Rogers Corp (ROG) 2011 Q1 法說會逐字稿

Good morning. My name is Sean, and I will be your conference operator today. At this time I would like to welcome everyone to the Rogers Corporation first quarter 2011 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). I would now like to turn the call over to Mr. Bob Wachob, President and CEO of Rogers Corporation. Sir, you may begin your conference.

Good morning, ladies and gentlemen. With me today are Dennis Loughran, Chief Financial Officer; Deb Granger, Vice President of Corporate Compliance and Controls; Robert Soffer, Vice and President and Secretary; Ron Pelletier, Corporate Controller; and Bill Tryon, Manager of Investor Relations. First, Dennis will dispense with the formalities, and then we will get right down to business.

Thank you, Bob. I would like to point out to all our listeners that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and should be considered as subject to the many uncertainties that exist in Rogers Corp operations and environment. These uncertainties include economic conditions, market demands and competitive factors. Such factors could cause actual results to differ materially from those of any forward-looking statements. I will now turn it back over to Bob.

Thanks, Dennis.

The first quarter of 2011 was marked by sales records in all of our core businesses. Our total sales grew 23% year-over-year for our legacy businesses. As we have mentioned in the past, we are focused on markets that are benefiting from three significant economic and social megatrends. They are the growth of the Internet, the expansion of mass transit, and the investment in clean technologies. We are having considerable success in these areas, as 58% of our sales in the first quarter were into these megatrend markets, with growth of about 49% year-over-year.

Activity in these megatrends continues at a brisk pace, with 30 programs entering production in the first quarter of this year. To keep the momentum going, we are adding sales people in China, Europe, India and the United States. The proliferation of smartphones and tablet computers are causing wireless data to grow at about 100% per year. To keep up with this growth, the infrastructure for wireless communications is having to expand at a rapid rate. Rogers is benefiting greatly from these trends.

In smartphones and tablets, it is our PORON polyurethane foam, and in wireless infrastructure, our printed circuit materials that are being utilized. The 4G or LTE systems needed to support the increase in data are still relatively small, but are expected to grow more than 100% in 2011, with 4G infrastructure spending expected to grow from $1.5 billion in 2010 to $27.9 billion in 2014, according to iSuppli.

The use of radar for safety applications in automobiles is growing rapidly, especially for the blind spot detection application. While only a little over 1 million vehicles were sold with this capability in 2010, it is predicted by ABI research that 20 million cars will incorporate this feature in 2016. Rogers is the clear leader this expanding market, which could be $60 million to $80 million in 2016 for our printed circuit materials. ABI reports that the 2012 models of the Ford focus and Mercedes C-Class will incorporate this feature.

Our PORON XRD extreme impact foam has been growing rapidly. This unique material, while soft to the touch, becomes stiffer the faster you try to compress it, thus providing greater impact protection. It is already been used in a wide variety of applications needing high impact protection, from the 100 miles per hour baseball helmet, Rawlings baseball gloves and football shoulder pads, power hockey helmets, ballistic vest backing, and a wide variety of footwear-related applications. An example is a metatarsal guard in the fireman's boots , replacing a mold of plastic parts. Other applications, including ski gloves, biking gloves, goalie gloves, safety shoes, walking shoes and motocross apparel. We have a very unique material for impact protection, and it is finding a wide variety of uses.

Curamik benefited from the tremendous growth in clean technology, from hybrid vehicles to wind to solar energy to fuel cells and energy efficient motor drives. In addition, we are seeing growth in applications such as automotive electric power steering, electric water pumps, and electric air conditioning, allof which save energy as they are only on when needed verses always on with hydraulic or belt-driven systems. Our busbars are increasingly finding applications in hybrid and electric vehicles. The motor control unit and the power converter are obvious examples, butalso the power storage model -- module is another. We have more than 15 active projects in hybrid electric and electric cars and buses.

Although we are focused on the three megatrends, and they are providing significant growth, they are clearly other applications which represent growth opportunities, and we are taking advantage of those too.

At this time, we see no significant effects in our business from the earthquake and tsunami in Japan. But I remain cautious, as we do not know which, if any, of our customers may experience parts shortages in the future. Only time will tell. Also, the price increase for printed circuit materials cost a few million dollars of pre-increase buying and could present a headwind for printed circuit materials in Q2. Otherwise, I'm optimistic about the second quarter, and even more so for the third.

