Operator: Good morning, ladies and gentlemen, and welcome to the INC Research Second Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. I would like to hand the conference over to Ronnie Speight, Vice President of Investor Relations. Please go ahead, sir.

Ronnie Speight: Good morning, everyone. The purpose of this call is to review the financial results for INC Research’s second quarter 2016. With me on the call today are, Jamie Macdonald, our Chief Executive Officer; Greg Rush, our Chief Financial Officer; and Alistair Macdonald, our Chief Operating Officer. In addition to the press release, a slide presentation corresponding to our prepared remarks is available on our website at investor.incresearch.com within the Events and Presentations section. An archived version of this webcast will be available for replay on our website

after 01:00 p.m.

today. As outlined in our press release, there will also be a telephone replay of this conference call available for the next seven days. Remarks that we make about future expectations, plans and prospects for the Company, constitute forward-looking statements for purposes of the Safe Harbor Provisions, under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors. These factors are discussed in the Risk Factors section of our Form 10-K for the year ended December 31, 2015, and Form 10-Q for the quarter ended June 30, 2016, as well as our other SEC Filings.

In addition, any forward-looking statements represent our views as of today and should not be relied upon as representing our views as of any subsequent date. While we might update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. During this call, we will discuss certain non-GAAP financial measures, which exclude the effect of events we consider to be outside of our core operations. These measures should be considered a supplement to and not a replacement for measures prepared in accordance with GAAP. We believe that providing investors these measures helps them gain a more complete understanding of our financial results and is consistent with how management views our financial results.

For a reconciliation of the non-GAAP financial measures with the most directly comparable GAAP measures, please refer to slides 20 through 24 in our presentation. As we will be limiting today’s call to one hour, we request that participants limit questions to one each with an opportunity to ask one follow-up question. I would now like to turn the call over to Jamie Macdonald. Jamie?

Jamie Macdonald: Thank you, Ronnie. Good morning and thank you for joining our second quarter 2016 earnings call.

Before we get started, I wanted to make a few comments about the CEO transition that we announced this morning. This is my fifth year with INC and it's been an exciting, rewarding and successful time. On a personal level, I’ve committed to reevaluating my priorities and I am fortunate enough that we have a strong internal team and successor to allow me to do that at this time. I'm very proud to have led the company through a significant period of growth. As disclosed in our press release, effective October 1, Alistair Macdonald will transition into the CEO position.

Alistair is a strong leader with a proven track record and real strategic vision that I believe will help drive growth and success going forward. I will step off the Board on October 1 as well and move into the position as Vice Chair working with the Chairman of the Board and Alistair to ensure a smooth transition until February 28, 2017. I very much look forward to working with Alistair over the next few months as he moves into the CEO position. Although, it's always tough to move on, it is time for me to think about my future and I'm comfortable that the company is being left in very good hands with Alastair and a strong management team. Thank you for all your support over these past five years.

I'd like to introduce Alistair and congratulate him on his new role. Alastair.

Alistair Macdonald: Thank you, Jamie. I am looking forward to working with you during this transition and look forward to engage with our shareholders and investors, while I transition into the CEO role. I’ll turn it back over to for rest of the call.

Jamie Macdonald: INC continue to execute well delivering another strong quarter. We grew our net service revenue by nearly 14% compared to the second quarter of 2015 and by nearly 16% on a year-to-date basis. Our net new business awards for the quarter were $302.1 million compared to $295.9 million during the second quarter of 2015, resulting in a net book-to-bill ratio of 1.2 for the second quarter and on a trailing 12-month basis. Despite slower decision-making by some customers during the quarter a strong finish to the quarter resulted in one of the highest quarters of gross awards in our history. These strong new business awards helped offset of $57 million program cancellation that negatively impacted our net awards.

The customer cancel the program due to insufficient clinical efficacy of the underlying compound. Our backlog as of June 30, 2016 was over $1.9 billion, an increase of approximately 14% from June 30, 2015. We believe our investments in our business development team and operational and therapeutic resources that support our customer proposal process are continuing to pay dividend. These investments help deliver our strong new business awards during the quarter, the strong backlog coverage for the remainder of 2016 and a robust new business pipeline for the remainder of 2016. Our success during the quarter included adding 39 new customer relationships and strong demand from our existing customers which represented 84% of the dollar value of our year-to-date new awards.

Our top five customers comprised 34% of our revenue for the first half of 2016, down slightly from 35% for the same period in 2015. Our presence remain strong in areas where clinical trials are particularly complex. With these areas representing approximately 74% of our backlog as of June 30, 2016, we believe this highlights the effectiveness of our therapeutically aligned project teams and the quality oriented approach of the trusted process. As part of our focus on quality and best practices we recently amend the achievement of Bronze certification under the IAOCR Clinical Operations Workforce Quality Accreditation Program. The International Academy of Clinical Research designed this program to serve as an international benchmark for clinical operations excellence and INC is the first CRO to achieve accreditation.

This not only highlights our commitment to quality for our customers but also to continued enhancement of our training and development programs consistent with creating a culture of opportunity for our employees. We are continuing to invest in our relationship with sites by growing our Catalyst Site program most recently with the launch of our vaccine site network. This network was created by invitation only and consists of 40 high-performing sites who will collaborate with each other and INC to develop and share best practices for conducting vaccine-related clinical research trials. This network will be particularly focused on creating startup and enrollment efficiencies and represents an innovative model for fostering collaboration among sites that are passionate about clinical research. Also as part of our partnership with the Center of Information and Study on Clinical Research Participation or CISCRP, we recently kicked off our Inspiring Hope Ideathon.

This initiative is designed to provide a forum for stakeholders across the clinical research environment to share and develop ideas for increasing the awareness of clinical trials among patients, healthcare professionals and the general public. At the end of the second quarter, our total employee base remained at approximately 6,600 staff. We look to grow our headcount for as the remainder of the year including our -- expanding our presence in Japan where our headcount stands at 125. In addition, we now have a total of 19 offices throughout the Asia-Pacific region. This continued geographic expansion and our investment in other initiatives support our overall strategic goal, becoming the CRO of choice for all stakeholders, employees, customers sites and investors around the globe.

Lastly, today we announced the share repurchase program under which our Board of Directors authorized the repurchase about $150 million of our outstanding common stock. We believe this demonstrates our commitment creating shareholder value not only through the execution of our business strategy, but also by continuing to evaluate other capital deployment options. Let me now turn it over to Greg Rush for more comments on our financials. Greg?

