 2010 and June 30, 2010. iMergent does not undertake any obligation to publicly update or revive any forward-looking statements, whether as a result of new information, future events or otherwise. And now I'd like to turn the call back to Steve for some comments.

Net income for the second quarter of 2010 was $50,000 or 10% per diluted common share, compared to 8,535,000 or 75, $0.74 per diluted common share in the comparable quarter last year. Please keep in mind that the earnings per share in the June 30, 2009 results included a benefit of $0.62 per share from the settlement of IRS in connection with our IRS solvent. Revenue for the second quarter of 2010 decreased 5% to 17.448 million compared to 18.278 million for the comparable quarter last year. However, the revenue results are sequential 8% higher than revenue from the March 31, 2010 quarter when excluding the 1 million one time benefit related to avail during the March quarter. The lower revenues when compared to 2009 were results of the 13% reduction in the number of workshops conducted during the second quarter of 2010 as compared to the comparable (audio gap) portfolio on a 17% decrease in the number of preview buyers attending our workshops compared to the prior quarter. We believe that the high end employment rate, general down turn in the economy and the lack of credit available to our customers continue to negatively effect our workshops and numbers of buyers. However, we have seen some hopeful signs; there was an increase in the percentage of attendees purchasing products to 27% in the second quarter of 2010 compared to 24% in the comparable quarter of 2009. Revenues from our Crexendo Business Solutions division were $365,000 to zero revenue in the comparable quarter last year. Total operating expenses for iMergent increased to 18.491 million for the second quarter of 2010 compared to 18.774 million for the comparable quarter in 2009 primarily as a result of an increase in the number of international events which have higher marketing and an event cost and an increase in expenses associated with the company's Crexendo division. We believe the timing is right to increase our direct sales efforts by hiring additional direct sales representatives for the Crexendo division finally an anticipation of the nationwide launch of our host of telecom offering in the first quarter of 2011, we have increased our development team to allow us to go to market with a robust offering that will include premium services such as operative services eventually conferencing such as the one you are on and sometime probably towards the end of next year, the first part of 2012 a very robust multi-party video conference to service the expected needs of our customers. While these additional investments in sales and research and development may impact our short term profitability, we believe these are necessary investments in our business to achieve future long-term success. I am also pleased with increase in the percentage of attendees purchasing and we believe that is impart due to selling more of our StoresOnline products and services as a service model in other words the SaaS is supposed to a traditional software and license sale which we believe there is better job of meeting with the needs to train and there is a better job of qualifying our purchasers. We have one team selling the SaaS model full time. We anticipate transitioning and additional workshop team to the SaaS model varying this quarter of 2010 with the goal of converting all of our workshop teams to the SaaS model at the first quarter of 2011. Aside from the benefits I discussed, the transition from a software license sale to a SaaS sale should enable us to open new sales channels such as affiliate marketing, private label partnerships, direct online channels to compliment our current workshop model. Finally, I have just completed my semi annual top to bottom review of operations. I fully believe we're in the right space and that we're on the right track. I have been energized by the progress in our SaaS sales telecom division, Crexendo services division and I realize the challenges we both, we face both in transforming our StoresOnline business, building our telecom division and expanding our Crexendo business services division all well, facing these tough economic uncertainties. My review and the progress our team has made convinced me more than ever that our common stock is undervalued. We have found it difficult to purchase the amount of shares we wish to purchase on the open market with our repurchase program. As a consequence, I have asked my team to prepare a stock tender offer seeking to allow the company to repurchase between 250,000 and 1 million shares of iMergent common stock at a range of 4.25 to 4.75 per share. We believe this action is in the best interest of our shareholders and our company and we are hopeful that this will be more effective in allowing us to acquire stock than our repurchase has been today. I believe iMergent's board will support this action and we hope to have a tender offer in place by the end of this year. At this time I will now turn the call over to John Erickson for a review of our 2010 financials.

