Welcome to the Franklin Covey Fiscal Year 2017 Q1 earnings call. My name is Adrian and I will be your operator for today’s call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Derek Hatch, Corporate Controller. Please go ahead.

Thank you Adrian. Good afternoon ladies and gentlemen and happy New Year. On behalf of the company, welcome to our first quarter investor call this afternoon. Before we get started, I just like to remind everyone that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management’s current expectations and are subject to various risks and uncertainties including, but not limited to, the ability of the company to stabilize and grow revenues, the ability of the company to hire productive sales professionals, general economic conditions, competition in the company’s targeted marketplace, market acceptance of products or services and marketing strategies, changes in the company’s market share, changes in the size of the overall market for the company’s products, renewals of all access passes, changes in training and spending policy of the company’s clients and other factors identified and discussed in the company’s most recent annual report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Many of these conditions are beyond our control or influence, any one of which may cause future results to differ materially from the company’s current expectations and there can be no assurance that the company’s actual future performance will meet management’s expectations. These forward-looking statements are based on management’s current expectations and we undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of today’s presentation except as required by law. With that out of the way, I'd like to turn the time over to Chief Executive Officer and Chairman of the Board, Mr. Bob Whitman.

Thanks Derek. Good afternoon everyone, we appreciate you joining us, we're happy to have the chance to talk with today. I would like to just briefly provide you an update on, first our progress on All Access Pass including how it's changing our business both strategically and economically. Some of you have asked us to kind of give a context for the strategic relevance of that and also how we expect the compounded impact of new All Access Pass sales plus the renewal of prior year passes to impact the next few quarters as those start kicking in. Second, we'll discuss our results for the first quarter on both a reported and on an apples-to-apples pre-deferral basis and how our investments and activities in the first quarter have built the foundation for what we expect will be a strong balance for the year. And finally review again our detailed outlook and guidance for 2017. So first I'd like to discuss our progress on the All Access Pass and then I'll ask Steve Young to review our results for the quarter and our guidance for the year. Maybe first just to note about the economics of All Access Pass, we've had some questions about. Well the accounting for All Access Pass is on a subscription basis. So it might be helpful to note a couple of differences in how the economics of All Access Pass work compared to those of some other subscription offerings. Number one, how many subscription offerings bill and collect monthly, the All Access Pass is billed and collected upfront, ahead of the time when we actually recognized most of the revenue. So it doesn't affect our cash flow and in fact it improves the cash flow as a percentage of reported revenue. Second, some subscription offerings are…

Thank you, Bob. Good afternoon everyone. First I hope that you'll find our Q1 financial report, our earnings release and the news bulletin issued on December 22 to be helpful. These reports contain information and detailed explanation of the quarter's results compared to last year. As outlined in these reports, the first quarter results reflect a decrease in reported sales and in adjusted EBITDA compared to last year. These changes reflect the combined impact of increases in deferred revenue, non-repeat business, the somewhat longer sales cycle for All Access Pass that Bob talked about, increased growth related cost and less onsite revenue offsetting the significant growth in All Access Pass sales. Before I talk about numbers, let me set some context. First, our first quarter has been an investment and staging quarter that establishes a foundation for the rest of the year. Our enterprise and government sales cycles include making significant first and second quarter net investments in growing our sales and delivery forces and end marketing. These investments in term drive increase in sales pipelines which are harvested in the third and fourth quarter and whose high gross margins generate high flow through to adjusted - and adjusted EBITDA in those quarters. This pattern in our corporate business as you can see in Slide 7 has been extenuated by the strong growth of the education practice, where more than half of its revenue and substantially all of its EBITDA comes in the fourth quarter. Except for commissions and other incentive compensation costs which track consistent with revenue, our other costs are relatively similar or flat in a quarter. As a result, our SG&A to sales percentage is higher. And the gross margin percentage and EBITDA to sales percentage lower in the first two quarters with these ratios reversing in…

Thanks, Steve. At this point, let’s just open it for questions and look forward to getting your questions.

Thank you. [Operator Instructions] And the first question comes from Marco Rodriguez from Stonegate Capital. Please go ahead.

