ACI Worldwide Inc (ACIW) 2006 Q4 法說會逐字稿

Good morning. My name is Tonya and I will be your conference operator today. At this time I would like to welcome everyone to the preliminary fourth quarter and year-end results conference call. (OPERATOR INSTRUCTIONS). I will now turn the call over to Mr. Bill Hoelting, Vice President of Investor Relations. Sir, you may begin your conference.

Good morning. The participants for this conference call are Phil Heasley, CEO; Henry Lyons, CFO; and Mark Vipond, COO. As you are aware, our fourth quarter fiscal year 2006 conference call is being held later than it has traditionally been held. On October 27, 2006 we announced that the Company's financial statement and all earnings releases and similar communications relating to financial periods since fiscal year 1995 should not be relied upon in light of the stock option review the Company has undertaken.

While the review is not yet complete, we want to provide as much information as we can about our quarter and the fiscal year ended September 30, 2006. While we do not at this time believe there any measurement date or other issues in the past five years, there appear to be some errors in the 1995 to 2001 period which could affect our financial statements in the past five years. Such restatements could roll forward and thereby affect the preliminary results and fiscal 2007 guidance contained in our November 14 press release, which will be discussed on this conference call.

Because of the ongoing nature of the stock option review, I'm sure you'll appreciate that we need to be a bit more circumspect than usual in response to some of the questions you may have. As a reminder, some of the comments made in this conference call, including any guidance about future periods and any responses to your questions, may contain forward-looking information. Such statements are subject to risks and uncertainties as described in the Safe Harbor language contained in the Company's press releases and filings with the SEC. Please refer to the Safe Harbor language contained therein. The Company disclaims any duty to update such forward-looking statements.

The agenda for the call will be as follows. Mark Vipond will provide highlights for the business this quarter. Henry Lyons will then provide the financial results. And Phil Heasley will close our prepared remarks, at which time we will open the call to respond to your questions to the extent we can. I will turn the call over to Mark Vipond.

Good morning everyone. Before Henry discusses our preliminary financial results, I would like to spend a few minutes reviewing our operations. I will start by reviewing some of the new business that we signed during the fourth quarter.

I'm pleased to report that Q4 turned into a very good contracting period for us. We added nine new customers, licensed 33 new applications to existing customers, and signed 23 capacity upgrades over $100,000.

The breadth of our productline clearly pays off when you consider the new applications sales that we made to existing customers where we continue to deepen relationships with our banking, processing, and retail clients.

Key sales in the quarter included BASE24-es wins at a top 25 U.S. bank, a large European payment processor, and a leading retailer in Spain. Each of these deals was won on a different hardware platform, demonstrating that our multiply form strategy for BASE24-es is indeed creating new opportunities for us.

The sale in Spain was on the IBM System z platform, the key factor in our growing relationship with IBM. The other two deals were on open system servers.

As you know, payments fraud is a hot topic in our industry. Demonstrating the strength of our Proactive Risk Manager product we signed three top 25 U.S. banks in the fourth quarter, each of whom will replace their current solution with ours. We also signed smaller banks around the world because payments fraud is not just an issue at large banks. We now have 112 customers licensed to use PRM, and continue to see good opportunities for the product.

We have spoken to you for years about the emergence of smart card technology for electronic payment. During the quarter we signed our first major Smart Chip Manager deal in North America with Royal Bank of Canada, as they prepared to meet the demands of Canada's planned B&B rollout. We also signed a Smart Chip Manager deal in Greece.

Finally, in the wholesale payment space we had two significant wins in the fourth quarter. First, we won a Wholesale Payment System deal at a top 50 U.S. bank, replacing an ASP-based offering from one of our competitors.

Second, you'll recall the one of the benefits of our restructuring into a single ACI branded operation was our ability to drive products like WPS through our ACI distribution channel, particularly in Europe where banks are faced with the impending [SUPPA] mandate. I'm happy to say that we won our first WPS deal in a number of years with the signing of a large UK bank, which is one of the top 20 banks in the world. We are seeing more and more opportunity for our Wholesale offering outside the U.S.

