iRobot Corp (IRBT) 2011 Q3 法說會逐字稿

Good day, everyone, and welcome to the iRobot third-quarter 2011 financial results conference call.

This call is being recorded.

At this time for opening remarks and introductions I would now like to turn the call over to Elise Caffrey of iRobot Investor Relations.

Please go ahead.

Thank you and good morning.

Before I introduce the iRobot management team, I would like to note that statements made on today's call that are not based on historical information are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements.

Additional information on these risks and uncertainties can be found in our public filings with the Securities and Exchange Commission.

IRobot undertakes no obligation to update or revise these forward-looking statements whether as a result of new information or circumstances.

During this conference call we will also disclose non-GAAP financial measures as defined by SEC Regulation G, including adjusted EBITDA which we define as earnings before interest, taxes, depreciation, amortization, merger and acquisition expenses, restructuring expenses, net intellectual property litigation expenses and non-cash stock compensation expense.

A reconciliation of GAAP and non-GAAP metrics can be found in the financial tables at the end of the Q3 2011 earnings press release issued last evening, which is available on our website.

On today's call, iRobot Chairman and CEO Colin Angle will provide a review of the Company's operations and achievements for the third-quarter 2011 as well as our outlook for the business for the rest of 2011 and John Leahy, Chief Financial Officer, will review our financial results for the third quarter and provide our outlook for financial expectations for the fourth quarter ending December 31, 2011 and fiscal 2011.

Then we will open the call for questions.

At this point, I will turn the call over to Colin Angle.

Good morning and thank you for joining us.

Our third-quarter results were excellent across all measures.

Revenue was up 28% from Q3 last year and EBITDA for the quarter increased 76% to $20 million, far exceeding our expectations.

EPS grew 85% to $0.50 from $0.27.

Excluding one-time tax benefits, EPS more than doubled in Q3 over last year.

John will discuss the details of the tax benefit later in the call.

Due to strong performance by both divisions in the third quarter, and our expectations for the fourth quarter, we are increasing our full-year 2011 expectations for the second time this year.

Our Home Robot business is exceeding our expectations while the government business is on track to deliver on the 2011 expectations (technical difficulty) we shared in February.

(technical difficulty).

We do expect full-year 2011 revenue (technical difficulty) $465 million (technical difficulty) and $470 million, an increase of roughly 17% over 2010, full-year EPS in the range of $1.32 to $1.36 and full-year 2011 EBITDA of $67 million to $69 million, an improvement of about 40% year over year.

EPS includes one-time tax benefit of $0.12 in Q3.

We are increasing our expectations while also increasing our investment in research and development and marketing programs critical to maintaining our industry-leading position.

Based on our current view of future defense spending, we have made a difficult decision to implement a reduction in force in the Government division during the fourth quarter; a decrease in our 2011 externally funded research and development efforts underlies this action.

The reduction is limited to our Government and Industrial Robots division which currently comprises approximately 40% of our annual revenue and will not impact our Home Robot division.

This action is expected to result in a nonrecurring fourth-quarter restructuring charge of approximately $1 million.

Our fourth-quarter and full-year 2011 financial expectations include this charge which is expected to impact EPS by approximately $0.02 to $0.03.

Now I'd like to take you through some of the highlights of the third quarter.

On the Home Robot front, revenue increased 32% in Q3 year over year and are up 27% year-to-date.

Strong demand for our Roomba 500 robots fueled Home Robot growth in Q3.

Sales of both our new Roomba 700 and Scooba 230 robots, which were only available on our website through the third quarter, continued to exceed expectations.

Near the end of the quarter we began shipping our Roomba 700 series to select retailers in the United States and to several international customers for limited distribution in overseas markets.

I was in Japan several weeks ago to introduce the new Roomba 700.

Our launch attracted more than 150 reporters and response from the Japanese retailers with whom I met was overwhelmingly positive.

International Home Robot revenue increased 56% in Q3 year over year as demand in overseas markets continued to be strong.

In meetings with our European partners, they commented that market growth for Roomba is outpacing the impact of a weakening economy.

We are benefiting from the fact that our target customers, who we call the modern professional, is not being as severely impacted by economic conditions.

However, we are closely monitoring indicators for signs of weakness in this market.

We expect to see continued growth in the fourth quarter as the Roomba 700 robot hits select retail stores.

