Penguin Solutions Inc (PENG) 2017 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the SMART Global Holdings Fourth Quarter and Full Year Fiscal 2017 Earnings Conference Call.

(Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

It is now my pleasure to hand the conference over to Ms. Suzanne Schmidt with Investor Relations.

Ma'am, you may begin your conference.

Thank you, operator.

Good afternoon, everyone, and thank you for joining us on today's earnings conference call to discuss SMART Global Holdings' fourth quarter and full year fiscal 2017 results.

Iain MacKenzie, President and CEO, will begin the call with a discussion of the market and the business; followed by Jack Pacheco, Chief Operating and Financial Officer, who will review the financial results in more detail and provide the forward guidance.

We will then open the call to your questions.

As a reminder, our earnings press release and a replay of today's call can be accessed under the Investor Relations section of SMART's website at www.smartgh.com.

Before we begin the call, I would like to note that today's presentation of SMART's results and the answers to questions may include forward-looking statements.

Any statement that refers to expectations, projections or other characterizations of future events, including financial projections and future market conditions is a forward-looking statement.

Actual results may differ materially from those expressed from these forward-looking statements.

For more information, please refer to the risk factors discussed in documents we file from time to time with the SEC including our most recent Form S-1, which was filed in conjunction with the company's recent IPO.

We assume no obligation to update these forward-looking statements, which speak as of today.

Additionally, during this call, non-GAAP financial measures will be discussed.

Reconciliations for those directly comparable GAAP financial measures are included in today's earnings press release.

And now, I'd like to turn the call over to Iain MacKenzie.

Thank you, Suzanne, and welcome to everyone on the call.

Our fourth quarter results came in solidly above our previous expectations, reflecting the underlying strength of the global memory market, combined with new products and favorable dynamics in our Brazil business as well as the growing demand from storage and telecom end markets for Specialty Memory.

In addition, we used the proceeds from just completed IPO to pay down the then existing term loan, and we completed the refinancing of that term loan, positioning us for increased operating leverage as we move into our fiscal 2018.

I'd like to take the opportunity to sincerely thank our customers for the opportunity to contribute to their success, for our suppliers for their continued support and our employees for their dedication and hard work, making these achievements possible.

First, regarding the overall memory market.

Various industry reports and input from our customers point to healthy demand trends for both DRAM and NAND with some calling for the supply to remain constrained well into 2018.

We remain in a constrained environment despite announcements of capacity additions from major suppliers such as Samsung and hynix, and we expect more typical but moderate Q-over-Q pricing declines in the 2018 and 2019 time frame.

Turning to Brazil where we just completed our eighth consecutive quarter of growth.

All signs point to ongoing strength.

We have numerous tailwinds that favor sustainable growth for strong momentum.

The overall economy in Brazil, while still depressed from where it once was, is now in recovery mode.

We stepped up our local manufacturing for the mobile market to support 50% of the in-country demand for 2017, calendar year 2017, and we'll adjust again to support 60% for the following 2 years.

Additionally, memory densities are increasing in both DRAM and Flash, which is also reflected in the ASP growth.

These structural growth drivers create a larger TAM for us to grow into.

For our Specialty Memory business, we remain a market leader in specialty Flash and specialty DRAM.

This is an area where we have excelled for almost 3 decades.

We address a small niche in a very large market.

Working closely with our customers, we collaborate to develop specialized and long life cycle solutions that provide a relatively predictable revenue stream.

Today, what is really driving the specialty side of our business is the server and storage area and, in particular, the area of all-flash arrays as well as other new technology offerings.

During the quarter, we announced the Osmium Drive, which is an ultrahigh capacity SAS drive, we announced an NVM Express Card featuring MRAM technology, and we announced a new innovative NVDIMM with encryption for high-security applications.

With the addition of the encryption, SMART's NVDIMMs are ideally suited for the financial and other data-sensitive applications where predicting data on the NVDIMM is critical.

We're also very pleased to announce that Randy Furr has joined our board.

Randy is a seasoned executive with vast knowledge of the technology industry including 12 years in the semiconductor and capital equipment and 13 years in EMS.

We look forward to his guidance and contributions in the future.

So now I'll hand you over to Jack to discuss the financials in more detail.

Right.

Thank you, Iain.

I'd like to begin by touching on a couple of topics that Iain mentioned.

During the quarter, we had 2 significant transactions that impacted our outstanding debt.

