KVH Industries Inc (KVHI) 2013 Q1 法說會逐字稿

Good day, everyone, and welcome to the KVH Industries first-quarter 2013 earnings announcement 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 Peter Rendall, Chief Financial Officer. Please go ahead, sir.

Good morning, everyone. I am Peter Rendall and with me is Martin Kits van Heyningen, Chief Executive Officer of KVH Industries. This call will address the first-quarter earnings release that we issued earlier today. Copies of the release are available on our website and also from our Investor Relations department.

This call is being simulcast on the Internet and will be archived on our website for future reference. If you are listening via the web, feel free to submit questions to IR@KVH.com and we will answer them following this call.

This conference call will contain certain forward-looking statements that involve risk and uncertainty. 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 April 2, 2013. The Company's SEC filings are directly available from us, from the SEC, or from the investor information section of our website.

Now I'd like to turn it over to Martin for today's discussion of results. Martin?

Thank you, Peter, and thank you all for joining us today. I am pleased to report that KVH achieved record results during the first quarter, our third record quarter in a row. Revenues of $39.9 million were up 49% from the same period last year. EPS for the quarter was $0.13, up from a loss of $0.09 per share in the first quarter of 2012.

Our continued solid revenue growth during the quarter was primarily the result of strong shipments for our guidance and stabilization business, which was up 189% for the quarter, and continued growth in our maritime VSAT business, which was up 42% from the same period last year. Our TACNAV business continues to benefit from our large ongoing contract with the Saudi Arabian National Guard.

Our Fiber Optic Gyros sales were also quite healthy, especially commercial sales of our inertial measurement units used in dynamic mapping systems and autonomous platform navigation. In fact, commercial FOG sales were larger than military FOG sales for the first time.

Looking at each of our markets in greater detail, starting with our satellite business, our overall mobile broadband revenues, including satellite TV, were $22.9 million. That's up 10% year-over-year. The mini-VSAT broadband portion of the business was up 16% overall, reflecting strong airtime growth, which offset a small decline in hardware sales.

Hardware sales were about flat from last quarter. The drop in hardware sales year-over-year was caused primarily by a decline in our European hardware business, which we believe was down due to the continuing poor economic conditions in the EU, especially in southern Europe.

As expected, our Inmarsat hardware revenues were down 32%, but that was offset by an 11% increase in Inmarsat airtime revenues. So, ironically, the Inmarsat price increases that have helped drive their customers to our mini-VSAT broadband solution have also supported our overall Inmarsat revenues for the quarter.

Moving on to our satellite TV business, TracVision revenues were up just 4% for the quarter over the same period in 2012 as the marine satellite TV market continues to show signs of modest improvement.

According to our dealers, unseasonably cool spring weather in both the US and Europe has negatively impacted the overall leisure marine market. So we are still seeing some weakness, but we believe we are in excellent position relative to our satellite TV competitors. We are also optimistic that some of this business wasn't lost, but merely deferred into the current quarter.

I'd now like to talk a little bit about some of our new product and service plans. We have a number of major initiatives underway to improve the performance of our mini-VSAT broadband network and to enhance our competitive position. First, the overall network -- from the overall network perspective, we have just about completed the full global rollout of the new variable coding, spreading, and modulation technology known as VCSM.

As I mentioned during our last call, VCSM effectively doubles the capacity of our network by enhancing our efficiency by optimizing transmissions to each terminal type on our network. In a very smooth process we automatically upgraded our entire population of onboard terminals, allowing us to support our growing user base without significant investments in new hubs and additional satellite capacity.

Later this year, the second major upgrade to the network is scheduled to be brought online that will continue --- that will contribute another significant increase in our transmission efficiency, creating another major increase in our capacity.

This upgrade will also include what we believe will be a game-changing capability called multicasting. This will allow us to send any data file or stream to all our customers on our network at the same time. One satellite transmission can be received by every terminal in the coverage area in much the same way that a television satellite broadcasts one stream of data to millions of customers.

The current technology used by KVH and other maritime broadband providers is unicasting, or sending individual transmissions to each individual customer. This is the standard Internet protocol.

Multicasting, which is layered on top of this, is exciting because it allows KVH to effectively eliminate the high cost of distributing large digital files to large populations of vessels. Things like digital chart databases, feature films, detailed weather data, e-learning programs, and television, sports, and news shows will be able to be economically transmitted on our mini-VSAT broadband network. So we hope to have some more exciting news about this new capability in the months to come.

