14th Annual Needham Growth Conference Call
January 12, 2012 01:30 pm ET
Kyle Huebner - CFO
Good afternoon and welcome back and we will get the afternoon session started with Kyle Huebner, CFO of Stamps.com.
Thank you, good afternoon. Welcome to the Stamps.com company presentation. A copy of the presentation is available on our IR website and there are copies for the presentation in the back of the room as well.
So first, the Safe Harbor. This presentation may contain forward-looking statements that involve risks and uncertainties. We will refer you to our filings with the SEC for a further review of these risks. So today I am going to talk about the PC Postage business which is our core business. I will talk about the service overview, the marketing, market opportunity, talk a little bit about photo stamps and then talk about the metrics and financial trends and the business model.
So our PC Postage business which we call our core business, software-based internet service that lets customers find, print their own USPS approved postage, requires only a PC and a printer. There's no specialty hardware that would be required as you have with a more traditional meter system. Its structure is a monthly subscription service fee, plus the cost of postage that the customer would buy. Easy to get started becoming a customer, you come to our website, you register for an account, you download the software, you buy postage and a prepaid model and then print it out as you need to for your mailing and shipping.
The postage that customers buy is a passthrough to the USPS so that's not included in our revenue or financial statements. So the core functionality allows customers to buy and print their own postage, there's three ways that they can print postage, through printing their own stamps, we call net stamps, printing out envelopes or printing on shipping labels designed for packages.
So I will just touch on each of those in a little more detail. Again this is how it works for the customer. The first way to print postage is printing that stamps here, a customer buys a sheet of blank label stock from us and then they use the software to print out the postage as they need it. There is no address associated, no date associated with it as other metering solutions have. So that’s really the most flexible kind of postage a customer can use. They can buy standard labels, theme labels or they can actually upload their business image and we will print out customized label for them to use.
Secondly as a customer can print on an envelope, directly on an envelope around labels that go in on an envelope, typically a customer will print, use this way to print postage if they are already planning on printing the destination address and return address. So we consolidated a two-step process into a one-step process where they print out the postage and the address. We integrate with all the address mailing software, contact management databases. So you don’t have to maintain two different address books. And one of the benefits of this is that we will validate the destination address against the USPS database to ensure that it’s a valid, accurate deliverable address.
So customers can save money by avoiding printing postage on mail pieces that we get returned as undeliverable. The third way to print postage is, it’s a shipping label designed specifically for use with packages, customers can print it on a piece of printer paper and tape it to the package or they can print it on adhesive labels, it supports all the USPS package classes, Priority, Express, Media Mail, Parcel Post.
Another discount, a big benefit for our customer is that they can get discounted rates on Priority and Express over the rates at the retail post office and so those discounts range from about 2% to 21% discounts, even higher if you meet certain volume requirements, you can get 30% discount rates. You get discounts on package, tracking and confirmation services. And then as an electronic solution, our solution makes it easier for customers to manage their package and shipping. We can automatically send emails to customers that can automatically return an email when it’s scanned and delivered. Customers have more ability, visibility in the process. We can hide the postage values which is a popular feature with e-commerce merchants.
So that’s how our customers can print postage using our software application. In addition we have integrations, where customers use the front end integration to print postage. Couple of our key ones, ones with Microsoft on the small business side. So, we are integrated with Office. Customers can, a lot of small businesses typically print the address on the envelope using Word. So we integrate with Word and they can pull on the postage from their Stamps account and print out the postage and the address all within one step from the Word application. This is in the envelopes and labels feature as well as the Mail Merge feature which is also popular with small businesses.
On the shipping side where we are targeting shipping customers, we have an integration with Amazon into their merchant market place. So any Amazon merchant selling on Amazon’s merchant market place where they are filling the goods, when they got to process the transaction, they have an option to print out a shipping label for their package and that’s a exclusive partnership arrangement we have with Amazon to integrate and provide them the postage on the backend.
In terms of customer benefits and value proposition, for the small business side, the value proposition really depends a lot on what your previous solution was before we switched over to us. So about 80% of our customers in the small business were using retail post office before 20% were using a meter. For the guys who are doing the retail post office, it’s more about you know, a more convenient cost-effective solution that allows them to focus on growing their business and reduced amount of time they have to spend on their mailing and shipping and going into the post office several times a week.
