Image source: The Motley Fool.
Zagg Inc (ZAGG)
Q1Â 2020 Earnings Call
May 28, 2020, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, ladies and gentlemen, and welcome to the ZAGG First Quarter 2020 Earnings Conference Call. [Operator Instructions]
I would now like to turn the conference over to your host, Mr. Brendon Frey. Sir, you may begin.
Brendon Frey -- Managing Director
Thank you, Iz.
Good afternoon and thank you for joining us today to review ZAGG's first quarter 2020 financial results. On the call today we have Chris Ahern, Chief Executive Officer, and Taylor Smith, Chief Financial Officer. Following Chris and Taylor's prepared comments, we will open the call for a question-and-answer session.
Our first quarter earnings press release was issued today after the market closed at approximately 4:05 PM Eastern Time. As a follow-on to the earnings release, we published the supplemental financial information on our Investor Relations website, and we also furnished this document to the SEC on Form 8-K. You can find all our earnings documents on our Investor Relations website at zagg.com in the Quarterly Results section under the Financials tab. We are recording this call, and a podcast of the conference call will be archived at the ZAGG Investor Relations webpage under the Events tab for one year.
Before we begin, we would like to remind everyone that the prepared remarks contain certain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements include, but are not limited to, our outlook for the Company and statements that estimate or project future results of operations or the performance of the Company. These statements do not guarantee future performance and speak as of the date hereof. For a more detailed discussion on the factors that can cause actual results to differ materially from those projected in any forward-looking statements, we'll refer all of you to the risk factors contained in ZAGG's Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. ZAGG assumes no obligation to revise any forward-looking statements that may be made in today's release or call.
Please note that on today's call, in addition to discussing the GAAP financial results and the outlook for the Company, we will discuss adjusted EBITDA and the gross profit excluding the impact of March 2020 inventory writedowns, both non-GAAP financial measures. An explanation of ZAGG's use of these non-GAAP financial measures in this call and the reconciliation between GAAP and non-GAAP measures required by SEC Regulation G is included in ZAGG's press release today which, again, can be found on the Investor Relations section of the Company's website. The non-GAAP information is not a substitute for any performance measure derived in accordance with GAAP, and the use of such non-GAAP measures has limitations which are detailed in the Company's press release.
And I'd now like to turn the call over to Chris Ahern. Chris?
Chris Ahern -- Chief Executive Officer
Thanks, Brendon, and thank you, all, to everyone for joining us on our call today.
I hope you and your families are safe and healthy. Our thoughts are with everyone who has been affected by COVID-19, and on behalf of the entire ZAGG organization, I want to express our gratitude to all those in the front line fighting the virus and working to keep our communities safe and healthy.
Throughout this evolving situation, we have worked diligently to ensure that we can continue operations while protecting our employees, which has required significant changes in how we operate, including the vast majority of our employees working from home and remote communications with our partners. I'm extremely proud of how well the ZAGG team has responded to the unique set of challenges created by the pandemic, and I want to personally thank everyone for their commitment and dedication you've shown to the Company during these unprecedented times.
Prior to the outbreak, we were experiencing a solid start to the new year, especially from a top line perspective. Even with the gross margin headwinds we were facing from higher tariffs that went into effect in mid-2019, we had a good line of sight in delivering a meaningful improvement in adjusted EBITDA compared to first quarter last year. Our performance was tracking to plan when we outlined our 2020 guidance during our fourth quarter call on March 11. On the call that evening, the concern around the impact of COVID-19 was primarily supply chain oriented and not related to demand as the outbreak of the virus in the US appeared to be still in early stages and isolated to a few areas of the country.
However, the situation changed very quickly soon after our call. That night, the National Basketball Association suspended its season after a Utah Jazz player was diagnosed with the coronavirus. On March 13, the President declared a national emergency which was supported by several states requiring nonessential businesses to close and individuals to shelter at home.
As a result of the actions taken to stop the spread of the virus, we experienced a steep drop-off in sales over the last few weeks of March, with many of our wholesale partners required to close their doors. They took steps to preserve liquidity by pushing out or canceling orders and working down on-hand inventory. We also saw March demand slow in our direct to consumer channels as consumers shifted their purchases to groceries, cleaning supplies and other necessities to weather the prolonged period of time at home.
