Franklin Covey Co. (FC) Q2 2013 Earnings Report, Transcript and Summary

Welcome to F2Q 2013 Franklin Covey Earnings Conference Call. My name is Trish and I will be your Operator for today’s call. (Operator instructions.) Please note that this conference is being recorded. I would now like to turn the call over to Derek Hatch. Derek, you may begin.

Thank you, Trish. On behalf of Franklin Covey I would like to welcome you to our investor webcast this afternoon to discuss the financial results through the end of our F2Q 2013. Before we begin we’d like to remind everyone that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management’s current expectations and are subject to various risks and uncertainties including but not limited to the ability of the company to stabilize and grow revenues, the ability of the company to hire productive sales professionals, general economic conditions, competition in the company’s targeted marketplace, market acceptance of new products or services and marketing strategies, changes in the company’s market share, changes in the size of the overall market for the company’s products, changes in the training and spending policies of the company’s clients and other factors identified and discussed in the company’s most recent annual report on Form 10(k) and other periodic reports filed with the Securities and Exchange Commission. Many of these conditions are beyond our control or influence, any one of which may cause future results to differ materially from the company’s current expectations; and there can be no assurance the company’s actual future performance will meet management’s expectations. These forward-looking statements are based on management’s current expectations and we undertake no obligations to update or revise these forward-looking statements to reflect events or circumstances after the date of today’s presentation except as required by law. With that out of the way we’d like to turn the time over to Mr. Bob Whitman, the company’s Chairman and Chief Executive Officer. Bob?

Thanks, Derek. We’d like to welcome everyone to the conference call today and we really appreciate you joining us. We’ll set out today just talking specifically about our F2Q results and go through those in detail, and then turn the time to Steve Young. The thought maybe is that we could have a Q&A on anything related to this and I’d like to then spend some time on updating to the extent we have time then to talk about our strategic initiatives and the progress of those. So maybe we’ll turn to Slide 3. As you know and as is shown in Slide 3, over the past year we’ve been fortunate to be able to achieve both significant and steady growth in revenue, adjusted EBITDA, our adjusted EBITDA margins, operating income, net income and net cash generated. And while any given quarter’s performance may have been higher or flatter, on a given twelve-months’ base the growth in all the factors has been strong and consistent. We were pleased to be able to continue these trends in F2Q, achieving growth on all of these key metrics. I’m going to give just some headlines and then we’ll go into detail on the discussion. The financial headlines were that revenue grew 4.7% for the quarter and 7.7% for the trailing four quarters, and that basically splits into two kind of groupings, while revenue in the company other than Government and Sales Performance in Japan grew 16% during the quarter. So from that perspective our, as we’ll go into detail – our direct [to offices] in the US, they’re geographic and many of our national account practices had terrific growth. This was partially offset by revenue declines in the Government region and in our Sales Performance practice, and by a primarily foreign exchange-related decline…

Thanks, Bob. Good afternoon, everyone. It’s nice to be with you today. My opportunity is normally to talk about the balance sheet and some hidden treasures and misunderstood items, so now and in the future – now that our management stock loan escrow program is resolved and the warrants are all exercised, and we are able to utilize our foreign tax credits now and everyone pretty much understands our finance obligation – our balance sheet discussion will be pretty straightforward and focus primarily on cash. So one of the ways that we’ll know that the strategy that we’re pursuing is working is in the change in our cash balance. To that end, we’re happy that the cash balance increased $8.3 million to $15.5 million this quarter. That’s an unusually high increase for us. Compared to other quarters our F2Q is always the quarter of highest increase so that was expected due to a decrease in accounts receivable plus operations. But we do expect to be a company that generates cash. In our F3Q we will have some earn out and acquisition payments, but again, it’ll be pretty much a straightforward discussion of the balance sheet we expect, and the focus on cash. Just a few numbers that we normally talk about: first of all, the amount of amortization in our cost of sales this quarter was about $500,000. We expect that to be about $2.3 million for the year. Depreciation and amortization expense last year was about $5.5 million. We now expect that to be closer to $6.0 million this year; a change resulting from the NinetyFive 5 acquisition and the amortization of intangibles related to that acquisition. Our net interest and discounting costs totaled $600,000 again this quarter. We expect those to be less than $2.8 million for the year. And we expect our effective tax rate to be less than 43%. The amount of share-based compensation in this quarter, which is included in SG&A but not in adjusted EBITDA is about $1 million. The amount of share-based compensation expected for the year will be around $3 million or just a little bit higher. So in my conclusion I’m pleased with our strategic direction, our continued investment in growth and we expect to be profitable and generate cash.

