KVH Industries Inc (KVHI) 2007 Q1 法說會逐字稿

Good day, everyone, and welcome to the KVH Industries' first-quarter 2007 earnings conference call. Today's call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to Mr. Patrick Spratt, Chief Financial Officer. Please go ahead, sir.

Good morning. I'm Pat Spratt, Chief Financial Officer of KVH Industries, and with me today is Martin Kits van Heyningen, President and CEO. This call will address the first-quarter earnings release that we issued earlier this morning. Copies of the release are available on our website, KVH.com, and are also available from our investor relations department. This call is being simulcast on the Internet and will also be archived on our website for future reference.

The conference call will contain certain forward-looking statements that involve risks and uncertainties. For example, statements regarding financial and product development goals are forward-looking. The Company's future results may differ materially from the projections described in today's discussion.

Factors that might cause these differences include, but are not limited to, those mentioned in today's call and risk factors described in our annual report on Form 10-K filed with the SEC on March 16, 2007. The Company's SEC filings are directly available from us, from the SEC, or from the investor information section of our website.

Now, I would like to turn the call over to Martin to begin today's discussion of results. Martin?

Okay, thanks, Pat. Overall, the first quarter was generally in line with our expectations. We saw a small increase in total sales over the last year, setting a new record for first-quarter revenue. We introduced a number of new products to strengthen our position in the marine market. We continued to build our long-term military business with a major increase in total value under contract; in fact, it was about a $20 million increase in just the last 90 days.

Following our recap of Q1 results, I'm going to discuss our plans going forward and why we are confident that we will be able to achieve our goals for the year 2007. Pat will then cover the financial results and provide some additional color on our guidance for the remainder of the year. As always, we will take your questions at the end.

During Q1, we achieved quarterly revenue of $20.4 million. That is about a $100,000 increase over the first quarter of 2006 and a new Q1 record. Mobile communications revenue was $16.1 million; that is up 12% year-over-year. Defense-related sales including those for TACNAV military systems and our fiber optic gyro solutions, were $4.3 million; and that is down 27% from the same period last year.

Earnings per share were about breakeven with a profit of $57,000. While Pat will discuss the financials in more depth shortly, it is worth noting that our earnings were only about $200,000 or so below our target. This is the result of a slightly lower than expected gross margin and a higher than anticipated tax expense due to the strength of our international operations. We are confident that the issues affecting gross margin are manageable and will not have a lasting impact.

Based on our revenue levels for Q1 and our visibility for the remainder of the year, I believe that we will be able to achieve the aggressive targets we have set for 2007, including double-digit revenue growth and a significant increase in our earnings per share.

As I mentioned earlier, mobile communications were up 12% over last year with good growth in both marine and land sales. Overall, marine sales were up 10% for the first quarter, with sales of our marine products in North America about on par with Q1 of last year.

But the international marine sales, on the other hand, continued to show excellent strength, up 35% overseas during the first quarter, thanks in large part to the introduction of our TracVision M3 to our smaller satellite TV system for the European market.

We remain optimistic that North American sales in the marine market will improve as the year continues, both as a result of gradually strengthening of the marine market as well as the new TracVision M-series that we introduced during Q1. The M-series was built using our new high-efficiency RingFire antenna technology. This RingFire design employs special shaped reflectors, custom-designed LNBs, and tuned high-efficiency feed tubes that offers the antennas a significant boost in their reception capabilities.

This new approach is the same one that allowed our original 14-inch TracVision M3 to offer coverage previously only available with an 18-inch antenna. That is what enables us to extend the market for satellite TV into smaller boats.

In the first quarter, we rolled out the RingFire technology across our entire marine satellite TV line, relaunching the products as the M-series. The first step was to expand our 14-inch product offering from a single DIRECTV only M3 to three versatile systems; and we launched those in mid February. These included the lower-cost TracVision M2, which is used on vessels at anchor at the dock; the TracVision M3 ST, which is really an upgraded version of the original MS. Then we added the TracVision M3 DX, which is an in-motion system that works with DIRECTV and high-definition programming and works really any satellite service provider around the world.

At the end of March, we unveiled the TracVision M5, M7, and M9, showed the RingFire-based replacements for our award-winning 18-, 24-, and 32-inch TracVision systems. The new TracVision M-series extends the range of our products further offshore than they have ever been able to go, radically redefining the relationship between antenna size and how far offshore you will be able to watch TV. As a result, M-series owners are able to enjoy satellite TV entertainment when they are traveling farther or even in worse weather conditions than with competing systems.

