Onto Innovation Inc (ONTO) 2011 Q2 法說會逐字稿

Good afternoon and welcome to the Nanometrics Second Quarter 2011 Financial Results Conference Call. A Q&A session will be held end of the call; until that time, all participants will be in a listen-only mode. Please note that this conference call is being recorded today, July 28, 2011.

At this time, I would like to turn the call over to Claire McAdams, Investor Relations, for counsel for Nanometrics. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to the Nanometrics Second Quarter 2011 Financial Results Conference Call. On today's call are Dr. Timothy Stultz, President and Chief Executive Officer, and Ronald Kisling, Chief Financial Officer.

Before we get started, I would like to call your attention to the following Safe Harbor Statement. This conference call contains certain forward-looking statements including, but not limited to, statements regarding financial results for the Company's most recently completed fiscal quarter, which remains subject to adjustment in connection with the preparation of our financial statements and periodic report on Form 10-Q for the second quarter of 2011, the continued adoption and competitiveness of our products, the expansion of our served markets, and future revenue growth, profitability, and cash flow.

Although Nanometrics believes that the expectations reflected in the forward-looking statements are reasonable, actual results could differ materially from the expectations due to a variety of factors including a contraction in current levels of industry spending, shifts in the timing of customer orders and product shipment, slower than anticipated market adoption, changes in product mix, increased operating expenses, and the additional risk factors and cautionary statements set forth in the Company's Form 10-K for fiscal 2010 as well as other periodic reports filed with the SEC from time to time.

Nanometrics disclaims any obligation to update information contained in any forward-looking statement.

I will now turn over the call to Tim Stultz. Tim?

Thank you, Claire. Good afternoon, everyone, and thank you for joining us today. Joining me on the call is Ron Kisling, our Chief Financial Officer.

In my remarks this afternoon, I will discuss the business and financial highlights for the second quarter of 2011 and our view of the near and longer-term business environment. Following that, Ron will provide a closer review of our financial performance, after which I will return with guidance for the third quarter.

Today I am pleased to report another quarter of strong financial performance with record revenues of $64.4 million, gross margins of 56%, and earnings of $0.47 per share. During this quarter, we experienced strength across all three of our business units -- automated metrology, integrated metrology, and materials characterization -- following another period of healthy investments by our customers in both technology conversion and capacity expansion.

Our automated metrology business continued to benefit from an expanding adoption of optical critical dimension, or OCD, technology, both for advanced device development as well as deployment into high volume manufacturing. We had growth in demand for our UniFire as more chip manufacturers invest in the emerging market of advanced three-dimensional packaging.

Our integrated metrology business saw strength in CMP and etch applications, primarily driven by semiconductor capacity expansions. And our materials characterization business benefited from increased spending in bare silicon wafer and LED manufacturing.

The real story behind Nanometrics, however, is not about the last quarter or even the last series of quarters where we have consistently outperformed the industry. Rather, it is about our business outlook and prospects for future growth, the strength of our business model, and confidence that our execution and performance will continue to exceed that of the overall industry.

The confidence we have in our business outlook can be readily understood by considering the following three facts. First, our primary served markets are the fastest growing segments of process control. Second, we are gaining share in served markets and expect to expand upon our track record of winning key tool-of-record positions with major customers. And third, we have consistently demonstrated our ability to be fiercely competitive and execute against our business objectives.

Now, returning to our primary growth markets -- OCD and 3D packaging -- the OCD market is projected to grow 15% to 20% in 2012 and growth in demand for 3D packaging metrology will likely be more than double that.

OCD is a disruptive force. It has already been established as a key technology used in the fabrication of 3D devices such as FinFETs or tri-gates where the number of OCD applications and measurements are increasing at a rate faster than other process or metrology steps. And because of its high speed, non-destructive, and high-fidelity data capabilities, OCD is rapidly displacing other traditional metrology tools such as CD-SEMs.

The other key contributor to our growth story is wafer-scale or advanced 3D packaging. Our UniFire product is being used by essentially every major semiconductor manufacturer in the world for the development of 3D packaging processes by measuring through-silicon-vias and micro bump chip-to-chip interconnects.

The UniFire has already been selected by one customer for high volume manufacturing of 3D packages and we fully anticipate further tool-of-record production awards in the not-too-distant future as our other customers transition their deployment of our UniFire from development into production.

