Bread Financial Holdings Inc (BFH) 2011 Q1 法說會逐字稿

Good morning, and welcome to the Alliance Data first quarter 2011 earnings conference call. At this time, all participants are in a listen-only mode.

Following today's presentation the floor will be open for your questions. (Operator Instructions)

In order to view the Company's presentation on your website, turn off the pop-up blocker on your computer. I present Ms. Julie Prozeller of Financial Dynamics.

Thank you, operator. By now, you should have received a copy of the Company's first quarter 2011 earnings release. If you haven't, please call FD at 212-850-5721.

On the call today, we have Ed Heffernan, President and Chief Executive Officer. Charles Horn, Chief Financial Officer of Alliance Data and Bryan Pearson, President of LoyaltyOne.

Before we begin, I would like to remind you some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are subject to the risks and the uncertainties described in the Company's earnings release and other filings with the SEC. Alliance Data has no obligation to update the information presented on the call.

Also on today's call, our speakers will reference certain non-GAAP financial measures which we believe will provide information for investors. Our reconciliation of those measures to GAAP will be posted on the investor relations website at www.AllianceData.com.

With that, I'd like to turn the call over to Ed Heffernan. Ed?

Thanks, Julie. I know this is a departure for us, but given the various holidays this week, we figured we would try to get this in.

I know we're competing with a number of other companies who are also trying to squeeze it in this week, as well. So, we're actually going to try to get this all done in an hour and before the market opens, and so with that why don't we just get going?

This also marks a milestone for us. This is actually our 40th or 10 year --10 years of earnings calls, so 40 calls over the past 10 years. It's been -- it's been interesting for sure.

With me today is Charles Horn, our CFO, and down from the great white north is Bryan Pearson, our ever-popular EVP and President of LoyaltyOne which comprises not only our Canadian program, but the now ramping up coalition efforts, as well, and Bryan's been with Loyalty for now going on 18 years. So, he joins us today.

And that being said, I'll let Charles take it away.

Thanks, Ed. The first quarter was a great start to the year. Our operating results were strong in things we measure.

Revenue, EPS, and adjusted EBITDA as all three business segments contributed solid results. Revenue increased 12%, $740 million. Both LoyaltyOne and Private Label achieved 9% organic revenue growth.

Epsilon contributed 11% organic revenue growth coupled with 12% non-organic growth associated with the DMS acquisition. The core EPS increased 47% to $2.03 considerably better than the Company's guidance of $1.65.

While GAAP EPS increased an even better 86% to $1.56 per share. Adjusted EBITDA increased 26% to $256 million, while adjusted EBITDA net of funding costs increased 44% to $220 million, aided by $10 million reduction in funding costs attributable to a mark to market gain on interest rate derivatives.

As discussed in our earnings release, this benefit of approximately $10 million or $0.11 per share, was excluded from our core EPS calculation. Our diluted shares outstanding were 54 -- 55.4 million for the quarter, essentially flat through the first quarter of 2010, despite an active share repurchase program.

The increase in the Company's average per share price during the quarter, added an additional 1.8 million shares to the diluted share count from the assumed conversion of our convertible senior notes and warrants compared to the prior year quarter.

As of March 31, 2011, 2.8 million shares covered by hedge agreements are included within our diluted share counts for which the Company would have no settlement obligations in the future when the convertible debt matures.

In summary, for the first quarter, we more than achieved our targets of double-digit revenue, adjusted EBITDA and core EPS growth. Let's move to LoyaltyOne and Bryan Pearson.

Thanks, Charles.

Overall, LoyaltyOne had a better than expected first quarter with high single-digit growth in revenue, adjusted EBITDA, and importantly, miles issued. Revenue and adjusted EBITDA both increased by 9% compared to the first quarter of 2010.

Adjusted EBITDA for the quarter benefited from the strong Canadian dollar, from higher margins on our redemptions and lower operating expenses partially offset by a $13 million grow-over from the runoff of amortized profit.

Adjusted EBITDA margin for the segment helped steady at 27% despite an almost $2 million increase in expenses attributable to our international and non-AIR MILES reward program related expenses. Miles issued grew a robust 7% for the quarter reversing what we've seen to be a three-year trend of relatively flat issuance.

We have now logged four consecutive months of positive issuance growth and we're also seeing a healthy balance between credit card and high frequency retail growth, which means that we're returning through the more traditional issuance mix versus what we've seen over the last couple of years.

Looking forward, we expect to see mid-single-digit issuance year-over-year growth for the remainder of 2011. Miles redeemed are up by 11%, as collectors took full advantage of the ability to book Flight On-Line, a capability we launched in the fourth quarter of last year.

In addition, routine changes made to the AIR MILES reward program during the quarter, contributed to the increase in redemptions. Again, looking forward, we expect redemption growth to moderate then trend to low single digit year over year increases for the remainder of 2011.

So, why don't we turn to a longer term view of our growth on the next slide? Growth for LoyaltyOne will primarily come in two ways, the Canadian AIR MILES reward program and new international coalition programs.

Let's start with the AIR MILES reward program first. Our program continues to maintain a very strong presence in the Canadian market with total active collectors actually growing marginally, we are keeping the AIR MILES program vibrant and growing in four primary ways.

First of all, with new promotions. Our collector activity is increasing and we are seeing momentum from the major consumer events that we are running with our key sponsors and these are reflected in issuance levels from these partners.

Our deeper analytic capabilities are being rolled out to more of our retail sponsors and we're now executing our one to one marketing vehicles with each of our grocery partners across the partners across the country. The results from these programs have been tremendous and have invigorated the program for both our collectors and our sponsor partners.

On the renewal side, we're also pleased with the long-term renewals from top LoyaltyOne clients such as Safeway and SOBE, marking our continued success in securing renewals from all of our key pillar partners.

The AIR MILES program is also benefiting from a resurgence in activity on the new client front, resulting from our focus on creating a relevant and compelling marketing platform for the retail trade. The combination of our unique AIR MILES currency, with retail analytics and targeted marketing is of particular interest to the specialty retail players in the country.

On the new client win side, we're making great progress in securing new sponsors in this category. As evidenced by our recent national launch of the Children's Place, with more exciting additions to come over the next two quarters.

In addition, we're expecting additional activity from the QSR, quick service restaurants and energy sectors.

Having additional and highly relevant earn opportunities from really well known brands such as the Children's Place, is a highly effective way to build collector enthusiasm and renewed engagement for the program.

