Innovate Corp (VATE) 2003 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter earnings release conference. [OPERATOR INSTRUCTIONS] I would now like to introduce your host for today's conference, Mr. John DePodesta, Executive Vice President. Mr. DePodesta?

Thank you, Matt, and good afternoon, ladies and gentlemen, and welcome to PRIMUS's fourth quarter 2003 financial results conference call and webcast. For those who have not had a chance to review the earnings release, it has been posted and can be viewed on our website at www.primustel.com, and discusses our fourth quarter results, our overall 2003 performance, and provides annual goals for 2004. Management will review the highlights in greater detail during the formal remarks and question-and-answer session of this conference call.

Joining me from PRIMUS on today's call are Paul Singh, Chairman and Chief Executive Officer; and Neil Hazard, Executive Vice President and Chief Operating Officer. We will begin with formal remarks from management, and this will be followed by a question-and-answer session.

Before we begin, however, please be advised that the statements made by the company during this presentation that are not historical facts are forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These statements may include, but are not limited to, revenue and earnings projections, statements of business plans and objectives, and capital structure and other financial matters. Forward-looking statements may differ from actuality and relying on them is subject to risk.

Factors that could cause forward-looking statements in this presentation to differ materially from actual results are discussed in the company's Form 10-K and 10-Q and other periodic filings with the Securities and Exchange Commission. These filings may be obtained from our website at no cost. The company is not necessarily obligated to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. I will now begin the management remarks.

We have a lot to celebrate today. First off, yesterday marked the 10th anniversary of the founding of PRIMUS. From a modest start we had a meteoric rise, then suffered from the telecom meltdown, adroitly recovered and emerged on our 10th birthday as a robust and profitable adolescent. It has been quite a ride. We have learned much from our mistakes as well as our successes and are extremely grateful to our loyal employees, customers and investors for we truly would not be here to celebrate this day without your continued support.

We can also celebrate the marvelous operating and financial results for 2003, a year in which PRIMUS posted top line revenue growth in excess of 25% and which witnessed the company's transition to a generator of positive net income. Accompanying these events were significant steps to strengthen the balance sheet and improve liquidity through debt and interest expense reduction and extending debt maturities. These efforts were facilitated by PRIMUS's return to the public capital market and the successful raising of 132 million of 3.75% convertible senior notes.

Following on that positive reception, last month we became the first international wireline carrier to reopen the high-yield credit markets and raised 240 million through the issuance of 8% senior notes, bolstered by rating upgrades from Moody's and Standard & Poor's. The equity markets have also responded to PRIMUS's improved fortunes and our common stock experienced a five-fold increase during 2003. And we closed the year with an equity market capitalization of over $1 billion and a substantially broadened, and I suspect happier, investor base.

But that was last year. And our focus has to be on the future. And here, too, the signs are very encouraging. While Neil will discuss our 2004 goals in greater detail, suffice it to say that we are confident that we can continue to grow our top line robustly and dramatically grow our operating income. Articulating these goals is all the more remarkable in an industry which generally is projecting flat to declining revenues and eroding profitability. Our confidence is grounded in the fact that our traditional business model is clearly working and growth opportunities continue to be present in our major markets.

We are also excited by the major initiatives we will pursue in 2004 in the local, wireless, and broadband arenas. These represent huge potential opportunities which individually could each become as large a business as PRIMUS's wireline business. I would now like Paul Singh to share this strategy with you.

Thank you, John. And good afternoon, ladies and gentlemen. Our 2003 results and our 2004 goals clearly justify a continuing confidence in our business model. The business model is working very well.

We are today operating and competing in a $75 billion wireline and primarily long-distance market, and in this market today we have about 2% market share. We are seeing a much better competitive environment. The prices have stabilized and, actually, we have experienced even a price increase in the last few quarters. We have a well diversified geographical customer base as well as geographical revenue distribution.

We feel that in the $75 billion market opportunities we are very well positioned to continue to grab market share from the incumbent and continue to grow our revenues as well as profits and this will be based on our current market strategy.

As John said, our focus is on the future. How do we evolve from primarily a long-distance carrier to an integrated global carrier with local, wireless, and broadband VoIP services. And that's the focus of my remarks today.