3D transistors, 3D NAND, and 3D packaging, all of which are emerging technologies with strong demands for 3D structural metrology. 3D structural metrology is poised to outgrow the capital equipment market in general and it is a market where Nanometrics is the industry and technology leader.

And finally, in addition to the significant growth opportunities already discussed, we benefit from a breadth of products and diversity in our served markets where our OCD and UniFire tools are also used in production by data storage industry, and our materials characterization products play important roles in the manufacturing of LEDs, bare silicon wafers, and solar photovoltaic devices.

So it should not be surprising that in spite of the near-term uncertainty in the timing and magnitude of overall capital spending we continue to be highly optimistic and confident in our ability to outperform the industry and deliver long-term business growth and superior performance to our shareholders.

Now, I'd like to turn the call over to Ron.

Thank you, Tim, and good afternoon. Nanometrics' press release, containing our second quarter results, was sent out by Business Wire today, July 28, at around 1.00 p.m. Pacific Time. The press release may also be found on our website at nanometrics.com.

As Tim indicated, we achieved another quarter of record revenues and strong financial results. Revenues were $64.4 million, up 4% from the prior quarter and up 27% from the second quarter of last year, and were at the high end of our Q2 guidance of $62 million to $65 million.

Total product revenue of $54.2 million were nominally flat with the first quarter of 2011 and up 25% from the second quarter of last year. Service and upgrade revenues of $10.1 million increased 24% sequentially and were up 37% from the year-ago quarter driven by higher upgrades and related services revenues. Service revenues comprised 16% of our total revenues, up from 13% in Q1 2011.

Sales of our automated metrology systems decreased slightly from Q1 and comprised 60% of total revenues. We saw increases in both our materials characterization and integrated tools business, which comprised 14% and 11%, respectively, of total revenues.

Turning now to our end markets, revenues from logic, IDM, foundry, and hard drive segment decreased to 24% in the second quarter from 34% in the first quarter. As a result, memory increased both in absolute dollars and as a percentage of total revenues to 59% of product revenues, of which flash memory comprised 45% and DRAM 14%. The LED, solar, and silicon end market segment also increased its share to 17% from 15% due to increasing sales this quarter.

Consistent with our historical reporting, we report revenue by geographic region based upon the ship-to or first end-use destination and break out separately regions that exceed 10% of revenues. In the second quarter, South Korea accounted for 35%; EMEA -- Europe, Middle East, and Africa -- accounted for 14%; North America and Japan, each 13%; China, 12%; and rest of the world, 13% of total revenues. Sales to Samsung accounted for 25.6%; Hynix, 18.1%; and Intel, 12.8% of total revenue in the quarter.

Turning to gross margins, we continue to see strong gross margins as gross margins came in at 56.1%. This compares to 56.6% in the prior quarter and 55.1% in the second quarter of last year.

Our gross margins came in above our guidance, primarily a result of improved services gross margins resulting from higher core service and upgrade revenues in the quarter. Product gross margins were 57% while service gross margins were 51.4%, above our model on both higher core service revenues and upgrade revenues.

Operating expenses in the quarter increased 3% over the prior quarter to $18.6 million, primarily due to sales volume coming in at the higher end of guidance as well as non-cash write-offs in engineering. General and administrative expenses were flat with Q1 spending.

Driven by record revenues and continued strong gross margins, our operating income was a record $17.5 million, compared to $17.1 million in the prior quarter and $12.9 million in the year-ago period.

Our operating margin was 27.2% of sales, slightly above our guidance of 25% to 27%. Net interest and other expenses were $0.7 million, compared to $0.8 million in the prior quarter and $0.1 million in the year-ago period. Other expenses for the quarter included approximately $350,000 in foreign exchange losses related primarily to our operations in Japan and the UK (technical difficulty) exchange rates.

Our effective income tax rate in the quarter was 34%, just slightly below our 2011 guidance of approximately 35%, resulting in net income of $11.1 million, or $0.47 per diluted share, at the high end of our guidance of $0.41 to $0.47 per share. We continue to expect our tax rate for 2011 to approximately 35%. These earnings compare to $0.51 per share in the second quarter of 2010, which reflected a tax rate of only 9%, and to $0.45 per share in the first quarter of this year.

