SWK Holdings Corp (SWKH) 2008 Q1 法說會逐字稿

Good day ladies and gentlemen. Welcome to the first quarter 2008 KANA Software earnings conference call. My name is Katie, and I will be your coordinator for today. At this time, all participant will be a listen-only mode. We will be facilitating a question/answer session toward the end of this conference. (Operator Instructions). I would like to now turn the call over to your host for today, Mr. Michael Fields, CEO or KANA Software. Sir, you may proceed.

Thank you operator, thank you everyone for joining us this afternoon. Before we begin I would like to ask Mike Shannahan to review our customary safe harbor.

Thanks Mike, I will try and be quick. During the course of this call we will reference non-GAAP historical measures. To supplement our financial results presented on a GAAP basis we use non-GAAP measures indicated in the table in the press release, which excluded certain expenses, including stock based compensation, amortization of intangibles and restructuring expenses we belive are helpful in understanding our past financial performance and our future results. Non-GAAP financial measures are not meant to 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.

Our management readily use our supplemental non-GAAP measures internally, to understand, manage and evaluate the business and operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Compensation of our executives is based in part on the performance of business based on these non-GAAP measures. Also as a reminder, on this call we will be making forward-looking statements regarding anticipated events and future performance of KANA . Including statements regarding out expected revenues, margins, expenses, profitability, cash, cash flow and expected growth relationships with customers and integrators, our long-term success, new hires, our product and product development efforts and characteristic of your market segments.

Actual events or results could differ from those described or anticipated in the forward-looking statements, as a result of a number of factors including, risks associated with efforts to grow sales, our reliance on large orders to meet our expected sales in a given period. Our sales cycles, our ability to manage expenses and finance our operations, competition, market acceptance of our product or services, the effects of uncertain economic conditions on spending by our perspective customers and other factors described in the filings with the SEC including the recent reports on form 10-Q and form 10-K.

The forward-looking statements for this call, addresses our view of the situation today, and no one should assume the comments we provide will be valid later in the quarter. Now I will turn the call back over

Thanks, Mike. When I spoke to you approximately 90 days ago, I discussed several initiatives that we're implementing to accelerate growth and consistency with our financial performance. I'm very pleased to report we met with success in Q1. Our first quarter financial performance exceeded plan, as we recorded total revenues of 18.3 million. Representing an increase of 40% year-over-year. Our license revenue was 5.7 million, increase of 58% from the first quarter of 2007.

Last quarter we set our goal of achieving positive cash flow from operations for each quarter of 2008. I'm delighted to report that we met this milestone in Q1 and reported cash flow from operations of over $2 million, the highest quarter cash flow in six quarters. Overall I'm pleased to see our organization execute and meet with success. Key customer wins in Q1 include: AT&T Mobility, Aetna, Best Buy, Best Western International, General Motors, Hutchinson 3G, Sprint Nextel, Verizon and Yahoo Japan. Importantly, we are not dependant on one vertical for success. We are only as successful as our customers are.

So, I would like to highlight a few customer success stories from the quarter. As you know, many of the world's best known brands rely on KANA, to enhance the customer service experience of their customers. Sprint Nextel for example, deployed our technology in one of the world's largest contact center operations with over 80,000 active KANA users. Sprint Nextel also presented at the Service and Support Professionals Association conference last week and highlighted their successes by using KANA solutions. We believe this is testimony of KANA 's highly scalable architecture and deep functionality.

Best Buy expanded it's deployment based on a in depth evaluation and a documented business value. In best best buy's case, over 1,000 users across five business segments, actively used the product throughout the Holiday season. The results demonstrated that exceptional service experience can reduce cost, while increasing customer loyalty and retention.

KANA continues to win competitive deals. For example, a fortune 500 bank recently selected KANA's online collaboration technology over several of our competitor. This bank will use chat and collaboration solutions to help their customers successfully complete loan applications on line. Resulting in better service experience for the customers, while reducing errors and processing costs for the bank.

KANA continues to execute with our strategy of cultivating cross selling, within the our large Fortune 100 and global 1,000customer base. As exhibited by the two large trance aces we did during Q1, with existing KANA customers. One of these transactions was with a top U.S. based telecommunication's company. Existing KANA customers expanding use of KANA solutions to include (No Audio) -- to both business users and consumer subscribers. The second large transaction, -- (No Audio) -- U.S. speciality electronics retailer -- (No Audio) -- knowledge solutions enterprise wide.

