Harte Hanks Inc (HHS) 2007 Q1 法說會逐字稿

Good morning, everyone. Welcome to the Harte-Hanks first quarter earnings conference call. On the phone today is Mr. Richard Hochhauser, President and CEO of Harte-Hanks. Today's parties will be on listen-only for the conference. (OPERATOR INSTRUCTIONS) Today's conference is also being recorded, and if you have any objections, you may disconnect at this time.

I would now like to turn this morning's conference over to Mr. Richard Hochhauser, President and CEO of Harte-Hanks. Mr. Hochhauser, you may begin.

Thank you. Good morning. On the call with me today is Dean Blythe, our Executive Vice President and Chief Financial Officer, and Jessica Huff, our Vice President -- Finance and Controller. I also want to welcome Bryan Perchersky who recently joined us as the Senior Vice President, General Counsel and Secretary.

Before I begin with my remarks, Bryan will make a few statements.

Thanks, Richard. The comments we make on this call will include forward-looking statements. Examples may include statements about our strategies and initiatives, financial outlook, competitive factors, business and industry expectations, and other statements that do not relate strictly to historical facts. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those projected or implied in the forward-looking statements. A description of some of the risks and uncertainties potentially impacting our business and future performance can be found in our most recent Form 10-K and other documents filed with the Securities and Exchange Commission and in the cautionary statement in today's earnings release.

Our call may also include a discussion of certain 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 Relations section of the website at www.Harte-Hanks.com.

I'll now turn the call back over to Richard.

Thanks, Bryan. After I make a few opening remarks, Dean will give some financial details and then we'll take your questions. Our earnings were softer than we had hoped they'd be, though we did expect a difficult Quarter 1. For context, in 2006, we had a strong first quarter as we hit the 2005 EPS level despite additional stock expense and the very big one-time project in 2005. We also had the Tampa acquisition positively impacting our performance. But the list of excuses can be long and we need to do better.

On the positive side for Quarter 1, 2007 financial performance, cash flow was up and revenue and EBITDA margins in Direct Marketing continued to get better. Our verticals in Direct Marketing did reasonably well and we're generally happy about the new business growth though we had some problems in the on-boarding of our new clients.

In Shoppers, the downward trend observed in the fourth quarter continued into Quarter 1 and while it is sure hard to know when a trend line turns, we are more optimistic about the second half for a few reasons. Postage costs will likely be lower. We'll have more time to evaluate and to grow our new circulation revenue. Paper costs are coming down and in the second half, year-over-year comparisons will likely be better than they are now. We have made some structural and people changes, starting a process of consolidation that will ultimately yield lower costs. Our fundamental business model is a strong one.

Before turning it over to Dean, let me make some key points. Harte-Hanks is a wonderful -- in a wonderful targeted marketing business and a leader in both Direct Marketing and Shoppers. We firmly believe the strength and durability of these two businesses. We're good operators and while we could have moved more quickly in a few areas, we are responding to the issues we are facing on both the revenue and the cost side. The real estate and related elements of the California and Florida economies are hurting our Shoppers business in the near term, but I cannot think of two better states in which to operate in the long term. We remain committed to investing in our future and to cutting costs in the fast-changing environment that we believe is the norm. And as I've said before but it bears repeating, the people at Harte-Hanks are really special. They make it happen for our clients and our stakeholders every day. Thanks to everyone for what you do.

Dean, over to you.

Thank you, Richard and good morning. As Richard indicated, our first quarter was even more challenging than we had anticipated. Here is a Company-wide overview. Revenue was up 1.7% for the quarter with revenue up 4.2% in Direct Marketing and down 1.9% in Shoppers. Operating income was down 8.7% with Direct Marketing essentially flat, up 2/10th of 1%, and Shoppers down 14.5%. Free cash flow in the quarter was $23.7 million, up approximately 7% from $22.2 million in last year's first quarter. The increase in free cash flow was attributable to a lower level of capital spending in this year's first quarter.

Turning to each of our two businesses, for the first quarter in '07, our Direct Marketing revenue was up 4.2% and operating income was flat. Absent the increased depreciation and amortization related principally to our new Manila facility which opened in the second quarter of last year, and our September 2006 Aberdeen acquisition, or in other words looking at EBITDA, EBITDA was up 5.6% for the quarter and EBITDA margins improved 30 basis points over last year's first quarter.