Turning to the balance sheet, we grew our cash and investments by $11.5 million in the second quarter, ending the period with $91.7 million, or approximately $4.04 per share, up from $3.53 per share at the end of last quarter demonstrating consistently strong cash flow generation from operations.

During the quarter, we repurchased 265,000 shares for approximately $4.26 million at an average price of $16.00 per share. We have approximately $5 million remaining under our existing $10 million repurchase program authorized or approved by our board last year. The primary goal of our repurchase program is to reduce the dilution from employee share programs.

Accounts receivable at the end of the quarter were $43.5 million, a decrease of $4.4 million over last quarter as our DSO declined to 61 days. Most of this decline in AR and DSO was due to shipments being weighted more towards the first half of the quarter than we have seen historically. And as a result, we continue to anticipate that our DSOs will remain generally around 70 days.

We saw an increase in our on-hand inventory of $1.8 million over the prior quarter in response to rapidly changing customer requirements and our inventory turns remained flat at 2.3 times.

Our tangible book value per share increased to $8.42 on 22.7 million shares outstanding at July 2 from $7.95 at the end of last quarter. We ended the second quarter with a headcount of 484 employees, a net increase of 11 from last quarter.

One last comment about our balance sheet. In July, we took the opportunity to pay down another 20% of our mortgage, bringing our balance below $8 million. You'll see this reflected when we report our Q3 results.

This concludes my prepared remarks, and I would now like to turn the call back to Tim.

Thank you, Ron. Summarizing this report, Nanometrics has delivered another quarter of solid financial performance and good operational execution. Customer confidence and trust in our products and services has been rewarded with increased market penetration, gains in market share, and strong positions with leaders in our served markets.

Recent news about shifts and a pause in capital equipment spending by a few major semiconductor customers has clouded the near-term business horizon for capital equipment manufacturers.

For Nanometrics, however, though we are not immune, we are much less susceptible to those spending swings than many of our peers due to our position in growth markets, our limited exposure to foundry spending, which has seen the biggest drop-off, and the benefits of continued investment in new technology by many of our customers.

Accordingly, when we entered our third quarter our outlook was for a flat to slightly up quarter-on-quarter performance. Just three days ago, however, we received notice from a key customer about a push-out of a sizeable portion of shipments scheduled for the third quarter.

This short-term, surprise notice, reflective of the high volatility of the current business environment, will result in a quarter-on-quarter decline of our automated OCD systems business somewhat offset by strength in our other business units such as UniFire and materials characterization. This shift in product mix will also put downward pressure on our gross margins.

That being said, our quarter-on-quarter outlook and expected performance is still stronger than most in our industry for the reasons stated previously. And most importantly, we believe this is a short-term issue. The long-term multi-industry drivers and fundamentals are still firmly in place, but the needs for additional investments in technology conversions and capacity expansion still exist.

The capital intensity is increasing in response to the challenges of advanced technology nodes, and thus our business, business model, and business outlook remain very positive for many quarters to come. So operationally, we will stay the course in building an even better Nanometrics, focusing on expanding our business in growth markets, increasing our position with key customers, and developing next-generation products and technologies which will position us for even further growth.

With that as a backdrop, our guidance for Q3 is as follows. We see third quarter revenues coming in between $57 million and $60 million with gross margins of 52% to 53%. The expected decline in gross margin is primarily a result of product mix and should rebound as the contribution to total revenues from our automated systems grows in forthcoming quarters.

Operating expenses are expected to increase slightly by $100,000 to $300,000 in support of ongoing multi-national fan-outs of our production platform and continued strong customer demand going into 2012, and we expect our operating margin will be between 19% and 21%. Earnings per share will be between $0.28 and $0.34, with a nominal tax rate of 35%.

With that, we will now open the line for questions. Operator?

Thank you. (Operator Instructions). Our first question comes from Tom Diffely of D.A. Davidson. Your line is open.

Yes, good afternoon. I was hoping to get a little more color on the push-out. Was that from a memory or logic customer? Is there any more information you can give us about --?

I will tell you that it was from a memory customer, but we can't give you any more specifics about the customer itself.

Okay. I'm just kind of curious because it looks like that your guidance for roughly 10% down in the third quarter is kind of in line with a lot of the other semi-cap guys, and you'd think that they would see these memory push-outs in addition to what they're seeing from the foundries right now. But maybe it's just a case where it just happened so quickly or so recently that it's not impacting them as of yet.

