Health Insurance Innovations' (HIIQ) CEO Michael Kosloske on Q1 2014 Results - Earnings Call Transcript

May.13.14 | About: Health Insurance (HIIQ)

Health Insurance Innovations Inc (NASDAQ:HIIQ)

Q1 2014 Earnings Conference Call

May 13, 2014 10:00 AM ET

Executives

Joan Rodgers – Chief Accounting Officer

Michael W. Kosloske – President and Chief Executive Officer

James P. Dietz – Chief Financial Officer, Secretary and Executive Vice President

Analysts

Steven D. Schwartz – Raymond James & Associates, Inc.

Glen J. Santangelo – Credit Suisse Securities

Steve Baxter – Bank of America Merrill Lynch

Brooks O’Neil – Dougherty & Company

Operator

Good day, ladies and gentlemen, and welcome to the Health Insurance Innovations First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder today’s call is being recorded.

I would now like to turn the conference over to Joan Rodgers, Chief Accounting Officer. Ma’am, you may begin.

Joan Rodgers

Thank you, operator, and good morning, everyone. We are delighted to have you join us today for a discussion about Health Insurance Innovations’ 2014 first quarter financial results. On the call this morning we will have Michael Kosloske, HII’s Chief Executive Officer; and Jim Dietz, HII’s Chief Financial Officer.

As a reminder, today’s conference call is being recorded and web cast from the Investor Relations section of our website and replay of the call will be available from the Investor Relations section of our website following the call.

I caution listeners that we will be making forward-looking statements on this call. All statements other than statements of historical facts are forward-looking statements. Actual results could differ materially from those projected or expected in these forward-looking statements. Listeners are urged to carefully review and consider the various disclosures made by the Company in this conference call and the risk factors disclosed in the company’s Annual Report on Form 10-K for the year ended December 31, 2013, as well as other reports filed with the Securities and Exchange Commission. Copies of the Company’s SEC reports are available on our website at www.hiiquote.com and on the SEC’s website. The company disclaims any obligation to update any forward-looking statements after this conference call.

At this time all participants have been placed in a listen-only mode. The forum will be opened for questions following the presentation.

With that, I would now like to turn the call over to our CEO, Mike Kosloske.

Michael W. Kosloske

Thank you, Joan. Good morning to everybody and thanks for joining us to review HII’s quarterly earnings. If you have a chance to look at our press release issued yesterday, we are very excited about our results for the first quarter of 2014. This is our ninth straight quarter of significant sequential quarterly growth and one of our highest quarterly growth rates ever.

It is important to note that the annual ACA open enrollment period now represents the only distinct interval where our plans have significant competition. During this first test, HII’s growth worst with over a 107% growth this quarter versus first quarter of 2013.

That filed sales growth was equally robust across all age groups as our plans provide great value for all ages and all family members. We continue to increase our record number of distributors, as most ages have few alternatives to sell any other health plans during the off season of the annual open enrollment period.

We are pleased with our total collections from customers, what our industry referred to us premium equivalent of $31 million, representing just over 40% growth over last year’s Q1 total. We realized the record of $18 million in quarterly revenues that is growth of 43% versus one year ago.

Our non-GAAP gross margin of $8.7 million represents 107.1% growth over first quarter of 2013. For the first quarter of 2014, the ratio of gross margin to Premium Equivalents was 28.1% compared to 19% for the first quarter of 2013, a 910 basis point increase. The impact of the Affordable Care Act on our marketplace continues to deliver positive demand for our products.

The at present pressure on individual consumers to address their health insurance coverage and for many of these people, our products are the most economical alternative to individual major medical plans, both on-exchange and off-exchange. Our health plans enjoy positive year on growth and value for our customers and distributors alike.

We’ve continued to invest in our 2014 strategic plan to provide a best-in-class user experience, removing any friction for purchasers and sellers alike, while building exclusive distribution, improving and broadening our products, our cloud-based technologies, and our marketing capabilities. These initiatives have been well received by our stakeholders.

The unprecedented demand we experienced and captured as submitted applications drove up 107% this quarter versus a year ago for submitted applications. This positions us very well for revenue and earnings and growth as 2014 continues.

A few of our non-financial highlights for the first quarter include, ancillary sales have grown 290% year-over-year. We gained exclusive distribution expanding our reach with several distributors who are now in our top 20 producers. Also 80% of all of our sales are now from captive or owned distributors.

