Sykes Enterprises, Incorporated
Q3 2015 Earnings Call Transcript

Published: 3 Nov 2015

[Operator:]

Good day and welcome to the Sykes Enterprises, Incorporated Third Quarter 2015 Financial Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Management has asked me to relay to you that certain statements made during the course of this call as they relate to the company’s future business and financial performance are forward-looking statements. Such statements contain information that is based on the beliefs of management as well as assumptions made by the information currently available to management. Phrases such as our goal, we anticipate, we expect, and similar expansions as they relate to the Company are intended to identify forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actually results to differ materially from those in the forward-looking statements were identified in the press release and in the Company’s Form 10-K and other filings with the SEC from time to time. Please also note this event is being recorded. I will now like to turn the conference call over to Mr. Chuck Sykes, President and Chief Executive Officer. Mr. Sykes the floor is yours sir.

[Chuck Sykes:]

Thank you Mike, and good morning everyone and thank you for joining us today to discuss Sykes Enterprises’ third quarter 2015 financial results. Joining me on the call today are John Chapman, our Chief Financial Officer, and Subhaash Kumar, our Head of Investor Relations. On today's call, I will provide a quick summary of our operating results after which I will turn the call over to John, who will walk you through our financials and then we’ll open up the call to questions. Let me start by saying that our third quarter results surpassed expectations on many levels. We delivered strong execution across the board and the good news is that we are carrying that operating strength into the fourth quarter and through the reminder of the year with our upwardly revised business outlook, due in large part to the hard work of our employees worldwide. Even as we launched three new domestic sites simultaneously in the quarter and started ramping new programs, we improved the trajectory of our operating results. We grew revenues on an organic constant currency basis making this the 10th consecutive quarter of revenue growth and we expanded non-GAAP operating margins on a year-over-year basis. We have now been operating above the 8% non-GAAP operating margin level on a trailing annualized basis for the last two quarters. This is a major milestone that is important in two ways; first we are ahead of schedule in getting to the 8% to 10% non-GAAP operating margin range, even more so, it validates our strategy. Everything from our strategic focus to our operational execution to our capital allocation. And finally, we translated that strong operating performance into robust double-digit non-GAAP earnings and operating cash flow growth. As we look across the industry, we remain cautiously optimistic about the overall demand trends. Broad and rapid changes in various industries spread partly by technological shifts coupled with reconditioned consumer service expectations continue to reshape customer care strategies across many industries and sectors. Consequently, we continue to see a healthy moment of opportunities within the technology and healthcare verticals. We also see similar levels of opportunities in the financial services vertical. This is noteworthy as financial services is a second largest vertical. It turned this quarter as projected at the start of the year and grew on a comparable basis the first time in over six quarters. We are taking share and winning new clients as well as expanding into new lines of business with existing clients. Opportunities range from providing e-commerce and tech support to technology clients to serving high-value credit card customers for our financial services clients to providing tech and care support to medical device manufacturers, payers and service providers in health care. Even in the communications vertical, we saw some softness this year. We are seeing opportunities firming up for care and tech support work for wireless and broadband providers driven by the convergence and consolidation in the marketplace. From an operation standpoint, the overall environment hasn’t experienced any significant shifts. Attrition levels and statutory rates pressures broadly speaking remain in check. And while those can vary by client, lines of business and geography, we are being vigilant in how we manage them so that the lead times between potential wage increases and corresponding price adjustments do not get elongated. Meanwhile, we continue to work the operational levelers of the business and see the payoff. And there are still scope for improvement in our operating margins as we continue to rationalize underutilized capacity and drive productivity across the enterprise even as we ramp new business. In closing, our solid third quarter results put us on a good footing for a better-than-expected fourth quarter. We are hitting our milestone as highlighted by our strong operating margin performance and we are well-positioned to capitalize on growth opportunities in some of our key verticals. As we deliver on our near-term financial objectives, we need to work the long-term engines of our financial performance. Our priorities are to continue to strengthen the core, build greater demand expertise, drive continuous operational improvements and leverage our at-home agent platform globally. To be sure we are making headway on all those fronts either organically or inorganically. The Alpine Access and the Qelp acquisitions are just two examples of how we are strengthening, innovating and differentiating the core platform. We believe similar opportunities present themselves in organizing for demand expertise. And we're starting to leverage our at-home platform beyond North America. All of this coupled with the current stretch of performance strengthens our conviction about the opportunities ahead of us. That said, we can never discount the unexpected to test us, but we do believe that the actions we are taking on balance will enhance our long-term growth and margin profile, while unlocking opportunities for our employees and value for our shareholders. With that, I’d like to hand the call over to John Chapman. John?

