EMCORE Corp (EMKR) 2008 Q1 法說會逐字稿

Good morning, ladies and gentlemen. My name is Chantal and I will be your conference facilitator today. At this time I would like to welcome everyone to the Emcore Corporation Fiscal 2008 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Following the speaker's remarks, there will be a question answer period. (OPERATOR INSTRUCTIONS)

And as a reminder, this call is being recorded. Listeners can also log on to www.emcore.com to access the webcast. Thank you.

It is now my pleasure to turn the floor over to your host Mr. Victor Allgeier of TTC Group. Sir you may begin your conference.

Thank you and good morning, everyone. Yesterday after the close of markets, Emcore released fiscal 2008 first quarter results. By now you should have received the copy of the press release. If you have not received the release, please call our office at 646-290-6400. With us today from Emcore are Reuben F. Richards, Senior Chief Executive Officer; Dr. Hong Hou, President and Chief Operating Officer; and Adam Gushard, Interim Chief Financial Officer. Adam will review financial results and Reuben and Hong will discuss business highlights before we open the call up to questions.

Before we begin, we would like to remind you that some of the comments made during the conference call and some of the responses to your questions by management may contain forward-looking statements that are subject to risks and uncertainties as described in Emcore's earnings press release and filings with the Securities and Exchange Commission. I'll now turn the call to Adam.

Thanks, Vic and good morning to everybody. Today we are reviewing the results of our first quarter ended December 31, 2007. Afterwards I'll provide some financial guidance for the remaining period of fiscal 2008. So, starting with the P&L. Consolidated revenue totaled $47 million. This represents an increase of 21% when compared to last year and flat when compared to the prior quarter. On a segment basis, fiber optics revenue totaled $34 million. That's a 34% increase when compared to last year and a 9% increase when compared to the prior quarter.

The year-over-year increase in fiber optics revenue was driven by a 40% increase in sales from our broadband division and a 13% increase from our digital fiber optics division. Compared to the prior quarter, revenues form broadband increased 7% and digital fiber optics increased 16%. Photovoltaics revenue totaled $13 million for the quarter. Now this represents a decrease of 3% when compared to last year and a decrease of 18% when compared to the prior quarter. As mentioned in yesterday's earnings release, our photovoltaics division experienced delays regarding the delivery and installation of capital equipment purchased for new CPV solar cell and receiver manufacturing line. For the quarter this resulted in a shortfall of approximately $3 million in revenue.

At this time we believe all capital equipment will be online and shipment of CPV receivers will commence this quarter. I want to make it clear that no CPV component orders were canceled during the quarter. We have revised shipment dates with our customers and expect to make up the revenue shortfall in the current fiscal year resulting in no impact to our fiscal 2008 revenue guidance. Had this delay not occurred, our quarterly revenues would have exceeded revenue guidance of $49 million.

Moving on to gross profit and margins. Consolidated gross profit for the quarter totaled $9.8 million. This represents a 78% increase in gross profit when compared to last year and a 20% increase in gross profit when compared to the prior quarter. Consolidated gross margin for the quarter was 21%. This represents a significant improvement from 14% gross margin reported last year and from 17% gross margin reported in the prior quarter.

Reporting gross margin by segment; fiber optics gross margins were 23% for the quarter. That's a huge improvement from 18% gross margin reported last year and the prior quarter. As expected, the increase in fiber optics gross margins was due to increased revenue and restructuring efforts completed last year. As a reminder, we consolidated design centers in Virginia, Illinois, and Northern California into our manufacturing sites located in Albuquerque, New Mexico and Alhambra, California. Also during the quarter, we started shipping product manufactured at our new facility in Langfang, China. This facility should enable us to improve our overall cost structure and fiber optics gross margins.

Photovoltaics gross margins were 14% for the quarter. This represents an improvement from 8% gross margin reported last year but a decrease from 17% gross margin reported in the prior quarter. The sequential decrease in photovoltaics gross margin was simply a result of deferred revenue along with unfavorable product mix. Had the equipment delay not occurred, gross margins would have exceeded the prior quarter. I should also mention that even at reduced revenue on gross margin, our photovoltaics division was EBITDA positive for the quarter.

Moving on, operating expenses for the quarter totaled $23.4 million. This represents an increase from $19.2 million reported last year and a decrease from $24.8 million reported in the prior quarter. The year-over-year increase was due to non-cash stock-based compensation expense. As I discussed in the last call, we incurred a $4.4 million non-cash stock-based compensation charge related to the modification of stock options issued to former employees. Now, excluding stock option based compensation expense, professional fees incurred associated with our review of historical stock option granting practices, non--recurring legal expenses and severance and restructuring related expenses, and I will refer later to these expenses and these types of expenses as adjusted expenses, operating expenses for the quarter totaled $16 million. Now, this represents an increase of $1.9 million of operating expense when compared to last year, which was due to increased SG&A spending in our new Terrestrial Solar Power Systems division as well as our other divisions to support the year-over-year revenue increase.

When comparing the results to the prior quarter, adjusted operating expense decreased significantly by $2.1 million or 12% and as a percentage of revenue, operating expenses dropped from 39% to 34% of revenue. Operating loss for the quarter totaled $13.6 million. Excluding adjusted expenses, our adjusted operating loss totaled $6 million. This represents a significant improvement to operations and to our bottom line on both an annual and quarterly basis. Compared to the prior quarter, adjusted operating loss decreased 37% or $3.5 million, which is an $0.08 per share improvement when compared to the prior quarter.

Net loss for the quarter totaled $14.5 million or $0.28 loss per share. Excluding adjusted expenses, our adjusted net loss totaled $6.8 million or $0.13 loss per share. This represents a decrease in net loss of 13% or $1 million, an improvement of $0.02 per share when compared to last year. Compared to the prior quarter, adjusted net loss decreased 34% or $3.5 million, an improvement of $0.07 per share.

Moving on to a few more P&L highlights for our business unit. In the past I used to disclose OpEx spending and the non-GAAP tables related to our new Terrestrial Solar Power Systems division. As I discussed in the last earnings call, this is no longer necessary since spending which is primarily related to research and development now occurs in all periods presented. For those of you that would still like to carve out this division, total OpEx spending totaled $2.6 million, an increase of $600,000 from last year and down $100,000 from last quarter. Our Gen2 system, solar power system is up and running in Albuquerque. Its energy output exceeds expectations and this design has been moved into production. This system is very impressive, you will be able to view photos on our Web site soon.

