Marketaxess Holdings Inc (MKTX) 2005 Q2 法說會逐字稿

Welcome to the MarketAxess Second Quarter 2005 Earnings Conference Call. At this time all participants are in listen only mode. Later, we will conduct a question and answer session.

[Operator Instructions].

As a reminder, this call is being recorded. It is Wednesday, May 4, 2005. I will now turn the call over to Steven Davidson, head of Investment Relations at MarketAxess. Please go ahead sir.

Thank you Alicia. Good morning. This is Steven Davidson, Head of Investment relations and I would like to welcome you to the MarketAxess Second Quarter 2005 Conference Call. We issued a press release this morning providing our results for the Second Quarter 2005 and the press release is available on our website. Rick McVey, Chairman and Chief Executive Officer at MarketAxess will provide a strategic updates for the company and then Jim Rucker, Chief Financial Officer will review the quarter. There will then be a question and answer session.

Before I turn the call over to Rick, let me remind you that this presentation may contain forward looking statements, including statements about the outlook and prospects for the Company and industry growth as well as, statements about the Company's future financial and operating performance. These and other statements that relate to future results and events are based on MarketAxess current expectation.

Actual results for future period may differ materially than those currently extracted or desired because of the number of risks and uncertainties, including our attendance on our broker-dealer clients, the level and intensity of the competition, the fixed income of the electronic trade industry and the pricing pressures that may result, the variability of our growth rate, our limiting operating history, the level of trading volumes transact on the MarketAxess platform.

The absolute level and the direction of interest rates, and the corresponding volatility in the corporate fixed income market, our ability to develop new products and offerings, and the market acceptance of those products, our ability to enter into strategic alliances, and to acquire other businesses and successfully integrate them with our business, our future capital needs and our ability to obtain capital when needed, and other factors. The Company's actual results and financial conditions may differ, perhaps materially, from the anticipated results and financial conditions in any such forward looking statements.

The Company undertakes no obligation of these forward looking statements, whether it is as a result of new information, future events, or otherwise. More information about these and other factors effecting MarketAxess business and prospects is contained in MarketAxess's periodic filings with the Security and Exchange Commission, and can be accessed at www.marketaxess.com. I would now like to turn the call over to Rick McVey, Chairman and Chief Executive Officer.

Thanks Steve. Good morning and thank you for joining our Second Quarter 2005 Earnings Call. Before Jim Rucker, our CFO, takes you through our financial results for the quarter, I will provide you with a strategic update on MarketAxess for the quarter. Please turn to slide 5. In the second quarter of 2005, we may head way on many fronts, despite what can only be characterized as challenging market conditions.

As part of my strategic overview, I will discuss the second quarter operating environment, give you a high level overview of our results for the quarter, recap where we are on the implementation of our new high-grade fee model, provide you with an update on the launch of our credit default swaps product, which we expect in early Fall, and give you and indication of where we see areas of growth for the Company for the remainder of the year and into 2006. This is a lot of ground to cover, so let's get right into it.

Please turn to slide 6, for an overview of the second quarter operating environment. As I mentioned earlier, the second quarter was punctuated by a significant change in market conditions, sparked by the auto sector profit warnings and downgrades in April and May. As you can see in the top graph, spreads in investment grades and high yield bonds widened sharply with auto spreads widening some 115 to 200 bases points, after what can only be characterized as a multi-year period of credit spread tightening right up through the first quarter of 2005.

While not unexpected, the timing and severity of what occurred, clearly took market participants by surprise. The net result was increased uncertainty and decreased end investor activity through out April and May. In April, NASD, high-grade trace volume declined 14%, followed by an additional decline of 2% in May. While volatility returned to more manageable levels in June, continued end investor uncertainty and risk aversion continued with trace volume falling off a further 8% in June. As I am sure many of you are already aware, many of our global dealers on our platform reported dismal fixed income results for our second quarter. Many of who attributed their poor results to market conditions in April and May, and the resulting decrease in client activity.

The graph on the bottom of this slide depicts precisely what occurred. A sample group of 6 of the leading global dealers reported an average 33% decline in the fixed income revenues when compared to the record results recorded in the first quarter 2005, a period when MarketAxess recorded record results. Fairing out the decline in end investor activity reported by many of the global dealers, trades volume for 2005 was down 11% when compared to the first quarter of 2005.