For the traditional meter side, the value proposition is more about getting you know sometimes significant cost savings over the cost of a meter and in addition getting incremental features such as the address validation that you don’t get with a traditional meter. Either way, no matter which way you were using before, customers can save money on their overall postage spend with our solution. So we touched on some of these discounted rates on Priority and Express, discounted package tracking, we offer a package insurance through a third-party partner at rates that are cheaper than the USPS’s rate. They can avoid the cost or return mail by verifying the addresses and they can avoid wasted postage, we calculate the exact amount you need, then you can print out that exact amount and we can also give you opportunities to save [Technical Difficulty] spending on a cheaper package class that would get there in a relatively similar timeframe.
Other benefits include reporting, it is an electronic solution, we have very robust reporting compared to the post office or the traditional meter, a lot of customers that sign, can sign reference codes. We do all the reporting by reference codes, spend et cetera and it enhances their productivity and image and it serves to streamline and optimize their shipping operations, some of the features I touched on before, the ability to process large batches of shipments at a single time, integrate with their customer databases, hide the postage, give the customer notifications are all things that streamline and improve the shipping operation.
So that’s how this service works quickly from the customer perspective. Looking at the industry and the marketing side and in terms of the market opportunity, we’re regulated by the US Postal Service and so we are domestic market and we’re focusing on the domestic postage market. There is about $50 billion of US postage that's addressable through our mail classes.
And from a customer segment perspective, historically our focus has been more on the small business customer. Over the last several years, we've expanded that focus to target corporate enterprises and high volume shippers, which I’ll talk more about. In terms of the small business market there is about 8 million small businesses, 14 million home-based part businesses that we target.
One of the unique features of our story is that we, as a regulated entity of the USPS they have a significant approval process that a new vendor would have to go through and then be subject to ongoing regulatory requirements. So it in effect forms a regulatory barrier-to-entry that makes it you know hard for people or very difficult process for a new vendor to go through.
The last approved PC Postage vendor was in the year 2000, so for over 10 years now it has worked very effectively as a regulatory barrier entry. In addition there is you know a lot as three approved vendors; everybody has a lot of patents; we have a very strong patent portfolio, 120 patents issued. So a new entrant in the market would have to address that as well.
In terms of the actual competitive dynamics there are two other approved PC postage vendors; Pitney Bowes is one. They focus on the traditional metering space. They also have a PC Postage solution. And the other is Endicia.com which is a division of Newell Rubbermaid.
So in terms of the actual market dynamics, we estimate that we have about 80% of the subscription PC Postage customers in the marketplace and that Endicia.com has the majority of the rest and Pitney has a relatively small proportion.
Looking at our actual offerings, we map our offerings to the customer segments and so as I mentioned, small business has been kind of our historical target. We have the Pro version targeted at single-location small business, typically at $15.99 price point. From there a small business can upgrade to the Premier version, where one of the main differentiator is a multi-user, multi-department functionality; so as the small business gets bigger, they may have the need for multiple users and departments and so the upgraded version allows them to track all their expenditures at that level.
Then the two new segments that I mentioned are the high volume or Professional Shipper and Enterprise. The Professional Shipper or high volume shippers, we’re targeting small-to-medium e-commerce merchant and fulfillment houses that are doing higher volumes of shipping. And so we have a Professional Shipper version which has some features that are very specific to shipping customers directly integrates into their order databases, faster label printing speeds, integration with a lot of shipping management applications and systems. The Professional Shipper version is typically at $34.99 base point.
The Enterprise segment, what we’re targeting here is a large customer with a large number of small or distributed offices. So it might be a Fortune 1000 company that has 50 to 100 branch offices throughout the U.S. We have a solution designed for them like corporate headquarters can link all the locations together that will use our Stamps.com software equipment, corporate headquarters can link them all together and get visibility into all the expense that’s going through and the postage across their distributed network, which is something they generally don’t have visibility into today.
We can also save them money over a traditional meter, you know, which you get a multiplier in fact with a number of location. So the Enterprise has been a beneficiary of the down economy as finance departments look for ways to cut costs.
I mentioned the Postage Meter just to kind of we are significantly cheaper than a postage meter as hardware versus a software comparison. When you add in the monthly fee and the cost to buy postage, taxes, insurance, we find that a typical low entry postage meter is about $50 to $90 a month versus $15.99 for our small business solution.
