Factset Research Systems Inc (FDS) 2015 Q2 法說會逐字稿

Welcome and thanks for standing by.

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

(Operator Instructions).

This call is being recorded.

If you have any objections, you may disconnect at this point.

Now I'll turn it over to the host, Senior Vice President of Strategic Resources and General Counsel, Ms. Rachel Stern.

Ma'am, you may begin.

Thank you, operator.

Good morning and thanks to all of you for participating today.

Welcome to FactSet's second-quarter 2015 earnings conference call.

This conference call is being transcribed in real time by FactSet's call street service and is being broadcast live via the internet at factset.com.

A replay of this call will also be available on our website.

Our call will contain forward-looking statements reflecting Management's expectations based on currently available information.

Actual results may differ materially.

More information about factors that could affect FactSet's business and financial results can be found in FactSet's filings with the SEC.

Annual subscription value or ASV is a key metric for FactSet.

Please recall that ASV is a snapshot view of client subscriptions and represents our forward-looking revenues for the next 12 months.

Lastly, FactSet undertakes no obligation to update publicly any forward-looking statements as a result of new information, future events or otherwise.

Joining me today are Phil Hadley, Chairman and Chief Executive Officer; Phil Snow, President; and Maurizio Nicolelli, FactSet's Chief Financial Officer.

I'd like to turn the discussion over now to Phil Hadley, our CEO.

At the end of Phil's remarks we will hear from Maurizio Nicolelli, our CFO.

After Maruizio's remarks we will have time for questions.

Please limit your questions to one question and only one follow-up so that we will have enough time to address questions effectively.

Thank you, Rachel and good morning, everyone.

I'd like to address two recent developments.

First, on a somber note, as many of you know, Mike DiChristina, one of FactSet's greatest leaders and member of our Board of Directors passed away in late February after battling a long illness.

His contribution over the past 29 years to the character and leadership of FactSet will never be forgotten.

After only a few short years at FactSet as an engineer, the bulk of the online system was written by Mike or under his watch.

His creation of Universal Screening in 1988 is still to this day the foundation of all of FactSet's quantitative and portfolio analytic products.

He left a mark an indelible mark on this Company and will always be in our hearts.

Second, on a lighter note, effective July 1, I will be stepping down from my role as CEO, which I've held since September 2000.

I will remain with the Company as Chairman of the Board of Directors.

Phil Snow, our current President, will become CEO on July 1.

In addition, Mark Hale was promoted to Chief Operating Officer yesterday, replacing Peter Walsh.

Peter is taking an active role in supporting Mark in his transition to his new responsibilities.

Both Phil Snow and Mark Hale have at least 19 years of experience at FactSet and have lead many teams that have contributed significantly to the growth of our Company.

They each have a strong knowledge of our clients, a deep commitment to our employees and a clear vision for growth.

We're all excited for FactSet's future as Phil and Mark take on their new roles.

Employees, clients and investors should take away several clear points from this change.

First, it is a great time to bring change to the most senior leadership positions at FactSet.

Topline growth has accelerated 300 basis points over the past year and EPS grew by 14% in the just completed quarter, our 19th consecutive quarter of double digit growth.

Second, this was a planned transition and it's been carefully arranged.

We are pleased to promote leaders from our deep bench of FactSet veterans along with new talent to FactSet.

We are excited by the addition of Scott Miller as head of our global sales team, who brings tremendous industry experiences to learn from the outside of our Company.

Third, I will remain a FactSet employee and will continue in my role as Chairman of the Board and as a resource to Phil Snow at this exciting period in our Company history.

Lastly, I'd like to personally thank Mike Frankenfield and Peter Walsh for their contributions to FactSet.

Mike has been with the Company since 1989 while Peter since 1996.

As key members of senior management over the years, they each have had a major impact on many initiatives which helped FactSet grow overall market cap fivefold in the last 10 years and reach $1 billion in ASV.

All in all, I couldn't be more pleased about how this important transition process was executed and I look forward to supporting Phil Snow and our experienced senior management team.

Thank you, everyone and I'll turn the call over to Maurizio to review our second quarter results.

Thank you, Phil.

Good morning, everyone.

Here is where we will focus our time for this call.

First, I'll review the second quarter results, including our recent acquisition of Code Red.

Second, I'll cover guidance for the upcoming third quarter.

Lastly, we'll close by addressing your questions.

So let's proceed with our second quarter results.

FactSet performed very well in the second quarter.

