Alphatec Holdings Inc (ATEC) 2007 Q3 法說會逐字稿

Good day, everyone and welcome to the Alphatec Spine second quarter 2007 earnings results conference call. This call is being recorded. At this time, I would like to turn the call over to Mr. Gordon Bigler. Please go ahead, sir.

Thank you, operator. This is Gordon Bigler, Alphatec Spine's Vice President of Investor Relations and Corporate Communications, and welcome to Alphatec Holdings' conference call to discuss our financial and operating results for the second quarter of fiscal 2007. By now you should've seen a copy of today's press release announcing our results. If you do not have a copy of the press release, you can find it in the investor relations section of our website at www.alphatecspine.com.

Before we go over the results, I would like to make a few quick comments. During this call, we will discuss some factors that are likely to influence our business going forward. These forward-looking statements may include guidance we will provide on future revenue, gross margin, and operating expense targets for the fiscal year 2007 and other future periods and statements about prospects for our business and the development status and planned availability of new products.

It should be clearly understood that our actual results may differ substantially from the forward-looking statements we make today. Specific factors that may affect our business and future results are discussed in the risk factors section of our annual report on Form 10-K for 2006 and subsequent quarterly reports on Form 10-Q and in our other SEC filings. A partial list of these important risk factors is set forth at the end of today's earnings press release. As always, we undertake no obligation to revise or publicly update any forward-looking statement for any reason.

Throughout this call we will be discussing certain non-GAAP financial measures, today's earnings release, and the related current report on Form 8-K describes the differences between our non-GAAP and GAAP reporting and represents a reconciliation between the two for the periods reported in this release.

With me today are Dirk Kuyper, our new President and Chief Executive Officer, and Ebun Garner, our Vice President and General Counsel. I will now turn the call over to Dirk.

Good afternoon. This is Dirk Kuyper, the new President and CEO of Alphatec. I'm excited to have this extraordinary opportunity to lead Alphatec into a leadership position in the spinal implant market. First off, we will walk through some of the second quarter operating highlights and discuss some of the more material aspects of the income statement, balance sheet, and cash flow statement. I will then go into more detail on specifics of the business and our future plans before we take your questions. Gordon will now take you through the financials.

Thank you, Dirk. Regarding the income statement, during the second quarter of 2007 we achieved Company-wide revenues of $18.8 million. This is a decrease of 3.1% from the same period last year and a decrease of 3.7% from the first quarter of 2007. In the U.S. specifically, we achieved revenues of $16.2 million during the second quarter of 2007. This is an increase of 2% from the same period last year and a decrease of 2.7% from the first quarter of 2007.

In Japan, we achieved revenues of $2.6 million during the second quarter of 2007. This is a decrease of 26.1% from the same period last year and a decrease of 9.6% from the first quarter of 2007. In the U.S., our products were used in approximately 1,927 surgeries in the second quarter of 2007 versus 2,070 surgeries where our products were used during the first quarter of 2007. In the second quarter of 2007, our average revenue per surgery was approximately $8,035, which is a 4.3% increase from average revenue per surgery from the first quarter of 2007. The increase in revenue per surgery is primarily due to the product mix in the quarter in which we had relatively more lumbar construct cases versus cervical construct cases due to the delays in the launch of our new low profile Trestle anterior cervical plate solution.

In Japan, the decline in revenue was primarily the result of losing a key sales relationship within Alphatec Spine Asia. We are addressing this issue by bringing on board an experienced sales team and expect Japanese revenues will recover to previous levels. Although disappointing, we feel confident about our ability to have a presence in the very robust Japanese orthopedic marketplace and feel that we are building a beachhead for future success.

GAAP gross margins were 63.7% for the second quarter of 2007 compared to 66.2% in the same period last year and 64.8% in the first quarter of 2007. The slight decline in gross margin was a result of unfavorable standard cost absorption rates because of slightly lower sales, increased instrument build-outs in anticipation of product releases in the back half of 2007 and product mix. Although the current operating and pricing environment is competitive, we expect our gross margin to improve as we grow and we are able to amortize certain fixed costs over more units sold, and we also anticipate that our upcoming product launches will give us additional pricing flexibility.

