Perficient, Inc.
Q2 2015 Earnings Call Transcript

Published: 30 Jul 2015

[Operator:]

Good day, ladies and gentlemen and welcome to the Second Quarter Perficient Earnings Conference Call. My name is Lesley and I’ll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to President and CEO, Mr. Jeff Davis. Please proceed, sir.

[Jeff Davis:]

Thank you. Good morning and thanks everyone for joining. We appreciate your participation on the call this morning. As we indicated in the preliminary results we issued earlier this month, Perficient’s performance in the second quarter fell below our initial forecasts. The softness we experienced in Q1 carried further into the quarter than we had anticipated and impacted the results. However, as we indicated with our preliminary results and you’ll note from our Q3 guidance, we believe things have already turned and the second half of the year will be substantially stronger with growth on both the top and the bottom-lines. Q2 bookings were very strong and the pipeline remains as large as it’s ever been. Additionally, revenue per billable day continues to increase and projects that have been delayed are now underway and growing as we hoped. Before I continue, I am going to ask Paul Martin to read the safe harbor.

[Paul Martin:]

Thanks, Jeff and good morning everyone. Some of the things we discuss in today’s call concerning future company performance will be forward-looking statements within the meaning of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements and we encourage you to refer to the additional information contained in our SEC filings concerning factors that could cause those results to be different than contemplated in today’s discussion. At times during this call, we will refer to adjusted earnings per share. Our earnings press release includes a reconciliation of certain non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with Generally Accepted Accounting Principles, or GAAP and that is posted on our Web site at www.perficient.com. We have also posted a slide deck, which includes a reconciliation of certain non-GAAP goals to the most directly comparable financial measures prepared in accordance with GAAP on our Web site under Investor Relations. Jeff?

[Jeff Davis:]

Thanks, Paul. So we continue to focus on leveraging the ABR improvements we’ve made over the last several quarters across a larger book of business to drive organic growth. Another point though to make years billable hours. We’ve talked about a mix shift from onshore to offshore, as offshore growth outpaces onshore. The total billable hours in Q2 were actually up 5% sequentially and up more than 13% annually. We’re also getting more leverage from our global delivery teams. 6.5% of revenues in the quarter came from our offshore team versus 2.5% of the the year ago period. Obviously some of that comes from the acquisition we made of Zeon earlier this year, but not all of it. As I said before, the offshore business is growing at a pace ahead of the onshore business, which is a positive. Our margins offshore are significant and in addition to that it represents a key differentiator in terms of our competition as well, and our ability to use offshore as an extension of our project teams versus just a BPO allows us to charge meaningful rates, $45 an hour to $50 an hour for offshore resources, again yielding very, very high margins. So while overall utilization was lower than we had planned in the quarter and lower than our goal, we’re confident we can manage with that into our target range in the low 80s going forward. We talk about this in couple of calls, but it remains worth reiterating and enterprises are reacting to market forces and competitive landscapes are moving faster than ever. All companies are dealing with digital transformation and rising consumer and constituent expectations. And our expertise of our digital experience, business optimization and industry solutions has us positioned extremely well, to benefit from the digital transformation that’s underway. In fact Perficient is now the agency of record or primary digital and creative provider to a handful of large accounts, and more than two dozen mid-size and smaller accounts. So you can see much of that work by the way at commerce.Perficient.com. If you are registered, I encourage you take a look at it. Our strong partnership with many of the world’s leading technology innovators continues to help drive our business and underscores our differentiation. We continue to receive meaningful recognition from our partners for our work and expertise. Particularly exciting during the quarter were the accolades we received from Microsoft; a really great achievement for us. We were named Partner of the Year in all three of their regional markets, East, Central and West in the U.S. Obviously it's an honor to be recognized as the top partner in just one market, but to sweep the entire country is something else altogether. We’re very excited about it. In fact, the Rich Figer, the Senior Director of U.S. Enterprise Partner Group of Sales at Microsoft stated adding and I quote, unanimous confidence for Perficient across our partner sales, executive teams in all three regions across United States. So extremely well positioned there. It's confidence like that from our partners and our track record of maintaining and growing long-term client relationships that continue to reinforce our belief that we’re continuing to build something great and unique at Perficient. I’ll touch on a few other notable topics and speak to our outlook for Q3 after Paul shares the details about the second quarter results. Than as usual, we’ll open the call up for questions. Paul?