Another important enhancement to our mini-VSAT broadband onboard terminals was completed in early April when we introduced an enhanced version of our smallest TracPhone product called the TracPhone V3-IP. With this product launch, all three of KVH's onboard terminals now have our combox network manager built right into the antenna control unit for the product. In the case of the TracPhone V3, the modem, antenna, controller, and combox are all include in a single [below-deck] box enabling this product to offer, by far, the easiest and fastest installation of any maritime VSAT.

The integrated combox modem in all our mini-VSAT products is a key part of our multicasting capability. Each of our standard products goes beyond providing multi-megabit connectivity and now can manage the reception, caching, and distribution of multicast data on board. So we now deliver the capability right out of the box from a hardware perspective to provide vessels with a unique firewalled network for their operations and crew, offer voice over IP, Internet cafe features, and to receive multicast transmissions from our network, which for the first time will enable cost-effective transmission of large files, making all sorts of exciting new content available to the world's 1.4 million seafarers.

In coming months, we hope to announce new relationships with leading applications providers and introduce a series of exciting value-added services to the maritime market. These services will profitably leverage our unique new content delivery capabilities to help solve important challenges faced by our customers created by new regulations like electronic navigation, pollution control, and crew welfare and labor relations.

Now, moving on to our guidance and stabilization business, our TACNAV product revenues were $7.8 million for the first quarter. That's up more than 580% year-over-year as we continue to ship the previously announced contract for the Saudi Arabian National Guard. We also had $3 million in non-recurring engineering sales, which were mostly associated with the facility construction contract that was part of the larger Saudi Arabian order.

Yet despite these impressive shipments and revenues, we actually increased our guidance and stabilization backlog by over $5 million during the quarter. Most of our TACNAV business continues to be international, so we don't expect any impact to this business because of the sequestration.

Turning to KVH's Fiber Optic Gyro business, our revenues grew to $6 million in the first quarter. That's up 93% year-over-year.

Consistent with our strategy to migrate towards higher-end systems, we are seeing strong orders from customers who use our IMUs for commercial applications, like a dynamic mapping industry. Think about all the aerial imagery and street-level scenes being captured for the new online mapping programs like Google Maps and Microsoft Bing Maps. They all require a very precise reference of the camera position and orientation, which is exactly the information our IMUs, tightly linked with GPS systems, provide.

We also have excellent reception to our new 1750 IMU where customers report that performance exceeds their expectations. This is great news in a market where customers regularly make trade-offs between price and performance when selecting one IMU over another. There are a lot of emerging applications for small, highly accurate IMUs in the autonomous platform and self-driving car markets, and we've got many units in the field now supporting customer trials.

As we have explained in past calls, these early design wins are critical because that's what leads to successful volume orders in the future. We are very encouraged with this new product's early success, even though the numbers are still small.

So looking forward to the remainder of this year, we are comfortable with our prospects for continued success in each of our strategic areas. For the mobile broadband business, our new network capabilities and new product line featuring our integrated combox modem are going to help us win more fleet customers. We expect to be launching new value-added services, which will help increase ARPUs and lead to a generally stickier offering.

For our guidance and stabilization military business and military business we continue to have a strong backlog. Our important relationship with Kongsberg continues to go well and we believe we will enjoy growing orders from those three program as it goes into production, although the sequestration does create some uncertainty with that program towards the back half of the year.

Lastly, commercial applications for our Fiber Optic Gyro business continue to look solid. We believe the emerging applications, especially in fields like autonomous platform navigation and dynamic surveying, will make our small, highly accurate IMUs extremely popular.

Now I would like to turn the call back over to Peter for the financial results. Peter?

Thank you, Martin. For the first quarter, total company revenues of $39.9 million were in line with our expectations and towards the higher end of the guidance we previously gave. As Martin stated earlier, our mobile communications revenues were $22.9 million, which represented a 10% increase year-over-year, while our guidance and stabilization business grew 189% year-over-year to $17 million.

