Pennantpark Investment Corp (PNNT) 2013 Q2 法說會逐字稿

Good morning and welcome to the PennantPark Investment Corporation Second Fiscal Quarter 2013 Earnings Conference Call. Today's call is being recorded. At this time, all participants have been placed on a listen-only mode. The call will be open for a question-and-answer session following the speakers' remarks. (Operator Instructions)

It is now my pleasure to turn the call over to Mr. Arthur Penn, Chairman and Chief Executive Officer of PennantPark Investment Corporation. Mr. Penn, you may begin your conference.

Thank you and good morning, everyone. I'd like to welcome you to our second fiscal quarter 2013 earnings conference call. I'm joined today by Aviv Efrat, our Chief Financial Officer. Aviv, please start off by disclosing some general conference call information and include a discussion about forward-looking statements.

Thank you, Art. I'd like to remind everyone that today's call is being recorded. Please note that this call is a property of PennantPark Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone numbers and pin provided in our earnings press release.

I'd also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections and we ask that you refer to our most recent filing with the SEC for different factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.pennantpark.com or call us at 212-905-1000.

At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Art Penn.

Thank you, Aviv. I'm going to spend a few minutes discussing current market conditions, followed by a discussion of investment activity, the portfolio, the financials, the overall strategy and then open it up for Q&A.

As you all know, the economic signals have continued to be mixed with many economists expecting a slowly growing economy going forward. With regard to the more liquid capital markets and in particular the leveraged loan in high-yield markets, those markets have continued to rally this year, as cash flows in the high-yield funds, leveraged loan funds and CLOs have been strong.

Risk reward in the middle-market has generally remained attractive, as the overall supply of middle-market companies that need financing exceeded the relative demand of applicable lending capacity. As debt investors and lenders, a slow growth economy is fine, as long as we've underwritten capital structures prudently. A healthy current coupon with deleveraging from free cash flow over time is a favorable outcome.

That said, as the more liquid capital markets have rallied that overall tone has impacted the middle market. Pricing has continued to compress and purchase price multiples and leverage multiples have increased.

As a result, we have continued to be selective about which investments we make in this environment. Given our strong origination network and size of our Company, we believe we can continue to prudently grow. We remain focused on long-term value and making investments that will perform well over several years.

We continue to set a high bar in terms of our investment parameters and remain cautious and selective about which investments we add to our portfolio. Our focus continues to be on companies or structures that are more defensive, have low leverage, strong covenants and high returns. With plenty of dry powder, we are well positioned to take advantage of investment opportunities as they arise.

As credit investors, one of our primary goals is preservation of capital. If we preserve capital, usually the upside takes care of itself. As a business, one of our primary goals is building long-term trust. Our focus is on building long-term trust with our portfolio companies, management teams, financial sponsors, intermediaries, our lenders and of course our shareholders.

We are a first call for middle-market financial sponsors, management teams, and intermediaries who want consistent credible capital. As an independent provider, free of conflicts or affiliations, we've become a trusted financing partner for our clients.

Since inception, PennantPark entities have financed companies, backed by 110 different financial sponsors. We have been active and are well positioned.

For the quarter ended March 31, 2013, we invested about $75 million. The average yield on new debt instruments was 13.4%. Expected IRRs generally range from 13% to 18%. Net investment income was $0.25 per share, before one-time debt issuance costs of $0.04 per share.

We have met our goal of a steady, stable and growing dividend stream since our IPO six years ago, despite the overall economic and market turmoil throughout that time period. We are one of the only BDCs to not cut its dividend during this time period.

We anticipate continuing this steady, stable dividend stream going forward. We are perfectly content under-earning the dividend temporarily, as we carefully and prudently invest in this environment. We are fortunate to have plenty of excess liquidity that we can use for both defensive and offensive purposes.

As a result of our focus on high quality new investments, solid performance of existing investments and continuing diversification, our portfolio is constructed to withstand market and economic volatility. The cash interest coverage ratio, the amount by which EBITDA or cash flow exceeds cash interest expense, continue to be healthy 2.7 times. This provides significant cushion to support stable investment income.

Additionally, [add cost], the ratio of debt-to-EBITDA on the overall portfolio was 4.5 times, another indication of prudent risk.

We have plenty of liquidity. As of March 31, we had in total about $300 million of available liquidity, consisting of $209 million of available credit facility, $75 million of new SBIC debt financing in our second SBIC and $17 million of cash on hand.

