台灣國際航電 (GRMN) 2004 Q3 法說會逐字稿

Good morning, my name is Christy, and I'll be your conference facilitator today.

At this time, I would like to welcome everyone to the Garmin third quarter earnings release conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks there will be a question-and-answer period.

If you would like to ask a question during this time, simply press star, then the number 1, on your telephone keypad.

If you would like to withdraw your question, press star, then the number 2, on your telephone keypad.

Thank you.

Ms. Schwerdt, you may begin your conference.

Good morning.

We would like to welcome you to Garmin Limited's 2004 third quarter earnings call.

Please note that a copy of the press release concerning this earnings call is available at Garmin's investor relations site on the Internet at www.garmin.com/stock.

Additionally, this call is being broadcast live on the Internet and a replay of the webcast will be available until November 26th, 2004.

A telephone recording will be available for 24 hours after this call, and a transcript of the call will be available on the website within 48 hours at garmin.com/stock, under the events calendar tab.

This earnings call includes projections and other forward-looking statements regarding Garmin Ltd. and its business.

Any statements regarding our future financial position, revenues, earnings, market shares, product introductions, future demand for our products, and our plans and objectives are forward-looking statements.

The forward-looking events and circumstances discussed in this earnings call may not occur.

And actual results could differ materially as a result of risk factors affecting Garmin.

Information concerning these risk factors is contained in our Form 10-K for the fiscal year ended December 27th, 2003, filed with the Securities and Exchange Commission.

Attending on the behalf of Garmin Ltd. this morning are Dr. Min Kao, Co-Chairman and CEO, Kevin Rauckman, Chief Financial Officer, and Andrew Etkind, General Counsel.

The presenters for this morning's call are Dr. Min Kao and Kevin Rauckman.

At this time, I would like to turn the call over to Dr. Kao.

Good morning.

From the press release this morning, you can see that in the third quarter of 2004 we, again, experienced record revenue and earnings.

Total revenue for the quarter increased 43 percent.

And excluding the effect of foreign currency, earnings per share exceeded the high end of our guidance at 58 cents per share, including the effect of foreign currency, diluted EPS was 62 cents.

We continue to benefit from the major research and development investments that we have made in the past couple of years.

In addition to the record revenue and net income, we were able to achieve many significant milestones since our last earnings report.

We recorded 37 percent growth in our customer business. 53 percent growth in our aviation business.

And solid growth in all 3 geographical regions.

We shipped our 10 millionth unit during the quarter, an exciting benchmark of our success and the strength of the common brand.

We delivered 8 additional products in the third quarter, bringing us to a total of 44 new products introduced year-to-date.

The products we introduced in the third quarter include 2 new counter handheld products, the Legend C and (indiscernible) C, that provide a beautiful yet very efficient, PFP display for outdoor recreational users.

This exciting new product brings color to our popular eTrex product group and also delivers street and aviation functionality at a very affordable cost.

The Quest is a pocket sized product loaded with many of the high-end navigation features of our StreetPilot line at a sub $600 price tag.

The GPSMAP 96 and 96C, portable aviation product bring full feature, yet affordable portable navigation to the cockpit.

This product integrates GPS navigation with a Jefferson database and comprehensive power and optical database.

They also accept data from a number of Garmin's (indiscernible) CDs which provides the pilot with (indiscernible) navigation on land, and marine (indiscernible) chart for navigation on water.

We continue to expand our patent portfolio with 168 US patents granted to date and 169 applications still pending.

Our Oregon facility expansion nears completion and occupation of the new space continues.

While we are pleased with our third quarter results we continue to have some challenges as we head into the final months of 2004.

Due to the high demand for (indiscernible) LCD crystal and on-air components by the electronic's industry, we continue to experience a critical component of their availability constraints.

In addition, our Taiwan facility is still working through some capacity challenges arising from the record number of products that were introduced this year.

As a result, even though we were able to achieve a 43 percent increase in revenue in the quarter, we were still unable to meet the customer demand of many of our products and significant backlog demand.

As we look forward to the remainder of 2004, we're experiencing continued momentum in both aviation and consumer businesses.

Consumer awareness and interest in GPS technology continues to grow, and we (indiscernible) with a many new products that were introduced and well received year-to-date.

Our opportunities to serve customers remain strong through the end of 2004 and into 2005.

Now that this year's major product introduction phase is behind us, we are working hard to improve the component availability and expand all sector recapacity.

As portable automotive represents, what other (indiscernible.) We are seeing many new entries into the market.

While we increase our automotive products continue to show strong growth in revenue, we do not want to underestimate our competition.

We continue to work hard to develop new and innovative products for this market, which we feel is still very underpenetrated, so opportunities in this area remain strong.

On the aviation side, both of our (indiscernible) and aviation teams continue the ongoing certification process of the GPS of the G1000 integrated for additional aircraft models.

In addition to the Cessna, Simon, Mooney, and (indiscernible) programs, that have been announced, we are in ongoing discussions with other aviation OEMs, and hope to have more announcements in the future.

In summary, we are pleased with the strength of our business as exhibited by the 34 percent revenue growth in the first 9 months of the year, and look forward to the 2004 holiday season.

The demand for our products remains strong.

And our new product development pipeline remains robust.

So we believe that Garmin is well positioned to take advantage of the opportunities the future offers.

We will continue to maintain our focus on growing our business through continued product innovation and promotion of the Garmin brand.

With that, I would like to turn the over to Kevin to discuss our financial results in Q4 and 2004 full year guidance.

Thanks, Min.

Good morning, everyone.

As has become customary, I would like to begin with the review of the third quarter.

I would like to break down each of the business segments that we report for the third quarter.

Look next at the full year numbers on a year-to-date basis.

And then finally, give the updated fourth quarter and 2004 guidance that was in the press release this morning.

So, to start with the third quarter overview, again, our revenue came in at 193.6 million, which was above the range of our earlier guidance of 167 to $174 million.

That's a 43 percent increase from the year ago quarter.

As you saw in the press release, our U.S. revenue was up 36 percent, to 134.4 million, from 99 million a year ago.

Europe, significant increase, up 71 percent, to 49 million, from 28.7 million a year ago.

And our Asian revenue increased 29 percent to 10.2 million, up from 7.9 million a year ago.

Gross margin, increased 590 basis-points to 57.7 percent, from 51.8 percent in the second quarter of this year.