This decision was made after the retail experience with KANA 's initial deployment -- -- you had (No Audio) and as we discussed in the past -- (No Audio) -- is a key differentiator in our go to market strategy. During Q1 we (No Audio) -- strategic alliance agreement with IBM, and the two organizations -- -- (No Audio) -- -- market, selling support, customer -- -- (Audio keeps cutting out) -- -- year agreement include a new OEM agreement to capture a large piece of the customer service and support segment. Going forward, KANA will embed IBM's Middlewear, including WebSphere and DB2 in our next generation enterprise customer service solution. A joint initiative to bring to market a new service experience management solution, enabling companies to drive customer loyalty and retention by creating seemless service experience across channels.

And a tighter integration between IBM across all areas including software, hardware, service and marketing. We have again exceeded 100% of our quota with IBM in 2007. This was the fifth consecutive year that KANA has exceeded 100% of IBM's quota. We value our close relationship with IBM and look forward to this new agreement.

In terms of industry recognition for the fourth consecutive year, KANA named to the KM World magazine, 100 companies that matter in knowledge management. KANA selected from a list of over 1500 companies and was specifically recognized for enabling enterprise organizations to create knowledgeable conversations with customers across channels. In terms of our sales and marketing execution, our sales organization named account strategy has been fully implemented and embraced and we've met with a success with many transactions closed in the first quarter. And we've seen success in some of the recent demand generation activities. During the first quarter, we hosted a series of best practice webinars, which have been met with very strong reception.

Companies of all sizes looking to optimize best practices, given the technology that they've already deployed. These best practice webinars, have also resonated well with our professional service value proposition and messaging, as customers try to optimize their customer service and support across their organization. And our professional services organization, continues to see strong success in the marketplace.

Our service organization given it's deep domain expertise in customer service, is highly differentiated in delivering world class customer service solutions. And has been instrumental in helping ensure that KANA delivers same world class customer service technologies to customers and prospects. We believe that the high caliber of our service organization has allowed us to attract top-notch talent in to the company.

I would like to turnover the Mike for discussion of the financials. Mike?

Thanks Mike. Turning to the income statement as Mike mentioned earlier, KANA's total revenue for the quarter ended March 31, 2008, was 18.3 million. Representing an increase of 4% over the prior quarter and an increase of 40% over the year ago quarter. License revenue for the first quarter of 2008 was $5.7 million. Representing a increase of 11% over the prior quarter, and an increase of 58% over the year ago quarter.

Service revenue for the first quarter was 12.6 million. Representing an increase of 2% over the prior quarter and a increase of 33% over the year ago quarter. Looking at our business by geographic region. The U.S. contributed 79% of total revenue in the first quarter, 77% in the prior quarter and 71% in the year ago quarter.

Turning to non-GAAP gross margins. Our overall gross margins, were 68% in the first quarter, compared to 70% in the prior quarter and 74% in the year ago quarter. Which is attributable to the relatively higher professional services, as a proportion of total service revenue. License margins were very consistent, 93% in the first quarter, 94% in the prior quarter and 92% in the year ago quarter.

Service margins for the first quarter were 58%, compared to 60% in the prior prior and 68% in the year ago quarter. Which again is attributable to the growth in the professional services, as a percentage of total service revenue.

For the first quarter of 2008, sales and marketing expenses were 6.1 million, compared to 5.8 million in the prior quarter and $6 million in the first quarter of 2007. The sequential increase in sales and marketing in the first quarter versus the prior quarter, was due to quota club held in Q1 and higher commissions due to increase in license revenue. As a percentage of revenue, sales and marketing represented 33% in the first quarter, 33% in the prior quarter and 46% in the year ago quarter.

For the first quarter of 2008, R & D expenses were 3.3 million, an increase from 2.7 million in the prior quarter and down from the 3.6 million in the first quarter of 2007. R & D increased sequentially, as a result of increased in head count due to our investment in our next generation product. The decrease from the prior year reflects lower overall head count and fewer outside contractors. R & D expense was 18% of total revenue in the first quarter of 2008, 15% in the prior quarter, and 27% in the year ago quarter.