In fact, our TracVision M-series products outperform any larger competing system while offering full access to local channels and HDTV. Initial response to these systems has been very positive. We expect to see the benefits of this new product line starting in Q2.

Our solid performance in the land mobile market continued in Q1, where quarterly sales were up 16% year-over-year, supported by growth both in our recreational vehicle and automotive businesses.

Sales in the RV market continue to grow thanks to several factors. First is the continuing strength of the TracVision R-series products. Based on reliability and value, our customers recognize that the R-series offers the best combination of price and performance in the market.

Secondly, we are beginning to see a slight uptick in the RV market itself, with Q1 shipments of Class A motor homes up approximately 8% compared to the first few months of 2006. While we were already gaining market share while the market was declining, we are now very well positioned to see continued growth as the Class A market begins to revive.

We are also continuing to strengthen our distribution network by adding new independent dealers. In addition, we're working closely with RV manufacturers in pursuit of new and expanded OEM sales opportunities. You should be hearing more news on this front later in the year, as these RV manufacturers begin to roll out their 2008 models.

Now to support these OEM efforts, we're making excellent progress on several new RV product development initiatives that are slated for introduction this summer.

Within the automotive market, response to TracVision A7 TV systems continues to be good. Dealers like the A7's easier installation and setup along with improved reliability and features. Consumer response to the product and to the new service packages has been very positive, and sales are up year-over-year.

Our new agreement with ASA Electronics, which we announced late in February, is helping to drive A7 sales in several underserved markets. ASA is now our distributor for the A7 and the TracNet 100, the Internet system, to dealers and manufacturers in the commercial vehicle, bus, limousine, and conversion van markets.

Turning to our defense business, our fiber optic gyro group continues to perform extremely well and had another great quarter. Revenue from FOG sales increased 53% from Q1 of 2006, continuing our trend of strong fiber optic sales growth.

As we had anticipated, shipments of our TACNAV navigation system declined significantly in the first quarter. In fact, they were down 80% from last year's level. However, in the last 90 days, we have added more than $20 million in new multiyear TACNAV contracts that will contribute to our revenue stream in 2007 and beyond. I expect this trend of orders will continue. We have several sizable international contracts in the pipeline and anticipated by summer.

At the same time, we're continuing to book new orders for our fiber optic gyro products, such as the recently announced $2.6 million contract for our TG-6000 inertial measurement units. This was the first of three options associated with a $15.8 million contract that we originally received from Raytheon. We hope to receive additional options later in 2007.

New product development in the fiber optic gyro area continues to make progress. Most notably, our efforts to enhance the performance of our entire FOG product line through the use of new higher-powered light sources. We did incur some changeover costs this quarter as a result of that. But the end result is a fiber optic gyro line with increased precision.

At the same time, we are also making good progress in our cooperative engineering effort with FLIR Systems to develop a new smaller fiber optic gyro. This new FOG will support optical stabilization and tracking in FLIR's next-generation gimbaled products. I look forward to providing additional details on this as FLIR's new products are announced.

So in conclusion, we have laid the foundation with our new products, and we have several exciting new products on the way that we will be announcing in Q2. We're confident that our existing and new technology, our market position, operating strategy, and sales prospects will give us the basis to achieve these goals during 2007 as we work to maximize value for our shareholders.

Now I would like to turn the call back to Pat to fill you in on some of the numbers. Pat?

Thank you, Martin. The first quarter met all of our financial expectations, with the exception of the bottom line, where we missed by a couple of hundred thousand dollars. Although that was frustrating, the related issues are relatively small and not systemic.

In fact, several first-quarter developments give us great confidence going forward -- the introduction of many new products, the increasing foundation of new defense contracts, and lower-cost component sourcing that took hold during the quarter.

Now looking at the details for the quarter, to start I would like to note that, consistent with GAAP accounting, our results for all 2007 and 2006 periods include stock option expenses. Going forward, all results and projections will be presented on this basis.

Gross margin for the quarter was just above 37%. This was the key element of the lower-than-expected earnings for Q1. During the quarter, we experienced the impact of some incremental new product startup expenses and some shifts in the product mix within businesses.

