Perficient Inc (PRFT) 2005 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Perficient earnings conference call. My name is Gregory and I will be your coordinator for today.

(Operator Instructions)

I would now like to turn the presentation over to your host for today's call, Mr. Jack McDonald, Chairman and CEO. Please proceed, sir.

Hi, this is Jack McDonald. I've got on the phone with me this afternoon Jeff Davis, our President and COO and Mike Hill, our CFO. We have about 10 or 15 minutes of prepared comments, after which we'll open the call up for questions as usual.

At this point I would like to ask Mike Hill to read the Safe Harbor statement.

Thanks, Jack, and good afternoon. Some of the things we will discuss in today's call concerning future company performance will be forward-looking statements within the meaning of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements and we encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause those results to be different than contemplated in today's discussion.

So as I mentioned, we're going to follow our standard format, a review of Perficient's business, our financial performance in the second quarter, and we'll talk about an outlook on revenue in this current quarter on Q3. Then again, we'll open it up to questions.

Q2 was a great quarter for the company. We had record services revenue, record EBITDA, operating income and earnings per share. We completed the acquisition of iPath Solutions in Houston, which expanded our presence in Houston. We're getting close to $30 million run rate just out of the Houston operation. And of course, we're looking at other acquisitions in Texas as well. And we continue to execute well and are on plan, based on a combination of strong organic growth and accretive acquisitions to hit our $100 million run rate target this year and to grow significantly next year.

Just looking at some of the accomplishments in Q2. Total revenue, including reimbursed expenses, was up 91% -- 91% year over year. And I stress as well, we had very strong organic growth, about 24%. So Perficient is using acquisitions to scale, but this is a strong organic growth story, with some very impressive numbers being posted there.

Net income was up 101%. Diluted EPS up 75%. EBITDA or cash flow up 96%. Again this was our ninth quarter, as we noted in the press release, of positive growing earnings per share. Our tenth quarter of positive growing EBITDA. We also again beat analysts' earnings estimates.

In terms of recruiting, our current headcount today is at about 510. We ended Q2 at just shy of 500. That number was up from about 424 people, at the beginning of the quarter, and that's a mix of full time and flex staff.

So we're demonstrating the ability to add capacity to meet demand. And as we noted in the press release, we're adding resources, both sales resources and consulting resources in most of our major markets in response to that increasing demand. And we are seeing accelerating demand on the part of our customer base.

In addition to the iPath acquisition which added roughly 8 million in annual revenues, we have a strong M&A pipeline, and we are in active discussions with a number of companies today. They represented approximately 200 million in revenues in total. And again, our goal is to book at least 50 million of that this year. We got a little bit of a slow start on that due to the secondary earlier in the year. But we have a number of ongoing discussions now. And we intend to have an active second half of the year where acquisitions are concerned.

So again, overall another great quarter. And our business is getting stronger across the board.

One note I'd like to make on reporting in guidance. To be consistent with the analyst community, the analysts that are covering our stock, and the numbers that they provide to Thomson First Call and with First Call's protocols, we are now reporting total revenues in our guidance, including reimbursed expenses. And reimbursed expenses run about a million a quarter. And that's the number that's always shown up in Yahoo! For example, that's the number that Thomson would come out with.

And we have been netting out reimbursed expenses, which most of our peers do not, and which the analysts do not. And that was creating a little bit of confusion in the market. So, after discussions with a few of the analysts that cover our stock, we've decided to begin reporting total revenues. And as I say, that's a delta of about 1 million a quarter on the top line.

So at this point, I'm going to turn the call over to Mike Hill, and he'll discuss in greater details our financial results for the quarter and will run it over to Jeff Davis to provide some additional color behind the numbers.

Thanks, Jack. For the quarter ended June 30th 2005, we recognized total revenue including reimbursed expenses of 21.7 million. That's a 91% increase over the second quarter of '04.

For Q2, services revenue including reimbursed expenses was 20.3 million compared to 10.3 million for the same period in 2004, and 18.3 million in the first quarter of 2005. This represents services revenues growth of 98% over Q2 '04 and 11% sequentially. In Q2 2005, revenue from the sale of third party software was 1.4 million compared to 1.1 million in the same quarter of '04, and 1.4 million in the first quarter of '05.