Looking at the marketing in terms of how we acquire customers, and in our core business, which covers small business, shipping and enterprise, we use a broad-based array of programs and we affiliate program and we do a lot of direct mail where we’re actually using our own postage in getting out the direct mail pieces. We have direct sales which are focused more on the enterprise and the high volume shipping where it’s more of a direct sale oriented model. We do a lot of online media search engine, marketing, optimization.
We have shipping integrations. So one of the primary ways we acquire e-commerce customers is through integrations with partners that include Amazon I mentioned and there is a wide variety of other shipping and order management applications. We have our own website referral program. We have strategic partners on the small business side and they include Avery, Microsoft, HP and the USPS. We do telemarketing on a more limited basis. And we do traditional media such as endorsement radio or TV.
One thing to note is we do have a kind of a legacy part of the PC Postage business; we’ve called the enhanced promotion channel or you can think about it as a more consumer oriented PC Postage. We de-emphasized that part of the business in 2007 so it’s sort of a small legacy part of the business, but it did decline from ‘07 to ’11. So lot of the metrics we talk about our core business metrics not included in the consumer business which is at this point relatively small.
If you look at our PC Postage plan, on the small business side, our primary focus was on increasing the customer acquisition spend in the core PC Postage marketing and in acquiring small businesses that the target is up 15% to 20%. We started the year at with kind of 5% to 10% target and as we’ve gone through the year the metrics have improved and so we’ve increased our investment in business. We are doing a lot of things around the product in the business model just to optimize and improve the customer experience.
And then really a lot of the focus for really the last two or three years has been on investing in this corporate enterprise and high volume shipping segments and that’s really been the focus and I think when you see the metrics, a lot of the trends we have seen you know that indicate some of the benefits we’re seeing now of investing in these spaces. So in the corporate enterprise space, the products largely build out, the focus is really on building the sales pipeline, getting the new customers in, getting them through sales cycle, getting full deployment in all their locations.
And on the high volume shipping side, we are still investing heavily in the product and technology platform and that’s been the big focus as well as the focus on the marketing side; it’s getting new integrations and an increase in the penetration of the e-commerce customers. I will talk for a second about PhotoStamps. PhotoStamps is a separate business from the core PC Postage, it really, if you go to photostamps.com you can upload a picture, customize it, you place the order with us.
We print it out and ship it back to you, so it’s a more consumer-oriented offering, you know kids, pets, weddings, birth announcements, holiday cards. You know a very cool concept, it’s just the economics were not compelling compared to the core PC Postage business. So PhotoStamps is regulated by the USPS as well. You need to be an approved PC Postage vendor to offer PhotoStamps postage. We market it to consumers and businesses, it’s consumer heavy, but some businesses will place high volume orders for corporate branding, corporate marketing purposes.
And so as I mentioned and we launched PhotoStamps in about 2005, by 2007 we had gotten an update to really see the expected returns on this business were not what we thought they were going to be and that the core business was a lot more attractive. So we made a strategic shift consistent with moving away from the consumer businesses to reduce marketing spend and redirect it to the core PC Postage business.
So at this point PhotoStamps is kind of status quo. It was more affected negatively by the economic downturn. It is modestly profitable and so we continue to run it but most of the corporate focus. It’s really on the core business, PC Postage business.
So looking at the metrics and financial trends. First, just talk about the overall financial business model. The PC Postage business, the first thing is it’s primarily a recurring revenue based model. So in terms of the service fees that we earn on the revenue, it’s a recurring subscription fee that we charge on a monthly basis. The other two revenue streams we have are store supplies and package insurance. So in the store, we have an online store where customers can buy consumables, peripherals related to the mailing and shipping business and things like our NetStamps labels, scales and then we sell package insurance through a third-party partnership where customers can insure the packages that they are sending.
And so the package insurance and the supply-store revenue is recurring to the extent that customers are using the service and they are depleting these and they buy it more. So it’s really recurring net revenue in nature as long as they are using the service. From a financial model perspective, the PC Postage margin is very high gross margin, 78% gross margin we have leveraged in the fixed cost. The business has very low working capital and capital expenditure requirements and what this does is, it results in a very strong free cash flow generating model and so [last] if you take this year and you annualize our first three quarters, it’s about $18 million of free cash flow.
