Radcom Ltd (RDCM) 2006 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the RADCOM second-quarter earnings release conference call. (Operator Instructions). As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Noga Fisher.

Thank you all for joining us. With me today are RADCOM's CEO, Arnon Toussia-Cohen, and its new CFO, Jonathan Burgin. By now, we assume you have seen the preliminary earnings press release, which was issued earlier this morning. It is available on all the major financial news feeds. Before we begin, I would like to review the Safe Harbor provision.

Forward-looking statements in the conference call involve a number of risks and uncertainties, including but not limited to product demand, pricing, market acceptance, changing economic conditions, product technology development, the effect of the Company's accounting policies and other risk factors detailed in the Company's SEC filings.

In this conference call, management will be referring to certain non-GAAP financial measures, which are provided to enhance the user's overall understanding of the Company's financial performance. By excluding certain non-cash charges, non-GAAP results provide information that is useful in assessing RADCOM's core operating performance and in evaluating and comparing its results of operation on a consistent basis from period to period. The presentation of this additional information is not meant to be considered a substitute for the corresponding financial measures prepared in accordance with generally accepted accounting principles. Investors are encouraged to review the reconciliations of GAAP to non-GAAP financial measures, which are included in the press release. The Company does not undertake to update forward-looking statements.

Now, I would like to turn the call over to Noni. Go ahead, please.

Thank you all for joining us. Before reviewing the quarter, I would like to start by introducing you to our new CFO, Jonathan Burgin. Jonathan has come to RADCOM with 22 years of experience, including 7 years as CFO of XTL Bio. During his time there, he listed its shares on the NASDAQ, London, and Tel Aviv Stock Exchanges, raised $110 million in four rounds and participated in number of M&A transactions. He also served as the CFO of publicly-traded Israeli investment bank and as a senior manager at PwC. We are very pleased that he joined the RADCOM team and believe that his financial and transaction experience will be important assets for the Company. Although he joined RADCOM just two weeks ago, he is already taking charge and the transition has been smooth. We look forward to introducing him to you during our next round of investor meetings.

Having come on board in the middle of the earnings release period, I can see that the financial department is very well organized and professional, allowing us to make a smooth transition. I'm very pleased to join the RADCOM team and look forward to meeting you all.

So now, I will turn to the quarter. The second quarter was another period of revenue growth, profitability and strategic progress for RADCOM. Our revenues increased by 18% compared to the second quarter of 2005, representing our 11th straight quarter over -- year-over-year revenue growth. This included the major order that we discussed last quarter, which has been delayed from the first to the second quarter and taking into account in our second-quarter projections.

Compared to our original projections, our revenues for the quarter fell marginally short. This was due to our accounting policies, as Jonathan will explain. Nevertheless with strong bookings and growing interest in all our products, we have visibility for a strong second half and are optimistic about our future prospects. I would like to take advantage of this conference call to give you more insights into our markets and prospects.

As we have been discussing in the past, we are positioned to benefit from two markets -- the build-out of the 3G deployment, which is driving demand for our 3G service monitoring solutions, and the emergence of next-generation wireline markets, which has begun to increase our convergence solution sales.

3G deployments picked up through 2005 and then accelerated during the past two quarters. As 3G traffic builds, operators are finding it more and more difficult to keep delivering a high quality of service. Our systems are a comprehensive solution to the problem. So far, we have sold Omni-Q to more than 20 service providers -- are in discussion with many others. As our experience demonstrates, each sale represents the potential for significant follow-on orders over time.

Our primary 3G sales continue to be in North America and in Europe. In parallel, we continue to build new channels and capabilities in the Far East. Although the 3G licensing process in China has been delayed, we view it as an area with a lot of future potential. Nevertheless, during the quarter, we identified a new opportunity that could take advantage of our converged Voice over IP and cellular capabilities and made our first sell there for live network monitoring system. Our ability to identify the need for this application was due to the close relation of our local office with Chinese operators. In general, we continue selling to local vendors for their development and believe in long-term opportunity of the region.

We are also positioned to benefit from the emergence of next-generation wireline networks. A variety of new type of networks will be established to address demand for ultra-high bandwidth services, especially those driven by IPTV as a service and IMS as an infrastructure. We believe these networks will come to the market during 2007 and that widespread deployment over the next few years will make it even a larger opportunity than the cellular markets.