As Martin mentioned, we also made a switch to new fiber optic components that was initially more costly than expected but will now generate better manufacturing yields.

On a year-over-year basis, gross margin was down about 6 percentage points. The largest portion of this change was driven by an 80% decline in military tactical navigation product sales. We have been aggressively advancing programs to drive product costs lower through the use of new suppliers and increasingly efficient product designs. The beneficial effects of these changes are beginning to take effect, and these should have positive future benefits for gross margins.

For Q1, operating expenses were only 1% up compared to last year. The overall level of operating expenses was a little more favorable than our expectations. The disciplined management of spending in these areas was a factor in mitigating the effect of some of the unanticipated higher cost of goods.

For the first quarter, reported R&D spending was about 1% higher than last year as well. As a percentage of revenue, R&D for the quarter was just below 11%. Reported R&D can fluctuate quarter-to-quarter as the levels of customer funded activities change, but we remain committed to sustaining a high level of investment. The steady stream of new product introductions is evidence of this commitment.

First-quarter sales and marketing expenses increased 4% year-over-year, and 9% compared to Q4. The sequential growth was due largely to the fact that the first quarter reflects strong seasonality, especially in the marine business. We vary our spending to support that seasonal profile.

The year-over-year growth is directly related to the number of new product introductions in the quarter both in the US and internationally. Sales and marketing expenses in future quarters will continue to reflect some variability, as we grow and adjust to changing market conditions and as sales patterns reflect seasonal changes.

First-quarter administration expenses were favorable compared to our expectations, contributing to the beneficial variance for operating expenses overall. Administration spending was down about 6% compared to Q1 last year.

Turning to the balance sheet, cash and marketable securities at quarter end were $53.8 million. Cash flow from operations was negative at about $950,000. This was expected, due to the lower level of profit, the seasonal upswing in the revenue, and various capital projects that are underway, including increases to capacity.

At $12.6 million, accounts receivable was about $2 million higher than the prior quarter. This is a direct result of the 17% sequential increase in revenue. Days Sales Outstanding was flat at 55.

Inventory decreased sequentially by about $100,000 to $8.9 million. Annualized inventory turns increased to approximately 5.7. Similar to the situation in the fourth quarter of 2006, we staged additional material for the production of ramp of new products that were introduced in the latter part of the quarter.

Now I would like to review our outlook for the second quarter and provide an update for the full year. For Q2, we expect the top line will increase by 7% to 9% over the second quarter of 2006. That would put revenue in the range of $23.5 million to $24 million. We continue to be somewhat cautious about the US marine market. However, we do anticipate year-over-year growth driven by our new products. We also expect that the international markets will continue to be strong.

On the defense side, we believe that FOG sales will continue to grow strongly, but not to the extent on a percentage basis that we saw in the first quarter. As we have made progress toward refilling the backlog of the tactical navigation business, we anticipate the Q2 shipments for this product area will be more than 3 times the modest level of Q1. The defense business backlog at the end of Q1 was $5.9 million, reflecting an increase of $1.6 million since the end of December.

We anticipate that gross margin will show a strong recovery to approximately 42% to 43%. This will be driven in part by changes in mix of business and by the cost-reduction programs are in place. Operating expenses will likely increase substantially both on a sequential and year-over-year basis. This is in part due to the fact that we will strongly support the early-stage market introduction of our new products. But it is primarily due to the fact that we are entering the trial stage of our patent litigation with King Controls.

Trial is scheduled for early June. As a result, legal expenses for Q2 will be well above recent levels. In fact, the additional expenses that we anticipate in Q2 related to this litigation equate to approximately $0.07 per share.

Given this profile and leaving some room for the variability of litigation expenses, we anticipate that second-quarter earnings will be in the range of $0.6 to $0.10 per share. For the full year, we continue to expect top-line growth will be between 10% and 17% compared to 2006. Factoring in the first-quarter results and allowing for the litigation matter that I just mentioned, we are adjusting our full-year EPS outlook a bit to a range of $0.36 to $0.44 per share. At this point, we have not seen anything else that would cause our outlook for the year to change materially.

In conclusion, we are pleased with our progress in bringing new products to market; with the signs of growth in our defense sales contract base; and with the lower cost that we're seeing from our sourcing strategy. Now we would like to take your questions. Operator, please open the call for questions.

