Viavi Solutions Inc (VIAV) 2018 Q2 法說會逐字稿

Good afternoon. My name is Christine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Viavi Solutions fiscal second quarter financial results. (Operator Instructions)

Bill Ong, Head of Investor Relations, you may begin your conference.

Thank you, Christine. Welcome to Viavi Solutions' Second Quarter Fiscal Year 2018 Earnings Call. My name is Bill Ong, Head of Investor Relations. Joining on today's call: Oleg Khaykin, President and CEO; and Amar Maletira, CFO.

Please note, this call will include forward-looking statements about the company's financial performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from current expectations.

We encourage you to review the most recent SEC filings, particularly the risk factors described in those filings. The forward-looking statements, including guidance we provide during this call, are valid only as of today. Viavi undertakes no obligation to update these statements.

Please also note that unless we state otherwise, all results except revenue are non-GAAP. We reconcile these non-GAAP results to our preliminary GAAP financials and discuss their usefulness and limitations in today's earnings release. The release, plus our supplementary slides which include historical financial tables, are available on our website.

Finally, we are recording today's call, and we'll make the recording available by 4:30 p.m. Pacific Time this evening on our website.

I would now like to turn the call over to Amar.

Thank you, Bill. Viavi's fiscal Q2 results topped the high end of our guidance and revenue, non-GAAP operating profit and non-GAAP EPS.

Revenue at $201.8 million exceeded $175 million to $195 million guidance range with both NSE and OSP exceeding their revenue guidance. Revenue was down 2.3% year-on-year, primarily due to exiting unprofitable product lines in our SE business. Operating margin at 12.6% beat the 9.3% to 11.3% guidance range with both NSE and OSP contradicting to the upside. We continued to improve on expense management as operating expense at $97 million declined 5.8% from the year-ago levels of $103 million.

EPS at $0.09 exceeded our $0.06 to $0.08 guidance range, but it was down $0.01 from a year ago of $0.10.

Now moving to our Q2 results by business segment, starting with NSE. NSE revenue at $153.6 million exceeded the guidance range of $132 million to $148 million. Overall, NSE revenue declined 2.5%. NE revenue increased 3.8% driven by solid growth in our field instrument business, while SE revenue fell 20.9% from a year ago due to restructuring of unprofitable product lines in our assurance business.

NSE gross margins at 62.6% declined 190 basis points from last year. This was a result of 310 basis points decline in NE's gross margin due to unfavorable product mix, partially offset by an improvement of 310 basis points in SE's gross margin driven by the SE restructuring plan.

NSE operating expenses in the quarter were $88.2 million, a reduction of 7.8% from a year ago, reflecting benefits from SE's restructuring and continued OpEx reduction. NSE's book-to-bill ratio was meaningfully ever 1.

Now turning to OSP. Revenue of $48.2 million exceeded the $43 million to $47 million guidance range driven by a better-than-expected demand in our anti-counterfeiting products. Revenue was down 1.4% year-on-year. Gross margins at 54.4% declined 330 basis points from a year ago due to lower volumes in the anti-counterfeiting business and unfavorable product mix with a ramp in 3D sensing revenue.

Operating margins at 36.1% exceeded our guidance range driven by anti-counterfeiting revenue upside but declined 660 basis points year-over-year due to change in mix and OpEx investments in growth initiatives.

Now turning to the balance sheet. Our total cash and short-term investment ending balance was approximately $1.21 billion, with total net cash of $301.8 million. Operating cash flow for the quarter was $23.9 million.

In Q2, we repurchased $21.8 million of Viavi's stock at a cost basis of $9.19 per share, including commissions. Of the $150 million authorized share buyback, we have repurchased shares worth approximately $127.5 million as of the end of fiscal Q2. With regards to our original $650 million 2033 convertible notes that is puttable and callable in August 2018, we have repurchased a total of $199 million in notional amount to date as of the end of fiscal Q2.

Specifically in Q2, we repurchased $12.5 million. Our remaining 2033 convertible notes balance is $451 million, our total outstanding debt of $911 million includes the $460 million 2024 note. We will continue to be opportunistic in repurchasing our Viavi stock to offset earnings dilution from stock-based compensation.

