Glenn Wiener - IR, ‎GW Communications Pat Lavelle – President & Chief Executive Officer Michael Stoehr – SVP & Chief Financial Officer.

James Medvedeff - Cowen Thomas Kahn - Kahn Brothers Advisors Mike Hughes - SGF Capital.

Good day, ladies and gentlemen and welcome to the VOXX International fiscal 2018 third quarter results call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. And as a reminder, today's conference call is being recorded.

I would now like to turn the conference over to Glenn Wiener, Investor Relations. Please go ahead..

Thank you Candace. Good morning and welcome to VOXX International's fiscal 2018 third quarter results conference call. Our call today is being webcast live on our website, www.voxxintl.com and a replay is available for those who are unable to make today's call.

Speaking from management this morning will be Pat Lavelle, President and Chief Executive Officer and Michael Stoehr, Senior Vice President and our Chief Financial Officer. Following their remarks, we will have the Q&A session for those investors wishing to ask any questions.

Before we begin, I would like to remind everyone that except for historical information contained herein, statements made on today's call and webcast that would constitute forward-looking statements are based on currently available information.

The company assumes no responsibility to update any such forward-looking statements and risk factors associated with our business are detailed in our Form 10-K for the period ended February 28, 2017. At this time, I would like to turn the call over to our President and CEO, Pat Lavelle..

Thank you Glenn. Let me start by wishing you all a happy and healthy new year and a successful 2018. As you know, as a result of the sale of Hirschmann, we start calendar year 2018 with a healthy cash position, access to capital through our banking facilities and virtually no debt, except for mortgages.

Our balance sheet is strong and we have significant opportunities ahead of us to unlock value and provide us with more stable platform for cash generation and profitability.

Our plan for 2018 is to look for accretive acquisitions and possibly monetize some of our assets, realign some of our operations to lower fixed expenses and to enhance gross margins further and continue our growth focus with product innovation and partnerships that give us access to new technology and leverage our distribution.

Let me start with a recap of our third quarter results and then Mike will have some more on the financials before we open the call up for questions. Of course, as I always do at this time of year, I will cover some of our newest products which debuted at the Consumer Electronics Show here in Las Vegas.

Net sales of $166.6 million were roughly in line with last year's third quarter, down 0.5%. Premium audio segment sales grew by 1.1%, consumer accessory sales grew by 13.7% and our automotive segment declined by 16.8%. The automotive decline was mostly timing related.

Within our domestic OEM business, programs with GM and Ford for our next generation rearseat infotainment solution EVO were delayed for further validations testing but we are now shipping and the product is at dealers.

In mid-October, we launched with GM on the Chevy Traverse, the Chevy Equinox, GMC Terrain and the Buick Enclave and there are seven additional GM vehicles that will launch over the next year-and-a-half and which will run through the model lifecycle of each vehicle.

The Ford program in August with the 2018 Expedition and 2018 Navigator has already contributed positively to our results. EVO will launch on six different Ford vehicles with an August 2018 launch date and running through and these are launches running through May 2019 with the bigger volumes impacting next year's fiscal third and fourth quarter.

We also have an EVO program with Mazda which is launching later this month and another with Nissan slated for September 2018. Approximately 60% of these new programs for EVO are replacement business but 40% are new business that paves the way for optimism with respect to growth in future periods.

We anticipated that our aftermarket business would be down as satellite radio and some of our older legacy product lines have dropped off. However, as a result of the acquisition of the Rosen electronics business acquired in 2018, we are seeing an increase in aftermarket overhead and headrest DVD systems.

Lastly, our remote start business is doing well and should continue to perform given the harsh weather conditions throughout the U.S. Within premium audio, we continue to see growth albeit at lower rates than prior quarters.

Our net sales were up 1.1% as compared to last year's third quarter, which was one of the highest sales quarters for this segment.