Greg Rush: Thank you, Jamie, and good morning, everyone. As a reminder, we are presenting our results on an adjusted or non-GAAP basis, and have further normalized certain metrics to improve comparability.

Detail of these adjustments are presented on slides three, four, 17, and 18. We grew our net service revenue on a year-over-year basis by nearly 14% to $258.8 million during the second quarter, up from $227.4 million for the first quarter of 2015. Foreign exchange had an immaterial impact on our revenue for the second quarter of 2016. On a year-to-date basis, we grew our net service revenue by nearly 16% from $438.9 million for 2015 to $507.8 million for 2016. Excluding a foreign currency headwind of $6.1 million, our revenue grew by approximately 17% compared to the first half of 2015.

Our direct costs increased 15% from $137.5 million for the second quarter of 2015 to $157.9 million for the second quarter of 2016 with gross margin declining from 39.5% to 39.0%. Foreign exchange had a positive impact of 90 basis points on our gross margin percentage during the second quarter of 2016. For the first half of 2016 direct costs were $307.9 million compared to $262.4 million for 2015, with gross margin declining from 40.2% to 39.4%. Gross margin for the first half of 2016 included a positive foreign exchange impact of 55 basis points. The decline in margin for both the second quarter and year-to-date 2016 was primarily due to the increased use of contract labor associated with the accelerated work we highlighted in the first quarter along with revenue mix and our ongoing investments in the operational resources supporting customer proposals.

We continue to drive our margin improment initiatives,

which include: improving our facilities utilization over time; a consolidation to one Clinical Trial Management System, or CTMS; and realizing the benefits of the improved efficiency of the new CTMS system we have adopted. Over the longer term we also improved the profitability of our early-stage units in our expanding Japanese operations. While I expect that these initiatives will continue to produce cost savings and efficiencies, we intend to continue to reinvest these savings in additional resources to support new business acquisitions. Turning to SG&A, SG&A expenses increased from $36.6 million in the second quarter of 2015 to $40.8 million in the second quarter of 2016, while declining from 16.1% to 15.8% of net service revenue. On a year-to-date basis, our SG&A expenses have increased from $72 million to $82.7 million, while declining from 16.4% to 16.3% of net service revenue.

We continue to reduce our SG&A expenses as a percentage of revenue despite the reinvestments we are making to support the acquisition of new business and the growth of our Catalyst Site initiative. Adjusted income from operations increased 12.6% from $48.8 million for the second quarter of 2015 to $55 million for the second quarter of 2016. The second quarter income from operations margin declined slightly on a year-over-year basis from 21.5% to 21.3%. Year-to-date adjusted income from operations increased from $95.3 million to $107.2 million, with the rise in margin decreasing from 21.7% to 21.1%. Excluding certain one-time benefits in 2015, operating margin was 21.1% in both 2015 and 2016.

Adjusted EBITDA grew by 12.8% to $60.1 million for the second quarter of 2016, from $53.3 million for the second quarter of 2015. Adjusted EBITDA margin declined slightly to 23.2% for the second quarter of 2016, from 23.4% in 2015. For the first half of 2016, adjusted EBITDA increased by 12.1% to $117.1 million, up from $104.5 million for the first half of 2015. Over the same year-to-date periods, adjusted EBITDA margin declined from 23.8% to 23.1%. Excluding the one-time benefits in 2015, EBITDA margin declined from 23.2% in 2015 to 23.1% in 2016.

Foreign exchange had a positive impact of $2.8 million on adjusted EBITDA for the second quarter of 2016, representing an impact of 110 basis points on EBITDA margin percentage. On a year-to-date basis, foreign currency had a positive impact of $1.7 million on adjusted EBITDA, and 60 basis points on EBITDA margin percentage. Adjusted net income increased to $34.3 million for the second quarter of 2016 from $28.6 million for the second quarter of 2015 and increased to $66.8 million from $54.9 million on a year-to-date basis. Adjusted diluted earnings per share was $0.61 for the second quarter 2016 compared to $0.47 for the second quarter of 2015, while increasing to a $1.19 from $0.89 on a year-to-date basis. Diluted weighted average shares outstanding were 56.1 million for the three months ended June 30, 2016 and 56 million on the year-to-date basis.

So it's the which included the impact of 1.8 million shares from equity base employee awards. At June 30, 2016 the outstanding share count was 54.6 million Slide seven provides key metrics related to our cash flow and leverage position. During the second quarter 2016 our operations produced 45 million of cash as compared to 51.6 million for the second quarter of 2015. This decrease was principally driven by changes in working capital primarily associated with changes in accounts payable and accrued expenses as well as deferred revenue. Cash flow from operations for the first half for 2016 was 44.4 million, a decrease of 50.9 million compared to the first half of 2015.

This decrease was primarily driven by the increase in DSO during the first quarter 2016 and the other changes in working capital. We ended the second quarter of 2016 with 91.9 million in unrestricted cash. As part of the ongoing management of our interest rate risk we have continuously monitored the market interest rate hedging transactions to refinance our debt in the second quarter 2015. Given changing market conditions and attractive rate pricing in early May we entered into two interest rate swap transactions which essentially converted 300 million of our 475 million outstanding term loan balance from variable rate debt to fix rate debt. These interest rate swap cap LIBOR had approximately 68 basis points on 200 million of debt on an advertising basis through June of 2018 and between 65 and 127 basis points on 100 million of debt through May of 2020.

Slide eight summarizes key metrics related to our backlog. We believe one of the most important leading indicators of future revenue growth is backlog coverage, which is presented in the bar chart in the bottom left quadrant. We are maintaining a favorable position with 96% coverage of our full year 2016 revenue forecast as of June 30, 2016. This is comparable to the same coverage percentages as of June 30, 2015 and 2014. Lastly on slide eight, you can see our backlog run rate of 13.8% for the second quarter which represents a slight increase from last quarter.

Backlog burn may continue to fluctuate based on changes in study duration. As Jamie mentioned earlier our Board of Directors authorized the repurchase of up to an aggregate of 150 million of our common stock. We intend to fund these share repurchases with the combination of cash on our balance sheet and borrowing on our revolving credit facility. On slide nine, we’re providing our updated guidance for key financial metrics for the full year 2016. This guidance takes into account a number of factors including our current sales pipeline, existing backlog, and our expectations for net awards for the remainder of 2016.