Domestic Home Robot revenue was up 10% year-to-date and the US retailers are cautiously optimistic about the holiday season despite the macros.

The fourth quarter is historically our strongest domestic quarter and we expect to see year-over-year growth in 2011 as well.

Our initiative to improve domestic profit margins through strategic management of channel, customer and product mix helped deliver a 500 basis point improvement in Home Robot gross margins to 45% in Q3.

We are committed to our strategy of profitable growth by continuing to focus on higher end products and exploring attractive new channels.

Our outlook for Home Robots is very positive and I am confident that we will continue to see strong growth driven by international customers, improvement in domestic customer spending, and expansion of new product distribution.

Our Government and Industrial Robots division's revenue grew more than 20% in Q3 over the same quarter last year as we began fulfilling orders received early in the quarter.

We are on track to deliver the 2011 expectations we shared in February.

Last quarter, I provided you with our expectations for awards of both PackBot and SUGV IDIQs, as well as delivery orders that we anticipated receiving prior to the end of the US government's fiscal year on September 30.

We received and announced all of those contracts during the quarter.

To recap, we've received a five-year $60 million IDIQ contract from the Army for up to 300 PackBots, which will allow the Army to buy PackBots, spare parts and repair services primarily to support foreign military sales.

We received a delivery order for approximately $1 million under this contract; a two-year $51 million IDIQ contract from the US Army for up to 350 SUGV 310s and an initial $11 million delivery order for 70 units; a $21 million delivery order under our existing $230 million IDIQ from Navsea for 100 PackBots.

In addition, we have begun building 76 SUGVs for the Brigade Combat Team Modernization Low Rate Initial Production initiative under an authorization to proceed from Boeing, and our small FirstLook throwable reconnaissance robot is being considered by the DOD to meet the needs of a Joint Urgent Operational Needs Statement for an ultralight recon robot capable of supporting dismounted operations.

All of this is very good news and speaks to the ongoing demand by the Federal government for cost-effective products that enable improved mission efficiency while keeping warfighters out of harm's way.

Our robots are part of the future.

During the quarter, we also announced the partial termination of the BCTM contract by Boeing.

This termination impacted only the development work we were doing under the contract, which we stopped as of September 30, 2011, and not the aforementioned Low Rate Initial Production.

There continues to be very strong demand for this product from the soldiers in the theater and support from military leadership.

Therefore, we are working with the government on a bridge contract that would reinstate the development work until a new contract vehicle is awarded in 2012.

This action will have a nominal impact on 2011 revenue.

We have estimated the addressable market for SUGVs to be approximately 15,000 robots over the next five to seven years.

The US Army has a written requirement for the purchase of 8,200 SUGVs and the balance of the opportunity is comprised of our estimate of the potential demand from other branches of the armed services, as well as international customers.

The timing and form of the contracting vehicle or vehicles to procure the SUGVs are uncertain, given the current situation in Washington.

Going into 2012, we expect the Federal government to be operating under a continuing resolution and that the defense budget will be cut further following the completion of work by the Joint Select Committee on Deficit Reduction.

Our decision to implement a reduction in force was driven primarily by a cutback in external research and development funding from the government in 2012, which we expect will directly impact our G&I contract revenue next year.

That said, we believe that current demand for our products and technology and the fact that we represent the future of modern military position us well within the defense contractor community.

The inherent lumpiness of our G&I business has been exacerbated this year by competing budget priorities in Washington resulting from the state of the US economy.

The delayed passage of the 2011 budget resulted in lower year-over-year growth for our G&I division in 2011 and we expect a similar challenge in 2012.

In summary, our Home Robot business is exceeding our expectations while our government business is on plan to deliver 2011 expectations.

Because of our confidence in delivering more profitable results than we discussed in July, we are increasing our expectations for the full year.

I will now turn the call over to John to review our third-quarter results in more detail.

Thank you, Colin.

Our performance in the third quarter was very strong.

Revenue, earnings per share, and EBITDA all exceeded our expectations.

Revenue was $120 million for the third quarter, an all-time high for this period and we are on track to deliver another record year.

Growth in our international Home Robot business continued to show strength despite global macro issues.

Our government and industrial robot business grew more than 20% in the quarter consistent with the expectations we've discussed on previous earnings calls this year.

