AudioCodes Ltd (AUDC) 2008 Q2 法說會逐字稿

Greetings, and welcome to the AudioCodes second quarter 2008 earnings conference call.

At this time, all participants are in a listen-only mode.

A question and answer session will follow the formal presentation.

(OPERATOR INSTRUSTIONS).

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr.

Erik Knettel, Investor Relations for AudioCodes.

Thank you, you may begin.

Thank you, Diego.

I'd like to welcome everyone to the AudioCodes second quarter 2008 earnings conference call.

Let me begin the call today with a brief Safe Harbor statement concerning AudioCodes business outlook or future economic performance, product introductions and plans and objectives related thereto, and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters.

These are forward-looking statements as that term is defined under US Federal Securities Law.

Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements.

These risks and uncertainties and factors include, but are not limited to, the effect of global economic conditions in general and conditions in AudioCodes' industry and target markets in particular, shifts in supply and demand, market acceptance of new products and continuing product demand, the impact of competitive products and pricing on AudioCodes' and its customers' products and markets, timely product and technology development, upgrades and the ability to manage changes in the market conditions as needed, possible disruption from acquisitions, the ability of AudioCodes to successfully integrate the products and operations of acquired companies into AudioCodes' business and other factors detailed in AudioCodes' filings with the Securities and Exchange Commission.

AudioCodes assumes no obligation to update that information.

In addition, during the call we will refer to non-GAAP net income.

We have provided a reconciliation of non-GAAP net income to our net income according to GAAP in our press release and on our website.

Joining us today from AudioCodes we have, Shabtai Adlersberg, Chairman, President and Chief Executive Officer and Nachum Falek, Vice President, Finance and Chief Financial Officer.

I would not like to turn the call over to Shabtai Adlersberg.

Mr.

Adlersberg, please go ahead.

Thank you, Erik.

Good morning and good afternoon, everybody.

I would like to welcome all to our second quarter 2008 conference call.

With me this morning is Nachum Falek, Vice President, Finance and Chief Financial Officer.

Nachum will start off by presenting the financial overview of the quarter.

I will then review some of the business highlights for the second quarter, and I'll describe some the developments in our business.

We will then turn it into the Q&A session.

Nachum.

Thank you, Shabtai and good morning, everyone.

Before beginning the financial overview of the quarter, I would like to note that the following discussion will include GAAP numbers and pro forma numbers.

Our second quarter pro forma results reflect adjustments for the following two non-cash items; stock based compensation expenses, which totaled $1.2m in the second quarter of 2008 and amortization expenses relating to the acquisitions of Nuera, Netrake and CTI, which totaled $800,000 in the reported quarter.

Full reconciliation of the pro forma results discussed on this call to GAAP results is currently available for view on our website and in the press release issued yesterday.

Getting to our quarterly results, in the second quarter revenues were $45.7m, which represent 4.5% increase from the last quarter.

As a percentage of our revenues, sales in America accounted for 52%, Europe 24%, Asia Pacific 16% and Israel 8%.

We had one customer above 10%.

Our top 15 customers accounted for 53% of our revenues compared to 49% in the previous quarter.

In terms of revenues by business group, in the second quarter our Technology business group accounted for 31% of revenue compared to 35% in the previous quarter.

And our Networking business group accounted for 69% of revenue compared to 65% in the previous quarter.

In the second quarter of 2008 pro forma gross margin was 57.6% compared to last quarter's pro forma gross margin of 57.8%.

On a GAAP basis, gross margin was 56.2%.

Our total pro forma operating expenses were similar to the first quarter level, at approximately $22.5m in the second quarter of 2008.

On a GAAP basis, operating expenses for the second quarter were $23.8m.

Headcount decreased this quarter by 25 employees, which brings us to a total of 663 employees.

Proforma net income for the second quarter was $3.6m, or $0.09 per share.

GAAP net income for the second quarter was $1.6m, or $0.04 per share.

Short-term and long-term cash balances was $147m compared to $137m last quarter.

The increase in cash balances is attributed mainly to a positive cash flow from operation and financing which were offset by a negative cash flow related to investment activities.

During the quarter we did a buyback of our share in the amount $7.2m and received a bank loan in the amount $15m for five years.

We have recently secured additional $15m bank loan for five years in order to improve our balance sheet strength, and which brings our total cash balances at this time to approximately $160m.

