Safeguard Scientifics, Inc.
Q3 2014 Earnings Call Transcript

Published: 24 Oct 2014

[Operator:]

Good morning. I name is Sherly and I will be your conference operator today. At this time, I would like to welcome everyone to the Safeguard Scientifics' third quarter 2014 financial results. (Operator instructions) Mr. John Shave, Senior Vice President of Investor Relations and Corporate Communications, you may begin your conference.

[John Shave:]

Good morning, and thank you for joining us for the Safeguard Scientifics' third quarter 2014 conference call and webcast. Joining me on today's call are Steve Zarrilli, Safeguard's President and CEO; and Jeff McGroarty, Safeguard's Senior Vice President and CFO. During today's call, Steve will review highlights of the third quarter 2014 as well as other developments at Safeguard and our partner companies. Jeff will discuss Safeguard's financial results and strategies. After that, we'll open the lines to take your questions. As always, I must remind you that today's presentation includes forward-looking statements. Reliance on forward-looking statements involve certain risks and uncertainties, including, but not limited to the uncertainty of future performance of our partner companies, the risks associated with our acquisition or disposition of interest in partner companies, risks associated with our decisions about the deployment of capital, and the effect of regulatory and economic conditions generally, as well as the development of the healthcare and technology markets and other uncertainties that are described in our filings. During the course of today's call, words such as except, anticipate, believe and intend will be used in our discussion of goals or events in the future. Management cannot provide any assurance that future results will be as described in our forward-looking statements. We encourage you to read Safeguard's filings with the SEC, including our Form 10-K, which describe in detail the risks and uncertainties associated with managing our business. The company does not assume any obligation to update any forward-looking statements made today. Now, here is Safeguard's President and CEO, Steve Zarrilli.

[Stephen Zarrilli:]

