Performant Healthcare Inc (PFMT) 2013 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Performant Financial Corporation's first quarter 2013 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded today, Thursday, the 9th of May, 2013.

I would now like to turn the call over to Jeff Grossman, with Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone.

By now you should have received a copy of the earnings release for the Company's first quarter 2013 results. If you have not, a copy is available on our website, www.performantcorp.com.

Today's speakers are Lisa Im, Chief Executive Officer, and Hakan Orvell, Chief Financial Officer.

Before we begin, I would like to remind you that some of the comments made on today's call, including our financial guidance, are forward-looking statements. These statements are subject to the risks and uncertainties described in the Risk Factors section of the Company's Form 10-K and other filings with the SEC. Actual results may differ materially from those described during the call. In addition, all forward-looking statements are made as of today, and the Company does not undertake any responsibility to update any forward-looking statements based on new circumstances or revised expectations.

Also, non-GAAP financial measures discussed during this call are reconciled to the most directly comparable GAAP measures in the table attached to our press release.

I would now like to turn the call over to Lisa Im.

Thank you, Jeff. Good afternoon, everyone, and thank you for joining us for our earnings call today.

Our first quarter was another solid quarter for Performant. Today we are reporting revenues of approximately $49 million in the first quarter, a year-over-year increase of 7.6%. Adjusted EBITDA in the first quarter was approximately $11.4 million. Adjusted EBITDA margins for the first quarter were 23%. Adjusted earnings per diluted share were $0.08 in the first quarter.

Before getting into the details of our first quarter results, I would like to provide additional color around several questions that have been raised in the last couple of weeks.

First, the Medicare RAC re-compete process. As you may know, the current CMS RAC contract is scheduled to expire in February of 2014. This past February, CMS issued a request for quotes, or RFQ, with the original expectation of a response and award from CMS later in the second quarter. We filed our response to the RFQ in early April.

We believe that we submitted a highly competitive bid and that our seven-year relationship with CMS and our related experience of providing recovery services to identify improper payments allows us to compete favorably. We also expect that our ongoing performance under the current RAC contract and established systems integrations with CMS and related Medicare administrative contractors should be key factors in determining our continued service to CMS in Region A.

Under the original framework, CMS communicated to RAC vendors that they should stop sending new medical record requests to providers in late May ahead of the new contract award anticipated in June. We understand their thinking on the transition plan from the current contract to the new contract and acknowledge that this transition process would result in a temporary interruption of our recovery efforts. We also expect such temporary interruption to have a greater impact on existing RAC vendors who do not win the same region.

On April 26, we learned that a protest was filed by a current RAC vendor that alters this time frame. This protest was accepted by the GAO, which has up to 100 days, or until mid-July, to rule on this matter. A central argument of the protest is related to how incumbent vendors would bear greater financial burden than a new contractor in the new contract due to their continuing responsibility for appeal costs under the existing contract, which the protestors argue creates an unequal treatment of bidders in the reprocurement process. As a result, we believe the timing of the new contract award may now be delayed until the third quarter.

Regarding how this protest will impact the current contract and the transition to the new contract, CMS has not yet officially commented. A number of possible scenarios exist. One, CMS could have the RAC vendors continue to operate under normal conditions on the current contract until the protest is resolved. Two, CMS could communicate a new date on which they want us to stop sending new medical record requests to providers, creating a temporary transition period. Or, three, CMS could stick to the May 22 date in spite of a potentially extended delay in the award of the new contract, which could create an extended period of downtime.

Under such a downside scenario, where our activities are suspended in May and we don't begin work under a new contract until September, we estimate that the potential impact for our 2013 total revenues could be in the range of $10 million to $15 million and approximately $5 million in adjusted EBITDA.

However, based on the historical performance on the current contract, which returns approximately $600 million to $700 million per quarter to CMS, we believe that CMS will look to minimize the disruption of that recovery stream as much as possible, and we expect that CMS will likely instruct the RAC vendors to continue to operate under normal conditions on their current contracts until the protest is resolved, thereby replicating the original plan, which would have involved only a short-term disruption.

A second topic relates to [one-night stays]. CMS has been sued by the American Hospital Association for denying any payment to hospitals that improperly provide a patient care, or [one-night stays], when the appropriate level of care is outpatient care. The American Hospital Association would like its hospitals to receive the difference between Part A, or inpatient, and Part B, outpatient, payments without a timeliness requirement and allow providers to bill for all outpatient services after an inpatient claim has been denied for lack of medical necessity.

