Richardson Electronics Ltd (RELL) 2008 Q2 法說會逐字稿

Good day and welcome to the second quarter fiscal 2008 Richardson Electronics earnings conference call. My name is Candace and I'll be your conference coordinator for today.

At this time all participants are in a listen-only mode. We will conduct a question-and-answer session after the prepared remarks. (OPERATOR INSTRUCTIONS)

It's my pleasure to introduce your host for today's conference, Mr. Edward Richardson, Chairman and Chief Executive Officer of Richardson Electronics. Sir, you may proceed.

Thank you, Candace. Good morning and thank you for joining Richardson Electronics second quarter fiscal 2008 conference call.

It's my pleasure to introduce you to Kathy Dvorak who joined us in early November as our new CFO. Kathy comes to us with a wealth of experience in distribution, having spent more than 25 years with the United Stationers. She served as CFO for the last six years and was instrumental in leading their working capital and expense control initiatives.

Also joining us today is Greg Peloquin who leads our RF, Wireless and Power Conversion division, which represents approximately 66% of our total revenue.

While we've been a bit more informal in the past we're hoping to make our calls more informative and more structured. Each quarter we provide our view of what the future holds for Richardson Electronics. That means we typically share forward-looking information.

As you know, these statements are projections which are affected by the risks and uncertainties in our business. We assume no responsibility to update our projections. Actual results may be materially different. Please refer to the cautionary language in our press release and SEC filings.

Our call is being webcast and will be available as noted in our press release.

For those of you who may be new to the Richardson Electronics story, I'd like to briefly review the business, have Kathy present the highlights of our financial performance and then Greg will discuss our business outlook for RFPD. I'll begin with some comments on the Electron Device group and the Display Systems group, and then provide you with some concluding remarks and then we'll be happy to answer your questions.

Historically, I've presented the Richardson story by business unit, however, it's probably easier to think of Richardson Electronics as a distributor of engineered solutions, electronic components and modules. In other words, we can supply a single component, we can design numerous components into a module, or design and provide a complete integrated solution.

Within all of these products we can supply engineered solutions from our design and manufacturing centers or design end products from our technology leading suppliers. The same business strategy applies to all three of our segments: the RF, Wireless and Power Conversion division, the Electron Device group and the Display Systems group.

We discussed issues within the Display Systems group for the past few quarters. I'm very pleased that we were able to recruit Doug Albregts to lead the DSG team.

Doug brings tremendous knowledge and experience to the team after spending more than 12 years at NEC Display Solutions. We look forward to his leadership in building the DSG business and returning it to profitable growth.

As I mentioned on previous calls, we're in the process of restructuring our supply chain that currently supports both EDG and RFPD. We've made great progress although at a slightly slower pace than we had originally anticipated.

We began with 18 distribution locations which are now consolidated into three global hubs. In November of 2007 we officially moved into our Asia hub which is in Singapore.

Our inventory is now housed in three primary distribution centers, Lafox, Illinois, Amsterdam and Singapore. This accessibility will us to more effectively manage our inventory from this point forward. In addition, using our new drop-ship capabilities, we have dramatically improved our delivery and service to our customers on a global basis.

The next step is to benefit from the limited risk distributor structure which we've installed to reduce our taxes overseas and return the majority of the income to the U.S. where we can benefit by using our net operating loss carry forward. We are working to leverage our global distribution infrastructure for the Display Systems group as well.

We are also diligently working on in initiatives to control and recover our freight costs incurred when purchasing inventory as well as selling our products which represents millions of dollars of potential savings. The initiatives focus on reducing overall freight expense.

Yesterday we announced that the Board of Directors voted to declare a $0.02 cash dividend per share which is a reduction of $0.02 per share from our past dividend policy to all holders of common stock. We believe that a reduction of the cash dividend was appropriate until our company improved its overall financial performance.

Finally, we're taking a step back and looking at every opportunity to simplify our overall business, increase efficiencies and remove cost.

Now I'd like to turn the call over to Kathy to briefly discuss our financial performance.

Thank you, Ed, and good morning, everyone. This is my first conference call as CFO at Richardson Electronics and I'm very glad to be with you today.

I've now officially been with the Company for about eight weeks so I appreciate your patience and understanding as I get up to speed. I look forward to meeting as many of you as possible in the coming months.