Good afternoon, guys. Hey, thank you. I have a few questions. Just wanted to get some clarification on some things. Specific kind of taking a look at page 6 of your slide presentation, on All Access Pass for Q1 ’17, you have total invoiced pass amounts of 4.9 million. And then you have revenue recognized as 3.7. So is that saying that 1.2 million of the 4.9 was deferred or how should I be looking at that?

No. The 3.7 million or 3.8 million recognized is the net amount of the deferral of the sales in that current quarter and then just a small of that, amount of that being recognized, offset by the revenue that is recognized from prior year sales. So every quarter will have some revenue that's recognized that was deferred in prior quarters and then will defer a significant amount of revenue of that current quarter, especially as we're talking All Access Pass sales. So again Marco, it's a net number of the deferral this quarter, the small amount that's recognized and the amounts that were recognized from the prior year.

So the 2.5 million or the 2.6 million that you have below that changing deferred All Access Pass revenue balance. Where is that coming from and how is that being generated now?

That's the change in the balance sheet. Okay?

Maybe I’m looking at the numbers wrong, but the balance sheet deferred revenue balance went down sequentially.

Well, the 2.5 million is the change in the balance sheet in this year. If you take the 2.7 or the 7.254 balance deferred at the end of the year and then the change in the deferral is the 2.5 million. That gets to the current deferred balance on the balance sheet related to these sales of 9.8 million. So every quarter, we’ll be talking about the change in deferred sales and also what the total deferred amount is because that is the number that is impacting sales so much.

Okay. Let me shift gears here then, just I'm not sure if I caught this or not, but the increased sales that you had in the quarter brought up SG&A fairly significantly on a year-over-year comparison basis. Can you walk me through what were the extra costs if you will that you saw in the quarter that are likely not to repeat?

The biggest single cost as an increase in SG&A is China. So China going from a licensee operation in which we don't have any of the operations in our financials where we were just reporting the royalty from that operation to an owned office or a direct office. So all of the SG&A of 1.6 million is an increase compared to last year. So that's the biggest single item. And then additionally, we mentioned things like in education, we add coaches, we added sales people through the year that’s an ad. We had implementation specialists, growth related ads that are annualized in this quarter. So that's the increase. Again, with the big, the largest one being China, which is totally offset by the sales in China so that our adjusted EBITDA actually goes up related to China even though there is such a significant increase in SG&A, that's more than offset by the increase in gross margin related to the increased sales.

Got you. And the investments made in All Access Pass in the quarter, were they fairly significant or not?

Well a good portion of the localization example, a good portion of that will be capitalized, but we did a lot of work on the portal and in IT and in innovations, preparing, getting ready for the All Access Pass and positioning the content properly on the portal. So yeah, there was a lot of work in many different areas of the company related to getting the All Access Pass portal and product functioning.

Marco I think your word is, we’re getting ready obviously for two things. One, we want to make sure that the offering in the portal is set for a very compelling for all the renewals that are coming up. Second, at the end of February, we're going to now launch All Access Pass globally, so that offices like China. Japan, all of our whole licensing network that currently do not sell All Access Pass that they'll have that available and so there are also marketing costs and training costs, and other things that went into it. These aren’t huge dollar volumes. We said we increase aside from China, another 900,000 of costs that are expensed in the quarter plus some significant investments in capitalized costs for curriculum and portal and other things.

Got you. And last quick question, I’ll jump back in the queue, I was wondering maybe you could expand a little bit more on the sales cycle elongation here, just trying to get a little bit better of a sense as far as your comment saying that the All Access Pass requires a higher level of company sponsorship. Is that just higher up the executive chain or are there additional company has a different segments of the business, any additional color there to kind of help me understand a little bit better the sales cycle would be helpful.

Let me ask Paul Walker just to address it first of all and then I’ll give some comments.

Hi, everybody. A couple of comments on that. The sales cycle is longer and I think you just alluded to one part of it. Typically, we end up going up at least one level in the organization for the decision and that's driven by two different things. One, there's now an IP contract that needs to be signed and the person who oftentimes has the authority to sign such a contract is a level up in the organization, so where we might have worked with a head of training and development in the past, we might now be needing to interface with the head of Human Resources or a division leader. So there's a little bit just the time related to getting on our calendar and then pushing through a final decision on their end and elongate a bit. Also, and this is probably good news I think for us is that the nature of the relationship now and what we're going to be doing with them and the job they're trying to get done have expanded. So we're in there not just talking about a single training initiative, but we're talking about additional ways that we can impact the organization through the pass and so there are more people that want to get involved. Not necessarily the decision, but in the decision about how they're going to use it and so that adds a few weeks as well and you try to have a final meeting to really launch and make sure we've got it scoped right and the pass is as large as we can get it.

