Innovate Corp (VATE) 2012 Q1 法說會逐字稿

Welcome to the PTGi first quarter 2012 earnings conference call. At this time all participants are in a listen only mode. Following Management's prepared remarks, we will hold a Q&A session. (Operator Instructions) As a reminder this conference is being recorded May 10, 2012. I would now like to turn the conference over to Mr. Richard Ramlall, Senior Vice President Corporate Development and Chief Communications Officer. Please go ahead sir.

Thank your Operator and good morning ladies and gentlemen. With me today on the call are Pete Aquino, Chairman, President and Chief Executive Officer; and Ken Schwartz, Chief Financial Officer. This call is being webcast with an accompanying slide presentation that can be accessed in the Investor Relations section of our website at investors.PTGi.com on the main Investor Overview page. Once you have registered for the webcast, a PDF version of the slides will be available for download through that link. Please note that all the financial information that we are presenting today reflects the acquisition of Arbinet which was completed in February 20, 2011, and affects first-quarter 2012 financial results.

Before we begin our call, we would like to remind you that statements made by the Company during this call that are not historical facts are forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors and risks which are more fully described in our annual report, quarterly reports, or other filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements are reasonable, and represent our views as of today, there can be no assurance that any of the estimated or projected results will be realized.

While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. During this call, we may also refer to certain non-GAAP financial measures. A discussion of any non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measures are available in the appendix to our presentation. Now I would like to turn the call over to Pete Aquino. Pete?

Well, thank you Richard and good morning everyone. Welcome to our first quarter call. So as we open up a new year of reporting, PTGi has begun to transform once again with the sale of Primus Australia and the planned realignment around Canada and the North American assets under management. Certainly, many of you have followed the turnaround story of Primus, could have imagined this as being one of the potential value-creating scenarios that could play out as part of our strategic review.

We are happy to report that this significant outcome of the process and the expected proceeds of a sale of Australia of approximately $200 million in USD to be the catalyst to kick off the next phase of strategic options for the Company. This will certainly include accelerating our momentum and expanding the capacity of our eight state of the art data centers in Canada, to capture demand for co-location, managed services, and cloud solutions across five key markets.

At this point, let's turn to slide 3 to recap the performance. For the first quarter was the current PTGi portfolio. Net revenue of $235 million was up 8% year-over-year with normalized EBITDA of $23 million for the first quarter. EBITDA increased nearly 16% over last year, driven by our commitment for profitable growth across all of our business units. You will also note that despite an increase in our capital program year-over-year, to incrementally fuel our highest return on investment projects and data centers, metro rings, and broadband growth services, our free cash flow from operations of $15 million, defined as EBITDA less CapEx, was still 12% better than last year.

Please turn to slide 4 to review the current sum of the parts. In summary, for the first quarter the four primary business units contributed over $26 million in normalized EBITDA before corporate overhead, and $19 million of free cash flow from operations. Corporate overhead of $3.5 million this quarter, excluding one-time charges, amounts to approximately $14 million on an annual run rate basis. Post to close of the Australian transaction, we expect to save at least $7 million annually in corporate costs, by consolidating and realigning under North American focus management team.

In the first quarter Canada has delivered $58 million in revenue in USD making up 25% of the PTGi revenue portfolio, and Australia was slightly higher at 30% of the revenue portfolio, but about 450 basis points lower in EBITDA margin. This is driven in part by Canada's overweight in data centers relative to Australia, eight versus three facilities respectively.

Our US reseller operation was absorbed into Canada's team by the end of last year, and although a smaller operation, was able to increase EBITDA and free cash flow. EBITDA of $1.7 million or 17% of revenue produced $1.3 million in free cash flow for the quarter. ICS makes up 41% of our total revenue and continues its efforts towards reaching its goals to meet or exceed industry benchmarks relative to a scale with approximately $400 million in annual revenue. We continue to focus on providing great customer service through thexchange and direct carrier relationships.

We are now down to the remaining key integration items in ICS in the areas of network and billing consolidation. This work has been delayed a couple of quarters in order to get a better view of our strategic direction. Now that we have a committed strategy in North America, we can pursue the open items that drive additional cost savings in ICS. Although its equal, the sale of Australia will reduce the Company's overall EBITDA in USD, which given recent currency strength of the Australian dollar, amounts to just 45% of the pie, excluding corporate overhead.

