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Edgewater Technology (NASDAQ:EDGW)

Q1 2011 Earnings Conference Call

May 11th, 2011, 10:00 am ET

Executives

Paul McNiece

Shirley Singleton – President, CFO

Timothy Oaks - Chief Financial Officer

David Clancey – EVP, Chief Strategy, Technical Officer

Analysts

George Mellas – MKH Management

Arnold Ursaner – CJS Securities

Presentation

Operator

Good ladies and gentlemen and welcome to the quarter one 2011 Edgewater Technology Financial Results Conference Call. (Operator Instructions) I would now like to introduce your host for today’s conference, Mr. Paul McNiece. You may begin.

Paul McNiece

Thank you, Operator. Good morning everyone and welcome to Edgewater Technology’s first quarter 2011 financial results call. I’m here today with Shirley Singleton, Chairman, President and CFO. David Clancey, Edgewater’s EVP and Chief Strategy and Technology Officer and Timothy Oaks, Edgewater’s Chief Financial Officer. Before we begin I would like to remind everyone that this call may contain forward looking statements as described under the Securities Act. Investors are cautioned that such statements could involve risks and uncertainties that could cause actual results to differ from current expectations with respect to such statements. These types of statements and the underlying factors were related to these statements are listed and reported in filed information with the Securities and Exchange Commission as well as within the company’s press release that was distributed earlier this morning. The statements made during today’s calls are made only as of the date of today’s call and the company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances. With that I will now turn the call over to Shirley.

Shirley Singleton

Thank you, Paul. Good morning, everyone. We said we were expecting strong organic growth and service revenue for Q1 and we do deliver on that projection. I’m really pleased with our Q1 performance. Our service revenue is up on both a year over year and sequential basis, and we’re really doing a good job of the number of new customers as well. We secured 31 new customers. I tried to take a sampling of customers from all of offerings across all offerings. One name is Old Mutual out of South Africa, it’s a new customer.

QUALCOMM, Essential Rewards, Employers Insurance, Maxwell Technologies, and Cisco but with that let’s have Tim get into the details.

Timothy Oakes

Thank you, Shirley. As disclosed and announced in our press release this morning we are pleased to report solid first quarter operating performance and related metrics. We are able to leverage strong fourth quarter bid and proposal activity resulting in an all-time high in service revenue, improved billable consultant utilization and improved gross margin in EBITDA.

This is positive news in light of that fact that operating performance comes in a period in which typically is a soft period due to traditionally seasonality in our EPM service offerings in the cyclical resetting of fringe expenses.

Total revenue for the first quarter was $23.6 million compared to $20.3 million in the first quarter of 2010. Service revenue which was $19.7 million during the first quarter compared to service revenue of $16.7 million in the first quarter 2010. On a year over year basis we’re reporting growth in both total revenue and service revenue of 16.4% and 25.5% respectively. Excluding the incremental revenue generated by our Meridian acquisition, which was completed in May of 2010, organic service revenue increased by 22.5% on a year over year basis.

We are reporting organic service revenue growth across all of our service offerings. On a sequential basis, while total revenue was relatively consistent with the fourth quarter of 2010. There was a shift in the underlying mix of the revenue. Service revenue increased by $2 million or 11.5% while softer revenue decreased by $2.1 million. The sequential increase in service revenue is primarily driven by sequential increases in our EPM and the RP related service offerings.

Software revenue which includes maintenance revenue representing 6.7% of our total revenue during the first quarter, this compared to 14.4% during the first quarter 2010. On an absolute dollar basis software revenue decreased by $1.3 million on a year over year basis, which is in large part driven by a singular software sale during the first quarter 2010. As we have stated in each of our past earnings calls, we’d like to remind everyone that we anticipate that software revenue will be a material part of future total revenue and hat our future operating results can be materially influenced by our ability to recognize software.

Also we’d like to reemphasize that quarterly software revenue can be volatile if subject to our customers demand for such off the shelf third party software. It can be impacted by software based revenue recognition rules. Quickly touching upon some of our other first quarter revenue metrics before moving on to gross profits, our annualized service revenue per billable consultant metric was $327,000 in the first quarter of 2011, which is consistent with the first quarter 2010.

We entered into first time engagements with 31 new customers during the quarter compared to 25 new customers in the year ago quarter. Service revenue generated by our top ten customers represented 25.9% of total revenue service compared to 30.3% in the first quarter of 2010. Only one individual customer accounts for more than 5% of our total service revenue during the current quarter.