I also want to point out that by simply excluding the one time $4.4 million non-cash stock-based compensation charge related to former employees, Emcore would have posted its best P&L performance in September 2006.

Regarding our divisions. Revenue from our digital fiber optics division continues to recover back towards 2006 historic levels. Our satellite photovoltaics division again posted positive EBITDA results for the quarter and our broadband business achieved a new quarterly revenue record and was also net income positive for the quarter.

Now turning to the balance sheet. Cash and cash equivalents and marketable securities totaled $30 million. This represents a decrease of $11.5 million from the prior quarter. The decrease was primarily due to CapEx spending and our semi annual interest payment on our convertible notes which was paid in November 2007. CapEx spend in the quarter was approximately $5 million which we used to increase CPV manufacturing capacity in our photovoltaics division. Also, depreciation and amortization totaled $2.5 million for the quarter.

As a reminder, our balance sheet includes a $13.5 million investment in WorldWater and Solar Technologies Corporation, listed on NASDAQ as WWAT.OB. This investment is on our balance sheet at original cost, valued based on $0.27 per share price. Our balance sheet does not reflect the significant appreciation in equity value based on WorldWater's recent stock price. Our current market value, our investment in the WorldWater is worth $75 million.

You will also notice on our balance sheet that our debt has moved from long-term liability to a current liability. This is because on January 29 we entered into agreements with certain holders of almost 98% or $83 million of our outstanding convertible notes to convert their notes into Emcore common stock. Now upon conversion of the notes, we will issue approximately 12 million shares based on the conversion price of $7.01. To incentivize the holders to convert the notes, we made cash payments equal to 4% of the principal amount of the notes converted, plus accrued interest. In addition, we called for the redemption of all of our remaining outstanding notes. As a result of this transaction, Emcore will save almost $5 million a year in annual interest payment through 2011.

Moving on to order backlog, our order backlog is significant and continues to increase. Because of our order backlog, we are more confident regarding our revenue guidance and financial performance in fiscal 2008 and beyond. As of December 31, 2007, our order backlog totaled $156 million and our order backlog is comprised of $142 million for our photovoltaics segment and $14 million for our fiber optics segment. Within the photovoltaics segment, $53 million relates to our satellite solar power business and $89 million relates to our terrestrial solar power business. Backlog does not include recently announced terrestrial solar power system agreements in Canada, Spain, South Korea and the U.S. other than the 300 kilowatt CPV system contract from Spain's Institute of Concentrator Photovoltaics Systems since contract terms, production requirements and delivery dates were still being worked out.

Now before I turn the call over to Rubin for his update on operations, I would like to provide some financial guidance for the remaining periods in fiscal 2008. In December we announced an agreement to acquire the telecom related portion of Intel's optical platform division for $85 million. The purchase price will be paid $75 million in cash and $10 million in cash or common stock at our option. At this point, including our pending acquisition, quarter two revenue is estimated to be approximately $56 million to $57 million. This assumes our acquisition is completed before the end of this month and that it adds at least $4 million in quarterly revenue. And depending on product mix, we expect continued improvement in gross margins by business segments and in consolidation. Including our pending acquisition, fiscal 2008 annual revenue guidance is estimated at $265 million to $285 million. Now this represents an increase of 25% from the previously provided revenue guidance of $210 million to $230 million and a 60% increase when compared to prior year annual revenue of $170 million. This also assumes our acquisition is completed before the end of this month and that it adds at least $35 million in consolidated revenue. To increased revenue guidance is also based on increased revenue expectations from our photovoltaics divisions driven by current order backlog for our (inaudible) terrestrial solar cells and receiver products as well as the initial launch of our new CPV solar power system.

And finally, profitability is still a main objective for Emcore management and we should see a significant drop in non-recurring expense in quarter two. We believe most of the severance and restructuring charges associated with facility consolidation is behind us, and we shouldn't encore any more significant professional fees related to our stock option restatement. In quarter two we do expect to incur one-time charge related to the redemption of our convertible notes of approximately $4 million to $5 million. But excluding this charge and other non-cash charges, we continue to expect to see significant improvement in P&L performance in quarter two.

And with that, let me turn the call over to Rubin for his operational update.

Thanks, Adam and good morning everybody. I am going to address the strategic opportunities in the Company and the trends that are affecting our business units. Obviously there have been some major business developments in the past several weeks as we've announced that the acquisition of Intel telecom unit, signed agreements for $300 million worth of business involving two projects in Korea, one in Canada. We have announced new projects in Spain and most significantly entered into an agreement to supply up to 700 megawatts of terrestrial solar systems for a number of utility scale solar projects in the Southwest with SunPeak Energy. Recently, we entered an agreement, as Adam pointed out, to have the convertible note holders convert to common stock resulting in a debt free balance sheet and an improved P&L performance and profitability.

On the December conference call, we articulated that in light of the significant business developments in the Company's terrestrial solar division and the acquisition of Intel's telecom product line that we would be raising revenue guidance from the initial $210 million to $230 million for fiscal '08. Consistent with that, we have raised fiscal year '08 revenues by $55 million to $265 million to $285 million, an increase of 25% from the original '08 guidance and 60% from the fiscal year '07 revenues. Equally important is the calendar year 2008 revenue guidance of $340 million, which represents a substantial increase in PV revenues in calendar Q4 from the contracts that we have announced in December, including the Canadian, Korean and Spanish contracts. Further, upon the extension of the investment tax credit through 2009, which we think is imminent, the 700 megawatts in utility scale projects that come online in the Southwest United States with SunPeak, we expect that '09 revenues will scale significantly beyond the Q4 '08 revenue run rate of $112 million a quarter to equal $450 million to $475 million in '09, this is not including the SunPeak order.

Given both the current and additional projects that Emcore has under development and the fact that the size of the renewable energy projects contemplated will require dramatic and unprecedented expansion, it is likely that the Board of Directors in this March meeting will determine that in order to finance this rapid growth, Emcore will split into two separate businesses; a standalone fiber optics company and a renewable energy company that would be spun off to Emcore shareholders after an IPO to raise the capital in support of the significant growth in the terrestrial power business.

