Qumu Corporation
Q2 2008 Earnings Call Transcript

Published: 26 Aug 2008

[Operator:]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Rimage Corporation second quarter earnings conference call. During today's presentation all parties' lines will be muted. Following the presentation the conference will be open for questions. (Operator Instruction) As a reminder, this conference is being recorded today, July 23, 2008. I would now like to turn the conference over to Mr. Bernie Aldrich, President and CEO. Please go ahead, sir.

[Bernie Aldrich:]

Good morning and thank you for taking the time to participate in our second quarter earnings conference call. Joining me today is Rob Wolf, our Chief Financial Officer, who will review our recent operating results following my opening remarks. Also with us is Manny Almeida, our Executive Vice President of Sales and Marketing. We'll be pleased to take your questions at the conclusion of our remarks. Since regulation FD prohibits us from providing any forward-looking statements unless they are simultaneously released to the public, we have provided financial guidance for the third quarter of 2008 in this morning's release. It is important to understand that this guidance is subject to a number of risks that could affect our anticipated performance. These risks are set forth in our filings with the Securities and Exchange Commission, which we urge you to review. Turning now to the subject of this conference call, our second quarter sales totaled $22.7 million, compared to $25.5 million in the year-earlier period, when retail-related equipment sales totaled $4.3 million. We recorded no significant retail sales in the current quarter. Second quarter earnings of $1.9 million, or $0.19 per diluted share, were down from $2.9 million, or $0.28 per diluted share in the comparable period of 2007. Due to the impact of weak economic conditions on sales of disk publishing hardware, we issued downwardly revised guidance on June 9th for earnings of $0.09 to $0.12 per diluted share on revenues of $22 million -- of revenues of $20 million to $22 million. Our second quarter results exceeded this revised guidance, due primarily to higher than forecasted sales transacted through our global distribution channel during the latter stages of the quarter. This enabled us to report second quarter sales and earnings consistent with the results recorded in this year's first quarter. Given the length in selling cycles for our disk publishing hardware that are a consequence of today's difficult economic environment, the stabilization of our operating results on a sequential quarterly basis makes us optimistic about Rimage's prospects once the economy begins to strengthen. I want to emphasize that our recent performance is not indicative of any fundamental problem with Rimage's operations. Rather, the weak and uncertain economy has caused many prospective users of our equipment to become highly cautious with regard to their purchasing decisions. Our response to this challenging economic environment has been to work even harder on the sales front. We know business is available to us because our field sales representatives have been reporting significant interest in our optical technology among prospective customers representing a diverse range of applications. As economic conditions improve, we believe these prospects, many of whom are now limiting their capital spending, could place orders for our systems. At the same time, we are undertaking a careful review of each of our distribution partners as we explore new ways to expand the penetration of the full line of Rimage products and services into our new and existing customer base. Our European operation is also demonstrating signs of strengthening in response to the sales and marketing initiatives implemented by its new management team. We expect our European business to show continued progress over the balance of 2008. In addition, we are establishing the foundation required for penetrating several highly promising business services markets. One of the strongest business services opportunities for our optical technology involves the media and broadcasting market. Large production houses currently use DVDs for editing, producing, distributing, and archiving video content. Many of these large operations, including Disney, already use Rimage's CD and DVD digital publishing systems, but they now will be transitioning to high capacity Blu-ray technology. This conversion process will require new or additional Rimage equipment from these current customers. Our greatest opportunity in the broadcasting and media market involves thousands of small and mid-sized pre-impulse production houses. Many of these studios currently archive and distribute their video content on magnetic tape. With the movement toward digital and high definition formats, these facilities are starting to convert to DVD and Blu-ray disks as their preferred output. To capitalize upon these opportunities, we recently introduced new software designed specifically for Macintosh-based audio-visual production environments. This was a critically important development since Apple has close to a 50% share of the video editing market. In addition, we have added more than 30 value-added resellers focused on the video market and established strategic partnerships with key industry players. Given all of these developments, we feel we have done an effective job of laying the foundation required for penetrating this market. Like the retail market, penetrating the media and broadcasting market will not be an overnight event, because the conversion to Blu-ray and digital formats involve some major paradigm shift for many small and mid-sized studios. But unlike the retail market, this opportunity will probably unfold as an extended series of medium-sized orders in comparison to the relatively small number of extremely large orders that our retail customers typically have placed. As a result, we would expect Rimage's sequential quarterly results to become less lumpy or uneven and somewhat more predictable. Beyond the area of sales and marketing, we have taken two additional measures to help ensure a successful future. First, we are moving forward with the development of important next-generation disk publishing systems that will keep Rimage at the forefront of the on-demand disk publishing industry. The second quarter introduction of our next-generation color printer, the Everest 600, was the first result of this process. Other new and updated products are in our product development pipeline. And, second, we have instituted cost reductions totaling approximately $2 million on an annualized basis. Enacted at the time of our second quarter earnings release, these cost reductions will take full effect in this year's third quarter. I will conclude my remarks by commenting on our financial guidance for the third quarter ending September 30th. At this time, we believe our performance should remain relatively stable in comparison to the first and second quarters. Consistent with this outlook, we are forecasting earnings of $0.17 to $0.23 per diluted share on revenues of $21 million to $23 million for the third quarter of 2008. We believe the forecasted stabilization of our operating results amid challenging economic conditions is evidence of the underlying strength of this business. And given the actions that we are taking today, we have every reason to believe that Rimage's future is very promising. Thank you. And now Rob Wolf will review our second quarter results in some detail.