For Q1, G&A expense was $3 million, compared to 2.4 million in the prior, 3.1 million in the quarter a year ago. As discussed on the Q4 earnings call, G&A expenses are higher sequentially, due to approximately $750,000 related to our year end audit, tax and regulatory filings. As a percentage of revenue, G&A was 16% in the first quarter of 2008, 13% in the prior quarter and 23% in the year ago quarter. The company recorded first quarter 2008 non-GAAP operating income of $254,000, and net income of $125,000, compared to a non-GAAP operating loss of $2.8 million, and a net loss of $2.9 million in the first quarter of 2007.

For the first quarter of 2008, KANA reported a GAAP net loss of 79,000, compared to a GAAP net loss of 3.8 million for the year ago quarter. Turning to the balance sheet. Unrestricted cash, increased to 5.7 million on March 31st, up from 4.3 million at December 31. As a reminder, KANA has no exposure to the auction rate securities market. During Q1 we renegotiated our $10 million credit facility with our bank, to convert 2.1 to a three year term line, which is being used for capital expenditures.

At March 31st, 2008, the amount borrowed was 1.6 million, and as a result approximately one million of our bank debt is reflected as long-term. Based on our current 2008 plan, our existing cash and cash equivalence are sufficient to meet our working capital and capital expenditures requirements for operations through the year, without the need to raise additional capital. Day sales outstanding for the first quarter was 42 days compared to 54 for the prior quarter.

At March 31st, 2008, total deferred revenue was 15.7 million compared to 16.1million at the end of last year. As we have indicated in the past, the timing of maintenance renewals is weighted towards Q4. And it's not unusual for KANA to post a sequential decline in deferred revenues in Q1. Moving to head count the company had 235 full time employees, up from 225 at December 31st. Professional services and R & D account for the increases in head count.

As Mike mentioned, we generated 2.1 million in positive cash flow from operations during the quarter. This was driven by strong collections during Q1. We are focused on continuing to drive efficiency within our financial model. However, we would not expect this level of cash flow to be sustainable each quarter in the near term.

Mike, now I'll will turn the call over to you.

Thanks, Mike. In conclusion, I am very optimistic about the remainder of 2008. I feel very good about our business. And the time I've been with KANA the business is healthy right now, as it's ever been. Our sales representatives are executing. We are becoming more efficient and affective, this will allow us to increase profitability in the future.

Turning to guidance, while we are very pleased with our performance during the first quarter, given the current macroeconomic climate, we think it prudent for us to maintain a conservative stance with respect to our top line. While continuing to focusing on operational disciplines with respect to the bottom line. With this in mind, we are reaffirming 2008 revenue guidance of 69 million to 72 million. Representing a 13 to 18% growth year-over-year.

We continue to be committed to posting, a non-GAAP operating profit margin of at least 5% and generating positive cash flow for the year. While inter quarter fluctuations may arise, our goal is to be cash flow positive from operations for each quarter in 2008. Now I would like to turn the call over the the operator for questions. Operator?

(Operator Instructions) Your first question comes from the line of Nathan Schneiderman from Roth Capital Partners.

Hi. Thanks very much. Hi, Mike Fields and Mike Shannahan . Nice job on the quarter, congratulations, I was hoping we could drill down a little bit on the expense controls, it was great to see the solid revenue number but really you didn't bring much of it to the bottom line.

What do you see as the opportunity to tighten the expense structure here and I understand 700,000 or so was one time in nature with the G&A and I gather some was one time with the sales kick off. But what do you see as the natural level of the expense structure, in Q2 ex-these one time events and what you see as the opportunity to tighten the belt there and bring more to the

I will let Mike discuss some of the specifics, but let me just overall say that in the last few months that Mike has been here, we identified many opportunities to improve our effectiveness and profitability. With are a managing to that we're beginning to figure out how to quantify them. But I'm very confident in our ability to significantly improve, not only see that change because of extraordinary expense but also to improve profitability.

Just one thing I want you to know, and Mike mentioned it earlier, that senior management bonuses is tied to operating profits. We are all focused on ensuring growth of the business and doing it affectively and profitably. Mike?

Nate, let's see, let's take them one at a time. So obviously Q1, we have a lot of seasonally adjusted expenses. We highlighted a number of them. But it affects the whole organization, actually. So I am looking for a slight increase in our margins to get back to where we were say in Q4. I think that our sales going forward in Q2, Q3 and Q4, without the quota club, and then I think just trying to be a little more efficient.