During the quarter, we saw a nice rise in Voice over IP/Omni-Q demand and sales. As Voice over IP services ramp up in scale, quality issues become very important and operators are looking to us for solutions. This is a good validation of our vision and an indication of the Voice over IP/Omni-Q's long-term potential.

On the technology side, we continue to improve the functionality of our existing products and to make progress on our next-generation offerings. In major products, we introduced during the quarter -- was our powerful new R70 Probe for the Omni-Q. This is a 10 gigabyte per second monitoring platform, a breakthrough technology that takes our products to the next level in performance. It is based on our patent-pending GearSet technology, an extension of the GEAR, which has been the main source of the performance advantage of our current solutions. We designed it in line with our evaluation of the needs of the market over the next three to four years, which will be experiencing higher and higher traffic levels as operators roll out their triple play and quadro-play services. As such, the R70 Probe strengthens our position as the industry technology leader.

I would like to stop here and turn the call over to Jonathan to go over the financial reports. Then, we'll open the line for your questions. Jonathan, please?

Since you have the results in front of you, I will focus on the highlights of the quarter. Revenues for the period were 5.7 million, up 18% year over year and 12% compared to the first quarter of 2006. This was marginally short of our original projections due to accounting policies relating to a multiple element agreement that prevented us from recognizing the revenues of a large order that was shipped during the second quarter.

On a geographical basis, our revenues were particularly strong in North America, which accounted for about 45% of our sales for the quarter. This included the contribution of a sale that was delayed from the first to the second quarter. Europe accounted for about 30% of the quarter and Asia-Pacific for another 12%.

In addition, as Noni mentioned, the fact that our book-to-bill ratio was greater than 1 for the quarter together with our strong pipeline gives us visibility for growth during the second half. Gross margin for the quarter was 70%, up from 68% in the first quarter.

In general, we expect the gross margin to fluctuate slightly depending on the mix of sales. On an operating basis, our expenses were similar to the level they have been for the past few quarters. On a GAAP basis, we reported $105,000 of non-cash charges during the quarter as part of an implementation of FAS 123R standard. This requires us to recognize the fair value of share-based incentives as compensation expenses.

In the earnings release, we have detailed their location, which affected all other expense categories, cost of goods, R&D, sales and marketing and G&A. For the first half of 2006, FAS 123R has added 233,000 to our expenses and we expect the total for the year to be about $500,000.

On a non-GAAP basis excluding these charges, our net income was $313,000 or $0.02 per share. This compared to 103,000 for the second quarter of 2005, which also does not include stock-based compensation. On a GAAP basis, net income for the second quarter of 2006 was 208,000.

Turning to the balance sheet, cash and marketable securities were 11.7 million at the end of June. Current and long-term deferred revenues as of the end of the quarter were $3 million, similar to the level at the end of the first quarter. As of the end of the quarter, we had about 16 million shares outstanding.

As to guidance, please keep in mind that our results for any one quarter will vary depending on the timing of individual large deals. Nevertheless, the strong pipeline that was built during the first half has given us visibility for a much stronger second half, enabling us to project third-quarter revenues of $6.7 million to $7.1 million. Back to you, Noni.

So, that's it for the quarter. In summary, our markets are developing in line with our expectations and we are growing along with them. The emergence of the 3G opportunity has written our growth for 11 straight quarters and continues to bring us new customers as well as repeat orders. We see the beginning of the emergence of next-generation wireline markets, which we believe will drive sustained growth of the Company over the long-term. Finally, the launch of our new R70 Probe is a major milestone that extends our technological leadership and prepare us to address the high demand for services in the heavy traffic environment of the future next-generation networks. Overall, we are optimistic regarding our prospects and working hard to achieve our full potential.

Before closing, I would like to reassure you that the current security situation here in Israel has had very little impact on the Company and has not affected our ability to carry on business, deliver goods or support our customers. Although we are obviously concerned about the situation, life has continued normally in Tel Aviv, where our headquarters are located. And very few of our employees have been called up on reserve duty. We have multiple sources of supply for all our companies. If the situation should escalate, which of course we hope it doesn't, we are organizing a way that will allow us to operate with minimal impact on our customers.

As always, thank you for your support of RADCOM and for participating in this conference call. With that, we would be happy to take your questions. Operator?