Let me focus on the three areas: Local services, broadband VoIP, and wireless international services. As John said, each of these segments have a potential of $50 to $75 billion market opportunity in next five to ten years. And furthermore, each of these markets fit the criteria that we had selected when we entered in the international long-distance market in 1995, and that is we like to enter the market which have a very large business opportunity, i.e., $50 billion or more, which have very well-established players and like the large incumbent carriers which again applies to this. And where we can grab to 1% to 2% market shares resulting in half a billion to $1 billion revenue in a five- to seven-year time period. So we have proven in the international long-distance market that we can become a billion dollar player, and now we believe that we are well positioned to attack these three opportunities. Let me just briefly remark on each one of them.

In the local service area, the primary opportunity for us today is to bundle local services with our long-distance and Internet services. By doing so, we believe that the average revenue per customer would more than double and return rate would go down. And that will result in a future revenue growth and the profit margins very attractive.

Now, in addition to just simply these [inaudible] the local services of the incumbents, the biggest opportunity we have is to use voice over IP and leap frog the incumbent technologies and grow the local business. And this is what we had recently announced in Canada to attack the second local line subscribers and offer them a bundled local and long-distance services. So, again, this is a large opportunity in pretty much every country that we currently operate in; and you will see us bundling more and more of local services with our current services.

The second one is our broadband VoIP. The broadband subscriber base is increasing across the globe, and at a very rapid rate. There are tens of millions of broadband subscribers in various countries. So the opportunity for us is that every broadband customer, regardless of in which country they reside in, could be a PRIMUS customer whereby they can use our VoIP services to offer local, long-distance, and international services.

Now, we have announced in last couple of weeks, we have announced services in Canada, in Australia, which is voice over over DSL line. In the U.S. we have announced voice-over IP for enterprise customers. And all of these services are just the start to attract more and more customers who are already subscribing to broadband services. They're paying $30 to $50 per month, and now PRIMUS can offer these subscribers an opportunity to save money on their local and long-distance services. Now, we would primarily focus on customers who are international callers, do the same thing in each of the countries we operate in, and then as a second phase of that, we would go overseas or outside the countries we currently operate in. And this is a three- to five-year type of growth project that we are embarking on. And again, this will be a $50 billion plus market opportunity, and we would again try to attack and grab 1% to 2% market share.

The last one is the wireless area. As you know, the number of wireless subscribers now exceed the wireline service subscribers. So, therefore, we want to attack the wireless market, especially the customers who make international calls using their wireless phone. Most of the time in the U.S. at least -- but the same is true in many countries -- most of the time you cannot make an international call because you're blocked from doing so. If you can make the call, it will typically cost you about 30 to 50 cents per minute if you make a call to the developed countries, and between $1.00 to $1.50 per minute if you make a call from the U.S. to developing countries.

Now, PRIMUS's cost corresponding to those countries would be about 10% of the prices that are being charged by the wireless carriers. So we have developed a service whereby your wireless customers can simply call an 800 number or a special access code to get a dial tone from our local switch, and once they get a dial tone then they can make all the international calls they want. The price discounts or price savings could be more than 50% of what they paid to their wireless carriers. They can prepay the bill, so they can postpay them. They do not need to switch from their wireless carrier because they can simply use us to make international calls.

Now, we recently announced, I think it was yesterday or today, we announced an intelligent PRIMUS-branded phone that has the intelligence built in so the customer does not have to dial an 800 number or a special pin number. Once the customer dials the international number the phone has the intelligence to dial the appropriate PRIMUS switch, get a dial tone, then it will automatically dial the international number. So that, again, is the beginning of offering to the customer PRIMUS-branded wireless phones so that they can make international calls without dialing too many digits. Again, the wireless opportunity for us is about $50 to $75 billion opportunity in the next five years, and again we have, starting in western Europe, and then from there we will roll it out into other countries in which we operate. And our targeting again will be to get 1% to 2% market share of that opportunity. So those are the three large opportunities that you will see the management focusing in on.

Lastly, I want to just make a comment on our balance sheet restructuring. In order to be successful in these initiatives, it's essential for us that we continue on the path of improving our balance sheet. I believe we are 80% of the way through. We have two additional steps that we would be taking on an opportunistic basis that will get our balance sheet to pretty much like an investment-grade company. Those two steps are, (1) we would be investing $40 to $50 million in making our trade accounts payable more current and, by doing so, this will open the doors for credit ratings or enhanced credit ratings from the rating agencies. At the same time, we believe that having -- paying the straight accounts payable down is just like reducing our debt. So that's the first step we plan to take.

