PAR Technology Corporation
Q2 2015 Earnings Call Transcript

Published: 8 Aug 2015

[Operator:]

Good day, ladies and gentlemen and welcome to the PAR Technology Corporation Fiscal Year 2015 Second Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder this call is being recorded. I'd now like to introduce your host for today’s conference Vice President for Business and Financial Relations, Chris Byrnes. Please go ahead sir.

[Christopher Byrnes:]

Thank you, [Mallory] and good afternoon everyone. I’d like to welcome you to the call for PAR’s second quarter 2015 financial results review. I'd like to take this opportunity and take care of certain issues in regards to the call today. Participants on the call should be aware that we are recording the call this afternoon and will available for playback. Also we are broadcasting the conference call via the World Wide Web. So, please be advised if you ask a question it will be included in both our live conference today and any future use of the recording. Participating on the call with me today is PAR CEO and President, Ron Casciano; and Matt Trinkaus, the Company’s Chief Accounting Officer. Please note that today’s call may includes forward-looking statements that reflect management’s expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information on this conference call related to projections or other forward-looking statements may be relied upon and subject to the Safe Harbor statement included in our earnings release this morning and in our annual and quarterly filings with the SEC. I’d now like to turn the call over to Ron Casciano for the formal remarks portion of our call, which will be followed by general Q&A. Ron.

[Ron Casciano:]

Thank you Chris, good afternoon everyone. As always we appreciate you participation today. Today’s call will focus on our second quarter results. After my formal remarks and our performance in the quarter, Matt Trinkaus, our Chief Accounting Officer will discuss the details of our second quarter financials. Let me begin with the recently announced addition to PAR senior leadership team. Mike Bartusek joined the company as PAR’s CFO in mid-July. Mike is distinctly qualified to serve as our company's CFO and we are looking forward to leveraging his experience for both the day-to-day financial operations of the company and long-term strategic planning. Mike is with us on the call today as well. Now let me start our results for the second quarter. This afternoon we announced that the company reported second quarter revenues from operations of $63.3 million compared to $57.4 million in the second quarter last year at 10.3% increase. On a non-GAAP basis are reported net incomes from operations of 553,000 or $0.04 earnings per diluted share in the quarter. This compares to a non-GAAP loss from operations of 336,000 and a $0.02 loss per share in Q2 last year. We recorded GAAP net income from operations of 101,000 and earnings per share of $0.01 in the quarter versus a GAAP loss from operations of a 519,000 or a loss per share $0.03 last year. The 2015 second quarter GAAP results include a $416,000 restructuring charge. For the first six months of 2015 revenues from operations increased 7.9% to $122.9 million compared to $113.9 million in 2014. On a non-GAAP basis net income from operations was 610,000 and $0.04 per diluted share compared to a net loss of 979,000 or $0.06 per share for the same period in 2014. The company reported a GAAP loss from operations of 284,000 or $0.01 per share compared to a loss of 1,000,005 and $0.10 loss per share for the first six months of 2014. Our primary goal continues to focus on improved value for shareholders by increasing our profitability. We are making steady progress any improving the performance of our company and strives to be more predictable in our results and provide more stability in our operation. And reviewing our second quarter results, I am pleased report that our hospitality segment produces another strong quarter and grew revenues 10.2% over 2014. Brink POS our cloud data solution for restaurants continues to perform above expectations. PAR selection by Five Guys for their 1200 stores is our biggest customer win to date for Brink POS software. Five Guys noted the cloud-based architecture of Brink is the launch-pad technology allowing them to offer a complete solution for the Five Guys brand that will easily accommodate changing demands. Five Guys will utilize the PAR Tablet solution and the PAR POS terminals in their restaurants for order entry and other management functions. Our new customers truly believe that the PAR Brink solution is a game changer for their restaurants and the industry as a whole. They feel they have found a true technology partner in PAR. Building on the selection of Five Guys and ensuring we maintain our customer momentum. We’re very pleased to announce earlier this week a solid win with Pita Pit selecting PAR Brink cloud solution for their 250 U.S. based stores. Once again the robustness and flexibility of the Brink platform was noted as the deciding factor over the competition. Pita Pit a growing concept and a big win for PAR in the fast casual market. The Brink solution continues to receive great interest from prospective customers and we have high confidence in the continued success of the software and it has established itself to be the cornerstone of our product and services portfolio. Our company also saw strength in our Tier 1 customer base in particular McDonald's in the quarter as we realize accelerated demand for our hardware products and lifecycle support services. Regarding our SureCheck solution we are on plan for the quarter and have begun the process of rolling out the solution with our major U.S. based retail customer in China, Mexico, Central America, United Kingdom and Canada. We deploy three new pilots in the quarter and our pipeline continues to expand as SureCheck garner significant interest with prospective customers. In the quarter we released the PAR SureCheck Advantage in all-in-one android-based platform with immediate interest with current and prospective customers. Now looking at the hotel side of our hospitality segment, this business continues to make progress and successfully deployed our ATRIO cloud solution to several new customers in the quarter. To date we have over 180 properties deployed or in backlog as market interest in new customer opportunities continue to grow. In the quarter we also signed new customers for feature-rich legacy spa and property management software products and services. As many of you know PAR’s hospitality business has recently experienced a significant transformation with adding software capability and realigning our infrastructure to ensure that our operations are streamlined and profitable. This transformation will continue as we further reorganize our operations while adding new products and capabilities. Our strategy is addressing customer requirements for the management of business data and our combined products provide a unique solution for the expansion of Internet of Things or IoT in restaurants and retail markets. These capabilities will help our customers blend real world and digital data to provide them with new and valuable insights like security alerts, marketing campaign, loyalty programs all in real-time. By doing so we are creating fast, secure and scalable solutions that allow customers to answer their most complex business questions today. Now let me turn to our government business. We continue to see strength in this segment as contract revenues and contract margins grew 10% and 33% respectively in the quarter and we increased our participation in the U.S. Army [indiscernible] program and received higher task orders surrounding the Eagle Intel-X initiative. In the quarter we signed a new technical services subcontract with U.S. Air Force at Wright-Patterson Air Force Base in Ohio totaling $3.7 million. We are committed to growing our government business by providing superior value compared to traditional defense contractors as we drive operational excellence, targeting improved margins, while extending our leading customer satisfaction. We will advance our leadership by ensuring that we have talented people in the right places to scale our business and achieve our goals. I would now like to turn the call over to Matt Trinkaus to review our financials in further detail. Matt?

