MiX Telematics Limited
Q3 2018 Earnings Call Transcript

Published: 1 Feb 2018

[Paul Dell:]

Good day and welcome to MiX Telematics Earnings Results Call for the Third Quarter of fiscal year 2018, which ended on December 31, 2017. Today we will be discussing the results announced in our press release issued a few hours ago. I am Paul Dell, Interim Chief Financial Officer and joining me on the call today is Stefan Joselowitz, who many of you know him. He is President and Chief Executive of MiX Telematics. During the call, we will also make statements relating to our business that may be considered forward-looking pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For discussion of the material risks and other important factors that could affect our results, please refer to those contained in our Form 20-F and other filings with the Securities and Exchange Commission available on our website at www.mixtelematics.com under the Investor Relations tab. Furthermore, we will also be referring to certain non-IFRS financial measures. There is a reconciliation schedule detailing these results currently available in our press release, which is located on our website and filed with the Securities and Exchange Commission. With that, let me turn the call over to Joss.

[Stefan Joselowitz:]

Thanks, Paul. I would like to thank you all for joining the call today. I am proud to announce that in Q3, MiX Telematics delivered the strongest quarter in the company's history. This is evidenced by the over 21% annual subscription revenue growth on a constant currency basis and the addition of 24,700 net new subscribers. In addition, we delivered record adjusted EBITDA of ZAR115 million at a margin of close to 26%. This was our sixth consecutive quarter of margin expansion and continues the great progress towards our longer-term goal of 30% plus. A few months ago, we marked the 10th anniversary of Mix's listing on the Johannesburg Stock Exchange and I wanted to take a moment to reflect on some of our accomplishments in the last decade. Just prior to listing in 2007, the company was primarily a provider of liquid tracking and fleet management services in South Africa with annual revenue of roughly ZAR277 million. Since then, through a combination of hard work, passion, persistence and consistent execution, we've book a business into an industry leading geographically toughest global provider of fleet and mobile asset management solutions. This year's total revenues are expected to be approximately ZAR1.7 billion, representing a compounded annual growth rate of approximately 18% over the past decade. Our commitment to innovation as evidenced by investments in research & development over the years has enhanced our competitive advantage, enabling us to deploy one of the broadest project offerings in the industry. We’ve also driven efficiencies in our operations, by investments in next generation platforms, such as Dynamics and MiX Lightening, as well as a new range of premium fleet hardware that we will be releasing later this year. These platforms are all being designed to provide a common foundation on which all applications in the group are developed. This has significantly improved the speed and quality of our software releases as evidenced by the 11 software updates and six mobile app releases completed during this last quarter. In regards to MiX Lightening this highly scalable backend platform, leverages leading edge technologies and architectural best practices to support exponential growth in our subscriber base. After system focus on our customers has resulted in our retention rates being 95%, with our large premium fleet customers and some of these relationships extend well beyond our average customer lifetime of approximately eight years. This highlights our commitment to customer service, as well as our ability to consistently deliver an attractive, easy to understand and easy to measure return on investment, which also drives long-term customer retention. As a final point, our ARPU has materially improved over the past decade, driven by a combination of our ability to sell a range of solutions on top of our core application, as well as our focus on bundling deals to our premium fleet customers. As a reminder, bundled deals deliver significantly more cash over the average customer lifetime and contributes almost $1,000 more in cash compared to an unbundled deal. The progress we’ve made with ARPU can clearly be seen in Q3, given the over 21% year-over-year growth in subscription revenue of 10% growth in subscribers. Now turning to a summary of our third quarter performance. Our subscription revenue of ZAR376 million was above our guidance and grew over 21% year-on-year on a constant currency basis. [Audio gap] Ladies and gentlemen, I apologize, I believe the line dropped at some point. The problem is I don't know where it stopped. So, I hope at the risk of boring you I am going to start my fiction again. So, I'd like to thank you all for joining the call today. I am proud to announce that in Q3, MiX Telematics delivered the strongest quarter in the company's history. This is evidenced by the over 21% annual subscription revenue growth on a constant currency basis and the addition of 24,700 net new subscribers. We also delivered record adjusted EBITDA of ZAR115 million at a margin of close to 26%. This was our sixth consecutive quarter of margin expansion and continues the great progress towards our longer-term target of 30% plus. A few months ago, we marked the 10th anniversary of Mix's listing on the Johannesburg Stock Exchange and I wanted to take a moment to reflect on some of our accomplishments in the last decade. Just prior to listing in 2007, the company was primarily a provider of liquid tracking and fleet management services in South Africa with annual revenue of roughly ZAR277 million. Since then, through a combination of hard work, passion, persistence and consistent execution, we've book a business into an industry leading geographically toughest global provider of fleet and mobile asset management solutions. This year's total revenues are