Kevin D. Williams - Chief Financial Officer, Principal Accounting Officer and Treasurer John F. Prim - Chairman, Chief Executive Officer and Member of Risk & Compliance Committee Tony L. Wormington - President.

Daniel R. Perlin - RBC Capital Markets, LLC, Research Division Glenn Greene - Oppenheimer & Co. Inc., Research Division Peter J. Heckmann - Avondale Partners, LLC, Research Division Timothy W.

Willi - Wells Fargo Securities, LLC, Research Division Michael Landau - Evercore Partners Inc., Research Division Brett Huff - Stephens Inc., Research Division David J. Koning - Robert W. Baird & Co. Incorporated, Research Division.

Good day, and welcome to today's Jack Henry First Quarter 2014 Earnings Conference Call. This call is being recorded. For opening remarks and introductions, I would like to introduce Kevin Williams, Chief Financial Officer. Please go ahead..

Thank you, Latoya. Good morning. Thank you for joining us today for the Jack Henry & Associates First Quarter Fiscal 2014 Conference Call. I'm Kevin Williams, CFO, and on the call with me today are Jack Prim, CEO; and Tony Wormington, President. The agenda for the call this morning will be as follows.

Jack will start with an overview of the quarter from his perspective. Tony will then provide some operational highlights of the quarter, and then I'll provide some additional comments regarding the press release that we put out yesterday after market close. Then we will open up the lines for Q&A.

I need to remind you that remarks or responses to questions concerning future expectations, events, objectives, strategies, trends or results constitute forward-looking statements or deal with expectations about the future.

Like any statement about the future, these are subject to a number of factors, which could cause actual results or events to differ materially from those which we anticipate due to a number of risks and uncertainties. And the company undertakes no obligation to update or revise these statements.

For a summary of these risk factors and additional information, please refer to yesterday's press release and the sections in our recently filed 10-K entitled Risk Factors and Forward-Looking Statements. With that, I will now turn the call over to Jack Prim..

Thanks, Kevin. Good morning, and welcome to our first quarter earnings call for fiscal year 2014. We are pleased to be able to report a very solid performance for the quarter. We saw a balanced performance, with continued strong sales across all brands driving 9% organic revenue growth and leading to a record revenue backlog.

Our payments businesses continued to grow above industry average growth rates. Strong execution and expense control allowed us to expand our gross and operating margins nicely.

Based on discussions with bank and Credit Union customers at our recent user conferences, we continue to believe that we will see slow but steady improvement in the economy in their businesses and, consequently, in our own. It was a good start to the year. We look forward to continued progress.

And with that, I'll turn it over to Tony to provide some additional information on the business..

Thank you, Jack. We remain very pleased with the contributions from all components of the support and services, which increased 10% in the quarter compared to the prior year quarter. The largest contributor continues to be our electronic payments revenue, which grew 15% for the quarter compared to the prior year period.

Our outsourced data and item processing services increased 14% over the prior year quarter, and our in-house annual maintenance fees increased 2% over the prior period. In addition, our onetime implementation revenues were up 9% for the same period. Our electronic payments transaction volumes continued to experience very strong growth in the quarter.

JHA Payment Processing Solutions transaction volumes for ATM, debit and credit processing were up 19% over the prior year quarter. Bill payment transaction volumes increased 16% over the prior year quarter.

Financial institution merchants installed and utilizing our Enterprise Payment Solution increased to approximately 60,000 merchants, representing a 41% increase compared to the prior year quarter. Merchant-related transaction volumes increased 21% over the prior year quarter. Jack mentioned our banking educational conference the week of October 21.

The event was well attended, with a comparable number of attendees to the prior year. In closing, I would like to thank our customers, our associates and our shareholders for their continued loyalty to JHA. I'll now turn it over to Kevin for a further look at the numbers..

Thanks, Tony. Our total organic revenue increased by 9%, as Jack mentioned, for the quarter compared to the same period a year ago. Our license revenue decreased by 8% for the quarter, which -- this continues to be a lumpy line in our financial statements, compared to the prior year and represents 4% of our total revenue for the quarter.

Our support services increased 10% for the quarter compared to the year ago and now represents 91% of our total revenue. The support and services break down into the 4 components, as we've mentioned before. Implementation services, a onetime fee, was $22.8 million and increased 9% for the quarter.

Our electronic payments were $109.5 million for the quarter, which is an increase of 15%. Our OutLink data processing of $55.8 million was an increase of 14%. And our in-house maintenance was $81.5 million, with an increase of 2% compared to prior year.

