The Hackett Group, Inc. (HCKT) Q3 2013 Earnings Report, Transcript and Summary

Welcome to the Hackett Group Third Quarter Earnings Call. [Operator Instructions] Please be advised that the conference is being recorded. Hosting tonight's call are Mr. Ted Fernandez, Chairman and CEO; and Mr. Rob Ramirez, Chief Financial Officer. Mr. Ramirez, you may begin.

Thank you, operator, and good afternoon, everyone, and thank you for joining us to discuss The Hackett Group's third quarter results. Speaking on the call today and here to answer your questions are Ted Fernandez, Chairman and CEO of the Hackett group; and myself, Robert Ramirez, CFO. Our press announcement was released over the wires at 4:09 p.m. Eastern Time. For a copy of the release, please visit our website at www.thehackettgroup.com. We will also place any additional financial or statistical data discussed on this call, that is not contained in the release, on the Investor Relations page of our website. Before we begin, I would like to remind you that in the following comments and in the question-and-answer session, we will be making statements about expected future results, which may be forward-looking statements for the purposes of the federal securities laws. These statements relate to our current expectations, estimates and projections and are not a guarantee of future performance. They involve risks, uncertainties and assumptions that are difficult to predict and which may not be accurate. Actual results may vary. These forward-looking statements should be considered only in conjunction with the detailed information, particularly the risk factors contained in our SEC filings. At this point, I would like to turn it over to Ted.

Thank you, Rob, and welcome, everyone, to The Hackett Group's third quarter earnings call. As we customarily do, I will start by providing some overview comments relative to our third quarter performance. I will then turn it back over to Rob and ask him comment on detailed operating results, cash flow and any updates relative to our credit facility and also ask him provide some detailed comments regarding our guidance. He will then turn it back over to me. I will try to provide some market and strategic overview comments and then we will open it up for Q&A. But let me first start with our quarterly highlight comments. We were pleased to report revenues of $58 million and pro forma earnings per share of $0.12 in our third quarter of the fiscal year 2013. For the quarter, strong U.S. performance was partially offset by weaker than expected international performance, which prevented us from being at the high-end of the guidance. More importantly, we now expect continuing deterioration in both Europe and Australia to more than offset continued year-on-year U.S. improvement in the fourth quarter. Our U.S. business experienced solid sequential and year-on-year improvements, particularly in our transformation and enterprise performance management groups. Internationally, both Europe and Australia were down more than expected, with the weakness in Europe coming primary from the U.K. On the balance sheet side, we continue to generate strong cash flow and -- but we did not pay down any additional debt as we prepared for the Dutch tender offer, which was planned during the quarter. We acquired nearly 1 million shares in our Dutch tender, which was short of our targeted 5.5 million shares, even after increasing our range. Given these results, the board approved an increase to our buyback authorization of an additional $5 million, taking the total available authorization to $10 million. I'm also pleased to announce that the board approved the declaration of annual dividend. Correspondingly, we will pay $0.10 per share for any shareholder of record as of December 10, on or before December 20 of this year. On the investment front, and consistent with prior quarters, we continue to develop and attract talent and expand our brand and intellectual property through the constant best practice research that we publish, that emanates from our proprietary benchmarking and performance study insight, as well as the development of our new Hackett Performance Exchange offering. I will comment about these opportunities in more detail in my strategic overview section of our call. I'll also comment further on market conditions and specific go-to-market initiatives, but let me first ask Rob to provide details on our operating results, cash flow and also comment on outlook. Rob?

