Amdocs Ltd (DOX) 2005 Q2 法說會逐字稿

Good day, everyone, and welcome to this Amdocs second quarter 2005 earnings release conference call. Today's call is being recorded. At this time I will turn the conference over to Mr. Tom O'Brien. Please go ahead, sir.

Thank you. I'm Tom O'Brien, Treasurer and Vice President of Investor Relations for Amdocs. Before we begin I would like to point out that during this call we will discuss certain financial information that is not prepared in accordance with GAAP. The Company's management uses this financial information in its internal analysis in order to exclude the affect of acquisitions and other significant one-time events that may have a disproportionate affect in a particular period. Accordingly, management believes that isolating the effects of such events enables management and investors to consistently analyze the critical components and results of operations of the Company's business and to have a meaningful comparison to prior periods. Also this call includes information that constitutes forward-looking statements. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or that any deviations will not be material. Such statements involve risk and uncertainties that may cause future results to differ from those anticipated.

These risks include, but are not limited to, the affects of general economic conditions and such other risks as discussed in our earnings release today and at greater length in the Company's filings with the Securities and Exchange Commission, including in our annual report on form 20-F filed on December 30, 2004 and our form 6-K furnished on February 14, 2005. Participating in the call today are Dov Baharav, President and Chief Executive Officer of Amdocs Management Limited, Eli Gelman, Executive Vice President, and Ron Moskovitz, the Chief Financial Officer. Following Dov Baharav's comments, we will open the call to Q&A. Now, let me turn the call over to Dov Baharav.

Thank you, Tom. Good afternoon, ladies and gentlemen. We are pleased to report that this was a very good quarter for Amdocs. We reported revenue and earnings per share in line with our guidance. We signed some important new business this quarter including eight new wins, contributing to a 35 million increase in our 12-months backlog. While not quite as many wins as we posted last quarter, the wins in Q2 combine with the success which we have experienced in recent quarters has position us well for the future. We are seeing continuing demand for our product and services from the market, which validates our strategy of helping IN carriers pursue an integrated customer management approach. In the market that we serve, we see continuing strength. Our main driver is the tent walls(ph) consolidation among carriers. Wide consolidation naturally introduces some weak. We see consolidation as a major opportunity.

In many cases our customers, such as SBC and Vodafone, are the leaders in this field(ph). At Cingular, for example, we continue to make progress as they integrate AT&T Wireless. We continue to workout for Sprint and Nextel, but we will leave it up to them to decide what they want to say about the plan for their systems. Overall, consolidation accelerates the need for a carrier to upgrade the system while (inaudible) with choosing the total cost performance sheet(ph). And that is best positioned to serve this large carrier. We have consulting services, we have (inaudible) business processes. We help migrate the existing system. We help these large carriers transform them self to integrated capital management. Amdocs 6 is an important element in this transformation. The release of Amdocs 6 -- now, the first time in our industry that there has been a simultaneous release by one company of all functionality integrated together which is needed to support a total ICM strategy. The fact that our product release schedule is in line to cost for that, means that our customers save money on upgrade and Amdocs saves us money on product development.

With Amdocs 6 we provide functionality necessary for our customers to pursue a total integrated consumer management strategy. While we continue to fact competition, our position as the market leader helps us to enjoy a greater benefit from the current business environment. Let me now spend just a few minutes talking about some of the wins this quarter. Elisa Corporation, a carrier for wireline and wireless in Finland and Estonia, have selected Amdocs to help it pursue integrated customer management. We are leading the business consolidation(ph) for Elias now, with Amdocs Business Consulting Services, in conjunction with the implementation of Amdocs 6 software. We believe that this business model bring a lot of business value and will be appealing to other customers in the near future. During the quarter we grew our managed services business, signing a long-term agreement with a North American wireline carrier to support its customer care and billing application. Content and data are expected to be the main gross risers for carrier, as they are expected to introduce hundreds of new services every year.

In order for this services to be possible, carriers will need to manage their relationship with partner and customers in highly efficient and user friendly way. We address this issue with our Amdocs Partner Management and Amdocs Self-Service product. And we had wins in North America and Europe with this product in Q2. On top of this win, we show strength in our existing customer base and we are working on a robust pipeline of potential deals for the future. As we mentioned in our earning release today, we went live this quarter with CRM at Nextel and MegaFon-Moscow. With Amdocs, we extend deployed and the (inaudible) line for each 15 million subscriber integrated with the Amdocs billing product already in place. This large implementation demonstrate our unique ability to successfully deploy (inaudible) in the larger scale, where we are the vender of choice.

