新聚思 (SNX) 2007 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the SYNNEX third-quarter 2007 earnings results conference call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session, and instructions will follow at that time.

(OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Ms.

Laura Crowley.

Ms.

Crowley, you may begin the call.

Thank you, James.

Good afternoon and welcome to the SYNNEX Corp.

fiscal 2007 third-quarter earnings conference call.

Joining us on today's call are Bob Huang, President and Chief Executive Officer; Dennis Polk, Chief Operating Officer; and Thomas Alsborg, Chief Financial Officer.

Before we begin, I would like to note that the statements on today's call which are not historical facts are forward-looking statements within the meanings of the Private Securities Litigation Reform Act.

These forward-looking statements include but are not limited to statements regarding our strategy to develop a successful BPO and services business; expectations of our revenues, gross margin, SG&A, net income and earnings per share for the fourth quarter of fiscal 2007; our growth and profitability; the benefits of our recent acquisitions; the consolidation of our Canadian facilities and the related expenses and impact on our earnings per share; our goal to reach double-digit return on invested capital; and statements regarded regarding our expected tax rate for 2007, which are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in these forward-looking statements.

Please refer to today's press release and documents filed with the Securities and Exchange Commission, specifically our most recent Form 10-Q, for information and risk factors that could cause actual results to differ materially from those discussed in these forward-looking statements.

To supplement our financial results presented in accordance with U.S.

generally accepted accounting principles, or GAAP, we use non-GAAP financial measures.

These non-GAAP financial measures should not be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Also, any use of the word pro forma refers to figures that are non-GAAP.

A detailed discussion and reconciliation of the adjustments between results calculated using GAAP and non-GAAP are included in today's earnings release, which can be viewed in the Investor Relations section of our website located at www.synnex.com.

Additionally, this conference call is the property of SYNNEX Corporation and may not be recorded or rebroadcast without specific written permission from the Company.

Now I would like to turn the call over to Thomas Alsborg for an update on our financial performance.

Thomas?

Thank you, Laura.

Good afternoon, ladies and gentlemen, and thanks for joining our call today.

Total revenues for the third quarter of 2007 were $1.76 billion (company corrected after call), an 11% increase over the third quarter of 2006, a 4% increase sequentially, and exceeded our stated guidance for the quarter.

On a non-GAAP basis, third-quarter net income was $15 million, a 9% increase over the prior-year third-quarter GAAP net income number of $13.8 million and also at the high end of our stated guidance.

On a GAAP basis, third-quarter net income was $14.4 million or $0.44 per diluted share.

Diluted EPS based on non-GAAP net income was $0.46 compared to $0.43 per diluted share in the prior-year third quarter.

Non-GAAP net income and EPS exclude a one-time third-quarter restructuring charge of $1.7 million net of tax and a one-time benefit of $1.1 million reduction in income tax expense.

The nature of the two excluded one-time items that are used to derive our non-GAAP results are as follows -- during the third quarter, we booked a one-time charge of $2.7 million pretax or $1.7 million after tax for the restructuring and consolidation of our four Canadian facilities associated with our Ontario-area warehouse consolidation and the integration of the Redmond Group of Companies, or RGC.

This charge is calculated in accordance with GAAP financial accounting standards and is primarily represented as an accrual for the costs associated with consolidating the four area warehouses into one central location, the related moving costs, and severance and temporary retention of some employees.

We also benefited from a one-time $1.1 million reduction in income tax expense resulting from the conclusion of an income tax audit of the Company's Canadian subsidiary.

Both the restructuring charge and the one-time tax benefit are excluded from our non-GAAP third-quarter 2007 (company corrected after call) statement of operations.

Now I will turn to the remainder of the P&L.

Our gross margin once again measurably expanded for the third quarter of fiscal 2007 to 5.18%.

This represents an increase of over 60 basis points compared to the prior-year quarter and an increase of 18 basis points sequentially.

We remain focused on improving all aspects of our gross margin.

Our core distribution business and our other business process services contributed to our increased gross margin percentage in the third quarter.

Third-quarter 2007 selling, general and administrative expense was $64 million or 3.63% of revenues compared to $49.2 million or 3.09% in the third quarter of fiscal 2006.

The increased SG&A spending as a percentage of revenues is from three primary sources.

