萬機儀器 (MKSI) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MKS Instruments first quarter 2014 earnings conference call. (Operator Instructions)

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

Thank you. Good morning, everyone. I'm Seth Bagshaw, our Vice President and Chief Financial Officer. I'm joined this morning by Gerry Colella, our Chief Executive Officer and President. Thank you for joining our earnings conference call.

Yesterday after market close, we released our financial results for the first quarter of 2014. You can access this release at our website www.mksinstruments.com.

As a reminder, various remarks that we may 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 and in the Company's most recent annual report on Form 10-K and the 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'll turn the call over to Gerry.

Thanks, Seth. Good morning everyone, and thank you for joining us on the call today. First, I'll provide an update on our progress toward the strategic initiatives I described on our last call, as well as some highlights of recent product wins. Following that, I'll give a recap of the first quarter of 2014, and finally, our outlook for the second quarter. Seth will follow me with further details and our financial results. Then we will open the call for your questions.

On the last call, I spoke about our vision to broaden our global leadership position in vacuum processing, and to measurably improve profitability for the Company. This vision is supported by several key strategies.

The first is a focus on satisfying customers with the best technology coupled with strong OEM relationships and more local support to help solve the complex and real challenges inherent in 20-nanometer geometries and 3D structures. In concert with this, we are expanding our product solutions in our core business and we are continuing to invest in and expanding to other high-potential advanced markets.

Next, we are managing the business for sustainable and profitable growth. To improve our results, we are taking measured and disciplined steps to improve our operating profit throughout all aspects of the semiconductor cycle. During the first quarter, we completed a number of actions to reduce our costs and realign our workforce to better focus on our key initiatives. These are permanent structural changes unaffected by volume.

We will continually pursue these initiatives in order to enhance our profitability while increasing shareholder value. Seth will have more details on this later in the call.

Finally, we are committed to deploying our capital in the best long-term interests of our shareholders. In the quarter, we paid an $8.6 million dividend and repurchased additional shares under our outstanding share repurchase program, and since 2007, have returned $340 million in cash to our shareholders.

As I mentioned last quarter, we have a robust M&A pipeline and are confident that we will continually successfully identify, acquire and integrate technology-based companies. This quarter, we are pleased to announce the planned acquisition of Granville-Phillips, or GP, a worldwide leader in indirect vacuum gauging to the semiconductor and other advanced markets.

As we seek out strategic acquisition targets, there are a number of factors we look for. One key aspect is having complementary products and technologies that we can deliver to our customers. GP's leadership in the indirect gauging market, coupled with our leadership in capacitance manometers, our direct gauges, will allow us to have one of the strongest technology portfolios in the gauging market with minimal product overlap.

As our core semi market addresses the process for (inaudible) finer geometries and 3D structures, GP expands our portfolio with products which can provide critical information to validate vacuum quality.

A second consideration in evaluating companies for M&A is their fit within our markets. GP serves complementary customers and end markets, and together, we'll have an increased capability to support semiconductor and other vacuum customers.

Approximately half of GP's business is outside of the semiconductor market in general industrial and analytical applications, including vacuum furnaces, thin-film coating, lead testing, freeze-drying and instrumentation. Additionally, they're strong in the analytical markets for use in mass spectrometry.

This business profile aligns with our goal to increase penetration of additional markets and will create further synergies. We believe we are in a strong position to give GP products more exposure to each of our target markets through existing global sales and applications distribution channels.

Another important element in evaluating acquisitions is the probability of successful integration. Here, we have a thorough understanding of GP's products, as well as their markets and customers, which reduces integration risk and provides opportunistic synergies that we expect will produce higher revenue and improved operating profitability.

Finally, as I mentioned in the last earning calls, we'll only seek acquisitions that have both top line and profit growth potential which meet or exceed our targeted return on invested capital. GP is a strong financially stable operation, with financial metrics that meet or exceed our own model, and we expect the acquisition to be accretive in the second half of 2014. The acquisition is proceeding as planned and is expected to close late in the second quarter after regulatory approvals.

Moving now to our first quarter results, we expected Q1 sales to remain strong and we closed the quarter with sales of $206 million, exceeding expectations and up from a very strong Q4.