Earnings per share for the quarter were $0.50 compared with $0.27 in Q3 last year.

Excluding the impact of a $3.5 million tax benefit in 2011 and the $2.3 million one-time benefit recorded in 2010, EPS for the quarter would have been $0.38 compared with $0.18 last year.

EBITDA for Q3 increased more than 75% to $20 million and year to date EBITDA has grown 37%.

Importantly, EBITDA reached 17% of revenue, our highest level ever, during the quarter.

Operating cash flow was very strong at $25 million in Q3 and $19 million year-to-date, due to record net income and reduced inventory levels.

Our cash and investments totaled $145 million, up $38 million from Q3 last year.

Our return on invested capital or ROIC is now in the high teens.

Our cash and our ROIC are the highest in the Company's history.

In the Home Robot division, revenue of $72 million increased 32% from a year ago.

International revenue increased 56% in the quarter year over year and comprised 75% of Home Robot revenue.

While domestic revenue was down 10% in Q3 due to timing of shipments, we expect that market to rebound in Q4.

Home Robot gross margins improved 500 basis points, primarily due to product and channel mix.

In the G&I division, revenue was $48 million compared with $40 million a year ago.

Product lifecycle revenue was $12 million or 32% of G&I product revenue.

As anticipated, we've made significant shipments of PLR in the third quarter and expect to do so again in Q4, which will result in full-year PLR equal to 25% to 30% of G&I product revenue.

Product backlog at the end of the quarter was $28 million.

For the total Company, gross margin for the quarter was 42% compared with 35% last year, up more than 600 basis points.

The year-over-year increase was driven primarily by favorable revenue mix in Home Robots and higher overhead absorption in G&I.

Gross margins have improved more than 1,000 basis points from two years ago.

Operating expenses grew to 29% of revenue from 27% in Q3 last year.

The increase was due to higher investments in IR&D which were up 45% in Q3 and 58% year-to-date.

Increased spending on marketing programs, up 36% in the quarter and 30% year-to-date, also contributed to the higher operating expenses.

We began these initiatives in the third quarter of last year and built the increases into our 2011 plans.

Now I would like to provide you with additional detail for the financial expectations Colin discussed, as well as color on the balance of the year.

We expect Q4 to be a strong finish to the year with revenue growth higher than our record-breaking Q4 last year.

We expect Q4 revenue to grow more than 15% over the last year to a range of $130 million to $135 million, EPS of $0.26 to $0.30, and EBITDA of between $16 million and $18 million.

For the full year, we expect revenue of $465 million to $470 million, EPS of $1.32 to $1.36, and EBITDA of $67 million to $69 million.

Importantly, EBITDA -- which we consider to be our key profitability metric -- will reach 15% for the full-year 2011.

This is a full year ahead of schedule for attaining our midteens EBITDA margin goal.

For the full year, we expect Home Robot revenue to grow more than we anticipated at roughly 21% to a range of $275 million to $280 million.

We expect G&I revenue to be $190 million to $195 million or roughly 12% growth, in line with our previous expectations.

Fulfillment of G&I contract awards received in Q3 will result in higher robot shipments in Q4 than in Q3.

Home Robot revenue should be up slightly in Q4 over Q3 due to the holiday season, but not as significantly as it has been historically due to the non-seasonal nature of our international business.

We completed two tax initiatives during the quarter, which resulted in a lower Q3 tax rate and lower actual cash taxes.

We booked a cumulative benefit associated with a Section 199 deduction, which is available to domestic manufacturers and software developers.

The second initiative involved a comprehensive true-up of R&D tax credits claimed in prior years.

Our Q4 tax rate will be roughly 31% and 25% for the full year due to the Q3 benefit.

As Colin indicated earlier, for the full year, we are increasing our expectations for EPS and EBITDA.

Cash from operations is expected to total $35 million to $38 million in line with our goal of high single-digit operating cash flow margins.

Finally, as we're working on our 2012 annual operating plan and the target underlying our three-year financial plan, I would like to note several things.

As you have heard Colin discuss, we are expecting an overall decrease in DOD spending that will impact us at some level.

Our G&I business will likely not grow at the annual rates we have seen over the past couple of years.

In 2011, we felt the impact of a continuing resolution when we set divisional growth expectations at midteens, following a year in which revenues grew nearly 30%.