Regarding the sales proceeds, we are able to put a currency hedge place a couple weeks ago, and we want to be conservative. In summary, our profile is going to change once again post close which is targeted for early June. We will then immediately realign the Company into North American operation, with a leaner corporate overhead and continue to remain a public company. At this point, let me turn over to Ken to go over the financials in a little bit more detail.

Thanks Pete and good morning everyone. I will walk you through the financial results at this point in time. As a reminder, please note that the results include the Arbinet acquisition from March 1, 2011, onward. Therefore, our first quarter and year-to-date results are not directly comparable with prior periods. In addition, unless otherwise noted, Brazil's financial results are removed from all prior periods, as we sold the stock of the entity holding that investment and classified Brazil as a discontinued operation in the fourth quarter of 2011.

Let's start with slide 5 titled Financial Summary. This provides four key financial metrics and their trends over the last five quarters. In the first quarter, net revenue increased 8.2% year-over-year to $234.7 million. Overall, the impact of foreign currency translation was a benefit of $1.2 million. On a constant currency basis, net revenue increased 7.6%. The primary driver of year-over-year revenue growth was carrier service expansion through the Arbinet acquisition, as well as our growth services.

Growth services revenue, which is a key focus for Management and consists primarily of consumer and SME broadband, data center, and other commercial data services, grew 4.9% year-over-year. On a sequential basis, net revenue decreased 6%. On a constant currency basis, the sequential net revenue decrease was 7.6%, primarily driven by a decrease in our revenue at ICS.

Adjusted EBITDA grew $10.7 million to $20 million in the first-quarter 2012, compared to $18.1 million in the first quarter of 2011. The positive impact of foreign exchange to adjusted EBITDA year-over-year was only $0.3 million, demonstrating our continued real operational improvements in our results. Adjusted EBITDA margin increased to 20 basis points from last year, to 8.5% on a normalized basis, adjusted for one-time charges including severance, integration, and other nonrecurring cost. It increased 70 basis points to 9.8%.

Normalized adjusted EBITDA grew 15.8% to $22.9 million in the first-quarter 2012, compared to $19.8 million the first quarter of 2011. On a normalized basis adjusted EBITDA margin increased 70 basis points from last year's quarter. As I mentioned, primarily due to our SG&A optimization and the contribution from higher margin growth services, particularly the data center, data services, and SME VoIP services. On a sequential basis adjusted EBITDA decreased 17.7% and normalized adjusted EBITDA decreased 10.8%, primarily driven by seasonality including the timing of marketing expenditures.

Capital expenditures in the first-quarter 2012 were $8.1 million or 3.5% of net revenue compared to $6.1 million or 2.8% of net revenue in the first quarter of 2011. Excluding $400,000 of network migration related costs, capital expenditures were $7.7 million or 3.3% of net revenue. Capital spending in the quarter continued to be driven primarily by our core investments in Canada, to expand our data centers and secondarily, in Australia to groom our metro ring highways. Normalized adjusted EBITDA, less capital expenditures excluding the $400,000, was $15.2 million in the first quarter of 2012, up 11.9% from the first quarter of 2011. Sequentially, capital expenditures decreased $500,000, but were roughly flat as a percentage of revenue.

Free cash flow for the first quarter of 2012, was a positive $9.9 million compared to $9.6 million in the first quarter of 2011, lengthening our record of delivering consistently positive free cash flow. On a sequential basis free cash flow increased $1.7 million as a result of quarter-over-quarter decreasing cash interest paid and capital expenditures offset by the decline and adjusted EBITDA.

Let's now move on to slide 6; review our operations in Canada. Primus Canada delivered in local currency first quarter 2012 revenues of CAD58 million and adjusted EBITDA of CAD12.5 million or 21.5% net revenue on a reported basis. This compares to revenues of CAD60 million and adjusted EBITDA of CAD12 million or 20.1% of net revenue in the first quarter 2011. Increases in broadband, data center, and SME VoIP, were offset by declines in retail long-distance, prepaid services, and local services. Yet, with a change in the mix of services toward our growth services, the adjusted EBITDA was up [CAD]500,000.

On a sequential basis Primus Canada revenue decreased 3.7% from CAD60.2 million and adjusted EBITDA decreased 11% or 180 basis points as a percentage of revenue. On a normalized basis adjusted EBITDA decreased 3.3%. The pie chart on the left gives you a snapshot of the current revenue mix. As Pete mentioned, beginning the second quarter, we will report Primus Canada in two segments. A Pure-Play Data Center of business and a Telecom business that includes US retail. As you can see, Pure-Play Data Center was approximately 14% of the first-quarter 2012 revenue while the Telecom Unit was approximately 86% of the first quarter 2012 revenue.