DSO came in at 59 days compared to last quarter's DSO of 50 days.

As for our guidance, we wish to update our annual guidance for 2008.

On an annual basis, we forecast revenues for 2008 to be in the range of $180m to $185m.

And now forecasted our non-GAAP earnings per share will be at the higher part of the range of $0.34 to $0.37, which we planned earlier this year.

We also estimate our GAAP earnings per share to be in the range of $0.12 to $0.15.

I will now transfer the call to Shabtai.

Thanks, Nachum.

We're very pleased to report record quarterly revenues for 2008 -- second quarter 2008 growing close to 20% year over year and 4.5% sequentially over the first quarter 2008.

All that, in the face of a challenging environment including markets and regions.

On the heels of the first quarter of 2008, and maintaining growth for the fifth consecutive quarter, we believe we are on track with our plans for 2008.

Even more, as Nachum noted earlier, we now believe we should end the year in the higher end of the earnings range planned initially for 2008.

The Networking business, which is now about 70% of product sales, continued to exhibit strong momentum, with 10% growth over previous quarter and above 25% year over year.

With our Networking business growing at about 30% annually for the past three years, and with the growing portfolio, new offerings and better infrastructure in place in our global presence, we believe that we are [seeding] these days all necessary ingredients for our continued future growth.

Operationally, we kept improving on several fronts.

On the operating margin front we grew to 8.3% versus 6.7% in the previous quarter, and only 2.3% a year ago.

Cash flow was positive in the quarter, bringing $4m.

Overall cash position, as Nachum reported, was $147m at the end of this quarter, close to $160m today.

And all that versus $137m at the end of the first quarter 2008.

Headcount decreased 25 employees mainly due to completion of the integration of some of the acquired businesses during 2006 and 2007 and adjustments in our business and more focus on several parts of the business.

Most important, profit grew to $3.6m compared with $3.1m in the first quarter and $1.4m a year ago.

Most important, we believe that we are fairly close to finalize the process of focusing our investments, solely [pee-yen] along with our strategy and current business, where we see very healthy demands for our products and services all over the globe.

That we believe that we should keep performing on the operational front in coming quarters.

Also, I'd like to mention that we see the competitive environment quite comfortable for us.

We are competing generally with smaller companies who face tough times in view of the uncertainty and some of the slowdown in certain markets and inability to act with financial strength.

On the other side, we have larger companies who prefer these days and tend to also to [build] type of products that we are manufacturing.

All in all, we believe that we are in very good spot to take advantage of weakening competition.

All in all, the first half of 2008 is quite in line with our plans.

Our key focus remains, and continues to be, on the CPE side.

We keep selling customer premises equipment to both the enterprise space and the service provider space, and we are solidifying the infrastructure that's required to do that.

We have strengthened our partnership with a few leading vendors in the enterprise market, most notably some of the names that you know are Microsoft.

We announced a relationship with Avaya and a few more leading enterprise market vendors.

At the same, we kept churning our partnerships with world-class system integrators that deploy complete network solutions.

And I believe that, all in all, we are positioning ourselves to be a fairly strong reliable committed partner to those large partners who sell complete networks.

We have some our winning products, especially in the low and mid density media gateway space, and those products kept growing in the quarter.

And we indeed see future for them both on the lower end side and also on the medium side.

Also, we saw a phenomena of some of the players in that market abandoning and not developing new products.

With new features that's being required in the field and the need to support new applications and more interoperability with different networks, we believe we are remaining one of the few parties in the market that keeps investing, keeps delivering new products.

And, therefore, we believe that new opportunities will be open for us as time goes by.

Most important this year, we are investing heavily.

In spite of keeping to our OpEx quite flat, we are investing heavily in new technology, development in new architecture and, thus, we are ready for the 2009 and beyond for better cost structure and more functionality.

And there's intense work that goes right now in the R&D section of the Company to be ready with those new products for early next year.

We have announced one very important imitative for us; the Multi-Service Business Gateway.

I'll get to that immediately.

That represents for us an entry into a completely new market segment that stands today at about $600m to $700m.

We are working on another initiative which we plan to announce towards the end of the year.

At this time, as Nachum mentioned, we see no change in outlook for overall 2008.