(Operator Instructions). Madhu Kodali, Fertilemind Capital.

Jonathan, welcome on the board. Arnon, I have a couple of questions. On the revenue side, could you give us a breakdown by segment -- wireless, wireline, VoIP, please?

It's very similar to our regular one. We did see a little bit increase in the Voice over IP. But generally, it's about 40% for the wireless, about 35% for the wireline and the rest for data communication.

How many new customers did you have this quarter?

It's very difficult because it depends on the size that you are calling. But for Omni-Q new deals, it's about three or four depending how they look on the size.

So, for the new product, you have three or four new customers. How many did you have total new customers, who have never bought anything in the past but bought something new for the first time?

It depends how do you call it and what application. We did say during the conference call here that we have more than 20 monitoring wireless. But it's -- it's not -- it's about more than 20 for the wireless.

More than 20 for the wireless -- that's the total number of customers you have, right?

Excuse me?

That's the total number of customers you have? The 20 number, isn't it total number of customers you have today? Is that right?

Yes, that's right.

I was wondering if you could tell me how many new -- total new customers--?

That's what it is. That's new customers that bought this quarter. You're asking about new customers that bought this quarter and never bought before.

That's correct.

So I was saying it's about three or four.

Oh, three or four. Okay, thank you very much.

It's the size of deals that are not small deals but Omni-Q deals that are $300,000 to $400,000 at least.

What's the average deal size?

As usual, if you are talking about wireless, it's usually end user price about between $700,000 to $1.5 million. In this quarter, it was around the $700,000 deal size for the wireless. In the wireline, it's usually smaller than that. It's around $300,000 to $400,000 in the wireline.

On the last -- order from the last quarter that shipped this quarter, that's completed or you still have anything in backlog from that particular customer?

This is Jonathan. It has been completed, and we have shipped it. And that order has been finalized.

On the Omni-Q, that's the new product, right, Arnon?

No, no. Omni-Q is our monitoring solution, which is both wireless and wireline. The new product is the R70.

Did you have any sales for the new product yet, R70, or it's still in the pilot beta state?

It's in a beta stage and it's now being offered to -- in different proposal for customers.

Right. Has anybody bought it yet?

No, no one bought it yet. It's still not (technical difficulty) --

Could you give us an idea on competitive landscape? Are you talking -- from a market share standpoint, I think you were roughly about 10 to 11%. Are you still in the same place? How is the market growing right now?

It's very difficult to say by a single quarter or even by half a year. But now, our feeling is that we are currently about the same and not even getting a little better than we used to have.

I see the SG&A is ramping up disproportionably to the sales. I was wondering what's going on there, if you can give us some light on that.

I couldn't understand the proportion of what?

The sales trend in SG&A -- sales and marketing line. You had about $2.3 million or $5.7 million sales, whereas you had only $2 million or 6.5 million for example in the fourth quarter of December '05.

I think -- I'm looking at the figures for 2006 and what we see the first quarter and the second quarter very similar. The first quarter was 470 and we are now at 475; although, the revenues increased as we said by 12%. So we are at approximately this level of January, and that is more or less the level that we expect to stay at.

So you're going to continue kind of guidances going forward roughly, you're going to maintain at 40, 41% of sales is what you're seeing -- off revenues is what you're seeing?

No. I actually stressed the absolute amount and not the percentage. I noted that the sales increased and the actual expenses did not increase in the G&A.

Yes, I understand in the G&A. But I was wondering about the sales and marketing line -- is where I've seen on -- on average, you had about 35% of revenues going into sales and marketing in the past in the last year. It's up like 6% right now. I was wondering is that something we should expect going forward or you have something different going on right now?

I'm sorry. I thought before that you were talking about the G&A. Looking at the sales and marketing, you are correct that it does go up according to the sales. It depends on the mix of sales and where we sell directly in the US. That's where we have -- more commissions are paid out there directly. So, that means that our expenses there are higher for those direct sales.

So your [actions] are higher for direct sales also as indirect sales?

Correct.

But you still -- it's being compensated by the margin, and that's why the gross margin grew to 70% compared to the (technical difficulty). So overall, if you look at the two (multiple speakers), then it stays about the same.

Are you seeing more incremental opportunities in the US right now?

Yes.

David Kanen, Pointe Capital.

