AXT Inc (AXTI) 2022 Q3 法說會逐字稿

Good afternoon, everyone, and welcome to AXT's Third Quarter 2022 Financial Conference Call. Leading the call today is Dr. Morris Young, Chief Executive Officer; and Gary Fischer, Chief Financial Officer. My name is Andrea, and I will be your coordinator today. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Leslie Green, Investor Relations for AXT. Please go ahead.

Thank you, Andrea, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding, among other things, the future financial performance of the company; market conditions and trends including expected growth in the markets we serve; emerging applications using chips or devices fabricated on our substrates; our product mix; our ability to increase orders in succeeding quarters, to control costs and expenses, to improve manufacturing yields and efficiencies, to utilize our manufacturing capacity, the growing environmental, health and safety and chemical industry regulations in China as well as global economic and political conditions, including trade tariffs and restrictions.

We wish to caution you that such statements deal with future events are based on management's current expectations and are subject to risks and uncertainties that could cause actual events or results to differ materially. These uncertainties and risks include, but are not limited to, overall conditions in the market in which the company competes, global financial conditions and uncertainties, COVID-19 or outbreaks of other contagious disease, potential tariffs and trade restrictions, increased environmental regulations in China, market acceptance and demand for the company's products, the financial performance of our partially owned supply chain companies, and the impact of delays by our customers on the timing of sales and their products.

In addition to the factors that may be discussed in this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations.

This conference call will be available on our website at axt.com through October 27, 2023.

Also before we begin, I want to note that shortly following the close of market today, we issued a press release reporting financial results for the third quarter of 2022. This information is available on the Investor Relations portion of our website at axt.com.

I would now like to turn the call over to Gary Fischer for a review of our third quarter results. Gary?

Thank you, Leslie, and good afternoon to everyone. Revenue for the third quarter of 2022 was $35.2 million. That's down from $39.5 million in the second quarter of 2022, and it's up from $34.6 million in the third quarter of 2021 from last year. To break down our Q3 '22 revenue for you by product category, indium phosphide came in at $17.7 million, gallium arsenide was $8.1 million, down from Q2 by about $4 million and reflects the overall slowdown in the marketplace.

Germanium substrate were $1.1 million. Our germanium substrate revenue was down by about $2.7 million from Q2. Part of this is the general slowdown we observed and part is due to the payment issue we described last quarter. We expect to resolve that situation in the near future.

As of today, we are not shipping to the customers in question. Finally, revenue from the 2 consolidated raw material joint venture companies in Q3 was $8.3 million. In the third quarter of 2022, revenue from Asia Pacific was 67%, Europe 14%, North America is 19%. Top 5 customers generated approximately 41% of total revenue and 1 customer was over the 10% level.

Non-GAAP gross margin in the third quarter was 42.2% compared with 39.4% in Q2 of 2022 and 33.8% in Q3 of 2021. For those who prefer to track results on a GAAP basis, gross margin in the third quarter was 42.0% compared with 39.1% in Q2 and 33.3% in Q3 of last year.

As you can see, we continue to execute well on gross margin. Despite lower volumes in Q3, our favorable product mix, improved yields and new indium phosphide recycling program, all contributed to strong results.

Total non-GAAP operating expense in Q3 was $9.2 million. This compares with $9.1 million in Q2 and was $7.7 million in Q3 of 2021. On a GAAP basis, total operating expenses in Q3 of 2022 was $10.2 million compared with $10.1 million last quarter. For comparison, total GAAP operating expense was $9.1 million in Q3 of 2021.

Non-GAAP operating profit for the third quarter of 2022 was $5.6 million compared with non-GAAP operating profit in Q2 of 2022 of $6.4 million and $4.0 million in Q3 of 2021. For reference, GAAP operating profit for the third quarter of 2022 was $4.6 million compared with an operating profit of $5.3 million in Q2 of 2022, and an operating profit of $2.4 million in Q3 of 21.

Nonoperating other income and expense for the third quarter of 2022 was a net gain of $2.7 million. This includes a gain of $2.0 million from the unconsolidated raw material companies.

The full breakdown is in our press release.

