Harvard Bioscience Inc (HBIO) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the first-quarter 2015 Harvard Bioscience earnings conference call.

(Operator Instructions) As a reminder, this conference is being recorded.

I would like to introduce your host for today's conference, Ms. Cheryl Schneider of Dian Griesel Int'l.

Thank you, operator, and good morning, everyone. Thank you for joining us today for the Harvard Bioscience first-quarter 2015 earnings conference call. Leading the call today will be Jeffrey Duchemin, CEO and President, and Robert Gagnon, Chief Financial Officer of Harvard Bioscience.

But before I turn over the call to management, I will read Harvard Bioscience's Safe Harbor statement. In its discussion today, the Company may make statements that constitute forward-looking statements. The Company's actual results and performance may differ materially from what it has projected, due to risks and uncertainties, including those detailed in its annual report on Form 10-K for the periods ending December 31, 2014, as well as its other public filings.

Any forward-looking statements, including those related to the Company's future results and activities, represent its estimates as of today, April 30, 2015, and should not be relied upon as representing its estimates as of any subsequent day.

At this point, I am delighted to turn the call over to Jeff Duchemin. Jeff, please go ahead.

Thank you, Cheryl. Good morning, everyone. Thank you for joining us for our first-quarter 2015 conference call. I am pleased to be addressing you today about Harvard Bioscience's first-quarter results.

While we were disappointed in our financial results, which we will discuss momentarily, we remain firmly focused on our long-term growth strategy and we believe the Company is stronger now than it has ever been. We are on track with and fully executing the strategy we put into place at the end of 2013, thanks to the efforts of our new leadership team and the work of our employees worldwide.

Let me give you an overview of the quarter, which had its many challenges, but was also a very exciting and rewarding one as well. As approximately 35% of our business is in Europe, our financial results this quarter, like so many other companies in our sector, were adversely affected by foreign exchange headwinds caused by the strengthening US dollar and the resulting impact to grants and budgets denominated in euros. In addition, we continue to see softness in the academic and government markets, which comprise up to 80% of our revenue.

On a positive note, as the quarter progressed, so did performance in both sectors.

What we did to address the softness in our top line was to take immediate action. Our sales and marketing teams have been working closely with our customers implementing volume-restoring programs. On the bottom line, we have also initiated cost-containment programs to help stay lean and constantly assess the operational efficiencies.

While it is still early in the second quarter, we have already begun to see improvements in our markets. Everyone in the Company is on board in addressing our performance. Our sales and marketing teams are working diligently to improve sales levels. As I mentioned, our initiatives were working.

As you saw in today's press release, we have reduced our guidance for the year based upon the results of the first quarter and anticipated continued stronger-than-expected FX headwinds through the remainder of the year. Rob Gagnon will provide more details of our guidance later on in the call.

Let me provide you a brief overview of our financial results for the quarter. Revenue for the first quarter was $25.8 million, a less than 1% decrease compared with last year's first-quarter revenue of $25.9 million. Included in the revenue this quarter were the on-target contributions from our three acquisitions, Triangle BioSystems, Multi Channel Systems, and HEKA Elektronik. Excluding the effects of foreign currency translation, revenue would've grown approximately 3.8% over last year's first quarter.

Our non-GAAP income from continuing operations for Q1 was $0.8 million, or $0.02 per diluted share, compared with $1.7 million, or $0.05 per diluted share, in Q1 of last year. In terms of geographic breakdown, sales in China continue to be on the lower side of our expectations due to the slower release of funds from the Chinese government.

With Asian markets still expected to produce very strong industry growth, we have prepared by increasing our channel relationships in Asia and expanding our commercial presence in those markets. Despite the lower sales volume we weren't distracted from our long-term growth strategy. Our teams delivered in other phases of our strategy during the quarter and I'm really pleased to share our results with you.

First, let me begin with our acquisition of HEKA Elektronik in early January. The integration of HEK, along with Triangle BioSystems and Multi Channel Systems, the two companies we acquired in Q4 of last year, is going extremely well and on plan and contributed to our top-line growth for this quarter.

While the HEK acquisition was one of the highlights of the quarter, our overall mission continues to be to deliver on each element of our strategy -- commercial excellence and organic growth; new product development; business development acquisitions; and operational efficiencies. Let me take a moment to update you on all four phases of our strategy.