Further, our guidance is based on current foreign currency exchange rates, current interest rates and our expected tax rate. We expect our net service revenue for the full year 2016 to range from $1,030 million to $1,040 million, representing a growth rate of 12.6% to 13.7%. This takes into account of foreign currency headwinds estimated at approximately $10 million, a negative impact to our full year growth rate of approximately 110 basis points. Accordingly, our constant currency growth rate is expected to be between 13.7% and 14.8%. We currently expect interest expense for the full year to range between $12.8 million and $13.4 million, which includes an increase of approximately $0.3 million related to entering into the interest rate swap transaction.

We continue to expect our effective tax rate to be approximately 34%. We expect our adjusted diluted earnings per share to range from $2.39 to $2.50, representing growth 24.5% and 30.2% compared to normalized EPS of $1.92 in 2015. Lastly, we expect to earn $1.74 to $1.85 per share on a GAAP basis. Included in our GAAP earnings per share guidance was an estimated negligible impact of share-based compensation in the pack. The impact of share-based compensation is further detailed slide 16 in the appendix.

Our revised guidance excludes the potential impact of any share repurchases that we may make pursuant to the equity repurchase plan announced today. This completes our prepared remarks, and we would be happy to answer any questions.

Operator: Thank you, ladies and gentlemen on the phone lines. [Operator Instructions] Our first question comes from John Kreger of William Blair. Your line is now open.

John Kreger: Hi, thanks very much. Greg, thanks for running through those details. Maybe a quick one. In the second half, what sort of FX impact do you expect on EBITDA margin, if any?

Greg Rush: Our guidance right now includes FX as of today, so the favorable impact that we got for the second quarter we expect to continue based on FX rates today. Obviously, if they move, that will change.

John Kreger: Okay, would it be reasonable to assume that that favorable margin impact gets smaller over time given when the dollar moved, or would you expect kind of a similar tailwind on margin percentage?

Greg Rush: Similar tailwind.

John Kreger: Okay, thanks. And then, Jamie, a question for you. You know, there has been a lot of discussion particularly around the QI&SD [ph] around sort of optimal strategies for site selection and patient recruitment. Can you just kind of step back and give us your approach on that front, assuming it’s going to be a pretty important issue in the next year or two?

Jamie Macdonald: Yeah, and we’re going to cover more of this on Investor Day on August 16.

I mean, it is multipronged. Identifying sites is part of the process, but you have to have the right protocol. So the protocol’s got to be scientifically valid and operationally feasible. You then have to put it in the hands of motivated investigators who have the right experience, and they obviously have to have clinically eligible patients. So it’s a pretty complex puzzle.

I think the data aspects are important when you have access to many data sources and obviously our own internal data, but working on the other aspects of really creating an environment where sites can be successful and enthusiastic about running protocols. That's a big part of getting people engaged. So you will have seen some of the stuff that we’re doing with CISCRP and others, it’s really to improve the overall environment so that people maybe are more aware and more prepared to consider a clinical trial upfront before they ever get a new disease diagnosis. And then we’re using our own sort of data sources and external sources to then target the right investigators based on the complexity of the protocol and the patient needs.

Greg Rush: Hey, John.

Just to clarify my response on the FX and the benchmark I’m going against is the first half, so our EBITDA margin impact for the first half was 60 basis points. I expect it to be in that same range which is negligible for the second half. And that really depends on if you look at the mix of our contract revenue it’s going to happen in the second half along with our coast base and where the currencies move, so really negligible.

John Kreger: Great, thanks. One last one, Greg.

I think you mentioned revenue mix as a driver of some of the year-over-year decline in EBITDA. Can you just expand upon that? What’s happening on that front?

Greg Rush: I mean, the lion’s share of the impact and why we ranked it first is the contractors where we pulled that -- if you remember on our Q1 call we talked about accelerating revenue front of our customers and we’re using a higher percentage of contractors. That was a big part of it. And every quarter our mix of revenue varies slightly based on some change orders we recognize, et cetera, and so we had a little bit lower revenue from change orders in the second quarter is somewhat main driver.

John Kreger: Okay.

Thank you.

Jamie Macdonald: Thanks, John.

Operator: Thank you. And our next question comes from Dave Windley of Jefferies. Your line is now open.

Dave Windley: Hi, thank you. The bookings in the quarter, Jamie, you had talked about slower decision-making during the quarter. You mentioned that and a couple of factors that maybe overwhelmed that and then a cancellation. So I guess I wanted to understand how prevalent this slower decision-making has been, if that’s something that you’re seeing persist into the early part of the third quarter, and then how we should think about the impact of the cancellation. Was that a study that was up and running or hadn't begun yet or how should we think about that?

Jamie Macdonald: Yeah, so the main element -- and Greg will give you some insight into this as well.

Certainly during the quarter it was a little more choppy than we thought in terms of decision-making. It was a little more back-ended than we thought and obviously as we sort of hustle did close out the quarter. Actually a lot of good customer interaction. So sentiment from customers not just around the opportunity that we were bidding on, but maybe their view of the market and and some of the macro factors that had sort of cleared up. So we actually had a pretty strong quarter, as we said from a gross award standpoint.

We obviously have one large cancellation which is sort of part of business, I seem to get these on my birthday every couple of years at the end of the second quarter. So it was June 28, so it doesn't give you a lot of time to recover, but that that one has already been sort of if you like sort of stage doubt, it was longer program of work, so actually the immediate impact on backlog is not that significant and obviously we're raising our expectations for revenue for the rest of the year. Pipeline looks good. I think we've heard that from number of competitors over the last couple of days, and it's improved quite a bit over the last couple of months, obviously we need to close on it. But I think sentiment was generally better than we thought.

I think the first part of the year some concerns about biotech funding, some of the rhetoric coming out about pharma pricing and and other things I think it's slowed up, maybe a little bit of decision-making, the IPO markets have opened up a little bit. We all watching the market just for follow-on raises. I think that would be the one area that we would caution where poor people need to come back to the market for additional funding given where some of the biotech stocks have gone. It would pose some some dilution concern for those companies that may slow up that follow-on funding. But at the moment -- yeah, I know I think we feel pretty good.

Neil and the team and the ops groups and finance are working well on the opportunities we have in front of us.

