NETGEAR Inc (NTGR) 2017 Q2 法說會逐字稿

Greetings, and welcome to the NETGEAR, Inc. Second Quarter of 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Chris Genualdi, Senior Investors Relations Manager.

Thank you, operator. Good afternoon, and welcome to NETGEAR's Second Quarter of 2017 Financial Results Conference Call. Joining us from the company are Mr. Patrick Lo, Chairman and CEO; and Ms. Christine Gorjanc, CFO.

The format of the call will start with a review of the financials for the second quarter provided by Christine, followed by details and commentary on the business provided by Patrick, and finish with third quarter of 2017 guidance provided by Christine. We will then have time for any questions. If you have not received a copy of today's release, please visit NETGEAR's Investor Relations website at www.netgear.com.

Before we begin the formal remarks, we advise you that today's conference call contains forward-looking statements. Forward-looking statements include statements regarding expected revenue, operating margins, tax rates, expenses and future business outlook. Actual results or trends could differ materially from those contemplated by these forward-looking statements. For more information, please refer to the risk factors discussed in NETGEAR's periodic filings with the SEC, including the most recent Form 10-Q.

Any forward-looking statements that we make on this call are based on assumptions as of today, and NETGEAR undertakes no obligation to update these statements as a result of new information or future events.

In addition, several non-GAAP financial measures will be mentioned on this call. A reconciliation of the non-GAAP to GAAP measures can be found in today's press release on the -- on our Investor Relations website.

At this time, I would now like to turn the call over to Ms. Christine Gorjanc.

Thank you, Christopher, and thank you, everyone, for joining today's call. We were pleased with the results for the second quarter of 2017, which were driven by the phenomenal growth of our Arlo segment as well as the strong performance of our Connected Home segment. Overall, NETGEAR net revenue for the second quarter ended July 2, 2017, was $330.7 million, which is up 6.1% on a year-over-year basis and up 2.2% on a sequential basis.

NETGEAR net revenue by geography reflects our ongoing strength in North America as well as improvement in the EMEA region. Net revenue for the Americas was $226.9 million, which is up 7.6% year-over-year and up 7.2% on a sequential basis. EMEA net revenue was $55.2 million, which is up 6.9% year-over-year and down 5.5% quarter-over-quarter. Our APAC net revenue was $48.6 million for the second quarter of 2017, which is down 1.1% from the prior year comparable quarter and down 9.4% quarter-over-quarter.

For the second quarter of 2017, we shipped a total of approximately 5.1 million units, including 4.1 million nodes of wireless products. Shipments of all wired and wireless routers and gateways combined were about 1.9 million units for the second quarter of 2017. The net revenue split between home and business products was about 80% and 20%, respectively. The net revenue split between wireless and wired products was about 75% and 25%, respectively.

Products introduced in the last 15 months constituted about 45% of our second quarter shipment, while products introduced in the last 12 months constituted about 38% of our second quarter shipment.

From this point on, my discussion points will focus on non-GAAP numbers. The reconciliation from GAAP to non-GAAP is detailed in our earnings release distributed earlier today.

The non-GAAP gross margin in the second quarter of 2017 was 28.4% compared to 32.3% in the prior year comparable quarter and 30.9% in the first quarter of 2017. Our non-GAAP gross margin was down year-over-year and sequentially due to increased investments in channel marketing that we made with key customers during the quarter as we continue to drive market share higher in both our Arlo and Orbi product line. As we discussed on the prior earnings call, the majority of this additional marketing spend hits our P&L with contra-revenue, therefore, affecting our gross margin level.

Total non-GAAP operating expenses came in at $65.8 million, which is up 1.9% year-over-year and down 2.7% sequentially. As always, we managed our expenses prudently while also ensuring that the growth portions of our business have the resources necessary to succeed. Our headcount increased by a net of 2 people to 953 heads during the quarter. We expect to continue to add additional headcount in key areas of the business during the third quarter of 2017. Our non-GAAP R&D expense for the second quarter was 6.6% of net revenue as compared to 6.6% of net revenue in both the year-ago comparable period and the prior quarter. R&D is critical to our success and, therefore, we expect this expense to continue to grow as needed in absolute dollars.

Our non-GAAP tax rate was 31.2% in the second quarter of 2017. We came in slightly below our guidance due to a onetime benefit that we do not expect to repeat in subsequent quarters.