There is also strong growth across several home entertainment speaker lines and new products that were introduced over the past year continue to sell well at retail, including our HD wireless speakers, wireless soundbars, Klipsch Heritage products and our wireless and multiroom streaming audio systems.

Additionally, the Forte III reintroduction has exceeded sales expectations and Jamo Studio is picking up steam with new Dolby Atmos speaker price points. Growth in this segment was somewhat offset by lower volumes of wireless headphones and portable Bluetooth speakers though our retail placement remains strong.

Internationally, our business is up as well. The biggest decline was in our commercial speaker business as some projects and programs were delayed as some of our cinema customers adjusted through slower box office sales.

Overall, the premium audio segment has grown over the last two years and consistently through the last seven quarters and we expect solid performance from them moving forward. Our consumer accessory segment was a bright spot as we reversed the declining sales trend posting net sales growth of 13.7%.

Driving the quarter, higher sales of the newly launched Striiv activity tracking bands, which is part of the program with Qualcomm and a major healthcare provider. This quarter, we expanded programs to include other national brands.

We also had higher sales of Project Nursery product, strong gains in the reception category and continued momentum in 808 wireless speakers, up over 40% in unit sales and higher international sales due to the rollout of an upgrade to the digital broadcasting platform in Europe. Gross margins of 26.5% were down 120 basis points.

Automotive segment margins were down 210 basis points due to delays in our OEM programs similar to the second quarter. Premium audio segments margins were up 60 basis points year-over-year and up 230 basis points sequentially. We have worked through the majority of the inventory we had on hand consistent with our remarks last quarter.

And consumer accessories segment margins were down 190 basis points year-over-year, but up 310 basis points sequentially. Q3 profit dollars were up however and the margin decline was due to higher fulfillment sales which should continue based on our new program in the wellness and fitness category with Qualcomm Life.

Operating expenses declined by 6.6% as we realized additional synergies post Hirschmann and continued our focus on reducing fixed expenses. We expect to continue gradually lowering expenses based on our strategic process to acquire and/or divest.

From a bottom line perspective, we reported operating income of $5.6 million, slightly better than Q3 of fiscal 2017.

Net income from continuing operations of $7.5 million, increase by close to $6 million and net income attributable to VOXX was $8.6 million or $0.36 per basic share compared to net income attributable to VOXX of $5.8 million or $0.24 per share in the year ago period. To summarize the quarter.

Sales were flat, margins were down as expected from the combination of the sale of Hirschmann and the increase in fulfillment business and our expenses declined. As a result, our bottom line performance improved.

As you know, we were in Las Vegas at the Consumer Electronics Show where we traditionally launch many of our new products and this year is no different. In accessory segment, we showed a new line of Sensation products due out in the summer of 2018.

We also introduced new versions of our wireless earbuds and some of our best-selling can speakers, SL speakers with Siri and Google Voice support and our new 808 Amazon Alexa voice speaker. RCA continues to move into the security and smart home market. And at CES, we introduced the RCA Wi-Fi security cameras and the RCA video doorbell.

We have several products arriving in February to May timeframe. CES was also the launching ground for the new RCA antenna lines with retractable and outdoor antennas. Our cord cutter all-in-one kit has been very well-received from retailers, both in-store and online.

The partnership with Project Nursery, we debuted the first-ever baby monitor to integrate Amazon's Alexa voice service, the Project Nursery Smart Baby Monitor System.

VOXX Advanced Solutions also made some CES noise with an expanded line of public safety products, including a body camera with 4G LTE and Wi-Fi, a dash and body camera with 360 degree video capture and a fixed location 360 degree camera for live streaming. We also introduced a live streaming 360 4K camera.

And further we announced an LOI with Blue Line Innovations, developers of FORTIFY, an evidence and case management system used by law enforcement. They will be the exclusive backend evidence management provider for our live streaming body cameras and together we will have a true end-to-end solution for the public safety market.