Now let me begin by reviewing our second quarter financial performance. Sales for the quarter were up 5.3% driven by positive sales growth in RFPD and EDG.

Gross margins declined by 70 basis points from 24% to 23.3%, which is primarily due to increases in our inbound freight costs as well as increases in our inventory reserve.

SG&A expenses were $31.3 million, up about $600,000 compared to the second quarter of fiscal 2007. Included in SG&A was approximately $900,000 of severance expense related to contractual arrangements with employees related to an acquisition.

Without this expense, SG&A expenses as a percent of sales would have been approximately 21% versus 22.3%. Overall cost containment actions are gaining traction and we should begin to see our SG&A expense measured as a percent of sales begin to decline.

Operating expenses included $1.3 million of depreciation and amortization expense. D&A for all of fiscal 2008 will be approximately $6 million. Operating income was $2.5 million versus $2 million in the prior year second quarter.

Interest expense was $1.6 million, offset by investment income of $200,000. This compares with interest expense of $1.4 million and investment income of $700,000 in the prior year's quarter.

An area I would like to discuss is our foreign exchange loss. The foreign exchange loss in the quarter was $1.4 million. Of the $1.4 million approximately $900,000 was a non-cash charge.

Let me take a minute to explain this. At the beginning of the quarter we had approximately $15 million related to proceeds from the SSD sale sitting overseas in U.S. dollars. This was intended to be used to pay back intercompany loans.

We effectively did this but more than $10 million was temporarily held in certain European countries that required us to value the currency at the beginning and end of the quarter in euros. Unfortunately, the translation of the U.S. dollar versus the euro declined by 8% and we took a corresponding P&L hit.

In the third quarter, we have about one month of foreign exchange exposure and then this particular issue should be behind us. The impact to our third quarter results for this issue should be immaterial as hopefully the U.S. dollar versus the euro translation will not be as volatile as it was during our second quarter.

Taxes in the quarter were unusually high as we had to do a one-time increase in our tax provision of approximately $500,000 related to the clean up of intercompany debt I just described. We believe our tax expense for the second half of the year will be in the neighborhood of $1 million.

Net loss for the second quarter was approximately $650,000 versus net income of $1.1 million last year. Sales for the first half of fiscal 2008 were $275 million, down slightly compared with $277 million in the first half of fiscal 2007. Gross margin as a percentage of sales remained flat at 24% for the first six months of both years.

Before I discuss specifics of the balance sheet, I'd like to mention that the volatility of foreign currency relative to the dollar that I just mentioned, also significantly impacted our balance sheet position. For example, our accounts receivable balance as of December 1st was $104 million versus $106 million at year-end. Excluding the impact of foreign exchange, our receivables actually declined $5.4 million versus the $1.4 million as shown on our balance sheet.

Our inventory levels were $115.8 million, up $5.6 million from year-end. Again, however, the foreign exchange impact accounts for just over $4.1 million of the total increase. Needless to say, inventory management is clearly an area of intense focus.

Progress in inventory management should result from several new initiatives including implementing a new sales demand planning tool, programs targeted at selling aged and reserved inventory, implementation of inventory tracking modules highlighting inventory with little to no movement.

And finally, negotiating improved stock rotation privileges with our vendors. We expect to make further progress on these initiatives in the months ahead.

Our accounts payable balance increased approximately $12 million since year-end. At the same time, we are working diligently to negotiate better terms with our suppliers. The foreign exchange impact included in the $12 million increase was about $1 million.

On a positive note, cash flow provided by operations for the first six months was $8.7 million as compared to cash flows used in operating activities of $3.8 million for the six months last fiscal year. This $12.5 million increase represents better management of our working capital as well as $2.5 million of long-term debt retirement cost we incurred last year.

We are also working on several cost saving initiatives which include the following: Our freight cost initiatives, if successful, should be reflected as incremental cost savings in our results of operations as early as the fourth quarter of fiscal 2008.

Next, an evaluation of our global infrastructure to better align our administrative costs while ensuring that we meet the needs of our business. We believe that this will likely result in a reduction in general and administrative costs and a reduction of fixed costs as a percentage of sales.

Third, during the first half of fiscal 2008 we continued our supply chain restructuring that commenced in fiscal 2007. Our supply chain restructuring includes changing how we operate from both a logistical and sales perspective. It was also designed to reduce our foreign currency risk and income tax exposure.