Thank you, Ted. As I typically do, I'll cover the following topics during our call: an overview of the 2013 third quarter results, along with an overview of related key operating statistics; an overview of the cash flow activities during the quarter; and I'll then conclude with a discussion on our financial outlook for the fourth quarter of 2013. For purposes of this call, any references to Hackett Group, will specifically exclude ERP Solutions. Correspondingly, I will comment separately regarding the financial results of The Hackett Group, ERP Solutions and the Total Company. Please note that all references to gross revenues in my discussions represent net revenues plus reimbursable expenses. As mentioned in previous quarters, we exited our Oracle ERP implementation practice during the first quarter of 2013. As such, historical information discussed on this call has been recast for comparability purposes. Additionally, references to pro forma results specifically exclude non-cash stock compensation expense, intangible asset amortization expense, results of discontinued operations and assume a normalized tax rate of 40%. Now moving onto our discussion on third quarter. As I mentioned on our second quarter call, the third quarter, on a sequential basis, is seasonally impacted by the timing of the U.S. holiday as well as the normal increase in vacation taken in both the U.S. and Europe, which unfavorably impacted available billing days on a sequential basis by approximately 5%. For the third quarter of 2013, total company gross revenues were $58 million and at the midpoint of our third quarter's guidance. This represents a year-over-year increase of 4% and a sequential decrease of 2%. Pro forma EPS was $0.12, which was also at the midpoint of our guidance and up 9% from the prior year. International revenues were down approximately 10% sequentially and 9% on a year-over-year basis. International gross revenues accounted for 18% of total company revenues in the third quarter as compared to 20% in the third quarter of the previous year. Gross revenues for The Hackett Group, which excludes ERP Solutions, were $48.7 million in the third quarter of 2013, representing a year-over-year increase of 7%, driven by approximately 12% increase in the U.S. and a sequential increase of 2%, which was driven by approximately 6% increase in the U.S, and this was offset by lower revenue from our international groups, as I just highlighted. Hackett Group annualized gross revenue per professional was $358,000 in the third quarter of 2013, as compared to $338,000 in the third quarter of 2012 and $358,000 in the previous quarter. Gross revenue from our ERP Solutions group, which consists of our SAP implementation group, totaled $9.2 million, down 10% on a year-over-year basis and 18% sequentially, as expected. It is worth noting that this comparison comes off a very strong 2012 growth that we did not anticipate would be maintained. ERP Solutions hourly gross realized billing rate per hour was $132 in the third quarter of 2013, as compared to $130 in the third quarter of 2012. This includes the impact of our offshore resources, which approximately is 45% of our ERP implementation resources at this time. ERP Solutions consultant utilization was 72% for the third quarter of 2013 as compared to 74% in the third quarter of 2012. Total company pro forma cost of sales, excluding reimbursable expenses and stock compensation expense, totaled $33.1 million or 63.7% of net revenues, as compared to $31 million or 62.2% of net revenues in the previous year. Total company consultant headcount was 718 at the end of the third quarter of 2013, as compared to 735 in the previous quarter and 726 at the end of the third quarter of 2012. Total company pro forma gross margin was 36.3% of net revenues in the third quarter of 2013 as compared to 37.8% in the third quarter of 2012. Hackett Group pro forma gross margins on net revenues was 37% in the third quarter of 2013, as compared to 35% in the third quarter of 2012, primarily due to increased Hackett U.S. revenues, which were partially offset by both the higher use of subcontractors in our EPM practice and the decline in Hackett international revenues. ERP Solutions pro forma gross margins on net revenues were 32% in the third quarter of 2013, as compared to 43% in the previous year, primarily due to decreased SAP license revenue, which carries a much higher margin and higher than expected use of subcontractors. Pro forma SG&A was $12.5 million or 24% of net revenues in the third quarter of 2013, as compared to $13.1 million or 26.3% of net revenues in the third quarter of 2012. This improvement is primarily due to cost containment measures enacted during the latter part of fiscal 2012. Interest expense on borrowings under our credit facility with $94,000 in the quarter. This compares to $196,000 of interest expense in the prior fiscal year. The decrease is a result of debt repayments of approximately $13 million since the third quarter of the previous year. Total Company pro forma net income for the third quarter totaled $3.8 million, up 15% when compared to pro forma net income of $3.3 million in the third quarter of the previous year. Total Company pro forma net income for the third quarter of 2013, excludes non-cash stock compensation expense of $1.5 million, intangible asset amortization expense of $150,000 and assumes a normalized tax rate of 40% or $2.5 million. Pro forma EBITDA on net revenues in the third quarter of 2013 was $6.9 million or 13.2% of net revenues, as compared to $6.2 million or 12.5% of net revenues in the third quarter of 2012. GAAP diluted earnings per share were $0.08 for both the third quarter of 2013 and the previous year. At the end of the third quarter of 2013, the company had approximately $20 million and $14million of income tax loss carryforwards remaining in the U.S. and in foreign tax jurisdictions, respectively. As a result, for tax purposes, we will continue to have the ability to offset most of our U.S. and international tax liabilities until the NOLs are fully utilized. The company's cash balances were $15.4 million at end of the third quarter, as compared to $11.3 million at the end of the second quarter of 2013. This cash increase in Q3 was primarily attributable to cash generated from operations. Net cash generated from operating activities in the third quarter was $3.9 million, which was primarily attributable to net income, adjusted for non-cash items, the timing of U.S. payroll cycles and payroll related items and was partially offset by an increase in accounts receivable. Our day sales outstanding at the end of the third quarter was 59 days, as compared to 59 days at the end of the fiscal 2012 and 55 days at the end of the second quarter of 2013. Capital expenditures for the third quarter of 2013 were $399,000, primarily related to the continued development of The Hackett Performance Exchange and other benchmark related offerings. During the third quarter, the company did not repurchase any shares of the company's common stock. At it's most recent meeting, the Board of Directors increased the stock repurchase program authorization by an additional $5 million. As a result, our repurchase authorization is now at approximately $10 million. I'm now going to discuss our fourth quarter guidance. Before I move to guidance for the fourth quarter, I would like to remind everyone of the seasonality of our business, specifically, the increased holiday and vacation time that is taken in the fourth quarter will decrease our available billing days by approximately 7% when compared to the third quarter. As such, we expect total company gross revenues for the fourth quarter of 2013 to be in the range of $51 million to $53 million, with a reimbursable expense estimate of 12% on net revenues. This compares to a prior year gross revenue amount of $55 million, which was recast to reflect the Oracle ERP divestiture and had a reimbursable expense ratio of 11.4% on net revenues. We expect U.S. gross revenues for the fourth quarter to be up on a year-over-year basis, by approximately 5% to 7% with Hackett U.S. estimated to be up strongly and ERP Solutions to be down. International revenues, primarily derived from Europe, are expected to be down on a year-over-year basis in excess of 30%. For international, this would represent a 14% 2013 fiscal year decline. Relative to pro forma diluted earnings per share, we expect the unfavorable impact of decreased available billing days to be partially offset by the corresponding utilization of vacation accruals and lower U.S. payroll taxes, resulting from reaching FICO limits. As such, we expect our pro forma diluted earnings per share in the fourth quarter of 2013 to be in the range of $0.07 to $0.09 per diluted share. Our pro forma guidance excludes amortization expense, non-cash stock compensation expense, the impact of discontinued operations resulting from the sale of Oracle ERP implementation practice and includes a normalized tax rate of 40%. Sequentially, we expect pro forma gross margins in the fourth quarter to benefit from the seasonal reductions in U.S. payroll-related taxes, resulting from reaching FICO limits and the utilization of vacation accruals, offset by a decrease in revenues due to the decrease in available days. As a result, our revenue guidance, we expect pro forma gross margin on net revenue to be approximately 33% to 35% in Q4. We expect pro forma SG&A and interest expense for the fourth quarter to be approximately $12 million or down sequentially by approximately $500,000. We expect fourth quarter pro forma EBITDA on net revenues to be in the range of 9% to 11%. Our recently announced Dutch tender offer was concluded, subsequent to the end of the third quarter, which resulted in the repurchase of approximately 1 million shares of common stock at the purchase price of $7 per share, or a total of approximately $6.9 million, excluding fees and expenses. This amount was funded by our term loans negotiated with Bank of America. As Ted mentioned, the company declared its annual 2013 dividend of $0.10 per share, for shareholders of record on December 10, and which is expected to be paid by December 20 of 2013. Having said that, we expect our cash balances, excluding the impact of debt repayments and any share buyback activity conducted outside of the tender offer, to be up on a sequential basis consistent with our guidance. At this point, I would like to turn it back over to Ted to review our market outlook and strategic priorities for the coming months.

