Macrovision Solutions Corporation Q1 2008 Earnings Call Transcript

Macrovision Solutions Corporation (MVSN)

Q1 2008 Earnings Call

May 7, 2008 5:00 pm ET

Executives

Alfred Amoroso – Chief Executive Officer and President

James Budge – Chief Financial Officer and Executive Vice President

Lauren Landfield - Vice President of Corporate Finance and Investor Relations

Analysts

April Horace - Janco Partners

Robert Stone - Cowen and Company

Andy Hargreaves - Pacific Crest

Alan Davis - D.A. Davidson

Richard Davis - Needham & Company

Ralph Schackart - William Blair

Brian Thackray - Deutsche Bank

Sasa Zorovic - Goldman Sachs

Presentation

Operator

Welcome to the Macrovision Q1 2008 earnings release conference call. (Operator Instructions) I would now like to turn the conference over to Lauren Landfield, Vice President of Investor Relations.

Lauren Landfield

Thank you, Nicole and welcome ladies and gentleman to the Macrovision’s first quarter 2008 earnings conference call. I am Lauren Landfield, Vice President of Macrovision and I am pleased to be joined today by Fred Amoroso, our CEO, and James Budge, our CFO. Before we discuss our results and estimates released earlier today, I would like to start with some housekeeping items.

First, I’d like to remind you that all statements made during our conference call that are not statements of historical fact, including but not limited to statements regarding the company’s forecast of future revenues and earnings, business strategies, product plans, and acquisition and divestiture plans, constitute forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results could vary materially from those contained in these forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements are described in our Form 10-K for the year ended December 31, 2006, as amended and other filings with the SEC that are filed from time to time.

Second, our results and estimates released earlier today include non-GAAP information which exclude as applicable non-cash or onetime items such as amortization and depreciation, asset impairment charges, equity-based compensation, restructuring and other charges, and gains on sales of strategic investment.

We have presented this collective non-GAAP information because this is how we report our business for our internal financial reporting and measurement. We believe that this presentation may be meaningful to our investors in analyzing the results of operations and income and cash generation for the company.

This presentation is not intended to be a substitute for our financial results presented in conformity with accounting principles generally accepted in the United States and investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures included in our earnings release.

As the final piece of housekeeping, the reconciliation and replay of this conference call will be available on the Investor Relations page of our website until our next quarterly earnings call.

I would now like to turn the call over to Fred.

Alfred Amoroso

Thank you Lauren and thanks to everyone for joining us today. I’m delighted to host our first analyst conference call as Macrovision Solutions Corporation. To put it in perspective, since I joined in July of 2005, we have substantially repositioned the company from being focused primarily on legacy analog copy protection and software license management to now being leading provider of digital media technology solutions.

With our significant metadata libraries, large patent portfolio, and broad technology suite, we have established ourselves as one of the largest IP licenses in the digital media sector leaving us well positioned to tap into the large growth opportunities unfolding before us over the next few years.

When we began to undertake this transformation a couple of years ago, we had just recently completed several significant milestones. On April 1, we divested our Software and Games businesses and of course on May 2 we closed the Gemstar transaction. Given that we have substantially repositioned our business, our primary focus today on the call will be to walk you through the new Macrovision.

But first let me turn the call over to James and review some of the metrics from a financial perspective to our business.

James Budge

Thank you, Fred. I’d like to first give you some highlights on the numbers we’ve reported today. Note that these are Macrovision only numbers given that we closed our acquisition of Gemstar on May 2 subsequent to quarter end.

After that I’ll discuss our pro forma combined company results, assuming all acquisitions were completed as of January 1, 2007 in the same manner it’s presented in our April 17, 2008 press release discussing preliminary results.

This is consistent with how we presented our financials in the proxy and for the debt financing process with the exception that we excluded synergies in Q1, as synergies are an annual measure.

We view this pro forma comparison to be more meaningful for purposes of understanding the trend. I’ll also cover full year estimates as well as give you some understanding of how we are thinking about the long-term expectations of the business.

In terms of the first quarter 2008, Macrovision-only results from continuing operations revenue was $32.2 million, a decrease from last year driven by anticipated declines in our legacy analog solutions.

Non-GAAP cost and expenses from continuing operations in Q1 were $25.5 million, an increase of 10% from the $23.2 million in Q1 2007. The absolute increase in operating expense primarily resulted from investments in new digital offerings offset by our efforts to reduce expenses.

Non-GAAP operating income from continuing operations for the first quarter was $6.8 million; non-GAAP net income from continuing operations was $7.8 million and non-GAAP diluted earnings per share from continuing operations were $0.14.

When we look at the results with Gemstar on a pro forma combined company continuing operations basis, Q1 revenue was $151.7 million and adjusted EBITDA before synergies was $38.7 million or 26% of revenue.

We define adjusted EBITDA as EBITDA less non-cash items such as equity-based compensation, and items impacting comparability such as impairment losses on strategic investments, restructuring, and asset impairment charges, and the benefit from resolving certain litigation proceedings related to a former CEO of Gemstar.

Consistent with the pro forma combined company results from continuing operations presented in our proxy and other publicly filed presentations, these numbers exclude the recognition of revenue related to a significant amount of Gemstar’s deferred revenue. This is because the majority of the Guidance business deferred revenue does not survive purchase accounting.

I’ll now share some specific Q1 revenue performance information pertaining to the business. It is important to note here, however, that beginning in Q2 while we will continue to share qualitative assessments of the various activities of our business, we will be presenting quantitative information for two operating segments only: Technology and Media Networks.

In Macrovision’s historical Embedded Solutions Group, revenues for Q1 2008 were $17.2 million, a decrease of 12% from Q1 2007. The decrease was due to the fact that Q1 2007 contained a significant amount of catch-up payments compared to Q1 2008. The Embedded business continues to be strong for us with significant margin contributions and a healthy pipeline for the balance of the year.

In Macrovision’s historical Entertainment Group, revenues were $9.3 million for Q1 2008, a decrease of 35% from Q1 2007. As discussed in previous calls, the decrease was due to the loss of a certain MPAA customer in Q2 last year which contributed significantly to Entertainment revenue in Q1 2007.

Moreover, DVD volumes continued to decline consistent with recent trends. In Macrovision’s historical Distribution and Commerce Group, revenues for Q1 2008 were $5.7 million, up 110% from Q1 2007. The increase was primarily attributable to the inclusion of AMG partially offset by reduced sales of our eRights product suite.