Net income was 1.6 million or $0.07 diluted earnings per share for the quarter compared to net income of 810,000 or $0.04 diluted earnings per share for the second quarter of '04 and 1.5 million or $0.06 diluted earnings per share for the first quarter of '05.

Cash earnings per share, a non-GAAP measure defined as GAAP earnings per share but excluding amortization of the tangible assets and stock compensation was $0.07 in the quarter, compared to $0.05 in the second quarter of '04 and $0.07 in the first quarter of '05.

Gross margin for services was 36.9 for the quarter compared to 38.7% in the second quarter of '04 and 36.8% in the first quarter of '05. Gross margin for software was 14% compared to 22.5% for the second quarter of '04 and 16.2% in the first quarter of '05.

SG&A expense was 4.1 million in the quarter, which is an increase in absolute dollars from the second quarter of '04 and the first quarter of '05. Our SG&A as a percentage of services revenue was 21.3% in the quarter compared to 24.3% in Q2 '04 and 21.4% in the first quarter of '05. EBITDA, a non-GAAP measure was 3.2 million for the quarter compared to 1.6 million in the second quarter of '04 and 3 million for the first quarter of '05.

During Q2, our utilization rate based on the 200 hour year excluding sub-contractors was 86% and the in-period billable headcount was 423 including 86 sub-contractors.

Our quarter end cash balance decreased to 2 million at June 30th at 4 million at March 31st. During Q2,, our net working capital increased to 15.4 million as of June 30th.

Now I'll turn over the call to Jeff Davis for some additional clarity behind some of these metrics.

Thanks Mike. I just wanted to cover a few topics. I'll be brief. Starting with, sort of what we're seeing in the market in terms of spending trends. We saw, as you can see it is a strong quarter in the second quarter anticipating the same for the third quarter. And I think where we are seeing the investments being made really validates our strategy to focus in the application integration middleware space.

Some of the trends we are seeing include continued strong investment on e-business infrastructure, meaning things like platform upgrades and migrations, particularly in the enterprise space. We are also seeing many new initiatives that fall in that category laying the foundation for some serious investments within BS&B markets as well.

Portal related spending continued to be strong, with particular strength in line of business-driven initiatives, particularly in the area of customer intimacy including customer acquisition and customer applications. Enterprise application integration is also very, very strong area out of Houston, related from the -- resulting from the Zetta Works acquisition, last year. Tremendous strength in EII in general.

Talking a little about the iPath acquisition that we completed at the end of last quarter. It was really a significant event obviously for the second quarter. And in that we added several new Fortune 1000 clients, in addition to that 40 strong consultants, just a really solid team that we are excited to get those guys on board with Perficient. Add a new partner in EMC Documentum, really strong relationship with the EMC Documentum came along with that acquisition. We are excited about that.

As we expected, we're already really seeing strong synergies between the enterprise content management skills that iPath brought in our existing business focus. As I mentioned before, this is really sort of a concentric circle expanding out our stack or our platform around AIM.

The team in Houston is already receiving immediate requests for assistance for presales and delivery from other business units or are already seeing that on the ground integration that's so important in these acquisitions. It's very exciting, it's really stepped up the demand for those skills and they are already busy. So it presents a new channel as a high-class problem.

We are also seeing strong financial performance from that business unit, really added some to the last quarter and we are expecting really good performance from them in this quarter.

On the growth front in general, in terms of our employees and our headcount, really strong organic growth, as Jack mentioned in the second quarter. We added a net 10 additional employees. And in fact our recruiting demands are so high right now that we have increased our internal recruiting staff from 4 to 5 in the quarter.

Also notable is that we moved up in the bar business technology company ranking position for our 2004 results from number 426 to number 306. And we are also awarded the Outstanding Revenue Award, honored as the fastest growing technology company of our size, and the fifth fastest growing overall. This again is all based on 2004 revenue results and we think that with our 2005 revenue we'll also be making significant progress on that list, again as well.

Looking ahead as I mentioned, I forecast is stronger than it's ever been before both organically and obviously with the acquisitions. We expect another very solid quarter in the third quarter.

And that's really all I had. Jack, I'll turn it back to you.

Great. Thanks. Let me talk briefly about the outlook for Q3. Total revenue at this point, we expect to be in the range of 22.5 to 24 million and that will be comprised of roughly 22 to 23 million in services revenue, and that includes reimbursed expenses, and 700,000 to 1 million in revenue from the sales of software. So that Q3 forecast range of services revenue will represent services growth of approximately 54 to 63% over the third quarter of 2004. So it's a pretty substantial growth there.

