AeroVironment Inc (AVAV) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the AeroVironment Inc. third-quarter FY17 earnings call.

(Operator Instructions)

As reminder, this conference is being recorded for replay purposes. With us today from the Company is the President and Chief Executive Officer, Mr. Wahid Nawabi; Senior Vice President and Chief Financial Officer, Ms. Teresa Covington; and Vice President of Investor Relations, Mr. Steve Gitlin. And now at this time, I would like to turn the conference over to Mr. Gitlin. Please go ahead, sir.

Thank you, Liz. And welcome to today's third-quarter FY17 earnings call. Please note that on this call, certain information presented contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include without limitation any statement that may predict, forecast, indicate or imply future results, performance or achievements. And may contain words such as believe, anticipate, expect, estimate, intend, project, plan, or words or phrases with similar meanings.

Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties. Including but not limited to economic, competitive governmental and technological factors outside of our control that may cause our business strategy or actual results to differ materially from the forward-looking statements.

Factors that could cause actual results to differ materially from the forward-looking statements include but are not limited to reliance on sales to the US government. Availability of US government funding for defense procurement and R&D programs. Changes in the timing and/or amount of government spending. Risks related to our international business, including compliance with export control laws. Potential need for changes in our long-term strategy in response to future developments. The extent of regulatory requirements governing our contracts with the US government and international customers.

Consequences to our financial position, business and reputation that could result in AeroVironment (technical difficulty) regulatory requirements, unexpected (technical difficulty) difficulties in [parent] and major research and product develop efforts. Changes in the supply and/or demand or [near] prices for our products and services. The activities of competitors and increased competition.

Failure of the markets in which we operate to grow. Failure to remain a market innovator and create new market opportunities. Changes in significant operating expenses, including components and raw materials. Failure to develop new products.

Product liability infringement and other claims. Changes in the regulatory environment and general economic and business conditions in the United States and elsewhere in the world. For a further list and description of such risks and uncertainties, see the reports we file with the Securities and Exchange Commission.

The content of this conference call contains time-sensitive information that is accurate only as of today, March 7, 2017. The Company undertakes no obligation to make any revision to the statements contained in our remarks, or to update them to reflect events or circumstances occurring after this conference call.

And just a process check here, Liz, we are receiving reports that there is significant echo on the call that may be causing some problems for our listeners. So I would appreciate it if you could look into that and see if you can do anything about that. Hopefully, with that address, we will now begin with remarks from Wahid Nawabi. Wahid?

Thanks, Steve, and good afternoon. The three key messages today are, first, third-quarter performance exceeded our expectations. Second, high third-quarter-funded backlog of $128 million demonstrates continued strong customer demand for our innovative solutions. And third, we anticipate growth this year in Tactical Missile Systems and international small UAS, and we are excited about the availability of our commercial information solutions later this calendar year.

On today's call, I will review our third-quarter financial performance, and then provide an update on the progress we're making to achieve our FY17 objectives. Teresa Covington, AeroVironment's CFO, with then provide a detailed financial review, before I discuss our outlook for the year and confidence in our long-term potential for value creation. Following are prepared remarks, Teresa, Steve and I will take your questions.

Now, a quick summary of third-quarter financial performance. During this quarter, we continued to execute our strategy successfully and achieve our objectives. Importantly, continued strength in bookings, an indicator of robust customer demand for our innovative solutions, produced our third-highest quarter-funded backlog ever of $128 million. This backlog, combined with year-to-date revenue in bookings this quarter, provides us with 94% visibility into the midpoint of our full-year guidance, which Teresa will discuss in more detail shortly.

Third-quarter revenue of $53.2 million was above the high end of the range I previewed last quarter, and loss per share of $0.09 was significantly more favorable than our expectations. Two factors contributed to the loss. First, revenue was lower than our breakeven run rate. Second, similar to our first and second quarters this year, planned increases in sustaining engineering reduced gross margins compared to levels from last year. The loss was smaller than we expected, mainly due to higher-than-expected revenue, favorable revenue mix and lower spending.

Now, let's quickly review progress in the quarter against some of the milestones I identified at the beginning of this fiscal year. Our core business with the US Department of Defense for Group 1 UAS remains strong, with the largest unit share by far of the total unmanned aircraft fleet. And a successful track record of winning more than 90% of the competitive task [Florida] dollars issued under the Army's latest small UAS program since inception in 2012. We continue to provide new small UAS to customers to meet their stated requirements, and deliver replacements when systems reach the end of their operational lives.