Looking at the bottom line for Q2. We reported non-GAAP net income of $19.9 million and non-GAAP diluted earnings per share of $0.60 per diluted share.

Turning to the balance sheet. We ended the second quarter of 2017 with $305.5 million in cash. For the second quarter of 2017, we used approximately $8.6 million of free cash flow, which is calculated as cash flows from operating activities, as presented in the statement of cash flows under GAAP, less capital expenditures. We continue to remain very confident in our ability to generate meaningful levels of cash and expect this free cash flow to improve significantly in the second half of the year.

During the trailing 4 quarters, we generated approximately $19.4 million in free cash flow, which has included a $1.6 million benefit from a presentation reclassification and historical cash flow statement. We continue to focus on optimizing the business and generating cash, providing us operational flexibility as well as the ability to strategically deploy cash to enhance shareholder value.

In Q2, we spent $45 million to repurchase approximately 929,000 shares of NETGEAR common stock at an average price of $48.44, which resulted in a $0.01 benefit to non-GAAP diluted earnings per share for the quarter. Since the start of our repurchase activity in Q4 2013, we have repurchased approximately 10.6 million shares, and our diluted share count is lower by 15.5% as compared to the beginning of that period. The fully diluted share count is approximately 33.1 million shares at the end of Q2 2017. We have 3.2 million shares remaining on our current buyback authorization and plan to continue to repurchase shares opportunistically.

Now turning to the results for our 3 product segments. The Connected Home segment, which includes the industry-leading Nighthawk and Orbi brands, generated net revenue of $185.9 million during the quarter, which is down 6.4% on a year-over-year basis and down 4.4% sequentially. The year-over-year decline is due to reduced service provider revenue for Connected Home, which is down $12.9 million from Q2 2016. Excluding service provider sales, the Connected Home segment net revenue was up slightly year-over-year.

The Arlo segment net revenue came in at $78.7 million for the second quarter of 2017. This is up 104% year-over-year or about $40.1 million from the prior year and up 29.7% on a sequential basis. I'd like to highlight that the Arlo segment generated more revenue during Q2 2017 than it did during Q4 2016 despite the fourth quarter seasonal strength. We believe that this sets the business up for a very strong back half of the year. The hyper growth of the Arlo segment continues to exceed expectations, and we strongly believe that this business has plenty of room for further growth, both in hardware sales and monetization of the installed base.

The SMB segment generated net revenue of $66.1 million for the second quarter of 2017, which is down 11.2% on a year-over-year basis and down 3.6% sequentially. During the quarter, we experienced softness in both the switch and storage category. While we continue to dominate the retail switch market, the gigabit switch market is contracting. The 10-gig and multi-gig switch markets are growing. However, their growth is not currently enough to compensate for the contraction in gigabit switches. Nevertheless, we see opportunities to drive growth in SMB, including the transition to Software Defined Video over Ethernet, or SDVoE, as the professional AV market moves from circuit switching to packet switching. NETGEAR is a founding member of the SDVoE Alliance, which is standardizing the hardware and software to make this transition possible. We believe our switching portfolio is very well positioned to benefit from this transition.

I'll now turn the call over to Patrick for his commentary. After which, I will provide guidance for the third quarter in 2017.

Thank you, Christine, and hello, everyone. It was a very exciting quarter for us here at NETGEAR. Our top line was fueled by the performance of the Arlo, Orbi and Nighthawk product lines. We launched multiple new SKUs for both the Arlo and Orbi product families, and we reached an all-time record market share level for NETGEAR in the IP camera market while continuing to dominate the high-end WiFi router market share. Needless to say, we've been quite busy these last few months.

I'd now like to spend some time discussing our vision for the Arlo business. As our quarterly results show, the Arlo business continues to grow at a phenomenal rate, posting 104% year-over-year growth for the second quarter of 2017. We have never seen a business of this size grow so rapidly in the more than 20 years that we have been in business. We strongly believe that our unique innovative technology, trusted brand and a superior distribution separate us from the competition in the IP camera market and will continue to allow us to drive share gain in this category.

Our market share in the IP camera category increased to 41% during Q2, up from 33% during the prior quarter. NETGEAR internal estimates suggest that the IP camera market in the U.S. will grow 30% to 40% year-over-year, becoming at least an $800 million market in 2017, which is larger than we had previously expected.