We used $61.1 million from our IPO to pay down the term loan that was in existence at the time, and then we refinanced that term loan with a new facility that expires in August of 2022, further extending the maturity of our debt.

Both these transactions will help us save approximately $8 million per year on interest expense.

These transactions also caused the company to incur $21.9 million of noncash charges that significantly reduced our Q4 and fiscal 2017 GAAP net income.

Now turning to the fourth quarter.

Gross revenue for the fourth fiscal quarter was $438.4 million, while net sales were $223 million.

The difference between gross revenue and net sales is related to our supply chain services business, which are accounted for on an agency basis, meaning that we only recognize as net sales the net profit on supply chain services transactions.

The $223 million in net sales was an 8% increase over the previous quarter as unit sales increased and average selling prices remained favorable.

Fourth quarter fiscal 2017 net sales of $223 million were broken down by geography as follows: Brazil, 60%; Asia, 20%; the U.S., 15%; other Americas, 3%; and Europe, 2%.

Our breakdown of net sales by end market for the fourth fiscal quarter was as follows: mobile and PCs, 56%; network and telecom, 20%; service and storage 16%; industrial, aerospace, defense and other, 8%.

Moving to the rest of the income statement.

Non-GAAP gross profit for the fourth quarter was $48.2 million, up slightly from last quarter's $47.6 million.

Non-GAAP operating expenses remained flat quarter-over-quarter at $22.8 million as we maintained our expense discipline during the quarter.

Non-GAAP net income for the fourth fiscal quarter was $17.4 million or $0.79 per diluted share, compared to $13.7 million or $0.62 per diluted share on a pro forma basis in the prior quarter.

Adjusted EBITDA increased 4.8% to $31.3 million in the fourth fiscal quarter.

For the full year of fiscal 2017, net sales were $761.3 million, an increase of 42.5% from fiscal year '16 as we benefited from the growth in our mobile memory business due to new product introductions and a strong memory market along with our unique position in Brazil.

Gross profit on a non-GAAP basis for the full fiscal year 2017 grew 51.7% to $162.9 million, while non-GAAP net income for the full fiscal year was $36.6 million.

Turning to working capital.

Our net accounts receivable increased to $183.3 million from $174.5 million last quarter, and our day sales outstanding was 38 days for this quarter compared with 35 days last quarter.

Inventory declined by $8.4 million to $127.1 million from the prior quarter, and our inventory turns at 12.3x remained relatively flat on a quarter-over-quarter basis.

Consistent with past practice, accounts receivable and inventory turnover are calculated on a gross sales and cost of goods sold basis, which totaled $438.4 million and $390.4 million, respectively, for the fourth fiscal quarter of 2017.

Cash and cash equivalents totaled $22.4 million at the end of the fourth fiscal quarter.

As I mentioned earlier, proceeds from the IPO of $61.1 million were received in our fourth fiscal quarter and were then used to pay down a portion of our then outstanding term loan on June 2. On August 9, we used proceeds of $151 million from our new $165 million term loan to pay off the remaining balance of the then existing term loan.

Fourth quarter cash flow from operations was $6 million compared with $8.7 million in the prior quarter.

Now let me turn to our guidance.

SMART estimates that first quarter fiscal 2018 net sales will be in the range of $225 million to $240 million, and gross margin for the quarter will be approximately 21% to 22%.

GAAP net income per diluted share is expected to be between $0.66 to $0.70.

On a non-GAAP basis, excluding stock-based compensation expense and intangible amortization expense, we expect non-GAAP net income per diluted share will be in the range of $0.79 to $0.83.

The guidance for the first fiscal quarter includes an income tax provision expected to be in the range of 18% to 20%.

The number of shares used in computing net income per diluted share was 22.3 million.

Capital expenditures for the first fiscal quarter are expected to be in the range of $3 million to $4 million.

Please refer to the non-GAAP financial information section and the reconciliation of non-GAAP financial measures and reconciliation of GAAP net income or loss to adjusted EBITDA tables in our earnings press release for further details.

That concludes my remarks.

Operator, we are now ready for questions.

(Operator Instructions) And our first question will come from the line of Blayne Curtis with Barclays.

This is Tom O'Malley on for Blayne Curtis.

So we've heard earlier this week, and again tonight, that demand trends for memory should remain strong into next year.

How do you guys see ASPs turning into 2018?

