Photronics Inc (PLAB) 2015 Q3 法說會逐字稿

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

(Operator Instructions)

As a reminder, this conference is being recorded Wednesday, August 19, 2015. I would now like to turn the conference over to Pete Broadbent.

Thank you, and good morning, everyone. I would like to begin by introducing a new member of our Management Team, Troy Dewar, our newly hired Director of Investor Relations. Troy is taking the lead of our Investor Relations activities, as I transition to my new role as Vice President US and Europe Mainstream Sales and Operations.

Troy is a former executive of ATMI, and headed up their Investor Relations Corporate Communications group. He is a chartered financial analyst, and brings to Photronics over 10 years of strong Investor Relations experience within the sphere of technology. Prior to working at ATMI, Troy was Director of Investor Relations at OM Group, and before that he was Manager of Investor Relations at Cummins, Inc. Now I'd like to turn the call over to Troy to complete the introductions. Welcome, Troy.

Thank you, Peter. Let me say I'm happy to be here and a part of the Photronics team, and look forward to meeting many of you over the coming months. I want to thank you for joining us for the conference call this morning to discuss our third-quarter 2015 results.

Before we begin, I'd like to remind all participants about the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Any statements we make during this presentation 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, marketing, 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.

Today's call will be archived on our website until we report our fourth-quarter 2015 results. Joining us today on the call are Dr. Peter Kirlin, Chief Executive Officer; Sean 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. Now I'd like to turn the call over to Peter Kirlin. Peter?

Thank you, Troy, and good morning, everyone. Please turn to slide 3 in our slide presentation. We reported a solid quarter, growing revenues to $131.7 million, which is near the high end of our guided range. This was the second quarter in a row where we delivered both sequential and year-over-year growth. The up-tick in Q3 was largely the result of an increase in high-end FPD sales and strong execution by our team. Total FPD sales were $27.7 million, up 18% sequentially, driven by an increase in next-generation AMOLED masks, built on our new P80 lithography tool.

Semiconductor mask revenues were essentially flat, with mainstream sales up $2.9 million, and high-end sales down $2.7 million. Mainstream sales recovered to Q1 levels of $65 million, and high-end memory was strong. The drop in the high-end IC mass business came from weakness in the foundry logic mass market.

As projected during our last conference call, we completed the qualification of our new high-end, flat-panel display photomask P80 lithography and [CLEOS] inspection equipment that we recently installed in Korea. We are the first FPD merchant or captive to have the next generation of mask-making equipment, and our customers moved to aggressively capitalize on our industry-leading position. As a result, the P80 ramped very quickly, and we exited the quarter at full utilization. In addition, demand for mainstream FPD photomask was strong, with sales up 1.1 million sequentially, or 13%.

Our high-end IC memory mask business continued to be strong, essentially flat with Q2. We are now definitively in the heart of the next-generation DRAM ramp. Conversely, our high-end logic mask business was down 2.5 million sequentially, reflecting challenges our customers are having within their own businesses. Importantly, our execution for our key logic customers was strong in Q3, and we believe that we have not lost any market share in this segment.

Furthermore, as we have stated before, we are fully qualified with our key customers at next-generation logic and memory nodes, and we have more capacity than all of our merchant competitors combined. We are well positioned to benefit when the logic business starts to improve.

Our mainstream IC business rebounded from the Chinese New Year holidays, as projected during the last call. Coming at $65 million, revenues were flat with Q1. Looking back over the last five quarters, with the exception of Q2, mainstream photo mask revenues have been in the $64-million to $65-million range. Our superior execution has generated incremental market share gains that have offset the small erosion in blended ASPs typical of this mature market segment.

Shifting gears to earnings, with our strong operating leverage and diligence on cost controls, we out-performed on our gross and operating target margins. As Sean will discuss, the gross and operating margins on incremental revenues were 94% and 84%, respectively. We exceeded our target of 50% this quarter by combining our routine cost-down programs with a reduction in outsourcing. The latter was driven by the completion of our operational integration plan for PDMC, our joint venture in Taiwan, and the concomitant reduction in outsourcing to DNP in Japan. As a result, we generated earnings of $0.17 per share, which exceeded our guided range of $0.06 to $0.13 per share.