[Matt Trinkaus:]

Thanks, Ron and good afternoon everyone. Product revenue in the quarter was $25.8 million an increase of $2.8 million and 12.4% compared to the second quarter of 2014. During the quarter, the increase in revenue was driven by multiple sources, regions and product lines. Highlights for the quarter includes strong growth within the company's international market noting a 28.9% increase over 2014. The majority of the increase was within PAR’s International markets was driven by the company's largest global customers as they continue to upgrade their technology platforms. Additionally, the growth in revenue from new customers contributed equally to the overall growth during the quarter. Service revenue was higher during the quarter generating $15.9 million versus $14.9 million in 2014 noting a 7% growth. The increase in revenue is primarily driven by sales of software related services associated with the company’s Brink, PixelPoint and ATRIO software solutions. In addition, service revenue generated by the company's hardware repair center has increased compared to prior-year driven by higher volume from the company’s Tier 1 customers. The company's recurring revenue base which represents both hardware and software related service contracts grew 5% in the quarter. Overall recurring revenue represents 25% or $10.4 million of total hospitality revenues during the quarter. Contract revenue from our government business was favorable year-over-year increasing $2.1 million or 10.4% to $21.6 million from $19.5 million in the second quarter of 2014. The increase from Q2 2014 is mostly due to the activity within the company's ISR contract. Contract backlog continues to be strong noting the total backlog of over $73 million as of June 30 2015. Product margin was 29.6% in Q2 2015 versus 31.1% in Q2 2014. The decrease in product margin percentage primarily relates to an increase in volume of lower margin product offering compared to 2014. Service margin for the quarter was 34.7% an increase of 730 basis points and 27.4% reported in the second quarter of last year. Service margins have been favorably impacted by an increase in software related services during the period primarily driven by SaaS revenue and professional services related to software deployments. Government contract margins increased 110 basis points to 6.4% as compared to 5.3% in the second quarter of 2014. As a result of favorable contract mix with a high volume of revenue earned through higher-margin contracts. Non-GAAP SG&A was $8.9 million a decrease of $300,000 from Q2 2014. The company continues to monitor its cost structure to better position itself within the global markets and enhanced shareholder value. Research and development expense was $4.4 million up from $3.8 million recorded during 2014. The majority of the increase is due to R&D associated with the company's acquisition of Brink and its POS cloud-based software portfolio and other investments within our various software platforms. Now to provide information on the company’s cash flow and balance sheet position. Cash uses in operations during six months ended June 30 was $554,000 mostly due to changes in net working capital requirements offset by the add-back of non-cash charges. Changes in networking capital are mostly due to decreases in accounts payable base and timing of payments to vendors for inventory purchases and increases in account receivable based on volume of product sales and contract billings. This was offset by increases in customer deposits and deferred revenue. The company decreases its borrowing and line of credit by $1.8 million during the quarter capital expenditures including software costs was $2.4 million. Inventory decreased from December 31, 2014 mostly related to the deployment of product for new customer rollouts. Additionally, accounts receivable increased compared to December 31 primarily due to higher revenues associated with hospitality segment. Days outstanding remained consistent with December 31 for hospitality and government noting 53 and 43 days respectively. This concludes my formal remarks and I'd like to turn it back to Ron for his closing comments.