On collector engagement, we're also looking to build this through other means. These include the launch of our mobile app, through the more relevant communications I alluded to earlier, and enhancing the redemption experience by providing an improved on-line booking experience.

On the international front, the performance of Dotz, our Brazilian international coalition platform, in the Belo Horizonte market continues to be exceptionally strong. We are approaching 500,000 active collectors in that one market and we issued our billionth Dotz point a few weeks ago on April 8.

Based on these market results we're proceeding with a rollout of our national partners while focussing our efforts on securing additional high-frequency partners to create some sort of phase rollout across the market.

We expect to make the Dotz program available to Banco de Brazil's 30 million customers by the end of the second quarter.

It is seemingly taken forever to actually get ink on paper, but what I can tell you is both parties are moving forward preparing for the rollout and we expect to announce something in the very near future.

We remain extremely excited about the strong potential for this market and have increased our ownership share in the Dotz entity in anticipation of the growth in the marketplace. With the target population of more than 70 million of the country's 200 million residents, we believe the long-term potential of Brazil equates to very much what we've experienced in the Canadian market.

As we ramp up the business in Brazil, we are looking for opportunities to make similar measured investments in other interesting markets.

As mentioned on previous calls, our main criteria for identifying attractive markets for coalition, are the size of the market, the competitive environment in terms of the presence of existing coalition programs, and a strong network of national retailers and high frequency categories.

Over the long term, we expect the international growth in combination with continued solid performance from the AIR MILES program in Canada, will result in a return to double-digit top line and bottom line growth for LoyaltyOne.

Before I pass it back to Charles, I'd like to thank the LoyaltyOne team for delivering these strong results.

Thanks, Bryan.

Let's flip to the next page and look at Epsilon. And basically you'll see the Epsilon's 2010 momentum continued with exceptionally positive Q1, posting strong quarterly financial performance and 23% growth at both the top and bottom line with $156 million in revenue and $34 million in adjusted EBITDA.

Specifically, the database digital offerings were up 21% for the quarter as Epsilon continues to on-board a strong backlog of large marketing loyalty platforms in key verticals. Pharmaceutical, financial, retail, and consumer packaged goods plus the contribution of solid organic growth within the existing client base added to the growth.

Digital volumes also continue to grow double-digit, as expected consistent with the ongoing industry migration toward low cost, measurable and personalized marketing channels like e-mail.

This core offering of database digital representing 60% of Epsilon overall, continues to show resilience and sustainable double-digit organic growth. The remaining 40% of the Epsilon segment includes the data other business which also contributed strongly to Q1 results.

Epsilon's Abacus offering, the market leading data co-operative for retailers, cataloguers, and other verticals delivered mid-single-digit organic growth, while demonstrating the stability we saw throughout 2010.

The DMS acquisition completed July 1, 2010, fully integrated within Epsilon delivers on expectation and contributed nicely to Q1 performance.

Summing up, a very strong Q1 all around for Epsilon, with solid double-digit organic growth, a tuck in acquisition delivery as expected and a robust pipeline that includes a number of promising cross-sell up-sell opportunities and not only will position Epsilon well for future growth but is indicative of the strength of the Epsilon relationship with its existing clients.

I will now turn it over to Ed to discuss the incident that recently occurred at Epsilon.

Okay.

There should be a slide, Epsilon Unauthorized Entry Incident and I'm going to address that. And no better way to start than to say, look, for those of you who have known the Company and known me the last ten years, we do not dance around the obvious elephant in the room here, so, we are going to provide all of the information that we can, without getting into hot water with the authorities, who are involved in, I think, a larger investigation, but we do want to walk you through exactly what happened, and where we are today, and where we think that leaves us on a go-forward basis without a lot of fluff. We're just going to hit it straight on here.

So, from the time line perspective on March 30, what happened?

Our monitoring systems at Epsilon detected certain what we would call abnormalities which suggested that there might be an unauthorized entry, and within the first 24 hours we had completed our initial damage assessment and concluded that really three things only the e-mail platform was affected. Only e-mail addresses and/or names were stolen and affected about 2% of our client base. And, three, we say only because the data stolen did not include any of what's called PII, or personal identifiable information, such as Social Security number, credit card numbers, account numbers, et cetera.

I guess in plain English, another way to think of it is stolen e-mail addresses are certainly bad, but stolen PII is what we would call really, really bad.

That's why just to keep consistent with industry lingo, this is officially called an incident and not a breach. And that's where we stand.

And as soon as our initial damage assessment was in, we immediately notified the various federal authorities, we hired forensic specialists, and we talked to all of our clients it impacted.

All right. Then over the following several days, our efforts were split between assisting the various authorities with the investigation, and assisting our affected clients in any way possible with their communication efforts to their customer bases.

We recommended that clients communicate with their customers as a best practice, and collaborated with them, as they each executed their plans. We also created a consumer inquiry team to assist consumers with answers to questions, concerns consumers may have had.

By day eight, the initial investigation of the e-mail platform incident was wrapping up, and at that point, we were comfortable such that the parent, ADS, could issue our press release that essentially said we had a pretty good handle on what happened, what was affected, we put a fence around it, and we could move forward.

So, where are we today? I would say three things are keeping us pretty busy. The first, while our pre incident security protocols have always been very strong by industry standards, we believe this incident and our significant industry presence, requires us to add a number of additional layers of protection.

The bottom line, we will emerge not with just strong industry security protocols, but industry-leading. And, again, trying to put this in a way, at least I understand it, essentially what we're doing is the platform was extremely user-friendly, and very flexible, and clearly with this incident and the feedback we've had from our clients, the trend is at the expense of making it a little less user-friendly and a little less flexible, we're essentially going to build Fort Knox around this thing.

And so, we've taken the position now that it's not good enough to be at or above the industry, we need to be the absolute leader in the industry, because we are the largest player in this specific platform. And obviously that's a decision that was not made lightly, but after consulting with our clients, that's what we're going to do.

Second, we are continuing to assist the federal authorities and forensic specialists in their investigations. Again, from our perspective, I think they're done with us, and what they're trying to do now is look at this in a broader scope.

We all have the same goals here, and that is to prevent another attack on the industry, because we believe this is a wider issue than just us, and certainly to catch these cyber crooks.

