Nice Ltd (NICE) 2007 Q1 法說會逐字稿

Welcome to the NICE Systems first-quarter 2007 results conference call. Thank you all for holding. All participants are at present in a listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder this conference is being recorded May 9, 2007.

I would now like to turn this presentation over to Ms. Daphne Golden, Corporate Vice President Investor Relations and Corporate Development. You may begin.

Thank you, operator, and good day everyone. With me on the call are Haim Shani, Chief Executive Officer, and Dafna Gruber, our incoming Corporate Vice President and Chief Financial Officer.

Before we start, I would like to mention that this call contains forward-looking statements in accordance with the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Please be advised that the Company's actual results could differ materially from these forward-looking statements. Additional information that could cause actual results to differ materially is contained under the subheading forward-looking statements in the Company's 2005 annual report on Form 20-F as filed with the Securities and Exchange Commission on May 17, 2006.

Such factors include but are not limited to changes in technology and market requirements; decline in demand for the Company's products; inability to timely develop and introduce new technologies, products and applications; difficulties or delays in absorbing and integrating acquired operations, products, technologies and personnel; loss of market share; pressure on pricing resulting from competition; and inability to maintain certain marketing and distribution arrangements which could cause the actual results or performance of the Company to differ materially from these forward-looking statements. The Company undertakes no obligation to update these forward-looking statements.

During today's call, Heim Shani will present an overview of our business and financial performance during the first quarter as well as our strategy and outlook for the remainder of 2007. Following the comments, there will be an opportunity for questions.

Let me remind you that unless otherwise noted on this call, we will be commenting on our adjusted results of operations which differ in certain respects from generally accepted accounting principles. Please refer to our first-quarter 2007 press release for a reconciliation of our GAAP and non-GAAP results discussed on this call.

With that, I will turn the call over to Haim Shani.

Good day and thank you all for joining us for the review of 2007's first-quarter results. I would like to start by reviewing the key highlights from this quarter's results and then move onto initiatives and market developments from Q1 which we believe have further strengthened our unique competitive edge and demonstrate the success of our strategy.

Following an outstanding year in 2006 and the strong momentum we saw coming into 2007, we raised our expectations for Q1 2007 back in February. I'm pleased to report that first-quarter results came in at the high end of the range with revenues at $117 million and with earnings per diluted share of $0.31 reflecting a gross rate of 33% on the revenue line and 54% increase in net income.

These results reflect the continued success of the execution of our strategy of bringing Insight from Interactions to organizations in the enterprise insecurity markets and helping them improve business and operational performance and ensure safety and security.

In the enterprise sector, we see the players in our rapidly evolving market following NICE leads. The fact that other vendors are focused on company integrations has presented NICE with many opportunities with customers and partners turning to NICE for our clearly defined long-term vision. In this sector, the microtrends we have been seeing on (inaudible) are very prominent.

We note that organizations are seeking to solve the many challenges inherent to the (technical difficulty) managements of the contact center. We are also seeing more and more implementations of advance in direction analytics and the migration to IP-based communications is likewise continually on the rise.

To address these needs which are driving contact center at enterprise performance, we recently announced NICE SmartCenter. Since its announcement, we have been receiving an enthusiastic response from the market where more customers are looking to leverage the synergies of the combined capabilities of NICE Perform, IEX TotalView and the Performix Solutions from NICE. In Q1, we saw customers seeking to take advantage of the benefits of NICE SmartCenter and opting to add one or more of the components.

One such example is Dobson Communications, which is also known as Cellular One and is the largest independent provider of wireless services to all areas in the United States. Dobson has added the IEX Workforce Management solution from NICE having replaced a competing system. With NICE SmartCenter solution in place including NICE Perform, and IEX TotalView, Dobson will be able to manage its contact center in a more insightful and proactive manner and take action at the right time.

Another example is Teleperformance which has recently -- which has already installed NICE Perform in 11 sites across Europe and Asia and has recently moved to NICE Perform and added IEX TotalView to the NICE environment in two sites in Holland. This leading outsourcer will now be able to leverage the synergies of the NICE SmartCenter solutions to consolidate, share and reuse information between the solutions resulting in enhanced contact center and enterprise performance.