Additionally, after quarter end, we used the accordion feature of our credit facility and increased the size of the facility by $50 million from $380 million to $430 million. As a reminder, we have exemptive relief from the SEC to exclude SBIC debt from our asset coverage ratios and SBIC accounting is cost accounting, not mark-to-market accounting. These facts highlight how the SBIC debt reduces overall risk of the Company.

We had some attractive realizations last quarter. For example, our $20 million second lien position in Paradigm Management was called out at a premium, generating a 19% IRR. We continue to hold an equity co-invest in that company.

After quarter end, we sold our equity position in Realogy in the secondary market. This closes the Realogy investments that we held for many years through the housing cycle. Despite some bumps along the way, we are pleased with the outcome. Over six years on about $47 million of capital, we realized an IRR of approximately 13%. This investment shows the benefit of permanent capital that we were able to invest over the long-term, and in fact, increased our investment during the downturn in order to generate an attractive return for our shareholders. Despite the recession, across PennantPark entities, we've had only seven non-accruals out of 244 investments since inception six years ago. We currently have no non-accruals on our books.

To refresh your memory about our business model, we try as hard as we can to avoid mistakes, but defaults and realized losses are inevitable as a lender.

We are proud of our track record of underwriting credit through the cycle. One way we mitigate those losses is through our equity co-investment portfolio. We are optimistic that our co-invest portfolio will generate gains over time.

In terms of new investments, we had another quarter investing in attractive risk-adjusted returns. Our activity was primarily driven by refinancings, and virtually all of these investments, we've known these particular companies for a while, have studied the industries, or have a strong relationship with the sponsor.

Let's walk through some of the highlights. We invested $18 million in the second lien debt of Brand Energy. Brand Energy is the largest North American provider of complex scaffolding work access services, including equipment rental and associated engineering services. First Reserve is the sponsor. We purchased $36 million of the subordinated debt of Varel international. Varel is a global manufacturer of drill bits for oil and gas and mining and industrial industries. (inaudible) is the sponsor. We originally purchased $44 million, then sold $8 million to manage diversification.

Although activity levels have been moderate so far in 2013, we continue to believe that the remainder of the year will be fairly active. Due to our strong sourcing network and client relationships, we're seeing active deal flow.

Let me now turn the call over to Aviv, our CFO, to take you through the financial results.

Thank you, Art. For the quarter ended March 31, 2013, recurring investment income totaled $0.24 per share. In addition, we had $0.01 per share of other income, as well as $0.04 per share of one-time bond issuance expenses. As a result, net investment income for the quarter was $0.21 per share.

Looking at some of the expenses categories, management fees totaled $8.9 million, general and administrative expenses and excise tax totaled $1.7 million, and interest expense totaled $4 million. During the quarter ended March 31, net unrealized and realized gains from investments and debt was approximately $13 million or $0.19 per share.

Excess dividend over net income was $2 million or $0.03 per share, before one-time debt issuance cost of $0.04 per share. Consequently, NAV per share went from $10.38 to $10.50 per share.

As a reminder, our entire portfolio, credit facility and senior notes are marked to market by our Board of Directors each quarter using the exit price provided by independent valuation firms, securities exchanges or independent broker-dealer quotations, when active markets are available under ASC 820 and 825. In case where a broker dealer quotes are inactive, we use independent valuation firms to value the investments.

Our overall debt portfolio has a weighted average yield of 13.5%. On March 31, our portfolio consisted of 58 companies across 30 different industries and was invested 26% in senior secured debt, 22% in second lien secured debt, 39% in subordinated debt and 13% in preferred and common equity.

Now, let me turn the call back to Art.

Thanks, Aviv. To conclude, we want to reiterate our mission. Our goal is a steady, stable and growing dividend stream. Everything we do is aligned to that goal. We try to find less risky middle-market companies that have high free cash flow conversion. We capture that free cash flow primarily in debt instruments and pay out those contractual cash flows in the form of dividends to our shareholders.

In closing, I'd like to thank our extremely talented team of professionals for their commitment and dedication. Thank you all for your time today and for your continued investment and confidence in us. That concludes our remarks. At this time, I would like to open the call to questions.

(Operator Instructions) Troy Ward, Keefe, Bruyette & Woods.

