Franklin Covey Co (FC) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2011 Franklin Covey Co. earnings conference call. My name is Yesinia, and I'll be your operator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your Host for today, Mr. Derek Hatch, Corporate Controller. Please proceed, sir.

Thank you. I'd like to welcome everyone now to our earnings call this afternoon for the fourth quarter and fiscal year ended August 31st, 2011.

Before we get started, I'd like to remind everyone that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon Management's current expectations and are subject to various risks and uncertainties, including but not limited to the ability of the Company to stabilize and grow revenues, the ability of the Company to hire productive sales professionals, and our economic conditions, competition in the Company' s targeted marketplace, market acceptance of new products or services and marketing strategies, changes in the Company's market share, changes in the size of the overall market for the Company's products, changes in the training and spending policies of the Company's clients, and other factors identified and discussed in our most recent Annual Report on Form 10-K and other periodic reports which are filed with the Securities and Exchange Commission.

Many of these conditions are beyond our control or influence, any one of which may cause future results to differ materially from the Company's current expectations. There can be no assurance that the Company's actual future performance will meet Management's expectations. These forward-looking statements are based on Management's current expectations, and we undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of today's presentation.

And, with that, we'd like to turn the time over at this point to Mr. Bob Whitman, the Company's Chairman and Chief Executive Officer.

Thanks, Derek. We're glad to have a chance to talk to all of you today and glad you could join us. And I'd like to start just with a few headlines, and maybe just three.

First, as you probably saw in the press release, we achieved significant revenue growth for the year. We finished revenue at $160.8 million, with a $23.9 million or 17% increase over the $137 million achieved in 2010, which in turn was $13.8 million higher than the $123 million in revenue we achieved during fiscal 2009. So this is -- we were able to keep this momentum going, and we're pleased with that. Our growth during the year was very broad based. It was exciting for us, with the Company achieving revenue growth in every major channel and in every practice.

It's important to note that this broad based revenue growth for the year is a continuation really of a seven-year growth trend in our core business that has seen revenues grow from approximately $96.5 million in 2004 to $160.8 million in 2011. We will not be able to pull those numbers out since we had other -- before we sold the previous business, but this is for us in this business is a continuation although it's accelerated recently.

We also are really pleased to have achieved revenue of $45 million in the fourth quarter. You may recall that in our webcast in June we said that due to the very high revenue level achieved in the fourth quarter of fiscal '10, which was driven by the significant initial revenue associated with the launch of that new government services contract we had just been awarded, we said that we believed then that despite strong business momentum it was unlikely that our fourth quarter revenue in the other areas of the Company, the growth in the other areas of the Company would be sufficient to offset the expected year-over-year decline in revenue related to that contract.

So we're very pleased that the $3.7 million in revenue growth achieved across the rest of the Company in the fourth quarter more than offset the expected and anticipated $3.4 million year-over-year decline in revenue from the government contract during the quarter, thus resulting in strong revenue for the quarter. And, in fact, it was the strongest fourth quarter we've ever had for our business. So point one, good strong revenue growth.

The second point I'd make, highlight would be a significant portion of our increased revenue for the year flowed through to increase in adjusted EBITDA and free cash flow. On our last conference call we said that we expected our full year results to be very strong and toward the higher end of our previously provided adjusted EBITDA guidance of between $18 million and $21 million.

As a result of the strength and momentum of our business during the fourth quarter adjusted EBITDA for the year closed at $21.2 million, just exceeding the high end of our previously provided guidance. This $21.2 million in adjusted EBITDA represented a $6.7 million or 47% increase in adjusted EBITDA compared with the $14.4 million achieved in 2010, which in turn was an $11.2 million increase compared with the $3.2 million achieved in 2009.

Because of our high gross margins which, as you know, are mid 60s and the variable nature of our selling cost, somewhere around 30% to 38% of incremental revenue flows through to EBITDA, even after making investments for hiring new client partners, staffing regional practice leaders, et cetera. In 2011 $6.7 million of the $23.9 million increase in revenue, which is 28%, flowed through the increased adjusted EBITDA. And over the past two years $18 million or 47% of our $38 million in increased revenue flowed through the increased adjusted EBITDA.

Because our ongoing maintenance CapEx expenditures or capital expenditures are modest, typically less than $2 million a year, and because NOL carry forwards reduce and will for at least the next several years reduce our cash tax expense, for the next several years approximately 70% of the increase in adjusted EBITDA is expected to flow through to free cash flow or usable cash.

The final point I'd make is just our adjusted EBITDA margins also expanded significantly during fiscal 2011. Adjusted EBITDA to sales increased to 15.2% in fiscal '11 from 10.5% in 2010. And we would expect future revenue growth and the expectation of continued high flow through of the incremental revenue to adjusted EBITDA, we expect that margin, the adjusted EBITDA to sales margin to increase to approximately 17% to 18% over the next couple of years.

So, all in all, we're pleased and encouraged by these strong results. We expect to continue to be able to achieve strong revenue growth in the future, which we expect will drive increases in adjusted EBITDA and cash flow and continue to expand our operating margins.

Let me just make a note that in addition to these strong financial results our channels and practices also gained important strategic ground during fiscal 2011. Just a few highlights. From the [book quant] standpoint we've just published, as you may have seen, a major new book through Simon and Schuster called The Third Alternative by Stephen R. Covey. We recently signed contracts, also, for two other important books, including Smart Trust, coming out in January, and The 4 Disciplines of Execution to come out in the spring of 2012.

In our Education business we added 450 schools in our Leader-in-Me School transformation process this past year, including 100 schools outside of the U.S. We're just beginning a Leader-in-Me implementation with 20 schools in India, which we hope will be part of the much larger scale rollout.

In terms of new offerings, we're in the middle of our largest new training launch ever. It's for our new 5 Choices for Extraordinary Productivity offering. Many of you have seen this material and some have attended, but we are doing 177 city launch tour, we're about halfway through. There'll be 192 events in that. Early indicators tell us that this offering has the potential to become a real blockbuster solution for us in the marketplace, and we really think it will be.

We added 15 net new client partners during the year. We increased the number of active certified facilitators inside client companies to just more than 10,000. The percentage of recruiting customers increased during the year to 62% compared to 53% at the end of last year. And the average revenue per client also increased by more than 12%. And we also increased the number of larger clients, which has been a focus for us, which are accounts greater than 100,000, by 16% during the year. So there were a lot of other things that we can do building a foundation for the future of the Company.