With the Intel telecom acquisition, the fiber optic business, along with the growth from the broadband and digital products will make a very competitive and profitable Company. As to the trends impacting our business in fiber optics, revenues grew slightly less than 10% quarter-over-quarter, and as Adam pointed out, margins expanded from 18% to 23% and we are very optimistic about this business. The broadband business revenues increased just under 8% for the quarter-over-quarter. Gross margins were at a record for this division and the business continues to be net income profitable. In discussions with customers and cable television MSOs, we expect an increase in capital spending in 2008 from 2007 which was a record year. Revenues for the broadband business should grow 20% to 25% in 2008 with expanding margins and profitability.

The digital business grew slightly over 16% quarter-over-quarter, driven by gains in both market share and an increase in overall demand for 10 gig products. Notable in the quarter were a number of new design wins on new platforms as major customers particularly for 10 gig optical back planes. That's the optical back plane application. We are seeing continued revenue growth in fiber optics this quarter and next, and at the same quarter-over-quarter growth rates that we saw in December.

In photovoltaics, despite the delay in the automated [diatack] equipment, which caused us to reschedule $3 million and TPV receiver shipments over the next few quarters. The business environment remains very robust with order backlog at $142 million, with $53 million in satellite and $89 million in terrestrial. This backlog number should expand significantly this quarter as the terrestrial orders from Canada, Spain and Korea are included based on committed delivery dates.

In satellite, Emcore's baseline under the number of new government and commercial satellite programs, and we expect to announce new program wins in the first half of the year. In terrestrial, as Adam pointed out, the new generation CPV system technology has being constructed and is now on site and operating, generating electricity into the Emcore buildings in Albuquerque. The Gen2 system design has been operating at an 8% premium to specification, 8% more electrical generation than we'd originally expected in the design. This new design is expected to achieve $3 a watt installed. Its operating video, we're going to put a time elapse video on the Web site, will be up and operational in the next couple of weeks.

With the announced purchase orders and agreements for Canada, Korea, Spain and the 700 megawatt agreement to the U.S., the Company is building a substantial backlog of business for both 2008, 2009 and beyond. We feel the revenue guidance provided for fiscal year and calendar year '08 is well within the Company's ability and we continue our expectations for EPS profitability by mid '08 and continued earnings growth throughout 2009. And with that, I will turn it over to Q&A.

Are you ready for questions?

Yes.

Thank you. (OPERATOR INSTRUCTIONS) Our first question will come from John Lau of Jeffries & Company.

Great thanks. Reuben, you gave us a lot of information there. I just wanted to review a couple of things. It's very -- you said that in calendar year '08, you are looking at something like $340 million, in '09 $450 million to $475 million, and that excludes SunPeak, is that correct?

That's correct.

Okay. And could you give us two things. Number one is your confidence level in terms of your visibility to achieve those objectives and more specifically, an update on SunPeak and their contracts because it is significant, but yet not in your number yet. Thank you.

Sure. The calendar year '08 number of $340 million and certainly the '09 number without SunPeak is largely based on contracts in hand, meaning there is nothing from an agreement standpoint that needs to be put in place. We can address that with the current capacity in the fab. Obviously, if SunPeak comes online, and I'll address that in a second, there is going to be a significant capacity expansion at the Company. In the calendar year '08 numbers, which -- of $340 million, that contemplates about $190 million in fiber revenues, about $150 million in PV revenues. And again, as I said, largely these are all projects that have been announced that are permitted. They are funded. It is just an execution issue to make sure that all of the parts and systems get out on the basis in which we've committed delivery.

With regard to SunPeak, as we said in the press release, it is contingent to our understanding on the investment tax credits being extended beyond the current period from '08 on, our understanding is that Washington is currently reviewing the extension of the tax credits. At a very minimum, they are going to extend them through '09 with a much longer period, maybe up to eight years beyond '09 later in the year. But, we feel pretty confident that this is going to be put in place. SunPeak is -- we've been told that SunPeak may well proceed even before the ITC is put in place and in which case, we will embark on an expansion of our production capacity. The current plans for capacity in the fab right now are to bring on four receiver lines. That's really the choke point in our capacity expansion and I expect it will have three of the lines up here in Albuquerque and one in China at our facility in Langfang. So, again, the visibility on calendar year '08, largely all of the business requirements are in place. We just need to execute to volumes. So, don't feel like if those lines come up that there is a tremendous level of risk around that number. On the '09 number again, that's a little far out but we expect calendar Q4 of '08 to be at a run rate of about $112 million. I think it's about 50/50 PV and fiber optics and that would trend to a 450, 475 kind of '09 number. I would price the SunPeak contract, if all things fall together the way we anticipate, the pricing will be somewhere between $3 and $4 a watt installed [AC] would be a reasonable expectation for pricing.

And Reuben, if I can just drill down a little bit more.

Sure.

In terms of your comfort level for the SunPeak contract that you are in right now, can you give us a visibility as to are they the milestones? In other words, do you believe they are funded, is the site selected, and then the final couple of points that would allow them to proceed even if the renewable energy credits didn't go through, but they feel they may go through anyway? When do they get the permitization?

Sure. Applications were filed some time ago with the BLM, Bureau of Land Management, in Southeastern California near the Arizona border. There are actually two projects. One is 200 megawatts and that is based on about 2000 acres just above Route 10 in that part of California. There's another, I think, 5000 acre area for the 500 megawatts project and that's near the -- above the Salton Sea.

So, the land's been identified, it's going under lease, permits have been achieved, access with the utilities, we expect all of that to be kind of wrapped up this quarter. From a funding standpoint, these guys at SunPeak are probably the most experienced people we've seen in renewable energy. Their history is very impressive. They've built a wind farm asset, which was sold a little while ago for a substantial amount of money, so they're well capitalized, well funded from an equity standpoint. They have a portfolio bank that has had successful relationships with them in their previous endeavors and are stepping up to fund these projects. So, I would say when you look at where the rips are it's the timing on the IPC coming out of Washington. Our best intelligence is something is suppose to happen here in the near term and we expect that we'll start our capital expansion plan to meet the capacity requirements for this, which are substantially above where we are today. But, that capacity can be brought online, the majority of it in six months. So we can meet the schedule to start producing systems for these projects by calendar Q4.

Great. Thank you very much, and I'll go back into queue if I have a follow up. Thank you.

Yes.

Thank you. Our next question will come from John Harmon, Needham & Company.

Hi good morning.

Hey, John.

