ModivCare Inc (MODV) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q1 2012 Providence Service Corporation earnings conference call. My name is Kirsty and I will be your operator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference.

(Operator Instructions)

As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Ms. Alison Ziegler of Cameron Associates. Please proceed, ma'am.

Thanks, Kirsty. Good morning, everyone. Thank you for joining us this morning for Providence's conference call and webcast to discuss financial results for the first quarter ended March 31, 2012. The press release was issued last night. If anyone would like to be added to our email list, please call 212-554-5469. Before we begin, please note that we have arranged for a replay of this call. The replay will be available approximately one hour after the call's conclusion and will remain available until May 17. The replay number is 888-286-8010 with the passcode 47479804.

This call is also being webcast live with a replay available. To access the webcast, go to www.provcorp.com and look under the event calendar on the IR page. Before we get started, I would like to remind everyone of the Safe Harbor Statement included in the press release and that the cautionary statements apply to today's conference call as well.

During the course of this call, the Company will make projections or other forward-looking statements regarding future events or the Company's beliefs about its financial results for 2012. We wish to caution you that such statements are just predictions and involve risks and uncertainties. Actual results may differ materially. Factors which may affect actual results are detailed in the Company's filings with the SEC including the Company's 10-K for the year ended December 31, 2011. The Company's forecasts are dynamic and subject to change; therefore, these forecasts speak only as of the date of this webcast, May 10, 2012. The Company may choose from time to time to update them and if they do, we'll disseminate the updates to the investing public. I would now like to turn the call over to Fletcher McCusker, Chairman and CEO. Go ahead, Fletcher.

Thank you Alison. No, we have not moved to the UK. Sorry, Kirsty, I couldn't resist. Thank you for your proper English. Good morning, everyone. Here in Tucson with me is Michael Deitch, our CFO and Craig Norris, our Chief Operating Officer. With us from Atlanta today, one of the busiest people I know, Herman Schwartz, CEO of LogistiCare.

This is probably the most exciting and certainly challenging time we have ever faced as a Company. Due to our tremendous success in the non-emergency transportation space, we are simultaneously bringing up new contracts in New York City, Connecticut, and Dallas. As we stated previously, we have been invited back into Missouri after a competitor failed to perform. We have also taken over regions from competitors in Georgia and South Carolina. As a result, we have nearly three million more covered lives in the any key segment than we did this time last year, which we attribute entirely to our reputation and solid performance day in, day out on behalf, now, of multiple state payers.

This kind of success also makes it very hard to measure or monitor our performance on a quarterly basis. In the first quarter, we had approximately $1.8 million of start-up expenses, bringing up these segment contracts. It is important to remember that many of these new, very large contracts are only a small part of the available market opportunity. If we execute well -- indeed we will -- we can gain statewide business, especially in New York and Texas. The initial feedback from these payers in this segment is very good. We expect that our continued success will position us very well for additional business in these prototypical states.

We have seen increased utilization in two and three of our markets which we attribute to our good execution, good access, especially in rural areas, and good outreach to Medicaid clients. We are typically rewarded with rate adjustments when we increase ride utilization through access and good execution. The social services segment is also a little ahead of revenue and continues to enjoy steady growth. Michael, I will let you highlight the quarter.

Good morning, everyone. In our first quarter of 2012, revenue totaled $260 million, a record revenue quarter for us and up from almost $228 million for the first quarter of 2011, a 14.2% increase. For the three months ended March 31, 2012, as compared to the three months ended March 31, 2011, home-based revenue grew 8.9%, foster care revenue grew 1.3%, management fee revenue decreased 10.4%, transportation services revenue grew 18.5%. First-quarter operating income totaled almost $6.6 million, which was 2.5% of our revenue. This compares with $13.7 million and 6% of revenue for the first quarter of last year. First-quarter net income totaled $3 million, which was 1.2% of our revenue. This compares with almost $4.5 million and 2% of revenue for the first quarter of last year.