I will now turn it over to Dennis, with the details of

Thank you, Bob, and good morning again to everyone.

We are fully one quarter into the new Rogers of 2011, a Rogers that is agreeing quickly and profitably, benefiting from our newly acquired Curamik operating unit and its strong position in clean technology markets, as well as all the substantial market opportunities available to our businesses, as Bob Wachob described in his remarks. We are a Rogers that is expanding its base to meet those opportunities and providing quality products where our customers are.

In the first quarter we made significant progress in our two new facilities; our circuit laminate facility in Suzhou, and our busbar manufacturing facility in Chandler, Arizona. Other notable activity included the completion of a capacity project for Curamik's copper/ceramic bonding operations,initiation of a new project to expand Curamik's master card finishing capacity, designing a line for additional silicon foam capacity, and instillation of high speed digital laminate, or Theta, manufacturing capabilities.

We are a Rogers that is continuing to be fiscally conservative and efficient with our corporate resources. During the first quarter of 2011, we delivered on our promise of being able to grow and not add overhead, asevidenced by our commercial expense totals. As a percentage of net sales, SG&A declined to 18% from 25% just over a year ago. And we were still able to focus critical marketing and sales resources on penetrating our markets and developing customer relationships to further drive our growth. While we have spent funds on inventory and receivables, to support our growth, we continue to maintain consistent metrics in working capital efficiency to generate positive cash flows over the long term. We believe we are continuing to do the right things to create excellent shareholder value.

For the first quarter of 2011, our combined efforts generated sales of $136.1 million, an increase of $52.2 million above last year's first quarter. With $32.9 million of that increase attributable to Curamik sales, our legacy businesses grew quarter over quarter $19.3 million or 23%.

All of our core business segments showed significant improvement. High Performance Foams and Printed Circuit Materials contributed growth rates of 23% and 24% respectively. And Power Distribution Systems grew at a 36.3% pace. Those rates, combined with the sales from Curamik, gave Roger as overall 62.2% increase in sales for the quarter.

Rogers reported a profit of $0.57 per diluted share for the first quarter of 2011, compared to a profit of $0.43 per share for the same period of 2010. Included in the 2011 results were approximately $1.3 million, or $0.06 cents per diluted share, of one-time costs directly associated with the Curamik acquisition. Overall for the quarter, Curamik was slightly accretive to our business, contributing just over $0.01 per diluted share.

Gross margin for the first quarter of 2011 was 31%, as compared to 36.1% for the first quarter of 2010. The decline in gross margin is primarily attributable to three factors. First, a 200 basis point decline related to the inclusion of Curamik at a lower average gross margin than Rogers other businesses. As has been discussed previously, Curamik's lower gross margin is offset by its lower commercial expenses, resulting in operating margins comparable to Rogers. Second, 130 basis point decline related to expensing of the inventory step up for Curamik, as previously mentioned. And, again, this is a first quarter only charge that will not repeat. Lastly, another decline of approximately 100 basis points related to the start up costs for the new circuit laminate facility in China and busbar facility in Arizona.

Overall, our core legacy business portfolio operated at approximately 35% average gross margin for the quarter, which is at our long-term target level. However, as mentioned in the press release, for the near term, with Curamik in the mix, we expect our average gross margin percentage to be in the 33% range.

Selling and administrative expenses for the first quarter 2011 and 2010 were $24.5 million and $21.0 million respectively. The increase of $3.5 million in SG&A expense was attributable primarily to the first time inclusion of $2.2 million of Curamik SG&A expense, as well as approximately $1.3 million of acquisition related costs, and another $1 million of acquisition related amortization expense. Also contributed to the increase were merit pay and other inflationary impacts, which were more than offset by our cost control measures. As a percentage of sales, including the Curamik contributions, SG&A expense actually decreased from almost 25% down to approximately 18%. We expect our SG&A to be approximately $26 million for the second quarter, due to a higher stock composition expense in the quarter when options are granted. And then approximately $25 million per quarter for the second half of 2011.

Research and development expenses were $6.0 million, or 4.4% of sales, in the first quarter of 2011, as compared to $3.5 million or 4.2% of sales in the first quarter of 2010. Long term, we anticipate our R&D spending will reach our targeted 6% level again. However, for the short term we believe our R&D spending rate will be closer to 4.5% of sales.