[John Chapman:]

Thank you Chuck, good morning everyone. On today's call, I will focus my remarks on key P&L, cash flow and balance sheet highlights for the third quarter of 2015. After which, I'll turn to the business outlook for the fourth quarter and full-year. During the third quarter, reported revenues came in at $317.9 million, which was in line with our revenue range of $315 million to $320 million provided in our August 2015 business outlook. However, absent the foreign exchange volatility intra quarter, revenues for the third quarter would have come in at the top end of the range relative to the business outlook. With the performance driven by clients within the technology, financial and communications verticals On a year-over-year comparable basis, although revenues were down 4.4% on a reported basis, constant currency organic revenues were up 0.9% in the third quarter of 2015. While vertical market on a year-over-year and constant currency basis, technology was up 16.9%, transportation up 6.5% and both financial services and healthcare up 3.6% more than offsetting the drive from the communications verticals. Third quarter 2015 operating margin was 7.7% versus 6.6% in the same period last year. On a non-GAAP basis, third quarter 2015 operating margin increased 8.9% versus 7.8% in the same period last year. With the comparable margin increase driven by higher agent productivity gains and improved capacity utilization, despite the drag from increased capital expenditures and ramp costs in the current quarter versus the prior-year period. Third quarter 2015 diluted earnings per share were $0.48 versus $0.39 in the comparable quarter last year, an increase of 23.1% on a comparable basis. On a non-GAAP basis, third quarter 2015 diluted earnings per share increased 20% to $0.54 from $0.45 in the same period last year. Both GAAP and non-GAAP increases in diluted earnings per share were driven by agent productivity gains and improved capacity utilization coupled with a lower effective tax rate. Third quarter 2015 diluted earnings per share were also materially higher relative to the companies August 2015 non-GAAP business outlook range of $0.34 to $0.37. Adjusting for just the interest and other expense, I’m using the non-GAAP tax rate as projected in the Company's August 2015 business outlook, non-GAAP diluted earnings per share for the third quarter of 2015 would have been $0.46. Turning to our client mix for a moment, on a consolidated basis, our Top 10 clients represented approximately 49% of total revenues during the third quarter of 2015, up from 48% in the same period with the impact driven largely by foreign exchange translation. We continue to have only one 10% plus client, our largest client AT&T, which represents multiple distinct contracts spread across four lines of business represented 16% of revenues in the third quarter of 2015, down from 17.2% in the year-ago period. After AT&T, client concentration dropped sharply. Our second largest client, which is in the financial services vertical, represented 5.2% of revenues in the third quarter of 2015, roughly unchanged from the same period last year. Now let me turn to select cash flow and balance sheet items. Net cash provided by operating activities in the third quarter increased 38.3% to $37.8 million, driven mostly by higher net income and changes in operating assets and liabilities. During the quarter, capital expenditures were $16.8 million. Our balance sheet at 30 September, 2015 remains strong with cash and cash equivalents of $226.7 million, of which approximately 93.3% or $211.6 million was held in international operations and deemed to be indefinitely reinvested offshore. Also at 30 September, 2015, we had $70 million of borrowings outstanding with $370 million available under our revolving senior credit facility. In the third quarter of 2015, we repurchased 354,000 shares at an average price of approximately $24.65 for a total of $8.7 million. Since the share repurchase program was authorized in August 2011, we’ve now repurchased 4.9 million shares with only 100,000 shares still remaining. We continue to hedge some of our foreign exchange exposure. For the fourth quarter, we have hedged approximately 78% at weighted average rate of 44.96 Philippine peso to the US dollar. In addition, our Costa Rica colon exposure for the fourth quarter is also hedged 80% at a weighted average rate of 555.57 colons to US dollar. Receivables were up $279.1 million. Trade DSOs on a consolidated basis for the third quarter was 74 days, up 1 day sequentially and up 2 days comparably. We collected approximately 4 days’ worth of DSO shortly after quarter-end. The DSO was split 75 days for Americas and 82 for EMEA. Depreciation and amortization totaled $14.5 million for the third quarter. Now let's review some seat count and capacity utilization metrics. On a consolidated basis, we ended third quarter with approximately 41,100 seats, up 100 seats comparably and up 900 sequentially. The comparable and sequential net increase in seats were driven by higher projected demand from clients within the financial services technology, communications and healthcare verticals. The third quarter seat count could be further broken down to 34,400 in the Americas region and 6,700 in the EMEA region. Capacity utilization rates at the end of the third quarter were 78% in the Americas region and 85% in EMEA versus 77% for the Americas and 88% for EMEA in year-ago quarter. Capacity utilization rate on a combined basis was 80%, up slightly from 79% comparably and unchanged sequentially. The increase in consolidated capacity utilization rate on a borrowing basis was driven by higher demand. Now let's turn to business outlook. The assumptions driving the business outlook for the fourth quarter and full-year are as follows. First, we are raising our 2015 revenue and diluted earnings per share outlook given the better-than-expected financial results for the third quarter coupled with incrementally higher anticipated demand for the fourth quarter. Second, we added roughly 1,600 seats on a gross basis in the third quarter in addition to the approximately 800 already added in the first half of 2015. The net seat count on a year-to-date basis is up by approximately 100. We expect in 2015 with a net increase in seats of 1,200 seats relative to the year-end 2014 versus the 1,700 projected in the August business outlook due mainly to timing as the remaining seat additions will slip into the first quarter of 2016. Our revenues and earnings per share assumption for the fourth quarter and full year 2015 are based on foreign exchange rates as of October 2015. Therefore, the continued volatility in foreign exchange rates between the US dollar and the functional currencies of the markets we serves could still have a further impact, positive or negative, on revenues and both GAAP and non-GAAP earnings per share relative to the outlook for the fourth quarter and full-year. Third, we anticipate total other interest expense of approximately $800,000 for the fourth quarter and $3.7 million for the full year. These amounts exclude the potential impact of any foreign exchange gains or losses in other income expense. Finally, we anticipate a lower effective tax rate for the full-year 2015 relative to the business outlook provided in August, driven entirely by the unrecognized tax benefit and valuation allowance released in the third quarter of 2015. Considering the above factors, the company anticipates the following financial results for the three months ending December 31, 2015