First-quarter diluted earnings per share totaled $0.23, with approximately 13.4 million diluted shares outstanding. This compares with $0.34 and approximately 13.3 million diluted shares outstanding for the first quarter of last year. At the end of our first quarter, our days sales outstanding was 36 days and management fees days sales outstanding was 91 days. At the end of our first quarter, we had $47 million in unrestricted cash, cash provided by operating activities totaled almost $9.2 million in the quarter. From December 31, 2011, to March 31, 2012, our accounts receivable balance increased by $8.6 million. $5.8 million of the increase relates to our transportation segment, of which $5.3 million was attributable to new business in two new regions in South Carolina. Those operations began in February 2012. The other $2.8 million increase relates to our social services segment, primarily due to revenue increases in our Virginia and North Carolina operations as well as our tutoring business, increasing volume from Q4 2011 to Q1 2012.

During Q1 of 2012, we spent almost $4.2 million for property and equipment, the majority of which was for our transportation segment purchasing technology and telephone equipment, supporting new business in Connecticut, Georgia, New York, and Texas. Also in the first quarter of 2012, as Fletcher mentioned, our transportation segment incurred start-up costs, totaling approximately $1.8 million, supporting new operations in Georgia, New York, South Carolina, and Texas. Our tax rate in Q1 of 2012 was 35.7%, which was lower than our expected tax rate of 42.5%. We were able to take advantage of a tax accounting method change related to a 2011 acquisition. This election had a favorable impact by reducing our effective tax rate for the quarter.

The Company, in consultation with our professional tax advisors, expects a 42.65% effective rate for the next three quarters. The effective rate for the year ultimately depends upon the profitability distribution between our two operating segments and the state mix of profitability within those segments. With that, I'll turn the call over to Craig Norris, our Chief Operating Officer.

Thanks, Michael. For the quarter, our direct client census on the social services side was approximately 6,100 -- or 61,900 clients. This is an increase from the prior year of roughly 2,100 clients. We also had approximately 12.4 million individuals eligible to receive services under our LogistiCare division, an increase of approximately 3 million eligible members compared to the same quarter in 2011.

All direct and indirect clients are being served from 502 local offices in 43 states, the District of Columbia, and Canada. Combined between our owned and managed entities, there are approximately 10,800 employees serving 979 contracts. In the first quarter, the social services segment performed well overall. We had an increase in census and many of our school-based programs and in-home services performed ahead of plan.

We have begun to execute our strategy of acquiring very small operations in North Carolina, as we see the market consolidating, and more geography will generate additional market share. We see this opportunity in other markets as well, as states seem to want to deal with fewer providers to reduce costs and increase efficiencies. I can't say enough about the resiliency of our leadership teams and the quality of our program staff. Our performance outcomes are strong, and we are making inroads in a number of markets and initiatives. We are in a good position to continue to grow market share as many states continue to see community-based options for its Medicaid populations. With that, I will hand it over to Herman for more details on LogistiCare. Herman?

Good morning. In the first quarter, NET revenue grew a healthy 18.5% over the same period last year. The growth was driven primarily by adding the state contracts in Wisconsin and Missouri during the second half of last year, expanding state contracts in Connecticut, New Jersey, and South Carolina, plus expanding our presence in Florida, Hawaii, Michigan, and New York through new managed-care contracts and adding new populations to existing contracts. Unlike last year during this quarter, transportation expense did not receive much benefit from trip cancellations due to cold temperatures and winter precipitation. With the growth we've experienced in the last few years, our trip volume has skewed more toward the Midwest and Northeast. In other words, our largest contracts are now in these cold water geographies, so the lack of a real winter this year certainly had a negative impact on our margins. We are also experiencing a higher-than-expected utilization factor in several of our largest contracts.

We are working with our clients to identify the source of this higher usage, but it is apparent that improved access and better service levels have generated much of the increase. The price of our success in winning business last year is that we had an unprecedented level of implementation activity in the first quarter. We strained our available resources, and I want to add here that our folks in IT and training and all of the different support staffs have truly been top-notch in the last quarter as they have been on the road and traveling nonstop to get all of these new programs up and running in South Carolina, Texas, Connecticut, New York, and Georgia. In the quarter, we did receive a little over a month's worth of revenue in South Carolina, but the remainder of these programs all started April 1 or later. For the most part, these implementations have gone relatively well and are working smoothly. We are still working through the normal challenges in our New York City program as the Brooklyn borough just went live last week.

