ICON PLC (ICLR) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, thank you for joining us on this call covering the quarter ended December 31, 2013. Also on the call today we have our CEO, Mr. Ciaran Murray; our CFO, Mr. Brendan Brennan; and our Chief Operating Officer, Dr. Steve Cutler.

I would just like to note that this call is webcast and there are slides available to download on our website to accompany today's call. I will now make the customary statement in relation to forward-looking statements.

Certain statements in today's call are or may constitute forward-looking statements concerning the Group's operations, performance, financial condition and prospects. Because such statements involve known and unknown risks and uncertainties and on circumstances and events that may or may not occur in the future, actual results may differ materially from those expressed or implied by such forward-looking statements.

Given these uncertainties, and as forward-looking statements are not guarantees of future performance, investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

This presentation includes selected non-GAAP financial measures. For a presentation of the most directly comparable GAAP financial measures please refer to the press release statement headed Consolidated Income Statements Unaudited US GAAP. While non-GAAP financial measures are not superior to or a substitute for the comparable GAAP measures, we believe certain non-GAAP information is more useful to investors for historical comparison purposes.

We will be limiting the call today to one hour and would therefore ask participants to keep their questions to one each with an opportunity to ask one follow-up related question. I would now like to hand over the call to our CFO, Mr. Brendan Brennan.

Thank you, Simon. Net revenue in quarter four 2013 was $345 million; this represents year-on-year growth of 15%. On a constant dollar organic basis year-on-year growth was 10%. For the full year 2013 net revenue was $1.336 billion, up 20% compared to 2012. On a constant dollar organic basis full-year revenue growth equated to 15%.

For the full year 2013 our top client represented 26% of revenue compared to 18% for the full-year 2012. Our top five clients represented 53% compared to 48% last year. Our top 10 represented 64% compared to 63% last year, while our top 25 clients represented 78% compared to 76% last year.

Our headcount remained steady during the quarter and we ended the year with approximately 10,300 staff. In quarter four Group gross margins were 27.7% which compared to 37.1% in quarter three and 36% in the comparable quarter last year. For the full year 2013 Group gross margin was 36.7% compared to 35.6% for the full year 2012.

SG&A for the quarter was 23% of revenue which compared to 24% in quarter three and 24.4% in the comparable quarter last year. For the full year 2013, SG&A was 23.5% of revenue compared to 25.2% for the full year 2012. Operating income for the quarter was $38.7 million and operating margin of 11.2%, which compared to 9.8% in quarter three and 8.1% in the comparable quarter last year.

For the full year 2013 operating margin was 9.7% compared to 6.6% for the full year 2012. The net interest income for the quarter was $40,000 and the effective tax rate was 14%. The effective [rate] was impacted by the positive resolution of a number of tax authority audits in several of our primary operating locations.

Net income for the quarter was $33.5 million equating to earnings per share of $0.53, which compared to earnings per share of $0.45 in quarter three and $0.34 in the comparable quarter last year. On a full-year basis earnings per share were $1.77, a 77% increase over last year.

DSOs in the quarter were 32 days which compared to 40 days in quarter three and 40 days in the comparable quarter last year. At the end of December 2013 we had net cash of $321 million compared to $219 million at the end of September 2013.

With all that said, I would like to hand over to Ciaran now to talk about our progress against our strategic plan and our outlook.

Thank you, Brendan, and good day, everyone. 2013 was another year of progress for ICON. At the beginning of the year we guided that our revenue would grow by around 15%, our exit margin would be circa 10% and our full-year earnings per share would be in the range of $1.44 to $1.60.

I am pleased that we have achieved all of these targets. Our revenue grew 20% in total, 15% on a constant dollar organic basis. Our Q4 operating margin was 11.2% and our earnings per share for the full year were $1.77.

We've continued to enhance our capabilities this year in line with our strategic plan. The acquisition of the clinical trials division of Cross Country Health Care significantly increased the US presence of our docs group enabling it to deliver truly global resourcing and FSP solutions. The combined organization is now a global leader in this market segment.

We made further investments in our differentiating technologies, launching new services that leverage our Firecrest and ICONIK platforms. These innovative solutions are helping our customers improve the quality and the productivity of the development programs.