Moving on to gross profit, total gross profit as a percentage of total revenue was 36.4% during the first quarter compared to 33.1% in the first quarter 2010 and 38% in the fourth quarter of 2010. Similarly gross profit margin related to service revenue was 38.5% in the first quarter compared to 34.1% in the year ago quarter and 39.5% in the fourth quarter of 2010.

Current quarter year over year improvement and total gross profit and gross profit margin related to service revenue is directly related to our current quarter increase in service revenue and the improvement in our billable consultant utilization rate. One a sequential basis positive factors influencing our total and service related gross margins included a shift in revenue mix between higher margin service revenue and lower margins software revenue combined with the improvement in billable consultant utilization.

The expected improvement in gross margin related to these items was offset by the traditional first quarter increases in fringe related expenses. During the first quarter we increased our billable consultant head count, which includes contracts, to 311. Billable head count was 268 at the end of the first quarter of 2010 and 290 at the end of the fourth quarter of 2010. Billable consultant utilization was 79% during the first quarter of 2011 compared to 75.3% in the year ago quarter and 75.7% during the fourth quarter 2010.

The improvements in our billable consultant utilization rate of being driven by the year over year and sequential growth in our service revenue. Touching upon SG&A expenses, SG&A expense is a percentage of total revenue which was 31.9% during the first quarter compared to 33.2% in the year ago quarter and 35% in the fourth quarter of 2010.

A quick reminder we would like to highlight that our fourth quarter SG&A expenses included $950,000 non-cash charges associated with potential sales and use tax liabilities associated with the full scale embezzlement issue. In absolutely dollar terms SG&A expenses totaled $7.5 million in the first quarter, which represented a year over year increase of $789,000 compared to the first quarter of 2010.

The year over year increase in SG&A is due to incremental expense related to the Meridian acquisition which was completed in the second quarter of 2010. Salaries and wages with annual merit increases, commission’s attributal to the growth in revenue, marketing and professional services. On a sequential basis, SG&A expense decreased by $723 in the first quarter of 2011 compared to the fourth quarter 2010.

The primary driver of the sequential decrease in expense is due to the absence of the $950,000 charge associated with the sales and use tax issue. And a $200,000 reduction in the company’s allowance for doubtful accounts. Other changes in SG&A expense on a sequential basis included increases in fringe related expenses, professional services due to the absence of insurance proceeds received during the fourth quarter of 2010.

And bonus accruals associated with the company’s 2011 performance based bonus plans. While we did not incur any significant expense during the first quarter associated with the full scope embezzlement issue we will continue to caution investors that we may continue to incur costs related to this issue in the future, however, we do not have an estimate for the anticipated future costs at this time.

Depreciation and amortization expense decreased on both a year over year and sequential basis by approximately 300,000. The anticipated decrease is primarily associated with the reduction in amortization expense related to the company’s previously completed acquisitions. We’re reporting net income during the first quarter of $310,000 or 3 cents per diluted share. Compared to a net loss of $639,000 or 5 cents per diluted share in the year ago quarter. Looking at our non-GAAP measures adjusted EBITDA was $1.1 million or 4.8% of total revenue and nine cents per diluted share.

Compared to adjusted EBITDA of $22,000 in the year ago quarter. As presented in the earnings release issued this morning our adjusted EBITDA calculation excludes costs for recovered amounts associated with the Meridian acquisition and the full scope embezzlement issues. Moving on to some final operating metrics, total company head count was 406 at the end of the first quarter, which 311 were billable?

Cash flow used in operations was $1.3 million during the first quarter compared to cash flow from operations. The cash flow used in operations of $5.9 million during the first quarter of 2010. First quarter 2011 cash flow used in operations is reflective of cyclical payments associated with prior year performance-based bonus programs and annual renewals of insurance policies.

Also, a reminder that first quarter of 2010 cash used in operations was significantly impacted by payments resulting from the December 2009 acquisition of Fullscope. From a balance sheet’s perspective our cash and cash equivalence totaled $9.5 million as of March 31st compared to $10.9 million at the end of 2010. Our cash and cash equivalence represented 77 cents per diluted share.

Accounts receivable balances included unbillable AR; totaled $19.7 million at the end of the first quarter and our DSO metric related to billed AR was approximately 65 days compared to 59 days at the end of the fourth quarter 2010. Another reminder that we have $2.8 remaining on our stock repurchases authorization as of March 31st. We did not make any repurchases of our common stock under the repurchase program during the first quarter. The stock repurchase program is scheduled to expire in September of 2011.

