萬機儀器 (MKSI) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the MKS Instruments Incorporated Third-Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions)

As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference call, Mr. Seth Bagshaw. You may begin.

Thank you. Good morning, everyone. I'm Seth Bagshaw, Vice President and Chief Financial Officer, and I'm joined this morning by Leo Berlinghieri, Chief Executive Officer and President. Thank you for joining our earnings conference call. Yesterday, after market close, we released our financial results for third quarter of 2012. You can access this release at our website www.mksinstruments.com. As a reminder, the various remarks that we make about future expectations, plans and prospects for MKS comprise forward-looking statements.

Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in yesterday's press release, in other recent press releases, and the Company's most recent annual report on Form 10-K, and most recent quarterly report on Form 10-Q, which are on file with the SEC. In addition, these forward-looking statements represent the Company's expectations only as of today. While the Company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statements should not be relied upon as representing the Company's estimates or views as of any date subsequent to today.

Now I will turn the call over to Leo.

Thanks, Seth. Good morning, everyone, and thank you for joining us on the call today. I'll give a recap of the third quarter, as well as our outlook for the fourth quarter. Following me, Seth will go through the details of our quarterly results and guidance and then we'll open the call for your questions.

Sales for the third quarter of 2012 were $141 million, at the low end of our guidance, and down 20% from last quarter. Sales to the semiconductor market were down 26% sequentially to $86 million and were 61% of revenue. As expected, sales to the solar market were down 74% to $2 million. Sales to all other markets were slightly up quarter-over-quarter and were $53 million.

Third quarter non-GAAP net earnings were $8.4 million or $0.16 per share. GAAP net income was $2.6 million or $0.05 per share. Our balance of cash in short- and long-term investments net of debt remains strong at $619 million and reflects the Q3 cash acquisition of Plasmart. Global economic conditions have remained unsettled and have impacted several of our markets. In the third quarter, demand in the semiconductor market continued to weaken. Several major device manufacturers have reduced their capital plans for the year, and semiconductor tool OEMs have lowered their build plans and moved out deliveries accordingly.

As a result, sales to the semiconductor OEMs were down 32% to $60 million and sales to the semiconductor device manufacturers were $25 million, down 7% quarter-over-quarter. In spite of the current decline in semiconductor capital spending, the fundamentals for semiconductors in electronics remain sound. Historically, the industry advances work on next-generation products in slower periods and this time is no exception. Development of 3D devices, finer geometries, advanced lithography, new materials and larger wafers continues.

We continue to work closely with both our OEM customers and device manufacturers as they focus on these opportunities. I am pleased to report that, in the third quarter, we once again had significant design wins for 450 millimeter tools, advanced etch applications, and EUV lithography. We also achieved our first win for our advanced control products in a liquid delivery application, as well as the first wins for our new Paragon on wafer plasma source with both US and Asian OEMs.

In the quarter, we also announced the acquisition of Plasmart; an innovative developer of radio frequency, RF plasma generation, and monitoring systems in Korea. Plasmart offers multiple growth opportunities in the semiconductor market, as well as other advanced and growing markets. With its significant applications experience, Plasmart strengthens and augments our existing RF power capability. In addition, Plasmart provides MKS with greater access, not just to the Korean market, but also to other key strategic customers throughout Asia.

The additional technical expertise gained through the acquisition of Plasmart also enhances our ability to serve our customer base. While the decline in the semiconductor market has impacted Plasmart's near-term revenues as well, they are well-positioned to support their new customers' new product development requirements. They have numerous design wins in multiple ongoing development programs, both with Korean and other Asian customers. We anticipate that when the semiconductor market recovers, they will benefit as these designs go into volume production.

In addition to increasing our share in the semiconductor market, our long-term growth strategy is to continue to strategically focus our business into other advanced markets where we can leverage our investments in R&D and operational infrastructure to a broader customer base. The other markets we target are selected because they have production processes that require high precision, utilize vacuum and gases, and need a sophisticated level of instrumentation and control, similar to what is needed for the semiconductor market. These markets include thin film coatings, light-emitting diodes, solar cells, drug development and production, medical, industrial, and environmental, food and beverage, and other critical applications.