Our hardware revenue increased 6% for the quarter compared to prior year and represents 5% of our total revenue. Recurring revenue, which, again, is our electronic payments, our OutLink and our in-house maintenance, experienced a growth of 9% for the quarter compared to the prior year and represents 80% of our total revenue for the quarter.

Consolidated gross margins improved to 44% for the quarter compared to 43% in the same quarter a year ago. License margins decreased to 88% this quarter from 92% a year ago due to increased sales of third-party software during the quarter.

Our support and service margins improved to 43% compared to 41% last year due to continued strong growth in our payments and OutLink offerings while, at the same time, continuing to contain costs and leverage our infrastructure. The hardware margins improved slightly to 24% from 22% a year ago due to sales mix.

To break this down into our 2 reporting segments, our Bank segment gross margins remained steady at 42%, and our Credit Union segment margins increased to 47% from 44% a year ago, which is primarily due to the increase in OutLink and our data processing and payments in the Credit Union segment.

In the Bank segment, license margins decreased to 84% from 91% a year ago. Support and service margins for the Bank segment were steady at 42%. And the hardware margins in this segment improved to 23% from 21%. In our Credit Union segment, license margins were steady at 93%.

Support and service margins improved to 44%, as I mentioned, due to the increase in data processing and electronic payments, which is driven by growth -- pardon me, and hardware margins increased to 26% from 25% last year due to sales mix.

Our total operating expenses increased 6% for the quarter compared to prior year, with increases in all components of our operating expenses, sales marketing, R&D and G&A, which all increased about the same percentage. As a percentage of total revenue, operating expenses decreased slightly to 17% from 18% last year for the quarter.

Our operating margin for the quarter increased to 26% from 25% a year ago, and our operating income increased 15% for the quarter.

The effective tax rate for the quarter was 35.5%, which is in line with the guidance we provided at the last earnings call, which was down slightly from 36% a year ago, which is primarily due to the timing of the R&E Tax Credit reenactment in January 2013, with no guarantees that we'll reenact it again this year, and it expires on 12/31 of this year.

It's a tough comparable we -- in the second half, when we've got the full impact of the non-retroactive reinstatement this last fiscal year. Our EBITDA increased to $103.3 million for the quarter compared to $91.9 million a year ago, or a 12% increase.

Depreciation and amortization expense of $25.9 million this quarter, with $13 million in depreciation and $12.9 million in amortization, compared to $24.2 million in depreciation and amortization this quarter last year.

Included in the total amortization is amortization of intangibles from acquisitions, which was $5.2 million for this quarter, which is down from $5.6 million in the same quarter last year. Our operating cash flow for the quarter decreased slightly to $97.7 million from $101.8 million a year ago.

Free cash flow for the quarter, calculated as operating cash flow less capital expenditures, of $7.3 million, which is up slightly from $6.8 million last year; capitalized software of $14.1 million, up slightly from the $11.6 million last year; and dividends of $17.1 million, up from $9.9 million last year.

Our free cash flow decreased to $61.9 million compared to $73.4 million a year ago, which, obviously, the biggest contributor to this decrease in our free cash flow is the large increase in dividends that we did this last fiscal year. This equates to free cash flow per share of $0.72 for this quarter compared to $0.85 last year.

Our in-house backlog, which represents contracts in hand for software, hardware and implementation services yet to be delivered is at $116.9 million, which is up 27% from last year. Outsourcing backlog, which is for the remaining life for current data and item processing contracts, was $386.3 million and up 17% compared to year ago.

Total backlog up 19% compared to year ago and, remember, there is nothing in our backlog for any of our electronic payments businesses, which currently represents a little over 37% of our total revenue. We will reiterate the guidance that we provided previous for FY '14 as the first quarter was pretty much in line with our expectations.

Top line revenue should continue in the upper-mid- to high single-digit growth range, with some ongoing leverage to our margins during the year. Obviously, as we all know, there could be some fluctuations due to sales mix.

The results of this continued revenue growth and continued margin leverage should be operating income growth in the low to mid-double digits, which, obviously, this means continued leverage to our margins compared to prior year of probably about 100 bps for the year, which we saw that in the first quarter of the year.

Our effective tax rate should remain at about 35.5%. Since we cannot predict the reinstatement of the R&E credit, obviously, if that gets reinstated, it will have a significant impact on our effective tax rate at the time the law passes.