Thank you, Rob. As we look forward, we expect year-over-year growth from our U.S. business, led by our EPM transformation benchmarking and advisory groups. We also expect demand in international to remain adequate, but characterized by uneven decision-making as compared to the U.S. We believe that some of our international volatility may be a result of our scale and more limited solution offering, when compared to the U.S. A key part of our solid U.S. activity is due to our very strong Enterprise Performance Management and Business Intelligence Capability, which now represents over 40% of our total U.S. Hackett revenues. If you recall in our last quarter's call, I mentioned that we have recently been named Oracle's #1 influence partner in EPM and BI in North America. To leverage this strength, internationally, we have hired a new European leader that has experience in successfully building and managing EPM practices. Additionally, we also plan to move selected U.S. EPM technology professionals to Europe to help us aggressively grow this critical capability in that region. We believe, by more closely mirroring our U.S. capabilities in Europe and building our EPM and BI strength globally, we can improve our ability to grow in Europe and also further our global delivery capabilities, which are important for large multinational engagements. Beyond our immediate focus on Europe, our strategy is to continue to build our brand, by building dedicated skills around our unmatched intellectual capital in order to serve clients strategically. We believe that clients that leverage our IP are more likely to allow us to serve them more broadly. IP-based services enhance our opportunity to serve clients remotely, continuously and more profitably. Our goal is to use this unique intellectual capital to establish a strategic relationship with our clients and to further use that entry point to introduce our business transformation and technology consulting capabilities. This strategy would allow us to increase our client base, profitability, as well as increase revenue per client. The best example of this strategy continues to be the revenue leverage we have experienced from our executive advisory client base. I apologize if that background noise is making this a little bit more difficult to hear. Specific to our executive advisory client base, our long-term goal is to be able to ascribe an increase in percentage of our total annual revenues to clients who are continuously engaged with us to our executive advisory programs and eventually, to our Hackett Performance Exchange. At the end of Q2, our executive advisory members totaled 821, across 248 clients. Consistent with prior quarters, over 40% of our Hackett Q3 revenue sales were also advisory clients, continuing to show its strong relationship leverage. On The Hackett Performance Exchange front, we have nearly completed our planned enhancements for both Oracle and SAP offerings. We are finalizing some key algorithms and presentation alternatives to our dashboard and are now fully engaged in testing and feedback with clients. Our plan is to increase client participation through the balance of the year to ensure the offerings are working as intended, by the beginning of next year. We are currently recruiting to build our dedicated sales team in preparation for our 2014 sales efforts. As I repeatedly have mentioned, this is an ambitious new offering, but if successful, it could enhance our business model by creating a powerful and, possibly, continuous relationship with our clients. Although we continue to learn about how best to sell and leverage our new offerings, we believe, it could represent a new way to monitor and benchmark a client's performance, which could result in a new revenue stream and a significant increase in data capture and operating insight. Lastly, even though, we have the client base offerings and market coverage to grow our business, we continue to look for acquisitions and alliances that can add scope, scale and capability and accelerate our growth. I would also add that our efficient access to debt further encourages this focus. In summary, we reported solid quarterly results, but it is clear that we must be more successful in Europe, so that it does not offset our success in the U.S. Having said that, we continue to believe that our unique ability to combine proprietary intellectual capital, with terrific talent to help our clients optimize their performance in a complex demand environment allows us to remain top of mind with leading global companies, and continues to bode well for our prospects. As always, let me close by thanking our associates for their tireless efforts and, as always, urge them to stay highly focused on our clients, our people and opportunities available to our organization. Those are my comments. Let me then ask the operator to open it up for our next section, which is the Q&A.