Our mini-VSAT business recorded $14.8 million in quarterly revenues, of which airtime services represented almost $10 million, which was 42% higher than the first quarter last year. Total VSAT product and service revenues increased 16% year-over-year while ARPUs for by-the-megabyte plans continued to be in the $600 up to $700 per month range and ARPUs for our fixed-rate plans continue to be around the $1,900 level.

The mix of VSAT unit sales for the quarter was 40% V3, 58% V7, and 2% V11. The relative mix of V7s and V3s remains consistent with recent quarters.

All other marine satcom revenue, including TV systems and Inmarsat systems and airtime, was about $8 million. Within that amount, marine satellite TV sales increased 4% year-over-year to $5 million, while land-based systems declined, as we anticipated, by 22% to $1.2 million.

Our TACNAV product revenues of $7.8 million saw a seven-fold increase year-over-year, which included over $6 million related to the Saudi Arabian National Guard program. We also recorded $2.7 million in revenues under this program related to the facility construction and management services.

We were pleased to see robust sales FOG sales during the quarter of approximately $6 million, which were up 93% year-over-year. And we continue to see a greater proportion of our FOG products being used in commercial applications versus defense applications, as Martin had mentioned earlier.

In the first quarter, over 50% of the revenues related to these commercial applications, which compared to less than 40% for the whole of last year. In terms of the split between products and services, our current quarter revenues of $39.9 million included $14.7 million, which was classified as service revenue. Of that amount, 74% relates to airtime and 18% relates to services performed under the Saudi National Guard program.

In Q1 last year we reported service revenues of $9.6 million, of which 81% was related to airtime.

The gross profit margin of almost 40% was in line with our expectations and over 200 basis points higher than the first quarter last year. The gross profit margin for VSAT airtime was 32% in the first quarter, which compares favorably to the 28% in the 2012 first quarter, and is up sequentially from 30% in the fourth quarter of 2012.

As we have disclosed previously, construction, installation, and program management services associated with the Saudi National Guard program is recorded at a gross margin of less than 10%. As I said before, $2.7 million of this quarter's revenue related to such services.

Our total operating expenses in the first quarter of $13.3 million were in line with our expectations and of that recorded in the prior quarter. Compared to the first quarter last year, operating expenses were up 17%, of which about 50% of that related to sales commissions for the Saudi National Guard program.

The reported tax expense for the quarter was 25% of pretax income, which included almost $400,000 related to R&D tax credits for all of 2012 and a portion of 2013. Including the effect of the R&D tax credits, we expect our effective tax rate for the full year to be between 35% and 40%. As we have discussed before, taxes are always difficult to forecast since there can be so many variables and unanticipated discrete items.

Our diluted EPS for the quarter was $0.13 on net income of $2 million, which compared favorably to the net loss of $1.4 million in the prior year and a net loss per share of $0.09. Our EBITDA, adjusted for equity compensation expense, was $4.8 million and the adjusted EBIT margin was 12%. Depreciation and amortization was $1.2 million and equity expense was about $1 million.

Moving on to the balance sheet. At March 31 we had cash and marketable securities of almost $45 million, an increase of $6.5 million in the end of the prior quarter. $4.7 million of this increase can be attributed to the refinancing of a portion of our VSAT infrastructure during the quarter. This refinancing also explains why debt on our balance sheet at the end of March of $15.1 million was $4.5 million higher than that recorded at December 31.

Our quarter-and accounts receivable balance was $29 million and days sales outstanding was 66, which remain broadly in line with the prior quarter. As of March 31 this year, our inventory balance stood at $17 million, which was up slightly from the balance at year-end. This increase resulted from a shortfall in demand from our European business.

Capital expenditures were approximately $800,000 for the quarter and we still expect our capital expenditures for the year to be in the range of $6 million to $7 million. Backlog for our guidance and stabilization products and services at the end of March was $38 million, up by about $5 million from December 31. This increase was attributed to strong FOG bookings during the quarter as well as TACNAV product bookings.

Turning to our outlook for the second quarter and for the full year, we expect our VSAT business will continue to grow at a strong year-over-year pace, driven by a combination of product sales as well as new airtime subscribers being added to our network. We do, though, remain cautious as it relates to the leisure markets for our mobile communications business, particularly after experiencing some softness in Europe this quarter.