During the second quarter, we extended Arlo's technology and brand to new markets with the launches of both Arlo Go and Arlo Baby. A review published last week by TechHive gave Arlo Baby 4.5 out of 5 stars and noted that to say the Arlo Baby is an improvement over conventional baby monitors is a gross understatement. TechHive put Arlo Baby at the top of their list of favorite baby cams. Meanwhile, our Arlo Go cameras are now available online, in retail stores and through service provider channels. We continue to be very excited about the market potential of both of these new products.

Additionally, we're very pleased to report that the Arlo business showed improvement in profitability during Q2, posting a contribution margin of 4%, up from 0.5% during the prior quarter. We remain committed to not only growing top line for Arlo but also ensuring that it is a healthy and profitable business once it reaches scale.

We have a clear vision for the future of the Arlo business. We are creating the best home security solution on the market by building an integrated hardware plus software plus mobile plus cloud plus artificial intelligence offering. We will continue to differentiate from the competition with our superior hardware design. We will deliver intelligent services tailored to each individual user's needs by leveraging our mobile app and the cloud.

Currently, we are developing services that will make Arlo both smarter and more robust. We plan to add service options for our customer that will improve the user experience as well as drive recurring revenue for the company.

We are developing much deeper customer relationships than we ever have before and transforming the NETGEAR business in the process. It's no small undertaking, but we are well on our way to realizing this vision. Since Arlo's launch in early 2015, we have shipped over 4 million cameras worldwide, laying the foundation for our global installed base. We will continue to grow this installed base with new users as fast as we can which also are offering our existing user services that improve and enhance the Arlo experience.

We are managing the Arlo segment for rapid growth and the eventual monetization of the installed base once it reaches scale. This is very different than how we manage the other 2 segments. For the Connected Home and SMB segments, we are focused on market leadership and hardware margin dollar growth with enhanced software capabilities. Both the Connected Home and SMB segments are steady, very profitable, predictable businesses that serve markets we have operated in for over 20 years. Combined, they have a contribution margin in the mid- to high teens.

Within the Connected Home segment, we continue to see significant growth in the home WiFi mesh category. We believe that the consumer WiFi mesh market will nearly quadruple in size this year. To continue to attack this opportunity, we successfully launched 2 new additions to the Orbi family during Q2 that are designed for small and midsized homes. Our Orbi line has been consistently praised by critics and customers alike. A review by The Wirecutter, which is a product recommendation site owned by the New York Times, wrote that, "After spending over 30 hours testing 9 mesh WiFi networking kits in a large complicated multilevel home, we are confident that the NETGEAR Orbi kit is the best choice for most people. The Orbi kit had the best throughput and range of the kits we tested, even with only 2 units to the other kits' 3." Well, the market has spoken, and it's clear that Orbi is the best solution available for whole home WiFi coverage.

We are pleased to report that our market share in home WiFi mesh is holding strong in the mid-30s, gaining slightly amidst fierce competition. As a result, we reached an all-time high in market share for Q2 in the U.S. retail online channels for combined WiFi routers, gateways and mesh systems. We continue to stay ahead of the competition by leveraging our second-to-none expertise in WiFi, broad product portfolio, our well-established brand and our global distribution channel. Consumers worldwide know that NETGEAR is synonymous with the fastest and most reliable home WiFi. And furthermore, no one can match the breadth and depth of our channel relationships.

We have lots to look forward to as we enter our seasonally stronger back half of the year. First, we will continue to build on the momentum that we have with Arlo and Orbi to gain market share, add paid services and drive growth for the overall company; second, Arlo expands into a new non-camera product category, allowing us to further enhance the Arlo platform and grow our TAM. We will announce this new product no later than our Analyst Day in November 2017.

I will now turn the call back to Christine for the Q3 guidance.

Thank you, Patrick. For the third quarter of 2017, we anticipate revenue will be in the range of approximately $340 million to $355 million. Third quarter GAAP operating margin is expected to be in the range of 6.5% to 7.5% and non-GAAP operating margin in the range of 9% to 10%. Our GAAP tax rate is expected to be approximately 35%, and the non-GAAP tax rate is expected to be approximately 33.5% for the third quarter of 2017.