Thank you, John, and thank you all for joining us today for an update on Safeguard and our partner companies. Disciplined execution continues to propel Safeguard and our partner companies toward achieving various strategic milestones and value creation opportunities in 2014 and beyond. During the third quarter, Safeguard deployed $29.5 million in four new partner companies; Propeller Health, Transactis, Trice Medical and WebLinc. For the nine months ended September 30, 2014, we deployed $39.3 million in six new partner companies and realized $81.3 million in proceeds from exit transactions involving four partner companies. We believe Safeguard is well-positioned to grow our stable of partner companies and to respond to M&A opportunities. Safeguard’s progress in 2014 is a function of our robust deal pipeline of early and growth stage healthcare and technology prospects. The engines driving our pipeline include strategic focus and disciplined execution along with our strong network of syndication partners, advisory board members and board members. In 2014, we expect to review and evaluate approximately 1000 new deal opportunities. Our partner company roster now stands at 24. By the year end 2015 we want to push that total to about 30. With an increase in assets under management we believe that we can achieve more frequent exit transactions. Those gains in turn fuel Safeguard’s evergreen model of deploying capital into early and growth stage businesses, building value in those businesses by providing operational expertise and support and realizing value through exit transactions to maximize value. We are convinced that this focus is and remains the key driver of Safeguard’s value creation model. This commitment serves all of our mutual interests going forward. As we have stated previously, a Safeguard partner company could be involved in a strategic or financial exit transaction at any time in its development. We have categorized Safeguard’s partner companies in four stages based upon revenue generation. A quick review for those of you who are new to our call, development stages are the pre-revenue businesses that are proving their technology through prototype development or beta product versions. Today we have two development stage companies, InfoBionic and Trice Medical. Initial revenue stage is made up of businesses that are building corporate infrastructure and management teams. They are beginning to penetrate target markets and have revenues of $5 million or less. Currently there are 10 partner companies in this category. Our expansion stages is comprised of companies that have characteristics of commercial grade solutions, growing market penetration, complete infrastructure and management teams, and revenue in the range of $5 million to $20 million. Currently there are six partner companies in this category. And finally, high-traction stage companies are characterized by rapid growth, significant commercial success and revenue in excess of $20 million per year. Currently, there are six partner companies in this category. We believe that this composition of assets within these stages, as defined, represents a balanced approach to asset diversification. We are also fairly evenly balanced with respect to the blend of healthcare and technology companies. As of September 30, 2014, we had 13 technology companies, representing $121 million of capital deployed; and 11 healthcare companies, representing $112 million of capital deployed. Just last week at Safeguard’s eighth annual investor day event at the New York Stock Exchange we highlighted several of our larger, more mature partner companies. Today’s let us take a closer look at three of our new partner companies, Propeller Health, Transactis, and WebLinc. Together with Trice Medical, which we discussed during our previous quarterly call, we deployed $29.5 million of capital into these businesses during the third quarter. Founded in 2010, Propeller Health provides digital solutions to measurably improve respiratory health. Propeller is among the first mobile platforms with FDA clearance. The company combines sensors, mobile apps and predictive analytics to monitor and engage patients, encourage effective self-management and create new opportunities for care teams to help avoid ER visits through early intervention. Propeller Health partners with health plans and other providers to improve quality, strengthen care teams and reduce the cost of care for asthma and chronic obstructive pulmonary disease otherwise known as COPD, the fifth and sixth most expensive diseases in the US, respectively. Specifically Asthma and COPD currently cost payers and patients in the US more than $100 billion annually. By 2020, the CDC estimates that the cost of medical care for adults in the US with COPD alone will increase 53% to more than $90 billion. In August 2014, Safeguard led a $14.5 million Series B financing round for Propeller Health, deploying $9 million in the company for 24% primary ownership position. Proceeds from Propeller Health’s financing will be used to accelerate product development, strategic alliances, client services and sales and marketing. We are excited by Propeller’s growth and prospects. In 2013, the company doubled its number of commercial programs, including a contract with Arizona Care Network, an accountable care organization with 14 hospitals, more than 2300 physicians, and approximately 130 healthcare facilities. Propeller Health has also received FDA clearance for its new inhaler sensor and predictive analytics, and is concluding a randomized control trial with two sites in the Dignity Health System, the fifth largest health system in the nation and the largest hospital provider in California. Today Propeller has captured data from more than 100 – from more than 1 million sensor events. Next Transactis, Transactis is a leading provider of electronic billing and payment solutions. The company’s technology helps customers migrate to digital transactions instead of paper bills, statements, invoices and payments. Transactis’ primary product is a white-label cloud-based offering that enables B2B and B2C enterprises to deliver secure electronic documents and accept payments online by telephone or by mobile devices. Transactis has won customers in head-to-head competition with larger competitors through attractive, flexible fee structures, better functionality and compliance capabilities. In August 2014, we deployed $9.5 million of an $11 million Series B financing round for a 25% primary ownership position. Proceeds from this financing will help Transactis expand sales, marketing, client services and product development, all at a time of great opportunity. Finally for this morning, our third newest partner company is WebLinc, a commerce platform provider for fast growing online retailers. The company has strong brand awareness among fashion retailers. WebLinc’s early adoption of responsive web design and expertise in developing native mobile apps helps B2B and B2C clients maximize multichannel revenue and outperform their competition. In August of 2014, Safeguard deployed $6.0 million in WebLinc for a 29% ownership stake. Proceeds from the financing will be used to accelerate development of new features for the company’s commerce platform, expand its rosters of third-party integration partners and to increase the sales and marketing teams. The case for WebLinc is supported by the explosive growth in online sales, driven by increased mobile device use. According to Forrester, US online sales are projected to grow at a compound annual rate of 9.5% from $294 billion in 2014 to $414 billion by 2018. The $3 billion e-commerce software market in which WebLinc competes also is growing rapidly. Gartner expects the e-commerce software market to grow at a 14% compounded annual growth rate through 2017. The total market opportunity for services, business process outsourcing, and embedding e-commerce into other software and business processes is close to a $30 billion worldwide market. Now with that I’m going to turn it over to Jeff for an update on our financial performance and ongoing goals.

[Jeffrey McGroarty:]