[Rob Wolf:]

Thanks, Bernie. First, I will run through a few highlights about our second quarter sales. Recurring revenues, including sales of printer ribbons and cartridges, parts, blank CD/DVD media, and maintenance contracts increased 10% in the second quarter of 2008 and accounted for 58% of sales, compared to 47% in the second quarter of 2007. Consumables accounted for a significantly larger portion of our second quarter sales mix, due to the economy-related slowdown in sales of our disk publishing hardware. In our last conference call, we said that we expected consumable sales growth to remain robust in 2008 given the expansion of our installed retail base in 2007. That has certainly proven to be the case during the first half of 2008, and we expect consumable sales growth to remain strong over the balance of the year. International sales increased 23% in the second quarter and accounted for 47% of total sales, compared to 34% of total sales in the year earlier period. In the absence of currency translations, international sales still grew modestly year over year. Rimage's European operation accounted for the great majority of the second quarter's international sales. And, as Bernie said previously, this operation is showing signs of strengthening. Rimage's gross margin was 44% in the second quarter, up slightly from 43% in the first quarter and down modestly from 45% in the second quarter of 2007. Our gross margins throughout this year's first half have been affected by the shift in our sales mix toward consumable supplies, which carry lower gross margins than those associated with disk publishing hardware. At this time, we believe our gross margin for the third quarter will be at or near the second quarter level. Moving down the P&L, second quarter R&D expense came to $1.5 million, up slightly from $1.4 million in both this year's first quarter and last year's second quarter. As these numbers indicate, we have maintained product development expenditures at a high level despite the challenges posed by the weak economic environment. This commitment to R&D signals not only our intention to remain at the forefront of the disk publishing industry, but also our confidence in Rimage's future. R&D spending in the third quarter of 2008 is forecasted to remain at or near the second quarter level. Selling, general, and administrative expense totaled $5.7 million in this year's second quarter, down from $6.6 million in the first quarter and $6.3 million in the second quarter of 2007. In comparison to this year's first quarter, the second quarter reduction in SG&A was attributable to lower compensation expense related to the elimination of several officer positions as well as lower marketing expense. The year-over-year reduction in SG&A primarily reflects the elimination of contractor and several officer positions. We believe SG&A expense will be at or modestly below the second quarter level. We recorded an effective tax rate of 36% in the second quarter, compared to 36% in the first quarter and 34% in the second quarter of 2007. We believe our effective income tax rate for 2008 will be in the range of 35 to 37%. Turning now to our balance sheet, cash and investments totaled $93.7 million at the end of this year's second quarter, compared to $92.4 million at the end of the first quarter and $94.2 million at the beginning of 2008. During the quarter, cash of $4.4 million was used to acquire 249,000 shares under two existing 500,000 share buyback authorizations. Approximately 725,000 shares remain available for repurchase under these authorizations. Stockholders' equity came to $107.1 million at the end of the second quarter, compared to $108.6 million at the end of this year's first quarter, and $105.1 million at the end of 2007. That wraps up our formal remarks and now the conference call operator will poll you for any questions.