As it relates to our TACNAV business, we have a good level of visibility of product sales through the end of the second quarter, a good portion of which relates to backlog associated with the Saudi National Guard program. With uncertainty surrounding defense budgets, we continue to remain conservative in our estimates regarding the timing of new order wins. We also expect FOG product sales will show solid growth year-over-year as we continue to ship against our backlog and book new orders.

Our effective tax rate for the second quarter and the rest of the year will increase to approximately 39%, up from the 25% we recorded in Q1, which also included the 2012 R&D tax credit which we just discussed. Considering all of these factors, our guidance for Q2 is as follows.

We expect revenue will be in the range of $39.5 million to $41.5 million, with an EPS in the range of $0.08 to $0.12 per share. Our guidance for the full year remains unchanged in that we expect revenues will be in the range of $151 million to $160 million and the EPS will be in the range of $0.37 to $0.48.

In conclusion, our confidence in our strategic growth businesses and operating fundamentals continues and remains strong. Now we would like to take your questions. Operator?

(Operator Instructions) Jim McIlree, Dominick & Dominick.

Morning. Can you map out the Saudi business for the rest of the year, please? How that flows through the P&L?

Sure, Jim. We are still expected to see about $17 million in revenue in 2013. 65% of that is expected to be product. And we say -- we did $8.7 million of that in Q1.

So does most of the rest get delivered in Q2 or is it spread out sort of evenly for the rest of the year?

It is skewed slightly towards Q2, but there is a portion throughout the rest of the year.

Okay. And when you talked about the Saudi business, you split it up -- it seems like you split it up into two parts, the [$7 million to $8 million], which was the products, and the $3 million of the services business. That $3 million is included in the $17 million total for the year?

That's correct.

Okay, great. Sticking on G&S for a bit. So the backlog for FOG versus TACNAV, can you describe, either quantitatively or qualitatively, how the backlog splits out between FOGs and TACNAV?

Approximately 25% is FOG backlog.

Great. And how long does that backlog extend? Is that just the next 12 months or is it the next few years?

It's generally the next 12 months, especially the FOG backlog is probably the next six months. Six to nine months max. We normally don't get the multiyear backlog in FOG, although with TACNAV we do. So there's a distinction there.

All right, one more. I don't want to hog all of which Rich Valera's questions.

It looked like the mini-VSAT business accelerated a bit. I think you have announced that there was 3,000 units either sold or delivered recently, which was a very short period after you had announced 2,500 had been sold or delivered. Am I right in thinking that, that the mini-VSAT (multiple speakers)?

Yes, generally the business has been increasing steadily, although this quarter in terms of units sold it was pretty flat with --- in terms of hardware with last quarter. So I think we anticipate year-over-year 2013 to be significantly higher than 2012.

That's great. Okay, thanks a lot.

Chris Quilty, Raymond James.

Martin, you were partly answering my question there, but given the flat performance in the first quarter sequentially, that obviously implies a pretty big pickup through the balance of the year. Can you give us a sense both of the timing of how you expect orders to land and, number two, what gives you visibility into those sales? Is it just based upon ongoing channel inquiries or do you have any large deals that give you discrete visibility?

Let me start with the second question. We don't really have any large deals that give us discrete visibility. We do have a number of large customers who are still in the process of rolling out our products across their fleet. So we have not visibility, but good expectations and very high probability of success because of -- are actually under contract but actually not in backlog.

So, for example, if we sign a contract with a customer for 100 vessels, we don't call that backlog because they issue POs against that as they are in the process of rolling out across their fleet.

Getting back to your first question, I think that Q1 was definitely softer than we would have liked. We thought that to -- but to put that in perspective, we are talking about 20 to 30 units less then we were expecting in Q1, so it's a little bit of a disappointment. Looking at what's happening across the markets, we are probably one of the few companies that actually is marketing products in Cyprus, for example. That didn't go well this quarter.

So the European, southern European business is definitely way off and that had an impact. But looking at other people in the industry, Inmarsat unit sales were down 4% or 5% and they reported they only sold 85 VSATs in Q1. So we are selling three times as many VSATs as they are according to their numbers.

Okay, great. Could you also give a breakout, not that it's that material, of the land revenue business, how that did in the quarter?

It continues --- we've discontinued all our discrete land products, so that had an impact on our revenues. It's roughly under $1 million now, about $1 million, $1.2 million. Peter is pointing to a number.