The reduction in force that Colin discussed is based on our expectation that G&I growth will slow in 2012.

However, the action will result in savings that will help ensure our continued strong financial performance.

Our Home Robot division continues to grow in long time and in new markets through the sale of existing and new products.

It currently comprises more than 60% of the Company's revenue and we expect it will drive iRobot's growth over the next several years as the government sorts through its budget issues.

Now I would like to turn the call back to Colin.

Our results in the third quarter exceeded our expectations.

Our international Home Robot business continues to perform well in long-term markets as it lays the groundwork in new markets.

Our two new Home Robot products continue to sell well on our website and retailers are very excited about having them for the holiday season.

We received and announced all of the government contracts we anticipated, which will enable us to meet our increased expectations, and IR&D funding is up 58% year-to-date, demonstrating our continuing commitment to investing in our future.

I would like to leave you with a few thoughts about how I see the Company and our vast opportunities.

IRobot is the leader in providing remote presence in automated home maintenance solutions and we are committed to continue making the technology investments required to make and maintain our leadership position for years to come.

Both the Roomba and PackBot, our flagship products, have been sold around the world for nine years and we are currently producing the sixth generation of Roomba.

We have significant runway with our core Home Robot products as the current market penetration is still less than 10%.

Beyond our core are many potential products to further automate the home inside and out that we can bring to the market through internal development or acquisition.

We have built bigger and smaller versions of our PackBot platform, the Warrior and FirstLook robots, in response to the developing needs of our military customer.

Our technology is enabling increased autonomy to improve the tempo of operations and effectiveness of the warfighter and through continued development, our robots will reduce the cost of conflict through force multiplication.

Importantly, we have exceeded our core three-year financial goals for revenue growth, EBITDA margins, and operating cash flow.

Today iRobot is a diversified, global technology company with a portfolio of products meeting the needs of customers worldwide, and our exceptional results reflect the increasing diversification of the Company.

We are successfully meeting the challenges of international economic uncertainty and continuing unresolved US budget issues by delivering multiple products into multibillion-dollar automated home maintenance and remote presence global markets.

With that, we'll take your questions.

(Operator Instructions).

Paul Coster with JPMorgan.

Good morning.

It's actually Mark Strouse on behalf of Paul.

Congrats on the quarter first of all.

Looking out to 2012 on the G&I side, so you expect the growth rate to be coming down from the past couple years, but at this point in time are we still expecting growth or do you think there could be potential declines there?

Right now, we are not giving our 2012 guidance.

We are trying to give you a little bit of color.

I think that certainly trendwise we are seeing a decrease in growth rates.

Where it falls it's -- we happily have a few months to figure that one out in more detail.

Okay, got it.

And then can you just give an update on the international launches?

I think last time we heard that South America would become material in 2012 and that China would become material in 2013.

Is that still the case or --?

Absolutely, those are the expectations that we would like to be setting.

We think we are getting some on track with some momentum in South America so that that will become something that is a revenue driver.

And I think that China, while we would love it to move more rapidly, experience has shown us that a little bit of conservatism in ensuring that we have time to make sure that our strategy is working, would push out materiality to 2013.

That's it for us.

Thank you very much.

Jim Ricchiuti with Needham & Company.

Thanks, good morning.

Congratulations on the quarter.

Thank you very much.

I apologize, I joined the call late so if this was already discussed in the Q&A I can take this off-line, but just had a question on the rollout of the 700.

Have you indicated at all as to how many retail stores you are in in the US or you expect to be in in the US in Q4?

We have not.

What we have said is that this is -- our strategy for new product launches in Home Robot starts with a very controlled direct launch, and that is what we did at the beginning of this year followed by retail expansion to select customers.

So we will -- you'll start to see the Roomba 700 in higher end specialty retail in the back portions of this year.

And internationally, we are also rolling it out to more of our specialty retail channels around the globe.

Over time, you will see the 700 series broaden in its retail distribution as part of our strategy.

And, Colin, in the select retail outlets that you are putting 700 into, will it be in addition to all of the 500 series models that they are carrying or will it replace one SKU?

It will replace the highest end 500 series and take over the spot as the most advanced product in our line.

The remainder of the 500 series will stay intact in our distribution.

So it's -- we will have executed a little bit of a product transition.