Research and development to be honest with you, is where we are making an investment, I think it is around the new technology that we are developing. So we'te maintaining our existing code base, while working with IBM to develop the next generation. Then within G&A, we are trying to use our current ERP system more effectively. I think as a result of that, we should be able to realize some additional savings. So again I think the guidance we gave was 5% non-GAAP operating margin and I'm confident that we can achieve that.

Let me ask the question in a slightly different way. For Q2, how much do you feel we should model expenses down, based on one time expenses that were in Q1 that will not show up in Q2?

Q2 I would think we should hit non-GAAP operating margins of somewhere around 3% to 4%.

Okay. I was hoping you could give us an update on the number of reps and your sales rep hiring plan. Mike in the past you've given us the total number of quota carrying reps, as well as that number plus sales management.

It actually remained consistent from Q4 to Q1. And to be honest with you, I don't see a significant amount of growth there, throughout the year. I think that the numbers should be able to do what we need or at least what we are committing to get done. We know that they are continuing to build a pipeline. So we are all very encouraged by the work that they are doing.

You gave us the number of seven figure deals too with existing customers. But I was hoping you could comment on just deal metrics overall and in particular just how many deals did you book during the quarter? How did those array, under 100,000 over 100,000? Can you speak to the medium sized deals as you have in the past?

Yes. I think so for me coming in, I have been here for basically less than 90 days, and I am still trying to develop the metrics that I think make sense.

I'm not sure that the number of transactions have an impact, because historically we have an inside sales group that does go back and sell in to the existing customer base for increases in seat licenses et cetera, et cetera. So, I think that the number of transactions aren't as important, however, I do know that trying to provide information on how are we doing from a average selling price is still important.

So if we look at our average sale, which was the initial license, and the first year's maintenance. In the past we have given these average for what we call the sort of sweet spot, over hundred thousand dollars and under a million dollars. And in Q1, the average was 254,000, which is very comparable to Q1 a year ago of 258,000. In Q4, that average was 306,000.

Okay. Then, I guess final question for you, Mike. I was hoping you could speak to deal activity during the month of April and then also kind of quantitatively how does the pipeline look running in to Q2 versus the way it looked running into Q1 and the year ago period just to give us sense of whether it's stable, decling, increasing and to what extent?

I mentioned at the end of last quarter that we are experiencing -- as I believe everyone was -- an elongated time frame from the time that we were informed that we won the business until the time the contract was rendered. Because of the influence of the finance organizations within our buying community. And that still continues.

We haven't seen a substantive change in a requirement. I mentioned earlier and in last quarter that we started a process of doing business value reviews with our prospects, so that they would be able to quantify what returns they should expect from the implementation of the technology. That's had a positive effect in driving the business to closure.

But the most important thing that's happening and I think the increase in the pipeline opportunities we've seen. We've just seen it grow across multiple markets. If you spoke to some of the people in our organization who focus on getting agreements done and dealing with the process of contracting, they will tell you they've been busier now than they've ever been in the first month of a quarter.

So we think the real measure here is how the pipeline is growing and even though we are still looking at a longer time than let's say, a couple of quarters ago of when it takes to close a deal, the good news is we are seeing a lot more deals.

Thank you very much.

Your next question from the line of Michael Huang from ThinkPanmure. Sir, you may proceed.

Thanks very much. With respect to the pipeline, in terms of large deals in your pipeline, now versus a couple of quarters ago, when you quantified that Mike, I think that was in Q3. How does that look now versus then? And if you could comment on whether your relationship with IBM or eVergence are any of these helping to bring those to close. What kind of substance do you have around this in your guidance for the year?

eVergence and IBM are important factors, in us not just closing deals, but also in our sweet spot transactions. The commitment that we can bring to a particular transaction of a very unique strategic service and best practices skills. None of our competitors have the level of expertise we have in that manner. That becomes helpful early in the sales cycle. In fact, there are some of the cycles have been started by eVergance involvement with customers, that has led to a discussion about our technology for implementing a strategy.

Most certainly later in that process, we talked a little bit about the business value document, I called it. The last time we discussed it. That is something now eVergance professional services team renders, where they go in with their expertise and help a company define pure business value.