A few final comments before I pass the call back to Shirley. As we’ve previously discussed in our earnings calls and disclosed in our filings with the SEC Fullscopes earn out will conclude on June 30th, 2011. We are now the space called Certain Microsoft Dynamics AX Suite and Process Manufacturing Related Contracts which will be expiring on or about June 30th. The company and its periodic operating results recorded service and royalty revenue associated with these contracts.

We anticipate that we will experience some volatility in service revenue during the second quarter of 2011 as we wind down the service and support contracts. At this time we anticipate that process related service revenues will decrease by approximately $400,000 in the second quarter of 2011 compared to the first quarter of 2011. This combined with strong growth that we experienced in the first quarter is primarily what leads us to anticipate a sequential decrease in our second quarter service revenue.

The company does not anticipate that we will continue to record service revenue or royalty revenue related to these contracts beyond June 30th of 2011. With that I’ll now pass the call back to Shirley for final comments.

Shirley Singleton

Thanks, Tim, let me see if I can put any color on the business because the business actually is doing very well. Both of our EPM offerings, namely our SAP work in EPM, and our Oracle work in EPM are doing very well. They’re continuing their fast pace. I mentioned on the last earnings call that we were really looking to see some multi-year, multi-million dollar contracts come in, in terms of in our pipeline and I’m happy to tell you that they’re in the pipeline.

Now whether we close them or not is another piece. That’s what we need to do when we hang up today but there are some very large contracts in our pipeline. We’re continuing to see really strong synergies between the business process advisory piece of our tax which Fullscope, AX, Microsoft unit if you will. This business process unit for those of you that have been with us for a while it would be the former NDS acquisition we did a couple years ago.

Those folks are really doing a great job assisting Fullscope in driving business process change into the manufacturing field which seems to be going through a replacement cycle as well as some rebirths in the United States.

On the Microsoft side our CRM offering continues to gain momentum. We’re leveraging the channel which was originally developed by Fullscope. So there’s another example of synergies between the offerings and that’s helping us accelerate our share end presence. So at this point customers now have the choice to engage us in actually two methods. One in product based consulting, i.e., the three ecosystems. We’re specializing in Microsoft, SAP and Oracle and those would be poignant solutions down those channels or they can engage us in advisory services, which is typically where we’re selling at a very high level to sea level, other senior executives and board levels to where they might not have a solution in mind yet.

They actually need our advice to try to drive it to a solution which eventually would end up in one of the channels or multiple channels in terms of software and I want to talk a little bit, actually I’m going to ask Dave to talk a little bit about the process contract work that’s winding down.

So it’s create some noise in Q2 and that’s you know not great news but what is the other news about the process winding down?

David Clancey

Well, as process winds down it’s basically Microsoft saying that 2012 is ready, the software is ready and the Fullscope resources are even working with Microsoft getting that release ready to go from a process point of view. We’re now freeing up. As they free up they give us a jump start into the next release of AX which will be the 2012 release and they also give us an opportunity to add to our IP modules which extenuate the process, AX portion, in the area of chemical and pharmaceutical.

Shirley Singleton

Okay, so we are expecting to see year over year organic growth in Q2. So that makes us very happy as well and with that I would like to take some questions.

Questions – and – Answers

Operator

Thank you, (operator instructions), our first question comes from Arnie Ursaner of CJS Securities, your line is open.

Arnold Ursaner – CJS Securities

Hi, good morning.

Shirley Singleton

Hi, Arnie.

Arnold Ursaner – CJS Securities

My first question relates to your head count. It looks like you have a quite sizable jump in head count and yet your utilization was quite good for the first part of the year. And normally when you do have a lot of head count additions it impacts margin quite a bit as they’re ramping up. Can you expand a little bit on both and maybe more specifically of the 311 you have quantify the full time versus more part time or consultant type employees?

Timothy Oaks

Sure, Arnie, I can handle that, at least the first part of it as it relates to the changes. If you look at the headcount change in the quarter it was roughly an increase of 21 billable consultants. Trying to break that down as it relates to the service offerings it would be more heavily weighted and based to both the EPM and ERP, which is in line with the growth that we saw in those two service offerings in the current quarter.

In terms of being able to maintain and increase you know the billable consultant utilization rate it’s really because the people that we’re bringing

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in I mean they’re high skills resources and we have the ability to sort of bring them on in a plug and play mode.