In addition to some good sales activity in the quarter, we continue to make significant progress in project deployment. We had several BASE24-es customers move into production status. These included Frost National Bank, Wal-Mart Mexico, and the New York Transit Authority. We expect four more customers to go live before the end of this calendar year.

Based upon the progress we have made with the stability of BASE24-es and customer projects, we met our goal of declaring Category A status for BASE24-es for revenue recognition purposes. This is important in that it validates the overall quality, reliability and stability of our flagship retail payment engine.

Finally at the end of the fourth quarter we made some organizational changes to complete the restructuring efforts we began at the start of the year. The objective was to position us for growth and global scale by forming units specifically focused on services, product development and software as a service. This new ACI Global Solutions group will be focused on improving our gold standard software and services and leveraging best practices, processes and resources in a high-growth environment.

We will continue to project these capabilities on a global scale by leveraging the local [soul] resident in our distribution channels. This is a logical step in our evolution as we expand our software and services business around the world.

Thanks for your time this morning. And now I will turn it over to our new CFO, Henry Lyons.

Good morning. Before I discuss our fourth quarter and fiscal year financials, I want to remind you that they should be considered preliminary to the ongoing review of the Company's historical stock option grants. In addition, we have not completed our year-end audit process. With these caveats, I would like to update you on our results.

Revenue for the fourth quarter was $88.5 million, representing a 12% increase over the same period last year. Revenue growth was driven by strong contributions from the EMEA channel, which increased 20%, and Americas International which increased 36% year-over-year.

Revenue for each of the geographic channels was as follows. Americas revenue was $46.2 million, which included U.S. revenue of $31.6 million, and Americas International revenue of $14.6 million. Revenue for the EMEA channel was $31.3 million, and our Asia-Pacific channel had revenue of $11 million. The $88.5 million in Q4 revenue included software license fees of $42.7 million, maintenance fees of $27.7 million, and services of $18.1 million. The license fee revenue of $42.7 million comprised $26.7 million in initial license fees and $16 million of monthly license fees.

Operating expenses for the quarter were $85 million compared to $67.9 million last year, an increase of 25%. Included in the fourth quarter expenses were approximately $5.7 million in special expenses associated with year-end activities, as outlined in our October 2 press release. These special expenses related to the following items -- globalization activity, such as the establishment of our Irish entity; the establishment of our New York headquarters; restructuring expenses related to formation of the ACI Global Solutions group, and above-plan sales commissions based on the strong contracting quarter.

In addition, fourth quarter results included approximately $1.8 million in equity-based compensation expense that had no comparable number in Q4 '05. Finally, as we announced last week, we incurred an expensive $8.5 million due to the settlement of a class-action lawsuit.

Our fourth quarter income tax expense was $2.4 million, or 51%. This expense was $0.02, or $775,000, higher than our projected rate of 35%. The fourth quarter 2006 tax rate was adversely impacted by the finalization of the value of the intellectual property transferred to Ireland, and by the true up of federal tax accruals as part of the year-end closing process.

Operating income for the quarter was $3.5 million, and our operating margin was 3.9% compared to $11.1 million and 14.1% for the same period last year. Net income was $2.3 million, or $0.06 per diluted share, during the quarter compared to $9.1 million and $0.24 per diluted share during the same period last year.

We finished the quarter with approximately $110 million in cash and cash equivalents. This balance reflects a cash payment of $78.5 million for the P&H acquisition. We funded $75 million of this acquisition from our $150 million senior revolving credit facility. Net operating cash flow for the quarter was $13.8 million.

During the quarter we repurchased 448,878 shares of our common stock. Through September 30, 2006, the Company has repurchased a total of 2,684,698 shares for approximately $73.5 million.

For the full year, revenue was $348.1 million. This included software license fees of $175.8 million, maintenance fees of $103.7 million, and services of $68.6 million. License fees included $107 million in initial license fees and $68.3 million of monthly license fees.

Revenue for each of our geographic channels was as follows -- Americas revenue was $180.7 million, which included U.S. revenue of $118.8 million, and Americas International revenue of $61.9 million. Americas revenue increased 7% over fiscal 2005, while our non-U.S. revenue grew 36% year-over-year. The EMEA channel had revenue of $132 million, up 20% year-over-year. Asia-Pacific revenue was $35.4 million, up 4% from the previous year.