In addition, a bill has also been introduced in the US Congress that would also permit healthcare providers to resubmit such claims for payment under Part B services without a time limit on claims. In response, CMS has recently proposed rules that would permit healthcare providers to resubmit such -- certain of these claims for payment for Part B services.

This type of improper claim has accounted for a substantial portion of the claims identified under our RAC contract. However, it is still too early to tell how all of this is going to shake out. For example, we don't know what claims may be eligible for rebilling or the timing for rebilling. We also don't know what penalties are going to be imposed, as many believe that permitting rebilling will result in higher levels of improper billing, which could actually benefit us. In the meantime, we are continuing to focus on these other types of improper payments.

Finally, on the topic of PIP hospitals, in January CMS began processing a small portion of the PIP claims manually, and, as a result, we recognized only a small portion, about $200,000, of revenues in the first quarter of 2013. CMS is working on implementing a permanent solution that we expect will be in place by the end of Q2, and we expect to be able to recognize all of our delayed PIP revenue during 2013.

We'll discuss our guidance a little bit later, but hopefully this has provided some clarity on some of the other recent topics that have surfaced related to the RAC contract and their implication as to Performant.

Let's talk about our student lending business. During the first quarter, student lending represented over 67% of our total revenues. Total loan placements were $1.7 billion during the quarter. We feel there are still a significant amount of defaulted student loans that are awaiting placement by the Department of Education, and we expect that we should continue to see meaningful placements from the Department of Education for the remainder of the year.

Student lending continues to be a solid and -- solid business, and provides predictable revenues and consistent growth. Compared to the first quarter of last year, revenues from this market grew by 14.1%. We expect to see strong growth throughout the remainder of the year as more borrowers take advantage of income-based repayment options.

We anticipated that the Department of Education will issue its RFP for the new recovery contracts in the near term. While we are not in a position to speculate on the details, we are confident that our strong performance on each and every one of the past four contracts over the past 22 years will serve us well in being reselected as one of the vendors on the new contract.

Turning to our healthcare business, as we have discussed previously, our total net claim recovery volume for Q1 declined 14.8% compared to the first quarter of 2012. This decline directly correlates to the impact from Hurricane Sandy. As a reminder, because of disruption caused by Hurricane Sandy in October of last year, we were not permitted to submit requests for medical records or submit claims to healthcare providers in the states of New York, New Jersey and Connecticut for a 30-day period which ended December 7 of 2012, and providers that were located within designated federal disaster areas received this relief until January 6 of 2013, which reduced our net claim recovery volume in the first quarter and pushed our recognition of certain revenues into the second quarter.

As mentioned before, our healthcare results in the first quarter only reflect a very small portion of revenue associated with PIP-related recovery activity. As a reminder, PIP hospitals account for approximately 20% of Medicare claims in Region A.

In addition, another factor affecting our first quarter results was a temporary interruption during the quarter in our client's claims processing that also delayed some revenue recognition. We expect to recognize these revenues in the second quarter of 2013.

Finally, with respect to activities in other markets, we continue to look for opportunities to expand within our current markets while seeking new opportunities to employ our technology-enabled services platform and recovery experience to new markets. We are still in the process of implementing the payment recapture contract that Performant that was recently awarded by the Department of Education as well as executing our other engagements with Magellan and Grant Thornton.

At the federal level we believe there are multiple opportunities similar to these that are being developed. Given our long-term success with the Department of Education and CMS, we believe we are well situated to capture these incremental growth opportunities as they arise.

We focus on capitalizing on two significant laws that were passed in recent years. The Patient Protection and Affordable Care Act, or Obamacare, which was signed into law on March 23 of 2010, yielding the implementation of ICD-10, which will provide opportunities for penetration and expansion of traditional and new program integrity audits.

The Improper Payments Elimination and Recovery Act, or IPERA, was just passed into law in 2010 and recently expanded in January of 2013. Through this law we are able to leverage our experience, services, strong existing relationships, reputation and recently established partnerships and alliances to work with federal agencies charged with creating their own IPERA path forward.

Lastly, we are evaluating ancillary opportunities within existing customers as well as in new markets to leverage our expertise and technology. Our value story of enterprise integrity allows our team to target multiple audiences within a single customer. For example, at a health plan we're not simply engaging claims management or cost containment areas. Our technology and services enable us to target compliance, medical management, finance, accounts payable, all areas which require our powerful data analytic technology and recovery services to uncover areas to maximize revenue, contain costs and mitigate risk.