ASV, revenues, client count, user count and EPS all grew to record highs.

During the quarter, our total ASV exceeded $1 billion for the first time and our organic ASV growth rate continued at 8.5%, up 300 basis points from the prior year.

Excluding foreign exchange and acquired ASV of $9.3 million, ASV rose $25.4 million during the quarter.

In terms of geography, our US operations generated $680 million in ASV.

International operations accounted for $325 million in ASV or 32% of the total.

Buy-side clients, which include all platform data sales and the market metrics business, accounted for 82.8% of ASV, while the remaining 17.2% of ASV was generated by our sell-side clients, which include M&A advisory, capital markets, and equity research businesses.

Included in our second quarter results were two items.

One, operating expenses include a $3.2 million pretax charge primarily related to changes in the senior leadership of the Company's sales teams, including the hiring of Scott Miller as FactSet's new Global Director of Sales and the optimization of our senior sales leadership in our European and Asia Pacific regions.

Second, income tax expense includes a $5.1 million benefit primarily related to the reenactment of the US federal R&D tax credit for calendar year 2014.

Excluding these two items, our adjusted operating margin grew to 33.8% and adjusted EPS rose 14% to $1.39.

This quarter marks our 19th consecutive quarter of double digit EPS growth.

Let's now turn to free cash flow.

We define free cash flow as cash generated from operations less capital spending.

Over the last three months, we generated $43 million in free cash flow, an increase of 12% over the same period last year.

Free cash flow increased during the quarter due to higher levels of net income, an improvement in our aged receivables and a higher accrued compensation.

Our DSOs were 36 days at the end of the second quarter, an improvement of 39 days in the prior year period.

Our cash and investments balance was $147 million, up $7 million during the quarter.

We continued our strong commitment to capital return in the second quarter while investing in the growth of our business.

This quarter we spent $56 million on share repurchases.

As of quarter end, $283 million remains available for future share repurchases.

We also paid regular quarterly dividends of $16 million.

When aggregating regular quarterly dividends paid and shares repurchased over the past 12 months, we have returned $303 million to stockholders.

Common shares outstanding were 41.6 million at the end of the quarter.

During the second quarter we also completed the acquisition of Code Red, which provides research management technologies to the investment community, including endowments and foundations, institutional asset managers, sovereign wealth funds, pensions and hedge funds.

The addition of Code Red to our existing RMS solution will enable us now to offer a complete research management solution for all of our clients' workflows.

The acquisition added $9.3 million in ASV and is expected to dilute our operating margin in the third quarter by 40 basis points.

We do not expect the acquisition to have a material impact on our FY15 EPS.

The Code Red acquisition was financed using our new revolving line of credit.

The current revolver totals $35 million and can be increased to a maximum of $300 million.

Our current cost of capital is 67 basis points.

The new revolving line of credit will enable us to manage our operational cash needs better between our US and foreign entities as more than 75% of our cash resides overseas.

Now let me walk you through our P&L.

Revenues in the second quarter grew to $248 million, an increase of 9% over last year.

Organic revenues also grew 9% over last year, which excludes $500,000 in revenues from the acquisition of Code Red.

Adjusted operating income, which excludes the $3.2 million pretax charge primarily from the changes in the senior leadership of the Company's sales teams, grew to $83.8 million, an increase of 12% over last year.

Adjusted net income grew 12% to $58.7 million and excludes the net impact from changes in senior management and the reenactment of the tax credit.

Adjusted diluted EPS grew 14% to $1.39.

In the second quarter, our US revenues rose to $167 million, which equates to 8% growth compared to the same period last year.

Non-US revenues rose to $81 million.

Excluding the impact of foreign currency, the international revenue growth rate was 13%.

More specifically, revenues in the second quarter from Europe and the Asia Pacific regions were $62.6 million and $18.7 million respectively.

Excluding foreign currency effects, year-over-year growth rates were 12% in Europe and 16% in Asia Pacific.

Let's now review the growth drivers this quarter.

In general, the positive ASV changes relate to broad based growth globally from the buy side.

In the US we have seen sustained growth for fixed income portfolio products, expansion of users focused on credit analysis and sales of equity attribution and our new geographic revenue module in PA.

ASV in Europe and Asia Pacific was driven by our portfolio analytics suite of products including expanding the footprint of FactSet's multi-asset class risk and stress test offerings.

Net user count for FactSet terminals increased 11% this quarter by over 1,800 users and totaled 57,408 at quarter end.