And also I mean, if you look at the top end of that range, 24 million that takes us to a revenue run rate of about $96 million. So getting very close to that $100 million revenue run rate target. And of course we've got organic growth and some additional acquisitions that we are looking at.

So in summary, we're as optimistic as we have ever been, about the potential for the company. Market demand, as we see it, is increasing. We've talked before about the fact that literally 8 out of 10 of our competitors, got wiped out during the crash and the ensuing nuclear winter, and as spending has started to come back, we are just not seeing a tremendous amount of competition out there.

And we've built a great base of global 2000 customers and more than 400 for whom we've done work. And in addition to that a number major mid-size clients, with a repeat business rate of better than 85%, better than 85% over the last 4 years. So, a loyal, strong repeat client base with an environment worth spending is increasing and a relatively little competition.

So that's a very -- from an entrepreneur's perspective, we look at the opportunities here, that's a very attractive environment. Obviously we have got to execute against that and we have been doing a good gob at that and we got some more work ahead of us.

In addition to that we continue to see a lot of attractive M&A opportunities, the smaller shops for whom really there aren't a lot of buyers. So we think there is an opportunity to continue to do accretive deal. And we really like our positioning in the market. We have been doing larger deals now, we are starting to win some of these multi-million dollar deals which we don't have to win frankly to continue our growth, right. We have built to profitably execute $0.5 million deals, $1 million deals, we are starting to win some that are in this 3/$4 million range now.

But even at that level, we are flying in most cases below the radar screen to the big guys, and competing against a bunch of small boutiques because most of the in-between sized firms are gone now. There are just a handful left. So it's an attractive environment. I think it's an environment really where we are just taking our stride now, as we approach 100 million in revenue, in Q3 as we approach that run rate, winning bigger projects, having an easier time recruiting than we've had in the past, because it's just that we are much more of a name in the markets, both geographic and from a technology standpoint, the business consulting standpoint in which we operate. Getting more mind share with our partners. Obviously the IBM Award for 2004 as the lead partner in the U.S., the Documentum Award and others. And I think really just hitting our stride in terms of recognition within the investment community, as we cross some sort of minimum critical maps thresholds. So, very excited about the prospects going forward.

So with that, I would like to open the call up for questions.

(Operator's Instructions)

And your first question comes from the line of Peter Heckmann of Stifel Nicolaus. Please proceed.

Good afternoon guys, nice quarter.

Thank you.

Mike, the other project expense number was up previously and sequentially. Is that a number that we expect to jump around a bit quarter-to-quarter or are we seeing in that number, some other expense building, for example from some ASP hosting or outsourcing work that you are doing?

Yes. Pete, that number is really related to our operations in Houston, mainly related to the Zetta Works acquisition. And as you recall, they have a travel model, which means that they have some project related expenses related to their services delivery that they do not get reimbursed by customers. And so, with that, now we are seeing kind of, lot of growth from Zetta Works operation in Houston, and we are seeing that number tick up some. It's a good thing because it's associated with a lot more revenue from the Zetta Works operation down there. But that's what it relates to. It's not something else behind the scenes, other than just related to services delivery.

Okay, I understand. And then, in terms of your headcount numbers, I don't know if there was a little bit discrepancy between the 2 numbers provided, ending total headcount with subs was what number and then if you could give average headcount, for the period?

Yes, so billable headcount was ending at Q2 was 423, average being a little over 400, about 409, and that's including sub-contractors.

Okay.

Now that's billable, total professionals in the organization ended with 487, and the average there was around 473 for the quarter.

Okay and so where would you be, I'm not sure if you said that number, where would you be right now in terms of billable?

So billable, Jack mentioned in the opening remarks, our current headcount being upwards of around 510, which is about 20 higher than the 487at the end of the quarter. And so those additions are related to billable heads. So we are running even higher than the 423 now.

Yes, we are about -- we're close to 450.

All right, great. And then are you seeing the ability to continue to encourage sales people, on some of the acquired operations, to consider selling or reselling some of the software applications, number 1, primarily Web Sphere? But then are you, with the iPath deal, are there also some additional reselling opportunities, or some of the new partners they bought in?

