Franklin Covey Co (FC) 2014 Q4 法說會逐字稿

Welcome to the Q4 2014 Franklin Covey earnings conference call. My name is Cheryl and I will be your operator for today's call. (Operator Instructions). Please note that this conference is being recorded.

I will now turn the call over to your speaker, Derek Hatch, Corporate Controller. Sir, you may begin.

Thank you. Good afternoon, ladies and gentlemen. On behalf of Franklin Covey, it's my pleasure to welcome you to our earnings call for the fourth quarter and fiscal year ending August 31, 2014. Before we begin, I'd like to remind everybody 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; general 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 the Company's most recent annual report on Form 10-K, and other periodic reports 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, and 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 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, except as required by law.

With that out of the way, we'd like to turn the time over today to Mr. Bob Whitman, our Chairman and Chief Executive Officer.

Thanks, Derek. I'd like to welcome everyone to our fourth-quarter and fiscal-year 2014 conference call. We appreciate all of you joining us. Most of you have probably seen the press release by now. We're delighted to report our results for the fourth quarter and for the full year. As you've seen, our will see, the results for both the fourth quarter and the fiscal year were the best-ever for our current business, with revenue, adjusted EBITDA, at our adjusted EBITDA margin, operating income, net income, and net income per share for both the quarter and for the year all hitting their highest levels ever for those periods.

We were particularly pleased to have achieved these results, even without the benefit of having any fourth-quarter revenue from the large government contract, which we discussed in the past, which we believed had the possibility of being renewed during the fourth quarter. We're happy to report that the renewal of this large contract did occur, just three days after the end of the quarter, and of course will benefit the first quarter in fiscal 2015 as a whole. But we were pleased with a tremendous performance and very broad-based performance throughout the Company.

As shown in slide 3, the results for the quarter of the year continued the pattern of year-over-year revenue growth and adjusted EBITDA growth, and growth in really all the key metrics that we focus on. Maybe get some financial highlights for the fourth quarter and for the full fiscal year, just on the numbers that perhaps you've seen.

The revenue grew 10.6% to $68.1 million in the fourth quarter, with overall growth of 7.5% to $205.2 million for the year. Excluding the government services and Japan regions, revenue grew 19% in the fourth quarter and 14.5% for the year. And so this lack of renewal of the government contract, and the yen in Japan, affected our growth rates on top and bottom line a bit, but still allowed us to meet our goals for the year.

Our adjusted EBITDA grew 33.3% to $16.6 million in the fourth quarter, again without the benefit of the government contract renewal, and increased 9.6% to $34.4 million for the full fiscal year, even after absorbing the impact on adjusted EBITDA of the $5.1 million decline in government services revenue for the year, and approximately $2 million negative impact on revenue from foreign exchange during the year.

Our adjusted EBITDA margin expanded to 24.4% in the fourth quarter, and to 16.8% for the year compared to 16.4% in 2013. And this reflected a more than 63% flow-through of incremental revenue -- incremental adjusted EBITDA during the fourth quarter.

Income from operations grew significantly, increasing 59% to $14.3 million in the fourth quarter, and growing 14.6% to $24.8 million for full year. Net income grew 61% to $12.5 million in the fourth quarter, and 26% to $18 million for the year, partially reflecting an improved tax rate for the year, which Steve will discuss in more detail. And diluted net income per share also grew significantly, increasing 55% in the fourth quarter to $0.73 a share, and 34% to $1.07 a share for the year, again benefiting from this somewhat improved tax rate versus last year.

The last highlight on that is our liquidity also remained strong. Our cash balance was growing to $10.5 million at August 31. We had also no borrowings outstanding on our credit facility, and Steve will speak more to that, as well.

In addition to these financial results, we also feel very good about the performance of the business, qualitatively. Our revenue growth and financial performance for the fourth quarter and full year was very broad-based. And so the nature of the results, I think, were important for us. Our US and Canada direct offices, without the government, posted 9.6% revenue growth in fourth quarter, and 9.2% for the year, on top of a very strong year last year. Our international direct offices achieved revenue growth of 4.2% in the fourth quarter, despite a negative impact on revenue of a year-over-year decline in the yen.

For fiscal 2014 as a whole, revenue in our international direct offices declined 3%, with a 2% increase in revenue in Australia; a really exciting 27% increase in revenue in the UK, which is now running our full -- is really runs just like any other direct office, with all the events and launches and so forth; and a 15% decrease in revenue in Japan, largely resulting from the negative foreign exchange rate-related impact. Excluding the foreign exchange rate of decline, revenue for the year in these direct offices grew 3% or $1 million.

Our international licensee operations grew 22% in the fourth quarter and 10% for the full fiscal year, reflecting ongoing efforts to implement the same client partner hiring ramp-up and marketing initiatives that are driving revenue in our direct offices. Our national account practices, in aggregate, grew revenue 30% in the fourth quarter, driven by 32% growth in education practice revenues, 16% growth in sales performance practice revenue, and 48% growth in customer loyalty practice, off a smaller base. These same practices achieved combined revenue growth of 31% for the full year.

This is important for us. As you know, we years ago established these vertical markets where we're offering specific solutions to specific problems. And we're getting good growth in each of those and feel like we've really got some huge opportunities in each of these areas. The growth in all the other areas was partially offset, as we said earlier, by a $5.1 million year-over-year revenue decline in government services region, and a $2.9 million partially FX-driven year-over-year decline in revenue in our direct office in Japan.

The final headline here -- the launch of our re-created The 7 Habits of Highly Effective People 4.0 offering exceeded even the high end of our expectations. You may recall that during last year's first quarter call, we said that we expected revenue from the launch of the re-created 7 Habits 4.0 offering to be approximately $3 million to $4 million in the second quarter; $4 million to $5 million in the third; and even higher in the fourth --I'd noted we thought maybe $5 million to $6 million in the fourth quarter, for a total of $12 million to $15 million for the second, third, and fourth quarters combined. And we were pleased that the total revenue from the new offering for those three quarters actually came in at about $21 million, exceeding the high end of our expectations.

I'd just like to quickly hit on the progress in our three big strategic initiatives. As you know, we have three overarching imperatives: one, to consistently grow both our top and bottom line; two, to deliver quality results for our client organizations; and, three, to increase the size and productivity of our sales and delivery forces worldwide.