Now on to the operating expense part of the income statement. Total GAAP operating expenses were $12.5 million in the second quarter of 2007 compared to $16.7 million in the same period last year and $15.3 million in the first quarter of 2007. The decrease in $4.1 million compared with the same quarter of last year was primarily due to the following expense reductions; $1.6 million if the decrease is related to one-time charges related to the Company's IPO in Q2 of 2006, $1.2 million of the decrease is related to stock based compensation expenses that needed to be trued up relative to FAS 123R evaluation allowances where we had previously over-accrued for stock-based compensation expense.

Despite several one-time charges as outlined in the EBITDA adjusted calculation, we were also able to drive additional operating expenses down approximately $750,000 in G&A as we continue to right-size our Company for future growth.

Offsetting these expense reductions, R&D spending for Q2 '07 versus Q2 '06 increased by approximately $450,000. The GAAP net loss applicable to common shareholders for the second quarter of 2007 was approximately $703,000 or a loss of $0.02 per share compared to a net loss of $4.7 million or $0.20 per share in the second quarter of 2006.

As it relates to our non-GAAP performance, non-GAAP EBITDA was a positive $740,000 in the second quarter of 2007. In previous conference calls, we said we would be non-GAAP EBITDA positive at revenues around $19 million. We exceeded that, and as Dirk will touch on, we will continue to construct the Company and structure the Company to achieve maximum earnings leverage as we grow and build for the future.

I would now like to move onto the balance sheet and cash flow statement. Our balance of cash and cash equivalents, including restricted cash at June 30, 2007 was $9.3 million. This is a decrease of $1.9 million from March 31, 2007. The major reason for this decline was inventory and instrument build-outs related to our new product launches in 2007. We are pleased that we have substantially lowered our quarterly cash run rate and believe that we will continue to have the appropriate amount of balance sheet liquidity to manage our business.

Accounts receivable days remained consistent at approximately 56 days during the second quarter of 2007. Inventory turns during the second quarter of 2007 were down slightly at 1.7 times compared to 1.9 times in the first quarter of 2007 as we built inventory to support our 2007 product launches.

One last line item on the balance sheet that I'd like to bring is the minority interest line item in the liability section of the balance sheet. As part of the original transaction with Roy Yoshimi, the founder of Alphatec, Roy essentially held an earn-out valued at approximately $2.7 million that he could, in essence, put back to Alphatec. We have closed out that liability with Roy for approximately 800,000 common shares in Alphatec.

Total capital expenditures for the quarter totaled $2.3 million; $1.3 million of this spending was for instruments to support new products as we launch in the back half of 2007 and beyond. An important aspect of our business model is our ability to grow Alphatec without large incremental capital expenditures to support additional capacity.

We'll now hand the call over to Dirk Kuyper.

Thank you, Gordon. Before I go into my initial observations and vision of where we can take Alphatec, I'd like to take a moment to thank John Foster for his service as Chairman of the Board of Directors. As we communicated in a press release recently, Tim Berkowitz has now taken over the role of Chairman of the Board of Directors.

Alphatec is a Company that has grown from about $17 million in revenue in 2004 to over four times that amount in 2006. The key now is focusing the Company on getting to the next level in its growth cycle. Alphatec has strong fundamental and an excellent opportunity as it has a consistent revenue platform, ample manufacturing capacity, a solid product offering, high quality sales people and committed employees. Like many companies, there are various times in their evolution where a change in strategic direction and leadership are in order to get to the next level. My leadership at Alphatec will focus on strategic business development, product innovations, and effective operating processes in order to become the leading independent spine company in the market.

In today's press release, we announced a cost savings initiative plan where we expect pro forma annual cost savings of approximately $2.6 million in 2008. We expect these actions to result in pre-tax restructuring charges in the range of $450,000 in the second half of 2007. After the severance charge, we expect net cost savings in the second half of 2007 to be in the range of approximately $650,000. We do intend to increase investments in research and development to strengthen our portfolio and ensure leadership positions in high growth areas of the spine market.

These are decisions that have to be addressed to ensure the long-term strength of our business. We have taken a thoughtful, disciplined approach to position the Company to exploit the opportunities we have. We will continue to invest in growing the business, as well as in promising technologies and product licensing opportunities to strengthen our position.

The reduction in force component of our savings plan will equate to approximately 8 or 9% of our total workforce. We will minimize the number of employees who are affected by these actions through the use of attrition and hiring freezes in certain areas of our business.