Commercial excellence and organic growth. Our sales and marketing teams are aligned and continue to implement global growth programs, driving key initiatives such as expansion into the electrophysiology market along with geographic expansion.

Last year our focus was China. In 2015 we are focused on other emerging markets such as South Korea, Japan, and most recently Latin America, while also expanding our focus in China. In February we hired a new Vice President of Sales at our Denville Scientific subsidiary. Denville remains an important part of our strategy and a growth driver for Harvard Bioscience.

To drive growth in our Denville business, we opened a new distribution center in Charlotte, North Carolina, during the quarter, along with moving customer service to Holliston, Massachusetts. The new operation will deliver improved service levels to customers along with cost savings to the business.

The second phase of our strategy I want to highlight is a new product development process. We continue to improve our product offerings, such as the touchscreen behavior products, along with product line extensions. One other area that will drive growth in future quarters is the development of new products for our global OEM customers.

Last, we received exciting news last month for a two-year [DARPA] grant to develop innovative wireless electrophysiology technology based on our TBSI expertise.

The third element of our strategy involves business development acquisitions. Our successful acquisition of three companies in the electrophysiology market -- HEKA, Multi Channel Systems, and Triangle BioSystems -- contributed as planned toward our top-line growth this quarter. Our portfolio of electrophysiology products now make us a market leader in this growing segment of research.

Within a very fragmented market, we continue to evaluate and pursue acquisitions, both here and abroad, that will help grow and diversify our portfolio of products into segments, such as biopharma, and fit in well with our goals. We continue to take a very strategic approach to these opportunities.

The fourth and final element of our strategy involves operational efficiencies. We implemented numerous steps to improve our operations this quarter. Most notable was the shutdown of our New Jersey distribution center.

We moved all distribution activity to our Denville Scientific distribution center in North Carolina. In doing so, we expanded from 12,000 square feet to 40,000 square feet, a state-of-the-art facility that is an amazing example of engineering and efficiency. Additionally, by relocating to North Carolina, we will avoid many of the weather-related issues that impacted us in the Northeast during the quarter.

We successfully implemented Phase 1 of our new ERP system. The new system will not only provide us better controls and information management, but will also enable the smooth integration of future acquisitions. We are in the process of moving our Biochrom manufacturing facility from England and consolidating it into our Holliston headquarters, which will provide further cost savings, synergies, and controls. Last, we achieved ISO certification for seven of our manufacturing facilities.

So to recap the business strategy we put in place a little more than a year ago when we began to realign our operations, create organizational efficiencies, and embark on cost reduction initiatives, talent acquisition, and geographic expansion is working well. We are executing in all areas of our strategy, as I outlined a moment ago.

We have successfully completed and integrated three acquisitions. We expanded our commercial presence in China and elsewhere in Asia, and revamped our new product development progress to focus process to focus on our core products. We are on track with all of our plans.

Along with executing to our strategic plan, we have added two new board members, both active CEOs of publicly-traded companies: Bertrand Loy with Entegris and James Green with Analogic Corporation. No relationship to David Green. The positions were created with the retirement of Chane Graziano in 2013 and, most recently, the retirement of Robert Dishman from our Board in April of this year.

To sum up, we had a challenging, yet exciting quarter. Thanks go out to our talented worldwide employees for their incredible hard work and dedication, which makes our continued success possible. We intend to continue to execute on our strategy and look forward to additional success throughout the year. We're energized and ready to perform for our shareholders and customers.

At this point it will turn the discussion over to Rob Gagnon, our CFO, who will provide more insight into our financials. Rob?

Great. Thanks, Jeff. Consistent with previous quarters, much of my focus will be on the non-GAAP quarterly results, which we believe better represent the ongoing economics of the business and reflects how we set and measure our incentive compensation plans and how we manage the business internally.

However, I will briefly review the GAAP results, the differences of which are outlined in the earnings release we issued today, which can be found on our website under press releases. Also our results for Q1 will reflect the results of our three recent acquisitions: Triangle BioSystems, Multi Channel Systems, and HEKA Elektronik.

Additionally, any material financial or other statistical information presented on the call, which is not included in our press release, will be archived and available in the investor relations section of our website. And a replay of this call will also be available for one week at the same location on our website at HarvardBioscience.com.

