Intrinsic value of Mitek Systems - MITK

Previous Close

$9.90

  Intrinsic Value

$4.19

stock screener

  Rating & Target

str. sell

-58%

  Value-price divergence*

0%

Previous close

$9.90

 
Intrinsic value

$4.19

 
Up/down potential

-58%

 
Rating

str. sell

 
Value-price divergence*

0%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MITK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  40.00
  22.20
  20.48
  18.93
  17.54
  16.28
  15.16
  14.14
  13.23
  12.40
  11.66
  11.00
  10.40
  9.86
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
Revenue, $m
  35
  43
  52
  61
  72
  84
  96
  110
  125
  140
  156
  174
  192
  211
  230
  251
  272
  295
  318
  342
  367
  393
  420
  448
  477
  508
  540
  573
  607
  643
  680
Variable operating expenses, $m
 
  39
  47
  56
  66
  76
  88
  100
  113
  127
  142
  157
  174
  191
  209
  227
  247
  267
  288
  310
  332
  356
  380
  406
  432
  460
  489
  518
  549
  582
  616
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  33
  39
  47
  56
  66
  76
  88
  100
  113
  127
  142
  157
  174
  191
  209
  227
  247
  267
  288
  310
  332
  356
  380
  406
  432
  460
  489
  518
  549
  582
  616
Operating income, $m
  2
  4
  5
  5
  7
  8
  9
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  28
  30
  32
  35
  37
  40
  42
  45
  48
  51
  54
  57
  61
  64
EBITDA, $m
  4
  5
  5
  6
  8
  9
  10
  12
  13
  15
  17
  18
  20
  22
  24
  27
  29
  31
  34
  36
  39
  42
  45
  47
  51
  54
  57
  61
  64
  68
  72
Interest expense (income), $m
  0
  0
  0
  0
  0
  0
  0
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  4
  4
  4
  5
  5
  5
  5
Earnings before tax, $m
  2
  4
  5
  5
  6
  7
  8
  10
  11
  12
  14
  15
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  37
  39
  41
  44
  47
  50
  53
  56
  59
Tax expense, $m
  0
  1
  1
  1
  2
  2
  2
  3
  3
  3
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
Net income, $m
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  41
  43

