Franklin Covey Co (FC) 2008 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Q3 2008 Franklin Covey Co. earnings conference call. (OPERATOR INSTRUCTIONS). I would now like to turn the presentation over to your host for today's call, Mr. Derek Hatch, Corporate Controller of Franklin Covey Company. Please proceed.

On behalf of Franklin Covey I'd like to welcome everybody to our conference call this morning. Before we begin, I'd like to read our necessary Safe Harbor regarding forward-looking statements and remind everyone at this presentation that contains forward-looking statements that are necessarily based on certain assumptions and are subject a certain risks and uncertainties, including the ability of the Company to stabilize and grow revenues, to hire productive sales professionals, general economic conditions, competition in the Company's targeted marketplace, market acceptance of new products or services and marketing strategies, increases or decreases in the Company's market share, growth or contraction of the overall market for the Company's -- for our products offered by the Company and its competitors, changes in the training and spending policies of the Company's clients, and other factors identified in and discussed in the Company's fiscal 2007 10-K report and subsequent 10-Q and 8-K reports filed with the Securities and Exchange Commission.

Many of these conditions are beyond our control or influence. There can be no assurance the Company's actual future performance will meet management's expectations. These forward-looking statements are based on management's expectations as of the date hereof and are subject to the outcome of various factors, including those listed above, any one of which may cause future results to differ materially from the Company's current expectations. That having been said, I'd like to turn our discussion at this point over Bob Whitman, our Chief Executive Officer.

Good morning everyone. We're glad to have you join us today. I'd like to talk about three things this morning then open it for questions. First is our performance for the third quarter. Obviously it's not one of our stronger quarters from a reporting standpoint. We'll talk about the underlying factors for this; however just say upfront we don't believe this is reflective of any fundamental weakness in our organizational operations.

More than -- just slightly more than 100% of the decline in profitability related to the products business, and within that it was primarily -- at least a significant factor was the timing of the change in our wholesale distribution partner. As you look at slide five, you'll see our momentum -- revenue momentum in terms of bookings and advanced bookings has actually been good and accelerated somewhat during the quarter.

On slide six you'll see that the ramp rates, ramp up rates for our new client partners continues to be on track and in slide seven, that our -- the productivity of our alumni client partners also has been good. And in fact, despite what isn't the a robust economy, generally have about -- maybe a little over two-thirds of our client partners are -- had at this point year-over-year, and we expect actually the fourth quarter from an operating standpoint to be stronger than third quarter and be a pretty strong quarter. So we will go into more detail on that.

The second thing we want to talk about is a review of the transaction, and all of you or most of you have read that we completed the closing of the transaction much sooner than we had originally anticipated, and that is now done and we can talk about the implications for -- of that. And third we want to talk about just briefly note the planes for the previously talked about tender offer and confirm our intentions as it relates to that. With that just an introduction, we'll obviously get into the detail now and answer any questions.

I'm going to turn the time over to Steve Young, as you know, our Chief Financial Officer, to go over anything he would like to talk about relative to those three things.

Welcome again everyone. Pleased to be here this morning to be able to talk about our quarter and the transaction that has taken place and the other matters that Bob mentioned. First of all, let me mention, related to our quarter filing, if we look at the income statement we'll notice first that sales were down 5.4 million. Bob mentioned that a portion of this, a major portion in fact, more than the total, is due to a decrease in product sales of 5.7 million and an increase in training sales of 0.3 million.

Product sales did decrease due to the timing of the transition of the wholesale business to a new distributor, as Bob mentioned. Some due to the impact of closed stores, and also due to traffic decreases in the retail and consumer direct business. Bill will talk more about the training sales revenue and business in a minute, so I won't go into that detail. You'll notice our margin decreased slightly compared to the prior year, primarily due to an increase in the amortization of development costs, still a good gross margin.

Our SG&A decreased somewhat compared to last year. We disclosed that there are some non-repeating benefits and some non-repeating costs in this quarter that tend to be offsetting a little bit of an improvement, just considering those items. So SG&A is down a little bit. We consider that to be good, and we continue to focus on SG&A. And after this transaction we will be focusing even more on rightsizing or adjusting, if you will, the remaining Franklin Covey Company.

You'll notice looking at our earnings or loss per share that our weighted average number of shares used is 16.1 million even though we have 19.6 million outstanding. The reason for this is we're obligated to remove the management loan shares that are held in escrow when we record a net loss. This is an accounting treatment not often seen, but one that is applicable to us due to the nature of our management loan program and the fact that those shares are held in escrow by the Company. Those 3.5 million shares are not removed for the earnings per share calculation when we have earnings.

So I know that's a quick review of the income statement. Bill will talk more about the training side of the business in just a minute and give more details about what is going on there, which is important.

Now if we look through a little bit at the transaction that just took place, I am excited about this, because I think the transaction is good for both companies, and if it's good for both companies it's going to be good for the employees, and hopefully the shareholders. But I am excited and pleased about what has taken place.

To date, the CSBU sale closed on Monday effective July 5th. We have received the 32 million cash representing the initial purchase price. We have invested $1,755,000 to acquire a 19.5% voting interest in the new company. That 19.5% voting interest is a little bit less than 16% interest in the earnings of the new company.

We've also made a $1 million preferred contribution to the new company that bears a 10% priority return. This preferred contribution will be paid back over time as there's available cash in the new company which is a defined term. So we don't anticipate that within the next year, but after that we anticipate that $1 million will be repaid.

Also, as a part of the transaction, we have entered into working capital note that will be adjusted over the next 60 days and then paid to us. It will become due in January of 2009. This working capital note represents the sum of two numbers. One is the amount by which working capital actually transferred to the new company exceeds 10.1 million. And the other part of the note is to reflect actual reimbursable costs that we have paid, and will be reimbursed by the buyer.

I know that you're very sophisticated financial people on the phone, and will -- if we calculate this working capital note as of the May numbers that have been disclosed it will total approximately 3 million, but our expected amount is 5.5 million. Please understand, as I said earlier that amount will adjust over the next 60 days as we actually close the books, as we actually accumulate all of the reimbursable costs and get final numbers, that could change materially. But that is our estimated amount at the current time.

So we're very pleased about how all that has gone. We will account for our 19% interest in the company using the equity method. We will receive a tax distribution to cover our tax liability each year, and our presentation going forward for this transaction is not discontinued operations treatment. So again, even though it's a significant portion of the business, we will not reflect discontinued operations.