I'd just like to recognize and acknowledge that the significant increases in these financial results, together with these strategic achievements are really a testament to our extraordinary talented and committed associates and partners around the world, who have executed with really impressive discipline on our key initiatives over the past years and throughout fiscal 2011.

In addition, we deeply appreciate and recognize the trust which our thousands of clients, our many strategic partners, and each of you have extended to us. And I'd also like to thank each of you personally for your support, advice, and assistance. And really for us success does mean winning with all of our key groups of stakeholders, and we're committed to doing so.

I'd now like to turn the focus of my comments and our comments on the following four topics. One, I'm going to turn the time to Steve Young to do a deeper review of our operating and financial performance for the fourth quarter and for the year as a whole. Then we'll come back and give a report on our business momentum and our pipeline, and we continue to be very encouraged by the momentum we're seeing in the business. We'll then share our outlook for 2012 and maybe a little beyond. And, also, discuss some key elements of our plan for accelerating the value of the Company over the next three years.

So I'd now like to turn the time over to Steve Young, who, as you know, is our great CFO.

Thank you, Bob.

I'm very pleased to be with you this afternoon, even more pleased to talk about our financial results. As Bob mentioned, I also am pleased with the amount of growth we had in the year. The broad based nature of that growth, pleased with the increase in adjusted EBITDA, and pleased that we generate some cash at the end of the day.

As Bob noted in the headlines, revenues for the year did go to $160.8 million, a significant $23.9 million or 17.5% increase compared to $136.9 million last year. A key driver of our revenue growth is the growth in the size and productivity of our sales force, which in turn is driven by growth in our number of clients and our average revenue per client.

During fiscal 2011 we benefitted from increased productivity of existing salespeople, as well as from the addition of 15 net new salespeople in our direct offices, bringing the size of our direct office sales force to just over 100.

As pointed out in previous conference calls, as our salespeople become more seasoned their productivity increases at a fairly defined rate. The Company's revenue benefits from new salespeople in year one, and this benefit increases to an average of $1.4 million of revenue per salesperson for salespeople who have been with the Company at least five years, with top salespeople generating as high as $3 million or $4 million in sales.

The productivity and ramp-up rate for salespeople has accelerated in recent years as a result of our focus and support of our various practices. During fiscal 2011 revenue per salesperson with us at least one year increased by 16%. New sales force additions typically benefit the Company at the EBITDA line in a salesperson's second year, and with approximately 45% of an individual salesperson's incremental revenue being realized as EBITDA an average seasoned salesperson's contribution to EBITDA typically exceeds $600,000. An example of a typical salesperson's ramp rate and EBITDA contribution is included on slide three. Many of you have seen this before. We think it's important to show this slide periodically.

As we have noted in prior sessions, we believe that there are more than 500 potential sales territories in the geographic boundaries of our existing direct offices. Compared with our current sales force size, as I said of just over 100. Consequently, we continue to view growth in the size and productivity of our sales force as a substantial driver of future revenue growth, and we continue to have a goal to add new salespeople in our direct offices and practices at a rate of 20 to 30 salespeople per year.

With these additions we expect to double the size of our direct sales force to more than 200 over the next four or five years, while continuing to increase the productivity of our sales force by at least 6% per year.

The size and productivity of our international licensee partners sales forces is also a key driver behind their almost tripling of revenue over the past seven years. We also expect the size of these international licensee partners' sales forces to more than double over the next four or five years and to see the steady increase in the productivity of their salespeople.

This increased productivity from seasoned to new salespeople resulted both from an increase in the number of clients and even more importantly perhaps from the more than 12% increase in the average revenue per client, even after excluding revenue from the large government contract. Importantly, the percentage of FY 2010 customers who repeated in FY '11 has increased to 61.6% this year compared to 53.1% last year. This percentage has grown steadily from the mid 40s just a few years ago to the current level. As we continue to connect our offerings to our customers' key strategic imperatives we expect this percentage to continue to increase in the future.

As Bob noted earlier, particularly encouraging is that our revenue growth was very broad based, with significant growth in all of our major channels and practices. As you see on slide four, which is sales by channel, we are pleased to have achieved growth in all of our major sales channels.

Revenue in our Government Services Group grew $8.3 million for the year, impacted materially by the revenue from the significant Government Services contract awarded to us the third quarter of last year. As noted earlier, while this contract continues to generate substantial revenue because of the magnitude of the initial implementation phase of the contract during the first quarter of 2011 and the first quarter of fiscal 2011 our year-over-year revenue for the contract declined $3.4 million during the fourth quarter of FY 2011 compared to the fourth quarter of FY 2010. As noted earlier, we are pleased that this decline was more than offset by the significant increases in revenue from our other offices and channels in the fourth quarter.

We also achieved significant growth in all of our other key channels in this year, FY 2011. Seven of our eight direct offices, both in the U.S. and internationally, grew revenue during FY '11, as did all four of our field support practices, our international licensee partner group, and all three of our national account practices. In Q4 six of eight direct offices, both in the U.S. and internationally, grew revenue, as did all three of our national account practices and our international licensee partner group.

All four of our geographic offices in North America grew their revenues during the year and in the fourth quarter. Revenues in these offices, excluding the Government Services region, grew $9.5 million or 18% in FY '11. In the fourth quarter revenues in these offices grew $2.1 million or 14%. Revenue in our international direct offices grew 13% in FY '11 and 11% in the fourth quarter, including in Japan where revenue grew 24% for the year despite the impact of the Tsunami and 19% in the fourth quarter. And that's significant.

We also achieved -- lots of things are significant, but that is especially significant to some of us. Also, in Australia grew 11% for the year and 17% in the fourth quarter. The significant revenue growth in our offices in Japan and Australia was somewhat offset by a $600,000 revenue decline in the UK for the year and $300,000 in fourth quarter. Our total international licensee partner revenue grew 14% in FY '11 and 19% in the fourth quarter, with all but six of our 35 international licensee partners growing over the prior year and 14 or 15 of our largest licensee partners growing.

We also, as you can see in slide five, our total international -- all seven of our practices grew significantly during the year. Revenue for our national account practices grew 22% in FY '11 and 34% in the quarter. The Sales Performance practice growing 33% for the year, 60% for the quarter. Education practice 19% for the year, 29% for the quarter. And Customer Royalty practice 12% for the year, and 16% for the quarter.