During the year we integrated our Central Laboratory business into our Phase II to Phase IV Group, reflecting our increased leverage of laboratory data in the planning and performance of clinical trials and we are encouraged that allowance performance in this new structure as we start to see the benefits of increased cross-selling into our customer base.

We also restructured our early fit phase business this year to better align our capacity with the customers' needs and increase our focus on translational services that target patient populations. And we have continued to enhance our commercialization and outcomes offerings which are increasingly important to customers as they look to evaluate the economic value of new treatments.

In 2013 we continue to leverage our cost base, reducing our support costs year on year by 170 bps and exiting the year with SG&A at 23% of revenue.

In 2014 we will continue to execute against the same core pillars of our strategic plan to ensure we have an organization with the appropriate scale, services, technology, scientific and medical expertise to develop to deliver high-quality differentiated solutions to our customers.

We ended 2013 with gross bookings for the year of almost $2 billion, and in Q4 we recorded a record level of gross business wins of $540 million. Net bookings last year grew to $1.65 billion, which means our trailing 12 months net book to bill now stands at 1.23, our backlog has grown by 12% to over $3 billion and we have 75% coverage of our 12-month forecast revenue.

We expect the market to continue to grow in 2014 driven by an increase in outsourcing penetration combined with modestly increasing R&D spending. As a result of all of that for 2014 we are guiding revenue to be in the range of $1.415 billion to $1.465 billion, which is an increase of 6% to 10% and our earnings per share to be in the range of $2.05 to $2.20 which represents an increase of 16% to 24%.

Before I move to Q&A I'd like to thank everyone at the ICON team whose hard work and commitment has contributed to another year of significant progress for the Company. Thank you, everyone. We are now ready for questions, Suzanne.

(Operator Instructions). Tim Evans, Wells Fargo Securities.

Ciaran, nice job on the margins. I am wondering -- I think you have said in the past that risk-based monitoring had started to contribute there. Is that something that you are still seeing?

Yes, we are seeing a little bit of that. More and more of our studies are being conducted in that platform, Tim. And it does have the opportunity to enhance margin. And dependent very much though on the particular study in question.

So while it is something that we see as being important to the future and is increasing, it wasn't the significant or a significant driver in delivering the margin performance this quarter, which really came just as a result of starting to see more of the benefits of the work we have been doing over the last couple of years around productivity and management of our costs.

Okay, great. And then on the book to bill, going forward in 2014, can you help us understand what your guidance implied? Is it going to be similar to your trailing 12-month book to bill for 2013, perhaps?

It is. Our guidance implies an assumption of 1.2 for our book to bill which is our sort of historical modeling which is based on longer term patterns as we look back over the history of our Company.

Great, thank you very much.

John Kreger, William Blair.

Kind of a similar question, Ciaran, about your expectations in 2014. If you think about your client revenue concentration, obviously that has trended up over the last couple of years. From your perspective do you think we have hit a plateau yet? And if not when do you think we could see those numbers sort of level out and perhaps even inch lower a bit?

A lot depends, John, on what we continue to win going through the next couple of years. There are still significant and interesting conversations with a number of potential customers across the industry.

But based on what we see at the moment and in the absence of making any guesses, I would say that our concentration is pretty close to the plateau and that as the Company grows over the next few years we should see it start to decrease.

Great, thank you. And maybe a quick follow on. I'm guessing you probably had some kind of strategic discussions with your clients as we came up to the end of calendar 2013. Did anything surprise you or are the types of requests you are getting from clients pretty similar to what you were hearing a year ago?

They are pretty similar to what we were hearing a year ago.

All right, thanks.

Eric Coldwell, Robert W Baird.

First off, on the pipeline a couple of questions already; I will just ask one more which is just general commentary on what you are seeing from nonstrategic accounts, the smaller biotechs, mid-tier pharmas, etc., strong biotech financing for the last two plus years, I'm curious if you are really starting to see an increase in demand from say the non-top 20 pharmas?

And then my follow-up question or alternative question is on the cash, I mean just a phenomenal performance on the balance sheet and cash flow this quarter. You have got a pretty big cash position. I'm curious if you can give us some thoughts on your capital deployment strategy over the next year. Thanks very much.

Thanks, Eric. I will maybe ask Steve to talk about the biotech and non-top 20 market and what we've seen. And then I will come in and talk about how we are planning to put our cash to work.