We believe that as a result of our supply chain restructuring we have reduced our lead times to our customers through enhanced drop-ship capabilities. The Company's overall financial objectives will need to be achieved in order to provide additional tax savings.

Finally, we are in the process of evaluating the current business model for DSG. The results of our evaluation will result in short-term changes to the business model to better position the Company for long-term profitable growth. We expect to be complete with our evaluation by the fourth quarter of fiscal 2008.

In summary, my personal goal is to build a plan that will lay the foundation for profitable growth for Richardson Electronics for years to come. We need to rebuilt this company, challenging every aspect of this business to do things more efficiently, eliminate waste and cut costs.

In addition, we must focus on cash flow. We are working to renegotiate our supplier and customer relationships to truly get paid for the value and service we provide.

In summary, we have a plan in place to return Richardson to profitable growth. This means from a P&L perspective we must get the expense base of the business in line with the revenue generated.

On a final note, I'd like to thank everyone again for the warm welcome that I received at Richardson Electronics.

Now I'd like to turn the call over to Greg to provide the color commentary on our sales outlook for RFPD.

Thank you, Kathy.

As Kathy mentioned, we had a tough Q1 but we are glad to say that we picked right back up to strong growth numbers in Q2. RFPD sales grew $5.5 million, or 6.1% from $90 million in the second quarter of last year. The growth in Q2 was led by our RF active product organization and our Power Conversion group.

On the Power Conversion side, as many of you know, we did a complete restructuring of the division and nearly doubled the business. Again, we are seeing double-digit growth this year with strong backlog with sales in high power applications such as motor drives, alternative energy, laser applications and battery chargers.

With recent advancements in power technology relating to energy conservation and renewable energy such as wind and sollar power, REL has positioned itself very similar to what the wireless group had done and will be a major player in this niche market as a niche global distributor. We expect sales growth over 20% again this year. (Inaudible) led the growth was sales increases of 47% and 30% respectively.

On another positive note engineered solutions sales were up 13% from Q1 and 40% over Q2 last year. The main application for these ES products are motor drives and battery chargers. Most of these products are designed or manufactured in our Lafox based design center.

RF active got back to their high growth ways with strong sales worldwide. Asia had the largest increase in the quarter specifically in Korea, and contract manufacturing, or CEM business in Southeast Asia. China continued to have an uptick at the end of the quarter for products and customers involved in TDS-CDMA rollout.

North America showed nice recovery with sales into the military, avionics and infrastructure market. Going forward we've already seen the same growth rate so far in Q3 as we had seen in Q2. The main growth will continue in our key markets such as infrastructure, applications such as WiMAX, TDS-CDMA, wireless LAN and digital broadcast.

ES sales in this group increased over $3 million from prior year. Most of the applications were for modules used in infrastructure products and LAN mobile communication. Going forward we feel we will continue to see sales growth with improved profitability as we continue to implement the objectives that Kathy and Ed have already mentioned.

Another positive note, as many of you know, China has been and continues to be one of our largest growth areas and recently was named distributor of the year in China by ESM magazine. In addition, our China design center and team were chosen as the Freescale Technology Forum winner. Over 1,000 attendees cast votes and Richardson China was chosen for the most innovative TDS-CDMA engineered solution module design using Freescale transistors. Not too bad for a distributor.

With that, back to you, Ed.

Thank you, Greg.

Let me briefly provide the highlights of the quarter for the Electron Device group and the Display Systems group.

Sales for EDG were up 7.4% to $27.4 million in the quarter. The increase was driven by a 9% increase in sales of tubes offset by declines in the sale of semiconductor wafer fabrication equipment.

The semifab industry is experiencing an overall slowdown. Our gross margin declined to 31.9% from 32.7% in the quarter, reflecting the mix of product sales.

In the second quarter sales for the Display Systems group declined by 2% to $21.4 million. The overall display market is down as well. ESG's gross profit declined to 21.4% from 24.3% due to sales mix.

I've challenged Doug Albregts to carefully evaluate the current business model and position the Company for long-term profitable growth. He'll be implementing his restructuring plan for DSG during the balance of the year.

As Kathy described, we are making progress on many fronts. We believe our initiatives will provide annual cost savings of several million dollars as well as improvements in working capital management.

Candace, at this time, I'd like to turn the program back to you for questions.