Sales for the semiconductor market were $150 million, a new high for MKS, as OEM customers pulled business into the quarter to meet their customers' schedules. Sales for all other markets combined were $56 million, also up from Q4.

As we look to the technology business environment, over the past few calls, we talked about the increasing challenges chipmakers face as they migrate to 20-nanometer and smaller devices. If we look at Etch, for example, our customers use our RF generators to provide the power to energize the plasma to drill or etch these high-aspect ratio holes and lines through numerous and strong, thick layers of different materials deposited from the wafer.

It is critical that the etch be smooth and precise, that it adapts to the different materials in the layers and that it stops before penetrating too many layers. This requires an unprecedented level of process control.

Our industry-leading pulse RF generators, combined with our newly introduced dynamic frequency tuning, or DFT, achieved matched power delivery in less than 15 microseconds, 10 times faster than previous tuning, providing virtually instantaneous adjustment of the RF power and delivering precise set point power to the process.

This is important to our customers because it stabilizes the plasma much faster, makes the etch more controlled, consistent and repeatable. This is critical when etching extremely thin layers and high-aspect ratios. It is a major advancement in our technology, which we believe will contribute to future revenue growth and market share gains.

Recently, three major OEMs evaluated MKS's Pulse Hour of Power alongside competitive solutions. They have now selected MKS's Pulse RF for their process tools of record. This is an important growth step for our business.

Our technology leadership extended to other areas as well in the first quarter. Over the last few years, we have invested to strengthen our infrastructure to support the emerging and increasingly important semiconductor hubs in Asia, especially Korea. Each quarter, we see further benefits from this investment.

Recently, we received a large volume order from a major Korean deposition equipment manufacturer for our latest [Aspects] product, the Power Grind Remote Plasma Source. Power Grind was selected for chamber cleaning because of its high reliability and long life, which provides better performance and lower cost of ownership for our customers.

In the quarter, we also had success with a major Korean manufacturer of memory devices. After competitive evaluation, this customer selected our residual gas analyzers for use on PBD tools to identify process issues and improve yield. Through our strengthened local applications and engineering presence, we have improved interaction with our customers, which benefits both them and MKS, as we work together to address their needs.

While semiconductor was a major part of our sales last quarter, approximately 30% of our business in Q1 was outside of the semi market. These other markets include environmental, medical, (inaudible), pharmaceutical, energy, thin films, LED and more.

The thin film market encompasses a number of applications. One emerging area is carbon-based products, such as carbon nanotubes and graphene. Graphene can be deposited using chemical vapor deposition, a process similar to the semiconductor deposition process.

Research into properties, applications, and best manufacturing methods for graphene carbon nanotubes and other nano materials, is being done in numerous research organizations and universities across the globe. As this research progresses toward commercialization, new tool OEMs are appearing.

I am pleased to report that this quarter, our highly successful G Series flow controllers have been designed in on a new European graphene deposition tool. This is truly an emerging field with much ongoing research, and our technology, including pressure, flow, and other products are supporting development in this emerging field.

Now, as we look ahead to the outlook for our second quarter, semiconductor analysts are forecasting that there will be a pause in equipment demand after an extremely robust Q4 and Q1. Although not formally announced, several planned projects in the area, such as 3D NAND and finFET logic devices at the foundries appear delayed, and we are seeing the slower demand in Q2.

Those of you who follow us closely are well aware that when our OEM customers are ramping, our business accelerates at an earlier and faster rate than our customers. And this was evident in the past 6 months.

Conversely, due to our short lead times, when a pause occurs, we typically see the impact sooner in the cycle [in a sharper rate]. However, we're confident that the long-term cycle of trends favor MKS.

In our other markets, world GDP is improving and we anticipate revenue growth will continue. Based on these factors, and looking at current business levels, we anticipate that sales in the second quarter may range from $160 million to $180 million. At these volumes, our non-GAAP net earnings could range from $0.21 to $0.35 per share.

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

Thank you, Gerry. I'll first discuss the Q1 2014 financial results before providing further details on our Q2 2014 guidance.

