Photronics Inc (PLAB) 2014 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Photronics' third-quarter earnings call.

(Operator Instructions)

As a reminder, this conference call is being recorded, Wednesday, August 20, 2014. I would now like to turn the conference over to Pete Broadbent, Vice President Investor Relations and Marketing. Please go ahead, Mr. Broadbent.

Thank you and good morning, everyone. We would like to thank you for joining our third-quarter 2014 conference call.

Before we begin, I'd like to remind all participants about the Safe Harbor Provision under the Private Securities Litigation Reform Act of 1995. And thus any statement we make during this call, except for historical events, may be considered forward-looking and may be subject to certain risks and uncertainties that could cause actual events to differ materially from those projected including uncertainties that may affect the Company's operations, market pricing, competition, procurement manufacturing efficiencies and other risks detailed from time to time in the Company's SEC reports. These statements will contain words such as believe, anticipate, expect or similar expressions.

This call will be archived on our website until we report our fourth-quarter 2014 results. Joining us on the call today are Constantine Deno Macricostas, Chairman and Chief Executive Officer; Dr. Peter Kirlin, President; Sean T. Smith, Senior Vice President and Chief Financial Officer; Dr. Christopher Progler, Vice President, Chief Technology Officer and Strategic Planning. During our remarks this morning, we will be referring to slides posted on our website under the investor relations link.

And now I'd like to turn the call over to Deno Macricostas. Deno?

Thank you, Pete. Good morning, everyone. It was a solid quarter for the Company both strategically and financially. In a moment, Peter and Sean will cover the details of our results and outlook.

But first a few comments for the general trends in our business. To begin, we're extremely pleased with our progress at PDMC, our joint venture in Taiwan. It's going very well on the integration front and results are contributing better than expected on the top line.

Our growth is helping us overall in operating metrics, as well. Second, our strategic investment in our [securability] are starting to pay off as our customer [amp] at advanced nodes.

We have deployed capital in three key areas, Korea, US and Taiwan. We are seeing improved activity across each region. Additional investment will allow us to capitalize on the high-end photomask demand we expect over the coming quarters. We have successfully aligned our footprint to match our customers road maps and we are beginning to see positive results of their strategy.

In summary, our business is healthy. It is strong at the high end and growing. We're optimistic about the coming quarter and the overall trends in the photomask business.

We are well positioned and we expect (inaudible) meaningful results for our customers and shareholders. My compliments to the entire Photronics worldwide team for their execution and results in this environment.

Now, I would like to turn the call over to Peter Kirlin who will offer some additional comments and details for our third quarter. Peter?

Thank you, Deno, and good morning, everyone. Sean will provide a detailed financial breakdown of our quarter. But first a few highlights and some comments on our business.

Please turn to slide 3 in our slide presentation. In Q3 we achieved sales of $124.9 million, up 19% sequentially and at the high end of our guidance. IC sales were $100.6 million with high-end sales up $19.4 million to $36.6 million, a new quarterly record for the Company.

Mainstream sales were up 8% sequentially with solid contribution from (inaudible)customers in Asia. Flat panel display sales were $24.3 million, down $4 million sequentially, but the general market trends in this business remain positive going forward. Increased revenue led to solid operating results with operating margin of 8.9% and EPS of $0.07, at the high end of our guidance compared with the $0.02 in Q2.

In our IC business, we are now seeing the ramp in the high-end nodes where we have already qualified with foundry logic at 28-nanometer up significantly in the quarter. We now have multiple customers taping out at 28 nanometers. As the quarter progressed, demand for memory [radicals] also began to build as we are starting to see the move to next-generation NAND and DRAM.

Finally, we completed the 14-nanometer qualification of a key Asian foundry customer in June. We are the first merchant to qualify with this customer at 14-nanometer and we expect this to drive high-end sales early next year as they move towards volume production at 14-nanometer.

As Deno mentioned, we are very pleased with the progress of our joint venture PDMC in Taiwan, customer demand is strong and integration is proceeding very well. In fact, we are hitting nearly 100% of our integration objectives in unifying systems, processes and leveraging our scale, tools and process technology across both facilities. We're at a very positive trajectory and our team in Taiwan deserve a lot of credit for executing their integration plan while also delivering on increased high-end and mainstream demand.