These companies' joint customers who are already enjoying the benefits of our combined solutions including DIRECTV, CUNA Mutual Group, Scottish Power and Ireland's largest telecommunications provider, eircom, which is increasing revenues, productivity and call center call quality with our solution.

Our best of breed analytics solution helps our customers gain insight into the customer and market dynamics, improve competitiveness and drive performance with the growing need for our advanced analytics capabilities as reflected by a growing pipeline serves as another growth driver for our Company.

To address the market's need for advance and direction analytics, NICE SmartCenter offers adaptive interaction analytics which is based on a multidimensional approach that includes the [phoenetic] search, speech to text and motion detection, world spotting cultural analysis, customer feedback and [string] content analysis. One of the customers who turned to NICE adaptive interaction analytics this quarter is a financial services company, LENDING.com. LENDING.com selected NICE to help them gain fresh insights into the real-time requirements and expectations of their customers and be able to respond and adapt quickly to their demands during this in a Voice Over IP environment by NICE.

There are many benefits that our customers are gaining from NICE unique approach to interaction analytics. For example, various customers in the financial services industry are identifying high risk interactions to avoid legal fees by resolving potential disputes proactively even before they happen. Organizations dealing with collections can now better understand why customers disconnect are reducing the disconnect rate and improving collection rates thereby increasing revenues.

Telcos and companies in other verticals are identifying customers who are most likely to buy [those] services increasing the average revenue per user. And this is just the tip of the iceberg.

Another major growth engine is Voice Over IP. In Q1 we saw migration to Voice Over IP based communications continue to rise. We are seeing a clear growth trend for NICE having nearly doubled our Voice Over IP business over the same quarter last year. Some examples from the many customers who turned to NICE for Voice Over IP solutions this quarter are China Merchants Bank which has placed a competing system with our solution; KBANK in Thailand; (inaudible) Services; Air France Frequent Flier Class; and Wachovia in the United States.

Customers who have extended their life to a full Voice Over IP environment includes Citel and Sutherland, two of India's leading outsourcer.

Moving to the security sector, we continued to see the trend where organizations are starting to implement solutions for multimedia command and control. We also see an increase in IP-based solutions for video, Voice and Radio over IP with the security personnel increasingly (inaudible) their data to be run on IP-based networks.

Q1 was very exciting for us with the announcement of the revolutionary NICE Inform. NICE Inform addresses the needs of this industry for multimedia command and control, that is to capture, manage and analyze information from the full spectrum of available sources including audio, video, text, GIS and IP data. NICE Inform is the only solution in the market in providing these comprehensive capabilities.

(inaudible) in March, we announced a selection by several command and control centers in a number of countries across the U.S. as well as a leading European mass transit organization which is using NICE Inform to centralize access to incident information from hundreds of stations and enhance passenger safety and operational efficiency.

Last week we announced a high profile project win for NICE Inform with the FAA which awarded NICE an IDIQ seven-year contract to enhance all traffic recording capabilities at up to 850 FAA and Department of Defense sites with a potential venue of up to $69 million. The contract comes under the FAA massive voice recorder replacement program which is part of the largest initiative to modernize the U.S. Air Traffic Control System and enhance the safety of more than one billion passengers. As announced, an initial order of 2.7 million came in during the second quarter.

Our selection followed an exhaustive evaluation where the FAA thoroughly tested our solution (inaudible) over a period of several months and selected us for a (inaudible) large number of (inaudible) vendors. No other solution could beat the quality and the resilience provided by NICE Inform. This is also the first time that NICE has been selected as the prime contractor for such a large project by such an important U.S. government agency.

In addition to the FAA win, we are currently working on other large scale multimedia dollar projects for audio and video multimedia command and control in large city centers and mass transit systems in the U.S. and India. Due to the scale and the correlating long sales cycles, we expect that these projects will further improve our visibility going into 2008 and for coming years thus confirming our expectations for midteens (technical difficulty)

And now I would like to provide some of the details about our Q1 2007 financial results. Enterprise sector revenues were 90.6 million in the first quarter, up from 62 million in Q1 2006 representing an increase of 46.1% year-over-year growth. Growth in the enterprise sector reflects in part NICE expanding leadership position in the growing market for best of breed solutions which includes quality monitoring interaction analytics, Workforce Management and performance management solutions as well as the increased migration to Voice Over IP.