Thanks, Steve. With that why don’t we now open it to questions particularly about any of the results for the quarter; but if you have questions about strategies going forward we’ll address those and we have a few additional slides that might be useful if we get to questions about how the growth initiatives are going. So we’ll open it to questions at this point, if we can have the moderator do that.

Yes, thank you. We will now begin the question-and-answer session. (Operator instructions.) And our first question comes from Jeff Martin from ROTH Capital. Please go ahead. Jeff Martin – ROTH Capital Partners: Thanks, hi Bob, hi Steve.

Hi Jeff. Jeff Martin – ROTH Capital Partners: Bob, I was hoping you might go into a little more detail on what specifically gives you conviction on the improvement in Sales Performance practice in the back half of the year.

Yeah, the main thing really is that we tend to have a relatively small number of large contracts, Jeff, unlike in our corporate business where we have a relatively large number of smaller contracts. Here in the Sales Performance practice we have large sales forces and large technology and professional services firms, and so what gives us confidence – and I can ask Shawn Moon if Shawn’s on the call-

Yes, I am.

Okay, Shawn. As a matter of fact, why don’t you just take and handle this one?

Hi Jeff, good to talk with you. There’s a couple reasons why we have good confidence in the back half of the year with the Sales Performance practice. As Bob was saying, the way the practice has historically acquired our clients is targeting these large organizations of $5 billion in revenues, [clients] that have very large sales forces. The good news when that happens is we acquire these large multiyear deals; they’re very pervasive and deep. The problem is you don’t have the volume of the smaller deals to offset the timing of the coming and going of those deals. So one of the things that we have been working on and we’ll be focusing on in F4Q is a rollout of a facilitator offering within that that acts as an entire new market. We have a very aggressive launch plan associated with that. And so what that gives us, Jeff, is the ability to continue the large client acquisitions which we are continuing to do at a healthy pace – we’re encouraged by that – while focusing on rounding that out like we have done in our other practice areas. You have [Cust] as an example, Leadership Practices is another example of rounding out the bigger deals with smaller deals that are a little bit quicker to be done. The second thing that encourages us is with the acquisition of NinetyFive 5. They have an online coaching capability that is very accessible to a broad base of organizations, far deeper than what we’ve had before. So we have an existing client base that we can go after and upsell our services but we can also go after a new market based on our relationship with them. So those are two key areas that we feel like give us a lot of confidence that the traction that we’re seeing in our large accounts will be augmented by a more balanced approach to the portfolio.

And Jeff, one additional thing is that our pipeline just of contractual business, forgetting the client facilitated option, is also larger independent of the NinetyFive 5 than it was last year. And of course with NinetyFive 5 it’s larger by a significant amount. So I think the pipeline usually gets delivered in the next couple of quarters; that plus the 50-city product launch of this client facilitated option which we’ve never had, it feels like we have more upside on our forecast than down. Jeff Martin – ROTH Capital Partners: You mentioned, Bob, that NinetyFive 5 is a subscription model. I was hoping you could give us some insight there into how much of the $8 million to $9 million is subscription base, whether that’s higher margin, what sort of impact that has on the business and the margin structure; and then also if that’s something you plan to take to the existing Sales Performance practice.

It is. In fact, maybe we should make one comment. NinetyFive 5 has merged in and the day after the acquisition there is now just one practice, which is the Sales Performance practice. They both had initially the same content base because years ago, the guys who founded NinetyFive 5 came to us and asked if they could get a license rate to some of our content including our Sales Performance content because they thought our content was the best – they helped to develop it, by the way. And they felt it was the best and they wanted to create this set of tools and coaching and the five online services, etc., that they have. And so the sales force was integrated. We’re picking up accounts that our existing consultants can do more work in. They’re picking up accounts that they can do more services in. The actual subscription service portion of the revenue, of this $8.5 million of revenue is about $1.0 million today and so it’s a portion and it’s an important portion. It’s kind of like our My4dX software is in the Execution practice – it’s significant but not dominant. It doesn’t change a whole business model but it does smooth out, have very high gross margins and gives a stickiness to our offerings so that they’re ongoing. When we finish training what’s been happening, as Shawn said, you get a big bulge and then it drops off. We don’t have ongoing coaching services or other online services to provide an ongoing bridge of revenue. And so we think the effect will be immediately we’ll get some additional revenue and EBITDA contribution; over time we’ll be able to build larger, more strategic and lasting accounts.