Therefore, as a result of this, our EPS should grow pretty much in line with the operating income growth in the low double -- low to mid-double digits due to the decreased interest expense primarily offset by the increased tax rate, because we paid our term note off at the end of last fiscal year. That concludes our opening comments.

With that, I'll now open it up for questions.

Latoya, would you please open the lines up for questions?.

[Operator Instructions] The first question is from Dan Perlin of RBC..

I just wanted to ask a couple of quick ones. There seems to be increasing kind of talk around branch automation and branch transformation. And it's just not clear to me kind of in detail what role you guys play in that environment if, in fact, it does accelerate this year.

Could you just kind of outline that a little bit?.

Yes, Dan. This is Jack. Certainly, we have a number of branch automation solutions, whether it's teller automation or account-opening automation solutions. Most of the financial institutions have some type of a system in place for that.

I think most of the talk around branch transformation really has more to do with the layout of their branches, the utilization of their staff typically empowering -- so rather than just have a traditional teller, there -- they might have somebody with a lot more ability to handle multiple issues, possibly make small loans up to a certain amount, those kind of things.

So I think it's more of a branch reconfiguration typically into smaller space and redeployment of staff. There's some technology in some cases that's used, where somebody can kind of do self-service via video, kiosk or screen of some type back to a remote call center.

So again, from the standpoint of a lot of additional upside in terms of additional product sales that we would have to facilitate that, the -- they're currently using the -- our products that would help to automate branches just -- probably just reconfigure and deploy them in a slightly different way..

Okay. And then the other thing is, and this is more of a bigger-picture question as well, it just seemed like the pace of core conversions is accelerating, and we even saw, again, this morning, I guess, with Zions Bank.

And so just wondering, what are you seeing from your clients, what are you hearing from them? Is that, in fact, true like have we reached the point now where this acceleration is going to really start to kickstart? And obviously, guidance kind of doesn't build that in necessarily, but I would just be interested in your thoughts given the position you have in the market..

Yes, Dan, we -- look, I would tell you that the crediting side of the business has been pretty frothy for a couple of years and remains at comparable levels to what we have seen. So I wouldn't say that it's picking up over there, but it's a nice environment there. I think it's tough to draw too much of a conclusion from a single quarter.

I would tell you that if you could draw a conclusion from a single quarter, this first quarter on the banking side for us would indicate that yes, we think there's maybe a bit of pickup. But I'm a little reluctant to, as I said, take one quarter and project that out for a full year or longer.

I think we're definitely seeing some activity, feel like we're very well positioned to compete if decisions do pick up. And there may be some substance to that feeling that it's picking up, but it's a little early to make that call, in my opinion..

Okay. And then just a last question I have. You guys have delevered the balance sheet very quickly.

I'm wondering, as you think about capital redeployment for M&A potentials, do you see things on the horizon that you want to fill into your product portfolio? The technology changes that are taking place from kind of mobile commerce and banking seems to be one area of enormous focus and attention? Or are there partnerships that you feel like you could forge instead of M&A? And I'll jump off..

Yes. Dan, we certainly have -- there's been a fair amount of M&A activity in at least the last year, and we've looked at probably all of the significant deals that took place. The challenge for us is that those acquisitions solve a different problem for somebody else than they do for us.

And apparently, that problem was -- that enabled them to pay considerably more money for some of those acquisitions than we felt like they would be worth to our company. We continue to be interested in acquisitions. Again, we're not -- we have a history typically of not overpaying for acquisitions.

If we can find something that delivers the right capabilities at a reasonable price, we'll do that. If we're not able to do that, as always, we'll redeploy that cash in the form of dividends and share repurchases.

I would say that whether it's investing in additional mobile capabilities or looking at acquisitions in that area, that is certainly something that we are receptive to. But again, nothing concrete that I could talk about today..

The next question is from Glenn Greene of Oppenheimer..

I guess first question may be for Kevin. A little bit of help on the Credit Union gross margins, which really picked up both sequentially and year-over-year. And I suspect these are kind of record levels.

Could you just give us a little bit more color on what kind of drove that and whether it's sustainable?.

Yes, they were record levels, and I'll tell you that the license revenue within Credit Unions was pretty comparable where it was last year. The big driving force was in the support and services, where I believe we had a record for implementation services because there's just an enormous amount of activity going on in the Credit Union space right now.

So that, obviously, any time you get higher implementation revenue from the resources, that's going to have a significant impact on margins. But also just the increase in our maintenance data centers and electronic payments, both on those sides are both in the double digits as well in revenue growth. So all of those are going to drive the margin.