In the security sector, revenue in the first quarter were 26.4 million, up from 25.9 million in Q1 2006. The growth rate we see this quarter on the security side reflects our shift to large scale projects with longer sales and delivery cycles.

Revenue by geography for Q1 2007 was as follows. The Americas accounted for $68.8 million, a 33.6% increase over Q1 2006. Europe, Middle East and Africa accounted for $34.6 million, a 34.2% increase over the same period last year. And APAC accounted for $13.6 million, a 28.1% increase over Q1 2006. Year-over-year organic growth this quarter was at the midteens reflecting the momentum in our core markets.

Q1 saw very strong bookings. We completed Q1 with a book to bill greater than 1 and we enter Q2 with a strong backlog that gives us better visibility than ever before. Gross margin for Q1 was 62.4%, up from 55.7% in the same period of 2006. The year-over-year increase in gross margin is a direct result of the continuing shift in our solution mix makes toward software based products including NICE Perform, Voice Over IP, quality monitoring, Workforce Management, performance management and the video analytics; and on the service side, more professional services and an accumulation of maintenance, contributing to higher profitability.

We continue to enjoy the leverage of our business model with revenue growth translate into higher gross on the bottom line. In Q1 2007, operating income increased by 90% year-over-year from $9.3 million to $17.6 million. Operating cash flow in the first quarter was $33.9 million. At the end of the first quarter, cash and equivalents were at $335.2 with no debt compared with $296.1 million on December 31, 2006.

DSOs at the end of March was 63 days (technical difficulty) further to the strong momentum we are seeing in both the enterprise and security sectors, we provide first time Q2 guidance as follows, expect revenue to beat 121 -- to be between $121 million and $126 million, and earnings per fully diluted share in the range of $0.32 to $0.36. We reiterate our previously revised guidance for 2007. We expect revenue to be between $487 million to $502 million and earnings per fully diluted share to be between $1.36 to $1.46.

I would like to close by offering some perspectives on where we stand as we continue to move through 2007. During the past two years, we announced the acquisition and successful integration of five companies along with record financial results. And as we continue to leverage the secular growth trends in the enterprise and security markets, we're in a position to take this success even further as we drive our Company forward.

We will continue to execute our strategic plan and complement organic growth with disciplined acquisitions, whether to extend global reach, to extend our technology and solution portfolio, or to broaden our customer base in the enterprise and security markets.

We believe in the power of Insight from Interactions and we are excited about the place it is taking our customers, our partners, our Company and our shareholders.

I'm very pleased to welcome to the company, Dafna Gruber, who just joined us as our new CFO and Corporate Vice President and would like now to turn this call over to her for a few words. Dafna?

Thank you, Haim. Good day to everyone. I'm very excited to be here. During the transition period, I am meeting with customers, partners, management and other team members to become fully acquainted with the Company's business. I look forward to meeting many of you at upcoming investor events and to be speaking with you on upcoming NICE conference calls.

Now I will turn the call over to questions. Operator?

Thank you. (OPERATOR INSTRUCTIONS) Shaul Eyal, CIBC.

Thank you. Hi. Good afternoon, guys. Congratulations on yet again a good quarter. A couple of quick questions from me. Haim, on the expenses side, a tad slightly higher this quarter. What is driving the interest on the expense line?

Hello, Shaul, and thank you. Yes, we believe that the Company is now strategically uniquely positioned to take advantage of the very many developments that we see in the market and we have decided to if you would like increase our spending in order to ensure that our competitive advantage and differentiation will be even larger and this will allow us to take further market share in the coming quarters and years.

Got it. Fair enough. Now a question maybe more industry related. During the first quarter, many of the enterprise software companies have talked about an increase in ASPs ranging between 5% to 10% on average. What are you guys seeing on the ASP front out there?

I would say that overall if you look at the solutions that we have to offer to the market now, they are significantly broader than what they were in the last I would say twelve months ago or even six months ago. And therefore the overall share of the wallet, if one may say so, that we are now generating for our customers is significantly bigger than what we had previously in previous years. And this is reflected in over 40% growth in our entire enterprise business compared to last year ago, compared to a year ago.

Fair enough. And one final quick question for Dafna. How are you guys coping with very strong share count and on the other side, a very, very weak U.S. dollar?