Looking forward, we believe that Q4 2015 will be another strong quarter for us. Our FPD business is running at full utilization, with strong demand at the high end. I would like to remind everyone that Q4 will be the first quarter in which we will have the full benefit of the P80. 20-nanometer DRAM is now solidly in production, and we are approaching mid-cycle in the ramp, where [vertical] demand has historically been very strong. 28-nanometer and 14-nanometer foundry logic, while somewhat erratic, are gaining traction with our customers. This makes predicting one quarter versus the next challenging, but there's little doubt these logic nodes will gain greater adoption moving forward.

Finally, 3D NAND and cross-point memory are on the horizon, and we expect to see the business start near the end of the calendar year or in the first half of calendar year 2016. Our capacity is on line, and we are fully capable for all of these nodes. We are optimistic we'll hit on all cylinders as our customers go to full production on this wide array of opportunities in the coming quarter.

Before I turn the call over to Sean, I would like to congratulate the team on their excellent execution this quarter, as they demonstrated once again while everyone is focused on delivering on the growth opportunities in front of us, they are also committed to taking actions needed to improve our productivity for the benefit of our customers and our shareholders. Now I'd like to turn the call over to Sean. Sean?

Thanks, Peter, and good morning, everyone. I'll provide a brief analysis of our financial results for the third quarter of FY15, review our operating results, balance sheet, cash flows, and forecasts for Q4. Please turn to slides 5, 6, and 7, which shows our sequential quarterly IC and FPD revenue performance.

Total revenue for the third quarter was $131.7 million. As Peter mentioned, revenues for IC photomasks were $104 million, as compared to $103.8 million for Q2. Revenues for high-end IC photomask, which are 45-nanometers and below, were $39 million, or 38% of total IC sales. Sequentially, high-end IC revenue was down $2.7 million, primarily related to softer demand from foundry logic customers.

Mainstream IC sales during the quarter were $65 million, a sequential increase of $2.9 million, primarily related to increased global demand. Revenues for FPD photomasks were $27.7 million, up 18%, or $4.2 million sequentially. The increase was related to increased AMOLED orders that Peter alluded to. High-end FPD revenue was $18.1 million, which was up $3.1 million on a sequential basis. Breaking out sales geographically, 67% of total sales were from Asia, 26% from North America, and 7% from Europe.

Now let's continue through the income statement. Gross margin for the third quarter was 28.3%, up 230 basis points sequentially. The increase was primarily related to the following items: the increased volume and improved manufacturing efficiencies which is now part of our baseline; and to a lesser extent, reduced variable costs. As Peter mentioned, the incremental drop-through on the gross margin line was 94%, or $2 million higher than our 50% target model. We expect as we move forward we will target 50% incremental margins on the new base line established in Q3.

Selling, general and administrative expenses were $12.4 million, which was essentially flat on a sequential basis. R&D expenses, which consists principally of continued development for our global advanced process technologies and qualifications at advanced nodes were $6.3 million, up $500,000 sequentially, due principally to increased leading-edge foundry logic and FPD development costs. During the quarter, our stock comp expense was approximately $950,000. We generated operating income of $18.6 million, or 14.1%. This represents an increase of 240 basis points from the second quarter, and amounts to an 84% incremental margin on a sequential basis.

Please turn to slide 8. EBITDA as defined in our credit agreement for the quarter was $42 million, or $168 million on an annualized basis. Other income and expense net for the quarter was income of $200,000, as compared to expense of $1.5 million in Q2. The improvement was primarily driven by favorable foreign exchange, and to a lesser extent, reduced net interest expense.

During the quarter, we recorded a tax provision of $3.4 million, which is above the high end of our guided range of $3 million. Minority interest expense was $3.3 million, and primarily consists of our Taiwan JV partner's share of PDMC's profits for the third quarter. Minority interest expense increased $1.2 million during the quarter. GAAP net income was $12.1 million, or $0.17 per diluted share -- as Peter mentioned, well above the high end of our guided range. At the end of the third quarter, we had 1,520 full-time employees, which equates to an annualized revenue per employee of $347,000.