Just one final note on that, Jeff. The deal size as we look at similar-sized organizations and similar-type engagements, the NinetyFive 5 portion of the deal size is about twice what the Sales Performance practice deal size has been. So we believe this will positively impact the size of deals as we move forward as well.

And reduce the steepness of the bell curve on that. Jeff Martin – ROTH Capital Partners: Okay. And then can we switch gears to the Leadership practice real quick? There’s not been a lot of discussion to this point but it did have a decline year-over-year. I was hoping you could shed some perspective on that and what your expectation is for the balance of the year.

Sure. Let me just mention, maybe put this in for context, but we have three practices that are sold by their [own]… As you know, the national account practices have their own sales forces but Leadership, Trust, Execution and Productivity are all sold by the same salespeople. And so in some cases, if you sell more of one you might sell less of another. We have had a big push in our Productivity practice over the past couple of years with the creation of [Five Choices] and then the recreation of our project management content to get out there and let existing clients and new clients know about these new offerings. As you can see, the growth in the Productivity practice has been substantial. We’ve also done a lot of marketing and such in the Trust practice because it’s newer and has the newer content, and it’s also grown substantially; execution, same way. And so I think what’s kind of gotten the…. While Leadership has a very strong base and it continues to be our largest practice, the growth rate – we’ve not had the marketing focus, the new product launch, the new tools, etc. The consequence when we have had that is the marketing [goes] everywhere else and so it’s more a substitution issue. As I mentioned, it still remains strong and our largest, and for the year as a whole. For the trailing four quarters it’s down 6%; it’s been up actually in certain of our offices and sectors, and certainly we have some (inaudible) accounts there. The focus here is we now have named a new Leadership Practice Initiative Leader – [Catherine Nelson] who’s leading this. We’re doing the same thing we did for years in building up the others, which is out there doing trial marketing events. We’ve done a few dozen of those now and by this time next year, approximately this time next year we’ll have the new Seven Habits course with all of the surround sound and stuff that will go with that. This is a very, very big effort, really our biggest ever effort and new product development; and it’ll be the company doing a 200-city plus tour, marketing events, all the sales people are being trained on how to do this. So it’s really a question of focus but we didn’t want to put the focus there until we had the new offering to go with it, so that’s really what’s happening there. Jeff Martin – ROTH Capital Partners: Okay, thanks. I better yield to other callers. I’ll come back in.

Thanks Jeff. Jeff Martin – ROTH Capital Partners: Thanks.

Our next question comes from Jim Larkins from Wasatch Funds. Please go ahead.

Hi Jim. Jim Larkins – Wasatch Funds: Hello, just a couple quick details. You mentioned that there was $0.02 of costs that came in from the stock loan retirement. Where did that hit in the income statement?

$500,000 of that is in share-based compensation which is included in SG&A, excluded from adjusted EBITDA. The rest is costs related to the NinetyFive 5 acquisition and legal costs, etc., and those would hit in SG&A.

But the total is, the after-tax effect is the $0.02, Jim.

Yeah, you take $600,000 of direct costs and the number that Bob talked about was $360,000 which is the after-tax amount, which is about $0.02 a share. Jim Larkins – Wasatch Funds: Okay, great. And did you buy any stock back in the quarter?

We didn’t buy any back in the quarter. Primarily we were anticipating this NinetyFive 5 acquisition and our earn out related to Covey Link, and we didn’t buy any in the quarter; which I think the next question is do we plan to and the answer is yes. We have our $10 million in place and we plan to look at that every quarter and buy shares.