In just over a year, our pipeline is growing aggressively, and we are expanding existing accounts. While it is a little early to announce the wins in the pipeline today, I will say that we have been proactively pursuing our growth strategy and expanding our business through a combination of organic cross-selling, customer penetration, strategic alliances and opportunistic acquisitions. The number of opportunities and diversity and alignment of our pipeline to our strategy reflects a large and diversified market in need for the services and technology Performant provides. There will definitely be more to come in the future.

As it relates to our guidance, based on our current operating performance and expectations under a steady state environment, we are reaffirming our revenue and adjusted EBITDA forecast of $252 million to $265 million and $81 million to $85 million, respectively. These estimates, of course, assume that we are successful in maintaining our position as the Medicare RAC contractor in Region A and that our audit and recovery activities are not significantly impacted by transition procedures adopted by CMS in connection with the contract rebidding process.

Should the transition procedures limit our ability to request additional documentation for providers from late May until September, we estimate that our 2013 revenues and EBITDA could be adversely affected in the range of $10 million to $15 million and approximately $5 million, respectively.

With that, I'd like to turn the call over to Hakan, who will now walk you through the financials. Hakan?

Thank you, Lisa, and good afternoon, everyone.

As Lisa mentioned, revenues in the quarter were $49.4 million, an increase of 7.6% from the prior-year period. The largest component of our revenue mix is student lending, which grew by $4.1 million, or 14.1%, to $33.3 million, compared to the first quarter of last year. First quarter placements were $1.7 billion, up 74.2% year over year. As a result of the increased placement volumes, revenues as a percentage of placement volumes were 1.91%, compared to 2.91% in the prior-year period.

The second largest component of our revenue mix, healthcare, decreased $1.8 million, or 14.8%, to $10.3 million, compared to the first quarter of last year. Net claim recovery volume decreased by $15.7 million, or 14.8%, to $90.4 million. Our claim recovery fee rate was 11.4%, compared to 11.4% in the prior-year period.

The reduced healthcare revenues in the quarter primarily reflect the Company's inability to audit certain healthcare providers in the fourth quarter of 2012 following Hurricane Sandy, and, as Lisa mentioned, to a lesser extent a temporary interruption during the first quarter in claims processing by the Company's principal healthcare client that delayed recognition of certain revenues until after quarter end.

Similarly, we continued to experience delays in recognizing delayed revenue from PIP providers. Of the estimated $6 million in delayed revenue related to PIP providers that we had at the start of the quarter, we recognized approximately $200,000 during the first quarter. As a reminder, we have already incurred expenses related to this delayed revenue but were able to recognize these revenues. We estimate that over 70% will drop to our pretax earnings.

We believe that CMS is close to implementing a fix to allow automated processing of these claims. However, until that update is completed, CMS is utilizing a manual system to process these claims. We remain confident that the delay is nearly over, and we anticipate that our work on claims for PIP providers will further contribute to our growth opportunities in 2013 and beyond.

Revenues from other markets grew by $1.2 million, or 25.1%, primarily as we continued to execute on the recently won default-aversion services contract.

Moving to our expenses, salaries and benefit expense was $24 million, an increase of 28.7%, as compared to $18.6 million, while other operating expenses for the quarter was $18.9, an increase of $2.7 million. The higher operating expenses are consistent primarily with the growth of the Company's healthcare claim recovery activity over the past year. In addition, the Company had expenses of approximately $1.6 million associated with its public offering completed in February of 2013, and these expenses are not deductible for tax purposes.

For the first quarter of 2013, our reported net income was $1.8 million, or $0.04 per diluted share, compared to net income of $2.5 million, or $0.02 per diluted share, in the prior-year period.

Adjusted net income in the first quarter was $4 million, or $0.08 per diluted share, compared to $5.7 million, or $0.12 per diluted share, in the prior-year period. Adjusted net income came in above the preliminary estimate that we provided in April due to a calculation error. This resulted in a more favorable tax adjustment than we originally forecasted, [although] no impact on our effective tax rate.

Fully diluted average outstanding shares increased to 49 million shares in the first quarter of 2013, reflecting the exercise of stock options.

Our adjusted EBITDA in the quarter was $11.4 million, compared to $13.7 million in the first quarter of 2012, while adjusted EBITDA margins in the first quarter of 2013 were 23%, compared to 29.9% in the prior-year period.