I will take this. Obviously like many companies that have operations, significant operations in Israel, this is an area that we are placing if you like a close look at it. This quarter it had an affect of less than 1 million. If the shekel will continue to deteriorate, it will have -- it might have if you like a stronger -- excuse me -- if the dollar will continue to deteriorate versus the shekel, it can have a higher effect than that. Right now we have tried to take it in our guidance in our models we will not assume any positive surprise on the shekel at this point in time or on the dollar at this point in time.

Fair enought. Just one final question, Haim. Some of the [vendors] are migrating to the SmartCenter. Are they delaying or suspending their decision their decision with respect to some other NICE products?

No, this is not -- on the contrary I would say that SmartCenter is designed by definition as an integrated best of breed solutions. So customers -- this is a good question by the way because we again, an opportunity to highlight. The SmartCenter is an integrated offering of best-of-breed solutions that each one of its products or components compete on its own, best-of-breed on its own and can work on its own. Of course when it is all working in tandem as one umbrella or in one solution, it gives additional benefits to its customers but they do not have to buy all the -- it's not all or nothing.

Got it. Good job, good luck. Thank you.

Paul Coster, JPMorgan.

Yes, thank you, good morning, good evening. Let me start by drilling down on your comments around the security segment, Haim. If I understand it correctly, you are saying the year-on-year comparison isn't entirely appropriate anymore in so far as the nature of that business is different, bigger deals stretched out further. What does that actually mean? Does that mean that the backlog is increasing, your visibility is increasing but this is kind of a temporary period during which the year-on-year comparisons look unfavorable?

You got it, exactly that. We are seeing several large projects, some of them we have announced. A few of them we are working very hard to close and we believe that we are in good shape and obviously it takes significant longer to translate them into revenue but they will at to the end because these are very respectable customers. And just the security by nature it is a bigger project we are part of sometimes bigger if you like projects and so on. So bottom-line is yes.

Does that mean --?

It means that we are moving -- what it means in practical terms that we will be moving hopefully to a situation where visibility will be not only for one year but for more than one year with the context of the security project which is obviously good news.

Does that also mean that these projects are on a percentage of completion basis or on a customer acceptance basis?

Some of them can be on this case and some of them are just the delivery itself has [failed] to be tied into a variety of requirements that are not necessarily related to us. So we have some of them are in this nature and some of them are normal if you like -- delivery but just a matter of when the customers complete the [cell] in building or the [cell] in infrastructure to be ready and so on.

In your prepared remarks, you said that backlog was good and gave you the best visibility you've ever seen. Does that mean that literally it is record backlog?

Yes, that is --

I just wanted to check on that. And then last point, last question. You talked to VoIP transition and how that is driving revenues. But when we talk about VoIP, are we talking specifically about the voice logging technology or is it broader than that?

I'm not sure I highly understand the question. But when we [fell] to the -- our Voice Over IP business doubling compared to last year, what we mean is that the shipment of the business of Voice Over IP logging has been or is moving into a Voice Over IP environment and this has doubled. So it is in the context of NICE and not necessarily the entire industry. Of course this is -- we are part of a much bigger industry where there are Voice Over IP telephony switches and so on which we benefit from this move as well.

I guess I'm just a little confused on how you differentiate the VoIP business from your other business, your more analytics business. Presumably a VoIP upgrade can capitalize the adoption of the analytics solutions as well?

Yes, it depends on which situation it comes. Some customers -- yes, obviously some customers would see it as an easier implementation of recording. Again, it depends on the environment or broader implementation of the record which is critical for them because this is the base on which they analyze the interactions. So this can come tightly [coupled] if you like.

Okay, great. Thanks very much.

Daniel Meron, RBC Capital Markets.

Thank you. Congrats on the ongoing execution. A question here on -- you mentioned acquisitions. Do you have any update on where you are heading with this as far as the industries or is it pretty much along the same guidelines of security acquisitions?

Obviously we cannot be specific so for obvious reasons as we said, our team now are working on both sectors, the security and the enterprise. We believe that we have now in a situation we have completed the integration of IEX and Performix, part of NICE clearly and therefore we are ready and actively looking at opportunities both in the security sector and the enterprise sector.

Okay, thanks. In the previous quarter, you mentioned that you expect to benefit from the integration process between Verint and Witness. Do you -- can you give us a status check on that one? Do you actually see this in the marketplace right now? And also can you qualify how much it contributed this quarter or to next quarter? Thank you.