So are they sustainable at 47%, Glenn? Probably not, but I think they probably will stay in the 45% to 47% range for the year..

Okay. And then a good segue maybe talking about the competitive environment within the Credit Union market, obviously, with Fiserv having bought Open Solutions earlier this year.

Can you just maybe give a kind of an update on what you're seeing competitively? Has it gotten more competitive, stable, less competitive or maybe just some commentary around that?.

Glenn, I would say that it's maybe a little more competitive. I think the focus has been on going back to the customers that had signed up for the now discontinued system and convincing them to move to the open offering. So I think there's been a fair amount of activity in that area.

Not a lot of new wins that I'm aware of that weren't part of the family, one family or the other. But again, our activity remains quite high over there. We feel good about the -- some of the opportunities that we're currently engaged in.

Certainly, I think that it likely will become more competitive once the integration of the 2 companies is done and the story is more clear. But so far, we're still doing quite well in this segment..

Okay, then just the last question for me, and I'll hop off. But the OutLink business, I think, was a 14% growth this quarter. And last quarter, I think it was north of 20%. And before that, you kind of had been caught high single to low double digits. Are we sort of at a new sort of somewhat higher level for the time being or maybe get for Kevin....

Well, if you remember....

Go ahead..

If you remember, Glenn, last quarter, we talked about some unusual onetime events that happened in the quarter, which really drove the growth in that quarter. This quarter, I think is probably more of a norm. There was some termination fees in there, but it was like $800,000 or more than it was last year, so very little impact on it.

I mean, like, it would have impacted down to a 13% growth to 14% growth. So I think it's pretty much a more normalized growth rate that we're seeing this quarter, which is due to a couple of things. I mean, one, 96% of all of our new core bank deals last year went outsourcing. Out of 24 new deals, 23 went outsourcing.

On the bank side, close to 50% of the new core deals, out of 35 of them, roughly half of them went outsourcing. Plus, we had 50 existing in-house customers last year who decided to go to outsourcing. So all of those things are continuing to drive the growth more into outsourcing.

And to be quite honest, I'm pleased that our in-house maintenance continues to grow even at 2% clip with some of the headwinds that we're seeing from all of our banks and Credit Union customers without having to commit [ph] to outsourcing..

The next question is from Peter Heckmann of Avondale Partners..

Kevin, could you update us on -- within bill pay? I believe you're doing a data center migration there.

Has that been completed?.

Peter, I'm trying to remember. I think we still got a little bit of work to do on that -- on the data center migration for bill pay. We've got several data center migrations that we're in the middle of doing right now. Some of those have been completed. And we did a number on the item processing side of our business. Those are complete.

We've got several more in the queue. I think we've got a little more work to do on the bill pay data center conversion..

Okay. And then could you help me remember some of the larger multiyear project that you're doing on the software development side and when we would expect some of those to get into general availability? I'm just trying to handicap a little bit and look out maybe another year in terms of when that capitalization software might even out..

Well, probably the biggest one, Pete, is -- well, it's actually really 2 really big ones. One of those experienced on the bank side, which we are now in -- I think release 3 will be coming out the first part of next year, which will be the last really big one, and these just coming out in our normal annual releases, Pete.

So there's no -- it's not like we're building it all up and it's all going to dump out at one time. These are complete rewrites of the user interface for our core and all of our complementary products, and it's going out in piecemeal. So like the first piece was like some tools behind the scene.

The second piece was core and our CRM solution and finances and some of our other products. And then this first release was going to entail a whole bunch more of our complementary products since they all look and feel the same, which kind of changes our support methodology. But that is a big one, and there's probably about 1 more year of that one.

The other one is kind of the technology upgrade for Episys, which that is a -- that's a 6-year project. I think we're 3 years into it. So there's probably another 3 years or so on that one, and, again, that one's going to come out just in annual releases.

So it's not going to be a -- this huge, great, big, new product, but it's allowing us to continue winning new deals. I mean, I will tell you that the technology roadmap that we laid out for Episys is why we were able to get American Airlines Credit Union to convert over us, which is over a $6 billion credit union.

If we would not have had that technology roadmap, I'm not sure we would have gotten them. So it -- these are huge projects that are ongoing. I will tell you there's an enormous amount of development going on in everything mobile right now.

So I don't know when developments are ever going to stop, Pete, because we just got to continue providing additional new products for all of our customers..

Okay, that's helpful.

And then just, you may have said it and I may have missed it, but were there any insurance recoveries in the quarter from the flooding incident?.