Rogers 50%-owned High Performance joint ventures with INOAC Corporation had first quarter 2011 sales totals $18 million, with equity income of $1.4 million,compared to $20.3 million of sales and equity income of $2.2 million in the first quarter of 2010.

Other income expense, which includes income from royalties, commissions and other fees, less other expenses, amounted to $1.4 million for the first quarter of 2011, compared to income of $0.8 million in last year's first quarter. The net increase is primarily related to a gain of $1.9 million recorded for the previously announced sale of the build in China, and$0.4 million of other income, partially offset by approximately $1.1 million of unfavorable impact related to exchange rate fluctuations in the elimination of $0.6 million of PLS commission income.

The effective tax rate for the first quarter of 2011 was 26.3%. The Company believes the tax rate for the full year of 2011 will be approximately 25%.

Rogers ended the first quarter with a cash and cash equivalent position of $66.1 million, as compared to $80.1 million at December 31, 2010. We redeemed at par $300,000 of auction rate securities during the quarter, leaving a par value of $37.3 million of such securities outstanding.

Capital expenditures were $4.1 million for the first quarter of 2011. Rogers expects capital expenditures of approximately $25 million for the full year 2011.

With regard to our balance sheet. During the first quarter of 2011, our networking capital position increased $34.3 million with approximately $14 million of that total related to consolidation of Curamik balance sheet. The remainder of the change related to increases in accounts receivable and inventory due primarily to improved sales levels, as well as reduction in accrued liabilities resulting from incentive compensation payments made in the first quarter.

In accounts receivable, days sales outstanding decreased to 57.1 days, compared to 61.6 days at the end of the previous quarter,primarily related to assimilation of Curamik, which brought with it lower average DSO statistics.

Inventories increased by $17.3 million during the quarter to $64.9 million, due primarily to Curamik inventory of $12.3 million as well as normal business growth. Our inventory tracking metric improved to approximately 9.0 weeks of supply versus last quarter's 9.5 weeks of supply.

Overall, our current assets ended the quarter at almost 3.5 current liabilities, relatively unchanged from last quarter. At the end of the first quarter of 2011, Rogers reported outstanding long term debt of $145 million, which represents borrowing against our credit facility in January 2011 to help fund our acquisition of Curamik. We incurred approximately $1.1 million of interest experience on the debt during the quarter at a rate of approximately 3%.

This concludes my remarks, and I'll now turn the call back over to Bob Wachob.

Thank you, Dennis. We will now take any questions you have.

(Operator Instructions). And our first question comes from the line of Fred Buonocore with CJS Securities. Your line is open.

Yes, good morning. Very nice quarter.

Good morning, Fred, thank you.

Just wanted to clarify as it relates to the pull forward of some revenue into Q1 for the Circuit Material by some customers. Is that impact reflected in your Q2 guidance, of have you tried to bake that into your Q2 guidance.

Yes, I have.

Okay, excellent. And then, also wanted to ask about this radar safety productthat you mentioned. You haven't really talked a whole lot about that in the past, and clearly there's an exciting long-term opportunity there. I mean, are you actually generating some meaningful revenues from that business, and can you give us a little bit more color on that business?

Sure, the revenue last year exceeded $5 million. Expected to be considerably higher this year, aswe see lots of new cars incorporating the feature. I can tell you for one thing, I have it. I can't stand driving rental cars now that don't have it. You get so used to just glancing over at the mirror to see whether or not the light is on or not. It's a very handy feature.

And for us, there's two radar systems in the blind spot detection, one on each side of the car. They operate at around 27 gigahertz. That's good for us, very high frequency. We get between $2 to $4 per automobile, depending on who did the design. That's pretty significant for us. It could be quite a large opportunity, and certainly with it being announced that the Ford Focus and the Mercedes C-Class next year, which are high volume cars, are going to incorporate it, we expect 2012 to be even better.

Excellent. And then can you provide us with a update on the Theta strategic initiative you have with Hitachi. Typically the last couple of quarters you have talked about sending sample materials, and seems like a big opportunity. I'd be interested to hear more about that.