Now to our guidance. We expect fiscal third quarter 2018 revenue for Viavi to be in the range of $190 million to $210 million; operating margin at 12.5%, plus or minus 1%, and EPS to be $0.08 to $0.10. We expect NSE revenue to be at $138 million, plus or minus $8 million, with operating margins at 2.5%, plus or minus 1%. We expect OSP revenue to be at $62 million, plus or minus $2 million; with the operating margin at 35%, plus or minus 1%.

The sequentially higher OSP revenue guidance in our fiscal Q3 reflects both the demand recovery in our anti-counterfeiting products and higher 3D sensing revenue from shipments that occurred in our fiscal Q2.

In the near term, we see lower-than-forecasted demand for 3D sensing. However, we expect a rebound in 3D sensing demand driven by multiple customers and multiple platforms in the second half of calendar 2018. We are prudently expanding 3D sensing capacity to meet this projected demand.

Our tax expense for fiscal second quarter is expected to be approximately $4.5 million. We expect our other income and expenses to reflect a net expense of approximately $0.5 million, and our share count to be approximately 210 -- 230 million shares. Please note our fiscal Q3 guidance does not include our announced agreement to acquire Cobham AvComm and wireless test and measurement businesses, which Oleg will discuss in his prepared remarks.

With that, I turn the call over to Oleg.

Thank you, Amar. I'm pleased with our execution in Q2 as both segments exceeded their revenue and operating margin guidance. Starting with NSE. Field instruments business for the second quarter in a row saw sequential and year-on-year revenue growth. Our cable products have continued to be a major revenue driver as cable service providers deployed DOCSIS 3.1. We expect the trend to continue in calendar 2018.

The picture for access is just the opposite. G.fast is lagging DOCSIS 3.1, as telecom service providers are delaying the launch. However, we anticipate G.fast to start ramping up later in calendar 2018.

Fiber field instruments was strong sequentially, driven by favorable customer demand and good sales execution. Lab and production products were significantly weaker, down sequentially and year-on-year, as China-based customers and NAMs continued to work down their optical component inventories. We expect lab and production to strengthen in calendar 2018 and are optimistic about its long-term outlook, which is driven by several major technology trends, including 5G wireless, 400 gigabit optical and gen 4 PCI Express.

The SE business declined nearly 21% from a year ago as a result of the discontinuation of unprofitable product lines and the decline in mature products. The overall NSE financials today reflect the restructured SE business resulting in a higher quality of revenues and margins from a year ago.

Moving on to OSP. Revenue from anti-counterfeiting products in Q2 was higher than projected, driven by improved customer demand. The anti-counterfeiting business is expected to continue to recover in the second half fiscal 2018 from the loss of the December quarter. The overall demand for anti-counterfeiting is driven by 2 factors. The base demand is driven by the reprint business and is supplemented by the periodic major currency redesign spikes. While we have a robust pipeline of banknote redesigns, the timing of order placement is driven by the central banks and the issuing of authorities.

Our 3D sensing shipments experienced a meaningful revenue ramp in fiscal Q2, which is expected to continue into fiscal Q3. While the market acceptance of facial recognition has been a success, we are expecting a near-term weakness followed by a strong recovery and growth in the second half calendar 2018.

This afternoon, we announced a definitive agreement to acquire AvComm and wireless test and measurement business of Cobham for $455 million cash consideration, subject to closing adjustments. The acquisition has been approved by boards of directors of each company, and we are expecting to close the deal in our second half fiscal 2018, subject to customary approvals and closing conditions. This transaction propels Viavi into a leadership position in supporting network equipment manufacturers and service providers in deploying the emerging 5G technology and services. In addition, the acquisition provides an attractive diversification of our change of Viavi into military, public safety and avionics test markets.

The acquired businesses generated more than $200 million in revenue in calendar 2017. It is on par or better than Viavi's average corporate operating margin and upon closing, it is expected to be immediately and meaningfully accretive to non-GAAP EPS. The transaction also allows us to realize synergies with Viavi's operational infrastructure and U.S. Federal NOLs. We will provide more color on the strategic opportunities and synergies of this transaction post-closing.

In conclusion, I would like to thank the Viavi team for delivering a strong quarter and express my appreciation to our customers and our shareholders for their support. I will now turn the call over to Bill.

Thank you, Oleg. On the Viavi Solutions company website, we've posted a presentation deck highlighting today's acquisition agreement. This quarter, we will be participating at Morgan Stanley Investor Conference in San Francisco on February 26.