[Operator:]

Thank you, sir. [Operator Instructions] The first question we have comes from Bill Warmington of Wells Fargo. Please go ahead.

[Bill Warmington:]

Good morning, everyone, and congratulations on a strong quarter. So my question is whether you guys think you can grow 46% next year even with the telecom space basically continuing to be weak? Can you sustain that level of growth and also deliver strong margin?

[Chuck Sykes:]

Yeah, Bill, this is Chuck. Two things, and I - we want to answer your questions without trying to get too much into what next year in earnings is going to look like. But just -

[John Chapman:]

Bill, feel free.

[Bill Warmington:]

Yeah, I am.

[Chuck Sykes:]

Well, nothing to say. 46% is kind of our nice linear net revenue growth that we measure ourselves on. Same way that when we are having to set expectations around the operating margins, kind of running every quarter in the range of that 8% to 10%. Now the truth is and you know this, because you’ve been following this year, but we were lumpy, right. I mean, the business doesn’t follow the straight line. So this year, I think, we definitely just took a little bit of a breather only because of some softness that had occurred in the telecom vertical, but what’s encouraging and gives us indication that we believe we will get back on trajectory is the success that we are starting to see in the other verticals which I think began to present here in Q3. And at the same time, the issues that create a softness in telco were somewhat acute to the first half of the year and we are already ramping growth as we speak with these new seats for the telco verticals. So right now the indications do look positive for going into next year that we ought to be on that range. And that’s anecdotal as I can give. I don’t know, John, if there is any more -

[John Chapman:]

No, that’s fine. We don’t really want to guide on 2016. I think directionally that’s also correct. You see the capacity we are adding in the US, Bill, that full capacity for the program that we know where that volume is going to go, so even though we’ve got a little delay and how that’s ramping between Q3, Q4 and Q1 next year, and that all looks good for us in terms of going into Q1 next year.

[Bill Warmington:]

So to be clear, the capacity that you are adding in the US is telco-driven?

[John Chapman:]

No, I would say it’s mainly financial services.

[Bill Warmington:]

Financial services, okay. Well, that was going to be my follow-up question for you is talk a little bit about what’s turning the tide on financial services that's been weak for a while, you are turning the corner on that? What’s been happening there?