For our vertical markets in the first quarter of 2007, high-tech/telecom, which was helped by our Aberdeen acquisition, was our largest vertical representing 25% of Direct Marketing revenue, retail 24%, select markets 20%, financial 18%, and healthcare/pharma 13%. Revenue in our high-tech/telecom vertical had double-digit growth in the quarter resulting in it being the largest of our five verticals. The select vertical showed continued solid growth with revenue increasing in the high single digits over the prior year. The retail and financial verticals were each up in the low single digits. The only vertical showing a revenue decline was pharma/healthcare, which was down mid single digits, with the pharma piece of this vertical showing strong growth while the healthcare piece was facing difficult comparisons to a very strong Q1 in 2006 that benefited from Medicare Part D enrollment work.

Our top 25 Direct Marketing customers represented 40% of Direct Marketing revenue for the first quarter. Our largest customer in the quarter represented 6.5% of Direct Marketing revenue.

Turning to Shoppers, Shoppers had a very difficult first quarter. Revenue was down 1.9% to last year's first quarter and operating income declined 14.5%. While we certainly have things within our control that we can improve to deliver better results and better revenue results, the general economic conditions, and particularly the real estate and associated financing markets in the California and Florida geographies in which we operate, are also contributing to our revenue softness. While homes for sale advertising remains solid, advertising from home builders and mortgage-related financial institutions has declined significantly. The decline in operating income was partially the result of the negative operating leverage associated with the revenue decline across a pretty much fixed circulation base.

Operating income margins also continued to be negatively impacted in the quarter by the large circulation expansions we completed during the last three quarters of 2006 with average weekly circulation in the first quarter of 2007 being about 800,000 higher than in the first quarter of 2006. Our continued investment in our internet presence also impacted operating income margins and higher year-over-year rates for newsprint and other paper being another contributing factor.

We have been and continue to address structural cost issues in this business. While this will provide a going forward benefit, the expenses associated with these actions negatively impacted an already weak performance in the first quarter. While our near term outlook for this business is cautious, we will be cycling through many of these issues as the year progresses which should help our second half as compared to the first two quarters of 2007.

Our first quarter net effective tax rate was 38.7%, up from 38.2% in last year's first quarter. For the full year 2007, we expect our tax rate to be higher than what it was for the full year 2006, and with the effective tax rate in 2006 being 37.6%, and we expect the rate in '07 to be at least 100 basis points higher than that.

On the balance sheet at 3/31, we were showing a net debt balance of $160.8 million. Book equity at March 31st, 2007 was $486 million. Net accounts receivable were $174.5 million with DSO at the end of March 57 days against 56 days in March of '06.

Looking at our statement of cash flows, net cash provided by operating activities for the quarter was $43.2 million. We have repurchased 1.2 million shares during the quarter. Since January 1997, the Company has acquired 51.8 million shares and spent over $975 million under our repurchase program including $200 million over the last 12 months.

As Richard discussed in his comments, we anticipated delivering a better first quarter than than the results we reported today. Given this, it will be more difficult to achieve our stated goal of similar EPS growth in 2007 as we saw in 2006 which was over 8% adjusting for stock options. Nevertheless we are committed to operating our businesses in an efficient and effective manner.

With that, we'll be happy to answer your questions. Operator?

Thank you. OPERATOR INSTRUCTIONS) Please stand by for the first question.

Operator?

Yes, sir. Our first question comes from Alexia Quadrani with Bear Stearns. Ma'am, your line is open.

Thank you. A couple of questions. First, you outlined a few reasons why -- how you can improve the operating performance of the Shopper business at least in the back half of the year. Is there anything you can really do on the revenue front or can we assume that revenues in the Shopper business will remain depressed until the general economic conditions in those markets improve?

Well, there are always things you can do on the revenue front, and we're working both sides of the fence, but clearly when you're in a tough economy, that's the primary driver, so be assured that we are working the revenue side, but it's harder, and so we're having to face some of the cost issues and deal with them, but as you know, Alexia, economies go up and economies go down and we're in the middle of a very difficult one, particularly in the states we're operating in.

And on the Direct Marketing business, a couple of questions. One, the pipeline for new revenue in Direct Marketing, how does that look? I mean I think some of your revenue that you anticipated maybe to fall in Q1 looks like it was pushed off. Do you think you'll see that in Q2?

