Startek Inc (SRT) 2006 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter and full-year 2006 StarTek earnings conference call. My name is Karisa and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's conference. (OPERATOR INSTRUCTIONS). I would now like to turn the presentation over to your host for today's conference, Ms. Jennifer Martin, Director of SEC Reporting and Compliance. Please proceed.

Thanks, Karisa, and good morning. I'm joined on the call today by StarTek's President and Chief Executive Officer, Larry Jones. We are also joined by Pat Hayes, our Chief Operating Officer and Sylvia Church, our Controller. Larry will be delivering our prepared remarks today with some brief comments about our release this morning. At the conclusion of our prepared remarks we will conduct a question-and-answer session. This call will conclude no later than 9:30 AM Eastern time.

As always, for those of you who have not yet received a copy of our press release from today please go to www.StarTek.com, where you can download a copy from the Investor Relations section of our Web site. And of course, please note that today's discussion may contain certain statements which are forward-looking in nature pursuant to the Safe Harbor provisions of the federal securities laws. These statements are subject to various risks and uncertainties and actual results may vary materially from these projections. StarTek advises all those listening to this call to review our 2005 Form 10-K posted on our Web site for a summary of these risks and uncertainties. StarTek does not undertake a responsibility to update these projections. I will now turn the call over to Larry Jones, StarTek's President and CEO.

Thank you, Jennifer, and good morning, everyone, and thank you for joining us.

Let me first start with some general comments. Then I will put my CFO hat on and talk about 2006 and the Q4 financials, and then turn to specific plans for 2007.

After nearly 60 days on the job I've been impressed with the support that I've received from the executive team, our clients, and the Board of Directors regarding discussing new ideas and strategies for growth. I am as excited as I was when I talked to you last January about both the strategic, financial and competitive prospects for the Company. My first 30 days were focused internally on the executive team, the employees, and I'm getting my arms around the 2006 and Q4 results. But over the last 30 days, I've turned my focus on completing the 2007 plan, visiting four of our 19 sites and holding meetings face to face with five our largest clients and prospects. Most of what you'll hear today in my report will be a direct result of those communications.

Now let me discuss the financial results for fiscal 2006. As I do so I will try not to repeat the details that can be found in this morning's earnings release but focus on the key drivers for revenue, gross margin, net income, and a few comments on our balance sheet.

Full-year 2006 revenues increased 9.8% over 2005 to $237.6 million, driven by $36.7 million in revenue from new clients added since the second half of 2005. Partially offsetting these increase was a decline in revenue from our largest client resulting in changes in revenue mix and operating hours as well as fourth-quarter challenges and hiring and retaining enough agents to meet the response of our clients.

Regarding revenue concentration for the year, we reduced the concentration of all three of our largest customers. You should note that given that we serve both AT&T Corp. and Cingular Wireless, and that these companies have merged as of January 1, we have combined both lines of business in our revenue concentration calculations and adjusted the percentages accordingly.

The revenue concentration for 2006 from 2005 was as follows. For Cingular and AT&T combined, in 2006, they were 52.7% combined with 53.1% of Cingular and 9.6% AT&T, down from 2005 when they were 63.6% combined, 52.6% Cingular and 11% AT&T. T-Mobile in 2006 -- they were 21.2%, down from 2005 when they were 23.9%.

Gross margins for 2006 were 15.2%, down from 22.7% in 2006, largely due to the ramp of three new call centers opening in 2006 and the effect of increasing agent attrition. The impact of the strengthening Canadian dollar versus the U.S. dollar during 2006 resulted in a $3.9 million hit net of hedges to our gross margin. We continue to hedge this foreign exchange exposure.

SG&A costs increased only $1.8 million over 2005 and represent a decline in the percentage of revenue as the Company realized benefits from its cost savings initiatives implemented in 2005.

The Company's effective tax rate declined from 36.8% in 2005 to 28.5% in 2006 due to several factors that will be more explicitly described in our 10-K.

As a result of the above, net income for 2006 fiscal year was $5.8 million and fully diluted earnings per share including discontinued operations was $0.39 per share compared with $0.88 in 2005. Now let me turn to the fourth-quarter results.

Fourth-quarter revenues were $59.1 million, a 4.4% increase from the third quarter of '06. As we discussed in our January call, total revenue declined approximately $2.7 million due to the changes in revenue mix, mostly training and our inability to stash due to economic pressures in several of our sites. We continue to implement programs at these sites aimed at better recruiting and training to help reduce overall attrition. Offsetting this was approximately $1.5 million of revenue from new clients in the quarter.