Our management team and Board of Directors took immediate actions to reduce our go-forward operating costs and further enhance our financial flexibilities. These actions included closing on amendments to our secured revolving credit facility to increase available borrowings; closing on small business administration loan under the CARES Act; implementing furloughs or laying off a portion of our global workforce; temporarily reducing senior management salaries; temporarily reducing the cash portion of the Board of Directors' compensation; deferring spending on all non-essential projects; implemented a host of global cost reduction initiatives and canceling or delaying purchase orders to align with adjusted demand forecast.
Despite a very difficult backdrop over the last few weeks of March, fourth quarter sales increased 16% even as we lost approximately $10 million due to the COVID-19. Our top line performance was driven by solid growth in our InvisibleShield screen protection business, along with year-over-year gains in HALO power and mophie wireless charging products. We continued our long history of introducing innovative new products several of which advanced our health and wellness strategy and were timely, given the current environment.
It started in 2018 with the launch of VisionGuard, our screen protection technology that filters out harmful blue light followed by the introduction of our antibacterial screen protection last fall that was developed under our partnership with Kastus, a leader in antimicrobial surface protection. This year, we will incorporate this antimicrobial solution to all InvisibleShield screen protection launches along with all new Gear4 case launches. We also developed two new product lines under our health and wellness strategy that launched or shortly will launch.
During early April, we launched antibacterial wipes for devices. You will find this range across our wireless and big-box retailers. These device wipes have sold in well and have sold through even stronger, especially as consumers have increased their focus on protecting their health. Later this quarter, we will launch UV phone sanitizers, which can be used in store or at home to sanitize your mobile devices. Early demand signals are encouraging for this product, and I look forward to seeing it in the market.
In addition, late in the first quarter, as individuals and families began staying at home, we saw a spike in several products that support work from home or remote learning such as keyboards, wireless charging and audio. As a result of the accelerated shift to online purchasing that occurred as retail stores closed or reduced hours, we did see some erosion in our screen protection market share as this business is heavily tied to retail sell-through of smartphones, particularly in our wireless channel. We anticipate recapturing this share as stores open and consumer traffic returns to these retailers.
As the second quarter got under way, the trends we experienced in late March carried over into early April. But as April progressed, we saw wholesale sell-through improve each week and the stores have remained open, going from down as much as 65% compared to the same period last year to down approximately 30% the last week of the month. In early May, a few states began to ease their lockdown restrictions and brick and mortar retailers slowly began to reopen. Today, depending on the retailer carrier, the percentage of doors open range from 45% to 90%. We continue to see more doors open weekly, and we are anticipating that the vast majority of our partner doors will be open in the July time frame.
In terms of our direct to consumer performance, Q2-to-date sales have outpaced 2019 by over 50% as we're seeing very effective dotcom ad spend and improved conversion rates online. Overall sales trends for the second quarter are slowly improving. We're currently trended to be approximately 50% below our forecast in March of $120 million to $125 million.
While we're not providing guidance for 2020 at this time due to the lack of visibility and unclear timing when consumer demand for our categories begin to normalize, we are planning our business conservatively over the next several quarters, especially as it relates to expenses and future receipts. With the amount of uncertainty created by COVID-19 in the near term and potentially longer term, the executive team and I took a deep dive into future profitability of all our brands, product lines, including a review of the recoverability of inventory on hand due to the decline in demand brought on by the pandemic.
To better position the Company for sustained profitable growth, we initiated a restructuring plan that includes discontinuing the BRAVEN audio brand while supporting throughout the remainder of the year; exiting the battery case category; and simplifying our IFROGZ audio, ZAGG keyboard and mophie power station businesses, including reducing SKU counts and discontinuing certain product lines. The focus going forward is on expanding within higher margin categories where we believe we can further separate ourselves from the competition through innovation either developed internally or through license agreements like we've done with our partners, D3O, Kastus and Healthe.
With respect to the battery cases, the size of the category has declined over the past several years as consumers have continued to shift to wireless charging solutions. In addition, those of you who are familiar with our battery cases will recall that our launches are always a few months after device launch. Thus, we lose out a significant sales opportunity as device launched. Lastly, battery cases are a heavily engineered product that have significant lead times, which has contributed to higher product costs and a difficult time purchasing the right amount of inventory for our consumer demand. Ultimately, all of these factors have contributed to this being a category, although it generated $20 [Phonetic] million in 2019, did not produce positive operating output for the Company. Given the current environment and our need to focus on product categories that we are confident we can profitably grow, we made the difficult decision to exit the category for retail market.