[Operator:]

Thank you, sir. Ladies and gentlemen, we'll now begin the question and answer session. (Operator Instructions) And our first question comes from the line of Chuck Murphy with Sidoti & Company. Please go ahead, sir.

[Chuck Murphy:]

Good morning, guys.

[Bernie Aldrich:]

Hi, Chuck.

[Rob Wolf:]

Hey, Chuck.

[Chuck Murphy:]

A few questions for you. First, Rob, can you give me the breakout of equipment sales between producer and desktop?

[Rob Wolf:]

Desktop for the second quarter I think amounted to about just under 10% for the quarter. And then our producer and professional would have been right around 30%, 32%.

[Chuck Murphy:]

32%, okay. All right. You mentioned one of the reasons for SG&A being down sequentially lower compensation for managers. Could you say exactly which positions were eliminated?

[Rob Wolf:]

I can tell you the areas. They were in the marketing, sales, and then also our HR area.

[Chuck Murphy:]

And why kind of were those specific areas targeted? I mean is that going to hurt your growth any in the next few quarters?

[Rob Wolf:]

No. We feel that the positions have been adequately filled as a result of that, either through people that are already existing in the organization or through the addition of an individual at a lower salary.

[Chuck Murphy:]

Okay. And was that for a particular region or --?

[Rob Wolf:]

Primarily here in the U.S.

[Chuck Murphy:]

Okay.

[Bernie Aldrich:]

Yes, Chuck, I mean, over the course of probably the last three or four years, I think like any organization where you're growing at a fairly quick pace and then you -- and you're attacking new markets, you see the organizations tend to, I think, grow. You add people. I've always said that in difficult times it's -- there is a good side to it. It forces you to look at yourself and look at your organization and see really where are you getting the real value-add. And how perhaps we need to step back and take a look every now and then. And that's exactly what we've done. And we focused primarily here in the U.S. because, as we've indicated in the past, we really look at our international opportunities as one of the real growth factors going forward. So we wanted to continue to keep our investments strong in Europe, Asia, and putting some additional focus in Latin America. And so, again, it is a business, you have to make decisions, it's still about not only growing the business but also generating a strong bottom line.

[Chuck Murphy:]

Okay. I forgot what I was going to ask there. Can you say exactly what the international sales growth was without the currency impact?

[Rob Wolf:]

Yes. For the second quarter it was right around 6% from a functional currency standpoint.

[Chuck Murphy:]

Okay. And kind of question I'm sure you're anticipating, why not more share repurchases?

[Rob Wolf:]

Yes. And, Chuck, the way that worked out, just essentially it comes from the quarter itself and the windows that we had to operate in. We were unable to, let's say, pull the trigger more than we probably would have liked to during the quarter.

[Chuck Murphy:]

Okay. So, I mean, would you be able to get more aggressive this quarter?

[Rob Wolf:]

Again, if we do decide to move forward with purchases, we do have a window that this quarter should be more of a normal window. We would be able to pull the trigger on those.

[Chuck Murphy:]

Okay. All right. I'll turn it over to somebody else. Thanks.

[Operator:]

Thank you, sir. Our next question comes from the line of Greg McKinley with Dougherty. Please go ahead.

[Greg McKinley:]

Thank you. Could you talk to us a little bit more about Blu-ray? How much volume are you doing with that technology today? How quickly do you expect it to ramp up? And I know we've all talked about this format change, but I'm just wondering how -- what the timeline is in terms of you thinking it actually becoming a meaningful contributor to your top line?

[Manny Almeida:]

Good morning, Greg, it's Manny Almeida.

[Greg McKinley:]

Good morning.

[Manny Almeida:]

Excellent question. We don't look at it so much as a format change as a format extension. And if you look at new formats being introduced into the market, you can look back at the early days of DVD, it's shaped very much like a hockey stick. I mean, it takes a long time for it to penetrate the market. And once it does and it reaches the mass market, it grows very, very quickly. What we see today is there is still limited availability of printable media. The speeds are increasing and there's some changes from single layer to dual layer. So we do not see a huge impact in our business in 2008. We think the bulk of the impact from Blu-ray will come into the later stages of 2009.

[Greg McKinley:]

Okay.

