Pioneer Power Solutions Inc (PPSI) 2014 Q4 法說會逐字稿

Good day, and welcome to the Pioneer Power Solutions, Inc. fourth-quarter and full-year 2014 conference call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Brett Maas of Hayden IR. Please go ahead, sir.

Thank you and good day. Welcome to Pioneer Power's 2014 fourth-quarter and full-year financial results conference call. The call today will be hosted by Nathan Mazurek, Chairman and Chief Executive Officer; and Andrew Minkow, Chief Financial Officer. Following this discussion there will be a formal Q&A session open to participants on the call. We appreciate having the opportunity to review the 2014 fourth-quarter and full-year financial results.

Before we get started, let me remind you, this call is being broadcast over the Internet, and that a recording of the call and the text of management's prepared remarks will be available on the Company's website.

During this call, management will be making forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary text regarding forward-looking statements contained in the earnings release issued today and in the posted version of these prepared remarks, both of which apply to the content of this call.

I will now turn the call over to Nathan Mazurek, Chairman and CEO. Nathan?

Thanks, Brett. Good morning, and thank you for joining us today for -- or, good afternoon. Thank you for joining us today for our conference call.

Three months into 2015, I can report that our confidence in the near-term and long-term future for Pioneer has never been stronger. My confidence is based on the growing backlog, which suggests strong growth for 2015 and beyond, as well as an expanding pipeline of opportunities for businesses we acquired in 2013 and early 2014.

Taking a step back, the strategy is working. We have purchased small businesses on favorable terms, augmenting our portfolio of offerings and creating savings through internal sourcing and robust cross-selling opportunities. We have invested in those businesses, transitioning them from slow to no growth and nominal profits to accelerating growth and more robust profitability.

Today, our recently acquired businesses have sales functions that are delivering improving top-line performance, and we are now bidding on larger projects and more components of them, resulting in a sales pipeline that is notably stronger, both in terms of quality and quantity.

I am pleased with this progress. But during the fourth quarter, we identified risks in our internal control over financial reporting which are the result of the rapid expansion of our business through acquisitions, combined with the simultaneous efforts to deploy new business information systems and adequately prepare and train our financial and non-financial personnel in its use.

In January, as part of our year-end review, our team identified $900,000 of additional costs of goods sold that should have been recognized during the first through third quarters of 2014. Andrew will discuss this in more detail. But even while these costs were immaterial to any of those three quarters and did not change our results for the full year, the cumulative effect of recognizing these out-of-period costs all during our fourth quarter contributed to an unexpected quarterly operating loss.

Needless to say, this situation creates a frustrating conclusion to an important year of transition. While we are certain the issues uncovered can be put behind us by initiating quick and decisive actions to strengthen our financial reporting, internal control processes, and procedures. Once we complete these actions to strengthen our financial reporting function at the subsidiary level, we will be better equipped to scale efficiently and profitably in the future.

In summary, while I am frustrated that this occurred, it does not alter our results for the full-year or my outlook for 2015 or beyond.

Our backlog as of December 31, 2014, stood at $36 million, up 48% compared to the backlog as of December 31, 2013, and up 33% compared to the backlog as of the end of our third quarter. In addition to the growth in size, our order backlog is more diverse than it has ever been before and provides us with higher visibility into our expected revenue over the next several months. The same trend is evident in our order rate.

As a result of this progress, we continue to expect that 2015 will be a strong year for us in terms of top- and bottom-line performance. This is despite exceptionally challenging demand conditions in Canada as a result of the decline in oil, and the Canadian dollar, affecting more than one-third of our business.

Our growth expectation is made possible by our investments in the last 24 months to elevate our core earnings power through the integration of three acquisitions, the broadening of our addressable market, and the expansion of our sales and engineering teams in order to capitalize on the previously unavailable sales opportunities. I believe the combination of these activities has significantly enhanced Pioneer's profile for sustainable growth.

I will now turn the call over to Andrew Minkow, our CFO, to provide some additional color regarding details of our 2014 fourth-quarter and full-year financial results, as well as a review of our 2015 guidance.

Thanks, Nathan. Before I get into a review of the financial results, let me provide you some additional details surrounding our internal controls and the financial reporting that we disclosed in our press release today and that Nathan briefly mentioned. During our year-end closing and reporting process, we identified several risks within our internal control of financial reporting.

