Harte Hanks Inc (HHS) 2016 Q2 法說會逐字稿

Good day and welcome to the Harte Hanks second quarter 2016 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Robert Munden, General Counsel. Please go ahead.

Thank you, operator. Our call will include forward-looking statements such as statements about our strategies, adjustments to our cost structure, financial outlook and capital resources, competitive factors, business and industry expectations, anticipated performance and outcomes, future effects of acquisitions, dispositions, litigation and regulatory changes, economic forecasts, and other statements that are not historical facts.

Actual results may differ materially from those projected or implied in these statements because of various risks and uncertainties including those described in our most recent Form 10-K and other filings with the SEC and in the cautionary statement in today's earnings release. Our call may also reference non-GAAP financial measures. Please refer to today's earnings release for the required reconciliations and other related disclosures. Our earnings release is available on the investor section of our website at harthanks.com. I'll now turn the call over to Karen Puckett, CEO of Hart Hanks.

Thank you, Robert. Good morning everyone and thanks for joining us this morning. Before we get started here and get into the numbers, I have a few comments and then I'll hand it over to Doug Shepard, our CFO, who will go through the financial results and then we'll move into Q&A.

There is really no other way to put it than to say that we are not satisfied with our overall results and it's clear that our turnaround is taking longer than we expected. While there is still a lot of work to do, we do remain confident that our strategy is sound and that we will soon begin to see more positive financial results from these efforts. First, I want to discuss our strong focus on cost cutting to return us to profitability. We have a [$20 million expense] reduction program in place. Most of that action was put in place in second quarter and we are taking the rest of the action this month. These reductions are across the entire organization and will target labor reduction and changes to our onboarding delivery approaches. Doug is going to provide more detail in his remarks.

Let me start with some of the challenges that we faced during the quarter. Our 2016 plan calls for a higher level of sales of our traditional services like contact center and direct mail for the first part of the year while we were really working on further developing our data, data analytics, marketing technology and strategy and capabilities to deliver leading-edge customer-centric marketing our clients have been asking for. And really, the bottom line is our sales cycle for these traditional services were longer than we planned and we did not get traction early in the year nor did we have the coverage to overcome some unanticipated volume declines in our mail.

During the quarter, reduced volumes were experienced by few large direct mail clients. Some of the volume decline is driven by the client business fundamentals, some of the shift was to other channels, and some of it was driven by more personalized digital print resulting in fewer targeted physical pieces, which we provide those services for our clients. We did experience higher than anticipated volume declines with two retail clients and a regional bank. [Billed forward to really] stem these ebb and flows and improve the trajectory of this business, we are taking several actions.

First, we are rationalizing our capacity and cost structure to better meet our current level of demand. We expect it to produce cost savings and improve the margins of this business. And then secondly, we are leveraging our analytics and agency capabilities to provide much greater value added to customer direct mail programs with a focus on guaranteed improvement in response rate ROIs and other key metrics. In fact, we just had a key win recently with that approach. However, in addition, we do anticipate volume increases with seasonal holiday direct mail volumes up for the second half of the year. So, typically we do have volume increases. They will continue going into the second half of the year driven by holidays.

As I've communicated, our growth opportunity is to capitalize on clients and prospects, need to shift and transition, and the changing and complex marketing landscape. Many clients do not have the expertise in data management, analytics, the marketing technology, and multi-channel strategy required in today's marketplace to be successful. And we've had recent wins that demonstrate this need. A couple of notable recent logos such as a large regional bank, an online payment company, and an European automaker understand shifts required in their respective marketplace and they have chosen Harte Hanks to help them through this journey. So we're very encouraged by these recent wins.

The challenge becomes as we gain new logo, the initial engagement tend to be smaller in size and over time we will increase our share of the client spend and grow the account. However, when we lose clients, they tend to be long time clients that already have larger spending. Overall, this has positive implications for the future, but in the short-term, it is a hill to climb as we stabilize and continue to stabilize our client losses and grow engagements with newer clients. Our win rates need to accelerate and this is starting to happen through leveraging our most recent acquisitions, Aleutian Consulting, which is now Harte Hanks Consulting and 3Q Digital. Both of these acquisitions are seeing double-digit revenue growth and are helping Harte Hanks position with greater thought leadership and new customer opportunities.

