HMS Holdings Corp
Q1 2016 Earnings Call Transcript

Published: 6 May 2016

[Operator:]

Good morning, ladies and gentlemen, and welcome to the HMS Q1 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Dennis Oakes. Please proceed.

[Dennis Oakes:]

Thank you, Jackie. Good morning and thank you, everyone, for joining us for the HMS first quarter 2016 earnings conference call. With me today are Bill Lucia, our Chairman and CEO; and Jeff Sherman, our Chief Financial Officer. As you know, we distribute our earnings release through our website, hms.com under the Investor Relations tab. We also post an investor presentation each quarter containing supplemental information, but we will not make specific reference to it in our prepared remarks. This call is being webcast and can be accessed via the Events & Presentations tab on our Investor Relations website. And a replay of the call will be posted later this morning. Some of the information discussed on the call today, including the company's future expectations, plans, and prospects, is considered forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the company's current expectations, and actual events may differ materially from those expectations. We refer you to the earnings release as well as the company's filings with the Securities and Exchange Commission. For information regarding risks and uncertainties that could cause actual results to differ materially from those contained in today's – in the company's projections or forward-looking statements. Any forward-looking statement discussed on this call is based on the information available to us, as of today, May 6, 2016, and the company disclaims any intent or obligation to publicly update any forward looking statement as a result of the developments occurring after today's call except as required by law. Finally we may refer to certain non-GAAP measures during the call and our earnings release and investor presentation both include a reconciliation of those measures to GAAP. For the Q&A session, we ask that you limit your inquiries to one question and one follow-up. So we can get to everybody in queue. We're ready to begin now. Bill?

[William C. Lucia:]

Thank you, Dennis and good morning everyone. 2016 is off to a very solid start, higher than projected commercial health plan revenue in the first quarter, pushed year-over-year growth to nearly 30%, putting us on track to achieve our full year projection of 18% to 20% growth. Total revenue of $120 million was 8.6% higher than the prior year first quarter which was also encouraging. This very strong performance on top of record breaking fourth quarter health plan revenue which was also nearly 30% higher than the prior year quarter is reflected of three recent trends in our health plan business

[Jeffrey Scott Sherman:]

Thanks, Bill, and good morning, everyone. Let me begin by indicating that our strong first quarter numbers reinforce our overall view of the company's expected full-year financial performance, which we articulated on our fourth quarter earnings call in late February. Most importantly that includes 18% to 20% year-over-year commercial health plan revenue growth, which Bill just addressed in detail, state Medicaid revenue growth year-over-year that we project will be flat to up 2% excluding New Jersey and flat operating costs excluding nonrecurring legal expenses, but including investments and growth and product innovation. Turning now to our first quarter performance, adjusted earnings in the quarter were $0.14 per diluted share including approximately $700,000 after tax or penny per share of PCG related legal expenses. Adjusted EBITDA in the quarter was $27 million. Total first quarter revenue of $119.8 million was slightly higher than anticipated due primary to a few onetime commercial health plan projects completed in the quarter in line (13

[William C. Lucia:]

Thanks, Jeff. I want to touch on two final items. The first is innovation, which continues to be a strategic focus of both our organic and inorganic growth plans for 2016 and beyond. We also believe product innovation is an important means of keeping our edge in a competitive market for cross containment solutions. We have an internal innovation team, which is looking at a variety of new product opportunities, one or two of which could be ready to go to market by the end of this year. Our premier innovation from 2015 to prepay clinical review product is nearing the end of its initial trial phase. As discussed previously, we and our alpha clients have been extremely pleased with the accumulated results, which generate higher finding rates than the usual post payment reviews. Additionally, the process totally eliminates the administrative time and expense of the pay and chase approach. Results also reflect less provider abrasion, better cash flow for our customers on top of the improved results and accelerated revenue recognition together with higher margins for HMS. We've now sold prepay to customers covering Medicare, Medicaid and commercial employer-based populations. Our sales team is actively marketing the product this year to both customers and prospects. So, we expect only limited revenue impact in 2016 as implementations of new sales will not be completed until the second half of this year, we should see a more meaningful revenue contribution from prepay in 2017. Finally, I want to comment briefly on the announcement we made last week that we settled the pending litigation with Public Consulting Group. This is a very positive outcome as it avoids the time, expense and distraction of the trial, which was scheduled to begin this month in Texas, to be followed by one in New York. Our press release provided all of the detail we are permitted to disclose under the confidentiality terms of the agreement. So we have nothing further to add on the call today. However, we said from the outset that our goal in bringing the lawsuits was to defend our intellectual property and protect our trade secrets. And those objectives were accomplished. This week, we filed the necessary papers in the Texas and New York courts to dismiss all pending cases between the parties. Everyone at HMS is very excited about the year ahead. Our principal focus is to preserve our state Medicaid footprint while sustaining the substantial commercial health plan growth we've seen in recent quarters into 2017 and beyond. Operator, we are now ready for the questions.