Christine, let's begin the question-and-answer session. We ask everyone to limit the discussion to one question and one follow-up.

(Operator Instructions) Your first question comes from the line of Patrick Newton from Stifel.

I guess, first one is on the NE side, it definitely feels like it's found a floor, even with poor 4Q CapEx trends from one of your largest customers. So I guess, do you feel like, with strong bookings and technology trends and DOCSIS 3.1 in optical and eventually, G.fast, that this business is now inflected and could have GDP-type growth on a go-forward basis? And while you're answering that, could you perhaps layer in how investors should think about this business over the next several quarters as one of your largest customers increased its annual CapEx and has a goal of passing a substantial number of homes with fiber?

Boy, you loaded a lot of questions in one question, but sure, I'll try to answer it all. So well, clearly, I think the -- a lot of what's been driven started with cable, right, so it's a different segment of communication service providers. And we've been obviously waiting for a DOCSIS 3.1 to take off, and it's kind of like dominoes, once one major service provider starts deploying, the rest quickly follow because nobody wants to be left behind. That's now in turn, puts a significant pressure in North America on people who deliver Internet to the homes through other means, such as DSL or fiber to the curb. To stay competitive, they're going to have to accelerate some of their rollouts. And clearly, cable is far ahead, and I think it'll sustain for the next several quarters. After North America, clearly, Europe is yet to come, and then there is Asia and Latin America. So it is encouraging that finally, the trend towards much higher speeds is taking place. And obviously, as the EDGE gets deployed, then there is also need for the higher speed test equipment, such as providing monitoring of the network core and so on. So we are encouraged by the, in the near term, with the strong cable demand. And -- but it also gives me, in some ways, good to have slower ramp and G.fast because as cable reaches the peak and starts to plateau, it's good to have the next wave of adoptions to start taking place, and we certainly hope that G.fast is going to start meaningfully ramp in -- later in the year. I mean, just purely as a response to competitive pressure from cable providers. That said, we're also seeing very strong interest in optical products, mainly for the networking optical products, not so much the lab and production test equipment for fiber optic modules or China in general, but it's a robust demand in Europe and North America. So from our perspective, I think, I expect, clearly, one quarter does not make a trend, but we do see some healthier optimism on our telecom service provider customers in terms of finally upgrading their networks, and we certainly hope that happens, starts happening later this year. As you mentioned, one of our major customers -- I mean, as in immortal words, show me the money. So clearly, it is encouraging that they are talking about higher CapEx spend, and we certainly hope a chunk of that change lands in our hands and obviously, when you roll out new services, you need to buy new test measurement equipment, and we certainly -- hoping that may be an additional boost later in the year.

So just to add some numbers to this, Patrick, to give you a little bit of context. So NE business grew 3.8% year-on-year in our fiscal Q2. And when you think about our guidance for fiscal Q3, that growth is going to accelerate from anywhere from mid- to high single-digit. So to Oleg's point, Q2 was 1 point, and we are hoping Q3 will start -- and Q4 will start making it a trend.

And we are being cautious because, I guess historically looking at Viavi and JDS Uniphase, Q3, while customers are still debating their CapEx spend, can be a bit dicey, but we started this quarter with a very healthy backlog.

Appreciate the details. And then just one on the Cobham business. Can you help us understand the contribution from the TM 500 and (inaudible) VM within that $200 million-plus run rate because I think those are the crown jewels? And on the OP margin side, you did say, kind of better than corporate average. That business segment under Aeroflex ranged anywhere from low single digits to 30% OP margin. So can you, from a, I guess trajectory perspective help us understand if it's stabilized a little bit and the opportunity you see there on a go-forward basis?