Is that response more fulfilling?

Yeah. That's perfect. That’s very helpful.

Yes. And for us, we like this because on one hand, you had, you could get a quick answer at the end of a quarter from a facilitator who is just ordering more materials and you could give them an incentive to do that. Now, you're actually in a sales cycle that those discussions are being had day after day with decision makers who are really trying to get stuff done. And so it’s a change in the whole thing like that. Ultimately, we’ll have $175 million of the business that is really focused in this exact same sales process. It’s affecting us in those courses and we didn't have big All Access Pass sales last year obviously because we just had a facilitator in the first quarter other than the 300 in the second quarter. We had 3 million of All Access that that jumped to 6 million and then 12 million in the third and fourth. So the effect of this was less in future quarters, because you’re comping against quarters in which you had some of this, but it’s just part of the transition over and we've made the decision not to try to do promotions and things like that with clients. We want to have these deep conversations. And so there's some bumps, timing bumps as you go through this for a couple of quarters, but it doesn't affect our view of that. The really interesting thing, Paul could also give some color or commentary on this, the number of contracts, I mean, there is a very, very high percentage of those who are actually getting the advanced pipelines that ultimately close where in the past you might have said, if it didn't close by the end of the quarter, because you had lots of incentives and other things and then sometimes you just didn't close because if you can't marry [indiscernible] you don't do it at all. Here, it tends to not be that way. We, actually at this point in fact, every single large deal that we had at the end of the first quarter that we thought would close as of yesterday now, I mean most of them close in the first two weeks after a lot close in the first couple of days after, but now, every single one of those is closed, so these are serious people talking about serious business issues. There is a compelling value proposition and it's just, there's an adjustment because the sales people are used to being able to pull the facilitator switch and get a few million dollars at the end of the quarter. We're just saying, if we get across this bridge which we're doing quarter-by-quarter, we don't want to go back.

And our next question comes from Jeff Martin from ROTH Capital Partners. Please go ahead.

Hi, Bob. Hi, Steve. I apologize for background noise in the car. Did I hear you correctly that the addressable revenue pool for All Access Pass overtime is roughly 175 million?

Yeah. I’m saying out of our business, when you think, that's the combination of our US direct offices and our international direct offices, the licensee network, higher education and even a portion of the sales performance and customer loyalty practices, which really interface with our All Access Pass plus that really the same sale system will apply to about, of the existing revenue of $175 million. And so what that leaves that isn't affected is of course the educations business other than in higher ed is a completely different thing with the leader in me, the licensee network for education isn't there and then we have some other revenue from our sale leaseback of the office space here, books and audios and some data collection revenue and customer loyalty, but otherwise, the whole business ultimately will expand into this, essentially everything, except those will be All Access Pass driven, and really more than two-thirds of the pipelines in those offices that are selling All Access Pass are now opportunities that what they’re discussing is All Access Pass. So we expect this to accelerate.

So would you say by this time next year, your three quarters are even higher transitioned to All Access Pass. What kind of timeline should we expect for the bulk of that 175 million to be converted over?

Yeah. I think it’s in two pockets. In the US direct offices, I think it will account for two thirds of the revenue probably in the US direct offices will be either directly with pass or pass related in this instance, selling services or products that go with it. I don't know that internationally, that we mean every international, to the exactly same levels we are now just because their businesses have been different always, but I think the idea that it will grow in those offices I think is true, but it's just, it will take a longer time to transition. So I think on, if you take half the business being, half of that 175 million, a little more being the US direct offices, the government business is the same way, it’s transition. The UK and Australia, there's roughly say $110 million of the business that should be in that 60% plus range. And then I think as the new offices come on, it will take a while and they may only ever achieve 30% or 35% just because they’re very heavy services oriented offices historically more than content, it may take us a while longer to, I mean, we may never get to those levels, but I think it will take a year or two to get into the 30% to 40% probably.