And then if you could just give us sort of a general idea of what you think kind of a normalized longer term growth rate should be in Direct Marketing? It looks like a a lot of your verticals performed well with the exception of the piece of the pharma business, yet the growth rate was sort of, below 5%, mid to low single digits. What should we assume is a growth rate in a healthy economy for that business?

Well, we have said then and we still feel that the high single digits kind of number is something that we strive for, and hopefully with a couple of points of acquisition revenue, we can get it to the low double digit level. As far as our pipeline is concerned, we feel good about the new revenue from the first quarter, and other than the fact that we have this peculiar second quarter, the one-time termination fee that we had in 2006, we're feeling really reasonably good about the year on the revenue side in Direct Marketing.

Okay. Thank you.

Thank you, Alexia.

Our next question comes from Mark Bacurin with Robert W. Baird. Sir, your line is open.

Good morning. Couple questions, I guess maybe two to follow up on Alexia's question on the Shoppers business. Is there a way for you guys to stratify what of the slowdown was economic versus maybe you guys intentionally slowing the circulation, I guess comparing it to the historic 6%, 8% that you guys have been putting up for the past several years?

Well, we believe, and Dean, you can chime in here-- we believe that the dominant factor here is the economy. We have looked at the business a lot of different ways, and we think that it's the economy that's impacting us as opposed to our own internal revenue generation machine, as opposed to the kind of effectiveness of the products that we have. You look at all of these things and by and large, it's very hard to quantify, but by and large, we believe it's the economy that's taking its toll, but the good news on that is if you think about-- when revenue's tough, then what do you do on the cost side. And we're going to get some breaks, even breaks that are outside of our control in the second half. We're going to get some postage breaks. We're going to get some -- probably some paper breaks, because they have been operating, both of those, at all-time highs, and they seem to be moderating and coming down a little bit. And recessions tend to have cycles and we have already been living through a pretty tough cycle in real estate and at some point that's going to change.

Richard, I want to follow up with you on that comment about postage rate break in the second half. If you look at the rate cases pretty much across all categories, rates are going up so it's interesting to hear you say you're actually expecting some savings there. What's driving that?

What is driving that is the element in the rate case that applies to our specific type of postage that-- there are a number of thing in the postage rate case that could have affected us differently. For example, if we had continued to use the cards that we were using, our rates would have gone up, I think it was in the 12% range. But we are now individually labeling the shopper. We have already purchased the equipment. We've already done the testing. We're actually labeling it for most of our geography, and when the rates go into effect, we're going to be labeling 100% of our shoppers so we expect that postage will actually decline from the drop-ship discount level that we're at. We're also going to get a benefit. That benefit is going to be in the second half, obviously, because that's when the postage rate case is.

Right. That's great. Couple other quick ones. Just in terms of the competitive landscape, it seems like there are more and more companies trying to put together this integrated solution that you guys have had for a long time. And just wondering if, in the RFP activity on the Direct Marketing side, if you are seeing some new faces or new entities that maybe you wouldn't have seen a year or two ago?

Well, it's funny, what-- if you-- if you have a long lens on direct marketing, we have seen competitors come and go over the couple of decades that I have been in this business, and yes, there are a couple of new ones, but I don't think that there are any that have emerged to the point where we're seeing some new dominant player anywhere. This is a highly fractionalized business, and the opportunities to win share are very big and so we're plugging away at trying to do that.

Very good. And then just last question, hoping you could touch on, give us a little more color on the Google announcement and what sort of revenue opportunities do you see from that relationship and kind of what the economics of the relationship are?

Richard, would you like me to-- ?

Yes. Go ahead, Dean.

This is a good announcement for us, and will help in -- as we build out our internet presence. This is not a revenue share arrangement. This is more a content-share arrangement. In essence, when people are on Google and they are looking for a particular business, our businesses will be highlighted in-- when I say our businesses-- our advertiser's businesses and the Shopper business will be highlighted and with links directly to our website where they have their own, in essence, individual web page. So it's sizzled to sell space on our website in that we'll be getting traffic from Google that will go to our advertisers' web pages that are hosted on our site.

So the way to think about it is for -- its another hook for you guys to go to an advertiser, say, in addition to being in the Pennysaver and being in PennysaverUSA.com, you also now get, sort of added distribution on Google.

Right. And if someone is looking for a Chinese restaurant in a particular geography and they advertise in the Pennysaver and on PennysaverUSA.com, they'll get premium position in essence.

Great. Thank you very much.

Thank you.

Our next question comes from Paul Ginocchio with Deutsche Bank. Sir, your line is open.