Good morning, gentlemen.

Good morning.

Art, this year, portfolio yield [is somewhere at] 13%. As we look at the, the other BDCs, it seems like you stayed in a higher yield kind of strategy there, while others have maybe moved into more senior assets with lower yields. Can you just talk, kind of, why you've done that and where you see the appropriate risk reward for your entity?

Yeah, thanks, Troy, it's a good question, something we always talk about. We're very focused on [not file] shifting. We always conceived that PNNT has a generally 12-plus percent vehicle, generally second lien, generally sub debt -- obviously stretched first lien can get us 12% plus. We're obviously interested. That may also mean at times we grow less quickly than others. But we're very focused on staying true to our mission, true to the ROEs that we're targeting for our shareholder and that's just our focus. In a time where it's harder to get higher yield, we may grow less quickly, which is I think what we've indicated in our comments. We just want to be highly disciplined about what we put in this portfolio and what we do with our shareholder capital.

So, I guess, when others maybe see a little bit of a less favorable environment, they're willing to move into lower yielding deals, you may see it's less favorable, you're just going to grow slower, is that kind of a good summary?

Yeah, I think we've been absolutely clear for a long time, there's no right from a higher power that a BDC should always grow. Certain times BDCs might want to stand still, and might even want to shrink. So, you need to constantly evaluate risk reward. We still think we can prudently grow as we say. We may not be growing as quickly as we did in, say, 2009 or 2010. That's okay. We have a view that we want to be around for decades and decades and decades, if we want, and we're playing it that way.

Okay. And then kind of you mentioned that you exited the Realogy equity here early in the second quarter. Two things. Can you give us any other indication of activity in the second quarter on prepayment or origination side, and also just is there any other equity, non-yielding equity in the portfolio that you may look to monetize as well?

Sure. Other than Realogy, it is public information that a company called Tekelec is getting purchased by Oracle. So, we have in Tekelec, both a piece of debt and a piece of equity and the values in the Q are we think a pretty good approximation of what we are going to get. So, that's little over $8 million of equity on Tekelec. So, we are excited about taking the roughly $20 million from Realogy and the $8 million from Tekelec, $28 million of equity gain -- equity proceeds, and over time, redeploying into yielding assets, which can help our income and dividends over time. So, that's exciting for us.

And, generally, we believe our equity co-invest portfolio should be about 5% to 10% of the overall pie. As of quarter end, it was about 13%. With Realogy and Tekelec we get down to about 10%. So, we are interested in continuing to rotate that and take equity gains. In this environment, you can get some equity gains and redeploying those proceeds into cash yielding investments.

Okay, great. And then one final question, across the space this quarter, we have seen income generated from activity, whether it's originations or prepayments come in lighter than maybe expectations. But assuming the activity returns, can you just speak to kind of where the fee levels are in this environment? Have you seen the compression of origination fees?

Yeah. So, just to refresh everybody on our accounting for a moment, upfront fees, we generally amortize over the course of the loan. So, that's OID to us, so that does not get reflected in current earnings that gets reflected over time over the life of the loan. Prepayment penalties and prepayment fees and amendment fees are one-time events and that is recorded in our Q in the other income line.

The prepayment fees for the quarter ended March were lighter than they had been, because we had fewer repayments. It's hard to predict. That's why we put it in the other income line, so that people know it is primarily one-time stuff. It looks like there will be more prepayment fees coming in this quarter ended June, but hard to give you a real strong estimate at this point, but looks like we are going to get some more prepayment fees in this quarter. I am blinking, Troy. I don't know if I answered your question.

Yes, maybe with the origination fees in the current market kind of where those levels are, I know you were amortizing, but where are --

Yeah, they are -- look, like we said in our comments, you are seeing things getting compressed and stretched, whether it be yields, leverage, and upfront fees. On new mezz, it's a 2% to 2.5% business versus what it was at 2.5% to 3%. I mean that gives you an indication on mezz. On first lien, self-originated, it's still around 2-ish, but again that's lower than it was a year or two ago.

Great. Thanks, guys.

Thank you.

Chris York, JMP Securities.

Good morning, gentlemen. This is Kevin Chen for Chris York. I just have one question on the non-accrual in the quarter, could you please comment qualitatively on that loan and how it was restructured and also your outlook for that investment?