Operator, that concludes our comments, and we can now take questions.

(Operator Instructions) Our first question is from Rob Cihra of Guggenheim Partners.

Two things if I could. One on -- so Connected Home, as you said, ex the service provider, was basically, call it, flat year-over-year, I guess, not too dissimilar from Q1. And the question there is, so Orbi is obviously growing. You mentioned, I think, Nighthawk being good in the release. So I'm just curious, what's sort of going on with the mix there in terms of Orbi going up? Is Nighthawk -- what's Nighthawk holding in versus Orbi and then sort of legacy products? And I have a follow-up, if that's okay.

Yes. The biggest change over the last 12 months is -- particularly in the last 6 months is the takeover of Time Warner Cable from Charter. Time Warner Cable, just like Comcast, used to rent cable modems and WiFi to their subscribers. So many subscribers actually prefer, instead of paying $10, $12 a month, to actually buy cable modems and gateways in retail from us that saves them a lot of money. Charter had a different policy. They gave -- well, they not quite gave, but they bundled the modem rental fees in their TV and Internet fees, so people do not have an option not to get modem from them and, as such, it significantly strength the retail rental market for cable modems and cable gateways. And since we are the biggest shareholder -- market shareholder in that particular category of products, we got hit the hardest. However, we do believe that with the continuous growth of the WiFi mesh market, number one, the ASP of the rest of the market will grow to offset the decline; number two, we are spending money to educate the customers, even though they get a free modem from Charter, their WiFi actually is not up to snuff, and you should actually supplement their modem with our Orbi. So we do believe things will -- the total accessible market of home WiFi in retail in the second half will turn around and grow again.

Okay, great. And then if I could ask a question on gross margin. So as you guys had guided, wherever gross margin came down in Q2, a lot of that being the contra-revenue hit from the channel marketing, from here, and I know you don't guide gross margin specifically, but normally, your -- seasonally, your gross margin is down a bit, maybe a point or so, call it, in Q3. But up -- well, actually, sorry, I guess it was last year, the year prior was actually up. But I'm just curious, ex seasonality, have you already sort of taken the hit from the sort of more aggressive marketing? Does it get steeper from here? Does it start to improve at one point? I'm just kind of curious how that -- how your plans play out there.

Well, what I'd say, Rob, we're still spending money on marketing. Obviously, optimizing that as we continue to move forward. We got a really good growth in the Arlo market share on that and, again, kind of slight growth in mesh and maintaining. So we'll continue to spend the marketing dollars. I do think, as you can see, the revenue is guided a little higher in Q3, you'll get a little scale out of that as you go forward. But we will continue to spend that money. Obviously, optimizing it, you can see the guidance is up a bit from Q2. And so we will continue to do both. We want to improve the bottom line, but we also want to make sure we do the right thing for the long run for both the Orbi and the Arlo category.

Yes. On the other hand, as you see, the Arlo market's growing very rapidly, and we're gaining share rapidly. And with that increased scale, we certainly could leverage into our buying as well as our pricing power in the market. So as Arlo becomes a bigger part of the overall business, the profitability of Arlo has a significant bearing on the overall profitability of the company.

Our next question is from Tavis McCourt of Raymond James.

My first one is on Arlo, and then I've got a couple of financial questions, Christine. So I think you show on the slide show, Arlo was a 41% share, or if I'm wrong, it was up a lot from Q1. That's a U.S. share number. What I'm wondering is what is your sense on the share outside the U.S. and how that market is developing outside the U.S.

It's pretty similar in Europe, and we actually have significantly even higher share in Australia. We haven't entered China yet, but we will. And we haven't really started Japan yet, we will. We believe that those 2 markets will offer even more attractive opportunities for us going forward. So we're very confident around the world.

And then financially, I guess, run through some of the reasons for the working capital usage this quarter and kind of more broadly in the first half of the year. And should we expect DSOs and inventory turns to normalize by the end of the year? Or is this a new normal given the mix of business?