Gross margins for the quarter declined to 14.3% from the third quarter of 2006 when it was 15.8%. The lower margins were due to mix changes, higher fixed costs as a percentage of revenue and was offset by approximately $1.2 million of other onetime items, primarily incentive grants from local municipalities.

SG&A costs increased approximately $200,000 from the third quarter of 2006. During the fourth quarter, the Company's other income benefited $459,000 from a cash recovery of an investment that we had previously written off. In addition, the fourth-quarter income tax expense was unusually low as we adjusted for the accrual for the full-year tax rate that we mentioned earlier.

Taking into account the lower operating income, the onetime other income adjustments and the lower income tax expense, net income for the quarter was $1.2 million. Fully diluted earnings per share for the fourth quarter was $0.08 per share compared to $0.11 per share in the third quarter of 2006.

Cash and debt. The Company's balance sheet remains strong. Year-end cash, equivalents and investments were $39.4 million versus $45.6 million at the year-end 2005. In addition, in the fourth quarter, the Company entered into a new secured equipment loan of $4.9 million U.S. and an additional loan of $9.6 million Canadian. As a result of these borrowings, our year-end total debt was $16 million in U.S.

No let me turn away from the financial issues and address some of the key operating issues for the business, namely, the executive team, the Cingular contract renewal, Petersburg, margin recovery, new business, and acquisitions.

The executive team. As I indicated in our January call, one of my first focus areas was on strengthening the executive team. This past Monday, we announced that three new executives had joined the Company. First, Sue Morse, Senior VP of Human Resources, will bring to the team 22 years of extensive HR experience with labor-intensive companies. Her focus will be on recruiting, retention, on lowering attrition in our field operations.

Second, Mary Beth Loesch has joined the team as Senior VP of Business Development. Her operations, strategy, and M&A experience allow us to better focus on our service expansion strategy and potential acquisition opportunities.

Finally, Mike Clayton has filled the Corporate Counsel position that has been open for a while to focus on corporate governance and internal legal matters.

All three of these leaders are A players and significantly add to the strength of the leadership team.

We continue to recruit a replacement for CFO for Rodd Granger. While we've seen a number of good candidates, we are still not in a position to announce a replacement. We are confident, however, that we will be able to do so in the near future.

The Cingular contract renewal. Another area of focus has been on renewing the Cingular contract. While I'm still unable to announce a signed agreement with the consumer side of business, I am able to give you a positive update. Our last contract extension was through March 30 and this week we have signed another 60-day extension to March 31. The first and this most recent extension were necessary to get through the AT&T and Cingular legal review required by the AT&T board. I assure you that both parties are working hard on the new contract renewal and that the delays are legal and not economic in nature.

Petersburg. On our last call we announced that our Petersburg, Virginia side had downsized as a result of customer reduction and FTE volume. We have been working with several clients to backfill this site and I'm optimistic that we will do so in the next 30 days.

Another area of focus has been margin recovery. The team has identified a number of actions that will accelerate this recovery. First is improving the pricing and terms of several of our customer contracts. Second is improving our site performance metrics and a few of our underperforming sites. Finally, is improving our overall recruitment and training efforts to lower agent attrition. I'm confident that these collective initiatives will allow us to restore gross margins to historic levels by the second half of the year.

New business. Equally important is our ability of our sales team to secure new business. We have a number of deals in play and I'm confident in our pipeline, on our ability to sign several new contracts in 2007.

Acquisitions. My track record of acquisitions and the hiring of Mary Beth has stimulated a lot of questions as to the timing and the nature of our acquisition strategy. First let me say Mary Beth's current focus is on laying out our strategy for extending our customer services offerings to the communications industry and whether it's best to build, partner or acquire such services. Even when we have identified these service extensions in conjunction with extensive customer involvement, we will be very cautious to acquire only when we are ready. To that end I would not expect any activity in the first half of '07 and even after that we would look at small and modest ones at that.

Let me turn to the subject of guidance. As most of you know, StarTek has had a strict policy of not providing guidance to the Street. While I would like to change this policy over time at this point, for several reasons, I am reluctant to do so. First, I'm very new to the Company and do not have total confidence in the financial drivers. Second, we are without a CFO. And finally, given our fourth-quarter performance I believe there is still some uncertainty on how quickly we can influence margin recovery. Having said that, I would like to provide you with some indications as to where do we believe 2000 (sic - see press release) will play out.