Traditionally, in difficult and volatile markets such as those we saw in April and May, it is not unusual to see an increase in professional trading activity, as opposed to true end investor activity and market participants may temporarily revert to the fall. We suspect that both of these shifts occurred in the second quarter. In summary, MarketAxess was not immune to the dislocation in the market experienced by the key global dealers in the fixed income market and other market participants.

Please turn to slide 7 for 2005 NASD Trace Volume Developments. The decline in one month's trace average daily volume after March, depicted on this graph, is another clear indicator of the impact of the events in April and May and the continued softness in the market as we moved into July. Trace 1 month average daily volume declined significantly in April, dropping 10% in the month. While relatively stable in May, trace average daily volume dropped another 12% in June and is down 9% in July. As reflected in the trace data I just discussed, the difficult market conditions clearly had an impact on our results.

Please turn to slide 8, for our quarterly financial performance. With an operating environment that I just discussed, our financial results for the second quarter 2005 were disappointing. Total trading volume was 4% above second quarter 2004 levels. Revenues was up only 6% versus the second quarter 2004. Expenses were up 18%, reflecting the realties of operating as a public company. And operating income was down 34% on the higher expenses.

Please turn to slide 9, for our US High Grade Fee Plan value proposition. On June 1st, we implemented our US High-Grade Fee Plan. With the implementation of this fee plan, we believe that we have revolutionized the industry by putting in place a value proposition that will serve to accelerate the growth of a more liquid and efficient electronic market place for the benefit of our broker-dealer clients, our institutional investment clients, and MarketAxess stock holders. For our broker-dealer clients, the fact that they are now able to account for their transaction fees on a trade by trade basis removes the negative and visceral response that dealers historically have had, through monthly trading bills that were view as a debit to the trading P&L.

The new fee plan also incentivizes dealers to put more volume over our platform creating a more favorable economic model based on declining marginal costs at higher volume levels. By automating the dealer transaction fee and creating a more favorable economic model, we are changing dealer behavior and preserving and expanding the largest pool of liquidity for the benefit of our institutional investor clients. Dealer support for the new fee plan has been very strong, and 16 dealers renewed their fee agreements early under this new fee plan.

Bonds Direct, a division of Jefferies & Company, has recently joined the platform. And separately, we are also pleased to have Dresdner Bank joining our European platform. For Institutional clients, the most important factors effecting their ability to achieve best execution in the credit markets, are the quality and quantity of dealers that are fully engaged and committed to competing for business on our platform. We are convinced that the depth and breadth of dealer participation on MarketAxess consistently delivers best execution to our institutional clients.

While the range of responses on a MarketAxess multi-dealer corporate bond inquiry is typically 10 bases points in yield, even the difference between the best dealer response and the cover or, second best response is on average 2 bases points. Based on our internal analysis corporate bond trades displayed 18 dealers frequently saved investment managers 1.5 to 2 bases points, versus those that only go to 5 dealers, a typical set for a telephone trade. The breadth and depth of dealer competition on our platform, therefore, is worth multiples of the average dealer's transaction fee of 0.2 bases points.

Finally, our value proposition for our stock holders comes in a form of a more scaleable model with a significant increase in recurring revenues that serve to dampen the volatility of our commission revenues. Our combined value proposition for our broker-dealer and institutional client is a key driver for the superior liquidity of our platform, which insures that all our clients achieve best execution on our trading system.

Now I would like to turn to another driver for our long term growth, credit default swaps. Please turn to slide 10. We are on track for the launch of our credit default swaps in early Fall. I know that many of you have been waiting eagerly for some more concrete details around the launch, and I am pleased to provide with them this morning. We believe, that the MarketAxess CDS product is extremely well positioned for success after launch due to both our CDS value proposition for broker-dealer and institutional clients and the synergies of CDS with our existing cash-credit business.

What makes our CDS platform superior from a liquidity perspective is the anticipation of 11 dealers for launch with a possibility for several more dealers will join us shortly. We have established a solid relationship with DTCC, and given their industry leading role in confirmation and matching process, we prefer to work with a leader rather than go head to head with them. We have noted a few of the characteristics of the product offering on this slide, but one characteristic that I believe that will particularly well received by users is the Pre Trade Counter Party and Documentation Verification Process that we will have in place. This attribute alone, will prevent scores of trades from happening that should not happen.