So I think we said we expect to see significant improvement in the free cash flow in the back half of the year. But clearly, the uses, since the beginning -- since the end of the calendar year, our inventory accounts receivable and also are payables are sort of at an all-time low. So we do expect -- receivables is all about timing. We always collect everything, so that really is not an issue. Inventory is always a balance between air and sea freight in that. And also, some of our customers, our larger ones, don't keep as much inventory. So you've seen our inventory go up some, so we make sure we optimize that. But we are focused. We believe the DSOs will come down a bit next quarter then we hit the seasonal dating term again in Q4. Inventory will continue to balance going forward. So we believe we will generate significant improvement in the cash flow in the back half of the year.

Got you. And then can you repeat the tax rate that you utilized for the non-GAAP earnings in the June quarter again? I got the tax rate guidance for next quarter.

At 31.22%, non-GAAP.

Our next question is from Woo Jin Ho of Bloomberg.

Quick question on the guidance. So your guidance implies about a 5% sequential growth rate, which is relative to the prior 2 years, let's just say, less than seasonal. And I understand that there are some factors that are going on there. I'm trying to better understand, especially given that you're putting investments into your higher ASP products, why is the guidance -- or how did you do construct that guidance, especially given that you are making these investments to boost share in Arlo as well as in Orbi?

Well, I think we construct the guidance the same way every time. We roll the numbers up. I think we have -- definitely, you're seeing a fast-growing Arlo category. You're seeing again the Orbi and the Nighthawk. But balancing against that, we also -- as we mentioned in the SMB area, we are -- there is -- the market is actually contracting a bit, so we will move against that with some of our new products and the 10-gig switches. But right now, we got to catch up with that. And the same thing that Patrick mentioned on the cable side; in the Connected Home, as we go forward, we're looking at those numbers. And that's -- on a year-over-year comp, that's down.

Okay. And then, Patrick, one for you. Could you dig a little bit deeper in terms of the competitive environment for both Arlo as well as Orbi? It looks like there's a couple of product refreshes that have [come on] over the past quarter as well as some traditional competitors coming out with new, more powerful mesh products. Could you just talk about what's happening on the competitive landscape?

Yes. I mean, on the Arlo side, it's pretty clear by the market share numbers that we continue to grab share because of our unique wire-free technology. All the products that are really leading the market, including the Arlo Pro as well as the Arlo Go are all wire-free. And so far, that wire-free technology is unparalleled. There is no competition in this area that could match our battery life, our WiFi or LTE connectivity robustness, as well as the cloud and mobile app capabilities. I think even though our competition tries, they have not been able to get anywhere close to the combination of the technology that we have put together. So we're pretty confident that we will continue to gain share in that regard. And we would use that platform to continue to expand into other areas that might not necessarily be 100% wire-free, such as the Arlo Baby. And then on the other hand, on the Orbi side, it's the same thing. We have a very unique technology called tri-band mesh. And as we mentioned in the discussion just now that Wirecutter said, "Hey, no matter how you test it, no matter how you look at it, we beat everybody hands down, even with only a kit of 2 versus everybody else's kit of 3 or 4 or 5 or even 7, especially in large homes." So we continue to believe that our unique technology, which we patterned it quite a bit off the tri-band secret sauce that will continue to lead. Then, of course, I mean we have some really big name competitors which, despite inferior technology, because of their brand and because of their price, they would continue to be a formidable competitor. But we decided competing against them with price is not the way to go; rather, with technology is the way to go. So that's where we're heading. And we believe that we're confident we'll get the 45% market share eventually.

And then one last thing for me in terms of the pricing environment. It just amazes me for like the past couple of years that your Nighthawk and your Orbi product line as well as your Arlo product line, pricing has remained stable. And kudos to you guys to being ahead of everyone else or ahead of the curve in terms of offering good product and good technology. I mean, how long do you think this product environment is going to stay stable for you? Because you've been able to successfully offset slightly declining units with your strong pricing?