And after all of that we had profit. As noted earlier, as a result of our strong revenue growth and our improvement in SG&A as a percentage of sales, as you can see on slide six, adjusted EBITDA, which is a key measure to us, grew from 14.4% last year to 21.2% -- million, sorry -- from $14.4 million last year to $21.2 million this year, an increase of $6.7 million or 47% and slightly, as Bob mentioned, slightly above the high end of our previously announced adjusted EBITDA range of $18 million to $21 million.

The improvement of adjusted EBITDA also flows through to income from operations and income before income taxes, with income from operations increasing $7.1 million to $11.1 million, pretax income increasing $7.3 million to $8.4 million.

Our net income from continuing operations improved $6.1 million, due of course to the increased pretax and due to a significant reduction in the income tax provision effective rate, which decreased from over 200% last year to a reasonable 43.1% this year. For quite some time we recorded that unusually high effective tax rate. In this fourth quarter our valuations indicated for the first time in many years we were able to record the benefits of our FY '11 foreign tax credits. The net amount of this benefit recorded this year was more than $2 million. Next year our tax rate will still be a little bit high but should be closer to this year's rate than to the 200% last year or the 68.5% we recorded through the first three quarters of this year. And after this we still have a significant amount, $15 million of NOL remaining and unrecorded foreign tax credits of about $10 million, which will create as high as -- as much as $15 million of cash tax benefit in coming years.

In slide seven, you'll see that we generated cash from operating activities. And, as a note, we invested quite heavily in curriculum and course development, so you see that our operating activities generated $13 million of cash, even after we invested $3.1 million in some pretty significant curriculum development. So we're generating cash, we're investing cash to grow, and we're investing a little bit in working capital. We make our annual earnout payment, and we expect to generate cash in the future.

In these webcasts we spend most of our time on the income statement. I don't think when you review our balance sheet that there will be anything surprising there. You'll see that our goodwill increased with our [cover link] earn out payment. Our working capital increased significantly as we paid off our revolving line. Our inventories, receivables, payables, in my opinion, are all at acceptable levels, reflecting significant growth in these areas.

So I would just say if there are any on the call who are new to the Company, please call, I'd be happy to discuss the balance sheet because I think there are some positive things there that might not be readily apparent.

So, Bob, pleased with the quarter, and turn the time over to you.

Thanks, Steve, very much.

We really did feel good about the Company's performance for 2011 and fourth quarter on really essentially every major metric. I'd like to maybe just focus now on our pipeline and our momentum. As I noted upfront, we continue to be very encouraged by the strength we are seeing in the business.

Our visibility into future revenue really has four key elements. The first and the one that we've talked about before is our pipeline of days and order revenue. The second, though, is our revenue from international licensee partners. The third is revenue from our more than 10,000 active client facilitators. And fourth is self-funded marketing revenue. I'd like to briefly touch on each of these to at least let you know how we see the visibility of our business.

The first of these metrics is what we refer to as our pipeline of booked days and awarded revenue. While this metric only captures booking data for our U.S. operations and, therefore, excludes the approximately 50% of our revenue, which is recognized in our international direct offices and our international licensee offices and from sales of materials to our licensed facilitators, both in the U.S. and Canada and in our international offices, it typically has provided a pretty good insight into the likely strength of our booked revenue for at least the next couple of quarters.

Just a few observations about this pipeline. Despite ongoing economic uncertainty the vast majority of our clients are focused on growing their businesses and they're still making essential investments. We have, you know, thousands of clients around the world. They continue to take sales calls. They are continuing to request recommended proposals. They're putting out RFPs, and we're bidding on them. Our face-to-face meetings with clients are very high, and we're talking about a lot of business. So as long as it's -- training investments connected to key strategic imperatives, they're still making these investments.

As a result, as discussed in our press release issued at the end of September, our pipeline of booked days and awarded revenue increased during the fourth quarter, and as of August 31 this key metric increased to $29.7 million from $5.2 million, at the same time in 2011, and this is an increase of $4.5 million, as you can see in slide eight.

It's worth noting that this pipeline increase was after deducting several million dollars in pipeline value related to the government contract, whose revenue we knew would be smaller going into this year's first quarter than it was in last year's first quarter. And so we were delighted to have that 18% growth, particularly after having several million dollars of reduction in the pipeline related to that government contract.

As you can see, starting in the second quarter of 2011 the amount of corporate or nongovernment contract bookings in our total pipeline increased both in dollar terms and as a percent of our total pipeline. As you can see in slide eight, as a consequence at the end of the fourth quarter 77% or $22.8 million of our $29.7 million pipeline was nongovernment contract related, which is up $7.3 million or 47% compared with the same quarter last year.

Only 23% or $6.9 million of our pipeline was government contract related, which was a decline of $2.7 million or minus 28% compared to the same quarter last year. As you can see on slide eight, also, from the fourth quarter 2010 to the fourth quarter of 2011 the size of our corporate pipeline grew by $9.1 million from approximately $15 million to approximately $24 million, which is an increase of 58%. This large growth allowed us to overcome the large but anticipated decrease in the government contract revenue in Q4. It should come close to doing the same in Q1 if not more, and thereafter we expect that this pipeline will translate into significant growth as the year-over-year changes in the government contract were relatively minor thereafter.

We're pleased also that just in the first two months of our new fiscal year, as of the end of October our pipeline had grown additionally by an additional $1.2 million as of the end of October. So our first quarter momentum continues. And while our pipeline reflects only domestic bookings we should note that we estimate that our international direct offices have an additional pipeline of booked days and committed revenue of between $8 million and $10 million, themselves, which we expect to include in our future pipeline discussions as this data becomes more standardized.

So this first element of visibility gives us pretty darn good visibility in the next couple of quarters. It suggests growth because we have $5 million or so more on the books to be delivered, and this reflects only the half of our business that is onsite and contractual business here in North America.

So a second element of revenue visibility is really our royalty and related revenue from our 35 international licensee partners. As you know, the vast majority of this revenue comes to us in the form of royalties, with very high gross margins and operating margins. Our international licensee partners gross revenues have almost tripled since 2004 from approximately $29 million in 2004 to approximately $74 million in 2011.

During the same time period our royalty and other revenues from licensing partners have increased from $5.2 million to $12.6 million and grew another 14% in 2011. These revenues have been highly predictable within a relatively narrow range, and so for us we feel like we have good visibility now even for the year because it's broad based, it's always operated within a band, and these are contractual minimum license fees, many of them that they continue to drive this. Although we're delighted that most, all but a few of our international licensee partners are actually operating north of their minimum contractual payments.