We also deployed the HII Cost Estimator cloud-based technology to our entire base of over 10,000 insurance agents. This is used to – in real-time compare subsidies, benefits, rates, and penalties for all of ObamaCare plans versus HII’s agile health plans, think Kayak for ObamaCare.

This provides consumers with the information necessary to make real-time informed decisions to their benefit. For a specific on our first quarter financial performance, I’ll now turn the call over to Jim Dietz, our Chief Financial Officer.

James P. Dietz

Thanks, Mike, and good morning, everyone. I’m pleased to provide an overview of our first quarter financial performance. As Mike mentioned, first quarter revenues of $17.9 million, a Premium Equivalents of $31 million, increased by 43.2% and 40.3% respectively over the same metrics for the first quarter of 2013.

Premium Equivalents are non-GAAP metric that measures the total collections by HII from its customers. A reconciliation of Premium Equivalents to revenues is included in the financial supplement included at the back of this press release. By policy type, the first quarter 2014 mix of revenues was as follows: 61% short-term medical plans, 17% hospital indemnity plans, and 22% ancillary policies.

Another financially related metric that we track is the number of new policy applications received each period. During the first quarter of 2014, total new policy applications grew 107% year-over-year and 56% sequentially to about 57,600. Growth in demand and application volume were very strong across all products with core medical applications growing over 55% and ancillary applications growing 290% year-over-year. The addition of the resulting policies bodes well for future profitability as revenues and added operating income will be recorded over the policy periods.

Gross margin, which is simply revenues plus third-party commissions, credit card costs, and ACH fees that comprise our cost of sales increased to $8.7 million this quarter as compared to $4.2 million in Q1 2013. Non-GAAP gross margin percentage of Premium Equivalents was 28.1% for the first quarter of 2014 as compared to 19.0% in the same period in 2013. This 910 basis point increase reflects the acquisition of the company’s largest distributor in July 2013, and an increase in the proportion of higher margin ancillary policies in force.

Loss per diluted share for the first quarter of 2014 was $0.01 compared to a loss of $0.78 in the first quarter of 2013. Non-GAAP net income pre share, which is calculated in the beginning with adjusted EBITDA was $0.06 for the first quarter of 2014, compared to $0.03 for the first quarter of 2013. A reconciliation of adjusted EBITDA to non-GAAP net income per share is included at the back of this press release.

During the first quarter of 2014, the company incurred a pre-tax loss of $300,000 in comparison to pre-tax loss of $6.3 million in the first quarter of 2013. The primary driver of the difference was $5.5 million of expense recorded in the first quarter 2013 TSG Agency transaction and $400,000 left non-cash stock-based compensation expense during the first quarter of 2014, as compared to the first quarter of 2013.

EBITDA that is earnings before interest, taxes, depreciation, and amortization was $100,000 for the first three months of 2014 compared to a negative $6.1 million for the same period in 2013. Adjusted EBITDA was $1.2 million for the first three months of 2014 compared to $600,000 for the same period in 2013, reflecting poor earnings growth of over a 100% year-over-year.

During the first quarter of 2014, total selling, general and administrative expense of $7.9 million was about 9% higher than expected due to incremental cost related to serving unexpectedly strong customer demand during the period. The approximately $700,000 of incremental spending by our owned call centers will produce greater revenues and profits over the term of the increased policies produced by these call centers.

Adjusted EBITDA is calculated starting with EBITDA and then further adjusted for items that are not part of regular operating activities, including acquisition costs, contract termination costs, and other non-cash item such as stock-based compensation and the $700,000 fair value adjustment reported in this quarter.

A reconciliation of net loss or income to EBITDA and adjusted EBITDA for the periods presented is included at the back of this press release. Cash used in operations during the first quarter of 2014 was $3.1 million compared to cash used in operations of $5.5 million in the same period of 2013.

Cash flow of this quarter was reduced by $2.3 million as we invested in advanced commissions to exclusive HII distributors as part of the company’s strategy to help these distributors fund the cost of increased new policy production. These distributors were very successful at producing incremental policies during the quarter and those policies will produce both revenues and income in future periods.

The cash outflow was also related to $1.5 million of additional working capital, which is typically required with such strong company growth. The operating cash outflow in the first quarter of 2013 was due to the $5.5 million paid in the TSG Agency transaction.

