Progress Software Corp

NASDAQ:PRGS

Earnings Call Transcript 2018-Q1

[Operator]

Good day and welcome to the Progress Software Corporation First Quarter 2018 Investor Relations Conference Call. At this time, I would like to turn the conference over to Brian Flanagan, VP of Investor Relations. Please go ahead.

[Brian Flanagan, IR]

Thank you, Ashley. Good afternoon, everyone and thanks for joining us for Progress Software's fiscal first quarter 2018 earnings call. With me today is Yogesh Gupta, President and Chief Executive Officer; and Paul Jalbert, our Chief Financial Officer.

Before we get started, I'd like to remind you that during this call, we may discuss our outlook for future financial and operating performance, corporate strategies, product plans, cost initiatives or other information that might be considered forward-looking. This forward-looking information represents Progress Software's outlook and guidance only as of today and is subject to risks and uncertainties.

Please review our Safe Harbor statement regarding this information, which is available both in today's press release, as well as in the Investor Relations section of our website at progress.com. Progress Software assumes no obligation to update the forward-looking statements included in this call, whether as a result of new developments or otherwise.

Additionally, on this call, the revenue, operating margin, diluted earnings per share and adjusted free cash flow amounts we refer to are on a non-GAAP basis. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers in our earnings release issued today.

Today, we published our financial press release on our website. This document contains the full details of our financial results for the fiscal first quarter 2018 and I recommend you reference it for specific details. Today's conference call will be recorded in its entirety and will be available via replay on our website in the Investor Relations section.

And with that, I will now turn it over to Yogesh.

[Yogesh Gupta, President and CEO]

Thank you, Brian, and good afternoon, everyone. Welcome to our FY2018 first quarter conference call. I want to first walk you through the highlights of our financial results for the quarter and then provide an update on our business, operations and strategy.

We are very pleased to announce another quarter of solid financial results, continuing our strong execution since we announced our new strategic direction more than a year ago. We exceeded both our revenue and earnings per share expectations, with strong year-over-year EPS growth of 59%. We also had another strong free cash flow performance.

Our operating margins were 37% and during the quarter we returned over $50 million to shareholder via share repurchases and dividend. Our core business is strong and stable and we remain committed to operating efficiency with targeted investments in product and people to further strengthen our core, while also building our capabilities for future growth.

As we've discussed, our goal is to drive sustainable long-term shareholders value by building an increasingly stronger business. And to deliver on that goal, our strategy has a few key elements. One, continue to drive the profitability of our business; two, provide a future technology path for our strong networks of ISVs and customers and acquire new customers and partners in the application development market; and three, leverage our operating model to acquire complementary businesses that we can operate more efficiently. We made good progress on these elements during the first quarter.

Our core business was solid, led by a strong performance from our OpenEdge ISVs with an increase of over 20% in SaaS related revenue from our partners who offer their applications in the cloud. These ISVs are the foundation of our core business and our continued investment in our OpenEdge technology helps them keep their OpenEdge-based applications current and competitive enabling them to win new customers and grow their revenues.

In our App Dev segment, we have double digit booking growth from DevTool and Sitefinity and released new versions of both our Telerik and Kendo UI tool sets. These new releases provide the most up-to-date tools for building modern beautiful applications, with support for latest cutting edge frameworks. DCI revenues also had a strong start to the year and we remain the premier provider of data connectivity to most major software vendors.

Our better than expected operating margins and earnings per share are indicative of our ongoing efforts to continually refine our operations and processes to gain efficiencies and to run our business in the lean fashion. Although, we have not changed our long-term margin commitment of 35%, based on our strong start in Q1, we are now targeting 36% to 37% margins for this year, which is an increase of 100 basis points. We're also increasing the high end of our EPS guidance by $0.06 for FY18.

Turning to our new initiatives, we had some encouraging proof points during the quarter. We added nearly 10 new customers for our data RPM and Kinvey products, including an international gas company, a large semiconductor manufacturer and several healthcare related companies.

One Kinvey customer Canopy Health is achieving success with Progress Health Cloud, our recently released platform for healthcare organizations. Progress Health Cloud utilizes Kinvey as its backbone to provide the only HIPAA compliant integrated end-to-end infrastructure independent cloud platform for the healthcare industry.

