DH Corporation (OTC:DHIFF) Q1 2016 Earnings Conference Call April 27, 2016 10:00 AM ET
Richard Colgan - IR
Paul Damp - Chairman
Gerrard Schmid - CEO
Karen Weaver - CFO
Dylan Steuart - Industrial Alliance
Stephanie Price - CIBC
Geoff Kwan - RBC Capital Markets
Graham Ryding - TD Securities
Wayne Johnson - Raymond James
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the DH Corporation Conference Call for the First Quarter Ended March 31, 2016. I would like to remind everyone that this conference call is being recorded today April 27, 2016 at 10:00 AM Eastern Time. I will now turn the call over to Richard Colgan, DH Investor Relations. Please go ahead, Mr. Colgan.
Good morning and thank you for attending. Today’s call is hosted by Gerrard Schmid, Chief Executive Officer of DH; and Karen Weaver, Chief Financial Officer. Before we begin, I'd like to advise you that the statements that follow include forward-looking information within the meaning of applicable securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the business or developments in DH's industry to differ materially from the anticipated results, performance, achievements or development expressed or implied by such forward-looking statements.
Information about the factors that could cause actual results to differ materially from anticipated results or performance can be found in our MD&A, which is available on SEDAR and in the press release announcing the results of the first quarter. As a reminder, we will use several non-IFRS measures and key performance indicators in our presentation, including adjusted revenues, pro forma adjusted revenues, EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per share, adjusted net cash from operating activities and debt to EBITDA ratio among others. These terms are described within our MD&A, where you will also see reconciliations to their nearest IFRS measure. To accompany our comments today, we have posted a slide presentation on the Investor Relations section of the DH Web site at dh.com under Events & Presentations, and via a link on the earnings press release.
I will now turn the call over to Gerrard.
Good morning everyone. Our results for the first quarter showed solid growth in several areas and in particular we remained pleased with the positive momentum from our acquisition of Fundtech approximately one year ago. Our GTBS and Canadian businesses showed solid growth and our lending and integrated core segments performed in line with our expectations for the first quarter in the core business. But was down in the lending segments due specifically to the timing of LaserPro renewals which we’ll address later in our marks from a higher level first quarter adjusted revenues grew by 40% driven by the addition of GTBS, positive FX impact from our geographically diversified business model and solid organic growth in our Canadian business as well as growth in integrated core.
Our adjusted EBITDA grew 18% primarily due to the acquisition of Fundtech and also the positive FX impacts. More specifically we’re pleased with the performance in the following areas, solid performance GTBS, ongoing strength in our Canadian business, as well as integrated core and progress in advancing our long term innovation agenda.
Turning now to Slide 5, for some more details on GTBS results, we continue to be pleased with the performance of the segment, the continued sales momentum and the continued positive reception we’re receiving from perspective clients for our payment hub technology. Adjusted revenues for GTBS grew by 9% on a pro forma constant currency basis for the first quarter compared to the same period last year. The first quarter results were led by 19% growth in adjusted revenues from our global payment technologies which includes our Global PAYplus payment hub and our U.S. payment technology on a pro forma constant currency basis. As we continue the sales momentum in payment hub technology, we’re pleased to see the recognition of one of our major global payment hub customers, the Bank of China being named a model bank by Celent a global financial services research firm.
Only three years from the original implementation, our global payment system is now live in 26 countries the bank has re-realized improved revenues, reduced costs and expansion of its business overseas. We are pleased with our client success and our role in helping them revolutionize their business to a payment system transformation. We are committed to providing innovative solutions to our clients, a recent example is a contract refined in the first quarter, with a large European bank to provide the technology to a system in becoming the first European bank to utilize a payment as a service model for payments.
Now let me provide some color on the L&IC on Slide 6, lending and integrated core results for the quarter compared to the same period last year were mixed, adjusted revenue increased by 7% for the quarter but decreased by 3% in U.S. dollars. Adjusted revenue growth in the integrated core was 6% in constant currency for the first quarter compared to the same prior year period, growth in integrated core was primarily driven by growth in our card payments and channel solutions revenues, and we continue to be encouraged by the market demand we're seeing for our Phoenix platform. However, adjusted revenues in U.S. lending was essentially flat for the first quarter compared to the same prior year period and decreased by 10% on a constant currency basis, primarily due to the timing of renewals in our LaserPro solution.