Yeah, just a note on that – to date, and we haven’t bought a ton of shares to date but of course at the end of F1Q because we were funding the big growth in the back half of last year. We also only had $7 million of cash which is below our threshold. In this quarter we were above, but if we were negotiating the NinetyFive 5 acquisition it wasn’t clear at the time how much cash we were going to need to close it – we thought it was strategic. What we ended up negotiating was a series of four payments and the primary reason for that was so that we could keep our liquidity high so that we could in fact continue to buy shares at 6.9x EBITDA. So we would expect to be buying in this next quarter or in the current quarter. Jim Larkins – Wasatch Funds: Okay, perfect. And then you said tax rate for the year should be a little below 43%? Did I get that right?

Yes. To some people that might not be as exciting as it is to us since it’s been in the 60%s and 70%s in the past, but yes, that’s what we said. Jim Larkins – Wasatch Funds: Okay great, thank you.

Thanks, Jim.

Our next question comes from Marco Rodriguez with Stonegate Securities. Please go ahead. (Operator instructions.) Okay, we’ll go to the next question from Anthony Cambeiro from Anthology Capital. Please go ahead. Anthony Cambeiro – Anthology Capital: Hi guys.

Hi, how are you doing? Anthony Cambeiro – Anthology Capital: Good, how are you?

Great. Anthony Cambeiro – Anthology Capital: Terrific. So my question has to do with when do you think you will start to see accelerating revenue growth? So and not just positive growth but you go from growing 6% a year to 10% to 12% - just based on the math of the new hires and their ramp up, can you shed any clarity on assuming the model works the way you’ve got it when you start to show accelerating revenue growth?

Yes, in fact if it’s easier for you to go to Slide 18 – I don’t know how the system works, is it easy for you to do that? Anthony Cambeiro – Anthology Capital: Sure.

Slide 18, for everybody who would like to follow along, shows the impact on revenue of adding on top of what we have now and the growth of productivity and the ramp up of people we have now – if you hire net 20 a year for five straight years, all of a sudden you have an extra $78 million or 30 net hires, which is what we’ve announced we’ll do this year, you get to $117 million by the fifth year. And so the effort we’ve been making… When we put the stake in the ground last year and said “We’re going to start hiring net 30 a year,” we had to build the pod structure around it as you saw in that bulls’ eye target. And our goal there is frankly for those offices who are running it, 25 of those hires will be in the US offices. The revenue growth has already started – as I mentioned, 21% last quarter, 15% this quarter absent Government, just leave that aside for a second which hasn’t been really playing the same game. And so with the acceleration of the new hires, I mean we were hoping that in the next year or so, year and a half that we’re mid-teens growth rate in the US offices, say excluding Government. We started the same process where we’re hiring five a year in the three offices this year at least in Japan, Australia and the UK, but with marketing support and starting to build their pods we need to get them from the low single-digit growth to high single-digits to low double-digits, and we think we can. The licensee business, Shawn, you may want to talk about what the acceleration plans are there and how long it’ll be before you think you’ll… You’ve been growing at 13% compounded so that’s pretty good, but…

Yeah, we think we can continue the growth. Over the last eight years it’s been 13% and we think we can continue that and maybe even accelerate it with the same things we’re doing here with the direct offices, which is hiring more client partners, salespeople and ramping them more effectively. In addition, there are several large economies we have yet to really engage fully – like we mentioned before, France and Russia are coming onboard – and the opportunity for new practices to grow with our international partners is huge. Still 65% of our revenues internationally are coming from this one practice, Leadership. Here in the US it’s more like 35%, and so the opportunities for Trust, Execution, Education and Productivity to grow internationally while continuing to grow Leadership are tremendous. So anyhow, generally we think if we can continue what we’ve done in the past that’ll be great and we’d love to accelerate it.

Was any of that helpful? Anthony Cambeiro – Anthology Capital: Yes, thank you. And good luck.

Thanks very much.

We have Marco Rodriguez from Stonegate Securities. Please go ahead.

Hey, Marco. Marco Rodriguez – Stonegate Securities: Hi guys, sorry about the little technical difficulties on my end. I have just a couple of quick follow-ups. I’m sorry if I missed this in your prepared remarks but the 4x hit to revenues as well as the Government Services decline in revenues, can you kind of quantify that as far as dollar figures?

Yeah, for Japan it was around $700,000 in the quarter with the FX impact. In local currency, in Yen, they were basically flat – it was down 1% actually technically. And they grew EBITDA in US dollars and Yen but it was about $700,000 in the quarter. For Sales Performance it was closer to a $900,000 decline in revenue for the quarter, obviously all in US dollars – it wasn’t a foreign exchange issue.