And the gross margin also was up 110 basis-points over the third quarter of 2003.

Our operating income was 39.8 percent, which compared favorably to 38.3 percent in the third quarter of '03, and net income results were 67.1 million.

As Min mentioned, our earnings per share results were 62 cents per share and excluding the effects of foreign currency, were 58 cents per share which is a 49 percent increase from the year ago quarter.

And also above our earlier guidance of 42 to 45 cents per share.

Total units sold during the quarter increased 4 percent, to 540,000 units compared to 517,000 units in the third quarter of '03.

Looking next at the third quarter gross margin, as I said, we reported margin of 57.7 percent, which is a sequential increase, around 51.8 percent in the second quarter of this year.

The principal causes of the sequential gross margin increase were related to improved product mix within both the aviation and the consumer segment, reduced product transition costs that we experienced during the first half of this year, we also experienced a slight improvement in raw material costs during the quarter, and finally, we received during the third quarter, a 1.8 million payment for completion of a government contract supplied by Garmin AT in Salem, Oregon.

Our average selling price increased to $356 per unit during the quarter, that excludes the 1.8 million government contract, from $333 per unit during the second quarter, and significantly higher than the $262 ASP during the third quarter of '03.

As we experienced in the second, approximately 45 percent of our third quarter sales were generated from products introduced within the last 12 months.

This is the second consecutive quarter where new product sales accounted for 45 percent of the quarter, and it continues to speak to the success of our sizable R&D investment over the last couple of years.

Looking at the operating income for the third quarter, Garmin achieved operating income of 77.1 million, as I said, a margin of 39.8 percent.

And during the third quarter, our SG&A as a percentage of sales, increased 70 basis-points to 10.3 percent of sales.

SG&A increased 53 percent over third quarter of '03.

And during the same period, our revenues were at 43 percent.

And the increase in SG&A investment was driven primarily by increased advertising costs, increased marketing and operating costs, (indiscernible) consulting fees, and Garmin AT SG&A costs.

Our R&D was down 110 basis points to 7.6 percent of sales from 8.7 percent of sales during the third quarter of 2003.

However, our R&D dollar investment did increase 26 percent over the prior period.

The increase is due to the continued hiring of new engineering staff and other engineering program costs.

We hired 10 new engineers during the third quarter, and the engineering associates in total, now equal 563 engineering associates around the world.

Overall, our total operating expenses as a percentage of sales decreased 50 basis points to 17.8 percent, from 18.3 percent in the prior year period.

We continue to experience some volatility on the foreign currency and we experienced a $4.4 million foreign currency gain during the third quarter, as the dollar strengthened compared to the Taiwan dollar, from 33.68 at the end of June, to 33.99 at the end of September, roughly, a .9 percent change.

Garmin management believes that our earnings per share before the impact of foreign currency translation gain or loss is an important measure.

The majority of our Company's consolidated foreign currency translation gain or loss results from the translation in new Taiwan dollars at the end of a reporting period, of the significant cash held in U.S. dollars by the Company's Taiwan subsidiary.

This translation is required under GAAP, because the functional currency of the subsidiary is in new Taiwan dollars.

However, there is minimal cash impact from the foreign currency translation, and we expect that the Taiwan subsidiary will continue to hold the majority of its cash in U.S. dollars.

Accordingly, earnings per share before the impact of foreign currency translation gain or loss allows an assessment of the Company's operating performance, before the largely non-cash impact of the position of the U.S. dollar versus the new Taiwan dollar, and this permits a consistent comparison of the results between periods.

Interest income for the third quarter came in at $2.4 million.

We're currently earning approximately 2.1 percent pretax return on our marketable securities and approximately 1.6 percent on our total cash balances on a consolidated basis.

I'll talk a little bit about taxes.

The effective tax rate of 20.0 percent was in line with our earlier guidance of 20 percent and 100 basis points lower than the third quarter of '03 rate of 21 percent.

The year-over-year improvement was caused by incremental tax holidays applied for in Taiwan during 2004.

We do expect that our effective tax rate for 2004, and going forward, will be approximately 20 percent.

There's been some news recently about some of the tax law changes, and one in particular, that we've heard questions on is the repatriation tax benefit that is now available to U.S. parent companies.

This particular benefit will not impact our overall tax rate since our U.S. entity does not have a foreign subsidiary.

Therefore, we do not intend to move foreign earnings back to the U.S.

Let's move next to the segment analysis.

Looking first at the third quarter consumer segment.

Our consumer revenue was 145.5 million during the quarter, a 37 percent increase over the third quarter of '03.

And the consumer revenue during the quarter equaled 75 percent of our total revenues, and we also had the twelfth consecutive quarter of year-over-year revenue growth in excess of 20 percent within the consumer segment.

Within the segment, we saw growth across all product lines and again, a demonstration of our continued demand for consumer GPS products.

The consumer gross margin increased 90 basis points to 55.9 percent in the quarter, from 55.0 percent in the third quarter of '03.

Primary reason for the gross margin increase is due to our improved product mix during the quarter.

Consumer operating income came in the same as a year ago at 40.1 percent of sales, driven by improved gross margins, offset by higher SG&A, and lower R&D expenses as a percentage of sales.

Our aviation revenue during the quarter increased 63 percent, to 48.1 million, compared to 29.6 million in the third quarter of '03, and this is represents 25 percent of Garmin's total revenues.

Our revenue increase on the aviation segment is due to sales from both panel mount and portable products, in addition to sales from our Garmin AT products during the quarter.

Aviation gross margins increased 100 basis points to 63.1 percent in the third quarter, from 62.1 in the year ago quarter, primarily due to the receipt of our 1.8 million payment that I spoke about earlier, for completion of the government contract supplied by Garmin AT.

Our aviation operating income improved 700 basis points to 39.1 percent, from 32.1 percent a year ago, driven by improved gross margins, lower SG&A and R&D expenses as a percentage of sales.

Moving next to our cash flow during the period.

Our cash flow from operations was 79.0 million during the quarter.

Free cash flow was generated with 62.9 from the third quarter, and we define free cash flow as operating cash less capital expenditures.

Garmin management believes that free cash flow is a useful measure of performance as it shows our Company's ability to generate cash after the payment of CapEx.

Free cash flow does not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies.

Our cash flow from investing during the period was $24 million use of cash.

Cash flow from financing .3 million use of cash, and our capital expenditures during the third quarter were 16.1 million, made up primarily of our U.S. facility expansion of $12.3 million.