Greg Rush: And then I would add it as you know what we had one of the top two or three quarters in our history on gross awards, so it was a really good quarter, and you know that was the second largest cancellation in our history. Also if you remember in the second quarter of 2014 we had our largest -- and you know despite that…

Jamie Macdonald: …that was my birthday as well.

Greg Rush: Yeah, the day -- beside this -- those large cancellation we had a strong book-to-bill and you know our pipeline is really strong for the rest of -- you have got to close that to be clear, but you know, we feel really good about our business right now.

Dave Windley: Okay.

If I could just follow-up. I can't resist the element -- and the else in the room here. So Jamie, it sounds like you referenced your birthday, maybe your birthday was the day that you had targeted to kind of evaluate these priorities. It's not something that -- I am speaking for myself I had certainly gathered that you were signaling at all. It's also not wasn't apparent to me in terms of IR activities that kind of putting Alistair in front of investors was something that was actively being done and so it does come across from the outside pretty sudden.

I was hoping -- I mean, I know you kind of read the the statement, but I was hoping you could elaborate on that to some degree help us to understand what brought you to this decision.

Jamie Macdonald: So Dave, I know I'm happy to address them and I have one of our legal here. When you mentioned signaling to the market I feel -- my reg FD training pretty rigorous.

Dave Windley: I think she is happy to hear that I guess.

Jamie Macdonald: She actually.

So let me give you the reason and then the timing. Yeah, you're right, but I would say it wasn't really the sort of part of it, it was also my five-year anniversary at INC on July 12. So the timing came together pretty well. Maybe a couple of rooms that I will clear up. Alistair is not my brother I know we've had this discussion a number of times, and I'm not leaving to play pokemon go full time so that's definitely not happening.

For me I want to make sure INC is in the best possible place on a go-forward basis. To do that you have to have a transition that allows somebody to take ownership of the business at a good time and then build the budget for next year. So the cycle is very similar to what I did with Jim Ogle back in 2012/2013. We have Investor Day coming up on August 16 and Alistair and I will both be there, so that is the the plan. And obviously I will be here supporting Alistair really as much as he needs through February.

So it's a long transition. I have got some key customer meetings that I'll attend in Boston and the Bay Area over the next few weeks. We've got some employees stuff. We also have an extremely strong team. I mean you've all met Greg and Ronnie, but we maybe should have done a better job of introducing you to the broader team, and that will happen again in New York in August.

So Michael Gibertini, who heads up clinical development; Jean Chitwood on Strategy; Judy Cashin on the Medical side will be there as well. So it's a real opportunity to meet the whole team, and obviously spend a bit of time with Alistair. We've all been pretty busy. So Alistair was on the schedule to do some IR stuff, I think, at the end of last year, but I think that meeting actually got postponed in the U. K.

And then we'd rather -- truthfully, as much as we love our investors and shareholders, I think you want us out in front of customers and with employees because that's what drives value to shareholders. So most of the rest of the team that you don't see are out working with customers.

Dave Windley: Great, thank you for that.

Operator: Thank you. And our next question comes from Tim Evans of Wells Fargo Securities.

Your line is now open.

Tim Evans: Thanks. On the share repurchase, just curious what the thinking there is in terms of the timing of that, and then how much of your EPS guidance increase are you contemplating for that share repurchase.

Greg Rush: I'll take that question. There are two parts.

EPS, there's nothing in our guidance from that share repurchase. So as we do that over time, that would provide additional accretion to that number. The second timer is the buyback is authorized to take place through December 31, 2017. So it will be a steady buyback over that timeframe. No anticipation at current to accelerate it all upfront or back-end loaded it.

I expect it to be fairly even over that period of time.

Tim Evans: Okay. Great. And then just one more to kind of Jamie’s comments about the slower decision-making. Can you parse it a little more finely as to which types of clients, where this was coming from? And I'm also interested not just in how this might be playing into bookings, but are you seeing anything on like the collection side that would give you any reason to maybe sharpen your pencils a little bit?

Jamie Macdonald: So I’ll maybe take the bookings and Greg can maybe talk about the collections piece, because I know that's come up in calls previously this week.

Yes, no, I think it's got a little bit more positive. I think there was probably a period of time where people were relooking at total cash flow obligations, if you want to call it that, particularly anybody that's pre-revenue. And I think that was causing them to say, if we run all these programs at the same time in parallel, how does our sort of cash flow look relative to what the opportunities might be to raise further funds in the market. And I think that was causing a little bit of a slowdown. People were iterating study design and maybe the sequencing of some of the work, and I think that’s sort of changed.

I think since the markets have opened up a little more and the ability to come and raised additional funds, and also pharma partnering stepping in. So what we've seen is and it's sometimes hard to track this. Pharma is partnering, co-developing, taking preemptive rights on certain assets, and that's really supported maybe where the public markets have slowed down, that seems to have supported the the rest of the market in terms of overall funding. So I think it certainly was something we saw in the first half of the year. We'll watch it closely, but it seems to have improved in the last couple of months.

Greg Rush: And, Tim, on the collections issue, I think you really need to break the DSO down into

two components: one, it's based on our total revenue and a lot of that drive of change in DSO is coming from two different elements. First, we've talked about our Catalyst Site initiative. One of the things that we're trying to do with that site initiative is pay more timely, work with our sponsors to get those invoices in faster and authorize for the payment, which can result in a slight uptick in our revenue on that element, and that usually is pulled out of deferred revenue. So if you look at one of the components of our DSOs, it’s in our slides, is our deferred revenue has changed somewhat because we're doing a better job of identifying when the sites are due to be paid and getting that process through the system, which does have a slight impact on turning the deferred revenue. That’s an area where we believe it’s appropriate in terms of our site relationships.

As you know a site is a big focus for us and that's part of one of the things that we're looking at as the Catalyst initiative is to make sure that we only pay those members quicker, but also other sites outside of that. So that's part of the impact on DSO. And that's why if you remember back up throughout all of 2015 we signal that our DSO may go up go that was one of the things that was in our mind when we thought about that as a way to do that. The second aspect is as a private company back prior to going public, you know, our leverage was five, six times and cat have all them met all of the terms and negotiating our fee with customers and cash flow is probably one of the most important terms and we would probably require above market well above market terms on that particular item and maybe agree to other terms and to balance out the contract with the customer. As we proceeded and you lowered our leverage down now below two times, we're not giving a term that above -- below market by any stretch, but we've tried to come back in line with the industry on that.