Revenues above $180m, representing more than 15% growth in the year, and potential growth on the earnings side.

Based on inputs from a market research group, Synergy, in the first quarter of 2008 we were ranked number four in the combined low and mid-density gateway market.

We were capturing 14.4% of the market and we believe that, as time goes, by we should be able to increase that market share.

And with some of the larger players, putting much less attention and effort and resources into that space we should be able to grow that market share.

Most important, as I have mentioned before, we are diversifying and accessing a new market.

So far, we have an omni-play, a pure VoIP play which is centered around voice and centered around media gateways.

We are now diversifying our operations and have introduced already a converged voice and data product.

That product, which targets both the SMEs, the small and medium enterprises space, and the SMB, represents for us a large opportunity which is not less than the one that we have been focusing these days.

So that represents a new growth engine for the Company.

That product will integrate into it, besides the voice media gateways, also a session border controller enterprise level and also data services that include, among others, switching, routing, firewalls, network user access, third-party user applications and other media processing functionalities.

We believe that type of integration level is not available with many companies.

And we believe that due to our leadership in the voice space we should be able to grab a nice market share in the new space.

All in all, the value proposition to service provider would be an easy to manage demarcation point for extra services.

And the value proposition for enterprises would be for those who seek a simple migration path for inter-branch communication.

We already have introduced to the market a fairly limited version of this new product.

By the beginning of the fourth quarter this year we will release a more advanced version which will deal with IP to IP mediation, enterprise session border control functionalities, wide network, fully fledged audio device and a few more.

All in all, we target to capture about 5% of that market in this coming year.

And we, therefore, have basically covered key developments in this quarter.

And, with that, I'd to the call into the Q&A session.

Operator.

Thank you.

(OPERATOR INSTRUCTIONS).

Our first question comes from Vivek Arya with Merrill Lynch.

Please state you question.

Hello, Shabtai and Nachum.

A couple of questions.

First, some housekeeping questions, and then some product and strategy questions.

First, in terms of housekeeping, Nachum, how should we model the share account for Q3 and Q4?

If I'm not mistaken, your convert roughly starts kicking in at these EPS levels, right?

So how should we model the share account.

Yes.

Hi, Vivek, first.

It's true, when and if the convertible will kick in you will need to add the shares from the conversion.

But remember that on the EPS calculation you need to take out the interest that we are paying on the convert, only on the calculation.

So, basically, it will be a little bit dilutive but very linear, and I don't believe it will have any significant influence in the next quarter in terms of our EPS.

So how many shares should we be adding and how much interest should we be planning back?

I'm not sure yet.

Obviously, it depends on how -- on the profit that we will make on the third quarter, so it's too early for me to know if it will kick in.

Assuming it will, you will need to add 6.8 million shares.

Okay.

And how much interest?

It's 2% over the annual, over the $125m.

All right.

And then, how should we model the interest expense?

I believe you have these new bank loans.

Yes.

So, basically, we have the loans.

I don't what to get into specific details but, all in all, since we deposited them, so back to back, the interest in very -- it's not significant on our interest income.

Got it.

Now, Shabtai, what is your view of carrier versus enterprise spending compared to views from three months ago?

What have been the positives, what have been the negatives so far?

Well, we really don't see much change and we really don't see different spending patterns between the two different spaces.

On the enterprise space there's a lot activities going on, on one side with products on integrating more product into their solution and then working with system integrators -- global system integrators [because] those solutions.

So it's no change on that front.

There's, on the other hand also, intensive work and responding to our seasonal projects to service providers.

Again, I think we've mentioned before that we see a lot of activity in Latin America, in East Europe, in Asia Pacific.

But, all in all, if I have to judge between the two spaces, I don't see any major change.

I see.

And then, on the activities that you have mentioned with Microsoft or Avaya, some of these tier-one enterprise players, how should we size -- how should we try and quantify the success of this activity?

Are all these representing a certain percentage of sales for you?

How should we track the progress with these partners?

Okay.

So, at this stage the sales level with those large partners is still not meaningful compared with the overall level of sales.

So, all in all, I think the key parameters we are using inside to measure success in those relationship is really on number of design wins and number of first -- initial very limited scale deployments.

We do believe that with both we will see, we actually already ramp up with one of them, but I think 2009 should be much more characteristic as to the true contribution of those partners.