In Gemstar’s historical Guidance Technology and Solutions segment on a pro forma basis after eliminating certain deferred revenue and including in Q1 2007 the results of Aptiv, which was acquired in March 2007, revenues were $73.5 million, up from $66.9 million last year representing growth of 10%.

IPG Licensing revenue grew 21% but this was partially offset by a decline in legacy VCR Plus sales. Strength was due in particular to better than expected growth at major North American television service providers, in particular at DIRECTV, and for Verizon’s FiOS service; the addition of several new operator customers including SKY Italia and stronger than anticipated volumes of IPG enabled CE devices in Europe.

Online networks revenue in Q1 2008 increased by $2.2 million compared to Q1 2007 due to increased program promotional advertising and higher CPM.

TVGuide.com averaged 5.1 million unique users per month in the first quarter of 2008, a 19% increase over the same period in the prior year. Media Networks, which includes the TV Guide Network and TVG, achieved revenues of $41.8 million in Q1 2008 versus $45.3 million in Q1 2007.

Important to note here that our definition of Media Networks is different than that previously used by Gemstar as it excludes the online business which will be included in our Technology Solutions segment going forward.

TVG Network, the company’s horse racing network, increased domestic household distribution to 30 million, up 47% versus Q1 2007. Direct wagering handle increased by 32% versus Q1 2007. Overall revenues decreased slightly due primarily to a license fee loss in the second quarter of 2007.

TV Guide Network household distribution grew to 83.1 million Nielsen households, a 3% increase versus Q1 2007. TV Guide Network now is shown full screen without a scrolling program guide for 30 million DBS subscribers on EchoStar’s DISH Network and on DIRECTV.

TV Guide Network revenues including ad sales were basically flat despite the writers’ strike and a reduction in analog households.

Programming expenses increased due to new program launches. Total marketing expenses increased somewhat but given that we are focused on strategic alternatives for the Media Networks Group, we have already began to curtail those campaigns related to cross platform promotions.

As we’ve discussed in previous calls, we are currently exploring strategic alternatives for the TV Guide Network, TVG and TV Guide Magazine. While we are classifying publishing as a discontinued operation, it is worth noting that revenue in Q1 2008 grew $2.5 million or 7% on a year-over-year basis to $36.1 million driven by an increase in advertising revenue per page and page count.

When combined with cost controls, the TV Guide Magazine business actually generated positive adjusted EBITDA in the quarter, the first time this has happened since Q1 2004. This turnaround boosts our confidence in the prospects for the sell-side process.

As to the balance sheet, our cash and liquid investment balance at the end of March on a pro forma combined basis, again as if the Gemstar transaction closed on March 31, 2008, was $330 million, well ahead of our forecast of approximately $275 million contained in our January SEC filing.

This pro forma balance takes into account the distribution of cash paid to Gemstar stockholders, the sale of our Software and Games businesses, and the $650 million of acquisition debt financing. On a pro forma basis our debt position was $904 million at the end of the quarter leaving net debt of $574 million.

Speaking of our debt financing, despite the significant downturn in the credit markets experienced earlier this year, we were very pleased to secure better terms than we originally expected when we announced the deal in December.

We’ve reduced the total financing from $800 million to $650 million and we’re able to avoid issuing the high yield notes provided for under our original commitment. The term loan book was oversubscribed which allowed us to upsize the loan from $500 to $550 million.

To fund the balance, we issued a $100 million worth of bonds in a private placement to a well established long-term oriented investor. We selected this combination due to its favorable economics and the ability to pre pay without penalties.

The five-year term loan has a coupon on LIBOR plus 375 and a LIBOR floor of 350. The $100 million 5 ½ year 11% coupon bonds are non-callable for 18 months and callable at par thereafter.

As a result of increased leverage due to the upsized term loan which was originally rated at $500 million, the final term loan rating fell from Ba1 BB- to Ba2 B+. However we are pleased that our corporate debt rating remained at Ba3 B+.

We expect to pay down debt with proceeds from divestitures and from excess free cash flow defined as cash generated from operations less CapEx. We expect CapEx to be in the $25 million range for the full year 2008 and to decline thereafter.

As to estimates, we have tried to be as transparent as possible. In addition to our January SEC filing where we published a combined company model, as well as both companies’ internal estimates included in the proxy, we also announced our preliminary Q1 results on April 17 to provide further visibility around our debt offering. Today, we are reiterating the estimates contained in our April 17 announcement.

On a pro forma combined company continuing operations basis, assuming the Gemstar transaction was completed on January 1, 2007, revenues are expected to range between $650 and $700 million and adjusted EBITDA, including the anticipated annualized benefit of over $50 million in synergies, is expected to range between $230 and $270 million.

Using the mid-point of the range, this is growth of 11% and 20% for revenue and adjusted EBITDA respectively, when compared to the $607 million and $209 million in pro forma combined company 2007 revenue and adjusted EBITDA, again including the annualized benefit of over $50 million in synergies, respectively.

To Fred’s point, Macrovision has indeed undergone a transformation and we understand the difficulty involved in keeping up with these changes. Therefore I will go into more detail than usual at this time in terms of how we forecast the business, both for the current year and on a long-term basis.

While the segmentation of the business is changing as we complete the transformation, hopefully what follows will allow you to understand the underlying trends.

On our February call for Q4 2007 results, we estimated between a $180 million and $190 million from Macrovision-only continuing operations. Based on Q1 results and current forecasts, we expect the previous Macrovision-only overall revenue to track to that range.

On a long-term basis, our historical Embedded products should continue to benefit from strong shipments of ACP-enabled set-top boxes. The research reports we use for our modeling indicate a five-year compound annual growth rate in the 5% to 10% range.

Further assisting in our growth in this area is our connective platform. We’re seeing strong signs of adoption here as measured by design wins and our pipeline is building nicely. Thus, we are increasingly confident in the future of that business.

However revenues, which are primarily driven by per unit royalties from product shipments, remain small given the nascent stage of the market. We’re seeing very similar signs of strength for our media recognition technologies which are embedded in devices to enable media identification and play listing and are sold with our entertainment metadata.

We think the market of devices that could support both of these technologies is approximately 750 million units this year and growing at over 10% per year over the next five years. Of course given our low penetration rates currently, we expect our growth rate in this market to be much higher.

Our Entertainment business solutions will continue to experience decline from legacy ACP revenue. However we think that the signing of the two MPAA bundled contracts we previously disclosed will cause this trend to abate somewhat.