As of March 31, 2014, the company had $34.2 million in cash and cash equivalents and short-term investments and no long-term debt. Mike?

Michael W. Kosloske

Thanks, Jim. HII is a unique healthcare IT company that innovates and administers health plans to meet the needs of our consumers. Looking ahead to the remainder of 2014, we stand able to meet the needs of our marketplace. We see the benefits of our four business model strength as they continue to deliver value to policyholders, distributors, and shareholders.

Number one, Price of Insurance Policies: Premiums for individual and family, private insurance have significantly increased, in some states, doubling in 2014 over 2013 rates. Premiums for our products are among the most affordable coverage available to qualified individuals and families and allows them the flexibility to choose their own doctor and hospital, as well as add other benefit such as dental, critical illness et cetera with one click of a button.

Two, Products Available for Year-round Sales: Enrollment in on-exchange individual major medical plans will be limited to a few qualifying life events. We have over 300,000 license insurance brokers across the country are experienced significant limitations and products that are both affordable to consumers and profitable for them to sell until November 15, the next open enrollment period. Short-term medical will remain one of the few exceptions. It is to many of the brokers the lifeline of income opportunity during the open enrollment off season.

Product Line Innovation: Our unique position as a product developer, working with multiple insurance carriers and distributors will allow us to remain agile to rapidly evolve and rapidly advance our pipeline with innovative, profitable products, relevant to the changes in the marketplace.

Fourth, Digital Focus: The increased dependence on digital technologies to deliver every aspect of our lives, including health insurance purchases as mandated by the Affordable Care Act sites. HII’s competitive advantages continue to be driven by our best-in-class, consumer-friendly, reliable technologies. We have sold approximately 370,000 polices in the past five years on our unique, virtually administrated Quote-Buy-Print private exchange platform.

We can continue our commitment to scalable, customer focus technology as a foundation of our business and to build processes that deliver satisfying, customer experiences, customer royalty, and maximize revenue, as we are the first virtual administrator in the U.S. Also, Jim Dietz and I will be at the Bank of America Merrill Lynch Healthcare Conference on May 14. We will be presenting and having one-on-one with investors plus whoever like to join us, please let us know.

Operator, let’s get the Q&A session now.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question is from Steven Schwartz of Raymond James & Associates. You may begin.

Steven D. Schwartz – Raymond James & Associates, Inc.

Hey, good morning, everybody. Question for Jim, $700,000, you mentioned that number with regards to your other expenses, Jim. And I think you said that it had to do with your wholly owned sales force, could you go over what that was and how that was calculated?

James P. Dietz

Yes, Steven, thanks for the question. The $700,000, there is actually two $700,000 items. One was the non-cash item related to adjusting the fair value of the earn-outs.

Steven D. Schwartz – Raymond James & Associates, Inc.

Not that one, the other one.

James P. Dietz

Okay, so that’s clear. The other $700,000 was simply an approximate amount of the increased G&A spend by our owned call centers to acquire new polices, our owned call centers hit the ball out of the park so to speak in this quarter of it is much better than expected. But in the call center business, the cost to acquire those policies is expenses immediately in that period, but the revenues come in subsequently. So the result of this is, it creates very high visibility to future profitability, future revenue, future income, and so, it’s a very positive thing to start out the first quarter and being launched into the rest of the year with these additional policies and with expense behind us.

Steven D. Schwartz – Raymond James & Associates, Inc.

Okay. So this $700,000, this is not matched to revenues, but it was outside, it would be matched to revenues?

James P. Dietz

Yes. There is a difference between our owned call centers and the call centers that are exclusive to us. In the case of exclusive call centers, we pay them commissions each month that the customer renews. So there is a matching of the commission with the revenue.

In the case of owned call centers, they acquired the policy and they incurred the SG&A expense and they expense it immediately and the revenues come in over the term of the policy. So there is a difference in accounting between the call centers that are part of our organization and those that are exclusive, but not owned by us.

Steven D. Schwartz – Raymond James & Associates, Inc.

Okay. And then one more, so the 700 is your guesstimate between given how much business your owned call centers did this quarter versus fourth quarter?

James P. Dietz

Yes. It’s really sort of a difference in sort of expectation as we came into this year, we expected them to do well, but they did much better than we even expected. And so, our owned call centers really put the foot on the accelerator pedal and did a great job of bringing in policies that are going to drive profitability in the future.