Okay. Thank you. Good morning. This Dave Clark for Paul. Couple questions. On the Direct Marketing side, you had a couple of nice retail wins in the quarter. Are those contracts combined of a similar scale to the major retail account you lost a little over a year ago? And then a second question, I was wondering on the Shopper side, how are business trends in Tampa, ex-real estate? Thank you.

The answer to the retail wins is you're right. We did have a couple nice ones but when we broke out the losses, we tend to not spike out those kinds of things unless they are unusual, and last year, when we talked about it, they were unusual because they were two of our clients and our top 10 clients that were acquired by other companies and when they're that big, we talk about it. These two do not fall into that size category.

I'm sorry, the second question was-- ?

I was just wondering how business trends are looking in Tampa, ex-real estate. Obviously real estate is having a big impact, but I was just wondering ex-real estate, how trends are looking in Tampa?

We're really pleased with what we're seeing in Tampa. They are certainly following some of the very same pattern-- and you say ex-real estate, it's hard to remove yourself from that but they are certainly following the same pattern as our other markets because Tampa, like the rest of Florida and California, was hurt disproportionately from the real estate -- helped disproportionately from the real estate boom and therefore on the flip side of it, is being hurt disproportionately, but other than that, we're feeling good about it.

Okay. Thank you.

Thanks.

Our next question comes from Steven Barlow with Prudential. Mr. Barlow, your line is open.

Good morning. Dean, if you could talk a little bit about your paper cost. What was volume versus price in the quarter as obviously some of the rates are coming down, and in terms of trying to sort of squeeze the cost structure here, anything you are looking at in terms of people we should think about in terms of severance going ahead, and/or any changes in your CapEx plans for 2007?

Okay, Steve. Let me -- I think there were three questions there. We're still seeing an increase in paper rate on a year-over-year basis. However, the rate of increase on a year-over-year basis is subsiding, and we expect that that will turn-- whether it turns in '07 or early '08, not exactly sure. In terms of volume, we do have 800,000 more circulation on a year-over-year basis. But I think some paper increases are obviously volume driven. Your second question, Steve, I'm sorry, was--

Had to do if you are looking at the cost side, so where are you looking to squeeze costs? And would some of that be related to people with any severance or is it more sort of manufacturing oriented things?

I think it will be all of the above. It will be -- are you talking specifically on the Shoppers side?

Really generally, but take either side you want.

Okay. Certainly, I think both-- we will adjust our labor resources to match the revenue that we have. We historically have done that and will continue to do that. We did some of that in the first quarter and we did have severance costs in the first quarter that were higher on a year-over-year basis. We'll continue to look at that. We will continue to look at consolidating functions to drive costs out of the system -- shutting down facilities and consolidating some facilities where we have some excess capacity, so I think you'll see it both on the people side and on the P&D side.

And then lastly was wondering what your CapEx outlook for the year is?

CapEx, Cap, excuse me, CapEx outlook currently is $35 million, which is slightly down from the range we had given. And we will continue to look at that CapEx number as the year progresses, and that's another area that we will watch carefully and perhaps reduce in response to the environment.

Okay. Then going back to the newsprint side, production and distribution, the absolute number was down, yet you said paper costs were up. What would be the contributing factor, then, to make that number down?

And again, this is for the total Company --

Okay.

-- as a whole. You have got a couple of things going on. As an example, we bought a business in September, Aberdeen, which is basically a people business only. At the same time, we sold a business, and it was, in essence, the same revenue amount that was primarily-- it was a printing facility and one had 2/3rds of their expense was labor. The other had 2/3 of their expense as, that showed up on the production and distribution line. So you had some of that going on. The revenue shift, as a matter of fact, Direct Marketing grew revenue and Shoppers revenue declined. Well, again, the same type of thing happens. Direct Marketing has a higher labor component in it and Shoppers has a higher production and distribution component in it. So you've got that contributing to the production and distribution decline, and then I think we have got in our Direct Marketing business, from a capacity constraint sometimes you-- we would send work outside for stuff that we either couldn't do or because of capacity reasons we couldn't do. We sent less-- and all of that shows up on our production and distribution line. We sent less of that work outside on a relative basis this quarter than we had in last year's quarter.

Thanks. That's very helpful.

Our next question comes from Karl Choi with Merrill Lynch. Sir, your line is open.