Yes, Eric, I think we have seen a lot of strength in the biotech market over the last, well 12 months really and been successful in our business development efforts around that segment. A number of -- we are seeing a number of these companies coming to us with very significant programs that are going right through to Phase III and even beyond.

So we see a lot of opportunity in that marketplace. We have been, I think, successful in that marketplace and we see it well-funded and growing going forward, an increasing part of our portfolio. So we are pleased with the way that market has developed and the way those companies are finding access to capital.

Okay, about your question about the cash, Eric. Yes we have had a good -- particularly good year, a good couple of years in generating cash and the balance sheet is very healthy. If you look back, I mean the question for us is that we work in a market that is constantly changing.

We believe there is opportunity in that market over the next number of years as the bio pharma industry continues to outsource more and look for more productivity and its R&D offering as it develops more partnerships and partnerships of a more strategic nature.

And in order to play in that market we took the decision a number of years ago that we had to invest in having the scale and the range of services and the technology and innovation that will help our customers do that, replace human and intellectual capital that they are moving out of their organization. And give them the tools, and deploy the tools to increase the quality and productivity of R&D development.

So I think a since probably 2008 we have made around 11 acquisitions that have all been geared at improving our capability and the service we can provide. I think we have probably spent about $300 million in that period.

I think if you look at the performance of the Company, particularly over the last couple of years, we are seeing the benefit of those investments. But in a market like ours that is constantly changing and with that opportunity I don't believe we have the luxury of being able to say we have built everything out, we are fit for purpose and that is it.

So in discussions with our customers in looking at the market we have identified a number of areas where we still need to build up our capability. We would like to expand further in Asia Pac around a technology agenda.

I think there is still a way to go to integrate service offerings and keep improving our customer offerings and certain specific capabilities and skills. As customers de-skill in areas of medical and scientific capability, we look to add strength, the increasing importance of market access and outcome studies lead us to want to invest more in those areas.

So we had plan and we have some targeted areas that we will invest in both organically and with specific bolt-on targeted M&A similar to what we've done in the past. That is how we intend to deploy the cash, we deploy it primarily with the belief that we want to add and drive shareholder value as we have done over recent years.

And when we get to the point where M&A capabilities aren't as strong as the agenda, we'll look at other options such as in the past couple of years ago we did -- opportunistically did a share buyback. We do have approvals in place so that at any given point in the future, if that is a better use of the shareholders' funds, we have the option to do that. So that's how we look at the cash deployment strategy.

Ciaran, thank you so much for that, that is a great response. I'm curious -- you talked about the 11 deals since 2008. So approximately two per annum, is that the kind of pace that we might expect here in 2014? And given the $300 million spent on the 11 deals would we expect deals of a similar size this year or perhaps something a little meatier in terms of the size of companies you might be looking at?

We are still -- I think they will be bigger on average than the historical numbers that you have seen. But they will still fall within a kind of -- they will be meatier but they will be targeted bolt-on style acquisitions, they won't be large or transformational. We very much work on the structure of looking to add targeted capabilities and to manage integration risk.

As to the number, well, you know yourself, Eric, sometimes you can get deals done and sometimes you can't. But two or three a year would be what we would normally target. And some years we do that and some years, like last year, we do less. And it really just depends how the chips fall and what you are looking at.

That is great. Thanks very much.

Douglas Tsao, Barclays.

Just following up on Eric's question first. Just when you think about the deals you have done over the years they have been related to sort of on the staffing side of the business as well as technology as sort of well as more regional focused expansion -- extension of capabilities. Just curious when you think about your M&A targeting today what are your highest priorities if we think about those three sort of broad buckets?

It is basically a little bit more of the same only just shared and slightly differently, if that makes sense. We made acquisition of certain capabilities which have added to our overall ability to perform. And in some of those same areas we are happy to continue to build scale.

We made a couple of acquisitions a few years ago with PriceSpective and Oxford in commercialization and outcomes research. They have worked very well for us and those organizations contribute greatly to our capability today. But there are opportunities in that market to grow and we would be happy to continue to invest in that market and to grow more so we continue to look there.

And sort of geographic and regional capabilities, we are always looking to add it to wherever the market is going. A few years ago it was Eastern Europe, we invested there mostly organically. In Asia we did a combination of organic and M&A.