[Manny Almeida:]

It takes some time for it to stabilize, for it to become a readily available product so that our customers can avail themselves of it. That said, yes, there are some early adopters that absolutely need the product now that are buying our units with single layer Blu-ray because they have a very specific application. But I don't think we're going to see huge impact in 2008.

[Greg McKinley:]

Okay. In terms of expense trends, Rob, can you share with us what your stock compensation costs were for the quarter?

[Rob Wolf:]

Greg, yes, what I can tell you on the stock comp expense, we did see some reduction. I don't have an exact number for you off the top of my head, but we did see some reductions there as a result of some of the elimination of positions within the Company.

[Greg McKinley:]

Okay.

[Rob Wolf:]

So going forward and also as a result of as the stock price does decrease and the options are issued, the value of those options do decrease as a result of the Black-Scholes valuation method. I see some decreases there.

[Greg McKinley:]

In terms of international, I think you said you sort of had an organic growth rate of 6%. What are the -- I know there's a management change in your European operation, but what specifically is causing you to be a little more optimistic about Europe, especially as maybe there's a few more data points out there that European economies are starting to get a little sluggish as well.

[Bernie Aldrich:]

Yes. This is Bernie. I think, like any organization, when you make a change at the top, and we did, we brought in a new managing director, every organization has to take time to adjust to that. I think you also have to give the new managing director time to assess the talent he has and begin to understand where we've been before he can understand where he wants to go. And we've been making those changes over the course of the last 12 months. We've been filling some external sales positions as we've assessed the various markets within Europe. Because in Europe, you really do have different, not only different countries, but when you look at it -- and we break it up, we have Northern Europe, we have Central Europe, we have Southern Europe, Southwestern Europe. We have -- then you have the U.K. and Ireland off by themselves, but it is addressing the unique needs, of each of those markets. But I think the fact that we're also looking at it in a much more -- while we still remain very strong with our existing partner base that we've had there, quite frankly, the bulk of our partners have basically for the last ten years, we are looking at new applications. We're also, much like we do in the U.S., we're looking at our existing partners and seeing, hey, what do we need to do to help them attack and address some of these new applications and opportunities that are out there. Where do we perhaps need some new partners to go after that are more specifically geared to address applications such as in the -- that are very specific, such as video, such as -- even in the medical, looking at issues -- opportunities like law enforcement. I mean those are very unique markets that offer opportunity. We're also positioning people -- we've never had a man in Eastern Europe before. We've just recently added that in the last year. And so, therefore, I think you're going to -- that's what gives me the confidence. And, like I said, I've always maintained that we live in a global economy here. Yes, I think some of the market, the economics are getting a little sluggish in Europe, but I think we're in a much better position today than we were a couple of years ago to address that. And there continues to be a broad range of opportunities and a broad range of economies in Europe and we will continue to, I think, capitalize on our growing presence over there.

[Greg McKinley:]

Thank you.

[Operator:]

Thank you, sir. And our next question is a follow-up question from the line of Chuck Murphy with Sidoti & Company. Please go ahead.

[Chuck Murphy:]

Yes. Just another question on the cost. Did the second quarter results include any of the $2 million in cost reduction you've talked about?

[Rob Wolf:]

What we saw there, Chuck, primarily, was -- we did have some severance costs in there, approximately $300,000 of severance. But the actual recognition of gains or I should say the savings going forward will start in the third quarter.

[Chuck Murphy:]

Okay. So I guess I'm kind of curious then, I mean if you're going to get roughly $2 million, or was it $2 million in savings? Am I remembering correctly?

[Rob Wolf:]

That's correct.

[Chuck Murphy:]

Then why would the SG&A be basically flat in the second quarter on flat sales?

[Rob Wolf:]

Well, as you saw -- as we stated in our comments, we say that SG&A will probably be at or slightly below what we saw in the second quarter. So we do feel that some of those savings will obviously help us in the third quarter. But there were also some one-time, as I just mentioned, some one-time expenses that we saw in the second quarter that we're not going to be able to, I should say reversals of expenses, that we will not be recognizing in the third quarter. But those do offset each other to an extent.

[Chuck Murphy:]

Okay.

[Bernie Aldrich:]

I think, too, Chuck, we also see -- I mean, much as some people may not admit, there is an inflationary pressure going on. I mean, we see rising our travel costs, our fuel costs are rising. I think -- and we also see some, particularly in the operating expense side, again with the foreign currency, we see -- we take a -- while it also helps on the revenue side, it also shows up on the expense side.