With that, I'd like to open the call up for questions.

Thank you.

(Operator Instructions)

And our first question comes from the line of Julio Quinteros, from Goldman Sachs. Please go ahead.

Hey, Lisa and Hakan. This is Paul Thomas for Julio. In your annual guidance, are you accounting for any change in states that could be a part of the new Region A? And, as a follow-up, if you did have to move regions, have you thought about what the impact that could be on 2013 revenue, assuming there's no other disruption related to the protest?

Hey, Paul. Yes, we have taken that into account. As we look at the shift, however, as you know, the percentage allocation national standard is still very close to what we currently have. We currently have 23% and the national standard's going to go to 25%. And as we look at the anticipated ramp-up of the new contract it's going to be later in the year as we look at the revenue recognition part. So this is going to be more of an impact for 2014.

Okay, thanks. And, as a follow-up, on student lending were there any one-time catch-up payments in the quarter? The fee rate you got in the quarter looked pretty strong compared to what we would've expected given sort of the lump in volumes that arrived last quarter. Is there any acceleration going on because of income-based repayments, or what's driving the improvement there?

Well, as we look at -- IBR, first of all, was implemented in -- started in September of last year, so that's going to be something that will be a benefit to us as we look at the latter part of Q2, starting in the latter part of Q2. Our anticipation on the fee rate, it came in at 1.91%, we expect it to be just north of 2% on a steady state going forward, so pretty much in line with what our anticipation has been.

All right. Thanks, guys.

Thank you. And our next question comes from the line of Suzie Stein, from Morgan Stanley. Please go ahead.

Hi. Can you just be more specific about your communication with CMS? Your comments seem to be a little more optimistic than what we've heard from HMS or PRGX, and I'm just wondering if you've actually had conversations with them about how this may play out, or is it just that you're hoping that logic will prevail as far as the cut-off date?

Sure. So, first of all, PRGX, as you know, is a subcontractor, so versus a prime, who are us, CGI, Connolly and HMS. I can't speak to where PRGX's comments are relative to what they're anticipating but believe that it is directly related to their status as a subcontractor versus a prime. With respect to HMS' comments, I think we agree that certainly there is a possibility that the award date could be delayed. We really kind of talked about three different scenarios.

The original intent of CMS was never to have a protracted gap in recovery, and, again, I think the trend of recovery to CMS is growing strong double digit. They're really on trend to look at about $1 billion of recovery per quarter, and historically about $700 million per quarter. So it's a very good program, and we believe that, similar to other ways that they have handled contract transitions and protests in which -- where they've kept the contract running until the protest was resolved, that there is -- their original objective was to continue the -- to have continuity in the program.

So I can't speak to conversations directly with CMS. I can tell you what their original objective was. And the timeline in terms of document requests under the old contract was really designed, again, to have -- to be very close in to new contract awards.

Okay. And then can you give us a sense of what the timing is likely to be on the change in the rebilling rule? When could that begin to impact your numbers?

If the policy does change, and, again, there's quite a bit of pathway when it comes to policy changes, so it has to go down some sort of runway -- if the policy does change we believe that it would be a look forward. And there'll be a small impact in 2013, but we'd really be looking at more of an impact in 2014. Again, we reiterate, we're not really sure what that impact will be, because it is yet to be determined what will be allowed, what the time -- whether there will be a timeliness filing requirement. So there are still a lot of moving factors that have yet to be more settled.

And, just to be clear, the guidance that you gave for this year includes kind of a normal transition period between the contracts, or does it not include any kind of disruption between the two contracts?

It includes a normal transition.

Okay, great. Thank you.

Thank you. And our next question comes from the line of Michael Tarkan, from Compass Point. Please go ahead.

Thanks for clarifying some of those healthcare issues. Can you just elaborate a little bit more about expectations around pricing under the new contract? You mentioned you submitted a highly competitive bid. I'm just looking for a little more color there around maybe how much fees may come in under the new contract. Just anything anecdotal would be helpful. Thanks.

First I want to tell you that we're not going to talk about a fee structure, per se, because in the event we have to resubmit our RFQ response it would, of course, put us at a competitive disadvantage if we talked about fee structure. From a competitive fee standpoint, and, again, a bid standpoint, the program itself is so strong, with strong recovery. There are nuances to the program, including provider relationships and working with CMS and all of their constituents that we feel are important as CMS makes its decision about how to continue the program.

