Aviat Networks Inc (AVNW) 2020 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Aviat Networks Fiscal 2020 Third Quarter Results Conference Call. (Operator Instructions) I would now like to hand the conference over to your speaker today, Glenn Wiener. Please go ahead.

Thank you, and welcome to Aviat Networks Fiscal 2020 Third Quarter Results Conference Call and webcast. You can find our Form 10-Q, press release and updated investor presentation in the IR section of our website, along with a replay of today's call in roughly 1 hour. Before I introduce today's moderators, I want to extend my best wishes to all of our investors, analysts, bankers and their families. It has been a very challenging time for everyone, and I hope you're all safe and taking every precaution to remain healthy.

As for today, Pete Smith, Aviat's President and CEO, will begin with opening remarks on the company's third quarter and year-to-date progress; followed by Eric Chang, our newly appointed CFO, who will review the finance. Pete will then provide closing remarks on Aviat's strategy and outlook, followed by Q&A.

As for safe harbor, during today's call and webcast, management may make forward-looking statements regarding Aviat's business, including, but not limited to, statements relating to projections of earnings and revenue, business drivers, the timing capabilities of new products, network expansion by mobile and private network operators and economic activity in different regions. These and other forward-looking statements involve assumptions, risks and uncertainties that could cause actual results to differ materially from those statements. These forward-looking statements reflect the company's opinions only as of the date of this call, and the company undertakes no obligation to revise or publicly release the results of any revision of these forward-looking statements in light of new information or future events.

Additionally, during today's call and webcast, management will reference both GAAP and non-GAAP financial measures. Please refer to our press release and financial tables therein, which include a GAAP to non-GAAP reconciliation and other supplemental financial information.

At this time, I'd like to turn the call over to Pete.

Good afternoon, everyone. I want to echo Glenn's comments. This global pandemic has been unlike anything we've ever experienced. And the health and well-being of everyone is our #1 concern. I truly mean that. And my heart goes out to our employees, customers, partners, shareholders and their families. Please be safe.

Given the nature of our business and the customers we serve, Aviat is part of the critical workforce infrastructure. Thus, we've remained open following U.S. federal and state mandates, the CDC recommendation as well as various regulations across the globe where we have customers and employees. We are doing all that we can to keep our employees safe and to ensure our customers get the products and services they need. Key to this has been our supply chain and logistics team, as we have many partners and vendors around the world. I'd also like to call out our global IT team as they successfully led the transition to a remote workforce over just 1 weekend, and our team in the Philippines should be commended as well, as they successfully navigated hurdles in the field and met customer commitments. Overall, I have been very proud with how we adapted quickly and delivered.

Now let's focus on our strong results. Third quarter revenue was up approximately 14%, and adjusted EBITDA was up $4 million versus Q3 of fiscal year '19. Our balance sheet remains in good shape. Our cash position is up over $7 million since the year began, and we remain on track to meet our prior guidance and deliver $11 million to $12 million of adjusted EBITDA for fiscal year '20. This is quite impressive considering what we faced, issues with a contract manufacturer in Q2, the volatility in Africa and now COVID-19. Revenue will be down this year, as expected, but profitability will be up, and we are better positioned going into next fiscal year to drive the bottom line. I believe we're going to see growth as well, and there are several actions we are taking now that are different from the past, initiatives that should lead to new customers and better performance.

There are 4 areas that I'd like to highlight before turning the call to Eric. First, my observations on North America. We have a strong presence in North America and our business in the third quarter and year-to-date is up significantly. We expanded into new states, cities and verticals. All positive achievements, and the team has done a great job. After 1.5 quarters as CEO, I have a better grasp of customer needs and the competitive landscape. I believe there are even more opportunities to drive growth on a global basis by focusing on our value proposition and through differentiation. I certainly don't want to provide a blueprint for our competitors, but generally speaking, we're going to focus on expanding our share of the market through both products and services with existing accounts, we're going to go after new customer type, particularly some of the midsized deals that we previously would not pursue and through better collaboration between R&D, sales and marketing, leading to commercial excellence. Our commercialization recipe is well suited to the emerging needs for both 5G and the increased focus on first responder networks.

