Chordiant Software F1Q08 (Qtr End 12/31/07) Earnings Call Transcript

| About: Chordiant Software (CHRD)
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Chordiant Software F1Q08 Earnings Call February 7, 2008 5:00 PM ET


Kelly Hicks - Vice President of Corporate Business Planning

Steven R. Springsteel - Chairman, President and Chief Executive Officer

Peter Norman - Chief Financial Officer


Brian Denyeau - Oppenheimer

Derrick Wood - Pacific Growth Equities

Analyst for Tom Ernst - Deutsche Bank


Welcome to the Chordiant Software’s first quarter 2008 earnings teleconference. (Operator Instructions) I would now like to turn the conference over to Kelly Hicks, Chordiant’s Vice President of Corporate Business Planning.

Kelly Hicks

Thank you for joining us today as we present the financial results of our first fiscal quarter of 2008. With me in Cupertino today are Steve Springsteel, our Chairman, President and CEO; and Pete Norman, our CFO. We’ll begin with prepared comments from management and then we’ll open up the call for questions.

The information in today’s conference call will include historical information and forward-looking statements including guidance about our business that involve risks and uncertainties that could cause actual results to differ materially from those contemplated by forward-looking statements. Chordiant’s actual results could differ materially from past results and forward projections.

Forward-looking statements are generally identified by words such as believe, anticipate, expect, will, plan, ensure, would, guidance, projects, projection, and similar expressions. Further information on potential factors that could affect financial results is included in Chordiant’s most recent SEC filing. We assume on obligation to update guidance or other forward-looking statements.

In addition, non-GAAP financial measures and the most directly comparable GAAP financial measures may be discussed on this webcast. Our first quarter fiscal 2008, earnings release dated February 7, 2008, which was issued after the close of the market today, contains non-GAAP financial measures. Table C and D in that press release reconciles the non-GAAP financial measures and defines the most directly comparable financial measures prepared in accordance with generally accepted accounting principles or GAAP.

Chordiant continues to provide all information in accordance with GAAP and does not suggest or believe non-GAAP financial measures should be considered as the substitute for or superior to measures of financial performance prepared in accordance with GAAP.

Chordiant believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operating results. Primarily because they exclude amounts the company does not consider part of ongoing operating results when assessing the performance of certain functions, certain geographies or certain members of senior management.

We believe that our non-GAAP financial measures also facilitate the comparison of results for current periods against guidance for future periods with results for past periods. Please visit our Investor Relations section of our website at for information regarding the non-GAAP financial measures discussed on this webcast.

And now I’ll turn the call over to our Chairman, President and CEO, Steve Springsteel.

Steven R. Springsteel

Welcome to Chordiant Software’s first quarter of fiscal 2008 earnings conference call. First, I would like to spend some time discussing the highlights of the quarter, the high level financial details, and our current thoughts on the economic environment. I’ll then turn it over to Pete, who will go into more detail on the financials as well as our revised guidance.

Revenue for the first quarter was $29.1 million, up 27% year-over-year. This was slightly above our preliminary results range of $27.5 to $29 million that we provided on December 27, but slightly lower than our internal expectations coming into the quarter.

GAAP net income for the first quarter was $205,000 or $0.01 per share and non-GAAP net income was $1.7 million or $0.05 per share, both higher than our preliminary results range.

Bookings for the first quarter were approximately $49.8 million. Our booking strength was driven by our transaction with Vodafone, which represents the largest transaction in Chordiant’s history. As we’ve discussed in the past, due to the size of our transaction and the timing of transaction closing, customer orders can fluctuate significantly from quarter-to-quarter.

Deferred revenue ended the quarter at $57.1 million and backlog was a record $96 million at the end of the first quarter. The disconnect between deferred revenues declining and backlog increasing is due in part to the structure of the Vodafone deal, which is included in the backlog number, but not in our deferred revenue balance. Steve will provide you with additional details regarding the accounting for this transaction later in this call.

We ended the quarter with cash balances of approximately $87 million, which is up over 84% from the prior year, but down slightly from the $90 million recorded last quarter.

Now let’s spend a little time covering some of the key events in the quarter. During the first quarter, we signed the largest transaction in Chordiant’s history with Vodafone, the world’s leading mobile telecommunications company. The transaction is for licenses and support of our Decision Management and Marketing Director Product suite, which are to be implemented in up to 18 Vodafone group companies located around the world.