First, as we previously discussed on our second-quarter conference call, our P&L includes certain redundant expenses associated with the consolidation of our Ontario warehouse facilities.

Specifically, within the reported results of the third quarter, we incurred pretax costs of approximately $1 million or $0.02 on a diluted earnings per share basis for temporary expenses associated with the transition and a ramp-up in our operations to the new facility from the previously existing facilities which are being closed.

These expenses are primarily related to SG&A and are not included as part of the restructuring charge.

We expect to incur a similar amount of such expenses in the fourth quarter.

These redundant expenses are reflected in our fiscal fourth quarter outlook that I will share with you shortly.

The second source of our increased SG&A expense resulted from an approximate $400,000 charge pretax taken during the quarter for the settlement of a previously pending litigation issue.

And the third reason for the increase in SG&A expense as a percentage of revenues is related to our recent investments in additional BPO service offerings.

All of the BPO service offerings we have have normal SG&A profiles that are significantly higher percentages of revenue than our historical distribution SG&A range of 3% of revenue.

While our core distribution business continues to perform at a historically low 3% range for SG&A, considering the overall mix of all of our service offerings, including our BPO services, our SG&A percentage for the near-term future should normally be a little below 3.5%, with the exception of any anomalies such as the redundant expenses or the settlement of the legal matter that I just spoke about.

On a GAAP basis, income from operations was $24.5 million or 1.39% of revenues for the fiscal third quarter compared to the GAAP results of $23.5 million or 1.48% of revenues in the prior year and $25.8 million or 1.53% of revenues in the fiscal second quarter of 2007.

Our income from operations for the fiscal third quarter on a non-GAAP basis, which excludes the $2.7 million pretax restructuring charge, was $27.3 million or 1.55% of revenues.

With respect to the net interest expense and finance charges, the total for the third quarter of 2007 was $3.5 million, an $800,000 increase from the previous-year third quarter of $2.7 million.

Within this figure, gross interest expense primarily increased as a result of increased borrowings used to fund recent acquisitions and growth in sales, which resulted in a higher level of overall borrowing.

On a GAAP basis, the effective tax rate for the third quarter of fiscal 2007 was 30.8%.

This rate includes the one-time benefit from the income tax audit in the amount of $1.1 million.

On a non-GAAP basis, based on net income, which excludes the $1.7 million net of tax restructuring and without the one-time tax benefit, our effective tax rate was 36.3%.

Given our current geographic makeup relative to income, our current expectation for our non-GAAP tax rate for the full 2007 fiscal year is in the low 36% range.

However, as always, this is dependent upon several factors, including actual profit contribution from the various geographies in which we operate.

Turning to our balance sheet information and metrics, accounts receivable totaled $603 million at the end of August 31, 2007.

On a pro forma basis, including the $93.2 million associated with our off-balance-sheet accounts receivable securitization program in Canada, total AR would be $696 million.

DSO, including the AR from the off-balance-sheet program, was 42 days.

Inventory totaled $593 million at the end of the quarter, translating to 32 days of inventory supply.

Netting out our days payable outstanding of 34 days, our third-quarter cash conversion cycle was 40 days.

Other third-quarter data and metrics of note are as follows.

Depreciation expense was $2.6 million.

Amortization expense was $1.8 million.

Capital expenditures were $2.9 million.

From a distribution product line standpoint, peripherals accounted for 31% to 35% of our sales; systems components accounted for 17% to 21%; IT systems accounted for 30% to 34%; software accounted for 8% to 12%; and networking accounted for about 4% to 8% of our total distribution revenues.

Hewlett-Packard at approximately 28% of sales was the only vendor accounting for more than 10% of sales during the third quarter of 2007.

Our total Company associates are 6510 as of the end of August 31, 2007.

This consists of 6007 permanent employees and 503 temporary personnel.

Moving to our fourth-quarter 2007 expectations, for Q4 2007 we expect revenues will be in the range of $1.875 billion to $1.925 billion.

Net income is expected to be in a range of $17.2 million to $17.9 million, and diluted earnings per share is anticipated to be in the range of $0.52 to $0.54 per share.

These forecasted diluted earnings per share figures are based on an estimated average weighted diluted average share count of approximately 33.2 million.

As a reminder, all of these statements are forward looking, and actual results may differ materially.

I will now turn the call over to Bob Huang for his perspective on the business and the quarterly results.