I'm happy to report that during the fourth quarter, and for the year as a whole, we made strong progress on each of these key objectives. Stuff we talk about every Monday morning, we talk about with -- review. And I'd say that almost everybody in the Company -- I hope everyone, but at least almost everyone -- in a recent meeting we had, when asked to just write down what the big objectives were, got it right, and focused on these three things.

Sorry, just a couple of headlines about each of those. We've already talked about the financial results. We talked about the revenue growth of 10.6% to $68 million in the fourth quarter, and the full year revenue growth; and the fact that, absent government services, and Japan regions, revenue growth in the fourth quarter was 19% and 14.5% for the year. While some quarters will obviously always be stronger than others, and we won't be unaffected by government shutdowns and foreign exchange fluctuations, our goal on an ongoing basis has been, and is, to grow revenue by approximately 10% a year, and have approximately 25% to 30% of that topline revenue growth flow through to increases in adjusted EBITDA. So our stretch goal, I can just, say, is to achieve adjusted EBITDA of approximately $50 million within the next three years or so, and just to keep accelerating, doing the things we're doing, doing them better.

Let's talk now about the second strategic imperative -- I changed the order a little bit to -- which about growing the size and productivity of our sales and delivery forces. As many of you know, we believe we have the opportunity to add many hundreds of additional sales territories and salespeople in our direct offices in the US and Canada, in Japan, the UK, and Australia, and in our national account practices.

If you look at slide 6 -- maybe, first of all, slide 5 just gives a demonstration, showing the revenue, total revenue growth of $14.3 million; shows the $8 million offset for government services and Japan; and then shows the remainder of the Company without the effect of those.

On page 6, we mention, just as an example, in this top half of the chart, where it shows in the US there are around 93,000 companies or company units that have at least 200 employees. That's a very good target for our client partners. And this is just rough math, but it actually is pretty close to what we've been doing, which is assigning around 100 accounts to a client partner. That would imply the number of territories, over 900 potential territories.

And as we've talked about before, we decided early on that we weren't going to give the frosting to the first 100 client partners, and cake to the rest; that we would try to have each territory represent, best we could, a vertical slice of the cake, so that each client partner has an equal opportunity, so that we've actually identified what these different territories might be.

And territory number 900 looks a lot like territory number 40, so it has a similar opportunity. And so, with that, we today have 88 of those territories covered in our domestic offices. These are corporate things, so our four US offices, leaving a lot of opportunity. And so we won't go into detail; this is just meant to be directional. But it's an important point, is that we still think -- we continue to believe that we have this kind of potential for growth.

With a current client partner count of 104 in the US and Canada in total, including education, we believe that our current goal of adding 30 net new client partners per year will give us a -- with that, we have a lot of headroom for continued and accelerating growth for many years to come.

If you look at slide 7, just gives a demonstration of -- if we're able to add 30 net new client partners per year in our direct offices each year for just five years, and have them ramp up according to our expectations, they would potentially generate over $100 million of additional revenue by the fifth year; with only the first year's hires having, by that time, achieved their full ramp-up.

By the time each of the five annual classes of new client partners had achieved their full five-year ramp up, incremental revenue from just those five years of hires alone would be generating something like $200 million if they met those numbers.

And that's in addition to the revenue we'd expect to be generated from our 176 current client partners, approximately 75 of which are still in their own ramp-up. And so, it's not surprising that, for us, these two objectives of making sure we have quality results for our clients to drive the revenues -- we want to have quality results for our clients so they repeat revenue and grow; but the rest of our discussions in our management meetings are how to hire and ramp-up salespeople successfully.

Let me just report on the key metrics: first, increasing the size of our salesforce. Our number of client partners increased from 145 at this same time last year to 176 client partners as of today -- and that's net of any losses -- a net increase of 31 client partners in the past 12 months. As stated, our goal is to add approximately 30 net new client partners per year. We have detailed office-by-office plans for meeting this goal in our direct offices and national account practices for fiscal 2015, and for each of the coming years.

We expect our total net number of client partners to reach approximately 210 by this same time next year. And this group of client partners, as I mentioned, together with the 75 -- at least 75 previously hired client partners who are still in their ramp-up, creates both a base of strong current revenue and the expectation of significant embedded future growth as they complete their ramp-up over the next few years.

As we've also talked about in recent calls, the investments necessary now in sales managers, the extra costs of moving up to 30 a year -- it was a big jump. But we now feel like, as we add incremental salespeople, incremental costs additions are fractional. For every salesperson, we have one-eighth of a sales manager; we have one-ninth of a regional practice; we have one-sixth of a client service coordinator. And so it's somewhat formulaic, and should allow us to have a good flow-through in the future as these client partners ramp up.

The second metric for us is making sure the new client partners do, in fact, ramp up according to plan. And I'm happy to report that our new client partner ramp-up and retention continues to be somewhat ahead of schedule; and that the revenue from and retention of our fully ramped legacy client partners also continues to be very strong.

And one of the byproducts of adding -- adding the sales managers was meant primarily to help ensure that the client -- at a two-thirds retention rate, that we would have the ramp up that we wanted. It has affected that. And we, in fact, have gotten that, and more. But it's also had a positive and very beneficial impact on retention. Having somebody really caring for you, thinking about you going every day, going on sales calls, checking in on you, and helping you succeed, has actually been very good.

And the final metric I'd just note is having the productivity of our international licensee partners also continue to increase. The Company's licensee partner network continues to expand. Our number of international licensee partners, including specific education licensee partners, has now increased to 55. And these partners' strength and productivity has continued to grow.

The opportunity for our international licensee partners to grow through adding new client partners is at least as attractive as in our direct offices, and many of our international licensee partners are now consistently hiring and ramping up new client partners each year.

It's interesting; at a recent -- we call Redwood Council meeting -- it's our top 40 leaders. As we went through hiring plans for the next couple of years, it became obvious that, in fact, our licensee partner operations in some cases, in aggregate, will actually be greater than those in our direct offices; there are so many more of them. But it's exciting that they are on the play, they are running the marketing event, et cetera.

As shown in slide 8, the growth revenue of our international licensee partners, on which we earn a royalty of approximately 15%, has increased from approximately $28.8 million in fiscal 2004 to almost $87 million in fiscal 2014.