Operating expenses for fiscal 2006 were $293.5 million compared to $248.8 million last fiscal year, an increase of 18%. Notable areas of expense that were incremental in fiscal 2006 compared to 2005 include $9.9 million in expense associated with the S2 business. $6 million in non-cash equity-based compensation, $4 million in expenses associated with the eps acquisition, a $3.6 million increase in the release of previously deferred services expense, and $8.5 million for the settlement of the class-action lawsuit.

Net income for the year was $55.8 million, or $1.46 per diluted share, compared to $43.2 million, or $1.12 per diluted share, in the previous year. In fiscal 2006 we had a benefit of $0.46 for tax related items in Q1 and 3, while we were adversely affected $0.14 due to the lawsuit settlement in Q4.

In summary, our GAAP earnings per diluted share of $1.46 was impacted by $0.10 for special charges, $0.14 for the class-action suit, and $0.02 by a higher effective tax rate, leaving us with $1.72 in adjusted earnings per share for the year. This $1.72 was about $0.06, or $3 million, lower than we had expected, due primarily to lower than expected conversion of sales to revenue. As you know, our sales go either to revenue or backlog, and the lower-than-expected sales to revenue conversion amount resulted in the strong backlog at the end of fiscal year 2006.

Our ending twelve-month backlog was $291.5 million compared to $258.2 million at the end of the third quarter of fiscal 2006. The backlog increased due to organic growth from strong sales, along with $24.9 million from the P&H acquisition, net of an accounting adjustment of $6.2 million. Backlog decreased $1.7 million due to the divestiture of our e-Courier and WorkPoint productlines.

On a comparable basis, that is excluding P&H from ending backlog and excluding e-Courier and WorkPoint from beginning backlog, our twelve-month backlog growth was $10.1 million, or 4%. The monthly recurring portion of twelve-month backlog was $214.1 million and the non-recurring portion of backlog was $77.4 million.

The monthly recurring components of our twelve-month backlog included monthly license fee of $67.8 million, maintenance fees of $118.7 million, and facilities management fees of $27.6 million. Nonrecurring components of backlog included license fees of $37.7 million and services of $39.7 million.

As of September 30, our 60-month backlog was $1.24 billion as compared with $1.09 billion at the end of the third quarter. The backlog increased due to organic growth and the addition of approximately $135 million from the P&H acquisition, net of an accounting adjustment of $9.7 million, and was reduced by $8 million due to the divestitures. On a comparable basis, our 60-month backlog growth was $22 million, or 2%.

Now let me talk a bit about 2007. Please note that this guidance does not include the 2007 impact, if any, from the ongoing options review, nor does it take into account the cost associated with the options review.

Looking forward, our revised fiscal 2007 guidance is for revenue of $430 million to $442 million, including P&H. Our earnings per diluted share guidance, $1.46 to $1.61. In summary, we have reduced revenue guidance by $1 million, and earnings per share guidance by $0.03. This revision is solely due to the refinement of accounting treatment of the P&H acquisition. None of this revision is due to the underlying P&H or TSA business.

We now expect the P&H acquisition to be dilutive in fiscal 2007 by $0.17 to $0.19. The previous guidance was $0.14 to $0.16 dilution. This incremental $0.03 of dilution is primarily due to an increase in the deferred revenue adjustment for 2007, an expense from a purchased compensation obligation that we originally thought would be included in the P&H purchase price, and a shorter amortization period for certain intangible assets. We're still very happy with our P&H acquisition and feels that it best positions us for sustainable long-term growth. Again, these revisions do not relate at all to the underlying P&H or TSA business operations.

Along with GAAP-based guidance we are introducing earnings per share guidance on an adjusted non-GAAP basis. We're doing this to give you more transparency to our earnings, focusing on operations before selected non-cash items. To calculate adjusted earnings per share we add back expenses associated with the amortization of acquisition-based intangibles and non-cash equity-based compensation.