Just a couple of questions. One, I was wondering if you could quantify the margin improvements you expected to see from moving to your Beijing facility? And secondly, I was wondering on your cable TV side, if you actually did see the fourth quarter budgets slash you sometimes see and how big it was this year? And finally, with the Intel acquisition coming up and looking at your balance sheet, the capital expansion you just mentioned, and I was wondering how you are going to pay for all of this?

Sure. Let's see, what I'm showing is we originally budgeted I think 3% to 5% gross margin improvement per product that was transferred there. I think based on our first quarter production out of that facility, margin improvement has at least -- this is not the whole body of statistics here, but the margin improvements so far has been about 8% to 10%. So, it's coming in better and the reason it's coming in better because you can pretty much schedule what the cost differential is on labor. But, what we have found is that they have done a very effective job in sourcing raw materials, consumables within the Chinese market and that's added to increase profit per product. I think we are very proud of the job that the guys in Langfang have done. It's truly an achievement how fast they ramped up and what they are contributing.

With regard to your question about funding, I think that the capital requirements, and we have said on previous calls, John, that the PV business, in order to add 30 megawatts of production at a systems level that you need to spend $8 million or $9 million per 30 megawatts. I think what you are going to see probably is us increase at a minimum by 100 megawatts, maybe 150 megawatts. So, you are looking at any where from $25 million to $50 million capital expansion. We would expect that to be funded by an IPO for PV business. That point with those kinds of volumes, you're looking at revenues in '08, specifically '09 as these projects kick in that this becomes a self funding entity. So, it will become a separate standalone and self funding company, which we would obviously spin along to shareholders. So, Emcore shareholders will continue to own their pro rate share of the PV business.

And on the Intel telecom assets, we've got a lot of options to finance that in the form of -- well, we've been receiving a lot of term sheets sort of unsolicited over the last couple of weeks and we'll decide what's in the best interest of shareholders shortly.

Thanks, and just finally the budget slash you might have seen in the cable TV product.

Yes, as you know, on -- well, '07 was a record year for spending on cable TV. And discussions with our customers, customers, the cable TV and that shows '08 will increase in capital spending year-over-year because of all of the competitive dynamics that they are experiencing with the telecom players, Verizon and AT&T in their delivery of video. I think it's significant to note that at least one of the cable TV companies, Comcast, has been able to raise rates in a number of its areas based on these bundled services. So, they are seeing some success to the business model. The slash, in the December quarter above plan was probably along the lines of $1 million to $2 million in that range and that $2 million would be the high end of anything we have experienced in the past five years.

Okay, so this is what you've seen in prior years?

Well, yes, but it's the high end.

Okay. Thank you very much.

Thank you. Our next question will come from Jed Dorsheimer, Canaccord Adams.

Hi thanks, just a couple of here, Reuben. The first, just I want to better understand the equipment issue in this automated tape and reel product. Last quarter, you did $18 million on the solar side, and so obviously, you have the capacity, so the hold up in this equipment, is it because it was on the concentrating photovoltaic and you are shifting back and forth between satellite and CPV that they caused the push out?

Yes, that's it. I mean the shortfall was -- look, our guidance for the quarter was $49 million. Internally, I think we thought $50 million was the number we were going to do. And if you look at the numbers, we did $47 million and the shortfall was $3 million on CPV receivers. So, we were right there and sort of met what we thought were budget expectation. The piece of equipment which is an automated dye attach is really a -- it's a high volume piece of equipment. And I don't want to dig too far into those, but our vendor was about to deliver this piece in November. And we went over to inspect it. It didn't have some of the key operating specifications that we had outlined that it needed to have so they had to take it back and redo it. And that's really largely the issue, and then it only came in last month. So that's ramping up. I am sorry, what was the rest of the --?

So, I guess just on that point, did you ramp that? How much of the $3 million -- you received the full $3 million in March, does it trickle into June?

These guys are -- they have the regularly scheduled March delivery requirements, which are probably about the same number as -- actually, it may be a higher number than what was in the December quarter. So, they are going to, they are going to make up as much of that $3 million as they can this quarter. They also need -- there's not an insignificant amount of the receivers that have to be consumed internally for the system shipment that have to go out this quarter. So, they are busting their tail not only to meet internal requirements, the external supply issues, but to recapture what we were short in the last quarter. I wouldn't anticipate that the -- what we are going to recapture it all this quarter, and that's not in our numbers. So, we are going to recapture as much and that will be upside.

All right. And then just moving on to the solar. I'll start with the satellite. I think in past conference calls, you have alluded to some of the government contracts. We haven't seen those announcements. Can you maybe just provide a little bit of an update on where we stand with some of the satellite and government deliverables, and are there still three to five intact, when do we expect? Is that sort of things on hold, is it by mid year, is it near term, just a little bit better visibility?

Yes, sure. I think what we've been talking about is there are sort of five, what I'll call, major government contracts. One of which we know we've been awarded, but haven't finalized the terms. It's not subject to funding and that will move forward, but there are some specs we've got to meet before the contract gets signed. So, I'd expect that this quarter. On the other ones, when I think -- they are well known, they are GPS3, they're [king stat]. There are a couple of others. Those are continuing forward. It's a competitive environment and I think they -- the only reason they have been delayed is largely congressional funding, which they expect to address shortly. So, it's -- these are all kind of near term issues, so month to month.

All right. And then just lastly a couple of questions on the concentrating side, on the terrestrial side. The first one is there seems to be some stuff growing over in Europe. It seems to be held up a little bit with some uncertainties in Spain. Did we look at sort the next couple of year opportunities over in Europe for you guys and the discussions that you are having, should we look at Spain as sort of -- if we look at Spain, Germany, Greece and Italy, are you heavily weighted to one particular region or is it pretty much a 20%, 25% per region, and when do you expect some of the Spanish feed-in tariffs to be resolved?

Sure. Just on the last point, we had expected the Spanish feed-in tariffs to have been resolved in the December quarter. That was sort of the stated objective. I think that what the Spanish government deal is going, it is probably the right thing meaning -- I think there was some concern about some of the speculations that had crept into the market in terrestrial TV. You had guys in the agricultural business, farmers tearing into land developers, and I don't think that that was what they intended. So, I think they are waiting for some of the healing to come out of the market a little bit with regard to the cost of land and so much and so on.