expected to be approximately ZAR1.7 billion, representing a compounded annual growth rate of approximately 18% over the last decade. Our commitment to innovation as evidenced by our investment in research & development over the years has enhanced our competitive advantage, enabling us to deploy one of the broadest project offerings in the industry. We’ve also driven efficiencies in our operations, by investments in next generation platforms, such as dynamics and MiX Lightening, as well as a new range of premium fleet hardware that we will be releasing this year. These platforms are all being designed to provide a common foundation on which all applications in the group are developed. This has significantly improved the speed and quality of our software releases as evidenced by the 11 software updates and six mobile app releases completed during the third quarter. In regards to MiX Lightening this highly scalable backend platform, leverages leading edge technologies and architectural best practices to support exponential growth in our subscriber base. After system focus on our customers has resulted in our retention rates being 95%, with our large premium fleet customers and some of these relationships extend well beyond our average customer lifetime of approximately eight years. This highlights our commitment to customer service, as well as our ability to consistently deliver an attractive, easy to understand and easy to measure return on investment, which also drives long-term customer retention. As a final point, our ARPU has materially improved over the past decade, driven by a combination of our ability to sell a range of solutions on top of our core application, as well as our focus on bundling deals to our premium fleet customers. As a reminder, bundled deals deliver significantly more cash over the average customer lifetime and contributes almost $1,000 more in cash compared to an unbundled deal. The progress we’ve made with ARPU can clearly be seen in Q3, given the over 21% year-over-year growth in subscription revenue of 10% growth in subscribers. Now turning to a summary of our third quarter performance. Our subscription revenue of ZAR376 million was above our guidance and grew over 21% year-on-year on a constant currency basis. I want to point out that our reported and constant currency growth rate were pretty close in Q3, given the every rand-dollar exchange rate during this period. However, in mid-December the rand started strengthening dramatic against major currencies. I’d like to be explicit about this. I’ve always said I prefer a stronger rand to a weaker one. The United States is my home and I always look at the business in U.S. dollar terms. The stronger the rand is, the more dollars I'll see from our significant South African business and the more dollars are earned from our rand dividend. In fact, the day might very well come, when we’re reporting our business in U.S. dollars. However, for the time being, our functional reporting currency is the South African rand to a stronger currency means we reported this range for our significant U.S. dollar, euro and British sterling revenue. To optically, the strengthening rand does offset some of the revenue growth we’re expecting to experience in Q4 in rand terms while adding to our growth in U.S. dollar terms. At the bottom line however, the impact is almost negligible, since we’ve foreign currency cost in all of our operations, which comes down in Rand terms with a stronger currency. Ultimately, I believe our business valuation will be driven by our performance, both at a top and bottom line, measured in U.S. dollars, rather than in South African Rand. We obviously had no control over exchange rates, which are cyclical and there are pros and cons, whichever way you look at it, but on balance, another strong rand, the way Warren Buffet loves cheap hamburgers. During the quarter, we added 24,700 net new subscribers, taking us to a total base of over 664,000 up 10% year-over-year. Given the strong pipeline of committed orders in sales opportunities globally, we remain confident in our ability to maintain the momentum. From a regional perspective, the strength in the business was broad based as we saw record new addition in the Americas, as well as ongoing momentum in South Africa, Europe and the Middle East. We secured a few sizable customer wins in Mexico and Brazil, including a vast fleet of over 800 vehicles in the Brazilian City of Salvador. I’m pleased to report that in the Middle East and Asia, we’re now seeing renewed activity within our energy sector customers, a rebound which has lagged that of the United States, since the recovery of oil price. Paul will provide more detail in a few minutes, but we are raising our fiscal 2018 total and subscription revenue guidance, given our very strong performance this past quarter. In addition, we’re increasing our full year adjusted EBITDA margin guidance to 25.3% at the high end of the new range, up from our previous guidance of 25%, which is a now step-up closure towards our long-term target of 30% plus. Finally, I am pleased to say that during the quarter, we generated positive free cash flow, while at the same time executing our bundling strategy, we believe this highlights our ability to efficiently operate the business and report strong subscription revenue growth at the same time. So, in summary, we are very pleased with our strong third-quarter results, as we continue to see broad based traction and growth across all geographies. MiX Telematics remains well-positioned to maintain the momentum for the remainder of fiscal 2018 and beyond, given the ongoing strong demand from existing customers as well as the growing pipeline of opportunities worldwide. And before I hand it over to Paul, I really like to this opportunity to thank our teams in the United States, in Europe, in South Africa, in Brazil, in Dubai and in Perth for their hard work and focus over the past three quarters to deliver these great results. I love it when a plan comes together, well done guys. With that, let me turn it over to Paul to run through the details.