And how's the health of the overall Brazilian PC market?

Thanks, Tom.

We have a particular dynamic happening in Brazil with smartphones on those eMCP devices.

So already, we've seen low 20s -- low $20 ASP in the fourth quarter.

I think we had said to you last quarter to funnel about $20.

So the density is definitely moving forward faster than we expected.

Overall, ASPs continue to tick up in the DRAM, as you referred to the announcement earlier this week and the coverage since, and NAND remains well constrained.

So I think it's still going up a few percentage points.

Great.

And then just one more.

Can you talk a little bit about how you see the subsegments turning into November, particularly in Specialty Memory?

How do we think about that business as a whole?

And how should it trend into 2018 as well?

Well, Specialty Memory in this last -- in the second half of fiscal '17 stepped up double digits, so that our expectation for total specialty is for us to have a high single-digit growth rate as we move forward.

And that's been very strong.

I think the products we're announcing just continue with a little bit higher ASPs, and our gross margins are being maintained, so we're seeing a few more gross profit dollars generated from that.

So I think steady as she goes.

It's not been too long since our IPO and our first quarter results.

So everything happening that we said to you and with some better results.

And our next question will come from the line of Sidney Ho with Deutsche Bank.

Following on the Specialty Memory question, if you just look at your business, the end market commentaries have been kind of mixed.

Cloud data centers are probably stronger.

The optical side is a little weaker.

It looks like both networking and service storage were weak -- a little weaker for you for the fiscal Q4.

Can you give us some color what's going on in those markets maybe by subsegments?

Yes.

I think Sidney, it's important to -- we would rather combined Q3 and Q4, in the back half of the year together, and then you'll see networking, telecom, storage, all being strong.

The quarter-end and where our particular quarter-end comes just with order flow and when the customers want their products is not a directional statement.

So everything there showing the second half being stronger.

Servers, well written to be an area of significant big growth, and we certainly see some of that going through into the ASP or average ASP of that product.

So server, network, telecom and storage, all having a great second half of the year.

And then -- and really nothing says -- I mean, the new products have just been announced, so nothing says that, that should stop anywhere in 2018.

So I feel solid about all of those subsegments.

PC, DRAM in Brazil had a strong quarter and a strong finish to the year, both in terms of units and ASP, and that's what brought a lot of the upside.

Got it.

And then as a follow-up, with all the memory component pricing going up so much this year, are you seeing any kind of despecking going on in any of your segments?

And on the flip side, what do you think in terms of inventory and the channel and your customers?

I mean, typically during times of tightness, customers tend to order more than they need?

Are you seeing any kinds of activities like that?

And how do you monitor that?

Yes.

So first of all, to the inventory question and the channel.

I think customer by customer, very, very different approaches and planning capabilities.

And I think we can certainly point to some customers who are not getting enough and so going to get more with endpoint to some of the inventory in a couple of their build and logistic locations.

So I don't think there's a generic answer by end market or by customer group.

So we see both at the moment.

And obviously, in this environment, you could trade between the 2 of them and point to, but it's not the same parts because we're more in the specialty business, so the parts that we're doing are not too tradable.

And the question about despecking.

Yes, despecking, well, there's 2 ways to answer that.

We believe the smartphone spec has been held back by supply.

And we believe that overall, if we take an industry approach, that the SSDs would grow faster.

So when I read the supply and demand analysis that says really for the whole of 2018, even if it's a plus or a minus, it's plus or minus 1%, then is there more demand that's not being counted for today?

And I think the answer is yes.

We just finished the quarter at more than 16 gigabytes of NAND and only 1 -- over 1.5 gigabytes of LPDRAM in the eMCP.

And clearly, that is headed north.

I think the other company's announced this week said we should expect between 3 and 5 gigabytes of DRAM, and certainly, that makes a fruit company said that they want some.

The average exabytes required is just growing significantly.

So yes, I think there's more demand elasticity once the supply frees up, but we don't see a good supply freeing up until mid-year.

And one last question from me.

Given how tight both DRAM and NAND supply are in the market, do you have any issues obtaining your parts from your partners, whether in Brazil or elsewhere?

We do not.

But then, at the same time, Sidney, I think as we said, we forecast our numbers.

Our numbers are pretty structural, in that we stepped our manufacturing up to -- from the start of this calendar year to 50% of the requirements, 50 million phones, so it's a little bit mathematical.