The reasons why renewal timing is relevant to LaserPro are as follows. LaserPro contracts range in term from three to seven years and the average return is approximately 4.4 years. However, the number of contract renewals is not easily distributed from year to year, the calendar years 2014 and 2015 at a higher proportion of contract renewing than in 2016. Therefore we anticipate lower revenues from contract renewing in 2016, even though there is no change in renewal rates and renewal rates continue to be well in excess of 95%. We anticipate 2017 to have a more normal renewal cycle.
The license component represents a largest component of LaserPro contract value and is recognized in revenues in the first year of the term contract. So, a period with a high number of renewals will have higher revenues. We believe it is important to note that since these are term licensed contracts and our build and collected over the term of the contract, we expect to see an increase in the cash from our business, despite comparative revenue decreases, caused by the renewal cadence.
The cash generated from this product has grown in the mid single-digits annually, since the acquisition of HFS, and should grow in the mid single-digits in 2016 over 2015. As a result of prior year bookings growth and revenue retention has exceeded 97%. So despite the reduced revenues in 2016 our competitiveness in the sector remains unchanged and we continue to maintain strong market leadership in this category. Our focus on lending in 2016 will be on broadening the use of our new LaserPro origination and processing capability, for commercial lending that launched in Q1, broadening our customer base and continuing our cross sell efforts.
Moving now to our Canadian segment on Slide 7, our Canadian segment showed adjusted revenue increases in both lending solutions and payment solutions driving an 8% increase in adjusted revenue for the first quarter compared to the same period in the prior year. We are pleased with the growth level for our Canadian segment which was roughly of equal magnitude both between our lending and payment solution service areas. Our registry business benefited from continued strong auto sales, the recovery business growth was driven by an increase in volume related to a new contract with the auto finance division of a large Canadian bank which we announced last quarter. We expect the recovery business, to continue to grow in 2016, from the addition of this major new client. We also expect volume to benefit in the event of adverse trends in general economic conditions and automated better performance in certain regions such as Alberta.
Canadian mortgage technology benefited from higher volumes and average order values which were offset by lower professional services revenues and the impact of a retroactive price adjustment for a contract signed in the first quarter of 2015. The Vancouver and the Greater Toronto area markets remained relatively robust in the first quarter, while there has been a negative impact on mortgage volume in the Province of Alberta due to adverse economic conditions.
Payment solutions continues to perform in line with our expectations. As check-order volumes decline, we continue to offset the financial impact through efficiency improvements, cost reductions and growth from enhancement services, and one final noteworthy item in the first quarter for our Canadian business was our success in being awarded the renewal of the Canada Students Loans program contract. We will continue to operate under the terms of the existing contract which was recently extended until the platform and the technology become operational in 2018.
I'll now turn the call over to Karen for a discussion of the financial performance by segment.
Thank you, Gerrard. Good morning everyone, I'll start with the GTBS segment on Slide 9. In our Global Transaction Banking Solutions adjusted EBITDA of CAD$22 million for the first quarter is in line with our expectation. The 23% adjusted EBITDA margin for this quarter reflects the variability due to seasonality of the business. As we have previously communicated the quarterly GTBS margins have historically varied in the range of 2,000 basis points through the quarters in the year. This quarter is no different.
Moving now to L&IC segment on Slide 10, our Lending and Integrated Core segment adjusted EBITDA decreased by 14% in the first quarter, this compares to the same period in the prior year and by 22% on a constant-currency basis primarily due to the decline of the LaserPro revenue in the quarter, increased costs related to risk management activities and some one-time expenses primarily related to marketing and customer activity. The first quarter adjusted EBITDA margin in the lending and integrated core segment decreased to 28% from 34% compared to the same prior year period. The decrease was primarily due to the reduced lending solutions revenues specifically related to the LaserPro timing, as discussed by Gerrard and in our MD&A and of course the one-time costs that I noted.
Turning now to our Canadian segment on Slide 11, the adjusted EBITDA of $40 million was marginally higher than the same prior year period. This reflected the increased revenues in the first quarter and the corresponding expenses related to the growth of our collateral management solutions and our enhancement services solutions. The adjusted EBITDA margin in the Canadian business was 24% in the quarter compared to about 25% in the same quarter of the prior year. The decrease is primarily due to the lumpy pricing adjustments in both our student lending and our Canadian mortgage technology businesses which were reported in the first quarter of 2015 along with our sales mix.