First of all as we speak right now, we are the only large vendor in this industry with a very clear roadmap which has been carefully developed, designed over the last few years with a very clear product portfolio, with a very seasoned and experienced and coherent management team. And I think this says something to our customers and partner when they need to make decisions.

The growth of over 40% in the enterprise business and hitting the revised high end of the guidance probably are the best testimony that what we expected is actually happening. However, of course, we have great respect for every competitor in the market. We are humble enough to know that we will never be alone as much as every company may want but we welcome serious competitors. To the best of our knowledge, the closing of our competitor deal has not happened and time will tell what will actually happen in the marketplace in the coming quarters or years?

So far I would say these are the major parameters that I think our investors should understand. A, what we have achieved so far; and b, the staples of our solution technology and management team.

And then last one from me. A couple of my (inaudible) indicated pretty strong demand in the financial vertical and also in the European region. Do you see any this as well in your (inaudible)?

And then also, can you maybe give us and little bit more color on the strength that you are seeing within the enterprise segment on which verticals are leading the way here?

Yes, I would say generally good observation. Europe is definitely enjoying a momentum. We see it both in the revenue side and although we don't specifically break down our booking, but I could say that Q1 was -- continued to see a strong momentum in EMEA in general. So, yes, this is a good observation and for obvious as you know, a significant part of the financial interactions today in the world are captured by using our technology and therefore a healthy financial services organization is good for our company.

Great. Thank you, Haim. Good luck going forward and welcome on board Dafna.

Thank you.

Roni Biron, ING.

Two questions from me. First, your recent FAA contract was a step up in terms of the size of the projects and the role that you are assuming. Looking at your pipeline, do you recognize similar opportunities for video surveillance deployments?

We see -- I would say multimedia command and control and city center projects not in the -- such a huge number as the FAA but definitely in the multimillion dollar range; bigger than what we used to do in the past. We definitely see them in our pipeline, yes.

Okay. And then gross margin -- regarding gross margin. What kind of expectations do you think that gross margin should continue to expand as it did so far in the coming year based on the higher software component or should it moderate at some stage?

I would say it will probably we will take the moderated approach at this point of time.

Okay, thank you.

Daniel Cummins, Banc of America.

Thanks. I see that we don't have precision on deferred revenue until we see the audited financials. Bur you did have a pretty substantial contribution to cash flow from accrued expenses and other liabilities. Could you tell us if that indeed was from deferred -- both short-term and long-term? And I had a question also about book to bill.

This was I would say more from a balance sheet management, very strong balance sheet management that we had during the quarter.

Not deferred revenue collected from customers?

No, nothing of this sort, not of any significant.

Okay and then you mentioned book to bill above 1. Is that typical for your March quarter and would you expect book to bill to be above 1 for each in the next two quarters?

We don't know. Of course we are trying as much as we can to close as many deals as we can and hopefully it will continue. But we don't give guidance for book to bill, okay. We had a good Q1 and we hope this will continue.

Okay and I may have missed. Did you indicate what the contribution was from software versus hardware in the revenue?

No.

Are you able to give that?

It's practically the way we sell our system and present our systems to customers. It is not a [system base] so it is practically impossible. I don't know if you can see from the margin the expansion in the software component is growing significantly.

And does that accelerate with Voice Over IP and the replacement cycle sales?

(inaudible)

Thank you.

Shayam Patil, Raymond James.

I have a few questions here. It looks like analytics is becoming an increasingly important business driver. Just want to know if you can comment on where you are today in terms of futures and functionality and where do you expect -- what do you expect to add or improve in the next 12 months? For example, are you moving closer toward a real-time solution or behavior analytics?

Okay. I'm not sure if I'm really familiar with the term behavioral analytics. We believe in more seductive analytics which is the way we define our offering. I would say that we are probably in the top end of what technology can offer. So from a technological point of view, we probably have the most comprehensive solution in technology in the market. And if you would like, the challenge right now is not so much the technology side; the challenge and opportunity is to deliver the value to the customers and this is something that we will be primarily focusing in the next quarters and next years.