First, we believe Q1 will look a lot like Q4 with an increase in SG&A due to onetime severance expense for Butler's departure and a recurring expense increase in executive staffing to prepare for our growth and HR staffing to address our people issues. For the full year 2007, we expect revenues to continue to grow incrementally throughout the year. As mentioned, margin recovery will be slow in the first half of the year and return to more traditional levels in the second half of the year.

So to recap, my focus in 2007 will be on building out the management team, securing new business, renegotiating contract terms as needed, improving our operating metrics to yield better margins, lowering attrition and preparing the base of the Company for a period of heavy growth serving the communications industry. I do not expect that our financial statements will immediately reflect the positive changes we're making today but I think by the end of 2007 these investments will prove themselves. Getting the Company back on track and focused on growth is never an easy task but I believe that the management team is ready and capable of projecting the Company forward in a manner that will provide good returns to the investors. Thank you. And with that, I will now open it up to questions.

(OPERATOR INSTRUCTIONS). Tobey Sommer, SunTrust Robinson.

I had a question about one of the first items that you had in your strategy that -- of addressing the pricing in some contracts. Wondering if you could give us some more color. Are those -- given the customer concentration, is that in either the Cingular -- the pending deal that you are negotiating or -- I'm trying to get a sense for whether those are legacy customers or some of the newer ones that you're thinking you'll get better pricing in new contracts or any color there, that would be great.

I will give you a little color. Unfortunately, I can't give you a lot. It is not in the -- two of our largest clients and it's clearly not in the Cingular contract. As I said that's mostly legal and not economic in nature. It tends to be some of our newer, smaller accounts.

Given that I guess the business side or the economic side of the Cingular contract is done, any color you can give us there on the parameter -- i.e. margins or volume expectation?

I'm sorry, restate the question. I'm not sure -- (multiple speakers) one of the contracts --

(multiple speakers) the economic terms of the Cingular contract apparently are done and it's kind of a legal issue at this point. Could you comment on what your expectations are for volume growth from that or the margin that you'll be getting from that contract?

Yes, I think given the pricing is changing, the margins will be consistent with the past and growth is -- has been constant through the contract terms and we hope that we can either pick up new lines of business or continue to grow the existing lines of business. So no big changes either way.

Then I had a question for you about your margins. You suggested towards the back half of the year margins looking a little bit more like what they have historically. Are you referring to gross margins, operating margins, kind of where in the P&L are you targeting?

Gross margins is what I was referring to. And I think in addition to that, over time, we believe we can get the operating margin back. But our clear focus right now is getting the gross margins back in line in the second half of the year, coupled with some increase in SG&A. But as we scale the Company, the operating margins should come back as well.

Just trying to get a sense for what your reference point is for historical gross margins, because they have at some point in the Company's history been quite high, at least relative to where we are today. Are you talking about the low to mid-20s that we've seen just a couple of years ago in the business?

I would look in the first half of last year -- late '05 time-frame. Before that we had pretty significant different kinds of business in the supply chain had other variables going on. But I would look in the 12 to 18-month window.

Okay. And then what sort of specific actions, to the extent you can comment on them, are you planning for the underperforming sites where they appear to be hurting both your margins and impacting I guess on the attrition side as well? Thanks.

Yes, I mean as I mentioned in the script, focusing on site performance metrics, which is tightly due to both management of the site as well as the customer mix at the site, is where we're focused most heavily. Secondly is attrition and recruiting. The more attrition, the lower the margins. Those are the primary drivers there and we are all over it. Even in sites where the economic pressure is there, we can improve the performance just by focusing on execution.

Melissa Moran, Thomas Weisel Partners.

Just a housekeeping question to start off with. Do you have the diluted share count for the fourth quarter?

Let's see. Fourth quarter fully diluted 14,706,754.

Okay, thanks. So I was wondering if you could actually give us some sense for what you think a normalized CapEx and depreciation level should be going forward, maybe as a percent of revenue.

I think if you look at our historical rate in '06, you can expect that to be pretty consistent. We added several sites and if we meet our projections we will continue to add sites into '07 and, therefore, the CapEx rates should be pretty consistent '07 to '06. And depreciation should fall off and then add on. So I think you can kind of normalize that to where we've been.