IBM, well just the partnership alone has helped. We are in comparison to IBM, a small company. But having IBM as a partner with these large enterprises, helps us from a selling standpoint of operating at higher levels within the organizations we are selling to. It also gives some confidence to our prospective clients about our ability to sustain growth and future technology opportunities for them. The mere fact we are involved now in this joint effort, has been very helpful to us.

Even if the customer is not necessarily an IBM client. The fact that IBM has chosen us to deliver this core requirement for them, really helps us even with non-IBM customers.

Great. Obviously in Q1, I think a couple of large deals you closed in Q1, I would imagine were helped by some slips in Q4. Could you comment on activity levels early in Q2 and whether or not you have the similar type of visibility based on what you see so far in Q2?

As I stated, we are very pleased with the activity we are seeing. Pipeline growth, both in this quarter and in future quarters. I mean the key it's a key elements of this business it's in the numbers. We are not seeing a slowdown in companies reaching to try to solve this business problem of service experience with their customers. It's really a growth objective for companies and they are spending money on it.

Now our so called large deal size, runs between a million to three million, so it's not that we are running large transactions now that are 20 million. But I will say to you that we have noticed when we have made initial transactions between half a million to 1.5 million. That typically means that sometime in the next 12 months there is another seven figure transaction from that client.

Most of the customers that -- customers then through -- would buy a million or two worth of technology from us. Our planning cycles say that over the next couple of years, they should buy, will buy at least that amount again. And a equivalent amount of professional services. So we are excited about the business prospects we see.

Great. And last question for you too. So, in terms of the guidance for the year, obviously some conservatism and targets. But wanted to get what could drive upside to those targets that you laid out? What were the kind of the potential drivers to upsiding what you laid out? Thanks very much.

In this case I think to some extent success breeds success and we are finding that some of our clients that bought last year are expanding, their talking about success and helping us with new clients. Sprint's very active discussion at the SSPA conference, highlighting how KANA is supporting their efforts, becomes tremendously helpful to us even with non-tel-co opportunities.

We are -- we think the fact we have a multichannel solution, customers typically acquire a channel for deployment and then look for the future for others. We have a very strong professional services offering, strategic services capability, with eVerg. We are known for our ability to help customers with their best practices. All those things lend to helping make ourselves, of course, more productive.

Thank you.

(Operator Instructions) Your next question comes from the line of Derrick Wood with Pacific Growth Equities.

Thanks, hey guys. So I'm going to try to drill in to this one more time I guess in terms of Q2. You guys put up licensed revenue of over $5 million, the last three quarters. Given what your pipeline looks like today, do you think you could keep that run going or would that be a little aggressive? And then I guess the second part to the question would be your professional services revenue which you said it's been an increase in percentage of total services revenue. What kind of seasonality do you see in professional services as you look at Q2?

Well from a pipeline standpoint on the license side, we are very comfortable that we have a good sense of kind of a baseline. We have been successful in achieving over $5 million a quarter for the last few quarters,so we don't feel bad about that at all. From a professional services standpoint, one of the hard parts is that we don't have a lot of demand history here and professional services is about demand history in determining seasonality. As you know, we just got started with the eVergance joining the firm in June of '07.

So it's difficult, we expect that there is going to be fluctuations because of professional service implementations, particularly in the thick of the summertime frame. But, so we expect that but then on the other hand we don't have demand history to be able to say we can pinpoint it. It can start in Q2.

Derrick, the reason for maintaining the guidance is again, contract negotiation has really been dragging out. You are fighting for every descriptor going through that process. Where, I think Mike and I feel comfortable and confident in our pipeline, it is really a matter of getting these license agreements to a position where we can certainly live with because we know that the customer is pushing very hard.

Okay. In terms of the productivity from the sales force. Where do you feel like you guys are now? Are you pretty happy with where they are or is there still a lot of work left to go?

The sales force now has been with us on average a year and in every sales organization there is going to be turnover you're not going to be able to keep everybody. Quite frankly we have experienced one loss this Q2, but I think that's just a fact of life. But we do feel good that we have an experienced team now and we're very happy with the pipeline that they have been working on and developing.

Alright, then international revenue seems to have been pretty flat here over the last few quarters. Some of your competitors, other software vendors are doing well, internationally, do you any plans to invest more our there to capitalize on emerging opportunities?

This year our focus is really on profitability as Mike said, even our executive comp is based on non-GAAP operating profit. So, I think we will be opportunistic, but we do have a relatively small international organization. And as we see that pipeline start to develop, we can start to make some investments, but I wouldn't say that it's something that we are planning to do in the next couple of quarters.