Okay. Also, I don't know --- Peter, you may have given this, but of the Saudi revenue or of the TACNAV revenue, excuse me, how much of that was non-Saudi?

So of the $8.7 million we did in Q1, $6 million was from the Saudi contract.

Okay. You weren't talking that fast but I can't type that fast.

Also, just on the mini-VSAT service margins, they've kind of stalled out over the last several quarters as the C-Band network has been rolled out. Two things. One, can you comment on how C-Band services are progressing and b) how does that impact, generally, how the service margins should trend towards the back half of the year? Are you still targeting a 40% type service margin by Q4?

We were sequentially up 3%, so it went from 30% in Q4 to 33% this quarter, which I think is good progress. And compared to year ago, I believe the number was 27%. Peter?

27% to 28%.

So I think we are on track, so I would no longer point to the C-Band as impacting the change in margin.

And have you landed any significant new customers on the C-Band?

I wouldn't say significant. We've got probably a dozen units out on trial, so we do expect to get significant orders for our V11 product. But at this stage we're not really making a distinction whether it's C-Band or Ku-Band because it's a dual-mode product, so we just look at them as customers that are on the network. We are not billing separately for the C-Band service.

Okay. And on the commercial FOG business, up year-over-year but last year was a pretty bad quarter. And if I have been doing my math right, it looks like the commercial FOG business was actually down in the first quarter relative to the rate it was running out for, say, the last three quarters.

What are your prospects for that business? Is it possible to get sort of a breakout from, call it, the $3 million to $5 million a quarter range? And what would it take to get there?

I'm not sure that the commercial is declining. I think commercial is increasing in terms of absolute dollars as well. We expect another 50% kind of year-over-year increase in Q2, which put us around $8 million or higher for the quarter.

So I think we are on a path where that business is growing quickly and I think by next quarter our biggest customers will be commercial. In addition to the total being more than 50% commercial.

How broad-based or concentrated is the commercial business now?

It's concentrated around a couple of key products and key customers, but compared to where we were where we had very high concentration on one program and one military customer, it's a big improvement. And also we like it because it's not military.

Right. Peter, one other question just on product margins. Down big, obviously, because of mix-related issues. How should we look at the product margin through the balance of 2013 and should there be any kind of a Saudi impact we should watch for?

Obviously, in terms of the Saudi contract, it's a combination of our higher-margin product revenues with our lowest margin service revenues. So throughout the course of the year, we should be seeing it being pretty consistent to increasing slightly.

Great. Thank you, gentlemen. Good work.

Rich Valera, Needham and Company.

Thank you. Question on the CROWS III. You made some cautionary comments regarding potential timing of that program as it relates to sequestration. Can you give us any sense of have you learned anything new in the past quarter with respect to that program specifically that would make you more cautious, or is it just a general caution?

And can you give us any sense of how much revenue could be pushed out or whatever in the back half related to CROWS III? Thank you.

Yes, we've gotten --- we have firm backlog in hand that covers Q2, Q3, so we have, I would say, zero risk for the next couple quarters. We've got some backlog related to CROWS in Q4, which is, I'd say, probably $0.5 million to $1 million less than what we would expect. But that's -- at this stage that's not unusual, so I would say at this point we don't have any visibility.

We have heard specific comments that sequestration is a concern for the prime contractor, but we haven't heard anything beyond that. So I think it's a concern for everybody, so I would say that is a generalized comment at this stage.

But am I to take it that what's really at risk for you relative to your guidance is $0.5 million to $1 million of revenue? That's a fairly small amount, I would say.

Yes, I think that that is -- so it was a cautionary comment, because it was a comment that we heard directly from the prime contractor, but we do have backlog in place including up through Q4. But we have it -- we are not fully booked yet for Q4, so that's where we are.

Okay. Not like a gaping hole there by any stretch.

Exactly, so we're in pretty good shape. As I pointed out, our TACNAV business is all international, so we don't expect any issues there.

Okay. I want to be clear, so as it relates to your expectations that you've laid out a quarter ago for guidance stabilization to be up, I think, about 10% in 2013, is --- does your current backlog cover essentially all of that minus, let's say, $1 million of CROWS III? Or is there other stuff you need to turn in the remaining few quarters to hit that number?