Second, my view on the international market. We have good customers in the markets we're in. And we all know that in the past, we have been dependent on Africa. Africa is now a much smaller percentage of revenue, and my goal is to continue to acquire customers. So that Aviat is not dependent on any 1 customer in any given quarter or year. In the past, the focus has mostly been on Tier 1 service providers. And let's face it, it's very challenging to replace an incumbent, especially internationally, where price is often a factor. We're going to focus on growing with many of our current accounts and at the same time, target Tier 2 service providers and some of the larger ISPs. We have a value proposition that cannot be met, and we have not marketed it enough. I am also working with the teams to identify new verticals internationally. The company has talked about this previously, but in my opinion, the strategy and accountability could have been different. It's clear to me what our focus should be on, and the new types of businesses that we should be pursuing. I want the right business that we can grow consistently over the years.

Thirdly, expenses. While plans were instituted over the past 2 years to reduce spend, savings did not materialize or positively impact the bottom line. You saw our 3 Form 8-K filings regarding cost reduction. Approximately $2.5 million will be spent to generate greater than $3 million in annualized net savings. The programs we announced will transpire over the next 2.5 quarters. And concurrently, we are working on other areas to reduce our spend further without sacrificing our ability to innovate and deliver.

Fourthly, generating higher profitability and shareholder value. If you look at the past 5 years or so, Aviat did a good job in progressing from a loss-making entity to a profit-making entity. Prior to the transition, revenues were falling, margins were low, expenses were high and the company posted losses year after year. Over the past few years, Aviat has been profitable, while revenue has been somewhat stable. That is why I am focused on growth, commercialization, customer acquisition, while concurrently reducing expenses. We have incredible products and services, but we can do so much more marketing our value proposition. As I mentioned earlier, we historically have chased the big deal. Moving forward, we will focus on opportunities in markets and geographies where competitors cannot match us, in addition to the bigger deals that make good business sense. That will lead to higher revenue, continued margin expansion, and ultimately higher profitabilities to drive shareholder value. As we get through our year-end report, through the COVID-19 uncertainty and throughout next year, we'll be talking more about strategy and wins to realize this value.

I'm going to turn the call over to Eric now to review our financials, but I do have a few additional comments after his remarks. Eric?

Thank you, Pete, and good afternoon, everyone. During my remarks today, I will review some of our Q3 and year-to-date financial highlights. Rather than read through all line items, I think can be found in both our Form 10-Q and press release. All comparisons are between the third quarter of fiscal 2020 and the third quarter of fiscal 2019, and between the 9 months ended April 3, 2020, and the 9-month ended March 29, 2019, unless noted otherwise.

Q3 revenue was up $7.3 million or approximately 14%. Driving this growth was an over 30% increase in North America revenue, offset by approximately 5% revenue decline internationally. Please note, the international decline was smaller than what we have experienced in the first half of the fiscal year, and during Q3, Latin America and APAC returned to growth with revenue up almost 18%.

A few other points. In Q3 of fiscal '20, North America comprised almost 61% of total revenue and continues to represent a higher percentage of mix. Also, product sales increased over 18% and services revenue increased over 5% when comparing against the third quarter of fiscal 2019. Q3 gross margins remained strong, 35.8% on a GAAP basis and 35.9% on a non-GAAP basis, both representing a 570 basis point improvement over Q3 of fiscal 2019. Q3 GAAP operating expenses were $20.7 million versus $18.8 million. And non-GAAP operating expenses, excluding the impact of restructuring charges and share-based compensation, were $19.7 million compared to $17.9 million. On the surface, our expenses may seem a little bit higher than anticipated, but increases were driven primarily by payroll costs because we had an extra calendar week in the third quarter of fiscal 2020 as well as certain variable compensation expenses and certain legal costs. These increases were offset in part by lower R&D expenses due to timing and consolidation of product development activities. We incurred restructuring charges of $600,000 during the fiscal '20 third quarter. But I would like to reference the Form 8-Ks filed on March 23, April 3 and April 21, as the addressed intent of the programs and related savings.

In summary, we expect to incur severance restructuring charges of approximately $2.5 million inclusive of the $600,000 recorded in the fiscal '20 third quarter and with anticipated annualized net savings of approximately $3.5 million. We removed about 20 employees during Q3 and have plans to reduce our workforce by another 45 employees from Q4 2020 through Q2 fiscal 2021. We will also be transitioning some positions to lower-cost locations, and the team is being vigilant in managing our overall expenses. It is a big focus for the company.