Now turning to the balance sheet. Cash and cash equivalents at the end of the quarter amounted to $192 million. Our net cash, which is cash less debt, was $57 million at the end of the quarter, an increase of $18 million sequentially. Working capital at the end of the quarter was $179 million, a sequential increase of $28 million. Accounts receivable at the end of the quarter were $104.7 million, up $7.1 million sequentially, primarily as a result of increased shipments in the second half of the quarter, principally FPD and memory products.

Our investment in our JV in Boise amounts to $93 million. As we have previously discussed, we expect to monetize our investment in Q3 2016 when the JV concludes. Accounts payable and accrued current liabilities at quarter end amounted to $145 million, down approximately $8 million sequentially, primarily as a result of reduced accrued CapEx. At the end of the quarter, we had $47 million of CapEx accrued for, which was down $9 million sequentially.

Please turn to slide 9 as we review our capitalization. Total debt at quarter end was $135 million. The principal components of outstanding debt include $115 million, 3.25% senior unsecured notes, 50% which are due in April 2016, and 50% which are due in April of 2019, and approximately $20 million in capital lease obligations. Our leverage ratio is now less than one times at 0.94 times, which is our lowest leverage ratio in many years. During the quarter and through today, we have not borrowed on our five-year, $50-million credit agreement.

Taking a look at cash flows. Cash provided by operations for the third quarter was approximately $34 million. Depreciation and amortization amounted to $21.1 million, up $1.6 million sequentially. Cash flow used in investing activities in Q3 amounted to approximately $12 million, which is primarily all CapEx. Net cash used by financing activities during the quarter amounted to approximately $1 million.

Please turn to slide 10 as we take a look ahead. Taking a look at CapEx, we expect our 2015 CapEx -- cash CapEx -- to be approximately $110 million. Our 2015 investments were principally geared towards high-end, leading-edge products for IC and FPD applications. We do expect to continue to generate free cash flow as we conclude 2015.

As we look ahead, our visibility as always continues to be limited, as our backlog is typically only one to two weeks. We are projecting revenue for the fourth quarter of 2015 to be in the range of $129 million to $138 million. We do expect our depreciation and amortization to increase modestly during the quarter as additional tools come on line. For the fourth quarter of 2015, we're estimating taxes to be in the range of $3 million to $4 million. As a result, based upon our current operating model, we estimate earnings per share for the fourth quarter to be in the range of $0.15 to $0.22 per diluted share.

In summary I'll leave you with a few key thoughts. First, as we stated in the beginning of 2015, we expect top- and bottom-line improvement for 2015. Second, our EBITDA will grow in 2015. 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. Finally, we expect a continued build on the momentum we've established over the past few years as a leader in advanced photomask technology.

Now I'd like to turn the call over to the operator for Q&A.

(Operator Instructions)

Our first question comes from Edwin Mok with Needham & Company.

Hi, thanks for taking my question. First question I have on the gross margin, Sean. I think actually Peter mentioned it. You guys did less outsourcing to DMP? Did I understand that correctly, and is that the normalized level now, and any color you can provide on that?

Yes, essentially as Peter mentioned, it represents a realignment of our site-to-site movement, as our Taiwan facility has been qualified at advanced nodes. Therefore we have less outsourcing to Japan, enabling us to absorb more of our fixed costs and increase margins. As I said Edwin in the prepared remarks, this is now in our base, and we expect to target 50% incremental margins going forward.

With that, but lower high-end IC sales this quarter, is there a way you can quantify what's your utilization right now for your factory, for high-end IC?

We don't specifically comment on, Edwin, on utilization for competitive reasons, but certainly we had additional capacity -- certainly as we talked about the decreased foundry logic orders to handle more business.

Yes, I think what we've said in the past, Edwin, is we have enough powder in the gun to hit or exceed $150 million in revenues, so that remains true.

I see, okay, great. Sorry about the background noise here, but can I ask you about cross point technologies, in terms of if that could potentially become the growth driver for you guys, and when do you think that can be a contributing factor for EBIT?

Yes, we have to be a bit guarded regarding what we say about cross point, but what we can say is we've been qualified to build those reticles for quite some time. We've been involved during the development. What I said is we see it as a growth driver for us as we exit the calendar year into the first half of 2016.