I am very pleased with the addition of Michael Blum to head up our efforts in the financial services area. As division president, Michael will design and the financial services sector strategy to help accelerate induction of integrated customer management as well as solution in cold banking, forward and compliance, by the world's leading financial institutions. Michael is a proven leader with deep industry experience at IBM and PWC and we look forward to great success in financial services. We are pleased with what we have accomplished so far this year. And are encouraged by what we see going forward. We are in a very good position competitively and we are attractive strategic partner of our customers. Market conditions are good for us. And while we are watching carefully development and uncertainties in the market, we are confident in our growth prospects. Let me now turn the call over to Ron Moskovitz, our CFO, for the financial review and then I will come back with some concluding remarks.

Thank you, Dov. Our second quarter revenue was $488.4 million. We're presenting growth of 10.3% over last year and sequential growth of 4%. Our EPS, excluding acquisition related charges net of related tax affect, was up 20.7% to $0.35 per diluted share. Also in line with our guidance. After taking into account the position of related charges GAAP EPS was $0.34 per diluted share. License revenue was $27.3 million with the growth driven in part by the increased bill activity that we have seen over the last few quarter. In Q2 license was 5.6% of revenue And I expect that we may see this same percentage of license in the coming quarters. Operating margins were up 10 basis points this quarter to 18.3%. We were able to get 70 basis points of leverage out of operating expenses which was mostly offset by a 60 basis point decrease in gross margin. The reason was service margins, which were down from last quarter for several reasons. First, due to the sales success in the last few quarters we have a significant increase in the number of implementation projects in diminutions stages which is when the service margins are normally compressed.

This service margin compression is offset by the license contribution from these deals. Also we are spending some money as we rapidly ramp up our business consulting organization in our development center in India. Overall we expect a slight increase in operating margins again in the coming quarters. Our income was -- other income was $5.7 million this quarter, up primarily due to more favorable interest rates on our cash. We expect this slight line item to be at this level or slightly up in the coming quarters. DSO at the end of the quarter was 49 days, down from last quarter's 55 days. Free cash flow, defined as cash flow from operations, less capital expenditures and principal payments on capital leases, was strong at 70.4 million for the quarter. We entered the quarter with a cash balance of $1.332 billion, an increase of $74.9 million from last quarter's balance. We announced in December 2004 that our board has authorized up to $100 million for share buybacks. We did not repurchase any shares authorization in the second quarter. We may or may not repurchase shares in the future based upon our evaluation of on going cash balances and needs and the share price.

Our 12-month backlog, which includes contracts, committed revenue for merit services contracts, letters of intent, maintenance and estimated on going support activities, was $1.550 billion at the end of the quarter, an increase of $35 million from the December quarter. Regarding the SEC investigation, we are not aware of any substantive developments since last quarter conference call. Looking forward, our guidance for the third quarter of fiscal 2005 is for revenue of approximately $505 million and EPS of $0.36 excluding the effect of a condition rented charges, net of related tax effect of between $0.01 to $0.02 per share. Our EPS guidance is based on a fully diluted share count estimated of $222 million. With that, let me turn it back to Dov.

Thank you, Ron. We are pleased with what we accomplished this quarter and are looking forward to additional success in the coming quarters. With that, let me now open the call to Q&A.

Thank you. The question and answer session will be conducted electronically. If anyone out on the phone audience does have a question, please signal at this time by pressing star, 1 on your touch-tone telephone. If you're on a speakerphone please make sure your mute function has been turned off to allow your signal to reach our equipment. Once again that is star, 1 to ask a question. We'll pause for just a moment. Our first question comes from Elizabeth Grausam with Goldman Sachs.

Good evening. Just wanted to touch on your Amdocs 6 release. First of all, will there be any reduction you see in your R&D spending going forward now that you are past that major release? Secondly on it, if it's not going down, what other product releases should we expect over the course of the next few quarters coming out of the Company?