For Primus Canada as a whole, our growth areas primarily include broadband data services for consumers' SME and enterprise segments -- commercial, including VoIP and High Speed Internet access in our soon to be eight data centers. These higher margin services continue to steadily increase as we invest in them for growth, and were 33.5% of the Canadian revenue in the first quarter. Canada growth services revenue increased over 10.2% year-over-year and 1% sequentially, with data center revenue accounting for 42.3% of the growth category, growing 11.8% year-over-year to CAD8.2 million for the first quarter in 2012. Other telecom services, including traditional long distance, local, prepaid, wireless, and dial-up, comprised 66.5% of Canada and decreased by 8.9%.

Canada capital spending in the first quarter of 2012 was CAD4.6 million compared to CAD2.6 million in the first quarter 2011, representing a significant share of PTGi's overall capital expenditure budget with incremental spending devoted primarily to our expansion efforts and our data centers. CapEx in the fourth quarter 2011 was CAD6.1 million a decrease of CAD1.5 million, due to timing of investments. Canada adjusted EBITDA, less capital expenditures, was CAD7.9 million in the quarter compared to CAD9.5 million in the first quarter 2011, as we ramped up our investment in future growth. Sequentially, adjusted EBITDA less capital expenditures was flat.

Now, let's move to Australia on slide 7. Primus Australia delivered, in local currency, first-quarter 2012 revenues of AUD66.5 million and adjusted EBITDA of AUD10 million -- AUD10.8 million or 16.2% of net revenue on a reported basis. This compares to AUD71.3 million and adjusted EBITDA of AUD9 million or 12.6% of revenue in the first quarter 2011. This year-over-year revenue decrease continues to result from our attrition in traditional services, that have largely been offset by our -- providing our high-quality growth services, which provide a greater gross margin to the Company.

Adjusted EBITDA growth in the quarter, over the prior year first quarter, was driven by our efforts to focus on the growth services, the inclusion of the capitalizations of the Trans-Pacific Cable Lease, and our continued efforts to aggressively manage our SG&A as a percentage of revenue, streamlining the service delivery process to our customers. Normalized for one-time charges, first-quarter 2012 adjusted EBITDA increased 24.9% to AUD11.3 million.

On a sequential basis, net revenue decreased 3.1% and adjusted EBITDA decreased 15.6% driven primarily by seasonality. Sequentially normalized adjusted EBITDA decreased 11.7%. The pie chart on the left gives you a snapshot of the revenue mix in Australia. Again, we operate in this business to focus on investment and growth services, which includes our data center, metro fiber, VPN, SME VoIP, high speed broadband, and local on-net services. We have successfully been growing these services which were up to 47.5% of total Australian revenue in the quarter.

Australian growth services was down a slight 0.3% year-over-year with broadband revenue, which accounted for 50% of the growth category, down 3.3% year-over-year to AUD16 million for the quarter, due largely to changes on our data plan structure. Data VPN services, which are roughly 15% of growth services, grew 20% in the quarter. Other telecom services, including traditional long distance, local, prepaid, wireless, and dial-up comprise 43% of Australia, and decreased 13%.

Australia capital spending in the quarter was AUD2.3 million compared to AUD3.1 million in the first quarter of 2011, decreasing primarily because of timing. A sequential basis, Australian capital expenditures increased AUD400,000, again due to timing. Australian normalized adjusted EBITDA less capital expenditures was AUD9 million in the first-quarter 2012 compared to AUD6 million in the first quarter 2011, as we grew our adjusted EBITDA and spent less in capital expenditures.

Now let's turn to slide 8 to review our other operations. First quarter of 2012, US retail net revenues were $10.1 million, a 9.7% decrease from $11.2 million in the first quarter 2011, reflecting the continued attrition in our traditional services. On a sequential basis, revenue decreased 8.5% from $11 million in the fourth quarter. Adjusted EBITDA for the quarter -- first quarter of 2012 was $1.7 million, a $100,000 increase from the $1.6 million in the first quarter 2011, and flat sequentially.

US retail capital spending in the first quarter was $400,000, up $300,000 compared to prior year and slightly up from last quarter. This produced positive adjusted EBITDA, less capital expenditures, of $1.3 million in the first quarter, down approximately $200,000 from the first quarter of 2011 and the fourth quarter. Under Canada's leadership we have achieved significant cost savings in our SG&A over the last two quarters. While we believe there continues to be some additional savings, we expect increases in our sales and marketing as we expand our successful IP PBX business in the United States.