All in all, it's growing and the measure is the number of design wins (inaudible) both partners.

I see, so mostly a 2009 impact.

And then, finally Shabtai, if you step back and look at the Company, obviously the market cap has come down significantly.

How do you think about AudioCodes from a much longer, two to five year point of view.

Do you think you can continue to succeed standalone?

You've done a very good job in the last year for of doing so, but when you look out two to five years, how do you see AudioCodes?

Frankly, I'm more optimistic than before because much more a closed game two years back when the large players used to deploy complete solutions and would rely markedly on in-house developed solutions.

I think with the telecom market under pressure and the large player under pressure, also from the software companies coming from the Internet space, there's tendency among large players to move more and more into a software only application level of solutions.

And they focus basically on the net service system integration and the applications side, and do tend these days to outsource and rely more on partners such as us to provide complementing I would call intelligent hardwares, type of hardware that we produce.

And so we do believe that we have more and more opportunities opening for us.

That has been evident in the first half of 2008 where we start to get access to partners who in the past never dealt with us or did everything internally.

So I believe AudioCodes' future lies in becoming a larger medium telecom market player.

And I think continuing to grow organically on the 15% to 20% annually is definitely an achievable target for us.

And if a good acquisition comes our way which will help substantially enlarge that, we will be no problem our goal at least for the next three years would be to become a $400m, $500m Company.

And I think that is, indeed, achievable.

Okay, thank you.

Shabtai Adlersberg; Okay.

Our next question comes from Troy Jensen with Piper Jaffray.

Please state your question.

Congrats on the nice results, guys.

So I just want to focus -- I have two questions, primarily on the margin front.

So if you guys look at the gross margins, September of '06 you had 59.9% and every quarter since then they've been flat to downish.

Now, at 57.6%, you're about 40 basis points below the low end of your targeted range.

So can you talk about what's going on in the gross margin line, and do we see the 58% to 60% again or is the fact that network's taken over, is that going to dilute the margins lower?

Yes -- Troy, this is Shabtai.

Yes, we definitely agree with your view that as the volume grows, as we become larger Company, as we sell more, we should see incremental, though very much controllable, decrease in the gross margin, okay?

It's not that you should expect a drop of 1% to 2%, but -- I've mentioned that trend, I think, already in 2005.

We're reaching close -- to be close to a 200m Company and, as our sales will grow, we'll see some decrease in gross margin, but we don't -- as I've mentioned before, as competition is not really pricing, it's really more the volume, the type of prices and margins that our customers plan for themselves and therefore look to get from us.

To that point, does -- is 58% to 60% still the target and do you think we're going to get back there?

Personally, I don't think we'll get to the 60% gross margin level.

I don't see large players holding that.

If we would have been a software company, we could ask command of that.

Being a majority based on intelligent hardware, I think saying as a range between 55% and 60% is a good target to fight for and to continuously invest in cost reduction and I think we are doing that.

Okay.

Well, you've been doing a great job, obviously, leveraging it to the operating line, with some tight expense controls and the headwind of the currency changes here.

Is there -- if you look a couple of quarters out, will you guys need to start accelerating any spending on R&D and sales and marketing, given that you've held back here for a while?

So we have -- I think we came to -- in the past few quarters, I think we came -- we have set for ourselves a range of investments that we plan for R&D.

Generally, I would put that roughly in the range of 17% to 20% of our sales.

And we monitor that very closely.

I would simply say that we are celebrating 15 years of existence and we have invested a lot, so the amount of incremental or additional investment that's needed is not that high.

And we believe that, with the efficiency and the talent that we have developed internally, we really do not feel that there's a need to invest substantially in R&D these days, beyond the level that I've mentioned before.

All right, got it.

Keep up the good work, guys.

Thanks, Troy.

Thank you.

Our next question comes from Ted Jackson with Cantor Fitzgerald.

Please state your question.

Hey, Nachum.

Hey, Shabtai.

Hi, Ted.

Hi, Ted.

One is just a fill in the blank.

I missed the employee number.

Could you just say that again?

663.

Thanks.

And then, just a couple of questions on business.

I was curious if you could give an update relative to the government project that you talked about last quarter.

You were pretty excited about it, thought it could generate $10m to $20m in 2009.

Do you still see that as on track and on base?

Yes.

Okay.

The second question had to do with the cable market.