Turning to Slide 12 for the consolidated performance in the first quarter, at $414 million of adjusted revenue, we benefitted from the inclusion of GTBS, FX tailwinds and organic growth in our Canadian segment. Our consolidated adjusted EBITDA margin was 25% in the quarter which compared to 29% in the first quarter of the prior year. Our margins were primarily impacted by the GTBS acquisition and seasonality as expected, the reduced LaserPro revenue and some non-recurring expenses in L&IC and the slightly reduced margins in Canada. Adjusted net cash from our operating activities which is net cash from operating activities adding back the impact of acquisition related and other charges totaled $67 million for the quarter. Our adjusted net cash from operating activities has primarily been used for what I call the usual suspects of capital expenditures, the payment of cash dividend and debt repayment.
Let me elaborate, capital expenditures, these have increased primarily due to our continued investments in product development initiatives in all of our segments with significant focus on lending and payment technology. With respect to debt repayment we've repaid $20 million of debt in the first quarter, this is consistent with our stated objective of reducing our leverage subject to FX changes and expected business results our forecast leverage is now between 2.6 and 2.75 times at year end and down to 2.5 times mid 2017.
Turning to Slide 14 for more balance sheet highlights, we ended the quarter, our leverage ratio 3.02 times debt to EBITDA, this of course reflects the reduction in the debt and the impact of the strengthening of the Canadian dollar which decreased our ratio by approximately 18 basis points. We also paid a regular dividend of $0.32 in the quarter and we declared a second quarter dividend of $0.32 to be paid on June 30, 2016 to shareholders of record on June 16, 2016.
Now moving to the bottom line on Slide 15, our adjusted net income per share was $0.43 in the quarter which compares to $0.55 in the first quarter of last year. It reflects the impact of the acquisition of Fundtech, decreased revenues in L&IC, increased shares outstanding and a tax recovery recorded in the quarter. For the year of 2016 we expect the global cash taxes to be in the range of CAD$35 million to CAD$40 million.
Now turning to Slide 16 for a discussion of the rest of our outlook on the year, in GTBS, our outlook for the year is consistent with the first quarter in terms of the rate of growth of the core solution, with global payment technology leading the way. In lending and integrated core our outlook for 2016 is split for coring channel and lending. We expect revenue growth in the integrated core as implementations are completed and we expect lending solutions to be flat year-over-year on revenue.
In Canada we remain watchful in general for parts of the business that the economic performance of the country will influence. We are approaching our two historically strongest quarter and have no change to our mid single-digit growth outlook in the aggregate. We do expect check order volumes to continue to decline in the high single-digits over the short to medium term. Overall we expect that we’ll continued higher expenses in risk management and corporate activities as we further build out our capabilities and strength in this area. These activities take time and will continue to our priority given the customers that we serve.
Finally we’ll work to continue to improve the effectiveness of our global operation, realign our corporate and business segment functions to ensure that we’re effective in deploying our operations globally and also to realize some cost synergy opportunities that have been provided by Fundtech. We will provide more color on our Q2 call as we advance this program, overall our outlook is consistent with that reported in February of 2016, we expect revenue growth in the 46% range on a normalized basis and we expect that EBITDA growth to be on the lower end of our 46% range.
I’ll turn it back to Gerrard for his closing remarks.
Thank you, Karen. We are a Company undergoing a long term transformation, we continue to believe that we’re well positioned to take advantage of market tailwinds with a business today that has in-demand products supported by a resilient business model, characterized by long term contracts, recurring revenues, solution capabilities that are difficult to displace, strong cash flow and geographic product and revenue diversification which we believe is particularly relevant given account volatility in the global economic landscape. We’ve also initiated a realignment of our global operating structure to achieve cost synergies which will increase our overall return on capital from our acquisitions of both HFS and Fundtech we will discuss this in more detail next quarter.
Turning now to Slide 18 I will close our first quarter remarks with a few final comments, we remain committed to our growth strategy and our focus of the near term continues to be firstly to continue to focus on revenue growth including maximizing the growth potential of GTBS and expanding our margins through operating leverage and cost realignment. Secondly increasing investment in innovation in our technologies as well as building stronger capabilities in software engineering and products developments. Thirdly, by evolving our business model and capabilities as a global Fundtech provider, fourthly to continue to reduce operating costs while increasing operating effectiveness throughout our global operations, and finally to strength them our risk management practices specifically in the areas of information security and U.S. regulatory compliance for the benefits of our clients and the Company over the longer term.