We agree to milestone payments and more so which is more the norm in the industry which is lengthened our pre-DSO. So that's really what's driving it. It’s not an issue where the customers are collecting the slower or an issue where our payment terms that extended beyond market, you know, it's all within and what we believe is the industry that's -- it's moved us from a negative DSO to mid teens.

Tim Evans: Appreciate the color. Thank you.

Operator: Thank you. And your next question comes from Erin Wilson of Credit Suisse. Your line is now open.

Erin Wilson: Great. Thanks.

Can you speak to the underlying demand across the market in terms of customer base I guess to elaborate upon some of the commentary that you just said? Are there any key differences that are you are seening in fundamental demand across the mid size biotech versus large pharma at this point?

Jamie Macdonald: Yeah, probably not a lot of change. I think what we're seeing is that there's quite a lot of assets in in pre-IND phase, I mean what we're seeing from the public preclinical group so Charles River in covariance is positive. We hear similar from some of the privates as well including in vigo. So we believe that the compounds are there and we're certainly looking forward to seeing the INDs and come into the clinical phase. Not a lot of difference, I think there are some individual companies may be sort of pre-revenue that that are struggling a little bit.

I think we've seen some companies go through that cycle, but that's not unusual. I think overall -- and I said this a couple of times I think the science has continued to improve in a number of areas particularly in oncology and rare diseases where the targets and the mechanisms and the compounds themselves are are clearly of in creeks both the investigators and patient. I think still a lot of work in the neurology space, I mean that's we continue to look at the opportunity there from unmet need. But as we've seen even recently there's been some fairly large failures in late-stage development in the neurology space. So it's just predictable drug development that until you have sort of good ideology and good mechanisms it's sometimes hard to get drugs that that really move the needle from a therapeutic standpoint.

Erin Wilson: Okay. Great, thanks. That's helpful. And with the management shift should we anticipate any other changes in management beyond this year all and maybe can you speak to any sort of -- if there's any sort of change in philosophy around capital deployment in particular as it relates to that change. Thanks.

Jamie Macdonald: So I'll maybe ask Alistair who is sitting next to me. I mean I would guess no plan it's been a very cohesive stable team for a long time, most of them are in the room at the moment. So maybe Alistair if you do come with.

Alistair Macdonald: Yeah, thanks Jamie. You know I think we've delivered over the last five years in the Jamie's leadership early as a full management team globally across the business that I don't see any reason why we should look to change that thing.

We have done very well. Still great backlog, work very well with customers across the globe. I love for Steven and Neil to change any of those. We will be looking at obviously strategic direction as we move forward what we'll be looking to do with the organization, but right now I don’t foresee any changes. I think the teams that’ve we put in place is very solid.

We work well together. We're engaged together with customers and investors. So I don't see the need for us to change any of that.

Greg Rush: On the capital deployment, there’s not a expectation of a change in that. We’re still focusing on taking M&A as our first priority, repurchase is second, and debt paydown third.

Erin Wilson: Excellent, thanks.

Operator: Thank you. And our next question comes from Robert Jones of Goldman Sachs. Your line is now open.

Robert Jones: Great.

Thanks for the questions and congratulations, Alistair, on the new role. I look forward to working more with you, and best of luck Jamie in your future endeavors. I guess just to go to some of the items in the P&L that helped the quarter, Greg, maybe you could weigh in. Really good cost control. Again, I know you touched on it, but it looks like SG&A as a percent of sales was the lowest, I think, we've ever seen, and I know you've talked on some items around facilities and CTMS initiatives, but I guess just how should we think about the opportunity that’s left within the SG&A control going forward?

Greg Rush: Yeah.

I think on an annual period, Bob, I’m not a big fan of quarters, because there is so much variability. Bad debt can swing it 25 bps to 50 bps depending on the quarter. We had a reasonable quarter of bad debt in Q2. And just as an example on our guidance, I’m thinking about the second half, we've got the bulk of our audit and internal audit work related to SOX which typically happens in the second half. So I would expect probably a slight uptick in SG&A in the second half.

But on an annual basis, if you look at annual period and take out some of that seasonality, I think we're in a good shape on SG&A. We do have a little bit more room to run on that, absent the investments that we’re committed to making in BD to expand our addressable market. So I think we will see a little bit of expansion, with that expansion being reinvested in terms of BD and other sources over the next 12 months, which I think is going to help, because we certainly believe we're taking market share right now and we have to continued to do that.

Robert Jones: So I guess just related follow-up to that then. As we look forward maybe beyond some of these initiatives and the benefits that you’ve reaped from related to the facility consolidation and the CTMS initiatives, how should we think about overall EBIT margin expansion beyond those initiatives? It sounds like the goal is to hire a little bit more, maybe pull back on the contract labor that you've been using.

I mean, should we think about overall EBIT margin expansion coming more from gross margin in the future or I guess just any insight on the balance between where overall margin expansion could come from in the future would be helpful.

Greg Rush: All right. Well, a couple things to remind everyone. We’ve said for 2016 we thought our EBITDA margins would be roughly flattish with the last year, mainly because of the reinvestment in those BD and customer acquisition-type related costs, and that’s despite the fact that we have this higher [indiscernible]. So I think they'll be roughly flattish within 30 bps, 40 bps is what I would call flattish.

So it could be up or down 30 bps to 40 bps from last year. That’s sort of what we're seeing it right now. As we go into 2017 and beyond which I think is where you’re primarily focused, we’re not giving guidance for that year at this stage, but we certainly believe that we have room to run facilities. That's probably a couple of more years of benefit that it will take to maximize where it will tap out of what we can get from the facilities utilization. The CTMS systems, the main thing that's left there is the benefits from the new system relative to the one we’ve historically used.

I don't have the exact number in front of me, but I would say approximately 50% to 60% of all of our studies today are still on the old system, so we're about halfway through, maybe a little less than halfway through, on the benefits of converting to the new CTMS system. That will probably take another two years or so to fully transition to that, so there's some room there. The real things that that we haven't really quantified yet, Bob, that could possibly offset it is, one, the labor market is still pretty tight. We were probably a little bit more concerned about the labor market in Q1 than we are today in terms of wage inflation. So I think that's moderated a little bit, so I’m a little bit more optimistic on the ability to expand margins than I was in Q1, mainly because wage inflation has eased a little bit.