It is a huge opportunity, and we have had some significant success here. We now have two very large printed circuit board shops that have been fully qualified with the world's largest server manufacturer. And now we must wait for the third. There are two more who are qualifying and expect to complete their work in July and September. So as soon as one of them completes and is fully qualified, then the OEM will begin designing with our material. They have talked about programs that could be $8 million each, with a large number of those. So this could be a whole new business for us.

But we have to be patient. This all takes time to get something really big. They are very cautious, because our material would be critical to the performance of their system. We are pretty excited. It was just yesterday we got the -- notified that the printed circuit board shop was fully qualified.

Great, well congratulations. It sounds like that could be something that we would see meaningful as soon as 2012 even, right?

Potentially, yes.

Okay, great. Thank you, I'll get back in line.

And your next question comes from the line of Avinash Kant with D.A. Davidson and Co. Your line is open.

Good morning, Bob and Dennis.

Good morning, Avinash.

So a few questions. First, looking at the Curamik. If I remember correctly, when you did the acquisition, you had said that Curamik would be adding roughly $0.20 to $0.30, and $115 million to $125 million in revenues for the year. Given the reporting in the first quarter, do you think that estimate has some upside now?

Yes.

Could you kind of update us in terms of where should we think of the contribution now?

Well, next quarter I think we could see 5% to 6% sequential growth from Q1.

5% to 6%. So basically the guidance you had, $115 million to $125 million and the $0.20 to $0. 30, it goes to what now? Do you have some idea, maybe, Dennis?

Maybe $130 million to $135 million or so.

And in terms of EPS, you only had a better performance. You were thinking Q1 actually could be negative, but it ended up being positive $0.01. How should we think of the EPS contribution?

Avinash, I'll jump in and say that we really focused on getting the second quarter numbers together. We have been letting them get assimilated into Rogers and have focused strategically on making sure that our sales and marketing teams are doing everything possible to grow the business. And we're -- basically in the second quarter we'll be looking out into the second half of the year, and we'll probably have better numbers as we give third quarter guidance.

Okay. Good. And as Bob was talking about this blind detection opportunity, what's the competition there? Who do you compete with, and what's your market share in this business?

The competition is the people who make woven-glass Teflon, which is the commodity. It apparently doesn't work as well, because our market share is very, very high.

All right. Okay.

So we're clearlythe first in, and first in, itcan apparently be a very big winner in automotive, because they don't like change.

Okay. And as far as the opportunity that you talked about from the smartphones and tablets and everything, how do you see that growing? Of course, given the unit growth, do you see strength into the September-quarter also there? That's what you were saying when you said the third quarter is going to be even better than the second?

Yes, typically the second quarter, at least for the smartphones is a pause quarter, as they make the transition from older models to newer models. But in the tablet area, of course, that is just going to keep going.

Would you give us some idea about your customer concentration in those areas? Like, are you levered more toone versus the others?

Well, we -- our biggest customer in that area would be the biggest phone maker. And our operations in Korea would be dealing with number two and number three, with some of our material being used there also. Number four number five are large customers of ours also. We really do business with everyone.

Fine. Fine. And maybe for Dennis, there was a share count bump here in the current quarter, what was that from and how should we think of it going forward.

For the share count?

Yes.

The numbers will get more dilutive as we get higher in terms of stocks valuations. I can't -- the more option valuations get in the money, so I can expect that number to go up. I don't have an estimate, because that relies on the market place.

Did you give the depreciation and amortization for the quarter, and how should we think of it for the year?

Yes, we have $6.2 million of total depreciation and amortization. $4.8 million of that is depreciation; $1.4 millionis amortization. And you can probably expect the depreciation to grow a little bit, as we are going to spend $25 million of CapEx this year, so toward the end of the year you might see the depreciation go up a little bit. But on average, $6.2 million to $6.5 million would be a decent number for each quarter.

Perfect. Thank you so much.

Your next question comes from the line of Shawn Severson with ThinkEquity. Your line is open.

Thank you . Good morning,

Good morning, Shawn.

Bob, can you talk a little bit about the investment strategy in Curamik and how this will progress going forward? When I say investments, I mean more kind of a channeled development, customer development. I mean, obviously, it's been very Euro-centric to date, but will you just give us some more detail on the expansion plan for the US customers. How long it takes, the design cycles, when you can really kind of lever up the opportunities outside of Europe?