Buy-side performance drove user count and accounted for more than half the change.

Over the last 12 months, buy-side users grew 11%.

FactSet also expanded its sell-side user base both this quarter and over the last 12 months.

Similar to previous years, we've issued our annual price increase for select US investment management clients during the second quarter, which contributed $8 million to ASV.

As we mentioned in the past, the number of clients affected by the price increase each second quarter has been declining because more and more clients have been experiencing a price increase at the time of their renewal and renegotiation of their contracts with us.

As a result, price increases are imposed throughout the year and are not as much a standard item in the second quarter.

Our wealth management products continue to grow and appeal to our clients and thus are delivering positive returns for FactSet.

We continue to find that our workstation can be well tailored to the needs of our wealth management clients who operate in both large teams and in small groups depending on their needs.

Lastly, our proprietary content also continues to be a strong product line for us as well as an opportunity to expand our data feed business.

Clients continue to value highly our industry leading content such as StreetAccount news, FactSet fundamentals, FactSet estimates, transcripts, takeover defense and entity mapping data.

Now let's take a look at the expense side.

Total operating expenses were $167.1 million.

Our adjusted operating margin was 33.8%, which excludes the $3.2 million charge primarily from changes in the senior leadership of the Company sales teams.

Cost of services expressed as a percentage of revenues increased by 180 basis points compared to the year ago period.

The increase was driven by higher compensation, partially offset by lower computer related expenses and amortization of intangible assets.

Employee compensation expense grew as we expanded headcount 8% year over year primarily from new hires and acquired employees in connection with the Code Red acquisition.

SG&A expenses expressed as a percentage of revenues decreased 120 basis points in the second quarter compared to the year-ago period due to lower compensation expense from employees performing SG&A roles and a reduction in occupancy costs, partially offset by higher professional fees related to changes in the senior leadership of the Company's sales teams.

At the end of our fiscal year, we had nearly 7,000 employees, a year-over-year increase of 8% globally.

We hired 91 net new employees this quarter, primarily within our software engineering and consulting classes.

The second quarter effective tax rate was 24.1%, down from 30.5% a year ago due to $5.1 million in income tax benefit related to the reenactment of the federal R&D income tax credit.

Excluding this discrete benefit, our effective tax rate was 30.4%, down 10 basis points from last year.

Now let's turn to our guidance for the third quarter of FY15.

We expect that revenues will range between $251 million and $256 million.

Operating margin should range between 33% and 34%.

This range reflects an overall increase in the guidance by 20 basis points, but also includes a 40 basis point reduction from the recent acquisition of Code Red.

We expect our annual effective tax rate to range between 30% and 31%.

Diluted EPS is expected to range between $1.40 and $1.42.

The mid-point of the range suggests a 13% year-over-year growth.

In conclusion, our first half of FY15 was very strong.

We delivered at the upper most end of all the metrics in our guidance.

More specifically, our ASV growth rate was 8.5%.

The operating margin rose to 33.8% and EPS grew by 14%.

Q3 guidance implies continued strong performance.

We're also in the final leg of a successful transition to a new but seasoned senior management team.

As our business crosses $1 billion, I would like to remind you that in 1996, FactSet's first year as a public company, there were over 5,000 public companies with revenues of less than $50 million.

FactSet is one of only 60 companies in that pool of 5,000 to have crossed the $1 billion mark in revenues.

This metric is a testament to our business model, our market opportunity and our experienced management team who knows how to execute.

Phil Snow and Mark Hale were employees in 1996 and are part of an experienced team that will lead FactSet to future growth.

Thank you.

We are now ready for your questions.

Thank you, sir.

(Operator Instructions)

Our first question is coming from the line of Mr. Peter Appert from Piper Jaffrey.

Thanks.

Good morning and Phil, congrats to you and your colleagues on your new roles.

It's certainly the end of an era for Phil Hadley.

So the question is on trying to better understand the impact of FX.

I know that the billings are primarily in dollars, but you've got costs in local currencies.

So I'm wondering if there was a measurable impact on margin or profitability in the quarter from the FX impact.

Hi Peter, it's Maurizio.

You are correct, there is an impact on the quarter from FX.

Keep in mind, FactSet has a net exposure approximately of $170 million in FX.

Half of that is in euros and pounds, so we are seeing a benefit from the stronger dollar there, but the offset there is also our investment in the business in headcount.

If you look at our headcount, in the first half of this fiscal year compared to last year, it's significantly higher.