[Ron Casciano:]

Thanks Matt. In summary, PAR has taken many steps forward in the last few months generating improved results for the first half of 2015 and building positive momentum in our two business segments. We are seeing increasing demand for our SaaS products, Brink, SureCheck and ATRIO that will accelerate the growth of our recurring revenue in the future. We are encouraged about the strength in our government business is evidence by the double-digit revenue growth and improved profitability this past quarter when compared to the second quarter in 2014. We’ve made progress against our key strategic initiatives elevated our effectiveness in delivering innovative and impactful technical solutions to both existing and new customers within our target markets. We will focus on executing against these important initiatives in the second half of this year with a clear objective of accelerating growth distinguishing PAR is a global technology solutions leader in enhancing shareholder value. We appreciate your participation on today's call and we look forward to providing updates throughout the coming quarters as PAR continues its mission of building a strong technology company in the markets we serve. And as always, I want to thank our employees for the dedication focused and hard work as they strive to achieve our performance goals. With that, we will be pleased to take your questions. Thank you.

[Operator:]

[Operator Instructions] Our first question comes from the line Sam Bergman from Bayberry Asset Management. Your line is now open. Please go ahead.

[Sam Bergman:]

Good afternoon. Ron, Chris and Matt how are you?

[Ron Casciano:]

Good Sam.

[Matt Trinkaus:]

How are you?

[Sam Bergman:]

Good, good. Can you talk about the revenue of this quarter the increase is there any particular rollout of new customer that accounted for the majority of that revenue increase?

[Matt Trinkaus:]

Sure Sam. The revenue increase was aided in a couple areas certainly McDonald's as I mentioned in my remarks was a big driver of the revenue increase both domestically and internationally a lot of our new customer wins and Brink software and SureCheck accounted for smaller amounts of the revenue growth and as you know under SaaS model takes a little bit longer to build up, but that's generally the major reasons the McDonald's demand and our newer products and our your customers as a secondary reason.

[Sam Bergman:]

So could you tell us [indiscernible], how many implementations you had how many stores in the 1200 stores you have already installed.

[Ron Casciano:]

Yes, very, very few Sam we anticipate that the Five Guys rollout will starting Q3 and it'll continue over probably the next 12 months to 18 months.

[Sam Bergman:]

Okay I have always expecting on that in the third and fourth quarter?

[Ron Casciano:]

Well maybe close to half in the second half of the year in total Sam. [Multiple Speakers]

[Sam Bergman:]

So have you started any implementation at all?

[Ron Casciano:]

Yes, we had a couple in Q2 when we started ramp up in July.

[Sam Bergman:]

Okay on the ATRIO side I have not seen many announcements versus what we saw in the first quarter. What’s the pipeline look line on that?

[Ron Casciano:]

The pipeline is growing we did win one account that we haven't been able to announce yet. The hotel count for their property now is anticipated between existing hotels today and their growth plans over the next 18 months could be a 40 hotel win for us which would be our largest win to date, The pipeline is increasing the little bit with the size of other hotel changes in that 20 plus areas. So things are picking up even though we haven't seen any announcements I mentioned in my remarks Sam were up to 180 installed plus backlog as far as number properties. So we are making progress.

[Sam Bergman:]

The other question I was defense so or on your government site. So the backlog seems to me that the lowest backlog in a long time is there – what’s pipeline look like there.