This contract will be transitioned in, by borough, over the course of the next nine months, so we will be going through several phases of hiring and training in anticipation of bringing on a new borough every two months or so. As for other business development, in a recently completed process, the Wisconsin Department of Health issued a Notice of Intent to negotiate a contract with LogistiCare to provide transportation services to the Medicaid managed-care population in the Milwaukee area. Transportation for this group is currently carved out of the state contract we started last year and this RFP moves it back under state management for our services. If we successfully complete negotiations, this contract will start in late Q3 or early Q4. We also continue to work with several states that are considering a move to a broker model, but there are no active state RFPs in process right now, so it would be likely 2013 before we see any impact from a new opportunity that arises. I will now turn the call back over to Fletcher.

Thank you, Herman. We echo your comments regarding your hard-working staff. Thank them on behalf of all of us. A quick word on guidance and then we will open the line for questions. You have noticed, we have reaffirmed our previously issued guidance. In spite of the start-up and utilization costs identified in Q1 and continuing into Q2, our new business will be fully ramped up in the back half of 2012. We see improved rates in many of our NET markets. As of this date, we have renewed all but one of our social services contracts for the fiscal year in that segment that begins July 1. Now with that, Kirsty, we are ready to open the line for questions.

(Operator Instructions) Nick Halen, Sidoti & Co.

So the first question I had was on the social services side. I was wondering how you have been able to grow faster than the census rates that we've been seeing. For the last four quarters, it looks like you have been up high single, low double-digit rates on the social services side. I was wondering how you've been able to do that and how sustainable you feel that is?

Yes. I think what you're seeing in part is -- last, I think it was the summer Michael, we converted one of our non-for-profits in Pennsylvania over to the for-profit side. So I think you're seeing some of that in those numbers.

Okay. So a lot of that has been from the non-for-profit to profit you're saying?

Yes. They were managed before and we converted them over to the for-profit side.

That number, Nick, is a owned sense, so that would be census only that we operate directly. So if there is a transition, you would see an artificial gain.

Okay.

If you were to back that out, we are probably pretty consistent with our single-digits growth expectation.

Okay. Also on the NET side, I was wondering if you could update us on what cancellation rates were in February and March and how they compared to last year.

Yes. For the most part, through the first quarter, January, February and March, we experienced cancellation rates in the neighborhood of 4 points to 6 points below last year. Across -- it's going to obviously depend based on operations, but anywhere from 4 points to 6 points. Now, we obviously don't budget to the level of cancellations that we incurred last year because last year was a heavy winter season. But it certainly was much lower than what we had expected or had historically incurred over the last few years.

Jack Sherck, SunTrust.

My first question is on your ability with states like Georgia, South Carolina, Missouri, going back to the business your way. What capacity do you still have in LogistiCare to take on new business without adding cost?

Without adding costs?

Yes. How maxed out are you in terms of capacity?

You've got to keep in mind that when we take on state contracts, almost unilaterally, there is a requirement that we set up operation in that state and add jobs in that state. So the call centers and jobs and what have you are typically in state. So we always, almost always have to add cost when we take on a state contract like that. Obviously, we do get leverage from our corporate staff and our overhead areas. But frankly, to be perfectly honest with you, at this point we are stretched in those areas. So we have -- if we were to take on another big contract, we would likely have to consider adding some cost either in regional operations, training, legal, HR, all of those areas that support the operations.

But again, that is a very small part of our costs. The bulk of a cost is in state and we have to add that every time we take on a new state contract. With the managed care contracts, we still do have capacity. We are not required to put the calls in the state that they are operating in. So, we can find open capacity of some of the call centers that we might have and we do have capacity available. Maybe not the jobs, but we don't have to go out and get more real estate in a few call centers.

Right. Fletcher, my second question is just a big picture question. I think you've always said historically this is a 10% EBIT business overall. Do you still see it that way or has anything changed at this point?

We're close to that on the social services segment, Jack, in a 8.5% to 9% range, and we are quite comfortable with that. We had guided down the margins on the transportation segment previously to about 6.5%. We are 150 basis points off of that in Q1, the start-up costs issue that we just described. But we do believe that you will see a margin difference now between the two segments as a result of some of the competitive pressure that resulted in pricing decreases over last summer. I would model the business probably 8.5% social services and 6.5% on a normalized basis on the transportation side.

Okay. Just my last question is, on the census growth we saw in this quarter which was 3.5% year-over-year versus 5% last quarter, is that just the economy getting a little bit better or seasonal shift or just what are we seeing there?