In terms of simplifying certain categories, the goal is to reduce inventories by sourcing finished goods and moving away from long lead time component commitments and significantly reducing our number of SKUs in each of the remaining product categories. While we incurred one-time charges this year in association with the restructuring, including inventory writedowns which Taylor will review shortly, we expect our actions will result in higher operating margins in the long term and a more nimble company that can better serve our retail partners and core consumers while generating increased value for our shareholders.
As we look toward adapting our business and organization to endure the near-term challenges, we're doing so with our sight in the future. We are evaluating our brands and strategies with the goal of strengthening our category-leading positionings, strengthening our consumer connections and strengthening our relationships with key partners. I'm confident that the steps we're taking now to weather the near-term volatility that will set ZAGG up for the longer-term success are in the best interest of this Company. We will manage the business with a high degree of flexibility this year and being prepared to capitalize on the opportunities that currently exist for our portfolio of brands as well as any new opportunities we anticipate that would be created by the lasting impact of this pandemic.
Thank you, all, to our shareholders for your continued support, and on behalf of the entire ZAGG team, I hope everyone is staying safe and healthy. I will now hand the call over to Taylor.
Taylor Smith -- Chief Financial Officer
Thanks, Chris.
Since many details of our quarterly financial performance were included in the supplemental financial information issued earlier today, I would just like to take a few minutes to add some additional comments on our first quarter financial performance.
Q1 net sales increased approximately 16% to $91 million, in line with the guidance range we provided on the last earnings call. The year-over-year increase was driven by increased sales of screen protection products and an increase in sales of the HALO and mophie wireless power product lines. Despite ending in line with guidance, we lost approximately $9 million to $10 million in March sales due to demand reductions from the COVID-19 pandemic, as Chris mentioned.
Q1 gross profit, as a percentage of net sales, decreased primarily due to a $45 million non-cash inventory writedown linked to: one, the discontinuance of the BRAVEN brand; two, exiting the battery case product category; three, the simplification of our IFROGS audio, ZAGG keyboard and mophie power station businesses, including reducing SKU counts and discontinuing certain product lines; and four, decreased demand due to the effects of COVID-19. Excluding the impact of this non-cash inventory writedown, gross profit as a percentage of sales would have been approximately 28% versus 30% in the prior year period. In addition to the inventory writedown during the first quarter, we experienced headwinds compared to last year from increased tariffs and the impact of both increased air freight and freight rates due to Chinese factories coming back online later than planned as a result of COVID-19.
Q1 operating expenses increased 55% or approximately $22 million compared to last year. The increase was due primarily to an $18 million non-cash impairment of goodwill linked to the decline in market capitalization at the end of the first quarter; $4 million in non-cash charges linked to the write-off of intangibles and equipment tied to the discontinuance of the BRAVEN brand and the product lines discussed; a $500,000 charge for severance linked to employees terminated at the end of the first quarter; and approximately $1 million linked to an additional investment in expansion across the Latin America region. These increases were partially offset by the Q1 impact of restructuring activities undertaken last year. Excluding the one-time impairment and severance charges, operating expenses would have declined by approximately $500,000 compared to last year.
Q1 adjusted EBITDA was negative $7 million versus negative $9 million in the prior year period. The improvement versus the prior year was linked to increased sales, but was partially offset by the headwinds to gross profit from air freight and tariffs that I discussed previously. Due to the non-cash nature of the inventory writedown, goodwill impairment and the write-off of intangibles and equipment, these charges are included as add-backs to adjusted EBITDA during the period.
Turning to the balance sheet. Compared to a year ago, accounts receivable decreased 11% to $84 million, and DSOs improved significantly from 107 days to a more normal level of 84 days. The quality of our receivables remains very good. Inventory was $94 million after the $45 million writedown compared to $100 million last year and $145 million at the end of 2019. Excluding the impact of the inventory writedown in Q1, inventory decreased by approximately $7 million compared to year-end. Given the significant impact on retail demand from COVID-19, we are very carefully monitoring sell-through, customer forecasts and customer inventory levels to ensure that we're bringing in an appropriate amount of inventory for second half demand, but are being conservative in our assumptions given uncertainty in future retail demand and OEM device launch timing.