As noted previously, our international licensee operations revenue grew 22% in the fourth quarter, and 10% for the full fiscal year, reflecting these ongoing efforts to implement the same client partner hiring ramp up and marketing initiatives that are driving revenue in our direct offices. The relaunch of the 7 Habits offering is actually just getting underway in many of the countries. And so we expect that our international partners' network will benefit significantly from the ongoing launch of 7 Habits this year.

Our final overarching strategic objective is to consistently deliver quality results for our clients. This initiative is focused on ensuring that our content and solutions are best-in-class; and the way in which we deliver them is best-in-class; and they're really having a measurable, lasting impact on our clients' results.

We've made significant progress on our quality objective over the past year, as we're doing a lot of interesting, really impressive things to ensure this quality. And this progress continued during the fourth quarter and for the full year.

Some key metrics on this. Our revenue renewal rates -- one, we're pleased that our revenue renewal rate remained very high in fiscal 2014, with approximately 90% of our revenue from fiscal 2013 repeating again in fiscal 2014. Our gross margin continued to be strong, reflecting the quality of our best-in-class branded solutions and best-in-class processes. Our gross margins have maintained this -- roughly maintained 67.4%. Gross margin was very similar, and consistent with the 67.6% in fiscal 2013.

And then, finally, the final metric for us in this area is making sure our practices are growing. If you look at slide 9, it kind of gives an idea that from the early days, when we talked about establishing these practices and thoughts of what might happen, each of our practice areas has grown significantly since then. This growth continued in fiscal 2014.

As you can see in slide 10, in the fourth quarter we achieved significant revenue growth across most of our practice areas, with customer loyalty growing 48% off a small base; education growing 29%; sales performance, 11%; and execution actually declining 7%, reflecting just the timing of some large accounts.

We've talked in the past about what I call the HR suite practice, which includes our leadership, trust, and productivity practices, all of whom sell primarily to decision-makers in the HR suite. This suite achieved overall growth of 12% during the quarter, led by a 24% growth in our leadership practice, reflecting the success of the re-creation and relaunch of 7 Habits; 3% growth in our Trust practice, where last year and in the previous year, in 2013, that had been a major focus during the third and fourth quarters; and a 2% decline in our Productivity practice.

As we noted, to ensure the successful relaunch of 7 Habits and establish it firmly, the efforts of our HR suite salesforce were focused heavily on leadership during the last three quarters of the year. Going forward, though, this year, when we look at the number of events scheduled, it's quite balanced across those. We would expect to achieve good growth in not only the HR suite as a whole, but in each of the practices independently.

And it's been our experience in the past that when we focus on something for a few quarters to really establish it, that it does establish it; but it's sometimes at the expense of other offerings within the HR suite. But for us, that's been working. Because once the product is established, and it has its own following, it has its own clients in each of the practices, then that regain their growth.

For the full year, we achieved significant revenue growth across most of our practice areas, with customer loyalty again growing 36%; sales performance growing 27%; education -- part for the full year, sales performance benefited partially by the fact that we acquired it partway through the prior year. But as noted, it did have good growth in the fourth quarter as well, 11% growth in the fourth quarter. Education grew 26%; execution grew 4% for the year. Revenue through the HR suite practices grew 6%, led by 15% growth in the leadership practice, reflecting our focus on, again, the 7 Habits offering, which impacted sales in Productivity and Trust during the year.

Finally, just a couple words on our outlook for the future. Each of our key momentum indicators continues to be very positive, and the momentum in our business continues to be both strong and broad-based.

Our pipeline of booked days and awarded revenue, which you see in slide 11, just to give a quick analysis, or at least summary of that. During our strong fourth quarter, in which revenue grew 10.6%, a substantial portion of our pipeline of booked days and awarded revenue on the books, which was on the books at the end of the third quarter, was converted to revenue in the fourth quarter, including substantially all of the third-quarter education pipeline. This is a normal thing that happens, is our fourth quarter, which includes education, and needs to get delivered -- and a lot of it getting delivered during the time when people are out of school, together with our annual -- big annual buy 10, get one free, promotion on -- or incentive on the facilitators side, which isn't reflected in our pipeline -- that it tends to -- we tend to drain a lot of the booked days and get them delivered in that quarter. And a lot of the new business we generate is actually in the facilitators' side.

So, as shown in slide 11, even though we delivered an enormous amount of revenue during the fourth quarter, because we had strong new bookings in the fourth quarter, we were able to end the quarter with $26.9 million of pipeline, those were in place, which was approximately the same as in the prior year at that time.

Since then, our government contract pipeline of booked days and awarded revenue related to the specific government agency contract, which was at zero at the end of fiscal 2014 due to the fact that it was awarded after the end of the quarter -- and mentioned earlier, it renewed just three days after the end of the quarter. And as a result of that contract and other strong bookings, our pipeline of booked days and awarded revenue has grown $2.8 million at the end of the fiscal year to $29.7 million at the end of October.

We have a lot of good things happening. Our prospective business pipelines, which as you know, are measured in the potential new revenue currently being discussed with and proposed to existing potential clients, increased significantly during the fourth quarter compared with last year, and reach record levels in our US geographic offices, in our direct offices in Japan, Australia, and the UK, and in our national account practices.

As you know, these pipelines are one stage earlier than the contractual pipelines, and historically have been very strong predictors of the likely strength of our bookings and revenue in the coming months and quarters. So we're feeling very good about the pipeline build, the size of it, and the rate of build, which we track every week formally.

And in fact, with the conversion of this large, prospective business pipeline at the end of the fourth quarter has already begun to translate into significant new contractual bookings and revenues in our first quarter.

So, overall, we're very encouraged by the strength in our fiscal 2014 results; by the momentum we're continuing to see in the business, really almost across the board; by the continued growth in the size and productivity of our direct salesforces; by the growth in our international licensee partner operations; and by the overall momentum and trajectory of the business, and what we believe it indicates for the coming quarters and for fiscal 2015 as a whole, and beyond.

As a consequence, we're setting our fiscal 2015 full-year adjusted EBITDA guidance range at $37 million to $40 million. To provide some direction on the likely spread of our expected increase in revenue and adjusted EBITDA, you might just refer to slide 12, which provides an historical overview of our historical spread of business throughout our fiscal year.