Okay. And then on the status of the T-Mobile contract, I think I had that it renews in August of '07. Is that right? Do you know when it renews?

That's correct, and we're working diligently with them right now. We don't see any risk or economic impact to that contract. We've got a great relationship with them and we continue to -- as you've seen our revenues continue to grow and our concentration continues to fall with them.

Okay, great. And then just finally, I think on the third-quarter call, you said that the new clients ramp costs were going to be minimal in 4Q. I was wondering if you could just remind me of what they were in 3Q and then what they were in 4Q, if any?

We're probably going to have to get back to you on that specific. In concept they did drop off dramatically. We had them in Q3 and minimal in Q4. But I don't have those at the fingertips here. We will look it up -- if we find it between the end of the call we will broadcast it.

Arnie Ursaner, CJS Securities.

First question I have relates to headcount and/or turnover rates. Obviously, you're talking quite a bit about improving attrition and reducing turnover. Can you give us a feel for what headcount was at let's say December 31 and in the two months or so since then, what has been the trend of headcount? And also comment on turnover rates that you saw in 2006, please.

At this point, we don't release FTE or headcount for a whole bunch of reasons. But I can tell you they are done proportional to the revenue. So, if you look at Q3 to Q4, the revenue and FTE, there was a little bit of mix change, but for the most part it was FTE's. And, again, there was also some seasonality Q3, Q4, Q1 in the FTE counts. But at this point we're not giving guidance on that.

Second question I have relates to two financial items. Embedded in your comment in the press release regarding gross margin, as you indicated, you had an offset of approximately $1.2 million of onetime items that impacted gross margin. Can you specify what those $1.2 million -- what is included in the $1.2 million?

Yes, most of them -- highest majority of those are site and incentives that typically get paid at the end of the year when we do the tallying of commitments that we've made to the municipalities relative to staffing. So they are onetime but they are also annual in nature, so. But they happen to come in the fourth quarter and you can't account for them ahead of time because you don't know what your staffing levels are going to be. So, yes, if you do the math there's a couple of points of margin there that we've picked up. But again, if you probably look, year over year, there's probably a good amount of that in the previous year as well, so.

Well again, if I've done my math right, that's the entire $0.08 of earnings you had in the quarter. It's not a rounding error by any means.

I didn't say it was a rounding error; it's a couple points of margin and, yes, it does fall right to the bottom line.

Literally, that is almost the entire earnings you showed in the quarter. The second item again as I just want to be very clear. You mentioned in your other income you had $450,000 of a cash recovery from an investment that had been written off. That is not embedded anywhere in this $1.2 million. That is in addition to the $1.2 million, correct?

Correct.

And I guess a follow-up to Tobey's question. Again, the most surprising thing I've heard so far is your view that you hope you can return margins to near historic levels. Again, they've ranged anywhere from 15% to 26% over the last few years. Given higher wage rates and other challenges, is that what you're actually trying to imply that you hope you can get back north of 15% gross margin by the back half of this year?

Correct.

Tom Carpenter, Hilliard Lyons.

Just a couple of questions to clarify what you said in the call. I think you might have said on Cingular that it's renewing for 60 days but you'd still said it runs through the end of March. That is through the end of May; correct?

End of May, I'm sorry -- did I give the wrong day? Yes, May 31 is the extension.

When you gave the '06 breakout for AT&T and Cingular, I think you said the combined was 52.7%, but I think you gave numbers that didn't add up to that. Can you repeat those for your breakdown for '06 for AT&T and Cingular?

Okay so let me make it simple for you. AT&T and Cingular combined was 52.7% in '06 versus 63.6%. And that 52% breaks out to 43.1% and 9.6%. And the 63% breaks out to 52.6% and 11%.

Okay. And the '06 a different number was given on the call. Can you give me the SG&A in the quarter because when I do the -- when I break down the aggregate that you had versus what you had in the prior quarters I have more than a $0.2 million increase quarter-over-quarter so I just want to make sure that I have the same number as you guys in my model.

In the quarter -- let's see. So quarter of December was 7.7 -- 7.75, so it's really 7.8. And it was 7.5 the previous quarter. So it was up a couple of hundred thousand dollars.