Government Services was about $800,000 in revenue.

Yeah, Government Services was also about $800,000. So you basically had in Government Service and Sales Performance, between the two of them it cost us $1 million basically of EBITDA for the quarter. Like I said, we think the growth in Sales Performance in the back half will offset any decline in Government. We don’t expect an increase in Government but it’s possible that the decline will be less than we’re including in our forecast. Marco Rodriguez – Stonegate Securities: Okay perfect, that’s helpful. And then the NinetyFive 5 acquisition, can you discuss any sort of integration issues or where you are in terms of the overall integration?

Sure. Shawn Moon, do you want to respond?

Yeah, the teams actually… One of the things that’s working to our advantage, Marco, is that these teams know each other. The founders of the NinetyFive 5 were individuals that had been part of the creation of the content in the first place many years ago, and so the integration so far has been pretty seamless. We have the teams working together now as fully integrated teams. We have chosen not to run them independent but actually have them become the new Sales Performance practice. So their salespeople have integrated with our salespeople; the same with their delivery people and our delivery people. They had some capabilities in terms of coaching and technical expertise that we didn’t have and so there was not any overlap there. The only overlap came in areas where we actually needed additional resources which was in sales and delivery, so we are marching forward. The team is actually meeting together – they met together last week for a couple days and we have our Leadership team in town this week, excuse me, next week. And the plan is all about hitting the quarter. So anytime you bring organizations together there are bumps in the road but so far we have not experienced any big bumps yet, and people are pretty energized about what is happening. One of the things that helps us frankly is that we ran into each other quite a bit in the marketplace. And so both organizations perceive this as a barrier being removed – we’re not competing against each other around the same content. So that’s helped a lot. There was great celebration on both sides when this was announced in terms of territory conflict. Marco Rodriguez – Stonegate Securities: Okay, that’s helpful. And are the existing Franklin Covey salespeople on the Sales Performance side, do they need special training or education to cross sell this or is it pretty simple?

Well, there’s some to be honest and that is actually taking place now. Again, the good news is that it is around our content and so it’s just a matter of understanding how this integrates – how the additional services integrate. But I would also say the practice prior to the acquisition had identified a couple of key areas where we knew we were deficient, and one was in technological support and the other was in the support of coaching. And so they actually had what we were working toward building and setting money aside to invest in that in future years we won’t have to do that. So the ramp up around those things is maybe less than it otherwise would be. Marco Rodriguez – Stonegate Securities: Got it. And then lastly, in terms of your guidance for this fiscal year, you didn’t make any adjustments to it given the acquisition. And given the commentary and the excitement level that it sounds like you guys have for this acquisition, I’m kind of wondering what might be behind the not changing the guidance upwards.

Yeah, I think basically the Government decline and uncertainty on the Government is likely to at least… Again, as I mentioned we’re hopeful the momentum will continue to build and that we’ll find out as we did last year by the end of our F3Q that in fact our pipeline was sort of significant, that we thought we’d be in the upper end of the range where last year we increased guidance and we’d love to be in that same position this year. Given the transparency we have right now of the pipelines, it sounds like we ought to – that keeping it in that range gives us a good shot to, even if Government were to not improve at all we think we can still hit the range and with possibly some upside. The acquisition itself won’t add a ton of EBITDA this first year. There are some integration costs, you’ve got some development costs that are being expensed and those sorts of things, but it’ll still be accretive in this year. Marco Rodriguez – Stonegate Securities: Got it, thanks a lot guys.

Thanks, Marco.

Our next question comes from Carter Dunlap from Dunlap Equity Management. Please go ahead. Carter Dunlap – Dunlap Equity Management: Oh thank you. Everybody else has hit all my questions. Thank you.

Thanks Carter, thanks very much.

And we have Jeff Martin from ROTH Capital with a follow-up. Please go ahead.

Hi Jeff. Jeff Martin – ROTH Capital Partners: Thanks, hi guys. Could you give us some perspective of what the trailing twelve month revenue base is tied to Government?

Yes. Yeah, so let’s see, I think I’ve got a slide on that. Slide 5, Jeff, we’ll take a quick look at that. Government Services for the trailing four quarters, if you see it up in that first box on the right- Jeff Martin – ROTH Capital Partners: Oh, I see it, yeah.