We believe there is a huge opportunity but at the end of the day, still a new technology and new concept driving Insight from Interactions is not something that most of the organizations have adapted at this point of time. But they are increasingly doing so and increasingly we are seeing more in more interest and more and more [pilots] and pipelines and so on and so the challenge if you would like and the opportunities more on the business side rather than the technology side. I think the technology side, we have set up the bar at a very high level so it is more on the marketing and business development side.

All right. And can you comment on what percent of your installed base is using analytics and what percent is using Voice Over IP?

I would say that both is less than 10%, probably both are still in the single digits. So there is a long, long way to go which is essentially good news.

And what was the organic growth in the enterprise segment this quarter?

We don't split it by sector. But overall I would say that the company has grown in the mid teens -- in the mid teen number more close to the 16, 16%. This was the combined organic growth of the company.

All right, and this is the last question. How many seven figure deals did you have in the quarter?

How many what?

Seven.

Seven? Ten. Ten seven-digit deals.

Thank you.

Rami Rosen, Oscar Gruss.

Thank you, congratulations and good luck to Dafna. My question I relate to operating margin. Are you expecting that to improve gradually during the year? And if you can quantify it?

Yes, we are expecting continuous I would say moderate improvement in the margins as the quarters progress.

Okay. I have a follow-up question on the -- regarding the merger of Witness and Verint. Do you sense or beginning to sense any price competition there?

First of all I would highly recommend to address this question to the other side but obviously the merger has not been completed yet. So time will tell. As far as we know, this is not -- there was no closing yet so time will tell.

Thank you very much.

Bill Benton, William Blair.

Good morning, guys. I'm sorry about that little delay here. Haim, I know you talked a little bit about some larger deals in the security side. And we touched briefly on the backlog. Could you talk about maybe what percentage maybe the backlog would have increased year-over-year on security? Can you give us any detail on that?

No, we don't provide this type of breakdown but the backlog continues to increase in both enterprise and the security market.

Okay. In terms of the gross margin, it was I know the product gross margin was over 76%. I know you've said it will likely moderate from these levels but can you offer us any reason why it might moderate from these levels given the trends seem to be consistent?

Things don't happen in a day. These are trends that will continue but we don't expect any revolution there so there will be a slow progress of moderate increase. This is the pace that the market adopted technology, adopted the market, adopted the product so this is behind our expectation of moderate improvement rather than any revolution.

Okay. And then similarly on the service [first] margins, I guess the service expenses, as you noted I think last quarter, you thought that margin would come back down from the spike in the fourth quarter. But the expenses on a dollar basis did pick up sequentially. Can you offer us any insight into what might be happening with the dollar basis there, the sequential increase there?

We will see continuous if you like ramp up in the service business both on the revenue side and also on the expense side. I think we are now more or less in wherever -- where the service revenues should be. Last quarter there was a major increase in if you like -- a major onetime increase which we said is going to be onetime. And from now on, we think we are more or less stabilizing where the service business should be.

Okay. Final question on the FAA deal. You guys acting as prime there. Can you give us any insight into how you will be reporting some of the revenue associated with some of the work done by Raytheon? I don't know how the reporting is done there and how that might impact the way you report your margins and (multiple speakers).

It will be in the standard way that we have recorded revenues so far by delivery.

Okay, but you won't be paying -- are you going to be in any way compensating or passing through -- or recording revenue for work done by Raytheon and then passing through stuff at lower margins?

Raytheon is going to be a subcontractor to us in some of the operations I expect some of the delivery aspects. But that is it. It's not different than what we are doing in many other cases. The big difference is of course the scope and the fact that this is a government agency that has chosen us to be a prime contractor. But from a revenue or delivery recognition point of view, there is no different than anything that we have done so far.

Great, guys. Thanks.

Thank you. Are there any additional questions? (OPERATOR INSTRUCTIONS) There are no further questions at this time. Before I ask Mr. Shani to go ahead with his closing statement, I would like to remind participants that the replay of this call is scheduled to begin in two hours. In the U.S., please call 1-888-326-9310; in Israel, please call 03-925-5930. International, please call 972-392-5930. Mr. Shani?

Okay, thank you. I would like to thank everyone for participating in this call. We look forward to having you join us on next quarter's call. Have a good day. Thank you.

Thank you. This concludes NICE Systems first-quarter 2007 results conference call. Thank you for your participation. You may go ahead and disconnect.