Okay, that's helpful. In the high-end IC side or high-end semi side sales has been somewhat lumpy, right? Any way you can let us think about as you move forward the next few quarters, what could give us confidence that, that business can stabilize or return to a more consistent growth trend?

As you stated, our high-end IC business is moving upwards, right? It's up and to the right, but it's kind of a sawtooth, as different technology nodes come in and go back out based on either market factors or yield issues our customers have. What I would say is we as a team have worked to try to assemble more and more growth drivers up and to the right. That's been our tactics to try to average out the sawtooth, to make it -- there will still be teeth in it, but maybe the teeth are less severe.

I think you really saw that this quarter. We had the FPD business come in at the high end nicely and drove growth up. Our high-end memory was stable. What I would highlight there is if you look at Micron during Analyst Day, I think [they] made a pretty strong statement about where they want to be with their DRAM business at the end of the calendar year -- more than 50% bit conversion. In order to do that, what they need is reticles. We're very confident, as I said in my prepared remarks, about the tone of our high-end memory business. Six months ago it was in the sawtooth mode. Now it's in the strong ramp mode.

You've got FPD. We've got memory. Then we have 14- and 28-nanometer logic, and that's where I think we all understand there's inventory overhang in the channel, and there's still yield challenges. That's moving in fits and starts. We have four pieces of growth driving our business right now, plus very sturdy, stable performance in our mainstream business. As we exit the calendar year, we'll see 3D NAND and hopefully the cross point kick in. The sum total of that is more and more growth drivers. Any impact on the business that one has should be diminished.

I see. Okay, great Peter. Last question I have, and I'll let the other guys ask. I remember on the analyst event earlier on this year, you guys had -- correct me if I'm wrong, I think it's 30% gross margin and 17% operating margin targets, with the higher gross margin this quarter. Is that -- are we sticking with those targets for now, or do you think long term you can surpass those numbers?

Edwin, we always look for continuous improvement. In the past when we laid out targets, and once we hit those targets, we reestablish new targets. We like to get there first before we talk about higher targets, but we certainly have aspirations for them.

Sounds great. That's all I have, thank you.

Our next question comes from Tom Diffely with D.A. Davidson.

Yes, good morning. First Sean, looking at the margins, obviously a very impressive increase sequentially in the margin structure., It sounds like you think this is the new baseline. But curious, was there anything from the mix that helped the margins this time, or is it truly just the overall business and better operating structure?

It's related to -- certainly as Peter [did] in his prepared remarks made -- constant cost reduction efforts. We had the FPD business pick up during the quarter, better utilization of our tool base. As we look forward, this is a new base. As I mentioned, we do expect a target 50% drop-through on incremental revenue based upon the Q3 baseline.

Okay. It sounds like you guys have done continuous improvement in your operations for as long as I can remember. I'm surprised it jumped so much in this one quarter. Apparently, it's just the DMP outsourcing is a big chunk of that, it sounds like?

Yes, Tom, just to remind everyone, our JV closed -- this quarter we celebrated the one-year anniversary. Most integration plans have a 12-month trajectory. The local team in Taiwan did a very excellent job in executing the integration plan supported by our Corporate team. It lagged just a bit, but it wrapped up more or less when it should have.

One thing that I think was never clear, when we did the JV, the critical layers for the most advanced masks were actually built in Japan. They were never made in Taiwan by DNP. As part of the integration plan, we needed to shift all of the reticle flow for the entirety of the sets to Taiwan. That required a qualification. That required us to put the tools in place in Taiwan, ramp the process technology, and then go through a full- blown wafer qual with our customers there. You know how long that takes, so here we are.

Yes, okay. All right, sounds good. Peter, how long during the quarter has the new tool for flat panels been up and running? Was it just a half quarter?

What we said last quarter was we hoped to get it up and qualified by mid quarter. We executed -- again, the team in Taiwan executed to that plan. We had about a half-quarter's worth of revenue benefit from the tool. One thing I would also say is since I've been at Photronics, I've never seen a tool ramp from zero to full capacity so quickly. There's a lot of demand for the capability that tool has.