(OPERATOR INSTRUCTIONS) Tom Watts with Cowen and Company.

Can you talk a little bit more, just about the purchasing environment in the defense sector; and how -- the rebound that you are seeing, and how sustained that will be, and what factors are driving that?

Sure. A lot of these contracts have been in the pipeline for a while, so I am not sure that they are necessarily a reaction to any short-term things that are happening. They are also somewhat long-term, multiyear contracts.

We are still -- we have been talking for a while about some big opportunities, and those have yet to materialize, so we still expect those to happen this year. So some of these orders that we have seen have been a bit of a positive surprise. They weren't the specific orders that we were counting on to come in.

So overall, we feel the environment -- both on the navigation side and also talking to some people who are in the satellite side of the military business -- that it is sort of a garrison mentality now within the US defense business. Now that they are there, they are within their compounds, their product requirements tend to be more around things like our fiber optic gyros which are used in stabilized weapons systems and systems for dealing with IEDs. You know, countermeasures against improvised explosive devices.

So that is sort of the general background that we are seeing. US military focused on near things that can help them today in Baghdad; foreign militaries more or less business as usual, longer-term programs.

Then on the gross margin side, you previously indicated that for the year overall we would see gross margins in the 42% range and probably exiting the year in the 44% range. Does that still seem likely?

It does seem likely at this point, Tom. We are anticipating that for the full year, we will be roughly 2 points better than last year, which would put it around 42%; and that exiting the year will be where you will see the strongest -- the stronger periods for the gross margin.

Okay, and also could you give us what stock-based comp was in the quarter?

Well, we're currently at a run rate of approximately $260,000. There are some adjustments that get made to that quarter-to-quarter, but that is roughly the run rate.

Now as with last year, the third quarter of this year will probably show a bit of a spike, because of the -- we do grant employee stock options in that period. The Board members also have yearly grants that are recognized at that point. So the third quarter will be higher than the other three quarters.

Okay. Then on the taxes, you mentioned you had higher than expected foreign taxes. Should we see a similar tax rate for the full year? You are guiding about -- you guided about, what 12%, I think, before for the fiscal year?

Right, on the last call, I mentioned that we expected that the tax rate for the year, blended for the Company, would be approximately 12% on a pretax basis. That still appears to be a fairly good number for the year.

Because of the nature of the skew of the profits, you know the first quarter was way out of line with that, but it was because of the profitability in our European operation versus of the US operation. But for the full year, I would say that is still a fair estimate.

Okay. Then on the litigation, the $0.07 a share is all in Q2?

Well, we have been incurring litigation expenses, legal expenses, for an extended period, up through now. What we are saying is that as we lead into the trial phase of this litigation, which is scheduled for early June, there is a fairly significant additional amount of money in the second quarter that is for that purpose. And that is what the $0.07 was representing.

Okay, and what is the potential impact of this case in terms of if the findings went against you?

Well, the reason that we're heading to trial is we feel that we have an extremely strong position. As a Company we have never actually gone to trial before. But in this case, we feel just incredibly strong about our position and our products, especially having been in the market earlier.

But as with any trial, anything could happen with a jury trial. But we're completely prepared in terms of design alternatives. So we don't see any long-term risk going forward, which is another reason we are going to trial.

Good. Will there be a decision t the time of the trial or is this -- then it could get extended? Or is there any way to get visibility on that?

We are, right now, under the assumption that the trial will be in early June; and it will be a jury trial; and it will last approximately five days or so. Then we would have an answer.

Okay. Good luck in that process.

Thank you.

Thanks very much.

Chris Quilty with Raymond James.

Good morning, gentlemen. A follow-up on the defense business. You have had real good strength in the fiber optic gyro. Is that all being driven by Mark 54 and CROWS? Or there other incremental programs that can help sustain that growth?

No, there are quite a few other programs. In fact, in this quarter, we expect an order that would be fairly significant for a different application. It would be approximately the same size as our CROWS business normally is on a quarterly basis.

So we are seeing other applications. We are also seeing sort of the growth in the kind of what we call onesie business, where people are just designing it into various products. Also, as I mentioned in prepared remarks, we are being designed into things like stabilized gimbal systems for cameras, for forward-looking infrared systems. So we see a lot of growth opportunities there.