[Paul Dell:]

Thanks Joss. Let me walk through our third quarter fiscal year 2018 performance and recall that our reporting currency is in South African Rand. For convenience, we have translated our results into U.S. dollars, both for the 2018 and 2017 periods, using the December 31, 2017 spot rate. You can follow these conversions in our press release. In addition, please note that our results are presented on an operating basis unless otherwise noted. In the third quarter, total revenue came in at ZAR442 million. Of this total, subscription revenues were ZAR376 million rand, up 21% and above the high end of our guidance range. On a constant currency basis, subscription revenues, also grew over 21%. This strong performance was driven by the ongoing positive traction from our premium fleet customers across all geographies and vertical markets, including the energy sector. Hardware and other revenue was ZAR66 million rand or down 28% year-over-year. We continue to see significantly more bundled contract, which is a positive for our business longer term as the larger subscription engagements are more profitable. Subscription revenue now represent 85% of total revenue, an improvement compared to 77% in the third quarter last year. Looking forward, we expect the ongoing shift towards bundled deals to increase our subscription revenue as a percentage of total revenue, which will provide us with both improved visibility and higher margins. Our gross profit margin in the third quarter was 65.3% relatively consistent with the previous quarter. The gross profit in Q3 again included additional depreciation charges related to in vehicle devices, and hardware peripherals used in certain of our bundled fleet contract. These contracts generate higher ARPUs and as they go through contract renewal cycles, I expect it to drive an increase in gross profit margins, which we expect to trend towards 70% in the long term. Operating expenses were 53% of total revenue compared to 55% in the third quarter last year, which again highlights our ongoing commitment to cost controls and scale in the business. Record that our general and administration costs include certain development costs not capitalized. With those of you interested to see our historical capitalization and development cost expense, we have provided a table in our earnings press release. To provide investors with additional information regarding our financial results, we disclosed adjusted EBITDA and adjusted EBITDA margin as well as adjusted earnings for the period, which are non-IFRS measures. So, we have provided full reconciliation tables in our press release. Third quarter adjusted EBITDA increased 30% to a ZAR115 million rand or 25.9% of revenue compared to ZAR88 million or a margin of 21.9% last year. As Joss mentioned in his remarks, we are very pleased with our adjusted EBITDA margin, highlighting our steady improvement towards our long-term target of 30% plus. Adjusted earnings for the quarter were ZAR0.07 South African per diluted ordinary share, which was consistent with the third quarter of fiscal 2017. From a cash flow perspective, we generated a ZAR110 million and net cash from operating activities and made ZAR92 million investments of capital expenditures, including investments of approximately ZAR64 million in end vehicle devices. This led to a positive free cash flow of ZAR17 million for the third quarter compared to ZAR24 million during the same period last year. Capital expenditures were ZAR18.9 million higher than in the third quarter of fiscal 2017, primarily as a result of increased investments in in-vehicle devices. Due to the continued increase in the number of bundled subscription contract, as Joss mentioned, we are very pleased with our ability to generate cash given the ongoing investments in in-vehicle devices driven by the demand for our bundled offering. Now turning to our financial outlook, due to our strong third quarter as well as our expectation for the momentum and subscription revenue growth to continue, we are increasing our expectations for fiscal 2018. Specifically, we are raising our guidance of total revenue to the range of ZAR1,690 billion to ZAR1,695 billion. We are raising full year subscription revenue guidance to the range of ZAR1,432 billion to ZAR1,436 billion. This would represent growth of 15.5% to 15.8% compared to our previous guidance of 14.5% to 15.5% growth. On the topic of subscription revenue, we also provide quarterly guidance target as this is a way we have the highest favorable visibility and predictability. Subscription revenue is the largest fastest growing and highest margin component to our business. For the fourth quarter of 2018, we are targeting subscription revenues in the range of ZAR371 million to ZAR375 million, which represents year-over-year growth of 15.3% to 16.6%. As Joss mentioned earlier, during the fourth quarter, we have seen a dramatic strengthening of the rand versus the U.S. dollar which at current levels will be a headwind on the upcoming quarter's performance. However, on a constant currency basis, our fourth quarter subscription revenue growth will be over 19% at the high end of the range compared to last year. In terms of adjusted EBITDA, we're also increasing our annual guidance given the better than expected quarter three results and our expectation of the margin accretion to continue. Specifically, we are now targeting adjusted EBITDA of ZAR417 million to ZAR428 million in fiscal 2018, up from our previous guidance of ZAR403 million to ZAR421 million. At the high end of the new range, this represents a margin of 25.3% up from our previous expectation of 25%. In regards to adjusted diluted earnings per share for fiscal 2018, we are increasing the range to ZAR23.1 to ZAR24.8 South African from our previous guidance of ZAR0.22 to ZAR23.5 South African cents. Our new guidance is based on 527 million diluted ordinary shares and an effective tax rate of between 28% to 31%. In summary, we're very pleased with our strong execution during the third quarter as they continue to benefit from the board-based momentum of our premium fleet business. In addition, our ability to improve adjusted EBITDA margin for the sixth consecutive quarter is further evidence that our margin accretion strategy is working. I will now hand it back over to Joss for some closing remarks.