The second step is going to be refinancing our 12.75% bond which is callable in October. So once we do these two steps I think we are going to have a very strong balance sheet that will allow us then to pursue these opportunities as well as make us the preferred acquirer of other companies. With this let me now pass it on to Neil for the financial summary.

Thank you, Paul, and good afternoon. I'd like to first go over the highlights of our fourth quarter and total year 2003 and then discuss our goals for the coming year 2004. For the quarter just passed in 2003, we had record high quarterly net revenue once again of $339 million. This is an annual growth rate quarterly, Q4 over Q4 of last year, of 26.6%. For the total year 2003 versus total year 2002 our annual growth rate was 25.8%. The sequential quarterly growth rate from Q3 was 3.2%, and this was organic with no acquisitions in the fourth quarter. The foreign currencies support this growth in the fourth quarter. Year-over-year approximately half of our growth in Q4 came from gains in our foreign currencies. Our goals for 2004 are to grow revenue double digits without any benefit from the foreign currencies.

In the fourth quarter our data and Internet revenue hit an all-time hit high, a quarterly high, of $36.2 million. Also our VoIP revenues hit an all-time high of $19 million. And this brings the total data and VoIP revenue as a percent of our total revenue for the quarter to a new record high for PRIMUS of 16.3% of total revenues. We also had record high operating income for the year 2003 of $70 million which was on the high end the range that we had been stating as our goal. We had record high net income and earnings per share, both quarterly for the fourth quarter as well as annually. We had record high free cash flow for the total year 2003 of $42 million positive.

During the fourth quarter we carried a record high number of international minutes of 1.3 billion minutes, as well as a record high total minutes of use of 2.6 billion minutes. Our average revenue per minute increased in Q4 1.2% sequentially from Q3, and it increased 5.4% year-over-year. We also had record high revenue per employee of approximately $600,000 annualized.

Our balance sheet has also grown stronger. Our current assets divided by our current liabilities at the end of December is now one to one, which is the best ever for PRIMUS, excluding one-time cash from fund-raising activities. Our working capital position excluding the current portion of long-term debt is close to 0, and, again, that's very, very good historically for PRIMUS. And best of all, our total debt to annual EBITDA ratio is now less than 3.0 to 1. All in all our Q4 results capped an outstanding year for PRIMUS.

One note I'd like to mention is that we've changed our income statement presentation to eliminate the gross margin subtotal in conformity with current industry practices. To calculate the number formerly known as "gross margin," you can just subtract the first two lines of our income statement, and for the fourth quarter that would also be a new record high.

Moving on to the year ahead of us, 2004, our goals on the revenue side are double-digit revenue growth in the 12% to 15% range, and this would include both organic growth as well as smaller sized acquisitions similar to what we have done this year. Our goals for operating income is to grow operating income 40% to 50% over 2003. And our net income goals before one-time charges are $35 to $40 million for the year.

Now, just a comment on that. GAAP accounting sometimes gives strange looking results in some cases, if you take the numbers at face value. For example, PRIMUS's net income in 2003 was $55 million actual reported, but that number included foreign currency exchange gains as well as gains on our bond retirement activities totaling $52 million. So if you subtract those two numbers you would have a $3 million net income for the year which, by the way, was consistent to better than our guidance of break-even to slightly profitable by year end.

Looking ahead at 2004, our 2004 net income will be suppressed by one-time expenses relating to the retirement of two of our remaining high-yield bond issues and other subsidiary debt and interest thereon by approximately $15 million, which has already happened in Q1 in January, as we used the proceeds of our recent $240 million high-yield bond offering. Without this charge, our net income goals for 2004 would be in the range of $35 to $40 million, which is over a ten-fold, 1,000% increase, over 2003. And this is even after paying for all of the incremental investments in our new initiatives that Paul described in 2004.

Our capital expenditures will increase during 2004 from approximately $25 million actual in 2003 to around 3% of net revenue in 2004. This will be comprised of approximately 1/3 maintenance Capex for our network, 1/3 new customer and revenue growth support, and 1/3 our new product initiatives.

We will be a tax-paying company in 2004 in both Australia and Canada. This is a good news problem to have, because these PRIMUS entities are so profitable that they have made back all of the money that they lost over the past years when they were getting started, and have used up all of their tax loss carry-forwards and are now taxpayers in their respective countries. Consequently, income tax expense for PRIMUS overall will increase next year from $60 million in 2003 to the $20 million range in 2004. Beyond 2004 for planning purposes, you should use a 39% overall effective tax rate for PRIMUS.