[Operator:]

Your first question comes from the line of Mohan Naidu with Oppenheimer. Your line is open.

[Mohan Naidu:]

Thanks. Bill or Jeff, whoever wants to take this on the commercial revenue, can you give us a little more sense of how much of the revenue came in with the one-time project and also are these projects scheduled earlier and came in ahead of the schedule or is it the new projects that came in into Q1 and completed?

[Jeffrey Scott Sherman:]

Yes. Mohan, we guided initially to help plan revenue growth of $52.5 million to approximately $53.5 million. And so, the delta between our performance and that was really related to these projects that occurred during the month. It's difficult to predict timing often on when these projects are going to hit. And so I think part of it is timing related. And as we've said previously, payment integrity revenue from quarter-to-quarter can be lumpy, just upon – based upon timing of when projects hit. So I would view the difference between what we came in at versus where we were guiding, was basically the items we called out in our earnings release.

[Mohan Naidu:]

Okay. And the direct project costs that picked up in the quarter, were they related to this one-time projects?

[Jeffrey Scott Sherman:]

So overall the one-time project costs were really driven with – in terms of year-over-year growth, quarter-to-quarter year-over-year growth, related to adding nurses and coders and chart retrieval fee costs related to the incremental volume we had in Q1 of this year versus prior year.

[Mohan Naidu:]

Okay. One quick question, Bill, on the RAC, thanks for that information. It looks like they are coming in not as – I guess, the requirements are not as exciting as they used to be. Is there still any more room to negotiate with CMS or are these new requirements, the final ones?

[William C. Lucia:]

Well, I mean it's now an open procurement. So, CMS's expectation is to get bids from the prospective bidders and after the bids are in, CMS goes through a typical contract negotiation process. But I would doubt at this point that the terms are negotiable unless they better chooses to protest the procurement.

[Mohan Naidu:]

Okay. Thank you so much for taking my questions.

[Operator:]

Your next question comes from the line of Stephen Lynch with Wells Fargo. Your line is open.

[Stephen B. Lynch:]

Hey guys. Thanks for taking my questions this morning. I was wondering if you could elaborate just a little more on the RAC RFQ. It sounds like the payment terms and ADR limits could actually deter you from placing a bid at all? I just wanted to see if that possibility is indeed on the table? And then also putting that aside, could we see a contract extension for the current contract beyond the end of July until new contracts are set up or should we just still continue to expect the RAC revenue to fall off at the end of July?

[William C. Lucia:]

Thanks, Stephen, that's a good question, and you raised a good point. We've really watched the decline of the program now for the past two years and it's been disappointing to us, considering the impact we can have on the Medicare Trust Fund. The new ADR limits rarely do severely restrain the audit activity and opportunities really for both CMS and the RACs. So it does change the ground rules a bit. But we still think the program can be a strong one, so we will take all of the factors into consideration when we – as we plan our approach to the bidding process.

[Stephen B. Lynch:]

Okay. And maybe just a follow-up on that, thinking about those factors. I was wondering maybe if you could comment on the two-midnight rule being dropped by CMS a couple of weeks ago. To what extent, you think that that could impact the opportunity to perform audit work or what do you expect as far as new regulations around inpatient admissions.

[William C. Lucia:]

I don't know if we can – if we really have any thoughts on what might happen with new inpatient regulations. So, CMS has still said that primary responsibility for measuring and auditing will typically be considered a short stay hospital, inpatient short stay as the function of the QIOs, the quality improvement organizations versus the RACs, and only high error rate providers would be referred to the RACs, which I don't believe we've had any referrals to-date. So, you did ask earlier if we think the contract would be extended. We've not gotten any notification for CMS on that, but with a end of May deadline for – or May 27 deadline for the bids, there's always a chance that the entire process could not be resolved by July, particularly if there are protests filed during the process.