Net debt, which is consolidated debt less cash, increased to $85 million compared to $79 million in Q1 last year. On a gross basis, the line of credit balance at the end of the quarter was $100 million versus $93 million in Q1 last year. The increase compared to last year was due to cash used to support our newly acquired HALO and Gear4 brands, 2019 inventory purchases and increases in tariff rates. During April, we amended our credit facility to increase the total amount available under the line of credit from $125 million to $145 million. This expansion, combined with the restructuring, cash retention and cost cutting initiatives we've undertaken, gives us confidence that we will successfully navigate the headwinds that COVID-19 has put on the business.
Like Chris, I'd like to spend a few minutes discussing our response to COVID-19 and actions we've taken to preserve cash, focus the business on the most profitable product lines and simplify product offerings so that we're a stronger and more profitable company as we emerge from this period impacted by COVID-19. As Chris and I left the office after the earnings call on March 11, which feels like a lifetime ago, we were very confident in the strong Q1 and Q2 shaping up to be well above last year. As Chris mentioned, that night, Rudy Gobert from the Utah Jazz tested positive for COVID-19 prior to the Jazz-Thunder game, and by the time the night was over, the NBA season have been canceled.
Over the next 72 hours, we saw the NCAA Basketball Tournament canceled and started to see store closures or reduced hours throughout retail. Given our significant reliance on sales through retail partners and franchise locations, the impact to our business has been significant. As you all know, the stay at home orders and related retail store closures have followed varied state and local guidelines. These stay at home orders and retail store closures started in mid to late March, though, as Chris mentioned, we're starting to see some light at the end of the tunnel in various markets throughout the US.
As we saw these significant potential headwinds to the business, we quickly mobilized a COVID-19 task force and took the following actions to preserve cash and reduce expenses. We amended our line of credit to increase available borrowings by approximately $20 million through March 2021, as I mentioned; closed on the small business administration loan under the CARES Act of approximately $9 million; implemented furloughs or layoffs of approximately 20% of global employees; temporarily reduced salaries, including a 15% reduction for Chris, 10% reductions for the rest of the executive team and 5% reductions for senior management; temporarily reduced the cash portion of the Board of Directors' compensation by 15% and replaced it with stock based compensation; significantly reduced marketing spend throughout the remainder of 2020; deferred or canceled spending on all non-essential projects; delayed or canceled certain purchase orders to align with our adjusted demand forecast; and significantly limited travel of employees internationally and domestically throughout the remainder of 2020.
In addition, as Chris mentioned, we critically examined all of our brands and product lines, looking at long-term growth and profitability. Ultimately, we made the decision to discontinue the BRAVEN brand, exit the battery case product category and simplify our IFROGS audio, ZAGG keyboard and mophie power station businesses, including reducing SKU counts and discontinuing certain product lines. These decisions were not made lightly. But the ultimate goal is to focus the business on the most profitable product lines, and although it'll sacrifice some top line sales, these decisions will drive improved profitability long-term.
During 2019, the BRAVEN brand and the discontinued product lines accounted for approximately $55 million in net sales. However, due to discounting and operating expenses needed to support these brands, they produced negative adjusted EBITDA. With everything else held constant, we expect these decisions to drive incremental profit dollars long-term.
As a result of all of these actions, we expect 2020 year-to-date gross margins to improve throughout the year, though we'll see some pressure in the next few quarters compared to the historical average of mid 30s as we sell through our excess inventory. As we move into next year, we expect improvement compared to our historical average gross margins, which, again, is in the mid 30s. For operating expenses, due to the many cost reduction initiatives that have been implemented since the end of March, we expect total operating expenses to be in a range of high 20s to approximately $30 million on a quarterly basis for the remaining quarters of 2020. Due to the impacts stay at home orders are having on retail demand worldwide and the limited visibility of when and where they will be lifted and subsequent customer demand, we withdrew our 2020 annual guidance in April. We may reinstate guidance later in the year as we have better visibility, but we will not be providing any further update to guidance at this time.