On our carrier services, revenue in the first quarter of 2012 was $96.6 million, and it increased 32.2% from the first quarter of 2011, primarily through the inclusion of Arbinet. The impact of foreign currency was an unfavorable $1.2 million. On a constant currency basis, net revenue increased 33.9%. On a sequential basis, ICS revenue decreased 12.3% in constant currency, primarily due to the seasonality and the impact of certain regulatory changes on US terminating traffic.

Adjusted EBITDA in the first quarter of 2012 was a negative $0.4 million compared to negative $1.1 million in the first quarter of 2011 and a positive $700,000 in the fourth quarter of 2011. Normalized adjusted EBITDA in the first quarter of 2012 was $0.4 million after adjusting for one-time charges, compared to $0.2 million in the fourth quarter of 2011, and $1.6 million in the fourth quarter of 2011.

ICS capital spending in first quarter of 2012 was $0.6 million, which included approximately $400,000 of network migration related costs. Excluding these costs, capital expenditures were $200,000 compared to $300,000 in the fourth -- first quarter of 2011, resulting in a normalized adjusted EBITDA, less capital expenditures of $0.2 million for the first quarter of 2012.

Now let's look at our balance sheet on slide 9. Cash and cash equivalents at the end of the first quarter was $46.2 million, up from $41 million at December 31, 2011. Cash was generated during the first quarter in the following amounts. $20 million of adjusted EBITDA, offset partially by $8.1 million for capital expenditures, $2.2 million for taxes, $2 million in fees associated with the 2011 debt exchange, $1.8 million in capital lease payments, and $800,000 of other expenses. We did not repurchase any shares in the fourth quarter 2011 under our buyback program.

Our long-term debt, including current obligations at quarter-end, stood at $247.6 million, primarily consisting of our 10% notes, down from $249.3 million at year-end, which has also consisted primarily of our 10% notes. While the change in the debt to adjusted EBITDA ratio remained relatively flat, we did see a sequential improvement in our cash interest coverage ratio. The improvement is a result of our continued success in delivering strong adjusted EBITDA each quarter and a benefit of our reduced cash interest expense following the debt exchange.

Our revised outlook for 2012 capital expenditures is for a range of $21 million to $26 million, the revised outlook reflecting the sale of the Australian operations. We continue to manage the business and generate sustainable growth in adjusted EBITDA for our ongoing businesses. Our CapEx program remains -- aimed at high return on investment projects, such as our data centers, allowing continued positive free cash flow generation. This concludes my prepared remarks and I'll turn it back to Pete.

Thanks Ken. So to wrap up, let's turn to slide 10. To date our strategic review produced a significant outcome that allows us to monetize the major assets, and to realign around North American footprint. We will immediately move towards simplifying into two primary business units. First, our Pure-Play data center business in Canada, which will feature eight state of the art data centers across five cities. Toronto, Vancouver, Ottawa, Edmonton, and London, with our newest and third facility in Toronto, coming online in the third quarter, as a premier Tier III site.

Second, our Primus Telecom unit, which will include Primus Canada's consumer SME customers, US retail, and now ICS, all under Canada's leadership. We believe that this is the next logical step and we'll continue to focus on cutting costs around this new alignment. In addition, we will be keeping our options open regarding other potential deals down the road. As I mentioned earlier, we're very excited positive about the M2 transaction and the direction that we are now headed with our Canadian data centers.

Finally, as many of you are interested to know, our planned use of proceeds from the sale are still with the board, and we will keep you informed post close. For now, rest assured, we're working on getting the deal closed first, after which the Board will have some very good options for its consideration. At this point, I will turn it over to the operator to take your questions. Operator?

Thank you. (Operator Instructions) In the interest of time, we ask that you please limit yourself to one question and one follow-up. There are no questions at this time. I apologize; we do have one question. One moment please.

Garrett Wheeler, of Candlewood.

Hi guys, thanks for taking my question. I guess the real question I had was, as far as the sale proceeds, I know you said the Board has yet to decide, but I was wondering if you could provide a little guidance on timing and potential options that they would be considering.

Thank you Garrett. Yes, we are still -- we are in discussions at the Board level, and we haven't really disclosed anything quite yet. The deal is going to close, we hope, in the early part of June, at which point we'll probably -- come to some conclusion what we do. We have some requirements under the 10% notes that we will follow strictly, but for right now, we are not really commenting on what we are going to do with the proceeds at this point.

