Gentherm Inc (THRM) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Gentherm Incorporated 2013 third quarter and nine month results conference call.

(Operator Instructions)

I would now like to turn the call over to Jill Bertotti, of Allen & Caron. Please go ahead.

Good morning, and thank you for joining us for the Gentherm 2013 third quarter and nine month results conference call. Before we start today's call, there are a few items I'd like to cover with you.

First, in addition to disseminating through PRNewswire this morning's news release announcing Gentherm's results, an email copy of the release was also sent to a number of conference call participants. If any of you need a copy of the news release, you may download a copy from either the Gentherm website at www.gentherm.com or the Allen & Caron website at www.allencaron.com.

Additionally, a replay of this conference call will be available via a link provided on the Event page of the Investor section of Gentherm's website.

Finally, I've also been asked to make the following statement. Except for historical information contained herein, statements on this call are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include statements regarding future sales, products, opportunities, markets, expenses and profits.

Forward-looking statements involve known and unknown risks and uncertainties which may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include but are not limited to risk that sales may not significantly increase; additional financing requirements may not be available; new competitors may arise; and adverse conditions in the industry in which the Company operates may negatively affect its results. Those and other risks are described in the Company's Annual Report on Form 10-K for the Year Ended December 31, 2012, and subsequent reports filed with the Securities and Exchange Commission, copies of which are available from the SEC or may be obtained from the Company.

Except as required by law, the Company assumes no obligation to update the forward-looking statements, which are made as of the date hereof, even if new information becomes available in the future.

On the call today from Gentherm we have President and Chief Executive Officer Dan Coker, Chief Financial Officer Barry Steele and Chairman Bud Marx. Management will provide a review of the results, after which there will be a question-and-answer period.

I'd now like to turn the call over to Dan. Good morning, Dan.

Good morning, Jill, and thank everyone for joining us on the third quarter review.

We had a relatively good quarter in the third quarter of 2013. As you'll see, our revenues broke $170 million for the first time, coming in at $171 million. That's compared to $141 million in 2012, or a $30 million year-over-year increase, and about an $11 million increase over the second quarter.

These were very strong, positive results, and they come from all sectors of our business, so we're quite pleased with the -- our market's response to the combination of the old Amerigon and the old W.E.T. and the formation of the new Gentherm. The story is being quite well received by our customers.

The second very important point I think we should make here is that our margins have returned back to the normal rate that we expect to see. I think our gross margin was around 26.8%, a nice improvement over our first quarter and a significant improvement over the somewhat (inaudible) second quarter. So we have seen our margins return to the normal rates.

A third point that I wanted to make is that yesterday afternoon in the German courts we received the registration of our squeeze-out, which essentially completes the final move for our acquisition of the W.E.T. AG corporation. That is a very significant moment for us as a company, and we'd like to congratulate all of our team members for all the hard work they've done on both sides, including our outside support teams that helped us make this moment be possible, so congratulations to the entire team.

We're going to follow our normal format. We're going to ask Barry Steele, our CFO, if he would guide us through some of the numbers, and then we'll open the floor for questions. Barry, are you ready?

Yes, I am. Thank you, Dan. Hello, everyone.

Our earnings for the third quarter were $0.24 on a -- $0.24 per share on a fully diluted basis. This result included $326,000 in expenses, or approximately $0.01 per share, for acquisition transaction expenses related to our increasing ownership stake in W.E.T.

As Dan mentioned, in February we acquired an additional stake in W.E.T. from the largest minority shareholder. We have since initiated and now registered a squeeze-out of the remaining 0.5% of these shares. In future periods you will not see any more minority interest deductions of our P&L on the bottom line.

Our product revenues for the third quarter of 2013 were $171.2 million, representing an increase of $30.1 million, or 21%, over the third quarter 2012 product revenue. The increase is due to strong automotive production, especially in North America and Asia. Our European-based revenues were also higher than the prior-year period, despite the soft automotive market in Europe. This is in part due to a strong performance in our specialty cable business.

Our gross margin for the second -- for the third quarter was 26.8%, as Dan mentioned. This was 70 basis points higher than the prior-year third quarter and 1.8% higher than this year's second quarter. Our gross margin varies from quarter to quarter for a number of reasons, including shifting mix in the underlying products, timing of our customer pricing concessions as compared with cost-saving initiatives, and special items, both positive and negative, that occur from time to time. We believe that the current quarter's performance would represent the midpoint of our gross margin range.