Q3 non-GAAP net income was $2.2 million compared to net loss of $1.8 million for the same period last year. Adjusted EBITDA of $3.5 million was up approximately $4 million compared to a loss of $0.5 million for the same period last year. As for 9-month comparisons, although revenue was down 2%, our non-GAAP net income improved to $4.1 million from $0.6 million. Adjusted EBITDA improved to $8 million from $4.9 million for the same period last year. We can address any questions relating to our results during Q&A.

Moving on to the balance sheet. Our cash and cash equivalents stood at $39.2 million at the end of the third quarter, up $1.1 million sequentially and $7.3 million since fiscal '19 year-end. However, our cash might be down in Q4 because of potential delayed payments from our customers due to COVID-19. To mitigate the COVID-19 uncertainty, we suspended our stock buyback program. Nonetheless, we expect our cash will be up for the fiscal year and with the goal of further improvement next fiscal year.

We repurchased approximately 26,000 shares of our common stock in the third quarter and approximately 128,000 shares through the first 9 months. Year-to-date, we have spent about $1.8 million in stock repurchases and $3.4 million remain available under the program.

One final point. On May 4, 2020, we have successfully renewed our credit facility with Silicon Valley Bank for another year to June 2021. This concludes my prepared remarks, and I would turn it back to Pete. Pete?

Thanks, Eric. Just a few additional comments before Q&A. North America has been strong this year and barring any unforeseen events, should be stronger in Q4 and next fiscal year. My only immediate concern is the impact of COVID-19, not on our end, but more about the impact that could be felt with our customers' budgets and time lines, and the ability to execute field service.

Africa is volatile, we all know that. But we are committed to the region, and we'll be looking to expand into new accounts beyond just the large operators, where it makes good business sense. We are continuing to support our current base. And as I alluded to earlier, there are different types of customers and different-sized accounts that we should and will be going after.

The APAC region was down significantly through the first half, as expected, due to the strong volume we saw last fiscal year. As you saw in Q3, it picked up again and should be a source of growth for Aviat in the years to come. The APAC region is an area that is ripe for expansion as we have products, services and solutions that apply to several geographies and markets that, frankly, we just haven't capitalized on, especially considering our competitive advantage.

And this ties to my #1 takeaway for investors, focus in execution. If we are going to expand our sales focus next fiscal year. We are lowering our expenses to drive greater profitability and stockholder value. We're building a business model that looks at Aviat's differentiation, and we're going to capitalize on the opportunities where we deliver value. We are not going to chase business opportunities, where we do not have a value proposition. As Eric noted, our cash position in Q4 might be down sequentially, but we will be up year-over-year. My goal is growth, margin expansion, expense reductions and meaningful bottom line improvement.

Operator, we are now ready for questions.

(Operator Instructions)

And your first question comes from Theodore O'Neill.

Congratulations on the good quarter.

Thanks, Theo.

Yes. So I just have 2 questions. Could you give us a little more color on the North American backlog split maybe between private networks, rural broadband and wireless? And my other question is on component supplies. Did you have any components constraints in the quarter and did any of that require expedited shipping or changing suppliers?

So I'll answer the supply chain. And Eric, you could think about how to answer the backlog. So really, during the quarter, it was -- to put it in an unsophisticated way, was a giant game of Whac-A-Mole. And at times, we had component shortages, and we were able to overcome most of them in a short amount of time. We deployed our Head of Operations and Supply Chain to Asia where a lot of our component suppliers and where the bottlenecks were. And we were able to solve those within a week or 2, right? So our on-time delivery was not perfect, but we were able to satisfy a lot of the demand within the quarter. And we -- so obviously, our supply chain performed pretty well, but this has made us step back and think about how we should -- going forward, how we should put more resilience into our supply chain, and we're actively doing that. So Theo, is that responsive to your supply chain question?

It is. And it makes -- maybe to -- a follow-on is whether or not there was any of the business that got pushed into next quarter as a result of this?

Maybe a little bit. What I would say that we had a -- and not really highly material, on the revenue line we did a lot of pushouts. Where we did see some small amount of pushouts would be on the service side, where due to COVID-19, either our person or our customer's person couldn't meet in the field to do an install. So there is a little bit of revenue that ticked over, but not substantial. But we did see that problem.