[Paul Martin:]

Thanks, Jeff. Total revenue for the second quarter were $108.5 million, a 7% decrease over the year ago quarter. Services revenues were $97.2 million for the second quarter of 2015, excluding reimbursable expenses,a decrease of 1% in the prior year quarter. Services gross margin for the second quarter 2015 including stock compensation and reimbursable expenses was 36.3% compared to 38.2% in the second quarter of 2014. SG&A expenses increased to $24.8 million in the second quarter 2015 from $22.4 million in the comparable prior year quarter. SG&A as a percentage of revenues increased to 22.9% from 19.2% in the second quarter of 2014. EBITDAS for the second quarter of 2015 was $13.4 million or 12.4% of revenues, compared to $18.8 million or 16.1% of revenues for the second quarter of 2014, with the decrease primarily resulting in lower than anticipated revenues. The second quarter of 2015 included the amortization of $3.4 million, compared to $3.7 million in the comparable prior year quarter. This decrease is primarily due to intangible assets while the previous acquisitions become fully amortized during the quarter, partially offset by an addition of intangible assets from acquisitions during 2014 and 2015 and the implementation of our ERP system, which went live in the third quarter of 2015. Our effective tax rate for the second quarter of 2015 was 19% compared to 42.1% in the second quarter of 2014. The decrease in the effective tax rate is primarily due to an additional research and development hedge product recorded during the three months ended June 30, 2015 which is related in the finalization of the Company's 2014 research and development tax credit. Net income decreased 37% to $4 million for the second quarter 2015 from $6.4 million in the second quarter of 2014. Diluted GAAP earnings per share was $0.12 a share for the second quarter of 2015 compared to $0.19 for the second quarter of 2014. Adjusted GAAP earnings per share decreased to $0.25 a share for the second quarter of 2015 from $0.33 in the second quarter of 2014. As a reminder, adjusted GAAP earnings per share is defined as GAAP earnings per share plus the amortization expense, non-cash stock compensation, transaction costs and fair value contingent consideration, net of related taxes divided by average fully diluted shares outstanding for that period. Our ending billable headcount at June 30, 2015 was 2,205 which included 2,077 billable consultants and a 128 subcontractors. Ending SG&A headcount was 399. Now let me turn to the six month results. Revenues for the six months ended June 30, 2015 were $219.1 million, a 2% increase over the comparable prior year period. Services revenue for the six months ended June 30, 2015 excluding reimbursable expenses were a $195.8 million, an increase of 5% over the comparable prior year period. So this is gross margin for the six months ended June 30, 2015, excluding stock compensation reimbursable expenses was 36.1% compared to 37.3% in the prior year period. SG&A expense increased to $48.9 million for the six months ended June 30, 2015 from $43.1 million in the comparable prior year period. SG&A as a percentage of revenue was 22.3% during the six months ended June 30, 2015 compared to 20.2% in the comparable period year period. EBITDAS for the six months ended June 30, 2015 was $29 million or 13.2% of revenues, compared to $32.8 million or 15.3% of revenues in the comparable prior year period. The six months ended June 30, 2015 included to $7.2 million of amortization compared to $6.5 million in the prior year. Our effective tax rate for the six months ended June 30, 2015 was 27.7% compared to 42.2% for the six months ended June 30, 2014. Again the decrease in the effective tax rate is primarily due to an additional research and development tax credit recorded during the three months ended June 30, 2015 related to the finalization of the Company's 2014 research and development tax credit. Net income for the six months ended June 30, 2015 decreased 14.5% to $8.1 million from $9.4 million in the six month ended June 30, 2014. Diluted GAAP earnings per share decreased to $0.24 a share from $0.29 per share in the comparable prior year period. Adjusted GAAP earnings per share for the six months ended June 30, 2015 was $0.50 a share and 12% from $0.57 a share in the comparable prior year period. We ended the second quarter of 2015 with $60 million in outstanding debt, down $7.5 million from March 31 and $6.8 million in cash and cash equivalents. Our balance sheet continues to leave us well positioned to execute against our strategic plan. Finally our days sales outstanding on accounts receivable were 81 days at the end of the second quarter of 2015, up from 79 days in the second quarter and 2014. This continues to be in an area of strong operational and financial focus. I’ll now turn the call over to Jeff Davis for a little more commentary. Jeff?