Our go-to-market and marketing thought leadership plan is beginning to produce opportunities in our funnel. Hartehanks.com and our MarketingJournal.org are attracting senior level marketers. We are engaging our targeted audience of marketing VCs and C-level executives and industry-leading content, which is driving a number of CMO level conversations and a key goal that we had set out at the beginning of the year. As we have stated, stemming client loss is a key priority for us entering the year. In the second quarter, we completed another client survey and we're getting invaluable feedback to improve client satisfaction. We really attribute this feedback and our respective action in improving client losses. However, we understand that we still have work in front of us to continue this improvement.

Now, I want to mention a few comments on Trillium. As you know, we announced our plan to look at strategic alternatives for Trillium Software. We feel that Trillium would be most valuable or more valuable and enhances ownership that is positioned to maximize its potential in the growing data quality and data governance segment. Initial interest is strong and we are off to a very good start. We will update you when the process is completed. Doug will discuss Trillium's financials, however, I'm going to mention a few notable accomplishments by our Trillium team.

First, the release of the Trillium TSS 15.3 which includes a new discovery center, which is a browser-based application for profiling features of Trillium. The release also includes several technologies to support Trillium's strategy of employing net native technology to support cloud and software as a service development. Secondly, we released an enhanced version of our Trillium for Salesforce version 1.2, a product that was originally introduced earlier this year. Trillium for Salesforce has a greater improved interface that is native to the Salesforce.com environment. It now includes cleansing, matching, and merging features for accounts, leads, and contacts as well as the ability to process highly refined subset of the customer's data. This gives user a very granular control of the data that they are manipulating. And finally, we achieved some important certification with SAP HANA and Cloudera, [Hive and Spark]. The SAP HANA is SAP's in-memory application server and Trillium was certified with Postal Validation and Duplicate Checking [aertolent search] on the HANA platform. In June, Trillium adapted the Refine product to use [Hive and Spark], a query language for gathering information after a quality project has run. In addition, Cloudera, one of Trillium's Hadoop log data partners certified us on their platform. We also established a very important OEM relationship with [Whitepages Pros]. We believe that these accomplishments will really set us well -- set us for second half of 2016. While I'm confident and believe that we are taking the right steps to continue our turnaround and return to profitability, I'm also aware that this is taking longer than I originally anticipated. We are focused on the profitability and really remain encouraged with recent wins on our go-forward strategy. With that, I'm going to turn it over to Doug to walk you through the financials and then we'll take your questions. Doug?

Thank you, Karen and good morning. As you have already noticed, our second quarter earnings results report our customer interaction business on the face of our financials and the results for Trillium Software is shown as discontinued operations due to our announcement to seek strategic alternatives for Trillium. You can find revenue and operating income results for Trillium in the tables supporting the earnings release. Also, my comments will include some breakout of the Trillium second quarter results.

Turning to our second quarter results, our consolidated adjusted revenues were $97.6 million compared to $108.7 million of adjusted revenues in the same quarter last year. This represents a decline of 10.2% year-over-year. Second quarter 2016 adjusted diluted loss per share from continuing operations was [$0.04] excluding severance, a legal settlement, and database development charges compared to a loss of $0.07 for the same quarter in 2015, which included little bit the loss on the sale of our B2B research business.

Customer interaction revenue declined 10.2% on a constant currency basis and after adjusting for the sale of our B2B research businesses. One of our goals continues to be reducing our client and revenue churn and we continue to slow the amount of revenue loss from existing accounts. Let me walk through the results of this business segment by industry vertical.

Our auto and consumer brands benefited from the implementation of a new entertainment client engaging us to provide multi-channel contact center support along with the expansion of services with an existing multi-national courier services client. Our select markets [pulled a client from a reduction] in contract center work with an entertainment client and reductions in mailing programs for a non-profit organization. Our financial vertical was impacted by mail clients moving their business including a regional bank losing its credit card services partner. This was partially offset by the expansion of lead generation mail work for a bank. The retail vertical continues to be our largest vertical in terms of revenue and is something we're watching closely with back-to-school occurring in the holiday season approaching. We were impacted during the quarter by three large retailers delaying programs and reducing mail volumes. Our healthcare vertical declined during the quarter from the loss of outsourced fulfillment work for a pharmaceutical company. The decline in our technology verticals was primarily driven by the sale of our B2B research businesses.