In terms of sales and marketing. Regarding our sales force, we will continue to build out our sales network via distributors with some direct sales people to optimize our customer service and growth opportunities. We have a talented and knowledgeable sales management team that understands our customers' needs and preferences from geography to geography. Additionally, we are aligning our sales, marketing, and product development groups to shorten the cycle time between creating and launching new products.

We will focus on creating brand awareness and developing a comprehensive national sales training program for our sales force and customers alike. This aspect of our business will be important in reinforcing our brand and products within the spine community. This is an important element of our growth and this aspect of our model is proceeding nicely. To reinforce this point, commission expense relative to total U.S. sales has been very consistent from the second quarter of 2007 versus the second quarter of 2006 and the first quarter of 2007. In fact, this percentage is actually down slightly in the second quarter of 2007. This illustrates our ability to attract high-quality distributors and sales people at reasonable commission rates.

We will continue to work to make it easy for our distributors to work with Alphatec through our unique offerings, such as our customs program that will help them to serve their surgeon customers' needs.

Our growth in the second quarter is a direct result of slower than expected product launches. Going forward, we will create a culture of achievement where product launch dates will be delivered on. I want to touch on a few of the products that will provide incremental revenue for Alphatec in 2007. Our new low-profile Trestle anterior cervical plate is expected to provide significant incremental revenue for us in 2007. Trestle features a large window that enables maximum graft site and endplate visualization, a self-retaining screw locking mechanism, and a very slim plate design that will compete effectively with the leading products in the market.

Our next generation Solanas posterior cervical thoracic system features a mobile polyaxial head, which allows 80 degrees of motion as top loading hooks for providing stabilization and a proven buttress thread closure that has received favorable reviews from the surgeons that have tested the product.

We are also poised to enter the high growth motion preservation market with the launch of our Dynamo dynamic stabilization rod. We have recently submitted it for 510(k) approval and we look forward to getting the product to market soon.

Our [Illico] MIS retractor system is currently in production and will be launched along with a cannulated Zodiac screw system. This retractor and screw system will be our first true MIS offering. Illico retractor has also received favorable recognition by the surgeons that have been involved in the testing. We expect to demonstrate all of these products at the upcoming North American Spine Society meeting in October, and they will be on display in our booth.

Regarding international sales, we expect to have most of our product CE-marked by the end of 2007, and we are in the process of setting up distribution networks for major international markets. We have seen a high level of interest for Alphatec products in particular from South America, and we expect to start generating revenue in South America and Europe in 2008.

As it relates to revenue expectations for the remainder of 2007, we need to reset the expectations. Although we expect year-over-year revenue growth in the third and fourth quarters of 2007 versus prior year periods, we now expect full year 2007 revenue to be in the range of $77 million as we continue to rebalance our priorities and streamline our processes to improve our ability to bring innovative products to market on time and on budget.

We think about growing Alphatec in very simple terms. We want to have more surgeons use our products more often. We'll be focusing on rolling out a strategic portfolio plan over the coming months, and we are excited about our future and hopeful that employees and shareholders alike feel how focused we are about building a world class spine solutions company.

Although we are managing through a transition to priorities and recalibrating Alphatec for measured and consistent future growth, Alphatec has never been better positioned for success. We will continue to support our surgeons with products and solutions they need to help their patients. My leadership at Alphatec will focus on strategic planning, on building an innovative product pipeline, and effective operating processes.

As part of being a world class leader, we will focus on reaching profitability as one of our key goals. We appreciate your participation, and I look forward to all of you enjoying our future success. At this time, we'd like to open the lines up for questions.

(OPERATOR INSTRUCTIONS.)

We'll take our first question today from Tao Levy with Deutsche Bank.

Good morning, everyone -- or good afternoon, everyone. Can you hear me okay?

Yes, Tao.

Great. Actually, do you mind just going quickly through those metrics again, Gordon, if you didn't mind, the number of procedures and the general ASP that you got. You went a little bit quickly there.

Sure. We completed 1,927 procedures in Q2 for right around $8,035 average revenue per procedure.

And what was it last year?

Last quarter it was right around 2,070 procedures at an average revenue per surgery of right around $7,850.

Gotcha. Did you have the numbers for last year or are you not providing those?

You know what? We actually had a -- when we added the Cortek acquisition, some of our data became a little messy, but we're working on backdating that so we can get a good apples to apples basis. We're hopeful that we can provide that in future conference calls.