Our continuing ramp-up process of our electronics manufacturing facility in China decreased our gross margin as it did in the second quarter. Our new -- this new manufacturing -- the new manufacturing overhead in this facility was approximately $678,000. However, our internal sales increased from approximately $50,000 during the second quarter to over $300,000 during the third quarter. These are internal revenues where we're getting incremental savings from sourcing these goods from third parties.

This has the effect to lower our gross margin by 30 basis points during the third quarter. The benefit of this new facility will increase in future quarters as production in that facility begins to get -- begins to ramp up further, and the unfavorable current impact on our gross margin will reverse and become a favorable impact.

Our operating expenses were $31.4 million during the third quarter, representing an increase of $4.5 million, and included the acquisition transaction and management -- or acquisition transaction expenses that we mentioned earlier. Taking these expenses out, our operating expenses increased by $4.2 million, or 15.7%, during the third quarter of this year. This also included approximately $800,000 related to the new electronic facility that we just discussed.

Much of the remaining increase reflects increased resources that are being directed to development of existing and new products and the related marketing activities for those new products, as well as an effort to develop new CCS systems using the best characteristics of each of the historical and W.E.T. existing system offerings.

I want to point out that on a combined basis we reported a loss of $1.4 million for revaluation of derivatives and foreign currency in both the current and prior-year third quarter, so it was about the same in both quarters. This compares to a net loss during the 2013 second quarter sequentially of only $251,000.

Much of these effects come from our portfolio of standard financial instruments such as currency forward and option contracts. We use these hedging instruments to cover our exposures to foreign currency.

For example, we incur expenses of the Canadian dollar, which are coupled with our US dollar-denominated North American revenue. These contracts are marked to market in each quarter. As such, we report gains and losses for instruments that are intended to hedge transactions in future periods in the current period.

In measuring our adjusted EBITDA, however, we add back unrealized portion, which we believe better reflects the current operating performance of the Company. Our adjusted EBITDA was $21.3 million, which was $2.8 million higher than that of the third quarter 2012.

A couple comments on the balance sheet and cash flow. Our cash decreased during the third quarter by $13 million from the end of the second quarter and is now at $36 million. Our total outstanding debt was $87.4 million at the end of the quarter, representing a decrease of $5.4 million, and our revolver -- revolving line of credit capacity remains virtually untapped and is approximately $56 million.

During the quarter we bought our North American world headquarters -- North American and world headquarters building in Northville, Michigan for $5.2 million in cash, so that was our use of our cash this quarter. We did this in order to secure our facility growth needs and to lock in the cost (inaudible) soft commercial real estate market here in Michigan.

We also invested in approximately $13 million in working capital, which is driven by the sequential growth during the third quarter. We expect that our working capital will be lower and operating cash flow therefore higher during the fourth quarter due to our regular year-end holiday period, which helps decrease the throughput during the last couple months of the year.

Dan, that's all I have.

All right, Barry. Thank you very much for that usual comprehensive review of our results. I thank you for that. And I think we should go ahead and open the floor for questions.

Operator, we're ready to address any questions the audience may have.

Thank you.

(Operator Instructions)

Philip Shen, ROTH Capital.

Hello, Dan and Barry, thank you for taking my questions.

Good morning.

So I was wondering, given -- congrats on the nice results and the squeeze-out of W.E.T. -- given the (inaudible), could you -- can you talk to us about the mix of products in Q3 and then how perhaps you expect this mix to trend going forward?

Well, Philip, we saw actually very strong results in all areas. I would say I'd comment that we saw significant growth in our -- what we would call climate seat area. That's the Climate Control Seats, the heated and cooled seats and the heated and ventilated seats.

But we also saw another very solid quarter from our cable business. We are continuing to enjoy success working with our primary customer that is now expanding outside of the European base, where we've always had a very good, solid business, into North America and into Asia.

So in general we had a very, very solid more normal mix of business than we had in the second quarter, where we indicated that some of the proportions of our business were a little bit out of mix. So this was a very normal, typical quarter where we had very good results [across the board].