Thank you Steve. As was mentioned the majority of our decrease in revenue from 19.37 to 17.448 million is related to a decrease in the principal collected and our accounts receivable balance was decreased approximately 1.8 million to 4.6 million in the current quarter, compared to 6.4 million in the prior year quarter. As a percentage of revenue, this equates to 27% of StoresOnline revenue in the current quarter compared to 33% in the prior year quarter. In December 2008, when we reduced our number of workshop teams from six to four, we realized an immediate pickup in revenue and profitability as a percentage of revenue related to the collection of our receivables increased dramatically. Incidentally this revenue has relatively little cost associated with it as the costs were recognized at the time of the event with very little cost recognized at the time of collection which triggers the recognition of revenue. Over the past 18 months, since we made the reduction in teams, our revenue related to principal collection on receivables has decreased from 7.9 million in the March 2009 quarter to 4.6 million in this current quarter. With that said, our quarter-over-quarter amounts have began to stabilize as we have gone from 5.2 million in December 2009 quarter to 4.8 million in the March quarter, settling in at 4.6 million this quarter. We expect the revenue related to principal collected on our receivables balance to continue near its current levels in the near term assuming of course the collection levels remain consistent. StoresOnline revenue related to our events in this quarter decreased approximately 5% to 9.1 million, compared to 9.6 million in the prior year, despite a 12% reduction in number of events as we were able to close a higher percentage of our attendees this year than we did last year. Now, I would like to expand a little on our plans to move from the sale of our traditional software license to a Software-as-a-Services model, with recurring monthly subscription, and how it will affect our revenue in the near-term. When we started testing this model in January of this year, we knew that we could not make the change to a SaaS offering unless we were able to generate a comparable amount of revenue at our events as we have under the software license model due to the significant marketing investment required to conduct these types of events. Realizing that, we've been working over the past six months to developing an offer, focused more on the training aspect of our services, which includes training on how to effectively design and market your site, not only to increase the traffic to your site, but also to increase the conversion of that traffic once the visitors get to your site. The results of this effort have been encouraging as we've been able to approximate the average sales price of our traditional license events and our SaaS events. While we are not prepared to transition all of our teams to the SaaS offer at this point in time, we do feel comfortable transitioning a second team to the SaaS offer and expect a transition of all of our teams to the SaaS offer by the first quarter of 2011. We believe this transition will give us more flexibility and how we fill our events, in addition to the potential additional sales channel that Steve spoke of earlier. As Steve mentioned, our Crexendo Web Marketing Services revenue increased 50% quarter-over-quarter, up to 365,000 from 242 in the March quarter. As we increased our investment in direct sales personnel on this division, we may see a decrease in our short-term profitability, either a new higher scale up to speed. However, we believe this short-term investment will pay dividends in the future. Operating loss from our Crexendo Web Marketing Services division was 443,000 during the current quarter, compared to 235,000 in the prior year quarter. Operating loss from our telecom division was 339,000 in the current quarter, compared to 186,000 in the prior year quarter. From a cash flow perspective, we generated approximately 467,000 in cash from operations for this quarter, compared to a use of 126,000 in the prior year quarter. During the quarter, we purchased 54,806 shares of stock at an average price of $4.69. We also acquired an approximately 22,000 square foot building in Tempe, Arizona for 1.5 million to $5 million. This building will serve as our corporate headquarters as well as the headquarters for our telecom division. As of June 30, 2010 cash and cash equivalents, including restricted cash was 19.5 million. Working capital was 14.8 million and working capital, excluding deferred revenue was 28.3 million. Total current long-term net trade receivables were 19.2 million at June 30, 2010. As we discussed in our last earnings call, we've experienced -- we've continued to experience slight deterioration in our accounts receivables. The deterioration continues to slow from a velocity perspective, and while we haven't reached the bottom yet, we believe we are nearing it, and we are comfortable with the allowance we have set. At this point in time, I'll turn it back to you, Steve.

Thank you, Jon. At this time, operator, we'd like to open this up to questions.

(Operator Instructions) We will go first to Neal Goldman with Goldman Capital Management.

Good afternoon. [Multiple Speakers]: Good afternoon

First, could you explain there is an option why hasn't is been approved, and why can't it be done in the next month or so?