Steven D. Schwartz – Raymond James & Associates, Inc.

Okay. I just like to one more, so the expectation, your expectation obviously was to do well in the first quarter given the enrollment period and what have you, you’re just thinking that you even did better than that would be on call centers, with the number we have up anyway?

James P. Dietz

That’s right. We had an upside surprise, we were very excited about it.

Steven D. Schwartz – Raymond James & Associates, Inc.

Okay. All right, got it. Thank you, guys.

Operator

Thank you. Our next question is from Glen Santangelo of Credit-Suisse. You may begin.

Glen J. Santangelo – Credit Suisse Securities

Yes. Hey, Mike, now that you’ve seen at the end of the open enrollment period as you sort of look back over the past kind of few months, can you maybe give us a little bit of color with respect to what you saw on the marketplace in terms of placing whether it would be for one of the exchange product, say, for example, the Bronze plan, or I think in your prepared remarks you seem to suggest that we saw huge premium increases for private insurance products. And so, how do you think about that pricing relative to short-term medical and how would you sort of summarize the value proposition, the short-term medical based on what you saw over the past three months?

Michael W. Kosloske

The prices rose significantly for off-exchange and on-exchange individual major medical, basically all of our competitors to short-term major medical, short-term medical has remained virtually unchanged in cost. And so, our value prop gets higher and higher.

First quarter during open enrollment is the one-time of the year, where we have competition with those individual major medical plans and our growth was a 107% showing that the value that we are providing what we experienced is more consumer awareness that they need to buy something and then when they look at our calculator and compared value of us versus on and off-exchange programs, they shows us with that 107% growth.

And then off-exchange period, which again April 15, we are seeing very positive results as we are one of the only games in town both from a broker standpoint and from a consumer standpoint, and if you think about it what are those 300,000 agents going to sell during the off enrollment period, which is three quarters of the year. So we are seeing a very strong trend. We added – we are adding 60 to 70 new agents a day that are coming in once they become aware that we exist and that there is a great value that they can provide to their customers.

Glen J. Santangelo – Credit Suisse Securities

Mike, is there any chance you can give us any numbers around the cost differential between, say, for example, the Bronze plan that you saw on the marketplace versus short-term medical and traditional major medical, give us a sense for how big that delta is?

Michael W. Kosloske

Including all aspects, we are still in the 50% plus range, not only are we much more competitive, but our benefits only $50 a visit, a doctor at hospital, and you can choose any doctor in hospital, which is limited under ObamaCare. So, we are just having a tremendous response to our offering.

Glen J. Santangelo – Credit Suisse Securities

You guys just has one more follow-up, just sort of stripping out the 60 to 70 brokers that you say, you’re sort of adding it there if I kind of look at it on a same-stores basis, could you comment on the activity post the open enrollment period, because it seems logical there would have been a lot of interest during the enrollment season, but I think you suggested that post the closure of the enrollment season that now you’re basically providing a lifeline for some of these brokers, because they have limited products to sell, I mean that we see in the growth rates accelerate post the open enrollment period, or is that not the right way to think about it, because there is some seasonalities to the business and we should just expect a smaller level of sales outside of the enrollment period?

Michael W. Kosloske

We are – we just went through this fourth quarter up a 107% and on a go forward basis after April 15, we are seeing very positive strong results. So, it’s a year round value prop. We’re not seeing any drops in excitement.

Glen J. Santangelo – Credit Suisse Securities

Okay. Thanks very much.

Operator

Thank you. Our next question is from Kevin Fischbeck of Bank of America. You may begin.

Steve Baxter – Bank of America Merrill Lynch

Hi, this is Steve Baxter on for Kevin. I was just hoping that you could give a little color around the dynamic of applications being up, 107% versus policies in force, I guess, it’s obviously due to policies being in place for less than a year. But if you could help us kind of understand any kind of differences that are going on with, any kind of churn dynamics, any changes there, and whether there was any aspects of the lower conversion rate during the open enrollment period? Thanks.

Michael W. Kosloske

So our submitted apps are the same thing as written apps, we did not see any change in conversion rates. We brought value to all our customers, all different age groups. We didn’t have the high level of churn that some other individual major medical carries experience, because our products are half the cost, chose any doctor. So even with the availability to jump on ObamaCare, this is a very valuable product for them.

