Acacia Research CEO Discusses Q3 2010 Results - Earnings Call Transcript

Oct.21.10 | About: Acacia Research (ACTG)

Acacia Research Corporation (NASDAQ:ACTG)

Q3 2010 Earnings Call

October 21, 2010 4:30 pm ET

Executives

Paul Ryan - Chairman and CEO

Chip Harris - President

Dooyong Lee - EVP

Clayton Haynes- CFO

Analysts

Mark Argento - Craig-Hallum Capital

Jonathan Skeels - Davenport & Company

Bruce Stewart - Private Investor

Walter Ramsley - Walrus Partners

Operator

Good afternoon and welcome ladies and gentlemen to the Acacia Research Third Quarter Earnings Release Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the presentation.

I will now turn the conference over to Mr. Paul Ryan. Please go ahead sir.

Paul Ryan

Thank you for being with us today. Today’s call may involve what the SEC considers to be forward-looking statements. Please refer to our 8-K which was filed with the SEC today for our forward-looking statement disclaimer. In today’s call the terms we, us and our refer to Acacia Research Corporation and it’s wholly or majority-owned operating subsidiaries. All intellectual property acquisitions, development, licensing and enforcement activities are conducted solely by certain Acacia Research Corporation’s wholly and majority-owned operating subsidiaries.

With us today are Chip Harris, President of Acacia, Dooyong Lee, Executive Vice President and Clayton Haynes, our Chief Financial Officer. Today, I will give you an overview of the progress we are making in building the business and Clayton Haynes will provide you with an analysis of our financial results. We will then open the call for questions.

Acacia had a great third quarter. It was our best quarter so far as we continue to build our leadership position and patent licensing. Acacia had record quarter the revenues of $63.9 million, record GAAP net income of $24.7 million and record trailing 12-month revenues of $138.6 million.

We continue to grow rapidly in all of our key performance metrics. For the first nine months of the year, we have generated $118.7 million in revenues, which is an 150% increase over the prior-year period. We have accomplished this growth while also increasing our gross margins by 39% from 46% to 64%. We have also increased our working capital since the beginning of the year by 153% to $91 million.

We have also significantly increased the diversity of our revenue base this year as we generate revenues from a larger number of our patent portfolios. Year-to-date, we have generated revenues from 52 different patent portfolios compared to 25 last year, an increase of 108%. Importantly, we have generated initial revenues for new licensing programs this year to 27, an increase of 237% over last year.

We continue to increase the rate of acquiring control of new patent portfolios for future licensing programs. Year-to-date we have acquired 27 new portfolios and we are on pace for another record year which continues to increase the potential for future revenue growth.

Having built the leading outsource patent licensing company Acacia is extremely well positioned as we see our major new trend of companies throughout the world deciding to generate revenues from their patents. During the third quarter, Acacia generated revenues from 36 different licensing programs including initial revenues from 12 new licensing programs. New programs generating initial revenues in the quarter included two of our important wireless portfolios.

Our smartphone technologies subsidiary which controls smartphone inventions created by Axis, Palm, Palmsource, Bell Communications and Geoworks completed initial license to Microsoft which was reported on in an article in the Wall Street Journal a couple of weeks ago in which I described this patent portfolio as foundational in the smartphone market.

We also began generating revenues form our Celltrace subsidiary which entered into initial licenses was Sprint Spectrum and US Cellular for patents relating to the use of short messaging and cellular telephony. During the quarter, we also entered into three new licensing agreements with IBM, two new agreements with Philips Electronics and settled litigation with Red Hat.

On the business development front, we recently issued a joint press release with Renesas Electronics that we have entered into a strategic patent licensing alliance with Renesas, the world’s third largest semiconductor company which has a portfolio of over 40,000 patents. Renesas Electronics is a Tokyo Stock Exchange listed company with over $14 billion in sales which has been formed by Mitsubishi, Hitachi and NEC. We have commenced initial licensing programs of Renesas patent portfolios and have already begun generating revenues.

During the quarter, we also announced that we have formed the Acacia Intellectual Property Fund which has $27 million initial funding commitment and is authorized to raise up to $250 million. This fund will give us the flexibility to access external capital to fund certain patent acquisition activities and licensing activities.