Bob?

Thank you, Thomas.

Good afternoon, everyone.

We made great progress with our results for the third quarter of 2007.

Our strategy of providing leading business process services is moving forward and gaining momentum.

I would like to thank our employees for their hard work and dedication, and our customers and suppliers for their business and continued support.

With the completion of our fiscal third quarter of 2007, SYNNEX achieved our 81st consecutive quarter of profitability.

Once again, we accomplished a strong performance in our core distribution services, which contributed to our increased revenues and gross margin.

Our relentless efforts on improving efficiencies and our enhanced services offerings through recent acquisitions enabled us to further deliver strong operating and bottom-line results for the quarter.

As for the distribution marketplace, the overall demand was as expected, and pricing remained rational but competitive during the quarter.

In terms of the customer segment or product categories, we did not see any significant differences from historical patterns or from what is being reported in the marketplace.

As we continue to expand our service offerings, our description of SYNNEX as the leading business process service company is a better way to articulate the business we are in.

We have enhanced the existing growth strategies of our core distribution business and complement our service offerings through our recent acquisition of Concentric, Link2Support, and PC Wholesale.

We added to the strength of our China operations with HiChina, and we now have a very compelling and complementary operations -- BPO operations, excuse me -- complementary BPO services offerings from which to better service not only our current customers and partners, but also other companies who we do not currently service today.

Now I would like to update you on the progress of the recent acquisitions and the larger initiatives.

First, from a business perspective, we are very pleased with the results from each of these recent acquisitions.

This includes HiChina, Link2Support, PC Wholesale and RGC.

All performed as planned during the quarter, and we continue to be excited by the growth, synergies and profit potential they have brought to us.

As indicated by our earnings result this quarter, we have already seen these benefit and synergistic opportunities, especially with respect to our technical support service offerings.

As Thomas noted, we have experienced certain inefficiencies with our consolidation and restructuring efforts in Canada, which resulted in greater SG&A expenses than we would have liked.

To correct this, the Canadian team has worked very diligently, and we're seeing positive results every day and believe these operational issues are short term in nature.

Regarding our TSD business, I am pleased with the progress on growing this business and executing on our stated goals for this division.

Our gross profit to expense ratio, or GPE, was 1.43 on a non-GAAP basis in the third quarter, down 1 basis point from our second quarter.

As noted by Thomas earlier, the increase in our operating expense results from the inefficiencies in our Canadian warehouse operations, and our recent acquisition are the main reasons for this change.

We expect that our GPE will be to back to our target range of above 1.5 as of our current fourth quarter.

Now let me comment on our fourth-quarter guidance.

At the midpoint of our guidance, we are projecting a 9% increase in year-over-year sales for the fourth quarter of 2007 and a 10% increase in our earnings per share.

This EPS growth rate is reflective of our continued focus on growing our business profitably.

The projected increase in our revenue also assumes from a growth standpoint a continued reasonable demand in IT distribution services and a normal seasonal pickup in the IT marketplace.

As we look forward to 2008, while we're optimistic about our current progress and our growth initiatives for our technical support and content-centric offerings and we remain quite focus on enhancing this existing business, I would like to comment that there is uncertainty at the macroeconomic level which may impact the demand of IT products in North America.

Before I turn the call over for questions, I would like to share that in reviewing our past four years of earnings results as a public company, we have more than doubled the size of our operations, gross margin dollars and net profit.

It is because of this strong determination and execution that if we grow at the same pace that we have done over the last four years, I am confident that we can accomplish our internal goal of achieving $100 million in net income and double-digit ROIC by the year 2010.

I would like to emphasize that we are pleased with our current results and the opportunities we have to further our earning growth potential.

Thanks again for your time today and your continued interest in SYNNEX.

Laura, let's now turn the call back to the operator for questions.

James, let's go ahead and open up the call for questions.

(OPERATOR INSTRUCTIONS).

Jason Gursky, JPMorgan.

Just a quick question on revenue.

As you noted, the midpoint of your guidance points to 9% sequential growth, which appears to be a little bit muted relative to prior fourth quarters.

I was wondering if you can just give, and especially in light of your comment about some macro demand issues, if you could just give a little bit of flavor as to what is going on with the demand picture as it relates to enterprise versus SMB and maybe your distribution operations relative to assembly and some of the other business process outsourcing operations.