We do know that the tariff is going to be reduced. Most people think it is going to be reduced from -- by 20%, which is still, it puts you in sort of the mid EUR0.30 a kilowatt hour. It is still a very robust feed-in tariff, but one of the issues is without knowing what the feed-in tariff is, the banks who do the projects' finance here and/or the equity guys don't know what their economic return is, and so until it's been crystallized, the market -- and the Spanish government talks about raising the market ceiling substantially for the number of megawatts that are allowed under this program. So, all of that's good. It is a timing issue, but there are a number of bags and there's been -- the successful first couple of years with regard to deployment. I think the banks were very happy with the returns they have gotten and there is a building level of liquidity from a project finance standpoint in Spain. Spain represents probably 30% of the total opportunity for us, that we are looking at currently.

And then last question since you brought it up on the call is, in terms of spinning off the terrestrial solar division, what type of -- can you give any color on what the margin structure would look like as a standalone company? Are we talking about sort of a 20% type of EBITDA number on that business with like 25% type of margins or do you think you can achieve higher than that?

Well, if you look back over the financial performance in '07 of the PV business, and Adam correct me if I am misstate this, but on what I'll call 20% gross margins, they were getting kind of 10% net. Is that about right?

Yes, that was -- '07 was a great year for them and they were profitable.

Yes. So, as you increase the revenue base, it clearly is a very cost affective model and there is a lot of operating leverage with regard to the staff. It doesn't require a lot of OpEx other than what we have been spending on the current generations to install the system. So, I don't -- I think that's going to be kind of a fixed number if you -- you are going to bump up SG&A. I think as we go forward, margin should be, I'll call them, mid 20s and I would expect that the net would be 10% or better based on their revenue numbers.

All right. And then just based on the $450 million to $475 million, should we look at that as a '09 number. Is basically half of that, so sort of visibility into $200 million to $250 million is sort of the right number that you would have to work off of that margin structure?

Yes, I think maybe PV would be slightly more than half, but that's okay.

All right, I will pass it on, thanks.

Thank you. Our next question will come from Michael Coady, B. Riley.

Thanks, good morning, Reuben. Looking at the fiscal '08 numbers and backlog, how much the backlog is from Green and Gold Energy?

$39 million, no these are a little bit higher than that. $39.9 million or maybe a little higher, okay.

Is that consistent with what it was previously?

Is it consistent with what we have previously? Yes, nothing changed.

Okay, great. And then looking at that and the differed revenue from the current quarter, is Green and Gold paying you upfront for the systems that you will be delivering to them?

Well, we don't deliver to Green Gold. Green Gold is, I will call, a design development and sort of supply chain organization. I don't mean that in anything but a positive way, but the receivers go to their manufacturing partners and ES Systems in Korea, I think that's right, and so the -- what they have done is they specified the ES Systems as their manufacturing CM. They consume and they pay us. So, it's not -- the credit aspects are not Green and Gold. These guys are the licensees and have developed pretty substantial backlog. I mean I have got to tell you, I mean we -- the screaming that occurred when we didn't ship in the December quarter with regard to the receiver is pretty substantial.

So, remember the prepayment from GGE and the product shipment for the remainder of orders from their sub licenses in Korean market, in Spanish market, and the Israeli markets and Australian markets.

And they had made a down payment we are yet to receive is 25% of the purchase order.

Okay, so the $3 million that's going to, I guess, clients of Green and Gold's?

Yes, licensee.

Okay. And the deferred revenue, that shows up on the balance sheet?

No. I mean the deferred revenue meaning if we had to reschedule shipments.

(inaudible) No, I mean the actual deferred, right. Okay, I see. And then, on the -- I guess somebody asked about the space, but I'm sure the backlog is down a little bit and the revenues were trending down. Were there any terrestrial revenues recognized in the quarter?

Yes, and we don't break that out, but the answer is yes.

Okay. All right, thanks. I'll jump off.

Thank you. Our next question will come from Ramesh Misra from Collin Stewart.

Hi, good morning guys.

Hi, Ramesh.

I have a number of questions. First was in terms of your current capacity, can you tell us where that is roughly at the cell level? And then in the near term, it sounds like the capacity expansion is mostly on the receiver side. Could you elaborate on it? Last quarter, you added about -- it sounds like almost 5 million over there. So, does that mean that on the receiver side, you are pretty much taken care of in the near term and what are your thoughts on CapEx in the next nine months?

I'll let Hong jump on this, but on previous calls, what we said is existing capacity today is about 150 megawatts at a cell level. On a system level, we were about 50. And then, the capacity that we talked about sort of based on again what happens from the regulatory and taxing perspective, that's 50 megawatts. And when you say expanding capacity at the system level, you are by definition expanding capacity at the cell and receiver level, but you wanted --?

Yes, when we talk about capacity, it's probably there are three things in there. One is the clean room fabrication capacity for the solar cells. That is at 150 megawatt level. In the past -- well then the second is the receiver packaging level and the third is system integration level. So what we came in short last quarter was the receiver packaging capacity. In the past, a lot of orders we booked including the first order from Green and Gold Energy at solar cell [bare chip] level and we have taken that strategy about six to nine months ago to really encourage customers to convert into the receiver package level.

So, we have one standard.

Right. So, we have one standard in this and we increase the value, we can provide to the customer and allow them to get into the market quicker so they don't have to mess around with the chips and establishing their internal packaging lines. Also we will be setting a higher barrier to our competition. So, it's the right strategy, but also then all the customers, they convert pretty much all the customers from the chip purchase up to receiver purchase. Then we have to deal with a number of (inaudible) factors who only designed a tool, wanted to build a capacity about a million receivers per month. That is a lot of capacity, and we wanted to make sure we do it right upfront from a front loading everything point of view. So that's why they got a little delay in the design and finalization of the automation process and then we received the equipment and then a little later.

So, we are right now as I said are building the capacity at the receiver level. We don't want to have that as a bottleneck. About .5 million to 1 million units per month translate into the power level is about 180 megawatts to 360 megawatts per year. So, that's going to be our capacity in six months. A lot of CapEx is related to the solar receiver side. The system level was that capacity is 50 megawatts and I think that number also we right now need to build the factory close to the factory of installation, so we can avoid or reduce the shipping cost. And in foreign countries also, there is another element in there, value added tax or import tax. So, we can eliminate that. So, at the system level, we are talking about building at capacities through several different sites. Did answer I answer your question, Ramesh?

Sir, looks like we lost him, give me just one second please. Ramesh, you're back in full talk. Did that answer your question?

Yes, can you hear me?

Yes, did you hear the answer?