We didn't buy back any shares during the quarter under our outstanding share repurchase plan.

However, Garmin Ltd. as previously announced, will pay a 50 cent per share dividend for all shareholders of record as of December 1st, 2004, and the payment of the dividend will be made on December 15th of this year.

Moving next to the balance sheet.

Our cash and investments at the end of the quarter amounted to 600.7 million.

Our marketable securities makes up roughly 50 percent of this balance at $301.7 million.

The accounts receivable balance was 85.9 at the end of the period, and this represents an increase of 3.9 million from 82.7 at the end of '03, due to more linear shipments during the quarter and also, strong cash collections.

Our days sale outstanding at the end of the third period was 44 days.

This is in line with our DSO at the end of the third quarter, also 44 days last year.

Inventory increased to 119.8 million from 96.8 million at the end of 2003 as expected.

The inventory balances at the end of the third quarter is made up of raw materials which was 52.8 million, our whip and assemblies of 26.5 million, finished goods inventory 52.1 million, offset by our inventory reserves of $11.6 million.

Looking at the increase from December of 2003, our raw materials have now increased during the year 7.4 million, whip and assembles up 13.9 million, finished goods increased 1.7 million, and reserves were roughly flat, just up .1 million.

We also granted 689,000 stock options during the quarter, at an exercise price of $39.87.

Overall, we continue to say our balance sheet remains strong, positions us well for the future growth that we expect in the business.

Moving next to our year-to-date overview.

Our year-to-date revenue for the year at 541.6 million, revenue growth is now 34 percent over -- on a year-to-date basis over '03.

The gross margin has decreased to 53.6 percent from last year.

Operating income of 190.9 million and net income of 158.1 million.

Our GAAP diluted EPS on a year-to-date basis was $1.45, which compares to $1.14.

This 27 percent increase in earnings per share was partially caused by $.5 million of FX gain in '04, compared to 11.1 million FX loss during '03.

Earnings per share results, excluding the effect of foreign currency were $1.45, which represents a 19 percent increase compared to the year ago.

Flee cash flow year-to-date, was 121.6 million, CapEx was 57.8 million.

Revenue breakdown by the geographic region on a year-to-date basis, our U.S. revenue is now has increased 29 percent, up to 367.5 million, our European revenue is up 50 percent over '03, at 149.1 million, Asian revenue of $25 million, which is a 32 percent increase from a year ago.

Looking next at our segments on a year-to-date basis, consumer revenue come in at 417.3 million, which is a 32 percent increase over a year ago.

And accounts were at 77 percent of our total revenue.

Aviation revenue of 124.3, an increase of 42 percent compared to '03 and 23 percent of our total revenues.

Total consumer and aviation units have increased to 1,587,000 units from 1,476,000 units, an increase of 8 percent.

Our year-to-date operating income as I said, was 109 -- 190.9 million or 35.3 percent of sales.

On a year-to-date basis, SG&A as a percentage of sales is increased to 20 basis points to 10.3 percent, from 10.1 percent.

SG&A dollars increased 38 percent compared to a year ago, year-to-date, 2003.

R&D as a percentage of sales increased 60 basis-points to 8.1 percent from 7.5 percent a year ago.

And the R&D investment on a dollar basis increased 45 percent, compared to a year ago of 2003.

As we've communicated in the past, we intend to grow our operating expenses at roughly the same rate as our revenue.

Finally, I'd like to end on the Q4 and full year guidance.

As you saw from the press release this morning, we expect our revenue revenue from the fourth quarter to be 200 to $204 million, an 18 to 20 percent growth in the quarter.

Our gross margins to come in at 53 to 54 percent.

Going forward, our product mix will continue to be the most significant variable in our gross margins, and we expect the margins in the fourth quarter to be down sequentially due to forecasted product mix, also, increased promotions and discounts we typically pay during the holiday season.

We expect our operating income to come in at 33 to 34 percent of sales in the fourth quarter.

Our effective tax rate to stay at 20 percent.

Net income will be between the range of 55 to 59 million, excluding any foreign currency impacts.

And our EPS to be between 50 and 54 cents per share, excluding FX.

This represents a 7 to 15 percent EPS growth rate in the fourth quarter.

And we're assuming outstanding diluted shares at 109 million shares.

We also expect our capital expenditures to come in at $12 million.

And then moving to the full year guidance, rolling through our fourth quarter and the actual results of the first 3 quarters, this will generate a revenue range of 742 to $746 million, a 29 to 30 percent growth rate for the year.

Gross margins to be 53 to 54, operating income 34 to 35 percent of sales, and overall tax rate for the year at 20 percent.

Our net income range to come in at 212 to 216 million, excluding foreign currency effects and earnings per share range for the full year at $1.95 to $1.98, excluding foreign currency, and this represents a 15 to 18 percent growth for the year.

Again, assuming outstanding diluted shares on a year-to-date basis of 109 million shares, and we expect our CapEx for the full year now to be $70 million.

That concludes my presentation on the financials, and we'd now like to open the conference call up to any questions you may have.

(OPERATOR INSTRUCTIONS) John Bucher, Harris Nesbitt.

Question for you on your outlook, Kevin.

The range of 200 to 204, given the fact that you indicated you have a significant backlogs and weren't able to meet all demand for the third quarter, should we assume that is approximately your current total production capacity?

I think the reason we came in at 200 to 204 was because of some of the limitations on our production capacity.

I'm not saying that's the total capacity, but we are somewhat constrained between that and as Min said, some of the component availability.

So, we're trying to take a prudent approach for the fourth quarter.

Can you say what approximate percentage of the third quarter revenues were held back, if you will, because of some of the constraints that you highlighted?

Well, I'll say that, quite a bit.

As I indicated in my opening statement, at the end of the third quarter, and also at this point in time, we still have significant debt loss and the market demand for our product appears to be very strong.

Okay.

And then, just a quick question on the increase in gross margins.

They actually rose back to the average level that they were at for all of 2003.

Of the factors that you listed your release, are they listed in rank order, in terms of impact on gross margin?

Well, over what I talked about, yeah, I think mix continues to be the number one factor.

Not only in third quarter, but going forward.

I think generally speaking, yeah, they're probably in rank order.

We had raw material cost improvements and also, the $1.8 million contract.

So, those would rank order, be pretty close.