This is Bob.

Let's start from the business process offering.

I think they're moving pretty strong for us.

We are happy with that.

The macro level of uncertainties that we mentioned earlier, today it's hard to say.

I think we have got mixed signals out there.

In some areas, they are fine, and in some areas we're a little bit nervous about it.

Overall, as you know, we have been focusing also on the more profitable business.

So we're not just really looking at the top-line growth.

We are much, much more interested in making sure that we have a good business and have a good bottom line.

Just as a quick follow-up to that, then, the areas that you are concerned with -- is it enterprise versus SMB?

And then just generally speaking, on the sequential growth that you're expecting this next quarter, it is more muted relative to prior years.

Is the seasonality now changing in the business, given the mix?

Well, last year we didn't feel we have the overall economic issues as compared to this year.

So as far as the specific segments, I think enterprise is doing fine, as we expected.

We have some areas of weakness probably on the SMB market for whatever the reasons you could imagine, but probably related more to the macro issues than the specific segment.

And then you have done a good job of talking about where you think SG&A as a percentage of sales goes, like the 3.5% range.

But we have seen some pretty strong sequential climbs in gross margin percentage.

Perhaps you could just walk us through on where you think this eventually goes over time.

Are we going to start topping out here at 5.2%, or is this essentially a 5.5% type business?

Jason, it is probably a mix of the businesses.

Thomas has mentioned earlier, for the business process services, the growth -- the SG&A you're talking about is in the 25% to 40% range, whereas in the distribution, you're talking about still at the sub or 3%-ish range.

That is what we have.

So it is really the mix of the business we see down the road.

Thomas, do you have anything to add?

The only other thing I would add to that, Bob, is that it is important to keep in mind that even though we have a greater SG&A profile in these kinds of businesses, the gross margin is also substantially higher.

And as a result, our net income, our net margins are also substantially higher than we would see normally in the distribution business.

So overall, obviously we view this as a very nice piece of business to be growing into.

Brian Alexander, Raymond James.

Yes, I just wanted to follow up on the comments around weakness in SMB, which I don't think we have really heard from you or your competitors before, Bob.

And I'm just trying to get a little bit more clarity on when you started to see this weakness.

Was it in July?

Was it in August?

Do you think it is tied to the tightness in the credit markets?

And is it possible that this is market share shift?

And I mention that because one of your major competitors reported double-digit top-line growth in North America in their July quarter, and they guided similarly for the next quarter.

So I guess I am trying to figure out when did you start to see it?

Is it possible it is specific to SYNNEX or is it more broad based than that?

I had very positive news that I wanted to share with you first.

In the recent CMP survey, SYNNEX is rated the number one on price and availabilities and relationship.

Those are three pieces the most, most important to our results.

So from the market share point of view, I don't think we are losing market share as far as we start to see in this type of somewhat weakness.

Again, I don't have any real solid data to share with you, but overall, just looking at what our business today, probably that if any weakness that we can see is going to come from -- that probably is one area that we will see -- probably somewhat concerns us a little bit.

But it is not really to the level that raises a big red flag that we need to take any actions on that.

This is Thomas.

I would like to add something to that.

To be very specific on the first part of your question, we feel our revenues were quite strong in Q3 and we have not seen any weakness in the third quarter, which you can contrast to the statement from the competitor.

So we had a very healthy third quarter.

And I believe Bob's comments are really more geared towards characterizing our fourth-quarter guidance and just the level of uncertainty -- you know, you pick up The Wall Street Journal today and the major headline there is concerns over the economy.

So we are just acknowledging, I think, what everybody is aware of, that there's just more increased uncertainty in the economy today than there was six months ago.

That is helpful.

I guess that is part of what I am trying to clarify.

So this isn't really, to paraphrase what you are saying, Thomas, this is not necessarily something that you're seeing in your run rate business, but it is more based on caution that you could see this as the overall macro picture is a little bit less certain.

Is that right, or have you actually seen your run rate business quarter to date slow down?

This is Dennis here.

I'm going to jump in as well.

First of all, the 9% midpoint guidance is above market growth.

And that is on our total revenue number.

As you know, last quarter we stopped segmenting out our assembly business, which is now a combined sale with our distribution business, and we're pleased by the overall momentum there.

