美商藝電 (EA) 2004 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen and thank you for standing by.

Welcome to the JAMDAT Mobile, third quarter fiscal 2004 earnings conference call.

At this time all participants are in a listen-only mode.

Following the presentation we will conduct a question-and-answer session.

Instructions will be provided at that time for you to queue up for questions.

If anyone has any difficulties hearing the conference press star, 0 for operator assistance any time.

I would like to remind everyone this conference is being recorded.

And now It is my pleasure to turn the floor over to Mr. John Mills of Integrated Corporate Relations.

Please go ahead sir.

Thank you.

On today's call are Mitch Lasky, JAMDAT's President and Chief Executive Officer and Michael Marchetti, the company's Chief Financial Officer.

Before turning the call over to Mr. Lasky I would like to remind everyone that comments made may contain forward-looking statements including statements related to anticipated revenue, expenses, earnings, operating cash flows, the outlook for JAMDAT's market and the demand for its products.

Please refer to JAMDAT's reports and filings with the Securities and Exchange Commission, including the S1 IPO filing for a further discussion of these risks and uncertainties.

We caution that any information regarding forward-looking statements included in this conference call is made as of the date of this call and the company does not undertake any obligation to update publicly any forward-looking statements to reflect new information, events, or circumstances after the date they were made or to reflect the occurrence of unanticipated events.

And now I'd like to introduce Mitch Lasky, Chairman and CEO of JAMDAT.

Mitch?

Thank you.

And welcome everyone to JAMDAT's first earnings release conference call.

These past several months have been very exciting time here at JAMDAT.

October 4th, we completed our initial public offering and were very pleased to be with you here today on our first earnings call as a publicly traded company.

As you can see from our earnings release we had another successful quarter with revenues up 133% from a year ago, our 11th consecutive quarter of double-digit sequential revenue growth.

JAMDAT maintains a leadership position in the mobile gaming industry and continues to build market share.

But more importantly, we believe the fundamental drivers of the mobile entertainment business continue to improve in the U.S. and elsewhere in the world in the third quarter.

Seeing that it's our first conference call we wanted to spend a few minutes here at the beginning discussing the mobile entertainment business generally and JAMDAT's strategy.

We founded JAMDAT four years ago because we saw a large market opportunity.

The mobile phone as the next mass market platform for the $20 billion a year interactive entertainment industry.

We recognized that the unique problems of making and distributing games for cell phones would create an early mover advantage for companies like JAMDAT focused on publishing mobile entertainment.

Armed with strategic investments from Qualcomm, Sun Microsystems, Intel, and Sprint PCS we've grown from a small team in Los Angeles to a 200-plus employee company with offices in five countries.

Our distribution platform now includes 83 wireless carriers in 39 countries around the world.

We have over 90 applications generating revenue for us.

Our business model is significantly different from the traditional video game publishing business.

Traditional video game publishers manufacture, box, and ship games to retail outlets booking revenue on the sale of units to the retail stores.

They maintain significant returns reserves to account for the fact these units have not yet sold through to end users.

Traditionally video game publishers typically have large amounts of capital tied up in physical inventory as much as $10 per unit they produce.

JAMDAT on the other hand delivers mobile game content electronically and records revenue only when end users have purchased our application and the associated charges appear on their phone bill.

Our wireless distribution involves limited bad debt risk and receivables risk and no need for returns reserve.

Because we deliver our content electronically our per unit cost to deliver one unit is not materially different than our cost to deliver one million units.

The key driver of our business is the adoption by consumers of game capable mobile phones -- what we call next-generation mobile phones.

Today that generally means phones with color screens, the Brew or Java application environment, and access to a commercial publishing platform like Verizon's Get It Now.

Mobile gaming is still in its infancy.

Unlike ringtone distribution, where almost all handsets are accessible we estimate just over 20% of phones in the U.S. are game capable and accessible through a carrier publishing platform, up from only a few thousand two years ago.

We caution these are our internal estimates since carriers generally do not break out next-generation phone sales in their financial reporting.

Color screen handsets with next-generation capabilities are popular with consumers and we believe demand is being fueled by aggressive pricing on the part of carriers as they compete for market share.

Often these next-generation handsets sell for under $100.

We believe these trends are positive for the growth of the next-generation phone installed base and because we believe there is a connection between next-generation phone sales and our ability to sell games for JAMDAT's revenue growth as well.