Finally, you should use a weighted average common share count next year of 107 to 110 million shares when calculating our earnings per share, because of our $132 million convertible bonds and our recent stock price. With PRIMUS's stock price being greater than the conversion price of the bonds, we must include these shares as if they were converted in our total share counts when computing earnings per share, which is a worst case scenario if all of the bonds were converted and the debt went away. So in summary we have a very challenging but very exciting and very rewarding year ahead of us in 2004. And with that we can open up the the call for some questions.

[OPERATOR INSTRUCTIONS] Our first question comes from Richard Klugman [ph) with Jeffrey [inaudible].

Thank you very much. I apologize, I missed the beginning of the call due to technical problems on my end. So if you addressed this in your opening comments, sorry for asking the redundancy. Neil, I think I heard you say there were no acquisitions in the fourth quarter. Was there any carryover, in other words, from having a full quarter's worth of acquisitions that aided the 4Q versus the 3Q comparisons? And also could you address the exchange rate, what that translated into in the fourth quarter impact versus the third quarter?

To answer the first question, no, we didn't have any significant partial acquisitions in Q3. So, no, there's really no acquisition effect in comparing Q4 to Q3 sequentially.

Okay.

I did mention in the first part of my speech that on a sequential basis the foreign currency did support our growth in the fourth quarter, sequentially the 3.2%. It's approximately $10 million in revenue terms if you use the currencies in effect during Q3. And --

So that's the bulk of the Delta on revenue, was foreign exchange, sequentially, it sounds like. $10 million, you said?

Yes. As I said, we had the wind at our back on currencies in Q4. But in 2004, as I mentioned, our goal is to have double-digit revenue growth fall to 15%, and we're assuming constant currencies at the end of 2003.

And assuming no acquisitions in there, either?

When I stated our revenue goal I did say that would be organic, plus some smaller-sized acquisitions, similar to what we have this year. Nothing big. But we have in 2002 and 2003 in certain countries acquired small customer bases and small kind of operations that would give us some enhanced products.

I'm sorry. That reflects acquisitions made in '03 that will have a full year in '04, or you're anticipating small incremental acquisitions in '04?

No. We continue to look for and expect to be closing some small acquisitions, new acquisitions in '04.

So what would that 12 to 15 translate on kind of an organic basis, as best you can tell?

Richard, this is Paul.

Hi, Paul.

Yeah. I think the right way for you to look at this, the historical perspective on growth through acquisition and organic growth is going to be roughly 50/50. It it may be less than 50%, but as I look the last few years we have found our acquisition growth has been sort of 50/50.

Okay. That's a good rule of thumb, I guess.

Good rule of them. I think that applies to 2003 also. So I'm pretty sure at the end we will come in that range.

I think that's true, at least from our math of it. Just one other question, Paul, if I could. You guys have had a series of press releases about offering in various parts of the world, Canada, Australia, the voice over IP. When does that become significant enough to start talking about subscribers and having a meaningful impact on your revenue?

I think you should consider that in 2005. 2004 we have kicked off these initiatives, a lot of exciting stuff is going on, we are marketing the services; but I think for a company that would be around $1.5 billion to actually have the numbers start showing up some percentages, I think realistically that's going to be 2005.

Great. Thanks a lot.

Thank you. Our next question comes from Vik Grover with Needham & Company.

Hey, guys. How you doing?

Hello, Vik.

Couple of questions for you. The traffic looked pretty flat on most of your routes, except for Americas, international. Can you just give us some color on what you're seeing out there in the market? Was seasonality a part of the impact? And a related question, getting down to the customer level, looks like business was down sequentially but consumer was up and wholesale was significantly up. Can you talk about mix, what the seasonality impact was? And was the foreign currency impact part of the driver for the subticket wholesale? Thanks.

Hold on just one second.

Every quarter the mix is a mixed bag, and that's no pun intended. But, for example, we did experience an increase in some of our North America wholesale for Q4. We experienced some softness in our prepaid [inaudible] services in Europe when looking Q3 to Q4, so it does change. Our VoIP revenue, however, did increase from Q3 and, as I mentioned, hit a new record high. You will get changes in mix. If, for planning purposes, wholesale is probably going to run between 15% and 20% of total revenue. Quarter by quarter it may fluctuate.