And, third, it's all hands on deck to continue our efforts to rebuild any damaged client relationships, and whatever it takes, we'll do it. While knowing that we are the victim of this crime, we will not be playing that card. Rather, we view our role as standing up, taking the hit for what these cyber crooks did. We'll learn from the experience and come out stronger than ever.

I had an opportunity to meet a number of our clients down at Epsilon's annual client symposium, and a number of those affected certainly were frustrated with the process, frustrated with what happened, angry at the cyber crooks, but at the same time they were supportive of Epsilon, wanted to make sure we had our act together in terms of building up the Fort Knox around the platform, and I think it was everyone's intent to push ahead and move forward here.

And so our outlook is simple with four items. We have no expectations of any meaningful costs or liability coming out of this event. Two, e-mail volumes have largely remained at expected run rates. Three, we expect no change in the pre-incident financial expectations for all of Epsilon. And, frankly, four, our quick, open, honest approach to the incident combined with our sincere apology looks to have served us well and we believe that the vast, vast majority, if not all, of our clients, understood the efforts and will stick with us.

And that's pretty much all we have to say on the matter. Obviously for obvious reasons we can't go into more detail on the technical side of the unauthorized entry. What the investigation found, or the new security layers being built into the platform.

I know people want to know, well, what layers are you putting in there, and all this other stuff. And obviously, it's best that we don't chat about that, but all we can say is that it will be, as I said, like Fort Knox. In the end, our job is to protect our clients and to help the authorities catch the bad guys.

That being said, I'll also mention in the midst of the media feeding frenzy that took place, there was a number of listing of other companies that were mentioned as having had an unauthorized entry into their e-mail, and there are a number of these companies that were not our clients.

So, there was a lot of misinformation out there in the market, which again, I can only suggest that this is a broader issue for the whole industry, and something that we're going to try to take a lead on going forward.

That being said, I'll kick it back over to Charles.

Thanks, Ed.

Let us flip to page nine and we'll talk about Private Label. For the Private Label Group, positive trends we saw in fourth quarter of 2010 continued into the first quarter of 2011.

As Ed would say, Private Label knocked it out of the park in the quarter. We had a very strong quarter. Financial charges up 12%, $36 million versus the same quarter last year. Most of this improvement is coming from increases in average APR and late fees. However, last year's yield was also negatively impacted by approximately 120 basis points due to the initial implementation of some of the CARD Act requirements.

Overall yield at 27.5% for the quarter, and with no further CARD Act requirements we expect it to stabilize for the remainder of the year. Yield is up 390 basis points versus last year and up 110 basis points versus Q4 2010, so very strong gross yield for the quarter.

There was also a significant reduction in the provision expense decreasing 23% year-over-year to $68 million. This improvement is due to a $24 million reduction in net charge-offs compared to the same period last year.

As the economy improves further, the provision rate is expected to continue on a downward trajectory. Overall for 2011, we are expecting provision expense as a percentage of average credit card receivables to be in the low 7% range.

Overall first quarter adjusted EBITDA net of funding costs increased 64% to $147 million. Excluding the benefit in funding cost of a $10 million cost of mark to market of interest rate derivatives we talked about before, adjusted EBITDA net of funding costs increased a stellar 52%.

Moving to the key drivers of the business, we are seeing solid performance in all key metrics. Credit sales grew about 5% for the quarter. This consisted of an 8% growth for active clients less a 3% drag from terminated/defunct clients.

Year-over-year, it was solid improvement in most areas of the retail world. Specialty retailers and cataloguers were particularly strong in this quarter, while some of the larger ticket merchants continued to be impacted by the macro-economic environment. Average credit card receivables decreased 4% during the quarter.

Payments continue to be strong in the quarter as consumers continue to push down debt levels. Payment rates now have returned to levels last seen back in 2007, reflecting the general improvement in the economy and consumer confidence.

While higher payments do pressure receivables growth there are officials in delinquency rate trends. For the quarter, average delinquency rates decreased to 5.4% of average credit card receivables. This is a 50 basis-point improvement versus the same quarter last year. We would expect an improving economy to continue to have a positive effect on this metric.

The principal charge-off rate was 7.9% for the first quarter, representing 150 basis-point improvement over the prior respective year. Clearly, the improving economy is having a very positive effect here, starting with the improved delinquencies and now dramatically better charge-off rates. Again, if the economy improves further, we would expect this rate to improve compared to last year.

Flipping to the next page, we'll walk you through liquidity. At the corporate level, available liquidity remains strong and March 31, 2011, at approximately $400 million. It breaks down as one, cash outside of our banks of approximately $75 million, and, two, available borrowing capacity of approximately $325 million.

Our debt levels continue to be modest. The key lone covenant ratio core debt operating cash flow was 2.3 to 1 at March 31, 2011, substantially below the covenant ratio of 3.75 to 1. The current bank facility matures Q1, 2012 and we will look to replace it no later than the third quarter of this year.

Turning to our banks, at the bank subsidiary level we have approximately $3.6 billion of available liquidity at March 31, 2011. Regulatory ratios at our banks remain strong with WF and NB capital ratios at 15% for tier one, 14% for leverage ratio and 16% for total risk based ratio.

Since the beginning of 2010, cash at our bank subsidiaries have been used to support the transition of previously off balance sheet assets into our regulatory capital. That transition concluded March 31, 2011, and accordingly, we expect to resume dividends from our bank subsidiaries to the parent Company, sometime in the second quarter of 2011.

Flipping to the repurchase program, we continue to see the share repurchase program as a viable use of our liquidity. During the quarter, we repurchased 900,000 shares, and as of March 31, 2011, we still have $267 million to spend under our program for the remainder of 2011.

In summary, our balance sheet, liquidity and capital ratios remain very strong. Let's turn to 2011 guidance update and with Ed.

Okay. Thanks, Charles.

Let's wrap it up with some -- have a little chat about guidance for 2011. You should have that slide in front of you.

Probably three general comments The first is it certainly looks like we're off to a heck of a good start. It looks like another record year in the making on top of a record 2010, and if you recall, in 2010 we grew revenue and EBITDA and core EPS by 12%, 15% and 26%, from normalized levels of the prior year.

So, '10 was certainly a good one. It looks like this one is creeping up to be equally impressive, and so, for 2011 we are looking at some fairly significant over performance really across the board.

I would say Canada's AIR MILES business will be -- have some of that muted by the investments in the coalition which, as you heard from Bryan, looks like that thing is getting ready crank up very quickly in Q2. However, we expect overall LoyaltyOne to have a very strong year. Epsilon is over performing at this stage in the game and we expect that to continue.