Canopy utilize Progress Health Cloud to streamline patient's digital experiences by building a public website, a suite of modern applications and a member portal. With progress at the heart of all three initiatives, Canopy accelerated the development and delivery of these experiences and is now able to easily manage and maintain the applications after deployment.

Our OpenEdge ISVs remain enthusiastic about our cognitive anomaly detection and prediction or CADP initiative. Although it's a 12 to 18 month process for them to build an integrated RPM cognitive capabilities into their applications, our partners recognize that predictive maintenance is a critical future need for their customers and they are committed to providing the functionality over the longer term.

While I'm pleased with our progress, it's still early stages for a meaningful revenue contribution from these new initiatives and we will ramp up our sales and marketing spending only as demand increases and our pipeline of opportunities requires it.

On the M&A front, our internal team is seeing many opportunities in this active market. But because of our strict acquisition criteria, it is difficult to predict the timing of any potential transaction. As we have stated, any acquisition must firstly complementary to our business with similar products, audiences and growth profiles. From a financial standpoint, they must bolster our recurring revenue and be accretive with margins of at least 35% after cost synergies.

And finally, they must have a return on invested capital that is above our weighted average costs of capital. We are confident, that we have the management team and internal expertise required to successfully integrate and operate the type of companies we are targeting.

In addition to M&A, we also allocate significant amounts of capital to be returned to our shareholders, which resulted in our returning over $50 million in the first quarter. This is consistent with our capital allocation framework, with established targets for both dividend and share repurchases.

Once we complete our currently authorized share repurchases by the end of 2019, our target is to return 75% to 80% of our annual operating cash flow to our shareholders in the form of dividends and share repurchases.

We also concluded our Board search process during Q1 with the appointments of Sam King and Angela Tucci, to our Board of Directors. As you know, we publicly announced the search in October, with an emphasis on diverse individuals, with senior executive experience in the enterprise infrastructure software industry. Both Ms. King and Ms. Tucci possess the skill and diverse perspectives to help us execute on our business strategy, strengthen our competitive positioning and deliver value to all of our shareholders and we could not be more pleased to have them join our Board.

Finally before I close, I’d like to say a few words about Praesidium’s recent sale of most of their shares in Progress. We dilute their constructive input and ideas and want to thank them for being a long-time shareholder. We will continue to actively seek feedback from all of our shareholders on our strategy, operations, governance and other areas of interest and we look forward to those conversations in the coming weeks and months. Our focus will continue to be on running a strong sustainable business for the benefit of all of our shareholders, customers, partners and employees.

So in closing, we are off to a great start for the year, and have the pieces in place for a successful 2018. Our core business is performing as expected, and we are pleased with the progress of our new initiative, including the addition of new customers and partners’ commitment to moving forward with our new technology.

Our relationship with our customers and partners have never been better, as evidenced by strong interest in our ProgressNEXT Conference, which will take place at the end of May. To be held in Boston, the conference will gather Progress customers and partners, who share our goal of delivering the next generation of mission critical business applications.

Attendees can select from a multitude of topics, including mobile application development, predictive maintenance, healthcare applications and HIPAA compliance, front-end development and application modernization. Since announcing the event in early February, we already expect more than double the number of attendees, compared to last year’s conference.

As I mentioned, we look forward to ongoing engagement with our shareholders, we really appreciate your input and support and welcome your feedback as we continue to execute on our strategy.

With that, I’ll now turn it over to Paul, to review our Q1 performance in more detail and outline our expectations for Q2 and FY2018. Paul?

[Paul Jalbert, CFO]

Thank you, Yogesh, and good afternoon, everyone. As a reminder, all the numbers that I’ll be referring to in my remarks are on a non-GAAP basis.

For our first quarter, total revenue was $94.2 million, which was $1.2 million above the high-end of our guidance range of $93 million. The overachievement was primarily related to a favorable FX impact of approximately $800,000, due to the weaker U.S. dollars, since we provided our revenue guidance in January.

Our earnings per share of $0.54 for the quarter grew 59% year-over-year and was well above the high-end of our guidance range of $0.48. The $0.06 overachievement consisted of $0.02 from higher revenue and $0.04 from lower expenses. The solid revenue performance coupled with continued prudent expense management enabled us to achieve a 37% operating margin for the quarter, an increase of 700 basis points over Q1 of last year.