We will continue to look in Asia and at other developing new regions at what we need. So there won't be a radical change in anything that we have done, we will just keep trying to build the scale we have. And I suppose technology is the interesting area that it is constantly changing.

We have an agenda there to drive innovation and the deployment of technology to break down silos and get more integrated offerings to speed up and development and improve the quality of it. So wherever technology takes us in the big data agenda in that field we will be looking in that sector. Would you add anything to that?

I think that is right. I mean certainly on the functional side we see some opportunity, but that is around some of our medical regulatory expertise and that is certainly where we are focusing. But I can't add much more to what you said.

Okay, great. And then just one follow-up. When I look at the guidance, obviously for the year you are forecasting some very nice improvement in the operating margin. The revenue guidance struck me as a little bit more conservative relative to the bookings that you have seen over the last couple years and certainly in this last quarter which was strong again.

Just curious to the extent that there is potential better top-line growth, is there some impact on the margin or moderation on the pace of margin improvement that we should expect? Or do sort of feel that the business is sort of hitting a level of scale that that traditional trade off we have seen between growth and margin expansion could be mitigated on a go-forward basis?

I think you may have two questions in there for me, Doug. I think it is fair to say, no, there will still be a trade-off between revenue growth and margin expansion or maintenance.

Because revenue growth, really when it gets to certain levels that you have to hire more significantly ahead of the curve and build your capabilities faster. And you tend to have to do that in advance of the revenue flowing. So you're always going to get a time lag and that will have and potentially can have short-term impact on your ability to grow your margin.

Looking at the guidance generally your point about it being conservative, I think I would point to the fact that in Q4 we grew 10% on a constant dollar organic basis which kind of sets the kind of initial tone. I would further look at a trailing book to bill of 1.23 and traditionally that supports growth in the high-single-digit to touching low-double-digit numbers which is reflected in our guidance.

We have had a good year but we have a backlog full of very interesting but large and complex studies, a lot of it in our oncology. And what you find with large and complex studies is the very complexity of the study means they are more prone to perhaps not starting off as quickly as expected, they are more prone to delays, they can be a little bit more challenging. So we have to factor in that when we look at guidance.

And of course then the very size of the projects because they are so meaty means that if they are delayed they have a higher impact perhaps in revenue than a few years in the past and that when the backlog was made up of smaller and not so many complex projects.

So we have to weigh all of those factors together when we do the guidance and that is how we come up with the number. To the extent that we are faster than it would go faster it would drag on the margin. So no real change there.

And then if I can just get one more final quick follow-up. Traditionally we've seen a lot of investment in oncology from smaller biotech companies, but we've certainly seen in the last few years a real major investment by major pharma. Is that reflected in your backlog as well and in terms of your reference point referencing to some large oncology projects in your backlog?

It is, yes.

Okay, great. Thank you very much for all the questions.

Tycho Peterson, JPMorgan.

Ciaran, I'm wondering if you can maybe just flesh out a little bit more color on some of the new market opportunities you talked about, starting with the cross-selling opportunity around the Central Lab business now that that has been integrated. And then follow up on kind of the outcomes offerings -- how large is this business today and how much of that business is being driven by pharma, pull versus push?

I mean with the cross-selling it is simple enough in the market. We have just integrated the management and the data capabilities in our lab division and brought the offering to customers that we traditionally work with perhaps in Phase II and Phase III and we are just gaining some traction and introducing our lab services there.

And we'll continue to do that. There is no rocket science in that one. It is just about integrating those two offerings together when we do RSPs for new business and going around our existing customers and showing them our capability, which perhaps we hadn't made them as aware of in the past.

And on the outcomes business it is a small part of our business, but it is technically very expert and adds a lot of value to those kind of drug development process. We see more of that business integrated earlier in the planning process, so in the days when everyone just talked proof of concept, now you tend to sit down and think both proof of concept and proof of value earlier in the process so you can design the trial then so that it more seamlessly moves into the Phase IV arena.

And really there is not much more I can say on that. We have a bunch of very expert consultants who are doing a good job in that phase -- in Phase IV, and then taking it back into Phase II. And we continue to see it grow but off a relatively small base.