That means as we go forward, revenue as an example in the first quarter of next year will be significantly less than the first quarter of last year because the products revenue is not included. So we will be obligated each quarter and -- not obligated, but -- and we will want to show that the impact of the sale on those numbers, but just wanted you to be aware that will be the accounting treatment going forward.

Additionally, please remember as a result of the transaction that if the EBITDA to the new company exceeds 13 million, then we will receive a 30% royalty on that excess up to 1 million -- up to a cap of 1.25 million of royalty per year.

One last thing relating to this transaction is that resulting from this sale we have a modification in our credit facilities. Our 25 million facility is now with one lender rather than two. Our interest rate has increased from LIBOR plus 1.1 to LIBOR plus 1.5. And our line of credit must be reduced from 25 million to 15 million by the end of June next year. So again, very pleased about the transaction and the work that's gone on in the last few weeks to close this transaction has been very exciting to see it all come together.

Looking at our balance sheet, as a result of this transaction you'll note at the end of third quarter we show assets and liabilities, and equity held for sale. This means that the CSBU assets and liabilities are summarized on those lines in the financial statement, and excluded from their normal classification. Inventory, as an example, shows a balance of 7 million. This is the amount that excludes the CSBU inventory.

If you look at our balance sheet you'll see that the assets of operations held for sale totaled 30.8 million. Our liabilities held for sale as of third quarter end totaled 10.4 million, and our other comprehensive loss held for sale totals 0.6 million. In those balances, the $30.8 million of assets held for sale is just over $5 million of receivables at just over $14 million of inventory, and about $3 million of current -- of other current assets for total current assets of $22.5 million, and fixed assets of $8.3 million.

On the liabilities side, those liabilities held for sale are accounts payable of just over 4 million and accrued liabilities of just over 6 million. So we know that using the third quarter numbers, there are many who will attempt to calculate our gain on sale, and so please remember that the balances as of the third quarter, the assets held for sale, those are -- that is not the transaction balance sheet.

The transaction balance sheet is as of the end of June, not as of -- end of June, not as of May or the end of our third quarter. So - but as you run the calculation, you'll see our working capital as of May was more than the required 10.1 million. And that isn't the exact number that we will have when we close. So if you attempt to calculate the gain you'll need to know our estimated closing costs that we use in our pro forma information is 2.4 million, and if you use that you should calculate a book gain on the sale of approximately 10.6 million.

And please remember all the disclaimers that we have not closed our books yet. This transaction was just effective less than a week ago. We have not closed our books yet, we do not have an exact gain on sale, and so that number is subject to modification. And could even be material, even though that is our anticipated number.

Also, I think very important to note, that even though we have a fairly significant book gain, because of the nature of our book to tax differences, this transaction will result in a tax loss of a few million dollars. I think that's an important thing to remember. If you cut through all of it and look at the assets held for sale and all the different things, excluding all of that, you'll calculate our accounts receivable were up a little bit, our inventories were down a fair amount. Our accounts payable and incurred liabilities were also down a fair amount in this quarter, compared to year end. So I hope that's enough information about the balance sheet, the income statement and the deal.

A little bit of comment about our pro forma information. Later today, consistent with SEC rules, we will file an 8-K that includes a summary of this sale transaction and will also include pro forma financial schedules that will show a pro forma balance sheet as of May, a pro forma income statement for FY '07, and a pro forma income statement for the three quarters reported of FY '08.

We would ask you if you're interested to look at pro forma information, I think it lays out quite clearly the impact of CSBU going out of the Company. And it will show that as of FY '07, the operating income attributed to CSBU was approximately 11 million, just a little bit under, and for the three quarters of FY '08, the operating income was just a little bit over 6 million. Please look at those schedules again to get more detail, and what you'll notice -- the way these schedules work is the pro forma information includes the revenues, the gross margin, and SG&A directly attributable to the CSBU, and also includes an allocation of certain expenses like audit costs and tax, and other things.

In our financial statement, as we mentioned for last year of course those things will be -- those items will be included in our numbers and will not go with the new company. I don't know if that's clear about the pro forma information, but I hope it is. And we're happy to talk more about our pro forma information once those schedules are filed today, and you have a chance to review those.

I might just add, as it relates to the transaction -- I think just stepping back from it, I'm sure everybody is still remembers the discussion or maybe remembers the discussion from May when we announced, but really there were three primary thoughts behind the transaction. And also behind that -- this kind of a transaction versus alternative things we might have done, the spinoff or other things, the first was -- is the strategic reason for it.

And products business continues to be -- surprising thing for most people is to recognize the products business continues to be a very strong business. That in terms of number of planners sold, that is a surprise for most people to recognize that the actual number of planners sold has increased since '99, not decreased. But the number that are sold through our own channels of course through a strategic choice has now move from -- has declined significantly.

And the overlap, because of the growth of our training business in areas other than just in time management and individual effectiveness, which continue to be strong and grow, but which are a small percentage of the business, there's only about a 12% overlap between the training that we do and time management. Time management training, which would actually drive the product sales.

And even with growth in that business over the next years we expected that to be down to 5% or 4%. So strategically we felt like for us we ought to be focusing our efforts as accompany on the training and consulting businesses and all the things around that, put all of our capital behind that and all of our focus there. And so strategically there was a reason for it.

Second, we felt that given that strategic direction, which is a continuation of really defining the core business and exiting everything that isn't that, we've clearly defined that as our consulting and training business. Second was we felt this transaction represents and is the net present value of the business, as we forecasted it out, and whether we thing to good opportunities for growth that will require investment and effort.

And as a public company, for the next years as that restructuring and transition continues to occur, it will be difficult thing for people to understand because it will continue -- the topline revenue will go down as the distribution and third party -- as the distribution shift to third party continues. And because it's not fundamental to the ongoing training business, felt if we could get the fair value of the net present value of the cash flows upfront, that would be a great thing to do.

Third, we felt that there might be some opportunity to repurchase shares which we will talk about later. And that while we're getting the net present value of our expected cash flows or got net present values of our expected cash flows, we would have a chance for reinvestment. And fourth, the expectation would be that over time a pure play company that is focused on -- this noncapital-intensive training business that's been growing and growing nicely, both on the top and bottom line, would over time warrant -- would be easier to understand, one. And number two, warrant -- it's in a peer group that would have a higher multiple.

The thing that Steve mentioned, obviously on one hand you're losing somewhere at least for the first nine months on a pro forma basis 7 million or so of operating income. And we talked on the May call that the real plan for us is -- obviously there are cost reductions that will be allowed by this, but they're also just business model improvements that will continue, and we expect good growth in coming years in the organizational business still, reflected by our momentum in [dates] etc.