Looking first at the solar market, there continues to be an oversupply of solar modules and government subsidies, which provide incentives for solar installations, have been reduced and in some regions, eliminated completely. Demand continues to slow and orders have been lumpy. As anticipated, the third quarter sales to the solar market were $2.3 million, down 74% from the second quarter, which as I mentioned in our last call, had included $5 million of revenue from a large Chinese customer.

Our solar business is now at the lowest level since 2009 and at this point, we are not seeing any rapid recovery. Despite current conditions, we do anticipate future growth for MKS in the solar market and we continue to work with customers to address their development road map and to identify new opportunities with both tool OEMs and cell manufacturers, including a new win in the third quarter for our ozone products from a major cell producer in China.

Despite the unsettled global economic conditions, our revenue to all other markets were $53 million, up slightly quarter-over-quarter. Similar to the semiconductor and solar markets, product development continues during a down period and it is important to work with customers to gain design wins to drive future growth. Once again, I'd like to share some examples of how we leverage our technologies and infrastructure to successfully achieve new design wins in these additional markets. One of our targeted markets is biopharmaceutical and pharmaceutical manufacturing, which is complex and requires precise control of process. To achieve control of these complicated processes, the industry is increasingly adopting process analytical technologies, or PAT, to improve process control.

The FDA defines PAT as a mechanism to design, analyze, and control pharmaceutical manufacturing processes through the measurement of critical process parameters which affect critical quality attributes. Implementing PAT involves modeling the process, identifying which variables impact the process, designing experiments to validate assumptions, and finally, the ability to analyze in realtime enormous amounts of data.

Our multivariate analysis, as well as our design of experiment software, are the industry standards in complex data analysis. I am pleased to report that this quarter, we have reached another milestone in the rollout of this software with a major global drug developer and manufacturer as they have implemented the software at another of their US facilities and have established plans for installation in multiple additional facilities in Europe in 2013.

On a sidenote, analyzing large amounts of data is a requirement that goes far beyond industries like drug manufacturing. In fact, this same software also had a role in this year's Olympic Games. The testing laboratories supporting the Games needed to rapidly analyze athlete test samples for banned substances. Like the drug industry, they relied on this same multivariate analysis software to quickly analyze the vast amounts of test results gathered to identify doping among the athletes. The need to analyze large and complex amounts of data is increasing in industry and in a host of other applications and we are seeing more demand for our multivariate analysis software to rapidly convert raw data to actionable information.

Moving to the medical electronics market, where we supply power amplifiers to medical imaging OEMs. We have introduced our next-generation high field, 3 Tesla RF amplifier for MRI scanners. These amplifiers provide twice the power of typical MRI amplifiers, enabling improved diagnostic testing of soft tissue, such as the heart and the circulatory system. In the third quarter, we achieved a design win from one of the top OEMs in this market and we are continuing our 3 Tesla development programs with our other established MRI OEMs, as well as with OEMs for emerging markets in Asia. In the environmental monitoring market, I've talked in the past about our gas analyzers, which are used to meet continuous emissions monitoring requirements for energy and power plants.

Legislation is expanding the need for this monitoring into other industries with hazardous discharges. The manufacturing of some very low tech products has the potential to emit very hazardous gases and monitoring of these gases rely on the same high technology solutions we provide to the energy market. One of these applications is cement manufacturing, which has the potential to release hydrochloric acid into the air. I'm pleased to report that, in the third quarter, we received our first win from a US OEM for emissions monitoring at a cement manufacturing facility, and we anticipate additional business in these applications in the future.

These are just a few examples, but they illustrate how we leverage our technology, talent, and infrastructure to gain businesses and grow revenue in new applications in other advanced markets. Over the past eight years, we achieved a 15% compounded annual growth rate in these other advanced markets. Near-term, however, the solar and LED equipment markets, which help drive this growth are depressed and we are expected to remain down until excess capacity is absorbed.

We anticipate that this will limit our ability to maintain this growth rate, at least organically, in the near-term. The semiconductor down turn and the global economic weakness we've seen over the last few months are continuing. These are challenging times, but we have seen slow periods in the past, and we have learned the importance of tightly managing the business as we go through them. I'd like to take a moment here and talk about how we are managing the business currently. We have curtailed non-critical spending and implemented a hiring freeze, including nonessential replacement personnel. We have reduced our workforce, scheduled mandatory time off, and have made adjustments to variable compensation.