[Chuck Sykes:]

Bill, if you go back and recall just in our past conversations, the financial services was related to three of our main relationships they had sold off their mortgage servicing business and we were supporting those programs. So it was merger acquisition activity that set us back and you know we are continuing to grow in financial services, but it’s just set a little for the comparables to shake out, so you are starting to see that growth again.

[Bill Warmington:]

Got it. And then my second follow up, to ask about your thoughts on kind of margin and tax rate looking out to 2016.

[Chuck Sykes:]

I looked at John, he looked at me. Listen, for us the good news for us is that again it’s taken us two, two and a half years to get the company back on the structural tracks that it should have been to where the operating margin is in any given quarter or in that range 8% to 10%. Going into 2016, certainly there are opportunities that we can continue to skew the overall operating margin performance a little more towards the right and over the 8%. I just don’t want to get ahead of myself in that because the ramping of these programs we do have a lot of capacity and lot of programs we are bringing on. Our guys did a great job here in Q3 and Q4 in dealing with that. We did get a little bit of a break, I would say, in how steep of a ramp was occurring, but regardless, those seats are coming on and getting in there to next year. So I don’t want to get any more specific than that, but we do still have opportunities and again the things that I would focus on to say, well, how do you know you have opportunities, it really is the facility utilization being sitting right now at 80% aggregate. Typically in our business, I mean it is kind of tough to get above 85%, but we really strive to do that. And that’s another opportunity for us. And then that growth gives us better economy of scale in our overhead. We don’t like it when we see our corporate getting over the 4% mark which it’s done. But again we just think that’s timing and some one-off things we can get that down. So that’s opportunity there as well. And then just holding on to our gross margins where we are, our guys have done a great job in just getting that productivity up, getting the programs ramped. So we just hold on to those things. I mean we have the opportunities to continue to improve on the margin.

[John Chapman:]

And, Bill, if I can talk a little bit about tax rate, we did mention I think maybe three or four calls ago that we have seen our tax rate slowly pick up over the last few years. We’ve got tax holidays in certain areas that have been slowly reducing. We spoke about the US and how well we are doing there, how well we are growing, our US tax rate is roughly around 37%. So in terms of tax rate looking forward, we are going to look at tax rate in low 30s is probably we are going to go to in the very near future. We don’t see it going much above that at all, but because of the growth in the US and US is by far our highest tax jurisdiction, you will see that tax rate bumping up to the low-30s.

[Bill Warmington:]

All right, thank you very much.

[Chuck Sykes:]

Thank you.

[Operator:]

[Operator Instructions] Next we have Mike Malouf from Craig-Hallum.

[Mike Malouf:]

Great. Thanks for taking my questions. So I am wondering going back to your comment on taking couple of years to get on your - back on track, it seems like when you look at the utilization and the margins, you certainly are there. You obviously have a little bit more work to do next year, but we are almost at that point where someone would say you are at sort of full margins. And you mentioned a little bit with regards to the opportunities, strategically surrounding companies like Qelp and whatnot. And I am wondering if you could talk a little bit more about strategic moves as you look out over the next two years that can help you keep going forward.

[Chuck Sykes:]

Yeah, thanks, Mike. I would say for us in the sense of our current size, the 8% to 10% is based on that size. Now, the key is to continue to take advantage of the additional productivity opportunities that we have, we have as and to your point we made really great strides there. But from this point too, it is about growth and we’ve got to get the growth engines here to make sure they are heading and I feel very encouraged with the way that right now in Q3 we are seeing growth distributed across more than one vertical in the concentration and seen some nice movement. I mean, the technology one was really nice to see. One of the things with that that’s going to be important for us is to continue strengthening our domain expertise in other verticals. Even when we speak about healthcare, I mean it’s nice that we’ve got the growth, but honestly we are just scratching the surface in that. You will notice other areas that we don’t break out quite as much right now. We’ll kind of put it in a bucket of other, but even in the retail space right now that’s something that that industry really likes the virtual model and we are starting to see some really nice momentum there. So we are very encourage by that. Financial services is getting back on track. I mean it went through a big change curve, spinning off the mortgage groups and everything, but we still see the financial services groups wanting to outsource. And then on top of that the wireless side which is just an industry in our space is clearly the largest when you think of it globally. And it’s a market that is addressable by our company in all of our geographic markets that we serve, perhaps with the exception of in China. China, it can be a little more difficult there. But the Qelp acquisition that we did which is a company putting us on the side of the self-serve type of requirement and helping our agents as well perform in wireless space, we believe little things like that can give us entries into this really big industry. So we are encouraged with that. We are going to continue looking at things in that space like Qelp which is around the content side, self-serve. We are going to continue looking at things on the social media front around social care that you read so much about all the digital channels. And we don’t see these things in a way of one cannibalizing the other. It’s the strength of all of these things working together that will create the differentiation for us. We are not looking at necessarily these acquisitions as how much they can grow by themselves. It’s when you put them together, that we create a really powerful value proposition or at least that’s what we believe our view of the market is. So I mean, things just staying consistent with what we’ve said. Any acquisition that would move us in a position of strength into a new vertical domain would definitely hit out radar. Anything that would be strengthening our platform in order to serve those industries is definitely going to hit our radar. Those are the two big focus areas right now.