And I guess getting to the edge [ph] services strategy, for lack of a better term, I'll call it the Vonnen [ph] strategy, although I'm sure you'll have your own term for it.

It's call the PRIMUS strategy.

Great. Can you talk a little bit about your distribution strategy? Will you pursue something similar to what that company has done in terms of partnering with cable MSOs or international last [inaudible] providers or -- I don't know. Just trying to figure out exactly how that will unfold, because it seems like that's a huge opportunity for you to build additional brand in the consumer space.

I would like to introduce -- we have another guest with us -- Mr. John Melick -- who is the Co-President of our U.S. operating company and is the father of our VoIP service.

How you doing, John?

Hi, Vik. Vik, we're going to do something quite different than Vonnage [ph], significantly different in terms of distribution initiatives and sales channels. Number one, Vonnage clearly is focused, as an example, on the U.S. market where we're going to leverage our multinational presence to not only focus on the U.S. market but markets abroad. Additionally, Vonnage and other pure emerging pure plays have focused primarily on the consumer marketplace where we've targeted three specific channels. They include consumers, of course; enterprise customers; and then we've also, I think, developed one of the pioneering reseller products which will enable us to go to cable companies, DSL service providers, other broadband service providers, value-added reseller systems, integrators worldwide, and enable them to private label our services and use our web-enabled features to do billing, provisioning, things of that nature. So ours is a much broader strategy encompassing many of the foundations we've laid for current product distribution channels worldwide today.

Do you have any kind of internal goal or anything you can share with us in terms of subscriber targets? Looks like Vonnage added about 100,000 in a year. Or is it still too premature?

Vik, this is Paul. No, we have not given any -- we do, obviously, have targets internally. We don't do anything without targets; but, no, we have not given any guidance on that. The other thing I would tell you is we announced our service in Canada. The feature functionality of that service is better than any other providers, from what I have seen; and the initial results have been very encouraging. Customers are are signing up on net, responding to direct marketing campaigns. They are in Canada, I think we'll also distribute the services to Best Buys and all kind of other retail distribution channels also, in addition to what John talked about.

Thanks a lot, guys. Congratulation on the turnaround.

Thank you.

Thank you. Our next question comes from David Shred [ph] from New York, New York.

Hi, guys. Couple of questions. First, in the beginning of the year I think AT&T announced an unlimited international calling plan and a suite of plans. Just wondering if there's any impact you've seen to your business from that launch? And just in terms of pricing, you mentioned holding steady. I'm just wondering if that's across the board? Are there any differences you're seeing region by region? And, then, just two housekeeping questions: (1) Just if you have a pro forma cash position as of now, post the financing, my estimate, but just wanted to see where you guys are; and if you could just expand a little more in terms of your plans on how to refinance the 12.75 in terms of equity versus debt? Thanks.

This is Paul. On AT&T, no, we have not seen any impact from AT&T plans. On the pricing part, the pricing comment I made, yeah, that is average of all of our markets together. In each market, yes, it does change quarter to quarter. But overall when we look at the price per minute across our whole network that actually has been surprisingly stable.

There's no specific market where it's changed materially?

Yeah, in some markets, like I said, quarter by quarter, some go up, some go down, some stay stable; but we look at our business on an aggregated basis. Pro forma cash --

David, we have -- the December ending cash balance that we are showing in the release is before the high-yield offering, the $240 million we just completed. Part of that has already come and gone out the door as we've paid off two of our three high-yield bond series outstanding; so as we speak today, we have over $100 million cash. By the end of March our intent is to pay off the remaining vendor debt at subsidiaries that we described in the offering. So, yeah, it will go down more to a normal number by the end of March. But the good news is, as everyone knows, we priced those bonds at 8% interest; so not only do we extend our maturities out for 10 years but we have a very favorable rate in our interest expenses it will -- after we finish the payoff and the one-time [inaudible] for Q2 and beyond our [inaudible] it will be quite a bit lower than they've ever been.

David, with respect to plans, with respect to the 12.75%, as you know that's a pretty inviting target out there. There's $116 million principal amount. It's clearly our highest coupon debt, and we expect to be opportunistic with respect to efforts of refinancing that. We have no settled plans. Those bonds are first callable in October of this year. But as Paul indicated in his remarks, that represents one of our major goals in terms of our final balance sheet restructuring.

