New York Times Co (NYT) 2008 Q3 法說會逐字稿

Good day and welcome to the The New York Times third quarter 2008 earnings conference call.

Today's call is being recorded.

(OPERATOR INSTRUCTIONS)

For opening remarks and introductions, I would like to turn the call over to Ms.

Catherine Mathis.

Please go ahead, ma'am.

Thank you very much and welcome, everyone, to our third quarter earnings conference call.

We have several members of our senior management team here today to discuss our results with you.

They include Janet Robinson, our President and CEO; Jim Follo, our Senior Vice President and Chief Financial Officer; Scott Heekin-Canedy, President and General Manager of the New York Times; and Martin Nisenholtz, Senior Vice President Digital Operations.

All comparisons on this conference call will be for the of third quarter 2008 to the third quarter of 2007, unless otherwise noted.

Our discussion will include forward-looking statements, and our actual results may differ from those predicted.

Some of the factors that may cause them to differ are included in our 2007 form 10-K.

Our presentation will include nonGAAP financial measures and we have provided reconciliations to the most comparable GAAP measures in our earnings press release which is available on our corporate website, www.nytco.com.

An archive of this call will be available on our website as will a transcript and a version that is downloadable to an MP3 player.

With that, let me turn the call over to Janet Robinson.

Thank you, Catherine, and good morning, everyone.

This morning we reported a preliminary third quarter loss per share from continuing operations of $0.01, including $0.07 per share expense for severance costs compared with $0.10 earnings per share in the third quarter last year which included $0.02 per share for severance costs.

Our preliminary results reported today do not include an anticipated non-cash charge for impairment of goodwill and long lived assets.

Due to the continuing softness of business conditions driven by the secular forces affecting the newspaper industry, we are testing the assets of our New England Media Group for impairment in the 2008 third quarter.

While the results have not yet been finalized, we currently estimate a non-cash impairment charge of $100 million to $150 million.

We the record a charge in our financial statement when we file our Form 10-Q with the SEC.

The charge will affect EPS for the third quarter, but will not affect the company's operating cash flow.

In the midst of the softening economy, advertising has certainly weakened.

We saw this across all of our properties this quarter.

But it is important to highlight several items in the quarter that speak to how we are positioned differently than many of our competitors.

First, the United States presidential election and the turmoil in the world financial markets have again demonstrated the need for high-quality journalism we provide in print and online.

The continued strength of our brands is evident in our ability to raise home delivery and newsstand prices which, in turn, is reflected in the growth of our circulation revenues.

It is also reflected in the strong growth and traffic to our website, which we monetize through advertising.

Second, as we continue transformation to a company focused increasingly on digital, our online advertising revenues grew 10.2% in part because of new advertising formats.

At last, and last, we have been and will continue to be very disciplined in reducing costs.

This quarter, our operating costs including -- excluding depreciation, amortization and severance costs, decreased 6.6% despite a 22.1% increase in newsprint prices.

Jim will discuss in greater detail the many steps we are taking to continue to drive down costs without detracting from the quality of our journalism or our ability to achieve our strategic objectives.

Turning now to revenues.

Total revenues for the Company declined 8.9% with ad revenues down 14.4%, circulation revenues up 1%, and other revenues down 4.2%.

Ad revenues at the news media group decreased 15.9% with national advertising down 11.4%, retail down 11%, and classified down 29.3%.

Half of the decline in ad revenues at the news media group was attributable to classified.

At the Times media group, ad revenues decreased 13.7% in the quarter.

National print categories that performed well included financial services where mutual funds, banks and insurance companies ran ads reassuring their customers amidst the crisis in the financial markets, health care, which benefited from increased advertising from pharmaceutical companies and hospitals, and corporate advertising which saw significant gains from energy related companies.

In total, luxury advertising, which made up about 13% of the Times media group's advertising revenue in the quarter, increased in the low single digits in part due to the performance of our key branded Sunday supplemental magazine.

The national print categories where we saw the largest declines were entertainment, with the films released this quarter did not match the strong performance of those in the very strong third quarter of last year.

Hotels, which weakened as two advertisers did not repeat major campaigns, and technology as advertisers held back budgets in a time of economic uncertainty and the migration of technology advertising from print to online continued.

Classified advertising decreased in all three major categories, recruitment, real estate and automotive.

Retail advertising revenues were down due to decreased advertising from department stores, direct response, and mass market stores.