In fact, we -- in those retailers, we have been working that through already this year so that the retailers who are getting it will have a spot on the shelf and will have appropriate inventory levels of all of our products.

And just one follow-up just with respect to the G&I business and the restructuring move.

Again, if this was asked I could take this off-line, but just can you talk a little bit about whether some of these reductions are -- or how much of these reductions are being concentrated in the UUV segment of business?

Very, very small.

This was a move necessitated by our outlook for 2012 externally funded research and development.

If you look at our numbers, you'll see substantial increases in internal research and development and a -- in order to make sure that the Company continues to make the investments required as we are -- our outlook for government-sponsored externally funded research and development becomes more lumpy and unpredictable.

So it is a strategic and necessary move that -- and reaction to our view of how the government is going to operate over the next few years.

Got it.

Thanks very much.

Adam Fleck with Morningstar.

Good morning.

Quick question on the Home Robot side again.

International growth was obviously up very strongly during the quarter.

What were the main geographies of that strength?

Our traditional geographies drove Europe and Japan, have been extremely strong and so that it is playing out at the strategy we put in place.

I would say that the -- if you look at our growth, compare our growth rates in Q2 versus Q3, in Q2 you saw a little bit of inventory management to ensure that the retailers were ready to take the 700 series as we had it -- as we brought it to them.

And then, our Q3 numbers certainly benefited by that same carefully managed transition in inventory.

But it remains a very, very strong area for us as we see growth, as I said in the call, outpacing the negative impacts of the economy.

Sure, great.

And then taking it back to the US, sales domestically fell both sequentially and year over year.

It is typically a seasonally stronger period.

Should we read into that at all?

Is that caution on the part of retailers or is that more of just a timing issue?

It is timing and I think that certainly retailers are cautious.

The more cautious they are, the less aggressively they buy ahead.

But our expectations reflect a strong confidence in a very good fourth quarter for us.

And so we are raising our guidance, based on our confidence and what the retailers in the US are telling us.

So we feel good about the fourth quarter.

The primary issue is timing and it is impossible to say, but there is some impact as we mentioned in caution on our retailers' part, which helps or affects exactly the timing of when a retailer is taking product.

Okay, great.

Well, thanks, guys.

I appreciate it.

Josephine Millward with The Benchmark Company.

Good morning.

Congratulations.

Thank you very much.

Colin, the Senate recently cut fiscal year 2012 BCTM unmanned ground vehicle funding from the House's markup.

Can you talk about how you see this playing out when the bill goes into conference?

And if you don't have an acceleration of SUGV floating from the base budget, how do you get visibility for government growth next year?

The way we approach our build ups for a year is by looking at the whole picture, including international markets, handicapping what we think is going to come in and, then, creating a weighted-average expectation of what we believe is going to happen.

And so what we saw this year, did everything play out exactly as we thought?

No.

Are we on track to hit our expectations that we laid out all the way back in February?

Absolutely.

So we like our strategy.

What is happening and the messages we are receiving, there is a lot of strong demand which can manifest itself from perspective orders in many different ways.

So I am unable to tell you exactly how and through what contracts the robots are going to flow at this time, but suffice it to say, we see multiple paths through which the needs being driven by the soldier in the field and the Pentagon will manifest themselves.

So it is a murky and a cloudy environment in which we are operating and so that we have to spend a lot of time in Washington and a lot of time talking with our supporters and with our end-users.

But it is an area which I think is far from bleak because of our positioning and our unique positioning in the marketplace.

So not a great and clear detailed answer I know that you are looking for, but it is a basket of opportunities strategy which we are looking for.

And it has worked for us through some very challenging times in the past.

We tend to be conservative, try to get ahead of things, but we receive very, very strong messages that our robots are in demand, are needed, and we should expect continued acquisition programs for those products.

That's helpful, Colin.

Since you don't have a lot in your backlog for next year and I know you have a wide range of opportunities, perhaps you can talk about what they are, what do you expect to drive growth next year.

Is it this robot?

Is it more SUGV?

If you can expand on that a little bit.

Sure, I can give you a little bit of color.

I think that we would expect a decrease in absolute units on the PackBot side.

I think that SUGV procurement levels being roughly on the same order, and I think that the smaller robots is an area where we think there is a substantial opportunity next year.

So that is going to be very material for our 2012 plans.