A third element of revenue visibility is revenue from our more than 10,000 active client facilitators who train more than 300,000 people within their companies each year, purchasing manuals or other materials from us to do so. And they generate predictable recurring revenues of approximately $33 million to $35 million annually. As you know, these facilitators are employees of our client companies who have been certified to teach certain of our courses and who attend Franklin Covey led courses each year in order to refresh their teaching skills and remain certified, so it renews their commitment, ups the skills, and motivates them to continue to order these manuals. Even through the year of the great recession we actually -- these client facilitators ordered more manuals during those years than in the prior year.

A final element of revenue visibility is revenue that comes from what we refer to as self-funded marketing programs. These marketing programs include public programs, books and audios, and speeches, which build market awareness. These activities build awareness of our offerings and at the same time generate approximately $8 million to $9 million of revenue and a small contribution to adjusted EBITDA. Because we largely control the volume of the public programs and speeches and book and audio sales are quite predictable we have good visibility on these revenues for the year.

So combined these four elements provide us with relatively strong visibility to approximately $100 million of annual revenue at any given point in time with the balance being revenue we generate in the year for the year from our ongoing marketing and selling activities. While this is not yet predicted revenue we have a series of lead measures which we watch carefully that have proven to be quite predictive of the building up of our revenue pipeline. These include the number of face-to-face sales calls, the number of we call solution recommendations, number of proposals we're issuing, and based on this activity we feel encouraged and optimistic about the prospect for continuing to build our pipeline and to have revenue growth going forward.

As is probably obvious, if we have good visibility for the whole year around elements two, three, and four, around our royalties, our facilitator, and our self-funded marketing, you know, the visibility for the whole year increases, of course, every quarter. And so as you have revenue behind you and as -- since the pipeline is predicted a couple quarters out, an extra $15 million to $20 million of visibility against, say, our total revenue of $160 million last year becomes visible each quarter. We feel very good about the momentum we're seeing in the business and expect that momentum to continue to drive growth in both revenue and profitability for fiscal '12 and beyond.

A third point I'd like to talk about is just maybe give our outlook for the coming year and a little bit beyond. Based on our momentum leading into fiscal '12, based on also the growth in our pipeline, and what we expect will come from the worldwide launch, the business that will come from our worldwide launch of our new 5 Choices to Extraordinary Productivity offering, which we now expect will generate almost $2 million of incremental revenue, even in the first quarter, we expect our first quarter and full year results to be very strong and expect to continue to achieve strong growth in both revenue and profitability in the future.

In our conference call at the end of June we communicated that our preliminary guidance for fiscal '12 was to grow adjusted EBITDA by approximately 20% to 25% in fiscal '12. At that time we expected full year adjusted EBITDA to come in at approximately $20 million, which implied that our adjusted EBITDA guidance in our minds was something between $24 million and $25 million. We ended up a little higher than that, as you saw.

We're now solidifying and formalizing and increasing our guidance for fiscal '12 at between $24 million and $26 million of adjusted EBITDA, which would represent another very strong year of significant growth.

As noted above, we expect strong revenue growth in fiscal '12, driven by continued strength across all of our channels. Noted above, we also expect to achieve very strong revenue during the first quarter, with significant growth in our corporate and nongovernment areas as reflected in our pipeline. We expect, however, as I've noted, that this growth will be offset during the first quarter to some degree or maybe totally by a reduction in the magnitude of revenues received from the government contract, which in last year's first quarter was still in its large revenue launch phase. As I mentioned before, the year-over-year impact to [reduce] revenues from this government contract, and expecting it much less significant during this year's second quarter and beyond, and really not very meaningful.

So we're encouraged by our results for 2011, the momentum we're seeing, and we expect to achieve strong growth and this guidance in the $24 million to $26 million range of adjusted EBITDA. We look forward to reporting on our continued progress.

Finally, I'd like to maybe spend a minute now in outlining our plan for accelerating the Company's value creation this year and in the coming years. Recently, one of our financial advisors prepared the information included on slides nine and 10, which suggests that our share price has actually performed pretty well, ahead of major -- and well ahead of major industries over the past one, five, and 10 years, and also well against [comparative] companies.

Despite this, and we're happy about, you know, we're happy that's happened, but we believe that the market has really yet to fully recognize the inflection point we've had in our operating results and strategic positioning over the past few years. But our interest is in seeing the value of the Company increase in the market, and our interest actually (inaudible) below the line with those (inaudible) believe.

We have very substantial insider ownership. In July we instituted a new incentive stock plan that fully vests our top 20 leaders only if the Company achieves a share price of $17 per share by July 2014. In addition, once the share price exceeds approximately $15 per share the Company's outstanding share count will immediately be reduced by more than 3.3 million shares, which is more than 18% of outstanding shares, as Management's stock loan shares currently in escrow revert to the Company.

We believe that two key achievements are necessary in order to significantly increase the value of the Company and also to have that value be more fully reflected in the market. The first of these is really the big one. We need to continue to grow revenue and to have that revenue flow through to increased adjusted EBITDA and free cash flow. Our analysis suggests strongly that anything else pales in comparison with the importance of continuing to hit our numbers. Achieving low double-digit increases in revenue, as we've talked about before, say 10% with a 35% or so flow through to adjusted EBITDA would result in an almost doubling of adjusted EBITDA over the next three years or so.

Our analysis suggests that if we achieve that kind of performance more than 80% of the potential future value of the Company will likely result from simply meeting our numbers, and so that's where we've got to focus, that's where we have focused our efforts and continue to. And I'd just note that we have plenty of opportunities for growth. And I'm going to name a couple of them.

One, we have a big opportunity just to accelerate growth by gaining deeper penetration within existing client accounts. While we have several thousand clients in North America, we have enormous potential for growth just through deeper penetration within these client companies with the existing offerings they're purchasing, as well as by expanding the number of offerings in which they are involved.

Over the past two years we've put real focus on expanding our business in existing accounts, and we achieved a more than 12% increase in revenue per account, even excluding the large government contract in 2011. Our efforts also to get various practices to work together on penetrating certain key accounts is also starting to bear real fruit. In one large account, for example, we achieved a worldwide rollout of a customized joint sales performance and execution offering that generated more than a million dollars in new revenue with that client last year alone. So we have plenty of opportunity for penetration within the existing client base that we have.