This historical spread suggests that a disproportionate amount of our total adjusted EBITDA and our growth in adjusted EBITDA that would be expected to occur in our fiscal second, third, and fourth quarters. This normal pattern is likely to be even more pronounced in this first quarter, due to the fact that we tend to hire a lot of our new client partners at the first of the year for sales academy. We've had a good 15 new client partners in for their initial sales academy training this week.

We also increased the commission draws for all of our client partners. So if they've had a big year and now have a new goal that's substantially higher than the previous year, they get an increase in their draw to match that. And the aggregate settles out during the year, and almost to the person. But along with those -- so, along with those great results and increased sales targets, they also get an increased draw. So between the new salespeople and increased commission draws, they -- has a disproportionately large impact on the first quarter. So, consequently, we would expect that almost all of the strong growth in adjusted EBITDA we expect to achieve in fiscal 2015 will occur in our second, third, and fourth quarters.

We expect the revenue ramp of new client partners hired in the first quarter -- we've now hired them as a full class, so they're all getting in together -- to provide a positive tailwind for us in future quarters, even by the end of this year, that they'll really start to contribute; and an increase in revenue in more than covering the costs. So we're encouraged by the strength of our results and by the momentum we're continuing to see in the business, and by what we expect will be a very, very good fiscal 2015. So I want to thank each of you for your continuing support in the guidance.

I'd now like to turn the time over to Steve Young, our CFO, for some brief remarks, and then we'll open it up for questions and answers. I'd like to just note, as I turn it over to you, Steve, that just for your information, Knowledge Capital, who has owned 1 million registered shares for approximately 14 years, and who received an additional 2 million shares through the net exercise of warrants 18 months ago, has requested that we now go through the process of registering those shares, as well. So, subject to Board approval, we expect to file this registration statement later this month. And we just wanted you to be aware of it.

I believe that Knowledge Capital is likely to be a major shareholder for years to come. As you know, Don McNamara, the Managing Partner of Knowledge Capital, has been a member of our Board of Directors for many years, and is standing for reelection again this year. As many of you have observed, however, if Don were to sell some shares, it might provide an opportunity to broaden our shareholder base. I just wanted you to be aware of that.

I will now turn the time over to you, Steve. Thanks.

Thank you, Bob. Good afternoon, everyone. I'm pleased to just add a few comments. First of all, as Bob talked about, I'd just like to point out again that in the five years since the end of fiscal 2009, we are pleased that our revenue has gone from $123 million to $205 million, an increase of $82 million. We think that's a reasonable growth over that period of time, when some -- when [some been some] difficulties with some of our competitors and others.

Second, you noticed our tax expense. This year's increase in net income is due to significant increase in operations and a significant decrease in the effective tax rate. We benefited this year from electing to utilize all previously unrecorded foreign tax credits. Our effective tax rate was 26% last year; it's 17% this year; and is expected to be approximately 40% next year, FY15. All foreign tax benefits have now been recorded. We haven't seen the cash benefit of all unused foreign tax credits yet, but we have recorded all of the benefit in our tax provision.

Just a comment on our ongoing investments: we're pleased that with these results that we've reported are being achieved while continuing to make these significant, ongoing growth investments in the business. While these growth investments totaled more than $20 million this year, we are pleased to still see significant increases in adjusted EBITDA and other measures. We see opportunities for continued growth, and we believe that our investments have, and will, continue to pay off.

Next, cash. In FY14, we generated $18 million of cash from operating activities. We also used a little more than $13 million of non-repeating type cash activities, including additional capitalized development for 7 Habits, acquisition payments, and a significant amount of cash paid for shares through the net exercise of share-based awards.

Next year, while there might be some similar items, this particular $13 million use of cash will not repeat, meaning that our cash balance will increase significantly, related to these items. We would not intend at this time, as we have said before, to just let excess cash sit in the bank; but, instead, buy shares or do something else with cash that would be beneficial to the shareholders.

Lastly, on slide 13, you can see the FY15 financial statement estimates that we normally provide. So, I think this has been a very good year, optimistic about the future.

And happy to turn the time over for question-and-answer. Thank you.

(Operator Instructions). Alexander Paris, Barrington Research.

This is Matthew Gall filling in for Alex today. Congratulations on the good quarter. Just more of a high-level question. Given that the great job that you've done in explaining the sales force model in previous quarters, and the success you've had in terms of ramping and the accelerated ramping and efficiency gains, what would be a limiting factor, if there is one? And do you think you can continue drive the efficiency gains with people during that ramp-up phase?

I'll ask Shawn Moon, who heads our direct sales forces in the direct offices, to respond.

Hi, Matthew. Nice to talk with you. This is a question we ask ourselves every day, to be quite honest with you. And one of the quick answers is that -- and there's several answers to things that could potentially get in the way. One is that we try to do too much, too fast. We have been -- we try to be very prudent and aggressive at the same time, in terms of how we bring on our client partners. We want to feel stretched and make sure that we bring on the right talent, the right quality; train them inappropriately; and have the right level of sales management support, without collapsing the infrastructure.

And that's a balance that we think we have struck with about 30 per year at the high end. The more we refine our processes and systems, actually, the more aggressively in the out years we might be able to be. We're pleased right now that we are tracking a little bit ahead of our ramp, but we are also being more aggressive this year than in prior years. And so we're going to monitor that very closely this year. So that's one thing.

The second is the limitation of sales management. That, as you know from previous discussions, has been a position and a function that we've discussed a lot, and has proven to be really, really helpful for us in terms of ramping our -- well, two things. It is ramping our client partners, but also moving the middle, if you understand that framework, with our existing client partners. And we move that middle just a few degrees, it has a big impact. And we've seen that over the years. So, getting the right level of sales management, making sure they have the right level of experience, and then they are all following consistent processes is critical.

And if we don't do that, it will limit. We have a mantra that we use called relentless replicability. We need to be able to replicate, region by region, office by office, licensee partner to direct office. And so failure to do those things will limit; and doing it too fast will limit. But that's the theme -- you've touched on the theme that consumes us. And we feel like we've got a good plan.

Okay. Well, thank you for the color on that, and that makes sense. Also, just maybe with just switching over more specifically to the education practice, and the great success that you've had there. Can you give us maybe some insight into your expectations for this next year, in 2015, and also when the selling season begins for the team? And as a follow-up, given the success that you've had in education, can you provide maybe a little bit of a sense of the competitive environment, and if you're seeing any more competition out there?