For Q3 of 2022, we had a non-GAAP net income of $6.8 million or $0.16 per share compared with $6.7 million or $0.16 per share in the second quarter of 2022. Non-GAAP net income in Q3 of 2021 was $5.4 million or $0.13 per share. On a GAAP basis, net income in Q3 was $5.8 million or $0.13 per share. By comparison net income was $5.5 million or $0.13 per share in the second quarter of 2022 and $3.8 million or $0.09 per share in Q3 of 2021.

The weighted average diluted shares outstanding in Q3 was 43.0 million. Cash, cash equivalents and investments were $48.2 million as of September 30. By comparison, at June 30, it was $57.2 million. Depreciation and amortization in the third quarter was $2.1 million and capital investments were $4.7 million. Most of this is facilities-related. Stock comp was $1 million.

Net inventory at September 30 was $88.5 million, 50% of the inventory is raw materials, 46% is WIP, and finished good makes less than 4%. This concludes the discussion of our quarterly financial results.

Turning to our plan to list our subsidiary, Tongmei, in China on the STAR Market in Shanghai, let me just give you a brief update. As previously reported, our IPO application was approved by the Shanghai Stock Exchange in July and was then submitted to the China Securities Regulatory Commission, often, we refer to that as the CSRC in August for the next step in the review process.

We have had feedback from the CSRC in the form of questions, and our advisers believe the questions were normal and customary. We hope to get CSRC approval soon and Tongmei still has to accomplish the offering as early as Q4 2022. This has been a long process, but we remain very enthusiastic and optimistic. We have posted a brief summary of the plan and the process on our website.

Before I turn the call over to Morris, I want to take a moment to address the topic of export control restrictions with China, since some of you have asked. We have extensively studied the new restrictions and guidance including consultation with our legal experts. As such, we and our attorneys have concluded that the new restrictions are not applicable to our products, equipment or manufacturing process. We do not expect to experience disruption as a result.

Okay, with that, let me turn the call over to Dr. Morris Young for review of our business and markets. Morris has been in China and is there right now. So he got up very early in the morning and it still is early in the morning there. Morris, go ahead.

Thank you, Gary and, well, good afternoon, everybody. Though a softening of the macro environment reset our growth trajectory, the trends that have driven our revenue, customer application expansion remain very much intact. Despite the setback, our Q3 results demonstrate several key things. First, indium phosphide is expanding and becoming an increasingly strategic material across the landscape of technology. Second, AXT has continued to make meaningful sustainable progress in driving our gross margin performance. And third, we are successfully supporting the business, technical and quality requirements of some of the most discerning Tier 1 companies in the world.

These 3 factors underscores our firm confidence that our business has reached a turning point. The time of innovation that is driving the expansion of applications for all materials we created is lifting our baseline opportunity. Even in the softer demand environment, we, more importantly, AXT is solidly positioned as a leader. Our product quality and technical capability have created a standard of excellence that is increasingly difficult for our competitors to match, as is evidenced by our market share gains in indium phosphide.

Our Q3 indium phosphide revenue grew 12% over Q2 to set a new high quarterly revenue. This is also a 48% increase over Q3 of 2021, driving our growth with the ramp of 2 consumer applications that contributed meaningfully to our results, and in line with our expectations coming into the quarter. As we mentioned previously, the first is the proximity sensor for audio devices and the second is a (inaudible) sensor for high-end handsets. We're shipping into both applications in production quality.

The strong performance in consumer was offset by weakness in PON and telecommunication applications, particularly in China. The data center market was also moderately weaker than we expected going into the quarter. The majority of the revenue shortfall in Q3 came from gallium arsenide. Industrial lasers, LEDs for automotive and wireless handset applications were all down in a meaningful way. Much of this related is to China. Where customers conservatism towards future demand, coupled with COVID and weather-related shutdown within the supply chain, resulting in steep drop in orders.

We're confident this is not a loss in market share as we are not seeing customer canceling orders. More commonly, they are delaying of placing orders. In other cases, this is to get a better picture into future demand. In the other cases, it may be the result of shortage within the supply chain. We see this issue persisting through Q4, but because of the rapid decline in the second half of 2022, an improvement in the demand environment or the supply environment could result in a relatively quick recovery in FY '23.