The second opportunity for growth is we can really accelerate growth by significantly expanding our number of clients. Despite having thousands of clients, in North America there are more than 113,000 companies or company units with whom we don't yet do business, that have at least 500 employees. To address this opportunity we plan to double our North American sales force over the next four to five years. We've doubled it over the past five years. We expect to do it again and to accelerate that. But even achieving this would leave us far short of penetrating this definable market. As Steve noted, we believe that we will have more than 500 salespeople in our direct offices, and we've been able to increase significantly the number of new client partners we can add in a given year.

Another key strategy for achieving greater market penetration is something we've been working on for the last few years and which has really proven to be very successful, is an event based marketing strategy which invites potential buyers to attend carefully prepared marketing luncheons which make the case and describe the value proposition for our various practice offerings. Based on the success of these marketing events over the past several years we are significantly expanding our number of such events in fiscal 2012. I noted before in our productivity practice we're in the midst of this 177 city, 192 event launch of our new 5 Choices to Extraordinary Productivity offering, and we're really pleased and excited about the early returns on that.

We will also hold more than 150 execution practice events, up from 100 last year, you know, during this coming year. We'll also hold more than 200 leadership days hosted by a leader in these schools, which is twice the number we held last year, and we also plan to hold 30 or so merger and acquisition oriented cultural integration events for Speed of Trust practice using trust to gain, to improve the likelihood of mergers, emanate activity, working out.

Internationally we have an even bigger opportunity than in North America. Our client penetration levels are even smaller. Despite tripling the revenue over the past seven years, even with the plan doubling of our international licensee partner sales forces over the next four years we still have even lower penetration than we currently have in North America, and there are more than 30 countries in which we have no real presence, at all, into which we plan to expand. So we have good opportunities in what we'd call reach, expanding our coverage around the world.

Third, we can also accelerate growth by penetrating narrow market segments in each of our practice areas. We now target markets and we do this with our marketing approaches where if we're able to achieve even a 3% to 5% penetration of our definable market we have generated at least $100 million in revenue.

In Education, for example, we now have more than 650 leaders in these schools, an increase of more than 400 during the year. But with more than 140,000 K through Six schools in North America alone this is only approximately 1.5% penetration. Each 1% of penetration of the North American K through Six market have generated approximately $60 million in revenue over three years or so.

In India, where they have more than 700,000 elementary schools, we've just won our first assignment with 20 schools in Delhi. We have similar sized opportunities in our execution practice with multiunit operators -- lodging, supermarkets, retailing, et cetera, with M&A integration opportunities for our Speed of Trust practice, where we've recently won four new assignments, and for increasing our penetration of the $6 billion leadership market. So there's plenty of opportunity, just knowing the market and moving on to the next, you know, once we penetrate, continue to penetrate that, and that add [one] new segment.

Finally, we're also seeing some -- a few, but very attractive capital driven growth opportunities. We've often said, and I've often said, that we believed it was unlikely that we would find attractive opportunities for deploying excess capital within our business beyond just funding working capital and R&D. But as we've expanded our international licensee operations and as we've strengthened and focused our practices we are now actually seeing a few very attractive investment opportunities. Some could involve making new investments to significantly accelerate the growth of our licensee partners in key markets, others include the opportunity to make small add-on acquisitions to expand in existing practice in an area which it might otherwise take us years to replicate.

So with these four opportunities, and there are others I could name, if we fail to grow it won't be for lack of opportunity, it'll be a failure of execution. So we feel good about the prospects for growth. We don't feel like we need to do, actually to grow if we can continue to do just what we're doing in the seven practices with the potential in just the segments we've chosen in those practices we can achieve all the growth that we expect in the coming years. But even within those -- so the second, within those same practices there's an opportunity to expand, say, for multiunit operators and execution into manufacturing, to take other, you know, we have that same opportunity geographically.

So we think there's plenty of opportunity, and we're going to stay focused on what we're doing, try to drive more and more of our revenue through these successful and very economically attractive marketing events which are practiced literally hundreds of times. Rehearsals are held, people are challenging, there's a review every single night at six o'clock to refine them until they're -- until they have the results that we expect.

In addition to continuing to grow the business, we also need to do a better job of explaining Franklin Covey to the investment community and of expanding our investor outreach efforts. We've allowed others to put us into peer groups that don't really match our business. As shown in slide 11, the puzzle piece slide, there are several true unique aspects to our business that differentiate us from our other -- from other companies in the [counseling] and performance enhancement groupings that people could connect us to.

One element of this, and each of these at least could argue for an expansion in [multiple] because but it resides in managing the message to institutional shareholders so they understand where we're positioned. First of those elements is our productized consulting or media model. More than 70% of our revenue comes not from one of our consultants delivering training but from the sale of training manuals, more than 500,000 annually, or training via electronic delivery, intellectual property licenses issued, customized training products. This allows scalability, as shown by our more than 10,000 licensed facilitators, it shows scalability, as shown by the fact that our licensee partners are able to expand rapidly, and this is a key element that's very different from the traditional training company.

Second is our international licensee network. This network, as you know, doesn't use capital, it pays royalties. These are strong partners who are growing, have tripled their business in the last seven years, and expect to double again in the next three to four. They're gaining strength and momentum within their markets. Our Senior Team is off every week, somewhere in the world. Sean Covey is right now in Singapore. Shawn Moon is in the UK today. But there's a big opportunity for the expansion of international licensee network, including as I mentioned more than 30 countries in which we have no presence or essentially no presence, at all, right now where we see some really -- and some big countries, actually, where we see some opportunity.

The third element is our royalty like annual product orders for our 10,000 licensed facilitators that make up $33 million to $35 million a year of revenue and they seem to be, you know, it's predictable, as you would think they would be. Ordering these manuals for $125, even in tough times. These people are embedded in the Company. They're committed to the initiative. The expenditure per person is small but the impact on our revenue and margins is high.

And, finally, our highly visible brand and our strong brand equity. In each of our practice areas we -- our go-to-market approach is to start with establishing general thought leadership in the category. So many years ago certain habits of highly effective people would establish the gold standard for having a book with influence. It still, you know, it now has sold over 20 million copies. It's one of the best selling business books of all time and continues to sell. The Speed of Trust in our trust practice has become a bestseller, and they have a follow-on book coming out, Smart Trust, in January.

In our execution practice there'll be the launch in the spring of a new book, which we expect to be a best seller called The 4 Disciplines of Execution. A year from now we expect to launch a new book on the type of choices for extraordinary productivity. Our sales performance book, Helping Clients Succeed, is the bestseller in its category. The Leader-in-Me is read by principals all over the world, and it's only in customer royalty at this point we don't have one but we're working on the foundations for that.