Good. And then looking forward, do you expect the cable business to take even more share or become a larger percentage of your overall revenues? What are your thoughts there?

Yes, I actually do expect -- we're encouraging our team to try to gain more business. In that type of business volume is essential, being able to better manage and better run the operation, particularly as we expand into new markets. It gives us an opportunity to facilitate a cable operation inside each of our facilities.

We obviously make cable every day in our normal business, and the ability to have a special cable project inside each of our facilities is very beneficial for the operational side and greatly contributes to our contribution margin. The businesses in North America are growing very nicely, and the businesses in Asia are just beginning to grow, and I think we see a pretty good period of growth through the cable business over the next few years.

Great. Thanks, Dan. As for -- I know you guys release your revenues by geography in your Q, but since the Q's not out, I was wondering if you guys might be able to share what the mix was. And in terms of a bigger picture, can you talk about how this mix might change over the coming year? In particular, are you seeing -- what kind of growth might you see out of China? Do you expect that 10% share to increase to greater levels? And how do you expect Europe will change, as well, given it sounds like it might be a bit of a recovery in Europe, as well?

Sure. Okay, I'll give you the overview and I'll ask Barry to look up the details for you. But in general our North American business is our biggest and strongest business globally, and they've had another very good, solid quarter. Our Asian business is one of our faster growing businesses and continues to show strength in 2013.

Our business in Europe, however, had a very good quarter, growing about 12%. So we're seeing a little bit of a recovery out of Europe, and, again, we -- when we have to talk about Europe we focus on the fact that the majority of our European customers are German based. So the German market has not been as impacted by the general European recession as some of the other markets. For us the automotive markets in France, Italy and England have been impacted much more severely than those in Germany.

So in general I would say that as we look forward we're going to see a little bit of a slowdown in the rather expansive growth rates in North America. And I think that will be partially offset by further expansion in Europe and in Asia.

Barry, if you could give us the exact numbers that would be helpful.

Sure. We didn't see a lot of change in the regional mix in this quarter if you look at it compared to last quarter. We were still about 25% for Asia and close to 50% for North America. So that's pretty consistent over the year as well as the year-to-date period.

Great. And, Dan, you talked about in Europe growing at 12%. Can you give us the numbers for North America in the quarter, what kind of growth you saw, as well as Asia?

Barry, do you want to give him those numbers?

The growth in Asia is what you're asking?

Yes, maybe in particular China, and what kind of growth did you see in the quarter for China?

We don't break our revenues out by country. We could give you the Asian market, which includes our revenues in Japan and Korea and the other Asian countries.

When you get the quarter you will be able to see China really has stayed about the same percentage of our business, so that means that the growth there is consistent with the overall growth.

Okay. That's fair. Let's move on to the China manufacturing facility. Can you -- what's the update there? How is that coming along? And what's the utilization now, and how do you expect that to ramp in the coming quarters? And then can you also talk about how should we think about capacity? Is there some kind of unit? Like can we think about units per year or pieces per year? How should we think about capacity there?

Well, I can comment a couple -- you're using your entire quarter here, Philip. But I will tell you that the facilities -- we have two facilities in China, actually. We have one in Langfang, which we've just completed and just celebrated, in fact, the grand opening of the new facility. We've doubled the square footage and we're in the process of adding additional capacities to service our anticipated very rapid Chinese market expansion, which we're enjoying. Now we need to tool up to make sure we can satisfy those demands.

We also have a brand new facility, which we just celebrated last week the grand opening of our electronics facility in Shenzhen, China. And Barry commented that that facility is now coming online. Our revenues, our internal revenues from that facility, peaked $300,000. That means we shipped to ourselves $300,000 worth of electronic controlling devices that in the past we would've had to pay a premium to outside suppliers in order to obtain for our businesses. We have already begun to see a positive impact on our gross margin lines as these facilities take flight.

To the capacity utilization, I don't really know that we've ever talked about that, but the facility in Shenzhen is clearly about 95% available. We're just now starting. We're just launching. We have two very fine production lines in place, and I think just in round numbers we should be able to produce somewhere between $25 million and $30 million worth of product out of that. So the capacity there is almost -- practically unlimited and will serve our needs for the next two to three years in its present state.