Shirley Singleton

And not everybody’s burning at 79% so we have some pieces that are bringing really hotter than that and some people that are not burning as hot and then the blended is 79%.

Arnold Ursaner – CJS Securities

Great, my second question relates to if you can quantify the impact on cost of goods. You have about 500,000 a process royalty revenue in Q1. Maybe another way to say the same thing how could you think about your cost of goods and how it might decrease when you remove the process royalties after Q2?

Timothy Oaks

I think as you look at it, Arnie, very high level. The process components as they break down between service revenue and the royalty piece. It’s about $900,000 plus per quarter if you look at 2010. If you look at an overall contribution on that service revenue on the service gross margin piece we don’t break down individual service margins. But we’ve reported a consolidated of about 38.5% in the current quarter. You can utilize that for the impact on the service revenue piece. Royalty is a bit tougher; I think a bottom-line number from a conservative perspective would be maybe they would be about a $300,000 impact on a quarterly basis in bottom-line PBC.

Arnold Ursaner – CJS Securities

Again, I never know how many questioners you have on the call so I don’t want to be rude to others but, Shirley, two quick ones for you. You mentioned the pipeline is quite active, you’ve got a lot of things that you have bids out for.

Shirley Singleton

Yes.

Arnold Ursaner – CJS Securities

When you speak about your second quarter revenue trends, how much of that pipeline are you including that you expect to win and would impact Q2?

Shirley Singleton

I’m not counting in the big bad boys that are in there because I mentioned in the last earnings call we’re up for a $5 million job. We got to the finals and we didn’t get selected. So I want to be conservative and I’m not going to count those in.

Arnold Ursaner – CJS Securities

So saying it another way, to the extent that you do win them it would create upside to what you’re’ saying now about Q2s sales guidance?

Shirley Singleton

Yes, that is true, depending on timing. If they signed it the last day of the quarter, no.

Arnold Ursaner – CJS Securities

Right, okay, and a quick one for Tim, how could we think about your cash build up during the course of the year and then I’ll jump back in queue and give others a chance?

Timothy Oaks

I mean I think you have the historical model, Arnie, in terms of what our cash flow is. Q1 cash flow has always, historically, been cash out flow from opps and we’ve traditionally built cash as we’ve moved through the quarters. We don’t give cash flow guidance on a full year basis but we fully expect to anticipate that our cash flow trends will model what we’ve done historically.

Arnold Ursaner – CJS Securities

Okay, thanks, I’ll jump back in queue and ask a few more follow ups later.

Shirley Singleton

Okay.

Operator

Thank you, (operator instructions), okay, I’m showing no further questions in the queue. I am showing one follow up question from Arnie Ursaner, your line is open.

Arnold Ursaner – CJS Securities

Hello.

Shirley Singleton

Hi, Arnie.

Arnold Ursaner – CJS Securities

Okay, sorry, so a couple of other questions. Sales growth in Q2 on a year over year basis, obviously you mentioned the process piece related to Fullscope would give out a $400,000 hit. You’ve been showing – you say double digits, you know 22% is a little better than just quote double digit. When I put it all together, how should I think about sales growth expectations on a year over year basis in Q2, it does form a range of expectations.

Shirley Singleton

Sure.

Timothy Oaks

Yes, Arnie, I mean we talked about the 400 coming out so that puts the downward pressure on the sequential. We’ve talked growth year over year, we would probably characterize that year over year growth to be high single digits approaching double digits.

Arnold Ursaner – CJS Securities

Okay, so what would cause a slowdown of that magnitude?

Timothy Oaks

Well, I think you have to look at what the ramp of revenue has been on a quarterly basis over the years, so you know you look at 2010 in terms of how we move with service revenue. We started Q1 with $15.7 in service revenue and jumped up to $17.4. The growth rate in terms of not being at a double digit 20% is really reflective of the historical growth we’ve achieved on a quarterly basis. So if that number becomes higher the bar thresholds for our continuous growth becomes tougher to get up to 20%.

Arnold Ursaner – CJS Securities

Follow up question for, Shirley, if I may? Shirley you mentioned again some world class Fortune 100 type companies, again, among your new customers, I think you mentioned QUALCOMM, I think you mentioned Cisco and just remind us again, your strategy in the past was you were you targeting small and little market companies, providing more specialized services and yet it increasingly sounds like you’re finding opportunities with the Fortune 100 where you might get in with one segment but have an opportunity to go more broadly within these organizations. Help us understand the process of why you’re winning this business and how you see that opportunity evolving?