Revenue for the quarter was $206 million, an increase of 1% compared to Q4 revenue of $204 million, and a 46% increase from $142 million a year ago. Revenue for the quarter was also above the high end of our guidance range, primarily due to continued strength in our OEM semiconductor business in the quarter.

Gross margin was 43.3%, which increased from 42.9% in Q4, primarily due to higher volumes.

Non-GAAP operating expenses were $50.2 million, which was favorable to our guidance range primarily due to the timing of R&D project spending, some of which we expect to incur in the second quarter, and lower discretionary spending.

GAAP operating expenses were $51.6 million. It included $700,000 of restructuring costs, [$410,000] of amortization of intangible assets and $200,000 of costs associated with our recently announced planned acquisition of GP.

Our non-GAAP operating margin was 19% of sales, ahead of our target model at these volumes.

Non-GAAP net earnings were $27.2 million, or $0.51 per share, compared to $22.3 million in the fourth quarter and $3.9 million in the first quarter of 2013.

Our non-GAAP tax rate was 31%, which was favorable to our estimates due to the geographical mix of taxable income.

GAAP net income was $31.2 million or $0.58 per share and the tax rate for the quarter was 18%, which reflected the benefit from the favorable settlement of an international income tax audit.

Now, turning to the balance sheet, cash and investments decreased by $2.8 million in the quarter to $647 million, or approximately $12 per share. The decrease in cash and investments was primarily due to the timing of accounts payable and incentive compensation payments in the first quarter, an increase in trade working capital and the payment of a dividend to shareholders.

Approximately 58% of our cash and investments are in the US, and the balance is located throughout our international operations.

Total book value, net of goodwill intangibles, increased to $882.1 million, or approximately $16.50 per share.

In terms of working capital, days sales outstanding were 53 days at the end of the first quarter, compared to 52 days at the end of the fourth quarter. Inventory turns were 3.2 compared to 3.3 in the fourth quarter.

Capital additions for the quarter were $3.1 million.

Depreciation and amortization expenses were $4.2 million.

Non-cash stock compensation was $3.2 million.

During the quarter, we paid a cash dividend of $8.6 million, or $0.16 per share. Also during the quarter, we repurchased approximately 32,000 shares at $945,000 at an average share price of $29.81 per share.

As we stated in prior calls, the timing and quantity of any shares repurchased will depend upon a variety of factors, including business conditions, stock market conditions, and business development activities, including, but not limited to, merger and acquisition opportunities. These repurchases may be suspended or discontinued at any time without prior notice.

As Gerry mentioned, we are committed to making continuous improvements in our financial performance over the operating cycle, and have initiated a reduction in the workforce in the first quarter that will be substantially completed by the end of the second quarter.

The annualized savings of these reductions is approximately $8 million in manufacturing overhead, research and development and selling, general and administrative functions both in the US and in our international operations.

With annualized savings, we plan to reinvest approximately $2 million in the various growth initiatives throughout the remainder of the year. The timing of these investments will vary, but we expect to reduce our permanent cost structure by approximately $6 million, which equates to an increase in net earnings per share of $0.06 to $0.07 per share on an annualized basis by the end of the year.

We are confident that this realignment will position us to both improve our financial performance and to redeploy critical resources to fund our growth opportunities. These actions, in connection with other opportunities, have improved our target operating model throughout the semiconductor cycle. We posted an updated version of this model in the Investor Presentation section of our website.

Overall, we have added a 100-basis point improvement in our non-GAAP operating margin throughout all phases of the cycle. We are also evaluating other opportunities that we believe will continue to improve our financial operating model.

We expect that the planned acquisition of GP will also provide further meaningful growth in our earnings per share. The purchase price will be $87 million of cash and we expect this acquisition will be accretive in the targeted returns on our capital deployed, as well as our targeted financial operating metrics. This acquisition is currently undergoing required regulatory review and we expect the transaction could close late in the second quarter.

Now, I'll go through more detail regarding the composition of revenues for the first quarter. Sales to the semiconductor market were $150 million, which is a new quarterly record and a slight increase, $149 of revenue in the fourth quarter, and comprised 73% of first quarter revenue.