Meanwhile prospects for our BD+ technology are brightening since Blu-ray has won the format war. While analysts’ reports cite single digit declines on a compound annual growth basis over the next five years for standard definition DVDs, growth of 70% to 80% is expected annually for Blu-ray discs. We think our Blu-ray opportunity could eclipse our legacy ACP or RipGuard revenues within the next few years.

With regard to our Distribution and Commerce business, in previous calls we stated we expected roughly $20 million in revenue from AMG in 2008. This continues to be our target and we think this business should grow about 10% annually thereafter.

Offsetting this partially is under performance in the eRights product suite, where we are currently exploring strategic alternatives given the lack of fit with the digital media strategy.

With regard to Gemstar’s Guidance businesses, revenues last year were $231 million on a pro forma basis excluding certain deferred revenue. The primary drivers for this area are digital subscriber growth in the cable satellite and Telco provided television market and IPG enabled digital CE device shipments such as DTVs and DVRs.

Certain industry analyst reports project 15% to 20% growth in subscribers and 20% to 25% growth in device shipments annually over the next five years.

With regard to Media Networks, we expect high single digit revenue growth rates overall with potential for out performance depending on TVG’s success in continuing to expand into new markets and TV Guide Network’s success in continuing its transition to an entertainment destination.

As I noted earlier, our definition of Media Networks exclude the online properties which we do not currently intend to divest. We expect the online properties to continue their steady historical growth and plan for a minimum of 10% revenue gains on an annual basis over the next few years.

We expect this trend to be driven primarily by advertising revenues generated from increased consumer usage of TVGuide.com which we plan to augment with additional data from our AMG assets.

These are the key business lines and how we think of the opportunity. In terms of visibility and the composition of revenue, as we have previously stated, our business has the strong degree of patent licensing revenue.

For example, approximately two-thirds of Gemstar’s IPG Licensing last year was from patents. From a margin standpoint, we would expect margins to grow in areas where revenues outgrow customary annual cost increases, which is the majority of our lines given that our expenses are primarily personnel related.

With regards to synergies, we reiterate our previous estimates of over $50 million in annualized expense reductions and Fred will discuss how this is unfolding. We expect the tax rate in the low 30s going forward and fully diluted shares outstanding are currently approximately 103 million, which we expect will adjust higher naturally over time as employees stock options are exercised for shares.

With regard to seasonality, while we decided to provide estimates on an annual basis beginning last earnings call given the various moving parts in our business currently, we would note that due to the difficult comparison on the Macrovision side for Q1, along with the ramp anticipated later in the year for the new solutions such as BD+, media recognition, and connective platform, as well as the seasonal DVD holiday trend, we would anticipate a higher percentage of revenue in the back-half of the year than in the first half.

This is consistent with previous years as over the past two years Macrovision’s continuing operations have averaged 30% of annual revenue in Q4. And while Gemstar’s non-publishing business has historically been more linear than Macrovision’s continuing operations, when combined with this international and mobile opportunities, we expect the majority of the pro forma combined continuing operations revenue to land in the second half of the year with Q4 having the highest weighting

Finally, a couple of housekeeping items. Common stock of Macrovision Solutions Corporation, our new legal entity began trading on the NASDAQ on May 5 2008, under MVSND. This is a temporary event as we transition to the new legal entity and on June 2 2008, the D will be removed and the shares will resume trading under the old symbol MVSN.

Regarding consideration paid to former Gemstar stockholders, the results of the cash stock elections were as follows: 97% of elections were for cash; 1% of elections were for stock; 2% did not submit an election.

Stockholders electing to receive cash will receive 57.3% of the consideration in cash and 42.7% in stock. Stockholders electing stock and those who did not make an election will receive a 100% of the consideration in stock.

Macrovision wired funds to DTC last Friday. It is our understanding DTC has transmitted these funds to brokerages and individual stockholders where applicable. Please consult your broker for any further questions.

I’d now like to turn the call back over Fred.

Alfred Amoroso

Thank you, James. First, I’ll update you on some of the key highlights of the digital growth platforms that James referred to, as well as trends on all of our key segments including those previously of Gemstar, and I’ll update you on the current organization structure and our integration process.

With regard to our emerging Embedded technologies picking up where James left off, we’re seeing progress both at a macro and a micro level. The proliferation of broadband, home Wi-Fi, and high-speed mobile data networks is the first pillar in unlocking this opportunity.

With broadband already in approximately 70 million U.S. homes, about two-thirds of all U.S. households are currently penetrated. A recent report from the Consumer Electronics Association cited U.S. household penetration for HD TVs has reached 41%, up 15% since last year.

With the connections in place and devices that can display rich media content spreading rapidly, the next opportunity is connecting these devices and enabling the consumer to discover digital media and easily move it around these networks from device-to-device. This is where connective platform, media recognition, and media management in the form of advance guidance come in.

Given the large number of rich media capable devices already deployed in broadband connected homes and amid very low current adoption rates, our models indicate growth in devices that could include connected platform at approximately 65% annually over the next five years. Similarly, we believe media recognition enabled devices could grow at a 45% compound annual rate over the next five years.

In terms of tapping into this opportunity as the market has begun to ramp, our design win momentum has increased notably this year. For connective platform on a set-up box side, which is a key end market focus for us given the synergies with our guidance, metadata and media recognition technologies, we had a couple of key developments.

We expanded our existing license agreement with Scientific Atlanta to include enhanced security as SA is building a multi room DVR application using our technology to enable consumers to access video stored on one DVR for example in the living room from another DVR such as in the bedroom. Now having licensed additional security technology these transmissions will be protected.

Additionally we recently captured a design win at a different set-top box manufacturer, which in combination with our previous wins give us customer relationship with manufacturers that control a significant share of the world’s set-up box market.

We also made significant progress in the digital TV area having garnered design wins with two key OEMs. In combination with Gemstar whose IPG software has already been distributed to approximately 30 million TVs and recorders, we are seeing increasing synergies in this space. Many new digital TV designs are including connectivity and our ability to integrate guidance and connectivity should provide a market differentiator.

While we continue to see in-house development as our primary competitor, we believe we are uniquely positioned given our engineering resources, our breadth of technologies and integration path to offer time to market, cost and performance advantages.

Customer response to the merger has been very strong, particularly in this segment given that this is where all of the technologies really coalesce. Many customers have approached us seeking a closer relationship given the breadth and significance of technologies that we’re now providing.

