Harte Hanks Inc (HHS) 2004 Q3 法說會逐字稿

Good morning and welcome to the Q3 2004 earnings release call. At this time ll participants are in a listen-only mode. After the presentation we will conduct a question-and-answer session. [Caller Instructions] Today's conference is being recorded. If you have any objections you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Mr. Richard Hochhauser, President and CEO of Harte-Hanks. Sir you may begin.

Thank you, operator. Good morning everyone. On the call with me today is our Chief Financial Officer, Dean Blythe, and Jessica Huff, our VP-Finance and Controller. The comments we make on this call will include forward-looking statements that involve a number of risks and uncertainties which can cause actual results to vary materially. After I make a few opening remarks, Dean will give some financial details and then we'll take your questions. We're very excited about our performance in the third quarter which was a continuation of our first two quarters results. Overall, operating income was up 13% on strong revenue growth of 9.7%. Earnings per share grew to 29 cents from 26 cents, up nearly 12%. Our earnings per share are up 10 cents, or 14.5% year-to-date over the prior year. In the quarter we generated $26.8 million of free cash flow which we define as net income plus depreciation and amortization, less capital spending. We continue to be a strong generator of free cash flow with 69.4 million generated year-to-date compared to 59.7 million last year.

Direct marketing operating income increased 19.3% on revenue growth of 9.8%. We're especially pleased with our margin improvement over last year which we have set as a goal for our direct marketing business. All of our vertical markets again had positive growth-- year-over-year growth and three out of the five verticals are up double-digits; the remaining two in the mid-single-digits. Shoppers had another great quarter with operating income up 11.1% on revenue growth of 9.6%. Shopper revenue exceeded $100 million for the quarter for the first time in our history. Revenue was helped by our continuing circulation expansion with expansion circulation of 148,500 during the quarter to bring the total year-to-date expansion to 600,000. In the fourth quarter, shoppers is coming against a difficult comparison to the prior year as the fourth quarter of 2003 had an extra publication week. Because of this and the negative expansion has on margins, we do not expect the same strong performance on a year-over-year comparative basis for shoppers in the fourth quarter. But make no mistake about it, we really like this business and our people know how to operate it.

With these last two quarter's performance, we're seeing both of our businesses performing well; top line growth, bottom line growth and margin improvement. This is the first time since 2000 that this has happened. Our direct marking business is rebounding. We're offering the vertical markets we serve the solutions they are seeking and need. And our shopper business continues to offer the unique combination of reach, frequency, and targeting that delivers cost effective results in terms of traffic and sales for our advertisers; with an increasing circulation base from our contiguous geographic expansion initiative. Before I turn it over to Dean, let me summarize on a few key points.

We said that the environment in 2004 is better than the past three years but surely not as strong as it was pre-recession. Yet our people turned in an outstanding third quarter and first nine months. We continue to be on the right track to have a successful year. Direct marking, we have had consistent revenue growth for a number of quarters now and we're thrilled to see the progress that has been made on margin improvement in each of the pass two quarters. Also our revenue growth in all verticals was really exciting. The expansion of shopper circulation is continuing and we're excited with the progress. We're building real value and our consistently strong performance suggests that our people are making it happen. Our goal is to keep getting better by meeting and exceeding the needs of our clients. As the recession took it's toll on our direct marketing business, we have each of the goals we have sequentially set for ourselves. First, revenue stability, then revenue growth, then faster revenue growth, then margin stability and now margin improvement.

And while each of these seem pretty basic, I want to tell all of our people how proud I am of them for making it happen. And make no mistake about it, our goal is to keep getting better by meeting and exceeding needs of our clients. In fact, our goal is to make it happen for all of our stakeholders. It's something we take very seriously. Dean over to you.

Thanks, Richard, and good morning. As Richard indicated, we did have a very good third quarter. Here is a companywide overview. Revenue up 9.7% for the quarter with strong revenue growth in both direct marketing and shoppers. Direct marketing revenue was up 9.8% and shopper revenue up 9.6%. Companywide, operating income was up 13% for the quarter. The increase in operating income was driven by both direct marketing and shoppers. Direct marketing operating income up 19.4 % while shopper operating income increased 11.1%. Operating income margins increased 50 basis points overall, with direct marketing up 120 basis points and shoppers up 30 basis points. Companywide operating income margins were tempered by an increase in corporate expenses which was primarily driven by higher incentive compensation expense related to the Company's improved performance relative to last year as well as increases in professional fees. The companywide increase in year-over-year labor expense as a percentage of revenue was also largely due to the higher incentive compensation expense in this year's quarter.