This is good for our broker-dealers, good for clients, and good for CDS industry as a whole. We believe, that our CDS product will help to offset periods of slowness in the corporate bond market as recent market conditions have shown that cash bond market and the credit default swaps market tend to be counter cyclical. As we move forward after launch, we will be providing you with updates and more detail on the product. With CDS on the verge of launch in the remainder of the year, we will be focussing on growing revenue from our existing products supported by a strong cash balance to drive our future growth.

Please turn to slide 11 for details on Future Growth Drivers. The launch of our CDS product is obviously been the focus of our product diversification and growth strategy for the past couple quarters. The CDS launch is part of a multiphase process that will go well into 2006, with the launch of CDS single names sometime in the first half of the year. For the remainder of 2005, we will be focusing on increasing the contribution from our existing products, specifically by increasing revenues from our high-grade and emerging markets product lines, as well as, by leveraging our existing technologies in these businesses to reach new client segments.

As we have seen with CDS, the product development cycle involves significant outlays in terms of resources, which we are funding from our current cash flows. As we look at new product opportunities, we will continue to strike the right balance between cost discipline on the one hand, and investing in our future growth on the other. We will also be closely analyzing each opportunity with in a buy or build frame work.

In the event that we are not able to organically achieve the right growth levels and diversification for our revenue base in the time frame that we require, we will look outside of MarketAxess to fill our need. As you can see from the chart on this slide, we have a strong cash position which gives us a great deal of flexibility in terms of filling gaps in our product portfolio. With that, I would like to turn the call over to Jim Rucker, our CFO.

Thank you, Rick. Good morning everyone. Before delving into the accounts, I like to walk you through some of the drivers of our volumes for the second quarter of 2005. Please turn to slide 13, for our Quarterly Volume Trend. Before discussing the volume numbers in detail, I like to reiterate Rick's comments at the beginning of the call, regarding market conditions in April and May and their impact on our volumes. Clearly, end investor uncertainty in the credit markets following the order of sector profit warnings and downgrades impacted our results.

The volumes on our platform are market sensitive, and this is just the reality of our business. Looking at our results by year over year basis, we reported second quarter 2005 total volumes of 72.1 billion, which represents 4.3% increase over the 69.1 billion that we reported the second quarter 2004. On a sequential basis, we saw total volumes decline 19.1% for the record levels that we reported in the first quarter of 2005.

As a point of reference, the NASD Trace data shows that in a market segment in which we are most active US High-Grade Corporate, overall market volumes declined 11% in the same period. As you can see from this slide, while our volumes in the second quarter 2005 dropped off significantly due to the market conditions in April and May, our total volume for the 6 months ended June 30th 2005, are running 12% above the same period in 2004. So, while our overall volume results in the second quarter were disappointing, the long term trends in our business continues to be positive.

Please turn to slide 14 for details on our Volume By Product for the first quarter. US high-grade volumes for the second quarter of 44.7 million, was on a par with the second quarter of 2004 and was impacted by the difficult market conditions in a quarter, and to lesser extent by the June 1st implementation of our new fee plan as institutional investor clients digested the impact to them, of our high-grade fee model changes. European high-grade volume declined by 3% to 17 billion, compared to second quarter 2004.

While there is no published source for European cash-credit volumes, we believe, that the decline in our European high-grade volumes is attributed to a lower overall European credit market volumes, and does not recollect any loss of market share. Many of the same factors that play in play in the US credit markets, have also impacted the European markets. Other volume, which includes emerging markets, crossovers, new issues, agencies, and US Treasury Securities, increased to 42% to 10.5 billion, compared to 7.4 billion in 2004 second quarter.

As of June 30, we had 572 active institutional investor clients that included, 401 US and 171 European institutions. Earlier this morning, we also released our volumes for the month of July. As Rick discussed earlier, trace volume has continued to decline as we move through the first half of the year and into July. Total trace volume in July declined 17% from June. For these market conditions as a backdrop, we reported total MarketAxess trading volumes of 19.9 billion, that were down 12% from June. US high-grade volume at 11.5 billion and European credit volume at 5.2 billion, were both down 12% from June.

Other volume at 3.3 billion, was down 14% versus June. Given the weak July, continued declines in trace, an expected seasonally slow August, we are cautious about prospects for the remainder of this quarter. Please turn to slide 15, for our Second Quarter Revenue Performance. Total revenue for second quarter was $19.3 million, up 6% from the 2004 second quarter and down 10% compared to the first quarter of 2005. Commission revenues for second quarter was $16.7 million, down slightly from the 2004 second quarter, and down 10% compared to the first quarter of 2005.