We are similarly encouraged by the traction in our media recognition Embedded technologies, an area that we believe has high growth potential given that AMG had only recently entered this space when we acquired them.

We had promising design wins in the MP3 player, home audio receiver, and automotive markets and a critical design win on the mobile front is progressing very nicely. Of course, design wins do not necessarily translate into meaningful revenue. Our customers’ products have to succeed.

We’re still in the early phases of these opportunities; we would not expect meaningful product shipments until next year. Thus this year, we will continue to measure our success in terms of securing future revenue streams through design wins and so far we’re off to a pretty good start.

In terms of data licensing, we extended our leadership position by adding over 20 new customers in Q1 and with the integration of Gemstar-TV metadata now underway, we expect to further extend our lead. It will be a very nice up sell opportunity into our existing accounts such as online etailers who are seeking more TV related metadata for downloads and online packaged media sales.

We have begun integration efforts to take advantage of Gemstar’s investment in database infrastructure which will save us a couple of million dollars versus the previous planned CapEx in this area.

Turning to the Guidance business, as James mentioned, results were ahead of plan driven by faster than anticipated digital subscriber growth and new customer agreements. Cable and satellite subscribers worldwide receiving a license or company provided IPG grew to 78.8 million, a 14% increase versus Q1 of 2007 on a pro forma basis, as if Gemstar’s acquisition of Aptiv occurred January 1 of 2007.

62.7 million subscribers were covered by a patent license and 16.1 million received a company provided IPG, an increase of 15% and 11% respectively versus Q1 of 2007. Geographically, 63.4 million were domestic and 15.4 million were international households.

As James mentioned, we believe the market growth prospects in this space remain robust and we expect to augment our opportunity by gaining additional wins internationally such as our agreement last quarter with Cablevision Argentina for our Passport IPG product.

On the mobile side in Japan there were a total of 24 million registered users of our technology at the end of Q1 2008, an increase of 60% versus Q1 of 2007. And during the quarter, we announced that we licensed our G-GUIDE Mobile IPG technology to KDDI for 1-Seg, a mobile terrestrial digital video broadcasting service in Japan.

G-GUIDE has adapted specifically for the Japanese market, built directly into mobile devices and with this agreement we intend to extend G-GUIDE to enable a rich mobile streaming television experience.

Domestically last weekend marked a significant milestone for one of our patent licensees. AT&T became the second major carrier after Verizon to offer mobile television service using Qualcomm’s MediaFLO network, which is the licensee of our IPG patents. The mobile market is very nascent and the winning path has yet to be determined but we feel pretty well positioned for the long-term opportunity.

On a CE and device side there were a number of notable wins in the quarter. We signed a multiyear licensing agreement with Mitsubishi Electric for Japan which extends its current license to incorporate a new digital version of our G-GUIDE IPG technology into its digital televisions and digital video recording devices in Japan.

G-GUIDE is adapted specifically for the Japanese market built directly into CE products and we’re targeting availability in the marketplace in 2009. In the meantime, under this license agreement we can collect a patent license on Mitsubishi’s existing products using non-Gemstar guides.

Also for G-GUIDE in Japan, we signed a multiyear agreement with Nintendo for the Wii. This is an application providing users with new television guidance options directly from their Wii console.

While G-GUIDE is already well established in digital recorders, televisions, mobile phones, and online in Japan, this agreement allows us to extend the reach to gaming consoles, an emerging platform which is increasingly becoming an important component of the digital living room experience.

We signed UMAX to a multiyear patent license allowing them to incorporate IPGs into retail digital set-top boxed throughout Europe. The patent license also extends to digital televisions and digital recording devices. UMAX is one of the world’s leading digital set-top box manufacturers and this is yet another agreement for Europe which underlines the increasing value of our intellectual property in this region.

Similarly, our recent announcement with TiVo to expand our patent license agreement internationally further validates our IP on a global basis. Closer to home we signed a multiyear agreement with Sony America to integrate TV Guide On Screen which is a leading IPG in the U.S. CE market into its primary line of television products.

TV Guide On Screen delivers continually updated program listings to users who simply have to plug in the TV and activate the Guide and will then receive full guide data through over the air transmission without having to subscribe to a paid TV service.

As you can see there are many complimentary areas between Guidance and our other Embedded solutions in terms of devices, customers, and technologies, and as discussed there is already overlap in terms of devices using both DLNA type technologies and media recognition technologies.

Our connective platform and AMG media recognition technologies are already integrated and we are approaching customers about buying them both together. As we look out over the next year, wrapping IPG technology and services into the equation will form the basis of our whole solution.

With the closing of the Gemstar acquisition last week we have shifted from integration planning to integration execution. This all starts with the organization where we move to a functional structure which we feel maximizes integration across the organization and solutions.

Tom Carson, who previously ran Gemstar’s North American IPG sales will assume the title of Executive Vice President – Market Segments and will now run worldwide sales for the Technology Solutions team.

Tom will be responsible for all customer verticals which have now been split into operators, CE, portals, and content producers. You will see a form of the vertical orientation across many of the functional areas as our objective is to be customer-, rather than product-focused.

As part of our Market Segments team Mike Buchheim, who previously ran Distribution and Commerce will now lead our Professional Services Organization. We think having a team dedicated to providing customers the resources necessary to bring new products to market will be a key differentiator relative to the smaller point solution alternatives.

We think this dedicated team will also further improve our ability to win slots from in-house competition as customers see our commitment to the market.

To drive customer and market feedback into our products, Steve Shannon also from Gemstar will be architecting our product roadmap, running product management. Steve was previously in charge of product development for Cross Platform Services within Gemstar.

Eric Free, formerly the Macrovision GM for the Embedded business will run an integrated product R&D organization. Paul Greenberg, head of Gemstar will remain in charge of our consumer portals, namely TVGuide.com, as well as take responsibility for allmusic.com.

John Moakley of Gemstar will take responsibility for our data solutions offerings and be tasked with integrating the AMG data and TV Guide data. Other functional areas such as Financial, Legal, HR, Marketing, etcetera, will remain largely as they previously were under Macrovision.

All-in-all I am very pleased to have retained our key executives throughout this process and of course there is a cast of over a 1,000 beside the executive team that really go to make all this happen.

In terms of synergies of our goal of over $50 million, we have already taken out over $30 million of cost on an annual run rate basis in the last week and expect to complete the actions necessary to realize the full $50 million by the end of the year.