So our real idea was that by the time the dust settles on this transaction, we get through operations that we could be back to a point where the basic income that we had with the CSBU, we can have without the CSBU, and with a reduced number of shares outstanding. So just remind people of the philosophical underpinnings and strategic underpinnings of the transaction. Steve?

Thanks Bob. I think that was important. As to the last point let me just mention a little bit specifically about our fourth quarter. We expect our fourth quarter operations to be good, and up from the prior year. Please also understand that -- so that's good. That's the underlying operations of the business we think in fourth quarter are going to be good.

Of course in the fourth quarter is when we record this transaction that has just completed. And the earnings and operations of the CSBU, the products business, for the months of July and August will not be included in our fourth quarter numbers, other than the -- our 15.6% interest in those earnings that will reflect as earnings of an unconsolidated sub. So we expect it to be a good quarter, and then in a quarter we will have those revenues excluded.

And also in the fourth quarter we will include any of the expenses and costs and payments related to the transaction that would not be allowed to be accounted for against the gain on the sale. Part of those expenses that will be incurred relate to our -- restricted -- RSAs and our [LTIP] awards that are outstanding, and which management of both OSBU and CSBU Have participated in. So we have restricted stock awards, we have LTIP programs. We have good results that had been recorded in past years. We have results expected in the future.

Those RSAs and LTIPS have terms and conditions that are related to the future operations of the Company. Of course the future operations of the Company are significantly impacted by the sale of the CSBU. So the compensation committee and management concluded a reasonable and fair settlement of those RSAs and LTIPs and related matters would be recorded in the fourth quarter. So the RSAs will be vested, the LTIP programs will essentially be eliminated and we will be in a position to go forward and we will record a reasonable settlement for those things in the fourth quarter.

So if you add the amount earnings of CSBU that would not be recorded, and that -- what did I call it -- a reasonable settlement for the RSAs and LTIPs and the transaction that has taken place etc., then it will be a few million dollars of cost, approximately $4 million of cost in the fourth quarter that would not have otherwise -- either wouldn't have been recognized on the cost side or would have been recorded on the revenue side. And so that will mask a little bit the overall good fourth quarter that we're planning to have.

And you also have the gain the sale of (inaudible)

Yes, and we'll also have the gain which we calculated to be a book gain of approximately 10.6 million that is subject to adjustment.

Steve, you might note why you talked about a 15.6% of the earnings versus 19.5% of the earnings of products.

Our voting interest in the new company is a 19.5% interest. Management of the new company has an opportunity to vest a participation in earnings. There our anticipated vesting in their share of the earnings would reduce our participation in the earnings to approximately 15.6%. (multiple speakers)

If they were to fully vest.

If they were fully vest, which means that management participation is just in the earnings and does not also represent a voting interest. Bob, does that sound like enough on that?

I think so.

On the tender offer, I think the only thing to update there is we are planning still to proceed with the Dutch auction tender offer that we have talked about and announced before, and disclosed. And when that tender offer is actually launched in the next short period of time, then we will of course at that time disclose the range and the amount of proceeds that will be used in that Dutch auction. So I think the key word there is simply that we're planning to proceed with what we have previously disclosed and announced. So with that, very pleased to turn the time over to Bill Bennett, President of the Organizational Solutions Business Unit.

Thank you Steve, and good morning everyone. I appreciate the opportunity to tell you a little bit about our Q3. Steve has already mentioned that we had extremely modest growth in the third quarter. And as Bob opened the call, he said this wasn't one of our best quarters. We were somewhat disappointed in the quarter.

However, before I go into detail to explain the background on that, let me just point out as we have each quarter this year, just remind you of the conversion of Brazil and Mexico. Brazil and Mexico were formerly direct offices reporting revenue. As of the first of this fiscal year they became licensees reporting only royalty to us, creating a rather dramatic revenue reduction on a year-over-year basis for this year, but that business model has also yielded an increase in profit for us. It's been a good decision.

If you take Brazil and Mexico out of the analysis so you have an apples-to-apples comparison for both years, that would add 1.3 million more to the revenue year-over-year revenue growth for OSBU. So keep that in mind as we go through here.

We break down this business into our big (inaudible) -- our big three channels, and then our other channels so we can keep our focus up on the core lines of our business and pay attention to the health of those. The big three are made up of our domestic direct sales offices, our international direct sales offices and our licensee offices. Let me cover each one of those.

On the domestic side, we have divided the United States into seven regions. Five those seven regions grew in Q3. Two of the seven did not, and the net of that together resulted in a slight decline in sales year-over-year for the domestic offices. However it's important to point out that even the two offices that declined, the declines there were isolated to a few territories.

In the case of one of the regions, it is the one region in United States in which we have substantial construction business which is isolated into two territories, and obviously those two salespeople have felt the hit quite directly from what's going on in that sector of the economy. Outside of those territories, the rest of the region performed well. But those happened to be some of our most experienced client partners with larger territories so it had a big impact there.

In the case of the other region that declined, again it was isolated to really one territory that was underperforming year-over-year while the rest of the territories performed well. So I don't want to imply that we're not concerned about it, but I think the first step of analysis was to take a look and what is happening on a broad base. In a broad basis we're growing, and Bob already pointed out two-thirds of our salespeople are running ahead of last year, several of whom will have the best years they've ever had this year.

As you take one level deeper look at domestic direct offices and take a look their drivers, our facilitator revenue was up 7% year-over-year, which we were happy with it. The on-site business was not up, and this is really where we felt the pain of the particular places where we were down. We started quarter with actually a very healthy inventory of days to be delivered. But during the course of the quarter we received -- as we always do, but perhaps slightly more than average day cancellations on those days to be delivered, as well as a slower booking pace in both the months of April and May.

We watch these book day inventories by carefully. It's a great bellwether of the business, so obviously we were little concerned in watching that. Upon inspection, I'll tell you what we think happened is we had a huge focus in Q3 on a new facilitator product launch in the leadership modules that drew quite a bit of attention on the sales force over to that, which is causing them to make contact with our facilitators in the field. And we think that caused us -- the majority of the issues that hit these book days.

If that assumption is correct, then we should have seen an increase in book days as we came in the fourth quarter. We did. The month of June was a spectacular increase. In fact, it was our second biggest booking on this year, almost 30% growth over prior years in our book days. So that bank of book days is refilling rapidly, and we feel -- as we look forward to the rest of Q4 and into Q1 we feel very confident about that. So on those two drivers, I think are fairly good indicators of what's going on.