Turning to Trillium; Trillium Software adjusted revenues were $12.9 million compared to $13.2 million in the second quarter of 2015. Software-as-a-service revenues declined during the quarter due to a non-recurring event closed last year and was offset by increased software license revenues. This business continues to transition to more recurring revenue with our software-as-a-service bookings growing during the quarter compared to last year excluding last year's non-recurring event.

Moving down the income statement. Adjusted operating loss from continuing operations excluding operating income from the previously mentioned B2B research business, severance, and other compensation expenses, and non-recurring database development charges was $3.9 million compared to income of $3.2 million in the same period last year. Reductions in production expenses from outsourced costs and mail supply chain expenses were offset by an increase in sales and marketing expense related to employment of additional sales force personnel. Trillium Software adjusted operating income now reported as discontinued operations was [$3.5 million] compared to $5 million in the same period last year. Decrease was due to the decline in revenues as this business transitions more towards software-as-a-service as most of the costs in this business are fixed.

As Karen previously mentioned, we have put in place a $25 million expense reduction program that primarily impacts labor and selling and general administrative actions. A large part of the action supporting the plan have already taken place and the remaining actions will occur primarily in the third quarter. These actions include lowering headcounts, hiring freezes, offshoring, and rationalizing inefficient redundant processes such as onboarding of new clients. Reductions are occurring across the business and are not isolated or concentrated in any specific functions with the focus on preserving revenue. We are encouraged by the reaction from third parties after announcing we would be evaluating strategic alternatives for Trillium Software. We will not be able to give an update or comment further until we are later in the process. At the end of the quarter, we had plenty of liquidity with over $12 million of cash and over $10 million available under our revolver. With that, operator, we'd like to open the call for questions.

Thank you. (Operator Instructions) Michael Kupinski, Noble Financial.

First, in terms of the vertical, it seems that the healthcare vertical has been the most challenging. Was that just a tough comp from a year earlier Doug?

Partly, but it's also the loss of a pharmaceutical client that we're working through and we haven't annualized yet.

And when do you cycle that? Was it the second quarter or is it going to the third?

It will go into the third.

Okay and then what is the nature of the client losses at this point? Is it pricing? Is it just capabilities? What is the nature of the losses?

Yes, this is Karen. I would say first off, the client satisfaction and just the executive team going out and really understanding what clients that we have issues with. It has gone a long way in helping get passed in action to continue to improve the client losses. In terms of where we've lost clients, recently, I would say it's more around we didn't have the right thought leadership going in to really further differentiate us and we've learned from that. And we are bringing in the consulting organization as well as some of the thought leaders on digital to turn those win rates around. So, I think our loss rates around either way, that's been significant. We're very pleased with that kind of capability that's growing in our Company. We just got behind on the thought leadership piece.

And in terms of the management team, Karen, do you feel like you have the right management team in place to kind of assist the turnaround or what are your thoughts in terms of the challenges that you have given your current management team and so forth?

Yes, if you really separate in a way the products that we have, we do have traditional services like mail and print and getting through just the ebb and flows of the volume is our biggest challenge. We've got some things in place around, as I mentioned in my remarks, really getting our capacity, relative to volume is a key goal, which will improve our margin. We're good in the print business, we're good in the direct mail business and so continue that effort and the expertise we have there is amazing and our clients do appreciate the experience that we have with mail with a very large client.

As we move to this multi-channel data, data analytics world which we were good at, but we need to become better at, I do think that we've got the right key leadership in place now and they are out having conversations that are making clients feel differently about our abilities than they did maybe a year ago. The challenges, the sales and marketing expenses that we added in the last two years has not proved to be beneficial in accelerating the revenue we need and so really sorting through what is the right distribution cost structure to yield the benefit is kind of where we're at right now. If there is one area, I would circle that would be it.

Can you talk a little bit about the pipeline of business at this point and before I think this quarter, you indicated that you thought that you could have revenue growth in the fourth quarter or a turn by the end of this year. Can you give your thoughts about that?

Yes, I'll speak of pipeline and I'll let Doug kind of talk you through how we're thinking about the turn in the revenues. From a pipeline, probably everyone is tired of hearing about pipelines, because it's really about walking the walk. I would tell you that there has been a lot of work in sorting through just the sales and how we think about the pipeline and the pipeline metrics and a ton of work around profitability and how we're out looking our revenue and so that's all going to begin to pay off because the metrics weren't in place that needed to be. I will tell you the opportunities that are in the pipeline are highly more quality than they were even eight months ago, nine months ago and that we really focus at the bottom of the funnel as those opportunities -- and they're growing.