For a reconciliation of this calculation and an explanation of why we think this is a useful operating measure, we refer you to our press release from last night, which has been posted on our website. For fiscal 2007 we expect amortization of intangible assets from acquisitions to be approximately $8.1 million, or $0.22 per share. Also, we estimate our non-cash equity-based compensation expense to be about $5.5 million, or $0.14 per share. When we add those non-cash items to our guidance, we get a range of $1.82 to $1.97 for adjusted non-GAAP earnings per share.

In calculating our annual guidance, we have made the following assumptions -- an effective tax rate of 34%; no significant change in foreign exchange rates; no projection as to the reduction in the number of shares outstanding as a result of our share repurchase program; the expensing of equity-based compensation under SFAS 123R, which began effective with the first quarter of this fiscal 2006. And again, this guidance does not include any impact from the ongoing review of our operations or the costs of our options review or costs associated with the review.

Thank you for your time this morning, and now I would like to turn the call over to Phil Heasley.

As you can tell we have quite a few things going on right now. We're working very hard with our advisors to complete the options review as soon as we can. Our current view is that any timing issues came into play before 2001. And we do not expect any impact on the current P&L or cash, although there may be some roll through effect based on charges from pre-2002 period in shareholders equity. As you probably saw, we also settled the class-action lawsuit that was initiated several years ago. We're happy to have this behind us.

2006 was a transformational year for TSA. I'm proud of our team for their great efforts in positioning us for future successes. Our major accomplishments included the following. We restructured the Company to operate as a single unit, leveraging the gold standard global brand, ACI Worldwide. We closed two strategic acquisitions designed to increase our global footprint and expand our solutions portfolio. We added depth to the management team through acquisitions and successful recruiting of proven performers like Henry Lyons and [Craig Mackey]. We established our Irish entity to house the international intellectual property for BASE24-es, which will pay off over time in terms of increased efficiencies as we grow outside the United States.

We were able to move our flagship payment engine BASE24-es to Category A status for revenue recognition purposes, a strong sign of product stability and maturity. We established our executive offices in New York City allowing us to be closer to our owners and many of our international customers and markets. We established ACI Global Solutions group led by veteran Mark Vipond to better coordinate our product delivery and service initiatives around the world. We announced our plan to rebrand the Corporation under the ACI Worldwide name, simplifying our image to the Street and our many stakeholders. We announced plans to rebrand our core product solutions under BASE24 name, again leveraging our gold standard brand and driving home our vision for payments convergence.

As Mark said, we ended on a particularly strong note from an operations prospective with good contracting quarter and significant wins across the breadth of our productline and our geographic reach. Our backlog reflects this, even after taking out significant increase from our acquisitions.

Our team continues to focus on growth and globalization, as well as offering premium solutions and services to our blue-chip customers. Electronic payments marketplace continues to exhibit excellent growth characteristics, and we think we're in a great position to benefit from its long-term sustained growth.

We appreciate your patience with us as we wrap up 2006. And we look forward to visiting with you all in 2007. And now I will turn it over for questions. I will put you back to the operator.

(OPERATOR INSTRUCTIONS). George Sutton, Craig-Hallum.

The first thing I wanted to do was -- I want to go back to a couple of the deals that Mark referred to. And first on the wholesale payment side you mentioned the top 50 U.S. bank. I believe you mentioned they are replacing an ASP system that they have today, is that correct?

Yes, that was correct.

Obviously, we have seen the opposite occurring pretty consistently. Can you just discuss that is not a trend you're seeing, that is just a specific example?

Well, it is a specific example where they had a desire to have more control over their own destiny and doing it in-house. Is it a trend we see? No. I mean we see the opposite also that some of the midsized banks are more interested in ASP software as a service type of deployment as opposed to having the entire -- bearing the entire cost by deploying it themselves. This is somewhat a somewhat unique example we believe.

That is what I assumed. I just wanted to make sure. You mentioned the large UK deal with the top 20 bank. What I just want to understand, is that related to SUPPA? Is that them looking out a little ways and seeing what SUPPA will force them to do and therefore making the changes now?

No, this one is specifically in the UK. There's also another initiative, which is really in the theme of convergence, called Faster Pay, which was a mandated network where you basically allow for payments in a near real time basis. It is really kind of a blending of card payment type technology with the wholesale technology. We signed this customer up for the Wholesale Payment System. We have also licensed some other customers who are using BASE24 or BASE24-es to solve this problem. And we believe some of them will license both because they had a broader view of how they can use the technology.