Yes, I did. Apologies for that. Following up on that, in regards to the split between 500x concentration and 1000x, it sounds like your Gen 2 products are using 500x concentration.

That's right.

And in that regard, Ruben, you said Gen 2 is already hitting about $3 per watt in CapEx cost. Yet you said that the SunPeak project will be around $3 to $4, so help me understand over there and also couple that in with your efficiency improvement plans. I think right now you are in the very high 30s and I think you have talked getting -- breaching the 40% level fairly soon, so just fill into kind of a cost per watt number maybe if you can please?

Yes, I would like to just make sure we are not confusing the metrics here. The system performance level of $3 a watt was the target for Gen 2. You have other -- and that's to DC power to get that AC power, you got to add another, I'll call it, $1 a watt, so $4 a watt and still you are kind of where you are. That's why I say $3 to $4.

I see, but obviously that expertise or that portion would be coming from elsewhere?

Yes.

Okay. And then transition from 500x concentration to 1000x concentration, what's it -- are customers jumping over to the 1000x concentration or what's the adoption level over there?

Ramesh, the majority of the customers use currently 500x concentration then a number of customers are using the 1000x concentration. It's really a system trade off design issue. Using a 1000x concentration certainly you can use less receivers for the system integrators they are buying receiver from us. They can reduce the cost at this level, but they have to do a more robust design with thermal dissipation and pointing accuracy. So, the cost for thermal and mechanical design is going to be higher. So, you know, a generation three design is taking all of this into consideration. But right now, we have our position with the -- pretty much everybody in the industry. The CPVs can really do what they are doing. I think probably two thirds using a 500x and one third using a 1000x concentration. Gen 2s is 500x, Gen 3 could be 500x, it could be 1000x, we still need to do system level cost optimization.

Okay. And my final question is in regards to your fiber optics business, obviously there are very strong trends over there, up 15% quarter-over-quarter. Do you expect that to persist and can you itemize some of the reasons why that was up so strong?

I think it's really platform related, Ramesh. One of the products that we have had in production for a couple of years in shipping to other customers has been our optical backplanes for telecom applications. And so, I think the uptick in our business will continue to be optical backplanes, which is the 10 gig component and it's going into what I'll call relatively new platforms that customers on Cisco and so on. And it's -- they are highly reliable and been in the field for while. So, and it gives them the performance that they are looking for. So, whether it's the Cisco CRS-1 or it's a new platform, that is -- and in addition, LX4 revenues have been increasing as well, and we talked about market share gain on the call. But, right now, the big runner is -- from a revenue standpoint is the 10 gig backplane application.

Okay. In the other four arenas, is the pricing holding up fairly steadily?

Yes. On pricing, we haven't seen much in the way of erosion. No, it's okay. The same as last quarters but that's where we are today.

Okay guys. I will jump off and come back if I have a follow up, thanks.

Thank you. Our next question will come from Sam Dubinsky, Oppenheimer.

Hi guys, couple of quick questions. Number one, how should we think about OpEx going forward for OpEx in fiscal year '08 when Intel starts kicking in? And as I believe, solar is ramping towards the end of the year. How should we think about OpEx then? And then heading into the next fiscal year, the December quarter should be a big quarter for solar. I know you are going to hopefully have the Company split up by then, but what do you think the OpEx run rates could be then? And then I have some follow-ups.

OpEx right now we are showing in this non-GAAP tables a significant improvement over the last quarter and we expect that trend to actually even pick up the in the next quarter. We are going to -- a lot of these non-recurring expenses that we talked about, and I talked about it on the call, are going to be gone or behind us right now. So, we see OpEx that we are still shooting for a $13 million, $14 million OpEx number excluding non-cash items.

That's with Intel contributing going forward?

That will have the Intel piece. I don't have all the pieces to that yet, and so -- we haven't closed that deal and so I want to be real careful on the kind of guidance I'm going to provide on that. So, I'm going to hold off on that, but we did this deal because we think it's going to advance us towards profitability a lot faster than we could do organically.

Yes. I wouldn't expect -- given the infrastructure at Emcore, I wouldn't expect a lot of sort of -- R&D being a separate issue, but I wouldn't expect much in SG&A. I think last quarter too I didn't -- some of the jump up in SG&A, a lot of it was legal related to contract work that we have since announced.

Okay, and how about starting fiscal year '09 and in terms of when that big solar ramp starts kicking in?

I mean, that's kind of far out there right now. I mean, we are definitely going to bring down OpEx as a percentage of revenue and we've done a good job taking it from 39% of revenue down to almost 34% in the quarter we just reported. So, if we continue it on that trend, it really gets the Company to a profitability level in less than we thought.

Okay. And then on the fiber optics side of the business, given some cautious commentary from one of your key customers, how confident do you feel about growth throughout the year? And I have a follow-up.

On the cable side, I have got to tell you we have what we call QBRs, which are quarterly business review with our cable TV OEMs, as well as obviously, we are well acquainted with the guys at the EMSL level. And I will tell you that they are all forecasting sort of sequential increase this year over the last. This current quarter is probably the slowest of the four, but they are still talking some pretty big numbers for the rest of the year. In my remarks, I talked about the '08 capital spending. Their view is it will be larger than '07. They continue to build out broadband capacity because of competitive dynamics with the phone companies. And new services, new markets are going into like commercial and we are not -- and whether it's Cisco or Motorola or any other key customers, Aurora -- they are all sort of forecasting comparable growth this year as flat.

What about on the Gen pack LX4 type modules on the enterprise side? Are you seeing -- what do you think about that. I know it's had a decent bounce recently, but just given some cautious commentary for next quarter, do you foresee a steady state run rate or can that business -- do you expect to grow at this point?

My visibility extends this quarter and sort of halfway into next, and what we would see is expanding revenues. Beyond kind of halfway through the June quarter, it's a little foggy because that's the extent of our sort of purchase commitment. Revenues will be up there. Beyond the June -- and I would sort of extend that to say through June that will be up. Beyond that I honestly don't have a visibility.

Okay. And then back to the financing for acquisitions, you alluded as you are looking at the term sheets availing a lot of options. Does that mean that you may have to issue some sort of debt and would you possibly liquidate some assets to pay for this deal or could you just give more details on that?