And obviously on the Private Label front, as Charles mentioned, the credit improvement is certainly more dramatic than we had initially guided to, which is certainly good news.

And as such, we are going to bump up our nums and adjust EBITDA from 10% to 12% growth or roughly $920 million, and our core EPS from 15% growth to 20% growth. And we're going to come in at -- we're going to throw out there that magical $7 per diluted share at this point.

Let's talk a little bit about Q2. Again, Q1 losses, actual losses, were about just under 8%, 7.9%, and we would expect that to be relatively flat in Q2 to Q1. Usually, we have a seasonal uptick in our loss rate in Q2, but the improvement that we're seeing overall in the file would suggest that that will probably be mitigated by the better trends and, therefore, we think Q2 will have relatively flat losses compared to Q1, which is obviously very good news since seasonally it tends to blip up.

Q2, we think is running at about a $1.60 core EPS, per diluted share, about a 16% above last year. Reflecting solid growth, but also tracking to typical seasonal patterns.

And, again, for those of you who don't track our seasonality, what you have in our business is that Q1 is typically our strongest quarter of the year, primarily as we come off the holiday season in Private Label. Q3 and Q4 tend to be next out of the gates because of the fact that Epsilon has huge ramps in Q3 and Q4, as we move into the back to school and holiday shopping season.

And Q2, tends to be more on the light side, and that is primarily due to the tickup in losses. We said we think that's going to be mitigated this quarter with better trends overall, so that's not going to happen, but we still see a downward tick in the yield on a seasonal basis. Essentially consumers use the first quarter and keep their balances -- roll their balances after the holiday spend by Q2, right as they are getting in their tax checks and everything else, and we tend to move from a more -- a less revolving type portfolio, which earns interest, to a more transactive type that pays off each month, and then it starts reverting back in Q3.

So, I think we need -- some folks need to factor in some seasonality in Q2. We think that certainly looks very robust and on the revenue side, we're probably talking around [710] or so in REVS, which I think as you redo your seasonality, you will see that that looks like it makes -- makes sense.

So, overall we expect a very solid Q2, and certainly, again, from a seasonality perspective, it's tracking very nicely to what we had hoped, given our new view on the loss curves that we're seeing.

And then, finally, because I know I'm going to get the question, how can you beat by $0.38, or whatever the number is, and only raise guidance $0.25? I chuckle a little bit because I never raised guidance $0.25 in my life, but I -- I can't help but wonder -- I know I'm going to get the question -- so I'll hit it head on, which is, this brings us up to 20% earnings growth.

It is the first quarter of the year. There's a long tail on this thing to play out, as good news continues to trickle in throughout the year, which I hope it will, hopefully there may be some more movement in that number, as well, but I think this is a comfortable level for us at this point.

It does not in any way indicate that numbers are coming down in the back half. We're merely saying that we're crystallizing at least $0.25 of the upside to the guidance.

We talked about Q2, people will need to factor in the seasonality which will treat that down a little bit, but again that seasonality, as I said, back half looks very strong, and then a third, as Bryan talked about, assuming Brazil kicks off with a bang here over the next few weeks, we may have the opportunity to accelerate that rollout even faster, which would obviously require a few more expenses.

So, I thought I would get in front of that one, because someone was going to ask me that.

Let's finish up, talk to free cash flow. Pretty straightforward stuff. It's a big year on free cash.

We would expect, just under a $1 billion in our operating EBITDA, if you take out the funding costs or Private Label, and all of the other costs of CapEx and interest and everything else, you'll get to about $430 million, which is up from I think we had $400 million the last go-around, or about $7.70 per share, which is high single-digit free cash flow yield, not too shabby at this point.

Also, trying to get in front of what are you going to do with the war chest? Probably our focus will be on we are looking at completing and announcing probably at least one tuck-in acquisition at Epsilon. There is a couple of pieces we want to firm up, and there is some nice assets out there, so we're focussing on additional growth at Epsilon.

Obviously, as Charles mentioned, we were active in the share repurchase market in the first quarter, so obviously the pricing itself where the stock is, does not scare us off. We think it is still a good use of our capital.

And then, finally, on the international side, as we said, if we could accelerate the rollout, we would certainly spend some extra coin to do that.

Overall, we think that is a good use of our cash, our ratios, as Charles said, look pretty conservative, so we're certainly not shy about getting out there and spending a little bit of it.

And so, now we'll finish up and in summary all the businesses are showing solid or above expected financial performance. LoyaltyOne, I can't tell you how relieved we are to see our critical metric miles issued which is how we eventually make money, because that's when the cash comes in, really has turned very solidly in our favor, which is good news after three years of no growth.

At Epsilon, we expect the over performance to continue. We expect that from the client perspective on the data incident, that we are hopefully past that and have moved more towards let's help them continue to drive their customer communication and acquisition programs.

And on the Private Label side, the sales were solid at a plus-7% net 5%, once you take out some terminated clients, which is quite solid and will eventually translate into portfolio growth.

What are the areas of concern? Probably I would say I have two of them right now. Or areas that we're watching.

One, would be at Epsilon and we want to make sure that we probably overdo it in terms of making sure our clients and their customers feel comfortable with what we're doing, and communicate as much as possible about gaining their confidence, retaining their confidence and making sure they stay with us. So, both Bryan Kennedy and myself will be spending a lot of time with clients just to make sure everything is in good shape.

And then, finally, the other area we're watching is in Private Label. Even though the sales are solid in our AR, or the portfolio is down as payment rates revert back to the pre-recessionary levels. We want to see that turn, obviously, we would like to file up about 5% for the end of the year. The payment rates will eventually anniversary. That's good. And we do have a number of potential new clients in the pipeline. We need to get those signed.

And that's -- those are two areas we're going to focus on, and overall, have to finish up. We feel good. We're raising guidance significantly. We're beginning to map out our strategy for 2012 and you can expect some very significant announcements over the next three weeks. So, that being said, why don't we open it up for questions.

And operator, it's all yours.

(Operator Instructions) Your first question comes from James Kissane from Bank of America/Merrill Lynch

Thanks and great job and also thanks for moving up the release time.

Ed, you touched on it there at the end but maybe give a little more color on the pipeline for Private Label business, maybe take a stab at the number of maybe new portfolios you can add in 2011, and is there any change in the competitive landscape around Private Label?

Sure. You bet.