Where it sits right now, those were not simply for SUPPA. That is another opportunity that we have, and we also have some deals that were pursuing right now in that regard.

Henry, are you able to repurchase stock during this internal work that you're doing on the options side, or does that preclude you from purchasing stock?

We can repurchase stock during this period.

Okay, good. Lastly, Phil, from a P&H integration prospective, can you just give us a quick update on how that is going?

I think it is going very well. I'm actually in Great Britain right now speaking to you, at the end of the management meeting. Mark and I are here. One of the topics we went through was P&H integration. The infrastructure integration is well along its way. We are actually combining the WPS -- we're combining our two wholesale structures and we have plans in place for that. Can't tell you -- I can tell you it is moving along very quickly. I'm not going to tell you anymore than that, because we're not announcing it to our people still Friday, and Friday and Monday. But, yes, that is moving along very quickly.

Great. It sounded like you had a little accent. Half fun.

Nik Fisken, Stephens, Inc.

Let me get started with the biggest question I've got. If I look at October 2, we gave guidance that we would end up at the low end of the range on earnings. That was after the quarter was complete. Now we have said we're $0.06 light because sales did not fall into revenue. I'm wondering what didn't happen there?

I will take that. It is Henry. October 2, the quarter was complete on the calendar, but the complexity of our deals, the analysis of the revenue recognition across those was nowhere near complete. It usually takes the better part of the month to get that out there. Really, the strong contracting quarter we knew about. The higher than budgeted commission charges we knew about. But when push comes to shove and you get into it deal by deal, just some of these deals simply don't have the revenue recognition and criteria to make the conversion go from sales to revenue. $3 million, $0.06, it is a big number, but it is $3 million and that is two or three deals going one way or the other. That is really the summary.

In terms of our guidance going forward, should we expect more charges or are we done with these charges x-ing out what you referenced relating to options?

Say that again. You mean special charges, restructuring type charges?

Exactly.

I wouldn't tell you to expect or not expect. We're going to continue to do the right thing for the business. If that means we have to take a charge, we will. I'm telling you what we see right now. Our guidance is that we should expect some charges -- some fees, relative to this option study, which is not in our guidance, because until I really know how long this is going to take and the depth we're going to have to grow to to get into, I would hate to bounce guidance all over the place relative to that.

You should expect -- that is why we highlighted -- you should expect some fees related to this options study. And restructuring, if we decide it is the right thing to do, we will do it. But right now our guidance is what it is, which is it will be impacted by fees and that is it.

Phil, if we look at the acquisition activity, the last 12 months, or looking even longer than that, you guys have done three deals, one very large deal. Are we going to be spending time over the next 12 months more on integration of acquisitions, and rather use cash for buybacks, i.e.? Are we going to see more acquisition activity do you think?

Before I answered that, this is Nik, right, that is on the phone?

Yes.

Nik, before I answer that I want to go back to the first piece. Henry answered that exactly the way that Mark and I would answer it. But I think we owe you folks to know that in the last 12, 15 months we have pretty much reorganized every single department in virtually every quarter of the world in this business. Do we expect to have that kind of movement going forward? There is no expected movement like that going forward.

We signaled that we were going to restructure from the three businesses to one business, and we're going to globalize. It has been a hell of a task to do it, quite honestly, as well as moving the IT overseas. But we don't expect that now.

As it relates to -- all I can tell you in answer to your question is there are two or three things that are on our list that I guess we would call Category A type acquisition candidates that we may or may not pursue, because they are interesting to us. We still have a strong appetite to buy backs our stock.

Since we're halfway through the December quarter, can you give us an update on how the quarter is progressing? You can use the September quarter as a bogey if you want.

The only thing I can tell you -- and I just got to do -- I just have to learn to be humble on this. I can tell you that sales, that contracts are going very, very well. We are getting larger and longer-term contracts, and our ability to adjust -- be positive in terms of what converts immediately from these contracts to revenue is very hard. as it relates to looking at our business on revenue plus backlog, I don't think this Company ever had a better year than last year, if you look at those two things combined. I would say that it is continuing.