There are. This is Jeff. Yes, there are in fact -- we are in the process right now, of working on an agreement with Documentum to -- they don't allow partners to actually do the resell. But what they do, an influence step, which essentially they give you the margin on the resell, which is what you are really after. So we are in the process of putting an agreement in place with them on that. And then one of the other partners that I won't mention that was a search engine partner, kind of a niche area but a real opportunity because as you might imagine there aren't a lot of partners for them to go to, are also pursuing us for a resell opportunity. And of course that is something we think we are pretty good at and obviously tend to leverage.

Great.

And likewise, to the part of your question, the acquisitions that we have done, in Zetta Works in Houston, essentially probably I have, I have a slightly different model. If you go all the way back to Meritage, these days we're selling IBM software, we got all of them tooled up to resell now. And if that Houston, former Zetta Works has done some IBM resell already.

All right, I appreciate it, I'll let someone else ask questions. Thanks.

And your next question comes from the line of Jeff Martin (ph) of Ross Capital Partners. Please proceed.

Thanks, good afternoon guys.

Hey, Jeff.

Could you give us a little indication on and the availability of talent out there and your hires basis and are you seeing any change in rates what you have to pay them?

Yes, we think there are some pretty good talent out there. Obviously for good people you've always got to look, they are not falling out of trees. But I would say that we have never had a company a stronger in-bound pipeline of qualified candidates than we have today. And a big part of that is due to the increased presence we have got in the market. While our Perficient may not be a household name, but generally in these mid-Western markets where we operate and in the communities, the professionals both on the technical and the business side that do the kind of business process management, e-business infrastructure work that we do, Perficient is getting much better known than we were just a year or 2 ago as we're now kind of approaching 100 million in revenue.

So even in what you might expect to be a somewhat tightening labor market, we are having an easier time recruiting than we have had historically.

In terms of wage inflation across, inflation on that side, Mike correct me on this, but I think we have been running on a 3/3.5% annual rate.

Yes, 3 to 4%, that's right.

And so there is nothing that we are seeing currently that would cause us to think that that's going to change in any material fashion any time soon.

Well and I'll add to this real quickly, I think we are beginning to see an opportunity and I think that -- we did some contractor work before in Q2 that kept our rates flat in Q1. But it's the work that we went out, the new work that we engaged in Q2 and new sales for Q2, we should be realizing some of this in Q3. I anticipate that the rates will be improving. So as we'd be needing to pay more for talent, we also expect to be charging more for talent.

And that was my next question. How has pricing been tracking? Are you able to continue to ratchet up rates, I think it was on Zetta Works that you are?

Yes we are. And Zetta Works has made, dramatic improvement. That's where we did, took on a large chunk of sub-contracting around one large project that we are doing there. But on par, (inaudible) we are going out and selling new work in that business unit, the rates are substantially higher than they were 90 days ago.

And again in the second quarter just in general for the work that we sold, I believe we are going to see it realize an up-trend in rates from that going into Q3. We will have to see what the final analysis is then, but that is what we are anticipating. So we are seeing the market being a little tighter on both sides at the same time, the economics look to me like they are going to work.

And you also got, particularly with respect to the acquisitions phenomenon that we've seen now for a number of years where a lot of these smaller firms, they price locally and they price out of fear, they often don't have adequate market knowledge in terms of what their services should be generating, and you get a cost based as opposed to a value based pricing mentality. And if you move off of that and also give them the back-up to stick to their guns a little bit more on pricing, because you are looking at a larger enterprise which is running it at a higher utilization across the board, you begin to see a pick-up in rates.

So we've not only got basically strengthening economic conditions in terms of IT spending but we've also got the improvements that we can make in these businesses after we acquire them both through what I was just saying and also by leveraging the kind of lead flow engine we've got through partners like IBM. So all of that adds up to good news.

So, how safe would then it be to assume that gross margins in Q2 are based to build upon versus a kind of a level where you will be around plus or minus for the next year or so?

Yes, I mean we think there is some upside in gross margins, but part of it has been driven over the last year and a half or so by some of the acquisitions we did. So we did 3 acquisitions last year. Great firms that added about 38 million in revenue that by and large had lower gross margins and lower bill rates. And as we were just discussing, we have done some good work to improve those. But those acquisitions took our gross margins as a whole into the mid to high 30s from the low 40s, prior to giving effect to those deals. Now just because the acquisitions we did last year had that effect doesn't mean that the deals we are looking going forward will. And of course the iPath acquisition had higher gross margins in the 40s and a bill rate in the mid 120s. And so that has a positive impact on those metrics and some of the other deals in our pipeline will as well, although there may be some that don't, but otherwise make sense because we've got opportunities to improve them.