Yes, I think this particular customer was making some of these surprise calls across-the-board during the last week, and I think a lot of us are all baking in the impact.

Okay. And is the customer just freezing orders for the third quarter or is it just a particular site -- a portion of their orders that they're pushing out?

No, it's a large portion of a block of orders that were scheduled for shipment in Q3, and we believe that they're going to be in Q4, possibly some of them slipping into Q1.

Okay. All right. And it sounds like it was almost all for OCD?

Yes, it was our OCD automated systems, yes.

Okay. All right. So just, I guess, stepping back, in general, are you seeing a difference in kind of order booking trends between your integrated systems and your stand-alone systems?

Proportionately, we've seen a little more -- a little shift. We saw growth in integrated metrology, whereas the automated systems on OCD were down a little bit. We saw strength in the UniFire product and we saw strength and some improvements in materials characterization. So the other business units are contributing nicely to the total story here.

Okay. I just wasn't sure if the integrated systems, because they may even go into foundries, if they were a little weaker as far as the outlook goes as well.

No. Most of our integrated systems themselves also do not go to a foundry.

Okay. All right. And then, I guess, when you look at the relative margins -- oh, I guess a step back, looking at the service component. I was hoping you could give us a little more color on the service and what drove strong margins in there previously and why the margins there are going down a little bit.

Yes. When you look at our service margin a big piece of the driver in margins is upgrades, and those tend to be pretty lumpy. And if you look back over the last couple of quarters, you'll see when we have a bump in service revenue, that's almost always driven by upgrades and upgrades have a much higher margin. Some of the upgrades tend to be software only, and so we have really strong margins on those.

So, when you have a strong quarter of upgrades, you'll get a pretty significant benefit in that particular quarter from -- to margins related to upgrades. So one of the things, if you want to look at sort of long-term, is you really need to look at a trailing four quarter because the lumpiness of upgrades kind of gets isolated over that period of time. But --.

Okay.

-- they do tend to be lumpy and events that occur on an irregular basis, and that's the driver to the margins.

Okay, so the outlook for the upgrades is not impacted by this push-out, then?

No, it's not.

Separate issue altogether. Okay.

That's correct.

Okay, thank you.

You bet. Thanks, Tom.

Thank you. Our next question comes from Gus Richard of Piper Jaffray. Your line is open.

Hello, Gus.

Just looking at the sequential decline in gross margins, can you sort of disaggregate how much of that is a decline in upgrade business and how much of that is lower product margin?

We don't break out the specific breakdown, but I would say that the single biggest driver is the upgrade cycle in terms of upgrades being lower in Q3 than they were in Q2. We do have some sequential decline in product margins, as Tim mentioned, as we see materials characterization products, which typically are lower priced and have slightly lower gross margins, making up a bigger percentage of the product mix, bringing down product margins in Q3.

But again, that's sort of mix-driven. And then the bulk of it, though, is really tied to the fluctuation you see in upgrades in the service line.

Okay, got it. And then, so product margins should hold fairly stable and it's the materials characterization and not the UniFire that's putting the pressure on the product margins?

I think you will see some decline in products because we will see a bigger mix of the materials characterization products. I think if you were to look at it broadly, our automation tools have the highest margin, and so when you see that mix changing you're going to see product margins come down a little bit.

And I think UniFire, we're still at fairly low volumes on those. But it's ramping and we're also seeing margins continue to increase on those, but we're starting -- because of lower volumes at somewhat lower gross margins on those tools.

Okay. And then just circling back to the push-outs, Tim. This is incremental to what people have been talking about over the last couple of months in terms of delay of shipments.

Yes. I don't know if I would use the word incremental, Gus. It was not one that's been talked about, actually. It was a surprise call from a customer that really hasn't been discussed by most of the companies that we were listening to previously.

Okay, got it. Let me try the question this way. Clearly, at the OEM level there's some shifts in where some companies are sourcing. And it's been a little bit confusing for your customers to determine if the shift in sourcing is going to be sticky or not and sort of causing some confusion in orders. Is this propagating from the guys that are losing share to the guys that might be gaining share?

If I understand your question, I don't think you're on target, Gus. This is a memory customer, as I mentioned earlier.

Yes.

This is one of our key customers. And this is automated OCD platforms that were planned for the quarter which have been moved out at least a quarter.