We have generated over a $100 million of free cash flow since we turned cash flow positive and profitable. And so what this does, we generate a lot of excess cash. One of our focus is on returning that excess cash to shareholders, so since 2002 we have returned over $258 million of excess cash to shareholders, $107 million via special dividends, $151 million via share repurchases that have reduced the shares outstanding by about 45%. So that’s a very big focus of the company in terms of cash use.
And then looking at the PC Postage business, the way we measure that business is looking at the lifetime values relative to the CPAs and so we are generating very attractive expected returns with lifetime values and the kind of two to three times the CPA range, the cost to acquire the customer that you earn over the customer life.
Looking at our financial results, you know, we’ve really over the last five quarters, you will see, when we get to the metrics have demonstrated an improving and accelerating trend in a lot of the core areas, core PC Postage revenues accelerated from 10% in 2010 to 25% growth in Q3. Total revenue has gone from 4% growth in 2010 to 20% last quarter. Pro forma EPS is at 51% year-over-year growth in 2010 and 52% in Q3. Our metrics have improved.
Again I will go through these financial metrics. Our pro forma operating margin has gone from 16% at the beginning of 2010 to 22% in Q3. Our pro forma return on equity has improved from 16% to 39%. That was helped by a special dividend we did that helped to line the capital structure. Q3, we had record metrics and in areas like number of paying customers, ARPU and customer acquisition levels. And then lastly on the financial model, we have a very strong balance sheet, $51 million in cash and investments. No debt. We also have about a $90 million deferred tax asset primarily related to very large NOL position, a $250 million federal NOLs. Of that, $8 million is on the balance sheet and the rest has a valuation allowance against it.
So turning to some of the trends, if you look at the first chart is really the revenue, the graph on the left is the core business revenue, it’s a small business, shipping and enterprise. The graph on the right is the consumer-oriented businesses, PhotoStamps and the consumer PC Postage business. So if you go back to 2006, the revenue was $29 million compared to $53 million, so you know around 40% of the revenue is in these consumer businesses, that is the point at which we made the strategic shift to refocus on the core business and so what you see is our core business has been growing throughout the entire economic downturn. In the worst of the economic downturn, the business was still growing at 5% to 10% rates on the core PC Postage.
The consumer businesses were expected to decline with the reduced marketing spend, in the economic downturn here you saw a more accelerated decline as those businesses got hit harder. The good news here is that these consumer businesses are smaller, but in the case of PhotoStamps more profitable. You know at $20 million in revenue, we were losing money at $7 million, we actually make some money on PhotoStamps. So what happened in 2010, we kind of hit a critical inflection point.
The consumer businesses, the decline in the consumer businesses were starting to moderate, the consumer businesses were a much smaller percentage of the overall business and the core business growth started to accelerate and so total revenue, when you add these two charts together was flat for 2007 through 2009, while we went through this transition. In 2010 total revenue started to grow again. So on top of that strategic transition, the other factor is that within the core business, the expansion into the enterprise and shipping started to drive very strong growth within the core PC Postage business.
So if you look at the chart on the right, this is the core PC Postage revenue which is again small business enterprise shipping, you can see over the last five quarters the growth rate has accelerated from 8% to 11% to 14% to 23% to 25%. And what that’s done is drive growth and the total revenue again. So we went from 2% to 5% to 9% to 15% as kind of the normalized growth rate excluding some one-time revenue in PhotoStamps and 20%. So we've seen the accelerating trend in the core business driving the accelerating trend in the total revenue growth.
So if you look at the core business revenue drilled down another level and look at paid customers versus ARPU, what you see is that the growth is coming equally between paid customers, was up 12% in Q3, ARPU is up 12% and you've seen a similar trend, 6%, 7%, 9%, 12%, 4%, 16%, 13%, 12%. So you've seen acceleration on both the paid customers and the monthly ARPU.
In terms of the small business, so what I would say characterizes that the growth in the paid customers is a lot of that’s coming from the small business segment and then the growth in the ARPU is really coming from the enterprise and shipping segments, so again getting balanced growth across all three segments.