So each of these differentiates us so that when a client is going for a specific need we hope that our thought leadership, our branded content, our best-in-class content that's practiced again and again, the scalability that we build into it through the investments in film based learning, et cetera, allow us to scale these things.

Shown in slide 12, several of our key metrics are actually much more similar to the high multiple learning and human capital software corporate content companies than they are to consulting firms. If you look on line one, our gross margins for example are virtually the same as the average gross margins for learning and human capital software companies. As discussed, this is due to the high percentage of our revenue which comes from the sale of productized training manuals, electronic delivery of training, and because of our very strong best-in-class branded content.

Our EBITDA to sales margins, even though they've grown a lot, are more similar to the learning and human capital software companies who are consulting than they are to government services, but we expect these, as we noted, to grow to 17%, at which point they would be above the average for everybody except the corporate content companies, like Corporate Executive Board.

At our revenue per employee is higher than any of these other groups, except for outright consulting firms. But despite all these different factors, our current adjusted EBITDA was lower than that for any of these comparative groups, and so we have allowed ourselves to be positioned as though we were a consulting body shop when, in fact, we're quite different.

With our new expanded Investor Relations program we expect to really broaden the sharing of what we believe is an exciting investment story with the investment community that is looking for companies, like ours, that have proprietary products, a stable and growing customer base, a history of sales and profit growth, strong execution, solid management depth, and we expect to make significant progress toward properly explaining the Company. And that activity has increased significantly.

A final point, mercifully, is a question that over the past year we have shown a predisposition for returning excess cash to shareholders. One of our advisors prepared the information included in slide 13, which shows that since 2002 we have returned $227 million of capital in favor of shareholders, including repaying $105 million in debt that was senior to shareholders, redeeming $87 million in preferred stock, also, senior to common shareholders, and repurchasing $36 million in common stock, including, as many of you will recall, $30 million just three years ago.

As shown, where they're taking all these three elements together into consideration, or if you only take into account the preferred and common stock we purchased, or even just the purchase of common stock alone, we have returned a dramatically higher percentage of our EBITDA and free cash flow to shareholders than typical Russell 2000 companies. In fact, Franklin Covey has been in the top decile or quintile of all Russell 2000 companies in returning capital in favor of shareholders on every one of those metrics.

As our Board considers how to utilize the free cash flow we expect to generate in the coming years, we've had to balance this predisposition for returning capital to shareholders with ensuring that we retain sufficient capital to ensure that we can take full advantage of our growth opportunities. Since more than 80% of all future equity value will depend on this growth, our first question has been to determine precisely what is the appropriate amount of cash to keep in the Company to assure that we can take advantage of our significant opportunities for growth and then and only then consider what to do with the excess cash.

We've engaged outside advisors to help us to study this question, and with their help we've looked at a broad range of growth companies and analyzed their levels of liquidity. Among other things, we've learned that a significant percentage of the Russell 2000 companies hold net cash with net of debt equal to approximately 80% to 120% of their annual EBITDA. A confirmatory learning is that an analysis of 20 comparative companies, some of whom have done major stock buybacks and paid dividends, are actually holding even higher levels of cash relative to their trailing EBITDA and free cash flows than these Russell 2000 companies. So they are truly doing any stock repurchase or dividends from the true excess of cash over and above maintaining 1.5 to 2 times their annual EBITDA.

But despite our past record and predisposition of returning cash to shareholders in some way, as a Board we've made two decisions. One, that we won't go into debt in order to buy stock. And, second, that we will first build-up sufficient cash to ensure that we can take advantage of the growth opportunities before us before returning additional cash to shareholders.

We've set this threshold of net cash in the range of $15 million to $20 million, a level which we expect to reach in approximately 18 months or so, at which time the Board will then address how best to utilize the excess cash that our Company generates. If it turns out, obviously, that we have more cash than we can possibly use the great news about having it is we can always choose then to return it to shareholders, but it gives us great optionality for the coming couple years. And, as I noted, we have we think now there are really some exciting opportunities for expanding the growth of our business and doing, and helping that along with the use of capital.

So my final statement would be that we are very pleased with the Company's performance in 2011. We feel good about the Company's momentum going into 2012. We believe we have truly extraordinary opportunities for growth and that we can execute on them, and we intend to do everything we can to take advantage of these opportunities to properly represent the Company in the marketplace. And we thank you for your continued support.

I apologize that our presentation went a little long today. We were trying to cover, also, the whole yearend and the strategy going forward. But I hope you'll find it helpful, and I'll now turn the time over for questions to those who would like to pose a few.

(Operator Instructions)

The first question comes from the line of [John Lewis]. Please proceed.

Well, first of all, I guess I would be in very sharp contrast to your Board and advisors on the advisement of building up a significant cash position, and over the years you guys have seemed to indicate to investors that you thought it was a very attractive opportunity to repurchase shares. You've been saying on numerous calls that you believe that the end of calendar year 2011 was an appropriate time to get into this discussion. And given your extreme optimism on the business it seems like a very odd departure. Can you give us some clarity on in a near zero interest rate environment why it's a good idea to build up cash?

Sure. John, I think it's a tradeoff. I mean I'll say it very simply because I obviously am not very articulate otherwise. It's this, if 80% of the future value of the Company and its shares depends on achieving significant growth, and if another 15% of that future depends on increasing our [multiple], it would really be foolish for us to do anything, if we had opportunities to invest in the business it would be really foolish and unwise for our shareholders for us to instead dividend it out or to repurchase shares rather than invest in the business.

So if I misspoke and it was unclear, we have had a very big record of returning cash to shareholders, and the only reason we haven't done it in the recent years is because three years ago we took $30 million of our cash and instead of paying off debt did repurchase shares, so I think our record on this --

Fine, look, I hear you there, Bob. That's helpful, but --

What I'm saying, John, is that I think two things that we're saying is, one, we should only do that of excess cash, just what -- those, that other people are doing buybacks and dividends or doing other excess cash, and so all we were saying is so to do that you have to establish, first of all, what is required cash versus excess? And we've established that is $15 million to $20 million rate. We continue to agree on your point otherwise, which is above that minimum threshold it's a great idea, and we've shown a predilection to do that.