In UAS, we also deliver sustainment support through spare parts, and provide options for our customers to upgrade their products in order to serve their needs better. Our i45 Sensor Suite significantly improves situational awareness through superior optical capabilities. The i45 is an upgrade to our Puma AE system that represents a healthy opportunity for us, and reflects the value of continuous innovation to create a new capability for our customers. As a point of reference, when we introduced the gamble sensor upgrade several years ago, our US DOD customers procured it to upgrade their existing Raven B fleets.

We recently submitted our proposal to the Army for the frequency relocation program, which requires that all small UAS be modified to operate on a new segment of the frequency spectrum. This spectrum shift is due to the fact that the federal government sold the frequency currently used by small UAS to commercial firms. We will provide an update on this opportunity as we learn more.

Indicative of new opportunities within the US DOD, we expect to deliver 30 next-generation Snipe Nano unmanned aircraft systems to a domestic customer for evaluation soon. The Army's Soldier Borne Sensor, or SBS, program calls for pocketable UAVs that front-line troops can quickly deploy to gain situational awareness within their immediate surroundings. We also continue to work with the US Navy to pursue the deployment of Puma AE systems on a larger number of their vessels. Given our strong customer relationships and innovative solutions, we believe we are well-positioned to build on these opportunities, to drive value for our stockholders.

After a strong first-generation small UAS procurement cycle from the early 2000s to early 2010, the US DOD market has transitioned into a sustainment and upgrade phase for those systems, while we continue to refine and advance new second-generation capabilities. In contrast, the international market is in the initial stage of adoption for first-generation small UAS. During our third quarter, we continued to see strong international demand for our small UAS, contributing to our robust funded backlog, and representing a significant portion of our expected high fourth-quarter revenue.

Turning back to the US government market, our Tactical Missile Systems business, which has grown into a significant contributor to our results, remains a strategic, long-term growth opportunity. We believe the market opportunity for Tactical Missile Systems represents more than $1 billion, based on analog DOD expenditures for legacy weapon systems. We believe our TMS family of systems offers fundamentally superior and more cost-effective solutions than the legacy systems employed today., and which we expect to displace for an array of missions. TMS remains focused on US government customers, and continues to grow -- the direct result of strategic investments we made in prior years that have and will continue to benefit our results.

Within TMS, we continue to produce Switchblade systems for dismounted infantry force protection, and focus on improving this product for a pending Army program of record for Lethal Miniature Aerial Missile Systems, or LMAMS. We continue to work with the US Navy to position Blackwing, our submarine-launched intelligence, surveillance and reconnaissance, or ISR solution, for broad adoption through deployment, development and evaluation. Of the four additional Switchblade variants we have discussed previously, one is in production and three are in various stages of development, casting and evaluation, much of it with customer funding. We expect TMS revenue to grow significantly from FY16, and believe there are compelling opportunities for additional growth in the years ahead.

Another area of strategic investment is our commercial information solutions business, or CIS. Based on third-party market assessments, we see a global market valued in the billions of dollars for drone-based commercial solutions.

CIS offers three differentiated solutions to commercial customers. First, our unique Quantix drone enables our customers to automatically map and scan more than 400 acres in 45 minutes, using both color and multi-spectral sensors, all at the push of a button. Second, our decision-support system processes scanned imagery, and automatically produces descriptive analytics and historical comparisons. And third, our turnkey flight services support customers who choose not to own or operate drones.

Part of what differentiates our valuable offering is its ease of use, high degree of integration, and its professional-grade design. For example, if the customer knows how to use a tablet device, then they can operate our Quantix drone. Which plans its own flight path based on a user-defined mapping area, then launches, scans the area, and lands itself right where it launched from. Our AV DSS processes the data from Quantix, and then performs a number of automated operations that include anomaly detection and canopy coverage analysis for growers.

We continue to work with early-adopter customers in agriculture, energy, utilities and transportation, to test and validate our solution. And this process is generating strong interest as we prepare for production and delivery later this calendar year.