[Chuck Murphy:]

Okay. This is just kind of a general question slash comment. I mean, obviously, the quarter-to-quarter results are extremely volatile. Just wondering, I mean, do you guys kind of set annual growth goals for yourself, and, if so, what are those?

[Rob Wolf:]

Well, we do set growth goals, Chuck, but we're not going to talk about what those are on this call. I think internally, obviously, we're going to -- we set a budget each year. We go the through each quarter. We re-forecast, if need be. But as you can see, and you've been with us for awhile, on a quarter-by-quarter basis, it's very difficult to determine what we're going to end up doing. And the backlog we have essentially is our aftermarket or recurring revenue stream and that's it. So that's maybe, in any given quarter, $12 million to $15 million. So that leaves a lot to be trying to figure out. And that's where we stumble sometimes. But, yes, internally, we're constantly looking at that. We're constantly talking to people trying to get updates.

[Chuck Murphy:]

Okay. Well --

[Bernie Aldrich:]

Our biggest challenge is our lack of visibility. And then as we, particularly as you see the -- when you get into maybe a little more difficult economic times, people don't pull the trigger until the very last minute. And to compound that, we've become very good at responding quickly. I mean, our whole operation is designed to respond. We build to order; we do not build to stock. And so we've designed our manufacturing operation along those lines and people know that, fortunately, we can respond quickly.

[Chuck Murphy:]

Okay. Well, I know I've talked to you guys about it before, but if I can kind of go on record here as strongly encouraging you to consider switching to the annual guidance rather than the quarterly guidance. Just kind of filling us in on what your annual growth goals are and kind of the goals that you hold yourself to. And that way you also don't have to worry about quarter-to-quarter results and you can make up over quarters anything that you might have missed in the short-term kind of thing. So I just wanted to put that out there, and that's all I really had. Thanks.

[Bernie Aldrich:]

Duly noted.

[Operator:]

Thank you, sir. And one moment please for our next question. (Operator Instructions) One moment please. And our next question comes from the line of Gerry Heffernan with Lord Abbett. Please go ahead.

[Gerry Heffernan:]

Good morning, gentlemen. Thank you very much for all your hard work in the quarter. I'd like to review the comments made in that last -- just with that last questioner there. I believe you made the statement that one of your biggest issues is lack of visibility. Understood. But go into the part again where you said, no, we're not building for stock, we're building for orders and the reactions or characteristics of the actions of your customers as a result of that?

[Bernie Aldrich:]

I guess we're perhaps -- we react more to the characteristics of our customers in that we know that businesses today, everybody is very aware of what inventory and the cost of inventory. I mean, we look -- you look at our -- the way we run our business. We've put a lot of emphasis on how we manage our inventory, how we minimize it. I think our -- when you sell to distribution, I think distributors are getting -- are following some of the very same principles that we adhere to, which is to minimize your inventory. Put more demand on their suppliers to be able to fulfill, the exact thing that we're doing. We work very closely with our suppliers to make sure that we have -- we spend a lot of time on material management. That means getting inventory in here just in time or, as I always say, just about in time. And I think that's what our distributors are beginning, they look for partners that can follow those same philosophies and minimize their -- because most distributors run on very small margins and therefore cash management is critical. And I don't have any problem with that. When we talk about we manage, we build to order, we do know, though, when we're working on a large retail opportunity or perhaps a multi-unit order. We have a pretty good sense of when that may be coming. And in some cases we can anticipate. And we have to anticipate somewhat to make sure on long lead time items that we have them in stock and available. So it's not a pure produce to order, but it runs along that basic philosophy.

[Rob Wolf:]

And in those cases, we're not going to most likely be giving you any guidance as to us getting those orders. Just being conservative, we probably will talk about those orders when we get them, not in the guidance.

[Gerry Heffernan:]

Understood. Understood, and wouldn't want you guiding on the basis on things that you hope to get.

[Rob Wolf:]

You run into trouble.

[Gerry Heffernan:]

Right. You do run into trouble. And I mean, for what it's worth, I, to some extent, I echo the opinion of the previous caller in that it's somewhat you're a victim of your own success in that you have conditioned the customer to be able to get what they want when they want it without a lot of lead time. Makes the customer happy and reduces your visibility. And, you know something, you're working on growing this thing year to year. The quarter-to-quarter issues seem to cause more struggle than it's worth. And it's certainly, if anyone has listened to your calls over the years, know that you guys are looking to better the Company over years not over quarters anyhow.