So the wireless business, the one you mentioned, it's about, I'd say, roughly 2/3 -- I'd say within 16%, 17% of the total. And as you can imagine, that business is doing very well and it's accelerating. In fact, they -- it was -- came in much stronger in the fourth quarter than was expected, and it's largely driven by a lot of interest in 5G. Network equipment manufacturers are buying their products and systems to develop the products and test their products in the networks. And the service providers are buying their products to run test markets, to run the -- to test the deployments and to validate service providers' solutions. So I think in that respect, there is a -- I expect there to be very strong interest in 5G portion of their products, but also we are seeing a number of the other regions, kind of like tier 2 regions, where 4G is just now up and coming, and there's a healthy demand there. And it's a market that we were playing in, and we shut down, by and large, that business because, to be honest, we just didn't have the scale and execution and I mean, these guys are, by far, the best, by far, in the business. We were a distant second, and then it drops off very rapidly. So we are very optimistic about the long-term outlook for that business. But also and what's -- more importantly, what they are developing today for the lab environment, these types of technologies are going to migrate into our field instruments over the next couple of years. I mean, up-to-date, Viavi didn't have much RF capabilities. And in combination with both Cobham wireless and AvComm business, we just gained significant RF, very high-frequency design capabilities and very strong IP, to integrate it into our field instruments and expand our field instruments TAM into the wireless infrastructure.

Your next question comes from the line of Dmitry Netis from William Blair.

So a couple of questions. Just to continue on this Cobham acquisition. I'm just trying to kind of get to the statement you made, meaningfully accretive. I mean, is there any way to quantify what that actually means? It sounds like that it may be a positive trajectory on the top line from the wireless side of the business? I'm trying to see where the synergies come from on the OpEx side, given that there're some new areas that you're entering in the defense military side of the business. I'm not sure if there're any R&D synergies, but love to hear any thoughts on that. And then, just after you monetized your NOL following this transaction, how would you think about the balance of those NOLs following this transaction? I guess that's 3 questions, so I apologize for that, but.

Yes, I was just waiting for you to pause. Hi Dmitry, thanks for your three-part question here. So let me take the first one. Now it is meaningfully accretive to -- on a non-GAAP EPS basis when you, as Oleg mentioned in his prepared remark, this is a business that is $200 million-plus in revenue. And as he said in his prepared remark, the operating margins is in line to slightly above our corporate average operating margin. So if you can do the math, you will see that it's a big drop to the non-GAAP EPS. Now that is before we go drive revenue and cost synergies in this business. There is, especially on the wireless test and measurement side, there is an overlap with our business here, as well as go-to-market. And also, there is overlap in the, on the OpEx side that we can optimize on both the sides of the house. So this is even before we look at the benefit from NOLs. So I think overall, you should think about this business, similar to our -- any business, low single-digit growth business, but we definitely have an opportunity to go drive the operating profit up double-digit. So think about top line growing, low single digit over the long term but opportunity to actually go to drive the EBIT, double-digit. So that's what we are looking at. And on the NOLs, listen, we have, what, $4.9 billion of NOLs. So there is enough to consume, even after this acquisition.

Just a clarification on the EBIT side. The double-digit, are we talking somewhere in the order of 15% to 20% operating margins here? Or just slightly above -- your corporate average is, call it, 12.5% the way you guided for, for the fiscal Q3, so is that...

It is -- I won't get in -- yes, I will not get into the details. I will -- we will provide you specific guidance once we close this business, but it is higher than our corporate average. Our corporate average is, in fiscal '17 was 13.3%. It is above that, and I will leave it there for now. But we'll provide you with all the details when we meet next time, once -- whenever we close this deal.

Okay, all right. And if I could ask one more on 3D sensing, I'll leave the rest of the questions to everybody else to ask. But on 3D sensing, I was just trying to say -- ask, relative to your expectations, the cuts that you had seen here in the near term, I guess the trajectory is still very, very positive, but relative to your expectations, how much is that being reduced by, if you could quantify that? Is it 10%, 30%, 50%, any sort of quantitative number you can give us in terms of how that business is tracking now, relative to expectations would be helpful.

Well it is tracking, obviously -- in the near term, a little below our expectations. We never expected the numbers, as some of the analysts and our competitors are throwing out. I mean, every time we launch a new product, companies tend to over-forecast, so we, obviously had -- our internal forecast was much more prudent. But with the -- some of the recent pullback in forecast, it still puts some pressure on our demand for the fiscal Q4, but we view it as a relatively short-term volatility that is -- you experienced when you have mostly one customer with one product. As you get multiple new customers and multiple new products from existing customers coming online in the second half of calendar 2018, we actually expect this business to rebound and grow quite nicely. And we are, actually in fact, prudently expanding some of our capacity because we expect a much stronger second half of the calendar year.

Your next question comes from the line of Michael Genovese from MKM Partners.