Moving to another opportunity area, we remain engaged with potential customers for our atmospheric satellite capabilities. We will inform you should we achieve meaningful results in our discussions.

In our EES segment -- which consists of EV test systems, EV solutions and industrial EV charging systems -- quarterly revenue increased by more than 70% year over year. We experienced strong demand for EV test systems from global automakers and battery manufacturers in North America and Asia. In our EV solutions product line, we began shipping our Level 2 home chargers to meet larger-than-forecasted initial demand, driven by the Chevy Bolt EV, launched in an additional North America OEM program. In January, we surpassed 45,000 Level 2 chargers deployed.

Our Posicharge industrial charger shipments picked up, with several deployments of our new ProCore line introduced earlier this year. We also benefited from continued demand for our ground support equipment charging systems at several airports during the quarter.

Before turning to our financial results, I would like to welcome Teresa Covington to her new position as Chief Financial Officer. Teresa most recently served as our Vice President of Finance, responsible for EES finance and managing corporate planning and treasury functions. I would also like to thank Raymond Cook for his service as our previous CFO, and wish him well. Now Teresa will review third-quarter and year-to-date financials. Teresa?

Thank you, Wahid, and good afternoon, everyone. Before I review our third-quarter financial results, I would like to take a moment to express my gratitude and excitement at serving our stakeholders as Chief Financial Officer. I have been with AeroVironment for six years, and have developed a deep understanding of our UAS and EES businesses, while also developing a profound appreciation for our incredible team. I look forward to meeting our stockholders and the analysts who cover us.

Now, third-quarter financial results. Revenue for Q3 was $53.2 million, a decrease of $14.4 million, or minus 21% from the third quarter of FY16 revenue of $67.6 million. The decrease in revenue resulted from a decrease in product sales of $16.6 million, partially offset by an increase in contracts services revenue of $2.2 million.

Looking at revenue by segment, UAS revenue was $41.9 million, a decrease of $19.2 million or minus 31% from the third quarter of FY16 revenue of $61.1 million. The decrease was due to a decrease in product deliveries of $21.5 million, partially offset by an increase in service revenue of $2.1 million, and an increase in customer-funded R&D work of $0.2 million. EES revenue was $7.3 million, an increase of $4.8 million or 74% from the third quarter of FY16 revenue of $6.5 million. This increase was primarily due to an increase in product deliveries of EV test systems and industrial EV charging systems.

Turning to gross margin, gross margin for the third quarter was $19.4 million or 36%, as compared to $26.6 million or 39% for the third quarter of FY16. The decrease in gross margin was primarily due to decrease in product sales margins of $8.3 million, partially offset by an increase in service margin of $1 million.

By segment, UAS gross margin decreased to $16.4 million for the third quarter of FY17, from $24.6 million. As a percentage of revenue, gross margin UAS decreased from 40% to 39%, primarily due to the increase in sustaining engineering costs in support of our existing products. EES gross margin increased $1 million to $3 million for the third quarter of FY17, primarily due to the increased sales volume, partially offset by the increase in sustaining engineering costs and support our existing products.

SG&A expense for the third quarter of FY17 was $12.8 million or 24% of revenue, compared to SG&A expense of $13.3 million or 20% of revenue for the third quarter of 2016. R&D expense for the quarter of FY17 was $8 million or 15% of revenue, compared to R&D expense of $8.2 million or 12% of revenue for the third quarter of FY16.

The operating loss for the third quarter was $1.4 million or minus 3% of revenue, compared to operating income of $5.1 million or 7% of revenue for the third quarter of FY16. The operating income decrease was primarily due to lower gross margins of $7.3 million, partially offset by a decrease in SG&A expense of $0.5 million, and a decrease in R&D expense of $0.3 million.

Our effective income tax rate was minus 101.9% for the third quarter of FY17, as compared to an effective income tax rate of minus 22.5% for the third quarter of FY16. Our effective income tax rate for the third quarter of FY17 was impacted by a change in estimate, which reduced our estimated full-year FY17 effective income tax rate. The net loss for the third quarter of FY17 was $2.2 million or a $0.09 loss per share, compared to net income of $6.2 million or $0.27 earnings per share for the three months ended January 30, 2016.