Okay. And just one follow-up, the third unit coming on in Toronto, is there a certain percentage of that is already leased out or do you expect some sort of ramp-up before it becomes cash positive?

That's a brand-new facility. Toronto Three is really state-of-the-art We basically leased out a huge building, put in the requirements to be qualified as higher-end Tier 3 site. I think the team has been very excited and introduced some of the potential players to the site, as a new facility, and by the third quarter, or thereabouts, we are going to be opening it up to the grand opening. We're basically looking at a brand-new facility in Toronto, and we look forward to opening it up.

All right, great, thanks guys.

Keith Rosenbloom, of CARE Capital Group.

Hey guys, great quarter and congratulations on executing on what you told us you would do.

Thanks Keith.

Pete, could you comment a little bit on the $7 million reduction in corporate expenses? What percentage overall of corporate is that $7 million reduction?

On a run rate basis -- right now we are just -- we're circling [hot]. The run rate is about $14 million plus or minus. I know I can get half quickly, and it's a function of just being logical about what we need to do, now that Australia is no longer in the portfolio. It's going to take some other sacrifices and other steps, but at the end of the day we are still going to be public. We're going to be more focused under North American Strategy, so there will be a lot of things we can do to simplify our life, frankly, by focusing on North America. And I think $7 million is probably a minimum.

If you think about what is left over in terms of ICS US retail and Primus Canada, there is always room for improvement in optimizing what we do and being at it probably for two years now, I would say that we have a clear vision on how to get to a right size of what we would be -- in the next chapter. The main thing for us is really to focus on separating the telco unit from the data center unit. And the data center unit is going to be positioned clearly as a pure-play business unit -- a pure-play segment, and ultimately a pure-play legal entity. And we really want to isolate it, and really have it compared to the peer group, which it deserves to be compared to. All of the cost, all of the organizational changes, all of the positive moves we would make to realign the Company under that strategy, again is aimed at highlighting what I would call the jewel-of-the-crown in our pure-play data center opportunity in Canada. And everything else will be run as a telco unit at that point. We have got a leadership team in Canada which is expert in the things that we are doing.

Thanks Pete.

Ross Taylor, Somerset Capital.

Yes, good quarter gentlemen. Will you comment -- the earlier questioner asked about Toronto Three and whether you had effectively a lead customer lined up to start it. Sounded like, from your answer, you do not have one. So, the question I have is, how long does it take you to get that business to cash flow positive?

It's one of those things where you certainly could pre-sell a lot of the data center or a good portion of the initialization of it, but you've got to be careful. You have to deliver when you start pre-selling. The guidance on how fast its cash positive and things, we have not disclosed at this point, but you can imagine, you almost have to build it first, because you have to prove you can deliver. They have experience with us already with seven data centers that are up and running across the country, and they have been -- many of the customers that are potential for Toronto Three, have seen our other facilities, and may, in some cases, already be customers at other facilities.

The way it would work is, you introduced them to the site, there's a lot of discussions and actually viewing of the site as we speak, but the actual sale and contracting of revenue will happen once we cut the ribbon so-to-speak, just to let you know how it works. We are very excited in showing that site and getting it somewhat pumped-up, but you've got to basically open a door, and that's when we will start talking about how successful we can be, with the pipeline that is building up for that site.

Historically, what type of time horizon has it taken in the past to achieve that, since obviously you can't predict the future, but in the past, what have you seen?

Not to be too specific, but you can imagine the pent-up demand that we are seeing in Canada, specifically that actually demands a new site. It could be one of those things where it happens very quickly. We're actually building the site into -- in four phases, in four pods, so we are opening up one pod, first. It will be approximately 7,000 to 8,000 square feet of raised floor space, that is brand-new state-of-the-art. If they are already in Toronto, either Toronto One or Two, or in London nearby, that will be encouraging, simply for them, to say okay, it is open, ready to go, and we can plug-and-play.

And I can't really give you guidance right now on the revenue stream associated with that, but if you look at our first-quarter revenues for the seven data centers we have, we're about $8.5 million in revenue for seven actives today. I imagine opening up a brand-new facility, in Toronto, which clearly is the number one city, could go quite well, but I'm cautiously optimistic. I want to be -- I want to pace myself, but we're showing it, we are encouraging folks that our current customers to look at it, and we are basically penciling in a bunch of presale potentials, but we're not disclosing exactly what that is today.