So there is a benefit in FX.

It's offset by investment in headcount and you're seeing the uptick result in our operating margin and you saw that this quarter at 33.8% for the quarter.

And you also see our guidance has been upticked a bit and our guidance now is between 33% and 34% going forward.

That also takes into account a 40 basis point effect decline from the effect of purchasing Code Red.

Got it.

So a portion is flowing through, a portion is being spent on higher investment spend, but the improvement in margin is basically FX driven?

The net effect, correct.

One other question.

The guidance I assume would imply that the passwords are going to be relatively stable on a go forward basis.

Is that a fair assumption?

Yes, I think that's a fairly stable assumption.

We're seeing good growth in passwords in both the buy side and the sell side.

Right, but no further accelerations, stable at this around 10% level?

Peter, we really don't spend any time internally projecting password growth.

We have always focused on ASV.

Okay and Phil one last thing for you, how active do you plan to be in your role as Chairman?

Will this be an Executive Chairman role?

That is correct.

It's an Executive Chairman role.

Phil and I have a list of responsibilities that I'm going to stay focused on for the next year and then we'll see how things go from there.

This is Philip Snow.

I expect Phil to play an active role in M&A, which he's done over his career at FactSet.

I think we've averaged about one deal every year for the last 17 years and Phil has been huge in sourcing deals into the M&A pipeline and helping us execute on that.

So Phil Hadley, your expectation is you'll just stay for another year?

I just said we'll see how it goes.

I want to make sure I'm still accretive to the management team and they view me as a positive coming into the office.

I'm loyal to FactSet through and through.

Okay, great.

Thank you very much.

Thank you.

For the next question, from Mr. Shlomo Rosenbaum of Stifel.

Good morning.

Thank you for taking the questions.

I want to get some thoughts on the underlying growth.

You guys had the highest sales quarter ever for buy-side workstations.

When you measure it in terms of ASV growth, it looks like it slowed a tad sequentially.

Is the upward trajectory in general, do you think the underlying growth rate is continuing to accelerate?

And is there any change in the nature of those buy-side workstations?

Is there still the same upside cross-sell potential that you usually have when you place a new workstation out there in the market?

Hi, it's Phil Snow.

Yes, I think we believe there's massive potential for us out there in the marketplace.

I wouldn't read too much into the slight slowdown that you saw on the buy side.

We think about sales now in terms of halves and we had an exceptionally strong half.

The sales team outperformed its first half goal.

I think this year what you're seeing is we pulled a little bit more into Q1 than we had in the previous year and that's most of what you're seeing.

Okay.

Then in terms of Phil's role in M&A and the fact that you guys are also, first time I can recall, have a real credit facility out there.

Should we expect that you will be more active on the M&A side of the business?

We'll definitely execute on great opportunities when we see them.

There's adjacent workflows that we're interested in.

We've is shown that through our history, that we've continued to build out our presence within our largest clients and we're just going to look for good opportunities and if we have something that looks attractive, we'll execute on it.

Is the pipeline any better or worse than you've seen it in the last few years for deals?

It's pretty stable.

So Phil, are you going to be bored?

It's kind of the same thing, just you're only going to be working on M&A?

Phil highlighted M&A as one of my responsibilities, but I still have several others.

One is certainly making sure that the transition is smooth in his role, but there are several other smaller projects and products and things that I think we'll find interesting.

Okay, great.

Thank you very much for taking the questions.

Thank you.

For the next question from Mr. Manav Patnaik of Barclays.

Hi, this is actually Greg calling on for Manav.

I was hoping to get some more details on the Code Red acquisition.

Is this the type of product that you plan on selling standalone or is it something that you can take advantage of bundling it with the workstation and then some details on the competitive environment and positioning there?

Hi, Greg.

It's Phil Snow.

Yes, Code Reds are a really nice local solution for clients that are interested research management solutions.

We also have our own internal research notes product, which has done very well over the last few years.

So our strategy is to combine those teams and really go out there with a strong hybrid solution that we can sell to any type of client.

There are certain types of clients out there that do demand a local solution.

We certainly ran into that while we were selling our hosted solution.

The team's already integrated.

We're very bullish about this area, this area of analytics for our clients.

The other thing that we're bullish about is that it really helps build community within the front office of our buy-side clients between the portfolio managers and analysts and that's something that we're focused on.

Okay and then with the hire of Scott Miller and what sounded like some changes on the sales team, wondering if there's any changes in how you're planning to go to market with the sales team and if all those changes are already in place?