At the New England Media Group, advertising revenues declined 19.4%.

National ad revenues decreased in the third quarter was the largest declines in travel, entertainment, and national automotive categories.

Retail advertising revenues declined due to weakness in department store, home improvement and home furnishing advertising.

Live entertainment and telecommunications advertising increased in the quarter.

Overall, classified advertising at the New England Media Group was off in all three major areas, recruitment, real estate and automotive.

At the Regional Media Group, advertising revenues decreased 19.2%, about two-thirds of the decline was due to less classified advertising.

The declines this quarter were again concentrated at our newspapers in Florida and California which have been deeply affected by the troubles in the housing market.

Total circulation revenues were up 1% in the quarter, mainly because of higher home delivery and newsstand prices for the Times.

Our digital operations, revenues grew at much higher rates in August and September after rising slightly in July.

For the quarter, our internet revenues increased 6.7% to $85.1 million, internet advertising revenues grew 10.2% to $74.4 million.

In total, internet business accounted for 12.4% of the Company's revenues in a third quarter versus 10.6% in the 2007 third quarter.

The About group had another strong quarter.

Total revenues grew 16.1% to $28.7 million because of increased cost for click and display advertising.

Operating profit before depreciation and amortization increased 31%, mainly due to higher revenues.

The ongoing development of content verticals across all of our sites has helped the Times company becomes the 11th most visited parent company on the web in the United States with 50.8 million unique visitors in September, up from 15 -- up 15% from September of 2007.

Our reach represents 31% of the online audience in the United States.

According to Nielson Online, in September the number of unique visitors in the United States to nytimes.com totaled 20.1 million, up 37% from September a year ago.

It's audience is more than 30% larger than the next newspaper website and is the fifth largest current events and global news site.

In September, we began a significant expansion of our online business coverage with a redesign technology section and the introduction of an economy section.

In the coming months, nytimes.com will expand its small business, personal technology and your money sections, introduce more journalists, deepen coverage and its deal book franchise, and continue to add new tools and multimedia features.

In September, page views in our business section were up 66% year over year.

By itself, the newly launched economy section had nearly 4 million page views in September.

With the extraordinary events of the financial markets, nytimes.com had three of its top ten days of all time during the week of October 5 and we have had three consecutive record-breaking weeks in terms of page views.

In the quarter, display advertising at nytimes.com was strong given our robust traffic growth, our investments in our verticals, and our success in selling innovative new ad formats.

As we move into the fourth quarter, our visibility on advertising remains -- revenue is limited.

To date, in October, print advertising revenue declines are similar to those in September, but we are seeing a slowing in digital advertising revenues mainly because of less display advertising.

These are difficult times in the economy and in the media industry.

We believe, however, that we have many strengths that are helping us successfully weather this period.

We have strong and trusted brands that we are leveraging into new products in print and online.

Our digital businesses continue to grow and we are increasing their share of revenues and profits that come from our online businesses.

We have a proven track record in expense reduction and we are executing well on our expansive program to lower our cash cost base.

We continue to seek opportunities to rebalance our portfolio of products.

Let me turn the call over to Jim who will tell you more about our cost reduction initiatives and other financial matters.

Thank you, Janet.

We continue to tightly manage our expenses in the third quarter.

Operating costs, excluding depreciation and amortization, and severance costs, decreased 6.6% mainly as a result of lower compensation costs and benefits expense.

As Janet mentioned, severance costs were $0.07 per share in the quarter, or $18.1 million.

About half of this was for the shutdown of City & Suburban, the company's retail and newsstand distribution subsidiary which operates in the New York metropolitan area.

The closure of C&S is expected to be completed in January 2009, and additional severance costs may be recorded before it is closed.

In the third quarter of last year, the company had $0.02 per share, or $4.9 million in severance costs.

Year-to-date, severance costs have totaled $56.9 million.

Depreciation and amortization decreased 34.6% to $33.9 million from $51.8 million last year.

When accelerated, depreciation totaled $11.7 million, or $0.05 per share, for assets at the Edison, New Jersey printing plant which the company closed earlier this year.

There was no accelerated depreciation in the third quarter of 2008.

New print expense rose 2.1%, stemming from a 22.1% increase in prices offset in part set by 20% decrease in consumption.

The newsprint price increase added $11.3 million to costs in the third quarter and the decrease in consumption lowered costs by $10.2 million.