I'm guessing that since you've got tight supply, I think, Min said in both some of the RF related components and the LCD components, that some of the commodity passive components that that market, apparently you're seeing some very favorable trends pricing-wise there.

Yes.

The price has been stable since the middle of the year.

In fact, as you all know, we have seen sizable price reduction in the fresh memory chips that have partially helped our margin.

Mike Whitfield, Wachovia Securities.

I want a clarification on the capacity or the production issues in Taiwan.

Is that capacity constraint or is there -- is it just simply the number of products and the number of switchovers that have to be done to meet their individual demands?

Mike, you're right in both cases.

There are several factors.

First, we introduced 36 new products in the first half of the year, which means almost one and a half new products a week.

So, we have done so well in the recent years we have, obviously, underestimated the learning curve it takes to bring the products into the market.

There's a new product that we'll introduce this year, that are more compact than the older products, that generally provide minimal features and capabilities.

So, they take more machine and labor hours to produce.

And again here, we don't know is that we didn't have the equipment and production workers.

Finally, the component shortage problems which seems to change can kind of, you know, from the beginning -- throughout the year, has further complicated our production timing and consequently compromised our production efficiency.

So, with all of these factors combined, we just realize that we didn't have enough production capacities.

As a matter of fact, we recognize this problem, we added 2 new SMT lines, the (indiscernible) lines, and at the end of the second quarter and are planning to add four more lines in early next year.

And we also added a couple hundred of production workers later.

And at this time, we're working hard to stock up our factory in order to get caught up and also, prepare for the next year.

Okay.

Great, thank you.

Kevin, I have a clarification, if you will, about the inventory rise.

You gave a comparison versus the 4Q, '03.

What's really the primary -- sequential driver in the inventory increase?

Sequentially, it's similar.

We see similar trends, both raw material is up, as is finished goods, and there are two factors.

Raw materials is some of the issues with that Min mentioned in terms of component availability and some shortages, trying to buy what we need when we can.

Secondly, finished goods, trying to ramp up that in anticipation of the holiday season.

And then final question here is, when we look at the new products that really shipped in the second quarter, can you comment on the reorder rate of those new products?

At what price -- is there particular price points that are seeing better reorder rates than others?

Well, the truth, we feel that the older has been pretty strong across all product lines, except the marine products, because as you know, the (indiscernible) product.

So, the order rates we're seeing is kind of beyond filling the channel, but these are actually true reorders?

I believe so.

Peter Friedland, Fulcrum.

Couple of questions.

First on Q3.

Were any of your sales pulled in, sales to fill retail channels for Q4, was any of that pulled into Q3?

And, as far as your Q4, outlook, if it weren't for the capacity constraints, can you give some kind of order of magnitude for what your top line guidance would have looked like?

And then, just lastly, you mentioned there's a pretty large sequential increase in finished goods and inventory.

And you mentioned you're preparing for the holiday season, but, in at least in terms of your revenue guidance, it looks like it's pretty modest in some of the sequential growth.

Just trying to get color there.

Peter, I guess some of the retailers, nowadays, they do, indeed, start to order products in the second half of September.

So, you're correct.

Some of the shipment we've had in the third quarter, are to fulfill the holiday season.

Your second question, about the inventory, you probably noticed that we have as much as over $20 million of work in process in assembly.

Which is, you know, abnormally high.

The main reason is because of -- because of the shortage of some critical components, has resulted in manufacturing delays.

So, therefore we could not quite complete the assembly of those products.

With regard to your question about, you know, we have have not had capacity limitation, what would be our guidance.

I think the truth is that we don't know.

That you just look at our backlogs, and also, the market demand for our product.

We suggest that we could provide a higher guidance.

And any time, you know, with a product shortage situation, you can see the demand and product request from all dealers and distributors.

You know, it is difficult to discern how much -- not how much, how those orders are redundant order, but all we know are the items that the shippers are trade in full additional products.

But it's kind of hard as you can see, that there is the demand there, but we don't know how much of the demand are redundant.

Okay.

Actually, I'm not sure I understand the response to some of the finished goods that's up pretty substantially in September, yet, you're expecting only modest growth in December.

I'm just not sure I follow you there.

I see that you are looking at the finished goods of last year.

About $50 million.

And right now, it is -- is it 50?

Right now it's 52, so definitely we have some increase in our finished goods.

The power of that is, first of all, our product, the new products, have (indiscernible) at higher dollar amount, higher ASP.

The second thing is that we do have this year, we have these 44 new products, but in the meanwhile, we have about 10 to 15 products.

So, in a way, we have a net addition of 25 probably, even 30 new SKUs.

So, in a way that, you know, it's just our ability to make it (indiscernible).

Adam Wright, Kynikos Associates.

Quick question here on the third quarter.

You mentioned that consumer mix improved.

I don't know if you touched on this.

I don't think you all have.

How did it improve in the third quarter.

What did you all sell more of and less of in terms of what was higher margin during the quarter?

Well I think what we stated was, all product lines improved, which is good news because that generally has helped our margins in the past.

So, primarily, it continued to be the recreational products.

We talked about some of the eTrex color and those types of products and also, the automotive.

Those are the two primary -- two primary drivers of mix increases during the quarter.

But, in the past, auto was kind of blamed for reducing margins because it was increasing as part of the mix.

That's what I was a little confused about.

I think even -- even within a product line, and we obviously we don't give details.

We have various margins that lower gross margin and higher gross margin.

I think during the quarter we experienced the benefit from that, from selling some of the newer products at better margins.

For the question I want to add is that until we recently, we do have two product lines for automotive.

One is GPS III with our old product line, and new product is 2620.

And, certainly, the first half of the year, we'll have the reduce the price of the GPS III to traditional (indiscernible) So as such, the combined margin for the for the automotive product in the first half of the year was lower than what you have today.

Jon Braatz, Kansas City Capital.

Couple of questions, going back to Taiwan.

Is there any need for additional physical space in Taiwan?

And if not, when would you imagine that you would actually have to expand the facility or build a new facility and so on?

Actually, we just have realized the limitation.

We recently kind of initiated the effort to look for additional space.

So we anticipate we're going to have -- it could be three years (indiscernible) that might incur about 40 to 50 million of capital expenditures if we elected to construct a additional facility.

To answer your question, John, we're not constrained at this point.

I mean Min even mentioned that we're going -- we've add 2 lines there , we're going to be adding 4 more in the early '05 time frame.