However, we don't look at management as simply cutting costs. We are selective in choosing our spending reductions, as we need to maintain our development programs and to continue to work with our customers to ensure that we get design wins, which will become volume business when the semiconductor industry and other key markets recover. Over the last 18 months, we've made deliberate investments to improve our quality and reliability, strengthen our management team globally, bolster IT capabilities and infrastructure, and increase our technical capability closer to our customers. These are strategic efforts, which we will continue as an investment in the future. We have also continued to look for opportunities to grow the business, both organically and through acquisition. Semiconductor industry analysts and recent OEM reports suggest that the industry will decline further in the fourth quarter.

Global economic conditions are expected to remain unsettled and business conditions will remain challenging. Given the current business levels, we anticipate that sales in the fourth quarter may range from $115 million to $135 million. At these volumes, our non-GAAP net earnings could range from a net loss of $0.07 per share to net earnings of $0.06 per share.

At this point, I'll turn the call over to Seth to discuss our results and expand on our guidance.

Thank you, Leo. First, I'll discuss the third-quarter results, before providing further details on our Q4 guidance.

Revenue for the quarter was $141 million, a decrease of 20% compared to Q2 2012 revenue of $177 million and a 27% decrease from $195 million a year ago. Gross margin was 40% in the third quarter, as compared to 43.1% in the second quarter. The sequential decrease in gross margin was driven primarily by lower volumes. Gross margin was lower than our expectations at this revenue level, due to unfavorable production capacity utilization. In order to continue to size our manufacturing capacity to lower levels, we are continuing to effect reductions in contract labor and overtime utilization and increasing the number of shutdown days in the fourth quarter. We also completed reduction in work force in October, which primarily affected manufacturing labor headcount.

Total R&D and SG&A expenses in the third quarter were $43.8 million, down $4.4 million from the $48.2 million recorded in Q2. The $48.2 million in the second quarter reflects a reclassification of approximately $400,000 of acquisition-related expenses from SG&A to a separately stated line item, which has been excluded from our non-GAAP earnings. As these levels continue to moderate, we have laid additional steps to reduce discretionary spending, limited hiring to only essential positions, and reduced employee-related costs, including variable compensation.

Third quarter R&D and SG&A expenses were lower than normalized rates, as the quarter included seasonally higher vacation periods, as well as adjustments to variable compensation accrued in the first half of 2012. In addition, certain project-related expenses, for example, research and development product materials and IT project costs, are anticipated to vary from quarter to quarter, depending on the timing of these projects and were less than expected in the third quarter. As a result, we'll continue to closely monitor our cost structure in the fourth quarter, certain these R&D and SG&A expenses return to more normalized levels in the fourth quarter.

In Q3, we incurred $5.3 million in charges to settle litigation with former shareholders of one of our former subsidiaries. This litigation was long-standing and the decision to reach a settlement was made to eliminate future legal expenses related to the suit. Our non-GAAP operating margin was 9% of sales. Non-GAAP earnings were $8.4 million, or $0.16 per share, compared to $18.9 million in the second quarter and $30.6 million in the third quarter of 2011.

GAAP net income was $2.6 million or $0.05 per share. The GAAP income tax rate for the quarter was 61% and reflects the change in expected full-year effective tax rate from 34% to 35.8%. Accordingly, the year-to-date effect of this change is reflected all in the third quarter. Our non-GAAP tax rate, which is our expected full-year effective tax rate, was 35.8%. It was slightly higher than Q2, due to the expected geographical mix of taxable income.

Now turning to the balance sheet, net cash investments decreased by $3.9 million in the quarter to $619 million. On August 29, we completed the acquisition of Plasmart for a cash purchase price of $24.5 million, subject to closing balance sheet adjustments. Adjusted for this acquisition, net cash investments would have increased by $21 million during the quarter. In terms of working capital, days sales outstanding were 56 days compared to 54 days in the second quarter, which remains below our historical averages as we continue to focus on customer collections. As expected, inventory turns were 2.3 times compared to 2.8 in the second quarter, as sales levels decreased.