Okay. There must have been something changed from what you guys reported prior in there maybe one of your facilities -- change. But if you guys add some new business to Cingular -- I'm sorry, to Petersburg, would we see the traditional historical model where you guys have maybe two or three months of training and then maybe a quarter two after where it starts to favorably impact your margins?

Well a couple of things are different. One is, the site is idling. Two, there is staffing that we can rehire, which makes it faster so you don't have the same kind of lag time. Three, we think we can train and reramp that quickly, not three months but a lot quicker than that. And four, the customers we're looking at putting in here will at least share some of the training costs. So, yes, a little bit of drag but not a lot.

Okay, well that's good news. Thank you.

Tobey Sommer, SunTrust Robinson Humphrey.

Wondering if you could give us your expectations for new clients in the year. Would you expect to continue diversity of your client base kind of outside the communications area or do you think that your new sales are likely to come from the communications segment?

Our new focus is on the communications sector and therefore, 90%-plus of our focus of our pipeline is in the communications area. Obviously, we have a heavy wireless concentration but we also have clients in the cable, telco, media space and that is the areas we're going to focus. And my guess would be that most if not all of the clients will come from that segment. And it is where we have a lot of expertise. It is where we are known as the quality provider of customer care in that space and it's where we've got the competitive advantage to play.

Sure. To the extent you can, you did describe an opportunity for better pricing. Among those subsegments that you described within the broader communications segment are there -- is there an expectation that the area that you don't have a lot of exposure to -- kind of outside wireless do have better margin profile?

Maybe a little bit. But I wouldn't go that far. I would say the margin profile has a lot to do with the kind of work we get for a given customer. Obviously, the higher end of the customer care, the tech support area, the receivables management, those tend to drive higher margins than the traditional basic care or activations. But we're pitching to all of those subsegments within the customer base. And the larger customers are more competitive; smaller customers tend to be a little higher margin given the volume discounts. But all in all I would say I wouldn't expect too much of a shift there.

So maybe backing into the trajectory you have on pricing of new contracts, would it be fair to say that your expectation may be to be getting slightly more sophisticated work in those new contracts that will yield a better price?

I think the biggest thing that moves the needle is our selectivity and our unwillingness to take on take unprofitable contracts. I think we have a discipline now and we have a focus to make sure that we get profitable work on positive terms and are not willing to discount to get revenue. That's the biggest driver.

The second driver is, yes, we will look to take on more and more higher-margin business and we will look to add on new services through [filled] or acquisition that will drive the margins up. But I would be cautious to say that we have got a major push to take the higher-end business and leave the lower-end business behind. I think it's more about competitive pricing and holding firm on our ability to take better contract terms.

Jeff Nevins, First Analysis.

A question on the outlook, Larry. Would you describe some of the telecom opportunities that you have out there as opportunities that are new and incremental outsourcing opportunities for just the outsourcing business or are they opportunities that are currently outsourced and the carrier is looking to consolidate vendors or just looking for newer vendors?

If I take aside the current customers that we have, where we are also looking to expand their businesses and their lines of business, if I look at new names, new customers, most of it I would say is existing outsourced capacity or changes in mix of capacity. Some clients are putting more outsourced less in-house. Some are moving more in-house, less out.

Secondly, a lot of customers are consolidating their outsourcers and looking to quality. Some are going offshore to onshore and creating incremental capacity in the U.S. and North America. So a lot of things driving that. I would say that the other piece is is that some of the winners in the space, particularly in cable and others, are growing internally dramatically and therefore they just have internal demand for more seats. And we're getting some of the benefit of that as they bring on new outsourcers.

(OPERATOR INSTRUCTIONS). Arnie Ursaner, CJS Securities.

Larry, last time you were on the conference call, your options had not been struck yet. You were going to -- you mentioned they would be struck relatively quickly thereafter. What is the strike price on your options, please?

Let me explain the process. The Board approves, subject to the opening of the window, which was post the last call because we don't issue options while the window is closed while there is some things known in the Company that have not fully been disclosed. And therefore, they were priced two days after the last call and I want to say 960.

And on a business model, can you give us an update on how the Comcast contract process is unfolding? You know, how is the relationship developing? Given the early tests, what sort of read are you getting from them about the outlook?

Comcast, we've got a very good relationship. The business is going well. And obviously, we hope to grow that into '07. Positive I guess is the -- what I would give you.