In the first quarter, we saw the first two Vodafone group companies make their first purchases from us. We expect that other Vodafone group companies identified in the agreement will make their first purchases over the next two years.

However, as we outlined in our 8-K regarding this transaction, we do have guaranteed minimum commitments from Vodafone in fiscal years 2008 and 2009 that add up to the $26 million initial transaction value. This contract also includes pricing to allow additional Vodafone group companies not specifically identified in this agreement to purchase Chordiant product over and above this initial $26 million contract.

We are extremely pleased with the closing of this transaction during our first fiscal quarter. We’re working very hard to expand our presence in communication, and this transaction is a validation of the strength of our solution and the ROI they can provide within this core vertical.

We believe a marquee transaction of this size and scope will expand our presence and reputation in the marketplace. We are hopeful that this will lead to future wins much in the same way that we have seen with the CIGNA transaction in the insurance vertical.

The CIGNA transaction led to additional wins for us over the last 18 months with such world-class firms as AIG, WellPoint, DAK and others. As we stated last quarter, we continue to see increased activity in the communications and insurance/healthcare vertical with both the US and internationally and our pipelines remain robust.

As we have discussed for several quarters, we’ve been focused on diversifying our customer base in both the communications and insurance/healthcare verticals, as well as our presence in the US and internationally. To help facilitate this, we hired David Cunningham as Vice President of Worldwide Sale. While he has only been onboard a few months, he has been working on our diversification strategy and identifying key areas of opportunity.

In addition to David, we have added sales people in North America to focus on increasing our vertical market reach. We are also hiring additional sales people to focus on emerging markets such as Russia, India, and the Asia Pacific region including Australia. We believe having direct resources in these new geographies that complement our system integration partners will enable us to more quickly identify and react to opportunities.

We’ve also hired a new VP of Alliances and a Director of European Alliances. Partner relationships are key to our growth strategy, and we believe we need additional resources to manage the increased activity levels with partners and manage the opportunities and turnover.

We have seen exponential growth in a number of trained and field experienced Chordiant partners reflecting the growing commitment that this community is making to us. These growing resources are dedicated to Chordiant by these global partners because they see a strong current and future demand for our solutions.

Ongoing innovation is also key for Chordiant. And during the first quarter, our development teams released Version 1.5 of our Collections module, updates to our Teller Solution, and updates to our Marketing Director products.

Now turning our thoughts to the economic environment, we’ve recently seen in North American financial services macroeconomic conditions deteriorate. The negative news from the US financial services sector of late increases our concern about the spending environment.

And while the financial services pipeline for fiscal 2008 remains solid, we are taking a more conservative stance with respect to deal closure rate and subsequently our fiscal year 2008 guidance. Steve will go in a more detail on this later, but we believe this is the prudent approach.

With that said, we have had some meaningful successes in the quarter. We saw strength within select verticals in North America and internationally, and believe investing in these areas of the business continues to be a right strategy for sustainable, profitable growth on a long-term basis.

We know you are interested in Citi, particularly in light of my previous comments. What I can tell you is that we are in production of three large projects in Citi and continue to move forward in three additional business units.

Our professional services people are fully engaged and we are continuing to receive additional orders for our professional services. What we are doing at this time is taking a more conservative approach to projecting the timing of additional seat license orders. But we haven’t had any direct indications from Citi that would impact their expected buying behavior; we believe a more conservative approach is appropriate.

We remain confident in our solutions and the value we provide to our customers. I continue to believe that the company is in good position to capitalize on our recent accomplishments and with investments in new and expanding market, I expect this fiscal 2008 will be another good year for Chordiant.

With that said I’ll now turn the call over to Peter Norman, our CFO for a deeper dive into the financials as well as provide an update on the guidance.

Peter Norman

Let’s take a more detailed look at our final results for the most recent quarter ended December 31, 2007. As Steve indicated, revenues for the first quarter of our 2008 fiscal year were $29.1 million, up 27% from the $22.9 million we reported for the same three months in 2007.

Sequentially, revenues were down 9.2% from the $32.1 million we reported for the September 30 quarter. While these results came in ahead of our preliminary range result for the quarter that we released on December 27, the quarter was impacted by a combination of seasonality and the final contract structure of the record €18.1 million or US $26.1 million Vodafone agreement.