You've got a good -- some good exposure within that marketplace.

You've seen some of these cable providers actually starting to move out of offering telephony services just to the consumer and trying to make efforts to get into the enterprise, get into the small business.

Given your product set, it seems you'd be well positioned to work with them on that front.

Is there any activity on that level that you could talk about, anything that would make us enthusiastic?

Well, we do definitely have activity in that area.

A, we do support consumer growth on the residential side and we are engaged -- we -- even recently, we got some reports that the number of subscribers is growing, so we have to keep investing in that.

But even more encouraging than that is, indeed, the fact that we see several cable companies in North America starting to invest in trying to deploy business communication services on top of their cable network.

And we've been engaged and if I am not wrong, we already have some initial services to one of them and a few more interactions with other companies.

So CPE sales to the MSOs in North America is something that we believe 2008 represents the first year, and we will probably see lots of that in coming years.

Okay, great.

And then, my last two questions were pretty generic.

I was wondering if you could give some update relative to CTI Squared, where that business stands, maybe a rough ballpark estimate of what you're looking for in terms of revenue for the year, and then the same discussion for Netrake on a standalone basis.

Thanks.

Right.

So with regard to CTI Squared, really no news.

They keep performing at the same level that we've seen about six months ago.

And at that stage, we don't see any major development in that business.

As far as Netrake is concerned, we are working with them on acquiring and integrating some of the session border control technology that has been acquired and integrating that into some of our products.

Again, I'm not in a position to tell you that we see any meaningful progress in that space.

Okay.

Thanks, and congratulations on the quarter.

Sure.

Thanks.

Our next question comes from Eric Kainer with ThinkPanmure.

Please state your question.

Thank you very much.

Given your competitors in the Voice over IP infrastructure space basically all reporting very weak results, I think you had a remarkably strong result here and you're to be congratulated.

I wonder if you can talk about the business from the enterprise versus the business that you're getting from the carrier markets.

Where do you see more strength?

Obviously, it looks like you've got a pretty compelling product coming here for the enterprise, but I wonder if you can tell us about, specifically to 2Q, where did you see more strength?

I think I have referred to that previously when I answered Vivek.

We do not really see any meaningful difference between the two spaces, enterprise and/or carrier.

I think if you look for what makes it work, really I think you need to basically attach it to two key points.

One is, versus other companies, not specifically finger-pointing one of them, we kept our investment more into the low and mid-density area where, relatively, I think the market is live.

In the high-density market, I think the market belongs really more to the large players and, therefore, smaller companies are not capable of competing equally in that market.

The other point really here is the business model and I think the fact that we chose to play a depth of wits type of play, which means that we will develop and sell the best media gateway but on the same pattern we would partner and sell it with all of the Softswitch vendors.

That really opens for us a lot of room for partnership and to enjoy different market segments that, on and off, ramp up and/or decrease.

Most of the other competition usually tends to sell complete solutions and, in that space, although we do not play there, I would assume that competition is much more fierce.

And therefore -- and also, most of those complete solutions have to sell them more in the service provider space, really have no access to the enterprise space, which is largely dominated by large players such as Cisco, Avaya and Nortel and Siemens.

So, all in all, I think it's really the business model and our focus more on the low and mid-density area.

Okay.

Did I understand your response earlier in the call where you seemed to indicate that you saw less competition, or maybe weaker competition, than you had previously seen, or maybe you were anticipating that?

Yes, that is correct.

I think smaller companies have less financial resources, less ability to be confident as to their investment for the future.

And, therefore, they are gradually looking to us because of lack of investment in cost reductions, in getting the new generation of products coming up and lowering the cost of those products.

At the same time, a larger company has less interest and appetite to invest in relatively small niche markets for them.

So, all in all, we're gaining customer wins from both sides.

Okay, very interesting.

Now, last thing that I wanted to touch on is the rollout of OCS which, obviously, you're a primary beneficiary here.

I wonder if you can tell us whether you've seen -- what kind of interest you've seen in actually getting some enterprise deployments there.

Are we seeing it still only in the headquarters, still in the testing phase?

Or are we starting to see deployments and are they starting to go from the headquarters locations maybe to some of the regional branches or what have you?

Yes, I'm less into the finer details in that sense, but from what I get, it seems that most of the engagement at this level is still only first deployment in one or two branches and you really have not seen yet companies adopting in a major way.