Within the semiconductor market, sales to semiconductor OEMs increased 4% from the fourth quarter and comprised 61% of total sales. Sales to semiconductor fabs decreased 11% in the quarter and comprised 12% of total sales.

As we mentioned in our last call, our sales to semiconductor fabs in the fourth quarter had included shipments for the first phase of a new memory fab in Asia.

Sales to our other advanced markets increased by 1% from the fourth quarter of 2014, and increased 8% from the first quarter of 2013, with $56 million, representing 27% of total revenue. Sales in these markets can vary from quarter-to-quarter based on specific projects, but in general, can be growing with GDP improvements until more cyclical markets such as LED, solar and display, incur more significant capacity additions.

Geographically, sales in the US were 57% of total sales. Sales in Asia were 34% and sales in Europe were 9%.

Sales to our top 10 customers represented 55% of total sales.

Sales to Applied Materials and LAN Research comprised 20% and 13% of first quarter sales respectively.

Our headcount at the end of Q1 was 2,326, down from 2,394 at the end of Q4, primarily due to restructuring actions undertaken in the quarter.

Now, I'll turn to Q2 guidance, which excludes any impact of the announced GP acquisition. Based upon current business levels, we estimate that our sales in the second quarter could range from $160 million to $180 million.

Based upon this expected sales range, our Q2 gross margin could range from 41% to 42.5%, reflecting these volumes and expected product mix.

Q2 operating expenses could range from $48.5 million to $49.5 million.

In the second quarter, R&D expenses could range from $15.6 million to $16 million.

SG&A expenses could range from $32.9 million to $33.5 million.

The range of operating expenses in the second quarter reflects lower fringe costs, which is seasonally higher in the first quarter, and lower compensation costs as a result of the reduction in workforce taken in Q1. These reductions are expected to be partially offset by the timing of continued investments in certain key research and development projects and annual merit increases.

As I mentioned in previous calls, the timing of these projects is dependent upon a variety of factors, and could vary from quarter-to-quarter.

In the second quarter, amortization of intangible assets is expected to be approximately $500,000. Restructuring charges are expected to be approximately $200,000. Net interest income is estimated to be approximately $200,000.

We expect our second quarter tax rate to be approximately 31%, reflecting the anticipated geographical mix of taxable income.

Given these assumptions, second quarter non-GAAP net earnings could range from $11.6 million to $19.1 million, or $0.21 to $0.35 per share, and GAAP net income of $11 million to $18.6 million, or $0.20 to $0.34 per share on approximately 54 million shares outstanding.

This concludes our prepared remarks. We will now open the call for questions.

(Operator Instructions) Our first question comes from Krish Sankar with Bank of America Merrill Lynch.

Thanks for taking my question. I guess you guys did articulate about how you see the dip when your OEM customers see a dropdown in shipments. The question I had was LAN is guiding to June quarter shipments down 9%. If I look at your semi revenue in June, it's probably down 18% or 20%, almost 2X the amount of one of your big customers.

So my question is if there is an expectation of shipment improvement sometime in Q4 or toward the end of this year, should we start seeing a sharper snap-back for you guys in Q3 or Q4?

I think the way to explain this is I look at this as a bit of a canoe. In the past, we've been in a V or a W, but we see this more of a canoe shape. And typically, what you will see is our customers will prime the pipeline much earlier than their shipments through us.

So you look at how we had a ramp in Q4 and a sustained ramp in Q1. That's a lot of inventory pipeline building that they're doing for the shipments that they would then start out over the next several quarters.

So the fact that we had record revenues gives me great encouragement that we're designed in where we should be and that we've seen great benefit from that. So my expectation is if we're following along the canoe, we'd expect -- hopefully, based on what we're hearing that wafer fab equipment spending is going to be about $32 million, $33 million; that, we would expect, hopefully, toward the end of the year, we would see a recovery.

That is how we're expecting it right now, but we're managing the business to the point where we are, but we will be prepared, and can respond, as in the past, to any snap-back that we see.

Yes, Krish, one other point too -- what we don't know is the amount of inventory, for example, we have in our OEMs. So if a customer guides down on shipments, that is one data point, but we don't know how much of the inventory they have at the end of the quarter, end of the quarter, which obviously affects our shipments or revenue in a particular period.