With respect to EyeLock, we showcased our new access control solutions for both outdoor and indoor use. With nanoEXT, we have the first of its kind outdoor device which can withstand extreme exterior elements and all lighting conditions while still providing unmatched security and convenience.

Staying with EyeLock, in November we announced our strategic partnership with ViaTouch Media to bring to market the first auto retail vending solution enabled by artificial intelligence which embedded EyeLock's Iris authentication technology.

At CES, Harrington was debuted, our version of the embedded solution which will be used in the ViaTouch Vicki and which has several other applications that can be leveraged in adjacent markets such as healthcare and medical. There was also a lot of excitement over this solution yesterday at the show.

In the automotive aftermarket, we had a number of products debuted. A smart mirror with built-in HD driving video recorder and touch free control to reduce distraction. The camera allows you to access your favorite apps and have a hands-free Bluetooth speakerphone built into the mirror. A new Android-based rearseat system incorporating Google Play.

And we won a 2018 CES Innovations Award Solutions for LOOK-IT, a new wireless backup camera powered by lightweight technology. It essentially turns your iPhone or Android device into the rear display itself. In premium audio, we had a number of announcements and product debuts under the Klipsch and Jamo brands.

First, our Klipsch wireless speakers and amplifiers will now support the Amazon Alexa connected speaker APIs, allowing users to control their speakers and multiroom audio systems from any Alexa enabled device. We showed our next generation of award-winning Heritage wireless tabletops speakers that have the Google Assistant built-in.

We debuted a new line of Heritage speakers with Klipschorn, La Scala, Cornwall, Forte and Heresy products which have sold very well for us over the past two years. Under Jamo, we launched two new soundbars, customized for interior living spaces which come equipped with Dolby audio and Bluetooth wireless technology.

And building on Studio 8 speaker series, one of Jamo's better performing lines for decades, we launched the new Jamo Studio 8 series. Of course, we had a host of other products on display, streaming audio, Bluetooth wireless speakers and a new line of in-ear and over-the-ear headphones with sleek designs at various price points.

As we look ahead, we expect to see further penetration into select lifestyle segments and high-end distribution channels for our Heritage headphones, amplifiers and speakers and expansion into high-end audio distribution channels with our new Heritage speaker programs.

Additionally, new Heritage soundbars will launch this spring and a new ground-up series of Reference and Reference Premiere speakers and subwoofers will debut in the summer. As I stated on our Q2 call, we expect the second half of the fiscal year to be profitable and that remains the case.

We have opportunities to drive growth in each of our business segments to enhance gross margins based on mix and new product introductions and we intend to continue to lower fixed cost to improve profitability. One last thing. Several investors have requested to make share repurchases.

We understand that request and may, from time-to-time, support the stock. But we also want to ensure that we have the resources to move if the right opportunities arise.

Our focus is on the long-term and we currently believe the best avenue to create long-term shareholder value is to use our resources to acquire businesses that will improve our earnings potential and cash flow. That said, we currently have an authorization plan in place to purchase up to nearly 1.4 million shares.

And although we did not purchase stock this fiscal year, that does not mean we won't do so in the future.

I will turn the call over to Mike now and he will provide additional comments with respect to our performance, balance sheet and outlook, Michael?.

Thanks Pat. And my best wishes to all in 2018. Since Pat reviewed the third quarter results in detail, I am going to focus my remarks on a few miscellaneous items related to the Hirschmann divestiture and the discontinued operations as well as our balance sheet.

We are more than happy to address any questions related to the third quarter and nine-month results when we open up the call for questions. Let's start with the Hirschmann sale. In footnote two of our Form 10-Q, you will find information related to the sale and what is now considered discontinued operations.

You will see information for discontinued operations for the three-months ending November 30, 2016 and for the nine-month period of fiscal 2018 and fiscal 2017. To summarize, we had $41.5 million in net sales related to the Hirschmann business in last year's third quarter than those sales in this year's fiscal period as the sale closed on August 31.