[Stephen B. Lynch:]

Okay. Thanks.

[Operator:]

Your next question comes from the line of Ryan Daniels with William Blair. Your line is open.

[Ryan S. Daniels:]

Yes, good morning. Thanks for taking the questions. Bill, one for you on the commercial market. If we think about your comments in regards to the appetite to work more with HMS, is that coming from an aggregation of accounts to a single vendor? Is it looking at new areas for cost control? Or is it really turning over work that these plants formally did internally to HMS to drive cost savings or to try to drive better yields?

[William C. Lucia:]

Ryan, thank you. And in fact it's a little bit of all the above as well as just growth in their membership and potentially challenges on other lines of business that are causing them to seek cost containments in areas where we have the strongest expertise. So as it has been publicly reported, a lot of the major plans have not had a good financial outcome on the health insurance exchanges. So they've stepped up their requests from us to contribute more to their bottom line over their current and next fiscal year.

[Jeffrey Scott Sherman:]

And also continues to be a fairly low risk proposition, because it's a contingency fee model, so and they only pay us when we have the findings. So I think that's also attractive from their standpoint of potentially expanding business with us.

[Ryan S. Daniels:]

Okay. That's helpful. And then, a follow-up there just in regards to the new sales you guys disclosed; if I look at the cross-selling of a 10.5 million lives and the new lines at 1.6 million, that is very significant relative to even what you did all of last year, I think the cross selling for example is about 83% if my math's right, what you did in all of 2015. So, I'm curious if you can maybe put a little more revenue color on that. Should we be thinking of the magnitude of actual sales once implemented being that much larger or are these smaller revenue generation opportunities even though it's more client lives? Thank you.

[William C. Lucia:]

Yes, Ryan. I think we want to be careful when we try to extrapolate the lives into revenue, because the range of products and scope of the services we sell just varies so significantly. So, I think you should expect that sales activity is a part of our 18% to 20% commercial growth target for the year. And on a quarter-to-quarter basis as you see in those numbers fluctuate. We still have to have the implementation of those sales. And as we have said, we have added resources; I mean that's another – another part of our cost increase is adding implementation resources to get these products into our revenue generation process earlier, but I would view it as part of that 18% to 20% growth target we have for the year.

[Ryan S. Daniels:]

Okay. Thank you. And congrats on all your momentum.

[William C. Lucia:]

Thanks.

[Jeffrey Scott Sherman:]

Thank you.

[Operator:]

Your next question comes from the line of Charlie Strauzer with CJS Securities. Your line is open.

[Charles Strauzer:]

Hi, good morning. Bill, If you can talk a little bit about the new CMS published regulations they've put out recently, the 1,400 page booklet about the managed care as well as the Medicaid & CHIP programs, any color you can give us on potential impact to your business and potential opportunities there. Thank you.

[William C. Lucia:]

Yes, Charlie. Thank you. So that was finalized this year. I think the original RACs were sent out about a year ago. We along with many organizations commented on it. The State Medicaid Directors Association was concerned about the onerous new responsibilities based on state Medicaid agencies. I think my only subsistent (31

[Charles Strauzer:]

That's helpful. Thank you. And also just maybe if you can talk a little bit more about the M&A side. I know, you've been talking for a while about being more aggressive on that front, but you haven't really seen anything come to fruition there. Is there anything kind of delaying that process at all, are people just not willing to sell, can you give us a little bit more color behind that? Thanks.

[Jeffrey Scott Sherman:]

Sure. So, careful monitoring acquisition opportunity is really just an ongoing process. So, there are several factors involved in evaluating acquisitions, assessment on how it'd expand or complement our product portfolio in order to strengthen or tracking this to existing or potential customers. If an acquisition allows us to sell a new product or enhances an existing product, we could strengthen our competitive position. So I think it's an ongoing process. We have significantly ramped up our internal operations to go through that and just timing is difficult to predict. So we have said we're going to maintain a disciplined approach in terms of pricing. And so I do think, overall we view in terms of what our large customers are telling us. Over time, they're going to look to consolidate vendors and deal with less vendors. So we believe as a vendor of size and providing a broad suite of products, we're going to be well positioned to be one of those vendors and some of the smaller vendors, we believe over time are going to be looking or really have an opportunity to sell. I think also just the data security requirement and the need for more advanced data security protections are going to have an impact on some of the smaller companies, which will also, we believe, contribute to both the market share opportunity for us and an acquisition opportunity for us.