Capital additions were $3 million for the quarter, depreciation and amortization expenses were $3.6 million and non-cash stock compensation was $2.8 million. During the quarter, we paid a cash dividend of $8.5 million, or $0.16 per share, a 7% increase from $0.15 per share paid in Q2 and repurchased 76,600 shares for $2.1 million dollars at an average price per share of approximately $27. As we mentioned in the past, we have historically been opportunistic in our share repurchase methodology.

Now I'll review in more detail the composition of revenue for the third quarter. Sales to the semiconductor markets were $86 million, a 26% decrease compared to the second quarter, and comprised 61% of third quarter revenue. This decline was driven primarily by lower sales to OEMs; sales to which decreased 32% and comprised 43% of total sales. Sales to semiconductor fabs decreased [7%] in the quarter and comprised 18% of total sales.

Sales to other advanced markets decreased 10% in the second quarter of 2012 and were $56 million and comprised 39% of total revenue. This decrease was driven by lower anticipated sales to the solar market. Sales to the solar market were $2.3 million in the third quarter compared to $8.8 million in the second quarter, which had included $5 million of revenue from one large customer in China. Sales [we made] to advanced markets were $53.3 million in the third quarter of 2012, or a slight increase from $52.8 million in the second quarter. Geographically, sales in the US were 52% of total sales, sales in Asia were 33%, and sales in Europe were 15%. Sales to our top 10 customers represented 37% of total sales. Sales to our largest customer, Applied Materials, represented 14% of total sales.

Our headcount, as of September 30, was 2,412; a decrease from 2,428 as of June 30. We added 72 employees with the acquisition of Plasmart. Excluding the employees of Plasmart, our headcount decreased by 88 or 4% for the second quarter and 10% from a year ago.

Now, I'll turn to the fourth quarter 2012 guidance. Based upon current business levels, we estimate that our sales in the fourth quarter could range from $115 million to $135 million. Based upon this expected sales range, our Q4 gross margin could range from 35% to 38%, reflecting these volumes and the expected product mix. Q4 R&D and SG&A expenses are expected to range from $46 million to $47 million.

In the fourth quarter, R&D expenses could range from $14.1 million to $14.5 million and SG&A expenses could range from $31.9 million to $32.5 million. We also expect approximately $500,000 of severance costs in the fourth quarter, related to the moderate reduction in workforce described earlier. In the fourth quarter, the amortization of intangible assets is expected to be $400,000 and net interest income is estimated to be approximately $200,000. We expect our fourth quarter income tax rate to be approximately 36%, reflecting anticipated geographical mix of taxable income. Given these assumptions, fourth-quarter non-GAAP net earnings could range from a loss of $3.9 million to net earnings of $3.2 million or a net loss per basic share of $0.07 to net earnings per diluted share of $0.06 on approximately 53 million shares outstanding. On a GAAP basis, for a net loss of $4.4 million to net income of $2.6 million, or a net loss of $0.08 per basic share to a net income of $0.05 per diluted share.

This concludes our prepared remarks and I'll open the call for questions.

(Operator Instructions)

C.J. Muse, Barclays.

First question, can you talk about the dynamic in this sales channel? What are you seeing in terms of inventory there at your core customers; whether you think that's healthy or not, how long it will take to bring that down? I would love to get your thoughts there.

Thanks C.J., this is Leo. I think I've commented on this pretty regularly. I think any time we've been -- when the industry has been sliding down, is that every time they sort of adjust their build rates, there's typically some inventory they have to consume. Normally, I can only speak theoretically, we shipped thousands of line items to the OEM customers so you can imagine just -- there is no snapshot of knowing what that is for us at a customer site. But just looking at some high valued items that we sell to them on an annual value basis, I would say that the large OEMs have been reducing inventory over the last couple of quarters and I would imagine that would continue since they've come out and sort of adjusted Q4 outlook as well.

Normally, that would happen quickly on the larger value items. I would think it will continue. I can't give you an answer that it stops on the second Tuesday in January, but I can say that normally it happens sooner than later and it probably has some impact on when their build rates stabilize. That will have some impact on when it stops, shortly after that.

When you think about what will lead you out of the trough here, do you think it will be first semis or are you more hopeful on either solar display or your other emerging tech businesses?