Who currently has a lot of that gimbals system business?

They're companies like Northrop Grumman, [Tumam]. Those would be competitors.

Northrop Grumman is the Fibresense?

Yes.

Okay. Are we still looking at an early summer award for the new CROWS program? I think that was the original timetable.

And second part to that question, I haven't seen any new incremental funding in either the main defense budget or the supplemental. Are you still living off the prior awards? Any risk that you will see a fall-off in business or a gap in business until the new contract comes on?

Well, the original contract award, I thought, was going to happen in March, and now it is supposed to happen in June. So it is probably closer to your schedule, but I thought it was going to happen sooner.

So there is some risk in terms of a gap that could happen in that, if that would be delayed further. But right now, that is the current schedule.

Okay. Your existing orders or your visibility with your CROWS business today, do you foresee a possibility or a risk that that business will come to an end if we don't get a new contract in say -- or new orders flowing in the next six months?

Yes, if they don't -- if the contract isn't awarded at all to anybody, then there would be that risk. We hope to participate in that contract no matter who wins. But yes, there would definitely be a risk to us if the contract were not awarded for whatever reason.

Okay. Shifting gears on the marine business, you seem to have some pretty good confidence that you will get a rebound in Q2 in the marine business. Is that based upon what you have seen quarter-to-date? How would you compare that to some of the statements that have come out of companies like MarineMax, which are predicting continued weakness?

Well, for us, it is a little bit of near-term history. But also the fact that we have new products that we launched very late in the quarter, that just started shipping at the very end of March. So we normally see an uptick in business.

So we see a growth in market share. We see an increasing number of OEMs using our products either as standard or as factory options. While the overall health of the marine market may still be a little bit soft in North America, we have seen good growth internationally. Overall, our sales have been up. Again, this quarter, sales were up 10%.

Does international also include the Asia-Pacific region? Because I think it was within the last six months that you really opened your sales office and got moving there.

Right, we have. So far, most of the growth has been in Europe. But we do expect growth from the Asia-Pacific area, as you mentioned.

Okay, great. I will back out into the queue. Thanks.

(OPERATOR INSTRUCTIONS) Rich Valera with Needham & Company.

Good morning. Martin, could you just talk about your overall defense growth expectations for 2007 for the entire Company?

The overall growth?

Growth rate, if you could. I don't know if you could frame that within the context of the 10% to 17% overall top-line growth. Within that what kind of range would you expect for defense?

Sure. I will let Pat do the percentage, but let me just give you a little bit of color on that question. What we are seeing is like the fiber optics continuing to grow very quickly; it was up 50% this quarter; and that trend has been going on for a while. So on a percentage basis, we see that declining, but still very robust growth in the fiber optic side.

On the TACNAV side, we see growth over last year as we build backlog for multiyear. So if you look at the overall Company split, the percent defense as a percentage of sales is probably going to decline year-over-year. Right now, it is probably down to about 20% of our total Company revenues; and last year it was about 25%.

So your question was what is the percentage growth of defense overall; and I will let Pat answer that if he has that handy.

Yes, Rich, I will go back. As Martin just said, in terms of a profile of business, our total defense business in the first quarter was only about 21% of the total revenue, whereas for all of last year it was 29%. So that changed quite a bit. We do expect that profile to head back toward the kind of profile that we saw last year as we move through the year and the defense portion to increase as a percentage of the total sales.

Back to the February conference call, what we indicated then was that we expect to see continuing good strong growth in fiber optic sales over the course of the year, but not up to the percentage growth that we saw for all of last year, which was almost 50%. Certainly that is our expectation.

On the military product side or the tactical navigation product side, what we indicated was that that could be flat to even potentially modestly down year-over-year.

But if you take this and you blend it altogether, our expectation is that the defense business will grow year-over-year. It will probably be in the high single digits to maybe around 10%, something like that.

Okay, that's very helpful. Now, Martin, you have referred to at least I guess a couple of large international orders that you were hoping to get sometime in the summer. Can you talk about sort of what needs to happen for them to come to you? Because obviously these have been prone to delays in the past. Is there anything you have to do? Or is this purely a matter of sort of paperwork and procedural stuff that has to happen on your customers' side to make these orders happen?