That now concludes our prepared remarks, with the operator assistance we would like to invite your questions, operator?
Thank you, sir. We’ll now take questions from the telephone lines. [Operator Instructions] Your first question comes from line Dylan Steuart from Industrial Alliance. Your line is open.
A quick question just on the LaserPro renewals, can you give us an indication of what the renewal rates were like in 2014, 2015?
So direction wise say Dylan is and the first thing in there one needs to remember and I think the -- we were quite clear on that on our call, the overall fundamentals for the LaserPro business have not changed at all. Our renewal rates continue to be in the high 95% side, 7% range and there is no evidence of any change in terms of our comparativeness. As it relates to 2014 and 2015 they were modestly higher than the average in terms of LaserPro renewals conversely 2016 is a low point in terms of the renewal cycle and conversely in 2017 we expect the return to a more normal cycle year so that is a relatively longwinded way of saying we would expect revenue pickup in the back half of 2016 moving into ’17 as we enter into a more normalized renewal cycle.
Okay and just so it sounds like may be the effect was a little bit more pronounced this quarter and into next quarter as far as that sort of thing?
I think you will continue to see our lending revenues grow through the back half of the year, as you will probably recall Q4 tends to be our strongest lending quarter and so when one marries that with the renewals cycles we do anticipate that the second half of the year to be stronger than the first half.
Okay and just as far as your other product lines, is LaserPro fairly unique in the lumpiness of the revenue reorganization?
So you’ll be reminded that we have over 3,000 LaserPro contracts where it is unique is that it’s on a term licensed basis where the license revenue is broadly recognized upfront when these licenses are signed so yes it is a relatively unique product in that regard, so we in our other products the only other lumpiness that you -- one might see would be when we sell large scale payment hub technologies there will be large license revenues which can move quarter to quarter based on the importance of the buying decision for an individual bank that we've shared them in the past vis-a-vis GTBS.
Okay, perfect and just finally, I believe you guys indicated that you expect margins to sort of improve due though the latter half of the year and back to the EBITDA margin close to 30%, is that realizing on some efficiencies or just more seasonal aspects of that business picking up the margin?
It's both Dylan, you will recall that typically Q4 is the strongest quarter from a margin perspective and when we marry that with the strengthening LaserPro renewals plus some efficiencies we'd expect to see strengthening margins through 2016.
And your next question comes from the line of Stephanie Price with CIBC. Your line is open.
Just going back to the LaserPro, just to understand why the renewal profile is so much different this year I don’t recall it being kind of highlighted in the past as a potential issue?
There is nothing unique about the year, Stephanie that would cause it to be a special year, we will have different buying patterns by different customers whether it's driven by changes in their outlooks around lending, but there is really nothing that we'd point to operationally that would make it special, other than the fact that there is a fewer number of contract being renewed, sometimes you will find some customers looking to sign longer term contract, in other cases shorter term contract but broadly there's really nothing unique about 2016 other than the fact, there is a fewer number of contract renewing.
Okay and then in terms of the sales funnel, in the LaserPro division, can you talk a bit about what you're seeing there?
As you are well aware because of the fact that banks with the different buying patterns, the reason why we don't disclose bookings in Q1 and Q2, is because of the lumpiness in that regard, so in keeping with our comments in the past in Q3 and Q4, we will disclose year to date bookings for our broad products, as it relates to LaserPro what I'll tell you is that in the quarter we saw some pretty decent new bookings growth from LaserPro, so I think the big message we'd like to share with everyone is that there is no change to the competitiveness of the product, either on the existing base business, where renewals continues to be in the high 90s and in bookings of new LaserPro products and Q1 was again an evidence of that as we saw a pretty decent bookings growth.
Okay and then just final one for me, in terms of margins in the lending business, it sounds like revenue is expected to pick up back half of the year, should we think of a similar sort of trajectory for margins in L&IC?
I think that's right, don't forget that the margins in L&IC in the quarter were also impacted by a couple of one-time non-recurring items. So we would expect our margins in L&IC to recover through the back half of the year.
And your next question comes from the line of Geoff Kwan with RBC Capital Markets. Your line is open.