I'm just first following up on that last answer for a little bit more granularity and hopefully, you're not repeating yourself, because I didn't miss -- because I missed it. In terms of this near-term outlook being lower, is that hitting more in the fourth quarter than in the third quarter? Or is it also impacting the fourth, impacting the third quarter?

Yes. So let me start and give you a little bit more granularity here, right? So as we have always been transparent on what we are assuming from a modeling and from a business forecast perspective for our 3D sensing revenue. So we said, roughly $35 million to $45 million, that's the range that we were expecting. Now we look at the forecast, and we want to be a little bit prudent here, so we are assuming roughly about $25 million-plus of 3D sensing revenue for fiscal '18, okay? Now it doesn't impact Q3 as much because as you recall, we have a lag of 1 month between the time we ship and the time we recognize revenue. So what we shipped last quarter, we are recognizing revenue this quarter. Now at some point in time, this will all catch up, but that's not what we're assuming in our fiscal Q3. So the impact will be felt in Q4 of this whole takedown and forecast. But having said that, I wanted to give you guys more color on the OSP revenue as such, right? So when we met last time we said, OSP revenue in second half is going to be -- is going to grow versus this first half. What we are seeing is overall, for fiscal '18, the OSB revenue has declined because we are taking down the revenue forecast for 3D sensing, but the encouraging news here is the high-margin anti-counterfeiting product revenue has actually come in higher than what we were expecting last quarter. So you see there's -- the anti-counterfeiting revenue is much higher than what we're expecting for fiscal '18, and that is more or less offset by the decline in the 3D sensing revenue. So that's what -- that's the dynamics. Again, 3D sensing revenue has a lower margin profile than the anti-counterfeiting. So I think this is -- from a product perspective, I think it's more incrementally positive.

That's very helpful, Amar. And just a follow-up, so at this point in time, versus say, a couple of months ago, do you have more visibility? Because it sounds like you do, but I want to make sure, on these additional SKUs that this technology will go into later this calendar year, and also just about additional customers, what is your expectation there?

So I mean, as you can imagine, 3 months is a long time in this space. So yes, I mean, we obviously have more visibility, not necessarily into specific products, we just look at customers' forecasts and how many SKUs they are looking at. And from there, you can deduce whether or not it makes sense. So our expectations is it'll be over -- various new customers coming in, with 1 or 2 platforms and further proliferation of this technology into other products at -- various customers.

Your next question comes from the line of Alex Henderson from Needham.

A couple of very quick questions, because I think they're almost 1-word answers. I assume you're not seeing any new competition in 3D sensing?

Well, I mean, there's obviously a lot of people talking about it, but all the customers we are talking with, I'm sure they are talking to other players as well, but we are getting some pretty firm commitments and indicators. So it leads me to believe that, at least for now, we are clearly in a lead position.

Okay. Is that a change from you saying you had a -- essentially, a lock on this business? I thought you guys were the only player in the category at this point?

We have a unique IP in this business, so I have not seen anybody who has demonstrated a solution that does not infringe our IP. But it would be foolish for me to think that we are the only guy out there who is doing it, but I think as far as I see in terms of meaningful business, I do not see any viable competitors at this time.

All right. So if I look at the $35 million to $45 million prior guide, going to $25 million, I assume that's mostly out of the fourth quarter that you did some 5-ish type number that is -- The Street was expecting in the December quarter and are on track for the $15 million-or-so that The Street's forecasting in the March quarter, and it's mostly falling out of that following quarter. Is that the right way to think about it?

So I think I'm not going to confirm those numbers. But directionally, your thinking is right.

All right. And then, just one last question and I'll cede the floor. You made a comment on the acquisition, I just wanted to make sure I understood what you were saying. I think you said that you expected low single-digit growth. Was that for the acquisition, or was that for the combined acquisition proforma with the NSE -- or the NE business? I'm assuming that's just the acquisition.

Yes, that's just acquisition assets, Alex. So what we are saying is, it has a similar growth profile like our NE business, a low single-digit core. But given the synergies that we have, and the operational improvements that we can drive in this business, both go-to-market as well as in the back-office, we believe that we can grow the operating profit double-digit for that piece of the business.

Your next question comes from the line of Meta Marshall from Morgan Stanley.