Our real challenge and when we talk about the turnaround that we spoke about first of the year is we had to sell more traditional services and although we are beginning to see that impact, we had that plan much earlier in the year and we didn't hit those sales numbers in traditional services. Part of it execution and part of it just longer sales cycle time and we're dealing with that. There is benefit coming into the second half of the year to resolve that focus. So we did miss our sales plan for the first part of the year on traditional and we set it up that way because from the work that was then going on is how do you go about having these higher level conversations at CMOs, senior executives around the changing landscape, the ability to navigate through the multi-channel and how do I think about digital data analytics customer journey.

We are now getting that work completed. We had demand generation that is just beginning per the plan, second half of the year, but again it's just beginning and we're very encouraged by some really pretty most recent wins within the last month that are beginning to pay off and then the kind of senior level conversations we are having are way different and they're starting to pick up. So we're encouraged by that, that the traditional plan that we had around increased sales just didn't happen first part of the year as we anticipated. You want to talk, Doug, about the revenue (multiple speakers)

For the remainder of the year, Mike, and into 2017, we've obviously made a lot of investment in sales and marketing resources. We have an expense reduction plan in place and are working through some of that and as Karen said, we are not satisfied with the status and the rate of our turnaround plan at this point and we expect to have improvements in the rate of decline in our revenues and we are expecting that we would have revenue improvement with stabilization in revenues obviously more realistically now in 2017.

And in terms of the planned cost reduction, what are the achievable margins that you would expect?

From an operating standpoint or EBITDA standpoint?

Either?

Either; the goal right now is not a specific margin target or number as much as the goal is to reduce the expenses and get the expenses out of the business to match our topline performance and to slowly grow the business and the margins. Historically, the business has been in the low-to-mid double-digit ranges at point. We're not there right now. So we have to start the process, which is what we have commenced on to grow it from where we are and to be able to show steady improvement quarter-over-quarter and grow those margins.

And in terms of FTEs, where are you at right now and where do you think the FTEs will be by the end of the year?

That's really a poor measure. We look more at our dollars because we have sizable production environments with our call centers and our mail facilities, which moves up and down based off the seasonality with back-to-school and Christmas, things of that nature. So we are more focused on dollar expense and what we're paying for the revenues that we're getting than we are on a pure FTE basis.

And just one final question, I know that you're indicating there's not much you can talk about Trillium, but have you been pleased with the amount of interest in Trillium or can you give us any color on that?

Yes, I believe Karen said in her remarks, I said something along in my remarks, we're pleased with how the process is proceeding. We've seen a good level of interest and we will update everybody when there's more tangible news to report about the process on where we are.

Steve Cole, Mangrove Money.

A couple of questions. Doug, I guess one thing I want to talk about is cash flow. I didn't see that or maybe I missed it for the quarter. Maybe you can give us a little bit of color on where would you expect that metric to go on the back half as we start to get these costs cut here and more in line with revenues.

There is some seasonality in our business especially in the third and fourth quarter. With holiday season and cash balances, cash flow increases and [grows, with halt with the] marketing spends that occur again tied to the holiday season and back-to-school, we ended June with roughly -- sorry almost $13 million in cash, debt is down year-over-year or I'm sorry since December 31 by about $8 million and we have over $10 million available on our revolver. And for the second quarter from a cash flow standpoint, we were essentially flat.

So you'd expect cash flow to be meaningfully positive for the back half of the year? Is that right?

Yes.

Let me talk little bit about, Karen, about sales and marketing because this has been one of the crux of the turnaround. So you've been dumping a bunch of money in and granted we haven't seen the payback. I guess I'm just curious as you guys have looked at it and done the surveys and what have you, what is the problem? Why aren't we getting traction? What can we do to change that approach on sales and marketing? What's worked? What hasn't? And what needs to happen? Because I understand on the digital side, you guys are getting traction on the acquisitions that you've made. I'm just curious what needs to happen to fix this so we can finally start to see some pick up?

Yes, I appreciate that question. I'll talk about it not really in any certain priority, but a couple of things. First off, we are getting -- we continue to perform well with those 3Q Digital and the consulting organization. Consulting has been key as well as 3Q, but as we enter into especially new logo conversations, it's all about that thought leadership and how you bring that different conversation into a CMO or a senior executive of a business and we were lagging on that until that acquisition. We are seeing when that -- when the consulting group is involved, we have a higher win rate. So part one there is to really accelerate that thought leadership capability.