If you look at the customer acquisition and SOHO; the key thing here is that from a seasonal perspective Q4 and Q1 are seasonally stronger quarters; Q2 and Q3 are seasonally slower quarters. Historically, we pulled back on marketing in those quarters, in those slower quarters. This year, we maintained a consistent level of marketing spend and so we were able to achieve and instead of seeing a big drop-off in acquisition, we were able to see you know levels of acquisition relatively consistent with the stronger seasonal quarters and we were able to do that at level, CPA levels that are consistent with historical average.
And so what that did is on the paid customers last year, historically when we pulled back on the marketing, our paid customers would be flat to down in Q2 and Q3 so we had to get all our growth in Q4 and Q1. This year by maintaining the marketing spend, we are able to grow the paid customers in all quarters throughout the year. So that was one of the things that was different in 2011 as well our approach to our customer acquisition spend.
Looking at other key metrics, the churn rate is, last quarter was about 3.3% that’s per month. We have seen a nice downward trend in the churn rates since they kind of peaked around the worst of the recession. Right now, our churn rates are in about 3% or 3.5% range. That’s what it was at during the last pre-recessionary period. So we have been able to get churn rate down in a sluggish economic environment relative to where they were in the pre-recession period.
The other key metric is total postage printed. This is postage again printed by our customers since the USPS revenue doesn’t flow through our financials, but it’s a key indicator of the use of the service, the more people use that the less likely they are to churn. The more consumables they’ll buy the more insurance they’ll purchase etcetera. And so we’ve been and that growth in the postage printed has been accelerating as well and we hit 52%. The high volume postage printed by our high volume customers has been growing at over a 100% the last two quarters.
Just key, quick on the monthly, our NFIB; that’s a monthly small business optimism index; what you see is you know and the big picture going back several years, the last three years we’ve been operating in kind of solidly in recessionary territory compared to kind of the pre-recession.
And so we’ve been able to deliver these results with against the backdrop of the tough environment to the extent that the economic environment improves; that’s upside potential for us. On a monthly basis, kind of the index has been up and down, last Q4 and Q1 it went up. Then it came down. Now we’re seeing kind of an up level. Most recent number was 93 and so, it’s improved since the summer, but still in recessionary territory.
Pro-forma operating income, EPS has improved as well. We’ve been able to translate the revenue growth into increased growth on the bottom-line. So you know, we can see coming out of 2010, or out of 2009, which was kind of the tough environment as the metrics and revenue picked up we’ve been able to grow that and this is, the green is just some one-time PhotoStamps revenue and income that we had; so EPS as well demonstrating an upward and accelerating trend.
So, just to summarize; large and key takeaways, large market opportunity, both from a postage and a SOHO perspective, significant barriers-to-entry exist in the form of the USPS approval process or intellectual property. Our solutions offer superior customer benefits at prices up to 80% less than traditional meters; we’re the category leader in PC Postage and customized postage. We are very – attractive expected returns on our PC Postage marketing spend, looking at the lifetime value relative to CPAs; PC Postage revenue is growing; its recurring; its growing; its the very high margin part of the business. We have the attractive strategic opportunities with enterprise and shipping; strong cash flows, strong balance sheet and a demonstrated history of returning excess cash to the shareholders.
So with that, I will open up for questions.
So we estimate that for paying subscription customers on PC Postage, we have about 80% of the paying customers. The balance we estimate that Endicia has the primary number of customers and that Pitney at this point is a very relatively low kind of low single digits percent of the PC Postage market.
So our total postage, if you annualize were at about $650 million of postage, so you know the postage penetration of us in kind of low single digit, so we see a lot of the opportunity as converting customers who are using the retail post office and the meter and the small business world to the electronic solution. What I would say, in terms of a small business, once they convert to us, we generally get all their volume, you know unless they are some really huge direct mail campaign that they outsource to a mail house. We generally, once we get the customer we’re getting that volume that’s going through the USPS.
In the shipping world, our goal is really to take share from UPS and FedEx and covert it to USPS postage volume and we can do that with an existing customer, an e-commerce merchant lets say can ship multicarrier to optimize the cost for the package. So we don’t need to necessarily steal the customer from UPS; we just need to capture the part of their volume or their realized cost savings by going USPS. So in the shipping world, we’re not getting necessarily all of their volume, in some cases we do, but not always; but we still see the market opportunity as really capturing part of the volume from UPS and FedEx and converting it to USPS.