Scott's transitioned in exceptionally well over the last two months.

His new team is in place.

We've made a few changes there and some are having direct ownership of the European and Asian regions under individuals, which we didn't have before.

And all of Scott's are direct, actually are FactSet employees.

So he has a very talented FactSet team reporting to him and we're excited about what he's going to do for FactSet.

The combination of the inside and the outside is definitely something that we think is going to be accretive to the business.

Okay, thanks.

And congrats to you both, Phil and Phil.

Thank you.

Thank you.

For the next question, from Ms. Toni Kaplan of Morgan Stanley.

Thanks for taking the question.

To follow up on that last one, do you think that the sales transition impacted growth this quarter at all?

I don't think it did.

We've been going through a transition, as Maurizio pointed out, for the last year.

So there has been some movement, particularly within the Americas Investment Management team over the last year.

We did reorganize that group to more clearly align by the firm types that we're selling to.

So it might have had an impact, but it's so minor that I don't know if we can directly attribute it to that and I firmly believe that we are positioned now to accelerate our growth rate based on how we are organized.

Okay, great.

In terms of the management transition, do you think that there will be any changes in philosophy, whether it be in terms of margin expansion versus reinvestment or leverage levels or capital deployment, anything of that nature or will it be very consistent with the prior policies?

After spending 19 years with Phil Hadley, I think it's going to be pretty consistent.

We've proven that it's a great business model, that reinvesting in our business is the way to go and I don't see that we'll be changing that.

Terrific, thanks.

The next question comes from Mr. Andre Benjamin of Goldman Sachs.

Hi, good morning.

My first question, of the new clients that you've added, is there any color on potentially some of the size and the mix of who you've been adding?

I'm trying to get of sense of how much of the growth is from really small shops with limited infrastructure versus some of the really large ones?

Hi, Andre, it's Phil Snow.

It's a typical quarter for us in terms of net new client additions, so healthy additions, a very good mix of hedge funds, wealth shops, traditional asset managers.

As we've said on previous calls, typically we bring clients on, kind of the smaller size and we end up growing them over time.

We already have most of the largest shops out there as our clients and we still view that as our biggest opportunity as a firm is expanding the wallet share that we have in those bigger clients.

As a natural follow-on to that, as you talk to them about their forward planning, I know you only guide a quarter out.

I'm not trying to extrapolate guidance here, but generally what are they saying about their expectations for how they plan to manage the business over the next couple years?

Trying to get a sense of whether or not they're thinking of maybe slowing things or not, given the market has been a little bit more choppy of late?

You're asking about our clients and how they think about the business?

As they talk to you about how they're thinking of managing headcount over the next couple years, wondering if there's anything you can share on color?

Right now it appears to us as though the clients are in a healthy spot on both the buy side and sell side and are hiring modestly.

Thank you.

Thank you.

The next question comes from Mr. Joseph Foresi of Janney Montgomery Scott.

Hi.

I was wondering if we could get an update on the wealth management product and maybe you could give us some color on how meaningful that is at this point?

The wealth business continues to do well.

On a relative basis, it's growing faster than some other segments of our business.

In the last half we released an asset allocation functionality, which I think will be good for that space and we've also increased coverage for some of our StreetAccount news areas, which we think will help the wealth space as well.

And are you seeing any changes indecision cycles from your clients, particularly anything in the European market?

Nothing material, no.

Congrats to everyone.

Thanks.

Thank you.

For the next question, from Mr. David Chu of Merill Lynch.

Hi, guys.

So if growth in new clients has been broad based, why has revenue per subscriber been trending lower in the past few quarters?

That's really not a metric that we track.

We have a big variety of clients that pay us different price points for different types of users.

So it's really not one that we pay attention to.

Okay.

So you guys added about 1,800 new subscribers or passwords in the quarter.

Can you share how many came from new clients versus existing?

I think it's pretty evenly split down the middle, to be honest with you.

Pretty even?

Particularly on the buy side.

Got it and last one, the $3.2 million in one-time costs, how does that split between COGS and SG&A?

This is Maurizio.

The $3.2 million is predominantly in the SG&A line.

Okay, thank you very much.

Thanks.

For the next question, comes from Mr. Glenn Greene of Oppenheimer.

Thanks, good morning.

A question on, you talked about the 300 basis points topline or ASV acceleration in the last year.

Is there any way you can frame how much you think of that is coming from market share gains versus broad industry growth?

That's a great question.