So we had a – again during the one-time of the year, we do have competition. We had those record sales, because the consumers are forced to make a decision or let to make a decision and they are choosing our product many times. I think off enrollment, we’re gaining many new distributors. Our top 20 distributors have really changed since April 15. Our old top 20 are still there, but we have new guys coming in that are some of the largest in the industry where we are picking up new distributors like we said 60 to 70 agents a day that are coming to the program.

Steve Baxter – Bank of America Merrill Lynch

Okay. That’s definitely helpful. And I guess kind of a follow-up to your last point, it seems like your top producers are, I don’t want to say our capacity, but it seems like they are produced at a very high level. Could you just kind of talk about the progression of maybe some other brokers they aren’t necessarily in the top tier and your ability to kind of make them more productive over time, just wondering whether there is kind of a lot you can do in terms of your current broker base, and whether you are going to continue to add brokers and drive the sales growth? Thanks.

Michael W. Kosloske

All right. So for the license agent call centre business, as business picks up, you can hire more license agent call centers within those organizations. And we experienced and have been experiencing quarter-over-quarter high organic growth from those existing call centers (indiscernible) owned call centre where they way outperformed expectations. And – but then we also have a new blood coming in, because they are now for the first time in American history experiencing where they have very little to offer except for short-term major medical plans. And so, we’re bringing in a lot of new distribution after April 15 and that has been a very positive for our company.

Steve Baxter – Bank of America Merrill Lynch

Thanks.

Operator

Thank you. (Operator Instructions) Our next question is from Brooks O’Neil of Dougherty & Company. You may begin.

Brooks O’Neil – Dougherty & Company

Good morning, guys, and congratulations on a strong start to the year. I have a couple of questions, I was hoping you could amplify a little bit on the ancillary products, it’s pretty clear, you are having good success there, I’m hoping you could just talk a little bit about what exactly you are offering? What’s your value proposition there? And how you are achieving what you are achieving in those ancillary areas? Thanks a lot.

Michael W. Kosloske

With – I’m 25 years in the business, I’m third generation in the business. And for years I’ve heard, insurance companies talk about how they want to cross sales and the sells something on top of something else, because it’s much more efficient from an acquisition cost standpoint. I’ve never heard a company having the success that we’ve had. So we came up with this unique proprietary bundling technology. We went public about 1%, little over 1% of our sales were ancillary. We now have 22% of our entire revenues that are ancillary, we’re selling 3.5% ancillary products for core medical.

We have experienced 290% growth, when we gave this to our marketing folks on the press release that came out at 2.9% growth, because they couldn’t believe 290% growth is massive. So what happened is for no cost, our consumer can check the box, add a critical owners, which is a very high product force from Cigna, basically it’s Aflac on steroids as soon as you are diagnosed with the drug disease you get $50,000 cash.

For example, in addition to your medical coverage, we have nationwide dental, we have Teladoc, call a doctor within 20 minutes, you can get a prescription, sent to your most convenient drug store. So these products are one click, you are on your iPhone, add these products to your portfolio, you get your ID card, you get your policy, and the consumers is on the go and off.

So our averaging 3.5 although is ancillary sales for core medical and those ancillary products are sticky in their own right, because we’re now operating 4.5 lots of business, right, core medical plus 3.5 ancillaries of separate blocks of revenue producing blocks of business. So we’re very proud and excited to see that happening.

Brooks O’Neil – Dougherty & Company

That’s great, Mike. Could you just talk a little bit about whether or not you need to make additional investments in technology, I think, I understand the part of the platform, but I’m just curious to make sure that it is scalable as it’s currently configure or what you need to do to continue to scale your platform?

Michael W. Kosloske

So let’s talk about today. It’s almost – it’s cloud-based technology, it’s – there is no limit to the scalability. We doubled in size, we did not add any administrative folks. We did not shutdown. We did not have to hire a bunch of folks, because it’s touchless in a virtual system from all aspects, the first of its kind in the U.S.

So that technology is, we were the first to sell short-term major medical, I hope by – in 1998 we perfected this technology. We are fortunate to come out with cloud-based technology, are popped up, so we can really have an intuitive, simple, technology for our consumers.

However, it is a – we’re going to continue invest in those consumer-friendly, intuitive technologies, where consumers at their finger tip can get their needs taking care of get the best value benefit and rate for them and beyond to their next project. So we are continuing to take advantage of innovative consumer friendly technologies.

