MSC.Software Corp. Q1 2008 Earnings Call Transcript

May.27.08 | About: MSC Software (MSCS)

MSC.Software Corp. (MSCS) Q1 2008 Earnings Call May 7, 2008 4:30 PM ET

Executives

Joanne Keates - VP of IR

Bill Weyand - CEO and Chairman

Sam Auriemma - CFO

Analysts

Barbara Coffey - Kaufman Brothers

Woo Jin Ho - Merrill Lynch

Michael Coady - B Riley

Mark Schappel - Benchmark

Operator

Good afternoon. My name is Teresa, and I will be your conference operator today. At this time, I would like to welcome everyone to the MSC.Software’s Q1 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I would now like to turn the call over to Ms. Keates, Vice President of IR at MSC.

Joanne Keates

Thank you for joining us this afternoon to discuss MSC's first quarter financial results. On the call today from MSC, we have Bill Weyand, our CEO and Chairman, Sam Auriemma, our CFO, and John Mongelluzzo, Executive VP, Legal Affairs. The slides for this conference call are available for download from our website at MSCSoftware.com/IR.

Before we begin, let me make our Safe Harbor statement. This presentation contains forward-looking statements that involve uncertainties. All forward-looking statements included in this webcast and conference call are based on information available to us at this time.

These statements involve uncertainties which may cause our actual results to differ materially from those implied by the forward-looking statements.

Important factors that may cause actual results to differ from expectations are discussed in risk factors in our quarterly 10-Qs and our 2007 Form 10-K filed with the SEC. We undertake no obligation to revise or update publicly any forward-looking statement for any reason or at any time.

At this point, I would like to turn the call over to Bill Weyand. Please go ahead, Bill.

Bill Weyand

Thank you, Joanne, and good afternoon. Welcome to MSC's Q1 conference call. Our first quarter total revenue grew at 6% at $61.2 million. This was led by a 20% growth in Europe, maintenance grew at 15% to $33 million, maintenance and services revenue grew in all geographies worldwide as well as having a favorable currency impact. Enterprise simulation represented $6.1 million or 28% of total software revenue in Q1.

We are beginning to see our customers not only support our product strategy and evolution but also beginning to upgrade from pilots and proof of concepts to Enterprise Simulation Solutions. Worldwide the announcement of Audi is a significant indication as to the progress we're making in this area. Deferred revenue was up $13.8 million or 17% to $94.4 million. Cash and investments were up $13 million or 10% to $48.1 million. Net cash generated in the quarter totaled $16 million.

This quarter we are launching R3 of all of our enterprise solutions and this is a significant milestone for us. We now are in a position with R3 releases scheduled that it should help drive SimEnterprise and SimManagers, as well as MD Solutions from proof of concepts pilots and early adopters to a more significant upgrade cycle. The release of these versions are very feature-rich and very robust.

And if you're a user of Nastran, Patran or Adams as an example, which is our traditional proprietary engineering tools and want to upgrade to MD Nastran, Patran or Adams as an example, you have to be able to do the old job and the new solution, therefore the robustness of the functionality is clearly there today. We also believe that the customer wins in the quarter demonstrate progress from again our initial pilot projects to the beginning of global deployments.

Breaking down revenue by geography, EMEA, Europe continues to lead our picture with 39% followed by Asia-Pacific at 31 and Americas at 30. Major wins in the quarter, which we'll spend some time talking about, are five including Audi.

First, I want to spend a few minutes on is Duracell, which is a division of Proctor & Gamble, obviously a manufacturer of consumer and industrial batteries. What drove this investment was critical engineering and business issues to increase product innovation and improve margins, do more virtual simulation early in design and development process and automate simulation and test methods.

They invested in SimManager and SimXpert to help drive that value. The second is VW and VW was upgrading from Nastran to MD Nastran, as well as implementing SimManager throughout their operations. Hyundai was also an upgrade from Nastran to MD Nastran and can see a trend here in terms of not only automotive wins but automotive wins in a difficult market because they drive significant value within their corporations and accelerate product innovation.

In the aerospace industry, United Launch invested heavily in MasterKey for Nastran, Adams and Patran. This is a joint operation owned by Lockheed and Boeing and obviously, United Launch does what it does, it launches satellites. The most significant milestone in our evolution to enterprise was the announcement, which we also put out this evening, from Audi and Audi is our largest deployment in the world of SimManager, and I'll quote Dr. Holzner in several of these slides and he states, I quote, we have adopted MSC.Software SimEnterprise solutions including SimManager because the competitive advantage of simulation process management is clear.