Secondly, the other thing I would tell you is that some of our product capabilities have fallen behind. Database, in particular, which we now have a strong plan. It has been declining and then with that goes data analytics. So we have a plan in place where we are putting -- we're moving, we been moving new clients to move into the cloud, we have a new infrastructure and with that comes some really the data ecosystem that starts bringing in the golden records and the analytics capability and we're gaining good traction.

We do have a number of clients that are still on old environments that we've been working through. Doug mentioned, one of the more challenging expense areas is the client that we on boarded nearly a year ago. We've had to use a different approach. So now that we've got the right leadership on database, that's all turning in the right direction. If we stabilize that product as well as in -- both with the data analytics, that will make a huge difference in our ability to accelerate the revenue we need, which has really little to do with sales because these then have products that are really capable. And so we're getting those back up and then our new go-to-market where we bring in not just data, data analytics but really the planning around multi-channel and the customer journey and this approach that we have around is [half] done is making a difference. So getting all those wheels in motion at once are important and then I would say from a sales standpoint, we just got to get ourselves more productive. Getting them out of the process earlier they stay in because they are concerned about getting the clients on boarded correctly and that's why we've got all this work going around onboarding and getting our seller back into the next opportunity. So there is some strong work happening of getting our hunters really hunting as opposed to staying way too long into a client organization. (inaudible).

And when you encapsulate the successes that you're having, I know we talked about some of the challenges but when you look at bookings, Karen, I understand the issue with the legacy folks being bigger initially and taking time to ramp the new ones but what can you give us, some comfort, obviously last quarter, you felt reasonably positive that we would see some pickup towards the fourth quarter year-over-year growth or at least teetering towards that and now that's shuffling a little bit, but what are you guys seeing, what metrics are you looking at that are giving you comfort that what you are doing is working right? So, I know you've talked about improving the product and what have you, but obviously you guys are seeing some real-time stuff and I thought, are you getting visibility three months out, six months out, maybe you can speak to that on where we are in that process and how much comfort can we have that we are actually -- it's where are turns there, we just haven't seen it come through the numbers completely yet.

I would say a couple of things. We had to -- is really brand awareness, thought leadership awareness we didn't have in the market. So some of that marketing investment, we just started the demand generation. So that MarketingJournal.org and we completely -- you can see the numbers, the hits going up and we've had some direct reach out to CMO's that we don't relationships with, that actually are reaching back in and responding.

Hopefully, we'll give you more a color around that because there is a few that we're really excited about. So that work is starting to -- investment is starting to pay off. Again, the plan first half of the year was to sell more traditional services and we just did not get the start that we needed, should have all that and the sales cycle has taken a bit longer as the new stuff is coming on and when I say the new stuff, the retooling of the database. So you got the thought leadership, really retooling of our database business, which can and will grow, but we had to take care of certain clients and get an infrastructure that's more modernized and really more efficient. So you'll see with that margin improve and then getting the analytics piece of that squared away in terms of all the third party data that we can bring into our clients to help them think about their customer journey in a different way. So we're seeing the next -- myself and all the senior team is out having conversations and I feel differently (technical difficulty) conversation and the response from our clients and let's do this next step kind of thing, it's beginning to happen.

And last question, just turning to Trillium, I know that the migration -- the shift to SaaS kind of obscures the numbers a little bit. Can we see some comfort for example, Doug, I'm looking at deferred revenue growth or what can we look out there that, that transition is actually moving along. I know you had an extraordinary item last year, but if we back that out, are we seeing growth in the core deferred revenue adjusted, I know there is some seasonality in that obviously as contracts come up but what comfort can you give us that, that business is actually doing what it should be doing?

We actually internally -- deferred revenue is one metric that folks look at, the other one that we pay more attention to at this point is bookings or sales as opposed to the revenues and when you adjust for the event last year, we do have bookings growth in our SaaS line and our SaaS product. So it continues to grow and expand as do the revenues once you adjust for those one-time events, but deferred revenue can move up and down because of maintenance contracts and other stuff. So we pay more attention to the sales or bookings metric, which is growing.

Is it growing double -- can you give us some color? Is it growing 1%, 10% or how would you characterize the growth rate?

Yes, it varies obviously month-to-month and by quarter, but for the second quarter, you're talking about a number that was in the low-to-mid single-digits.