For the four quarters ended March 2, 2013, $19 million, so roughly 10% of our total revenue. Jeff Martin – ROTH Capital Partners: Okay. And can you give us some perspective on how long you foresee a decline in Government? Is this something that could take a year to resolve? Is it too uncertain? Do you have any views at this point on it?

Shawn, do you want to address it from your perspective?

Sure. It is a little uncertain, Jeff, right now given the budgetary woes that we are experiencing but it is settling down. And the uncertainty, when you have a new administration coming in and the leadership teams that follow within each of the agencies, the agency where we have our large government contract the administration has not formalized all of the leadership team there so there is some uncertainty there. We anticipate that over the course of the next twelve months that we will see some increased traction there. We’re seeing willingness and the desire on the part of the buyer. When the uncertainty settles down we anticipate over the next twelve months being able to get some traction back. Jeff Martin – ROTH Capital Partners: Okay, my other question was on China and the Education practice, and getting the first school onboard. I would imagine that’s a huge potential market for you; I was just curious if you can kind of shape what that market opportunity is and if that could come on fairly quickly.

Yes, Sean Covey?

Sure. Well, it is a big opportunity and we’re excited to get our foothold in there. Our plan is to go direct, not work with our partner in China – our international partner, our licensee partner but to go direct and to look for partners already established in China. And so this first school is part of a partner there in China that’s already established, that just has one little niched in a certain city. The plan would be to get a partner or multiple partners to go to market with and to try to get, literally start with a few dozen and get hundreds and even thousands of schools eventually. In Brazil, we found a great partner in Abril, we talked about last quarter, and they’re one of the biggest education companies in Brazil. And because of that partnership we’ll be able to penetrate very fast in Brazil. In like manner we’re thinking really big about China. We hope to get to the thousands of schools, not just you know, a few here or there. We know that quality is the key. If we do the first few schools very well and right it’ll spread fast. In education people talk – word of mouth is the best marketing. So the plan is start small, start smart, go with partners and with the end in mind of getting really big and getting to thousands of schools and hopefully millions and millions of kids. Jeff Martin – ROTH Capital Partners: Great, thanks guys.

Jeff, just to follow up on your question about Government, I’d say that we, you know, I mean on one hand this Government thing has obviously interrupted the quarter and such. But given the size of the Government and the really small amount of revenue that we get, and the success we’ve had in certain pockets, we’re not accepting this idea that Government’s just going to be tough for a long time. If you look at the number of multi-unit operators in Government, you know, I mean in the Veteran’s Administration there are 85 hospitals that are run virtually identical. We do no Execution work in any of those and yet in our corporate business we’re doing lots and lots of Execution in multi-unit operators like lodging chains and restaurant chains, etc. We just have not in that business, we’ve had our hands full servicing the business that we’ve had and we’ve now been adding people. But we anticipate, let’s (inaudible) and say it’s a very, very tough world for a long time – folks in Execution and things that we were able to do in the Department of Defense, when they lost their whole budget in 2002-03 with the Iraq War and yet we did more business in the Department of Defense in the coming years than we did in the previous years, all around Execution. So on the agency side, we need to go out and win that business, we’ve got plans to do so. Marketing events are occurring now, and so I think it will take a few quarters for that to build in the pipeline but we’re not going to say let’s say that Government never recovers in the general case. That won’t be the case. In terms of the government itself expenditures, we expect that with the offerings we have we ought to be able to win more than our fair share and grow that business. We’re not accepting lack of growth anywhere. Jeff Martin – ROTH Capital Partners: Okay, that’s great perspective, thanks Bob.

Thanks. I know we’re past our time. We’re delighted to continue answering any questions if there’s interest on the part of any of you all to do so.

Okay, we actually have no further questions at this time so I’ll now turn it back to you, Bob, for any closing remarks.

Alright, my closing remarks would be thank you all for being on the call today. There are some additional slides that might give more perspective that are part of the deck there that give you progress on the ramp up of the sales force, the hiring, the sales wheel, etc. but I think those are pretty much self-explanatory to use those as reference for today. We appreciate all your support. We are committed to growing every business every quarter and I’m glad that we could, despite some of the other challenges, grow in this past quarter. Thanks very much.

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for participating, you may now disconnect.