During this quarter two of the 18 subsidiaries covered under this agreement placed and paid for orders aggregating approximately $3.7 million with $1.4 million of this balance being characterized as license revenue.

As of December 31, 2007, backlog which includes our deferred revenue balances was a record $96 million compared to the $75.4 million last quarter. Chordiant defines backlog as contractual commitment received from our customers to purchase orders or contracts that have yet to be delivered.

The Vodafone booking had a significant positive impact on our backlog. Our aggregate $57.1 million deferred revenue balance at December 31, 2007, decreased by approximately $10.9 million from the $68 million at our fiscal year end of September 30, 2007.

Our deferred revenue balance varies from quarter to quarter depending on the timing of license transaction, the magnitude of the support and maintenance agreements renewed during the period, and the accounting treatment associated with new contract. The decline in the deferred revenue balance this quarter was driven by the fact that the remaining portion of the Vodafone deal is not reflected in the balance sheet as deferred revenue.

As discussed in our Form 8-K filing in December, based on the final terms of the Vodafone agreement future amounts will not be invoiced until purchase orders are placed or until the amounts become due on the date specified in the contract. As such, at December 31, 2007 future amounts are not recorded in our balance sheet either as accounts receivable or deferred revenue prior to invoicing.

These unbilled balances committed by Vodafone at December 31, 2007 totaled approximately $23 million and are included in our backlog at the end of the quarter. Of the $23 million, $13.4 million is contractually due within the next 12 months, and the remaining $9.6 million is due no later than April 2009.

A significant portion of our deferred revenue balance and the Vodafone backlog balance continues to relate to license fees. As of December 31, 2007 we had five accounts with more than $1 million in deferred license revenue, which will be recognized in future periods.

Additionally, included in the Vodafone backlog balance is approximately $17.8 million of license fees. Of the $57.1 million in total deferred revenue at December 31, 2007 approximately $20.6 million or 36% of the balance relates to license fees and the remaining 64% is primarily associated with support and maintenance agreements.

Bookings for the quarter were $49.8 million and included the $26.1 million commitment from Vodafone. As we’ve discussed in the past, due to the size of our transaction and the timing of deal closing, customer orders can fluctuate significantly from quarter to quarter.

Looking at the geographic distribution of our revenues for the first quarter, North American revenue of $15.6 million represented approximately 54% of our total revenues with the remaining $13.5 million or 46% being generated in Europe.

Our international results continue to be solid in parts due to our expansion into emerging markets. Europe and the emerging markets are important because presently outside of North America we’re not seeing the macroeconomic issue that we are observing in the United States, specifically with respect to challenges and the financial services sector.

We are currently making investments including the addition of sales reps in emerging market as Steve discussed earlier. We believe these additions will begin to have a positive impact on our quarterly results in the second half of fiscal 2008.

Now, let’s take a more detailed look at the income statement. License revenues for the first quarter of fiscal 2008 were $8.8 million or 30% of total revenues and service revenues were $20.3 million or 70% of total revenues.

Our license revenues will fluctuate from quarter to quarter to the extent that we sign large book ship deals and account for prior transactions based on a percentage of completion method of accounting. This is why we provide you with metrics such as bookings and backlog so you can better assess the trends in our business.

In our first quarter, our license revenue was impacted by the seasonality that we discussed on our last quarter’s conference call as well as by the limited number of initial orders Vodafone placed under their 18-country commitment.

With respect to margins, our overall first quarter non-GAAP gross margins including licenses and services were 70.3% below our targeted range of 74% to 76%, and a decline of 400 basis points compared with the September quarter’s results. The decline in gross margins is primarily due to the revenue mix for this quarter shifting more towards service revenue, which have lower margins than license revenues.

Non-GAAP service margins, which include support and maintenance, were 59%, up 240 basis points as compared to last quarter and at the high end of our targeted model of 55% to 60%.

Now let’s review operating expenses by category. Sales and marketing expenses, excluding stock-based compensation for the quarter ended December 31, 2007, were approximately $8.7 million, increasing from the $7.8 million we reported last quarter. This increase is primarily due to the planned additional expenses that we mentioned during last quarter’s conference call, specifically those relating to our sales kickoffs, President’s Club and our Executive Customer Advisory Board event.

We expect that sales and marketing expenses will increase as we execute to our plan to grow the number of quota carrying sales reps and alliance professionals from 23 at December 31 to approximately 30 by the end of fiscal 2008.