We have enough physical space to support that.

But we realize, much like we did here in Kansas City, that we need to look at future expansion to support, you know, on going production capacity there.

Would the capacity restraints as you look at them right now, would that influence at all, the rollout of new products for next year?

And then, secondly, at this point, what kind of responses are you getting from your customers about, let's say, the backlog.

And do you get a sense that they're irritated that they're not getting the product and that you may, in fact, lose some sales as they drift to let's say, competitive products?

For your first question, with regard to the facility in Taiwan, we feel that we are good for at least another year.

Beyond that, it's a matter of function of growth, we have for the next 2 or 3 years.

As far as the missed sales, the truth is we did miss some of the sales during this year's marine season.

And unfortunately, we may also missed some sales of our new creation in the automotive products for the holiday season.

We know that our customers haven't been happy for the shortage, but we're working hard trying to deliver as many products as we can.

Min, will there be any impact on your new product rollouts for next year?

In what aspect?

Well, if you're capacity constrained, may you delay some products introductions or delay them for 3 or 4 months or something like that?

I think the truth is that I think this quarter, the first quarter, we actually had already delayed a 2 or 3 products until first quarter.

Our hope is that we'll be able to work through all the component shortage problem by the end of the year.

And beyond that point, as far as the production composite is concerned, I feel we'll be tight through the first half of the next year.

But we hope, you know, we do better.

One final question.

I think early on this year, you might have indicated that you thought the G1000 might contribute, I don't know, 12 or $13 million in revenue for the year.

I'm not sure exactly what you may have said, but it seemed to be in that range.

Are you, in fact, doing better then that?

I think, you know, year-to-date, we're on track.

I think we've seen probably close to $10 million worth of sales on the G1000, and we've really only been shipping it for about 3 or 4 months now.

So, I think we're right on track and, are we doing better then that?

Remains to be seen, as we continue to ship the G1000 into the fourth quarter.

Bill Benton, William Blair.

A couple of questions.

I had recalled before that maybe you guys had talked about capacity, and this is the broader question.

Maybe it's the physical limitation, it being kind of 2 times current unit level.

Is that about right in terms of maybe physical capacity?

Well, I think that the physical capacity, I think that we should be able to at least, kind of loss one more year.

What we had experienced this year is that the equipment and also, production workers communications.

Okay.

It's obviously other issues.

Uh huh.

And in terms of -- I know everyone is asking about the outlook here.

Was your order flow in the quarter more consistent with the historical growth rate.

I mean, I know your historial sequential growth rates are kind of in the upper 20 percent range, and I'm trying to -- in the consumer space.

I'm trying to get a sense if your order flows are more consistent with that?

You're talking about increased orders and backlog?

Yeah.

I would say that we've been running at 20 percent plus, as we said, and the backlog as Min mentioned, continue to be in the new orders continue to be strong, primarily driven by the new products that have been introduced this year.

So, the short answer is yes.

Okay.

And then your guidance, obviously, implies gross margins to go down and it looks like if I do a quick calculation, to around 53 percent.

Yeah, 53 to 54 was the expectation I gave this morning.

Was that a full year number or was that a fourth quarter?

Both.

Okay.

And then the Quest initial impact on the results and just capacity with that product?

I think Quest has just begin shipping about 6 weeks ago and so far, we're at the sub $600 price point, which we think is very attractive.

So far, good news out of that, going forward, we need more time before we can--

It's one of the products that we have a very sizable backlog.

It has more capacity limits.

That's one of the bigger capacity limitations?

Uh huh.

And then one final question.

There's been more talk about real time traffic apps.

I guess ACUR RL launched one in-vehicle.

I know you talked about new products, is that something that you guys think about?

Excuse me.

Is your question about FM?

Real-time traffic applications.

For automotive?

Yeah, in the automotive.

Definitely, we are interested in the applications.

Okay, so that's one of the new products that you're kind of working on now?

I guess so.

Greg Knesney, Deephaven.

I don't know if this has already been discussed.

But the inventory build that you saw in the quarter, if you just step back and look at it, I mean, is that something that has happened because you overshot estimated demand a little?

Or is it more because you're seeing very strong pull from your retail distributor customers that's caused you to build that up?

I think it's not overshot, but, actually, demand, it overshot our production capacity.

But, every week, we work hard and thinking next week we produce more product, but, you know, our improvement in production capacity has not come as fast as what we had hoped for (indiscernible).

But also, the component shortage really has (indiscernible) like I mentioned that we had $20 million of assembly within 4 key components to allow us to finish that assembly.

So, would you expect that your inventory balance would come down meaningfully in the December quarter?

I think we do believe, as we overcome the component shortage and production capacity issue, the inventory should come down.

Mike Rapore, Rice Volker.

I have a couple of questions.

The first one is LCD available just in general, in terms of all-flat panels, seems to be basically increasing.

And I was wondering if you could put the component shortage, at least for LCDs in perspective, and talk about how it might have changed over the last 3 or 4 months?

Is it less of an issue now than 4 months when your severely constrained, or is it about the same?

How has that changed through time?

I think that ironically the LCD supply in general, I'm sure you know that some (indiscernible) for a lot of displays, but for the mobile device, the LCD, they come and go.

And for us, we -- our production has been limited by LCD throughout the year.

Unfortunately, the monitors that kind of hamper our production has changed from the -- throughout the year.

For instance, early in the year, we have great, huge limitations because of the small (indiscernible) but later in the year, especially, right now, we have limitations on some other type of displays.

Okay.

And then, the $1.8 million government contract, was that the Capstone contract?

Yes, it was.

Can you put the 4 additional lines in perspective, that you're going to add next year in Taiwan, in terms of what percentage capacity increase that is for Taiwan?

Well, we are working very hard, you know, try to increase capacity.

Like I say, we added 2 SMT lines in the second quarter this year, and now, we're in the process of adding 4 additional lines by January of next year.

So, our hope is that capacity won't be an issue next year.

Right, but when you -- these 4 lines, presumably, every time you add machinery it's faster and more productive.

How big of a capacity increase will that provide adding those 4 lines?

I think in the past we used to say that, you know, what we add 1 SMT line.

Again, these are very, kind of (indiscernible) just estimates.

In the past, we say that when we add 1 SMT line, you get $50 million in revenue.

And also, you know, how many units per week or per day, it turns out that, you know, the additional contribution in terms of that amount, has been still correct.

However, because of our new products, are more compressed.