We thank those employees who are in the process of leaving for their great efforts. Unfortunately this is part of the business. We combined with areas we identified for making efficiency gains and areas where significant overlap existed, we simply couldn’t justify previous expense levels and still maximize return for our shareholders.

Finally as previously stated, we are in the process of exploring strategic alternatives for all of the media properties: the TV Guide Magazine, the horse-racing channel and the Network. The data rooms are populated and we are fielding interest for each asset. Proceeds from these divestitures will go towards paying down the debt.

I am very proud out of how much we’ve been able to accomplish relating to operational execution for the different business units as well as transforming ourselves through significant M&A, divestiture, and integration activities. We appreciate that this was a complicated transaction for largely non-overlapping stockholder bases and we truly appreciate the patience and support that our investors have shown over this busy period.

We are pleased that of those Macrovision stockholders electing to vote, 96% voted in favor of the transaction and of those Gemstar stockholders who voted over 99% voted in favor. We are grateful for the opportunity stockholders have afforded us and are confident this combination is the best path forward.

Having began the process with Gemstar about ten months ago now, it almost feels like we’ve been together as one company for quite sometime. But now the real fun will begin as we integrate to unlock the true potential of the assets through the synergistic combinations we identified from the outset. I’m excited about the future and I look forward to updating you on the progress in future calls.

At this point I’d like to turn the call back over to Nicole to open up the lines to see if you have any questions.

Question-and-Answer Session

Operator

Our first question comes from the line of Sasa Zorovic - Goldman Sachs.

Sasa Zorovic - Goldman Sachs

My question would be regarding the timing of the divestitures. Is your plan still to mostly complete these as soon as possible and ideally enter ‘09 as with all of these things behind you at that point?

Alfred Amoroso

That is exactly correct. We’d like to get all of the properties fully divested and into their new homes before the end of 2008.

Sasa Zorovic - Goldman Sachs

Now in terms of when I’m looking at your model here and how are you planning really −

and you’re giving the guidance for this pro forma basis − for the second quarter specifically, how should we be looking to build that model on a pro forma basis, on the actual basis, what do you want us to do there?

James Budge

So, we’ve purposely not given quarterly guidance. We wanted to get away from that because the business is transforming. We’ve given you annual guidance; we provided you with assessment of how they quarterly skews go.

Obviously we indicated that between the combined businesses you probably would be expecting anywhere from around 30% or 27% to 30% in the fourth quarter. You’ve seen the amount now in the pro forma basis at $151.7 million on a combined pro forma basis for the first quarter and we’ll leave it to you to do the math on how the second quarter and the third quarter skew.

Alfred Amoroso

Sasa, we recognize that certainly this is a new business and so your models are going to be interesting to watch as you all put them out.

The other thing that we want to be sensitive to, and the reason why we don’t want to give you guidance down to an individual product base level is because as you could see and hopefully as you garnered from the comments we had, there is a lot of synergy and overlap in the products and when we approach a single customer like a Sony or whoever, we have a very large opportunity of integrating a number of different product areas into an overarching customer solution.

And while we recognize that is difficult to model perhaps from a financial perspective on a product-by-product basis, that’s not really the way we’re looking at the business. We’re really looking at the business to try and maximize our leverage and our integration and our combination of capabilities for a much broader differentiated solution.

That’s what we think is the right think to do in terms of how we look at the business and then we’ll give you as much transparency as to what’s happening in the individual components as we can on the earning calls.

James Budge

I think just coming back to the basis question again, Sasa, what you heard from us today is what you’ll hear for the second, third, and fourth quarters for at least 2008 as well. We’ll talk about the companies on a pro forma combined basis, so that will be meaningful especially in the second quarter because the deal closed on May 2 so there is a month of lost revenue from a GAAP reporting perspective from the Gemstar side so we’ll definitely give you the information on as if it was combined prior to that.

So, you can get a good feel for what the pro forma combined would be and we’ll do the same thing on the adjusted EBITDA number and that’s what we would be measuring ourselves against anyway as we go throughout the balance of 2008.

Sasa Zorovic - Goldman Sachs

Thank you.

Operator

Our next question comes from the line Brian Thackray - Deutsche Bank.

Brian Thackray - Deutsche Bank

As I look at your numbers here particularly on the Macrovision side, you have talked about a ramp in the back-half of the year. Can you just give some more color in terms of what’s driving that, whether it be Mediabolic, BD+, AMG? Just give a little more insight there to get us comfortable with that?

James Budge

It’s all of the above. So the media recognition technology specifically from AMG, not the full AMG business, the data solutions piece will be more spread across the year but the media recognition piece in some of the wins we’ve had recently will start to pay off for us in the back-half.

Connected platform with some of the design wins that we indicated in the prepared remarks, there’ll be significant numbers coming in in 2009 but we still expect a fair amount of revenue in the back-half of the year as some of these wins with the Scientific Atlanta, the Samsung, and this other unnamed set-top box manufacturer start to payoff revenues for us in the back-half of 2008.

BD+ is certainly something when we acquired that technology in the fourth quarter of last year it’s been our expectation all along that that would be more of a third, even fourth quarter event as far as revenue acceleration.

So collectively all three of those combined definitely puts up more weight in the fourth quarter than you might even have historically seen on the Macrovision side.

Alfred Amoroso

One more comment to that Brain, the other thing is that while we do have bundle deals that moderate the revenues across the year now for those customers, we still have other customers that are not on a bundled basis that pay us on a per DVD basis. While we recognize DVDs may go up or down quarter-to-quarter and maybe have a long-term trend line down, the fact is that going into the Q4 there will be an uptick in DVD volumes for holiday season sales.

Brian Thackray - Deutsche Bank

Okay, if I look at your base business then Embedded down 12% year-over-year. How much of the royalty catch up was, you were focused on integrating the acquisition, how much of that is, there is just not as many royalty catch up opportunities out there and how should we think about that for the rest of the year?

James Budge

As I think we were hopefully clear about this in our fourth quarter call, there aren’t as many opportunities certainly now going throughout 2008, 2009 as there were as we were growing over 100% in 2007.

We had guided down expectations on that business line to be more in the teens on an overall year-over-year basis and we still expect that. There were as we mentioned, several large catch-up adjustments specifically in the first quarter of 2007 and that made it a difficult compare in 2008 but we expect that all across the other way as we go throughout the balance of the year.

Brian Thackray - Deutsche Bank

So if I adjust for the royalty catch ups, was Embedded up in the mid-teens? Q1.