[Ron Casciano:]

Sam you are right this is lowest has been in several quarters and however I think it is a timing thing and we have a very robust pipeline and are expecting sum follow-on wins in the areas that were working and especially in the ISR area. And hopefully we'll see some announcements very soon that will grow that backlog significantly.

[Sam Bergman:]

Ron, do you have any software numbers for us in this quarter?

[Ron Casciano:]

The numbers we reported were in Matt’s comments about software and software related services and recurring revenue.

[Sam Bergman:]

But you have a net amount of software revenue?

[Ron Casciano:]

We don't report that the detail Sam. I mean we do have obviously the software revenue we have is [indiscernible] SaaS. And at this time we’re not reporting that we’re reporting total software and software related services.

[Sam Bergman:]

Any obvious plans to report that in the near future or not?

[Ron Casciano:]

We certainly are going to evaluate that option going forward, Sam.

[Sam Bergman:]

Thank you very much.

[Ron Casciano:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Anthony Hammill with Broadview Capital. Your line is now open.

[Anthony Hammill:]

Good afternoon, gentlemen nice to see an acceleration on the top line there.

[Matt Trinkaus:]

Thanks, Anthony.

[Anthony Hammill:]

In terms of the restructuring and I think the original number was cost of about a $1.5 million looks like you spent pretty much that amount in Q2. Could we read that as saying that you’re essentially done with the restructuring or is this first small step maybe you can just expand upon? Exactly, what happened today and then what's likely to happen in the future as you look to for the right size the cost structure of the business.

[Ron Casciano:]

Sure, Anthony. As we announced at the end of our first quarter we had embarked on our initial phases of cost reductions where we estimated $2 million savings on an annual basis, we’re very confident that we've achieved at least that amount going forward. And we’ll start to see the majority of the benefit of that in the second half of the year. We are not done, we have other projects that were about to begin. I think I alluded to that as well the first quarter remarks that we’re not gone and we expect to do more. I'm not at a point yet where I can try to quantify it. But certainly we’re going to shoot for larger amounts and that will really have an impact. So and we’ll begin those right away the starting now. So….

[Anthony Hammill:]

Okay, so long-term if it's $2 million that’s still you know at the current level of profitability even if you were to sort of slash run rate $2 million of that cost it’s still not what I or like other analyst would deem, an acceptable level of profitability. If we’re looking forward what do you guys and management and the board think of as unacceptable level of profitability for, let’s say the hospitality business. Because understand the margin....

[Ron Casciano:]

You know this is a question that I am not going to pinpoint the exact amount. But let me tell you we are working as both ways as we just discussed Anthony, we are going to make some more what I consider significant reductions going forward. But at the same time we have to make sure that we have enough resources to achieve the revenue growth and continued the momentum we have with our software products and that will certainly improve margins and accelerate the growth on the bottom line. So we are happy with the progress we’ve made up at this point but we are certainly not done and trying to drive much higher operating margins on the bottom line.

[Anthony Hammill:]

Okay. Moving to R&D which is one of your largest cost, you know this year you'll spend about a quarter of your market cap on R&D. How should we look at that, is there a portion of that that is kind of one time in nature as you’re looking to finally build-out ATRIO or is that just this very high level or is just something we’re going to have live with and hope the revenue gets to a point where as a percentage of sales, it doesn’t so…

[Ron Casciano:]

Yes, and couple things about R&D Anthony. First, the comparables are skewed because of the timing of the Brink acquisition which was late in the third quarter last year so that's impacting that comparability analysis. As far as the…

[Anthony Hammill:]

Yes, I think more just on the absolute like that you guys do spend a lot of money on R&D and as far now the revenue growth was in this quarter and we have yet to see much of that translate into growth and profitability. I’m just not talking about this quarter I’m talking about – looking back over the last.

[Ron Casciano:]

Yes, three to six months or 7% R&D spend as a percent of total company revenue. I think you'll see a slight uptick in the dollars as we have a couple of new project planned for Q3 and then after that it showed level out somewhat, but as you know we are never done with software we are always looking to add features and functions and we have a pretty good team right now, we don't – but we are constantly evaluating what investments will we need to make to continue to drive the revenue growth.

[Anthony Hammill:]

Okay. And the board hasn’t composed now I congratulate you guys on finding what looks like very capable team. Can you let us from the outside, can you let us know about some of the maybe early findings or jobs that the board has passed the company with or anything that you can share with us in terms of what this seems a very capable group as gone and we’ll do to help PAR become a better more profitable company?