You guys alluded to some opportunities going forward in wireline Voice over IP. Can you tell me in the second half of the year, do you see that segment increasing as a percentage? I think you said it was about 35% -- I'm sorry, wireline in total was 35% of revenues. Can you tell me where you can project the second half of the year wireline being in light of growth in Voice over IP?

It's very difficult in our business -- is a lumpy business -- to really project on a quarterly basis the exact percentage that will be closed or at least to commit to that. I would say that if I am looking forward and that's -- I think is more important as we look forward, we start seeing opportunities in the wireline, which are related to IPTV, IMS including Voice over IP but not only Voice over IP. We do see opportunities in the wireline ILECs, and these are big opportunities. This is not -- this is opportunity. When it comes in, it affects dramatically the Company.

Now we do see that as something that will start kicking in in 2007 and will have an effect on our sales in the next three or four years. And I believe that we do see opportunities with Voice over IP. We do believe that we will close more opportunities in this area. But I think that the changes will come when the ILECs will do the move into a convergence and that we expect to happen between -- next year. But, the exact timing is not something that we can be very specific.

Just a clarification -- the last question asker was trying to understand sales and marketing. So, in dollars, should I expect next quarter to be relatively flat or total -- I think total expenses were around 3.9 million. Should that be relatively flat with the only variable being commissions more or less?

That is correct. As I mentioned looking back to prior quarters, we have had approximately the same amount of expenses. And as we mentioned, it should only fluctuate according to the commissions that we pay out.

So there's the opportunity for tremendous operating leverage going forward if the gross margins stay more or less at that level. Is that reasonable expectation?

Correct.

Let's see -- here I noticed in the Northeast for example where I live, Cablevision Systems of New York said that they just surpassed the 1 million subscriber mark for what they call their Optimum Voice service, which is a Voice over IP. What is the -- what is the level of subs where it becomes viable for them to really start investing in a monitoring system in your opinion? What is kind of the number critical mass so to speak?

I would say it's not so much the question of number of the customers. It's more the question of say moving to -- moving from a location base really to national-wide deployment. We do see that more strongly in the wireless; wireline is not as clear-cut as that. In the wireless, we do see clear-cut that when they are moving to national deployment because this deployment involves huge deployment of infrastructure than they are moving in parallel to that. Usually six months or nine months later, they will put in a monitoring system.

With Voice over IP, the way that the customer is working is really by ILEC. As we've seen even with bigger opportunities than the Cablevision, what you see is that they will work by and will develop it by region or by cities or by market or even by application. So they are building small solutions. It might be pure testing or monitoring. And then at a certain point where it becomes -- and be united as a single service, that's the time that they will implement a monitoring system.

Can you tell me how many 10% plus customers were there in the quarter and what should I expect in Q3 with the growth in revenue?

If we look to the previous quarter, we had one customer that was about the 10%. I should know exactly how we will be in the next quarter -- I think is a little bit hard to say at the moment. Because as we said, we don't know when each of these deals will actually close. But we're focusing today in the bigger deals and not so much in the smaller deals. So going forward in general terms, we do expect more bigger customers as we go forward.

Maybe one more remark for the -- we always had one or two customers that is more than 20%. But our history is that every six months, they are changed, which means that because of the nature of the business, we get relatively a large order from a single customer. And then at that point, this is more than 10%.

But when we move forward, it's changed into different customers. In the past, we had vendors. It used to be in every year there was a different vendor that we sold to them that had more than 10%. So we anticipate that this same phenomenon will happen here that whatever 10% deal we had this quarter, it's -- or even in the first half will change and will evolve according to wins in the market.

In your prepared remarks, you guys alluded to -- I think I heard it -- this follows that you did make your first sale in China and it was due to converse wireline, Voice over IP and cellular. Is that correct? And if that's --

But it's the first monitoring. We sold quite a lot until now to vendors and to less -- also to service providers. But it was mostly test equipment and mostly for the labs. This is the first time that we sell a live network monitoring system, which is our strategic direction. We want to expand. We are working with -- we are working with the vendors and the service providers, preparing ourselves for the time when the licenses will be granted, which is the biggest question is when it will happen. But we already started selling to other application and that's a very good sign for us.

So this monitoring system sale that you recognized in the quarter in China, was this consistent with your average deal size?

Yes, yes.