The one restructuring was PAS Technologies that got restructured intra-quarter, so it was not on the books at quarter end as a non-accrual. It was about $17 million of debt, it converted into equity, which is reflected in the Q. This company was hurt, it's an aerospace company, was hurt by defense expenditures getting some focus on sequestering, getting some focus in this environment. It was hurt by the American Airlines bankruptcy, and it was hurt by a general aerospace cycle. So, it's a long-term investment in our view, now in equity, certainly disappointing at $17 million of pace, certainly not material to us, but we are very disappointed with it.

Great, thanks for the color. Thanks for taking my question.

Thank you.

Mickey Schleien, Ladenburg.

Good morning, Art, and thanks for taking my question. Art, I just want to understand if you've become a little bit more optimistic on the economy. I noticed that you increased your asset allocation to second lien and sub debt in the quarter, which may imply that you are more optimistic. And I also noticed that you marked up Jacuzzi pretty significantly and that may have something to do with the economy. So I'm just curious on your sense of the tone of the economy at this point?

Yes. So a couple of questions in your comment, Mickey. The economy we think is a slow growth economy and again as a debt investor that's absolutely fine, if you're underwritten well, it all works out. The allocation of second lien and sub debt this quarter is just idiosyncratic to those particular deals. This upcoming quarter and in June you will see some more first lien, so we underwrite on a deal by deal by deal basis. It just depends on what makes sense in a particular transaction, what the risk reward is. So there was no particular movement to second lien or mezz. Those were just the best deals that we saw for this quarter in the marketplace for us.

Jacuzzi, that's a broker dealer quoted instrument, the broker dealer quote is up there, is a rumor that there is going to be a refinancing in Jacuzzi, so we are hopeful that we will hopefully get a part to take out at some point and then we redeploy what has been sub-optimally the only piece of paper into something with a better yield. So, that's another opportunity to increase the income.

Couple more quick questions. Could you walk us through the refinancing of Greatwide Logistics? And lastly, when can we expect you to start to tap into the second SBIC facility?

Greatwide got merged this past quarter with a company called Cardinal Logistics. So Greatwide, we had a piece of debt that was marked in the 50s. Due to the merger it was a really positive credit event, so that's why that piece of debt is now marked to par and the equity that was marked to zero has now been marked up to having some value and it's really due to this merger that they have with Cardinal Logistics.

What was the second part of your question, Mickey?

When might we expect you to start to tap into the new SBIC I?

It's great question. When a deal that is applicable to SBIC comes in, we put it there. First what happens is the SBIC I is filled, but if there is a refinancing in SBIC I and the deal gets taken out, any new deal goes in there first and then going forward if SBIC I is full, we will put it into SBIC II. So, we have had some refinancings in SBIC I. I believe that Paradigm deal we mentioned was in SBIC I that created liquidity there. And that's been since filled, but it's a moving target.

Thanks for your time, Art.

Thank you.

Jonathan Bock, Wells Fargo Securities.

Good morning and thank you for taking my questions. Most of them have been answered, but Art, I do appreciate the comment of no right from a higher power to grow, and looking at that in terms of leverage, not in terms of the attachment point at which you invest, but what both you and the team believe to be the appropriate leverage level for the types of assets, say, more second lien subordinate debt that you have originated in the past, has your target leverage level for the BDC, both regulatory and/or non-regulatory has that changed? And, maybe taking that a step further, what would cause you to perhaps run with a little bit more excess equity or excess capacity in light of current economic events?

It's a great question. Look, we are very focused on keeping the equity levels in our portfolio manageable. We still target 5% to 10%, got to 13% this past quarter, it's coming back down to 10%. So, we want to keep that a manageable percentage of the portfolio. For some reason equity levels got to be a bigger percentage. We have to reassess our leverage. We still underwrite either stretch senior, second lien or mezz the same way we've always underwritten it, the same methodology, the same discipline, the same focus. So, as a result, we still target as an overall company 0.6 to 0.8 times debt to equity. Having the SBIC and the SBIC exemption, in theory, we could go north of one to one. To us that's just extra cushion worth for defensive purposes and if we needed offensive purposes. But we think we got plenty of liquidity and cushion now. Even going to 0.6 to 0.8, and then having that extra cushion with the SBIC, just gives us more of a margin of safety for defense. And then if we see really great opportunities in really great market we can play offense a little bit more aggressively.