I thank all of the talented and very hard-working people at Acacia for another great quarter as we continue to build a great reputation as the premier date and licensing company. Acacia is beginning to benefit from major trends which are impacting our business. The first theme is the rapidly growing interest of large companies in the US, Europe and Asia and generating revenues from their patent portfolios and to earn a return on investment from their R&D and M&A activities.

As the number one outsourced patent licensing company, having built a great track record of licensing, we are seeing many new opportunities as large companies seek to generate financial returns from the patents. Acacia’s business model makes sense for companies that want to generate these returns without having to make any additional investments of capital of human resources to earn those returns.

Acacia’s corporate IP partners are recognizing that we have built a highly specialized company for patent licensing, and that there are significant advantages to outsourcing this activity to us. They increasingly recognize the value of our multi-disciplinary teams that can screen large patent portfolios for licensing opportunities, our due diligence teams that can validate licensing opportunities, our broad partnering relationships with leading law firms for enforcement and a proven track record of our licensing teams in generating revenues. We continue to see a significant expansion of our business from these IP partnering agreements with large companies.

The second major trend that is beginning to impact business is the growing interest of large companies and entering into structured agreement that will enable them to in-license patent portfolios from us. Companies are deciding that it makes economic sense for them to enter into structured agreements with Acacia that will facilitate periodic licensing negotiations and licensing renewals and reduced litigation.

This trend is being driven by the scale we are building in total patent portfolios, the accelerating growth of our intake of new portfolios and the increasing depth and quality of many of our new patent portfolios. This trend could benefit Acacia and our IP partners by shortening the time to money, reducing legal expenses and continuing to improve profit margins.

With that, I would like to turn the call over to our Chief Financial Officer Clayton Haynes

Clayton Haynes

Thank you, Paul, and thank you and to everyone joining us for today’s third quarter 2010 earnings conference call.

As indicated in today’s earnings press release on a consolidated basis Acacia reported record third-quarter 2010 revenues of $63.9 million as compared to $16.2 million in the third quarter of 2009. Third quarter 2010 revenues included license fees from 51 new licensing agreements covering 36 of our technology licensing programs as compared to 36 new licensing agreements covering 18 of our technology licensing programs during the comparable prior year quarter. For more details please refer to today’s earnings press release for a summary of technology licensing programs contributing to revenues during the quarter and a summary of technology programs generating initial license fee during the quarter.

We continued our trend of revenue growth with consolidated trailing 12 months revenues totaling $138.6 million as of September 30, 2010 as compared to $90.8 million as of June 30, 2010, $67.3 million as of December 31, 2009 and $65.7 million as of the end of the prior year quarter. Currently on a consolidated basis, our operating subsidiaries have generated revenues from 87 of our technology licensing programs, up from 56 technology licensing programs as of the end of the comparable prior year quarter. License fee revenues continue to fluctuate from period to period based on the various factors discussed on previous earnings conference calls and in our periodic filings with the SEC.

For the third quarter of 2010, Acacia Research reported record net income of $24.7 million or $0.75 per share and $0.70 per fully diluted share versus a net loss of $3.4 million or $0.11 per share for the comparable prior year quarter. As illustrated in today’s press release and related 8-K filed with the SEC.

Excluding the impact of non-cash patent amortization charges and non-cash stock compensation charges we reported third quarter 2010 net income of $28.3 million or $0.80 per fully diluted share as compared to approximately breakeven excluding non-cash items for the comparable prior year quarter.

Our average margins defined as gross licensees less in rental royalties and payments to non-controlling interest and contingent legal fees for the portfolios generating revenues during the period was approximately 57% for the third quarter of 2010 as compared to 41% for the comparable prior year quarter.

Average margin continue to fluctuate period-to-period based on the mix of patent portfolio that generate revenue experience that terms in conditions of license agreements execute each period and the related economics associated with the underlying and venture agreements and contingent legal fee arrangements, if any.

Inventor royalty expense and payments to non-controlling interest for the third quarter of 2010 increased 209% to $17.6 million versus $5.7 million for the comparable prior year quarter, consistent with the related increase in revenues for the same period.

Contingent legal fees for the third quarter of 2010 increased 156% to $9.7 million versus 3.8% for the comparable prior year quarter, again consistent with the related increase in revenues for the same period.

On a combined based, inventor royalties, net income attributable to non-controlling interests and contingent legal fees as a percentage of total revenues decreased to 43% as compared to 59% in the comparable prior year quarter primarily due to lower inventor royalty rates and contingent legal fee rates, if any, for the portfolios generating revenues during the third quarter of 2010.