As you look at their corporation, Audi has globally deployed SimManager, not only through their corporation but the supply chain. It drives a significant competitive advantage and has a significant ROI. Again, quoting Dr. Holzner from the press release, with SimManager, we manage and automate our simulation processes and methods, allowing us to integrate functional performance information earlier in the design process. The results show that we have increased the throughput of simulations by 35% with the same number of people, therefore significant ROI.

Let's spend a few minutes on our product portfolio because this has been a journey for MSC and in some ways a source of a little confusion for some of our investors. We've created an integrated enterprise solution based upon an open architecture and this open architecture provides definitely expanded functionality. If you look at the bottom of this chart, we list our seven individual solvers, again still in their traditional sense proprietary architecture. If you look from there to the product portfolio, it is all open and integrated. So you can take MD Solutions and integrate our individual solvers or for that matter anyone else's, and then you can build upon that architecture and integrate the SimDesigner, SimManager and SimXpert.

What's driving our customers to move in this direction, and what was part of our original strategy and vision and it's now becoming important to the marketplace is IT and integration of CAE is becoming more globally focused. By that I mean companies are moving engineering from their headquarters to the supply chain and from their headquarters and engineering departments to more cost effective areas around the world and in order to do that, they need an enterprise architecture that does that and this is where we are. We're [glad] to release 3 and the deployment of that.

In regard to on Q1 transactions, we had about the same number of orders this quarter versus Q1 last year, over 100,000. The average order value does and is continuing to increase, which is good news. A new metric for you is sales force, quarter carrying sales people. We ended Q1 '08 at 181 worldwide. Sam?

Sam Auriemma

Thank you, Bill, and good afternoon to all of you on the first quarter call. Let's talk a little bit about the financial results for the first quarter. As many of you are aware, 2007 was a year of transition for MSC with many opportunities and hurdles. As we continue to work with our customers to offer Enterprise Simulation Solutions in addition to our engineering tools applications, we encountered many transition challenges. We believe the first quarter results reflect another step along the way.

In the first quarter, we saw a strong maintenance growth, stabilized services revenue and enterprise products increasing to 28% of total software revenues. And, we believe these are good indicators that our customers continue to move through the product transition.

Revenue for the first quarter of 2008 was $61.2 million, and that's an increase of 6% when compared to $57.6 million for the first quarter 2007. The increase is favorably impacted by changes in foreign currency of $5.2 million when we compare it to the first quarter of 2007.

Let's talk about the separate components of revenue. Software revenue for the first quarter decreased 4% to $22 million and that's compared to $23 million in the first quarter last year. Enterprise solution product revenue represented 28% of total software revenue in the first quarter and we'll talk more about that on the next slide.

The decline was due to decreased revenues of engineering tools but that was partially offset by an increase in enterprise simulation licenses. Changes in FX favorably impacted software revenue by $2 million. At March 31, 2008, total deferred software revenue stood at $24.8 million and that compared to 26.4 at December 31, 2007.

Enterprise solutions represented 21% of software revenue in the 2007 first quarter. That percentage increased to 28% or approximately $6.1 million in the 2008 first quarter. We have spoken in the past that increasing revenue from these product is a key objective for MSC.

Let's take a look at our maintenance revenue for the three months ended March 31, 2008. Maintenance revenue increased 15% to $33 million and that compares to $28.7 million for the first quarter last year. The increase in maintenance is primarily the result of the timing of renewals, incremental increases in our installed base and continued high renewal rates.

Additionally changes in FX favorably impact maintenance revenue by $2.7 million. At March 31, 2008, deferred maintenance was $68.7 million and that compares to $52.9 million at December 31, 2007.

For the first quarter, services revenue increased 5% to $6.2 million, and is comparable with the prior year. We are pleased that this business is stabilized and we focus our efforts on higher margin services engagements going forward into the past. At March 31, 2008, total deferred service revenue stood at about $1 million and that compares to $1.3 million at December 31, 2007.