These are an unfortunate outcome of increased complexity resulting from the rapid expansion of our business through acquisitions. In addition to our simultaneous efforts to deploy our new ERP system and adequately prepare and train our people in its use, an initiative which ultimately will aid us in our reporting and financial controls, this new system rollout exacerbated the situation. In January 2015, through the application of our year-end controls and procedures, our team identified $900,000 of additional costs of goods sold that should have been recognized during the first three quarters of 2014 by 2 of our operating units.

The amount of these costs were not material to the results we previously reported in each of those first three quarters. However, the cumulative effect of recognizing these costs all during the fourth quarter, rather than spread out over the previous three quarters, contributed to fourth-quarter loss.

Approximately half of the amount related to a single purchase order transaction that occurred at the very end of the third quarter. The situation is easily preventable in the future by having modified our clerical and review procedures.

The other half of the out-of-period costs recognized during our fourth quarter reflects more systemic problems at our Bemag Transformer reporting unit in Canada. As a result of Bemag's reported loss for the year and its reduced outlook for 2015, given the rapid recent devaluations in the Canadian dollar and the price of oil, we also recognized a non-cash impairment charge of $1.4 million in the fourth quarter relating to the carrying value of Bemag's goodwill on intangible assets.

Two notes about this situation: first, it is important to note we identified it -- that is, the $900,000 -- and reported it to our auditor. Second, we have moved quickly and are implementing actions to strengthening our financial reporting, internal control processes, and procedures. As part of our review and remediation efforts we have identified and are taking direct actions in the following areas.

First, we will be significantly upgrading our divisional accounting strength to include the recruitment of senior personnel at our reporting unit locations and provide additional training for our existing accounting staff as it relates to our financial reporting requirements.

Second, members of management and the accounting staff have and will receive additional training at the policies, procedures, controls, including Pioneer's policies regarding monthly reconciliations and supervisory review procedures for all significant accounts.

And, thirdly, additional training has and will be provided to non-financial and financial personnel related to the new ERP system that was implemented at the reporting units in question to foster utilization of tools available for timely review of production runs and projects in progress.

Through these collective efforts, we believe we are addressing the issues that affected our financial results. Our progress will be monitored with the assistance of independent review by our independent Sarbanes-Oxley consulting firm, and for certain business processes by our independent accounting firm. We are committed to making sure these issues are not repeated.

Finally, as Nathan indicated, none of them temper our long-term optimism. The revenue line was not impacted. Demand for our solutions is as strong as it has ever been, as evidenced by our backlog and growing sales pipeline. We will improve back-office operations and be in a better position to move forward efficiently, accurately, and profitably.

With that said, let me now turn to a review of the results for the December quarter and full year, and then provide some comments regarding our 2015 guidance.

Fourth-quarter revenues were $24.1 million, up 14% from $21.2 million in the fourth quarter of 2013. The $2.9 million year-over-year increase was driven by our Critical Power businesses, which accounted for $2.4 million of the increase and includes our Titan acquisition, which contributed $1.7 million of that during the month of December.

The remaining $0.5 million of the increase was driven by sales of switchgear by our operation in Los Angeles, partially offset by lower sales of electrical transformers, which were 3.6% lower on a year-over-year basis as compared to the same three months of 2013. From time to time, our sales figures are negatively impacted by the effect of foreign currency translations when comparing our results to prior period, as was the case this quarter.

Our gross profit for the fourth quarter was down to $2.4 million, or 9.8% gross margin, compared to a $5.2 million gross profit, or a 24.6% gross margin, in the fourth quarter of 2013. The fourth-quarter cost of sales includes approximately $900,000 in expenses that related to the first through third quarters, as I previously mentioned, which negatively impacted our gross margin by about 3.8%.

In addition, during the fourth quarter of 2014, we accelerated the timing of several new product development initiatives, which further reduced our gross profit margin by another 2%, or $0.5 million.

The two largest of these projects included one to attract a significant new data center-oriented OEM customer, which was successful and began shipping at the end of the fourth quarter. And the second project related to obtaining UL approval for a new switchgear offering by our Critical Power business.