[Rob Wolf:]

Exactly.

[Bernie Aldrich:]

Right.

[Gerry Heffernan:]

And I missed some of this in your opening remarks, but you talked about R&D efforts, you talked about working on projects for the products of tomorrow and improving margins. And I was wondering if you could just review that a little bit more in-depth. Are you talking R&D projects that are improvements on just the current products or R&D projects that are the next latest, greatest product that is something new and different from where we're at? And when you talk to margin improvements, is this effort towards margins simply to offset expected raw price increases, labor increases, etc., or are you actually think -- are you setting a goal of actual incremental increase to the overall profitability of the Company?

[Bernie Aldrich:]

Okay. There's a lot there.

[Gerry Heffernan:]

Yes. I have a habit of doing that; sorry.

[Bernie Aldrich:]

But I will tell you this, when we talk about new products, again we break it down into there's a hardware component to what we do, there's a software component and it is -- there's existing products and there are new products. I think -- we continually have a -- we're working on our existing products where our improvements there are many times found, as you find users and specific applications drive us to make enhancements to the product that we didn't have. I think, as you mentioned, the -- certainly rising commodity costs force us to look at how our product is designed, how it's built, what's incorporated in it. We are on a very -- we have a focused effort to reduce costs of our product, which will help offset some of these. And I think over the course of the years, if you look at the last ten years, one of the things we have done very well here is cost reduce our products. Now, in the past, much of that has come just through the sheer reduction in technology costs. When you see the price of certain electronic components, they have a tendency to drop dramatically as their life goes on. I think drives are a good example. Now, in today's world, some of those easy cost reductions are gone and we have to look at it -- we look to our engineering group, we look to our manufacturing group to be really assessing our products. We're trying to reduce the number of parts, we're trying to look at where we can do more to -- along the component side, how we can facilitate the assembly of a product and minimize, like I said, the costs, our inventory carrying costs. As far as new product development, over the course of the last few years we've put a lot of effort and energy into our print technology. And that continues to be an ongoing development and where we've had a very strong focus on a thermal transfer technology. As we go forward, within the optical world, how many more new enhancements can you bring to the hardware on the optical side? Probably you won't see as many new and revolutionary enhancements there as you've seen in the past, because much of the technology is there in place. I think where we are continuing to put a lot of focus and a lot of energy is on the software side. Because as we become more involved in applications and integration, we -- and again, the secret to our success, a large part of it, is our ability to be integrated into workflows, which requires us to be able to communicate with other software. It requires us to work very closely with other partners because there can be three or four, five, six different players that may be called in to support a retail installer, to support a medical installation, or support a banking operation. And that's where we have a lot of strength. That's also where we've invested a lot of money and personnel over the last few years, is in our application engineering group. And that's a true business opportunity for us. So that's where a good deal of our development is going on. When I look at new and revolutionary, I look at it in our software and I look at it in our approach to trying to incorporate a larger portion of that solution and being able to support that. I don't know if, Manny, you have anything?

[Manny Almeida:]

I think that's exactly on, right on, Bernie. I think if you think of our software platform, even beyond optical, if we continue to develop the software platform to suit our customers' needs, it's really not just about optical ultimately. It's about workflow and it's about secure distribution of digital data. So, if five years from now we're distributing both in optical format and some other format, we should be able to leverage our software across those formats.

[Gerry Heffernan:]

Great, great. Thank you very much, gentlemen.

[Operator:]

Thank you, sir. And at this time, there are no further questions. I'd like to turn it back to management for any closing remarks.

[Bernie Aldrich:]

Okay, well, again, thank you for joining us this morning and we look forward to sharing time with you again in another three months.

[Operator:]

Ladies and gentlemen, this concludes Rimage Corporation's Second Quarter Earnings Conference Call. If you would like to listen to a replay of today's conference, please dial 303-590-3000, entering pass code 11117486. Once again, if you'd like to listen to a replay of today's conference, please dial 303-590-3000, entering pass code 11117486. ACT would like to thank you for your participation. You may now disconnect. Have a pleasant day.