The design cycles are typically 12 to 18 months long. So we can look at 18 to 24 months from the day we began until we actually see business. Because most of these applications are things which last a very long time, sothey want to be very careful about the materials they use. Of course, there are always exceptions. If you can't get something from someone else, you may find a way to take that chance and switch. And I believe we have seen just a little bit of that.

Our strategy here is to add a couple of sales people in China, actually some more sales people in Europe, and a sales person in the US. Because we thought they were undermanned and needed some more feet on the street, so to say. It's not going to make an immediate impact, but it will come 2012, 2013. In the meantime the business is growing quite nicely with the existing customers. As a huge amount of this business is not people buying the IGBTs, but buying the power module. And in fact we've determined that in Detroit, for example, a lot of those cars are actually using power modules that had been designed and built in Europe by the big players in -- So we are getting the business, it is just in a different way.

Okay. And so when you look at the incremental market opportunity, what do you see then, now that you've kind of had the business for a few months and you know the market opportunity, where are those incremental opportunities in terms of market share, both in the US and in China? I mean, current suppliers, or is this just new product coming out from customers around the world? Are you going to displace, do you think, other sources?

The easiest and quickest is new products. Going backwards and getting someone kicked out, really hard.

So we are focused on new applications, get qualified for the new product and grow from there, as opposed to what's very hard to do, going backwards.

And providing better service. For example, we now have reduced our prototype lead time from six weeks to three, and expect to be at two weeks in short order. And we have dramatically reduced the backlog, and so we're providing much better on-time delivery. We have made arrangements to get a material which had been in very short supply, aluminum nitride, and we now have sufficient quantities and are eliminating that backlog. We are making really good progress with suppliers and the organization in the Focus.

We have stopped doing a whole bunch of small items, which used up the majority of the prototype people's time on what we would call science projects. Interesting to the engineers, commercially not very interesting at all, andso we have stopped those kind of activities.

I think what you can see here is that we are still doing things, making the business better. And we're starting to add the sales people so that we can start growing it as an even faster rate than it is now. We still believe that 15% is easily attainable.

And could get bigger.

Just a follow up on the Hitachi business. I mean, if they are going to commercial scale, we are probably looking at sometime, what, middle of 2012? Is that kind of realistic scale up for that product for them?

Yes.

Okay. And current capacity, in terms of Printed Circuit Materials, everything is fine with all of that?

They have plenty of capacity, and of course, we have the new capacity coming on in China. And we have made room in Arizona so that we can make the prototype quantities that will be needed, because that will be the main activity in the US,

is making material short lead time material for prototypes. Because when it goes to high volume production, almost always heads off to Asia.

Okay, then just one last housekeeping. Could you clarify again the other income and how we should think about that going forward in terms of second quarter and beyond?

Well, in the other income basically we are going to have -- you have the JV income is a separate category, right, Sean?

Right. Exactly.

It's going to be $1.5 million a quarter, roughly, and in other income we typically -- you've got your -- any incremental gains and losses. In the second quarter guidance, we have a small gain on a property sale of about $600,000. You've got some FX changes that are unforecastable, unpredictable throughout the year. So, to me, in the $500,000 to $600,000 range per quarter would be the right kind of impact.

Okay. Great, thank you.

Your next question comes from the line of Jiwon Lee with Sidoti. Your line is open.

Thanks, and good morning.

Good morning, Jiwon

Just kind of going back to the Curamik side, Bob, if you could elaborate a little more about what specifically in terms of the product and market, especially the market, is driving this pretty strong revenue growth?

Well, the biggest market is the motor controls. That market is growing, because the new variable frequency motor controls can save 30% to 40% of the power used to drive these motors. That all by itself justifies replacing the whole control system. It's easy math to figure out. So that's one of them. Certainly, solar and wind energy is driving it. And then the hybrid electric vehicles, which are just beginning, are also. And we did not know early on, but we are in two of the Japanese manufacturers.

So if I think about it, that motor control addresses -- the legacy side is more on the industrial side, but the newer markets are the hybrid vehicles as well as this wind and solar? Is that the right way to think about that business.

That's the right way to think about it.

Okay. That's helpful. And let's see, the thermal management side, could you guys talk a little bit more about the construction? Where we stand, and what your expectation is for this year into next?