The Times reduced the width of its pages last August, and The Globe did so in the fourth quarter of 2007.

In May, we reduced the width of our Florence, Alabama, paper to 44-inch web width, and we are planning to move seven other regional newspapers to that size before the end of this year.

As you can tell, we are executing well on a program to reduce our cash cost base.

We have previously stated we expect to reduce our 2007 cash cost base by more than $230 million by 2009, excluding the effects of inflation, severance and one-time costs.

Of this amount, we expected to achieve more than $130 million in savings this year.

As a result of our continuous cost reduction efforts, we now expect to exceed these targets by even larger amounts.

As we get further away from the $230 million target, it becomes increasingly difficult to continually update this number as many factors contribute to our cost levels.

For example, some initiatives could result in lower revenues while others could result in higher revenues and expense.

We continue to explore a wide range of additional cost reduction initiatives and as they develop we will provide the details on them.

The progress we have made on our cost reduction measures has occurred across the company.

Earlier is this year, we completed the consolidation of our two New York area printing plants which we estimate will save $30 million in annual operating costs.

In September, we announced the consolidation of the Globe's printing facilities which we expect to be completed mid to late 2009.

At our Regional Media Group, we have consolidated or outsourced telemarketing and some finance and advertising functions.

We have also consolidated mail rooms at our Gainesville and Ocala, Florida, papers.

Furthermore, our general and administrative costs continue to be reduced through offshoring, centralizing and other means.

The Company's income tax expense of $12.8 million was larger than our pretax income of $10.8 million in the third quarter.

Income taxes were unfavorably affected by nondeductible losses on investments in corporate owned life insurance policies and a change in Massachusetts state tax law.

The size of these items relative to taxable income in the quarter distorted the effective tax rate in the quarter.

In this difficult environment we are reviewing our uses of cash.

This quarter, our capital expenditures were $27 million, and year-to-date they totaled $96 million.

We have revised downward our CapEx guidance for the year from 156 -- to $150 million to $165 million to $140 million to $145 million.

Next year, we expect our capital expenditures will decrease from the 2008 levels to be approximately $80 million.

In addition, our Board of Directors plans to review the dividend policy before the end of this year to determine what is most prudent in light of the overall market conditions.

As part of this process, we are evaluating future financing arrangements which will depend upon our funding requirements and market conditions.

We have $49.5 million in medium-term notes maturing at the beginning of December which we plan to repay using an existing revolving credit facility.

In May 2009, one of our two revolving credit agreements will expire.

Late next year, approximately $100 million in medium term is due.

Based upon conversations we have had with lenders, we expect that we will be able to manage our debt and credit obligations as they mature.

Going forward, we plan to explore opportunities to reduce our debt levels.

With that, we would be happy to open up for questions.

(OPERATOR INSTRUCTIONS) We will go to our first question from David Clark of Deutsche Bank.

Thank you, good morning.

Two questions.

What sort of impact on circulation volume have you seen from your home delivery and single copy price increases at the times over the summer?

Second, what is the current guide count at about.com and is the plan still to scale up to 900 guides by next year or has that been scaled back in light of the economic environment?

Thanks.

I will have Scott give you the information on circulation and Martin will give you the overview in regard to the guide network, Dave.

As with our price increases in recent years, we are seeing better than expected volume drops as a result of the price increase, so we're tending better than expected in circulation levels.

The yield is significant and we expect to annualize generate $16 million to $18 million of revenue.

The current guide number is 770, and we are trending toward the 900 that you referenced for next year.

Okay.

Thank you.

We will now, move on to our next question from Ed Atorino with Benchmark.

SG&A was down looks like about $30 million from last year.

Would that sort of be a run rate going forward in terms of the cost reduction actions?

We continue to execute well, as I said, on the $230 million target and we have been building the cost savings as we go and the third quarter was a number which far surpassed any other number.

Specifically on the G&A line, I can't give specific guidance on that, but we certainly expect the cost savings, the cash cost savings numbers will continue to show the results that we saw in the third quarter specifically on that line.

We certainly expect that line to come down in meaningful numbers going forward.

I can't give precise number, however.

Second question, sort of a little minor item, joint venture income looked pretty good and with the news print environment would the fourth quarter joint venture income be significantly above a year ago?

Well, last year was a loss, be in the vicinity of the second or third quarter levels?

We gave the full year guidance in the press release.

The joint venture line has a seasonal aspect to it, particularly as it relates to --

Got you, thank you.