I think, obviously, we announced two this year, the Jay deal and the cycle deal. I would certainly expect that we would sign and announce three to four new ones the remainder of this year that would be our goal, so we would like to have a total of five to six announcements this year.

The ones we're looking at for the most part, are straight down the fairway in terms of what we're used to, which is a typically -- a portfolio that either exists or will build to about $50 million of AR and sales of about $80 million or $90 million. Those are our typical clients.

The pipeline looks pretty good. I would say from a portfolio perspective, there are a couple of properties out there. It's a question of do we want to take on the existing file if we've got some issues on the credit concern side or do we just start it up from scratch?

I think, Jim, right now we're probably leaning a little bit more, because we did get Jay Jill in which is a $50 million file. We're probably leaning a little bit more to the tried and true let's start it up from scratch, which means probably not as much benefit to '11, but really adding to the bottom line in '12.

And I think part of that is also driven by the fact that '11, obviously, as you can tell, looks very, very strong in Private Label in terms of the earnings, so we're not quite as compelled to go out there and sniff out a big file. So look for more of your typical, probably start from scratch, brand names folks who decided to try Private Label.

On the competitive landscape there's the usual rumors floating about, with the big guys, that they're in, they're out, they're out and about. Who knows? We are very, very aware of who stood tall during the great recession and took care of the clients and who didn't and hopefully our clients are, as well. So we'll be -- we'll be sniffing around there, as well.

Great. And Ed, you said 5% growth in receivables, is that sort of exiting 2011? And is that -- okay. And you said -- since you're adding brand new files, it's not a function of adding new Private Label portfolios? Is that right?

Correct.

What you'll find and Charles alluded to, the payment rates which, obviously will help drive losses and delinquencies lower, the downside is the fact that the more people pay each month, right, the smaller the files -- file growth rate is.

And what's happening is it will not probably anniversary to pre recessionary levels until about this summer or third quarter, which is sort of when we saw that happening last year. So, once that anniversaries, what you're left with is you have got sales growth of about 7%, and you can expect, 4, 5 points of that to flow into AR.

Okay.

And just one last question for Bryan, you mentioned getting back to double-digit growth top and bottom line at some point, not to put you on the spot, but can you give us sort of a time frame when you might be able to do that?

Yes, that's really predicated on the international activities coming on line.

And so, it doesn't take a lot of international revenue, really, to push us up from what we're seeing now, which is, we did high single-digits this quarter, but if you call it mid-to high-single-digits in the base business in Canada and then you look at just bringing in a modicum of revenue from Brazil, for example, that could push us into a space where we would be doing double-digit top line and bottom line growth.

The bottom line growth will be a little bit longer because we have got to wait for those businesses to turn cash flow and EBITDA positive. And as you know, when you launch these programs, there is a bit of investment up front until you get the collector activity and the sponsor activity rolling and that's usually a couple of years.

Thank you very much.

Okay.

Your next question comes from the line of Andrew Jeffrey with SunTrust.

Hi, good morning, guys.

Good morning.

Ed, thank you for the update on Epsilon, I think that is really helpful. I think you addressed what you're doing in terms of current client hand-holding and so forth, makes a lot of sense.

It may be too early, but could you give us a sense of maybe what's happening with sales cycles? I know a lot of the growth this year is coming from expansion of existing relationships and recently-signed deals.

As you start to look out to '12 and what's going to drive growth in Epsilon, any sense for what is changing on the new client sort of discussion front post incident?

Yes, I mean, it's a fair question. I think the pipeline itself is continues to be very robust. And we would love to take credit for doing such a great job, and I'll give credit to a lot of the Epsilon folks who are doing a good yob.

But the fact of the matter is, as you know Andrew, the trend is our friend on this one. The whole shift of spend to the type of stuff that we do away from general marketing spend, obviously continues and seems actually to be accelerating a little bit.

So, we're getting a lot of people primarily fortune 1,000, who are very, very interested and the book that we put on last year of the huge database clients, the Visas and AstraZenecas and the Kraft's and Unilevers and stuff like that, and just the Norwegian Cruise Lines.

Those are soup to nuts type programs, where what we're seeing is a continuation of what used to be signing one piece of Epsilon's business and, hey, it's a $2 million or $3 milion a-year type contract. Are now people are looking for everything from the creating -- creative data, database, analytics, and digital distribution or other areas of distribution, so you're doing a multiple of that of $15 million or $20 million type annual contract.

So, that's what is fueling the growth. It's coming from the fortune 1,000, the CMOs want this stuff and they want a Company that can appeal to every single distribution point, whether it's the old stuff, as they say, like point of sale and direct-mail, to the more -- the newer stuff.

But even more traditional newer stuff like web and permission based e-mail and going into mobile and social media, and so, what we're finding is the pipeline looks very strong. I don't think the incident at Epsilon has changed the discussion. I think there's an added piece of the discussion now which is very quietly trying to explain why this thing looks like Fort Knox at this point.

Okay.

And just competitively, is -- is -- is there any other entity that you see when you go and pitch business that can offer the same set of solutions that Epsilon can? How well differentiated would you characterize this solution as being at this point?

Yes, it's a good question. It's pretty straightforward.

The answer is no. There is no player in the market today, that can offer all five pieces as we walk through. So, what you're running into, Andrew, is the same thing we've run into, in Private Label over the years, which is if a client just wants to be creative or agency side, they can go to Madison Ave, if they want data, there is a couple of big data players out the there. If they want databast there is a couple of big database players out there. There are other digital platforms.

So, if a fortune $1,000 just wants to piecemeal it, they can choose to go with us or tey can choose to piecemeal it to someone else. But if they want the full -- the full service treatment, we're the only game in town, and, again, Private Label was -- is the same way of you need all four services to come with us, which is the credit, the processing, the customer care and the database marketing, as well.

It is -- it's -- a benefit and it's a curse in the sense of we're not for everyone, and if I were to look down the road three to five years, I think there's a very good chance we'll have fewer clients at Epsilon than we have today. But those clients will be quite large.

Great. Thank you very much.

Yes.

Your next question comes from Darrin Peller with Barclays.

Thanks, good morning, guys.

First question, between -- when you think about the expiration of some inactive miles program and loyalty program and some other changes made there along with further ramp up in some of the major contracts in Epsilon, then you put that together with higher yields and credit quality improving, is there any reason why we should not expect overall margins to be meaningfully higher in the second half of the year or even into '12 than it was in the first -- than it will be in the first half?