I appreciate that. And then looking at the liability side of the balance sheet, it's definitely been diversified and with the SBIC and other financings that's very attractive, I'll just call it an asset, if you will. What about the potential for on-balance sheet securitization and whether or not that makes sense with the type of assets that you originated and whether or not you would be comfortable with the restrictions that come with an on-balance sheet securitization in light of the fact that you do have an all-in lower interest cost relatively what you are borrowing on a term loan basis?

It's a good question, it's something we should always be evaluated. For PNNT, it's probably less applicable than PFLT, given the types of assets that we primarily have in PNNT, but it's something to think about. It is restrictive in terms of your ability to move things. And in some sense the SBIC is in essence that, if you think about it, because you are terming out 10-year money at a low yield. What it does -- we like the flexibility the SBIC gives us in terms of movement. So, that's my attempt in answering your question at least.

Well, it makes total sense, guys. Thank you so much.

Thanks.

Rick Shane, JPMorgan.

Thanks guys for taking my question this morning. As we go through all the BDC calls, the focus has been on yield structure and on spreads. And one of the things that we have observed over the years and I know you guys have observed as well is that neither of those things really matter in the context of credit, and that you can't solve bad credits by wide spreads or by good structures.

Right.

When you look at the market right now from a fundamental credit perspective, I don't think this is coming up, how do you guys feel about the world right now?

Look, I mean, we've been -- people have asked questions what do you think about the economy. The economy clearly seems like it's mending slowly. There is a bunch of cross currents. There is certainly pockets of weakness. We've seen weakness, obviously, related to governmental issues, like defense spending under pressure or government spending under pressure. We've seen stress in companies related to the CFPB, the Consumer Financial Protection Bureau. That's mired a lot of companies in kind of a never, never land. We had an issue with a company that was involved with Keystone Pipeline in the governmental pullback there.

So, it's not all above cherries for sure, but the economy does seem like it's slowly mending. You could take a look at our investment in Direct Buy, which was a restructuring, we now have a piece of debt and a piece of equity, and the equity was marked up this quarter. And we are seeing a mending there. We talked about Jacuzzi. We talked about Realogy.

So, lots of cross currents, but that's part of the debate we all have as investors is, although leverage multiples keep getting stretched and yields keep getting compressed, the economy seems okay. This in comparison to what it was in let's say in '06, '07, where you saw in a [blooming] market, yet the economy was on the verge of a recession. So, that's a real challenging thing that we all have to deal with right now is that issue. But we ultimately need to look at ourselves and say, this is what we have pulled our shoulders we are going to do. We don't want to style shift. We want to generate a sensible risk adjusted return on equity for our shareholders and we need to be disciplined around that.

And it's interesting in those comments that there are very clearly a couple of thematic risks related. It's really sounds primarily related to government intervention or government spending, but other than that it sounds like you are pretty comfortable with what's out there. I am assuming that when you are screening things right now, that's really part of -- that theme really enters into what you are talking about?

Sure. You look at it deal-by-deal and in certain cases, we might stretch a little bit in leverage. But if we think the wind's at the back of the particular company and we think there will be a quick de-leveraging, so that you get into more comfortable mode pretty quick, we might do some investing in that lane, where you say, okay, it might be five times today, but it's going to be down to 4.5 and 6 months based on the trends in the market and what's going on. You can more comfortably do that today than you could in some other times. That said, if on average, you see a market that's in the mid-fives again in terms of debt to EBITDA which is kind of what it was in '07, at very minimum it should give you some pause.

Okay, great. Art, thank you very much.

Thank you.

Arren Cyganovich, Evercore.

Thanks. You mentioned that the portfolio company metrics are pretty strong, with cash interest and debt to EBITDA coverage. What about the trends in terms of underlying revenues and EBITDAs for your portfolio companies?

Yeah. Now, there, as a general proposition, Arren, we're seeing nice trends up in general, on both sales and in EBITDA. I don't have the numbers right at my finger tips today, but decent slow growth in general. Other than the couple of pockets that we mentioned that might be a little softer, overall, we're seeing fine credit metrics.

Thanks. And then, I guess, back to the portfolio yield question and your desire not to style shift, is that for you at some point a negative selection process with most of the other lenders willing to go more senior and the focus really being on the senior side of the market today in the middle market?