The only thing I would say is that we're actually shipping more bits because of those higher densities, and hence, the number of units is now a little bit light.

But overall, very, very happy with the level of support from our suppliers.

Yes.

And we're getting reading the bits.

We're not always getting them when we want them, so it creates a little bit of imbalance sometimes we try -- when we need the parts versus when we can build with them, but we're getting what we need.

It's just not always exactly when we'd like to see them.

And our next question will come from the line of Delos Elder with Jefferies.

This is Delos on behalf of Mark Lipacis at Jefferies.

I just kind of wanted to follow up on the Brazil scandal.

I know it's been a couple of months, but I was just wondering if you saw any impact from that political scandal or if there's anything ongoing there.

I think the good news is that the economy is doing well.

Our demand is doing great.

The employment -- the indicators have all started to go the right way.

And I think that was just an unfortunate, another moment in time where it hits the news heavy but did nothing to the underlying fundamentals of the recovery of the country.

And I mean, one way to look at is our PC DRAM units were up about 8%, 10% in Q4 from Q3.

So we saw more demand from the customers on the PC side in Brazil.

Great.

And then is there any development on the local content requirements?

I believe there's a case that WTO -- do you have any update there?

So I'd say you've had 2 subjects there.

So on August 3, which we had said before, we were waiting for confirmation of the 60% local manufacturing requirement.

So 60, 60 for calendar year '18 and '19.

So August 3, that was confirmed.

And then the WTO did release -- finally released that report on August 30, which was from last December it was supposed to be released.

So they released the report.

They have issues with how some of the laws are executed within Brazil.

They agree with local manufacturing.

They agree that that's the requirement, but they'd like to change the methods.

So Brazil will appeal, will be the next process, and then I've got a very, very strong feeling that this is for -- especially for IT industry and for the millions of jobs involved that some work changes and perhaps some methodology changes may be required in the long term.

But government -- we had the Qualcomm ESC announcement in March of a new investment when they already had the result.

So we're -- we will just watch the process.

The earliest an implementation could happen, we think, is January 2019.

So its something to watch and keep up-to-date with.

We've got people very much involved with the process.

Great.

And then I think you discussed this earlier, but smart TV expectation is -- that you're seeing?

Yes.

We've -- I think we've done well.

It's only our second quarter after qualification.

We qualified another vendor, that's probably in the last few weeks so this might be into Q1, but we certainly qualified another vendor.

We shipped over $5 million in the last quarter, so we think that's a good ramp.

And that total TAM was somewhere about $30 million.

So yes, so we're taking the majority share there immediately straight out of the chute.

Great.

And then kind of a bigger picture question, but how do you think the sale of the Toshiba chip plant or chip assets are affecting the market?

And what impact is there on SMART?

I've -- none on SMART.

I can see we use very little of Toshiba output.

Certainly, as you know, all of Brazil is predicated on Samsung supply, being the only people that have a wafer supply agreement with Samsung.

Toshiba, I think, is more about the WDCs, where Apple taking bits, where hynix taking their 15% of bits, both Kingston, Dell.

So if all of those bits are pre-spoken for and the demand I saw that even Apple share couldn't hope to cover more than 25% to 30% of the total demand, I think it takes some supply away from the generic consumer product potentially.

And that may well give -- increase the requirements.

I think WD, hopefully, they still get their bits and still continue to be a stabilizing, focused in the output.

But no impact to SMART.

And then do you have any plans to participate in some of the new memory architectures being discussed, ReRAM, MRAM, 3D XPoint?

Well, we mentioned that we're the module partner with Everspin on their MRAM.

You just saw Samsung announced an embedded MRAM into their SoCs.

So yes, we always try to play with the modular portion of the solutions for all new technologies.

We've had Rambus, FRAM, MRAM solutions.

So yes, we like to supply.

We really like to be agnostic to these customers who need unique supply because that is our business.

Right.

Great.

Then just one more if I could.

The capital structure, you guys have done some changes there.

Are we going to be good to go for a while?

Is it just planning to build up cash going forward and pay down debt with excess cash.

Yes, I mean, I think right now, we will use excess cash and stock pile a little bit in the balance sheet.

We're always looking for what we can do to augment the Specialty Memory business.

So we'll continue to do that.

And then if it makes sense, then we'll use excess cash to pay down the debt, or we'll use it for -- if we have a better use for it, we'll use it for somewhere else.