This is Phil Hadley.

I would say, if I had to guess, I would probably say half and half.

I think half of it is probably pure market health and the other half of it when we look at our win loss, I think it's definitely coming from market share gains from others.

Is there any change in the trend competitively?

Is it accelerating or pretty much what you've seen for the last few years?

This is Phil Hadley again.

I think it's pretty consistent over the last few years.

It is something we focus on trying to understand, whether our ASV is coming from what we think of as alpha or beta, meaning clients are adding more users and we're not really gaining share.

But I think it's been pretty consistent through time, as half and half would be the way I think about it.

Then a quick update on what you're seeing with the fixed income product, how much traction it's having and similar to the prior question on the wealth management anyway, to frame how meaningful it is to the business at this point?

The fixed income product continues to do exceptionally well in a few different dimensions.

We have through our portfolio analytics products selling fixed income in PA is doing well.

We have a fixed income analytical services product that has a high growth rate and we're also doing well and selling credit workstations.

Okay, thank you.

For the next question comes from the line of Mr. Tim McHugh of William Blair.

Good morning.

It's Stephen Sheldon in for Tim.

First, I want to ask has there been any notable changes in the growth drivers for the sell-side business?

I think you've talked over the last few quarters about stronger M&A markets having an impact, but are there other areas that may be improving more than others over the last few quarters?

I think it's pretty consistent with prior quarters.

We're not seeing any meaningful change there.

Okay and then looking at the international growth, specifically in APAC, I think you said that constant currency growth was about 16% in the quarter.

Is the joint venture with Quick in Asia having any notable impact on the growth in the region?

I don't think we're seeing the impact of that yet.

I think that will be coming in future quarters.

Okay, thank you.

For the next question, from Mr. Keith Housum of Northcoast Research.

Thanks for taking my call.

Guys, as a reminder, are most of contracts that you guys have with your overseas customers, are those in US dollars?

Yes.

So the impact on ASV is immaterial then for foreign currency, correct?

Correct.

Over 95% of our invoices are in US dollars.

Got you.

And then administrative more on Code Red; is most of that revenue spread evenly throughout the ASV or is there any projects related revenue to that?

No.

Got it.

Thank you.

For the next question, from Mr. Bill Warmington of Wells Fargo.

Good morning, everyone.

Congratulations to Phil and to Phil.

So a couple of questions.

First is for Phil Snow.

I wanted to ask in terms of your thoughts now going forward in the role of CEO, what are the things that you would like to do the same and what are the things that you would like to do differently?

Sounds like an interview question.

We've always looked at our opportunity at FactSet through multiple lenses.

We'll look at the opportunity geographically, we'll look at it by the types of firms that we're selling to, the different sites of users or workflows within those firms, lots of different ways of looking at it.

One area that I think you'll see increased focus from at FactSet is specifically around that end-user work flow.

So I'm going to be obsessed with making sure that we're providing different types of users the content and analytics that each of them wants and delivering it the way that they want.

We've done that in past.

We're just going to raise the priority or sort on that particular lens that we look through.

Okay.

Any thoughts to changes in capital allocation, perhaps shifting more to M&A versus buybacks?

I think going forward our capital allocation will still be very similar to what it has been in past.

We look at share repurchase, dividend and M&A and we try to find the best areas and the best [R] funds to get the highest return on capital at the end of the day.

Okay, thank you all very much.

Thanks.

For the next question, coming from the line of Mr. Patrick O'Shaughnessy of Raymond James.

Hi, good morning.

A quick one for me kind of following up on that last line of questioning.

Your credit facility, $300 million capacity it looks like.

Does that imply that you guys are open to looking at bigger deals going forward?

Obviously, you haven't had a facility in the past.

You've mostly done smaller deals, so does this broaden the scope of potential acquisitions for you?

Hi Patrick, it's Phil Hadley.

Our policy, as Maurizio said, has always been to look at those three categories: dividend, share repurchase and M&A.

We've looked at many deals that are much larger than we've actually accomplished, so we've always been open to it.

It just has to be strategically the right thing to do.

I think the actual $300 million facility was one that Bank of America offered us at no cost, so we took it, but I don't think it's really a change in policy.

Got you.

So there's no commitment fee on that facility?

No.

Zero.

Great, thank you.

And speakers, right now we don't have any other questions in queue.

Thank you, everyone.

Thanks, everyone.

See you next quarter.

That ends this conference.

Thanks for joining.

You may now disconnect.