Thanks, Steve. Let's begin with a review of key financial metrics for the quarter ended September 30, 2014. At September 30, Safeguard's cash, cash equivalents and marketable securities totaled $165.7 million. The total carrying value of our outstanding debt was $50.3 million, resulting in net cash, cash equivalents and marketable securities of $115.4 million. During the third quarter, primary uses of cash were capital deployments totaling $29.5 million in four new partner companies Propeller Health, Transactis, Trice Medical and WebLinc; follow-on deployments of $2.3 million in one existing partner company Quantia; and cash used in operations of $2.7 million. During the third quarter, Safeguard filed a universal shelf Registration Statement on Form S-3 with the SEC to allow the company to issue common stock and various debt securities from time to time up to an aggregate of $150 million. Safeguard also filed an acquisition shelf Registration Statement on Form S-4 with the SEC to allow the company to issue up to an aggregate of $50 million in common stock for future acquisitions. These registration statements replace the company’s existing shelf registration statements that expired in January of this year. Both registration statements have been declared effective by the SEC. Although we have no immediate plans to issue securities under either shelf registration, we believe these filings enhance Safeguard’s financial flexibility in the event that appropriate opportunities present themselves and market conditions are favorable. As of September 30, 2014, our roster of partner companies totaled 24. The cost of our interest in these companies totaled $233 million. The carrying value of those partner companies was $155 million. Safeguard’s financial strength, flexibility and liquidity are evident on this slide showing the company’s balance sheet at September 30, 2014. Safeguard Scientifics reiterates that partner company aggregate revenue in 2014 is projected to be between $345 million to $365 million. Aggregate revenue for the same partner companies in 2013 and 2012 was $284 million and $201 million respectively. Now here is Steve to lead us through the question and answer segment of the call.

[Stephen Zarrilli:]

Thanks Jeff. Operator, let us open the phone lines for any questions.

[Operator:]

(Operator instructions) Our first question comes from the line of Bob Labick from CJS Securities. Your line is open.

[Bob Labick:]

Good morning.

[Stephen Zarrilli:]

Good morning Bob.

[Jeffrey McGroarty:]

Good morning Bob.

[Bob Labick:]

I just wanted first to say congratulations on an excellent analyst day. It was very informative and very well executed. It was very good use of a day. Thank you.

[Stephen Zarrilli:]

You are welcome. Thank you.

[Bob Labick:]

You guys – so, I think Jeff just went over this too, you maintained the growth for your partner companies at 20% to 28% for the year, and I believe that also exclude some of the new companies, the exciting companies that you just told us about on this call, could you give us a sense of the growth rates or trajectories of the newer companies that are not included in that annual guidance for this year?

[Jeffrey McGroarty:]

Sure Bob. I will take that one. As we mentioned, we have six new partner companies and as luck would have it they are evenly split. We have got two that are pre-revenue or development stage, we have got two that are initial revenue, and we have two that are expansion stage. So the pre-revenue companies obviously they are going to be – we expect significant growth from them once they commercialize. The initial revenue stage companies are very early in their commercialization. So on a percentage growth basis it is extremely high growth, but off of a fairly small base given that they have only recently commercialized in the past year to two years in both of those cases. And then the expansion stage companies, which are Transactis and WebLinc, those are companies that are growing in line with what our aggregate revenue guidance is for our existing partner companies with a weighted average over the past couple of years of 21% to 22% for those companies combined, but as Steve mentioned in the call, the use of proceeds for those companies are to expand sales and marketing and accelerate new product development features, and in case of WebLinc to develop third-party integration partner relationships to really help them to grow their revenues. So we expect them to be in that range or higher then what we have experienced with our existing partner companies this year.

[Bob Labick:]

Great. Thank you very much for that. And then at the analyst day, Joe Zawadzki of MediaMath talked about acquisitions to enhance their strong growth there, and then I think maybe the next day they announced one. I was wondering obviously it wasn’t talked about at the analyst day, could you tell us a little bit about what MediaMath has added and how it helps their portfolio?

[Stephen Zarrilli:]

Sure, Bob and I will take that one. The recent acquisition is of a company called Upcast and Upcast is a UK-based organization. Upcast is a Facebook preferred marketing developer that serves clients worldwide. It uses its capabilities to create, manage and optimize large-scale social advertising campaigns and also provides full visibility into certain campaign budgets and performance. MediaMath views Upcast as important to their growth for a number of reasons as they have outlined in their marketing material and public disclosures. One of the things that I think Joe and the team are focused on is the whole evolution of native advertising and its impact on a variety of social media platforms, which we all know are growing rapidly. So Upcast will not only enhance MediaMath’s ability to serve its clients to leverage Facebook and twitter, but also paves the way for its clients to take advantage of future opportunities on other social media platforms and native app platforms. Currently Upcast provides most of its services to clients in Europe and Asia with a growing pipeline of opportunity in Latin America. So they are looking to really use us to round out some of their other capabilities.

[Bob Labick:]

Okay. That is great. Thank you very much.

[Stephen Zarrilli:]

You are welcome.