[Operator Instructions] The first question comes from Bill Sutherland.

So just, obviously, a little more color on Europe would be great, Ted, and as much as maybe the mix of business over there at this point, and what's faring better than some of the other offerings? And I guess, and if you can also give a little more color on how many resources you're putting over there?

I guess, I would mention 2 things. One is that, the most important thing I mentioned is that we know how important our EPM capability has been to the overall U.S. success. So I would start by saying that, we think making sure that we add and grow that capability in Europe is important. Secondly, relative to client decision-making, look, we had one significant client in Europe and one significant client in Australia, push Q4 opportunities into Q1, for entirely different reasons, that would be one way to add color. I would say, the other piece of it, as you know, probably Europe, relative to the U.S., the mix of working capital, or REL-related business, to the overall number is more significant. And I would say that there continues to be higher demand for the strategic cost reduction efforts of Hackett than there are right now for working capital-related additions. And I think, that's simply a direct function of just the access to capital and lower overall weighted average cost in capital that has taken place since the financial crisis. That would be the best way to add color. Overall, Bill, I think, further color is just that, with the smaller scale, those differences in client decisions are pushed can significantly alter our quarterly performance as we are experiencing right now. And I think, that's just a direct -- directly related to scale. I don't think, we can change scale. But I think, we can more closely mirror the capabilities in the U.S. And I think, that would help, so we're aggressively doing that. We're starting with the leaders. We're going to quickly build capabilities around that. We have actually made some staff adjustments in Europe to actually allow us to make those investments more freely. We think, there is demand for those services. But as you know, it'll take time to ramp that up. But we hope to, by the middle of the year. We've got a pretty nice capability in Europe as we head into the second half. So our hope is that the pushes start, that the decision-making does not change much, let's say, activity there. When I say adequate, look, it's no different than it was the last few quarters. And that we would see results from Europe actually contribute instead of hurt us to this level, like they are, relative to our fourth quarter guidance.