[Mike Malouf:]

That's really helpful. And maybe just a quick follow-up, John, you said on the tax rate that you thought that might eek into the low-30s given the growth particularly in the US. Is that a commentary on something that could happen over the next 12 months, or is that more of a long-term commentary?

[John Chapman:]

No, that's a commentary in terms of what will happen probably next year if we continue growing in the US and do as well in the US in terms of profitability. Yeah.

[Mike Malouf:]

Okay, great. Thanks a lot.

[Operator:]

Next, we have Dave Koning of Baird.

[Dave Koning:]

Hey, guys. Great job. Yeah. I guess my first question, the last few years have been - three of them more stable, just years probably for you guys and probably for the whole industry of the last 10 or so or maybe last eight years or so, just been very stable over the last few years and I’m wondering is that sort of the expectation looking forward, is there anything you’ve seen recently around the horizon that does much to change the industry, like coming on the path, you’ve had the move to Philippines or obviously the recession or technology changes, is there anything really changing much, because it just seems like kind of stable lately?

[Chuck Sykes:]

Yeah. I was going to ask you how you’re using the word stable, because certainly for us, trying to get our margins up as they felt super stable. In terms of the industry, yeah, you're absolutely right, it's interesting. And when you think in the beginning - in the 90s, the whole thing of outsourcing was relatively new and Sykes was innovative in the sense of building centers and small communities in the US. Then we went international. Then the dotcom error comes in and actually to be a part of that, we went into the whole CRM e-commerce support. And then you're right, and then we moved into globalization and that has been the name of the game for quite a while. I do believe as we go forward today, every single piece of commentary that you pick up today is all about digital channels and that is going to have a really interesting effect on our business. I think the things that you may end up seeing in our industry through that is going to be using the power of the digital channels, which now gives you the ability to do some pretty amazing things with the power of analytics, because once you get people into out of the voice medium into the digital medium, you’re able to do more with that technology. And then in that same time, I think you're going to see a little more of a convergence in some way with areas in sales and service coming together. That's not a new idea in our industry. It was around in the late 90s, but I think in today, with the way digital channels and the power of analytics and the fact that so many others today, I mean just thinking on our own lives, everybody listening to call, our propensity to go to the web first to get informed and everything, once you do that, there is a big opportunity there for a lot of our clients to leverage that and try to do sales. And we’re today with a lot of our public companies, we are doing sales and service. The good news in that is I think it allows us to move from not just participating on the cost side of the equation for our clients, but to actually help on the revenue side of the equation and that to me helps us to continue to sustain our margins. Because it’s easier for our clients to equate expense with value when you are linking it to our revenue performance versus when you are telling them, hey, I can reduce your costs 10%, 15%. It's an interesting thing. So we’re encouraged by that and excited about the advances that are taking place, but it's going to become a smarter, certainly more interactive, certainly more analytical type of environment and we are encouraged by that, Dave.

[Dave Koning:]

Great. And I guess just my one follow-up question, this year, cash flow is trending pretty much in line with earnings. It's very tight conversion, maybe even a touch above earnings. The last several years, cash flow had been somewhat below earnings and maybe that had to do with some of the volatility of buying new centers as you shut other ones down, et cetera, but is this overtime, given the historic kind of perspective, it seems like it's usually under earnings, free cash flow is under earnings, but I mean are we at a point now where it’s going to be more in line with earnings overtime?