Right. Yes, we deftly have more to book to hit our numbers, so this was just a comment about the specific sequestration exposure as it relates to guidance and stabilization. We have also heard that we have some exposure in the possibly 30 to 40 unit range as it relates to Coast Guard, because that's also federal money. So we will keep an eye on that, too.

But that's (multiple speakers)

You are talking about the Coast Guard mini-VSAT exposure?

Yes, yes. So that's not guidance and stab, obviously, but it is defense. It's federal government.

Got you. No, okay, that's helpful color there.

Then in the leisure marine market, I wanted to make sure I understood the dynamics there. So you suggested that I think the March quarter was lighter than expected because of the cold weather, and you were hopeful that some of that might actually come back to you in later periods, sort of delayed demand.

Is there anything you are seeing a month now into the second quarter that would lead you to believe there will be some pickup, or is that still something you are hoping to come in the next several weeks or months?

Yes, I think it's a little bit too early to tell. April has been better than March was, but it's too early to say whether that's just early April sales. I don't have, obviously, a full quarter results yet, but so far so good.

Okay. You kind of indirectly addressed this but I just wanted to get your sense of the competitive dynamics in the mini-VAST market, particularly, I guess, as it relates to Inmarsat, who clearly is competing aggressively in that market.

Any thoughts on --- they sort of suggest their price increases have not led to increase churn and defections, and sort of worked out great for them. But how are you seeing the competitive dynamics in the marketplace, particularly as it relates to them?

Well, I think it hurts them. I think it hurts their brand and their reputation, and I think it will make it more difficult for them when they come with their new system that requires people to buy new hardware. I think that they are correct in that the price increases didn't really hurt them in the short term, because people have their equipment on board, it only works with their service so they are kind of stuck in the short-term.

So I think it's a good short-term strategy, but I think it's going to hurt them in the long run. But I can't say that that's an immediate benefit to us, but it certainly doesn't make their customers happy because they feel like they are being abused and there's nothing they can do about it.

Right, understood. Thanks for taking my questions.

Jim McIlree, Dominick & Dominick.

Thanks again. Martin, I think you mentioned that the discrete land products have been, I think you said discontinued. Does that mean that we will see a drop in that land business from the $1.2 million to close to nothing going forward?

No, I should have -- I wasn't very clear on that. What I should have said is that we discontinued our unique RV products. We are still selling --- we now have a common platform that is our low-end marine products, which is also our only RV product, which is our M1 platform that is an R1 variant.

So we have discontinued all the products that were only designed for the RV market. And that we are continuing with. We are also continuing with the A7, which is used primarily in the bus market today, motorcoach market.

Got you, okay. Great.

And that's not a change from our guidance, so I should have been more clear on that. Sorry about that.

There have been a lot of new services and products recently in the mini-VSAT business. It sounds like you have a whole bunch more coming this year. Can you tell us what you think the impact is going to be on ARPU as these things get rolled out?

Well, the reason we are doing it is because we want to drive ARPUs higher, but I think that the way we want to do it is a little bit different from I think the way our competitors are approaching it. We want to sell products that have value so that the delivery cost will be transparent to the customer or nonexistent to the customer.

So by using this multicast approach we will be able to deliver things, for example, like a movie where the customer pays for the movie; he doesn't pay for the delivery of the movie. So the net impact will be increasing ARPUs, but it will be done through the delivery of things that people want to buy like a digital chart. So the impact will be increasing ARPUs. Each one of these services might be $100 a month or $400 a month, but, in the aggregate, it should make a significant impact on our ARPUs we are hoping.

I see. Okay, great. And last one. Peter, I'm sorry I keep harping on this Saudi service, the Saudi business and the service business. But, again, if you would just focus on the service business, that low margin, that 10% margin from the Saudis, how does that map out over the year? I just want to make sure that I get how that progresses over the year correct.

We anticipate doing approximately $5 million with the remaining three quarters.

Of that low-margin service business?

Correct.

Okay. And there's a skew towards Q2, but you do have some in Q3 and Q4?

Correct. And it's based on meeting certain milestones so certain costs can flow from one quarter to the next.

Right, I'm with you on that. Okay, great. Thanks a lot.

With that, we have no further questions in the queue.

Thanks, everyone, for listening. As always, if anyone has a specific question, feel free to call us or email us. Thank you.

That does conclude today's conference. We appreciate everyone's participation today.