It is also important to note that we continue to see a meaningful amount of development work happening for new applications in both indium phosphide and gallium arsenide. Customers are highly focused on new innovation. We believe that this will contribute to some exciting new use cases for our substrates in the coming fiscal year, including consumer and health care monitoring. A bit further out, micro LED applications are growing increasingly more promising. We would not be surprised to see noticeable revenue in FY '24.

In terms of our own innovation, I'm pleased with the progress we are making in both 8-inch gallium arsenide and 6-inch indium phosphide material. Our R&D investments are allowing us to ensure that we are ready to meet the market when the application for this larger diameter moves closer to production.

Finally, revenue from our 2 consolidated joint ventures were about $8.3 million in Q3. We expect the softer demand environment to bring sales down some in Q4, mostly from JinMei. That is as a result of raw material prices coming down, and ongoing customer conservatism. BoYu, who makes pBN crucibles is likely to remain steady.

In closing, despite the setback of a weaker environment, we have made enormous progress in our business, and we are well positioned to weather the near-term softness. Today, we are the world leader in indium phosphide, and we are the company that Tier-1 customers come to when they are bringing new innovation to market. We continue to raise the bar on our technical capability and our quality, creating clear differentiation with our competitors.

Further, we have worked hard to improve our efficiency. And as a result, we are delivering solid profitability. Over the coming quarters, the environment will do what it will. And though we will diligently manage our business through it, our eyes are on the horizon, because the massive trend that will continue to transform the landscape of technology are not going away. And AXT will be the leading supplier of many of these materials.

I will now turn the call back to Gary for our fourth quarter guidance. Gary?

Thank you, Mr. Morris. That said, we expect Q4 revenue to be between $26 million and $29 million, which reflects our view that the inventory corrections will continue during the quarter. As such, we expect our non-GAAP net profit will be in the range of $0.03 to $0.05, and GAAP net profit will be in the range of $0.01 to $0.03. Share count will be approximately 43.0 million shares.

This concludes our prepared comments. Morris and I will be glad to answer your questions now. Andrea, please go to Q&A.

(Operator Instructions) Our first question comes from Charles Shi with Needham & Company.

Maybe first question. I want to ask you how to reconcile what we heard from your #1 customer, [Epihouse] Taiwan. That particular company recently said they are quite bullish about the 5G and the fiber rollout in China next year, and they think '23 will be a growth year for them. What is your thought, your own business going into '23. I know fourth quarter '22, it seems like that the correction will continue but into '23, are you seeing a similar trend as your #1 customer and especially on the telecom and the datacom side?

Let me take this first, Gary. Yes, Charles. I think, indeed, we think indium-phosphide will continue to grow, although I think Q4 is taking a slight dip, I think, but I think the trend of indium phosphide growth is going to continue. And I think not only telecom, datacom is going to be growing in 2023. But also the consumer product, I think, is going to not only continue to grow, hopefully, we're going to pick up 1 or 2 more new consumer product applications, which, as you know, could be quite accelerating our growth, because it's a new product.

Yes. I'll add that, that particular company is a long-term customer of ours. And we feel very strong with them, and we expect to continue to serve their needs.

Got it. So maybe the second question to the consumer business. How -- what's the total revenue opportunity you're seeing for the current -- the one you already have, the second consumer application? What is the end customer tells you? What's the total size of the revenue opportunity to this smartphone cycle?

And do you see any changes to the forecast they provided to you over the recent weeks or months? Because I hear, you said that the trend of indium phosphide growth will continue, but that kind of make me wonder you did guide down your Q4 by quite a lot. And I wonder whether that second consumer application has a little bit of change in terms of how fast the ramp can be in Q4.

Yes. I don't think there's a slowdown in the demand for the second consumer product in Q4. I believe the slight downtick on indium phosphide demand mainly from our other China customers, which unfortunately, we don't know exactly what they are doing. It could be datacom, it could be the PONs market, et cetera. But definitely this particular customer is not slowing down.

In fact, if I may add, I think they are only using on the high end of the [PON] market in their first launch this year. And hopefully, later on, they're going to use it in the whole spectrum of products that they're offering. So we do expect perhaps the demand for this product -- on the second product is going to go up next year.

Yes. So maybe just to clarify -- this is going to be my last question. But to clarify, you are optimistic about 2 more consumer applications. Does the proliferation of the indium phosphide-based sensor into the -- that's their low-end product, but in the market it's probably considered mid- to high end. Is that accounted as a third application or you're talking something completely different when you talk about the 2 more consumer applications there?