[Jeff Davis:]

Thanks Paul. Where we sold 33 deals north of $500,000 during the second quarter averaging $1.2 million each, that compares to 38 in the first quarter, averaging about a $1 million each, and 29 in the second quarter of 2014 averaging $1.1 million. So four more deals and a higher overall average year-over-year of $100,000 per deal. A good year overall in large deal bookings and we had solid volume growth sequentially and annually for deals below that range. So from an industry perspective, healthcare, financial services in retail and consumer good verticals remain our strongest performance. We talked for several quarters about our continued focus on developing and marketing Perficient in an IP to our clients. While we didn’t close any material sales during the second quarter, our pipeline continues to grow there and we expect additional sales this year including actually in the third quarter. Finally, we’re continuing to look to supplement our organic growth with accretive M&A and with firms that help deepen our expertise and expand our reach. We’re looking to complete two to three more deals remaining in 2015. So turning our attention now to the expectations for the third quarter, Perficient expects its third quarter 2015 services and software revenue including reimbursed expenses to be in the range of $111.5 million to $122 million comprised of $104.5 million to $110 million of revenue from services including reimbursed expenses and $7 million to $12 million of revenue from software sales. The mid-point of the third quarter 2015 services revenue guidance represents growth of 7% over the third quarter 2014 services revenue. So with that we can open the call up for questions. Operator?

[Operator:]

[Operator Instructions] Your first question comes from Mayank Tandon with Needham Company. Please proceed.

[Mayank Tandon:]

Jeff, I wanted to just kick things off in terms of the weakness you saw in 2Q, the difference between delayed and cancellations, and do you expect to make up all the revenue you lost in 2Q or will there be a portion that will not come through because of cancellations, et cetera?

[Jeff Davis:]

We really didn’t have cancellations materially. I would say cancellations are a part of the business and Q2 was normal in that regard. It was really delays, both delays to deal closures. So some extended sales cycles and a few big engagements, new big deals, as well as delays in just ramping up on deals that were already closed. There was one large deal that we’ve talked about a few times. We’re really the source of that delay. I think the answer to your question in terms of whether we’ll earn all that revenue or not; I think over time the answer is yes. Again, we didn’t see cancellations. What we saw was delays. But we started from a lower point now coming from Q2 to Q3. So unfortunately those people didn’t go work on other projects waiting for those project to start. A good chunk on them were on the bench, which is why obviously revenue was down and margins were down for Q2. Now it's rebounded. So I would look at it as though honestly Q3 is sort of what we expected Q2 to be and then we’ll build on it from there. So we are expecting a pretty strong Q3 as the guidance reflects. We try to be conservative of course on our guidance based on what happened in Q2. So we feel good about it, and feel confident. And we do believe that we can build on that in Q4. It's too early to determine that, but I’m optimistic that while these delays hurt us in Q2, I think ironically they may actually help u in the fourth quarter; and going in, primarily transitioning from the fourth quarter to the first quarter. We typically had a seasonal slow start to the first quarter due to the fact that a lot of projects reset or a lot of renewed time tracks start in January and don’t necessarily start on day one. The good news is we’ve got a big chunk of contracts now that extend beyond six months and have closed and should extend into Q1 and help us bridge that gap that we normally see. So, I am optimistic we’ll buck the seasonal trend in the early part of Q1. Again it's early to say, but I think that might be some silver lining and what we experienced in Q2.

[Mayank Tandon:]

And then in terms of organic trends, just from modeling perspective, what was the organic growth or -- the negative growth in the second quarter and then what are you expecting for the back half of the year?

[Jeff Davis:]

Yes, it was down 9%, a little under 9% for the quarter. Our guidance right now is roughly flat for Q3, down a little actually at the midpoint, but again we try to be conservative there and if I’m correct on how we bridge Q4 and Q1, I actually expect us to see growth again in Q4. One of the things I want to point out, I alluded to it in the script though is that we are seeing a mix shift. So while revenue was down and when we talk about focusing on hours right. So revenue was down 9%, obviously a negative. Hours though was down organically half of that, 4.5%. So again it's sort of a positive. And if you look forward to Q3, I think we’ll actually see again that’s a growth in hours and that should repeat again in Q4 going forward. We really focused on driving volume up. We expect that didn’t benefit us as much in Q2. Obviously it was down some, but we held that bench for these late starts. That’s behind us now. We do expect to drive utilization into the 80, beginning here in Q3, and with that shift to offshore, we should begin to see more margin expansion and actually overall growth in billed hours organically.