I'll ask Sean Covey to (multiple speakers).

Sure. Hi, this is Sean Covey. Thanks for the question. Yes, so expectations -- for this last year, we grew at about 26%, 27% for the year. And we expect we can continue in that range going forward. The numbers get bigger, but the opportunities are strong. Our pipeline is strong. So I think we can continue to grow in the same range we have been, at least this last year.

In terms of -- we have about 1,900, kind of close to 2,000 Leader in Me schools right now. Leader in Me is our school transformation process. And we find, increasingly, we are getting into bigger districts, which provides new opportunities for us. So, typically, we start with a few schools in a district and have some -- The Leader in Me is really all about driving climate and culture change inside of the school. And if we do well there, we find we have more opportunity. So that's good. We're just not penetrated very much at all. We are into, in the US, about 1,600 schools out of about 100,000 in the US and Canada.

In terms of competition, we don't feel we have a direct competitor. There are other whole school transformation processes that are different than ours. We do have -- we get compared a lot to character education programs. We don't feel we are really a character education program, because we're a lot more -- our scope and services is a lot broader than that. So we don't really put ourselves in that bucket. But there are a few smaller, emergent -- I guess you could call them competitors, that are all about culture change, that have emerged. But we don't think they are real big right now.

So we think the biggest -- the challenges we have right now are just continuing to make sure our quality is high. We want to have a long-term relationship with the school. We'd love to start with a school and be within 20 years later. So our biggest challenge is just quality results for the school and continuing to focus on that.

I might just add that, because of that focus on quality results, which Sean and his team have been relentless about, I think the difference between internal goals and things that you should model are probably different. I think we would feel that we'd be willing to live with a slower growth rate than the 26% you've got, and I think to make sure that everything we're doing is having the impact that we wanted to have on the schools.

And so, in my mind, if we had a 15% growth next year in the education practice, that would be a really great result, particularly given -- Sean, you might mention the whole new process that the 3.0 versions, and the different versions you are coming out with. I think, just for modeling purposes, I would say is we may slow down in some areas by choice, just to make sure that everything we do is making a real difference in our client schools.

Yes. Our goals in education are just typically double-digit growth. We want to be 10% plus, so that's the true target we shoot for.

Okay, great, great. Thank you. And just one final question, and then I'll get back in the queue. And this is maybe more so on the modeling -- of the seasonality of the business. Over the past 3 to 4 years, it looks like Q4 is becoming a bigger portion of the revenue stream. And obviously that is somewhat driven by the education practice. But just curious, do you think that -- obviously with double-digit growth in that area, do you see that begin to normalize? Or do you think that trend will continue? And that will be it for me. Thank you.

The thing with seasonality, let's just say, is driven by two things. One, the large amount of education revenue North America, which occurs during that period of time. And the second is the fact that with our -- years ago, before our time, actually, because that was -- the fiscal year ended at the end of August. There's no particular reason why the corporate side of the business should be bigger in the fourth quarter. But because we have all these thousands and thousands of client facilitators who teach in their own companies, and because we have a tradition of having a large promotion in the fourth quarter, it tends to spike that.

I think the education side will continue in North America and in Europe to be seasonal in that regard. But we're also building out the business in South America, and through our licensees who will help to balance that off some. I believe it would be a good thing for us over time to get away from having the fourth quarter be the big promotion time. There's no natural reason for it to be so. And while we're not stating a specific thing, I bet if you were talking to us on this phone call three years from now, or four years from now, you'll find that we've shifted our big promotion probably to the end of November, so that we're starting out our year. And we may do that sequentially, one office at a time, or may just do it all at one time, a year or two from now.

But I think it would be a good thing for us not to have the artificial seasonality that's here, having so much of our total EBITDA for the year occur in the fourth quarter. We're cognizant of that. Some of it is just is what it is, but this other is self-inflicted seasonality. And I think over time -- we're doing various things -- we'll tend to move that.

There's a third thing, which is that subscription service revenue is becoming, not a huge portion of our total revenue, but increasingly an important part. The Leader in Me online, My4DX, which is a subscription service that supports -- portal that supports The 4 Disciplines of Execution has [5 online], InSights. These other products, all of which are growing rapidly, will also tend to do that.

But we have a conscious goal. And we'll keep you informed as to when we take the actions to start moving that over. But to move this so that education is our fourth-quarter big thing. First quarter, when corporations are back from summer and really getting ready to do stuff, we'll try to move that over time so that we have a much less seasonal business. But it will take us a few years to get there.

Was that helpful?

Tim McHugh, William Blair.

This is Matt Hill in for Tim. The first question I had was around the government contract that got renewed. Just trying to figure out how to get this in the model here. Looking at the pipeline, backing in with the percentages, it's about $4 million. And then last quarter, with guidance coming down for the fourth quarter by $1 million, primarily due to the government contract. I'm just wondering how to size the contract based on those numbers that are out there.

So the total contract value is approximately $6.5 million. A portion of that comes in the form of intellectual property license, which -- it's interesting. In this pipeline of [days over] revenue, it kind of skips it. Because it wasn't here at the end of August, and it's recognized when it came in in September, so it never showed up in the pipeline. So that what makes -- we've made it hard on you, Matt, to calculate. The total contract size is $6.5 million. We've already received a couple of million of that in the -- when it was awarded, shortly after it was awarded.

So there's still another $4 million or so that it will come in, and it should come in during -- some of it will come in in the balance of the first quarter. It will be really primarily -- the balance will be primarily allocated in the second and third quarters. The contract is actually for that period of time, at the end of our third quarter.

Okay, great. And then just talking about incremental margins, the goal with the 25% to 30% flow-through -- just looking at the guidance for this year, and trying to look at a revenue number out of that, are those the appropriate incremental margins we should be looking at? Or are those not the true ones, given all the investments still in the salesforce?

I think in the investment standpoint, I think they are the true margins. So, you'd say, well gosh, 10% growth would give you roughly $20.5 million of incremental revenue growth. And somewhere between 25% and 30% of that, say $5 million or so of incremental revenue, which falls within the range. There are two things in our range that we recognize, is that one is the yen and other FX changes that we don't control. And so in local currencies, we'd expect them to grow, but whether that all translates to local or not, you don't know. And there's always a pothole somewhere.