Looking ahead, we are poised to capture the growing high-end demand across our business in foundry logic, memory and flat panel display markets. Our installed high-end IC capacity is strategically located for our customers and we are successfully qualifying at advanced nodes. We expect 28-nanometer earnings strong for us in the coming quarters while memory demand continues to build and 14-nanometer logic moves forward to production.

As always, we continue to drive cost efficiencies throughout our operations, improve our customer service and maintain a laser focus on capitalizing on growth opportunities. As we continue to execute our strategy and the high-end demand increases across our customer base, given the leverage in our business model, we expect to translate that into strong returns for our shareholders.

And now Sean will provide more details on our quarterly performance and outlook.

Thanks, Peter, and good morning, everyone. I'll provide a brief analysis of our financial results for Q3 of 2014 and review our balance sheet and cash flows and forecast going forward.

As a reminder, in April we formed a JV PDMC through a non-cash merger of our wholly owned sub PSMC with DNP Taiwan, a former Taiwanese subsidiary of DNP. Some of the basic tenets of the JV include the following. Photronics owns 50.01% and consolidated PDMC in our financial statements. Photronics manages and controls PDMC. This is absolutely critical to our ability to be successful with our high-end strategy.

Accordingly, our Q3 results represent the first full quarter of PDMC's operating results. For competitive reasons, we will not be providing a detailed breakout of the incremental revenue or expenses for PDMC in our Q3 results.

On slide 4 for reference purposes, we listed the impact of this acquisition that we discussed in our Q2 conference call. And as Peter and Deno have stated, it would be fair to say that PDMC has initially been performing better than expected.

Please turn to slides 6, 7 and 8 which shows our sequential quarterly IC and FPD revenue performance. Third-quarter revenue was approximately $124.9 million which was, as Peter alluded to, at the high end of our guidance. Revenues for IC photomask were $100.6 million, up $24 million or 31% sequentially.

Revenues for high-end IC photomasks, which are at 45 nanometers and below, where $36.6 million, or 36% of total IC sales which represents, as Peter stated, a new record for Photronics. Sequentially, high-end IC revenue increased $19.4 million or 113% as a result of increased high-end revenue in Taiwan, Korea and in the United States. Additionally, mainstream IC sales increased 8% sequentially. And as a reminder, our mainstream business is a cash generator.

Revenues for FPD photomasks were $24.3 million, down $4 million sequentially due primarily to decreased high-end orders for the quarter. High-end FPD revenue for the quarter, which consists of G8 and above and AMOLED-based products decreased $5.6 million sequentially.

As Peter mentioned, the market trends continue to be positive going forward and additionally in Q2 some high-end FP orders -- high-end FPD orders were very strong as some orders were pulled in. Breaking out Q3 sales geographically, 69% of total sales were from Asia, 23% from North America and 8% from Europe.

Now let's continue through the income statement. Gross margin for the third quarter was 22.9%, up 170 basis points sequentially. The increase is attributable to the increased revenue partially offset by the increased cost associated with PDMC.

Selling, general, administrative expenses for the quarter were $12.4 million. SG&A increased $1 million sequentially when excluding $2 million of transaction costs for Q2, due in part to the JV.

R&D expenses, which consist principally of continued development for our global advanced process technologies and qualifications at advanced nodes were $5.2 million, down $700,000 sequentially due in part to the completion of a 14-nanometer foundry logic qual in Asia that Peter mentioned. During the quarter we generated operating income of $11.1 million, or 8.9%. EBITDA as defined in our credit agreement for the third quarter was $34 million, up $9 million sequentially. This represents $136 million on an annualized basis.

Other income and expense for the third quarter was $1.2 million, which is consisting of Q2 when excluding the nonoperating gain of $16.4 million in Q2 related to the inclusion of the former DNP [ENP] Taiwan net assets at fair value on our consolidated balance sheet. During the third quarter, we recorded tax provision of $2.5 million, which was within our guided range of $2.5 million to $3.5 million. Minority interest for the quarter was $3.2 million and primarily consists of DNP share of PDMC's profit for the third quarter.

GAAP and non-GAAP net income was $4.2 million, or $0.07 per share, which as Peter stated was at the high end of our guided range of $0.02 to $0.07. At the end of the third quarter, we had 1480 full-time employees which equates to annualized revenue of $338,000.