For the nine-month period, sales were $91.8 million compared to $124 million for the fiscal 2018 and fiscal 2017 periods respectively. The loss from discontinued operations, net of taxes, for the three-month period in fiscal 2018 was $368,000 or a loss per share of $0.02 versus income, net of taxes, of $2.2 million or income per share of $0.09.

For the nine-month period, with a gain on the sale incorporated in our income statement, income from discontinued operation was $32.3 million or $1.34 per share in the fiscal 2018 nine-month period compared to income, net of taxes, of approximately $400,000 or $0.02 a share.

In footnote 13 of the Form 10-Q, you will find information related to income taxes for the three and nine month period. For the quarter ended November 30, 2017, VOXX generated $6.9 million in pretax earnings from continuing operations. We had an income tax provision of $700,000 on these earnings.

However, we reversed an uncertain tax position of $1.3 million in connection with the lapse of the statute of limitations related to the 2/28/2014 tax year. As a result, we had an income tax benefit of $600,000, which was an 8.23% effective tax rate for the quarter.

As for our balance sheet, we ended the quarter with $37.5 million in cash compared to approximately $1 million as of February 28, 2017.

So there is nothing outstanding on our domestic credit facility as we used the proceeds from the Hirschmann sales to pay down the line whereas the amount outstanding on the facility as of February 28 was $92.8 million.

Our total debt, which is inclusive of all mortgages, stood at $19.1 million as of November 30, compared to $110.4 million as of February 28, an improvement of $91.3 million. Long term debt of $11.4 million improved by $89.8 million and total long term debt, net of debt issuance cost of $8.6 million, improved by $89.2 million.

You can find more information in footnote 15 of our Form 10-Q. You will note in footnote 20 of the Form 10-Q information related to our majority interest in EyeLock LLC. The net loss for EyeLock during the three-months period ended November 30, 2017 was $3.9 million compared to a net loss of $4.8 million in last year's third quarter.

The improvement was driven by actions we took throughout the quarter to lower fixed expenses, primarily in SG&A. The reduction in engineering and tech support was mostly due to the fact that many of our past investments were for products that are now commercially viable. Lastly, in footnote 21 you will find a breakdown of our segment reporting.

You will see our automotive and premium audio segments were profitable during fiscal 2018 third quarter and while we generated a pretax loss of $2 million in our consumer accessories segment, the losses have been reducing significantly year-over-year.

To reiterate Pat's comments, our balance sheet remains strong and in addition to our cash position we have access to capital through our senior secured credit facility with committed availability up to $140 million which can be increased at our option up to a maximum of $175 million. I will turn the call back to Pat.

Pat?.

Okay. Michael, thank you. And at this time, we will open the call up to questions.

Operator?.

[Operator Instructions]. Our first question comes from James Medvedeff of Cowen. Your line is now open..

Good morning guys..

Good morning James..

Good morning..

Nice quarter. Very good..

Thank you..

So I have a couple of questions.

Could you just run through that tax situation again? The tax?.

That's right. Sorry..

Go ahead Mike..

On the taxes, so if you look at the tax, we had a tax benefit for the quarter, which was primarily the results of a release of an uncertain tax position that we took back in [2002/28] [ph]. The statute of limitations ran out and we brought the tax benefit across into the financials statements..

What was the tax? I got that part. That was $1.3 million.

The tax excluding VAT, what was the tax on the pretax income?.

It was $700,000..

Okay. Thank you..

You are welcome..

So EVO, in the automotive segment, how big is EVO likely to be within the segment? Is it 10% of segment sales or 50% order of magnitude?.

I would think that as the programs launch with different vehicles we are in, I think it would exceed 50% of our overall automotive sales..

And margins on that?.

Margins depending on obviously the volume because we are producing this ourselves should move higher than they are now based on the absorption within the factory and everything else, but we expect that would be in the traditional range you have seen us in the past..