The facility in Langfang, which is our original primary manufacturing facility, is very well managed and very well balanced and will be -- we now have the floor space to be able to add production capacity as the market demands. So, and in terms of utilization we're in very good position in Asia.

Great. That's really helpful. One last thing and I'll jump back in queue, as a follow-up. I think you've mentioned in the past that the Shenzhen facility in particular, it's for internal consumption, primarily, but you would have potentially enough capacity to sell externally. Once you're at 100% utilization, what percent do you see as -- of the capacity would you envision being sold externally versus internally consumed?

Well, actually, in theory what we're doing here is taking a full step into the electronics business, and that world is very, very tough and very competitive. We know it very well. And we're taking a very conservative stake approach. We are essentially designing and building our own modules that we understand better than anyone in the world.

So that's our first two years' worth of effort. We're going to get ourselves square, going to get ourselves completely equipped and tooled (inaudible), and then we're going to also offer these world-class facilities and talent to other people inside the market opportunity for us.

Right now we're building our own heat control and thermal control modules that will go into our own equipment. In the future we're planning on helping our OEM customers and our Tier 1 customers with any other electronic control requirements that they may have.

I suspect that our volume over the first two years will be very heavily internal, and then we will begin to see in year two and year three more external sales. So I think that that's not something we're going to put a proportion on, but it's generally a first step into our own business requirements, and then as we get good and we show off our abilities we'll be able to get additional outside business.

Great. That's really helpful. Thank you, Dan and Barry, and I'll jump back in queue.

All right. Please deposit your extra quarter before you go back, though.

Steve Dyer, Craig-Hallum.

Morning, gentlemen. Nice quarter.

Good morning, Steve.

Just one more question on Shenzhen and the electronics business and we'll put that to bed. I think in the last conference call you had indicated that it would be sort of by the end of the year this year that it would be sort of a net neutral to your gross margin. Is that still a safe assumption?

I think we're on track for all of our projections. In fact, I think we're slightly ahead. But we feel very confident that the business plan we put together is being realized, yes.

And then could you venture a guess as to how much just that mix internally, producing that next year, could help your gross margin, all else equal?

I couldn't. Barry probably would, but I'm not brave enough to do that.

Yes, I don't know that we'll get into the specific -- the margins on specific parts of our business. But we can say, though, that it will help us quite a bit.

I guess I'm just trying to get a sense -- and we can get as granularity --

Yes, actually, Steve, we're not going to tell you what the numbers are, but we can tell you that it will be impactful, and it will be impactful enough that we were willing to bet about $10 million, $11 million in investment to get control of that part of our world.

Got it. Okay. Outside of the seat business, can you give any color sort of on the bed business or cup holders and sort of how those are trending?

The bed business is the most significant piece of that, and for the third quarter we saw kind of what I'm hoping to be a final cleanup of the mess we had in the late first and all of the second quarter where we had some issues with our bed partner. Those have been cleaned up.

We took a credit to offset all of the products that had to be recalled back out from the market by our Mattress Firm retail partners. There was some exchange of goods that were done. That has now been completed, and we're expecting to see a positive fourth quarter. And in fact I think we're going to finally see some pretty good results. Some significant changes were made to our process and our vendor partners, and I think we're in a good position now to see the bed business grow.

The cup holder business is continuing to get very strong support from customers around the world, not just in the US. We're seeing very strong interest in Europe and in Asia for these what we call convenience products, which also includes the cold storage boxes. So I think we're going to continue to see good positive results, and you'll start seeing some new wins in that area beginning sometime next year and in 2015.

Perfect. A couple last questions so I don't have to deposit any more money, as well. Operating expenses, any reason to think that they would deviate significantly one way or the other from kind of the current run rate going forward?

I don't think you're going to see any significant deviation one way or the other. I think we've kind of established ourselves as a running business now. We see some significant increases in SGA and R&D, as Barry had mentioned, as we tool up to get ready to grow more rapidly in the future and to maintain our current growth rate.

If you did the math, and I'm sure, Steve, you did, you'll note that our current projections indicate that we'll probably be somewhere around a 17% growth rate this year over last. That's been a very good year, and it's been something that we were a little bit surprised with how strong the second half was.