Third quarter 2010 marketing, general and administrative expenses including non-cash stock compensation charges increased to $6.4 million versus $4.7 million for the comparable prior year quarter primarily due to an increase in variable performance-based compensation costs, an increase in stock-based compensation related charges, state related growth received taxes incurred on certain licensing revenues recognized in the third quarter of 2010 and a minor net increase in engineering and licensing personnel.

Third quarter of 2010 litigation and licensing expenses decreased to $2.9 million as compared to $4 million for the comparable prior year quarter. Litigation and licensing expenses continue to fluctuate from period-to-period based on patent enforcement and prosecution activity associated with ongoing licensing and enforcement programs and the timing of the commencement of new licensing and enforcement programs in each period.

Looking forward for fiscal 2010, we expect MG&A excluding non-cash stock compensation charges to be in the range of approximately $17 million to $17.5 million again due primarily to increases in variable performance based compensation costs and certain other variable, general and administrative costs.

For fiscal 2010, we continue to estimate that patent related litigation and licensing expenses incurred for 2010 will be between approximately $13.5 million to $14 million.

From a balance sheet prospective, cash and cash equivalents and investments totaled $85.6 million as of September 30, 2010, compared to $53.9 million as of December 31, 2009. Working capital increased 153% to $91 million as of September 30, 2010, from $36 million as of December 31, 2009. Net cash inflows from operations for the third quarter of 2010 totaled $14.2 million versus net cash outflows of $3.3 million for the third quarter of 2009. Net cash inflows from operations for the nine months ended September 30, 2010, totaled $30.3 million versus net cash inflows of $5.9 million for the nine months ended September 30, 2009.

Again, thank you for joining us for today’s third quarter earnings conference call, and I will now turn the call back over to Paul Ryan.

Paul Ryan

Operator, can you open up the call for questions and answers?

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from the line of Mark Argento from Craig-Hallum Capital.

Mark Argento - Craig-Hallum Capital

Congratulations on a really another breakout quarter. When we look at there’s kind of two parts of the business, the base licensing business and then more of these kind of structured license deals like you did another one this quarter, which drove some pretty good upside. I know you probably don’t want to breakout the two, but because it is so lumpy, could you give us some overall trends on the kind of the base licensing business separate from kind of the structured licensing, kind of the size of the deals, maybe and try to give us a little bit of color on that if you could?

Paul Ryan

If you look through the nine months year-to-date, the base licensing continues to move up significantly. Most of the revenue has been generated from our base licensing programs, and to some degree they will generate probably more and more of these structured deals, where we periodically negotiate the licenses of multiple portfolios.

When you really think about it, when we do these deals, we’re basically licensing a number of our portfolios at one time to one company, which is part of our base licensing. So, it’s really one and the same, quite frankly. Generally you got larger numbers when a company decides that it wants to take licenses to a number of portfolios that we control at the same time in the same quarter.

Mark Argento - Craig-Hallum Capital

Can you talk a little bit more about these kind of structured license deals? I mean, are they for a period of time, are they taking perpetual licenses for certain portfolio? That’s kind of how I’ve always understood there’s kind of two flavors here. Could you maybe give a little more color on that?

Paul Ryan

It depends on the company and the structure. Predominantly, the essential element is, it rationalizes and makes more economic for both sides. The licensing process, it gets more money to our IP partners, because you tend to settle these with less litigation cost and less expenses of licensing. So, it’s really beneficial to both parties.

Depending on the company and depending on their needs, but you are right, generally, there is a term and what they want to achieve is a periodic round of licensing negotiations, much like large companies do with each other although our timeframes are generally much shorter than is typically done in the industry, because we want our new IP partners coming in, participating in additional revenues from those renewals of those agreements.

So, they take a variety of forms, but basically in essence that it’s a way for us and large companies, where we have many portfolios that relate to them to enter into periodic negotiations and take licenses without litigations.

Mark Argento - Craig-Hallum Capital

I noticed on the balance sheet, you have a pretty good size receivable. When do you expect, or what kind of the terms historically on recouping your cap or getting your cash from some of these deals going forward?

Paul Ryan

Actually, we have collected the receivables of $38.9 million, we have collected $37.6 million in the first 15 days, so we’ve collected 98% of all that money, it is in the bank.