Sure, we think we've budgeted for it in the general thing, but I think it's primarily an FX question that you don't know exactly what the impact will be. In our guidance, we're not expecting the renewal of the government contract, or not projecting the renewal of the government contract. We're not projecting a lot of other things that we'd hope would happen and offset any negative surprises, but it's basically that.

But I think, from the local currency perspective, we think we are now at a point where our incremental investments will be in line with the long-term model; and that if you took out any potential for FX that you'd be thinking that on $20 million of revenue growth or so, you'd have $5 million plus of EBITDA growth. And so I think our range attempts to take into -- say that that's possible on the high end, if you don't have tremendous FX hit. But if you do, hopefully you still get a cushion to be in the range.

Okay, great. And then just one final one. On the international licensee piece, just how far along in those partners developing the 7 Habits program? Do you have any insight there of just how much penetration you have with those guys?

Yes, with the launch of the new 7 Habits?

Yes.

Yes, sure. Yes, we're at the very front end of this. I'd say if this were a meter, you'd be at 15%. We spent the last several months localizing in all the key languages. We have a few countries that have started. That's, of course, the English-speaking countries already have launched the 7 Habits. But it's 50% of our revenue with the international partners, so it's a big chunk. It's what they know best. It's what they are most experienced with. And so we think this is a big opportunity for us this year. So it's just that this is a front end, we have hundreds and hundreds of events that are being planned for right now. We're going to run events just like we did here in the US.

So I think it's one of the encouraging things we have for the partners this coming year. It's a big chunk of the revenue, and we're just on the front end of it.

All right, great. Thank you very much.

Jeff Martin, ROTH Capital.

Just to segue off the international license question there, you said 50% of revenue is coming from Leadership today. That was 80%, probably two years ago. Could you characterize which practices are growing rapidly with the international license partners?

Sure, yes. So, Leadership is still the biggest. The other practices are growing faster, of course, just because they're smaller, I think, to start with. But Productivity is growing rapidly, growing at about 25% a year. Sales Performance is growing about 50% a year; a much smaller practice, but a lot of potential and opportunity there. Education practice among the partners is growing rapidly as well. They are in the 25% plus range. So across the board, all of the new practices -- or the smaller practices -- Productivity; Execution, as well, is strong. We've got good, solid growth across the board, growing a lot faster than Leadership is growing.

But, again, that's one of the big opportunities we have: continue to grow Leadership, which is the plan. We don't want the new practice was to cannibalize Leadership, but continue to focus on Leadership, but start to grow these specialty practices as well as our other core practices, like Trust and Productivity. So, again, I think this is -- the two biggest opportunities we have with the partners is, one, running the play -- running the same process, hiring and ramping, running events and so forth, that we're doing with our direct offices. That's one key thing; to treat them more like a franchise -- this is what we do versus just a loose license.

And then the second thing is the practice growth. So, we'll continue to push on those new practices while we continue to try to grow the Leadership one as well. I expect Leadership to continue to come down as a percent of total revenue.

Jeff, there's one other factor I think that will affect that, and Sean may have mentioned earlier, but -- is that now we are -- in addition to our -- just as we have the HR suite in our direct offices, we also do, among our licensees, the primary -- most of our licensees have license rights. And their whole focus of their business, and we'd be happy to expand those rights, but it's just mostly our folks that have been in the HR suite in Leadership, Productivity, and Trust. And so it's natural that those areas would grow.

As in the direct offices, Execution is a natural thing to sell to those same clients, but it's a different entry point. But beyond that, the specialty practice that are in the national account practice and were actually signing new licenses around the world that are specific. So in addition to just the mix shift within existing licensees, we're adding additional licensees in Education. We expect to do the same in Sales Performance and customer loyalty. And so, over time, that will also accelerate the shift, because 100% of those licensees' efforts will be in something other than Leadership.

Okay. That's good to know. Could you give some perspective around the upside in Q4 from the 7 Habits relaunch? And with $21 million exceeding your expectations by a pretty wide margin, do you think there was any pull-forward of revenue from 2015?

I don't think so; not in that. Jeff, the reason there wasn't is that a lot of this 7 Habits business is done with licensed facilitators inside companies. And so it's not so much that you have a large contract necessarily -- I mean, it leads to that, ultimately -- but most of the sales in this early launch phase, we're getting both the existing base of licensed facilitators recertified and teaching, and then getting new people who came in and bought it and made a decision to become a licensed facilitator of their own. And so as a consequence, those sales just tend to happen. They weren't contracts existing, because the product hadn't already been sold, and it wasn't something you were able to bring forward.

And so, in total, while the launch was very successful, as you see, it also affected the growth of some of the other practices. And so all of the revenue that we had in 7 Habits wasn't incremental to the Company either. But it established it firmly that we don't think there was very much, if any, pull-forward at the end of the quarter. It was mainly people getting certified.

Shawn Moon, I don't know if you want to add anything to that.

No. I would agree with what Bob said. The existing facilitator base is a really is the critical target that we went after, and some of the new facilitators that we target, new organizations, new logos, take a little bit longer in the sell cycle to do. So, while there may have been a little bit of pull-forward, as there always tends to be at that time of year, really it also tends to build the coming quarter with a pipeline that we otherwise wouldn't have had. So it balances it out.

Okay. And then just on a high level, what kind of growth in Leadership is possible in 2015? And how long does the tail on 7 Habits run you?

Let me just give maybe context for this, Jeff. Among our existing client companies, of course, are the -- many of whom are existing -- many who have had existing 7 Habits facilitators, more than half of those that have converted over to the new 4.0. Others, either because they've already customized materials, or they had enough -- they didn't need to buy new manuals, we sold probably 40% of the -- 40% or so of the existing client facilitators to ultimately come over. So there will be some natural growth among that group.

But I think the big thing for us that we think -- that existing client company so you take, in the US, 2,700, 2,800 client companies, and not all of them of course are 7 Habits companies, but you look at this. In the US workforce, there are 165 million people or so. You can tell us the more specific number. And about, say, 115 million of those work outside of local or state or federal government, or not-for-profits. And so with that, just call it 110 million people, there's a manager out there for every -- pick it, 10 or 11 of them -- so there are 10 million over 11 million managers. That earlier slide showed there are 93,000 companies that we could assign to a client partner and ask them to actually develop that company.