Okay. Thank you..

You are welcome..

So you mentioned that, I will ask just a couple more and then I will get back in the queue. So expenses are a little bit lower than we had modeled and you say they are going to continue to lower from here.

Is that correct?.

As far as the quarter, we believe we will see some further reductions in the fourth quarter and then we have plans to further reduce overhead as we move into the next year. We are laying the groundwork for some of those things now and we will start to see the impact into next year..

Okay. And my final question for now is interest expense. I was curios to see that it was as high as $1.2 million, given that all the debt was eliminated or most of the debt was eliminated.

Why is that? And how should we think about it in the future?.

Mike?.

Yes. Well, what you will see is, we do have a facility out and about $5 million outstanding in Germany. You will have the debt discount. The amortization of the debt discount will be coming through that interest line.

And the last part is that we do have embedded receivable program that we deal with the banks for two of our largest accounts which we will continue to keep open which comes through that interest line.

To look at it for, well you asked about next fiscal year?.

I am just asking about it in general. If the total debt is about $20 million or is slightly less, it seems like, I am not sure what your interest rate is on those mortgages, but it seems like --.

You will probable see the interest come in around probably -- what I am trying to think about is, like as we are falling off with discounts for the embedded programs for the seasons, it would be probably about $500,000..

Per quarter?.

Yes..

Okay. Great. Thank you..

Thank you. And our next question comes from Thomas Kahn of Kahn Brothers Advisors. Your line is now open..

Thank you and congratulations again on the Hirschmann sale..

Thank you Tom..

I have a number of questions. One is the notion of trimming businesses which are me-too businesses, don't have any special uniqueness to them and have not generated profits in the past. I just look at page 49 and I see that consumer accessories loses money and automotive and premium make money.

So what are we going to trim? Are we in love with all of our businesses, so there is nothing we can trim that represents sort of me-too products and we don't have any competitive advantage relating to them? That's my first question..

All right Tom. Well, the first thing as far as when you say me-too products. When we look at our premium audio space and products that we are in, we are the number one selling premium audio brand in the market..

I am not talking, Pat, about premium. I am just saying, in the consumer accessories column, you show lots of red ink..

Let me address that. The red ink that is shown in the consumer space is basically generated by our investment in EyeLock because EyeLock falls within our accessory space..

Okay. That's a good answer. And that's fine. Second question. What have you identified, the way you say you want to trim things, have you identified anything you want to trim which represents me-too, because obviously EyeLock is not a me-too product. They have 100 patents or whatever they have.

Have you identified any areas where we don't have a competitive advantage but really we can hang in there but we are not going to win?.

Well, the thing is that any businesses that we are profitable with, we are going to maintain. And yes, we have looked at different product categories. And in fact, have exited a number of different product categories that were not performing over the past few years. We have gone through each one of our subsidiaries.

And the guys have done a good job in bringing their overhead down and where I am going to be focusing a lot of the energies as far as the continued reduction in overhead is in some of our shared service expenses where we believe that we have an ability to become a little bit more efficient utilizing automation, some of the new technology that's available to us.

And that will be our primary focus for reduction in overhead as we look into next year..

But Pat, if you look at your various businesses and you say listen, we compete with ABC in these various business and we have a competitive advantage or no competitive advantage. It's just a level playing field and we are doing okay but we are competing with bigger people one way or another.

Shouldn't we look at our portfolio of businesses and figure out how we can trim and where we can focus our energy and things where we have some advantage, whatever it is?.

Yes. And we do that on a regular basis. As I said, there are a number of categories within the different spaces. When I look within our RCA Group, we are in the number one market position in reception products. We have the number one market position in remotes and universal remotes. And we are in the top five in a number of other categories.

The ones that fall behind or legacy products, those are the ones that get targeted to redirect our attention on either newer technology and if a particular product line is not generating profitability that we need to sustain it, it goes. But that's an ongoing --.