[Mayank Tandon:]

And then I notice in the press release you didn’t confirm or reaffirm the guidance you had provided for the full year back in early July. I just want to make sure you are reaffirming that range that you have provided back then?

[Jeff Davis:]

Yes, we are going to stick with that full year we issued a few week ago.

[Mayank Tandon:]

Okay. And then just a couple of follow up questions on the model. Paul, could you just give us the sense of what the tax rate may look like in the back half of the year, the trajectory in terms of margins, 3Q and 4Q and then last but not least, what the shares might look like, given some of the buybacks you've completed.

[Paul Martin:]

Yes. So on the tax rates, the adjusted tax rate should be somewhere in the 37% to 37.5% range in the back half. Obviously the lower rate in Q2, and then talked about what was driven by -- this adjusting to the research and development tax credit. Margins certainly, with utilization increasing will be increasing and I think you are going to be in roughly flat with what they were in Q3 of last year, maybe up a little bit.

[Mayank Tandon:]

And share count?

[Paul Martin:]

And share count, yes obviously depending upon what we do here in Q3 with buyback, it should come down and we’re modeling it down if we do additional buyback.

[Jeff Davis:]

But it's about $34.3 million line up fully diluted.

[Operator:]

Your next question comes from Peter Heckmann with Avondale. Please proceed.

[Pete Heckmann:]

Good morning, gentlemen. Just following up, and I may have missed some of the detail but looking at some of your operating metrics, I was surprised to see that utilization actually hoped better than I expected, and so some of the -- more of it miss in the quarter appears to be negative leverage on your operating expenses and can you talk about that utilization and the gross margin number? What are the puts and takes in there between offshore? Clearly a big decrease in software reselling revenue, but certainly the way you got to the bottom line number was a little bit of a surprise versus kind of what I expected based on the fee announcement.

[Jeff Davis:]

Yes. So utilization overall, including offshore was actually up. So again, part of the impact year is a mix shift, which will be positive long term but at the same time, so we had some utilization being made up by offshore, though you’re holding more expensive resources on the bench in on shore. So that was the biggest impacts to the gross margin really. And I'll let Paul talk about the operating margin and some of the SG&A. I know we had someone time cost there. Paul, you want to give detail out there.

[Paul Martin:]

Yes. From an SG&A perspective, if you look at year-over-year by quarter, certainly revenues coming in lower than we anticipated effected the percentage, but we also had a sales move and trade shows, that sort of onetime things that were higher in this quarter as well as some professional fees associated with this R&D tax credit that we talked about. In addition to that we have made some investments in finance, HR and IT in anticipation of growth, and we anticipate that SG&A as a percentage of revenues that go down as we get into these higher revenue numbers in the back half.

[Pete Heckmann:]

Right. And then in terms of average fill rate for North American employees on new engagements, how do you expect that's going to change, given some of the changes to the mix, your onshore facility, that type of thing?

[Jeff Davis:]

Yes. I still think we are going to see some expansion for U.S. rates, onshore rates as well as offshore actually. And our offshore rates are phenomenal for offshore rates. Like I said before, $45 to $50 an hour, and substantially gross margin/ It's a small but it's still smaller piece of the business that is not moving the meter tremendously, although it is adding tremendous value. So we do expect rates that will expand somewhat going forward. I think we were flattish, slightly down maybe in the quarter. But one of the things to keep in mind, these larger engagements that we've talked about will be lower rate. However the margins will still be as strong or stronger due to the fact that since they are long term, there will be very high utilization prospects. So we’ve made rate concessions to win a $50 million engagement as an example of that runs a couple of years. However the margin on that opportunity should be as strong or stronger than our average. That makes sense. So again, you might see rates flatten a bit or bounce around a little bit where they are now. Overall I do expect expansion but not at the pace we were given the mix shift of the business.

[Operator:]

Your next question comes from Frank Atkins with SunTrust. Pleased proceed.

[Frank Atkins:]

Thanks so much. You talked about some of the lengthening of the sales cycles with some of the larger projects. Are you seeing any changes in the sales cycle time or other projects or other industries in general across the business?