James Budge

Yes.

Brian Thackray - Deutsche Bank

Okay. And then just on BD+, can you tell us where you are at in terms of studio adoption, where those decisions are?

Alfred Amoroso

This one is an interesting topic. There’s a couple of things going on and I will try not to get too detailed on this. We have one contract with a studio; we have two other pilots that are actually going on with other studios. They’re MPAA studios.

The way that BD+ was established in order for it to be viewed as a preferential technology, we are trying to get to be established through the BD+ customer organizations which is Sony and Fox and some of the others to be an authorized ECD partner for theirs that would allow us to actually incorporate and perform the addition of BD+ for all of the others studios even if they are much smaller studios.

That would open up the market usually beyond just MPAA into a much broader based markets segment. Not withstanding that, we still see BD+ as a very, very secure highly interactive technology as I think it’s certainly much more secure than where AACS has been.

Brian Thackray - Deutsche Bank

All right. Thanks a lot.

Operator

Our next question comes from the line of Ralph Schackart - William Blair.

Ralph Schackart - William Blair

James, I was wondering if you could give us maybe a little building block guidance to the extent you can on what’s going to be incorporated in Technology and Media Networks, thinking that really the old company is only representing about 20% of the total revenue on a go forward basis?

James Budge

20% of the overall business. I will give you a little bit of information and then I will point you to a few filings we did two, three weeks ago in advance of our debt offerings that give a lot more of the details underneath the Technology side.

So, if you look underneath the Technology side, you’re basically going to have in media networks the TV Guide, the horse-racing channel and the TV Guide Network. You are going to have publishing off to the side as a discontinued operation, and then everything else between the two businesses, the guidance and online business from the Gemstar side and everything from the Macrovision side will be put into the Technology business line.

Given the notion that we are heading down the strategic alternative paths, that’s probably the most important business segment to focus on.

Ralph Schackart - William Blair

Great. And then on a go forward basis, will you be giving the Street some operational metrics to track the business on a quarterly basis via households, ARPUs, whatever?

James Budge

Yes, we will continue to give some qualitative assessments, and with some numbers sprinkled in just to give you some sense for how things are tracking.

Ralph Schackart - William Blair

Right. And then last one, Fred, you’ve got this acquisition put together. You’ve got the new company on a go forward basis. Can you help us frame where you are in this process? Are you still on the integration of IP stage? Are you still specking together the strategy or are you absolutely in the execution stage with the new vision [inaudible]?

Alfred Amoroso

It’s a great question, Ralph. I would say first of all, I want to compliment publicly all of the people inside of both Gemstar and Macrovision because the integration effort has been just phenomenal.

To be very frank, we are further along in integration after about the third day or fourth day than I have seen in any company that I have ever been affiliated with of an acquisition of this size and scale.

We have common e-mail distribution systems. We have people from both companies being able to approve whatever it happens to be, expense reports or policies, plans across the different organizations.

We took a philosophy of, without regard to Macrovision or without regard to Gemstar, who are the best people for the job, and so, as a sidelight, we actually have a fairly combined and overlapping organization structure with members of both teams fitting into the overall organization.

One of the key things Ralph that we wanted to do as I said in the call was we wanted to drive a tremendous amount of focus towards customer. And so, we have moved much more aggressively than where Gemstar was before. And going back to maybe some of the early things I did here at Macrovision where we created a single sales team across all of our different product bases.

If you read through or into some of the comments that James and I both made, you will realize that actually a lot of the products can be combined for value to our customers already.

So for example in November, we actually integrated AMG, and in Q1, we were able to sell combined connected platform and AMG metadata together, so that took less than three or four months.

The opportunity to do the similar things with guidance in connected platforms, especially with CD guide is expected to take less than six months with just a couple resources. So there is not a tremendous amount of effort to drive overlapping synergy and increased value for our customers.

Now, one of the things though that we are driving towards as well is a new advanced guide beyond IPG that has a perspective that is both broadcast and subscriber-based interactive programming guide, coupled with search type technologies from the Internet and have it be personalized by genre.

That capability is starting to be planned right now, and that one will likely come out in a 12 to 18 month period of time as we make progress incrementally towards that goal.

Ralph Schackart - William Blair

Thanks Fred.

Operator

Our next question comes from the line of Richard Davis - Needham & Company.

Richard Davis - Needham & Company

I had a question on search engine, you have partnerships and things like that and you have some of your own stuff I presume. Because to me when you get all this stuff together, one of the key things will be able to do discovery of all the content that you’re enabling to whip across through your home and various platforms, partnership build by, what are your thoughts on search engine?

Alfred Amoroso

It’s a great question, Richard. So first of all, let me perhaps prematurely, and so James could smack me, but we are going to have an analyst day later on in the year, probably in the fall timeframe. And our intention would be to bring together some of these concepts so that you can actually see them now that I’ve committed James to that.

James Budge

Fall’s going to extend really late this year.

Alfred Amoroso

The other thing Richard is that there are technologies already built into TVGuide.com to enable a search. And that is in fact one of the reasons why I don’t look at TVGuide.com as just a pure search or consumer site, purely with a consumer view.

In fact a lot of the potential that I think Gemstar had previously seen and our own personal view of Macrovision since then has been more of a syndication strategy, and the team has embarked on that where we can take some services, we can take TVGuide.com, the dot-com search listings and syndicate it within other portals.

So for example, one of the very largest portals in the United States − their whole TV listing capabilities is actually syndicated through TVGuide.com, and we maintain ad revenues through that.

So in response specifically to your question, I think we are certainly open to partnerships in terms of how to drive more of a search and an IP-based solution. We feel we actually do have a fair amount of technology.

When we develop ad strategies, specifically in this new area, I think that will define more aggressively as to whether we should partner with certain bigger players or drive certain parts of these solutions on our own. We are very open to it and I think as we develop and get further refined, we will understand which way to go.

Richard Davis - Needham & Company

Got it. Then a straightforward question for you James. With regard to the always popular vaporizing deferred revenues that you have to do when you make a purchase accounting. Does it start to come back in twelve months and so therefore we will get a big acceleration equal to that?

James Budge

You’d typically see that from, let’s call it, enterprise software company where those same customers are coming back and re-upping for another year of maintenance where they come back year after year after year. In that context, that’s absolutely right.