Worldwide new mobile phone handset sales remain one of the high growth segments of the consumer electronics market.

According to a recent UBS report sales of all handsets worldwide are expected to grow from 640-million units this year, to 833-million units in 2007.

As carriers increasingly offer next-generation phones to their subscribers we believe we will see at least two to three years of high growth rates for the installed base of next-generation mobile phones.

We estimate by the end of 2007, we will have as broad an opportunity to access mobile phone subscribers as the ringtone publishers have today.

We believe that we are well positioned to take advantage of the growth of this expanded installed base for next-generation game capable handsets.

I want to spend a minute or two discussing strategy for maintaining our position as the market continues to grow.

Our publishing strategy is built on world-class distribution, product innovation and quality, and consumer branding.

These are the core values that define JAMDAT's strategy and they're the core values that define the strategy of any successful consumer publisher.

We've invested capital to create competitive advantage in each of these areas; and we will continue to do so in the future.

I want to discuss each of these areas briefly in a little bit more detail.

Great publishing businesses are built on a foundation of great distribution and we have invested and will continue to invest aggressively in building a global distribution network.

We concentrated on building out our North American distribution first and we've achieved strong market share position here in North America.

We turned our attention in Europe early in 2003, and in the most recent quarter we tripled our revenues from Q3, a year ago.

In 2004, we've invested in building out our direct distribution platform in Asia.

We opened offices in Japan and India, at present approximately 15% of our worldwide headcount is located in Asia.

We launched direct distribution in Japan, in October.

And we're now in a position to take advantage of market growth anywhere it happens, here in the U.S., in Western or Eastern Europe, Latin America, Asia -- anywhere.

We've also invested in research and development.

We invest both in new product and also in new technology to help us deliver compelling entertainment to our customer -- like our multiplayer client server technology.

We've led the industry with some of the most popular interactive multiplayer game including the award winning JAMDAT Bowling 2, Bejeweled Multiplayer, and Scrabble games.

We have over 115,000 unique user IDs for registered multiplayer customers and have managed 15-million multiplayer game sessions on our servers since April 2003.

Our commitment to quality and innovation have not gone unrecognized.

We won the Brew 2004 Game of the Year Award as well as the G4 Media, Best Mobile Game Award for our JAMDAT Bowling 2 and Bejeweled Multiplayer games, respectively.

We won 5 out of 15 Mobile Entertainment Awards in 2004, the most by any publisher.

Our JAMDAT Bowling title was just certified platinum by Sprint PCS signifying one million paid downloads on the Sprint Network alone.

JAMDAT Bowling joined Tetric as the only other game to reach platinum status.

With Pac-Man representing the only other game to break 500,000 units sold on Sprint.

Finally we've invested in the creation and licensing of intellectual properties and the JAMDAT brand.

We have relationships with all the major North American sports leagues and with game companies like Activision for Tony Hawk's Pro Skater and Atari for Hasbro titles -- like Scrabble and Yahtzee.

We think that these licensings have helped associate the JAMDAT brand with quality entertainment.

At the same time, we've created great original properties that we own and control.

In addition to our JAMDAT Bowling titles we've created Lemonade Tycoon, JAMDAT Solitaire and Casino, JAMDAT Golf, and the JAMDAT Sports Line.

This investment in original properties has paid off, as the JAMDAT branded products have generated half our revenue during the first three-quarters of 2004.

Over the last three years, our customers around the world have downloaded over 25-million JAMDAT games with their mobile phones -- each time getting at least one and usually many impressions of our brand.

We intend to make the JAMDAT brand synomonous with mobile entertainment and we believe we are well on our way to achieving that goal.

In summary, our business continues to grow profitably and we see excellent prospects for sustaining strong annual growth through the end of the decade -- as game-capable mobile phones continue to proliferate worldwide.

We believe that our continued investment in distribution, research and development, and intellectual property gives us a sustainable competitive advantage.

Our strong balance sheet, with nearly $70 million of cash and public currency, positions us to take advantage of any strategic opportunities that may present themselves in the future.

And with that I will turn it over to Michael Marchetti our Chief Financial Officer who will take you through some of the numbers for the quarter.

Michael?

Thank you Mitch, and good afternoon.

The third quarter was another strong quarter for JAMDAT.