Okay, great, thank you very much.

Kenneth Miller, of Nokomis Capital.

Good morning gentlemen. Thanks for taking my question. My first question is, as we look at Primus as ongoing entity without Australia. Do you think this quarter is -- adjusted EBITDA results, less Australia and less the portion of the corporate overhead you identified, are a good proxy for the on-going EBITDA run rate, or is there some seasonality or some other - either improvements or declines, expected in the future to get to the new ongoing run rate EBITDA number?

That's a good question. That's kind of where I was going before. You can simply cut the overhead in half and take out Australia and you have a baseline. I don't think that's the end of it. You also have to look at the quarter seasonality. First quarter is -- it tends to be lower than the fourth quarter, so you have a pattern that already exists.

But, my sense is that's table stakes. We're going to try to do better than that. Because, I think, once you realign under a North American Strategy, other things fall in place. But, to get it started, that's simply the math that we would be doing, and the rest is timing. To realign and to reduce our cost, is just a timing issue, but the strategy is just like you outlined.

Okay. Maybe it would be helpful if you discussed, as you think about what to do with the proceeds, what the restrictions are around your debt. Obviously your new run rate of EBITDA will be lower -- I figured something like $50 million to $55 million maybe, and that seems like it would leave you pretty decently leveraged, for example, if you distributed all the proceeds. What are the restrictions on the debt and how much of that has to be retired if you were to want to disturb the debt, or what other kind of restrictions around leverage do you have -- are you working with there?

Yes, this is some good writing, actually, by Jefferies' lead, Romeo Reyes, who laid out what the requirements are of the notes. And simply stated, we have 365 days to figure out what to do with the proceeds. We either have to use them or offer them back in a form of a tender of accrued interest -- principal plus accrued interest. But there is a lot of movement in between, under that indenture, to have some flexibility there. But, it's pretty simple right now, where we will be -- if you use proceeds or give it back to the bondholders, and timing is everything. We have a call that is in place in March of '13 at $106.50, so we will keep our eye on that as well. But we haven't really -- and it's a public document, so you definitely could read up on all the ins-and-outs of it. But, if you referred to the Jefferies' summary that came out, I guess the last two weeks Richard, it's not bad in terms of laying out the high-level pattern of what we're up against here with the indenture.

Who wrote the summary at Jefferies?

Jefferies.

I know. Who was the author?

Romeo. Romeo Reyes.

Okay.

And it came out right after the M2 announcement. Literally two or three weeks ago.

Okay. One last question, is one of the ideas in the table for the proceeds to buy more Canadian data centers or embark upon a decent, kind of, Greenfield Canadian data center building plan? And if so, how much in capital (inaudible) to work with -- those uses?

Yes, it is certainly one of the options and it is certainly one of the allowed options. Our guidance that we put out today for 2012 is $21 million to $26 million. It's a good -- it's a good budget for us to work within to finish T-3 and to alleviate some capacity concerns we might have for the future, but it is a scenario in Canada, with the competition as it is, and our guys would tell me this all day long, if you build it, they will come. Because we are in five cities and we are spread out across Canada. We are in some very good markets and there is demand there. And the lack of the quality facilities of what we are -- such as what we are building, could be a limitation and constraint on demand.

We could use, definitely, some of the money to build out data centers if we were to use excess cash and capital. That's were we would point it clearly, to build value for shareholders. But it's a balancing act, and we're going to do, as I mentioned, I think, in the last presentation, we will be shareholder friendly in what we do and how we accomplish what we do, to get to the next chapter. But the Board has some very good options. When you are starting with $200 million USD as a treasure chest to begin the next chapter, it's a kind of a good lie for us and we are kind of excited about what we can do next. But I can't really give you more than that, except to say, that's how we are focused today.

Okay, thank you.

George Schultz, of Schultz Asset Management.

Hey, good morning gentlemen. Just had a question regarding the Australian transaction. Do you expect to pay any capital gains taxes or other taxes on the sale?

I think we are going to be in a position that -- whatever taxes we pay will be very limited. We -- there are minimum taxes with everything else, looking at both from an Australian and US perspective. We feel confident that the majority of the proceeds we will be able to maintain.

Thank you.

There are no further questions at this time. Please proceed with your presentation or any closing remarks.

Thank you operator and thank you everyone for your attention today. We look forward to updating you at the second quarter call or before. Thank you very much for your time. Have a great morning, great afternoon. Bye bye.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation, and ask that you please disconnect your line.