We don’t have that in this case. The deferred revenue was attributable to two customers that paid a very large sum three-four years back. That was being amortized in over a ten to twelve-year period. There was very little requirement to provide any service to that going forward, so that all gets blown out and that’s not going to come back for several more years to come.

Richard Davis - Needham & Company

Got it. Thanks very much.

Operator

Our next question comes from the line of Alan Davis - D.A. Davidson.

Alan Davis - D.A. Davidson

Just one quick accounting question. James, wonder if you can break down the Gemstar revenue segments that are in that $151.7 million for the quarter for Guidance, TV Guide Networks, TVG and Online?

James Budge

I’d rather not at this time. Historically, we gave 2007 numbers a couple of weeks ago in preparation for the debt and we showed that $421 million from the overall Technology business including the Macrovision piece and the Guidance piece, and then the residual to get to the $607 million on a combined basis came from the two media networks properties.

That’s probably skewed a little bit more even to the Technology side, but those are the numbers you should be looking for in Q1 as well.

Alan Davis - D.A. Davidson

Okay. And is that distribution and commerce number you broke out, does that capture all of AMG?

James Budge

It does.

Alan Davis - D.A. Davidson

Okay. And probably not meaningful revenues from BD+ or Mediabolic at this point?

James Budge

Not meaningful revenues in either one of those, and just let me come back on the AMG one. The small piece is media recognition today, that would have been in the Embedded Solutions side. So again not meaningful to date, but that’s one of the key drivers going forward.

Alan Davis - D.A. Davidson

Okay. And going forward do you wish to share any more annual rough guidance in terms of where operating expenses or other line items break out, or are you just going to stick to your revenue and EBITDA?

James Budge

Revenue and EBITDA but we have said that on an EBITDA percentage basis for the year, just take the implicit guidance of 35% to 40% as a percentage of revenue, the depreciation piece is not particularly meaningful, so the operating margin is roughly in the same ballpark.

Even if you go back to the January filing we made, when you look forward into 2009 especially if you have an expectation as we do that the media properties are out of the business by then which have lower margin businesses, we would be creeping up towards the 45% margin business, again assuming that those lower margin media properties businesses are out of the combined company at that point.

Alan Davis - D.A. Davidson

Okay, and do you have a sense of where amortization will fall for the year?

James Budge

Depreciation probably in the $20 to $30 million range. Amortization will be enormous because you are amortizing all of that intangible asset that gets put on the books in the Gemstar acquisition.

So the starting balance for that will be like $1.3 billion for intangible assets on the books from the Gemstar acquisition that will amortize over time. Again, all non-cash of course.

Deprecation is really the one to focus on there outside of the amortization coming from the runoff from the Gemstar acquisition. There’s not really any other meaningful amortization to speak of.

Alan Davis - D.A. Davidson

Okay. A seven year amortization for that?

James Budge

Something around there; seven to ten years.

Alan Davis - D.A. Davidson

Okay. And then lastly, obviously looking at where reported EBITDA may fall for the year, obviously those synergies, or half of them, will be made over the second half of the year so you won’t have those obviously on a pro forma basis as in your guidance.

So actual realized EBITDA on a combined basis for the year is that going to fall more likely in the $210 million range or do you have an estimate there?

James Budge

It will definitely be below. We hopefully won’t go as low as $210 million but the range would not be $230 to $270 million; it’d probably something more in the $210 to $250 million range.

Alan Davis - D.A. Davidson

Okay. Great thank you.

Operator

Our next question comes from the line of Andy Hargreaves - Pacific Crest.

Andy Hargreaves - Pacific Crest

First of all, congratulations on getting this all done. How would you classify the interest level that you’ve had so far on Media Networks business?

Alfred Amoroso

It’s been pretty good actually. Each one is different and each one is unique in their own rights, so for the Magazine there has been a few people that we’ve actually spoken to and have expressed interest.

We have signed NDAs with a few of them. That’s where we are now. We really couldn’t do much before the deal actually closed on Friday and now we’re in the process of getting people signed up secure, so we can start exchanging information.

TV Guide, horse-racing channel is a very unique property and we’ve gotten a tremendous number of inbound calls on that; have a number of NDAs already signed and are starting that process.

Similarly for the Network there’s been a few parties in different areas that have expressed very strong interest; a couple of NDAs have been signed, a couple more are being negotiated so we are pretty much in the flow of each one of those different properties.

Andy Hargreaves - Pacific Crest

Okay. Then can you give us any detail on that, how the sales pitch may be changing as specific to the service providers and as you go in, what are you leading with?

Alfred Amoroso

First of all realize that almost 70% of the Gemstar technology DTS revenues before were patent license revenues and that still represents the same way it is today. A big part of our capability is underscored by the 2,300 patents we have as a now single organization on a worldwide basis and some 1,500 additional patents that are pending.

What we actually did is put licensing under Tom Carson to drive it much more proactively as a customer item but I will tell you I’ve also said to our team, while we’re not taking our foot off the pedal at all as it relates to IP licensing and we’ll drive that as aggressively as it ever has been, at the same time, the value of our strategy will be driven by having our solutions be adopted within the marketplace.

We have as much focus on driving a royalty-based embedment of our media recognition technologies, our metadata and our connected platform along with our Guidance products as we do IP licensing.

Andy Hargreaves - Pacific Crest

So is it appropriate then to say the goal is to go from being primarily a check collector to value-added technology partner?

Alfred Amoroso

Fair, with an important component that a huge competitive differentiation is protected by the patents that we have invested in; yes.

Andy Hargreaves - Pacific Crest

Okay. Have there been any departures from Steve Shannon’s team?

Alfred Amoroso

None that I’m aware of that we didn’t plan for.

Andy Hargreaves - Pacific Crest

Okay. One more question, are the ASPs on the connected platform for the deals that you have been signing pretty much in-line with what your expectations were?

Alfred Amoroso

We always said that we were between roughly $1 and $5; that’s exactly where we are depending upon the volume of the shipments expected.

Andy Hargreaves - Pacific Crest

Okay thanks.

Operator

Our next question comes from the line of Robert Stone - Cowen and Company.

Robert Stone - Cowen and Company

So lots of moving parts Fred, if you had to think back over the last couple of months, what would you say surprised you in this process, better or worse?

Alfred Amoroso

Honestly, really, I am not going to bull you when I tell you this, there is actually more value than we thought in the deal. We did a lot of diligence as much as we could going through the point of announcement but as we even got more into it and as we really got deeper into all of the individual teams, not just the leadership of the teams, saw the platforms, what was being put together, some of the architectures and strategies, it became even more exciting going forward than we thought at the outset.