As Mitch mentioned, Q3 was our 11th consecutive quarter with double-digit sequential revenue growth and we've posted strong operating income and positive net income for the last three-quarters -- even as we've continued to invest to maintain and enhance our position in the market.

Revenues for the third quarter of 2004, totaled $9.5-million, an increase of 133% over $4.1-million recorded in the same period last year.

For the nine months ended September 30th, 2004, revenues were up over 200% to $25-million from $8.2-million in the same period last year.

We continue to expand revenues by geography, carrier and product.

In fact, both our U.S. and international revenues have more than tripled over the comparable nine months last year.

U.S. revenues have increased from $6.6-million to $19.9-million and international revenues have increased from $1.6-million to over $5-million.

For Q3 2004, the U.S. represented 81% of our revenue.

We are seeing strong and consistent growth through the U.S. with revenue up 162% from the comparable quarter last year.

We also continue to effectively diversify revenues by carrier.

Verizon and Sprint, our two top carriers, represent 51% of our revenues in Q3 2004 -- down from 64% of our revenue in the comparable period last year.

The combination of Cingular and AT&T, our number three carrier, represent 13% of revenue in Q3 2004 -- which is up substantially from only 3% of revenue for the comparable period last year.

These three carriers serve over 100-million subscribers in the U.S. and we are well positioned to continue to grow our revenues as their subscribers transition to next-generation handsets over the coming years.

We are also committed to strategically expanding and diversifying our revenue base around the world.

It has been just over one year since we opened our international offices and our international wireless revenues are up over 380% from last year.

We are continuing to strengthen our international presence.

We opened an office in India in the third quarter and in October our office in Japan launched JAMDAT products on KBDI [ph].

We're also continuing to show remarkable balance from a product revenue standpoint.

The JAMDAT bowling titles accounted for 20% of revenue in Q3 2004 -- which is down from 26% of revenue in Q3 2003.

We had approximately 94 products generate revenue during nine months ending September 30th, 2004 -- which is up from 49 products for the same period last year.

We generated approximately 80% of our revenues from 20% of our product.

Approximately 31% of our Q3 revenue is from subscription.

Which is the same percentage for Q3 2003.

We are currently offering subscription-based products on nine carriers, up from six carriers in the same period last year.

JAMDAT branded applications accounted for 47% of revenues in Q3 and 50% of total revenues for nine months ending September 30th, 2004.

Our gross margin for Q3 was 80% -- which is down from the 87% for the comparable period last year.

This decrease is a result of increased royalty payments associated with the increased sale of licensed properties as well as increased royalty payments for properties that have earned royalties in excess of advances.

Licensed amortization costs have also increased slightly as a result of increased licensing activity.

Total operating expenses for third quarter was $7.7-million, broken out as follows: $3.5-million on research and development; $1.3-million on selling and marketing; $1.9-million on G&A expenses;

And $1-million of non-cash stock amortization expense.

Full-time headcount at the end of Q3 was 215.

We have nearly doubled from 116 at the end of Q3 last year.

Over 60% of our full-time workforce is located outside the United States and over 75% are in R&D.

Approximately 24% of our research and development expense was external development -- which is down from 34% in the same period for 2003.

This is the result of our increased product development activity and our excellent internal studio in Canada.

Our continued investment in R&D is a critical aspect of our business and represents a pipeline of products for future revenue growth.

We expense our product development costs through R&D as it has incurred.

We do not capitalize software development costs.

While this lowers our operating margins in the current quarter it allows us to maintain our commitment to quality and innovation.

Net income for third quarter 2004 was $8,000 or zero cents per diluted share compared to a loss of $950,000 in the year ago period.

Q3 2004 includes approximately $1-million of non-cash stock compensation expense as a result of the remeasurement of fair value stock grants that were issued prior to the IPO.

Net income for the nine months ended September 30th, 2004 was $1.1-million or 24 cents per diluted share compared with loss of $5.2-million in the same nine-month period in 2003.

Adjusted net income which excludes amortization stock compensation and other intangibles and which we believe is an accurate measurement of our business and operation was $1.1-million for the third quarter 2004 or 21 cents per diluted share and 11% operating margin compared to adjusted net loss of $248,000 in the third quarter 2003.

For the nine months ended September 30th, adjusted net income was $3.9-million or 80 cents per diluted share -- a 15% operating margin compared to adjusted net loss of $1.6-million during the same period in 2003.