Yes. I would rather I get pinned down and we have got a number, sort of obvious alternatives. Look, having -- we got out as a converts for a couple of -- one is balance sheet issues, P&L profitability. All of that helps. There are some other strategic reasons to get out of the bonds and that really has to do with sort of setting up the balance sheet to split the two companies; split Emcore into two companies. It gives you the flexibility to do that, which is why we did it at the time. So, we are kind of setting the table for all of that to happen. Going back and doing a convert, the terms are -- I got to tell you that on some of the proposals, several of them are very attractive, but -- and on the other hand, the downside is I don't want convert holders at the table, if you will.

Okay. And then my last question regarding solar. I know the big, some big deals are based on tax credits. If these tax credits don't get renewed for whatever reason -- is your range of 200 to 700, does that mean you hit the low end of the range or does that mean that low end of the range gets lower?

Say that again.

If I know that big deal you announced just --

Yes.

Does that mean that if these tax credits go to -- does that mean you hit the low end of the range or does that mean that the low end of the range gets lower?

No, I think the sort of talking about the low end of the range.

Either way the low end of the range is that the tax credits get put off.

Yes, I guess nothing is certain particularly when you are dealing with Washington. But it does seem that based on the best intelligence we have that in the near term the credits will be extended through '09, which will certainly launch this project. Beyond that to hit the high end, you are going to have to have them extended beyond '09 clearly.

Okay, great. Thank you.

Thank you. Our next question will come from Dave Kang, Roth Capital.

Good morning, thank you. I guess I will just follow up on the comments about 200 megawatts. Well, something told me that they are looking at 500 megawatts for imperial and 200 megawatts for (inaudible). I am not quite clear if that tax credit situation doesn't change then we are looking at the low end. Does that mean that they are going to forego imperial and just go with (inaudible) or just more color on that comment please, Ruben.

Yes, can't give you -- you know what -- We've had conversations with them and they talked about proceeding with or without the --

That's right. That's the comment I got from the CEO over there.

No, no, I think that's fair. I think we wanted to be a little more cautious. And it is -- it's likely to be based on economics and so that sort of comes full circle as to what's the electrical generation from the system, what's the cost per watt. What -- all of that is going to be subject to some very sharp pencils on the project cost. But my feeling is that the economics here are certainly the ITC helps a lot. You get to the same place with a cost reduction per watt, right. So, that is -- I think that's what the thinking is. Again, I couldn't carry out -- my impression was that the 200 megawatts was going to come first, but again yes, if for some reason they get access permission quicker on one versus the other, that will have an impact too.

Sure. I guess one question about SunPeak is how are they capitalized? I know they are sold like a 1000 megawatt facility, windmill facility a few years ago. Is that going to be sufficient to capitalize this or fund this project?

Yes, from an equity standpoint, you got to remember that -- I don't know what the loan to value ratio is going to be, but it's in the 80% and 90% range.

Okay, all right. Just let me -- actually I think that you gave us a number about the receiver capacity that's going to be like a .5 million to 1 million units per month and you said you gave us a number into the megawatts, what is that number?

I think it is 180 to 360 megawatts, and the 180 will be referred to 500x concentration and the 360 megawatt will be 1000x concentration.

So, I guess on the capacity situation, the question is how quickly can you scale up? I guess with the lead time for certain capital equipment? I got to believe they must run several months. How quickly can you scale up? I guess there's another question not just on quantity but also the lengths of capacity scaling up.

The first set or two took longer than we expected. That is the reason of the delay. So, replicating the same, we worked out the same -- other design details and replicating the same tool sets, it takes about three to four months.

Okay. And just lastly on the guidance, couple of questions; first on your fiscal second quarter, $56 million to $57 million and as well as fiscal '08. How much of Intel has been factored into those guidances?

Yes, I think it's $4 million for the current quarter assuming we close this month -- this month, and it will be towards the end of this month. And for the fiscal year it's $30 million, $35 million range in fiscal '08. And in '09, I can't remember what have in '09, $80 million?

$75 million.

$75 million.

$75 million, okay. And then just wanted to clarify, I don't know whether you made comments on these, but the Canada and Korean contract, are they reflected in your fiscal '08 or $340 million. I guess that's calendar '08, how much of that numbers are baked into $340 million for calendar '08?

I would say the 5.3 megawatt purchase order.

5.7, it is --

5.7, I'm sorry in calendar year '08. I did give in a fiscal year '08 and 7 additional Korean contracts taken into consideration for calendar year '08. A Canadian contract was not factored in fiscal year.

Well, that's probably in the September quarter.

You say, so this 5.7 is all Korea and none of the Canadian countries are baked in at this point?

Well, I think that they have an obligation to do 20 megawatts in 36 months and I think that it runs September to September per year.

Okay. And just lastly on the fiber optics, with all this cautionary comments, you say something like 190 for calendar '08. Are you assuming all these are -- and I'm assuming they are kind of baking in all these cautionary spends and all that? Have you --

Yes, I think, Dave, the two other inputs, one is the broadband business last year grew 34%, 35% year-over-year. And we have given the market shares that we have in that business, we have a pretty good visibility on where the spending is going to be. So we are pretty -- we are as confident as we can be about guidance with that business. The digital side, the 10 gig tends to be a little bit more of turns kind of business, but I think in general we are -- we got visibility, and I'll call it through June. That only kind of leaves one quarter that we don't have visibility in the fiscal year. So, I think we feel -- and knowing what platforms are there. I think we feel reasonably good with -- on that piece. So, again things change but for the moment we feel pretty confident about our numbers though.

Okay. And lastly, I don't mean to get too greedy but I believe back in December you talked about two major contracts. One is 200 megawatts which you just announced and you also talked about 150 megawatts for Europe that goes to cover Italy and Greece. Whatever happened to that contract? I don't think we have seen it yet.

That's a portfolio of licenses. It covers Spain, Italy and Greece. And I think you'll see some flashing around that once the Spanish feed-in tariff is resolved. That could be -- that is a month-to-month thing.

Okay, got it. Thank you.

Thank you. Our next question will come from Lenny Bracken, Bracken Capital.

Hey guys, maybe I missed it, but did you comment on progress on the funding source of that Asian customer and the timing? I think it was the South Korean order?

Well, we got the purchase order which is fully licensed and in place on the 5.7. What is the follow on is the 14.3 megawatts and maybe I don't know --

Right. So, it is -- that you are in a process for evaluating several banks for project financing. They expect to finalize the 14.3 megawatts within three months or so.

Within three months of what? Okay, okay. With the -- I mean do you have any reconnaissance or research on how you are actually going to be funding that?