Free cash flow, which we define as net income plus depreciation minus capital expenditures was 26.8 million in the quarter versus 21.4 million in the third quarter of 2003. In this year's quarter we spent 5.8 million on capital. Based on our year-to-date capital expenditures and the timing of certain projects originally slated for the fourth quarter of this year, we now expect to spend for the year somewhat below the $40 million range we had previously indicated as our projected as capital spending for 2004.

Looking at each of our businesses individually. For the third quarter of 2004, our direct marking revenue was up 9.8% and operating income up 19.3%. Our focus has been on improving the profitability of our direct marketing business and we are seeing progress here with margins up 120 basis points year-over-year. Operating income margins were helped by lower depreciation costs and lower production and distribution and general & administrative expenses in relation to the increase in revenue. For our vertical markets in direct marketing in this quarter, retail represented 26% of direct marketing revenue, high-tech telecom 25%, financial 20%, select markets 18% and healthcare/pharma 11%. International business in the quarter was 8% of our direct marketing revenue. Our top 25 direct marketing customers represented 40% of direct marketing revenue for the third quarter. Our largest customer represented 8% of our total direct marketing revenue.

Turning to shoppers, we had very good revenue growth in this quarter of 9.6%. This growth, which is above the 6.8% revenue growth target we had discussed, was driven by strong growth from our existing circulation as well as revenue from the expansion circulation we have seen over the past 12 months. With had strong growth in both ROP and distribution products. Within ROP, real estate and employment-related advertising, again, were especially strong. Fourth quarter comparisons, as Richard indicated, will become more difficult. Particularly as a result of the 53rd publication week we had in 2003 which resulted in 14 publication weeks in the fourth quarter of 2003 versus the 13 publication weeks we will have in the fourth quarter of this year. For the quarter, shopper operating income increased 11.1% compared to the prior year quarter with margins up 30 basis points over the prior year at the operating income line. During the quarter we expanded into 148,500 homes in California and Florida, for year-to-date expansion of 600,000 circulation.

As we have previously stated, newer zones initially tend to contribute less from a revenue per thousand perspective than existing zones and, in fact, are typically expected to lose money at the beginning. Therefore, the expansion past hampered existing margins, although during the quarter and year-to-date, absolute margins in shoppers have improved. But this will exert downward pressure on future margins as we continue our expansion.

On the balance sheet, at 9/30 we were showing a net debt balance of $1 million. Book equity at September 30th was $555 million, net accounts receivable were 182 million versus 153 million at December 31, 2003. DSO at the end of September was 63 days against 55 days at September '03. Looking at our statement of cash flows, net cash provided by operating activities for the quarter was $15.3 million. We repurchased 1 million shares during the quarter bringing the year-to-date total to 3.1 million shares repurchased. There are approximately 6.1 million shares remaining from repurchase authorizations from the board. Since January 1997 the Company has acquired approximately 38.8 million shares split-adjusted under it's repurchase program and spent over $630 million under it's repurchase program. With that we'll be happy to open it up for your questions.

Thank you. We will now begin the formal question-and-answer session. [Caller Instructions] Fred Searby of J.P. Morgan you may ask your question.

Great quarter, guys. Thank you, I feel honored here to have the first question. First, you know, margins are expanding nicely in your direct marking business. Can you just give us some sense as to what's happening with price or is it just really more fixed cost dilution as revenues have ramped up here? And then, secondly, can you give us an update on, kind of, new channels, you know, interactive and e-mail and stuff seems to have been stalled at one point and what your clients are saying as we see the share shift towards measured media.

Well, let me see if I can jump in at least with the second part of that question. We have, probably for the last seven or eight years, talked about online being an important component of the direct marketing business and just that, a component of it. We still believe that. We are seeing a little bit more activity in the online area than we have in the past, but no major shifts; and certainly the slope of increase is nowhere near the slope of decrease that we saw a couple of years ago. And Dean, you want to tackle the first part of the question.

Fred, I think you asked about what was driving the margin improvement? I think the margin improvement is being driven by, probably, three things. It's being driven by, you know, adjustment to our fixed cost structure in connection with primarily some facility consolidation. Also by efficiencies in what we are doing and how we are producing. It's also driven by us selling higher value added services. I think from the perspective, it is not being driven by, I think, price increases from us.