We also watch, of course, our new client partners. You see this in one of your charts, and Bob brought attention to it. We keep our eye on the growth rate of our new CTs, and they remain at or above our targeted revenue growth ramps around the world.

And further, year-to-date domestic direct offices are up about 6% over prior year. In the fourth quarter, just to give you one look forward, we had a very large deal fourth quarter of last year, $1.9 million deal that will not repeat. Despite that, we're still forecasting growth in the domestic direct offices for the Q4. So we feel very good about their outlook.

The second of the big three is international direct offices. We had about 10% growth in Q3, and there was some spectacular growth, Canada almost 40%, Australia about 23%. Our largest office, Japan, had -- grew but was fairly modest at a little over 3%. We had a very large deal that typically comes in in Q3 and this year came in for various reasons in Q2. And so that adjusted the two quarters in Japan.

Looking forward into Q4 Japan is looking to have a great growth quarter there too. So we think we're very much on track in that place. And year-to-date, overall in our direct offices we're well into the double digits of growth over the prior year. Finally, licensees --

You probably didn't mention, a portion of that growth of course comes from the foreign exchange.

It does, yes. And so we did benefit in this particular quarter from the exchange rates. Adjusting for exchange rates we still grew. And so that obviously is added to it. It's one of the quarters where it giveth and we benefited from that. But we still had growth in those cases. Finally, the third of the four channels we keep our eye on is the licensing business, and we had about -- almost 14% growth for the quarter and we're tracking almost 20% growth for the year in those businesses.

So net net, on the three big channels amounted to a little over about a 3% increase in sales. It was obviously forced down by what I already described in domestic, but I already mentioned what we are feeling about Q4.

A quick summary of the remaining channels, remaining parts of the business which are also important to us, but tend to be more on the periphery as indicators of our future business is our sales performance group, which sells our sales training, our public programs group, our audio and book sales, and our professional speaking businesses which is of course almost entirely Stephen Covey. Publics are off. Publics are off and other companies in that industry are off as well.

The bright spot there is that we have done quite well, I think Bob has mentioned on prior calls, with our Web based -- our live webinar we been have been teaching. In fact that has been so successful we have five more webinar-style courses coming out over the next few months, and our publics business is going to be shifting to put tremendous emphasis on that style of delivery. And that is just from top to bottom a great business model.

Our sales performance group started off the year quite far below last year. They had been climbing all year. They were a little bit behind in Q3 and we anticipate them showing flat to maybe modest growth in Q4 and continuing growth into next year. So we feel that is going the right direction.

Audio and book is just very cyclical. When we publish a book, the business goes up right away. And there is an echo affect as the audios, which are typically derivatives of the book, follow behind. We didn't publish anything so the business is down. We will be publishing next year and the business will go up.

And finally, Stephen R.'s speaking circuit has actually grown quite well. It doesn't drop much to the bottom line because of the way we structure that business, but it does create huge awareness for the Company. Obviously when Stephen is out there in attracting crowds, it's good for us all.

Just the last two notes I will make, just two positive items of note. Our customer loyalty practice is quite new. We're not ready to record anything on how that is going overall, but we will tell you the early start in there, the momentum is outstanding. We're quite excited about that.

And our upcoming release for Great Schools called The Leader in Me is going to be coming -- this is probably one of the most beta-tested programs we have ever come out with. And the early returns on those beta tests are excellent. I think we're going to have a great run with that as well. I hope that was helpful.

Thank you so much. At this point I'll turn the time to our host to tell us how to move this into Q&A mode.

(OPERATOR INSTRUCTIONS). [Kevin Hanrahan, KMH Capital Advisors].

Hello. Hello Steve. I had a question I saw in your previous press release, not today but maybe a week ago, you were saying that the tender offer would commence in the fourth fiscal quarter of 2008 which I believe ends August 31. But a lot of people may not realize you're fiscal year. So if you can clarify any color on that, so that would mean the tender offer would commence say, the next few weeks or at least six weeks.

We would expect in the next couple of weeks, it will commence.

Thanks for that color, I appreciate that.

I would think within 14 days we'd be starting.

And the size, you haven't commented exactly. Would it be at least the (multiple speakers) the proceeds of the deal?

Our general thoughts are just what they were before. We will use the net proceeds from the transaction to do that. So the exact number, we don't need to be quite that precise, but it will be somewhere -- the net proceeds as Steve said will be somewhere in the $28 million range.

Okay, thank you.

John Lewis, Osmium Partners.

Good morning Bob -- and just a couple of quick questions if I can. Bill, I missed when you said -- what were the bookings up in June?

Almost 30%, about 29%.

And on slide five, I believe you guys show actually -- it shows a pretty hefty ramp, it looks right around April. I think that was the launch of I guess Great Leaders, Great Teams, Great Results. Is that what really drove the spike up in kind of the April/May time period?

What it really was is that a year ago, the launch -- the thing we were comping against in the third quarter actually, which kind of also contributed to the flat -- flatter year-over-year performance was that last year was our big launch of the new leadership offering to which you refer. This year, we refer in the momentum to bookings -- a lot of those are not recognized as revenue until later.

And in connection with our customer loyalty business, we entered into a couple big contracts during that April period that the revenue for which will come into the future. But I think that was really more a factor in the spike, and as Bill said, the 7% increase in facilitator sales related to sales of these leadership modules (inaudible). We've got a new product where historically we have been course-centric.

We've talked strategically about moving more and more to resource-based offerings. These are taking courses and breaking them down into modules where these are a couple-hour to four-hour modules, whereas part of the management meeting or whatever else, you could just do part of a course where you don't actually have to consume the whole thing. We will be actually going forward on that and breaking it down into more than molecular level or even the principle that you can use in one of your staff meetings with -- on the Web you can get a quick teach about things.

We're starting to launch that, so that together with the entry into these new contracts on the customer loyalty practice were the primary reason for that spike.

Fair enough. Just to understand, if I were to take '07 number in June on your momentum index on slide five, you said it was up 30%, so would I take 30% on 63 million, and your momentum index would be up to around 80 million?

Let me just -- we probably haven't done a good job in the past of describing the factors that make up that momentum index. Maybe it would be a good time to do so now. The momentum includes three things. One is the book days, and that makes up about half of our total business. So it's the actual days that we book for delivery on-site at a customer site.

The second thing includes facilitator sales, which are actually recognized right when they are sold, and these are manuals and things. And the third is what we call other revenue, which are these large deals that might be intellectual property or other things, and those are the three things that we have bookings on. And so to Bill's point, that portion of it, the 50% portion of the business, say, that is on-site revenue, and it changes in different months. But let's just use that as a number. That 50% was up 30% in June, and that's the thing to which Bill was referring. Bill, you may want to add color commentary on that.