Okay. Thank you.

Thank you. Our next question comes from Thomas Lee [ph] with Morgan Stanley.

Good afternoon. It's Steve Flynn with Morgan Stanley. Couple of questions. No. 1, with regard to D&A, depreciation and amortization, that you seemed to step up about a little over $2 million in the fourth quarter, just wondering why and what's a good run rate to use for 2004? Then I have a follow-up question.

Well, the [inaudible] stepped up in Q4, one is we have been making new capital expenditures during the year 2003; and we actually spent approximately $10 million in the fourth quarter, which brought our total Capex spending to $25 million for 2003. So you will see more depreciation from that. There was some year-end adjustments, catch-up depreciation, to get everything squared away for the year. That wasn't a very significant amount, but there was some of that in there. Next year, with our Capex spending projected 3% of revenue, those assets will come into service; so we will be stepping up the D&A to a normal amount based on that from the levels in 2003.

Tom, to the extent that some of our acquisitions that we anticipate -- smaller acquisitions that will occur during 2004 -- we have basically been targeting customer basis. And, generally, under the accounting rules the amortization period on customer basis is fairly accelerated. So to the extent we have additional acquisitions involving customer basis you'd see the amortization costs also pick up.

And that's all reflected in your 40% to 50% operating growth, I imagine?

Correct.

Second question: Neil, you talked about your taxes, what we're going to see on a reported basis for '04 and '05. Can you talk about at what extent those are actually going to be paid in cash in those years when looking at a free cash flow forecast?

Fortunately this is really the first full year of income tax paying for both PRIMUS Canada and PRIMUS Australia. So as you know, the $6 million of income tax expense in 2003, will get paid here in the first quarter of 2004; but the majority of this year's 2004's income tax expense won't be paid until 2005. So there's approximately a one-year lag on the cash payment of those taxes; but for income statement book purposes, we have to accrue the expense.

Great. And final question. I'm just a little confused. Can you talk about the pay down in trade tables? You talked about paying down in trade tables, then you also mentioned paying down some of your credit facilities, some of your AR facilities. When we look at what you're going to be paying down, should we be looking at the $108 million in accounts payable on the year-end balance sheet, or will it be that and a combination of some of your other debts, some of your AR facilities?

It's really two different concepts or two different actions that aren't related. Number one, we've issued $240 million of high yield, we paid off two of our three series of high-yield bonds. We intend before the end of the quarter to pay off additional subsidiary debt which is actually ahead of the priority over these new bonds. So that money will come and go, and a good chunk of most of the subsidiary debt will be paid off by the end of March. So that's really the refinancing program from the high-yield offering we just did.

The trade payables is really a separate issue, and when we had our recent high-yield bond offering rated, the rating agencies, they did both -- both Moody's and S&P -- did upgrade us. But one of the things that kept us from being upgraded further was calculations that they do when they look at priority obligations, which are ahead of the bondholders to total debt. And our ratio was a little bit higher than what the ratio that they would like to have. And one of the big factors in that is trade payables, because those are all at the operating subsidiary level which is really debt to the company that's senior to the high-yield bonds. So our intent was to work, especially in the next six months, to pay those down and get everybody current. And by doing so we would fall below this rating agency threshold of priority obligations ratio; and, hopefully by then, sometime later in the year, they would recognize that and then we would go ahead and get another notch upgrade because of it. And we think that's important because that will not only make the company stronger but lower our future cost of capital for 2005 and beyond.

Great. Thank you.

Our final question comes from Brian Horey with Equity Growth Management.

Just a housekeeping item. Your operating income guidance for next year, is that ignoring the one-time items that are in operating income for this year? Or is that including them in that calculation?

No, we gave a goal -- well, we gave a goal of -- it's based on our reported operating income for 2003 of $70 million. No adjustment to that. What I said was for next year we're assuming 40% or 50% growth off of that reported 2003 number.

Okay. Thank you.

Thank you for joining the fourth quarter earnings PRIMUS conference call. We have run out of the allotted time for the Q&A session. Mr. DePodesta?

Thank you very much, Matt. I just want to note that replay information can be found on our website at www.primustel.com, and that replay should be available in about an hour. Thank you all for joining us today, and good evening.

Ladies and gentlemen, this does conclude your program. You may now all disconnect.