As Jeff discussed, this was a challenging quarter on the top line due to a number of factors. In addition to the focus on sales, we have commenced cost-containment measures to offset some of the weakness. These measures include the advancement of certain facility relocation plans as well as decreases in certain spending areas across the entire P&L.

One important note here, we do not expect these measures to slow down or impede our strategic plan as we continue to remain focused on our long-term strategies and growth plans. One key area of our strategic plan is acquisitions and in the first quarter we completed the acquisition of HEKA. HEKA adds to our strengthening electrophysiology franchise and is a great addition to the Harvard Bioscience family.

As it relates to the operational efficiencies, as Jeff mentioned, this quarter we completed the relocation of our Denville Scientific business from New Jersey to North Carolina and we have commenced the consolidation of our UK manufacturing operation into our Holliston, Massachusetts, facility. More on both of these changes in a moment, but I will begin with the top line.

Revenues in the first quarter were $25.8 million, a decrease of $100,000, or 0.5%, compared with revenues of $25.9 million in the first quarter of last year. The negative impact from currency translation was $1.1 million and was due largely to a weakening euro relative to the US dollar.

In addition to negative currency translation, revenues were negatively impacted by lower sales from customers based in Europe of our US-produced products, compared with sales levels in the first quarter of last year. We believe this was also due to the sudden decline of the euro relative to the US dollar in the first quarter.

Due to these factors, we estimate the overall impact of a weaker euro on the top line was closer to $2 million to $2.5 million in the quarter. And on an extrapolated basis, this would be $8 million to $10 million annualized. This is higher by $2 million to $3 million than we had expected and communicated when we provided financial guidance in February during the Q4 2014 earnings call.

Finally, we continued to integrate the three businesses we acquired in the past six months, and we are pleased that revenues from these three businesses met our expectations based on the guidance we had previously provided at the time of the acquisitions.

Now turning to bookings and backlog. Bookings in Q1 were $26.7 million, an increase of approximately $300,000, or 1.2%, compared with bookings of $26.4 million in the first quarter of last year. The increase in bookings in Q1 is due to the three businesses we acquired, offset by the weaknesses highlighted.

We finished Q1 with backlog of approximately $7.7 million, up more than 38% compared to backlog of $5.6 million at the end of Q1 last year.

Now turning to costs and expenses, cost of revenues in Q1 were $13.9 million, a decrease of approximately $200,000, compared to $14.1 million in Q1 of last year. As a result, our gross profit was $11.9 million this quarter compared with $11.8 million from last year's first quarter. Our gross profit margin was 46.2% in Q1, an increase of 70 basis points compared to 45.5% in Q1 of last year. Overall, we were pleased with the outcome in gross margins, given the challenges on the top line.

Operating expenses for Q1 were $10.9 million, an increase of $1.8 million compared to $9.1 million in Q1 of last year, and included in the Q1 results this year is the operating expenses of the three acquisitions. But also this quarter, as mentioned, we completed the relocation of our Denville Scientific business from New Jersey to North Carolina and we also commenced the consolidation of our UK manufacturing operation into Holliston, Massachusetts.

The UK manufacturing operation is our second-largest manufacturing site within Harvard Bioscience. The cost benefits and margin expansion of both of these moves will begin to accrue to us next year and represent a major step forward in our plans to optimize our manufacturing footprint and reduce the number of sites and costs.

In Q1 we incurred approximately $200,000 in costs for these moves of the $750,000 to $1 million in total costs that we had communicated on our Q4 earnings call. We still expect to incur this amount in costs this year to complete these moves. And as communicated previously, we still expect to realize savings of a similar amount beginning annually in 2016.

Operating income in Q1 decreased $960,000 as compared to $2.7 million in Q1 of last year. Operating margins in Q1 was 3.7% on a non-GAAP basis, indicative of the lower revenues and investments we are making on the expense side. This compares to the operating margin in Q1 last year of 10.5% on a non-GAAP basis.

While the cost incurred to optimize our footprint contributed to the decrease in operating margin, we continue to believe that the payoff of these investments will result in higher operating margins over the long run. Our non-GAAP effective tax rate was 18.6% in Q1 compared to 29.4% in Q1 of last year. The decrease in effective tax rate was due to lower profit before tax and overall geographic mix. We continue to forecast our effective tax rate in the range of 28% to 30% over the long run.