Well, we've actually, we want it together our second quarter results out, and due to just being able to get all of our Directors together that all live in different cities, we --

Neal pardon me, this is Jeff. The idea just came to us probably over the last two and a half weeks and do a tender offer is a long detailed process. We will involve paperwork back and forth with the SEC and we'll probably taken internally a good four to five weeks of drafting as you know it's not a small document. We just wanted to -- once management all thought that it was a really good idea. We want to put that information out there, but it's just that the very preliminary stages that we've decided to move forward with this.

Okay.

And the other thing, Neal it takes -- we'll have to do this with the document that is approved by the SEC and as you know that can be a 6 to 12 week across the (inaudible) itself.

Okay. Number two, what is it take to get Crex -- I mean you're losing on Crexendo 440,000, what kind of revenues you need to be a casual breakeven at Crexendo?

I'm going to let Jon Erickson handle that question, but I want to point out we're ramping up the sales force so that number keeps moving up as we have salesmen.

Okay.

Neal currently would be at about 900,000 per quarter to be a breakeven point for the Web Marketing services, from a telecom perspective we haven't started selling yet. So that's all development cost.

First of all, what -- in your mind Steve, what sort of ramp do you expect now in the sales level at Crexendo?

Well, I think you can see a ramp comparable to what we have. We're ramping on at least 50% a quarter. Now obviously, at some point in time that's going to level off and ramp more than normal ramp. I would think though that we should be able to sustain quarter year-over-year sales increases once we normalize, and they'll probably take us a year or two to normalize in the range of 25 to 30% a year.

Okay, but that yet -- you're still of -- first of all, the second quarter didn't look like it was significantly greater than the first in this 365 versus three something?

No the 365 versus 242 was a 50% increase quarter-over-quarter.

Okay.

I'm probably looking at full-year or some other number.

Okay. And in terms of telecom, your offering will be ready when for your [Multiple Speakers]?

We expect it to be ready in the first quarter of next year. I'm actually talking to our telecom hosted product. I'm sitting in my office in Reno, Nevada and this is being hosted out of our servers in Orem, Utah.

Okay, all right and just on the SaaS model, I understand the training which really get the clients up to snuff in terms of their ability to have an effective product line. In terms of the hosting, what is that going to amount to on a per client basis or has that worked?

We haven't figured that out, but I would expect on the enterprise side a minimum of a 1000 or $2 per month because we're going to host the website hopefully if they don't have one already, their telecom, we're going to provide them with their network service, in another words their connectivity on the internet and we're also going provide them with search engine optimization, link building and any other services like pay per click.

This is John Erickson. From a StoresOnline perspective a lot of the things we're working on is taking the current software that we have and bifurcating it into multiple modules that we can charge a subscription for each individual module. But we're in the process of bifurcating that so that we can assign a price to each element.

Okay, and on that enterprise side Steve, 1,000 or 2,000, what would be the average customer that would need that kind of -- that range of services?

I'll say somebody with 10 to 20 phones approximately.

Okay, very good. Thank you.

We'll go next to Jeff Bash, Private Investor.

Hi, Jeff. How are you?

Okay, I'll follow up with some more questions on the [Dutch] tender offer. Will your buy back continue in the meanwhile?

I'm going to let Jeff Korn answer that.

We will strategically purchase on the open market as appropriate while we're doing that, Jeff.

And the second question if you can't answer it now Steve, at least think about it and maybe it should be in the FDC document. If you all have the ability or authority from the board to purchase any excess tenders over the amount that the company is able or willing to approve?

You're absolutely right. To go over a million shares it will take additional board approval.

Correct, but can you say now that you will consider that purchase of the excess over a million or you might not?

We'll definitely consider it but we have to keep enough cash on our balance sheet to operate the company.

Oh no, I didn't make myself clear. I meant you personally, since you've shown…

Me personally? Absolutely, yes. Personally I will.

Making a point to Jeff Korn that I think this is something that would need to be in a disclosure document.

It would be, Jeff. It's obviously one of the things we've considered. As Steve indicated and as we had in the press release, the tender offer is anticipated to offer to purchase somewhere between 250 and 1 million shares. We don't know if we'll get up to the million shares. We have to work that out with the board obviously. John Erikson and I are starting, preparing the tender offer and those things are all obviously being considered Jeff. I appreciate you pointing that out.