There is a couple things, certainly our school-based programs have seen growth. This has been a strong quarter for them. You are seeing some of the census from the not-for-profit conversion that I mentioned on the last question. Both of those things are going on. I do think you are seeing some markets on the social service side starting to add census were they were mostly flat before. So I think it's a combination of those two things.

But I was just wondering the slight deceleration we saw from 4Q.

The Medicaid enrollment, Jack, is flat. So you're not seeing big enrollment swings. LogistiCare is a market share story right now, gaining new business in new markets. You are seeing some ideological shift on the social services side as Medicaid puts a lot of pressure on the out of home providers. So some of our census pick up is related to clients that are being diverted from 24-hour care. We would expect that to continue. But again, we see that segment's growth throttle back as a result of state budgets, probably in the 5% to 9% annual rate.

Rick D'Auteuil, Columbia Management.

She got your name right.

Pretty good, I'll sign her up. Social service side of the business, are you seeing any rate pressure in any state that you are in? Or is it fairly stable at this point?

No, I haven't seen -- the rates are pretty much stable. In fact we are starting to hear some grumblings -- well, I wouldn't call it grumblings, but we are starting to hear some discussion about potential increases coming. Not everywhere, but in some states. So that is a positive sign because we have not frankly, heard that in a while. No, I haven't had any major rate decreases at this point on the social service side.

Okay. Then for Herman, what do you expect the start-up expenses to be in Q2? It looks like a pretty substantial number again based on where EPS guidance is on that revenue level.

It's certainly not going to be where it was in Q1. New York -- Brooklyn didn't start until May 1, so obviously the month of April we were carrying staff and training and getting prepared for the start-up without any revenue coming in yet. We do have a Georgia region. The last region in Georgia will start July 1, so we will have some start-up cost as we get into late May and June for that. Then we will have the next phase in New York, which is Queens, which is scheduled to start July 1, as well. So we will have some start-up costs, Rick, but a lot of that Q2 is just our normal seasonality that happens in Q2 as schools get out and we take on summer programs and things like that. So it is not all attributable to start-up costs.

Is at 50% of what it was in Q1, you think?

I would anticipate it would be somewhere in that range. Obviously, we have got infrastructure in place in New York and management now, that should have some experience. So, we probably won't have to use as many people from out-of-state. But based on what we know now, then I would say, yes. If we throw in another big managed care contract or hit something. If Wisconsin comes back and says for the new contract we just got there, they want us to start a little bit earlier than September, that could fluctuate a little bit.

Originally in my discussions with you and Fletcher, the anticipated start-up costs were going to be -- I think originally estimated $500,000 to $1 million. I think that -- for Q1 and it migrated toward $1 million and it was actually $800,000 more than that.

Yes, that --

Q2 was supposed to be $300,000 to $500,000 and we are still talking at least about a $0.5 million more than that.

Let me explain Q1 to you. Q1, if you look at what we had budgeted and anticipated, that is exactly what we spent, right around that $1 million. We had South Carolina that was not in our budget that came online in February and we had a very short timeframe to get that up and running. You'll recall that all happened at the end of last year. So, none of the start-up costs for South Carolina nor any of the revenue or expense for South Carolina were in our budget.

So, South Carolina was a huge start-up with a lot of people. We had to higher 65 to 70 additional people there. We had to expand the physical space that we had there, bring in all the equipment, so we had a lot of IT support and things like that going into South Carolina. So, that gap of the $1 million -- $1.1 million to about $1.8 million, over 50% of that is South Carolina. The other part of that is Georgia. The region in Georgia that started April 1 was originally anticipated to start July 1. So that is really a shift, a timing issue that was in our budget later in the year but it got moved into Q1 because they moved the date up on us.

So, the start-ups are tracking -- are they tracking to your original expectation which was anticipated in your bid? Theoretically, we're going to capture the margin over the time of the -- over the life of the bid -- of the program. You're eating the start-up costs upfront, but you will make that up in margin later on?

Yes. Absolutely. In terms of looking at what we spent in Q1 versus what we expected to, I would tell you, we probably had $75,000 to $80,000 of excess expense. Frankly, that was a function of -- we got so strained with Texas, Connecticut, New York and Georgia all going on at the same time, we had to just pull people from anywhere and everywhere to try to make that happen.