[Charles Strauzer:]

Great. Thank you very much.

[Operator:]

Your next question comes from the line of Greg Bolan with Avondale Partners. Your line is open.

[Steven Couche:]

Hi. This is Steven Couche on for Greg Bolan. Good morning. So, for SG&A line for OpEx, even pulling out the litigation expense in first quarter, you're calling for flat year-over-year OpEx and that would imply a run rate that's less than 1Q, just qualitatively or if you could put some numbers around it. How much of that decrease that we're going to see in the next three quarters is due to the Medicare RAC peeling off and then how much is just kind of internal efficiencies?

[Jeffrey Scott Sherman:]

Certainly some will be related to the Medicare RAC, more of those expenses will probably be on a direct operating costs versus the SG&A side. And so, I think as we look at opportunities for increased efficiencies, SG&A is also an area we're focused on in terms of also just IT initiatives that over time we think can help reduce costs in that area as well. So I think from an overall cost perspective, if you look at SG&A, fairly consistent with the fourth quarter and we do expect operating efficiencies – to achieve operating efficiencies and the cost of services line over the next quarters as well. And really as we see revenue growth, not seeing costs growing with that revenue.

[Steven Couche:]

Great. Okay. Thank you. And then I guess, just trying to get a better idea of how you are proactively approaching your commercial clients. I mean, what are they really focused on and I guess, are you approaching them with different benchmarks – industry benchmarks from some of your other commercial clients, just trying to get a better idea of your strategy there.

[William C. Lucia:]

Well, I mean that some of the discussion in terms of helping them understand what percentage of MOR or their costs can we impact. But again the organizations we serve, particularly our largest ones are very complex. There is a certain amount of work being done in-house different lines of business, often with different decision makers by line of business. So, our approach has been really to what we bring new audit opportunities to them and of course our clients bring new opportunities to us. So, for clients having a specific challenge in their behavioral health line of business, they'll ask us to look at that. So, it's really – it's a little bit of a two ways street. A lot of our opportunities come from client driven needs that they're talking to our account management and sales team about all the time.

[Steven Couche:]

Great. Okay. Thank you and congrats on a good quarter.

[William C. Lucia:]

Thank you.

[Operator:]

Your next question comes from the line of Matthew Gillmor with Robert Baird. Your line is open.

[Matthew D. Gillmor:]

Good morning. And thanks for taking the question. I wanted to ask another follow-up on the commercial sales activity. Obviously a strong period in the first quarter, I think Bill mentioned that the contract sizes were getting larger. Can you maybe provide some details on what's driving the larger contract size? Is that due to customers buying multiple services within COB and a part of integrity or is it due to new relationships or existing relationships starting off with a bigger set of membership?

[William C. Lucia:]

It's really – again it's a little bit of all of the above. So with some of the – some of the contracts that we closed last year were larger expansions on the existing accounts and those expansions covering either a new – entire new line of the business or a significantly larger field of play from an order perspective. So that's part of it as well as our focus on which has been pretty steady really on the top 50-plus health plans in the nation and both – those that we don't have those clients starting to close those deals and those that are our clients expanding on them. So – but it's a really a shift into potentially new lines of business that a client has. An example is that we've been working for them traditionally in Medicaid and they've now asked us to audit their Medicare population or their commercial line of business. So that's really why the deal sizes on average have gotten larger and, again, our focus has been on of course the top 50 plans in the nation.

[Jeffrey Scott Sherman:]

And we have – as we've said in the past, we have changed our sales, go to market approach in terms of our sales channel. So we had a large national payer sales group, regional payer group and then another group focused on the independent blues. So, I think that's also been part of the sales success.