Now turning to the balance sheet. As a reminder, our balance sheet includes the fair value of the acquired assets of the former DNP Taiwan. We have strengthened our consolidated balance sheet including our net cash position.

Included in the assets we obtained from the acquisition was a state-of-the-art manufacturing facility with leading-edge equipment. This will allow us to have a more efficient capital allocation in the future.

Cash and cash equivalents at the end of the quarter was $196 million. Our net cash, which is cash less debt, was $29 million at the end of the quarter, up $6 million sequentially. Our working capital at the end of the quarter was $205 million.

Accounts receivable at the end of the quarter increased $5 million sequentially to $103 million based upon the increased sales. Accounts payable and accrued liabilities at quarter end amounted to $139 million, up $18 million sequentially, primarily as a result of increased accrued CapEx. At the end of the quarter, $36 million of CapEx is accrued for, up $15 million from the second quarter.

Please turn to slide 10 as we review our capitalization. Total debt at quarter end was $167 million. The principal components of outstanding debt include a $22 million 5.5% senior unsecured convertible note which matures October 1, 2014. $115 million 3.25% senior unsecured note due in April 2016 and approximately $30 million related in capital leases.

Please note that the 5.5% convertible note has a conversion price of $5.08. This is equivalent to 4.338 million common shares and we do expect the bonds to convert at this point as they earn the money. During the quarter and through today, we have not borrowed on our five-year $50 million credit agreement.

Taking a look at our cash flows, cash provided by operations for the third quarter was approximately $22 million. Depreciation and amortization was $21.6 million, up $2.7 million sequentially. Cash flow used in investing activity for Q3 amounted to approximately [$16 million], which was primarily all CapEx. Year-to-date cash CapEx amounted to $58 million.

In the second quarter, we acquired access tools from a captive that we are paying for in part by supplying IP photomasks to them. Recently, we also acquired additional tools from the captive previously mentioned and from an additional captive shop that has and will result in additional revenue for us.

These opportunities to partner with these two captives should provide additional market share for us in the future. Net cash used by financing activities during Q3 amounted to $2 million, which was primarily all related to repayment of debt.

Please turn to slide 11 as we take a look ahead. Now taking a look at CapEx. We have recently decided to increase our planned 2014 cash CapEx needs to be in the range of $100 million to $110 million. We increased our planned spend due in part to react to a strategic opportunity in our FPD business. We do however have the flexibility to accelerate or decelerate our spend depending upon market conditions.

Despite our increased CapEx for 2014, we still expect to continue to generate free cash flow. Our 2014 investments have been principally geared towards high-end leading-edge projects for IC and FPD applications.

Now taking a look ahead on our -- our visibility as always, continues to be limited as our backlog is typically one to two weeks. We are projecting revenue for the fourth quarter to be in the range of $125 million to $130 million.

During 2014, our tax rate will be affected by the flow of income from jurisdictions for which we may have credit and upon our limited ability to recognize tax benefits in areas of which we are taxable. For the fourth quarter of FY14, this will equate to a range of $2.5 million to $3.5 million in whole dollar terms. For 2014, we estimate total taxes will range from $10 million to $11 million.

We will continue to be impacted by minority interest expense related to PDMC during the quarter. They're estimating minority interest expense to be approximately $3 million to $3.5 million. As a result, based upon our current operating model, we estimate that earnings per share for the fourth quarter to be in the range of $0.07 to $0.11 per diluted share.

In summary, I'll review the few key thoughts. First, we are pleased with the integration of our new Taiwan joint venture and believe that this initiative provides us an excellent growth opportunity in that region going forward. Second, we expect top line and as well as increased EBITDA in 2014.

And third, we are confident about our business model and our ability to grow market share at the high-end. We see continued opportunities in our customers' businesses and node migration plans and we have a strong financial position and excellent technology to capitalize on those plans. And finally, we expect to continue to build on the momentum that we've established over the last -- past few years as a leader in advanced photomask technology.

Now I'd like to turn the call over to the Operator for questions and answers.

(Operator Instructions)

Tom Diffely from D.A. Davidson.

First, a question on the joint venture. You talked about $7 million, or $5 million to $7 million in cost synergies by early next year. I'm curious, how much if any of those cost synergies were in the current quarter or in the outlook for the fourth quarter?