Darrin, I think that's very reasonable. I think with Epsilon as the year progresses you'll see leveraging coming through on the EBITDA percentage.

Private Label, I think you'll continue to see rollout of the high growth yield. A little bit of improvement in the charge-off rates. Little bit of improvement in funding costs. You're going to see the net spreads pick up a little bit. And then, with LoyaltyOne we get past the grow over or amortized profit in Q2, so then Q3, Q4, they'll be unlevered from that burden. So, I think that's a very reasonable expectation.

Okay, and so when you think about some of the conservatism baked into your outlook for the year, I think there is questions probably around some of the share price -- not the share price necessarily but the share count.

Touching on just cash availability for a minute, I think we talked about some share dilution as converts come more or more into the money or the stock moves

I think you also mentioned earlier, there was an incremental tuck and deal potential in Epsilon. So, can you provide some clarity for instance, if the stock were to move meaningfully higher would we be able to count on buy backs offsetting dilution to keep the 56 million share count accurate in line with your guidance?

Darren, you know Ed very well which is the price is never too high for a share repurchase program. From my standpoint as long as we have good liquidity, we're going to be very active.

I mean, we did talk about in Q1 we had 2.8 million shares in our share count that would go away. We call them phantom shares. That will increase as the year goes on based upon our average share price going up.

But, I think from liquidity standpoint, the ability to pull in all four triggers, that Ed talked about, repurchase program, tuck in acquisitions, growing Private Label which would just mean a little bit of regulatory capital, and getting the international rollout for the new coalition programs, I think we're in very good shape to do all four.

Yes, I think it's -- I'll jump in here and ignore what Charles said earlier, but a lot of people, because the way the accounting works on the converts, even though some of the converts are in fact in the money, we had purchased hedges when we put the converts on, so that that effectively drove up the strike price, and as Charles said, there is almost 5% of our shares that you're seeing in the share counts that are -- essentially will go away when those converts mature. Because they're hedged out.

So, call them phantom shares or whatever else, and so I think -- I think your number you're looking at, aside from that, looks fairly reasonable.

All right.

Just last question for me. You talked earlier about getting back to the double-digits growth and loyalty, and I think you were talking also about -- or Bryan you were talking around Brazil contributing there at some point.

Help us understand, that is still a minority investment. Is that right? And so, are you implying that you're going to move it over to 50% in the coming quarters, or should we just assume that you're saying kind of big picture in equity investment.

That's what it would take, Darrin, we would have to get to a consolidating position to get to that revenue stream which is fully our intent at this point.

I mean, we currently own about a third of it. I think which is about what -- we've indicated before.

I think the other piece to recognize, to give you a little bit more clarity to Jim's question earlier, is that, next year, just in Canada alone, we would expect to see revenue growth in and around 8% and EBITDA growth 10% or better.

So, on the question getting back to double-digit growth, we're on our path back to that regardless, and, from an accounting treatment perspective, we recognize our revenues and the miles that have been issued over a long period of time, and so we're working as we get issuance going again, which has happened over the last four months, what we're going to see is that -- we'll see that naturally coming up over the coming years.

Great job guys, thanks.

Your next question comes from the line of Dan Perlin with RBC Capital Markets.

Thanks.

Just a question on Epsilon and the database revenue. You have found a lot of large clients. I was wondering if you could help us understand to what extent most of those large clients have actually been launched.

Because my understanding is that your database revenue comes in from a recognition standpoint at launch and then the remaining period is ratably recognized versus your data revenue. Can you just help us understand that dynamic?

It's one of those, Dan, we don't specifically disclose the backlog for the various pieces of Epsilon. I would say at this point for 2011, our backlog is stronger than what it was the year before. So, if we continue to launch and grow based on that pattern, you're going to see double-digit organic growth. To your point, it generality takes anywhere from three to six months to launch. A new signing, some may take a little bit longer.

So, what you are going to see this year are some signings that took place in Q3, Q4, go to launch, see the revenue coming through, you'll see some in Q1 that we talked about actually being higher than what it was the previous year, that will launch Q3, Q4. So, as you look at that rollout, what we've already pretty much done will set the year at around 10% plus organic growth and now what we're doing when we get to Q2, Q3, we're setting up for the following year.

Would that -- could that I guess imply that the margin expectation for Epsilon, as we historically thought, you have big solicitation periods in third and fourth and that is really what drives EBITDA, but you kind of layer on top of that the revenue rec coming from database. Is that the hope, and does it kind of stack up that way in addition to what we would typically see in kind of a seasonal pattern?

I think seasonal pattern is correct. From a leveraging EBITDA you see that come more in Q3, Q4, as you see some of your data other business pick up, which are more of a for instance basis, with more of a higher fixed cost you get good leveraging coming through.

As long as Epsilon is growing its database business aggressively and quickly you won't see a lot of leveraging coming through to the EBITDA line so the percentage will stay pretty consistant. What you get in Q3 and Q4, are the other pieces of this business really pick up they do tend to carry a little bit higher fixed costs which is why you get the leveraging coming through to the EBITDA line at least in terms of margin in Q3, Q4.

Got it.

I think, to Charles' point the seasonality in Epsilon is such that you may look at low 20's EBITDA percent in the front half, and then you look at high 20%s or maybe as much as 30% in the back half.

Got it.

Now I thought I heard you guys say you actually increased your ownership in your prepared remarks on Dotz. The K has it on 31%. Did you start to increase it in the quarter or is it still holding at this level?

We're at 33% now.

33%.

So we're up a little bit.

Okay. Great.

And then what's kind of the competitive dynamic that you're seeing right now given some questions about what is going on around Axiom and then you guys had the breach. I suspect you were probably moving forward with taking some share. Is that on hold or are you still moving in that direction?

Yes, I'll take it. In terms of what's going on at Axiom again, they're primarily a player in what traditionally has been called the big iron, and they have some very, very solid client relationships and solid assets that would be challenging to pry loose.

That being said, I think from the database side and winning new business, I think right now quite frankly, Epsilon is the one to beat, and Epsilon, has as we've gone through the pipeline and the new clients, Epsilon has pretty much won just about everything at this point.

I think the overall package that Epsilon can offer with proprietary data and the creative agency and the analytics, and the distribution, is something that no one else can offer. The data incident at Epsilon, I think certainly requires an additional discussion with potential clients, but as I said, following the frenzy and I think making sure that people understand that this thing is going to be built like Fort Knox, now at the expense of losing some flexibility, for sure, it doesn't -- it doesn't really seem to be that big of an issue going forward.