Yes, we're pretty confident that as long as the Internet speed, both from a wired, cable or fiber optics or from the wireless on LTE or 5G basis, as long as the speed continue to rise, we will still continue to lead with high ASP. I mean, just imagine, if these days, there was no Internet, the phone average price will now get to $800. Because of the Internet, because of the speed of the Internet, people want to use the phone to watch video. And that's why the phones keep going up in ASP. The same thing is true, if the Internet speed, both from the LTE 5G perspective or from a fiber optic or cable perspective continue to rise, people always want faster routers, faster WiFi mesh and then faster mobile hotspots. That will enable us to continue to charge more because we are pretty confident which -- we are at least about 3 to 5 years ahead of any of our competition in terms of all these radio frequency expertise and tuning of WiFi and LTE coverage. So there's just no reason to believe that the Internet speed is going to slow down. If you look at, I mean, what we have been able to do with our Nighthawk M1 mobile router, we're the first one to demonstrate 1-gigabit download on an LTE network. And Qualcomm has already announced that their next generation, before 5G arrives, will actually get to 1.6 gigabit. And then, 5G is promising 10-gigabit. If 5G could do 10-gigabit, I'm pretty sure fiber optic and cable would get there, too. And so DOCSIS 3.1 already promised that kind of speed. So think about that. When you want 10-gigabit -- when you have 10-gigabit coming into your house or into your surroundings, you absolutely want the best WiFi not only around every single corner of your house but every single corner of your front and backyard.

Our next question is from Hamed Khorsand of BWS Financial.

First off, I want to ask as far as the pricing strategy goes with wireless AC, how is that going to affect, given that some of the units that don't have Nighthawk brand are now being priced competitively at lower price points versus Nighthawk? And how are you going to market that to individuals?

As we are going over to 11ax, which is coming around the corner, it's pretty clear this time is to -- the time to call RIP for the 11n, all right. So basically, what we want to do is to eliminate the really low end of 11n and replace that with low-end 11ac of the higher ASP than the low-end 11n. So you see us also while we're busy introducing high-end Nighthawk, such as the Nighthawk X10, we're also busy introducing lower-end 11ac. We recently, in Q2, introduced 11ac, AC750 as well as AC1200 in various retail channels. Our objective is very simple: we would like to cover our customer base all the way from a small, little dinky apartment, all the way to a single-family home with front yard and backyard, or with the hugest estate. So we span across an entire spectrum of price points and technologies. And that's why, in Q2, we saw our historic high market share in overall WiFi -- home WiFi market.

Okay. And then changing up to Arlo or the Baby Arlo. Are you making any changes and improvements given the reviews have been pretty mixed on Amazon?

What are you talking about? I think...

Well, the consumer reviews are now at something like 3 stars out of 5 on Amazon for the Baby Arlo.

Oh. Oh. I think you missed probably the last 20, 30 reviews. If you go back to look at the last 20, 30 reviews, they're all 4 and 5 stars. So the 3-star reviews are mostly when we just launched the product, which we admitted, we had some software bugs, especially on the Android app platform. We fixed it. So I encourage everybody to look at the last 20, 30 reviews. They're all 4 and 5 stars. So we're pretty confident.

Okay. And my last question is just on the operating margin guidance. Is there much of a change as to the pricing strategy? Is this guidance purely a volume-driven with scale? Or is there some change to pricing as far as no more deep discounts like there was in Q2?

Well, I mean we never do deep discounts. I mean we're just doing the channel marketing. But as I mentioned in prior discussion, and you saw it pretty clearly, right, when Arlo went from $40-some million to some-$70 million, their profitability went up 3.5 -- 350 basis points. And there's no reason to expect that Arlo's revenue is not going to grow in the second half, which is seasonally strong. And clearly, the Arlo profitability will grow in commensurable manner. And if you do a simple arithmetic, if Arlo goes higher in the contribution margin, it's certainly will be a favorable factor to our overall operating margin.

And I guess the same question for the Nighthawk line as well.

The Nighthawk is pretty steady. I mean, we don't see any movement in terms of its profitability.

Our next question is from Tavis McCourt of Raymond James.

Just had a follow-up on the deferred revenues, Christine. They were up quite a bit year-over-year and a little bit sequentially. Can you remind us what the driver is there?

A couple of things. First of all, if it doesn't qualify to go to revenue, it's not shipped on time and not delivered, and typically that. There's also a carve-out in there from Arlo. With Arlo, you get 7 days of free cloud storage. So the more Arlo, we carve out a piece of that to account for the storage and amortize that over the life of Arlo. And as Arlo grows, so does the carve-out.

(Operator Instructions) Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to management for closing remarks.

Well, thank you all for joining today's call. We have a lot to look forward to in our seasonally stronger back half of the year. I look forward to updating you all on our progress in October when we announce our third quarter results. Talk to you later. Thank you, bye-bye.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.