Tom, this is Sean. Maybe I can give you a brief update on what we talked about in Q2. We stated in our Q2 conference call that we would generate incremental revenue of at least $20 million per quarter and we believe we're certainly ahead of that plan. We also stated the majority of that revenue, or 75%, will be at the high-end and we believe we're at the head of that plan.

We also stated, as you've alluded to, the JV would be accretive after two quarters, certainly by 2015. And based upon our first full quarter of operations, we believe we're ahead of that plan. We also stated that JV would be accretive to EBITDA and once again we are ahead of that plan. Of course, we need to continue to execute going forward in the future.

Okay. I'm curious if there's still more cost reductions coming that'll make it even more accretive or if being ahead of the plan means that you were faster than expected in getting those cost reductions?

I think it certainly it would be fair to say, and Peter may have a follow-up comment, is that we are generally ahead of the plan, integration and cost savings and in top line. So we would -- without providing guidance for 2015, we may look to move the target as we move forward.

Okay, Tom, to add some maybe extra color, the organization has 30--, 60-, 90- and 180-day integration objectives by function. And we're beyond the 90-day mark. As I said in my remarks, we were on or ahead of our targets almost uniformly across all the functional areas. And operational execution drives financial performance market strong.

So if you look at this quarter, within $0.01 a share, the JV is essentially neutral to earnings. And we're not done -- we're not done yet. So there's more to come there. But in any event, we're about one quarter ahead of where we expected to be both operationally and financially.

Okay, that's very good news. And then, Sean, when you look at the CapEx increase for flat panel, is that for new capabilities or just increasing capacity?

Perhaps, Tom, I'll have Chris answer that question.

Okay.

Yes, Tom, this is Chris. It's primarily for both. I would say new capabilities, definitely and also some additional capacity. New capability primarily connected to advanced mobile displays, seeing a lot of interest in low-temperature poly silicon, higher resolution displays, also AMOLED. So that's driving tighter specifications, denser files at the mask. So some of this investment is for meeting those capability needs and then there is also some capacity add connected with it as well.

Okay. And then how long does it take that capital spending to turn into revenue?

Tom, this is Sean. I'll give you a little historical perspective. In the latter part of 2010, we made a similar type of strategic investment. And if you recall, 2011 was a record year for us on FPD because we hit it, I think the revenue went from $96 million to $122 million and I believe we stated at that point in time we monetized that investment within nine months or three quarters.

I think one other important point, in the display market, we're the technology leader. I think that's -- I think everyone knows that. And we'll be the first merchant to have this capability. So we're looking to take what is already a strength and expand upon it, essentially just as we're doing in the IC space.

Okay, great. And then final question, sounds like there's -- it looks like your four nice drivers of growth over the next several quarters. Between the Asian foundry at 14 and 20 nanometers memory, you're still recovering the joint venture in Taiwan and now flat panel, which of those four do you think are the biggest -- is the biggest driver over the next few quarters?

I think we think near term -- really near term it's the 28-nanometer foundry logic with more and more build in from memory. As far as the memory, of course, our memory business is a concern, we're really only in the first or second inning of the next node ramp. So right in front of its 28-nanometer, building strongly on the back of that is advanced memory. Then swelling in behind it is the ramp in 14-nanometer logic in FPD.

Great, thank you.

Patrick Ho from Stifel Nicolaus.

Sean, maybe a question about the high-end IC trends over the last couple of years. In your prepared comments you talked about -- it looks like a much broader mix going forward. Can you discuss how that's changed over the last few years and how it'll look like as we go into calendar 2015?

Sure. I'll add some comment and then Peter and Chris can also talk a little bit further. But when we look at our customer base, we have a much improved high-end customer base as a result of our technology investments and performance over the last few years. And as we exited the third quarter, we now have a customer list which includes four 10% or more customers. An Asian-based IP foundry and FPD supplier, a second Asian-based project foundry supplier, memory supplier and an additional FPD supplier. So, we have a very good reach and diversity in our customer base. And, Peter, maybe you want to -- you just spoke about some of the trends going forward but do you have any other color on that?

Yes. In my prepared remarks, we went over a way to highlight the 14-nanometer logic qual. Historically, looking backwards, we entered the high-end market with a JV with Micron. And it took us a few years to become the merchant market leader in memory. Once we achieved that, we set upon a mission to do the same thing in logic.