Okay.

And then two quick ones, how much did the cat add in the quarter and specifically I was wondering what are the initiatives that -- aside from the cyclical kind of rebound driving AIR MILES issuance, what were the specific programs you mentioned -- it sounded like there were two or three. What did the Canadian dollar end the quarter then and those initiatives and I'll jump off, thanks.

Okay now, what was the first question? If you look in the press release you see that from an EBITDA standpoint the Canadian dollar added about $3 million to adjusted EBITDA and about $11 million to revenue.

On the programmatic side, what we're referring to is the work we're doing right now we've got a retail program that we have been running, we ran it last year just in one region, in Ontario, and now we rolled that out nationally.

These are what we call super-bonus events. They run on usually three or four days over a weekend, where a number of partners come in, including our financial institutions on the credit card spending side, and they would be offering large bonuses for -- to attract consumers into their stores for the weekend. So it's -- -- those have been working very well.

In combination with that, much as Epsilon works in a targeted marketing manner with our clients, we clearly have a robust database that we work with our clients to mine, and those -- that work that's happening, looking at what consumers are actually purchasing in the stores, how often they're coming in, translate into one to one marketing programs, so it's, we'll do a1million e-mail or direct-mail packages and out of those, you would have 987,000 unique mailings.

So, in other words, it is extremely targeted, and extremely relevant for the consumer and it has demonstrated very strong results for our partners, and, hence, the reason why we started them last year with a couple of grocery partners, and now we're working with all of our major partners on executing these kinds of events.

I think the last thing is that we're just leveraging the web. Our mobile app we've got well over 200,000 downloads provides an opportunity for consumers to look on their iPhones or Blackberries and identify where the special offers are, where the sponsors are, relative to where they are. You can get location-based marketing, and all of these things are contributing to renewed energy and activity from our partners.

Thank you, guys.

Your next question comes from David Scharf with JMP Securities.

Thank you, good morning.

Couple questions on the Private Label side. One is, and I know there was a question about the pipeline, but I'm wondering, excluding just macro factors, is there still much kind of aggregate wallet share opportunity in your existing file, meaning if you took the retail sales of all of your whatever, 105, 110 programs, divided that into your credit sales, I mean, what is your aggregate wallet share right now coming from your cards and is that pretty much tapped out or is there actually an organic growth opportunity of a few percentage points still there?

Yes, you hit on one of the areas that we're putting our shoulder into now, which is, look, you're coming out of the great recession, there's a strong push for, obviously, these retailers to drive incremental sales, and so the question is, are there programs that we can put together that can drive incremental wallet share.

And some of those things, David, are, when we have what we call thin file applicants the folks who don't have a robust credit history, what you can do is you can start them, open the account and start them at a relatively small credit line. It could be $150 or $200. If they're thin file.

And then grow them as the payment history grows over the next 12 to 15 months. So, that is definitely going to be a big push on our end, so I would say if we're at about, call it 30% wallet share right now across all 100-plus programs, we think if the retailer is also driving, getting on the bus, in terms of the whole movement to Loyalty, that there is probably 2 or 3 points available for us to get in there and get going.

Got you. That is helpful.

And then lastly , I wanted to make sure I understood the comments on expectations for provisioning expenses this year. Did you say -- I think it was about low 7% of average receivables? Does that sound right,

We're trying to do -- David, we're trying to give people a benchmark with the new accounting rules, I think some people, including some analysts are a little bit confused. So, what we are trying to lead you to from an expense standpoint even with changes to the reserve, we expect provision expense or our bad debt expense to be in the low 7% range as a percentage of AR. So, what we're saying is now we're expecting the charge-off rates to continue in that 7% to 9% range, probably with the expense coming through the P&L in the low 7%s.

Is -- so on the expense side, that equates to with that be accurate, around $360 million or $370 million for the year?

That would be correct.

Okay.

I guess what I'm trying to get my arms around is, I back out the Q1 number, and that leaves me with $300 million or on average about $100 million of provisioning expense per quarter for the remainder of the year. Now, if we were adding a lot of receivables, it was significant receivable growth, obviously you have to provision for that.

But by and large, even though you're hoping to end the year up 5%, on an average basis, the file is relatively flat for the next nine months.

What you have to do from a sequencing stand point, David, is keep it lower than that Q2, Q3, then you get that big jump up in credit sales in AR in Q4. That's where you see a pop in the overall provision expense. As Ed picked up before, talked about before, AR can pick up $400 million from September to December.

With that pickup from an accounting standpoint, you have to reserve against it even though it may not be revolving and producing income yet. So what you'll see is Q1 typically being the lowest provision expense. Q2, Q3, being up a little bit, but consistent. And Q4 by far being your biggest quarter from an expense standpoint similar to last year.

Got you. Thanks.

And, another way I look at it, is you look at the actual loss dollars in Q4 and your provision expense can actually be above the loss dollars or it is the reverse in Q1. It is more of a timing issue, but I think the overall reserve, our goal at the end of the year, the overall reserve is going to be well above the actual loss rate as we exit the year. So, we're keeping a fairly conservative rein on this thing and just let it trickle out over the next couple of years.

So, what we were doing there, David is trying to give you an indication of expense. Some people look at the reserve and get a little confused and they wonder should they be adjusting our numbers for the reserves coming down, and my take is that is logical if your expense is then below your long-term average. For us, we think long-term trend will be towards 6% to 6.5% expense. So, for expensing still 7% slightly above 7% for the year, that means we have not fully come back to a run rate basis yet. So, we're just trying to get people to understand how the expense works and not get overly hung up in the reserve and how reserve changes in dollars can affect it.

Okay.

Yes, it's largely consistent with what I have modeled now, I was just curious given the fact that losses are certainly trending below beginning of year guidance whether or not the actual reserve number is going to start trending down more. But it sounds like there is good conservatism built there. Thanks.

Yes.

Your next question comes from Bob Napoli with Piper Jaffray.

Good morning. So, much for the hour. I knew that wouldn't happen.

We saved it for you, Bob.

Thanks, Ed. Appreciate it. In the credit card business, the yield -- the profitability of the overall business as a percentage of assets is, is very strong, as are some of the other good Private Label programs, but the yield has moved up.