We have a lot more history in semi cycles than the solar and display cycles. I would think since there are some other factors that impact solar, certainly there's some equating of demand in using up capacity. I would think that semi would recover before solar and it also is a much larger piece of the business, still today. A smaller recovery in semi would have an impact as opposed to, I don't see anything in the near-term in terms of solar and LED, and I think there was an announcement just recently on one of the major LED equipment companies, I think that was not raising anything, expectations for Q4.

Okay. In terms of your OpEx guide, does that include the $500,000 severance costs?

No, the OpEx expenses would not include that, C.J.

Okay. I just wanted to make sure. Great, thank you.

Krish Sankar, Bank of America.

Leo had said your guidance for Q4, the midpoint is down 11%. Can you just tell us a little bit how the different segments are going to fare, semi, solar, and the other businesses?

I'll comment this way, Krish, is that we probably expect the majority of it to be in the semiconductor business. I would say that with solar being at $2.3 million and LED is pretty far down as well compared to where it has been, I wouldn't see -- it wouldn't be much impact in LED in solar in any further reduction. We have several other markets or if you look at segments, many more than that. I would anticipate that most of it would come from semi.

Got it. If I use that framework (inaudible), historically your revenue from semi business has been about maybe 2.2%, 2.3% of the wafer fab (inaudible) lithography. But when I look at it for this year, it seems to be below the 2% range. I'm wondering is there share loss going on or is it just more a timing issue?

2.2% sounds a little bit high when we track some of the direct OEMs. But, no, in fact, I think you've seen our chart that we've done at conferences and every meeting that's on our website, as well, which shows our growth in semi over a multi-year period. I think what you can see in there and what we've always talked about is that we typically gain more share as geometries get smaller, wafers get larger, there are more challenges, new materials are brought into the process. We have shown and demonstrated that we get more share.

I think one of the things you have to factor, and usually you guys are the first guys to ask me about the same question, Krish, that C.J. had, which is related to inventory. You're going to see the inventory adjustment affect us more than they would our customers and as you go down the supply chain, it's a bigger and bigger impact. I would imagine some of that is that. We don't see any areas at all where we see loss in share.

That's helpful. I understand that this is a business where there's always pricing pressure, but when you look at your customer base, it's consolidating (inaudible) and you have a certain synergy target you want to extract. Have you guys seen any part number consolidation on your end as your customer base consolidates?

I think what's very interesting in this industry is even within a company, I think it's challenging for them to consolidate part numbers, to standardize on a part number. Forget the merger of two companies, just in a company itself, you've got different types of tools and everyone trying to get best cost of ownership and they're going to use exactly the part that gives them that. Just standardizing on a part number for the sake of that, it may be some volume, is not what's going to drive -- what drives that.

In fact, several years ago, I did a study, just on one of our product groups and looked at four or five major OEMs and an integrator and they were buying over 500 line items within a year from one of the groups and I think I saw 22 items that had the same part number in over 500 items. I think we already purchase some things, with our kinds of volume and size, we do purchase things in mill runs and other. I think the argument of higher volume on a part probably isn't one of the arguments that too many people can make and I wouldn't expect that to be the case. Obviously, the larger the customer gets, the more total volume they buy, you look at ways of trying to be even more competitive and acquire more business and look at the rationale for which costs we can reduce and things like that.

Thanks. That's very helpful Leo. Thanks.

James Covello, Goldman Sachs.

Jim Covello, thanks very much for taking the question. Leo, I was hoping you could help explain a little bit more the dynamics in your guidance for the fourth quarter. I understand you're expecting the semiconductor business to be down. I was wondering, are you assuming a continued decline in the order run rates or are you assuming something that's more in line with the current order levels that you're getting?

I think that's a good question. Let me comment, one, just in general, on how we come up with these numbers sometimes here. I think most everyone on the call should understand that we're a turns business. We are getting orders in today that'll ship in two weeks or four weeks and so, when we make this call, obviously, we've got to look at the rates that we're seeing for orders at that time. I think what I could say is that, we saw those rates deteriorate for orders within the third quarter and they have somewhat stabilized.

That's no guarantee they won't change, but we have seen them stabilize over the last several weeks and so, when we put our estimates for Q4, they're based on what we've seen most recently, plus or minus anything significant that we'd see. If we hadn't seen the rate, but we heard some very significant news about a change, then we'd have to also recognize that in our guidance. We saw the decline in Q3, seemed to stabilize towards the end of Q3, continues to be roughly in the same spot and that's why the guidance is where it is.