Mark Argento - Craig-Hallum Capital

Decent current cash number is the $83 million that you had at the end of the quarter plus roughly another $37 million?

Paul Ryan

Yes, so we pay our IP partners.

Clayton Haynes

Less than 43% margin on an average.

Paul Ryan

Yeah, then you take the normal margins that we are achieving and the splits that go to our IP partners, but yeah, right now we have $85 million in cash, plus the $37 million, and during this month we will be doing these payments out to our partners.

Mark Argento - Craig-Hallum Capital

It seems to be, really over the last nine months in particular just a really significant shift in the way large tech companies are viewing their IP and maybe if you just touch on a little bit, who it’s benefiting? You guys are getting more deals done; do you see this persisting for a period of time? How do you think about the opportunity going forward and kind of where’s you are positioned today and what you need to continue to do to find success?

Paul Ryan

In terms of the trend, the large companies worldwide decided to monetize their patent. We think we are at the very beginning of that process. Historically, it has been a couple of handfuls of companies that have generated very large dollars from their patent portfolios, and increasingly we are seeing more and more companies, certainly in the dialogs we’re in with companies plus the ones that we are hearing about in the marketplace. So, we think we are at the very beginning of a major trend of companies realizing that the patents that are on their balance sheet are the results of their investment and R&D with shareholder money and that ought to be generating financial returns from those patents.

So, more and more companies are adopting what I might call the IBM philosophy. They were kind of the leaders in realizing that there’s a lot more returns that can be generated for their shareholders from their R&D investment by broadly licensing out their patents to industry instead of just holding those patents defensively. As more companies have done that and it’s impacted their bottom line, there’s more pressures on managements and boards to do the same thing. So, we think we are at the very beginning with this new trend.

Mark Argento - Craig-Hallum Capital

When you think about the, I don’t have the stat right in front of me, but the number of new patent portfolios you guys brought in the quarter and so far this year, and I don’t know it’s up 50% to 75% in terms of just total number of portfolios, but just the number of portfolios is one statistic or a challenge statistic and this is hard to provide I assume, but do you think about the size of these new portfolios you are bringing in like of course the one that you signed with Renesas.

If you think about the new IP that you brought in this year, not just in a number of portfolio stats, but the opportunities out there. The way we look at it, it’s probably a magnitude of what you had historically in the pipeline. So, have you doubled your market opportunity or tripled your market opportunity do you think with the new IP you brought in so far this year?

Paul Ryan

No, we want to put a specific number, because we have a lot of legacy IP that we think is very valuable. Certainly there is no question that when you start partnering with companies that have 40,000 partners here, moving in orders of magnitude in terms of sheer numbers of patent, and we just think it’s an increasing trend. I wouldn’t want to put a hard number, but certainly it’s gone up dramatically. Yes, the value.

Mark Argento - Craig-Hallum Capital

Last question, more of a housekeeping question. In terms of the NOL, where are we and how much you have left on your tax yield?

Clayton Haynes

From NOL standpoint, as of the end of the fiscal 2009, we had approximately $86.4 million in federal NOLs and about $68.7 million total in state NOLs.

Mark Argento - Craig-Hallum Capital

They were all (inaudible)?

Clayton Haynes

With respect to what the tax return is looking like for fiscal 2010, we’ve not done those calculations yet, but the 86 and the 68 are what is available as of the end of 2009.

Paul Ryan

We’ve generalized 38 million in profit so…

Clayton Haynes

So, the two numbers we don’t know what the exact taxes will be but starting the year we had an 86 million NOL and we have made 38 million this year. So, you can do the math as where we’re slightly big.

Operator

(Operator Instructions). Our next question comes from the line of Jonathan Skeels of Davenport & Company. Please state your question.

Jonathan Skeels - Davenport & Company

Can you talk a little bit about your confidence may be signing additional structured licensed deals and specifically can you talk about the interest level among companies in signing these deals within.

Paul Ryan

Yeah, we had a goal at the beginning of this year doing two. Our goal for next year is three and for the following year four. People have asked us why that pays and it’s because we have some specific requirements in terms of the structure of our business particularly relating to the length of the term of these licensees. Some people in the industry are used the longer term, but it doesn’t said our business model.