Also, I'd like to also make a point in that OCS was really not -- there was much less focus on voice deployments until basically this time of the year and, therefore, any increased activity regarding voice parts in the OCS will be much more prominent, probably, in 2009.

Okay, great.

Well, thank you very much and good luck.

Sure.

Thank you.

Thank you.

Our next question comes from Joe Park with Oppenheimer.

Please state your question.

Hi.

Thank you, and congratulations on a good quarter.

Just had a couple of quick questions here.

I was wondering if you could provide some more color regarding traction you're seeing with MSBG.

And also, we saw sequential improvement in OpEx as a percent of sales quarter over quarter.

I just wanted to know what other steps the Company might be taking to continue with this improvement.

And, lastly, regarding exchange rate, I just wanted to get a better understanding of what your exchange rate guidance is based upon.

Thanks.

Joseph, I'll start with the exchange rate.

So part of '08 is the -- was hedge by forward transactions that we did.

Going forward, obviously, the exchange rate, shekel versus the dollar, will impact us.

But, as we mentioned before, we will do the target that we set for ourselves and we will be the higher range, meaning closer to the $0.37 rather than to the $0.34.

Thank you.

(OPERATOR INSTRUCTIONS).

Our next question comes from Jeff Meyers with Cobia Capital.

Please state your question.

Great.

Thanks a lot, guys.

How have you seen July so far?

How's the demand looking there?

We see no change at this point.

It's just along the same lines we've seen in second quarter.

Got you, okay.

And then, what about in terms of next year?

Let's say you continue the 15% organic growth.

How much do you think your operating margin could move up going into next year?

Well, the targets we have -- we've set targets for ourselves to get into the range of 10% to 12% we -- simply because we keep investing.

So I think, realistically, we should be able to attain that level early 2009.

Got you, okay.

And what about in terms of the buyback?

Are you guys still buying back stock?

And, obviously, I think it would be pretty accretive -- you trading at 10 times earnings.

Correct, yes.

We have shown confidence in the future of the Company and our ability to grow.

We believe, at this time, the share price represents a very attractive proposition and we keep purchasing it.

We kept doing that in the month of July and we believe that, in this quarter, we will probably basically complete all that..

Got you, okay.

And what about -- just the last question in terms of the MSBG.

How is demand?

How have you seen demand for that so far?

Well, actually, the whole concept of the MSBG really came from inputs from the field, from customers, who wanted to see data functionality and security features integrated into our media gateway.

So we have responded to that and, indeed, we already see some first contacts and, actually already one design win, and we do believe there's another very meaningful one on the way.

Got you, great.

Thanks a lot, guys.

Sure.

Thanks.

Our next question comes from Robert Katz with Senvest.

Please state your question.

Hi, Shabtai and Nachum.

Great quarter.

Can you please review in detail the terms of the convert?

What causes the convert to happen and how does it relate to what you're earning?

I didn't quite understand that.

Yes.

So, basically, it's not a matter of whether it will be convert or not.

It's actually -- it's about the interest that we are paying for each share that can be exercised by the convert.

When we will reach certain level of profitability, we will need to add to the number of shares the shares that could be converted.

And just by adding that, the share count will increase from 42m to close to 50m on the one hand.

But, on the other hand, on the calculation of the EPS, we will need to take out, or to actually add to our profit, the interest that we paid for the convert.

Basically, on the EPS, it will be very similar if we will add the convert or not.

And I -- at this point, I can't say if we will need to add it or not.

But again, Robert, at the end of the day, it's an accounting treatment, very usually straightforward and it won't affect the EPS at this time.

At what price does that happen or what EPS does that happen?

And are you able to force conversion at any point?

No.

We've -- there is a put and a call option and the convert is basically due at the end of '09, not before.

That's the first time that there is a put and a call option.

And, again, it's got nothing to do with the accounting treatment of adding as if converted to the number of shares.

Okay.

Thank you.

Okay.

Ladies and gentlemen, there are no further questions at this time.

I will turn the conference back over to Shabtai Adlersberg for closing remarks.

Thank you, sir.

So I'd like to thank you all for attending our conference call today and we look forward to have you on our call in next quarter.

Thank you very much.

Bye bye.

Thank you.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you all for your participation.