No I just want to make clear the fact that Steve maybe willing to purchase any excess over what the company can or is willing to, is a material factor that ought to be included in the tender offer.

It is and obviously -- I don't think Steve wants to make that decision while we're on the call right now but it's one of the things I will discuss with Steve. Our lawyers and auditors will discuss, and the board will, and if Steve intends to do that, we obviously will put that in the document.

Well he might not even have commit to do so but if you might [multiple speakers]

We'll just see if he wants the option to do it. Yes, correct Jeff, if he wants the option.

I would think Jeff that even that would require SEC scrutinization.

I agree now. Now let's get to some company questions. You did mention having some international events and for a while there you didn't. Now historically one time the company did up to a third of its events overseas and they were at that time considered to be more profitable because they have higher cash payments generally and less financiering. Are you headed back in that direction on a gradual basis or what?

Well you know we always look at any opportunity that's out there. I will say this. It appears that the economic conditions worldwide have affected the potential customers in overseas markets more than they have in the U.S. so for the time being unless Clint Sanderson have something in the works that I'm not aware of. We don't have any additional overseas selling opportunities except for what we're doing in India.

Yeah. That was my next question. How are we doing with the Indian initiative?

Well, the Indian initiative is actually starting to gain traction. I'll let Clint answer that.

So yes, Jeff back to your question on international events. Steve is correct. I don't have anything up my sleeve there right now with the downturn in the economy and the marketing expenses involved in going overseas especially right now it's not possible really to do that profitable. So, that's what we're holding up on the international events right now, and don't have any plans to do international events at least the rest of this year. As for India, we are encouraged by what's going on in India. We have the bulk of our non-customer facing tasks as far as programming being done now with our team there, and we are working with our partners in India right now on the go-to-market strategy marketing our software platform and our web marketing services, very basically leveraging the strategic partnerships and relationships that they have in India, and we're also seeing potential in-roads into Europe as well through that partnership.

Do you have any feel as to what the revenue potential on an annual basis might be? I mean obviously you don't know for sure, but you're talking a few million or many, many millions or what?

Well, it's right to early to project that, but we're certainly doing the ground work to get as much as possible job. I really can't comment until we get a little more traction, and we get some more of the relationships we are working on in place.

I understand. I'll respect the Crexendo. When you first talked about it a year or so ago, you really had grand hopes for the vision, yet starting from 365,000 a quarter, even a 50% a quarter growth, it will take many years before its up to 10 or 20 million in sales, and I guess I'm curious to see that as a potential down the road or scale back your expectations to what you think you can achieve there or what?

Absolutely of anything I think we can exceed the numbers, but until we have a full product offering and that won't occur until January. We won't be able to offer a full compliment of products and services to our enterprise customers, and obviously we also intend to offer these products and services to our StoresOnline customers, but that will be a much smaller opportunity. But the reason why these numbers are probably not as great as your expectations Jeff is because of the fact that most of the revenue is recurring revenue, and it goes on for basically as long as customers are customers of ours. Instead of selling them something upfront, the way we did at Inter-Tel where if sold a $50,000 system you got 50,000 upfront; but then the next month you had to go out and shoot a whole -- lot more of business. In a recurring revenue model your revenue just keeps going month after month after month. So, I think the profitability on a recurring revenue model is going to be a lot higher than it would be on a SaaS model.

I got it. I only got two more questions. On CapEx of our office building, when you made the decision to make that purchases as opposed continued leasing somewhere, did you take into consideration it's cost in terms for us having less money available to buy stock at these low levels and the lousy commercial real estate, the value situation in the country generally and the sort of tougher economic times in Arizona probably contributed to by this immigration furor you have down there.

Well we took all of that into consideration and we feel that it also makes the statement about the direction of the company. That building will house our Crexendo division and it's approximately 22,000 square feet. We bought it for what we think is market or slightly below market. So, the prospects for that building are only up and frankly the amount of money that we received in the way of interest that our cash balances are very, very small but we took all of the things that you mentioned into consideration.

Last question, do you have any plans in the near term to go on the road to share the story with people who might have been former investors in Inter-Tel or former investors in iMergent in past times.