We’ve learned from our discipline on the business development side where we’ve always done 50-50 deals with partners and we’ve basically never broken that rate structures proving to be quite valuable now as we partner on larger portfolios. So, we think it’s going to be important for us to maintain that same discipline in the number of term deals we do because we are probably are going to deal do a dozen of this and hopefully the plan would be that they would renown you get three or four of them renewing per year give a lot more stability to the revenue base beginning each year.

That’s the goal and we think that’s a reasonable timeframe. We have interest from a lot of major companies, but it’s always price and terms. So, that’s our goal, three for next year, four for the following year.

Jonathan Skeels - Davenport & Company

Talking about renewals can you talk about may be confidence you have that companies wide enter into these deals and then it probably would find and stay in them longer term?

Paul Ryan

We can predict that if were made sense for them this time around with our accelerating growth in new portfolio. If that trend continues, it would probably make sense that they would want to do at the same way at the end of the original term period, but we have no evidence or experience with that yet.

Jonathan Skeels - Davenport & Company

You started to monetize Renesas and the Access portfolios it seems like that the revenue ramp at Renesas has been quick and there is very little litigation involved there signing the first your first two deals in the quarter. Is this ramping as expected or you ahead of the schedule can you talk a little bit about that?

Paul Ryan

We are ahead of schedule. We’ve had the ability on these partnerships similar Access is a publicly traded company on the Tokyo Stock Exchange that had the original Palm source patents along the patents that they’ve developed themselves and Bell and certainly we feel moved into the first large license of that portfolio to a major company. We did that without litigation to Microsoft. So, certainly at this stage both of our partners are very happy with the timing that we’ve done and we’ve exceeded their expectations.

Jonathan Skeels - Davenport & Company

How is the positive pressure you’ve been getting on these fields helping with other potential partners in both Asia and the US? These give references for you and in terms of the plans in new business.

Paul Ryan

Certainly the visibility are being in the press doing these kind of transactions with large companies can only help our visibility there. We are in discussions our business development paper and discussions with a number of other large companies, but certainly having favorable cost doesn’t hurt.

Jonathan Skeels - Davenport & Company

Back on the cash balance you have said you wanted to get to $100 million can you just update us on the strategy there? In particular if you’re looking to possibly put capitals to work or put some of that cash to work what kind of returns that we’ve seen in the past when you put up money?

Paul Ryan

Why don’t I let Chip address that? He gets asked that question a lot.

Chip Harris

Yeah, clearly the cash balances have grown pretty dramatically over the last couple of years as we have achieved probability. If you look at the three opportunities big companies have to do out there I mean, they can build an in-house licensing company for portfolios if they thinking about monetizing there assets. They can spin it off. You see the big semiconductor companies spend their portfolio off into a separate entity or they can access companies like ourselves to be their in-house licensing departments.

The ability to have a strong balance sheet is clearly a competitive advantage that we have over companies that might consider themselves competitors of ours and to be able to put your might of work and as seen our margins growth we’ve been able to buy down back into participation to achieve the margin growth that we talked about in the last of years. We used to be in the high 30s low 40s, we moved to kind of the mid 40s to the mid 50s. On a year-to-date basis we’re over 60% now.

Capital can be used for a lot of things like that. Psychologically, its very compelling if we’re going to have to compete and show what we can do for big companies compared to what’s supposed to a competitor might be able to do.

Jonathan Skeels - Davenport & Company

On the IP fund when we expect that to ramp? Can you talk a little bit about what kind of opportunities you’re seeing out there?

Chip Harris

We got a couple of opportunities do we have on the contract right now, that’s just the profile of the IP fund. We think that you know there’s early signs that were seen earlier monetization in some of our opportunities. Obviously, if we close on a couple of the opportunities and we do some of the licensing, one can only imagine the yearly returns of the fund. It does make it easier for us to attract additional capital if we need to if we find opportunities that kind of dwarf our balance sheet maybe.

Jonathan Skeels - Davenport & Company

Can you break out your largest licensee in the quarter? Is that something we usually see? It usually in the queue, but…

Paul Ryan

Yes, we’ll providing that in this 10-Q as part of the third quarter results.

Operator

Our next question comes from the line of Bruce Stewart, a private investor. Please take your question.

Bruce Stewart - Private Investor

I don’t have a question. I want to say congratulations.

Paul Ryan

That sounds easy to answer, thanks.

Clayton Haynes

We’ve the answer on that one. Thank you.

Bruce Stewart - Private investor

I want to thank you, thank the whole team for doing such a wonderful job.