But I don't want to speak more about pricing, Michael. And I know there have been comments around pricing from other folks in the space. Again, what I would suggest to you is comments around -- from PRGX, they are a subcontractor. We really don't know what their model is in terms of operations expense. So it's difficult for us to say where's the market in terms of pricing.

Okay. And then I guess, given your full-year 2013 guidance, does that take into account what you have bid on the new contract assuming a normal transition?

Yes.

Okay. And then, just as a follow-up, you mentioned a potential September implementation date for the new contract. I guess, given that the existing contract officially expires in February of 2014, is it possible that we have to wait until then for the new contract to start? And, if so, are we talking about another $10 million to $15 million in revenue if we hypothetically got to that point?

We don't believe we'll actually see that kind of, again, a drawn-out process. I think at this point it would be difficult to conceive of a program of this kind of value with that kind of a gap. So I actually -- I think that February timeline, again, CMS' original intent was to try to have some overlap and have a very orderly contract transition, which I believe is still their objective, and we believe they're working toward that.

And, Michael, just one other point (inaudible). If this protest should drag out to that extent that the new contract will not start until potentially in February when the current contract expires, we would expect that we would then continue to operate under normal conditions, and, again, then it would not be any impact on the guidance that we have given here as far as the transition into the new program.

Understood. Thank you.

Thank you. And our next question comes from the line of Edward Caso, from Wells Fargo Securities. Please go ahead.

Hi. Congrats on the solid quarter here. Hakan, can you update us on the seasonality? You've talked previously about Q2 and Q3 being much stronger given the PIP situation, the Sandy situation and so forth. Can you just give us some framework on the revenue and margins? Thanks.

Sure. So as we look at it on the -- and let's talk about student lending first -- on the student lending side, as you may recall, we had an increasing trend in placements. So as you look at Q3 of last year, we increased our placements by -- it went up to $1.3 billion. In Q1, as an example, it was only $1 billion. And then in Q4 of last year it increased to $2.2 billion.

So, again, as we look at the Q3 increase in placements, that will drive revenue to us nine months out, so you're looking at Q2 of this year. Similarly, in Q4, the strong takeup in placements, which was very much driven by Department of Education, is going to drive a spike in revenue in Q3. So that's on the student lending side. And then just furthermore, as we look at Q1 placements of this year was also solid. It was at $1.7 billion. So, again, that will benefit us in Q4.

And then, furthermore, as we look in on the healthcare side, we had, as we talked about, we had a delay in revenue recognition related to Hurricane Sandy that impacted us in Q1, and, again, that will flow into Q2. And then we have the PIP backlog that we talked about last year that was -- at the end of last year was at $6 million. Again, we would expect that to come through here in the Q2-Q3 time frame, more heavily weighted towards Q3. That's going to drive, again -- these are some of the key components for the spike in revenue in Q2 and Q3 -- expected spike.

Can you update us and give us some help with the quarterly pattern of the tax rate? I understand that the impact of the advisor fee that hurt your tax rate in Q1, obviously you revisit that again in Q2. But what would sort of the tax rate be in Q3, Q4?

Sure. So as we look at the tax rate, just to repeat, on Q1, that came in at around 50%, and that was very much impacted by the non-deductibility of the secondary offering and the expenses associated with the secondary offering. Absent that we would've been right around 40%. We can have a similar situation here in Q2 with a similar amount of costs that are going to be part of the -- that was part of the secondary offering that we just did. And so you need to kind of take that into account. As we look, then, at the rest of the year, we would anticipate to be right around 40% is where we see our effective tax rate being, absent any other abnormal situation or anything out of the ordinary.

Great. Thank you.

Sure.

Thank you.

(Operator Instructions)

Our next question comes from the line of Bob Napoli, from William Blair. Please go ahead.

Thank you. Good afternoon. I'm sorry, I missed part of the opening comments. Can the trend on the Medicare business in April and the recovery, I guess, from the decline from Hurricane Sandy in the first quarter, I mean, can you give a little more color on that?

Sure. So, again, as we look at Hurricane Sandy, we were unable to request medical records or submit claims, findings to providers for a period of 30 days, and then up to 60 days for FEMA-designated providers. So, again, what that -- the impact of that has, and that's the primary reason that you see the decline in revenue quarter -- going from Q4 to Q1. That revenue we expect to flow through and be able to recognize here in Q2.