That's excellent. I guess -- so just more of a fundamental big picture question, given kind of the weak overall economy, what -- I guess what in your mind is really having you guys kind of swim upstream, so to speak, on the training side?

I think if you break it into maybe three things, at least as I see it, and Bill, please -- you have a very granular perspective every day. But we've got a couple of industries frankly that are in full out recession. I mean year home building industry and the construction industry, and even the Defense Department because of the cost of funding the war, etc. Certain branches, for them all discretionary spending has been cut. And that's affected our training.

Thankfully as Bill mentioned, that reflects in a few territories, is not broad-based, but nevertheless we had some large deals. So we think those businesses -- the construction industry, that is going to be tough for a while. And where the Department of Defense interestingly has shifted where historically they bought -- as they cut their discretionary spending on things that affect our individual effectiveness and leadership offerings, but at the same time the advanced bookings we have on the execution related business have actually been quite exciting in the Department of Defense as well.

So I think that business -- the combination of those two sectors will be down and will probably be down -- the construction sector will be down I'm sure for the next year or two. But I think the defense business will come back this year for us. So that's one area.

I think you then have specific other industries or companies that doesn't seem to be really broad-based, but where they have themselves decided to cut discretionary spending, and it hits you where it hits you. But as Bill said, while it's muted maybe the growth of certain of our client partners, some of the client partners actually have had that happen to them, they're still having -- some of their top performers have figured out how to avoid it. But you'll have some of that hit that we didn't have as much in the past.

The third place where it shows up is in cancellation rates where people book things and then pull them off the books. And there we watch that very carefully. In 2001, where our offering -- where perhaps the economy -- the nature of the slowdown was different in its make up, but also where our offerings were very different, where we were completely just selling training offerings and no execution related stuff, our cancellation rates went up into the mid-20s, and things that were already on the books.

We watch that very carefully, and really the pattern has not -- with the exception of those few accounts, the pattern really isn't very different right now. So we think the business is more resilient, but it's really -- so I think a challenge is making sure our value propositions are really hitting on business outcomes. We've been looking working on that for a number of years. I think that is helping us a lot.

We thankfully have not have a lot of companies who have just said outright we're not training, but they really are very anxious of course to understand the economic payback. And so things like our customer loyalty and execution related offering, even our leadership offerings, and interestingly even time management where there is a direct payback where people can see those tend to be easier value propositions to sell than others.

But overall, we're -- obviously it's not a robust economy, but we haven't thus far and we hope we won't, but we haven't thus far seen any kind of a broad-based thing as reflected by the fact that two-thirds of our salespeople are ahead. I do not know that was responsive.

That's helpful.

Bill you may want to add to that.

If I could throw out one more comment, Bob briefly mentioned '01. One of the real lessons we learned in '01 was when we took a real hit in that economic turn, is where we had gone out and sold directly into the HR department and on a transactional basis, people love us, we have a great reputation. But when our course goes into a company as one of their catalog offerings, that business gets swept away pretty fast when there is a crunch in the business. And what we learned is we weren't doing enough value oriented selling, where we're tying our solutions to business problems.

And the tie is there. It's very clear. We had just fallen on our laurels and a victim of our success. So ever since that decline we've focused the last several years. We've invested in one of our top people leading our sales training. We've taught all of our new CTs. We stressed to our existing CTs the idea of tying to a business problem.

Where we've done that, which is where we're thankfully doing in most places now, you can keep your fingers crossed. But we tend to be pretty resilient. In fact in some cases, as a company tightens up, they increase their focus on the things they think are going to make a difference to their bottom line, and we've done the job right, we stay in place. So --

That's very helpful, appreciate that. Bob, I'll hop back in and let some other people ask questions and be back. Thanks.

[Julian Allen, Spirit Capital].

Good morning. Two quick questions. The first is that back in May, in the original discussion of the sale of the CSBU business, I believe that you guys referenced approximately 10 million in savings due to the reduced complexity and that savings would be shared across the two businesses. Could you give us some color on whether or not that quantity has changed, and over what time period we might expect to see that reduction occurring?

In May, just as you said, we talked about -- independent of the transaction actually, back last December we identified about $10 million of cost reductions, a little less than half of which would happen in the CSBU, a little more than half of which would happen in the OSBU. That's the thing to which you referring, right?

Right.

And we believe the size of that is still right, and I think we talked a little bit about the makeup of that in May. And we've already taken a number of steps. But really since then, if anything we've solidified pieces of that as we've negotiated or reconfirmed elements of that.

So I think overall the part of the pro forma we had for the sale of the CSBU included about $4.3 million of cost reductions and business model improvements. We feel we're right on, on that number. It's actually going to take a little less capital. Those things that we identified for the OSBU and central operations, which was a little over 5 million, are firming up or have already been accomplished. I think we're still thinking that on the remaining Company side there is somewhere north of 5 million.

By the time it's all -- it doesn't all happen exactly on fiscal years. For example, there are IT savings which we think will be a little north of 1 million a year, will kick in when we get the new systems in place, which we have identified and are in the process of doing. They're not big system changes, but nevertheless it won't be happening exactly on the first of the year. The annualized impact of these cost savings are really the same magnitude, or maybe a little bit more.

So just to make sure I understand that, when you publish the pro formas for the businesses, the ongoing business that's primarily comprised of the CSBU unit will immediately enjoy the benefit of that portion of its overhead that will be covered by the OSBU. And furthermore over time should enjoy some further cost reductions as some of these initiatives kick in.

Steve, do you want to speak to that as it relates to the pro formas?

Yes, the pro forma information for -- the pro forma information for CSBU will include a certain amount of allocations, I believe as I said earlier, like audit expenses, tax expenses, etc. So it is the portion of our earnings that are being pulled out. And yes the savings of 10 million that we talked about, the portion attributed to them would be future savings. Also when Bob talked about the dust settling over the next year or so, and us getting back to a point, then our savings are anticipated in that dust-settling comment also. I don't know if that -- does that answer the question?

Sure. If I could ask my last one, you discussed in the backlog in inventory of books to days. Can you give us a sense in -- after a very strong June of nearly up 30% in bookings, would that leave your backlog as of early July kind of roughly in line where it was last year? Is it up, is it down? Just to help us quantify some of the effects of some industries up, some down, some regions up, others down.