All right. Thank you.

Alexia Quadrani of Bear Stearns you may ask your question.

Good morning and a wonderful quarter. I had a couple of-- first I guess a follow-up question on Fred Searby's point on the margins. We've seen an impressive turn around here. My question is, how far more do you think you can go on the direct marketing side? Is there sort of a goal that you have, do you feel that it's a question of where the revenues go or do you think that the costs will be cut further? I mean, I guess if you give us an idea of what the upside is longer term on the profitability?

Well, I will give you a headline and then Dean might want to add to it. As you probably recall, the margins were at their highest during the initial part of the slow down when we had a pretty significant cost decline. And our goal is to work our way up toward that number but, you know, that was a little bit artificial given the climate. So, we're well on the path to doing what we have said we want to do. In fact, maybe even a little bit ahead of the game now; which is sort of nice. But we do-- there is room for more margin expansion. That's going to come from a combination of strong revenue growth, which will help us, and a continued focus on the business fundamentals to drive margins.

And, Richard, do you have some sense, or is it too early in terms of what your clients are generally thinking; again on the direct marketing side in terms of budgets and marketing spending for 2005?

We--it really is too early. We are starting the process of '05 planning ourselves, next week actually, and it goes for about a five or six week period. And during that time we'll get to understand a little bit better, at least I will get to understand a little bit better what the marketplace is telling us. So I think it is a little bit early for that.

And just last question on the retail category which seemed to do much better this quarter in the direct marketing business, is that a sustainable turn around?

Well, you know, first of all it's really nice to see. I think the economy is healthier and retail is in reasonable shape and so we saw some increase. You know we have a significant presence in that market and we're going to benefit by some of the cycles that that market has. Is it sustainable to the extent that retail stays healthy, yes it is.

I guess a different way to look at it, I believe some of the issues in there that plagued the retail market were company specific. Do you find you've circled through some of those issues or do those clients themselves seem to be spending more?

We did see some increase in client spending. We also did close some new business in retail. So our growth came from a combination of those factors. And cycling through, you know, I wish I could say that we've cycled through everything but each year there is another cycle to go through. Whether it's a surprise bankruptcy or it's a change in ownership or a change in management. And we've talked about these things on these calls, it's pretty hard which is why the business is hard. But we're holding our own now and beginning to grow a little bit and I'm really pleased with the results.

Okay. Thanks very much.

Lauren Fine of Merrill Lynch, you may ask your question.

Oh thank you. I just have a couple of questions. First of all, did the hurricanes in Florida cause any, you know, negative impact at all on your shopper business? And then, secondly, also related to shoppers, is there a way to break out the growth rate of the existing shoppers or shoppers that you've had, you know, circulation that you've had for more than a year or two; as opposed to the contribution you might be getting from the new expanded circulation? And then I have a follow-up question.

I'll try the first one and Dean maybe you can tackle the second one. We did have some impact from the hurricanes in our shopper, as well as number of our direct marking operations, and those were due to scheduling related issues because the hurricanes creates havoc with people's schedules and people go home and work doesn't get done and then it goes into overtime and all those sorts of things. But our people did an awesome job in dealing with the realities of those production requirements, both in shoppers and in direct marketing. And also dealing with the issues of profitability of safety and I'm very proud of what we did in the state of Florida this year. It did not have a significant enough impact for us to be talking about numbers and, of course, numbers are hard to get at anyway; but our people just did an awesome job. Dean?

Yeah, Lauren, I think in terms of the driver of the shopper growth, obviously, we had it was a 9.6% revenue increase in the quarter, which is-- we had talked about a 6 to 8% over a period of time as the top line growth target. You know, our existing circulation growth, you know, by itself without the expansion met that target. So, it was really, there was certainly contribution from both, but it was--we had very strong growth from our existing circulation in the quarter.

That's great. Thanks.

And we do know that--as you know, the newer circulation contributes significantly less than the older circulation and then we do look at those numbers.

Okay, and then just a follow up. Is there--I know you can't be specific, but are you seeing any opportunities on the acquisition side?

There's a pipeline. There's always a pipeline. And we continue to be diligent about making sure that we're out there looking, that we're doing our evaluation and, you know, we don't usually say very much more than that.

No, that's fine. As long as you're finding things out there go for it. Thanks a lot.

Thank you.

Chris Owen of ThinkEquity Partners, you may ask your question.