Okay, now we continue to hear a lot of things coming out of especially Korea about the push now to get these high amyloid screens out there. It sounds like you have the right tool at the right time for that. Looking at the CapEx, Sean, we've -- it looks like we've peaked here on a quarterly basis, on a four-quarter moving basis. Would you expect the CapEx to trend back down to the normal $80-million range over the next few quarters, from a trailing four-quarter basis?

Yes, we're going to provide CapEx guidance, Tom, for next year in our December call. We did say at the Analyst Day that our first outlook for next year was at a peak of about $75 million. Yes, we would expect it to trend down.

Okay. Then Peter looking at the memory side of the business, obviously the DRAM is working really well right now. When 3D NAND starts to ramp up, what does the relative mask cost of 3D NAND versus plainer NAND, and maybe throw in versus DRAM as well?

Yes, I'll direct that question to Chris. He's probably best positioned to answer it. Chris?

Sure, thanks Peter. Tom, I don't know if we can comment on the mask cost, but generally the 3D NAND sets tend to have more layers in them, but fewer critical layers. I think it's similar set composition in total. Of course, it's a new device, new technology. We do expect a higher re-spin ratio for NAND, because things will be getting tweaked and tuned as manufacturing ramps. We think the re-spin percent -- this is the number of masks that get re-ordered in a given set we think will be higher. I would say consider it comparable to similar nodes for plainer NAND. But more, we are hoping for more design activity because it is a new technology that's being adopted.

Okay, and then what about NAND versus DRAM then?

DRAM, the masks on average with many more critical layers, it still drives the technology curve much more aggressively than NAND. We expect that definitely will continue. More layers in DRAM now, more multi-patterning we're seeing, use of things that have been used on the logic side for a while we're seeing in DRAM. I think you can expect -- I'll say more than 20% increase in DRAM layers compared to NAND, and also node over node. That layer count's really going up, and critical layers, as well.

Okay. Most of what you're doing today is in the high 2x node [and the] difference between the big slug of 20-nanometer business yet for DRAM?

We are seeing that particular node ramping, a lot of mask being built, so yes, I would say we're seeing that ramp for sure.

All right. Peter, last question, just a broader question on China. What's your exposure there today? What are your views of the near-term cross-currents, and what is your long-term opportunity there?

Yes, we see China as a clear growth opportunity for our Business, both in FPD and in IC. We saw in China last quarter the Business actually was up $1 million quarter over quarter. I'm not so sure we gained market share. Maybe we gained a little share, but the business there is also in growth mode. We're in the process of establishing a sales and customer support office there. We -- as Sean said, most everything we try to do is step by step. That market clearly is the next wave of growth for our industry, and we're taking a very pragmatic approach to developing the Business there. But without a doubt, it looks like a significant opportunity for us.

Great, sounds good. Thank you.

Thanks, Tom.

(Operator Instructions)

Our next question comes from Patrick Ho with Stifel Nicolaus.

Thank you very much. Peter, maybe first off in terms of some of the comments you made on the high end logic foundry business, you mentioned both market conditions, as well as yield issues related to ramps. From your perspective in this July quarter, was one a bigger impact than the other? How do you see it trending into the current October quarter?

Yes, it's -- as I said, it's very difficult to know how exactly how that business is going to materialize in any one quarter, but we did see -- we really saw the Business slow down at the beginning of the quarter. If anything, the tone is a bit better now than it was when we started. If we use that as a guide, we would say that this quarter looks incrementally better than the last. But two weeks from now something could change and the business could soften again. Very reluctant, Patrick, to say exactly how it's going to end up, but right now, incrementally it looks better, where we sit right now.

Okay. Moving on to the flat-panel display side of things, obviously we're starting to see the emergence of the amyloid trend. Can you comment on how sustainable this ramp is, and maybe to use a baseball analogy, what inning do you believe we're in, in this ramp?

Well, I think we're maybe in the first or second inning of the next -- the QHD to UD transition, we're probably in the first inning, maybe the second, first to second inning of that transition. As I've mentioned, we're the only game in town right now that has a mask-making tool that really can build the mask required to make that transition an easy one for our customers. We have a lot of room to run there.