That’s helpful. Thanks. And then could you touch on discovery days, I think you said, I heard you say about 50% covered with the All Access Pass holders, how has that been going versus your expectation and maybe some other anecdotal information you could provide would be helpful.

Yeah. Great. Let me just provide the idea, then Paul you can respond to how it’s going through in the US direct and in the direct offices in general. The idea again is the sale itself is more consolidated, you’re involving more people as Paul has described. What we want to do though is make sure that this for us is it’s great to make the sale. We want people to use it and renew every year. And if we do, you win the game eventually. The compounded effect of this wins if you can get renewals and if you don’t, then you’re in kind of caught in no man’s land. So for us, we just want to make sure that people are really utilizing the product and liking it and getting huge value out of it and so literally the day just somebody starts before they sign the contract, we've already scheduled an implementation specialist phone call with these people where they're discussing and almost always more than 90% of the time, they come out of that initial call already with what we call an impact journey or series of impact journeys planned out. They've got just part of the organizations, they're trying to get this done and that's already scheduled upfront. The challenge though is we've made a sales to maybe one person, ultimately even though it's a level up. What we want to do is go in to that organization and with the flexibility of All Access Pass, meet all, a bunch of other stakeholders, business owners, so this discovery day is we say look, we'll be willing to, if you'll be willing to invest as a client, the time to get a bunch of your senior leaders together, we’ll be willing to invest a day of our time and bring one of our senior consultants in too and we’ll spend, it's not a whole day mercifully, but it’s 3 or 4 hours where you're in there discussing what people are trying to get done and all of a sudden, you broaden the base of people who see how valuable the All Access Pass can be and how they can get value out of this as well. And so the idea was, you may have a discovery day was a new idea, kind of toward the end of the summer, we have process sized it. It began to be implemented in September-October. It’s accelerating now. It’s expected to be tried to get it done in thirty days, but since it's a relatively new process and we’re continuing to sell new ones, we’re only at about half of the days. I don’t know Paul if you want to add color or commentary to that.

I would just say, to date, we’ve completed 561. We have 40 additional scheduled. So we’ll be here in another few weeks about 600 and a little over half way there and as Bob mentioned there, it’s providing the foundation frankly for the $4 million as you see there on slide 6 of additional services and products. That’s where those are really driven, another 14% in addition to the passes that are sold and that 14% of revenue comes out of Discovery Days.

And Jeff, the answer to really, what we’re kind of saying is that aside from the education, we’re really saying honestly, we have one thing, we do sell intellectual property passes, primarily All Access and we add on services and populations et cetera and that’s really what the whole business we expect will be.

And the next question comes from Kevin Liu from B. Riley & Company. Please go ahead.

Hi. Good afternoon. Just on the international licensee business, I understand because of the impact of China going direct, but I think there is also reference that the other licensees declined a bit. Could you just address that and then talk a little bit about what's going on there and then more generally for both international direct and licensee, as you start to localize and translate your All Access Pass, what sort of impact do you expect that to have on both sales cycles as well as actual recognized revenues over the course of this year?

Great. Let’s provide those. And maybe, I’ll ask Sean Covey to respond to the licensee business.

Yes. The licensee business that chart you look at has got China in it. So it's hard to compare, but just looking at the growth business itself, the first quarter was down a little bit, about 5%. On a gross revenue basis, not the recorded licensee revenue that we show, but on a gross revenue basis, down about 5%, which is unusual, because almost every quarter has been up for many years and it's primarily a couple of things. I'm not really worried about it, because I feel like second quarter is coming in much better and the year looks good, but it's primarily I think part of it was the China operation also impacted Hong Kong, Singapore and Taiwan. They're three of our bigger partners. I think the focus on launching the new big office centrally in China, the direct office really took the eye off the ball on those other properties and then we had like three other partners that just had a bad first quarter. So overall, I feel good about the growth, the continued growth of the partners. We did have a down first quarter. The All Access Pass, as Bob mentioned, we have 15 languages coming on. We've all the European languages, Spanish, Portuguese, all the major Asian languages will all be ready at the end of this month. We have a certification process. Our goal is to sell a few hundred of these by the end of the fiscal year. It's going to take some time to get going. The partners are generally very excited about this. It's kind of like it's about time. This is what our clients have been asking for. Many of their best sales and biggest sales are to multinational corporations that want multiple languages, so that's going to be very helpful. So I believe that this will, we've had really strong growth for the past many years with the licensees. I think that All Access Pass will secure it for many more years to come that continued double digit growth that we've experienced for so long and, but I think it's going to take I think this year, we’ll have six months of selling it. I think it will really start hitting more strongly next year. So anyway, I don't know if that's responsive to your question.