So as to the best of my knowledge, anyway, we're the first merchant to qualify at the 14-nanometer node. First time we can say that in a logic space. So I think that is -- that's one piece of tangible, concrete evidence that we're duplicating in logic what we've already done in memory.

The second reason why we hit upon that particular milestone, is we were disappointed with this customer in our execution at the 28-nanometer node. We were asked a lot about that. We think we turned that into a learning experience and we applied what we learned at the 28-nanometer node to do better at 14. Again, given that we're the first one to complete that node with that customer, we think it demonstrates that we did, in fact, learn from our mistakes and we've institutionalized that learning and we're going to continue to do that going forward.

Great, that's helpful. Go ahead.

Patrick, I can make one more comment on the node trends. I think for 28-nanometer, it looks like it's going to be a very strong node. I think a lot stronger than many felt. If you recall at 32, people didn't even think much about 28-nanometer, maybe a transitional node. But I think it's a very -- going to be a very strong node and also a lot more interest in 20-nanometer now as well. So it could mean some delays in 14, 16 [fid fed] industry wide. But those three nodes all look fairly solid today and then over the next year or two.

Great, that's helpful. Maybe more specifically to the memory side, especially again at the high-end. Given your new joint venture in Taiwan and a lot of the transitions that are going on in the memory industry from other places into Taiwan, how do you see the mix of your PDMC joint venture in terms of memory versus logic?

Well clearly, Patrick, with the Micron acquisition of Elpida, Taiwan appears to be almost uniformly transitioning to the, quote, Micron [bit sell with Epi] it was origins were originally Elpida or Micron. So, this represents a significant market opportunity for us for sure. And as I said in my -- as I said earlier, as far as the memory ramp at the next node or nodes is concerned, we're really only in the first or second inning of that ramp. And really on one hand what I would describe the [vanilla] or mobile DRAM memory ramp will be at what Micron describes as the 100 series node. And as far as foundry logic -- sorry, foundry memory in Taiwan is concerned, it's really the 90 series node.

Both of those ramps are really going to happen simultaneously here over the next several quarters. Given our JV with Micron, [where] processor record, given our capacity in Boise and now in Taiwan, we're well-positioned to take advantage of both of those nodes.

Great. And final question from me in terms of the flat panel display, you show the high-end dip a little bit and you talk about pull-ins. Are you seeing any incremental demand maybe from the mobile side which gets you obviously, I think, to the gen 6 or gen 5 and gen 6 type of generations? Are you seeing any pull from that end?

Well I -- Chris can likely give more color, but the memory -- I'm sorry, the FPD market for the first three quarters for us has been pretty consistent. If you look at our revenues this quarter, they're essentially the same as they were in Q1. We saw an uptick in Q2 which was simply of a reflection of how the orders came in and how the shipments went out. But the market basically has been consistently strong throughout the year.

And the investment we talked about is really being driven by the enhanced resolution that's needed to deliver on the mobile display market opportunity. So our objective there is to be at the leading edge of that and to capture the early demand for next-generation mobile displays. So that's what we're trying to accomplish.

Yes, and, Patrick, I can make one additional comment. There is a lot of mid-range display, a lot of price competition now in the mobile space, but still resolution seems to be a premium. All the Smartphone and tablet makers are pushing resolution. You saw the first 4k resolution Smartphone come out, still a little bit of a novelty. But a lot of effort to try to differentiate with display resolution in mobile and it's very competitive. So that usually leads to a lot of design activity.

Great. Congrats and thanks again.

(Operator Instructions)

Edwin Mok from Needham & Company.

Question on 28-nanometer. It sounds like that's a driver for growth right now for the quarter -- at least for the near term for this quarter because of ramp there. I was wondering how -- any way you could talk about (inaudible)? I know that -- I think, Peter, you had mentioned that you have a broader mix of customer. Do you think that -- and is the level of sales that you see will be sustainable for a few quarters in the coming or is it more in the near-term trend? Trying to get a sense of some sort of how sustainable that business would be.

Yes, if you look of the 28-nanometer logic node, obviously TSMC was out in front of the rest of the industry, particularly in Taiwan. And some of our other foundry customers, particularly our large Taiwanese foundry customers, are really just now starting to ramp that node strongly. So the way we see it is the next several quarters at 28, it's going to be -- that's going to be a very vibrant market as the industry builds out around the original penetration by TSMC and Samsung. So the volume on that node, I think it's still in front of us.