Looking at consolidated revenue for the quarter as compared to Q1 of last year, total revenue of $94.2 million was 3% higher at actual exchange rates and flat on a constant currency basis. The year-over-year impact of exchange rates on our first quarter revenue was a favorable $2.8 million. License revenue of $25.4 million increased by 4% at actual exchange rates and 1% on a constant currency basis.

Maintenance and services revenue was $68.8 million, an increase of 3% year-over-year at actual exchange rates and flat to last year on a constant currency basis. The 1% license revenue increase at constant currency is due to an increase in our DCI segment, offset by slight declines from our OpenEdge and AD&D segments.

Within OpenEdge, our ISV channel showed strong growth, this was more than offset by declines in license revenue from our direct enterprise customers. Although maintenance and services revenue for the quarter was flat compared to last year on a constant currency basis, maintenance revenue rose slightly offsetting lower professional services revenue.

Costs for professional services also decreased during the quarter, resulting in an improved gross margin. This is consistent with our goal of optimizing our professional services profitability as I discussed during our fourth quarter 2017 call.

Q1 EPS of $0.54 was $0.20 higher than last year and primarily to improved operating performance and a much lower tax rate and to a lesser extent lower share account. The operating performance improvement is due impart to higher revenue as well as significantly reduced expenses as a result of our restructuring in early 2017 and to the ongoing operating efficiency. The year-over-year impact of exchange rate movements on our EPS was a favorable $0.01 for the first quarter.

Turning now to our revenue by segment, which is all at constant currency, OpenEdge revenue was $63.8 million for the first quarter, down 1% versus Q1 of 2017. As I mentioned, we had strong license growth from our OpenEdge partners for the quarter, while license revenue from our direct enterprise customers declined.

The license revenue increase from our partner channel continues to be fuelled primarily by the growth from partners who deploy their applications in a SaaS model. Our SaaS-related revenue for OpenEdge was $6.4 million for the quarter, up 23% versus Q1 of last year. While we are pleased with the strong growth in this area, we have not changed our expectation of low double-digit growth from this revenue stream going forward.

OpenEdge maintenance was essentially flat on a constant currency basis compared to last year. Our maintenance renewal bookings were strong in the quarter and our maintenance renewal rates remained well over 90% for the quarter.

DCI revenue was $7.6 million for the first quarter, an increase of 11% compared to Q1 of last year. The increase for the quarter was due to an early renewal of an existing OEM agreement.

Our multi-year license backlog at the end of the first quarter was $15.6 million, compared to $22.3 million at the end of Q1 of last year. The DCI backlog can rise and fall as our OEM contracts are renewed and revenue is recognized, and the year-over-year decrease is due solely to timing of those renewals.

Turning to our AD&D segment, total bookings were $19.2 million for the quarter, up 6% versus Q1 of last year. The bookings increase was primarily due to strong renewals of our DevTool products and to increased Sitefinity professional services. Revenue was $20.1 million for the quarter, an increase of 1% due primarily to increases in maintenance and professional services revenue for Sitefinity.

The total revenue by geography with our international regions at constant currency, North American revenue was $51.8 million, up 3% versus Q1, 2017. EMEA revenue was $30.3 million, up 2%, Latin America revenue was $4.5 million, down 11% and Asia-Pacific revenue was $4.8 million, down 17%.

Total costs and operating expenses were $59.5 million for the quarter, down almost $5 million from a year ago. The year-over-year decrease in costs and operating expenses was primarily due to lower compensation and benefit costs across most areas of the company, the result of our fiscal 2017 restructuring efforts, as well as ongoing operating efficiencies.

Marketing costs also decreased due to a shift in the timing of our annual Customer and Partner Conference, the conference was held in Q1 2017, it is now schedule for Q2 in 2018.

Q1 2018 operating income grew 28% over Q1 last year. Operating income margin improved 700 basis points from 30% in Q1 of last year to 37% this year. The improvement in both operating income and margin is the result of the cost reductions from our restructuring actions, as well as additional savings from ongoing expense management.

Moving on to a few balance sheet and cash flow metrics, the company ended the quarter with a strong balance sheet with cash, cash equivalents and short-term investments of $168 million. Our debt balance at the end of Q1 was $122 million. DSL for Q1 2018 was 51 days, up four days sequentially and up three days from Q1 of last year.