So this is Eric here. So from a booking standpoint, so we normally don't break out our bookings by region. But high level, from a book-to-bill standpoint for Q3, we're slightly above 1. And on a year-to-date basis, we're well above 1. And I think some of the bookings that we missed in Q3 will be caught up in the fourth quarter.

And one last thing to say about the rural broadband, Theo. So the last couple of weeks of the quarter, we did see demand start to build, which kind of would be logical, given the impacts of COVID-19.

Your next question comes from Tim Savageaux.

Congrats on the results. In a difficult environment, you did see a pretty good, as you mentioned, uptick in kind of the APAC and Latin America region. I wonder if you can give us maybe a little more color there. And whether you expect that to continue into fiscal Q4?

So I'll start and then, Eric, you can chime in, right? So some of the improvement in APAC were really kind of a year-over-year comp perspective. But we've also been able to win -- have new wins with Globe and [digiCHECK] on our 5G rollouts. So we see our business relationship expanding there. And that -- now we see a good runway particularly in Asia Pac going forward. So -- and we also have learned that some of our value proposition in Asia Pac is it -- we can extend it within other countries in the region where there's high spectrum cost and our multiband radio. So we see us being able to deliver a value proposition in Asia Pac.

And on Latin America, I wouldn't say that there's anything extraordinary, it was just a couple of projects wins. Eric, do you have anything to add?

Yes. So I think the only thing I want to add is that in fiscal '19, we had a great year with Globe in the Philippines, right? So obviously, that went away part of this year in fiscal '20, but we'll start seeing that picking up again beginning in Q3 and now obviously, beginning in Q4 as well.

Great. Well, okay. So assuming that, that kind of strength maintains, this is more about your comment on the release about an eye toward top and bottom line growth in fiscal '21. And so you're looking at a year, I guess, assuming things, kind of, stay similar to what we saw in Q3, where you've got solid double-digit growth in North America and seemingly some pretty positive trends. And 20% plus declines internationally, some of which appear to be turning around. I guess in the context of that performance for fiscal '20, Pete, maybe I'd ask you to try and get a little more specific with regard to the growth potential for the company given in light of that performance, right? Double-digit in North America and maybe international moving back to a growth profile?

Yes. So we're thinking a lot about FY '21, right? So we don't really want to give guidance until we're through next quarter, but we do believe that there's going to be growth in revenue. Our cost and our efficiency program, even with flat revenue should drive an improvement in earnings. But with our growth programs, we see the way you characterize it, North America is growing. We see that there's still growth opportunities in North America. And for your model, you might say we're going to be flattish with international. But I want to grow in international as well. And I think over the last 4 months, we've learned about our differentiation in our value proposition, which before we weren't as confident in, and we think that's going to be able to drive growth. And then, of course, the caveat is what does COVID do to the consumer and our customers' budgets. But if we do return to a normal environment, I'd be really disappointed with all of the good things we have going inside of our portfolio, in our sales funnel if we don't achieve growth. So give us a little more time so you -- so we kind of get pegged down on a top line number for next year, Tim.

Fair enough. And just last question from me. And you mentioned an uptick with Globe, I gather it's 5G related. I wonder if you look across your customer base internationally, and maybe especially given events of the past few months, what have you seen in terms of operator plans for 5G deployment. Have they accelerated, been pushed out? Or are there any discernible trends as you look into next year?

So I would -- yes. So I would say it's heterogeneous, right? Some are accelerating and some are pushed out. It really depends on the operator's budget. So we -- internationally, we see kind of a mixed bag. But I think also, like in Africa, the COVID-19 was late to get there. So they're still digesting it. And that's been partly why I want to hold back on guidance as we get through to whatever this new normal is or steady state post COVID-19, then we'll be able to see if the kind of pushouts were just reaction or if they're real. And we're hopeful that the acceleration that we've seen are -- will stick, and we think they will. And then lastly, we also see that the for our private network business has been on a steady path. But as the COVID-19 going to catalyze more investments as telecom and our communications, particularly with the WISPs become more critical. So that's what we're trying to sort out, Tim.

Your next question comes from Steve Busch.

Excellent quarter.

Thank you.

So I guess a few questions that -- just drill down a little further. Where did most of our fiscal year Q3 2020 North American revenue comes from?