And then the other quite unknown is new -- it is just being at the top of the heap so to speak on EBITDA margin is, you know, how much more room at the industry itself have and including all both, for example, as we've talked about in the past as customers move and more to a full service model and higher level services will that lifts all boats on the margin.

Robert Jones: Got it. Thanks so much.

Operator: Thank you. And our next question comes from Eric Coldwell with Baird.

Your line is now open.

Eric Coldwell: All of my questions became less good as the call went on. So at the most of them have been hit on a little bit here. I think Greg you just mentioned the bad debt I, you know, clearly wanted to ask all the companies this quarter about bad debt after what one of your peers said recently about theirs troubling versus normal experience. Looks like you actually had a credit and it gave you a peny and a half this quarter, did I interpret that correctly?

Greg Rush: I'm checking that number.

Right now our bad debt over the last 18 months for us has been relatively neutral. We take a really conservative position and what goes in backlog as you know, so it's got to be funded. So for if they even get in back of the risk of bad debt should be relatively low. Secondly, if there's a concern around flexibility at all and we're aware of it we actually want to take the revenue to setup and they are where you would have a bad debt. So we have two pretty strong gates to prevent that.

And then the third gate obviously is if for some reason the customer sell through those gates and obviously they could change operations they could spend is a lot more money than and they told us that they were going to and that we projected they do to where they end up in a bad position where they can't pay us at that point time we have a bad debt. And I think we've been pretty conservative in reserving our existing AR. Peter, do you have that? I'll get back to you on that number later in the call I don't forget that that question exactly what our bad that was. But, yeah, we have had quarters where we've had a credit where we've done a pretty good job of actually recovering previously written off bad debt from customers. I think some of our competitors mentioned we don't stop calling the customer and trying to work out a reasonable agreement to get quite something that we seemed uncomfortable and if that happens we do end up with credits in quarters.

Eric Coldwell: Okay. That's really that's really helpful. On the -- I maybe go back to this accounting standard change on share-based compensation and I'm a little foggy on exactly what happened last quarter. But I think you guys adopted a 2016 09 early and I'm just curious if that's having any influence on your adjusted the tax rate in our earnings or if you're excluding any benefits from that with your adjusted results. Just any kind of an update on what you're doing with that share-based compensation taxation treatment.

Greg Rush: Yeah, a good question. So as you know we exclude stock comp from our all of our adjusted numbers, we also exclude the associated tax benefit. So within our adjusted numbers is out of both. Then when we adopted it there was a cumulative effect that didn't even run through our P&L, ran through retained earnings. So after adoption of that on January 1, we are receiving a benefit in our GAAP rate I think that number was roughly $8 million of a benefit from it adopting that in our GAAP numbers.

If you look at slide 16 there we were basically said on a year-to-date basis our share-based compensation is about 3.8 million of actual expense, so we actually got a credit in our P&L from following that accounting standard of $8 million in our tax rate so we actually in our GAAP numbers got a benefit of $4 million net to our GAAP earnings, but we've excluded that net impact both in our reconciliation and the adjusted numbers so.

Eric Coldwell: That's great. I'd appreciate you excluding it I think that's the right treatment and thanks for the info. Last question, I didn't hear tone maybe generally -- didn't hear a tone about the organizational realignment plan. I am courious if you could be a little more direct on where you are with the staging of that any benefits you're picking up that could be specifically identified with that and in perhaps how much activity around that plan announced last quarters, is actually -- how much activity is actually left to up to pursue at this point.

Greg Rush: So we did announce a small refinement of that that took place in April of about 20 heads and took a additional restructuring charge. Those have benefited. The main driver of that restructure was to basically look at we've grown really fast over the last couple years and looking at do we have the right resources in the right place. So our headcount effectively stayed flat from Q1 if you think about it. So those heads, call it, 200 heads that left were replaced with new heads of 200 people in different areas.

So it was more of a reallocation of resources. It was less about trying to drive additional incremental savings, but making sure that we have the right resources in the right place to execute on our business plan going forward. There's modest savings built into that, but that's really more savings from what our costs would otherwise have been versus savings in our business plan. And it helps offset a little bit of that contractor cost that we’re realizing. I did give the number, by the way, on your bad debt.

That number was a small credit of, I think, $30,000, so effectively zero for the quarter, but we did not have bad debt in the quarter, which typically runs if you look at a 12-month block, bad debt should be about about 25 bps of revenue, and that can vary wildly in any quarter depending on you have a bad quarter with one customer and then you may have a pickup in another quarter.

Eric Coldwell: I though since – maybe I looked at this wrong in the bad debt. You recorded $1,129 million in the first quarter and minus $31,000 I thought year-to-date in the June quarter, so maybe I looked at that wrong. I thought you actually got a credit this period of about $1.1 million, which is why you’re net at minus $31,000, but we can talk about that offline. I'll leave it there.

Greg Rush: Okay.

Eric Coldwell: Thanks so much.

Greg Rush: Okay.

Operator: Thank you. And our next question comes from Sandy Draper of SunTrust.

Your line is now open.

Sandy Draper: Thank you so much. And, as Eric mentioned, he just stole a few of my last questions, so I don't have a whole lot. Maybe just as a fine point. Jamie, you’ve mentioned examining pre-revenue.

Can you just remind us what percentage of your customers, either whether you look at it from revenue, backlog, however you want to look at it, are pre-revenue just in terms just of general exposure? That would be the only question I have. Thanks.

Jamie Macdonald: We'll get to it, hang on a second. Last quarter is in the 13% to 14% range. I don’t think it’s moved materially from that.

That’s the pre-revenue.

Greg Rush: Yeah, I think 14%.

Jamie Macdonald: 14%.

Sandy Draper: Okay, great. That’s my only question.

Thanks.

Operator: Thank you. And our next question comes from Tycho Peterson of JPMorgan. Your line is now open.

Tycho Peterson: Hey, guys.

So, Jamie, thanks for clarifying that you're not actually related to Alistair. Believe it or not, we got the question a couple of times this morning.

Jamie Macdonald: I have fielded this for the last four years.

Tycho Peterson: I guess the next question is do you have to be from the clan of Macdonald to reign at INCR.

Jamie Macdonald: It’s just gets easy for our communications people.