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  34
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  48
  17
  21
  25
  29
  34
  39
  44
  50
  56
  63
  69
  77
  84
  92
  100
  109
  118
  127
  137
  147
  157
  168
  179
  191
  203
  216
  229
  243
  257
  272
Adjusted assets (=assets-cash), $m
  14
  17
  21
  25
  29
  34
  39
  44
  50
  56
  63
  69
  77
  84
  92
  100
  109
  118
  127
  137
  147
  157
  168
  179
  191
  203
  216
  229
  243
  257
  272
Revenue / Adjusted assets
  2.500
  2.529
  2.476
  2.440
  2.483
  2.471
  2.462
  2.500
  2.500
  2.500
  2.476
  2.522
  2.494
  2.512
  2.500
  2.510
  2.495
  2.500
  2.504
  2.496
  2.497
  2.503
  2.500
  2.503
  2.497
  2.502
  2.500
  2.502
  2.498
  2.502
  2.500
Average production assets, $m
  4
  5
  6
  7
  8
  10
  11
  13
  14
  16
  18
  20
  22
  24
  26
  29
  31
  34
  36
  39
  42
  45
  48
  51
  54
  58
  62
  65
  69
  73
  78
Working capital, $m
  32
  -2
  -3
  -3
  -4
  -5
  -5
  -6
  -7
  -8
  -9
  -10
  -11
  -12
  -13
  -14
  -16
  -17
  -18
  -19
  -21
  -22
  -24
  -26
  -27
  -29
  -31
  -33
  -35
  -37
  -39
Total debt, $m
  0
  2
  4
  7
  10
  13
  16
  19
  23
  27
  31
  36
  40
  45
  50
  56
  61
  67
  73
  79
  85
  92
  99
  106
  114
  122
  130
  138
  147
  156
  166
Total liabilities, $m
  9
  11
  13
  16
  19
  22
  25
  28
  32
  36
  40
  45
  49
  54
  59
  65
  70
  76
  82
  88
  94
  101
  108
  115
  123
  131
  139
  147
  156
  165
  175
Total equity, $m
  39
  6
  7
  9
  10
  12
  14
  16
  18
  20
  22
  25
  27
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  68
  73
  77
  82
  87
  92
  97
Total liabilities and equity, $m
  48
  17
  20
  25
  29
  34
  39
  44
  50
  56
  62
  70
  76
  84
  92
  101
  109
  118
  127
  137
  146
  157
  168
  179
  191
  204
  216
  229
  243
  257
  272
Debt-to-equity ratio
  0.000
  0.330
  0.580
  0.770
  0.930
  1.050
  1.150
  1.230
  1.300
  1.350
  1.400
  1.440
  1.470
  1.500
  1.530
  1.550
  1.570
  1.590
  1.600
  1.620
  1.630
  1.640
  1.650
  1.660
  1.670
  1.680
  1.680
  1.690
  1.700
  1.700
  1.710
Adjusted equity ratio
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2
  3
  3
  4
  5
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  23
  25
  27
  28
  30
  32
  34
  36
  38
  41
  43
Depreciation, amort., depletion, $m
  2
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  7
  8
Funds from operations, $m
  7
  4
  4
  5
  6
  7
  8
  9
  10
  11
  12
  13
  15
  16
  17
  19
  20
  22
  24
  26
  28
  29
  31
  34
  36
  38
  40
  43
  45
  48
  51
Change in working capital, $m
  -1
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
Cash from operations, $m
  8
  4
  5
  5
  6
  7
  8
  9
  10
  12
  13
  14
  16
  17
  19
  20
  22
  23
  25
  27
  29
  31
  33
  35
  37
  40
  42
  45
  47
  50
  53
Maintenance CAPEX, $m
  0
  0
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -7
New CAPEX, $m
  0
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
Cash from investing activities, $m
  -3
  -1
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -7
  -7
  -7
  -7
  -8
  -8
  -8
  -10
  -10
  -11
  -11
  -11
Free cash flow, $m
  5
  3
  3
  4
  4
  5
  6
  7
  8
  8
  9
  10
  12
  13
  14
  15
  16
  18
  19
  21
  22
  24
  25
  27
  29
  31
  33
  35
  37
  39
  41
Issuance/(repayment) of debt, $m
  0
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
Issuance/(repurchase) of shares, $m
  2
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2
  2
  2
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
  5
  6
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  8
  9
  9
  10
Total cash flow (excl. dividends), $m
  6
  5
  5
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  18
  19
  20
  22
  24
  25
  27
  29
  30
  32
  34
  36
  39
  41
  43
  46
  48
  51
Retained Cash Flow (-), $m
  -9
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
Prev. year cash balance distribution, $m
 
  34
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  38
  4
  5
  6
  6
  7
  8
  9
  10
  11
  12
  14
  15
  16
  17
  19
  20
  22
  23
  25
  27
  29
  30
  32
  34
  36
  38
  41
  43
  46
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  36
  4
  4
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  5
  5
  5
  4
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
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Mitek Systems, Inc. develops, markets, and sells mobile capture and identity verification software solutions for enterprise customers worldwide. The company applies its patented technology in image capture, correction, and intelligent data extraction in the mobile financial and business services markets. Its technology allows users to remotely deposit checks, open accounts, get insurance quotes, and pay bills, as well as verify their identity by taking pictures of various documents with their camera-equipped smartphones and tablets instead of using the device keyboard. The company offers Mobile Fill to pre-fill forms with personal data by simply snapping a picture of the consumer’s driver license, credit card, or other document; Mobile Verify, an identity verification solution that can be integrated into mobile apps, mobile Websites, and desktop applications; and Mobile Docs, a mobile document scanning solution. It also provides Mobile Deposit, a software that allows users to remotely deposit a check using their camera-equipped smartphones or tablets; and Commercial Mobile Deposit Capture product that integrates the same core technology as Mobile Deposit with additional capabilities specific to small and medium size businesses. The company markets and sells its solutions primarily to financial services, such as banks, credit unions, lenders, payments processers, card issuers, insurers, etc. through direct sales teams and channel partners. Mitek Systems, Inc. was founded in 1983 and is headquartered in San Diego, California.