And then a follow up, you've been fairly open about kind of the renewal process. Obviously it's been a focus for the last couple earnings calls. Can you maybe just bring us up to speed as to where we are in the process of going through some of the renewals? And any change in your view in terms of the pricing dynamics on the renewals or maybe the increased scope of work that is coming as you go to kind of re-sign some of these customers?

There is nothing I can really add to what we talked about last year. I mean I think we have a business now that is made up of a bunch of customers and every few years the contracts come up for renewal and it's really become just a normal ongoing feature of what we do.

I think that kind of stuff got focus a few years ago when this was a newer departure in the business now; I characterize every much as business as usual. We talked about last year the fact that we renewed a couple of contracts and there was no significant difference in pricing and that some of the scope on them increased.

As we go forward into the future we will have discussions with customers about that. But at the minute it is too early for me to say how those discussions might go. We can only point to history and say that the renewals that we have had have tended to work out pretty well for both parties.

And then just last one. Can you talk on the margin about where you may be making incremental investments as we think about 2014? I mean obviously you had some question earlier on M&A, but as we think about kind of organic growth are there areas where you're kind of stepping up spending internally that you would call out?

No.

Okay. Thank you very much.

Steven Valiquette, UBS.

I was also going to ask about the top-line guidance, but -- and you touched on this part of it a little bit. But your backlog burn rate has been pretty consistent in the 11% to 12% range. I'm just curious whether you're anticipating any change in that burn rate in 2014 in the context of your expectation of your sales trends for guidance for this year.

No, not within that range, Steven. If you look back I think last year we had some quarters where back in 2012 where one was 11% and 11.2%, we have seen some more recent quarters at 11.8%. But it can be a little lumpy and it is hard to predict exactly, but we tend to assume somewhere around 11.5% as being the sort of steady-state burn rate as we model our numbers.

Okay. And then just quickly, recognizing that CRO industry penetration rates are way more important than total R&D spend patterns, you did mention for your outlook that you do expect the client base to witness some modest R&D spend growth.

I was just curious for historical context, is your view on that a change from what you were seeing previously? Or is that the same view that you have had around the modest R&D spend growth?

It is broadly the same view, it can depend I suppose for all of us in this business your R&D spend is a little bit dependent on the particular portfolio of clients that you have. But over the last few years we have formed the same view that R&D spend is broadly, depending on the timing, flat to growing modestly. So there is no fundamental change in our assumption there.

Okay, got it. Okay, thanks and congrats.

Robert Jones, Goldman Sachs.

Thanks for the questions, guys, it is [Stefan] calling in for Bob. Firstly on the tax rate, it has been pretty low the past two years, below that 18% sustainable rate. I guess what is the assumption for 2014? Seems as though there could be a headwind there which probably implies even better EBIT growth than we were expecting.

It is Brendan here. Just on our expectation for next year, I think that 16% would be how we have looked at it in our guidance when we have looked out at the tax rate for 2014. So that is probably the right number to use as you think about your modeling.

They can be -- you are right, we have been more successful in that over the last couple of years and taxes can -- it is a subjective area so it can go up and down. But certainly what we are focused on at the moment is 16%.

And I guess is the 18% to 20% still the appropriate long-term range to look at?

No, no, as I said 16% for growth rates for next year and we'll see what we can do with it thereafter.

Okay, great. And then on the expense leverage, the SG&A line has been the source of the operating margin expansion I guess for some time, up until two quarters ago. Since then it has been mainly the gross margin line. Should we think about SG&A expense ratio being relatively consistent going forward with the expansion really coming in gross margin?

Yes, we have seen a lot of success on the SG&A, as you quite rightly point out, over the course of 2012 and 2013 indeed. And so, while we expect some efficiency there as we go through the course of the year, yes, a lot of the benefit has been delivered. The gross margin, as you say, in the last couple of quarters has been very, very pleasing. And again, that will be incremental improvements as we go through 2014.

Great, thanks for the questions.

(Operator Instructions). Greg Bolan, Stern Agee.

Thanks for taking our question this is Mike Ward and for Greg today. We were just wondering has management noticed any change in the intensity at which their large competitors are looking for Phase III business.