Now, moving through the first three quarters FY17 results. Revenue for the first three quarters of FY17 was $139.5 million, a decrease of $39.8 million, as compared to $179.3 million for the nine months ended January 30, 2016. The decrease in revenue was due to a decrease in product deliveries of $47.6 million, partially offset by an increase in contract service revenue of $7.8 million.

UAS revenue decreased $44.6 million to $113.2 million for the first three quarters of the FY17. Primarily due to a decrease in product delivery to $52.8 million, partially offset by an increase in service revenue of $5.4 million and an increase in customer-funded R&D work of $2.7 million. EES revenue increased $4.8 million to $26.3 million for the first three quarters of FY17, primarily due to an increase in product delivery of EV test systems, EV solutions and industrial EV charging systems.

Gross margin for the first three quarters of FY17 was $43.5 million, as compared to $74.2 million for the first three quarters of FY16. The decrease was primarily due to a decrease in product margins of $32.2 million, partially offset by an increase in service margins of $1.5 million.

UAS gross margin decreased to $36.7 million for the first three quarters of FY17, from $66 million. As a percentage of revenue, gross margin for UAS decreased from 42% to 32%, primarily due to the reversal for the settlement of prior-year government incurred cost audits recorded in the second quarter of FY16. An increase in sustaining engineering costs in support of our existing products, and an increase in warranty-related costs.

EES gross margin decreased $0.8 million to $6.8 million for the first three quarters of FY17, primarily due to an increase in sustaining engineering costs in support of our existing products. And the reserve reversal for the settlement of prior-year government incurred cost audits recorded in the second quarter of FY16, partially offset by the increased sales volume.

SG&A expense for the first three quarters of FY17 was $39.8 million or 29% of revenue, compared to SG&A expense of $43.3 million or 24% of revenue for the first three quarters of FY16. SG&A expense decreased $3.5 million, primarily due to a decrease in bid and proposal costs, a decrease in professional service, and a decrease in bonus expense. R&D expense for the first three quarters of FY17 was $25.1 million or 18% of revenue, compared to R&D expense of $28 million or 16% of revenue for the first three quarters of FY16. The decrease in R&D expense was primarily due to a decrease in development activities for certain strategic initiatives.

The operating loss for the first three quarters of FY17 was $21.1 million or minus 15% of revenue, compared to operating income of $2.9 million or 2% of revenue for the first three quarters of FY16. The increase in operating loss was per merely due to lower gross margins of $30.7 million, partially offset by a decrease in SG&A expense of $3.5 million and R&D expense of $2.9 million.

The effective income tax benefit rate for the nine months ended January 28, 2017, was 13.5%, compared to the effective income tax benefit rate from the prior year of 361.2% for the nine months ended January 30, 2016. The net loss for the first three quarters of FY17 was $18 million or a $0.78 loss per share, compared to net income of $3.6 million or $0.16 earnings per share for the nine months ended January 30, 2016. Our funded backlog as of January 28, 2017 was $128.2 million, an increase of $48.5 million or 61% from the third quarter of FY16. And an increase of $8.6 million or 7% from the second quarter of FY17.

Turning to our balance sheet, cash, cash equivalents and investments at the end of the third quarter of FY17 totalled $238.1 million, a decrease of $11.5 million from the prior quarter. The decrease in cash, cash equivalents and investments was driven by higher working capital requirements of the business. Accounts receivable, including unbilled and retention receivables, at the end of the third quarter of FY17 totalled $37.9 million, a decrease of $5.1 million from the prior quarter.

Total day sales outstanding was approximately 68 days, compared to 81 days the end of the prior quarter. The inventory at the end of the third quarter of FY17 was $68.8 million, compared to $55.2 million at the end of the prior quarter. Days in inventory were approximately 164 days, compared to 137 days at the end of the prior quarter. This increase in days in inventory was primarily due to an increase in inventory for anticipated fourth-quarter shipments.

Turning to capital expenditures, in the third quarter of FY17, we invested approximately $3.1 million or 6% of revenue in property improvements and capital equipment, and recognized $1.8 million of depreciation and amortization expense.

Now, an update to our FY17 visibility. As of today, we have year-to-date Q3 revenues of $139 million. Q3 ending backlog that we expect to execute in FY17 of an additional $107 million. Q4 quarter-to-date- bookings that we anticipate to execute in FY17 of an additional $6.5 million. No unfunded backlog from incrementally funded contracts that we anticipate to recognize revenue during the balance of the year. And no revenues needed to hold EES revenue flat relative to last year.