No, that's not considered a new win. We think that's probably going to increase the demand, but we haven't talked to the customer yet in terms of how much they want us to prepare, because this is too early for next year demand. But I'm talking about possibly we can pick up 1 or 2 more new consumer product applications. As you know that we have at least 2 products sort of in the queue, but we are not sure, especially with the world economy shaping up like this, where are they going to introduce this new product.

Our next question from Richard Shannon with Craig-Hallum Capital Group.

Let me ask this very specifically on the fourth quarter guidance here. You obviously talked about indium phosphide down a bit. The overall number here at the midpoint is down a little bit more than 20%. Can you delineate the other categories, how they're doing relative to kind of that midpoint? I'm assuming gallium arsenide and maybe raw materials are down more than average. But maybe, Gary, if you could delineate that a little more closely, that would be great, please.

Yes. Well, we're trying to be conservative, first of all. Secondly, we're uncertain about when the market is going to bounce back. But I don't think anyone on this call or in the tech business, thinks it's going to bounce back in Q4. So -- so therefore, we forecasted all of the products to be down, a big -- and a big drop in raw materials. So raw material has been running about $8 million. That alone will be down at least 25%.

So -- and I think it's just reflective of the overall slowdown in the markets. So as I said to our team, it's a good thing we're growing up, because it is what it is. We can't change the whole marketplace. And it shifted on us, I wouldn't say, overnight, but it was a very dramatic, rapid shift during the summer. And we don't know when it will be bounce back. Hopefully, it will be in Q1. But we'll have to get closer to Q1 before we know for sure.

Yes. Gary, I want to add to the point is that I don't think we are losing market share, that's very important to underline. And our underlying strengths, our future remains solid now with new factories adding capacity, low [EBD] and responsiveness. As you can see that (inaudible) will be second new consumer product. We ramped up our production very successfully. We didn't lose a stride. And I think they are really making good marks to our most demanding customer.

And so we think we are stronger and better at any time in our industry, but semiconductor unfortunately is cyclical, when people are worried about supply, they buy a lot. And when there's a scarce or recession coming through, everybody wants to use their inventory. I mean the same thing for us. You see we built some inventory, it's going to take us a quarter or 2 to bring it down and then we're not going to buy from our customers.

So the nature of the business, I would say.

That's very fair. My second question is on gross margin. I want to talk most about -- both about the third quarter and then kind of the view into the fourth year. So you've talked in the past about volume being a fairly important indicator of gross margins. So you obviously had a shortfall in your best gross margin ever. Clearly, indium phosphide mix is helping a lot. Maybe you can delineate any other drivers here in the third quarter that helps you? And are there anything that can help you or are there such as recycling yield things that you've improved on do those have more legs to grow on?

And then as we look forward here, particularly with the much lower volumes, how do we think about gross margins here? Can we look back at the quarters with similar revenue and see us in that range? Or how do you help -- Gary, can you help us think about where you think about gross margin pay out in the fourth quarter?

Sure. Yes. Well, for our business model, the way the company operates, it's not usually like one single thing that makes the gross margins swing up or down. I refer to it as several small dials instead of one big dial. But clearly, product mix is a key factor. And that's one of the -- first thing that comes to mind when we say why is gross margin improving.

Another is the new indium phosphide recycling program, where, as we described before, we developed last year a way to reclaim certain scraps that are a result of this production process. That was in, what I would call, beta test in Q4 last year and in early production level in Q1 of this year. Then, I would say, general production level in Q2. And again, in Q3, and in fact, it was -- Q3 was a little -- financially, has contributed a little bit more than it did in Q2.

So that's good for gross margin. It's also good for ESG kinds of concepts that we're learning how to recycle some of the stuff. So a third factor is that we've generally had our yields improved. And in general, I think we're seeing more manufacturing efficiencies. Morris talked about our strengths, and we're really -- the team is really a good team. So I've used the phrase with some of you before that I think we've been going through a settling in process at the new sites.

And I think it's -- we're improving in that. It's more stable. That's helping the efficiencies and the yields. And to be straight about it for Q3, we had a quarter where a lot of the numbers seemed to be pointing north, that is in a positive direction. That doesn't happen very often. And sometimes it could be pointing south. But in this case, every number on the board was helpful. So -- and that will enable us, on a GAAP basis, to be at 42%.