We looking forward -- at least we do not see a decrease of our R&D expenses. We believe that our offering of integrated customer management is very relevant to the market and the transition of the market to quantum, to new services, to ITTV. We will continue to require additional investment by Amdocs in order to increase the gap that we have already between Amdocs and all the other competitors. We have a unique offering and we intend to increase the gap and enable our carriers, our customers to enjoy our offering. Now regarding what we are going to present, we will have more emphasis on the other areas, not only billing and CRM but more on the (inaudible), service fulfillment, more emphasis on accountant management and improving our offering so it will be very (inaudible) of the industry to consolidate and converge and be competitive moving forward.

Will some of the budget also be focused on the financial services vertical and development there and also on video product or cable product.

Yes. Some of the money will be devoted for the Pay TV activity. It is already a part of our plans and as we indicated in advance, we won a contract with a North American carrier regarding the -- regarding activity in this area. And we intend to -- and that is part of our activity. Our system already is geared to handle IPTV and data services. We are pursuing a cable TV companies and so, in North America and in Europe. And we will invest in this direction soon. Again, financial services we totaling 52,005 will be focused more on building our strategy and start designing our plan and we'll see more investment in 2006.

And then just one last question for Ron. On the managed services contract signed in the quarter, did that have any drags specifically on the services gross margin end or any drag on the CapEx you had in the quarter?

The deal that was discussed, is going to kick in in the next quarter only. So there was no financial impact on this quarter.

Should we see services gross margins perhaps have another drag next quarter again?

It might put some pressure, but it is a relatively small activity. So overall we would expect to see stability in this line item.

Thank you very much.

Thank you.

And before we go to our next question, I would like to remind the audience to please limit yourself to one question and one follow-up question. We'll hear next from Michael Turits with Prudential Equity Group.

Hi, guys. The managed services contract, is that -- it says help upgrade. Are they currently on any Amdocs system at all and then you are going to upgrade them and do a managed services or is it an entirely new customer? Hello?

It is an entirely new activity in the carrier in North American. This is not based on (inaudible) on the existing activity or existing system of Amdocs.

But it is within a set of obligation that we are very much within our scope of product and services. So it is an application for the BSS, the customer can -- billing set of applications.

Okay. Also, the Elisa deal and you're going to be a systems integrator on that. Were you bidding separately against other SIs on that deal?

On the Elisa deal, the idea here is that we are going to implement the full ICM on both wireline and wireless and some other activities that Elisa have across Europe. We are talking about many different components of Amdocs 6 and we are going to provide a lot of the services and the business process re-engineering for Elisa because of our knowledge in this area. This is going to be part of our consulting group combine with our delivery group.

I am only asking was the license part, the Amdocs 6 and all the stuff you are going to do, was it a separate offer from the systems integrator or was it one package and were there other systems integrators that were trying to compete for the SI work to do on the same license deal?

Different components of different phases of the project.

Okay. Thank you.

Next we'll move to Tom Ernst with Deutsche Bank.

Good afternoon and thank you. In regards to the Amdocs 6 launch, can you comment a little bit on your beta program or any reference accounts you've already built up in the program? And do you see this perhaps -- do you see any, perhaps, pent-up demand for the software?

Yes, we see - and I would say that we see kind of a very warm reception to the Amdocs 6 product. We launch it in (inaudible). We have already contracts. Regarding Amdocs 6, Elisa is a good example. There they -- all the implementation with integrated customer management, of the ordering of CMA, of a delivery date based on Amdocs 6, so it will serve as a kind of a beta not only for the software, but also for the whole implementation of the business processes, Amdocs from something services and the (inaudible). On top of it, we have other customers, like Telus, which we announced in North America, and I think four or five or six others.

And as a follow-up on that, your backlog coverage, that is the 4 12-month backlog as a percentage of what the street's expecting for you, is here again at a high level as it was last quarter, highest level its been in the last couple years. Is there anything you think in terms of near-term lumpiness, perhaps, just in concentration of the pipeline or do you think overall the pipeline is developing healthy as we look out further?

The pipeline -- the way we look at the pipeline every quarter looks quite strong and well for the future. As a matter of fact, it is as strong as it was last quarter, slightly stronger. And it comprises of all different type of applications, all type of services and different scale of size of the deal from medium to some small, medium and large. And altogether very large number of deals. So the answer is that we see the pipeline growing strong for the future as well.

Okay. I mean, I guess, just to make sure I'm clear on that, we had a bit of a sequential slowdown in the second half of last year, but it has been strong sequential growth outside of that. Do you feel that the strong sequential growth we are seeing here this first half is the anomaly or was the second half last year more of the anomaly.