So it was a meaningful piece of business --

Yes, it was (multiple speakers).

I'm going to let somebody else ask questions at this point.

Jeff Meyers, Intrepid Capital.

So this deal that was deferred from this quarter because of the accounting policy, do you expect that to be a 10% customer in the next quarter?

We haven't actually mentioned when we will recognize the income from that deal. And at this moment, we aren't in a position to mention such an issue. So I think that is a little bit premature to say when we will actually recognize the revenue from this deal.

Let me ask you this way. In your guidance for this coming quarter, is that deal a part of that guidance or is not a part of the guidance?

I think when we look and to give guidance, we have taken into account the structure of the different deals and the recognition of income as a general item. And this includes any kind of adjustments that we need to take into account, again without relating to any specific deals as such.

Noni, you and I have talked in the past about kind of the use of partners to get into some of the larger opportunities. Did you make any progress this quarter on new partners or getting deeper into existing partners?

There was a little change to our strategy during this quarter, but it was due to what we identified is -- or maybe I will take one step back. When we started with this direction, we really put two targets. One target was to go -- or three targets. One target was to go through partners that are peer companies and to go together and to show combined value to our customers. The second was going through system integrators and the third one to go through vendors of infrastructure.

Now what we've seen during this quarter that although we were successful with creating partnerships with a few companies, we didn't see a specific project -- it was good for our positioning, etc., but we could not really identify projects that it really -- that created totally new opportunities. On the other hand, we do see nice progress with working with some of the vendors that have global service organizations. When we do see these kind of opportunities are coming into place -- we didn't have yet a definite closing of that but we do see a few opportunities. The same thing with -- at least one of the system integrators, we do see a nice opportunity working with them.

So overall, I would say that from this aspect, the quarter was very good progress. The question when it will be material is not -- I don't -- I cannot say that. But it's -- we did progress nicely in this direction.

Last question -- if you look at your pipeline today versus at the beginning of the year, is it sort of meaningfully larger in a way that you would say you know the market is really starting to take off or it's just larger because of seasonal factors or that sort of thing?

We do see it larger than it used to be. We do see -- of course, it depends on the market. But some of the market, we do see a tremendous increase in pipeline and opportunities. In some of the markets is slower, but these markets that it's slower, it's markets that are behind. So I believe that looking forward, the leading market is showing good health and growth opportunity. So I believe even with the other markets, these opportunities will come as these markets progress.

[Steve Rudnitsky], [US IT].

Can you explain to me, Jonathan, this issue of the order that if I understood you right, it was shipped in the quarter but not booked? And just tell me what the accounting issue is that brings about that result?

What we mentioned is that we had an order that was shipped, but we did not recognize the income from that order. And as we mentioned, it's a contract with multiple parts to it. As such, no income was recognized in this quarter.

I see. So the accounting rule that would apply here is because we haven't completed the -- because this in theory some sort of liability on the shipping or in the completion of the order, we can take in the percentage that was booked. Is that how that goes?

That is correct.

I mean so far the percentage that was shipped?

In the general line that we usually adopt more conservative accounting policies and as you are aware, the profession is very conservative. The accounting profession is very conservative in such kind of deals. So that is the story, yes.

The balance of that particular order, will that be completed in Q3 so that we are able to take the entire mountain in this quarter? When will it be completed in general?

I think I already related to this issue, and we have not stated when exactly this whole deal will be recognized in the P&L. And I don't think at the moment that it will be a good idea to mention anything on that. Still, I think what is important when we look forward and giving the guidance for the third quarter, as I mentioned, we did take into account all the issues of recognizing of income that we have for the different deals.

Just focusing on this particular deal, I take it we have a signed contract at this point for this deal? It's not simply a verbal one?

That is correct.

Maybe I will add to that. Usually, the way that we work is there is a term called SOR, sales of return. This is not the case. We're talking about a definite contract and definite APO. We supplied it. We've gone through the process. But as Jonathan says because it's at multiple stages, that was the issue that we could not recognize.

Noni, just going forward and obviously your clients have certain demands but from a revenue recognition point of view, it sounds to me like this probably could have been addressed with a little better drafting of the contract that you could break it up into segments, so at least we could have taken some of it in. Because it is pretty typical that when you ship, you get to book the revenue. So I mean it just might be something now that Jonathan is on board that we could look at a little more closely in how we are drafting these agreements.