But from a directional standpoint, I can tell you that that former business was slightly down, approximately 8% to 10% down sequentially from Q2.

And we are expecting it to be flat in Q4.

So if you take a look at our prior numbers that we broke out for assembly, which were above $140 million in Q4 of last year, you can see that there is a little bit of a drag on the overall business from that change year over year.

So if you factor that out, our growth rate is even stronger in our core distribution business.

Yes, I am coming up with roughly an 8% organic type of growth rate in the distribution business.

Is that fair for Q4?

Quarter over quarter?

No, year-over-year, stripping out acquisitions.

It is higher than that.

Higher than 8%?

So that is pretty good.

So just on this topic of the credit markets, any change in behavior that you have seen from customers?

Are they actually looking to leverage distributors more because they can't get local financing?

Have you seen any increase in your aging or bad debt experience?

The answer simply is no.

We have -- while there has been a lot of buzz out there, we have not seen the effects that you just described in our business.

The final one for me is, and I appreciate you calling out the $1.4 million of nonrecurring expense, but even if you back that out from SG&A, it does look like OpEx is growing a little bit faster than gross profit dollars.

So taking into account that your mix is changing, we are still not seeing the operating leverage, if you will, at the operating margin line that maybe I would have expected to see.

So could you just give us a sense for when you expect that to flip around?

When do you think you'll start to grow GP dollars faster than OpEx and we could see some more meaningful operating leverage?

Certainly, Brian.

As I commented on my prepared remarks, we expected to see additional redundant costs of about $0.02 in the fourth quarter.

And we believe that that will, by the time the fourth quarter is completed, we will have completed our restructuring and our consolidation of the warehouses.

And so we think that going into Q1, we should be running on a normal run rate.

And so that normal run rate implies, then, that maybe in 2008 we should start to see GP grow faster than OpEx?

Yes.

Rich Kugele, Needham & Co.

Just one last question on economic factors that -- when you look at the breakdown that you do provide every quarter, historically, since you guys have a lot of history, where do you normally see the first hit if the broader IT spending environment slows?

Is there a usual segment that tends to be first hit and that at least gives you a tip-off?

Not necessarily enterprise or SMB, but specific segments of your business?

This is Bob.

No, we could not see the pattern in the past.

A couple of years ago, we had some issues more on the federal segment.

We felt somewhat slower because of whatever the reasons happening out there on the defense budget.

And then from time to time, we also see enterprises come slower sometimes.

So it is hard to narrow it specifically in terms of seasonalities.

And then just lastly, in terms of your own ability to fund your purchases, you haven't had any difficulties or anything that has changed in the way you have been running your balance sheet?

No, we don't have any difficulty here.

And just one other thing on the acquisition front, especially since you have made quite a few of them in the past few quarters -- do you feel you have all the pieces you need to grow your other segments, or can you give us a sense on what you're thinking on the acquisition front?

When you say all the other pieces, what are you referring to?

Well, you have put together all these different operations to go and boost your gross margin and get into some of the more higher-end growth areas.

Are there further acquisitions that you need as you see your whole plan play out to reach those levels?

Well, while we are digesting, we always are looking at new opportunities.

So again, our philosophy, then, is if the strategy is right, the price is right, we could integrate and we could finance them, we will do it.

So yes, we will continue to look through new opportunities.

As far as the current, the call center business, I think that one is running pretty well, fully focused on the technical support area, and that is doing very well for us.

Ananda Baruah, Banc of America Securities.

I guess more of a clarification -- just wanted to make sure that the $0.02 costs that you guys incurred from the consolidation efforts in Guelph is an apples-to-apples with the $0.01 that you incurred last quarter and the $0.01 that you were expecting to incur this quarter.

That is correct.

We anticipated that it would be $0.01 heading into this quarter.

It ended up being $0.02.

And as Bob and I both remarked, it is simply because we have had a lot to execute during the quarter and we have not executed as well as we wanted to in terms of the timing in particular.

So if I look at it simplistically, if you had kind of just really hit the $0.01 that you were expecting, you actually would have posted $0.01 upside in your core business.

So should we read, then, maybe the core business overall is actually operating a bit stronger than you had anticipated?

Because the $0.46 was the high end of your guidance -- looks like maybe you would have put up $0.47?

That is a fair comment, because indeed, but for this restructuring and the SG&A costs that went with it, we had a very solid, very strong quarter, both in the core business and in our business process services.