Through project financing.

Okay, thank you.

Thank you. Our next question will come from Russell Anmuth, Gotham Holdings.

Hey, Ruben. Hello?

Yes, Russell.

Hi guys. Earlier you said that SunPeak could go between $3 and $4 a watt. Assuming ITC gets done at some point this year, what do you think a ballpark deal is for a contribution from SunPeak in 2009 calendar?

Sure. I think -- SunPeak, if we could produce all of this in one year, they'd have it produced all of it in one year. I think that our view is that from a reasonability standpoint, this is a kind of three year project, maybe slipping into a fourth year. But kind of $3, it will take the low end at $3 a watt kind of number starting in '09, that's a 150 million to 200 million, if it gets fully deployed.

Okay, okay. Very impressive, thank you.

Thank you. Our next question will come from Tim Savageaux, Merriman.

Hi guys. The -- I guess the hour grows to an hour and a quarter, so I'll try to be brief. I do want to follow up on a couple of the fiber optic issues and clearly have some issues and clearly have some degree of cross-currents here with some pretty good numbers out a various of your competitors, JDS and (inaudible) and again some previously referenced cautionary comments out of Cisco. Are you seeing any change in the trends, are you in a position to talk about the your acquired asset and Intel which I gather is probably more telecom oriented versus what should be a -- looks like you have a mix in your current business of more carrier oriented stuff in the backplane and then the [Alexford] Transport? So, can you comment on any differential trends there? And while we are talking about splitting the businesses up, I mean the Cisco kind of rise to the 10% plus level for the entire Company in the quarter or were you to split fiber optics off separately either with or without Intel, I would gather. Cisco and Motorola would be 10% type customers. If you could give us some type of color for how that would look.

Sure. Well, that's about 18 questions, Tim. Just to start, I think they said on the Intel asset it is at least to our most recent understanding trending exactly in line maybe a little bit better particularly on consumable side of the business. I think they have what is a terrific product and so it's -- I think that part of the telecom spend appears to be robust, at least as far as we can see for the next couple of quarters. So, we feel pretty optimistic about how that business is trending and we think the Intel guys are terrific. So, it adds a lot of depth and breath to those given product portfolio. Whereas the second part is from the telecom spend standpoint, part of this is going to be a -- you're now with (inaudible), you got the 310 pin part, you get XFP and it's a much broader portfolio as Intel goes for a pick and expands their capacity and in the formation of what the industry calls the Agile-Network. So from a telecom side, spending -- we are a new player relatively and -- but what we are seeing is particularly on the optical backplane that they would be more widely deployed. We're in new platforms. So you are coupling a bunch of products that happen to be emerging so-called hot space from a growth standpoint. So, we're -- and I think we are pretty confident about the business outlook for fiber.

I am sorry, but two relative sides, the Cisco and Motorola, either relative to fiber as a standalone or the company entirely?

Well, if you include Scientific-Atlanta and Cisco, my guess is yes, they were certainly a 10% customer. Motorola will certainly be a 10% customer.

And Tim, another thing is the cautionary comments from Cisco, but our product in business the exposure to Cisco is really not that big; even adding the cable TV size, they are at a 10%. The product we supply to that customer mostly on -- for the new platforms.

And is that of the fiber optics business or the whole company you are talking about?

The fiber optics business.

Yes, I think if you add in the SFA business, we are probably there at 50, you are talking about digital.

Okay, great. So, I can just follow up with what question is 19 and 20 real quick, and then I will be done, I swear. Assuming that the Intel business coming in given the comments about attrition previously is a higher gross margin and the 23% you put up for the fiber optics unit; that's one question. And then the other, if you look on the cable side, I hear about your of visibility given your market share. Time Warner yesterday talked about kind of a flattish capital spending profile in '08 from '07 level that was up dramatically over 20%. Are we seeing in there a mix of maybe higher network oriented spending and lower CTE oriented spending? Will that explain the increases you are seeing sort of industry-wide in what might be slowing or flattening kind of overall high level CapEx number?

Yes, I mean I think that sort of addresses it. You got to remember there are some emerging market opportunities that these guys are developing. What I mean by that is they are targeting more segments of the telco customer base. In order to do that, they've got to add -- this isn't a live work, but dedicated capacity meaning the tolerance for a business customer for sort of business interruption is not the same as a residential one. So it has to be, that have to articulate that this is the equivalent of a telco network in performance better in speed and lower in cost, so reliability too. So, that's going on, and I think they have had some initial success last year. As you pointed out, CapEx spending was up 20% last year and it's not just the Time Warners, you have got all the other players too. Time Warner, Comcast obviously, Bell whethers but it's -- I'm reasonably sure that Comcast's spending in this area is going to be up as well. So -- and that's what we are being indicated from both our OEM customer as well as the end customer.

A big part of the business you wouldn't see from the Time Warner Cables' CapEx forecast is overseas market; customers were saying about 40% of their shipment going into the overseas market.

Yes, that's right, Hong raises a good point. It is particularly Russia and Eastern Europe where there is a what I'll call a greenfield build-out on cable TV; that was not insignificant to our revenue numbers last year. So that plays more where the only OEMs are going; that customer base like Deutsche Telecom and -- excuse me -- Deutsche Post or other cable operators.

Okay, thanks.

Thank you. Gentlemen, at this time we have no further questions in the queue. So, I would now like to turn the conference back over to Mr. Richards for any closing comments you may have for our group today.

Just in closing, I want to point out we feel very strongly about the financial performance of the Company. We have maintained our targets. We have been highly disciplined in the acquisition of the Intel telecom unit to make sure that it accelerates our profitability. And as you bring on the revenues particularly from the PV side and you get revenue ramp, then obviously you cover more of the fixed costs and improve profitability across the Company. And we're optimistic that our business will remain robust through the end of this fiscal year. We don't see a lot of upheavals in the end market. I know the economy may be drifting in its own way for a period of time, but in the market segments in which we compete, some of which are consumer driven. I would say we continue to see robust growth. And as a result you are going to see 60% year-over-year revenue growth based on through the investments we made in new products, and significant growth beyond that. And we expect both these divisional units reporting segments to be substantial in their own rights both within Emcore and subsequently as separate companies. Anyway, thank you very much for your attention today and we look forward to the next call.

Ladies and gentlemen, thank you very much. This call has now concluded. You may now disconnect at this time. Thank you and have a wonderful day.