FINANCIAL RATIOS  of  Mitek Systems (MITK)

Valuation Ratios
P/E Ratio 162.3
Price to Sales 9.3
Price to Book 8.3
Price to Tangible Book
Price to Cash Flow 40.6
Price to Free Cash Flow 40.6
Growth Rates
Sales Growth Rate 40%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate -100%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 4.6%
Ret/ On Assets - 3 Yr. Avg. -0.8%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. -1%
Return On Equity 5.8%
Return On Equity - 3 Yr. Avg. -1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 88.6%
Gross Margin - 3 Yr. Avg. 90%
EBITDA Margin 11.4%
EBITDA Margin - 3 Yr. Avg. -2.3%
Operating Margin 5.7%
Oper. Margin - 3 Yr. Avg. -6%
Pre-Tax Margin 5.7%
Pre-Tax Margin - 3 Yr. Avg. -4.2%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. -2.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. -16.7%
Payout Ratio 0%

MITK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MITK stock intrinsic value calculation we used $35 million for the last fiscal year's total revenue generated by Mitek Systems. The default revenue input number comes from 2016 income statement of Mitek Systems. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MITK stock valuation model: a) initial revenue growth rate of 22.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MITK is calculated based on our internal credit rating of Mitek Systems, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Mitek Systems.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MITK stock the variable cost ratio is equal to 91.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MITK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Mitek Systems.

Corporate tax rate of 27% is the nominal tax rate for Mitek Systems. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MITK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MITK are equal to 11.4%.

Life of production assets of 10 years is the average useful life of capital assets used in Mitek Systems operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MITK is equal to -5.7%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $39 million for Mitek Systems - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 34.375 million for Mitek Systems is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Mitek Systems at the current share price and the inputted number of shares is $0.3 billion.

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COMPANY NEWS

▶ ETFs with exposure to Mitek Systems, Inc. : July 31, 2017   [Jul-31-17 04:53PM  Capital Cube]
▶ Mitek Systems meets 3Q profit forecasts   [Jul-27-17 11:46PM  Associated Press]
▶ ETFs with exposure to Mitek Systems, Inc. : July 10, 2017   [Jul-10-17 02:52PM  Capital Cube]
▶ ETFs with exposure to Mitek Systems, Inc. : June 27, 2017   [Jun-27-17 03:25PM  Capital Cube]
▶ Mitek Awarded 30th Patent For Mobile Capture Innovation   [Jun-06-17 07:00AM  GlobeNewswire]
▶ Mitek ID Solutions Selected by Leading Digital Lender   [May-24-17 07:00AM  GlobeNewswire]
▶ Mitek Systems tops Street 2Q forecasts   [Apr-27-17 06:24PM  Associated Press]
▶ Mitek Granted New Mobile ID Verification Patent   [Apr-11-17 07:00AM  GlobeNewswire]
▶ Mitek to Enable B2B Mobile Deposits on Ariba® Network   [Mar-20-17 07:00AM  GlobeNewswire]
▶ Nasdaq-listed fintech Pioneer Mitek launches in the UK   [Feb-07-17 07:00AM  GlobeNewswire]
▶ San Juan Basin Royalty Trust (SJT): Is It A Good Stock to Buy?   [Dec-17-16 09:27PM  at Insider Monkey]
▶ Here is What Hedge Funds Think About Avid Technology, Inc. (AVID)   [Dec-02-16 10:09AM  at Insider Monkey]
▶ Mitek Appoints Kalle Marsal as Chief Marketing Officer   [Oct-04-16 07:00AM  GlobeNewswire]
Stock chart of MITK Financial statements of MITK
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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