And again, hoping the product mix (indiscernible) each additional SMT line has not been able to add as many new products as we had hoped for.

Okay.

So now, you know, you've got components on both sides of the board and that's kind of eating up the productivity?

Absolutely.

Okay.

Well, thank you very much, and great quarter.

Jim Duffy, Thomas Weisel Partners.

Let me add my congratulations, great quarter.

As you look into Q4, how do you expect the product mix to change?

Is it more a mix shift that's causing, you know, the sequential decline in margins, or is it some of the other factors that you've mentioned?

And then I guess as a follow on to that, is there an opportunity to prioritize production capacity to emphasize the higher margin products?

Well, I think you cannot give all the answers.

But, the mix definitely, is mostly for recreation and automotive products.

And you are correct that, when we have shortage on many products, it is possible for us to put high priority on higher dollar amount, higher money product.

However, there are also sometimes we have higher requirement to many retailers, which we can't afford to miss.

The truth is, the production is somewhat constrained by what components are available.

So, for the supply situation is kind of volatile, we tend to just build what components we have to build for.

I see.

That makes a lot of sense.

Thank you.

The follow-up question.

Can you comment on the disparity between unit growth and the revenue growth?

Certainly you're selling a lot of the higher-priced products.

Should we infer from that that you're seeing very strong growth in your automotive segment and that's what's driving that?

I think the automotive, definitely, is one of the fastest growth categories and attribute to the increase of the ASP. (Indiscernible) in our category, like recreational products, the new product we introduced this year, the GPS (indiscernible) and 76C and other color product, has been received quite well and they have contributed to the increase in the ASP as well.

Okay.

And then onto the aviation segment, if I can.

Can you comment on what you're seeing from the G1000 or have you made any progress moving towards the business jet market, and can you comment on any changes you may have seen in the competitive landscape there?

I think we continue to have discussion with additional OEMs, but don't have any specific kind of information to provide at this time.

And as I reported, at this time, we are still resource is limited.

Both of our (indiscernible) working hard to certify that all those models we have coming into.

Okay.

Any change in competition in that market?

Is there anybody who has tried to kind of copy or draft off of the success of the G1000?

Not really.

Truth is, we have not seen much change in the landscape.

Neal Miller, Fidelity Investments.

A couple of questions here.

One is on the resource build up, the cash build up in Taiwan and I'm just kind of wondering what the long term strategy is there, and I guess,a related question would be, at what point should we not ignore the FX to the extent that it becomes very sizable, variable?

Well, first of all, the resource buildup, we've had discussions about this.

Without giving any details, we're looking at potential ways to best utilize those resources, to try to get the cash in the appropriate place so we can buy back stock or, you know, other dividend options, and also, looking at acquisitions.

So, it's definitely something that's been on our radar screen.

We've been trying to focus on to better and more efficiently utilize that cash.

And, again, put the cash balances in the appropriate spots within the organization.

A couple of other aspects of that.

One is, mainland China a consideration here for further diversification of manufacturing?

And I guess the other question is, in Taiwan, we're heading towards, you know, political turmoil at some point when they want to change their name to the Republic of China, and it makes you kind of go nuts.

Well, I'm probably most quiet for the situation.

We saw the diversification of manufacturing, I guess, while we are positioned more than 2 million units a year, we have over 100 (indiscernible).

So as such the environment is not there in our view, to be efficient to the absorption.

But, definitely, we don't do (indiscernible) but, for our business here today, we don't see the benefit of outsourcing or having to do ( indiscernible).

Appreciate it.

Another question, on the new product flow, and the pressure, perhaps, on margins, I'm just kind of wondering whether you're contemplating next year might be as significant an interval here as this year was the aviation package.

And then it was kind of color product in marine.

I'm wondering if there's any major threshold of that nature which could be, I suppose, an OEM car arrangement for navigation.

In your margin anticipation, are you expecting a major new launch in the product therein?

I'd say first of all, you know, we've now delivered 44 products year-to-date.

And now it looks like anticipating we'll probably end up with 50 by the time we get to the end of this year.

And also, we have as our new product pipeline remains robust, we still think we'll probably introduce about 40 to 50 new products next year.

However, in terms of 2005 guidance and whether there's a major shift in margin, we don't anticipate that at this point.

And really, on the OEM side, I really don't have anything new to offer there, other than we're continuing to go after that business, in addition to the portable business that we have.

Final question on marine.

At what point do you think water temperature might be a component of the description where you are?

We already are we (indiscernible) display temperature.

Mark Anderson, Etfield.

Really quick question on the margin going forward.

You know, just wondering why you expect to be discounting in the fourth quarter, given the demand profile that you've been talking about?

I think if you look back historically, we've had some periods where we don't, but typically, the fourth quarter, we do have additional promotions and discounts that we give to retail and dealer channel in order to sell through that.

So that's not unusual for us to have that in the fourth quarter.

Lee Exel, Elmridge Capital Management.

It's actually 2 related issues.

I'm sorry, but I have to go back to the capacity issue.

Your units are down sequentially, they're down 13 percent from peak units before, and you're talking about capacity shortages and end component shortages.

And I'm wondering, first of all, in terms of your capacity, how can that be?

More specifically, across, you know, the food chain, any component you look at has become more available recently, and again, your units are down.So what shortages are there?

What -- I don't understand the bottleneck there?

Earlier, I tried to mention 3 factors.

One is the learning curve to bring up the new product.

The second thing is the product mix.

Some product, you know, more complex to build than others.

And thirdly, I call it component shortage, really has harmed our production efficiency.

You have to look at the second quarter and third quarter, you are correct that third quarter we shipped about 30,000 units less than the second quarter.

So, bigger in terms of the number of units are concerned, it is, indeed, down slightly.

But, at the same time, the ASP increased by $20, which could be an indication of the complexity of the product we shipped in the third quarter.

Right.

I guess it'd have to be a material change, you're down almost 100,000 units versus the December '03 quarter.

So it has to be materially more complex, and the yield -- all of a sudden the learning curve should get a lot more difficult.

Actually, we're only down from about 50,000 from the December quarter. 590 now, now we are doing, we did 540.

I guess I have 624, I guess I have the wrong number.

And the other issue is-- Sorry.

You were referring to year end.

I just wanted to make sure you were asking the question on 100,000 -- you mentioned 100,000 down, you were talking about fourth quarter, '03, right?