[Ron Casciano:]

Yes. Let me just say in general Anthony we are very pleased with the board and they are advising us in the area – one of our key objectives that is to grow software, grow recurring revenue and they are helping us in that area which is a key component to our future growth and they of course want to see improvement on the bottom line as well. So we are aligned and sink in – we got a good team together and we are working well together.

[Anthony Hammill:]

Okay, and in partially to echo one of the Sam’s points earlier I think if the focus is on recurring revenue and software it certainly would be helpful to be able to disclose the revenue is because that’s the revenue that’s going to attract the high multiple and get people interested?

[Ron Casciano:]

That’s a fair question, fair comment and we’ll certainly take a look at that is as the number grows.

[Anthony Hammill:]

And my last question and I appreciate the time with the restructuring and improvement on the cost structure and again hopefully that continues and with just like top line growth and hopefully that accelerates as well that the hospitality business has a standalone should be at least breakeven and making some money from here on that would at least – that should soon be the case. With that and you were in the context of that can you once again explain to me why it makes sense to have both the hospitality business and the government business under one public security because I understand in the past the cash flow that would come in from the government business you could rely on to fund the other business, but if that rational very more is it what is the rational for at least not exploring the separation of the two businesses?

[Ron Casciano:]

Anthony, the boards in the past and the new board as well always continues to look at our strategic options for our different businesses. It’s on the agenda in every board meeting and as you said the government business is doing very well, we have – as I mentioned to Sam we’ve a very big pipeline there, it’s profitable, generating cash right now, restaurants run on and hotels run in the right track, but we are not talking about any major restructuring there or changes at this time.

[Unidentified Analyst:]

Okay, but it is something that when the board meets?

[Ron Casciano:]

Absolutely.

[Unidentified Analyst:]

Big picture.

[Ron Casciano:]

There's a lot of things you know as long list of very important things that we discuss and its our job to do that and then you know looking at our different businesses and what options to grow them you know at the end game is to maximize shareholder value. So that is discussed all the time.

[Unidentified Analyst:]

Okay well I again I just restate our please to made opinion that is its our view and I am sure, sure – so there is would go along way to maximizing shareholder value.

[Ron Casciano:]

Yes.

[Unidentified Analyst:]

So thank for the time and good quarter.

[Ron Casciano:]

Thank you very much for your questions.

[Operator:]

The next question comes from the line of [indiscernible]. Your line is now open. Please go ahead.

[Unidentified Analyst:]

Hi, congrats on a good pick up on the quarter. I have kind a broader level of question. As you kind of look at the business are there some kind of secular drivers that because kind of accelerated growth some of the kind of new innovation minute kind of essentially kind the merging of like hardware and software what kind of plan need to – is that kind of like any kind of significant secular forces at place that was probably kind of accelerated growth over the next couple of years.

[Ron Casciano:]

Certainly our strategy for diversifying the revenue growing SaaS software that we've been talking about combined with our new innovative hardware products come out within the last year we come out with a tablet offering with we came out with this new sure check all in one product. So I think we were really on track to keep up with innovation is going to drive growth and keep up with the demands of our customers and as we grow this recurring revenue you'll see the accelerated growth in the bottom line.

[Unidentified Analyst:]

Great and kind of specifically like if you look at kind not so much better with the next one or two quarters but longer-term 18 months or two or three years. Any kind of paint like what should be like kind of upsize scenario or even kind of a little bit realistic scenario and some of these kind of come together.

[Ron Casciano:]

Well not going to get specific on a size but we are certainly look to double the revenue of the total company in the several years but its going comes in steps its going to come as we continue to build up the software and recurring revenue. We continued win new customers our break acquisition for example is I had a plan in meeting our expectations so far. So were very optimistic about the future.

[Unidentified Analyst:]

Great, great and I am looking if you fast forward like three years I am how large as a percentage of revenues would expect kind of your SaaS POS software business to be kind of what’s the entire business?

[Ron Casciano:]

I am not going to speculate on that at this time, but certainly it'll be a much larger percentage of the total revenue. Again our focus is recurring revenue and it starts slow but we're making progress, we’re ahead of our plans and you’ll continue to see the benefit of it is - hopefully, our success continues.