Eric, do you want to take that?

Yes, it's mostly coming from private network.

Private network. Okay. Perfect. And I know we kind of covered COVID-19 and some of their effects on installing. I would think it would be, I guess, easier with less people around to do some of our work? Or is that just a matter of getting the customers there? And also, you mentioned it was affecting some payments. How is that affecting us? And on what kind of scale on the payment side?

Okay. So I'll -- Eric, you can do the payments, I'll do the install, right? So it -- to do an install, it takes 2 or 3 people to meet out in the field, if you will, at a minimum, usually somebody from Aviat side, somebody from the customer side. So you're right that cell tower is sort of socially distanced. But company policy where it emphasizes protection, those got pushed out just from partly us being conservative and partly our customers being conservative. So the good thing about that is that demand doesn't go away. It just moves out a little bit in time. And if you think back to late March, we didn't know nearly as much as we do know now, and a lot of folks behaved with an abundance of caution. So I think that would describe the field service pushout.

Eric, do you want to talk about cash?

Yes. Yes, let me talk about cash, all right? So first of all, our cash was up about $1 million sequentially and $7 million year-to-date. And we did see, because of lockdown, a lot of the countries, we do see the customers are slowing down in making payments. Some of our customers, when working from home, they don't have access to all the supporting documentation to make the payment. Therefore, they won't be able to pay us until the lockdown is lifted. But we do believe that we're managing the situation, and we do believe that even though the Q4 cash might be down because of that delay, but for the full year, we're still expecting our cash to be up.

Right. So most of those people who are late on payments are overseas, I take it?

Eric...

They are. Yes. Yes.

Yes.

Okay. All right. Where are we on the NEC product lines? Are we seeing any kind of meaningful contribution to revenue on that at this point? Or is that gearing up for 2021? So then (inaudible) questions.

So we've announced the multiband, that we're having good traction on that. And the better we think that, that will be a margin-accretive product. And then the second that we're -- we've highlighted is our frequency-assured service that we hope to launch by the end of this fiscal year. And that would be something that is a software service that would help identify and ultimately lead to interference in the 6-gigahertz band. So we feel that those 2 products could be a driver of growth in fiscal year '21.

Okay. I mean are we looking at any other product lines from NEC? Or is it -- we're stuck where we're at?

We have a couple of others in the pipeline and when they get closer to launch, we'll talk more about them.

Sure. That's fair enough. So the Sprint/T-Mobile merger, now that we have some clarity, is that affecting you in a good way, bad way? Uncertain yet?

Yes. So we think that, that's going to be a net positive for us. But as they're -- from what we can tell, they're still doing their integration. And as they get through the integration and they release money for spend, we'll go after it, right?

All right. Okay. Fair enough. And so I guess a final question. Where are you seeing 5G going so far in North America? Has it slowed down? Or you see it gaining speed? Or is it really another year pushout? And is it mostly an overseas story at the moment? And that's all I got.

Yes. Well, I would say that we see our best 5G installments overseas. We also -- we see that it's accelerating in multiple regions, principally overseas. We see that most of them are being built on top of existing sites. And what that does is that drives additional capacity requirements, which we sell radios into capacity upgrade, right? Domestically, it's harder to tell. And then the other thing that I would say is with LTE and LTE Advanced, some of our same radios are also aligned with those. And sometimes it's hard for us to distinguish if it's a network upgrade that -- if it's 4G or 5G. And what I think 5G does, from a high level, is it drives -- it's basically a proxy for needing more capacity, and that's good for us. And if we deliver on that. We see that it will help the operators compete against each other and drive reinforcement and demand. And one thing that I'd like to come back to is our multiband radio and our product road map is aligned with 5G. So the more 5G rolls out, the better off -- the better we're going to do.

Your next question comes from [Pete Perkash].

Congratulations on the quarter. Definitely, operationally, I think that shows great results. 2 quick comments and questions. One is if you could just talk about kind of the shareholder value comment in terms of increasing. What levers do you guys see in terms of formulating them? Just keep that in the context of the shareholder who's been with the company and followed them for about 3 to 5 years. We've heard, hopefully, revenue growth and obviously, margin expansion and cutting OpEx. But if you can kind of look ahead and see where you think that shareholder value will come from? And then if you can just talk about some of the things that you mentioned regarding things that were not done previously that you guys see opportunities for. I think that tone really struck well with me in terms of not accepting status quo. If you can kind of elaborate on that, that would be appreciated.