And then, in addition, we have the PIP revenue that is in backlog. We were able to recognize this, a very small portion here, during Q1, just based on the timing. Again, we recognize revenue once the payments are done or the (inaudible) are done. So that's something that we have in our back pocket right now going into Q2, as well.

Okay. And then can you give me a breakout of the -- can you give us a breakout of the placement volume, mix and the student loan business between the GAs and the [in Ed.]?

Yes, I can give you an approximate number. As we look at Department of Education it's about $0.5 billion, and the rest is in the GA and other space.

Great. Thank you very much.

Sure.

Thank you. And our next question comes from the line of Richard Close, from Avondale Partners. Please go ahead.

Yes, thank you for all the information. With respect to the PIP, if for some reason the Medicare RAC, you lose that contract and you haven't been able to recognize the PIP revenue, what happens to that? I mean, that doesn't necessarily go away at all?

No, Richard, we -- that will actually process in the contract transition, in the wind-down of the old contract.

Okay.

But anything that -- again, this is work we've already done and submitted, so this is a part of the wind-down of the old contract.

Okay, great. I just wanted to be sure on that. And then as we've been looking at the Part A/Part B rebill, there's the interim rule that I guess we're operating under, but then there's the proposed rule, and on the proposed rule it doesn't look like -- it looks like there's the one-year date of service, so you have to rebill within that one-year date of service. And so based on that, the way it's written, it seems like it wouldn't be that much of an impact if that was adopted in its form as currently being proposed. How do you guys view the proposed rule?

What you're saying is actually correct. There is a -- there should be a timeliness requirement on the rebill, and the OMB has scored it based on a 12-month timeliness window. So, given that, there wouldn't be much in the way of impact.

Okay. Thank you very much.

Thank you.

(Operator Instructions)

And we have a follow-up question from the line of Richard Close, from Avondale Partners. Please go ahead.

Okay, sorry about that. I would've kept on asking. Can you give us an update on the Department of Education contract that you -- I think that was awarded in February, what you think the ramp is, and any additional insight you can give in terms of now that you're beginning to look at that more closely?

We're actually still in the process of implementation, so just to give you a sense of where we are in the process, it's still pretty early on. We are still in the process of exchanging data files. So at this point, Richard, it's a little bit tough for me to articulate, which is why I think we want to wait until we're a little further along to comment about that contract.

Okay.

But we're underway.

Okay. And with respect to the guidance, is there any contribution in this year's guidance associated with that contract?

Very, very minimal.

Okay, great. Thank you.

You're welcome.

Thank you. And our next question comes from the line -- a follow-up from Michael Tarkan, from Compass Point. Please go ahead.

Thank you. Just a quick one, are you -- on the education side, are you using income-based or payment now to rehabilitate anything from the GAs, or is that still just Department of Education?

It is still largely Department of Education, with just very little usage from the other channel of federally guaranteed student loans.

Do you expect that to change going forward? Are you hearing from them that they're allowing you to use that more going forward?

There is some openness to the IBR process that we're seeing in the GAs, but, again, I think given where we are in the -- again, I think if you were to ask, this is the fifth year of a recession, and a lot of the loans, as you recall, direct loans are now being made through the Department of Education. So we actually see clearly a much broader adoption by the Department of Ed.

Okay. Thank you. And then I guess just a follow-up, the fees under rehabilitations now, those were cut 13%, is that correct, and that was as of March 1?

That is correct, yes.

Okay, thanks.

Thank you. And we have a follow-up question from the line of Julio Quinteros, from Goldman Sachs. Please go ahead.

Hey, guys, one quick follow-up. On the CFPB report that was published last night and some of the requested or some of the recommendations that they had in there, any read-across from you guys if you had a chance to look at that and if there's anything in there that's worth pointing out?

We took a quick look, again, largely related to -- it's specifically related to private student loans, and that's really not a big market for us. One of the interesting points that they make is on using private capital to help fund federally guaranteed student loans, which, frankly, is another -- potentially another form of the public/private partnership that used to exist (inaudible), just in a different form. So we're very interested and continuing to follow their comments on that particular initiative.

But nothing direct as far as your business is concerned, then?

No, nothing direct.

Thank you. And at this time I am showing no further questions in my queue. I'd like to turn the conference back over to Lisa Im for closing comments.

We want to thank you for being with us again today and appreciate all of your focus on our business, and we look forward to continuing our conversation with you over the next quarter. Thank you again, very much.

Thank you.

Ladies and gentlemen, this does conclude our conference for today. We thank you all for your participation, and at this time you may now disconnect.