Hi, good morning. Had a few questions here. I wonder first of all, following up on Steve's question, if you can isolate the amount of severance costs in the quarter and also give us a sense of how much, if at all, headcount was down at the end of the quarter?

Karl, just from, there were -- it was under $1 million of severance cost in the quarter.

Okay.

For both businesses.

Okay. And do you have a headcount number, what percent of changes? Sounds like it's probably not that big of a change then.

I-- Karl, I do not have a headcount number because-- there's also-- it depends on what you are comparing it to. If you are comparing it to prior year or sequentially because we do have seasonality in our business as an example, and typically headcount is down in Q1 from Q4 anyway.

Okay, and could you also isolate the amount of internet investments, ballpark, that you made in the quarter?

I'm sorry?

Internet investments on the Shoppers side.

Again, we're -- it is on a year-over-year basis. That was certainly a contributing factor to some of the revenue-- not revenue decline, I'm sorry, to some of the margin decline.

And as far as postage is concerned, how much of a savings -- how much of the savings do you actually expect in the second half in terms of percentages?

Well, remember some of it is a savings from what we anticipated.

Okay.

When the rate case first came out, we were looking at if we did not go to detached-- if we stayed with our detached card as a method of addressing, we were looking at a low teens rate increase. We have moved to labeling the book, as Richard talked about. Even with labeling the book, we were thinking of-- that the rate case would be in the 3% range increase. Now that looks like that number is going to be flat.

Okay.

The overweight rate has come down a little bit. So when we talk about we're going to get help, we're not going to see the increases that were originally thought of when the rate case was first filed.

Got it. And also could you remind us what percentage of the cost base in the Shoppers business is paper cost at this point?

Of the-- let's see. That's of revenue or--

Either way is fine.

It's about 10% of the expense-- 10% or a little bit higher. That would be both newsprint and job paper.

And last question, is it possible to quantify the decline in real estate revenues for the Shoppers business in the quarter?

We talked to our Shopper folks about this, and there are certainly categories of revenue that we look at, and some of them we can see some pretty significant declines in. But it's the overall effect of what's going on in real estate and all of the ancillary items related to real estate that we believe is creating a little bit of a halo effect on our performance. And so we certainly know that the numbers are down significantly in real estate-related items, like, for example, mortgage, but each of these items are-- percentage points and percentage points and percentage points, and at some point, they begin to add up, and that's what has happened to us.

Got it. Great. Thank you.

Okay. Our next question comes from Fred Searby with JP Morgan. Sir, your line is open.

Yes, hi. Thank you. Couple questions. One, could you talk about your digital initiatives and how they trended, if you can break anything out? I believe the e-mail marketing group post future that you bought, just what you are seeing there in terms of the displacement of -- on the postal side as it kind of migrates over to digital and what kind of growth rates you are getting right now?

Secondly, just-- have we seen the financial -- the full financial consolidation impact on Direct Marketing and generally, what is the pricing environment like in Direct Marketing? I mean, you had a 4% revenue growth, which was fine and dandy, but obviously your margins came in a little bit and you attributed that to some other factors. I'm just curious what the pricing environment looks like? Thank you.

What was the second-- was it the financial markets you were asking about?

Well, I mean last year we talked about the financial consolidation and the impact that had on you on the Direct Marketing side, and I'm just curious as to whether-- we-- we've-- you think that's kind of-- we have lapped that and not having an impact anymore.

I'll let Dean take that one. Let me just mention on either side of that -- the digital and the price one. Our digital initiatives in both businesses are going about as we had planned, which is really quite good. Our revenue growth is significant, but significant on a very small number, so we're not reporting it. We're not talking about it yet. But we're very pleased with what we're seeing. We know that e-mail numbers are certainly bigger than they have been, but you know what, so are mail numbers bigger than they have always been. Now the rate of increase in mail is certainly not as great as the rate of increase in e-mail. It's not as great as the rate of increase in web, but we're excited about what -- all-- if you take the multi-channel approach to life, which has been our consistent message, we want to be there in all channels that are relevant to the customer, and that's what we're achieving. In both businesses, we're achieving that.

As far as price is concerned, I think we said this before. We're in an environment where price is not going to be a lot of fun, and we're having to operate that way, and we're just used it to and having to deal with it.

But is it getting worse, getting better or just kind of still -- ?

I think it's there. It's -- there's always pressure, and I don't see it getting any worse in-- it's certainly not getting better, and I don't see it getting any worse, but that means that the price pressure that we have been observing continues.