I want to focus a little bit -- you mentioned in Q1, your SG&A expense would be higher due to staffing and some other items. You obviously added some very senior professionals. I guess weighing all of the factors, headcount, new people you have added, perhaps headhunter fees you have to incur and any other items you can build into SG&A, what sort of level of SG&A spend do you expect in Q1?

As I said in my script, there are two big drivers. One is incremental HR staffing, which, by the way was decided in fourth quarter and started to ramp into January, February. So, it has nothing to do with my entry into the -- so that will be incremental recruiting and field expense for HR.

Secondly, yes, we have added a couple of hitters but if you think net-net, the CFO is going to replace the CFO and really all we've done is add 2.5 incremental executives. So you will see a little bit of SG&A increase there. I'm not going to give guidance relative to how much that's going to grow. But I would say that after the first quarter, that SG&A growth will be minimal as we will have most of the SG&A in place.

Regarding Petersburg, Virginia, trying to figure out if the facility has basically been shut for the entire quarter, how big a negative drag was it in Q4 and how big a negative drag might it be in Q1? And I assume that just hits the gross margin line.

Well, to be clear, it was live and running throughout most of January. So you will see a month or two depending on how fast we ramp up the new of impact in Q1. So it's not huge.

So again, to be clear, I think you were optimistic you would find a client or so to fill that facility. It sounds like you've already done that.

We're optimistic. We've got dialog going on and nothing is final until it's signed, so.

Josh Vogel, Sidoti & Company.

Larry, did you mention that the strong Canadian dollar was about a $3.9 million hit to the gross margin in '06?

Let me double check. I think that was the number. Yes, full year, $3.9 million.

Okay, and was that in the absence of any hedging activities?

No, we had hedging activities. We do that quarterly so we end up with different impacts. But net of hedging -- we don't hedge the full vote but we do try to basically do catastrophic hedges.

Okay. Just turning to the top line, you said to look for incremental growth throughout the year. Should we expect top line to grow on the level we saw in '06 at about 10%? Is that a fair estimate?

That would be a reasonable estimate.

And I am not sure if you give out this information but, how many total seats do you have right now in the U.S. and Canada?

We don't give seats out. In the future we will look at the way to give you best guidance. But at this point, seats are not the best accurate way to give you guidance. So no, we don't give that out.

Okay, but you have 19 total sites right now?

Correct.

And that's up from what at the end of '05?

Up 3 from '05, right.

Tobey Sommer, SunTrust Robinson Humphrey.

I want to ask one more question on the gross margin. Included in your expectation for an improvement in gross margin as we work our way into 2007, is there any expected impact from a reduction in currency-related or for-ex impact on the gross margin?

No. First of all, we hedge most of it; and two, the rest we just with the flow. So, no, there is no expectation there.

And then I was wondering, I know you've been there a relatively brief time still but in terms of what your views are on the Company's kind of geographical revenue mix and if you have a desire over time to gain some exposure in offshore markets?

In general, my strategy has been to focus on the current business model. So therefore, focus on the communications sector and also focus on North America. So while we had about six to nine months ago some initiatives to look at offshore, our current strategy is that we want to be the expert of North America onshore. If our clients drive us in the future to do some offshoring, we will look at that. But at this point there is no initiatives for offshore.

Our general feeling is that, particularly in this industry, there is a slight movement to [a slight the] quality and there are vendors who can provide adequate offshore for those pieces of business that they want, and a lot of our clients use multiple vendors. So, our strategy has been let them go to another vendor for the offshore and stay with us for the North America piece, where we know we can deliver high quality, which is critical in a churn type of business that we are in.

Donna Jaegers, Janco Partners.

I just wanted to check in on where you guys stand on agent and home services because obviously, technologically, that's become a lot more feasible and that might help you improve gross margins and provide better service to your communications customers.

As a mentioned, Mary Beth Loesch just joined us and part of our initiatives is to look at alternative delivery mechanisms and incremental types of services, ranging from technological base -- IVR etc. through the home agent market. We don't have a position right now, whether we want to or that would be a viable part of our mix. But it is clearly one of the things that's on the table.

(OPERATOR INSTRUCTIONS). There are no further questions. I would like to turn the call back over to Larry Jones for closing remarks.

Well, I thank all of you for the active questioning. Obviously, this is an exciting time for the Company. Wrapping up '06 is important to us but our focus on '07 growth, new executives and the like is where we're focused right now. So, I welcome your continued dialog, which I've already started with many of you and look forward to a great '07. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.