So then, Richard, secondly, what do I see going forward. I think we have some more ground to gain both on mix and on yields and on manufacturing efficiencies, all the things I just described. We have some other recycling ideas that we're not ready to share them yet, either with you guys or with our competitors. And we have some -- I think, some other things that we can do to keep the gross margin relatively high.

Yes, it's not going to be in the 40 percent for Q4, because the volume is going to be lower. And I think somewhere in the 37% to 38% range is achievable. And I haven't really had -- haven't taken a look at it yet, gross margin for next year. But I do -- I can say, and I say this with confidence that we have some good ideas that are being implemented now, and it will help us next year.

So next question, Richard?

You reported a 10% customer. Is this a new customer or one you've had as a 10% in the past?

It's one that we've had before. And we expect they could be 10%, going forward they'll continue to be strong. They are servicing the consumer application that we touched on. So...

(Operator Instructions) Our next question comes from Hamed Khorsand from BWS Financial.

My first question was, how are you adjusting the business given the decline in revenue, but your inventory has been increasing quite a bit now? And how are you going to adjust for that and to generate some free cash flow?

Well, I can -- first of all, let me assure you that we're very aware of what's happened to the inventory. It evolved because we're running really hard to keep up with demand and we're deliberately building inventory and then things shifted pretty dramatically. So -- but we're very aware of it. Let me point out again that if -- in our inventory right now, 50% of it is raw materials, and 46% is WIP. So only 4% is finished goods.

I'm not worried about having to write down the inventory or anything like that. And the way we're going to have to bring it down, which we will, is several things. Number one, I've already been communicating with my teammates in China and forming sort of a [SWOT team] if you will, to monitor inventory closely. Of course, we will stop purchasing as much, because we have too much now.

And I think we can bring it down over the next couple of quarters, but -- and it will help on cash, yes. So -- unfortunately, I think we're mirroring what we've seen in our own customers. They're trying to manage their inventories also, so they stopped buying as much. And we're actually in the same position. So -- but we're definitely on it. We've been talking about it.

And it's not my first rodeo. I've been in these situations before. There's a saying that I use is, if you want to change something, measure it. So I'm looking at different ways to measure different things in the inventory and communicate that to the team and get everybody's attention. So I feel it's an achievable goal to bring it back down.

Okay. I mean what I'm trying to get to is also, how are you adjusting to this environment? Because in Q2, you were doing something in the realm of 40% or 50% more in sale -- revenue per month than what you're guiding to now. So that's quite a bit of an adjustment you have to make. Are you putting people on leave or how are you just doing the manufacturing there?

We're not putting people on leave. We're not hiring anybody either, but I think it would be detrimental to our midterm in the future if we start jettisoning employees. So we expect the market is going to come back. And when it does, we're going to be ready. So -- but in the meantime, we will trim expenses. We'll try and improve on efficiencies. And we have a lot of dry powder of things that we can do to manage the business. So -- but -- we've considered, should we do layoffs, but at this point, no, we're going to.

Yes. One of the things we obviously are doing is, as you know that during the very busy time, we were asking people to take a lot of overtime and forfeit their vacations, et cetera. So we're now in a slower time. We are on the slower segments such as gallium arsenide and germanium. We either shift them -- part of them to working in indium phosphide, because that's still quite busy. We're still building future capacity for the expected demand increase next year. But also we do encourage people to take their any vacation and any leave time as much as possible. So ready for the next run up to the high demand later.

And my last question is, how would you describe the clarity that you have in the business right now?

You mean about the marketplace in the future?

Yes. we are as clear as we can. I mean although market is down, but as we said, I don't think we're losing market share. Customers are all there. In certain segments, the demand is still strong, but we're covering a lot of business. For instance, everybody -- I think nobody is happy to see that our guided revenue going forward is going down so much. But on the other hand, part of it could very well be the gallium price erosion. I mean, gallium price came down almost 20% and it's still going down, maybe another 10%.