So we had a lot more travel cost than we had originally expected to, because the timing of Georgia moving up and some of the delays between New York and Texas. We had them all starting at the same time and we use job coaches from different markets to try to help get new customer service reps up and running. So we had to start really pulling from a lot of different places. We didn't have the ability to put them there and leave them there just because of personal issues and everything, so there was a lot more in and out than we would normally like to do.

Okay. I appreciate that. On the insurance side, the business you got out of last quarter, the thought was that maybe we're over reserved there. Is there any update on that business?

No, frankly, we haven't gone back and looked at it yet. We're letting some of the run out occur. We will get the actuaries in at the right time to go back and look at that reserve and see where we stand.

Then you brought up, I think a couple of times on this call, the utilization rate not only being higher because of the weather issue, but also higher because of access to the services that you guys are providing. Again, I think the contracts generally call for adjustments in this case, what are you doing proactively to capture those?

Well, where we have been able to definitively build the data and build a case, and where it is appropriate given the specific contract that we are talking about, plus taking into account political factors and everything else going on. We will and have started conversations in some places around rates. It is too early to tell you where that is going to go and how that's going to go but believe me we are not sitting on our hands accepting a lower margin than we would like to see or expected to see. Where we can and where it's appropriate, we are talking to our clients about the ability to put through some rate.

New Jersey, is that at targeted levels yet or are you still struggling there?

Without going too specific, New Jersey happens to be one of the states that is experiencing a tremendous spike in utilization. So, if things had held where we expected them to, we would be right where we thought we were going to be. Our unit cost is in line with where everyone expected it to be, but utilization and the lack of weather in New Jersey in particular, truly hurt us there. So, New Jersey is a state we are looking at in terms of the rates going forward.

Okay. Let me just see, I think I had one more. So if I look at -- Fletcher, I guess this kicks back to you. If I look at the back half of the year, usually third quarter on the social service side of the business with school vacations, is a seasonally weak quarter for that part of the business. That's still true, right?

Yes, in our model we would anticipate our traditional seasonality. I also believe Herman and Michael can correct me, I don't believe we have any start-up or pre-revenue investment spending in the back half. Is that --

That is correct.

So, all of the investment spending then you see -- because these contracts are starting up, actually, earlier, it's front loaded those costs, Rick, in the first half. You see the impact of new revenue, the elimination of start-up cost, but we still expect our typical seasonality in both segments through the summer. That is why Q4 is so much stronger. Because we would be past the seasonality, past the start-up period and that is a good indication of our run rate in the last quarter of the year.

Okay. If you were to compare your business historically -- and I realized that the NET business is growing a lot faster so it has become a bigger part of the pie, but would it be fair to say that the first half is generally as strong as the second half given that the social service has that lull in Q3? Or is it typically even stronger in the first half?

In a normal budget cycle, Q1 would be our best quarter, Q2 would pick up the first month of the summer, Q3 is seasonally the weak, and Q4 is a little bit under Q1.

Okay, so the first half generally is stronger than the second half?

Correct.

So if I look at the run rate in the second half without the start-up costs of $0.82, I would think next year is going to look an awful lot like a $1.60 or more. Is that how we should be looking at the world? If not, why?

You're ahead of us in that regard but when we would build our budget, we will build it off of the run rate coming out of the back half.

Kevin Campbell, Avondale.

This is Wes Huffman on for Kevin. Thanks for taking the questions. I just wanted to know if you could provide us any update on the strategic alternatives initiative?

That is a market rumor, Wes. It has not been initiated by the Company, so consequently we won't respond one way or the other.

Okay, fair enough. Moving to modeling purposes, if we were to say, annualize the EPA guidance for the back half of 2012, it looks like the run rate for 2013 would be about $1.64. Is there really any reason why we shouldn't be looking at it that way?

Only that we've yet to budget. We typically do a zero-based budget. But I think it is safe to assume that the things affecting us in the first half of 2012 do not occur in the back half of 2012. You should be able to build a budget off of the back half.

Okay. Just on LogistiCare, quickly, could you run down the RFPs that exists right now?

There are none currently in the Street, Wes. Oklahoma renews in the summer of 2013. That is the only incumbent contract we have that is up for a rebid. As Herman mentioned, there are a handful of states that are publicly discussing brokering their transportation business. None of them have circulated an RFP as of this date.

Okay. Do you have the names of those states that are talking about that at this point?

We would not preempt their public announcements. But if you did a little research, there is some indication of who they might be.