For the quarter, SG&A expenses decreased 9.5% on an absolute dollar basis to $3.7 million as compared to $4.1 million in the fourth quarter of 2013. As a percentage of our revenue, SG&A expenses decreased from 19.2% of revenue in the fourth quarter of 2013 to 15.2% of revenue in the fourth quarter of 2014.

Operating loss for the quarter was $2.6 million compared to operating income of $1.3 million in the fourth quarter of 2013. The decrease was primarily the result of lower gross margin and non-cash impairment charges, which were $1.4 million, related to the impairment of all the goodwill and a portion of the intangible assets associated with our Bemag Transformer business in Canada, which was slightly offset by higher overall sales and lower SG&A expenses.

Our net loss for the quarter was $2.9 million, including those non-cash charges, compared to net income of $2.1 million in the prior year's quarter. Adjusted EBITDA loss was $8.8 million during the quarter compared to EBITDA of $1.8 million, or 8.5% of revenue, in the fourth quarter of 2013. Our non-GAAP diluted EPS was a loss of $0.18, down from earnings of $0.18 in the prior year's quarter.

Turning to our 12-month financial results for the period ended December 31, 2014. First, as we will report in our annual report on Form 10-K, in connection with our 2014 acquisition of Titan, we realigned our operations into two reportable segments, the first being Transmission & Distribution Solutions and the second being Critical Power Solutions.

Our Transmission & Distribution Solutions business segment provides equipment solutions that help customers effectively and efficiently manage their electrical power distribution system to desired specification. And this comprises our Pioneer Transformers, Jefferson Electric, and Pioneer CEP brand names.

Our Critical Power Solutions business provides customers with sophisticated power generation equipment, switchgear, related electrical distribution infrastructure, preventative maintenance services, and an advanced data collection and monitoring platform, the combination of which is used to ensure smooth, uninterrupted power to operations during times of emergency. These solutions are marketed by us under the Pioneer Critical Power and Titan Energy Systems brand names.

Turning to the full-year results, our revenues for the year were $92.2 million, up 4.5% or $4 million, from $88.2 million in the comparable period of 2013. Breaking this down further, revenue from our transformer product line decreased by $5.1 million, or 5.9%, driven by lower sales from our Canadian operations, which were down 12.4%, or 4.8%, on a constant currency basis, primarily due to cyclically lower spending in 2014 by our two largest utility customers. As a reminder, this compares to all-time-high levels of spending by each of these two utilities in 2013.

Our sales in Canada were also impacted by a number of large, unrepeatable project-based orders delivered in 2013, particularly in the oil and gas sector, that were not fully replaced in 2014.

Partially offsetting the Canadian market decline was a 7% increase in sales to our US customers. The US sales increase is led by significant growth in our OEM solutions, which were up 29%, or approximately $2.1 million.

The $4.1 million increase in our sales of transmission and distribution switchgear was primarily the result of including a full year of Pioneer CEP in our 2014 revenue as opposed to approximately only three months in 2013. The increase in Critical Power revenue was driven both by the timing of acquisitions and internal growth.

On the acquisition side, our Titan business, which we acquired in December 2014, contributed approximately $1.7 million of our Critical Power revenue during the year. The remaining $3.3 million increase in Critical Power revenue was attributed to internal growth, and is primarily due to the completion of six major orders for our paralleling switchgear solution as compared to only two such large projects completed in 2013.

For the 12 months ended December 31, 2014, our gross profit was down 16.5% to $18.2 million at a 19.7% gross margin compared to $21.8 million of gross profit, or a 24.7% gross margin for the year-ago period. The decrease in gross margin was driven primarily by lower transformer sales and an unfavorable shift in transformer solution sales mix, the completion of two large critical power projects completed in 2014 that included a large component of products purchased by us and packaged into the projects as compared to 2013, and the inclusion of our acquisition of Titan in December 2014.

Turning to SG&A for the 12 months, our expenses were $15.2 million, or 16.5% of revenues, compared to $14.7 million, or 16.7% of revenues, in the year-ago period. The 3.4% increase in our SG&A dollars was driven primarily by the addition of new sales and engineering staff at our Pioneer CEP and Critical Power segments, as well as increased expenses related to the Titan acquisition, which were partially offset by lower variable selling and bad debt expenses in our Transmission & Distribution Solutions segment.