Just in terms on a little bit of LaserPro, but I just want to make sure, so you have got the lumpiness in the LaserPro I don’t know if lumpiness is the right word but you have the counting of that and then also on the payment hub side, just specific to LaserPro then is the way you're talking about it is 2017 it looks like it's going to be call it a little bit more of a normal contract renewal year, and so just given what we're seeing in 2016, if we're looking just at LaserPro revenue specifically, it would seemingly kind of suggest that LaserPro revenue should double next year and then on an all else equal basis that we may see this, kind of the revenue impact in terms of it being lower, in like in 2020ish timeframe, is that the right way to kind of think about it?
So, Geoff, the way I'd, I'm not sure what's your comment related to vis-à-vis payment hubs but as it relates to LaserPro, yes, so you are right, but given that 2016 is a low point in the renewals cycle, we would at this juncture anticipate revenue growth from lending to be in the high single-digits going into 2017, as a result of this reversion back to the norm, in 2018, we would expect an equally solid year and in after years there will be another year where we have a dip in the number of renewals.
Okay and so my reference in the payment hub is just is going forward because this seems to have caught a lot of people by surprise, is even though you guys are still sticking to the 4% to 6% revenue guidance there, if you guys have maybe some noise that might be material within a sub-segment or a segment of your business, is that something you guys in light of share price reaction say that you might consider, providing a little bit more disclosure, just around how there might be some puts and takes in there in your various divisions?
Yes Geoff, we will always seek to add more clarity around disclosures that's an ongoing process for us, with payment hub it's a very, very different business from LaserPro, I know that we've discussed in the past, LaserPro is a very broad-base of customers over 3,000 contracts, whereas payment hubs tend to be more concentrated with a fewer number of very, very large global banks. So, I do anticipate that there will be lumpiness in GTBS revenues, if a license contract lifts from one quarter to the next, so that one is something, we have all anticipated for some time, and so I don't know that if there is any additional color though that I'd actually need to provide in that particular regard but around a broadest theme of ongoing disclosure, it's certainly a topic we will continue to revisit each quarter, and look for ways to provide more color on what's going on in our business.
And just the final question I had on the student loan admin contract renewal, are you able to discuss directionally in terms of -- on the pricing side if there's any pricing concessions, if so is it a one-time event or is it kind of rolled over multiple years and any sort of incremental CapEx that you need to spend on that?
So Geoff I think it's too early to really comment on the pricing side of things impart because we're working with the government on, what does that transition plan look like and there's certain revenues tied to transition activities, certain revenues tied to the underlying servicing of portfolio. So, and once we've got a better handle on that we will certainly share that with the market, as it relates to the capital needs to build out that portfolio that is already embedded in our outlook around our capital spend. So, we wouldn't expect extra capital there.
And your next question comes from the line of Graham Ryding of TD Securities. Your line is open.
Just wondering if you previously had visibility going into 2016 around it being a trough year for renewals, with LaserPro, was there anything that changed over the last couple of quarters that would lead to this revenue decline just given it's in contrast considering your previous guidance where lending I thought was supposed to pick up in 2016 after being more medium in 2015?
Yes so, Graham, a few things that all just remind people of, our overall outlook for 2016 has not changed, we're -- we strive hard to not run this business on a quarter-by-quarter basis and as Karen said in her remarks our outlook remains unchanged for 2016. So, we do anticipate strengthening through the back half of the year. Operationally there's nothing that has changed vis-à-vis LaserPro, we generally don't get into providing too much forward-looking clarity on individual product line so it's just a broad brush way of saying that the underlying fundamentals for our business have not changed.
Okay. And then it doesn't sound like, this is something that you would look to change if you could like do you even have the ability to change the revenue model around LaserPro to smooth out the profile, moving into this hosted or SaaS-based product?
Hi Graham it is Karen a good question, so we don't really have any flexibility in terms of applying U.S. GAAP les IFRS to this, the nature of this term contract, the only way that it could be achieved is if we have a different delivery of the technology and maybe that is both a longer term view, but this accounting will be with us, it leads through 2018 in terms of our own view on what's accounting rules apply?
And Graham as Karen said that if we do change the delivery model to a SaaS model that certainly gives us a basis to reconsider the contract treatment for the delivery of LaserPro services, I think that that will likely impact future go-forward customers as we deliver to that and as customers on these term contracts roll on to new contracts would certainly be able to deal with that to change at that point in time. But as Karen said, from where the business is at today we looked at it through the lens of '16,'17 and '18 probably being more in line with what the delivery times we have on that business.
On the GTBS side just wondering if there's any update that your discussions with the Canadian banks?