Deferred revenue was $154 million at the end of Q1, up $7 million versus Q1 of 2017. The increase was due to FX as well as solid year-over-year increases in deferred revenue for Sitefinity and DevTool. Adjusted free cash flow was $33 million for the quarter, compared to $43 million in Q1 of last year. The decrease versus last year is due to increased payouts in Q1 of this year, related to our variable compensation programs, as well as lower collections and slightly higher tax payments and CapEx.

In the quarter we repurchased 1.1 million shares at a cost of $45 million. At the end of the quarter we had $175 million remaining under our current authorization. We are targeting an additional $75 million of repurchases during the remainder of fiscal 2018 and intent to spend the remaining $100 million of our authorization during fiscal 2019.

Now I’d like to turn to our business outlook and guidance for fiscal 2018 and Q2. For the year our revenue guidance remains unchanged at $399 million to $404 million, flat to an increase of 1% versus 2017. The U.S. dollar weakened during the quarter and currency rates are now expected to have an incremental favorable impact of $4 million on our fiscal 2018 revenue. The total expected impact on our results is now $8 million, but with three quarters still remaining in the year too early to change our guidance due to currency movements.

Turning to our earnings per share and operating margin, a strong start for the year has enabled us to increase our full year guidance for both metrics. We are now expecting operating margin to be 36% to 37%, an increase of 100 basis points versus the guidance we issued in January.

For EPS, we expect full year earnings per share of $2.36 to $2.41, an increase of $0.06 to $0.07 versus our prior guidance. This is an increase of 24% to 26% over fiscal year 2017 EPS. Our EPS outlook reflects the remaining $75 million in share repurchases, we are targeting to complete by the end of the year.

Current exchange rates for weaker dollars is expected to have a positive currency translation impact of approximately $0.04 for the full year EPS. Our prior estimate was $0.01 as with revenue with three quarters still remaining in the year, it's too early to change our EPS guidance due to currency movements.

Our adjusted free cash flow guidance for 2018 is $115 million to $120 million unchanged from our previous guidance and our expected tax rate is 22% also unchanged from our prior estimates.

Turning to our guidance for Q2 2018, we expect revenue to be between $93 million and $96 million flat year-over-year to a 3% increase. This includes a positive currency translation impact of approximately $3 million. On a constant currency basis, although we expect the decline in OpenEdge professional service revenue, our guidance assumes slight overall growth from our OpenEdge segment.

Revenue from our AD&D segment is expected to be flat, and we expect DCI revenue to decline offsetting the increase in Q1. However, we expect DCI revenue to be flat to last year for the first six months of fiscal 2018.

We expect earnings per share of $0.51 to $0.53 for the second quarter compared to $0.42 in Q2 of last year, an increase of 21% to 26%. This includes a smaller sequential expense ramp relating to shifting our Annual User Customer and Partner Conference from Q1 to Q2 in 2018 as I mentioned earlier. Based on current exchange rates, we expect positive currency translation impact of approximately $0.01 on Q2 earnings per share.

In closing, I'm pleased with our solid financial performance for the quarter and our improved profitability outlook for the year. We will continue to focus on generating strong cash flows, and on running a lean operation, while still making the investments we need to strengthen our business. We remain committed to our disciplined capital allocation policy and our focus on driving increased value for shareholders.

With that, I'd like to hand it back to Brian to Q&A.

[Brian Flanagan, IR]

Thank you, Paul. That concludes our formal remarks for today. I'd now like to open up the call to your questions. I ask that you keep your remarks to your primary question and one follow-up.

I'll now hand the call back to the operator to conduct the Q&A session.

[Operator]

Thank you. [Operator Instructions] And we'll take our first question from Steve Koenig from Wedbush Securities. Please go ahead.

[Steve Koenig, Wedbush Securities]

Thanks team for taking my questions. I got one follow up for you as well if you don't mind. I wanted to just ask you Asia-Pac, looks it was down this quarter more than the other regions. Any color there just a small number that bounces around or anything in particular going on?

[Paul Jalbert, CFO]

Yes, I know it is a fairly small number. We did have a fairly sizable deal last year on direct end user that's now replicated this year. And also down on maintenance.