(OPERATOR INSTRUCTIONS) Our first question will come from the line of Ron Damron of 21st Century Equity. Please proceed.

Good morning, everyone.

I wanted to start on the gross margin line. Kathy mentioned margins were slightly impacted on the, due to inbound freight costs and increase in inventory reserve. Maybe you could explain that just a little bit more in detail, and is this something that we should expect going forward as well?

Rob, this is Kathy.

At this point we're evaluating the inventory. Hopefully as we get things under control the need to continue to reserve inventory won't be necessary. And we are also working on our freight initiative which should ultimately show up as improved gross profit margins rather than having a negative impact on margins.

Okay. That's helpful.

And then, let's see, on the inventory side of the equation, are you still holding excess inventory as a result of this restructuring? I know you were holding some additional inventory in distribution centers while you were moving forward with this new restructuring.

Could you just give us an update on that and then when we may begin to see some incremental or, I guess, lowering of the inventory?

As mentioned, it was just last month that the Singapore distribution center was finalized. So at this point the excess inventory, I mean, we've consolidated the inventories but haven't gotten the excess inventory out of the system.

Okay. And you expect that --

(Inaudible) on that you should see it in the upcoming months in combination with our other inventory initiatives.

Okay.

And then in terms of, we had a number of one-time costs this quarter. If we look into, I guess, Q3 and Q4, could you just give us a little color on if you expect additional one-time costs going forward?

Certainly. At this juncture in a big picture I'd tell you, again, I've only been here eight weeks so it's a little premature for me to speculate on what's out there. Certainly we do anticipate some severance expense as we go into Q3 and Q4.

A lot of the expense base in this business is certainly people related expense so if we're going to pull down expenses you will see some corresponding severance expense. I can't quantify it for you at this point. It's just too soon for me.

Okay. And then just maybe the last question.

Ed, could you talk a little bit about, I guess, the strategy for Display Systems? Certain markets that you may be targeting versus other markets, just basically a strategy to begin to see improved results there?

Yes, I mean, the area that we see probably with the most opportunity for growth is digital signage which is really going to be an expanding market in the future. So we're focusing in that area. Also the OEM side of custom.

In the past we've spent an inordinate amount of time working on one-off kinds of projects that have taken up a lot of engineering costs with very little returns and sometimes a dead end, if you will. So we think the OEM side of custom makes a lot more sense where it's reoccurring business.

Also in medical we're going to expand our sales of medical products for the PAX environment into Europe under our Image Systems brand.

And then, again, we're really pleased to have Doug on board. He has lots of experience in NEC display solutions. We've, in the past, done very little in marketing of our resources in display and that's something that's something that is Doug's specialty so we'll be expanding our marketing efforts in that area as well.

Okay. That's helpful. Good luck. Thanks.

Thanks, Rob.

Our next question will come from the line of Christian Schwab of Craig-Hallum. Please proceed.

Great. Thanks. Did you guys give specific guidance for the next quarter?

We did not. Normally our Q3 because of the Christmas holiday, December turns out to be about a two-week month for us.

Q3 is normally down about 3% from Q2 and we think right now things look pretty normal. So that would put us in a range of somewhere from 140 to 145 on the revenue side. We think margins in the 24% range will stay about flat while we work on some of these initiatives. So I think that's about the range, Christian, for the time being.

Great. And then are we going to see, are we addressing maybe the fact that SG&A at $30 million give or take a quarter is just still way, way too high?

I'll let Kathy comment on that.

As I just mentioned, I do believe that SG&A is still too high. And as I described, the majority of the SG&A is driven by people and people related expense so we need to evaluate where our opportunities are and how, in fact, we do bring down SG&A. But, yes, it's certainly a goal.

Right. And we've been at this for a long time and we're still not making consistent money. So what, I mean, I think we all appreciate the fact that you hired somebody new for display but, again, it's going to take another two quarters for him to have an idea of restructuring it.

I mean, are you guys sitting down with any hard, fast restructuring, significant restructuring plans or are we just going to kind of muddle through baby steps continuously here? What's your plan, Kathy?

We are trying to pull together a very consolidated plan. No, we don't intend to muddle through with baby steps but we certainly need time as a team to understand what the opportunities are out there.

We guarantee to you over time we will see SG&A come down. We need to get through the next few months and understand what's out there and understand how we really need to reposition this company.