I think at this point in time, July is a little off of last year. August is getting to be up about where it was last year, and I expect that to continue to improve. One data point that might be useful to you is as we book days, probably 75% of them fall between one month out and four months out for delivery. You got probably 7%, 8% that fall inside the month they are booked, and the remainder spread all the way up to a year out. And that shifts according to lots of different things. But on the average, that's about what that runs. So you got quarter plus sometimes impact from an increase or decrease in days.

So I suspect we're in our fiscal July. July will continue to improve. I'll be happy if July comes in flat with last year. I think August will be up. And it bodes well for Q1.

Beyond just booked days, as I mentioned, there's also these other large contracts that don't -- aren't reflected as much in booked days as they are intellectual property or contractual things. Those will also contribute -- begin to contribute in the fourth quarter and then ramp up as it moves into the first and second quarters. Also facilitated revenue is -- at fourth quarter is historically our biggest time for that.

So again, the three of those make up the momentum but (inaudible) you asked the specific question about just booked days, which is say about half of -- normally half the business, but because of some of these large contracts it's a little bit less probably in the fourth quarter. Okay?

Thomas Koch, Turnaround Capital.

Good morning. I had a follow-up question to the last discussion here on these booked days. How do the cancellation rates play into that? I.e., you're saying you see some visibility as far as strength there, but then you also in the previous part of this whole conversation talked about having some higher cancellations or cancellations have come in.

The booked days are net of those. Our --

That's net of cancellations (multiple speakers)

Anything we know about, so these big accounts that have canceled and so forth, they have already been netted out. And so -- you can have ongoing (inaudible) if I misspoke -- I hope I didn't. But our cancellation rate, really, with the exception of a couple accounts, has been really about where it's always been. So we haven't seen any increase in that. So we don't have an expectation at this point based on looking at every month very carefully that beyond these two or three accounts, that there is any kind of statistical shift toward higher cancellation rates. So we don't anticipate much different.

So Bob, what changed then? When we were back in the beginning of the year and you guys talked about having a weaker beginning of the year followed by a stronger second half, and this last quarter I don't think fell into that fairway. What changed? If cancellations didn't change, why are your numbers not up more like you thought they were going to be? I guess I'm just trying to understand and question I guess the visibility that you guys really have on a forward basis.

Let's talk about visibility first because I think it's an important point. I think Bill attempted to say it's not that we have enormous visibility beyond a certain number of months, and we -- it begins -- take three things. The booked days, as Bill mentioned, tend to be delivered within four months so that we have a good visibility on for about four months at a time.

Facilitator business, actually we have a day's visibility. We know the general patterns, but you know what's in the pipeline, but really in terms of once it comes on, it's booked when it's sold. And the third is these larger contracts that come in and go out.

So I would say from my perspective, the news of the second and third quarters was that overall, the booking pace was flatter than we thought it would be. In December and January, we had the two largest looking months I think in history. December was the largest looking months in history, and January followed with a huge booking month. February was flatter, March was really significant, and I flattened a lot in April and May. Our question is how much of that was economy-related and how much of it was something else-related. But it was lower.

And as a consequence, the third quarter -- the first quarter was also soft, but we already talked about that. And so that affects -- for the next three or four months, there was a higher -- there was an anticipation, which may have been a little unrealistic as you look at it in terms of the -- we had a very successful launch of these new modules. There was a big push on that in the third quarter, which because they were focused on selling these modules I think there was less focus on the booked days, as Bill talked about, which hits you for a few months. But it was very successful relative to I think some of their expectations, but not relative to what they were forecasting they thought they could do. And so that was a little flatter.

So the combination of those two factors leads you into -- effectively the third quarter. And on the fourth quarter, because you had flatter bookings in the third quarter, that leaves you a little softer in the third -- the fourth quarter as well. We will benefit on the other hand from some of these larger contracts that are kind of independent of booked days because they're more contractual intellectual property related things, which we didn't get any of to speak of in -- none of these big contracts hit in the third quarter. But they will begin -- the revenue will start the recognized here in the fourth quarter partially offsetting.

So I would just say primarily the book days being flatter in the third quarter than we had thought, and the launch of the modules being more modest than had been forecasted by our teams at that time and which they felt very strongly about. Those are the two factors. Bill, you want to add to that?

I think I would agree.

Okay, I had one other question regarding margins. In the earnings release, there is a comment here, talks about the decline in gross margin primarily due to increased amortization of capitalized development costs and increased sales of low margin specialized seminar events. Did those two items pertain to the OSBU side or the CSBU side?

The OSBU side. Here's what they are -- is -- let me talk about the second one. In the third quarter I think this also, by the way, had an impact. It may have been significant as it relates to the flattening of the booking pace in the late third quarter.

Is that we had historically we have these big symposium events in the spring. They took a ton of time for our sales forces. We lost money on them but they were the small amounts -- not small, $300,000 to $500,000 a year on those. But they were -- we would have these large client events, where you would have Jack Welch and other people come and speak, and put on a big thing. We recognized or felt strongly that the effort, while it generated revenue in later quarters, was one that also kind of disconnected our sales force sometimes from just selling the value propositions. They're always trying to promote people to an event.

This year we went to something that was -- we had tested the previous year. We had 26 or 27 of these -- what we called Greatness Summits. They just don't have very much margin associated. So it was much less -- it took a lot less time from our sales force than these other bigger events took. Each one of them just kind of took responsibility for their own city. But there's not much margin in those, and because we did so many of them, that margin -- it doesn't repeat in further quarters. It's just relative to that quarter.

I still think -- I think Bill thinks that perhaps even though we believe [all those] had been successful and we resulted in bookings as they did in June and other months, that they're still another -- they were sapping a little bit too much of our sales force strength.

So that, when it's non-repeating -- as it relates to amortization, though, that is -- as we invest in -- as we have invested in things like the 7 Habits Interactive and in other offerings that have these big resource based components, the amortization associated with those hit you -- you have kind of straight line amortization of those capitalized development costs which hits your margins when you haven't yet been generating revenue or as much revenue from those [tracks] because you kind of have a straight line amortization. But the sales you hope are not straight line, you hope they build.

And so in connection with 7 Habits Interactive and our customer loyalty offering, we have capitalized development costs that we immediately begin to amortize on a straight line basis, but the ramp up of those revenues occurs over a longer period of time. We don't believe that those -- the effect of the -- for both of those reasons, the gross margins, which have increased very steadily for years, we expect that to -- those margins to be able to hold and perhaps improve a little bit in the future. But in this last quarter and this quarter the amortization expenses together with these zero margin or close to zero margin promotional events where we get revenue but no profit, have hit that. Is that helpful?