Brooks O’Neil – Dougherty & Company

That’s great. One more, I’m just curious, you had some success with the acquisition, I think in the last 12 months periods, what your appetite is for additional acquisitions, what areas you might be particularly focused on? Thanks a lot.

Michael W. Kosloske

We’re always interested in technologies, especially consumer based, the health drive more traffic and more leads into our call centers, which have grown from 31 to 100 into those brokers that have – again, that we are adding 60 to 70 brokers a day. So we’re always interested in feeding those with new technologies, innovative technologies to provide lead for those programs. We are also – we are a vintage company. We are also looking for what products best fit our consumer needs. And we can respond very quickly in a matter of weeks with new product lines that fit the needs of our consumers and the families.

Brooks O’Neil – Dougherty & Company

That’s great. I actually line it, I apologize. This is the last one, you mentioned obviously the importance of the consumer and the individual consumer itself. Can you just give us a sense for what you’re doing from a consumer marketing perspective and whether you see that is something that could be significant driver of growth over time?

Michael W. Kosloske

Yes, we brought in a top of CMOs who is one of the top in the world has done lead place for companies like Google et cetera. G is focused on digital marketing again to health drive leads to our license agent call centers. One of the reasons we went public is we exceeded the potential by 300% market increase in group business, particularly small group business. We built that the nation’s first calculator, the ObamaCare, the Kayak of ObamaCare.

In addition to that we have built a simple define contribution list built for those small employer groups. And so, that is initiative that we’ve launched, we’ve sold our first couple of groups. We expect to see a lot of traction in that initiative towards the end of this year. And again, we see a potential marketplace increase of 300%, where we can really provide a value particularly to the small groups under 50, although we can really provide great value to those employer groups.

Brooks O’Neil – Dougherty & Company

That’s great. Thank you very much. Congratulations. Keep up the good work.

Operator

Thank you. Our next question is a follow-up from Steven Schwartz of Raymond James & Associates. You may begin.

Steven D. Schwartz – Raymond James & Associates, Inc.

Okay, thank you. Yes, a few here. Just back on the timing issue, I know that Premium Equivalents have timing issues as well as if you’ve sold something on January 2 and then you’ve got three months of Premium Equivalents if you’ve sold something on March 30, if you’ve only got one day of Premium Equivalents. And of course, we saw ObamaCare enrollment grow dramatically during the quarter. Did you see the same type of pattern they were greater than January, March greater than February?

Michael W. Kosloske

Yes. So our sales went up January, February, and March, in order as the enrollment period came to a close. And then again after April 15, when we’re the only gains in town, we are seeing very positive, very positive results. Other companies did experience a lot of drop off, because people love their individual plans and went to ObamaCare.

And with our program, we saw a little bit of that in January, a little less than Feb, and then March back to normal. So we’re just going to experience that in a significant way, because our product is so much – is so valuable half the cost similar benefit that the consumers stuck with us because of the value.

Steven D. Schwartz – Raymond James & Associates, Inc.

Okay. And then, all right. And then just maybe an update on what we talked about in the fourth quarter the direct marketing effort and the small group effort?

Michael W. Kosloske

Yes. So we have two new initiatives that we’ve invested – we are a high cash flow, high profit company, we have no debt. We have our cash business and we have invested – we’re going to make a lot of cash this year, I think that needs to be clear. And then we are going to take a portion of that cash and we are going to put into these two initiatives, because it’s how massive the opportunities are. Those two new initiatives are the small group initiatives.

We brought in top executives to make that happen. We’ve done almost a billion in that business with our senior management and feel we’re very comfortable in that space. And then the other one is the digital, our marketing branding, which again will drive consumers to – as leads for those license agent call centers. That initiative had just kicked off. We will be announcing shortly a new consumer brand and that is a initiative that we are very excited about.

Steven D. Schwartz – Raymond James & Associates, Inc.

All right. Thank you, guys.

Operator

Thank you (Operator Instructions) I’m showing no further questions at this time. I would like to turn the conference back over to Mike Kosloske for closing remarks.

Michael W. Kosloske

Thanks, everyone, for joining us today and we’re just very excited about the opportunity ahead of us and we appreciate everyone’s time. Thank you.

Operator

Ladies and gentlemen this concludes today’s conference. Thank you for your participation. Have a wonderful day.

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