(Operator Instructions) Mike Petusky, Noble Financial.

A few questions. Fletcher, on the 6.5% normalized margin that you are targeting in the NET business, what might be the first quarter that we would see that? Would that be a fourth quarter event or a first quarter next year? When would we actually see the 6.5% in your view?

You should see the ramp up of the new contracts that term and then join, fully in place by Q4 of 2012. So, we see Q4 of this year, as a normalized quarter.

Okay, all right. Then, I guess another question on the second quarter revenue guidance, of the incremental $15 million between the $260 million that is reported overall and the $275 million you're guiding towards. Is about roughly two-thirds of that NET business and the balance social services? Or can you just give just a general breakout of how you see that incremental growth coming in?

Most of that would be on the NET side. That is the Georgia impact, South Carolina, New York City, Texas run rate.

Right. Is it a two-thirds, one-third? Is that a decent --?

It's probably 80/20.

It's mostly transportation because social services is going to have a summer month in Q2.

Rick D'Auteuil, Columbia Management.

Again for Herman, the 150 basis points off target of operating margin in the quarter. How much of that would you put in the bucket of weather impact? Is it one-third of it or is it maybe 50 basis points or more than that?

Our estimates of -- it is an estimate because it is hard to tell. We are obviously -- the only way we can truly get at that is to look at our cancellation rates and we can attribute a lot of that weather but it is not always the case. For the first quarter, we are saying somewhere in the neighborhood of $1.5 million was lost to weather.

That is not revenue, that's bottom line?

That's bottom line, right. That is expense that was incurred that we normally would not incur because it would have been canceled. That is across our system.

Okay.

It would represent, Rick, 50% of the mix.

Yes, It sounds like 50% is start-up costs and then 50% is weather. The other thing is, on the 6.5% operating margin, doesn't it really need to be something like 7% or maybe even in the low 7%s to offset the periods where if you're really recouping the start-up cost through the duration of the contract, at some point it's got to be better than 6.5% to offset the zero that you're getting in the start-up phase.

That's an annual number, we have always guided to annual expectations. You're right. On both sides there is some variance. Social services is much more steady. The NET margin goes up little, down a little. That would be an annual target. That is how we budget. When we guide, we guide to annual. But there is some inter-quarter differences.

Okay. But obviously, if some quarters are below the 6.5%, there have got to be some quarters above it. Maybe -- if we don't have start-up costs in the fourth quarter, we actually probably should see it above the 6.5%.

We agree.

Okay. What's the pipeline look like for social service acquisitions? Are you still looking at tuck-ins there or is that secondary at this point?

Most of the pipeline activities in North Carolina as Craig mentioned, we are seeing an opportunity to consolidate in that state. We do have a number of other interesting opportunities. We would only announce them, Rick, if and when we closed them. But we would expect to be able to do one a quarter, or two certainly this year.

Okay. North Carolina in my recollection has been a tough state from time to time. Is the environment better for your services or is the reason that there is a consolidation opportunity because it is inferior rates there for your services?

If you remember the history there, this is a state that opened up home-based services to any and everybody. They were inundated with providers, they audited many of them that were unscrupulous, began to shut a lot of them down. It really tightened up in terms of looking for the high-quality providers. So, that is a state clearly where our model and survivability has led to a consolidation opportunity. We are perfectly happy with rates there.

Okay. Lastly, as the cash builds and you still have a significant debt on the balance sheet, what are your thoughts about further pay down? Maybe you can address short-term and then longer-term on the debt picture?

We are obligated, remember, to reduce the convert to $25 million. Michael, it's currently, $50 million?

Yes.

So we have got $25 million between now and a year from now that we've obligated ourselves to the senior lenders to reduce that convert. So we will continue, Rick, to chip away at that and bring that down under the $25 million mark. It is trading from time to time. We find something we can buy at par and we use the free cash to tend to that convert.

And how about the senior?

If we continue to produce cash, we like to keep cash on the books. We've talked about that for a variety of reasons. My guess is we probably wouldn't do any more this year than the $25 million convert.

There are no further questions queued in. I would now like to turn the call over to Fletcher McCusker, Chairman and CEO, for closing remarks. Please go ahead.

Thank you. Thank you everyone, it sounds like we got to most everything today. If we did not get a question answered, please call Michael or I directly. We will see many of you this summer. Again, thank you very much.

Thank you. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.