So I think the only thing that's changed is that given the acceleration of growth, the fact that we have more large contracts which tend to require more working capital, the opportunity to invest in the business in ways that we think can give us a multiple return on a few of these add-on acquisitions or investments, then in trying to assess that whole thing I hope that it makes sense that we try to figure out as a Company what we think we need to take advantage of all the stuff that we think can actually increase the value.

And that's all we're saying is that rather than saying we'll take the cash to zero and borrow money to buy stock, we just have said once we have sufficient cash and that we're comfortable that we can fund the growth opportunities that we'll then, the idea of returning cash makes sense after that point, so.

Got it. Okay, I'll just leave it, and we'll move on to some other questions. But basically, one, the business is as you guys have said is way more predictable. It's gone from 40% to 65% recurring revenue. EBITDA margins have expanded, there's attractive growth opportunities as far as the eye can see. The debt has been paid down. Like I said, a zero interest rate environment you can pay dividends, buy stock, and for a very predictable business like this I'm sure there's no problem of getting any kind of line if you had any attractive investment opportunities.

But this is a sharp departure over your history of repurchasing stock when the business was in a much more precarious position over time. And so to see the business in a much better position and to see you guys saying you need a $15 million to $20 million cushion strikes me as ridiculous, and your Board and your advisors don't represent what I think is necessary for this business.

I appreciate that, John, and I think the only difference is what you think the minimum cash is, and --

Well, I mean you said it on the last call, you thought that the international licensee business in your opinion was worth [750] to (inaudible) on a standalone basis. So I just find it shocking we have all these other great growth opportunities, you have a stock price under your watch over 10 years that really hasn't done anything. I saw you guys picked the low price, but the reality of the situation is the stock price hasn't done anything. We haven't been able to get analyst coverage. We haven't been able to get really any buy side attention, and it's frankly frustrating and disappointing to see you guys change what you have stated you'd do in the past. You can move on to the next question.

Okay, thanks, John.

The next question comes from the line of Joe Janssen from Barrington Research. Please proceed.

Hey, guys. How are you?

Good, Joe. How you doing?

Good. Hey, just kind of building on what was previously said, you know, you mentioned the large addressable market within your existing practices. You talk about the sales force, you're going to add an additional 20 in 2011. I mean are there any internal conversations of really starting to accelerate the hiring of these salespeople, especially if they can ramp-up so quick and become so profitable so fast?

Yes, in fact, we think the opportunity is even within certain practice areas to hire as many salespeople within a given practice, like in Education, as we historically hired in the whole Company. So we have a steady stream of recruits, it's an accelerated effort, and it's ongoing. So we see opportunities there.

We think there'll be some opportunities to, like I say, invest in some expansion of our licensee network so that it can grow even faster than it would otherwise grow. Because we have, as great as our licensee partner business is the growth is sometimes, you know, these people don't necessarily have the capital necessary to grow their business and it's being constrained. We have some opportunities there. There are opportunities to reacquire some countries and so forth that we then could get new partners in who could penetrate it further. We've got these big investments that we're making in these marketing programs which have a predictable return. So I think there are four or five key levers for driving the growth of the business, and we expect to do so.

Appreciate that. And just a modeling question, I always ask this, you know, taxes, you mentioned were going to be similar to the tax rate you had for on a full year basis. Should I be expecting like a lumpiness in that or is that somewhat normalized where I'd expect that 43% to go over quarter-over-quarter for the next four quarters? I know you kind of give a formula historically, but I wasn't really expecting the gain, which was a benefit in terms of EPS, but just some clarity around that?

I don't have an exact number, but it would be more like the 43% we would expect next year.

On a year-over-year basis?

Yes.

And on a quarterly basis was that -- should I expect some lumpiness or would that be more normalized?

That's about the percentage each quarter the way we do our tax provision.

Okay, and I'm going to jump back in queue.

The next question comes from the line of [Don Hickman] from [Ladenburg]. Please proceed.

Hi, Don.

Hello. I'm new to this story, and I'm interested if you could just I mean without too much elaboration, but could you talk about how you're selling your Education services product into the schools these days when school districts, by and large, have no money? What's --

Yes, the growth in our Education business has really occurred kind of during the last three to four years when the schools have had no money.

Yes, so?

The growth in that is coming away from two -- well, one, there are certain Title IX schools and so forth, Title I programs that allow the expansion. And they're actually allowed different ways to fund. But beyond that the majority of the growth has actually occurred by the results the school has -- the schools have have been profound enough and encouraging enough to local communities. And in many cases chambers of commerce have stepped in to fund them, sort of our investors have sponsored schools in their own communities, which we admire and appreciate. We have some larger companies who have decided to fund a number of schools based on what they've seen happening in those schools.

And so through a combination of community funding, endowments, large businesses, and government funding we've been able to find those schools and they've been able to in many cases go find the money themselves. It may be a wealthy parent who decides to -- a committed parent to do it. And so, obviously, having free flowing money would be an easier thing, but all of the growth that we've had to date has been in that kind of circumstance. So it's based on really the results the school gets, and that's been the focus.

So do you sell that on a per school basis or classroom?

It's a per school basis, so a whole school implementation program, and that's the focus.

And so what's a per school cost?

A school would typically invest over its first three years about $45,000, so on average $15,000 a year. It's more on the front, close to $25,000 to $30,000 in the first year or so, as you take everybody through the initial phases of training, then there's an ongoing fee that continues and hopefully continues forever in these schools.

And then so could you go over the stats just one more time? What's the opportunity in the like nationwide, the number of schools?

There are 140,000, just over 140,000 K through Six schools, and so if you look at 1% penetration there'd be 1,400 schools, and so 1,400 schools, you know, for every 1% penetration if there's $45,000 or $50,000 of revenue you can kind of do the math, it suggests there's a -- every 1% can generate $55 million to $60 million of revenue in that business. We've grown to a half percent penetration over the last three years. I think we can continue the momentum, but that's kind of the math. And that's just in the U.S. and Canada, it doesn't include the foreign opportunity which we are starting in India and we have other --

And that's just one module, the $15,000 is just one?

But that's a whole school, yes, it's one school, yes. So it's a whole school integration --

But I guess you could add other products to that over time?

Oh, it's an integrated product, it's an integrated offering. We'd be happy to take you through it on the website and maybe have our Education Practice people take you through it in detail. I think you could get a good feel for it if you'd like?

Okay. Thank you.

Thank you very much.

(Operator Instructions)

We're showing that we have a couple of questions in the queue but for some reason they're not coming through here, so.

The next question comes from the line of Bill Gibson, [Nugent Merchant]. Please proceed.