The US high-grade variable fee per million to the quarter was $133, down from a $141 per million in the first quarter of 2005. This decline reflects the introduction of the new fee plan in June, and the corresponding lower variable fees. In the third quarter, we will expect to see the average variable fee per million in US high-grade moving to the $109 per million range. As a reminder, the average variable fee per million is impacted by three factors, yield, maturity, and trade size. The 6 (ph) month for US high-grade distribution fees for the second quarter increased by 900 thousand, to 5.7 million.

All other revenues which consist of information and user access fees, interest income, and license fees, increased to 2.6 million in the second quarter of 2005, from 1.4 million in the prior year and same period. The increase was due to high interest income, as well as, increased fees from our Corporate Bond Ticker service. Please turn to slide 16, for more details regarding our Recurring Revenues. As you can see from this slide, our recurring revenues, which consist of fixed high-grade distribution fees, interest income, license fees, and information user access fees are contributing a larger percentage of our revenue stream.

The key factor driving this element is the implementation of our new high grade fee plan. With the introduction of the plan on June 1st, we can secure higher fixed US high grade distribution fees from our dealers. The full impact of the new fixed distribution fees will be felt in the third quarter of 2005, when we will expect to have fixed distribution fees of approximately $7 million. As a result, we conservatively estimate that we will have an additional $1.3 in revenues in the third quarter. The rate of percentage of recurring revenues, served us well in down markets, like the ones we have been experiencing over the past few months.

These recurring revenues serves as a nice cushion from all volatile commission revenue, reducing our sensitivity to volumes. If you look at our recurring theme relative or expenses that we will discuss in a moment, you will see that over 40% of our expense base is covered by these recurring gees. We will expect recurring revenues to cover over 50% of our expense base in the third quarter. Please turn to slide 17, for a review of our Expenses. Total expenses for the second quarter of 2005 of 16.5 million, were 18% above the second quarter of 2004.

The primary drivers of this increase was higher professional consulting fees, market data, and data communications expenses. Compared to the first quarter of 2005, expenses were up 3%. I will talk a little bit more about the professional consulting fees when we turn to the next slide. Employee compensation and benefits expense was up just 3% from the second quarter of 2004. The number of employees increased from 175 as of June 30, 2004, to 177 as of June 30, 2005.

In sum (ph) of our operating expense guidelines for 2005, we stated our prior course, that we expected our expenses to increase 11 to 16 % (ph) over the full year of 2004 expenses of 58.5 million. With half the year behind us, we expect to report a total of operating expenses in the upper half of the range of our previously stated guidance, at the same time capital expenses are running below the guidance that we gave at the beginning of the year. Capital expenditure for the quarter was $900,000. We are reducing our capital expenditure guidance for the full year from the previously stated 7 to $9 million, to a range of 4 million to 6 million.

Please turn slide 18, for more details regarding our Expenses. What I would like for you to take away from this slide is that the cost of being a public company are important components of our year on year expense growth. Shown on a prior slide, professional consulting expenses increased 246% from 2Q '04 ... (audio gap) ... tax, insurance, legal and financial consultant fees are included in the professional consulting expense line, makes up over 50% of the increase in expense above our pre IPO levels in 2Q '04.

These expenses are incurred to enable us to meet the requirements of being a public company, including all aspects of compliance with Section 404 of Sarbanes-Oxley. The underlying record expense growth from the second quarter of 2004, to the second quarter of 2005, if you exclude these expenses, was just 9%. Naturally, these are expenses that are not going away and will be an ongoing fixture for our expense base, but we did want to provide you with the detail, so you can see their impact on the overall increase in expenses for us.

Please turn to slide 19, on Earnings Performance. Let me first talk about the restatement of the 2004 financial results. As I mentioned in our first quarter 2005 call, in 2005 we engaged new tax advisors, who assisted with the preparation of the 2004 tax returns. On reconciling of 2004 returns the tax benefit recorded in our year end 2004 financial statements, we determined that the 41.3 million tax benefit, and the related deferred income tax assets have been overstated by 1.1 million (ph). The overstated resulted from the incorrect recording of deferred tax assets relating conversations expense, incentive stock options, alternative tax credits and other items on our 2004 tax returns.