The GAAP weighted average fully diluted share count for Q3 and nine months ending September 30th is $5.2-million and $4.8-million, respectively.

This number does not give effect to recently completed IPO which closed in the fourth quarter.

Our estimate for weighted average fully-diluted share for Q4 2004 is $20.9-million.

And now turning to guidance.

We are committed to continued and profitable growth in-line with the market opportunity.

As such we are investing aggressively in licensing, product development, distribution and sales and marketing.

We believe that wireless gaming is in its infancy and that we are uniquely positioned to capture significant market share and press our early leadership position and ensure long-term growth and success.

In the short-term this investment may lower our operating margin but we believe it will result in creation of more shareholder value over time.

For the fourth quarter we expect revenues will be approximately $10.6-million more than double the $5.2-million in Q4 2003.

We expect net income of approximately 1 cent per diluted share and adjusted net income of approximately 4 cents per diluted share.

The small decrease in operating margin is the result of increased license amortization cost due to new licenses and extension of certain existing licenses.

We expect gross margins to hold between 77 and 80%.

Q4 R&D and sales and marketing costs will also increase in absolute terms due to increasing investment in product development particularly in Europe and Japan and increased marketing expenses for the holiday season.

We have scaled the company significantly to take advantage of the opportunities we see in the wireless games market and position to us execute on our 2005 operating plan.

We will discuss our 2005 plan in more detail on our next conference call.

However, we anticipate an operating margin expansion throughout 2005 and top line revenue growth consistent with the overall growth of the wireless games market.

Research firms forecast the mobile game market will triple in size in the next two years, reaching $1-billion by 2006 in the U.S. alone.

We believe that the investment we have made over the past four years in building our global carrier distribution platform and world-class product and brand portfolio along with our strong financial and competitive position will enable to us grow and grow profitably with the wireless game market over the coming years.

Long-term, we believe 25% adjusted operating margins are achievable.

Now, I will turn it back to Mitch for some closing comments.

Thanks, Michael.

Again we're pleased to be able to present such strong performance here today.

Execution is the corner stone of everything we do at JAMDAT and we will continue to execute and remain focused on growing the business in a profitable manner.

Looking forward to 2005 and beyond, we see many opportunities for our business.

We believe that we must invest today to create the maximum scale advantage for JAMDAT when the mobile gaming market matures.

All of our investment initiatives will be implemented in order to deliver the highest possible long-term value to our shareholders.

We intend to continue our strategy of delivering high quality, innovative, well branded applications for U.S. market and leveraging our success internationally through our global distribution system.

We believe that our customer focused strategy combined with the expansion of the existing installed base of next-generation game-capable mobile phones will continue to produce very attractive revenue and earnings growth for the company for the next several years.

At this point, I think we'll open it up for some questions and answers.

Absolutely, sir.

The floor is now open for your questions and if you do have a question please press star, followed by 1 on your touchtone phone at this time.

If at any point your question is answered you may remove yourself from the queue by pressing the pound key.

Questions will be taken in the order they are received.

And we do ask that while posing your question, you pick up the handset to provide optimum sound quality.

Once again ladies and gentlemen, to pose your questions at this time please press star followed by 1 on your touchtone phone.

Please hold while we poll for questions.

Our first question will come from Jeff Kvaal of Lehman Brothers.

Mitch, Michael, thanks very much for taking the question.

First, Mitch, for you, could you talk a little bit about your end customers and what you see the main drivers are there and how growth is progressing, I'm particularly I'd be interested to know the market share at Verizon and Sprint and how that's holding up, perhaps as a percentage of sales as well.

Then, Michael, could you comment on your -- and you had talked in the past about 20 to 25% operating margin as a long-term target for the business.

Is there a time frame that we should associate with that or is there a revenue level we should think about in terms of those target?

Thanks.

Thanks, Jeff.

Taking the first part of the question, with respect to our end users, we see a fairly stable from where it's been over the last couple of years and again, you know, from our estimates and from the anecdotal and direct evidence that we have still a large number of women, a very broad demographic with respect to age and consumption patterns again consist remaining relatively consistent.

We're starting to see with the introduction of a larger amount of prepaid in the United States and also some of the MVNOs that have come online, the beginnings of, sort of the teen market coming online which we hadn't seen here in the United States in the volumes that we've seen in Asia and Europe in previous years and we find that an exciting development for the future.