So we've had to add some people. We've had to add some team to be able to facilitate that growth and continue our plan to grow 10% a year and outgrow the industry and our peers. We've added some infrastructure to the business, as well. We've had to add things like human resources, where as two smaller companies we didn't really have the capacity or need to have an HR team. Now we do. We've had to add some inhouse legal counsel. And those people pay for themselves, but we show them on our SG&A line.

So there are some costs there. But you are going to see, now that we've kind of stabilized the team, I think you're going to see us be able to effect some of the cost synergies that we talked about, and these teams that we've established are going to start paying for themselves, and you'll see some reductions, as we've said all along, over the next two to three years.

Got it. Okay, F-Series redesign next year. Would you anticipate that you could be on some additional trim levels there?

Could be.

Got it. Last question, now -- I promise -- so now with the convertible preferred behind you and those dividends having rolled off, you should, at least by my calculations, start to generate a significant amount of free cash flow. What are sort of -- how do you think about the priorities for that, whether it's paying down debt, buying back stock, any acquisition related? How do you sort of think about or prioritize that?

Well, our first priority, of course, is the ongoing business. And we want to make sure we have sufficient cash stocks and reserves to be able to suffer any dips or even any dramatic increases in the business activity.

You heard Barry say earlier that we had an investment in operating expenses because of the dramatic expansion of our business in the third quarter. Growth takes cash, as well. So that's our first priority. We want to make sure we have sufficient cash and cash reserves to be able to grow and/or suffer any kind of dip. So priority number one, staying alive.

Beyond that we want to accumulate cash. We like to be flexible. We like to pay down debt as quickly as we can. We also want to make sure that we have the ability to take advantage of any opportunities that the market or investment community may present. So those are our main priorities with what we expect and how we plan to manage our cash.

All right. Well done, guys. Thanks.

Thank you.

Anthony Dean, KeyBanc Capital Markets.

Hi, good morning.

Good morning.

Thanks for taking my questions. A lot of them have been asked, but just a couple here. So you cited 25% W.E.T. growth in the press release. Just on some of the numbers you gave it looked like 8% of the growth might be attributable to the climate-controlled seat products. So as we think about the mix of that W.E.T. growth, is the remainder of that primarily attributable to the cable business? Is that where the rest of that 17% growth is coming from?

The cable business is growing quite nicely (inaudible). It's a smaller piece of our revenue base, but it is growing quite nicely. The rest of it is actually fairly well balanced. We're seeing good growth in the heater business. We're seeing very good growth in the heated and cooled and heated and vent business, and we're beginning to see some good traction in our -- on our nonautomotive businesses, as well.

So I wouldn't say that we can attribute everything to one segment or the other. I would say that we're working very hard to try to balance our growth and take advantage of opportunities. Right now we see a very good opportunity in the cable business, and we're working very hard to expand and support that customer.

Okay. And then in thinking about next year, what's your current take on the revenue outlook? Should we assume another year of 17% growth? Sounds like that certainly was ahead of internal expectations? But -- or should we think more along the lines of high-single digit, low-double digit type growth into next year, consistent with your longer term outlook?

Well, I would certainly say that I would not expect another 17% growth year. This was a very phenomenal combination of events, and we're very pleased to have been able to manage this rapid growth as efficiently and effectively as we have.

I would also point out, as we mentioned earlier, that the North American market is -- has been accelerating very steadily over the last three years, actually now four years, I guess, as we've moved out of the 2009-2010 recessions. That will begin to taper off, so we'll have to not rely as much on the overall market growth and we'll have to continue to rely on new products and new market penetration.

The European business is beginning to show some signs, particularly in Germany, some signs of recovery, and we also have the ability to use our cable business to add additional growth in Europe. Asia is a good, steady market, and we expect it to continue to expand at about the rate it has.

So we will put out a projection for 2014 revenues sometimes toward the end of the fourth quarter, beginning of the results of the fourth quarter.

Out of those markets, are there any of them that you can point out and say we anticipate growing well ahead of the market for the foreseeable future? Would you expect your new business growth above and beyond underlying production in China to be higher than Europe, per se? I mean, any of those regions where you're expecting new business growth to accelerate or remain higher versus other regions?

Well, we expect to outperform all of the major markets significantly by the basic market growth. We do -- we are focusing quite a bit of time and effort and money, as you've heard, on our Asian business, so we expect that to grow in a higher proportion than the rest of the markets, and we do expect the European business to begin recovering next year.