That is the reason.

We now, move on to our next question from Peter Appert with Goldman Sachs.

Thank you.

Two questions.

First, on the cash flow from, Jim, I am wondering if the $80 million capital spending plan for '09, should we think about that as the sustainable number going forward?

And then related to the cash flow also for Janet, I am wondering how seriously you will consider asset sales as you review the efforts to cut that.

And then just one other and unrelated item, on the newsprint front there is some talk in the market that maybe pricing pressure is easing a little bit in the fourth quarter, what are you guys seeing?

Let me say CapEx number first, the $80 million number actually includes two items which we view as somewhat non-recurring and both of them are meaningful parts of the $80 million.

We still have, as we mentioned, a plant consolidation in Boston that will contribute meaningfully to that number.

And we are still in the final stages of our SAP implementation which we expect -- which will be complete in kind of mid 2009.

So X those two numbers, I think that number actually comes down somewhere in the $20 million to $30 million range now.

I wouldn't call a $50 million number of sustainable long-term number.

But we don't see the $80 million as something you look at as a good target.

Okay.

Great.

On the news print side, we think there is potential leveling out as we go into the fourth quarter.

There are several factors that are helping to mitigate what we hope further increases.

We do see the price increases that were announced as largely sticking.

There has been a $20 per month increase throughout the year.

That being said, I think we do view the prices in to 2009 as flatish, we look at Canadian dollar and some of the raw material and energy prices favorably impacting the consumption across the board also impacting it.

But we do kind of think long term really 2009 is more of a flatish type environment.

Peter, on the sale of assets, divestitures, we don't comment on that but we have said often that we constantly review our portfolio and will continue to going forward.

I think the focus right now is making sure these properties are running as efficiently as possible, and we are making sure the cost base of all of them are being brought down quite dramatically as evidenced by what we have done at the Times and the case of the C&S distribution arm closing, the consolidation at Edison and certainly the closing of Bill Ricker in Boston.

We are going to continue to do those things to make sure all of these properties are run as efficiently as they possibly can be.

Right.

Is there a specific debt level or leverage ratio that you folks might like to be at the end of 2009, let's say?

We don't have a specific target other than we are certainly mindful of providing some balance sheet flexibility through lower debt levels.

We don't have a specific target, just a function of the environment and our view of the business on operations.

Great.

Thank you.

Thank you, Peter.

We'll now move on to our next question from Alexia Quadrani with JP Morgan.

Thank you, a couple questions.

First, Janet, when you mentioned constant reviewing of your portfolio, do you think there are buyers of newspaper assets right now currently in the marketplace?

And then my second question is on the internet side of the business where you talk about the weakness in display advertising going forward.

Is it on any specific one property or is it across the board there?

I will have Martin answer the internet advertising.

In regard to the outlook, I guess, and regard to potential buyers for newspaper properties, I think this is a difficult time for our industry.

It is clear is that we are facing secular and cyclical head winds but from the standpoint of the brands represented by newspapers nationally, it is clear that these are still very strong brands in their communities and beyond.

In light of that, many newspapers of course are not just positioning themselves as newspaper companies, they are positioning themselves as news media sources that are extending their content over a variety of platforms.

I think from the standpoint of timing right now, it is a very difficult time for asset sales, but companies overall are doing exactly what they should, Alexia, focusing on the productivity of those assets, expanding the base across platforms to make them very profitable business that contribute to the bottom line.

Regarding the internet revenue streams.

It isn't equal across the properties.

The CPC and (inaudible) businesses, which are really more in the about area, remain quite robust, very strong.

Display at the lower end of the business is weaker.

At the higher end it is holding fairly firm.

Of course, classifieds, which have been weak all year in help wanted, continue to be weak.

As we look out, we don't see a change in that.

It isn't really a uniform story at all across the four segments.

Thank you very much.

We'll now move on to our next question from Catriona Fallon with Citi.

Two quick questions.

One, in terms of the dividend discussion with the Board, what is the main focus there?

Is that maybe reducing the dividend yield, working on cash flow or is there something else that is driving that?

And the second question, on the digital aspect can you give some detail on CPM for the higher end ads or the front page of nyt.com and maybe some other color on the range of CPM?

On the dividend front, a fairly dynamic discussion, it takes place at every Board meeting.