[Steve Koenig, Wedbush Securities]

Got it. Okay, thanks. I guess the other thing I would ask into my follow-up. So Kinvey, I think you said there were 10 new customers for Kinvey. I know you're doing a bit in healthcare there. And so I'm curious if you can give us any color maybe insights into they had a good start in the healthcare vertical. I think even before you guys bought them, but then I think you guys said there wasn't significant revenue now or revenue run rate. Can you comment at all on there -- can they bring some revenues with them. Can you remind me please? And what are you expecting in terms of returning those customers into incremental revenue?

[Yogesh Gupta, President and CEO]

Hey, Steve good to hear from you. So we added 10 new customers this past quarter between Kinvey and DataRPM. You are correct that Kinvey had healthcare customers some healthcare customers already. We since then have actually launched a new offering that uses Kinvey at the center of it, which we are calling the Progress Health Cloud, which also includes our front-end tooling to make it easy to build those apps connected to this back end also uses the DCI connectivity to connect to other data sources that they may need in addition to the data sources that Kinvey already had connectivity to.

So, it is a more bigger, more solid, more robust offering, more complete offering than what we had by -- that Kinvey had by itself. We haven’t really commented on revenue contributions in the past by Kinvey. And as I said in my earlier remarks, it’s too early to talk about revenue from them, we are happy to see the traction we are seeing in the market. As you are aware healthcare is a healthy market out there and people are trying to figure out how to implement and execute on their digital initiatives, especially in the healthcare arena.

And I think patient care applications, patient engagement applications, et cetera are all interesting opportunities for us. As these things become meaningful, we will absolutely share the data with you, but at this point we aren’t sharing anything publicly.

[Steve Koenig, Wedbush Securities]

Okay, no that’s good. I appreciate the color. Thanks, Yogesh, thanks, Paul.

[Yogesh Gupta, President and CEO]

You’re welcome Steve, thank you.

[Paul Jalbert, CFO]

Thanks, Steve.

[Operator]

And we will take our next question from Mark Schappel with Benchmark Commitments. Please go ahead.

[Mark Schappel, Benchmark Commitments]

Hey, guys.

[Yogesh Gupta, President and CEO]

Hey, Mark.

[Paul Jalbert, CFO]

Hey, Mark.

[Mark Schappel, Benchmark Commitments]

Hey, thanks for taking my question here. So, Paul starting with you, with respect to the revenue guidance, the $4 million increase for foreign exchange that you are expecting in fiscal 2018 actually suggest that your revenue guidance is coming down here, I was just wondering what’s driving the thought process here behind the lower revenue guidance?

[Paul Jalbert, CFO]

Yes, know Mark, I think in my remarks I stated that we are not changing guidance for the incremental $4 million. As I said earlier in Q1 we had an $800,000 favorable variance, right of which $4 million is part of. The rest of that currency is really projected based on the exchange rates and given where we are in the year on changing guidance for FX movement, I didn’t think it was prudent at this point.

[Mark Schappel, Benchmark Commitments]

Okay, great. Thank you. And then, Yogesh the OpenEdge direct business that continues to struggle and continues to offset the positive performance we are seeing to the ISV channel and I was just wondering if there was initiatives underway or things you are thinking about to turn that around to the direct business?

[Yogesh Gupta, President and CEO]

Yes, so Mark as you know in the direct business that business is actually lumpier than the in-direct business, because sometimes customers want to expand and they buy more licenses and then other times they don’t. So we’ve had certain periods when certain customers have decided to expand their business and we have seen healthier performance in that business and other times not.

From a maintenance perspective and retention perspective that business continues to be very, very solid. The expansion happens basically based on whether or not the usage of that application within that business grows. So Mark, that to some degrees out of our control, what we do control and what we have done a very, very good job of is to maintain the maintenance revenue and retention of those customers.

So I want to be very clear here that the license revenue part is not really in our control because after all whether an application that is currently being used at a business gets used by more users or they need more capacity or not is really dependent on their business. Whereas the maintenance and retention and keeping them in our fold and keeping them using our product is really what we are focused on for our direct customers.

[Mark Schappel, Benchmark Commitments]

Okay, great. Thanks. And then if I can sneak another on in here.

[Yogesh Gupta, President and CEO]

Sure.

[Mark Schappel, Benchmark Commitments]

On the ISVs, the two ISVs that are beta testing, the data RPM product for you, is there anything new to report on that front this quarter?