Tycho Peterson: So in terms of my questions here, book-to-bill trended down a little bit since 3Q 2015 where you guys were around 1.4 and now it's just shy of 1.2. Conversion rates seemed to have held up pretty well for you versus some of your peers out there. I noticed that this mid-cap client base has increased from 40% to 45%, while repeat customers have gone down from 94% to about 84% of revenue. How should we think about some of these subtle but persistent changes that are occurring, not just for you guys but for a lot of CROs out there today? And then perhaps can you give us some color on the percent of trials that you have in startup phase this year versus perhaps last year or a couple of years ago? Where I'm trying to get with this question is basically has the mix of business gotten more choppy as the work shifts towards more complex niche indications?

Jamie Macdonald: Yes, it's a good question, and there are sort of lots of elements in there. I appreciate you sort of summarizing.

I don't think we've seen a massive change in the mix. I certainly think oncology continues to be the area that is driving most research. That in itself is different and difficult because you’ve got a lot of competition at sites for investigator resource and for patients. So the areas that we're watching closely are startup efficiency where we feel we're pretty good. I know over the last year or so the industry has commented about slower startup, but I think we still feel pretty efficient in that space.

That's a part of the business that Alistair has had direct oversight on, and the team there works works really well. I mean other areas that we continue to sort of focus on are really understanding of a therapeutic changes. The rare disease work is continuing to improve. We're may be seeing a little more expansion in different areas of general medicine that's why we consolidated that business group recently. So, that definitely helped us from an oversight standpoint.

But by and large, I don't think we've seen anything changed massively. There's a little bit of focus on the immunoncology and obviously the balance between efficacy and toxicity in that area as well. So, we're watching that. But I don't think there's anything that I've seen or the team has seen that's changed significantly in the last sort of a year or 18 months. We're still seeing some good molecules come through; some of the science is pretty interesting.

Michael Gibertini and the team are very focused on I'm making sure that we follow what we think is innovative and it's going to be of interest to investigators and patients and trying to establish that position of incumbency with those new molecules and that's a strategy that we believe has worked well and one will continue to focus on.

Tycho Peterson: Got it. And then in terms of your European customer base are you seeing sort of any shift at all. I mean concerns around budgets or perhaps people being a little bit more cautious about starting new work given Brexit and the other issues in the European Union at the moment?

Jamie Macdonald: Given Alistair is in the U.K., I'm going to and sort of has been spending a lot of time with European customers, do you want to talk a little bit about Europe?

Alistair Macdonald: Yeah. Thanks Jamie.

I don't think we've seen any big impact from -- or any reluctance from the European side. I think the pipeline that we've been working on over there has been pretty consistent. I think we've done a good job in breaking into new customers, particularly in Southern Europe with the sales team that we've deployed over the last few years. So, I've not seen any big difference yet. I think there will be obviously some changes to come down the -- down the road, but I think we're well -equipped deal with both as an organization and as an industry really.

Obviously, we have operations throughout Europe and U.K. as well. So, we'll assess the impact of Brexit. But we haven't seen any reluctance on the customer side yet or any real slow down in the development work that's coming out of Europe.

Jamie Macdonald: Yeah.

We've already had sort of reach out from the U.K. government just to talk through any potential concerns we see. Obviously, we booked the MHRA from a governing regulatory body standpoint will continue to work closely with the MA or and/or FDA. We operate on global standards in any way so we don't have concerns there. The one that we're going to watch it is obviously on the people side and just residency of Europeans that are living in the U.K.

and vice versa. Obviously, that movement of people is going to be top of the agenda and clearly we want to understand how that plays out. At the moment, we don't have any specific concerns.

Greg Rush: And only other thing from a positive perspective on the company and not with the uncertainty around for Brexit vote, at the beginning or actually at the end of Q1, we renegotiate several large contracts and move those from the pound currency to the U.S. dollar just to -- which helped us and now I think our ongoing revenue historically we've been in the 5% to 10% of our revenue was the pound and then going forward we're down to about 1% of our revenue in the pound.

So, we took some proactive steps that paid out for us.

Tycho Peterson: Got it. Thanks so much guys.

Operator: Thank you. And our next question comes from Donald Hooker of KeyBanc.

Your line is now open.

Donald Hooker: Great. Good morning. I just have one question. You guys have added -- continue to add new relationships.

And I was wondering where you see those relationships coming from. I assume some of the smaller -- there's hundreds of CROs out there, a lot of the smaller ones I assume are sort of seeding market share to you and I assume over time INC among other large CROs take share, is that trend continuing? Is there any color you can add around that?

Jamie Macdonald: Yeah. I think that's true. I mean the nature of clinical development, particularly once you get outside of maybe 1b and 2a studies is now global. See that in some of the data that comes out from CMR and [Indiscernible] and others.

And in order to be able to be able to run some of the larger 2, 2e three studies you have to have a global footprint and you've got to have scale. So, yeah, I think it's safe to assume that the smaller CROs are losing shares to the larger CROs. I think we're also being competitive against the largest CROs in terms of some of the relationships that they. And obviously, the key strategy we have is to expand our addressable market and the volume of RFPs and ultimately avoid revenue from customers that traditionally haven't been part of the INC's customer set, and we continue to do that. We spend a lot of time with these customers in non-selling situations, socializing our capabilities, our experience.

We see them at conferences. It's a long cycle, as we’ve said before, but we continue to make good progress. I think INC has a compelling offering around our therapeutic expertise, trusted process, the relationship that we have with investigative sites. I think all of these resonate with customers, current and potential future customers as well.

Donald Hooker: Thank you.

Operator: Thank you. And our next question comes from Michael Baker of Raymond James. Your line is now open.

Michael Baker: Thanks a lot. Alistair, you’re going to be taking over the reins here in October.

Just wanted to understand what your top one or two key areas of focus will be.

Alistair Macdonald: Well, I think the focus won’t change immediately and we’ll be assessing what we're looking at as we go forward, but for me it's about doing the same things that we have been doing successfully over the last four or five years is getting out, meeting with customers, making sure they understand what our model is and how we deliver against that, and what we bring that differentiates for them. It’s some of the stuff that Jamie talked about, the value in the process, the value in therapeutics, taking our model into larger organizations, penetrating the top 20 organizations, driving the financial results, making sure we stay on track for sales revenue, obviously earnings, so those things. And as I kind of transition into this role, I have a long background with INC both in operations and sales, so I think we can use that skill set to really bring those pieces together as strongly as we can and drive the model forward.