I agree with you that Jonathan -- one of the first priorities that he has is to make sure that we learn exactly from that and construct the contracts in a way that we could take advantage of the contracts earlier than later. And I think that we will instruct and tell our -- accessible how to build a contract that hopefully will not repeat this case.

Now Asia was 7% of sales, is that right? Basically, we had one good-sized sale there.

I've actually mentioned 12%.

I'm sorry. I wasn't sure; I just wanted to clarify. So it's 12 --

But it was not a single sale. It's more than a single sale. 12% is -- but it's built of one relatively larger and a few that are smaller.

Could you describe for us the -- I understand that R70 product has a 10 gigabyte per second monitoring. Could you just give us some sense of how that compares to what our competitors have in the marketplace so that we know how good this is relative to the people we are competing against?

I think that the 10 gigabyte is something that is easy to describe, but I think that this is not necessarily the most important part of this product. I think that the most important part of that is that because it's the GearSet technology, we're talking here about power base that is using a [pilot] processing in order to achieve not only the ability to do line extraction and evaluation. But more than that, we can bring down applications into the hardware level.

For instance -- and I know that we are unique with it -- we're the only one who could perform voice quality algorithm in hardware. And this device not only that it can do high speed but also it can do thousands of call in parallel of voice quality. Now we know that this is for instance one of the issue of the things that competition doesn't have. And we built it; it's a product that we're working in the last two years in bringing to the market. I think that's in some of the meetings and even before we mentioned that our target is to bring this product in the middle of the year.

But I think that from what we see, our current GEAR technology is still ahead of the performance over our competitors. We brought this that we believe that it can be -- the performance are much higher even than the GEAR technology. So we believe that this will give us an advantage over relatively long periods of time. But more than that, it will design already taking into account that certain software features and session-based applications will be put directly into the hardware. And this is the uniqueness of this product.

Last thing I just want to tell you. Obviously for those of us who have been to Israel, we understand where Tel Aviv is relative to the North. But we also understand that you and your employees have relatives in the North and friends who are subject to the hostilities there. And just from my part, I just want to say our hearts are with you guys and with your families.

The only question I have for you is, are you seeing any -- I know it would be difficult for me not to be on the Internet at all times seeing how my -- how things are going. Are you finding any drop-off in just your worker productivity? Is there anything -- I don't know how you would stop that frankly just because of the level of interest has to be so high. And maybe you could talk about that for a second.

The only thing I can say is that unfortunately, this is not the first time. If you look at our history just with the Iraq war that you participated with was affecting Israel. And I'm sure the interest here was the same as in the US. I think that we've gone through these periods of time with no effect on the delivery and in particular here our already experience with such -- unfortunately our experience and has -- and they know how to separate the two things.

I do believe that it will not affect our schedule and our promises to the customers. I'm not saying that just because I believe so but also we have the history. Even with the first war in Iraq, the people were sleeping at home because even Tel Aviv was affected. And we did find the technology solution, so people can continue to work from home.

So I think that unfortunately, we have a lot of experience of how to deal both with the effect on anything that may happen if happens -- hopefully not in Tel Aviv -- but also with people going to the reserve force, which is the usual thing for us and other effects. So I believe -- I feel very comfortable in saying that we will continue and do whatever is needed in order to maintain the business with no effect.

You set up in your -- on your plant or on your [reese] R&D team? I'm sure most people have Internet access, but do you set up a system where somehow everyone agrees not to be looking at [Harrets] or CNN online all the time and then you will just alert them to a problem? Or how does that go? Do you physically set up a new system to just keep--?

No, not at all. We believe in our people. We believe that they know what to do and how to do that. We give them totally open access to the Internet, and I believe they know what they should do. And our experience says that they know. I think that if people are -- my personal belief is that if you try to stop them from looking, they will find a way how to do that. And the trust that they will have with the Company such that we need to provide them any aspect of the business that will give them the feeling that we trust them and that we are together in this situation. I don't think any system that will prevent them or anything like that will have a good effect. I personally believe contrary, and that's the way we run here the Company.

I agree with that. I think that's very wise and just look forward to continued good results. It sounds like you are on the right path.

(Operator Instructions). There are no further questions.

Thank you very much and talk to you again next quarter. Bye.

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