Our GAAP net loss was $1.4 million in Q1, or $0.04 per diluted share, compared with net income of $719,000, or $0.02 per diluted share, for Q1 of last year. Our non-GAAP net income for Q1 was $756,000, or $0.02 per diluted share, a decrease of $0.03 per diluted share, or 60%, compared with $0.05 per diluted share in Q1 of last year. And weighted average shares outstanding were $32.9 million in both Q1 of this year and last year.

Now turning to the balance sheet. We finished Q1 with approximately $8 million of cash and equivalents, a decrease of approximately $6.1 million, compared to $14.1 million from Q4 last year. The decrease is primarily due to the acquisition of HEKA.

Accounts receivable as of Q1 were $16 million compared to $16.1 million as of Q4 last year, essentially unchanged. And inventory at the end of Q1 was $22.1 million, compared to $20.5 million at the end of Q4 last year. Inventory turns were 2.6 times compared to 3.4 times for Q4 last year.

In addition to the inventory associated with the acquisitions, the increase in inventories relate to the temporary transitional requirements needed to accommodate the consolidation of our UK manufacturing facility with Holliston, Massachusetts.

Capital expenditures were $1 million for Q1 compared to $781,000 for Q4 last year. The increase in capital expenditures is due to investments in our infrastructure and ERP system, as well as build outs related to the consolidation of the UK manufacturing facility and the new Denville facility. We expect capital expenditure levels will be lower and more comparable to historical levels following completion of these programs.

Debt at the end of Q1 was $21.9 million, compared to $21.5 million at the end of Q4 last year. The increase was due to net draws on our revolving credit facility to fund the temporary working capital requirements to accommodate the two site moves, offset by scheduled principal payments made during the quarter.

I will now turn to annual guidance.

Today we are updating our financial guidance for the full-year 2015 to reflect the additional negative impact of foreign currency due to the strengthening of the US dollar and the top-line softness experienced in the first quarter. For 2015 we now expect revenues of approximately $110 million to $112 million.

We now expect reported revenues will be lower by $8 million to $10 million compared to prior year and $2 million to $3 million lower than our previous guidance issued during our Q4 earnings call.

For non-GAAP EPS, we now expect $0.21 to $0.23. Also reflected in this guidance is the cost we will incur in 2015 to relocate and consolidate certain manufacturing and distribution facilities of $750,000 to $1 million, or approximately $0.02 per diluted share. As mentioned on past calls, the differences between our GAAP and non-GAAP financial guidance, including EPS and reconciliations, are outlined in the earnings release we issued today, which can be found on our website under press releases.

We will now open the call to questions from participants. Operator?

(Operator Instructions) Paul Knight, Janney Capital.

Jeff and Rob, you had mentioned the kind of up to as much as $2.5 million from FX. The question I have is regarding the customers who suddenly have a 25% increase, if they are buying products based in dollars.

Are they recovering -- how are they recovering? Meaning are you seeing a recovery in their budgets? What do they have to do to recover from that? So how does that really roll out, do you think, this year?

Paul, it's Jeff. How are you? Thanks for the question.

Yes, we are. We're starting to see a little bit of a settle down. I think early in the quarter FX obviously was at its most unstable point. From a customer base, I think customers have settled in. There is less money being spent, especially for US-manufactured products being sold to Europe. But on the flipside, our Eurozone manufactured products being sold here in the US gives us an advantage to look at maybe some pricing scenarios where we can drive growth of business.

So we are working with our customers. We will look at price where appropriate to help them with their reduced budgets in the quarter or in future quarters moving forward, but we are seeing people starting to settle down. As the quarter progressed, we saw improvement and I think we've seen improvement not only because of FX, but we have seen improvement in the global government and academic markets.

Rob, do you want to talk about the dollars? Is there anything else to add there?

Paul, it's Rob. I'll just add the impact on purchasing power of euro customers in volumes. We estimated that to be about 3% to 4% of the decline in the quarter and we have incorporated a similar assumption going forward in the guidance and projection.

Then last question. Jeff, in regards to bookings of 1.2% or backlog that you stated was up 38%, this is -- can you talk to the 38% increases from acquisitions? Is it better tone? What's happening on the booking and backlog side?