[Operator:]

Our next question comes from the line of Ryan Lynch from KBW. Your line is open.

[Ryan Lynch:]

Good morning. Thank you for taking my questions. My first one, previously you had given 2014 corporate expense guidance of about $16 million to $17 million, so I was just wondering how are corporate expenses pacing so far this year and then additionally can you give any guidance for corporate expenses in 2015?

[Stephen Zarrilli:]

Sure Ryan. Corporate expenses for this year are tracking in line with our expectations, slightly below the prior year. So we expect to end up in that same $16 million to $17 million range again this year. For next year we haven’t begun the budgeting process, but we would expect that we won’t be materially different from our historical level of corporate expenses, although we always are looking for opportunities to build out the team and add additional resources to enable us to put capital to work. So we will have more information and guidance on 2015 at our year-end call.

[Ryan Lynch:]

Okay, and then one company you guys have discussed before in previous calls is AdvantEdge, this is one of our larger portfolio companies and it is also one of your oldest, can you maybe just give us an update on this company?

[Stephen Zarrilli:]

Sure. As you mentioned AdvantEdge has been with us for at least – almost 7 years now, maybe even a tad longer. It is a company that continues to grow. It has been growing at a rate that has been a little bit slower than what would have been hoped. As we have said in the past we felt that the way that AdvantEdge will ultimately create sustained, long-term value is to combine both acquired growth with organic growth. I think David Langsam and the team have done a good job over the last few years in demonstrating their capability to acquire growth, and I believe he now has a real focus on demonstrating that the platform is also capable of providing organic growth. I don’t it is until we see that organic growth that we will have real opportunity for other pathways for AdvantEdge, and all of the resources and the team’s attention today is being heavily applied to that organic growth model. So for 2014 revenue is pretty much flat with 2013, but we are starting to see some real evidence as we got into the second-half of 2014 that the initiatives that they have been working on are starting to take root. They have had a couple of different speed bumps as it relates to their sales team, some unfortunate happenstances with individuals with certain health issues, but I believe now over the last 12 months they have put together a team that has the ability to really move the ball forward on their organic growth initiatives. So we are hoping for good things from AdvantEdge in 2015.

[Ryan Lynch:]

Okay, I appreciate that update and then just one last one, in the third quarter you invested into two healthcare companies as well as two technology companies, so an even split there, can you just give us any color on your – on the pipeline, are you seeing any more deals in the healthcare versus technology pipeline in as far as a risk reward opportunities in those?

[Stephen Zarrilli:]

Yes. So let us talk about the pipeline for a moment. As we reported last week, through the end of the third quarter, we saw a little more than 700 opportunities for the year and we are still seeing a very nice flow of opportunities as we are operating here in the fourth quarter. We continue to try to find opportunities that will allow us to remain balanced between technology and healthcare. That is an important element to our strategy. We believe that that balance is important for diversification and risk management. We are cautiously optimistic that we maybe able to have one additional deployment before the end of the year, but a lot of that will be dependent upon whether or not we can get through the term sheet process and any other negotiations with those parties along with the diligence and papering off the transaction that is required. So – but more importantly, as we near the end of 2014 we are seeing strength in the pipeline that gives us great optimism about maintaining the pace of deployment, similar in 2015 to what we had seen in 2014, and that is core to some of our key objectives for the business.

[Ryan Lynch:]

Okay. Thanks for taking my questions.

[Operator:]

And our next question comes from the line of Jim Macdonald from First Analysis. Your line is open.

[Jim Macdonald:]

Hi, good morning guys.

[Stephen Zarrilli:]

Good morning Jim.

[Jeffrey McGroarty:]

Good morning Jim.

[Jim Macdonald:]

Could I follow up on Bob’s question and talk about the new partner companies this year, can you give us an approximate revenue that they are going to have this year on an annual basis?

[Stephen Zarrilli:]

I think I can give you some sort of information Jim that might be helpful. We will be talking – you can look at the two companies that are in the expansion stage and they are both between $5 million and $20 million. We would expect that in aggregate the two combined will actually be about $20 million for 2014. And then the initial revenue stage companies Syapse and Propeller, as I mentioned they are in the very early commercialization stage. So there are at the lower end of that. So on a combined basis you would be talking about less than $5 million.

[Jeffrey McGroarty:]

And just to augment that the final two, Trice and InfoBionic, do have FDA approval are expecting to go into market beginning with the first month of the first quarter of 2015, so they should be generating revenue in 2015 as originally planned.