[Stefan Joselowitz:]

Thanks, Paul. Apologies again for the trans-Atlantic technology glitch during this call. I'm sitting today with Paul in Johannesburg reporting these results. I'd just like to reiterate that mix is running on all cylinders as we reported our strongest quarter in the company's history on both the top end bottom line perspective while at the same time generated strong free cash flow. We continue to make great progress towards our long-term targets and remain fully focused for maintaining the momentum for the remainder of fiscal 2018 and beyond. With that, we'll turn the call over to the operator to begin the Q&A session.

[Operator:]

Thank you. [Operator Instructions] And we'll go first to Brian Peterson, Raymond James.

[Brian Peterson:]

Thanks guys and congrats on a great quarter. So, the average revenue per vehicle was up double-digits and it looks like you are on pace for that matter to be up the best figure in quite some time. So, Joss if I would think about the long-term pipeline and the mix of opportunities in front of you versus what you have today, how should I think about that revenue per vehicle figure and what should we think about that over the long-term as a growth factor?

[Stefan Joselowitz:]

Certainly, in terms of pipeline, we certainly see nice opportunities, nice deals in fact both in our premium fleet business and in our lower ARPU asset tracking business. So, it still remains a difficult one to model because it is driven largely by the mix of products that are deployed during the quarter. So, what's very evident in this quarter we're just reporting is we saw a large percentage of premium fleet deals being implemented from a ratio perspective and you'll recall four or five quarter ago that ratio was apparently much lower because we were doing much higher ratios of the lower ARPU asset tracking deals. So, we are planning for a reasonably balanced year. This quarter was particularly strong from a higher ARPU perspective and not to say we don't expect to see that going forward but all the best we can do when we're marketing our year ago going forward is using our best judgment based on the information that we've got in front of us. So, we still expect to see quarterly variations both up and down from a blended ARPU perspective.

[Brian Peterson:]

Got it and just one more from me. I know you're not giving guidance on fiscal year '19 today, but if you had to call on a few key factors that investors should pay attention to for next year, what would be the top two or three? Thanks guys.

[Stefan Joselowitz:]

As I mentioned in the call, we are firing on all cylinders. We're pleased with our pipeline. Our focus is clearly on finishing this year with a flourish and beyond. So, we're very focused on delivering our strategy, executing on our strategy and I'm pleased that all of our geographies are contributing. So, despite some regional challenges, we see nice contribution from each one of the regions and that's always a good sign from our perspective. Of course, the energy sector is our biggest vertical in 20% odd of our revenue and probably growing a little bit now because we're seeing a much stronger activity globally now out of that sector. So, it's another thing I would bear in mind that we had not just a lag between the rebound in the energy sector that we had seen in other sites versus Middle East and Asia etcetera. We're starting to see a rebound happening in those regions as well. So, I think bear those factors in mind.

[Brian Peterson:]

Great. Thanks Joss.

[Operator:]

We'll go next to Matt Pfau, William Blair.