Yes, good morning. I realize you haven't gone through your 2005 planning process, but you do seem to suggest that the current business momentum in direct marketing is sustainable. Could you just elaborate on your confidence? Are you seeing existing client spending accelerating? Is it mail volumes?

Richard, you want me to take a--

Yeah, go ahead.

I think, you know, we do look at our revenue in terms of, you know, our existing customers spending more, spending less; as well as, you know, new business net of loss business. And I think the primary driver of the growth in this quarter was our existing customers spending more which, if you looked at the prior quarter, it was kind of split between existing customer spending and new business. But I think we saw some acceleration in our existing customer spending in the quarter?

Okay. And another question, just on your accounts receivable, it looks like that increased somewhat more than we had anticipated sequentially. Can you help us understand that?

Hey Chris, I think that's with, you know, with the strong revenue quarter, I think it was this, you know, the momentum during the quarter, the distribution of revenue throughout the quarter which the way we calculate obviously impacts. We had a couple of items-- particular customer items that actually have come in. And these were more logistical issues as opposed to credit issues or dispute issues. Those have already been collected since the end of quarter, that drove it up a few. So I think this is a little bit of an aberration and I expect to see that number come down.

Thank you.

Mark Bacurin of Robert W. Baird & Company, you may ask your question.

Good morning, congratulations on a good quarter. Just to follow up on that AR question for a second, Dean. Are you saying that you expect to see positive working capital adjustment related to the AR balances in Q4?

Mark, you know, I did not say that. I said I think it was a little bit of an aberration in the third quarter and I expect to see that number come down. From a timing perspective, I can't predict whether that's going to occur in the fourth quarter.

But it is fair to say these are timing issues and you guys haven't loosened your credit terms or anything that would cause concerns--

That is correct.

Okay, fair enough. On the-- you know, it was impressive, I guess, to see the improvement in the shoppers margin despite the fact that you guys are adding circulation. I'm just curious, if there's anything specific to what you guys are doing in that business that's allowing the margin improvement there?

Well, Dean, you should answer this question but I want to, once again, to those shopper folks that are on this call say thank you for doing just an awesome job for so many quarters in a row. Dean, you can get to the substantive part of this thing.

Well, I mean, if you look at this business over the past several years, it has some significant margin expansion, probably in the neighborhood of 100 basis points for four or five years in a row. Our revenue from existing circulation continues to grow and have strong growth. And obviously there's higher incremental margin on incremental revenue and, you know, we started out the year saying, we know the downward pressure from expansion revenue and we also know that the natural rise in margin from the existing circulation; and it just so happens that with the strong growth in existing circulation that it's cancelling out the downward pressure and we're showing positive leverage and margin improvement.

That's great and then just maybe a couple quick ones. On the-- you mentioned a million shares bought back in the quarter but could you give us the actual dollar amount spent there.

Yes, I can.

It's 24,079,000.

That was Jessica. Did you get that?

Great. The 24.79?

24.079.

079, great. And then just real quickly. No mention of guidance. I know you're not ready to talk about '05 guidance, but you didn't sort of reiterate the guidance for fiscal '04. Is that just because you didn't want to get specific on Q4 guidance?

I think the answer to that is yes, I mean, I think as Richard was quoted in the press release; and Richard, if you want to talk about it. I mean, you know, we have seen trends in our businesses and we see those trends continuing in the base business.

Yes, the quote specifically says that with we feel good about the trends in our business continuing and we do. We do know though that we're coming up against the realities of one fewer week in shoppers. And we've said it a lot of times, it doesn't bear repeating, but it is a factor and if--I know when you look at numbers it's hard to remember all the issues out there. But that's going to be a big one for us to deal with.

Great. Thanks.

Bob Vutel of MD Sass, you may ask your question.

Thank you. It was answered already. Thanks.

Mike Kupinski of A.G. Edwards, you may ask your question.

Thank you and congratulations every at Harte-Hanks, you did a great job. Pretty impressive growth in direct marketing. We there any particular spikes in revenues related to software sales. I know most of that falls to the fourth quarter. Was wondering if you had any Trillium sales or so forth that would have accounted for a little bit stronger growth there.

Mike, this is Dean. It was not particularly driven by our software sales growth. We obviously had some from our Avelino acquisition, we did have some incremental revenue that we certainly wouldn't have had in the third quarter of 2003 since we acquired the business in March of 2004. But, there is--from the Trillium sales itself, that was not the driver of the growth. It was kind of commensurate with the overall growth.