Robert Stone - Cowen and Company

So as you think about the guidance that you have out there, what is the biggest risk to achieving those numbers by the end of this year?

Alfred Amoroso

There’s two things Rob. The first one is, we’re in a market overall that’s not the best market and so there are macro factors affecting this that may have some dampening effect to some of the adoption of new technologies; that’s one.

The second thing is, we are actually at a point of inflection of a new curve of technologies that can be developed and implemented in the marketplace, so there is always a question as to how fast will they actually be adopted within that marketplace.

I actually think that, however, while we are at a point of new technologies, new devices, connected devices, etc., I actually think the market is going to develop more quickly and so one of the hallmarks of our culture that I have started to talk to our team about is speed, because this market could develop so quickly that we’re going to have to run like crazy to just keep up with the market opportunity that’s there and leverage the value of what we have created.

Robert Stone - Cowen and Company

So, you were thinking about macro economic, technology, transition cycle, et cetera, on April 17 you put out the preliminary results. Is it fair to say you’re already discounting these things as you can see the numbers together although worldwide conditions may look a little bleaker now than they did back when you actually announced this combination with Gemstar, right?

Alfred Amoroso

We’ve taken them into account, correct. The other thing that people may look at as a risk is obviously there is always an integration risk when you combine two organizations of this size. I will tell you that the teamwork and the chemistry between both of the companies, executive and management teams have been fantastic.

We have a number of off-site meetings next week where we’re going to start talking about full-year planning and driving the business processes and the culture that we’re going to create of the both organizations.

But the other thing is we had kick-off meetings around the world this past Monday and Tuesday and I think from everything I’ve heard, there is a real genuine excitement on the part of Gemstar’s technology team as now being forefront of a technology company as opposed to being largely part of what was being positioned more as a media company.

There is tremendous excitement to work together and drive what we’re talking about here.

Robert Stone - Cowen and Company

Other than the sales of the properties, the three businesses that you plan to dispose of, what would you say is the biggest remaining operational or integration hurdle?

Alfred Amoroso

Sales execution. We have a lot of people in new positions that are facing customers. We’ve got a tremendous amount of focus on doing sales training and get them to absolutely understand all of the different products, all of the different nuances of the solutions for the products.

We actually have apportioned revenue out. Tom has done a great job apportioning the revenue across all of the teams for the remaining part of the year.

In a very short order, we’re going to be putting commission plans in place whether they are bonus plans or commission plans, so people know how they are going to get paid based up on revenue production, but I think arming them with the facts and the capabilities, so they can intelligently talk to customers about things that maybe they hadn’t been responsible for is going to be one of the key things that we’re going to have to focus on and work on.

Robert Stone - Cowen and Company

So, as you think about the sales team combination and the expense reduction that have already been undertaken, how much of the overlap in terms of reduction in force came out of the sales area? I am trying to get some sense of how the, what used to be Macrovision sales force and what used to be Gemstar sales force, lineup, overlap or combine?

Alfred Amoroso

So, none of the redundancies came out of sales at all. Sales actually is a growth part of the organization on a combined basis. I want to underscore one other thing James said in his comments or I said: $50 million of synergies that we have already driven to and will be achieved by the end of the year.

We’ve actually already actioned not only the people who left day one, but we’ve actually actioned and communicated the people that are in transition assignments for whatever that period of time is 30 days, 60 days, 90 days until we get to integrate the different systems and processes that they are operating with. Those also have been actioned as well already.

Robert Stone - Cowen and Company

Great. Thank you.

Operator

Our next question comes from line of April Horace - Janco Partners.

April Horace - Janco Partners

Good afternoon, thanks for taking my question. Couple of questions. On the Scientific Atlanta expanded agreement, congratulations. I am trying to figure out is that code going to be embedded in the box of all the boxes or is that security feature going to be more of an option that the MSOs could choose from?

Alfred Amoroso

I think Scientific Atlanta is identifying different features in different product capabilities and so if you want to have a box that has the ability to link in DVRs from multiple points and have you be able to manage those recorded shows through different connected TVs then that will be a unique box that has that capability and that capability will not be in every one of the SA boxes that they offer.

April Horace - Janco Partners

Okay. And then you’ve also expanded a lot of the licensing agreements on an international basis in Europe; specifically Gemstar has got the deal with SKY Italia. Are you going to be going after cable and Telco to gain licenses there as well? Specifically, Liberty Global, anybody else that might not be licensing your technology today?

Alfred Amoroso

The answer to that is yes. And that’s why one of the things that we see is it’s pretty nascent market. We’ve had good success so far in establishing our patents and we’ll continue to press on the importance of those patents internationally; that’s not just EMEA by the way that’s also in Asia as well. So yes, that’s a very large part of our growth paradigm.

April Horace - Janco Partners

Did you glean any reason why Gemstar hadn’t gone after those two markets?

Alfred Amoroso

I think there was more of timing issue. To be frank, we didn’t do this over the last three days. Gemstar had done BSkyB and SKY Italia. As you’re probably aware, they did file suit against Virgin Media so those things were already in the works with Gemstar.

One of the things that we’ve also done, April, is we have driven much more towards a less regionally separated business units and much more to run on a global basis where we actually integrate all of our capability and solutions and our approaches worldwide.

So today EMEA and AP actually report under Tom Carson and Sameer Amalie who does the IPG licensing under Tom, will wind up really owning that global responsibility. Not dissimilar from the way he did before either. But we’ll put more pressure on that.

April Horace - Janco Partners

Okay. And then lastly any thoughts on the Comcast joint venture TV Guide works as to how that’s going to move forward?

Alfred Amoroso

So yes it’s out there. It’s a joint venture. We recognize it. We’ve taken a look at it. We have more work to do to really understand that better before we come up with any decisions or options.

April Horace - Janco Partners

Congratulations on all you’ve accomplished; looking forward to the future. Thank you.

Operator

We have no further questions. I’d like to turn it back over to management for closing remarks.

Alfred Amoroso

Again, thank you all for joining us on the call. We recognize this was a perhaps half-in and half-out quarter. It’s one of the reasons why we spent so much time on taking a look at the progress across the entire combined organization, because it gives you I think much more relevance to certainly the upcoming calls and the progress that we’re making overall as part of our transformation.

We do look forward to participating with you for our Q2 earnings call later on this year. Thank you all.

Operator

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T. You may now disconnect.

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