I just wondered, is there anything -- I mean, in that yield, that you feel is at risk with the Consumer Financial Protection Bureau? I mean, is -- do you need to bring that yield down? Is it a better strategy to bring that yield down in order to get some growth to help your retail partners ability to grow the file?

No, I don't think so. This has been pretty much -- we, as you know, run a plain vanilla program. It is having gone through the CARD Act, which you can appreciate, and the ins and outs and all the changes to tiering and risk-based pricing and balanced transfers and over the limit fees, and everything else.

We largely escaped unscathed, and so what we're doing is we're just keeping, essentially, the only two fees that we collect, which is APR and late fees, and our late fees are well below where the industry is, at about $25. And our APR is, are floating around where they have been.

And really Q1 was a little bit more of last year's Q1 got dinged a bit as we were putting in some new change in terms. So, I think the yields in the late fees, they don't seem to be popping up as being overly excessive, and we seem to be holding our own pretty nicely, revolving rates are holding pretty nicely.

And actually, what we're seeing is payment rates are continuing to increase as people are finding money and are reverting back to pre recessionary levels. But, what we're seeing is that they is certainly not going past that. They seem to be settling in nicely to where they have been for 20-plus years in our programs.

In terms of the CFTC, consumer -- CP, whatever it is -- FP. Our understanding is they are going to be extremely focused on disclosure, and education, and making sure that the consumer knows what he or she is signing up for, because, look, with the CARD Act and everything else, Congress made the law and the FED and everyone else has implemented the law. So, our understanding is this agency, their job to interpret what has already been put down, and make sure that consumers understand all of the disclosure. So, I think we're in decent shape from what we can tell.

Okay. And as far as the Charming shops, that has been a headwind on growth. They announced closing of a number of stores, is that -- is that file -- how much is that file down, if you adjusted for that, what does the loan growth look like?

Last time I looked at it, Bob, it was down year-over-year base basis, $30 million to $40 million range. We did expect the store closures this year. They began the process last year obviously. So, within the guidance we talked about and Ed gave you, we've considered it.

We had seen their credit sales pick up, so it is an encouraging sign even with fewer stores, the credit sales numbers are picking up year-over-year, so we're seeing it reverse now and we think we'll get some good support in the back half of the year.

Yes. I mean, you've got, it's a point of headwind and we don't really go into the clients, but stuff that is public is public. But there are other clients who are doing exceptionally well. And so it kind of evens out.

We're looking at about a 2 point drag from programs that are burning off from the recession that either went bankrupt or we had to terminate them. And that 2 point grow over should be burned off going into Q3.

The capital in the bank increased couple hundred basis points in the quarter, what is the right capital level? You obviously are building capital very fast. I know you said you'll start dividending out, but what level of capital do you intend to keep in the bank?

I'd answer it this way which is we have a very robust level within the banks. Obviously, it is the back half of the year, we anticipate good net income at the banks. So, we expect a good dividend stream coming back to us without even depleting those ratios. Ratios are healthy, they can support some very strong growth in Private Label AR, but conversely with the net income we're going to generate back half of the year, we can dividend to our expectations without in any way decrementing the ratios.

Okay.

What did you pay for the Brazil additional ownership? What kind of valuation is there on that -- on that business at this point.

We haven't done that, Bob. We did put in some money during the quarter. I think we put in one of the areas of about $5 million and so we're tracking right toward our expectations for the year, somewhere $15 million to $20 million in cash into both of the coalition programs for the year.

Thanks.

Last one, just to be clear on Epsilon, what are the -- e-mail marketing piece, you said 2% of your clients, is that having an effect, like our all clients stepping back as you look at the pipeline and saying hang on a second, let me make sure and I mean have you started -- what is -- what piece of your business is affected, is it really carrying over to other parts of the business? And have you started signing new business subsequent to that announcement yet?

Yes, we -- it is a fair question. Clearly in the first, I would say 48 hours, certainly there was heightened concern, but like everything else, it's -- the teams did a pretty good job or did an excellent job of making sure, the forensic guys and the investigators crawled through all the pipes and wires, so to speak and made sure this thing was clean, there was no malware floating around or any of that stuff. And our clients essentially said, okay we are comfortable that the bad news is out there, there was no PII, and the -- what we basically heard was, look we got go get going there and because every campaign that they miss is potentially lost revenue to our clients. So, they were blasting out campaigns within 48 hours of the incident. I would say e-mail volumes haven't really dipped.

Thank you.

Your final question comes from Dan Leben with Robert W. Baird.

Great, thank you, first one for Bryan, the grocery vertical in Canada had been an area of concern back in last year, what does that look like now and how should we think about that going through the rest of 2011?

I think you should look at it being fairly robust for the remainder of 2011, last year, one of our larger grocery partners looked to alternative means, they wanted to focus a bit more on price so they diverted some of their investments in that direction.

But this year, with the retail programs I alluded to earlier, we're getting a lot of heightened focus from not only our grocery partners, but all of our retail partners, and so we're feeling pretty buoyant for the direction for the remainder of the year on that sector for sure.

And then, secondly as you're thinking about the potential for tuck-in acquisitions in Epsilon with the integrated model you have where you're handling soup to nuts for a lot of these large customers, where do you need to bulk up when you're looking at these tuck-ins, what are the areas where you feel the offering can be improved that you are looking for potential acquisitions?

Yes, I think if you look at the five areas, right, the creative agency data, database, analytics, and digital distribution, and start from the bottom-up, I think digital distribution with Double-click and Bigfoot, obviously that is a world leader on that platform. So, nothing there.

On the analytics and the database, that is the original Epsilon, so I would say nothing there. On the data side, last year we were light on the data side, and I think buying the data assets from EquiFax put that now in a place where it's second to none. So, it is a process by elimination you get down to one piece left and that would be sort of the agency creative side, the pieces where we have an entree into the CMO's office to speak the same language, that is probably the one area where you're looking, for really a significant footprint and presence with, both traditional, as well as digital marketing and agency capabilities. That would be an area that would be a very great interest to us.

Great. Thanks, guys.

Is that close enough?

Yes, that's perfect, Ed, I appreciate it.

Okay. I think that's -- it. We're going to wrap up.

I appreciate everyone getting up and, David, on the West Coast in his jammies, I appreciate that as well. So, we will see if people like this approach better or not. And otherwise, it looks like it will be a great year.

So thank you for your time and we'll talk to you in Q2. Bye-bye, now.

This does conclude today's conference call. You may now disconnect.