Operator

(Operator Instructions) Our next question comes from the one Walter Ramsley of Walrus. Partners. Please take your question.

Walter Ramsley - Walrus Partners

The patent acquisition cost, they were down in the quarters and it’s going to be the ongoing trend that now that you have the IP fund or what’s the outlook there?

Paul Ryan

No, I don’t think you can draw any conclusion from a particular quarter in that particular quarter, in the fund for you, portfolios we brought in, we do have capital and if our IP partners want upfront payments and we can buy more points, we’ll do that but in this particular quarter there just weren’t many of those opportunities.

Clayton Haynes

You see a solid trend.

Walter Ramsley - Walrus Partners

In the fourth quarter I mean you have indicated you don’t really expect a structure deal to take place so, you don’t get one, given up for the base business going at this point, generate a profit?

Clayton Haynes

We hope so.

Operator

Our next question comes from the line of [Paul Berger of Hammock Investors]. Please state your question.

Unidentified Analyst

Two items, one on the license that you do with Oracle and Microsoft, can you give us a little color on but how many patent portfolios they took?

Paul Ryan

No, the confidentiality agreements that we have generally prohibit us from discussing adding specific of licenses or numbers of patters,

Unidentified Analyst

Is DMT dead now or is there is still appeals left for it?

Paul Ryan

It’s been in the appeal process, we also have new patent that received. Actually we started a new paten issued this week. There are new patents that have issued in the portfolio, we recently had a fed circuit appeal and the fed circuit confirmed the lower court’s decision that the five initial patents had indefinite claims. We haven’t made a final decision about any further appeals at this time, but that’s the most recent event and that’s occurred. Contemporaneous with that, we’ve been getting some patent issued which generally now will go out to spring of 2014. So, we will make a decision on the licensing and enforcement of those new patents.

Unidentified Analyst

For those people that you already have on under license and you had some that will continue or they continue into pay or is that on hold?

Paul Ryan

Actually the practicality of it is just the original patents expired in January. So, this would be the last quarter that people will be making payments under the original patents anyway. By the payments and result whether we decide to appeal the most recent decision and now basically the payments under the agreements would have been completed. We have these new patents which would cover from the day of issuance until roughly the spring of 2014.

Unidentified Analyst

Do you see the same kind of potential for the new patent as you go to one time for the old ones?

Paul Ryan

Shorter life, the licensing obviously they only revenues we could generate our further life of the patent which would be for that three and half year period, not a longer period which the original ones would have had a longer life. The market obviously has grown since then and so from this day to 2014 obviously there is a much larger market opportunity on a annual basis.

Operator

Our next question comes from the line of Peter [Norton of Norton] Capital Management. Please state your questions.

Unidentified Analyst

Question I have relates to the cash that you discussed on the balance sheet, which is growing. As I understand the capital intensity in the business is rather low. I’m wondering what the thoughts might be internally about the dividend or some sort of stock off buyback etc?

Clayton Haynes

Well, we see our sales tell us a growth company. Through the second quarter we had kind of the annual growth about 68%. Our treasury policy or functional be more aligned with growth companies than mature dividend paying companies.

Unidentified Analyst

They’re actually growth companies that paid dividends.

Clayton Haynes

We might be one of them.

Unidentified Analyst

That’s what I’m asking.

Paul Ryan

We don’t have any policy on that. This is clearly in this process here that. The corporate opportunities that we’re seeing and our kind of overwhelming the business development opportunities here and we’ll just have to take a look at when and if we deploy cash on larger opportunities we have in the past. It’s a little early with that a lot of foresight into the future is what our revenues going to look like. Too early still talking about a dividend or a stock buyback right now.

Unidentified Analyst

Is there a number on the balance sheet cash number that we trigger decision to move in that direction or not?

Clayton Haynes

It’s a function of what’s on the balance sheet in the opportunities that we see in the kind of the near term say in the next year so, we have to had take a look at both of those and determine what’s appropriate from a retention of cash.

Operator

This will conclude the question-and-answer session. I will now turn the call back to Mr. Ryan.

Paul Ryan

I want to thank you all for being with us on the quarterly call. If you have additional questions, you can call give myself or Rob Stewart. I look forward to talking on our next call in February, thanks.

Operator

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing (800) 642-1687 or (706) 645-9291 with confirmation code 10039317. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may disconnect.

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