Okay. That's fair. And I guess the first question on this -- in this area, so the number of surgeries went down a bit sequentially. Just wondering, is that at all a function of surgeons who may have been using your products going away or any disruption there or was it more the effect of some of the product delays?

It's primarily driven from product delays. It's manifested itself positively in revenue per surgery.

Right.

We thought we'd get a lot more cervical cases and that would've put our average revenue per surgery probably flat, but since we didn't get those cases, we had fewer cases, but it bumped up our average revenue per case because we just had more relative lumbar type constructs.

And how would you characterize -- I don't know if you mentioned it -- the number of surgeons that had used your product in the quarter versus Q1?

We don't really talk about that. I think in Q1 we said we had 136 active surgeons and in this quarter we had 147 active surgeons, and that's defined as people that have used it consistently for the last four months and that have never dropped off a month in the last 12 months.

Okay. And in terms of -- obviously there's a lot of products coming out here in the second half and [NASS] not too far away, is your expectation then that -- I know you provided full-year guidance that Q3, a little bit of the sort of bumpiness given that some of these products won't be showcased till sort of the October timeframe and then a little bit of acceleration exiting the year into '08. Is that the right way to think about it?

We said in our prepared remarks that we thought we'd be year-over-year up in Q3 and Q4. That is the right way to look at it. We certainly anticipate a bigger Q4 than Q3, but we think with Japan right-sizing and the steps we've made here in the U.S., we anticipate, again, kind of a growth in Q3 versus Q2 and then probably growth again in Q4 versus Q3.

And then just the last question here on this, did the G&A of 4.4 million, roughly around there, 4.35 --

Yep.

-- the right way to think about that is to add back the $1 million and change --

That's right.

-- from the options, so on a go-forward, something around a six-ish is the right now, not a four-ish number?

Probably, right. Probably -- 5.5 to 6 is probably the right way.

Okay. And then just on the strategy front. As you face some, internally, some difficulties with -- obviously no one likes to see folks leave, what are your expectations in terms of areas that -- where you're looking to let some people go because obviously you faced a risk of that potentially having an impact on your operations and possibility for future growth. What -- how are you approaching that so, again, growth isn't impacted by cost savings?

Well, obviously that is an issue we're very sensitive to and we've tried to take the right actions to right-size the Company and do it at one time and certainly be working with the employees to share our vision with them, in fact, after this call, and to make sure that everyone's focused on where we're going and how we're going to move forward.

Okay, great. Thanks a lot.

Thank you, Tao.

For our next question we'll go to Brian Wong with First Albany Capital.

Thanks and good afternoon and welcome aboard, Dirk.

Thank you.

Just to follow-up on the salesforce question, have you had much turnover in the salesforce, any growth or any losses that you can comment on?

I'm not aware of any significant losses at this time. We have seen some interest from what I would consider some top-tier distributors, so I'm very encouraged by sort of some of the people that we've been able to attract and, quite frankly, by the overall makeup of the salesforce. For having only been here six weeks, I find it to be a very strong organization, and I'm very excited about getting new products into their hands, because I think they will do very well with -- but I've not seen any significant loss, no.

Okay, and can you remind us where that stands at this time in terms of size?

Sure. We think about sort of revenue in kind of two buckets for the Company. We've got a certain component that's direct, and we manage our salesforce with eight regions, so we've got eight regional managers and then another level of senior management, and they probably are responsible for right around 15% of revenue typically, and they manage in their region third party distributors. The remaining U.S. revenue is through them. Think about it as sort of 85% comes in through third party distributors.

And numbers of salesforce, have you given us that?

We don't give that and the only reason, other than what I just told you about kind of how we manage it -- eight regions and then there's another layer of senior managers above them is each distributor we find has a different number of reps, so if I start talking to you about how many distributors we have, sometimes it's very misleading. It might be more appropriate when we have one very large distributor that might have ten reps isn't the same as a distributor that might have two reps, so we find that we don't give out kind of that distributor number just because it leads to bad conclusions.

Gotcha. And then you mentioned your cervical was a little lighter than you expected, obviously, with the revenue being down year-over-year. Was there any other area that you can comment on that might've been lighter in terms of any of your biologics or your standard metal lumbar components? Were they also less than you expected?

No. Pretty steady-state. We -- unfortunately, we didn't get the number of cases that we think we had queued up, frankly, in the pipeline that the sales guys had brought to the table, but we were late on our plate. We look forward to getting that out, but no, that was -- that's really just a function of having a little bit of a delay with Trestle.