But in those companies, there are millions of people who could make a decision to take their team through 7 Habits, or to take them through Trust, et cetera. And so we're making a real effort to make sure that these launches aren't just a, hey, we're bringing a new launch out to existing customers, and now they've done it. 75% of the participants that came to our events in 7 Habits launch events after the -- in the second quarter, we had like a three-week period -- of course about half of those were existing clients -- but beyond that, after that, 75% of all the people who have come through events are actually new clients that are not currently customers of the Company.

And they've come in, and, remarkably, it's just proven up the thesis -- we've proven it up earlier in other product categories. But this is one where these people without -- they may have known about 7 Habits, but they weren't a current client -- they came in. We thought they'd find it interesting, and then certify, our go back to the company and do that months later. And of course a significant portion of those do that. But we were really surprised, pleasantly, that a significant portion -- like 20% plus -- of those people who came to the event were able to make a decision within two or three weeks of the event.

And so our basic plan is to say we've got a marketing effort that will run this year, will run -- last year we had 480 -- we call the event equivalents; I won't go into the details -- it defines a certain number of organizations coming to an event. So, as you have a bigger of event, it can be 1.7 in equivalents. And we just normalize it. And we had about 486 last year in the US and Canada. We'll be over 700 this year. And so, basically, 7 Habits will probably run more events this year than it did in the second and third quarters -- and second, third, and fourth quarters this last year because we've got more client partners; they are more trained.

And we'll do the same in Trust; and we'll do the same in Productivity. And so we really believe that there is a portion of our business that ought to be year in, year out, going after these 10 million or 11 million decision-makers. And, of course, 30% of those change over every year, so there's an endless supply of decision-makers. We're having 30,000 or 40,000 of these people come through events.

We're not going to eliminate the potential very soon. And so we think this is a -- hopefully this is responsive -- The 7 Habits launch ought to continue for the next 10 years. Speed of Trust launch ought to continue for the next 10 years. The Productivity launch ought to continue for the next 10 years. We'll continue to refresh the products. But the basic idea doesn't seem to have a very -- it seems to have a lot of headroom.

Shawn Moon, you want to --?

I was just going to say in -- on top of all -- this doesn't really address this coming year or maybe the year after that, but we are very pleased. In the foreword to the 7 Habits, what Jim Collins wrote when he described the 7 Habits as 25 years ago. As we work with the new workforce -- the new generations that's coming into the workforce, these are folks that have not been exposed to the material. And we're actually being very pleased with how they resonate with this, and how they see this as a particular and important way of increasing their productivity and their leadership skills and their job aids. So, we think this is a bit of an evergreen for us.

Great. Thanks for the color, guys. Very helpful.

Marco Rodriguez, Stonegate Securities.

I have a couple quick questions. Most of my questions have been asked and answered. But I just want to talk a little bit about your EBITDA goal; the margin, that is. Hitting 17%, 18% seems pretty likely for you guys in this fiscal 2015. And I know in the past you've mentioned that you would like to look at shifting some of the investments to accelerate long-term growth. And obviously you invested quite a bit already with the ramps of the CPs. But I was wondering if maybe you can discuss what sort of strategies or other investments, as it relates to this objective, should we be thinking about once you hit that 17% to 18% milestone? And also, what sort of time issue will you be thinking about?

We used to say, and believe when we said it, that when we got to 16% EBITDA margin that we would trade off accelerated growth for higher margin. And we've done everything we can do to do that. We've increased and invested -- more heavily increased the number of client partner hires, et cetera. I think where we are now, though, is feeling that we're making significant investments. We're investing 4% of revenue every year in pure R&D. We're investing another 3.5% in practices. We're investing millions in marketing; hiring 30 new client partners. But it now seems to be more formulaic. And so, if we had a big opportunity to increase a practice area or whatever, of course we'd make those investments.

But it seems that with the expected flow-through reflects ongoing, significant investments in growth every year. We're investing somewhere in the -- if you include the hiring of new client partners and all the investments in marketing, et cetera, it's more than $30 million of growth investments, our growth budget. But with that, we think the idea of the 25% to 30% flow-through, which compressed some in the last couple of years when we were building the capability to hire 30 a year, that at least as long as you're hiring 30 a year, is a pretty reasonable thing, which would take us to that 18% mark in this year, the range we're talking about.

In the future, if we were to make a decision to try to amp that up and move to 40 or 50 client partners a year, which we don't anticipate doing in the next couple of years, that would require again some probably stepped-up investments for a year or two in infrastructure to move it to that level. But at the current level of 30 a year, which I think the biggest risk -- someone, Mark, I think -- raised the question earlier as to what risks do we see. Shawn answered it well, that we have this metaphor that was used by Jim Collins in his Great by Choice book, being kind of a 20-mile march, which is metaphor for the Amundsen South Pole expedition.

It's a hard goal. If anybody has ever marched 20 miles in one day in the snow, that's a lot; so it's not an easy goal. At the same time, not planning to go 40 miles when you really -- when it's going to exhaust you. So I think at the current level of growth that we anticipate for the coming years as 10% top line, you'll get to the 18% EBITDA margins.

I don't know, Steve, if you want to add to that (multiple speakers). I think it will get to that. And we'll probably -- maybe in this year.

And is there thought to making a large acquisition? I know obviously you've made some small ones here very recently in NinetyFive 5, but in a thoughts around that?

Let's talk about things that would argue against it for a second. Given the ramp-up -- so, you wouldn't tend to do it to get more distribution, unless it was maybe some unique distribution that we couldn't get to ourselves. Because, as you know, the client partner ramp-up model means that the money you invest in new client partners in year one, you usually get back within a year or so. And so it's hard to think that you'd be able to get -- make an investment in just distribution; unless, like I say, it was some new channel. Maybe somebody had unique distribution to small businesses, that are almost too small to be called on. It might be something like that.

The argument on the other side, to get content, because of our distribution and because we have such significant distribution, even though it's small roads of what it can be, it's still larger really to most anybody else in our industry. And as a consequence, we have lots of content providers who come to us and give us the option to license their contract, or ask us, would we be willing to distribute for them. And we don't need to acquire them to either acquire the content or to license the content.