No, there we're not. We are in some negotiations with them, so there could potentially be some in this next quarter. I am still negotiating with them, but there is also nothing built into the guidance I've provided either. So if we do get some, it will be a onetime hit..

The next question is from Tim Willi of Wells Fargo..

I had a couple of questions around payments. I know you gave this out at the -- a little bit of color at the annual analyst day.

But I was wondering if you could just give us a little bit of additional update on, as you look at the bill payments portion of electronic payments, sort of how to think about the penetration rates of banks that are currently with you on iPay and their consumer activity.

And then I -- and then in -- just in general, how many more banks are -- or sort of you feel are addressable to bring over to iPay that might be using a different third party for bill pay? That was my first question..

Well, Tim, the adoption rates are going to be lower in a typical community financial institution compared to what you're going to have at some of the large institutions like Wells Fargo, Bank of America.

Now I think that some of the reason why we're seeing really solid growth rate is in -- is growing user adoption and better utilization of bill payment. We are continuing to add new financial institutions to our bill pay product. I think in the credit union industry, it's probably 95-plus percent of credit unions have a bill payment solution.

It's probably low 90 percentile on the banking side. But there is a reasonable amount of churn out there.

Remember, that we not only market our bill pay solution to our own customers and to other customers -- other core customers directly, but we have a number of partners, whether they're Internet banking providers or other core system providers, that don't have their own bill payment system that are partnered with us and market our solution to their financial institution customers.

So we gain customers, new financial institutions replacing other bill payment solutions via that channel as well. So we think there's still very solid growth opportunities for us in the bill payment market..

If I could just stay on that for a second.

Within your iPay customer base, is there sort of a reference set of banks you would look at and say, you know what, here are big institutions that have been on the platform the longest or we think have done the best job, and sort of here's where they're at in terms of consumer penetration and usage? And could the vast majority of the remaining portion of our base is at half that, 1/3 of that, just sort of -- just the way to think about like the greenfield that sits within the existing base of FIs versus those that have really figured out the equation and have done tremendously well?.

Yes, it's a good question, Tim. I don't know that I can quote you any kind of accurate numbers off the top of my head. But I do think in a ballpark kind of an estimate, if you look at our top performers, to say that the average performer is potentially at half that rate is probably not much of a stretch to believe that, that would be the case..

Okay. And then the second question around payments was, you recently added, I think, Laura Kelly to your board, who's got obviously a lot of payment experience. You had brought Tom Wimsett on a while ago.

I'm just curious, if the addition of Laura as well as Tom -- does that signify further aspirations around what you think you can do in payments? Or was that more representative of we actually have a big payments business. We should probably have some board members that understand it.

So I'm just trying to sort of figure out what those moves were about..

Yes, I think it's a combination of both, Tim. I mean, our payments business, as you know, is over a $400 million-a-year business, and there's obviously a lot of talk around emerging payments and new payment forms.

So I think it's a combination of wanting to make sure, given the size and the growth rate and the future potential of that business, that we had folks helping us make the right kinds of decisions about areas of payments that we should be in, shouldn't be in and basically bring us a very deep industry perspective, which Laura Kelly and Tom Wimsett both do..

The next question is from David Togut of Evercore..

This is Mike Landau in for David Togut. What was capitalized software in September quarter? And how does that compare to the quarter 1 year ago? And I -- any revision on where you think software capital will land for the fiscal year would be helpful..

Cap software, as I said in my opening comments, for the quarter was $14.1 million compared to $11.7 million last year. So this quarter is -- somewhere in between those 2 is probably a reasonable run rate for the year. It's probably going to end up somewhere around $52 million for the year in total cap software..

And the next question is from Brett Huff of Stephens Inc..

A couple of quick questions. We're talking about M&A and capital deployment, and I'm thinking about the payments question that was just asked.

As you guys think about future proofing your business or even thinking about payments as a big opportunity just to even accelerate the growth you had, the -- when you guys bought iPay, folks thought it was expensive. It turned out to be a really good deal.

Would you view other payments businesses appropriately given -- I know that you guys are parsimonious with your capital, appropriately so.

But how do you think about payments given that even okay payments businesses may be relatively expensive?.

Well, I would not disagree with your assessment, for starters. Yes, I think, Brett, we just kind of tend to look at the individual opportunity and what we felt like it was going to do for us near term and long term. Would we pay up for a payments business as we did with iPay that we thought had the right long-term potential? Yes.