So, Graham as I've reminded everyone each quarter the sales cycle for payment hub tends to be in the 18 to 24 month timeframe and we're at the 12 month mark with regards to the acquisition of Fundtech so I think that probably the clock is still ticking. What I'll do say to you that we continue to be very-very engaged with a number of Canadian banks, I think the tone of the dialogue remains positive but as and when we have more definitive news on that front, we will obviously be more than happy to share that with the street.
And then just last one on the your initiative around realigning your global operations and realizing some of the cost synergies, at this point are there any expected savings or a range that we can expect from this or potentially the impact on margins? And secondly how long should we be expecting the sort of one-time items related to this initiative to be flowing through? Thanks.
Yes so, Graham as Karen said in her outlook we'll provide more color on that in Q2, but just at a high level the, what we are doing is when we acquired Fundtech we clearly came to an operational conclusion that we had a business that operated on a global basis and by contrast we had a U.S. and Canadian business that operated on a geographic basis and we had a view at that point in time that we wanted to make sure that we aligned the business on a global basis that we could provide a single view to customers in the U.S. when we bring both our payment and lending products to market. Now the timing to undertake a global realignment of our old structure really was contingent upon how we felt our pace of integration and as I said in the past that integration has gone really quite well, which is why we are at a juncture right now, of undertaking this global realignment. So I will be in a position to share with you more color in Q2 on that but I think what I would say to you broad brush terms is that, we expect to be fully done with that program through Q3 in terms of any one time expenses that might be related to that and then on a go forward basis the positive impact from those changes will impact us Q3 onwards.
And your next question comes from the line Wayne Johnson from Raymond James. Your line is open.
On that last topic so could you quantify a little bit more on what the dollar value cost of the realignment what is one time in nature and what’s recurring and I know that you are at , you mentioned that can you give us any more color on all that in the quarter or so but is there -- can you give us some bigger call out like a hi, this U.S. compliance is going to be here with us it is the world we live in that is x and we’re going to be spending y on these other projects just so we have a kind of some kind of ballpark?
So Wayne I’ll give you a color not precision and as I will keep in mind we are able and we said we’ll provide more color in Q2 but that is at a high level, we then sort of anticipate onetime costs in 2016 related to our global realignment beyond those onetime costs I don’t anticipate material recurring expenses as a result of that particular initiative, the additional expenses that are more recurring that we would expect that you could see in this business relate to risk management and information security specifically driven out of the U.S. regulatory regime we continue to look at that market as having a higher than other market perspective around regulatory oversight side and as result we built out that risk management team so I think that, we’re not talking about costs in the $10 million range, there are certainly south of that around our enhanced risk management expanses.
Annually, this is annual so let’s say somewhere between 5 million and 8 million or something like that?
Wayne let me come back to you on that, I don’t have those numbers at my finger tips right now, so rather than give you an imprecise I would directly comeback to you on that but I would say that those are probably on the upper end of where we would look for those costs to be on a recurring basis but let me come back to you on that.
Okay and then switching to the product side Fundtech seems like, sounds like momentum is favorable there, could you talk at all about any kind of cross selling that you guys have been targeting for Fundtech is it possible for the payment hub to cross sell any other smaller into the smaller banks in the U.S. or is it just going to be more of a big bank focus for the seeable future?
So Wayne, I’m going to be a little bit careful with my comments there due to some product competitive dynamics unfolding, what I’ll tell you is that and I think we were fairly consistent in this regard from the outset our original cross sell expectations were to sell the payments hubs into our large Canadian clients and that’s why I answered by Graham’s question the way I did, when one thinks about the U.S. markets, I do continue to believe that there is an interesting opportunity for us to offer our payment technologies to smaller banks in the U.S., one needs to adjust for is that against the timing of when the U.S. market will move towards real time payments. So I think that, when I think about were market momentum will come from in that regard I believe that that’s a 2017-2018 type of event and it is a function of what products we bring to market in support to that because when one takes a look at the large scale license enterprise solutions that we deliver to global banks today and not well suited to smaller banks so clearly we need to think about a different product to offer to meet the needs of banks in that regard and I think I will tap my comments there because we are getting into some competitive dynamics.
And as there are no further questions, I’ll now turn the call back over to you Mr. Schmid.
Thank you, Suzan. That completes our call so thank you for participating today. We look forward to reporting our second quarter results and hosting our next call in late July. Thank you.
And this concludes today's conference call. You may now disconnect.
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