So net to net, I think we have an opportunity and our target is to move back towards 40 in gross margins. But again given the fact that we are looking at a pipeline of acquisitions we may churn sort of in the mid to high 30s range for a while, that we previously said and are sticking to, a general range of 35 to 40% around gross margin.

Okay, and a final question on sales cycle. Are you seeing lead times lengthen or contract?

I would say contract. We are definitely not seeing them lengthen now. Yes, we are seeing some larger projects. And I guess you might, I mean, as I mentioned earlier we are actually looking, you know, we won recently a project north of $4 million and so we are starting to see some bigger deals now. Typically you might assume longer lead times around larger projects. But even with some of the larger work we've won, we haven't seen a demonstrable increase in lead times. I guess it's possible if those trends were to continue that you might see more. But right now there are no clouds on that horizon.

Yes, if you draw, if you look at it -- gradual say over the last 12 to 18 months, so if you look at it from last quarter, yes I would say that the lead-time shrunk from a contracted sum. But if you look at a comparative 12 or 18 months ago, you can definitely see a shortening in the lead time in the sales cycle for these deals. But how long that continues, who knows? But right now we've got, as I mentioned before, a very strong forecast, very best pipelines, and we are expecting to see the deal close, be with very shorter cycles than we saw, say a year ago.

Great, thanks guys, thanks very much.

And your next question comes from the line of Feld Goldsmith (ph) from Goldsmith and Harris. Please proceed.

Hi, good afternoon, great quarter guys. With regard to the strong M&A pipeline that you see, where do you see a brick wall out there in terms of your ability to finances this with debt as opposed to equity?

Right now, we have got a $28 million facility in place and about 20 million of borrowing capacity. And we've indicated that we want to get a total of 50 million in deals done by the end of the year. We've already have done one piece of that, a small piece. So we've got about 40 million more to do. And to take a very rough metric, if you say we are paying one time's revenue and of course half of that in cash because half of the deals are in restricted stock, that gives us enough capacity and to the existing debt facility to finance this year's deals.

In addition to that, if you look at how we do the deals, we are paying roughly 5 times EBITDA but again as I say only half of that in cash. So the cash price paid is 2.5 times EBITDA. So if you look at that, with each one of these transactions, we actually increase our borrowing base given the ratios that we have to comply with under the debt facility. So we could very well at the end of this year substantially increase the debt facility enough to finance the cash portion of next year's acquisitions, another 50 million in deals.

So, I think -- and we are not cutting new ground here and there has been others in this industry, in similar industries that have used these kind of debt facilities to finance some substantial growth through acquisition.

We do have the equity lie out there though. We've converted that F3 (ph) to a shelf. And were there one particularly large deal, by say next year, we don't anticipate that for this year if we needed to take down 20 or 25 million coincident with an accretive acquisition, in other words, putting the money immediately to work on a accretive deal, we would have the capacity to do that. But as of right now, I think we have got some pretty good capacity to execute against our plan just using the debt facility.

Okay. With regard to the value basis for charging that you referred to, do I understand you correctly, in other words, as you make the acquisitions you bring them in, the gross margins are going to age and increase as we go forward. So typically you are going towards 40% or a bit over 40% as they age. Is that the metric that you're kind of, looking at?

Yes, the metric we are looking at for the company as a whole, our target is to get back to 40. But as I say, we will be doing acquisitions as we go, so it may take us a little while to get there. And in order to add (ph) on the side of being conservative, what we have said is that gross margins could range between 35 and 40% over the next couple of years. Now obviously we want to target the top end of that range. But what we are focused on are good solid companies where we do have an opportunity to optimize those gross margins through the means we discussed earlier. An of course we are looking for the deals that are accretive. We will not do any acquisitions, unless they are accretive, adding the earnings per share after giving effect to the shares issued in the deal and any financing costs associated with the debt, used to finance the cash portion of the deal. So we are committed only-- to doing only accretive acquisitions. And we think there are some good opportunities out there, and we are aggressively pursuing them.