But even if, for example Pat, we have a profitable product line but it's worth more to another company than ourselves, shouldn't we be considering selling that profitable product line to another company because they can pay more than what it is worth to us?.

Yes. And we have done that. Obviously Hirschmann was one of those things where we felt that that was a very good move for the company.

And yes, as I said in my statement, not only are we looking at possible accretive acquisitions, but we will also be looking at some of the existing assets that we have to see if we can divest and use those dollars to grow the other businesses that we have..

Okay. Two more questions.

Did Hirschmann come to us? Or did we initiate the sale of that?.

We initiated the sale of Hirschmann..

Okay. And hopefully you will review your portfolio of profitable businesses and figure out which are more valuable to other people and we rather have the cash. Next. Please do that because we are scattered over an awful lot of businesses.

Even if they are profitable, it's fun to run them but they maybe more valuable to somebody else and we should have the cash. Next one. Directors, our stock is in the toilet bowl as I would call it and has been for quite a while and notwithstanding the good work that you and some of your teams are doing, it remains in the toilet bowl.

So this presents a very good opportunity for all directors to step up to the plate and buy shares. And I don't see it. And I have only been in Wall Street for 40 years, but I will tell you when shares are in the toilet bowl and directors don't buy, there's always a red flag on the play.

I can't tell you, you know, I can give you lots of examples of it, but it's a red flag in the play. And I would say, nobody should be interested in buying our stock unless some of the directors step up to the plate and say honey, you can't have a new Mercedes this year because I have to buy company stock.

And I think you should seriously consider it and somebody should put their foot down. If you don't want to buy, we love you, get off the Board, okay..

All right. Obviously, we have had some of our directors purchase shares over the past year. We encourage our directors to own stock in the company. It is not a requirement.

We bring a number of our members on Board for their expertise in different areas and things like that, although we encourage them most of them will enter into a 10b-5 program to acquire which we put it out there for a period of time in the future. But yes, we do encourage them.

And I do think, with the stock price where it is that you will see more purchases by the Board..

Thank you. And our next question comes from Mike Hughes of SGF Capital. Your line is now open..

Good morning. Thanks for taking my questions. I think you said, once the new business wins, I think specifically GM and Ford are ramped, the EVO product would be roughly 50% of auto.

Is that correct?.

Yes..

Okay. What I guess I don't know is, where is that number now.

I am trying to figure out how incremental this business is to that segment for you?.

Well, again, the EVO business, it's not something that is on every vehicle, okay, in that it is not a commodity like an antenna or windshield. It is something, it is a dealer option, okay, it's installed at the factory, but the dealer has to click the box.

So for us to come with a hardball number based on the number of vehicles that we have, it's a little bit difficult, especially when you look out on the launch dates as the various times that they will be launching.

But we would expect that based on where we are this year, we would see a doubling of the rearseat entertainment sales that we currently have within the automotive group. We do not breakout specific numbers for specific product categories.

But like I said, roughly 40% of what we will be introducing is new business and that's why we believe we will see some significant growth in the OEM space..

Okay. So when you say there will be a doubling, does that mean that EVO right now is roughly 25% and it's going to 50%.

Is that right?.

I would think, yes. I would think that that would be a fairly accurate statement from the standpoint that our current business has been down from previous years, okay, because of the delay in the launches that additional validation required..

What are your thoughts on the attach rate, the dealer clicking that box now versus, let's say six, seven years ago when the iPad and other technologies didn't exist? Would it be lower?.

Yes. There is no question that the iPad and some of the Android products have impacted rearseat entertainment over the years. But we still find, both in the aftermarket and at OEM a considerable market for us.

And again as a percentage, it depends on the car, it depends on the trim level of the car, in some cases the trim level has the rearseat entertainment system as standard. So we expect that it will be a vibrant market for us..

Okay.

Maybe it's too early to say, but how would you say the attach rate has been so far?.