Would it potentially be at a multiple that would seem somewhat out of bounds for the kind of multiple where we would have -- let's say if we were looking at an acquisition of another core processor, there's no way the multiples that we would pay for any core processor out there would be anywhere close to the multiples that you're likely to get for, frankly, a mediocre payments company or particularly in the mobile arena in any event.

So yes, I think we would look at those on a case-by-case basis. If we felt like there was something there that offered us good long-term potential and we had to pay up for it, we would explain that at the time of acquisition as to why we did it and go forward from there.

But would not shy away from an acquisition solely for high valuation and particularly in that arena, that arena being mobile..

Yes, and one more comment, Brett. I mean, if you think about when we did iPay, we did pay 16x trailing EBITDA, but their EBITDA was also growing at 43%. So there's a number of factors you have to look at other than just an EBITDA multiple when you're looking at an acquisition of a payment-cycle-related company versus a core, as Jack mentioned..

That's helpful.

And then on -- given that HFS has traded hands now and is owned by a Canadian parent, I mean, is there going to be any change to the competitive set you see from them? I mean, did you see them often before, and do you think that'll change going forward?.

Brett, I would say that we did not see them that often, and I don't know of any reason why that would change the -- I don't think the ownership of HFS was a problem per se or a problem that's been resolved. So I think we'll see them out there occasionally, but they are not the folks that we are going to be running into on a more frequent basis..

And then last question for me. On the bank headwinds, the bank closure headwinds, the M&A headwinds that existed 2, 3, 4 years ago, I remember you guys had quantified a pretty big drag to organic growth.

Have we lapped most of that now? Or are we still getting some of the benefit of that in the very good organic growth that you guys are seeing?.

I think we've probably lapped most of that, but again, we had at a fairly sizable customer last quarter, I think it was, that failed, a $3.5 billion bank. Those hurt, but I think, by and large, we're most of the way through that at this point, Brett..

Yes, I think what we're seeing now is more of the resurgence of the typical M&A activity, which is kind of replacing some of the headwinds that we saw from the other. But that's more of a typical 3% or 4% consolidation that we've seen since the '80s..

[Operator Instructions] And the next question is from David Koning of Robert W. Baird..

Yes, yes, and just my first question, EFT, it slowed very mildly. I mean, midteens is really good relative to almost anybody else out there.

I'm just wondering if you did see at all what Visa and Fiserv and Vantiv have kind of talked about late September, maybe a little into early October just a bit slower volumes and then it sounded like by mid-October, it picked up a little bit again. But I'm just wondering if you saw some of those same trends..

Yes, this is Tony, David. We did see above-average growth in the quarter, but we did see a slight deceleration at the end of the quarter. That really didn't impact the results significantly.

The slight deceleration has continued into the early part of the current quarter for the month of October, but we don't expect any significant impact, only a slight deceleration in terms of volumes..

Yes, okay. That sounds like what others said, too. Okay, that makes sense. Secondly, just to review guidance again, I think you talked about this a lot last quarter, if I remember right, but the up to 100 basis points of operating margin expansion is off of a GAAP basis, including the Lyndhurst expenses last year..

Yes, yes..

Yes, okay, okay. That's good..

Because as I said, Dave, there was enough interest reimbursements and some unusual onetime revenue hits that we got last year that it essentially offset the Lyndhurst impact or within a couple of million dollars of it. So for the full fiscal year, the -- if you took all of onetime, put them together, it wasn't a huge impact on our margins..

Right, right, okay. And then it looked like in the press release, you talked about the capitalized software expenses. But there was also a new category I don't remember seeing before, internal use software.

Is that something that'll continue kind of around that $3.2 million level that it was last -- this quarter?.

It was a little higher this quarter, Dave, and that's something that we have always kind of had out there, but our auditors thought that we should disclose that. So that's kind of a new thing, and it was a little higher this quarter. But it'll be an ongoing disclosure item going forward now..

Did you used to just lump it within the capitalized software?.

Yes..

There are no further questions at this time. I'll turn the call back over for closing remarks..

Thank you, Latoya. Again, we want to thank you, all, for joining us today to review our first fiscal 2014 results, which we were very pleased with. And we want to tell you we will continue to do what's best for all of our customers and you, our shareholders. And we thank you for joining our call again.

With that, Latoya, would you please provide the replay number?.

Yes, ladies and gentlemen, this conference will be available for replay. And the number is -- one moment. That number is (800) 585-8367 or you may use (855) 859-2056 or (404) 537-3406. And that does conclude our conference for today. You may now disconnect. Good day..