Okay, great. Final question for me in terms of going back to the IC business for a second. The memory business obviously is quite strong right now, particularly at the high end. As 3D NAND ramps up at the end of this year and into next year, do you believe that will be supplemental to the DRAM business that you're seeing today, or does that offset maybe a potential peaking of the high-end DRAM business as we get into the first half of 2016?

Yes, I think that's a good question. We're quite bullish on the DRAM business over the next one to two quarters. I think as you said correctly, after that ramp peaks, the vertical demand coming from DRAM will start to fade away. The good news is that as that starts to fade away, the 3D NAND in particular should be coming up nicely. Layer on top of that is the 3D cross point memory. Our hope is that the net of all of that is upward, but we certainly don't think it's going to be downward.

Great, thank you very much.

Thanks, Patrick.

Our next question comes from David Fondrie with Heartland.

Hi, good morning. Congratulations on a nice quarter. I wonder if you could -- in the past you've talked about the lack of investment by some of your competitors, or your competitors on the merchant side. I wonder if you can talk, is that just -- give a little flavor, is that still the case? Do you believe that they've somewhat backed off from the investment in the high end?

Yes, that indeed is still the case. We do a lot of work to check the channel and multiple levels. So far, our large merchant competitors have backed off on investing in next-generation technology. Right now, we're the only one.

Then talking about the P-80 and the opportunity in the flat-panel displays, are the captives investing in that kind of a tool, or -- I guess next question is if you are running at capacity or near capacity on that tool, is there a possibility you would qualify another tool?

Yes, there is one captive that we -- again, we do a lot of work to check the channels. There is one FPD captive that has a P-80 that basically has the duplicated tool set on order, and it should be delivered towards the end of the calendar year. There will be capacity coming on line into the business. Unlike the IC business, the FPD photomask market is considerably smaller. We add -- we're very deliberate in when and how we add capacity and capability. We like to add them both, if we can, simultaneously. Having said that, we'll continue to watch the market. We'll see how the business evolves. If -- clearly, if we believe that we can load another tool, given we already have all the process technology we need to exploit it, we'll make that move.

Peter, following up on that, is that tool only for amyloid, or can it be used for high-end regular flat-panel displays?

It's used for both. It offers substantially improved capability for both. The other thing I would say is we're not done improving on our process technology that supports that tool. We believe we have significant room to run with the performance we can extract from it, so it is indeed valuable for both. But I think we had said before in our calls that Samsung had recently ramped their A3 line for amyloid displays in Korea. That line has a next-generation of stepper made by Canon instead of Nikon. It was waiting for a better photomask, and we delivered it. It's a very happy marriage right now.

Great, thanks very much. Appreciate it.

Our next question comes from Tom Diffely with D.A. Davidson.

A quick follow-up here. In an environment when inventory issues are hurting a lot of companies' mid- to low-end chips, your mainstream business seems to be doing quite well. Curious if it just Pete's leadership in that space, or is there something specific about your mix of business?

Thank you, Tom.

Yes, so Pete likes those kudos. What I would say Tom is we have a very strong global team in this market. We've been doing it forever. I'm not in any way trying to diminish Pete's leadership, but this is truly -- this is 1,500 people working quite hard deliberately together to provide superior service and industry-leading pricing for our customers. It's what we've done for 46 years. Everything this quarter, if you ask me what I'm most pleased with, I'm very proud of what the Team is doing in the mainstream business.

Similar to Dave's question on the capacity [added by] the [effective] leading edge, I get the sense that some of your competitors have taken capacity off at the lower end nodes, too. As IOT ramps over the next couple years, it seem like this might give you a nice advantage at the low end of the market?

You're right in everything you just said. One of the reasons why our revenue is not dropped is our competitors are actually incrementally exiting the business. We actually last quarter had a piece of lithography equipment -- new piece of lithography equipment -- qualified in the mainstream market because we were out of capacity on a certain node. Yes, we -- for us on some nodes that you would find very surprising, we're sold out -- we're nearly sold out.

All right, great. Thank you.

Thanks, Tom.

I'm not showing any further questions at this time. I'd like to turn the call back over to our host.

Okay, thank you, everyone, for participating on this morning's call. We look forward to talking to you again or during the quarter. Thank you.

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