Yeah.

Only about $50,000 difference -- 50,000 unit difference.

The related issue is, the finished goods inventory build, is both significant sequentially and more importantly, last year you had in the fourth quarter, 25 percent sequential growth, the year before that you also ended in the fourth calendar quarter, again, you had 24 percent sequential growth.

This year you're expecting, I think, around 4 percent sequential growth.

The sequential growth is coming down here, and yet the finished goods inventory build is material.

And especially if I think about that again in light of component shortages and bottlenecks, how does that all work?

Well, I think what Min tried to answer earlier, is you've got a higher ASP.

So, first of all, that will drive substantial finished goods, you know, finished goods increase on a dollar basis.

Secondly, I think it gets back to some of the other things we've already mentioned in terms of sheer number of products.

I mean, there's a 50 percent increase in finished goods sequentially versus 7 percent increase in ASP, so it has got to be more then that, right?

I think we're still expecting, you know, still expecting a larger -- you're saying sequential, not up as high, but it is still sequential growth.

So, overall, we don't view that the finished goods number is really the one that's out of line here .

If there's anything that's out of line, it's more on the assemblies and on the other raw material components.

And just lastly, to clarify.

So, you had customers that did not receive product, but instead, it was put in inventory?

I see, if I can add to this.

The $34 million of finished goods at the end of second quarter, is just extraordinarily inadequate.

There are products shortage has been going on for a long time, and you heard me call that why we reported our second quarter, we also indicated we did not have, you know, sufficient product to meet the customer demands.

So, I'll probably say, $34 million finished goods inventory at the end of second quarter was not a good reference point.

But, even if you look back 2 years on days basis, your finished goods inventory is up 7 days.

Yeah, no doubt it's up higher.

(indiscernible)

I was referring to on a day's basis.

John Bucher, Harris Nesbitt.

Had another question on your margin outlook.

There appears to be a significant amount of interest at the AOPA conference for a lot of your upgrades.

You've got a rather large installed base of existing avionics systems out there.

It would appear that some of these software and other upgrades for these ought to be relatively high margin.

Wouldn't that suggest that you might see some of an increase in margin mix, margin pressure, as a result of some the mix of these upgrades that are primarily software intensive?

I think you're talking about the cost to (indiscernible).

For the upgrades, I think there are 2 part.

In terms of the new sales, you are probably right.

We expect to derive a good margin from that.

But at the same time, there are good number of products out in the field, that we've requested upgrades and, for that, you know, to support our customers, the upgrade price is quite reasonable.

So, we don't expect to reap a windfall profit on margin from that project.

Does that include the upgrade to the CNX 80, also?

Same sort of rule would apply there?

We have not talked about that maybe right now it's about 430, 530?

I understood that was on 430, 530.

I'm talking about the upgrade to the CNX 80 to make it GNS480 compatible?

I think it is probably lower volume.

Bill Benton, William Blair.

Quick questions.

The Trimble announcement with Nextel a couple of day ago, I was wondering if you guys could just maybe comment on that concept of where the phone is at and how you think about that?

I think the Trimble solution appears to be similar to other cell phone applications such as real moto (ph) from Motorola.

And (indiscernible) from a small company called Tavigation (ph).

And both of which have a single arrangement as Nextel has been in the market for some time.

There has been -- there has been recent articles written in the press describing the benefits and (indiscernible).

And also, we've done our own variation of this product in applications, so, our view is that it appears that there's a good potential for the concept, but current implementation stuff, shipping has some limitations.

So, we don't see it as a replacement for the GPS products.

You have to be certain these overlap.

But we view it mostly as a new opportunity.

Okay.

Just a quick question on your advertising.

I'm trying to just figure out where you are targeting it with the broader set of new products.

I think I saw you guys on my Happy Meal bag at McDonalds.

And I was trying to understand where you guys are going with your advertising there?

I think in general, as we look forward we talked about, the advertising is one of the key drivers of our overall SG&A expense.

And we've been able to hold the SG&A fairly flat, 10 to 10.5 percentage points of sale.

What we do and what which experience in the fourth quarter is higher advertising due to the holiday season.

We're out looking just in the near term is the advertising will continue to increase, and we're doing, as you know, we're advertising in several sources.

Print media.

Some TV advertisings in the fourth quarter.

You mentioned the Happy Meal.

I mean, that's not a major component to that, but in general, we would expect SG&A in the fourth quarter to come up, primarily due to the percentage of sales due to the advertising.

Okay and the automotive products will probably be the focus of the TV advertising? advertisements?

The automotive and 4Runner?

Ben Swindurn, Morgan Stanley.

If I could come back to the topic of the day on the supply constraints and the capacity constraints.

First, just want to make sure I'm getting it right.

It sounds very much like it's not a physical constraint issue, as it is a learning curve and complexity of the product manufacturing design, that's the issue.

And if that's true, how do you think about this sort of 2 to 3 years out?

Because it sounds to me, your obviously bullish on new products, the number of new products increasing, the ASPs are increasing because they're more complex, you're adding color, you're adding more software.

Doesn't this problem -- which is also obviously a problem for competitors, and somewhat a barrier to entry for you guys, which is a good thing.

But, doesn't this become even more severe long term?

Is there -- how do you solve this issue sort or 3 or 4 years down the road, thinking more long term about the business?

We're certain we have realized all the weaknesses and challenges you just mentioned, and so (indiscernible) we are working hard to beef up our infrastructure.

Not jobs, the assembly workers, but also the production printers and production engineers.

So, hopefully, we're able to overcome this in the next 6 months.

Does -- I know they've always had this philosophy at Garmin to do everything in house.

How difficult or philosophically does it ever make sense to look elsewhere for contract manufacturing or is the complexity issue not make it worthwhile financially for you?

I think it's complexity and it's also unit volume, both.

As Min mentioned earlier, if we get to a point where we have a major part of the business with significant volume that we could carve out and outsource, we could consider that.

But at this point, we don't see that.

In the long term view, we're looking at facility expansion, like Min mentioned a 3 year program to start looking at what it's going to take to get adequate capacity for this growing business that we're in.

And if I could just shift over back to the marine business, which is out of season, so to speak.

But, obviously, there were some issues in the first half of this year, you have a lot of new marine products that you've launched.

And if you think about next year's season, when does the buying start to show up from your retailers from marine, especially given what's happened in the southeast with the hurricanes?