Got it. It makes complete sense. I just wanted to make sure. Thanks for taking the questions.

Sure, Gus.

Thank you. Our next question comes from Mahesh Sanganeria of RBC Capital. Your line is open.

Thanks a lot, Tim. I would say congratulations on a pretty good guidance. If I compare to the other guys like [Novalis] is down 25% from the peak to the trough and [Lamb's] guidance is close to 37% down, and so that is pretty -- your guidance is pretty strong [with consider] for September.

And so, in fact, I have a question is that besides Intel, what else is helping you maintain this high level of revenues?

Thanks Mahesh. And it's a good observation. I think I'd like to just elaborate a little bit on it, that we do realize that we're guiding 7% or 8% down in revenues Q2 and Q3. But that's nominally about 50% or less than what we've seen from some of the other companies that have a higher exposure to the [bait] of the market.

And if we look at our annual performance and we look at the annual capital spending going from flat to 10% to 20% in the wafer fab equipment, our business outlook and our business performance to date is almost three times that. And it all ties into the theme that we've been trying to share, is that the strength of our business comes from the growth markets of OCD, the growth markets of wafer-scale packaging, and the fact that we have been gaining some market share in some key areas.

What supports our business is, in fact, the continued spending on these technology conversions. The technology conversions, I think, are averaging two to three times more than on the capacity expansion as they drive down the nodes, and it's putting a greater demand on metrology tools and, in particular, in the 3D arena for 3D transistors, 3D NAND devices, and 3D packaging.

And so we're seeing a lot of pull, a lot of encouragement, and a lot of pressure on us to continue to evolve our technology roadmaps to address them.

Okay. So, one more question on the push-out. I think you should expect that everybody's going to ask that. My question is what is really driving that? Because what we thought -- the foundry push-out is quite well known and you have now no exposure to that. DRAM spending has been quite low, and I just thought that there was not any room for push-out there. And NAND is the one which had been stable, but I didn't hear anybody saying that there was an overcapacity on the NAND.

So, what is confusing me is that what has changed that is driving this push-out? And you can probably verify that. I would assume that there is nothing in DRAMs that has to be in demand side.

Well, actually, I would say it's the other way around. It's actually on the DRAM side and it's driven by the further weakness of the DRAM, and spending of a particular customer was pulled back pretty dramatically in the last few days.

Okay. Okay, that's interesting. And in terms of your 10% customers, would you say that there's going to be a significant change in Q3 compared to Q2?

In terms of the mix?

Yes.

I would say no. No. The mix should be similar, not necessarily in the same absolute numbers.

Okay. Okay. Okay, that's very helpful. Thank you, Tim.

Sure.

Thank you. Our next question comes from Edwin Mok of Needham. Your line is open.

Hi. Thanks for taking my question, and I share the same view, that you guys have done a pretty good job in this environment. So, just one question. Sorry to come back to the push-out. Just wondering, is that customer just shifting the capital spending to other part of the fab network or is it just something that they decided to delay in terms of expansion or investment?

Yes. To the best of my knowledge, it's not a shift at all. It's simply a delay based on what are they going to put in capacity against where's the DRAM pricing and the return on investment of a continued investment in capital for that market. We fully expected to come back in in Q4 and maybe some of it's slipping into Q1.

I see. So it sounds like there's more -- there's timing -- at least the way they have communicated to you so far is more the timing of third quarter versus the fourth quarter?

Yes. There's been -- I should strongly point out that there's been no cancellations. And in this volatile environment, I may come into the office tomorrow and find out they're pulling them back in. It's just the behavior of some of the customers in this kind of environment.

When you have a high concentration of customers -- of business with a few key customers, then when they do a major shift like this it's hard to have it roll off your back. Even so, it has still only pulled us down between 7% and 8% against the quarter, which we still feel very good about.

Yes. Definitely, Lamb said something similar, so I would imagine it's across-the-board.

So, I actually have a question on your UniFire product. Tim, in your prepared remarks you talk about one of them being qualified for a 3D -- basically, a 3D packaging application. I was wondering, what kind of application is that? Is that interposer? Is that through [atrue] -- for the TSV? Is it memory or logic? And also, any idea when you expect that customer to start ramping production on that 3D technology?

Yes. We do know that there's actually some ramping activity taking place. We generally avoid going into customer specifics. It's in the packaging and primarily in the micro bumps and then some TSV applications as well.