So, as we look at what would you do -- what would you get from doing a big acquisition versus the risks of integration, and wondering whether it's incremental -- our thought about acquisitions is that we should do some. But they will be more likely, at least in our minds, they'll be more likely to entering a new solution category, where there's an existing firm who already owns something like, just to use an example, merger and integration. Somebody who had a merger and integration practice, and it's already up and going. It's not something in which we have particular expertise. And yet we have content. And we've done a lot of things around that problem, but not a full solution. It would tend to be that.

I think our view is probably the same with acquisitions as it is with adding salespeople, that we want to fire bullets, not cannonballs. So I don't think it would be unusual for us to even be thinking about something where it would fundamentally change the nature of the business to make the acquisition.

So, I don't know, I hope that's responsive.

Very helpful. And last quick question, just a couple quick housekeeping items. In your adjusted EBITDA table, you've got a couple of line items: reduction in earnout, and an impairment of related party receivables. Where are those hitting on the income statement? And then last thing, on the balance sheet, your payables spiked significantly, sequentially. Can you talk a little bit about what drove that?

Both of the items you mentioned from the adjusted EBITDA schedule are in SG&A.

And I missed it; sorry, I missed the second part of the question. The spike in --?

Payables.

Well, it's just the nature of when we make certain payments. There isn't anything fundamentally different in the way we're handling our accounts payable, or the rate at which we're paying people. We make payments when we need to on this, according to the timing, the age of the payables. And this time, it was just a case where at the end of the year we had a little bit higher balance than we did that year before. Nothing fundamentally going on related to our accounts payable.

Are you including that in that question, Marco, also just the accrued liabilities which would include all the commissions from the large sales in the fourth quarter, or just looking at --?

I think it's just Accounts Payable.

Yes, just the payables. You were roughly $7 million in Q3, and it went up to $12 million in Q4.

Yes. Like I say, we're looking at each other, and there's nothing fundamentally going on related to our handling of accounts payable. We had some additional inventory related to the 7 Habits that we acquired. But we didn't handle that in any different way than we handled payables before -- meaning we didn't extend the timing at which we pay anybody in order to generate (multiple speakers).

They're basic payables. Those that aren't due immediately, like rent and so forth, is we pay everybody within 45 days. So, that doesn't -- that is just kind of a moral imperative, so that hasn't changed.

Got it. Thanks a lot, guys.

Kevin Liu, B. Riley & Company.

Just with respect to the FX impact that you guys talked about, I was wondering if you could quantify what impact, if any, it had on your fourth-quarter numbers, and talk about how that might impact your growth expectations in your international direct offices for fiscal 2015?

Yes. In the fourth quarter, the effect of FX, and particularly in Japan, I think was about $250,000 in the fourth quarter. Of course, subsequent to the -- well, yes -- about that in the fourth quarter. Subsequently, of course, the yen has taken a dive, relative to the dollar. And so those impacts would be greater, going forward. In fiscal 2015, it might have an impact. Our estimate right now is at current exchange rates, it might affect the revenue by $1 million -- a couple of million dollars of revenue, and $0.5 million of EBITDA or so.

So, if we were to annualize the current exchange rate of the yen, particularly, it would be something in that range. So, it would moderate our topline growth percentage a little bit if we didn't grow faster than 10% otherwise. And that's why we're saying it's approximately 10%. Certainly, in local currency, we expect to have that. And it will affect the bottom line by $0.5 million, which is one of the reasons for the range we have provided.

Got it. That's helpful. And then just a couple questions around the international licensee business. I think Shawn did address a few of these earlier. But that growth has accelerated here in each of the last two quarters exiting the year. To what extent was that helped by the release of the new Leadership content versus maybe just expanding the number of licensees, or perhaps just adding more content to your existing licensee base? Any color on that front would be helpful.

Sure. It was some of it, but not -- it wasn't the main factor by any means, because it's just not out there that far yet. But I think we just had a number of (technical difficulty) that just have taken root, with a lot of the new processes and hiring and doing events. We had really strong growth in some of our bigger countries, such as Brazil; China has come on really strong. And some of our Middle Eastern -- Central Eastern Europe performed really well. So, it was just a matter of basic performance, I think, with some of our bigger partners that came through pretty strongly in the second half of the year.

And a quick follow-up to that, so I mean the 20% plus growth rate you had there in the quarter, is that sustainable, given that you'll start to add more of the Leadership content into there? Or is there things like new Education licensees, for instance, that might have pushed it up just from seasonal perspective?

No, I don't think it's sustainable. I think we came in for the year at 10%, and that's always the target we're shooting for is double-digit growth, on the partners as well. So, as Bob mentioned, we are adding -- we did add four new Education licenses last year. One of the international partners will continue to do that. But it was -- I will just call it an anomaly in the fourth quarter, with some just big -- and we had a couple of large deals that came through in the fourth quarter that are going to be hard to repeat.

Understood. Thanks, and congrats on the solid performance for the year.

I believe our operator said that was the last of the questions. If there are more, then we are certainly delighted to answer more, but I'm sure that you're tired of hearing (laughter). Are there any more questions?

We have no further questions at this time.

Do you have any closing comments?

I think the closing comment would, again, be to thank each of you for making the time to join today; particular thanks to you for your guidance, and your thoughtfulness and support over the years. As we said in our kickoff meeting this year, we -- far from celebrating having achieved the summit, we now -- we're celebrating having arrived at the base camp of the new mountain, which we think we're now at a position where we've got -- in our industry, there are -- in the history of industries, who knows? Because most of these are private companies -- but our guess is there are fewer than 25 companies that have ever achieved $20 million or more of revenue, because it's kind of a cottage industries.

We have now eight of our units, either practices or offices, that are north of that level. And it's not just a number. It means by the time you get to that level, you have great offerings. You have tremendously capable consultants, client partners, and great clients that you are really solving some problems. And so it feels to us that we're now in a position where we can really accelerate this, where it's much less driven but simply than is being pulled by our practice leaders and offices out in the field. So it feels like we're in a good position. I'm sure we'll have plenty of -- we will have bumps along the road as we have had, whether it's the yen or a government shutdown. But the fundamental core business has been growing well for a number of years, really quite a number of years, and we feel like it's ready to accelerate.

So we thank you for your support, and look forward to answering any questions you all might have off-line. Steve and I are, of course, available for that. Thanks.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participation. You may now disconnect.