And our next question will come from the line of Kevin Cassidy with Stifel.

For the -- I attended the Flash conference this summer, and NVDIMM seems to be the hot topic.

And I know you announced a product there.

Can you talk about what the demand looks like?

And how does that affect your view of Specialty Memory as you move out into next year?

Well, it's an emerging technology.

It definitely has the interest of engineers.

We have jacked some 5 to 10 samples and area sampling.

We have a couple of people already in multimillion predictions and forecast.

So I think this is the time for it building up, and we really like this new encrypted NVDIMM.

It's getting a lot of attention and makes sense since there's a processing power on the DIMM now, then you can choose to do things with that.

I think this year, it will still be in the less than $20 million, in the range, could surprise, but this is the adoption period for it.

I mean, it's going to help drive the growth in our storage business, right.

I mean, with all the storage devices, we'll have NVDIMMs, a lot of -- and with somewhere in qualification, a lot storage players for NVDIMMs, and so -- but as Iain mentioned, it takes -- qualification cycle is long.

Should we -- we can probably see the revenue ramp from all the qualifications until 2019.

Okay.

And have you seen any change in the market since the announcement of the new Skylake product from Intel?

Has there been any type of pause in front of an upgrade?

Or is the upgrade starting right away?

Nothing at all.

There are people who can take advantage right away in a world where the spend of high end that's ready to take advantage of new technologies from the rollout, and there's other people screaming for us to manage their legacy, their long life cycle products, please don't follow this transition and support us for the next 5 to 7 years or so.

We see both, but yes, there's certainly immediate adopters.

And our next question will come from the line of Raji Gill with Needham.

Question on the local content requirement rule.

So you mentioned you were going from 50% to 60% on calendar '18, calendar '19.

And the ASPs, kind of steadily increasing.

So we clearly can see growth from '17 to '18 on the penetration story.

How should we think about kind of '18 to '19?

I know it's a little bit far out.

But perhaps thinking about this type of business and this type of revenue stream as pretty much guaranteed, how do you think we should look at kind of on a go-forward basis a little bit in the future in terms of kind of ongoing density increases or overall phone growth in Brazil?

Right.

There's a few answers there.

So being careful of calendar year versus fiscal year, so we're just starting our fiscal '18.

So 50% of this year, we will be at 50%; and 50% of this year, we will be at 60%.

Then our next FY '19, we'll be at -- all at 60%, 60% and 60%.

And there's no reason that the 60% is the end.

We're just 2 years ahead, so we could move that up to 70%, 75%, especially if someone else comes along.

So I wouldn't take that 60% at the end.

We're very pleased, as we predicted at the time of the S-1, we had said that we're waiting for that final approval, and that was given.

So I think that's good.

Density, I think, continues to go up.

As I mentioned, we're only at 16 gigabytes of NAND and just passed through 1.5 gigabytes of LP as a total portfolio.

And we're not feeling that Brazil in particular is delaying or behind the rest of world for too many months.

The demand is definitely to keep increasing.

We've just introduced the new 32 by 2, so that's continuing.

We went over $20 now earlier than expected, and I think that will continue with our commentary over the NAND and DRAM pricing environment not subsiding, then I think the densities will drive ASPs up throughout next year.

And Jack, how should we think about the gross margin profile?

You have better ASPs in Brazil, in the mobile side.

How should we think about the cost structure process and other things like that, favorable and mix?

Well, I mean, our costs will stay in line.

Nothing is going to -- should drive our costs up higher with these ASPs, but you also have revenue going up.

So we're looking at it from a gross margin standpoint, we're down in the mid-21% range.

We're kind of in our target model.

I think we'll stay in that target area.

So I think you'll get some incremental revenue, grow your incremental profit as well as ASP increases, but then you also have costs going up because the price of the DRAM and the price of the Flash is going up as well.

So it kind of tends to mitigate the gross margins, still leave at kind of in our -- within our target model of 20%, 23%, somewhere in there.

All right.

And last question from me, you mentioned the design win with Everspin on the MRAM side.

And obviously, Samsung is talking about embedded MRAM.

Maybe just some general views on your view of MRAM as kind of an emerging memory class technology.

I mean, it's been there for a while, but it's gaining more steam.

How are you thinking about MRAM in terms of penetration into the enterprise SSD or the enterprise server markets?

Any thoughts there?