You said, the U.K. was the weakest, a little surprised by that, just based on the kinds of economic numbers they've been reporting, you feel it's unrelated to that?

Well, I think, when you look at the 2 major markets that we serve, Germany and the U.K., economic activity and -- the really strong consumer industrial manufacturing orientation of Germany has always been a pretty good market place for Hackett Group. So Germany is stronger than the U.K. Germany is more predictable than the U.K. and Germany's client base is -- probably has more affinity to our offerings than they do in the U.K.

The headcount reductions in the quarter, were they related mostly to Europe? Or more to the ERP Solution reduction?

No. I would say that it was probably more to the quarter itself. It's really more of -- since it was -- those numbers are really not that large, if you look at it sequentially. It's probably just traditional turnover with us, just kind of holding the line. I think you'll see some of the headcount related things that I'm talking about, they really happened throughout the fourth quarter so they'll probably be more visible in Q1.

I mean, based on your forecast for the fourth quarter, I mean, even on a billable day basis, it seems like you'll be trimming headcount further, available headcount?

No, no. We -- we're -- with the changes that we've made, related to Europe have been made, those are happening, or have already happened, and -- but you won't see those reflected in -- until you see our Q1 headcount numbers. But we're not making -- these are small adjustments relative to our total European headcount. Europe is important. Europe -- in our view, long-term should be equal the size of the U.S. and our goal is to get it there. But there is no doubt that economic strength, client decision-making in Europe does not match the intensity of velocity of the U.S. It's different.

Okay. And on Hackett Performance Exchange, as you build up a sales force, I guess, this quarter, should we expect to see, I mean, Rob laid the outlook for expense lines. I'm just curious as you -- I guess, you are switching, I suppose, from development to sales expense, and is that how we should think about it?

Somewhat. But we're going to continue the development of the product, but we believe the product will be ready to commercially sell and go-to-market, and so we'd like to build that dedicated sales force as quickly as we can. And we've kicked that off already, so it'll happen throughout this quarter and into next quarter. And yet, those numbers are already in the SG&A guidance we've provided.

Okay.

Yes, the reason you're not seeing it, Bill, is that -- we manage SG&A pretty well. We've had cost containment efforts that were actually put in place and would benefit it from throughout the year. So you're seeing netting of number, that's why you're not seeing any significant movement. You are seeing SG&A, as a percentage of revenue, still continue to pretty -- to come down. But it's really -- we're just offsetting decisions we have previously made by making investments and they're showing up there now.

Is there still a penny of building and development in the expense structure this quarter?

That is correct. And that will continue throughout 2014, as we fully support the product. And try to drive adoption and see if we can build a revenue based on the offering.

[Operator Instructions] Our next question comes from George Sutton.

This is Ryan, in for George. Where do you stand in your goal of expanding your brand permission? As we do checks, most companies still think of Hackett as a benchmarking firm, but your results the past couple of years suggest you're having in some success.

Well, we try to do it everyday. For example, I just looked at our marketing report for the current quarter. We had a 100 -- over 100 industry placements, quoting and citing Hackett across global periodicals and mediums throughout the globe. Our goal is to be able to use the fact that people want that research insight and to make sure that anyone ever refers to Hackett, we try to drive an implementation message to basically quickly follow the fact that our research and our data is what gets us into the press. We are trying to do it in the grassroots way. We do not believe that a broad-based advertising campaign that would be used by someone of much greater scale is something that we should do or could do at our scale. We think the process we're using to make sure clients understand that we're every bit as good at designing and implementing a solution as we are at helping them identify -- they tell us the size of the prize. Is there -- and we do it every opportunity we can. But you will not see us change our advertising or marketing budget in some substantial way in order to do that in a quicker fashion than we believe we can.

Okay. And regarding M&A, are there any other Archstone or Relic opportunities out there, in your view?