Our investments in these revenue generating opportunities will also include modest infrastructure cost increases. Research and development expenses excluding stock-based compensations were essentially flat at $6.5 million for the quarter compared to last year. We expect R&D expenses to increase modestly in absolute dollars as selected headcount increases are added over the next several quarters.

General and administrative expenses excluding stock-based compensation were $4.4 million for the December 31, 2007 quarter, up from the $4 million we reported last quarter. The increase included a significant portion of our normal year end audit fees. In future quarters, we expect G&A costs to decline slightly from the Q1 level.

Non-GAAP operating income as a percentage of revenues for the quarter was 3%, down as compared to the 17.3% for last quarter. The decrease was primarily due to the revenue decline of significant portion of which was seasonally driven combined with the previously discussed increased operating expenses.

Other income and expense combined with interest income was approximately $970,000 for the quarter, a decrease of $194,000 from last quarter. This difference includes net changes to foreign exchange gains and losses.

Income tax expense was $152,000 in the quarter. In the near term, the majority of our taxable income will continue to be offset by a $127.6 million in Federal net operating loss carry forwards. As noted in the footnotes to our financial statement, NOLs have been adjusted to reflect the change in control limitation resulting from historical merger activity.

Our non-GAAP net income, excluding amortization, adjustments to restructuring reserves, and stock-based compensation for the quarter ended December 31, 2007 was $1.7 million or $0.05 per share compared to the $6.3 million or $0.18 per share in the quarter ended September 30, 2007.

Under generally accepted accounting principles, or GAAP, net income for the quarter ended December 31, 2007 was $205,000 or $0.01 per share on a fully diluted basis compared to $5.3 million or $0.16 per share last quarter.

Now let’s take a look at cash and accounts receivable. Cash flows from operations for the quarter resulted in a point usage of cash, aggregate cash, cash equivalents, marketable securities and restricted cash on our balance sheet were $87.4 million, a decline of $3 million sequentially but up $39.4 million from the year ago period. Cash collected from Vodafone was $3.7 million.

During the quarter, our days sales outstanding or DSOs relating to accounts receivable were 66 days, down significantly from the 81 days we reported last quarter due to strong cash collection. Again, it is important to note that there were no outstanding license receivables from Vodafone at the end of the quarter.

Now, let’s turn to our guidance. With regard to our 2008 guidance, we are revising our previously discussed guidance and adopting a more cautious outlook. Our 2008 guidance is adjusted as follows. Total booking, which include the Vodafone transaction for fiscal year 2008, are now expected to be in the range of between $140 and $150 million.

Total revenues for fiscal year 2008, are now expected to range from $127 million to $137 million. We expect deferred revenue balances, which exclude the Vodafone backlog to decline slightly during fiscal 2008 as compared to 2007.

We also now expect to report GAAP fully diluted earnings per share of between $0.24 and $0.42 and our non-GAAP fully diluted EPS is expected to be between $0.40 and $0.58. These earnings estimates for fiscal 2008 are based on approximately 35.5 million diluted shares outstanding.

Finally, Chordiant expects to generate positive cash flow of up to approximately $5 million for fiscal 2008. With respect to added color surrounding the quarterly trends during the year, we expect to see sequential increases in quarterly revenues and non-GAAP operating profit percentages for the remainder of fiscal 2008.

And we expect to exit fiscal year 2008 with quarterly non-GAAP operating profit percentages within the range of our previously published non-GAAP targeted operating model of between 15% and 20%. Additionally, as previously stated, we also believe that the investments we are currently making in emerging markets will begin to have a positive impact to our results in the second half of fiscal 2008.

Our updated guidance takes into consideration the shortfall we experienced in Q1 and the current macroeconomic issues that we are seeing in the market, specifically, with respect to the financial services industry in North America. We believe it is prudent to take a more conservative approach to our guidance for fiscal 2008.

With that being said, we would like to point out that our international business continues to be strong and we are seeing continued traction in our other key vertical markets of insurance/ healthcare and telecommunications.

With that let me turn the call back over to Steve for a brief summary.

Steven R. Springsteel

In summary, the economy North America is presenting us with some challenges and the Chordiant team is up for those challenges. We’ve made adjustments that should continue to allow us to grow our business at both the top and bottom line. We were able to accomplish this through continuing to increase our focus on communications and insurance/healthcare vertical, expanding into new international geographies, and increasing our efforts with our system integration partners.