And one of our joint venture, JinMei, who sells gallium. They buy and sell gallium. So first of all, if the gallium price is low, then their revenue comes down. So that really has nothing to do with revenue coming down so much, because -- but we are clear, when our revenue was up, we are clear to report to everybody, hey, part of the increase in revenue is really because of raw material price is going up. So this is coming down on the other side. But it doesn't hurt us, because we -- in JinMei's business, we're refining it to high purity. And so it doesn't really hurt our business.

And in terms of -- and also add on to it is when prices go down, people don't want to buy, because they don't want to step into -- it's going down further. So why don't I buy a month later? So maybe this is working to bring down inflation, so to speak. But as far as the rest of the factory, I think we are holding our heads up quite a bit, and we're busy -- very busy preparing for the IPO process and also we still have a lot of R&D work. We're working very hard on doing 8-inch gallium arsenide and 6-inch indium phosphide development. And I think the team spirit is high.

Our next question comes from Richard Shannon with Craig-Hallum Capital Group.

I guess 2 questions. First of all, Morris, you talked about micro LED and you could imagine a scenario where it picks up in calendar '24. Can you give us more detail on what you're hearing and what you're engaged with some customers? And my understanding is if that picks up nicely or you greenlight something there, you probably have to have some more capacity. How far in advance do you need to know about this before you get your capacity in place for such a build in that year?

Yes. I think we're increasingly more optimistic, because it's shaping up nicely. I think the customers are making their commitment. And -- so as you know, one of them is building a very large factory down in Malaysia. And yes, indeed, we are seeing the demand curve really start to pick up in 2024, and we are making all the preparation for it. And the ramp in volume demand is gradual.

I think it's going to start by some 400 wafer per month in next year. And we are already delivering some samples to our customers already and they are evaluating the performance of it.

And we expect between the two of us, I mean, our customer and us to tweak the specification that they want. And indeed, it would take us some time to build a new factory for the capacity to deliver that expected increasing demand. So we are working on it, and we expect to be able to deliver in the neighborhood of some 5,000 wafer a months which is middle of next year. And we expect it to further increase it to close to 10,000 or 12,000 wafer a month in early 2024.

Okay. Perfect. And just a quick follow-up on that topic, Morris. When do you expect your 8-inch wafers to intersect with that opportunity?

What do you mean? I mean we were building the capacity for that 8-inch, yes. The numbers are 8-inch wafers.

Okay. Perfect. My second and last question here is on indium phosphide. You talked about tight capacity here. And while the revenues seemed to be going down a little bit in the fourth quarter, you've got some positive comments about new applications or additional volume in current application in consumer space. Where do you sit in terms of utilization of your capacity? And do you need to build more in the near term or next year?

Yes. This is still fairly tight. And maybe Q4 is going to give us a little breather. We are still building capacity in anticipation for the volume ramp up next year. We could be overbuilding. I mean I must say -- I mean a lot of these buildup in capacity is in our own initiatives because we have to anticipate what customers really wanted and they usually don't give us -- I mean most of them give us at least 2 months advance notice.

But some of them, for instance, one of the customers did tell us they're doing pilot run and they expect results back in, I think, last time we talked to them, it's about in 6 months in the middle of next year. But whether they're going to come successfully asking for more product or not, obviously, we're going to keep very close tap with them and as time get closer -- but for us to increase indium phosphide capacity, it's not as easy as gallium arsenide. It's more complicated. So it takes a little bit longer time. We need about 6 months to get all the things together. So we are doing a little bit more in advance of the products coming in.

And last year, as you know, these 2 products or consumer products, I think, we did a very nice job in expanding our capacity to meet all the demand from our most demanding customers. So I pat myself on the back and say good job, Morris. Hopefully, is the same thing for the next consumer product ramp. But, right now, I cannot promise you. I mean they are not coming in with the order yet. Next question?

I'm just not showing any more questions right now. Actually, I would like to turn the call back to Dr. Morris Young for closing remarks.

Thank you, everybody, to -- in participating in our conference call. And let me see what other conferences will be attending. This quarter, we'll be presenting at Craig-Hallum's Alpha Select Conference in New York in November -- on November 17. And we will be participating at the Needham Conference in New York City, on January 11. We look forward to see many of you there.

As always, please feel free to contact me, Gary Fischer or Leslie Green directly if you would like to set up a call. We look forward to speaking with you in the near future.

Thanks, everyone.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.