It is just a function of how we want to allocate capital, what we see in the future as far as investment opportunities and making sure we have sufficient balance sheet capacity and flexibility in being able to invest in growth business, that is the way we think about it.

On the CPM front, CPMs at nytimes.com have been up in the mid single digits year-to-date.

That does not include ad network CPMs which have also been up.

I don't have a specific number on that but they have climbed year-to-date as well.

That is the answer.

Thank you.

You are welcome.

We'll now move on to our next question from John Janedis of Wachovia.

Good morning, thanks.

Janet, you talked about visibility being limited on the advertising side.

Can you talk about maybe the buying patterns in these categories?

How much closer to run date are you seeing commitments come in from department stores or other categories compared to a quarter or two ago?

There is more of a trending toward just-in-time placement across all of our properties.

I think retail most of all primarily because of the nature of their business.

That said, John, there is quite a bit of business that is already on contract, not only at the times but at the Globe as well.

That is in a number of categories.

I think from a standpoint of the economic situation that exists right now, you're seeing more just-in-time placement as opposed to longer flights and flights that are predetermined months in advance.

On the contract side, given the economy, are you seeing instances where clients are trying to pull back on a contract or pull back on the commitment?

It is too early to tell.

Certainly there will always be discussions about contractual obligations.

But the way contracts are put together, they are incentivized to run a certain amount of advertising during the course of the year.

From the standpoint of their cost base, I think there are distinct advantages to sticking to the contractual agreements that they agreed to.

I think in most cases people are going to be focusing on those advantages going forward.

If I could just ask Martin a question.

Your comment about high end versus the lower end, can you give us an idea maybe how much inventory is you would classify as higher end?

That is a good question.

My reference was really to higher end being at the Times website.

In general, that inventory is viewed as premium inventory as opposed, for example, to the About inventory.

The question was are all of the properties behaving the same and they are not.

With respect to your question about kind of parsing that a little bit, I would say all of the inventory at nytimes.com is viewed because use of the brand as high end inventory or as premium inventory, we hold rates.

We won't sell inventory just to discount it.

There is no question, and we have said this over the past several years, that vertically oriented or more contextually oriented inventory is worth a lot more than general news inventory.

In some ways, you can cut the word premium by is it premium as a result of its brand affiliation or is it premium as a result of its contextual affiliation?

Those are two dimensions to the question.

So the inventory that will tend to go more toward the remnant side at nytimes.com is the general news inventory.

Categories like luxury and financials, they are hanging in there?

Very much so.

In fact, as I said, on the CPM side we have seen mid single digit increases this year and absolutely hanging in there for sure.

Not just those two categories but certainly any categories that attract commercial intent on the part of the consumer or that target a particular type of demographic, we have talked about executive decision makers in the past, and that is particularly important and sizable segment for us.

Okay.

Jim, if I could squeeze in one quick question on the model.

Are the 3Q numbers for both corporate and DNA for about good run rates for the fourth quarter?

I'm sorry, repeat the question, please.

Are the 3Q actuals for the corporate line and also for the DNA at About, are those good run rates for 4Q or is that step down?

I think those should be good run rates.

Thank you very much.

You are welcome.

We do have a follow-up question from Edward Atorino.

Are we too late?

We can't hear you, Ed.

We can't hear you.

Mr.

Atorino?

I am sorry, thank you for reminding me I was on.

I was dodding off.

Regarding the advertising outlook that you talk about October, do you think, given sort of the credit crisis and the credit crunch and people watching their cash, there has been sort of a, you mentioned just-in-time advertising which has been my personal belief anyway.

People might have been -- advertisers might have been unduly cautious and if the credit markets loosen up and they believe the money is in the bank, they might put some money back into the budgets or is that wishful thinking?

Ed, this is Scott.

Advertisers are definitely taking a day-by-day wait and see approach to see where the markets are going, how the economy is going to respond, and they are trying to spend their ad dollars very judiciously.

You have seen some nice increases, particularly from financial services in the past month, as institutions have tried to take advantage of this marketplace as well as reinforce their reputations.

We saw a strong climb in financial advertising at both the Times and the Globe in regard to the advertising that addressed the crisis certainly with banks and financial institutions.

It is clear when there is a deliberate reason for them to get their message out they use these vehicles to do so, the immediacy of the message and the full explanation of the message in those kinds of ads that are appearing in those papers.

You don't think there has been sort of pressure on budgets because a cash that exaggerated the weakness?