Shirley Singleton

Okay, very astute question. The EPM offerings are really driving us into those brand name customers. We have a very large Oracle EPM practice. Its arguable number one in planning and budgeting in the North American footprint. We’ve opened up a U.K. office and we’ve mentioned that in the past and that was upon the recommendation or urgent request from Oracle itself, saying, hey there’s a dearth of resources and presence in the U.K.

That we put two our best people on the ground over there, that’s how we ended up getting Old Mutual in South Africa through our London piece. So we have an excellent, excellent brand in the Oracle EPM space and that’s really word of mouth and customer references are strong. That the big guys are talking to the others. They’re saying who do you hire if you want Oracle EPM high peering services and the name comes back as (inaudible).

And conversely our SAP, EPM offerings are flirting with some big names as we speak. It’s a little tougher because we don’t have the math that we have in the Oracle practice but our intent is to build that up right alongside the Oracle practice. EPM doesn’t seem to be wilting on the vine. It seems to be accelerating. As it relates to the other strategy, the Fullscope acquisition which gave us Microsoft AX, that really plays nicely to upper middle market and that’s that replacement cycle that we’ve talked about from manufacturing companies.

They seem to be heading towards that replacement cycle but on top of that it works very well in the hub and spoke model with Fortune 100’s where they might have a large portfolio of different companies and their going to a divestive one and as they spin that company off it needs to have some internal financials systems and process and they may not want to spend Oracle and SAP type dollars on an ERP system for the spoke. I mean for the – yes, for the spoke.

So Microsoft AX is playing that upper middle market space and we also see synergies occurring between the AX piece and the potential layer of EMP on to that upper middle market as well because after the put in the financial systems now they’re going to want planning, budgeting and consolidation roll up of financials.

To the extent that …

Arnold Ursaner – CJS Securities

Successful?

Shirley Singleton

… that help?

Arnold Ursaner – CJS Securities

That’d be very helpful. To the extent you’re successful in this, does this create more recurring revenue for you in your opinion and more of a competitive advantage versus some of your competition that doesn’t have some of these capabilities.

Shirley Singleton

Actually, yes, I think it does because what’s happening is – let’s just focus in on EPM with planning and budgeting and consolidation. As all these big companies that were winning are buying other companies or selling other pieces, it means that they’re core planning and budgeting modules and the way they’re approaching tracking that type of financials that’s got to change.

So whenever you see a big acquisition or divestiture on one of our accounts its potential reoccurring revenue for us to go back in and help them rethink up on how they need to do planning and budgeting.

Arnold Ursaner – CJS Securities

I have a question for you, Tim; it’s a financial one too. You’re know your incremental margins of this quarter, you’ve got 50% or so incremental operating profit margins which really goes for the broader issue of you know cooperate overhead as a percent of the company, things like that.

As you look forward for the balance of the year do you see that level of incremental margin being sustainable or could it even expand?

Timothy Oaks

I think the easy answer is, Arnie, the SG&A has structured that what we have is leveraged from a growth point of view. So as we can continue to grow in scale we should achieve economy of scale and be able to better leverage that SG&A percentage.

Arnold Ursaner – CJS Securities

And I’ll jump back in queue, thanks a lot.

Shirley Singleton

Okay, thank you.

Operator

Thank you, our next question comes from George Mellas of MKH Management, your line is open.

George Mellas – MKH Management

Hi, guys, how are you?

Shirley Singleton

Hey, George, how’s it going?

Timothy Oaks

Hey, George.

George Mellas – MKH Management

Very well, thanks. Hi, guys, how are you? A few quick questions. The June quarter is usually your strongest quarter for software sales I think as it coincides with Microsoft's year-end. Do you expect sort of a similar -- something similar this quarter?

Timothy Oaks

Yes, George, good question. Yes, I mean Q2 is typically the strongest quarter from a software product and maintenance revenue perspectives as you said it coincides with Microsoft’s year-end. We just finished convergence but again at the same time while history dictates that’s the case we are certainly still subject to, A, customers demand for the software, our ability to close what deals we have in the pipeline which is why we always say it’s subject to volatility but …

Shirley Singleton

We have a good pipeline though, George.

George Mellas – MKH Management

Okay, great, and then on the CRM side, have you closed any deals at this point yet or are they still in the pipeline and in this sort of nascent new practice that you have?