[Jim Macdonald:]

That is very helpful. I’m also interested, I mean you have a lot of companies in the initial revenue stage and I’m interested in which ones are like prospects to be moving into the expansion stage, I mean specifically you mentioned some huge growth numbers for Pneuron, is it getting close to expansion stage?

[Stephen Zarrilli:]

Pneuron is getting close to expansion stage and I think that if we cross our fingers and I think the team at Pneuron led by Simon Moss, I think they really do have a shot of being in the expansion stage in 2015 based upon the data that we currently have.

[Jim Macdonald:]

I don’t know the right way to ask this, but I mean maybe how many initial revenue stage companies might expand into the expansion stage in 2015?

[Stephen Zarrilli:]

I’m not sure if I have the data handy enough Jim. I would run the risk of being potentially inaccurate. So it is a good question, and why don’t we take the opportunity as we prepare for the next quarter call to make sure we have that data available.

[Jeffrey McGroarty:]

Yes, Jim, our partner companies are for the most part just beginning the process of preparing their budgets for 2015. So I think it would be premature to try to give you any indication which companies or how many of them will be growing over that $5 million number as of today.

[Stephen Zarrilli:]

Yes, my intuition in looking at the list quickly Jim is 25% to 30% probably have a legitimate shot of getting into expansion stage as we move into 2015.

[Jim Macdonald:]

Great, and just a clean up question, I noticed a carrying value of Penn Mezzanine was down a little bit, was that from realizations or write-offs or…?

[Stephen Zarrilli:]

That was due to realizations, both on the debt side as well as the sale of some equity interests.

[Jim Macdonald:]

Great. Thanks very much.

[Operator:]

(Operator instructions) Our next question comes from the line of Ed Woo from Ascendiant Capital. Your line is open.

[Ed Woo:]

Yes, thanks for taking my question. I was just curious, you mentioned that the pipeline is pretty good, but what about the outlook for possible divestiture either through M&A or through IPOs we have some volatility in the market, and does that affect any of your long-term views?

[Stephen Zarrilli:]

It can always impact us in some form or fashion and we need to be remindful of that not only with respect to timing, but potentially valuation and I think for us it is probably more weighted to timing than value. We are working on providing guidance for ’15 as we get near the end of the year here. But I will tether you back to a thought of we are – our game plan is to provide consistency with regard to exits. We have had four this year. I would suspect that we are going to have a few in 2015 and as we end the year and begin the new year will have greater clarity as to what that looks like but I am optimistic that we are going to be able to maintain the plan that we are on and stay true to the underlying objectives that we have communicated to you all in the past as it relates to both putting money to work and providing meaningful exists on a consistent basis.

[Ed Woo:]

Great. Okay. Now you provided your target perhaps (inaudible) companies by next year in terms of in your portfolio, have you thought about longer terms of how big that number can be or do you see it as (inaudible) begin near term target?

[Stephen Zarrilli:]

Great question and it's probably the most important question that we asked ourselves on a recurring basis. We believe that overtime we will continue to build our capital resources to allow us to have a broader base of assets under management. And we are not only looking at that from the standpoint of partnered companies and how we currently manage our existing family of partnered companies but how we add to that base going forward. That includes looking at how our resources base and personnel will grow to manage that ever increasing opportunity and timing. So as we have well timed exists producing the profits that we think we can produce, I think it's going to give us the opportunity to continue to build assets under management and 30 could go to 40 over the next 36 months or maybe even something greater if we are able to maintain a certain pace of exist opportunities that brings capital back into the organization. But we look at all of that and I will remind everyone on this call we look at that with regard to a much broader capital allocation program and we are very mindful of a number of elements with regard to how we are growing our asset base and what we do with our capital as we go forward. A couple of key elements to our strategy are to remain consistent and disciplined to the sectors and the types of companies we get involved with both with regard to size and amounts of capital deployed but we also realize in order to do that, and to have more companies under management we would need more professionals but we also want to balance that with regard to ensuring that we can put that money to work in a meaningful way and in a way that would provide the returns that our shareholders expect. So we are constantly looking at what's the balance between capital needed to be retained in the business versus capital that maybe used in other forms of capital allocation for our shareholders.

[Ed Woo:]

Great. Well thanks for answering my questions. And good luck.