So let's take a look at the expense structure. Gross margin for the first quarter increased to approximately 80.3% and that's up compared to 79.8% in the first quarter of last year, and that's due to a slightly favorable product mix. Software gross margin was slightly improved to 89% and that compared to 87% in Q1 of last year.

Maintenance and services margin was comparable at 76% in both quarters. Operating expense, R&D expenses for the first quarter increased to $14.4 million, and that's compared to $13.2 million in the first quarter last year, basically driven by higher employee-related expenses and higher contracted services costs. R&D represented about 23.5% of total revenue and that compares to 22.9 for the prior year. Company continues to invest in enhancing and developing all of its products.

Selling and marking expense for the first quarter were $23.6 million and that compares to $20.2 million for Q1 2007. This increase is primarily the result of higher commissions and incentive compensation costs. Sales and marketing expense represented 38.6% of total revenue versus 35.1 for the comparable period in 2007.

G&A for the first quarter was $15.2 million, and that's a decrease of $3.5 million when compared to $18.7 million for Q1 last year. The decrease in Q1 was driven by lower fees incurred for timing tax projects, reductions in employee benefit costs, lower facilities costs and lower provision for bad debts.

G&A expressed as a percentage of revenue were $24.8 million and 32.4% for the comparable period in 2007. Before we move on from expenses, it's important to note that total operating expense were increased by $2.6 million as a result of FX.

So let's turn to additional items impacting operating income. Our results for the first quarter of '07 and '08 were impacted by restructuring and other charges. We took a restructuring charge in 2008 in the first quarter of $139,000 and that compares to a restructuring charge for the first quarter of 2007 of $7.1 million.

Some metrics, stock based comp for the 2008 first quarter was $2.6 million and that compares to $1.6 million in Q1 last year. Operating loss for the quarter totaled $4.5 million compared to an operating loss in the first quarter of last year of 13.4.

Altogether, the company reported net loss from continuing operations of $2.2 million or $0.05 a share in the first quarter of 2008 versus a loss last year of $6.4 million or $0.15 in the first quarter. Our effective tax rate for the three months ended March 31, '07 and '08 was 49% and 42% respectively.

Some other financial metrics, deferred revenues, overall deferred revenues grew 17% or $13.8 million from year-end to $94.4 million at March 31, '08. Growth in deferred revenue reflects strong business activity we seasonally see in the first quarter.

Net cash provided by operating activities was $16 million in Q1 2008 and that compares to cash used in operations of $7.4 million during Q1 2007. Cash and investments at March 31, '08 stood at $148.1 million and a nice increase from the $135 million of December 31, '07.

CapEx in Q1 was about $0.5 million, and depreciation and amortization was about $3.5 million. At this time, the company will not issue any guidance, our business remains difficult to predict.

Now, I will turn the call back to Bill.

Bill Weyand

Thanks, and let me summarize our Q1 performance. Q1 revenue was up 6% to $61.2 million, cash was up 10% to $148.1 million. Q1 deferred revenue up 17% to $94.4 million, Q1 maintenance up 15% to $33 million. Q1 SimEnterprise products at 28% of software revenue or $6.1 million, and Q1 G&A down year-over-year by $3.5 million.

MSC has created an integrated open architecture solution for the simulation market. R3 releases this quarter will have expanded functionality, and we believe our global customers are now beginning to upgrade.

With that, let's open it up to questions.

Joanne Keates

Teresa?

Operator

Yes.

Joanne Keates

Questions?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Barbara Coffey from Kaufman.

Barbara Coffey - Kaufman Brothers

Can you speak a little bit about the reseller network and what end markets they're selling into and what kind of traction they're seeing?

Bill Weyand

Sure. I would be happy to. Our reseller or channels business remains robust and we've been focused on expanding the number of channels partners. It tends to be that they focus more on the supply chain in some of the smaller global countries around the world. It has been an integral part of our business and should continue to grow as we introduce products like our engineering solvers or SimDesigner or SimOffice. It's particularly targeted for the channel partners and resellers as well.

Barbara Coffey - Kaufman Brothers - Analyst

And was there any -- in the quarter as you look across the different countries, was there any sort of difference in selling cycle times based on different regions of the world?

Bill Weyand

Not necessarily. We obviously like others have experienced some softness in the U.S. market due to the economies and some of the things that are going on there. Europe obviously continues to be very strong for us and our customers are investing significantly there. SimEnterprise is the classic crossing the chasm and is beginning to get worldwide attention by major OEMs who need to do simulation on a worldwide basis, and Asia-Pacific particularly outside of Japan continues to be very strong.