So you need all those pieces to really correlate, I think, exactly what's happening, plus LAN is one major customer. We have a lot of other semi customers, but typically, we do -- as you know, Q4 and Q1, we tend to ramp in advance of our end customers, but it's not exactly a 1-1 correlation in each quarter.

Right, got it, that's really helpful. Then do you guys have any shutdowns in 2Q?

None that we've announced, no.

None that you've announced, okay, got it. Then one final question -- once you close the acquisition of Granville-Phillips, do you plan to break it out separately or it will be rolled into your semi and non-semi business?

Yes, it's pretty integrated, Krish, so it rolls in very nicely with our valve and vacuum business, so it will be rolled in together.

Yes, it gives us an opportunity to create consolidated restructured business units, so it will be folded into the other businesses. There's opportunity there.

Just one final question -- does Granville-Phillips do any complete tool integration on any custom-made products on other OEMs?

Not that we're really aware of. They've done some work where they do some integration work with others on RGAs, as they've done with us, as an example. We buy their indirect gauges to make a subsystem on our RGA business out of the UK. So there's some work that we do actually incorporating theirs, but for the most part, I believe it's pretty much standalone components.

Got it. Thanks a lot, guys.

Okay. Thank you.

You're welcome, thank you.

Our next question comes from Patrick Ho with Stifel Nicolaus.

Thank you very much. Gerry, first off, on the non-semi side of things, you've seen some nice quarters recently and a little bit of growth. How does that trend in the second quarter? And are there any specific markets that are providing a boost?

I think it's pretty much steady as we go right now, Patrick. We still see the LED and the solar market kind of on live support, although there are some discussions we're having on the solar side, which would imply there may be some opportunity there. That's a possibility of some upside, but yet to come to fruition.

On the flat panel side, the display side, we've also had some discussions about potential opportunities within the quarter. So I think we see a little bit on the display side, if things come as we think they will; probably see a little bit out of the solar side. Everything else will just be GDP-plus .02, I guess. So pretty much steady as you go, with some upside.

Great. In terms of some of the restructuring and the redeployment of resources, as you reinvest into the Company, is there a target for these reinvestments? Is it more semi-based or is it more non-semi-based?

There's a couple of areas that we think there's some potential opportunity like environmental monitoring. We have some leading-edge technology there. We think that's one of the top growing markets, a megatrend globally. So we're looking -- more involved in it there. Biopharm and pharmaceutical, we think there's opportunities there as well, whether it be organic or potentially acquisition-based growth.

The grapheme, we discussed. We don't really see that taking hold right now, but one of the good things about MKS is we get in very early on in technology development and we get to participate in the design of the products. So although we won't see a big benefit right now, we're positioning ourselves on the nano side to be well positioned over the next several years, I believe. But those are a couple of the three (inaudible) areas.

And also, temperature control is an interesting area for us that we're taking a different view of. We have a lot of control on the semi side and we think there's some opportunity on temperature within and outside of semi. So a fair amount of upside, but we're still committed to our semiconductor core business through the acquisition of GP.

Then there's the industrial side we've looked at. We've made some great strides over the last year on our flow controller business in the industrial side. We don't participate on the semiconductor site in flow, of our own volition, but we think the industrial side has some real opportunity, and particularly in Asia and other areas. So there's a lot of good places to put the resources to use and see some good benefit, Patrick.

Great, that's really helpful. Final question for me -- obviously, with a lot of comments recently by your OEM customers and the equipment guys -- they're talking about kind of mid-year pause that we're seeing right now. At the same time on the fab side, it seems like wafers have started to pick up. You can see some healthy outlooks by a lot of the semiconductor companies. How does that trend for you guys into the second quarter from the fab side?

Certainly, if there's a -- we're very agnostic, so whichever fab picks up in the equipment that's involved with our customers' OEMs into it, we'd participate in that . Certainly, there are other opportunities that we have within the fabs for hookups, as well as analytical work with RGAs, which are a close OEM bolt-on most of the time. So we'd expect that we'd see -- and again, we'd see some opportunity on the service side, so that probably bodes pretty well for us.

Great, thank you very much.

You're welcome, Patrick, thank you.