That's still is a start up business with very low levels of sales, who are involved in the qualification phase of acouple of large IGBT makers and motor control makers. We do have that order for hybrid -- a series of hybrid vehicles. That may start at the latter part of this year. But this business, certainly is taking longer andgoing slower than we anticipated.

Okay. That's fair. Thank you, and then more for Dennis, I guess. The Curamik side of the business, the expenses came in a lot I guess better than you previously anticipated. Now when you are guiding $25 million in quarterly operated expenses for the second half, Dennis, does that fully factor in the anticipated infrastructure build in here as well the Asian side?

Absolutely. For SG&A, yes.

And what kind of attributed to kind of the lighter expenses on the Curamik versusyour original expectation?

I would say early on in our disclosures on Curamik we had said that their gross margins were lower than Rogers' average, and their SG&A was lower than Rogers' average, andyou came in with a comparable set of numbers on the operating income. We actually in the first quarter, were mentioning -- we mentioned this $1.3 million of acquisition related experiences, so we were actually higher in the first quarter than we had guided to. And was really just the size and the time line for getting the SEC reporting done caused us to spend that one time amount on third party accountants and consultants to get it done so quickly. So I would say they are growing nicely. They are profitability is at or slightly better than where we thought it would be. Their expenses are I think, Jiwon, are about where we thought they would be, other then those one timers.

Also in the sales were about $4 million higher than we thought.

Yes.

Very good. And with the Curamik I believe you are taking some expansion in the China side of the Circuit Materials coming -- Is there sort of a CapEx guide for this year?

Say that last part again, I'm sorry?

The CapEx guide for this year.

They are in the -- that's all in our CapEx of about $25 million. The Curamik -- the first part in terms of the bonding operation was a project initiated prior to our acquisition, so it was completed during the first quarter. And then we are looking [at the] finishing operations are something that we approved a capital project in the first quarter that won't be completed until late this year.

Okay, perfect. And lastly for me, some of the raw materials cost increasing, and some -- I guess the PTFE impacts and what not. Now, looking at the business now, the margin impact is fairly minimum?

It had a negative impact on the first quarter, and that's especially the PTFE part, and copper also had a negative impact. And that's why we raised prices, and we expect those to see the benefit of that beginning in June. The full benefit will be in June. As you probably know, you can announce a price increase, and then you must negotiate with all the big customers as to when it actually takes place. Because they all begin with the word "no," and you go from there. We have implemented it. Everyone has accepted it. Now we just have to wait for it to be effective.

Understood --

And that will take care of the cost problem.

Very good, thank you.

Thanks, Jiwon.

(Operator Instructions). Your next question comes from the line of Richard Glass with Lockwell Investments. Your line is open.

Hey, guys. Great quarter. I will just say my questions were answered and move on and follow up later.

Thanks a lot.

All right, thanks.

(Operator Instructions). Your next question comes from the line of Fred Buonocore with CJS securities. Your line is open.

Yes, just a quick follow up on the situation in the supply chain and cautions or concerns you may have inthe wake of the tsunami earthquake. That seems to be the one looming thing that provides you with a lot of uncertainty. When -- can you give us any more color on, are you seeing any signs of an impact there? When do you think you might start to see some signs?I mean your Q2 guide clearly doesn't seem to impact anything that would represent headwind, so just want to see if you can blow that thought out for us a little bit.

We have no raw material impacts effecting us. Our joint venture has a few chemicals which they have a lot of difficulty getting, but we have a second source here, and we have shipped them all that they need to be operating in a normal way, andwe will continue doing that. We did see, probably for one week at the beginning of April, a slow down at the fabricators for the cell phone, smartphone people. I think they all were a little cautious. And that has passed.

I believe that it will be the very late part of May, the early part of June is when, if something is going to happen at our customers' customers, that's when it will be as people run out of inventory. Right now, everyone tells us no problems. And we will find out who is not telling the truth at the end of May, beginning of June.

Okay, thank you.

As we have no further questions at this time, I turn the call back over to Mr. Bob Wachob for closing remarks.

All right, thank you. In closing, I want to remind you that I have said for a while now that we had laid the foundation for faster growth. Well, we're now experiencing that growth. And we will continue to develop and to invest in new products and focus on the three megatrends. Thank you for joining us today, and good-bye.

This concludes today's conference call. You may now disconnect.