I believe you do a little bit of work with charitable organizations and the government. Were there any advocacy or political dollars in the third quarter that may not be there next year.

No, that's not a part of our business.

Okay.

We do do some government work, but it's--

Not political?

Okay. Just thought I'd ask. Then on the-- obviously the payroll expenses were up quite a bit and, obviously, you've gone through several years of no bonuses and so forth. Can you give us some outlook in terms of how we should gauge payroll expenses as we go into the next quarter or into 2005? Is there any metric or something that we should look for there in terms of revenue growth or how compensation is paid?

Mike, I don't know-- certainly for the fourth quarter I don't have any specific guidance to give you. You know, I think we indicated in my comments, that the--as you indicated, the relative better performance has resulted in higher incentive compensation. Accruals and payments in 2004 versus 2003. That has really been the driver of the negative leverage at the labor line. So I think on a going-- and we were going against a year where there were very low payments--incentive compensation payments. So I think on a going forward bases, at least your base is looking different in '04 than it looked in '03.

Assuming that we continue on this type of trajectory, would you expect that we cycle through that then through like the first half of next year? I mean, should we look for an elevated payroll expense through like the third quarter of '05?

You know, Mike, I really can't--I mean other than the comment that obviously the base in '04 will be-- will have those incentive compensation payments in it whereas the base in '03 did not. You know, and I think you can draw your own conclusions about-- about '05. And part of that's going to depend on our relative performance in '05 versus some pretty aggressive targets I'm sure we'll set for ourselves.

Okay. And then finally on the CapEx, you mentioned it's going to be lower than the 40 million in your previous guidance. Looks like you're on pace to be closer to about 30 million, do you think it will be closer to the 30?

I think it'll certainly be between those and-- but, you know, some of it-- it depends on the timing of certain projects. I thought we were going to spend a little more in the third quarter than we ended up spending. So, some of these projects, it's hard to tell whether they're going to get in and capitalized in December or in January. It's certainly going to be north of 30 and certainly below 40.

Okay terrific, thanks.

Lilia Kozicky of SunTrust Robinson Humphrey, you may ask your question.

Thank you and congratulations on a wonderful quarter. First question, could you give us an update on how your color in book inserts are progressing and client receptivity?

The color in book and inserts are two different kind of things. The inserts that are put into our shoppers are one part of the revenue stream and the addition of color in the book in ROP is another part of our revenue stream. I don't have exact numbers at my finger tips, but I do know qualitatively that we are having success with color-- from a revenue perspective and profit perspective. I do know that the readership scores that we look at are improving. Now, it is very difficult to isolate one factor like color to say that's the reason, but you know, in the mix of things, it's comforting to see better readership. And perhaps color has played a role in that as well. So it's achieving the two primary objectives that we had, the book looks better and therefore is being read more and we're generating revenue and profits from it.

Great. And then just a question on direct marketing. Can you comment a bit on you direct marketing mix between CRM and marketing services and how this is contributing to margin improvement? And then, secondly, you've seen a nice ramp this year in select markets. And what does this reflect and how do you expect this to be trending in the future?

I'll answer the second one, again and, Dean, maybe you can get to the first one.

Okay.

The select market group was created a number of years ago-- four, five years ago and it was created out of our belief that we needed to look beyond the verticals that we had specific expertise in and expand. And while we had desire to focus on our existing markets, we wanted to add more. So we created an organization that was devoted to looking beyond the verticals that we were really good at, the one that you're familiar with: retail and financial and high-tech and pharmaceutical. So we established it and we have had success with select markets. It has come from a number of different areas. We have talked publicly about automotive, though that was not a particularly strong driver of this quarter's results, it has been a strong market for us. But there are others as well, and we're hiring people with specialties in different parts of those markets. We're not breaking out the revenue, we're not talking about the specifics of it. But it's serving us well and because the potential is unlimited there we feel really good about our continued growth.

Great and the second question.

Yeah, could you refresh--it was about, I think it was about the growth between marketing services and CRM, was that the question, Lilia?

Yeah.

Okay. You know, we no longer break out our business in direct marketing between those two subsegments and it's more because as direct marketing evolves and as we evolve we view it more as an integrated solution offering. I mean, if you look at the way we describe our direct marketing business with the five solution sets represented by the steel balls in a circle; you know, we had growth in all of those areas. So I don't think from a marketing services versus CRM perspective, it's very difficult to draw the line the way we used to. The way we're going to market and the things that are being purchased. But we had growth across, as I said, all of those solution sets in the quarter.