(Operator Instructions) Our next question comes from Tom Diffely with D.A. Davidson.

Good morning. Seth, maybe first a quick question on the proposed acquisition of GP. If it closes in the second quarter, are there deferred revenues that get delayed? What is the ramp of revenue once you do close on that acquisition?

I don't think there's any deferred revenue, Tom. Again, our expectation, it will be closed very late in the quarter. It's right now in regulatory review, so it's hard to give an exact date, as you can imagine. But I think our expectation is very little impact in the quarter if it closes late. I think from an accounting viewpoint, we'd book revenue as soon as we acquire or control that company.

Okay. Can you remind us what the split was for them or most recently for semi and non-semi?

Yes, I don't have any -- it's really part of Brooks's business right now, so I can't really comment on what it is currently. The historic has been a 45%-50% split, non-semi and semi, which is attractive to us in the non-semi piece as well.

Okay. Then moving on, when you look at some of the dynamics in the end markets right now where you mentioned 3D NAND was a little slower. It sounds like DRAM is starting to pick up a little bit. Between those trends, does it matter to you -- do you benefit more from a 3D NAND versus a DRAM or is it fairly close in what you're selling to the OEM customers?

I think the mix of equipment is pretty much the same. It's just that if there was a bigger acceleration based on just the mix, where there's a lot of 3D NAND equipment because people are migrating to that as a secular change, that would be a benefit. But that would be purely be volume. The mix is relatively the same throughout all the equipment of the different customers -- not much difference.

Okay. A question on the restructuring -- the net $6 million of restructuring, does that impact revenue at all? Are there certain programs you're walking away from?

No, no. This is productivity, looking at redundancy that we probably should've looked at in the past, but we thought there would be some opportunity. So we don't see any impact. Actually, we're hoping the investment that we're making with the savings from that shows the positive side, but we don't see any ill effect by that, no, not at all.

Okay, great.

Okay.

Then finally, Seth, when you look at the tax rate of 31%, that's come down a little bit in recent quarters, it seems like. Is 31% a good long-term tax rate to use now?

Yes, I think for 2014, Tom, that's our expectation for this year. Assuming no change of rates in the future and the mix stays the same, it's probably pretty good estimate going forward as well.

Okay.

The --

Sorry, go ahead.

Yes, but only 2014 I give visibility to right now.

Okay. What has caused the slight decrease in the tax rate?

It's really mix where the income resides and we do a little bit on the planning side, I'd say, but primarily, it's where the mix of the income ends up. And we get some lower tax jurisdictions versus the US tax rate and that's driving most of it.

Great, thank you.

Yes.

You're welcome.

Our next question comes from Josh Baribeau with Canaccord.

Maybe a follow-up to that -- is there anything else that you can do in terms of tax jurisdictions that might be able to lower that going forward maybe, let's call it, in 2015?

Yes, I'd say, Josh, we're looking at that all the time. There's a number of internal reviews we're still looking at to drive that tax rate down. So we're not at a point now we can outline the impact of that at this point. We're early stages, but I can tell you we have a fair amount of effort internally geared exactly in that area, and also to ensure the cash flow is readily available for corporate use as well.

Great. Then we're hearing a little bit more on the display side about the growth in the OLED opportunity and how some manufacturers might be focusing more on that versus traditional. Any comments on maybe the capital intensity of the mix of products in OLED versus traditional LCD for you guys?

Well, in terms of you're seeing more direction of the business in OLEDs?

Well, we're seeing continued investment there, just looking at your panel mix.

(Inaudible) our ozone cleaning system is used [as well] the manufacturing at some major Asian fabs. So we've seen some good opportunity in the OLED. So I think that would certainly continue to benefit MKS.

Okay. That's actually it for me, thanks.

Okay. Thanks, Josh.

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

Well, we've established specific goals and plans to drive increased customer satisfaction, develop innovative product solutions, improve profitability and deploy capital in a disciplined approach to fund growth and increase shareholder value. The actions we have undertaken this quarter are aligned with these core objectives and are part of our long-term strategic direction.

I am pleased with the strong start we've achieved this year and look forward to updating you on continued progress in July. Thank you for joining us on the call today.

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