I see, great, that's helpful. And then second question I have is on the flat panel display business, it declined this quarter. I think you guys mentioned that the overall market is still healthy. Can you explain why, what happened there on the high-end side of FPD and (inaudible) sorry about that? And then you mentioned that there's some new capability you're adding with this CapEx. With this new capability, will it allow you to expand your footprint into other markets such as Taiwan and potentially China?

All right, yes, Edwin, as far as the FPD market is concerned, the orders as we get them, particularly for the advanced sets, the value of an order is $2 million to $3 million for the advanced nodes. So we book and build that business to the market need.

So we've been running along this year, essentially running the business to meet the customer requirements. So last quarter was up, but it just happened to be a consequence of how the orders came in and how the shipments fell. Q1 and Q3 are identical, so literally within $100,000 of one another on FPD revenues. So what you saw is the timing of bookings and shipments, really it's deceptive. But business really has not changed materially over the last three quarters.

And to answer your point, and I think Sean might have a comment -- to answer your question on what we're trying to do with the advanced capability, the Korean customers generally are the drivers of technology in the FPD space. So we're making this investment to satisfy their demands and we're there pushing us from a resolution point of view. We're starting to see more and more IC photomask technology creep into the display market. So the investment is really -- that we're going to make is driven to do that.

As far as the Taiwan market is concerned, we already have a facility there and we already have a market position there. But as Chris said, it's much more a mainstream FPD market, where price and service win rather than technology.

I see, great, that's helpful. And then my last question is for you, Sean. When I [call the] incremental margin that we saw in the July quarter, I noticed that only -- it was only 30% or 32% incremental margin for the quarter. I think you typically have said that you can get to 50% incremental growth margin. I was wondering what happened in the quarter? Does it have to do with the joint venture or any color you can provide on that?

Edwin, that's a good question. Certainly, this was the first full quarter of PDMC, the joint venture. We did talk about additional cost. We didn't exceed that, nor did we project our 50% incremental margin on that revenue. Now that we have our baseline, if you will, or our foundation, we get into Q4, we do expect our target is to have a 50% contribution margin and the growth in operating margin line on the incremental revenue. If we exceed it, it means we took out additional cost quicker but that's still our target. So this is a little bit of an aberration because it's the first full quarter. So from a comparable standpoint, you really can't compare Q2 to Q3.

I see, okay. Great, that's helpful. Thank you.

Tom Diffely from D.A. Davidson.

Sean, a quick follow-up. I want to confirm that the EBITDA number you gave us, the $34 million, up $9 million sequentially, is a pure non-GAAP number. No one-time itema in there?

It's a pure non-GAAP number as defined in our credit agreement. So consistently how we've been defining that and disclosing that over the last three to four years.

Okay, so you'd assume if you're already at $136 million run rate and you still have some cost reductions left to do and you've got four pretty nice drivers of revenue, that you're going to have a nice growth in that over the next several quarters?

Absolutely. We do believe our EBITDA will continue -- especially on the trailing 12 month continue to rise. And to the extent we -- our revenue goes up, certainly with cost reductions, our EBITDA will go up even more.

Okay. And finally to confirm, even with the new joint venture in place, you still have normal seasonality where business in your first fiscal quarter is likely down a little bit sequentially?

We haven't guided towards that as of yet. We're just providing guidance for Q4. So I think with what we expect at this point in time, let Peter or Chris add -- obviously they may have their own comments as well, we expect growth going forward.

Yes, Tom, our -- we didn't -- no one really asked the question. It was I think in my prepared remarks and Sean's, our mainstream business was up nicely in the quarter. So that's -- but that also is the business that's most -- it's susceptible to seasonality. So looking into the future, we'd expect the mainstream business to be seasonal, as you mentioned.

The high-end, there's so many drivers now in our high-end business. We would expect those to continue through the next several quarters regardless of the season. So it's really going to be a blend of the two.

Okay. Thank you very much.

Thank you. Ladies and gentlemen, there are no further questions at this time.

There's no other questions; like to thank everyone for participating in this morning's call. Thank you, everybody.

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day.