Tom McCrohan, Janney Montgomery Scott.

I'm going to apologize upfront. I have a long question, but I can't think of weight to say it concisely. I'm trying to compare the backlog to your revenue guidance, and trying to understand some of the dynamics there.

If you look at -- you kind of began 2006 with twelve-month backlog about $243 million. You ended the year with $348 million in sales. There was a gap of $105 million between the beginning of the year backlog where you ended the sales. That gap, $105 million, grew like 26% relative to the gap where you were at at the beginning of 2005.

Going into 2007 the gap is about $123 million, if you adjust for P&H and assume P&H is going to do about $40 million in sales this year. You are $430 million. The low end of your guidance is really $390 million including P&H. So that gap this year, the $123 million is about 16%, 17% growth over the $105 million gap you had at the beginning of last year.

Given the gap of 26% last year, you only need to do 16% this year to get hit the low end of your guidance, what factors this year would play into the growth rate in your ability to achieve that low end of guidance?

This is Mark. I got a couple of key points that I would respond to in that regard. One is, you hit the nail on the head. That is a very accurate assessment. Our gap is bigger. As we get bigger, the gaps do get bigger. As a percentage, when we look at the businesses, the backlog that we have to what our targets are for the year, they are comparable with what they had been for a number of years.

A couple of key things as to why we see an opportunity for an increase in terms of the revenue that would get recognized. One is demand for our products throughout the marketplace. We have had very good demand in Europe. That continues. The SUPPA initiatives, the various catalysts in the marketplace are driving an opportunity for us to increase our sales, and thereby the revenue that will be derived from them.

The other key factor that goes into our thinking is the BASE24-es categorization as Category A. It gives us the ability to recognize that revenue, at least have the control of recognizing that revenue quicker than we have been in the past.

Mark, I know that the gap is bigger this year, but from a growth basis it looks like you don't have to sell as much above your twelve-month backlog to hit the low end of your guidance this year.

And the way I'm calculating it is, you have $123 million gap. That is only 16% growth over the gap last year. Why would the gap grow slower than it did last year? Was there something last year in the delta between your beginning of year backlog and the actual end of year sales related to maybe capacity upgrades, or sales of your PRM risk management product that you did not expect to happen this year? Any slowdown in there or are you just being conservative on your guidance?

This is Phil Heasley. I would add two more things on to what Mark does. Actually, everything Mark said I agree with. I'm just adding these two things. One is, we're less -- we're less and less dependent as we go forward on capacity upgrades. You notice at the end of last year there was less capacity upgrades in the mix. And this budget year has less -- from a backlog perspective, we have less capacity upgrades.

The other thing I would tell you is that the nature of our contracts are getting larger and longer. We're just -- we embarrassed ourselves this quarter and somewhat last quarter in terms of the conversion of contracts. Not the amount of business we're doing in the marketplace, but the conversion from contracts to revenue. We don't want to do that in 2007.

Franco Turrinelli with William Blair & Co.

Actually, mainly I had a couple of housekeeping items, if I may, I think for Henry. Henry, do you have the amortization of acquisition-related intangibles in the quarter, those not related to P&H?

For Q4?

Yes.

Yes. The acquisition of intangibles were $0.02 in Q4 '06.

Can I get a dollar figure from you?

$0.02 would be -- what is that -- $600,000. I'm sorry, $1.2 million. $600,000 a penny, about $1.2 million.

Also, in the several items that affected expenses in the quarter, do you happen to have, or are you able to give us a little bit more of a sense of what the divestiture of the e-Courier WorkPoint cost from an expense point of view in the quarter?

What I will do is I can tell you of the $0.10, I really break it into two broad buckets. About $0.05 of that was not just e-Courier, but restructuring in general. Remember we also had some restructuring charges within Mark's group in our globalization initiatives. But about $0.05 of that $0.10 I would say are restructuring onetime charge type in nature. And then $0.05 were infrastructure investments, such as establishment of New York City headquarters, etc., etc. Does that answer your question?

It does. Thank you. Those were the housekeeping questions. I will get back into line. Thank you.