Yeah. But just a quick follow-on to that, I mean do you expect, are there any licensee partners or perhaps international direct customers that you feel are just going to wait for All Access Pass or will the sales cycles ongoing now just continue, even though they know this is coming down the pike.

Well, they will, will clients be waiting? I think that it's, I think, most of our clients internationally don't know much about it at this point. I think some of the large multinational US companies do, but the international ones that are based in international countries do not. I think for us because we recognize royalties, we won’t have to defer revenue with licensee partners. When they sell, we’ll recognize it right up front, even though they might be deferring revenue, we wouldn’t need to.

I think also the sales cycle question in these offices will be less just because these offices have always been, they've not been facilitator based operations, they've always sold, strategic kind of on-site things and so for them, the sales cycle, I suspect will not be very different and they'll be using All Access Passes, the vehicle through which they deliver content for continued on-site assignments. And that's why I mentioned earlier to Jeff’s comment, that because services have represented a much higher percentage of our international direct office business than has IP, the replacement of the IP with All Access has all the advantages that it has, but we have a bigger services base as a percentage that should continue to -- I expect would continue to go well and they will use All Access as the way in which they deliver the content. That's one reason why All Access as a percentage of total revenues won't be as high because services as a percent will be higher. Also, I expect it won’t have the same impact on sales cycle since the on-site days already have a long sales cycle. Bob, I’m not sure if you want to add to that. Okay. Is that helpful, Kevin?

Yeah. Definitely helpful. Thanks for taking the questions.

And the next questions comes from Tim McHugh from William Blair. Please go ahead.

Hi, guys. This is actually Trevor Romeo in for Tim today. Hi. First one, it sounds like the metrics and the renewal rates that you guys quoted for All Access Pass have been pretty strong so far. I just wanted to ask a little bit more qualitatively as you’ve kind of expanded it, what's the reception from clients been like, what kind of feedback have you heard from them?

In terms of the, on renewal specifically?

Just in terms of like, I guess, how they're using the program and how they like it so far?

Great. I think right now, I mean I can tell you that every Tuesday from 9 until 1 o'clock, there's only one topic which is making sure that every person is delighted, finding anybody who we think is that setting up an on-site visit to go out and try to recover if there's any problem or whatever. I think right now, the number of recovery calls is very small. So I think the answer is that early on because we said that from day one, we want people to get value and be utilizing this very quickly that more than 90% of the people who have purchased have impact journeys that extend beyond the term of their pass. And so, they've already committed to doing things in their organization that they're not assuming they're not renewing, they know it's kind of automatic renewal but that the point is that they can stop it, but that they're not intending. They've committed to impact journeys where they're trying to get stuff done in their organization that is going to take a while. And so they're delighted that they now have the access to it. So I’d say that there seems to be very, very high levels of satisfaction with what it is. A lot a plans to expand. We had, of the initial pass is actually 10 of the 15 that did renew expanded there not only renewed, but they expanded their pass size or upgraded. So they either added population to it or they added content to it, moving from All Access Pass to All Access Pass plus or from a personal effects. So I think the indications are that people are using it and they're liking it, but for us, what we're learning also in these discovery days is that…

Okay, great. That's helpful. And then just one more kind of switching gears a bit, the education practice did grow in the quarter. It looks like the growth rate has been kind of decelerating in the last several quarters. Is there any particular reason for that. And if you could give any kind of any more color on how to think about growth for that practice in the future that would be great?