It is. I just want to ask one other kind of numbers question to see if this ties in anymore with this. But when you guys do have some pro forma information in the Q here, and if I take the EBITDA from OSBU for this quarter was 12.2% think versus what I calculate to be about 16.4% in the quarter a year ago, why is that -- is that -- are these the same issues we're talking about?

Two of the three are. The two we just talked about, both affected that. Another thing that affected was that last year, the launches of some of the new things created some additional gross margin that we were comping against. But fundamentally it's these two areas. Bill, do you want to add to that?

No, I think that's fine.

So on a consolidated basis, the EBITDA the nine months for the OSBU business is relatively flat with where it was last year. I guess you're talking about some -- I didn't hear anything on an EBITDA basis, but on a top line basis I guess you're talking about expectations in the fourth quarter for growth. Does that mean that EBITDA could be expected to be higher as well? I know you talked about some of these onetime costs and expenses related to the deal, but if you took those as below the line items, when you're talking about just the core operations, what's your expectation there?

Core operation would grow but for those onetime costs. One thing is challenging the fourth quarter on a comp basis is that last year in the fourth quarter we had a $1.8 million sale which was to a big client in one of industries I've talked about that did not repeat this year. It had very high margins, about 1.3 million or so of margin. Even with that, without these onetime special items you could argue below the line, we still would expect bottom-line growth even absorbing that. But that's what we think.

So again, I think last time last call you touched on this a little bit, last earnings call, with these -- so we can kind of take this run rate of this EBITDA level we're at and everybody make their assumptions on where that's going. And add on top of that over the next twelve months, you're hoping I guess what I heard was to get something close to 50% of the 10 million of savings that would be on the OSBU side that will show up gradually over the next twelve months?

Yes. Probably I would say a little bit more than that, but (inaudible) the IT portion will be the one that will be phased in more. A lot of the others will occur more rapidly. So I would think we will probably get 75% of that 5 million into the year, into the fiscal year, if that's what you're asking.

75% think will show up by the end (multiple speakers)

Will happen in the next fiscal year. And if you take that question we hope will be growth and expect will be growth in both -- the big three channels. And a significant thing really for our operations for next year, just as you think about it, is that this year-to-date, even though the three small channels, the public programs, the sales performance group and books and audio, even though their upside is relatively limited as it relates to the total size of the business, their downside has been significant this year.

On a year-over-year basis, and this won't be exact, somewhere around $2.5 million of EBITDA is the year-over-year decline in EBITDA just in those three channels. So it if next year we were to just stabilize those three, so that we didn't lose any further ground, and we think in every case we won't lose further ground and actually will get some growth, that -- you pick up 2.5 million in the business model next year, say that number, some number close to that. If you didn't have -- with everything else being equal, for next year you ought to be able to pick up these cost savings plus the nonrepeat of the decline, would at least help you in those areas.

What happens on the top line growth in the big three is of course the topic -- the subject of the last fifteen minutes of questions, is booking pace, other things. And I think as it -- realistically as you've had -- the flatter bookings in the third quarter will affect us in the fourth quarter, as we -- and will affect it, even though not so much that we won't be able to grow still, it's still flatter than we had originally thought.

If we were able to continue strong bookings along with these new big contracts, then in the first and second quarters you'll start to build. But even without growth in those we should have improvement as a consequence of those -- the cost reductions and hopefully nonrepeat of the decline of those three smaller channels.

Great, thanks so much.

One additional thing -- when you look at the pro forma information today and look particularly at the business being sold versus the CSBU segment information, you'll see -- and then recall what we said in the past, it isn't exactly this segment that's being sold. So to look at our segment information, and the CSBU column -- the business being sold is a bit more profitable than the CSBU segment.

Because of internal allocations of cost that get [redone] by about 1.3 million. Is Tom still there?

I think that will be important to everybody to look at that pro forma information, and if you want to compare it back to the [secondary] information.

John Lewis, Osmium Partners.

Just to understand, you guys are going to file a pro forma statement with the SEC tonight?

Yes.

Thanks. What is your current headcount on client partners? If you could give me that, that would be great.

We've got approximately 70 right now in the US, we've got about 50 to 55 or so in the international direct offices and you have another -- throughout the licensees the count is not exact because they -- sometimes these people have multiple jobs with some of the licensee offices. But there is another -- there's another hundred slots probably -- maybe up to 150 or so in those offices scattered about the world.

And we've been trying some different things, too, there. We have been starting to build more little teams as time has gone by, and so you have a good mentoring environment for junior client partners coming up through the ranks (inaudible).

In your Q, you say you have licensed operations in 87 countries, and you have licensed rights in more than 140 countries. Could you just clarify? I think I get it, but what's the difference there?

You want me to respond to that? The licensed operations would refer to the actual -- I guess brick and mortar or people on the ground located in specific countries. The larger number of countries where we can sell are those places in which we are selling, the countries in which we're selling as a company.

In other words, somebody may have gotten rights to a territory they haven't yet been fully able to develop, and they focused on one country of three in which they have rights.

Okay. Now that you're -- I guess more pure-play focused obviously on the OSBU, what kind of opportunities are there? I know you're in some very tiny countries, and I guess it must be licensed rights. But 87 countries in terms of licensed operations, where are some of those countries where you -- we talked in the past about China and India, you guys think you're barely scratching the surface.

Could you give us big picture of outside of company-owned -- or company-owned operations to franchise -- where big international opportunities, where you would like to have franchisees push the pedal a little more aggressively?

If you look at the world and say 6 billion plus people, the direct [to offices] both domestically and internationally that we have are the ones that are really owned and our owned and operated offices cover less than 500 million of those people, although they're of course in some great industrial countries. Nevertheless, it's Japan, the UK, Canada and Australia, along with the US.

So a lot of the big growth opportunities, South America, China, India, Russia and elsewhere really are through our licensee partners. And so while historically there was probably a time when that was viewed as, it's nice, they can do some business there, hope they win, they're paying us net amounts, and I'm not sure -- that was never the mentality, but you could easily -- out of sight out of mind.

Today, if we're going to really grow, take advantage of all the opportunities we have for growth, we have to really help those people build their businesses. So in places like China and India, our licensee partner in India has doubled its business every single year, has opened nine or ten offices at different places in India, and is barely scratching the surface and yet running as fast as they can. In China, they opened several offices and are moving rapidly.