A couple of questions. Just first, does this acquisition kind of change any philosophy with some of the SE businesses that you've wound down? Or changed any thoughts of whether you would divest some other assets within the company? Second, just, are you starting to see any bring-forward of kind of dates of 3D sensing outside of the smart devices? And then third, just quickly, given the NOL position, I wouldn't imagine so, but is there any impact to the tax reform we should be thinking about?

Sure, thank you. So on the does it change any philosophy or view, it does not. I think it's very -- in fact, it's very much in line with our what I call, big Network Enablement focused Service Enablement strategy. It plays right into that strategy. And in terms of the Service Enablement, everything we have now left at Viavi is what I'd qualify as core technologies and they are doing very well. I think, we'll restructure it, the remaining business is now stable and actually growing. So I think we are doing in the right way, we are not doing a Hail Mary, but rather we are approaching it in a very deliberate way to the market and selling our software products where we have very strong equipment position and have both products reinforce one another. So that's the answer on that piece. So I think we are very pleased with our current mix and strategy and a C space. Regarding the 3D, I mean, clearly, all -- most of the current opportunities are all in consumer electronics, mainly smartphones. However, the advanced engagements that we are currently involved are also very -- there's very interesting space in the whole automotive space, but as you can imagine with automotive, my bet it's 2 to 3 years before we see any of these products come into the market. So at that point, it's all pathfinding, R&D concept development stage in automotive, and it's prime time in consumer electronics.

Got it, and then, just on tax reform. Yes, sorry.

Yes, let me just give you some color here. So I think the tax reform has minimal impact to us. We -- typically, with companies that have NOLs and R&D credits, they have a DTA, deferred tax assets associated with it, and this will be required to be restated using the new tax rate. And to the extent that the reduction in the DTA amount is not offset by the corresponding, what they call is the valuation allowance, then the reduction in DTA will be included in the tax expense and in the P&L. That's how it typically works. However, in the case of Viavi, the reduction in the DTA will be totally offset by a release of a VA that we have. Therefore, for us, the net impact of the P&L is almost 0. So again, it doesn't impact us as much as other companies, but hey, by the way, we have to do the same amount of work to get ready for this new tax provision.

Your next question comes from the line of Dave Kang from B. Riley.

This is actually Lee Krowl filling in for Dave Kang. A lot of questions have already been answered, but I just wanted to confirm what you guys just said on the SE. Did you guys say it's actually stabilized and begun to grow? And then my second question is, just with this transaction, can you maybe just talk about the cap structure, I know you guys have been retiring debt and buying back stock and obviously, you have a convert that comes up in the second half of 2018. So can you maybe just talk about that cap structure as you go and purchase this all-cash transaction?

Yes. So let me first handle that SE question. So SE, if you see SE business, there are 2 pieces of business within SE, one is our assurance business; and then the second piece of the business, we call is the network performance and monitoring business. And so these are 2 different businesses. One goes into the data center, the other one is to the service providers we sell, right? The assurance business is a business that we restructured. So the point we are making is, as we continue to -- as we restructured this last year, that's going to taper off. There's a mature piece within the business, that's also running off very rapidly. So at some point in time, that piece of the business will start stabilizing, and we have started seeing that stabilization in the business with the growth piece within that assurance starting to grow, and the mature assurance piece continuing to run off. And there's the other piece of business, which is the -- which I call the ghost into the data center, that piece of the business is slated to grow. I think we are seeing one of the best booking quarters in that business, it was a record booking quarter for that business, and we also started seeing deal sizes being much larger than before. So a good example of driving discipline with a new leadership team, both in the product side as well as on the sales side, has now started paying some dividends there. So that's the point we are making. We expect SE business to continue to stabilize in the 20 -- maybe $28 million to $30 million range, and then potentially start growing and -- sometime next year. Now with regards to our capital structure. Again, there's no new news there. We are very clear on how we are going to manage our capital structure. We will continue to do share buybacks where it makes sense if we -- we can do it opportunistically. On the converts we did buy back some, but now I'm not going to open up my strategy here to tell you what we are going to do with our 2033 converts that will be due in August 2018. So there are various options there. This acquisitions doesn't change our approach to our capital structure, and it still remains the same. So that's something that we will continue to execute on.

There are no further questions at this time. Mr. Bill Ong, I turn the call back over to you.

Thank you, Christine. This concludes our earnings call for today. Thank you, everyone.

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