And speaking of the delays, should we expect that to be alleviated in the third quarter or more in the fourth quarter as NASS is kind of the launch point?

Well, our plan is to get the products to market obviously as quickly as we can. We do expect Trestle to come out at the end of the third quarter and potentially Solanas, as well. But certainly by NASS our expectation is most will be in the market.

Okay. And then in terms of overall turnover, any significant adds or losses in the management team?

No. This is Gordon. No, Brian, nothing worthy of mention at this point.

So I can assume [Ziggy's] still sitting there listening?

No. Ziggy actually had a -- thank you for asking that. We had to change the call date as you're aware and Ziggy had a pre-scheduled family situation that he just couldn't change and so unfortunately Steve had to do that and we wish him the best today and we look forward to having him in the office tomorrow. And that's just a function of us having to change the date sort of last minute.

Gotcha. And then you mentioned, Dirk, that --

Brian?

One moment. We'll get Brian back on.

We can queue Brian up if he's late and we can get somebody else on, operator.

We'll go on to William Plovanic with Canaccord Adams.

Great. Thank you. Good evening. Can you hear me?

Yes. Good evening.

Fantastic. Couple of questions. You gave us an update on some of your new product launches for the end of this year, Dirk. Just wondering in terms of other products that were previously talked about, cervical allographs, the TLIF spacer, your parallel allograph spacer, just wondering if those products are still scheduled or you just didn't deem those as important as the ones that you highlighted.

Well, they are actually released, most of the ones that you have mentioned, but they are not, I think, in the plan that was put together for this year. Certainly, Trestle, Solanas, Dynamo were some of the more significant in terms of their ability to generate incremental revenue, so we do those other products such as the CONNECT II cervical allograph, the new TLIF, those have been released and we should start to see some pickup from those in this quarter, as well. They're just -- they just weren't quite as significant.

And then what about -- I think there were talks about a third generation, or I'm sorry, a revised [scoli] system.

Yes. That actually has been released, as well.

Okay, so everything's out there except what you highlighted.

That's correct.

And then I know this was asked, but I just want to get clarity. So, in terms of kind of the salesforce, you're very comfortable with where that is, not a lot of turnover, don't expect a lot of turnover?

That's correct.

So, it's truly a function of just not feeding the beast is kind of what's going on here.

Absolutely, and I'm very confident once we get these products in their hands they can do a great job with them.

Okay. And then I think on more than one occasion in your prepared remarks you mentioned strategic relationships, partnership opportunities.

Yes.

What -- is that in terms of European distribution? Is that in terms of products? What are you really getting at there?

Well, certainly international distribution is a way for us to grow revenue into 2008, although it does take some time to set those relationships up, but also we are looking at potential licensing opportunities and partnerships for product, as well. But we're still in the process of sort of fleshing that plan out so I'm certainly not prepared to discuss any of that yet, but we will when the time's right.

Not to gear in on this, but, I mean, from my understanding, you have some of the broadest or the most SKU offerings in the industry. I'm kind of at a loss for where the holes might be in your product set at this point. I was wondering if you could enlighten us there.

I think you're correct in terms of sort of fusion products. Alphatec has a great base of products, but we need to move into some more innovative and dynamic areas and that's really what we're focused on.

Great. That's all I have. Thanks a lot.

Thank you.

Thank you, Bill.

And we'll go back to Mr. Wong now to complete his question.

Great. Thanks. To follow-up on Bill's question, you said you need to move more into innovative areas. Could you expand on that a little bit? You said you were investing more into R&D. Any particular areas that you could mention on?

We're still in the process of fleshing that out and there's a number of opportunities that we're exploring, but none of them are to the point where I think it would be wise to discuss because some may come in, some may go out, but I expect we should have a good strategic portfolio plan for innovative products here in the next couple of months.

Is that a combination of both R&D and possibly licensing or just R&D?

Yes, both.

Okay. Thank you.

Thank you.

And we'll go next to Steve Ogilvie with Thinkequity.

Hey, guys. Sorry to return to this topic; it seems like I'm missing something on revenue, the sales distribution side seems to have been stable and the number of active doctors went up and you did have some product launches, yet the number of surgeries went down. What's the dynamic driving that?