[John Chapman:]

Yeah. I think you’re right, David. I think that’s how we see it and we see this year's probably typical on the go forward. Yeah.

[Chuck Sykes:]

Yeah. If you recall, I think on the capacity, if you recall, I mean we still have a little bit of it today. When you look at the number of gross seat adds, almost equaling the number of seats that we’re removing. That's not the way that we want to add seats, but the last two years, we had to do that in pretty big order, because the way we started growing with some of our clients and I’d just call it as our company has been maturing in a good way, Dave, as we've been maturing and winning bigger deals. We were misaligned with where we had seat capacity availability with what our clients wanted and it did require us to spend cash I think on level that maybe wasn't quite in sync with growth. But today, I think it's kind of little more normalized. We are still making some pretty significant investments on the foundational aspects of our company with our ERP system. Again, it’s part of the maturation process of our company. But in general, I would see it getting more synced up again.

[John Chapman:]

Yeah. I mean, we’re adding 8% gross new seats, CapEx is about 4.1 and 4.4 and if you remember back to start of the year, we spoke about how we are investing in ERP, sharply 0.5 point. So excluding that what you described as one-off and tenure investment, you're really looking at CapEx this year around 3.5% to 4%, which is where we see it being even with the top end of the 4% to 6% growth rate.

[Dave Koning:]

Got you. Okay, great. Thank you.

[Operator:]

Next, we have Shlomo Rosenbaum of Stifel.

[Adam Harrington:]

Hi, this is Adam Harrington in for Shlomo. Quick question for guidance, implies a sequential decline in 4Q margins, which is usually strongest margin quarter, what's the reason for that? Were there some --?

[John Chapman:]

Yes. Let me just call something in Q3 actually, because we did have - we always have one-offs, we always have lot of things that impact the numbers. In Q3, we also had an insurance claim that probably added about 50 basis points to margin. So if you take that out, the 8.9 really is an 8.4. Around Q3 and Q4, it’s probably about the same and if you look at the implied guidance, about 8.3 through 8.7 for Q4. So it's certainly not the step up that we saw last year, but if you remember as well, we are growing - growth between Q3 and Q4, half of the growth is coming in new facility and not does drag you down a little bit versus last year where we grew in existing facilities with existing clients. So, yeah, you've got to kind of take out 50 basis points from Q3, get down 8.4 and then think about that broad impact on Q4 this year that may exist last year and you’ll see that, we’re guiding flat to maybe slightly up at the top end of the guidance.

[Adam Harrington:]

Okay. Got it. And capacity utilization has been flat for the last three years, it seems like margin expansion has come from agent utilization, could you provide more color on what’s improving the utilization on the ground?

[John Chapman:]

Yeah. I mean, you are absolutely right. I mean, it’s all the good work that’s been done by operations, because again if you remember, this model in our business has moved from just the prior model to be a risk-based, you've got more skin in the game in terms of price per contact. So it's all about the blocking and tackling, getting the utilization of the agents, making sure you’re at regions where you needed to be and delivering on that for the company as well as the stocks and for the client to make sure that you're not getting penalized and so it's all those things that we've been doing really well that’s contributed to that.

[Adam Harrington:]

Okay. And lastly given the current operating performance, would you say the business is at a point where the current operating trends are more of a run rate level, I think within that 8% to 10% range that you provided?

[John Chapman:]

Yes, absolutely. Again if you look at the business and we were really correct of ourselves. We look at it and say there are opportunities that still exist, but I think that will always exist in our business when we've got very demanding clients, we've got volume changes all over the world, we’re marching our capacity or people through that demand, but I think we’re really happy that we’re now operating in that 8% to 10% range and you've always got opportunities and we’re always looking at improving where we are going forward, absolutely.

[Adam Harrington:]

Okay, thank you. I appreciate the time.

[Operator:]

Well, at this time, we're showing no further questions. We will go ahead and conclude our question-and-answer session. I would now like to turn the conference call back over to management for any closing remarks. Gentlemen?

[Chuck Sykes:]

Great. Thank you, Mike and no closing remarks just outside of thanking everybody for the participation on the call and we look forward to updating you guys next quarter. Everybody, have a good day.

[Operator:]

And we thank you sir and to the rest of the management team for your time also today. Again, the conference call is now concluded. Again, we do thank you all for attending today's presentation. At this time, you may disconnect your lines. Thank you and have a great day, everyone.