[Jeff Davis:]

Yes. I think Frank, we did in Q2. So that was one other things that caused -- the challenge we had in Q2 was there were some specific ones that were responsible for the most material component of the impact. However there was kind of and across the board of sales cycle extension. Deals closed, but maybe not as rapidly as we had expected, sort of an aggregate. That's actually changed. Bookings have been quite good and were quite good actually in the later part of the second quarter, have been strong starting out this quarter. We expect a strong July and August here, and it's too early to see September, but we’ve got some really good momentum going that I am anticipating will continue. So I can’t put my finger on what kind of cause the more macro across the board slowdown in terms of the sales cycles, the potential sales cycles. That was a factor, but it seems to be past us now.

[Frank Atkins:]

And where are you in terms of capacity on the sales side. Are you getting to the point where the deal inflow is going to need to necessitate some hedge added there or are you pretty comfortable with where you are?

[Jeff Davis:]

No we are going to be adding capacity. We’ve got -- I expect we’ve got a strategic team assembled right now to drive additional capacity in sales. We’ve done some hiring already and we anticipate doing more. I believe though that the business sales as a percent of revenue, might climb a bit, but I think we’ll be able to grow into that or grow with that. And we’ve already got some strategies to offset some of the additional investment there in other areas. So overall SG&A impact might be modest. Again, if we can get the top-line growth that I think we’ll get, it won’t be huge, but we are investing in that to your point, looking intent driving additional organic growth. It's still our goal to get that business to high single-digits organic growth or better. I believe we can do it. I think the portfolio we have and the position we have in the market is there, and I do think sales capacity is one of the challenges and we’re addressing that now and adding sales capacity right now.

[Frank Atkins:]

And lastly from me, taking a step back and looking at the broader hiring environment, what are you seeing out there? Is it much tougher to get folks onboard, or are you having to do anything to incent people to stay over the business just color on the hiring and retention environment?

[Jeff Davis:]

Retention is good. Our voluntary attrition is running right around 20%, slightly above. Our goal is to have it basically slightly below. Frankly I think below 18% or so is unhealthy. People -- it's a tough business and when people need to move on, they need to move on. So we’re satisfied with the retention. It's actually better than it was a year or two ago. In terms of attracting talent, I’ll say what I always say to this, and it sounds clichéd but it’s very true. It's always hard to find good people. I don’t know of any skilled IT, skilled folks that are unemployed. It's just not the environment we are in and it's not the environment been in the long time. So it depends on the technology or the skills of course. Some areas are very, very hot. Some areas are more stable or mature, and we always try to hire the best. So it's always the challenge. We’ve got a great recruiting team though, and we’ve done well and hiring into some of these larger demand areas that we’re experiencing right now. So that ramp up was the challenge for our recruiting team but they’ve been able to keep pace with that ramp, now that it's finally started.

[Operator:]

Your next question comes from Brian Kinstlinger with Maxim Group. Please proceed.

[Brian Kinstlinger:]

Could you talk about the large healthcare customer, just remind us what you're doing for them and just give us a sense, do you still expect a ramp over the next six to nine months to where you originally expected or was there any scope change to that contract?

[Jeff Davis:]

Right now we are very cautious. I would say right now we do expect, and all indications from the customer are that that ramp will stay on, what will now stay on pace to what we expected. And I think ultimately it ramps to, I want to say it's $30 million, $40 million annually, maybe even beyond that. However again we’re not counting on all of that necessarily, because things can change. The logistics of what they are taking on is challenging. So we want to be nimble and be able to fit it, if that pace slows. However they are committed -- as I said, they are committed to the engagement. We’ve heard nothing other than they are absolutely committed to making it happen. The work that we’re doing for them is -- the overall engagement is they refer to it as a complete digital transformation of their business. I think mentioned before they got $1.5 billion of services only budgeted for this and it is a digitization of everything patient facing, as well as doctor facing within their organization. So mobile, analytics, portal, everything that falls under that umbrella are all things that are on the table.

[Brian Kinstlinger:]

And was a delay of function that they weren’t prepared or they wanted to just slow the process or was it a function of anything [indiscernible]?