(OPERATOR INSTRUCTIONS). Tom McCrohan, Janney Montgomery Scott.

I just had a follow-up. Can you remind us the number of sales -- quota salespeople you have on staff? What the change was year-over-year, and what their quota is going into '07, kind of the average quota per salesperson?

The salespeople, the targeted quota salespeople are around 100 that we have Companywide. It is pretty consistent with last year. We're expecting higher productivity out of them. I don't want to give you that quota for the sales reps, simply because it is comparable -- it isn't comparable, we changed our comp plans this year. But it is significantly higher than it has been last year in terms of these sales that we expect from each sales rep. Part of that is due to the way that we're measuring it, and part of it is due to the increased demand and the productivity expectations that we have out of them.

And that number doesn't include P&H?

Right.

The average tenure for these 100 people, can you give us a little sense of turnover and how long?

Golly, that is a hard -- I don't actually have that data, but I would tell you it is going to be somewhere in excess of seven years on the average. 7 to 10, I think, if I go back through it.

Great. Have they -- one last follow-up -- have they been subject to significant increases in their quotas in the past?

Increases?

Yes.

Yes. They have been subject to increases in their quota every year.

Franco Turrinelli, William Blair & Co.

Henr, one quick housekeeping follow-up. And then I have a question for Mark, if I may. The [Pollitt and Haney] is included in the facilities management backlog, is that correct, just for comparability purposes?

Correct.

Okay. Mark, if we go back several years, your results used to have a pretty marked seasonal pattern, with the September quarter in particular being strong as people look to close deals during your fiscal year. Then over the past couple of years I would say -- maybe more than that -- there has been a little bit of a breakdown of that seasonal pattern, I think in part because of the revenue recognition changes. Should we expect a return to that historical seasonality now that BASE24-es is a Cat A product, or is it not appropriate to think of it that way?

I would not think that way. I think the rules and the practice for how you recognize revenue overcomes any of that stuff. There were so many variations and issues that we have to think through on every contract that you can no longer -- you can't say just because we have es in Category A that that is going to change.

Okay.

The seasonality of our business is relative to contracting quite frankly has not changed. Towards the end of the year, last quarter of the year, it is basically mostly geared towards our salespeople. It historically continues to be our largest sales quarter. But it is pretty hard to predict anymore how that translates into revenue.

I was wondering also if the larger, more complex contracts is also to some extent overriding that seasonality. And those contracts tend to have a life of their own, as you obviously know, and I'm wondering if that is overriding some of that seasonality too?

Sure. That is factored -- if you sell a contract with multiple products, your revenue recognition is dictated by what I will say the weakest link. If one product is a Category C, which means you are recognize it on installation, they are all related and you take them all at the same time.

I was wondering also just, Mark, come from an actual business point of view, these larger contracts, I think you and Phil have commented before, are more complex, take more time and are somewhat less predictable in terms of when they actually close. Is that still a fair statement?

Yes.

George Sutton, Craig-Hallum.

In the past -- this is either for Mark or Phil -- in the past you referred to some large RFPs or RFIs related to European money transfer opportunity. Could you just give us an updated sense of activity there?

This is Phil. I would tell you that things are very, very active, and I don't know how much more I can really say. But they are very, very active. There is a lot of -- there's a lot of business moving. I think we listed two or three fast-paced and the large bank being closed, there is still a large inventory of RFPs in the -- especially in the European theater for wire transfer.

Again, is this still a SUPPA-related discussion that? (multiple speakers) to think through this?

Yes, I think it is both SUPPA and a first cousin of SUPPA, which is globalization. SUPPA has caused a lot of global banks to, not only address Europe, but address the whole globe as a result of being able to put Europe on the same -- basically within the same infrastructure. We're looking at things that are Europe, and then the New York agency and then perhaps the Far East as part of it. The global banks are looking globally as a result of SUPPA. And it is more, it is not limited to, but it is mostly the global European banks that are looking that way.

There are no further questions at this time. Mr. Hoelting, are there any closing remarks?

We appreciate everybody's patience. Thank you for attending the call. That concludes the call today.

This concludes today's Transaction Systems Architects conference call. You may now disconnect.