As expected..

Okay..

It's not anything that we are being surprised by. Again, with the product being as robust as it is and the content that can come in on to the system, we expect to see an improvement there because the product is built to be in an automotive environment.

An iPad traveling down the road at 70 miles an hour may have some difficulties maintaining streaming and things like that that our system that would not have a problem with.

So we believe better performance, more content, our relationship with Sling Media makes our product very, very interesting in that if you have Sling Media at home, you can watch whatever you have at home, you will be able to watch that in the car.

We think those are the things that will help drive the category plus, obviously the safety of having the screens fixed in the vehicle. In case of an accident, they are not missiles flying through the car. These are the reasons why the OEMs want to maintain and believe that there is a robust market here..

Okay. Makes sense. And then the quarter was good but I thought that the operating cash flow for the first nine months is a little bit disappointing but maybe it's embodied by the discontinued ops.

So could you just speak to cash drain in the first nine months of the year?.

Yes. Again, we had some lower margins that were generated by our premium audio group that now has been corrected and what we saw was the softening of, again, our OEM business due to the delay in launches that we had anticipated earlier in the year..

Right. But I am specifically referencing just the working capital, AOR was a use of $11 million, prepaid expenses $12 million, accounts payable and accrued $15 million, all of those were a big drain on operating cash flow.

Is that associated, I would think that's not associated with the discontinued ops but just maybe any color on that? How you see that playing out in the current quarter?.

The reason you see the increases, this is Mike speaking, the increase in the flow is that you are looking at the best largest selling season for us right now and we are at levels of receivables of inventory.

As you move into the fourth quarter, you will see the balance sheet will being to contract which it is actually doing right now and can even spin out..

Not to belabor the point but the payables, the accounts payable and accrued expenses are a drain in the first nine months of $15 million and last year they generated $15 million.

So was there just an abnormal build in 2016 and we are seeing that reverse itself this year?.

I am sorry. I really cannot hear you..

The accounts payable and the accrued expenses were a drain of $15 million in the first nine months of this year, whereas they contribute about $15 million to cash flow in the first nine months of last year.

Was there just an abnormal buildup in 2016 and we are just seeing it reverse out at this point? Is that how to look at that?.

That is correct. With the accounts payable, we did have a buildup in payables which is --.

Okay. And then the satellite radio business, I understand why that's under pressure.

Would you say at this point, that's declined to the point where it will stop being a drag on the topline or not?.

Yes. In our conversations with satellite radio, we believe that we are at a point with the new products that they introduce for the aftermarket and everything that they should be able to maintain sales roughly in the areas that were in. At least that's our expectation based on our discussions with them. Again, this is a fulfillment program.

So really the sales are driven by satellite radio and the promotions that they offer in that space at retail. And based on our discussions and what we have seen for next year, we think that it should hold the sales..

Okay. One last one for you. You mentioned maintaining your profitable businesses, but you would look at divesting the money losers. EyeLock is consuming a lot of cash.

Would you ever consider divesting it? And then maybe to maintain some of the upside, put in some sort of a licensing arrangement where you would get a royalty with EyeLock?.

Yes. We have looked at all options when it comes to EyeLock. We think that the future is bright, especially for an iris-based because of the level of security that it offers. But we would entertain all options as it pertains to the EyeLock situation..

And you recently named a new CEO there.

Was there not a CEO there? Was it actually a replacement?.

No. There was a CEO, but with the business and the opportunities that are presented to us now, we are more in an operating mode than, let's say, an M&A mode or raising capital. And we believe that the CEO that we just announced, Jeff Carter, is more suited for us to help grow that company based on his strong technical capabilities..

Okay. Thank you very much..

You are really welcome..

Thank you. [Operator Instructions]..

Well, if there are no more further questions, I want to thank you for joining us this morning. And again, I wish you all a very healthy and prosperous new year. Thank you..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day..