We'll also see some beginnings of market development on the Warrior side and our maritime -- demand for our maritime robots will also see some real increases.

So it's a -- across the board we are very happy to be diversified and have multiple products in the marketplace with which to drive revenue.

Thank you very much.

Barbara Coffey with Brigantine.

Yes, good morning.

Could you give us some signposts that we should be watching for from the Super Committee?

What kind of numbers are you even hearing being thrown around as for defense cuts and what would that mean to you if it sort of took the worst case scenarios?

I really don't have anything constructive other than to say that I hope that our government will do what it is being paid to do and work through these hard issues so as to avoid seeing some automatic cuts to programs.

So I would, certainly if it happens, it is not a good thing and we will -- as we look at the prioritization that the DOD will have to go through in order to figure out how to spend its money will be more challenging for them.

But we have a motto around here when it comes to the government side about how we feel fortunate that we will be negatively impacted less than most.

I think that it is important and I will reiterate a point that John made is that in 2011, Home Robots grew 21%.

G&I grew 12%.

G&I is 40% of our revenue and as we look forward we can be again very happy that we are a diversified company.

That 60/40 split could further separate, making challenges in achieving our traditional growth rates in G&I less impactful, positioning us very well to work through whatever hiatus in growth the US government throws at us and continue to strongly perform as a leading high-tech company.

So again, diversity is our friend.

Product diversity and G&I is our friend, and we are managing as best we can.

Thank you.

Brian Ruttenbur with Morgan Keegan.

Thank you very much.

First of all, gross margins were very strong in the period.

How do you see gross margins shaking out in the fourth quarter?

Well, John, why don't you take that?

Brian, gross margins we've seen great success over the last couple of years, and as I mentioned in the remarks, up about 1,000 basis points over two years -- from two years ago.

And so we think the margin improvements we have made are sustainable and they are influenced by product mix, channel mix, our mix between domestic and international.

But we -- in our numbers we don't expect a meaningful change in Q4 from what you saw in Q3.

Is there room for expansion with scale?

Because typically in the fourth quarter you have such large volume shipments on the commercial side, is there going to be an expansion in margins potentially because of that?

I think that when you look at what drives margin expansion traditionally it has been revenue growth in G&I which more fully absorbs overhead and gives us margin growth; and while we will see some increase in G&I it is, in revenue, it is not particularly significant.

Which means that our -- you should expect G&I to be flat from a margin improvement perspective Q3 to Q4.

And on the Home Robot side, that is a little less coupled to revenue, more to product mix and customer mix.

And I think that with the 700 series continuing to roll out, there may be some small impact because the 700 series is positive to our margins.

But as we said in the call, we are expecting gross margins.

Q3 was already a very strong quarter from a margin perspective and we expect to hit that full-year 15%, which John laid out and we feel very, very good about.

In the future, we do think that there are opportunities for some amount of continued margin expansion though not at the truly breathtaking rate that we have been able to execute over the last two years.

So we are very happy to be at midteen margins and sort of committed long-term to a slow continued march forward.

All right, just a couple of other housekeeping minor things.

Currency exchange impact in the quarter, I don't think you mentioned that or have talked about it that much.

Is -- was it significant in the period?

No, not meaningful.

Okay and then on the commercial side of the growth, new markets.

You talked about existing markets were driving a lot of the sales, I believe during the Q&A, I just wanted to make sure I was clear on that.

Is it new specific countries that are driving some of the growth also?

The main driver of the growth is existing markets.

Latin America, not material this year, will start to become material next year and the major market of China, we see able to help us add to our growth in 2013.

And then last question.

This is a real housekeeping question.

Tax rate in 2012, is it going to be at that 25% to 30% level?

Should it be 30% to 35% as you look out?

We haven't finished our planning yet for 2012 yet, Brian.

But for Q4, you should assume about 31%.

And that bounces back just from the benefit we had in Q3.

For next year we won't have -- we don't expect to have these large one-time benefits that we experienced this year so it is probably will be back somewhere in the mid-30s but that's a very preliminary number.

Thank you very much.

That concludes our third-quarter earnings call.

We appreciate your support and look forward to talking with you again in February to discuss Q4 and our expectations for 2012.

Ladies and gentlemen, we thank you for your participation in today's conference.

This concludes the presentation and you may now disconnect.

Have a good day.