With that, we'll now open up the call for questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question comes from the line of Thomas Forte with D.A. Davidson. Your line is now open.
Thomas Forte -- D.A. Davidson -- Analyst
Great. Thanks for taking my question. So I think I have a question and a follow-up and then I might get back in the queue. So can you talk a little more about your direct sales to the extent that you're seeing? I think you gave us some data points on the performance there. But as a general rule, what's your priority as far as maintaining inventory for direct sales versus the wholesale?
Taylor Smith -- Chief Financial Officer
Yeah. Tom, great question. On our direct sales, initially did actually see a decline because obviously Amazon focused heavily on essentials, so we saw a little bit of a dip. But coming out of March, we're starting to see really good traction in our direct to consumer space. We're actually focusing more on our spend from digital spend on our own dotcom as well as Amazon. We've obviously ring-fenced key inventory products and categories that we're putting on both those platforms. So we're seeing really nice traction and continue to see so this month and the forecast is pretty strong. So we're really putting as much fuel in the fire as we can when it comes to direct to consumer.
On the other platforms, QxH, we've seen some nice growth there [Technical Issues] nice forecast coming into the back end of the year. As you know, they're very Q3, Q4 focused, but we feel that we've gained some nice momentum with a number of our brands on that channel as well. So overall, direct to consumer is strong, and we continue to invest dollars in that channel.
Thomas Forte -- D.A. Davidson -- Analyst
All right. So the one follow-up, and then I'll get back in the queue. So on the follow-up side, how have you been able to develop some of these, call it antibacterial products so quickly? I guess that's pretty much my question. So I know you had the screen protector that had those properties at an early date, but some of the other product launches you're doing that address that very thing. How was that you've been able to create these products so quickly?
Chris Ahern -- Chief Executive Officer
Yeah. It's a mixture of two things, Tom. A bit fortunate and also I would say very nimble. The team has been very, very quick to react. But also, we have been working on one or two products prior to this in terms of in line with our health and wellness strategy around product, and as this unfortunate situation occurred, we've been talking very closely with our partners in retail and carrier and the opportunity basically came around very quickly, but we were able to react to it quick enough to be able to meet the requirements of our partners.
So, I'm very proud of the team in terms of how quickly they reacted to this, but we were also a little bit fortunate as we happened to be starting looking at certain products in that space.
Thomas Forte -- D.A. Davidson -- Analyst
Okay. Thank you, Chris. I'll get back in the queue for more questions. Thanks.
Chris Ahern -- Chief Executive Officer
Thanks, Tom.
Operator
Our next question comes from Jon Hickman with Ladenburg. Your line is now open.
Jonathan R. Hickman -- Ladenburg Thalmann & Co. -- Analyst
Hi. I was writing pretty fast and you were talking pretty fast. So did you say that you expect sales to be down 50% in Q2 from your previous guidance? Is that what you said?
Taylor Smith -- Chief Financial Officer
We never guided to Q2, but what Chris said was we were estimating in early March that Q2 sales would be approximately $120 million to $125 million and that tracking right now at about 50% of that amount.
Jonathan R. Hickman -- Ladenburg Thalmann & Co. -- Analyst
Okay. And then could you elaborate a little bit on what you mean by exiting BRAVEN? Is that just going to go away or are you going to try [Technical Issues].
Chris Ahern -- Chief Executive Officer
Yeah. So ultimately we will be exiting the brand, Jon. But we will be supporting partners throughout the year because it is arranged in certain retail partners, and we have products for -- the tooling is already there. So we're able to support the current product set for the foreseeable future. What we're saying is we're not going to go out and develop a whole new set of products on the back of that brand.
Jonathan R. Hickman -- Ladenburg Thalmann & Co. -- Analyst
So right now you're -- I mean, but those products will be available at retail and directly through what, the end of the year? Or...
Chris Ahern -- Chief Executive Officer
Yes. Yes. And, for the current lineup that we have, if there is any particular product that's selling well with a partner, we are able to maintain and support that partner.
Jonathan R. Hickman -- Ladenburg Thalmann & Co. -- Analyst
Okay, buys that product..So you're not putting any like R&D there.
Taylor Smith -- Chief Financial Officer
Correct. That's the most correct way to put it.
Jonathan R. Hickman -- Ladenburg Thalmann & Co. -- Analyst
Thank you. That's it for me.