Barbara Coffey - Kaufman Brothers

Thank you.

Bill Weyand

You're welcome.

Operator

Our next question comes from Michael Coady from B. Riley.

Michael Coady - B Riley

If you look at your R&D dollars, have been creeping up pretty regularly. And I know you're doing more off-shoring. Can you talk about when you think you'll get a return on that investment, when you may see R&D come down as a percentage of revenues?

Bill Weyand

Sure. I'd be happy to comment. Well, you are right. The spending has gone up. And it has gone up for several reasons. We are supporting basically a larger group of functionality that we've introduced with our three on not only of our engineering solvers, but our new feature-rich SimEnterprise solutions.

As a percentage of revenues, as we begin to accelerate adoption of it, it should start to trend down from the percentage of revenue we're looking at today. Ongoing product enhancement and upgrades are clearly what will be driving our business and growth going forward. And it has been a journey. We have obviously invested a significant amount of money starting in '05 to enhance all of our traditional engineering solvers. And you can see by the maintenance renewal that our technology is not only incredibly sticky, but the reality is that some of our customers that may have moved away from some of our solvers actually have moved back. And you can see it by the significant maintenance renewals of reactivating something like Nastran versus other options in the marketplace.

Michael Coady - B Riley

Okay. And as more and more of your software revenues are derived from the enterprise solutions, is that improving your visibility or is visibility getting better? You haven't provided guidance for some time now. It seems that it might be around the corner. At some point if that revenue piece becomes a large enough piece of software and maintenance and services also have been kicking up, which probably has the better visibility. I mean do you feel like at some point in the future, I'm not holding you to a specific time, but you will be able to provide guidance again because visibility continues to improve?

Bill Weyand

I would say -- this is Bill, I would say that we're getting closer to it. In Q4, obviously, the numbers are out there. And shows that we're making progress and completing the transition. Q1 was another step in it. My view and Sam you can comment, is that when we get to mid year, I think, we'll have a clear three quarter backwards looking approach in terms of our position. And then secondly, mid year, we’ll know what’s really happening in the economy a little bit clearer.

And then thirdly is that, we'll have a track record externally and internally through our own metrics that we'll probably consider revisiting guidance at that time.

Sam Auriemma

This is Sam. So your observations are right. I mean, you have pretty good insight in the quarter and going forward, on maintenance revenue and services revenue, the smaller component of it. But there is a base business there that's a bit more predictable.

Where you run into the part that's difficult to predict is the timing of revenue associated with larger transactions, customer acceptance, buying cycles, which are longer than the company is used to. A brand new sales force system that gets more reliable, sales force automation system that gets more reliable as the quarters roll out. And it's all about visibility and your degree of confidence on visibilities going forward. We think we’re still on a difficult to predict position but it's improving.

Michael Coady - B Riley

Okay. Thanks. And I'll ask just one last question and then jump back in the queue. Bill, could you talk about the acquisition activity in the space you've seen ANSYS and Ansoft, and Autodesk, Moldflow, just talk in general terms about [branch] valuations, competitive landscapes, et cetera? Thank you very much.

Bill Weyand

Sure. There's no question that the PLM market space and even the bigger software industry is consolidating marketplace. You are aware of it, in the last 30 days two acquisitions have been announced by others in this space. We have announced two previous, what I would call, technical tuck-in acquisition. We are in a consolidating market. And that's why we're keeping our powder dry in terms of our cash because we intend to be acquisitive as well going forward.

Michael Coady - B Riley

Great. Thanks again. And good luck in the balance of the year.

Bill Weyand

Thank you.

Operator

Our next question comes from Woo Jin Ho from Merrill Lynch.

Woo Jin Ho - Merrill Lynch

Great. Thanks. Question on the engineering tools revenue. I calculate that engineering tools was down around 21% on a year-on-year basis. That's including, I'm sure, a benefit from currency. Could you give us a sense on where you think this business can bottom out? Not only on the engineering tools side, but if we look at it as a combination of an MD as well as an engineering tools side, I mean, is there a scenario where you can eventually plateau and show growth here?