And is-- do you-- I mean, is your digital initiative as opposed to -- are they growing 20%, 25%? Can you give us some kind of ballpark feel for that?

We laugh a little bit in our Company about percentages, because when people present in their annual plan some big percentage increase, then we say, well, what was the number? And the number turned out to be small, so we don't count percentages. So I'm going -- I'm not going to answer the question because the number is small, and when it gets big enough to report, then we'll talk about the percentages. It was healthy. It was nice. We're satisfied.

Fred, I think your other question was have we lapped the financial impact of the consolidation that occurred within our customers in the financial vertical? The answer to that is no. But that -- we took that into account in looking at our revenue for the year. As an example, in the second quarter of last year, as part of that financial consolidation, we talked about the termination fee that we received in the second quarter of 2006. So obviously that was a big chunk of revenue that won't be there in 2007. So the answer is we have not lapped-- we probably won't lap until Q4 of this year, but we knew that going into the year.

All right. Thank you.

We have one more question at this time, gentlemen. (OPERATOR INSTRUCTIONS) Our last question at this time comes from Troy Mastin with William Blair and Company. Mr. Mastin, your line is open.

Hi, actually it's [Megan Friedman] for Troy. Can you provide some additional detail regarding the tough comp in the healthcare vertical of the Direct Marketing segment?

It's really pretty straightforward, ironically, because we have looked at some other companies reporting, and they have all talked about the difficult comparisons with the Part D work. The government created a huge opportunity in the first quarter of last year and we were one of the companies that took advantage of that opportunity. I can tell you that overall, we're really optimistic about the growth potential in our pharma/ healthcare market, and while we did face some challenging comparisons in this vertical for the first quarter due to that Part D work, absent that, the overall market was strong, so that's the explanation. It was singular.

And those-- the good thing about it is many of those customers who spent a lot of money with us a year ago in the first quarter, they were already our customers. They just had us doing this particular Part D work. These people are still our customers, and they are still good customers that continue-- that we continue to do work for.

So then when did that revenue tail-- the Part D revenue tail off?

It was almost all first quarter last year.

Okay. And then just another question, can you talk a little bit what resulted in lower and more costly ramp-up of the Direct Marketing accounts?

Yes. This is an issue that is a broad-ranging one. It ranges from getting a statement of work all the way through physical implementation. You know that there were always issues, and the reason we're talking about it this quarter is because the issues were higher than average. It's not anything that is endemic to who we are. It is just something that happened and it's a way to help explain the performance of our Company during the first quarter, but when a statement of work doesn't get signed and we don't get a contract, we don't have revenue. When we have revenue and we're ready to implement it and the implementation is tough at the very end of this continuum, then we have higher costs, and we had some issues right through that cycle of implementation.

Okay. So it wasn't getting them actually signed up. It wasn't actually implementing. It was the whole--

It was everything. It was all the elements. And that's why we decided to talk about it. Because, this is -- these things happen all the time, but when they are bigger than usual, we spike them out and talk about it. And we don't expect anything that we saw to be endemic to who we are and for it to continue. We take the issues and we move on with them.

Can you talk at all about what you're doing to address it or -- ?

Well, sure. The implementation issues are straightforward to address. We have created some plans on how to deal with what we call on-boarding, the tail end of on-boarding, in terms of the contract. We have some procedures in place to speed some of that up, but sometimes no matter what we do, if our prospective client doesn't move as quickly as we would like, we're sort of stuck. So in this first quarter, things were moving just a little bit more slowly than average.

Thanks a lot.

Thank you.

We do have one further questions, sir. It's from Edward Atorino with Benchmark. Sir, your line is open.

Hi. Thanks. Early on, you talked about the outlook. I wondered if could sort of talk about what your "visibility" quote unquote on revenues for the second quarter versus the first quarter in each of the two businesses?

Well, the-- the visibility in our Shopper business is a little bit lower than it has been, given the changes and given the softness, and that seems to always be what happens once you get the softness, the visibility goes away. In the Direct Marketing business, if you can get past that one-time event that we talked about, we're-- our visibility is reasonably good, and we feel reasonably good about it.

Okay.

Dean, do you want to add anything to that?

No, I think that's right.

Thanks a lot.

Thank you.

Gentlemen that was our last question at this time.

I want to thank everybody for their time. Have a great day.

Thank you.

Bye.

That does conclude today's conference. Thank you all for participating, and have a great day.