For the 12 months, non-cash impairment charges related to the impairment of all the goodwill and a portion of the intangible assets associated with our Bemag Transformer business in Canada totaled $1.4 million. The impairments is the result of Bemag's operating loss for the year coupled with market-related pressure and execution challenges that have reduced and delayed our projections for revenue and cash flow in future periods.

Our 12-month operating income including impairment charges decreased 75% to $1.8 million from $7.1 million in the year-ago period. We posted a $0.3 million loss, down from net earnings of $5.3 million in the prior-year period. Our adjusted EBITDA for the 12 months was $5 million, or 5.4% of sales, as compared to $8.9 million, or 10.1% of sales, in 2013.

Lastly, our non-GAAP diluted EPS was $0.25, down from $0.80 in the comparable 2013 period.

Turning to the balance sheet, our total debt is $18.9 million as compared to $10.1 million at the end of 2013. As of the end of 2014 we had net working capital of $10 million, including $3.8 million of cash and cash equivalents, compared to net working capital of $13.8 million, which included approximately $400,000 of cash at the end of 2013.

Our ratio of current assets to liabilities stands at 1.4 to 1, and we had approximately $5 million of available and unused borrowing capacity from our revolving credit facilities not including cash on hand. The availability of this capacity under our revolving credit facility is subject to some restrictions on the use of proceeds and is dependent on our continuing ability to satisfy certain financial and operating covenants, including financial ratios.

Lastly, as Nathan mentioned, today we are providing full-year revenue and earnings guidance for 2015, which is as follows. For the year, we expect revenue between $110 million and $120 million. That will be broken down into our new two reporting segments. Transmission and Distribution Solutions is expected to yield sales of $85 million to $95 million. And our Critical Power Solutions segment is expected to deliver sales of $20 million to $25 million.

For the Company, we expect adjusted EBITDA in the range of $6.5 million and $7.5 million, and non-GAAP diluted EPS between $0.45 and $0.55.

Our guidance is based on foreign exchange rate of $0.78 to CAD1, which reflects an unfavorable 14% variance from last year and will affect over one-third of our revenues and some of our most profitable product categories.

In addition, our below-the-line assumptions continue to include an effective tax rate of approximately 28% and a share count of approximately 7.4 million.

This concludes my remarks, and now I will turn the call back over to Nathan.

Thank you, Andrew. Operator, I would now like to open the call for questions.

(Operator Instructions). Matt Koranda, ROTH Capital.

Just wanted to start out with gross margins. It looks like a big portion of the decline in margin, year over year at least, is from the liquid-filled transformers. So can you just talk about what gross margins were in this segment during the quarter, and then just your outlook for 2015? How much of that 8.4% decline can you guys get back on mix, and how much of that is kind of lost to FX for the year in 2015?

A good amount of it is lost to FX in 2015. And the FX on translation does not affect the percent did margin. But we are facing at is -- what we are facing is buying large components of the raw materials we need in very expensive US dollars up there, which affects our margins. So it is going to be a tougher year than in the past in our liquids-filled transformer business.

We still are expecting comparable sales, at least in Canadian dollars. But without much going on in the oil patch, where we earn a lot of our big profit margin, custom-type business, our profit margin on our gross margin is probably good to slip another 2 or 3 points from where it was in 2014 on the liquid-filled product.

Okay. All right. And can you remind us again where it was into 2014? That 2 to 3 points, what are we slipping from?

From around 27% in 2014.

Okay. Got it. And then it looks like you guys are kind of making some fixes and hiring some more senior accounting personnel, and doing some training activities during 2015 to rectify the internal control stuff. Can you help us think about quantifying the spend in 2015 associated with that?

Well, it is in our numbers. We have identified a number of actions we need to take. Frankly, some of our people are so new, no decisions have been met -- made. But it's the kind of thing where in looking through the plan and budgeting in, we have put in a good $0.04 or $0.05 for it. (multiple speakers)

Okay. Got it. That is helpful. And then in terms of -- I know you guys have said that you think that there weren't -- it wasn't material enough to go back and restate any of the stuff from 2014. But as you dig further in, looking back maybe even further, is there any risk here that we see restatements further back than 2014, in 2013 or other periods?

No, because it really -- this is very specific to two divisions that switched over their ERP systems in 2014, so it shouldn't go back to any prior periods.

Okay. Got it. And all of that ERP switch is now done as of the end of Q1. Is that right?