Yes, Jon Erickson, we're planning on been of an [ADA] conference here in the not too distant future. Can you elaborate on that on that?

There is one in November that we have. We're contemplating attending in San Diego.

Okay great. Thanks a lot for your comments.

You bet Jeff.

(Operator Instructions). We will go next to Robin Lochner, who is a Private Investor.

Good afternoon Robin.

Hi good afternoon. This has been a good call, the company definitely seems like it's on the right path. I just had a couple of quick questions. Once the tender offer commences, what will the timeframe be for completing it?

I have given my opinion and then Jeff Korn our company attorney will give you his. But generally these tender offers are open for a period of anywhere from 30 to 60 days or until the full amount of the tender offer has reached. Jeff, do you want to add to that?

No, I would expect it would be something along those lines Steve, again Robin we have not run all of this through completely with our Board, so it's hard to answer those questions. But the parameters Steve gave you make a lot of sense.

And the SEC has an awful lot to say about Venezuela.

Sure. And then during the quarter the company was able to repurchase a little less than 55,000 shares of stock. Where you able to repurchase any since June 30?

Well we have been on a client period, so there have been no repurchases and we already started discussing the idea of the tender offering in the last week or two. So, the answer is no, however, I might also point out, I am not sure of the exact amount but I believe I purchased approximately a 100,000 shares in the quarter as well.

Okay and then finally sort of a open ended question. There is a lot of things going at the company at the moment, given that what do you think the company's biggest challenges are, how would you quantify those challenges and how are you addressing those challenges?

Well we have three big challenges and they are execution, execution and execution and the way we're addressing those challenges is we're in the process of putting our quality improvement process in place that should drive our costs down. We've hired some very, very experienced telecom engineers and we're hiring the very best sales people that are out there. We've got some great people at iMergent already and I'm very confident that we'll be able to execute but that's going to be our -- our greatest challenge is executing profitably and doing it in a way that's scalable because as the business picks up, it will be necessary to be just as good on the execution side from a scalable standpoint as it from a sales standpoint.

Okay, very good. Thank you.

(Operator Instructions). We'll go next to Vishal Gupta, Private Investor

Hi.

Good afternoon.

Good afternoon. So I have a question regarding competition. So now, obviously if you look at your Crexendo product rights, there are free conference call services. There are also free video conferences. Intuit is offering Homestead for about $20 a month. So then there are competitive products and I do see a value in your product. It's completely integrated. You're proving search engine optimization out of web services. How do you justify charging $1,000 or $2,000?

Well it depends on how many customers are out there but lets say you have a company with 20 employees and that's probably the size that can justify 1,000 to 2,000, you're probably going to have somewhere in the neighborhood of around 600 a month for their phone service, maybe even slightly higher. They're also going to need probably at least a T1 line which is anywhere from another four to $700 a month. Now you're up to 1,000 right there. Then the hosting of their web services can be anywhere from another $30 a month to $100 a month depending on the amount of traffic they've got going over. Now you're up to 11 or 1,200 a month. Then you add in SEO which is a constant thing. It is like the yellow pages. SEO is required all the time. As algorithms change you have to change the search engine optimization. That can anywhere from 500,000 a month. We like holding got that and then you add all these other services like operator services, live operator services I might add, bridge, conference bridge, video conferencing and so on, its very to see how a customer with 15 or 20 employees can be up to 1,000 or two a month. And that's a lot less than one operator would cost. A single operator answering the phone with all the benefits and insurance and so on can run 30 to $40,000 a year.

Got it. So, maybe I've misunderstood a little bit. Right, so an operator is needed in the company essentially to take inbound calls. Here we are talking about a conference calling system. Right? That essentially (inaudible) conference call.

No, no. The operator services is answering your phone and locating people for you. The conference bridge is what we're talking on currently.

I see, okay. Okay. And just on the Indian market, what's your go-to market strategy there? Are you selling your StoresOnline product or are you focusing on our Crexendo product?

We have a partner in India that owns the Yellow Pages in India and they are selling our web services to their customers on a resale or a white label basis. And we are doing the hosting in the United States.