[Matthew D. Gillmor:]

Got it. Thanks for that. And then maybe just sort of a bigger picture question on the long-term margin outlook; for the past couple of years, there's been some noise in the P&L due to the Medicare RAC program and the PCG litigation. But maybe, as you think about kind of over the medium and long term, maybe three years to five years, is there anything different in the business that would prevent you from getting back to kind of the low $30 millions margin level. I just wanted to get the puts and takes there.

[Jeffrey Scott Sherman:]

We haven't given obviously margin guidance out that far. I think what I would say, Matt, is we believe we have good scale and leveragability of our asset base. So driving incremental revenue in both the payment integrity side and the COB side can lead to a margin expansion over time. And so, I think we are focused on continuing to devout and do see the opportunity to improve our margins over time as a result of revenue growth and becoming more efficient both on the cost side and the yield improvement side.

[Matthew D. Gillmor:]

Okay, great. Thanks a lot. Appreciate the question.

[Operator:]

Your next question comes from the line of Dave Windley with Jefferies. Your line is open.

[David Howard Windley:]

Hi, good morning. Thanks for taking my questions. Bill, do the mergers in managed care and the larger plans in managed, Centene, Health Net obviously already closed, a couple pending and then some speculation at sometime not too long ago that several of the not for profit blues talking about potentially the need to being together; does that create opportunity or alternatively threat to HMS wise business?

[William C. Lucia:]

Thanks for the question. We have seen historically a net positive when there's been consolidation in the industry, and I think there is a couple of factors and we believe that for us it's neutral to net positive. Couple of factors, one is the larger the organization, the more focus they have from an audit and security perspective on the security of their data. I think we've talked about – I think at any given point, we have five to six clients auditing us per month. But because we're HITRUST certified, and we've recently been recertified, some of the customers just as long as they see the HITRUST certification, they don't perform a security audit. So, I think that's an important factor, because a lot of competitors in the market, small to medium and potentially large may not be HITRUST-certified and that is the gold standard for the health insurance industry. So that's one of the factors where we see consolidation, also potentially requiring consolidation in the vendor community and we think we have a competitive leg up. I think the other part that gives us the competitive – a positive competitive outcome from consolidation, there's two other factors. Of course one is, these mergers are really seeking cost synergies and it – one of the ways to get cost synergies is to just do more work on a success fee basis with HMS. So we think that drives continued success. And finally it's just the factor that these organizations look to – at over time look to reduce the number of players that have access to their data. It's a little tied to my first comment and that security is paramount. As everybody knows, healthcare breaches have been significant over the last 18 months. They are the most costly type of data breach or the most valuable record on the black market is a healthcare record. And if you add that to the fact that you want to shorten the list of vendors you're sharing your data with, if you're a very large Medicaid plan, you'd be hard pressed to find someone to be as effective in Medicaid coordination of benefits and the other work that we provide. So, we have a very significant competitive advantage to some of our competitors in the program integrity space due to that consolidation.

[David Howard Windley:]

Got it. Thank you; appreciate that answer. So and follow-up and on a separate topic. I wanted to explore a little bit, the implementations, the 2015 wins and implementations relative to the growth guidance. So, Jeff, you mentioned that to reinforce your confidence – the management team's confidence about a majority of that growth coming from simply the run out of the prior implementations. I guess what I wanted to try to understand is do those 2015 implementations kind of achieve a plateau or run rate level during 2016 beyond which they don't really grow or in other words, they've gotten to a maturity based on the contract that you sold last year or is there continued growth and that upward trend is two years or three years long until they reach a plateau, and your growth this year is just assuming a portion of that. If you could help me with that conceptually, I'd appreciate it.

[William C. Lucia:]

Yes, I think – we initially sell a product or a group of products to a health plan. It's a very dynamic process, versus the state market, which is much more time driven and RFP driven. The commercial health marketplace – health plan marketplace is very dynamic. So, we're constantly changing, adding new services to contract. So, from the standpoint of our ability to do more work or sell more products, we certainly think there is an opportunity to do that. And also, our yield improvement opportunities can go across many of our customers when we identify opportunities, they can go across many of our customers. So we're constantly looking at how to improve yield for ourselves, which obviously generates more savings for our customers also. So I think both of those represent opportunities over time that the implementations are occurring, can grow over time, and it's our goal to see more business and get more business from our existing customers as we can demonstrate successful outcomes for them.