While the overstatement was not material to the full year 2004 results or any quarter in 2004, the adjustment in aggregate would have been material to the 2005 second quarter results, if recorded in this quarter. Therefore, we decided that a restatement was necessary. The restatement has no impact on revenue, expenses, or operating income. It has no impact on our cash balances.

Turning now to our second course of 2005 results, pre tax earnings for the second quarter for $2.8 million and that income was $1.8 million or $0.05 a share on a fully diluted basis, compared to $3.1 million or $0.09 a share in the first quarter of 2005. Our offering margin fell to 15% for the quarter, from 25% in the first quarter. Our effective tax rate for the quarter was 35%, because we were able to book some tax benefits from employees exercising incentive stock options.

Turning now to the Balance Sheet Data on slide 20. Cash and other liquid assets totaled $106.8 million as of June 30, 2005, reflect an increase of $7. 9 million when compared to March 31. The deferred tax asset was $37.3 million. The deferred tax asset benefited the Company's cash flow, as we did not expect to pay cash taxes except for certain state and local taxes until the third tax asset is fully utilized. Total stock holders equity was $164.3 million, representing book value on a fully diluted basis of $4.64 a share. With that, I will turn the call back to Rick for concluding remarks.

Thanks Jim and thanks to all of you on the phone for joining us today. While market conditions have clearly had an impact on our operating results for the past few months, MarketAxess is well positioned to recapture growth when favorable market conditions return. Our new fee plan was a significant step toward fostering a more liquid and efficient electronic fixed income market place.

We expect to have a strong CDS product, and we are focusing on increasing the revenue contribution from our existing high grade and immerging markets businesses. Furthermore, our ability to generate cash even during quiet markets, gives us the flexibility to continue investing organically, as well as, pursuing new business incentives.

Now Jim and I would be happy to take you questions.

[Operator Instructions].

The first question comes from the line of Daniel Goldberg with Bear Sterns. Please go ahead.

Good morning

Hello Daniel.

You talked about, I think, pretty much in depth about the second quarter volumes and July volumes. What do you see so far in early August? Have you seen any changes in trends? Just a little bit of color there.

Well, we obviously have not reported our own volumes, Daniel, for the first part of August, but the trace volumes have remained soft.

I'm sorry, have remained -?

Have remained soft.

Okay. You do not expect anything to change. You said seasonally slow; you should expect similar to July so far?

That would be our expectation based on our normal patterns through the month of August.

Okay. Great. Pre tax margins obviously, with some of the expense items higher than expected fell to 15% as you mentioned. Any guidance or goals there? Can that number get back up to the mid to upper 20's where we have seen it prior?

As I mentioned in my prepared remarks, we are, as far as operating margins are concerned are going to be very sensitive to the volumes, as I think we have shown in past quarters. Our expense base is relatively constant. As you said, we have had some increase but what really is going to drive margins, is going to be an increase in volume and revenue.

Okay. The new fee schedule, I think you may have had some slightly negative customer reactions initially. Can you give us an update or any other color there in terms as what the reactions have been, as a result to the new fees?

Sure. I think it is an important question, Daniel. Obviously managing through any fee model change is always complicated, but I can tell you that we are please in the month of July to see our volumes holding up better than the overall market versus June. So, we think we are on a positive track. The model that has been implemented does provide an electronic solution for dealers to include their transaction fee on a trade by trade basis in their bid offer spread.

I think -- clients have been working through whether that means it would be an addition in the cost to them in the bid offers that they have received through the system or, whether dealers would offset that through tighter bid offers. I can tell you during the course of during the first two months we have seen plenty of examples of both. Ultimately, what clients are being reassured of is that the breath and depth of dealer competition on our platform is continuing to deliver price improvement to them that is worth multiples versus the dealer transaction fees that is not electronically included in their bid offer.

So, we are confident that investors have asked us all the right questions and worked through this in a logical way, but we are seeing a return in terms of the overall activity on this system. We were pleased to see in July that the breath of users on client side grew once again versus the June numbers. We think we are on the right track.

Okay. That is all fine. Lastly, any reactions for the new CDS product from some of the beta (ph) customers?