[Stephen Zarrilli:]

Thank you.

[Operator:]

Our next question comes from the line of Bill Sutherland from Emerging Growth Equities. Your line is open.

[Bill Sutherland:]

Thanks. Good morning guys. Just one question left on my list and that's as you did with advantage Steve maybe talk about the two others in that cohort beyond the Bridgevine and just fundamental trends, market conditions as far as exits and remind me if you are the lead investor in those two. Thanks.

[Stephen Zarrilli:]

Yes. Great. So Beyond -- Bridgevine, let's beyond we are the lead investor, ownership is close to 40%. Beyond the going through a bit of a pivot with regard to its business, pivot seems to be the an overused term in the marketplace today but really what we are trying to do is, is really rebuild parts of their business to be more profitable and to provide longer term growth opportunity. They are not – 2014 was not a year of growth for Beyond but they have been using their time and energies and resources to reposition the company for growth in 2015. They have sufficient capital. We are not required to provide them with any additional capital at this point in time. We are very supportive of management thoughts with regard to its business prospects moving forward. We have had very active dialogue with them and they are leveraging other resources within Safeguard in order to improve upon their business strategies. Bridgevine on the other hand actually did a transformation on transaction this year we believe. It merged itself with the company called Acceller which arguably was an equal competitor in the marketplace and has given them a real scale in the market. I think as they get into 2015, we will be able to share with you and others some of the accomplishments that they have had on the sales development front that we will positively impact them in 2015. We believe that revenue will grow nicely producing real opportunity for profit and really does position Bridgevine to be at some point sooner rather than later we think an interesting target for certain companies that might find their capabilities meaningful for integration into a broader platform of services. So we have got a great management team there that has worked through this transformational transaction with this merger. We today have just a little less than 20% stake although we are one of the larger institutional investors in Bridgevine so we still have significant minority influence and what's going on there and we are actively working with management as you would expect on a week to week, month to month basis in order to help them continue to evolve and develop their strategy.

[Bill Sutherland:]

So Steve, your stake is here under 20% and did it get as the function of the merger --

[Stephen Zarrilli:]

Yes.

[Bill Sutherland:]

Okay.

[Stephen Zarrilli:]

Bill, there was no cash that we had to put up to recapitalize the business. It was just purely a function of the economics related to merging the two companies and re-balancing the shareholder group in that respect.

[Bill Sutherland:]

Can you just give us maybe an example of a natural buyer for this kind of combined business?

[Stephen Zarrilli:]

If you look at the area of the market that Bridgevine is focused on today, it's all about helping customers acquire, helping companies acquire customers that are focused on digital services. So if I stepped back from that and I begin to look at some of the players in the market that are really trying to own vast elements of the digital marketplace, it becomes a – the answer is I think it's a variety of different companies that are not necessarily prepared to say which two or three companies are the primary acquires of this business. But it's something that we can continue to provide some further guidance on it as we go forward and as we begin to develop greater thoughts around that. There is one player in the market, it's the company called All Connect that is equally capable of providing these services, some would argue that they might be an acquirer but I think time needs to play out on this clock right now for Bridgevine to solidify its market presence with the services that it offers and the current customers that it serves.

[Bill Sutherland:]

So I guess the takeaway here is on these three of the veteran partners that Bridgevine looks like it's got it's act the most together at this point I mean the other two are at work and look at more of a projects still.

[Stephen Zarrilli:]

Well, I think they all have their act together. I think Bridgevine has been able to in the last 12 months taking major lead forward and repositioning itself in the marketplace. I think Beyond is in the midst of trying to do that as we speak and I think they are going to be successful as we get into 2015 and I think Advantage has too as I mentioned earlier they have got to demonstrate that they can grow organically because that will be the catalyst for greater value creation. Now having said that I am not concerned in any respect that any one of these companies cannot only for us to be able to recoup our capital but I still believe that the proper opportunity on these, well committed access will be in line with what people have been expecting. I think it's just elongated from the timing perspective.

[Bill Sutherland:]

Great. Okay. Thanks Steve. I appreciate it.

[Stephen Zarrilli:]

Thank you.

[Operator:]

[Operator Instruction] We do not have any further questions in queue at this time.

[Stephen Zarrilli:]

Okay. Well thank you everyone and make it a great weekend and we will talk to you at the end of the fourth quarter.

[Operator:]

This concludes today's conference call. You may now disconnect.