Al Tobia, Sidus.

Assuming that you've got some pick up in the second half from some seasonality, I guess I'm trying to understand at around this level of revenue, you've got some legacy type of customers that are either declining in terms of their use of mail in the first half of the year and some new wins that are ramping but slower than the old ones are declining. When you say that maybe the revenue grows sometime in 2017, not in Q4, can you give us any other details on that? Like is there a piece of the business that is a growth piece that's sort of X percent of total and then there's an X percent at legacy and how do we know how much sort of revenue is at risk to the clients because you obviously had to take layoffs [and kept your expense base down $25 million]. So I assume you have some idea. Can you just give us some -- shed some light on that?

Yes, we talked about it a little bit and then our digital offerings with like 3Q Digital, the consulting business that we recently purchased along with what we described as our agency services, account management, creative, those type of things. Generally, this year had been performing well and have been growing. We have been struggling from a product standpoint in our mail area and when we talk about the traditional marketing channels versus the more digital stuff, our traditional lines, which are generally the contact center work that we do and the mail services that we provide are roughly 60% of our revenues and the more digitally-related offerings, the agency, the database type offerings, the data work that we do, the analytics and the consulting strategy is roughly 40% of our total revenues.

And so when you look at what's in the pipeline and how it rolls out? How much do you feel like as business that you can sort of forecast as you look forward and then now that you've met with more and more customers, what's the sense in terms of at-risk revenue?

The trait within our business is that most of our contracts don't have volume guarantees. They have pricing commitments depending on the nature of the service and what we're doing, if it's an hourly rate for data or for agency type work, maybe per mail piece, something on call center, number of heads or per phone call. So our clients have the ability, which is not unique to us, it occurs across this industry because it's for competitive reasons that we have to do this as our competitors are doing the same thing. Our clients can, will, and do change their volumes periodically and they do it quickly. So even right now as we're talking to you in early August, our clients will make final decisions and will change their holiday spend plans as late as early November. They communicate to us for scheduling reasons both for us and them to make sure we can handle the volumes and we have the right people trained and up and running to handle their work, but they do have the ability to make changes I would say 30 to 45 days out from when they are going to actually run a marketing piece for the most part.

Okay, maybe a question for Karen, just sort of asking this in a little different way. The Board made a decision to sell the software business and you're going to incur some form of a tax hit in order to effect that -- when the sale is effected. I mean I know, Doug, you had mentioned you wanted to moderate the tax hit somehow and that you were looking at ways to do that, but let's assume you are going to pay some level of taxes. The decision to pay those taxes indicate something about the base business, otherwise, it would be easy just to sell the whole company. So I guess, question is, was it in fact considered and is that tax burden that you are overcoming still something that you think you can basically overcome by raising the value of the base business?

Yes, I'll let Doug get on, I'm not sure if I completely understand the question, but obviously, anything that we can do to minimize the tax would be a priority. We'll see how that all works out. Back to the decision to look at alternatives for Trillium, I mean as I came into the business, it was clear to me that, the great thing with Trillium was it was organically growing which proves the value that our employees over the years have found niches and opportunities to grow the business.

The opportunity is that data quality and data governance is such an evolving area just like on the other side of the house, this marketing landscape changed, so we have two growth potential opportunities and it was clear to us that Trillium really was more -- it became more of a software enterprise kind of company which we're not and the use cases were well outside marketing these cases, I mean especially in financials and regulatory municipalities, government, you name it and even like the Internet of Things come along and so it was very obvious to [nearly] allow Trillium to gain the potential that it can and will, it was better in an enterprise software kind of -- and we will see again, good strong interest in the beginning. We'll keep you updated.

That leaves us with the upside opportunity in navigating this marketing landscape or marketing CMO key leaders but we still do have (inaudible) to drag on the legacy revenue, which we're working through with some creative things that we could do there. So encouraged by the upside and obviously huge respect for the legacy business that we continue to have, that are being impacted by volumes from clients trying to decide -- as the more diversified we can get our client base as you know, we do have with fairly high percent of retail clients. The more diversified we can get in our client coverage is a good thing and you'll see more conversation in the coming months about how we are doing that.

There are no further questions at this time.

All right. Well, I appreciate the time today. Again, we will keep you -- communicate any updates that we have when we're through the Trillium process and we look forward to talking about third quarter in the coming months with you. Thank you.

That concludes today's conference. Thank you for your participation, you may now disconnect.