Maybe it would be helpful if I just kind of broke this out for the listeners, because I know there is a number of moving parts in this.

If you look at our reported SG&A of $63.9 million, and that is our GAAP number, except for the restructuring, which is on a separate line item, as I said before, we had about $1 million in these redundant costs or inefficiencies, and then we had another $400,000 in legal costs that would normally not occur, of course.

So if you back out both of those costs, it gets you down to something closer to $62.5 million, which is closer to something like 3.5%, 3.55% of revenue.

And again, I would also want to let you know that we have not yet factored in the benefits of our restructuring.

So we took the $2.7 million charge, but we are going to see the benefits of that on a go-forward basis.

And so after factoring in the benefits of the restructuring charge as well, you would expect to see our Company overall come out with an SG&A as a percentage of revenue, given the current mix and current revenue and so forth, of a number of slightly below 3.5%.

Is that helpful?

Yes, it is, thanks.

And I guess just for further clarification, the 3.5%, I guess what I'm trying to understand is once you get the full benefit at whatever point that is, through 2008, of the restructuring efforts, is that what the 3.5% represents or can you actually drive beyond that?

Because I know that you had provided some guidance or had begun to provide some clarification last quarter about the actual benefit exceeding the restructuring charges that you were going to actually take, and that the long-term benefits would actually exceed what that charge was, although you weren't ready to provide guidance around that yet due to some long-term lease benefits and things of that nature.

Right.

So I can answer that second question, and then I will go back to the first.

With regard to the second question, we expect the payback period on this restructuring charge to be about three quarters.

And then going back to your first question, yes, our goal is to reduce our SG&A below 3.5% -- let me say it differently.

I didn't characterize that well.

What I just did when I reconciled into that number that is slightly below 3.5% was just to explain, if you take all the moving pieces that we have on the table today and back them out, that is where we would come.

So that is how we think of our operations when we are managing the businesses.

We're trying to complete the integration and the execution.

And then by the end of Q4 going into Q1, we look at ourselves as a 3.5% or lower SG&A company.

And then as I have been saying since I have been here, we have SG&A opportunities.

Dennis has said the same thing with me.

And we continue to work to reduce those numbers.

So our goal is to go, again, even lower than that number.

Ben Radinsky, Bear, Stearns.

Can you just remind us what your goal is for TSD for the full year?

I believe it was originally, by Q4, you would be at a run rate of $500 million per year.

And is that goal still out there?

I think we are pretty much reaching the goal that we told you actually even as early as last year.

So I think we are fine.

And then in terms of the breakout between organic growth and acquired growth this quarter, I believe in one of the earlier questions you began to break it out, but I was hoping you could give us a little bit more color.

This is Dennis here.

I don't think we are breaking out specifically our organic growth versus the growth that comes from the acquisition.

What we are trying to provide you is that the core business is growing faster than the market, which is our desire.

And on top of that, we're getting benefit from the acquisitions.

And then last one for me -- if you could just talk about specifically in the quarter maybe a deal or two that was won because of the new strategy, the new BPO strategy, if you could just provide some color as to how you have actually seen some benefit from putting these pieces together?

Perhaps on a no-name basis?

That would be fantastic.

We cannot disclose our customers for any BPO -- they are generally very nervous about this.

This is Dennis.

I think it is fair to say, given the relationships that we have had for 25-plus years now on the vendor and customer side from a distribution standpoint has benefited us when we have combined these organizations into SYNNEX.

Have you seen incremental business because of the combination, I guess is where I was going with this?

We have indeed.

And speaking specifically of the BPO service, again on a no-name basis, you're familiar with the business we had -- Concentrix here in the United States, and then recently two quarters ago, we acquired another business in the Philippines called Link2Support.

And it was only a couple of months ago that we were able to have the folks who were in Concentrix U.S.

win business on behalf of the folks in the Philippines, Link2Support.

That would have been business we would not have otherwise been able to win by either company alone.

At this time, I show no further questions.

Well, this concludes our third-quarter conference call.

Thank you for joining us today.

We will have a replay of this call available for two weeks beginning today at approximately 5PM Pacific Time through October 8, 2007.

As always, should you have any follow-up questions, both Thomas and I are available to take your call.

Thank you for your participation today.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program.

You may now disconnect.