We have had a very positive market reaction in the meetings that we've had so far. I think it is a product and market sector that is greatly in need of operational efficiency. The solutions that we are putting forward have been very well received. For the Company, we are excited not only to add the product, which is large and growing, but also to be attracting the interests of hedge fund community, which uses the CDS product as a vehicle of choice for trading credit spreads. In a way, we think we did a 2 for 1 in terms of the addition of a new product, as well as the attraction to a new client segment.

Just to clarify, you said in the release that it would be in September, the commercial will roll out and then I think in the prepared remarks you said in the Fall. Any specifics there?

We currently expect the launch to occur in September. I think I used the term both early Fall and September. To be clear, we expect to launch the product in September.

Okay. Great. Thanks a lot.

Thank you.

The next question from comes the line of Howard Chang (ph) with CSSB. Please go ahead.

Good morning Rick. Good morning Jim.

Hello Howard.

A few questions. First, on the pricing improvement in the core US business, I know we had 1 month of the new fee plan, but while it's difficult, Rick can you speak to if there was an improvement in terms of the product mix? I know we have been kind of stuck in an environment where things have catered to the shorter duration securities.

Right. I think the product mix and the maturity mix on the platform was very much what we expected when we announced earnings in the fee model change at the end of the first quarter. During the latter part of the quarter, we did see a slight decline in the average maturity of bonds trading on the system, which is not surprising in a period of rising interest rates. We did see a slight decline in average maturity and we saw a slight decline in the average size of the trade taking place on the system. Those 2 things netted off to result in an average transaction fee which was very much what we expected, when we announced our expectations I would come in around $109 per million on average during the first quarter release.

Okay. That is helpful. You mentioned earlier that both Dresdner and Jefferies Bond Direct were coming on, will we see any kind of improvement in licensing fees in the second half of the year, specifically the third quarter due to that?

I think that they are coming on for specific product areas, so the increase in license fees might likely to be modest during the third quarter.

Okay. It is helpful. Jim, last question, on cash and securities is there is anything to read into in terms of the transition between pure cash and securities?

You are talking about our (inaudible), are you Howard, sir?

Correct. The liquid assets, Jim.

No. Obviously at the end of the last year, we received in the proceeds of IPO, and those were mostly in cash in very short term securities until the end of the year of which point we then, working with 2 investment advisors, invested a large amount of proceeds with slightly longer term securities.

Okay. Should we expect that transition to continue?

I think you will see a similar main stir to the one you saw at the end of this quarter.

Okay. I guess I can either wait for the Q, but to get a sense of the duration -- when you say you are stretching out the duration of the securities, can you kind of frame that a little bit in terms of some numbers?

It is all under 2 year maturity and the average is much shorter than that, but we take a very conservative stance on investing other cash balances.

Right. Okay. Great. Thanks.

[Operator Instructions].

The next question comes from the line of Erin Fedel (ph) with Host Capital (ph). Please go ahead.

Hi. Erin Fedel with Host Capital. Can you hear me okay?

We can. Good morning.

Maybe you discussed and I might have missed it -- there was a lot on the prepared remarks, but can you give any estimate on the revenue that you expect from the CDS product either in the third quarter or fourth quarter or this year or '06, and the expenses that might go along with that?

On the expense side, first of all, the expenses are fastidious, all ready built into the numbers that you are already seeing.

Okay.

Because we have been building out the products for some while, so the start expenses associated both with technology build, as well as things like the sales and marketing effort are already built into the numbers that you see in the second quarter. Also within that quarter, we have incurred some capitalized expenses for the software development. So, the expenses I would expect to shift significantly because of the CDS roll out. On the revenue side, it is really too early to give any revenue numbers when we have not yet launched the product, but obviously in future quarters, we will be able to provide more detail on that.

What do you expect maybe after next quarter to provide sort of '06 type of guidance on revenue expenses similar to what you did earlier this year for '05?

We did not provide any revenue guidance for '05 and the view we have taken is, we do provide expense guidance, we provide CapEx guidance, but because (inaudible) are obviously very sensitive to market volumes, we do not provide revenue guidance.

Okay. Rick, you filed to sell some stock. I just wanted you to address why -- what the thinking is there?

I did file earlier in the quarter over the course of the year to sell a small portion of my holdings just in order to diversify the portfolio, and no transactions have taken place yet.

Okay. Thanks very much guys.

I think that concludes the Q&A session. Thank you very much for joining us for the Quarterly Earnings call today. We look forward to speaking with you next quarter.

Ladies and gentlemen you may now disconnect. Good day.