[Matt Pfau:]

Hey guys thanks for taking my questions. First, just wanted to touch on the cash flow a bit. And I think you stated that the incremental cash flow was a bundled deal over the lifetime versus an unbundled deal is about $1,000. But when you see that inflection point over the course of the deal? How many years or months does it take when a bundled deal becomes more cash flow accretive that an unbundled deal?

[Stefan Joselowitz:]

Certainly, it's basically from contract renewal onwards on the assumption that there is no need to potentially roll out new hardware at that stage. So, we started driving this exercise quite aggressively as you know post our capital raising on the New York Stock Exchange. So, our early contracts are now going into renewal cycle stage. So that inflection point will certainly be starting around about now if it hasn’t already started, but of course within we're investing cash in new deals. But there is no doubt that we're further into that cycle then we were when we started and I would imagine we're probably a year to 18 months away from being a cash machine again. I would imagine that that's the kind of time. Although we are generating positive free cash and I am pleased with that performance. I am thinking back to what we know we're capable of achieving and certainly as these deals cycle through, as they become fully amortized and we're renewing higher ARPU deals without having to allow cash flow hardware that's when the real magic starts happening.

[Matt Pfau:]

Got it. And then just one more for me. In terms of the ARPU, I'm guessing that the bundled deals are really the biggest contributor to the increase in ARPU. But other than bundled deals, are there any specific products that are sort of driving the most incremental ARPU that you're seeing currently?

[Paul Dell:]

So, it's certainly not only -- bundled deals are a big contributor, but higher value peripheral add-ons that we're doing are certainly part of that picture now. So, hours of service we've got tens of thousands deployed and that adds more revenue, subscription revenue. We've seen ongoing improving traction out of mix vision as I've reported in previous quarters and that carries on and we're enjoying additional revenues out of that. So, it is a combination of factors which is really the bundled deals being part of the picture. Another part being add-on modules or peripherals that drive ARPUs up.

[Matt Pfau:]

Got it. That's it for me guys. Thanks for taking my questions.

[Stefan Joselowitz:]

I appreciate it. Thank you for your time.

[Operator:]

We'll go next to Joshua Reilly, Canaccord Genuity

[Joshua Reilly:]

Hey Josh on for Mike here. You mentioned the new hardware platform that's potentially going to be coming out later in the year, is that going to be at a lower cost than the existing one? Could you talk about benefits for that?

[Stefan Joselowitz:]

It's to replace our premium fleet platform. So, it's a bunch of -- there are a bunch of benefits both in terms of the kind of modularity in terms of things we can add on. It also enables a lot of additional features that we could potentially offer to a customer without deploying additional hardware. So, it's got -- it's more self-sufficient then I guess our existing platform is and it's also got new technologies, new architecture in it that enables it to communicate more efficiently and more effectively with in terms of how it interacts with other peripherals and with our back office. So, it's an important component. We're not in the hardware business and I've made this clear from the beginning. We're in the subscription services revenue business, software business. But this is certainly -- we're also one of the few companies that see benefit in controlling our whole ecosystem and we continue to see that benefits. So, this is an important enabler for us and we think it's going to enable us to do more things for customers at a more effective cost ultimately as well. That's a combination of both competitiveness and driving additional ARPU potentially.

[Joshua Reilly:]

Okay. Great. And then I think you mentioned there was a record number of net add in the U.S. That's one of the more competitive markets and I just wondering is there any verticals driving that beyond energy at this point?

[Stefan Joselowitz:]

Yeah, we've got, it's not in terms of the traction we saw in the Americas in this quarter. It's a combination of verticals, but there's no getting around the fact that energy still remains a very big part of our U.S. business and it's something we're working very hard to pull other verticals to ultimately reduce our lines on that sector. And we're not yet satisfied with the ratios, with the diversification we've achieved. It still remains a work in progress. It is progress. We're making progress but it's a work in progress.

[Joshua Reilly:]

Okay. Great. And then last one for me, we didn't get the geographic breakout this quarter but I am just curious, how are you thinking about scaling other regions, margins, up to the level that you have currently in South Africa?