Okay. And lastly, the software gross margins have trended down. Are they going to level out from here or where would you--

Yes, yes I see them leveling out somewhere between 12% and 15%.

Okay fine. Thank you very much.

Thank you.

(Operator Instructions)

And your next question comes from the line of George Mihalos of Gilford Securities, please proceed.

Hi guys, congratulations on the quarter. Just a couple of quick questions. What do you expect in terms of organic hiring for the remainder of the year?

Jeff, why don't you take that one in terms of targeted numbers?

Yes, I think you know the best way to answer that is I expect to be consistent with organic growth. So we're targeting 15% to 20% and we are tracking right now the 20%, knock on wood, and we're beating that right now. I would expect the organic hiring to be about in that range.

Okay.

Does that answer your question?

Yes, yes. And can you comment a little bit on the guidance related to the software sales. It looks like they're sort of a flattening out. And if I'm not mistaken, would you not expect a bit of second half spike traditionally?

Yes, traditionally you would expect a bit of a second half spike, particularly as it relates to the fourth quarter. We are just always really looking to err on the side of being conservative, particularly where software revenue is concerned for two reasons. One, it's lumpy and two, it's relatively low margin work revenue for us, right. It's an additional ticket we write when we're out selling the services.

So yes, you are correct. And obviously if you look at our numbers from last year, there was a very substantial spike. In the fourth quarter alone, I think we did 7 million alone of software. And here we are, really forecasting just $1 million in Q3. So, you are correct and we are really just trying to be conservative in the estimate.

Okay, so there is potential upside there, that's fair to say?

Yes.

Okay, and just a final question. Can you give us the cash flow from operations figure and maybe comment on what appears to be a fairly sharp rise in DSOs sequentially?

Yes, let me take that one. So, DSOs first of all, that came in at about 88 days, which is admittedly higher than we wanted it to be. We did have a large $1million collection of few days, subsequent to the end of the quarter on an aged account from one customer. So that $1million actually brought us down since we are just using ending AR, to about 83 days.

And to kind of explain what we should expect for DSOs for Perficient, really two-third, over two-thirds of our customers we bill on a monthly basis. So there's a 30-day billing cycle right there. We typically have about a 14-day invoicing cycle to collect time, approve invoices and so forth. And so that's 14 more days. And then we have between 30 and 45 days cash collection cycles, IBM being the 45-day collection cycle and everybody else, all the other customers being 30 days. So all those added up, we expect DSOs in kind of a reasonable range of 74 to 89 days.

So again, 88 being at the upper end of that range and higher than we want it to be. We are targeting to bring that down by focusing on those 3 cycle times to try to get it down to the low 70s-- to the high 70s again below 80, as it has been in the past and as it was 77 days in Q1.

How much of this increase is a function of acquisition activity? Sort of aged accounts perhaps coming in from an acquisition?

Well, the acquisitions can -- really what's happened is with the latest acquisitions we've really added on more, a proportionately more customers that bill on a monthly basis. And as such, that first cycle that I mentioned there really hurts us more. Obviously, if we could bill more frequently than we'd obviously cut that first cycle time down and therefore cut that total down. So with the acquisitions we've added on more monthly billing cycles and as such as that's why we have seen a growth in DSOs. And so it's a requirement for us to go in and see if we can change some of those billing cycles through renegotiation with some of the customer contracts.

Okay, and just one final thing. What was the actual CFFO for the quarter?

So, cash flows from operations was going to be around negative 1.5 million/2 million. Better way to look at that is going to be looking at free cash flow, which was about 1.6 million positive. And we get that by net income adding back the non-cash charges for depreciation, amortization, stock comp and then taking off CapEx and debt service payments. So really from a free cash flow standpoint, the company's throwing off about 1.6 million positive. But during Q2 primarily because of the increase in the AR, as well as other cash uses for the acquisition of iPath, our cash balance diminished.

Okay, but cash flow from operations itself was a little north of negative 1.5 million, right?

Right.

Okay. Okay, thank you.

Ladies and gentlemen this concludes today's question and answer Session. I would now like to turn the presentation back over to Mr. Jack McDonald for closing remarks.

Okay, well thank you very much. We appreciate your time this afternoon. And we look forward to speaking to you again next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. To access the replay of this call, you may use the dial-in number 888-286-8010 and use the access code of 34244926. You may now disconnect. Good day.