Got it and to sell your Crexendo product, you mentioned you are going to use direct sales force. So, you're not going to leverage your workshop model by any means to sell that?

Well, we may leverage it to the extent that, that is as we bring on affiliates and they have a customer base. We may hold the events for their customers. But it's more of a direct sales model, whereas the Crexendo -- I mean whereas the StoresOnline model is more of a marketing model. But we will devote marketing dollars to generate leads on the Crexendo sign.

Okay. And another question related to the increase in the Crexendo revenue, you've said from about 240 to about 320. So, about $100,000 increase. So, an annualized basis, this makes me $400,000. Is that a correct way of looking at it?

Well, first of all, it's a little bit larger increase than that, but if we get an increase of 50% in the coming quarters that would be about $550,000, whereas end of the year, that would be about 750 to 800,000 in the quarter. So, it's going to be more than 400,000.

Right. And what's your retention rate? I know it has been only -- this business doesn't have a big history, but what's your retention rate right now?

Well, the retention rate in the StoresOnline has been very poor. And that's why we are going more to our SaaS and more to training model, so that we can help our customers be successful. But on the Crexendo side, you are selling to existing enterprises and that the retention rate should be very high, over 90%, maybe 95 or 96%.

Got it. And just one final question on that accounts receivable issued side, I am very familiar with the issue. You could just please elaborate on that as to what is going on? Why we haven't been able to collect?

In the past, we generated at a very large receivable with our customers because they were buying a $6,000 package or a $3,000 package. And they were financing it over two or three years. So, we have large receivables and as the economy got worse, our customers failed to pay us in a lot of instances. So, as we go more to SaaS model, that receivable will go down because it will be month-to-month, and the customers are actually paying you in most instances a month in advance. So, receivables will continue to shrink. But we are on a cash basis accounting in the StoresOnline division and we only recognize revenue when we collect the receivable. As we go more to a SaaS model, we will go more to accrual accounting and probably, eventually we'll get to the point where everything, accrual accounting like all our regular corporations are.

And Steve, let me add a little bit of clarification on that. Well from our receivable perspective, we finance basically all of our customers if they can provide a sufficient down payment, their financers there is not a tremendous amount of underwriting going on related to that. When we switched to a SaaS model like Steve mentioned, they will switch to a subscription service with recurring monthly, that being said, as I mentioned earlier on the call, in order for a success to a SaaS model, we need to be able to generate the same amount of revenue at our events that we currently do and we're doing that by transition to selling a training product. That training product will be financed similar to what is now. And so we will still have receivables that we'll be collecting on and we believe it's a higher value product for our customers whether or not that increases our collection rates, we will see that will depend upon the customer we're selling to and their qualifications more than anything else. Historically, we have financed all of our customers who come up with a sufficient down payment. There hasn't been underwriting. And that's why you've seen a high default rate on our receivables in the past which has necessitated a cash revenue recognition approach.

Got it and has the number of people coming to your free preview workshop, has that started increasing or stabilized at least?

Let me have Clint Sanderson answer to that.

Hello. Yes, it's actually stabilized, right now, we're seeing for this type of year, July and August, particular have never been good for us historically as far as sale rates but yes, it's stabilized right now.

Got it, and just one last question if I may, I mean it almost looks like if I look at the long-term strategy of the company which I think is pretty solid, the idea of, you have Crexendo product, you are converting your StoresOnline to SaaS, right? Why do you need the workshop model at all, why not just stop it?

Well, right now it's about 90% or 85% of our revenue. If we were to stop it and plus it's very profitable right now. So, if we -- we'd be shooting ourselves in the foot, in fact, maybe in the head.

Got it. Now that helps and thanks a lot for your time.

You're welcome.

And we have no further question at this time, Mr. Mihaylo; I'll turn the conference back over to you for any additional or closing remarks.

Okay, thank you operator. Well, as you can tell we're very energized by what we see in our results and that confidence is displayed in our -- soon to be tender off for up to a 1 million shares of our stock. We're looking forward to the next couple of quarters and we'll be looking forward to speaking with all of you after our third quarter results. Thank you very much and good afternoon everyone.

Ladies and gentlemen, that does conclude today's conference call. We'd like to thank you all for your participation.