[Yogesh Gupta, President and CEO]

They continue to work with us. They actually are not just beta testing, they are actually working with us to go-to market and integrated into their products as well as go-to-market to their customers, Mark. So there our product is available, it is not in beta it is generally available and they are out there with and we are out there with them speaking to some of their direct customers as well. Nothing more to report than that.

[Mark Schappel, Benchmark Commitments]

Okay, great. Thank you.

[Operator]

And we'll take our next question from Glenn Mattson with Ladenburg Thalmann. Please go ahead.

[Glenn Mattson, Ladenburg Thalmann]

Hi, good afternoon. Just curious what the impact guide from the shift in the conference was to the sales and marketing line in Q1 in dollar terms?

[Paul Jalbert, CFO]

Yes, I'm not going to provide you the dollar term, but I think if you look at based on the guidance that we provided for Q2 and where the expense level is for Q1 there is a slight uptick as a result of that.

[Glenn Mattson, Ladenburg Thalmann]

Okay. Thanks.

[Paul Jalbert, CFO]

You're welcome.

[Glenn Mattson, Ladenburg Thalmann]

And then just on the cost cutting, can you give us -- is there any more steps to go in that. I mean most companies always in the seventh inning of costs cutting program. Is that how you see yourselves now, or is most of the work done in your minds?

[Yogesh Gupta, President and CEO]

So, Glenn, as we've said right all along, our job is to continue to run a very lean operation and we've continued to do that. We always are on the lookout for opportunities to make our business more efficient. But we don't really see significant changes. I mean, after all if you look at our guidance we are guiding 36% to 37% operating margins this year, which is an improvement even from last quarter guidance of 100 basis points. So we do what we can, but there isn't anything large that we see in the foreseeable future.

[Glenn Mattson, Ladenburg Thalmann]

Okay great. Thanks for the help.

[Operator]

And we'll take our last question from Matthew Galinko with Sidoti. Please go ahead.

.

[Matthew Galinko, Sidoti and Company]

Hey, thanks for taking my question. You called out the Canopy deal. So I just had a couple of questions around that. One would be, I was wondering if you can quantify kind of the time to market benefit if any that they enjoyed from kind of deploying your tools. And then secondly what was the competition for that deal like? Who did you see in the market or was it closely contested and kind of what brought you over the top?

[Yogesh Gupta, President and CEO]

Hey, Matt thanks for the question. So two part question, so the first part in terms of value that they saw and the pace at which they were able to deploy. The project from the time they signed up for it to the time they went live was a matter of months somewhere between four and six months with all three of the initiatives, which was dramatically faster than -- in fact they had attempted to do something with one of our competitor's offerings prior to this and it spent a significantly longer period without anything going live on even one of the channels.

So it was a phenomenal reduction because the alternative never even got there. The competition was the usual folks. I mean in fact Canopy Health among other things use their sales force for their CRM. So all kinds of people were in the mix with their health cloud offerings. And we feel really good about what we were able to do for them and what they were able to accomplish and be successful with our product offering.

[Matthew Galinko, Sidoti and Company]

Thanks. If I may ask a quick follow-up, when the competitor that I guess effectively displaced or was displaced earliest was that selected prior to your owning the Kinvey asset or is it a deal that sort of you participated in and then it gathered and came back to you.

[Yogesh Gupta, President and CEO]

No, that was before. That was before we got Kinvey.

[Matthew Galinko, Sidoti and Company]

Perfect, alright. Thank you.

[Operator]

And that concludes our question-and-answer session for today. I'd like to turn the conference call back over to Brian for any additional or closing comments.

[Brian Flanagan, IR]

Thank you all for joining the call today. As a reminder, we plan on releasing financial results for our fiscal second quarter of 2018 on Wednesday June 27, 2018 after the financial markets closed and holding the conference call the same day at 5 PM Eastern Time. I'll now turn the call over to Yogesh for his closing remarks.

[Yogesh Gupta, President and CEO]

Thanks, Brian. We continue to execute well and with our strong financial performance in Q1 have maintained the momentum we’ve worked so hard to achieve. We remain committed to building a strong sustainable business and we look forward to further meetings with our shareholders to discuss our strategy, goals and accomplishments. Thank you so much for joining the call. Have a great evening.

[Operator]

And that does conclude today's conference call. We thank you all for your participation and you may now disconnect.