Okay. Last question just around I guess as a follow-up. Competition in North America. Has that changed at all, are win rates pretty steady? Or have you seen any new competitors? If you can just talk qualitatively about that. Thanks.

Well, we think again just not a tremendous amount of demand history. We see it the pipeline growth where we are in opportunities, what customers are saying and our win rates seem very solid. There are competitors here, as there are around the world, but we are getting a lot better at quantifying with the customer the reasons why we are a unique opportunity.

It goes to the enterprise highly scalable multichannel solution, with the kinds of strategic and best practice services we can deliver. When you add those up, there really is no competitor. Now of course it's a job of our sales force and our executive team to help convince the client about those facts. But when they understand that, our competition goes more then towards when someone wants to deploy something, rather than why another product may be better.

Alright, thanks.

Your next question comes from the line of Gregg Speicher from KANA. Please proceed.

Hey guys, this is Gregg with Moss Creek. The customers who are spending with you now, what are they really telling you abut why they are deciding to buy now? Are they just facing their own competitive pressures, is it cost cutting or regulatory? Is there sort of a theme?

The answer, Gregg, is yes. It seems to cover a number of things. And frankly, that's why we have been successful this business value review we do with the client. Because you don't, you never know specifically where the value is going to be recognized. In some cases one of our large transactions that we did last quarter, the company that signed the agreement with us, which was a substantive seven figure transaction, within ten days of that had a major layoff.

You might say that doesn't make and sense. Well it does because they believe as we know that our technology will help to improve productivity of their call and contact center personnel. So in that case it was about productivity gains. In other cases it's go to markets, in ensuring customer retention. The issue of customer defection in certain markets such as retail, and insurance, gets pretty high because of the use of technology. Use of the Internet.

So they look for solutions very quickly in order to ensure customer retention because they know that that adds more profitable revenue to them. An existing customer that is happy with your service and happy with the knowledge they gained from talking to you will buy more at higher value than even a new customer. So it ends up being about retention.

We have some customers that are interested primarily in knowledge transfer within their organization. How do they ensure that the individuals in their company that may carry tremendous knowledge but with the turnover that takes place within the organization, they lose it? It's about employee retention and employee knowledge.

We are finding compliance that's a interesting case. We see that on occasion with some companies that have or particularly governmental agencies, that have selected pure play on demand solutions. And are finding from a compliance standpoint there are certain elements of data they can't put under the control of another company. So our solution looks valuable to them.

So it's a number of things. Our sales force with their maturity is beginning to hone in on what that issue is. Using eVergance and our professional services capabilities to help in discerning that business value and then moving to secure business with that prospect.

Sounds like a nice diverse reason for people buying. That's kind of a good lead in here. So would you say the biggest change in your organization is just that the sales force is more mature than a year ago? Is that the big reason people are spending now because they know how to approach the customer and are well trained?

It's a combination of things, Gregg. It is certainly. The kind of maturity of the sales force has really helped and as I mentioned it's the inclusion of the very special professional services capability we have because of the acquisition of eVergance. I think the market is catching up to the importance of these systems and helping to drive profitability, helping to drive better business value, lower customer defection. All those things are now considered to be substantively important to large enterprise (No Audio)

If you go back five, ten years, certainly even five years ago, a lot of large corporations thought customer service was an out source, where they only focused on acquiring new customers, that was more important. You ask business executives today driving their large companies, what I would say the global 1000 companies, they are saying no. We have to find ways to retain and make loyal our existing customers, and we fit right in to this in the right way.

Are you there?

Did you hear that answer?

Yes, I don't know if I'm the only one having the problem but the call is kind of cutting in or out. It may just be my phone system. Well, thank you for the answer, I think I heard most of it, thanks a lot.

At this time, I'm showing you have no further questions. I would like to now turn the call back over the Mike Fields for closing remarks.

I want to thank you all for signing in and listening to our call today. We are very excited about the future and our ability to execute. We believe that the market dynamic is moving in our direction and we have the capabilities in our organization to take advantage of it.

So thank you very much for talking to us, and hope to speak to you again either in our call at the end of Q2 or before that if we happen to see each other. Bye now.

Ladies and gentlemen, thank you for your participation. You may now disconnect. Have a wonderful day.