We spent quite a bit of time kind of scouring the universe looking for great opportunities. So yes, the answer is those efforts continue. But it's a combination of getting the right -- you've got to hit the right blend of strategic fit, culture fit in valuation. So that's really what predicates timing. But we've got the capital and our effort in that area continues very strongly.

Next, we have Morris Ajzenman.

Going back to international, Europe and Australia, if I would quote correctly in the second quarter, still declining but the trend's looking ahead, showing some improvement, in a way the decline looks like it was just getting better. Now the third quarter, we hit -- clearly, we have a dip here and looks like into the fourth quarter continuing, maybe even accelerating. You talked about one client in Europe and one in Australia, particularly. But is this overall trend where even, x individual clients. that Europe and, to some extent Australia, are just retrenching, or moving back into a more defensive mode as far as spending. I mean, what's kind of changed, not that it was accurate before, but what's kind of reverted back to where things are more difficult now?

I think the macroeconomic conditions are the same. I don't really think it's changed. Yes, some people would say that European -- Europe is improving. You asked me this pretty frequently. We haven't seen that. We think that economic growth is still hard to come by. Client decision-making, as we can tell, can be, clearly, more uneven and have different velocity than it does in the U.S. Some people would make the argument that Australia may be at a high, high level. Somebody would say it is changing. No, Australia for us is -- it's a small entry point. So a client decision to start or stop can impact an Australia reference. In the U.K. it is really more broader. And as I said, a couple of client decisions, can -- I'll call it, exacerbate the issue in this quarter. And yes, back to your reference throughout up to Q3, if you remember, we thought that there was choppiness going into Q3, I mean, Q2. We thought we were going to have pretty significant decline, which we did have, instead of 20%, it was a 17% decline in Europe. We thought our decline in Europe in the third quarter would be 3% to 5%, it ended up being in the higher end. Australia ended being beyond the higher end of the range that we were thinking for Australia. Remember, our penny is $0.5 million. There is your penny, that was the difference between midpoint and high-end, which is, as you know, we target. Relative to the fourth quarter, a couple of those pushes, and in my view, as you get to the end of the year, would perhaps, maybe some clients being a little bit more cautious, if they don't think the fourth quarter is fully baked, protecting year-end performance, bonuses and the like, that could happen. I can't give you a specific reference. What we know is that for fourth quarter to happen, these are activities that already need to be in place. You need to plan for that holiday to disturb -- what would you call the traditional contract that have start -- that you would have, so you know that will happen as you enter early into December. Combination of all those things, lead us to think, like Rob said, that the year-over-year number for international could be down in excess of 30%. But no, I can't make a macro comment relative to any change, any pricing. Our client engagement is pretty good. But client decision-making is clearly uneven. There are some starts and stops, or even some who change scope. And we look at it and say, "Okay. So how does that compare to U.S?" We look at the overall success of the U.S. It is a broader business, much bigger scale, but we also see that we've got strength in EPM and that's just a hand we're not playing, and engaging clients where then we say, "At the minimum, we ought to be investing in the area where we seem to have the greater strength." In the U.S., and we're out to do that as quickly as we can.

Switching gears, one further question on Hackett Performance Exchange. I'm not sure how this plays out, but you say you're certain of the investments through 2014. The paid subscription model, will that commence in the first quarter of '14 or is that going to be pushed out later into the year?

No, we will start marketing the product to be used either for an event, or as we would like, for an event that then leads to it being for a continuous use. So our goal is to be able to offer the dashboard to be used either way, as an event or as a continuous monitoring product. But even on the event top, even in the event efforts, our hope and belief is that if a client sees the value of the dashboard, how easy it is and how compelling the information is, they will want to use it on a continuous basis. That's what we hope to prove in 2014, but as I've always said, until I prove it, I'll talk about its promise, but promise nothing.

But Ted, as far as the timetable looks, from your eyes, over the last few quarters, everything is on schedule, things have pushed out, there have not been any bugs or things for you that pushes this out a quarter throughout?

That is correct. That is correct. The product, the testing, the feedback, the way we think, how we go to market with it, all those things that are required for commercial launch, we believe are in track for January 1.

At this time I show no further questions. I would now like to turn the call back over to Mr. Fernandez.

I would like to thank everyone for participating in our third quarter earnings call and look forward to updating you again, when we report the results for the fiscal year and our fourth quarter. Thank you again for participating.

Thank you for your participation on today's call.