For those divisions, but we have more to do.

Okay. And when do you think you will have the full ERP implemented across all of the subsidiaries? Is that something that will be done by the end of this year?

That is our objective.

Okay. Got it. Okay, let's touch on backlog and bookings just for a moment, as well. Since we are done with Q1 pretty much as of today, can you just comment on bookings cadence during Q1? How is activity? Maybe you could talk about each segment. So just talk about Critical Power Solutions and T&D Solutions. And if you could break T&D out between Pioneer and Jefferson that would be helpful.

Yes, Matt, this is Nathan. So I will start. The first quarter, the bookings for the largest unit, the Pioneer Transformer, was still strong. Although we are budgeting -- and in the guidance, I am budgeting for a much reduced year, profit wise, for them primarily because the oil and gas patch in Alberta is stone quiet.

Jefferson is ahead of any kind of pace that they set in their history. They are beginning 2015 at a torrid pace, which we expect to continue for the rest of the year. So they are way, way ahead. In fact, probably by the end of the year, they will be the largest revenue segment that we have. Especially given to the translation of the Canadian dollar, it might go toe to toe with Pioneer Transformers as far as EBITDA earning.

Bemag -- the pace is probably in line exactly with what was going on in 2014 from a revenue point of view. The Canadian economy, but more specifically to us, the Canadian construction market is very weak right now. Everybody is complaining. But we are looking for it to be no less than stable with last year.

The P-CEP business, DLA business, which rounds out T&D Solutions, continues to grow at an exceptionally fast rate. Their challenge is not so much the growth, but their challenge is to grow with a better mix and improve their profitability. They still continue to drag significantly on our earnings for the year.

Critical Power, which is now a much larger and more diverse business than it was prior for us, given the acquisition of Titan, will of course -- because the acquisition is the reason for most of the revenue growth, the big revenue growth that we are going to experience from 2014 to 2015. But I would say that the early indications there are the equipment side of their business is growing at a good-to-modest pace, which is great, over 2014. And the service business is growing at a much quicker pace to that.

And then to break some of the numbers down, we have put out there $36 million of backlog. The way that breaks down is $10 million is Critical Power. $26 million is T&D, Transmission and Distribution. Of that $26 million, since you started with the Pioneer Transformer liquid-filled, about 60% of that $26 million is our liquid-filled. About another 20% is Jefferson, which is driven in large part by this major new OEM customer I touched on earlier in the call. It is a data center-driven business. And the remainder of our T&D backlog of about $2 million or $3 million, whatever that adds up to, really splits evenly between Bemag and our Los Angeles switchgear operation.

Okay, awesome. That is very helpful color around the backlog and bookings outlook here. So, great. Was wondering in the outlook if you could maybe just touch on the $20 million to $25 million that you have for Critical Power. How much of that would we attribute to Titan for the year? And what is kind of the remainder for the base Critical Power businesses?

In broad strokes, about $20 million. $18 million to $20 million for Titan, the balance for the business that we bought and have been nurturing since last quarter of -- early -- first half of 2013 --.

Right, since April or whatever -- March or April 2013. And of Titan's $18 million to $20 million, probably about $7 million-ish is equipment sales, and the balance is service.

Well, plus (multiple speakers). More half-time.

Sorry. Was that -- you said half and half?

There is a piece of their business that is sort of -- I don't know, is a hybrid type business. So if you threw that into equipment, it is almost even, 10 to 10.

Okay. All right. 10 to 10. Got it. Okay, great. One more for me here. Could you -- is there a bit more color you can share on the OEM customer with Jefferson? It sounds like it was kind of a material step up in business for them, and it's related to data center. Could you just give a little more color on sort of --?

Sure. (multiple speakers) Yes, no, 100%. From the time we bought Jefferson, which was in April of 2010, the push has been to migrate them to -- to move them up the value chain and start doing more in custom magnetic solutions, where the value proposition and the margins are higher, as opposed to the standard ventilated distribution unit, which is going into primarily commercial construction.

It's one thing to say it; it's another thing to do it. And so it has taken a number of years of effort, of investment, of personnel upgrade, of being dogged in certain markets. But in 2014 -- although it really began already in 2013 -- but in 2014, that shift really began to manifest itself. So they did more on the OEM side as a percentage was for the first time a super-significant percentage of their business than it had ever been historically. And that is beginning to pan out.