It really comes back to slower than anticipated new products coming on board and so we didn't get as many cervical surgeries as we would expect and then with our full complement of either peak or allograph spacer we don't get the incremental revenue pickup there. I think you can attribute it mostly, Stephan, to the lack of that product and subsequently missing cases.

So there wasn't a specific product line or something that kind of dropped off for the sequential decline, because I can understand how not adding a new product wouldn't grow revenue. I'm just wondering where the drop came from.

Well, our new cervical offering we think is going to be sort of best in show from a competitive standpoint and right now our plate necessarily isn't as competitive as we would like, so we probably missed some cases on the cervical side, relative to what we had last year.

Okay.

I think there was an anticipation by some of our customers of the product coming out sooner than it did and they were holding on to the older version of the product maybe longer than they would have and that dropped off.

Okay. That makes sense. Then a question on the cost cutting plan, when -- Dirk, with your six-week tenure there, was this plan already in place before you arrived or was this something you formulated in the last month and a half?

This really has been formulated in the last month and a half by sort of looking through where we were at and trying to make sure we right-sized the organization for the performance and set it up appropriately for the future.

You feel like this is the final version or as you go deeper into the company that this plan may be modified as you learn more about Alphatec?

Well, I think we've got to constantly evaluate sort of where we're at, but based on sort of anticipating an increased growth rate in Q3 moving forward, I think from -- we've right-sized the organization. Certainly, we'll be looking for additional efficiencies in manufacturing and in other areas and if they're there to be had, we'll certainly take them, but I think that's more in terms of sort of cost control.

Okay. And then on the cash burn, you have a lot of product coming, especially Dynamo, which is a little bit more expensive to make, in the back half of the year. Can you maybe talk about what your anticipated burn is especially in light of building up inventories for the new product line?

Sure. We built a significant amount of inventory in Q2 here as you saw the change in inventory, but as a steady-state business, we don't anticipate the need to raise additional cash and feel comfortable that our current cash balance is able to support our current operations. Now, that being said, we're always on the lookout for new products and licenses that would potentially fit well with our product portfolio and that may require outside capital, but right now we feel very good about our cash balance relative to where we are as a steady state sort of ongoing operation.

Okay. And let me try and be a little more direct. In the case where Dynamo creates a lot of -- generates a lot of interest, which may lead to additional distributors, etc., etc., or require a fair amount of capital to outfit them and to cover all the cases, in the best case scenario are you capitalized to be able to meet a greater demand than you might be anticipating?

I believe we are, yes. Dynamo is a unique product, obviously, because it's licensed, but one of the advantages we have is the fact that we self-manufacture most things today, sort of we have a lower cost base in terms of acquiring additional sets, so I think what we have, I'm very impressed with sort of the cost structure there. So I think we have the ability to add what we need to continue to fuel the growth rate.

Okay. Thank you.

Thank you.

(OPERATOR INSTRUCTIONS.)

We'll go next to Matt Campbell with Knott Partners.

Good afternoon, Matt.

Dirk, welcome aboard. I understand you taking a measured approach to the top line and applaud the cost cutting, but if you were to take a longer term look, could you give us a sense of what would be a realistic top line growth (inaudible) five years out?

That's a long time from now. Obviously with -- I've been given the charter by the board to make this the leading independent spine company in the market. In order to do that, we need to significantly accelerate our growth rate and that's really part of the focus in terms of developing a strategic portfolio plan and getting the Company set up right for accelerating growth. I think it would be sort of premature to talk about what that rate would -- could be at this point, but certainly that's a clear goal, is to accelerate the Company's growth rate going forward.

Okay, great. And just a follow-up on that surgery day, was there any holidays that fell on particular days of the week that may have affected surgeries this past quarter?

That's a great question. Overall, surgery days from Q1 '07 to Q2 '07 were 64, but if you sort of look deeper in Q2 '07, we actually had a couple holidays on a Monday, which really affect your Monday revenue, which happens to be a large surgery day and really affects Tuesday, which happens to be the largest surgery day. So, we did feel some effects of that and that's a good question.

Well, good luck, and welcome aboard, Dirk.

Thank you.

And ladies and gentlemen, at this time we have no additional questions. I'll turn the conference back to our speakers for any closing remarks you may have.

We appreciate everyone joining us this afternoon. We also appreciate everyone's participating as you watch us grow. Thank you now and good-bye.

Once again, ladies and gentlemen, we appreciate your participation. This does conclude our Conference -.