Bill Weyand

Well, again, this is an upgrade market. All of our MD solutions are upgrade from our traditional tools. So and two of the customer examples I announced, which were major orders in the quarter, they are an upgrade from Nastran to MD Nastran or Patran to MD Patran, et cetera, so that our tools business is on a journey. Just like other companies when they went from 2D to 3D, it was different. We're in an upgrade market. And the acceleration of our upgrade market would clearly be enhanced by this quarter with the release of R3 where they can, again, do the complete job on the new solution that they did in the others.

Just like the Boeing announcement in Q1 of moving from our engineering tools to the whole enterprise solution, you have got to do the old job and the new solution and until you get the buckets of functionality that was prohibiting that.

So what am I saying to try to add some granularity to it is that, yes, our new solutions probably delayed some purchase decisions. But it is an upgrade program. And it is an upgrade path. And so when people move from Nastran to MD Nastran, that's good news for us because they're moving from basically an older proprietary architecture to an open architecture that now will do simulation in a multi-disciplined fashion.

And then secondly, since most companies now in the engineering operations are moving to off-shore or supply chain, they'll need an open integrated architecture and an enterprise architecture to be able to move that information and manage it just like the Audi press release. The Audi press release on SimManager, they have 180,000 simulations in the systems; 20 million data objects. Every engineer in Audi is using SimManager plus 200 in the supply chain. They're doing over 850 simulations a day. And if you do it in a point solution, this basically point solutions will be evolving and are evolving relatively quickly because integrated is better and open architecture is better.

So it's a journey for us. And what you want to see and what we want to see is a faster adoption and larger orders in terms of continuing to invest in our engineering solutions, but moving to the new architecture and the new ROI.

Woo Jin Ho - Merrill Lynch

Okay. Thanks for color on that, Bill.

Bill Weyand

My pleasure.

Woo Jin Ho - Merrill Lynch

Just shifting here to the general market overall. A couple of general market questions. In terms of simulation data management, can you give us a sense on what factors more in the investment decision? Is it the feature and functionality of the core data management set, particularly, SimManager? Or is it the level and use of the authoring or the proliferation of the existing authoring and simulation tools at the customer site?

Bill Weyand

It's actually both. Is that, in terms of proliferation of enterprise simulation or simulation data management or life cycle management or content and process management, it is having an integrated suite that allows you to do it in a more robust fashion and move it from engineer to engineer, department to department. And move it from OEM through supply chain.

You have to have the richness of features and functions in the enterprise solution or the new product to do, again, the old job. A classic aerospace engineer using Nastran for 30 years is not going to move to MD Nastran until it can do the old job and the new solution. Where we are today with our three is the robustness and our traditional tools is now very evident as well in our MD solutions; and then the pilot concept and the proof of concept on our enterprise solutions, and the testing of the architecture and the robustness. But again, as evidenced by Audi, is that it's ready now to stage. We anticipate a lot of our customers moving from pilots to global deployments of these solutions. And the early indications are company again like Boeing and now like Audi. And we know more companies that have made the same decision. So we're kind of like Crossing the Chasm in the Jeffrey Moore's side of the view of the business going from the early adopters, kicking the tires, to the early majority doing significant work and significant lifting.

And for Audi to improve their processes 35%, being able to do 35% more work with the same number of people is a significant ROI, plus it's all integrated and all stored. And get very quick access.

So back to your question on enterprise simulation and so on, I was with a major aerospace company last week. And they said, Bill, they said enterprise simulation is now at the same stage that product data management was eight or ten years ago. I said what did you mean by that? He said the need is clear, the growth will be significant, and it could be a market of equal size.

Now that was just his view. But it was a major aerospace company that really understands the space. And the key part is knowledge, capture, and reuse and best practices, which builds significant number of templates and significant number of proprietary knowledge, and significant amount of reuse that helps streamline the process and preserves the knowledge and experience of their best engineers.

Woo Jin Ho - Merrill Lynch

Okay. A couple more for me. Sam, a business model question. In terms of booking deals, it seems as if you're doing more term-based business versus perpetual more so than in the past. What does that do to the revenue growth, the business model, as well as how should we think about operating margins under that scenario? And Bill for you, could you just give us any updates to the competitive landscape? Has your dialog with customers changed in any way as a result of growing competition? Thanks.