Sure. Well, last year, the practice grew at 20%, which was solid and not as high as some of the earlier years, which were more around 30, but we, yes, it’s smaller, it's harder obviously to grow at the same rate, bigger numbers. But we look at this year and we're expecting high growth again. Oftentimes, it's hard to see exactly what's happening in the first three quarters, because we work for the first three quarters to close deals in the fourth quarter. And most of the growth comes then, all of our leading indicators look really good, the contracted new schools that we are starting for the year. So this first quarter, we grew at 7%, which has typically been around 15% or 20%. I still think we're going to close the year in the 15% to 20% range. We've got good leading indicators in place. A good way to think about our businesses is new schools that we bring on. This year, our goal is to bring on 800 new schools, 600 in the US and 200 outside the US. So that would be on top of 3,000. Currently, we have 3,000 schools, 2100 in the US, 900 outside. So our goal is 800 new ones, 600 US, 200 outside. And we install the leader in me, it takes about three years to install it and then we also have a membership package, which is a renewal subscription service. Basically, it works just like All Access Pass. It’s kind of the All Access Pass equivalent for education. And that's about eight grand a year and per school. And so our goal there is last year, we had 94% renewal on that. And so we just think about it in terms of boy, bring on 800 new schools, get 95% of them to renew their subscription to leader in me and it's a really good business model. So, yeah, I think that the growth is decelerating a little bit from where it was years ago and I think it'll can, we see the potential is not changing much at all that we can still continue to grow at double digits for a long time to come. So any other follow-up questions on that?

No. That was helpful. Thank you. Thanks for taking my question guys.

And our next question comes from Alex Paris from Barrington Research. Please go ahead.

Good afternoon. This is Chris Howe sitting in for Alex Paris. Just had one last one for you guys. You had mentioned earlier in the call about some clients who are only using All Access Pass after having used All Access Pass in addition to other services. Was this client specific driven by your sales force or was this the result of the expansion of your content?

Yeah. I didn't explain it well. What I’m really saying is that one of the reasons why on-site sales have declined some is that where historically the person who chose to do on-site is maybe somebody who wasn't that committed to doing too much. And so they weren't sure what they were going to do. So they just hired us to deliver the content early on. Now, those people have been engaged at a higher level and are saying, gosh, we have a lot of strategic things we can do, they buy the pass, where in the past, they might have just hired us to train for a day. They've now bought the pass. We're in there doing the Discovery Day and will ultimately sell them. We are selling them on-site days. But it's just that the sales cycle, we may have frozen somebody in the headlights who would have bought, who would have said, oh, sure, just commit and train on one class for a day, when they understand the value of All Access, they're saying, gee, for not that much more for my population, I could have all your content and do a lot of things. So it was just a statement that part of the reason why on-site days declined for three quarters, they've come back now year to date for the first four months even has been that that you've got on-site clients who now are saying, gosh, maybe, I should be thinking of doing more. But whether they’re thinking of doing more, they first buy a pass, then they go through discovery day and that's just extended the time, but now it's starting to generate new days.

I can give you one example of that. We had one of our early purchasers of the pass last year in November, purchased the pass for 100 users and the client partner and our implementation specialist getting in there and working with them to determine how they were going to use it. They started using 100% path, things are going well. In the first quarter of this year, they upgraded the audience site when they renewed from 100 people to 3000 people and they booked 96 consulting days with us. And that's an extreme example. We have a number that are smaller examples of that though, where you get in, you do the discovery day right, the clients start to get a feel for the volume of things they can be doing with us and with the pass and then that naturally leads to some of those things they will do on their own and some of those things they want to contact with us to do. And that's where we're starting to see our on-site days pick back up just because we're not kind of on the backside of many of those conversations now.

That's very helpful. Thank you for the example.

And that concludes our question-and-answer session. I will now turn the call back over to Bob for final remarks.

Okay. Thanks very much. Thanks everyone for joining today. Appreciate your great questions. Look forward to answering more detailed questions from many or all of you as you, if you like and Steve and myself and the whole team are available as you'd like. So thanks very much. Let's say, we feel good about it. We had a strong December. The pipelines that were built during the first quarter as a consequence of these investments were really significant. We have what we call the A pipeline and sales force for All Access Pass and just generally is quite strong through the December. And as you saw in that one chart that the revenue, the percentage of revenue through -- year to date, through January is 42% All Access versus 38% for the first quarter saying that in one month, even with the holidays, you've been able to increase it enough to move it. So we feel good about where we are. I think this will be another bit of a transition quarter as we've given guidance on what we expect things are kicking in, in the third and fourth quarter, we’ll start to see the effect of this. So thanks very much. Look forward to talking to you. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating and you may now disconnect.