It should be a sort of unusual or atypical year in marine for the segment next year.

I'm just trying to figure out, when should we expect that?

Is part of the reason the finished goods are higher, or perceived to be, but maybe higher this quarter than normal, that you have some marine left over from what wouldn't sold in 2Q or are we reading that the wrong way?

Let me sort out your question.

I believe your first question is really about the timing of our introduction of new products for next year?

Yeah.

When do the retailers start to buy for marine for the season next year?

Along January or February time frame.

Okay.

And the finished goods?

That's not being driven at all by marine?

That was left over, that wasn't sold because you were a little late?

That's not the reason.

Okay.

And then the last question I had, Kevin, on the share buy-backs, I'm just wondering if the reason we didn't see shares bought back was the reference you made before in terms of where the cash sits.

If that's the driving force or if it's really still a question of what do you want to do with your cash balance long term, strategically?

I think it's primarily been the constraint that we talked about earlier in trying to get to have the appropriate amount of cash at the right location, subsidiary, or holding company in the Company.

And shouldn't read anything further into that.

Rich Valera, Needham & Company.

Just quick clarification.

The $50 million of revenue for SMT line, that's annual revenue, is that correct?

That's annual incremental revenue.

Right.

And just going back to -- this has been addressed in previous questions, but units up very modestly this quarter on a year-over-year basis, ASP is up around 35 percent.

And this year as a whole, that's been sort of the trend, is very modest unit growth but very strong ASP growth, whereas last year, it was sort of the opposite.

You really had the unit growth driving the top line, with ASPs actually dow.

Just trying to think about how we should look forward for modeling.

Should we think -- I would think particularly the fourth quarter -- look at the same type of trend where it's primarily growth driven by ASP, and then would we expect that trend to continue in '05?

First of all, I wouldn't see us going back down to the ASPs of 260 to 280, just given the product that we've released this year.

A lot of that has to do with the price points of the 44 products that are out on the market.

As far as next year, we really haven't given any guidance yet.

So I'd really just rather not comment on that at this point.

Great.

And with respect to the -- to the areas with the greatest backlog entering the fourth quarter, I think you mentioned the Quest.

Is there any other product areas that are notable in terms of the amount of backlog that you're carrying, because of the inability to meet demand?

It's across very broad range.

I think, in general, automotive products are in great shortage, and a good number of our recreational products including the older eTrex, are in great shortage.

Great.

And I think, Min, you mentioned that you'd added a couple of hundred workers.

I think at some point during the quarter.

I was just wondering if you could say, when you added them, and what did they make up as a percent of your total production work force?

Basically, we added them throughout the period.

You're asking what -- how the overall manufacturing workers is compared to the total or-- ?

Yes.

Correct.

How do they compare to your total number of production workers?

The total number of production workers?

Yes.

We added, probably, 15, 20 percent within the third quarter.

As a percentage to the total manufacturing labor.

Okay, that was the question, perfect.

And just quickly on the G1000, it seems like sales are going well but I noted you did have a sort of a safety bulletin on your website with respect to some component issue in the G1000 that presumably the ones out in the field had to be sort of refitted.

Is that been an issue at all for G1000 sales?

I think it was just a problem that a component was not correctly installed.

And as soon as the problem was identified, we instituted a full scope inspection, that so far has determined that the product had a component installed incorrectly was a very small percentage.

So we feel that the situation is really under control, and of course Garmin will be financially in material.

Anthony Lorenzo, John A. Levin & Company.

Good quarter.

The question I have -- I mean I hate to harp back on the inventory, but it seems like if your finished goods are 47 percent of inventory and you had capacity problems, I don't really understand.

Is that a lot of old stuff in there like 2610s, and 3pod3s that you guys are going to have to sell, because I know you're already discounting the 2610 pretty heavily, right?

I want to -- let me sort of add that our business model is not build to older.

Our business model is to build and have inventory in preparation for order from a customer.

So historically, our Company practice is to have 6 to 8 weeks of finished goods inventory.

So we can always kind of ship upon our customer demand.

So along those lines, I think that you look at our regular level and also the number of our products that many of the product we don't have (indiscernible) 6 to 8 weeks of inventory.

And, the truth is, I think the more products you have, the harder it is to have product available.

Right.

But you kind of are claiming capacity issues as the reason it's up, and finished goods are up a lot, too.

I'm just trying to figure out if there's old stuff in there, maybe, since you had some trouble getting the new stuff to customers, what's in that finished good number?

Again, I think we probably look at, you know, which quarter are you comparing to?

Well, just in general.

I mean, the high inventory number, sequentially, when you said you could have had much more demand but you couldn't couldn't meet it because of capacity issues.

First, I do have a spreadsheet in front of me.

I'm looking at Q3, 2003 quarter, that is a year ago, we had $44 million finished goods inventory.

Q4, we had 50, and on Q1this year, we had another 40.

That's why we started experiencing, you know, shortage and also, capacity, delivery problems.

Q2, we cannot order (indiscernible) $34 million.

So, Q3, it went up to 52.

Which is, you know, you just take a look at revenue over the period you compare it to, of last year.

It is lower.

As a percentage of revenue, it is lower. (multiple speakers)

But you're not looking for very big sequential growth into Q4, and the inventory is up a lot?

That gets back to the sheer number of products we're carrying.

The number of SKUs have greatly increased, and so we're trying to meet the demand across a broader spectrum of products, even -- and at the same point, sequential growth, even though it's not as high as maybe it has been in the past, so all those factors contract into the fact that finished goods inventories up to $52 million.

Okay.

That's fair.

So there's not a lot of old stuff there.

I'm just trying to get a sense for --

You're trying to figure out if we're going to write off a bunch in the future.

And --

No, no.

Not write off.

Just if you're going to have some similar margin degradation that you had with the StreetPilot III, that you might have with the 2610, as it comes to end of life.

I mean, it've very natural and it's been your business model, which is fine.

I have to say that we generally manage our inventory obsolescence and (indiscernible) quite well.

Okay.

I'd agree with that.

Well, we know that there are more questions right now, but we really feel like we need to wrap up the call.

We do appreciate all the questions this morning.

If you do have further questions, please, call Polly, our head of investor relations.

And at this point we need to cut off, and close the call.

So, thanks, everyone, for your attention and for your participation.

We'll speak with you after the next quarter.

Thanks.

Thank you, everyone.

Thank you.

This concludes your conference.

You may now disconnect.