Great. Thank you.

Thanks, Christian.

Our next question will come from the line of Dick Ryan of Feltl & Company. Please proceed.

Yes, just a question on taxes, Kathy, I wasn't sure I caught it. You said cumulative taxes in Q3 and Q4 were will approximate $1 million?

That is correct.

Okay. Okay.

Say, Ed, on the Display side, the new technology you've introduced for the outdoor signage applications, can you give us a sense of how that's being received?

Yes, the high bright technology it's for sunlight readable displays, we think that, at the moment anyway, we have a technology lead in that area. We probably have more requirements for the product than we have capacity to produce and there's some newer technologies coming along as well.

After having said that, so far it hasn't produced a lot of revenue. We're really optimistic about the future of those products but I couldn't quantify it for you.

Okay. Okay.

Say, Greg, a question on the alternative energy side. How much does that contribute to that portion of the business and what kind of growth do you see for that sector?

Well, in the prior quarter it was about $4.5 million in bookings and on the revenue side about $1 million. But that is the fastest IS growth area of the power conversion group specifically now in Asia and Europe as governments mandate the percent of energy that will be developed through alternative means so it'll be double-digit growth. The organizations in Europe and China see growth of over 20% over the next 12 months.

Great. Thank you.

Our next question will come from the line of Ali Motamed of Boston Partners. Please proceed.

Hi.

Can you, well, first of all, I'm glad Kathy's there because, obviously, your stock is trading at, like, 60% of book value so that really suggests what people are thinking of the job that you've been doing.

We're really pleased to have Kathy on board.

Hopefully you give her the opportunity and she's aggressive in putting in place some of the things that you obviously have not been able to do in the past three years. What was the inventory reserve in the quarter that you took and how much impact does that have on gross margin again? Hello?

Yes, we're getting your number here.

About $600,000.

Okay.

Why would you cut the dividend at a point when you're putting up free cash flow? I mean, are you buying back stock do you think at this point? What was the thought process?

It just seems like, you know, you didn't have bad sales number, your guidance for the next quarter is not horrible, especially on the sales front. You've got a lot of cash.

What was the real reason? I mean, what's the thought process there to do that because I'm sure a lot of your price action today has to do with that?

Well, as you know, we sold the Security Systems division back in the June time frame and we finally paid off the majority of the bank debt. We as a Board were absolutely adamant that we weren't going to borrow more money, that we were going to take down the cash invested in this business and run it as is, and so we really feel that it's in the best interest of all the shareholders that we improve the cash flow in the Company and instead of borrowing money to pay dividends that we use the cash within the Company to grow the business and that was the reason for it.

And then you sold Burtek. You got a lot of money for that business unit. Obviously, these segments put up a decent amount of gross profit.

Is there a point where you start evaluating with Display Systems instead of having us sit around and weigh down the Company and be sitting at 60% of book value for the next two years? Could you actually just sell the business unit or put it up for sale and that way we can move on from something that you're having trouble fixing and actually focus or narrow our focus and then maybe give Kathy and the team an opportunity to really have something stable that they can work on one time instead of keeping them sort of working and chasing your tail?

Well, I tell you, we went through this exact process with the Securities Systems division. We brought a gal in by the name of Wendy Diddell to take a look at Security and to fix it and to make a decision whether it had more value as part of our company or if we could sell it and the results are obvious.

We sold it for $80 million. It was a very nice gain. Wendy's now been moved over. She's in charge of the Display Systems group and she and Doug are working as a team under the same premise.

We're going to figure the business. It's either going to be a very profitable portion of Richardson Electronics or we'll follow the same process that we followed for the Security Systems division.

Okay. So hopefully we can be aggressive with all these things now and get some progress in the next year.

We're certainly committed to that.

(OPERATOR INSTRUCTIONS) Our next question will come from the line of Russ Silvestri of Skiritai Capital. Please proceed.

Thank you.

I had a couple of questions in terms of just trying to understand the earnings power of the Company just in this last quarter when you talked a lot about one-time things. But as you look at the one-time things that happened from the foreign currency on down, when you take all those things out, I mean, what was the earnings power in the quarter?