This particular customer is in the vertical, they are in the data center market. They are manufacturing as -- and they have several competitors, some of which Jefferson is serving or is angling to serve, as well. Special what we call PDUs, product distribution units, specific to the data center market, Jefferson is providing them with a particular magnetic solution, a magnetic piece of equipment that is installed into their equipment.

The markets that they are serving are the big data guys. This company is a Fortune 500 company, which in turn serves the alpha dogs of the data center market, which is -- without discussing which particular customer we are serving on this end, be it Amazon, Microsoft, Facebook, Google -- I'm probably missing somebody who's going to be upset. But those are the big monsters of the data center market. And so that is who they are serving.

And to clarify, our customer is one of the international, major electrical equipment companies who is incorporating our subassembly into their product. And their customer is one of the major technology companies that Nathan gave a few examples of.

Right. These projects that they have secured and are quite long, although they sort of dole it out to us in multi-month segments -- but these projects are slated to last about five years.

So we have in our guidance one phase of one project that we and Jefferson is able -- once you are in there, it is easier to get a piece than the next one, so long as you don't do anything wrong.

So I think we will see as of course the first quarter will unfold -- you asked about the first quarter order rate. But for Jefferson in particular, the first-quarter order rate and, in tandem with that, their sales rate are things that they have not experienced in their history that I know of. I only know 20 years back. Before that, I can't say.

Okay.

One more thing about this order, we have a lot of doom and gloom on the price of oil and currency. If not for this particular customer relationship, we would not be talking about 20% to 30% revenue growth next year.

Okay. Got it. Understood. All right. I will jump back in the queue, guys. Thank you.

(Operator Instructions). Michael Epstein, Northeast Securities.

I am just a little new to the story, so I apologize. But can we discuss recurring revenue aspects of the Company and the quality of the earnings? I am hearing a lot that the oil patch in Canada is down, but I am sure it is all over the world. Any other industry that we can serve to make up for that shortfall?

Yes, of course -- thank you, Michael -- we are always looking for -- to do more business and widen our base. It doesn't happen as quickly. The decline in oil was so violent to the down so quickly, projects just stopped immediately. So it takes a little while to compensate for that. So it's not like everything fell out. Probably, I don't know, X percentage of our liquid-filled business, probably about 15% of our liquid-filled business was dedicated or was serving oil and gas for the last few years. That is a very profitable business for us. So for that to violently go down and to shut off so quickly, takes a little time to make that up. But we're trying.

To your point, Mike, I mean you are correct. We have a very nicely profitable service business. Annual contract, two-year contract, three-years contracts with some major retailers in the country. And it's a nice, stable, dependable type of earning stream for us. It takes some time to build. We have brought in a new head of sales for national accounts in order to build that business more rapidly.

But for 2015, we are trying to keep close to the chest and not expect too much out of it all in the first year. So the acquisition of Titan is something that we feel has a long time to grow. So we spent a lot of time in the last two months trying to organize the policies and the procedures of how the Company goes to market and how people have incentive to do sales in order to set a base to grow the business much bigger.

But at the moment, it is -- Nathan talks about oil and gas. Right now, the oil and gas is just -- it outweighs that portion of our business.

Okay. It looks like you could use some cash. Are we expecting some sort of public offering in 2015 to build the treasury up?

Yes, Michael, one, our cash position is still relatively strong. We still have a lot of untapped borrowing capacity. We still have a lot of cash sitting. And the business overall continues to generate cash. We are not really looking for cash right now. We will, of course, go to the market when we think that we are in a position of some strength, or for some other purpose, to raise more equity and to create a wider and more liquid market for our stock.

But right now, the focus on 2015 is to really rebound from the disappointing performance of 2014 and demonstrate that these business units are capable of earning much more money on the shorter and longer term.

Thank you. I am looking forward to attend your annual meeting and meet you, Nathan and Andrew. So looking forward to that. Thank you.

Okay, our pleasure as well.

Thank you, Michael.

At this time, there are no questions in our queue, and I would like to pass things back to management for any closing and additional remarks.

Okay. Thank you all so much for your time and attention. I look forward to updating you again on our next call.

Ladies and gentlemen, that does conclude today's presentation. We appreciate everyone's participation.