With regard to Michael -- second part of the question?

Sure, on the operating margin 20, 25% we still think that's achievable in the next 12 to 18 months.

We're finalizing our 2005 plan as we speak, but it has a lot to do with sort of how quickly we can scale back up over our current G&A expenses which ramped up in anticipation of going public, putting in all those processes.

Obviously it's still a fairly small company from a top line so adding half a million dollars of public company expenses had the biggest impact, frankly on our Q3 margins than what we think will have an impact on Q4.

Although, G&A is coming down significantly as a percentage of revenue, in [inaudible] dollar terms, it's still fairly large given the size of our company but yet we're comfortable at 20 to 25% in the next 12 to 18 months.

That's perfect.

Thank you both very much.

Thank you, our next question will come from Karen Tow[ph] of Merrill Lynch.

Hi, thank you.

Just a couple quick questions.

One, with respect to the subscription revenue in the quarter do you have a target or I guess a goal that you're trying to get, move your revenue that direction?

First.

Then secondly just in terms of the guidance for next quarter do we kind of break up the kind of up the-tick in expenses evenly across each of the items, or do you think you'll be seeing a little bit more in any one particular group?

First on subscription revenue it's actually been running remarkably consistent in the 30 to 32% for almost the last two years.

It kind of grows in locked step with the growth of the overall market for us so we get as many subscribers as we do new purchases.

So kind of -- and given the lower purchase price it kind of averages out to about a third of our revenue.

A lot of the new applications we are launching, multiplayer games particularly, only are subscription.

And as I said we've increased our number of carriers that offer these types of billings from six over to nine and we think the European markets will start adding that kind of service as well -- sort of earlier into 2005.

So we don't have a specific target.

Obviously it's more a function of does the carrier have the billing mechanism in place to allow us to do that and can we offer the end user a value proposition where that makes sense.

As to the breakdown for Q4 in terms of expenses, I would say the biggest -- it's pretty much across the board.

I mean G&A should be relatively flat from a dollar standpoint, sales and marketing will be up probably the most in percentage terms but not significantly on the dollar basis.

And G and R -- R&D will also be up probably, again, a couple hundred thousand dollars in actual dollars, not a huge increase in percentage base, so somewhat across board, flat sort-of-ish on the G&A line.

Are you doing anything different this year in terms of sales and marking in trying to get that revenue number higher?

We are trying a variety of new activities on the sales and marketing front.

Last year in the Christmas season we did some in-theater advertising in conjunction with the Lord of the Rings Launch.

We don't have a Lord of the Rings film in theaters this Christmas, so we're looking at more in-store activities.

We're doing a lot more direct marketing sort of joint ventures, if you will, with our carrier partners.

Where we invest and they invest in particular programs so we're -- I think we're moving a little bit away this Christmas from buying media and more looking at sort of point of sale and partnership opportunities.

And we also have something more individual product marketing on the Q4 as well as we did stuff with the NFL with T-Mobile in Q3, and I think we're going to be doing some stuff in Q4 around the NBA and some other products.

Okay great.

Thank you very much.

Thanks, Karen.

Our next question will come from the line of Jim Callaman[ph] with RS Investments.

Hi, guys.

I just wanted to kind of have you guys talk about download trends.

There's been some public companies that have reported Cingular, Infospace, and such -- Cingular had 22% data growth quarter over quarter.

The download volumes at Infospace were 40% and you guys, you know, some of those calls, the game growth was faster than even 40%, so I'm kind of wondering what happened in your quarter that you only had sort of 13%, low double-digit sequential unit growth?

That's my first question.

Sure, I'll take that.

You have to figure out what percentage of the revenue that those other companies is actually gained, and we know it's a de-minimus amount, so the growth from that basis, you know, very small number.

Nobody else breaks out their wireless game revenue.

It's mostly -- they're talking about ringtone revenue or ringtone downloads which obviously are much higher given the lower unit cost.

So we see -- we can see a strong consistent download growth across all of our carriers, it's just that we have the largest sort of share of actual game revenue of any of those companies.

So, yeah, we're not seeing 40%, actual sequential growth rate on the game download side it's more inline with the ability of the carriers to get new handsets into the market that can access our games.

So the carriers, this data comes from some of the carriers themselves that, you know, the sequential -- monthly sequential growth has been running in downloads 10% to 7% at some carriers, and when you ask them what's growing fastest they say games.