Well, that's why we highlighted those three --

I know you highlighted them and you kind of talked about this, you talked about that, but can you give me a number? I mean, you have the tax benefit this quarter then you're going to take it away next quarter, it's hard to understand and maybe it's just me, but can you tell me what the earnings power was in terms of a number earnings dollars, pennies per share of what it would be if you whacked out the one-time charges?

I think if you do the math on the one-time charges you get to something like $1.6 million of net income.

So it's a dime basically a share or thereabouts, correct?

Yes.

Okay.

And then I have to understand, too, why you want to pay a dividend which is reducing the value of the stock when the stock is selling at, like the gentlemen before said, it's an $8 of book value. Stock today is, what is it right now, it's $4.25 and it's down $1.50.

I don't know who the CEO is, I mean, Mr. Richardson, I know you are the CEO, but what do you care about? I would think you care about a stock price, I do care about the stock price as an investor, why don't you invest in your business by buying your shares back here?

I mean if you buy your share back you're going to actually increase the value per share as opposed to decreasing it by paying a dividend? Can you answer that question for me, please?

Well, obviously, we took action to reduce the dividend and that's something we'll continue to look at quarter-by-quarter and certainly I'm sure at this kind of level the Board will re-evaluate whether we should be buying back shares or not.

Well, I mean, every share you buy back when it's selling below book value it's going to go, the book value per share is going to go up so that math I can do in my head.

The other question in terms of the bookings on the Power Conversion, I think you said it was $4 million last quarter. Can you give me some sense of what the bookings were at the end of this quarter?

The bookings for the quarter were 1.06.

So backlog is?

I don't have it broken down but RFPD as a backlog is about $125 million.

On the Power Conversion?

For all of RFPD.

Okay. $125 million?

$125 million.

Okay.

And when do you think the Board will have an opportunity to evaluate the stock repurchase as opposed to the opportunity for that? Is that something we should happen within a week?

Well, I'm sure we'll take a look at the stock price in the next couple of days and then we may well convene another Board meeting, yes. And also it has to do when cash flow improves as well.

Okay. If you were to grade the quarter and the performance here on a scale of one to ten, how would you grade your performance?

As far as the revenue side we were right on. If you recall at the end of Q1 we forecasted that we would do $145 million and that's exactly what we did.

The real answer is that we have to take cost out of this organization to get the earnings to the bottom line and I think with Kathy joining us that we've identified all the strategic initiatives to do that. She's been through this process at United Stationers, she was very successful with it.

We have a whole list of initiatives that we're committed to go through. So, you know, I guess, the revenue stream, the strategy of the business works very well. The question at this point is to take cost out and to get it to the bottom line.

Which at the end of the day that's something that you guys can control, I mean, that's an execution game which lands squarely in the lap of management.

That's right and I think we have new management in place. We have a senior management team now that's very experienced in doing that and that's our charter here in the near-term is to implement and execute a plan to take cost out.

One question. You talked also about the margins improving and as a percent of sales, is it going to be more a function of expenses coming down or sales going up? Talk about as a percentage that's going to decrease? Is it going to be more coming from the expense side or are you expecting sales to grow in order to get that reduction as a percentage?

Well, we're going to have both. We will continue to show at least single-digit growth in the sales side as the blended numbers from the business and we'll take cost out at the same time.

Okay. And then just and last, this is my last question I promise.

The severance, you said you wouldn't give an answer but how about just is it going to be more or less or about the same as it was in Q2 or Q3?

Severance charge.

I'm not asking for a dollar number just in the range, more, less, the same?

It really depends on where we go in terms of how much cost we take out and how aggressive. Again, at this point we don't have a definitive plan so I can't really give you an answer to that question. There will be severance expense in Q3 and Q4. The magnitude I really can't quantify for you yet.

All right. Well, it's probably rare situations where you can by $1 worth of value at $0.50. Unfortunately, I'm full up on the position and unfortunately I've lost a lot of money in the stock but hopefully you can guys can use your cash flow to improve the perform of the stock and invest in the Company in the future. Thank you very much.

Thank you.

This concludes the question-and-answer period of today's conference. I will turn it back to management for any closing remarks.

Thanks, Candace.

Well, again we're really pleased to have Kathy on board as a member of the senior management team. And we want to assure you we're focusing on every area of our business to improve the financial performance of the Company. It's going to take some time but we're all confident that we can do that and we'll deliver improved results going forward.

Thank you very much.

Thank you for your participation. You may now disconnect. Have a great day.