Right. Some of them are what I would categorize as extremely low risk. A contract in that, to fall into that category, would be an example where the prime contractor already has a contract to build the vehicle, and we are specified as a deliverables part of the vehicle, and the prime contractor simply hasn't issued the PO yet. Some of the contracts I'm talking about are in that category. So we have very, very high confidence.

Some of the other ones are foreign military sale to another, where the vehicles are being built in another country. Those normally have higher risk and more delays.

So the near-term ones are US companies under contract for foreign militaries, and we are specced in; but we don't have the order yet. So it is really kind of a blend. I don't know if that answers your question.

That's helpful. Then just getting back to that litigation, can you say which products it applies to? Is there any way to sort of put a percentage on how much of your revenue might be impacted and what percent of your revenue might have to have sort of product redesigns to work around that situation, if in fact there was an adverse outcome for you?

Right, well, that is in contention, number one, what products it would apply to. They're not alleging infringement for a product like the A7, for example. None of the TracPhone products. There is --

So, in general, we're talking about TracVision products, but not A7, not TracPhone, not obviously military or FOG or anything like that. Then, there's certain subsections of products below that, but it is extremely vague, undefined, and in dispute. So I can't really give you a good answer on that, because it is very poorly defined.

Okay. Then in the marine business, would you be willing to give us a rough split of European versus domestic sales in the most recent quarter? Is that sort of 1/3 maybe Europe versus 2/3 domestic, something like that?

Yes, I can give you a rough split. It was about -- of the total marine sales, the US was about 60% of it.

Okay, that's helpful. Pat, I know we have talked about this on past calls, but this expectation that at some point, if you guys remain profitable, you would have to sort of switch to paying at least on paper a higher tax rate. Is there any increased visibility for that happening? Or we still just kind have to wait to see how that plays out?

Yes, we are still in a wait mode to see how that plays out over the course of the year. Nothing new has changed. As we said earlier, the only things that have changed since the last time we chatted, the conference call, was the first-quarter results, which were just barely under our expectations on the bottom line.

So I would say that at this point, we are still in a wait and see. If the year progresses as we expect it will, we believe that that will become a more frequently discussed subject as we get later in the year.

Great, and just one final one if I could. I missed the actual defense backlog number, if you could give me that, Pat.

Yes, $5.9 million.

Great, thank you.

(OPERATOR INSTRUCTIONS) Chris Quilty with Raymond James.

Well, how far we have come that the follow-up question is the first one on the automotive business. I guess that is kind of the basis of my question. Is -- things have been relatively steady but unspectacular in the automotive. Moving any closer toward seeing breakthrough announcements, either at the OEM level, or dealer penetration, or product design issues that might stimulate that market?

No, I think that -- you know, I think you said it correctly. I think it is moving into the sort of mature product category, so it is slow and steady growth. It hasn't been spectacular growth. It hasn't been declining. It is behaving more like our other products now.

So we are continuing to open up some new channels for smaller markets like buses and limos and conversion vans and things like that. But other than that, it has really been sort of slow and steady growth.

Okay. There's been lots of announcements in the last say six months, with the idea of mobile TV or mobile video broadcast. Everything from EchoStar saying they were going partner with RaySat, but hasn't done much. Stuff coming out of the NAB show, with broadcast solutions. Then of course, there's all these cellular delivery and Sirius. Any of this discussion increasing the awareness level or sense of urgency with any of your partners?

I think it is. I think that overall the first reaction is, oh jeez, this is bad for KVH. But if you stop and look what is being offered, I think it actually is good for us.

Because for example, you mentioned the Sirius thing. It is three channels, and it is $700 or $500 for the hardware, and it is $7 a month on top of $12 a month. Then you look at our product, and it's a couple thousand dollars for the hardware, but it's only $5 for the service and you get 200 channels.

So I think it puts it in perspective that it is a more desirable product offering and that there is no magic bullet. I think a lot of times people thought, oh, there's got to be a better way or an easier way or a simpler way to solve this problem. What people are finding three years later that there isn't.

This is really a good solution. It covers the entire country today. It has great choice for channels. It's high-definition picture quality. You are just not going to get that any other way. People are now, I think, beginning to realize that.

Fair enough. Thanks, gentlemen.

Gentlemen, we have no further questions at this time.

Great, we will wrap up at this point. As always, feel free to contact us directly. Thank you.

That concludes today's conference call. Thank you for your participation and have a great day.