That's helpful. I appreciate that. Looking at the non-semi business excluding solar, it's been trending relatively flat. I was wondering, are there certain design wins that you know are going to be shipping in the next two to three quarters that could drive an increase there? Or is there other factors like macro that are really going to be what's most important to get that starting to grow again?

In those other markets, we talk about top 10 customers and what they represent, then we have thousands of customers and lots of business groups transacting with those customers. I think sort of the slowdown or kind of flatness in the other markets outside of LED and solar and LCD are just really around global concern; some geographical regions in terms of some financial crises, certainly China isn't investing at the same rate it was investing a year ago. In the US, we've got concerns about whether the economy's growing or not and an election year coming up. I think that plays probably the largest role, although there's activity going on with many of those customers all of the time. I don't see a single factor or something I can hang my hat on that says, gee, two quarters from now, it will look like this.

It's really going to depend on how the overall economy looks, global economy, how things turn out in the US, how China continues to grow, and of course, the design wins that we get. There are certainly, even outside of LED and solar, we see push outs on certain things in industrial markets and we'd expect some of that to come back in 2013. I'm sorry I can't give you an answer, an exact answer, but I think more of it depends on the global economy. Some things will come back naturally because we've had some push outs from a couple of customers or delaying placing the next order. Some of that will come back, but it'll take more of a global confidence in spending.

I appreciate that. Last one for Seth, I was wondering if you could help us understand the impact of the Plasmart acquisition on your model in terms of revenue, margins, and what the OpEx implications are.

Sure. I would say in the fourth quarter, you wouldn't see much impact at all. Again, the overall semi market is, as we well know, pretty soft. In Q4, not a major impact on our operating results. We think, long-term, those should add some accretive to our business, but that won't happen in the fourth quarter, given we are on the current semi cycle.

Thank you.

Patrick Ho, Stifel Nicolaus.

You guys have done a really good job of going into new markets like RF power and as you continue to make inroads in those kind of marketplaces, are you seeing any type of increased pricing pressures as you get traction there?

Certainly what we've been doing is leveraging semiconductor-designed products into these other markets. I think in some markets, they don't require some of the same specifications of 20 nanometer semiconductor process control. In some cases, there are. In other cases, I think there's less pricing pressure because you don't have -- these customers are not our top 10 customers. They're not buying $100 million or $40 million worth of product from us, so I think there's less -- they're buying a technology they need to manage a process they're trying to produce. I think in some cases it is, but in most cases, it's not, for that type of technology.

Okay. Great. As the semi industry moves to new process technologies and new wafer sizes, stuff like EUV and 450 millimeter wafers, is there the potential of increased, quote, spending next year as some of those process technologies end of quote, the next phase, whether it's EUV getting closer to the high volume manufacturing phase that they're trying to get to and as 450 starts getting, again, greater traction for the later part of the decade adoption?

Yes. I haven't heard of any acceleration planned in 2013 from a spending standpoint. I think that all of the major equipment companies have some type of 450 millimeter program and we've been engaged in them all. I think there are certain device manufacturers that are working on next-generation geometries, but I don't see anything that I can mention or think about that would say, next year would be a significant shift in that kind of spending.

Okay. You don't see it impacting you guys, as well?

Pardon?

It's not going to impact or increase your spending as well, it's basically on plan, on what you guys --

Again, a number of our products will work in whatever size geometry that the customer's looking at. Obviously, there are other products on a change in geometry that will have us provide a new type of product or new specifications, new features. Those are pretty much ongoing and I wouldn't see an acceleration of any significance in any particular product area.

Great. Thank you.

I'm not showing any further questions at this time. I'd like to turn the conference back to our host for closing remarks.

Great. Thank you. Despite the uncertain conditions, we continue to work closely with our customers in the semiconductor market and our other markets as they work to address technology demands and new initiatives. We're focused on gaining design wins which will drive future sales when the market recovers and we will continue to manage the business during this down period, drive organic growth, and identify and evaluate new opportunities. Thank you for joining us on the call today and we look forward to updating you on our Q4 call in January.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.