We believe that our strong products and revenue diversification position us well to remain the leader in customer experience management. Our revised guidance reflects all of these activities, and after a record fiscal 2007 financial performance, we are still guiding towards positive growth in revenues, significant profit and positive cash flow.

That concludes our remarks for today. We’ll now open up the call for questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Brian Denyeau - Oppenheimer.

Brian Denyeau - Oppenheimer

So if we can just dig into the methodology used for revising this guidance, specifically, it almost feels like you’re ex-ing out any contribution from North American finance. Would this change your guidance? Can you just sort of walk us through? I know you are being more conservative, but I mean, how conservative do you feel you are being? Is this kind of a worst-case scenario approach you would chose to use?

Steven R. Springsteel

With respect to North America, all those economic indicators, kind of deteriorated over the last month or so. So what we did is we heavily discounted financial services. We looked at what we had projected for Citi and we moved a lot of that out.

And then we kind of did a little bit of a reduction with respect to some of the EMEA financial services numbers as well. As the previous forecast and the previous guidance did not incorporate mega deals into the bookings numbers and so forth, we did not include them here either. So, that’s kind of the high level approach that we took.

Brian Denyeau - Oppenheimer

Did you make any substantial changes to your closure rates or kind of pipeline methodologies for the other verticals you plan?

Steven R. Springsteel

No. Actually, we didn’t adjust the closure rates to the other verticals. In fact, what we are doing this year is focusing on expanding geographically into areas such as Russia, the Asia Pacific region. We are looking to bring on a couple of people in Spain. So those emerging markets we’re continuing to invest in and then we think those will add incrementally to what we have.

Brian Denyeau - Oppenheimer

So that to move from 23 to 30 in quota carriers over the next nine months, that’s the same number you have used before. Are you basically just moving from hiring people in the States and focusing now on taking those people over? You’re not adding people in the States at this point.

Peter Norman

If you look at the hiring, where we are at, I think we are okay in the United States. We have beefed up our Alliances area. We have brought on a VP of Alliances and then we also have somebody heading up Alliances in EMEA for us. So that’s a key area of focus for us.

We think that’s going to bear significant fruit particularly with the increased activity with our Alliance partners as that pipeline grows. And then the additional sales people, quite candidly, as we just talked about are in those emerging geographical areas.


Our next question comes from the line of Derrick Wood - Pacific Growth Equities.

Derrick Wood - Pacific Growth Equities

Wanted to drill on some more of the specifics on Citi, you talked about you are pushing out some expectations. What led you to do that and what is the revenue impact?

Steven R. Springsteel

So we don’t really get into the specific revenue impact of it other that we have always said that the amount for Citi is not a huge number in fiscal 2008. What led us to move it out were really the press releases, the announcements around financial services in North America in general.

And then you just listen to somewhat again, the announcements more so than what we’re hearing internally. As I’d mentioned in my prepared comments, internally we’re still moving projects along. They have projects in production. We feel pretty good about that, but we just feel that it just make sense to take a more conservative approach on that.

Derrick Wood - Pacific Growth Equities

Is it fair to assume that over the last month, just trying to figure out what’s changed, you haven’t really seen a whole lot in your direct pipeline change, but you’re more reacting to the headlines and some of the economic indicators?

Steven R. Springsteel

I think it’s a combination of both, but probably slanted more towards the headline and the economic indicators. But having said that, quite candidly Derrick, I mean we do see kind of a little bit of the slowness in the activity in North America financial services.

Derrick Wood - Pacific Growth Equities

And in terms of Citi, were you able to book any sizeable seat expansions in the quarter?

Steven R. Springsteel

No, not seat, we are booking and performing additional services work as we continue to move those projects along.

Derrick Wood - Pacific Growth Equities

So you are doing, IBM is not doing a whole lot of the service.

Steven R. Springsteel

No, actually, TCS is doing a lot of the services. But we continue to provide kind of the high-level technical architect type and business analyst types on not just Citi, but other implementations as well.

Derrick Wood - Pacific Growth Equities

Have you had a chance to talk to IBM and see what they are seeing in the market. Has the pipeline with them changed at all between you guys?

Steven R. Springsteel

We do see a lot of the pipeline with IBM. And they are kind of taking the same conservative approach as us with respect to how they allocate their resources and so forth. I would encourage you to talk to them to get their comment with respect to what they see in their specific pipeline. I can’t really talk about that.