[David Howard Windley:]

Appreciate that. And last question for me is around, Bill, the ink to green and the comments about improving your implementation rate by, I think you said, 33% in the press release. I was trying to maybe understand that in numbers of implementations or perhaps how long it would take you to implement your current backlog, trying to get an understanding of what that 33% increase means, and then also I know the initial push or at least my perception was the initial push of that was to get more revenue in your top line quicker. I'm also curious from the clients' perspective, what their satisfaction level is or to what degree are they kind of beating on you and saying I need this tomorrow.

[William C. Lucia:]

Well, those are good questions. So, the push is driven by, of course our goal to help our clients save or recover dollars, and then the faster we're able to execute that, the faster we're able to impact our top line. It's really kind of a mix. It's a mix bag. There are customers that are pushing very hard that at times have challenges through their own infrastructure, getting what they need out of the organization for us to flip the switch and complete the implementation. Often the delays are related to accuracy and data, that's important to our process in the program integrity space because we don't like to send out audits with false positives. It causes a significant provider abrasion. And then the other complexity that we typically don't see in the COB space that we see in program integrity is at any time during an implementation process, a client may have other concerns in their Medicare line of business, where they choose to put a pause or a temporary halt on increasing the audits. There could be significant settlement negotiations with providers in specific regions that where they choose not to turn the audits on or to slow the audit half down. So there is a lot of factors that impact implementation. What we can control is as soon as the client gives us data a rapid discovery around the data making sure that it is accurate and we have brought new tools into the company to be able to do that on a much more rapid basis giving feedback to our clients quickly. And then, we can of course control the implementation of developing and/or implementing our audit algorithms and scenarios for each customer once all of the data is accurate. So, running some of those processes simultaneously and making sure that our implementation team continues to drive down that period from ink to green is critical and those are the things we can control, but politics or IT issues or the network management group within our clients are really outside of our control. We can try to impact it, but we can't always impact that. And so, there are going to always be areas outside of our control. But our focus is get dollars and savings back to our clients as rapidly as responsible and that will drive our top line.

[David Howard Windley:]

Very good. Thank you very much.

[Operator:]

And our last question comes from the line of Toby Wann with Obsidian Research. Your line is open.

[Toby Wann:]

Hey, good morning, guys. Congrats on the quarter. Just taking the step back, could you guys kind of talk about the overall commercial opportunity? Where we are in terms of early innings, mid innings, just the other opportunities out there within the commercial space whether that's beyond managed Medicaid more towards Medicare Advantage, employer-based plans, just kind of talk about, how you guys see the long-term growth opportunity on the commercial side? You put up a couple of – you put up 20% growth last year; you expect 20% growth this year. How long can we continue to grow at that clip? Thanks.

[William C. Lucia:]

Thanks, Toby. So I'll start and just from our measurement, the market opportunity alone, and I am talking about total addressable opportunity. So this is a – it's a large number obviously, it's in the billions, and that's because the error rates in the programs across the nation still continue to be large and the lives continue to move into the managed care programs on both the Medicare and Medicaid side. That said, the HMS is – and I'll just give you some approximate numbers; we're probably about – in our commercial business, probably about 70% to 75% of it is coming from Medicaid managed care today with the balance from Medicare and then a smaller amount from what we consider true commercial risks, so employer-based insurance. That's why we still believe we're in the early innings, because we have a large growing opportunity in the Medicare Advantage line of business. If we were to look at our sales last year, we'd see a significant number of expansions in our customer base to start off working on their Medicare line of business. And we're just starting to see some sales success in the commercial line of business, so that's where our clients or potentially new clients, that's where our existing clients have said we'd like you to now focus on our commercial address population. So we think, that's one of the reasons, we believe as a company we're still in the early innings, because a lot of our work is transferable across the entire spectrum, of health insurance and our penetration rate in the Medicare and true commercial is much lower.

[Toby Wann:]

Okay. Thank you.

[Operator:]

I am showing no further questions at this time. I'd now like to turn the conference back to Mr. Bill Lucia.

[William C. Lucia:]

Thank you. Thank you for attending our call today. I want to thank our customers, our employees and our investors as HMS continues to focus on containing healthcare cost in our nation. We look forward to speaking to you again on our second quarter call in early August. Thank you and have a great day.

[Operator:]

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may now disconnect.