Great. Thank you. And congratulations once again.

Thank you.

[Caller Instructions] Troy Mastin of William Blair & Company, you may ask your question.

Good morning, thank you. It seems like there are probably three likely drivers of the strength in the direct marketing business, at least from my perspective. Overall improvement in the marketing economy would be one. Secular trends, a shifting to accountable media maybe due to the do not call list as well, and then the third one being market share gains that you might be getting. I wonder if you could give us some sense as to which of those is more prominent in driving your results; if you have any idea. And if there is a cycle to any of these, where we might be in that cycle?

Well, starting backwards, the cycles are pretty difficult because for us we went for over a decade without a cycle and it was pretty unusual. Of course our business was a lot smaller at the beginning of the 90s until the recession hit in '01. So cycles are pretty difficult to figure out, though I do think, and we have stated, that the improvement in the economy has certainly helped us. I also think that in some areas, at least, we are winning some share. It's very difficult to know because it's hard to measure. But the growth, for example, that we've seen in the high-tech space certainly suggests that we're winning share given the overall growth of that market. So I'm feeling good about our share performance as well.

And the secular trends, you know, we've said that we really--we really haven't seen a lot of it. I've heard a lot of people talk about it, but we haven't seen a lot of it. And if it's there, it's there, I think. in a smaller proportion perhaps than the other two-than the economy or winning market share. Dean you want to--

I mean, I just think of that, Richard, you know, I don't think we can-- from a secular shift, we certainly hear what people are talking about and reading about but I don't think we can trace the growth to that. I think that just takes a longer period of time to understand if that's what's going on.

Okay, great. Second question if I may. There have been quite a few acquisitions in this space. I guess there's been a fairly meaningful one recently. Any idea as to how this is having an impact on your business, if at all? And then also your position toward acquisitions. Maybe in terms of where you might be focused on a going-forward basis. Has that changed at all seeing that some of your competitors are acquiring more aggressively internationally?

Well, we have certainly an eye toward the world as our market. It's easier to run companies in the United States with a lot of our senior management here, but our worldwide view is very real. And to the extent that opportunities exist outside of the United States we will take advantage of them. Because other people are buying companies does not put pressure on us. That pressure can yield pretty sad results we have found in watching the behavior of others. And so we're going to continue to be very diligent about our philosophy in acquisitions, which is to see if we can add to the capabilities of our company, or strengthen or add to the existing vertical markets that we serve. And we will continue looking at acquisitions. And I said there is, in fact, a pipeline for those acquisitions.

The other side of that, then, if you break it down by business, we have said that while our priority is in direct marketing if there was an acquisition in the shopper area that was an unique one, that if it went away it might go away for a long period of time and we wouldn't want that to happen; we'd take a look at that as well.

In terms of your acquisition pipeline or though process towards direct marketing, has the mix changed at all in terms of your focus between domestic or international? Or is just opportunistic as you see the chances?

Well, you know, our revenues-- and it's mostly Europe now when we talk about International; though we have revenues in many places throughout the world, but it's mostly Europe. That economy for direct marketing has not been robust. It had the same recession that we had, in fact, it was perhaps even a little bit stronger from a direct marketing perspective. We have managed to maintain the percentage of our revenue throughout that period and, in fact, are seeing, perhaps--and Dean, you can correct me if I'm wrong. But perhaps a little bit of incremental growth versus the rest of the world or the U.S. mostly. And so, we're winning in Europe without acquisition.

And then on my first question relating to some of your competitors that had been acquired, the two that come to mind are a major software vendor that's competitive with Trillium. I forget exactly how long ago. But then very recently a database marketing provider. Have you seen anything positive or negative from these or is it too tough to tell?

Well, you know, I think you're referring to Epsilon and Alliance Data Systems that announced their purchase of Epsilon. We compete with Epsilon on deals from time to time, but we don't see them as frequently as we see some other competitors. And we really didn't view Alliance Data Systems as a competitor before this, clearly we'll change that view now. I don't think it fundamentally changes our approach to our strategy or our execution.

Thank you.

There are no further questions at this time.

Well I just want to say thank you to all of those who congratulated us, we appreciate it.

Thanks very much.

Bye.