And so I think for us, as we go forward, the real idea is to look and say in terms of actual offices, we ought to be looking at our domestic international direct and licensee offices in a very similar way as it relates to holding ourselves accountable for the growing against opportunity and helping them to grow, providing resources and training people to help them internationally. This year we added a very strong individual from the US who now -- whose full responsibility is to help licensee partners on sales training and so forth and will build those teams.

So I think if we look and say -- if we are agnostic as to whether we own or license the operation, the things we provide in terms of great offerings, great sales process, great ability to develop consultants, as we do -- and great marketing, much better marketing support, e-commerce support etc., Web based offerings and things. As we make those scalable across the world we're going to be -- in the past when we launched products, we launch in the US, and a year to 18 months later they would come up having to spend their own money to develop this. We're going to -- for now on we're going to introduce everything in seven key languages so that a big percentage of our people can move.

I think through a combination of helping people to grow, there may be opportunities in the future even to invest capital to help them grow in certain areas of the world, adding country heads which will mean just to go in there and try to help multiple franchise -- even with franchisees within or licensees within a given market area, that if we're really going to grow significantly in the world we've got to help these people grow more systematically than we have in the past.

Thankfully they're such great partners that they have grown very well on their own. A place like Scandinavia that isn't a high-growth economy, nevertheless we have a very high-growth business and high-growth team there and in other areas of the world.

Thanks that's very helpful. My last question is -- can you give any color on what your targeted SG&A would be on the OSBU over time?

You're saying just OSBU, or OSBU and Central combined? What are you thinking?

Both. Central and combined.

Steve, do you have the number off the top of your head?

Going forward, I don't have a number.

Why don't you ask that question next quarter and we'll give a good number.

Fair enough. I thought it was slightly over -- we'll see what happens on the pro forma tonight.

Fundamentally, we're holding ourselves to a business model. If you think of a business model, we're targeting as we talked about in the last call that for the remaining business, by the time the dust settles we want to be in mid-double-digit business model in terms of the EBITDA to sales, and certainly operating income of more than 10%. So you can kind of figure out, given our gross margins, where are selling costs have to be to get that.

Great, thank you very much.

Maybe one more question, I think we've probably kept you all past your expected time.

Thomas Koch, Turnaround Capital.

I was just wondering, given now you're going to be in a more kind of less capital intensive business, what do you intend on a go forward basis to be doing? It looks like you'll be generating a fair amount -- significant amount of cash flow on a cash-flow basis. I know you've got NOLs, you have to pay some foreign taxes, you got interest expense and you've got some development costs, but shouldn't be a lot of CapEx involved.

So now that you're emerging as this new entity with only this -- the one business segment, and significant cash flows, how would you describe kind of what the strategy is? Is that to reinvest those in growth, or are there any other acquisitions to do, or would it be a return of those profits to shareholders?

The rank order, at least in my mind, would be as follows. One, we want to make sure we're investing sufficiently to build the foundation of offerings and capabilities and sales training and other things that are necessary to really allow the growth to really expand around the world, because we've got so much opportunity. We've been making those kind of investments, so that reflects a big increase in spending in (inaudible) particular either SG&A or capital, but there will be ongoing investments there that we will have the very highest returns on capital.

The next opportunity would be in the acquisitions area, but I think for us those would be -- those will probably tend to be smaller opportunities, because we've got a strategy and a set of offerings and a perspective on the problems that we've chosen to solve that leads us to -- it doesn't mean the others don't have great offerings. So it might be the acquisition of rights to a book or distribution rights.

But they will tend to be, we think -- it would be great if we had some big acquisition opportunities. There might be some, but we're really seeing as we play out these solution areas where -- in which we play, that there are other people have great things as part of an offering where you can maybe acquire in small pieces or buy a practice or whatever. But I don't think you'll have -- spending a ton of capital there.

A third area would be in actually helping licensee partners if they get strapped for cash. Taking an interest in some of those operations is not a stated objective, but that could be an interesting one in some of these high-growth markets if we could be helpful to our partners in helping them grow with capital, that would be a place to put it. But beyond that, I think in one way or another returning to shareholders, either continue to be purchasing of stock, or eventually even dividending could be in the picture. So that will become more clear.

But we're -- obviously in addition to this 28 million or so that would be spent on the repurchase of shares now, if we were able to get shares, we expect as you would say, to generate a lot of cash. So those are kind of our priorities right now as we see it. We think even in that rank where you'll end up lower on the scale of where you would be doing things, where you will be returning it to shareholders in some way.

Right. And you talked about expectation of getting it was 3 to 5 million-ish I think from the working capital down the road as well, right? That's additional cash that comes in.

Right.

A dividend program would be great.

Like I say, we would be looking for the upper part of the chart, right now expecting that we will probably be on the lower part of the chart.

Thanks.

I think maybe that -- unless there is one more urgent question of some kind, and I say urgent, but somebody that really would like to get answered, we'll give 10 seconds for that. Otherwise we'll just close up.

There are no questions in the queue.

Thank you very much for all joining, we appreciate it. We're actually -- obviously for the last quarter and this next quarter, the financials are going to be a little messy in terms of -- with all the transactions and everything else. But I think as we talked about, fundamentally, we've all on these calls for years talked about what are you going to do with the consumer business? When are you going to repurchase shares? Hopefully these actions have been responsive to those questions. We've been thinking about it for years trying to get it done for years, obviously.

But between the -- among the various efforts, of recapitalizing the preferred that gave us the flexibility to repurchase that, which we have now completed, the sale of CSBU, the repurchase of stock, a lot of -- and perhaps some ongoing purchase of stock going forward, as it relates to the capital side of the business and even the strategic side, restructuring, we think largely this multi-year process that we've been going through has yielded a company that is clean, able to grow, not very capital-intensive, and relatively focused with some big opportunities around the world.

Operationally over the next few -- I think our teams have done a great job in operations. I think Bill, Steve and Sarah have done really a wonderful job in turning their businesses around, and getting them to grow. And we are happy to continue to be partners with Sarah and Peterson Partners in the products business. But I think as we focus solely on this new business, there will be I think in the next couple quarters may be some flatness resulting from some softer bookings as we've had in the past.

But we think we can grow the bottom line and topline well. We think our fundamental bets are good, and as I say over -- our goal is to, despite maybe the difficulty of understanding exactly what's going on in any specific quarter, the dust settling point is really our objective is to be back at about the same level of profitability in approximately the next year or so, without the Subs who were with it, and with a lot fewer shares outstanding. Hopefully these steps are ones that will both help us to focus strategically as well as a benefit to shareholders long-term. We sure appreciate all your interest and support in this. Thanks very much, hope you all have a good weekend.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.