[Jeff Davis:]

Unfortunately, we were ready. It’s part of the reason the margins got it. But it's -- and again I would say, in hindsight we probably -- we maybe have could have seen that it was going to more difficult for them than they may realize, but it's a huge undertaking. The program is made up of many, many project teams, and just the logistics of getting all that pulled altogether and managed effectively. So if their dollars are being used wisely, it took them longer than they had originally anticipated. But again the pace is good now. We have no indication to believe that it will change now, although we’re being weary of that possibility and we’ll see how it presses on. But the delay was more on them than us, but certainly understandable.

[Brian Kinstlinger:]

And then within large new deals getting delayed, I guess I'm curious why the U.S. rate dropped so sharply in the second quarter?

[Jeff Davis:]

I think the rate only dropped a couple of dollars. Don’t forget that the acquisition of Zion for pulled the rates. So the organic drop was only a couple of dollars an hour. And that's going to -- and I think you can expect to have to bounce around a bit as I said earlier, but the larger drop that you maybe referring to actually [Indiscernible] yes.

[Paul Martin:]

Yes it's [Indiscernible]

[Brian Kinstlinger:]

[Indiscernible] the majority of what's you are seeing and organically it's not as much

[Jeff Davis:]

It's flattish organic but that’s what kind of what we expect. So dollars is [Indiscernible]

[Brian Kinstlinger:]

Okay. And then I guess I want to talk about your satisfaction with the sales productivity. I guess in response the new incentive package also, has there been significant turn over there? Has your numbers changed the numbers of sales people you have?

[Paul Martin:]

There hasn’t been voluntary turnover to speak of. I think there are some people who were struggling who option out, but that's ongoing. I only say it this way, I was seeing the no more voluntary turnover than we would normally see and with maybe one or two exceptions, nobody sided the plan. I think the folks have embraced it now. We continue to tweak it. The intent of that plan obviously was not to be punitive in any way at all. It was to help drive more alignment to our strategy. And then I think the folks understand that. We’re working with them to help them meet their goals and I think they've adapted to it really quite nicely. Where -- in terms of productivity, our folks did a great job and I'm always -- I'm very pleased to actually with what they accomplished. They work hard and put up good numbers. Frankly with some of the restriction that we had, both voluntary and involuntary we find ourselves with less capacity than we’d like to have, and less capacity than we believe we need to drive the organic growth goal that we have. So as I mentioned earlier, we’re working very hard and in a very focused way to change that and bring people on board and in fact we've hired I think three or four sales people in just the couple of weeks.

[Brian Kinstlinger:]

Great. And the two I want to touch on, doing separately is, two of the things we don’t talk about are spare verticals very often. The first with the industry obviously reported very weak numbers as energy. You've seen some pressure in the last two quarters. It's small for you guys. I'm just curious, should we expect the little bit more volatility in the near term given energy prices, or is there a pipeline to stabilize that small piece of revenue?

[Paul Martin:]

Yes. It's a good question. I don’t have a crisp answer. I do expect that we’ll see some more fluctuation there. I think we're at a fairly stable point though. I don’t necessarily think it would be tremendously volatile. And for us utilities are included in that and the facilities seem to be fairing much better than the producers. So we feel pretty good about that side of the business, lot of data there, lot of BI I opportunities in the utility space. So we’re hoping that we can make up any losses or drops from the producer side on the utility side. But yes, we do expect continued volatility. I do still think though that the other verticals, not the least of which of course South care and [Indiscernible] can compensate and more than compensate for that.

[Brian Kinstlinger:]

Right. And I'm just talking about what we really talk about, on the positive side we saw electronics and hardware have a nice sequential spike. Is that one large win? Is there something more broad based going on there , that we should continue to really follow closely, because it's going to move one way or the other?

[Paul Martin:]

It is coupled to a couple of key winds. We've always done pretty well in that space, but it’s been a huge vertical for us. And I expected it would be about the same as it has been. But it will be about the same percent of revenue that it's been historically. Telecom is a space that we continue to see good opportunity and we’ve god a fantastic relationship. We’re the key account there but also expanding on that account leveraging that skill set.

[Operator:]

I would now like to turn the call over to Mr. Jeff Davis for closing remarks.

[Jeff Davis:]

All right, well thank you all for your time today as usual and I'm very much looking forward to an excellent Q3, and the opportunity to have a call here in 90 days talking to you all about a great quarter. Thank you very much.

[Operator:]

Ladies and gentlemen, thank you for your participation. This concludes today’s conference. You may now disconnect. Have a great day.