[Unidentified Analyst:]

Great. And just one last question, you had quite a few kind the big global wins that you have kind of discussed especially – but how many of those wins you think even though they may have bought more of the traditional offering. How many of those wins, those wins that you had were as a result of having Brink in the portfolio. So what I am trying to understand is was Brink one of the key factors that help you win some of the things even though Brink may not be what’s primarily being used by the big global customers?

[Ron Casciano:]

Yes, certainly software drives the sale and it was the bright software that was the start and key reason that we won Five Guys that we won Pita Pit, that we won Sonny's Barbecue and we would not have been in the game if wasn't for their product and PAR’s ability to provide the total solution to many of those customers, not only just the software but hardware and services, lifecycle support.

[Unidentified Analyst:]

Great. And just quick follow-up in terms of kind of pipeline have you noticed kind of a measured difference in pipeline kind of pre-and post Brink?

[Ron Casciano:]

I am sorry that was pipeline, you asked.

[Unidentified Analyst:]

Yes, I mean asking is the size of your pipeline you know – the wins are the wins we cannot see that. But has your pipeline increase as a result, are you [indiscernible] more and more deals because of Brink?

[Ron Casciano:]

Absolutely, without a doubt when we acquired the Brink product, Five Guys was not in the forecast and to win an account of that size with that product is the tremendous accomplishment and it’s going to get a lot of attention a lot of bigger size customers, we certainly hope so.

[Unidentified Analyst:]

Terrific. And good luck for rest of the year.

[Ron Casciano:]

Thank you very much.

[Operator:]

Thank you. Our next question comes from the line of Bill Lauber with Sterling Capital. Your line is now open. Please go ahead.

[William Lauber:]

Yes, we are on the good quarter, it looks like maybe our patience is going to be rewarded.

[Ron Casciano:]

Thank you, Bill.

[William Lauber:]

We’ve noticed and heard has some anecdotal evidence that - in this slow growth economy a couple of sweet spots in this economy are the hotel and the restaurant business. Are you finding that's true and is that helping are you finding that these two sectors of the economy are possibly willing more confident, more willing to be spending money on software and hardware?

[Ron Casciano:]

Yes, we certainly - finding you know the CapEx budgets are stable and growing in some areas and we’re certainly seeing that in our in our day-to-day sales activity. So we’re pretty bullish on the pipeline that were building in our technology products so in both restaurants and hotels. So we are seeing some good uptick, we are seeing some accelerated replacement opportunities. So we just got to keep at it.

[Unidentified Analyst:]

You mentioned that your McDonald’s contributed significantly to the uptick in revenue, do you anticipate that continuing throughout the year or is that a…

[Ron Casciano:]

McDonald’s will be a solid contributor throughout the balance of the year the growth rate may slow a little bit as we come to the end of certain demands or to fulfill certain demands in different parts of the world, but we certainly are counting on our new wins here that we've announced with the – there are nine major customers that are going to more than offset that slowdown.

[Unidentified Analyst:]

The momentum of Yum! what’s going on there?

[Ron Casciano:]

Yum! started in between cycles with them we are still delivering to them throughout the world and our relationship is as strong as it's ever been, but there are in between major cycles although we started this year to deliver to one of their largest franchisees in the United States. It has been a longtime customer of ours and they're going through a replacement cycle now, but it will return to growth in the future for sure.

[Unidentified Analyst:]

Okay. One last question concerning ATRIO. I know in the past if I understood this correctly that one of the concerns on part of these hotel especially the larger change was the in fact that the security about the cloud, is that correct and is that concern still persists and is there anything that you are doing or can do to alleviate that concern?

[Ron Casciano:]

We think security and clouds getting a lot better than it was Bill. I’m not sure that's a major obstacle anymore and certainly it is to some point, but we are making headways into the smaller independence and collections. I think the big guys I don't believe there has been a lot of big decisions to change out at this point in time that will come in the future. So we are not surprised by a lot of reluctance. I think we've mentioned before that the adoption rate in the early part of the ATRIO release is slower than we had anticipated, but it’s starting to pick up.

[Unidentified Analyst:]

Okay. Well, that’s all I had. Thank you very much.

[Ron Casciano:]

Thank you, Bill. End of Q&A

[Operator:]

Thank you very much. I’m showing no further questions at this time. I’d now like to turn the call back to Ron Casciano for any further remarks.

[Ron Casciano:]

Well, again I want to thank you all for your participation and your questions and everybody have a good evening. Thank you.

[Operator:]

Ladies and gentlemen, this does conclude the program and you may all disconnect. Everyone have a great day.