[Stefan Joselowitz:]

Yeah, we will give another breakdown. I think we do it twice a year. So, we'll do it at the full year, but Q4 results, so you get a feel of that, but we're making progress. I am absolutely delighted with the margin accretion trend that we're seeing in our business over the last six and seven quarters now. And that's come really from all of our operations putting together both the topline driving towards scale and a very big focus on making sure that out costs accretion percentage remains below our topline accretion and that's where the magic really starts happening. So, we know what is achievable with scale. We see 40% plus out of our African business and that's ultimately our vision really for all of our operations. Now realistically can we hit all of them in a relatively short timeframe probably not, but we think we can get one or two others of them there. And we don't need to get them all there to get them -- to get to our target of 30% plus EBITDA margin. We need to get -- we need to get really another one of them there and for the others to continue focusing on their efficiencies and as a group, our central services function to continue to get more efficient and the team has been doing a great job in achieving this. So, I am expecting to see the trend continue.

[Operator:]

[Operator instructions] We'll go next to David Gerhardt, First Analysis.

[David Gerhardt:]

Hi. Good morning, Joss. Thanks for my question and congratulations on a nice quarter. So, my first question, I wanted to revisit the mix of additions, it sounded like again that there was a nice strong mix of premium fleet, but in past quarters I think you said two quarters in a row of premium fleet increasing as a percentage of the mix. Did that hold for yet another consecutive quarter?

[Stefan Joselowitz:]

Certainly, I would, off the top of my head.

[David Gerhardt:]

Okay. And then in terms of the gross margin profile I know that with the depreciation of hardware from bundled deals we've seen a little bit of a decline in hardware that's been ongoing and this morning you reiterated your target -- long-term target of going back to 70%. Just wondering how we should think about the trajectory of margin at least near-term, when do we start turning back upwards towards going to the positive territory and on a positive trajectory for gross margin?

[Stefan Joselowitz:]

We've had a combination of things, one, I guess the most significant is a couple of large deals we did nice ARPU deals, but that have third party, high cost third party hardware peripherals that we've bundled and the margins are very slim on those third-party pieces of equipment. So, during the initial term of the contract, before we're going to a second cycle it's had the impact of all muting our gross profit margin and we expect that those kind of deals are reasonably unusual. So, we've done some of the larger deals we're doing now are our traditional kind of deals. We're bundling out hardware without third party peripherals, which is certainly doesn’t which returns us to a margin trajectory back towards our stated goal. So, it does get influenced by these larger deals which are effective for us. So, I am not -- I don't want to turn away from that. We're also looking at internally getting some of these hardware providers to actually come to the party in terms of how we handle that bunding. As you know our boxes is a $100 box and we're doing some deals where we're paid $500 for other people's hardware to bundle into a transaction and we certainly can't make anywhere near the kind of margins the deal worth for a customer on that bases that we make on our own box. We recognize having those impact and we remain focused on our targets. So, I've made it very clear to the team, we have to get our direction back the right way and get to where -- get to the destination that we set for ourselves and that's where we're headed.

[David Gerhardt:]

Okay. And then last one for me, one of your competitors actually a couple of them were acquired in the U.S. and we're getting a little bit further off from when those transactions took place. Just wondering if you're seeing any change so far on the U.S. market in regards to competition with one of your biggest competitors being acquired? Just wondering if they’ve revitalized or if you're seeing any change in the balance?

[Stefan Joselowitz:]

It's one I think you're referring to -- my view is that there is a way for them to go in terms of getting them -- in terms of getting them a more serious competitive fit than they were I suppose in the first place. So, I'll observe telco doing these kind of deals in the past and globally and they haven't been generally particularly successful at doing them. So, time will tell as I said we're focused on our business, we're focused on driving our strategy. Clearly, what we're doing is working where we're seeing -- we're seeing good traction in our operations in just about in fact in all geographies. We're winning nice deals and we've just delivered on balance the strongest quarter in our history. So, I'll still speak with one eye. I am never going to turn a blind eye to a competitive fit, particularly when the kind of sizes that are developing in our industry, but we can't do much more than what we're doing which is focusing on what we do.

[David Gerhardt:]

Okay. Thank you very much for the color. That's it for me.

[Stefan Joselowitz:]

Appreciate your time. Thanks again.

[Operator:]

That will conclude the question-and-answer session. I'd like to turn the call back over to management for any additional or closing remarks.

[Stefan Joselowitz:]

Appreciate it. Thanks again for joining us today. Just a reminder, we will be presenting at the Raymond James Conference in Orlando Florida in early March and excited to see some of you there. If any of you are attending and for now really appreciate your attention, your questions. Have a great day. Thanks very much.

[Operator:]

Again, that does conclude today's call. Thank you for your participation.