Our guidance for the third quarter implies for continuous growth and what we said is we expect to see continuous growth following in the common quarters. So we don't say -- we didn't say that we expect some sloppiness in the second half of this year.

All right, thanks again.

And next we'll move to Tom Roderick with Thomas Weisel Partners.

Hi, good afternoon, thank you. Looking here at the license line, this is obviously a very strong performance on license, up sharply from last quarter. If we think back to the last time it was up sharply, it was a very good leading indicator for a number of projects that you were working on. Would you encourage folks to think of license up as a strong leading indicator and how should we think about sequential license growth or perhaps a tick back to normalcy in the next quarter?

The license growth, which we say this quarter is a result of the momentum that we have in the business in the last few quarters. So definitely it's an indication that leads our growth in this quarter, next quarter and following that. Going forward, at this point what we can say is that we expect to maintain this level of license and maybe slightly growth.

Okay, great. And looking at that license growth this quarter, should we extrapolate that any of it was related to -- to carry over from deals that were perhaps won last quarter or is that gross in general be seen as new license revenue from Enabler 6?

It is a combination of a deal that was signed in the previous quarter and deals that were signed this quarter.

Okay. And thinking geographically here, some of your competitors in the software world and services world have talked about weakness in Europe. Can you give a sense as to geographic breakout here and kind of where you are seeing strength and weakness on a global basis?

So this quarter our geographic break down is 65% in North America, 26% in Europe, and 9 in the rest of the world, which actually present growth and strengthening of Europe. So especially we have the deal kicking in in this quarter effort to grow Europe and overall we maybe really want to refer to Europe.

I won't say that we definitely see a lot of business coming North American. But we have a lot of (inaudible) in Europe, the new dealers we announced and the lease size vindication of it. We have some other deals that we did not announce the name of them and also we have a very especially strong pipeline on deals for the next few quarters, not necessarily this quarter only, from Europe. So we feel that the demand for our product and service in Europe is strong.

Okay, great. Thank you both, helpful commentary.

Thank you, Tom.

Again I would like to remind the audience, if you do have a question, please press star, 1 at this time. We'll next take a question from Sterling Auty with J.P. Morgan.

Thanks. I want to drill into the services gross margin. Can you give us an idea the number of IT people at the end of the quarter versus last quarter? Just trying to get a better understanding of the spending there and why the margin dropped, as you mentioned, kind of the build up in the business consulting.

The amount of the IT people in this quarter is about 9800, a growth of about 300 people from the previous quarter, mainly in the consulting and in India, in the development sector, where we grow rapidly the base of, say, recruiting. So we need to spend some money on training on setup pay -- cost in these areas. So this put some of the pressure on our service margin in this quarter.

And then in terms of the new projects that you talk about, are those new projects within existing customers or new projects with new customers and does it really make a difference in terms of the lower margins that you normally get when you do the projects on the managed service basis?

Usually we talk about new projects with new customers. These are the one that represent more challenging results on the margin. But since this is the other side of winning a lot of new projects in the last few quarters. So we are mainly talking about major wins and major projects as a result of it. Sometimes we talk about a significant additional project in existing customer, but not just an add on to the on going support or just a change of crest to think about. It is significant projects for existing customers or completely new projects.

Okay. Thank you.

Next we'll hear from Julie Santoriello with Morgan Stanley.

Thank you. Good afternoon. Just a quick follow-up on the services gross margin issue. Looking into the fiscal third quarter, looking at your guidance, it looks as though operating margins would be about flat, maybe slightly down. I wonder if you could elaborate a bit more, Ron, on how the gross margin in the fiscal third quarter is being impacted by some of the buildup in India and in the consulting practice. Is that carrying forward and for how long will that be a bit of a drain on margins before you get some leverage there?

First of all we expect in the next quarter, in the third quarter to have a stability with similarly growth margins and slight increasing in the operating margin. We keep on increasing our activity in India in the coming quarter. The same goes for the consulting business. So we are going to -- given the growth that we see in the project, and the limitation activity, we are going to expect to see a similar pressure on gross margin and basically could see the gross margin being stable over the next few quarters.

Thanks. If I can get one more question, earlier today Cingular had reported and they had reported what looked like some pretty good numbers, 4.8 million gross subscriber adds and about 3 million subs were migrated from AWE. I wonder if you could help us understand what these kinds of numbers mean for Amdocs?