So are you losing a lot of share at a certain carrier or something?

You know, to this have download growth be so -- so much lower than the industry?

No, and I think the other thing that may be masking this a bit is which carrier you're talking to.

I think on Sprint and Verizon who already have...

...both of your carriers.

...who have very robust games businesses, I think our growth was well inline with there's.

I think we saw sequential growth rates in the mid-teens on both of those carriers.

Monthly or -- obviously not monthly, but quarterly?

Quarterly.

They were talking monthly.

Yeah, again, I don't have an answer for why that's different, I think in general, you know, we felt that we were growing with the market from all the indications that we had.

Secondly, the gross margin hit was more than I think than people expected.

I think you guys had kind of said on the road show that obviously a number -- you're kind of running at, I think, 83 last quarter and I didn't think it would come down so dramatically.

And now you've guided sort of -- we're now into the 70s for next quarter, so I'm getting a sense -- I just want to get a sense of exactly what's going on there.

Is there also a component of rev share that's hurting you somewhat?

Because I saw it too on Get It Now and also on your own site there's some $7.99 games so I thought there might have been an upward bias to the pricing.

There's no web share issue in there -- get that in.

The only thing that affect our gross margin is license payments to licensors.

The down sinking of Q3 it's more of a mix issue of what applications made the predominance of the revenue in Q3.

I meant more the hit to revenue intensity.

If your revenue intensity went down it might hurt some of the more fixed costs and gross margins, you know, from an absorption standpoint.

But there was no revenue change, rev share change?

No.

No, there was no rev share change from Q2 to Q3.

Will there be some going forward?

None that we have, none with any of the contracts that he currently are in negotiations with or have recently have signed up.

Also, on the -- there was a question asked on the road show that was like, you guys were talking about sort of a 70/30 mix of revenues which you announced, you kind of confirmed on this call.

I think it sounded like -- you picked up slightly if you went to 31% of revs from subscription.

But you had mentioned something that on the volume basis that it was more like a 50/50 growth rate, so I think I was expecting and maybe want to get your outlook going forward on the mix of the subscriptions versus downloads.

Just to be clear, it's 31% of revenues, but the subscriptions are typically priced much less expensively than the one-time downloads;

And therefore from a volume transaction, volume perspective the transaction volumes are closer to 50/50, and that because of the difference in pricing that results in the 70/30 mix-split from a revenue perspective.

Does that make sense?

Again, sir, if there are any questions, please press the star followed by 1 on your touchtone phones at this time.

Mr. Lasky, it appears that we have no further questions at this time.

Hold on, I think we're seeing some here.

Hang on.

We do have a question from Mike Wallace of UBS.

Hey, guys.

Hey, Mike.

Just a quick question about the numbers, Mike.

What's the stock comp expected in Q4?

Number two, as far as the higher expenses in the fourth quarter, it's bigger jump and obviously lower net than what I was thinking about, and I'm just curious when did this come up?

Is it after the IPO?

You had a lot of cash?

There are more opportunities out there?

Need to spend a little more?

Are licenses costing more?

Is there more competition?

Do you feel the -- I'm just curious, you know, what's changed, why the marketing R&D are going to be higher.

Quick on the stock comp, 630 - 640,000 for Q4.

Okay.

And the biggest jump that we had was actually from our international development -- Japan and the U.K. in particular, where we started doing some more localized development.

In the U.K. we're launching Coca and some Rally products in the U.K., which are licenses we picked up in the U.K., work on the company code master, did some development over there.

Obviously the Euro appreciation cost us more, doing development in Euros.

Also launching a football manager program in Europe.

In Japan as well, we launched products in Q3 and some of that R&D -- some of that expense is going into Q4 for the product that they've been working on.

So, you know, the biggest jump that we have is clearly on the product development side.

And any of these new games you just mentioned, are these going out this quarter, or is this early next year?

Q4.

They're going on in Q4.

Okay, okay, thanks.

Okay.

Again, ladies and gentlemen, as a final reminder if you do have a question at this time, please press star followed by 1 on your touchtone phones.

Mr. Lasky, there appear to be no further questions.

Okay.

Thank you very much.

Thank you, ladies and gentlemen this concludes today's teleconference.

Please disconnect your lines at this time and enjoy the rest of your day.