Because I thought that was kind of an important milestone.

Yes.

So on MRAM, we're definitely waiting for the launch of the next density, and we've proven the technology.

It's an expensive solution, and therefore, it keeps itself into a niche in itself.

But it doesn't require a big firmware team to manage it.

So it has -- it's definitely another one of the solutions out there.

What we're seeing between the all-flash arrays, the DRAM, the NVDIMM, MRAM is that they all have a different place and different architecture.

So I think it's a great product, has to reduce some price and has to bring some higher density, so it has the minimum required without the firmware requirements.

I think from a Samsung point of view and clearly having this with that SoC is a great advantage for low power applications.

Are you seeing all-flash array OEM start to adopt MRAM?

Are you seeing great controller systems?

No, I couldn't point to a particular adoption yet.

We can point to applications that have tried that out, have said it's looking good, let's qualify it or we really need the next density.

And I think that I don't want to speak for another public company that makes density as imminent, I'm sure.

(Operator Instructions) Our next question will come from the line of Suji Desilva with Roth Capital.

In terms of the -- you guided the first quarter of your fiscal '18, can you talk about how do you think the year will play out from a seasonality perspective?

Or will you have secular strength like you had in the first quarter kind of playing through the year, trumping the seasonality?

We still think Q2 potentially because it is the Christmas season in Brazil, right, and they shut down their manufacturing for a couple of weeks in Brazil.

Could be a little down potentially from Q1, like we've always discussed, but it's really -- we don't think it's going to be a demand issue from like other areas.

It's more like Brazil because of they're just -- they shut down for weeks at that time you have the Christmas season.

And also when you sell in the smartphone market, you've got the Christmas buy-ins, people buy a lot more in that Christmas season potentially aren't going to buy as much maybe in the January time frame.

Okay.

That's helpful.

And then you talked about a low 20s ASP for the Brazil smartphone market.

Could you talk about where that might trend to or where that could go here or if that's benefiting from the ASP strength and would normalize more as an offset in terms of density?

So the detail we've given you so far is $16.16 for FY '16, $17.09 finishing in the end of Q2 and now going over $20 at the end of Q4.

And that gives us about just under $20 for the full year '17.

That strength, depending on what happens, really, looking at we should add 16 gigabytes of NAND Flash and 1 gigabyte of LP really to that.

Through the year, that's where it should transition to average out at somewhere around about 24 GBs of NAND and 2.5 GBs of LP.

So that will give you an idea of the pricing to add.

Okay.

That helps.

And then lastly, I think you talked about television.

But can you talk about Brazil, just whether the opportunity outside of PC and smartphone is something you think is being meaningful, material for you guys or whether the PC/smartphone growth is going to be the kind of the strong element there?

Yes, so it's definitely going to be the strong element for this period.

Remember, we're coming to a phase where we've grown year-over-year than the previous year by 100%, to the $200 million level.

We're still growing significantly through the $300 million and $350 million level.

So we've got our work cut out for us.

We introduced the smart TV, which I think was an excellent addition to show a consumer product with a soldered down component being sold.

And so that's a nice, little bit difference on the model and the sales directly from our component company.

And then any new initiatives we're currently -- as we expressed, we're currently experimenting and trying to forge partnerships in other areas, beginning to develop.

We said that we don't really need them and don't plan on them being meaningful until 2019 calendar.

So I think we will be diversifying away from memory in that time scale, and we can clearly see the path to do so.

I'm just wrought to launch too early from -- really in partnership negotiations.

Thank you.

This concludes our question-and-answer session for today.

So now it's my pleasure to hand the conference back over to Mr. Iain MacKenzie, Chief Executive Officer, for some closing comments or remarks.

Sir?

Thank you, Brian.

In closing, we're entering fiscal 2018 with (inaudible) seeking new opportunities.

Our operational execution and performance, we believe, continues to set a competitive standard.

I'm confident that our solid track record and unique competitive positioning in Brazil and our Specialty Memory businesses will continue to propel SMART forward from providing customers with great value and their shareholders with increasing returns.

Thank you for joining us on today's call.

Look forward to seeing many of you at the various conferences coming up over the coming months, and we will speak to you again with the report of our first quarter fiscal 2018.

Thank you.

Ladies and gentlemen, thank you for your participation on today's conference.

This does conclude the program, and we may all disconnect.

Everybody, have a wonderful day.