So on the backlog side we've brought on some new OEM customers, global OEM customers, which is driving that backlog number up, which is great for future quarters. So we are seeing a positive influence there. Bookings, the bookings are not as strong as we would like them to be right now and that is really being driven by the academic segment on a global basis. We have sales initiatives in place that will help us drive demand of our products and those initiatives were put in place during the quarter.

As we saw the quarter not fallout as we expected it would, we started to put plans in place and those plans are working. We're starting to see the funnels, the funnel activity increase. We have some confidence level on equipment and instruments that will be pulled through in Q2 and beyond, so the initiatives are starting to work.

Paul, if I could just add, in terms of the amounts there in backlog, the three acquisitions contribute around $0.75 million to that backlog. They made it higher compared to last year's comparison. And FX, the FX impact of remeasuring that backlog was a similar amount, a little bit less but fairly similar.

Thank you.

(Operator Instructions) Raymond Myers, Alere Financial Partners.

As I look at my quotes this morning, I see the dollar/euro FX. It's actually started to recover a little bit too $1.12. So can you give us a sense of what was the FX exchange during Q1 and what was your guidance based on?

Let me give you a little bit of color there. You're right, we were watching FX every day as well and I think if you roll back a week or so it was probably in the $1.07, $1.08 range. So it's still highly volatile every day; it's moving around.

When we set guidance back in February, it was in the range of $1.13, $1.14, $1.15 and pretty quickly after that in early March it got as low as I think $1.04. It might have even been a week later or two weeks later.

So we are trying to set guidance based on a spot as opposed to trying to forecast where it's going to go, but again we are watching it every day. So the guidance and how we're thinking about that now, we are basing that based off of where that spot had been in the last week or so, so sort of in that $1.07, $1.08 range, and we will continue to monitor it.

But again, when we set guidance it was $1.13, $1.14 and that was back in Q4. As we are thinking about guidance now, we're thinking about a spot rate of $1.07, $1.08. Again, just continue to monitor it.

Okay, that sounds good. Now I want to understand the difference between the guidance that you had two months ago and the guidance now. What have you learned and can you parse out how much of it is direct currency translation versus how much of the change is the order impact from pricing that results from a lower US dollar? And then thirdly, was there anything else that caused results to be weaker in the current quarter?

Yes, it's Rob; I'll take that. And let me just get you grounded. The old guidance on the top line was $1.14 to $1.16 and it was EPS of $0.27 to $0.28 and it was FX headwinds of $6 million to $7 million on the top line. Our new guidance as we sit here today, we are projecting $1.10 to $1.12 on the top line, EPS of $0.21 to $0.23, and FX headwinds of $8 million to $10 million.

Now in terms of the decline in EPS, we are estimating that -- overall that's about $0.05. We're estimating that about $0.03 of the $0.05 is due to the added FX and that largely has to do with that lack of buying power that you described and that Jeff was talking about and the impact on budgets and grants and on volumes. So we estimate that to be an additional headwind of $0.03. There's an additional $0.01 to $0.02 just for the overall softness that we experienced right out of the gate in the quarter that started to rebound.

That helps a lot. Can you give us a sense to was there --? Are you saying that there is --? Is the weakness exclusively currency related and pricing related that flows from currency changes? Is there any other government-oriented or other weakness other than direct currency?

Let me just answer the second part of that. I'm going to let Rob answer the first part. Ray, it's Jeff. From a government standpoint, two things. We have yet to see China pickup like we're expecting, but we are positioned well there, so when things do turn in China I think we're going to be in a very good position.

The other thing that impacted us this quarter was Japan, the academic segment in Japan strictly driven by the Japanese government. We have a good portion of our OEM business based in Japan, so those two factors played into the softness in the quarter.

I just would add; I don't like to blame weather, but a number of our academic customers are located in Northeast that are consuming lab consumables and that certainly had an impact. But in terms of those other factors, if you take FX out, the overall weakness in the market that we experienced was about 3% or about $1 million.

Okay, sounds good. Different question. Have you felt any improvement in service or cost or any other benefits yet from Denville's move to North Carolina?

Yes, Ray, I was down in North Carolina about a week ago. The facility that we built down there is state-of-the-art. We have room for expansion, which is great. It's a major improvement from where we were in New Jersey and really what we were living through in terms of managing our distribution and supply chain capabilities.