Hi, Bob.

Hi, how are you?

Good. Say, I love how the business is operating, but I'm more in John's camp, and you know where I stand. But so this is more for any Directors that are listening, and you had all those nice tables but I can play with spreadsheets and show you could pay considerably above today's price and be accretive to earnings. And to not have an opportunistic program in place, and what I mean is that doesn't mean you charge in and drive the stock up, but we're in one of these volatile markets where bouts of weakness come about, where all the buyers go on strike. And to not take advantage of that is just absolutely crazy in my opinion because you have relatively low compulsory capital investments. So that was my two cents worth on stock buyback. I just think you ought to have a program in place.

My question, and it's just kind of really minor because you went over everything in pretty good detail, the third alternative, which practice does that fall in?

It falls in the Leadership practice.

That'll be in the Leadership, okay.

Yes.

Okay. Thank you.

Thanks, Bill.

Your next question comes from the line of [Jamie Gia] from [Cordis]. Please proceed.

Yes, thank you.

Hi, Jamie.

Bob, Steve, congratulations on a very nice quarter and a great end to the year.

Thanks, Jamie.

I think other people have echoed this, I think it's seven quarters in a row now, I may be a quarter off, of just at least meeting if not beating expectations. You did a good job of talking about how you've got increased visibility into your business, and really pleased with the opportunities that you have in front of you for this next year.

You talked a little bit about where you think the opportunity is for long-term adjusted EBITDA margin, did you also talk about kind of the long-term EBITDA goal, or we finished the year this year with over $21 million and you continue to grow EBITDA in this 20%, 25% range that you've been growing, which you seem to be able to execute on on an extremely consistently. That would get you to the $40 million in EBITDA three years from now, and with that $2.50 in EBITDA and given what valuations are, you know, comps, really an opportunity to be -- have an opportunity to make two-and-a-half, three times your money on the stock.

I mean is that kind of -- that's what I'm in this stock for, is that really how you want to present this thing? When you're going out on the road how do you want people to view this story? Because you've got some sell side analysts who position us for, hey, over the next three months we think the Company is going to earn this and we've got an $11 target on it. And then you do this, and they move their target up to $13. But that's not a way to really position a Company to new investors.

So as a leader of this Company how is it that you want to position this for people who have the ability to be in the stock for the next three years and the challenge is this is a volatile stock, but I'm willing to live with the volatility given the predictability of your results and the visibility you have on your business and the growth that you think you have in front of you. So can you just speak to that because if your projection for the next three years is what I think it is, I'm going to be here for a long time. So that'd be helpful if you could speak to that?

Thanks, Jamie. I think we see it the way you see it. I mean we're -- I think what's behind this is the desire to make sure we have plenty of ability to invest, the opportunities are getting bigger. For us, you know, we've said time and time again that we think that maintaining the kind of organic growth of that 10% top line a year is something that we can do and we can pull through a lot of it. And so the numbers that you talked about as a base plan would lead you to the kind of numbers you talked about, I mean if you grew $6 million of EBITDA a year, $5 million to $6 million of EBITDA a year you'd be in that $40 million range.

We think the potential is at some point along that, you know, it's not that that doesn't require a lot of hard execution. I mean that's a very fast growth rate at the bottom line, and it's, you know, and organically there aren't that many companies who are growing organically at that rate. At the same time we think, and as others have noted, there's an opportunity to accelerate that.

Because that's really what's behind the desire to have sufficient liquidity to take advantage of it is that we believe there's an inflection point in various of these practices and various of these countries that could really change the equation for us. And so we're playing and we're playing, you know, as great as it would be and we hope we can do something like what you're talking about, continue to every year put up good numbers and grow the EBITDA by a predictable amount. There also may be a couple opportunities along that road to make a pretty significant leap in one area or another. And so that's really what's behind the thinking of our Board that's considered this very carefully.

I hear the others and I agree with the -- I actually agree with John and Bill, with you, that buying stock if you believe you're going to get to $40 million or $50 million of EBITDA over the next few years the stock is cheap. At the same time getting to $40 million to $50 million might require some financial flexibility, and so I think it's really been a discussion among all of our Board members and ourselves to look at a variety of scenarios and just try to peg a number that says, look, we're not -- we haven't, as a Board, made it impossible for the Board to have a phone call and decide if there's real weakness in the stock that we can't move.

But what we are saying as a general matter the others, the many companies that we've studied over the last six months who have done buybacks, et cetera, have done so from their excess cash, and it seems wise for us to do that. I wish again and again that three years ago maybe we shouldn't have bought the $30 million, then we'd have the $30 million today and we'd make people happier today, but -- and to John's point, I mean it is a departure not to be buying right now but the difference is then we had excess cash. And so all we're trying to do is quickly get ourselves back up to the point where we have the flexibility to invest in the business and to grow it.

We see, as you say, Jamie, in each of our practices we talked several years ago about having these practices be able to move from $3 million to $7 million or $8 million, we've had -- we have five of the six that have gone past that at this point. And we see the opportunity to double those again and triple those. And so we see plenty of opportunity, some of which will require some capital and so, for us, we're playing for, the kind of thing you're talking about, which is there, if it's next quarter that we're playing for, obviously we're playing for that too, but we're trying to figure out how do you create a couple hundred million dollars of incremental value in the Company over the next three years by executing well on the strategy and trying to keep ourselves focused on that question and hope that effort will attract the kind of people who like that idea, can see the intrinsic value, and want to be part of it, so.

Okay, that's helpful. I appreciate it. I'm encouraged by the fact that you've got internal growth projects that could utilize cash, that could have a much higher return on invested capital than a buyback. I think if that's the case then I would be in favor of investing in internal projects, and at some point when we can do both that's a great position to be in. So thanks, again, for your efforts this quarter and be in touch next quarter. Thank you.

Thank you. Any other questions?

Your next question comes from the line of Joe Janssen from Barrington Research. Please proceed.

Yes, my question was already asked.

All right.

I would now like to turn the conference over to Mr. Bob Whitman for closing remarks.

Well, I'm sorry that we've gone over. Appreciate your questions. We're happy to have a chance to talk to you, and of course be delighted to talk to any of you individually who would like to talk further. And for those who would like to learn more about any part of the business we can arrange to have Practice Leaders or others spend some time with you, and we'd welcome you, of course, to visit here or be glad to visit with you, as we will be doing in the coming weeks. So thanks very much, and have a good rest of the day. Thanks.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

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