I would say that any growth of activity of Cingular and (inaudible) and success of Cingular forwardly would have positive impact on Amdocs business. We are have a main vendor to Cingular. We help Cingular in the conversion of a -- we help Cingular in the conversion of AT&T wireless. We provide them a lot of help in (inaudible) the huge business of more than 50 million subscribers. And the more subscribers as they have and the more activities there, it will -- probably it will supposedly backed on our business.

And is the pace of those conversions from AT&T Wireless tracking as you would have expected, or has it been slower or faster?

The conversion activity that we have with Cingular is based on plain or more positive from our perspective in terms of volume. But I also want to add one more comment that we are not being paid per subscriber in a linear way at Cingular. We have an increased activity with them because of all this transaction, all this huge company is merging together creates a lot of needs for new systems and consolidation system, and conversion and needs of our obligations and services. So we are enjoying it, but we're not being paid by -- per subscriber in Cingular.

Okay. Thank you.

Next we'll hear from Peter Jacobson with Kaufman Brothers.

Thanks, good afternoon. Regarding your establishment of a President of the Financial Services Division, can you review kind of roughly how many customers you have today in financial services and/or what kind of revenues you're getting from that vertical today? And how you concluded that the market opportunity supports the establishment of that new position? And maybe how you think that business might grow over the next year or so.?

Yes. Well, Peter, I believe that financial services might represent a big opportunity for the Company. In 2005 it's not going to be major factor that will effect our revenue and our profit. However, we have the hope that under the leadership of Michael Blum we will be able to build a new vertical for Amdocs that will actually propel the growth of the Company in 2007 and 8 and moving forward. So far we have one customer for our Alasim(ph), our retail fees management, it is ABN Amro, where we have a very successful lay project which is not only help them to calculate the fees, but enables them to offer abundant services and it actually converged the different silos of services that they had. And we have several customers in the CNI areas. So to some extent, today our activity independent services is limited, not to a large extent. However, we equated a high caliber and people we believe that under the leadership with Michael Blum, plus the peoples that we already reported. The offerings that we have already and inductees is that we'll have in the next year, we will see nice growth starting next year.

Okay, thank you.

Thank you.

We'll hear next from Marianne Wolk with FIG.

A couple of quick questions. First, what was the managed services percentage this quarter and where should we expect that to be next quarter? And then the second question, I know you said that there were two big factors U.S.A. factors effecting your services margins, the investment in business services and some of the new projects getting underway, can you give us some sense of which is the primary factor or larger factor affecting margins. And then finally, if you've got these new projects just getting under way, are they yet reflected in backlog or should we expect some increases in your backlog related to these projects downstream?

Okay. Managed services is slightly above 40% and we expect that to be again slightly above 40% in the coming -- in the next quarter as well. As for the service margin and basically what we see, we refer to two main elements. One is some ramp up of activity in India and consulting. The second is the new projects. Now, traditionally when we have new implementations we have some shift between -- of a gross margin between license and services. So in the first phase of the implementation, the service margin is traditionally compressed and given the growth that we see-- new activity that we see in the last quarter going forward given the new service, we are going to see this phenomenon in the near-term.

So the new projects is the primary factor affecting the margins and the Indian investment is the more minor one?

It's a combination of which. I cannot tell exactly what is the breakdown, but both of them are affecting us.

Are the projects you're working on that are affecting the margins, are they in backlog now or could they add to backlog downstream?

It is even backlog.

Okay. And then can you give us the billing figure this quarter or the billing percent?

It is -- we have a directory is 10%. So the rest is -- the break of this is 53% is wireless, 27% is wireline which presents growth from the previous quarter, and 7% is a -- some other stuff, enterprise and some other stuff.

And you had directory as 15.

13.

13, thank you. Okay, thank you.

Thank you.

Next we'll here from Ashwin Shirvaikar at Citigroup.

Hi, thanks for taking my question. It seems like you are investing in many different areas simultaneously, there's IPTV, there's professional services growth, financial services, India, plus there's managed services. Can you prioritize where you would like to see your growth come from or do you feel that you have to build all of these simultaneously? And then I have a follow-up question.