The service levels will continue to improve. The facility is new. We have implemented an ERP system, so we are in Phase 1 of our ERP system, which is going well, and we continue to make improvements where necessary. But long-term our service levels will be dramatically better than what they were based on the New Jersey facility.

And in terms of the cost benefits of that move, sure, we started to see those and experience those, but still it's very early in the process. What is muting that is this Biochrom manufacturing move is so substantial; it's significant for us. It's our second-largest site and it's costing us money to move it.

But that's a good investment. That's a good investment for us to make and that's why when we talk about the realization of savings, it's really next year we start to benefit from these two events, which are major events for the Company.

Right, let me turn to (multiple speakers).

I was just going to add one point to this, too. This is not only for your question, but anyone else listening.

We are staying focused on our strategy. It's a long-term strategy; this is not a one-quarter strategy. And to Rob's point around some of the activity, especially around operational efficiencies and the cost savings that the business will see, this is a long-term play.

Yes, it was a little bit of a setback with the academic market. It was a setback with foreign-currency this quarter. But as we move forward, we are going to overcome this and we are going to be able to prosper due to the some of the activities that are not only taking place today, but have taken place over the last 12 months.

Good. I wanted to ask about the progression of the UK facility consolidation. That was announced that it would be over the course of this year. Can you give us now a little more detail around when we you think this year this would be complete?

It's already in process. We're working on it for a while. There's a number of products in the manufacture there and it requires hiring, cross training. There's travel involved. There's build out of inventories so that you have an adequate bridge to cut over.

In terms of completion date, you are talking the back half of the year. I would actually say later in the year. And again that is -- that's why when we look at it we look at it as a 2015 investment that begins to pay back in 2016.

Okay, so later this year, good. You know, one more question.

You've got a few months under your belt with the three recent EP acquisitions. Could you give us any color as to are they performing according to your expectations, and any color around how they have contributed to the business, either directly financially or strategically so far?

Ray, it's Jeff. The acquisitions have met our expectations. We are on track with integration. We are on track with the financial performance of these three acquisitions.

We are excited that we were able to go out and acquire these companies. It really fits well in our portfolio and it is going to help us drive the performance, not only of their products but of the legacy core products of Harvard Bioscience. We're already starting to see cross-selling and revenue synergies coming into play because of these three acquisitions.

I want to echo what Jeff is saying. They have performed well. We are pleased with the performance today. We're integrating those businesses, also the facilities and the costs.

And at the time we made those acquisitions, the guidance we provided was -- if you take the sum of the three it was about $12 million in the top line. Two of those larger businesses are euro denominated, but they still have performed well. They have met expectations and in one case actually exceeded expectations, so we're happy with the performance there.

Okay, great. Thanks very much.

Paul Knight, Janney Capital.

Jeff, I guess it's fair to say that electrophysiology is about 30% of your revenue now. Could you talk about is that market growing? Do you want to add more electrophysiology? And I guess generally what markets are most exciting to you right now based on customer demand, queries, etc.?

Paul, thanks for the question. The electrophysiology market is a growing market. Our three acquisitions, as we just stated, are really meeting the financial expectations that we had in place for Q1.

One of the interesting things about electrophysiology, or what we are doing with our current position in electrophysiology is, there is a lot of room for improvement here in the US. One of the acquisitions, Multi Channel Systems, majority of their business was in Europe. It gives us great opportunity to grow that business here in the US.

So we have increased the number of sales people in the US. We have a dedicated electrophysiology team and we expect growth coming in future quarters from electrophysiology.

But to that point, I am just going to switch gears here for a second. In terms of what products or markets are attractive to us in the future, one of the things that really impacted our business over the last quarter was we have 80% of our business in academia and that had a negative effect on us because of the softness in that space.

As we go forward, whether it's through research and development, whether it's through our acquisition strategy, if we can better balance our portfolio of products to really play more in the biopharma space, I think it is going to take away the type of risk that we saw this quarter. So those are the markets that are attractive to us right now.

And just in terms of a percentage of the total, the current e-phys franchise inclusive of the HEKA acquisition amounts to about 25% of our overall business.

Thank you.

(Operator Instructions) I'm showing no further questions at this time. I would like to turn the conference back to management for any further remarks.

Just like to thank everyone for calling in today. We appreciate it. We look forward to speaking to you after Q2. Thank you, everyone.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.