Bill Weyand

So, Woo Jin, I don't know that we've seen any shifts at all from paid up mix to the lease mix in our current model. I think if you're talking about the target of deferred revenue increase, most of that is maintenance, which is ratable over the period of time. But I don't see the mix has changed here in Q1 at all from lease to paid up.

Woo Jin Ho - Merrill Lynch

Okay.

Bill Weyand

The increase in deferred revenue is basically driven by maintenance, which by its nature is ratable.

Woo Jin Ho - Merrill Lynch

Yeah.

Sam Auriemma

In regard to your question on competitive landscape. We're actually quite pleased that a number of companies have announced entering the enterprise simulation space. It helps drive a market, create a market. And again, with our three we are significantly ahead in terms of the breadth of functionality and the capabilities of our product. And then, frankly, having more companies outselling helps drive a market faster. And so we think that that should be an advantage for us. And we are looking forward to it.

Woo Jin Ho - Merrill Lynch

Okay. Thank you.

Bill Weyand

You are welcome.

Operator

Our next question comes from Mark Schappel with Benchmark.

Mark Schappel - Benchmark

Hi. Good evening. Sam, first question for you.

Sam Auriemma

Yeah.

Mark Schappel - Benchmark

Were there any big deals in the quarter over $1 million?

Sam Auriemma

Yes. There were.

Bill Weyand

Yeah. We had four during the quarter.

Mark Schappel - Benchmark

Thanks. Any of those for a lack of a better term mega deals, significant seven-figure deals?

Sam Auriemma

No. We didn't announce anybody over 5% during the quarter or 10% during the quarter. They're good transactions. Kind of a step along the way, more adopters. And as Bill talked about, upgrades from what we’ve seen in Nastran and MD Nastran they clearly see the value in that. And have larger bites to upgrade to what they had.

Mark Schappel - Benchmark

Okay. Thanks. And Bill, despite the increase in total revenues this quarter, license revenue continues to decline year-over-year, granted at a much slower pace. Could you give us a sense of when we can expect license sales to begin climbing on a year-over-year basis as far as our modeling goes?

Bill Weyand

Sure. Again, organic growth was 6%. We did experience a software decline. It had to do with the product transitions of customers basically waiting for R3 release and the breadth of functionality. So it helped unfortunately caused a pause in investing that should improve itself going forward. But we can't control when customers place orders. They place them when they do. But we're looking to grow that piece of our business over time as well as we're doing maintenance and services.

Sam Auriemma

Hey, Mark, let me clarify one item on that. On the four transactions during the quarter, two were software business and two were total maintenance renewals.

Mark Schappel - Benchmark

Thanks. Thanks. And then finally, one last question. For you, Bill, if you could just remind us what the quarter carrier headcount was at the end of last year?

Bill Weyand

I think it's on the chart that I had in the presentation. It should be Q1. Q1 '07 was 188. Q1 '08 was 181. So again, we're going through a transition. And we cycled part of our sales force to the enterprise side of the business. Having said that, the average tenure of our sales force is five years. And that's very good for our traditional business as well. And we also have it broken down on slide number 15 is broke down in sales force by geography and then total.

Mark Schappel - Benchmark

Okay. I apologize for that. I'm a little bit remote at the moment.

Bill Weyand

That's okay.

Sam Auriemma

Thank you.

Bill Weyand

You are welcome, Mark.

Operator

And this concludes today's question-and-answer session. I would now like to turn the call over to Mr. Bill Weyand.

Bill Weyand

Thank you. Well in summary, we are mindful of the economic environment, yet we feel we are making continued progress. We believe that the Boeing and now Audi announcements are early indications that we are moving from early adopters to what's called the early majority.

Product launches scheduled for Q2 will provide business opportunities with our customers. Again, significant feature, functionality, and performance improvements. And we are building on our foundation and extending simulation to the enterprise.

MSC’s solutions are very sticky, as evidenced by our continued maintenance improvement. And that remains a strong asset of our installed base. And also provides an opportunity that we are now in the midst of an important upgrade cycle as our customers begin to move from initial pilots to fuller scale upgrade deployments. A mid-year technology update, we'll be scheduling and announcing a June 3 Mid-Year Technology Update at our corporate headquarters and the Shareholders Meeting is scheduled for May 28.

Thank you very much.

Operator

This concludes today's conference call. You may now disconnect.

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