This adds up to $252.6 million or 94% at the midpoint of our revenue guidance. Now I'd like to turn things back to Wahid to discuss AV's expectations for the remainder of the year.

Thanks, Teresa. We continue to execute our strategy, building on leading positions in our core business and moving our growth portfolio toward the significant, long-term marketing opportunities we are pursuing. We remain the leading supplier of small UAS to the US DOD. Our international small UAS business is thriving. TMS is growing, CIS is poised for launch, and we see great progress in EES. We are also very much aware of the variability in our short-term financial performance due to uncertainties associated with customer adoption.

As we have stated throughout this fiscal year, our results have been in line with our expectations. We've been preparing for an expected increase in revenue during the fourth quarter to achieve our full-year outlook. We have been ordering long-lead items in advance, preparing documentation for export license requests to the US Department of State, building inventory, and implementing additional efficiency enhancements across the organization.

Even with our planning and preparation, as our international business and the number of customers we're servicing has grown, our exposure to delays associated with contracting, exporting, licensing and even travel visa approvals, has increased. As we look to the balance of the fiscal year with this exposure in mind, we now expect full-year financial results at the low-end of our previously stated revenue and earnings per share guidance range of $260 million to $289 million, and $0.20 to $0.35, respectively.

Once again, our main messages today are: first, third-quarter revenue performance exceeded our expectations. Second, high third-quarter funded backlog of $128 million demonstrates continued, strong customer demand for innovative solutions. And third, we anticipate growth this year in Tactical Missile Systems and international small UAS, and we're excited about the availability of our commercial information solutions later this calendar year.

Thanks to our customers who place their trust in their environment to help them proceed with certainty. Thanks to you, our stockholders, who trust us to create long-term value. And thanks to our employees for their continuous efforts to deliver on our commitments. Now Teresa, Steve and I will take your questions.

(Operator Instructions)

Ken Herbert, Canaccord.

Hi, good afternoon.

Good afternoon, Ken.

Hi, Wahid. I just wanted to follow up specifically on the international growth you are seeing within the small unmanned aircraft, or the small unmanned systems market. Clearly it seems like that's been a real source of upside over the last few quarters. Can you provide any commentary specifically around risks to this, from a timing standpoint?

It sounds like most of this obviously is in your backlog. But are you seeing any concern past the fourth quarter of 2017 into FY18 around sustainability of this growth? And any change recently in the attitude amongst your customers, since the election in particular, internationally?

Ken, that's a great question, and a question that we think about and discuss and analyze quite thoroughly internally. Overall, as you know, our international sales this year, in the past year as well, have grown significantly. And we expect this growth to continue throughout FY17.

Given and knowing that we have significant revenue and growth in this space, the size of these orders and contracts are large in nature. And the number of, I would refer to as hurdles, that we have to go through in order to secure a contract, get international travel schedules arranged, get visa approvals for some of our customers to come for demonstrations and factory acceptance tests. As well as securing export licenses from our US Department of State, always is a risk factor and continues to be a risk factor in terms of the timing of those orders being transformed into revenue. And so for that matter, we do see those risks as we have always seen, and that has been the nature of our business.

In regards to the prospects for the long term, we remain confident about our international small UAS business. I've said this in the previous earnings calls, that our assessment is that the international market for small UAS is about five to 10 years behind the adoption curve of the US domestic DOD market. That means that we believe, in the long run, we will see more adoption of our products and need for our products internationally, and we look forward to that. However, the timing of those orders always is a tough challenge to predict precisely.

Thanks, Wahid. Just as a follow-up to that, are you using as much demand internationally on the services side as you establish a foothold with the products? And is that something that you have seen much of the upside there yet? Or is that really upside that could be coming here in the future?

Pretty much, Ken, on all of our international customers, we not only provide our customers with a family of systems or a system solution, but also services related to training, enabling their force just to be able to operate these systems effectively, so they can get the actionable intelligence they deserve, to proceed with certainty. As well as support and logistics services, such as spare parts and sustainment, as well as repair activities that goes beyond just the initial acquisition of system solution and services.