Derrick Wood - Pacific Growth Equities

I meant the pipeline in terms of generation of software deals for you.

Steven R. Springsteel

That’s going great. I mean that’s kind of the confusing part for us is from a partner perspective, as you recall, we’ve switched to the partner-enabled model, probably been about a year and a half ago now.

And so more and more folks within our respective system integration partners as they learn about Chordiant, the pipeline increases, and that’s really what prompted us to hire and create and fill the position of VP of Alliances. So, we have a senior person heading that effort up on a worldwide basis. And then we have somebody who does nothing but that in the European arena for us, and that has borne a lot of fruits, specifically, with IBM across Europe.

Derrick Wood - Pacific Growth Equities

Pete, did you say how many deals over a million there were in the quarter?

Peter Norman

Vodafone deal was the only transaction over a million. There were two subsidiaries within that master agreement that both placed orders both over a million.

Derrick Wood - Pacific Growth Equities

I don’t know, I haven’t looked at the 8-K or the 10-Q, but did you disclose the revenue from Vodafone?

Peter Norman

Yes, we have $1.4 million of license revenue.

Steven R. Springsteel

Yes, the majority was license which was $1.4 million and then there was a kind of apportionment to maintenance, much of which is in deferred.

Peter Norman

So we collected $3.7 million from Vodafone. Of that, $1.4 million was license revenue and the remainder is sitting in deferred as deferred support maintenance that will be taken over the term.

Derrick Wood - Pacific Growth Equities

The other thing I’m trying to reconcile is it was a great backlog number. And obviously, that includes Vodafone, but you’re sitting there with almost $100 million, well, $90 plus million in backlog and looking at a revenue number not too much higher than that. Can you help us in terms of what you see in the short-term and long-term breakdown in the backlog?

Steven R. Springsteel

Well, with respect to Vodafone, specifically, in the 8-K that was filed in December, we showed the split. And it’s roughly $10 million a year for ‘08, ‘09. So, in that backlog there’s roughly $9, $10 million of Vodafone backlog that would be 2009.

Peter Norman

And then you can also look at the current, non-current split on the face of the balance sheet for deferred revenue and get the current, non-current split there as well.

Derrick Wood - Pacific Growth Equities

Was the backlog number higher than expectations or is that what you were thinking?

Steven R. Springsteel

Our backlog was a little bit light from what we were thinking. We were hoping to push over the $100 million mark. The deferred revenue, the rate of the transaction was originally and really kind of got down the pipe the long ways that would have been in deferred revenue. But at the end there, the structure got changed such that it was in backlog, but not deferred.


Your next question comes from Tom Ernst- Deutsche Bank.

Analyst for Tom Ernst - Deutsche Bank

I am sitting in for Tom Ernst today. Just a couple of questions, one is on your geographic revenue mix. Obviously, it’s moving towards more diversity, and do you also provide a split out of the verticals?

Peter Norman

No, we don’t publish the vertical split. But geographically, yes, it’s about a 50-50 split in this quarter. I think it’s about 53%, 54% North American.

Analyst for Tom Ernst - Deutsche Bank

And what number do you expect to get? Are you guiding for fiscal ‘08?

Steven R. Springsteel

Well, in the 10-Q, we disclosed that it should continue to be a roughly a 50-50 split moving forward. We see international actually getting pretty strong.

Analyst for Tom Ernst - Deutsche Bank

At some point, it’s possible that international could overtake the US?

Steven R. Springsteel

Sure. Yes, that would not surprise me.

Analyst for Tom Ernst - Deutsche Bank

And did you provide any information on headcount and quota carrying sales reps?

Steven R. Springsteel

Yes, we said that we ended December with approximately 23. Our plan is to get up to approximately 30 by the end of our fiscal year. And then it’s worth noting that with regards to our financial projections, as we have historically, we always embed a ramp time for those people to get up to speed which leads to Pete’s comment about that we will see the impact of those later in the year.

Peter Norman

And then with respect to total head count we have approximately 284 employees as of the end of last quarter.


There are no further questions at this time, sir. I will turn the call back over to you for any closing comments.

Steven R. Springsteel

I’d like to thank everybody for joining us on this call. And again, we look forward to another record 2008 as 2007 was. Thank you very much.

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