You can never, in this business, let down you guard with respect to credit selection. You have to have an absolute view on a credit, regardless of the yield. So, negative selection is something you just can't go down. So, again, we've all seen cycles, we've all lived through this type of thing before and if it means a slow growth environment for us, so be it, and if it means a no growth environment for us, so be it. I mean, you have to ultimately -- we are [bricks] in the very important mortgages, in that [Rick] acronym, which is investments. Ultimately we have to make good investments. We are an investment company. We're not a growth machine. We're not an origination machine. We have to make good investments. If we can make good investments we should make them.

Great, that's helpful. And then lastly, you mentioned being willing to under-earn the dividends a little bit. Can you talk about whether or not they would be on a taxable income basis, so do you have any additional carry forward income that will help you kind of go through that path of getting back towards the dividend?

Yeah, we're not in a rush. Again, we got to make the right credit bets, worried about even right now from the standpoint of tax and the dividend payouts. And if, as we said in our prepared remarks, temporarily we under-earn for a few quarters, we temporarily under-earn for a few quarters, we don't want to rush. Given all of our excess liquidity, we will pick our spots and we will gradually grow and we'll grow into our dividend hopefully well in excess of our dividend over time, but we don't want to -- we don't want to be forced to make investments that aren't comfortable.

Fair enough. Thank you.

(Operator Instructions) We'll take a follow-up question from Troy Ward.

Hi Art, real quick, a follow-up on Mickey's question about the SBIC number II. Have you pledged unencumbered assets that qualify as regulatory capital to that already? And then so, once you do start to use it we're talking about drawing debentures?

We have put it, I think, just a couple of million of equity so far in SBIC II. We haven't yet funded it with any other capital. Aviv, do you have any other comment?

Essentially, the way we'll play out, so remember it's $75 million that's the government can lend to you and obviously we need to put our $37.5 million. So, the way probably it's going to be playing out is the first $37.5 million and the first will come from us as equity and then the next $75 million will come from the government.

So, if we were thinking drawing debentures towards the latter half of this year that would seem to be in line?

Yeah.

Okay. And then, Art, one of the things that we've seen across the space is BDCs getting more active and meaningfully using their 30% bucket. And by that I mean, of course, non-qualified assets, whether it's financials or CLO equity or international. Can you speak to kind of what you think about how you view the ability to use the bucket for non-qualified assets?

Look, we are always open minded to good risk reward on behalf of our shareholders. We just want to make sure it's good risk reward. If it's equity in a finance company, the question is, or equity in a CLO, the question is at what price do you price that equity out? Is it a 12%, is it a 15%, is it an 18%? To us, equity risk is equity risk, it's not debt risk. Right? So you should be getting an equity return. We can all debate what an equity return should be, but for us buying equity in a CLO or finance company should be in mid to upper teens at least, exercise, otherwise we can do debt in middle-market companies and get 12%, 13% and be higher in the capital structure.

Okay. And then just as a follow-up, where are you today on your percentage of non-qualified assets?

Very low, few percent.

Yeah, it's south of 6%, 7% or so, very low.

Okay, great. Alright, thanks, guys.

Doug Mewhirter, SunTrust Robinson Humphrey.

Hi, good morning. Most of my questions have been answered. I wanted to follow up on your the restructured non-accrual during the quarter. Could you quantify the impact to, I guess, investment income? I assume you lost the coupon when you converted to equity reserve. What about $0.5 million in income that was foregone this quarter because of that?

It was about $0.005 a share or $0.01 -- we got a $0.005 a share, yeah. (inaudible).

Okay, thanks for that. And my second and final question, if you look at your -- what have you in the hopper for deals, your pipeline or backlog or whatever you're going to call it, the past couple of quarters, has that pipeline or backlog grown or stayed steady or declined a little bit in terms of what might be in the offing?

It does seem to be picking up a bit, activity levels, we are getting more pings from people than we were a month or two ago. So, it's starting to pick up. Hard to predict with accuracy what that will ultimately mean in terms of actual deals that we do, but we are starting to see increased activity levels.

Okay, great. Thanks. That's all of my questions.

Great.

(Operator Instructions) And there are no other questions at this time. I would like to turn it back to our presenters for any additional or closing remarks.

Thanks everybody. Just want to thank you all for spending time today and your interest in us and we'll talk to you next quarter.

Thank you. That does conclude today's conference. Thank you all for your participation.