Michael Baker: Okay, and then just a follow-up.

I know Jamie has been doing a lot of work on the outcomes side of the business. Just wanted to get your thoughts on where that stands and just overall.

Jamie Macdonald: Yes. We’ve made some changes recently structurally, has moved our kind of late-phase group into a standalone business unit. We've brought some more focus to that, more clarity around the team, we’ve been working on the value chains, and I've actually been the leader of that effort along with [indiscernible] in the U.K.

office, who's taken over that group. So we'll be looking to drive that, looking to penetrate customers with that. We feel that we've got some access points with larger customers in that field and we’ll continue to put effort and development work into that field.

Michael Baker: Thanks for the update.

Jamie Macdonald: Thank you.

Operator: Thank you. And our next question comes from Greg Bolan of Avondale Partners. Your line is now open.

Steven Couche: Good morning, guys, and thanks for fitting us in here. This is Steven on for Greg.

Taking a step back maybe to more the industry level, I was just wondering how you would characterize the level of intensity among Tier 1 competitors during RFP bake-offs, either for non-biological compounds or just across the board, and then how would you think about that compared to maybe this time a year ago?

Jamie Macdonald: I don't think the competitive environment has changed that much. I think I still see pretty good discipline across the board. We’re competing based on value and strategy and team. I'm not seeing a lot of influence on pricing or cost. I think most sponsors realize that in order for their study to get done to the quality they expect and in the timeline they expect, they've got to have the right team, right strategy, right hours, and they're willing to pay that.

It's a value-based discussion, not a pricing discussion. I think there are some nuances and strategy. I think we’ll continue to see very strong hit rate, strike rate from an INC standpoint. Something that's not measured, but I think even where we were not the chosen CRO I think we quite often by our impression or at least the sales guys tell us, we’re the bridesmaid. So that bodes well.

It means that we're still bringing a competitive offering to the table. Still hard to unseat incumbents. I think that's something that’s existed. That means to me that the relationships between sponsors and CROs remain quite strong. But we've been able to do that.

We have unseated incumbents and we have a different strategy in that situation. So sales guys continue to do a good job of really understanding what the competitive tension is going to be on any particular opportunity. And then the ops and finance guys are putting the right strategy and commercial model together.

Greg Rush: The only thing that I would added that as you know is mentioned in Q1, while we're not seeing any real change in behavior on price, we have and continue to see some of the CROs be a little bit more aggressive in terms of timeline that you -- with our therapeutic expertise and operational model, we think we're pretty confident that the timelines that we've given -- those customers were correct and in fact ironically over the last some of the things that we see in our pipeline going forward are some of the same customers coming back to us and saying well, I guess you're right. And that's helpful to us.

Calls even though we lost business initially, the fact that we're very therapeutic aligned, customer process we were confident with our deadlines and timeline and some of those aggressive behaviors are coming back dividends for us.

Steven Couche: Great. Thanks. And then maybe just a quick follow-up. We continue to hear that functional outsourcing remains a viable strategy for some of the larger biopharma sponsors and I know you mentioned earlier that you're seeing a trend more towards full service, but could you just maybe help us out with some of the pros on more of an outsourcing strategy?

Jamie Macdonald: I'm going to give this one to Alastair because he's being pretty close to driving that strategy for us.

Alistair Macdonald: Yeah. So, we've always had an approach on the full service side that's been second to none. I think we're well known for that. We also have them a fair amount of SSP work over the years. I think we've had some big relationships across clinical as well as data, safety, that kind of the field where it's easier to kind of deploy function.

So, that's something that we do. We have a lot of those relationships with some of our larger customers even when we're working in a full-service side also deploying full data management across the function or study starts off or whatever it may be that are looking for us or regional FSBs and monitoring that kind. So, business we make good margin on, it's a business that we are eager to expand into and I think it's something that helps us bringing stuff into the organization, get them deployed quickly and we've been pretty successful in mixing that together with a full-service model or as a standalone.

Steven Couche: Okay, great. Thanks for the color and best of luck Jamie.

Jamie Macdonald: Thank you. Appreciate it.

Operator: Thank you. And our final question comes from the line of Sandy Draper of SunTrust. Your line is now open.

Sandy Draper: Thanks. One quick follow-up. Greg you had mentioned earlier talking about the payments and make it change around the payments and trying to clean that up in terms of that the sites. I know your technology vendor that you moving to is going to be offering a new technology. Is that something that really changes that dynamic enables you to have a better and differentiated payment model of the sites that allows you to maybe end up having a better relationship, or is it just a little bit of the streamliner, is there really a step function potential change.

If you have any thoughts there, I'd appreciate it.

Greg Rush: I don't like the model -- that module itself will have an impact on our revenue because the biggest change in on the total revenue was procedures in identifying when the procedure is done by and making sure that we work with the posture to get approved approval that where we can actually pay it and therefore that the revenue. Since the model -- module won't help there, but we've been really working closely with that vendor to help influence their processes and we do think it will help our processes in the back office in terms of payment and tracking that. So, we're optimistic that model will help streamline our own processes, but it won't change any of the timing of P&L.

Alistair Macdonald: Yeah.

And just to add a little bit from the operations side about that. Some that work is to create an environment to the site. I think Jamie referenced to their on the work we've done inside the patients. We want sites to engage with us to have a -- to remove hurdles for them in terms of getting them aligned with the study, keeping them motivated, keeping that -- making sure that process for investigator payment is as smooth as possible and it's easy for them than that is for the process. So, some of that work is about setting up the right environment for those sites to drive in and to keep that motivation to drive and enroll patients with us.

Sandy Draper: Great. That's really helpful. Appreciate it guys.

Operator: Thank you. And that concludes our question-and-answer session for today.

I'd like to turn the conference back over to Mr. Macdonald for any closing remarks.

Jamie Macdonald: Jamie will take -- not the other Macdonald. In closing I want to remind you that we recently announced that we're hosting our Inaugural Investor and Analyst Day in New York on August 16th at the Nasdaq Market site. Goal for this event is to provide you with a deeper understanding of our company, our points of differentiation and our growth opportunities.

Thank you ladies and gentlemen for your attendance today and for your interest and investment in our company. We look forward to reporting back to you on our next call with further progress made during the third quarter of 2016. Have a great day.

Operator: Ladies and gentlemen thank you for participating in this conference. This does conclude the program and you may all disconnect.

Have a great day everyone.