And then last question, so on the Europe business, obviously it has been strong. It sounds like a lot of the growth is from the cable business, but not entirely. So as we think about underlying production at 2% in the third quarter in Europe, if we just strip out the cable business, how well is the rest of the European business doing relative to market growth here recently?

Well, if I understand your question, I would say that our businesses in Europe have been doing relatively well compared to the market conditions. We have been able to gather some new customers, but, more importantly for us, we are stimulating a lot of new interest in a lot of new product categories, a combination of the companies that have formed Gentherm (inaudible).

We now are selling more -- sorry, we are promoting more thermoelectric-based products in the form of heated and cooled technology. We're also promoting heating and cooled storage boxes. We're promoting heated and cooled cup holders. And this kind of new technology to our customers has been quite exciting, quite well received. So we expect to see some very good response from that in the future.

Okay. Thank you.

Okay, thanks a lot. Operator?

(Operator Instructions)

James Basch, Dialectic.

Hello, guys. So, Dan, could you talk a little about increasing penetration kind of going down from high-end luxury to midrange segments for heating and cooling, specifically I guess the opportunities in Europe to add additional big OEM customers as we go down market?

Sure. Well, we think that the -- particularly on the high-end market for us in Europe, there's a big opportunity. Most of the major luxury car suppliers in Europe, particularly in Germany, have adapted kind of a halfway measure for their customer base. They've put in heated and ventilated systems in many cases, I think partially because they really didn't have a trustworthy, reliable source that spoke their local language and had local technical support to be able to help them take a step into the thermoelectric-generated systems. So now we have that and we're starting to see very good response.

In terms of penetration for us, we expect that to be a good base for us. We also expect the Asian market to be a good base for heated and cooled products. But we also see a very interesting trend and something we've kind of been predicting over the past few years. We're seeing more people who bought heated seats now considering selling and offering heated and ventilated seats for the midrange market, and that's a very significant future potential growth area for us that we think is actually going to be a very large segment of the business as more and more people recognize that heat contact is a key point of thermal comfort in cars.

And in midrange cars heaters are being added much more widely, and we believe that as these vehicles get out in the market people are going to start demanding some form of comfort release in hot weather conditions. So we're going to see a big growth in heated and vent systems, and we're going to see a direct growth of heated and cooled systems in Europe and in Asia.

Okay. Thanks, Dan.

Okay, thanks a lot.

Ailon Grushkin, Nano-Cap Growth Fund.

Hi. Another great quarter. You guys are doing a great job. My question relates to some of the newer initiatives, like I believe you have a design win for the BMW i8 for a thermoelectric generator. Is this the type of product that might eventually go to like a Tesla to improve their electric cars, as well?

We don't obviously make any comments about any specific programs with any -- future program with any customers worldwide. We do have very good relationships with BMW. We also have a very strong relationship with Tesla. But to comment about any individual product award or win, we would not make any comment until the customers have made their decisions and made those decisions public.

Okay. I know a few years ago I had asked about possibly trying to penetrate the aerospace market or commercial airlines, maybe first-class seats.

Yes.

Have you guys, I guess, looked at maybe trying again now that you're such a much bigger company?

We do look at that as an opportunity, and it's something that we're evaluating, and we do have some people who are doing some customer integration work in that, so yes.

Okay. And, last, are you still introducing the heated and cooled office chairs in the fourth quarter or first quarter 2014?

We have seen a very positive response for the heated and ventilated office chairs. We have indicated that those will be on the market probably early next year.

Okay, great. Thank you so much. Keep up the great work.

Okay, thank you, sir.

And at this time I'm not showing any further questions. I would like to turn it back to management for any closing remarks.

Thank you very much, operator. And I'd like to thank everyone for dialing in today and helping us review our third quarter 2013 results.

Again, we think that we had a pretty good quarter. We're pleased with the revenue growth. We're pleased with the good, solid margin performance. We have lots of work yet to do on the integration, and we believe over the next few years you're going to see some very positive results out of Gentherm.

So we thank you very much, and we ask you to join us again in about 90 days to review our fourth quarter and year-end 2013 results. Thank you, everyone, and goodbye.

Thank you. Ladies and gentlemen, that does conclude our conference call for today. Thank you for your participation. You may now disconnect.