They are being extremely cautious in regard to how they are spending their money.

I don't think the dollars are totally gone, but I think they are being very judicious in regard to how they are spending.

I also think in regard to the retail sector, it will be a wait and see in regard to how the November and December time frame performs for them because, in many cases, when things get more difficult for retailers, they do advertise more rather than less.

In a similar vein, advertisers are telling us they were trying to wait as late in the year as possible their ad budgets for 2009 to wait and see where the economy is going and how consumers are going to behave.

One last question.

Have you thought about the rate structure for '09, ad rate structure?

We have not decided specifically in regard to those structures as of yet.

I think they will be further evaluation, I think we will be conservative in regard to any rate increases that we are looking at for 2009 particularly because of the economic situation.

Thank you very much.

We will now take our next question from [Craig Hubbard] with Barclays Capital.

Good morning.

Thank you.

I just want to ask a couple questions.

First one about the pension.

Just looking at your 10-K I think it is underfunded last year $275 million underfunded and I think you have about $1.5 million of assets.

Just given here the S&P 500 is down 35% to 40% this year, I guess most bond funds are down between 5% to 10%, it is probably not unreasonable for your pension assets to be down a good 20%, that would probably put your underfunded status upwards of down $600 million give or take.

I am not a pension expert by any stretch but if you have roughly seven years you have to get that back to break even.

Does that mean investors should expect a large outflow of cash going to your pension plan of $80 million give or take?

Craig, I think the number you are referring to regarding the funded status was all funded and unfunded plan.

The qualified plan, which is the [Arisa] plan, was fully funded as of last balance sheet date.

It is also true, however, with the credit markets, with the equity markets being what they are, we have obviously had some asset losses in the first nine months of the year.

We don't think that is a big material number.

It is hard to quantify.

It's a fairly dynamic number and hard to predict now.

Do you have any idea how much cash to put in the pension plan?

In 2009 we think it will have no impact.

You have to think much farther out.

A lot can happen between now and then before you have to commit.

We don't think this thing is a $100 million.

Certainly puts more pressure but, again, in 2009 it will result in no additional contributions to the qualifying [plans].

That is good to hear from a cash flow standpoint.

On the dividend discussion, are you guys contemplating at all taking a dividend to zero or potentially just cutting it in half like (inaudible) did here recently?

That is something we will have a full deliberation as we always do with the Board, and that is not something we can comment on.

Okay.

Lastly on your comments on the digital "slowing." Can you just quantify a little bit better what you are seeing at about.com so far this month?

Is the rate slowing there, the growth rate?

Certainly not -- Yes.

The growth rate on revenue has slowed this month.

As I said before, it is a result of the display, the display side of the business, the non-premium display side of the business.

We are continuing to see very robust growth in CPC and lead generation but the non-premium display inventory is under pressure.

Okay.

Very good, thank you.

You're welcome.

Our next question comes from Scott Davis with JP Morgan.

Good morning.

I guess I am looking at About and I am curious about the other side of the equation, the cost side.

Wondering if Martin can give a minute of color on what you are doing there because costs on my numbers, excluding DNA, grew 5% to 6% which is vastly better than the 30%, 40%, 50% growth that you had.

Are we just anniversarying this sales growth that you put in place or is something else happening?

Yes, in part, that is what we are doing.

We invested, as I think you know, if you followed the story to date, we have invested a significant amount of money in the salesforce rebuild.

We are committed to that, we think it's an important part of the business and we think we need to have a highly confident and sizable sales force given the size of the business.

That was the principal investment that we made.

As we cycle around on that, we will --

We also, Scott, anniversaried against the consumer search acquisition.

That acquisition was done, I believe, in May 2007.

This is the first quarter were in which we anniversaried against a full quarter's worth of expense.

On consumer search.

So the cost growth that we saw this quarter you think it is representative going forward?

In general terms, that is right.

It seems like a small issue but sadly, profitability is becoming a fairly big piece of the Company.

Feels like it is important.

I will add one other thing that doesn't totally go to the growth.

Embedded in there as we continue to invest small but meaningful amounts about China as well and that we see that continuing for the foreseeable future.

Thank you.

There are no further questions at this time.

I would like to turn the conference back over to Ms.

Catherine Mathis.

Thank you all for joining us today.

If you have any additional questions, please give us a call.

Thanks so much.

Goodbye.

That concludes today's conference.

We appreciate your participation.

Have a great day.