So what exactly happened in the fourth quarter of 2010 (inaudible) and began to expense more, we continued spending on marketing in the second and third quarter, that helped and it is more than that I mean the revenues first off (inaudible) you added more customers and then the postage were using more, so were there dealings around that specific area for the new marketing channel.
There were some, I mean I would say it had bigger contacts, you know if you take something like shipping, we've been investing heavily in the product and the technology in 2009 and 2010. In the second half of 2010 was where we started to translate that into some of the integration wins, getting new customers. Amazon, the integration I mentioned launched in Q3 of 2010, so that was a positive contributing factor from that point going forward. We were in the position to on the shipping side to really add more integration partners and really focus our marketing spends, sales efforts on increasing the e-commerce penetration.
The product side was key, again there's a lot of features backed processing. These integrations, printing speeds, where you know in 2009 we had a lot of work to do and so by the end of 2010 we had gotten the product at a point where we were able to start penetrating, the market win, win customer wins, win integration wins, et cetera. The small business I think it’s what we talked about and we saw the economic environment improving, we ramped our spend. We also added some additional channels. We ramped up some of our traditional media channels and what we found is that as we ramp those up, we saw benefits in our existing channels. So by utilizing TV and radio, then somebody gets a direct mail CD they've already seen us and other venues, they are more likely to convert then if we hadn't spent the money in those other areas.
Well, I mean in the shipping space, the USPS is our key partner and what they have done is they have done certain things that have created incentives for the PC Postage program that focus on shipping. So I mentioned they give customers discount, high volume shippers get discounted rates versus the retail postal rates. So in this area they have done lots of programs, if customers meet certain volume thresholds, we can give them the service for free et cetera. So the USPS in the shipping world is looking to us to help develop the technology and the integrations in the marketing to help them steal that share from UPS and FedEx.
So at this time they are a solid partner of ours. In the small business side, it’s really, we are competing with the post office and the traditional meters. There is a lot of talk about the USPS and how did they cut cost. One of the things they want to do is shut 4000 post offices or 10% of post offices. That would actually benefit us. We are more a convenient alternative access point for those customers and so if their local post office goes away, that may create more incentive for them to sign up for our service.
I meant that if they were to more to actively promote the fact that stamps are available from the USPS live on the internet, wouldn’t that have some negative impact on your business if they don’t charge a monthly rate?
Well, no I mean, really what we are selling is a comprehensive solution where you can do any type of postage, shipping, packages, flats all that. What they offer on their website in the mailing world is limited to a $0.44 stamp that you got to buy and then wait for it to show up in the mail. It doesn’t integrate with any of your address book. I would categorize their stamps on the internet is more of a consumer offering, you know, volume offerings. So you know, I mean, our hope would be that the opposite way you said, they get out and they market PC Postage because it’s a lower cost distribution channel forum. But that’s you know, obviously with their financial troubles there, you know, their marketing spend has been constrained.
No. They want to do that. They are getting a lot of pushback from Congress and labor unions. So what they recently agreed to do is do a six-month moratorium on closing post offices where they will do a more comprehensive analysis of the situation. It’s something that would be a benefit for us, but it’s politically very difficult to shut post offices. So you know, I think we are taking a wait and see. It’s a benefit if it happens, but you know, they’ve been trying to close post offices for years and you know Congress has generally stopped them from doing that.
It was; it is somewhere in the spring like May timeframe. They announce it right around the holidays.
This just clarify this is Amazon’s merchant marketplace. This is not Amazon sending their own shipment. So when you go on Amazon, if it’s not sold by Amazon and sold by one of their merchants, if they are fulfilling, they have the now an integrated option to print off a USPS shipping label and if they chose to do that, then it’s us providing the shipping label on the backend.
No, returns is generally a different product; I mean Amazon returns if they have a special return product to USPS that’s where you are only getting charged that the customer actually deposits in the mail stream. But they can, I mean it’s up to the merchant at that point.
Yeah, we don’t have that data, that level of visibility into the data; you know what I would say is at a broader level Amazon is one mechanism to reach e-commerce customers, but a lot of e-commerce customers ship on Amazon, on eBay on their own website, on Yahoo!, on Etsy and so we have a whole separate you know lot of our other integrations, and direct customer integrations are really targeted on getting these higher volume guys where Amazon might be just one channel. In other cases we have been, where they are using just Amazon marketplace we get it to the direct integration.
All right, thank you very much.