Shirley Singleton

Oh, we more than closed deals. We’ve actually completed installation of the CRM software for one customer, it would be LoJack. We’ve completed that system. They love it. We’re working on a biotech right now. We’re in the final testing stages and the customer for what I hear is very happy.

And we just closed a CRM deal this week which I’ll be talking about at our next earnings call but it’s a CRM piece and it’s for a well named company that everyone will be very happy to hear. So we’re getting traction and we’re delivering so it’s more than just starting to sell.

George Mellas – MKH Management

Okay, great. And is it leveraging the channel or is it sort of -- is there an element of cross-selling or is it really just leveraging the Fullscope channel?

Shirley Singleton

Really, really good questions, very astute actually, we’re – these sales are coming from the advisory services. We’re selling to sea level and people that have some problems in their business in terms of customer outlook and relationships and influence on their customer base. We’re just now firing up some sales within the classic channel, the Fullscope channel, if you will.

We’re going to add some BDMs in there. Some business development people to sell it down the channels. So our intent is two prong. Go straight down the channel for CRM and then straight up and gain customers through advisory services.

George Mellas – MKH Management

Okay, can you tell us -- can you remind me a little bit about your advisory services, how big that is and --?

Shirley Singleton

Well, advisory services is comprised of two pieces. It’s got the tech unit which is you know the customer development, the business analysis, the design, the technical road maps, the CRM development team and it also has the former NDS group that I mentioned earlier, George, that does this process. Does business strategy, how else would you describe them Dave?

David Clancey

It’s advisory services, they are comprised of the index group, they also include our infrastructure people and what they’re doing is they’re consulting on how to manage the technological base whether it be hardware, software, et cetera. They help people and businesses make decisions to whether they should try and consolidate on one ERP system or one set of software or they should go with multiples, they update, et cetera. So that’s pretty much what they’re doing.

George Mellas – MKH Management

Okay, very good, and then I have just one final question. Dave, you talked a little bit about the advantages that you guys may have having completed that module, sort of pharma-chemical module for Microsoft. Can you talk a little bit more about that because I didn't quite understand how you guys would leverage that?

David Clancey

All right, what happens when you are selling ERP systems and AX in particular is you have your basic manufacturing system? You have a layer process on top of that so you’re now doing process manufacturing and then when you present to a customer they usually make their decision on who to buy from based on the added intellectual property which would apprise very special purposes modules like one of their modules we’re talking about in the chemical side is potency.

You know what is the potency of the chemical product being produced? You can see how that would work both in terms of paint or pharmaceuticals.

Shirley Singleton

Or cost of ingredients, yes.

David Clancey

So it’s your cost of ingredients, its’ all these very specialty modules and your specialty modules in the end is how they make the decision and allows you to sort of lock down the channel a little bit. Does that help?

George Mellas – MKH Management

Right, but that module will be available to all AX partners?

David Clancey

That module will be available to all AX partners but what typically happens is if you’re a buyer, nine times out of ten you’re going to tend to favor the guy that wrote it over someone who’s just logging it.

George Mellas – MKH Management

Yes.

Timothy Oaks

Plus, it’s the advance knowledge of how 2012 will be wired.

David Clancey

Yes, right.

George Mellas – MKH Management

But you feel like …

Shirley Singleton

(Inaudible) in the new release.

David Clancey

Right, there’s a certain sales aura associated with Fullscope having been the folks who built the process side.

George Mellas – MKH Management

Yes.

David Clancey

And that aura extends to any IP that we build to hopefully get a sense of more advanced pieces of manufacturing.

George Mellas – MKH Management

Right, so are you expect Microsoft to refer people to you partly on that basis?

David Clancey

You bet.

Shirley Singleton

Yes.

George Mellas – MKH Management

Great. Thank you very much.

Shirley Singleton

Thanks, George.

Operator

Thank you, I’m showing no further questions in the queue, I’ll hand the call back to Tim.

Shirley Singleton

Okay, so it’s actually going back to me, Shirley, we’re going to have our annual meeting of stockholders that’s coming up on June 8th. This year’s meeting will be in the Sheridan Colonial Boston North Hotel Conference Center in Wakefield. It’s just about a mile and a half from our office and our Q2 earnings call will be on August 3rd.

With that Tim and I and the team will be here all afternoon, if anyone wants to call in and chat and go down to any level of detail, we’re here. I think that’s it.

Operator

Thank you, ladies and gentlemen this concludes the conference for today. You may all disconnect and have a wonderful day.

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