It's Steve Cutler here. No, I don't think so. I think we have seen over the last 12 months a very competitive pricing market environment. Phase III is -- there is an intense competition out there for it, but I don't think it is any more cutthroat or difficult than it has been in the past. It remains a very competitive industry.

I think we will probably find, if we are successful in winning earlier phase work, early phase and Phase II work we have an advantage as we move into Phase III. And so I guess the intensity of competition tends to start earlier in the phases if anything. I think customers tend to want to stick with providers who can take them right through the phases. So I think we see that as an opportunity getting in early.

But, no, I don't think -- if it is the pricing environment you're looking at I don't think the pricing is cutthroat occasionally we will see some of our smaller providers come in and with some pricing that is a little under the -- well, a little more challenging to us.

But I think customers are smart enough now to realize that they get a better service from the larger companies and ultimately better quality and more reliable delivery. So that is essentially what we are seeing.

Great, thanks. And then just a follow-up. I think we asked this last quarter, but we wanted to ask if you guys have seen any evidence of budget flushing by big pharma.

No, we haven't seen any evidence of that.

Okay. Thank you.

Declan Morrissey, Davy Research.

Most of the questions have been asked, but just maybe one quick one. Let's say some of your competitors in addition to offering CRO might offer commercialization upstream -- or downstream services I suppose. Do you think in any way that you are disadvantaged versus those guys in terms of being a more focused business in terms of winning new business, maybe if you have any comments on that.

No, we don't feel we are disadvantaged at all. They are two very different businesses. And there is no real linkage between them and we have never found ourselves disadvantaged by not being in that space.

Okay. Thank you.

(Operator Instructions). Todd Van Fleet, First Analysis.

Just wanted to ask you about the docs business and are you seeing in the marketplace that sort of offering becoming of increasing importance relative to maybe some of the more traditional outsourcing models? So maybe if you could talk to that dynamic a little bit.

And then thinking about the margin potential for a business like that, do you see the potential being kind of similar as other aspects of your late stage development activities in terms of margin potential and potential for margin expansion, that sort of thing? Thanks.

Yes, Todd, it is Steve Cutler let me talk a little bit about docs. In terms of the models, we are seeing I think significant interest from customers on the FSP type models. There are a number of models across the industry, full service is obviously well established at the FSP and even models that represent some sort of hybrid between the two are becoming more common.

So we see interest in them, we see ourselves at an advantage for having a group like docs who can provide that sort of service. And we see ourselves able to use those -- use that group as a backup for our full service model as well in terms of offering that contracted resource.

So I think there are some customers who tend to go towards a full service model, there are others who tend toward the FSP model there are others who are sort of somewhere in between. And we see -- and in fact and some customers both models exist. So we see there is room for all of those models within the industry and we see we are well placed to be able to offer them.

In terms of the margins, I don't think there is any doubt that in the more contracted resource area the margins are lower, we would expect that, the risk is lower. In the FSP area I think the margins are kind of somewhere in between that and the full service.

And you could have a debate for hours about the pros and cons of FSP versus full-service and other -- some people have bought in in some areas and others in other areas. But I think the margins are generally a little lower on the FSP side of things.

But then perhaps the opportunity for innovation and creativity is a little lower as well. So I think both have their strengths and both have their potential issues and weaknesses but I think we feel good about being in a place where we can offer one or the other or a hybrid of both.

Great, thanks.

Ross Muken, ISI Group.

Hi, this is Elizabeth Anderson and for Ross. I was just wondering where you see euro and Japanese Pharma versus US pharma as it relates to strategic process -- partnerships?

Our strategic partnerships thus far have tended to be with European and US pharma. Japan has been slower to outsource certainly the Japanese market, some of their subsidiaries in our part of the world do tend to engage and it. And we have had relationships in the past with them.

But from a -- in the Japanese market point of view we don't have significant strategic partnerships there and tend to work with our European and U.S. partners and that market.

Okay, great. Thanks so much.

Thank you. As there are no further questions I would now hand you back to Ciaran Murray for any additional or closing remarks.

Okay, thank you, everyone, for listening today. Just to sum up I would say I think we've made good progress in 2013 as we continue to position ICON as the global CRO partner of choice of the Bio Pharma industry. We are all looking forward here to working hard in 2014 to build on the strong foundation that we have set last year. Thank you very much.

Thank you. Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation and you may now disconnect.