I see. And that TSV application is for a launching application, or is it interposer, which I think is still called 2.5D if I'm thinking right?

I can't walk that close to the line or I'll get my wrists slit from my customer.

I see. I understand that. That's very -- okay, thanks for the clarity around that.

You bet. You bet.

Thank you. (Operator Instructions). Our next question comes from Patrick Ho of Stifel Nicolaus. Your line is open.

Thanks a lot. And actually, nice work on the quarter as well, Tim. In terms of -- I guess I'll just avoid the push-up since I think it's been beaten to death.

But just looking longer term in terms of the adoption of OCD as the DRAM market goes to more of these vertical device structures, can you just give a little bit of color of how you see, I guess, the expansion of the market opportunity as DRAM goes from 4X to 3X to 2X? Can you just give qualitatively, like how many more tools or what the market opportunity may be as you go down those technology nodes?

Thanks for the comment on the quarter. I know it's not what we did yesterday, it's what we're going to do tomorrow, but it's nice to hear the recognition of the performance on the quarter.

Anyway, with regard to the OCD in the three-dimensional devices, there's a fair amount of activity, actually, in the 3D NAND right now and we're involved in technology development with our tools for some key customers. Most of this is occurring in the 1x and 2x nodes.

I think that DRAM starts looking at this, and when it gets down below the 3x nodes. But our engagement on DRAM 3D devices is not as strong as it has been on both logic and the NAND devices.

Okay, great. That's really helpful. Now, obviously like others have said, you guys do not have as much foundry exposure as many of your other equipment peers. Having said that, at some point they're going to be also moving to 3D transistors or FinFET as well.

I guess from your perspective in the work that you're doing with the leading foundries, how do you see that adoption rate going? Do you see any of the issues that they faced at both the 4x as well as the 28 nanometers in terms of transitioning to high-k metal gate? Does that delay any of their developments to get to 3D structures?

As you pointed out, we don't have a material position with the foundry, but I will tell you that our foundry position has improved and is growing, even though we don't break it out yet. And it's in tools, OCD as well as the UniFire and integrated metrology, in all three of these areas.

With regard to your specific question, I think 3D structures are absolutely -- will be and are currently being evaluated and being embraced in the foundry locations. And our tools are being used to both assess and to develop those capabilities, and we see that as kind of the door cracking open for us to make greater headway and benefit more from foundry spending than we have in the past.

Great. And final question, maybe for Ron. I know that you've stated that the buyback has been primarily to offset the dilution from the employees' options. Is there a way that you guys can be more opportunistic given the current market environment? And especially, if the group continues to decline, is there a way to be more opportunistic?

I think as you stated, yes, the stated goal is to offset the dilution from options and other grant awards to employees. And we have about $5 million left under the board's original $10 million authorization, so we still have a little bit of -- a fair amount of authorization left. And so we're continuing to look at opportunities when it makes sense to do a repurchase.

So I think the short answer is yes, we're continuing to look at all of the factors and opportunities when it makes sense to repurchase to meet that goal we're trying to achieve.

Great. Thank you guys.

Thank you. Our next question comes from Tom Diffely of D.A. Davidson. Your line is open.

Yes, hi. Just a quick follow-up on the push-out. How quickly could you guys respond if it did get pulled back in? Is that an intra-quarter affair?

Definitely. One of the things that we're doing, Ron mentioned earlier, is that we've actually increased our on-hand inventory. During volatile periods like this where the customers are leveraging and benefitting from short lead times, in order for us to respond to those business opportunities we need to build some tools against forecast and outlook as opposed to simply by backlog. And so we make sure that we can respond to those opportunities and take advantage of short-term changes in the tide when they occur.

Okay. So there's not a lot of customization, then, for these platforms?

No, these are standard OCD platforms.

Okay, great. Thank you.

You bet.

We have no questions at this time. I'll turn the call back over to Tim Stultz.

Thank you. And thank you again for joining our call. I take particular pride at this time to once again recognize and give credit to the employees of Nanometrics who have made it their personal mission to distinguish our Company to above average competitiveness, commitment, and execution. And I thank you all for joining our call. We look forward to reporting to you on our third quarter results in October.

Thank you. Ladies and gentlemen, this concludes the conference for today. You may all disconnect and have a wonderful day.