Chris Ahern -- Chief Executive Officer
Thanks, Jon.
Taylor Smith -- Chief Financial Officer
Thanks, Jon.
Operator
[Operator Instructions] We have a follow-up question from the line of Thomas Forte with D.A. Davidson. Your line is now open.
Thomas Forte -- D.A. Davidson -- Analyst
Great. Thanks. I have three. I'll go one at a time. So, Chris, I wanted to ask, first and foremost, to the extent that we're expecting 5G to present a tremendous opportunity for ZAGG to the extent that it should stimulate unit growth for smartphones, are you seeing anything to suggest that there'll be material delays in 5G rollout later this year?
Chris Ahern -- Chief Executive Officer
Not straight off the bat, Tom. But we do expect it to probably take a longer period of time, given obviously the COVID-19 has had some impact, right. I think in terms of devices, most devices coming now will be 5G compliant, as you see with Samsung, the latest launch they had. So we anticipate that we will see growth around 5G. We're planning our business around that. And we're not looking at hockey stick growth right off the bat. We expect it to be more slower ramp plan in terms of growth, but more sustained as well.
Thomas Forte -- D.A. Davidson -- Analyst
Are you seeing anything though that would suggest to you that the long-term opportunity on 5G is any less robust?
Chris Ahern -- Chief Executive Officer
No. I still believe that opportunity is there, Tom.
Thomas Forte -- D.A. Davidson -- Analyst
Okay. Great. So two more. To what extent is it possible that Apple offering a $399 iPhone could stimulate unit growth in smartphones and then create a shorter-term opportunity for you?
Chris Ahern -- Chief Executive Officer
Yeah. I do think it will produce an opportunity for us. Getting some feedback from the field, I do believe that the device has been accepted really well by consumers. We have full set of products around that, be it screen protection and cases. So we're excited with that product and obviously ready to take advantage of any opportunities in the marketplace that brings.
Thomas Forte -- D.A. Davidson -- Analyst
All right. So, apologize; two more. So, to what extent has your success selling on QxH given you thoughts on how you can apply that success to your other distribution channels?
Chris Ahern -- Chief Executive Officer
Yeah. So I would say our success has been primarily driven by the success of the product, right, the quality of the product, the functionality of the product. And it has been developed very, very closely with QVC. So, a very strong partnership. So if anything that's what we are taking away. And really what we're seeing with all of our major partners, Tom, is how we partner with these retailers and carriers very much dictates how you can bring a good product to market. So for me it's all around the partnership and continue with the focus on innovation of products is how will be successful. So I will tell you, we are using that blueprint across all of our key partners.
Thomas Forte -- D.A. Davidson -- Analyst
Excellent. So last question from me and then best of luck. The question I have is, how should we think of the future role of China for your supply chain? Has COVID-19 changed your thoughts about the long-term role?
Chris Ahern -- Chief Executive Officer
It hasn't changed our thoughts, Tom, around the long-term role. I think prior to COVID-19, as a business with the tariffs, with the difficulties that brought our business, we've been looking at how do we diversify our supply chain. So, we've already been looking at that, and I can tell you, we've a number of product sets where we're already outside of China, right. So I think we will continue with that strategy. And obviously, China is still a very key part of our business, but we'll continue to evaluate and be ready to move as quickly as we can to diversify.
Thomas Forte -- D.A. Davidson -- Analyst
Great. Thank you, Chris. Thank you, Taylor. Take care.
Chris Ahern -- Chief Executive Officer
Thanks, Tom.
Taylor Smith -- Chief Financial Officer
Thanks, Tom.
Operator
That concludes today's question-and-answer session. I'd like to turn the call back for closing remarks.
Chris Ahern -- Chief Executive Officer
Just thank you, all, for joining our first quarter update for 2020. I hope you're all staying safe, you and your families. And we look forward to speaking to you again for our Q2 update. Thank you.
Operator
[Operator Closing Remarks]
Duration: 30 minutes
Call participants:
Brendon Frey -- Managing Director
Chris Ahern -- Chief Executive Officer
Taylor Smith -- Chief Financial Officer
Thomas Forte -- D.A. Davidson -- Analyst
Jonathan R. Hickman -- Ladenburg Thalmann & Co. -- Analyst