Thank you for the question. And I would like to maybe clear the picture where it looks like we have many separate direction where we invest the money. However, if you look it it's part of one cohering strategy. We offer to our customers worldwide integrated customer management. So we are offering to the tier one a set of services and it (inaudible) that enables them to integrate the management of their customer, to manage the integrated customers and actually to converge all their activity of wireline and wireless and beta and for functionality from a CNM (inaudible). Now, in the new pardon(ph), where a voice based on circuit sweeps is shifted to AL-P(ph), a ultra new systems that will enable them to do voice over IP, to do IPTV, to do a data services and to do the traditional growth as well. So when we invest in Amdocs 6, Amdocs 6 actually will provide the IPTV. And the owl(ph) and the services -- the consulting services that we invest in, will help the carrier to implement the IPTV and to even cable company to implement our system to support their customers in the new year. India is an investment that will enable us to reduce the cost to our customers. As we see consolidate, when Verizon consolidates, Vodafone are trying to (inaudible) worldwide. They need to be in a position as they can offer a more services for less money. So our activity in India will help us to -- also to the market. Product and services for lower amount of money and makes them more competitive. So it is start of the same strategy. The only, I would say, (inaudible) activities that is not part of all that is financial services. Financial services is a new vertical. So I would say that overall we have very coherent strategy regarding the telecommunication and we leverage our investment in telecommunication and we get into a new vertical. So we believe that it is a balance of some investment in financial services and very focused strategy in the telecommunication will be the gross and then just the risk of gross for the Company.

Thank you for that answer. And the follow-up is on could you provide an update on your acquisition pipeline? In the past you've mentioned a desire to go deeper into OSS.

Ashwin, thanks for the question. We can basically share quite a little information about the acquisition. We said all along that we are looking into several areas including acquisitions in the area that we are in and some adjustment market, including OSS and Pay TV and other areas. And as soon as we will have something we will be more than happy to share it with you. But, it's a definitely something that is part of our strategy.

Okay. Thank you very much. Nice quarter.

Thank you.

Next we'll move to Donna Yeagers with Gentil Partners.

Hi, two quick questions. I'm curious on your DEX Media contract. I've been hearing that they have been having some problems with some of the publishing of those directories. Was there any penalty on your part in the earnings this quarter?

Well, thank you, Donna, for the question. I'm not aware of any problems that we have in DEX Media. The other way around. We are hearing the customer extremely happy with our services in all areas, not only just the production of the books, but in -- (inaudible) we expand every day our business with DEX Media. So I am not aware, but I look into it and maybe something happen in the last 24 hours that I was not aware of.

Great. One other question, too. There is some news coming out of Russia about Savi Invest(ph), the legislation moving through the Russian parliament as far as breaking up the company. I know you guys have a contract to look at their billing system and the streamlining of it. If they broke the company up similar to the breakup of AT&T in '84, would that cause any sort of disruption in your current project and in your outlook for future projects?.

Donna, as a matter of fact it may create some more opportunity. Basically, we signed up a contract with all the adjacent subsidiaries, MRKs they're called there. And we have the ability to help them in any structure that they will choose to operate in and usually more change in a consolidation or break up of companies creates more dynamics of the business and usually more dynamics of the business creates more need for software and services where we are expert and we have this agreement with all the different MRKs and they are all signed up on the same strategy to go forward.

Great.

So we don't see it as a threat.

Okay. Good luck to you, thanks.

Thank you, Donna.

Next we'll go to Daniel Meron with RBC Capital Markets.

My questions have already been answered. Thank you.

And we'll take a follow-up now from Sterling Auty with J.P. Morgan.

Yes, kind of follow-up on the Russian carrier opportunity. Can you just give us a little sense as to what was already included in backlog in the 1.55 billion number you reported?

Could you repeat that?

Well, in the backlog of the (inaudible) -- in the backlog we included the first phrase of the contract which included some of the licenses and the maintenance and the small portion of services. We expect the deal to move forward and add a lot of additional services and maybe even licenses moving forward. So we add in the backlog, the current month backlog, our expectation for license, maintenance and some services and we expect to see it growing overtime.

Okay, great. Thank you.

And that's all the time we have for questions. I'll turn the conference back over to our speakers for additional or closing remarks.

Thank you. This is Tom O'Brien. On behalf of the Company thank you, everyone, for joining the call tonight. This concludes the call. Good night.

That does conclude today's conference. We thank you for your participation and have a great day.