Usually almost all of our international as well as domestic customers have a long lifecycle with us beyond the initial procurement. And once we are into the sustainment mode, we also get an opportunity to provide upgrades beyond just spare parts and sustainment.

Thank you very much. I will stop there.

You're welcome.

(Operator Instructions)

Joseph De Nardi, Stifel.

Thank you very much. Wahid, I'm just wondering if you can talk a little bit about where we are on this curve of reinvesting core earnings back into the business for some of the growth drivers? Does that come to an end next year? You're going to generate a decent amount of earnings in fourth quarter. Help us think about what the runway is for next year?

Joe, great question again. So as I mentioned in my remarks previously as well as today, our domestic US DOD -- as you know, primarily with the US Army, we are what I refer to as in a sustainment mode. They have the number for the quantity of systems that our US DOD customer believes, primarily US Army, to maintain and meet the requirements that they had intended to achieve. And in the past several years, as you know, we have been providing a significant amount of spare parts, repair activities and upgrades to our existing fleet.

So beyond that, we have opportunity to sell and deliver new solutions for new requirements of our existing customers and new customers. For example, the Snipe UAV that I just mentioned in this call, and also at last call, is a new requirement by the US Army for Soldier Borne Sensor, which we believe we're positioned extremely well. And we are going to be delivering 30 systems for demonstration and evaluation. Beyond that, we've been engaged in the last year or two with the US Navy for the maritime application of our Puma AE system.

So in the domestic market, we continue to serve to our domestic existing customers with sustainment and upgrades. And we also continue to pursue new growth opportunities with new customers, or existing customers and new products.

And last, we also believe that, while the lifecycle of the first generation of UAVs with the US domestic customers is going sometime come to an end, we believe that it will initiate the procurement of what we refer to as the second generation of our small UAS solutions to our US domestic customers. And that will take a little bit of time. However, we do look forward to that, and we are working toward that opportunity and outcome.

Okay. And then just on the balance sheet with the plan for the cash, maybe on a commercial or enterprise side of the business, do you see yourselves as acquirers in that market? Or is it too early, really, to do that?

We, Joe, believe that the commercial information solutions, or the commercial application of drones in [software] analytics represents a very large but also long-term opportunity. And we're very much, as you said, at the very early stages of getting the right solution to the market first. We believe that our existing solution set that we have demonstrated and unveiled is disruptive, and has a unique and compelling value proposition that has received, so far, very strong, positive customer feedback.

So we're excited about launching that product. And then we will be in a position to be able to test the market, and then provide you with some updates as to what we expect in that market to happen. Related to the capabilities and acquisitions, we've always had the belief and the intent to fill the gaps in our capabilities, when we find opportunities for acquisitions of filling that gap, either in terms of a timeframe or cost. If we could do it better and cheaper by acquisitions, we will always do so. So far, we haven't come across any that we believe and the Board leaves that is right for a decision and execution and implementation.

I also personally believe that there is quite significant investments going on in this space, and the likelihood of properties becoming available at reasonable prices probably will improve over time with any other industry. And when we find those opportunities, we will not hesitate to take action and deliver the results that we expect to our shareholders.

Thank you.

I'm showing no further questions, thank you. At this time, I'd like to turn the call back to Mr. Gitlin for any closing remarks.

Thank you, Liz. Before we do close out, one question that typically comes up on the call for Teresa would be some indication of our expected CapEx this year and tax rate for the full year. Teresa, would you mind addressing that?

Sure. Regarding our capital spend, our history at AeroVironment has been in the 2% to 5% of revenue range. Year to date, we've spent $7.6 million on capital, and I would expect our full year to be in the 3% to 4% of revenue range. Regarding our tax rate, we estimate our full-year tax rate, and we start with the statutory rate of our federal and state. And then we have both a deduction for our federal R&D tax credit, and then we also mentioned that we had a reserve release in Q1 of $900,000. And so that would be our estimate of our full-year tax rate, is the combination of those factors.

Great. So with that, we'll close out. And we thank you all for your attention today, for your interest in AeroVironment. An archived version of this call, all SEC filings, and relevant Company and industry news can be found on our website, AVInc.com. We look forward to speaking with you again following next quarter's results. Good afternoon.

Ladies and gentlemen, thank you for your participation in today's conferences. This concludes the program, and you may now disconnect. Everyone, have a great day.