So Eric, would you like me to go or you want to go on the stock price shareholder value?

Well, I think from my perspective is how we go about improving the bottom line, right? So earlier, we mentioned that -- on the call that we have gone through a couple of restructuring efforts. One in Q3, we announced about a headcount reduction, about 20 employees, and then another 45 employees in Q4 through the second quarter of fiscal '21. So we're looking at revenue growth, and we're also looking at how we can continue to cut cost to drive shareholder value.

Okay. So that's kind of Eric's perspective on part of it. The other part of your question is what are we doing different, right? So since I've been in the role, my focus has been to challenge every cost, right? And as we've challenged the cost, we've been able to identify areas to get operationally more efficient and that where -- some of the places where we've benchmarked ourselves against a basket of companies. Where our costs are too high and we're going to fix that. That's the cost side. But let's talk about the biggest problem that if you go back in the 4 years of financials, right? The top line has been $240 million, plus or minus $5 million. And there has been cost-cutting before I've gotten here. So -- and I give the folks that did that a lot of credit. But the top line hasn't been improved. And I would also say the top line hasn't been improved, and the -- we haven't gotten paid for our innovation. So we are in the midst of an extensive voice of the customer program, so that we understand where Aviat has a compelling value proposition and a little tidbit would be where there's high spectrum costs are high-performance, high-capacity radios, deliver more value than our competition or the next best alternative. The multiband radio, when I started, we were kind of going to go out and look at that. We were just going to try and sell that everywhere, and that drives higher cost to serve. So we're going to work to specifically target that, get leverage out of our SG&A.

And then on the FAS, we -- which is a new product in the pipeline, we didn't really have a go-to-market perspective. We're fine now. We understand what the economics are of the customers' problem, and we're going to go after that. So I think to kind of put all that in a bucket, we want to be commercially excellent, and I take an expansive view of that. We're going to make sure that our sales force is going after opportunities where we can win, and we have a compelling and differentiated value proposition.

On our R&D portfolio, we're going -- before we spend $1 on hardware or software, we're going to do voice of the customer, so we understand the economics of the customer's problem. And when we deliver that solution, we know that there's going to be demand, and we're going to get paid for that demand.

And then lastly, to go back to the COVID supply chain, we did execute very well. But what we did differently in addition to deploying our Head of Operations and Supply Chain during that crisis is we -- typically, a business will run its supply and operation planning on a monthly basis, and that's basically matching supply and demand. And in the crisis because there was continuous pop-up of issues, we ran the SIOP process twice a week, so that we could optimize our supply and demand matching, and then identify issues and rigorously problem solve them, so that we didn't get to the end of the week, the end of the month, and say, "Oh, we missed this demand." So those are some things that I would say are different and gives me confidence that -- outside of the COVID-19 that we're going to be able to drive growth in the company.

Excellent. If I could ask a quick follow-up. If you were to think like over the next 3 years, in terms of kind of where you see the company growing, whether it'd be operational improvement from the cost side or revenue side. Is it fair to say this year is more on the operational cost side with stagnant growth or limited growth? And then years beyond, the focus is going to be growth and you would be disappointed if you didn't see that?

Yes. Yes. So -- and I would just add 1 more aspect, right? This year, we're working to improve our SIOP process and make sure that on the demand that we see in front of us, that we deliver on, right? So we're taking -- we're addressing costs. And I think if you look at our 8-Ks, the cost road map takes us over the next 2.5 quarters. So that should buy us some earnings improvement between now and then, and we need to drive top line growth with the program I just described. But I think that's a reasonable way to think about it. Yes, the way you put it.

(Operator Instructions)

There are currently no further question at this time. I'll turn the call back to Pete for any closing remarks.

All right. Well, everyone who joined us, thanks for your attention and your interest in Aviat. We think that the guys who have been on the phone and talked to us and gave us thanks for a good quarter, it was a good quarter given the circumstances. So we're looking forward to continuing to deliver and getting through this COVID-19 and driving our cost down, getting on a growth path and then ultimately delivering shareholder value. So thank you for your attention, and we'll talk to you next quarter.

This concludes today's conference call. Thank you for joining us. You may now disconnect.